Q2 2025 Southside Bancshares Inc Earnings Call

Unknown Executive: session, you will need to press star 11 on your telephone. to remove yourself from the queue. You may press star 11 again.

Lindsey Bales: I would now like to hand the call over to Lindsey Bales, Vice President, Investor Relations. Please go ahead.

Question to ask a question during the session, you will need to press star 1, 1 on your telephone, to remove yourself from the queue. You may press star 1 1 again.

Lee Gibson: Thank you, Lateef.

Lee Gibson: Good morning, everyone. And welcome to Southside Bankshare's second quarter 2025 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 remind you forward-looking statements are subject to risk and uncertainties. Factors that could materially change our current forward-looking assumptions are described in our earnings release in our Form 10-K.

I would now like to hand the call over to lindsy Bales vice president investor relations. Please go ahead.

Thank you Latif. Good morning, everyone and welcome to salsa Bank shares. Second quarter, 2025 earnings call a transcript of today's call will be posted on southside.com under investor relations.

Lee Gibson: Joining me today are CEO Lee Gibson, President Keith Donahoe, and CFO Julie Shamburger. Firstly, we'll start us off with his comments on the quarter, then Keith will discuss loans and credit, and then Julie will give an overview of our financial results.

During today's call in another disclosures and presentations, I remind you for looking statements or subject to risk, and uncertainties factors that could materially change. Our current forward-looking assumptions are described in our earnings release and our form 10K.

Lee Gibson: I will now turn the call over to Lee. Thank you, Lindsey, and welcome to today's call. We had an excellent quarter with net income of $21.8 million, resulting in diluted earnings per share of $0.72, an annualized return on average assets of 1.07%, and an annualized return on average tangible common equity of 14.38%.

Speaker Change: Joining me today are CEO Lee Gibson president Keith Dono and CFO Julie. Shamburger firstly, we will start us off with his comments on the quarter. Then Keith will discuss loans and credit and then Julie will give an overview of our financial results. I will now turn the call over to Lee

Lee Gibson: I want to thank our dedicated team members for their hard work and contributions that were instrumental in producing these results. Linked quarter, our net interest margin increased nine basis points to 295. and Net Interest Income increased $414,000 to $54.3 million. The yield on our earning assets increased two basis points, and the cost of our interest-bearing liabilities decreased by five basis points. linked quarter total loans increased $35 million while average total loans during the quarter decreased $106 million primarily due to heavy payoffs during the first two months of the quarter. Linked quarter total loan growth resulted from the strong net loan growth of $104 million during June, a large portion of which occurred during the last two weeks.

Lee Gibson: Thank you, Lindsay and welcome to today's call. We had an excellent quarter with net income of 21.8 million resulting, in diluted earnings per share of 72 cents an annualized, return on average assets of 1.07%, and an annualized return on average tangible common Equity of 14.38%.

Lee Gibson: I want to thank our dedicated team members for their hard work and contributions that were instrumental in producing these results. Linked quarter, our net interest margin increased 9 basis points to 295

And net interest income increased 414,000 to 54.3 million.

The yield on our earning assets, increased 2 basis points, and the cost of our interest bearing liabilities decreased by 5 basis points.

Lee Gibson: Linked quarter total loans increased 35 million. While average total loans during the quarter decreased 106 million, primarily due to heavy payoffs during the first 2 months of the quarter.

Lee Gibson: We anticipate this late quarter loan growth bodes well for potential further NIM expansion during the third quarter.

Lee Gibson: Length, quarter total loan growth, resulted from the Strong net, lung growth of 104 million during June a large portion of which occurred during the last 2 weeks.

Lee Gibson: We anticipate this low this late quarter, loan growth.

Lee Gibson: Our loan pipeline is solid and shortly Keith will provide additional details related to the second quarter loan activity and our current loan pipeline. Our deposits, net of public funds and broker deposits increased $90.1 million linked quarter. Based on discussions with our customers related to the uncertainties in the market surrounding tariff announcements and the ongoing related negotiation Overall, we remain optimistic. While it's too early to discern the likely outcome of these tariff announcements and negotiations, the current economic conditions and overall growth prospects for our markets continue to reflect a positive outlook. Overall, the Texas markets we serve remain healthy and continue to report both job and population growth.

Boats. Well for potential further. Nim expansion during the third quarter.

Lee Gibson: Our loan pipeline is solid and shortly. Keith will provide additional details related to the second quarter loan activity, and our current loan pipeline, our deposits, net of public funds, and broker, deposits increase, 90.1 million, linked quarter.

Lee Gibson: based on discussions with our customers related to the uncertainties in the market, surrounding tariff announcements, and the ongoing related negotiation,

Overall, we remain optimistic.

Lee Gibson: While it's too early to discern the likely outcome of these tariff announcements. And negotiations, the current economic conditions and overall growth prospects for our markets, continue to reflect a positive outlook.

Keith Donahoe: I look forward to answering your questions and will now turn the call over to Keith Donovan. Thank you, Lee. The second quarter new loan production totaled approximately $293 million compared to the first quarter production of $142 million. Of the new loan production, $228 million funded during the quarter with the remaining portion expected to fund over the next six to nine quarters. Despite strong new loan production, we continue to experience meaningful payoffs, resulting in muted loan growth during the second quarter. Excluding regular amortization and line of credit activity, second quarter payoffs totaled $200 million. Consistent with the first quarter, commercial real estate loans continue to be the largest source of payoff.

Lee Gibson: Overall, the Texas markets, we serve remain healthy and continue to report, both job and population growth.

Speaker Change: I look forward to answering your questions and we'll now turn the call over to keithon.

Speaker Change: Thank you Lee. The second quarter of new Loan Production total of approximately 293 million compared to the first quarter of production of 142 million.

Of the new Loan Production 228 million funded during the quarter with the remaining portion expected to fund over the next 6 to 9 quarters.

Speaker Change: Despite strong new Loan Production, we continue to experience, meaningful payoffs resulting in muted, loan growth here in the second quarter.

Excluding regular amortization and line of credit activity. Second quarter payoffs total of 200 million.

Keith Donahoe: Second quarter's commercial real estate payoffs totaled approximately $150 million, including 13 loans secured by a variety of property types, retail, medical, office, multifamily, industrial, and commercial land. Commercial real estate payoffs were largely the result of open market property sales. However, two multi-family properties were refinanced with other lenders to include a life insurance company and a private debt fund. Both offered more aggressive loan-to-value limits and limited, if any, ongoing capital. In addition to the commercial real estate payoffs We experienced an unexpected $50 million payoff in our oil and gas portfolio. This resulted from a private equity firm's acquisition of a Southside customer.

Speaker Change: Consistent with the first quarter commercial real estate loans continue to be the largest source of payoff.

Speaker Change: Second quarter, uh, commercial real estate payoffs totaled. Approximately 150 million dollars, including 13 loans secured by a variety of property property types, retail medical office multifamily Industrial, and Commercial land.

Speaker Change: Insurance company and a private debt fund.

Both offered more aggressive loan to value limits and limited. If any ongoing Covenants

Speaker Change: in addition to the commercial real estate payoffs,

We experienced an unexpected $50 million payoff in our oil and gas portfolio.

Keith Donahoe: For the remaining half of 2025, we anticipate moderated payoffs and new loan production consistent with the first half of 2025. However, we are slightly lowering our loan growth guidance to 3 to 4% year over year. Currently, our loan pipeline exceeds $2.1 billion, representing a slight increase over first quarter's ending pipeline of $1.9 billion. The pipeline is well balanced with approximately 43% term loans and 57% construction and or commercial lines of credit. Historically, we closed between 25 and 30% of our pipe Additionally, we are making progress with our C&I initiative, which now represents approximately 30% of our total type.

Speaker Change: This resulted, from a private Equity firms, acquisition of the Southside customer.

Speaker Change: For the remaining half of 2025, we anticipate moderating payoffs and new Loan Production consistent with the first half of 2025.

However, we are slightly lowering our loan growth guidance to 3 to 4 percent year-over-year.

We are loan pipeline exceeds. 2.1 billion dollars. Representing a slight increase over first quarter's ending pipeline of 1.9 billion.

Speaker Change: The pipeline is well, balanced with approximately 43% term loans. And 57% construction Andor commercial lines of credit.

Speaker Change: Historically, we closed between 25 and 30% of our pipeline.

Keith Donahoe: up from 25% at the end of first quarter. Expansion of the Houston C&I team continued with two new relationship managers. One individual started in late June and the other individual started in early July. both have contributed to the expanded C&I pipeline. New C&I hires in the Houston market now stand at four individuals during the first six months of 2025.

Speaker Change: additionally, we are making progress with our cni initiative, which now represents approximately 30% of our total pipeline up from 25% at the end of first quarter,

Speaker Change: Expansion of the Houston. Cni, team continued with 2 new relationship, managers 1, individual started in late June and the other individuals started in early July.

Both have contributed to the expanded scene. I pipeline.

Keith Donahoe: Overall, credit quality remains strong. During the second quarter, non-performing assets increased slightly and remained concentrated in one large construction loan we moved into a non-performing category during the first quarter. The loan is secured by a newly built multifamily project with positive leasing activity and a sponsor that has demonstrated a willingness and financial capacity to support. As a percentage of total assets, non-performing assets remain unchanged at 0.39%. During the quarter, a $17.9 million payoff of a classified loan was partially offset by the migration to classified of a $6 million.

Speaker Change: New cni hires in the Houston Market. Now stand at 4 individuals, during the first 6 months of 2025,

Overall credit quality remains strong.

Speaker Change: During the second quarter non-performing assets, increase slightly and remain concentrated in 1. Large construction loan. We moved into a non-performing category during the first quarter.

Speaker Change: The loan is secured by a newly, built multi-family project with positive, leasing activity and a sponsor that has demonstrated a willingness and financial capacity to support.

As a percentage of total assets non-performing assets remain unchanged at 0.39%.

Keith Donahoe: Overall, classified loans decreased from $67 million at the end of the first quarter to $55.4 million at the end of the second quarter.

Speaker Change: During the quarter, a 17.9 million payoff of a classified loan was partially offset by the migration to classified of a 6.

Keith Donahoe: With that, I look forward to answering questions and will now turn the call over.

Overall classified, loans decreased from 67 million at the end of the first quarter to 55.4 million at the end of the second quarter.

Julie Shamburger: What's that? I look forward to answering questions and we'll now turn the call over to Julie.

Julie Shamburger: Thank you, Keith. Good morning, everyone. And welcome to our second quarter call. For the second quarter, we reported net income of $21.8 million, an increase of $306,000, or 1.4%, compared to the first quarter, and diluted earnings per share of $0.72 for the second quarter, an increase of $0.01 per share linked quarter. As of June 30, loans were $4.60 billion, a linked quarter increase of $34.7 million, or 0.8%. The length quarter increase was primarily driven by an increase of $28.8 million in commercial real estate loans, $12.3 million in construction loans, and $9 million in commercial loans, partially offset by a decrease of $7.5 million in municipal loans and $5.3 million in 1-4 family residential loans.

Speaker Change: Thank you Keith. Good morning everyone and Welcome to our second quarter. Call for the second quarter. We reported net income of 21.8 million in increase of 36,000 or 1.4% compared to the first quarter and deleted. Earnings per share of 72 cents for the second quarter and increase of 1 cent per share linked quarter.

Speaker Change: As of June 30th, loans were 4.60 billion a linked quarter increase of 34.7 million or 0.8%.

Speaker Change: The length quarter increase was primarily driven by an increase of 28.8 million in commercial, real estate loans,

Speaker Change: 12.3 million in construction loans, and 9 million in commercial loans.

Julie Shamburger: The average rate of loan spending during the second quarter was approximately 6.9%. As of June 30, our loans with oil and gas industry exposure were $53.8 million, or 1.2% of total loans, compared to $111 million, or 2.4% length quarter. The decrease occurred primarily due to the payoff of a large loan relationship of approximately $50 million. Non-performing assets remain low at 0.39% of total assets as of June 30th. Our allowance for credit losses decreased to $48.3 million for the linked quarter from $48.5 million on March 31st and our allowance for loan losses as a percentage of total loans decreased slightly to 0.97% compared to 0.98% at March 31st.

Speaker Change: Partially offset by a decrease of 7.5 million in Municipal loans and 5.3 million in 1 to 4 family residential loans,

Speaker Change: The average rate of loans funded during the second quarter was approximately 6.9%.

Speaker Change: As of June 30th, our loans with oil and gas industry, exposure were 53.8 million or 1.2% of total loans compared to 111 million or 2.4% length quarter.

Speaker Change: The decrease occurred primarily due to the payoff of a large loan relationship of approximately million dollars.

Speaker Change: non-performing assets, remain low, at 39% of total assets, as of June 30th,

Julie Shamburger: Our securities portfolio was $2.73 billion at June 30th, a decrease of $6.2 million or 0.02% from $2.74 billion last quarter. The decrease is driven primarily by maturities in principal payment. As of June 30th, we had a net unrealized loss in the AFS security portfolio of $60.4 million dollars, an increase of $9.2 million compared to $51.2 million last quarter. There were no transfers of AFS securities during the second quarter. On June 30, the annualized gain on the fair value hedges on municipal and mortgage-backed securities was approximately $5.2 million compared to $8.6 million last quarter. The unrealized gain, or this unrealized gain, partially offset the unrealized losses in the AFS securities portfolio.

Our allowance for credit losses, decreased to 48.3 million for the linked quarter, from 48.5 million on March 31st. And our allowance for loan losses. As a percentage of total loans, decreased slightly to 0.97% compared to 0.98% at March 31st.

Speaker Change: Driven primarily by maturities and principal payments.

Speaker Change: as of June 30th, we had a net unrealized loss in the AFS security portfolio of 60.4 million, an increase of 9.2 million compared to 51.2%

Speaker Change: There were no transfers of AFS Securities during the second quarter.

Speaker Change: On June 30th, the unrealized gain on the fair value. Hedges on Municipal and mortgage back Securities was approximately 5.2 million compared to 8.6 million Lynx quarter.

Julie Shamburger: As of June 30, the duration of the total securities portfolio was 8.4 years, and the duration of the AFS portfolio was 6.2 years, a decrease from nine in seven years respectively as of March 31. At quarter end, our mix of loans and securities was 63% and 37% respectively, consistent with last quarter. Deposits increased 41.1 million or 0.6% on a linked quarter basis due to an increase in broker deposits of $61 million and a $90.1 million increase in commercial and retail deposits, partially offset by a decrease in public fund deposits of $109.9 million. The increase in commercial deposits was due to an account that increases for a short period at this time each year and is expected to exit the bank in the third quarter.

Speaker Change: The unrealized gain or this unrealized gain, partially offset. The unrealized losses in the AFS Securities portfolio.

As of June 30th, the duration of the total security portfolio was 8.4 years in the duration of the AFS portfolio with 6.2 years. A decrease from 9 in 7 years respectively, as of March 31st,

Speaker Change: At quarter end, our mix of loans and securities with 63% and 37% respectively consistent with last quarter.

Speaker Change: Deposits increased 41.1 million, or 6%, on links quarter basis. Due to an increase in broker deposits of 61 million and a 90.1 million increase in commercial and Retail deposits.

Partially offset by a decrease, in public fund, deposits of 109.9 million.

Julie Shamburger: Our capital ratios remain strong, with all capital ratios well above the threshold for capital adequacy and well capitalized. Liquidity resources remain solid with $2.33 billion in liquidity loans available as of June 30th. We repurchased 424,435 shares of our common stock at an average price of $28.13 during the second quarter. Since quarter end and through July 23, we have repurchased 2,443 shares at an average price of $30.29 per share. We have approximately 156,000 shares remaining in the current repurchase authorization. Our tax equivalent net interest margin increased non-basis points on the linked quarter basis to $2.95 from $2.86.

The increase in commercial deposits was due to an account that increases for a short period at this time. Each year and is and is expected to exit the bank in the third quarter.

Our Capital ratios remain strong with all capital ratios. Well, above the threshold for Capital adequacy and well capitalized.

Speaker Change: Liquidity resources, remain solid with 2.33 billion in liquidity lines available as of June 30th.

We repurchased 424,435 shares of our common stock at an average price of $28.13 during the second quarter.

Speaker Change: Since quarter in and through July 23rd, we have repurchased 2,443 shares at an average price of $30.29 per share.

Speaker Change: We have approximately 156,000 shares remaining in the current repurchase authorization.

Julie Shamburger: The tax equivalent net interest spread increased for the same period by 7 basis points to $227 from $220. For the three months into June 30th, we had an increase in net interest income of $414,000 or 0.8% compared to the length quarter. Non-interest income, excluding net loss on the sales of AFS securities, increased $1.4 million, or 12.7% for the linked quarter, primarily due to an increase in swap fee income and deposit services income. Non-interest expense was $39.3 million for the second quarter, an increase of $2.2 million or 5.8% on a linked order basis, primarily driven by the $1.2 million write-off and demolition of an existing branch that was replaced with a new building.

Speaker Change: Our tax equivalent, net interest, margin increased non- basis points on the linked quarter basis to 295 from 286.

Speaker Change: The tax equivalent, net interest spread increased for the same period by 7 basis points to 227 up from 220.

For the 3 months ended June 30th. We have an increase in that interest in kind of 414,000 or 0.8% compared to the length quarter.

Speaker Change: Non-interest income, excluding net loss on the sales of AFS Securities, increased 1.4 million, or 12.7% for the length quarter.

Speaker Change: Primarily due to an increase in swap fee income and deposit Services income.

Speaker Change: Non-interest expense was 39.3 Million for the second quarter.

Speaker Change: An increase of 2.2 million or 5.8% on a linked quarter basis.

Julie Shamburger: As certain items in our budget continue to materialize, we expect to be in the $39 million range for the remaining quarters this year. Our fully taxable equivalent efficiency ratio decreased to 53.7% as of June 30th from 55.04 as of March 31st, primarily due to an increase in total revenue. We recorded income tax expense of $4.7 million, consistent with the prior quarter. Our effective tax rate was 17.8% for the second quarter, a decrease compared to 18% last quarter. We are currently estimating an annual effective tax rate of 18% for 2025.

Primarily driven by the 1.2 million write-off in demolition of an existing branch that was replaced with a new building.

Speaker Change: A certain items in our budget continue to materialize. We expect to be in the 39 million range for the remaining quarters this year.

Speaker Change: a fully taxable equivalent efficiency ratio decreased to 53.7% as of June 30th from 55.04 as of March, 31st primarily due to an increase in total revenue

We recorded income tax expense of 4.7 million consistent with the prior quarter.

Our affected tax rate was 17.8% for the second quarter. A decrease compared to 18% last quarter.

Julie Shamburger: Thank you for joining us today.

We are currently estimating an annual effective tax rate of 18% for 2025.

Unknown Executive: This concludes our comments and we will open the line for your questions. Thank you.

Speaker Change: Thank you for joining us today. This concludes our comments and we will open the line for your questions.

Unknown Executive: As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please stand by while we compile the Q&A roster.

Speaker Change: R11 on your telephone, to remove yourself from the queue. You may press star 1 1 again.

Speaker Change: Please stand by while we compile the Q&A roster.

Michael Rose: Our first question comes from the line of Michael Rose of Raymond James. Please go ahead, Michael. Hey, I guess good afternoon. Thanks for taking my questions. Maybe because you are, you know, big picture. We've seen a couple of deals here. Texas.

Speaker Change: Our first question.

Speaker Change: Comes from the line of Michael Rose of Raymond James. Please go ahead, Michael.

Lee Gibson: More broadly, one one bigger one last night, just wanted to get a sense for, you know, what you see is potentially the dislocation from a hiring and client acquisition front. And then, just given where you guys are on an asset side, just any updated thoughts around potential M&A for you all. Yeah, thank you. I do agree that there's some potential that, you know, we could pick up some people from some of these acquisitions, especially the out of state ones. And, you know, that's a real possibility. And certainly on our radar screen, it's good to see the activity finally begin to happen in Texas.

Michael Rose: Hey, I guess, good afternoon. Um, thanks for uh, taking my questions. Um, maybe could you start, you know, big picture? Um, we've seen a couple deals here and now announced in Texas and

Michael Rose: More broadly, uh, 1, 1, bigger 1 last night. Um, just wanted to get a sense for, you know, what you see is potentially the, the the dislocation opportunities from from a hiring and client acquisition front. And then, you know, just giving where you guys are on an asset side. Just any updated, you know, thoughts around potential m&a for for you all, thanks.

Lee Gibson: And we think that's going to lead to additional sellers coming out of Woodwork. And, you know, we would like to be a part of that at some point in time, if it strategically makes Okay, perfect.

Yeah, thank thank you. I I, I do agree that there's some potential that, um, you know, we could pick up some people from, uh, some of these Acquisitions, uh, especially the out of state ones. Um, and, you know, that's a real possibility and certainly on our radar screen. Uh, it's good to see the, uh, activity, finally begin to, uh, to happen in Texas. And we think that's going to lead to additional sellers, uh, coming out of the woodwork. And, you know, we would

Michael Rose: Like to be a part of that, at some point in time, if it's strategically makes sense.

Keith Donahoe: And then maybe just on the on the credit front, just any update on the on the multifamily credit that was added to restructure last year, just wanted to See if that's progressing as expected. Michael, this is Keith. Yeah, the loan continues to perform, still haven't had any, you know, missed payments, but the leasing activity on the asset continues to be positive.

Michael Rose: Okay perfect. Um and then uh may maybe just on the on the credit front. Um just any update on the on the multifamily credit that was added to uh, restructured last year. Just wanted to

Michael Rose: See if uh, that's progressing as expected.

Keith Donahoe: We do anticipate at the end of the year, when the maturity hits, that that loan will move out of the bank. And we don't see any reason why it wouldn't be able to do so at this point, but we are continuing to monitor the lease effect.

Michael Rose: All right, very helpful.

Michael Rose: Michael. This this is Keith. I yeah, the, the loan continues to perform still haven't had any uh, you know, missed payments, but the leasing activity on the asset continues to be positive. Um, we we do anticipate at the end of the year when the maturity hits, that that loan will move out of the bank, um, and we don't see any reason why it wouldn't be able to do so at this point, but we are continuing to monitor the reset activity.

Michael Rose: And then maybe just one final one for me. You know, it looks like, you know, you kind of effectively lowered your, your loan growth outlook, but I think that's more of a function of maybe a little bit softer growth this quarter. So just wanted to confirm that because you did say pipelines were, were solid. And then if you could just kind of size the pipeline opportunity, and maybe how much of the pipeline is comprised of, you know, kind of newer C&I loans around, you know, the efforts there. Thanks. Sure, yeah, you know, if you notice, we've produced more than twice the loans that we've produced in the first quarter.

Speaker Change: All right, very helpful. Um, and and then maybe just 1 final 1 for me. Um, you know, it looks like, you know, you kind of effectively lowered your your loan growth Outlook but I I think that's more of a function of of maybe a little bit softer growth, this quarter. Um, so just wanted to confirm that because you did say pipelines, were were solid and then then if you could just kind of size the the pipeline opportunity and and maybe how much of the pipeline is is comprised of uh you know kind of newer cni loans around uh you know the efforts there. Thanks.

Keith Donahoe: So we've had a lot of momentum moving forward. We anticipate on the growth side that to continue. The thing that's been a little bit harder to judge for us has been the payoffs. We know we have some payoffs still to come. It's the ones that kind of surprise us that we're not 100% sure. We don't know about the $50 million oil and gas reduction was a kind of out of the blue for us. But so we're, we're really bullish on the fact that production is going to be there. We're just not 100% sure what the payoff situation is going to look like.

Speaker Change: Sure. Yeah, you know the if if you noticed we produced more than twice the loans that we produced to the first quarter. So we've had a lot of momentum moving forward. We anticipate on the growth side that to continue. Um, the the thing that's been a little bit harder to judge for us has been the payoffs. We know we have some payoffs, still to come. It's the ones that kind of surprise us that we're not 100% sure and we don't know about the fifty million dollar oil and gas reduction was a kind of out of the blue for us.

Keith Donahoe: You add to it the fact that we did increase our pipeline total from $1.9 billion at the end of first quarter to $2.1 billion, so we're seeing a lot of opportunity. We're doing our best to compete with not just banks, but we're starting to see a lot of competition from the debt funds. We've got some numbers on that. It's a little bit surprising. We're seeing debt funds that are now pricing deals that banks were getting from a spread standpoint six months ago. Debt funds are really aggressive with their spreads at this point. As you know, they typically come with higher leverage and fewer covenants.

Um but so we're we're really bullish on the fact that production is going to be there, we're just not 100% sure what the payoff situation is going to look like.

Speaker Change: You add to it. The fact that we did increase our pipeline total from 1.9 billion, at the end of first quarter to 2.1 billion. So we're seeing a lot of opportunity.

Keith Donahoe: It's a tough competition, but we still feel pretty good about the second half of 2025 from a production standpoint. I hope that helps.

And we're doing our best to compete. Um, with not just Banks but we're starting to see a lot of of competition from the debt funds. Um, we've got some numbers on that, it's a little bit surprising there. We're seeing debt funds that are now pricing deals that Banks were getting, you know, from a spread standpoint. So, you know, 6 months ago, and so that funds are really aggressive with their, with, their spreads at this point. And and as, you know, they're they're typically come with, you know, higher leverage and fewer covenants. So it, it's a

Michael Rose: Yeah, it's great call. I really appreciate it. Thanks for taking my question. Thank you.

Speaker Change: Test competition. But we still feel pretty good about the second half of 2025 from a production standpoint.

Speaker Change: I hope that helps.

Unknown Executive: Once again, to ask a question, press star 11 on your telephone.

Speaker Change: Yeah, it's great call. I really appreciate it. Um, thanks for taking my questions. I'll step back.

Matt Olney: Our next question comes from the line of Matt Olney of Stevens. Please go ahead, Matt. Hey, thanks for taking the question, guys. I want to ask about the net interest margin, and we saw some improvement this quarter. Any more color on just the puts and takes on the direction of that margin from here in the back half of the year? And then specifically, can you add some color on on how dependent that margin outlook is on the loan growth? It sounds like the loan growth could be volatile based off the paydowns. And just curious how much of a driver that is for the margin.

Thank you. Once again to ask a question. Press star 1, 1 on your telephone. Our next question comes from the line of Matt only of Stevens. Please go ahead. Matt.

Julie Shamburger: Thanks. You know, we're up 12 basis points for the year. And looking at the average balance sheet, average loans have been down for the year. So, so far, it hadn't been dependent on loans. The encouraging thing is all that loan growth that we had occurred in the, in the, really, the last two to three weeks of June. So in terms of our average, average loans, you know, they're at the highest point they've really been at this entire year. So if we can continue to, to produce the loans, as Keith's discussing, and, and we have pretty good insight into what, what's going to happen the next couple of months, it's the, it's the payoffs that will be the difference.

Any more color on, just the puts and takes on the direction of that margin from here, and the back half of the year, and then specifically can you ask them color on on how dependent that margin Outlook is on the loan growth? Uh, it sounds like the loan growth could be volatile, based off the pay downs and just curious how much of a driver that is for the margin. Thanks.

Speaker Change: Uh,

Julie Shamburger: But if we can, if we can have net loan growth going forward, I think it's going to do nothing but really accrue to our benefit when it comes to the outlook for the NEM for the last half of the year. Okay, so it sounds like the margin has some tailwinds with or without the loan growth.

Speaker Change: you know, we're up, we're up 12 basis points for the year. And looking at the average balance sheet average loans have been down for the year. Uh, so so far it hadn't been dependent on loans. The encouraging thing is all that loan growth that we had occurred in the uh in the really the last 2 to 3 weeks of June. Uh, so in terms of our average average loans you know they're they're at the highest point. They've really been at this entire year. So if we can continue to uh to produce the loans as as Keys discussing and and we have a pretty good insight into what what's going to happen in the next couple of months. It's the it's the payoffs that will be the difference. Uh, but if we can, if we can have net loan growth, going forward, I think it's going to do nothing but really acrew to our benefit when it comes to the, uh, the outlook for the Nim, for the last half of the Year, Okay? So

Julie Shamburger: Maybe just some commentary on deposit competitions. Some of your peers in Texas are pointing towards increased competition that's perhaps going to put up a push up deposit pricing the back half a year in the absence of any kind of Fed cut. So just curious kind of what you're what you're We're really not saying that, you know, we've, we have focused previously in, you know, prior quarters, I'm putting on CDs, a lot of those CDs are, you know, we had a lot that matured. During this, this second quarter, we have another, I think, in the next 90 days, we have a little over $430 million that that will mature, we're not going to be able to save as much money as we did in the, in the first and second quarter on the maturities.

Speaker Change: So it sounds like the margin has some Tailwind with or without, uh, the lung growth. Um, maybe just some commentary on deposit competitions, some of your peers in Texas are pulling towards increased competition, that's perhaps going to put up, uh, push-up deposit pricing in the back half of the year, um, in the absence of any kind of fed cut. So just curious kind of what you're, what you're seeing.

Speaker Change: We're we're really not seeing that. Um, you know, we've we have focused previously in, you know, prior quarters, I'm putting on CDs, a lot of those CDs are, you know, we had a lot that matured uh, during this this second quarter we have another I think in the next 90 days we have a, a little over 430 million dollars that uh, that will mature.

Julie Shamburger: But we anticipate we'll, we'll, you know, be able to lower the average rate on those CDs at least 10 basis points, if not just a little bit more. So, you know, that that's really where the relief is going to come. And, you know, who knows whether the Fed's lower rates or what they're going to do. But, you know, we're, we believe that, that we will continue to see a little, you know, some relief in terms of pressure on deposit pricing over the over the last half of the year. Okay. Thanks, guys. All right. Thank you.

Speaker Change: We're not going to be able to save as much money as we did in the uh, in the first in the second quarter on the maturities. But we anticipate will will, you know, be able to lower the average rate on those CDs. At least 10 basis points, uh, if not just a little bit more. So um you know that that's really where the relief is going to come. And you know, who knows whether the feds, you know, lower rates, or what they're going to do. But um you know, we're we believe that that we will continue to see a little, you know, some relief in terms of pressure on deposit pricing over the over the last half of the year.

Speaker Change: Okay, thanks guys.

Lee Gibson: I would now like to turn the conference back to Lee Gibson for closing remarks. Thank you everyone for joining us today. We appreciate your interest in Southside Bancshares along with the opportunity to answer your questions. Our excellent second quarter results only reinforces our optimistic outlook for 2025.

Speaker Change: All right, thank you. I would now like to turn the conference back to Lee Gibson for closing remarks, sir.

Lee Gibson: We look forward to reporting third quarter results to you during our next earnings call in October.

Unknown Executive: This concludes the call. Thank you again. This concludes today's conference call. Thank you for participating. You may now disconnect. Goodbye.

Lee Gibson: Thank you everyone for joining us today. We appreciate your interest in Southside Bank shares along with the opportunity to answer your questions. Our excellent second quarter results. Only reinforces our optimistic outlook for 2025. We look forward to reporting third quarter results to you during our next earnings. Call in October, this concludes the call. Thank you again.

Lee Gibson: This concludes today's conference call, thank you for participating. You may now disconnect

Goodbye.

Unknown Executive: Thanks for watching!