South State (US:SSB)2023-05-05 13:00PART I — FINANCIAL INFORMATION Item 1. Financial Statements Presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2023 Condensed Consolidated Balance Sheets Total assets increased to $44.9 billion, driven by growth in net loans and cash, while liabilities rose due to new borrowings Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $44,923,827 | $43,918,696 | | Total cash and cash equivalents | $1,996,662 | $1,312,563 | | Total investment securities | $8,014,663 | $8,189,780 | | Loans, net | $30,325,497 | $29,821,418 | | Goodwill | $1,923,106 | $1,923,106 | | Total Liabilities | $39,674,823 | $38,843,769 | | Total deposits | $36,401,592 | $36,350,623 | | Other borrowings | $900,000 | $0 | | Total Shareholders' Equity | $5,249,004 | $5,074,927 | Condensed Consolidated Statements of Net Income Net income for Q1 2023 increased 39.5% year-over-year to $139.9 million due to higher net interest income Key Income Statement Data (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Interest Income | $381,263 | $261,518 | | Provision (recovery) for credit losses | $33,091 | $(8,449) | | Total Noninterest Income | $71,355 | $86,046 | | Total Noninterest Expense | $240,505 | $228,600 | | Net Income | $139,926 | $100,329 | | Diluted EPS | $1.83 | $1.39 | Notes to Condensed Consolidated Financial Statements Provides detailed disclosures on accounting policies, acquisitions, financial instruments, and capital adequacy - Effective January 1, 2023, the company adopted ASU No. 2022-02, eliminating the Troubled Debt Restructuring (TDR) accounting guidance prospectively without a material impact on financial statements364591 - On March 1, 2022, the company acquired Atlantic Capital Bancshares, Inc for a total purchase price of $657.8 million in a stock transaction, resulting in $342.0 million of goodwill5355 - The company's capital ratios as of March 31, 2023, were well in excess of the minimum regulatory requirements to be considered 'well capitalized', with a consolidated Common Equity Tier 1 ratio of 11.13% against a 7.00% requirement185 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial performance, highlighting strong net income and net interest income growth Results of Operations Q1 2023 net income rose to $139.9 million, driven by a 117 basis point expansion in net interest margin to 3.92% Q1 2023 vs Q1 2022 Performance Summary | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Income | $139.9M | $100.3M | | Diluted EPS | $1.83 | $1.39 | | Net Interest Income | $381.3M | $261.5M | | Net Interest Margin (Non-TE) | 3.92% | 2.75% | | Provision for Credit Losses | $33.1M | ($8.4M) | | Noninterest Income | $71.4M | $86.0M | | Noninterest Expense | $240.5M | $228.6M | - The yield on interest-earning assets increased by 180 basis points year-over-year to 4.64%, while the cost of interest-bearing liabilities rose 99 basis points to 1.14%, demonstrating that assets repriced faster than liabilities244248 - Noninterest income decreased by 17.1% YoY, primarily due to a $14.4 million decline in correspondent banking and capital markets income and a $6.3 million drop in mortgage banking income263 Analysis of Financial Condition Total assets grew to $44.9 billion, with stable deposits but a compositional shift toward time deposits and increased borrowings - Total loans grew by $518.3 million during Q1 2023, with the non-acquired portfolio increasing by $945.4 million while the acquired portfolio decreased by $427.1 million292 - The investment securities portfolio decreased by $175.1 million to $8.0 billion and had a total unrealized net loss of $1.2 billion due to higher interest rates275276 - The Allowance for Credit Losses (ACL) increased to $370.6 million, or 1.21% of total loans, reflecting a more cautious economic outlook298307308 - Nonperforming assets increased to $128.3 million, or 0.42% of total loans and repossessed assets, up from 0.36% at year-end 2022317 Liquidity and Capital Resources The company maintains a strong liquidity position with $12.9 billion in available funding and robust capital ratios - The company has access to approximately $12.9 billion in available liquidity from sources including the FHLB, Federal Reserve discount window, and brokered deposit capacity349 - Estimated uninsured deposits totaled $12.7 billion at March 31, 2023, down from $14.1 billion at year-end 2022326 - In April 2022, the Board approved a stock repurchase program authorizing the repurchase of up to 4,120,021 shares, with no shares repurchased under this program during Q1 2023331397 Regulatory Capital Ratios (Consolidated) | Ratio | March 31, 2023 | Well-Capitalized Minimum | | :--- | :--- | :--- | | Common Equity Tier 1 | 11.13% | N/A | | Tier 1 Risk-Based Capital | 11.13% | 6.00% | | Total Risk-Based Capital | 13.30% | 10.00% | | Tier 1 Leverage | 9.05% | N/A | Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk disclosures were reported from the 2022 Annual Report on Form 10-K - No material changes in market risk disclosures were reported for the quarter ended March 31, 2023, compared to the disclosures in the 2022 Form 10-K390 Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2023391 - No material changes to internal control over financial reporting occurred during the first quarter of 2023393 PART II — OTHER INFORMATION Legal Proceedings The company is not party to any material legal proceedings outside the ordinary course of business - SouthState is not party to any material legal proceedings outside the ordinary course of business as of the report date394 Risk Factors No material changes to the risk factors disclosed in the 2022 Annual Report on Form 10-K were reported - No material changes to the risk factors disclosed in the 2022 Form 10-K were reported396 Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the public program in Q1 2023, though some were acquired for employee tax obligations - The company did not repurchase any shares under its publicly announced 2022 Stock Repurchase Program during Q1 2023, with the full authorization of 4,120,021 shares remaining available397 - A total of 43,889 shares were repurchased from employees during Q1 2023 to satisfy tax obligations related to the vesting of stock-based compensation, separate from the public buyback plan398 Exhibits Lists the exhibits filed with the Form 10-Q, including certifications and interactive data files