SouthState Corporation ((SSB)) has held its Q4 earnings call. Read on for the main highlights of the call.
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SouthState Corporation’s recent earnings call painted a largely positive picture for the company, with notable achievements in deposit growth and strategic transactions. The call emphasized the company’s improved net interest margin and successful financial maneuvers, although it acknowledged ongoing challenges with non-performing assets and rising noninterest expenses.
Deposit Growth and Liquidity Improvement
SouthState reported significant deposit growth across all its regions. Customer deposits grew by an impressive 9% annualized, when excluding brokered CDs. This growth not only indicates solid customer trust and engagement but also contributes to improved liquidity for the bank. Additionally, deposit pricing is becoming more rational, suggesting a favorable trend in managing liquidity costs.
Successful Completion of Sale-Leaseback Transaction
In a strategic move, SouthState completed a sale-leaseback transaction involving approximately 170 branches. This maneuver harvested $225 million of off-balance sheet capital at an attractive cost, demonstrating the company’s ability to optimize its balance sheet and enhance financial flexibility.
Regulatory Approval and Closing of Independent Financial Acquisition
The company received regulatory approval for its acquisition of Independent Financial, closing the deal sooner than anticipated on January 1. This acquisition’s conversion is scheduled for Memorial Day, marking a significant milestone in SouthState’s expansion strategy and expected to bolster future growth.
Increase in Net Interest Margin (NIM)
SouthState’s net interest margin improved by 8 basis points to reach 3.48%. This improvement was driven by a reduction in deposit costs and the repricing of legacy loans, highlighting effective interest rate management and operational efficiency.
Strong Credit Performance
The company maintained strong credit performance, with net charge-offs at a low 6 basis points for the quarter. Past dues and nonperforming assets remained well-managed, supported by healthy reserve levels, indicating a prudent approach to credit risk.
Increase in Non-Performing Assets (NPAs)
Despite overall positive performance, SouthState noted an increase in non-performing assets, which rose to 63 basis points. A significant portion, about 23%, of these nonperforming loans are SBA loans with a 75% guarantee, highlighting an area of concern for the company.
Higher Noninterest Expenses
Noninterest expenses increased by $7 million in the quarter, reaching a total of $250.7 million. The rise was primarily due to commission expenses and other operational costs, presenting a challenge in managing operational efficiency.
Soft Loan Pipelines Heading into 2025
SouthState’s loan pipelines showed a softer start to 2025, down approximately 10%. However, the company expects this trend to pick up later in the year, indicating cautious optimism for future lending activities.
Forward-Looking Guidance
In its forward-looking guidance, SouthState highlighted its strategic initiatives and robust performance metrics. The company expects continued growth in customer deposits and pre-provision net revenue, driven by an increase in total revenue and an improved efficiency ratio. Despite higher noninterest expenses, the company remains confident in its strategic maneuvers, including the completion of the sale-leaseback transaction and the Independent Financial acquisition, which are anticipated to drive future growth.
In conclusion, SouthState’s earnings call reflected a largely positive sentiment, underscored by strategic achievements and a robust financial outlook. While challenges with non-performing assets and expenses remain, the company’s proactive measures and strategic acquisitions position it well for future growth. Investors and stakeholders can look forward to SouthState’s continued progress in enhancing its financial standing and operational efficiency.
