Southside Bancshares(SBSI) - 2025 Q2 - Quarterly Results

Financial Performance Summary Q2 2025 Financial Highlights Southside Bancshares' Q2 2025 net income fell 11.6% to $21.8 million, with diluted EPS at $0.72, despite an improved net interest margin Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $21.8 million | $24.7 million | -$2.9 million | -11.6% | | Diluted EPS | $0.72 | $0.81 | -$0.09 | -11.1% | | Return on Avg. Assets (ROA) | 1.07% | 1.19% | -12 bps | -10.1% | | Return on Avg. Equity (ROE) | 10.73% | 12.46% | -173 bps | -13.9% | - Key linked-quarter improvements include a 9 basis point increase in the tax-equivalent net interest margin to 2.95% and a $414,000 increase in net interest income[3] - Nonperforming assets remained low at 0.39% of total assets[6] CEO's Statement CEO Lee R. Gibson praised Q2 2025 results, noting improved net interest margin and core deposit growth, projecting 3-4% full-year loan growth - Deposits, excluding public fund and brokered deposits, increased by $90.1 million on a linked-quarter basis[3] - Total loan growth was strong in June at $104 million, and the company anticipates 3-4% loan growth for the full year 2025[3] - A one-time expense of $1.2 million was incurred during the quarter for the write-off and demolition of an existing branch being replaced[3] Detailed Operating Results For the Three Months Ended June 30, 2025 Q2 2025 net income decreased 11.6% to $21.8 million, driven by higher noninterest expense and credit loss provisions, despite some revenue growth Q2 2025 Income Statement Summary (vs. Q2 2024) | Item | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $54.3M | $53.6M | +$0.7M | | Noninterest Income | $12.1M | $11.6M | +$0.6M | | Noninterest Expense | $39.3M | $35.8M | +$3.5M | | Provision for Credit Losses | $0.6M | ($0.5M) | +$1.1M | | Net Income | $21.8M | $24.7M | -$2.9M | Net Interest Income Net interest income for Q2 2025 increased 1.2% YoY to $54.3 million, with tax-equivalent net interest margin expanding to 2.95% Net Interest Margin Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Margin | 2.82% | 2.74% | 2.74% | | Tax-Equivalent NIM | 2.95% | 2.86% | 2.87% | Noninterest Income Noninterest income rose 5.1% YoY to $12.1 million, primarily due to reduced AFS securities loss and increased other noninterest income - The YoY increase was mainly due to a decrease in net loss on sale of AFS securities, and increases in other noninterest income and trust fees[5] - On a linked-quarter basis, noninterest income grew 18.8%, largely due to higher swap fee income[5][7] Noninterest Expense Noninterest expense increased by 9.8% YoY to $39.3 million, largely due to a $1.2 million one-time branch demolition charge and higher fees - The increase was primarily driven by other noninterest expense, professional fees, and salaries and employee benefits[8] - A significant component of the increase was a one-time $1.2 million charge for the demolition of an old branch facility[8] Income Tax Expense Income tax expense decreased 9.5% YoY to $4.7 million, with the effective tax rate at 17.8% due to higher state income tax Effective Tax Rate (ETR) | Period | ETR | | :--- | :--- | | Q2 2025 | 17.8% | | Q1 2025 | 18.0% | | Q2 2024 | 17.4% | For the Six Months Ended June 30, 2025 For H1 2025, net income was $43.3 million, down 6.2% YoY, with diluted EPS at $1.42, due to increased expenses and provisions Six-Month Performance Comparison (2025 vs. 2024) | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Income | $43.3 million | $46.2 million | -6.2% | | Diluted EPS | $1.42 | $1.52 | -6.6% | | Net Interest Income | $108.1 million | $107.0 million | +1.1% | | Noninterest Income | $22.4 million | $21.3 million | +5.1% | | Noninterest Expense | $76.3 million | $72.6 million | +5.1% | - The tax-equivalent net interest margin for the six-month period improved to 2.91% from 2.87% in H1 2024[11] Balance Sheet and Asset Quality Balance Sheet Analysis As of June 30, 2025, total assets were $8.34 billion, with total loans at $4.60 billion and deposits at $6.63 billion, and 21.1% uninsured deposits Key Balance Sheet Items (as of June 30, 2025) | Item | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $8.34 billion | $8.52 billion | $8.36 billion | | Total Loans | $4.60 billion | $4.66 billion | $4.59 billion | | Total Securities | $2.73 billion | $2.81 billion | $2.71 billion | | Total Deposits | $6.63 billion | $6.65 billion | $6.50 billion | - Linked-quarter loan growth of $34.7 million was driven by increases in commercial real estate, construction, and commercial loans[15] - Estimated deposits without insurance or collateral were 21.1% of total deposits as of June 30, 2025[18] Asset Quality Nonperforming assets significantly increased to $32.9 million (0.39% of total assets), mainly due to a $27.5 million restructured commercial real estate loan - Nonperforming assets increased by $26.0 million YoY, primarily due to a $27.4 million increase in restructured loans[22] - The increase in restructured loans was caused by the maturity extension of a $27.5 million commercial real estate loan to allow for an extended lease-up period[22] Allowance for Loan Losses | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Allowance for Loan Losses | $44.4M | $44.6M | $42.4M | | % of Total Loans | 0.97% | 0.98% | 0.92% | - The company recorded a provision for credit losses for loans of $0.7 million in Q2 2025, compared to a reversal of $0.9 million in Q2 2024[24] Capital, Liquidity, and Dividends Capital Resources and Liquidity The company maintained strong capital, repurchasing 424,435 shares at $28.13 per share, with total available contingent liquidity at $2.33 billion - During Q2 2025, the company repurchased 424,435 shares at an average price of $28.13 per share under its Stock Repurchase Plan[20] - Total available contingent liquidity, including FHLB advances and Federal Reserve Discount Window access, was $2.33 billion as of quarter-end[21] Dividend Declaration Southside Bancshares declared a Q2 cash dividend of $0.36 per share, paid on June 5, 2025 - A cash dividend of $0.36 per share was declared for the second quarter of 2025[26] Supplementary Information Conference Call Information Management scheduled a conference call for July 25, 2025, at 11:00 a.m. CDT to discuss Q2 2025 results, with webcast and dial-in options available - The conference call to discuss Q2 2025 results is scheduled for Friday, July 25, 2025, at 11:00 a.m. CDT[28] - Participants can access the call via webcast for listen-only mode or register for a dial-in number to participate in the Q&A session[28][29] Non-GAAP Financial Measures The company uses non-GAAP measures like FTE net interest income and efficiency ratio, adjusted using a 21% federal tax rate for comparability - The report uses non-GAAP measures including fully taxable-equivalent (FTE) adjustments for net interest income, net interest margin, and the efficiency ratio[31] - These adjustments use a 21% federal income tax rate to make tax-exempt interest income comparable to taxable income, which management believes enhances comparability[31][32] - A reconciliation of non-GAAP measures to the most directly comparable GAAP measures is provided at the end of the financial statement tables[36] Financial Tables (Appendix) Consolidated Financial Summary (Balance Sheet) This section provides the unaudited consolidated balance sheet as of June 30, 2025, with comparative data for preceding quarters Consolidated Financial Highlights (Income Statement & Ratios) This section presents unaudited consolidated income statement, common share data, and performance ratios for Q2 and H1 2025 Asset Quality and Capital Ratios This section details nonperforming assets, asset quality ratios, and capital ratios for Q2 and H1 2025, with comparative data Loan Portfolio and Allowance for Credit Losses This section provides a breakdown of the loan portfolio and changes in allowances for credit losses on securities, loans, and off-balance-sheet exposures Average Balances and Yields This section contains detailed tables showing average balances for assets and liabilities, along with their average yields and rates on a fully taxable-equivalent basis Non-GAAP Reconciliation This section provides reconciliation tables bridging non-GAAP financial measures to their nearest GAAP equivalents