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SouthState Corporation Reports Third Quarter 2022 Results, Declares Quarterly Cash Dividend
Press Releases

SouthState Corporation Reports Third Quarter 2022 Results, Declares Quarterly Cash Dividend

WINTER HAVEN, Fla., Oct. 24, 2022 /PRNewswire/ — SouthState Corporation (NASDAQ: SSB) today released its unaudited results of operations and other financial information for the three-month and nine-month periods ended September 30, 2022.

“SouthState reported very strong performance in the third quarter,” said John C. Corbett, Chief Executive Officer.  “We produced another record for pre-provision net revenue, robust net interest margin expansion, and another quarter of good expense control.  We are also pleased to have net loan recoveries, though we remain vigilant in the face of an uncertain economy.”

Highlights of the third quarter of 2022 include:

Returns

  • Reported Earnings per Share (“EPS”) of $1.75; Adjusted Diluted EPS (Non-GAAP) of $1.89
  • Net Income of $133.0 million; Adjusted Net Income (Non-GAAP) of $143.7 million
  • Return on Average Common Equity of 10.3% and Reported Return on Average Tangible Common Equity (Non-GAAP) of 18.0%; Adjusted Return on Average Tangible Common Equity (Non-GAAP) of 19.4%*
  • Return on Average Assets (“ROAA”) of 1.16%; Adjusted ROAA (Non-GAAP) of 1.26%*
  • PPNR per weighted average diluted share (Non-GAAP) of $2.74, up 18% from the prior quarter’s $2.32 and up 47% from $1.87 in the year ago quarter
  • Book Value per Share of $65.03 decreased by $1.61 per share compared to the prior quarter primarily due to the $2.98 per share impact from the change in Accumulated Other Comprehensive Loss (“AOCI”)
  • Tangible Book Value (“TBV”) per Share (Non-GAAP) of $37.97, down $1.50 from the prior quarter, also due to the impact of AOCI

Performance

  • Net Interest Income of $358 million; Core Net Interest Income (excluding loan accretion and deferred fees on PPP) (Non-GAAP) increased $47 million from prior quarter
  • Net Interest Margin (“NIM”), non-tax equivalent and tax equivalent (Non-GAAP) of 3.53% and 3.55%, respectively, up 0.43% from prior quarter
  • Noninterest Income of $77 million declined $11 million compared to the prior quarter due to mortgage banking and correspondent banking and capital markets income; Noninterest Income represented 0.67% of average assets for the third quarter of 2022*
  • Noninterest Expense, excluding merger and branch consolidation related expense (Non-GAAP), increased $1 million compared to the prior quarter
  • Efficiency ratio improved to 53% from the prior quarter’s 55%; adjusted efficiency ratio (Non-GAAP) improved to 50% from the prior quarter’s 54%

Annualized percentages

Balance Sheet / Credit

  • Fed funds and interest-earning cash of $2.4 billion (5% of assets) and ending loan to deposit ratio of 77% provide balance sheet flexibility
  • Loans increased $901 million, or 13% annualized, led by consumer real estate, commercial and industrial, and commercial real estate loans
  • Average deposits declined $384 million, or 4% annualized; average noninterest-bearing deposits remained flat from the prior quarter; total deposit cost was 0.11%, up 5 basis points from prior quarter
  • Period-end deposits declined $1.2 billion primarily due to the timing of ACH payments for the payroll business.  In a quarter ending on a Friday, such as Q3 2022, balances temporarily contract as payments are made from the accounts of payroll companies to their clients’ employees.  The impact on the third quarter 2022 ending balances was a $457 million temporary decline in noninterest bearing deposits.  The payroll deposit impact, along with the average balance decline above represents the majority of the $1 billion reduction in period end core deposits.
  • Net recoveries of $1.3 million, or (0.02)% annualized

Subsequent Events

  • The Board of Directors of the Company declared a quarterly cash dividend on its common stock of $0.50 per share, payable on November 18, 2022 to shareholders of record as of November 11, 2022

Financial Performance


























Three Months Ended


 Nine Months Ended


(Dollars in thousands, except per share data)


Sep. 30,


Jun. 30,


Mar. 31,


Dec. 31,


Sep. 30,


Sep. 30,


Sep. 30,


INCOME STATEMENT


2022


2022


2022


2021


2021


2022


2021


Interest income























   Loans, including fees (1)


$

312,856


$

272,000


$

233,617


$

238,310


$

246,065


$

818,473


$

752,209


   Investment securities, trading securities, federal funds sold and securities























      purchased under agreements to resell



61,954



53,659



36,847



29,071



25,384



152,460



65,257


Total interest income



374,810



325,659



270,464



267,381



271,449



970,933



817,466


Interest expense























   Deposits



10,137



5,776



4,628



5,121



7,267



20,541



28,061


   Federal funds purchased, securities sold under agreements























      to repurchase, and other borrowings



6,464



5,604



4,362



4,156



4,196



16,430



14,291


Total interest expense



16,601



11,380



8,990



9,277



11,463



36,971



42,352


Net interest income



358,209



314,279



261,474



258,104



259,986



933,962



775,114


  Provision (recovery) for credit losses



23,876



19,286



(8,449)



(9,157)



(38,903)



34,713



(156,116)


Net interest income after provision (recovery) for credit losses



334,333



294,993



269,923



267,261



298,889



899,249



931,230


Noninterest income



77,178



88,292



86,090



91,894



87,010



251,560



262,315


Noninterest expense























Operating expense



226,754



225,779



218,324



217,392



214,672



670,857



652,080


Merger and branch consolidation related expense



13,679



5,390



10,276



6,645



17,618



29,345



60,598


Extinguishment of debt cost















11,706


Total noninterest expense



240,433



231,169



228,600



224,037



232,290



700,202



724,384


Income before provision for income taxes



171,078



152,116



127,413



135,118



153,609



450,607



469,161


Income taxes provision



38,035



32,941



27,084



28,272



30,821



98,060



100,464


Net income


$

133,043


$

119,175


$

100,329


$

106,846


$

122,788


$

352,547


$

368,697

























Adjusted net income (non-GAAP) (2)























Net income (GAAP)


$

133,043


$

119,175


$

100,329


$

106,846


$

122,788


$

352,547


$

368,697


Securities gains, net of tax



(24)







(2)



(51)



(24)



(79)


Initial provision for credit losses – NonPCD loans and UFC from ACBI, net of tax







13,492







13,492




Merger and branch consolidation related expense, net of tax



10,638



4,223



8,092



5,255



14,083



22,953



47,485


Extinguishment of debt cost, net of tax















9,081


Adjusted net income (non-GAAP)


$

143,657


$

123,398


$

121,913


$

112,099


$

136,820


$

388,968


$

425,184

























   Basic earnings per common share


$

1.76


$

1.58


$

1.40


$

1.53


$

1.75


$

4.75


$

5.22


   Diluted earnings per common share


$

1.75


$

1.57


$

1.39


$

1.52


$

1.74


$

4.71


$

5.19


   Adjusted net income per common share – Basic (non-GAAP) (2)


$

1.90


$

1.64


$

1.71


$

1.61


$

1.95


$

5.24


$

6.02


   Adjusted net income per common share – Diluted (non-GAAP) (2)


$

1.89


$

1.62


$

1.69


$

1.59


$

1.94


$

5.20


$

5.98


   Dividends per common share


$

0.50


$

0.49


$

0.49


$

0.49


$

0.49


$

1.48


$

1.43


   Basic weighted-average common shares outstanding



75,605,960



75,461,157



71,447,429



69,651,334



70,066,235



74,184,816



70,643,289


   Diluted weighted-average common shares outstanding



76,182,131



76,094,198



72,110,746



70,289,971



70,575,726



74,791,139



71,108,204


   Effective tax rate



22.23 %



21.66 %



21.26 %



20.92 %



20.06 %



21.76 %



21.41 %


 

Performance and Capital Ratios

























Three Months Ended


 Nine Months Ended





Sep. 30,


Jun. 30,


Mar. 31,


Dec. 31,


Sep. 30,


Sep. 30,


Sep. 30,





2022


2022


2022


2021


2021


2022


2021



PERFORMANCE RATIOS






















Return on average assets (annualized)



1.16

%


1.04

%


0.95

%


1.02

%


1.20

%

1.05

%

1.25

%


Adjusted return on average assets (annualized) (non-GAAP) (2)



1.26

%


1.08

%


1.15

%


1.08

%


1.34

%

1.16

%

1.44

%


Return on average common equity (annualized)



10.31

%


9.36

%


8.24

%


8.84

%


10.21

%

9.32

%

10.41

%


Adjusted return on average common equity (annualized) (non-GAAP) (2)



11.13

%


9.69

%


10.01

%


9.28

%


11.37

%

10.28

%

12.01

%


Return on average tangible common equity (annualized) (non-GAAP) (3)



17.99

%


16.59

%


13.97

%


14.63

%


16.86

%

16.19

%

17.34

%


Adjusted return on average tangible common equity (annualized) (non-GAAP) (2) (3)



19.36

%


17.15

%


16.79

%


15.30

%


18.68

%

17.77

%

19.85

%


Efficiency ratio (tax equivalent)



53.14

%


54.92

%


62.99

%


61.27

%


64.22

%

56.63

%

66.99

%


Adjusted efficiency ratio (non-GAAP) (4)



50.02

%


53.59

%


60.05

%


59.39

%


59.16

%

54.17

%

60.05

%


Dividend payout ratio (5)



28.44

%


31.03

%


33.71

%


32.02

%


27.94

%

30.82

%

27.39

%


Book value per common share


$

65.03


$

66.64


$

68.30


$

69.27


$

68.55







Tangible book value per common share (non-GAAP) (3)


$

37.97


$

39.47


$

41.05


$

44.62


$

43.98





























CAPITAL RATIOS






















Equity-to-assets



10.9

%


10.9

%


11.2

%


11.4

%


11.7

%






Tangible equity-to-tangible assets (non-GAAP) (3)



6.7

%


6.8

%


7.0

%


7.7

%


7.8

%






Tier 1 leverage (6) *



8.3

%


8.0

%


8.5

%


8.1

%


8.1

%






Tier 1 common equity (6) *



11.0

%


11.1

%


11.4

%


11.8

%


11.9

%






Tier 1 risk-based capital (6) *



11.0

%


11.1

%


11.4

%


11.8

%


11.9

%






Total risk-based capital (6) *



12.9

%


13.0

%


13.3

%


13.6

%


13.8

%








*

The regulatory capital ratios presented above include the assumption of the transitional method relative to the CARES Act in relief of COVID-19 pandemic on the economy and financial institutions in the United States.  The referenced relief allows a total five-year “phase in” of the CECL impact on capital and relief over the next two years for the impact on the allowance for credit losses resulting from COVID-19.

 

Balance Sheet




















Ending Balance


(Dollars in thousands, except per share and share data)


Sep. 30,


Jun. 30,


Mar. 31,


Dec. 31,


Sep. 30,


BALANCE SHEET


2022


2022


2022


2021


2021


Assets

















   Cash and due from banks


$

394,794


$

561,516


$

588,372


$

476,653


$

597,321


   Federal Funds Sold and interest-earning deposits with banks



2,414,901



4,160,583



5,444,234



6,366,494



5,701,002


Cash and cash equivalents



2,809,695



4,722,099



6,032,606



6,843,147



6,298,323



















Trading securities, at fair value



51,940



88,088



74,234



77,689



61,294


Investment securities:

















   Securities held to maturity



2,738,178



2,806,465



2,827,769



1,819,901



1,641,485


   Securities available for sale, at fair value



5,369,610



5,666,008



5,924,206



5,193,478



4,631,554


   Other investments



179,755



179,815



179,258



160,568



160,592


               Total investment securities



8,287,543



8,652,288



8,931,233



7,173,947



6,433,631


Loans held for sale



34,477



73,880



130,376



191,723



242,813


Loans:

















Purchased credit deteriorated



1,544,562



1,707,592



1,939,033



1,987,322



2,255,874


Purchased non-credit deteriorated



6,365,175



6,908,234



7,633,824



5,890,069



6,554,647


Non-acquired



20,926,566



19,319,440



16,983,570



16,050,775



14,978,428


    Less allowance for credit losses



(324,398)



(319,708)



(300,396)



(301,807)



(314,144)


               Loans, net



28,511,905



27,615,558



26,256,031



23,626,359



23,474,805


Other real estate owned (“OREO”)



2,160



1,431



3,290



2,736



3,687


Premises and equipment, net



531,160



562,781



568,332



558,499



569,817


Bank owned life insurance



960,052



953,970



942,922



783,049



778,552


Mortgage servicing rights



90,459



87,463



83,339



65,620



60,922


Core deposit and other intangibles



125,390



132,694



140,364



128,067



136,584


Goodwill



1,922,525



1,922,525



1,924,024



1,581,085



1,581,085


Other assets



1,851,303



1,394,645



1,114,790



928,111



1,262,195


                Total assets


$

45,178,609


$

46,207,422


$

46,201,541


$

41,960,032


$

40,903,708



















Liabilities and Shareholders’ Equity

















Deposits:

















   Noninterest-bearing


$

13,660,244


$

14,337,018


$

14,052,332


$

11,498,840


$

11,333,881


   Interest-bearing



24,005,777



24,538,833



24,723,498



23,555,989



22,226,677


               Total deposits



37,666,021



38,875,851



38,775,830



35,054,829



33,560,558


Federal funds purchased and securities

















   sold under agreements to repurchase



557,802



669,999



770,409



781,239



859,736


Other borrowings



392,368



392,460



405,553



327,066



326,807


Reserve for unfunded commitments



52,991



32,543



30,368



30,510



28,289


Other liabilities



1,588,241



1,196,144



1,044,973



963,448



1,335,377


               Total liabilities



40,257,423



41,166,997



41,027,133



37,157,092



36,110,767



















Shareholders’ equity:

















   Common stock – $2.50 par value; authorized 160,000,000 shares



189,191



189,103



189,403



173,331



174,795


   Surplus



4,207,040



4,195,976



4,214,897



3,653,098



3,693,622


   Retained earnings



1,241,413



1,146,230



1,064,064



997,657



925,044


   Accumulated other comprehensive (loss) income



(716,458)



(490,884)



(293,956)



(21,146)



(520)


               Total shareholders’ equity



4,921,186



5,040,425



5,174,408



4,802,940



4,792,941


               Total liabilities and shareholders’ equity


$

45,178,609


$

46,207,422


$

46,201,541


$

41,960,032


$

40,903,708



















Common shares issued and outstanding



75,676,445



75,641,322



75,761,018



69,332,297



69,918,037


 

Net Interest Income and Margin





























Three Months Ended




Sep. 30, 2022


Jun. 30, 2022


Sep. 30, 2021


(Dollars in thousands)


Average


Income/


Yield/


Average


Income/


Yield/


Average


Income/


Yield/


YIELD ANALYSIS


Balance


Expense


Rate


Balance


Expense


Rate


Balance


Expense


Rate


Interest-Earning Assets:


























Federal funds sold and interest-earning deposits with banks


$

3,193,313


$

16,668


2.07 %


$

4,597,551


$

8,635


0.75 %


$

6,072,760


$

2,199


0.14 %


Investment securities



8,705,657



45,286


2.06 %



8,880,419



45,024


2.03 %



6,084,812



23,185


1.51 %


Loans held for sale



47,119



620


5.22 %



76,567



791


4.14 %



184,547



1,307


2.81 %


Total loans, excluding PPP



28,267,741



312,172


4.38 %



27,055,042



271,003


4.02 %



22,937,207



226,083


3.91 %


Total PPP loans



27,236



64


0.93 %



77,816



206


1.06 %



939,111



18,675


7.89 %


Total loans held for investment



28,294,977



312,236


4.38 %



27,132,858



271,209


4.01 %



23,876,318



244,758


4.07 %


     Total interest-earning assets



40,241,066



374,810


3.70 %



40,687,395



325,659


3.21 %



36,218,437



271,449


2.97 %


Noninterest-earning assets



5,103,869








5,160,394








4,375,329







     Total Assets


$

45,344,935







$

45,847,789







$

40,593,766

































Interest-Bearing Liabilities:


























Transaction and money market accounts


$

17,862,637


$

7,956


0.18 %


$

18,316,890


$

3,836


0.08 %


$

15,908,784


$

3,110


0.08 %


Savings deposits



3,621,493



488


0.05 %



3,548,192



143


0.02 %



3,126,055



241


0.03 %


Certificates and other time deposits



2,627,280



1,693


0.26 %



2,776,478



1,797


0.26 %



3,256,488



3,916


0.48 %


Federal funds purchased



240,814



1,312


2.16 %



333,326



628


0.76 %



479,960



101


0.08 %


Repurchase agreements



376,985



194


0.20 %



403,008



153


0.15 %



380,850



158


0.16 %


Other borrowings



392,427



4,958


5.01 %



405,241



4,823


4.77 %



334,256



3,937


4.67 %


     Total interest-bearing liabilities



25,121,636



16,601


0.26 %



25,783,135



11,380


0.18 %



23,486,393



11,463


0.19 %


Noninterest-bearing liabilities (“Non-IBL”)



15,101,739








14,955,329








12,333,922







Shareholders’ equity



5,121,560








5,109,325








4,773,451







     Total Non-IBL and shareholders’ equity



20,223,299








20,064,654








17,107,373







     Total Liabilities and Shareholders’ Equity


$

45,344,935







$

45,847,789







$

40,593,766







Net Interest Income and Margin (Non-Tax Equivalent)





$

358,209


3.53 %





$

314,279


3.10 %





$

259,986


2.85 %


Net Interest Margin (Tax Equivalent)








3.55 %








3.12 %








2.86 %


Total Deposit Cost (without Debt and Other Borrowings)








0.11 %








0.06 %








0.09 %


Overall Cost of Funds (including Demand Deposits)








0.17 %








0.12 %








0.13 %




























Total Accretion on Acquired Loans (1)





$

9,550







$

12,770







$

5,243




Total Deferred Fees on PPP Loans





$







$

8







$

16,369




Tax Equivalent Adjustment





$

2,345







$

2,249







$

1,477






(1)

The remaining loan discount on acquired loans to be accreted into loan interest income totals $79.5 million as of September 30, 2022.

 

Noninterest Income and Expense


























Three Months Ended


 Nine Months Ended




Sep. 30,


Jun. 30,


Mar. 31,


Dec. 31,


Sep. 30,


Sep. 30,


Sep. 30,


(Dollars in thousands)


2022


2022


2022


2021


2021


2022


2021


Noninterest Income:























   Fees on deposit accounts


$

31,188


$

33,658


$

28,902


$

30,293


$

26,130


$

93,748


$

75,348


   Mortgage banking income



2,262



5,480



10,594



12,044



15,560



18,336



52,555


   Trust and investment services income



9,603



9,831



9,718



9,520



9,150



29,152



27,461


   Securities gains, net



30







2



64



30



100


   Correspondent banking and capital market income



20,552



27,604



27,994



30,216



25,164



76,150



79,789


   Bank owned life insurance income



6,082



6,246



5,260



4,932



5,132



17,588



13,478


   Other



7,461



5,473



3,622



4,887



5,810



16,556



13,584


         Total Noninterest Income


$

77,178


$

88,292


$

86,090


$

91,894


$

87,010


$

251,560


$

262,315

























Noninterest Expense:























   Salaries and employee benefits


$

139,554


$

137,037


$

137,673


$

137,321


$

136,969


$

414,264


$

414,709


   Occupancy expense



22,490



22,759



21,840



22,915



23,135



67,089



69,310


   Information services expense



20,714



19,947



19,193



18,489



18,061



59,854



55,928


   OREO and loan related expense (income)



532



(3)



(238)



(740)



1,527



291



2,769


   Business development and staff related



5,090



4,916



4,276



4,577



4,424



14,282



12,100


   Amortization of intangibles



7,837



8,847



8,494



8,517



8,543



25,178



26,675


   Professional fees



3,495



4,331



3,749



2,639



2,415



11,575



7,990


   Supplies and printing expense



2,621



2,400



2,189



2,179



2,310



7,210



7,480


   FDIC assessment and other regulatory charges



6,300



5,332



4,812



4,965



4,245



16,444



13,017


   Advertising and marketing



2,170



2,286



1,763



2,375



2,185



6,219



5,584


   Other operating expenses



15,951



17,927



14,573



14,155



10,858



48,451



36,518


   Merger and branch consolidation related expense



13,679



5,390



10,276



6,645



17,618



29,345



60,598


   Extinguishment of debt cost















11,706


         Total Noninterest Expense


$

240,433


$

231,169


$

228,600


$

224,037


$

232,290


$

700,202


$

724,384


 

Loans and Deposits

The following table presents a summary of the loan portfolio by type (dollars in thousands):




















Ending Balance


(Dollars in thousands)


Sep. 30,


Jun. 30,


Mar. 31,


Dec. 31,


Sep. 30,


LOAN PORTFOLIO


2022


2022


2022


2021


2021


Construction and land development *


$

2,550,552


$

2,527,062


$

2,316,313


$

2,029,216


$

2,032,731


Investor commercial real estate*



8,641,316



8,393,630



8,158,457



7,432,503



7,131,192


Commercial owner occupied real estate



5,426,216



5,421,725



5,346,583



4,970,116



4,988,490


Commercial and industrial, excluding PPP



4,962,616



4,760,355



4,447,279



3,516,485



3,458,520


Consumer real estate *



5,977,120



5,505,531



4,988,736



4,806,958



4,733,567


Consumer/other



1,263,362



1,279,790



1,179,697



928,240



943,243


Total loans, excluding PPP



28,821,182



27,888,093



26,437,065



23,683,518



23,287,743


PPP loans



15,121



47,173



119,362



244,648



501,206


Total Loans


$

28,836,303


$

27,935,266


$

26,556,427


$

23,928,166


$

23,788,949



* Single family home construction-to-permanent loans originated by the Company’s mortgage banking division are included in construction and land development category until completion. Investor commercial real estate loans include commercial non-owner occupied real estate and other income producing property.  Consumer real estate includes consumer owner occupied real estate and home equity loans.


† Includes single family home construction-to-permanent loans of $881.3 million, $795.7 million, $733.7 million, $686.5 million, and $665.0 million for the quarters ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021, and September 30, 2021, respectively.

 




















Ending Balance


(Dollars in thousands)


Sep. 30,


Jun. 30,


Mar. 31,


Dec. 31,


Sep. 30,


DEPOSITS


2022


2022


2022


2021


2021


Noninterest-bearing checking


$

13,660,244


$

14,337,018


$

14,052,332


$

11,498,840


$

11,333,881


Interest-bearing checking



8,741,447



8,953,332



9,275,208



9,018,987



7,920,236


Savings



3,602,560



3,616,819



3,479,743



3,350,547



3,201,543


Money market



9,126,058



9,264,257



9,140,005



8,376,380



8,110,162


Time deposits



2,535,712



2,704,425



2,828,542



2,810,075



2,994,736


Total Deposits


$

37,666,021


$

38,875,851


$

38,775,830


$

35,054,829


$

33,560,558



















Core Deposits (excludes Time Deposits)


$

35,130,309


$

36,171,426


$

35,947,288


$

32,244,754


$

30,565,822


 

Asset Quality




















Ending Balance




Sep. 30,


Jun. 30,


Mar. 31,


Dec. 31,


Sep. 30,


(Dollars in thousands)


2022


2022


2022


2021


2021


NONPERFORMING ASSETS:

















Non-acquired

















Non-acquired nonaccrual loans and restructured loans on nonaccrual


$

34,374


$

20,716


$

19,582


$

18,700


$

23,800


Accruing loans past due 90 days or more



2,358



1,371



22,818



4,612



1,729


Non-acquired OREO and other nonperforming assets



114



93



464



590



365


Total non-acquired nonperforming assets



36,846



22,180



42,864



23,902



25,894


Acquired

















Acquired nonaccrual loans and restructured loans on nonaccrual



61,866



63,526



59,267



56,718



64,583


Accruing loans past due 90 days or more



1,430



4,418



12,768



251



89


Acquired OREO and other nonperforming assets



2,234



1,577



3,118



2,875



3,804


Total acquired nonperforming assets



65,530



69,521



75,153



59,844



68,476


Total nonperforming assets


$

102,376


$

91,701


$

118,017


$

83,746


$

94,370


 




















Three Months Ended




Sep. 30,


Jun. 30,


Mar. 31,


Dec. 31,


Sep. 30,




2022


2022


2022


2021


2021


ASSET QUALITY RATIOS:

















Allowance for credit losses as a percentage of loans



1.12 %



1.14 %



1.13 %



1.26 %



1.32 %


Allowance for credit losses as a percentage of loans, excluding PPP loans



1.13 %



1.15 %



1.14 %



1.27 %



1.35 %


Allowance for credit losses as a percentage of nonperforming loans



324.30 %



355.11 %



262.50 %



375.94 %



348.27 %


Allowance for credit losses, including reserve for unfunded commitments,

as a percentage of loans, excluding PPP loans



1.31 %



1.26 %



1.25 %



1.40 %



1.47 %


Net (recoveries) charge-offs as a percentage of average loans (annualized)



(0.02) %



0.03 %



0.04 %



0.02 %



0.00 %


Total nonperforming assets as a percentage of total assets



0.23 %



0.20 %



0.26 %



0.20 %



0.23 %


Nonperforming loans as a percentage of period end loans



0.35 %



0.32 %



0.43 %



0.34 %



0.38 %


 

Current Expected Credit Losses (“CECL”)

Below is a table showing the roll forward of the ACL and UFC for the third quarter of 2022:

















Allowance for Credit Losses (“ACL and UFC”)




NonPCD ACL


PCD ACL


Total ACL


UFC


Ending balance 6/30/2022


$

257,428


$

62,280


$

319,708


$

32,543


Charge offs



(4,950)





(4,950)




Acquired charge offs



(292)



(1,884)



(2,176)




Recoveries



1,783





1,783




Acquired recoveries



2,597



4,008



6,605




Provision (recovery) for credit losses



14,353



(10,925)



3,428



20,448


Ending balance 9/30/2022


$

270,919


$

53,479


$

324,398


$

52,991
















Period end loans (includes PPP Loans)


$

27,291,741


$

1,544,562


$

28,836,303



N/A


Reserve to Loans (includes PPP Loans)



0.99 %



3.46 %



1.12 %



N/A


Period end loans (excludes PPP Loans)


$

27,276,620


$

1,544,562


$

28,821,182



N/A


Reserve to Loans (excludes PPP Loans)



0.99 %



3.46 %



1.13 %



N/A


Unfunded commitments (off balance sheet) *











$

9,896,528


Reserve to unfunded commitments (off balance sheet)












0.54 %



* Unfunded commitments exclude unconditionally cancelable commitments and letters of credit.

 

Conference Call

The Company will host a conference call to discuss its third quarter results at 9:00 a.m. Eastern Time on October 25, 2022.  Callers wishing to participate may call toll-free by dialing 844-200-6205.  The number for international participants is (929) 526-1599.  The conference ID number is 879329.   Alternatively, individuals may listen to the live webcast of the presentation by visiting SouthStateBank.com.  An audio replay of the live webcast is expected to be available by the evening of October 25, 2022 on the Investor Relations section of SouthStateBank.com.

SouthState Corporation is a financial services company headquartered in Winter Haven, Florida.  SouthState Bank, N.A., the Company’s nationally chartered bank subsidiary, provides consumer, commercial, mortgage and wealth management solutions to more than one million customers throughout Florida, Alabama, Georgia, the Carolinas and Virginia.  The Bank also serves clients coast to coast through its correspondent banking division.  Additional information is available at SouthStateBank.com.

Non-GAAP Measures

Statements included in this press release include non-GAAP measures and should be read along with the accompanying tables that provide a reconciliation of non-GAAP measures to GAAP measures.  Management believes that these non-GAAP measures provide additional useful information, which allows readers to evaluate the ongoing performance of the Company.  Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company.  Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company’s results or financial condition as reported under GAAP.






















(Dollars in thousands, except per share data)


Three Months Ended


PRE-PROVISION NET REVENUE (“PPNR”) (NON-GAAP)


Sep. 30, 2022



Jun. 30, 2022



Mar. 31, 2022



Dec. 31, 2021



Sep. 30, 2021


Net income (GAAP)


$

133,043



$

119,175



$

100,329



$

106,846



$

122,788


Provision (recovery) for credit losses



23,876




19,286




(8,449)




(9,157)




(38,903)


Tax provision



38,035




32,941




27,084




28,272




30,821


Merger and branch consolidation related expense



13,679




5,390




10,276




6,645




17,618


Securities gains



(30)










(2)




(64)


Pre-provision net revenue (PPNR) (Non-GAAP)


$

208,603



$

176,792



$

129,240



$

132,604



$

132,260























Average asset balance (GAAP)


$

45,344,935



$

45,847,789



$

42,946,332



$

41,359,708



$

40,593,766


PPNR ROAA



1.83

%



1.55

%



1.22

%



1.27

%



1.29

%






















   Diluted weighted-average common shares outstanding



76,182




76,094




72,111




70,290




70,576


PPNR per weighted-average common shares outstanding


$

2.74



$

2.32



$

1.79



$

1.89



$

1.87


 






















(Dollars in thousands)


Three Months Ended


CORE NET INTEREST INCOME (NON-GAAP)


Sep. 30, 2022



Jun. 30, 2022



Mar. 31, 2022



Dec. 31, 2021



Sep. 30, 2021


Net interest income (GAAP)


$

358,209



$

314,279



$

261,474



$

258,104



$

259,986


Less:





















Total accretion on acquired loans



9,550




12,770




6,741




7,707




5,243


Total deferred fees on PPP loans






8




983




5,655




16,369


Core net interest income (Non-GAAP)


$

348,659



$

301,501



$

253,750



$

244,742



$

238,374























NET INTEREST MARGIN (“NIM”), TAX EQUIVALENT (NON-GAAP)





















Net interest income (GAAP)


$

358,209



$

314,279



$

261,474



$

258,104



$

259,986


Total average interest-earning assets



40,241,066




40,687,395




38,527,023




37,031,640




36,218,437


NIM, non-tax equivalent



3.53

%



3.10

%



2.75

%



2.77

%



2.85

%






















Tax equivalent adjustment (included in NIM, tax equivalent)



2,345




2,249




1,885




1,734




1,477


Net interest income, tax equivalent (Non-GAAP)


$

360,554



$

316,528



$

263,359



$

259,838



$

261,463


NIM, tax equivalent (Non-GAAP)



3.55

%



3.12

%



2.77

%



2.78

%



2.86

%

 
































Three Months Ended



 Nine Months Ended


(Dollars in thousands, except per share data)


Sep. 30,



Jun. 30,



Mar. 31,



Dec. 31,



Sep. 30,



Sep. 30,



Sep. 30,


RECONCILIATION OF GAAP TO NON-GAAP


2022



2022



2022



2021



2021



2022



2021


Adjusted Net Income (non-GAAP) (2)





























Net income (GAAP)


$

133,043



$

119,175



$

100,329



$

106,846



$

122,788



$

352,547



$

368,697


Securities gains, net of tax



(24)










(2)




(51)




(24)




(79)


PCL – NonPCD loans and UFC, net of tax









13,492










13,492





Merger and branch consolidation related expense, net of tax



10,638




4,223




8,092




5,255




14,083




22,953




47,485


Extinguishment of debt cost, net of tax





















9,081


Adjusted net income (non-GAAP)


$

143,657



$

123,398



$

121,913



$

112,099



$

136,820



$

388,968



$

425,184































Adjusted Net Income per Common Share – Basic (2)





























Earnings per common share – Basic (GAAP)


$

1.76



$

1.58



$

1.40



$

1.53



$

1.75



$

4.75



$

5.22


Effect to adjust for securities gains



(0.00)










(0.00)




(0.00)




(0.00)




(0.00)


Effect to adjust for PCL – NonPCD loans and UFC, net of tax









0.19










0.18





Effect to adjust for merger and branch consolidation related expense, net of tax



0.14




0.06




0.12




0.08




0.20




0.31




0.67


Effect to adjust for extinguishment of debt cost





















0.13


Adjusted net income per common share – Basic (non-GAAP)


$

1.90



$

1.64



$

1.71



$

1.61



$

1.95



$

5.24



$

6.02































Adjusted Net Income per Common Share – Diluted (2)





























Earnings per common share – Diluted (GAAP)


$

1.75



$

1.57



$

1.39



$

1.52



$

1.74



$

4.71



$

5.19


Effect to adjust for securities gains



(0.00)










(0.00)




(0.00)




(0.00)




(0.00)


Effect to adjust for PCL – NonPCD loans and UFC, net of tax









0.19










0.18





Effect to adjust for merger and branch consolidation related expense, net of tax



0.14




0.05




0.11




0.07




0.20




0.31




0.66


Effect to adjust for extinguishment of debt cost





















0.13


Adjusted net income per common share – Diluted (non-GAAP)


$

1.89



$

1.62



$

1.69



$

1.59



$

1.94



$

5.20



$

5.98































Adjusted Return on Average Assets (2)





























Return on average assets (GAAP)



1.16

%



1.04

%



0.95

%



1.02

%



1.20

%



1.05

%



1.25

%

Effect to adjust for securities gains



(0.00)

%



%



%



(0.00)

%



(0.00)

%



(0.00)

%



(0.00)

%

Effect to adjust for PCL – NonPCD loans and UFC, net of tax



%



%



0.13

%



%



%



0.04

%



%

Effect to adjust for merger and branch consolidation related expense, net of tax



0.10

%



0.04

%



0.07

%



0.06

%



0.14

%



0.07

%



0.16

%

Effect to adjust for extinguishment of debt cost



%



%



%



%



%



%



0.03

%

Adjusted return on average assets (non-GAAP)



1.26

%



1.08

%



1.15

%



1.08

%



1.34

%



1.16

%



1.44

%






























Adjusted Return on Average Common Equity (2)





























Return on average common equity (GAAP)



10.31

%



9.36

%



8.24

%



8.84

%



10.21

%



9.32

%



10.41

%

Effect to adjust for securities gains



(0.00)

%



%



%



(0.00)

%



(0.00)

%



(0.00)

%



(0.00)

%

Effect to adjust for PCL – NonPCD loans and UFC, net of tax



%



%



1.11

%



%



%



0.36

%



%

Effect to adjust for merger and branch consolidation related expense, net of tax



0.82

%



0.33

%



0.66

%



0.44

%



1.16

%



0.60

%



1.34

%

Effect to adjust for extinguishment of debt cost



%



%



%



%



%



%



0.26

%

Adjusted return on average common equity (non-GAAP)



11.13

%



9.69

%



10.01

%



9.28

%



11.37

%



10.28

%



12.01

%






























Return on Average Common Tangible Equity (3)





























Return on average common equity (GAAP)



10.31

%



9.36

%



8.24

%



8.84

%



10.21

%



9.32

%



10.41

%

Effect to adjust for intangible assets



7.68

%



7.23

%



5.73

%



5.79

%



6.65

%



6.87

%



6.93

%

Return on average tangible equity (non-GAAP)



17.99

%



16.59

%



13.97

%



14.63

%



16.86

%



16.19

%



17.34

%






























Adjusted Return on Average Common Tangible Equity (2) (3)





























Return on average common equity (GAAP)



10.31

%



9.36

%



8.24

%



8.84

%



10.21

%



9.32

%



10.41

%

Effect to adjust for securities gains



(0.00)

%



%



%



(0.00)

%



(0.00)

%



(0.00)

%



(0.00)

%

Effect to adjust for PCL – NonPCD loans and UFC, net of tax



%



%



1.11

%



%



%



0.36

%



%

Effect to adjust for merger and branch consolidation related expense, net of tax



0.82

%



0.33

%



0.66

%



0.43

%



1.17

%



0.60

%



1.34

%

Effect to adjust for extinguishment of debt cost



%



%



%



%



%



%



0.26

%

Effect to adjust for intangible assets



8.23

%



7.46

%



6.78

%



6.03

%



7.30

%



7.49

%



7.84

%

Adjusted return on average common tangible equity (non-GAAP)



19.36

%



17.15

%



16.79

%



15.30

%



18.68

%



17.77

%



19.85

%






























Adjusted Efficiency Ratio (4)





























Efficiency ratio



53.14

%



54.92

%



62.99

%



61.27

%



64.22

%



56.63

%



66.99

%

Effect to adjust for merger and branch consolidation related expense



(3.12)

%



(1.33)

%



(2.94)

%



(1.89)

%



(5.06)

%



(2.46)

%



(6.94)

%

Adjusted efficiency ratio



50.02

%



53.59

%



60.05

%



59.39

%



59.16

%



54.17

%



60.05

%






























Tangible Book Value Per Common Share (3)





























Book value per common share (GAAP)


$

65.03



$

66.64



$

68.30



$

69.27



$

68.55










Effect to adjust for intangible assets



(27.06)




(27.17)




(27.25)




(24.65)




(24.57)










Tangible book value per common share (non-GAAP)


$

37.97



$

39.47



$

41.05



$

44.62



$

43.98







































Tangible Equity-to-Tangible Assets (3)





























Equity-to-assets (GAAP)



10.89

%



10.91

%



11.20

%



11.45

%



11.72

%









Effect to adjust for intangible assets



(4.23)

%



(4.15)

%



(4.15)

%



(3.76)

%



(3.87)

%









Tangible equity-to-tangible assets (non-GAAP)



6.66

%



6.76

%



7.05

%



7.69

%



7.85

%










Certain prior period information has been reclassified to conform to the current period presentation, and these reclassifications had no impact on net income or equity as previously reported.

 

 

Footnotes to tables:

  1. Includes loan accretion (interest) income related to the discount on acquired loans of $9.6 million, $12.8 million, $6.7 million, $7.7 million, and $5.2 million, respectively, during the five quarters above.
  2. Adjusted earnings, adjusted return on average assets, adjusted EPS, and adjusted return on average equity are non-GAAP measures and exclude the gains or losses on sales of securities, merger and branch consolidation related expense, initial PCL on nonPCD loans and unfunded commitments from acquisitions and extinguishment of debt cost.  Management believes that non-GAAP adjusted measures provide additional useful information that allows readers to evaluate the ongoing performance of the company.  Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company.  Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company’s results or financial condition as reported under GAAP.  Adjusted earnings and the related adjusted return measures (non-GAAP) exclude the following from net income (GAAP) on an after-tax basis: (a) pre-tax merger and branch consolidation related expense of $13.7 million, $5.4 million, $10.3 million, $6.6 million, and $17.6 million for the quarters ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021, and September 30, 2021, respectively; and (b) net securities gains of $30,000, $2,000, and $64,000 for the quarters ended September 30, 2022, December 31, 2021 and September 30, 2021, respectively; and (c) initial PCL on nonPCD loans and unfunded commitments acquired from ACBI of $17.1 million for the quarter ended March 31, 2022.
  3. The tangible measures are non-GAAP measures and exclude the effect of period end or average balance of intangible assets.  The tangible returns on equity and common equity measures also add back the after-tax amortization of intangibles to GAAP basis net income.  Management believes that these non-GAAP tangible measures provide additional useful information, particularly since these measures are widely used by industry analysts for companies with prior merger and acquisition activities.  Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company.  Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company’s results or financial condition as reported under GAAP. The sections titled “Reconciliation of Non-GAAP to GAAP” provide tables that reconcile non-GAAP measures to GAAP.
  4. Adjusted efficiency ratio is calculated by taking the noninterest expense excluding merger and branch consolidation related expense and amortization of intangible assets, divided by net interest income and noninterest income excluding securities gains (losses). The pre-tax amortization expenses of intangible assets were $7.8 million, $8.8 million, $8.5 million, $8.5 million, and $8.5 million, for the quarters ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021, and September 30, 2021, respectively.
  5. The dividend payout ratio is calculated by dividing total dividends paid during the period by the total net income for the same period.
  6. September 30, 2022 ratios are estimated and may be subject to change pending the final filing of the FR Y-9C; all other periods are presented as filed.
  7. Loan data excludes mortgage loans held for sale.

Cautionary Statement Regarding Forward Looking Statements

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 of 1934. Forward-looking statements are based on, among other things, management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy and SouthState. Words and phrases such as “may,” “approximately,” “continue,” “should,” “expects,” “projects,” “anticipates,” “is likely,” “look ahead,” “look forward,” “believes,” “will,” “intends,” “estimates,” “strategy,” “plan,” “could,” “potential,” “possible” and variations of such words and similar expressions are intended to identify such forward-looking statements.

SouthState cautions readers that forward-looking statements are subject to certain risks, uncertainties and assumptions that are difficult to predict with regard to, among other things, timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results. Such risks, uncertainties and assumptions, include, among others, the following: (1) economic downturn risk, potentially resulting in the number and pace of higher interest rates, deterioration in the credit markets, inflation, greater than expected noninterest expenses, excessive loan losses and other negative consequences, which risks could be exacerbated by potential continued negative economic developments resulting from the Covid19 pandemic, or from federal spending cuts and/or one or more federal budget-related impasses or actions; (2) interest rate risk primarily resulting from the interest rate environment, the number and pace of rising interest rates, and their impact on the Bank’s earnings, including from the correspondent and mortgage divisions, housing demand, the market value of the bank’s loan and securities portfolios, and the market value of SouthState’s equity; (3) risks related to the merger and integration of SouthState and Atlantic Capital including, among others, (i) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (ii) the risk that the integration of Atlantic Capital’s operations into SouthState’s operations will be materially delayed or will be more costly or difficult than expected or that the parties are otherwise unable to successfully integrate Atlantic Capital’s businesses into SouthState’s businesses, (iii) the amount of the costs, fees, expenses and charges related to the merger, and (iv) reputational risk and the reaction of each company’s customers, suppliers, employees or other business partners to the merger; (4) risks relating to the continued impact of the Covid19 pandemic on the Company, including possible impact to the Company and its employees from contracting Covid19, and to efficiencies and the control environment due to the changing work environment and to our results of operations due to further interventions to mitigate the impact of the pandemic; (5) the impact of increasing digitization of the banking industry and movement of customers to on-line platforms, and the possible impact on the Bank’s results of operations, customer base, expenses, suppliers and operations; (6) controls and procedures risk, including the potential failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures; (7) potential deterioration in real estate values; (8) the impact of competition with other financial institutions, including deposit and loan pricing pressures (including those resulting from the CARES Act) and the resulting impact, including as a result of compression to net interest margin; (9) risks relating to the ability to retain our culture and attract and retain qualified people; (10) credit risks associated with an obligor’s failure to meet the terms of any contract with the Bank or otherwise fail to perform as agreed under the terms of any loan-related document; (11) risks related to the ability of the Company to pursue its strategic plans which depend upon certain growth goals in our lines of business; (12) liquidity risk affecting the Bank’s ability to meet its obligations when they come due; (13) risks associated with an anticipated increase in SouthState’s investment securities portfolio, including risks associated with acquiring and holding investment securities or potentially determining that the amount of investment securities SouthState desires to acquire are not available on terms acceptable to SouthState; (14) price risk focusing on changes in market factors that may affect the value of traded instruments in “mark-to-market” portfolios; (15) transaction risk arising from problems with service or product delivery; (16) compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards; (17) regulatory change risk resulting from new laws, rules, regulations, accounting principles, proscribed practices or ethical standards, including, without limitation, the possibility that regulatory agencies may require higher levels of capital above the current regulatory-mandated minimums and including the impact of the CARES Act, the Consumer Financial Protection Bureau regulations, and the possibility of changes in accounting standards, policies, principles and practices, including changes in accounting principles relating to loan loss recognition (CECL); (18) strategic risk resulting from adverse business decisions or improper implementation of business decisions; (19) reputation risk that adversely affects earnings or capital arising from negative public opinion; (20) cybersecurity risk related to the dependence of SouthState on internal computer systems and the technology of outside service providers, as well as the potential impacts of internal or external security breaches, which may subject the company to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events; (21) reputational and operational risks associated with environment, social and governance (ESG) matters, including the impact of recently issued proposed regulatory guidance and regulation relating to climate change; (22) greater than expected noninterest expenses; (23) excessive loan losses; (24) potential deposit attrition, higher than expected costs, customer loss and business disruption associated with the Atlantic Capital integration, and potential difficulties in maintaining relationships with key personnel; (25) reputational risk and possible higher than estimated reduced revenue from announced changes in the Bank’s consumer overdraft programs; (26) the risks of fluctuations in market prices for SouthState common stock that may or may not reflect economic condition or performance of SouthState; (27) the payment of dividends on SouthState common stock, which is subject to legal and regulatory limitations as well as the discretion of the board of directors of SouthState, SouthState’s performance and other factors; (28) ownership dilution risk associated with potential acquisitions in which SouthState’s stock may be issued as consideration for an acquired company; (29) operational, technological, cultural, regulatory, legal, credit and other risks associated with the exploration, consummation and integration of potential future acquisitions, whether involving stock or cash consideration; (30) major catastrophes such as hurricanes, tornados, earthquakes, floods or other natural or human disasters, including infectious disease outbreaks, such as the ongoing Covid19 pandemic, and the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on SouthState and its customers and other constituencies; (31) terrorist activities risk that results in loss of consumer confidence and economic disruptions; and (32) other factors that may affect future results of SouthState, as disclosed in SouthState’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, filed by SouthState with the U.S. Securities and Exchange Commission (“SEC”) and available on the SEC’s website at http://www.sec.gov, any of which could cause actual results to differ materially from future results expressed, implied or otherwise anticipated by such forward-looking statements.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. SouthState does not undertake any obligation to update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

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SOURCE SouthState Corporation

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