Q2 2026 SouthState Bank Corp Earnings Call

July 24, 2026

Operator 3: Thank you for joining us, and welcome to the SouthState Corporation Q2 2026 earnings conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference call over to Will Matthews, Chief Financial Officer. Mr. Matthews, please go ahead.

Speaker #2: Thank you for joining us, and welcome to the SouthState Bank Corporation second quarter 2026 earnings conference call. After today's prepared remarks, we will host a question-and-answer session.

Speaker #2: If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference call over to Will Matthews, Chief Financial Officer.

Speaker #2: Mr. Matthews, please go ahead.

Speaker #3: Good morning. This is Will Matthews, and welcome to SouthState’s second quarter 2026 earnings call. I’m here with John Corbett, Steve Young, and Jeremy Lucas.

Will Matthews: Good morning. This is Will Matthews, and welcome to SouthState's Q2 2026 earnings call. I'm here with John Corbett, Steve Young, and Jeremy Lucas. We'll follow our typical pattern of brief prepared remarks and then move into Q&A. I'll refer you to the investor relations tab of our website for the earnings materials. 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.

Speaker #3: We'll follow our typical pattern of brief prepared remarks and then move into Q&A. I'll refer you to the Investor Relations tab of our website for the earnings materials.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #4: Thanks, Will. Good morning, everyone, and thank you for joining us. SouthState delivered another strong quarter. We generated a return on assets of 1.36% and a return on tangible common equity of 17.6%.

John Corbett: Thanks, Will. Good morning, everyone, and thank you for joining us. SouthState delivered another strong quarter. We generated a return on assets of 1.36% and a return on tangible common equity of 17.6%, which extends the consistent high performance over the last several quarters. Our results reflect solid balance sheet growth, stable margins, improving efficiency, and continued strength in credit quality. As we reach the midpoint of 2026, I'm encouraged by the progress we're making against the four priorities we outlined at the beginning of the year: attracting top talent, growing the balance sheet, creating value through disciplined capital allocation, and building artificial intelligence capabilities throughout the company. Starting with talent. SouthState's culture continues to be a differentiator. In a period of meaningful disruption across many of our markets, bankers are looking for a platform that empowers local decision-making, values long-term relationships, and creates opportunities for growth.

Speaker #4: This extends our consistent high performance over the last several quarters. Our results reflect solid balance sheet growth, stable margins, improving efficiency, and continued strength in credit quality.

Speaker #4: As we reach the midpoint of 2026, I'm encouraged by the progress we're making against the four priorities we outlined at the beginning of the year.

Speaker #4: Attracting top talent, growing the balance sheet, creating value through disciplined capital allocation, and building artificial intelligence capabilities throughout the company. Starting with talent, SouthState's culture continues to be a differentiator.

Speaker #4: In a period of meaningful disruption across many of our markets, bankers are looking for a platform that empowers local decision-making, values long-term relationships, and creates opportunities for growth.

Speaker #4: Our division presidents have successfully expanded our commercial banking sales force by more than 10% in just the last three quarters. And we continue to be impressed by both the quality and diversity of talent joining the franchise.

John Corbett: Our division presidents have successfully expanded our commercial banking sales force by more than 10% in just the last three quarters. We continue to be impressed by both the quality and diversity of talent joining the franchise. These are experienced relationship managers who understand our markets, fit our culture, and position us for future growth. That recruiting success is an investment in the company's future, and it's directly supporting our second priority, meaningful balance sheet growth. Over the last year, loans have grown 8% and deposits have grown 5%, both within the range of guidance we provided. There's been considerable discussion this quarter around the balance between growth and incremental profitability. That's an important conversation. Frankly, it's one that we have every quarter. Our responsibility as capital managers is to balance three objectives simultaneously: soundness, profitability, and growth. We don't optimize for one quarter.

Speaker #4: These are experienced relationship managers who understand our markets, fit our culture, and position us for future growth. That recruiting success is an investment in the company's future, and it is directly supporting our second priority: meaningful balance sheet growth.

Speaker #4: Over the last year, loans have grown 8%, and deposits have grown 5%, both within the range of guidance we provided. There has been considerable discussion this quarter around the balance between growth and incremental profitability.

Speaker #4: And that's an important conversation and, frankly, it's one that we have every quarter. Our responsibility as capital managers is to balance three objectives simultaneously: soundness, profitability, and growth.

Speaker #4: We don't optimize for one quarter; we optimize for long-term shareholder value. That requires discipline and judgment, particularly when opportunities are abundant. One thing we're confident in is that we'd rather operate in vibrant, growing markets than be forced to manufacture growth where it doesn't naturally exist.

John Corbett: We optimize for long-term shareholder value. That requires discipline, judgment, particularly when opportunities are abundant. One thing we're confident in is that we'd rather operate in vibrant, growing markets than be forced to manufacture growth where it doesn't naturally exist. Strong markets give us options. They allow us to be selective, compete where we have advantages, and build profitable relationships that create value over many years. Our bankers and our footprint continue to provide those opportunities. Equally important, we're maintaining our commitment to soundness. Asset quality improved during the quarter, with non-performing assets declining 14% and net charge-offs remaining exceptionally low at just six basis points. Credit metrics continue to reflect the disciplined underwriting culture that has long been a hallmark of SouthState. Turning to capital allocation, we remain confident that SouthState represents an attractive investment at today's valuations.

Speaker #4: Strong markets give us options. They allow us to be selective, compete where we have advantages, and build profitable relationships that create value over many years.

Speaker #4: Our bankers and our footprint continue to provide those opportunities. Equally important, we're maintaining our commitment to soundness. Asset quality improved during the quarter, with non-performing assets declining 14%.

Speaker #4: And net charge-offs remain exceptionally low at just six basis points. Credit metrics continue to reflect the disciplined underwriting culture that has long been a hallmark of SouthState.

Speaker #4: Turning to capital allocation, we remain confident that SouthState represents an attractive investment at today's valuations. Over the last year, we've repurchased nearly 5% of our shares outstanding, while also increasing the dividend and maintaining a CET1 capital ratio above 11%.

John Corbett: Over the last year, we've repurchased nearly 5% of our shares outstanding while also increasing the dividend and maintaining a CET1 capital ratio above 11%. We view share repurchases as one of several tools available to create shareholder value. When our stock trades at levels that we consider attractive relative to the long-term earnings power of the franchise, we intend to be opportunistic. While repurchase activity slowed a little during Q2, our philosophy hasn't changed. We expect to continue returning capital in a disciplined manner, likely at a pace more consistent with our previously communicated the 40% to 60% capital return framework. Finally, artificial intelligence remains an area of significant focus and opportunity. Our objective is to empower every department to identify opportunities where this technology can improve speed, quality, and scale.

Speaker #4: We view share repurchases as one of several tools available to create shareholder value. And when our stock trades at levels that we consider attractive, relative to the long-term earnings power of the franchise, we intend to be opportunistic.

Speaker #4: While repurchase activity slowed a little during the second quarter, our philosophy hasn't changed. We expect to continue returning capital in a disciplined manner, likely at a pace more consistent with our previously communicated 40% to 60% capital return framework.

Speaker #4: Finally, artificial intelligence remains an area of significant focus and opportunity. Our objective is to empower every department to identify opportunities where this technology can improve speed, quality, and scale.

Speaker #4: Today, we're already seeing productivity gains in areas such as credit operations, fraud management, call center support, and through the continued adoption of our internally developed small language model.

John Corbett: Today, we're already seeing productivity gains in areas such as credit operations, fraud management, call center support, and through the continued adoption of our internally developed small language model. When I step back and I look at the quarter, I see a team that's aligned and it's executing. We're growing, we're maintaining strong credit quality, we're investing in talent and technology, and we're continuing to allocate capital in ways that we believe will create long-term shareholder value. I want to thank our teammates for what they accomplished this quarter, and I'm optimistic about the opportunities ahead. With that, I'll turn it back over to you, Will, to walk through the quarter in more detail.

Speaker #4: When I step back and look at the quarter, I see a team that's aligned and executing. We're growing and maintaining strong credit quality.

Speaker #4: We're investing in talent and technology, and we're continuing to allocate capital in ways that we believe will create long-term shareholder value. I want to thank our teammates for what they accomplished this quarter, and I'm optimistic about the opportunities ahead.

Speaker #4: With that, I'll turn it back over to you, Will, to walk through the quarter in more detail.

Speaker #3: Thanks, John. Our net interest margin of 3.78% was down a basis point from Q1 and in line with our 3.75% to 3.80% guidance. Deposit costs were unchanged at 1.76%, also in line with our guidance.

Will Matthews: Thanks, John. Our net interest margin of 378 was down a basis point from Q1 and in line with our 375 to 380 guidance. Deposit costs were unchanged at 176, also in line with our guidance. Loan yields of 591 were down five basis points from Q1, and accretion of $33 million was down $6 million from Q1. Excluding accretion, loan yields were up a basis point, and NIM was up four basis points. One side note about accretion. We often get questions about that number, but rarely about core deposit intangible amortization, a non-cash expense resulting from purchase accounting rules. Slide 11 in our deck shows quarterly margin, accretion income, and CDI amortization expense. I'll note that our quarterly CDI amortization number of $21 million is getting close to our quarterly accretion number, and I expect those lines to cross in the next four to five quarters.

Speaker #3: Loan yields of 5.91% were down 5 basis points from Q1, and accretion of $33 million was down $6 million from Q1. Excluding accretion, loan yields were up a basis point, and NIM was up 4 basis points.

Speaker #3: One side note about accretion. We often get questions about that number, but rarely about core deposit intangible amortization—a non-cash expense resulting from purchase accounting rules.

Speaker #3: Slide 11 in our deck shows quarterly margin accretion income and CDI amortization expense. I'll note that our quarterly CDI amortization number of $21 million is getting close to our quarterly accretion number.

Speaker #3: And I expect those lines to cross in the next four to five quarters. Additionally, I'll point out that our Q2 2026 EPS, excluding both accretion income and CDI amortization expense, was up 13% versus the second quarter of 2025.

Will Matthews: Additionally, I'll point out that our Q2 2026 EPS, excluding both accretion income and CDI amortization expense, was up 13% versus Q2 2025. Net interest income of $576 million was up $14 million from Q1. In comparing to Q1, the $6 million positive impact of the extra day in the quarter matched the $6 million decline in accretion income. As John noted, we had a record quarter for loan growth and loan production, with loan growth of $1.35 billion equating to an 11% annualized rate, matching the growth rate in average loans. Over 76% of our loan production in the quarter had a floating rate. Our Florida banking group led the company in loan growth dollars this quarter, and every one of our banking groups had good growth. Pipelines continue to be strong, though down slightly from 31 March levels. They remain well above other recent quarters.

Speaker #3: Net interest income of 576 million was up 14 million from Q1. In comparing to Q1, the 6 million dollar positive impact of the extra day in the quarter matched the 6 million dollar decline in accretion income.

Speaker #3: As John noted, we had a record quarter for loan growth and loan production, with loan growth of $1.35 billion equating to an 11% annualized rate.

Speaker #3: Matching the growth rate and average loans. Over 76% of our loan production in the quarter had a floating rate. Our Florida Banking Group led the company in loan growth dollars this quarter, and every one of our banking groups had good growth.

Speaker #3: Pipelines continue to be strong, though down slightly from March 31st levels. They remain well above other recent quarters. Non-interest income of $97 million, or 57 basis points of average assets, was within our guidance range of 55 to 60 basis points and $3 million below Q1's levels, as higher deposit fees were offset by lower mortgage revenue.

Will Matthews: Non-interest income of $97 million or 57 basis points of average assets was within our guidance range of 55 to 60 basis points and $3 million below Q1's levels, as higher deposit fees were offset by lower mortgage revenue. Non-interest expenses of $358 million were slightly better than guided. We had higher deferred loan origination costs offset due to the record quarter for loan production, but this was offset by higher incentive accruals and commission expenses, holding compensation costs flat with Q1 levels. Looking to the remainder of the year, we have no changes to our 2026 NIE guidance for the year. Consensus estimates for NIE are a bit above $1.46 billion, and this is in line with our 2026 guidance of 4% growth over 2025 levels. John noted the continuation of our successful record of low net charge-offs.

Speaker #3: Non-interest expenses of $358 million were slightly better than guided. We had higher deferred loan origination costs due to the record quarter for loan production, but this was offset by higher incentive accruals and commission expenses.

Speaker #3: We are holding compensation costs flat with Q1 levels. Looking to the remainder of the year, we have no changes to our 2026 NIE guidance.

Speaker #3: Consistency estimates for NIE are a bit above 1.46 billion and this is in line with our 2026 guidance of 4% growth over 2025 levels.

Speaker #3: John noted the continuation of our successful record of low net charge-offs. This quarter's six basis points makes eight out of the last nine quarters where our net charge-offs have been below 10 basis points.

Will Matthews: This quarter's 6 basis points makes eight out of the last nine quarters where our net charge-offs have been below 10 basis points. Provision expense of $16 million was primarily driven by the quarter's loan growth. We had a nice reduction in non-performing assets and in our classified loans, and payment performance remains very good. We continue to feel good about our credit quality. Turning to capital, we repurchased 1 million shares in the quarter at a weighted average price of $97.62 for a 68% total payout ratio including dividends. This brings our year-to-date total to 2.5 million shares repurchased for an 80% total payout ratio year-to-date. We continue to expect to generate solid growth, so our longer-term total payout ratio guidance remains in the 40% to 60% range, as John stated.

Speaker #3: Provision expense of $16 million was primarily driven by the quarter's loan growth. We had a nice reduction in non-performing assets and in our classified loans, and payment performance remains very good.

Speaker #3: We continue to feel good about our credit quality. Turning to capital, we repurchased 1 million shares in the quarter at a weighted average price of 97.62.

Speaker #3: For a 68% total payout ratio including dividends. This brings our year-to-date total to 2.5 million shares repurchased for an 80% total payout ratio year-to-date.

Speaker #3: We continue to expect to generate solid growth, so our longer-term total payout ratio guidance remains in the 40% to 60% range, as John stated.

Speaker #3: Even with a higher capital return posture and 11% loan growth in the quarter, capital levels remained very healthy. CET1 ended at 11.1%, TCE was 8.7%, and our TBV per share ended at $58.72, which is up 13% from the year-ago level—a period in which we repurchased over 4.9 million shares, or approximately 5% of the company.

Will Matthews: Even with a higher capital return posture and 11% loan growth in the quarter, capital levels remained very healthy. CET1 ended at 11.1%, TCE was 8.7%, and our TBV per share ended at $58.72, which is up 13% from the year ago level, a period in which we repurchased over 4.9 million shares, or approximately 5% of the company. Operator, we'll now take questions.

Speaker #3: Operator will now take questions.

Speaker #2: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand.

Operator 3: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the roster. Your first question comes from Stephen Scouten with Piper Sandler. Your line is open. Please go ahead.

Speaker #2: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #2: If you are muted locally, please remember to unmute your device. Please stand by while we compile the roster. Your first question comes from Steven Scouten with Piper Sandler.

Speaker #2: Your line is open. Please go ahead.

Speaker #3: Yeah. Good morning. Thank you. Maybe if I could start on NIM trends moving forward if you continue to grow loans at this kind of high single-digit, low double-digit pace.

Stephen Scouten: Yeah, good morning. Thank you. Maybe if I could start on NIM trends moving forward, if you continue to grow loans at this kind of high single-digit, low double-digit pace, and what you're seeing on deposit costs, specifically within that dynamic.

Speaker #3: And what you're seeing on deposit costs, specifically within that dynamic.

Speaker #4: Sure. Good morning, Steven. This is Steve. Yeah, just a reminder: net interest margin this quarter was 3.78% versus our guide last quarter at the 3.75% to 3.80% range.

Stephen D. Young: Sure. Good morning, Stephen. This is Steve. Yeah. Just a reminder, net interest margin this quarter was 378 versus our guide last quarter of the 375, 386, kind of right in line. Last quarter, we grew $900 million of interest-earning assets with only 1 basis point of contraction. I think that was a real win going forward. Deposit costs were flat at 176 and within that, our guidance. Really, as we think about going forward, really nothing has changed in our guidance. Our guidance going forward is stable and we're going to continue to grow. The format we usually use around interest-earning assets is the same as last quarter. We see the growth that John talked about continuing on in that mid to upper single-digit range.

Speaker #4: So, kind of right in line. And last quarter, we grew $900 million of interest-earning assets with only one basis point of contraction.

Speaker #4: So, I think that was a real win going forward. Deposit costs were flat at 1.76% and within our guidance. So, really, as we think about going forward, nothing has changed in our guidance.

Speaker #4: Our guidance going forward is stable. And we're going to continue to grow. So our the format we usually use around interest earning assets is the same as last quarter.

Speaker #4: We see the growth that John talked about continuing on in that mid to upper single-digit range. We have no rate cuts nor rate hikes in our forecast.

Stephen D. Young: We have no rate cuts nor rate hikes in our forecast, we sort of see a stable NIM, and we have some dynamics that are working there. Some of it is the repricing of our existing book that is for loans and securities, on the new production rates. All of that to say that we continue to expect NIM if we have flat rates through 2027, just to continue to be in that 375 to 380 range.

Speaker #4: And we sort of see a stable NIM. And we have a some dynamics that are working there. Some of it is the repricing of our existing book that is for loans and securities.

Speaker #4: And then on the new production rates— but all of that to say that we continue to expect NIM, if we have flat rates through 2027, just to continue to be in that 3.75% to 3.80% range.

Speaker #3: Okay, helpful. And I know you guys have talked about this ongoing conversation, both industry-wide and internally—about the push-pull between growth, NII, and NIM. Given your 2026 focus of driving meaningful balance sheet growth, I would presume that if you had to weigh one more than the other, you would say a couple of basis points of NIM compression would be okay as long as you're growing good customer loans and NII.

Stephen Scouten: Okay. Helpful. I know you guys talked about this ongoing conversation industry-wide and internally, the push-pull between growth and NII and NIM. Given your kind of 2026 focus of driving meaningful balance sheet growth, I would presume that you guys, if you had to weight one more to the other, would say a couple of basis points on NIM compression would be okay as long as you're growing good customers loans and NII. Is that fair in terms of your mindset?

Speaker #3: Is that fair in terms of your mindset?

Speaker #4: Yeah, that's exactly right, Steven. We set out a plan for this year that we're going to expand the team, and we're successfully doing that.

Stephen D. Young: Yeah, that's exactly right, Stephen. We set out a plan for this year that we're going to expand the team, and we're successfully doing that, and they're producing for us. That new hires that we've had have so far contributed $600 million of new loan production, they got a nice big billion and a half dollar pipeline coming behind that. We've got lots of opportunities to grow, every day when we make loan decisions, we're doing it based upon a risk-adjusted return on capital. We see opportunities continue to grow, we'll make those trade-offs that make sense to us from a capital management standpoint.

Speaker #4: And they're producing for us. New hires that we've had have so far contributed 600 million dollars of new loan production and they got a nice big billion and a half dollar pipeline coming behind that.

Speaker #4: So we've got lots of opportunities to grow. And every day when we make loan decisions, we're doing it based upon a risk-adjusted return on capital.

Speaker #4: And we see opportunities continue to grow, and we'll make those trade-offs that make sense to us from a capital management standpoint.

Speaker #3: Got it. And then just lastly for me, from a deposit growth standpoint, do you think— it seems like traditionally there’s a little bit more of a pickup in the back half of the year seasonally, in terms of deposit growth.

Stephen Scouten: Got it. Just last for me, from a deposit growth standpoint, it seems like traditionally there's a little bit more of a pickup in the back half of the year seasonally in terms of deposit growth. Would you expect that deposit growth would more closely match loan growth in the back half of the year? Just how do you think about the pressure on deposit costs as you manage that balance?

Speaker #3: Would you expect that deposit growth would more closely match loan growth in the back half of the year? And just kind of how do you think about the pressure on deposit costs as you manage that balance?

Speaker #4: Sure. Yeah, no, that's right. Obviously, there's seasonality that goes on in our book, and typically second and third quarter—second quarter because of tax payments, and third quarter is just the rest of the public fund stuff kind of comes out before it starts moving back up.

Stephen D. Young: Sure. Yeah. That's right. Obviously, there's seasonality that goes on in our book, typically Q2 and Q3. Q2 because of tax payments. Q3 is just the rest of the public fund stuff kind of comes out before it starts moving back up. Underlying all those trends, there's a lot of good deposit activity going on. From our perspective, as we think about that mid to upper single digit loan growth, we're going to fund it for the rest of the year somewhere in that mid to upper single digits. I would say that probably as we continue to remix the deposits, it's probably going to be in the mid-single digits over the next quarter or so, kind of move up towards the upper single digits probably in the last part of the year based on the seasonality.

Speaker #4: But underlying all those trends, there's a lot of good deposit activity going on. So from our perspective as we think about that mid to upper single-digit loan growth, yeah, we're going to fund it for the rest of the year somewhere in that mid to upper single-digit.

Speaker #4: I would say that, probably as we continue to remix the deposits, it's likely going to be in the mid-single digits over the next quarter or so.

Speaker #4: And then kind of move up towards the upper single digits, probably in the last part of the year, based on the seasonality.

Speaker #3: Okay, great. Thanks for all the color. Appreciate it, guys. Congrats on a great quarter.

Stephen Scouten: Okay, great. Thanks for all the color. Appreciate it, guys. Congrats on a great quarter.

Speaker #4: Thank you, Steve.

Stephen D. Young: Thank you, Stephen.

Speaker #2: Your next question comes from the line of John McDonald with Truist Securities. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of John McDonald with Truist Securities. Your line is open. Please go ahead.

Speaker #5: Good morning. Thanks. I was hoping to follow up on the last question around deposits. So inside of that outlook for the back half of the year, Steve, what do you see in terms of deposit mix in terms of non-interest bearing versus interest bearing?

John McDonald: Good morning. Thanks. I was hoping to follow up on the last question around deposits. Inside of that outlook for the H2 of the year, Stephen, what do you see in terms of deposit mix, in terms of non-interest bearing versus interest bearing? There were some different dynamics between kind of the end of period and average this quarter that I assume was kind of some seasonality. Just a little bit of color, maybe what happened this quarter on that mix and what you see for the H2. Thanks.

Speaker #5: There were some different dynamics between, kind of, the end-of-period and average this quarter that I assume was kind of some seasonality. So just a little bit of color, maybe, on what happened this quarter on that mix and what you see for the back half.

Speaker #5: Thanks.

Speaker #4: Sure, John. Yeah. As you mentioned, this quarter we had 5% average deposit growth quarter over quarter. So that's sort of how we get paid, as we all know.

Stephen D. Young: Sure, John. Yeah, as you mentioned this quarter, we had 5% average deposit growth quarter over quarter. That's sort of how we get paid, as we all know. We also had 5% non-interest-bearing deposit growth quarter over quarter. From time to time, there's, I don't know, seasonality things that happen on the last day of the quarter or whatever. We don't see that as a trend in a negative way. I just think that's a particular day. As we think about deposit mix, clearly as we think about deposit costs and all within our guidance in them, we were able to keep deposit costs flat this quarter. Obviously, if we continue to grow loans at this pace, they'll move up a little bit.

Speaker #4: And then we also had 5% non-interest-bearing deposit growth quarter over quarter. And so, from time to time, there's, I don't know, seasonality—things that happen on the last day of the quarter or whatever.

Speaker #4: We don't see that as a trend in a negative way. I just think that's a particular day. But as we think about deposit mix—clearly, as we think about deposit costs and all within our guidance and NIM—we were able to keep deposit costs flat this quarter.

Speaker #4: Obviously, if we continue to grow loans at this pace, they'll move up a little bit. But it's really just about if we grow in that kind of mid single-digit range over the next quarter or two, we should be able to keep those pretty contained.

Stephen D. Young: It's really just about if we grow in that mid-single-digit range over the next quarter or two, we should be able to keep those pretty contained. That's all part of our guide of margin coming forward. I think non-interest-bearing deposits, if you look at our treasury management kind of underneath the noise, we've grown treasury management accounts this year about 16% annualized year to date. Our year-to-date balances annualized have grown 8%. Underneath all the things that you all don't get to see, there's a lot of good growth going on in those areas.

Speaker #4: And that's all part of our guide of margin coming forward. So I think non-interest bearing deposits, if you look at our treasury management kind of underneath the noise, we've grown treasury management accounts this year, about 16% annualized year to date.

Speaker #4: And our year-to-date balances, annualized, have grown 8%. So, underneath all of the things that you all don't get to see, there's a lot of good growth going on in those areas.

Speaker #5: Great. Then maybe I could ask John for some color on loan growth. Maybe speak a little bit to the sustainability of the strength—whether new markets, legacy markets—any color on that would be helpful.

John McDonald: Great. Maybe we could ask John for some color on loan growth. Maybe speak a little bit to the sustainability of the strength you saw this quarter and where it's coming from, whether new markets, legacy markets. Any color on that would be helpful.

Speaker #4: Yeah, John. We've guided this year to mid to high single digits. And we kind of communicated last quarter that we thought based on the pipeline strength that we could wind up on the higher end of that guide.

John Corbett: Yeah, John, we've guided this year to mid to high single digits, we kind of communicated last quarter that we thought based on the pipeline strength that we could wind up on the higher end of that guide, and we did. We've grown 8% year over year. This year, we've grown 9% annualized. I just feel like we're on track for the prior guidance we gave you. The growth is really broad-based across all of our markets. From a dollar standpoint, naturally, as you'd think, the greatest contributors are the states where we have the largest presence, which is Florida, Texas, and South Carolina from a dollar standpoint. From a percentage standpoint, Atlanta saw really nice growth in C&I in Q2, so did Virginia, and so did Alabama.

Speaker #4: And we did. We've grown 8% year over year. This year, we've grown 9% annualized. So I just feel like we're on track for the prior guidance we gave you.

Speaker #4: The growth is really broad-based. Across all of our markets, from a dollar standpoint, naturally, as you'd think, the greatest contributors are the states where we have the largest presence, which is Florida, Texas, and South Carolina from a dollar standpoint.

Speaker #4: But from a percentage standpoint, Atlanta saw really nice growth in CNI in the second quarter. And so did Virginia, and so did Alabama.

Speaker #4: As we think about the first half of the year, John, versus the back half of the year, we saw a little higher and more elevated C&I seasonal paydowns in the first half and saw more CRE growth.

Will Matthews: As we think about H1, John, versus H2, we saw a little higher and more elevated C&I seasonal paydowns in H1 and saw more CRE growth. We looked for that possibly to shift in H2 where we would have more of a pickup in C&I, and we've got more planned CRE payoffs on H2. That's kind of the underlying mix shift that we see in our pipelines.

Speaker #4: We looked for that possibility to shift in the second half, where we would have more of a pickup in CNI, and we've got more planned CRE payoffs in the back half.

Speaker #4: So that’s kind of the underlying mix shift that we see in our pipelines.

Speaker #5: Great. Thank you.

John McDonald: Great. Thank you.

Speaker #2: Your next question comes from the line of Hannah Wynn with KBW. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Hannah Nguyen with KBW. Your line is open. Please go ahead.

Speaker #6: Hi, good morning. Stepping in for Catherine Mueller. I wanted to start off on expenses—your expenses came in strong this quarter, and I know you guys are working on hiring initiatives as well, and kept your guide at 4%.

Hannah Nguyen: Hi, good morning. Stepping in for Catherine Mealor. I wanted to start off on expenses. Your expenses came in strong this quarter. I know you guys are working on hiring initiatives as well and kept your guide at 4%. I was wondering where you're seeing the pricing of these new hires as markets become more competitive and where you expect expenses to trend for H2, as you guys have been relatively flat so far in H1 to 4% for the full year would be a pretty big ramp.

Speaker #6: I was wondering where you were seeing the pricing of these new hires as markets become more competitive and where you expect expenses to trend for the back half of the year as you guys have been relatively flat so far in the first half to 4% for the full year would be a pretty big ramp.

Speaker #4: Yeah, Hannah. Good morning. It's Will. Yeah, you're right. We have, as John said, had success in recruiting folks. And, of course, it's a competitive market in which we operate.

Will Matthews: Yeah, Hannah, good morning. It's Will. Yeah, you're right. We have, as John said, had success in recruiting folks. Of course, it's a competitive market in which we operate. We do think we offer a value proposition beyond just the compensation package in terms of our culture, our operating structure, the ownership culture, et cetera, which is helpful in our recruiting efforts with some of the disruption we see. In terms of the NII itself, as I mentioned in my prepared remarks, the one factor that did help on the compensation line is with loan production, you of course have a deferred origination cost offset you book that is then amortized over the life of that loan. As production picks up, that offset to comp expense increases.

Speaker #4: We do think we offer a value proposition beyond just the compensation package, in terms of our culture, our operating structure, the ownership culture, etc.

Speaker #4: Which is helpful in our recruiting efforts, given some of the disruption we see. In terms of the NIE itself, as I mentioned in my prepared remarks, one factor that did help on the compensation line is with loan production—you, of course, have a deferred origination cost offset you book that is then amortized over the life of that loan.

Speaker #4: So as production picks up, that offset to comp expense increases. That was a help in the second quarter. Somewhat offset by incentive accruals and a little bit higher commission expense in the quarter two.

Will Matthews: That was a help in Q2, somewhat offset by incentive accruals and a little bit higher commission expense in the quarter, too. We do expect good production in the back half of the year. We also have these folks that we've hired throughout Q1 and Q2 that'll be in the run rate for full quarters. We also have in Q3 beginning 1 July is when our merit increases for most of the company beyond the executive staff kick in. That's an inflationary number there for the comp expense. All that baked in is why in my prepared remarks, I was sort of holding steady with the 4% year-over-year, which is pretty much where consensus has it, I think, in the $460 to 465 range. We still feel good with that guide.

Speaker #4: We do expect good production in the back half of the year, but we also have these folks that we've hired throughout the first and second quarters that will be in the run rate for full quarters.

Speaker #4: We also have, in the third quarter beginning July 1, when our merit increases for most of the company beyond the executive staff kick in.

Speaker #4: So that's an inflationary number there for the comp expense. So all that baked in is why, in my prepared remarks, I was sort of holding steady with the 4% year-over-year, which is pretty much where consensus has it, I think, in the $460 million and $465 million range.

Speaker #4: So, we still feel good with that guide. There are obviously a lot of factors that change as you get near the end of the year.

Will Matthews: There are obviously a lot of factors that change as you get near the end of the year in terms of incentives and other things like that and the loan production number that can cause it to vary a little bit. That's really how we think about it.

Speaker #4: In terms of incentives and other things like that, and the loan production number, that can cause it to vary a little bit.

Speaker #4: But that's really how we think about it.

Speaker #6: Great, thank you. And then my other question is—I know you mentioned in your opening remarks keeping capital return in the 40% to 60% range.

Hannah Nguyen: Great. Thank you. Then my other question is on, I know you mentioned in your opening remarks, keeping capital return in the 40% to 60% range, and was just wondering if you could give a little more color on the timing, and expectations for share repurchases that you see for the rest of the year.

Speaker #6: I was just wondering if you could give a little more color on the timing and expectations for share repurchases that you see for the rest of the year.

Speaker #4: Yeah, that's a good question. I'm going to stick with our 40 to 60 percent guy. We have to make decisions as we serve out the environment from us.

Will Matthews: Yeah, that's a good question. I'm going to stick with our 40% to 60% guide. We have to make decisions as we serve at the environment from us. We do think we're blessed to have the ability to invest in growth, and we expect to continue to be able to do that. We have taken advantage of weaker share prices over the last year and been more active. If you look back over the last year, trailing 12 our payout ratio is 75%, and that includes Q3 of last year where we only bought back 440,000 shares. The last three quarters, the trailing nine months payout ratio is much higher. That's not sustainable if we want to maintain CET1 in that 11% to 12% range and still expect mid to high single-digit loan growth. Other than that's about as specific as we can get.

Speaker #4: We do think we're blessed to have the ability to invest in growth, and we expect to continue to be able to do that. We have taken advantage of weaker share prices over the last year and been more active.

Speaker #4: If you look back over the last year—trailing twelve months—our payout ratio is 75%. And that includes the third quarter of last year, where we only bought back 440,000 shares.

Speaker #4: So the last three quarters, the trailing nine months, payout ratio is much higher. That's not sustainable if we want to maintain CET-1 and 11 to 12 percent range and still expect high single digit mid to high single digit loan growth.

Speaker #4: But other than that, that's about as specific as we can get.

Speaker #6: Okay, great. Sounds good. Thank you so much.

Hannah Nguyen: Okay, great. Sounds good. Thank you so much.

Speaker #2: Your next question comes from Michael Rose with Raymond James. Your line is open. Please go ahead.

Operator 3: Your next question comes from Michael Rose with Raymond James. Your line is open. Please go ahead.

Speaker #5: Hey, good morning, guys.

Michael Rose: Hey, good morning, guys. Thanks for taking my questions. Maybe just on the loan pipeline and growth in generation. Can you just talk about how some of the newer bankers that you've hired over the past year or two have performed versus expectations? Just trying to get a sense of the momentum levels and how that translates or compares to kind of what's going on in your legacy markets versus the expansionary markets. Thanks.

Speaker #7: Thanks for taking my questions. Maybe just on the loan pipeline, growth, and generation—can you talk about how some of the newer bankers that you've hired over the past year or two have performed versus expectations?

Speaker #7: Just trying to get a sense of the momentum levels and how that translates or compares to kind of what's going on in your legacy markets versus the expansionary markets.

Speaker #7: Thanks.

Speaker #4: Yeah. Yeah, Michael. I go back to kind of the goal to kind of take advantage of some of this disruption occurring in our markets.

John Corbett: Yeah. Michael, I go back to the goal to take advantage of some of this disruption occurring in our markets. We laid out the opportunity for our division presidents to increase the commercial relationship manager, specifically team by 15% to 20% and be opportunistic over the next couple of years. We're up now over 10% in just three quarters. As I think I mentioned earlier, we're tracking the loan production and pipelines of those specific hires. Through three quarters, they've contributed $600 million of loan production. They've got a $1.5 billion pipeline. The most success we've seen, and we're very pleased with the team in Texas, led by Dan Strodel. They've had the most success as far as expanding the sales force. They're actually up 25% as far as the number of commercial RMs in Texas.

Speaker #4: We laid out the opportunity for our division presidents to increase the commercial relationship manager team specifically by 15 to 20 percent and be opportunistic over the next couple of years.

Speaker #4: We're up now over 10% in just three quarters. And, as I think I mentioned earlier, we're tracking the loan production and pipelines of those specific hires, and through three quarters, they've contributed $600 million of loan production.

Speaker #4: They've got a $1.5 billion pipeline. The most success we've seen—and we're very pleased with the team in Texas, led by Dan Stroedel—they've had the most success as far as expanding the Salesforce.

Speaker #4: They're actually up 25% as far as the number of commercial RMs in Texas. And as we work through the next few quarters, we look for the Southeast to continue to pick up on the hiring front.

Will Matthews: As we work through the next few quarters, we look for the Southeast to continue to kind of pick up on the hiring front. To be able to produce $600 million for that new team, I feel like they've hit the ground running.

Speaker #4: But to be able to produce $600 million for that new team, I feel like they've hit the ground running.

Speaker #7: Okay, very helpful. And then, maybe just one— I hear you on the return to the 40% to 60% total payout ratio. I did notice that the cash to assets is kind of low.

Michael Rose: Okay. Very helpful. Then maybe just one. I hear you on the return of the 40% to 60% total payout ratio. I did notice that the cash to assets is kind of low. I think it's like 2.5%. Any concerns around the ability to fund ongoing buybacks? Obviously nice to see the dividend increase. Thanks.

Speaker #7: I think it's like 2.5%. Are there any concerns around the ability to fund ongoing buybacks? And obviously, it's nice to see the dividend increase.

Speaker #7: Thanks.

Speaker #4: Yeah, Michael, this is Steve. No, there's nothing around that. Typically, if you look over our history, we run somewhere in that 2 to 3 percent range on the cash to assets.

Stephen D. Young: Yeah, Michael, this is Steve. No, there's nothing around that. We've typically, if you looked over our history, we run somewhere in that 2% to 3% range on the cash to assets. That's normal. As it relates to the buyback, that's not a limiting factor.

Speaker #4: So that's normal. So, as it relates to the buyback, that's not a limiting factor.

John Corbett: Cash is not a component of that decision-making process.

Speaker #8: Cash is not a component of that decision-making process.

Speaker #4: No.

Stephen D. Young: No.

Speaker #7: All right. I'll step back. Thanks, guys.

Michael Rose: All right, I'll step back. Thanks, guys.

Speaker #2: Your next question comes from the line of Janet Lee with TD Cowen. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Janet Lee with TD Cowen. Your line is open. Please go ahead.

Speaker #6: Good morning.

Janet Lee: Good morning.

Speaker #4: Good morning.

Will Matthews: Morning.

Will Matthews: Good to see your deposit costs being relatively stable. Are you suggesting that your NIM guide is assuming deposit costs increase a little bit from here or stay relatively stable through the year-end? Just want to clarify your comments there.

Speaker #6: Good to see your deposit costs being relatively stable. So, are you suggesting that your NIM guide is assuming deposit costs increase a little bit from here or stay relatively stable through the year-end?

Speaker #6: I just want to clarify your comments there.

Speaker #4: Sure. Yeah. No, this is Steve. Yeah, we think that deposit costs would move up a little bit here. Over the rest of the year, depending on how long rates stay flat and we're but as we think about the opportunity of growth, your incremental deposit cost is going to be marginally higher, which is going to over time add to it.

Stephen D. Young: Sure. Yeah. No, this is Steve. We think that deposit costs would move up a little bit here over the rest of the year, depending on how long rates stay flat. As we think about the opportunity of growth, your incremental deposit cost is going to be marginally higher, which is going to, over time, add to it. As you kind of look at what happened this past quarter, we also have repricing of the old book. Yeah, I would expect it to move up a little bit. From a standpoint of it's well within the guidance of being able to reprice some of the other assets on our balance sheet, and that's why we get stable NIM.

Speaker #4: But as you kind of look at what happened this past quarter, we also have repricing of the old books. So yeah, I would expect it to move up a little bit.

Speaker #4: But from a standpoint of it's well within the guidance of being able to reprice some of the other assets on our balance sheet. And that's why we get stable NIM.

Speaker #6: Right. And is NIM having an upward bias, or could it come in at the high end if we get a hike? Is that a fair assumption?

Hannah Nguyen: Right. Is NIM having a upward bias or could come in at the high end if we get a hike? Is that a fair assumption?

Speaker #4: Yeah, no, it's a really good question. So if you think about it, it really depends upon the curve. But the way we kind of characterize our interest rate position is we are asset sensitive.

Stephen D. Young: Yeah. No, it's a really good question. If you think about it really depends upon the curve. The way we kind of characterize our interest rate position is we are asset sensitive. If they hike rates, let's say every 25 basis points, the curve doesn't change, then it's probably reasonably neutral. If everything goes up 25 basis points or everything goes up 50 basis points, then it is very accretive to our NIM. That's the asset sensitivity. We still continue to get the asset repricing, which is very beneficial. At the same time, we get a better curve. If it's the way I would characterize it, we're pretty stable around whether rates go up or rates go down. If there's a bear flattener, it's probably pretty much a wash. If it's a shock up, then that would be positive to the NIM.

Speaker #4: If they hike rates, let's say every 25 basis points, but the curve doesn't change, then it's probably reasonably neutral. But if there's an upward move—if everything goes up 25 basis points or everything goes up 50 basis points—then it is very accretive to our NIM.

Speaker #4: That's the asset sensitivity. So, we still continue to get the asset repricing, which is very beneficial. At the same time, we get to have a better curve.

Speaker #4: So, the way I would characterize it is we're pretty stable, whether rates go up or rates go down. If there's a bear flattener, it's probably pretty much a wash.

Speaker #4: But if it's a shock up, then that would be positive to the NIM.

Speaker #6: Thank you. And if I can just squeeze in one more—fee income trajectory. It's been down the past couple of quarters. How should we think about the growth trajectory here, and where do you see the most upside in terms of growth?

Janet Lee: Thank you. If I can just squeeze in one more. Fee income trajectory, it's been down the past couple of quarters. How should we think about the growth trajectory here, and where do you see the most upside in terms of growth? What's a good growth rate for fee income in 2026 and perhaps beyond 2026?

Speaker #6: What's a good growth rate for fee income in '26 and perhaps beyond '26?

Speaker #4: Sure. Yeah. On page 12, we have a summary of our non-interest income over the last four quarters. And you can kind of see it's a little bit bumpy.

Stephen D. Young: Sure. Yeah. On page 12, we have a summary of our non-interest income over the last four quarters, you can kind of see it's a little bit bumpy. The $97 million this quarter was 57 basis points of assets. Our guide has continued to be 55 to 60 basis points. If you look at it a year ago, Q2 a year ago, we're up 11%. A lot of that is because of the correspondent revenue. On the right-hand side of that page, you'll see that gross revenue has increased about $5 million. How we kind of look at it, really nothing's changed on that guidance. 55 to 60 basis points is the right number. As we grow assets, there's going to be continued growth. From a percentage perspective, I'd see us somewhere in the middle of that range.

Speaker #4: The $97 million this quarter was 57 basis points of assets. Our guide has continued to be 55 to 60 basis points. And if you look at it a year ago—second quarter a year ago—we're up 11%.

Speaker #4: And a lot of that is because of the correspondent revenue on the right-hand side of that page. You'll see that gross revenue has increased about $5 million.

Speaker #4: So I would kind of look at it. Really, nothing's changed on that guidance. 55 to 60 basis points is the right number. And as we grow assets, we're trying to continue to there's going to be continued growth, but from a percentage perspective, I'd see us somewhere in the middle of that range.

Speaker #4: So no change there.

Stephen D. Young: No change there.

Speaker #6: Right. So, correspondent banking—is it relatively stable based on what you're seeing in the markets?

Janet Lee: Right. Correspondent banking, is it relatively stable based on what you're seeing in the markets?

Speaker #4: I think that's right. We've kind of guided to 25 million dollars gross a quarter. And last quarter was 24/4. This quarter is 24/8. Obviously, things change in that business relative to the curve.

Stephen D. Young: Yeah, that's right. We've kind of guided to $25 million gross a quarter. Last quarter was $24.4. This quarter is $24.8. Obviously, things change in that business related to the curve. I guess if interest rates got out of whack one way or the other, it could materially affect that a little bit in the short run. Right now, we have a pretty good run rate going on and feel pretty good about that.

Speaker #4: So I guess if interest rates got out of whack one way or the other, it could materially affect that a little bit in the short run.

Speaker #4: But right now, we have a pretty good run rate going on and feel pretty good about that.

Speaker #6: Got it. Thank you.

Janet Lee: Got it. Thank you.

Speaker #2: Your next question comes from Gary Tenner with DA Davidson. Your line is open. Please go ahead.

Operator 3: Your next question comes from Gary Tenner with D.A. Davidson. Your line is open. Please go ahead.

Speaker #5: Thanks. Good morning. I wanted to ask a follow-up on the kind of conversation about the components of loan growth in the back half of the year, particularly in the construction segment, which was obviously a pretty significant contributor.

Gary Tenner: Thanks. Good morning. I wanted to ask a follow-up on the kind of conversation about the components of loan growth in H2, particularly in the construction segment, which was obviously a pretty significant contributor. Does the comment about commercial real estate payoffs extend to construction, or should we assume that we're kind of in a phase right now where you had this build of commitments to construction that are going to continue to fund up and drive net growth there for the next several quarters?

Speaker #5: Does the comment about commercial real estate payoffs extend to construction or should we assume that we're kind of in a phase right now where you had this build of commitments in construction that are going to continue to fund up and drive net growth there for the next several quarters?

Speaker #4: Yeah. Gary, so if you step back and look at the big picture, that construction category is down about 10% from this time. Last year.

Stephen D. Young: Yeah, Gary. If you step back and look at the big picture, that construction category is down about 10% from this time last year. But we did see a move up this particular quarter, and it was due, there was a fair amount of owner-occupied construction projects for C&I clients, multifamily construction. But to my comment earlier about the back half of 2026, we do have a number of planned payoffs of multifamily. That is just part of their normal cycle that will be paying off on schedule. We are going to see more of that in the H2. But we see a pickup in the C&I areas. In the C&I areas, a number of these are seasonal kind of pay downs, number one, that we have seen in the last couple of quarters. One is the energy book.

Speaker #4: But we did see a move up this particular quarter, and it was due to a fair amount of owner-occupied construction projects for CNI clients—multifamily construction.

Speaker #4: But to my comment earlier about the back half of 2026, we do have a number of planned payoffs of multifamily. That's just part of their normal cycle that will be paying off on schedule.

Speaker #4: So we're going to see more of that in the second half, but we see a pickup in the CNI areas. And in the CNI areas, a number of these are seasonal kind of paydowns.

Speaker #4: Number one that we’ve seen in the last couple of quarters is the energy book. With oil prices as high as they are, our clients are experiencing really strong cash flows.

Stephen D. Young: With oil prices as high as they are, our clients are experiencing really strong cash flows, and they are paying down their lines. We saw a reduction in capital call lines. As we move into the H2 of the year, we see some of that business picking back up while we are also faced with the planned payoffs of multifamily. But really, one goes up, the other goes down. Really, the guidance still, we still feel pretty confident that we are in that mid to high single-digit range and could very well be on the higher end of that range.

Speaker #4: And they're paying down their lines. We saw a reduction in capital call lines. So, as we move into the back half of the year, we see some of that business picking back up, while we're also faced with the planned payoffs of multifamily.

Speaker #4: But really, one goes up, the other goes down, but we still feel pretty confident that our guidance is in that mid- to high-single-digit range.

Speaker #4: And could very well be on the higher end of that range.

Speaker #5: Got it. Thank you. And then just a question about the allowance. If you look over the past five quarters, really since the first quarter last year, the AAAL is down 32 basis points.

Gary Tenner: Got it. Thank you. Just a question about the allowance. If you look over the past five quarters, really since the Q1 last year, the ALLL is down 32 basis points. The allowance for credit losses overall is down 30 basis points to 130. What is the kind of glide path, if you will, to where this could go given a positive economic environment? I guess the question is, where do you see this trending the next few quarters?

Speaker #5: The allowance for credit losses overall is down 30 bps to 1.30%. What's the kind of glide path, if you will, to where this could go given a positive economic environment?

Speaker #5: I guess the question is: Where do you see this trending over the next few quarters?

Will Matthews: Sure, Gary. It is Will. I would say overall, we would expect the recent trend we have seen to continue absent significant changes in the Moody's expectations for unemployment, CRE price index, and other loss drivers that impact the model more significantly. We have seen some downward pressure on the level of reserves from the migration of loans from PCD to non-PCD, the PCD loans carrying a higher reserve. On the other side, you had some small upward pressure as rates have moved up because prepay models show a slowing down there, and that impacts reserve rolls up a little bit. But overall, some downward pressure. Our provisioning really this quarter was really for growth. The other comment I will make, too, is if you look at our

Speaker #4: Sure. Gary, it's Will. I'd say, overall, we would expect the recent trend we've seen to continue absent significant changes in the Moody's expectations for unemployment, the CRE price index, and other loss drivers that impact the model more significantly.

Speaker #4: We've seen some downward pressure on the level of reserves from the migration of loans from PCD to non-PCD. The PCD loans carry a higher reserve.

Speaker #4: On the other side, you've had some small upward pressure as rates have moved up because prepay models show a slowing down there. And that impacts reserve levels up a little bit.

Speaker #4: But overall, some downward pressure. Our provisioning this quarter was really for growth. The other comment I'll make too is if you look at our scenario weightings, as you know, Moody's has various different scenarios.

Will Matthews: Our scenario weighting, because Moody's has various different scenarios, and we model three scenarios and weight them. The baseline, the S1, which is more optimistic, and the S3, which is more pessimistic. Our traditional weighting is 40, 30. 40 baseline, 30 for each of those two. We moved to a more pessimistic weighting about probably a year or so ago, I can't remember exactly. We have, for the last few quarters, been weighting 40, 20, 40. We have 40% in S3 rather than 30, and 20% in S1 rather than 30. Over time, we would expect to go back to 40, 30, there is enough uncertainty out there in the economy with what we've been through the last year with tariffs and the conflict in the Middle East that we have elected to be a little more conservative in that regard.

Speaker #4: And we model three scenarios and weight them: the baseline, the S1, which is more optimistic, and the S3, which is more pessimistic. Our traditional weighting is 40/30/30—40 for the baseline, 30 for each of those two.

Speaker #4: We moved to a more pessimistic weighting about a year or so ago. I can't remember exactly, but for the last few quarters, we have been weighting 40/20/40.

Speaker #4: So, we have 40% in S3 rather than 30%, and 20% in S1 rather than 30%. Over time, we would expect to go back to 40/30/40/30, but there is enough uncertainty out there in the economy with what we've been through over the last year with tariffs and the conflict in the Middle East that we have elected to be a little more conservative in that regard.

Speaker #4: But anyway, that's sort of again, absent a big change in the economic forecast, we think we're still in that slight downward pressure from here.

Will Matthews: Anyway, that's sort of again, absent a big change in the economic forecast, we think we're still in that slight downward pressure from here.

Speaker #5: Thanks. Appreciate it.

Gary Tenner: Thanks, appreciate it.

Speaker #2: Your next question comes from the line of Anthony Ellian with JP Morgan. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Anthony Elian with JPMorgan. Your line is open. Please go ahead.

Speaker #3: Hi everyone. On deposit costs, can you give us a bit more color on what you're seeing with competition? I think last quarter you mentioned you saw more competition towards the end of the quarter, and that new money rates started in the 2.40% range and ended at 3%.

Anthony Elian: Hi, everyone. On deposit costs, can you give us a bit more color on what you're seeing on competition? I think last quarter you mentioned you saw more competition towards the end of the quarter, and that new money rates started in the 240 range and ended at 3%. Is that still a dynamic you're seeing?

Speaker #3: Is that still dynamic, you're seeing?

Speaker #4: Yeah, sure, Anthony. Yeah, this is Steve. Actually, yeah, just to give you an update on some of the stats, our new money market rates referenced last quarter—this quarter, we raised a little over $470 million at a 2.68%.

Stephen D. Young: Sure, Anthony. This is Steve. Actually, just to give you an update on some of those stats. Our new money market rates reference last quarter. This quarter, we raised a little over $470 million out of 268. I think last quarter, the average was 268. I think about roughly a little bit lower of a number. That trend toward the end of the quarter sort of died down, and sort of where we are now is at 268. We also had about $1.01 billion in new and renewed CDs last quarter on the retail side. The average rate it renewed at was at 352, and from the first quarter last, it was at 369. I'd say that on the retail side, that has sort of calmed down a little bit on the new money market and CD rate form.

Speaker #4: I think last quarter the average was 268. I think it was roughly a little bit lower than that number. So, that trend toward the end of the quarter sort of died down, and sort of where we are now is the 268.

Speaker #4: We also had about $1.1 billion in new and renewed CDs last quarter on the retail side. The average rate they renewed at was 3.52%.

Speaker #4: And from the first quarter, it was at 369. So I'd say that on the retail side, that has sort of calmed down a little bit on the new money market and CD rate.

Speaker #4: Forum, so that's kind of how that's played out.

Stephen D. Young: That's kind of how that's played out.

Speaker #3: Okay. And then, on correspondent, I think in the past you’ve talked about some initiatives and products in the pipeline that, at some point, could drive an increase in that stream of revenue.

Anthony Elian: Okay. On correspondent, I think in the past you've talked about some initiatives and products in the pipeline that at some point could drive an increase in that stream of revenue. Could you give us an update on those products and a timing of when you could see a lift? I think you got it to $25 million per quarter. Thank you.

Speaker #3: Could you give us an update on those products, and a timing of when you could see a lift from those? I think you got it to $25 million per quarter.

Speaker #3: Thank you.

Speaker #4: Sure. Yeah, no, that's a good point. And yeah, there are a few things that we have been working on and are continuing to work on that we just got an update on.

Stephen D. Young: Sure. Yeah, no, that's a good point. Yeah, there's a few things that we have been working on and are continuing to work on that we just have got an update on. One is relative to commodity hedging, which is an extension of our energy business that we already do. We're in the testing phase of that and make sure that we've got all the risk controls on that. I would say that's probably a 2027 event, as well as some of our on our commercial clients, we have some FX initiatives that we're working on, and that is also a 2027 go live. We're testing some things, but really a 2027 go live area. I think right now there's not going to be any significant change to our guidance this year.

Speaker #4: So, one is relative to commodity hedging, which is an extension of our energy business that we already do. We're in the testing phase of that and making sure that we've got all the risk controls on that.

Speaker #4: I would say that's probably at a 2027 event, as well as with some of our commercial clients. We have some FX initiatives that we're working on.

Speaker #4: And that is also a 2027 go-live. We're testing some things, but really, it's a 2027 go-live area. So I think right now there's not going to be any significant change to our guidance this year.

Speaker #4: And then, as we get into the fourth quarter, I'd probably be able to give you a better sense of where the timing of those initiatives is for 2027.

Stephen D. Young: As we get into the Q4, I'd probably be able to give you a better sense on where the timing of those initiatives are for 2027.

Speaker #3: Thank you.

Anthony Elian: Thank you.

Speaker #2: Your next question comes from the line of Ben Gerlinger with Citigroup. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Ben Gerlinger with Citigroup. Your line is open. Please go ahead.

Speaker #5: Hi. I know you guys have had really good loan growth and production, from the hirings and also just legacy team members as well. But I was just kind of curious—have payoffs slowed more than what you were anticipating?

Ben Gerlinger: Hi. I know you guys have had really good loan growth production and from the hirings and also just legacy team members as well. I was just kind of curious, have payouts slowed more than what you were anticipating? Just largely from the merger or in Texas, just trying to think about the pace of growth or kind of the dynamics, considering one is filling the bucket and one is just kind of a natural emptying. How has that emptying part trended relative to past expectations?

Speaker #5: Is that growth largely coming from the merger, or is it in Texas? I'm just trying to think about the pace of growth and the dynamics, considering one is filling the bucket and one is just kind of a natural emptying.

Speaker #5: How has that emptying part trended relative to past expectations?

Speaker #4: Yeah. The Texas-Colorado franchise went through the conversion a year ago, so naturally, they're inwardly focused and distracted. As a result, their production and their payoffs weren't providing much growth.

John Corbett: Yeah. With the Texas-Colorado franchise went through the conversion a year ago. Naturally their inwardly focused and distracted. Their production and their payoffs weren't providing much growth. Now they're growing at exactly the same rate as the rest of the Southeast franchise, up around 10%, 11%, if you exclude the specialty lines. This particular quarter, we actually saw more payoffs than we had in the prior quarters. It was tied to what I mentioned earlier, some of these C&I businesses, energy and capital call lines that we don't think is a trend. We think that business picks back up in the back half of the year.

Speaker #4: Now they're growing at exactly the same rate as the rest of the Southeast franchise, up around 10%—11% if you exclude the specialty lines.

Speaker #4: This particular quarter, we actually saw more payoffs than we had in the prior quarters, and it was tied to what I mentioned earlier—some of these C&I businesses, energy, and capital call lines. We don't think this is a trend.

Speaker #4: We think that business picks back up in the back half of the year.

Speaker #5: Got it. Okay, that's helpful. I just wanted to dovetail off of Tony's question within correspondent banking. Is the payout ratio, or more so—sorry, not payout, but efficiency ratio for that business—uniquely different than the bank? Or, if that grows, should we expect a higher pace of expenses, albeit equal?

Ben Gerlinger: Got it. Okay, that's helpful. I just wanted to dovetail off of Tony's question within the correspondent banking. Is the efficiency ratio for that business uniquely different than the bank? Or if that grows, should we expect a higher pace of expenses, albeit equal?

Stephen D. Young: Yeah. This is Steve. Yeah. That's correct. The efficiency ratio on maybe the fixed income portion is a little bit higher, more like a wealth management, maybe in the 70% range. Some of our other products, it's closer to 40 or so. I would kind of just, as we grow that revenue base, I would grow the expense base by, I don't know, I'd call it half just to make a simple math statement there.

Speaker #4: Yeah, yeah, this is Steve. Yeah, that's correct. The efficiency ratio on maybe the fixed income portion is a little bit higher, maybe more like in the wealth management—maybe in the 70% range.

Speaker #4: And then some of our other products, it's closer to 40 or so. So I would kind of just—as we grow that revenue base, I would grow the expense base by, I don't know, I'd call it half, just to make a simple math statement there.

Speaker #5: Yeah. And as you know, Ben, it's not a capital-intensive business. So a higher efficiency ratio in that business still makes it very attractive.

Jeremy Lucas: As you know, Ben, it's not a capital-intensive business, so a higher efficiency ratio in that business still makes it very attractive.

Jeremy Lucas: As you know, Ben, it's not a capital-intensive business, so a higher efficiency ratio in that business still makes it very attractive

Speaker #5: Right. Yeah. No, actually, sorry. I just wanted to double-check, considering your initiatives are 27% growth. I just wanted to make sure I have it squared away.

Stephen D. Young: Right. Yeah. No issues there. I just want to double-check, considering your initiatives are 27 growth. I just wanted to make sure I have it squared away. I appreciate the time. Thank you, guys.

Speaker #5: But I appreciate the time. Thank you, guys.

Speaker #4: Thank you.

Jeremy Lucas: Thank you.

Speaker #2: Your next question comes from the line of David Chiaverini with Jefferies. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of David Chiaverini with Jefferies. Your line is open. Please go ahead.

Speaker #6: Hi, thanks for taking the questions. I had a follow-up on NIM. I appreciate slide 11 laying out the accretion income. With the downward trend in accretion income and you're holding the NIM guide flat at 3.75% to 3.80%, it implies the core NIM should show a nice increase.

David Chiaverini: Hi. Thanks for taking the questions. I had a follow-up on NIM. Appreciate slide 11 laying out the accretion income. With the downward trend in accretion income, and you're holding the NIM guide flat at 375 to 380, it implies the core NIM should show a nice increase. Can you talk about the drivers behind that core NIM expansion?

Speaker #6: Can you talk about the drivers behind that core NIM expansion?

Speaker #4: Sure. Yeah. No, happy to. And yes, your point is well taken. And it's really sort of the same thesis we had a couple of years ago when we did the independent deal.

Stephen D. Young: Sure. Yeah, no, happy to. Yes, your point is well taken, and it's really sort of the same thesis we had a couple of years ago when we did the independent deal, is that as the accretion moves out, the loan repricing moves in, and we move it from reported NIM to core NIM. The stats for the NIM and the repricing there as accretion comes down is we have about $6 billion of loans that will reprice within the next year or so. Depending on whether they're floating or fixed, we sort of give it 50 basis points of repricing. Some will be higher than that, some will be lower than that. But about 50 basis points of hikes.

Speaker #4: Is that as the accretion moves out, the loan repricing moves in, and we move it from reported NIM to core NIM. But the stats on sort of the NIM and the repricing there as accretion comes down is we have about 6 billion dollars of loans that will reprice within the next year or so.

Speaker #4: Depending on whether they're floating or fixed, we sort of give it four or five basis points, or 50 basis points, of repricing. Some will be higher than that.

Speaker #4: Some will be lower than that, but about 50 basis points of hikes. And then also, we have about $1 billion of securities that will come cash flow back to us, that will give us about a 1% course depending on the curve.

Stephen D. Young: Also we have about $1 billion of securities that'll come cashflow back to us that will give us about 1%, of course, depending on the curve. Those things are going to create, when I refer run off, when the legacy Independent loans pay off as they should, particularly the vintage in 2021 and 2022 that were five-year loans, and they roll off at coupons that are 3% and 4%, and we reprice them in the sixes, that's going to shift that bucket from less accretion and more core as we reprice those loans.

Speaker #4: So, those things are going to create, as we run off some of the—when we're off, when the legacy independent loans pay off as they should—particularly the Vantage in '21 and '22, that were five-year loans—and they roll off at coupons that are 3% and 4%, and we reprice them in the sixes, that's going to shift that bucket from less accretion and more core as we reprice those loans.

Speaker #6: Very helpful, thank you. And you touched on my follow-up—I was going to ask about the rate on new production. It sounds like it's in the sixes?

David Chiaverini: Very helpful. Thank you. You touched on my follow-up. I was going to ask about the rate on new production. It sounds like it's in the sixes.

Speaker #4: Yeah, that's right. And part of it has to do with the floating/fixed rate mix. And I think Will mentioned it in his prepared remarks that we've been really working on the balance sheet mix to get more of that in an uncertain rate environment.

Stephen D. Young: Yeah. That's right. Part of it has to do with the floating fixed rate mix. I think Will mentioned it in his prepared remarks that we've been really working on the balance sheet mix to get more. In an uncertain rate environment, we want to get more of our loan book to floating. This quarter, our loan production was 76% floating, 24% fixed. If you kind of look at the overall loan portfolio now, we've made a lot of progress on that front, so that last year, in June 30th of last year, 32% of our loans were in the floating rate bucket. Now we've improved that to 38%.

Speaker #4: We want to get more of our loan book to floating, and so this quarter our loan production was 76% floating, 24% fixed. And so, if you kind of look at the overall loan portfolio now, we've made a lot of progress on that front.

Speaker #4: So, as of June 30th of last year, 32% of our loans were in the floating rate bucket. Now we've improved that to 38%.

Speaker #4: And so, as we think about new loans and interest rate sensitivity and the durability of NIM, we believe we've got the balance sheet and the earnings stream in a much more stable position if rates go up, because we've gotten more floating rate loans.

Stephen D. Young: As we think about new loans and interest rate sensitivity and durability of NIM, we think we've got the balance sheet and the earnings stream in a much more stable position if rates go up because we've gotten more floating rate loans. I think that's an appropriate way to think about it.

Speaker #4: So I think that's an appropriate way to think about it.

Speaker #6: Very helpful. Thank you.

David Chiaverini: Very helpful. Thank you.

Speaker #2: Your next question comes from the line of Dave Bishop with Hovde Group. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of David Bishop with Hovde Group. Your line is open. Please go ahead.

Speaker #5: Yeah, good morning. Following up on the comments in the preamble about some of the strongest growth, I think you mentioned Virginia and Alabama. As I look at the branch map, maybe there isn't as much critical mass there.

David Bishop: Good morning. Following up the comments in the preamble about some of the strongest growth. I think you mentioned Virginia, Alabama, as I sort of look at the branch map, maybe not as much critical mass there. Are those regions where you may target or circle back for additional bank or lift outs? Just curious, maybe any sort of new markets you might be targeting for additional expansion.

Speaker #5: Are those regions where you may target or circle back for additional bank or lift-outs? Just curious if there are any new markets you might be targeting for additional expansion.

Speaker #4: Yeah. We love the markets we're in. We really just want depth and density in those markets. So to the extent Bobby Cowgill, who runs Virginia for us, has opportunities to expand and recruit commercial RMs, we're going to do that.

John Corbett: We love the markets we are in. We really just want depth and density in those markets. To the extent Robert Cowgill, that runs Virginia for us, has opportunities to expand and recruit commercial RMs, we are going to do that. We built out Hampton Roads maybe 2 or 3 years ago and have had a lot of success there. Really no new markets on the horizon. We really just want depth and density. We did expand to Nashville in a loan production office, I guess it has been about a year and a half ago with Cameron Wells, and he is doing a great job. No expansion markets on the horizon right now.

Speaker #4: We built out Hampton Roads maybe two or three years ago and have had a lot of success there, but really, no new markets on the horizon.

Speaker #4: We really just want depth and density. We did expand to Nashville in a loan production office, I guess it's been about a year, year and a half ago with Cameron Wells.

Speaker #4: And he's doing a great job. But no expansion markets on the horizon right now.

Speaker #5: Got it. Appreciate the call.

David Bishop: Got it. Appreciate the call.

Speaker #2: Your next question comes from the line of Samuel Varga with UBS. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Samuel Varga with UBS. Your line is open. Please go ahead.

Speaker #5: Hey, good morning. I wanted to go back to the balance sheet discussion a little bit. This quarter, with the loan growth you had, the loan-to-deposit ratio went up just north of 90%.

Samuel Varga: Hey, good morning. Just wanted to go back to the balance sheet discussion a little bit this quarter with the loan growth you had. The loan-to-deposit ratio went up just north of 90%. Obviously, with cash down, there's a little bit of a less of an opportunity to not pair fund it with deposits. Loan growth outpaces deposits. Where can that loan-to-deposit ratio go? What sort of governor do you have on that?

Speaker #5: Obviously, with cash down, there's a little bit of a less of an opportunity to not pair fund it with deposits. But in case loan growth outpaces deposits, where can that loan to deposit ratio go?

Speaker #5: What sort of governor do you have on that?

Speaker #4: Yeah. We typically been pretty conservative on that loan to deposit ratio. Typically, the way we think about it is at the beginning of a cycle, you typically start that loan to deposit ratio at a little less so-called I think in the mid-70s or so.

Stephen D. Young: Yeah. We've typically been pretty conservative on that loan-to-deposit ratio. Typically, the way we think about it is at the beginning of a cycle, you typically start that loan-to-deposit ratio at a little less, so call it I think in the mid-70s or so. Later in the cycle, you probably want to be in the 90% range. We probably would let it go as high as maybe 92, but probably not much higher than that is our thinking today. That's all part of the guide. If you think about our interest-earning assets, we're going to fund the loans portfolio with the deposit portfolio.

Speaker #4: And then later in the cycle, you probably want to be in the 90% range. Yeah, we probably would let it go as high as maybe 92%, but probably not much higher than that is our thinking today.

Speaker #4: And that's all part of the guide. If you think about our interest-earning assets, we're going to fund the loan portfolio with the deposit portfolio.

Speaker #4: And as John talked about the new bankers, some of this is, as we continue to put new bankers on the ground and as they bring on their new customers, over time, it'll continue to grow that deposit book as we continue to mature those things.

Stephen D. Young: As John talked about the new bankers, some of this is as we continue to put new bankers on the ground, and as they bring on their new customers, over time, it'll continue to grow that deposit book as we continue to mature those things. I would kind of just look at it in terms of the same guide on our interest-earning assets. That's kind of how we're going to fund the loan growth.

Speaker #4: So I would kind of just look at it in terms of the same guide on our interest-earning assets. That's kind of how we're going to fund the loan growth.

Speaker #5: Great, thank you for that, Steve. And then just on the competitive landscape—we've touched on this a bunch over the last couple of quarters—comparing the Southeast versus Texas and Colorado.

Samuel Varga: Great. Thanks for that, Steve. Just on the competitive landscape, we've touched a bunch on this the last couple of quarters on the Southeast versus Texas and Colorado. In the Texas, Colorado markets, are you seeing more pressure from the deposit side or the loan spread side? How would you say that?

Speaker #5: In the Texas-Colorado markets, are you seeing more pressure from the deposit side or the loan spread side? How would you say that?

Speaker #4: Yeah, I think it's similar to what it's been. For instance, in Texas and Colorado both, our CD rate is a little higher over in that market than it is over in the Southeast markets, about 25 basis points.

Stephen D. Young: Yeah. I think it's similar to what it's been. Like for instance, in Texas and Colorado both, our CD rate is a little higher over in that market than it is over in the Southeast markets, about 25 basis points. I think it's probably more so on the deposit side is where we feel a little bit more of the pressure, but that's probably just market to those markets.

Speaker #4: So I think it's probably more so on the deposit side where we feel a little bit more of the pressure. But that's probably just market to those markets.

Speaker #5: Great, thanks for taking my questions.

Samuel Varga: Great. Thanks for taking my questions.

Speaker #2: We have reached the end of the Q&A session. I will now turn the call back over to John Corbett for closing remarks.

Operator 4: We have reached the end of the Q&A session. I will now turn the call back over to John Corbett for closing remarks.

Operator 3: We have reached the end of the Q&A session. I will now turn the call back over to John Corbett for closing remarks.

Speaker #4: All right, thank you, Jesse. I just want to end by thanking our team. We’re executing successfully on the four goals we laid out last year.

John Corbett: All right. Thank you, Jesse. I just want to end by thanking our team. We're executing successfully on the four goals we laid out last year. SouthState's financial performance is among the top quartile in our peer group. The plan's working, and as you've heard throughout the call today, our guidance from prior quarters is basically unchanged. I want to thank you for joining us this morning, and feel free to reach out with any follow-up questions, and I hope you have a great day.

Speaker #4: SouthState's financial performance is among the top quartile in our peer group. The plan's working. And as you've heard throughout the call today, our guidance from prior quarters is basically unchanged.

Speaker #4: So, I want to thank you for joining us this morning, and feel free to reach out with any follow-up questions. I hope you have a great day.

Speaker #2: This concludes today's call. Thank you for attending. You may now disconnect.

Operator 4: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Thank you for joining South State Bank Corporation Q2 2026 Earnings Conference Call. The line will disconnect automatically.

Operator 3: This concludes today's call. Thank you for attending. You may now disconnect.

Operator 1: This event has now concluded. Thank you for joining South State Bank Corporation Q2 2026 Earnings Conference Call. The line will disconnect automatically.

Q2 2026 SouthState Bank Corp Earnings Call

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