icon
icon
icon
icon
Upgrade
icon

SouthState (SSB) Q2 Earnings call transcript Jul 25, 2024

AInvestFriday, Jul 26, 2024 3:40 pm ET
1min read

In the recent SouthState Corporation's Second Quarter 2024 Earnings Call, the company showcased a solid performance with a 15% increase in earnings per share compared to the previous quarter. This increase was driven by a significant improvement in net interest margin and noninterest income, as well as the strategic acquisition of Independent Financial, a move that is expected to unlock the earnings potential of their assets and enhance their market presence.

Strategic Acquisition and Market Expansion

The acquisition of Independent Financial is a strategic move that aims to expand SouthState's footprint into new markets with a strong demographic profile, aligning with their current markets in terms of people and income migration. This acquisition is expected to boost the company's earnings with a 27% earnings per share accretion and improve their capital management through an interest rate swap on all earning assets. This swap not only unlocks the earnings potential of Independent Financial's loan portfolio but also utilizes SouthState's valuation and currency advantage, making it a more powerful capital management strategy.

Financial Performance and Outlook

SouthState reported total revenue of $425 million for the quarter, with net interest income of $350 million and noninterest income of $75 million. The net interest margin of 3.44% rose by 3 basis points, demonstrating the company's ability to maintain a healthy interest spread. Deposits remained flat with Q1 levels, but loan growth of 7% annualized showed a positive trend. The company's balance sheet remains strong, with a TCE ratio of 8.4%, CET1 of 12.1%, and TBV per share at $47.90.

Looking ahead, SouthState expects noninterest income to remain in the $250 million range for the remainder of the year, with a potential increase in Q3 and Q4 due to merit increases and project-related expenses. The company is also anticipating a decline in their deposit beta from 34% to 25% post-merger with Independent Financial, indicating a shift towards a more liability-sensitive balance sheet.

Challenges and Opportunities

Despite the positive developments, SouthState faces challenges in the deposit environment, which remains challenging due to the end of a rate-pausing cycle. The company is focusing on managing deposit costs and growth while remixing the balance sheet without expanding the overall funding structure. However, with the expectation of a rate-cutting environment, SouthState is optimistic about the potential return of liquidity in money market funds and other alternatives, which could improve their deposit base.

Conclusion

SouthState Corporation's Q2 2024 Earnings Call highlighted the company's robust financial performance and strategic acquisitions that position it for future growth. With a focus on expanding into new markets and enhancing capital management, SouthState is well-positioned to navigate the evolving banking landscape and capitalize on opportunities in the coming quarters.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.