Bank M&A activity, which slowed sharply in 2022, will likely remain muted in 2023, SouthState Chief Executive Officer John Corbett said Friday in a conference call with investment analysts.
“Right now, there’s just not a lot of clarity when it comes to the regulatory approval process, and there’s not a lot of clarity when it comes to the potential downturn risk,” said Corbett, who has made more than a dozen acquisitions at a company. predecessor. of SouthState, based in Winter Haven, Florida. However, he believes the pace of trading may pick up towards the end of the year and into 2024 as bankers turn to M&A to offset a more challenging earnings environment.
According to Compass Point analyst Laurie Havener Hunsicker, 168 bank deals were announced in 2022 with a total deal volume of $22.7bn, up from $76.6bn in 2021.
With a presence in some of the country’s fastest-growing markets, SouthState, with assets of $44 billion, has “a lot of opportunity to fish where we are,” Corbett said, though he did not rule out a resumption of M&A by SouthState, which was created in 2020 after a merger of equals involving CenterState Banks, which Corbett co-founded in 1999, and SouthState.
According to Corbett, targets that would be potentially attractive to SouthState would have balance sheets of around 10% to 33% of its size and would operate within its six-state territory of Virginia, the Carolinas, Georgia, Florida and Alabama. “If you look at the gross domestic product of the six states that we’re in, it would be the fourth largest GDP in the world,” Corbett said.
Since the 2020 merger of equals, SouthState has completed one acquisition, paying $542 million for Atlantic Capital Bancshares of $3.8 billion in assets in Atlanta in March.
SouthState reported fourth-quarter net income totaling $143.5 million, driven by strong loan growth. The company’s portfolio totaled $29.8 billion on December 31, an increase of 5% over the related quarter. Deposits of $36.4 billion were down 1.5% of the total as of September 30, but with 36% in non-interest bearing accounts, SouthState’s cost of deposits was 21 basis points, a number the analyst at Hovde, David Bishop, called it “ultra-duty” in an investigation. note thursday.
“This was a very strong quarter, in our opinion,” Bishop wrote.
SouthState expects to pay more for its financing in 2023, as time deposit and money market costs rise. “We are certainly feeling the pressure in the money market [and certificate of deposit] side,” chief strategy officer Steve Young said on the conference call, adding that SouthState raised deposit rates “generally” earlier this month.
“Our job is to continue to grow core clients to protect the deposit franchise, which is the most important part of our balance sheet,” Young said.
SouthState expects deposits to remain relatively stable in 2023, while loans grow in the mid-single-digit range, Young said.
