SBSI - Earnings call transcript Q3 2021 | Southside Bancshares, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Southside Bancshares, Inc.

Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Also, please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Ms. Bailes. Lindsey you. Thank ahead. Please go

Lindsey Bailes

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

loan want and This would entire the Southside to call to welcome contributions quarter third Bancshares team for for morning, their earnings annualized to $X.XX, of growth an share per net morning, decreasing quarter efforts linked results increase outstanding XXXX. reported asset quarter Highlights X.XX% these continued total tremendous quality in without which assets earnings possible. for X.X%, interest of assets. strong quarter an included I of nonperforming thank Good we with deposit XX.X%, and the and of not the Southside results. of X.XX%, PPP, been of to have annualized margin quarterly X.XX% linked growth, ROA net

fourth The yield increased loans due assets. credit The on included the to margin reversal points, $X.X basis basis of losses average point interest for securities average basis increased Linked yield basis net our XX September $X third points, million. increased also increase our XX, net positively in provision to notes, a The accretion. million coupon increased cost the XX primarily results decreased interest will the and XX subordinated quarter of XXXX, one points, interest on earning increase our and On quarter, the net yield a in due XX quarter. spread PPP redeemed margin impact we X.X% point. in funds of basis our which five basis loan points, largely further on

million redemption. with XXXX this During quarter, loan was we as expensed $X.X September the growth in XX, X.X%. of connection Annualized

to Our XXXX, continue generate strong headwinds projects. the of of customer payoffs serve. the tax loan all Fourth is outlook this into accelerated high-growth We growth well closer in of X%. potential loan as for be now believe the are strong. our of net changes anticipated will law given anticipation XXXX markets anticipate for We loans sales pipeline will to we markets quarter PPP has

budgeting loans growth, projecting currently and of loan for XXXX net PPP are We of X%.

quarter, increase During lowest the average our to our cost an we liabilities. represent non-maturity third interest-bearing continued deposits, which experience in

serve increased duration the lowering continue had shorter company swapped Julie's DFW combined on FHLB base to past look remain XX we country. markets the borrowings will now conditions in and the be answering Austin dependence existing to the which population at has our with our strong, remarks, allowed deposits unswapped significantly borrowings. our months, expansions relocations turn call I growth. bolstered following markets questions markets The continued by over to among and growth your and highest that forward company I Over Julie. transform by strategically XX and million. economic CDs funding The in non-maturity of to $XXX and cost higher FHLB us have September We

Julie Shamburger

XXXX. the or period X.X% $X.X to the compared call welcome We same $XX.X million net today. you, provision of net Good gain due of $X.X primarily or $X in everyone, income quarter of a linked securities morning, to AFS of on of Net Thank million and income XX.X% increased our reported Lee. and million, a increase sale of million. to reversal $X.X million

of diluted compared basis. Linked $X.XX earnings ended in linked-quarter or million For XX, to a same billion. quarter XXXX on the $XX.X loans and quarter, an the our loan of our to portfolio $XX.X $X.XX $X.XX increase increase XXXX, increased or XX.X% an share X.X% of $X.XX, net the September decrease million, per of period PPP were in

decrease $XXX.X financing. Our The increased construction commercial approximately $XXX.X million, the $XX.X real partially the loans primarily forgiveness, quarter. estate excluding projects offset loans loans during by loans, the completed converting construction in million payoffs increased of result is to the a in third decrease PPP of million. permanent and Commercial

million in added a new increase of basis. $X.X loans linked-quarter X.X%. We average loans municipal also weight the quarter The was on experienced an during of third

the XXXX. loan ended The for months down September $XX.X XX, at approximately was included balance average $XXX.X million. September XXXX, PPP loans commercial As million, of million category the three from XX, totaled our $XXX.X our loans in XX, of June PPP

forecast provision losses of XXXX. an the on million compared in in Our XX for XX, September third the or assets due XX.X% million provision June decrease $X.X at September $XX recording second quarter was asset third a to decreased by million to million of decreased of A down our reversal XXXX. XX.X%, The the assets Linked improvement to of primarily quality $X.X at $X.X decrease XXXX. quarter compared strong. due or Non-performing total for million loss Moody's credit the of at allowance to for X.XX% loans the loan $X.X to X.XX% to in remains quarter, quarter XX, economic provision.

when XX, total September loans. allowance of was for X.XX% and of loans loan losses as our excluding percentage X.XX% PPP As a

compared provision $X.X of for months reversal sheet at million credit expense exposures of reversal totaled for million the provision for provision provision to for million $X.X due June allowance credit at Combined compared Our of $XXX,XXX ended of the to the credit September loans, quarter. when $XXX,XXX on reversal XX, XXXX. XX, XXXX, $X.X to decreased three losses to with in losses September XX off-balance a the previous of

at of the the during have million oil paydowns million gas gas $XX.X prior exposure We industry quarter. or with remaining by and X.X% several to and compared end, currently our XX, loans loans no total driven quarter COVID-XX-related deferrals. September loans As with decreased of oil on $XX.X

on portfolio in an million net of gains securities net linked from decreased security last or recognized of increase X.X% the quarter, We $XX,XXX $X.X on securities basis. quarter. gains the the Our AFS reported $XX.X sale during million a quarter

a in As increased we years X.X the of quarter. the portfolio $XXX.X had duration the securities to portfolio unrealized September X.X million, at XX, gain years second of the net XXXX, end of and the of from

linked-quarter securities loans basis of at remained on XX% Our XX% mix at consistent a securities. XX and loans September and

quarter of at $XX.XX. purchased XXX,XXX XX, During remaining a authorized September total repurchase repurchased an the plan, the under shares price of ended stock we our shares average

basis on fees a basis fees by increased of PPP basis increase to increased forgiven. basis PPP result loans. the XX Approximately interest-earning Our on to margin net interest and on X.XX% linked-quarter the XX and earned yield margin assets points net XX on points interest a related the spread loans of net points in interest

months $X.X approximately X interest June interest net income million included September fees XX, related million at to the when in compared loans the For quarter quarter. PPP X.X% XX. We've the million ended to net recorded or to $X.X increased linked $X.X income this compared in

over we to fees the be XXXX, XX, remaining September of adjustment as loans. million $X.X of yield a terms recognized deferred approximately of the net had As

the decrease accretion $XXX,XXX loan recorded Additionally, purchased of a quarter, $XXX,XXX from this in quarter. prior we

which redeemed due increased in X gains increase or primarily was income. loss $XXX,XXX net and $X.X income. And to AFS other X.X% primarily an quarter, our of non-interest resulting increase the non-interest million driver on XX, income notes, Securities, reported services X.X% increase in in expense. mortgage the we the in increased the sale charges For fee on income. servicing September redemption driven subordinated deposit deposit overdraft other of non-interest services increase ended months in excluding linked by the September a On for income non-interest in XX, was income, XXXX, an An

linked-quarter redemption, Excluding remained the consistent a on loss on expense the basis. non-interest

non-interest expect quarter the of $XX be approximately million. For fourth expense to XXXX, we

ratio to Income million taxable previous income. foreign in to increase for the equivalent ended fully ratio compared was June quarter. driven pretax decrease net quarter. XX.XX% The interest XX.X% XX.XX% or due the increase the efficiency efficiency the by tax to the to months expense $X.X in increased taxable the Our compared XXXX, income in XX, three in decreased equivalent

rate last decrease in quarter, income. income the time, percentage a we XX.X%. due to as annualized of tax a rate joining effective for increase effective Our This concludes to XX.X% our tax for are will you today. questions. tax-exempt estimating and comments, pretax open from primarily the to Thank XX.X% we up for third quarter, At increased this us an in our line

Operator

[Operator Instructions].

from comes the Brad question first line KBW. Gailey from Your of

is line open. Your

Brady Gailey

guys. it's Good Yes, Brady. morning

Lee Gibson

Brady. morning, Good

Julie Shamburger

morning. Good

Brady Gailey

more be geographies, lesser loan do rate? your that's to to where payoffs? is growth? a just a X% Or I amount you year growth PPP I next of you then Relative it ex mean want a Maybe the healthy year, that this driving within level. just it is And fairly are expect loan to best comment. seeing start with higher growth. production

Lee Gibson

I more be combination going year. both production of of think but those, additional it's a to next

well. the about production, Some of And come for big to of the is seeing and the markets. we're the are had metropolitan the this the year year, what amount. XX% probably we area largest most of Austin is the The hired only going we're And that where that's people dollar dollar we in producing the anticipating. DFW, production, Houston

be in people terms being are areas. metropolitan of dollars, about of number we're And the far the markets. changes this Now going made the concerned year. the as Texas of payoffs are it's lot loans a to - largest go, tax East But as in

third more quarter. fourth payoffs the quarter, even so generated that And in we're the that additional seeing in accelerate some but

Brady Gailey

But that fairly the repurchased so of first beyond Should All at I that. don't of three you've about think on the pause? level. you a about buyback right. have the look And we company, quarters healthy the then continuing here? X% does Or authorized next, If from the anything buyback. year,

Lee Gibson

I available with some an additional next point, to But would if early have additional this at so we think not to I quarter, authorization we're have quarter. we'll authorization availability. have the going discuss that anticipate Board

Brady Gailey

last right. All for then me. And

million same it's around of next sounds close to have good out quarter. be like guys done level. a You the to job this the going expenses It year holding flat $XX

what you should towards XXXX, look sort As expense creep expect? we of

Lee Gibson

would to looking know we're additional of don't technology spend. what I will see. from that's percentage at $X.X million neighborhood In We XXXX. in for have Exactly standpoint, know some to a quarter. spend. going but Julie compensation maybe I $X likelihood, I all haven't increased some be Brady, a completed million, going somewhere the to, there anticipate amount the to I'm budget

Julie Shamburger

my I things were the in a No, because came we're that now. few things looking compensation think at mind right to two technology

mean most. $X.X million - million, $X it I - would the I So but at to around I see think like

Lee Gibson

what on We'll seeing January call, be we're based obviously, that the But have a stab projecting, with what I better idea initial if would of my at that, now and it. unfortunately. - we're

Brady Gailey

great. Okay, Thank you guys.

Operator

Your next Michael comes Securities. of from from line Young the question Truist

Your line is open.

Michael Young

taking for thanks the Hey, question.

Do years that or anything it's XXXX of and payoffs follow-up I or think we've around some been XXXX Just of healthy, number? with times, It for the be into related wanted into kind have X% driving ask surprised growth. But have sounds paydowns. Obviously, may loans than X% on like generally, that kind visibility the very that, payoffs just paydowns loan prior to that. you like of is good. at you kind would a help to very when been us confidence better in larger

Lee Gibson

not be fourth Our finished, when to the for long quarter, know after too we best but that. typically slated visibility projects construction and that's is are

lease migration begin up, That's but - we a they for Some state. how we the company that are on of vulnerable it in a fast can't have become know a in idea needed population they And most up our we're also of and warehouse we pipeline these space. because of the see to going areas, is continue just have the end expanding they depending up. all as multifamily those that lease that what's states. we growth. continuing relationships other explode on from right now, just the XXXX in enough, in markets companies anticipate how - the good when things to fast strong coming build to is And they There's of then There's sorts that's lot lot relocations, and of just the what into needs existing houses payoffs. overall,

Michael Young

year? size excess the size kind as book. book? Thanks. loan That's Or expect kind outlook, securities securities growth book do move next maybe that? With we the And any on to that push expect sheet hold do of to the helpful. to the just continue you strong through loan you of then of kind to outlook liquidity some balance into of there Just for relative

Lee Gibson

would growth the see to bare and be would it not The where such that hold Our we'd that maybe minimum, loan hope able plan little is be decrease securities to, a be the necessarily it a at portfolio. bit. is actually it expand

Some that's continued even the as at going year. of grow of deposits securities a just if might little that seen on hold be growth liquidity. we deposit some this see bit would Then it's excess to depend that up possible we and rate to continue the steady deploy we've book

Michael Young

or helpful. And remind is kind fixed? lastly, then impact hike loan around maybe more? the book of just us That's early Could of now thoughts sensitivity. variable just how asset of just much And on X.XX-point versus you maybe any

Lee Gibson

XX-XX, to and don't one moving loans. essentially fix in loan - but five forward. don't On right than other the We them is fix four fixed family that see home rate we varies stayed loans, year, all we our the it's is in at years. It what XX-XX. typically on XX-XX that's past It the typically range to from portfolio

an range. even X.X those to probably average So of X in duration somewhere years, that have

going non-maturity we're to into been would that in up, XX% all up - we've maybe to anticipate points the loan amount I XX anticipate book. liability to able the point XX% X.XX not of of deposits, with then enjoy I get that deposit side the most side. basis So And on a transform significant would migrate of to we'll that almost since see

So it small. very be will

Michael Young

appreciated. Thanks,

Operator

from comes Milsaps Brad Piper of question Your from line the Sandler. next

Your line open. is

Brad Milsaps

good guys. Hey, morning

Lee Gibson

Brad. morning, Good

Brad Milsaps

basis questions. Lee, my you It did excluding accretion and yields. want three I guys points, are around loan like they impact addressed most to only maybe of have two PPP. ask the looks down of or

me I you mix? like if on loans new better by sounds think curious originations. Or Is earlier drivers getting memory new serves, kind you key the are if that X.XX, of driven pricing kind of help could now closer you're out of understand to new of Just X.XX. kind the on kind around there, talking more coming obviously just kind fees? of there it's yields about

Lee Gibson

Yes. quarter, that the three In average in range. lower first the was

was right third to in went X.XX. the in it quarter, quarter. then think the X.XX closer second nose. I loans the it on that new for the And on you It's hit books the

to up, little about better folks a we're pricing better and are pricing. it's combination a some So of and concerned rates moving able just get

Brad Milsaps

just reversed Okay. took kind you growth out would provision of start loan you coming point, equal? as that all That's And then provisioning about this to think think the and pike last through support you provisioning, Do of down your the reserving, that then great. is quarter, a you this again some got you're mostly you some. you've quarter, at and

Lee Gibson

band. But of of at that's obviously, We look a think every and were CECL correct upper a I a lower the time. and has small that narrowed dramatically, statement. - time. the kind fairly - and quarter, reserve, to top And band point hits the at was at an it's saw right we the it's where in reserve this this down upper there's that number band -

in I mean So the anticipate want. is further to you the of would absent that's some is portfolio, additional that at loan mix going I ultimately growth reserves, cost come fine. what which loan

Brad Milsaps

Sure.

in dividend your least you a kind at then guys, And covered Lee. helpful, that's I've question. know is special typically, the mid-XXs. of typically the payout guys ratio payout bid where quarter you final I in Now, fourth since

a dividend, that reserve for payout guys get then going a guys to special earnings I would large pretty but release, is imply tracking to to part are know of one. are a that you year. because mid-XXs back record of You this even

curious - that of reserve, based your scale I it type curious about kind the it's bit? decision, know is Board little because should but on or kind payout we think a think about how Just maybe to that that of a back history? of from Just how you coming

Lee Gibson

the you this in decisions, We sorry, be more made the But it doesn't that has in early to don't see something mid-XXs on provide here next payout probably is Board lot I the a we're I'm any aggressive. up but about lot, year to think certainly guess with month. but a of haven't taking little mid-XXs going that. to a being And come simply of reversal because been And I provision that a it expense. that's

Brad Milsaps

total Makes color. would sense. I the appreciate Thanks Lee.

Operator

Group. comes Your from next question Hovde from Brett of line Rabatin the

open. is line Your

Brett Rabatin

good Hey, morning everyone.

Lee Gibson

you're Hey doing? Brett, how

Brett Rabatin

guess, in the was if but Julie, catch decide - first, million - Wanted the recognized Thanks. I amount to great. fees, didn't PPP heard handy. that quarter missed am the remaining what I I that I was you there on I third $X.X

Julie Shamburger

Yes. million second recognized during fees compared quarter quarter. $X.X the were million The third to $X.X

Brett Rabatin

you about then the and And rates talked go upside higher. margin the when potential for Okay.

mix change the the book, opportunities the new playing can of little you margin a about margin you earning the have and think asset lower how a from mix outlook Or and loan you securities the to As see until a give unless a versus the out funding remaining improve maybe creep little does in you yields base? bit shift bit here on move originations rates the that stronger higher? in

Lee Gibson

X.X average now. home this right point deposits funding with of mostly and years And bank impact I reason Well, time. over start raising is X.X% we reduced of that I in loan the have fourth fourth have the approximately the borrowings, at positive. that side million If in be in XX% the took fact say last course is, in going then dramatically it CD will $XXX quarter, quarter. if at I of a short-term funding fixed at they you the think we swaps to real think rates, positive look do And non-maturity our are the the it's them

that the do going that's I think on rates, would worst have net still impact flat it's if margin. a even And they if our to anticipate next would hold in So improve the start case they short-term then quarter don't, I and overall positive fourth to raising year. interest interest going

Brett Rabatin

Lee. just Okay. thinking for I X% ex then - And expecting you're Appreciate color the core growth right, the there, about PPP. year, the it if heard

pipeline the bit quarter, Is fourth a And atrophy here, stated I relative XQ. in to that construction growing things of the X% that if expectations that of that the terms right? building? little means wanted a of lot a got are color is to maybe C&I? it back the on little just the for more And on then is 'XX, get in So right Just numbers pipeline.

Lee Gibson

Right.

upfront. of a is on XXXX construction a because projects it four we on going for period Some their put was because in And the lot loans then, of what's loan, six-month make out they when where construction pandemic. happen people there goes a of period to figured course, in the construction putting of equity simply with hold weren't you time about a until to

because Texas, start And seeing banks quarter number not this so the just so of that loans lending, those we to be funds the of be did - that of municipal their a we're are made - guns were side. legislature on funding time. their last the 'XX. lot position fund in of on to loans to made not - a the in nice we've now then we're commercial going on them what allowed able up up have look a going anticipating session originate we're related increase. to - in And A or legislative make state in in some municipal it's on the are taking will larger state a continue 'XX. that on think And the to whole 'XX be the in lot CRE That side, thunders of combined with there's at

that in in So us there's are that loan next going of terms just factors a of bode number growth we believe to come for well year.

Brett Rabatin

a Okay. declined and little around the And the quarter first balances that bit linked part two-part fourth a was then quarter. was stated but guess the I just question,

Lee Gibson

I'm declines? sorry. And what then

Brett Rabatin

guidance, X% core of kind sure I want the it that just with the... have make correct I to Just

Lee Gibson

more right at through were loan X% X.X% at growth, we we're I the for we is didn't the I X% year. think If mean, have quarters, three basically, annualized. any

with So anything in little fourth in a but we quarter anticipating the the because what are of experienced like the not headwinds of third the payoffs. simply bit quarter we loan growth

Brett Rabatin

What's Okay. possibility had diverging I Lee, some term. seems the doing lastly, near been M&A? and your conversations think then And active? curious, appreciate transactions this priority the one for a you point around I've on I you've more at And current here of be you And is maybe do optimistic that. point? at I'm And M&A that of it in about how like deal making. view big to expect potential

Lee Gibson

we not that this something It interest then willing you've the future. is actionable just a expect here And point, goes of banks that it's sold, We bought. we're not that they're be maybe have active. in have we've got back are lot sellers willing of to And to And in. to not some talked at would seeing near be them that to going to sellers.

Brett Rabatin

much Okay, color. great Appreciated.

Operator

are time. There questions at more no this

Lee Turning Mr. for back remarks. to closing the call Gibson

Lee Gibson

for the position, you in results our quality, strong We Bancshares. earnings reporting call pipeline, forward the to annual and answer January. call. our us closing, look capital fourth positive your asset our to core the and to earnings conditions joining Thank interest during markets, in in you next questions appreciate This economic and your we concludes opportunity given quarter Southside In today.

Operator

and you gentlemen, conference your Thank Ladies this for participation. concludes today's call.

disconnect. You now may

Southside Bancshares (SBSI) 26 Oct 212021 Q3 Earnings call transcript