SSB - Earnings call transcript Q2 2024

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Operator

Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the SouthState Corporation Second Quarter 2024 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Mr. Officer. Financial Chief Matthews, Will

William Matthews

Good morning, Call. with Quarter Earnings SouthState's Corbett, welcome is Will to Lucas. This Jeremy here Young Second Matthews, Steve XXXX and and and John I'm

highlights questions. make John always, remarks move can and earnings and read will investor of We As on some presentation, you to point thus understand our regurgitate copies all few try I and website. out but and comments brief then We won't items our release all into before make Relations interest few Investor information, a Q&A. which of moving are on a the to

and and to in more subject harbor about our begin Any we statements statements make forward-looking safe we review the within safe presentation such comments Please are us. to for make and may remarks, risks Before laws rules. which remind the disclaimer statements forward-looking you information the that the regulations. I want and forward-looking of the harbor forward-looking uncertainties include may the meaning our may we release affect securities federal press language and

Now I'll over turn our John the CEO. Corbett, call to

John Corbett

last second on Thank all It felt earnings share Noninterest income firing Good were controlled joining cylinders Expenses for well us. quarter. inflection from you, SouthState were the and was per in net morning, Will. like long saw interest margin. everybody. Thanks quarter. up the anticipated our We nearly of was XX% up.

of their Denver, much June easier And already structure, most and spent financial all and sheet, change of to no With this independent and and We hall bank. geographic basis shape it keep second next bankers branch the clients balance X impactful we've to deposits serving month. a to with leadership Houston. with but employees and the and incredibly town forecast good They're . The filed welcoming meetings the hospitable. transaction. shareholder for month was asset Austin Dallas, vote their in obviously for the terrific. building the On in our in team than still event charge-offs. of announcement and proxy, quarter points grew scheduled overlap makes is in the challenge, his loans the are quality better are the on the David no and integrate focus for We've only

X. We July the applications on also filed regulatory

So are schedule. things on progressing

the markets. We rationale great when deal announced May. walked strategic we the in We're expanding through into

migration in that both fact, the In markets, there's markets of migration. our demographic current only from the and people match the country profile income of some growth

with also about share the We power, talked financial accretion. XX% earnings per

But the I a management thinking on and about perspective. want deal we're from minute to how down drill a capital take

of As end an we're increase decades. fastest industry, back the in on rates interest of the

under-earning current that and for But because yielding not rates. Our are their overhang strong they're the from That's investments the industry is market suffers enjoys ratios. of loans capital the will a years. industry positive benefit last negative currently potential that

it peers never strategy. us got have bond swap, chosen to potential team So surplus reposition of our balance Many unlock of these how and excited as but a looked that's the and capital utilize execute a bond question particularly bank earnings to We rather capital every years. sheet management fine, the for a the at waiting assets trade. swap than a is management dollar-for-dollar as to

feels like to dollar-for-dollar $X but you the invest us and of the of but from it engineering a $X timing that's flows. Again, you earnings, get a financial perspective, capital accelerate You trade. of cash fine

we're with independent What is capital. more a powerful doing use of

just Financial, their the the potential unlocking of portfolio. entire but not bond the the unlocking like bonds of it's loan the swap, we're Independent Just We're power bonds. earnings at earnings

assets. swap $XX key. the much SouthState valuation But billion a management loans trade, the is So investments, more Rather both utilizing a the we're capital simultaneously of all thing and than about a advantage which different makes earning here's that that powerful and rate this makes approach. the as on currency it's including with interest capital, dollar-for-dollar investment swap the

the going rates normal assets economies scale moved both a far plus Independents as opens billion interest in capital $XX All this only margin we net advantage instantly rate the gain transaction and currency be in rates vanilla a bond Layer of swap. we and far, of use of rates. better see locked a the deposit earning and movement to in. the forward market will wide than are

should to rates, team thank and independent liability-sensitive what enthusiasm for a together. a independent. so feel into and David sheet and SouthState us move period likely we more Dan with of the entire their balance for of making as As welcome Brooks, Strodel building we're benefit want lower I Dan

Will I'll quarter. the turn over it provide back to color on to more

William Matthews

income revenue count. $XXX of million Total million. quarter $XX QX day of noninterest $XXX with from John. revenue equal was an forecasted of than number a That and Thanks, million up for million bit the was total on interest $XX income net better

rose points was our in X.XX% and with NIM Our X of line basis expectations.

to be first XX our to yields deposit increase our loan of brings and basis XX%. of loan what an basis also to where the in And a X loan lower guidance cost our to point. X yield QX . I'll for points. As guidance in end beta increased points 'XX, our note from point basis total XX within to deposit the quarter This That basis points of since exceeded of quarter, cumulative improvement of cost quarter. the inflection of beta prior deposits of our is for total at cost the cumulative increases XX% points appears basis as deposits. something XXX X our X to slowed

Confirming our expectations, shift our deposit slowed. appears to have mix

was guidance fact, margin future DDA will and were unchanged $XXX QX's million of million Noninterest of items In $X from total versus to for excluding million DDA up above deposits QX give average QX QX on bit average XX.X%. the balances expected. up the quarter, color mix slightly was moderately levels. some and Steve income our was Q&A. 'XX the a NIE, up than from QX, nonrecurring from of we $X in better

remainder Looking were ahead X, second project There increases July that compensation some related of effective of we of will expect half to most are for so also merit expenses year, the hit the the and increase. have we expense the the year. in to bank

is million So NIE still to QX $XXX and in QX in be the range. likely

somewhat on is items with NIE dependent always, that As vary revenue. expense

the essentially to to quarter's expense provision decline and X And reserve to the reserve million leaving combined caused $X levels when the net charge-offs, growth, total matched with total loans loan points X.XX%. basis flat. Our

$XX are significant one loan have this we in will where recent credit Past the in and we strong centered not we've seen expect payment losses in current upon loan portfolio we where that to liquid substantial based guarantors favorably. we with up forecasts. performance and memory. NPLs And as and as million were improved see expect capacity resolve to dues continue

Lastly, our TBV to average Capital rate. on deposits CETX brought growing X%. levels X% year-to-date and $XX.XX. to with and were growth deposits ratio annualized annualized growth improved our down QX the balance sheet of front, up with ending X.X%, flat our a loan at and slightly to TCE per share approximately with XX.X% deposits X% ending

questions. take now we'll Operator,

Operator

Rose from the question Instructions] James. Your Raymond Michael line first of [Operator comes of

Michael Rose

wanted expectations. kind about growth had guys just I previously of know just talked digits. you get I to loan a mid-single on the sense

better little I quarter was I a think was this what bit for. than looking

maybe what to any expect sort customers if pent-up looks about see you. can talk you of of the telling like. is Would assuming business that perspective, you guys your activity just thoughts works any to sense and for from of with Just demand? you I'm get trying there a are just everything out kind side, customer have deregulatory the kind election what

John Corbett

you're little referenced mid-single-digit loan We we're really, Yes, John. early done loan in stronger And growth second in about about right. tracking. the year. guidance We've a the that's X% It's quarter. what growth

quarter, we in last in that loan growth second mentioned growth our translated Michael, pipelines significantly November think into year, that production starting the have last grown pipeline and of quarter. I

grew second first quarter. production in in loan $X.X Our the $X from about to the billion billion

sales loan seeing as XX% in payoffs in always, lumpy but coming they've our it so payoffs quarters, activities, some But see strongest The few be pipelines out from that 'XX. increase. benefited that is construction we of contributor the middle we so That last the benefit. of But is the of we wildcard and abates about of stable, can may but last funding tailwind largely 'XX are some the we're historically might appropriate. the to increase still probably been And low really quarters, Carolinas. growth the current it's the so a starting seeing we're production. The quarter-to-quarter, from guidance loans multifamily the credits So are year, lose in growth market we're think in and currently here is C&I were biggest earlier broad-based. companies, made

Michael Rose

credit. just to then And switching helpful. Very

You guys reserves for quarters of built pretty meaningfully. bunch a the

You than earlier the less what some you modest in takes the Can and reserve very categories? me others migration, did just But of The of much come puts the off have the and understanding maybe looking low substandard think, special did some levels. stage was, were it's increase provision for. and drove I upward and down. discuss mention

John Corbett

John. Michael, it's Yes,

that's particularly a kind and So normalization migration yield I more commercial primarily story. as see quarter slowing rising quarters it's and we'll a increases rise, down think the we few manifested of estate a probably itself, rates loans, it's the But a real two. curve or talked in and last about ago a rate although of

know quick is think culture, upgrade. you I and downgrade as that's one it to slower be, our to to

credit loans, we we're loss not that really a any team and the talk as payment don't these issues. are material performance significant content, see But having to analyzing they

are past you points, estates, basis a on are in points. his dues only basis real the points. opening are And office, all X commercial basis only take but step all focused dues back, past mentioned if loans it remarks, Will past think, office I dues XX and only we're in XX

We'll So I at but move credit accordingly folks strong content cycle, service our debt got see this think loans improve, we as equity of coverages this particularly guarantors. point. upgrade concerned don't or loss as we rate aren't lots we through

William Matthews

Yes. advance. charge-offs. our you CECL advance $XXX about that behind Will. always million X the you Michael, a provision expense is in build it, is course, and it's of at dangerous predict. last provisioning. the But look provision comment of up quarters, theory it's losses on maybe I'll if And net over recognized and thing to difficult

economic if see tick start in to up industry down And if the fall at might moving potentially same charge-offs -- as the cases, you see possible levels come would reserve see it's so the continue to improvements some same you forecasts, we even practice and in folks ahead, others some if time.

But portfolio. from So CECL's it see economic some other wouldn't model, incorporate forecasts moving it is I does all factors your improve associated forward-looking reserve necessarily today. where with our up in if qualitative at a from things here,

Michael Rose

you me. why one or maturing Makes a Can expect lot extent some just for And you that And comments give. fixed was that's any a of and the sub they looks as do then you comment, 'XX. that just filed about last sense. the like down that to comments can debt in guys to debt I to talk of saw income sort IBTX presentation you just this any sub can maybe filed? what has pay presentation that just one

William Matthews

market IBTX entity is and the debt may not Yes. they to Michael, has refinance or maturing say as that, may opportunistic on that be that it. stand-alone in All a shortly I'd

Operator

line the from comes Mealor KBW. question next Catherine of of Your

Catherine Mealor

guidance. see as wanted we likely push see the It the to was about with to what the half thinking come the to back of your December? right I great likelihood margin year, in line you're to the cuts particularly of back

Stephen Young

and that there's no as April, than XX% Sure, did transaction to But time guidance. thought changes for, really thinking headline a is with the our longer material on I real we announcement accretive. maybe It's probably is I it's in I said, spend IBTX, Catherine. a a because, This have, we're we in this May Steve. but would answer you're guess the ready little about

changer game think a the this of we year. about kind bit of end of a as is it So post

first the no really guess is, point I So change to our there's guidance.

where we I for $XXX $XXX million year, said think of the to million are. sort that's full we and

headed. of -- modeling, where around kind build changed earning to interest bridge $XX of the billion we're assets from has no assumptions There's really at me XXXX. there. we That's it's change. are for kind a Let try we're three and And where nothing

Our in It same. talked rate in is the cuts April forecast XXXX Moody's and about that is was It XXXX. we baseline. X X cuts in the

has changed. not So that

And up. company deposit the around is assumption way on the modeling company, we're has way on big forma down. XX% then down. on third a beta. And pro the with IBTX then We're as XX% on And way XX% stand-alone a the

So we we to yields be flat would point rate costs X fourth us, for each the market about seems NIM And cut indicate, expect basis third with set get basis to we quarter September, improvement if NIM quarter. a to cuts. a the X those loan rate X And stand-alone we in for would in then rate company, talked thereafter, for expect point expect each other. would funding the the offsetting what a we in to X the each increase of for before, and

increase expect first still loans IBTX. point I'm mark-to-market XX closes, us as about quarter, when not fixed the think rate company, IBTX we run late. rate we for XX in or would As to the that which we IBTX in basis early and rate adding happen into sure fixed we of margin the the securities a expect to But

So forward from to conclude of the to the just here as we kind from kind of of think XXXX. bridge end

merger, $X.XX So we the in and We'd in assumptions about in would range. modeling have be have with have $XX to of during we our and $XX the fourth NIM that $X.XX fourth billion loans. by about quarter exiting assumptions billion quarter our deposits the these rate that would announced approximately XXXX,

X And as X X points. to we if about Moody's more would margins, XXXX. our cuts rate in XXXX, Which is correct, then there's that to add same think baseline basis

that we're less X.XXs to rate be we that get, but basis have get in cuts get be potentially. cut continue X in margin lower it would that we by it's X than -- it's fewer if So, to we If get don't rate -- the X we don't for lower points XXXX X if each cuts. -- we we’d would if expecting, theory, expand, expect than in

stand-alone So year. modeling of you the XXXX. us through kind of IBTX hopefully, with your a that end helps think the about then through as together us on and

Just two other on that. comments

environment, deposits, rate less liability beta As Post, a And as our post-IBTX rate pre post-IBTX would loans about think be we sensitivity a be XX%. so then will XX%, low our pre-IBTX, it XX% we little is XX%. and floating our world. a in percentage in in of a floating mentioned,

to that all So of those that to all up adds assumptions kind to of guidance. get

hope helpful. that's I So

Catherine Mealor

that like you thing would awesome, mentioned cost one Yes. that about you Steve, to we That how get peak? And was as somewhere that X.XX% nearing deposit before that. always. that the last quarter you're on thinking It still deposit the cuts thought still now, so feels in the -- we're we're your Is cost probably peak mid-X.XXs.

Stephen Young

interest Yes. didn't forecast No rate since the change change.

This quarter, X.XX%. we were

the the that in press in what's in the costs. our is late still peak excuse Probably third quarter, mid-X.XXs. the to release think our expect quarter, with in third in I deposit quarter We me. or fourth

Catherine Mealor

Great.

X.XX% correct? at next you of ending accretable includes year mentioned, yield, course, X.XX% Okay. . guidance And for -- the your to you X that, then gave that

Stephen Young

it would rate interest call be market I on accretable a... That's yield. would swap. rate correct. I wouldn't That it, call

Catherine Mealor

it back will a We at core....

Stephen Young

don't. Please

Catherine Mealor

Yes. the impact But still, but the of that includes marks.

Stephen Young

right. That's Yes.

Operator

question Truist comes next of King of from Your Securities. line Brandon the

Brandon King

fees came So as this stronger well. quarter in

if of just to fees range wanted points, forward, but changed given that's the you're thinking kind that XX we've I basis so an So on has wonder all XX to get far? update the to going XX but basis I strength what points, believe seen at is at about XX

Stephen Young

on XX our of fee Brandon. Page Yes, of it Sure. on showed our or We XX $XX XX guide. sort interest to shows have line on basis point basis This refund IRS is trend $X But a was we which assets, an fee on slide did totals. added about Steve. million income Thanks, our you higher a quarter income, that second tax payment million the than XX. points to

guidance be change assets based the point you NII first I rate XX expect kind of if late to cut third the average So interest basis basically, say that and to to maybe this range. happen that lot -- to of a that not would We of sort quarter. XX there's in on forecast in the would

run in to start full little assets we NII cutting XX the starts run basis -- in be maybe XX we range rate noninterest points maybe towards which and as look as mortgage climbing, capital get back a basis as to after perspective, expect they of point first IBTX, as And we add that when range, coming income, we look to somewhere Before a a then that close. it rate would XX average businesses has XX we combined start rates next to less markets the at pre the year. and

Brandon King

right. that a deposits spot helpful. basis your then, And That's deposit decline remarks mentioned environment very quarter-over-quarter. in All challenging, prepared John, still on is you

the further expectations of could on of elaborate what So you just in kind going deposit kind any you're for seeing forward? growth environment,

Stephen Young

This Brandon. Steve. is Sure,

And I are And the of and rate the right think goes to growth. costs other our loans that trying kind this having our securities cycle manage, we're place. a with at cycle fund end we're rate is our cycles cutting in balances. And to obviously, of I right the where is until remember into deposit now, pausing deposits we cycle. with the hard of from kind ability liquidity

the call of in I'll things I other So or environment, and treasury. the people in typically deposits in back bank They money market liquidity that alternatives there's would in back portion typically a it. it, that, expect go as rate-cutting funds, comes are some

the and overall managing to environment, own it. within focused and the balance the remix to without trying sheet remix really on and funding been So balance we've capital sheet in trying this overall our growing structure

trying on it, also the team things. balance those expect two on focused and so focused but we're PPNR, would we're I to So certainly

Brandon King

on your clarification deposit expectations -- mix a point with noninterest assumptions lastly, within especially or just guidance. And What NIM embedded Okay. for that is bearing? mix,

Stephen Young

Yes.

quarter So is we're XX%. this non-interest-bearing around

was, I think to think, quarter. XX% rounded it last I it

think nice on little moderation there, I flattening a than I So of a we're too. a saw think is But that. off seeing a less stand-alone basis. sort IBTX they

So I XX now, sitting at be of or think or XX all. change trends, maybe a But we've I something and it expect wouldn't the shift seen absent like there here from hardly the mix But that. down sort points. right to was basis huge around rate

William Matthews

we where around pre-COVID. is This were

when the different, to it's through Brandon. close predict So we pretty where pre-COVID, to this hard is environment but is went

Operator

comes of Your line question of next the from Davidson. Gary Tenner D.A.

Gary Tenner

completed made construction regarding I you up Well, ] I'm and some little in see move any are or think, sheet comments, you're curious, the or projects, you sale going decline times extension to balance permanent fumbled to to moderate your dwell that a Obviously, as it relates projects. [ the before bit. market? seeing there's or they maybe of transaction maybe on projects secondary a terms the before market

John Corbett

Yes. seeing markets and a I particularly. them But it cap transactions In seeing X.XX% fall flip to trade the on the be was rate. think just, last slowness multifamily. a little side, lease are project saw We to some -- We're more a to in -- capital Gary, there. segments, start the seeing we're at multifamily slower self-storage, seeing we month, a we up little

the that that there these ability books. tells to get activity transact the business out there you projects and off So and is

Gary Tenner

particularly largest the March the just I curious the over just appreciate above volatility balance. XXX It I quarter, the seemed then balance, intra-quarter was XX almost average $X And there. the on balance. the about DDA billion color

And that how it? about So about think intra-quarter just curious to volatility.

William Matthews

question. sure basis an not as flat misunderstood a DDAs of on overall really to Mary, deposits may percent Yes. our QX have I your I'm QX. average

Gary Tenner

average for $XX.X period $XX guess ] -- your I'm DDA and between just at [ as end delta XX. billion about $XX.X querying I've the billion of at billion ] [ got quarter versus I over the about March

. if that average versus of the just period I'm curious So inter-quarter volatility end?

William Matthews

Yes.

for in ]. [ was [ XX.XXX XX.XXX I We your QX got model. average have blip QX ] think you and may a was

in year a noninterest an Maybe June year for [ X. average yes, So input ] error the XX.XXX quarter spreadsheet. ago ago

Stephen Young

on Page the earnings X of release. That's

Gary Tenner

I Again, a offline No, I've it. -- we was got can those major trying the you -- I talk -- to It's not out just about numbers. there.

Operator

question of line next Group. the David Bishop comes Hovde of from Your

David Bishop

might space argument looking back been areas areas going of deal, landmine, this the to obviously opportunities? markets saying, a business see and to and around from commercial Into There's or avoid any where lot real the not the just any we're here. pulling within hey, grow segments some you you're sub this estate consciously where

John Corbett

any SouthState. think really, difference David, of and I IBTX in philosophy don't there's

I see our that think and we XXX% below well wanting total manage decline ratio CRE to are over the time.

naturally granular cautious pretty all IBTX cautious assisted good and office, we're retail were really on a You on retail that. book, solid living. on got CRE has bullish

our down. going in concentration I lending So I change our practices accrete that ratio we're but practices, way with don't anticipate a capital will lending their do to the or drift CRE anticipate

David Bishop

Got a is should But the will about profitability XXXX merger the Appreciate with How housekeeping obviously, the it. go-forward in merger. the it. tax once escalate rate we a complete? item. I know think

William Matthews

to forecasting I'll have couple we Not more have changes the today, major project. we closer and update standpoint, change of as this from guys big -- refined I you move anything Dave. are closing quarters. better some any next to a maybe But don't estimates probably where

David Bishop

Got it. the Appreciate color.

William Matthews

I'm been I've non-recurring some about cyber expenses, clarifying year-to-date of you on million, the $X in comment no questions, in the quarter notes event, to about the because going item. in half second And further that there in make half have quarter. which are If that the and first have the add of one the of cost your line and noted seen we non-interest

have the coverage We event. for cyber

not have filed insurance the claim. We yet

total to amounts two Those some $X by by combined will borne about a be that the have payments some and weren't related retention covered there’s that amount policy million. technically employee We then us.

make that of to know in operating adding some that point. you of some So as expense are just I wanted your models, back I but

$X to that that cost but of be have event. of about We file and yet all million claim reimbursed for would the expect to

FYI. So just

Operator

Okay.

John questions. will Mr. for I there over the remarks. conference no now back further closing to turn So Corbett are

John Corbett

joining We All to right. a this Thank you you've lot got guys for on. morning. know jump us calls of

can provide you great hope any So day. a And ring. have don't to other give you clarity hesitate if we us for I a

Operator

that Thank conference. joining. Ladies the for and gentlemen, concludes you

You may now disconnect.

SouthState (SSB) 25 Jul 242024 Q2 Earnings call transcript