SBSI - Earnings call 4 2023 | Southside Bancshares, Inc.

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Operator

Thank you for standing by, and welcome to Southside Bancshares' Fourth Quarter and Year-end 2023 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to VP, Investor Relations, Lindsay Bailes. Please go ahead.

Lindsey Bailes

Thank you, Latif. Good morning, everyone, and welcome to Southside Bancshares' Fourth Quarter and Year-end 2023 Earnings Call. call posted today's Investor southside.com of Relations. transcript will on be under A

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

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

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

Lee Gibson

Lindsay. on Thank earnings quarter million, Southside Call. tangible XX.X% of average net and strong morning, This you, Fourth Earnings return $XX.X of per Good common quality to equity share everyone, and Year-end metrics. continued fourth income and Bancshares' of welcome morning, $X.XX asset reported we a Quarter and

securities impacted U.S. During a portion share to the securities largely a by restructuring $X.XX premium The loans. reinvested $XXX proceeds AFS loss with were securities. mortgage-backed of the by income quarter, a per net reinvested million or million in of XX% due portfolio in fourth of approximately lower-yielding agency selling approximately was $XX.X of

than estimated the estimated. income and in income, net increase X-year payback originally interest margin net a net the basis of The interest less increased X is loss. restructuring points our to quarter, million Linked resulting interest $X.X only declined

margin is to are restructuring the -- slowly we during of believe Given at higher XXXX. the interest securities the net should move bottom the near and begin portfolio,

our We excellent loan with ended $XXX.X we loans or to growth, estimate. X.X%. increasing X.X% experience quarter, with year growth continued Linked slightly exceeding loan the million

following grow remain continue budgeting The Julie's loan over currently remarks. growth. now I the questions will to markets call X% to to we well. healthy serve turn For perform forward your Julie. look XXXX, I answering we are and and for

Julie Shamburger

income income call. on with in $XX.X $X.XX, a ended common you, everyone, September net fourth fourth the $X.XX million share quarter, quarter Lee. million, year-end our linked-quarter of net and basis reported of of decrease $X.X of to and $X.XX per decrease we diluted compared a morning, of to XX. earnings $XX.X the and We diluted earnings of share Thank Good per million a year welcome for

XXXX, construction primarily $XXX.X or loans loan commercial had For we million million $XXX.X The loans. growth in real million X.X%. $XXX.X was increases of and growth of by driven estate in

the loans and of rate construction by For quarter quarter, approximately quarter of or on estate driven average funded $XXX.X in fourth X.X% during X%. million. commercial growth increases real The $XX.X million was the loan $XX.X of we linked loans interest had million loans of

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

quarter. $XX.X linked by to fourth million. provision Our off-balance for during loss by increase credit loss in a $X driven $X.X The sheet million increased for the of was the quarter the exposures by allowance The loan on quarter. for provision the and loan for a $XX,XXX increase fourth credit of primarily was driven loans provision losses million

total linked-quarter remained as X.XX% nonperforming total of percentage December $X December a of allowance metrics of with was strong our on on or losses quality loan X.XX% Asset XX, assets consistent loans for On a assets million XX. basis.

into lesser late Our drop to sales December by X.X% into proceeds treasury portfolio related rates securities higher-yielding AFS a reinvestment of a to basis, or of securities to extent, $XX.X driven opportunities decreased primarily linked-quarter and a in strategic on loans. million and due in securities

XX. the fourth ended quarter or resulted year of The loss during December in realized net were sales of $XX.X AFS securities million. transfers a There no for the

primarily last quarter, in a of the of to lesser $XXX.X As million, $XX.X million compared the to the lower and portfolio $XXX decrease XX, had securities. a sale unrealized securities of AFS securities portfolio extent, interest net municipal December due million to we of in rates loss a

XX, million the unrealized linked interest the million portfolio. the also the hedges on $XX.X the gain quarter driven As was $XX.X of This unrealized lower fair AFS December gain partially rates. losses securities value on by to securities offset unrealized compared in municipal approximately

September a on of AOCI loss XX, net $XXX Our December $XXX.X compared million net XXXX, of to was million loss a XXXX. on XX,

retirement net loss plans. $XX.X swap of of our derivatives to related and million was on million net $XX.X comprised and securities The losses our

X XX%, in September mix the respectively, and of slightly to of was the As portfolio XX% XX. quarter and from and compared years loans X.X respectively, XX% X.X of A duration and the decrease XX% on duration total securities At portfolio at XX. to X.X years. December the and our securities years, AFS years XX, was end, September increased

Deposits increased linked-quarter in $XXX.X of million X.X% public on $XXX.X or of driven increase basis, by million. $XX.X an a million deposits fund primarily in deposits brokered

remained above resources capital the billion with XX. Our threshold. liquidity December and capital available strong of well with Liquidity ratios in well-capitalized adequacy all ratios as solid lines $X.X remained capital

an plan. During stock $XX.XX shares of average the at we XXX,XXX pursuant of to fourth purchased our price common quarter, stock repurchase

repurchased have the the end not shares of year. since We any

equivalent equivalent tax net for the X.XX%. X.XX%, to by $X.XX net period X interest X.XX%. to points Our on points from margin linked-quarter The interest a basis same spread X decreased from basis down basis tax decreased

$XX.X fourth budgeted approximately X.X% net expense for purchase Noninterest million loss BOLI $XX,XXX. income XX, a XX% XXXX, net December $X.X $X.X for sales ended $X.X increase linked-quarter in excluding income, basis noninterest to primarily we million compared have recorded increased quarter. interest or of quarter quarter. linked quarter accretion million, increased $XX.X million months $XXX,XXX the the expense loan or due was on the million income the linked securities X for to on in to the each the AFS this the decreased The quarter. For Noninterest in of

effective the annual decreased XXXX. effective of rate tax decreased from decreased Income the fourth taxable fully to in XX.XX% for ratio September of quarter an down previous estimate to XX.X% the million XX.XX% our XX tax expense Our We quarter. $XXX,XXX during from rate efficiency equivalent XX. as and from XX.X% quarter, of as for currently tax XX% $X.X We December third

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

Operator

Instructions] Sandler. Our comes from Dick line question of the first of Graham Piper [Operator

Graham Dick

loan wanted growth. to start just I on

Another for it solid are now quarter the to right seen your you guys. about Relative markets How for to what peers. new into thinking we've as you what maybe hires. offering are versus potential also some XXXX from growth relates

for I the XXXX. back think seen we've of line you -- expecting can generally, give or with about the last an half maybe more what trajectory Just in the idea less would be you're it over

Lee Gibson

we're XXXX. Graham, throughout growth X% now, projecting loan Right

a Some may rates of quite But of interest to feel they a able do have, to bit. X%, for are, estimate. Obviously, we'll update even rates. with say, right markets good loans we with be that's year, place now, things on us right going we like the if the some that make. we rates to now. these we be see dependent interest where If budget the Then healthy change interest decrease during

Graham Dick

it. thoughts it initially just some you view, you when can Lee, guess, Got you you it, as on securities your viewed on quarter, transaction this the how I I how did it? of run or through guess, appealing And attractive then,

Lee Gibson

$X.X basically, our push. where rates sales. to that's sold of some our million really mortgage-backed pretty ended that the unwound million swaps of took municipal the rate security mortgage-backed gain interest When then loss million securities swaps we We securities out and and were increased about and lower on our Yes. the of as $XXX net loss came about being come on we a sold much that we gave because with during us down on fourth we another rate in $XX,XXX,XXX quarter, long-term ended municipals a the up a able value. of at $XXX look the at we And up

rate come out making we we basis overall things were So and of million swaps that $XXX the basically, points. the to XXX were yield the even the increase on on about with able

Graham Dick

you seems guess. wait trade. like I have kind there certain Or rates where it Is like get do you're rates going, that to are that have do of might call looking on good clear right to on more Or you anything a you now? going? be else some Yes, think a this

Lee Gibson

this down But further move additional aren't the anything in movement portfolio, We at we think long-term securities here. further right in at looking really would any rates point, at change from we terms take that. of don't. should I look certainly interest rates a now,

guess on I terms pretty is on interest guess. In of begin going Fed if lower rates. biggest to The and is when the forecast much to anybody's guess, rates,

that of anticipation is that first already come than thought that make if is to they in it summer closer they've Long-term some of rates, move. decline. March down probably Our it's

Graham Dick

Yes.

down but I I a just lastly guess point hear. Okay. this may basis X then a quarter, of points clarification, think expecting the Good the there's you I rest if only more than last to better of I I I be number if to the And more something I to pressure for margin? on surprised and margin, Or to it's wanted analyst was X.XX% referenced, industry. you there's guess, just that a there basically hear quarter. flattish come, remember allow think, lot

Lee Gibson

Yes.

quarter the quarter, quarter, pressure sure to have, to anticipated. last kind deposit the the to loan loan but up continuing when probably growth I mean we that weren't one see going deposit with didn't -- and X.XX%. being were get stronger time, And we a what the during the think was ended I we it could remained of than we pressure question growth little were down at in

little the back restructuring, the a December. And in then gave with in December, us half lift that primarily of occurring

either restructuring loan we be during So we dropped we at to see I we're it with point the like growth only did But feel basis the or at up why NIM that's move XXXX. this the and should surprise near had, that points. able me X bottom that the and

Graham Dick

right cuts, the that XXXX does the assume some predicting now, maybe as some point as I year, And not at Okay. many include some markets increase this rate NIM starting in right? but in

Lee Gibson

one It's we're And June the we're first now, Yes. for X. December. budgeting anybody's Right budgeting guess. in is one for last in

cuts X one So certainly I going help only not but it the dramatically. it December. it's rate hurt, in to NIM don't -- won't really would list

Graham Dick

right. All it appreciate I guys.

Operator

the Our line of KBW. [Operator comes Setley question next from of Mark Instructions]

Unknown Analyst

guess expenses, to So clarify I on I you heard just correctly. that

of sort 'XX that I'm XXXX. implementation in wondering with stuff million really a quarterly So sort looking baked to lot growth like at in rate into going of technology run what's 'XX. the of and drive $X

Julie Shamburger

buildings. additional and biggest is as technologies for driving -- our in Mark. be well. locations salaries and for into our we X benefits. we then thing that of combining there be then one Yes, to little of $X XXXX million did the probably one going bit And number have that software budgeted markets we're about that And of The a million is $X smaller disposing over employee built is additional

And some we so for budgeted loss there.

So those the X items. largest are

can and guess still, of -- still at the there. the But spend I technology, software -- more looking are one bigger we

Unknown Analyst

Got it. was term, And balance here? that for That's sheet playing restructuring year-end the I helpful. what's mix you like more sort of by assets of of sitting the just But the said goal you then shifting just XX%. balance kind of think out at, longer maybe from and wondering sheet, possibly your I and the wondering XX%, how securities currently a anticipate

Lee Gibson

all impacting at the into par, flexibility put sell so at shift think net As portfolio of the a least least -- we them all securities they're those have or securities gives purchased probably the we of in total that that with securities if to them restructuring loans. lot gain to at and P&L the without of now, we all a I the us in they're the well, want are -- right --

loan And on growth higher if than a up into loans. we're that those is likely that securities. the keep what loan to growth, put not, securities If deposit we is. growth loss some we'll keep of can If those and will and be able no with anticipating then depends sell literal and growth of margin what greater lot deposit with

in see So loan -- see ideally, to how more mix loans we to moves. the that we're going that we'll and -- to move XXXX, securities less with growth expect much

I and don't few really be a points but in in probably loans basis securities. either know, -- up in it down would in

Unknown Analyst

buybacks as slowing Got maybe up? of yourself core what's one that I And outlook sort the more. not capital you see guess used until on Do XXXX? of just authorization it. current the far still for as your is sort down And your

Lee Gibson

probably I for that. be they're to pull think at is if market there what from If back buy, the levels, look we'll we're times in opportunistic certain going we'll stock the is buying. to

in price the buy fourth think was range. I average the our $XX quarter somewhere in

Julie Shamburger

went that -- the late of in Most Well, it October. early. all through October, happened

Lee Gibson

if times buy -- we for stock. be aren't buyback there have us. So available we'll are looking But that to any for hopefully, opportunistic there

Unknown Analyst

Got it. makes sense. That

Operator

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

Matt Olney

Just some a few here from questions. previous follow-ups

growth more Or color loans you loan looks continue 'XX like growth build here? some Any healthy the the to book? clip. it construction a On front, see peaked? still construction pretty that more in Has in

Lee Gibson

see equity originated to during that primarily construction 'XX they're looking we these for advances XX% in many we'll more just But and point not XX% late 'XX. gone We're are now they're loans think that some and as I draws. in 'XX in in growth time. and this new in then early seeing loans at has that where

And that that's what's really this point. creating at

Matt Olney

is lean kind this concentrations residential of construction more by And it market? on me And remind any commercial? or book,

Lee Gibson

and be well largest maybe huge market. The extent, warehouse the X little to by really multifamily, And a think and It's between DFW, Houston a concentrations. they're pretty market. primarily would there's lesser don't concentration homebuilding Austin I split the

Matt Olney

Appreciate the recent some as details. yields? -- yields loan the growth Okay. color what those are on And as loan of those any then new far

Julie Shamburger

for all on X%. loans. the mean, I quarter The average was

Matt Olney

renewed that's some yield. -- a kind that and right? I And assume new of Is

Lee Gibson

is That correct.

Matt Olney

I'm that. I missed sorry,

Lee Gibson

Yes, That is correct.

Matt Olney

going And far a lots to as you gave securities of ago. then was good sold. us there back details Perfect. few what Okay. restructure, minutes as the

anything Do think that view? was some of what missed details you maybe about I have in purchased that point I restructure. from

Lee Gibson

from doing into loans, doing if working. loans. need just premium Freddie go good and securities we're get we a do went Fannie But securities move the potential that and about P&L point. that We the proceeds of the to go agency those and to position the had anticipation proceeds we of Sure. this of those we wanted sale into what higher-yielding of sale to a rates and get overall something U.S. XX% and those feel of money and like now, out to and mortgage-backed securities, the XX% mortgage-backed right ahead gain went About they're said and into with loans, ahead impacting without in on at doing the wanted

Matt Olney

And Okay. on some the yields were what of you purchased? that securities the

Lee Gibson

the over They Fannie yield and Freddie were and average was little a X%.

Matt Olney

in earlier then comments your the And helpful. all around margin. That's Okay.

better feeling you're deposit that the cost mentioned You pressure. about

can more here that you are kind recently Any to wanted Just comment. flying on out far how much as of as focus of peak and we'll seeing what you have more kind you're color provide shortly. costs conviction that and deposit

Lee Gibson

to until don't any I feel time. restructuring loan then the continue and help the -- with that like pressure the and going is benefit I at securities we -- out. point they've to they're expect starts Fed I the offset portfolio, growth going with associated that increasing. increase, in this expect further with don't at expect to cutting deposit been but pace I don't And flatten well, to increase the think to the them

the XX isn't most lifting but after continue, is forward us, But be of do deposit the interest-bearing likely but pressure even points some to expect off going heavy to basis going non-maturity of of there's pressure behind deposits. still to first the some rate take we

Matt Olney

Okay. Perfect.

Operator

Thank for back remarks. over you. the Gibson I closing Sir? conference like now to to would turn Lee

Lee Gibson

earnings your opportunity questions looking today. along XXXX we're next April. in during right. our us to during again. Bancshares. you, to All Thank interest In closing, you in Southside everyone, results and you quarter Thank your answer appreciate call reporting the We prospects to joining first for with our forward

Operator

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

now may You Goodbye. disconnect.

Southside Bancshares (SBSI) 26 Jan 242023 Q4 Earnings call transcript