Southside Bancshares(SBSI) - 2024 Q4 - Annual Report

Financial Performance - For the year ended December 31, 2024, net income was $88.5 million, compared to$86.7 million in 2023, representing a year-over-year increase of approximately 2.1%[18] - Diluted earnings per common share for 2024 was $2.91, up from$2.82 in 2023, indicating a growth of 3.2%[18] - The company's results of operations are primarily dependent on net interest income, which is influenced by interest rates and competitive conditions[270] Assets and Capital - As of December 31, 2024, total assets were $8.52 billion, total loans were$4.66 billion, total deposits were $6.65 billion, and total equity was$811.9 million[18] - As of December 31, 2024, Southside Bancshares, Inc. reported a Common Equity Tier 1 risk-based capital ratio of 13.04%, significantly above the regulatory minimum of 4.50%[65] - The Tier 1 risk-based capital ratio for Southside Bank was 14.07%, exceeding the required minimum of 6.00%[65] - The total risk-based capital ratio for Southside Bancshares, Inc. was 16.49%, well above the minimum requirement of 8.00%[65] - The leverage ratio for Southside Bank stood at 9.67%, surpassing the minimum requirement of 4.00%[65] - The Company and the Bank are expected to continue exceeding all applicable well-capitalized regulatory capital requirements in 2025[64] Regulatory Environment - The Company is subject to regulation and supervision by the Federal Reserve and the FDIC, ensuring compliance with capital adequacy standards[47] - Changes in federal and state laws could materially impact the profitability and business practices of the Company[45] - The Federal Reserve may require bank holding companies to maintain capital ratios substantially in excess of mandated minimum levels based on economic conditions[61] - The bank holding company must guarantee compliance of any subsidiary bank that becomes "undercapitalized" with capital restoration plans, up to 5% of the institution's total assets[69] - The Dodd-Frank Act mandates that financial institutions with over $1 billion in assets must have incentive compensation arrangements that do not encourage inappropriate risks[73] Competition and Market Conditions - The company faces competition from various financial institutions, including credit unions and fintech companies, which continue to increase in the financial services market[33] - The Texas markets served by the company continue to show healthy job and population growth, despite potential negative impacts from higher inflation and elevated interest rates[32] - The banking industry has faced significant challenges, including bank failures in the first half of 2023, leading to increased market volatility and decreased customer confidence in regional banks[147] Risk Factors - The company is subject to credit quality risks, which may not be sufficiently mitigated by existing credit policies, especially during economic downturns[130] - A decline in the real estate market could significantly impair the value of collateral underlying loans, potentially increasing the allowance for loan losses[132] - Cybersecurity risks are heightened due to reliance on electronic communications and information systems, with potential for significant financial losses from breaches[135] - The evolving legal and regulatory environment surrounding artificial intelligence (AI) presents challenges, including compliance costs and risks of erroneous outputs[138] - General economic conditions, including inflation and recession, could adversely affect loan delinquencies and the value of collateral securing loans[139] Employee and Workplace Culture - Approximately 778 full-time equivalent employees were employed as of December 31, 2024, with an average employee tenure exceeding eight years[34] - The company was awarded "Best Banks to Work For" by American Banker for the third consecutive year in 2024[36] Liquidity and Funding - The principal source of liquidity at the parent company level is dividends from the Bank, which are subject to federal and state restrictions[71] - The company has established liquidity policies and regularly monitors its liquidity position to manage funding sources effectively[168] - The company may face challenges in maintaining liquidity, especially during periods of market volatility similar to the Great Recession of 2008[171] Technology and Innovation - The financial services industry is experiencing rapid technological changes, and the company's future success depends on its ability to effectively implement new technology-driven products and services[151] - The company faces risks from technological changes that allow customers to bypass traditional banking services, potentially leading to loss of deposits and fee income[186] Environmental, Social, and Governance (ESG) Issues - The company faces increasing scrutiny related to ESG (Environmental, Social, and Governance) issues, which could impact its reputation and operational costs[142] - Potential negative publicity from clients or business partners could affect the company's ability to attract and retain clients, impacting stock price[144] - The company may incur increased costs related to ESG efforts, and negative perceptions could adversely affect its reputation and stock price[145] Securities and Investments - The company's securities portfolio increased by 8.1$2.60 billion at December 31, 2023, to $2.81 billion at December 31, 2024[261] - The company purchased$655.6 million in short-term U.S. Treasury Bills and $532.3 million in low premium MBS during the year ended December 31, 2024[262] - As of December 31, 2024, securities accounted for 33.0$66 to $91 per barrel in 2023[178] - The allowance for loan losses may be insufficient, as economic conditions and borrower credit risks could necessitate increases in the allowance, impacting net income and capital[162]