425: SouthState Corporation Announces Strong Second Quarter 2024 Results, Increases Quarterly Dividend

SouthState Corporation reports a 15% increase in earnings per share over the first quarter, driven by loan repricing and growth, and announces an increased quarterly cash dividend.

Summary

• SouthState Corporation (NYSE: SSB) announced its second quarter 2024 financial results, with diluted earnings per share (EPS) of $1.73 and adjusted diluted EPS (Non-GAAP) of $1.79.
• Net income was $132.4 million, with an adjusted net income (Non-GAAP) of $137.3 million.
• The company's return on average common equity was 9.6%, while the return on average tangible common equity (Non-GAAP) was 15.5% and adjusted return on average tangible common equity (Non-GAAP) was 16.1%.
• Return on average assets (ROAA) was 1.17%, and adjusted ROAA (Non-GAAP) was 1.22%.
• Net interest income totaled $350 million, with core net interest income (excluding loan accretion) (Non-GAAP) at $346 million.
• The net interest margin (NIM) was 3.43% (non-tax equivalent) and 3.44% (tax equivalent, Non-GAAP).
• Loans increased by $567 million, or 7% annualized, driven by commercial and industrial and consumer real estate lending.
• Deposits decreased by $80 million, or 1% annualized.
• The total loan yield was 5.82%, up 0.09% from the prior quarter, resulting in a 39% cycle-to-date beta.
• The total deposit cost was 1.80%, up 0.06% from the prior quarter, resulting in a 34% cycle-to-date beta.
• The company's efficiency ratio was 57%, and the adjusted efficiency ratio (Non-GAAP) was 56%.
• The Board of Directors increased the quarterly cash dividend on its common stock from $0.52 per share to $0.54 per share, payable on August 16, 2024.
• On May 20, 2024, SouthState announced its acquisition of Independent Bank Group, Inc.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, loan growth, and an increased dividend. The acquisition of Independent Bank Group is also viewed favorably. However, there are some concerns about deposit decreases and potential risks associated with the acquisition and economic conditions.

Positives

• Earnings per share increased 15% over the first quarter.
• Loans grew at an annualized rate of 7%.
• The company maintains a strong capital position.
• The quarterly cash dividend was increased from $0.52 to $0.54 per share.
• The acquisition of Independent Bank Group is expected to enhance the company's presence in high-growth markets.

Negatives

• Deposits decreased by $80 million, or 1% annualized.
• Net charge-offs were $4.2 million, or 0.05% annualized.
• The company incurred merger, branch consolidation, severance related and other expenses of $5.785 million.
• The company incurred FDIC special assessment of $619 thousand.

Risks

• The company's forward-looking statements are subject to various risks and uncertainties, including economic conditions, interest rate changes, and regulatory factors.
• The integration of Independent Bank Group may be delayed or more costly than expected.
• The company faces reputational risk and potential adverse reactions from customers, suppliers, and employees related to the acquisition.
• Major catastrophes such as earthquakes, floods or other natural or human disasters, including infectious disease outbreaks could impact results.

Future Outlook

The company's future results are subject to various risks and uncertainties, including economic conditions, interest rate changes, and the integration of Independent Bank Group.

Management Comments

• Both revenue and net interest margin inflected during the second quarter as loans repriced faster than deposits.
• Loans grew at a 7% annualized pace and earnings per share increased 15% over the first quarter.
• During June, we traveled in town hall meetings with the Independent team and are increasingly excited about partnering with David Brooks and his relationship bankers in the best growth markets in the country.

Industry Context

The acquisition of Independent Bank Group is part of a broader trend of consolidation in the banking industry, as companies seek to gain scale and expand their presence in high-growth markets.

Comparison to Industry Standards

• SouthState's return on average tangible common equity of 15.5% is strong compared to regional bank peers.
• The efficiency ratio of 57% is also competitive within the industry.
• The company's capital ratios are above regulatory requirements, indicating a solid financial position.
• Compared to peers disclosed in SSB's 2024 proxy, the pro forma franchise is expected to have a better ROAA and ROATCE, but a worse efficiency ratio.

Stakeholder Impact

• Shareholders will benefit from the increased quarterly cash dividend.
• Customers may benefit from the expanded services and geographic reach resulting from the acquisition of Independent Bank Group.
• Employees may have new opportunities for career advancement within the combined company.

Next Steps

• The company will host a conference call on July 25, 2024, to discuss the second quarter results.
• The company will work to complete the acquisition of Independent Bank Group.
• The company will pay the increased quarterly cash dividend on August 16, 2024.

Key Dates