SBSI - Earnings call transcript Q2 2022 | Southside Bancshares, Inc.

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Operator

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

Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lindsey Bailes, Vice President of Investor Relations. Please go ahead.

Lindsey Bailes

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

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

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

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

Lee Gibson

strong XX.X% an growth the securities metrics. point and on Good XXXX. our continued included of share on continued partially reported pleased during basis yield point annualized linked everyone average equity asset of on Call financial interest earnings on for the increase quality average growth X average in XX net The reflected the the Bancshares' increase in This quarter common and $X.XX, XX.X% our in quarter quarter welcome offset X loan average increase extremely basis morning, increase the for our Second strong loan with ratio Quarter second a X rate loans, yield by increase interest Earnings point margin quarter to second margin, Southside net in the strong point basis interest-bearing efficiency the We're tangible liabilities. in a PPP, results return per basis of we of net linked morning, of for XXXX. Highlights a XX.XX%, an a quarter. quarter linked of

the 'XX. are remains prospects strong the half and of loan second about growth encouraged pipeline Our we loan for

year-end. second I loan to may want pay growth short quarter the $XX out of off point term prior approximately and However, be that million do to

to increasing growth markets, in Given the as our well the the serve we're high-growth net our year of growth mid-teens. XXXX for we loan anticipated from as occurring estimate solid the X% outlook full other markets PPP

During securities higher the mortgage-backed increased, interest sold we primarily securities. purchased coupon mortgage-backed as coupon rates quarter, lower and

In purchased the quarter of call the had the hedged which to securities, securities date of these municipal approximately We overall purchased we XX% during to securities. addition, the X% of municipal duration half reduce coupons.

municipal expansions of We growth, securities robust amount and our the markets. have bolstered this highly resulting markets additional from levels housing growth and performing relocations are date. there serve approximately our population also market, from a continue the in strong mortgage remain the Texas among in to The company the and call par steam in several higher the of hedged combined the to Currently, solid market of to with out continues AFS states. AFS Austin country. shortage we XX% of costs that to closer have highest Rising some taken be be markets moving by very municipal rates the economic continued existing continued company hedged migration conditions markets and DFW The securities. other single-family pre-pandemic

in consider and the seasoned over additional the continue hired your our one Julie. execute in contributions in be growth. will what Austin best lenders, We loan been and to answering to entire in successfully call recently I two look country. not results the the enhance we model and business now thank and recognize possible. to Southside following efforts, We Julie's would for state that to operate these which without want have to which turn team one remarks, should I their questions overall continued I to forward Houston

Julie Shamburger

basis; the and second within our increase strong to $XXX decrease morning, income loans, portfolio an of net of in $X.XX of report to quarter, loan estate a million $XX.X increased per million quarter, pleased our earnings share quarter the second Good Lee. Thank you, $XX.X real linked PPP by diluted and Linked linked-quarter call common driven loan We're growth million, our welcome for net everyone primarily $XXX,XXX a portfolio. of today. quarter. to increase $X.XX $X.XX billion on

on Our X.X%. loans weighted increased an basis. during funded net second increased $XXX.X CRE quarter $XX.X in also increase $XX.X we of The million. commercial new million loans loans of rate average was approximately Construction and experienced million of loans linked-quarter the PPP a

$X.X loans second million, approximately As from loan included PPP commercial PPP totaled category for loans balance of $XX.X of down in the last the quarter. The average June XX, $X million million was our quarter.

We asset to at X.XX% assets experience the of June XX, or million quarter. with $XX.X of strong consistent assets nonperforming continue quality first with metrics total

the second our provision June reversal credit $XXX,XXX net recoveries for due XX, loss decreased the months of ended partially by in the quarter, For to for allowance loan loans slightly on $XX,XXX. three recorded losses offset of of

loan X.XX%. was as of percentage for losses June total of our As a allowance XX, loans

expense credit a decreased sheet $X.X off-balance linked million the for $XXX,XXX provision provision allowance quarter reversal on in $XX,XXX compared quarter. exposures prior a to of due to basis Our of to of

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

purchases principal The portfolio. mortgage-backed Our and securities treasuries $XXX in that more sales in increased the the payments corporate driven offset bonds. of million million million $XXX of in a securities, $XXX.X bonds and in of increase securities, unrealized on basis. purchases approximately the U.S. linked-quarter securities million $XX The and losses XX.X% increase than in portfolio combined or by consisted was the municipal portfolio

we the $XXX.X net $XXX.X securities end fair during million in net portfolio of During quarter to additional quarter. held $X.X the unrealized losses million securities of to million sale We sale transferred the quarter. maturity. values first additional had securities the on AFS $XXX.X the of recognized we second compared quarter, to of loss at the with available a end, of At million for

June from was X.X years, years. X.X at years XX. AFS of increase XX, As The of an portfolio securities of was entire duration portfolio duration the June the March XX at X.X the

mix basis purchases the of respectively, the XX loan loans on in securities portfolio in at and the XX% June securities to to offsetting from a XX% XX% due growth shifted and more and portfolio. the than closer Our XX%, linked-quarter

deposits In X.X% or an basis plan with million authorization Our purchase a first $XXX approved deposits noninterest-bearing one to the X.X%. to includes on shares. of stock which in $XXX.X linked-quarter million increase quarter, repurchase increased million or new our our a Board an up

Since we shares quarter During an repurchased an X,XXX purchased the XXX,XXX second of share. and price per July at average end XX, of $XX.XX through price quarter, $XX.XX. shares we at average

ended securities in in the interest three quarter. for net the margin interest from increase loans net this for portfolio. on increased months points or The included same XX loans to interest driven margin basis this net X.X% income and income to points $XXX,XXX to Together, resulted a increase quarter. average increase X.XX% X.XX% on PPP XX of to compared primarily quarter $X.X period X linked-quarter and increased interest approximately the a linked to the Our in net on yield in net fees X.XX%. the by the basis when basis interest from in related in June X.XX% million $XXX,XXX spread last was recorded We compared

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

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

for by sale XXXX, income, AFS net of The decrease linked X.X% by XX, driven June excluding a nonrecurring ended the months loss $XXX,XXX on three noninterest net or securities, decreased quarter. the was the partially For gain the swap offset recorded fee servicing in investments brokerage fee income. services and income, other in on $XXX,XXX deposit and decreases of services in an income quarter prior mortgage income, increase

fees software $XX.X was or million, and $XXX,XXX quarter, professional X.X% basis For to due an benefits, expense in the salaries primarily increase a second expense. linked-quarter on noninterest of increases employee and

remainder noninterest be expense quarterly approximately expect the of million. we to 'XX, For $XX.X

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

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

Operator

[Operator Instructions] question from our next Brad Gailey. And comes

Brady Gailey

Brady. It's

while. nice, update of as you for NSF? far at couple of or that changes you So are next over you revenue all overdraft healthy more Or Southside as can that, years? a as any think wondered, just to at is And where kind enjoyed a you that on has the do risk of we stable? think bigger level of do picture I it us charges think should service

Lee Gibson

to year-end. in expecting budgeted we're -- I But on it over couple to adjustments action but that not regulatory I I'm effective, not what that above made that we're and revenue September the the it's time XX% few some are little to so substantially that so a bit and the X. by and Right a of now, it's over see anticipated now away going It side adjustments going more we next expect tell, years. earlier year. actions any little I far a can We some year. make Brady. there. to probably what the on to depends Yes. We but can reduce overdraft think, see slowly just tough We're going this see additional go we're between take but Actually, come of down it to means approximately out reducing

Julie Shamburger

April Lee date mentioned X, did quarter-to-quarter. X make that that was explains the change that April some an was the that Sure. It impact so in change. And you already effective we of we that line see -- effective

Brady Gailey

the stable it this was bonds we how you the and All -- the right. at if sheet, portfolio average should then And next of into portfolio the think little -- year? been the for down to size rest bond of balance bond quarter. your But a has about look year bit

Lee Gibson

would we loan organization. that bond as a I is through which But it. high begin let growth of the [Technical dependent the some to and -- on that loan right it less And we'll if very that now probably securities become good. the off Difficulty] continues, of like be the thought going see assuming to and growth that's may prepayment as say, part portfolio continues you're believe mortgage-backed that looks My gradually

Brady Gailey

me And The finally for then just year. the Okay. last coming down your reserve. has reserve on been

floor points, there's of at points? XX XX of that's, now least think a more roughly here Do that as do that's around do think percentage, basis think Or you a of kind do stable? we hit terms down... you a So of at you at basis think in

Lee Gibson

think would pretty it's I stable.

that over reserves small our on since loans. and those have those alarm we've have the municipal loans little brings pledges down the -- tax those. part of a on in things not some most very any losses loans One ever very, for the are And is that are XX% of experienced

standpoint, percentage where then needs to fairly a I am forward, moving stable forecast it if And that from it's thinking the any So should that ratio conditions. see be move changes reserves up. about absent the be worsens, and really economic in you'll economic

Operator

from comes question next Brett Rabatin our Group. from And Hovde

Brett Rabatin

Wanted kind to new wanted from customers? balances your trend quarter. of this to then kind a guys the Was bit And that quarter beta kind in first deposit a about deposit that being of existing bucked how up account or how the new deposits margin? the and Was the of flows just here that of affects get and ask, openings? and with you think the sense you little

Lee Gibson

of some openings. The account new -- Yes. it was

the will was likely And customers. was new a of $XXX was of mentioned, as bit the increase Julie quarter. I it interest-bearing Some million go of third around existing customers. A that's think accounts, that was that deposit in seasonal existing a portion little away noninterest-bearing. it increase of in But

likely it difficult beta to next week going of but In that on deposit next we're into into the we're tier, is thinking deposits. be XXX in one, say that terms it's be basis where to well to -- And somewhere XX% beta deposit forward, exactly the range. all point that's the going and going above since to third the be moving is really just XXX

in we've don't approximately noninterest-bearing $XXX have course, of are got those hedged so anticipate deposits do And movement point the really we of then, those. this any because -- at and deposits. million we So

Brett Rabatin

rates in Okay, were a XQ. talk about helpful. then of just growth. Lee, any loans that's has the And think a might about on I obviously, that that production that of been kind loan sheet you XQ? loan little that Or the And that, really rate older? it? talk rates loan growth got all on Can on wanted that production in Was was maybe certainly you to high strong the you have

Lee Gibson

closing quarter. And now in part, new the are in that that quarter. there closings for the have we ended second basically closing for third Some in quarter. the second most of we for close the it then, of some had to set was the first set loan loans course, were up quarter that But

the are in moving to anticipate they what's are that, the probably of that's the and half In floating with those rate those so went terms and of rate move rates, loans third loans combined going nicely, rate that especially up. here on average week. is rate likely pretty that going up And we quarter next floating to happen approximately

Brett Rabatin

margin Okay. maybe back lower at here it to second to fair tweak pace And just that quarter? Would than last up one the continues but then the the margin. on a be maybe assume slightly

Lee Gibson

to a going the little the be then is first pace the the going simply but we've beta be would higher to the Yes. pace in second second it seen, certainly saw up would we at it's think the I If quarter loan deposit continues not because what and think tweak bit in than we is I -- saw quarters. growth at

Operator

And from our next question Milsaps Brad Piper Sandler. from comes

Brad Milsaps

have timing like of period follow good up back You on addressing the below job of the was of looked a to the did I done just a portfolio, some want most kind purchases. good maybe bit maybe end. everything. bond It the average guys

third XQ moves those of on of I'm bit talk a it think the be So the of particularly of lot of timing individual just kind that buckets kind and and on that of we to three also the mean level? can to would guys a kind from if that moves some for those category kind the then safe the say curious the MBS. the about came late you assuming MBS in the quite maybe MBS taxable, as maybe you tax I'm what some about guys up around should of have, average of quarter, exempt quarter. Is rates

Lee Gibson

oh, a par. purchased the X.Xs mortgage in -- and were X.X% lot above part, purchased quarter. purchased, -- average But close Yes, pretty And the And terms Okay. had little of par, June. MBS just to the I we basically, the X%, meaning very the up X.Xs maybe definitely, were balance slightly will premium. premium them, in yes, that maybe most And on be And in MBS think for was of for the third would -- Xs. the okay. pools the Xs

of were Xs when securities So were we've we duration Xs the we of the those a on municipal the shortened why June But but a took on lot were securities. basically securities. that's lot pretty them municipal final we really when the maturity hedged X.X much the out a of consideration side, yields we call got coupons. high -- we and a of May did purchased on lot the of considerably purchased the when lot that of and we taken the -- purchased into some also to purchased those and and we them risk widened in in purchased Most spreads purchased rates some

on goes that. the gives our So cost as based know be basically, that week, hedge or of what don't And color you very helps overnight the I -- cost in of any low And down. happens starting you rises, August. SOFR if next the on the hedge should

Brad Milsaps

report and going that terms Yes, another based the it that... like you three third kind lift Brett's seem Back would of you're does I of in the would see nice to in the help. buckets across on quarter. yield of such, of think question, timing kind But that the kind to should

Lee Gibson

that are you correct. yes. Yes, -- No,

are You correct.

whole yield. in portfolio nice securities overall the as lift a a I will see think

Brad Milsaps

should So should correct? yielding be average on higher on it and it average, be larger

Lee Gibson

That is correct.

Operator

And Olney question Stephens our next from comes from Inc. Matt

Matt Olney

Wanted back on the circle to loan growth.

hear would good months today color I Any as XQ loan then growth can think pipeline as And by gave love more some give stands also far as color to market? to you loan ago. as by compared the it type. the loan three about you

Lee Gibson

four the where in Okay. some flat It and we loan occur and payoffs markets. the the DFW guess, in loan Houston. much Southeast primarily The market Texas was then pretty that -- saw growth lot so occurred, I in in East of A of in there. is Texas, Austin, was well,

the that So four those are markets saw. we

the strong. the may have of of the the beginning it we anticipated still still terms call had year. pipeline, as above but we not it's what It In as be would strong was at last when earnings it's well

Matt Olney

love And would taking you back, you'd just sides but overall Okay. I both hear for helpful. balance competition of That's then on step how kind outlook deposits us on betas guess I sheet, characterize to gave a the loans. of guess of I and both the deposit level an

we a think what how you July, would Here are your in maybe few love to kind ago. of it appreciate compares would expectations to I been have months

Lee Gibson

is with other think on deposits remains amount would us for I loans have the competition quality having in extremely areas. the of The competition return really the loans the and competitive up surprised The for which customers opportunities are rates marketplace. fierce that that anticipated I is in available thing but

the And much amount volume competition total of the latter the is part is there larger would anticipated than last of year. have those the so fierce, and we while

Matt Olney

done producing a follow up year point. And lot loan growth. or I hirings two that know the bank of portion on just to last of that the a that's has last over commercial

really new you from hires mentioned the are So just how some versus maybe much a robust that of the of opportunities market?

Lee Gibson

come has from hires that don't quantify at numbers can months. loan last would the X/X Quite be the that -- in but XX the know would guess least my growth on I I a bit. overall I of new

to hires new successful hires great the they've and added been and new what potential the there forward we've we're looking So two -- just is. been and it's very they've

Operator

And closing showing like call further I the over now for back questions. no to I Gibson turn am would to remarks. Lee

Lee Gibson

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

Operator

today's participating. you concludes for conference Thank This call.

now You may disconnect.

Southside Bancshares (SBSI) 25 Jul 222022 Q2 Earnings call transcript