Southside Bancshares, Inc.

Good day and thank you for standing by. Welcome to the Southside Bank Shares, Inc. First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Lindsay Bills. Please go ahead.

Thank you, Ashley. Good morning, everyone, and welcome to Southside Bank Shares' first quarter 2021 earnings call. A transcript of today's call will be posted on southside.com under investor relations. During today's call and in other disclosures and presentations, I will remind you that any forward-looking statements are subject to risk and uncertainties. Factors that could materially change our current forward-looking assumptions are described in our earnings release in our Form 10-K. Joining me today are Lee Gibson, President and CEO, and Julie Schamburger, CFO. First, Lee will share his comments on the quarter. Then, Julie will give an overview of our financial results. I will now turn the call over to Lee.

Good morning, and welcome to Southside Bank Shares' first quarter earnings call for 2021. This morning, we reported that we had an excellent first quarter, highlighted by record net income and earnings per share. Beginning the year on a strong note, the first quarter results included a partial reversal of provision for credit losses of $10.1 million. Our asset quality metrics remain strong as the ratio of non-accruing loans to total loans linked quarter increased. decreased to 0.14% from 0.21%, and non-performing assets to total assets decreased to 0.22% from 0.25%. Length quarter, we did see a decrease in net interest income. Approximately half of this was due to a decrease in interest and accretion income related to PPP loans. with the rest due to the $200 million decrease in average earning assets. To give you a little more color about our first quarter average earning assets, there are three things I want to point out. First, during the first quarter, annualized loan growth, net of PPP loans, and payoffs increased 6.2%. A large percentage of the payoffs occurred during the first half of the quarter, and approximately $97 million of the loan growth net of PPP occurred during March. Second, we are actively participating in the second round of PPP, and as of April 21st, we've originated a little over 1,000 loans, totaling $105 million. Approximately 70 million of these PPP originations occurred after mid-February. Third, our net interest margin, linked quarter, was unchanged while our net interest spread increased one basis point. As for the rest of 2021, our loan pipeline remains very healthy, a trend we currently anticipate will continue throughout the year, given the outlook for the high growth markets we serve. We continue to anticipate 7% loan growth for 2021 net of PPP loans. During the first quarter, we added three experienced commercial lenders, two in the DFW area and one in Austin, that have hit the ground running, originating loans and bringing new relationships to Southside. In addition, on April 12th, we opened our Houston LPO near the Galleria, and this group of commercial lenders have been active originating loans and introducing new relationships to us as well. We continued to see a very healthy increase in our non-maturity deposits during the first quarter, due in part to the stimulus payments received by our customers, combined with PPP loan funds being deposited into Southside accounts. These deposits allowed us to further reduce higher-cost wholesale funding and time deposits. We previously disclosed plans to close three branches, two in East Texas that were in close proximity to other Southside branches, and one lease branch in North Texas. These closures were completed in mid-March. During the second quarter, we will realize the full savings associated with these closures. Economic conditions in our market areas continue to improve, bolstered by company relocations and population growth due to individuals moving to Texas from other states. The DFW and Austin markets continue to be among the highest growth markets in the country. I look forward to answering your questions following Julie's presentation, and I will now turn the call over to Julie.