Southstate Bank Corporation · NYSE:SSB
Southstate Bank — Q4 2021 Earnings Presentation
43 slides from Southstate Bank's earnings presentation, Jan 25, 2022
Slide 1: Earnings Call 4Q 2021
Earnings Call 4Q 2021 Tuesday, January 25, 2022
Slide 2: Disclaimer
DISCLAIMER Statements inclu ded in th is commun ication, wh ich are n ot h istorical in nat ure are inten ded t o be, an d are hereby identifie d as, forward-lookin g statements f or purposes of the safe harbor provided by Section 27 A of t he Secu rities A ct of 1933 a nd Sect ion 21E of the Securi
Slide 3: SouthState Corporation Overview of Franchise
SouthState Corporation Overview of Franchise (1) $42 Billion in assets #1 in Florida #2 in Georgia #3 in South Carolina $24 Billion in loans (281) $35 Billion in deposits 7 Greenwich Excellence Awards 2021 Top 50 Forbes $5.7 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 • Corporate Billing / Fa
Slide 5: Strong Population Growth Trends
S T R O N G P O P U L AT I O N G R O W T H T R E N D S • SouthState is located in four of the top six states for highest population growth over the past year • The four states highlighted below represent 93% of SouthState’s total deposits Top 10 States in Population Growth (July 2020 to July 2021) A
Slide 6: 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 7: 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 8: Quarterly Results
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Slide 9: Highlights | Linked Quarter
H I G H L I GHT S | L I N K E D Q U A R T ER 3Q21 4Q21 GAAP Net Income $ 122.8 $ 106.8 EPS (Diluted) $ 1.74 $ 1.52 Return on Average Assets 1.20 % 1.02 % Non-GAAP* Return on Average Tangible Common Equity 16.86 % 14.63 % Non-GAAP, Adjusted* Net Income $ 136.8 $ 112.1 EPS (Diluted) $ 1.94 $ 1.59 Retu
Slide 10: Quarterly Highlights
Q U A R T E R LY H I G H L I G H T S | 4 Q 2 0 2 1 • Reported & adjusted diluted Earnings per Share (“EPS”)(1) of $1.52 and $1.59, respectively • Pre-Provision Net Revenue (“PPNR”)(2) of $132.6 million, or 1.27% PPNR ROAA(2) • Loans(3) increased $395.8 million, or 6.7% annualized from prior quarter
Slide 11: Tangible Book Value per Share Plus Dividends
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 ) P L U S D I V I D E N D S Tangible Book Value per Share Cumulative Dividends $4 9.00 $4 8.00 $4 7.00 $46.54 $4 6.00 $45.41 $1.92 $44.01 $1.43 $4 5.00 $4 4.00 $4 3.00 $42.49 $0.94 $4 2.00 $41.16 $0.47 $4 1.00 $4 0.00 $43.98 $44.62 $43.07 $3 9.00
Slide 12: Net Interest Margin
NET INTEREST MARGIN Net Interest Income excld. Accretion** Accretion** Net Interest Income Net Interest Margin* $450 3.5% 3.14% 3.12% $360 2.87% 2.86% 3.0% 2.78% $ in millions $265.5 $262.0 $260.0 $253.1 $258.1 $270 2.5% $29.3 $30.8 $20.5 $21.6 $13.4 $180 2.0% $236.2 $231.2 $232.6 $238.4 $244.7 $90
Slide 13: Loan Production vs Loan Growth
LOAN PRODU CTION VS LOAN GROWTH Loan Production (1) Loan Portfolio Growth (1) $3,129 $3,200 $2,636 $2,460 $2,355 $2,079 $1,933 $ in millions $1,791 $1,879 $1,834 $1,699 $1,720 $1,470 $1,535 $1,256** $980 $240 $180 $82 $267 $153 $180 $169 $573 $396 $(372) $(277) $(155) $(185) -$500 1Q19* 2Q19* 3Q19*
Slide 14: 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 Highlights Quarterly Mortgage Production 4Q20 3Q21 4Q21 Portfolio • Mortgage banking income of $12.0 million in 4Q Secondary 28% 2021 compared to $15.6 million in 3Q 2021 54% 46% 53% 47% 72% • Secondary pipeline at 4Q 2021 of $254 million, as compared to
Slide 15: 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 1,060 Financial Institution Clients Correspondent Revenue Breakout ARC Revenues FI Revenues Operational Revenues Total Revenue $35 $ 3 5 .0 $30.2 $27.8 $28.7 $30 $ 3 0 .0 $25.9 $25.2 $25 $ 2 5 .0 $ in millions $20 $ 2 0 .0 $15 $ 1 5 .0 $10 $ 1 0 .0
Slide 16: Interest Rate Sensitivity
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Slide 17: Cash & Securities
CASH & SECURITIES Investments ($) Fed Funds & Int. Earning Cash ($) Avg. 10-Yr Treasury $15.0 3.0% $14.0 $13.5B $13.0 $12.1B $11.6B 2.5% $12.0 $10.9B $11.0 $10.0 1.80% $6.4 2.0% $8.7B $5.9 1.59% $5.7 1.53% $ in billions $9.0 $7.8B 1.33% $8.0 $7.3B $5.6 1.32% $7.0 $6.4B 1.38% 1.5% $6.0 $4.2 0.86% $4.
Slide 18: 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) 21.0% 21.1% 20.3% 20% 19.3% 18.6% 18.8% 18.4% 18.6% 17.9%
Slide 19: 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% 20.0% 40.1% 49.0% 49.0% 15.0% 29.6% 20.0% 41.5% 30.7% 10.0% 20.4% 14.9% 10
Slide 20: 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 21: Balance Sheet Strength
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Slide 22: Capital Return to Shareholders
C A P I TA L R E T U R N T O S H A R E H O L D E R S • Returned $281.7 million to shareholders in 2021 through share repurchases and dividends • 1.8 million shares repurchased in 2021 represents 2.6% of outstanding shares • Annual dividend of $1.92 represents an attractive dividend yield of 2.3% (1)
Slide 23: Loan and Deposit Trends
LOAN AND DEPOSIT TRENDS Loans(1) Deposits Total Loans PPP Noninterest-bearing Checking Interest-bearing Checking MMA & Savings Time Deposits $30 $ 2 4 . 8 B $40 $ 3 5 0 , 0 0 ,0 0 . 0 B $35.1B $24.6B $24.4B $33.2B $33.6B $24.0B $23.8B $23.9B $32.4B $30.7B $2.8 $ 2 4 . 6 B $ 3 0 0 , 0 0 0 , 0 . 0 B $
Slide 24: 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 5,420 $ 2.03B $ 374,400 CDL (1) 9% Investor CRE 9,391 7.43B 791,400 Consumer RE Owner-Occupied CRE 8,144 4.97B 610,300 20% C&I 16,958 3.51B 207,400 Investor CRE Cons
Slide 25: 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 8% 8% Deposits Noninterest- $2.8 bearing Checking Accounts Checking (Noninterest & Interest-bearing) 80% 33% $11.5 51% Money Retail 60% 34% Market Total Deposits $8.4 $3
Slide 26: Asset Quality Metrics
ASSET QUALITY METRICS Net Charge-Offs (Recoveries) to Loans Nonperforming Assets to Loans & OREO 0.50% 1.0% 0.8% 0.33% 0.48% 0.46% 0.6% 0.40% 0.38% 0.35% 0.4% 0.16% 0.01% 0.03% 0.02% 0.2% (0.00)% 0.00% -0.01% 0.0% 4Q20 1Q21 2Q21 3Q21 4Q21 4Q20 1Q21 2Q21 3Q21 4Q21 Criticized & Classified Asset Trends
Slide 27: Capital Ratios
C A P I TA L R AT I O S 3Q21 4Q21(1) Tangible Common Equity* 7.8 % 7.7 % Tier 1 Leverage 8.1 % 8.1 % Tier 1 Common Equity 11.9 % 11.8 % Tier 1 Risk-Based Capital 11.9 % 11.8 % Total Risk-Based Capital 13.8 % 13.6 % Bank CRE Concentration Ratio 236 % 239 % Bank CDL Concentration Ratio 57 % 55 % (1) P
Slide 28: Appendix
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Slide 29: PPNR
P P N R ( 1) PPNR excld. Accretion* Accretion * $200 $150 $143.7 $139.6 $132.2 $132.6 $29.3 $30.8 $113.4 $13.4 $21.6 $ in millions $100 $20.5 $114.4 $108.8 $110.6 $119.2 $50 $92.9 $- 4Q20 1Q21 2Q21 3Q21 4Q21 Dollars in millions (1) Adjusted PPNR is a Non-GAAP financial measure that excludes the impa
Slide 30: Current & Historical - Quarterly Performance
C U R R E N T & H I S TO R I C A L 5 - QT R P E R F O R MA NC E Revenue Composition Net Interest Margin (“NIM”) NIM / Revenue Noninterest Income / Revenue Avg. 10-year UST NIM ($) NIM (%) 3.0% $300 4.5% $363M $358M $332M $347M $350M 1 2 0 % Total Revenue 2.5% 4.0% 1 0 % $280 3.14% 3.12% 24% 3.5% $ i
Slide 31: Loss Absorption Capacity
LOS S A B S OR P TION CA PA CITY | 4 Q 2 0 2 1 4Q21 % of Total Loans (1) Allowance for Credit Losses (“ACL”) Non-PCD ACL $ 225.2 PCD ACL 76.6 Total ACL $ 301.8 1.27 % Reserve for Unfunded Commitments Reserve for unfunded commitments 30.5 0.13 % Total ACL plus Reserve for Unfunded Commitments $ 332.3
Slide 32: Branch Optimization
B R A N C H O P T I M I Z AT I O N 2009 …..……………..………..……....…………………………….. 2021 420 Branches 281 Branches 236 Branches 85 Branches Acquired Plus Consolidated or Average Size Average Size $40M 12 DeNovo Sold $125M Branches 85 432 236 281 ~213% growth in deposits per branch 32
Slide 33: Best in Class Platforms
D I G I TA L I N V E S T M E N T S SSB Website Consumer Mobile/Online SBA Platform Best in Class Platforms Wealth Risk/Audit Finance 33
Slide 34: PPP Update
P P P U P D AT E PPP Totals ($ in millions) Not Forgiven Forgiven $263 $2,955 $- $400 $800 $1,200 $1,600 $2,000 $2,400 $2,800 $3,200 $3,600 • As of 4Q21, approximately 92%, or $3.0 billion of PPP loans have been forgiven by the SBA (1) • In 4Q21, we recognized PPP deferred fees of $5.7 million • App
Slide 35: 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 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 3Q21 4Q21 Net income (GAAP) $ 122,788 $ 106,846 Plus: Amortization of intangibles 8,543 8,517 Effective tax rate, excludi
Slide 36: 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 3Q21 4Q21 Net income (GAAP) $ 122,788 $ 106,846 Plus: Securities gains, net of tax (51) (2) Merger and branch consolidation related expense, net of tax 14
Slide 37: Non-GAAP Reconciliations – Adjusted ROAA & Adjusted 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 3Q21 4Q21 Adjusted net income (non-GAAP) $ 136,820 $ 112,099 Total average assets 40,593,766 41,359,708 Adjusted Retur
Slide 38: 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 A CC R E T I O N ) Net Interest Margin - Tax Equivalent (Non-GAAP) 4Q20 1Q21 2Q21 3Q21 4Q21 Net interest income (GAAP) $ 265,547 $ 261,998 $ 253,130
Slide 39: 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) 4Q20 1Q21 2Q21 3Q21 4Q21 SSB SSB SSB SSB SSB Net interest income (GAAP) $ 265,547 $ 261,998 $ 253,130 $ 259,98
Slide 40: 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) 4Q20 1Q21 2Q21 3Q21 4Q21 SSB SSB SSB SSB SSB Noninterest expense (GAAP) $ 278,398 $ 228,711 $ 263,383 $ 232,290 $ 224,037 Less: Amortiz
Slide 41: 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 4Q21 (1) (1) SSB CSFL Combined SSB CSFL Combined
Slide 42: Tangible Book Value / Share & 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 – 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 4Q20 1Q21 2Q21 3Q21 4Q21 Shareholders' common equity (excludes preferred stock) $ 4,647,880 $ 4,719,820 $ 4,757,623 $ 4,7
Slide 43: SouthState
S SouthState