SouthState (NASDAQ:SSB) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/361570488
Summary
SouthState reported a return on assets of 1.37% and a return on tangible common equity of 17.6% for Q1 2026.
The company is focusing on expanding its commercial banking sales force, achieving organic growth, systematic share repurchases, and leveraging artificial intelligence.
Loan pipelines have increased by 50% since last summer, leading to solid annualized loan growth, with a significant boost in Texas and Colorado.
SouthState repurchased nearly 4% of its shares since Q3 2025 at an average price of $95.28, viewing this as an attractive use of excess capital.
Net interest margin guidance was slightly missed due to higher-than-expected deposit costs, but the company remains optimistic about continued loan growth with strong loan pipelines.
Non-interest income reached $100 million, slightly above expectations, with strong performance in capital markets and wealth.
The company is embracing AI to improve efficiency and customer service, with plans to integrate AI tools at various levels.
SouthState maintains strong credit quality with non-performing assets stable and a focus on long-term growth through strategic hiring, particularly in the Texas and Colorado markets.
Overall capital levels remain healthy, with a payout ratio higher than long-term expectations due to strategic share repurchases.
Full Transcript
Audra (Conference Operator)
Good morning, My name is Audra and I will be your conference operator today. At this time I would like to welcome everyone to the SouthState Bank Corporation first quarter 2026 earnings conference call. Today’s conference is being recorded. 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 the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time I would like to turn the conference over to William Matthews, Chief Financial Officer. Please go ahead.
William Matthews (Chief Financial Officer)
Good Morning. Welcome to SouthState’s first quarter 2026 earnings call. This is Will Matthews and I’m here with John Corbett, Steve Young and Jeremy Lucas. We’ll follow our pattern of brief remarks followed by Q&A. 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 which may affect us now. I’ll turn the call over to you. John.
John Corbett (Chief Executive Officer)
Thank you Will. Good morning everybody. Thanks for joining us. For the quarter, SouthState delivered a return on assets of 1.37% and a return on tangible common equity of 17.6%. As we progress through 2026, our four main priorities are first, to expand our commercial banking sales force, second, to deliver meaningful organic growth, third, to systematically retire shares at an attractive valuation, and fourth, to learn how to leverage the benefits of artificial intelligence implement it throughout the company. We’re making good progress on all four fronts as far as recruiting. We’re now in a yield curve environment that is more favorable to balance sheet growth, and with the consolidation disruption occurring throughout our markets, we see an opportunity to expand our commercial banking team by 10 to 15% in the next couple years. In the last six months alone, our division presidents were successful in attracting and growing our commercial banking team by about 7%. We’re going to continue to be opportunistic, but based upon the rapid success, we may slow the pace of hiring in the next few months. Second, for organic loan growth, loan pipelines have grown 50% since last summer and that’s resulted in solid annualized loan growth of 8% in the fourth quarter and then another 7.5% loan growth in the first quarter. Pipelines grew significantly again in the first quarter, which gives us confidence moving forward. Our previous loan growth guidance for 2026 called for mid to upper single digit growth this year. There’s a decent chance that we could end up on the higher end of our guidance. The biggest highlight by far has been the success in Texas and Colorado on a year over year comparison. Loan production in those two states have more than doubled from 500 million in 1Q25 to 1.1 billion in 1Q26. And Houston, specifically experienced the highest loan growth of any market in the entire company this quarter. Third on stock buybacks, we’ve repurchased nearly 4% of our shares outstanding since the beginning of the third quarter at an average price of $95.28. We continue to see this as an attractive use of excess capital at a time when bank valuations seem, at least to us, disconnected from fundamental performance and intrinsic value. And then fourth, we’re enthusiastically embracing the potential for artificial intelligence. We’re deploying more and more copilot licenses and training our bankers at the individual user level. We’re researching and beginning to deploy AI tools from our major software providers at the department level, and we’re looking for ways to re engineer processes between departments at the enterprise level. More to come, but we’re pleased with the way the entire organization is embracing these new tools with the goal of improving our speed and scalability. Speed for improved customer service and then scalability for efficiency and shareholder returns. Before I turn it over to Will, I’ll point out that we’ve refreshed some of the slides in our deck to highlight the value proposition of being a SouthState shareholder. Our story hasn’t changed and it isn’t complicated. We’re building a premier deposit franchise and we’re doing it in the fastest growing markets in the United States. We adhere to a geographic and local market leadership business model. It’s a model that empowers our division presidents to tailor their team products and pricing to deliver remarkable service to their unique local community and at the same time, an incentive system built on geographic profitability that instills a CEO and shareholder mindset. This is a model that produces durable results that have outperformed our peers on deposit cost, asset quality and overall returns. And the outperformance is consistent and durable over the last year, over the last five years and over the last 20 years. Ultimately leading to a top quartile shareholder return over multiple cycles. Will, I’ll turn it back over to you to walk through the details on the quarter.
William Matthews (Chief Financial Officer)
Thanks John. Our net interest margin of 379 was just below our guidance of 380 to 390. The slight miss was primarily a result of deposit costs being a few basis points above our expectation. In spite of the 6 basis point improvement from the prior quarter, loan yields of 596 were slightly below our new loan production coupons of 609 for the quarter. An accretion of 38.8 million was in line with expectations and $11.5 million below Q4 levels. Excluding accretion, our net interest margin (NIM) was up a basis point. Net interest income of 562 million was down 19 million from Q4 with the day count impact being 12.6 million of that difference. As John noted, we had another good loan growth quarter with loans growing 896 million 7.5% annualized growth rate. Average loans grew at a 6.5% annualized rate. Our Texas and Colorado team led the company in loan growth and every banking group within the company grew loans in the first quarter. We have some optimism about continuing loan growth as our pipeline at quarter end was up 33% compared with year end. Non interest income of 100 million was at the high end of our range of 55 to 60 basis points guidance. We had a solid quarter in capital markets and wealth with seasonally lighter deposit fees offset by stronger mortgage revenue which was aided by an increase in the MSR asset value net of the hedge. NIE of 359.5 million was in line with expectations. Looking ahead, we have no changes to our NIE guidance for the remainder of the year, but if we have greater success in our recruiting efforts and we’ve been pleased with our success thus far, NIE could of course move up somewhat. Net charge offs of $10 million represented a 9 basis point annualized rate for the quarter and this amount was matched by our provision for credit losses. Non accrual and substandard loans were down slightly. Payment performance remains very good and we continue to feel good about our credit quality. Turning to capital, we repurchased one and a half million shares in the quarter at a weighted average price of $100.84. This makes a total of three and a half million shares repurchased in the last two quarters and our share count was 97.9 million shares at quarter end, down from 101.5 million shares a year prior. Like last year’s fourth quarter, the first quarter payout ratio was higher than we expect to maintain over the long term, but we thought it an opportune time to be more active. Our strong loan pipeline and recruiting success give us some optimism. We’ll need to retain capital to support healthy growth. Even with a higher capital return posture and a 7.5% annualized loan, growth in the quarter capital levels remained very healthy. CET1 ended at 11.3%, our TCE was 8.64% and our tangible book value per share ended at $56.90. I’ll point out that our TBV per share is up almost $7 or 14% above the year ago levels and our TCE ratio is up 39 basis points from March 2025, even with our higher capital return activity of the last couple of quarters. Operator, we’ll now take questions.
Audra (Conference Operator)
Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star one again. We’ll go first to Kathryn Mueller at kbw. Thanks. Good morning.
Kathryn Mueller (Equity Analyst)
Hey Kathryn, I wanted to see if we could start on the margin. Will you talked about how the margin fell a little bit below the range just on deposit costs. Curious if you still think that 380 to 390 range is fair for the year or if deposit pressures are bringing that a little bit lower than the range. Thanks.
Steve Young
Sure. Thanks. Kathryn,, this is Steve. Let me kind of, walk through our various assumptions and kind of, update them versus last quarter. So to your point, yes, we were, you know we thought that the margin would start out in the low 380s for the first quarter and trend higher during the year. It looks like we missed that by a couple of basis points to start the year. If you look at, you know the four things that really make up that guidance in our forecast or the level of interest earning assets, the rate forecast, what our loan accretion forecast is, and deposit costs. So those four things and if you look at the interest earning assets I think we forecasted for the first quarter we’d be between 60 and 60 and a half. I think we ended up at 60.2. So right, right in the middle of that we said for the year that our interest earning assets would average somewhere in the 61 to 62 billion dollars range. And I think where we are with that, we think that it’s potential. We’re kind of reiterating that, but we do think that the loan growth might drive that slightly higher. A little bit too early to tell, but that, you know it could, it could, interest earning assets could end the year in the 63, 64 million dollar range, billion dollar range relative to the fourth quarter. But the average is probably going to be more on the high end of what we were thinking as it relates to rate forecast. Last quarter we thought that there would be three rate cuts coming into 2026 and it looks like right now the market’s at zero relative to the conflict and so on. I think the two year and the five year treasury rates are up 40 basis points from the lows earlier this quarter. So we’ve now taken out the rate cuts in our forecast on loan accretion, which is our third one is we forecasted 125 million for the full year of 26 and there’s really no change. So that’s coming in line with what we’d expected. And then the last one was on deposit costs and our original deposit beta forecast was 27%. And then, you know, it looks like we came in around 20% for the quarter. So you know, if you kind of go back and look at the movie, I think for the first hundred basis points of cuts we got 24 had a 38% beta and then the last 75 basis points we had a 20% beta. So you combine it all together, we’ve had a 30% beta on 175 basis points. But as we look forward and think about the deposit environment that we’re at, in the flat environment with our growth trajectory, we think that the deposit cost will be in the mid-170s versus our early forecast to be in the low mid-170s. So based on all these assumptions, we’d expect NIM to be in the 375 to 380 range. If the mid, if growth is in the mid single digit, we would expect them to be on the high end of the range. And if growth is as we expect, a little bit …
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