South State (US:SSB)2023-01-27 19:01Financial Data and Key Metrics Changes - Total loans grew 19% annualized in the quarter, with C&I loans specifically growing at 27% annualized [4] - Net interest revenue increased with a tax equivalent NIM of 3.99%, up 41 basis points from the third quarter, and core net interest income rose by $36 million [9] - Non-interest income totaled $63 million, down $10 million from Q3, while non-interest expenses were $228 million, slightly up from Q3 [11][12] - For the full year 2022, PPNR per share was up 36% over 2021, with loans growing 17% and deposits decreasing 5% [22] Business Line Data and Key Metrics Changes - Mortgage production fell to approximately $700 million in the quarter, with expectations for 2023 remaining muted across the industry [29] - The $1.3 billion in loan growth was centered in single-family residential, CRE construction, and C&I loans [12] - The company set aside $82 million in loan loss provisions for the year, with only $4 million in charge-offs, indicating strong credit quality [5][21] Market Data and Key Metrics Changes - SouthState operates in four of the six fastest-growing states in the U.S., with Florida being the fastest-growing state last year [6] - The company continues to experience population migration to the South, with two-thirds of the 1.7 million people moving to the South landing in SouthState markets [23] Company Strategy and Development Direction - The company aims for a compounded annual growth rate of 10% across all good aspects of the bank over a cycle [7] - Management believes that the South will outperform other areas of the country regardless of economic direction due to population migration [24] - The company is cautious about M&A activity in 2023, expecting it to pick up towards the end of the year as banks reassess future earnings streams [42][71] Management's Comments on Operating Environment and Future Outlook - Management noted that the economy is slowing, and loan pipelines are shrinking, with expectations for mid-single-digit loan growth in 2023 [31] - The company has a strong balance sheet flexibility with an 83% loan-to-deposit ratio and minimal reliance on wholesale funding [13][22] - Management expressed confidence in credit quality, with minimal net charge-offs and a focus on monitoring economic indicators that could affect future provisioning [60][88] Other Important Information - The company recorded a $3.2 million write-down on MSR assets, leading to negative mortgage division revenue for the quarter [28] - The ending tangible book value per share rose above $40, and the TCE ratio improved approximately 40 basis points to 7.2% [13] Q&A Session Summary Question: What is the outlook for residential mortgage growth? - Management expects residential mortgage growth to align with the rest of the loan book, projecting mid-single-digit growth [17] Question: How does the company view its deposit beta? - The company maintains a low deposit beta of 5% and expects it to remain stable despite industry pressures [39][73] Question: What are the expectations for loan growth funding? - The company anticipates $1.5 billion in loan growth for 2023, utilizing cash from securities runoff and slight increases in deposits [94] Question: How is the company managing credit quality? - Management reported excellent credit results, with minimal charge-offs and a focus on monitoring economic indicators affecting future reserves [60][88] Question: What is the company's strategy regarding M&A? - The company prefers to focus on existing high-growth markets for potential M&A opportunities, with a cautious outlook for 2023 [71]