SouthState Bank Corp (SSB) 2026 Q2 法說會逐字稿

Hello, everyone. Thank you for joining us, and welcome to the SouthState Bank Corporation second-quarter 2026 earnings conference call. (Operator Instructions)

I will now hand the conference call over to Will Matthews, Chief Financial Officer. Mr. Matthews, please go ahead.

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. We'll follow our typical pattern of brief prepared remarks and then move into Q&A. And 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.

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 4 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. 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.

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. 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. We don't optimize for one quarter. 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 nonperforming assets declining 14% and net charge-offs remaining exceptionally low at just 6 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. 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.

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. 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 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.

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.

Thanks, John. Our net interest margin of 3.78% was down 1 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. 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 1 basis point and NIM was up 4 basis points.

One side note about accretion. We often get questions about that number, but rarely about core deposit intangible amortization, a noncash 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.

Additionally, I'll point out that our Q2 '26 EPS, excluding both accretion income and CDI amortization expense, was up 13% versus the second quarter of 2025. Net interest income of $576 million was up $14 million from Q1. And 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 March 31 levels. They remain well above other recent quarters. Noninterest 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. Noninterest 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. 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 nonperforming 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. 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.

(Operator Instructions) Stephen Scouten, Piper Sandler.

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?

Sure. Stephen, this is Steve. Yes, just a reminder, net interest margin this quarter was 3.78% versus our guide last quarter of 3.75% to 3.80%, so kind of right in line. And last quarter, we grew $900 million of interest-earning assets with only 1 basis point of contraction. 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, really nothing has changed in our guidance. Our guidance going forward is stable and we continue to grow.

So our -- the format we usually use around interest-earning assets, same as last quarter. 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, and 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 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.

Okay. Helpful. And I know you guys talked about this ongoing conversation industry-wide and internally, the push-pull between growth in NII and NIM. And 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 of NIM compression would be okay as long as you're growing good customers, loans and NII. Is that fair in terms of your mindset?

Yes, 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, and we got a nice big $1.5 billion pipeline coming behind that. 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. And we see opportunities to continue to grow, and we'll make those trade-offs that make sense to us from a capital management standpoint.

Got it. And then just last for me, like 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. 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?

Sure. Yes. And that's right. There's -- obviously, there's seasonality that goes on in our book. And typically, second and third quarter, second quarter because of tax payments, third quarter is just the rest of the public fund stuff kind of comes up before it starts moving back up.

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, 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 digit over the next quarter or so and then kind of move up towards the upper single digits probably in the last part of the year based on the seasonality.

John McDonald, Truist Securities.

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 noninterest-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. So just a little bit of color, maybe what happened this quarter on that mix and what you see for the back half.

Sure, John. Yes, 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. And then we also had 5% noninterest-bearing deposit growth quarter-over-quarter. And so from time to time, there's the 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. But as we think about deposit mix, clearly, the -- as we think about deposit costs and all within our guidance and NIM, 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. But it's really just about if we grow in that kind of mid-single-digit range over the next quarter or two2, we should be able to keep those pretty contained, and that's all part of our guide of margin coming forward.

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

Great. Then maybe I 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, are the new markets, legacy markets? Any color on that would be helpful.

Yes, 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, 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. The growth is really broad-based across all of our markets.

From a dollar standpoint, naturally, as you think, the greatest contributors are the states where we have the largest presence, which is Florida, Texas and South Carolina from a dollar standpoint. But from a percentage standpoint, Atlanta saw really nice growth in C&I in the second quarter, so did Virginia and so did Alabama.

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. We look for that possibly to shift in the second half where we would have more of a pickup in C&I, and we've got more planned CRE payoffs in the back half. So that's kind of the underlying mix shift that we see in our pipelines.

Hannah Wynn, KBW.

Stepping in for Catherine Mealor. 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%. 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 the back half of the year as you guys have been relatively flat so far in the first half, so 4% for the full year would be a pretty big ramp.

Yes, Hannah, it's Will. Yes, 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. 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 NIE 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 has been amortized over the life of that loan. 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, too. 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 quarter, they'll be in the run rate for full quarters. We also have in the third quarter, beginning July 1 is when our merit increases for most of the company beyond the executive staff kick in.

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 been, I think, in the $1.460 billion to $1.465 billion range. 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 in terms of incentives and other things like that, that can -- and the loan production number that can cause it to vary a little bit, but that's sort of how we think about it.

Great. And then my other question is on -- I know you mentioned in your opening remarks, keeping capital return in the 40% to 60% range. And 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.

Yes, that's a good question. I'm going to stick with our 40% to 60% guide. We have to make decisions as we're served by the environment around 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 the third quarter of last year where we only bought back 440,000 shares. So the last 3 quarters, the trailing 9 months payout ratio is much higher. That's not sustainable if we want to maintain CET1 in the 11% to 12% range and still expect high single digit -- mid- to high single-digit loan growth. So -- but other than that, that's about as specific as we can get.

Michael Rose, Raymond James.

Maybe just on the loan pipeline and growth and generation. Can you just talk about how some of the newer bankers that you've hired over the past year or 2 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?

Yes, Michael, I go back to kind of the goal to kind of 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 3 quarters. And as I think I mentioned earlier, we're tracking the loan production and pipelines of those specific hires. And through 3 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. And as we work through the next few quarters, we look for the Southeast to continue to kind of pick up on the hiring front. But to be able to produce $600 million for that new team, I feel like they've hit the ground running.

Okay. Very helpful. And 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? And obviously, nice to see the dividend increase.

Yes, Michael, this is Steve. No, that's -- there's nothing around that. We've typically -- if you look over our history, we've run somewhere in that 2% to 3% range on the cash to assets. So that's normal. So as it relates to the buyback, that's not a limiting factor.

Yes, cash is not a component of that decision-making process.

No.

Janet Lee, TD Cowen.

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? I just want to clarify your comments there.

Sure. Yes, this is Steve. Yes, 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 -- 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. But as you kind of look at what happened this past quarter, we also had repricing of the old book.

So yes, I would expect it to move up a little bit. 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.

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

Yes. No, it's a great -- really good question. So if you think about it, it really depends upon the curve. But if -- 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, but the curve doesn't change, then it's probably reasonably neutral.

But if there's an upward -- 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.

So we still continue to get the asset repricing, which is very beneficial. At the same time, we get to get a better curve. So if it's the way I would kind of characterize it, we're pretty stable around whether rates go up or rates go down. If there is a bear flattener, it's probably pretty much a wash. But if it's a shock up, then that would be positive to the NIM.

And if I could 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 like a good growth rate for fee income in '26 and perhaps beyond '26?

Sure. Yes. On Page 12, we have a summary of our noninterest income over the last 4 quarters. And 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. And if you look at it a year ago, second quarter a year ago, we're up 11%. 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. 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. So no change there.

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

That's right. We kind of guided to $25 million gross a quarter. And last quarter it was $24.4 million. This quarter, it's $24.8 million. Obviously, things change in that business relative to the curve.

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

Gary Tenner, D.A. Davidson.

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. 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 have this build of commitments in construction that are going to continue to fund up and drive net growth there for the next several quarters?

Yes, Gary. So 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's just part of their normal cycle that will be paying off on schedule. So we're going to see more of that in the second half, but we see a pickup in the C&I areas.

And the C&I areas, a number of these are seasonal kind of paydowns, number one, that we've seen in the last couple of quarters. One is the energy book. And with oil prices as high as they are, our clients are experiencing really strong cash flows 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.

But really, one goes up, the other goes down. But really, the guidance still -- we still feel pretty confident that we're in that mid- to high single-digit range and could very well be on the higher end of that range.

Got it. And then just a question about the allowance. If you look over the past 5 quarters, really, since the first quarter last year, the ALLL is down 32 basis points. The allowance for credit losses overall is down 30 bps to 130. What's the kind of glide path, if you will, to where this could go given a positive economic environment just -- I guess the question is where do you see this trending in the next few quarters?

Sure, Gary. It's Will. I would say, overall, we would expect the recent trend we've 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've 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 levels up a little bit.

But overall, some downward pressure. Our provisioning really is -- 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. And we model 3 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 baseline, 30 for each of those 2. We moved to a more pessimistic weighting about probably a year or so ago. I can't remember exactly, but we have, for the last few quarters, been weighting 40-20-40. 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 40-30-30, but 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.

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.

Anthony Elian, JPMorgan.

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 2.40% range and ended at 3%. Is that still a dynamic you're seeing?

Yes, sure, Anthony. Yes, this is Steve. Actually, yes, just to give you an update on some of those stats. Our new money market rates that I referenced last quarter, this quarter, we raised a little over $470 million at 2.68%. I think last quarter, the average was 2.68%, I think about roughly a little bit lower of a number.

So that trend toward the end of the quarter sort of died down and sort of where we are now is at 2.68%. We also had about $1.1 billion in new and renewed CDs last quarter on the retail side that the average rate it renewed at was at 3.52%. And from the first quarter, it was at 3.69%. 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 form. So that's kind of how that's played out.

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. Could you give us an update on those products and the timing of when you could see a lift from the -- I think you guided to $25 million per quarter?

Sure. Yes, that's a good point. And yes, there's a few things that we have been working on and are continuing to work on that we just had got an update on. So one is relative to commodity hedging, which is an extension of our energy business that we already do. That's -- we're in the testing phase of that to 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. So I think right now, there's not going to be any significant change to our guidance this year. And then as we get into the fourth quarter, I'd probably be able to give you a better sense on where the timing of those initiatives are for 2027.

Ben Gerlinger, Citigroup.

I know you guys have had really good loan growth 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, just largely from the merger in Texas? Just trying to think about like 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 is that emptying part trended relative to past expectations?

Yes. With -- the Texas, Colorado franchise went through the conversion a year ago. And so naturally, they're inwardly focused and distracted. And so 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, and it was tied to what I mentioned earlier, some of the 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.

Got it. Okay. That's helpful. And I just wanted to dovetail off of Tony's question within the correspondent banking. Is the payout ratio -- or sorry, not payout, but efficiency ratio for that business uniquely different than the bank?

Or like if that grows, should we expect a higher pace of expenses, albeit equal?

Yes, this is Steve. Yes, that's correct. The efficiency ratio on maybe the fixed income portion is a little bit higher, maybe in the more like a wealth management, maybe in the 70% range. 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.

Yes. 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.

Right. No issues there. Just wanted to double-check, considering your initiatives are '27 growth. I just wanted to make sure I have it squared away. I appreciate the time.

David Chiaverini, Jefferies.

So I have 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. Can you talk about the drivers behind that core NIM expansion?

Sure. Yes. 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 is that as the accretion moves out, the loan repricing moves in, and we move it from reported NIM to core NIM. But the stat on sort of 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 4 or 5 basis -- or 50 basis points of repricing. Some will be higher than that, 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%, of course, depending on the curve. So those things are going to create as we run off some of the -- when I point off, when the legacy independent loans pay off as they should, those particularly the vintage in '21 and '22 that were 5-year loans, and they roll off at coupons that are 3% and 4%, and we reprice them in the 6s, that's going to shift that bucket from less accretion and more core as we reprice those loans.

Very helpful. 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 6s.

Yes, that's right. And part of it has to do with the floating fixed rate mix. And I think, Will mentioned it in our -- 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. 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 so that last year in June 30 of last year, 32% of our loans were in the floating rate bucket.

Now we've improved that to 38%. And so 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. So I think that's an appropriate way to think about it.

Dave Bishop, Hovde Group.

Following up the comments in the preamble about some of the strongest growth, I think you mentioned Virginia, Alabama. And 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 banker lift-outs? Just curious maybe any sort of new markets you might be targeting for additional expansion?

Yes. We love the markets we're in. We really just want depth and density in those markets. So to the extent Bobby Cowgill that runs Virginia for us has opportunities to expand and recruit commercial RMs, we're going to do that. We built out Hampton Roads maybe 2 or 3 years ago and have had a lot of success there.

But really no new markets on the horizon. We really just want depth and density. We did expand to Nashville and a loan production office, I guess it's been about 1 year, 1.5 years ago with Cameron Wells, and he's doing a great job. But no expansion markets on the horizon right now.

Samuel Varga, UBS.

Just wanted to go back to the balance sheet discussion a little bit in 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. But in case loan growth outpaces deposits, where can that loan-to-deposit ratio go? What sort of governor do you have on that?

Yes. We've typically been pretty conservative on that loan-to-deposit ratio. Typically, the way we think about it is at the beginning of the cycle, you typically start that loan-to-deposit ratio at a little less, so call it, I think, in the mid-70s or so. And then 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.

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. 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 will continue to grow that deposit book as we continue to mature those things. 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.

Great. And then just on the competitive landscape, we've touched a bunch on this last couple of quarters in 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?

Yes. 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. So 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.

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

All right. Thank you, Jesse. I just want to end by thanking our team. We're executing successfully on the 4 goals we laid out last year. SouthState's financial performance is among the top quartile in our peer group.

The plan is working. And as you've heard throughout the call today, our guidance from prior quarters is basically unchanged.

So 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.

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