Southside Bancshares, Inc.

Good day, and thank you for standing by. Welcome to Southside Bank Shares Inc. Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 1-1 on your telephone. I would now like to hand the conference over to your speaker for today, Sonny Davis, Chief Risk Officer. You may begin.

Thank you, Tawanda. Good morning, everyone, and welcome to Southside Bank Shares' third quarter 2022 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 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, and then Julie will give an overview of our financial results. I will now turn the call over to Lee.

Good morning, everyone, and welcome to Southside Bank Share's third quarter earnings call for 2022. This morning, we reported excellent financial results quarter. Highlights for the quarter included earnings per share of 84 cents, a return on average tangible common equity of 19.94%, annualized linked quarter loan growth of 10.1% net of PPP, a linked quarter increase of six basis points in our net interest margin, an efficiency ratio of 47.42%, and continued solid asset quality metrics. The linked quarter increase in our net interest margin reflected a 48 basis point increase in the average yield on loans, a 10 basis point increase in the average yield on securities, partially offset by a 40 basis point increase in the average rate on our interest bearing liabilities. I want to thank the entire Southside team for their continued contributions and efforts which made these results possible. We're extremely pleased with our continued strong loan growth during the third quarter, 2022. During our second quarter earnings call in July, we discussed the possibility that $60 million of our second quarter loan growth could be short term and pay off prior to year end. That potential pay off occurred during the third quarter. There was actually only $35 million with a longer-term refinance of the remaining $25 million. Our loan pipeline remains solid, and we're encouraged about the loan growth prospects for the fourth quarter and beginning 2023. In addition, we are seeing advances in our construction portfolio increasing as loans that closed several quarters ago are now beginning to fund. Given the outlook for the markets we serve, we continue to estimate loan growth for 2022 net of PPP loans in the mid-teens. During the quarter, as interest rates increase, we hedge additional available per sale municipal securities to the call date to reduce the overall fair value volatility. Currently, approximately two-thirds of the par amount of our AFS municipal securities are hedged to the call date. The economic conditions in our markets remain solid, bolstered by continued company relocations and existing company expansions, combined with population growth, a result of continued migration from other states. Rising mortgage rates and high costs have continued to take some of the steam out of the highly robust single-family market, moving this market closer to pre-pandemic levels. However, housing shortages continue to exist in several Texas markets. We continue to successfully execute on our business model in what we consider to be the best state in the country in which to operate. I look forward to answering your questions following Julie's remarks, and I will now turn the call over to Julie.