SouthState's Fourth Quarter 2024 Earnings: A Bright Outlook Amidst Market Challenges
SouthState's recent conference call provided valuable insights into the company's performance in the fourth quarter of 2024. Despite the effects of the Federal Reserve's rate cut, SouthState managed to demonstrate resilience and a strong growth trajectory.
According to John Corbett, CEO of SouthState, the company felt the impact of the first rate cut in September, but saw deposit growth across all regions starting in October. This growth was particularly evident during the tax collection cycle, which typically sees an increase in municipal deposits. In addition to this seasonal boost, customer deposits actually grew by 9% on an annualized basis, a testament to the company's ability to adapt to changing market conditions.
The improving liquidity and deposit pricing environment led to a 9% pickup in Pretax Pre-Provision Net Revenue (PPNR) for the quarter, with total revenue increasing by 6%. For the year as a whole, SouthState's regional presidents successfully managed the inverted yield curve, generating moderate mid-single-digit growth while maintaining a healthy net interest margin.
One of the most significant developments announced during the conference call was the regulatory approval and subsequent closing of Independent Financial in December. This acquisition is expected to provide SouthState with an additional $225 million of off-balance sheet capital, which can be converted into future revenue growth. The company has scheduled the conversion for Memorial Day, ensuring a relatively clean fourth quarter after cost saves.
The conference call also highlighted the benefits of this strategic move, with John Corbett emphasizing that the Independent Financial franchise fits perfectly within SouthState's strategy of building the company in the best geographies in the country with the best scale and business model.
Will Matthews, CFO of SouthState, provided a detailed breakdown of the moving parts on the balance sheet and income statement. He noted that revenue growth outpaced expense growth by $24 million to $7 million, respectively, making for a solid quarter of operating leverage. Balance sheet growth was in line with mid-single-digit guidance, with loans up 4.2% annualized and deposits up 4.5% annualized or over 9% excluding brokered CDs.
The company's income statement showed an 8 basis point improvement in net interest margin to 3.48%, driven by a 15 basis point reduction in cost of total deposits. Noninterest income increased by $6 million from the third quarter, with correspondent banking and wealth management showing notable improvements. Wealth management had a record year, achieving a remarkable $45 million in revenue.
Overall, SouthState's fourth-quarter earnings demonstrate the company's ability to navigate market challenges while maintaining a strong growth trajectory. The strategic acquisition of Independent Financial is expected to further bolster the company's position in the market, and the improving liquidity and deposit pricing environment provide a promising backdrop for future success.
