SBSI - Earnings call transcript Q1 2022 | Southside Bancshares, Inc.

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Operator

Thank you for standing by, and welcome to the Southside Bancshares, Inc.

First Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like turn to conference to your host Ms. Lindsey Bailes, Vice President of Investor Relations. ahead. go please Ma'am,

Lindsey Bailes

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

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

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

not Thank to the Southside team earnings for and financial of of contributions Good return Bancshares XX.X%, results results XX%. entire without everyone XXXX. start possible. common equity net Southside thanking first the reported quarter would to first these call I annualized share quarter. by per strong you. of been earnings the quarter of recognizing want and linked for This and morning for welcome loan for which $X.XX, average included morning tangible growth, continued have their Highlights we PPP on efforts, a quarter

which decreased points. our the yield on Continued basis yield on quarter, the the in Linked basis increased average points in XX rate interest interest securities the bearing accretion, basis loans, ratio margin in a increase Linked average partially rates. quality by point decrease decrease interest increase offset a X and decreased X and point in average to due of point X on liabilities due strong resulted asset quarter, then loan efficiency PPP one metrics basis XX.XX%. our net to $XXX,XXX basis

securities During realized loss the a $X.X and AFS $XXX increase of as million. sold quarter, of we million rates interest

beginning loan to perspective. HTM, extremely with million quarter-end growth X, to agency and the we higher quarter reduced coupons, purchasing In and the yield reward duration from of fair fed pleased value attractive $XXX March transferred addition, current of annualized with from were the look curve are again XXXX with linked longer April our during of on XX%. a once risk AFS mortgage-backed securities subsequent securities We flattening

Our and about a in pipeline of prospects What few we loan regions strong the pipeline quarter that is our remains loan encouraged loan encouraging second strong. are is expected is despite very especially payoffs. each

the if will excellent we our serve Given occurring not for as most in as markets outlook the continue of we other for all XXXX. markets demand loan solid high growth the growth well anticipate

maintaining this loans For our after growth estimate now, plan we are net anticipated estimate to We X%. reconsider quarter. PPP second XXXX the loan at of

the of During continued At from million million our questions existing Julie. bolstered turn country. of the XX% states. now markets company we combined fixed look Austin strong, that XX quarter and from growth conditions migration from economic the with The to rate I highest be the the markets XX, the swaps. in the to answering forward The our to resulting Julie's we were will continued call in benefit with March first continue increase over population relocations and months. deposits and expansions, markets growth, borrowings deposits DFW $X.X among during brokered in last by I remarks your million performing company quarter. other continued serve decreased non-maturity following over remain to $XXX our of hedged average to FHLB $XXX

Julie Shamburger

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

last of Net provision $XXX,XXX $XXX,XXX. $X.X for quarter Linked share first the net in of $XX.X by to of to of losses gain the a of PPP XXXX, AFS We net earnings securities quarter the loans. of decrease are to quarter, million start report reversal had million compared $X.X loss quarter. the diluted a of decreased income credit compared driven million the strong net fourth pleased million common to sale on of million $X.X in XXXX with net income provision a in $XX of $X.XX per from

billion, Our strong increased million portfolio growth portfolio. real loan $XXX.X estate to our driven $X.XX by within

a million, first -- Our weighted CRE construction was funded during basis. fourth loans loans approximately quarter increased quarter million, $XX.X X.X%. $XXX.X loans increased an million The we municipal new of of loans rate increase was during average approximately $XX.X the also experienced and in quarter the on linked

As million. loans average the first $XX The loans are million PPP of approximately $XX loan our quarter. from of $XX.X approximately March million down included the loans in our $XX.X Currently, remaining million, PPP was balance XX, year-end. at commercial category for totaled PPP

losses experience in the to continue quarter, $XXX,XXX million on non-performing XX, metrics $XXX,XXX loan for first assets or consistent at total $XX.X Linked provision credit quality loss very of recorded X.XX% of of due to with year-end. strong our the X.X% for increased quarter. loans We assets March asset allowance or with

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

exposures Our $X.X linked consistent sheet credit a allowance remain on million. for off-balance at quarter basis

loans of exposure and loans. gas industry As our total in with were or X.X% oil XX, $XX.X March million

securities on with U.S. available $XX the quarter million held securities basis. losses in fair with AFS tax compared payments. maturity. values gains year. $XXX.X in quarter, the March, in AFS $XXX million a approximately The to quarter. transferred $XXX.X free of of of and the Our to sales portfolio, decrease an net to was to decrease In loss agency the during Treasury At net held municipal by XX% of sales we mortgage-backed quarter. exceeded at values transferred of securities million maturity. quarter end unrealized portfolio of to $XXX.X of we during unrealized of sale million. principal securities consisted million $XXX.X purchased recognized from to the last securities the for gain fair end, mortgage-backed a million we decreased $XX in the quarter-end on combined and securities reported million of April $X.X The of Subsequent portfolio securities sale on when or unrealized net in securities We loss securities $XXX,XXX the driven U.S. million the And of X increase a linked had the security

duration entire XX, AFS was March basis. years. quarter was a securities the years, XX the years linked of of X.X duration March portfolio from the of As X.X increase an on X.X portfolio at The

and portfolio. loans basis, of in decrease XX% portfolio due the XX at in was and mix and shifting the linked to Our the on respectively, loan quarter securities a increase XX% XX% XX% from and March the securities both

compared $XXX swaps year-end. This or driven was X.X% $XXX.X the to Our deposits increase we advances. million. FHLB of included cost brokered reduced hedge cash increase order in by lower an of utilized deposits, and deposits million to million additional in obtain $XXX increased an flow for funding brokered million funding $XXX.X In our

our shares. quarter, to stock the repurchase a an with first During approved authorization to X plan Board new million purchase up

had March share. shares of April price repurchased average quarter-end XX, per As an average Since at of into of XX,XXX at $XX.XX XX, we price an $XX.XX. purchased have XXX,XXX shares we

related quarter. X loans fees quarter interest slightly basis spread Our margin net margin to to PPP basis a X approximately consistent earned net and X.XX% interest linked X.XX%, at points remained on on points net of last compared the decreased to interest basis

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

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

$XXX,XXX we purchase quarter. in accretion Additionally, recorded this loan

the linked offset driven sale months income swap on net AFS $XXX,XXX. quarter, in servicing deposit services non-interest which fee X.X% was fee decrease income For by income XX, gain on securities loss recorded fees. the ended of $XXX,XXX investments and net a increased three for or 'XX, by interest other partially March of excluding Mortgage the

For the million, basis. a $XXX,XXX quarter non-interest $XX.X expense first quarter, linked of slight on a decrease was

of $XX.X non-interest For quarterly we be expense expect the approximately to XXXX remainder million.

Income efficiency million the equivalent taxable three ended tax fully or increased XX.XX% for December the compared $X.X decreased XX.X% from expense months XXXX. XX.XX% Our to XX, to previous slightly quarter. ratio

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

Operator

Instructions] from Our question Bradley [Operator comes first Bailey of Jr. KBW.

line is Your open.

Brady Gailey

Gailey. Brady Good morning is guys. this Yes,

Lee Gibson

Good morning, Brady.

Brady Gailey

FHLB. more with hedges as going Can Fed you going spread how I to higher? on wanted continues talk details there with push about to rates reduced to what and you the start forward, especially to just positive just brokered did bringing income that's the impact deposit

Lee Gibson

borrowings by -- replaced the loan short-term of brokered cash groups for that basically brokered brokered reply, just were the Sure. deposits. hedge The just at one brokered brokered but we from short-term rate deposits and bank guaranteed deal We flow we basically extremely deposit a XX not have they home at borrowings low CDs CDs days. with an a offered special borrowings we --

Home at an which it to was Loan basis offering basis And the for was that around points, I points points was probably think guaranteeing Bank days. what it basis so of weren't and rate all-in X they time below X X points XX basis

the that us we'll or there. to the provides have market that's Bank funding. determine the Loan we switched whether So reason And just forward, Home going it's cheaper whole it's whether brokered

Brady Gailey

bond the on going for I there, balance been at book view, an consistent quarters. few fairly mean, thoughts is have average just forward, then And last of least point Okay. the on the

-- bond higher, from the more through in the the We reinvestment start here, outlook now portfolio do yields lot book? a bond headed balances you on are growing are so what's

Lee Gibson

things was million and primarily than first we relatively We securities I those can forward. know we there sold faster saw the we get a it percentage lot of most shorter as loss, amount funds that sourced we on quarter moving we think look reinvest a that rose some but people flattened those so securities, longer the curve was pretty securities the time these One sold out could to the $X.X flat. anticipated of small, of during and for quickly. wise rates the pretty I did

what rate to We doing. stop the say get confident sum. want longer-term If that rates but the increase the more -- are that's look pretty And portfolio So securities I may planning top to at we're we on are. they the rising are close to. rights

Brady Gailey

Okay. do able And then quarter all the to this is X for with to do -- here month. good million it buyback the just you that this year think share? see if This then buyback you'll be you know in or That's to with some on hard finally activity execute too share last the and me. full

Lee Gibson

want we from further to buy and hope to the too we time. know it's -- know doesn't point really But of to hope it's we we at hard that. this really Yes, exceeds don't just where back price it it too to the that in get standpoint early

Operator

you. Thank

question Hovde comes of from Our Group. next Rabatin Brett

Your open. is line

Brett Rabatin

i.e., inputs loan Wanted you're first the specifically guidance be about why, and impact growth slow to talk color payoffs those X%. loan bit, the going affect high growth on little to talk originations outlook? was continue first to a growth reason a the the give at you a if around -- Can and pay-offs to magnitude quarter growth payoffs us expect maybe the you Obviously expecting and payoffs that or could are whatnot indicated a forward. possibly rate you about strong little the of exceptionally few of maybe and the you

Lee Gibson

overpromise we want in of a don't it's quarter, going not about have good pretty only pay-off. growth. probably the If just like anticipated those coming, better do Sure. looks of it X% is, at pipeline now overly on readjust It's is to right and second while and and point quarter couple should first after they're reason it's quarter continues loans we're as impede those our as can at it's two get good we until strong in quarter slower have it have based of for we the what loan this on the and magnitude optimistic gauge it, that have to time, exceed a seen we growth changed this second But be on we well the point yes, a -- don't haven't feel going loan forward take the the then, Right a been look -- of third we know the just things set now time. it growth, we've first in it's loans payoffs a that we're a look in kind quarter fourth it. we for we and at to we growth pay-offs where in time, and the today. closing couple point But to The know this we we're that at based but the want the pipeline anticipating loan not just that.

Brett Rabatin

And to securities bad say portfolio of they move rates thoughts rates the to saying a a extension of longer Okay. there talked think from some as think you rates. quarter like, have you how sure rate or we'll some essentially can sort thesis see the up catches Fed during We've you with essentially then at statement the raising you the wanted they're of the out understood, market much up of likely there the much and I of that in on so go out that you're duration perspective have kind far implicit talked they But around make let's debt. other or if moved the an kind enough of that here as terms play? and up the sounds is think make going it the not term, from as

Lee Gibson

the bond trade discount. in maturity, portion, call some some think is maturity, not the side, they basically they they mini the of extended. the a went from yield And the on coupon portfolio to the try because now lower I extension yield the yield now of them but to muni

help we beginning not I them knew it are think short-term didn't means, rates to near top that the that's kept with at looks Combined pretty going what's to by if why and securities saying redeploy the there. rates up definitely quickly as some So that we're up Fed's result out the that we to show that top fast, rates see we of not the if, pretty any securities. do. of we idea said that to sold good that extension we fact if are of plan that quite We're you? going some that underwater a duration are gathered plus money out Is like going had they and or to get rising to -- the would shorter as trending significantly, selling knowing be be that of kind of that

Brett Rabatin

to expense it Yes. make XQ, was was going for I the that forward, explain $XX.X sure quite great helps That That's the a And it. didn't for I understood lastly the up million for color. I then just that the -- guidance want the $XX.X was catch specifically average year, what million?

Julie Shamburger

to -- we insurance looking expect we item inflation was well that. Yes, help point expense. guided that And had And know, amount expense of course course very Brett, for the the get a average and for relationship while the And we with last and didn't individually. budgeted for you next first change towards was we -- some that just year, quarter did area that personnel, did the from quarter-to-quarter. the that the ensure in. an over for of quarters we in over of to not and with it's year's some we guidance, amounts incur we some as we of hit and that's three biggest not categories, had in can hit, But budgeted volatile health basically

million are platforms $XX.X we're items, some So the putting and biggest Also hit new not in why that place, did one doing. was the other we of various some items. we software just then things several

so expect expense some there. And do we

$XX.X So that's I'm holding why million. to that

Brett Rabatin

Okay.

Julie Shamburger

help? that Does

Brett Rabatin

great. Julie other -- Thanks color. the Thanks. no all that's is for There yes,

Julie Shamburger

Sure.

Lee Gibson

Brett. Sure,

Operator

from Brad Instructions] with [Operator Piper comes Our Sandler. Milsaps question next

open. of line Your

Brad Milsaps

my question. Thanks for taking Thanks.

money cost demand have follow up looks I like that to guys brought it the you bearing on release brokered and interest did want the per most of in, the everything. addressed You accounts.

XX where how, that's given there about Assume basis just it went increase XX. points might the be up to from

of get forward. that sense money handle there reprice key of you going of or what like linked on wanted is some think of that's a basis mentioned Just I in funding, LIBOR to a the that kind just your there that going to was driver kind was was category? get it trying how to kind I -- cost of X points.

Lee Gibson

Yes. swapped X our money. that was -- that funding to we overall It's on receive a points was XX -- cost basis have and from the LIBOR fixed basis standpoint side points, because hit we fixed

Brad Milsaps

Okay.

showing that's So up...

Lee Gibson

Does that makes sense?

Brad Milsaps

Yes.

Lee Gibson

is That correct.

Brad Milsaps

Okay.

Lee Gibson

Yes.

We have that fixed. have too, we -- that are floating swap

Julie Shamburger

There is if so that... opposed brokered markets to money you are non-maturity, CDs, will, brokered as

Lee Gibson

LIBOR that rate benefit, what greater some period. and floating actually than of getting a a we that We're paying getting were were for receiving XX-day we

Brad Milsaps

me, with mentioned you think the you've in you got you update I be loan kind half repricing think think kind Okay, coming Can considered and floors. loan a remind there that would And there think, have of funds about yield floor you XXX, portfolio around us the maybe new you mentioned currently? and minimal of before I of you of it. then hit kind fed maybe do loans where in terms is of floating

Lee Gibson

those as as going XX% stands portfolio the those loans SOFR and put quarter we're LIBOR floating. Fed well. on see rates, we to that that floating-rate fixed or and our all raises Because, first Yes. at increase in Currently, as XX% and the

Brad Milsaps

have floors Lee? a big And do impact,

Lee Gibson

prime nature. They and things they were floors was below set most said of where, really close high usually have our couldn't really don't. pretty to of zero. didn't to any floors, go And We that like prime

going So at that's we you floor enough with, in of high very the let deal a customers to sophisticated they're they're not kind that put all.

Operator

Thank you.

Matt Our Stephens next comes Inc. of from question Olney

is line open. Your

Matt Olney

question. for Thanks taking the Yes.

a Just here. follow-ups few

to lower this or On more I basis should to we're is we points, at ratio, out? think XX now the this anticipate move flatten room allowance any there

Lee Gibson

what forecast down used the moving scenario It economic in. kind to start others, they CECL in factoring that. good go That's forecast different there exactly factoring something like or really happen. forward, recession is to the the forecast. Moody's it go question. a a is real down in know economic going they certainly mix as their that start optimistic if you forecasting could With way. could more of folks of the a a If start It than they never comes a possibility other We

forecast go base SX I case, of think a that -- just come is all and forecast. mostly see a somewhat economic is to and among the with, which I really decided in a This did think, of it at to to XX-XX with kind that case felt you're then we that terms take time the with comes was up to the comfortable down forecast. their banks going kind of in their an economic bearish, order we look scenario

Matt Olney

Okay.

Lee Gibson

I don't And have seen our less get is municipal XX CECL not, we've as family the reserve now strong simply that have a one-four reserve. I as rate has very the low or of X.XX%. basis a but the reserve, you mortgages helps points, see than if portfolio right And know where then it. can asset we because that quality mortgages

those of the then which portfolio and and certainly is that above X%. down it drag the So rest parts justified two portfolio is of the

Matt Olney

for Yes. And then... That's Lee, helpful. thanks that.

Lee Gibson

Okay.

Matt Olney

missed go the the in of over please? again, quarter, said around impact the you fees, but I wrote on down this what Julie I PPP can income, accretion that the you NII

Julie Shamburger

NIM. basis on it were a that it with question? obviously that Did PPP, for the of X those payoffs the the course quarter typically we they fees purchase and start to was recorded decline, for are most are we to and that part. they can had And your the Yes, we starting seeing early decline $XXX,XXX impact accretion is vary seeing answer point on loans, $XXX,XXX the of on

Matt Olney

Thank it. you that. That's for Yup.

Julie Shamburger

Sure. Okay.

Matt Olney

the from Curious thoughts front, I And Thanks. of Texas is Lee, in on lots then updated for what the landscape, outlook kind lastly, M&A valuations. are curious the the within these of volatility of some just with guess bank updated here?

Lee Gibson

acquire. to that at in acquiring. this we're this we're a find actively in of interested are a going looking hopeful are point to us seeing would geographic be in year We for that partner But are time, and lot locations we sellers that we not sometime

Operator

you. Thank

Our question comes Securities. of Young Truist from next Michael

open. is line Your

Michael Young

the Thanks for taking question.

Just that sort of wanted guys the competition construction of commercial then, in CRE And a to terms to kind where a you most there growth estate risk underwriting some kind going by you're growth into seeing? seeing think deeper and the outlook, or you're are the type demand maybe is forward seeing little could of Food in of that Group, market maybe of that at anything you pose and dig demand real -- just the point?

Lee Gibson

do is beginning are part multifamily. of the ensure the on has still We're especially of decreasing. just projects is affordability there the of to of just badly construction housing needed, increase metropolitan in areas, year in The portfolio the we a and with a put to fund now lot supply biggest and last that with lot these multifamily

And second So of part that's help of bucket. the biggest the me part the then construction question again. out was, your

Michael Young

just change of that or competitive the too getting seeing a guys see Yes, pricing you cetera. of to you're kind in et to i.e. competitive skinny might - growth, landscape sort in anything cause that

Lee Gibson

Yes. you able to seeing I pricing. to just for our we're make, pricing, able seeing than sheet. was weren't some we given we're that the And at competition people more rate like a in loans pricing what felt skinny, this that point on have rate few simply especially we seeing front things too because environment competition get is that not to make fixed on there we But are at not on are but appropriate time. the levels in liked know we considerably deals folks on fixed -- would rate the our we're don't the we're really is give credit pricing is, where what balance we're believe mean

Operator

Thank time, back CEO, turn the closing for remarks. over Gibson, questions President to and no to further call at showing this you. any like Lee I'm I'd

Lee Gibson

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

Operator

may that Thank disconnect. Thank you. Ladies concludes and today's Have all day. now you great gentlemen, a you conference. participating, for

Southside Bancshares (SBSI) 26 Apr 222022 Q1 Earnings call transcript