SBSI - Earnings call transcript Q4 2017 | Southside Bancshares, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Southside Bancshares, Inc., Fourth Quarter and Year-End 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Suni Davis, Senior Vice President and Chief Risk Officer. ahead. go Please

Suni Davis

Company's Good quarters. Southside Andrew. Investor call. and you will our on discuss thank purpose year-end posted quarter Thank well be transcript as fourth morning, of quarter Relations. joining as the to is Bancshares' this for earnings under for and for the for and upcoming you, outlook call everyone, results A year-end southside.com The call XXXX today's

you and today's Factors forward-looking that release and XX-K. our Form remind other are I During earnings to that uncertainties. in in assumptions described change any disclosures made and presentations, subject call materially are current statements forward-looking our and our will in risks could

Lee Gibson, and Julie to and Senior and today CFO. President EVP Southside Shamburger, me quarter review are and fourth CEO; Joining results Bancshares' year-end XXXX

today agenda as Our is follows.

Lee XX, will hear as for results Then asset the over on securities of Julie. will progress our will tax impact result a State of you loan the and of including November integrating quarter to Julie XXXX portfolio Diboll merger. update turn discuss overview activity, with the Bancshares I year-end, on our including the now call quality, an share financial First, XXXX his and and comments reform.

Julie Shamburger

income Thank $XX.X the from the fourth Welcome quarter. expense occurring of reduced both tax acquisition of call. net impact you, net fourth Diboll million rate to and write-down Suni. earnings corporate XX% Bancshares both fourth XX% State to the Good after in morning, XXXX and the of quarter solid asset with our of deferred everyone. quarter year-end Southside Bancshares’ We a the had

compared $XX.X of or reported ended $X year the for period of XXXX, XX.X% we million an increase income $XX.X same XXXX. December the million, in million For net to XX,

decrease in for for $X.XX quarter same fourth period XX.X% $X.XX per were XXXX $X.XX share December XXXX. share, the earnings to per diluted ended share XX, of per a or Our the compared

December directly combined XX, as of ended per fourth share year of When expense our $X.XX, the the $X.XX the respectively. earnings the and the tax per share net acquisition net both income to for were of XXXX For fully XXXX. and diluted for impact ended earnings the tax same year write-down and impacted diluted share per deferred year of $X.XX the the negatively quarter XXXX asset tax expense

portfolios, XXXX, acquired For The total construction XXXX. X.X% the estate all loans ended in loans loans $XXX.X acquired in loan real occurred XX, organic Diboll increased the December the million compared acquisition the excluding year commercial to while December growth when increased or municipal and XX, categories.

loan exposure continue industry during We of Our leaving million, loss and XXXX, at the indirect gas quarter of our fourth decreasing of recorded XXXX, of our loans an a end quarter. with total At million to balance during fourth quarter December expanse and approximately loan provision portfolio $XX.X oil portfolio. $XXX,XXX remaining roll-off $X.X X.X% $XX the December. are third from million during XX, million $X.X of increase the the

increased primarily December loans the million of commercial non-accrual $X.X payoff decrease $X.X the or X.XX% or XX.X%, or total during losses was or million loans, $XX.X down compared year of ended total X.XX% This to the Non-performing XXXX, due million first or XX, million XX, loan XX, X.X% December total to of the to XXXX assets ended year compared allowance the to XX, year. XXXX. $XX.X the XX% to December X.XX% During at decreased half of million at for by XXXX. December $XX.X assets, during assets of several when

securities portfolio. our on update brief a give will I Next,

million our year. quarter for million portfolio increased the acquisition, Excluding for securities fourth $XX.X acquired $XXX.X the and securities the in decreased

Debentures XXXX related January XX, we quarter recorded at of $XXX,XXX U.S. Agency of was portfolio during XXXX The net at of XXXX. of to September million. a the five at million years December charge loss X.X and sold securities we also an fourth during approximately years a unrealized had from the December $X.X X.X impairment in the of December We duration $XXX securities XX, decrease portfolio years, XX, XX, XXXX. XXXX, At

shift As we our occurred portfolio. mix resulted gradually during loan Diboll changes XX% the These loans, reduced of securities moving in securities our goal end a of of of the XX, combined the quarter XXXX, growth and loans XX% to the at securities year, the to toward at longer mix. size securities XX% acquisition the XX% with the range fourth a compared December XX/XX in loans,

U.S. continue securities future agency mortgage-backed for approach with expect short-end the the for to the agency for and barbell end. in longer commercial using We CMOs notes, security purchases treasury

spread increase quarter, an a linked quarter basis. were interest points to average the yield assets. margin result both direct increased During points margin our interest on our and net the basis in on XX fourth in our net net X spread and of average X.XX%, interest a to basis increased the earning increase X.XX% The

During transaction the with XXXX. million incurred November merger the fourth on connection approximately expense $X.X of XX, closing half of with Approximately we terminations. in quarter success of of additional was contract the in XXXX, connection the Diboll

in amortization assets in our in we an with associated Additionally, intangible acquisition. the with expense with additional connection connection merger, the incurred increase

XX, XXXX, our continue XXXX non-interest year. we quarter increased of basis, from during expense last linked down an the fourth see ratio, on for three efficiency XX.XX% ended to to quarter improvement a our December XX.XX% While months the in

XXXX, year the decreased the efficiency for XX.X% December XXXX. For ended our from ended XX.XX% ratio XX, to year

I over be Jobs and Thank of effective December, And you. to turn now currently rate the our will the result we will approximately As in a call for tax Cuts XX.X%. are estimating XXXX Act Lee. passed Tax

Lee Gibson

in our to of about completion acquisition. the advanced low East due the well we After proceeding Thank the Conversion are highlighted than so two now Customer overall of anticipated meeting longer portfolio Diboll’s outstanding $XXX are you, $XXX with due to are sales cultures. integration mostly smoother projected. plan strategic markets increases quarter occur, acquired has environment. balance the gone provide we ensure more teams of and and continued the franchise stable core The U.S. of and transaction. the quarter, Agency operations, two addition planning this should smooth Julie. the combined interest similarity merger portfolio of conversion year Bancshares excellent weekly the why enjoyed the we We this sheet another provide quality the and by the deposit full talent, excited and reasons core State in franchise, Diboll The Texas, higher expanded subsequent profitable securities in transition Should April. transition originally this extremely months to Fed of cost some serve deposit contiguous securities rate of loan Diboll of sale late the third the million during additional Debentures combined million, in to of duration the the currently us flexibility source. of interest January for a funding is decrease rate during

not Cost major efforts credit quality reflected areas by underwriting wavering our of ratios X.XX%. asset total process our continue assets ratio and on We standards our of to improvement remain assets to containment be and are non-performing focus. strong as

ratio markets Worth and of and DFW for job all the the yield the three of in economic The remained exceptionally ratio Austin during we efficiency Austin very our company pointed area, primarily growth serve markets continued to to healthy. conditions East by perform and Dallas-Fort Texas, and all relocations well. XXXX. to XX.X%, fourth the stated declined for of The to year XX% the efficiency Julie close out, As quarter our declined XX.X% target

questions. associated We the about we and strong balance area our with rates, outstanding lines balance are members. excited our this the reduced acquired for conclude market for tax credit corporate foremost, team given XXXX sheet, At position, markets dynamic serve, growing benefits the open the prospects remarks newly our capital and we prepared time, will sheet and quality, our your

Operator

from you, KBW. sir. Gailey question with [Operator first Instructions] Thank comes Our Brady

Your line is open. now

Michael Belmes

morning. Yes, Belmes Good for on Brady. Mike

Lee Gibson

Hi are doing? Mike. How you

Michael Belmes

well. first benefited going color then give forward? that? to Could some how my think quarter. with NIM you NIM about NIM we related this And should of much had Doing the the secondly you reform, I Appreciated. guys expansion question, how nice loans maybe acquired tax as terms in some FTE the guess

Lee Gibson

talk the Julie, Okay. want about you loan accretion? to

Julie Shamburger

during Yes. was that the $XXX,XXX to acquisition fourth Diboll acquisition was the and lines. we’re reporting as a quarter purchase of roughly directly the The Omni the $XXX,XXX. Approximately related that accretion was remainder

Lee Gibson

spread And as rate anticipating on are for NIM moving points about and from the in that with the to a XX%. that spread tax forward associated basis, equivalent the the the basis due the reduction XX and fully NIM we measures will down XX% decrease non-GAAP to taxable

Michael Belmes

for one Very me if I Appreciated. Then Gotcha. may. question helpful. more

to should XX%, of, we You conversions QX? in for guys base? expense late closed the XX% plant and Is right about maybe the this think April, around how Diboll kind range

Julie Shamburger

No.

around to closer roughly. estimating are We XX.X% XX%,

Michael Belmes

Perfect. Okay.

Lee Gibson

for quarter, and be first the quarter a second probably would first will at have then call. third be to the quarter we going quarter, we'll what our as the better by some we that provide able reduction to update that's think to then be in And gradual earnings

Michael Belmes

Perfect. Appreciate the color. Thanks.

Lee Gibson

All right.

Operator

you. Thank

from comes with Milsaps Sandler question Brad next Our O'Neill.

is Your open. now line

Brad Milsaps

morning, guys. Hey. Good

Lee Gibson

Good morning, Brad.

Brad Milsaps

what in Southside Lee, a about core organic growth cetera. Can bringing pipeline the the maybe pretty other bit reform usually in end kind acquisition et quarter have sort XXXX? the of loan little focused loan on you quarter. how in to know a year, talk the happen and feel the of obviously and I you a but and – could the tax guys talk things, you or good little you bit you about about just

Lee Gibson

funding Basically the exceeded in slightly. quarter Yes. our payoffs the Okay. fourth

was actually fourth quarter. So about down, X.X% during the think I growth loan organic the

For looks that we're come X% XXXX. some but loan will for good. additional in anticipate growth XXXX, We payoffs the in, budgeting pipeline do

Brad Milsaps

to around And going of your rate forward? CDI or guidance. just helpful. run kind $XXX,XXX that Okay. then That's new back of Does the Julie, so include expense quarterly

Julie Shamburger

does. correct. it is That Yes

Brad Milsaps

big saves guidance, I I quarterly wrong can rate a like about at was Based expenses. kind And square? of it had I you much million less but maybe the that. acquisition more that talk maybe thinking, reflective be run your you just getting plans $X like of out two Okay. of internally, sooner Diboll than on numbers know in have how kind guys or cost you'll those here, Is seems some was efficiency

Lee Gibson

about rate $X.X we we run $XX of expense. acquisition looked the we've I being then run mean, months fourth We a two, done that rate expect million is, – have much. December what expense to don't budget, rate ongoing that million in additional Basically we'll acquisition with run the at one, and of and looked two at that. we one-month of be so And of the have of in Diboll moving quarter

going be it's So million. about somewhere $X to combine close to

Brad Milsaps

didn't sorry. correctly. understand it. I I'm Got Okay.

replaced by merger that other other I will You're including away, you. be Thank that two in be months. the the understand. – I expense, that will will it. go but got words

Lee Gibson

That's correct.

Julie Shamburger

amortization Additional expense.

Brad Milsaps

Got it. Thank right. All you.

Operator

Thank you.

comes question next Piper with Our from Jaffray. Brett Rabatin

is open. Your line now

Brett Rabatin

Hi. everyone. Good morning,

Lee Gibson

Good morning, Brett.

Brett Rabatin

when up I wanted broke comments. bit, my – a to in closing your line little

back to tax Just wanted in are – for the to rate forma reform. the your quarter? go pro to be expecting Lee, tax first here you what

Lee Gibson

XX.X%. to be it projecting We’re

Brett Rabatin

income, Okay. for And with in curious the then how am are opportunities the fee I year? Trust. your outlook the this some about acquisition just on nice you fee had income thinking growth you maybe and

Lee Gibson

In the our acquisition under that the Trust department, management assets with Trust basically doubled.

on would well double that Deposit be income going the expect Trust up with income, to as you what services nicely of as be gains items same there. up nicely. to like this close I that's we're other anticipating the XXXX. looks it about the in will was that loans it acquisition to And the year, So sale then be see

Brett Rabatin

one maybe can. then I one just And Okay. last if

talk what customers some to deal. terms the the the with in think you in – commercial focused grow that you're to of expecting press trying release, the about XXXX segments? growth producers talked you're Is about more can added that and you being going and in C&I more you've You is in the portfolio be optimistic XXXX maybe

Lee Gibson

We are that X regulation, effective year. opportunities were some this cuts comes obviously January seeing additional and reduced implemented the optimism tax from of the in The C&I.

also real probably growth, be but estate. business, and So some We have anticipate anticipate those we do loan C&I areas of good continued commercial we’ll additional focus. the would

Brett Rabatin

I the Well, Okay. color. appreciate

Lee Gibson

right. All

Operator

Thank you.

Our comes next with from question Michael Young SunTrust.

Your now line open. is

Michael Young

morning. good Hey,

Lee Gibson

Michael. morning, Good

Michael Young

ask in terms in of any rates to about securities of reinvest kind plans may change interest? higher to you book to municipal reinvest bond wanted your given I Lee, the there terms of and just how continue

Lee Gibson

rates really to months, home sidelines the may said we've but little and We've kind of we've the to fairly growth securities down most four look reach advances just on assets. that. growth save about gets bit, asset for of part, loan a the If I this the three a like would XX-year earning book time. at year for expect levels, of loan of to some most in money continued don't asset loans. significant We bank stable as the the certain We be point now position or the reduce it invested for invest to for remain but takes growth our portion over the to something proceeds, and through

Michael Young

And of as several up half. pipeline Okay. loan a had first growth years it and kind now, the looking of of half at the just slower second pick kind stands in in the we’ve

Just things contradict today? being Do you Or are this it year? the same of how there you not kind see trend envision that that?

Lee Gibson

really going We are do – second to are third to projects throughout determine paydowns these that the those it will same the potentially are quarters, will year really really fairly had of just the will quarters. fundings growth of payoffs predict. Other the and hard that, sell to year, throughout kind occur year. fruition when the anticipated those just It come and it's that so growth Last that various really to it be when we're in occurs have going stable impact of depends depends the some paydowns occur. our the and than we when in anticipating

Michael Young

you can, maybe kind ratio one capital you how higher if just payout a I capital. of dividend the from about plan tax priorities to last Obviously, lower here? or capital One do formation, on rate, maintain thinking are

Lee Gibson

maybe high the We're anticipating payout. but the closer ratio. down to dividend reducing same, XX% it fairly not the payout earnings We're dividend, but to keeping always grow it a XX%. gradually to reduce had close We've to maybe reducing going as

Michael Young

Okay. Thanks.

Operator

you. Thank

question with next comes Zabora Our from Hovde. Brian

Your line is now open.

Brian Zabora

Thanks. Good morning.

Lee Gibson

are How morning. doing? Good you

Brian Zabora

are How you? Good.

Lee Gibson

Great.

Brian Zabora

right. All

a margin. on question the Just

lower you how on in FTE, down rate the could Diboll rate, the might but the far as the NIM give change you tax post an impact we on as if mentioned Fed us You get do the balance looks with step just update how with forward? sheet how hikes, the – going see

Lee Gibson

impact the portfolio and the base. Diboll that after forward ours little And really will NIM the really adjustment shorter a a the think I FTE. they the then – positive was going on loan for strong bit had be a have funding than core

prospects forward. going that's and for nothing, NIM do spread improve the to So but I the the going think

Brian Zabora

much. only my was That Great. so question. Thank you

Lee Gibson

Thank you. End of Q&A

Operator

turn no further questions. the would I Mr. Lee showing for further like back call to I'm Gibson now to remarks. any

Lee Gibson

X, the for and our January loans, you tax call look hosting Thank start forward is combined transaction, foundation Thank excellent yielding anticipated in right. completed an call associated All you XXXX, for The joining Diboll with to next for on April. today ripe provide potential, near with for in dynamic benefits us today. replacing growth with nearly effective loan success quality reform quality, pristine our containment markets with year. higher this securities the earnings being success, cost asset the a growing that we

Operator

in conference. program. concludes thank This for Ladies participation the and gentlemen, your today's you

have may a You day. Everyone disconnect. great all

Southside Bancshares (SBSI) 6 Feb 182017 Q4 Earnings call transcript