SSB - SouthState Corporation Reports Second Quarter 2022 Results Declares an Increase in the Quarterly Cash Dividend

July, 28 2022 04:01 PM SouthState Corporation

PR Newswire

WINTER HAVEN, Fla. , July 28, 2022 /PRNewswire/ -- SouthState Corporation (NASDAQ: SSB) today released its unaudited results of operations and other financial information for the three-month and six-month periods ended June 30, 2022 .

The Company reported consolidated net income of $1.57 per diluted common share for the three months ended June 30, 2022 , compared to $1.39 per diluted common share for the three months ended March 31, 2022 , and compared to $1.39 per diluted common share one year ago.

Adjusted net income (non-GAAP) totaled $1.62 per diluted share for the three months ended June 30, 2022 , compared to $1.69 per diluted share for the three months ended March 31, 2022 , and compared to $1.87 per diluted share one year ago. Adjusted net income in the second quarter of 2022 excludes $4.2 million of merger and branch consolidation related expense (after-tax).

"We are pleased to report very strong performance in the second quarter, with record pre-provision net revenue, robust loan growth, and continued strength in asset quality," said John C. Corbett , Chief Executive Officer. "Our strong revenue growth in the quarter and limited expense growth combined to produce 12% operating leverage. We are also pleased that our pre-provision net revenue per diluted share rose almost 30% from Q1 levels."

Highlights of the second quarter of 2022 include:

Returns

Reported and Adjusted Diluted Earnings per Share ("EPS") of $1.57 and $1.62 (Non-GAAP), respectively
Net Income and Adjusted Net Income of $119.2 million and $123.4 million (Non-GAAP), respectively
Return on Average Common Equity of 9.36% ^* and Reported and Adjusted Return on Average Tangible Common Equity of 16.6% ^* (Non-GAAP) and 17.2% ^* (Non-GAAP), respectively
Return on Average Assets ("ROAA") and Adjusted ROAA of 1.04% ^* and 1.08% ^* (Non-GAAP), respectively
Pre-Provision Net Revenue ("PPNR") of $176.8 million (Non-GAAP), or 1.55% ^* PPNR ROAA (Non-GAAP)
PPNR per weighted average diluted share (Non-GAAP) of $2.32 , up nearly 30% from the prior quarter's $1.79 and up 46% from $1.59 one year ago
Book Value per Share of $66.64 decreased by $1.66 per share compared to the prior quarter primarily due to the $2.60 per share impact from the change in accumulated other comprehensive loss
Tangible Book Value ("TBV") per Share of $39.47 (Non-GAAP), down $1.58 , or 3.8% from the prior quarter
Recorded a provision for credit losses of $19.3 million compared to a negative provision for credit losses of $8.4 million in the prior quarter

? Annualized

Performance

Net Interest Income of $314.3 million ; Core Net Interest Income (non-GAAP) (excluding loan accretion and deferred fees on PPP) increased $47.8 million from prior quarter
Net Interest Margin ("NIM"), non-tax equivalent and tax equivalent (non-GAAP) of 3.10% and 3.12%, respectively, up 0.35% from prior quarter
Total deposit cost of 0.06%, up 1 basis point from prior quarter
Noninterest Income of $88.3 million , up $2.2 million compared to the prior quarter, with a $4.8 million increase in fee income on deposit accounts offset by a $5.1 million decline in mortgage banking income
Noninterest Income represented 0.77% of average assets for the second quarter of 2022
Noninterest Expense, excluding merger and branch consolidation related expense (Non-GAAP), increased $7.5 million compared to the prior quarter; salaries and employee benefits declined by $636 thousand
Efficiency ratio and adjusted efficiency ratio (non-GAAP) improved to 54.9% and 53.6%, respectively, from prior quarter's 63.0% and 60.1%, respectively

Balance Sheet / Credit

Fed funds and interest-earning cash of $4.2 billion represents 9.0% of assets
Loan production† of $3.9 billion , excluding production by legacy Atlantic Capital Bancshares, Inc. ("ACBI")
Loans, excluding PPP loans, increased $1.5 billion , or 22.0% annualized. Of the second quarter loan growth, 53% was commercial loan growth, led by commercial and industrial loans, and 47% was consumer growth, led by consumer real estate loans.
Loans, excluding PPP loans, grew 12.3% over the last year
Deposits increased $100.0 million , or 1.0% annualized, with core deposit growth totaling $224.1 million , or 2.5% annualized
36.9% of total deposits are noninterest-bearing checking
Net charge-offs of $2.3 million , or 0.03% annualized

† Loan production indicates committed balance total

Subsequent Events

The Board of Directors of the Company increased its quarterly cash dividend on its common stock from $0.49 per share to $0.50 per share; the dividend is payable on August 19, 2022 to shareholders of record as of August 12, 2022

Financial Performance


























Three Months Ended

Six Months Ended

(Dollars in thousands, except per share data)

Jun. 30,

Mar. 31,

Dec. 31,

Sep. 30,

Jun. 30,

Jun. 30,

Jun. 30,

INCOME STATEMENT

2022

2022

2021

2021

2021

2022

2021

Interest income






















Loans, including fees (1)

$
272,000

$
233,617

$
238,310

$
246,065

$
246,177

$
505,617

$
506,144

Investment securities, trading securities, federal funds sold and securities






















purchased under agreements to resell


53,659


36,847


29,071


25,384


21,364


90,506


39,873

Total interest income


325,659


270,464


267,381


271,449


267,541


596,123


546,017

Interest expense






















Deposits


5,776


4,628


5,121


7,267


9,537


10,404


20,795

Federal funds purchased, securities sold under agreements






















to repurchase, and other borrowings


5,604


4,362


4,156


4,196


4,874


9,966


10,094

Total interest expense


11,380


8,990


9,277


11,463


14,411


20,370


30,889

Net interest income


314,279


261,474


258,104


259,986


253,130


575,753


515,128

Provision (recovery) for credit losses


19,286


(8,449)


(9,157)


(38,903)


(58,793)


10,837


(117,213)

Net interest income after provision (recovery) for credit losses


294,993


269,923


267,261


298,889


311,923


564,916


632,341

Noninterest income


88,292


86,090


91,894


87,010


79,020


174,382


175,305

Noninterest expense






















Pre-tax operating expense


225,779


218,324


217,392


214,672


218,707


444,103


437,409

Merger and branch consolidation related expense


5,390


10,276


6,645


17,618


32,970


15,666


42,979

Extinguishment of debt cost


—


—


—


—


11,706


—


11,706

Total noninterest expense


231,169


228,600


224,037


232,290


263,383


459,769


492,094

Income before provision for income taxes


152,116


127,413


135,118


153,609


127,560


279,529


315,552

Income taxes provision


32,941


27,084


28,272


30,821


28,600


60,025


69,643

Net income

$
119,175

$
100,329

$
106,846

$
122,788

$
98,960

$
219,504

$
245,909
























Adjusted net income (non-GAAP) (2)






















Net income (GAAP)

$
119,175

$
100,329

$
106,846

$
122,788

$
98,960

$
219,504

$
245,909

Securities gains, net of tax


—


—


(2)


(51)


(28)


—


(28)

Initial provision for credit losses - NonPCD loans and UFC from ACBI, net of tax


—


13,492


—


—


—


13,492


—

Merger and branch consolidation related expense, net of tax


4,223


8,092


5,255


14,083


25,578


12,314


33,402

Extinguishment of debt cost, net of tax


—


—


—


—


9,081


—


9,081

Adjusted net income (non-GAAP)

$
123,398

$
121,913

$
112,099

$
136,820

$
133,591

$
245,310

$
288,364
























Basic earnings per common share

$
1.58

$
1.40

$
1.53

$
1.75

$
1.40

$
2.99

$
3.47

Diluted earnings per common share

$
1.57

$
1.39

$
1.52

$
1.74

$
1.39

$
2.96

$
3.44

Adjusted net income per common share - Basic (non-GAAP) (2)

$
1.64

$
1.71

$
1.61

$
1.95

$
1.89

$
3.34

$
4.07

Adjusted net income per common share - Diluted (non-GAAP) (2)

$
1.62

$
1.69

$
1.59

$
1.94

$
1.87

$
3.31

$
4.04

Dividends per common share

$
0.49

$
0.49

$
0.49

$
0.49

$
0.47

$
0.98

$
0.94

Basic weighted-average common shares outstanding


75,461,157


71,447,429


69,651,334


70,066,235


70,866,193


73,464,620


70,937,301

Diluted weighted-average common shares outstanding


76,094,198


72,110,746


70,289,971


70,575,726


71,408,888


74,103,640


71,444,631

Effective tax rate


21.66 %


21.26 %


20.92 %


20.06 %


22.42 %


21.47 %


22.07 %

Performance and Capital Ratios

























Three Months Ended

Six Months Ended




Jun. 30,

Mar. 31,

Dec. 31,

Sep. 30,

Jun. 30,

Jun. 30,

Jun. 30,




2022

2022

2021

2021

2021

2022

2021


PERFORMANCE RATIOS





















Return on average assets (annualized)


1.04
%

0.95
%

1.02
%

1.20
%

1.00
%
1.00
%
1.27
%

Adjusted return on average assets (annualized) (non-GAAP) (2)


1.08
%

1.15
%

1.08
%

1.34
%

1.35
%
1.11
%
1.49
%

Return on average common equity (annualized)


9.36
%

8.24
%

8.84
%

10.21
%

8.38
%
8.81
%
10.52
%

Adjusted return on average common equity (annualized) (non-GAAP) (2)


9.69
%

10.01
%

9.28
%

11.37
%

11.31
%
9.85
%
12.34
%

Return on average tangible common equity (annualized) (non-GAAP) (3)


16.59
%

13.97
%

14.63
%

16.86
%

14.12
%
15.28
%
17.59
%

Adjusted return on average tangible common equity (annualized) (non-GAAP) (2) (3)


17.15
%

16.79
%

15.30
%

18.68
%

18.74
%
16.97
%
20.46
%

Efficiency ratio (tax equivalent)


54.92
%

62.99
%

61.27
%

64.22
%

76.28
%
58.66
%
68.38
%

Adjusted efficiency ratio (non-GAAP) (4)


53.59
%

60.05
%

59.39
%

59.16
%

62.88
%
56.58
%
60.49
%

Dividend payout ratio (5)


31.03
%

33.71
%

32.02
%

27.94
%

33.65
%
32.26
%
27.12
%

Book value per common share

$
66.64

$
68.30

$
69.27

$
68.55

$
67.60






Tangible book value per common share (non-GAAP) (3)

$
39.47

$
41.05

$
44.62

$
43.98

$
43.07




























CAPITAL RATIOS





















Equity-to-assets


10.9
%

11.2
%

11.4
%

11.7
%

11.8
%





Tangible equity-to-tangible assets (non-GAAP) (3)


6.8
%

7.0
%

7.7
%

7.8
%

7.8
%





Tier 1 leverage (6) *


8.0
%

8.5
%

8.1
%

8.1
%

8.1
%





Tier 1 common equity (6) *


11.1
%

11.4
%

11.8
%

11.9
%

12.1
%





Tier 1 risk-based capital (6) *


11.1
%

11.4
%

11.8
%

11.9
%

12.1
%





Total risk-based capital (6) *


13.0
%

13.3
%

13.6
%

13.8
%

14.1
%

* The regulatory capital ratios presented above include the assumption of the transitional method relative to the CARES Act in relief of COVID-19 pandemic on the economy and financial institutions in the United States. The referenced relief allows a total five-year "phase in" of the CECL impact on capital and relief over the next two years for the impact on the allowance for credit losses resulting from COVID-19.

Balance Sheet




















Ending Balance

(Dollars in thousands, except per share and share data)

Jun. 30,

Mar. 31,

Dec. 31,

Sep. 30,

Jun. 30,

BALANCE SHEET

2022

2022

2021

2021

2021

*Assets*
















Cash and due from banks

$
561,516

$
588,372

$
476,653

$
597,321

$
529,434

Federal Funds Sold and interest-earning deposits with banks


4,160,583


5,444,234


6,366,494


5,701,002


5,875,078

Cash and cash equivalents


4,722,099


6,032,606


6,843,147


6,298,323


6,404,512


















Trading securities, at fair value


88,088


74,234


77,689


61,294


89,925

Investment securities:
















Securities held to maturity


2,806,465


2,827,769


1,819,901


1,641,485


1,189,265

Securities available for sale, at fair value


5,666,008


5,924,206


5,193,478


4,631,554


4,369,159

Other investments


179,815


179,258


160,568


160,592


160,607

Total investment securities


8,652,288


8,931,233


7,173,947


6,433,631


5,719,031

Loans held for sale


73,880


130,376


191,723


242,813


171,447

Loans:
















Purchased credit deteriorated


1,707,592


1,939,033


1,987,322


2,255,874


2,434,259

Purchased non-credit deteriorated


6,908,234


7,633,824


5,890,069


6,554,647


7,457,950

Non-acquired


19,319,440


16,983,570


16,050,775


14,978,428


14,140,869

Less allowance for credit losses


(319,708)


(300,396)


(301,807)


(314,144)


(350,401)

Loans, net


27,615,558


26,256,031


23,626,359


23,474,805


23,682,677

Other real estate owned ("OREO")


1,431


3,290


2,736


3,687


5,039

Premises and equipment, net


562,781


568,332


558,499


569,817


568,473

Bank owned life insurance


953,970


942,922


783,049


778,552


773,452

Mortgage servicing rights


87,463


83,339


65,620


60,922


57,351

Core deposit and other intangibles


132,694


140,364


128,067


136,584


145,126

Goodwill


1,922,525


1,924,024


1,581,085


1,581,085


1,581,085

Other assets


1,394,645


1,114,790


928,111


1,262,195


1,177,751

Total assets

$
46,207,422

$
46,201,541

$
41,960,032

$
40,903,708

$
40,375,869


















*Liabilities and Shareholders' Equity*
















Deposits:
















Noninterest-bearing

$
14,337,018

$
14,052,332

$
11,498,840

$
11,333,881

$
11,176,338

Interest-bearing


24,538,833


24,723,498


23,555,989


22,226,677


22,066,031

Total deposits


38,875,851


38,775,830


35,054,829


33,560,558


33,242,369

Federal funds purchased and securities
















sold under agreements to repurchase


669,999


770,409


781,239


859,736


862,429

Other borrowings


392,460


405,553


327,066


326,807


351,548

Reserve for unfunded commitments


32,543


30,368


30,510


28,289


30,981

Other liabilities


1,196,144


1,044,973


963,448


1,335,377


1,130,919

Total liabilities


41,166,997


41,027,133


37,157,092


36,110,767


35,618,247


















Shareholders' equity:
















Common stock - $2.50 par value; authorized 160,000,000 shares


189,103


189,403


173,331


174,795


175,957

Surplus


4,195,976


4,214,897


3,653,098


3,693,622


3,720,946

Retained earnings


1,146,230


1,064,064


997,657


925,044


836,584

Accumulated other comprehensive (loss) income


(490,884)


(293,956)


(21,146)


(520)


24,136

Total shareholders' equity


5,040,425


5,174,408


4,802,940


4,792,941


4,757,623

Total liabilities and shareholders' equity

$
46,207,422

$
46,201,541

$
41,960,032

$
40,903,708

$
40,375,869


















Common shares issued and outstanding


75,641,322


75,761,018


69,332,297


69,918,037


70,382,728

Net Interest Income and Margin




























Three Months Ended



Jun. 30, 2022

Mar. 31, 2022

Jun. 30, 2021

(Dollars in thousands)

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

YIELD ANALYSIS

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Interest-Earning Assets:

























Federal funds sold and interest-earning deposits with banks

$
4,597,551

$
8,635

0.75 %

$
5,678,147

$
2,852

0.20 %

$
5,670,674

$
1,350

0.10 %

Investment securities


8,880,419


45,024

2.03 %


7,895,281


33,995

1.75 %


5,371,985


20,014

1.49 %

Loans held for sale


76,567


791

4.14 %


110,542


869

3.19 %


281,547


1,977

2.82 %

Total loans, excluding PPP


27,055,042


271,003

4.02 %


24,675,512


231,373

3.80 %


22,588,076


225,664

4.01 %

Total PPP loans


77,816


206

1.06 %


167,541


1,375

3.33 %


1,719,323


18,536

4.32 %

Total loans held for investment


27,132,858


271,209

4.01 %


24,843,053


232,748

3.80 %


24,307,399


244,200

4.03 %

Total interest-earning assets


40,687,395


325,659

3.21 %


38,527,023


270,464

2.85 %


35,631,605


267,541

3.01 %

Noninterest-earning assets


5,160,394







4,419,309







4,201,147






Total Assets

$
45,847,789






$
42,946,332






$
39,832,752
































Interest-Bearing Liabilities:

























Transaction and money market accounts

$
18,316,890

$
3,836

0.08 %

$
17,473,192

$
2,217

0.05 %

$
15,453,940

$
4,513

0.12 %

Savings deposits


3,548,192


143

0.02 %


3,408,129


130

0.02 %


2,995,871


453

0.06 %

Certificates and other time deposits


2,776,478


1,797

0.26 %


2,848,829


2,281

0.32 %


3,408,778


4,571

0.54 %

Federal funds purchased


333,326


628

0.76 %


354,899


111

0.13 %


520,585


112

0.09 %

Repurchase agreements


403,008


153

0.15 %


438,258


158

0.15 %


394,056


211

0.21 %

Other borrowings


405,241


4,823

4.77 %


354,133


4,093

4.69 %


368,897


4,551

4.95 %

Total interest-bearing liabilities


25,783,135


11,380

0.18 %


24,877,440


8,990

0.15 %


23,142,127


14,411

0.25 %

Noninterest-bearing liabilities ("Non-IBL")


14,955,329







13,131,727







11,951,384






Shareholders' equity


5,109,325







4,937,165







4,739,241






Total Non-IBL and shareholders' equity


20,064,654







18,068,892







16,690,625






Total Liabilities and Shareholders' Equity

$
45,847,789






$
42,946,332






$
39,832,752






Net Interest Income and Margin (Non-Tax Equivalent)




$
314,279

3.10 %




$
261,474

2.75 %




$
253,130

2.85 %

Net Interest Margin (Tax Equivalent)







3.12 %







2.77 %







2.87 %

Total Deposit Cost (without Debt and Other Borrowings)







0.06 %







0.05 %







0.12 %

Overall Cost of Funds (including Demand Deposits)







0.12 %







0.10 %







0.17 %



























Total Accretion on Acquired Loans (1)




$
12,770






$
6,741






$
6,292



Total Deferred Fees on PPP Loans




$
8






$
983






$
14,232



Tax Equivalent Adjustment




$
2,249






$
1,885






$
1,424

(1)

The remaining loan discount on acquired loans to be accreted into loan interest income totals $89.0 million as of June 30, 2022.

Noninterest Income and Expense


























Three Months Ended

Six Months Ended



Jun. 30,

Mar. 31,

Dec. 31,

Sep. 30,

Jun. 30,

Jun. 30,

Jun. 30,

(Dollars in thousands)

2022

2022

2021

2021

2021

2022

2021

Noninterest Income:






















Fees on deposit accounts

$
33,658

$
28,902

$
30,293

$
26,130

$
23,936

$
62,560

$
49,218

Mortgage banking income


5,480


10,594


12,044


15,560


10,115


16,074


36,995

Trust and investment services income


9,831


9,718


9,520


9,150


9,733


19,549


18,311

Securities gains, net


—


—


2


64


36


—


36

Correspondent banking and capital market income


27,604


27,994


30,216


25,164


25,877


55,598


54,625

Bank owned life insurance income


6,246


5,260


4,932


5,132


5,047


11,506


8,346

Other


5,473


3,622


4,887


5,810


4,276


9,095


7,774

Total Noninterest Income

$
88,292

$
86,090

$
91,894

$
87,010

$
79,020

$
174,382

$
175,305
























Noninterest Expense:






















Salaries and employee benefits

$
137,037

$
137,673

$
137,321

$
136,969

$
137,379

$
274,710

$
277,740

Occupancy expense


22,759


21,840


22,915


23,135


22,844


44,599


46,175

Information services expense


19,947


19,193


18,489


18,061


19,078


39,140


37,867

OREO and loan related (income) expense


(3)


(238)


(740)


1,527


240


(241)


1,242

Business development and staff related


4,916


4,276


4,577


4,424


4,305


9,192


7,676

Amortization of intangibles


8,847


8,494


8,517


8,543


8,968


17,341


18,132

Professional fees


4,331


3,749


2,639


2,415


2,301


8,080


5,575

Supplies and printing expense


2,400


2,189


2,179


2,310


2,500


4,589


5,170

FDIC assessment and other regulatory charges


5,332


4,812


4,965


4,245


4,931


10,144


8,772

Advertising and marketing


2,286


1,763


2,375


2,185


1,659


4,049


3,399

Other operating expenses


17,927


14,573


14,155


10,858


14,502


32,500


25,661

Merger and branch consolidation related expense


5,390


10,276


6,645


17,618


32,970


15,666


42,979

Extinguishment of debt cost


—


—


—


—


11,706


—


11,706

Total Noninterest Expense

$
231,169

$
228,600

$
224,037

$
232,290

$
263,383

$
459,769

$
492,094

Loans and Deposits

The following table presents a summary of the loan portfolio by type ( dollars in thousands ):




















Ending Balance

(Dollars in thousands)

Jun. 30,

Mar. 31,

Dec. 31,

Sep. 30,

Jun. 30,

LOAN PORTFOLIO

2022

2022

2021

2021

2021

Construction and land development * †

$
2,527,062

$
2,316,313

$
2,029,216

$
2,032,731

$
1,947,646

Investor commercial real estate*


8,393,630


8,158,457


7,432,503


7,131,192


7,094,109

Commercial owner occupied real estate


5,421,725


5,346,583


4,970,116


4,988,490


4,895,189

Commercial and industrial, excluding PPP


4,760,355


4,447,279


3,516,485


3,458,520


3,121,625

Consumer real estate *


5,505,531


4,988,736


4,806,958


4,733,567


4,748,693

Consumer/other


1,279,790


1,179,697


928,240


943,243


907,181

Total loans, excluding PPP


27,888,093


26,437,065


23,683,518


23,287,743


22,714,443

PPP loans


47,173


119,362


244,648


501,206


1,318,635

Total Loans

$
27,935,266

$
26,556,427

$
23,928,166

$
23,788,949

$
24,033,078

* Single family home construction-to-permanent loans originated by the Company's mortgage banking division are included in construction and land development category until completion. Investor commercial real estate loans include commercial non-owner occupied real estate and other income producing property. Consumer real estate includes consumer owner occupied real estate and home equity loans.

† Includes single family home construction-to-permanent loans of $795.7 million, $733.7 million, $686.5 million, $665.0 million and $599.4 million for the quarters ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively.




















Ending Balance

(Dollars in thousands)

Jun. 30,

Mar. 31,

Dec. 31,

Sep. 30,

Jun. 30,

DEPOSITS

2022

2022

2021

2021

2021

Noninterest-bearing checking

$
14,337,018

$
14,052,332

$
11,498,840

$
11,333,881

$
11,176,338

Interest-bearing checking


8,953,332


9,275,208


9,018,987


7,920,236


7,651,433

Savings


3,616,819


3,479,743


3,350,547


3,201,543


3,051,229

Money market


9,264,257


9,140,005


8,376,380


8,110,162


8,024,117

Time deposits


2,704,425


2,828,542


2,810,075


2,994,736


3,339,252

Total Deposits

$
38,875,851

$
38,775,830

$
35,054,829

$
33,560,558

$
33,242,369


















Core Deposits (excludes Time Deposits)

$
36,171,426

$
35,947,288

$
32,244,754

$
30,565,822

$
29,903,117

Asset Quality




















Ending Balance



Jun. 30,

Mar. 31,

Dec. 31,

Sep. 30,

Jun. 30,

(Dollars in thousands)

2022

2022

2021

2021

2021

NONPERFORMING ASSETS:
















Non-acquired
















Non-acquired nonaccrual loans and restructured loans on nonaccrual

$
20,716

$
19,582

$
18,700

$
23,800

$
16,065

Accruing loans past due 90 days or more


1,371


22,818


4,612


1,729


559

Non-acquired OREO and other nonperforming assets


93


464


590


365


695

Total non-acquired nonperforming assets


22,180


42,864


23,902


25,894


17,319

Acquired
















Acquired nonaccrual loans and restructured loans on nonaccrual


63,526


59,267


56,718


64,583


69,053

Accruing loans past due 90 days or more


4,418


12,768


251


89


—

Acquired OREO and other nonperforming assets


1,577


3,118


2,875


3,804


4,777

Total acquired nonperforming assets


69,521


75,153


59,844


68,476


73,830

Total nonperforming assets

$
91,701

$
118,017

$
83,746

$
94,370

$
91,149




















Three Months Ended



Jun. 30,

Mar. 31,

Dec. 31,

Sep. 30,

Jun. 30,



2022

2022

2021

2021

2021

ASSET QUALITY RATIOS:
















Allowance for credit losses as a percentage of loans


1.14 %


1.13 %


1.26 %


1.32 %


1.46 %

Allowance for credit losses as a percentage of loans, excluding PPP loans


1.15 %


1.14 %


1.27 %


1.35 %


1.54 %

Allowance for credit losses as a percentage of nonperforming loans


355.11 %


262.50 %


375.94 %


348.27 %


408.98 %

Net charge-offs as a percentage of average loans (annualized)


0.03 %


0.04 %


0.02 %


0.00 %


0.03 %

Total nonperforming assets as a percentage of total assets


0.20 %


0.26 %


0.20 %


0.23 %


0.23 %

Nonperforming loans as a percentage of period end loans


0.32 %


0.43 %


0.34 %


0.38 %


0.36 %

Current Expected Credit Losses ("CECL")

Below is a table showing the roll forward of the ACL and UFC for the second quarter of 2022:

Allowance for Credit Losses ("ACL and UFC")

NonPCD ACL

PCD ACL

Total ACL

UFC

Ending balance 3/31/2022

227,829

72,567

300,396

30,368

ACL - Adjustment for PCD loans from ACBI

—

4,540

—

Charge offs

(3,215)

—

(3,215)

—

Acquired charge offs

(637)

(2,311)

(2,948)

—

Recoveries

1,166

—

1,166

—

Acquired recoveries

1,188

1,470

2,658

—

Provision (recovery) for credit losses

31,097

(13,986)

17,111

2,175

Ending balance 6/30/2022

257,428

62,280

319,708

32,543

Period end loans (includes PPP Loans)

26,227,674

1,707,592

27,935,266

N/A

Reserve to Loans (includes PPP Loans)

0.98 %

3.65 %

1.14 %

N/A

Period end loans (excludes PPP Loans)

26,180,501

1,707,592

27,888,093

N/A

Reserve to Loans (excludes PPP Loans)

0.98 %

3.65 %

1.15 %

N/A

Unfunded commitments (off balance sheet) *

8,204,567

Reserve to unfunded commitments (off balance sheet)

0.40 %

* Unfunded commitments exclude unconditionally cancelable commitments and letters of credit.

Conference Call

The Company will host a conference call to discuss its second quarter results at 9:00 a.m. Eastern Time on July 29, 2022 . Callers wishing to participate may call toll-free by dialing 844-200-6205. The number for international participants is (929) 526-1599. The conference ID number is 322914. Alternatively, individuals may listen to the live webcast of the presentation by visiting SouthStateBank.com . An audio replay of the live webcast is expected to be available by the evening of July 29, 2022 on the Investor Relations section of SouthStateBank.com .

SouthState Corporation is a financial services company headquartered in Winter Haven, Florida . SouthState Bank, N.A., the Company's nationally chartered bank subsidiary, provides consumer, commercial, mortgage and wealth management solutions to more than one million customers throughout Florida , Alabama , Georgia , the Carolinas and Virginia. The Bank also serves clients coast to coast through its correspondent banking division. Additional information is available at SouthStateBank.com .

Non-GAAP Measures

Statements included in this press release include non-GAAP measures and should be read along with the accompanying tables that provide a reconciliation of non-GAAP measures to GAAP measures. Management believes that these non-GAAP measures provide additional useful information, which allows readers to evaluate the ongoing performance of the Company. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP.






















(Dollars in thousands, except per share data)

Three Months Ended

PRE-PROVISION NET REVENUE ("PPNR") (NON-GAAP)

Jun. 30, 2022


Mar. 31, 2022


Dec. 31, 2021


Sep. 30, 2021


Jun. 30, 2021

Net income (GAAP)

$
119,175


$
100,329


$
106,846


$
122,788


$
98,960

Provision (recovery) for credit losses


19,286



(8,449)



(9,157)



(38,903)



(58,793)

Tax provision


32,941



27,084



28,272



30,821



28,600

Merger and branch consolidation related expense


5,390



10,276



6,645



17,618



32,970

Extinguishment of debt costs


—



—



—



—



11,706

Securities gains


—



—



(2)



(64)



(36)

Pre-provision net revenue (PPNR) (Non-GAAP)

$
176,792


$
129,240


$
132,604


$
132,260


$
113,407






















Average asset balance (GAAP)

$
45,847,789


$
42,946,332


$
41,359,708


$
40,593,766


$
39,832,752

PPNR ROAA


1.55
%


1.22
%


1.27
%


1.29
%


1.14
%





















Diluted weighted-average common shares outstanding


76,094



72,111



70,290



70,576



71,409

PPNR per weighted-average common shares outstanding

$
2.32


$
1.79


$
1.89


$
1.87


$
1.59






















(Dollars in thousands)

Three Months Ended

CORE NET INTEREST INCOME (NON-GAAP)

Jun. 30, 2022


Mar. 31, 2022


Dec. 31, 2021


Sep. 30, 2021


Jun. 30, 2021

Net interest income (GAAP)

$
314,279


$
261,474


$
258,104


$
259,986


$
253,130

Less:




















Total accretion on acquired loans


12,770



6,741



7,707



5,243



6,292

Total deferred fees on PPP loans


8



983



5,655



16,369



14,232

Core net interest income (Non-GAAP)

$
301,501


$
253,750


$
244,742


$
238,374


$
232,606






















NET INTEREST MARGIN ("NIM"), TAX EQUIVALENT (NON-GAAP)




















Net interest income (GAAP)

$
314,279


$
261,474


$
258,104


$
259,986


$
253,130

Total average interest-earning assets


40,687,395



38,527,023



37,031,640



36,218,437



35,631,605

NIM, non-tax equivalent


3.10
%


2.75
%


2.77
%


2.85
%


2.85
%





















TEFRA (included in NIM, tax equivalent)


2,249



1,885



1,734



1,477



1,424

Net interest income, tax equivalent (Non-GAAP)

$
316,528


$
263,359


$
259,838


$
261,463


$
254,554

NIM, tax equivalent (Non-GAAP)


3.12
%


2.77
%


2.78
%


2.86
%


2.87
%
































Three Months Ended


Six Months Ended

(Dollars in thousands, except per share data)

Jun. 30,


Mar. 31,


Dec. 31,


Sep. 30,


Jun. 30,


Jun. 30,


Jun. 30,

RECONCILIATION OF GAAP TO NON-GAAP

2022


2022


2021


2021


2021


2022


2021

Adjusted Net Income (non-GAAP) (2)




























Net income (GAAP)

$
119,175


$
100,329


$
106,846


$
122,788


$
98,960


$
219,504


$
245,909

Securities gains, net of tax


—



—



(2)



(51)



(28)



—



(28)

PCL - NonPCD loans and UFC, net of tax


—



13,492



—



—



—



13,492



—

Merger and branch consolidation related expense, net of tax


4,223



8,092



5,255



14,083



25,578



12,314



33,402

Extinguishment of debt cost, net of tax


—



—



—



—



9,081



—



9,081

Adjusted net income (non-GAAP)

$
123,398


$
121,913


$
112,099


$
136,820


$
133,591


$
245,310


$
288,364






























Adjusted Net Income per Common Share - Basic (2)




























Earnings per common share - Basic (GAAP)

$
1.58


$
1.40


$
1.53


$
1.75


$
1.40


$
2.99


$
3.47

Effect to adjust for securities gains


—



—



(0.00)



(0.00)



(0.00)



—



(0.00)

Effect to adjust for PCL - NonPCD loans and UFC, net of tax


—



0.19



—



—



—



0.18



—

Effect to adjust for merger and branch consolidation related expense, net of tax


0.06



0.12



0.08



0.20



0.36



0.17



0.47

Effect to adjust for extinguishment of debt cost


—



—



—



—



0.13



—



0.13

Adjusted net income per common share - Basic (non-GAAP)

$
1.64


$
1.71


$
1.61


$
1.95


$
1.89


$
3.34


$
4.07






























Adjusted Net Income per Common Share - Diluted (2)




























Earnings per common share - Diluted (GAAP)

$
1.57


$
1.39


$
1.52


$
1.74


$
1.39


$
2.96


$
3.44

Effect to adjust for securities gains


—



—



(0.00)



(0.00)



(0.00)



—



(0.00)

Effect to adjust for PCL - NonPCD loans and UFC, net of tax


—



0.19



—



—



—



0.18



—

Effect to adjust for merger and branch consolidation related expense, net of tax


0.05



0.11



0.07



0.20



0.35



0.17



0.47

Effect to adjust for extinguishment of debt cost


—



—



—



—



0.13



—



0.13

Adjusted net income per common share - Diluted (non-GAAP)

$
1.62


$
1.69


$
1.59


$
1.94


$
1.87


$
3.31


$
4.04






























Adjusted Return on Average Assets (2)




























Return on average assets (GAAP)


1.04
%


0.95
%


1.02
%


1.20
%


1.00
%


1.00
%


1.27
%
Effect to adjust for securities gains


—
%


—
%


(0.00)
%


(0.00)
%


(0.00)
%


—
%


(0.00)
%
Effect to adjust for PCL - NonPCD loans and UFC, net of tax


—
%


0.13
%


—
%


—
%


—
%


0.06
%


—
%
Effect to adjust for merger and branch consolidation related expense, net of tax


0.04
%


0.07
%


0.06
%


0.14
%


0.26
%


0.05
%


0.17
%
Effect to adjust for extinguishment of debt cost


—
%


—
%


—
%


—
%


0.09
%


—
%


0.05
%
Adjusted return on average assets (non-GAAP)


1.08
%


1.15
%


1.08
%


1.34
%


1.35
%


1.11
%


1.49
%





























Adjusted Return on Average Common Equity (2)




























Return on average common equity (GAAP)


9.36
%


8.24
%


8.84
%


10.21
%


8.38
%


8.81
%


10.52
%
Effect to adjust for securities gains


—
%


—
%


(0.00)
%


(0.00)
%


(0.00)
%


—
%


(0.00)
%
Effect to adjust for PCL - NonPCD loans and UFC, net of tax


—
%


1.11
%


—
%


—
%


—
%


0.54
%


—
%
Effect to adjust for merger and branch consolidation related expense, net of tax


0.33
%


0.66
%


0.44
%


1.16
%


2.16
%


0.50
%


1.43
%
Effect to adjust for extinguishment of debt cost


—
%


—
%


—
%


—
%


0.77
%


—
%


0.39
%
Adjusted return on average common equity (non-GAAP)


9.69
%


10.01
%


9.28
%


11.37
%


11.31
%


9.85
%


12.34
%





























Return on Average Common Tangible Equity (3)




























Return on average common equity (GAAP)


9.36
%


8.24
%


8.84
%


10.21
%


8.38
%


8.81
%


10.52
%
Effect to adjust for intangible assets


7.23
%


5.73
%


5.79
%


6.65
%


5.74
%


6.47
%


7.07
%
Return on average tangible equity (non-GAAP)


16.59
%


13.97
%


14.63
%


16.86
%


14.12
%


15.28
%


17.59
%





























Adjusted Return on Average Common Tangible Equity (2) (3)




























Return on average common equity (GAAP)


9.36
%


8.24
%


8.84
%


10.21
%


8.38
%


8.81
%


10.52
%
Effect to adjust for securities gains


—
%


—
%


(0.00)
%


(0.00)
%


(0.00)
%


—
%


(0.00)
%
Effect to adjust for PCL - NonPCD loans and UFC, net of tax


—
%


1.11
%


—
%


—
%


—
%


0.54
%


—
%
Effect to adjust for merger and branch consolidation related expense, net of tax


0.33
%


0.66
%


0.43
%


1.17
%


2.16
%


0.49
%


1.43
%
Effect to adjust for extinguishment of debt cost


—
%


—
%


—
%


—
%


0.77
%


—
%


0.39
%
Effect to adjust for intangible assets


7.46
%


6.78
%


6.03
%


7.30
%


7.43
%


7.12
%


8.12
%
Adjusted return on average common tangible equity (non-GAAP)


17.15
%


16.79
%


15.30
%


18.68
%


18.74
%


16.97
%


20.46
%





























Adjusted Efficiency Ratio (4)




























Efficiency ratio


54.92
%


62.99
%


61.27
%


64.22
%


76.28
%


58.66
%


68.38
%
Effect to adjust for merger and branch consolidation related expense


(1.33)
%


(2.94)
%


(1.89)
%


(5.06)
%


(13.38)
%


(2.08)
%


(7.89)
%
Adjusted efficiency ratio


53.59
%


60.05
%


59.39
%


59.16
%


62.88
%


56.58
%


60.49
%





























Tangible Book Value Per Common Share (3)




























Book value per common share (GAAP)

$
66.64


$
68.30


$
69.27


$
68.55


$
67.60









Effect to adjust for intangible assets


(27.17)



(27.25)



(24.65)



(24.57)



(24.53)









Tangible book value per common share (non-GAAP)

$
39.47


$
41.05


$
44.62


$
43.98


$
43.07






































Tangible Equity-to-Tangible Assets (3)




























Equity-to-assets (GAAP)


10.91
%


11.20
%


11.45
%


11.72
%


11.78
%








Effect to adjust for intangible assets


(4.15)
%


(4.15)
%


(3.76)
%


(3.87)
%


(3.94)
%








Tangible equity-to-tangible assets (non-GAAP)


6.76
%


7.05
%


7.69
%


7.85
%


7.84
%

Certain prior period information has been reclassified to conform to the current period presentation, and these reclassifications had no impact on net income or equity as previously reported.

Footnotes to tables:

Includes loan accretion (interest) income related to the discount on acquired loans of $12.8 million , $6.7 million , $7.7 million , $5.2 million and $6.3 million , respectively, during the five quarters above.
Adjusted earnings, adjusted return on average assets, adjusted EPS, and adjusted return on average equity are non-GAAP measures and exclude the gains or losses on sales of securities, merger and branch consolidation related expense, initial PCL on nonPCD loans and unfunded commitments from acquisitions and extinguishment of debt cost. Management believes that non-GAAP adjusted measures provide additional useful information that allows readers to evaluate the ongoing performance of the company. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP. Adjusted earnings and the related adjusted return measures (non-GAAP) exclude the following from net income (GAAP) on an after-tax basis: (a) pre-tax merger and branch consolidation related expense of $5.4 million , $10.3 million , $6.6 million , $17.6 million and $33.0 million for the quarters ended June 30, 2022 , March 31, 2022 , December 31, 2021 , September 30, 2021 and June 30, 2021 , respectively; and (b) net securities gains of $2,000 , $64,000 , and $36,000 for the quarters ended December 31, 2021 , September 30, 2021 , and June 30, 2021 , respectively; (c) initial PCL on nonPCD loans and unfunded commitments acquired from ACBI of $17.1 million for the quarter ended March 31, 2022; and (d) extinguishment of debt cost of $11.7 million for the quarter ended June 30, 2021.
The tangible measures are non-GAAP measures and exclude the effect of period end or average balance of intangible assets. The tangible returns on equity and common equity measures also add back the after-tax amortization of intangibles to GAAP basis net income. Management believes that these non-GAAP tangible measures provide additional useful information, particularly since these measures are widely used by industry analysts for companies with prior merger and acquisition activities. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the company's results or financial condition as reported under GAAP. The sections titled "Reconciliation of Non-GAAP to GAAP" provide tables that reconcile non-GAAP measures to GAAP.
Adjusted efficiency ratio is calculated by taking the noninterest expense excluding merger and branch consolidation related expense and amortization of intangible assets, divided by net interest income and noninterest income excluding securities gains (losses). The pre-tax amortization expenses of intangible assets were $8.8 million, $8.5 million, $8.5 million, $8.5 million and $9.0 million, for the quarters ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively.
The dividend payout ratio is calculated by dividing total dividends paid during the period by the total net income for the same period.
June 30, 2022 ratios are estimated and may be subject to change pending the final filing of the FR Y-9C; all other periods are presented as filed.
Loan data excludes mortgage loans held for sale.

Cautionary Statement Regarding Forward Looking Statements

Statements included in this communication, which are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on, among other things, management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy and SouthState. Words and phrases such as "may," "approximately," "continue," "should," "expects," "projects," "anticipates," "is likely," "look ahead," "look forward," "believes," "will," "intends," "estimates," "strategy," "plan," "could," "potential," "possible" and variations of such words and similar expressions are intended to identify such forward-looking statements.

SouthState cautions readers that forward-looking statements are subject to certain risks, uncertainties and assumptions that are difficult to predict with regard to, among other things, timing, extent, likelihood and degree of occurrence, which could cause actual results to differ materially from anticipated results. Such risks, uncertainties and assumptions, include, among others, the following: (1) economic downturn risk, potentially resulting in deterioration in the credit markets, inflation, greater than expected noninterest expenses, excessive loan losses and other negative consequences, which risks could be exacerbated by potential continued negative economic developments resulting from the Covid19 pandemic, or from federal spending cuts and/or one or more federal budget-related impasses or actions; (2) interest rate risk primarily resulting from the interest rate environment, rising interest rates, and their impact on the Bank's earnings, including from the correspondent and mortgage divisions, housing demand, the market value of the bank's loan and securities portfolios, and the market value of SouthState's equity; (3) risks related to the merger and integration of SouthState and Atlantic Capital including, among others, (i) the risk that the cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (ii) the risk that the integration of Atlantic Capital's operations into SouthState's operations will be materially delayed or will be more costly or difficult than expected or that the parties are otherwise unable to successfully integrate Atlantic Capital's businesses into SouthState's businesses, (iii) the amount of the costs, fees, expenses and charges related to the merger, and (iv) reputational risk and the reaction of each company's customers, suppliers, employees or other business partners to the merger; (4) risks relating to the continued impact of the Covid19 pandemic on the Company, including possible impact to the Company and its employees from contacting Covid19, and to efficiencies and the control environment due to the changing work environment and to our results of operations due to government stimulus and other interventions to mitigate the impact of the pandemic; (5) the impact of increasing digitization of the banking industry and movement of customers to on-line platforms, and the possible impact on the Bank's results of operations, customer base, expenses, suppliers and operations; (6) controls and procedures risk, including the potential failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures; (7) potential deterioration in real estate values; (8) the impact of competition with other financial institutions, including pricing pressures (including those resulting from the CARES Act) and the resulting impact, including as a result of compression to net interest margin; (9) risks relating to the ability to retain our culture and attract and retain qualified people; (10) credit risks associated with an obligor's failure to meet the terms of any contract with the bank or otherwise fail to perform as agreed under the terms of any loan-related document; (11) risks related to the ability of the company to pursue its strategic plans which depend upon certain growth goals in our lines of business; (12) liquidity risk affecting the Bank's ability to meet its obligations when they come due; (13) risks associated with an anticipated increase in SouthState's investment securities portfolio, including risks associated with acquiring and holding investment securities or potentially determining that the amount of investment securities SouthState desires to acquire are not available on terms acceptable to SouthState; (14) price risk focusing on changes in market factors that may affect the value of traded instruments in "mark-to-market" portfolios; (15) transaction risk arising from problems with service or product delivery; (16) compliance risk involving risk to earnings or capital resulting from violations of or nonconformance with laws, rules, regulations, prescribed practices, or ethical standards; (17) regulatory change risk resulting from new laws, rules, regulations, accounting principles, proscribed practices or ethical standards, including, without limitation, the possibility that regulatory agencies may require higher levels of capital above the current regulatory-mandated minimums and including the impact of the CARES Act, the Consumer Financial Protection Bureau regulations, and the possibility of changes in accounting standards, policies, principles and practices, including changes in accounting principles relating to loan loss recognition (CECL); (18) strategic risk resulting from adverse business decisions or improper implementation of business decisions; (19) reputation risk that adversely affects earnings or capital arising from negative public opinion; (20) cybersecurity risk related to the dependence of SouthState on internal computer systems and the technology of outside service providers, as well as the potential impacts of internal or external security breaches, which may subject the company to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events; (21) reputational and operational risks associated with environment, social and governance (ESG) matters, including the impact of recently issued proposed regulatory guidance and regulation relating to climate change; (22) greater than expected noninterest expenses; (23) excessive loan losses; (24) potential deposit attrition, higher than expected costs, customer loss and business disruption associated with the Atlantic Capital integration, and potential difficulties in maintaining relationships with key personnel; (25) reputational risk and possible higher than estimated reduced revenue from announced changes in the Bank's consumer overdraft programs; (26) the risks of fluctuations in market prices for SouthState common stock that may or may not reflect economic condition or performance of SouthState; (27) the payment of dividends on SouthState common stock, which is subject to legal and regulatory limitations as well as the discretion of the board of directors of SouthState, SouthState's performance and other factors; (28) ownership dilution risk associated with potential acquisitions in which SouthState's stock may be issued as consideration for an acquired company; (29) operational, technological, cultural, regulatory, legal, credit and other risks associated with the exploration, consummation and integration of potential future acquisitions, whether involving stock or cash consideration; (30) major catastrophes such as hurricanes, tornados, earthquakes, floods or other natural or human disasters, including infectious disease outbreaks, such as the ongoing Covid19 pandemic, and the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on SouthState and its customers and other constituencies; (31) terrorist activities risk that results in loss of consumer confidence and economic disruptions; and (32) other factors that may affect future results of SouthState, as disclosed in SouthState's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, filed by SouthState with the U.S. Securities and Exchange Commission ("SEC") and available on the SEC's website at http://www.sec.gov , any of which could cause actual results to differ materially from future results expressed, implied or otherwise anticipated by such forward-looking statements.

All forward-looking statements speak only as of the date they are made and are based on information available at that time. SouthState does not undertake any obligation to update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

SOURCE SouthState Corporation

Company Name:	SouthState Corporation
Stock Symbol:	SSB
Market:	NASDAQ
Website:	southstatebank.com

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