South State (US:SSB)2025-10-23 14:00Financial Data and Key Metrics Changes - Earnings per share increased by 30% year-over-year, with a return on tangible equity of 20% [3] - Loan production rose to nearly $3.4 billion, with moderate growth in both loans and deposits [3] - Net interest income reached $600 million, up $22 million from the previous quarter, driven by a tax equivalent margin of 4.06% [6][8] - Charge-offs were reported at 27 basis points for the quarter, with year-to-date charge-offs at 12 basis points [4][8] Business Line Data and Key Metrics Changes - Commercial and industrial lending saw a 9% linked quarter annualized growth, while residential growth was about 6% [18] - The pipeline for loans in Texas increased from $800 million to $1.2 billion, indicating strong growth potential [19] - Non-interest income was $99 million, up from $87 million, with capital markets contributing significantly to this growth [32] Market Data and Key Metrics Changes - Loan production in Texas and Colorado increased by 67% since the first quarter of the year [3] - The company identified approximately $90 billion of overlapping deposits in the Southeast, Texas, and Colorado markets that are currently consolidating [5] Company Strategy and Development Direction - The company is focused on capitalizing on market disruptions and is actively recruiting bankers to support organic growth in 2026 [5][19] - Strategic planning is underway, considering deregulation and opportunities in the banking landscape [4] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in net loan growth accelerating over the next few quarters, despite some challenges in the market [3][18] - The credit team forecasts charge-offs to land around 10 basis points for the year, indicating stable credit metrics [4][8] Other Important Information - The company redeemed $405 million in subordinated debt late in the quarter, which is expected to positively impact net interest margin by approximately four basis points [6][8] - The tangible book value per share increased to $54.48, reflecting strong capital levels despite the dilutive impact of the Independent Financial merger [8] Q&A Session Summary Question: Can you walk us through the excess accretion and margin dynamics? - Management explained that higher accretion was seen in July, with expectations for a decrease in the following months due to early payoffs of loans [11][12] Question: What is the outlook for loan growth given market dislocation? - Management guided for mid-single-digit growth for the remainder of 2025, with a focus on commercial and industrial lending [18] Question: How do you feel about the rest of the credit portfolio apart from the large charge-off? - Management confirmed that the charge-off was related to a specific credit and that the rest of the portfolio remains stable [25] Question: What is the optimal CET1 ratio and capital management strategy? - Management indicated a preference for maintaining CET1 in the 11% to 12% range, with flexibility for share repurchases [26] Question: Can you quantify the impact of accretion on future margins? - Management noted that the expected accretion for the next quarter would be lower, impacting the overall margin guidance [46][49]