Southstate Bank Corporation · NYSE:SSB
Southstate Bank — Q1 2022 Earnings Presentation
44 slides from Southstate Bank's earnings presentation, Apr 29, 2022
Slide 1: Earnings Call 1Q 2022
Earnings Call 1Q 2022 Friday, April 29, 2022
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) $46 Billion in assets #1 in Florida #2 in Georgia #3 in South Carolina $27 Billion in loans 16 Greenwich Excellence and Best Brand awards $39 from Coalition (283) Ranked #30 Greenwich by S&P Global Billion in deposits Top 30 $5.8 Forbes 100 Best Banks
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: Pursuing a Greater Purpose - 2021 Impacts
PURSUING A GREATER PURPOSE - 2021 IMPACTS Commitment to Our Community 20: Commitment to Environmental Resourcefulness AQA Promoting Diversity and Inclusion AuIN iG Commitment to Our Team Members $680MM provided in community development loans $434MM provided in affordable lending mortgage programs $7
Slide 6: 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 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
Quarterly Results Ga
Slide 9: Highlights | Linked Quarter
HIGHLIGHTS | LINKED QUARTER 4Q21 1Q22 GAAP Net Income $ 106.8 $ 100.3 EPS (Diluted) $ 1.52 $ 1.39 Return on Average Assets 1.02 % 0.95 % Non-GAAP* Return on Average Tangible Common Equity 14.63 % 13.97 % Non-GAAP, Adjusted* Net Income $ 112.1 $ 121.9 EPS (Diluted) $ 1.59 $ 1.69 Return on Average Ass
Slide 10: Quarterly Highlights
Q U A R T E R LY H I G H L I G H T S | 1 Q 2 0 2 2 • Completed Atlantic Capital Bancshares, Inc. (“ACBI”) merger on March 1, 2022 • Reported & adjusted diluted Earnings per Share (“EPS”)(1) of $1.39 and $1.69, respectively • Pre-Provision Net Revenue (“PPNR”)(2) of $129.2 million, or 1.22% PPNR ROAA
Slide 11: Net Interest Margin
NET INTEREST MARGIN Net Interest Income excld. Accretion** Accretion** Net Interest Income Net Interest Margin* Net Interest Income excluding accretion increased 10% from 1Q21 – 1Q22 3.12% $320 3.2% 2.87% 2.86% 2.78% 2.77% $280 $262.0 $260.0 $261.5 $253.1 $258.1 2.4% $ in millions $7.7 $30.8 $21.6 $
Slide 12: Loan Production vs Loan Growth
LOAN PRODUCTION VS LOAN GROWTH Loan Production (1) Loan Portfolio Growth (1) $3,500 $3,129 $3,000 $2,636 $2,582*** $2,500 $2,355 $2,079 $1,933 $ in millions $2,000 $1,791 $1,879 $1,834 $1,699 $1,470 $1,535 $1,500 $1,256** $1,000 $500 $180 $82 $267 $153 $180 $169 $573 $396 $381*** $0 $(372) $(277) $(
Slide 13: Mortgage Banking Division
MORTGAGE BANKING DIVISION Highlights Quarterly Mortgage Production 1Q21 4Q21 1Q22 Portfolio • Mortgage banking income of $10.6 million in 1Q 2022 Secondary 33% compared to $12.0 million in 4Q 2021 46% 47% 53% 67% 54% • Secondary pipeline at 1Q 2022 of $260 million, as compared to $254 million at 4Q
Slide 14: Correspondent Banking Division
CORRESPONDENT BANKING DIVISION 1,173 Financial Institution Clients Correspondent Revenue Breakout ARC Revenues FI Revenues Operational Revenues Total Revenue $35 $35.0 $30.2 $28.7 $28.0 $30 $30.0 $25.9 $25.2 $25 $25.0 $ in millions $20 $20.0 $15 $15.0 $10 $10.0 $5 $5.0 $- $0.0 1Q21 2Q21 3Q21 4Q21 1Q
Slide 15: Interest Rate Sensitivity
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Slide 16: Cash & Securities
CASH & SECURITIES Investments ($) Fed Funds & Int. Earning Cash ($) Avg. 10-Yr Treasury $15.0 $14.4B 3.0% $13.5B $12.1B $11.6B 2.5% $12.0 $10.9B $5.4 1.98% $6.4 1.53% $ in billions 1.80% $8.7B 2.0% $9.0 $5.9 1.59%$5.7 $7.8B 1.33% $7.3B $5.6 1.32% $6.4B 1.38% 1.5% $4.2 0.86% $6.0 $4.7B $4.1 $2.0 $4.0
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) 24% 23.3% 21.0% 21.5% 23.0% 20.3% 18.8% 18.6% 19.3% 19.3%
Slide 18: Premium Core Deposit Franchise
PREMIUM CORE† DEPOSIT FRANCHISE Deposits by Type Deposit Mix vs. Peers Checking Accounts MM & Savings Time Deposits Checking Accounts Composition 100% Time Deposits 7% 7% $2.8B Noninterest- 36% 80% 33% bearing Checking Commercial 50% $14.1B 60% Money Market $9.1B Total Deposits 34% 40% $38.8 Billion
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 Year 1 Net Interest Income Sensitivity(1) Loan Repricing Frequency (excluding PPP) Instantaneous Shock Ramp Fixed Variable Adjustable 18% 60% 15.5% 16% 50% 14% 12% 40% 10% 8.0% 30% 8% 9.1% 50.1% 50.1% 6% 20% 42.0% 4.0% 31.9% 4% 4.7% 2.0% 10% 18.0% 2% 2.4%
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 T A * Cost of Deposits Average Fed Funds Rate Average 5-YR UST 4Q15 - 2Q19 SouthState total deposit beta (including DDA) equal to 24%; 2.88% 3.0% 2.76% 2.80% deposit beta for first 100 bps increase equal
Slide 21: Balance Sheet Strength
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Slide 22: Tangible Book Value per Share Plus Capital Return per Share
TA N G I B L E B O O K VA L U E P E R S H A R E (1) P L U S C A P I TA L R E T U R N P E R S H A R E Tangible Book Value per Share ("TBVPS") Cumulative Dividends Cumulative Repurchases per Share Change in AOCI per Share $51.00 $50.96 $49.09 $43.49 $2.54 $39.13 $3.80 $3.75 $0.45 $1.88 $4.29 $31.00 $4
Slide 23: Capital Return to Shareholders
C A P I TA L R E T U R N TO S H A R E H O L D E R S • Returned $120.4 million to shareholders in 1Q22 through share repurchases and dividends • 1.3 million shares repurchased YTD represents 1.7%(1) of outstanding shares • Annualized dividend of $1.96 represents an attractive dividend yield of 2.6%(2
Slide 24: Loan and Deposit Trends
LOAN AND DEPOSIT TRENDS Loans(1) Deposits Total Loans PPP Noninterest-bearing Checking Interest-bearing Checking MMA & Savings Time Deposits $28 $26.6B $27.0B $42 $38.8B $350, 000,000.0B $24.4B $24.0B $23.8B $23.9B $0.1 $35.1B $33.6B $2.8 $26.5B $24 $1.9 $36 $32.4B $33.2B $1.3 $0.2 $300, 000,000.0B
Slide 25: 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 Loan Type Balance Loans Balance Cons / Constr., Dev. & Land 5,459 $ 2.32B $ 424,300 Other CDL (1) 4% Investor CRE (2) Investor CRE 9,358 8.16B 871,800 9% 31% Owner-Occupied CRE 8,358 5.35B 639,700 C&I 18,485 4.44B 240,600 Consumer Total
Slide 26: Asset Quality Metrics
ASSET QUALIT Y METRICS Net Charge-Offs (Recoveries) to Loans Nonperforming Assets to Loans & OREO 0.05% 0.04% 0.6% 0.04% 0.03% 0.03% 0.02% 0.5% 0.46% 0.44% 0.02% 0.40% 0.38% 0.01% (0.00)% 0.00% 0.4% 0.35% -% (0.01)% 0.3% 1Q21 2Q21 3Q21 4Q21 1Q22 1Q21 2Q21 3Q21 4Q21 1Q22 Criticized & Classified Asset
Slide 27: High Quality Investment Portfolio
HIGH QUALIT Y INVESTMENT PORTFOLIO Investment Portfolio† Composition Investment Securities Yield (2) 6% 2.0% 7% 1.75% Agency MBS(1) 1.52% 1.49% 1.51% 1.53% 13% 1.5% Municipal Total Investment Portfolio† Treasury & agency $8.8 Billion 1.0% 1Q21 2Q21 3Q21 4Q21 1Q22 Other 74% Municipal Bond Rating 1% 0
Slide 28: Capital Ratios
C A P I T A L R AT I O S 4Q21 1Q22(1) Tangible Common Equity* 7.7 % 7.0 % Tier 1 Leverage 8.1 % 8.5 % Tier 1 Common Equity 11.8 % 11.4 % Tier 1 Risk-Based Capital 11.8 % 11.4 % Total Risk-Based Capital 13.6 % 13.3 % Bank CRE Concentration Ratio 239 % 243 % Bank CDL Concentration Ratio 55 % 57 % (1)
Slide 29: Appendix
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Slide 30: PPNR
P P N R (1) PPNR excld. Accretion* Accretion * $200 $150 $139.6 $132.2 $132.6 $129.2 $30.8 $113.4 $21.6 $13.4 $7.7 $ in millions $100 $20.5 $110.6 $119.2 $121.5 $50 $108.8 $92.9 $- 1Q21 2Q21 3Q21 4Q21 1Q22 Dollars in millions (1) Adjusted PPNR is a Non-GAAP financial measure that excludes the impact
Slide 31: Current & Historical - Qtr Performance
C UR R E N T & H I S TO R I C AL 5 - QT R P E R F O R M AN C E Revenue Composition Net Interest Margin (“NIM”) NIM / Revenue Noninterest Income / Revenue Avg. 10-year UST NIM ($) NIM (%) 3.0% $300 4.5% Total $358M $332M $347M $350M $348M 120% Revenue 2.5% 4.0% 100% $280 3.12% 24% 24% 3.5% $ in milli
Slide 32: Loss Absorption Capacity
L O S S A B S O R P T I O N C A PA C I T Y | 1 Q 2 0 2 2 1Q22 % of Total Loans(1) Allowance for Credit Losses (“ACL”) Non-PCD ACL $ 227.8 PCD ACL 72.6 Total ACL $ 300.4 1.14 % Reserve for Unfunded Commitments Reserve for unfunded commitments 30.4 0.11 % Total ACL plus Reserve for Unfunded Commitment
Slide 33: Significant Purchase Accounting Marks
S I G N I F I C A N T P U R C H A S E A CC O U N T I N G M A R K S (1) Loan Balance % of (2) Credit Mark Interest Mark Total Mark Total NonPCD Loans ~$ 2.3B 95 % ~$ 20.5mm ~0.9 % ~$ 14.4mm ~0.6 % ~$ 34.9mm ~1.5 % PCD Loans ~$ 0.1B 5 % ~$ 9.2mm ~8.2 % ~$ 4.5mm ~4.0 % ~$ 13.7mm ~12.2 % Total $ 2.4B $
Slide 34: Branch Optimization
B R A N C H O P T I M I Z AT I O N 2009 …..……………..………..……....…………………………….. 1Q 2022 422 Branches 283 Branches 236 Branches 85 Branches Acquired Plus Consolidated or Average Size Average Size $40M 12 DeNovo Sold $137M Branches 85 434 236 283 ~243% growth in deposits per branch 34
Slide 35: Technology | Digital
T E C H N O L O G Y | D I G I TA L 2020-2022 Foundation Future System Conversion Complete • Strategic Talent Adds Tech Stack with Best-in-Class Systems • Efficiency, Capacity, Automation Talent retained and in place for next phase • Data Analytics • Money Movement • Digital First Target: Digit
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 . 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 4Q21 1Q22 Net income (GAAP) $ 106,846 $ 100,329 Plus: Amortization of intangibles 8,517 8,494 Effective tax ra
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 4Q21 1Q22 Net income (GAAP) $ 106,846 $ 100,329 Plus: Securities gains, net of tax (2) - Initial provision for credit losses - NonPCD loans and UFC from t
Slide 38: Non-GAAP Reconciliations – Adjusted Return on Avg. Assets & Equity
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 4Q21 1Q22 Adjusted net income (non-GAAP) $ 112,099 $ 121,913 Total average assets 41,359,708 42,946,332 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 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) 1Q21 2Q21 3Q21 4Q21 1Q22 Net interest income (GAAP) $ 261,998 $ 253,130 $ 259,986 $
Slide 40: 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) 1Q21 2Q21 3Q21 4Q21 1Q22 SSB SSB SSB SSB SSB Net interest income (GAAP) $ 261,998 $ 253,130 $ 259,986 $ 258,10
Slide 41: 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) 1Q21 2Q21 3Q21 4Q21 1Q22 SSB SSB SSB SSB SSB Noninterest expense (GAAP) $ 228,711 $ 263,383 $ 232,290 $ 224,037 $ 228,600 Less: Amortization of intangi
Slide 42: 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 (SSB & CSFL)* 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 (1) (1) SSB CSFL Combined
Slide 43: 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 – T A N G I B L E B O O K V A L U E / S H A R E & 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 Book Value per Common Share 1Q21 2Q21 3Q21 4Q21 1Q22 Shareholders' common equity (excludes preferred stock) $ 4,719,820 $ 4,757,623 $ 4,792,941 $ 4
Slide 44: SouthState
S SouthState