SouthState’s Share Buybacks Signal Valuation Disconnect

Date of Call: Jan 23, 2026

Financials Results

• Revenue: Not explicitly provided; PPNR for Q4 was $323M, full year $1.27B
• EPS: Q4: $2.47 per share; Full year: $9.50 per share

Guidance:

• Net Interest Margin for 2026 expected to be between 3.80% and 3.90%.
• Loan growth for 2026 expected to be mid- to upper single-digit.
• Noninterest Income for 2026 expected to increase ~4% over 2025 levels ($1.407B).
• Deposit beta for 2026 expected to be around 27% initially, potentially moving toward 30%.
• Noninterest Income businesses to be expanded, adding ~1% to inflationary ~3% increase.
• Correspondent Capital Markets revenue forecast at ~$100M for the year.
• Operating expenses for 2026 expected to grow ~4% over 2025 NIE base.
• Three rate cuts expected in 2026.

Business Commentary:

Acquisition Integration and Financial Growth:

• SouthState Bank Corporation reported that earnings per share in 2025 are up over 30% excluding merger costs, with a 10% increase in tangible book value per share.
• The company also experienced an 11% dividend raise and share repurchases.
• This growth was driven by the successful integration of the Independent Financial deal, which expanded operations into Texas and Colorado, despite initial risks.

Loan and Deposit Growth:

• The company ended the year with 8% loan growth and 8% deposit growth in the fourth quarter.
• This was supported by a strong pipeline that led to record production of $3.9 billion in loans for the quarter.
• Growth was attributed to effective pipeline building and the momentum in Texas and Colorado markets.

Net Interest Margin and Costs:

• SouthState reported a 3.86% tax equivalent net interest margin (NIM) and a 1.82% cost of deposits for the fourth quarter.
• Despite a decline in accretion income, the NIM excluding accretion improved by 2 basis points.
• The stability in margins was supported by controlled deposit costs and a forecast of three rate cuts.

Non-Interest Income and Expenses:

• Non-interest income for the fourth quarter was $106 million, up $7 million from the previous quarter, largely driven by performance in the correspondent Capital Markets division.
• The increase in expenses was due to higher performance-based compensation and increased marketing and business development spending.
• The company expects a 4% increase in non-interest income in 2026, driven by initiatives to expand revenue producers.

Capital Return and Share Repurchase:

• SouthState repurchased 2 million shares in the fourth quarter, representing 2% of the company, and authorized an additional 5 million shares for repurchase.
• The company maintained healthy capital ratios, with a Tier 1 Common Equity ratio of 8.8% and a CET1 ratio of 11.4%.
• The aggressive share repurchase was driven by the belief in a disconnect between the company's fundamentals and its valuation.

Sentiment Analysis:

Overall Tone: Positive

• "Our goal for 2025 was to have a clean conversion, achieve our cost save mandate and get the organization growing at historical levels by the fourth quarter. And the team accomplished those goals." "The integration is now in the rearview mirror, the risk profile of the company is reduced. The fundamentals of the company are as good as they've ever been, and we're carrying that momentum into 2026." "We had good balance sheet growth in the quarter with loans and deposits growing at an 8% annualized rate."

Q&A:

• Question from John McDonald (Truist Securities): I thought I would just ask Steve to give the thoughts on the net interest margin for the year, and how you're thinking about deposit costs and growing deposits to fund the loan growth you expect?
  Response: Guidance unchanged: NIM expected 3.80-3.90% for 2026; deposit beta ~27% initially, moving to ~30% over time; three rate cuts expected.

• Question from John McDonald (Truist Securities): Inside of that earning asset outlook, could you talk about your loan growth expectations. You ended the year with good momentum with the 8% you cited. How are you feeling about the loan growth outlook for this year?
  Response: Guidance unchanged: mid- to upper single-digit loan growth for 2026, driven by pipelines; upper end could be boosted by investor CRE and Texas/Colorado momentum.

• Question from Stephen Scouten (Piper Sandler): So just curious on the hiring activity. Do you guys think about, especially maybe within that expense guidance a number, a target that you hope to hit in terms of new hires? Or is it really just about being opportunistic across the platform and really just leaning into the opportunity set?
  Response: Hiring target of 10-15% increase in commercial RMs over next 1-2 years is opportunistic and already factored into expense guidance.

• Question from Stephen Scouten (Piper Sandler): And then I guess my follow-up question would be come around correspondent banking and the strength there. Do you think the strength we've seen, especially the last couple of quarters is is sustainable? Or is there anything more episodic that's led to the strength there?
  Response: Strength driven by rate changes; expects correspondent revenue to average ~$25M per quarter in 2026, with full-year NII at ~55-60 basis points of assets.

• Question from Unknown Analyst (JPMorgan): You saw a little bit of an uptick in 4Q sequentially. Anything that we should back out to get a good run rate for 2026? And does expense growth of mid-single digits that you guys guided previously. Does that still feel appropriate for 2026?
  Response: Q4 expense uptick due to performance, loan growth incentives, seasonality, and growth initiatives; 2026 operating expense guidance is ~4% growth over 2025 NIE base.

• Question from Unknown Analyst (JPMorgan): And then as a follow-up on the buyback, how quickly do you guys anticipate using that new authorization. Is there a price sensitivity at a certain level? Any commentary on that would be great.
  Response: Buyback activity is flexible, driven by share price vs. intrinsic value; total payout ratio (dividends + buybacks) expected in 40-60% range, but could vary.

• Question from Catherine Mealor (KBW): Just wanted to do one follow-up on expenses. I know you said this in the beginning, well, but what was the base that was your growing expenses by a 4% level that was on operating expenses, right?
  Response: Base was 2025 noninterest expense of $407M; guidance is to grow that by ~4% for 2026.

• Question from Catherine Mealor (KBW): And then maybe one thing back to the margin. Can you talk a little bit about the deposit data commentary was great as good as it come down. Just on loan pricing and where you're seeing that. And maybe just kind of update on that balance and what we should expect to see there would be helpful.
  Response: Legacy fixed-rate loans ($4.3B repricing in 12 months) reprice up from ~5% to new origination rate of ~6.06%; Independent book ($2B in 4 quarters) reprices down from ~7% to ~6.25%. Net positive ~$2.3B at ~1%.

• Question from Unknown Analyst (Barclays): Maybe just thinking a little bigger picture about investments outside of hiring this year. Are there any projects planned on the tech side in like correspondent can you or anything else across the business that you're looking into?
  Response: Investments in commercial loan servicing platform, AI, FX platform, and revenue-producing initiatives; focused on completing platforms to drive revenue.

• Question from Unknown Analyst (Barclays): And then maybe on the deposit pricing side, starting the year at like [ 1.75. ] Is that to migrate lower throughout the year? And I guess, does the beta move lower as we get further cuts and you get to a lever in the work deposit area?
  Response: Deposit costs expected to start at ~1.75%, with beta initially 27%, aiming for 30% over time; growth pace will influence beta.

• Question from Gary Tenner (D.A. Davidson): Just wanted to ask a little bit about the loan production side. I know the $3.9 billion was a great number. Just curious if you could tell us how much was in Texas or if you want to combine Texas and Colorado and then what the comparative third quarter levels were the same market?
  Response: Texas/Colorado production was $888M in Q4, 15% higher than Q3; full-year 2025 production up 10% vs. 2024; 17 of 26 new RMs added in Q4 were in Texas/Colorado.

• Question from David Bishop (Hoffe Group): And just in terms of the hiring efforts you mentioned there, you mentioned the disruption, I think over -- I think it was close to $120 billion in terms of bank deposits going through the conversions. As we look out into the year, you mentioned the '26 here. Are there -- the calling efforts do you have like a list of bankers, list of clients you're looking to target -- do we see something similar to that maybe in the latter half of the year in terms of lift-outs.
  Response: Has a formal pipeline of ~40 bankers; in Q3 had conversations with bankers, grew to 237 in Q4; will hire a small percentage of those in active conversations.

Contradiction Point 1

Deposit Cost Beta Assumption

Contradiction on deposit rate sensitivity to future rate cuts, impacting funding cost modeling.

Will deposit rates start at 1.75% and decrease? Will the beta rate also decrease with further rate cuts? - Unknown Analyst (John on for Jared Shaw, Barclays)

20260123-2025 Q4: Deposit costs expected to align with ~1.75% rate by end of Q1 2026. Pricing lags CD rates; aim to align by early April 2026. - Stephen Young(CSO)

What drove the 11 bps QoQ increase in transaction and money market account costs? Was it to attract new deposits for expected growth? - Gary Tenner (D.A. Davidson)

2025Q3: Deposit beta is modeled at 27% for the next easing cycle (vs. 38% seen initially). As rates are cut, deposit costs are expected to improve, but funding loan growth will require diligence. - Stephen Young(CSO)

Contradiction Point 2

Non-Interest Expense (NIE) Growth Guidance

Contradiction on the expected growth rate for noninterest expenses in 2026.

What factors caused the Q4 expense increase, and is mid-single-digit expense growth still appropriate for 2026? - Unknown Analyst (Mike on for Anthony Elian, JPMorgan)

20260123-2025 Q4: 2026 guidance remains ~4% growth on 2025 operating expenses of $1.407B. - William Matthews(CFO)

Any change to Q4 NIE outlook of $345M-$350M? - Gary Tenner (D.A. Davidson)

2025Q3: For 2026, mid-single-digit growth is planned (~3% inflation plus ~1% for organic growth investments). - William Matthews(CFO)

Contradiction Point 3

Net Interest Margin (NIM) for 2026

Conflict on NIM trajectory and drivers for 2026, affecting income statement forecasting.

How do you view the net interest margin for the year, deposit cost trends, and deposit growth strategies to support loan growth? - John McDonald (Truist Securities)

20260123-2025 Q4: Expect NIM to remain between 3.80%-3.90% in 2026, starting lower in Q1 and rising later. - Stephen Young(CFO)

What's your outlook on the M&A and talent acquisition opportunities in your markets? - Stephen Kendall Scouten (Piper Sandler & Co.)

2025Q2: The NIM is expected to drift higher in 2026 as legacy SouthState loans reprice... In 2026, the NIM is expected to drift higher due to this repricing dynamic, even in a stable rate environment. - Stephen Dean Young(CFO)

Contradiction Point 4

Loan Growth Expectations for 2026

Shift from mid-single-digit guidance to mid- to upper-single-digit potential, impacting asset growth outlook.

What are your loan growth expectations for the year, given the 8% growth achieved? - John McDonald (Truist Securities)

20260123-2025 Q4: 2026 guidance remains mid- to upper single-digit loan growth. - John Corbett(CEO)

With strong origination momentum, will organic loan growth reach mid- to high-single digits in the second half of the year? - Catherine Fitzhugh Summerson Mealor (Keefe, Bruyette, & Woods, Inc.)

2025Q2: While mid-single-digit growth is the current guidance, if the yield curve becomes more favorable, growth could move into the mid- to upper-single-digit range in 2026. - John C. Corbett(CEO)

Contradiction Point 5

NIM Guidance and Response to Rate Cuts

Contradiction on NIM sensitivity to rate cuts between quarters.

How do you expect deposit costs and deposit growth to impact net interest margin and support loan growth this year? - John McDonald (Truist Securities)

20260123-2025 Q4: Expect NIM to remain between 3.80%-3.90% in 2026, starting lower in Q1 and rising later. - Stephen Young(CFO)

Would the NIM guide accelerate with rate cuts? What are the key learnings and growth potential from the IBTX transaction? - Stephen Scouten (Piper Sandler)

2025Q1: In a 25 bps rate cut scenario, the NIM impact is modeled to be minimal, around 1-2 bps. - John Corbett(CEO)