Southstate Bank Corporation · NYSE:SSB
Southstate Bank — Q3 2021 Earnings Presentation
40 slides from Southstate Bank's earnings presentation, Oct 28, 2021
Slide 1: Earnings Call 3Q 2021
Earnings Call 3Q 2021 Thursday, October 28, 2021
Slide 2: Disclaimer
DISCLAIMER Statements included in this communication, which are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act o
Slide 3: SouthState Corporation Overview of Franchise
SouthState Corporation Overview of Franchise (1) $41 Billion in assets #1 in Florida #2 in Georgia #3 in South Carolina $24 Billion in loans (281) $34 Billion in deposits 7 Greenwich Excellence Awards 2021 Top 50 Forbes $5.4 Billion market cap 100 Best Banks in America 2021 3 (1) Financial metrics a
Slide 4: High-Growth Southeast Markets with National Line of Business Capabilities
DIVERSIFIED LINES OF BUSINESS High-Growth Southeast Markets with National Line of Business Capabilities Regional National • Commercial Banking • Mortgage • Correspondent Banking & Capital Markets • Retail Banking • Wealth • Payroll & Payments / Fintech (1) • Business Banking • SBA • Corporate Billin
Slide 5: The WHY, The WHAT, The HOW
The WHY To invest in the entrepreneurial spirit, pursue excellence and inspire a greater purpose. The WHAT The HOW Guiding Principles Core Values Local Market Leadership Our business model supports the unique character of the communities we serve and encourages decision making by the banker that is
Slide 6: Investment Thesis
INVESTMENT THESIS • True alternative to the largest banks with capital markets platform and upgraded technology solutions • High growth markets • Low-cost core deposit base • Diversified revenue streams • Strong credit quality and disciplined underwriting • Energetic and experienced management team
Slide 7: Quarterly Results
Quarterly Results Gr
Slide 8: Highlights | Linked Quarter
HIGHLIGHTS | LINKED QUARTER 2Q21 3Q21 GAAP Net Income $ 99.0 $ 122.8 EPS (Diluted) $ 1.39 $ 1.74 Return on Average Assets 1.00 % 1.20 % Non-GAAP* Return on Average Tangible Common Equity 14.12 % 16.86 % Non-GAAP, Adjusted* Net Income $ 133.6 $ 136.8 EPS (Diluted) $ 1.87 $ 1.94 Return on Average Asse
Slide 9: Quarterly Highlights
Q U A R T E R LY H I G H L I G H T S | 3 Q 2 0 2 1 • Reported & adjusted diluted Earnings per Share (“EPS”)(1) of $1.74 and $1.94, respectively • Pre-Provision Net Revenue (“PPNR”)(2) of $132.3 million, a $18.9 million increase compared to 2Q 2021, or 1.29% PPNR ROAA(2) • Loans, excluding PPP loans,
Slide 10: Tangible Book Value per Share
TA N G I B L E B O O K V A L U E P E R S H A R E ( 1 ) $45.00 $43.98 $44.00 $43.07 $43.00 $42.02 $42.00 $41.16 $41.00 $40.00 $39.83 $39.00 $38.00 3Q20 4Q20 1Q21 2Q21 3Q21 (1) The tangible measure is a non-GAAP measure and excludes the effect of period end balances of intangible assets - See reconcil
Slide 11: Net Interest Margin
NET INTEREST MARGIN Net Interest Income excld. Accretion** Accretion** Net Interest Income Net Interest Margin* $450 3.5% 3.22% 3.14% 3.12% $360 2.87% 2.86% 3.0% $270.3 $265.5 $ in millions $262.0 $260.0 $270 $253.1 2.5% $30.9 $29.3 $30.8 $21.6 $20.5 $180 2.0% $239.4 $236.2 $231.2 $232.6 $238.4 $90
Slide 12: Loan Production vs Loan Growth
LOAN PRODUCTION VS LOAN GROWTH Loan Production (1) Loan Portfolio Growth (1) $2,800 $2,636 $2,355 $2,250 $2,079 $1,933 $1,879 $1,834 $1,791 $1,699 $ in millions $1,700 $1,470 $1,535 $1,256** $1,150 $600 $180 $82 $267 $153 $180 $169 $573 $50 $(372) $(277) $(155) $(185) -$500 1Q19* 2Q19* 3Q19* 4Q19* 1
Slide 13: Mortgage Banking Division
MORTGAGE BANKING DIVISION Highlights Quarterly Mortgage Production Portfolio 3Q20 2Q21 3Q21 • Mortgage banking income of $15.6 million in 3Q Secondary 28% 2021 compared to $10.1 million in 2Q 2021 57% 43% 54% 46% 72% • Secondary pipeline at 3Q 2021 of $410 million, as compared to $403 million at 2Q
Slide 14: Correspondent Banking Division
CORRESPONDENT BANKING DIVISION 1,079 Financial Institution Clients Correspondent Revenue Breakout ARC Revenues FI Revenues Operational Revenues Total Revenue $35 $35.0 $27.8 $28.7 $30 $30.0 $26.4 $25.9 $25.2 $25 $25.0 $ in millions $20 $20.0 $15 $15.0 $10 $10.0 $5 $5.0 $- $0.0 3Q20 4Q20 1Q21 2Q21 3Q
Slide 15: Interest Rate Sensitivity
Interest Rate Sensitivity Ga
Slide 16: Cash & Securities
CASH & SECURITIES Investments ($) Fed Funds & Int. Earning Cash ($) Avg. 10-Yr Treasury $13.0 $12.1B 3.0% $12.0 $11.6B $10.9B $11.0 2.5% $10.0 $8.7B $5.9 $5.7 $9.0 1.80% $7.8B 2.0% $8.0 $7.3B $5.6 1.59% $ in billions $6.4B 1.33% $7.0 1.38% 1.32% $4.2 1.5% $6.0 $4.7B $2.0 $4.1 0.86% $5.0 $4.0 $4.0 $0
Slide 17: Excess Liquidity Provides Significant Tailwind
E X C E S S L I Q U I D I T Y P R O V I D E S S I G N I F I C A N T TA I L W I N D Fed Funds & Interest Earning Cash / Assets Investments / Assets Peer Avg. - Fed Funds & Interest Earning Cash / Assets (1) Peer Avg. - Investments / Assets (1) 20% 20.3% 19.3% 19.1% 18.6% 18.8% 18.4% 18.6% 17.9% 19.0%
Slide 18: Interest Rate Risk Profile
I N T E R E S T R AT E R I S K P R O F I L E Static Balance Sheet Instantaneous Rate Shock Loan Repricing Frequency (excluding PPP) Up 200 Up 100 Fixed Variable Adjustable 45.0% 60.0% 40.0% 50.0% 35.0% 30.0% 40.0% 25.0% 30.0% 43% 20.0% 49.4% 49.4% 15.0% 30% 20.0% 41.4% 21% 29.9% 10.0% 15% 10.0% 20.7
Slide 19: Well Positioned for Higher Rates – Historical Deposit Beta
W E L L - P O S I T I O N E D F O R H I G H E R R AT E S – H I S T O R I C A L D E P O S I T B E TA * Cost of Deposits Average Fed Funds Rate Average 5-YR UST 4Q15 - 2Q19 SouthState total deposit beta 2.80% 2.88% 3.0% 2.76% (including DDA) equal to 24% 2.53% 2.47% 2.40% 2.5% 2.22% 2.07% 2.12% 1.94%
Slide 20: Balance Sheet Strength
Balance Sheet Strength Gr
Slide 21: Loan and Deposit Trend
LOAN AND DEPOSIT TREND Loans(1) Deposits Total Loans PPP Noninterest-bearing Checking Interest-bearing Checking MMA & Savings Time Deposits $30 $25.5B $40 $350,000,000.0B $25.2B $24.6B $24.4B $24.0B $33.6B $23.8B $32.4B $33.2B $30.7B $300,000,000.0B $2.3 $1.9 $0.5 $30.0B $3.0 $1.9 $1.3 $3.3 $25.0B $
Slide 22: Total Loan Portfolio
T O TA L L O A N P O R T F O L I O Loans by Type No. of Avg. Loan Cons / Other Loan Type Balance Loans Balance 4% Constr., Dev. & Land 5,587 $ 2.03B $ 363,800 CDL (1) 9% Investor CRE 9,726 7.13B 733,200 Consumer RE Owner-Occupied CRE 8,317 4.99B 599,700 20% C&I 17,155 3.46B 201,600 Investor CRE Cons
Slide 23: Premium Core Deposit Franchise
PREMIUM CORE† DEPOSIT FRANCHISE Deposits by Type Deposit Mix vs. Peers Checking Accounts MM & Savings Time Deposits 100% Time 9% 9% Deposits Noninterest- $3.0 bearing Checking Accounts (Noninterest & Interest-bearing) 80% Checking 34% $11.4 50% Retail 60% Money Market Total Deposits 34% $8.1 $33.6 B
Slide 24: Asset Quality Metrics
ASSET QUALIT Y METRICS Net Charge-Offs (Recoveries) to Loans Nonperforming Assets to Loans & OREO 0.50% 1.0% 0.8% 0.33% 0.50% 0.48% 0.46% 0.6% 0.40% 0.38% 0.4% 0.16% 0.01% 0.01% 0.03% 0.2% (0.00)% 0.00% -0.01% 0.0% 3Q20 4Q20 1Q21 2Q21 3Q21 3Q20 4Q20 1Q21 2Q21 3Q21 Criticized & Classified Asset Trend
Slide 25: Capital Ratios
C A P I TA L R AT I O S 2Q21 3Q21(1) Tangible Common Equity* 7.8 % 7.8 % Tier 1 Leverage 8.1 % 8.1 % Tier 1 Common Equity 12.1 % 11.9 % Tier 1 Risk-Based Capital 12.1 % 11.9 % Total Risk-Based Capital 14.1 % 13.7 % Bank CRE Concentration Ratio 229 % 236 % Bank CDL Concentration Ratio 54 % 57 % (1) P
Slide 26: Appendix
Appendix Gr
Slide 27: PPNR – Bridge from Q to Q
P P N R (1) – B R I D G E F R O M 2 Q 2 1 TO 3 Q 2 1 (1) Adjusted PPNR is a Non-GAAP financial measure that excludes the impact of merger-related expenses and extinguishment of debt cost - See reconciliation of GAAP to Non-GAAP measures in Appendix * Core NIM is also a non-GAAP financial measure tha
Slide 28: Current & Historical - Quarterly Performance
C U R R E N T & H I S TO R I C A L 5 - QT R P E R F O R M A N C E Revenue Composition Net Interest Margin (“NIM”) NIM / Revenue Noninterest Income / Revenue Avg. 10-year UST NIM ($) NIM (%) $385M 3.0% $300 4.5% $363M $358M $332M $347M 120% Total Revenue 2.5% 4.0% 100% $280 3.22% 3.14% 3.12% 3.5% $ i
Slide 29: Loss Absorption Capacity
L O S S A B S O R P T I O N C A PA C I T Y | 3 Q 2 0 2 1 3Q21 % of Total Loans (1) Allowance for Credit Losses (“ACL”) Non-PCD ACL $ 221.4 PCD ACL 92.7 Total ACL $ 314.1 1.35 % Reserve for Unfunded Commitments Reserve for unfunded commitments 28.3 0.12 % Total ACL plus Reserve for Unfunded Commitmen
Slide 30: Branch Optimization
B R A N C H O P T I M I Z AT I O N 2009 …..……………..………..……....…………………………….. September 2021 420 Branches 281 Branches 236 Branches 85 Branches Acquired Plus Consolidated or Average Size Average Size $40M 12 DeNovo Sold $119M Branches 85 432 236 281 ~198% growth in deposits per branch 30
Slide 31: PPP Update
P P P U P D AT E PPP Totals ($ in millions) Not Forgiven Forgiven $525 $2,693 $- $400 $800 $1,200 $1,600 $2,000 $2,400 $2,800 $3,200 $3,600 • As of 3Q21, approximately 84%, or $2.7 billion of PPP loans have been forgiven by the SBA (1) • In 3Q21, we recognized PPP deferred fees of $16.4 million • Ap
Slide 32: Non-GAAP Reconciliations – Efficiency Ratios & Net Interest Margin
N O N - G A A P R E C O N C I L I AT I O N S – C U R R E N T & H I S T O R I C A L : E F F I C I E N C Y R AT I O S & NET INTEREST MARGIN(UNAUDITED) 3Q20 4Q20 1Q21 2Q21 3Q21 SSB SSB SSB SSB SSB Noninterest expense (GAAP) $ 236,887 $ 278,398 $ 228,711 $ 263,383 $ 232,290 Less: Amortization of intangi
Slide 33: Non-GAAP Reconciliations – Investments, Fed Funds Sold & Int. Earning Cash
N O N - G A A P R E C O N C I L I AT I O N S – C U R R E N T & H I S T O R I C A L : I N V E S T M E N T S , F E D F U N D S S O L D & I N T. E A R N I N G C A S H ( U N A U D I T E D ) Combined Business Basis* 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 SSB CSFL Combined (1) SSB CSFL Combined (1) SSB S
Slide 34: Non-GAAP Reconciliations – PPNR, Adjusted & Correspondent Income
N O N - G A A P R E C O N C I L I AT I O N S – P P N R , A D J U S T E D & C O R R E S P O N D E N T & C A P I TA L M A R K E T S I N C O M E ( U N A U D I T E D ) PPNR, Adjusted (Non-GAAP) 2Q21 3Q21 SSB SSB Net interest income (GAAP) $ 253,130 $ 259,986 Plus: Noninterest income 79,020 87,010 Less:
Slide 35: Non-GAAP Reconciliations – Tangible Book Value & TCE Ratio
N O N - G A A P R E C O N C I L I AT I O N S – TA N G I B L E B O O K V A L U E / S H A R E & TA N G I B L E C O M M O N E Q U I T Y R AT I O Tangible Book Value per Common Share 3Q20 4Q20 1Q21 2Q21 3Q21 Shareholders' common equity (excludes preferred stock) $ 4,563,413 $ 4,647,880 $ 4,719,820 $ 4,7
Slide 36: Non-GAAP Reconciliations – Return on Avg. Tangible Common Equity & PPNR ROAA
N O N - G A A P R E C O N C I L I AT I O N S – R E T U R N O N A V G . TA N G I B L E C O M M O N E Q U I T Y & P P N R R E T U R N O N AV G . A S S E T S Return on Average Tangible Equity 2Q21 3Q21 Net income (GAAP) $ 98,960 $ 122,788 Plus: Amortization of intangibles 8,968 8,543 Effective tax rate
Slide 37: Non-GAAP Reconciliations – Adjusted Net Income & Adjusted EPS
N O N - G A A P R E C O N C I L I AT I O N S – A D J U S T E D N E T I N C O M E & A D J U S T E D EARNINGS PER SHARE (“EPS”) Adjusted Net Income 2Q21 3Q21 Net income (GAAP) $ 98,960 $ 122,788 Plus: Securities gains, net of tax (28) (51) Merger and branch consolidation related expense, net of tax 25
Slide 38: Non-GAAP Reconciliations – Adjusted ROAA & ROATCE
N O N - G A A P R E C O N C I L I AT I O N S – A D J U S T E D R E T U R N O N A V G . A S S E T S & A V G . TA N G I B L E C O M M O N E Q U I T Y Adjusted Return on Average Assets 2Q21 3Q21 Adjusted net income (non-GAAP) $ 133,591 $ 136,820 Total average assets 39,832,752 40,593,766 Adjusted Retur
Slide 39: Non-GAAP Reconciliations – Net Interest Margin & Core Net Interest Income
N O N - G A A P R E C O N C I L I AT I O N S – N E T I N T E R E S T M A R G I N & C O R E N E T I N T E R E S T I N C O M E ( E X C L D. F M V & P P P ACC R E T I O N ) Net Interest Margin - Tax Equivalent (Non-GAAP) 3Q20 4Q20 1Q21 2Q21 3Q21 Net interest income (GAAP) $ 270,348 $ 265,547 $ 261,998
Slide 40: SouthState
S SouthState