Q4 2023 Southside Bancshares Inc Earnings Call
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Operator: Thank you for standing by, and welcome to Southside Bancshares' fourth quarter and year in 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. To remove yourself from the queue, you may press star 11 again.
Speaker Change: Thank you for standing by and welcome to Southside Bancshares' fourth quarter and year end 2023 earnings conference call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: After the speaker presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session you will need to press star one one on your telephone.
Speaker Change: To remove yourself from the queue you May press Star one one again.
Lindsey Bailes: I would now like to hand the call over to VP of Investor Relations, Lindsey Bailes. Please go ahead. Thank you, Lateef. Good morning, everyone. And welcome to Southside Bancshares' fourth quarter and year-end 2023 earnings call. A transcript of today's call will be posted on Southside.com under investor relations. During today's call and in other disclosures and presentations, I will remind you that any forward-looking statements are subject to risk and uncertainty. Factors that could materially change our current forward-looking assumptions are described in our earnings release and in our Form 10-K. Joining me today are Lee Gibson, President and CEO, and Julie Shamburger, CFO. First, Lee will share his comments on the quarter, and then Julie will give an overview of our financial results. I will now turn the call over to Lee. Thank you, Lindsey.
Lindsey Bibby: I'd now like to hand, the call over to VP Investor Relations Lindsay bells. Please go ahead.
Lindsey Bibby: Thank you Latif and good morning, everyone and welcome to sell said Bancshares' fourth quarter and year end 2023 earnings call. A transcript of today's call will be posted on seltzer dot com under Investor Relations.
Lindsey Bibby: During today's call and in other disclosures and presentations I will remind you that any forward looking statements are subject to risks and uncertainties.
Lindsey Bibby: Factors that could materially change our current forward looking assumptions are described in our earnings release and our Form 10-K.
Lindsey Bibby: I know you today are Lee Gibson, President and CEO and Julie Shamburger CFO.
Lee R. Gibson: Firstly, you will share his comments on the quarter and then Julie will give an overview of our financial results I will now turn the call over to Lee.
Lee R. Gibson: Thank you Lindsey and good morning, everyone and welcome to SaaS side, Bancshares' fourth quarter and year end earnings call. This morning, we reported fourth quarter net income of $17 3 million earnings per share of <unk>, 57% a return on average tangible common equity of 13, 1% and continued strong.
Lee R. Gibson: Good morning, everyone, and welcome to Southside Bancshares' fourth quarter and year-end earnings call. This morning, we reported fourth quarter net income of $17.3 million, earnings per share of $0.57, a return on average tangible common equity of 13.1 percent, and continued strong asset quality metrics. During the fourth quarter, net income was impacted by a loss of $10.4 million, or $0.27 per share, due to a restructuring of a portion of the securities portfolio by selling approximately $388 million of lower yielding AFS securities. The proceeds were largely reinvested in premium U.S. agency mortgage-backed securities, with approximately 20% reinvested in loans. The restructuring is estimated to increase net interest income, resulting in a two-year payback on the law.
Lee R. Gibson: Asset quality metrics.
Lee R. Gibson: In the fourth quarter net income was impacted by a loss of $10 4 million or <unk> 27 per share due to a restructuring of a portion of the securities portfolio by selling approximately $388 million of lower yielding securities.
Lee R. Gibson: Securities.
Lee R. Gibson: Proceeds were largely reinvested in premium U S agency mortgage backed securities with approximately 20% reinvested in lines. The restructuring is estimated to increase net interest income, resulting in a two year payback of the loss.
Lee R. Gibson: Linked quarter, our net interest income increased $1.2 million, and the net interest margin declined only three basis points, less than originally estimated. Given the restructuring of the securities portfolio, we believe the net interest margin is at or near the bottom and should begin to slowly move higher during 2024. In the linked quarter, we continued to experience excellent loan growth with loans increasing 103.9 million dollars, or 2.3 percent. We ended the year with 9.1% loan growth, slightly exceeding our estimate. For 2024, we are currently budgeting for a 5% loan. The markets we serve remain healthy and continue to grow and perform well. I look forward to answering your questions following Julie's remarks. I will now turn the call over to Julie. Thank you, Lee.
Lee R. Gibson: Linked quarter, our newest income increase $1 $2 million and the net interest margin declined only three basis points less than originally estimated given the restructuring of the securities portfolio. We believe the net interest margin is at or near the bottom and should begin to slow.
Lee R. Gibson: Ollie move higher during 2024.
Lee R. Gibson: Linked quarter, we continue to experience excellent loan growth with loans, increasing $103 $9 million or two 3%.
Lee R. Gibson: We ended the year with $9.
Lee R. Gibson: 1% loan growth slightly exceeding our estimate for 2024, we are currently budgeting for 5% loan growth.
The markets, we serve remain healthy and continue to grow and perform well.
Lee R. Gibson: I look forward to answering your questions following <unk> remarks.
Lee R. Gibson: I'll now turn the call over to Jill.
Julie N. Shamburger: Good morning, everyone, and welcome to our fourth quarter and year-end call. We ended the year with net income of $86.7 million and diluted earnings per share of $2.82. For the fourth quarter, we reported net income of $17.3 million, a decrease of $1.1 million on a linked quarter basis, and diluted earnings per common share of $0.57, a decrease of $0.03 compared to September 30. For 2023, we had loan growth of $376.8 million, or 9.1%. The growth was driven primarily by increases of $230.1 million in construction loans and $180.7 million in commercial real estate loans.
Jill: Thank you Lee good morning, everyone and welcome to our fourth quarter and year end call. We ended the year with net income of $86 7 million and diluted earnings per share of $2.82 for.
Jill: For the fourth quarter, we reported net income of $17 3 million a decrease of 1.1 million on a linked quarter basis and diluted earnings per common share at <unk> 57, and.
Jill: A decrease of three cents compared to September 30th.
Jill: For 2023, we had loan growth of $376 $8 million or noncore, 1%.
Growth was driven primarily by increases of $231 million in construction loans and $187 million in commercial real estate loans.
Julie N. Shamburger: For the fourth quarter, we had loan growth of $103.9 million, or 2.3% of the length of the quarter, driven by increases in construction loans of $69.2 million and commercial real estate loans of $51.1 million. The interest rate of loans funded during the quarter was on average approximately 8%. As of December 31st, our loans with oil and gas industry exposure were $94.5 million, or 2.1% of total loans. Our allowance for credit losses increased by $1 million for the linked quarter to $46.6 million. The increase was driven by a loan loss provision of $2.2 million and a provision for off-balance sheet credit exposures of $79,000 for the fourth quarter. The provision for loan loss was primarily driven by the increase in loans during the fourth quarter.
Jill: For the fourth quarter, we had loan growth of $103 9 million or two 3% linked quarter driven by increases in construction loans of $69 2 million in commercial real estate loans at 51.1 million.
Jill: The interest rate of loans funded during the quarter with an average of approximately 8%.
Jill: As of December 31st our loans with oil and gas industry exposure were $94 5 million or two 1% of total loans.
Jill: Our allowance for credit losses increased by $1 million from the linked quarter to $46 6 million. The increase was driven by a loan loss provision of $2 2 million and our provision for off balance sheet credit exposures of $79000 for the fourth quarter.
Jill: The provision on loan loss was primarily driven by the increase in loans during the fourth quarter.
Julie N. Shamburger: Asset quality metrics remain strong, with non-performing assets of 4 million or 0.05% of total assets on December 31st. Additionally, on December 31st, our allowance for loan losses as a percentage of total loans was.94%, consistent on a linked quarter basis. Our securities portfolio decreased $40.1 million, or one and a half percent on a linked quarter basis, driven by sales of AFS securities in late December due to strategic opportunities related to a drop in Treasury rates and reinvestment of proceeds, primarily into higher yielding securities, and to a lesser extent into loans. The sales resulted in a net realized loss of $10.4 million. There were no transfers of AFS securities during the fourth quarter or for the year ended December 31st.
Asset quality metrics remained strong with nonperforming assets of 4 million our point of 5% of total assets on December 31.
Jill: On December 31, our allowance for loan losses, as a percentage of total loans with client nine 4% consistent on a linked quarter basis.
Jill: Our securities portfolio decreased $41 million or one 5% on a linked quarter basis, driven by sales of <unk> Securities in late December major strategic opportunities related to a drop in treasury rates and reinvestment of proceeds primarily into higher yielding.
Jill: Securities and to a lesser extent into loans.
The sales resulted in a net realized loss of 10 $4 million. There were no transfers of assets securities during the fourth quarter or for the year ended December 31st.
Julie N. Shamburger: As of December 31, we had a net unrealized loss in the AFS securities portfolio of $36.2 million compared to $137 million last quarter, a decrease of $100.8 million, primarily in the municipal securities portfolio due to lower interest rates and, to a lesser extent, the sale of securities. As of December 31, the unrealized gain on the fair value hedges on municipal securities was approximately $13.6 million compared to $42.2 million in the linked quarter, also driven by the lower interest rate. This unrealized gain partially offsets the unrealized losses in the AFS securities portfolio. Our AOCI on December 31, 2023 was a net loss of $113.5 million compared to a net loss of $155 million on September 30, 2023. The net loss was comprised of net losses on our securities and swap derivatives of $94.7 million and $18.8 million related to our retirement plans.
Jill: As of December 31st we had a net unrealized loss in the securities portfolio at $36 2 million compared to 137 million last quarter, a decrease of 108 million primarily in the municipal securities portfolio due to lower interest rates into a lesser.
Jill: Our extent the sale of securities.
Jill: As of December 31st the unrealized gain on the fair value hedges on municipal Securities was approximately $13 6 million compared to $42 2 million linked quarter also driven by the lower interest rates.
Jill: This unrealized gain partially offset the unrealized losses in the <unk> securities portfolio.
Jill: Our Aoc on December 31, 2023, with a net loss of $113 5 million compared to a net loss of 155 million on September 30th 2023.
Jill: The net loss was comprised of net losses on our securities and swap derivatives at $94 7 million and $18 8 million related to our retirement plans.
Julie N. Shamburger: As of December 31st, the duration of the total securities portfolio was 8.4 years, and the duration of the AFS portfolio was 5.8 years, a decrease from 9.7 years and 8 years, respectively, at September 30th. At quarter end, our mix of loans and securities increased slightly to 64% and 36%, respectively, compared to 63% and 37% on September 30th. Deposits increased 200.1 million, or 3.2%, on a linked quarter basis, driven primarily by an increase in public fund deposits of $145.4 million and broker deposits of $38.4 million. Our capital ratios remain strong, with all capital ratios well above the capital adequacy and well-capitalized threshold. Liquidity resources remain solid, with $2.2 billion in liquidity lines available as of December 31. During the fourth quarter, we purchased 146,580 shares of common stock at an average price of $28.54 pursuant to our stock repurchase plan. We have not repurchased any shares since the end of the year.
Jill: As of December 31, the duration in the total securities portfolio was eight four years and the duration of the <unk> portfolio was five eight years, a decrease from $9 seven years and eight years, respectively at September 30th.
Jill: At quarter end, our mix of loans and securities increased slightly to 64% and 36%, respectively compared to 63% and 37% on September 30th.
Jill: Deposits increased $201 million or three 2% on a linked quarter basis, driven primarily by an increase in public fund deposits of $145 4 million in brokered deposits of $38 4 million.
Jill: Our capital ratios remained strong with all capital ratios, well above the capital adequacy and well capitalized threshold.
Jill: Quiddity resources remains solid with $2 2 billion in liquidity lines available as of December 31.
Jill: During the fourth quarter, we purchased 146580 shares of common stock at an average price of $28.54 pursuant to our stock repurchase plan.
Jill: We have not repurchased any shares since the end of the year.
Julie N. Shamburger: Our tax-equivalent net interest margin decreased three basis points on a linked quarter basis to $2.99 from $3.02%. The tax-equivalent net interest spread decreased for the same period by 5 basis points to 2.26%, down from 2.31%. For the three months into December 31st, net interest income increased $1.2 million or 2.3% compared to the length of the quarter. The purchase loan accretion recorded this quarter was $63,000. Non-interest income, excluding the net loss on the sales of AFS securities, increased $2.1 million, or 19%, for the linked quarter, primarily due to the increase in bully income of $1.8 million in the fourth quarter. Non-interest expense decreased $370,000 on a linked-quarter basis to $35.2 million.
Jill: Our tax equivalent net interest margin decreased 30 basis points on a linked quarter basis to $2 99 from three 2%.
Jill: The tax equivalent net interest spread decreased for the same period by five basis points to two 6% down from 231.
For the three months ended December 31st net interest income increased $1 2 million or two 3% compared to the linked quarter.
Jill: The purchase loan accretion recorded this quarter was $63000.
Jill: Noninterest income excluding the net loss on the sales of assets Securities increased $2 9 million or 19% for the linked quarter, primarily due to the increase in Bowie income of $1 8 million in the fourth quarter.
Jill: Non interest expense decreased 370000 on a linked quarter basis to $35 2 million.
Julie N. Shamburger: For 2024, we have budgeted approximately $37.9 million in non-interest expense for each quarter. Our fully taxable equivalent efficiency ratio decreased to 50.86% as of December 31 from 52.29 as of September 30. Income tax expense decreased $914,000 from $3.1 million during the third quarter, and our effective tax rate decreased to 11.3% for the fourth quarter, down from 14.5% in the previous quarter.
Jill: For 2024, we have budgeted approximately 37 9 million in noninterest expense for each quarter.
Jill: Our fully taxable equivalent efficiency ratio decreased to 58, 6% as of December 31 from 50 to 29 as of September 30th.
Jill: Income tax expense decreased 914000 from $3 1 million during the third quarter and our effective tax rate decreased to 11, 3% for the fourth quarter down from 14, 5% in the previous quarter.
Jill: We currently estimate an annual effective tax rate of 18% for 2024.
Operator: We currently estimate an annual effective tax rate of 18% for 2024. Thank you for joining us today. This concludes our comments, and we will open the line for your questions. As a reminder, to ask a question, you will need to press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question. To remove yourself from the question queue, you may press star 11. Please stand by while we compile the Q&A roster.
Speaker Change: Thank you for joining US today. This concludes our comments and we will open the line for your questions.
Speaker Change: As a reminder to ask a question you will need to press star one one on your telephone again Thats Star one one on your telephone to ask a question to remove yourself from the question queue. You May Press Star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you for standing by our first question comes from the line of Graham <expletive>.
Operator: Thank you for standing by. Our first question comes from the line of Graham Dick on Piper Sandler. Please go ahead, Graham. Hey, good morning, guys. Good morning.
Speaker Change: Piper Sandler. Please go ahead Graham.
Graham: Hey, good morning, guys.
Graham: Good morning.
Graham: I just wanted to I just wanted to start on loan growth. Another another solid quarter for you guys.
Lee R. Gibson: Just wanted to start on loan growth, another solid quarter for you guys. How are you thinking about growth into 2024 as it relates to what your markets are offering right now versus maybe the potential for also new hires just generally? If you give an idea for the trajectory, are you expecting anything to be less or more about in line with what we've seen over the last few years? Right now, Graham, we're projecting 5% loan growth throughout 2024. Some of that's going to be dependent on interest rates, if interest rates do decrease quite a bit. Then, you know, some of these loans we may be able to make. But right now, with interest rates where they are, and even with the healthy markets we have, we feel like 5% is a good place for us to budget right now.
Graham: While received from some peers how are you thinking about growth into 2024 as it relates to what your markets.
Our offering right now versus maybe the potential for for also new hires just generally if you could give an idea for the trajectory you expect anything in the last year or more about in line with what we've seen over the last maybe the back half of 2023.
Graham: Thanks.
Right now Graham, we're projecting 5% loan growth throughout 2024.
Graham: Some of that is going to be dependent on interest rates, if interest rates do decrease quite a bit.
Graham: And then.
Some of these some of these loans.
We may be able to make but right now with the interest rates where they are.
Graham: Even with the healthy markets we have.
Graham: Like 5%.
Graham: A good place for us to.
Graham: Right now obviously, if we see things change during the year, we will we'll update that.
Lee R. Gibson: Obviously, if we see things change during the year, we'll update that estimate. Got it. And then I guess we on the on the securities transaction this quarter. Can you just run through some of your thoughts on it?
Graham: Yes.
Speaker Change: Got it and then I guess Lee on the Securities transaction. This quarter can you just run through some of your thoughts on it.
Lee R. Gibson: How you, I guess, viewed it as appealing or attractive when you initially... Yeah, when the rates came down during the fourth quarter, we took a look at some of our interest rate swaps on our municipals. And basically, we were able to come out of about 200 million of long-term lower-rate municipals at pretty much a push. And then we sold, as mortgage-backed securities increased in value, we sold another $188 million of mortgage-backed securities. And that's really where the loss ended up being, because we ended up with about a $6.4 million gain on our slots that we unwound. And that gave us a net $10,400,000 loss on the security sales. So basically, we were able to come out of things even with the rate that we were making on the swaps and increase the overall yield on the $388 million by about 175 basis points. Yeah, it seems like a good trade. Is there anything else like this that you're looking for right now? Or do you think that, you know, you kind of have to wait to get some more clarity on where rates are going? Or do you have a certain call on...
Lee R. Gibson: How you view.
Lee R. Gibson: How you viewed it as appealing or attractive when you initially did it.
Lee R. Gibson: Yes, when the rates came down during the fourth quarter.
Lee R. Gibson: We took a look at some of our interest rate swaps on our municipal and basically we were able to come out of.
About $200 million of long term lower right municipals.
Lee R. Gibson: At pretty much a push and then we sold as mortgage backed securities increased in value we sold.
Lee R. Gibson: Another $188 million of mortgage backed securities and Thats really where the.
Lee R. Gibson: The loss ended up being because we ended up with about a six.
Lee R. Gibson: $6 $4 million gain on our swaps that we unwound.
Lee R. Gibson: And that gave us the net $10 million 400.
Lee R. Gibson: Dollars loss on the security sales. So basically we were able to come out of things even with the even.
Lee R. Gibson: Even with the rate.
Lee R. Gibson: Making on the swaps and encourage the overall yield on the.
Lee R. Gibson: $388 million about 175 basis points.
Speaker Change: Yes, it seems it seems like a good trade is there anything else.
Speaker Change: I'd like to see Youre looking right now or do you think that.
Speaker Change: You kind of have to wait to get some more clarity on where rates are going or do you have a certain call on where rates might be going I guess.
Lee R. Gibson: I think at this point, in terms of any additional movement in the securities portfolio, we really aren't, you know, looking at anything should interest rates change further. You know, long-term rates move down further from here. We certainly would take a look at that. But right now, we don't.
Speaker Change: Yes.
Speaker Change: I think at this point in terms of any additional movement in the securities portfolio, we really are.
Speaker Change: Looking at anything should interest rates change further.
Long term rates move down further from here.
Speaker Change: We certainly would take a look at that but right now we don't.
Lee R. Gibson: In terms of, you know, forecasting interest rates, I guess it's pretty much anybody's guess. The biggest guess is on when and if the Fed's gonna begin to lower rates. You know, our thought is that it's probably closer to summer than it is in March. You know, if they make that first move.
Speaker Change: In terms of forecast on interest rates I guess pretty much anybody's guess the biggest gas is on.
Speaker Change: When and if the fed is going to begin to lower rates.
Speaker Change: Our thought is that it is probably closer to summer than it is March.
Speaker Change: Sure.
Speaker Change: If I make that first move.
Lee R. Gibson: Long-term rates, you know, they've already come down in anticipation of some of that decline. Lastly, on the margin, this may be more of a point of clarification, but they were only down three basis points this quarter. A lot better than I was expecting and the rest of the analysts in the street. I just wanted to hear if there was something there that surprised you, I guess, to allow for basically a flattish margin if there's more pressure to come. I remember you referenced that. Yeah, I think when the question last quarter was, you know, could it get down to 2.75? And I didn't mean in just one quarter.
Speaker Change: Long term rates.
Speaker Change: They've already come down in anticipation of some of that.
Speaker Change: Decline.
Yes, Okay. Good to hear and then I guess, just lastly on the on the margin I, just maybe more a point of clarification.
It was only down three basis points this quarter, a lot better than I think I was expecting in the rest of the animal industry.
Wanted to hear if there's something there that surprised you I guess to allow for basically flattish margin.
Or.
Speaker Change: If there is if theres more pressure to come I remember you referenced I think 275% number last quarter.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: The question last quarter was.
Lee R. Gibson: At that time, you know, we weren't sure what kind of loan growth we were going to have. And we were, you know, continuing to see deposit pressure with the deposit pressure remained during the quarter, but the loan growth ended up being probably a little stronger than we anticipated. And, you know, then with the restructuring, primarily occurring in December, that gave us a little lift in the back half of December. So it did surprise me that we only dropped three basis points.
Speaker Change: Could it get down to 275, and I didn't mean in one quarter.
Speaker Change: At that time, we werent sure what kind of loan growth, we were going to have.
And we were continuing to see the deposit pressure with the.
Speaker Change: The deposit pressure remained during the quarter, but the loan growth ended up being probably a little stronger than we anticipated.
Speaker Change: <unk>.
Speaker Change: And with the restructuring primarily earn in December that gave us a little lift in the back half of December so.
Speaker Change: It did surprise me that we only dropped 30 basis points, but.
Lee R. Gibson: But, you know, with the restructuring and the loan growth that we've had, you know, that's why I feel like we're either at or near the bottom at this point, and we should be able to see the NEM move up during 2024. Okay, and I assume that... increase their name in 2024 it will. Maybe not as many as the market's predicting right now, but something. Yeah, right now, we're budgeting for three. It's anybody's guess, you know, when the first one we're budgeting for is in June, and the last one in December, so really, only two right cuts would help them the one in December. I don't, You know, it certainly won't hurt, but it's not going to lift it dramatically. Okay, all right. I appreciate it, guys. Thank you very much.
With the restructuring.
Speaker Change: And the loan growth that we had that's why I feel like we're either at or near the bottom at this point and we should be able to say that.
The NIM move up Gary.
Speaker Change: 2024.
Gary: Okay, and I assume that.
Gary: The increase in the NIM in 2020 does include some rate cuts maybe not as many as the markets predicting right now, but something starting at some point this year right.
Gary: Yes, right now were budgeting for three.
Anybody's guess and the first one we're budgeting for us.
Gary: And last one in December so really only two rate cuts.
Gary: Help the NIM the one in December.
Gary: It's certainly a part but.
Gary: It's not going to lift it dramatically.
Okay, Alright, I appreciate it guys. Thank you very much.
Operator: All right, thank you. Thank you. Again, to ask a question, please press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question.
Speaker Change: Alright, thank you.
Okay. Thank you again to ask a question. Please press star one one on your telephone again Thats Star one one on your telephone SaaS question.
Operator: Stand by for our next question. Our next question comes from the line of Mark Shetley of KBW. Your question, please, Mark. Thanks. Good morning.
Please standby for our next question.
Speaker Change: Yeah.
Speaker Change: Our next question comes from the line of Mark set Lee of <unk>. Your question. Please mark.
Mark Lee: Good morning.
Mark Lee: Good morning, good morning.
Julie N. Shamburger: Um, so on expenses, just to clarify. I thought I heard you correctly, so looking at like 37 million. Quarterly run rate of 24 and with, you know, sort of a lot of the technology implementation stuff, sort of baked into 2023. I'm wondering what's really going to drive that growth in 2024. Thanks.
Mark Lee: So I guess.
Mark Lee: Just to clarify.
Mark Lee: I heard you correctly, so looking at like $37 million quarterly run rate in 'twenty, four and with <unk>.
Mark Lee: Sort of a lot of the technology implementation stuff.
Mark Lee: Sort of baked into 2023, I'm wondering what's what's really going to drive that growth and 24.
Julie N. Shamburger: Yes, Mark, the biggest thing driving that is our salaries and employee benefits, and then there is an additional little bit over $3 million for additional software technologies that is built into that number as well. And then we did we have budgeted for 2024 about a million dollars. We're going to be combining two locations in one of our smaller markets and probably be disposing of one of the buildings. And so we've budgeted for some loss there. So those are the three largest items.
Mark Lee: Yes.
Mark Lee: Biggest things driving that.
Mark Lee: Our salaries and employee benefits and then there is additional.
Mark Lee: So a little bit over $3 million for additional software technology that is built into that number as well and then we did we have budgeted for 2020 for about $1 million.
Mark Lee: We're going to be combining two locations in one of our smaller markets and probably be <unk>.
Mark Lee: <unk> one of the buildings and so we've.
We budgeted for some loss there.
Mark Lee: So those are the three largest items that still.
Lee R. Gibson: But still, you know, I guess one of the bigger software and technology we still can, you know, we're looking at more spin there. Got it. That's helpful. Thank you, carries restructuring. I was just wondering more, you know, what's your goal for that mix of assets, maybe by year end and possibly longer term, you know, currently sitting at, I think you said, like, a 64, and 36. That's just, yeah, kind of wondering how you anticipate the balance sheet, plan out from here. You know, as with the shift in the, well, with the restructuring of the securities portfolio, you know, right now, we have So that gives us a lot of flexibility without impacting the P&L to sell those securities if we want to put them into loans, and if the loan growth is greater than what we're anticipating, and, you know, a lot of that depends on what deposit growth is.
I guess one of the bigger the software and technology, we still can.
Mark Lee: Looking at more spend there.
Speaker Change: Got it that's helpful. Thank you.
Speaker Change: Sure.
Speaker Change: The securities restructuring and sort of the shifting of the balance sheet I was just wondering more.
Speaker Change: What's your goal for that mix of assets, maybe by year end and possibly longer term currently sitting at.
Speaker Change: I think you said like a $64 36.
Speaker Change: Just kind of wondering how you anticipate the balance sheet playing out from here. Thanks.
Speaker Change: As with the shift in the.
Good luck with the restructuring in the securities portfolio right now.
Speaker Change: We have the securities that we purchased are all well.
Speaker Change: Well there are at least all of in total or at least at par and I think theyre, probably all gains.
Speaker Change: Net.
Speaker Change: So that gives us a lot of flexibility without impacting the P&L too.
Sell those securities if we want to put them into loans and if the loan growth is.
Greater than what we're anticipating.
Speaker Change: And.
Speaker Change: A lot of that depends on what deposit growth as if deposit growth can keep keep up with loan growth. Then we likely will keep those securities if not we will be able to sell some of those securities.
Lee R. Gibson: If deposit growth can keep up with loan growth, then we, you know, likely will keep those securities. If not, we'll be able to sell some of those securities with little, literally no loss, and put that into higher margin loans. So, ideally, with the loan growth we expect to see in 2024, we'll move that mix to less securities and more loans. How much that moves, I don't really know, but it would probably be a few basis points up on loans and down on securities. Got it. Thank you. Maybe just one more.
Speaker Change: Literal weather alone no loss and put that into higher higher margin loans. So.
Speaker Change: Ideally with loan growth were going to say, we expect to see.
Speaker Change: In 2024, we'll move that mix to less securities in more loans.
Speaker Change: How much that moves I don't really know but.
Speaker Change: It would probably be a few basis points in either.
Speaker Change: Up in loans and down in securities.
Speaker Change: Got it thank you.
Lee R. Gibson: Do you still see yourself sort of not slowing down on the buybacks until the current authorization's used up? And I guess sort of, yeah, what's your outlook on that as far as your capital priorities are? For I think what we're going to look for there is if they're, you know, opportunistic times to buy; we'll be in the market buying if the stock is at certain levels, it will probably pull back from that. You know, we, I think our average buy price in the fourth quarter was somewhere in the $28 range. Most of the half that all happened early. Well, in October, it went through late October.
Speaker Change: Maybe just one more.
Speaker Change: Do you still see yourself sort of not slowing down on the buybacks until the current authorizations used up and.
Speaker Change: And I guess sort of.
Speaker Change: What's your outlook for that as far as your capital program 2024.
Speaker Change: I think we're going to look for there is if there are opportunistic times to buy we will be in the market buying.
Speaker Change: The stock is at certain certain levels will probably pull back from that.
Speaker Change: I think our average by price.
In the fourth quarter was somewhere in the $28 range most of that that will happen early well in October it went to late October so we'll be looking for.
Lee R. Gibson: So, you know, we'll be looking for, hopefully, there aren't any opportunistic times to buy stock, but if there are, you know, we have that buyback available. [inaudible] All right, thank you. Thank you. Our next question comes from the line of Matt Olney of Stevens Inc. Please go ahead, Matt.
Speaker Change: Hopefully there aren't any opportunistic times to buy stock, but if there are we have that buyback available for us.
Speaker Change: Got it that makes sense, thanks for taking my questions.
Speaker Change: Alright, thank you.
Speaker Change: Yes.
Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Matt Olney of Stephens, Inc. Please go ahead Matt.
Operator: Thank you. Just a few follow-ups here from some previous questions on the loan growth front. It looks like construction loans continue to build at a pretty healthy clip. Any more color here?
Matt Olney: Hi, Thank you just a few follow ups here from some previous questions.
Matt Olney: On the loan growth front.
Matt Olney: It looks like the construction loans to continue to build a pretty healthy clip.
Matt Olney: Any more color here has construction.
Lee R. Gibson: Has construction peaked, or do you still see some more growth in 24 in that book? I think we'll see some more growth in that. And they're primarily loans that we originated in late 21, during 22. And then, you know, in early 23, we're not seeing as many new construction loans at this point in time. But these are just, you know, advances were, you know, that 40 to 50% of the equity had gone in, and now you know, they're looking for draws, and that's what's really creating that at this point. And remind me of this construction book and any concentrations by market, and does it lean more residential or commercial? You know, primarily, primarily multifamily home building and warehouse would be the three largest concentrations. And I don't really think there's a huge concentration by market. They, you know, they're pretty well split between DFW, Austin, and maybe to a little lesser extent, the Houston market.
Matt Olney: Or you still see some more growth in 'twenty four on in that book.
Matt Olney: I think we'll see some more growth in that and they are primarily in loans that we originated in.
Late 'twenty one during 'twenty two and then.
Matt Olney: And in early 'twenty, three we're not seen as many new construction loans at this point in time, but these are just.
Matt Olney: The advances were.
Matt Olney: 40%, 50% equity has gone in and now.
Matt Olney: They are looking for draws and that's what's really creating that at this point.
Matt Olney: And remind me this construction book any.
Matt Olney: Patients.
Matt Olney: By market and does it lean more residential or commercial.
Matt Olney: Sure.
Matt Olney: Okay.
Matt Olney: It's primarily.
Matt Olney: Primarily multifamily homebuilding and.
Matt Olney: And warehouse would be the three largest concentrations and I don't really think there is a.
Matt Olney: Huge concentration by market.
Matt Olney: The.
Matt Olney: They're pretty well split between.
Matt Olney: DSW, Austin, and maybe to a little lesser extent the Houston market.
Matt Olney: Okay.
Lee R. Gibson: Okay, appreciate those details, and then any color on the recent loan growth as far as what some of those yields are? [inaudible] The average for the quarter was 8%. I mean, on all loans. And that's, I assume, some kind of new and renewed yield. Is that right?
Matt Olney: Okay.
Speaker Change: I appreciate those details and then.
Speaker Change: Any color on the recent loan growth as far as what some of those yields are.
The new loan yields.
Speaker Change: Go ahead your average for the quarter was 8%.
Speaker Change: Okay.
All lines.
Speaker Change: And that's a I assume some kind of new and renewed.
Speaker Change: The yield is that right.
Julie N. Shamburger: That is correct. I'm sorry; I missed that. Yes, that is correct.
Sure.
Speaker Change: I'm, sorry, I missed that.
Speaker Change: Yes that is correct.
Lee R. Gibson: Okay, perfect. Thank you. And then, going back to the securities restructure, you gave us lots of good details there a few minutes ago. As far as what was sold, I think I missed maybe some details about what was purchased in that restructuring. Do you have anything from that point of view?
Speaker Change: Okay perfect. Thank you.
Speaker Change: And then going back to the Securities restructure you gave us lots of good details there a few minutes ago as far as what was sold I think I missed maybe some details about what was purchased and that restructure do happy to think from that point of view.
Lee R. Gibson: Sure. About 80% of the proceeds from the sale went into premium US agency mortgage-backed securities, you know, Fannie and Freddie, and about 20% of those proceeds went into loans. We just wanted to get with the rates doing what they're doing and potential anticipation of the Fed doing something. We wanted to go ahead and get that money working.
Speaker Change: Sure.
Speaker Change: About 80% of the proceeds from the sale went into.
Speaker Change: Premium USA agency mortgage backed securities Fannie and Freddie.
Speaker Change: And about 20% of those proceeds went into loans.
Speaker Change: We just wanted to go ahead and get.
Speaker Change: With rates doing what they're doing in potential anticipation of.
Speaker Change: Fed doing something we wanted to go ahead and get gift.
Speaker Change: Get that money working.
Lee R. Gibson: But right now, the mortgage-backed securities are overall at a gain. And, you know, if we need to move out of those and into loans, higher-yielding loans, then, you know, we feel like we're in a good position to do that without impacting the P&L on the sale of those securities. Okay, and what were the yields on some of the security that you purchased? They were Fannie and Freddie, and the average yield was a little over six percent.
Speaker Change: Right now the mortgage backed securities overall, our head again.
Speaker Change: If we need to move out of those and then the loans higher yielding loans and we feel like we're in a good position to do that.
Speaker Change: Without impacting the P&L.
Speaker Change: On the sale of those securities at this point.
Okay, and what were the yields on some of the security that you purchased.
Speaker Change: They were.
Speaker Change: <unk>.
Speaker Change: They were Fannie and Freddie and the average yield was a little over 6%.
Speaker Change: Okay.
Lee R. Gibson: That's all helpful. And then earlier in your comments around the margin, you mentioned that you're feeling better about the deposit cost pressure. I just wanted to kind of focus on that comment.
Speaker Change: That's all helpful. And then earlier in your comments around the margin you mentioned that you're feeling better about the deposit cost pressure just wanted to kind of focus on that comment any more color you can provide as far as what you are seeing more more recently and kind of how much conviction yet.
Lee R. Gibson: Any more color you can provide as far as what you're seeing more recently and kind of how much conviction you have that deposit costs are flying out? And we'll peak here shortly; you know, until the Fed starts cutting, I don't expect them to flatten out; I expect them to continue to increase, but I don't think they're going to increase at the pace they've been increasing, and then with loan growth and with the restructuring and securities portfolio, we feel like that the benefit associated with that is going to help offset any further deposit pressure at this point in time. But we don't, you know, we do expect deposit pressure to continue. But, you know, most of the heavy lifting is behind us, but there's, there's still going to be some going forward. You know, even after the first rate, 25 basis points isn't likely to take pressure off some of the non-maturity, interest-bearing deposits.
Speaker Change: But deposit costs or <unk>.
Speaker Change: Playing out and we'll peak here shortly.
Speaker Change: I don't expect a well until until the fed starts cutting I don't expect them to have flattened out I expect we will continue.
Speaker Change: To increase but I don't think theyre going to increase at the pace. They have been increasing and then with loan growth and with the restructuring of the securities portfolio, we feel like that the benefit associated with that is going to help offset.
Speaker Change: Any further deposit.
Speaker Change: Pressure at this point in time.
Speaker Change: We do expect.
Deposit pressure to continue but.
Most of the heavy lifting is behind us, but there is there still going to be some going forward.
Speaker Change: Even even after the FERC rate 25 basis points isn't likely to take pressure off of some of the nominal charity interest bearing deposits.
Lee R. Gibson: Okay, perfect. Alright, thanks for all your color. All right, thank you. Thank you. I would now like to turn the conference back over to Lee Gibson for closing remarks, sir. All right. Thank you, everyone, for joining us today. We appreciate the opportunity to answer your questions along with your interest in Southside Bancshares. In closing, we're looking forward to our prospects during 2024 and to reporting first quarter results to you during our next earnings call in April. Thank you again. This concludes today's conference call. Thank you for participating. You may now dis- Goodbye. (inaudible)
Speaker Change: Okay perfect.
Speaker Change: Alright, thanks for all your color.
Speaker Change: Alright, thank you.
Speaker Change: Thank you I would now like to turn the conference back over to Lee Gibson for closing remarks, Sir.
Lee R. Gibson: Alright. Thank you everyone for joining us today, we appreciate the opportunity to answer your questions along with your interest in SaaS side Bancshares and closing we're looking forward to our prospects during 2024 and to reporting first quarter results to you during our next earnings call in April.
Lee R. Gibson: To you again.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Goodbye.
Speaker Change: Okay.
Speaker Change: [music].
Okay.
Speaker Change: [music].