SouthState Bank Corporation

hello everyone and welcome to south state corporation q4 2022 earnings conference call if you would like to ask a question during today's presentation please press star followed by one on your telephone keypad if you change your mind please press star followed by two i would now like to turn the conference over to will matthews cfo please go ahead good morning and welcome to south state's fourth quarter 2022 earnings call

This is Will Matthews, and I'm here with John Corbett, Steve Young, and Jeremy Lucas. John and I will make a few prepared remarks, and then we'll open it up for questions. As always, a copy of the earnings release and the presentation slides are located on our website under the Investor Relations tab. Before we begin our remarks, I want to remind you that comments we make may include forward-looking statements within the meaning of the federal securities laws and regulations. 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 our forward-looking statements and risks and uncertainties which may affect us. Now I'll turn the call over to John Corbett, our CEO.

Thank you, Will. Good morning, everybody. Thanks for joining our call. We're really proud of our team and the momentum that's been building throughout 2022. I think of 2021 as a year that we were taking the time to plant the seeds for the future. And 2022 was a year where those seeds began to take root and to grow. And that growth is reflected in the results that we announced last night. During the fourth quarter, PPNR per share increased 11% over the third quarter. That took us to a PPNR return on assets over 2% and a return on tangible equity of 20%. We set aside $47 million in reserves, but incurred less than $1 million in charge-offs. So credit quality metrics continue to be excellent, and Will can walk you through the impacts of the Moody's economic forecast later in the call. Total loans grew 19% annualized in the quarter, and over the last few years, we've recruited some of the best middle-market bankers in the Southeast, and that team is doing a great job, as C&I loans specifically grew at 27% annualized. End of period deposits declined 6% annualized, and we've still got balance sheet flexibility with an 83% loan to deposit ratio. Our total cost of deposits landed at 21 basis points. And so far this cycle, our cumulative total deposit beta is only 5%. If you step back and look at the full year for 2022, PPNR per share was up 36% over 2021. Loans grew 17%. deposits decreased 5%, and as we right-sized the balance sheet, net interest margin expanded 120 basis points. Over the entire year, we set aside $82 million in low-cost provisions, but only incurred $4 million in charge-offs. So we strengthened our reserves in 2022 to prepare for a likely economic slowdown in 2023. In addition to organic growth, our integration team successfully completed the Atlantic capital conversion last summer and our Atlanta bankers are doing a terrific job in a dynamic market. The Census Bureau released their latest population report last month. We updated a Census Bureau map on page six of the deck that breaks out the four regions of the country. And since the pandemic began in 2020, 1.7 million people in the Western states, the Northeast and the Midwest sold their homes, they packed their bags, and they moved to the south. And of the 1.7 million people that moved to the south, two-thirds of them landed in our south state markets. Based on the latest census reports, south state continues to do business in four of the six fastest growing states in the country, with Florida ranking number one as the fastest growing state in the country last year. As we think about the economy and the year ahead, it seems to us that the Fed is getting what it wanted. The economy is slowing, and loan pipelines are shrinking. So we don't know if 2023 will be a soft landing, a mild or a moderate recession, but what we believe is that regardless of the direction of the economy, based on the level of population migration, the South will outperform other areas of the country. We believe in the power of compounding over time, so our aspiration has always been to grow everything good at the bank at a compounded annual growth rate of 10% a year over a cycle. Three years ago this week, we announced the merger of equals of Center State and South State and began the integration process coincidentally right when the pandemic hit. It's obviously been a volatile three years of monetary policy since the merger announcement, and our growth has been lumpy. But if you look back over the last three years and if you smooth out the lumpiness of the cycle, we've grown at the pace that we planned. Deposits have grown at a compounded annual growth rate of 13% since the merger announcement. And loans have grown at a compounded annual growth rate of 9% a year since the merger announcement. So our team is executing on our plan and we're now witnessing the earnings power of their hard work. So I'll close by congratulating and thanking all of our team members from our IT team that made big improvements to our digital offerings, to our risk management areas that have strengthened our defenses, to our bankers that generated $13 billion of new loans during the year, and our branch employees that have cared for our clients through countless changes. You've done a great job in a challenging environment. So, Will, I'll turn it over to you.