SOUTHSIDE BANCSHARES INC Q1 FY2025 earnings call

• Lee Gibson noted a solid first quarter with net income $21.5M, diluted EPS $0.71, but linked quarter loan decrease of $94.4M due to CRE payoffs, expecting mid-single-digit loan growth in 2025.
• Keith Donahoe reported Q1 commercial loan production $142M, 46% increase vs Q1 2024, but only $52M funded in Q1; loan pipeline over $1.9B, balanced between term and construction loans; credit quality strong despite slight increase in nonperforming assets.
• Julie Shamburger provided financial results overview: net income $21.5M, loans down $94.4M, securities portfolio changes, deposits, capital ratios strong, net interest margin up, noninterest income/expense changes, efficiency ratio 55%, effective tax rate 18% for Q1 and estimated 18% for 2025.

Net income was $21.5 million, resulting in diluted earnings per share of $0.71. Linked quarter, loans decreased by $94.4 million or 2% primarily in the CRE portfolio. Securities portfolio decreased by $76.9 million or 2.7% due to maturities and principal payments, with a $120 million restructuring of securities. Deposits decreased by $63.4 million or 1% mainly due to a drop in brokered deposits. Net interest margin increased 3 basis points to 2.86%. Loans were $4.57 billion as of March 31, securities were $2.74 billion. Allowance for credit losses increased to $48.5 million. Return on average assets was 1.03% and return on average tangible common equity was 14.14%. Revenue contribution: Loans were a significant segment, with securities and deposits also playing roles in the financial structure.

• Anticipates mid-single-digit loan growth in 2025.
• Margin expected to be positive moving forward due to CD maturing (average rate 4.84% maturing over next 3 months to reprice down) and new swaps in Q2.
• Expecting swap fee income to increase in the second quarter.
• Budgeted $7M for trust fees in 2025, a 16% increase from 2024.

• Uncertainty in markets related to tariff announcements and ongoing negotiations.
• Prepayment risk in securities portfolio due to selling $120M of mortgage-backed securities.
• Potential impact of loan payoffs on CRE portfolio if C&I growth doesn't moderate the heavy CRE exposure.

Q: Brett Rabatin asked about the $1.9 billion loan pipeline, pull through, and margin impact from CD maturing.

A: Keith Donahoe said pipeline is largest in 2-3 years, historically 25%-30% pull through; Lee Gibson mentioned CD maturing with average rate 4.84% reprice down 40-45bps and new swaps in Q2 positive for margin.

Q: Wood Lay followed up on margin sensitivity to rates, expenses, and restructured CRE credit.

A: Lee Gibson discussed margin sensitivity to Fed actions, Julie Shamburger explained expense decreases due to salaries, incentives, and depreciation; Keith Donahoe said restructured CRE credit is in Austin, TX, a multifamily loan with positive leasing activity.

Q: Tim Mitchell inquired about swap fee income and buyback.

A: Julie Shamburger said expecting swap fee income to increase, budgeting $7M for trust fees; Lee Gibson mentioned monitoring buyback based on current stock prices.

Q: Matt Olney asked about capital, buyback, and loan growth guidance.

A: Lee Gibson discussed balancing stock repurchase and sub debt call; Keith Donahoe explained loan payoffs were partly unexpected but pipeline build and expected fundings support mid-single-digit growth guidance