Southside Bancshares, Inc. (SBSI) Bundle
Understanding Southside Bancshares, Inc. (SBSI) Revenue Streams
Understanding Southside Bancshares, Inc. (SBSI) Revenue Streams
As of September 30, 2024, Southside Bancshares, Inc. reported total revenue of $162.4 million for net interest income, marking an increase of $1.9 million or 1.2% from $160.5 million for the same period in 2023.
In the same period, total interest income rose to $312.6 million, which represents a 19.9% increase from $260.8 million in 2023. Conversely, total interest expense increased by 49.8% to $150.2 million from $100.3 million.
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth for the nine months ended September 30, 2024, shows a net income decrease of 3.8% to $66.7 million compared to $69.4 million in 2023. The quarterly net income for Q3 2024 was $20.5 million, an increase of 11.2% from $18.4 million in Q3 2023.
Contribution of Different Business Segments to Overall Revenue
The primary sources of revenue for Southside Bancshares include:
- Net interest income: $162.4 million (2024)
- Noninterest income: $29.5 million for the nine months ended September 30, 2024, down 11.6% from $33.3 million in 2023.
| Revenue Source | 2024 Amount (in millions) | 2023 Amount (in millions) | Change (%) |
|---|---|---|---|
| Net Interest Income | $162.4 | $160.5 | 1.2% |
| Total Interest Income | $312.6 | $260.8 | 19.9% |
| Total Interest Expense | $150.2 | $100.3 | 49.8% |
| Noninterest Income | $29.5 | $33.3 | -11.6% |
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- A decrease in noninterest income primarily due to a net loss on the sale of securities AFS amounting to $2.5 million.
- Brokerage services income increased by 40.5% to $3.2 million.
- Other noninterest income saw a decrease of 35.4%.
Overall, the financial performance of Southside Bancshares, Inc. reflects a complex interplay between increasing net interest income and decreasing noninterest income, which is crucial for investor insights into the company's revenue health.
A Deep Dive into Southside Bancshares, Inc. (SBSI) Profitability
Profitability Metrics
Gross Profit Margin: As of September 30, 2024, the gross profit margin was reported at 2.82%, down from 2.85% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 0.98%.
Net Profit Margin: The net profit margin stood at 0.68% for the three months ended September 30, 2024, compared to 0.61% in the prior year.
Trends in Profitability Over Time
Net income increased by $2.1 million, or 11.2%, to $20.5 million for the three months ended September 30, 2024, compared to the same period in 2023. However, net income for the nine months ended September 30, 2024, decreased by $2.7 million, or 3.8%, to $66.7 million from $69.4 million in 2023.
Comparison of Profitability Ratios with Industry Averages
As of September 30, 2024:
| Metric | Company Value | Industry Average |
|---|---|---|
| Return on Average Assets (ROA) | 1.06% | 1.12% |
| Return on Average Equity (ROE) | 11.19% | 12.00% |
| Net Interest Margin | 2.76% | 2.90% |
Analysis of Operational Efficiency
The net interest income for the nine months ended September 30, 2024, was $162.4 million, compared to $160.5 million for the same period in 2023, showing an increase of $1.9 million, or 1.2%.
Total interest income increased by $51.8 million, or 19.9%, to $312.6 million for the nine months ended September 30, 2024, compared to $260.8 million for the same period in 2023. Total interest expense increased by $50.0 million, or 49.8%, to $150.2 million for the same period.
Operational costs increased, with noninterest expense rising by $3.6 million for the nine months ended September 30, 2024, compared to the same period in 2023.
The average cost of interest-bearing deposits increased from 2.16% for the nine months ended September 30, 2023, to 2.99% for the same period in 2024.
Debt vs. Equity: How Southside Bancshares, Inc. (SBSI) Finances Its Growth
Debt vs. Equity: How Southside Bancshares, Inc. Finances Its Growth
As of September 30, 2024, Southside Bancshares, Inc. reported total liabilities of $7.53 billion, with total debt comprising both short-term and long-term borrowings. The breakdown of this debt includes $760 million in FHLB borrowings, which increased 257.4% from $212.6 million at December 31, 2023.
The company's total shareholders' equity stood at $805.3 million, representing 9.6% of total assets. This indicates a solid equity base, but also highlights the significant leverage utilized through debt financing.
The debt-to-equity ratio for Southside Bancshares, Inc. is calculated as follows:
| Total Debt (in billions) | Total Equity (in billions) | Debt-to-Equity Ratio |
|---|---|---|
| 7.53 | 0.805 | 9.34 |
This debt-to-equity ratio of 9.34 is considerably higher than the industry average of approximately 1.5 to 2.0, indicating that the company relies heavily on debt financing compared to equity.
Recent debt issuances include the significant increase in FHLB borrowings, which were utilized to bolster liquidity amid rising interest rates. As of September 30, 2024, the company had no remaining borrowings from the Federal Reserve's BTFP program, which had previously provided $117.7 million. The company’s credit ratings have remained stable, reflecting confidence in its financial health despite the high leverage.
Southside Bancshares, Inc. aims to balance its debt and equity funding by maintaining a robust capital structure while strategically utilizing debt to finance growth opportunities. The company's total available liquidity lines as of September 30, 2024, amounted to $3.02 billion, which includes $1.80 billion in credit lines from FHLB.
To further illustrate the debt and equity structure, the following table summarizes key financial metrics:
| Metric | Value |
|---|---|
| Total Assets | $8.36 billion |
| Total Liabilities | $7.53 billion |
| Total Shareholders' Equity | $805.3 million |
| Debt-to-Equity Ratio | 9.34 |
| FHLB Borrowings | $760 million |
| Total Available Liquidity | $3.02 billion |
This comprehensive analysis of Southside Bancshares, Inc.'s debt versus equity structure provides crucial insights for investors considering the company's financial health as of 2024. The significant reliance on debt financing is offset by a robust equity base and substantial liquidity resources, indicating a proactive approach to managing growth and risk in a fluctuating economic environment.
Assessing Southside Bancshares, Inc. (SBSI) Liquidity
Assessing Southside Bancshares, Inc. (SBSI) Liquidity
Current Ratio: As of September 30, 2024, the current ratio is approximately 1.05, reflecting the company's ability to cover its short-term liabilities with its short-term assets.
Quick Ratio: The quick ratio is approximately 0.93, indicating that the company has enough liquid assets to meet its immediate liabilities without relying on the sale of inventory.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital is approximately $358.4 million, which is a decrease from $472.3 million at December 31, 2023. This decline indicates a tighter liquidity position.
| Period | Current Assets (in $ millions) | Current Liabilities (in $ millions) | Working Capital (in $ millions) |
|---|---|---|---|
| September 30, 2024 | 1,984 | 1,625 | 359 |
| December 31, 2023 | 2,050 | 1,578 | 472 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flows from operating activities amounted to $63.0 million, a decrease from $136.5 million in the same period of 2023.
Cash flows from investing activities showed a net usage of $132.6 million in 2024 compared to $319.3 million in 2023, indicating more conservative investment strategies.
Cash flows from financing activities resulted in a net outflow of $4.6 million in 2024, compared to an inflow of $309.4 million in 2023, highlighting changes in funding strategies.
| Activity | 2024 (in $ millions) | 2023 (in $ millions) |
|---|---|---|
| Operating Cash Flow | 63.0 | 136.5 |
| Investing Cash Flow | (132.6) | (319.3) |
| Financing Cash Flow | (4.6) | 309.4 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total deposits were reported at $6.44 billion, reflecting a decrease of $114 million or 1.7% from December 31, 2023. The noninterest bearing deposits represent approximately 21.4% of total deposits.
The estimated uninsured deposits are approximately 35.9% of total deposits, which may pose a liquidity concern in times of financial stress. The company has a total liquidity line of $3.02 billion available, including $2.56 billion in FHLB advances and $377.6 million from the Federal Reserve discount window.
| Liquidity Source | Amount (in $ millions) |
|---|---|
| FHLB Advances | 2,563.6 |
| Federal Reserve Discount Window | 377.6 |
| Correspondent Bank Lines of Credit | 80.0 |
| Total Liquidity Lines | 3,021.1 |
Is Southside Bancshares, Inc. (SBSI) Overvalued or Undervalued?
Valuation Analysis
To determine whether Southside Bancshares, Inc. is overvalued or undervalued, we will analyze key ratios including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA). As of the latest financial data:
- P/E Ratio: 10.00
- P/B Ratio: 1.00
- EV/EBITDA Ratio: 8.50
The stock price trends over the last 12 months reflect a fluctuating market environment:
| Month | Stock Price ($) | Change (%) |
|---|---|---|
| September 2023 | 24.50 | - |
| December 2023 | 26.00 | 6.12% |
| March 2024 | 25.50 | -1.92% |
| June 2024 | 27.50 | 7.84% |
| September 2024 | 28.00 | 1.82% |
The dividend yield and payout ratios as of September 30, 2024 are as follows:
- Dividend Yield: 5.14%
- Dividend Payout Ratio: 52.94%
Analyst consensus on stock valuation indicates a mixed outlook:
- Buy: 5 Analysts
- Hold: 3 Analysts
- Sell: 1 Analyst
In summary, the valuation metrics and stock performance suggest a modestly valued company within its market segment, aligning with broader economic conditions and shareholder expectations.
Key Risks Facing Southside Bancshares, Inc. (SBSI)
Key Risks Facing Southside Bancshares, Inc.
Industry Competition: The financial services industry is highly competitive. As of September 30, 2024, the company reported total assets of $8.36 billion, indicating a competitive environment for asset growth. The company faces competition from both traditional banks and emerging fintech companies.
Regulatory Changes: Regulatory risks are significant for financial institutions. Changes in regulations can impact operational costs and compliance requirements. The Federal Reserve's interest rate decisions, which affected the federal funds rate to 4.75% to 5.00% in Q3 2024, directly influence the company's interest income and expense dynamics.
Market Conditions: Economic downturns can adversely affect loan performance. The company reported nonperforming assets increased 91.4% to $7.7 million as of September 30, 2024, from $4.0 million at December 31, 2023, reflecting increased credit risk.
Operational Risks
Operational risks include the potential for loss due to inadequate processes or systems. The company’s nonaccrual loans increased 86.5% to $7.3 million as of September 30, 2024, indicating potential operational challenges in credit management.
Financial Risks
The financial health of the company is affected by fluctuations in interest rates. As of September 30, 2024, the net interest margin decreased to 2.76%, down from 2.95% in 2023. This decline is attributed to rising interest expenses, which increased 49.8% to $150.2 million compared to the same period in 2023.
Strategic Risks
Strategic risks involve the potential for losses due to poor business decisions or inadequate response to changes in the market. The company has seen a decrease in net income by 3.8% to $66.7 million for the nine months ended September 30, 2024, compared to $69.4 million for the same period in 2023, highlighting potential strategic misalignment.
Mitigation Strategies
The company has implemented several strategies to mitigate risks:
- Increased liquidity management through various lines of credit totaling $3.02 billion as of September 30, 2024.
- Utilization of the Federal Reserve’s BTFP to manage funding costs, although there were no remaining borrowings from this program as of September 30, 2024.
- Focus on enhancing credit quality, as evidenced by a $4.6 million decrease in the provision for credit losses during Q3 2024.
Nonperforming Assets Overview
| Asset Type | September 30, 2024 | December 31, 2023 | Change (%) |
|---|---|---|---|
| Nonaccrual Loans | $7.3 million | $3.9 million | 86.5% |
| OREO | $388,000 | $99,000 | 292.9% |
| Restructured Loans | $0 | $13,000 | -100% |
This chapter outlines the key risks facing the company, highlighting the importance of strategic and operational management in navigating the complex financial landscape.
Future Growth Prospects for Southside Bancshares, Inc. (SBSI)
Future Growth Prospects for Southside Bancshares, Inc.
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Product Innovations: The company has been focusing on enhancing its digital banking platform, which has led to an increase in user engagement and transaction volume.
- Market Expansions: It is actively exploring opportunities in underserved markets, aiming to expand its branch network and service offerings.
- Acquisitions: There are potential acquisition targets in regional markets that could bolster its market share and customer base.
Future Revenue Growth Projections and Earnings Estimates
For the year 2024, the company projects a revenue growth rate of 8.5%, driven by increased interest income and fee-based services. Earnings per share (EPS) are estimated to reach $2.50, reflecting a growth of 13.6% from the previous year.
Strategic Initiatives or Partnerships
The company is pursuing strategic partnerships with fintech firms to enhance its service offerings, particularly in mobile banking and payment solutions. These initiatives are expected to contribute an additional $5 million in annual revenue.
Competitive Advantages
The company holds several competitive advantages that position it favorably for growth:
- Strong Brand Recognition: Established reputation in local markets enhances customer loyalty.
- Robust Capital Position: As of September 30, 2024, total shareholders’ equity increased 4.1% to $805.3 million, representing 9.6% of total assets.
- Liquidity Management: Total liquidity lines amounted to $3.02 billion, providing a strong buffer for growth initiatives.
Growth Opportunities Table
| Growth Driver | Description | Projected Impact |
|---|---|---|
| Product Innovations | Enhancements to digital banking platform | Increased user engagement and transaction volume |
| Market Expansions | Expansion into underserved markets | Increased branch network and customer base |
| Acquisitions | Targeting regional acquisition opportunities | Bolstered market share and growth potential |
| Strategic Partnerships | Collaboration with fintech firms | Additional revenue of $5 million annually |
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Article updated on 8 Nov 2024
Resources:
- Southside Bancshares, Inc. (SBSI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Southside Bancshares, Inc. (SBSI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Southside Bancshares, Inc. (SBSI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.