Executive Summary

GAAP diluted EPS was $1.34; adjusted diluted EPS was $1.58 on record revenue driven by fee income (mortgage and correspondent), versus Q2’s ($1.96) GAAP loss and $0.89 adjusted EPS, and $1.50 GAAP EPS in Q3’19 .
Net interest margin (tax-equivalent) dipped 2 bps to 3.22% amid ~$3B+ excess liquidity; core NIM ex-accretion was 2.95% as liquidity weighed ~24 bps on NIM .
Asset quality remained benign (net charge-offs 0.01% annualized; NPAs/Assets 0.33%); ACL/Loans rose to 1.74% (1.92% ex-PPP) and reserve coverage of NPLs ~391%; loan deferrals fell to ~$452M (~2% of loans) with half paying interest .
Capital improved (CET1 11.5%, Total RBC 13.9%, TCE 7.83%); dividend maintained at $0.47; integration and $80M cost saves on track with the bulk in 2021 post system conversion; 20 branches to be consolidated by YE’20 .
Street consensus from S&P Global for Q3’20 was unavailable in this session due to API limits; we cannot provide vs-estimate comparisons (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

Record revenue from strong fee lines: mortgage banking income $48.0M and correspondent banking & capital markets $26.4M; management highlighted these as the quarter’s profitability drivers (“the highlights… profitability of our mortgage and correspondent banking units”) .
Pre-provision earnings and efficiency improved: PPNR of ~$170M (PPNR ROAA 1.79%) and adjusted efficiency ratio 55.8% vs 61.9% in Q2 .
Credit metrics resilient: NCOs 0.01% annualized; NPAs/Assets 0.33%; ACL/NPL coverage ~391%; deferrals down to ~2% with half paying interest (CEO: “loan deferrals declining to just 2%… half… making their interest payments”) .

What Went Wrong

NIM compression persisted: NIM fell to 3.22% (down 2 bps QoQ and ~51 bps YoY) due to excess liquidity; core NIM 2.95% (CFO: “our NIM would be approximately 24 bps higher” without excess cash) .
Loans declined $261M (~4.1% annualized) in Q3 as acquired loan runoff outweighed originations; management noted the pipeline had bottomed in August (now up 24% from the low) but growth remained subdued intra-quarter .
Provision remained elevated at $29.8M (vs $151.5M in Q2), with $22.1M tied to methodology changes for the reserve on unfunded commitments after consolidating CECL models; this muted some earnings leverage from fee strength .

Financial Results

Metric	Q3 2019	Q2 2020	Q3 2020
Net Interest Income ($M)	$127.4	$162.6	$270.3
Noninterest Income ($M)	$37.6	$54.3	$114.8
Diluted EPS (GAAP) ($)	$1.50	($1.96)	$1.34
Adjusted Diluted EPS (Non-GAAP) ($)	$1.49	$0.89	$1.58
Provision for Credit Losses ($M)	$4.0	$151.5	$29.8
NIM (Tax-Equivalent) (%)	3.73%	3.24%	3.22%
Adjusted Efficiency Ratio (%)	58.40%	61.91%	55.78%
ROAA (%)	1.31%	(1.49%)	1.00%
ROATCE (Non-GAAP) (%)	16.62%	(19.71%)	14.66%

Noninterest income composition (selected):

Category ($M)	Q3 2019	Q2 2020	Q3 2020
Mortgage Banking Income	$6.12	$18.37	$48.02
Correspondent Banking & Capital Markets	$0.69	$10.07	$26.43
Fees on Deposit Accounts	$19.73	$16.68	$24.35
Trust & Investment Services	$7.32	$7.14	$7.40
Bank-Owned Life Insurance	$1.50	$1.38	$4.13

Key credit and capital KPIs:

KPI	Q2 2020	Q3 2020
ACL / Loans (%)	1.70%	1.74%
ACL / Loans ex-PPP (%)	1.88%	1.92%
Net Charge-offs / Avg Loans (annualized)	0.00%	0.01%
NPLs / Loans (%)	0.48%	0.45%
NPAs / Assets (%)	0.38%	0.33%
CET1 Ratio	10.7%	11.5%
Total Risk-Based Capital	12.9%	13.9%
Tangible Common Equity Ratio	7.56%	7.83%
Loan Deferrals	—	~$452M (1.98% of loans excl. PPP/HFS) as of 10/23

Notes: “Revenue” is presented as net interest income + noninterest income for comparability.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Cost Saves (run-rate)	By Q3 2021 (post core conversion)	~$80M target reiterated	~$80M target; bulk of savings in 2021 post conversion	Maintained
Branch Network	YE 2020	—	Consolidate ~20 branches (305 → 285)	Announced
Dividend	Ongoing	$0.47 per share in Q2	$0.47 per share; payable Nov 20, 2020	Maintained
Investment Securities Mix	Medium-term	~12% of assets historically	Target ~12% of assets; gradual deployment given low-rate backdrop	Qualitative reiteration
NIM Outlook	Near-term	—	Pressure from excess liquidity (~24 bps NIM drag); core NIM 2.95%; cautious redeployment	Qualitative
PPP Fee Recognition	Q4’20–H1’21	—	Expect concentration in Q1–Q2 2021; ~$53.3M net fees unrecognized at Q3-end	New color
Capital Return (Buybacks)	2021	—	Optionality if TCE >8% and credit benign; no immediate action	Qualitative

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2020)	Current Period (Q3 2020)	Trend
NIM & Liquidity	Q1 SSB NIM 3.68%; Q2 NIM 3.24% amid deposit surge and securities sales pre-merger .	NIM 3.22%; core NIM 2.95%; ~$4.4B average cash; removing excess cash would add ~24 bps to NIM .	Slightly negative near-term; lever via securities over time.
Fee Engines (Mortgage & Correspondent)	Q1: strong mortgage/capital markets at both companies; fee diversification emphasized . Q2: mortgage $18.4M; correspondent $10.1M .	Record levels: mortgage $48.0M; correspondent $26.4M; announced Duncan Williams broker-dealer acquisition .	Strong positive; sustainability monitored into 2021.
Credit & Deferrals	Q1: proactive deferrals, focus on hotels/retail; strong guarantor support . Q2: deferrals peaked mid-year .	Deferrals down to ~2% (half paying interest); NCOs 0.01%; hotel leisure assets improving occupancy; business travel weaker .	Improving.
Digital & Branch Optimization	Q1: accelerated digital adoption noted; early planning .	20 branch consolidations by YE; new website live; new mobile app rollout; sharp YoY increases in digital KPIs (mobile deposit up 67%, online account openings up 170%) .	Positive structural shift.
Merger Integration & Cost Saves	Q2: $80M cost saves on track; core conversion targeted Q2’21 .	On time/on budget; ~12–13% of $80M cost saves recognized (annualized run-rate) to date; bulk in 2021 post-conversion .	On track.
Capital & Buybacks	Q2: sub debt raised; capital ratios solid .	CET1 11.5%, TRBC 13.9%, TCE 7.83%; buyback optionality if TCE >8% and credit benign in 2021 .	Improving.

Management Commentary

“The highlights for the quarter was clearly the profitability of our mortgage and correspondent banking units.” – John Corbett, CEO .
“Our margin continues to be negatively impacted by the significant liquidity we're carrying… if you were to reduce… cash… to $1 billion… our NIM would be approximately 24 basis points higher… core NIM excluding loan accretion, was 2.95%.” – Will Matthews, CFO .
“We will be downsizing our branch network by 20 branches this quarter… increases our average deposits per branch to over $100 million.” – John Corbett, CEO .
“Our loan pipeline bottomed out in August and is steadily rising… now 24% higher than a low in August.” – John Corbett, CEO .
“Deferrals declining to just 2% of loans… half… making their interest payments… second quarter in a row that we recorded only one basis point in charge offs.” – John Corbett, CEO .

Q&A Highlights

Expense run-rate: Management estimates ~12–13% of $80M cost saves realized (annualized) with ~$5M quarterly of COVID-depressed discretionary items likely to normalize post-pandemic; bulk of savings in 2021 after conversion .
Margin outlook: Core NIM 2.95%; excess liquidity weighs ~24 bps; cautious securities deployment with medium-term target ~12% of assets; accretion ($22.4M in Q3) expected to trend down over time .
Loan growth: Q3 loans down as acquired portfolio runs off; pipeline recovered from August trough (+24%); modest growth expected as C&I and owner-occupied CRE showed intra-quarter strength .
Reserve methodology: $22.1M of Q3 provision tied to reserve for unfunded commitments due to CECL model consolidation; absent that, provision would have been ~$6–7M; reserve seen adequate if macro forecasts don’t worsen .
Capital return: Buybacks not imminent; optionality increases if TCE >8% and credit remains benign in 2021; dividend maintained .

Estimates Context

S&P Global consensus estimates for Q3 2020 EPS/revenue were unavailable for this request due to a temporary API limit on our end. As a result, we cannot present a vs-estimate revenue/EPS comparison for Q3 2020 today. Management did not provide formal numerical guidance ranges this quarter; investors should monitor sustainability of fee income and NIM trajectory into 2021 .

Key Takeaways for Investors

Fee income is the swing factor near-term: record mortgage ($48.0M) and correspondent ($26.4M) income powered revenue; normalization of gain-on-sale margins and volumes in 2021 could weigh sequentially even as fixed income distribution offsets part of the decline .
NIM recovery lever is liquidity redeployment: with ~$4.4B average cash depressing NIM by ~24 bps, measured growth of the securities book (target ~12% of assets) and loan pipeline rebuild provide a path to stabilize core NII .
Credit remains a tailwind: ultra-low NCOs (0.01%) and declining deferrals (~2%, half paying interest) support low loss content; watch hotel/business-travel exposure and criticized/classified levels for lag effects .
Capital and dividend secure optionality: CET1 11.5%, TRBC 13.9%, TCE 7.83% underpin the maintained $0.47 dividend and potential 2021 buyback flexibility if TCE >8% and credit benign .
Integration execution is on track: cost saves (~$80M) and 20 branch consolidations, plus digital rollouts, support medium-term efficiency improvements (adj. efficiency 55.8% in Q3) .
Watch PPP fee timing and accretion: ~$53.3M net PPP fees remain to be recognized, likely concentrated in 1H’21; loan accretion ($22.4M Q3) should taper, affecting reported NIM/NII optics .

All figures and statements are sourced from SouthState’s Q3 2020 Form 8‑K and exhibits and the Q3 2020 earnings call transcript, as cited throughout.

SouthState Corp (SSB)·Q3 2020 Earnings Summary