- Earnings call transcript Q3 2022

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Operator

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

Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question and session. now for hand Risk today, would to conference Officer. I speaker your Suni Instructions] like the to over [Operator Davis, Chief

You may begin.

Suni Davis

Southside call will (ph). and posted on Earnings [Tuwanda] morning, Investor be A Bancshares Relations. under to call. today's you, XXXX Third of Thank transcript southside.com Quarter Good welcome everyone

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

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

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

Lee Gibson

with partially loans, securities, in XX on basis reflected interest increase in in efforts, by possible. a XXXX. on Southside contributions average the liabilities. quarter and interest per third the margin equity for net Bancshares' PPP, loan average thank a everyone, point of entire asset The X our of in our for morning, this quarter continued increase XX.XX%, team reported their financial We're Southside annualized yield earnings our to XX.XX% This which return XXXX. ratio yield want a rate net in basis point points and growth average strong increase these increase XX Highlights common results welcome include, and XX linked loan growth share call quarter linked to during of quarter. quarter basis the average excellent for point we the morning made interest-bearing tangible metrics. our basis quarter $X.XX, continued a increase offset solid third XX.X% results on the I extremely and earnings for pleased of efficiency on continued of margin quality net of quarter linked the Good

earnings be term call of potential quarter the only longer remaining that second with on could that prior our $XX we second refinance the occurred term pay-off discussed quarter $XX to That short third possibility pay-off in a million During growth $XX July, was actually our the and loan million. during million quarter year-end.

are pipeline remains the loan XXXX. about solid, the loan Our and fourth we prospects encouraged and for growth beginning quarter

In addition, several as loans in quarters increasing, to construction are beginning are we now seeing advances that portfolio closed ago fund. our

Given we loans net the for outlook estimate XXXX continue PPP for loan serve, of we mid-teens. the the growth markets to in

interest levels. date remain existing for as to hedged this solid, markets states. and thirds our sale the approximately continued some par the and available other the with two combined robust from expansions, hedged call value migration overall result population higher company the in moving volatility. The securities the to rates market, bolstered we highly pre-pandemic economic are During Rising increased, conditions company additional our date. have AFS out take Currently, the municipal rates closer of securities single-family continued of municipal call by a costs quarter to of the to market steam of amount reduce to continued growth, relocations of fair mortgage

exist continued in Texas markets. several to However, shortages housing

forward in Julie's what successfully will questions remarks. we be state which our to now We country I continue model your business call execute to And to Julie. best operate. following in answering to and the on the the turn consider look over to I

Julie Shamburger

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

$X.XX share diluted quarter. $X.XX, earnings report per of third income We of basis a pleased increase of increase an $XX to a quarter linked quarter net million, $X.X on common linked are million and

strong growth The Our net linked of in loans. primarily real million loan $X.X our PPP increase quarter, billion $X.XX within decrease by to estate increased loan portfolio was $XXX.X portfolio. million driven

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

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

experience assets of assets with X.XX% at strong total We September nonperforming last continue to XX of with million asset quarter. or metrics $XX.X consistent quality

September by ended offset $XXX,XXX. for losses increased loss months to three third of loan the quarter, in for on the due credit the allowance million net of recorded XX, charge-offs provision For loans partially our $X.X

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

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

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

by X.X% driven was of principal a in basis. and quarter losses or portfolio. increase on unrealized portfolio The securities $XXX.X payments Our linked million sales in the the securities, decreased decrease

compared AFS At a additional securities securities $XXX.X net available XX, securities of million. quarter. quarter, on additional net the AFS of transferred AFS losses $XX.X of $XX values the the increase last unrealized to HTM for $XX,XXX transferred we of $XXX.X loss During we end, in $XX.X during the quarter quarter, of with and million to with September values an million portfolio third fair million had subsequent sale to fair we of million. We sale additional healthy securities maturity recognized to

As And securities the offsetting hedge September mentioned we unrealized the $XX remarks, securities AFS the AFS his portfolio. Lee on gain approximately in million, the during securities. losses unrealized partially of was the quarter, additional third XX, in hedged additional as municipal

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

a portfolio, decrease XX% quarter the due of a mix decrease securities in loan total with and XX% XX in the and was combined loans to securities in basis, to securities. portfolio on Our linked loans compared in respectively, sum of a growth XX%, XX% September at and the

basis. linked linked deposits $XX.X in decrease in $XX.X an or quarter million. by Our increase of consisted on non-interest decreased of bearing decrease X.X% offset a The deposits interest deposits bearing million, of in partially $XX.X a quarter million deposits

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

$XXX,XXX We this purchased quarter. accretion also recorded in loan

For securities by income the three $XXX,XXX months services linked loss income for decreased or ended decreases net the September and services was the of non-interest XX, AFS excluding in quarter. X% on sale primarily driven income. deposit brokerage decrease XXXX, The

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

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

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

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

Operator

with Instructions] Sandler. Brad comes question first the Thank you. line [Operator of Our from Piper Milsaps

is open. line Your

Brad Milsaps

afternoon good Hey,

Lee Gibson

Brad. Hey,

Julie Shamburger

Hello.

Brad Milsaps

where closer $X.X the billion at a end, fair and is taking quarter I is may the Lee, to presented was the you for help the period the size me have little of questions. were the for understand quarter. my I averages at billion. know were headed? value for other Thanks maybe kind the $X.X bond cost. they think one I portfolio Do overestimated, of over presented maybe versus

So you wanted a movement to quarter. lot the had I of just make sure, in

of portfolio So bond mind? feel help your quarters the the several next way can in kind which kind of over get me headed average a directionally is you for

Lee Gibson

the we I going we Brad, indicated were increase portfolio. securities to think,

may would I say average $XX million there re-invest So It a way point that vary the one is or somewhere another, but that. roll-off this close in should opportunities to stay to time. at good some

for that we're long look So I having. the loan of change as continue to growth as I that, a really but some major anticipate have don't doing we

Brad Milsaps

Thank quarter Got for it. this think And then, I that. -- you

Lee Gibson

the the average, earnings average -- Brad, when about talk talk page looking XX on of we balances when I'm -- back at balance about And release. the we

Brad Milsaps

Okay.

Lee Gibson

Not the million For sorry. let which million is $X.X -- months, I'm $XX at $X.X right. September three $XX get million, me Friday billion, XX, the numbers --

Brad Milsaps

Yeah. Okay.

So the with difference, ended you the just under $X.X mean billion. I quarter

So bonds make some same but we loss, -- the the as some want it well, of you average sold like feels it on sure is down obviously should but should feel that [indiscernible] come page. like just to the are

Lee Gibson

Right.

Brad Milsaps

Okay.

Lee Gibson

million And we did sell in only was $XX it bonds. million, maybe but $XX some bonds,

Brad Milsaps

Okay.

Lee Gibson

is Julie at think, me. looking I

Julie Shamburger

Speakers] [Multiple

Brad Milsaps

Speakers] [Multiple

Lee Gibson

Okay.

Brad Milsaps

about loan but maybe look seemed, a around correctly, little this you like how governor wanted saw just could I does mix you I that with like the thinking you on where But new sounds betas? for was XXX to [XXX] third move a kind your of do putting loans quarter 'XXs something the loan rates if It kind yield It continue mid (ph) have kind bit to on been pace relative which yields a a curious, similar at expect at up are, little just of put maybe quarter. to Yeah. new just beta of or to as are the of loan did low, of you're quarter. in that, ask kind heard loan maybe

Lee Gibson

Right.

I think overnight labor days, on on flow for of that average because the went loan those the for take that put or fed similar XX consideration something some in and at every maybe increases. yield we're fourth a either those into quarter at skewed bit, little didn't they time July looking

if the be at we So floating probably higher. rates, real real we and -- average the may took the little looked a bit rate it

Brad Milsaps

it. it. Got Got

Okay.

Lee Gibson

sense? makes that Does

Brad Milsaps

the understand. kind totally yeah, of skewed Obviously, by mix, Yeah.

hop I'll you queue. And answering for in Great. my Okay. thank questions. back

Lee Gibson

Okay.

Operator

for standby you. question. Thank Please next our

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

Your line is open.

Brady Gailey

you. Good guys. Thank morning, Hey.

Julie Shamburger

morning. Good

Lee Gibson

you are how doing? Brady,

Brady Gailey

All right.

So, XX% will quarter if loan year. this hit guidance quarter, XX% around quarter mid-teens I for linked the this at put annualized you next that growth

about is loan single-digit far growth, level? is down to but something maybe How about we economy do the So the step next in next is a in think how year? growth the outlook are thinking to high about loan as I you the it right what going are know in uncertain as thinking year?

Lee Gibson

that. I it's what for feel year. this better was would be a surprised have We'll if it

single better little quarter is So we'll double out the or think we'll loans how low to something that's either progresses I digits land, as idea feel further, going high that's these have really for a then a maybe better but digits fund. this probably a and pipeline on and getting looking at are there construction that where

Brady Gailey

Okay, about And for a right. that compensation XQ step-down $X million any expenses mostly And that's guidance the XX.X%, then you all on that? line? Is of can for provide in XQ. color the from

Julie Shamburger

health last more was around was Yeah. under do health that year's are obviously health benefits importantly year-to-date. anything, in employee and we but increase last mean, on self-insured, million $X.XX mean, On of under can the under of I course, I largest budget. year-to-date two-thirds and salaries, year's we're expense. also expense we're we increase of claims are and

So not budgeted. Brady, that what's that's could happen again, but

and $XXX the we keeping that then part for think professional quarter I with me up related So million that for there that's of really we it legal. fees reason had and it least fees third $XXX in at about a million that least I professional the worked were where to some of project on in specifically increase -- had at

And so, that will not occur again.

is that budget XX.X%. for So the

moment. that. it, doing don't reason but have I to for my at a tempted increase basis the I so that really So for was was

Lee Gibson

it not decided that. suit forward like move [indiscernible] on wasn't anything or a to it, Yeah. law

Brady Gailey

for right, guys. thanks Okay. great, All the color

Lee Gibson

right. All

Operator

to you. Lee queue. I Thank further in like for showing would to I'm turn closing now no remarks. the back over questions Gibson the call

Lee Gibson

to Southside in today. you interest call reporting the opportunity for and prospects joining questions our we're in for results January. next look you. about you closing, the Thank quarter, and In forward fourth This us your the appreciate your answer the excited during to to those Thank call. concludes Bancshares. We earnings

Operator

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

Southside Bancshares (SBSI) 25 Oct 222022 Q3 Earnings call transcript