Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the SouthState Bank Corporation First Quarter 2026 Earnings Conference Call. Today's conference is being recorded. The operator provided instructions. At this time, I would like to turn the conference over to William Matthews, Chief Financial Officer. Please go ahead.

Good morning. Welcome to SouthState's First Quarter 2026 Earnings Call. This is Will Matthews, and I'm here with John Corbett, Steve Young and Jeremy Lucas. We'll follow our pattern of brief remarks followed by Q&A. I'll refer you to the earnings release and investor presentation under the Investor Relations tab of our website. Before we begin our remarks, I want to remind you that comments we make may include forward-looking statements within the meaning of the federal securities laws and regulations. Any such forward-looking statements we may make are subject to the safe harbor rules. Please review the forward-looking disclaimer and safe harbor language in the press release and presentation for more information about our forward-looking statements and risks and uncertainties which may affect us. Now I'll turn the call over to you, John.

Thank you, Will. Good morning, everybody. Thanks for joining us. For the quarter, SouthState delivered a return on assets of 1.37% and a return on tangible common equity of 17.6%. As we progress through 2026, our 4 main priorities are: first, to expand our commercial banking sales force; second, to deliver meaningful organic growth; third, to systematically retire shares at an attractive valuation; and fourth, to learn how to leverage the benefits of artificial intelligence and implement it throughout the company. We're making good progress on all 4 fronts. As far as recruiting, we're now in a yield curve environment that is more favorable to balance sheet growth. And with the consolidation disruption occurring throughout our markets, we see an opportunity to expand our commercial banking team by 10% to 15% in the next couple of years. In the last 6 months alone, our division presidents were successful in attracting and growing our commercial banking team by about 7%. We're going to continue to be opportunistic, but based upon the rapid success we may slow the pace of hiring in the next few months. Second, for organic loan growth, loan pipelines have grown 50% since last summer, and that's resulted in solid annualized loan growth of 8% in the fourth quarter and then another 7.5% loan growth in the first quarter. Pipelines grew significantly again in the first quarter, which gives us confidence moving forward. Our previous loan growth guidance for 2026 called for mid- to upper single-digit growth this year. There's a decent chance that we could end up on the higher end of our guidance. The biggest highlight by far has been the success in Texas and Colorado. On a year-over-year comparison, loan production in those 2 states have more than doubled from $500 million in the first quarter of 2025 to $1.1 billion in the first quarter of 2026. And Houston, specifically, experienced the highest loan growth of any market in the entire company this quarter. Third, on stock buybacks. We've repurchased nearly 4% of our shares outstanding since the beginning of the third quarter at an average price of $95.28. We continue to see this as an attractive use of excess capital at a time when bank valuations seem, at least to us, disconnected from fundamental performance and intrinsic value. And then fourth, we're enthusiastically embracing the potential for artificial intelligence. We're deploying more and more Copilot licenses and training our bankers at the individual user level. We're researching and beginning to deploy AI tools from our major software providers at the department level. And we're looking for ways to reengineer processes between departments at the enterprise level. More to come, but we're pleased with the way the entire organization is embracing these new tools with the goal of improving our speed and scalability, speed for improved customer service and then scalability for efficiency and shareholder returns. Before I turn it over to Will, I'll point out that we've refreshed some of the slides in our deck to highlight the value proposition of being a SouthState shareholder. Our story hasn't changed and it isn't complicated. We're building a premier deposit franchise and we're doing it in the fastest-growing markets in the United States. We adhere to a geographic and local market leadership business model. It's a model that empowers our division presidents to tailor their team, products and pricing to deliver remarkable service to their unique local community. And at the same time, an incentive system built on geographic profitability that instills a CEO and shareholder mindset. This is a model that produces durable results that have outperformed our peers on deposit cost, asset quality and overall returns. And the outperformance is consistent and durable over the last year, over the last 5 years, and over the last 20 years, ultimately leading to a top quartile shareholder return over multiple cycles. Will, I'll turn it back over to you to walk through the details on the quarter.

Thanks, John. Our net interest margin of 3.79% was just below our guidance of 3.80% to 3.90%. The slight miss was primarily a result of deposit costs being a few basis points above our expectation in spite of the 6 basis point improvement from the prior quarter. Loan yields of 5.96% were slightly below our new loan production coupons of 6.09% for the quarter and accretion of $38.8 million was in line with expectations and $11.5 million below Q4 levels. Excluding accretion, our NIM was up 1 basis point. Net interest income of $562 million was down $19 million from Q4 with the day count impact being $12.6 million of that difference. As John noted, we had another good loan growth quarter with loans growing $896 million, a 7.5% annualized growth rate. Average loans grew at a 6.5% annualized rate. Our Texas and Colorado team led the company in loan growth, and every banking group within the company grew loans in the first quarter. We have some optimism about continuing loan growth as our pipeline at quarter end was up 33% compared with year-end. Noninterest income of $100 million was at the high end of our range of 55 to 60 basis points guidance. We had a solid quarter in capital markets and wealth with seasonally lighter deposit fees, offset by stronger mortgage revenue, which was aided by an increase in the MSR asset value net of the hedge. Noninterest expense of $359.5 million was in line with expectations. Looking ahead, we have no changes to our noninterest expense guidance for the remainder of the year. But if we have greater success in our recruiting efforts and we've been pleased with our success thus far, noninterest expense could, of course, move up somewhat. Net charge-offs of $10 million represented a 9 basis point annualized rate for the quarter, and this amount was matched by our provision for credit losses. Nonaccrual and substandard loans were down slightly. Payment performance remains very good, and we continue to feel good about our credit quality. Turning to capital. We repurchased 1.5 million shares in the quarter at a weighted average price of $100.84. This makes a total of 3.5 million shares repurchased in the last 2 quarters. And our share count was 97.9 million shares at quarter end, down from 101.5 million shares a year prior. Like last year's fourth quarter, the first quarter payout ratio was higher than we expect to maintain over the long term, but we thought it is an opportune time to be more active. Our strong loan pipeline and recruiting success give us some optimism, but we'll need to retain capital to support healthy growth. Even with a higher capital return posture and a 7.5% annualized loan growth in the quarter, capital levels remained very healthy. CET1 ended at 11.3%. Our TCE was 8.64%, and our tangible book value per share ended at $56.90. I'll point out that our TBV per share is up almost $7 or 14% and above the year ago levels, and our TCE ratio is up 39 basis points from March 2025, even with our higher capital return activity over the last couple of quarters. Operator, we'll now take questions.

Operator: We'll go first to Catherine Mealor at KBW.

I wanted if you could start on the margin. Will, you talked about how the margins fell a little bit below the range just on deposit costs. Curious if you still think that 3.80% to 3.90% range is fair for the year or if deposit pressures are bringing that a little bit lower than the range?

Sure. Thanks, Catherine. This is Steve. Let me kind of walk through our various assumptions and update them versus last quarter. So to your point, yes, we thought that the margin would start out in the low 3.80s for the first quarter and trend higher during the year, it looks like we missed that by a couple of basis points at the start of the year. If you look at the 4 things that really make up that guidance and our forecast — the level of interest-earning assets, the rate forecast, what our loan accretion forecast is, and deposit costs — those are the 4 things. If you look at the interest-earning assets, I think we forecasted for the first quarter we'd be between $60 billion and $60.5 billion. I think we ended up at $60.2 billion so right in the middle of that. We said for the year that our interest-earning assets would average somewhere in the $61 billion to $62 billion range. And I think where we are with that, we think that it's a potential — we're kind of reiterating that, but we do think that the loan growth might drive that slightly higher. A little bit too early to tell, but interest-earning assets could end the year in the $63 billion to $64 billion range relative to the fourth quarter, but the average is probably going to be more on the high end of what we were thinking. As it relates to the rate forecast, last quarter we thought that there would be 3 rate cuts coming into 2026. It looks like right now the market is now pricing in zero cuts relative to the Fed outlook. I think the 2-year and the 5-year Treasury rates were up 40 basis points from the lows earlier this quarter. So we've now taken out the rate cuts in our forecast. On loan accretion, which is our third one, we forecasted $125 million for the full year of 2026, and there's really no change to that, it's coming in line with what we had expected. And then the last one was on deposit costs and our original deposit beta forecast was 27%. It looks like we came in around 20% for the quarter. So if you go back and look at the movie, I think for the first 100 basis points of cuts, we got a 24 and had a 38% beta. And then the last 75 basis points, we had a 20% beta. So you combine it all together, we've had a 30% beta on 175 basis points. But as we look forward and think about the deposit environment that we're at in the flat environment with our growth trajectory, we think that the deposit cost will be in the mid-170s versus our early forecast to be in the low mid-170s. So based on all these assumptions, we'd expect NIM to be in the 3.75% to 3.80% range. If growth is in the mid-single digits, we would expect NIM to be on the high end of the range. And if growth is a little bit higher in the high single digits, we'd expect the NIM to be on the lower end of the range with net interest income higher. So hopefully, that helps tell you all the different assumptions.

Yes, that's great. And then just kind of take us in big picture. I mean it feels like this is growth related, right? So as you just think about your model and your forecast, is there a big change in NII dollars? Or is it more that earning assets are higher and that's coming with a little bit of a lower margin, but that you're at the same place in terms of dollars?

Yes. I think if you look at our models in 2026 because growth takes a while to accelerate and get into the budget for 2026, the NIM is, if you have lower NIM in the short run, it gets you lower NII dollars in 2026. But if you look at 2027, it all sort of catches up with higher growth. So that's kind of the way I would describe the net interest income dollars.

We'll move next to John McDonald at Truist Securities.

Great. I was hoping you could drill down a little bit in terms of what you're seeing on the loan growth front? What gives you confidence that you might be able to see the high end there? And kind of just drill down a little bit more in terms of gross production versus payoffs and utilization.

John, it's John Corbett. The production — loan production that we had in the first quarter was very similar to the fourth quarter, which that was a record for us, almost $4 billion. But a lot of the growth came in the latter part of the quarter. We wound up at 7.5% loan growth. Last quarter was 8%. And really, the growth was broad-based, both from the type of loan we are doing and also the geography. Investor CRE was up 9%, C&I is up 9%, single-family residential owner occupied, up mid-single digits. And from a geography standpoint, I think Will said in his opening remarks, every single geography grew led by Texas and Colorado, which was the thing that puts a smile on our face as we worked through the integration last year. Following Texas and Colorado at $1.1 billion, Florida and South Carolina each did about $640 million of production. Greenville was the strongest in South Carolina and as I mentioned earlier, Houston had the highest production in the entire company. But winding the clock forward even with the $3.8 billion in production, we did not drain the pipeline. The pipeline stayed full, and we actually grew the pipeline 33%. So it went up to $6.4 billion from the end of the year which was $4.8 billion. A lot of that's happening in Florida and Texas. So just with the momentum we're seeing with the pipeline growth, we think we can keep this momentum going, and we think we could be in the upper end of our guidance that we gave you previously.

We'll move next to Stephen Scouten at Piper Sandler.

One other question maybe on the NIM front. It's just — the change in the guidance, how much of that would you say is related to that last comment you made about the progression of deposit competition versus removing those 3 cuts? I think at one point it was maybe 1 to 2 basis points of help for every 25 bps, but I think that had been diminished over time. So just kind of wondering the puts and takes...

Yes, I think it's probably half and half. So I mean, I think the 2 things driving a little bit the NIM lower between 3.75% and 3.80% versus 3.80%–3.90% are probably half attributable to our view of growth versus what we originally gave you — so that's probably half of it — and probably the other half is the deposit competition being higher than we expected. And so the question is, when we got down to the final mile on the deposit beta getting from 20% to 27%, rate went up toward the end of the quarter. And so I would assume at some point when we get back to a rate cutting cycle, that will ease off and we'll be able to get some of that, particularly in some of the new markets. But that would be kind of how I would characterize it, if that's helpful.

Extremely helpful. And then maybe digging into the hiring plans and activity a little bit more. Obviously, you put that as your #1 strategic goal in the presentation. So can we get an update on what that number was this quarter? I think it was 26 last quarter? And then kind of if you continue to be focused more on Texas, Colorado, maybe the newer IBTX markets and maybe even the Nashville market, which I think was a newer entrant for you guys?

Yes, we kind of kicked off the initiative at the beginning of the third quarter to expand the commercial banking sales force by 10% to 15% in the next couple of years. This is the kind of thing you have to be opportunistic about; it's not going to happen on a straight line. The team geared up and built a recruiting pipeline with a couple of hundred folks in there. We've grown the commercial banking team specifically by 7% from October 1 to March 31. Most of that net growth occurred in Texas and Colorado. Dan Strodl and the team have done a great job carrying the brand and the flag out there. That's an area I'd probably ask them to integrate and assimilate the team and maybe not grow too fast. But I'd like to see our team in the legacy Southeast markets continue to take advantage of that growth. So I think maybe by the end of the year, when we end the third quarter of 2026, maybe we're in the 10% net growth rate.

Okay. If I could sneak in one more. Just kind of wondering how you're thinking about the total payout ratio. Obviously, the last couple of quarters have been extremely aggressive, but I know Will said you might need to hold more capital for growth. So how can we think about what you might be from a total payout ratio?

Stephen, really, our guidance of 40% to 60% over the medium to long term still holds. And I think that makes sense. If you think about it at a — call it, a 17% return on tangible common equity, if we're growing at the 8% to 10% range, then a 46% payout ratio would essentially hold our capital levels pretty constant. We did exceed that not only in the fourth quarter, but also here in the first quarter. I think first quarter is around 93%, but we thought it was an opportune time given where the share price dislocation was in our minds and we're more active. But I'll also say too, our capital policy and thoughts about capital in addition to the growth, we have, I think, a pretty sophisticated capital stress testing framework, and that informs our capital thoughts as well. So we integrate that, and we like to travel in that 11% to 12% CET1 range.

We'll move next to Anthony Elian at JPMorgan.

Will, you reiterated the expense outlook of 4% you gave us last quarter. Just thinking about the cadence of quarterly expenses. Is it pretty consistent with each remaining quarter or anything you'd call out for the pattern of expenses by quarter?

Yes. I'll call out a couple of things and say, of course, there are items that vary with revenue. You've got some revenue-based expenses, but some general trends we've seen over the years and embedded structural items. Generally, most of our staff annual base pay increases typically occur on July 1. So that kicks in the third quarter. That's one thing to keep in mind. Our ownership model incents people both in support and in running a business with revenue to think about how they spend money. Sometimes you see more conservatism earlier in the year and sometimes — last year, if you look at our fourth quarter, you saw less conservatism with respect to noninterest expense spend. First quarter, you've got normal things like higher FICA expense, higher 401(k) match and those kinds of things. So anyway, we're still sticking with our guidance that we gave heading into the year in that roughly 4% range and we'll continue to update that as the year goes along. And some of that will, of course, depend on, as John said, the opportunistic nature of our hiring initiatives; you can't necessarily time that exactly when you want it when good people become available.

And then, John, you made a comment in your prepared remarks that you may slow the pace of hiring in the next few months given the success you've seen. It just seems like you have a lot of room across your footprint to keep making hires. Is the potential for a slowdown of hiring due to keeping a closer eye on what expenses could do over the short term? Or just walk us through that, please.

Anthony, it's less about expense growth. Hiring folks is really an investment in the long-term growth of the bank. You look at our core values; it's all about the long-term horizon and the compounding effects of that. So really, it's less about expense and more about the assimilation process. We've hired 75 or 80 commercial bankers in 6 months. A lot of that occurred in Texas and Colorado. You just want to make sure folks are assimilating well into the credit culture of the bank there. So I'd probably look to slow a little bit in Texas and Colorado and continue to be opportunistic in the Southeast.

We'll go next to Michael Rose at Raymond James.

Steve, the fees to average assets were a little bit above the target this quarter. I think it was 61 basis points. Obviously, some good momentum there. Any change in thoughts to that? And can we get an update on the correspondent business just given the changing rate curve in your view?

Sure. Thanks, Michael. Yes. On noninterest income, our guidance for the full year noninterest income to average assets was between 55 and 60 basis points. We ended up at 61 basis points. We put a new slide on Page 12 in the deck that you can look at for the trend. The good news is year-over-year we're up from $86 million in the first quarter of 2025 to $100 million now, which is healthy growth. On the correspondent revenue, that graph on Page 12 shows it has driven almost half of it. We were at $16.7 million a year ago and now around $24.4 million. In our earlier call in January, we mentioned we probably thought we'd average somewhere in the $25 million a quarter on correspondent revenue. There's really no change to that. We were $24.4 million so basically right in line. There might be some quarter-to-quarter volatility, but that's generally where we see it. We're growing the asset base as we're growing.

I appreciate it. Maybe just as a follow-up, related to the pipeline commentary. I think you said they're still strong and robust. Can you size that for us? And maybe given the success you've had hiring in the Texas and Colorado markets, what that could contribute to growth for the franchise over time? I would expect that it would grow at an increasing rate and the mix would be weighted towards those 2 markets given some of the success and some of the merger disruption.

Just to frame up the size of the pipeline. A year ago, the pipeline at the beginning of the year was $3.2 billion. Right now, it's $6.4 billion. So it's doubled. Two-thirds of that growth has occurred in Florida, Texas and Colorado. There is a bit of a mix shift. Last year, most growth was in C&I and very little in commercial real estate. The commercial real estate portion of the pipeline has picked up from 35% of the pipeline a year ago to about 45% now. Still, C&I is the majority of it.

We'll move next to Janet Lee at TD Bank.

This is Noah on for Janet Lee. First question, with the investment securities portfolio moving a bit higher, can you walk through how you're thinking about the trade-off between deploying into securities versus loans?

Sure. As we think about balance sheet growth, we're mainly looking at it relative to loan growth. Our securities to assets is around 13%. In this interest rate environment, unless we get a few more rate cuts and there's more of a carry trade, that's probably not something we'd be aggressively funding new security purchases with. I don't expect the securities book to move significantly. We have about $900 million maturing the rest of the year and about $900 million in 2027, and that weighted average rate is around 3.60%. So we probably get about 100 basis points on just keeping that book reinvested, but I don't expect us to expand the book significantly.

Got it. That's helpful. And then a follow-up. I appreciate the AI slide in the deck. I'm wondering from a cost perspective, is there anything quantifiable that you're seeing in terms of expense saves and then when we would begin to see that flowing through to the bottom line?

The incremental cost of AI on the margin is not that high. A lot of our major software providers are embedding AI tools in software we already use. On the individual user level, Copilot licenses are an expense but relatively small. The important part is learning individual use cases. For example, we own a factoring company where it takes an individual about 2.5 minutes to load an invoice, and there's always some human error. We've employed an AI tool that can process 1,000 invoices in 2.5 minutes with 100% accuracy. These are small use cases but they're getting everyone excited. As far as expense run rate, I don't see a big build; much of this is embedded in software we currently utilize.

I think a follow-up to that is our way of measuring success over the long term, probably over the next 18 to 24 months, will be the ratio of revenue producers to support personnel. The expectation is that as we increase revenue producers, support personnel should stay relatively flat, and that should open up margin via efficiency. That's how we're thinking about monitoring it.

Next, we'll move to Gary Tenner at D.A. Davidson.

A couple of questions. First, just a follow-up on the capital commentary and the kind of payout ratio questions from earlier. Any preliminary calculation on the potential impact of new capital rules on your capital levels?

Yes, Gary, we have run some math on that. It's roughly a 7% reduction in our risk-weighted assets, and that would be roughly an 85 basis point positive impact on our CET1 levels. Now I'll say that we don't run the company where the regulatory limit is our controlling factor. There are a lot of other factors, including our capital stress testing as well as ensuring we maintain the confidence of the rating agencies. So I don't know that that necessarily changes our thoughts a whole lot, but certainly something new and we have to study it further.

Appreciate that. And then a follow-up on the fee side of things. Just curious about the deposit account fee line. Obviously, you had a really sizable ramp over the course of 2025, and this quarter seemed a little more of a seasonal dip than typical. So I'm just curious how you see that line trend either full year-over-year or just over the course of the year?

Typically, the fourth quarter hits the highs of the year because of seasonal debit card activity in the Christmas season and so on. I would expect the trend year-over-year to be in the 3%–4% range. If you model it in that way, that's within our 55 to 60 basis points guidance for noninterest income to average assets.

We'll go next to Ben Gerlinger at Citi.

I just wanted to follow up on correspondent banking. You guys said roughly $25 million per quarter, $100 million for the year. I know there's sensitivity to rates. So is it more business activity and then thinking longer term, if we do get a couple more cuts, could that $25 million turn into $30 million? How should we think about the business operations overall?

It's a good question. Let me frame it and clarify gross versus net. When I speak about correspondent revenue, I'm speaking to gross revenue. The $24.4 million is gross revenue. The minus 3 million is the variation margin, which is really an interest margin, so the fees produced were $24.4 million. Historically, in our best years that business did about $110 million of revenue and the worst year about $70 million. So we're towards the higher end of that. We're also rolling out new products that won't have much impact in 2026 but could in 2027, particularly around commodities to support our energy business and some FX hedging. That could add a few million dollars. There's reasonable upside longer term, but with the current volatility, the quarter-to-quarter picture can change. I wouldn't assume $30 million per quarter in 2027 yet; we need to see product rollout results and get more visibility by October.

Got you. Okay. That's great color. And then just a follow-up on mortgage. Is there a fair value mark or anything that's in there? It seems large.

Ben, it's Will. As I mentioned in my prepared remarks, we had our normal practice reviewing our MSR valuation, and we had a positive impact this quarter of about $4.5 million net on the MSR valuation. Some quarters that moves against us and some quarters it's positive. This quarter was a positive.

We'll go next to David Chiaverini at Jefferies.

I wanted to drill into the deposit growth outlook. With your strong loan growth and the strong deposit growth in the first quarter, what's your sense of your ability to sustain that level of deposit growth given the strong loan growth outlook?

David, it's a good question. That's the hardest part to forecast. You saw the yield curve move up during the quarter and short-term funding costs move up. Our customer deposits grew at 7% this quarter excluding seasonal runoff of public funds. We did see seasonal public funds run off of about $400 million. Business accounts were up 10% and a lot of that was treasury management. So we can generate deposits; the question is at what cost. If funding markets move down a bit that would be helpful. But generally, the business is growing and we can attract deposits; it's a balancing act on cost.

And shifting to credit quality. Looking at nonperforming assets in the 5-quarter trend, it looks very stable. But some peers in the Southeast and Texas are showing upticks. Any areas you're watching more closely?

We went through a period where rates spiked up 5%, and we underwrote a lot of commercial real estate with a 3% rate shock. That's why we saw reclassing into special mention and classified in the commercial real estate portfolio. We inserted a slide on Page 18 breaking out the investor CRE portfolio. There's little to no concern about loss content in that portfolio given the loan-to-values and payment performance. We broke it out by category and we're at a weighted average loan-to-value of 56% for these problem loans. Ninety-eight percent of them are current, including nonaccruals. So that's not an area of concern. Areas to watch are the lower-income consumer and some small business segments, particularly SBA loans because many are floating rate and experienced the rate shock, but we have government guarantees on about 75% of SBA loans. Overall, credit feels pretty stable. Special mentions are coming down and classifieds ticked down a little; charge-offs remain low.

And we'll go next to Dave Bishop at Hovde Group.

Maybe stay on the credit topic. I appreciate the NDF lending segment breakout. Are you seeing any sort of credit stress within those buckets? Any note you're well below peers, any appetite to even grow some of the exposure to those segments?

We spent a lot of time analyzing that portfolio. It's an area where we don't have much exposure — it's the third lowest NDFI exposure among our peers at about 1.7%. The biggest piece of that is capital call lines, and our advance rate averages about 50%. If there's pressure in that market, it may enhance underwriting standards and some business may shift back to banks. But at present, our exposure is modest and not a material concern.

Got it. And one follow-up on the assimilation of some of the new bankers in Texas and Colorado. Curious in terms of those hires: are those bankers through noncompete and nonsolicit agreements? Are they generating load in the loan pipeline at this point?

It's case by case. Dan Strodl told me the loan pipeline associated with new folks he brought on in the last 6 months is about $400 million. So there's good production early on. A handful will have some kind of employment agreements we'll work through. That team has done a fantastic job — doubling production from $500 million to $1.1 billion while integrating conversions is a strong result.

And that concludes our Q&A session. I will now turn the conference back over to John Corbett for closing remarks.

All right. Audra, thank you. And as always, we want to thank all of you for your interest and support of the company. If you have any follow-up questions, feel free to reach out. We'll be available today. And I hope you have a great day.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.