South State (US:SSB)2022-11-04 13:26Financial Performance - Consolidated net income for Q3 2022 was $133.0 million, an 8.4% increase from $122.8 million in Q3 2021, with diluted EPS rising to $1.75 from $1.74 [242]. - The Company reported a net income of $133.043 million for the three months ended September 30, 2022, compared to $122.788 million for the same period in 2021, reflecting a year-over-year increase of 1.02% [393]. - The return on average tangible equity (non-GAAP) for the nine months ended September 30, 2022, was 17.99%, up from 16.19% in the same period of 2021 [393]. Assets and Liabilities - As of September 30, 2022, SouthState Corporation had approximately $45.2 billion in assets and 5,074 full-time equivalent employees [211]. - Total assets increased by approximately $3.2 billion, or 7.7%, to approximately $45.2 billion from December 31, 2021, to September 30, 2022 [285]. - Total deposits increased to $37.7 billion as of September 30, 2022, up $2.6 billion from $35.1 billion at December 31, 2021, primarily due to $3.0 billion in deposits from the Atlantic Capital transaction [356]. Credit Losses and Provisions - The company recorded a provision for credit losses of approximately $23.9 million during the third quarter of 2022 [220]. - The provision for credit losses increased by $62.8 million, with a provision of $23.9 million recorded in Q3 2022 compared to a release of $38.9 million in Q3 2021 [248]. - As of September 30, 2022, the allowance for credit losses (ACL) was $324.4 million, representing 1.12% of total loans, with an increase of $4.7 million from $319.7 million at June 30, 2022 [317]. Mergers and Acquisitions - The acquisition of Atlantic Capital was completed on March 1, 2022, for a total purchase price of $657.8 million, acquiring $2.4 billion of loans [222][224]. - Goodwill increased to $1.9 billion as of September 30, 2022, following the Atlantic Capital merger, which added $341.4 million in goodwill [234]. - The Company identified approximately $137.9 million of loans as purchased credit-deteriorated (PCD) during the merger with Atlantic Capital, with an allowance for credit losses of $13.8 million on acquisition date [314]. Interest Income and Expenses - Interest income increased by $103.4 million, driven by a $66.8 million rise in loan interest income and a $22.1 million rise in investment securities interest income [242]. - The average cost of interest-bearing liabilities increased by 7 basis points to 0.26% in Q3 2022 compared to Q3 2021 [257]. - The yield on investment securities increased by 55 basis points to 2.00% in Q3 2022, with an average balance increase of $2.6 billion compared to Q3 2021 [260]. Noninterest Income and Expenses - Noninterest income decreased by $9.8 million, primarily due to a $13.3 million drop in mortgage banking income [242]. - Noninterest income decreased by $9.8 million, or 11.3%, in Q3 2022 compared to Q3 2021, primarily driven by an 85.5% decline in mortgage banking income [269]. - Noninterest expense rose by $8.1 million, or 3.5%, in Q3 2022 compared to Q3 2021, with significant contributions from bank-owned life insurance and SBA income increases [277]. Regulatory Changes - The Federal Reserve's recent rule changes regarding debit card transaction processing will affect the company starting July 1, 2023 [227]. - The FDIC's new rule will increase initial base deposit insurance assessment rates by 2 basis points, effective January 1, 2023 [228]. Growth Strategy - The company continues to pursue a growth strategy focused on organic growth and selective acquisitions of financial institutions [213]. - The company operates in a six-state footprint, providing a wide range of financial products and services [211]. Shareholder Equity - Total shareholder's equity increased by $118.2 million, or 2.5%, attributed to the Atlantic Capital acquisition and organic growth [286]. - Shareholders' equity increased by $118.2 million, or 2.5%, to $4.9 billion as of September 30, 2022 [339]. Loan Portfolio - Total loans, net of deferred loan costs and fees, increased by $4.9 billion, or 27.4% annualized, to $28.8 billion at September 30, 2022 [297]. - Non-acquired loans increased by $4.9 billion, or 40.6% annualized, with significant growth in commercial non-owner occupied loans ($1.4 billion) and consumer owner occupied loans ($1.3 billion) [297]. Interest Rate Risk - The earnings simulations indicated that a 100 basis point increase in rates would result in an estimated 2.5% increase in net interest income, while a 100 basis point decrease would lead to a 4.1% decrease [375]. - The company revised its deposit beta assumptions higher due to the rapid increase in interest rates, with the federal funds target rate increasing by 150 basis points during the third quarter of 2022 [374].