Earnings call transcript Q1 2023

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Southside Bancshares, Incorporated First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

would turn I to conference time, Ms. this like the to over At President Investor Bailes, of Lindsey Vice Relations. Ms. begin. please Bailes,

Lindsey Bailes

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

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

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

First, Lee overview quarter will will of share then an the his comments give and on our results. financial Julie

the I turn call will to Lee. now over

Lee Gibson

net of X.XX%, a Bancshares' on metrics. quarter to equity Good morning, of for welcome $X.XX, average everyone, and million, assets average on quality earnings first of and strong earnings per of XX.XX% a income continued $XX we return share XXXX. common tangible Southside reported return call This morning, asset

basis, was to close linked anticipated and closing expected now a was less delays first the quarter loan second to payoffs. This anticipated. quarter a in quarter due On originally loan than our few growth

we for loan opportunities our our requiring digits. That standards. Because healthy due budgeting leverage pipeline, lost growth in and loan the the advances second underwriting construction we loans change during competitors. markets we projected also no said, than funding the tested we still overall anticipate for to quarter our serve, plans are the high-single have credit underwriting During XXXX lower we to quarter, time loan our of

both in required Pricing for point U.S. accounted largely margin. basis adjust financial for from pricing us our than to institutions interest net Bills more originally and decrease Increased competition Treasury competition our XX anticipated. deposits the

measures enhance there. increasing additional spread cash maintaining to a as in already implemented at Fed solid liquidity unfolded, Fed by availability at securities small and the banking our pledging additional position very further uncertainty at we Additionally, industry very

re-priced enhance new margin had as of to an utilized program, our our without the Fed's interest one-year to X.XX% of Solely profile, [debt] $XXX repaid rate average yesterday, term at risk be will obtained of funding net penalty. can we term as bank at million for interest rate and time continue anticipate We or deposits remains the pressured discretion any competition high. and be funding

events XX% deposits, prior continue Our to X.X% a swaps public offset decreased swaps to potential fair occurred portion brokered deposits quarter, and the value to of portion quarter of which quarter our banking interest our $XXX March. hedge the reduction early rate lower net half cost and of industry fund a of margin in Over compression. provide of the the during of changing result Linked deposits. brokered in linked a resulting brokered from a deposits million to funding in total fed borrowings swap decline in was deposits

Given are the of as out that of to March collateralized. insured recent FDIC fully XX.X% banking events, I XXXX, deposits, point our think our it's XX, important

only the deposit balance addition, of base granular In $XX,XXX. our account is average

markets chances that of remain on keeping recession, are as continue more report a watchful to are the forecast increasing we While grow. we economy and we eye to the a glad economists healthy serve

Julie. and your forward now remarks, the answering I following I over call Julie's will to turn look to questions

Julie Shamburger

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

for decrease income X.X%, million or by solid by partially decreased per $X.XX of a or in $X.XX, a common We of offset by with earnings diluted of million to interest linked report quarter. share start losses. net to credit decrease pleased are in net driven XXXX a $X.X and Net income, $XX first X.X% provision quarter a income decrease

Southside balance deposit March, banking disclosures showed our overall granularity in earnings the in of we occurring below our average events of $XX,XXX exclusion We release, are XX.X% of the included which collateralized insurance with additional an funds, public as light with in industry XX In of deposits. which levels. the fully deposits estimate of since several insured well owned March an of FDIC base

swaps March to of deposits prior primarily was million half to deposits our in flow X.X% as basis. transitioned The more of on $XXX.X large funding customer occurring mentioned funding quarter remaining percentage $XXX.X advantageous was of sources. of decrease as earnings a due to decrease Over outflow Deposits non-maturity linked the of million a some our our to the related in or release. with brokered decreased hedge we cash deposits

a of total loans XX, decrease primarily approximately $X.X assets debt an average Our to of metrics accounting of loan during non-performing weighted portfolio We remained around quarter $X.X was of this the and troubled strong quarter, new X.XX% the funded the and the quality with reported quarter, assets rate linked million X.XX%. measurement recognition at consistent quarter restructures. linked $X.XX adoption billion March million pronouncement of of at related or asset

slight as a X.XX%, compared X.XX% a total December of losses loan for loans allowance our on XX, percentage March decrease XX. to At was

allowance decreased linked credit the $XXX,XXX Our for for losses quarter.

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

Our a quarter securities portfolio linked increased $XXX.X million or basis. X.X% on

quarter by purchases of of The driven three sales by was month securities. AFS partially offset increase treasury first bills

transfers offset net net than The in was loss securities At last equity which resulted $X.X $XX.X quarter, $XX.X to no during securities the loss million. AFS AFS more of of compared decrease had AFS March a There the of sales a of portfolio XX, in a million. $X.X realized of of a of the the by million securities million unrealized were resulted securities net quarter. sale $XX we first gain that in million,

portfolio. approximately unrealized losses million, unrealized was on the in AFS of securities the XX, partially the March securities $X.X offsetting hedged gain the As

portfolio XX, of the the X.X X.X was March years. securities portfolio duration As the was in duration AFS and entire of the years,

slightly Our mix XX% and shifted XX. securities respectively XX%, to XX% December of XX% and to compared loans in at

well adequacy Our available capitalized capital thresholds. liquidity of capital Liquidity capital ratios as remain $X.X March ratios XX. lines with and solid the strong resources well with remain billion in all above

the end XX, April XXX,XXX purchased average quarter, of we stock $XX.XX. XXX,XXX of per at have shares purchased an we an through price our common and price average During shares Since $XX.XX. at share of first quarter

equivalent decreased from to average tax the average margin net period on by X.XX, liabilities to X.XX on earning down Our offset and by The from yield quarter basis linked equivalent driven basis X.XX. the balance yield partially X.XX increase the XX for the interest-bearing points on interest tax decreased average by in same an assets. net spread a

ended linked the $X.X decreased XX, income compared million X.X% net three For quarter. the months interest to March or

to net accretion benefits increased quarter. Non-interest the realized gain BOLI $XXX,XXX in equity securities was sales securities recorded quarter. $XX,XXX quarter. loan death the this X.X% and for increase the The in We of the $XXX,XXX income also purchase or AFS on excluding by first of income, the driven related linked

related prior For from million primarily the period, was same in benefits. or of an three-month salaries non-interest the X.X%, quarter million, employee and an $X.X increase expense increase to $XX.X

For XXXX, we have quarter. non-interest budgeted each approximately in $XX.X expense million

efficiency to decrease Our March driven fully December as of expense. of XX.XX% and from interest in taxable as equivalent XX non-interest XX.XX% increased increase income the in ratio XX, net by

to with XX. the million increased December months expense compared for tax $X.X ended million Income $X.X three

we from XX.X% this tax tax of to effective rate for time, estimate rate XXXX. first in the an the increased effective quarter. XX.X% previous annual for Our quarter XX.X% At

Thank will we your for you open questions. the our line for joining us and today. This comments concludes

Operator

or Brett first from is line question Our [Operator Rabatin, your Group. Hovde Rabatin comes Mr. open. comment from of the line Instructions]

Brett Rabatin

morning, Good Hey. everyone.

Lee Gibson

morning. Good

Brett Rabatin

just just perspective? a back to the – over obviously book the yield on can you from on securities and reduced yield the during with go securities on talk the that Wanted from linked just does first we movements. then bought that the sold ask, what What matriculation and you be duration portfolio? quarter portfolio quarter, might the here Can you

Lee Gibson

sold and terms some T-bills purchased. it then And municipal we was primarily We largely securities Okay. securities. that mortgage-backed purchases, the of in

in duration, the think to mentioned. were of the we didn't that look swaps, include Julie fair that take that in a at when if duration our duration I calculation we But we have to also we look and four it value look that at – under fair real four risk include place, that a it we drops and take I that the X%, just not – the value at with years swaps years. duration mean X%

roll-off to $XXX And but off. things we'll obviously quarter, million. not then have additional the forward, will be roll-off, substantial approximately to this going roll nature is in going So so that's that's some going T-bills what

Brett Rabatin

Okay.

Lee Gibson

income thing also that the out point then one one – now right overall little interest the income. I over But securities swaps a to want to million value net and the in adding fair a $X are that

Brett Rabatin

some Okay. And then deposit funding pretty just well. how curious The for an you from folks here. levels. think from expecting I'm the current managed costs But any been the outlook are uptick. about have betas margin maybe

margin from the how Just feel levels? curious, about Julie, you XQ

Lee Gibson

pressured. I was think, the in think early banks occurred the to it's pretty closures already events as March with intensified of Competition in to deposits that then said, couple I continue first even with for the going intense a that I of quarter. further. And be

expect at change would be to don't remain time. deposits and for soon we and we competition that So proposition intense expect growing expensive to deposits very in anytime this an point

Brett Rabatin

you what nature, how from that and Okay. entails, others in a just apologize, but single-digit what there And guidance. there's loan comes think just pull that quite full-year. I I able what an here had, as question Lee, was the back then might high if market guidance you the for maybe maybe maybe mentioned wasn't get growth was, wanted you stuff or underwriting the I to other on you have a you I so to or be understood that back – of missing you'll impact the sure that's color were you get function terms I that don't, credit If little on make some like out if due I on your But better about sure have that. standards, then misunderstood to to versus just stringent loan may want feel talked credit? to that's And you of deals you that. get

Lee Gibson

It's little quarter it We're – that loan in just rate really unusual a driven. in was hadn't come was we usually still seen into requirements play this that deals. turn winning leverage

leverage. and we're we gave entire competition when see still of leverage at single-digit you of required high was that and we're the for I at XXXX, know based XXXX did, that guidance, the on pipeline loan did lower that some This anticipating based quarter concerned entire of look the the look But end of year than XXXX what deals we still growth the today our when for and lose year we on loans a XXXX. never we end anticipating you we're

Brett Rabatin

all Okay. color. Great. the Appreciate

Operator

Thank you.

Brady is next Standby. Mr. Gailey, the comment open. or Gailey line from KBW. of from comes Our line question your

Brady Gailey

morning, Good guys. you. Thank Hey.

Lee Gibson

Brady. morning, Good

Julie Shamburger

morning. Good

Brady Gailey

think you that fairly single-digit quarter loan could downside growth? low was growth? high more what unique deposit that? ratio How see But about all growth, deposit So you first there deposits? loan about deposit about know know, at to I XX%. are a I do is Is you mean, thinking quarter. your I

have you are deposits. So room definitely But there. about you how thinking

Lee Gibson

deposit don't anticipate. challenging. anticipate personal think is going My growth opinion to we – We I do mean, be I is

the are have that one second of bond We be public to contract about going receiving expecting in quarter under depositories million. the proceeds we of is fund the $XXX

in those a the we're during we're receive to based willing in win is more terms will I there. quarter. betas. out on be now think of brokered net deposits to what we just and net pay of deposit than for public But now remaining paying of even Unless of the deposits, static deposits deposits, right terms funds competition So going

really looking the I currently that kind at have. looking we're not making able So – And that substantial I'm for retain sure growth. deposits we wouldn't to I'm of

Brady Gailey

to we buyback expect balance sheet has to know I active? the that now? it any there be continue to But right. share very April, your should been safe into repurchase of And that so other program. should but the seen paused plenty I then active know guys companies and way Is capital. have in expect Southside buyback future? we for far have you in remains continue All the the we've a pretty

Lee Gibson

many Julie, we have do how left? shares

Julie Shamburger

XXX left. got we I think

Lee Gibson

shares. Julie on number the checking is of

could safe it's of where we have price say think the are, as anticipate – doing. I shares based said, we we I have don't that what about any XXX,XXX the we're Julie around changes to shares that on in purchase. that left

that, opine ready additional authorize after on we'll not whether that. I'm Now to repurchase

Brady Gailey

have been that And end March that the far that is of in or authorization, as the XXX,XXX incorporate of left that so that’s does the shares in repurchased April?

Lee Gibson

have shares been That incorporates in the repurchased April. so far that

Brady Gailey

Okay. color. Great. All you right. Thank the for

Lee Gibson

All right. Thank you.

Operator

Mr. from Olney, Mr. [Operator next question now Instructions] the comment Olney from your Stephens. is Our line open. or line comes of Matt

Matt Olney

morning. Good

around… commentary additional some for looking Just

Lee Gibson

Good morning, Matt.

Matt Olney

On yields some the the you're what putting far morning. average balance sheet? Good as of of that loan seeing you're on as some just growth, the

Lee Gibson

quarter yield that the Yes. was first average the in Julie, stated XXX.

right assume seen maybe somewhere with quarter. X%, would second in and I the likely debt we've increases, be So that X% around will the slight X.XX% between

Matt Olney

then, Okay. press what have release maybe or you didn't March Do I as position see And the is it. and the AOCI I position in the missed just of unrealized XX?

Lee Gibson

is grabbing Julie Yes. that.

Julie Shamburger

was believe earnings in as the equity think, I It million. a I just total XXX.X Yes, stated release. is

Matt Olney

okay. Oh, provided, that was Is AOCI number of as March you And was, that one that the which XX? that? position

Julie Shamburger

million. XXX.X Yes.

Matt Olney

it. Got

Okay, Thanks great. everybody.

Lee Gibson

All right. Thank you.

Operator

no to in to time. Mr. Gibson, Lee this at questions turn Thank and queue additional back you. over I'd the sure conference like CEO. President I'm the

Lee Gibson

about in excited Southside to call again. today. our during We to for quarter the In our results opportunity for and your July. the look Thank along you to we of interest remainder with prospects closing, questions answer earnings you appreciate you, remain your XXXX, Bancshares. next second forward reporting Thank us in everyone, joining

Operator

thank and conference. today's gentlemen, for participating Ladies This you the in concludes presentation.

disconnect. may have You now a day. wonderful Everyone

Southside Bancshares (SBSI) 25 Apr 232023 Q1 Earnings call transcript