Q2 2024 Southside Bancshares Inc Earnings Call
Operator: Good day, and thank you for standing by, and welcome to Southside Bancshares Inc.'s second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sunny Davis, Chief Risk Officer. Please go ahead.
Operator: Copyright 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. [inaudible] Good day, and thank you for standing by, and welcome to Southside Bancs' 2nd Quarter 2024 Earnings Call.
Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Suni Davis, Chief Risk Officer. Please go ahead.
Speaker Change: I'd now like to hand, the conference over to your Speaker today, Sunny Davis Chief Risk Officer. Please go ahead.
Suni Davis: Thank you, Justin. Good morning, everyone, and welcome to Southside Bankshares' second quarter 2024 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 Form 10-K
Sunny Davis: Thank you, Justin. Good morning, everyone and welcome to Southside Bankshares second quarter 2024 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 Form 10-K.
Sunny Davis: Thank you, Jeff and good morning, everyone and welcome to Southside Bancshares' second quarter 2024 earnings call. A transcript of today's call will be posted on Southside Dot 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 uncertainties factors that could materially change our current or looking assumptions are described in our earnings release and Form 10-K. Joining me today are Lee Gibson, CEO and Julie Shamburger CFO first Lee will share his comments on the quarter and then Julie will give an overview about financial results.
Suni Davis: Joining me today are Lee Gibson, 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.
Speaker Change: I will now turn the call over to Lee.
Lee R. Gibson: Thank you, Suni. Good morning, everyone.
Lee R. Gibson: This morning we reported second quarter net income of $24.7 million, earnings per share of 81 cents, a return on average tangible common equity of 16.9%, and continued strong asset quality metrics. For the linked quarter, our net interest margin increased one basis point to 2.87 percent. During the quarter, we sold approximately $93 million of lower coupon municipal securities, unwound the related fair value swaps, and reinvested most of the proceeds in higher yielding agency mortgage-backed securities. We estimate the payback of the loss on the sale of securities will be less than one year. Linked quarter loans increased an annualized 1.1% as we experienced a few payoffs.
Lee: Thank you Stephanie good morning, everyone. This morning, we reported second quarter net income of $24 $7 million earnings per share of 81.
Speaker Change: Return on average tangible common equity of 16, 9% and continued strong asset quality metrics.
Julie N. Shamburger: This quarter, our net interest margin increased one basis point to 2.87%.
During the quarter, we sold approximately $93 million of lower coupon municipal securities.
Speaker Change: Wound the related fair value swaps and reinvested most of the proceeds in higher yielding agency mortgage backed securities.
Speaker Change: We estimate the payback of the loss on the sale of securities will be less than one year.
Speaker Change: Linked quarter loans increased an annualized one 1% as we experienced a few payoffs our loan pipeline remains solid and we continue to target 5% loan growth for 2024.
Lee R. Gibson: Our loan pipeline remains solid, and we continue to target 5% loan growth for 2024. Since the last quarter, we have continued implementing initiatives associated with our five-year strategic plan. One of the initiatives is to carefully examine additional revenue opportunities as well as cost containment opportunities. Attrition and a slight reduction in the workforce resulted in an additional cost savings of approximately $600,000.
Speaker Change: So last quarter, we have continued implementing initiatives associated with our five year strategic plan.
Speaker Change: One of the initiatives is to carefully examine additional revenue as well as cost containment opportunities.
Christian: Christian and a slight reduction in workforce resulted in additional cost savings of approximately $600000.
Christian: Great pricing of services, and our wealth management and Trust Department.
Christian: Allocating additional revenue of approximately $500000.
Lee R. Gibson: The repricing of services in our Wealth Management and Trust Department will result in additional revenue of approximately $500,000. Additionally, we are executing on an initiative to expand C&I lending in our metropolitan markets to further diversify our loan portfolio, increase revenue, and grow deposits. We've hired a lead C&I relationship manager in the Houston area and expect to add additional C&I team members in the coming months. The $600,000 in cost saves and $500,000 in added revenue are estimated to more than cover the expenses associated with this initial C&I expansion phase in the Houston area. We continue to evaluate expenses as well as revenue opportunities, and we'll update you on any further progress in future quarters. The markets we serve remain healthy and continue to grow and perform well.
Christian: We are executing on initiatives to expand C&I lending in our metropolitan markets to further diversify our loan portfolio increased revenue and grow deposits. We've hired a lady C&I relationship manager in the Houston area and expect to add additional C&I team members in the can.
Christian: In months.
Christian: The $600000 in cost saves and $500000 in added revenue are estimated to more than cover the expense associated with this initial C&I expansion phase in the Houston area.
Christian: We continue to evaluate expenses as well as revenue opportunities and will update you on any further progress in future quarters.
Christian: The markets, we serve remain healthy and continue to grow and perform well.
Lee R. Gibson: I look forward to answering your questions following Julie's remarks. I will now turn the call over to Julie. Thank you, Lee. Good morning.
Christian: I look forward to answering your questions. Following <unk> remarks, I will now turn the call over to Julie.
Julie N. Shamburger: Thank you, Lee. Good morning, everyone, and welcome to our second quarter call. We are pleased to report second quarter net income of $24.7 million, an increase of $3.2 million, or 14.7% on a linked quarter basis, and diluted earnings per share of $0.81, an increase of 14.1% linked quarter. We had slot loan growth of $12 million, or 0.3% linked quarter, and 1.1% annualized. Our annualized year-to-date loan growth was 2.9%. The growth was driven by increases of $59.4 million in commercial real estate loans and $17.5 million in 1-4 family residential loans, partially offset by decreases in construction loans of $53.4 million and municipal loans of $10.2 million.
Julie: Thank you Lee good morning, everyone and welcome to our second quarter call. We are pleased to report second quarter net income of $24 7 million, an increase of $3 2 million or 14, 7% on a linked quarter basis.
Earnings per share and 81 cents, an increase of 14, 1% linked quarter.
Julie: We have flat loan growth at $12 million or 3% linked quarter and one 1% annualized.
Julie: Annualized year to date loan growth was two 9%.
Julie: The growth was driven by increases at $59 4 million in commercial real estate loans and $17 5 million of one to four family residential loans, partially offset by decreases in construction loans at $53 4 million in municipal loans of $10 2 million.
Julie N. Shamburger: The average interest rate of loans funded during the quarter was approximately 8%. As of March 31st, our loans with oil and gas industry exposure were $120.8 million, or 2.6% of total loans. Our allowance for credit losses decreased $762,000 for the linked quarter to $45.6 million. Asset quality metrics remain strong.
Julie: The average interest rate of loans funded during the quarter was approximately 8%.
Julie: As of March 31st our loans with oil and gas industry exposure or $128 million.
Julie: 6% of total loans.
Julie: Ireland for credit losses decreased 762000 for the linked quarter to $45 6 million.
Julie N. Shamburger: Non-performing assets decreased to $6.9 million from $8 million, or 0.08% of total assets on June 30th compared to 0.10% at March 31st. On June 30th, our allowance for loan losses as a percentage of total loans was 0.92% compared to 0.95% on March 31st. Our securities portfolio was $2.71 billion at June 30th, consistent with March 30th. As Lee mentioned, we sold municipal securities and replaced them with higher-yielding agency mortgage-backed securities and, to a lesser extent, U.S. Treasury bills.
Julie: Asset quality metrics remained strong nonperforming assets decreased to $6 9 million from 8 million or 8% of total assets on June 30, as compared to 10% at March 31st.
Julie: On June 30th.
Julie: For loan losses, as a percentage of total loans risk, 0.92% compared to nine 5% on March 31st.
Julie: Our securities portfolio with $2 seven 1 billion at June 30th consistent with March 30th.
Julie: As Wayne mentioned, we saw municipal securities and replace them with higher yielding agency mortgage backed securities and to a lesser extent U S Treasury bills.
Julie N. Shamburger: In connection with the sale of the municipal securities, we unwound the fair value swaps associated with the hedged items, which resulted in a net loss in the second quarter of $563,000. Additionally, there were no transfers of AFS securities during the second quarter.
Wayne: In connection with the sale of the municipal Securities, We unwound, the fair value swaps associated with the hedged guidance, which resulted in a net loss in the second quarter at $563000.
Speaker Change: There were no transfers diantha securities during the second quarter.
Julie N. Shamburger: As of June 30th, we had a net unrealized loss in the AFS securities portfolio of $48.3 million compared to $48.8 million last quarter. At March 31, the unrealized gain on the fair value hedges on municipal and mortgage-backed securities was approximately $18.6 million compared to $20.4 million last quarter. This unrealized gain partially offsets the unrealized losses in the AFS securities portfolio. As a result, our AOCI on June 30, 2024 was a net loss of $111 million compared to a net loss of $110.9 million on March 31, 2024.
Speaker Change: As of June 30, we had a net unrealized loss in the securities portfolio at $48 3 million compared to $48 8 million last quarter.
Speaker Change: At March 31st the unrealized gain on the fair value hedges on municipal and mortgage backed securities was approximately $18 6 million compared to 24 million linked quarter.
Speaker Change: This unrealized gain partially offset the unrealized losses in the securities portfolio.
Speaker Change: Our IFC on June 32024, with a net loss of $111 million compared to a net loss of $110 9 million on March 31 2024.
Julie N. Shamburger: The net loss was comprised of net losses on our securities and swap derivatives of $92.5 million and $18.5 million related to our retirement plans. As of June 30th, the duration of the total securities portfolio was 8.9 years, and the duration of the AFS portfolio was 6.7 years, a slight increase from 9.1 years and 6.9 years, respectively, at March 31st.
Speaker Change: Net loss was comprised of net losses on our securities and swap derivatives of $92 5 million and $18 5 million related to our retirement plans.
Speaker Change: As of June 30, the duration and the total securities portfolio was $8 nine years and the duration in the <unk> portfolio was six seven years.
Speaker Change: A slight increase from nine one years and $6 nine years, respectively at March 31st.
Julie N. Shamburger: At quarter end, our mix of loans and securities was 63% and 37%, respectively, with no change in the mix from March 31st. Deposits decreased $49.8 million, or 0.8%, on a linked quarter basis due to a decrease in public fund deposits of approximately $71 million and broker deposits of $100 million. These decreases were partially offset by an increase of approximately $121 million in deposits from an account that increases at this time each year for a short time and is expected to end in the third quarter.
Speaker Change: At quarter end, our mix of loans and securities was 63% and 37% respectively with no change in the mix from March 31.
Speaker Change: Deposits decreased $49 8 million or 8% on a linked quarter basis due to a decrease in public fund deposits of approximately $71 million and brokered deposits of 100 million. These.
Speaker Change: These decreases were partially offset by an increase of approximately $121 million in deposits from an account that increases at this time each year for our short tonne and is expected to exit in the third quarter. This account enabled us to reduce our brokered deposits during the same time.
Julie N. Shamburger: This account enabled us to reduce our broker deposits during this same time, saving approximately 190 basis points. Our capital ratios remain strong, with all capital ratios well above the capital adequacy and well-capitalized threshold. Liquidity resources remain solid, with $2.24 billion in liquidity lines available as of June 30. During the second quarter, we purchased 57,966 shares of our common stock at an average price per share of $26.22. We have not purchased any shares subsequent to June 30th, and we have approximately 583,000 authorized shares remaining for repurchase.
Speaker Change: Saving approximately 190 basis points.
Speaker Change: Our capital ratios remained strong with all capital ratios, well above the capital adequacy and well capitalized threshold.
Speaker Change: Liquidity resources remained solid with $2 4 billion in liquidity lines available as of June 30th.
Speaker Change: During the second quarter repurchased 57966 shares of our common stock at an average price per share of $26.22.
Speaker Change: We have not purchased any shares subsequent to June 30, yes.
We have approximately 583000 authorized shares remaining for repurchase.
Julie N. Shamburger: Our tax equivalent net interest margin increased one basis point on a linked quarter basis to $2.87 from $2.86. The tax equivalent net interest spread decreased for the same period by 3 basis points to $213, down from $216. For the three months ending June 30th, we experienced a slight increase in net interest income of $260,000, or 0.5% compared to the length of the quarter. Non-interest income excluding the net loss on the sales of AFS securities increased $2.4 million, or 24.4%, for the linked quarter, primarily due to the increase in BOLI income of approximately $1 million due to a death benefit on a former covered officer realized in the second quarter, a loss on the sale of loans in the first quarter, an increase in deposit services income, and trust fees.
Speaker Change: Our tax equivalent net interest margin increased one basis point on a linked quarter basis to 287 from 286, the tax equivalent net interest spread decreased for the same period by three basis points to 213 down from 2016.
Speaker Change: For the three months ended June 30th we experienced a slight increase in net interest income of 260000 or half a percent compared to the linked quarter.
Speaker Change: Non interest income excluding the net loss on the sales of <unk> Securities increased $2 4 million or 24, 4% for the linked quarter, primarily due to the increase in <unk> income of approximately $1 million due to a death benefit on former covered officer really.
Speaker Change: <unk> in the second quarter, our loss on sale of loans in the first quarter, an increase in deposit services income and trust fees.
Julie N. Shamburger: Non-interest expense decreased $1.1 million on a linked quarter basis to $35.8 million, driven by decreases in salary and employee benefits, primarily due to approximately $618,000 recorded in the first quarter associated with future cost reductions. Based on the estimated cost savings reported last quarter, we are expecting quarterly expenses of $37 million for the remaining two quarters of 2024. Our fully taxable equivalent efficiency ratio decreased to 52.71% as of June 30th from 55.54% as of March 31st.
Speaker Change: Noninterest expense decreased $1 1 million on a linked quarter basis to $35 8 million driven by decreases in salary and employee benefits primarily due to approximately 618000 recorded in the first quarter associated with future cost reductions.
Speaker Change: Based on the estimated cost savings reported last quarter, we are expecting quarterly expense of 37 million for the remaining two quarters of 2024.
Speaker Change: Our fully taxable equivalent efficiency ratio decreased to 50, 271% as of June 30th from 50 554 as of March 31.
Julie N. Shamburger: We recorded income tax expense of $5.2 million, an increase of $590,000 compared to the first quarter. The increase in tax expense was driven by an increase in pre-tax income. Our effective tax rate decreased slightly to 17.4% for the second quarter from 17.7% in the previous quarter. We currently estimate an annual effective tax rate of 17.6% for 2024.
Speaker Change: We recorded income tax expense of $5 2 million, an increase of 590000 compared to the first quarter.
Speaker Change: The increase in tax expense. This is gerald and an increase in pre tax income.
Speaker Change: <unk> tax rate decreased slightly to 17, 4% for the second quarter from $17 seven in the previous quarter.
Speaker Change: We currently estimate an annual effective tax rate of 17, 6% for 2024.
Operator: Thank you for joining us today. This concludes our comments, and we will open the line for your questions. And thank you.
Speaker Change: Thank you for joining US today. This concludes our comments and we'll open the line for your questions and Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster in one moment.
Operator: And thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from Woody Lay from KBW. Your line is now open.
Speaker Change: First question.
Wood Neblett Lay: And our first question comes from Woody lay from K BW. Your line is now open.
Wood Neblett Lay: Hey, thanks for taking my question. Good morning. I wanted to start on the NIM. Obviously, there are a couple of different moving pieces there. I think in the opening comments you called out sort of a short-term in nature deposit account that benefited the NIM in the quarter. Any way to quantify how much of an impact that had on either the NIM or NII?
Wood Neblett Lay: Hi, Thanks for taking my question wanted to good morning.
Speaker Change: Alright.
Wood Neblett Lay: Yeah. Good morning wanted to start on the NIM.
Speaker Change: Obviously.
Speaker Change: Couple of different moving pieces, there I think in the opening comments you called out sort of.
Speaker Change: Short term in nature deposit account.
Speaker Change: That benefited the NIM in the quarter any way to quantify how much of an impact that was on either the NIM or NII.
Julie N. Shamburger: I can tell you that the account started accumulating money probably in early June and reached that high of around $120 million on June 30th. So, you know, I don't know what the exact average was, but I'm going to guess it was $60 million for that for that one month. So, you know, one sixth of the quarter we've experienced to benefit from that $60 million. I have not quantified it in basis points, but it's probably going to leave sometime in August is what we estimate at this point in time. It's an account that does this every year, and they build up to a certain level, and then they use the money for the purposes that it was raised for. Got it.
Speaker Change: Yeah.
Speaker Change: I can tell you that.
Speaker Change: The account started accumulating money.
Speaker Change: <unk> in early June.
<unk> reached that high of around $120 million.
Speaker Change: At June 30th So I don't know exactly what the exact average was but I'm going to guess it was $60 million for that.
Speaker Change: For that one month so.
Speaker Change: One six.
Speaker Change: <unk>.
Speaker Change: Experienced a benefit on that $60 million.
I have not quantified in basis points.
Speaker Change: But likely its probably going to leave some time in August is what we estimate at this point in time.
Speaker Change: It's an account that does this every year and they build up to a certain level and then.
They.
Speaker Change: Take the money and for the purposes that it was raised for.
Julie N. Shamburger: Got it. And that account is listed in the interest-bearing bucket. That is correct. Okay. And then with the securities reposition, you know, we've seen a pullback in longer-term rates over the past couple months. Is there an opportunity for further repositioning from here?
Speaker Change: Got it in that account.
Speaker Change: On the interest bearing bucket.
Speaker Change: That is correct.
Speaker Change: Okay.
Speaker Change: And then with.
Speaker Change: The securities repositioning, we've seen a pullback in longer term rates over the past couple of months is there an opportunity for further repositioning from here.
Julie N. Shamburger: It's possible, and, you know, we're going to continue to look for those opportunities. You know, we've been doing it off and on now for, you know, probably the last 18 to 24 months. And, you know, as we find opportunities, especially with the fair value swaps that we have in place, you know, and we can get a reasonable payback, and we're going to look for those opportunities. I don't have anything specific right now, but, you know, we're obviously going to, as rates change, as spreads change on the various securities, you know, we're actively looking at that.
Speaker Change: It's possible and we'll we're.
Speaker Change: We're going to continue to look for those opportunities we've been doing it off and on now or.
Speaker Change: Probably the last 18 to 24 months and.
Speaker Change: If we find opportunities.
Especially with the fair value of swaps that we have in place.
Speaker Change: And we can get a reasonable payback and we're going to look look for those opportunities.
Speaker Change: I don't have anything specific right now but.
Speaker Change: Yes, we are.
Speaker Change: Obviously as rates change as spreads.
John: John the various securities.
John: We're actively looking at that.
Lee R. Gibson: Yeah, and then maybe lastly, on the longer front, any expectations for growth in the back half of the year, you've got the CNI initiative coming on board, but I would imagine that would take some time to contribute to growth.
John: Yes, and then maybe lastly on the loan growth front any expectations.
John: For growth in the back half of the year, you've got the C&I initiative.
John: Coming onboard, but I would imagine that would.
Speaker Change: That would take some time to contribute to the growth.
Lee R. Gibson: Yeah, I think it will, you know, we may see some growth occur as a result of that in the fourth quarter, but I don't think it'll be 2025 before we, we believe that's going to be significant in nature. So, likely, most of the growth will be continued funding on our construction portfolio and other, you know, full funders on the CRE.
Speaker Change: Yes, I think it will.
Speaker Change: We may see some growth occur as a result of that in the fourth quarter, but I don't think it is.
Speaker Change: It'll be 2025 before.
Speaker Change: We believe that's going to be significant in nature, so likely most of the growth will be.
Speaker Change: <unk> fundings on our construction portfolio and other full funders on the CRE front.
Wood Neblett Lay: Yep. All right, thanks for taking my question.
Speaker Change: Alright, Thanks for taking my question.
Operator: All right, thank you, and thank you. And one moment for our next question, and our next question comes from Brett Rabatin from Hovde. Your line is now open.
Speaker Change: Alright, thank you.
Speaker Change: Thank you and one moment our next question.
Speaker Change: And our next question comes from Brett Baton from <unk>. Your line is now open.
Brett D. Rabatin: Hey, good morning, everyone. Good morning.
Speaker Change: Hey, good morning, everyone.
Operator: Wanted to ask, just staying on the margin, so it looks to me like the securities portfolio actions you've taken, if I look at it right, didn't really affect the second quarter that much. Do those actions raise the margin in 3Q, or does the cost of funds, you know, is that going to be an offset in the back half of the year? Just any thoughts on the tenor of the margin?
Speaker Change: Good morning.
Speaker Change: Wanted to ask.
Speaker Change: Staying on the margin so it looks to me like the securities portfolio actions you've taken.
Speaker Change: I look at it right it didn't really affect the second quarter that much to those actions.
Speaker Change: Raise the margin.
Speaker Change: <unk> or just the cost of funds.
Speaker Change: Is that going to be an offset in the back half of the year just any thoughts on the tenor of the margin in the back half.
Julie N. Shamburger: Most of those transactions took place in late May, but the bulk of them took place in June. And so there really wasn't much impact that we saw in the second quarter. Most of that impact will be in the third quarter, and I agree with you. I think as long as the Fed funds rate stays where it is, that's mainly going to mitigate any potential impact as a result of potential deposit increases, um, and really, it's just a point when we reach that point where the Fed those decreases rates, then I think that pressure will wane, and it'll move the other direction.
Speaker Change: Most of those transactions took place in either late may but the.
Speaker Change: Bulk of them took place in June.
Speaker Change: So there really wasn't much impact that we saw in the in the second quarter most of that impact demand in the third quarter and I agree with you I think as long as.
Speaker Change: The fed funds rate stays where it is.
Speaker Change: That mainly going to mitigate any.
Speaker Change: Potential impact as a result of.
Speaker Change: Potential deposit increases.
Speaker Change: And really it's just a 0.1.
Speaker Change: When we reach that point, where the where the fed does.
Speaker Change: Does the crush rates and I think that pressure will.
Speaker Change: Wayne and will move the other direction.
Julie N. Shamburger: And then on the expense guidance, if I heard you correctly, Julie, was that $37 million for the back half of the year? (inaudible) That is correct.
Speaker Change: Okay.
Speaker Change: And then on the expense guidance. If I heard you correctly is that was that $37 million for the back half of the year.
Speaker Change: Yes.
Craig: This is Craig.
Julie N. Shamburger: OK. And so, you know, looking at TQ versus $37 million. I know you've obviously made some changes and done some things to improve efficiency, you know, growth in the back half because of the initiatives that you've added. Can you maybe give us some color on growth in the back half of the year?
Speaker Change: Okay, and so you know.
Speaker Change: Looking at.
Speaker Change: Take you versus the 37 million I know, you've obviously made some changes in vessel things to improve.
Speaker Change: Efficiency is.
Or is the growth in the back half because of.
Speaker Change: The initiatives that you've added can you maybe give us some color on.
Speaker Change: <unk>.
Speaker Change: The growth in the back half of the year.
Julie N. Shamburger: Well, originally, we started off with a budget of roughly $37.9 million. And then we did some cost containment efforts in the first quarter and kind of projected out that that would have an eight or $900,000 or maybe a seven or $800,000 impact on the third and fourth quarter. So, you know, I'm taking that off.
Speaker Change: Well originally we started off with a budget of roughly 37 9 million and then we did some of the cost containment efforts.
Speaker Change: In the first quarter and kind of projected out that that would have been.
Speaker Change: Eight or 900000 dollar alright, maybe it was seven or $800000 impact on the third and fourth quarter. So.
Julie N. Shamburger: Certainly, we continue, and you know, and want to err on the side of caution with respect to software and software expense continues to remained steady, and actually, most of the categories, if you look at them quarter to quarter, were pretty steady with the exception of salaries and employee benefits. So I really just didn't want to project a lower number. I mean, so far, we have been below that anticipated budget, but we just didn't want to project it any lower than that for the third and fourth quarters.
Speaker Change: Sure.
Speaker Change: Taking that off.
Speaker Change: Certainly we continue.
Speaker Change: Wanted to err on the side of caution with respect to software and software expense continues.
Speaker Change: <unk> steady and actually most of the categories. If you look at them quarter to quarter, we're pretty steady with with the exception of salaries and employee benefits.
Speaker Change: So.
Speaker Change: Really just didnt wanted.
Speaker Change: Project lower number I mean, so far we have been lower than that anticipated budget that just didn't want to projected any lower than that for the third and fourth quarter.
Julie N. Shamburger: Yeah, that's helpful. And then we're probably being conservative. Yeah, I mean, we are being conservative.
Speaker Change: Yes that helps.
Speaker Change: Yes, that's helpful and then.
Julie N. Shamburger: Yeah, I mean we are being confirmed.
Speaker Change: And conservative.
Speaker Change: I mean, we are being conservative.
Speaker Change: <unk>.
Lee R. Gibson: And then just lastly on credit, you know, the results are really pristine, and you reduce the reserve with the negative provision. Any thoughts on, or criticism of, assets lower, you know, any color on, if you guys are basically just not seeing anything from a credit perspective at this point in time.
Speaker Change: Okay.
Speaker Change: And then just.
Speaker Change: Just lastly on credit.
Speaker Change: Results are really.
Speaker Change: Christine and you reduced.
Speaker Change: The reserve with it.
Speaker Change: With a negative provision.
Speaker Change: Any any any thoughts on or criticized assets lower any color on if you guys. Just are basically just not seeing anything from a credit perspective at this point in terms of any.
Speaker Change: Borrower stress.
Lee R. Gibson: Yeah, we once a month have our watch list meeting, and it's basically any credits that are criticized at all. I came away from that meeting, you know, not losing sleep over any of them.
Speaker Change: Yes.
Speaker Change: We have our watch list.
Speaker Change: Meeting basically any credits that are criticized at all.
Speaker Change: I came away from that meeting.
Speaker Change: Not losing sleep over any of them.
Lee R. Gibson: I think we have one small, very small credit that we think we'll have a small loss on. But it looks like now that that loss is gonna be less than what we've reserved for Beyond that, you know... There's just, with the equity that we had going into deals, it just doesn't look like, at this point, we're seeing any credits that give us any significant concern. Obviously, we have ones that we watch, and we get reporting on a monthly basis, but many of them are trending in the right direction. So that's encouraging.
Speaker Change: I think we have one small very small credit that we think will have a small loss and but it's.
Speaker Change: It looks like now that loss is going to be less than what we have reserved for.
Speaker Change: Beyond that.
Speaker Change: There's just.
Speaker Change: With the equity that we had going into deals.
Speaker Change: It just doesn't look like we are.
Speaker Change: At this point, we're seeing any credits that.
Give us any significant concern.
Speaker Change: Obviously, we have ones that we watch and we get reporting on a monthly basis, but.
Speaker Change: Many of them are trending in the right direction. So that's.
Speaker Change: That's encouraging.
Brett D. Rabatin: Okay, great. I appreciate all the callers. (inaudible)
Speaker Change: Okay, Great I appreciate all the color.
Operator: And thank you. And if you have a question, that is star 11. Again, if you have a question, that is star 11. And one moment for our next question. And our next question comes from Matt Olney from Stevens. Your line is now open.
Speaker Change: And thank you and if you have a question that is star one one again if you have a question that is star one one and one moment our next question.
Speaker Change: And our next question comes from Matt Olney from Stephens. Your line is now open.
Matthew Covington Olney: Hey, thanks, good morning. Good morning.
Matthew Covington Olney: Hi, Thanks, good morning.
Operator: One asked about the fees. A good quarter of fees, even after I made a few adjustments that you noted. Would love to hear any commentary about expectations for fees for the back half of the year.
Matthew Covington Olney: Good morning.
Matthew Covington Olney: Want to ask about the fees.
Speaker Change: Good quarter of fees, even after I make a few adjustments that you noted would love to hear any commentary about expectations for fees for the back half of the year.
Julie N. Shamburger: I think, you know, we mentioned that we did some repricing and we needed to in the wealth management and trust area. So we anticipate those fees are going to, you know, that wouldn't reoccur in the third quarter. But overall, fees, it's been encouraging this year to see the fees move in the direction they have.
Speaker Change: Hi, Thanks.
Speaker Change: We mentioned that we did some repricing and we needed to in their wealth management and.
Speaker Change: Trust area. So we anticipate those fees are going to.
Speaker Change: Go up the last half of the year also our brokerage.
It's doing extremely well, so I think that that's going to.
Speaker Change: Go up and then the.
Speaker Change: Deposit service fees.
Speaker Change: Really done probably better than we originally budgeted and anticipated so.
Those are really the areas.
Speaker Change: Obviously, then we have the extra boley income, but that was a death benefit so.
Speaker Change: <unk>.
Speaker Change: We are hopeful that didn't reoccur in the third quarter.
Speaker Change: But overall fees.
It's been encouraging this year to see <unk> move in the direction they have.
Lee R. Gibson: Okay, appreciate that. And then the Houston C&I hiring, appreciate it, may take some time to get some traction there. We'd love to hear maybe kind of some longer-term plans. I guess it's early as far as the team, you're still looking for new employees, but maybe it's a longer-term strategy that you want to build out there.
Speaker Change: Okay I appreciate that and then.
Speaker Change: The Houston.
Speaker Change: C&I hiring.
Speaker Change: I appreciate it may takes them some time to get some traction there.
Speaker Change: I think it may be kind of some some longer term plans.
Speaker Change: Uh huh.
Speaker Change: I guess, it's early as far as the team you're still looking for new new employees, but maybe its a longer term strategy.
Lee R. Gibson: Yeah. I think our plan is, and it's going to occur over many, many quarters, is we're going to build out that Houston area first, and then we'll decide whether to move to DFW or Austin next. But those would be the three markets that we would build out some additional C&I lending teams that can focus on small to mid-size C&I lending in those areas, and that will be their primary focus, so that we can further expand our C&I lending in those metro markets. But we're going to start with the greater Houston area, and then we'll move forward. But we're anticipating, and we're hopeful by year end, we'll have a large part of the team in place in Houston.
Speaker Change: Matt you want to build out there.
Speaker Change: Yes.
Speaker Change: Our plan is.
Matthew Covington Olney: Going to occur over over many many quarters.
Matthew Covington Olney: As well, we're going to build out the Houston that Houston area first.
Matthew Covington Olney: And then we'll decide whether to move to DFW, our Austin next but.
Matthew Covington Olney: Those would be the three markets that we would build out some additional C&I lending teams that.
Matthew Covington Olney: <unk> focus on small to mid size C&I.
Matthew Covington Olney: C&I lending in those areas and that that will be their primary focus.
Matthew Covington Olney: So that we can we can further expand our C&I lending in those metro markets, but we're going to start with.
Matthew Covington Olney: The greater Houston area and.
Matthew Covington Olney: And then we'll move forward, but we're anticipating we're hopeful by year end, we'll have a large part of the team in place.
Matthew Covington Olney: In Houston.
Lee R. Gibson: Okay, and I guess your existing footings in some of those larger metro Texas markets, I assume at this point, those are mostly real estate based, so these new teams would kind of complement those existing teams?
Matthew Covington Olney: Okay.
Matthew Covington Olney: Okay, and I guess your existing footings in some of those larger Metro Texas markets I assume at this point those are mostly real estate base.
Matthew Covington Olney: These new teams would.
Matthew Covington Olney: Kind of complement those existing teams.
Lee R. Gibson: That is correct. I mean, we do have some C&I lenders in the various markets. But, you know, if you were to look at the concentration of lenders we have, they're much more heavily focused in the CRE arena. Slayton.
Matthew Covington Olney: That is correct.
Matthew Covington Olney: We do have some C&I lenders in the various markets.
Matthew Covington Olney: If you were to look at.
Matthew Covington Olney: The concentration of the lenders we have there are much more heavily focused in the CRE arena.
Matthew Covington Olney: Right, okay. Okay, thanks for the commentary.
Matthew Covington Olney: Right.
Matthew Covington Olney: Yeah.
Matthew Covington Olney: Okay. Thanks for the commentary.
Matthew Covington Olney: Alright, thank you.
Lee R. Gibson: and thank you. And I'm showing no further questions. I would now like to turn the call back over to Lee Gibson, CEO, for closing remarks.
Matthew Covington Olney: And thank you.
And I'm showing no further questions I would now like to turn the call back over to Lee Gibson CEO for closing remarks.
Lee R. Gibson: Thank you everyone for joining us today. We appreciate your interest in Southside Bancshares along with the opportunity to answer your questions. In closing, we're looking forward to our prospects during the second half of 2024 and reporting third quarter results to you during our next earnings call in October. This concludes the call.
Speaker Change: Thank you everyone for joining us today, we appreciate your interest in the SaaS side Bancshares, along with the opportunity to answer your questions.
Operator: In closing, we're looking forward to our prospects during the second half of 2024 and reporting third quarter results to you during our next earnings call in October.
In closing, we're looking forward to our prospects during the second half of 2024 and reporting third quarter results to you during our next earnings call in October.
Operator: This concludes the call.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Good bye.
Speaker Change: This concludes the call.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
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].