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SOUTHSIDE BANCSHARES INC (SBSI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 GAAP diluted EPS was $0.16 versus $0.72 consensus, driven by a one-time $24.4M loss on restructuring ~$325M of lower-yielding AFS securities; underlying net interest income rose 2.7% q/q and NIM (FTE) was essentially flat at 2.94% (EPS miss; restructuring was the driver) .
  • S&P Global consensus revenue was $70.3M* versus S&P “actual” of $42.6M*, reflecting the AFS sale loss booked in noninterest income; management’s non-GAAP “total revenue” (which adjusts for securities losses) was $70.5M, aligning more closely with consensus (revenue miss on GAAP basis; non-GAAP comparable to consensus) *.
  • Balance sheet momentum: loans +$163.4M q/q (+3.5%) with ~$81M closing on 9/30; deposits +$329.6M (+5.0%) q/q; cost of total deposits decreased to 2.25% from 2.26% .
  • Q4 outlook: management expects NIM to be “up slightly” and net interest income to “improve nicely,” with ~$600M CDs repricing (avg ~34 bps savings), full-quarter impact of the securities repositioning, and lower opex guided to ~$38M (positive catalyst into Q4) .
  • Capital and shareholder returns: CET1 12.97%, total RBC 19.01%; buyback authorization increased by 1.0M shares (to 2.0M) on Oct 16; regular $0.36 dividend declared Nov 6 .

What Went Well and What Went Wrong

What Went Well

  • Loan growth accelerated: total loans +$163.4M q/q (+3.5%) with commercial real estate +$82.6M, commercial +$49.3M, construction +$49.1M; pipeline rebounded to ~$1.8B; average rate on Q3 fundings ~6.7% .
  • Funding and margin setup: NIM (FTE) held at 2.94% (down 1 bp), net interest income +$1.45M q/q, and deposit costs edged down to 2.25% total; management expects Q4 NIM up slightly and NII to improve .
  • Strategic repositioning: sold ~$325M of lower-yielding long-duration munis/MBS (3.28% TE yield), reinvested into higher-coupon agencies/munis; estimated payback <4 years; reduced AFS unrealized loss to $15.4M from $60.4M .

What Went Wrong

  • Large one-time loss: $24.4M net loss on AFS sales drove GAAP noninterest income to -$12.0M and diluted EPS to $0.16 (down from $0.72 in Q2) .
  • Asset quality optics: nonperforming assets rose to $35.6M (0.42% of assets) primarily due to a $27.5M restructured CRE loan from Q1; allowance/loans at 0.95% .
  • Opex pressure earlier in the year: while Q3 opex decreased q/q (-$1.7M), prior quarters included a $1.2M branch demolition charge and higher professional fees, impacting efficiency trends .

Financial Results

Core P&L and Ratios (GAAP unless noted)

MetricQ3 2024Q2 2025Q3 2025
Net Interest Income ($USD Millions)$55.464 $54.266 $55.718
Total Noninterest Income ($USD Millions)$8.171 $12.145 -$11.990
Diluted EPS ($USD)$0.68 $0.72 $0.16
NIM (FTE) (%)2.95 2.95 2.94
Efficiency Ratio (FTE) (%)51.90 53.70 52.99
ROAA (%)0.98 1.07 0.23
ROAE (%)10.13 10.73 2.40

Results vs S&P Global Consensus (Quarterly)

MetricQ1 2025Q2 2025Q3 2025
EPS Consensus Mean ($)0.675*0.6825*0.7175*
EPS Actual ($)0.6907*0.7764*-0.6161*
Revenue Consensus Mean ($USD Millions)$67.389*$68.004*$70.283*
Revenue Actual ($USD Millions)$63.317*$65.789*$42.636*
Target Price Consensus Mean ($)32.0*32.0*32.0*
Number of EPS Estimates4*4*4*
Number of Revenue Estimates4*4*4*

Values with asterisks retrieved from S&P Global.

Balance Sheet and KPIs

MetricQ2 2025Q3 2025
Total Assets ($USD Billions)$8.34 $8.38
Total Loans ($USD Billions)$4.60 $4.77
Total Securities ($USD Billions)$2.73 $2.56
Total Deposits ($USD Billions)$6.63 $6.96
Estimated Uninsured Deposits (% of total)38.5% 36.9%
Cost of Total Deposits (%)2.26 2.25
CET1 (%)13.36 12.97
Total Risk-Based Capital (%)16.91 19.01

Loan Portfolio Composition ($USD Millions)

CategoryQ3 2024Q2 2025Q3 2025
Construction585.817 470.380 519.528
1-4 Family Residential755.406 736.108 730.061
Commercial Real Estate2,422.612 2,606.072 2,688.712
Commercial (C&I)358.854 380.612 429.952
Municipal402.041 363.746 353.324
Loans to Individuals53.318 45.015 43.712
Total Loans4,578.048 4,601.933 4,765.289

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIM (FTE) trajectoryQ4 2025Not specified“Up slightly” Raised
Net Interest IncomeQ4 2025Not specified“Improve nicely” Raised
Non-interest expense ($USD Millions)Q4 2025~$39M for remaining quarters (Q2 guide) ~$38M for Q4 Lowered
Effective Tax Rate (%)FY 2025~18% (Q2) ~16.6% (Q3) Lowered
CD Repricing SavingsQ4 2025~10 bps expected in Q2 remarks ~$600M maturing, ~34 bps avg savings Raised
Capital actionsOngoingBuyback program in place Authorization +1.0M shares (to 2.0M); ~868k repurchased to date Expanded
DividendOngoing$0.36 declared May 8 $0.36 declared Nov 6 Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (prior)Q2 2025 (prior)Q3 2025 (current)Trend
NIM outlookNIM up 3 bps q/q to 2.86 (FTE) NIM up to 2.95 (FTE); tailwinds into H2 Slight NIM uptick expected in Q4 Improving
Loan growth & pipelinePayoffs exceeded projections; growth weighted to H2 Production $293M; pipeline $2.1B; guidance 3–4% y/y Production ~$500M; pipeline ~$1.8B; strong Q3 closings Stronger production; pipeline elevated
Deposit costs & competitionCost of total deposits down to 2.26% Expect relief via CD repricing (~10 bps) ~$600M CDs repricing (~34 bps savings); cost total deposits 2.25% More relief
Securities portfolioReduced duration; AFS unrealized loss up in Q2 Notable duration reduction Repositioned ~$325M; payback <4 yrs; AFS UL down to $15.4M Positive reposition
M&A/hiringNot discussed in detailOpportunistic hires, potential dislocation from deals Pursuing hires; evaluating targets amid TX consolidation Active
Asset qualityNPA rose with $27.5M restructure NPA 0.39% of assets; classified down q/q NPA 0.42%; expect restructure to refi/right-size by year-end Stable; concentrated single credit
Non-interest incomeSwap fees down in Q1 Swap fee pickup; trust fees rising Trust fees strength; noninterest excl. AFS loss +2.1% q/q Improving ex one-time

Management Commentary

  • “We sold approximately $325 million of lower-yielding long-duration municipal securities and, to a lesser extent, MBS… at a loss of $24.4 million… The net proceeds from these sales partially funded loan growth… We estimate the payback of this loss to be less than four years.” — CEO Lee Gibson .
  • “Our tax equivalent net interest margin was 2.94%… net interest income increased $1.45 million… We expect non-interest expense to be in the $38 million range for the fourth quarter.” — CFO Julie Shamburger .
  • “Third quarter new loan production totaled approximately $500 million… the pipeline… has rebounded to $1.8 billion today.” — President Keith Donahoe .

Q&A Highlights

  • Margin and NII trajectory: management expects Q4 NIM “up slightly” with full impact of the securities sale, ~$125M average loan increase without new growth, and ~$600M of CDs repricing (~34 bps savings); headwind is full-quarter cost of 7% subordinated notes and 3.875% notes floating in mid-November .
  • M&A and talent: evaluating potential sellers in Texas and opportunistic hiring amid out-of-state acquisitions and market disruptions .
  • Buyback strategy: authorization increased; activity will be opportunistic, including potential use of 10b5-1 plans .
  • Fee income outlook: trust fees expected to deliver double-digit revenue growth next year; exploring metro market expansion in wealth management for 2026 .
  • DDA dynamics: recent DDA growth tied to specific enterprise business client activity; expected to moderate in Q4 .

Estimates Context

  • EPS: GAAP diluted EPS $0.16 vs S&P consensus $0.7175* for Q3 2025; the difference reflects a $24.4M AFS sale loss recorded in noninterest income (non-GAAP “total revenue” adjusts for this) *.
  • Revenue: S&P consensus $70.283M* vs S&P “actual” $42.636M*; company’s non-GAAP “total revenue” was $70.528M, which excludes the securities loss and is more comparable to bank revenue consensus methodologies *.
  • Estimate path: Q1–Q3 2025 EPS and revenue consensus were relatively stable; target price consensus held at $32.0* across periods. Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • The material Q3 EPS miss was primarily from a one-time $24.4M securities sale loss; underlying core trends (NII +2.7% q/q, NIM (FTE) ~flat) were constructive .
  • Setup into Q4 is favorable: full-quarter benefit from repositioning, ~$600M CD repricing (~34 bps savings), and lower opex ($~38M), supporting NIM uptick and NII growth .
  • Loan growth momentum and pipeline strength should support earning asset yields; average funded rates around ~6.7% provide a tailwind if payoffs moderate .
  • Deposit mix and cost trends remain supportive: total deposit cost down to 2.25% and noninterest-bearing ~20.3% of deposits, with uninsured deposits 36.9% (21.7% excluding affiliate/public collateralized) .
  • Capital and liquidity strong (CET1 12.97%, total RBC 19.01%, contingent liquidity $2.77B), enabling flexibility for buybacks and growth .
  • Asset quality remains manageable and concentrated in a single restructured CRE credit expected to refi/right-size by year-end; allowance coverage at 0.95% of loans .
  • Trading implications: near-term reaction hinges on how quickly investors look through the one-time loss to anticipated Q4 margin/NII inflection, CD repricing benefits, and lower opex; medium-term thesis emphasizes sustainable NIM expansion, fee growth (trust), and disciplined loan pricing amid competition .