SBSI - Earnings call transcript Q1 2021 | Southside Bancshares, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Southside Bancshares, Inc.

First quarter 2021 Earnings Call. [Operator Instructions] After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Lindsey Bailes. ahead. go Please

Lindsey Bailes

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

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

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

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

Lee Gibson

quarter, Southside of million. per note, XXXX. morning, we a had the year reported Beginning welcome to earnings first net partial included reversal quarter we the credit strong of This by and income for Bancshares' highlighted Good share. on record earnings morning, first for call a $XX.X that results losses and excellent provision quarter first an

color due loans earning asset to interest point loans average assets. to linked of strong Our income Linked with our accretion did decrease the I are want a PPP quarter million decrease total and to from a from three X.XX% first assets, decrease in assets to there To more in related the little loans to decreased was to nonperforming net half about X.XX% see as interest of out. average and things you $XXX X.XX% nonaccruing rest we decreased earning quality in X.XX%. due give the to quarter income. to total ratio Approximately quarter, remain assets this a metrics

increased of and half of of occurred the percentage growth -- annualized the million first quarter March. payoffs of loan loan the occurred payoffs growth the first PPP net A quarter, and during quarter $XX the the of during approximately net large during during loans X.X%. PPP First,

of of as PPP million. little these originations originated the mid-February. April participating totaling PPP a second actively million and are round over in we after X,XXX $XX XXst, occurred Second, $XXX of loans, we've Approximately

Third, basis unchanged point. was quarter our our increased X spread net interest net margin interest linked while

As loan the growth currently for pipeline a throughout our will we the healthy, outlook serve. trend anticipate for given markets continue the of the remains year, we rest XXXX, very high

We to of for loan anticipate loans. X% continue growth PPP XXXX net

During the Southside. loans and in originating the three one two hit commercial Austin have quarter, first relationships new that we added DFW bringing lenders, area in the to ground experienced running, and

Galleria this April and In relationships have and addition, opened been lenders we on active commercial group as Houston originating of XXth, to the near loans LPO our new well. us introducing

reduce proximity further to Texas. disclosed and completed Texas Southside being in see previously accounts. closures in funds our continued to We higher-cost a North close into healthy loan the in other that customers non-maturity lease first deposits. to branch combined mid-March. to one in the us our These These plans East branches wholesale two deposits branches, with quarter very PPP stimulus increase close were allowed time in deposits payments in funding due by were received We during and Southside three to part deposited

now other improve, the individuals moving associated Economic to market Texas call turn to DFW due During highest company savings closures. conditions we growth full bolstered will population growth I The the markets country. in continue these in the among and I quarter, questions will with areas second presentation, following our be the answering forward to continue relocations the to over to Julie's and to Austin markets realize states. Julie. from by and look your

Julie Shamburger

our call and morning, Good Lee. welcome you, everyone, to today. Thank

million and our XX.X% quarter share with the solid or or on increase income per on quarter of linked per portfolio or increased $X.XX earnings of family net million loan offset with decrease $XX.X We million, of estate $XX.X a increased driven loans basis. and diluted billion $X.X our real an residential quarter, of basis X.X% construction share a Linked million, $XX.X increase primarily million $X.XX start are to loans loans partially $XX.X pleased $XX.X million. XX.X% XXXX, in a in $X.XX by to to by commercial linked X-X of an

by earlier, we this in mentioned Lee time. loan As in activity his pipeline the remarks are at encouraged our

million, $XXX.X million with the XXst, fees $XX March originated of net in in round loan the category PPP second of our loans commercial As including program. included totaled connection approximately the

PPP in in loans New originations for forgiveness payments the quarter. resulted million linked $X the increase net of

a metrics Our compared credit X.XX% XXst for economic loss decreased On to XXst loans to our losses XXXX. quality of total the assets quarter on XX, for nonperforming basis, to December or X.XX% total result percentage $X.X $XX.X quarter, assets to forecast. loan million linked of in a improvement our the as a metrics to allowance $XX.X reversal in Linked of provision of first decreased million March million. nonperforming the March due $X.X assets at $X.X at million quality -- or an remained at with strong quarter, credit million XX.X% XX.X% decreasing

decrease we provision In exposures December XX, a these as losses XX, and to X.XX%. for X.XX% provision million, loans March At due our excluding off-balance when allowance Combined, of reported of credit loans credit from reversals loan reversal percentage on March totaled a for $X.X addition, exposures. XXst, at million $XX.X PPP for XXXX, our was XXXX, at million. sheet a allowance total $X.X at sheet losses off-balance

million, consisting mortgages. decreased As of of April XXnd, to related had our primarily COVID-XX $X.X deferrals

As were total gas modifications category. this of are There exposure in $XXX.X with loans. of industry and no X.XX% our or COVID-XX oil March million loans XXst,

million X.X resulting and end or on of the At approximately of securities duration net X.X% in during years sale recognized million the the Our net from of quarter linked $XXX.X had million the decreased a securities. sales years, on quarter, portfolio $XX.X quarter We gains security X.X the securities we was basis. a from of gain in municipal $X securities the at in end, XXXX. portfolio an increase unrealized portfolio AFS

at XXst in March securities. loans consistent XX% Our and XXXX XX% December remained with at and mix securities loans of

repurchase As shares shares offset of shares. XXX,XXX of increased in remain stock connection an price shares XXnd, equity an $XX.XX. the quarter. Year-to-date our were Approximately at issued shares partially XXX,XXX average have our by price XXX,XXX XXX,XXX current treasury XXXX, with from we award treasury $XX.XX our at transactions of stock through by during purchased XXX,XXX March Purchases authorized April stock XX, plan. under of of shares average

XXXX interest of to remained spread the a fees the on first consistent related X.XX% X.XX% net quarter XX the basis, interest and compared on margin loans. to The to quarter. increased margin previous net Our in net quarter linked approximately PPP earned at the X.XX% basis interest points for of interest

a For loan the $XXX,XXX quarter, March accretion recorded this We from period. in net of ended the three interest months decreased XXst, purchase prior X.X%. $XX,XXX or income million decrease $X.X

Additionally, included this we of the related interest PPP million quarter, which net income to loans of was recorded approximately $X.X fees million to $X.X in in program. the one related round

the on of million XXXX, million of a consisting $X.X XX, approximately we $X.XX remaining, March of net two deferred one on PPP round and of million round had $X.XX fees loans. As

round second we originated approximately terms on over As two to million a of million of the the recognize April the expect adjustment and XXst $XXX as round, based fees loans. $X.X in approximately on yield on total

noninterest and income, XXst, brokerage gains or months increase driven These for ended services linked of and For in March the increases was income. loans. of quarter, by primarily on gain three securities available-for-sale partially net services with non-interest X.X% decreases increased sale deposit the sale other were offset excluding the in which on an $XXX,XXX

services income Servicing in fair The Rights Our other of decrease and stimulus increased check deposits of Mortgage overdraft was a income, of the result in to decrease primary primarily swap an the income increase driver mortgage noninterest rate fee and $XXX,XXX in value income due of during quarter. increases the the in locks. deposit

months the with with quarter the slight XXXX, March decrease expense of For consistent of XXst, three fourth $XX,XXX. a ended noninterest was

this we approximately For be expense quarter XXXX, with the noninterest second consistent at of $XX quarter expect million. to

ratio closure increased XX.XX% linked to to in ratio on net the The a efficiency decrease interest efficiency a the increased expense tax compared XX.X% the compared basis. to as due the increase by equivalent taxable equivalent to compared three XX.XX% pre-tax was non-recurring branch the income increase to in expense prior $XXX,XXX months decrease fully in income. driven fully well XXst, taxable quarter. Income Our or in as quarter December to ended

questions. our of will to transactions during Our for At comments tax slightly the benefit first the XX.X%. effective to time, last quarter. we from connection of first effective rate annualized are and due This $XXX,XXX us quarter line Thank tax discrete recorded estimating an the for open quarter with award tax equity today. we XX.X% concludes rate you for joining this in XX.X% the decreased

Operator

[Operator Brett first the line Rabatin Hovde comes question Instructions] Your from of Group. with

now is Your line open.

Ben Gerlinger

actually is for This on guys. morning, Ben Good Brett. Gerlinger

Julie Shamburger

Good morning.

Lee Gibson

Good morning.

Ben Gerlinger

I there's was up one or and curious months cost has being or going we you how could loan as one you're of significantly just itself legs Texas, from how to industry also is half two it wonder, think XX? a back-half a with growth. businesses then show I members, kind -- strong. X% you the those playing of it growth lot people guys additional and And is year is moving can LPO, are with weighted? lot be lenders and work of wondering, approaching in there of that start in a the overall. rest core on something XX the guess, ramped going growth banking loan is the out this of know Houston is within guidance second is I I Dallas team will that's foresee that if pretty of much Austin, of they longer guys kind of you of there, year the it fully that moving in -- you it year then into more there, was I that

Lee Gibson

they today. Basically, are say, terms lenders, are the I up extremely ramped fully in would much new experienced lenders. pretty of They,

growth of anticipated be in of that. X% a we had and started we part the they quarter Some would earlier when the forecast already them loan that

be expect our year. in additional XXXX, do XXXX? loan full we'll growth of going So XX part this to simply months do in a Yes, nice a because have I that anticipate they're I but

we are good going have right a when we're where commercial But As linear in, would for loans two remaining loans quarters, and appraisals, the just things. And growth the -- in to comes of a live, but not when the especially problems problem seeing the perfectly highest weighted the among to for comes that as in the -- we're we three continuing very down it the would people we're markets been estate of all be be so we each growth nice more it's equally pipeline and finding among good lot it actually sorts between they're of real guess growth, to close, get different rooftops now, of being would right it's have. having my to loan optimism, be have think, that now, on And to quarters. in the the markets three be I country. for markets from in see

Ben Gerlinger

thinking helpful there I color. multiple itself. Texas about you Are -- whether all growth of that That's When Great. think the are or lenders have that mean, anything extent. business or be areas within terms areas that MSAs, might or full want? capacity different experiencing technology have you kinds they of doing you an and any to to different in in, pockets how the want you might you state? are additional or bolster M&A like potentially within that you the you'd think You not up add about feel

Lee Gibson

throughout I markets, know that I'll three if opportunities. DFW there don't markets. hire cover might enough explore, continue those to fully will those that those is lot say not we could that I we're we lenders entering and markets a good additional in, explore smaller markets. are of some think, then, Houston, through of that to massive markets Austin M&A, And state the so

Ben Gerlinger

guess, I trend of works somewhat of on just working it of is higher guide That's approximately new the you. then, core low do good fair new the half of to assume is you start off and puts bit XX, XQ year? with there a closures, you think is is it again? second it through or would we XX just lot fair that or level assume that, helpful. is from ramping a it a rate perspective, takes branch And that a a core that's to of little the as run -- Got of that you're higher thinking expense before

Julie Shamburger

ups point, this -- pretty I is -- don't get I to think, to a be last with advertising, some should quarters was somewhere to There's that us actually what so quarter. -- I mean, seen and don't -- these have fourth we we may probably down of think, expect areas we've XX, expect few downs. indicative. it at think to us a I I travel, of couple couple --

more, we like we we because still haven't accustomed were out I to. think, get out as fully gotten

as the ramp think those I happen moment. But up the So what think, to XX be I more, areas. to year, things will those yeah, up my that's think, of some rest XX.X see for the we'll thought at of I we expect should

Ben Gerlinger

Okay, it. start to Appreciate Congrats the really color. great. helpful great That's on year.

Lee Gibson

Thank you.

Operator

comes with KBW. question from Brady Gailey next Your

open. now Your line is

Brady Gailey

Thank you. Good morning, guys.

Lee Gibson

Morning.

Julie Shamburger

Good morning.

Brady Gailey

the tick dramatic to stabilize, but look down higher the growth, at bond curve book kind grow of at make you bond look not this it or When five Do need we end over do a should tick it just expect to the been planned every has so to focusing of little-by-little of long and is tick quarters, kind portfolio decision if you do up? you and to continue really to of if portfolio buyback? that continues the size on to down and not loan the loans quarter. the last a When you're the you bond the

Lee Gibson

to We're up. pick loans expecting

for the do selling that first of municipal points, of things standpoint, the not yeah, the in the a had go In were that bond crisis with decrease bonds terms it decision grid to points, XX% portfolio weather, got anticipating if of sale half, XX% have the downside from were in some gone, X we and probably could to with our power upside in the pretty power X cities, events associated electric might significant so but just the related had accounts -- was of -- about the uncertainty they our February X they much that of they they that credit a couple unlimited, the that. we and were we sold and had. were And down subsidiaries power made different way with was they have -- maybe that we because to didn't simply of we

it's just kind of thing. interest active rates risk-reward rates been in a ticked planned up most occurred and in April, You're the to appropriate active for did correct more as are the second in us during purchasing the on quarter We more and half. those become rates that we've so where buys. not is and It's of make

Brady Gailey

you three Yes. with to All right. in and That hires. active and makes what sense. in got, And Houston it was expect, stick like, Houston, it should play good more going to to are lenders? hear great which of kind continued Lee, we LPO/branches hires hear lender Houston? of but is slow in you going lender do continued mature that and what about an more making hiring forward of or let you to sounds you're be investment the expect on how It kind

Lee Gibson

additional there, and of anticipate hired half begin little a if it anticipate future, has is and lenders so of to that, obviously, capacity an maybe slow second -- right additional of year, Houston. active. The where so they additional started going got of for additional the is that we're going pretty I house banks to those more places look where lenders anticipate to but then well centrally we're half LPO in that to and them pull up that lenders don't to 'XX-'XX they because it as the can begin successful to things have first to Southside. out something that But experienced really will we have the might would people, try find that possibility, we opened there we they're we the XXXX, played we would real there them kind be get that a LPO located. -- in open other solid we good covered now, I bit got been I in

Brady Gailey

And over what's get the Houston small, now big probably you base you there, but as think then, sticking just What's I your know, portfolio? that time? right loan loan in with as And far you could do goal it's the Houston? started so Houston. how

Lee Gibson

me are wait, Let's numbers here. they handing some

is know and but million asking happen million to in Brady I not I because to is to I the about second, of we that's for whatever searching double we in can think, Houston. think loans Okay, and certainly to, with I market there, triple, it is we size the area. in we it over of going Julie not $XXX number, it what I so in of fairly -- sorry. Houston if time, in he $XXX but give And probably this think, over terms can easily size, started, time -- year, you today, here I'm the simply it's will get just

Brady Gailey

back Yes, we're like you that? are I feels the BancorpSouth mean, on is have Texas, it yes. on Cadence M&A some things back be and in -- transaction think that a M&A, with active think this in and later going And you we in to how fits on banks realistically Texas? business you and more front, the But big we guys then smaller clearly do Southside Do year. feels like buying will saw it for open state picking up

Lee Gibson

that sometime discussions are definitely we along arena we're Yes. picked Those within active XX additional months, and lines. would do up, those discussions to and have that definitely in the I beginning anticipate I hope have next

maybe XX. with interested are be and the definitely of XX there our the to sales I-XX, east And we or the think, to out going that XX in I west people miles focus going down of interested. state So to basically continues are more side, so on talking about

Brady Gailey

you you're guys from would remind point a the billion, mean, us of the view, view, $XX target somewhat what close look billion getting $X from point just are size so mark, but Lee, to I size of a And like? ideal

Lee Gibson

billion, probably $X billion. there, end we're portfolio to we up least balance to $XX above get We mark. billion billion, going sheet to go be preparing by $X.X at much target but to, $X of ideal able at would reducing we An over be get probably year much the be if securities right if we're wanted it's to while ready $X.X billion. could I adjust $XX before the billion, think, that to And getting our above

Brady Gailey

Great. Yeah. guys. the for Thank you color

Lee Gibson

right. on the we'll Thank number Houston. and you, get you All

Operator

comes Your with Milsaps Piper next Brad Sandler. from question

now line is Your open.

Brad Milsaps

Hey guys. Good morning.

Lee Gibson

Good morning.

Julie Shamburger

morning. Good

Brad Milsaps

just Lee, up portfolio fairly on bond discussion, size, the but different the follow Hey, wanted looks like in the year-over-year. stable to direction maybe actually yield has a stayed

can or Just of kind just of is like hard weight typical you that, over kind bond talk portfolio the your ordinary sort really of yield anything the the working, of of curious, about time. you've if affecting out done that

relatively Just rates yet. that stable been I impressive collapsed think, able seen very it's around stay We've to us. that's obviously

helpful. would color Just any additional there be

Lee Gibson

those they've lower in much And and CPR premium. own at tend haven't stuff off, Sure. they rolling been the mortgage-backed Basically, rolling probably of those a off that a roll faster higher of arena been in yields the off in lot that And the been than we as we that's is in the other portfolio stuff that's up of some with we municipals have XX range. stole. had to XX prepayment those really speeds and say, result paying to

not it on so think, it. are off, on than lower attribute off, I I'd at not. seeing. rolling but love stuff putting say, the to X% But what's putting what's is we're So I that's higher to we're and we're higher yes, on putting you're largely can we everything what or we think, rolling

Brad Milsaps

the just That's on you. other the then Thank side of Okay. helpful equation. and

of a run-off You the in this quarter. category time guys deposit lot had

million. think, were I almost averages down $XXX

Loan how think the think of have You kind then, of more to a close Just that's same run much And getting you you Bank the to advances. steady off Federal have state? curious there? go Home pretty we

would left taking be helpful. of on from two what have of but any categories kind swap, preclude new think, may those just is I lower, so you most that that you color

Lee Gibson

Sure.

we in has close I correct one do We deposits. for, have to brokered where off the I the fund, CD everything won't million on on June, think, replace swapped. time Loan we're rolls we likely, Home Bank Most the deposit that is arena. public but of You're been related And pretty customers roll the off the don't may getting where time $XX and at to advances, so what we're brokered $XX swap we in to also on on core down know, down fund pretty we on the getting depository I'd public are off have. zero the anticipate, with are run side, we're but the for -- funding million if to institution. to, CDs, that those, close we're we level, excess a And those, call, continue

slow going a that's would bit several I So next to over quarters. anticipate that, quite the

Brad Milsaps

also a then, contribution Great. final coming sure, PPP quarter, Thank if couple loan where and then the purchase on new this the be just for loans And ones. not the Julie, quarter are And guys. Curious, helpful. then the average you, accounting of in yields dollars books? have from you

Lee Gibson

quarters, average the on a having average with may for was the in without but going The loans We on up rate anticipate [Phonetic]. ex-PPP yield the higher rates first books future little do the we that Okay. some PPP rate X.XX% see was that with loans. moved the quarter loans

in If then loans [Phonetic]. PPP around the... you it X.XX% right there, the And put was

Julie Shamburger

average on The was $XXX,XXX,XXX. the balance loans PPP

Lee Gibson

the then And purchase.

Julie Shamburger

accretion down $XXX,XXX. The about was was It last purchase from quarter. $XX,XXX

Brad Milsaps

you. Really guys. Thank you, All right. appreciate Thank it. Excellent.

Operator

at your further call CEO will questions time. closing no this are I and the remarks. for Lee now to turn There Gibson, back President

Lee Gibson

Okay.

Brady's for the loans have million right right in on in in Houston. loans $XXX we As area, Houston now, question in around approximately Houston, total

million about of you today. loan million. for provided $XXX of new Closing $XX has Thank loans us Our joining remarks. that group new

concludes asset next for sheet, quality call to this during July. encouraged markets, about call. the and our forward balance earnings you look you positive the our and capital we Thank for outlook are earnings, attending core results Given XXXX our in reporting and very strong position, to

Operator

[Operator Instructions]

Southside Bancshares (SBSI) 23 Apr 212021 Q1 Earnings call transcript