Yahoo Finance SouthState Corp (SSB) Q1 2024 Earnings Call Transcript Highlights: Key Financial Metrics and ...
Total Revenue: $341 million, aligned with forecasts.
Net Interest Margin (NIM): At the lower end of guidance.
Non-Interest Income: Above guidance at 64 basis points.
Deposit Costs: Increased by 14 basis points.
Loan Yields: Increased by 8 basis points.
Net Interest Income: Declined by $10 million due to fewer days in the quarter.
Non-Interest Expense (NIE): Down $4.9 million from the previous quarter.
Provision for Credit Losses: $12.7 million versus $2.7 million in net charge-offs.
Effective Tax Rate: Expected at 23.5% for future quarters.
Loan and Deposit Growth: Loans up 3.5% annualized; deposits up 1.4% annualized.
Capital Ratios: Remain healthy, providing financial flexibility.
Share Repurchases: 100,000 shares repurchased in the quarter.
Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you walk through how you're thinking about the NIM from here, given the move in the forward curve and how that might shift your guidance on the NIM? A: (Stephen Young - Chief Strategy Officer) We expect NIM for the full year 2024 to range between $340 million and $350 million, starting from the lower end in the first quarter to the higher end in the fourth quarter. The guidance adjustment is based on the rate cut forecast having only two cuts versus four cuts, which impacts us by about 5 basis points in 2024.
Q: What kind of metrics might you have on hand as you've looked at stressing your portfolio for higher rates -- for potentially higher for longer and what that looks like as we fixed rate loans reprice higher? A: (John Corbett - CEO) We've seen a tick-up in our sub-standards due to rising rates, predominantly. We monitor and downgrade credits due to higher interest costs, but we don't see loss content in our portfolio. Our largest loan that was added to substandard paid off at a substantial profit, and another significant loan is expected to cash flow significantly better once it transitions to a permanent market.
Q: Can you discuss the average size of some of the substandard loans that increased and the changes in office and multifamily in the substandard? A: (John Corbett - CEO) The move in the first quarter included four or five loans making up 75% to 80% of those, with the largest being a multifamily loan that's expected to perform well once it transitions to the permanent market. There are a couple of office loans included, with one potentially taking a reserve but overall not significant loss expected.
Q: What are your updated expectations as it relates to the fixed income and the swap fees and other components of non-interest income? A: (Stephen Young - Chief Strategy Officer) We expect non-interest income to average assets to be in the 55 basis points to 60 basis points range until rate cuts occur, then potentially increasing. The correspondent banking and mortgage sectors performed better than expected this quarter, contributing to higher non-interest income.
Q: How do you see potential credit loss trajectory if rates stay higher for longer and even if long-term yields continue to rise? A: (John Corbett - CEO) We're forecasting where potential losses might come from, estimating 40% from the C&I portfolio, 40% from office, and 20% from smaller SBA and consumer losses. We see minimal to no loss content in multifamily, retail, or industrial sectors.
Q: Could you describe the acceleration in deposit costs seen in the quarter? A: (Stephen Young - Chief Strategy Officer) We observed a deceleration in deposit costs during the quarter, with costs increasing by smaller increments compared to previous quarters. This trend reflects a mix of factors including seasonal variations and growth in lower-cost deposit segments like our homeowners association business.
Q: What does the loan repricing look like over the next few quarters, and what might they be pricing to and from? A: (Stephen Young - Chief Strategy Officer) We have about $1 billion in loans repricing each quarter, with around $3.3 billion left in 2024 repricing from a 467 coupon. Our average loan yield this quarter was around $7.5 billion, indicating a significant potential uplift in yields as these loans reprice.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
