SouthState Corporation, a leading regional bank headquartered in Winter Haven, Florida, has established itself as a formidable player in the financial services landscape. With a rich history spanning over four decades, the company has weathered various economic cycles, consistently delivering reliable performance and shareholder value.
Company History and Growth
Incorporated under the laws of South Carolina in 1985, SouthState Corporation has steadily grown its footprint, expanding its services and product offerings to cater to the diverse needs of its customers. The company's journey has been marked by strategic acquisitions and organic growth, solidifying its position as a prominent regional bank with a strong presence across the Southeastern United States. In its early years, SouthState focused on organic growth, building its presence in the Southeast region while supplementing this growth with selective acquisitions of other financial institutions.
A significant milestone in SouthState's history came in 2020 when it merged with CenterState Bank, substantially expanding its footprint and capabilities. The integration of CenterState was a major undertaking for the company, but it was successfully executed, further strengthening SouthState's market position.
Navigating Challenges
During the challenging period of the COVID-19 pandemic in 2020 and 2021, SouthState demonstrated its commitment to its customers by working closely with businesses to provide support and assistance. The company's resilience was evident as it maintained strong asset quality and profitability during this difficult time. Additionally, SouthState successfully navigated regulatory changes, such as the implementation of the CECL accounting standard in 2020, which required significant effort to implement.
More recently, SouthState faced industry-wide challenges in early 2023 when the failures of a few regional banks led to increased FDIC assessments. The company proactively managed this situation, working to recoup the higher costs through pricing adjustments. In February 2024, SouthState experienced a cybersecurity incident, which prompted the company to enhance its security measures and respond to regulatory inquiries. The company notified banking regulators and law enforcement, and took actions including offering credit monitoring services. Despite these challenges, SouthState remained focused on serving its customers and communities.
Financials
SouthState's financial performance has been a testament to its disciplined approach and prudent risk management. As of the latest reporting period, the company boasted total assets of $46.08 billion, reflecting a 2.60% increase from the previous year. This growth has been driven by a combination of factors, including a robust loan portfolio, strategic investments in technology, and a focus on diversifying its revenue streams.
The company's loan portfolio has been a key contributor to its success, with total loans (net of unearned income) reaching $33.55 billion as of September 30, 2024. This represents a 4.80% annualized growth, primarily driven by strong performance in the commercial non-owner-occupied, commercial and industrial, and consumer owner-occupied loan segments. SouthState's disciplined underwriting and diligent risk management have been instrumental in maintaining the quality of its loan book, as evidenced by its low non-performing asset ratio of 0.57% as of the same reporting period.
Turning to the company's deposit base, SouthState has demonstrated its ability to attract and retain a diverse mix of customers. Total deposits stood at $37.64 billion as of September 30, 2024, reflecting a 1.60% increase from the prior year. The company's focus on building strong customer relationships and offering innovative banking solutions has been a key driver of this growth.
SouthState's financial strength is further reflected in its robust capital position. As of September 30, 2024, the company's common equity Tier 1 capital ratio stood at 12.37%, well above the regulatory minimum, providing a solid foundation for future growth and operational flexibility.
For the fiscal year 2023, SouthState reported revenue of $1.70 billion, net income of $494.31 million, operating cash flow of $546.76 million, and free cash flow of $507.87 million. In the most recent quarter (Q3 2024), the company achieved revenue of $544.18 million, representing an 8.7% year-over-year increase, primarily driven by higher interest income on loans. Net income for the quarter was $143.18 million, a 15.3% increase compared to the same period last year. However, operating cash flow and free cash flow for Q3 2024 decreased to -$246.81 million and -$231.81 million respectively, primarily due to growth in loans and deposits.
SouthState's business is primarily concentrated in six states: Alabama, Florida, Georgia, North Carolina, South Carolina, and Virginia. This regional focus allows the company to leverage its deep understanding of local markets and customer needs.
Liquidity
The company's commitment to prudent financial management is also evident in its liquidity position. SouthState maintains a diversified funding base, including a well-developed deposit franchise, access to wholesale funding sources, and ample liquidity reserves. This, combined with the bank's proactive risk management practices, has enabled it to navigate industry challenges and economic uncertainties with agility.
As of the latest reporting period, SouthState's debt-to-equity ratio stood at 0.07, with total debt of $481.59 million and total equity of $5.53 billion. The company held $998.88 million in cash and cash equivalents. SouthState has access to substantial credit facilities, including a $6.50 billion total credit facility with the Federal Home Loan Bank, of which $6.20 billion remains available after $300.00 million in advances and $2.90 million in letters of credit. Additionally, the company has $1.70 billion in credit available at the Federal Reserve Bank's discount window.
SouthState's current ratio is 1.10, with total current assets of $3.32 billion and total current liabilities of $3.01 billion. The company's quick ratio stands at 1.07, calculated using cash and marketable securities of $2.29 billion divided by total current liabilities.
Core Banking and Financial Services
SouthState's core business revolves around traditional banking and financial services activities. The company offers a comprehensive range of products and services, including:
1. Deposit Accounts: SouthState provides various deposit account options such as checking accounts, savings accounts, money market accounts, and certificates of deposit. As of September 30, 2024, the company's total deposits of $37.64 billion comprised $10.38 billion in noninterest-bearing checking accounts and $27.26 billion in interest-bearing deposits.
2. Loans: The company's loan portfolio, totaling $33.55 billion as of September 30, 2024, consists primarily of commercial loans (including commercial non-owner-occupied, commercial owner-occupied, and commercial & industrial loans), consumer loans (including residential mortgages, home equity, and other consumer loans), and construction/land development loans. Key loan categories include commercial non-owner-occupied loans ($9.25 billion), consumer owner-occupied loans ($7.13 billion), and commercial & industrial loans ($5.93 billion).
3. Wealth Management and Trust Services: Through its trust and investment services division, SouthState offers wealth management, trust, and asset management services. This segment generated $33.06 million in revenue during the first nine months of 2024.
4. Correspondent Banking and Capital Markets: SouthState's correspondent banking and capital markets division provides services such as bond sales, loan brokerage, and government guaranteed loan purchases and sales. This division contributed $19.06 million in revenue during the first nine months of 2024.
Future Outlook and Guidance
Looking ahead, SouthState remains well-positioned for continued growth and success. The company's strategic initiatives, which include further enhancing its digital capabilities, optimizing its branch network, and selectively pursuing accretive acquisitions, are expected to drive long-term value creation for its shareholders.
For the upcoming quarter (Q4 2024), SouthState expects non-interest expenses to be in the $245-$250 million range. Looking further ahead to the full year of 2025, following the merger with IBTX, the company anticipates:
- Net interest margin (NIM) to be in the 3.75-3.85% range by the end of the year. - Loans to reach approximately $50 billion and deposits to be around $55 billion by year-end. - Non-interest income to average assets to be in the 50-55 basis point range, which is at the higher end of their previous guidance.
SouthState has also reiterated its guidance that for each Federal Reserve rate cut, they expect a 3-5 basis point improvement in NIM, with about two-thirds of that occurring in the first quarter.
The banking industry continues to face challenges such as rising interest rates, increased competition for deposits, and regulatory changes. Despite these headwinds, SouthState has reported mid-single digit loan growth in 2024, in line with guidance, and expects continued growth as the yield curve normalizes.
In conclusion, SouthState Corporation's rich history, disciplined financial management, and commitment to serving its customers and communities have positioned the company as a reliable and innovative player in the regional banking industry. As it navigates the evolving financial landscape, SouthState is poised to capitalize on emerging opportunities and deliver sustainable growth for its stakeholders.