Southside Bancshares Inc (SBSI) Reports Decline in Q4 Net Income Amid Strategic Asset Sales
Net Income: Q4 net income fell to $17.3 million, a 37.4% decrease year-over-year.
Earnings Per Share: Earnings per diluted common share dropped to $0.57, down from $0.87 in Q4 2022.
Loan Growth: Loans saw a linked quarter increase of 2.3%.
Deposits: Deposits rose by 3.2% linked quarter, with a notable increase in public funds.
Dividends: Declared a Q4 cash dividend of $0.35 per share and a special dividend of $0.02 per share.
Asset Quality: Nonperforming assets remained low at 0.05% of total assets.
On January 26, 2024, Southside Bancshares Inc (NASDAQ:SBSI) released its 8-K filing, detailing the financial outcomes for the fourth quarter and the full year ended December 31, 2023. The report showed a decline in net income and earnings per share compared to the same period in the previous year, with net income dropping by 37.4% to $17.3 million and earnings per diluted common share decreasing by 34.5% to $0.57. Despite these declines, the bank experienced a 2.3% linked quarter loan growth and a 3.2% increase in deposits, primarily due to a rise in public funds.
Southside Bancshares Inc, a financial institution headquartered in Tyler, Texas, offers a range of services including personal and business banking, mortgage and equity lending, wealth management, trust, and brokerage services. The bank generates revenue through interest income, gains on sales of assets, and fee income.
Financial Performance and Challenges
The bank's performance in the fourth quarter was impacted by the sale of approximately $388 million of lower-yielding available for sale securities, resulting in a $10.4 million net loss. This strategic move aimed to increase net interest income and is estimated to provide a two-year payback of the loss incurred. The net interest margin slightly decreased by three basis points linked quarter, while the efficiency ratio increased to 53.30% from 48.92% in the same period in 2022.
Southside Bancshares Inc's capital ratios and contingent liquidity sources remained solid, with the bank purchasing 146,580 shares of its common stock at an average price of $28.54 under the Stock Repurchase Plan. The bank also utilized the Federal Reserves Bank Term Funding Program to reduce overall funding costs and enhance its interest rate risk position.
Asset Quality and Dividends
Asset quality remained strong, with nonperforming assets constituting only 0.05% of total assets. The allowance for loan losses totaled $42.7 million, or 0.94% of total loans, reflecting increased economic and repricing concerns forecasted in the bank's CECL model.
Southside Bancshares Inc declared a fourth quarter cash dividend of $0.35 per share and a special cash dividend of $0.02 per share, underscoring its commitment to returning value to shareholders.
Analysis of Financial Statements
The bank's balance sheet showed total assets of $8.28 billion as of December 31, 2023, an increase from $7.56 billion at the end of the previous year. The loan portfolio saw a 9.1% increase year-over-year, with total loans amounting to $4.52 billion. Deposits grew by 5.7% to $6.55 billion, reflecting the bank's ability to attract and retain customer funds.
Southside Bancshares Inc's financial strategy and asset quality metrics indicate a resilient banking operation, albeit with reduced profitability in the short term due to strategic asset sales. The bank's focus on loan growth, deposit accumulation, and shareholder returns positions it as a potentially attractive option for value investors seeking stability and consistent dividend payments.
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Explore the complete 8-K earnings release (here) from Southside Bancshares Inc for further details.
This article first appeared on GuruFocus.
