SouthState Bank Corporation (SSB) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong loan growth, low net charge-offs, and a healthy capital position, indicating robust financial health. The company's strategic plan to capitalize on market opportunities and a broad capital return strategy, including share repurchases, further adds to the positive sentiment. Despite some unclear management responses, the overall outlook with optimistic guidance and growth initiatives suggests a positive stock price movement in the short term.
Key Financial Performance
Earnings Per Share (EPS) Earnings per share in 2025 are up over 30% year-over-year, excluding merger costs. This increase is attributed to the successful integration of the Independent Financial deal and improved financial performance.
Tangible Book Value Per Share Tangible book value per share experienced double-digit growth in 2025, even after accounting for day 1 dilution from the merger. This growth was supported by the company's financial performance, dividend increases, and share repurchases.
Dividend The dividend was raised by 11% in 2025, reflecting the company's strong financial position and performance.
Loan Growth Loans grew at an 8% annualized rate in Q4 2025, driven by building pipelines throughout the year and deals hitting the books in the fourth quarter.
Deposit Growth Deposits grew at an 8% annualized rate in Q4 2025, aligning with the company's overall balance sheet growth.
Pre-Provision Net Revenue (PPNR) PPNR for Q4 2025 was $323 million, contributing to a full-year PPNR of $1.27 billion. This reflects strong operating performance.
Net Interest Margin (NIM) The tax-equivalent NIM for Q4 2025 was 3.86%, with a cost of deposits at 1.82%. Excluding accretion, NIM was up 2 basis points from Q3.
Net Interest Income Net interest income for Q4 2025 was $581 million, down $19 million from Q3 but up $14 million excluding accretion. This was influenced by reduced accretion income and a decline in loan yields.
Noninterest Income Noninterest income for Q4 2025 was $106 million, up $7 million from Q3, driven by strong performance in the Capital Markets division.
Noninterest Expenses (NIE) NIE for Q4 2025 was higher than expected due to increased performance and commission-based compensation, as well as higher marketing and business development spending. However, the efficiency ratio remained below 50% for the quarter and the year.
Net Charge-Offs Net charge-offs for Q4 2025 were 9 basis points, bringing the full-year figure to 11 basis points. Credit costs remained low.
Share Repurchases The company repurchased 2 million shares in Q4 2025 at an average price of $90.65, representing approximately 2% of the company. This was part of a broader capital return strategy.
Tangible Common Equity (TCE) Ratio The TCE ratio remained at 8.8% at the end of 2025, indicating a healthy capital position.
Common Equity Tier 1 (CET1) Ratio The CET1 ratio ended 2025 at 11.4%, reflecting strong capital levels.
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Operating Highlights
Market Expansion into Texas and Colorado: SouthState Bank successfully completed the integration of its acquisition of Independent Financial, expanding its market presence into Texas and Colorado. This move was described as a transformational step for the company.
Financial Performance: Earnings per share (EPS) in 2025 increased by over 30%, with double-digit growth in tangible book value per share. The company also raised its dividend by 11% and repurchased 2 million shares in Q4 2025.
Loan and Deposit Growth: The company achieved 8% annualized growth in both loans and deposits during Q4 2025.
Operational Efficiency: The efficiency ratio remained below 50% for both Q4 and the full year 2025, indicating strong cost management.
Share Repurchase Strategy: The company repurchased 2 million shares in Q4 2025 and authorized a new share repurchase plan for an additional 5.56 million shares, aiming to capitalize on the disconnect between the bank's performance and valuation.
Integration of Independent Financial: The integration of Independent Financial was completed successfully, reducing the company's risk profile and aligning with its strategic plan for 2025.
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Risk or Challenges
Integration Risks: The company faced high risks during the initial period of integration following the acquisition of Independent Financial, including regulatory approvals and systems conversions. These risks have been mitigated but were significant during the process.
Higher Noninterest Expenses: Noninterest expenses were higher than expected in Q4 2025, driven by performance and commission-based compensation, as well as increased marketing and business development spending.
Loan Yield Decline: Loan yields declined by 35 basis points in Q4 2025, which could impact net interest income if the trend continues.
Economic and Credit Conditions: Future provision expenses are dependent on economic and credit conditions, which, if unfavorable, could lead to higher credit costs.
Accretion Income Decline: Accretion income decreased significantly in Q4 2025, which could affect overall net interest income.
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Guidance & Outlook
Margin and deposit costs: Guidance for 2026 indicates expectations for a 4% increase in noninterest expenses (NIE) over 2025 levels, driven by initiatives to expand revenue producers and inflationary pressures.
Loan growth and net charge-offs: Future provision expense is expected to be primarily influenced by loan growth and net charge-offs, assuming no significant changes in economic and credit conditions.
Capital return activity: The company plans to continue funding growth and growing capital levels while being active in share repurchases, particularly when there is a disconnect between fundamentals and share price.
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Shareholder Return Plan
Dividend Increase: The company raised its dividend by 11% in 2025.
Share Repurchase Activity: The company repurchased 2 million shares of SouthState stock, approximately 2% of the company, in the fourth quarter of 2025 at an average price of $90.65 per share.
New Share Repurchase Plan: The Board authorized a new share repurchase plan, adding an additional 5.56 million shares to the 560,000 shares remaining in the old plan.
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Key Q&A
Q:What are the thoughts on the net interest margin (NIM) for the year and deposit costs?
A:Stephen Young stated that there is no significant change from last quarter's guidance. The NIM is expected to remain between 3.80% to 3.90% in 2026. Deposit costs were down 9%, and assumptions include interest-earning assets, rate forecast, loan accretion, and deposit beta. Loan accretion is forecasted at $125 million for next year, and deposit beta is expected to be 27%. Seasonal municipal deposits will roll over in Q1, and deposit costs may average 1.75% in Q1.
Q:What are the loan growth expectations for the year?
A:John Corbett mentioned that the loan pipeline grew from $3.4 billion to $5 billion over the year. Loan production in Q4 was up 16% from Q3, reaching $3.9 billion. The guidance for 2026 remains mid- to upper single-digit loan growth, with potential tailwinds from investor commercial real estate growth in Texas and Colorado.
Q:What is the hiring activity outlook and its impact on expenses?
A:John Corbett highlighted significant hiring activity, with 550-600 commercial RMs added and plans to increase by 10%-15% in the next year or two. This growth is included in the expense guidance. Stephen Young added that hiring is focused on commercial RMs but also includes opportunistic hires in areas like SBA securitization and foreign exchange. Expenses related to hiring are factored into the guidance.
Q:Is the strength in correspondent banking sustainable?
A:Stephen Young explained that the strength in correspondent banking was driven by rate changes and increased interest rate swaps and fixed income. The business is expected to generate $25 million per quarter, totaling around $100 million annually. Noninterest income is forecasted at 55-60 basis points of assets for next year.
Q:What is the guidance on expenses for 2026?
A:William Matthews stated that Q4 expenses were impacted by performance, seasonality, and growth initiatives. The guidance for 2026 includes mid-single-digit expense growth, with hiring and business development costs factored in. Expense growth is based on a 4% increase from 2025 operating expenses.
Q:What is the plan for share buybacks?
A:William Matthews mentioned that share buybacks depend on factors like share price, economic outlook, and growth. The total payout ratio in Q4 was 97%, which is unsustainable long-term. Future payout ratios, including dividends and buybacks, are expected to be in the 40%-60% range, depending on circumstances.
Q:What is the outlook for loan yields and deposit pricing?
A:Stephen Young provided details on loan repricing schedules, with legacy bank fixed-rate loans repricing at higher rates and independent book loans repricing slightly lower. Loan yields are expected to rise if the rate environment remains stable. Deposit beta is expected to start at 27% and may move towards 30% depending on growth.
Q:Are there any planned investments in technology or other areas?
A:Stephen Young mentioned investments in commercial loan servicing platforms, AI, FX platforms, and syndication business. These investments are included in the expense guidance and are focused on revenue producers.
Q:What caused the increase in substandard loans this quarter?
A:Stephen Young explained that the increase in substandard loans was due to a handful of multifamily properties in lease-up. These loans have a weighted average loan-to-value of 52%, and the credit team is not concerned.
Q:What is the loan production outlook for Texas and Colorado?
A:William Matthews stated that loan production in Texas and Colorado was $888 million in Q4, up 15% from Q3. For the full year 2025, production in these markets was up 10%. Recruitment efforts have added 17 commercial RMs in these regions, contributing to momentum for 2026.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer on the specific timeline for share buybacks and the exact impact of hiring on expense growth. Additionally, while they provided general guidance on deposit beta and loan repricing, the responses lacked precise details on how these factors would evolve under different economic scenarios.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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SSB Transcript
SouthState Bank Corporation (SSB) Q4 2025 Earnings Call Transcript
Positive1-23
The earnings call highlights strong loan growth, low net charge-offs, and a healthy capital position, indicating robust financial health. The company's strategic plan to capitalize on market opportunities and a broad capital return strategy, including share repurchases, further adds to the positive sentiment. Despite some unclear management responses, the overall outlook with optimistic guidance and growth initiatives suggests a positive stock price movement in the short term.
SouthState Bank Corporation (SSB) Q3 2025 Earnings Call Transcript
Positive10-23
The earnings call reveals strong financial performance with improved loan yields and noninterest income, a stable noninterest expense, and a solid CET1 ratio. Additionally, the dividend increase and potential share repurchases indicate confidence in future growth. The Q&A highlights positive loan growth prospects, especially in Texas, and a healthy capital position. Despite a charge-off related to First Brands, management's optimism about margin improvement and strategic hiring efforts suggest a positive outlook. Overall, the combination of strong fundamentals and strategic initiatives supports a positive sentiment.
SouthState Corporation (SSB) Q2 2025 Earnings Call Transcript
Positive7-25
The earnings call reveals strong financial performance with a high net interest margin, optimistic loan growth, and a stable expense outlook. The Q&A section supports this with positive sentiment on growth and deposit costs. Although there are uncertainties in regulatory impacts and talent acquisition, the overall guidance remains positive, with potential for higher dividends and buybacks. The absence of negative financial surprises and focus on organic growth further supports a positive sentiment.
SouthState Corporation (SSB) Q1 2025 Earnings Call Transcript
Unknown4-25
The earnings call reflects a balanced outlook. Strong financial metrics, including high NIM and ROE, are positive. However, the economic slowdown, tariff impacts, and competition present risks. The Q&A section revealed some unclear responses, particularly regarding loan marks and economic impacts, causing uncertainty. While the shareholder return plan and capital flexibility are positive, flat non-interest income guidance and economic concerns temper enthusiasm. Overall, the sentiment is neutral, with potential for minor fluctuations depending on economic developments and management's strategic execution.
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Frequently Asked Questions
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