Southside Bancshares(SBSI) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net income of $19.8 million for Q3 2019, an increase of $1.2 million or 6.4% on a linked-quarter basis, but a decrease of $511,000 or 2.5% compared to the same period in 2018 [4] - Diluted earnings per share were $0.58, an increase of $0.03 on a linked-quarter basis and consistent with the same period in 2018 [4] - Net interest margin decreased by 14 basis points to 3.03% from 3.17% in the previous quarter [9] - Non-interest income excluding net security gains increased by $231,000 or 2.1% [11] Business Line Data and Key Metrics Changes - Loan growth increased by $39.8 million to $3.5 billion on a linked-quarter basis, with year-to-date loan growth at 5.6% [5] - The allowance for loan loss increased by $424,000 or 1.7% to $25.1 million [6] - The securities portfolio increased by $145.5 million or 6.5% due to purchases in municipal and mortgage-backed securities [7] - The mix of loans and securities shifted slightly, with loans at 60% and securities at 40% [8] Market Data and Key Metrics Changes - Economic conditions in the Texas markets remain solid, with the Austin and DFW markets performing well above average [20] - The company anticipates continuing to add revenue producers in higher growth Texas markets [20] Company Strategy and Development Direction - The company plans to open a new branch in Kingwood, a high-growth area just north of Houston [20] - There is a focus on exploring growth opportunities through acquisitions or organic growth [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about fourth quarter loan growth, citing a solid loan pipeline and the hiring of additional lenders [15] - The company expects net interest margin to be stable to higher in the fourth quarter due to recent decreases in short-term interest rates [17] - Credit quality remains solid, with no current areas of concern [19] Other Important Information - The efficiency ratio improved to 50.53% compared to 51.44% on a linked-quarter basis [12] - The effective tax rate for the third quarter was 15.6%, expected to remain consistent for the year [13] Q&A Session Summary Question: Clarification on NIM and amortization expense - Management will provide the exact number for amortization expense later, acknowledging it was up due to increased prepayments [25][27] Question: Loan growth expectations for 2020 - Management expects loan growth to be around 6% for 2020, with potential for a slight upward revision [30] Question: Prepayment quantification and visibility - Most prepayments were in the commercial real estate portfolio, estimated at $50 million to $60 million for the quarter [36] Question: Securities portfolio management - The company is buying municipal and mortgage-backed securities, focusing on quality credits and longer duration securities to mitigate risks [40] Question: FDIC benefit quantification - The company received a credit of $413,000 for the third quarter, expected to be similar in future quarters [54]