South State (SSB)2022-04-29 20:44Financial Data and Key Metrics Changes - The company reported earnings per share of $1.39, with adjusted earnings per share at $1.69, yielding a return on tangible common equity of approximately 17% [8] - The net interest margin for Q1 2022 was the highest quarter for net interest income, up $9 million from Q4 2021 [17] - The cost to total deposits reached a new low of 5 basis points for the quarter [19] - The company experienced a significant increase in its investment portfolio, growing from $7 billion to $9 billion during the quarter [12] Business Line Data and Key Metrics Changes - Loan production hit $2.6 billion for the quarter, with linked quarter annualized loan growth at 6.3% excluding Atlantic Capital acquired loan balances [13] - Non-interest income was reported at $86 million, down approximately $6 million from Q4 2021 [20] - The mortgage production for the quarter was $1.27 billion, with 47% going to the secondary market and 53% retained in the portfolio [21] Market Data and Key Metrics Changes - The Southeast economy continues to show strength, with significant population migration and brisk construction activity [7] - The company noted that clients are facing labor shortages and wage pressures due to increased consumer demand [8] Company Strategy and Development Direction - The company is focused on expanding its FinTech and payments verticals following the acquisition of Atlantic Capital [10] - The management emphasized the importance of maintaining a liquid balance sheet and preparing for rising interest rates [11] - The company plans to eliminate NSF fees and introduce new deposit products with no overdraft fees, estimating a net impact of $0.08 to $0.10 per share annually [13] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the strength and resilience of clients despite market concerns about a recession [10] - The company is bullish on loan growth, expecting high single-digit to 10% growth rates, with April showing double-digit growth [42] - Management indicated that the current economic environment is favorable for the company to thrive, particularly due to population shifts to the Southeast [30] Other Important Information - The company repurchased approximately 1 million shares in Q1 2022, with an additional 300,000 shares repurchased in April [27] - The ending regulatory capital levels remain strong, with a CET 1 ratio of 11.4% and total risk-based capital of 13.3% [28] Q&A Session Summary Question: Discussion on asset sensitivity and deposit beta - Management explained that their net interest margin was 2.77% in Q1 and they expect it to improve to 3.2% to 3.3% by the end of Q4 based on Moody's forecasts [34][35] Question: Loan growth expectations - Management indicated that they are targeting high single-digit to 10% loan growth, with current production levels supporting this guidance [42] Question: Correspondent business performance - Management provided guidance that the correspondent division's revenue would remain stable, with expectations for arc revenues to be slightly higher than fixed income due to changes in interest rates [49] Question: Credit provisioning outlook - Management discussed the uncertainty in predicting provisioning levels but expressed confidence in the current asset quality and client cash positions [58] Question: Hiring environment and opportunities - Management highlighted their proactive approach to recruiting talent from larger banks, indicating a strong opportunity for growth in key markets [60] Question: Share buyback strategy - Management stated that their priority is to invest in growth rather than share buybacks, although they will consider repurchases based on market conditions [62]