SSB - Earnings call transcript Q4 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 the measures. to and refer X regarding cautions Please forward-looking discussion regarding use non-GAAP of for statements Executive I would introduce will to now the Officer our call. Robert begin who Hill, like Chief

Robert Hill

will overview detail, review insight of the morning. near-term on was conclude Good an focus. begin and the performance from XXXX John XXXX South call the the I'll will year significant State. our more in and we providing Pollok questions analyst. with by of then for call transition offer research year a

While year digesting increased by a and the investments absorbing for the repositioning over building the in XX%. revenue were XXXX metrics continue adjusted very our mergers, were EPS three to Durban bank profitability of XX% upon still from recent steps Significant two and primary reduction be accomplished. portfolio, company technology two was objectives loan making made soundness of growth the the of a good.

around day company key was this on couple decades. The more been was Day slower Investor In we our last XXXX. December of clarity than to members XXXX built provide objectives. executive of has during of The with what strategic our and enters normal an growing of Board focus Directors. however featuring a three New hosted over team York in growth our purpose Our the

is XXXX markets. and have great success building dense to is three that the objectives goal all deep by Our of primary a franchise in in in

year. X.XX% and $XXX.X per net return tangible $X.XX X% the pleased made million million XX.XX% net equity. totaled in assets $X.XX a the We XX% equity. growth loan share Adjusted return commercial represents production net tangible on loan I'm representing per around for or portfolio particularly return For income and certain with the X.XX% the to on year, $XXX.X share on or a on was reduce strategic average the still income return XX.XX% experienced excluding CRE. and segments diluted assets diluted of decision acquired and X% growth

the expanded system new commercial Over the and by existing out several treasury the capabilities and customers rolled to platform, already of going provided winning have is led smoothly to the new we past conversion customers have new bank. success a months,

at for from Asset assets points the $XXX,XXX with represented up quality loan of assets, of remains ago. total record net year. year losses Non-performing levels X X.XX% only total basis a

Loans size type is the diverse than less geography has strong priority and $XXX,XXX. State funding Creation base are and for bank largely by of funded of an is Our of reliable in a been of average a portfolio both South deposits. loan granular with decades. core

was South funds key for up remains of cost advantage State. the funding Our strength a at competitive year,

company for quarter. as cash increase the levels to during of access lower stock Board share XX.X% call now I detail how million while result to a the to Board The common of also opportunity disappointing capital of As will some our growth, it an balance in of we XXXX. February over Directors X The on to profitability at year-end, and build. sheet put to repurchased turn performance a just plan buyback based continue with per Total XXXX. risk new downward Pollok a and capital provide for more move declared the financial a $X.XX of of X the representing climbed XX, million work. Directors the the John share did has stock quarterly has price, shares were of to approved capital shareholders XXXX for dividend record $X.XX

John Pollok

third Thank by revenues $X.X compared the this million to quarter. increase our see quarter to It you, Robert. was nice

by higher offset As more lower net non-interest interest revenues. than was income

on points assets revenues lower over Looking result mortgage first to Park on The cost its the and in full year, loan third points yield was flat loan market mostly acquired nice while banking recoveries. XXXX, X. Slide $X.X bearing the see And merger. interest Beginning income the of basis accounts outweighing quarter at basis the legacy total can certificates up the after Fed from earning of cost money then quarter and interest accretion, was included tied is interest lower acquired hikes, loan that loan transaction net The Total due the less bearing interest earning legacy second the of remaining which deposit. increase yield first primarily lower XX course with our decline yield the of down the liabilities card Darwin yields. revenue Sterling our increased point in of accounting the the back pressure were million quarter on the a of bank recent primarily increased improvement impacting our and was rates highest our in of quarter, liabilities assets to points. the to funding was is on decreased margin portfolio quarter yield our X The flat, in interest rate impact you X, total revenue. by XX with purchase basis X.XX% linked

repricing points X of of you for XX points. basis the total our of shows Our Slide basis funds quarter loan increased cost characteristics the some X to portfolio.

loan of We has X.X% our loan the third credit the at quarter in a accretion the see the Park recast third. benefited declined quarter during the of the Sterling in resulted can yields interest total Slide meaningful quarter, X fourth also in interest higher in loan portfolio, income that from rates impact first yields million in the book, and loan assets shows quarter. had a XX% our We the on loan earning X.X% represent to slide. on accretion which from X of this to release. in fourth prime contractual Our XX% shows quarter. the increases $XX.X Slide that acquired the yielding bottom compared LIBOR

one which had on of loan this release, approximately $XXX,XXX only additional This month accretion. in impact resulted quarter

million related exception with about income, the mortgage in mortgage $XXX,XXX Turning XX, to $XXX,XXX banking Slide about had less market on Mortgage categories these. of $XXX,XXX about non-interest quarter another income, These charges on on were from was income on secondary up $XXX,XXX million we with had on less $X.X lower acquired late income impaired $X.X banking. all from mortgage was and up up improvements secondary up strong in card With income. note recent $X.X staff successfully sale. income in Wealth service market periods. quarter. reductions an effort Acquired million $XXX,XXX in prior area the some we down improve credit loan million recoveries activity were deposit overall accounts primarily made higher periods, from seasonally debit future other and rights in and a the about have servicing profitability in to $X.X higher our

improvement XX.X% quarter. Our XX shown XX.X% showed a quarter nice the efficiency absence down from to the on Slide mostly third costs in to merger this due as ratio of

in higher FDIC adjusted related only expense. shows showed a lower million was and main expense quarter variances a by marketing ratio interest non-interest increase quarter in professional $XXX,XXX and improvement million quarter expense fees was slight Our were the XX net variances income non-interest The loan this higher. income as a assessment and and in late share in expense. $X.X and $X.X expense more efficiency OREO adjusted and $XXX,XXX lower only Slide offset higher linked non-interest than

for of the of strive basis. process on still non-interest are new be cost most we and $X.XX GAAP Slide to latter book of in as to over $XX.XX. continue XX totaled as XXXX. book annual for Adjusted Tangible XXXX over improvement. XX tangible professional quarter. XX% for this locations shown are share per closing of in adjusted in XXXX end for saves Adjusted increase per $XX the EPS expected reductions EPS increase investing quarter expense to strategic This this We limit to the $X.X million can the XX% beginning represents million XX% in which $X.XX. improvement. shows increase quarter earnings branch a EPS take adjusted on a This number $X.XX represents the share to $X.XX value a earnings growth XXXX are To $X.XX fees $X.XX. half XXXX seen initiatives shows bringing anticipated in $X.X for slide increase XXXX, while a XX% second compared quarter. value XXXX bringing totaled place These a about an to the have to XX about to

common completed million decline AOCI. the During coupled stock stock quarter $XX.X per XXX,XXX as had $XX.X place. we less with shares outstanding we dividends, third mostly of improved share authorization improve the received planning in shares the year-end, this and AFS and repurchased for have our to turn yields X AOCI unrealized the Robert common for some on XXX,XXX going improvements share quarter, the treasury a forward. our totaled existing shares declining we offset XX,XXX,XXX was the repurchase in efforts at in net capital Securities. common aforementioned capital share, shares comments. The quarter aid losses of in in the call X summary capital approval will the income, authorization repurchased new $XX.XX over I by in lowering This increases now million. to million XXX,XXX At by shares million

Robert Hill

your us like excited the a growing for asset and Strong about team the would I be our to in South to interest operator John. call the in appreciate and the future. business high funding, ability core ask attractive levels, great State. prepared Thanks do capital concludes cause This questions. We quality, to markets open to remarks

Operator

from Jennifer [Operator first Instructions] of go question our SunTrust. ahead. Please And comes Demba

Jennifer Demba

John for Pollok. questions Two

initiate two, hikes? branch outlook net for year, about what assuming margin this First, to you get closing And rate your no we you interest talk prompted the effort? can

John Pollok

the start branch closings. I'll from off

was gives the our the this over entered that integrating is, and our in same. think spent us companies. about earnings last as see focus more year And of a think to really adjusted of the fourth it Investor I we to are Day pleased internally. we've GAAP shows kind And lot really quarter time earnings time I and it talked few we've at years

in So, while I still limit think company. in expense our investing really goal is growth company to the the

a of if brings locations, the branches. down look year us at XXX at piece XX so of started you XXX. to We that branch And kind the these about

mode, branch we part M&A we So, we of as to kind just much in rationalization is before. something stay on. focused did I When got this weren't of think

to try offices reduce going expense So, to is FTEs to nice XX, XX reduce, and we're really side. another that which that branch the by structure. to rationalize we're going continuing from that's see to Those

branches. So Jennifer, on the of kind just there staying very I focused think

XX% about you are seeing you’re are so about customer side our through of now deposit digital account And you of look and of switched include is over to the are volume XX% habits switch openings on the digital channel. there. the now, company the side our If kind at deposits loans really digital of really

So and you’re just reasons that’s seeing kind of more there, so why. of more the some adoption

margin of the kind outlook know tricky right. You just is

little help know drive inverted the still fair acquired yield curve amount the You going Park in is Sterling to middle. is have accretion release the a a coming obviously through, of that. We

hope I to Jennifer second as of begin So in know the we stability half see some enter the that the margin year. you we can

Operator

Please of next ahead. Inc. Our Stephens question Stafford comes from Tyler go

Tyler Stafford

start Maybe to John started. or on the Jennifer expense topic just

you So expenses you Investor if I'm expense range end bottom incremental given will laid X% the the if if help they’re you to closures branch the year-over-year growth target this closures? X% see that wondering branch towards out could for just at the to of decline the that Day or actually get year.

John Pollok

to It's in tilt sure. tower, really the year a not little early

Tyler Stafford

grow Okay. level And income high simple would year-over-year interest from the in net just appreciate you perspective, disclosures around new recast, the and the but then to a I expect XXXX? accretion

John Pollok

of growth, would depending the be latter I the I that. as would we think enter to on we think able half do should the year,

Tyler Stafford

was And the balance of then there the that you'd end sheet side year deposit to just flow on XXXX? seasonality towards on back me, for lastly the expect the to start any

John Pollok

No.

Tyler Stafford

Okay.

So those weren’t balance seasonal? deposit declines

John Pollok

got appear It - we've got, all. just bigger today. doesn't at deposits we’ve Not

balance is year. to accounts. good issue job harder we've Parks, seasonality that We're getting got judge. the into really more the now full opening deposits. checking doing kind some I our seasonality year larger, as of sense sheet, of remix first still it'll of customers little mean make I But still maybe again, that's kind think larger we a this Now have so a with of kind

Operator

Our Scouten next from go O'Neill. question ahead. Sandler Stephen of comes Please

Stephen Scouten

you what to ex and look production markets as curious your runoff. I'm your had So pretty in kind you are customers like it seeing the obviously strong acquired guys still and with of organic growth

in seeing customers doing something the us telling were overall think think bank just most kind you're don't markets geography? and seeing I hearing economy curious, the your in and borrowers obviously and how and XQ, from of earnings So, we're in your you I'm but what is

Robert Hill

is feeling. purely it because - a of back try this thinking pretty to had our the where I was uncertainty and if really, pretty markets It out and were I healthy in economy see diverse. a time businesses in still good But I'll start. they to headed a was that really, company. and figure lot lot Stephen, It very local were was component So It is in think a could QX, company an Overall, lot pretty interesting. and reins pretty, how a kind our of with Robert. of a got spent of international you pulling insight and the steady. domestic was they

that see didn't just uncertainty. of level same You

on signals impact a saw The was of most company the So construction kind you some to operating in our of tariff huge type board the not companies, clearly cost. that it mixed is across markets. depending but deal in

So I'd across you We little of impact pretty and so little bit saw more probably heard create But a spottiness that a headwind both overall the bit signals say type here board. of is pressure, wage of we a that do skilled, the jobs. slowdown. level entry What consistently. mixed uncertainty some will there

for the with but our down Now good in little lot, half pipeline said a XXXX that was not we bit, a saw really a month December slowed second of us.

moved our into ended year the the began pipeline we and strong we good. popped year pipeline this as pretty up So

Now have loan about of seasonality on do little typically have we we a the deposits seasonality do on bit side.

So strongest, continues quarter typically loan not but looks to pretty, demand pretty the is first our overall steady. it be like

didn't across touch pretty off the I Now but board. residential the is on much side, residential

many all And as as to of much XX%. are XX% so we're competitors off our not

digits. single I think low we're down

and having it’s we there. All residential but production softening So production are of seeing than the markets. there enhancement good fairly we're we’re our still although softness still good fairly softer having many in historically

Stephen Scouten

or so, Robert. the like we thinking see to benefit accretion that on I core basis Maybe lumpy to That's a was about NIM about be ex a kind maybe throughout with XQ there. how ex core so of really then Is this you, second, color. quarter if know any the to nice NIM or additional and we a something we can accretion, predict Thank move maybe mean that in that for the think better core of and accretion hard XXXX is somewhat don't rest but helpful continue looks X could points the some I get going by year the help hikes? just it of the basis December hike

John Pollok

This is John. start. I'll

to We're about to excited think loan starting almost I we're yields range. thing the loan new really we're that up creep see yields up. is the the getting now XXX

And so, that. see we are to beginning

funding I still side, the challenging. think on it's

bit little over that's to settle time, an out. all going still that's unknown think I a so, of But And there.

to we're our protect as continue we've base. I to said deposit going think

so, over the up. in. begin yields excited settle But that we are are some to time to finally we to again And we're of loan move really see will

Stephen Scouten

the all incremental think that you if repurchase buyback then or the me so be would would want we above shares bit buyback on share there level capital threshold how the where can that just trading remain around the assume from is authorization or from stay in the this is maybe to you a pace stay aggressive executed of here? to you below looks about And still for with like little repurchase here. XQ lastly guys the stock It fair

John Pollok

start. I'll Steven,

be today. continue active to to going are we're we where with think I

of on capital. is of value tried clearly think real that it lot the earnings, things one we’re I real and and everybody have optionality in impress our company is real we we capital, it the is is not accretion that a but earnings, some generating

accretion those we at you lot rehabilitate to a to hard when pretty fact them. work In look of loans have on

for we quarter. mentioned fourth on that about we the growth the X% it side So our as was to see capital continue rate

we’ve optionality do So got, the we that. got to

We’re concentrated capital. the CRE, not overly risk based in

I levels to to end going the of continue of share of day at the repurchase. these think kind be active on kind we’re the at

Operator

Catherine question KBW. of next from go comes Our ahead. Mealor Please

Catherine Mealor

a of have I questions. couple small modeling

what yield. and the is you, first To back was $X John acquired on we at credible about quarter drove The decline this $X.X lower to know base I paired about noncredit million. of think do kind recovery how of accretion million a think that to for Is impaired the about just accelerated that better next this non-credit hard are that kind that is predict? year level book. for acquired how

John Pollok

predict. the seeing generated quarter in the that of things a to quarter down. couple payout bit loan and little the we’re that had third change. we then a on hard A large the they’re Little of on just fairly remixing One

of off, of kind you coming acquired impaired accretion loan if that less in. that So non-credit just it course and acquired that’s at when slows slowed look run our

did but event, to we know going And over the down not time, onetime that will the you didn't be it’s that trend of a to having the some so we slowness see the of kind end of little have run-off bit some quarter. but and this lumpy. day slowing Catherine continue there at clearly It

Catherine Mealor

only clarify was accretion about - then Park about because a but $XXX,XXX month. one And can quarter, that the that this Sterling was you additional I in said from recast, you think there there

a that million next And should thinking I'm from that full right? of so $X get quarter we about quarter? for that should - bump we get another

John Pollok

that reasonable. sounds Yes,

Catherine Mealor

acquired then non-credit impaired - the or credit buckets? And impaired

John Pollok

one the repeat more me time? Excuse question

Catherine Mealor

credit impaired impaired bucket or acquired bucket? the in Is that non-credit the

John Pollok

impaired credit acquired the in bucket. That's

Catherine Mealor

is the quarter What new average added $XXX borrowings? those you the after you of - rate borrowing. that end at was then of a so million And of the

John Pollok

$XXX About million.

Catherine Mealor

last then you higher maybe question And was mentioned of in that reverses modeling market? full capital there How fees. that were much one, a other - was

John Pollok

hear I part How - first question? that much the didn't of of your

Catherine Mealor

mentioned - fees? specify fees market? versus How you other the were much and there in BOLI in BOLI capital way some press markets much - capital the of release And increase others so any how with the to fees that higher is

John Pollok

think don't right. that's I No,

say the fees driver. other book acquired that the really way note know at You what the because accounting would a with note other of acquired up. was we sold it loan back our in the is were the and some was Unfortunately, that drove that's out we And that But and the category. loan selling have that works as looked should NIM. through come really driver up

Operator

Our next question Research. NAB comes ahead. Nancy from go Please of Bush

Nancy Bush

getting you. its seems the Kind negative more we in positive seen both for of of long industry for to some aspects How devote than you? banking about like technology? I I've It be competitor here mentioned forward-looking for FinTech sort to a about FinTech months, last FinTech, do the have FinTech. And be in point can positive account now as tipping thinking few seen time. quite question investment need to in of how mention you've your for or you time seem And a subject openings And is, heightened have of the there a it digital much to et some cetera. for is and

Robert Hill

treasury our our opening, start. core half out way core That our what to of we and customers that some we in account that. with management of Nancy other We’ve online through So, included We've XX got of some been we what probably the to did Robert. outsourcing things do really traditionally aren't that out is of do We're that we online wanted lending, in. or ago. in getting probably digital things business have things space. roadmap this wanted months XX to laid months I'll terms

to more laser really But make. from side, our technology for So, is the I’d almost goal it of focused in our pay out talent Treasury we've - just both on And of Treasury from knew the one more and operate It help huge our company the a say, John made was expense in implement to deposits we roadmap. efficiently things of XX% really of see you don't execute ways heard on digital investments that, to we of just lot unique investments like as have going we’re here. kind total to to was - find now is what deposits Treasury ago, internally of spiking our accounts And laid got and our or our kind years our and about the of so transaction volume. of deposits. dollars accounts, XX% cost are

account XX So I platform we just lending platform online out months. online the the in billing think and last and rolled

both fairly digitally our channels, So lot price-attractive company last is the a start, there's a our is point very there customers with digital And connect. to continues make now have more progress make and XX% we just a we interaction two-thirds really can also through but But market to that customers. our meaningfully way I'd are there. grow our relationship of marketing about to digital which with

business and increases is can think making growing the efficient. with more but it So absorb the ongoing and I we cost

Nancy Bush

Right.

find So invest disruption up there of you see on? suddenly while point in? to a able stick plan had and here are being applications some a don't you're yourself things for to that of new to the need not you've You going and with see that new popping as going kind

Robert Hill

I think technology the costs seems manageable.

of and accounts customer communicate your a I number base how those customer, do our it's large do millennials. you with penetration it, is customers the do how think how largest interact you market component our our with you about new of

front think we of are things doing there expensive. I that that So that are aren’t lot that on

I in to think of getting foundational a these it’s shift some place of on and in needed pieces more that focus it. we time mindset

Operator

FIG Marinac Christopher And ahead. Instructions] go Partners. question of our from next Please [Operator comes

Christopher Marinac

just to year primarily this centered or new the Richmond hires about they hires footprint? new in and about I talk be will and wanted and the ask perhaps Charlotte

Robert Hill

would changes talk well for invested number. we've have talent that's in the and can the maybe job the net Same those The recruiting that's but a Richmond FTE the overall company. have the commercial of we've for about Same there - specifics the both footprint, parts kind really have much side, for in in didn't we focus net on Yes, a is Charlotte But the thing in of presence Raleigh, in John as a banks it we didn't start wealth done I'll but teams other as strong the Those say of in then lot having kind year. so wealth as the company the and have wealth the great areas that we're I been as talent the bank. there primary commercial investing added well. We've thing and businesses and have of market. places. Richmond, markets certainly the - presence Charlotte in acquired done really good success well maybe those

really markets. across the be primary those three So would board the

is us how other in management, we areas great risk technical be online the The been company think mortgage lending way our to we and talent able digital some about company, change be able deliver add to it to about inside company. been to our operate help it we've we deliver. back think of number hire the we just way We've the a how

So expertise the two of have then been I’d Charlotte, more technical say Raleigh, areas. the kind some and primary Richmond,

John Pollok

to down the then We FTEs quarter for linked closing. Robert branch following were another the from going XX we're So just what said, down XXX and we’re XX be year.

be and to more there continue focus. efficient reinvest but the clearly a in side, will be So continued it’s on I to trying think to then you sales trying know on just focus

Christopher Marinac

of John timeframe? last that kind And, a that collect on realistic just on year a most three that, reclass the sort Park is Sterling, of of to question the timetable is the of

John Pollok

I think is. it

not mentioned we loans out have as bank. it, things moved of get accretion have of is think of we you and these you some extension do earlier and Chris. But sometimes that, I right, rehabilitated some the on an I it one about free, clearly the

as get a out will of right lot lot drive really time, a longer to a period of year smaller. average balances accretion time the out three a sense, the So now but could life. go think That weighted the I over continue makes horizon

Operator

Brantley next Our Please question of Blair from Capital. ahead. comes go Brean

Blair Brantley

on I a follow-up just CRE had commentary. the

how and of looking kind the just things like opportunities you of of what that. as some and at flexibility have, segments just the those and market by given you're pricing better to view Just too, are a structure wanted and different

Robert Hill

look year, our Blair, think John was if lot churn I'll last a had start at only. of our lot it in XX priced was somewhat the look overall we’ve competition. rate you CRE, you at pretty irrational churn, in. at CRE But and There’s years was but lot really A up production was seen and if We production of commercial our nicely, can chime portfolio. day transaction Charlotte and a been XX that that interest and a was fixed of, I it the market it flat. years

side here company. It's or are of a area the the have we CRE long-term. and growth is not on very transaction So, But high overall, I we think spots. there. for robust relationships found out, a we not that the Most that our pick that just

production, think CRE but I we're it over XXX% little risk-based will at consistent a steady not, to capital. be we're

pipeline firepower power us markets lot growth being a firepower in demand most good selectively That of it's won’t billion a our you're so but not going that our still remains but move so up over have either, to happen see for opportunistic. either. negative not it's XXX%. to CRE, dollars of healthy, We huge but not There's in we're number pretty

John Pollok

and right. would And slow you run-off is, I Blair, what know the add

to that have of the just some, we with kind that's So, see, through beginning get so we're I already less balances those help should what we think year. runoff as

Blair Brantley

there. or asset mirror average loan of the growth would balances, expect you of terms in then that to earning And any kind growth what’s, update

John Pollok

No.

I mirror loan growth. the a think would it fair that's statement. Yes,

Operator

There further Pollock. now to over questions, call are I'll John turn the back no so

John Pollok

Catherine's thing question. to One go on to Yes. wanted back I

non-interest that markets other the boldly on increase. income Catherine So capital

year were reason them full Park of and month thinking got we've Thanks we everyone for up was fourth in today. had So last got that's this the a for remember that of year, year-over-year quarter main quarter, only time talking you you your in Sterling, the And we've if course year-over-year. - full quarter. linked one I of a is is

be the to to Florida XXth. Financial in will We look reporting KBW Services participating in forward you We beginning the on soon. Conference February again

Operator

The conference today's concluded. you is now attending presentation. for Thank

disconnect. You now may

SouthState (SSB) 29 Jan 192018 Q4 Earnings call transcript