Southstate Bank Corporation · NYSE:SSB
Southstate Bank — South State — Investor Day (December 2018)
80 slides from Southstate Bank's investor day presentation, Dec 11, 2018
Slide 1: Investor Day Wednesday, December 12, 2018
Investor Day Wednesday, December 12, 2018
Slide 2: Jim Mabry, Charleston, SC
Jim Mabry Charleston, SC
Slide 3: Agenda
Agenda 3 11:00 Jim Mabry Introduction EVP 11:15 Robert Hill A New Season CEO 12:00 Greg Lapointe Markets, Commercial Bank President 12:15 Renee Brooks Wealth, Mortgage, Consumer COO 12:30 Lunch 1:15 Jonathan Kivett Credit Commercial CCO 1:30 John Pollok Finance CFO 2:15 Robert Hill Closing Remarks C
Slide 4: Forward Looking Statements
Forward Looking Statements 4 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 Securit
Slide 5: Clarity, A New Season, Visibility
Clarity A New Season Visibility 5
Slide 6: Robert Hill, Charlotte, NC
Robert Hill Charlotte, NC
Slide 7: South State Today
South State Today SOUTH STATE
Slide 8: Guiding Principles & Values
8 Guiding Principles & Values
Slide 9: Cb || soles
Cb || soles SS GEORGIA Pp DF BAN arrests ame First Federal Branches TRUST . __ & ox QR = Haber: pam ‘MERIDIAN Bani Seavinal
Slide 10: Executive Leadership
Executive Leadership 10 Robert Hill CEO of South State Corporation John Pollok Chief Financial Officer Renee Brooks Chief Operating Officer Jim Mabry EVP, Investor Relations and M&A Greg Lapointe President of South State Bank Jonathan Kivett Commercial Chief Credit Officer Don Truslow EVP, Risk Mana
Slide 11: The South State Digital Solution
The South Digital State Solution get headers, | %
Slide 12: Footprint Market Share
Footprint Market Share 12 Rank Institution Deposits Share 1 Wells Fargo & Co. $ 32.6 18.3% 2 BB&T Corp. 23.2 13.0 3 Bank of America Corp. 22.6 12.7 4 SunTrust Banks Inc. 12.9 7.3 5 First Citizens BancShares Inc. 11.9 6.7 6 South State 11.7 6.6 7 Toronto-Dominion Bank 4.7 2.7 8 United Community Banks
Slide 13: Deep and Dense Footprint
Deep and Dense Footprint 13 I-85 Corridor $ 2.1 Coastal $ 3.8 Central SC / Augusta $ 2.8 Charlotte $ 1.6 See Appendix for Footnotes Deposit Dollars in Billions
Slide 14: Markets
Markets 14 • Deep and Dense Footprint • 11.7 Million People • 200,000 Businesses • 700,000 Customers Market Share Rank Banks <$100 Billion 1-2 3-4 >4 • Charlotte • Charleston • Greenville • Savannah • Augusta • Hilton Head • Columbia • Myrtle Beach • Raleigh • Richmond • Wilmington See Appendix for
Slide 15: Philosophy for Creating Shareholder Value
Philosophy for Creating Shareholder Value
Slide 16: Assets
Assets 16 Dollars in Billions $0.4 $1.0 $2.2 $3.6 $5.1 $7.9 $8.6 $14.5
Slide 17: Creating Shareholder Value
$5.62 $51.12 Creating Shareholder Value 17 Cumulative DividendsTBV See Appendix for Footnotes
Slide 18: Long-term Returns
-150 -100 -50 0 50 100 150 200 250 300 2006 2009 2012 2015 2018 SSB Total Return SSB KRX SNL Southeast U.S. Bank 188% 127% 8% -40% Long-term Returns 18 See Appendix for Footnotes %
Slide 19: SS GEORGIA >
9 bb SS GEORGIA > BAl ce & og sont STATE PARKSTERLING First Federal — Branches TRUST & 8 Biovail Habersham MERIDIAN © ls SAVANNAH BANK
Slide 20: Greg Lapointe, Charlotte, NC
Greg Lapointe Charlotte, NC
Slide 21: How We are Positioned to Grow
Consistent and Strong Credit Culture Soundness How we are Positioned to Grow High-growth Footprint Talent Expand Commercial Bank Opportunity 21
Slide 22: Economic Highlights
22 • Right to Work States • Two of top 10 Busiest Ports • Jasper Ocean Terminal • Strong Infrastructure Richmond Columbia Greenville Charlotte Charleston Wilmington Savannah Myrtle Beach Raleigh Atlanta Augusta Economic Highlights
Slide 23: Established Presence in High-growth Markets
Established Presence in High-growth Markets 23 2.7x 2.3 2.3 2.3 2.0 2.0 1.7x 1.7 1.6 1.3 1.2 MSA Branches Myrtle Beach 10 Charleston 24 Hilton Head 9 Raleigh 1 Charlotte 22 Wilmington 4 Greenville 14 Savannah 7 Columbia 9 Augusta 12 Richmond 8 National Average 3.56% Growth >2x Nation Growth 1-2x Nat
Slide 24: Commercial Bank
Commercial Bank 24 • 63% of Loans • 43% of Deposits • $2.3 Billion of Deposits in Treasury Relationships Depth • 135 Bankers • 15,000 Lending Relationships • 3,600 Treasury Customers Solutions • Lending • Depository • Cash Management • Interest Rate Risk Advisory • FX • 401(k) Management
Slide 25: Capital Markets
2016 2018 Treasury 30 Employees Leading Product Capital Markets In-house Team Component of Large Relationships Process Product Suite Competitive with Large Banks 11 Employees Third Party Lead with Credit Investments 25
Slide 26: Opportunity in Footprint
Opportunity in Footprint 26 Charlotte Raleigh Richmond 45% Other 55% Businesses Revenue 6,000 $10-50 54,000 1-10 140,000 <1 200,000 See Appendix for Footnotes Dollars in Millions
Slide 27: Charlotte Opportunity
Charlotte Rock Hill Gastonia Charlotte Opportunity 27 $38 Billion in Deposits South State Bank of America Wells Fargo BB&T See Appendix for Footnotes
Slide 28: Talent
Talent 28 Recent Hires Talent Charlotte Charleston Raleigh Richmond Greenville Columbia 2 Middle Market / STI 1 Middle Market / WFC 2 Middle Market / STI, MTB 2 Commercial Bankers / SONA, FTN
Slide 29: Results
Results 29 Publicly-traded Manufacturer Revenue $4,000 Credit 45 Deposits Full Deposit Dollars in Millions Regional Service Company $30 42 Full Treasury National Insurance Provider $100 5 Primary Deposit
Slide 30: Renee Brooks, Raleigh, NC
Renee Brooks Raleigh, NC
Slide 31: Wealth, Consumer, Mortgage
Wealth Consumer Mortgage 31
Slide 32: Overview
Overview 32 • 89% of Noninterest income • 37% of Total Loans • 57% of Deposit Balances • 320,000 Households Wealth • $22.6MM Fee Income – 24% of Q3 18 • $5.6B Assets Under Management • 17,700 Customers Mortgage • $11.1MM Fee Income – 9% of Q3 18 • $3.0B Loans • 31,000 Serviced Mortgages Consumer • $
Slide 33: Wealth
Wealth 33 • NC/VA Expansion • Deeper Penetration in Established Markets Richmond Augusta Savannah Hilton Head Wilmington Established Market Growth Market Charlotte Charleston Raleigh Greenville Columbia
Slide 34: Mortgage
Mortgage 34 • 85% Purchase • 90% of Servicing Retained • Top 5 Share in Major SC/GA Markets • Opportunity in NC/VA • Digital Expansion & Efficiencies Myrtle Beach Established Market Growth Market Richmond Augusta Savannah Hilton Head Charlotte Charleston Raleigh Greenville See Appendix for Footnotes
Slide 35: Consumer
Consumer 35 Growth >2x Nation Growth 1-2x Nation See Appendix for Footnotes • 406,000 Checking Accounts • Opportunity to Deepen Relationships • 71% of Branches in High-growth Markets
Slide 36: Optimization Opportunities
Optimization Opportunities 36 • Branch Network • Self-service Options • Process Efficiencies • Data and Analytics 6.6 Million Non-ACH Deposit Transactions In Branch 84% Mobile/ ATM/ RDC 16%
Slide 37: Jonathan Kivett, Columbia, SC
Jonathan Kivett Columbia, SC
Slide 38: Consistent Credit Culture, Building for Growth, Soundness
Consistent Credit Culture Building for Growth Soundness 38
Slide 39: Continuity of Leadership
Continuity of Leadership 39 Consumer Chief Credit Officer 16 / 16 Commercial Chief Credit Officer 9 / 22 Senior Credit Risk Manager 13 / 17 Chief Credit Officer 12 yrs / 20 yrs Senior Credit Officer 15 / 41 Years of Experience South State / Industry
Slide 40: Soundness
Soundness 40 $48 $78 $73 0.72% 0.72% 0.67% 4Q16 4Q17 3Q18 Past Dues – All Loans (MM) $69 $70 $77 8.09% 4.98% 5.15% 4Q16 4Q17 3Q18 Classified Assets / Capital (MM) $39 $36 $39 0.43% 0.25% 0.27% 4Q16 4Q17 3Q18 NPAs (MM) $644 $265 $1,335 0.05% 0.02% 0.07% 4Q16 4Q17 3Q18 Originated Net Charge Offs (000)
Slide 41: Granularity
9.3% 8.2% 6.1% 5.3% 4.3% 2.0% 4.2% 5.7% 5.5% 3.7% 5.2% $79,246 $127,052 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Largest Relationship as a % of Risk Based Capital Average Loan Size $25 $25 $20 $20 $20 $15 $31 $45 $47 $52 $77 Granularity 41 See Appendix for Footnotes Dollars in Millions
Slide 42: Asset Quality and Economic Variables
Asset Quality and Economic Variables 42 0 % 2 % 4 % 6 % 8 % 10 % 12 % Recession SSB PD % SSB Classified/Loans % SSB NAs/Loans % Southeast Unemployment Rate See Appendix for Footnotes
Slide 43: Lessons Learned
Lessons Learned 43 12/31/08 9/30/18 Consumer - Owner Occupied 22.3% 31.3% Commercial - Owner Occupied 18.3 18.5 Commercial - Income Producing 14.3 18.9 Commercial – Non Real Estate 10.9 11.5 Construction 8.0 7.9 Land 15.1 2.6 Consumer – Non Real Estate 4.0 5.4 Other Income Producing 7.1 3.9 23.1% 10
Slide 44: Concentrations
Commercial Real Estate 29.3% Consumer 37.0% Commercial 33.7% Concentrations 44 C&LD 10.5% Retail 4.6 Hotel 4.0 Industrial 3.3 Office 3.2 Multifamily 2.6 Mini Storage 1.1 99.5% of Commercial Real Estate is in Footprint See Appendix for Footnotes
Slide 45: CRE and C&LD Capacity
195% 227% 222% 219% 212% 80% 91% 88% 83% 76% 3Q17 4Q17 1Q18 2Q18 3Q18 CRE C&LD Capacity 45 $1.3 $0.4 See Appendix for Footnotes Dollars in Billions
Slide 46: Building For Growth
Building For Growth 46 Firm Foundation Established Credit Culture Process Improvements Talent Acquisition
Slide 47: John Pollok, Richmond, VA
John Pollok Richmond, VA
Slide 48: Park Sterling Update, Profitability, Balance Sheet Strength, Targets
48 Park Sterling Update Profitability Balance Sheet Strength Targets
Slide 49: Accretable Yield
Accretable Yield 49 • $12.4 million accretion represents 8.7% of 3Q 18 interest income • First recast on Park Sterling in 4Q 18 • Park Sterling credit performance better than anticipated 18.3% 12.5% 9.4% 8.7% 5% 10% 15% 20% 1Q15 4Q15 3Q16 2Q17 1Q18 4Q18 Accretion / Total Interest Income SBFC Merger
Slide 50: Park Sterling Scorecard
Excellent Deposit Account Retention Achieved Planned Cost Saves Deal Charges Below Budget Mid-single Digit EPS Impact 3Q 17 3Q 18 TBV $33.66 $35.37 Park Sterling Scorecard 50 See Appendix for Footnotes
Slide 51: Net Loan Growth
Net Loan Growth 51 $10,623 $10,909 $1,841 4Q17 Runoff / Amortization Production 3Q18 ($1,555) $2,503 $662 Unfunded Park Sterling ($350) Dollars in Millions
Slide 52: Summary Balance Sheet
Summary Balance Sheet 52 Short-term Investments $ 307 2% Investment Portfolio 1,571 11 Acquired Loans 3,303 23 Non-acquired Loans 7,606 52 Total Loans 10,909 75 Goodwill 1,003 7 Other Assets 732 5 Total Assets $14,522 100% Noninterest-bearing Checking $ 3,157 22% Interest-bearing Checking 2,707 19 O
Slide 53: Core Funding is a Strength
Core Funding is a Strength 53 10.6% 3.4% Peer Median South State Wholesale Funding Reliance 0.75% 0.50% Peer Median South State Cost of Funds 3Q 18 See Appendix for Footnotes
Slide 54: Transaction Deposits
3Q 2018 Transaction Deposits 54 ~267,000 accountsRelationship Based Avg. Balance $13,000 Avg. Age 10 Years Consumer Digital Banking Online Banking 266,000 users Mobile App 166,000 users Mobile Deposits 875,000 transactions annually Debit Card Annual Transactions 102 million 267,000 $3.2 188,000 $2.7
Slide 55: Margin
Margin 55 3.67% 3.65% 3.72% 4.11% 4.22% 4.04% 9/17 12/17 3/18 6/18 9/18 Net Interest Margin 0.47% 0.55% 0.75% 0.17% 0.31% 0.50% 9/17 12/17 3/18 6/18 9/18 Cost of Funds 4.10% 4.14% 4.34% 4.22% 4.49% 4.50% 9/17 12/17 3/18 6/18 9/18 Yield on Earning Assets Closed PSTB Acquisition Peer Median South Stat
Slide 56: 3Q 2018 Loans
3Q 2018 Loans 56 Organic Growth Non-acquired Loans 17% YTD Relationship Driven Top 25 6.9% of Total loans Average Loan Size $127,052 Asset Quality NPAs/Assets 0.27% Non-acquired Charge-offs 0.06% $2.0 $6.2 $2.1 $0.6 By State (Billions) N Carolina S Carolina Georgia Virginia
Slide 57: Loan Characteristics
Loan Characteristics 57 Floaters $2,447 23% Hybrid ARMs $2,059 19% Adjustable $362 3% Fixed $5,978 55% Overall Weighted Average Life of 3 - 4 Years 3Q 18 <1 year 30% 1 - 5 years 34 5+ years 36 Matures or Re-prices Dollars in Millions
Slide 58: Capacity for Operating Leverage Improvement
Capacity for Operating Leverage Improvement 58 We believe an efficiency ratio of 56-57% is achievable. 3Q 18 59.5% 56.8% 62.3% Peer Median South State Corporation Adjusted GAAP Peer Median See Appendix for Footnotes
Slide 59: Strong and Growing Capital Base
Strong and Growing Capital Base 59 13.51% 13.04% 13.32% 13.48% 13.80% 9.36% 9.23% 9.20% 9.45% 9.65% 3Q17 4Q17 1Q18 2Q18 3Q18 Total RBC TCE / TA
Slide 60: Capital Strength Provides Options
Capital Strength Provides Options 60 Organic Growth M&A Dividends Repurchase
Slide 61: Stock Repurchase Plan
Stock Repurchase Plan 61 • 769,000 shares repurchased in 4Q 18 at an average price of $67.37 • 131,000 shares remaining under existing plan • Anticipate authorizing 1,000,000 additional shares for repurchase as part of our 2019 capital plan
Slide 62: Tangible Book Value
Tangible Book Value 62 • Long-term Consistent Growth • Organic Growth • Selective Acquisitions o 3 FDIC o 5 whole bank o 1 branch deal (13) $17.04 $35.37 4Q09 3Q18 See Appendix for Footnotes
Slide 63: Longer-term Targets
Longer-term Targets 63 Loan Growth 5 - 10% Expense Growth 0 - 3% Efficiency Ratio 56 - 57% Capital TCE / TA 8 - 9% Dividends 25 - 30% Payout ROTCE 16 - 18%
Slide 64: ROTCE Target of 16-18%
16.72% 15.94% 15.49% 17.60% 17.68% 15.90% 13.54% 13.62% 11.64% 15.06% 15.49% 14.99% 8% 10% 12% 14% 16% 18% 20% 2015 2016 2017 1Q18 2Q18 3Q18 Target Adjusted South State Corporation Adjusted Peer Median Target of 16 – 18% ROTCE 64 See Appendix for Footnotes
Slide 65: A New Season
A New Season sm rr] “a Robert Hill
Slide 66: Markets, Team, Opportunity
v 66 Markets Team Opportunity
Slide 67: South State
SOUTH STATE
Slide 68: Robert R. Horger
Robert R. Horger 68 Mr. Horger is a partner with the firm of Horger, Barnwell & Reid, LLP located in Orangeburg, South Carolina and has practiced law with the firm since 1975. With 42 years of experience in the legal profession, Mr. Horger has practiced in the fields of litigation, commercial real e
Slide 69: Jean E. Davis
Jean E. Davis 69 Ms. Davis, retired as the head of Operations, Technology and e- Commerce of Wachovia Corporation in 2006, a position that she held since 2001. She previously served as the Head of Operations and Technology, Head of Human Resources, Head of Retail Banking, and in several office execu
Slide 70: Martin B. Davis
Martin B. Davis 70 Mr. Davis is executive vice president of Southern Company Services and chief information officer of Southern Company. Mr. Davis has spent nearly 30 years leading complex technology organizations in highly regulated environments. He most recently served as head of enterprise inform
Slide 71: Robert R. Hill, Jr. and John C. Pollok
Robert R. Hill, Jr. 71 Mr. Hill has been the Chief Executive Officer of South State Corporation since 2004. He has served in various positions since joining the bank in 1995, including Chief Operating Officer and President. He is also a member of the South State Corporation Board of Directors. Chief
Slide 72: Renee R. Brooks and Greg A. Lapointe
Renee R. Brooks 72 Ms. Brooks has been Chief Operating Officer of South State Corporation since July 2018. Ms. Brooks has served in various positions since joining the bank in 1996, including Chief Administrative Officer and Chief Risk Officer. Chief Operating Officer Mr. Lapointe has been an execut
Slide 73: John S. Goettee and Jonathan S. Kivett
John S. Goettee 73 Mr. Goettee has been an executive leader at South State for 12 years, most recently as president of the Southern Banking Group. Goettee is a 35-year banking veteran and has served in various leadership positions for Bank of America and Wells Fargo throughout the Carolinas and Geor
Slide 74: Donald K. Truslow and James C. Mabry IV
Donald K. Truslow 74 Mr. Truslow, who joined the bank in 2017, has had a 36-year career in banking, including serving as chief risk officer for Wachovia and M&T Bank and, most recently, chief financial officer for Park Sterling Bank. Mr. Truslow's areas of responsibility include risk management, leg
Slide 75: Non-GAAP to GAAP Reconciliation
Non-GAAP to GAAP Reconciliation 75 Please reference company filings for prior period data Quarter Ended September 30, June 30, March 31, December 31, September 30, 2018 2018 2018 2017 2017 Pre-tax, Pre-provision Operating Earnings (6) Net income (GAAP) $47,082 $40,459 $42,326 $2,421 $35,046 Provisio
Slide 76: Non-GAAP to GAAP Reconciliation
Non-GAAP to GAAP Reconciliation 76 Please reference company filings for prior period data Quarter Ended September 30, June 30, March 31, December 31, September 30, 2018 2018 2018 2017 2017 Operating Return on Average Common Tangible Equity Operating return on average common tangible equity (non-GAAP
Slide 77: Non-GAAP to GAAP Reconciliation
Non-GAAP to GAAP Reconciliation 77 Please reference company filings for prior period data December 31, December 31, December 31, 2017 2016 2015 Pre-tax, Pre-provision Operating Earnings Net income (GAAP) $87,554 $101,282 $99,473 Provision for loan losses 11,890 6,819 5,864 Provision for income taxes
Slide 78: Non-GAAP to GAAP Reconciliation
Non-GAAP to GAAP Reconciliation 78 Please reference company filings for prior period data December 31, December 31, December 31, 2017 2016 2015 Operating Return on Average Common Tangible Equity Operating return on average common tangible equity (non-GAAP) 15.49% 15.94% 16.72% Effect to adjust for F
Slide 79: Footnotes
Footnotes 79 Page 12 Data per S&P Global Market Intelligence. Deposit Data as of 6/30/18. Includes combined counties of operation for SSB; excludes money center or super regional branches with greater than $1.0 Billion in deposits. Deposit data pro forma for any announced transactions. Dollars in bi
Slide 80: Footnotes
Footnotes 80 Page 42 Data per Company filings and S&P Global Market Intelligence. PD refers to 90 Day Past Dues. Unemployment data per the Bureau of Labor Statistics. 44 Data as of 9/30/18. Commercial loans include Commercial Owner Occupied Real Estate. 45 As of 9/30/18. CRE Capacity calculated base