Southside Bancshares(US:SBSI)2022-04-26 20:41Financial Data and Key Metrics Changes - The company reported earnings per share of $0.77 and a return on average tangible common equity of 15.2% [7] - Net income for the first quarter was $25 million, a decrease of $3.7 million from the previous quarter [17] - The efficiency ratio increased slightly to 48.15% from 47.61% in the previous quarter [32] - The net interest margin decreased to 3.22% from the previous quarter [29] Business Line Data and Key Metrics Changes - The loan portfolio increased by $172.9 million to $3.79 billion, driven by strong growth in the real estate portfolio [18] - Commercial real estate (CRE) loans increased by $124.4 million, and construction loans increased by $42.3 million [18] - The allowance for loan losses as a percentage of total loans was 0.93% [21] Market Data and Key Metrics Changes - The company experienced strong asset quality metrics with non-performing assets at $11.5 million, or 0.16% of total assets [20] - Brokered deposits increased significantly, with 85% of $676 million hedged with fixed-rate swaps [13] - The securities portfolio decreased by $314.8 million or 11% on a linked quarter basis [22] Company Strategy and Development Direction - The company anticipates solid loan demand to continue for most of 2022, maintaining a loan growth estimate of 9% net of PPP loans [12] - The company is actively looking for acquisition opportunities but is not seeing many sellers in desirable geographic locations [80] - The strategy includes managing interest rate risks through the use of brokered deposits and cash flow hedges [38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic conditions in their markets, particularly in the DFW and Austin areas, which are among the highest performing growth markets [14] - The company is encouraged about second quarter loan prospects despite some expected loan payoffs [11] - Management noted that competition is primarily on pricing rather than credit quality, which could impact growth [86] Other Important Information - The company approved a new stock repurchase plan to buy back up to 1 million shares [28] - The duration of the entire securities portfolio increased to 8.1 years from 5.9 years in the previous quarter [26] - The company recognized a net unrealized loss in the securities portfolio of $103.7 million compared to an unrealized gain of $111.7 million at year-end [25] Q&A Session Summary Question: Details on brokered positive deposit hedges and impact on spread income - Management explained that they replaced short-term borrowings with brokered deposits at a lower rate, which will help determine future funding costs [38] Question: Outlook on bond portfolio growth - Management indicated plans to grow the bond portfolio if they become confident that rates have stabilized [40] Question: Loan growth guidance and expected payoffs - Management confirmed that while there are expected payoffs, the loan pipeline remains strong, and they are cautious about overpromising future growth [44] Question: Securities portfolio duration and market rates - Management clarified that the extension in duration reflects a strategy to manage interest rate risks and that they are monitoring market conditions closely [46] Question: Impact of expenses and guidance for the year - Management provided insights on expense management, indicating that they expect quarterly non-interest expenses to average around $32.5 million for the year [49] Question: Commercial real estate and construction growth outlook - Management highlighted strong demand in multifamily construction and noted competitive pricing pressures in the market [86]