Earnings call transcript: South State Corp Q3 2025 earnings beat but stock dips

South State Corp (SSB) reported third-quarter earnings for 2025, surpassing expectations with an earnings per share (EPS) of $2.58 compared to the forecasted $2.10. The company also reported revenue of $699 million, exceeding the forecast of $660.72 million. The bank, which has maintained dividend payments for 29 consecutive years and raised them for 13 straight years, currently offers a 2.6% dividend yield. Despite the positive earnings surprise, the stock fell by 3.38% to $90.70 in market trading, indicating mixed investor sentiment. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment.

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Key Takeaways

• South State Corp achieved a 22.86% EPS surprise, significantly beating forecasts.
• Revenue for Q3 2025 was $699 million, above expectations.
• Stock price declined by 3.38% despite strong financial performance.
• The company is focusing on organic growth and has strong loan pipelines in key markets.
• Concerns about future expense growth and market consolidation may have impacted investor sentiment.

Company Performance

South State Corp demonstrated robust financial performance in Q3 2025, with a notable 30% year-over-year increase in EPS. The company reported a return on tangible equity of 20%, highlighting its strong capital efficiency. Loan production reached $3.4 billion, supported by significant growth in markets such as Texas and Colorado. This performance positions the company well against industry trends and competitors, emphasizing its focus on organic growth and strategic market expansion.

Financial Highlights

• Revenue: $699 million, exceeding the forecast of $660.72 million.
• Earnings per share: $2.58, a 22.86% surprise over the forecast of $2.10.
• Net interest income: $600 million, up $22 million from Q2.
• Loan production: $3.4 billion, with strong growth in key markets.
• Return on tangible equity: 20%.

Earnings vs. Forecast

South State Corp’s Q3 2025 earnings per share of $2.58 significantly exceeded the forecast of $2.10, resulting in a 22.86% surprise. Revenue also surpassed expectations, coming in at $699 million against a forecast of $660.72 million. This performance indicates strong operational execution and financial health, continuing a trend of positive earnings surprises in recent quarters.

Market Reaction

Despite the positive earnings report, South State Corp’s stock fell by 3.38% to $90.70. This decline suggests that investors may be concerned about future expense growth and market consolidation challenges. With an InvestingPro Financial Health Score of 2.19 (FAIR), and trading significantly below its 52-week high of $114.27, the current price level may present an opportunity for value investors. The stock’s beta of 0.67 indicates lower volatility compared to the broader market, while maintaining solid fundamentals with a return on equity of 8%.

Outlook & Guidance

Looking forward, South State Corp projects mid-single-digit loan growth for the remainder of 2025 and anticipates interest-earning assets to reach $61-$62 billion in 2026. With a debt-to-equity ratio of 0.32 and strong revenue growth of 26.7% over the last twelve months, the company maintains a solid financial foundation for future expansion.

Access the complete SSB financial analysis, including detailed valuation models and peer comparisons, through InvestingPro’s comprehensive research platform. The company expects three rate cuts in both 2025 and 2026, which could impact net interest margins. Loan accretion is expected to decrease from $150 million to $125 million in 2026, reflecting potential challenges in sustaining current growth rates.

Executive Commentary

CEO John Corbett highlighted the company’s strategic position, stating, "We’re now in a perfect position to capitalize on the disruption occurring in our markets." He emphasized the focus on organic growth, saying, "With our particular fact pattern, investing in SouthState is more interesting right now than doing an M&A deal." Executive Will Matthews added, "Our margin position is as neutral as we’ve seen it in years," suggesting a balanced approach to future financial management.

Risks and Challenges

• Potential expense growth in 2026 could pressure profitability.
• Market consolidation opportunities may not materialize as expected.
• Decreasing loan accretion could impact revenue growth.
• Macroeconomic factors, including anticipated rate cuts, could affect net interest margins.
• Competitive pressures in key markets could challenge organic growth strategies.

Q&A

During the earnings call, analysts inquired about margin dynamics and the impact of deposit beta on financial performance. Executives also addressed a large loan charge-off related to First Brands and discussed strategies to incentivize growth and recruitment. These discussions highlighted the company’s proactive approach to managing financial and operational challenges.

Full transcript - South State Corp (SSB) Q3 2025:

Bella, Conference Operator: Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to SouthState Corporation Q3 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Will Matthews. You may begin.

Will Matthews, Executive, SouthState Corporation: Thank you. Good morning, and welcome to SouthState’s third quarter 2025 earnings call. This is Will Matthews, and I’m here with John Corbett, Steve Young, and Jeremy Lucas. As always, we’ll make a few brief prepared remarks and then move into questions. I’ll refer you to the earnings release and investor presentation under the Investor Relations tab of our website. Before we begin our remarks, I want to remind you that comments we make may include forward-looking statements within the meaning of the federal securities laws and regulations. Any such forward-looking statements we may make are subject to the Safe Harbor rules. Please review the forward-looking disclaimer and Safe Harbor language in the press release and presentation for more information about our forward-looking statements and risks and uncertainties that may affect us. Now I’ll turn the call over to you, John.

John Corbett, CEO, SouthState Corporation: Thank you, Will. Good morning, everybody. Thanks for joining us. We’re pleased to report a strong third quarter for SouthState. Earnings per share are up 30% in the last year, and the company generated a return on tangible equity of 20%. If you recall, we closed on the Independent Financial transaction in January. We converted the computer systems in May, and now we’re beginning to realize the full earnings power of the combined company. Loan production was up a little in the third quarter to nearly $3.4 billion, and we saw moderate growth in both loans and deposits. Payoffs were about $100 million higher in the quarter. Loan production in Texas and Colorado is up 67% since the first quarter of the year, and loan pipelines across the company continue to grow, and we feel like net loan growth will accelerate over the next few quarters.

Our charge-offs were 27 basis points for the quarter, primarily due to one larger commercial and industrial credit acquired with Atlantic Capital that has been in the bank a number of years. Stepping back, however, the credit metrics in the bank are stable. Payment performance is good, non-accruals are down slightly, and we’ve only experienced 12 basis points of charge-offs year to date. Our credit team is forecasting that we’re going to land in the neighborhood of 10 basis points of charge-offs for the year. We’re currently in the middle of strategic planning this time of year and thinking about the banking landscape, deregulation, and the opportunities in front of us. Over the last 15 years, we’ve built a company in the best markets with good scale and an entrepreneurial business model, and we’ve done the heavy lifting to build out the infrastructure of the bank.

We’re now in a perfect position to capitalize on the disruption occurring in our markets. We’ve calculated that there are about $90 billion of overlapping deposits with SouthState that are in the midst of consolidation in the Southeast, Texas, and Colorado. Our regional presidents understand the opportunity, and they’re laser-focused on recruiting great bankers and organically growing the bank in 2026. Will, I’ll turn it back to you to provide additional color on the numbers.

Will Matthews, Executive, SouthState Corporation: Thanks, John. I’ll hit a few highlights focused on our operating performance and adjusted metrics and make some explanatory comments, then we’ll move into Q&A. We had another good quarter with PP&R of $347 million and $2.58 in EPS, driven by $34 million in revenue growth and solid expense control. Our 4.06% tax equivalent margin drove net interest income of $600 million, up $22 million over Q2. $19 million of that growth was due to higher accretion. Cost of deposits of 1.91% was up seven basis points from the prior quarter, and we’re in line with our expectations. In addition to the cost of deposit increase, overall cost of funds was impacted by the larger amount of sub-debt outstanding for much of the quarter. We redeemed $405 million in sub-debt late in the quarter.

Going forward, that redemption will have a net positive impact on our NIM of approximately four basis points, all else equal. Our loan yields of 6.48% improved by 15 basis points from Q2 and were approximately eight basis points below our new origination rate for the second quarter. Loan yields, excluding all accretion, were up a basis point from Q2. Steve will give updated margin guidance in our Q&A. Net interest income of $99 million was up $12 million, driven by performance in our correspondent banking services, capital markets division, and deposit fees. On the expense side, NIE of $351 million was unchanged from Q2 and was at the low end of our guidance. Our third quarter efficiency ratio of 46.9% brought the nine-month year-to-date ratio to 48.7%. Credit costs remain low with a $5 million provision expense.

As John noted, we did experience one $21 million loan charge-off during the quarter, which is an abnormally large charge-off for us. This brings our year-to-date net charge-offs to 12 basis points. Absent that loss, net charge-offs would have been nine basis points for the quarter. Asset quality remains stable, and payment performance remains good. Our capital position continues to grow with CET1 at 11.5% and tangible book value per share growing nicely. As you’ll recall, we closed the Independent Financial acquisition on January 1, 2024. Our tangible book value per share of $54.48 is now more than $3 above the year-end 2024 level, even with the dilutive impact of the Independent Financial merger. Our TCE ratio is also back to its year-end 2024 level. As we’ve noted before, our strong capital levels and healthy capital formation rate provide us with good capital optionality. Operator, we’ll now take questions.

Bella, Conference Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Michael Rose with Raymond James & Associates Inc. Your line is now open. Please go ahead.

Michael Rose, Analyst, Raymond James & Associates Inc.: Hey, good morning, guys. Thanks for taking my questions. I guess I’ll hit the margin question since you brought it up, Will. Steve, can you kind of walk us through the excess accretion? This quarter looks like the core margin accretion was down kind of high single-digit basis points. Can you just give some puts and takes here as we think about the contemplation of a couple of rate cuts this quarter, near term? If you can talk about some of the pricing dynamics, both on the loan and deposit side, new production yields, things like that. Just trying to better frame up the core versus the reported margin as we move forward. Thanks.

Steve Young, CFO, SouthState Corporation: Sure, Michael. Yeah, I just, you know, maybe kind of give you some explanation of where we think we’re headed on margin, and maybe I can answer some of those questions in the middle of that. You know, as you mentioned, we had higher accretion than we expected, and really, you know, a couple of things around that. We saw the highest accretion in July, and then in August and September, it kind of tailed off a little bit. Really, due to some early payoffs of 2020 and 2021 vintage loans that had, you know, kind of three-handle coupons with these big discounts that sold. Those are, you know, not economic decisions, but they’re, I mean, they’re economic decisions in the fact that they sold, but you know, typically, you’d keep those coupons.

Also, we had a 29% decline in PCD loans this quarter, and of course, those have larger marks. Anyway, all of that, we look at prepayments. They’re really not outside of our scope of what we thought. It’s just that some of the vintages were different than we thought, and therefore had bigger discounts. Having said all that, you know, as we think about the guidance for NIM going forward, you know, really, not a lot of change, a little bit of change, but not a lot. You know, we talk about the size, the assumptions of the interest earning asset size. The second is our interest rate forecast. The third is loan accretion, and the fourth is deposit data in an environment where rates are going down. Interest earning assets, we’ve been saying $59 billion for quarter four average. That’s no change.

You know, for full year 2026, we’re looking somewhere between $61 and $62 billion. That’s kind of a mid-single-digit growth. Rate forecast last quarter, we had no rate cuts in our model. This quarter, we’re thinking we get three rate cuts in 2025 and quarterly rate cuts, three more in 2026. That would get a 150 basis point cut in total and get the Fed funds up 3% by the end of 2026. That seems to be somewhere where the market is. You know, as it relates to the third assumption, loan accretion, you know, based on our models, we expect loan accretion this quarter for the fourth quarter to be somewhere in the $40 to $50 million as expected prepayments fall. You know, our October accretion so far is in line with these expectations. As I mentioned, August and September came down pretty rapidly.

I think that’s a good run rate to use. For 2026, we do, you know, we did certainly pull some forward in 2025. We expect instead of $150 million of accretion, we’re looking at about $125 million based on our prepayment forecast. Of course, it can be lumpy based on these vintage loans. The last part is deposit beta. For the first 100 basis points of cuts, our deposit cost came down about 38 basis points from $2.29 to $1.91, so 38% beta. In our 2019 to 2020 easing cycle, our deposit cost beta was around 27%. Our expectation is with growth plans that our deposit beta would look a little similarly to 2019-2020, so 27%. Maybe we get to 30% over time with a lag, but I don’t think it’ll be as high as 38%.

Based on all those assumptions, we’d expect NIM to continue to be in the $3.80 to $3.90 range with the set down in accretion this quarter and fourth quarter and for 2026. For it to be in that range, $3.80 to $3.90, as we kind of move forward. One of the questions you asked was our, you know, pricing dynamics. Our new loan production rate for the total company this quarter was $6.56. If you look at Texas and Colorado, that new loan rate was $6.79. It’s a little bit higher in Texas and Colorado, but it’s in total of $6.56. I know you had a few questions, a few puts and takes, but that’s some guidance for you.

Michael Rose, Analyst, Raymond James & Associates Inc.: No, that’s really helpful, Steve. I appreciate it. Maybe just a broader one for John. I think you mentioned that loan production was up a little bit in the third quarter. I think there’s clearly going to be some dislocation in some of your markets from some of the deals that have been announced. I know you guys are obviously leaning a little bit more into Texas and maybe Colorado as well with some of that. Can you just kind of walk us through the loan growth environment at this point, given the fact that I think a lot of banks are kind of upping their hiring plans for loan officers, the pricing dynamics, and kind of maybe what we should expect as we move forward? Thanks.

Steve Young, CFO, SouthState Corporation: Yeah, sure, Michael. I think good morning. You know, we kind of guided to mid-single-digit growth for the remainder of 2025. I think we came in at 3.4% for the quarter, so a little bit less than mid-single, but we still think mid-single-digit growth for the remainder of the year feels about right. As I said, we had about $100 million more in paydowns in the third quarter than we did in the second. You know, if we move into 2026, it could move higher, maybe the mid to upper single digits, but we’ll have a better feel for that in January. Most of the loan growth is coming in in the area of commercial and industrial lending. For the quarter, we had 9% linked quarter annualized growth in commercial and industrial lending.

Residential growth was about 6%. If you combine construction and development and commercial real estate, really, we were flat for the quarter. There was a migration of construction loans that just migrated into commercial real estate upon completion of construction. Our biggest pipeline build is in Texas. We had an $800 million pipeline there in the second quarter. End of second quarter, now it’s up to $1.2 billion. We kind of got past the conversion there, and now we’re starting to see the pipelines and the activity building. Florida’s got a $1 billion pipeline. Atlanta’s got a $900 million pipeline. Those are our three, probably, largest markets. As I said on the call, with that dislocation, and really all the states we’re in, we are kind of leaning in on the hiring front, and we see opportunities to recruit bankers. Like yesterday morning, I was interviewing one from another bank.

That is where a lot of our focus and effort is right now.

Michael Rose, Analyst, Raymond James & Associates Inc.: All right, great. I appreciate you guys taking my questions. Thanks.

Bella, Conference Operator: Your next question comes from the line of Jared Shaw with Barclays Bank PLC. Please go ahead.

Jared Shaw, Analyst, Barclays Bank PLC: Hey, good morning, everybody.

Steve Young, CFO, SouthState Corporation: Hi, Jared.

Jared Shaw, Analyst, Barclays Bank PLC: Maybe just if we could hit on credit. You know, you were listed as a creditor to First Brands. I’m guessing that’s what the large charge was. Was there for that charge, was there a prior—it looks like there was a prior reserve. Was there also a prior charge taken against that? I guess how do you feel about the rest of the portfolio, you know, apart from that?

Steve Young, CFO, SouthState Corporation: Yeah, you’re correct. That’s what that charge was. There was not a prior reserve. I mean, that news happened pretty fast. That was our only supply chain finance credit. As we examine the portfolio, we don’t have any more of that type of lending. Unfortunate, and we’re going to use it as a learning lesson for our credit team and management associates. I’d say, Jarrell, the reserve question, based on what John just said, we would have had a reserve release before that charge-off in the quarter, i.e., a negative provision just based on the underlying economic loss drivers. Just to be clear, we did charge off the full amount of that balance in the third quarter.

Jared Shaw, Analyst, Barclays Bank PLC: Okay. All right. Thanks for that. I guess, you know, looking at capital, you just gave some great color on sort of really good growth opportunities over the coming years. Still seeing growth in capital, and like you said, Will, just that improving backdrop on credit. Where do you feel like you would like to see CET1 optimally? How should we think about the buyback and capital management in general from here?

Steve Young, CFO, SouthState Corporation: Yeah, Jared, it’s a good question. You know, we’re obviously 11.5% on CET1, about 10.8% if you were to incorporate AOC. Very healthy capital ratios. I’d say we don’t articulate a particular target out there, but we do like this 11% to 12% range we’re in. We do like the optionality we’ve got with the ratios being strong and with the formation rate being so good. We are hopeful, as John said, to take advantage of some of the disruption in the market through growth, but we also have the ability to use some of that capital to repurchase our shares. It’s sort of a quarter-to-quarter decision we’ll be making.

Jared Shaw, Analyst, Barclays Bank PLC: Okay, great. Thank you.

Bella, Conference Operator: Your next question comes from the line of Catherine Mealor with Keefe Bruyette & Woods. Please go ahead.

Catherine Mealor, Analyst, Keefe Bruyette & Woods: Thanks. Just one follow-up back on the margin. It was helpful to have your guidance for next quarter. Is it fair to assume that, or actually, this is the way to ask the question. Is there a way to quantify how much of the accretion this quarter was just accelerated versus just helping us to kind of model what a normal kind of base level would be for accretion going forward versus how much is accelerated from paydowns?

Steve Young, CFO, SouthState Corporation: Yeah, Catherine, you know, there’s a couple of things that I don’t want to overcomplicate your answer, but it’s complicated. There’s a few things that go into it. One is full payoff, like we talked about, and then there’s partial prepayment. Based on our models, when we were looking at it and to give you that forecast in the last quarter, it was based on our expected prepayments. Our expected prepayments actually came in reasonably well. What we didn’t get right was the vintage part of it, as well as other partial prepayments. The bottom line is what we saw in July and early August was a little bit outsized. What we saw in end of August, September is much more run rate type of thing. I think this 40 to 50, that’s kind of what we expected in the fourth quarter, the back half of the year.

That’s sort of what we’re seeing. That sort of informs us going into 2026.

Catherine Mealor, Analyst, Keefe Bruyette & Woods: Okay. Got it. That’s helpful. On fees, any outlook into how you’re thinking about fees near the end of the fourth quarter and into next year? It was really nice to see another quarter of higher correspondent banking services and service charges.

Steve Young, CFO, SouthState Corporation: Sure. No, it was a really good quarter. You know, non-interest income was $99 million versus $87 million. So a nice pickup, 60 basis points of average assets, a little bit higher than our guide of around 50, 55. You know, two-thirds of that was capital markets. A couple of things happened in correspondent. Number one, we had changes in interest rates. And so when you have changes in interest rates, that business typically does a little bit better. It was sort of broad-based. A couple of million dollars was due to fixed income. Maybe $3 million, $4 million was higher interest rate swaps, another $1.5 million in sort of other trading. I think that number was around $25 million. So that’s a $100 million run rate. To put it in context, our best year ever was $110 million in revenue. Last year was $70 million.

This quarter was a really good quarter. I don’t expect that to, we’ll see, continue to repeat. Clearly, we had a good quarter. We’ll see with the run rate. I think we get a couple of quarters behind this, we’ll have a better view. Clearly, it’s higher than our run rate of $87 million. I’m not sure we’re as high as $99 million. I’d say it’s probably, as we kind of think about 2026, somewhere in that $370 million, $380 million run rate, that’s probably not a bad place to start. We’ll just see how it progresses, is the way I would think about it.

Catherine Mealor, Analyst, Keefe Bruyette & Woods: Okay, that’s helpful. Thank you.

Bella, Conference Operator: Your next question comes from the line of Janet Lee with TD Cowen. Please go ahead.

Janet Lee, Analyst, TD Cowen: Good morning.

Steve Young, CFO, SouthState Corporation: Good morning.

Janet Lee, Analyst, TD Cowen: Morning. On a core basis, I believe from your second quarter earnings call, you talked about how every 25 basis point cut would be a one to two basis point improvement to overall margin. Is there any change in thoughts on that, or was that guidance, or was that guidance based on the core NIM, or was that including any accretion?

Steve Young, CFO, SouthState Corporation: Great question, and thanks for asking it. You know, a couple of things there. If we get back to six cuts and we get one to two, that would be, you know, call it, let’s just take the midpoint. That’d be nine basis points. I think our core NIM is somewhere, as I think about core NIM, somewhere in the mid 380s. What’s changed there? Number one is the loan accretion forecast. If we, next year, we’re 125 versus 150 just because we pull forward, that’s about four basis points of decrease. The other is just on the deposit beta, and the lag thereof, kind of where, like I mentioned in our other question, our deposit beta so far, through the first 100, was 38%. On the other hand, we didn’t grow deposits more than, you know, call it 2%, 2.5%.

As we contemplate the future and we look back at history at 2019 and 2020 during that easing cycle, when we were growing a little bit faster, more mid-single digit-ish, our deposit beta was more like 27%. We’re taking that model back down to 27. We hope to outperform that, you know, call it, there’s a lag, the CDs and pricing and all that. By the beginning of 2027, our hope would be we’d be in that 30% range. For right now, what we’re seeing in front of us, we don’t see that really, we see that more of a lag, and we’re modeling 27 in our numbers. Steve, does when you translate what you’re saying there to Janet’s question about one to two basis points with each cut, that may take that away if the deposit beta is not as good on the way down. Right.

To finish that thought, to your point, John, to finish that thought, if our deposit beta, so we’re guiding sort of in the mid-range of 380 to 390. To the extent at the end of the year, next year, we go through the cuts and we start moving our deposit beta from 27 closer to 30, 31, that would get us in the high 380s, maybe 390 at the end of the year of 2026. That’s how we’re thinking about modeling it.

Bella, Conference Operator: Got it. Thanks for the color. Just to follow up, if I am not making this up, hopefully, I believe that the IBTX bankers, that group will start adopting SouthState’s business model. In a way, what would be the implication on or any implication on the expenses or their incentive to bringing like prioritized, you know, lower deposit costs or loans? Is there any sort of change that could be coming or whether an implication on growth profile there? Could you explain, could you give us any color on what that could mean for SouthState, that transition?

Steve Young, CFO, SouthState Corporation: Yeah, sure. Janet, it’s John. We went through this transition year in 2025 when we did the conversion, and we kind of kept the incentive system at IBTX the same as it had been in prior years. In 2026, it’ll move to more of the SouthState approach where we allocate P&Ls to the Regional Presidents. Their incentive will be based on both loan growth, but predominantly on their PP&R growth. One of the things that we’re contemplating making an adjustment for to incent additional recruiting and hiring is not to penalize those Regional Presidents for the first year compensation of new hires to encourage recruiting efforts into 2026, both with the existing SouthState plan and the IBTX plan. Good question. Hope that helps you.

Bella, Conference Operator: Thank you. Go ahead.

Steve Young, CFO, SouthState Corporation: Is there another question?

Bella, Conference Operator: Yes, one moment, please. Mr. McDonald, your line is now open.

Gary Tenner, Analyst, D.A. Davidson & Co.: Okay. Thank you. Sorry, I didn’t hear anything. Hey, guys. Sorry, just one more follow-up, Steve, on the margin. I think your prior outlook was, you know, to be in the 3.80, 3.90 and then drift higher in 2026. I just want to make sure that the 2026 outlook 3.80, 3.90 includes the rate cuts and about $125 million of accretion, if I heard that right. Anything’s changed from, you know, prior? What are some of the puts and takes?

Steve Young, CFO, SouthState Corporation: Yeah, no, I think I was trying to answer that in the prior question. It’s really the accretion number, that, you know, from 150, it was what we all thought in 2026 last quarter to 125. That’s about four basis points of decrease. Then on the deposit beta, you know, we have 38%. 2019 was 27%. You know, we think ultimately we’ll get to somewhere in the low 30s, but it just is probably a bit of a lag. You know, it’s probably not going to, we’re going to be very diligent on growing, you know, for the loan growth we think is coming. We think we should, in 2026, model more in the 27% range. Hopefully, as the CDs reprice and all those kinds of things through 2027, we could see it uptick.

I think, back to the guidepost or how this would work, is you start out in the mid-380s and then move higher into the end of 2026, early 2027. John, this is Will. I would add, our margin position is as neutral as we’ve seen it in years, just based upon the actions we took in 2025. The number one, the merger and marking that balance sheet properly. Then two, the portfolio restructuring we did in connection with the sale-lease pact. We have a relatively stable-looking margin under most reasonable scenarios.

Gary Tenner, Analyst, D.A. Davidson & Co.: Got it. The delta between having a four-handle this quarter and moving into 380s next quarter is really accretion going from 80 this quarter and cutting half to 40 next quarter in your outlook?

Steve Young, CFO, SouthState Corporation: Yeah, that’s right. Yep, that’s what we’re currently seeing.

Gary Tenner, Analyst, D.A. Davidson & Co.: Okay. One just follow-up again on the next quarter’s average earning assets in the $59 billion. It seems like that’s kind of where you were this quarter. Are there some kind of puts and takes of what you expect in terms of growth in the fourth quarter?

Steve Young, CFO, SouthState Corporation: Typically in the fourth quarter, we have some seasonal deposit growth, and depending on how we manage it, we get some of the seasonal wholesale stuff out of the bank at the same time. We sort of manage it towards that level, but year over year, I’d call it mid-single-digit growth is kind of how we’re thinking about it from an average earning asset.

Gary Tenner, Analyst, D.A. Davidson & Co.: Okay, thank you.

Bella, Conference Operator: Your next question comes from the line of Ben Gerlinger with Citi. Please go ahead.

Will Matthews, Executive, SouthState Corporation: Hi. Good morning.

Steve Young, CFO, SouthState Corporation: Hi.

Will Matthews, Executive, SouthState Corporation: I was wondering, if we kind of step back to correspondent banking, I understand that a rate cut, a rate movement kind of sparks it. We’re looking, I don’t know, you said roughly three to six cuts over the next 12-ish months. How long is the tail for that kind of tailwind, I guess you could say? If there’s two cuts in December, or excuse me, two cuts in the fourth quarter, would the first quarter also see a benefit, or is it fairly short-lived?

Steve Young, CFO, SouthState Corporation: Yeah, as I was trying to explain before, as you kind of think about that business, the highs and lows of it, back in 2020 when things went crazy on rates, I think our best year was $110 million. I think we did that in 2020, 2021. Last year was our worst when rates were at the highest and sort of out there. That was about $70 million. As I kind of think about that business, you’re going to have fixed income do better in rate cuts lower because, particularly for our bank clients, they’ll want to take their excess cash and buy bonds because there will be a yield curve. On the interest rate swap side, depending on the shape of the yield curve, it may not be as good as it is today. Today, it’s deeply inverted. That’s really good for that business.

I kind of see those businesses offsetting each other, but maybe creating some stability at that level.

Will Matthews, Executive, SouthState Corporation: Gotcha. Okay. That’s helpful. From a follow-up perspective, it seems like you have a lot of opportunity in front of you. I think that’d be hard to disagree, especially with the other disruption in the markets that you operate in. Is it fair to think you’re going to think organically, like you’re hiring individuals, obviously, and growing loans, or could you potentially see a small bolt-on deal or something like that?

Steve Young, CFO, SouthState Corporation: Yeah, and it’s John. You know, with our particular fact pattern, kind of our view is investing in SouthState’s more interesting right now than doing an M&A deal. That investment in SouthState comes in two forms. The first way is just to increase our sales force and accelerate our organic growth because of all this dislocation that’s going on in the markets. The second way, as Will described, is in purchasing SouthState shares through our buyback authorization. The capital formation rate is pretty strong right now, and the valuation is pretty attractive. That’s kind of how we’re thinking about priorities on capital.

Will Matthews, Executive, SouthState Corporation: Gotcha. I appreciate it. Thank you.

Bella, Conference Operator: Your next question comes from the line of Gary Tenner with D.A. Davidson & Co. Please go ahead.

Gary Tenner, Analyst, D.A. Davidson & Co.: Thanks. Good morning. I just wanted to go back to the NIM-related discussion for a minute. You know, the big delta, as I look at the average balance sheet, was really the cost on the transaction and money market accounts up 11 basis points quarter over quarter. Can you kind of talk about the dynamics around that? Is it an effort to, you know, bring in some new deposits with the anticipation of stronger growth over the next year, or just, you know, maybe comment on kind of the driver there?

Steve Young, CFO, SouthState Corporation: Yeah. You know, back in July when we had the call, Gary, we talked about our expectation of deposit costs. We talked about the range this next quarter, for the third quarter, as 1.85% to 1.90%. It was 1.91%, so we were on the higher end of the range, missed a basis point. What drove that was, and our expectation was that, particularly in the CD book, if you looked at the first quarter to second quarter, our CDs went from, I don’t know, 7.1 or 7.2 or something to 7.7, I think. That was back to funding and loan growth and getting the balance sheet where it needed to be. Those obviously transacted at a higher rate level than others. As we kind of think about it, that was part of our guidance. It’s, frankly, a tough environment right now with deposits.

We expect that as we get rate cuts and the curve gets a little bit more steady, we could continue to see better. That’s a little bit why we’re guiding down on the 27% deposit beta. Ultimately, we need to fund the loan growth that we think is in front of us.

Gary Tenner, Analyst, D.A. Davidson & Co.: Right. Then as a follow-up on that beta, since you just mentioned it as well, to be clear, that 27% to 30% beta is relative to the next phase of easing as opposed to cumulative, including last year’s.

Steve Young, CFO, SouthState Corporation: Right. Yeah, that’s right. That’s a great way to say it. Yeah, you’re right. If we had to average them, it’d probably be somewhere in the low to mid-30s. Yes, that’s right. It’s the next incremental. Yes.

Gary Tenner, Analyst, D.A. Davidson & Co.: Okay, great. If I could stick in a last question, just on the NIE, I think you had guided previously to a bit of a step down in the fourth quarter, I think, to the $340, $350 range. Any change to that outlook for the fourth quarter?

Steve Young, CFO, SouthState Corporation: Yeah, Gary, I think our guidance for Q4 is still in that 345 to 350 range. There’s always some variability that’s hard to predict with respect to how some of the commission compensation businesses perform. A loan origination volume can impact your FAS 91 cost deferral. Somewhere in that roughly $350 million range, we’re pretty clean now in terms of recognizing the cost saves on Independent. If you look at Q3 to Q2, it was flat, even though we had the annual merit increases for most of the company, except for executives, July 1. Things were flat. We’ve done a good job of getting the costs out and getting them out pretty early. Looking ahead to 2026, we hadn’t talked about that, but I might as well address that. Our planning is obviously still underway. We still think for 2026, that mid-single digits is a good guide.

Maybe it’s an inflationary sort of 3% plus another percent or so for some of the investments in organic growth initiatives like that John addressed. Maybe that’s what 2026 will look like. We’re still, as I said, finalizing our planning there, but that’s kind of what we’re thinking right now.

Gary Tenner, Analyst, D.A. Davidson & Co.: Thank you.

Bella, Conference Operator: Your next question comes from the line of Gary Tenner with D.A. Davidson & Co. Please go ahead.

Steve Young, CFO, SouthState Corporation: That was Gary Tenner we just spoke with.

Bella, Conference Operator: I’m so sorry. That concludes the Q&A session. I will now turn the call back over to John Corbett for closing remarks.

Steve Young, CFO, SouthState Corporation: All right. Thank you, Bella. Thank you all for calling in this morning. We, as always, appreciate your interest in our company. If you have any follow-up questions on your models, don’t hesitate to give us a ring. Have a great day. Thank you.

Bella, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining, and you may now disconnect. Everyone, have a great day.

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