South State (SSB)2021-01-28 21:30Financial Data and Key Metrics Changes - The company reported earnings per share of $1.21 on a GAAP basis, and $1.44 adjusted for merger and non-recurring items, with a return on tangible common equity of 15.4% [12][13] - The company achieved a record pre-provision net revenue (PPNR) of $629 million for the year, with only two basis points of charge-offs [12][14] - Net interest margin (NIM) was 3.14%, down 8 basis points from Q3, while NIM excluding accretion was 2.99%, up 4 basis points from Q3 [18][19] Business Line Data and Key Metrics Changes - Correspondent banking and mortgage lines outperformed, with correspondent banking profits doubling from 2019 and mortgage profits nearly quadrupling [13][14] - Mortgage production was $1.41 billion, down about 10% from Q3, primarily due to a strategic slowdown in the mortgage pipeline for system integration [21][22] - Non-interest income was $97.9 million, down $17 million from Q3, mainly due to a decline in mortgage banking revenue [21][22] Market Data and Key Metrics Changes - The commercial loan portfolio grew modestly in Q4, with commercial loan production increasing 24% from Q3 levels, and the pipeline now stands at $3.2 billion [16][17] - Core deposits increased over 12% annualized, with deposit costs moving down to 17 basis points, a 3% reduction during the quarter [17][20] Company Strategy and Development Direction - The company is focused on integrating CenterState and SouthState, with a new logo, website, and mobile app launched [10][11] - The acquisition of Duncan Williams, a broker-dealer, is expected to enhance the correspondent platform and is set to close on February 1 [15] - The company aims to remain opportunistic in acquisitions post-systems conversion, while focusing on maintaining strong asset quality [42][86] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the integration process and the potential for future growth, despite challenges posed by the pandemic [34][35] - The company anticipates low-to-mid single-digit loan growth in 2021, with expectations for stronger performance in the latter half of the year [53][75] - Management remains cautious about credit quality, citing national economic factors while noting strong performance metrics within their portfolio [50][74] Other Important Information - The company’s capital ratios improved, with the tangible common equity (TCE) ratio growing to 8.1% and the CET1 ratio ending at 11.8% [30] - The efficiency ratio was 60.2% excluding merger-related expenses, impacted by a decline in mortgage revenue [26][72] Q&A Session All Questions and Answers Question: Interest in Acquisition Opportunities - Management indicated that while they are focused on the current systems conversion, they remain open to acquisition opportunities post-conversion, given the low yield curve and industry revenue headwinds [41][42] Question: Mortgage Production Trends - Management noted that despite a decline in the mortgage pipeline, they expect robust activity moving forward, with a strong mix of purchase-oriented mortgages [44][45] Question: Credit Reserve Outlook - Management explained that their reserve levels are reflective of national economic conditions rather than their own portfolio performance, maintaining a conservative approach due to ongoing uncertainties [49][50] Question: Loan Growth Outlook - Management anticipates low-to-mid single-digit growth in loans for 2021, with expectations for stronger growth in the latter half of the year [53][75] Question: Hiring Outlook for Commercial Bankers - Management highlighted a favorable hiring environment for experienced commercial bankers and indicated no specific limits on recruitment [105][106] Question: Correspondent Banking Seasonality - Management discussed the strong performance in correspondent banking and the expected seasonal trends in fee income for the upcoming quarters [109][110]