Jordan Ghent

Jordan Ghent from Stephens asked about Southside's M&A strategy concerning target asset size and the approach to crossing the $10 billion threshold. He also sought clarification on whether the Q1 2026 operating expense forecast of $39.5 million included the one-time $800,000 charge related to subordinated notes redemption.

Answer

President and CEO Keith Donoho explained that the company typically targets acquisitions below $1.5 billion, but would consider a larger, significant transaction to propel them over $10 billion, acknowledging fewer $3-5 billion targets in Texas. CFO Julie Shamburger confirmed that the Q1 2026 operating expense forecast of $39.5 million does include the one-time $800,000 charge.

Jordan Ghent asked about Southside Bancshares' M&A strategy concerning target asset size and the approach to crossing the $10 billion threshold.

Answer

President and CEO Keith Donahoe explained that the company would not acquire targets in the $2 billion category, preferring those below $1.5 billion, unless an opportunity significantly propels them over $10 billion. He noted that opportunities below $2 billion are more common in Texas, and the strategy involves a 'puzzle' of transactions to approach and then exceed the $10 billion mark. Jordan Ghent also followed up with CFO Julie Shamburger, asking if the Q1 2026 operating expense forecast of $39.5 million includes the one-time charge of $800,000 related to the subordinated notes redemption. Julie Shamburger confirmed that it does include the one-time charge.

Jordan Ghent asked about the number of rate cuts Southside Bancshares is assuming through year-end and maybe even into 2026.

Answer

CEO Lee Gibson anticipated potential Fed movement next week, at least two cuts next year, and suggested that new leadership mid-next year might favor additional cuts, depending on inflation and employment data.

Jordan Ghent asked about expectations for future share buyback activity following the recent increase in authorization. He also sought insight into the growth trajectory of trust fees and their contribution to overall income, and the company's assumptions regarding the number of Fed rate cuts through year-end and into 2026.

Answer

CFO Julie Shamburger explained that the company's buyback strategy remains opportunistic, purchasing shares when the price dips, and that there's no plan for aggressive activity. CEO Lee Gibson and President Keith Donahoe expressed optimism for double-digit revenue growth in trust fees next year, driven by a strong team and potential expansion into metro markets. Mr. Gibson anticipated potential Fed movement next week, another possible cut this year, and at least two cuts in 2026, depending on new leadership, inflation, and employment data.

Jordan Ghent of Stephens Inc. asked for expectations on the securities book yield, whether Q4's high fee income is a sustainable run rate, and the company's appetite for share buybacks.

Answer

CEO Lee Gibson stated he expects the securities yield to recover towards Q3 levels after a Q4 dip caused by rapid prepayments on premium mortgage-backed securities, which have since been restructured. He clarified that Q4's high swap fee income is not a sustainable run rate and the bank is budgeting for a lower amount in 2025. Regarding buybacks, Gibson noted the bank is not planning to be active, preferring to retain cash to maintain flexibility for its subordinated debt coming due at year-end.

Jordan Ghent from Stephens asked about the current competitive landscape for loans and deposits, specifically if loan yields are significantly decreasing and if any irrational pricing behavior is observed.

Answer

CFO Jim Mabry stated that competition remains very high on both the loan and deposit sides, with an incremental increase in deposit competition. He noted that loan pricing is generally stable, and while they hope for some relief on deposit costs in 2026, they are not factoring it into their current outlook.

Jordan Ghent asked for additional color on the recent loan sale, including the types of loans involved, and whether more loan sales are anticipated in the future.

Answer

Jim Mabry (CFO) explained that the sale involved a portfolio of high-quality loans secured by cash surrender value of life insurance policies, which were acquired by The First and deemed non-core due to a lack of ancillary business and being outside the footprint. Kevin Chapman (COO) added that they chose to focus capital on in-market growth opportunities, and no other portfolios are expected to be sold. Jordan Ghent also asked about loan and deposit competition, to which Jim Mabry (CFO) noted it remains competitive, with an incremental increase on the deposit side, hoping for relief on deposit costs in 2026.

Jordan Ghent, Equity Research Associate at Stephens, inquired about Bank OZK's $350 million subdebt, which transitions from fixed to floating in October, asking if redemption is still an option and how this might influence the share buyback strategy. He also sought an update on loan balance guidance, specifically near-term trends for Q4, 2024, and 2025.

Answer

George Gleason, Chairman and CEO, confirmed the subdebt transition but stated no decision has been made regarding redemption, noting that Tier 2 capital is a long-term part of the capital structure. He emphasized the bank's strong capital and earnings power, allowing for opportunistic buybacks. Tim Hicks, CFO, and George Gleason clarified that while Q1 2026 is expected to be positive for loan growth, the mid-single-digit annual growth guidance is likely to be more heavily weighted towards the second, third, and fourth quarters due to anticipated Q1 payoffs.

Jordan Ghent from Stephens inquired about the current M&A landscape, specifically asking if high seller valuation expectations and AOCI overhangs remain significant headwinds or if sellers are becoming more negotiable. He also sought clarification on the decline in non-interest-bearing deposits and any expected seasonality in Q1, as well as commentary on the expense and fee guide and the anticipated duration of impact from oil and gas revenues.

Answer

President and CEO Thomas L. Travis explained that while AOCI has slightly decreased, acquiring quality deposit franchises remains challenging and costly due to market efficiency. He reiterated Bank7's disciplined approach, non-negotiable asset quality, and strategy to accumulate capital for future M&A or MOE opportunities, viewing the resulting high capital ratios as a "high-class problem" despite short-term ROE impact. CFO Kelly Harris attributed the dip in non-interest-bearing deposits to increased depositor rate awareness, with Thomas L. Travis adding minimal seasonality. Regarding expenses, Thomas L. Travis affirmed strong control and dismissed oil and gas revenue as immaterial, expecting a gradual decline over 3-4 years with minor GAAP fluctuations. Kelly Harris provided Q4 figures: $9.1M core expense, $1M oil and gas expense; $1M oil and gas fee income, $1M core fee income.

Jordan Ghent questioned the M&A landscape, asking if high seller valuation expectations and AOCI overhangs remain significant headwinds, or if sellers are becoming more willing to negotiate. He also sought color on the decline in non-interest-bearing deposits and any expected seasonality in 1Q deposits, as well as commentary on expense and fee guidance and the future impact of oil and gas revenues.

Answer

Thomas L. Travis (President and CEO) noted a slight reduction in AOCI but affirmed that quality deposit franchises remain difficult to acquire at a bargain due to market efficiency. He reiterated Bank7's disciplined approach to M&A, prioritizing asset quality and accumulating capital for future opportunities, including potential MOEs. Kelly Harris (CFO) attributed the decline in non-interest-bearing deposits to increased depositor awareness of interest rates. Thomas L. Travis mentioned public funds have seasonality but not much otherwise. Regarding expenses, Thomas L. Travis emphasized strong expense control and deemed oil and gas revenue as an insignificant, gradually declining portion of the bank's income over the next 3-4 years, with past GAAP accounting potentially front-loading revenue. Kelly Harris provided Q4 core expense at $9.1 million and oil & gas at $1 million, with fee income split similarly.

Jordan Ghent asked about the potential primary and secondary effects of a government shutdown on Hilltop Holdings' broker-dealer and other business lines.

Answer

CEO Jeremy Ford stated that the broker-dealer had not experienced any primary effects from a government shutdown, but expressed concern regarding SBA processing. CFO William Furr elaborated on secondary impacts, noting potential processing slowdowns for government agencies like USDA in the mortgage space due to lower or no staffing. He clarified that the public finance group primarily serves local municipalities, not the federal government, thus limiting direct federal shutdown impact.

Jordan Ghent asked about the primary and secondary effects of a potential government shutdown on Hilltop Holdings' broker-dealer and other business lines.

Answer

Jeremy Ford, CEO, stated that there have been no primary effects on the broker-dealer from a government shutdown. He expressed concern about SBA processing. William Furr, CFO, added that in the mortgage space, USDA and other government agencies might be impacted by lower or no staffing, leading to processing delays for mortgages and SBA. He clarified that the public finance group focuses on local municipalities, not the federal government.

Jordan Ghent from Stephens Inc. focused on expenses, asking how much of the improvement in the full-year expense guidance was attributable to the one-time insurance recovery. He also requested a forward-looking run rate for the fixed component of expenses.

Answer

William Furr (executive) clarified that the improved expense guidance was not primarily due to the insurance recovery but rather the result of broad, ongoing optimization and efficiency efforts across the organization. For a run rate, Furr directed attention to the presentation materials, suggesting that quarterly expenses, other than variable compensation, are expected to remain in the $185 million to $190 million range, consistent with recent quarters after adjusting for one-time items.

Jordan Ghent, an Equity Research Associate at Stephens Inc., questioned Simmons First National Corporation's strategy and trajectory for brokered deposits, specifically if the goal is to reduce them further from the 9% of total deposits seen at quarter-end. He also inquired about competitive dynamics in the loan market, focusing on rates and structure, and whether the company has a specific loan growth target for 2026 given current pipeline activity.

Answer

CFO Daniel Hobbs stated the long-term goal is to reduce brokered deposits to zero by growing core customer deposits, noting the strategic decision to exit public funds deposits as an alternative to further brokered deposit reduction. President Jay Brogdon added that deposit dynamics involve both repricing and remixing, with significant opportunities in the core customer book. Brogdon characterized competitive loan market behavior as often 'irrational or just not very smart,' particularly concerning pricing, citing an example of a competitor offering very low rates. He affirmed the company's commitment to maintaining discipline for strong risk-adjusted returns. While no formal 2026 loan growth target was provided, Brogdon indicated an expectation for more positive growth than recently, contingent on the competitive environment and continued discipline.

Jordan Ghent from Stephens Inc. asked if the growth in unfunded commitments points to stronger loan growth ahead and requested commentary on the minor increase in classified assets during the quarter.

Answer

President Jay Brogdon confirmed that rising unfunded commitments, particularly with a growing C&I mix, signal future loan growth potential. Regarding credit, he noted the uptick in classifieds was not indicative of a broader trend, stating that underlying credit metrics remain stable and are normalizing, with positive trends in leading indicators like past-due loans.

Jordan Ghent asked about the company's hiring plans for 2025 and its expectations for the number of Federal Reserve rate cuts during the year.

Answer

Executive Bart Caraway stated that the hiring strategy remains 'selective and surgical,' with plans to potentially add one or two more bankers in 2025 while also being opportunistic for exceptional talent. Regarding Fed rate cuts, Executive John McWhorter explained that the company is 'somewhat indifferent' due to its well-matched asset and liability sensitivity. Bart Caraway added that rate volatility, in either direction, presents an opportunity for the bank to capitalize on, making change more beneficial than a static rate environment.