SSB

SouthState ($SSB) Directors Keep Buying as Q2 Revenue Surges 56%...Undervaluation Correction Expected

08/04/2025 15:00

SouthState ($SSB) has caught investors' attention with a notable pattern of insider buying since March, particularly from board members purchasing shares during price declines. SouthState Corporation is a Florida-based regional bank holding company founded in 1933, operating across six southeastern states. With a market cap of $8.85 billion, the company offers comprehensive financial services from traditional banking to wealth management and brokerage services through its 6,306 employees. The most striking development is the dramatic shift in insider trading patterns. From September 2024 through March 2025, executives including CEO Daniel Bockhorst consistently sold shares. However, when the stock declined from the $90s to $80s in March, directors began aggressive buying. Director Stacy Smith purchased 3,100 shares at $93.60 on March 6, while Janet Froetscher bought 2,717 shares at $92.02 on March 10. Notably, Froetscher added 3,338 shares at $97.31 on July 30, and Smith purchased another 2,500 shares at $92.30 on August 1. This insider buying reflects strong confidence in the company's fundamentals, which Q2 results validated spectacularly. Revenue surged 56.2% year-over-year to $664.77 million, beating consensus estimates of $639.47 million by 3.96%. Earnings per share reached $2.30, significantly exceeding both last year's $1.79 and the $2.00 estimate. Particularly impressive was the net interest margin improvement to 4.0% versus the 3.8% estimate, representing a 58 basis point year-over-year increase. The efficiency ratio of 52.8% also beat the 55.6% estimate, demonstrating substantial operational improvements. The insiders' contrarian buying during the decline proved prescient. SouthState is well-positioned in the ongoing regional bank consolidation trend. U.S. regional bank M&A increased to 38 deals in 2024 from 29 in 2023, with SouthState successfully completing a $2 billion merger with Independent Bank Group. This scale expansion is essential for competing against larger financial institutions. The stock declined to the low $80s in March-April but has gradually recovered to the mid-$90s. The timing of insider purchases appears to have captured the bottom accurately. Given that directors possess superior information about long-term prospects, their buying represents a positive signal for investors. Financially, SouthState maintains solid health with $3.53 billion in cash providing ample liquidity and an 8.19% return on equity. However, nonperforming assets of $323.84 million slightly exceeded estimates, warranting monitoring. Looking forward, SouthState projects 14% annual revenue growth, double the 7.5% industry average. Earnings per share are expected to grow 54.4% over the next three years. The dividend payout ratio of 32% offers room for reduction to 24%, supporting continued dividend increases. Currently trading at a P/E ratio of 13.86x compared to large financial institutions like Charles Schwab at 26x, SouthState appears undervalued. The price-to-book ratio of 1.07x near book value suggests significant upside potential. Key metrics for investors to monitor include maintaining net interest margins above 4% for continued profitability improvement and efficiency ratios below 53% for operational excellence. Warning signs would include nonperforming asset ratios exceeding 0.3% or loan loss rates rising above 0.5%. In an optimistic scenario, Fed rate cuts and accelerated regional bank consolidation could position SouthState as an acquirer in additional M&A. The base case anticipates continued strong growth with ongoing dividend increases. Risks include economic recession leading to increased loan losses and heightened interest rate volatility. Overall, SouthState presents an attractive medium-term investment opportunity given strategic insider buying, strong earnings momentum, and favorable positioning in industry consolidation trends.