SouthState (SSB) Q1 2025 Earnings Call April 25, 2025 10:27 PM ET Company Participants William Matthews - CFO & Executive VPJohn Corbett - CEO and DirectorMichael Rose - Managing DirectorSteven Young - Chief Strategy OfficerCatherine Mealor - Managing DirectorStephen Scouten - Managing DirectorRussell Gunther - Managing DirectorJared Shaw - Managing DirectorChristopher Marinac - Director of Research Conference Call Participants None - Analyst Operator Thank you for standing by. My name is Eric, and I will b ...

Core Viewpoint - SouthState Corporation reported strong first-quarter 2025 results with adjusted earnings per share of $2.15, exceeding estimates and reflecting a 36.1% year-over-year increase, despite a decline in net income attributable to common shareholders [1][9]. Group 1: Financial Performance - Total revenues for the quarter reached $630.6 million, marking a 51.8% increase year over year and surpassing estimates by 2.4% [2]. - Net interest income (NII) was $544.5 million, up 58.3% from the previous year, with the net interest margin rising to 3.85% from 3.41% [2]. - Non-interest income increased to $86.1 million, a 20.3% rise from the prior year, driven by most components except for other income and net securities losses [2]. Group 2: Expenses and Efficiency - Non-interest expenses surged to $408.8 million from $249.3 million in the year-ago quarter, primarily due to merger-related and restructuring costs [3]. - The efficiency ratio increased to 60.97% from 58.48% year over year, indicating a decline in profitability [3]. Group 3: Loans and Deposits - As of March 31, 2025, net loans totaled $46.1 billion, a 37.9% increase from the prior quarter, while total deposits rose to $53.3 billion, up 40.1% sequentially [4]. Group 4: Asset Quality - Provision for credit losses was $100.6 million, significantly up from $12.7 million in the prior-year quarter [5]. - The allowance for credit losses as a percentage of loans was 1.33%, down 11 basis points year over year, while the ratio of annualized net charge-offs to total average loans increased to 0.38% from 0.03% [5]. Group 5: Capital Ratios and Profitability - As of March 31, 2025, the Tier I leverage ratio was 8.9%, down from 9.6% in the prior year, and the Tier 1 common equity ratio decreased to 11% from 11.9% [6]. - The annualized return on average assets was 0.56%, down from 1.03% in the previous year, and return on average common equity was 4.29%, compared to 8.36% in the prior-year quarter [6]. Group 6: Capital Distribution - The company declared a quarterly cash dividend of 54 cents per share, payable on May 16, 2025, to shareholders of record as of May 9, 2025 [7]. Group 7: Recent Developments - SouthState completed the acquisition of Independent Bank Group, Inc. on January 1, 2025, and executed a sale-leaseback transaction resulting in a gain of $229 million, net of transaction costs [8].

Core Insights - SouthState (SSB) reported a revenue of $630.64 million for the quarter ended March 2025, marking a 51.8% increase year-over-year and exceeding the Zacks Consensus Estimate by 2.35% [1] - The earnings per share (EPS) for the quarter was $2.15, up from $1.58 in the same quarter last year, resulting in an EPS surprise of 50.35% compared to the consensus estimate of $1.43 [1] Financial Metrics - Net Interest Margin (Non-Tax Equivalent) was reported at 3.8%, slightly above the estimated 3.6% [4] - The Efficiency Ratio stood at 61%, higher than the average estimate of 57% [4] - Total nonperforming assets were $280.44 million, exceeding the estimated $251.43 million [4] - Net charge-offs as a percentage of average loans (annualized) were 0.4%, compared to the estimated 0.1% [4] - Average Balance of Total interest-earning assets was $57.50 billion, below the estimated $58.46 billion [4] - Net Interest Income was reported at $544.55 million, surpassing the average estimate of $516.19 million [4] - Total Noninterest Income was $86.09 million, slightly below the estimated $88.27 million [4] - Net interest income, tax equivalent (Non-GAAP) was $545.33 million, exceeding the average estimate of $528.97 million [4] Stock Performance - SouthState's shares have returned -5.6% over the past month, compared to a -5.1% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

SouthState (SSB) came out with quarterly earnings of $2.15 per share, beating the Zacks Consensus Estimate of $1.43 per share. This compares to earnings of $1.58 per share a year ago. These figures are adjusted for non- recurring items. This quarterly report represents an earnings surprise of 50.35%. A quarter ago, it was expected that this bank holding company would post earnings of $1.73 per share when it actually produced earnings of $1.93, delivering a surprise of 11.56%. Over the last four quarters, th ...

[First Quarter 2025 Highlights](index=1&type=section&id=First%20Quarter%202025%20Highlights) SouthState's Q1 2025 marked strategic transformations including the IBTX acquisition, sale-leaseback, and securities restructuring, resulting in adjusted EPS of $2.15 and a 3.85% net interest margin - The CEO described Q1 2025 as a "strategic reset" significantly improving the company's earnings profile, driven by the IBTX acquisition, a sale-leaseback, and a securities restructure which boosted the **net interest margin to 3.85%**[3](index=3&type=chunk) Q1 2025 Key Performance Metrics | Metric | Value | | :--- | :--- | | Diluted EPS (GAAP) | $0.87 | | Adjusted Diluted EPS (Non-GAAP) | $2.15 | | Net Income (GAAP) | $89.1 million | | Adjusted Net Income (Non-GAAP) | $219.3 million | | Net Interest Margin (NIM, TE) | 3.85% | | Adjusted ROAA (Non-GAAP) | 1.38% | | Adjusted ROATCE (Non-GAAP) | 19.9% | | Adjusted Efficiency Ratio (Non-GAAP) | 50% | - Key strategic transactions completed in Q1 2025 include the acquisition of Independent Bank Group, a sale-leaseback generating a **$229 million gain**, and a securities portfolio restructuring resulting in a **$229 million net loss**[6](index=6&type=chunk) - The Board of Directors declared a quarterly cash dividend of **$0.54 per share**, payable on May 16, 2025[6](index=6&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) Q1 2025 saw net interest income rise to $544.5 million, total assets grow to $65.1 billion, and strong adjusted performance ratios [Consolidated Income Statement](index=2&type=section&id=Consolidated%20Income%20Statement) In Q1 2025, SouthState reported net interest income of $544.5 million, with GAAP net income of $89.1 million and adjusted net income of $219.3 million Q1 2025 Income Statement Highlights (vs. Q4 2024) | Metric (in thousands) | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Net Interest Income | $544,547 | $369,779 | | Provision for credit losses | $100,562 | $6,371 | | Total Noninterest Income | $86,088 | $80,545 | | Total Noninterest Expense | $408,826 | $256,609 | | Net Income (GAAP) | $89,080 | $144,178 | | Adjusted Net Income (Non-GAAP) | $219,282 | $148,764 | | Diluted EPS (GAAP) | $0.87 | $1.87 | | Adjusted Diluted EPS (Non-GAAP) | $2.15 | $1.93 | [Performance and Capital Ratios](index=3&type=section&id=Performance%20and%20Capital%20Ratios) Q1 2025 adjusted performance ratios were strong, with ROAA at 1.38% and ROATCE at 19.85%, and robust capital ratios including an 11.0% Tier 1 Common Equity ratio Key Performance and Capital Ratios (Q1 2025 vs Q4 2024) | Ratio | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Adjusted ROAA (Non-GAAP) | 1.38% | 1.27% | | Adjusted ROATCE (Non-GAAP) | 19.85% | 15.56% | | Adjusted Efficiency Ratio (Non-GAAP) | 50.24% | 54.42% | | Tangible Book Value per Share | $50.07 | $51.11 | | Tier 1 Common Equity Ratio | 11.0% | 12.6% | | Total Risk-Based Capital Ratio | 13.7% | 15.0% | [Consolidated Balance Sheet](index=4&type=section&id=Consolidated%20Balance%20Sheet) As of March 31, 2025, total assets increased to $65.1 billion, with loans at $46.1 billion and deposits at $53.3 billion, primarily due to the IBTX acquisition Balance Sheet Highlights (as of March 31, 2025 vs. Dec 31, 2024) | Metric (in thousands) | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $65,135,454 | $46,381,204 | | Loans, net | $46,143,042 | $33,437,647 | | Total Deposits | $53,337,615 | $38,060,866 | | Goodwill | $3,088,059 | $1,923,106 | | Total Shareholders' Equity | $8,624,361 | $5,890,415 | - The Independent acquisition added **$13.1 billion in loans** and **$15.2 billion in deposits**[27](index=27&type=chunk) [Detailed Financial Analysis](index=5&type=section&id=Detailed%20Financial%20Analysis) This section details the company's financial performance, including net interest margin expansion, noninterest income and expense, loan and deposit growth, and asset quality metrics post-acquisition [Net Interest Income and Margin](index=5&type=section&id=Net%20Interest%20Income%20and%20Margin) Net interest margin expanded by 37 basis points to 3.85% in Q1 2025, driven by a 6.25% total loan yield and $61.8 million in loan accretion income Net Interest Margin Analysis (Q1 2025 vs Q4 2024) | Metric | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Net Interest Margin (TE, Non-GAAP) | 3.85% | 3.48% | | Total Loan Yield | 6.25% | 5.76% | | Total Deposit Cost | 1.89% | 1.75% | | Loan Accretion Income (in thousands) | $61,798 | $2,887 | - The remaining loan discount on acquired loans to be accreted into future interest income totals **$457.1 million** as of March 31, 2025[11](index=11&type=chunk) [Noninterest Income and Expense](index=6&type=section&id=Noninterest%20Income%20and%20Expense) Total noninterest income for Q1 2025 was $86.1 million, heavily influenced by offsetting one-time items, while noninterest expense rose to $408.8 million due to merger costs and expanded workforce - Noninterest income was significantly impacted by a **$229.3 million gain on a sale-leaseback**, which was nearly offset by a **$228.8 million net loss on securities**[13](index=13&type=chunk) Noninterest Expense Breakdown (Q1 2025 vs Q4 2024) | Expense Category (in thousands) | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Salaries and employee benefits | $195,811 | $154,116 | | Occupancy expense | $35,493 | $22,831 | | Merger and restructuring expense | $68,006 | $6,531 | | **Total Noninterest Expense** | **$408,826** | **$256,609** | [Loan and Deposit Composition](index=7&type=section&id=Loan%20and%20Deposit%20Composition) At the end of Q1 2025, total loans reached $46.8 billion and total deposits grew to $53.3 billion, driven by the IBTX acquisition, with core deposits comprising $46.2 billion Loan Portfolio by Type (March 31, 2025) | Loan Category (in thousands) | Balance | | :--- | :--- | | Investor commercial real estate | $16,822,119 | | Consumer real estate | $9,838,952 | | Commercial and industrial | $8,106,484 | | Commercial owner occupied real estate | $7,417,116 | | Construction and land development | $3,497,909 | | **Total Loans** | **$46,766,732** | Deposit Composition (March 31, 2025) | Deposit Category (in thousands) | Balance | | :--- | :--- | | Money market | $17,447,738 | | Noninterest-bearing checking | $13,757,255 | | Interest-bearing checking | $12,034,973 | | Time deposits | $7,158,242 | | **Total Deposits** | **$53,337,615** | [Asset Quality and Credit Losses](index=8&type=section&id=Asset%20Quality%20and%20Credit%20Losses) Asset quality metrics in Q1 2025 reflect the Independent Bank portfolio addition, with nonperforming assets at 0.43% of total assets and an ACL of 1.33% of total loans Asset Quality Ratios (March 31, 2025) | Ratio | Value | | :--- | :--- | | Nonperforming assets as a % of total assets | 0.43% | | Nonperforming loans as a % of period end loans | 0.58% | | Allowance for credit losses as a % of loans | 1.33% | | Net charge-offs as a % of average loans (annualized) | 0.38% | | Net charge-offs (excl. acquisition date charge-offs) as a % of avg. loans | 0.04% | - The Allowance for Credit Losses (ACL) increased from **$465.3 million** to **$623.7 million**, primarily due to initial provisions for acquired loans from Independent[18](index=18&type=chunk) - The company recorded **$39.4 million in acquisition date charge-offs** on acquired PCD loans from Independent to conform with its own charge-off policies[6](index=6&type=chunk)[18](index=18&type=chunk) [Company and Shareholder Information](index=9&type=section&id=Company%20and%20Shareholder%20Information) This section provides details for investors, including the announcement of a quarterly dividend and information regarding the upcoming earnings conference call, and a brief overview of company operations [Dividend Declaration](index=1&type=section&id=Dividend%20Declaration) The Board of Directors declared a quarterly cash dividend of $0.54 per share, payable on May 16, 2025, to shareholders of record as of May 9, 2025 Q1 2025 Dividend Information | | Details | | :--- | :--- | | Dividend per Share | $0.54 | | Record Date | May 9, 2025 | | Payment Date | May 16, 2025 | [Conference Call Information](index=9&type=section&id=Conference%20Call%20Information) SouthState will host a conference call to discuss its Q1 2025 financial results on April 25, 2025, at 9:00 a.m. Eastern Time, with webcast access available on the investor relations website - A conference call to discuss Q1 2025 results is scheduled for **April 25, 2025, at 9:00 a.m. Eastern Time**[21](index=21&type=chunk) - SouthState Corporation is headquartered in Winter Haven, Florida, serving over one million customers across Florida, Alabama, Georgia, the Carolinas, Virginia, Texas, and Colorado through its bank subsidiary[22](index=22&type=chunk) [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles GAAP results to non-GAAP measures, which management uses to provide a clearer view of ongoing performance by adjusting for securities losses, sale-leaseback gains, merger expenses, and initial credit loss provisions Reconciliation of GAAP to Adjusted Net Income (Q1 2025, in thousands) | Description | Amount | | :--- | :--- | | **Net Income (GAAP)** | **$89,080** | | Securities losses, net of tax | $178,639 | | Gain on sale leaseback, net of tax | ($179,004) | | Initial PCL - Non-PCD loans & UFC, net of tax | $71,892 | | Merger & restructuring expense, net of tax | $53,094 | | Deferred tax asset remeasurement | $5,581 | | **Adjusted Net Income (Non-GAAP)** | **$219,282** | Reconciliation of GAAP to Adjusted Diluted EPS (Q1 2025) | Description | Amount | | :--- | :--- | | **Diluted EPS (GAAP)** | **$0.87** | | Effect of securities losses | $1.76 | | Effect of gain on sale leaseback | ($1.76) | | Effect of initial PCL | $0.71 | | Effect of merger & restructuring expense | $0.52 | | Effect of deferred tax remeasurement | $0.05 | | **Adjusted Diluted EPS (Non-GAAP)** | **$2.15** | - Management uses non-GAAP measures like Adjusted Net Income, Adjusted EPS, Tangible Book Value, and Adjusted Efficiency Ratio to provide additional useful information by excluding items such as merger costs, securities gains/losses, and other one-time events[23](index=23&type=chunk)[27](index=27&type=chunk) [Forward-Looking Statements](index=12&type=section&id=Forward-Looking%20Statements) The report includes forward-looking statements subject to significant risks and uncertainties, including economic volatility, merger integration, interest rate, credit, cybersecurity, and regulatory risks, with no commitment to updates - The report contains forward-looking statements based on management's current beliefs and assumptions, which are not guarantees of future performance[28](index=28&type=chunk) - Key risks that could cause actual results to differ include economic volatility, inflation, merger and integration risks with Independent Bank Group, interest rate, credit, and liquidity risks, competition, regulatory changes, cybersecurity, and geopolitical risks[29](index=29&type=chunk) - SouthState cautions readers not to place undue reliance on forward-looking statements and undertakes no obligation to update them[30](index=30&type=chunk)

Company Overview - SouthState (SSB) is expected to report earnings for the quarter ended March 2025 on April 24, 2025, with a consensus EPS estimate of $1.43, reflecting a year-over-year decline of 9.5% [3] - Revenue is anticipated to be $604.47 million, which represents a significant increase of 45.5% compared to the same quarter last year [3] Earnings Expectations - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [4] - The Most Accurate Estimate for SouthState is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -23.21%, suggesting a bearish outlook from analysts [10] Historical Performance - SouthState has a history of beating consensus EPS estimates, having done so in the last four quarters, with the most recent surprise being +11.56% when it reported earnings of $1.93 against an expectation of $1.73 [12][13] Industry Comparison - In the Zacks Financial - Miscellaneous Services industry, Virtu Financial (VIRT) is expected to report earnings of $1.14 per share for the same quarter, indicating a year-over-year increase of 50% [17] - Virtu Financial's revenue is projected to be $460.2 million, up 25.4% from the previous year [17] - Despite a recent 2.3% downward revision in the consensus EPS estimate for Virtu Financial, a higher Most Accurate Estimate has resulted in a positive Earnings ESP of 3.08%, suggesting a likely earnings beat [18]

Group 1 - SouthState Bank has established a presence in Nashville, Tennessee, by hiring an experienced team to expand its operations in the region [1] - Cameron Wells has been appointed as division president, bringing over 20 years of experience in the banking sector, particularly in the Middle Tennessee market [1] - The bank aims to serve its Commercial and Middle Market customers in Nashville, leveraging its reputation for providing remarkable customer experiences [1] Group 2 - Will Hatfield has joined SouthState as director of Middle Market Banking, bringing 12 years of experience in Commercial and Small Business Banking [2] - Kelsea Lamia has been appointed as a Commercial banker, contributing 14 years of banking experience to the Nashville team [3] Group 3 - SouthState Corporation is headquartered in Winter Haven, Florida, and operates a nationally chartered bank subsidiary that serves over 1.5 million customers across multiple states [4]

Core Viewpoint - SouthState Bank's fifth Corporate Stewardship Report emphasizes its dedication to community engagement, employee support, corporate responsibility, and environmental sustainability [1][2]. Commitment to Community - The bank made $5.75 billion in Community Reinvestment Act (CRA)-eligible loans [9]. - It awarded grants and contributions totaling $7.1 million to 2,393 organizations [9]. - Extended $401 million in community development loans and invested $54.7 million in economic development and affordable housing projects [9]. Commitment to Colleagues - Recorded a 24% increase in employee volunteer hours, totaling 19,047 hours with 1,028 different organizations [9]. - Provided $242,000 in financial assistance to 166 team members through The Sunshine Fund [9]. - Continued the ReMARKable Leader program, with 61 team members graduating to enhance their career development [9]. - Maintained a diverse workforce, with 14.78% Black or African American and 7.78% Hispanic/Latino team members [9]. Commitment to Corporate Stewardship - The bank focuses on building meaningful relationships with community-based and nonprofit organizations [3]. - Maintained a tenured and diverse board of directors, with 50% having CEO-level experience [9]. Commitment to Environmental Resourcefulness - The bank's digital solutions have led to significant environmental savings, including 1.28 million gallons of water, 1.08 million pounds of CO2 emissions, and 70,000 pounds of solid waste [9]. - 58% of accounts are receiving eStatements, contributing to reduced environmental impact [9].

Core Insights - SouthState has announced a series of new hires and promotions across its Private Wealth, Small Business, and Commercial Banking divisions, emphasizing internal talent development and the addition of experienced bankers from other institutions [1][2]. Small Business Banking - The company has promoted Joseph Brice and Rob Pregnolato to lead the Small Business Banking Group for the Northern and Southern Groups, respectively [3]. - Four new Small Business bankers have been added under their leadership, including Peter Bevel, Andrew Leech, Tanesha Thrash, and Christy Truitt, each bringing extensive banking experience and community involvement [4][5][6][7]. Private Wealth Management - New Private Wealth advisors include Will Barlow, April Croasmun, Jennifer Thompson, and Steven Wickline, all of whom have significant experience in wealth management and investment strategies [8][9][10][12]. Commercial Banking - SouthState has welcomed three new members to its Commercial Banking team: Lauren Ervin, Matt Mehr, and Douglas Tuttle, each with over 20 years of experience in financial services and commercial banking [13][14][15]. Company Overview - SouthState Corporation, headquartered in Winter Haven, Florida, operates as a financial services company providing a range of solutions including consumer, commercial, mortgage, and wealth management to over 1.5 million customers across multiple states [16].

Core Points - SouthState Corporation will release its first quarter 2025 earnings results on April 24, 2025, after market close [1] - A conference call to discuss the earnings results is scheduled for April 25, 2025, at 9:00 a.m. (ET) [2] - Investors can access the earnings results and participate in the conference call through various means, including a live webcast [3]