Southside Bancshares (SBSI) investor relations material

Executive summary

• Fourth quarter net income was $21 million, with diluted EPS of $0.70, up $16.1 million (327.2%) sequentially; full-year net income was $69.2 million, down $19.3 million (21.8%) year-over-year, mainly due to securities portfolio restructuring and a $32.3 million net loss on sale of AFS securities.

• Partial restructuring of the securities portfolio in Q4 included selling $82 million in lower-yielding municipal securities and reinvesting in higher-yielding agency MBS, resulting in a $7.3 million net loss but enhancing future net interest income and balance sheet flexibility.

• Net interest income increased 6.6% year-over-year in Q4 and 2.7% sequentially, driven by lower funding costs and a favorable shift in asset/liability mix.

• Credit quality remains strong, with non-performing assets at 0.45% of total assets, though this rose mainly due to a $27.5 million restructured commercial real estate loan.

• The company repurchased 369,804 shares in Q4 and declared a $0.36 per share dividend; 762,000 shares remain authorized for repurchase.

Financial highlights

• Net interest margin (tax-equivalent) expanded to 2.98%, up 15 bps year-over-year and 4 bps sequentially.

• Efficiency ratio improved to 52.28% in Q4 from 54.00% a year ago and 52.99% last quarter.

• Loans grew 3.4% year-over-year to $4.82 billion; deposits increased 3.2% to $6.87 billion, though deposits decreased $96.4 million (1.4%) sequentially, mainly due to a reduction in brokered deposits.

• Allowance for loan losses was $45.1 million (0.94% of loans) at year-end.

• Full-year return on average assets was 0.83% and return on average equity was 8.40%, both down from 2024.

Outlook and guidance

• Redemption of $93 million in subordinated notes in Q1 2026 is expected to positively impact net interest margin.

• Non-interest expense budgeted to rise 7% in 2026, mainly from salary, benefits, software, and a one-time $800,000 charge for debt redemption; Q1 2026 non-interest expense forecasted at $39.5 million.

• Annual effective tax rate estimated at 17.4% for 2026.

• Loan production expected to exceed 2025, though high payoffs may offset some growth.

• Management anticipates continued focus on optimizing the securities portfolio and managing funding costs.