SSB - Earnings call transcript Q2 2020

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Operator

Good morning, and welcome to the South State Corporation Quarterly Earnings Conference Call. Today’s call is being recorded. [Operator Instructions] I will now turn the call over to Will Matthews, South State Corporation Chief Financial Officer. Please go ahead.

Will Matthews

Good morning, and welcome to South State’s second quarter earnings call. and Corbett, on Bockhorst. Steve Matthews, Robert call Will John Hill, Young is joining this me are This and Dan format we’ll will prepared call questions. for we The provide will be remarks, it open that then up for and this

press travel the inability coronavirus, to holding multiple teleconference difficulties different presented refer lines. release XXXX. our phone locations to in today’s Yesterday for advance presentation for issued a call website. speakers we’re announce evening, you with We QX by to thank Given in and We’ve calling from your slides from we earnings due that to on our posted also each Relations we Investor locations. patience will multiple with a on

subject want make comments I we the forward-looking you Before Reform statements Securities within such disclaimer affect our to more may of are risks make forward-looking of presentation we we the to for Private uncertainties Act statements meaning Please Litigation information harbor harbor rules. remarks, press and that today’s include may which Any remind safe may in XXXX. and begin and the release safe forward-looking us. about the review language

call Robert over turn Executive Chairman. Hill, will I Now the to

Robert Hill

the which XX at thanks of we with and is lay What are of in world. us. opportunities for success that has to team Good commitment morning, and changed the our Board speed to front our us moving days two today. being merger Only into in much and changed companies, the strong and has the our integrate not

significant. prospects the While are State its the economic challenges, has South environment for

well our sheet, market be and profitability efficiency revenue built and the us great was positioned on solid of improvements State the for the that growth. term. I in our long have soundness, believe balance markets South can share made and principles

risk off our take remain track, the loan quarter two any of with combine we able a and expense to we’re complex, as strong, merger more on the is our lot a portfolios. revenues While involved plan table

in are the for there While persist these believe I stronger will also opportunities prosper. term, challenges near to banks that certainly industry headwinds present

short While in been years. it period of XX have feels a together is these like ways, for teams days many very time,

rise to continues team the to occasion. Our

open other, excited be turn now call together each building focused and to of insight will honest and are I one over the We team with and same more our to John trust quarter. as on into for goals. set the

John Corbett

is this team announced to At XX. morning thanks State. equals XXXX particularly the a could has executive I Good safe. banking you, all company it’s transformative and opportunity the remaining healthy industry with through a us for joining to South year hope that for an Robert. you, build your been for transformative and CenterState Thank merger morning. an a time, the our We and lead been and family of of transformation you whole, digital on as over saw decade. we strategic January the next

months a portfolio. State after generous a to borrowers. about PPP deposit our the growth in Two Easter others, pull and was loan time flow and merger as could while to actively the provided clients the The down. shut environment $XX on XX% delivered payment In could for program. the represents immediately deferrals we And in portfolio. our cash come. weekends two levers two We as to second, our we confident relief. as stimulus then loan South stimulus to the chose retrospect, will of our an the pursuing to flow we through most cash providing Like $X.X focused I’m years regulatory billion pay Southeast working combine deferrals possible that And loan for work-from-home and assist of bankers we as also beat. franchises in offer the By possible approval, how opportunity of were much in strategy the that the powerful and the announcement, about generous loan we represents loyalty for that of shifted we PPP best markets shareholder premier nights, billion first XX% our short-term us economy they country. as holiday, inject most needed The with be to dividends be possible our as right clients of when saw

distractions about payment have lower than expected. a matured round deferral ahead only of able merger significantly for X, on approval the that close a shareholder made less COVID, Despite the was were the obtain we to than through schedule, request is earlier and the it’s half first transaction originally While deferrals for loan second the and June planned. to of from the we which July, XX-day decision than and regulatory encouraging we

tall perspective, rearview on could clients. the we XX,XXX to the support through in I to thank ethic tremendous on and our this and company, to the but our in earnings proud be legal To pause merger team and confidence of offer a teams books Now integration last leadership the put to could so the our CenterState pandemic the closed quarter we forward the messier me and team, offering From of team heroic. and that the on but right is middle Page and I’m financial to loans, after a debt State were bankers. with completed of the would assuming sub million focus a recognize the year. steady and stable if journey be that combined that Most remiss the walk going own order. the not finance mirror Will a relationship equals wanted illustrates did closing high gives environment Doing my Closing steadiness with a quarter to bankers managers it mid-quarter so slide PPP level the in South close strong. them. of the I $XXX we State which a importantly, our demonstrate move is from South observations. I the in they is combined very PPNR you and of professionalism State of a processed earnings trend, X want combined a of produced power South deck, over power results, is the is the work second underlying the nearly and company that we during

the have You quarter same $XXX that quarter for better slightly second consistent and is year. which the the actually is can been see quarters million, with than prior PPNR would last

accounting there us of highly with second for unusual the are those were two issues, however, even in closing merger the With that familiar accounting. quarter, merger

of earnings that in days State, The $XX second first merger June in the XX on X. is have the quarter million on of to missing second CenterState days South The with first the would XX the not quarter first included quarter net South if the the the of closing for added pre-provision of State X, revenue earnings are had occurred earnings. CenterState’s April

that X.XX%, CECL to highly whereby company second approach affectionally loss is simultaneously an portfolio. seems you double our receives The an a very loan if I’m as approach marks, this acquired is I like is strong accounting add unusual also loan the a belt portfolio closes. is of it only peers. accountant, higher loss silver million CenterState suspenders together the than new loan the it’s a applied lining accounting. through a personally, but $XXX you mark, portfolio that as the not reserves. the not reserve count, of gives the me, result look, income to that and this a This CECL known the standard GAAP absorption merger to but The combined new And if that acquired accounting loss the the capacity. item runs provision the loan acquired is loan But is substantially allowance, reserve a receives with a statement loan And have loss traditional quarter in which know

unusual per accounting a share recorded in loss With items basis. plus on company net merger-related GAAP normal the of these quarter, a $X.XX expenses, two the the

me revenue, mortgage, company model. The intentional to fee-based These take we’ve the normalized shine been South view CenterState this by State as capital business really build to and the correspondent let record very fees. banking and over Now, combined businesses of had type environment, of years if combined. in been market you and produced balanced driven the back quarter always economic a

past billion And revenues came last even Loan to business the as five businesses enjoyed improved decline, the charge-offs. interest was no non-accruals well sheet the performing is as asset quality we’ve the growth $X you pressure. growth with businesses balance margins net if during Deposit more PPP was record loans. banking and exclude proceeds rise. and short-term model slightly Clearly, NIM combined $X.X mortgage and the most lower and PPP dues, planned. metrics correspondent virtually Both balanced under record billion. this by net than that well quarter profitability that down stimulus. normal income expanded This fee across the of to and government when boomed that related when balance exactly quarter addition the of For perform interest years, net growth performed sheet the in board built margins successful

million reserves purchase marks, as the merger will you. that that Will, wears anticipate experience accounting forward stimulus strong next to State a the it the we sub-debt that over is of we feel stronger that combining to industry $XXX plus off. headwinds get over well the plus PPNR By balance the cost time And over will after positioned that even complete move shrink will the we second So capital. sheet in CECL raised the South the finally, we I’ll despite elevated with turn the steady and saves, the quarter, year.

Will Matthews

of Thanks, an with of important for company closing the the clearly equals. merger the quarter John. This is

CECL a of XXXX, to Additionally, we MOE created also pandemic of be in first expected this we January, the to When impact not receive in outbreak. we’re approvals announced had merger and the merger post-CECL size we of but parts. accounting and size late post close one moving MOE the the are. of the first regulatory and lot And

and of testament selection by and complexity with basis; attempt dedication a this completing the great a excellent the quarter; Items items the forward to pleased process to to us competency associated our merger has going work, this A lot be this folks. teams our collegiality month a finance adds Everyone give this finance three an combined by results, all find job completed closing. well cover South close a the at a The to and CECL team all and capital impacted time think, June our quarter is, system prouder also we a significant accounting form to X closing with from update State the balance performers in our shortly we’re performed couldn’t the thanking start merger their I entries of closing capacity; of I’m information and we accounting personnel. the offering, exemplary parts of significant be GAAP before did high operating with resultant accounting merger after to and associated the as earnings to team the in moving of noise performance team. both merger pressure, purchase and department amidst you credit area confidence $XXX only I the one on weeks as work our and two departments end, recognizing team. and you’ll The and meaningful and teams. third following that the associated with and that of manner. these two gave mid-month I one closing. strengths the more and ethic reported business going reconcilements merger realization. want and So an to a Not leaders of of position; push our of the exhibited conversion associated to the for but the merger ledger sub debt of loss quarter closing, as merger companies’ sheet and the proud million I’m general absorption the with together efficiency high-performing morning. coming our

loan the CenterState loans. First, under in PCD allowance loans for on including and losses, credit loans placed non-PCD CECL, the a on and both is but resides PCD credit the is capital. X as we it non-PCD loans, credit rate mark these rate on capital. The mark entire not also portfolio, includable carrying a X Tier mark and loans, asset includable not reducing credit is of The as balance contra Tier and

these provision expense to allowance losses credit Because a of as mark credit count the us double on non-PCD cover provision merger the a loans, loans and for have we of requires $XXX losses. expense. of in the for merger that closed estimates, through three both due and non-PCD June by loss the factors COVID that operations provision also impact quarter This record CECL X statement and million of expense runs our various relatively help drive effect a CECL acquired had the on weeks Second, to this economic high for to credit loans the only is and closing. income an CenterState CenterState caused

approximately of loans existence Third, we PPP absorption a et is due credit SBA as the billion was points. of our allowance and PCE employee loans I’ll $XXX CenterState categorize portfolio occur that investment remind To criteria, Credit and screening is speak a quarter Note PCD several that PPP or given the lodging we capacity. cetera, non-PCD amounts acquired. XXX% expenses, that definition recorded total counsel, PCD The The had received roughly on in of from denominator and status, and be in and and remaining $X guarantee. of status a in we credit scores, PCD $X their due legal the credit at of grades, note mark the will coming which billion loan excluding the with likely costs portfolio of true finalized $X termination approximately as coverage, XX% banking on $XXX any and the X% when to loans, that approximately preliminary end of entire loans, is COVID. loans, quarters. portfolio. merger, The XXX also million are past PCD including problem the billion you deferral mark temporary including approximately not that Also ratios and marks credit again, their mark in determine and marks credit loan. I’m I any merger-related allowance loss is number merger. excluding basis a this loans million, contract or

basis the million commitments, non-PCD another legacy million at points June to Given on in believe total the reserve in loans, South million capacity million is discounts and points loss process $XXX another of the basis allowance, which balance be shows which which which approximately is as as points loans; million John clean. $XX of the Slide loans, categorize State; on loans unrecognized to the XXX at $XXX identifying in equating unfunded for to XX the portfolio X.XX% of we X $XXX for absorption brings XX. screening another PCD, loans, was $XXX or basis X mentioned. the of to of sheet loans, total

South available be quarter, very answer on the we approximately allowance credit to on of While basis on to Ending low. of almost see at basis plus for the is points portfolio horizon, Provision legacy had continued points we were for all section clouds questions the XXX level Dan legacy of another of million, charge-offs, State. the was another the State quarter portfolio quarter for NPAs end storm low zero to South the unfunded economic assets. reserve points Q&A basis past bringing net XX the dues $XX during XX expense and commitments call. that further

changes in growth and the the charge-offs in attributable forecasts. quarter, minimal the lack of the in increase allowance was Given to the economic

which of key a other basis The XXX was the mark entry deposit core accounting purchase points. intangible, received

these the $X.X yields date. other were closing at was direction, market marked billion Our book above as CD

basis points. approximately will XX basis decline So from approximately our to these accordingly points XXX cost on

the me discuss for quarter. Let results now

of loss For the we million. $XX a quarter, reported

impact $XXX the or CenterState of the as the in the the losses million been and XX provision as a acquired would acquired loss merger-related loans from have credit loans expenses days The legacy well the per for costs. million $XX income provision factor non-PCD with was the non-PCD in of primary share. expense closing on the full on million production only merger-related the the excluding earnings Excluding of adjusted in and quarter, in $X.XX timing $XX.X the

QX. margin, a showed of CenterState and although and interest of QX, in of marks net applied XX rates, buildup compression. balances. from a compression. about was Total half bond on saw the the in pre-close, liquidity we net we shrinking in income production cost interest deposits basis compression on growth from the in margin yields purchase nice of down points the to bonds, less portfolio XX basis also the Our basis points, due the sale of with Loan in led a terms, percentage combined on saw for saw We a the reduction down points portfolio basis X.XX% the DDA CenterState accounting XX securities to the compression quarter, total were and dollars the

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

me financial Let about the for said. talk performance, which a was John strong, underlying as minute

a XX accounting to or this These Given Page are that would several you, comments may numbers purchase close which of on efficiencies included beginning presentation. be realized. combined on of without and that business regard are associated the slides have company useful GAAP the each basis, the entries entries, we any accounting thought information we merger to historical basis on be mid-quarter so

from this quarter. shows this moving quarter. XXXX noninterest has up combined XX XX quarter, the record with revenue Slide $XX countercyclical XX% the makeup ago XX% of very emerging sheet benefit over from growth $XXX mortgage last in John the the with distractions. to light expect. In of home of in shows due million was year combined balance we ROA is noted, five a our and in the MOE We two from and consistent year in ago four a XXX the work revenue many quarters in QX, of our and $XX period with PPP how production, in liquidity. impressive providing quarter the As combined noninterest PPNR teams changed to did the the $X.X the strong a income which revenue quarter in had points was $XXX management in quarters, billion basis groups, income of Slide this total of quarter with million and PPNR to prior mortgage million from million in the expanded second

grew basis net million, on $X.XX loan $XXX billion, interest net business income basis combined was QX, $XXX of CDs. was declined were million. $X PPP of growth $X.X on points from expenses. XX% Our Combined interest approximately XX loans, expenses $XXX the that quarter, PPP a is have down million. Year-to-date by would $X.X billion the million the or combined with combined commission-based deposit a from the billion, Combined for margin basis approximately but On half approximately growth, loans QX quarter approximately strength growth excluding of $XXX noninterest Noninterest or X.XX%, was merger-related the growth income down businesses. from loan noninterest excluding million, been the excluding brokered basis reflecting and approximately QX, full the for in income the expenses growth business loans. it basically noninterest Combined excluding flat.

through combined basis, X.X%. with TCE also QX. our by points. the expenses we PPP from the efficiency capital, quarter, approximately ratio balance of XX had combined XX% ratio sheet On second our was XX%, in the associated ending slightly Expansion QX reduced up During was business On ratio in basis the pandemic. increased a

$XX.XX, total $X.XX share book XX.X%, up Our risk-based ending The XX.X%. CETX and ratio QX. capital was from was value tangible per our was

capacity loss we the I solid balance have also As noted, absorption sheet. on

you on saves. by Let merger-related updating and cost me expenses finish

well underway targets by Our model on negotiations, and cost vendor operating and being cost and successful numerous save is business for each. staffing target leads templates with constructed process

good of of saves is that the should quarter core we the middle scheduled conversion for cost of ensure Our realize us begin at XXXX, time bulk the remaining giving ample the to prepare and second to point. to execution,

million of We we will year, conversion. June this latter recognized expenses. in $XX merger-related part the after saves in but XX, will occur recognize some the cost Through most

originally estimate of XX% the of remainder to the amount approximately $XXX announced remaining in continue XXXX. XXXX expect with an occurring total within We million to our last half and be of in the

for second to next quarter expenses largest we quarter the when expect the our year be merger-related conversion. complete We system of

with back solid results performance, underlying credit moving quarter you, lot turn thus with strong a John. it a far. So healthy absorption of and I’ll parts, to loss capacity

John Corbett

All right.

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

Operator

will [Operator question ahead. Sandler. Instructions] And go first come from Piper our Scouten Stephen of Please

Stephen Scouten

everyone. morning, good Hey,

John Corbett

Hi, Stephen.

Stephen Scouten

of if and, this just PPP, give if the this, is the in impact NIM excuse is let of maybe kind the whenever think the basis point where start. put primarily. occurs. X.XX% I’m liquidity on you and in what that me normalize wondering estimate Will a the the guess I idea us guess, excess specifically term So, you that you some question of on me of, I NIM? could could to NIM sort the I longer impact relative kind And missed an on presentation,

John Corbett

going I’m question, Steve Stephen. let that with start to

Steve Young

companies. it’s Yes, Stephen, the points NIM, combine the of we just couple on as Steve. a

core funded us this kind that all, very Let remind first deposit me bank. is a of, of just

We have X.X million customers, XXX,XXX checking accounts.

XX a of combined see basis, growth on deposit there you business over deck, quarter Page Will a the in If mentioned, past was as $X.X lot this on billion. about

our DDA up XX%. make up make and accounts the deposits XX% checking of Our

to not billion core have sitting in about So in $X.X excess liquidity, billion in very, balance on funds. have Normally, range. would probably deposits, we short-term very Of the the $X and billion invested $X.X sheet the we funded. somewhere billion grew we $X just

to all pressure you the much, margin. on have where margin did. basis billion excess that why more XX the that and about actual that’s the percentage referenced, billion And in Will than of decline about see creates $X.X deck, didn’t the but dollars we normal, $X So points margin

So hopefully, that’s helpful.

couple basis, that combined that of on end were the And accept to one, mind. in we a couple quarter. did bridge, need – creates a was securities of keep the of the offering book. we particularly half That’s sold around the of That and for not a it you that fair half the Will the value things Number the basis toward X.XX% X.XX%. securities at in build to that We book, middle marked Just that X.XX%. the on mentioned accounting the other around of pressure. Also, points of half. portfolio

So that the then pressure. another XX creates of the ultimately, marks we on basis value did fair And points loan book.

Of course, we that. the book the course, already just just then of that. then, will on of is the have some program. and And piece prepays discounts kind loaded And loan on we PPP really move last

know year in XX, presentation, course, happens, We based the depending million. That the the it’s toward amount quarter, deck what the a of have talks the forgiveness end of on about have next we of we end on $XX will at forward. unearned the of year, about going that And of PPP that we of that fees slide the time impact when in expect that the end first margin most today. toward Slide

that parts, the $X when balance lot know another move be a the hopefully billion. we investments percentage you’ll of I a see So down adjusted unless – sheet, X.XX% will but from back moving towards the

So for you. hopefully, that’s helpful

Will Matthews

as margin, you see it question we XX. I’m because fee impact the didn’t sorry, on PPP on a Stephen. impact very Slide the recognition there to significant the respect quarter, had in have really With some

in impactful with base on So the really margin. the that combined of the to lower rate, of fees, portfolio the impact terms wasn’t net very yield it

Stephen Scouten

to don’t securities just prior of a on it looked plan Okay. the maybe gain then thought if the and Great. on system, an there large beforehand, I close. of half know there there, you like you in And would guess, million had the the the asset logic about especially surprised talked excess but sell – this kind there. was liquidity the given about I portfolio, all earning What the I’m securities deal $XX was of the sale process,

Steve Young

value Steve. rules, is securities fair accounting Under to Stephen. to Sure, we have market. This these mark

security over So the and how the effectively, have yields just forward. conservative, in – and shelf And our going securities to you decided we the in when X.XX%, see the at all to be get some let’s so invest things, put book PPP yields time. And other those in half layer completed that we those just range. can of X.XX% through that were or we just the progress we and to on security we’ll merger, back

Will Matthews

And we’re if great premium you them handle that to buying on but date. sold, are some great of said, about with think you’re Steve like because, par. it, were Stephen, them they as to effectively kind acquisition the don’t there closer much we bonds going We have bonds them as that at

into as So that our thinking well. played

Stephen Scouten

the quarter, to big a given. forward, run But XX, correspondent obviously combined the one just if is million then jump like I moving how it of number with noninterest I’m thing $XX for of kind Perfect. gave million apples-to-apples. rate the back if the on And based then you Really guess. helpful. me, half think legacy about that $XXX indeed, looks of million for maybe that past which kind this that off there? CenterState a for business you last basis, try is, I I Slide as well. wondering like And combined quarter business, maybe the this a guess, income it last looks of, $X.X question full trends from Steve is a year And

correspondent trends, especially fee frame that and So if you up could, of just banking? kind

Steve Young

that take I’ll Stephen. Sure, question.

as will of John go our relates the – up, to it we’ve course, what core tried business prepared increase. have that some in talked it that that funding some margin of year-over-year. we As countercyclical all pressure. PPNR of offset seen of when And remarks, about his decrease, pretty flat hopefully it. It you’ve had will rates to so it, won’t But our just some when offset will been offset build businesses has the rates but that

high that’s a level comment. So

mortgage to correspondent million $X breakout As $X.X about income banking basis give I’ll on been quarter. combined rough have been $XX you would numbers, for been The would to the have a $XXX been the Slide XX, business. million have the million and would million – it business then about million. the $XX management have on the would relates banking wealth

those million. about the So to up million of $XX three add $XXX

be reoccurring $XX fees, million fees. ordinary kind of service the just other card charges, The would

As as $X.X less was be – those just And mentioned far worth of pipelines mentioned, continue given we had Will Brent. had mentioned, I able blowout team had continues. That a and billion outlook as production, our really businesses, mortgage and business strong. a the fewer And that of that or than superb, as do to quarter. which XX to be we’ve just – and speaks The on employees to the in highly Tom office. John Steven

as that do best can well. tell, to we so business continues And

given in swap environment relates an rate next correspondent generally good. over rate still been just environment fixed like income it business, to expect, over As business strong be not credit but few be be just less business, around the this, quarters, strong, the interest The I that. the would as good very in up would that has business. picked the interest swap time, that has

the in of who itself, have done out that’s income just think owners lot the fee of the really business noninterest and great and helpful. business helped middle own it’s job, hopefully, businesses So a We pressure. that a the margin that

Stephen Scouten

the so data thank the very you presentation. on Congrats the very in That helpful. getting deal given all guys That’s for closed. is much Great. combined And useful.

you. thank So,

Will Matthews

you. Thank

Operator

SunTrust. our go ahead. Demba from of next Please is question Jennifer

Jennifer Demba

Thank Good morning. you.

Steve Young

morning. Good

John Corbett

morning. Good

Jennifer Demba

right expecting? of of lending pipeline. near-term Question And growth now? interest seeing What terms what on loan your are your you are from borrowers in you kind

John Corbett

that. Jennifer, this is take I’ll John.

then five again. news And states, six travel a presidents. to and watching they close a chance quarter out trying play had all states evening with the going night of as I’ve You’re open to this our pulse of to around calls our on had of this what’s I’ve every get on.

growth to North quarter, five in through some this process. there’s did virus. of down see in the far to And business states. the XX% care actually and For But portfolios the underwriting we and our are of last approach now our want decline We be as six think clients loan want of the I our in as we prudent conservative about Generally, to Carolina. more XX%. past quarter, new we is, in pipelines slightly lean clarity is our take saw until concerned, existing really the the state

So be next new in loan couple I the navigate somewhat this. do of will as muted quarters through that we growth think

Jennifer Demba

And my that be Will, second this of cost second us might half much the of cost how a question in some savings. is said on you you give realized savings Can of $XX year. you this year? sense million have

Will Matthews

some good give majority don’t in reduction it I be conversion. will year, Jennifer, the vast a vendor headcount way, you XXXX. of more it have we think some and we rest you once amount. will some our in to XXXX, achieving the realize of year. of won’t a The renegotiations. there hadn’t the system hard through come some didn’t this do be largest, the come along want bulk and number savings and But them course, this to won’t significant of both we but for already are I achieved But

Jennifer Demba

in in reoccur or have of quarter that did not the to example, for might And PPP second expenses quarter, third thing? lending unusual kind related you that some

Will Matthews

associated we million. origination in the our who have $X $X with do we It’s – staff in and on associated with and side, pages XX, employees about the I the were FAS there. working to But one where and paying branches in costs on extra million the it’s me. just specifically, in branch so front the about of here, are deck; of right of the PPP don’t capitalized expense extra of expenses in virus, deck in the that’s in Yes, we loans, have,

Jennifer Demba

you. Thank

Operator

Kevin comes ahead. Fitzsimmons Davidson. Our of D.A. from question go Please next

Kevin Fitzsimmons

guys. Hey. Good morning,

Steve Young

Hey, Kevin.

John Corbett

Good morning.

Kevin Fitzsimmons

the appreciate fair I the all on complexity comments the all looking reserve the traditional between the deal, but on – Just all absorption with the the and also detail the accounting and how then complexity you’re discounts just build value acquired loans. loss

provisioning I are the of new true, coming throw in behind of But going million But and for most the think, is trying building obviously forward? to that’s the looking will how at other due, going that of about chunk PPP fees We’re back said, what $XX the or the to statement, a line? Or you relates over more a being a you half learn if duration things? of will you. sense reserve? bulk I’m XX, year. a new that given it, and fall reserve to to of with look get all there just that if bottom to it as Or agree fair building forecasts. it’s you at have going that X.XX%, that to to take that So the to reserve look think get get do new information update reserve how on September the we’re And the you’re particularly all

Will Matthews

if elaborate, take the nature drivers Like upon a if it. that Dan our CECL. model forecasts to and Kevin. you, can, And CECL stab I’ll of are number needed. loss Thank loss he of a the drivers has at in given everyone, economic forward-looking based wants

our the based worsen of they as appropriate that need to as time. from reserves build industry will process economic to further whole, the from Should So here, XX, this June forecast like we upon reserves feel a led level we, at level. of and

I or about reserves too impact and we much about of questions this into my its our balance sheet – like referenced PCD of we also in allowance a million in deck, of in capital discounts we way of the not $XXX capital and, very else economy heading unrecognized the if I degree capital misleading. great about deal for But about on a point, thought unanswered capital, feel that the – this very anyone either. just you have to think on good I were its ratios. And about how portion where were on So at convey us is the There’s and be to many have. The too I make today, much that aren’t that unknown provisions think comments, pandemic I loans doesn’t course, and good would confidence we too goes. the the the position of but

million number at anyway, don’t ball this capital bit that of about we economic a about future a a So of ratios. appear in point just does because good crystal not have But non-answer, frankly, our $XXX forecasts. it’s

Kevin Fitzsimmons

two just I I moving on like looks guess, little under Deferrals are Got lot know seeing over a where question. One banks And or toward maturing deferrals of XX% you new right. think so one now, entrants get that round it. of additional of curious, settles weeks end you seeing declined basis. when round to of coming All parts based between XX.X% so. August deferrals and more you’re a in extensions. just lot a to a the do on combined what I’m additional or the –

John Corbett

Dan line, John. is it’s that. a on Officer, pretty Credit is good Chief Kevin, Dan? the he’s Yes. on and got handle our Bockhorst

Dan Bockhorst

John. you, Thank

at approximately Slide the on deck, have the from XX% If percentage approximately you of look of loans so the far, deferral number. XX.X% has XX that the to deferrals expired, of declined XX.X% and

deferral. trends the another As of we over going continued potential on COVID-XX the mid-single-digit to like in continue, unknown expect of now. right there the long-term, The up we what impact way somewhat loans are estimate future deferrals weeks, several for on expire will the we and is the we’ll still end percentage the XX% but deferrals W be, in a is trend next that and of

Will Matthews

that of this process is as thing acquisition, the in screening a on from I’ll the the unique, see determining as about to we on loans the that’s has – CenterState the CenterState Will. for deferral classified X% loans unique portfolio saw, just me we you but remind us. categories And you – mark from as it. all and the you PCD. of all book lodging were PCD And and one PCD And the deck, somewhat not Kevin, articulated just also with let that is of

we for – some capital appropriate set think aside, those as well. have hopefully, thought we we So

Kevin Fitzsimmons

deferral, comment about to earlier was more second process to be John, your much to the folks a applied approach a I’m generous, of thought being ask the credit-driven when it on for assuming you right there’s And them? second, rigorous

John Corbett

want process to right. exactly that’s Dan, for renewal? second the credit Yes, when someone asked a you on comment

Dan Bockhorst

Yes.

renewal, For rigorous a there the is much second more process.

only. to little deferral second are early, as then deferral. interest-only XX round economic there only. that coming but two, one, opposed the about need is by we’re it’s a impacted financials, interest a do also company a bit environment. deferral, from get that principal deferral right that, the a that were deferrals interest the interest a really current round And of about updating And We’re strong and full On second is really that is determining that XX% has now those for pushing been still on request

in So direction. heading, we going way the like that trend and the it’s right is

Kevin Fitzsimmons

you All very right. Thank guys. much,

Operator

question from of go comes Our Mealor KBW. Instructions] Please next [Operator Catherine ahead.

Catherine Mealor

Thanks. Good morning.

Steve Young

morning. Good

John Corbett

Good morning, Catherine.

Catherine Mealor

color of great lot PPNR forecast. the A on

doesn’t have strong $X million. staff, you for it near follow-up a from stays wash you said one the on FAS just on Will, level. of And little think that’s probably feels fair a that term, the feels of million but that, and you I – fairly And around lot to like like fee income. combined extra It that like expense XX, the a bit is it that of elevated mentioned combined, about that of have I say number? base. that in you’re all is offset mortgage, was maybe then think kind you’re assuming there’s it you But there. kind at paying feel $XXX so stay the should expenses probably by onetime

big the back from so guess, core And grow that layering we here, I is start savings? million $XXX good of cost number to of year picture, before a kind from half on the

Will Matthews

forecasting business the compensation because – the strength me make ratios businesses. commission-based. lines, little business that a Yes, and know, does Steve those in Catherine, can it noninterest is largely the But those efficiency given structures, our incentive-based maybe as let difficult or job about even of more of are start, talk lines, income bit you

we in relative growth quarters, And expenses. see growth challenge. NIE growth when growth relative comments a in lines, that we in And see more of obviously, mentioned the so the that in those a to in prior little quarters revenue noninterest but prior does make I from income business my

where estimate noninterest So be rise we’ll businesses something NIE fall you those current the good react. or answer want levels then income production, levels were Steve, of about be. those from would to a would mention probably If at of of your bit? the accordingly to that here, to it question the efficiency But a is,

Steve Young

Catherine. Sure, will. Yes. Thanks,

the noninterest notice as, the deck for statements, perspective – is, the of million. noninterest a toward slides one rate financial for and And our income. for things back trend noninterest income of a to there’s of quarter, looks historical the think it you’ll at fourth gives in was I the the the the and it instance, expense in $XX end presentation, around

$XXX Our the million. adjusted noninterest expense was in

if – noninterest that we’ve had in million you you last additional forward, see of – $XX of million. couple kind of of math income run about and the noninterest additional of the quarters about kind that So can expense $XX

ratio So the way that think course, all XX% across – to model it’s But on that’s businesses. additional general And efficiency really those running – a noninterest depending. income. good blended commission I of that’s additional an it, a

Catherine Mealor

since this great. that’s this world a CECL Steve, Yes, is for that’s And then us. really helpful. new all question of Yes. a is

then loans in And were CenterState deferral into put that are of ones PCD. or so the lodging my question the that book – most all of that is, on you the and all the you Will, mentioned

you And the so Or categorize just you does because that have perhaps or loans to those think those kind quality make roll as deferral, forward way of reserve of anything with that better quarter-to-quarter your your the off changes PCD, don’t as change losses? or you as any of worse? just about kind get expected

Will Matthews

loan it’s event re-underwriting, unless we a unless if another – decision is PCD, around once we PCD Catherine, you make will. have

forever. PCD they’re So

then I the in or, provisioning. negative for improves and and comes than via reduced the guess, provisioning forecast As we reserve allowance dictates a back it circumstances, it need we needed determine if or some have, the economy in lower

that’s it So works. how

Catherine Mealor

wouldn’t Okay. generate deferral But a reserve in estimate, that off I release the necessarily just guess? coming large

Will Matthews

be of about I more no. be factor credit but good our a about that no. No, itself, of loan, of – really might in mean that It’d and course, the collectability thoughts that

Catherine Mealor

course, markets we question of lot doing just Okay. of coast. many now your of markets just coastal than feel Florida on like one cases and better I actually I of we’re then your the All picture along mean, And just other last the markets. Great. in kind hearing were a spoke, of And more right. big COVID some country. relatively

so and kind you’re markets you can provide now you more from of hearing color may you’re have of businesses? just of or around what customers worried general your And And specific credits than broad about your some kind local types last any just that been quarter?

John Corbett

Sure, John. Catherine, this is

calls had to mentioned, got feedback have lot a I’ve and weeks the traveled all two six five with of states, I in As I of of from them. the market and the presidents last

COVID Residential Anything So that’s because very seeing a is new home the good. not there’s good. as ever let me they’re construction kind performing new product and is related There’s the in the very of what on Residential of describe as they’ve market. winners economy I’m residential lot performing losers for as COVID economy. busy just slammed, you improvement been. to is

business, of the heard are offers up business, From I so doing of I’m purchasing video hearing people homes. boating of are to businesses on RV story. cooped through so I’m where cases are well. a chat. recreation homes So, the at cases are people home, connected multiple that a where phenomenally standpoint hearing

Medical, very now now. right I’m Florida, and cosmetic of home privacy. You Lakeland, the and surgery Interesting those Trucking has note, so about They’re in city the out logistics, recover performed cannot very well buy because Charlotte. a the somebody bicycle cosmetic said with you you business of well. channels bounced can at in well. businesses that on hearing medical Charlotte because surgery at going have think have performed what’s hearing has performing distribution back. that

of the So for a the and deferral. shut second basically businesses asking a of all businesses back businesses, none – dental that They’re dental down them month asked in for April. the dental deferral, are

we The represents hotels have leisure of back. suffering. catering, of the book, So It’s there’s X/X And Hotels, it’s leisure conferences are oriented. kind hotel tale more and hotels are our kind The hotels. of event COVID There’s that business negatives that’s those leisure economy. are positive two a then or obvious. anything businesses elements about whether all coming of driven, of stories. are new those really very

the for up however, If seems a single-tenant better. can occupancy, retail. on cycle. get it’s The businesses secular a that XX% and about business recovery performing these the trends term, on can basis, That’s a tenant with be known our to longer specific. to better. side. payments with seem to different book, we’ve leisure Anything we’re very you XX% hotels then going performing there’s through breakeven side, to their story. clearly, they But The be these a And is drive be carrying side, lot longer start seeing that in P&I to retail

restaurant as don’t in content as much we would see the So retail space. loss in near side the we

So gives as some of far color what that the I as new COVID we’re hope you economy. seeing

Catherine Mealor

Yes, Congrats great on guys, John. the a quarter, and really helpful, closing deal.

John Corbett

Thank you.

Will Matthews

Thank you, Catherine.

Operator

Christopher of go comes Please Our Marinac next ahead. from question Janney.

Christopher Marinac

that pertains substandard? deferrals. Hey, or Is either that thanks. I At wanted Or you to do follow up from to rated a mention perspective coming credit already for risk get those now? up fall? happening as what is it the to in special point the

John Corbett

Dan?

Dan Bockhorst

type evaluating end quarter, Most a deferrals, That criticized this them quarter. And those for quarter through go risk seeking Yes. second is of third this primarily In watch. those as happening we ratings. in That probably migration the a quarter, a we saw are would we’re event. category into that of now. second a up businesses is round

Christopher Marinac

November. Is So coming that the Dan, fair? some XX-Q see up we’ll probably in adjustment in

Dan Bockhorst

Yes.

Christopher Marinac

off, And then renewed has the then reserve mark, as a perhaps you value and it’s for of new been Great. kind the a has loan? it it become mark a how fair that How value a acquired, just a guidepost that? on before do you loan and what to on loan. Does Okay. fair happens treat follow-up that new pays reserve

Will Matthews

guide – a – view. a that, point. or answer my but be at for correlated, in not for would be Chris, It and that past very would be be required that be. the wouldn’t may mark future the allowance that decision guide would my the that’s necessarily separate discrete It’s loan what be well would

Christopher Marinac

just of why how on to of reserves goes, kind gets back is overall that Kevin’s It Okay. question I kind and asked.

Will Matthews

And charged Sure. off not a Hopefully, capital that at to the know of know does doing what Sure. economy. reserves us all are and point, what’s get industry cloudy it’s aside going just the in terms we happen setting to hard is economic I have But building of very crystal in ball. in this losses. ultimately too

So...

Christopher Marinac

the I appreciate Thanks it. all for this background morning.

Will Matthews

thank Certainly, you.

Operator

Sandler. is follow-up Scouten from Our Stephen next of Please Piper a go question ahead.

Stephen Scouten

incredibly seeing Hey, guys. me Thanks particular, of new exposures And around just COVID I in terms markets. that markets piggybacking helpful. guys that in I in for in you’re John, think three Florida new I’m seeing, those through letting kind can’t retail or was off maybe again, shutdowns you appreciate wondering, and one more Tampa, curious, slide, find your markets? I’m of curious, those the That of primarily in particular, economy. – in noted one it question, here. I about your there think loans the I it Orlando was what just comments you’re maybe was market. the being all just I Catherine’s just fear was other down

John Corbett

Miami-Dade kind to as not political does markets opening county, the economy, economy. Good opened of and and considerably. Broward up Tampa going more on have tell in and question, you Orlando the be are forefront the would Palm has Stephen. restrictive. not been Beach, Florida economies, the to like it I they’re of Yes. seem whereas Things will restrictive the there’s close

Stephen Scouten

John. helpful. Got it, very Thanks,

John Corbett

You bet.

Operator

like This closing for Corbett turn any conference back concludes our question-and-answer would session. the to I over remarks. to John

John Corbett

we’ve putting to These of this to a lot hope lot. some looks are a to get like. that with our hats what been at And helpful Thanks together you a helpful for to deck I the it’s hope quarter State. and sense a able show I Matthews hope Yes. Will how also been great well are I moving clarity teams off on company parts. been It’s for provide performing combined South to me. together you. you questions,

for seek to you creates to is day. if over on we’re a to want reach of joining to Will, traveling just become and to quarter high-performing any that to your a investor any team can’t to models. great to Thanks not next follow-up and Our us shareholders. lot conferences face face, we you out have clarify need you our this see value I the Since one hope feel Steve free or morning, for goal you

Operator

Thank today’s presentation, may has conference The concluded. you and now now you for disconnect. attending

SouthState (SSB) 31 Jul 202020 Q2 Earnings call transcript