SBSI - Earnings call transcript Q4 2021 | Southside Bancshares, Inc.

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Operator

Thank you for standing by, and welcome to the Southside Bancshares, Inc. Fourth Quarter and Year-end 2021 Earnings Call. [Operator Instructions].

As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Lindsey Bailes, Vice President, Investor Relations. ahead. go Please

Lindsey Bailes

Investor Good Fourth Jonathan. transcript and to southside.com welcome today's Thank and morning, Year-End Bancshares under on posted Quarter will A XXXX Southside call you, be everyone, Relations. Earnings of Call.

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

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

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

Lee Gibson

XX% of Good X asset net in included ROATCE interest per X.X%, thanking contributions extraordinary basis for PPP yield The of decreasing results quarter annualized loans, and fourth X.XX% a increase of results not We of XX for XX.X%, decreased increased want nonperforming points. growth with due debt yield expense. Earnings the net strong of have an PPP; recognizing asset results earnings basis of of everyone, the points XX the of margin basis assets $X.XX; points, continued further the an the interest the included Quarter been largely included X quarter for with resulted decrease our welcome increased to improvement which Highlights the $X.XX, of in net rate of XXXX. to X% decrease million; on an for $XXX.X Linked full The liabilities loan $X.X a and average quarter Fourth points. average anticipated efforts share credit and interest-bearing XX our annualized quarter reported of fourth increase X accretion. total on X.X%, quarter, reversal extremely net per Bancshares and year team net of XX%; strong in XX.X%, record assets. the increase loan million. the payoffs Call quarter. discussed from were on to entire basis Highlights annualized a fourth of these and loan in X.XX% linked of and income record ROATCE quarter. start our XXXX, of exceptional quality linked growth deposit without net loans points; deposits, morning, growth, in year basis basis an our PPP Year-End by quality. that I net for would in earnings losses to This their and possible. Southside quarter for pleased share the to morning, of we given margin provision Southside during in securities margin interest And during occurred linked points, previously decreased sub large The which increase PPP, the

What in As begin is is XXXX, extremely is pipeline encouraging pipeline our that the very our strong. regions is strong. each we especially of loan

well as as growth loan other excellent solid we the markets, the well anticipate XXXX. continue serve high-growth will markets in the for occurring Given into we outlook our demand

net projecting loans, X%. are PPP loan of XXXX We of growth,

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

strong, the our strategically are now swapped and we population questions million, I remarks, reducing conditions The borrowings. the company highest serve expansions growth have Austin will other CDs from duration significantly, states. borrowings cost markets be and dependence by in migration and Julie's transform company Currently, economic and increased allowed growth bolstered Over higher relocations the resulting deposits December which that FHLB the The country. and on your among nonmaturity and has answering significantly $XX I funding DFW million continued $XXX since months, look our down XX to other to turn XX. past base unswapped existing forward by remain markets over combined us in wholesale shorter markets call Julie. following continued with continue the from to to

Julie Shamburger

decrease you, for income sale and by to income $XXX,XXX a XXXX. annual X.X% linked and of ended another net Thank a the securities, credit in decrease our decrease quarter We financial gain losses XX.X% a $X.XX, share provision We due quarter from XXXX for call or diluted everyone, $XX.X a million, $XXX.X AFS a today. on of reversal of of Lee. reported fourth with common year of Good morning, million per with offset strong for interest record in increase to and earnings quarter and lower $X.XX net partially welcome results expense. of

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

quarter had fourth during increased rate large including commercial construction payoffs $XX $XX.X Our approximately an a in increased new million we and increased Commercial the average million. basis. several We quarter linked increase million million. experienced funded PPP on of the And $XX.X X.X%. municipal $XX real excluding in The was between loans forgiveness, estate, million. $XX.X weighted loans loans also loans, loans of

category loans remaining XX, average was $XX.X Currently, September million $XX loans December million. $XXX.X our PPP at million $XX from PPP the approximately of loans down included balance for in XXXX. for XX, fourth and $XX.X approximately PPP are the XXXX. As totaled our million, of The quarter commercial million loan

as assets total Linked loan a XX.X% quarter XXXX. of reversal on to $X.X for of $XXX,XXX Nonperforming recording real of a the decreased X.XX% our fourth to provision decreased million compared The XXXX, well a of Our at for forecast with to strong. remains to estate or on was quarter XXXX. allowance improved $X.X an impact for throughout provision asset as December loss due reversal total of decrease million fourth XX decreased linked-quarter credit XXXX X.X% loan assets the XX, or X.XX% in the nonperforming quarter, payoffs of December loans assets primarily for due or X.X%. allowance. for of the basis, losses at $X.X quality On $XX.X million commercial million

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

loans, credit XX, million compared reversal was quarter. in to December fourth Our to allowance This, December with for the X for of due at when a at provision on losses the reversal XXXX, decreased of provision of off-balance sheet months ended $X.X XX XXXX. credit million combined of exposures to September million $X.X provision the credit for losses XX, total reversal $X.X the for $XXX,XXX

industry exposure $XX.X of XX, loans of million oil and with As total X.X% our was loans. gas or December

securities quarter. years years years, portfolio and At the gain securities the million in and security AFS sale or linked of securities million $XXX.X a $XXX,XXX end a net year-end, up portfolio X.X was unrealized million, X.X the of last increased quarter the X.X% in $X.X the decrease We recognized of gains at reported Our on of XXXX. portfolio the from X.X net from the on had net we duration of $X.X quarter, linked a quarter during basis. gains

XX% basis and at prior December XX% consistent and with loans mix shift and for remaining of year-end. respectively, securities from XX% XX linked loans the on was Our the securities quarter XX%, a

X.X% year. $XXX.X million fourth in compared $XXX.X the Our increase public or deposits fund September in XX, of increased fund increase consisted of to each quarter XX.X%. an This Public normally or XXXX. deposits increase million deposits

in XXX.X%. brokered or our million funding, $XXX.X increased order swaps obtain reduced In deposits flow FHLB for brokered deposits advances. to funding cost lower Additionally, $XXX December, utilized cash million hedge in and we

FHLB the hedge place $XXX of remaining quarter During deposits 'XX, on cash swaps. first utilize of brokered advances plan the to flow we million in of

basis this the by funding to expect reduce We cost overall the XX swaps points. approximately on

on points margin basis impact quarter. rate NIM. basis approximately of September average net Approximately And net compared to X increased to points related loans on on X the our PPP interest-bearing X.XX%. on an on liabilities spread basis the of by fees quarter notes for reduction basis X.XX%. net X Our impacted margin earned to our points XX interest last of the to basis interest interest points subordinated paid points points XX a linked the X basis increased The basis XX

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

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

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

AFS securities linked $XXX,XXX December excluding for ended For net on income, X.X% gains the of XXXX, XX, quarter. the noninterest sale months the or X increased

noninterest For expense million. the fourth quarter, $XX.X was

a redemption the quarter basis. noninterest in on expense third X.X% increased loss the $XXX,XXX on quarter, linked the Excluding or

For noninterest $XX.X XXXX, to approximately we quarterly million. expect be expense

We expense tax September X report the months for decreased or fully are months and XX, was ratio Income December XXXX. efficiency pleased XX $XXX,XXX taxable compared the respectively. ended to X and X.X% equivalent XX.XX% to XX.XX%, our XX ended

time, your XX.X% effective estimating effective fourth This and we to for us will Thank for XXXX. an we Our tax of today. tax annual concludes line quarter. rate open are comments, rate our you At for slightly XX% joining for this decreased the the questions.

Operator

[Operator Instructions].

Graham of Piper Sandler. comes question from first Dick Our line from the

Graham Dick

Do well. seasonal portfolio. guys have growth been deposits. there here? some Just plans of all wanted the there I brokered the Overall might is strong. those start deposit it bond pretty grow addition any from you as you it about talked looks to like on in to have funds know But

if are here? grow it to Just you from wondering guys anymore planning

Lee Gibson

No.

that just million, bond slight the hedge no, could growth portfolio, the we're for in the not. brokered us the And million those budgeting think bank home $XX in due a or funding brokered to that were in funding approximately really so our I an XX deposits points. $XX from basis so swap increase deposits to ever save we of But we're loan changing somewhere range. year,

Graham Dick

the trade then was nonrecurring Right. if quarter? yields there's thing just a you this for anything pretty guess wondering That portfolio. guys. And the the I like MBS I last improvement driving one sounded good in on bond

Lee Gibson

anticipate, And And with where securities. the continue mortgage-backed I to think those we did possibly the amortization being mortgage increase see up some we the with yield on on bit. -- move some little had of prepayment expense to of may that speeds would that rates the maintenance do less some securities. there's further up yield have long slowing end, on a prepayment a little bit I we mortgage could

Graham Dick

of a guess, And more thought. environment. then to kind at Okay. sensitivity rate asset what I moving, higher and That's just looking I

of percent So would a broadly, and upfront, heading what you of be your would maybe all are like might loans you paid little you shock helpful. then immediately all how wondering guys if on expecting repriced like -- color guys what even very deposit this, on provide just all scenarios that NII positioned could be into or the

Lee Gibson

Okay.

the really a began, banks on dependent lot less over We basically since become started unswapped on to deposits I right which the dependent of. CDs to think growth last significantly all now deposits pandemic significantly in the funding, nonmaturity and we less just growing. utilized have become that deposit wholesale in don't

So as like our increases increase, the feel raise to rates interest anywhere have near we costs going what funding we're those to short-term don't are.

increase year the of up increase goes the a nonmaturity anticipating that rate even increase the increases not year. may they're all, of if be X deposits, be this first but fact, going throughout percentage the it'll any forward, on small some it there very In at

but a Probably loan that. of Julie the think it probably I XX% is a to the of little side, reprices On year. immediately, within floating most in and XX% XX%, less X number, to months than reprices rate just has

Some X of it X-month it's of a based some LIBOR, lot is and overnight off month, but and a immediate. of it's

Graham Dick

Congrats on that. quarter. appreciate solid I a pretty

Lee Gibson

you. Thank

Operator

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

Michael Young

Just the loan to on wanted outlook. touch growth

loans what bit at good the they ex was X%. be You that kind seeing of Are kind back and assume just are so bucket, curious new growth. what's of of PPP, I mentioned, a putting on. you're I what in, book the most think, yields historical areas loan it's point strength just than construction that's you And off? I on might rolling kind of if the this core higher the the

Lee Gibson

to of almost and or And typically, X-month they're a seeing to construction those tied typically fair at amount -- point. they're are or loans, tied SOFR are always this floating. prime either not LIBOR they're We

that on we're really funders, the throughout some as construction loans real side question, we're answer commercial that we a But we're anticipate of move year. the increases primarily move seeing So up, rates estate seeing municipal that loans kind those will up. lot encouraging Does your what's it's is then and of that. seeing full Michael? And in nice

Michael Young

new sort dilutive? I'm to Or at, still you're be slightly and higher sort I and Yes. loans of what's line accretive should more on, of trying yields guess of yields? and higher are off at the running putting get kind basically, it rates that in is are they or to loan it

Lee Gibson

say at funders, LIBOR going higher to what's we're prime at they're they're the I'd you'll everybody and And across see SOFR, that point increase. floating fixing think at board is if full than similar I -- March, they're least the funders But full And occurs. if rate, that XX in to the in today. reflected the anticipating yields rolling that have yields probably off. on what we slightly basis

wouldn't the basis -- will but pretty ought spreads say, be that full to spread is what floating increase XX, it increase. got funds points, one rate basis prime -- at XX much, will somewhere, the it of the let's we've I those, points, going our at XX over is those XX real XXX loans, spread So the say XX cost to on in

Michael Young

Right.

capital Okay. have Lee, sort And on side, just loan guys to going growth. you curious, of the then are stronger

wanted So the in even the is outlook get what M&A? on updated capital for buyback returns, your where is if just given still stock equation then thoughts and is the share to

Lee Gibson

Okay.

at you'll currently and point do that's that that. terms in something one half sometime year, In this looking that first see we of on in have anticipate something stock we're probably buybacks, the at of would But place. not time during this

say, mean let's mentioned of, terms capital. there's... you In it -- was I

Michael Young

M&A, dividends, yes.

Lee Gibson

some think something but hopeful happen anything be don't M&A, potential for acquiring. we're I'm on with the actually that quarters today, interested during partners first exactly good having I be would in And it to nothing some half conversations. we'd But XXXX, just but maybe conversations possible be of more the look meaningful -- I X something. that there's first able sometime sitting announce that we're or may to table immediately,

Operator

comes from question from next Our of the Gailey Brady KBW. line

Brady Gailey

about, are service thinking I some and when And much a overdraft income, just going fee seeing is one, how lot look within driven and So industry fees at talk you now Can on on you forward? overdraft, pressure it charges deposits. of XXXX? NSF that then your tell that maybe by just, NSF how is us guys about

Lee Gibson

the can grabbing the have cognizant tell for for the number XX% lowered it of months year. that of is What our you is correct? that. we're I Julie XXXX. X budget Is for And basically XXXX, last we by that

Julie Shamburger

Yes, that's correct.

Lee Gibson

refunds of the make change tax doing we income that on for first because months something, would through. nature. is look really of and while because filter that it take to if And of reason the a of only we're that in And lower today to some our Yes. occurs a quarter things overdraft

number for Julie that, So that has we XXXX. think and of I cognizant are

Julie Shamburger

check Yes, $X.X And by as significant, about to was together million. XXXX some right million. of $X.X now. just in charges deposits mainly itself institutions not Brady, the decline some probably decline, due the were from in was overdraft The and all overdraft abundance but that well, return

Brady Gailey

beyond average that? first And kind to that expense the Or see run of the of of for the the is in then some going more rate million, the full moving you're run to kind and base, growth more quarter that $XX.X is year? an guidance rate

Julie Shamburger

for to on probably the budgeting. It's full year closer an based average

Lee Gibson

going to third that and quarter. hopefully possibly factored we've see officer likely hires some additional -- the in fourth quarter, in And loan it you'll we're second

think... I So that's

Julie Shamburger

run in little QX. might lower It a

Lee Gibson

lower QX. a Run in little

yes, million to quarter. think $XX budgeting first average, million, on we you year per in the were the think guessing $XX.X But for closer I it's somewhere quarter.

Brady Gailey

have Okay. you're last Lee, little And on in then, a years. M&A active it you sounds more like than the couple now of been

size for remind just point us of of do from a geographies view target sweet like what you what's So for Southside? kind bank spot and a the

Lee Gibson

Geography, Interstate to probably of population state. the that probably of might west at staying at that economy least basically, We XX, this state that. we along the and of and, but go plan miles XX, the encompasses XX in time, point much percentage we'd past XX% on about stay not to east. And XX the in Interstate like in the

be and of ideal too billion $X billion terms in on So $X and size, size We between somewhere billion. started we're getting would above touching $X billion. much $XX

were $XX the acquisition, like $X billion that under at really, us so us unless look But we'd And a or billion. we at to to over we'd for an billion $X do billion. would really sweet to really probably acquisition $X if stay -- $X large least billion we that like take spot to

Brady Gailey

And sounds billion for All Durbin then us a know I just going like under here, but on Durbin, do stay impact while right. remind if you guys that topic, you the to be. $XX could it are cost, what

Julie Shamburger

around last that think, probably or $X Our million. estimate seem to refreshed, be so. I quarter It was, was last would but

Brady Gailey

million, a $X balance And million or billion on $X that Julie, sheet? is sheet that today's balance $XX

Julie Shamburger

is it today's No, sheet. balance

Operator

question Matt the Olney next line from Stephens. of from comes Our

Matthew Olney

want of loan It pickup year I versus ask you you to color heavier quarters. the Any last what downs a back few more guidance guys half mentioned the pay I think X% about full of we've PPP. the for improvement? were nice the ex XXXX. on over seen that in provided implies growth that And

assuming more in level you moderate of XXXX? are a So pay downs

Lee Gibson

of -- not occurred uncertainty lot half that then the sales and there typically -- we're a payoffs the December laws volume. months. furious, expecting in the this of probably things anticipating that the some pretty like -- a pay via are the we few not are of some time. start was nature not first year. But tax slow And downs certainly the our seen drove And year it's the about quite of and thing some in and we is the We that a had pipeline, that in January fast been no, main quarter. and have fourth But like to that

and just So X in not regions. it's regions. it's very our just encouraging, or X of It's all

feel in. economy growth. -- new growth we what's good. is doing on. people companies is and well, So in, jobs, it's it's amazing extremely moving just going just real occurring, The It's and moving It's

in area in we're apartments kind for So DFW Austin we're down like the week -- not you talking that Austin, bidding apartments that this we wars houses. talking wars there's see and -- about about of for heard bidding that

related. housing lot it's So stuff. type warehouse It's relocation of and a company related related

it's of So result right see just impact really real and positive that we're pipeline. a now, to on our a as beginning

Matthew Olney

Lee. helpful, this additional earlier potential X%? That's upside is you year. optimism those also embedded new could the And year, from current guidance? for be later the you expect production hiring mentioned producers loan even producers on in that from around that also that Or Is

Lee Gibson

loan hire. have additional that's in get we're everybody that notify and today. because we the we're different their the takes first including few. we're from think And But get current X especially feel to be about a it could kind quarters the of X% that to officers -- some to not upside place potential always we But -- moved. we going our good and on lift I expect something visiting We're a that hoping the guidance. for that in land not ground that that lenders out over actively somebody with of feet month they've

Operator

This does further to of remarks. Gibson to back for any session program question-and-answer hand the today's like Lee program. the conclude I'd

Lee Gibson

your in and balance conditions In opportunity Southside today. the pipeline, markets, appreciate us joining in economic strong questions given for our you our interest Bancshares. the your closing, sheet, Thank look concludes capital answer about to and excited call. results to We XXXX next the you earnings and quality, Thank prospects to the core position, This reporting we're you. quarter first in during our call earnings asset forward for April. positive

Operator

Thank your conference. does program. in participation you, conclude for ladies and This today's gentlemen, the

Good disconnect. day. now may You

Southside Bancshares (SBSI) 28 Jan 222021 Q4 Earnings call transcript