Teleconferência de Resultados do 3T26 da SouthState (SSB): NIM se Mantém em 3,78% com Crescimento de 9% em Empréstimos e Depósitos

Destaques Principais

• A SouthState Bank Corporation relatou um crescimento anualizado de 9% tanto nos empréstimos quanto nos depósitos. Os empréstimos comerciais e industriais lideraram o crescimento, avançando 12% durante o trimestre, enquanto a administração destacou posteriormente um crescimento de 13% ano a ano nos empréstimos C&I.
• A margem financeira líquida (NIM) permaneceu estável em relação ao 2º trimestre em 3,78%, dentro da projeção da empresa de 3,75% a 3,80%. Excluindo a receita de apropriação (accretion income), a NIM subiu 4 pontos-base, para 3,61%.
• As métricas de crédito permaneceram estáveis. As perdas líquidas com baixas (net charge-offs) foram de 9 pontos-base, marcando o nono trimestre dos últimos 10 abaixo de 10 pontos-base. A provisão de US$ 20 milhões foi impulsionada principalmente pelo crescimento dos empréstimos.
• A receita não proveniente de juros caiu US$ 3 milhões na comparação trimestral, para US$ 94 milhões, à medida que taxas mais altas dos títulos do Tesouro dos EUA reduziram a atividade no mercado de capitais. A receita do mercado de capitais correspondente recuou para US$ 20,1 milhões, vinda de aproximadamente US$ 25 milhões.
• A administração projeta uma NIM entre 3,75% e 3,85% até 2027, sob suas premissas atuais de taxa de juros e balanço patrimonial. A empresa também manteve uma perspectiva de crescimento de empréstimos na faixa média a alta de um dígito para 2027.
• O índice CET1 encerrou o trimestre em 11,1%. A SouthState recomprou 250.000 ações durante o 3º trimestre e 2,75 milhões de ações no acumulado do ano, mas a administração espera que o payout ratio total de 2027 fique próximo do limite inferior de sua faixa de longo prazo de 40% a 60%.

Principais Dados Financeiros

A receita líquida antes de provisões por ação, excluindo a receita de apropriação e a amortização de intangíveis de depósitos de relacionamento (core deposits), aumentou 10,5% em relação ao 3º trimestre de 2025. Nos primeiros nove meses de 2026, essa mesma métrica subiu 13,9%, para US$ 9,10 por ação.

Desempenho Operacional e dos Negócios

A SouthState originou quase US$ 5 bilhões em empréstimos durante o trimestre, uma alta de 45% em relação ao ano anterior. A administração atribuiu parte desse aumento à expansão de sua equipe de gerentes de relacionamento comercial. O banco aumentou seu número de gerentes comerciais em 10% no último ano, e essas contratações originaram aproximadamente US$ 1 bilhão em novos empréstimos.

As contratações foram mais fortes no Texas, onde a força de vendas de gestão de relacionamento cresceu 22% em relação ao ano anterior. Na Carolina do Norte houve alta de 19%, em Atlanta o aumento foi de 16%, e a força de vendas total da empresa se expandiu 13%.

A carteira de empréstimos também se tornou mais sensível aos ativos. Os empréstimos a taxas flutuantes aumentaram de 28% da carteira combinada quando a transação com a Independent Financial foi anunciada em 2024 para 39% atualmente. Aproximadamente 55% a 60% das originações recentes de empréstimos foram contratadas a taxas flutuantes.

O crescimento dos depósitos foi sustentado por novos relacionamentos em gestão de tesouraria. O banco abriu mais de US$ 700 milhões em contas de gestão de tesouraria para novos clientes durante o trimestre, embora cerca de US$ 500 milhões em pagamentos trimestrais de impostos e uma queda de US$ 250 milhões em fundos públicos tenham compensado parte dessa atividade. A administração afirmou que o dinheiro novo total dos clientes entrou com um custo de aproximadamente 2,95% no 3º trimestre.

A atividade no mercado de capitais enfraqueceu à medida que o rendimento dos títulos do Tesouro americano de cinco anos subiu 87 pontos-base durante o trimestre, incluindo 60 pontos-base em setembro. A receita do mercado de capitais correspondente recuou para US$ 20,1 milhões, vinda de US$ 24,8 milhões no período anterior. A administração espera que a atividade de renda fixa compense parcialmente a fraqueza nas operações de swap de taxa de juros à medida que os clientes reagem à curva de juros mais inclinada.

Projeções da Administração

A administração espera que as despesas não provenientes de juros no 4º trimestre fiquem próximas ou excedam ligeiramente o nível de US$ 375 milhões registrado no 3º trimestre. O crescimento das despesas para todo o ano de 2026 deve permanecer próximo da taxa de 4% comunicada anteriormente, apesar das contratações de geradores de receita acima do esperado. A empresa estimou o crescimento das despesas não provenientes de juros em 2027 entre 3,5% e 4%, sujeito a atualizações orçamentárias, comissões e atividades de recrutamento.

A SouthState elevou sua projeção modelada para a faixa da NIM para 3,75%-3,85% até 2027. As premissas incluem dois aumentos de taxa pelo Federal Reserve no total, incluindo a alta de setembro e um movimento adicional em dezembro, o rendimento do título do Tesouro de cinco anos próximo a 5% e um beta total de depósitos de aproximadamente 50% entre saldos existentes e novos.

A perspectiva para a margem também reflete a reprecificação de ativos de taxa fixa. Espera-se que aproximadamente US$ 1 bilhão em empréstimos legados de taxa fixa por trimestre seja reprecificado nos próximos cinco trimestres, com a administração estimando um aumento de cerca de 150 pontos-base se as taxas de mercado permanecerem amplamente estáveis. Mais de US$ 1 bilhão em títulos com vencimento no mesmo período pode ser reprecificado cerca de 200 pontos-base acima.

A administração espera que o crescimento dos empréstimos desacelere para a faixa média de um dígito no 4º trimestre, após um avanço de 9,5% no acumulado do ano, deixando o crescimento de todo o ano de 2026 na faixa alta de um dígito. A perspectiva preliminar da empresa para 2027 permanece com crescimento de empréstimos na faixa média a alta de um dígito.

A receita do mercado de capitais correspondente deve permanecer próxima do nível do 3º trimestre no próximo trimestre ou dois antes de voltar para aproximadamente US$ 25 milhões com a estabilização das taxas. A receita com tarifas como porcentagem dos ativos pode permanecer perto do limite inferior da faixa de 55 a 60 pontos-base durante esse período.

A SouthState também está desenvolvendo plataformas de câmbio (FX) e commodities. A administração espera lançar a oferta de commodities de forma mais ampla no primeiro trimestre e a plataforma de câmbio por volta de 1º de abril. Uma vez totalmente consolidados, os dois produtos poderão contribuir conjuntamente com US$ 10 milhões a US$ 15 milhões em receita anualizada no primeiro ano, segundo a administração.

Riscos e Pontos de Atenção

• O pipeline de empréstimos recuou aproximadamente 14% em relação ao pico anterior e retornou a cerca de US$ 5 bilhões, à medida que taxas mais altas reduziram a atividade. A administração afirmou que a demanda por C&I permaneceu sólida, enquanto a atividade no setor imobiliário comercial enfraqueceu.
• Taxas de juros mais altas dos títulos do Tesouro dos EUA estão pressionando a receita do mercado de capitais correspondente, especialmente swaps de taxa de juros, mesmo enquanto sustentam a margem financeira líquida e a reprecificação de ativos fixos.
• Espera-se que os custos de depósitos subam ainda mais após os aumentos de taxas. A administração indicou que o custo dos depósitos pode se aproximar de 2% até o final do 1º trimestre se suas premissas de taxa se concretizarem.
• Movimentos rápidos na curva de juros podem comprimir os spreads de empréstimos, pois os compromissos de taxa fixa podem permanecer em aberto por cerca de 45 dias antes do fechamento.
• No momento, a administração não observa deterioração relevante no crédito imobiliário comercial (CRE). No entanto, reconheceu que uma nova alta substancial nos rendimentos de longo prazo do Tesouro poderia criar pressão. Os empréstimos CRE originados em 2021 e 2022 possuem relação empréstimo/valor (LTV) média ponderada próxima a 55%.
• A projeção de despesas continua sensível a comissões, custos diferidos de empréstimos e ao ritmo de contratação de geradores de receita.

Destaques da Sessão de Perguntas e Respostas dos Analistas

Crescimento do balanço patrimonial e sustentabilidade da margem: A administração afirmou que a sensibilidade dos ativos, uma maior proporção de empréstimos a taxas flutuantes e a reprecificação de ativos de taxa fixa devem sustentar a faixa de NIM de 3,75%-3,85% até 2027, enquanto os empréstimos continuam crescendo a um ritmo de médio a alto de um dígito.

Alocação de capital: As prioridades da SouthState continuam sendo o crescimento de dividendos, a expansão orgânica do balanço, a recompra de ações e, por fim, M&A. Após recomprar cerca de 5% das ações em circulação no último ano, a administração espera que o payout ratio de 2027 fique perto do limite inferior da sua faixa de longo prazo de 40%-60%. M&A continua sendo a menor prioridade na alocação de capital.

Condições de crédito: As tendências de ativos classificados e criticados foram descritas como estáveis a em melhoria. A administração atualmente não espera uma mudança significativa de curto prazo nas baixas por calote (charge-offs) e citou patrimônio substancial dos mutuários em empréstimos CRE próximos da reprecificação ou vencimento.

Estratégia de captação de recursos: O banco continua priorizando a gestão de tesouraria, contas correntes e relacionamentos com pequenas empresas, em vez de alterar significativamente sua estratégia de depósitos. Os incentivos internos foram ajustados para reforçar a captação de depósitos.

Disciplina de liquidez: A administração continua a buscar uma relação empréstimo/depósito próxima de 90%, sendo possível um movimento temporário modestamente acima desse nível, mas com um teto de aproximadamente 92% em qualquer trimestre.

Transcrição Completa da Teleconferência de Resultados

Transcrição completa da teleconferência de resultados

Comentários da administração

Operator

Hello, everyone. Thank you for joining us, and welcome to the South State Bank Corporation Third Quarter 2026 Earnings Conference Call.

[Operator Instructions]

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

William Matthews

Good morning, and welcome to SouthState's Third Quarter 2026 Earnings Call. This is Will Matthews, and I'm here with John Corbett, Steve Young and Jeremy Lucas. We'll follow our typical 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 the 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.

John Corbett

Good morning, everyone. Thank you for joining us. SouthState delivered another quarter of healthy growth, strong profitability and stable credit. There's an ongoing debate about the trade-offs between growing the balance sheet versus protecting the margin. And I'm pleased to report that in the third quarter, SouthState did both. Loans grew 9% annualized with growth broad-based across our footprint and led by C&I up 12%.

The Southeast and Texas are among the most vibrant markets in the country, and we're benefiting from strong underlying market growth. As planned, we've grown our commercial relationship bankers by 10% over the last year. These bankers have already originated about $1 billion in new loans and have a healthy pipeline. Deposits also grew 9% and without sacrificing margin, which held flat with the second quarter at 3.78% -- that net interest margin stability reflects a deliberate shift over the last couple of years towards more floating rate loans.

When we announced the Independent Financial deal in 2024, the percentage of floating rate loans in the combined portfolio was only 28%. Today, we've moved the floating rate loan percentage up to 39% of the portfolio. And recently, about 55% to 60% of new loans are being originated with a floating rate. This strategy will help provide net interest margin stability, assuming the Fed continues its rate hiking path. Credit continues to remain solid with net charge-offs of only 9 basis points.

Capital markets activity, however, pulled back as treasury rates moved higher during the quarter. Steve will give you an update on that business going forward. We continue to see SouthState shares as a compelling value, and we're going to stay opportunistic with buybacks as we were this quarter. Over the last year, we've repurchased roughly 5% of our shares outstanding.

Before I turn it back to Will, I want to thank our bankers for focusing on the fundamentals, growing loans, growing core relationship deposits, deepening client relationships and staying disciplined on credit. Will?

William Matthews

Thanks, John. Our net interest margin of 3.78% continued to be in line with our 3.75% to 3.80% guidance and was flat with Q2. Our cost of deposits increased by 4 basis points to 1.80 reflecting the quarter's rate hike. Loan yields of 5.92% were up a basis point with accretion of $27 million, down $6 million. Accretion income exceeded CDI amortization expense by $6 million in the quarter, further narrowing the gap between the 2 purchase accounting items. This is illustrated on the NIM slide in our deck. Excluding accretion, loan yields were up 7 basis points and NIM was up 4 basis points to 3.61%.

Additionally, and I only reference this because we've gotten so many questions about accretion income over the last couple of years, I'll point out that our third quarter PPNR per share, excluding all accretion income and CDI amortization expense, was up 10.5% versus the third quarter of 2025. And the 9 months year-to-date comparison of the same metric versus '25 was up 13.9% to $9.10 for the first 3 quarters of 2026. Net interest income of $592 million was up $16 million from Q1.

The impact of the extra day in the quarter was approximately equal to the decline in the accretion income versus Q2. As John noted, we had another good quarter for growth, both in loans and deposits, each up 9% annualized. Noninterest income of $94 million was down $3 million from Q2 due to a decline in our capital markets businesses. NIE of $375 million was $17 million above Q2's levels, primarily due to employee compensation expense. Some factors in that increase include: one, higher incentive accruals, including for growth and production; two, higher salaries with the July 1 merit increase date for much of the employee base; and three, lower deferred loan costs in the quarter.

I'll note that our revenue producer hiring initiative has been very successful with the addition of some great talent and some great wins in terms of production. The total cost of this group of employees, including not just compensation, but also recruiting and business development expenses is approximately $15 million year-to-date. Looking to the fourth quarter, with qualifiers around variable expenses that are hard to predict, such as commissions, deferred loan costs, et cetera, we expect Q4 NIE to approximate or perhaps be slightly above Q3 levels, bringing the full year NIE pretty close to the level we guided to at the beginning of the year.

Recall that we guided to 2026 NIE growth of approximately 4% over 2025 levels with approximately 100 basis points of that increase due to our revenue producer hiring initiative. We've enjoyed more recruiting success than we expected, so that component will be higher than the 1% impact, but we should basically be in line with the approximate 4% increase guidance we gave for the year. Looking ahead to 2027, we're still early in our budgeting process, and these thoughts could change, but we'd estimate an increase to NIE in the 3.5% to 4% range at this stage.

As always, our commission-based businesses and our recruiting success could cause the increase to be slightly higher. We'll refine our modeling through the fourth quarter and provide further 2027 expense guidance in the January earnings call. The third quarter's 9 basis points of net charge-offs makes 9 out of the last 10 quarters at a level below 10 basis points.

Our provision expense of $20 million was primarily driven by the quarter's loan growth. Asset quality trends remain stable to improving, and we continue to feel good about our credit quality. Turning to capital. We repurchased 250,000 shares in the quarter for a 40% total payout ratio, including dividends. This brings our year-to-date total to 2.75 million shares repurchased for a 67% total payout ratio year-to-date and a trailing 12 months total payout ratio of 75%, both of which are slightly above our longer-term guidance of 40% to 60% for a total payout ratio.

Capital levels remain very healthy. CET1 ended at 11.1%. TCE of 8.4% and TBV per share of $58.19 were both reduced slightly by the impact of the move in treasury yields on AOCI.

Operator, we'll now take questions.

Operator

[Operator Instructions]

Your first question comes from the line of John McDonald from Truist Securities.

Perguntas e respostas

John McDonald

Great. I was hoping Steve could give a little bit of color on the corresponding capital markets income this quarter. kind of what drove that down? And then also whether you can get back to kind of that $25 million guidance range you talked about previously.

Stephen Young

Sure.John, Yes, as you mentioned, if you look on Page 12, corresponding income this quarter was $20.1 million versus $24.8 million, $25 million guide. And I think I mentioned on the call last quarter, we were thinking that $25 million would be the number absent wacky, I think what I said, wacky rate scenario. And I guess that's what we got in the fourth quarter.

The 5-year treasury went up 87 basis points in the quarter and 60 basis points of that was in September. So it did move a lot. I think based on that shock in rates in the third quarter, I think that what I would expect for the next quarter or so is more in line with where we were in the third quarter before sort of some point, rates will settle back down and then we'll head back toward $25 million. But I think that's probably where we are for the next quarter or so is that, that will be a little bit more muted until rates settle down a little bit.

John McDonald

Sure, Steve. So that's kind of between where you were this quarter on the -- that what you're pointing to?

Stephen Young

That's right. Yes, that's our expectation right now.

John McDonald

Okay. And then maybe updated.

Stephen Young

Just to further that comment, there's 2 businesses that really make up most of that income. One is the fixed income business and 1 is the interest rate swap business. And so when the curve gets steeper, the interest rate swap business has a little bit more of a challenge whereas the fixed income business does a little bit better. And so we're seeing the handoff from the swap business to the fixed income business, and that's not always exactly linear, but eventually, it happens and should happen this quarter.

John McDonald

Okay. Great. And then maybe just a follow-up on Will's comments on the expense front. It sounds like something in the 375 ballpark in the fourth quarter will and then growing 3.5% to 4% next year. and that's inclusive of kind of your hiring plans next year and everything else. I know it's an early look or just the thoughts behind that.

William Matthews

Yes, John. I mean if you look at -- back at the beginning of the year, we did guide to a 4% increase for the year, and that was a normal 3% inflationary type growth plus an estimate of 100 basis points for the new hires. It's hard to predict, of course, the level of your success and the timing of your success when you're hiring new revenue producers.

We're pleased that we're ahead of pace there. As I mentioned in my prepared remarks, we spent $50 million year-to-date on that. And that's on an annual budget of about $14 million. So for the full year, we're probably -- that number is probably $21 million, $22 million attributable to that effort. We would not call that a miss, though. We would call that that we were more successful in that. And I think as those folks have been productive as some of their nonsolicits burn off, I think they'll continue to be productive and maybe even more so. So that's a little bit on this year.

For next year, it looks like consensus right now is in the [indiscernible] range, which will be right in there with that 3.5% to 4% range that I gave you. We're still finalizing budgets, of course, and there could be some slight tweaks here there, but that feels like a pretty good number sitting from where we sit today.

Operator

Your next question comes from the line of Jared Shaw with Barclays Capital.

Jared David Shaw

I guess maybe just sticking with the relationship manager hiring and you called out the $1 billion of growth from that team. I mean how should we be thinking about loan growth going into the beginning of the year? I mean, could that accelerate as more of those new hires, like you said, start hitting their stride?

John Corbett

Jared, it's John. It was a great quarter for loan production and loan growth in the third quarter. We had nearly $5 billion of production. That's up 45% from a year ago and a decent amount of that is attributable to these new hires that we've joined our team.

Last quarter, we mentioned we thought we'd see strength in the C&I category for the back half of the year, and we have C&I category is up 13% year-over-year. So as we're heading into next year, we're looking at the pipeline as backed off just a little bit when the rates came up. So our full year guidance for 2026 was mid- to high single digits. Last few quarters, it felt like we'd be on the high end of that based on the pipeline. And so we've grown 9.5% year-to-date. I would imagine with the spike in rates and the pipeline dipping a little bit, we're probably more like the mid-single digits in the fourth quarter, still for the year, I think we'd be in the high single-digit range.

Next year, I think our guidance is pretty much the same in that mid- to high single-digit range. You really can't tell quarter-to-quarter, but I feel like the current pace and current guide stays with us into 2027.

Jared David Shaw

Okay. And I guess just sticking with that theme, what's been the client sentiment as you've been out there speaking with commercial borrowers? Are they how are they feeling with the rate environment and the macro backdrop?

John Corbett

Yes, if you're in a real estate-oriented business, the rate increase has a little bit more impact on your business. And so we're seeing some pullback in those areas. The pipeline is down about 14%. We started the year with a $5 billion pipeline, it shot up to about $6.4 billion in the first quarter. A lot of that's getting pulled through to closings. And now we're right back to about the $5 billion range. But the C&I activity still feels good, feels strong. CRE is a little bit weaker.

Operator

Your next question comes from the line Hannah Wynn.

Hannah Wynn

John, I wanted to go back to a comment you made initially in your prepared remarks, just your ability to protect NIM while still showing an attractive level of loan growth. That's frankly quite a differentiating trend compared to some of the other results we've seen with some of the higher-growth Southeast banks out there I guess the question though is, do you feel like this trend is durable in this kind of higher for longer rate environment, where we kind of live in this high single digit -- high 370s NIM range but can still show high single-digit growth. Maybe if you could just give us your high-level views on maybe those 2 dynamics.

Stephen Young

Sure. Wynn, this is Steve. I'll just kind of talk a little bit about NIM. As you mentioned, I mean it was stable this quarter at $3.78 and we grew our interest-earning assets, $1.1 billion, which is sort of in that mid- to upper single-digit range. So really happy with that. Deposit costs increased 4 basis points, which was within our expectations. And so as we think about going forward. I'll kind of lay out where we see the pluses of and minuses there to NIM. If you look at -- think about the 4 different areas that entrusting assets and for us, John just mentioned that we think mid- to upper single digits all the way through '27, best we can tell. That's sort of where we think that will be -- if you look at the average for 2027, that would be around $66 billion. That's sort of how we're thinking about it today.

The rate forecast changed from June, we had no rate hikes and now we have in our models, we have 2 total Fed rate hikes, 1 that's already in September and then 1 more in December and then we're using the same yield curve. So that we had at -- So the 5 year is roughly about 5% which is where we do a lot of our fixed pricing off of.

And then as it relates to deposit costs, we have 40% of the existing beta of the book on the beta. And then, of course, we have new deposits that will be on a little higher. So we kind of use a 50% total beta on the growth and the existing book. And then loan accretion really has been pretty steady over the last year. I think we said at the beginning of the year, $125 million for '26. That seems about where we're going to be maybe half of that for next year.

But based on all these assumptions, we expect NIM to be between $3.75 and $3.85. And this range is 5 basis points higher than last quarter. And it's really due to your question to a couple of different things. It's due to the Fed rate hikes, and we are a little bit asset sensitive when we have the floating rate loans that John mentioned in his prepared remarks versus our exception price deposits.

The second is the higher yield curve for fixed asset repricing. And then the third is just new production on the steeper yield curve. So based on all those assumptions, our models, we expect this range to stay in effect through '27. So it's a positive story for us. A lot of that's driven by our asset sensitivity and really the fixed asset repricing that we've talked about last quarter.

Hannah Wynn

Great. That's very helpful, Steve. I appreciate all that color. Maybe just to dig a little deeper into deposit costs this quarter. Obviously, a really great result there. again, very differentiating relative to some other high-growth names out there. Could you talk just a little bit about your deposit strategy in the quarter? Maybe just how you were able to achieve 9% growth, while while kind of balancing and managing cost of funds so well? Are you incentivizing differently? Or are you looking and tapping some of your less expensive markets for deposits. Just kind of how are you attacking deposit growth in this environment?

Unknown Executive

Well, it's really no new strategy here. It's a continuation of existing strategy. Certainly, the focus has changed and gotten more precise -- but I mean, we're seeing a lot of really good wins this quarter -- we saw a lot going on in the treasury management area. I think we opened up new accounts that for new clients to the bank, new treasury management accounts, that was about $700 million little over $700 million underneath the -- but in the middle of that, we had quarterly tax payments go out for $0.5 billion and we had public funds down $250 million. So it sort of wiped out the the temporary part of that.

But what's going on in the underlying bank is we're growing real relationships with new money at great rates. And if you look at sort of our new money -- if you look at all the money that's new to the bank from a customer perspective, we're raising money somewhere. If you look at CDs, money markets, DDA altogether, it's a little less than 3%. So that's where the new money is coming in. But I would say no huge change in strategy. I just think it's -- we're seeing a lot of momentum, particularly on the treasury management side. But we're also seeing it throughout the bank, and we're also seeing new geographies like Texas and Colorado, where they didn't have that product a year ago, we're starting to see some item there.

William Matthews

And Wynn, you did ask about incentives. It's to say that we did tweak a little bit sort of our intercompany crediting to maybe reemphasize the importance of deposits so that there's a little bit of an incentive change in that regard, too.

Hannah Wynn

Yes. Okay. That's helpful, guys. And maybe just 1 clarification on the margin that kind of increased guide there, Steve. Is it really a steeper curve that kind of gets us to the upside case there, the $385 million.

Stephen Young

Sure. Yes. No, it is. It's both. Obviously, Treasury just mentioned it, it's still negative to to the fee income side on correspondent. So we got an 80 basis point shock in the 5-year, but it's a positive to NIM. We have, as I mentioned last quarter, we have about $1 billion a month over the next 5 -- excuse me, $1 billion a quarter over the next 5 quarters to the end of 2017, that will reprice on the South State legacy loan book, and those are fixed rate repricings and they come in around 5.5%. That's about where the coupon is.

And we think those will move up somewhere around 150 basis points. If rates don't move a whole lot. And that's a significant tailwind to fixed rate repricing into NIM. We also have securities that will reprice that are maturing that are about $1 billion, a little over $1 billion over the next 5 quarters. that probably will have an increase of about 2%. So that fixed asset repricing is significant. But I'd also say it's a combination of that. It's a combination of the Fed rate hikes where our floating rate loans are outpacing our the margin increase. That's probably 1 to 2 basis points versus our deposits.

And then we also have new production that there will be a little bit higher. But those kind of those 3 things kind of make up that guide.

Operator

Your next question comes from the line of Michael Rose with Raymond James.

Michael Rose

Just wanted to get a thought on buybacks here. Obviously, you guys bought back a decent amount this quarter. But a little bit less than in prior quarters. Can you just talk about kind of the thought process here in capital levels and maybe what the tailing rules will do for CET1.

William Matthews

Sure. Sure, Michael. It's Will. We have -- in the last year, as we said, been above our expectations for the long-term total payout ratio, which we've said is 40% to 60%. If you look back Q3 was at 40%. Year-to-date, it's been 67%. -- trailing 12 months has been 75%. So we've been more active over the past year. I'd say we still think that 40% to 60% makes sense for a company that's a growth company growth margins like ours. -- given that we've been more active repurchasing over the last year, I'd say looking ahead to 2027 without the benefit of a crystal ball, we're likely at the lower end of that payout ratio range in 2027.

So we were 40% in the fourth quarter. So we're probably the lower end of the 40% to 60% in 2027, recognized that in 2026, we've been north of the top end of that range. With respect to the tailor rules and whatnot, while that will benefit our CET1 becomes finalized by reducing the risk-weighted assets. Today, we don't see us changing our capital risk appetite, if you will in light of that. So we still think that CET1 in the 11 to 12 range makes sense for us. for all the reasons about growth and just being a company with a bit of a margin of safety sort of philosophy. But if those did pass, you'd see our CET1 improved probably by about 8 basis points or so.

Michael Rose

Very helpful, Will. And then maybe just 1 follow-up for Steve. Just as we think about kind of the 3.5% to 4% expense growth, how should we think about that toggle with kind of the fees to average assets. I would assume if we get another rate hike or 2 the correspondent will continue to be a little bit depressed here. So kind of the way to think about it is you would kind of be towards the lower end of that expense growth.

If the fees to average assets kind of are at the lower end and then would scale upward if that were to kind of revert higher. Is that the toggle we should kind of contemplate as we're thinking about fees and expenses?

Stephen Young

Yes. I think generally, Michael, I think this quarter, we did $94 million of fee income. That was 54 basis points of assets. So our guide has been 55% to 60%. But like I said, in the next quarter or 2, that's probably going to be on the lower end of that, maybe similar to where we were in the fourth quarter -- or excuse me, in the third quarter. So that's probably accurate.

And then as I mentioned, the NIM guide has gone up. And so as we kind of think about the balance of the 2, total revenue really doesn't change in this environment. and we're headed towards 10% PPNR growth year-over-year. So if you kind of think about just big picture how we're thinking about it, that's how we're trying to land all of those moving parts.

Operator

Your next call comes from the line of Janet Lee with TD Cohen.

Sun Young Lee

I think you obviously raised the NIM guide, which is positive and it seems like you held the line pretty well on deposit costs quarter as well. And you're pointing to -- if I heard it correctly, 50% total deposit beta through the cycle. Are you able to share where those new deposits are coming into the bank as it stands? And just kind of kind of a follow-up question to what was asked earlier, how you're able to bring in those deposits at such low cost. Are you able to share where these new deposits, which seem to be coming in at a slightly higher price rises before.

Stephen Young

Sure. Yes, it's Steve. The new customer money when you include all so if you just look at new non-CD money, which would be DDAs, money markets, savings accounts. I think those came in around 230 this quarter. But if you add the CDs, which is a real part of what we're doing, as you know, that moves the new customer money up in the 2.95% range for the quarter. That was for the third quarter.

And then if you had any wholesale, that could be closer in the $330 million to $340 million range. So if you kind of peel back beyond you, that's the way the pricing for the third quarter went, of course, most of the quarter. there was not a Fed rate hike until the very end. So my guess is it will go up a little bit, and that's part of the guide of the betas and all the stuff. But that's sort of where the third quarter fell out. And I think in the new -- if you looked at our new money market accounts, if you just look at that granularity, we raised new money about $670 million at 3.12% for the quarter -- if you look at new and renewed CDs, I think it was $1.65 billion at $362 million. So that kind of gives you more color behind that new customer money, but those are kind of the part of pieces. But if you kind of summarize all that new customer money at $2.95 is where we saw that come in.

Sun Young Lee

Got it. In terms of capital deployment what's your -- can you give us an update that stands on M&A? Is this something that's still on the cards or -- is that not an attractive option in a current environment?

John Corbett

It's John. I mean nothing's changed on our thinking there. The bank is performing great. We were growing talent. The balance sheet is really growing well. We've got strong earnings. So as we think about capital priorities, the first priority is keep growing our dividend alongside of earnings growth, that would be one. Number 2 is the organic balance sheet growth and the fastest markets of the country. So we're blessed with a great pipeline. Number 3 would be share repurchases as long as the valuations are as attractive as they are now and M&A would be the lowest priority.

Sun Young Lee

Got it. If I could squeeze 1 more. How do we are there any certain markets or categories within your lending -- is there any spread compression that you're seeing in any 1 particular area, depending on who you talk to, some people are pointing to some multifamily spread compression in Texas. Wondering if that's something that you're seeing in any particular way?

John Corbett

Where we've seen spread compression is probably a result of the yield curve moving up as quickly as it is. Unlike the capital markets business, a lot of these loans come with a fixed rate commitment. -- from the time of the commitment to the time of the closing, which might be 45 days or so. And if the rates move up significantly, sometimes the competition, sometimes we don't raise the rate as quickly as the yield curve, so you do wind up seeing some spread compression. My guess is most of it's tied to the fact of how rapidly the yield curves moved up. If the yield curve stabilizes, I still think there's attractive spreads in the markets that we're lending into.

Operator

Your next question comes from the line of Gary Tenner with D.A. Davidson.

Gary Tenner

You've talked a little bit about kind of the beta assumption on the deposit side with higher rates. I'm just curious, the last hiking cycle you weren't in Texas yet. I'm just wondering if you're contemplating any differences through that franchise on a combined basis going forward?

Stephen Young

This is Steve. Yes, that's all included in that guide. I think if you remember, before the merger with independent, I think South State legacy was somewhere around 30 in maybe 32%, 33% of betas. And then Texas and Colorado, we're in the mid-50s. And so that combined was about 40% on the existing.

So that's sort of part of that guide just for the existing book -- and then -- so if you kind of play that out over a couple of rate hikes, we were around 175 cost of deposits, maybe the second quarter, somewhere in there. So if you use 50% over the next couple of quarters, you get to maybe by the end of the first quarter, if those rate hikes come through or close to 2%. That's kind of how we're thinking about modeling it.

Gary Tenner

I appreciate that. And then on the correspondent banking business, just thinking of the kind of the variation margin. Obviously, the gross number was lower this quarter, but the ratio margin increased as well. So just wondering how to think of that more from a net basis. You've talked about the grows a little bit, but just like thinking about the net.

Stephen Young

No, that's good. And we look at that number. It's sort of I guess, somewhat related to that income, but really not a lot, and we can talk about that offline. But basically, that number tracks 2 things. It's the rate of the 10-year treasury and then also the Fed funds rate. So it moves around with that. But I think in the fourth -- in the third quarter, the average 10-year treasury rate was up from 4.42% to 4.75%, so it was up 33 basis points. And of course, it's really spiked at the end of the quarter. That's where you see the variation margin times the Fed funds, which also went up at the end of the quarter to come up.

So our expectation, I think this quarter, it was in the $55 million range negative. I would think it's probably if things kind of go as we think for 4Q, maybe it's in the $6.5 million, $7 million range, somewhere in there would be our expectation on a negative basis just for the variation margin.

Operator

Your next question comes from the line of Anthony Elian with JPMorgan.

Anthony Elian

On correspondent, earlier this year, you talked about some new products that could provide a lift of fee income. Has the timing on rolling out some of those new products change given the higher rate backdrop -- and when we could potentially see that $25 million of income turn into $30 million?

Stephen Young

Sure. No, great question. And yes, we are moving forward on those projects really a couple of different products that we're offering out. One is a new FX platform. One is a commodities platform. And those were doing some test trades on commodities now, and we see that to be rolled out probably on a real basis in the first quarter. And then -- also on the FX side, I think that's been -- that project has gotten delayed a little bit maybe to the -- maybe April 1.

So we'll see some benefit to both of those -- but I don't think -- I think that both of those, if you kind of add them together, probably on a full run rate basis, at $10 million to $15 million range in year 1. -- once they're fully established. So maybe it's a couple of million dollars a quarter or something like that once they're fully -- and then on capital, what exactly is driving the expectation for 2027 total payout ratio to be at the lower end of your 40% to 60% guide? I get that this year will be above that range, but you still have a lot of buyback remaining. Your CET1 is within the 11% to 12% range you provided and you potentially have tailoring coming.

William Matthews

Yes. Tony, I'd say 2 things. One, the tailoring today is not part of the equation for us. It may become as we study it further. But today, it's not. The -- and we don't have firm plans we put in place and say, lock and low, that's where we're going to go with buybacks for the next 12 months. But looking at, again, the long-term total payout ratio and where we've been the last year, we think it makes us to be at the lower end of the range this year. our CET1 appetite is to be in the 11% to 12% range. We're just shy of 11 million end this quarter. We've got, we think, good growth prospects ahead of us.

So from a priority standpoint, while capital return through repurchases is certainly on the list we think growth at appropriate returns on capital levels is superior in terms of long-term shareholder value to share repurchases. And right now, we think that's probably where we'll be investing more capital next year.

Operator

Your next question comes from the line of David Severini with Jefferies.

Unknown Analyst

This is Brian Bellino on for Dave. Just on credit, obviously, it's been fairly strong, at least over the past few quarters. Just wondering with the 5-year up as much as it is if you're foreseeing any potential incremental stress on CRE borrowers as they come to their resets and maturities next year?

John Corbett

We're not at this point, Brian. You're seeing the classified, criticized asset trends are all kind of improving. We're talking to our credit folks. We don't really see any material changes to the charge-offs in the near term. And those CRE loans that you're referencing, the -- a lot of these were originated coming out of COVID in '21, '22. And the weighted average loan to values are around 55%. So there's just a lot of margin in those deals, and they're either rightsized at maturity or if the cash flow is a little less or they're able to move it to another another lender, permanent lenders.

So far, we're not seeing issues to naturally the long-term treasuries continue to move up materially from here that could create issues. But right now, we're not experiencing that.

Unknown Analyst

Great. And just on the loan-to-deposit ratio, I think in the past, you've quoted looking to stick no higher than 92%, I guess, just wanted to see if that's still the same focusing into next year if there's some potential work of room around that number?

Stephen Young

Yes. No, that's right. I think for us, sort of target is around 90%. There might be a quarter or 2, the new higher than that for a little bit, but not much higher than 92% in any particular quarter, but the target would be 90. That's how I 'd model it. And you saw that this quarter. I mean, you saw that in the second quarter, we grew loans, I think, 11% deposits 3%, and that got us to 90%, and this quarter it was 99%. And I would expect as we continue to grow loans mid- to upper single digits, the deposit growth would stay in check there to keep that 90% over the medium term.

Operator

Your next question comes from the line of Timur Braziler from UBS.

Timur Braziler

Just a couple of follow-up questions for me. On the deposit side, you have the spot rate at the end of the quarter? I don't have it in front of me. We typically don't disclose it, but it wasn't a dramatic, I don't remember the quarter exactly where we started, where we ended, but it wasn't -- I mean, we were only up 4 basis points. So it was a kind of a ratable thing as I recall, but I don't have the number in front of me.

Unknown Executive

Okay. And then I've been getting some questions, some investors kind of push back over the course of the quarter on correspondent banking in at where those levels were during the last hiking cycle versus where they are now still implies some downside. Maybe just talk us through what's changed in that business and why the levels that you saw in in 2024, end of '23, early '24 why that's kind of off the table here in this rate hiking cycle.

Stephen Young

Yes, I think a couple of things. One is in 2024, there was a bit of a liquidity situation going on in the banking industry. Of course, we serve a lot of bank clients. And so loan growth really went down to very little in that environment. And remember, we do interest rate swaps in particular loans. So that's -- there's a lot more volume going through the pipe. And so even if the yield curve is not perfect for that business, there's still volume -- as it relates to fixed income, same issue.

Remember, in 2024, everybody was talking about AOCI and how significant it was than it was because rates shocked up significantly. This certainly was a bit of a rate shock but not near anywhere near 30, 100 basis point shock. So what we're seeing clients do now is clients are investing. People look at this opportunity and they see 3- and 4-year duration paper in the 5.5%, sometimes as high as 6% range. which is a lot steeper and a better place to invest than a few years ago.

Timur Braziler

Great. And then just last for me. You brought up the success you're having hiring -- just any color you can provide on which institutions you're having most success hiring from?

John Corbett

Yes. It's very diverse based upon the market, but we're getting a lot of bankers out of the regional banks and some out of the money center banks. -- where we're having the most success. I think I mentioned before, is in Texas. The total relationship management sales force in Texas is up 22% from the same period last year. So that just leaves us as we integrated that bank over the last couple of years. Dan Stroll leads it for us. They've not only just strike the cool A of the South State culture. They're out selling the South State tooled.

North Carolina is up 19% year-over-year. Atlanta is up 16%. So in the geographies, overall, we've increased the sales force by 13%.

Operator

Your next question comes from the line of Christopher Marinac of Brean Capital.

Christopher Marinac

Thanks for hosting us today. Steve, I just want to go back to the deposit comment you made a little while ago about the near 3% all in. Does that number go up further from here this quarter? Or can you manage it to be about the same?

Stephen Young

Yes, good question, Chris. If you looked at the last several quarters and you looked at that number, it ticked up -- I don't have the number the all-in number from last quarter, but I'm thinking about the money market rates were up maybe 20 basis points or so from last quarter, but that doesn't reflect all things. So my expectation is rates are up. So I would expect it to come up some. I just don't have a great prediction on what that would be in the next quarter. But I do think based on our modeling, that beta is probably pretty accurate.

If you think about there's the new money part and then there's the -- which is what you're referencing, and then there's the existing book the existing book, the way we manage that is mainly through exception pricing. And we have already for the September rate hike already factored that into the fourth quarter guidance. But I would expect it to probably be somewhere in that 3% range. But it's a little early to be able to tell that going into the next quarter.

Christopher Marinac

And as you have success on the treasury side, particularly in your new markets, that's also going to drive that new money or hold back the new money rate as well.

Stephen Young

It should. I mean our job is to grow treasury management accounts treasury management balances, small business accounts, small business balances in retail and checking. So I mean our focus in the way the incentives are set up in in the offices as well as in the RM level is very much pro checking, and that's where we believe the relationship exists and that's where we're focused.

Operator

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

John Corbett

All right. Thank you, Tracy. I'd just wrap up by saying that we're in the middle of the budget season now. And so far, we're liking what we're seeing for 2027. For several years, we've been focused on investing in technology and infrastructure. But now we're investing in people and expanding the sales team, and that's a lot more fun and rewarding. As you've seen in our balance sheet growth, it's working, and our net interest margin is stable and it's headed in the right direction with the back book repricing, more floating rate assets, which gives us confidence headed into 2027.

So I want to thank you for joining us this morning. If you have any follow-up questions, don't hesitate to reach out. Have a great day.

Operator

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