Name: SouthState Corp Q1 2021 Earnings Call
Start: 2021-04-29T10:01:00.000Z

Executive Summary

EPS surged to $2.06 GAAP and $2.17 adjusted, driven by a $58.4M negative provision release and strong fee income; NIM ticked down 2 bps to 3.12% on excess liquidity .
Core deposits grew $2.0B (30.3% annualized); total deposits +$1.7B; 33% of deposits now noninterest-bearing, lowering cost of funds to 0.21% .
Capital actions: approved redemptions of $25M sub debt and $38.5M trust preferreds; management expects ~$11M accelerated discount amortization in Q2, a temporary EPS headwind .
Expense trajectory improving; management guided Q4 2021 noninterest expense to $210–$215M with conversion synergies, while planning to deploy liquidity by lifting securities to 16–17% of assets over “next several quarters” .

What Went Well and What Went Wrong

Reserve release of $58.4M with net loan recoveries (~$21k), reflecting strong credit outcomes; ACL excluding PPP at 1.80% and NPAs fell to 0.28% of assets .
Fee engines performing: mortgage banking income up vs Q4 (+$1.7M), pipeline rose to $945M; correspondent/Capital Markets revenue benefitted from Duncan Williams addition ($7.5M revenue in Q1) .
Management tone confident on Southeast growth and banker hiring: “Our balance sheet has never been stronger… poised to generate significant growth and shareholder value” .

NIM compressed 2 bps to 3.12% (core NIM -7 bps) due to ~$6B average cash/fed funds and rate mix; normalized core margin dollars were flat Q/Q .
Loans ex-PPP declined $185M (3.3% annualized), mainly consumer real estate/HELOCs (-$131M); overall loan growth remains back-half weighted .
Expense variability persists in commission businesses (Fixed Income/ARC) and expected ~$11M accelerated TRUPs discount in Q2 will temporarily weigh on earnings .

Metric	Q1 2020	Q4 2020	Q1 2021
Diluted EPS ($)	$0.71	$1.21	$2.06
Adjusted Diluted EPS ($)	$0.82	$1.44	$2.17
Net Interest Income ($USD Millions)	$128.013	$265.547	$261.998
Noninterest Income ($USD Millions)	$44.132	$97.871	$96.286
Provision for Credit Losses ($USD Millions)	$36.533	$18.185	$(58.420)
Net Interest Margin (Tax-Equivalent)	3.68%	3.14%	3.12%

Segment – Deposits Mix ($USD Billions)

Type	Q3 2020	Q4 2020	Q1 2021
Noninterest-bearing checking	$9.681	$9.711	$10.802
Interest-bearing checking	$6.415	$6.956	$7.369
Savings	$2.619	$2.694	$2.907
Money Market	$7.404	$7.584	$7.884
Time Deposits	$3.851	$3.749	$3.480
Total Deposits	$29.970	$30.694	$32.441

KPIs and Operating Metrics

KPI	Q1 2020	Q4 2020	Q1 2021
Total deposit cost	0.46%	0.17%	0.15%
Overall cost of funds	0.59%	0.26%	0.21%
PPP fees recognized ($USD Millions)	—	$16.6	$20.4
Loan accretion ($USD Millions)	$10.9	$12.7	$10.4
Noninterest-bearing deposits (% of total)	—	—	33%
Loan deferrals ($USD Millions)	—	$255.2	$186.3
ACL / Loans (ex-PPP)	—	2.01%	1.80%
ROTCE (non-GAAP)	8.35%	13.05%	21.16%
Adjusted ROTCE (non-GAAP)	9.45%	15.35%	22.24%
Tangible Book Value per Share ($)	$38.01	$41.16	$42.02

Metric	Period	Previous Guidance	Current Guidance	Change
Noninterest Expense	Q4 2021	n/a	$210–$215M; includes full-quarter Duncan Williams and merit increases	New guidance
Securities portfolio / Assets	Next several quarters	~13–14% of assets at Q1 2021	Target 16–17% of assets; add ~$1–$1.5B	Raised deployment
Sub debt/TRUPs redemption	Q2–Q3 2021	n/a	Redeem $25M sub debt (June 1) and $38.5M TRUPs (June–July); expect ~$11M accelerated discount in Q2	New actions
Dividend	Q1 2021	$0.47	$0.47 per share declared	Maintained
PPP fee recognition remaining	FY 2021	$36.7M remaining at 12/31/20	$33.3M remaining at 3/31/21; ~75% expected in 2021	Down; accelerated
Loan growth outlook	H2 2021	n/a	Mid single-digit growth expected; more residential on balance sheet as rates rise	New outlook

Topic	Previous Mentions	Current Period (Q1 2021)	Trend
Liquidity deployment	Q4 2020: Began investing post-rate back-up; investments 13% of assets, cash 14%	Plan to lift investments to 16–17% of assets over several quarters	Increasing deployment tailwind
Margin	Q3 2020: NIM -2 bps; Q4 2020: NIM -8 bps on liquidity	NIM -2 bps; core NIM -7 bps; core margin dollars flat when normalized	Stabilizing post-bottom
Credit quality	Q3 2020: 0.01% NCOs; strong ACL and loss absorption	Net recoveries; reserve release; NPAs down to 0.28% of assets	Improving
Mortgage	Q4 2020: pipeline $674M; revenue down on FV marks	Pipeline $945M; production $1.3B; likely shift more ARMs to portfolio as rates rise	Rebounding; portfolio shift
M&A/talent	Q4 2020: 3.5M-share buyback authorization; DWI acquisition closing	Added 10 bankers; M&A optionality post-conversion; focus on in-footprint expansion	Building capacity/optionality

CEO: “The banking industry dodged the bullet and will avoid a prolonged credit cycle… we released $58 million in loan loss reserves… EPS came in at $2.06; adjusted $2.17… ROTCE 22%” .
CFO: “Our net interest margin was 3.12%… core NIM of 2.85% was down seven bps… new production weighted average coupons up to 3.41%… investments moved up to 13% of assets; fed funds at 14%” .
CEO: “We’ve created a $40B regional bank in the most desirable markets… we announced… 10 new commercial and middle market bankers recruited from large banks” .

Securities deployment: Aim to raise investments to 16–17% of assets, average in over time given rate moves; peers ~17–18% .
Margin framing: Core margin dollars flattening near-term; expect inflection later as cash is deployed into loans and securities .
Expense trajectory: Q4 2021 NIE guided to $210–$215M; variability tied to commission businesses (Fixed Income/ARC) .
Capital actions: Call $25M sub debt in June; redeem older TRUPs (~6.5% cost); ~$11M accelerated fair value mark in Q2 with 4–5 year payback .
Growth outlook: Commercial pipeline ~$4.2B with ~35% pull-through; expect mid single-digit loan growth in H2 as conversion completes and residential ARMs migrate on balance sheet .

S&P Global Wall Street consensus estimates were unavailable at the time of request due to provider limits; thus, comparisons to consensus cannot be provided. Management did not offer EPS or revenue guidance for Q1 2021 beyond operating levers and expense trajectory .

Earnings quality strong but aided by reserve release; watch sustainability as macro normalizes and reserve weighting evolves .
Excess liquidity (~$5–6B) is a near-term drag on NIM but offers earnings tailwind as securities move to 16–17% of assets and loans accelerate H2 .
Q2 headwind from ~$11M accelerated TRUPs discount (redemptions) is transitory with 4–5 year payback; capital remains robust (CET1 >12%) .
Deposit franchise strength (33% DDA; 0.21% cost of funds) positions SSB well if rates rise, supporting future margin expansion .
Fee diversification (mortgage, correspondent/DWI) provides ballast; commission variability remains a watch item .
Back-half loan growth drivers: banker hires, construction fund-up, residential ARMs back on balance sheet; mid single-digit growth targeted .
Optionality on buybacks exists post-conversion and as visibility on taxes/economy improves; in-footprint M&A opportunistic .