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SouthState Corporation Reports Second Quarter 2021 Results

SouthState Quarterly Earnings

WINTER HAVEN, FL - July 23, 2021 – SouthState Corporation (NASDAQ: SSB) today released its unaudited results of operations and other financial information for the three-month and six-month period ended June 30, 2021.

The Company reported consolidated net income of $1.39 per diluted common share for the three months ended June 30, 2021, compared to $2.06 per diluted common share for the three months ended March 31, 2021, and compared to consolidated net loss of ($1.96) per diluted common share one year ago.

Adjusted net income (non-GAAP) totaled $1.87 per diluted share for the three months ended June 30, 2021, compared to $2.17 per diluted share for the three months ended March 31, 2021, and compared to $0.89 per diluted share one year ago. Adjusted net income in the second quarter of 2021 excludes $25.6 million of merger-related and branch closure costs (after-tax), $9.1 million of extinguishment of debt cost (after-tax) and $28,000 in gains from security sales (after-tax). 

Net income was negatively impacted during the second quarter of 2021 by a $10.3 million decline in accretion on acquired loans and PPP fees compared to the previous quarter. Core net interest income (non-GAAP), excluding such accretion, increased $1.4 million from the first quarter of 2021. Net income during the second quarter of 2021 was also impacted by the effect of pipeline marks included in mortgage banking revenue, which declined by $16.8 million, in spite of a $105 million quarterly increase in production to $1.4 billion. A healthy 72% of mortgage production during the second quarter of 2021 was purchase volume, and portfolio loans increased to 43% of total production from 33% in the first quarter of 2021.

“We experienced solid growth this quarter, with loans increasing 3% annualized, loan production up 25% from the first quarter of 2021, and our commercial loan pipeline nearly double the level of the pandemic lows. In addition, core net interest income increased for the first time since the start of the pandemic,” said John C. Corbett, Chief Executive Officer. “We made the strategic decision to retain more of our mortgage production on balance sheet which resulted in a negative pipeline mark but will drive higher interest revenue moving forward.” 

Highlights of the second quarter of 2021 include:

Returns
  • Reported & adjusted diluted Earnings per Share (“EPS”) of $1.39 and $1.87 (Non-GAAP), respectively
  • Recorded a negative provision for credit losses of $58.8 million compared to a negative provision for credit losses of $58.4 million in the prior quarter
  • Reported & adjusted Return on Average Tangible Common Equity of 14.1% (Non-GAAP) and 18.7% (Non-GAAP), respectively
  • Pre-Provision Net Revenue (“PPNR”) of $113.4 million, or 1.14% PPNR ROAA (Non-GAAP)
  • Book value per share of $67.60 increased by $1.18 per share compared to the prior quarter
  • Tangible book value (“TBV”) per share of $43.07 (Non-GAAP), up $4.74, or 12.4% from the year ago quarter
Performance
  • Core net interest income (non-GAAP) (excluding loan accretion and deferred fees on PPP) increased $1.4 million from prior quarter
  • Loan accretion on acquired loans and PPP net deferred loan fees declined a combined $10.3 million compared to the first quarter of 2021
  • Total deposit cost of 0.12%, down 3 basis points from prior quarter
  • Noninterest income of $79.0 million, down $17.3 million compared to the prior quarter, primarily due to a $16.8 million decrease in mortgage banking income caused by an approximately $230 million decline in the secondary mortgage pipeline and by a 148 basis point reduction in gain on sale margins, leading to a negative secondary pipeline mark
  • Recorded $11.7 million in extinguishment of debt cost from the redemption of $38.5 million of trust preferred securities assumed from CenterState Bank Corporation (“CSFL”)
Balance Sheet / Credit
  • Loans, excluding PPP loans, increased $168.8 million, or 3.0% annualized, centered in $253.0 million growth in investor commercial real estate, commercial owner occupied real estate, and single family construction to permanent loans (which are included in the construction and land development loans category)
  • Cash position increased to $6.4 billion, 15.9% of total assets, which creates a potential significant earnings lever as it is deployed into future loans and securities
  • Total deposits increased $801.0 million with core deposit growth totaling $941.4 million, or 13.0% annualized
  • 33.6% of deposits are noninterest-bearing
  • Net loan charge-offs of $2.1 million, or 0.03% annualized
  • Loan deferrals totaled $120.2 million, or 0.53% of the total loan portfolio, excluding PPP loans and held for sale loans
Capital Returns
  • Repurchased 700,000 shares during 2Q 2021 and approximately 273,000 shares in July 2021, bringing total 2021 repurchases to approximately 973,000 shares at a weighted average price of $83.70
Mergers & Acquisitions
  • On July 23, 2021, the Company announced the execution of an Agreement and Plan of Merger with Atlantic Capital Bancshares, Inc. (“Atlantic Capital”)

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