SouthState (SSB) 24 Apr 202020 Q1 Earnings call transcript

Company Profile

Participants

Robert Hill	Chief Executive Officer, South State Corporation
John Pollok	Chief Financial Officer, South State Corporation
John Corbett	President and CEO, CenterState Bank Corporation
Steve Young	Chief Operating Officer and Executive Vice President at CenterState Bank Corporation
Richard Murray	Chief Executive Officer Exec VP/Chief Credit Officer, CenterState Bank Corporation
Jonathan Kivett	Chief Credit Officer, South State Corporation
Daniel Bockhorst	Chief Credit Officer, CenterState Bank Corporation
William Matthews	Center State Corporation Chief Financial Officer
Stephen Scouten	Piper Sandler
Catherine Mealor	KBW
Michael Rose	Raymond James
Christopher Marinac	Janney Montgomery Scott LLC
Jennifer Demba	SunTrust Robinson Humphrey
Kevin Fitzsimmons	D.A. Davidson

Call transcript

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Operator

Good morning, and welcome to the joint South State Corporation and Center State Bank 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 Will Matthews, Center State Corporation Chief Financial Officer. Please go ahead.

William Matthews

welcome. and morning Good joining for us. you Thank Matthews. This is Will

Hill, Joining Pollok, John Jonathan Robert Dan me this call Kivett. on John Steve and Corbett, Bockhorst are Young, Murray, Richard

joint it pending companies. results quarter in be to of to we of our sharing order to thought the that During hold our merger, in a both information conference facilitate first interest call discuss investors appropriate may to

so state will operating first me do closing. two continue that we separately and of still Let we course companies to through are

While and making we and integration on we team becoming separate actively are same closing. companies, plans the to upon were managing believe two one engaged in on company we these great planning look forward are officially we progress

we our it take remarks will each The for we questions format provide individual then open performance that about and up we’ll for will which this call jointly. be companies’ prepared will

you person, We question a will to that both. it when or a you ask company direct either have a

to multiple travel will cooperate Coronavirus, We in and locations a difficulties thereof operations our presented from with we our patience phone hope we multiple with the by Given thank locations. your in calling due teleconference advance and you different inability speakers the each from technology are the for and holding to lines.

company investor company’s slides we each will that to Yesterday announce on We’ve presentation posted call its website. issued on release each a press XXXX. refer evening, each earnings for also QX relations today’s to

Litigation the information rules. and subject Safe risks Harbor forward-looking Harbor more and in XXXX. for such meaning of South I statements which release the include and Private and may may comments to by make Securities Center language forward-looking us. beginning, made management about teams Before to are affect Please forward-looking press statements State today’s Reform of disclaimer And uncertainties may we both presentation remind want that of you Safe the within any Act the State review

to John to joint South will team the remarks lead John? call we CenterState’s Now prepared which, will Corbett. Hill take over after do We’ll deliver over I the He I then Q&A. turn Robert it to and comments. turn his State’s will

John Corbett

Good you this you families our healthy our Will. our share am on your to efforts going you about are joining Hope merger. an and update clients this on morning. our during crisis; you, morning some and give all high-level us support and safe. for talk then remaining thanks business Thank I of also pending to employees and to humanitarian performance, observations

in quarter about a with the produced still produced after earnings. loss $XX first This million of the of an reserve, the at CECL tangible of tangible loan elevated strong levels Capital XX%. special is CenterState a remains common XXXX, after-tax $XX a equity equity million Even after common For pandemic. of the as result on company return provision X.X%.

to on this Will our to both State pandemic, capital equity. and begun forma to ability Steve In have cycle our response travel South with dividend or a the pro Bank our through impacting basis without common confirm stressing position

downturn a this capital. stronger earning decade pretax, credit the for entered conservatively with we State a surplus ago, significant South with with Together and equity book much borrower underwritten pre-provision

at Both tailwind a provides to profitability. our in of rates and bright business. sales levels and as to the business interest spot mortgage businesses record be markets these Fee continues drop a capital operating of income both are

and in liquidity by during is represents is which company income of $X the non-Covid-XX X.X% deposit the Fed of strong with quarter. billion The X% cash over assets, above growth driven Funds Fee goal. XX% now also our of

XX an net basis points ratio only charge-offs. quarter of good the with NPA in As of X for asset quality, and CenterState points ended shape basis

quickly stage mandatory to relief shifted center during While providing of more the as we the our and urgent to and other health in and financial important, our earnings are took attention shutdown. priorities clients always our April online safety March teammates

the kept XX% virus only our during non-branch exposure working branches We reduce since. our of limit of them we drive to employees. to to from shutdown ever open the the branch have but moved the to remaining home staff through been service quickly

working Fortunately, mandatory during our from there teams closures. have hurricane experience seasons, when home were also

in and were our financial crisis clients managers offer personal are on a proactively to really assistance when and the that the Early our relationship we branch eager lives. the are clients. our in hardships Despite on Times managers us difference those most the vulnerable. shutdown, to calling team, provide relief an of their to they most make depend began campaign can our organized to

we We for and withdrawals, increased waivers limits to our up distribute the protection ATMs struggling clients. offered loans began fee loan mobile small to deposit payment ramping paycheck CD business and process deferrals,

days a the to rethink banker’s club at in ago, had workday in five in midnight. a to like golf I’d bankers it in time XX XXXX country day, Nobody suggest predicted with week to their hours preconceived this bankers nine at a many that like a I years seven notion be term is afternoon. of I hours. would business XX after hours the When started desks

weekend just PPP forgivable the Easter worked That bankers in our the was program a days, by two XXXX precisely billion occurred the around for of loans and as after two what processed Saturday Easter in loan is weeks and the was $X.X loan proceeds crucible to CenterState SBA launched clock Sunday. in SBA. the

program relief $X,XXX. weekend. the million over for in it of our small is $X.X volume that cash flow three The Since our just a X,XXX We loan billion generated in largest and clients. the smallest that we loans business put nearly loans of for $X secured was total did a CenterState month perspective, times that holiday launched, was the team it and

pride for stepped during up publicly everything national they appreciation at stores included schools. secured patriotism like doctors my and XXX,XXX crisis. churches for retail our I’d to Borrowers all, were They express time clients from for team and CenterState continued there to to and a our In and a and plumbers, of to paychecks workers date. to their

State the planned. and between We vote we Bank CenterState shareholder Bank that am then SX South as the and merger I happy May have the the filed XX. scheduled merger there schedule. of proceeding to Finally, is confident third that quarter on merger feel small schedule ahead the the We also will we and close complete in a is for chance can announce

leadership as and to Our companies working executive continue January integrate joint South one began in Wednesday and two before announcement team the State meet this CenterState to every we crisis. the together during even team

or are can overcome strengthened teams new new crisis can of stress times are driven when opportunities when are there the be trials together. this apart be that like and through teams Periods and fragmented people they

lining silver that As and our in team newly combined relationships one through have grown another personal executive our our South the crisis, State trust collaborated stronger. with is the

produce shareholders and We our and for are it eager to to to generous to returns high-performing our clients communities together serve do as one and move forward company.

Will, over to quarter on you first for color the financials. more

William Matthews

Thanks. John.

margin down QX. points interest from X.XX%, net basis X Our was

points core rate team progress accretion were ex accretion was basis down X points. again costs our made NIM, cuts. points, excluding XX down X after in Our X.XX%, good were basis basis the all deposit down March and interest-bearing has Loan yields

in day With a versus by of fewer one driven million record $X.X in income quarter accretion and our QX lower income revenue businesses. spite for non-interest

revenue Mortgage and income a had $XX with markets capital had is revenues. which million as in business fixed $XX.X well great quarter million. of correspondent Our

change credit Non-accrual total PCD to loans basis of $X.X CECL. treatment net loans basis and accounting along new with million nonX-PCD at basis the non-performing four Turning We X of million the XX with charge-offs of to assets bringing ended previous the with accounting points charge-offs million points. $X.X Absent had or the $XX.X annualized X net quarters. NPAs went to or ratios ending points.

million $X was million $XXX reserve points, unfunded or CECL for basis additional initial XX Our commitments. plus

losses loan million light $XX.X increase commitments $X.X growth. expense Additionally, a quarter net unfunded little impact $XX.X the us economic end, recognizing total QX during for on million forecasts, made having spite at very million, an only Coronavirus and the expense and provision the to of credit in quarter $X in of million the plus of reserve of additional charge-offs in essentially for of for we

credit the brings over unfunded $XXX.X a ending for the the which adoption XXX XX.X% side be of Including basis allowance. in a points. this our reserve X.XX%. represents commitments for This resides CECL losses allowance X liability increase to would the sheet, or day This million balance

also a of on balance have remaining loans million Page release. We on purchased for sheet the non-credit disclosed of as the earnings $XX.X discount X is

non-interest Turning expenses. to

versus cap. $X expense QX Relative insurance so the deductible adjusted. QX often a higher the to compensation $X.X QX our FICO including up million we to XXXX, of higher Our higher health in million $X.X plan, was annual are resetting expense QX high and self-insured in have FICO million was in efficiency XXXX estimates as due expense XX.X% ratio

included reserve unfunded $X our our QX. $X.X CECL is line million commitments to up versus other the expense and in million FDIC was Also NIE assessment the increase expense

tax recognized NOLs back years million our to under a In prior rate, terms of carry $X.X benefit Cares in to the the a rate. Act tax ability with we higher

out first benefits million some from tax in We had also that. excess and in equity comp the pay quarter $X.X recognized

loan growth and in non-CD the formation. while capital We provision unfunded DD&A did sheet and growth spite only grow $XX liquidity, the growth, for and reported we of credit asset losses balance in ROTCE was of our an to And X.X% XX% the XX% Turning quarter. commitments million deposit to X%. had

did loan So in QX. capital consume not growth

ROTCE will kind we’re able earned income almost While quarter. profitability a XX% full credit of margins pre-pre pre-provision the will rate to quarter pre-tax, our of with million ROA in in this cost equates environment in zero this for This of were pleased which and $XX to a have the pressure X.XX%. impact over earn we industry course,

that the CECL QX ratio pleased CECL X% and the of also of adoption north with are quarter provision We ended heels a expense. on a we TCE higher

of good strong position, of deposit addition growth, capital performance during quarter almost core strong wallets the a a with to ROTCE healthy after all So, a that. our and respectful XX% pre-pre

I’ll to now turn Robert. it over

Robert Hill

with a are your and It’s your to coworkers families morning. be and you hope today thatyou, Good pleasure well.

and strong solid added first deposit Our was sheet and liquidity, revenues, and growth provisioning loan with balance quarter increased losses. strengthened with record a for loan

results were managing therefore in provision we way the earnings on minute our very will $XX our by more levels, is this felt loss important. color bolstered loan record and economic for through financial and at environment our approximately period. bank John sharing pre-provision start million. by a We just provide preparation will leading While that was Pollok the

and is Our the businesses reflection heels of has communities of times part of the tough be the on foundation day. our culture it the a are this This to we to bank job the people, bank solution. When continues and our great since they been serve. the of started through is was going depression

weeks few never support last bankers the our customers to like Our and served have sacrificed in before.

in gained crisis and team through different, team Beginning February, response response natural activated our Covid-XX. while was in a crisis from is us the number this experience successfully to late guided disasters This disasters past is invaluable. has of

like for the time more focus prepare our weeks long-term would for relationships has making we can and are be about to challenging remain forged to future. based period, and past view what decades to for we we to upon see committed I few talk this decisions been our as doing come. where these Throughout this

in Our focus two main is areas.

our customers. team and Our

start me with Let our teams.

this the enormously to addition All proud to this working the third our team our clock grateful to ongoing I the and merge handled team they’ve of two crisis. has running company, around the in still we how our while, the working of quarter are of been am In very great for customers. assist year. companies efforts

strong locations of in the we’ve Throughout are past, inspiring. working respective the our the has stronger are and as at South responded as team State services. open company, continue and team our providing sacrifice today the almost incredibly to home than support with branches branch work all from and we’ve with through we of been to teams been never as call The of drive XX% employees stories a certain their

have a just employees Covid-XX. impacted by fortunate We have to few been

frontlines, economic healthcare are first it we we our not responders. while customers, As among are the relates to the on

and loan We whose businesses. and relationships a medium-sized our are up made businesses crisis This deposit across of are no and of footprint. small individuals, boundaries employees knows hundreds thousands impacting their and company and of it’s

access priority. branches customer our our our bankers top been Providing and has to

in a We we experienced outreach person in digital consumer digitally task and both channels. develop increase to significant forces have to areas Early our our delivery responses have expanded in on, and our and customer mobilized both needs. commercial

to and and in Job to on our of weather have more for facilitating customers program. and commercial customers are the times the and providing We found deferrals communication of interest is today through that crisis, principal they even to one the businesses storm. call consumer loans efforts positioned been how understand PPP proactively was important. small focused have Much

areas principal balances. took approach processed of interest proactive payment We’ve with approximately XX-day and interest We deferrals our and of principal total of most X% a deferrals for XX% impacted.

These customers pay, deferrals to to through deferrals this and were but made together our of instead inability more manage to environment. because have allow the us with constructive work dialogue a to these

loan program, In customers regarding for a almost our to have approximately average the support is size total we for assisted about customers and $XXX,XXX. welcome the their Today, X,XXX PPP has of through business a weeks around small team $XXX worked programs to our The new clock bank. million. existing

ready as programs deliver in need those stand We are to them a customers. our have we assist opportunity to great and developed, to other

State very period in good this South financial health. enters

been, principles and profitability operating Our growth. have always soundness,

capital quality strength, funding, and liquidity high loan core and to a speaks portfolio. deposit granular Soundness

is this decades. have ways have in While been crisis others we certainly this than crisis faced, we decisions for for different preparation many in making

I both and the teams. to thank Finally, South want State CenterState

becoming serve for opportunities operate this and the for we we customers together even during time, the as crisis we one that are team. and the are experiencing compelling This more separately as our makes have partnership is and strong ahead. While to today continue we right our banks confirms opportunity this

financial State will in Pollok call John turn over first the to I quarter discuss to the detail. now South results

John Pollok

Robert. you, Thank

and active that are ensuring we risk our base of shareholders. of the mentioned, very managers teams needs taking care customer have Robert our been our As

Our than the different what quarter the very at of of standard under sizable first by CECL the to economic year. earnings we provision impacted this were implemented loan start losses a imagined new forecast due

some the the as returning quarter. provision compared asset Q&A last losses to of With portfolio this Credit you Chief attention we this give some many $X.X help in million Kivett, $XX.X for of have insight totaled and segments added the various to million, quality, during to speak loan Our our quarter to will quarter Jonathan much these our loan Officer session. of slides

what balance Beginning strong million economic levels number believe share. capital. with very is liquidity begin we We this net downturn totaled Slide $XX.X or a sheet, of XX, with solid per income with our and $X.XX

$X.XX per adjusted totaled $XX.X net income expenses, million Excluding merger or share.

strong our in provision $X.X interest of income growth net losses, much and total impact revenues for and a loan the Without higher non-interest income as future improved performance very million was with $X.X million respectively.

growth basis XX, over earning as number X our margin linked $XXX average see can number was X.XX% of On X Slide on you a loan net cost $XXX XX. Slide basis interest little Total and assets seen declined our yield funds to increased assets points. over interest million unchanged the quarter on points of million with as earning advanced

during our $XXX our During liquidity borrowings added pipeline mid-March, loan anticipate a to the of increasing, We demand million. much will be surrounding Program with under with we SBA current position Protection million. second the $XXX of Paycheck totaling new uncertainties Covid-XX with quarter

or can mature. income adoption on totaled and Turning to a number accretion result In absence of pool accretive remaining change XX, as pay renew pool from and be see loans up of will any $XX.X down the you $X.X million, million Slide accounting. CECL our the the loans acquired the of accounting, discount as

on on Then portfolio. the $X can Slide you acquired that number $XX this discount see remains million XX, billion

income unusually $X.X amount, rights servicing-related high this banking hedge million higher as fair million. to was with higher this increased mortgage and The servicing $XX.X the decline secondary $X.X of higher. in gains our income $X.X non-interest the significantly mortgage Turning mortgage by income income by outpaced number the the XX, Slide income million value million was was market Of quarter asset.

the the additional done treasury job a during application of yield than course has increased mortgage Lower the ten much volume. is fantastic result year team this mortgage declining This significantly and activity rates of our more processing overall period. significantly the

no $.X.X but million quarter income non-interest loss through in recoveries to loan and the the contribute loan post-CECL now Acquired world, totaled provision. longer flow this

quarter was this capital group our $XXX,XXX this and declining income during higher strong swap markets of had Wealth rates a activity back-to-back environment. quarter management

non-interest net number all On XX, the in Slide changes you expense can see categories.

expenses, FICA of $X resulted higher non-interest about million, New merger-related $X million which Excluding adjusted Year. taxes the increased in expense in

was by expense. category to expense higher income also positive passive which other The on has it million $X.X the of related as amortization tax expense loss higher investments, a impact

efficiency a primarily expenses, – in XX ratio revenues. shows decreased Adjusted for increased number XX to number our due slightly efficiency XX.X% XX.X% XX.X% Slide increase to Slide efficiency $X.X merger shows from our last from the total to XX.X% ratio million quarter.

as primarily share this are Until adoption of we number Slide in XX due at Tangible our CECL. rearview do the time. anticipate purchase on economy impacts to the of not on quarter, value linked Covid-XX shown declined book mirror, $X.XX any the reactivity the

I John will now call turn Corbett, the CEO of CenterState. to over

John Corbett

As question a are please and you our I like would remarks like for ask concludes appropriate to ask this operator call This reminder, would questions. direct to call and the your the open you I respond. that to remotely conducting we individual prepared the to

Operator

ahead. comes [Operator Instructions] question Stephen Please Piper with Today’s Sandler. first go Scouten from

Stephen Scouten

lodging maybe guys much Hey, portfolio as South but I of you portfolio how noticed inbound deferral everyone. deferrals? first guess, in would for both requesting wondering good loans under maybe to question reaching that State. other deferred for I I'm guess, XXX% well first customers teams, with morning all be I out of my calls as the that was versus particular,

this various of there on why like as then for book? like kind haven’t consumer companies basis been I’ve a the large but side. commercial seemed percentage you a resi things think XX% pretty the from percentage kind deferrals quarter more And different seen of

Robert Hill

our we can got Kivett is it then, we are think these and aren’t Credit certain think this were talking are Chief turn Officer to national multiple hotel you we’ve like to on hotel segments – him, those instantly customers over Robert. take example, to strategies but book taking I the on out. start deferrals. when I’ll ease these going – these But I’ll Jonathan and I hit. We get for Stephen, operators.

operators. local are These

local liquidity mostly and to really loan investors low and local have with equity value. raised good the So with

So, very well. people we know these

going the know are next with really them. the we engage approach. hotel – So for wasn’t need-based industry. was a days be It that XX tougher It we to

days. defer Let’s XX for

During engage. that let’s time,

information. Let’s get

we Let’s in to position. for liquidity here come take What how make your you understand days. and next we sure breakeven up XX the

So the behind philosophy that was it.

So gap – for the those say Jonathan, you really I’d I other kind color. our it proactive any help to part the customers it was all on over to get additional bridge to of to side. turn

Jonathan Kivett

that's you I – industries. at is calling industry, that XX% outbound Robert. think the on The particularly No, know being right, commercial restaurant exclusively almost hotels, and retail the just number proactive, the baked commercial or

the book, think are on is more a calling outbound that is making that reason think reactive. consumer haven’t I and the in We numbers calls. little proactive as been is, bit I those did lower those

Stephen Scouten

moving And maybe ideology Okay. I in of deferrals the the deferrals thoughts able of if kind on be to consumer don’t similar forward? know, might and on Will, you terms comment

William Matthews

Dan. or answer That’s Jon probably better by

John Corbett

Dan decade. before at Special that, then the know Okay, and about Stephen, even been you Prior this National. worked don’t Dan, Florida. he for Dan. the Head Chief of And of Credit Dan a CenterState was back with the Assets for Officer that, has for at here Alabama is Will Richard RBC to John. many

long, time. address team want with a us has you long Dan So, do to combined Dan, that? been a for in

Daniel Bockhorst

the proactive somewhat And continue very very on be will the commercial Robert that and Yes, on consumer – to side to reactive and what Jonathan consumer indicated, muted. expect stable be side similar the side. more and

Stephen Scouten

Okay.

think side, throughout don’t quarter to consumer Dan continue the any expect you to quarters? increases you So, the I escalate resi auto? – see coming mortgage, guess, on throughout mean, to the do I that

Daniel Bockhorst

leveling – impacted have noticeable of been a drop-off been Those requests. and kind already. impacted for been It’s has deferral that

modeled We on for consumer or type any loans. our of little those exposure have very side auto consumer

Stephen Scouten

at don’t so could do Okay. visibility any helpful. know it’s you this think give Very if Great. could hard into, the and John, or curious just combined but I where is basically you NIM Will then And this point? maybe, shake of out I if kind us know

I of rates. just mean, obviously But to next combined thoughts parts, NIM some think kind how of go into it’s on kind of with and we where that? moving a heading lot get directional can the the quarter about

John Corbett

I answer and John let am is this that. Steve Stephen, to going Yes, Young

Steve Young

But basis pretty Hi, out Sure. core CenterState I don't only want speak how here. Both was points. this the The NIM to shook pleased Stephen. with we down State perspective, a from for were - South X quarter. NIM

– I on think the we really reflects going side. help – couldn’t that we what’s can’t asset on,

from real a as can both we well can we But banks there around discipline control. control what our funding as is core

the So, there side. has efforts reduce deposit to of lot on been a rates

a from really prediction core a give know at I if we guess, were from we the But were I CenterState to So at environment here uncertain. look XXX. as is because backwards, think margins how think we I difficult on you pleased a little the –

maybe, balance little more some you John, bit sheets offset in have a want obviously, talk State do margin be comments? the bigger are I which And in Pollok, but going of past. think you the a But, challenging, to any But do that. to margins the help little South will future, to John

John Pollok

I’d I question, things. the couple say Sure. appreciate Stephen.

knew I CECL the into as impact year, quarter six we we think this of first, on is margin. past talked going the about of months, lot over first a the our

decks, we about the talked slide of ought coming discount Page the now, it’s Stephen, you at, I our show that look to in both discount. really it’s you XX through both we've of faster, decks, As think

that faster. come keep and coming for that it’s $XX probably million through $XX CenterState, have for discount us, don’t each million to going about through that we So equations

the So impact a on margin. that having clearly positive is

the with Now, down. as be we going know, have all there way come pressure rates is to clearly

a side But about second. let’s the talk funding

of gotten our now, cost quarter of XX. to kind March XX you points. Well, look see the terms at in the carve for down basis just you down of kind March it’s if out, kind So, can is of funds

there. So we lot side, are a relief seeing really of on the funding

are getting funding. of tons We

In come slug fact, these of that since through. both $X up the got obviously of quarter. are We our PPP deposits that that. loans then end we And big got over the billion a have

to that, Stephen. trying model So,

the are you going forgiven run to fees probably and a through of margin. of that. have in loans few XX% The those get next kind of then months tail-off the

a of environment have a lot think offense customers. moving as we but, around we to PPP good pieces mentioned, both and that, to new lot on played of got I So, – continue definitely good core this opportunities funding get in see some side teams to to the

Stephen Scouten

maybe one And on other John, Great. things could Obviously, Okay. you that’s I that on non-interest activity forgiven of comment just cards just and Curious, revenue for you junk play think expectations for big curious, less fees am guys. you maybe how around charge of one revenues. out last nature? or being pretty could service a maybe me. that

John Pollok

start I that. going of to think guess, million. I’d This PPP minute for about just piece are after we is I is, John be $XX Pollok. just a will with the let’s expenses north say,

doesn’t pencil to change. the so right, contracts that written continue in these Now are – rules

know plus pay sure, going to while reserve, a CenterState the of that bills you put we terms I in could to clearly pays I in XXX% that’s up number. million loan of comment their on But going help So, all are not loss and fees clearly but XX Stephen, we’ve that. lot all been a am for – trying to experienced know,

Stephen Scouten

directionally there? I like we And account guess, see fees and just affect which yes, big should like drop-off deposit a

John Pollok

going mean, is will consumers I what a of right the clearly, are, tougher. what a The more clearly drive charge-offs unemployment the bottom-line the consumers cash these rate less. is is, out lot Well, the now. getting income lot things, the that be to fee

They’ve with should things stimulus checks, they of few think some yes, that, gotten their are impact, it all will fees, think I but holding the to on but you being would cash kind and of on with kind a on the I Stephen. stingy seeing

Stephen Scouten

guys. Thanks Great. the color Okay. for it. Appreciate

Operator

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

Catherine Mealor

Thanks, morning. good

Robert Hill

Catherine. morning, Good

John Corbett

morning. Good

Catherine Mealor

I I into then calculations assumptions to that build reserve first for we can John this want provision direct maybe quarter. Will to your – just to talk maybe economic about see the it well – and went guess, I’ll and the your to

how get are changed quarter end? then, us reserve maybe may about, And a how assumptions that since you to some of thinking Just sense you help we Thanks. level kind as builds what those economic about of of kind how think future see? have of

John Pollok

start, is the for This our I’ll Moody’s John. used economic model, we have analytics we of CECL kind When developed forecast. Catherine.

put the until different just we the Moody’s then obviously, three then and So, on out One XXth Xnd. forecasts. April didn’t the get XXth, March of and XXth really the final

kind the are of So, we baseline Moody’s using Covid-XX.

XXXX. kind And about of to clearly in X% quarter It’s it then third that trough that GDP come key part negative partial the peak got bounce in a up the I a and in going to forecast the second employment Hopefully, in is, recession in think first quarter when and does back? the back it’s full number forecast, of the unemployment X%. year,

Catherine, predicting of that, in kind say, you today. the how we helps environment. kind got really have you of piece, this complete I accumulate the Nobody data. thinking guess so are think you a knows So it future that about I’d is clearly

a L. then, and lot not people of think to like time key unemployment shock key are use to last finally clearly are obviously We it’s time how how I of we hope last going clearly instant demand. an And think, the had letters. it’s and don’t past Well, supply unemployment defaults with an go. to a how go dues is is going I V, the goes

wider of as downtick and a uptick W by we more a or see we and rationalize it’s some W I kind stimulus a like we of it then view kind businesses. see of in, feels of be It a an is, kind of what might comes these mean a

So, that’s it. how we kind of think about

the think this releases more get to forecast going I clearly, in I guess, quarter, quarter. I'm second three

be different. sure am all they I So, a little are

to continue to some second So quarter, I see bit pressure play time of think little is, out. would our still but a we in the view

pass will I of over that, with to it So Will. kind

William Matthews

our year, Catherine, the John. Thanks, components. same models but the this exactly are a same, lot of not

Moody’s We baseline basis. been COVID a forecast. And the as also that rapid changing use John on very said, has

And are factors with index, and number rates, that expense then defaults unemployment, would like correlated one, vacancy price provision most be index, price that. within CRE things that, probably housing the homeowner loan

based what that that, what is I have I’ll of and at appropriate appropriate. allowance which banks that And like provision everybody XX, said, felt on other lot their was think March is said and available, their the John information

If we it’s build get of look changes, ourselves see we gotten likely this getting like the get are it any the reserves economic doesn’t same we’ve that the will at included, June brighter. weekly the point industry, because continue daily, forecast type you to around XXth, that before,

well. tell out will from it to doesn’t Last it, and hope just the the and data. ability these because are built off Tier-X Today, going I’ll our models practices different flush that, govern that to cases, Tier-X through question, underwriting remind ourselves make comment a into is losses. as capital In geography But is into historical just, much and of will many Tier-X crisis to as moved our as them. time manage use it’s

Catherine Mealor

this you Okay. are thoughts balancing quarter maybe versus deal updated upon loan updated and the Thank an mark is, kind mark about from thinking next builds the any how closes about CenterState’s you. of And as Thank That’s and just before closure? you of reserve follow-up very kind helpful. quarter thinking are merger, you. on

William Matthews

with John start that jump on Yes, talking Catherine, together this. in. We’ve been and may I’ll

we January. we it that’s has announced As in close. our times it proper will book first modeled changed we model so, and And since a when do to this, and are changing close need late economy alluded just to certainly a like it at wait way the to deal to this lot we when until you

the mark logically, clearly, what on we in the economic and increase But the given modeled. should originally change forecast, credit

CDI loans mean of was that double PCD Additionally, the likely non-PCD of would the lower it’s would decrease. it before. also the would impact likely today that than percentage loans counting is to be which increase

would been it have be before. to likely is mark than today Rate lower

still remind to March our original So were of all in million out modeling higher back at what you, CECL just XXst directional of merger model. closed I’ll two it than that’s $XXX the the the our combined impacts. also reserves some looking though, true was companies some

say But, about to directionally, not be think to we and have any won’t I do yet really be But able thinking additions? we ready so revised will you are be it. should you until John, what those marks are the that at close. we where are do

John Pollok

I think your I that with comments. – agree

Catherine Mealor

helpful. Okay. you. Thank Very

Operator

Please go from [Operator Instructions] at Michael question Our next Rose ahead. James. Raymond comes

Michael Rose

How guys. you? morning Good Hey. are

John Pollok

Michael. Good,

Michael Rose

and Okay. some Florida, bit into Tampa, I more book know dig travel Orlando, of bit. just are want restaurant little little a business-oriented. the diverse, the little bit tourism, a to I obviously John markets in more

XX% But to little surprised bit I this only point. a guess, see deferral I was at

any would and can on on you split there Thanks. be So maybe give a but and fast it, concept, sort – am color et just color and missed the fast cetera, if I the food little sorry of I then great. between casual

John Corbett

nice is, there. The without we are concentration with this sure. going – into Yes, thing

to less Dan little and then I ask than Dan? I’ll X% X% think that. address it’s or bit

Daniel Bockhorst

To overview restaurant Yes. that give kind of some on you side.

Our all Darden. top Darden We of are guarantors. are XX three and the have top two strong good exposures

liquidity. guarantors seven or those, higher If at requests the look top-XX seven deferrals. Four high you were credits, of have figure the

And the Chick-fil-A, quick accepting a we for to guarantors guarantor bit do it’s some borrower deferral are hire well. that on and based short-term and restaurant so, of little those type not that service, skew a as the support a probably seeing of we credits or

Michael Rose

then, And helpful. retail you there portfolio just give you location, on Just more it’s some whether store a geography up? XX% obviously will a you Can book just Thanks. bit is very on feel bit breakdown? or on which hold type That’s on bigger, of maybe color CRE that little comfortable why deferral. the guys color Okay. little

Daniel Bockhorst

do to Yes, happy that.

to think, disciplined our lending payoff, in sector. especially underwriting this and I approach would

successful last in cash liquidity, the downturn Our relationship-driven. who are guarantor guidance with principles have equity, always dealing borrowers been

centers, typical neighborhood markets the be entry. with dense Our to in is barriers going to center

neighborhood Raton. a center would example good in A be Boca

goods the to on the for and for the that’s on consumers demand be got the one side, ocean with Everglades long-term. will You dense continue other going

the for long-terms going the in these Dollar needs in have They some of good of top-XX. they General, to centers, type A of are are tenant Allstate these exposure national are local all Hut, Insurance, Pizza example These communities. type tenants.

Michael Rose

maybe final just Okay. And one me. for

correspondent Steve maybe numbers this quarter. good banking the for on some Obviously, Just, business.

very the in Just near-term, of in components activity would any you the Thanks. change sort the of expect levels within business? various

Steve Young

Will any the big we just we up on interest the And years to on have you environments. at that streams wanted second our Just was got the of and means around income ago, net bank revenue to to income. fee sure worth XX% talked have for John look quarter, a in really about, great if this we’ve just, and picture, non-interest which businesses revenue business both backing few make XX%, correspondent diversified income

interest A represented ago, our year XX% revenue. net XXXX, March income of of our

really it it and downside these margin businesses both what hedges So, the hedge really does risk is - rates. to

to is relates record quarter. As it it correspondent, it a is a real,

quarter is interest fourth up which was million. record business quarter Our from the a rate $X.X about swap

pleased were also income million. see $X.X about business We fixed our to increased

So if remember about was that you million, $X.X there.

know, record, every in able off a quarter. they’ll coming to it, we the be that You think about do as future, not

that But slowing rate will the new think see fixed income as we continue at to business business be will but have elevated a But and higher as to some, new some real slowdown not pace. interest still will as a purchases positive, but we would be swap finances. down we robust

hopefully, So that you. helps

Michael Rose

for thanks my guys, Hey questions. it. taking Got

Steve Young

you, Michael. Thank

Operator

And ahead. our Montgomery comes go LLC. next from question at Scott Marinac Christopher Janney Please

Christopher Marinac

classified that play of translate we’ll over take the or think it catch-up grades companies deferrals appreciate quarter what ask the on Or morning. loan see the the out? of loans? that all Good I criticized we to for we disclosures. end next into kind you do both that information extent and thanks. longer do just will will provided more time and wanted to see on that those some to And about Hey, by

John Corbett

at John. do and This maybe Chris. Jonathan, Yes, stab is that you follow-up? then want Dan to take can a

Jonathan Kivett

Sure. Yes.

in are initially, that not going I think, to see change grade. we

I are going to say, over start take? the would to quarters, think time, catch-up. the going how see that question over is two that and is you to think I it I then long next is,

borrowers the of a P&I most deferral. So, are under XX-day

mid-March. probably the deferral call of it that P&I that vintage is, So,

quarter. an the late conversations. talking to second having you mid-June at going so, deferrals are then to So, of you the and end about deferral quarter, ongoing have, end early to I are obviously that period, But for call come we be it, are third going think

to You this know are through a are start we really hopefully, going and hopefully, to little pandemic. further

these for so We going back got get of these a And to – to of going industries. the long-term how understanding outlook better kicked - better businesses is the economy is some into on be gear.

a lot will we So, know better.

So, I little early. QX end of – a QX might think,

So thinking on I long-term we’ll real prospects grades. and am a good certainly gauge that Dan? QX, have

Daniel Bockhorst

The will some classified will on regulatory remind of I looking perspective, a guidance as of gave were majority a that months everybody before they a from Jonathan. TDR. Yes, same something echo timing ours six XX-day timeframe of I’ll kind regulators be a the are the that deferral. is of at

to time, with At have an liquidity. getting ones say are support that guarantor collateral, of support. end would another that a there is I do lot guarantor shore needed. will evaluate that if At solid that deferrals XX-days up additional opportunity of we that the maybe additional XX-days, strong if with

risk significant is think to the a we long-term be impact rating So going there don’t to

Robert Hill

Robert. Okay. add-on they to said. kind just what And I’d Chris of is this

or correlation I loss really this can should between loans a link you think at a trying stage, draw make. deferral it and not problem to

industries I unique – way. situation it’s think a are really unique it’s handling a some a in we

as good have, the really about. said, that support Dan guarantor But we I and feel well, liquidity think the they

positioned are and at really these of In most fact, the larger ones are guarantor strength. significant are equity and significant well the ones that

small be ones the the ones could actually of struggle. some that So,

So, I don’t trying between correlation to it to impacts. our markets Most not Manhattan. a the gets It’s that’s COVID of two. significant make where think back have

So, where you’ve – got got you significant impact. obviously

of a like pay feel So, be payment operate they'd without to will and XX% businesses and like able we normal begin used over certain principal period having it to. a to interest reopen time, on occupancy and these

both engage a was like kind I So it’s customer too a needed felt we just between think I what proactive to the think correlation way future and the any approach. assets. deferrals that's problem with draw a better we just of early And

Christopher Marinac

Sounds Thanks. a good. I background that lot. appreciate was

Operator

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

Jennifer Demba

Good you. morning. Thank

Robert Hill

Jennifer. morning, Good

Jennifer Demba

cost shutdown, the does the this merger Will, all at right Will. now for on should savings? closing you all that on the the – going changed this happen time. said Question Now on with the timing pandemic and

William Matthews

theme that customers we our the this questions you we and on generational pretty are is our we and us hear how couple and we opportunity, you a think, with customers a I moment, to many are that Jennifer, members. will today hear we One, a also to team upon with say Yes, teams a our take focused strengthen seize our bonds us opportunity our think going on for really significant focused state things. are depending will to

when a number day into a job great per units multiple assembly numbers he of used with churning an churning to convert of certain to alluded about line John forms as obviously, not day out doing multiple, of And that's that. what out, a talked one and larger different done process, had units all the PPP we’ve and to smaller multiple,

So we on have been things. focused those

mid we We So have quarter see the date of planning a until to we in if recall expecting do deck – have we from of quarter. delayed sometime of sometime the second conversion you see integration - part or next year. early as in early But the year you in as next second the much saves announcement, that. some of our our weren’t cost –both

lot of really to is saves. cost a That the going drive

we So, while are now opportunity more build taking right this I to with important constituents. focused very on two bonds think

to that very merger benefits this particularly still for challenging entities more focused on income both the us and time cost maybe where pre-provision in in saves We some. are affords pre-tax,

conversion. that We have opportunity to are profitability glad we boost get when our very help to through

Jennifer Demba

overlap between your circumstance branch have don’t you of using or companies, term? making you of a two doing network the the make more by through but I with does it drive longer the Does physical less the now does that it rethink lot in and – branch know rethink branches appointment,

William Matthews

go say… Yes, and would I ahead.

John Corbett

is and change think as going it in this be that of thought the a a This things have will accelerate an John, I that of here really guess way Jennifer. is digital all My adoption towards. of working we’ve maybe have been Yes, a will to Robert acceleration and and an pandemic occur is well. lot channels

immediate the our thought So, do on. to I to add I acceleration that there? see in there path of know anything don’t branches, we anything process is an that already but relative were Robert,

Robert Hill

Similar cycle. just about John last deal overall, about this end and comments, couple maybe we number is, think mean, at the I expense of talk I think, felt to when I were the both the I talking not of save were to just just that years, John’s Jennifer, the of the we kind over

– we are right Now obviously what through could going nobody now, recognize. we

economic we by But whatever of there was, come putting companies could side the was I deeper mean, the stronger. other our clearly we cycle and we one out are shallow, in the that, would that hoped be that had things or downturn – we together it

to economic we an opportunity through. impact that have is manage there kind So, short-term of the

the it's whole their But business looking and we are at only long-term our the businesses. ourselves hearing and just impact not in from from short-term for but but well. structural economic the are our as model banks, long-term the impact, change customers, They

digitize was, So, do one thing. this do of make more of How bank? you our how the challenges

had and year period, thought or pushed, significantly. five could encouraged, there. to is have three we good us we going And make adoption over accelerate we a or really This seven gains

was March more did but we increase. last XX% deposits than year. of we So of points, XXX% just in digital March year, this That data in did

adoption we the a we different can how to seeing of very run accelerate. in is going company and how digital And this way products these are so,

a be but just I adoption. us digital So, faster create felt there happen, pace for that I the things things would downturn, be that path. think going would at opportunities all some are all those happen, we just think that, much to and there on a would

Jennifer Demba

so you Thank much.

Operator

question from Kevin go D.A. Fitzsimmons at ahead. And Please our today next Davidson. comes

Kevin Fitzsimmons

Good morning, everyone.

Robert Hill

morning. Good

John Corbett

Kevin. Hi,

Kevin Fitzsimmons

was that a pays and I later? should question. believe a I quarter lot just if for quick that fee that incremental viewing it the a through. or necessarily some flowing can some follow-up the in And little origination be coming about John of in bills had of that that Whether line third that’s earlier be as not we expenses. thinking, that used just of bottom-line so, to mentioned

frontline compensating looking building employees, how Thanks. But referred you be will be have your at that? Just whether of additional be reserve should some it’d whether that’d you we like to?

John Pollok

Pollok. John is this Yes,

clear, so, we as and that for change really know you only so, it. loan be little caveat expense have The with to that loss reserve. to Just XX would establish $XX the – over rules pays all million continue to a

of XX% or net next So, I is, it’s loans that clearly, over operating if year-and-a-half would deal to But the come think and then of our view repaid. the through so expenses. the back couple today XX% quarters come year the next of

Steve Young

do Yes. Kevin, CenterState in forgiven over – as funding, could know The is number, least be expenses. gets have time depending the how far as And, today, at the on that we is what this after we mid-XXs thing Steve. you

So, John to happen, mentioned going but over as time. that’s

it. predict to So, really hard

William Matthews

Will. on, add just I’ll this And is

of from necessary with help those be But any about would one revenue decisions the uncorrelated another obviously, You level fund provision expense is asked mean, provides provision, source provision of expense. course. – I of that certainly that. could independent it another that

Kevin Fitzsimmons

you. process. Thank And one just quick it. loan deferred Got follow-up on then,

are and of process of credits what get you going are detailed trying that that? kind going customers those in you through credit-driven are Thanks. Just terms scrutinizing come out guys, But to reaching some some to You through. you risk how of a at you proactively for to industries. before sense of larger

John Corbett

maybe, And you want Dan, to start do there?

Daniel Bockhorst

clients, they making on are Yes, on the disciplined liquidity a analyzing are using taking sure discussions frank before their honest and bank. we have some that, approach relying in first cases with they

So, going through yes, that process make are to a determination. we

John Corbett

add? Jonathan, anything to

Jonathan Kivett

same No, here.

banking. kind We just relationship of are

industry to the it and capital we just having working are conversation We are for these with with a basis. on with their needs, really working their borrowers prospects understand case-by-case on one-on-one them are and we

Kevin Fitzsimmons

you. Thank Okay.

Operator

no further are There questions.

So, John call the to to I’d back turn now Corbett. over like

John Corbett

for Thank is are This times you right. calling unique in that All lugging morning. certainly again through. we this

participating the We are May. D.A. on virtually in planning with Conference and SunTrust Conference Davidson the

many day. hope to we you of talk Have a to great then. So

Operator

conference. today’s concludes This

your day. and You have may now a disconnect wonderful lines

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