South State Corporation Reports Third Quarter 2020 Results And Declares Quarterly Cash Dividend
The Company reported consolidated net income of $1.34 per diluted common share for the three months ended
September 30, 2020, compared to net loss of ($1.96) per diluted common share for the three months ended June 30, 2020, and compared to $1.50 per diluted common share one year ago. Contributing to the net loss in the second quarter of 2020 was the initial provision for credit losses (“PCL”) recorded on acquired non-purchase credit deteriorated (“NonPCD”) loans and unfunded commitments (“UFC”) which totaled $119.1 million, pre-tax, and merger-related costs of $40.3 million, pre-tax related to the June 7, 2020 merger with CenterState Bank Corporation (“CSFL”).
Adjusted net income (non-GAAP) totaled $1.58 per diluted share for the three months ended September 30, 2020, compared to $0.89 per diluted share, in the second quarter of 2020, and compared to $1.49 per diluted share in the year ago period. Adjusted net income in the third quarter of 2020 removes $17.4 million of merger-related costs, after-tax; and in the second quarter of 2020 removed two primary adjustments: (1) the initial PCL on NonPCD loans and UFC of $92.2 million, after-tax, and (2) merger-related costs of $31.2 million, after-tax.
Highlights of the third quarter included:
- Return on Average Equity of 8.3%.
- Return on Average Tangible Common Equity of 14.7% (Non-GAAP); Adjusted Return on Average Tangible Common Equity of 17.1% (Non-GAAP).
- Return on Average Assets (“ROAA”) of 1.00%, and Adjusted ROAA of 1.18% (Non-GAAP).
- Third quarter of 2020 Pre-Provision Net Revenue (“PPNR ”) was $170 million, or 1.79% PPNR ROAA. This compares to the second quarter of 2020, where on a combined historical basis (as if the companies had been merged for the full quarter, Non-GAAP), PPNR of $157 million, or 1.68% PPNR ROAA. The second quarter’s results only include the operations of CSFL for the final 23 days of the quarter.
- Book value per share of $64.34 increased by $0.99 per share from 2Q 2020.
- Tangible book value (“TBV”) per share of $39.83, up $1.50 from 2Q 2020 (Non-GAAP).
- Record quarterly revenue of $385 million (compared to actual prior period and combined historical basis).
- Net interest margin, declined by 2 basis points to 3.22% during 3Q 2020 from 2Q 2020.
- Significant allowance for credit losses and credit marks on the balance sheet representing 2.58% of total loans (excluding PPP loans).
- Net charge-offs of $594,000, or 0.01% annualized.
- As of 10/23/2020, loan deferrals totaled $452.4million, or 1.98% of the total loan portfolio, excluding PPP loans and held for sale loans.
combined company”, said John C. Corbett, Chief Executive Officer. “Our fee businesses continue to perform well, leading us to another record quarter of revenue. While the current environment includes challenges and uncertainties, we look forward to the future with great optimism.”
Robert R. Hill, Jr., Executive Chairman added, “The CenterState and South State partnership is about the longterm but you can clearly see the progress being made in the short-term. Progress with technology, products, efficiency, and talent all have us uniquely positioned. We are off to a solid start.”
Loan / Deposit Growth
As of September 30, 2020, we have assisted customers with nearly 20,000 Paycheck Protection Program (“PPP”) loans and have an outstanding balance of $2.4 billion. We have recognized $8.5 million in deferred loan fees, net of costs in the income statement during the third quarter of 2020, and $15.9 million on a YTD basis. $53.3 million of net deferred fees remains to be recognized over the life of these loans. During the third quarter, loans (nonacquired and acquired) declined by $261.3 million, or 4.1% annualized. The third quarter decline in loans was centered in construction and development loans and single-family residential mortgage loans. Total deposits increased $12.7 million with core deposit growth totaling $310.6 million, or 4.8% annualized.
Quarterly Cash Dividend
The Company’s Board of Directors declared a common stock dividend of $0.47 per share, payable on November 20, 2020 to shareholders of record as of November 13, 2020.