Southstate Bank Corporation · NYSE:SSB
Southstate Bank — Q2 2021 Earnings Presentation
39 slides from Southstate Bank's earnings presentation, Jul 23, 2021
Slide 1: Earnings Call 2Q 2021
Earnings Call 2Q 2021 Friday, July 23, 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) $40 Billion in assets #1 in Florida #2 in Georgia #3 in South Carolina $24 Billion in loans (281) $33 Billion in deposits 7 Greenwich Excellence Awards 2021 Top 50 $5.3 Forbes 100 Best Banks in America Billion market cap 2021 3 (1) Financial metrics a
Slide 4: 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 5: Investment Thesis
INVESTMENT THESIS • Well-positioned to compete with 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 manageme
Slide 6: Quarterly Results
Quarterly Results Ga
Slide 7: Highlights | Linked Quarter
H I G H L I GHT S | L I N K E D Q U A R T ER 1Q21 2Q21 GAAP Net Income $ 146.9 $ 99.0 EPS (Diluted) $ 2.06 $ 1.39 Return on Average Assets 1.56 % 1.00 % Non-GAAP* Return on Average Tangible Common Equity 21.16 % 14.12 % Non-GAAP, Adjusted* Net Income $ 154.8 $ 133.6 EPS (Diluted) $ 2.17 $ 1.87 Retur
Slide 8: Quarterly Highlights | 2Q
Q U A R T E R LY H I G H L I G H T S | 2 Q 2 0 2 1 • Reported & adjusted diluted Earnings per Share (“EPS”) (1) of $1.39 and $1.87, respectively • Pre-Provision Net Revenue (“PPNR”)(2) of $113.4 million, or 1.14% PPNR ROAA(2) • Core net interest income (excluding loan accretion and net deferred fees
Slide 9: PPNR – Bridge from Q to Q
P P N R (1) – B R I D G E F R O M 1 Q 2 1 TO 2 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 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 ) $4 5.00 $4 4.00 $43.07 $4 3.00 $42.02 $4 2.00 $41.16 $4 1.00 $4 0.00 $39.83 $38.33 $3 9.00 $3 8.00 $3 7.00 $3 6.00 2Q20 3Q20 4Q20 1Q21 2Q21 (1) The tangible measure is a non-GAAP measure and excludes the effect of period end balances of intangib
Slide 11: Net Interest Margin
NET INTEREST MARGIN Net Interest Income excld. Accretion** Accretion** Net Interest Income Net Interest Margin* $450 3.5% 3.24% 3.22% 3.14% 3.12% $360 2.87% 3.0% $270.3 $265.5 $ in millions $262.0 $270 $253.1 2.5% $30.9 $29.3 $30.8 $20.5 $162.6 $180 2.0% $17.3 $239.4 $236.2 $231.2 $232.6 $90 1.5% $1
Slide 12: Mortgage Banking Division
M O R TG A G E B A N K I N G D I V I S I O N $1,900 Secondary Portfolio Cash Gain on Sale Margin QTD $1,700 $1,493 $1,574 Production 140% $1,500 ($) 4.49% 4.11% $1,413 4.56% $1,299 $1,404 5.0% 5.0% 120% $1,300 4.33% 4.0% 4.0% 100% $1,100 33% 43% 28% 80%$900 27% 28% 2.85% 3.0% 3.0% 60%$700 2.0% 2.0%
Slide 13: Correspondent Banking Division
C OR R E S P OND EN T B A N K I N G D I V I S I ON 1,077 Clients Correspondent Revenue Breakout ARC Revenues FI Revenues Operational Revenues $35 $30 $25 $ in millions $20 $15 $10 $5 $- 2Q20* 3Q20 4Q20 1Q21 2Q21 • Provides capital markets hedging (ARC), fixed income sales, international, clearing an
Slide 14: Interest Rate Sensitivity
Interest Rate Sensitivity Ga
Slide 15: Cash & Securities
CASH & SECURITIES Investments ($) Fed Funds & Int. Earning Cash ($) Avg. 10-Yr Treasury $13.0 3.0% $11.6B $12.0 $10.9B $11.0 2.5% $10.0 $8.7B $5.9 $9.0 1.80% $7.8B 2.0% $8.0 $7.3B $5.6 1.59% $ in billions $7.0 $6.4B 1.32% 1.38% $4.2 1.5% $6.0 $4.7B $2.0 $4.1 0.86% $5.0 $4.0 $4.0 $0.6 0.69% 0.65% 1.0
Slide 16: 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% 20.0% 18.8% 19.3% 18.6% 18.4% 18.6% 17.9% 19 .0 % 16%
Slide 17: 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 Down 100 Fixed Variable Adjustable 50.0% 60.0% 40.0% 50.0% 40.0% 30.0% 48.5% 30.0% 20.0% 48.6% 48.6% 20.0% 42.9% 31.7% 24.0% 30.0% 10.0% 15.7% 10.0% 21.4%
Slide 18: Balance Sheet Strength
Balance Sheet Strength Ga
Slide 19: Loan and Deposit Trend
LOAN AND DEPOSIT TREND Loans(1) Deposits Total Loans PPP Noninterest-bearing Checking Interest-bearing Checking MMA & Savings Time Deposits $40 $26 .0 B $40 $350 , 00,00. 0 B $32.4B $33.2B $300 , 00,00. 0 B $30.0B $30.0B $30.7B $25 .5 B $3.5 $3.3 $30 $25.5B $30 $25.2B $24.6B $24.4B $3.9 $3.7 $24.0B
Slide 20: 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 4% Loans Balance Constr., Dev. & Land 5,477 $ 1,947MM $ 355,600 CDL (1) 9% Investor CRE 10,131 7,094MM 700,200 Consumer RE Owner-Occupied CRE 8,348 4,896MM 586,400 21% Commercial & Industrial 17,463 3,12
Slide 21: Premium Core Deposit Franchise
PREMIU M CORE† D EPOS IT F RANCH ISE Deposits by Type Deposit Mix vs. Peers Checking Accounts MM & Savings Time Deposits 100% Time 10% 10% Deposits Noninterest- bearing Checking Accounts $3.3 (Noninterest & Interest-bearing) 80% Checking 33% $11.2 50% Retail 60% Money Total Deposits 33% Market $33.2
Slide 22: Loan Production vs Loan Growth
LOAN PRODU CTION VS LOAN GROWTH Loan Production (1) Loan Portfolio Growth (1) $2,500 $2,355 $2,079 10 % $1,933 $1,879 $2,000 $1,791 $1,834 $1,699 $1,470 $1,535 $ in millions $1,500 $1,256** 6% $1,000 2% $500 $180 $82 $267 $153 $180 $169 (2)% $0 $(372) $(277) $(155) $(185) -$500 (6)% 1Q19* 2Q19* 3Q19
Slide 23: Asset Quality
ASSET QUALITY Net Charge-Offs (Recoveries) to Loans Nonperforming Assets to Loans & OREO 0.50% 1.0% 0.8% 0.33% 0.56% 0.50% 0.48% 0.46% 0.6% 0.38% 0.4% 0.16% 0.01% 0.01% 0.01% 0.03% 0.2% (0.00)% -0.01% 0.0% 2Q20* 3Q20 4Q20 1Q21 2Q21 2Q20 3Q20 4Q20 1Q21 2Q21 Criticized & Classified Asset Trends Loan D
Slide 24: Capital Ratios
C A P I TA L R AT I O S 1Q21 2Q21(1) Tangible Common Equity* 7.9 % 7.8 % Tier 1 Leverage 8.5 % 8.1 % Tier 1 Common Equity 12.1 % 12.1 % Tier 1 Risk-Based Capital 12.1 % 12.1 % Total Risk-Based Capital 14.5 % 14.1 % Bank CRE Concentration Ratio 224 % 229 % Bank CDL Concentration Ratio 53 % 54 % (1) P
Slide 25: Branch Optimization
B R A N C H O P T I M I Z AT I O N 2009 …..……………..………..……....…………………………….. June 2021 420 Branches 281 Branches 236 Branches 85 Branches Acquired Plus Consolidated or Average Size Average Size $40M 12 DeNovo Sold $118M Branches 85 432 236 281 ~195% growth in deposits per branch 25
Slide 26: Appendix
Appendix Ga
Slide 27: Current & Historical - Quarterly Performance
C U R R E N T & H I S TO R I C A L 5 - QT R P E R F O R MA NC E Revenue Composition Net Interest Margin (“NIM”) NIM / Revenue Noninterest Income / Revenue Avg. 10-year UST NIM ($) NIM (%) $383M $385M 3.0% $300 4.5% $363M $358M $332M 12 0% Total Revenue 2.5% 3.38% 4.0% $280 3.22% 10 0% 24% 3.14% 3.12
Slide 28: Loss Absorption Capacity | 2Q21
LOS S A B S OR P TION CA PA CITY | 2 Q 2 0 2 1 2Q21 % of Total Loans (1) Allowance for Credit Losses (“ACL”) Non-PCD ACL $ 245.4 PCD ACL 105.0 Total ACL $ 350.4 1.54 % Reserve for Unfunded Commitments Reserve for unfunded commitments 31.0 0.14 % Total ACL plus Reserve for Unfunded Commitments $ 381.
Slide 29: Merger-Related Expenses / Deal Costs 2020-2021
M E R G E R - R E L AT E D E X P E N S E S / D E A L C O S T S ( 1 ) | 2 0 2 0 - 2 0 2 1 CSFL(2) SSB Total MRE 1Q20 $ 3,076 $ 4,114 $ 7,190 4/1-6/7 33,526 33,526 2Q20 40,229 40,229 3Q20 21,574 21,574 4Q20 17,036 17,036 2020 YTD $ 36,602 $ 82,953 $ 119,555 1Q21 9,999 9,999 2Q21 32,961 32,961 LTD $ 36
Slide 30: PPP Update
P P P U P D AT E PPP Totals ($ in millions) Not Forgiven Forgiven 2Q21 Forgiven 1Q21 Forgiven 4Q20 Round 1 $467 $818 $704 $420 Round 2 $804 $5 $- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 $2,400 • As of 2Q21, approximately 81%, or $1,942 million of Round 1 PPP loans have b
Slide 31: 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 & N E T I N TE R E S T M A R GI N (UN AUDI TE D) Combined Business Basis* 2Q20 3Q20 4Q20 1Q21 2Q21 SSB CSFL (1) Combined SSB SSB SSB SSB Noninterest expense (GAAP) $ 175,112 $ 132,703
Slide 32: Non-GAAP Reconciliations: Investments, Fed Funds Sold & 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 SSB CSFL Combined (1) SSB CSFL Combined (1) SSB SSB SS
Slide 33: Non-GAAP Reconciliations: PPNR & 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) 1Q21 2Q21 SSB SSB Net interest income (GAAP) $ 261,998 $ 253,130 Plus: Noninterest income 96,285 79,020 Less:
Slide 34: 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 2Q20 3Q20 4Q20 1Q21 2Q21 Shareholders' common equity (excludes preferred stock) $ 4,491,850 $ 4,563,413 $ 4,647,880 $ 4,7
Slide 35: Non-GAAP Reconciliations: Return on Avg. Tangible Common Equity
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 COM M ON E QU I TY & P P N R R E TU R N ON AVG. A S S E TS Return on Average Tangible Equity 1Q21 2Q21 Net income (loss) (GAAP) $ 146,949 $ 98,960 Plus: Amortization of intangibles 9,164 8,968 Effective tax rate, e
Slide 36: Non-GAAP Reconciliations: Adjusted Net Income & 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 (Loss) 1Q21 2Q21 Net income (loss) (GAAP) $ 146,949 $ 98,960 Plus: Securities gains, net of tax - (28) Merger and branch consolidation related expense, ne
Slide 37: 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 1Q21 2Q21 Adjusted net income (non-GAAP) $ 154,773 $ 133,591 Total average assets 38,245,410 39,832,752 Adjusted Retur
Slide 38: Non-GAAP Reconciliations: Net Interest Margin & Core NII
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 A CC R E T I O N ) Net Interest Margin - Tax Equivalent (Non-GAAP) 2Q20 3Q20 4Q20 1Q21 2Q21 Net interest income (GAAP) $ 162,557 $ 270,348 $ 265,547
Slide 39: SouthState
S SouthState