South State in Columbia, S.C., reported lower quarterly profit because of a major acquisition and a charge tied to tax reform legislation.
The $14.5 billion-asset company said in a press release Tuesday that its fourth-quarter earnings fell 90% from a year earlier, to $2.4 million, or 8 cents a share. The results included a reduction in the value of the company's net deferred tax asset by $26.6 million, or 83 cents a share.
Without the tax hit, South State’s earnings would have increased by 19%.
Comparisons from a year earlier were also skewed by South State’s acquisition of Park Sterling in Charlotte, N.C. The acquisition closed on Dec. 1.
Net interest income increased by 39% to $112.3 million, largely due to loans acquired from Park Sterling. Total loans rose 59% to $10.6 billion, while the net interest margin widened by 9 basis points to 4.18%.
The loan-loss provision increased by 512%, to $3.8 million. Nonperforming assets fell nearly 7% to $36.1 million.
Noninterest income increased by 19% to $39 million, mostly from fees on deposit accounts, trust and investment services income and recoveries of fully charged-off acquired loans.
Noninterest expense rose by 39% to $104.6 million, mostly due to increased salaries and employee benefits, as well as merger-related expenses. South State’s efficiency ratio was 68.5% at Dec. 31, up from 65.8% a year earlier.
“South State completed two acquisitions, crossed the $10 billion regulatory threshold and reported strong financial results in 2017,” Robert Hill Jr., South State's CEO, said in the release. “Assets total over $14 billion and we serve over 700,000 customers in markets from Virginia to Georgia. We look forward to 2018 and are excited about the prospects for continued growth.”
South State, which crossed $10 billion in assets threshold last January with its acquisition of Southeastern Bank Financial, said it will have increased FDIC insurance costs this quarter. South State said it expects the added expense to be $500,000 annually.
The Durbin amendment’s cap on interchange fees will go into effect in July; South State will undergo its first stress test in July 2019.