Executive Summary / Key Takeaways

• Strategic Transformation Driving Performance: SouthState Bank Corporation has successfully executed a multi-faceted strategic transformation, including the Independent Financial acquisition, a significant balance sheet reset, and a sale-leaseback transaction, propelling its earnings power and positioning it for sustained growth in high-growth Southeast, Texas, and Colorado markets.
• Robust Financial Health and Margin Expansion: The company reported strong Q3 2025 results, with diluted EPS up 30% year-over-year and a 20% return on tangible equity. Net interest margin (NIM) expanded to 4.06% in Q3 2025, driven by strategic balance sheet optimization and effective deposit cost management, with management guiding to a stable NIM in the 3.80%-3.90% range for Q4 2025 and 2026.
• Accelerated Organic Growth and Capital Optionality: SouthState is actively leveraging market dislocation to accelerate organic loan and deposit growth through strategic hiring and an entrepreneurial business model. Its strong capital position (CET1 at 11.5%) and healthy capital formation rate provide significant optionality for continued organic investment, consistent dividend increases, and opportunistic share repurchases.
• Technological Differentiation in Payments: The company's recent expansion into instant payments for Treasury customers, utilizing RTP and FedNow networks, offers a tangible technological differentiator, enhancing efficiency, security, and real-time cash flow management for businesses, thereby strengthening its competitive moat in commercial banking.
• Prudent Risk Management Amidst Uncertainty: While credit metrics remain stable with low net charge-offs (12 basis points year-to-date, excluding a one-time C&I charge-off), management maintains a cautious macroeconomic outlook, incorporating downside risks into its Allowance for Credit Losses (ACL) modeling and actively monitoring credit concentrations and regulatory changes.

A Regional Powerhouse Forges Ahead with Strategic Acumen

SouthState Bank Corporation (NYSE: SSB), founded in 1933, has meticulously cultivated its position as a prominent regional financial services company. Its enduring strategy centers on achieving optimal scale within the nation's most dynamic growth geographies, particularly across the Southeast, Texas, and Colorado, while fostering an entrepreneurial business model. This foundational approach has been instrumental in shaping its current market standing and strategic responses to an evolving financial landscape.

The company's core business encompasses a comprehensive suite of banking services for individuals and businesses, including diverse deposit accounts, a wide array of lending products, and specialized services like wealth management, treasury management, and correspondent banking. SouthState's competitive advantage is rooted in its strong regional brand, extensive branch network, and community-focused relationships. These attributes translate into enhanced pricing power in local markets and robust recurring revenue from loyal customers. In a competitive environment populated by larger institutions like Truist Financial (TFC) and Regions Financial (RF), SouthState differentiates itself through a more personalized, localized service delivery, which can lead to stronger customer loyalty and potentially faster response times for local business needs. Against peers such as Fifth Third Bancorp (FITB) and Synovus Financial (SNV), SouthState's strategic adaptability for regional markets often provides an edge, though it acknowledges potential lags in overall technological innovation compared to larger, more resource-rich rivals.

Technological Differentiation and Innovation

A key differentiator for SouthState is its commitment to enhancing its technological capabilities, particularly in payment solutions. The company has recently expanded its instant payments capabilities for its Treasury customers, leveraging both The Clearing House's Real-Time Payments (RTP) and the Federal Reserve's FedNow networks. This core technology enables real-time transactions, offering significant tangible benefits over traditional payment methods.

The instant payments system provides enhanced speed, security, and reliability, allowing businesses to manage cash flow in real-time and improve reconciliation processes. A pilot program demonstrated the efficacy of this technology, processing over 600,000 instant payment transactions totaling more than $400 million. This adherence to the global ISO 20022 standard creates greater efficiency and less friction for businesses. For investors, this technological edge contributes directly to SouthState's competitive moat in commercial banking, attracting and retaining treasury clients by offering superior, modern payment solutions. This capability directly supports higher customer acquisition and retention, contributing to fee income growth and strengthening the bank's market positioning against competitors who may offer less advanced real-time payment options.

Strategic Initiatives and Operational Excellence

The year 2025 has been pivotal for SouthState, marked by three significant strategic capital moves. The all-stock acquisition of Independent Bank Group, Inc. (IBTX) on January 1, 2025, for $2.50 billion, was a transformative step, significantly expanding its footprint into the high-growth markets of Texas and Colorado. This merger added $13 billion in loans and $15.21 million in deposits, with the computer systems successfully converted in May 2025, allowing the combined entity to realize its full earnings potential. Management noted the "social blend of these two organizations has gone as well as any that I've ever been involved with," highlighting the cultural alignment.

Concurrently, SouthState completed a sale-leaseback transaction on February 28, 2025, involving 165 bank branch properties. This transaction generated a net gain of $229.30 million and harvested off-balance sheet capital, providing attractive cost of capital compared to other sources. In the first quarter of 2025, the company also executed a securities restructuring, selling $1.80 billion of available-for-sale investment securities to reinvest in new securities, optimizing its balance sheet and improving its net interest margin. These actions collectively reset the balance sheet closer to current market rates, propelling earnings power beyond initial expectations.

Financial Performance and Profitability

SouthState Bank Corporation delivered a strong financial performance in the third quarter of 2025, demonstrating the benefits of its strategic initiatives. The company reported consolidated net income of $246.64 million, translating to diluted earnings per share (EPS) of $2.42, a 30.1% increase year-over-year. This performance resulted in an impressive return on tangible equity of 20%.

Net interest income (NII) for Q3 2025 reached $599.70 million, an increase of $248.20 million (70.6%) compared to Q3 2024, primarily driven by the interest-earning assets and interest-bearing liabilities acquired from Independent. The tax-equivalent net interest margin (NIM) expanded to 4.06% in Q3 2025, up from 3.39% in Q3 2024. This expansion was largely attributable to a 71-basis point rise in the yield on interest-earning assets, while the average cost of interest-bearing deposits declined by 7 basis points. Loan yields improved to 6.48% in Q3 2025, benefiting from approximately $78.90 million in loan accretion recognized from the Independent portfolio.

Noninterest income also saw significant growth, increasing by $24.20 million (32.2%) to $99.09 million in Q3 2025 compared to the prior year. This was fueled by strong performance in correspondent banking and capital markets income, which surged by $11.30 million (114.3%), and increases in trust and investment services income, deposit fees, and mortgage banking income. Noninterest expense, while increasing by $125.50 million (50.8%) to $372.34 million, largely reflected the integration costs and expanded operations from the Independent acquisition, including higher salaries and employee benefits, amortization of intangibles, and occupancy expenses. Despite these increases, the efficiency ratio improved to 46.9% in Q3 2025, reflecting effective cost management.

Asset Quality and Risk Management

SouthState maintains a stable asset quality profile, with management forecasting year-end net charge-offs to be around 10 basis points. For the nine months ended September 30, 2025, net charge-offs to total average loans were 0.29%. This figure includes a notable $21.50 million commercial and industrial (C&I) charge-off in Q3 2025, which management identified as an abnormally large, one-time event related to a supply chain finance credit acquired with Atlantic Capital (ACBI). Excluding this specific charge-off, year-to-date net charge-offs would have been 0.12%.

The Allowance for Credit Losses (ACL) stood at $590.13 million, or 1.24% of total loans, at September 30, 2025, providing 1.96 times coverage of nonperforming loans. Management employs a blended macroeconomic forecast for ACL modeling, incorporating a 40% baseline, 25% upside, and 35% more severe scenario, reflecting a neutral stance with recognition of downside risks from flat job growth, high interest rates, and trade policy impacts. Total nonperforming assets were $320.80 million (0.67% of total loans and repossessed assets) at September 30, 2025, an increase from year-end 2024, primarily due to acquired nonperforming loans from the Independent merger.

Outlook and Guidance

Management's outlook for SouthState Bank Corporation reflects confidence in continued growth and profitability, underpinned by strategic execution and an improving economic backdrop. For the fourth quarter of 2025 and for the full year 2026, management anticipates the Net Interest Margin (NIM) to remain stable in the 3.80% to 3.90% range. This guidance incorporates an updated interest rate forecast, which now includes three rate cuts in 2025 and three more in 2026, totaling 150 basis points, bringing the Fed funds rate to 3% by the end of 2026.

Loan accretion is projected to be in the $40 million to $50 million range for Q4 2025, and approximately $125 million for the full year 2026, reflecting some acceleration in 2025. Deposit costs are expected to be in the 1.85% to 1.90% range for the coming quarters, with management projecting a deposit beta of around 27% for future rate cuts, aligning with historical easing cycles during periods of faster growth. Average interest-earning assets are expected to be around $59 billion for Q4 2025, growing to $61 billion to $62 billion for the full year 2026, representing mid-single-digit growth. Noninterest expenses (NIE) are guided to be in the $345 million to $350 million range for Q4 2025, with mid-single-digit growth anticipated for 2026, accounting for inflation and organic growth investments.

SouthState's strong capital position, with CET1 at 11.5%, provides significant capital optionality. Management expects CET1 to grow by 20-25 basis points per quarter, enabling continued investment in organic growth, consistent dividend increases (an 11% hike was declared in Q2 2025), and opportunistic share repurchases. The company repurchased 757,519 shares in October 2025, with 1.80 million shares remaining under its authorization.

Conclusion

SouthState Bank Corporation stands at a compelling juncture, having successfully integrated a major acquisition and optimized its balance sheet to enhance earnings power. The company's strategic focus on high-growth markets, combined with its entrepreneurial culture and technological advancements in payment solutions, positions it to capitalize on market dislocations and drive accelerated organic growth. Its robust financial performance, characterized by strong NIM expansion and healthy capital formation, provides a solid foundation for future shareholder returns.

While macroeconomic uncertainties and regulatory changes present ongoing risks, SouthState's prudent risk management, stable asset quality, and clear guidance underscore its resilience. The company's commitment to investing in its sales force and digital capabilities, alongside its capital optionality for dividends and share repurchases, reinforces a compelling investment thesis centered on sustained growth and superior returns in the dynamic regional banking sector.