SouthState Bank Corporation

Hello and a warm welcome to the South State Corporation third quarter earnings call. My name is Melissa and I'll be your operator. For any questions on today's call, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I now have the pleasure of handing over to Will Matthews to begin. Will, over to you.

Good morning and welcome to South State's third quarter 2021 earnings call. This is Will Matthews, and joining me on this call are Robert Hill, John Corbett, and Steve Young. Doug Williams and Pat Oaks of Atlantic Capital are also joining us to provide some color on their quarter. The format for this call will be that we will provide prepared remarks, and we'll then open it up for questions. Yesterday evening, both companies issued press releases to announce earnings for Q3 2021. We've also posted presentation slides that we will refer to on today's call on our Investor Relations website. Before we begin our remarks, I want to remind you that comments we make may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements we may make are subject to the safe harbor rules. Please review the forward-looking disclaimer and safe harbor language in the press release and presentation for more information about risks and uncertainties which may affect us. Now I will turn the call over to Robert Hill, Executive Chairman. Good morning, and thank you for your interest in South State. We are pleased to report our performance for the third quarter. The performance was solid, and the team made nice progress in each of our three areas of focus, soundness, profitability, and growth. We knew going into 2021 that this would be a year of significant change for the company, building the foundation for a larger bank, which included new technology and talent. These are difficult changes and take time to digest, but this year has positioned us well for the future. As an investor, it's hard to see the benefits in the short term of an MOE, but the third quarter was a quarter that provided a glimpse into the future opportunities for South State. Just as 2021 was a year of change, 2022 will be a year of focusing on ourselves. The internal opportunities for growth, efficiency, advancing talent, technology, and building our culture are real and meaningful. We have great markets, a strong and growing team, and so many opportunities to make our company better. We look forward to reporting to you the progress we make in these areas over the next year.

I will now turn the call over to John. Thank you, Robert. Good morning, everybody. I hope you and your families are doing well. Throughout the pandemic, we've talked about the population migration to the southeast, the rapid reopening of our markets and our growing loan pipelines. Not surprising, loan production increased significantly last spring following the vaccine rollout, and that trend continued in the third quarter. In fact, loan production of $2.6 billion in the third quarter is a record for us, and is 72% higher than a year ago. Our previous guidance was for mid-single-digit loan growth in the second half of this year, and we exceeded that guidance in the third quarter with 10% annualized loan growth. Most of the growth was in C&I loans, which has been the trend over the last few quarters. A portion of the C&I loan growth this quarter was associated with seasonal businesses that support hurricane cleanup efforts for large power companies. So some of this quarter's growth is seasonal and temporary. Our cash position at 14% of our balance sheet is materially higher than our peers, and we're working to deploy that excess cash as interest rates drift upwards. Securities increased by over $700 million last quarter, and loans increased by $573 million, excluding PPP. So we deployed about $1.3 billion of our surplus cash into earning assets. The growth in loans and rising rates resulted in our core net interest income growing by $5.8 million in the quarter. We were encouraged by the Fed's commentary a few weeks ago about tapering their asset purchases, and we believe that South State is in a unique position to benefit from rising rates over the next year. Asset quality continues to be a non-event, with net charge-offs of zero basis points during the quarter. As a result, we released $38.9 million in reserves. After the reserve release, our adjusted earnings per share landed at $1.94, and our return on tangible common equity was 18.7%. Doug is here with us and will comment later in the call on another strong quarter at Atlantic Capital. They had 12% loan growth. I do want to report that we received regulatory approval for the acquisition from the OCC and we are now awaiting Federal Reserve approval. The shareholder vote is scheduled for November 16th, so we're hopeful for a close in the first quarter. We originally thought there was a chance we could convert the computer systems in the first quarter, but it looks more likely in the second quarter. So that will push back the cost savings by about 90 days. We've accomplished a lot strategically in the last two years. With the MOE in 2020, and the opportunity with Atlantic Capital in 2021. As we look ahead, it only makes sense that 2022 will be a year that we are internally focused rather than focused on bank M&A. We're going to be focused on continuing our recruiting and our organic loan growth, refining our processes and new technology, and improving our profitability. As we saw in this quarter's results, 10% loan growth, with an improvement in the expense base and a little lift in interest rates can have a powerful compounding effect in the quarters ahead. I'll turn it over to Will now to provide further details on the quarter.