Southside Bancshares Reports Solid Q2 Earnings

News Summary

Southside Bancshares has announced its earnings for the second quarter, showcasing a net income of $21.8 million, up 1.4% from the previous quarter. The company’s diluted earnings per share reached $0.72, and it reported an annualized return on average assets of 1.07%. The loan portfolio saw an increase to $4.6 billion, driven by commercial real estate and construction loans. Despite adjusting its loan growth guidance to 3%-4%, Southside remains confident in its outlook for the future with a strong balance sheet and robust loan pipeline.

Southside Bancshares Posts Positive Q2 2025 Earnings Amidst Loan Growth Adjustments

In a recent financial report, Southside Bancshares highlighted a strong performance for the second quarter of 2025, reflecting an increase in net income and net interest margin. The reported net income for the quarter stood at $21.8 million, which shows a 1.4% increase or $306,000 more than the previous quarter.

Improved Earnings and Interest Margin

Providing insights into the bank’s profitability, the diluted earnings per share reached $0.72, marking an uptick of $0.01 from the first quarter. The bank exhibited an annualized return on average assets of 1.07% and a significant annualized return on average tangible common equity measuring 14.38%.

Additionally, the net interest margin saw a slight increase of nine basis points to 2.95% on a linked quarter basis, contributing to a net interest income of $54.3 million, which reflects an increase of $414,000 or 0.8% from the prior quarter.

Loan Origination and Funding Insights

In terms of loan activity, Southside Bancshares originated $293 million in new loans during the second quarter, of which $228 million has already been funded. The total loans outstanding as of June 30, 2025, reached $4.6 billion, representing an increase of $34.7 million or 0.8% compared to the last quarter.

This loan growth has been primarily driven by commercial real estate and construction loans. However, the bank reported approximately $150 million in payoffs from commercial real estate and a $50 million loan payoff in the oil and gas sector, significantly lowering its exposure to oil and gas loans to $53.8 million, which accounts for 1.2% of total loans.

Adjusted Growth Predictions

Despite the positive financial results, the loan growth outlook for 2025 has been moderated, with expectations reduced to 3%-4% year-over-year. Nonetheless, the bank’s loan pipeline remains robust, exceeding $2.1 billion, an increase from $1.9 billion at the end of the first quarter. Approximately 43% of the pipeline consists of term loans, while 57% includes construction and commercial lines of credit.

Furthermore, commercial and industrial (C&I) loans now comprise 30% of the loan pipeline, which reflects an increase from 25% at the end of Q1.

Asset Management and Risk Control

The bank’s nonperforming assets remained stable at 0.39% of total assets, while classified loans decreased from $67 million to $55.4 million. The allowance for credit losses slightly decreased to $48.3 million from the previous quarter. The bank’s securities portfolio also saw a slight decline, totaling $2.73 billion as of June 30, down $6.2 million or 0.2%.

Liquidity and Shareholder Value

In terms of liquidity, Southside Bancshares reported $2.33 billion in available lines as of June 30, 2025. In addition, the bank has been active in returning value to shareholders, having repurchased 424,435 shares at an average price of $28.13 during Q2, and an additional 2,443 shares at $30.29 post-quarter.

Noninterest Income and Expenses

On the noninterest front, the bank recorded an increase of $1.4 million or 12.7% over the previous quarter. However, noninterest expenses rose to $39.3 million, reflecting a $2.2 million or 5.8% increase, primarily due to a $1.2 million write-off tied to branch demolition. The efficiency ratio improved to 53.7% from 55.04% at the end of Q1.

The effective tax rate for the second quarter was reported at 17.8%, a slight decrease from 18% in the previous quarter. Management remains optimistic regarding the overall outlook for the bank in 2025, despite the adjusted expectations for loan growth.

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