8-K: SouthState Corporation Announces Solid Third Quarter Results and Declares Dividend

SouthState Corporation reported steady growth in loans, deposits, revenue, and earnings per share for the third quarter of 2024, despite hurricane season challenges.

Summary

• SouthState Corporation announced its financial results for the three and nine-month periods ending September 30, 2024.
• The company reported diluted earnings per share of $1.86, or $1.90 on an adjusted basis.
• Net income was $143.2 million, with an adjusted net income of $145.7 million.
• The return on average common equity was 9.9%, and the return on average tangible common equity was 15.6%, or 15.9% on an adjusted basis.
• The return on average assets was 1.25%, or 1.27% on an adjusted basis.
• Net interest income was $351 million, with a core net interest income of $349 million.
• The net interest margin was 3.39%, or 3.40% on a tax-equivalent basis.
• Net charge-offs were $6.1 million, or 0.07% annualized, and there was a $7.0 million release of provision for credit losses.
• Noninterest income was $75 million, representing 0.65% of average assets.
• The efficiency ratio was 57%, or 56% on an adjusted basis.
• Loans increased by $314 million, or 4% annualized, and deposits increased by $540 million, or 6% annualized.
• The total loan yield was 5.86%, up 0.04% from the prior quarter, and the total deposit cost was 1.90%, up 0.10% from the prior quarter.
• The company's tangible common equity, total risk-based capital, tier 1 leverage, and tier 1 common equity ratios were 8.9%, 14.9%, 10.0%, and 12.5%, respectively.
• Shareholders approved the acquisition of Independent Bank Group, Inc., which is still subject to regulatory approval and other customary conditions.
• A quarterly cash dividend of $0.54 per share was declared, payable on November 15, 2024, to shareholders of record as of November 8, 2024.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, growth in key areas, and a successful shareholder vote for the merger. The language is optimistic and confident, indicating a positive sentiment from the company's perspective.

Positives

• The company experienced steady growth in loans, deposits, revenue, and earnings per share.
• Tangible book value per share increased 7% during the quarter.
• Shareholders overwhelmingly supported the acquisition of IBTX.
• The company has a strong capital position.
• The loan portfolio is diversified.
• The company has a granular, low-cost core deposit base.

Negatives

• The company experienced a slight increase in total deposit costs, up 0.10% from the prior quarter.
• Mortgage banking income decreased from $5.9 million in Q2 2024 to $3.2 million in Q3 2024.

Risks

• The company's forward-looking statements are subject to risks and uncertainties.
• The merger with IBTX is subject to regulatory and other approvals, and may not close as expected.
• The benefits from the merger may not be fully realized or may take longer to realize than expected.
• The integration of the two companies may be delayed or more costly than expected.
• The company is exposed to general economic and market conditions, interest and exchange rates, and competition.
• Major catastrophes such as hurricanes could impact the company's performance.
• Changes in asset quality and credit risk could affect future results.

Future Outlook

The company looks forward to joining with Independent Financial and building shareholder value in the best growth markets in the country. The merger is expected to enhance scale and operating leverage.

Management Comments

• John C. Corbett, SouthState's Chief Executive Officer, commented that the company produced steady growth despite the challenges of hurricane season.
• He also noted the 7% increase in tangible book value per share during the quarter due to the compounding effect of interest rate changes.
• He expressed pleasure in receiving overwhelming shareholder support for the acquisition of IBTX.

Industry Context

The document highlights SouthState's position in high-growth markets in the Southern United States, which is experiencing significant population and income migration. The company is positioning itself as a strong regional bank in the South, competing with larger national banks.

Comparison to Industry Standards

• SouthState's return on average tangible common equity of 15.6% is strong compared to the industry average.
• The company's efficiency ratio of 57% is also competitive.
• The document notes that SouthState's deposit mix is favorable compared to peers, with a lower cost of deposits.
• The company's loan portfolio is diversified, with a focus on commercial real estate, consumer real estate, and commercial and industrial loans.
• The company's office loan exposure is granular and diversified, with a lower expected default rate compared to larger office properties.

Stakeholder Impact

• Shareholders will benefit from the declared dividend and the potential value creation from the merger.
• Employees may experience changes due to the merger, but the company emphasizes a positive culture.
• Customers will have access to a larger network and potentially enhanced services.
• The company's strong financial position benefits creditors and suppliers.

Next Steps

• The company will host a conference call on October 24, 2024, to discuss the third quarter results.
• The company will continue to work towards closing the merger with Independent Bank Group, Inc.
• The company will pay a quarterly cash dividend on November 15, 2024.

Key Dates

Keywords

financial results, earnings, loans, deposits, net interest margin, credit losses, dividends, merger, acquisition, banking