SSB Q3 2024: Exit NIM 3.75–3.85% on 3–5 bps per rate cut
- Margin Expansion Opportunity: The call highlighted that every rate cut could add 3–5 basis points to NIM, supporting an exit NIM guidance of 3.75–3.85% in Q4, which underpins improved profitability.
- Controlled Deposit Cost Management: The bank effectively manages deposit costs—particularly with $10 billion of exception-priced deposits—and has already executed rate cuts that are expected to help stabilize funding costs and improve margins.
- Robust Growth Pipeline and Merger Synergies: A consistent $4 billion loan pipeline over recent quarters, combined with synergies from the pending IBTX merger, positions the bank for mid-single-digit growth and fee income enhancement.
- Margin Pressure: Elevated deposit costs—up 10 basis points in Q3—combined with uncertain timing in rate cuts could continue compressing SouthState's net interest margin, especially if deposit rates remain sticky or increase further.
- Merger Integration Uncertainty: The pending IBTX merger has led to several open positions, delaying integration and potentially reducing pre-merger earnings, which could adversely impact profitability.
- Credit Quality Concerns: In segments like multifamily and office, rental rates for some properties are about 5% below plan, suggesting potential delays in reaching desired performance levels, which could negatively affect asset quality and future earnings.
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Margin Outlook
Q: Will rate cuts boost margins by 3-5 bp?
A: Management expects each rate cut to add roughly 3–5 basis points to NIM, with most gains realized within the first quarter of each adjustment. They now target a fourth-quarter exit NIM of 3.75%–3.85%, including the IBTX merger impact. -
Deposit Costs
Q: Can deposit costs decline post rate cut?
A: Management noted that effective October 1, they trimmed deposit rates—especially on the sensitive $10 billion in exception-priced deposits—anticipating improvements later in the quarter as market adjustments take full effect. -
Growth & IBTX
Q: Will the IBTX merger affect growth expectations?
A: The teams maintain a strong pipeline of approximately $4 billion and expect mid-single-digit growth. The IBTX deal, including the exit from the warehouse business, positions their balance sheet for continued performance. -
Credit Quality
Q: Are CRE and multifamily credits at risk?
A: Management reported resilient credit metrics with charge-offs at only 7 basis points and very low past-due levels. Although multifamily shows a slight lag in performance, overall asset quality remains robust. -
Expense Outlook
Q: What cost targets are set for the future?
A: They project that legacy expenses will grow in line with 3–4% NIE, while anticipated IBTX-related cost savings should bring overall expense levels closer to 2% of assets as integration progresses.
Research analysts covering SouthState Bank.