8-K: Southern States Bancshares Reports Strong Third Quarter Results Driven by Acquisition

Southern States Bancshares announced a net income of $7.4 million for the third quarter of 2024, boosted by the acquisition of CBB Bancorp.

Summary

• Southern States Bancshares reported a net income of $7.4 million, or $0.76 per diluted share, for the third quarter of 2024.
• Core net income reached $8.7 million, or $0.89 per diluted share.
• The company's net interest income increased to $24.2 million, a $2.7 million rise from the previous quarter.
• Net interest margin (NIM) improved to 3.65%, up 9 basis points from the prior quarter.
• Loans grew by 36.3% annualized, and total deposits grew by 44.8% annualized.
• Excluding brokered deposits, total deposits grew by 71.5% annualized.
• The company completed the acquisition of CBB Bancorp on August 1, 2024, which significantly contributed to the results.
• Nonperforming loans increased to $7.9 million, or 0.36% of gross loans.
• The company recorded a provision for credit losses of $2.6 million for the quarter.
• Total deposits reached $2.4 billion, up from $2.2 billion in the previous quarter.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the successful acquisition and growth in key areas, but there are concerns about the increase in nonperforming loans and expenses.

Positives

• The acquisition of CBB Bancorp significantly boosted net interest income and deposit growth.
• The company experienced strong loan growth, both including and excluding the acquired loans.
• Net interest margin improved, indicating better profitability on lending activities.
• The company's core efficiency ratio improved to 46.96%, showing better cost management.
• Southern States Bancshares was recognized as a top-performing small-cap bank for the third consecutive year.
• Total deposits increased significantly, with a substantial rise in non-interest bearing deposits.
• The company's capital ratios remain strong.

Negatives

• Net income decreased compared to the previous quarter, from $8.2 million to $7.4 million.
• Nonperforming loans increased significantly to $7.9 million, or 0.36% of gross loans.
• The company recorded a $2.6 million provision for credit losses.
• The efficiency ratio increased to 52.79%, indicating higher operating expenses.
• There was a $1.5 million in merger-related expenses.
• The company experienced a decrease in swap fees due to not participating in any swap transactions.

Risks

• The increase in nonperforming loans could indicate potential credit quality issues.
• Merger-related expenses and integration costs could impact profitability in the short term.
• The company's exposure to uninsured deposits is 39.85% of total deposits, which could pose a risk.
• The increase in interest rates could continue to impact the cost of interest-bearing liabilities.
• The company's loan portfolio is concentrated in commercial real estate, which could be a risk if the market declines.

Future Outlook

The company aims to maintain strong organic growth, expand into new markets, and evaluate strategic acquisition opportunities while prudently managing capital.

Management Comments

• Mark Chambers, CEO, stated that the top highlight of the third quarter was the completion of the CBB Bancorp acquisition.
• He welcomed new colleagues and noted the seamless integration between the two organizations.
• He mentioned that the combination with Century Bank has strengthened the platform to drive loan and deposit growth.
• Management aims to run a highly efficient bank, consistently deliver the highest level of customer satisfaction, and increase value for shareholders.

Industry Context

The results reflect a trend of consolidation in the banking industry, with Southern States Bancshares leveraging acquisitions to expand its market presence and drive growth. The company's focus on high-growth markets aligns with broader industry trends of banks seeking to capitalize on regional economic opportunities.

Comparison to Industry Standards

• Southern States Bancshares' ROAA of 1.05% is slightly below the average for well-performing small-cap banks, which often target ROAA above 1.2%.
• The company's ROATCE of 13.35% is competitive but could be improved to match top-tier performers in the industry, which often exceed 15%.
• The efficiency ratio of 52.79% is higher than the industry average for well-managed banks, which typically aim for ratios below 50%.
• The company's net interest margin of 3.65% is within the range of industry averages, but there is room for improvement to match top performers.
• Compared to peers like First Bancorp (FBNC) and United Community Banks (UCBI), Southern States Bancshares is showing similar growth strategies through acquisitions, but needs to improve efficiency and asset quality metrics to match their performance.

Stakeholder Impact

• Shareholders will see increased value through the acquisition and growth initiatives.
• Employees will benefit from the integration of new colleagues and expanded opportunities.
• Customers will have access to a broader range of services and locations.
• Suppliers and creditors will see a stronger and more diversified financial institution.

Next Steps

• The company will continue to focus on strong organic growth.
• They will further develop and grow their core deposit franchise.
• They plan to expand into new markets by hiring commercial bankers.
• They will focus on high-growth markets and further expand their Atlanta franchise.
• They will evaluate strategic acquisition opportunities.
• They will prudently manage capital between balance sheet growth and return to shareholders.

Key Dates

Keywords

Southern States Bancshares, SSBK, bank, financial results, earnings, net income, net interest margin, loans, deposits, acquisition, CBB Bancorp, nonperforming loans, credit quality, efficiency ratio