Southside Bancshares, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Southside Bank Shares Incorporated 3rd Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during this time, you will need to press star 1 on your telephone keypad. Also, please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Ms. Lindsay Bales. Thank you. Please go ahead.

Thank you, Jeff. Good morning, everyone, and welcome to Southside Bank Share's third quarter 2021 earnings call. A transcript of today's call will be posted on southside.com under investor relations. During today's call and 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 relief and 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' third quarter earnings call for 2021. This morning, we reported outstanding quarterly results. I want to thank the entire Southside team for their tremendous contributions and efforts, without which these results would not have been possible. Highlights for the quarter included earnings per share of 90 cents, an ROA of 1.61%, annualized link quarter loan growth, net of PPP of 7.9%, annualized link quarter deposit growth of 13.5%, an increase in the net interest margin to 3.16%, and continued strong asset quality with non-performing assets decreasing to 0.17% of total assets. The third quarter results also included a reversal of provision for credit losses of 5.1 million. Length quarter, our net interest margin increased 10 basis points, and our net interest spread increased 11 basis points, primarily due to a 10 basis point increase in the yield on earning assets. The average yield on loans increased 15 basis points, largely due to the increase in PPP loan accretion. The average yield on securities increased five basis points, and our cost of funds decreased one basis point. On September 30th, 2021, we redeemed our 5.5% coupon, $100 million subordinated notes, which will further positively impact the net interest margin in the fourth quarter. During the quarter, we expensed $1.1 million In connection with this redemption, annualized loan growth as of September 30th, 2021, was 5.3%. Our loan pipeline in all of our markets is strong. We anticipate this will continue well into 2022, given the strong outlook for the high growth markets we serve. Fourth quarter payoffs are anticipated to generate headwinds as the anticipation of potential tax law changes has accelerated sales of customer projects. We now believe loan growth for 2021 net of PPP loans will be closer to 5%. We are currently budgeting for and projecting 2022 loan growth net of PPP loans of 9%. During the third quarter, we continued to experience an increase in our average non-maturity deposits, which represent our lowest cost interest-bearing liabilities. Over the past 18 months, non-maturity deposits have increased significantly, which has allowed us to strategically transform our funding base by lowering our dependence on higher-cost and shorter-duration CDs and unswapped FHLB borrowings. We had swapped FHLB borrowings at September 30th of $605 million. The economic conditions in our markets remain strong, bolstered by continued company relocations and existing company expansions combined with population growth. The DFW and Austin markets that we serve continue to be among the highest growth markets in the country. I look forward to answering your questions following Julie's remarks, and I will now turn the call over to Julie.