South State (SSB)2021-05-02 07:18Financial Data and Key Metrics Changes - The company reported earnings per share of $2.06, adjusted for merger expenses, resulting in $2.17, with a return on assets of 1.6% and a return on tangible common equity of 22% [10] - Core deposits surged by 30% in the quarter, with deposit costs falling to just 15 basis points [11] - The net interest margin (NIM) was 3.12%, down two basis points from the previous quarter [16] Business Line Data and Key Metrics Changes - Non-PPP loan balances declined by $185 million, a 3% annualized rate, primarily in single-family residential loans and HELOCs [18] - Mortgage banking income increased by $1.7 million, with production reaching $1.3 billion in the quarter [22] - The total residential mortgage loans under management increased from $8.6 billion to $10 billion, a 16% rise [19] Market Data and Key Metrics Changes - The commercial and industrial loan balances increased for the third consecutive quarter, with a commercial pipeline growing to approximately $4.2 billion [20] - The company noted significant migration trends in the Southeast, with five of the top ten cities for in-migration being core markets [13] Company Strategy and Development Direction - The integration of CenterState and SouthState is nearing completion, aiming to create a $40 billion regional bank to compete with larger banks [12] - The company is focused on organic growth opportunities and is open to M&A, particularly in existing markets [48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic recovery, indicating that the banking industry has avoided a prolonged credit cycle [8] - The company anticipates loan growth to return to mid-single-digit rates in the second half of the year, driven by increased residential loans and a growing commercial pipeline [62] Other Important Information - The company released $58 million in loan loss reserves, leaving a reserve level of 1.8% [10] - The tangible book value per share grew to $42.02, reflecting a 10.5% increase year-over-year [29] Q&A Session Summary Question: Thoughts on growing the securities book further - Management indicated a desire to increase the securities book to 16%-17% of assets, which would require an additional $1 billion to $1.5 billion in securities [37] Question: Right range of net charge-offs - Management noted that charge-offs will vary with the economic cycle but historically have been in the top quartile [38] Question: Status of cost savings from the merger - Management confirmed that approximately $20 million of the expected $80 million in cost savings has been realized [41] Question: Expected loan growth rates - Management expects loan growth to return to mid-single-digit rates in the second half of the year, with a focus on residential loans [62] Question: Future M&A opportunities - Management is open to M&A opportunities but emphasizes organic growth and capital deployment as primary focuses [48] Question: Expected pace of new hires - Management plans to continue hiring at a rate of five to ten new bankers per quarter [53] Question: Impact of mortgage expenses on fee income - Management clarified that mortgage commissions are netted against revenue, indicating a stable expense base despite fluctuations in revenue [57] Question: Capital deployment strategy - Management is considering stock buybacks and other investments as capital builds up [88]