Financial Data and Key Metrics Changes - Total assets reached $10.4 billion as of Q3 2025, with total investment securities increasing by $336.8 million to $2.3 billion [14][15] - Net interest income was $94.2 million, up $3.7 million, driven by higher average rates on loans and securities [17] - Non-performing assets increased to $140 million, or 1.3% of total assets, compared to $98 million, or 0.9% in the prior quarter [21] Business Line Data and Key Metrics Changes - Loans declined by 3.4% quarter over quarter, with a total gross loan amount of $6.9 billion, primarily due to increased prepayments and the sale of a large substandard loan [9][15] - Core deposits increased by $59.4 million, while total deposits remained stable at $8.3 billion [15] - Non-interest income was $17.3 million, while non-interest expense was $77.84 million, leading to an efficiency ratio of 69.84% [17][19] Market Data and Key Metrics Changes - International banking strengthened its presence across LATAM, with approximately 50% of new accounts opened in Q3 originating from countries like Argentina and Guatemala [8] - The company expects loan production and purchases of syndications to be partially offset by reductions in criticized assets and payoffs, with net loan growth projected between $125 million to $175 million for Q4 [25] Company Strategy and Development Direction - The primary focus for the quarter was on asset quality over loan growth, with plans to address the increase in non-performing asset levels [6][10] - The company launched an expense reduction initiative aiming for savings of $2 million to $3 million per quarter starting in 2026 [28] - Leadership changes in commercial banking were announced to strengthen market presence and business development efforts [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the franchise and the opportunities ahead, emphasizing a proactive approach to credit risk management [34] - The company anticipates a decrease in expenses in Q4, projecting non-interest expenses to be in the range of $74 million to $75 million [26] - Management highlighted the importance of timely identification and resolution of credit issues, indicating a more aggressive stance on downgrades [88] Other Important Information - The Board declared a quarterly cash dividend of $0.09 per share, reinforcing confidence in the company's long-term outlook [13] - The company intends to resume share buybacks post-earnings when the blackout period ends [13] Q&A Session Summary Question: What is the outlook on credit and when can the company expect to return to a sustainable ROA? - Management indicated that Q3 was the peak for portfolio evaluations and expects a better path for resolution in Q4, with a focus on early identification of credit issues [39][41] Question: What will drive the expected decrease in net interest margin for Q4? - The decrease is attributed to the impact of recent rate cuts and the timing of asset repricing, with expectations for a normalized net interest margin [45][46] Question: Is the company considering strategic alternatives given the current M&A market? - Management stated the focus remains on executing current strategies and achieving desired returns, with evaluations of opportunities as they arise [50] Question: What is the expected loan growth and syndication activity moving forward? - Management expects organic loan growth to be between $125 million to $175 million in Q4, with a focus on participating in syndications [25][56] Question: What is the outlook for realized loss content over the next couple of quarters? - Management anticipates charge-off activity to stabilize, with specific reserves already established for potential losses [63][64]

Core Insights - Southside Bancshares reported a net income of $21.8 million for Q2 2025, reflecting a 1.4% increase from the previous quarter [2][26] - The company experienced growth in net interest margin and net interest income, while lowering loan growth expectations due to elevated payoffs in core portfolios [12][32] Financial Performance - Diluted earnings per share reached $0.72, up $0.01 from Q1 2025 [3][26] - Annualized return on average assets was 1.07%, and return on average tangible common equity was 14.38% [3][26] - Net interest margin increased by nine basis points to 2.95% [3][32] - Net interest income rose to $54.3 million, a 0.8% increase over the prior quarter [3][32] Loan Production and Growth - New loan production totaled $293 million, with $228 million funded during the quarter [4][21] - Total loans reached $4.6 billion, a 0.8% increase from the prior quarter, driven by growth in commercial real estate and construction loans [5][26] - Loan growth guidance was reduced to 3%-4% year-over-year due to moderated expectations [6][23] Asset Quality - Nonperforming assets remained stable at 0.39% of total assets, concentrated in a single large construction loan [7][24] - Classified loans decreased from $67 million to $55.4 million, indicating improved asset quality [7][25] Securities and Deposits - The securities portfolio was valued at $2.73 billion, a slight decrease from the previous quarter [8][28] - Deposits increased by $41.1 million, attributed to broker deposits and commercial/retail deposits, despite a decrease in public fund deposits [9][30] Operational Efficiency - Noninterest income rose by 12.7% to $1.4 million, primarily from swap fee and services income [10][32] - Noninterest expense increased by 5.8% to $39.3 million, influenced by a write-off from branch demolition [10][33] - The efficiency ratio improved to 53.7% from 55.04% in the previous quarter [11][33] Management Outlook - Management expressed optimism for 2025, citing strong second-quarter results and a solid loan pipeline [12][49] - The company anticipates continued competition from debt funds impacting credit spreads, particularly in commercial real estate [12][41]

Financial Data and Key Metrics Changes - The company reported GAAP fully diluted earnings per share of $0.87, which represents a 135% increase compared to the fourth quarter and an 81% increase year-over-year [6] - Pre-provision net revenue for the first quarter was $9.4 million, or $1.22 per share, an 11% increase from the previous quarter [12] - The net interest margin for the quarter was 281 basis points, a 21 basis point increase from the linked quarter [12] Business Line Data and Key Metrics Changes - SBA originations grew to $10 million in the first quarter, with gain on sale margins exceeding 10% [9] - Noninterest income increased by 56% to $1.5 million, driven largely by SBA gain on sale income [16] - The first quarter provision expense was $463,000, significantly lower than $4.5 million in the prior quarter [18] Market Data and Key Metrics Changes - Core deposits grew by $43 million, including $28 million in noninterest-bearing deposits, while broker deposits declined by $81 million [10] - The company expects low single-digit loan growth for the full year despite a slower first quarter [9] Company Strategy and Development Direction - The company successfully disposed of two nonperforming credits, which reduced nonperforming assets as a percentage of total assets to 83 basis points [7] - The management emphasized the importance of attracting talented professionals and has added two deposit teams in the New York Metro Area [20] - The company plans to continue expanding its net interest margin and reaffirmed its net interest income guidance for the full year 2025 of $93 million to $95 million [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the SBA gain on sale activity accelerating in Q2 2025 [9] - The management noted that credit trends were benign and highlighted the company's strong balance sheet and liquidity [19] - The company is cautious about potential changes in the SBA environment that could impact growth [52][54] Other Important Information - The company repurchased 29,924 shares at a weighted average price of $30.46 during the quarter, with 220,000 shares remaining on its authorization [19] - The efficiency ratio for the quarter was 59.9%, with expectations for improvement as net interest margin expands [18] Q&A Session Summary Question: Update on new teams and their focus - The focus of the new teams is primarily on deposits, with some loans mixed in, and both teams have prior books over $100 million [26] Question: Update on loan pipeline and growth outlook - The company still expects low single-digit growth, with a robust pipeline despite some unexpected payoffs in Q1 [30][31] Question: Core loan yield for the quarter - The core loan yield for the quarter was approximately 6.40%, reflecting a 10 basis point expansion over the fourth quarter [38] Question: Thoughts on interest-bearing costs and margin - Timing issues affected the interest-bearing costs, with some callable brokered CDs called in Q1 leading to a one-time drag [41][42] Question: Expectations for SBA originations and fee income - Originations were better than expected, with the strongest quarter anticipated in Q4 2025 [50] Question: Share repurchase strategy - The company aims to balance share repurchases with the need to build consolidated CET1 capital, currently at 11% [72]