SouthState outpaces estimates, buoyed by NII and fees

SouthState Bank's earnings surpassed Wall Street's expectations in the fourth quarter, thanks to rising net interest income and fees.

In the final three months of 2024, the Winter Haven, Florida-based bank reported diluted earnings per share of $1.87, beating analysts' estimates of $1.62, according to S&P. Net income for the quarter was $144.2 million, a 35% increase from the same quarter in 2023.

Much of this growth was fueled by net interest income, which rose 4.4% year on year to reach $369.8 million. The bank's net interest margin increased to 3.48%, beating analysts' estimates of 3.45%, per S&P.

Another factor in its strong performance was fee income. Fees on deposit accounts reached $35.1 million in the fourth quarter, a 5.7% increase from the same time in 2023.

"SouthState finished strong in 2024," CEO John Corbett said in a statement. "We produced steady growth in loans and deposits and had a nice uptick in net interest margin and fees."

The bank, which operates in seven southern states and Colorado, also saw a healthy increase in its deposits and loans. Deposits grew by $423 million, or 4%, since the fourth quarter of 2023, and loans rose by $355 million, also a 4% increase.

Corbett thanked the Fed, which began cutting interest rates in the fall of 2024, for SouthState's growth in deposits.

"We clearly felt the effects of the Federal Reserve's first rate cut in September," Corbett said in a conference call with analysts on Friday. "In October, we started to see deposit growth across all our regions, and the growth occurred even as we were cutting deposit rates at the same time. … So it's nice to feel like we've reached the end of the tightening cycle."

During the call, Corbett also updated investors on SouthState's purchase of Independent Bank Group. SouthState announced last May that it was buying Independent for $2 billion, making it the biggest bank acquisition of 2024. And since the deal closed on Jan. 1, it was also the first bank merger to be completed in 2025.

"Things progressed a little faster than planned," Corbett said. "Our teams have spent a lot of time together over the last few months, and I can sense both their excitement and their eagerness to finish the integration and keep building the company and serving our clients."

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The official conversion is scheduled for Memorial Day, Corbett said. The acquisition adds close to $20 billion in assets to SouthState's balance sheet, and also expands its presence in Texas and Colorado — two states where the bank already does business.

Another topic on the call was the sale-leaseback deal SouthState announced earlier this month. The bank plans to sell 170 of its branch locations to Blue Owl Real Estate for $475 million, and then lease the properties to keep using them. Corbett said this was a way to free up some $225 million in capital.

"We've looked at this type of transaction several times over the years, and it felt like the stars aligned now," Corbett said. "We now have the option to convert this extra capital into future revenue growth."

After the fourth-quarter earnings were announced, analysts were encouraged by SouthState's performance.

"Both [net interest income] and [pre-provision net revenue] results were better than expected," wrote Citi analyst Benjamin Gerlinger.

Piper Sandler's Stephen Scouten was also laudatory, calling it "another really solid and straightforward quarter."