SSB

Overall Q2 2026 Performance

• Delivered strong core performance with a 1.36% return on assets and 17.6% return on tangible common equity, extending a trend of consistent high performance over recent quarters.
• Credit quality remains exceptionally strong: non-performing assets declined 14% quarter-over-quarter, net charge-offs came in at just 6 basis points (the 8th time in 9 quarters that net charge-offs have been below 10 basis points), and provision expense of $16 million was driven almost entirely by loan growth.

Talent Acquisition

• Has expanded the commercial banking sales force by over 10% in the last three quarters, taking advantage of industry disruption to recruit high-quality, experienced relationship managers that align with the firm's culture of local decision-making and long-term relationship building. Texas has led expansion, with a 25% increase in commercial relationship managers to date.
• New hires have already generated $600 million in new loan production with a $1.5 billion pipeline of future opportunities, exceeding early performance expectations.

Balance Sheet Growth

• Maintains a disciplined long-term approach that balances soundness, profitability, and growth rather than optimizing for single-quarter results. Year-over-year loan growth of 8% and deposit growth of 5% are both within prior guidance ranges.
• The firm has intentionally shifted its loan portfolio mix to increase floating rate share, which now stands at 38% of total loans, up from 32% in June 2025, improving balance sheet stability and interest rate sensitivity.

Capital Allocation

• Has repurchased nearly 5% of outstanding shares over the last year while increasing dividends and maintaining a Common Equity Tier 1 (CET1) capital ratio above 11%, which ended Q2 at 11.1% (well above regulatory requirements).
• While year-to-date 2026 payout ratio is 80% due to opportunistic repurchases at attractive valuations, the long-term target total payout ratio remains 40-60% of net income to balance capital return and balance sheet growth.

Artificial Intelligence Investment

• Is company-wide AI to improve operational speed, quality, and scalability. Productivity gains are already being realized in credit operations, fraud management, call center support via the firm's internally developed small language model.

• Net Interest Margin (NIM) guidance is maintained at 375-380 basis points for 2026-2027, assuming flat policy rates; NIM came in at 378 basis points in Q2, in line with guidance.
• Full-year 2026 non-interest expense guidance is maintained at 4% year-over-year growth, consistent with a full-year expense level of ~$1.46 billion.
• Non-interest income guidance is maintained at 55-60 basis points of average assets, with gross correspondent banking revenue expected to hold at ~$25 million per quarter.
• Full-year 2026 loan growth guidance is maintained at mid-to-upper single-digit, with management noting results are on track to land at the higher end of this range.
• Long-term total capital payout ratio guidance is maintained at 40-60%, with management noting that higher year-to-date repurchase activity is opportunistic and not a change to the long-term framework.
• The maximum comfortable loan-to-deposit ratio is 92%, with the ratio currently just above 90% as of Q2 end.

South State Bank is a single-line regional banking firm with core performance centered on lending and deposit activities. Net interest income (NII) for Q2 2026 was $576 million, up $14 million from Q1 2026. Non-interest income (NII) came in at $97 million, equal to 57 basis points of average assets, which is $3 million lower than Q1 2026 as higher deposit fees offset lower mortgage revenue. Non-interest expenses (NIE) for the quarter were $358 million, slightly below the guided range, with full-year 2026 NIE expected to come in at ~$1.46 billion, a 4% increase over 2025 levels. The loan segment grew by $1.35 billion in the quarter, representing an 11% annualized growth rate, with 76% of new loan production carrying a floating rate. Florida led all regional banking groups in dollar loan growth, with all groups posting solid growth. Total loans grew 8% year-over-year, and total deposits grew 5% year-over-year.

• There is ongoing industry-wide competitive pressure for both top lending talent and deposit market share, which can put upward pressure on compensation and deposit costs.
• Economic uncertainty stemming from global trade policy (tariffs) and geopolitical conflict (Middle East) creates uncertainty for future credit performance and reserve requirements.
• Interest rate volatility can impact net interest margin, deposit costs, and the trajectory of correspondent banking revenue.
• Construction and commercial real estate loan concentrations have planned paydowns in the second half of 2026, and unexpected shifts in the CRE market could create unplanned credit risks.

Q: How does management balance the push-pull between strong balance sheet growth and net interest margin profitability? What is the strategic mindset on this tradeoff? / A: Management confirms the firm's 2026 priority is meaningful balance sheet growth after successfully expanding the commercial lending team. New hires have already generated significant new loan production with a large outstanding pipeline, creating ample attractive growth opportunities. The firm underwrites all new loans based on risk-adjusted return on capital, and is willing to accept small amounts of NIM compression to add high-quality new customers and loans, growing total net interest income and long-term shareholder value.

Q: What is the outlook for the allowance for credit losses, given the consistent downward trend in reserve levels over the past five quarters? / A: Absent a significant adverse shift in key economic inputs (unemployment, commercial real estate prices, etc.), management expects the slight downward trend in reserve levels to continue. Downward pressure comes from the migration of higher-reserve purchased credit deteriorated (PCD) loans to non-PCD classification, partially offset by small upward pressure from slower loan prepayments in the current rate environment. Management has maintained a more conservative weighting of pessimistic economic scenarios (40% pessimistic, 20% optimistic, compared to the traditional 30/30 split) due to ongoing economic uncertainty, so larger reserve releases are on hold until uncertainty moderates.

Q: What has been the performance of newly hired commercial bankers over the past three quarters, and how does growth differ between legacy and new expansion markets? / A: Management set a multi-year goal to expand the commercial relationship manager team by 15-20% amid industry disruption, and the firm is already up over 10% after just three quarters. New hires have produced $600 million in new loan originations to date, with a $1.5 billion outstanding pipeline, exceeding management's early expectations. The most success has come in Texas (the firm's key expansion market), where the commercial team has grown 25%, and the recently converted Texas franchise is now growing at the same double-digit pace as legacy Southeast markets. No new full-market entry is planned, as the firm focuses on adding depth and density to existing markets.

Q: What drivers support stable core NIM as purchase accounting accretion declines over the next year? / A: As accretion from the Independent Bank acquisition declines, core loan repricing will offset this drop. Around $6 billion of existing loans will reprice over the next 12 months, with an average expected increase of ~50 basis points in coupon. Additionally, $1 billion in securities will mature and reprice at ~100 basis points higher than current yields. Legacy low-coupon (3-4%) loans from 2021-2022 are rolling off and being replaced with new production originated in the 6% range, lifting core yield even as accretion declines.