SouthState Bank Corporation

Hello everybody and a warm welcome to the South State Corporation Fourth Quarter Earnings Call. My name is Melissa and I'll be your operator. If you would like to ask any questions on today's call, that will be star followed by one on your telephone keypad. If you change your mind, that will be star followed by two. I now have the pleasure of handing over to our host today, Will Matthews, to begin. Will, over to you.

Good morning and welcome to South State's Fourth 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 will then open it up for questions. Yesterday evening, both companies issued press releases to announce earnings for Q4 2021. We have 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, we'll turn the call over to Robert Hill, Executive Chairman. Robert Hill, Executive Chairman, Thank you, Will, and good morning. And thank you for joining our call today to discuss the fourth quarter of 2021. This was the year of transition for the company and one where we moved past integration and quickly moved toward execution. I've always felt that the best sign of how Emerger was progressing was how quickly the company returned to growing its customer base post-integration. Our team moved into growth mode almost immediately, and you can certainly see the momentum building in the company. We're adding customers, adding talented bankers, and seeing excellent opportunities to grow market share in great markets. We're making progress in each of our guiding principles, soundness, profitability, and growth. Our balance sheet remains very strong and growing, and this strength will help us achieve the profitability potential of the bank. 2022 is a year of internal focus, and a year where I believe we will make significant further progress in all three areas. I'll now turn the call over to John.

Thanks, Robert. Good morning, everybody. I hope you and your families are doing well. As we reflect on 2021, it was a challenging year in many ways, but I'm proud of the way our team prevailed and successfully completed the largest conversion in our history last summer. And as soon as the conversion was complete, our bankers turned on the growth. We continue to see a lot of positive momentum in the Southeast as we accelerate out of this pandemic cycle. If we step back and look at loans and deposits, this past year in 2021, we originated roughly $10 billion in new loans. To put that in perspective, we originated about $7 billion in 2019 before the pandemic and about $6.5 billion in 2020. So 2021 saw 40% to 50% higher lending volume than the past two years. And we saw that trend accelerate in the fourth quarter as loan originations increased another 19% from third quarter levels to a new record, of $3.1 billion. That level of loan production resulted in 7% annualized loan growth in the fourth quarter compared to 10% loan growth in the third quarter. After the vaccines rolled out last spring, we guided the mid-single-digit loan growth in the back half of 2021, and we wound up at 8.5%, so a little better than our guidance. The excess liquidity from the Fed's monetary policy continues to flow onto our balance sheet. Deposits were up 18% in the fourth quarter, even as we drove our deposit costs down to just six basis points. And the excess liquidity in the system continues to lead to elevated loan payoffs. Many of our clients have wisely sold their operating businesses at high valuations or sold commercial real estate to lock in the gain from historically low cap rates. A few weeks ago, the Census Bureau released the latest population migration trends for 2021, and the conclusion's clear. The South won the population battle during the pandemic. The Northeast, the Midwest, and the West all lost population, and the South gained 786,000 people. Not surprising, the South state footprint is in the fastest growing markets in the country. Florida ranked number two for population growth behind Texas. followed by Georgia, North Carolina and South Carolina, placing South State in four of the six fastest-growing states in America. That population growth is driving strong housing demand as well as demand for new construction and really all housing-related products, including furniture, appliances and building materials. I'll give you a quick update on Atlantic Capital. Doug is here to comment on the fourth quarter for Atlantic Capital. They continue to deliver outstanding results with 22% annualized loan growth in the fourth quarter. We've now received approvals from both the OCC and from the Atlantic Capital shareholders. But we're like many acquirers, we're just waiting for Federal Reserve approval. We're hopeful for a close in the next couple months, but that is entirely subject to the Federal Reserve timing. As we move into 2022, we're excited about our momentum. We've been intentionally patient about deploying our excess cash. Cash now makes up 15% of our balance sheet. And with an improving economy and accelerating loan growth, we have a real opportunity to deploy that excess cash into a higher rate environment and drive our revenue higher in 2022. I'll turn it over to Will so he can give you additional color.