SSB - Earnings call transcript Q2 2018

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Operator

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 in-charge of Investor Relations and M&A.

Jim Mabry

Thank you for calling in today to the South State Corporation Earnings Conference Call.

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

Robert Hill

joining thank Good morning us. and you for

at our the discussing like the The comment depth our on for strength to organizational greatest of changes. is quarter Before second results South we leadership. of have recently tremendous financial would XXXX, State announced I

have achieved by position seen South for leadership on shareholder well us parts this substantial decade We focus our realigning growth over to long the reporting made of chapter These strong returns transitioning State. for past the the structure The period. changes and we next and and next come management as financial generation moves critical roles term performance the recently during leadership We A company focus attention leaders. to we the strength and that changes, within was talent. maintaining of emphasize development and drive experienced on to People numbers evident of are depth the The great recent very and people. our seeks individuals of part of coming leadership our these company. the all team our have culture. considerable with fortunate in improving from effort we and

equity on XX.XX%. represents a of average million related earnings on represents equity return $XX.X This second $X.XX $XX.X Adjusted tangible of X.XX% average million was a for assets or per assets or merger on quarter the diluted to respectively. share. on for the Turning tangible per share. results, X.XX% expenses, net This XX.XX% income financial and and return and of return $X.XX average average return were

legacy bank customer to we annualized The these loan continue retention in of the markets among has productive net for generate able the high. of was and been over with the X%. Sterling the Sterling, most Park markets markets very quarter As growth Park company were integration the in

with quarter, wealth, and a experienced the seeing during team commercial, consumer key Commercial to both mortgage. this of good also the in we our banking quarter. growth is number Additionally, The and quality banking banking are hirers we in added growth loan strong. strength Private

estate While our of capital risk based we saw commercial capital. real to to XXX% decline

We will continue this the portfolio Durbin be by quarter. to loan experience begin churn and in impacted to

While well earnings creates us future. headwinds, kind balance level the positioned term some short our sheet of markets and for this have

a dividend payable will to share, the $X.XX of declared has last August as board detail on the for cash quarter, XX, record quarter. to shareholders of performance XXXX. of the more Pollok quarterly for call per Our higher I John financial over than $X.XX turn now

John Pollok

little slide length $XXX.X Robert. in and points earning margins. four, X to expanding acquired asset Interest yields number yield basis contraction of $XXX,XXX On the Thank interest quarter you up see you, the points with loan increase points income now points. five last loan less to the of interest-earning quarter book over compared the than advancing shows loan basis basis representing non a XX% assets. number of portfolio Slide the loan this acquired acquired representing and and X X our basis net the can in non-acquired assets XX% interest-earning million interest were yield quarter net X XX%

the in yields of point a portfolios one resulted mix in this overall loan change yield. both While basis expanded, decline

points basis due reflective liability Our quarter, XX to offered Federal basis Reserve rate higher this hikes. increased points XX rates the cost recent interest-bearing to of

points modest increased nine only funds XX Our basis basis overall of to points. cost a

and merger. in funding. our our reduce XX% end, non-interest-bearing we the of brokered acquired As total $XXX to deposits Sterling million Park represented customer money average increased continued quarter quarter and At this deposits borrowed deposits

contractual the our in yield impact slide well Slide accreted to six, acquired periods. portfolio, number as future the enhancing loan see be discount the can on, $X.X non-interest in security remaining purchase million a than recoveries. on to income accretion related and loan million and lower you gains Turning of shows primarily seven as a accounting income, mortgage number $XXX,XXX The losses excluding banking to less $X.X reduction reduction acquired linked is quarter.

the we a As half due of this second the the during reminder of impact lower million to approximately year, interchange income anticipate $X.X amendment. of Durbin

quarter efficiency number shown linked slide to on ratio XX% eight. adjusted decreased as XX.X% Our from

conversion Noninterest million million systems the $XX.X cost additional expenses, saves, merger During having achieved quarter, closing. to excluding after declined we cost for in $X.X complete branch quarter. the

next the Slide saves for half number this per represents expect quarter's we quarter, to On our share, increase the the see nine Sterling impact This overall the revaluation Park bringing the to the in you value total can cost one Robert a value year-to-date tangible the to some third will $X.XX year-to-date EPS from see $X.XX While number comparable for share rate adjusted fair a the the over shows initial XX, of modest run now we adjusted summary comments. first be to quarter includes call should additional estimates. $XX.XX number. $X.XX. per quarters XX% of XXXX. from day slide of to I increase which book earnings turn

Robert Hill

Thank John. you,

this of our We and about year plans XXXX. are excited the rest for

good changes remarks. attractive term. position This long and results recent team growing us our organizational increase financial in generate and to the over market share and strong a concludes Our put our prepared

would call So open the like the for to I operator ask questions. to

Operator

ahead. from Stephen go of Today’s Scouten question Please first Instructions] [Operator Sandler O’Neill. comes

Stephen Scouten

Hey good morning guys.

Robert Hill

Stephen. Hey

Stephen Scouten

the much update quarter. estate A first also you book it was question SNCC if know about if quarter, from came this last the finance is builder real an how growth. book And could I still around and that and for I'm much how runoff give I curious about to could you sector curious us from million that $XX loan come there? of consumer

John Pollok

John. Stephen, I’ll this is start.

consumer million equity the million lines. up if so book at builder real you more would of $XX the and we in part growth about include So real on that, finance that last the the We think estate, in the roughly look were question linked consumer total SNCC book estate your complete I quarter. overall $XX on then about on this that's have

Robert Hill

this Robert. Stephen, is

you up good give feel the the consumer about in picture productivity quarter, third, as third a and we’ve about real a that a about. if book basically second was from up broader in of [XX the a level, the about by But to overall look it quarter was commercial CRE about CRE the I up estate loan real same XX% about categories, differences, is Production C&I] owner-occupied X%. churn Just don't about first was of guess third, growth some balance. a kind And talked flat. commercial The consumer pretty and we was you

Stephen Scouten

thinking you which should fed NIM quarter going rate [move deposit kind for guys maybe the little this think have some and this hike of I did just mentioned a that XX is about in pressure remixing cause on that Okay, more what completed do you mistaken cost you good helpful. that’s when if quarter. a run pricing quarter of the that in a you were saw new to be to quarter. was not points on last that just aggressive this the And over know the quarter that, see second, more deposit elevated basis little a deposit each] quarter, then some get cost core on I and spring of the deposit this we somewhat to of I'm abate we quarter or cost might is

John Pollok

say John, start. a Hey few I’d this things. I’ll is

relatively cost -- funds. overall think of basis first mild. XX is at our it’s is still your so I you look When points,

we there talked on was you two Loan As the Home the over advances Federal really quarter Sterling look remixing transaction, at between GBT brokered Park and $XXX then million companies Bank and at is, if deposits. last you the those transaction between look

rather And quarter happen, we so so an look to to you And too that more with our feel from coming, be on with think last like get deposits it, looks felt aggressive. so saw view, you deposits. gonna when core rate clearly like we’d want XX% clearly at customers. as two funded said We we’re far don’t there like that, behind say bank We fund hikes opportunity our that's there's that, I more is

our deposits, Clearly general DDA betas, were you too. think of we we see DDA noninterest good there very think generating in So them. it at I noninterest in in the can view growth growth. of think When we

also We think cost we there too as of in wholesale look borrowing it. at

And so of it's think combination I it's, things. a

we where that think I of clearly seeing going. rates two remixing got sheets the combination and a balance it’s are

Robert Hill

about last few do with balance not to we of coming. lagged few moves were sheet while have We good leverage the see we in more to we Robert and on. most like activity, good deposits all our a along to this that and it to the that the had, creating timing felt our our right on to bad. but additional protect getting some just were add footprint. deposit majority end We rid I we’ve all certainly run the always want thought balance by opened and so felt obviously] clean pass And in relationships borrowings felt kind of we Stephen, that, just customer be saw or first to mean we the year was sheet this XX,XXX loans doing able rate. in really the over we checking far gotten and the with that in especially competition we accounts and of kind and that very had base of create wholesale customer of was value terms we that remix to of months the and like them that certainly of won't the today. hikes rate continue And, [that

the and in pressures, kind little bit to deposit clearly of remixed our they get ahead want got curve. also sheet, of balance a So

Stephen Scouten

as in I are here? saw if this so rate deposit would we your the this tracked the mean expected that in in is the the you likely interest those term, lags incremental would talking range the on about, think you or just cost rate to be bearing near quarter, Okay, of XX% XX% a some more XX% function of from level run XX% hikes beta

Robert Hill

I think the tell. it’s to in early quarter

Stephen Scouten

kind is about? if of one referencing expenses to charges is said John of fair just number one-time this -- that enough. And think are the when you XX.X clarifying question, then the XQ, we kind to Okay, million, number the exclude to you in it similar

John Pollok

Right.

Stephen Scouten

I the color. appreciate guys, Thanks

Robert Hill

Thanks, Stephen.

Operator

Please comes question SunTrust. And our go Demba from next ahead. of Jennifer today

Jennifer Demba

you’ve that outlook pay to Thank the four Couple you, exit for CRE the Sterling? interests, is guys quarters. kind was you’re of production of and converted in of you two and question finance, growth loan next seeing downs on my second the M&A And what [brought] Park now builder looking questions Thanks. are good morning. Robert, you. for then

Robert Hill

you for your questions. Jennifer Thank

have, loan the The QX production First quarter, see well on really have quarters both much -- would – think had growth production growth, good productivity been first pretty on loan of we during same. but in in didn't I the I the and in and the levels unusual. X% QX it's we was with those X% were

little to So bit it’s hard a predict.

So now X% between place. and probably end will side, I on year, on side the X% low the take is remixing think still of majority of of is and like probably that the the we the kind higher

high as much loan growth the be terms have typically think our projection, XXXX, which on consistent would overall while, more range. footings we of single been I just move in So in digit into more

that? on else anything So

Jennifer Demba

that’s No, Thank you. great.

Robert Hill

know The me conversion around -- and retention just quarter We I the of a deposits around question, productivity. I -- had overall we've kind growth overall of XX% had front, X%, on say, base overall M&A South on have would but for loan really step of let minute, loan the back of Carolina the XX%. it’s of North went well. M&A kind the is Carolina what customer good last Stephen's growth had

feel overall, So behind to Sterling get markets the good. want Park these really us. really related changes We all

changed. much or some has very there M&A than front. get to to taking say those, help we place more an last we’ve months do in but can were prepare did get you in going be been capability clear. three to are us our how had ahead executive I’d the focus [Indiscernible]? that major We've and today And that do want six and more And had the Sterling whole three that? how the there’s in current seen you past integrate decks How Park in really pay some -- a while, maybe is were updates last very you QX. month There technology it You so of is while, do a opportunities the are for on we ago. Go place The conversations our shifted. get with years now we than inbound in and new see certainly

our So has been really that focus.

basic are look generating rate, Now how how how our we efficient at focus how do talent tackling, is continue the leverage really get we blocking that back expanding we more to and do at we we and do franchise. capital do higher that a our productive, and

Jennifer Demba

much. Thank you very

Operator

Instructions] comes question [Indiscernible] go Piper Today’s from next of Please Jaffray. [Operator ahead.

Unidentified Analyst

Hey good morning everyone.

Robert Hill

Good morning.

Unidentified Analyst

wanted go on to quick Just real expenses. the back

the if on you So investments or pace? just beyond we planned so rate, cause growth said then I and assume normal on you that, kind around – a any quarter of pressure or XX mean normal have I should that initiatives some -- that should or think third the may million the be we do

John Pollok

we Hey, for so just well next entering everything our budget kind we’re the every really of year. is do as kind I’ll every do year, is table year like John, season we start. into on of This

going we’re rate really begin the see So run kind right. number, expense get got so – forecasting. Durbin and dust next that. of to kind of the in the you'll to quarter, see in evaluate you We settles our The

end I think, towards of how exactly year, as more the we detail begin works. that we’ll to share get the

Unidentified Analyst

one then Okay, And all for Robert see right. you.

I last CRE closely. the call around mentioned a capacity, talked you kind areas you but also having of or so think of are about watching you’d billion

to also get updated updates, environment. so be mentioned on So in thoughts CRE any quarter, the I I’d current CRE you curious this growth think Thanks. limited

Robert Hill

CRE good. pipeline I to our are continues overall So think be very

churn, to I seek that continue kind cycle. in We think of, the is counterpoint

over multifamily You construction construction few certainly our seen the in a marketplace years. lot hospitality last of

Some we've of that certainly done.

step to mini seen is permanent tend construction to perm on go rate kind stuff. We of fixed You’ve really then the which market, that begin out longer-term and appropriate. the to do and

the have is some So, thing good certainly CRE the right the for would cycle continues it we to the I now for natural some not feels Sterling category if think and to me there in think kind it shut churn. We questions pipeline down. us I lot of a that probably that look like be obviously of But is grown Park good.

have opportunities base billion] in dry We have came XXX% projects. week, really great it's And our we borrowers. -- a some some now because was good last there. I down about CRE great powder, We've with risk of to [$X.X still one CRE overall capital.

carefully very something actually and full coming So lot key lot a area. that we are are of banks opportunities it's are powder we've there think there dry been of disciplined better around. We've relationships, a we of very because that the on used have in but some

Unidentified Analyst

All Thank you guys. right. much, very

Operator

from Our go FIG next comes Christopher ahead. today Marinac question Partners. from Please

Christopher Marinac

guys. Thanks,

how as you're sort new a business just this of sort opportunities Just Carolinas of of on were follow-up mix in of or in looking you're of change is you the also reflective the types loan early yields and shift we pricing, business pursuing? in mentioning Robert, John saw more part quarter at

Robert Hill

kind I'd let just me of say – macro.

can a you loan we're think, perspective color on yields. give I nice these segments, macro increases from maybe in what more seeing is John, but

a part there lot some We some remixing. of certainly CRE, of C&I of this our – our growth X-X owner-occupied really So some see and yields CRE which our were continued up. are this had we've quarter of to but certainly family growth step quarter, We were heavier – roll-off. growth the good were part big had our

new the of four. we was above slightly production year, on -- So coming beginning were

more like Now XXX range. it's in the coming on

on to and see our loans. new renewed improved So yields we're continuing

John Pollok

us you've away, refinances seen fees with down, in Chris, what as go rates add the history is go mortgage space would up. fixed as go our I

the We are big get in on believers the when to ARM deals this business balance sheet place.

ones So when pretty ones, and you're that we three more product, found seven product we ones nicely. five and like that doing churns

that option nice book into have we was some saw of so of them decrease business, loans the some those If we you some from permanent, of land you development sheets, like and going – on and the the them portfolio look pretty The keeping majority market, secondary relationships ARM yield right that there. construction the construction growth balance of clearly in going in overall on that mortgage deposit the clearly lots there's we're business increase new seen that's but kind that side tentacles of muted our consumer now, bringing in. of that

Robert Hill

the piece color, mortgage overall muted yield to John just so you give little loan some. is the a So said

there So you look the if to yields just X.X. commercial alone, the at segment loan closer

Christopher Marinac

as capital background. capital only? should That's through just just acquisitions general where guys. your for growth follow-up, kind are, you return helpful. as does think great, into That's And fall really Thank you generate you continue mix? would we and that you and all of strongly a redeployed that Or to dividends as very of organic select

John Pollok

through I wanted Park took Well, the dividend was to we you that our -- we the but moving as think to quarter, the dilution to Obviously TBV kind increase initial TBV we rate. get could the expense of back as want out the that run slight save, to our deal. the number back earn in back right We get this expense a to earn saw want from we we our get saves possibly direction. the get quickly in Park took thought back dilution of

make certainly quarter. You saw strides that this good

and I is but now board the on goal primary or an it think And important lot our capital continue to organic think of to dividends would there, find have of that be. to a of nice would off means ways we're I and I that the and part means, be table but will generate and try with that been story M&A don't be to our anything returns – always off really obviously so overall leverage having allocation, discussions think through

Christopher Marinac

very you I Thank Robert. much. Great, it. appreciate

Operator

of today ahead. comes Research. And our Bush Please Nancy go next question NAB from

Nancy Bush

Good morning, are How gentlemen. you?

Robert Hill

Good morning.

Nancy Bush

Question, mean, probably Southeast, question, I sort is track to lose churn deals of when and are this all of easy bigger sometimes in I in country that region going of the most at we anywhere the there M&A picture think look the in on it process.

have respond could have been step how tell you you consolidation the et sort us is cetera? had of what if opportunities? to you just all on, have back going immediately been by What impacted and So to most the

Robert Hill

is say that is been I market. in the overlap. there significant a market operate mean, those this larger wouldn't there's look impact, And there acquired where Robert. you start. of small Nancy, the have I and if really as where banks I'll share typically much there's not markets are we share at a

in really that wouldn't there's really mean, Fargo, they impact. how mean, where it's so, versus I the names And run we or consolidated into them Wells mostly low really are large and in that the alive, against. share an market those we typically don't SunTrust, Bank I The in that's I compete typically us have BB&T, banks. the come with markets compete America, say are -- new are the we been we

Nancy Bush

Okay.

Robert Hill

So terms I terms XX our here This of in what for of kind our of kind been of no your we've to strategy would of say years question, different. kind efforts. focus, in recruitment is strategy doing

from all larger where the I we some where so added and efforts you we tend that's compete this quarter, they look we really business. and came think to our our people banks, if nice have from at recruit recruitment that's

Nancy Bush

right still competition of expanding When value particular in the Atlanta the high competition, mean, sort you place do on you are concerned any there right Do cetera? presence a thoughts market going in that that's particularly about now? you Okay. I as et about about at your that – deposit over you competition have Atlanta? now, look

John Pollok

we're primarily operate. the think focused we our I priority. where markets are That's number on large metro currently one

We're pick additional number of of go business. a in good very clearly making major in think list. we're there Charlotte both couple calls there growth added then Charleston be in major a be is Greenville, presence there. made for there. corridor share. some list, infrastructure is four So got whole Atlanta strong and Charlotte, talent. a in tremendous few in. just the I'd branch will of but ago, have dominant a And We've in really the and you Richmond really the outskirts with from a of and we've been Raleigh, say kind up, I five potential. in that We've was We're there. innings. I all Raleigh that really if Richmond weeks, early our We decade, through the the bankers, that [Indiscernible] same we investment the corridor just our We lines in there. weeks innings can second, we opportunity successful really a where opportunity a And early is top

Nancy, Atlanta So I I be markets. a our focus, to think And is those on think market. tends great

that niches to have you're because But really a certainly get just never there's focus you find think that compete no is going in, would There's in five there today. market. to I to there. successfully compete to player be way top not to able to our be be

focus the and opportunities Greenville have of us Charlotte Our and really and places in like Raleigh. Richmond in front and we is

Nancy Bush

of I you that? expect think the to normal was that you your has rate expected. second the a could paydowns, just I exaggerated question is than be of second perspective this on been do whole natural in And be on? more of this increases and My give loan quarter issue sort coming or us mean goes which to on anybody interface condition

Robert Hill

we a Nancy, see a of of hospitality. saw X-X saw We family. its seen construction. amount I amount tremendous amount it even natural cycle healthy. CRE of the CRE, those because tremendous are see tremendous a coming of of paydowns back most is and in big I probably a not chunky it the part and popular We've is answer.

the banks And leverage capital. see lot of at so you you a – XXX and of plus and terms in

banks. play clearly that been So is of a for lot growth a

rates well. have moved quite has projects there's of up, an been it. slowed work as then don't just So I And think as abundance tend to that those

up to pause sectors. think moved a on those completed, think there little permanent see that companies leased those bit a as So, I part. healthy now of or I seems markets. more and insurance being are be And in to a I projects

that our was operating for companies a Now did up growth this and this really the we C&I part X% year long and time see not investment was quarter. business --

So -- and think owner-occupied our was double up digits. I

ones those components the So I were that really better then, a the mean, is balance growth, feel overall much that that over think last much healthier so couple that I loan about than we've seen years.

Nancy Bush

very All right. Thank you much.

Operator

question from Blair Brantley the next ahead. of go Please Brean And is Capital.

Blair Brantley

Most and Good have questions asked morning, everyone. of my answered.

and Just some just your want touch penetration on on treasury in to fee of update of terms capital thoughts income, platform with real mortgage? markets kind also

John Pollok

this to They beginning feel a their really focus traction. to past. what Park John. in doing the start. Sterling we're really capital kind what terms and I capital like tendency of some moved is I'll was had efforts On upscale loan markets, smaller markets from do size in get We've Blair, or loans of there.

we middle-market more mentioned see lot capital around and this at As looking there. clearly deals so we a larger markets business, the you treasury, of piece into opportunity we're move

wins really very see the really some side. the traction conversion. starting really through some the We're get starting nice very I gotten that. good about treasury to side, On to we've feel on treasury there,

the we and checking get the mortgage, one forward. of that really It's their way we that's in sheet more think owner-occupied you We business sheet. a to terms business. do account mortgage balance outlook core get it more find on of and construction for one ARM. balance I more another threes seeing on us fives mentioned sevens Like but the and reasons like like the our of earlier, funding, going We the mortgages. on I've going we

now business is purchase Our about XX%.

So that there's rates there. with refinance opportunity not really much going up those is

Robert Hill

just follow-up This comments be. to would is Robert. My

treasury commercial middle-market I but year. the in that space. platform talent as component, That been commercial We're bringing a our in really good some it's has great. is think last whole obviously rebuilt now feels over really

of treasury the very a now is on We've good. technology par. On own. lot side our got It's people

take system. All We We converted all in still. now been talent, integrated. seeing those really think State the in that year. Park South on and integrated between kept areas. and customers But success markets capital been They system. the piece the their in and will treasury not you over. systems the the be nice were have old the the of Our that's I all end But additional platform, customers pipeline we're

Blair Brantley

Great. Thanks. you think of with in, then back of to QX kind going And income could earn of just Durbin to any Obviously fee one QX that impacts mean, follow-up. run when I rate? it's on overall. view be kicking kind the relative or kind

Robert Hill

do good numbers, while I pace open, income that, checking come going many banks up. to core we're think while. take size to are swipes a take this accounts. that year. people be a to to Blair able our take don't debit think to but get it's We're going mean, fair I fee I do on card in, XX it's million to going there's that It's The number back to obviously going while. seeing a a news its we're is seeing a account growth,

Blair Brantley

Okay, Thanks guys. great.

Operator

a Stephen our ahead. O'Neill. go Sandler And today from Please is question follow-up next of Scouten

Stephen Scouten

just fund of guys. about of ability follow-up on Can kind you to of here to a down Hey, loan kind think One how I'm talk the obviously you question. were how And basis. to mix, wondering bit an securities end little you period balance might shrink about see think Thanks this lot. we deposits securities about down or to some the the manage that growth? if from book growth loan grow sheet

John Pollok

This is John.

typically assets. in time history XX% X. It’s our we’ve range short the could total if that total see long at been over you been term. think a we’ve since I been X% you down to We’ve look assets to in the of

seasonality it and have We we’re something I clearly be very to very think to as going second on quarter some see more. forward. grow in we will deposits the move begin we focused

Stephen Scouten

helpful. Very John. Perfect. Thanks

Operator

no are further questions. There

So back call Pollok over the to John I’ll now turn

John Pollok

time today. everyone for you Thank your

XX, the Forum hosting the on will Day look and We We to again XX. Investor to Bank participating you on in soon. forward in be York in reporting New Fig September Atlanta beginning December an

Operator

today’s Thank conference. concludes you. This

You may now disconnect your lines.

SouthState (SSB) 31 Jul 182018 Q2 Earnings call transcript