SouthState Bank Corp Q3 FY2024 earnings call

• John Corbett noted broad-based growth in loans, deposits, revenue, and earnings per share, with stable asset quality and controlled expenses. Addressed Hurricane season impact, mentioning business continuity and the Sunshine Fund's role. • William Matthews discussed balance sheet and income statement details, including NIM down 4 basis points to 3.40, loan growth, deposit growth and cost, non-interest income, provision for credit losses, and capital improvement. • Mentioned progress with the Independent Financial partnership, with regulatory approval process ongoing and teams traveling together to build relationships.

For the quarter, loans grew 4% annualized with single family residential and C&I loans showing the highest growth. Single family growth was due to construction loans moving into the residential portfolio. Yield on loans held for sale increased because of the SBA securitization business. Total deposits grew 6% during the quarter, with customer deposits up $470 million ending and average up ~$90 million. Deposit costs increased 10 basis points to 190. Net interest income was up $1 million PPNR on an additional day count. Non-interest income was flat. Provision for credit losses was $2 million for funded loans but offset by a $9 million release for unfunded commitments, resulting in a total release of $7 million. Net charge-offs were low at $6 million or seven basis points annualized. Capital improved with TCE ratio at 8.9%, CET1 at 12.5%, and TVV per share at $51.26.

• Reiterated that for every rate cut, there's an expected 3-5 basis points NIM improvement. Fourth quarter NIM expected in the 3.75-3.85 range. • Pre-IBTX non-interest income expected around 65 basis points, post-IBTX around the high end of 50-55 basis points. • Deposits costs adjusted on October 1st, expecting further changes with rate cuts. • Fourth quarter end includes IBTX with $50 billion in loans and $55 billion in deposits.

• Interest rate fluctuations impacting NIM and deposit costs. • Economic uncertainties affecting credit quality and potential charge-offs. • Execution risks related to the merger with Independent Financial, including timing and integration challenges.

Q: Good morning. Could you provide updated outlook on margin moving forward, including rate cuts?

A: Yes, NIM was down 4 basis points this quarter. For every rate cut, expected 3-5 basis points NIM improvement. Timing of improvement within first 3-6 months, roughly two-thirds in first quarter. Fourth quarter NIM expected in 3.75-3.85 range including IBTX.

Q: Do you see deposit costs declining next quarter with rate cuts?

A: Yes, deposit rates cut on October 1st. About $10 billion of exception priced deposits and $4.5 billion of CDs adjusted, expecting deposit costs to move with rate cuts.

Q: Could we expect further reserve releases as rates come down?

A: Yes, reserve levels could come down as loss drivers and portfolio performance improve, though it's forward-looking and driven by economic forecast and portfolio characteristics.

Q: Thoughts on credit quality in multifamily and office portfolios?

A: Office properties show work from home trend bottoming, concentrated in small offices. Multifamily substandard increase due to rising interest rates on floating rate loans, but absorption expected with in-migration and housing supply issues.