SBSI - Earnings call transcript Q2 2019 | Southside Bancshares, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Southside Bancshares, Inc.

Second Quarter 2019 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 follow at that time. [Operator Instructions] As a reminder, today's conference is being recorded.

introduce for to conference like would your today's host Ms. I Relations. Vice President Bibby, of Lindsey Investor Ma'am may you begin.

Lindsey Bibby

A call Michelle. welcome under second call. to you, Investor Southside of Thank Good Bancshares' quarter morning Relations. XXXX on be posted will everyone and transcript southside.com today's earnings

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

Joining CEO; me Executive and President today are Lee and Vice Gibson, and CFO. Senior Julie Shamburger, President

agenda follows. Our as is today

you'll First, comments quarter including update discuss an on our of our our financial non-performing performance on financial the and Lee overview loan his results hear assets. pipeline. loan share and Julie including activities Then an will

turn now Julie. will the call to over I

Julie Shamburger

everyone a or Good earnings $XX.X to Thank to decrease quarter, second call. morning million $XXX,XXX basis of a and $X.X the reported a compared linked-quarter Bancshares' XXXX million net We you, and in income of XXXX. or X.X% period decrease second the quarter same on X.X% welcome Lindsey. of for Southside

of basis per compared quarter XXXX, on the XXth, a same period our $X.XX the and to linked-quarter decrease diluted were For a a June decrease $X.XX, $X.XX earnings ended share of XXXX. in

growth and and or to estate in an extent, million of second on to with increase quarter the portfolio billion the with of an during growth commercial lesser quarter $X.XX commercial second linked-quarter increase experienced XX.X% to during municipal million We growth our both real pleased in $XXX or loan are our X.X% portfolios. solid report basis. loan $XXX.X of a the most a We

in X.X% during loan for $XXX,XXX increased increase second primarily basis, allowance Our driven the quarter. by the on a loans or linked-quarter loss

quality overall We non-performing and remains see credit continue improvements in our assets strong. to

XXXX June million non-performing decrease total million compared assets X.XX% March driven $X.X end assets The decreased March. largely to XX the or loan at $XX.X or of was million payoff full due total at XX% non-performing as of the assets past more reported in or Our X.XX% assets or XXth, of at to XXXX. days by the of $X.X million XXst, $XX.X

securities $XXX.X for XXXX. June million Our by increased quarter portfolio ended XX.X% the or XXth,

a expect in restructuring interest We the a quarters in of over impact on the the portfolio securities positive second our and margin net result first future quarter. as

net at decrease securities At June duration million and the XXth, years years, had of X.X the of from portfolio a X.X March. end a unrealized XXXX, $XX.X in we a gain of

and a XX% Our securities the end securities of quarter the was in to end mix XX% of quarter. loans of with slight shifted mix compared at securities increase to XX% and securities at loans purchases due the slightly additional This XX% second this in at March. and loans

hedge interest loans quarter by loss increased previous to basis our interest during $XXX,XXX the net and in the income first X.XX% second average for driven increase from the value the was recorded points Our margin XX on of in This increase during the quarter quarter. non-recurring of fair a the X.XX% quarter. XXXX through

the accretion the loan average quarter We from interest-bearing yield assets rate We recorded the to prior earning the of experienced this paid quarter X.XX% X.XX% of a liabilities. second $XXX,XXX compared increase XX on slight together for $XX,XXX quarter, spread to in the the in quarter. increase in an average also our increase net basis interest a first to our on XXXX, with point in of due decrease

quarter. the increase $XXX,XXX when loan recorded the reversal million compared related the previous During a was of of the of provision second million, quarter, of the provision $X.X during quarter. we recorded $X.X expense the to million in provision Approximately growth to experienced $X.X

partial non-interest quarter deposit security quarter. income XX.X%, a in the services a excluding increased swap income, instrument primarily increase prior non-recurring recorded value an Linked on fee net in and million gains due $X.X our loss to or fair income hedge

lower-yielding a available sold for we net $XXX,XXX mortgage-backed agency quarter, sale second of increase resulting of on linked on in quarter U.S. gain securities, sale an $XXX,XXX, the basis. a During of securities

in June interest During our to the the quarter. quarter. and quarter efficiency experienced slightly XX.XX% non-interest income compared our down the income by increased quarter ended improvement the XX.XX% XX, primarily non-interest XXXX, to from ratio, in we Linked to previous both expense increase net during $XX,XXX due an

rate expense a quarter, tax-exempt increased percentage tax for expectations second pre-tax of from to due increase Income compared the $XXX,XXX to income. reflecting of tax an XX.X% effective lower as an quarter last income

the quarter, million. For non-interest $XX approximately remains expense at our estimated

rate tax effective our adjusting are XX.X%. to We

Thank will the return over you I to And Lee. so call much.

Lee Gibson

basis net percentage Thank our highlighted you, increase We Julie. to assets loans, quarter and for a a in a like would us thank total an X.XX%. morning. as linked second XX.X% decrease our quarter by to everyone in point quarter this interest outstanding linked XX assets I of on joining quarter enjoyed annualized in XX.X% call a margin, increase non-performing linked

Our a quarter time combination have a large in for of strong that pipeline second reduction in been loan a and number loans some prepayments. of growth funding our from resulted

at achievable guidance ahead We XXXX growth least X% months, slightly now of six first for been believe the loan absent loan of growth all prepayments. has for is X% XXXX. the During unexpected of X.XX%

are compared Our additional current quarter. pipeline prepayments second the is steady, to third when the during but quarter expecting we

with regions our our quarter All growth and the second DFW growth loan during largest Austin markets. in occurring the experienced of

that of in loan growth the add expect opportunities. half the higher-growth our to We lending our officers enhance in year should further markets last

in overall the during XX of from resulted percentage spread explained, loans the as net increasing and point increase one quarter. a costs linked-quarter interest primarily higher-yielding our earning second basis point margin average assets Julie decreasing As basis and funding

quarter. stable decline along the areas with costs the highly down quarter, the to earning all and by could remain in to third treasury second third overnight Reserve with as growth; improve anticipated quarter curve should average the reflect the assets the continue loan of third Federal During margin decrease fully funding consistent quarter funding the in during

quarter the in during of was responsible average the basis first the XX portfolio restructuring linked-quarter for the securities. securities The total yield increase of point largely

During purchased security. those second in the sold we million portfolio $XXX These lower-yielding changes million of mortgage-backed further sold. over third than impact we approximately the quarter, $XXX with Throughout yields of commercial of quarter. quarter, positively yield agency the the securities securities should the overall higher

to south announce of we're XX located Kingwood Splendora pleased footprint our miles our a branch and and community expanding also approximately I'm of branch. Houston a opening in that northeast

desired considering selling. Economic are banks positive remain continuing. our On seriously the conditions footprint that acquisition front, in as we population both more our and are learning are about growth in markets job

lines open and At this going to time, our for prepared questions. your conclude we're remarks the

Question-And-Answer Session

Operator

Our the line first comes Rabatin Instructions] question of with Brett [Operator Piper from Jaffray.

Your line is open. go ahead. Please

Brett Rabatin

Hey, good morning.

Julie Shamburger

morning. Good

Lee Gibson

Brett. Good morning,

Brett Rabatin

good quarter This confidence in? a talk year estate areas terms or that in in seen to I What they planning C&I of obviously the then, the they'll just And I'm gives other what just presumably? half make growth payoffs. you're can will be some loan the bank? first of it is be where be Will function in commercial about the real back you curious. we've of lower of the ask. wanted hires to lender payoffs and and lower Lee you

Lee Gibson

estate obviously some be be C&I, real they'll we're -- -- be them they'll think will some will commercial of but related. -- I

of just to things we terms to pipeline In some fund. have we in confidence, the that -- continue expect our we

We have quarter. fundings experienced in but we in the have have third some also that payoffs we already quarter, the third

loan robust growth anticipating of not we we're point, half the loan this year. last at the of half but year, So some growth anticipating the potential last are

So in out good there. seeing markets. our opportunities -- We're a of we're lot

in we're So the economy the continues extremely to be in. markets good

Brett Rabatin

talk I margin. about the then And wanted to Okay.

being about of talk what about costs here funding up book? asset assume in Can talk that the then side. the I improvement up. one the it being You is And function a continued from on doing two, you're flattish the and just securities you margin

thoughts can third can if flat Just in quarter? base you keep if lower think it the funding on and hear your wanted actually you that the or you to

Lee Gibson

on funding looks we on funding costs, it Looking side, wholesale at be will the potentially our lower the especially side. funding able to like it wholesale

able deposit to we're rates potentially picking lower with down, would the up able we've be And significantly. retail the on CDs CD it rates down of been hold CD flat side, because I to terms expect side to In dramatically. to the

I on could expect would costs quarter. -- would what in week, So depending expect the does I funding fed that third be the down rates next potentially overall

Brett Rabatin

income. for me one last fee on just one maybe then, And Okay.

half of is The other impacts and the fee excluding about back year the Can if that? over if rate or have of a of in lines the run you year. year income; rates just noise past back terms half the talk for good the XQ been anything the the volatile

Lee Gibson

Julie?

Julie Shamburger

Okay.

I $XXX,XXX of have We this fee you -- about On we quarters experienced swap income. some And -- had the like as that -- have fee we swap mentioned, quarter some. booked -- know we we income.

for fourth We to more third deposit the expect $XXX,XXX speak overdraft second to raise in the quarter. we of and we our April. We about -- was increase on fees. slightly that don't. specifically the in of in that this but services, we there of really in in more probably do in the quarter the related saw quarter fees an was Some increase can't did quarter that that the I expect quarter. do third fourth, that And

And did much impact pretty from that. we so quarter full a get

in income the And service fee remainder income ATM that arena. interchange-type the of deposit was

is expect continue. been income that think I've service certainly in So the -- I do I swap And deposit of the with services to the there the rate that year. bigger I'm on income. of deposit thinking deposit is rest services were what based that provided most do and in and swings that two going -- for to fee the those remain at

Brett Rabatin

Okay. color. Appreciate the all

Lee Gibson

All you. right. Thank

Operator

of Hovde Thank with next the Will you. question And line Curtiss from our comes Group.

open. is line Please ahead. Your go

Will Curtiss

everyone. Hi. Good morning,

Lee Gibson

Good Will. morning,

Will Curtiss

improve. broadly of had of then to margin more maybe about in see of And Brett's I do are year? wanted fact kind you Lee, what margin. rate this there make a want to in the to you get sure go just rate I we question understand out in back terms you mentioned can expect playing I And back kind the the that in do half cuts earlier it how the if couple cuts. -- assumptions I of think

Lee Gibson

trying -- we loan thing was that the that out earning the about the one during second the the quarter. I overall second quarter was was was half mean the growth Well, -- assets in to figured average in into I earning of yield point assets only

full have in impact the third we'll quarter. that So

than did expect we so We securities by replacing -- some the slightly. out more securities replacing to higher-yielding with yield them moving them up securities further some portfolio lower-yielding tweak securities with move

in down potentially things with third could two combined in the margin. at being those least to the costs improvement So further quarter funding we flat see

Will Curtiss

And on a I guess -- then Okay. the question accretion.

So of I quarter. over from year? trend it course up of half for think Any back the it sense this last was how should the

Julie Shamburger

up we during quarter was It XX% $XX,XXX It recorded fluctuates over payoffs. certainly this -- last with quarter. $XXX,XXX last month about actually about

a little discount one than up. larger And -- happens. all with it can You payoff a creeps the and of ordinary have out that

So more I feel would to with that don't going number I quarter's $XXX,XXX I we're know can't maintain a last comfortable go-forward -- basis. probably on every quarter.

Will Curtiss

Thank you.

Julie Shamburger

of just monthly loans getting on discount -- what going just the you on slow it's a so XX% remains accretion of it's overall really or basis because -- about the XX% smaller. naturally But is remaining Omni the to discount Omni our

more along I'm -- first probably. So thinking the with quarter and

Will Curtiss

mentioned then it's for been. And third million Okay. And Thank $XX think, quarter consistent it's be one we year? there as curious stable pretty into you should for out expenses you. -- to if further last remain with Or me, next I to look to relatively the the look some heading where we other we maybe expense we forward? should a expect are little things XXXX base the going consider so

Julie Shamburger

this remain I that think point we should I at they would say -- stable.

XXXX into and benefit going have employee sometimes of your to start you then adjustments salary numbers. If course you

year the some there increase a I new would pretty remainder year. could this would for So though. it of potentially see think stay in flat you

Will Curtiss

That's you me. Okay. very it much. for Thank

Lee Gibson

you. Thank

Julie Shamburger

you, Thank

Operator

Our comes line [Operator question Instructions] next the KBW. you. Woody Thank of Lay from with

Your is Please ahead. open. go line

Woody Lay

Good guys. morning,

Lee Gibson

Good morning.

Woody Lay

looking So, expenses. closer at

any expect With that the branch opening? we expenses Kingwood can with branch announcement in XQ, incremental

Julie Shamburger

Not…

Lee Gibson

an – It's store an will in branch. in-store be it

personnel costs be -- a and small, of to because an The will it of it the at inexpensive three build-out personnel four will relatively doesn't that relatively maybe most. capitalized. So will to be will be require staff lot in-store

I amount So anticipate there'll significant wouldn't up. that show that a expense be will

Woody Lay

the kind really you you're interested branch Got either with would footprint the expanding through just focused closer the And on Houston M&A a or your it. M&A market to with way announcement, then metro is now? market. strategy it current of that to the in be current right inching Kingwood Is

Lee Gibson

markets that East I in certainly First we I that Trust outskirts think terms in, a And of loans that with market we'd of & make Texas the a Houston interested there's other of the think good it market in acquisition. Bank touch M&A, we be lot And currently. is market. our but more

Houston plenty into had the market. of tentacles They

a Houston market things So of Houston look a -- focus we quite the do in the see lot market of I'm we that's for not and at in terms that M&A us, sure but but primary bit.

Woody Lay

all guys. Got for me. Thanks That's it.

Operator

Lee Mr. like no turn at And the you. to over conference further I'm showing Thank President I and time CEO would back to questions Gibson. and this

Lee Gibson

excuse extremely I'm you. Thank me. --

Operator

queue-up. their want Did guys have I'm you question? somebody sorry. did take We to just

Lee Gibson

Sure.

Operator

Okay.

a have Graham line of the with question Dick from O'Neill. We Sandler

line open. Your is

Graham Dick

thought that today, about question. up on just I'm realized the I I sorry one minute and last had was I but queued for guys. Hey, wasn't. at Brad

the You loans. pretty loan loan wondering guys saw posted you quarter I'm of at what X% on core It guys new in yields the lower just of and well looks held some kind pretty like kind yield X%. growth this strong

Lee Gibson

because of where well probably put the in it that type very that loans. X% yield That's on. a was pretty was close average yield was loan half low to -- of floating-rate lot we It

Graham Dick

really Thank just I great. That's clear that all Okay, had. wanted up. to you. I

Lee Gibson

you. Thank All right.

Operator

to further turn you. I Lee back conference questions like would am Thank showing to CEO, no Mr. the over And and and President Gibson. now

Lee Gibson

We much. with further interest the anticipated quarter results second net the and Thank I'm million right pleased of third October. increases very in the you third given margin joining you this results morning. fine-tuning reporting to growth, additional loan extremely portfolio. our forward All basis thank with second quarter, $XXX in securities for quarter point again increase us quarter look XX

Operator

in conclude gentlemen, and for may a does and you today's thank participating the Ladies Everyone, disconnect. you This have program day. conference. all great

Southside Bancshares (SBSI) 26 Jul 192019 Q2 Earnings call transcript