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SOUTHSIDE BANCSHARES INC (SBSI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered steady profitability: net income $21.8M and diluted EPS $0.72, with ROA 1.07% and ROATCE 14.38% . Linked-quarter NIM (FTE) rose 9 bps to 2.95% on lower funding costs and a late-quarter loan surge .
  • Results were above S&P Global consensus on EPS and revenue: EPS $0.72 vs $0.6825*, and “total revenue” $68.8M vs $68.0M*; definitions differ for revenue (company “Total revenue” is non-GAAP) .
  • Guidance/tone: management lowered 2025 loan growth to 3–4% (from “mid-single-digit”), sees NIM tailwinds in 2H driven by CD repricing (-10 bps on ~$430M maturities) and June loan production; expects ~$39M quarterly noninterest expense and ~18% ETR for 2025 .
  • Potential stock catalysts: rising NIM, disciplined expense run-rate, active buybacks (424,435 shares in Q2 at $28.13), and improving C&I pipeline despite payoff volatility .

What Went Well and What Went Wrong

What Went Well

  • NIM expansion and funding cost relief: “linked quarter, our net interest margin increased nine basis points to 2.95%, and net interest income increased $414,000” (CEO) .
  • Late-quarter loan production and pipeline: June net loan growth of $104M, Q2 production ~$293M with $228M funded; pipeline rose to ~$2.1B (30% C&I) (President) .
  • Deposit growth and mix: deposits up $41.1M q/q; cost of interest-bearing deposits fell to 2.82% and total deposit cost held at 2.26%; uninsured deposits estimated 38.5% but only 21.1% excluding affiliates/public funds .

What Went Wrong

  • Elevated noninterest expense from one-time branch demolition write-off ($1.2M), pushing Q2 noninterest expense to $39.3M (+5.8% q/q) (CFO) .
  • Credit costs ticked up: provision for loan losses $0.7M vs reversal in prior year; net charge-offs $0.9M (vs $0.3M both Q1 2025 and Q2 2024) .
  • NPAs stayed elevated vs 2024 on a restructured CRE loan: 0.39% of assets ($32.9M), flat q/q but up sharply vs 0.04% in Q4 2024; allowance at 0.97% of loans .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Total revenue ($USD Millions)$68.496 $66.982 $68.844
Net interest income ($USD Millions)$53.707 $53.852 $54.266
Noninterest income ($USD Millions)$12.281 $10.223 $12.145
Net income ($USD Millions)$21.786 $21.507 $21.813
Diluted EPS ($USD)$0.71 $0.71 $0.72
Margins & EfficiencyQ4 2024Q1 2025Q2 2025
NIM (FTE) %2.83% 2.86% 2.95%
Net interest spread (FTE) %2.12% 2.20% 2.27%
Efficiency ratio (FTE) %54.00% 55.04% 53.70%
ROA % (annualized)1.03% 1.03% 1.07%
ROE % (annualized)10.54% 10.57% 10.73%
Consensus vs ActualQ4 2024Q1 2025Q2 2025
EPS Consensus Mean* ($)0.715*0.675*0.6825*
Diluted EPS Actual ($)0.71 0.71 0.72
Revenue Consensus Mean* ($USD Millions)68.117*67.389*68.004*
Total revenue Actual ($USD Millions)68.496 66.982 68.844

Values retrieved from S&P Global*. Company “Total revenue” is a non-GAAP measure (FTE-based) per the release; consensus “Revenue” definitions may differ .

Loan Portfolio Composition ($USD Millions)Q1 2025Q2 2025
Construction$458.1 $470.4
1-4 Family Residential$741.4 $736.1
Commercial real estate$2,577.2 $2,606.1
Commercial & industrial$371.6 $380.6
Municipal$371.3 $363.7
Loans to individuals$47.6 $45.0
Total loans$4,567.2 $4,601.9
Asset Quality & CapitalQ4 2024Q1 2025Q2 2025
Nonperforming assets ($USD Millions)$3.589 $32.193 $32.909
NPAs / total assets %0.04% 0.39% 0.39%
Allowance for loan losses / loans %0.96% 0.98% 0.97%
CET1 capital ratio %13.04% 13.44% 13.36%
Tier 1 leverage %9.67% 9.73% 10.03%
Deposits & FundingQ4 2024Q1 2025Q2 2025
Total deposits ($USD Billions)$6.654 $6.591 $6.632
Cost of interest-bearing deposits %2.92% 2.83% 2.82%
Cost of total deposits %2.31% 2.26% 2.26%
Estimated uninsured deposits %38.1% 40.0% 38.5%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loan growth (y/y)FY 2025“Mid-single-digit” (heavily 2H-weighted) 3%–4% Lowered
Noninterest expense (run-rate)2H 20252025 budget +5.7% y/y; one-time ~$1M demolition expected (Q4 commentary) ~$39M per quarter for remaining quarters Formalized quarterly run-rate
Effective tax rate (ETR)FY 2025~17.7% ~18.0% Slightly raised
Net interest margin2025Expect margin expansion, bulk in Q2–Q4 Further expansion expected in Q3 (June loan growth tailwind) Maintained positive trajectory
CD repricingNext 90 days (from Q2)N/A~$430M CDs to reprice; average rate targeted -10 bps or more New detail
Share repurchases2025Limited activity near Q4; preserving cash for sub debt Repurchased 424,435 shares in Q2 at $28.13; 2,443 subsequent Resumed buybacks
DividendQ2/Q3 2025$0.36 quarterly dividend maintained $0.36 declared for Q2 (paid Jun 5); $0.36 declared for Q3 (pay Sep 4) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q4 2024; Q-1: Q1 2025)Current Period (Q2 2025)Trend
Net interest margin trajectoryQ4: bulk of expansion expected in Q2–Q4 2025 NIM +9 bps to 2.95%; expects further Q3 expansion (late June loans) Improving
Loan pipeline & payoffsQ1: pipeline ~$1.9B; surprises in payoffs; expect lighter Q2 payoffs Pipeline >$2.1B; Q2 payoffs ~$200M; two multifamily refinanced with debt funds; unexpected $50M oil & gas payoff Pipeline strengthening; payoff volatility persists
C&I initiativeQ4/Q1: building Houston team; expect C&I growth in 2025 4 Houston hires; C&I ~30% of pipeline Accelerating
Deposit pricing & competitionQ1: CD repricing and swaps to aid margin Not seeing rising deposit competition; expect -10 bps on CDs over next 90 days Favorable
Securities portfolio & hedgesQ4: restructured MBS to reduce amortization volatility AFS unrealized loss $60.4M; hedge gains ~$5.2M; AFS duration down to 6.2y; total portfolio duration 8.4y Stabilizing durations; valuation sensitive to rates
Asset qualityQ4: NPAs 0.04% (very low) NPAs 0.39% (flat q/q) due to large restructured CRE; leasing positive; classified loans down to $55.4M Elevated vs 2024; stable q/q
Tariffs/macro—Customer discussions reflect tariff uncertainty; Texas markets healthy Watchlist
M&A landscape in Texas—Potential hires and client acquisitions from dislocation; open to M&A if strategic Optionality

Management Commentary

  • CEO: “We had an excellent quarter… linked quarter, our net interest margin increased nine basis points to 2.95%, and net interest income increased $414,000… We anticipate this late quarter loan growth bodes well for potential further NIM expansion during the third quarter.”
  • President (Loans): “Second quarter new loan production totaled approximately $293 million… payoffs totaled $200 million… we are slightly lowering our loan growth guidance to 3% to 4% year-over-year.”
  • CFO (Expenses/ETR): “Non-interest expense was $39.3 million… primarily driven by the $1.2 million write-off… we expect to be in the $39 million range for the remaining quarters this year… We are currently estimating an annual effective tax rate of 18% for 2025.”
  • CFO (Deposits): “We have… a little over $430 million [CDs] that will mature [in the next 90 days]… we anticipate [lowering] the average rate on those CDs at least 10 basis points.”

Q&A Highlights

  • Strategic optionality from Texas bank M&A: management sees hiring and client acquisition opportunities from dislocation; open to M&A if strategic .
  • Loan growth guidance trim reflects payoff uncertainty: pipeline stronger, but surprises (e.g., $50M oil & gas payoff) drove reduction to 3–4% y/y .
  • Margin drivers: tailwinds without depending on loan growth; CD repricing and lower funding costs support NIM even if payoffs remain volatile .
  • Deposit competition: not seeing pressure; expect relief on CD pricing irrespective of Fed path .

Estimates Context

  • EPS: Reported diluted EPS $0.72 vs S&P consensus $0.6825* → beat; prior quarters: Q1 reported $0.71 vs $0.675*, Q4 $0.71 vs $0.715* .
  • Revenue: Company “Total revenue” $68.8M vs S&P consensus $68.0M* → slight beat; note consensus revenue taxonomy may differ from company FTE measure .
    Values retrieved from S&P Global*.

Key Takeaways for Investors

  • NIM expansion appears durable into 2H: lower deposit costs, CD repricing, and June loan growth should push NIM higher; watch 3Q trajectory .
  • Loan growth outlook moderated to 3–4% y/y; payoff volatility is the swing factor—pipeline strength (>$2.1B) and increasing C&I mix help offset .
  • Expense discipline: expect ~$39M/quarter run-rate after one-time demolition; supports operating leverage if NIM expands .
  • Asset quality stable but elevated vs 2024: NPAs 0.39% tied to restructured multifamily—leasing improving; allowance near 1% of loans .
  • Capital actions supportive: Q2 buybacks (424,435 shares at $28.13) and strong capital ratios (CET1 13.36%) provide flexibility ahead of sub debt decision .
  • Near-term trading lens: EPS/revenue beats vs consensus*, visible NIM tailwinds, buybacks, and benign deposit competition are positives; monitor payoff cadence and securities OCI sensitivity to rates .
    Values retrieved from S&P Global*.