Southstate Bank Corporation · NYSE:SSB
Southstate Bank — Q3 2023 Earnings Presentation
49 slides from Southstate Bank's earnings presentation, Oct 27, 2023
Slide 1: Earnings Call 3Q 2023
Earnings Call 3Q 2023 October 27, 2023
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) $45 Billion in assets $32 Billion in loans Ranked #2 by S&P (251) $37 Global Billion in deposits 5 Greenwich Excellence & Best Brand Awards for Small Business Banking from Coalition Greenwich Top 35 $4.9 Forbes 100 Best Banks in America Billion market
Slide 4: The Why, The What, The How
The WHY To invest in the entrepreneurial spirit, pursue excellence and inspire a greater purpose. The WHAT The HOW Guiding Principles Core Values Local Market Leadership Our business model supports the unique character of the communities we serve and encourages decision making by the banker that is
Slide 5: Positioned for the Future in the Best Growth Markets in America
POSITIONED FOR THE FUTURE IN THE BEST GROWTH MARKETS IN AMERICA Actual Population Growth GDP 2010-2023 ($ in trillions) 17.8% $0.8B US $25.0 $0.6B 13.7% China $18.3 12.8% 11.9% Japan $4.3 8.9% 8.3% $2.9B 6.0% $2.0B SSB Footprint $4.3The combined GDP of Germany $4.0 SouthState’s 6 state branch footpr
Slide 6: Pandemic Accelerates Population and Income Migration to the South
P A N D E M I C A C C E L E R AT E S P O P U L AT I O N A N D I N C O M E M I G R AT I O N TO T H E S O UT H Net Gain/Loss in State Adjusted Gross Income Due to Domestic Migration #1 Florida $39.2B #4 North Carolina $4.5B #6 South Carolina $4.2B #12 Georgia $1.3B #15 Alabama $0.7B #44 Virginia -$1.9
Slide 7: Investment Thesis
INVESTMENT THESIS • High growth markets • Granular, low-cost core deposit base • Diversified revenue streams • Strong credit quality and disciplined underwriting • Energetic and experienced management team with entrepreneurial ownership culture • True alternative to the largest banks with capital ma
Slide 8: Quarterly Results
Quarterly Results Ga
Slide 9: Highlights | Linked Quarter
HIGHLIGHTS | LINKED QUARTER 2Q23 3Q23 GAAP Net Income $ 123.4 $ 124.1 EPS (Diluted) $ 1.62 $ 1.62 Return on Average Assets 1.11 % 1.10 % Non-GAAP(1) Return on Average Tangible Common Equity 15.8 % 15.5 % Non-GAAP, Adjusted(1) Net Income $ 124.9 $ 124.3 EPS (Diluted) $ 1.63 $ 1.62 Return on Average A
Slide 10: 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 3 • Reported Diluted Earnings per Share (“EPS”) and adjusted Diluted EPS (non-GAAP)(1) of $1.62 • Pre-Provision Net Revenue (“PPNR”)(non-GAAP)(2) of $190.2 million, or 1.68% PPNR ROAA (non-GAAP)(2) • PPNR per weighted average diluted share (non-GAAP)(
Slide 11: PPNR per Diluted Share
P P N R P E R D I L U T E D S H A R E (1) $3.50 $3.03 $3.00 $2.90 $2.74 $2.59 $2.48 $2.50 $2.00 $1.50 3Q22 4Q22 1Q23 2Q23 3Q23 (1) For end note descriptions, Earnings Presentation End Notes starting on slide 46. 11
Slide 12: Net Interest Margin
N E T I N T E R E S T M A R G I N (1) Net Interest Income excld. Accretion(2) Accretion (2) Net Interest Income Net Interest Margin(3) $396.0 $400 $381.3 4.4% $7.4 $362.3 $7.4 $361.7 $355.4 $9.5 3.99% $5.5 $350 3.93% $4.1 4.0% $300 3.58% 3.62% 3.50% 3.6% $ in millions $250 $388.6 $373.9 $352.8 $356.
Slide 13: Loan Production vs Loan Growth
LOAN PRODUCTION VS LOAN GROWTH (3) (3) Loan Production Loan Portfolio Growth (1) $4,000 $3,863 (1) $3,500 $3,372 $3,305 $3,129 $3,000 (1) $2,636 $2,582 $2,355 $2,369 $ in millions $2,500 $2,181 $2,079 $1,933 $1,879 $1,834 $2,000 $1,791 $1,699 $1,470 $1,535 $1,459 $1,500 $1,256 (2) $1,451 $1,347 $1,0
Slide 14: Balance Sheet
Balance Sheet Ga
Slide 15: Loan and Deposit Trends
LOAN AND DEPOSIT TRENDS Loans (1) Deposits Noninterest-bearing Checking ("DDA") Interest-bearing Checking MMA & Savings Time Deposits $42 $32.0B $42 $350, 000,000.0B $36.9B $36.4B $36.4B $36.7B $36.9B $31.5B $36 $36 $2.5 $2.4 $300, 000,000.0B $31.0B $4.1 $4.4 $4.5 $30 $30.5B $30 $250, 000,000.0B $12
Slide 16: Total Loan Portfolio
TOTA 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 Loans Balance Balance 4% Investor CRE 8,460 $ 9.4B $ 1,108,000 Investor CRE (2) CDL (1) Consumer RE 43,444 7.6B 175,100 29% 9% Owner-Occupied CRE 7,973 5.5B 694,800 C&I 19,413 5.5B 280,900 Constr., Dev. & Land 4,0
Slide 17: Premium Core Deposit Franchise
PREMIUM CORE† DEPOSIT FRANCHISE Deposits by Type Deposit Mix vs. Peers Checking Accounts Checking Accounts MM & Savings Time Deposits Composition Time Noninterest- 100% Deposits bearing 12% 17% $4.5B Checking 40% 80% $11.2B Commercial 37% 39% 60% Total Deposits 31% 40% $36.9 Billion Small Business M
Slide 18: Remain Well-Positioned During Current Cycle
REMAIN WELL-POSITIONED DURING CURRENT CYCLE – P R E V I O U S A N D C U R R E N T R I S I N G I N T E R E S T R AT E C Y C L E 6.0% 6.0% 24% deposit 27% deposit beta in beta in 5.25% previous current cycle 4.98% 5.0% cycle 5.0% to date 4.50% 4.0% 4.0% 3.64% 3.0% 3.0% 2.40% 2.40% 2.22% 2.17% 1.92% 2.
Slide 19: Credit
Credit
Slide 20: Loan Portfolio – Office Exposure
LOAN PORTFOLIO – OFFICE E XPOSURE State MSA AL 3% NC FL 4% 45% Other 5% VA 6% GA Greenville 17% SC 20% Atlanta Charleston Granular and Diversified Office Portfolio • Office represents 4% of the loan portfolio • Average loan size only $1.4 million Jacksonville • 95% located in the SouthState footprin
Slide 21: Loan Portfolio – Nonowner-Occupied Commercial Real Estate
L O A N P O R T F O L I O – N O N O W N E R - O C C U P I E D C O M M E R C I A L R E A L E S T AT E ( 1 ) Non- Substandard Special Wtd Avg Wtd Avg OTHER Accrual & Accruing Mention Loan Type Balance Avg Loan Size DSC(2) LTV(2) AL% FL% GA% NC% SC% VA% % %(3) %(3) %(3) Retail $2,126 $1.6 1.78 54% 2% 5
Slide 22: Loan Portfolio – CRE Maturities by Year
L O A N P O R T F O L I O – C O M M E R C I A L R E A L E S T AT E M AT U R I T I E S B Y Y E A R ( 1 ) 91% of CRE loans mature in 2025 or later $9.0 51% 50% $8.0 $7.0 40% $6.0 $ in billions $5.0 30% $4.0 $7.6 20% $3.0 12% 11% $2.0 10% 7% 7% 10% $1.0 2% $1.8 $1.7 $1.5 $1.1 $1.0 $- $0.3 0% 2023 2024
Slide 23: Loan Portfolio – Consumer, Residential Mortgage and HELOC
LOAN PORTFOLIO – CONSUMER, RESIDENTIAL MORTGAGE AND HELOC Consumer, Residential Mtg and HELOC Segment Credit Indicator 2Q23 3Q23 Mortgage(1) 14% HELOCs NPL Ratio (Non-Accruals & 90+ DPD & Accruing) 0.33% 0.34% Other Consumer 11% Net Charge-Offs Ratio 0.00% 0.02% CD-Secured 73% 30+ DPD Ratio (Accruin
Slide 24: Asset Quality Metrics
ASSET QUALIT Y METRICS Net Charge-Offs (Recoveries) to Loans • $151 million in provision for credit losses vs. 0.25% $18 million in net charge-offs trailing four 0.16% quarters 0.15% 0.04% • Increased ACL plus reserve for unfunded 0.05% 0.01% 0.01% (0.02)% commitments by 28 bps to 1.59% from 3Q22 to
Slide 25: Loss Absorption Capacity Trend
L O S S A B S O R P T I O N C A PA C I T Y T R E N D Provision for Credit Losses & Net Charge-Offs (Recoveries) Total ACL(1) plus Reserve for Unfunded Commitments Provision for Credit Losses Net Charge-Offs (Recoveries) Total ACL Reserve for Unfunded Commitments % of Total Loans $50 $47.1 $500 2.20%
Slide 26: Capital
Capital Ga
Slide 27: Capital Ratios
C A P I T A L R AT I O S 2Q23 3Q23(2) Tangible Common Equity(1) 7.6 % 7.5 % Tier 1 Leverage 9.2 % 9.3 % Tier 1 Common Equity 11.3 % 11.5 % Tier 1 Risk-Based Capital 11.3 % 11.5 % Total Risk-Based Capital 13.5 % 13.8 % Bank CRE Concentration Ratio 242 % 240 % Bank CDL Concentration Ratio 60 % 58 % (1
Slide 28: Well Capitalized Including AOCI Impact
W E L L C A P I TA L I Z E D I N C L U D I N G A O C I I M PA C T TCE Ratio(1) Tier 1 Leverage Ratio 14.00% 14.00% 12.00% 12.00% 10.00% 10.00% 9.34% 7.48% 7.48% 7.64% 8.00% 8.00% 6.00% 6.00% 5.00% 4.00% 4.00% 4.00% 2.00% 2.00% —% —% As Reported With AOCI Impact As Reported With AOCI Impact CET 1 Ris
Slide 29: Appendix
Appendix Ga
Slide 30: Stable Funding Base and Strong Liquidity Position
S TA B L E F U N D I N G B A S E A N D S T R O N G L I Q U I D I T Y P O S I T I O N Primary Contingency Funding Sources at September 30, 2023 Total Net (in millions) Available Amount Used Availability $ $ $ Cash and Cash Equivalents 1,329 — 1,329 Federal Home Loan Bank of Atlanta 7,767 2 7,765 Fede
Slide 31: High Quality Investment Portfolio
HIGH QUALIT Y INVESTMENT PORTFOLIO Investment Portfolio† Composition Investment Securities Yield(2) 0.4% 2.37% 2.35% 2.36% Agency MBS(1) 2.40% 2.29% 2.06% Treasury, Agency & SBA 12% 2.05% Municipal 1.70% Corporates 1.35% 14% Total Investment 1.00% Portfolio† 3Q22 4Q22 1Q23 2Q23 3Q23 $7.2 Billion 73%
Slide 32: Current & Historical Quarterly Performance
C U R R E N T & H I S TO R I C A L 5 - QT R P E R F O R M A N C E (1) Revenue Composition Net Interest Margin (“NIM”, TE) NIM, TE / Revenue Noninterest Income / Revenue Avg. 10-year UST NIM, TE ($) NIM, TE (%) $462M $453M $440M $438M $429M $400 4.5% Total 3.99% 100% 4.5% 3.93% Revenue 14% 16% 17% 18
Slide 33: Mortgage Banking Division
MORTGAGE BANKING DIVISION Highlights Quarterly Mortgage Production 3Q22 2Q23 3Q23 Portfolio • Mortgage banking income of $2.5 million in 3Q 2023 Secondary 22% 38% compared to $4.4 million in 2Q 2023 47% 62% 53% 78% • Secondary pipeline of $92 million at 3Q 2023, as compared to $99 million at 2Q 2023
Slide 34: Residential Mortgage Portfolio
RESIDENTIAL MORTGAGE PORTFOLIO GAIN ON SALE (“GOS”) MARGIN AND INTEREST RATES Consumer R/E Loan Growth ($) 30-yr Fixed Mortgage Rate GOS Margin 7.50% $600 $700 7.08% 8.0% 6.75% 6.21% 6.38% 5.54% 6.0% $450 $500 4.56% 4.33% 4.49% 4.25% $517 4.11% $472 $498 3.63% $ in millions 3.00% 3.13% 3.25% 2.87% $
Slide 35: Correspondent Banking Division
CORRESPONDENT BANKING DIVISION 1,219 Financial Institution Clients Correspondent Revenue Breakout ARC Revenues, gross Interest on VM FI Revenues Operational Revenues Total Revenues, gross $35 $35.0 $30 $27.7 $24.8 $30.0 $25 $22.0 $20.6 $25.0 $20 $16.8 $20.0 $ in millions $15 $15.0 $10 $10.0 $5 $- $5
Slide 36: Digital Trends
D I G I TA L T R E N D S Digital Sales – Deposit Accounts * Digital Sales – Loans ** Digital Deposits* 100% 100% 100% 23% 24% 16% 18% 80% 80% 80% 33% 35% 84% 82% 77% 76% 60% 60% 60% 67% 65% 40% 40% 40% 20% 20% 20% —% —% —% 3Q22 3Q23 3Q22 3Q23 3Q22 3Q23 Branch Digital Branch Digital Branch Digital *
Slide 37: Branch Optimization
B R A N C H O P T I M I Z AT I O N 2009 …..……………..………..……....…………………………….. 3Q 2023 422 Branches 251 Branches 268 Branches 85 Branches Acquired Plus Consolidated or Average Size Average Size $40M 12 DeNovo Sold $147M Branches 85 434 268 251 Increased deposits per branch 3.7x from 2009 to 3Q23 37
Slide 38: Non-GAAP Reconciliations – ROTCE & 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 . T A 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 2Q23 3Q23 Net income (GAAP) $ 123,447 $ 124,144 Plus: Amortization of intangibles 7,028 6,616 Effective tax ra
Slide 39: 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 2Q23 3Q23 Net income (GAAP) $ 123,447 $ 124,144 Plus: Merger, branch consolidation and severance related expense, net of tax 1,414 130 Adjusted Net Income
Slide 40: Non-GAAP Reconciliations – Adjusted ROAA & ROTCE
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 & AV 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 2Q23 3Q23 Adjusted net income (non-GAAP) $ 124,861 $ 124,274 Total average assets 44,628,124 44,841,319 Adjusted Return
Slide 41: 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 CO M E ( E XC L D. F M V & P P P ACC R E T I O N ) Net Interest Margin - Tax Equivalent (Non-GAAP) 3Q22 4Q22 1Q23 2Q23 3Q23 Net interest income (GAAP) $ 362,334 $ 396,004 $ 381,263 $
Slide 42: 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 , P P N R / W E I G H T E D A V G . C S & 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 & PPNR, Adjusted per Weighted Avg. Common Shares Oustanding, Diluted (Non- 3Q22 4
Slide 43: Non-GAAP Reconciliations – Efficiency Ratios
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 ( U N A U D I T E D ) 3Q22 4Q22 1Q23 2Q23 3Q23 Noninterest expense (GAAP) $ 240,433 $ 229,499 $ 240,505 $ 242,626 $ 238,206 Less: Amortization of intangible assets 7,837 8,027 7,299 7,
Slide 44: Non-GAAP Reconciliations – Tangible Common Equity Ratio
N O N - G A A P R E C O N C I L I AT I O N S – T A N G I B L E C O M M O N E Q U I T Y R AT I O Tangible Common Equity ("TCE") Ratio 2Q23 3Q23 Tangible common equity (non-GAAP) $ 3,264,648 $ 3,212,787 Total assets (GAAP) 44,940,332 44,989,128 Less: Intangible assets 2,025,362 2,018,200 Tangible asse
Slide 45: Non-GAAP Reconciliations – Capital Ratios with AOCI Impact
N O N - G A A P R E C O N C I L I AT I O N S – C A P I T A L R AT I O S W I T H A O C I I M P A C T Tier 1 Leverage Ratio with AOCI Impact CET 1 Risk-based Capital Ratio with AOCI Impact Total Risk-based Capital Ratio with AOCI Impact (non-GAAP) (non-GAAP) (non-GAAP) September 30, 2023 September 30,
Slide 46: Earnings Presentation End Notes
E A R N I N G S P R E S E N TAT I O N E N D N O T E S Slide 5 End Notes • Loans and deposits as of September 30, 2023; excludes $2.0B of loans and $3.5B of deposits from national lines of business and brokered deposits. • Country GDP as of 2022; State GDP as of 1Q23 • Sources: S&P Global, Internatio
Slide 47: Earnings Presentation End Notes
E A R N I N G S P R E S E N TAT I O N E N D N O T E S Slide 15 End Notes (1) Excludes loans held for sale and PPP loans. Slide 16 End Notes (1) CDL includes residential construction, commercial construction, and all land development loans. (2) Investor CRE includes nonowner-occupied CRE and other in
Slide 48: Earnings Presentation End Notes
E A R N I N G S P R E S E N TAT I O N E N D N O T E S Slide 28 End Notes (1) The tangible measures are non-GAAP measures and exclude the effect of period end intangible assets - See reconciliation of GAAP to Non-GAAP measures in Appendix. • AOCI represents accumulated other comprehensive income. • A
Slide 49: SouthState
S SouthState