SBSI - Earnings call transcript Q3 2020 | Southside Bancshares, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Southside Bancshares Incorporated Third Quarter 2020 Earnings 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, this conference is being recorded. I would now like to turn the conference over to your host today Ms. Bailes. Lindsey ahead. go please Ma'am,

Lindsey Bailes

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

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

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

First, share Julie comments results. the will the on give now financial Lee. call will Lee our his will quarter over to an then overview I turn of

Lee Gibson

current and to how we're loan call. to welcome this third Bancshares' managing I'm the morning bank provide quarter environment. of going overview in earnings results, demand Good an economic and Southside quarterly the

During quarter we XXXX. compared per real non-interest and were were the economic brand during forecast reversal losses branch third driven $XX.X XX.X% partially a of annualized loans. by closings advertising. income average improvement related non-interest to in by the as $XXX,XXX by increase driven These largely return estate increased interest to an for expense commercial expense. Approximately increase the tangible net in XX.X% the and on earnings that $X.X third provision and for We reported provision in in decrease offset recorded partial period million in the of a increase XX.XX% was and $X.XX the of credit quarter, same the in an largely the in losses to increased net share of quarter, credit increases an income to decrease equity million

during the net XX% $XX.X assets million represent non-performing metrics of quality loans. X.XX%, while to X.X% and quarter of total as decreased COVID-XX to asset loans PPP total modified Our loans, further decreased to assets improved

loan our the underwriting test knew the would As standards. true of pandemic be this strength a consistent of intensified, we

categories. We continue loan quality and asset monitoring our at the of through earnest ongoing focus on the risk portfolio most

to individual observed asset we loan we addition and and loan reports appropriate have normal we procedures, learned to by on our what reviewing underwriting an within the are our by detailed relative more In basis. Overall, standards. portfolio encouraged were quality and when industry

continue Our balance Texas increased as of securities, largely unchanged X.XX% million expected sheet quarter. net the along linked margin well interest during X.XX%. rated at to funding the approximately purchasing quarter The first made and perform we interest municipal basis decisions was with to moves net points the X third spread quarter, during $XXX highly certain

While potential potential loan pipeline growth quarter during XXXX. encouraged by loan our increasing growth the remains anticipated uncertain to we're payoffs, for in gradually the fourth due loan and

are the appear markets COVID-XX anticipate subsides, considering be strength. economic pre-pandemic gradual carefully serve will for When increasing activity. resume loan XXXX. experiencing COVID-XX, we of we We our Texas impact Despite growth impact the projections the to caused by markets

franchise. Texas As navigate our are a sheet, position, times our to strength successfully liquidity we capital utilizing believe we challenging resume and balance and well these result, of the positioned growing

the customers. safety contributions As the of the thank Julie. team operating team on now we to focused our keenly over and for Southside members this will remain during members customers. I to continued call all I the of continue their bank want to Again, and we Southside dedication outstanding pandemic, our turn our and

Julie Shamburger

of period increase quarter, the $X.X compared XX.X%, call everyone basis, or to to and morning or morning. our for the and in XX.X% pleased on of of million, linked this were an third welcome Good an Lee. very net same a to million, $X.X $XX.X million you, quarter income Thank report XXXX. We increase

decrease quarter of XX, ended For $X.XX, same and basis X.X%. $X.XX, increase by increase our or an loan construction in share our an the loans. $XX.X increase per occurred in compared or to a decreased residential real offset Linked-quarter XXXX. an portfolio million loan period portfolio diluted linked in XX.X% earnings September our were $X.XX, of primarily loan partially commercial on wonderful our XXXX, estate quarter or The portfolios, the XX.X%, and

For the increase of loans September reported million ending nine-month $XXX.X of XX, in an fees. million, $XXX.X of inclusive of PPP we or X.X%, period net loans approximately deferred

have Excluding loans or PPP total $XX year-to-date. million loans, X.X% decreased

fourth beginning pop to not on growth loan increase, the is we our Although do quarter. anticipate during

a of Our assets assets slight credit nonperforming June a as XX. X.XX% with to at total decrease in at XX, compared quality remains percentage X.XX% strong September

$XXX,XXX of non-performing million of With $XX.X at to assets the the end decrease or X.X%, down in September.

loss reported and the Our $XX.X reversal largely million when three X% result million partial decrease ended estate $X.X September XX we XXXX. at forecast driven allowance XX, economic a improvement of of an reversal of loans PPP our X.XX%. loan provision total by at $X.X of a decreased as XX, commercial X.XX% September a allowance partial a in of the percentage or XXXX, The million loans in to loan provision for for September was portfolio. At and excluding our months real

CRE, The XX, As deferrals at decrease hotels $XX.X at $X.X at deferrals million, categories had COVID-XX to a restaurants self-storage exposure decreased of were $XX.X and retail industry million; At food million. approximately million; million; million our of of $X reported or $X.X services our $XXX.X and XX.X% million remaining X.X% million; oil quarter earnings property we a with loans second $XX.X mortgages our loans. gas of on largest total and September $XXX CRE of XX, include call. since October

with were there As industry modifications COVID-XX gas of XX, October oil exposure. no and

XXXX. unrealized duration an $XXX.X September September X.X% of quarter. compared the of was during the the decreased We on security the approximately XX, end years XX, or June XX. of XXXX, and had recognized gains X.X at the gain in increase ended portfolio $XX,XXX in securities portfolio securities AFS net X.X net $XX.X the a quarter At securities million we in to portfolio sale for million years, Our the from

loans securities consistent of remained XX% on and with linked-quarter excluding a mix loans loans, PPP and Our XX% securities. basis,

net basis of cost. spread lower and interest on net X.XX%, consistent Our funding result to linked-quarter interest remained margin and deposit a a increased X.XX% as at

quarter, the partially income and primarily ended decreased to recorded due quarter. decrease quarter. continued of from borrowings months XX, accretion lower by income expense a securities driven interest a increase offset purchase or loans, interest by for on and $XXX,XXX, mortgage-related XX.X% decreases liabilities by an loan For FHLB decreases three net cost September $XXX,XXX the deposits lesser extent, in average the in funding into prior on in this We $XXX,XXX interest-bearing interest in

fees $X.XX in included recognize to this interest additional remainder potential fee the PPP million including net for for we the to related to an PPP quarter. approximately related Additionally, loan we recorded expect program, forgiveness, the income of income XXXX. million Not $X.X in accelerated

XX.X% sale sale income the mortgage non-interest due For a fair gain income, increased to in Other swap of or the September other three in AFS non-interest commitments, $X.X write-down excluding income servicing fee written value a in an an months decrease million on value of the due ended rights. securities, gain increase on to loan net XX, loans the and increase fair linked-quarter, increased and income. of for increase in non-interest on services, deposit

an salaries insurance Other retirement and $X.X increase the occurred losses due X.X% disposition and result The non-interest associated assets increased a salary increased primarily as and recorded closure with in the expense decrease due payroll the in non-interest employee in million an expense. of and expense to benefits, for other linked-quarter, right-sizing. and to expense increase tax or on benefits expense. non-interest FDIC Our of employee branch

estimating non-interest million. For $XX the are fourth expense we of XXXX, quarter of approximately

efficiency increased XX.X%, due increased income. months to the driven $X the XX.XX% million increase Income or on Our compared in compared the basis, increase quarter three expense to to non-interest June pre-tax linked in ratio tax expense. to ended XX.XX% XX, a by primarily

the for effective us for year. we joining At previous increased comments tax tax in This estimate rate the time, for will from of XX% our XX.X% open the questions. rate you the this quarter. Our remainder and today. effective line Thank the third quarter for to concludes an we of XX.X%

Operator

from question from Securities. of First Instructions] Michael line [Operator you. the Thank comes Truist Young

Your open. now line is

You may ask question. your

Michael Young

question. Hey, good the Thanks for morning. taking

Lee Gibson

morning. Good

Michael Young

to pipeline. do And pipeline you that then, or this might construction here? terms do of – that'll I grow I pandemics you you think may wanted you have bit? wanted just from think continue up and any to shrink Do of kind be to a about ask seen at in point? since good timelines large impacts the alleviated fund the construction the of ask remaining have How Lee. morning,

Lee Gibson

Some of in be the are have extremely space. we good the lending going that construction to are opportunities

So construction. But that we're in see to a I'm not – see. let's today going sure decrease

Michael? part your last of the about was So question

Michael Young

Sorry.

of terms of last the you're new kind part So for is the in projects? timelines appetite there what in just seeing market and was an construction

Lee Gibson

an type framing side. doubled is Lumber we're Construction – extremely multi-family in in What package space, market on construction seeing the last, seems especially six think in home the increase in space and now, months. I well building the the going costs. to on be family single right space, has the in homes prices the mainly warehouse

costs more So like shortages material weather that. moving and seen up. we're – anything It's and we're labor delays not or really

Michael Young

expectation up higher of rate would potentially? roll at just moving leadership toward What Got a do about, another we what then we to tax here, so. a tax do political effective of anything some kind separately or there's you. on into an And do as that should and or you have change the your topic, the but in sort we your if be models thinking XX% rate of have rate, – point to it that move tax

Lee Gibson

goes Well, in somewhere we overall portfolio, range, the will X%, mainly the loan of ours not that the in rate only amount securities income also go of tax-free probably because X%, if up portfolio. but have, over the in up tax

but would up So it to full then it's go not impact, obviously some. the going up go

Michael Young

Okay, you. Thank helpful. That's great.

Operator

you. Thank

now the Will KW. line [ph] Your line from Jones next is comes of open. question from Your

You may ask your question.

Unidentified Analyst

thanks. Hey, Good morning.

Lee Gibson

morning. Good

Unidentified Analyst

Hey, some question, mostly was little items bit so of quick a looks just quarter big loan and by paydowns it’s reversal. headline economic It like more one maybe provision kind the outlook. better this one prompted

level sitting sitting at currently are ACL pretty at? dealing are is with the for ACL the levels, provisioning? kind And guys healthy the that how you guys getting of comfortable With you

Lee Gibson

CECL model every forecast. in the the dependent model elephant the Well, is on and quarter economic CECL say the is going the to what room is

quarter passed. this September early change follow anticipated package model This Congress, the towards and some economic because being a out the But September. out a of quarter, obviously notes we had hasn't been end which put stimulus And it they didn't by forecast. put they passed they little in Moody's their

the this weighted, than baseline. three forecasts is were our there out weightings So we baseline And we toward did better that's quarter. and that one – One basically threw change significant we baseline.

throughout basically to better we that XX% baseline it hit was XX%, worst. to way to better the the one baseline So than put but it the the XX% – into was it because and

it basically, It's trends the that our we're forecast weighted I forecast. so, the we comes going worst economic economic place. our reserve date credit metrics to XX% where baseline; XX% good to the was extremely in depend and And Based on about seeing, feel on in. have all

Unidentified Analyst

Right.

been along moving color. that's past just this – about been it's range. right have stable held fairly quarters Maybe guys where few guiding Now, thinking you is all kind on that X% And this of great year. the on NIM,

side think into funding or or you do the future more permanent loan do think NIM. potentially you Just thoughts that its some we bottom still move some about XXXX, X% maybe more on future around opportunity range is the compression? As

Lee Gibson

the It we going for be any if think I basis in growth is then to – basis most. But points can to on some pay-offs quality accelerated the quarters look loans, PPP the the that – due point the in at NIM may out relatively accretion take basis NIM going to at fourth the maybe stable. loan done achieve basis going move reducing there. we X or and X quarter you of it that forward is, to think we be bit future X and way, If is the points, probably margin growth loan XXXX, here additional a everything funding few of securities the will have market that side over relatively stay minor is there moves tell terms the remains in But lifting then do there, quarters, on little X a there on the absent next costs I point or to I like the If stable. the do can funding two is side can't, there. we will and

moving gradual right it's So going loan now, hold if long we encouraged know but type to now, going really right increase but dependent we what we're the kind asset really mix to the pipeline. growth And of on that's answer, by are be a in have the be on it's dependent we of I what studying stable, that's but loan loans forward. can or

Unidentified Analyst

loans Yes. the are That – those totally books guys makes sense. where at? that Any are new coming making you on

Lee Gibson

them There depends of on to loan It come the Xs, they're lot sits. is a a but on to what depending pretty close X.XX% type type are whether range but X% fixed prime coming it coming is. of in in or of most the on that few them where on are floating,

them probably that And in little coming X.XX% a in range. they just a some of in them below But under that that; definitely X.XX%, of quarter that. in somewhere are average over some on to

Unidentified Analyst

you. I Yes. got got I you.

deferrals. me. stabilizing just gave. Are disclosure onto the are So, for then. remaining of yes, improvement remaining of second versus since Shifting guys deferrals deferrals feels of last a Maybe the of bit gears or their it kind just on second add first? the of in just deferral one content Great last kind terms majority what's to you loan yields like those

Lee Gibson

Julie XX either we going their were this at they're me their don't is of see they're as second deferral. and happened to and know to But days the on in I the because I the hotels and go and And them I deferral $XX and looking probably X-X check, first this XX I'm the $XX $XX.X over is million. million those family. telling The the far rest deferral know most. have to another a what are room, to because right going third of or rest handful a don't are, not, million in to already of days, morning on last two what's some we as maybe number know if know million, at we're $XX.X deferral happen. drop them next or mentioned around are second

Unidentified Analyst

was Well, soon. it again will taking that's guys. That me, Nice. for talk Thanks great for you I to my questions. hear. to

Lee Gibson

you. Thank right. All

Operator

Thank would Mr. back further the conference you. like Lindsey question Bailes. I'm no this showing I to to time. turn now at

Lee Gibson

is Lee Yes. Gibson. This

look results in quality, fourth joining concludes had continued asset a interest to a reporting highlighted outstanding net us quarter today. XX.X% an loans, by reduction earnings a morning's you third stable sound Southside margin earnings increase in per XX% modified and this for in Thank This We forward call. share. quarter January.

Operator

concludes this Ladies today's you and a Thank participation and have for day. conference. gentlemen, wonderful

may You now disconnect.

Southside Bancshares (SBSI) 23 Oct 202020 Q3 Earnings call transcript