• Net Income: $20.5 million for the third quarter.
• Earnings Per Share (EPS): $0.68, a decrease of 16% linked quarter.
• Return on Average Tangible Common Equity: 13.9%.
• Net Interest Income: Increased by $1.86 million linked quarter.
• Net Interest Margin: Increased 8 basis points to 2.95%.
• Loan Portfolio: Decreased slightly to $4.58 billion.
• Allowance for Credit Losses: Increased $2 million to $47.6 million.
• Nonperforming Assets: $7.7 million or 0.09% of total assets.
• Securities Portfolio: $2.70 billion as of September 30.
• Deposits: Decreased $60.2 million or 0.9% linked quarter.
• Noninterest Income: Decreased $2 million or 16.7% linked quarter.
• Noninterest Expense: Increased $567,000 or 1.6% linked quarter to $36.3 million.
• Efficiency Ratio: Decreased to 51.9% as of September 30.
• Income Tax Expense: $4.4 million, a decrease of $822,000 linked quarter.
• Effective Tax Rate: Increased slightly to 17.6% for the third quarter.

• Warning! GuruFocus has detected 7 Warning Signs with SBSI.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Southside Bancshares Inc (NASDAQ:SBSI) reported a third-quarter net income of $20.5 million, with earnings per share of $0.68.
• The company experienced an increase in net interest income by $1.86 million and an 8 basis point rise in net interest margin to 2.95%.
• Asset quality metrics remained strong, with nonperforming assets at low levels of $7.7 million or 0.09% of total assets.
• Recent investments in the wealth management and trust department are yielding positive results, with steady growth in new clients and quarterly fee income.
• The company's capital ratios remain strong, with all capital ratios well above the capital adequacy and well-capitalized thresholds.

Negative Points

• Net income decreased by $4.1 million or 16.8% on a linked-quarter basis.
• Loans decreased slightly due to large payoffs, with a reduction in target loan growth for 2024 from 5% to 3%.
• The company recorded a net loss of $1.9 million from the sale of lower-yielding AFS municipal securities and related fair value swaps.
• Noninterest income decreased by $2 million or 16.7% for the linked quarter, primarily due to an impairment loss on AFS securities.
• Deposits decreased by $60.2 million or 0.9% on a linked-quarter basis, driven by a commercial account exit.

Q & A Highlights

Q: Can you discuss the yield on the securities you sold and purchased, and the net effect on the margin going forward? A: The net effect on the margin will be positive, likely about 1 or 2 basis points. We sold lower-yielding municipal securities and bought higher-yielding agency mortgage-backed securities with shorter durations. The impact on the margin will not be significant due to the small amount of securities involved. - Lee Gibson, CEO

Q: What is the current status of loan payoffs and the loan pipeline, and how does this affect loan growth projections? A: Loan payoffs are a sign of a good economy, but we have experienced some early payoffs. Our loan pipeline is solid, but due to anticipated additional payoffs, we have reduced our loan growth target for 2024 from 5% to 3%. We have seen good loan growth in October, but expect more payoffs. - Lee Gibson, CEO

Q: What are your thoughts on the margin outlook going forward? A: The margin will be a bit bumpy due to seasonal deposit fluctuations and potential Fed rate changes. A large deposit account that affects our margin will not be present in the fourth quarter, which may cause some variability. The future margin will depend on Fed actions regarding short-term rates. - Lee Gibson, CEO

Q: Can you provide an update on the C&I lending initiative and recent hires? A: We made two hires in the quarter and are interviewing for more. We expect to see results from this initiative in 2025 and will continue hiring throughout the year. The initiative is progressing as planned. - Lee Gibson, CEO

Q: How are deposit costs trending, especially after the recent rate cut? A: Post rate cut, we reduced rates on approximately $1 billion in deposits by about 80% of the Fed's cut. We also have CDs maturing monthly, allowing us to adjust rates downward. Overall, we expect deposit costs to decrease by about 40 basis points monthly. - Lee Gibson, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.