SouthState - Earnings Call - Q2 2025

Transcript

Speaker 7

Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the SouthState Corporation Q2 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Will Matthews. Please go ahead.

Speaker 4

Good morning, and welcome to SouthState's second quarter 2025 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.

Speaker 8

Thank you, Will. Good morning, everybody. As always, thank you for joining us. In January, we closed the Independent Financial transaction, a deal that we projected to be 27% accretive to our earnings per share. In the first quarter, the bank's earnings accelerated just as we forecast. Loan growth stalled with all the economic uncertainty. Remember, though, we mentioned in April that our loan pipelines were growing significantly in the spring. As you can see in the deck, the pipeline growth in the first quarter led to a 57% increase in loan production from around $2 billion a quarter to over $3 billion in the second quarter, and that led to solid loan growth. In Texas and Colorado specifically, loan production increased 35%. Non-PCD loans grew by about $200 million.

The loan momentum in Texas and Colorado occurred in the same quarter that we successfully completed the conversion of the computer systems. I'd be remiss if I didn't recognize and thank our Texas and Colorado team for their great work navigating through the conversion. It was tremendous teamwork all around, including 400 people who left the Southeast for three weeks to serve as ambassadors to help with the transition. A special thank you to all the operations, IT, risk, finance, and HR teams that numbered over 1,000 people who made this conversion one of the best we've ever done. Now that the Independent Financial integration is complete, we've had some time to reflect on the progress that we've made. Our goal has always been to build the company in the best geography in the country with the best scale and to build the best business model.

We believe that those three priorities will ultimately yield the best shareholder value. By adding Texas and Colorado to the franchise, we're now firmly established in the fastest-growing markets in the country. At $66 billion in assets, we've achieved a scale that's enabled us to make the necessary investments in technology and risk management while simultaneously producing top-quartile financial returns. Just look at the second quarter. Adjusted for merger costs, SouthState's return on assets was 1.45%. Our return on tangible common equity was nearly 20%. Finally, our entrepreneurial business model is producing a superior customer experience and a superior employee experience. Our retail bank ranks in the top quartile of JD Power's net promoter score, and the scores are improving every year. Our commercial and middle market bank collectively ranked in the top 5% for award recognition in 2025 of the 600 banks tracked by Coalition Greenwich.

Our level of employee engagement ranks in the top 10% of financial institutions in America according to this year's employee surveys. We've built a team of professionals that is talented and engaged with a heart for serving each other and serving our clients. It's a team that's delivering top financial returns for our shareholders. We've now put the Independent Financial conversion in the rearview mirror. As we look ahead to the prospects of an improving yield curve, we're in a great position to focus on and accelerate the bank's organic growth. Given the strength of our earnings growth and our capital levels, the board of directors felt comfortable this week to increase our dividend by 11%. Will, I'll turn it back to you to walk through the moving parts on the balance sheet and income statement.

Speaker 4

Thank you, John. As always, I'll hit a few highlights focused on operating performance and adjusted metrics, and then we'll move into Q&A. We had another good quarter with PP&R of $314 million. And $2.30 in EPS. Net interest income grew by $33 million over Q1, only $2 million of which was due to higher accretion. We continued to perform well on cost of deposits, which came in at $184, a five basis point improvement from Q1. Our loan yields of $633 improved eight basis points from Q1 and were approximately 22 basis points below our new origination rate for the second quarter. Loan yields in the quarter also benefited from early payoff on acquired loans, including some PCD loans. Excluding $14 million in early payoff accretion, loan yields of $620 were one basis point higher than Q1.

And loan yields excluding all accretion were up seven basis points from Q1. Additionally, the second quarter had a full quarter's benefit of the Q1 securities portfolio restructuring, driving the yield on securities 51 basis points higher. To recap, and you can see this in the waterfall slide in the deck, of the 17 basis points improvement in the NIM, approximately five basis points of NIM improvement was due to the lower cost of deposits, six basis points was due to loan coupon yields, and seven basis points was due to a full quarter of the securities portfolio restructuring. As always, Steve will give some updated margin guidance in our Q&A. Non-interest income of $87 million was similar to Q1 levels, with improvement in our correspondent business offset by a slight decline in our mortgage revenue.

On the expense side, NIE of $351 million was at the low end of our guidance, and our second quarter efficiency ratio of 49.1% brought the six-month year-to-date ratio below 50%. Credit costs remain low, with a $7.5 million provision expense essentially matching our six basis points in net charge-offs. We had one additional day-one PCD charge-off of $17 million on an acquired independent relationship. This is an as-of acquisition date impairment where there were conditions in existence at the January 1 closing date that we became aware of during the quarter. We continue to have strong loss absorption capacity. Asset quality remains stable, and payment performance remains very good. Our capital position improved again, with CET1 and TBV per share growing nicely. It's worth noting that tangible book value per share of $51.96 is up 8.5% from the year-ago level, even with the dilutive impacts of the IBTX merger.

Our TCE ratio is also higher than its June 2024 level. Additionally, our strong capital and reserve position and the rate at which we're growing capital continue to provide us with good capital optionality. That includes this quarter's 11% dividend increase and other options, including the potential to repurchase shares opportunistically should we choose to do so. Operator, we'll now take questions.

Speaker 7

At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Katherine Miller with Keefe Bruyette & Woods. Please go ahead.

Speaker 3

Thanks. Good morning.

Speaker 8

Morning.

Speaker 3

I thought we could just start on your outlook for the margin. Gosh, it was just really great across the board on securities, loan yields, deposits. We kind of got everything all at once. Just curious if you think there's still upward movement. I mean, we're now at kind of the top end of the range that I would have expected. Is there the ability to still expand the margin from here? Just curious for your outlook for the margin in the back half of the year. Thanks.

Speaker 8

Yeah, sure, Katherine. This is Steve. Yeah, like you mentioned, the net interest margin score is very strong at 4.02. I think we have a slide on page 12 that talks about that. Our guidance this last quarter was between 3.80 and 3.90, so. Significant beat. Approximately half of that beat related to our expectations of loan coupon securities, deposit costs, as you mentioned, that is better than we thought. And then half of it related to our expectation of loan accretion, which was a little bit higher than we thought due to some higher PCD accretion from early payoffs. You can see that in our PCD balances. Page 13, as Will mentioned in his opening comments, describes the change quarter over quarter in NIM. I think the highlight are all the loan coupon increase, the security coupon increase, and the cost of deposits.

That makes up the 17 basis points quarter to quarter. As we think about the guidance, to be just simply, there is really no significant change to the guidance as we see it. Sometimes, as we look at these quarter to quarters and as it relates to accretion, sometimes it is looking at the portrait versus looking at the movie. I think the portrait from quarter to quarter can get a little noisy, but the movie is kind of where we are going to continue to guide you towards, and that is over the next 18 to 24 months. As we think about the assumptions, the main assumptions around that are the size of interest-earning assets, the rate forecast, and then lastly, the loan accretion.

For us, the interest-earning assets, we reiterate our guide from last quarter that we would have average earning assets to be roughly $58 billion for the full year in 2025. In the fourth quarter average, we would exit somewhere in the $59 billion. That is a mid-single-digit growth rate. We sort of see that going into 2026. As John mentioned in his prepared remarks, we will see how the growth outlook evolves over time. Really, no change in guidance to the interest-earning assets. On the rate forecast, we do not see rate cuts this year, so we are trying to keep it simple, and then we can talk later about interest sensitivity. Accretion, loan accretion, based on our models, we would expect loan rate accretion to total approximately $200 million, maybe slightly higher than that for 2025, of which we have recognized about $125 million so far this year.

So $200 million in total for 2025, but we recognize $125 million. That indicates we have, I do not know, between $75 million, $80 million, $85 million left or so for this year. We expect, in our models, based on prepayments and others, about $150 million in 2026 of accretion. As a reminder, we have about $393 million left of the discount. Anyway, based on all those assumptions, we'd continue to expect NIM to be between 380 and 390 for the remainder of the year and to drift higher in 2026. As the combination of the legacy SouthState loan book continues to reprice up. No change to any of the guidance that we talked about, except that if, obviously, if rates or if our growth rate got higher, then certainly net interest income would move higher.

Speaker 3

That makes sense. Okay. Within that, it seems, I guess, within that $75 million-$80 million of accretion left in the back half of the year, I guess that's just your base level. It does not assume any accelerated accretion. We've gotten that the past two quarters. We may get that, but that's just kind of your base level.

Speaker 8

Yeah. Our base level, it's hard to tell some of these things. Like last quarter, there was a fair amount of PCD. If you look at our PCD loans, they were down $225 million. That was higher than we expected, which is a good thing. It affects accretion, certainly affects the allowance, too. Ultimately, we would not expect those PCD. Some of that is just our people resolving some of those as we get our hands around the IBTX portfolio.

Speaker 3

Great. That makes sense. Okay. Maybe one more just on the growth outlook. The origination, the slide that you were, you show origination. It seems like you've really got some momentum in the origination volume, which is so great to see. Just curious for your growth out. I mean, I know you said average earning assets are still kind of heading towards $59 billion, but is it fair to assume an improvement in the bottom line organic growth rate in the back half of the year, maybe kind of closer towards that kind of mid to high single-digit level?

Speaker 8

Hey, Katherine, it's John. I think we guided to mid-single digits for the remainder of the year. That's kind of where we wound up in the second quarter, in the mid-single-digit range. This kind of played out the way we talked about in April, with that pipeline increasing as much as it did. It translated into a really big spike in production, and that led to the loan growth. I'd say going forward, we're getting more bullish, but we don't know for sure. The loan pipeline increased 45% in the first quarter, but then in the second quarter, the pipelines increased another 31% on top of what it grew in the first quarter. That tends to make us feel a little more bullish that mid-single digits is probably still appropriate for the next couple of quarters.

If the yield curve becomes more favorable, I think it's likely we could move to the mid- to upper-single digits growth probably next year.

Speaker 3

Great. Makes sense. Thanks. Great quarter. Appreciate it.

Speaker 4

Thank you.

Speaker 7

The next question comes from the line of John McDonald with Truist Securities. Please go ahead.

Speaker 1

Hi, good morning. Just wanted to follow up on Steve's comments there on the NIM and NII. Inside of that, what surprised you about deposit costs, which were very strong this quarter, and what's your outlook for the deposit costs inside that NIM guidance?

Speaker 8

Yeah, that's a good question, John. This is Steve. Just to kind of pick you back up to the movie versus the portrait or Polaroid, I think. If we go back a couple of quarters, if you looked at IBTX and us together, the peak cost of deposits was in the third quarter at 229. And of course, last quarter, it was 184, so a 45 basis point improvement. So 45% beta on 100 basis points. And we only modeled 27% just because we thought it would be a bit different. Having said all that. I think we've optimized the deposit base. I would kind of look at it that as we continue to grow loans, if we're in a situation where we're in the mid-single digit, maybe even a little higher than that. Those deposit costs on an incremental basis will go up a little bit.

Our forecast is that those deposit costs to be in the 185-190 range over the next few quarters, just as we continue to kind of grow on that. Even at that, that would be a 40% beta or something like that, which is better than we thought.

Speaker 1

Thanks. Just on the loan growth, another follow-up. In terms of the pull-through of the strong production to net loan growth, what are you seeing on paydowns? Any change in the paydown pace and activity that's affecting the difference between the gross production and what you're seeing in terms of net loan growth?

Speaker 8

Yeah. The paydowns in the first quarter were actually lower than normal. We went back and looked at Independent and SouthState combined for the last four or five quarters, even before we closed. The second quarter paydowns returned to a little more normal. It was a little more elevated than the last five-quarter run rate. I think that the level of paydowns in the second quarter is probably appropriate for where we go from here. A lot of this has to do with not just paydowns, but how much the loan originations fund initially versus over time. We're funding around about 60% of that production. There is some additional funding that will occur over time.

Speaker 1

Got it. Okay. Great. Thank you.

Speaker 7

Your next question comes from the line of Steven Scouton with Piper Sandler. Please go ahead.

Speaker 0

Hey, thanks. Good morning, everyone. Steve, if you could maybe talk a little bit about the interest rate sensitivity as well, as you noted, just kind of want to make sure that's still the way I think about it. I think you said you see the NIM going higher in 2026, assuming that has some cuts baked in and that you guys are still kind of a net beneficiary if we get a little bit of rate cuts on the lower end, but steepness of the curve.

Speaker 8

Sure. No. Good question. As it relates to the interest rate sensitivity, I think we talked about it last quarter, but really no change from our guidance as we model it and our team models it. We expect somewhere in the one to two basis point improvement to overall margin for every 25 basis point cut. I guess if the Fed ends up cutting rates 100 basis points, maybe that's four, five, six basis points on the run rate when all that's finished. The math behind that is we have about 30% of our loan portfolio is a floating-rate portfolio. That's $14.6 billion. Of course, all that gets cut immediately. We have a little over $14 billion in exception price deposits that we think that over time we get about 80% of the beta on that. Then we have the CD book, which is $7.7 billion.

We think we get 75% of that. That's sort of been our history. We'll have to see, but that's sort of the math behind that one to two basis points. On the loan repricing piece, without any rate cuts, we should continue, as I mentioned in my remarks, that margin should continue to increase. The math behind that is the fixed-rate loan repricing of the legacy SouthState. If you think about, if you kind of look at the 18-month period from here to the end of 2026, the legacy SouthState, the unmarked book, has about $6.6 billion of loans repricing. On average, over that period of 18 months, the coupon's about 5%. We think, obviously, our new loan production this past quarter was $654 million, but we're modeling sort of a 6.25% over that period of time. You pick up a percent and a quarter on that.

Then, of course, on the independent portfolio, we have about $3 billion over the next 18 months that will mature, reprice on the fixed book. Of course, that discount rate is somewhere in the 7.25% range. If that's true, that would be negative by about, if we want to use the same number, 6.25% by 1%. The positive would be $6.6 billion repricing up one and a quarter percent, and the negative would be $3 billion pricing down at 1%. The net of all that is about $50 million, about 10 basis points positive on loan yield. That's how we're kind of thinking about the moving parts from here. A lot of the sensitivity of the interest rates have already been taken out because of the independent marks. What's left is the legacy SouthState repricing book, and then any rate cuts on top of that.

Hopefully, that's helpful if you think about it.

Speaker 0

Yeah. No, that's great detail, especially about the puts and takes on legacy SouthState versus IBTX. Appreciate that. I guess maybe if we could touch on the deal that was announced last night, maybe not that specifically, but just M&A in your markets even, how do you think about how dislocation could benefit you all? Would you have any governor to adding people and talent if they become available? Just kind of how you think about the dynamics of the market and your ability to take advantage of that moving forward.

Speaker 8

Yeah. I mean, I look about where we are. I'm really glad we made our move in Texas when we did in early 2024. That was really before the competition heated up. I think that timing gave us an early mover advantage. For us, we're not pursuing anything now. The way the bank's performing, the bar is high for us, and we can afford to be patient and selective on M&A. Plus, we think our multiple's cheap. Our top priority now is that we're firing on all cylinders in Texas and Colorado. The conversion went great. The organic pipelines in Texas and Colorado grew by 31% last quarter. That's what we're focused on. With all the disruption of M&A in the Southeast and Texas, that always creates opportunities and SouthState's positioned in the right spot.

Speaker 0

Got it. Nothing that would deter you from adding. If a team of, let's just say, 10 or 20 people came around, you'd go ahead and do that if this was right.

Speaker 8

I mean, yeah, absolutely. We added 47 revenue producers in the second quarter. That is part of our DNA is constantly recruiting. With all the disruption in Texas and Southeast, we will continue to do that.

Speaker 0

Perfect. Thanks for the color. Great quarter.

Speaker 7

Your next question comes from the line of Jared Shaw with Barclays. Please go ahead.

Speaker 5

Hey, good morning. I guess just looking at, you call it the regulatory sweet spot of $60 billion-$80 billion. How do you see that trending? You're in there right now. How do you see that trending over time? Do you think if we see some concrete change in regulation for $100 billion that your platform can naturally grow above that without any more big investments? Or how should we think about that regulatory sweet spot changing over time for you in scale?

Speaker 8

Yeah. I mean, it's in the news every day. You've got new regulators in place. They're making changes. I mean, the way I think about it, we're a long way from $100 billion. It's $66 billion in size. So we've got a long time to continue building the infrastructure. Our Chief Risk Officer, Beth DeSimone, has done a fabulous job. Managing the heightened expectations over the last four or five years as we crossed $50 billion. We got great relationships with our regulators. We'll just have to watch and see how the regulation evolves. We got a long time before we're faced with that.

Speaker 5

Okay. Thanks.

Speaker 7

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

Speaker 6

Hey, good morning, guys. Thanks for taking my questions. Steve, just any updates on the expense outlook? Looks like you were at the lower end of the range for this quarter. Maybe just some color on what drove you to the lower end of the range and any updates as we kind of think about what you'd previously said around the back half of the year just as a starting point. Thanks.

Speaker 4

Yeah, Michael. I guess the short answer is really no change to our prior guidance. I mean, honestly, looking at consensus, you guys have, we think, a good number in there for the remainder of this year and 2026. I'd say really no change to our guidance. There are always some moving pieces, as you well know, relative to revenue-based compensation, some of the business lines. You have loan origination volumes that impact your deferred loan costs, all those kinds of things that move in and out. You have incentive comp, all that sort of stuff. Any variability between what I last think I said between 350 and 360 this quarter. We were at the low end of that range. All those kinds of things can factor in. We have done a good job in executing on the cost save.

We are still very good about that part of the integration with Independent. Really sticking with our guidance on NIE.

Speaker 8

Perfect. And then maybe just.

Speaker 4

One comment I forgot to mention. Just a reminder, I've said it before, but July 1 is when much of our team across the company gets their merit increases. So that's also factored into my guidance as well, that the third quarter will reflect that too.

Speaker 8

Perfect. Appreciate it. Maybe just as my follow-up. I know it's still early days, but anything on the revenue synergy front that we should be contemplating now that we're another 90 days past the deal? Then just from a retention standpoint, how has that held up relative to kind of your original expectations? Thanks. Yeah. It's held up great. As I've mentioned previously on these calls, we went to all the geographic leaders before the announcement, and they all signed up with employment agreements before the announcement. Then we went to the, I think it was the top 47 revenue producers with retention kind of packages, and all of them joined up and did that. We've been very, very pleased. The leader we've got in Texas and Colorado, Dan Strodl, highly respected in the bank with that team, and he's done a great job.

The bankers are doing a good job. We're hiring. I think in, I mentioned those revenue producers, we've added. We added two in Houston. We added two in Colorado. We added one in Dallas. They're out recruiting.

Speaker 5

Just on the fee side, the synergy side, anything that should be contemplated?

Speaker 8

One thing that's been a real positive. Independent was a really good CRE lender. And we've got the interest rate swap product, Michael, the capital markets product where we make a fees. And they've been quick adopters to that. So that's been a nice source of fee revenue.

Speaker 5

All right. I'll step back. Thanks for taking my questions.

Speaker 7

Your next question comes from the line of Gary Tenner with D.A. Davidson & Co. Please go ahead.

Speaker 0

Thanks. Good morning. I wanted to just ask a question about kind of the deposit rates. I know you gave kind of a 1.85% to 1.90% range for the back half of the year. On the CD side, I guess I'm curious, A, the amount of growth there this quarter was pretty notable just from a sequential quarter comparison. I am wondering about kind of the push there. The rate paid did not come down maybe quite as much as I would have assumed. I am just wondering kind of how that market is shaping up from a pricing perspective.

Speaker 6

Yeah. No, Gary, this is Steve. When we closed, and you did not have the benefit of seeing this, but when we closed the Independent transaction, if you looked at our December 31 numbers, I think our CD balances would have been a little over $7.5 billion or so. A lot of that has to do with we are trying to balance sheet manage this. Of course, there is a lot of moving parts and putting it together. In the first quarter, even though I think we grew deposits a little bit, our CDs actually shrunk, although that was the first time we reported together, so you did not see that. What is happening now is just the growth rate phenomenon. In the first quarter, as we mentioned before, did not grow loans. This quarter, we did, and we think we will.

It is going to be on the incremental new deposit side. It is just going to be at a higher funded rate until they cut rates. That is all I would say about that. I think if our balance sheet was flat, we would probably stay here. On the incremental growth, as we record 6.5% loans, and we are going to have to fund those incremental loans with incremental deposits, those rates will be a little bit higher on the incremental margin.

Speaker 0

Okay. Appreciate it. Then follow-up question just on the loan yields, the seven basis points expansion kind of accretion. I know I think Will, you've kind of offered some reasons why that moves around. Was the normalization of prepays this quarter a notable driver of that expansion, or is it more mix and production yields?

Speaker 6

Yeah. This is Steve. I guess. If you take all accretion out and we show this on the waterfall. Our loan yield went from 5.71 last quarter to 5.78. So 5.70, yeah, something like that, seven basis points or so on the loan yield. There is a repricing component to that. Obviously, as we mentioned on the accretion. Some of that was the PCD accretion, it was higher than we thought. That is because I think we worked some of those relationships out or did. Anytime you accelerate some of that back to the individual quarters, there is going to be some noise in that. If I had to kind of bring you back to what we said last quarter and thinking about total loan yield. We sort of said it should range this year in the 6.15-6.25 range.

If you kind of think about the comments I just made in a flat rate environment and the repricing of our loans from Legacy SouthState as well as Legacy Independent, you would see another 10 basis points higher over. Now, almost kind of in the 8-10 basis points a year range. I know one of the research analysts put out a report a few weeks ago just trying to show the total loan yield, which is kind of how we think about it. In a flat rate environment, our total loan yield in the next two years would be, call it 20 basis points higher than it is today. I doubt we will be in a flat rate environment. I doubt everything will be similar. That is kind of how we are thinking about loan yield this year.

6.15-6.25, we have overperformed a little bit because of some of the PCD and other things. Long term, it continues to march higher in a flat environment.

Speaker 0

Thank you.

Speaker 7

Your next question comes from the line of Samuel Varga with UBS. Please go ahead.

Speaker 2

Hey, good morning. I just wanted to ask a question on the allowance. You gave some great color last quarter around not shifting the scenario weightings, but having a Q factor adjustment in there for tariffs. Can you touch on where that adjustment is today and sort of how you're trying to bake that in moving forward and where the allowance might go as a result?

Speaker 8

Sure. Sure. Sam, good question. I'd say this about the reserve level, a couple of things. One, if you look at slide 21 of the deck, you can see obviously our charge-off history is very low. 51 basis points cumulatively over 10 years plus a quarter. At some point, that data seeps its way into the regression analysis that drives loss estimates and reserve balances. We've been through a pretty uncertain period in the economy these first couple of quarters, obviously, with the tariff uncertainty, etc., etc., which has driven some of those Q factor items that we mentioned last quarter. Those continue this quarter. We did actually adjust our scenario weighting this quarter a little bit more pessimistically than it was in the first quarter.

I'd say stepping back, if you look at the reserve level, if we see stability in the economy and the economic forecast, I think it is reasonable to say that we could see reserve levels decline as a percentage of loans. If you look back when we adopted CECL, of course, the company was smaller then, but the reserve was down to 115-120 basis point range. Other thing to keep in mind too, Steve referenced that the PCD loans declined at a more rapid rate the second quarter. That's really like a 25% annualized decline rate. PCD loans, not only are they marked at a little bit higher interest rate, but they carry a higher reserve. Reduction in PCD loans is also going to put downward pressure on reserve levels.

All that being said, it's always difficult to predict, but I think it's reasonable to expect that over time with a stable economy, you see our reserve levels probably move down.

Speaker 2

Great. Thanks for that. John, could you just touch on capital allocation from here? The buyback word came up. Just curious on how you think about it over the next 18 months.

Speaker 8

Yeah. With the earnings improving the way they have, you saw our PP&R per share increasing substantially in the last year. The board felt comfortable to move the dividend rate up. We moved the rate up 11%. And we think we're in a position to annually consistently see that dividend rate increase. That's naturally a priority. We do believe there's opportunities on the buyback. I mentioned that I feel like our currency is cheap right now, so there could be some opportunities there. We're watching these loan pipelines continue to grow and opportunities to recruit. That would be the other main priority as well as organic growth.

Speaker 4

Yeah. I'll just layer in, Sam, a couple of comments. One, I think I previously said that we saw our CET1 growing 20-25 basis points a quarter. If we do some buyback, maybe that number drops down to the 10-15, 15-20 range. We in the first quarter did some capital actions with respect to the sale leaseback and then restructuring the bond portfolio, which, as we saw, with the impact of that on the margin. If you look at our CET1 today with AOCI included in the calculation, we're actually above the level we were a year ago. We were at almost 10.5 at the end of the second quarter on CET1 with AOCI. A healthy position for CET1 as calculated, and if you calculate it with AOCI included, that's about 12 basis points above where we were a year ago.

That does give us some good optionality and some opportunity to think about different options.

Speaker 2

Great. Thanks for taking my questions.

Speaker 7

I will now turn the call back over to John Corbett for closing remarks. Please go ahead.

Speaker 8

All right. Thank you guys for spending some time with us this morning. As always, if you have any follow-up questions, feel free to give Will and Steve a ring. I hope you have a great weekend.

Speaker 7

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.