Good morning, and welcome to the South State Corporation Quarterly Earnings Conference Call. Today's call is being recorded. And all participants will be in listen-only-mode for the first part of the call. Later we will open the line for questions with the research analyst community. I will now turn the call over to Jim Mabry, South State Corporation Executive Vice President and Director, Investor Relations and M&A.

Before beginning I want to remind listeners that the discussion contains forward-looking statements regarding our financial condition and results. Please refer to slide number two for cautions regarding forward-looking statements and discussion regarding these of non-GAAP measures. I would now like to introduce Robert Hill, our Chief Executive Officer who will begin the call.

Good morning. We'll begin the call with the few summary comments about the first quarter of 2017, offer an update on our merger with South Eastern Bank Financial Corporation and provide insight into our performance for the period. Our results were strong this quarter and start us off on a good pace for 2017. Net income in the first quarter totaled $18.3 million or $0.63 per diluted share, which represents a return on average assets and a return on tangible equity of 0.68% and 8.87% respectively. With the closing of the merger in the first quarter, we incurred significant merger related cost. Adjusting to these expenses, earnings were $33.4 million or $1.15 per share. This represents an adjusted return on average assets and return on tangible equity of 1.25% and 15.55% respectively. I'm very pleased with our team's accomplishment this quarter. We closed the South Eastern merger in early January and converted the systems in February. The team in South Eastern is a strong addition to the South State team and we believe that the merger will be additive in many ways to the company. We also welcomed the addition of Grey Murray to our Board of Directors. Grey is the CEO of a logistics company based in Augusta, Georgia. With the merger, South State crossed $10 billion in assets. We've talked about this milestone for some time and have been preparing for it over the past several years. This preparation has not only resulted in improvements in the way we operate the Bank, but also enhance the customer experience. While there are still steps, we can take to improve the way we do business, a lot of progress has been made throughout the company. I will now turn the call over to John Pollok for more detail on the financial performance for the quarter.

Thank you, Robert. From a balance sheet perspective, the combination of strong organic growth this quarter coupled with the South Eastern merger closing further strengthened our balance sheet. We achieved 11% annualized net loan growth excluding the $1 billion of loans acquired in the merger with strong growth in the upstate and Central South Carolina as well as the Charlotte and North Georgia markets. Non-interest DDA totaled $400 million this quarter to $2.6 million or 27% of our total funding. $279 million of the growth is from the South Eastern merger and the remaining $121 million was organic growth. NPAs were flat linked quarter and improved as a percent of assets down to 0.35% due to an increase in total assets from the merger, annualized non-acquired net charge-offs totaled only five basis points again this quarter. On slide number five, our net interest income increased $16.8 million linked quarter and our margin expanded to 4.2%. We estimate the impact of the South Eastern merger accounts for approximately $15.8 million of the increase. The remaining $1 million is related to increases as a result of the December FOMC interest rate hike and the remix of interest earning assets. Turning to slide number six, you can see the mostly merger related $1.6 billion [ph] increase in interest earning assets and the increase in the investment securities portfolio as a percent of interest earnings assets. As you recall, South Eastern had a large investment portfolio and as planned, we reduce the size in the investment portfolio and redeployed some of this liquidity into loan growth. On slide number seven, you can see the components of the $3.6 million increase in non-interest income with strong mortgage and wealth management quarters. Non-interest expenses increased $29.5 million linked quarter to $104.7 million, which included $21 million…

Thank you, John. As we look forward to the rest of 2017, I believe we are well position to continue the strong financial performance and growth. Our markets are economically vibrant, as evidenced by a double-digit loan growth and we continue to take share from the larger banks. That concludes our prepared remarks. So, I would ask the operator to open the call for questions.

Thank you. We will now open the line for questions. [Operator Instructions] The first question comes from Catherine Mealor of KBW.

Thanks. Good morning, everyone.

Good morning.

Good morning, Catherine.

I am curious into the acquired loan yield just a little bit and just wanted to make sure I am thinking about this right. So, the color you gave, it's really helpful and saying that excluding South Eastern, the acquired loan yields with from 760 or 747 to 766, but if we think about the balances on how that portfolio declined quarter-over-quarter is everything on a dollar basis, your accretible yield if you will ex-South Eastern still declined quarter-over-quarter, I mean that higher yield is really just on a lower balance?

Catherine, this is John. That’s correct. If you take South Eastern out and just look at our run-off for the quarter, it's about little over $80 million. So yes, you're correct.

Okay. All right, great. And so then, and then if I do the math back into what looks like South Eastern is coming in on it looks like it’s about I think it's around a 590 or so incremental yield? If you think about the direction of the core, or the acquired yield now moving forward probably moving outside of any kind of big changes in accretable yield were probably going kind of what you said to about kind of 6.7% yield as we move through the rest of the year or is that too far down we think?

You know, I think it's still somewhat of a guess, we're early on. But I think those are reasonable, you’re probably at tad high on your 590, but that’s fairly reasonable to think about it that way.

Okay. All right, that’s helpful. And then the name of the securities that obviously increased to which South Eastern. How quickly do you think you can move that back down to your historical 12% level or you're comfortable staying around 15% for the near future?

Well an average balance, Catherine, it's about 15%, but if you look at period in, it's about 12.5%. So, we moved it down, but hey, 12.5% for us is a little high overtime as we grow our loan book going back below 10 is not a problem. We're about 12.5% at period again.

Okay, that’s helpful. Great. Thank you. That’s all I've got for now.

The next question is from Stephen Scouten at Sandler O'Neill.

Hey guys. This is actually Peter [ph] on for Stephen. Just, I guess in terms of loan growth quickly. Great growth again this quarter, but it seems like a net pace of maybe in the low double-digit range is still reasonable going forward, what do you guys seeing in your markets and kind of what’s your outlook for growth going forward?

I just think the overall just I think stability of our company and quality of our team, a lot of traction. If you look back over the last five quarters, we've been high single-digit, low double-digit every quarter. The pipeline you know that seems to be kind of a good run rate for us, it's kind of what we typically been, I think it's too high, we tend to dollar back through pricing or those types of things. So, I think where you're seeing us the last five quarters would be a pretty good indication on how we're feeling like that the four -- looks. I also think just in terms of diversity, we're just seeing it really across almost all of our markets, so, all but just a couple of our markets were up this quarter and fairly, and fairly meaningful, obviously, our metropolitan markets are growing at a little bit more rapid pace, but overall the quality, the diversity, geographically and by line of business all feel good. I think one of the things that you've seen in our loan growth numbers has been when we bought for number of years ago there were obviously a thrift and so there was a lot of wonderful on the balance sheet. We’ve been bringing that number down over the last few years, and now it's really getting to be close more closely in line with traditionally where we’ve kind of get kept our wonderful family book. So, I think there is certainly some opportunity for to see some enhanced growth on the consumer side.

This is John, I'll just add with the growth obviously, the rate hikes, our new loan yield production rate is up about 20 basis points. So, we’re seeing pricing on the loan side go up. As Robert mentioned on the mortgage side, when you look at our forward pipelines, little over 50% of the pipelines will go on balance sheet. It’s kind of those 3/1, 5/1, 7/1 ARM, so we really feel -- feel really good about what the future holds on the growth side. And just finally to wrap up is the C&I momentum has been a big focus the last few years, seeing really good traction in Q1 on annualized basis, we were up 25% in the C&I book. But it feels overall still positive momentum in the loan portfolio.

That's great, I appreciate all the color. I guess just maybe flipping into M&A, I guess following the election and kind of where stock prices have gone, has the level of conversation changed at all and I guess the second part to that question is has your geographic interest changed at all. I know traditionally you've wanted to focus on the Carolinas, but has that changed at all to include maybe Atlanta or something like that?

So, I can take the first part just in terms of momentum. Clearly, over the last six months, the activity level has increased pretty meaningfully. It’s been steady. It’s not like it was ever soft but it certainly increased a lot in the last six months, especially as we got into the latter part of last year and to this year. So, that's always been there. We tend to look at a lot of deals before we do one. And we tend to focus on something that is geographically additive to our existing footprint when possible. But with that said, that does not preclude us from expanding our scope, clearly, we will. I wouldn’t say it’s just targeted at Atlanta, but certainly things then parts of Florida, more to central to the northern part of Florida, parts of Virginia, Tennessee obviously still got a lot of work to do in North Carolina. So, all those areas in terms of taken us out of few and another state or too are all imply, if we can find the right companies to partner with.

Great, thanks. That's it from me.

The next question is from Jennifer Demba, SunTrust.

Hi. Good morning.

Good morning.

The loan provision was a little higher than we were expecting, can you just give us some color around the provision in this quarter?

Sure, Jennifer, this is John. Obviously, the first quarter after an acquisition can make the numbers a little confusing. Especially, when you merge with a company that has its higher loan quality as South Eastern does. So, a couple of things to think about when you think about our provision is we had about $50 million in non-acquired loan growth out of the Augusta market and which you are going to see, actually Augusta now is our fourth largest loan market that we have in terms of balances. So, we had $50 million really kind to go into the non-acquired book, Jennifer. And so, with that cause is a couple of things, one, it did have some effect on the margin taken the margin up, but since those loans were really originated over there, we just felt like we needed to reserve more at the loan loss rates that we did when we acquired that currently, so that kind of put the provision up a few basis points.

Okay. Thank you very much.

The next question is from Tyler Stafford, Stephens.

Hi. Good morning, guys.

Tyler. Good morning, Tyler.

Very nice quarter. Congratulations. Maybe first just start on the margin just a question on the funding cost. So, the release did call out the 7-bps funding cost increase from South Eastern quarter-over-quarter. So, I think legacy deposit cost -- legacy South State deposit cost were up 4 bps or so and I assume that's mostly just related with rates, but is that in line with what you expected and just curious generally what you are seeing from a market standpoint on pricing pressure?

I'll start. Tyler, at the reality is most of that increase is just really from the South Eastern deal. That might been a tad or from without South Eastern, but most of that is from South Eastern.

Okay. So, you haven't really started to see pressure on the legacy deposit book just from higher rates yet?

Howard, this is Robert, just color from kind of my perspective is our loan deposit ratio is 87%. It went down this quarter. We had really strong core deposit growth. And that's without any really any additional firepower in terms of increased rates. So, we feel really good about what we're doing on the core deposit side. You see a few outliers that have limited liquidity that are better in the market trying to grab some deposits. So, I guess to fund their loan growth, but I'd say it's the exception not the rule. And the majority of our competitors in terms from a market share perspective are the large banks. And obviously, their liquidity positions are very strong. So, I think they'll be slower than even the mid and small banks in terms of raising rates overtime. So, we don't -- we have not sensed a lot of pressure on the deposit front yet.

Okay, great. Still on the margin, the $4.2 million of accretion out of the non-PCI book, should we basically expect to see that kind of steadily turned off from here I guess getting back to Catherine's earlier question?

Yeah, I would think so. And just remember, as I answered Jennifer's question a minute ago, a lot of that just came out of the margin and flowed over into the legacy reserve. So, some of it's going to depend -- especially next quarter I think it's the first two quarters up for an acquisition. You could see some more accretion in there and it flow over. But yeah, you are correct that's going to trend down, but also think as that trends down, the reserve will also trend down some.

Do you have what the PCI accretion was this quarter? I believe it was $15.9 million last quarter.

We'll have all that in the first quarter queue, when we file that for you?

Okay. And then on the remaining cost saves, I think you said $11 million, just remind us of the timing of those, should all of that hit in 2017 or will there be some that I believe into next year?

Well, we obviously just did the closing in conversion this quarter. So, we've got a little bit of that. So, I think when you think on it on a per share basis, we've got about another $0.07 to go, we won't get all of that next quarter, but we feel like the second half of the year that we'll be able to do that.

Okay, great. Thanks, guys. That's it from me.

Thanks, Tyler.

The next question comes from Christopher Marinac at FIG Partners.

Thanks. Good morning. John, I want to follow-up on the point about the 20 basis points move and loan yields. If we're fortunate to see additional Fed hikes, will there be kind of a rule of thumb on that where it perhaps at 6% to 8%, if you can recapture those yield exchange?

I didn't hear the last part of the question, Chris. Can you ask it one more time please?

Would rates going up translate into a rule of thumb on the 20-basis point loan yield that you mentioned. I mean is that something that we could use as a guide post going forward?

That's hard to tell. I think it's a little hard to tell. I mean the rates go up, but then obviously, the market adjusts, so I think that's a little hard to know. But in general, they're going up, but it was just nice to see that 20 basis points linked quarter.

Okay. And then what is the opportunity to do additional fee income growth. I guess I'm curious both on the deposit account and just organically, in addition to the mortgage business, will you expect to see mortgage grow year-over-year?

So, on the mortgage side, a few things there, I think if you think back to when we announced the South Eastern deal, they had a nice area that did a lot of government lending, a lot of FHA and VA. We feel like that is another line of business embedded inside of mortgage that we can take company-wide. In fact, Chris, it was nice to see in the first quarter of this year, our number one mortgage originator was out of the Augusta market. So, we feel like we're going to bring some things to the table in Augusta on the mortgage side, where they'll be able to do more business. And then, I think the last thing I would or two other things, we're continuing to still recruit very well on the mortgage side. So, we're continuing to add originators. And then the last piece, one of the things we were excited with the first federal merger is of course the MSR asset. So, rates are starting to move up, the value, the length of time that those mortgage servicing assets are going to stay on the books is much longer. And of course, when we did the first federal merger, a lot of that mortgage servicing asset book was wholesale lending. And we feel like we've kind of squeeze in most of that out. So, we think we'll see some nice growth on the mortgage servicing asset.

Great, John. That's very helpful. Thanks for that. And Robert just a quick one for you. If you change the footprint and expand in some of the states that you mentioned, is there a size that is almost too large for you to look at this point. I was curious if there is a sort of fence around the size that makes sense for you at this point?

Again, as it gets too small. The accretable impact on our EPS, there is certainly I would say a lower end, as you get down to a billion dollars or lower, it certainly gets a little bit tougher to move the needle, but that said if it's the right franchise and the right spot, we certainly absolutely look at those. We've really not bound ourselves on the upper end either, but as you -- I mean you know it’s pretty well, we tend to take kind of methodical steps forward and I think that -- I don’t think our M&A strategy will change a lot from kind of what you see historically.

Great. Thanks for the color on all fronts, guys. Appreciate it.

Chris, let me touch on just briefly kind of what you asked on the fee income side, to give you a little bit color there outside of mortgage. So, the wealth business has certainly been and continue to be a good contributor for us, where we about $5 billion is where we ended the quarter in terms of the assets in that area. And if you exclude South Eastern, our wealth group was up about 15%, so I think wealth will continue to be an area from a fee income. Our fee income line of business that were growing nicely now and continue to grow. On the fee income side from check in accounts from those types of things, we had 25% growth in C&I in terms of loan growth this quarter, but we are just in the mix on companies that we weren’t able to be in the mix on in the past and obviously, treasuries are significant component of that and provides really a nice upgrade, nice opportunity and we're going to upgrade our treasury platform, that’s on our roadmap for the next 12 months, that's kind of take it to another level. So, I think commercial treasury fees and I think also other products and services, we have a swap program now that we can sell on the swap side to -- on some of our larger credits on the C&I customer. So, I think where you will see us be able to grow on the fee side is going to be on the commercial side mostly. I think on the retail side, we are a big retail buying, so we've got roughly 630,000 customers. I think the opportunity there is we’re continuing to see a significant migration to self-service and significant migration to mobile. Our mobile was up about 15% in the first quarter and that’s been pretty consistent. And so, I think what you are going to see on the retail front is just continue to build to really -- retail fee growth will be slower, but I think the efficiency opportunities are still pretty significant.

Great, Robert. Thanks a lot, on the background here. Appreciate it.

[Operator Instructions] The next question is from Nancy Bush, NAB Research.

Good morning, gentlemen. Quick question for you, you mentioned that you’re recruiting mortgage bankers and I can’t help it reflect that some of the markets that you are in right now, Charlotte particularly is experiencing a few tremors in the banking industry and I am wondering, if you are having other recruiting successes as this sort of consolidation trend goes on. I am thinking more about loan producers?

I think that we've always seen, kind our number one priority is recruiting talent and growing the book organically. That’s always been our number one focus and you know kind of like M&A. We kind of know how we like to do it and we are pretty steady consistent with doing it and we continue to see that. Our platform, our size, we are in a space that’s really unique in our footprint from a sizing capability perspective. And then as I said earlier is our -- the banks that have shared in our markets are the large banks and we compete very favorably against that. So, that’s how we've been building the company for the last 23 years and we continue to see that momentum.

Okay. And if I can also ask on the wealth management business, as you get bigger, as you incorporate more franchises under your footprint et cetera, is there a need to sort of grow that business in different ways, are there products, are there strategies et cetera that need to be added to this and are you seeing any opportunities there for bringing new people on board?

Yes, I think the wealth management piece is the piece that's provided the most opportunity for us. I think there -- I don’t think there is significant product gaps that we’re missing particularly. Obviously, you’re seeing kind of migration of how people think and invest their money. I think the holistic approach that we bring from both the financial planning and investing, and in a state planning is fairly unique. And we can file little bit under the radar screen, it does take $50 million in assets to really get us interested. We can come in at a lower level than that. So, and the -- most of the money center banks or the broker chances are obviously at a much higher level. So, I think that mix of those three things seems to work very well for us. I think that we will - I think that the answer primarily to growing that is to continue to recruit the right talent and give them the opportunity to kind of build their shop and build their business, through [ph] acquisitions in that space. We have those opportunities. I think they are tougher because most of the time it’s like the -- it’s kind of like insurance, they've kind of build their businesses and they may be looking to sell, because they want to exit and so what are you really getting. So, I think if we found the right partner from an M&A to get some additional scale and product scope that's certainly something we would do. But I feel good about really how we are executing today, I feel good about the growth pace and are continuing to attract talent mostly from the larger companies.

Could you just remind us what kind of opportunities you got from the Augusta deal, I mean there is a fair amount of wealth in Augusta, Gulf related or not. But just -- did you get anything in terms of people on wealth management side from the Augusta deal?

Yes, Augusta had -- I mean as you expect with most banks that wealth didn’t fully developed with most smaller companies. It’s not a fully developed line of business. But they had $700 million on assets under management. So -- and they have exceptional market share in that market. So, they are dealing with the people who need those services. So, I think back to your question a minute ago on scope. I think what we were able to bring is some - a broader array of products, kind of a deeper product set and their model was more outsourced, ours is more managed in-house and so, I think we can -- have been able to have some -- we'll have some impact there. But they have got very deep ties in that community and with that relationship. So, I think a combination of the platform they have, the scope and higher level sophistication of the platform that we have along with the combined talent. I think there are certainly opportunities in Augusta to expand it. Same thing on the mortgage side, I think the opportunities we’ve had to combine resources and make it combined better as played out on the mortgage side as well, we've added government lending which we weren't really good at, they were really good at. Augusta and space as John said, the number one originator in the company was from Georgia Banking Trust side for this quarter. So, I think the same thing we’ll play out on trust overtime.

All right. Thank you very much.

There are no further questions. I will now turn the call back over to John Pollok.

Thanks, everyone for your time today. We will be participating in the SunTrust Robinson Humphrey Financial Services Conference in New York beginning on May 24th - 23rd. We look forward to reporting to you again soon.

The conference is now concluded. Thank you for attending. You may now disconnect.