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01/11 07:55
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture. While there are positive signs such as improved efficiency ratios and active buyback plans, concerns about slow loan growth and increased net charge-offs are notable. The Q&A session reveals cautious optimism about the future, but the lack of specific guidance and some unclear responses from management temper enthusiasm. Overall, the sentiment seems balanced, resulting in a neutral prediction for the stock price movement over the next two weeks.
Net Income $137.6 million for Q3 2025, compared to $127.3 million for Q3 2024, an increase of 8.1%. The increase was primarily due to a higher net interest margin.
Net Income Per Diluted Common Share $1.45 for Q3 2025, compared to $1.34 for Q3 2024, an increase of 8.2%. This was driven by improved net interest margin.
Net Interest Margin (Tax Equivalent Basis) 3.24% for Q3 2025, compared to 2.95% for Q3 2024, an increase of 29 basis points. The improvement was attributed to favorable interest rate changes.
Loans (Excluding Warehouse Purchase Program Loans) $20.7 billion as of September 30, 2025, compared to $20.9 billion as of June 30, 2025, a decrease of $160 million or 0.77%. The decline was due to borrowers using their own cash to pay down balances and not drawing on their lines, as well as a competitive lending environment.
Deposits $27.7 billion as of September 30, 2025, an increase of $308 million or 1.1% from $27.4 billion as of June 30, 2025. The growth was driven by an increase in core deposits.
Nonperforming Assets (NPAs) $119 million as of September 30, 2025, compared to $110 million as of June 30, 2025, an increase of $9 million. Credit quality remains strong despite some isolated incidences.
Allowance for Credit Losses $377 million as of September 30, 2025, compared to $119 million in nonperforming assets. No additions were made to the allowance during Q3 2025.
Net Interest Income Before Provision for Credit Losses $273.4 million for Q3 2025, compared to $261.7 million for Q3 2024, an increase of $11.7 million. This was due to higher net interest margins.
Noninterest Income $41.2 million for Q3 2025, compared to $41.1 million for Q3 2024, showing a slight increase.
Noninterest Expense $138.6 million for Q3 2025, compared to $140.3 million for Q3 2024, a decrease of $1.7 million. This reflects improved efficiency.
Efficiency Ratio 44.1% for Q3 2025, compared to 46.9% for Q3 2024, an improvement of 2.8 percentage points, indicating better operational efficiency.
Net Charge-Offs $6.46 million for Q3 2025, compared to $3.02 million for Q2 2025, an increase of $3.44 million on a linked quarter basis.
Merger with Southwest Bancshares Inc.: Signed a definitive merger agreement with Southwest Bancshares Inc., expanding the San Antonio metro footprint with four additional branches, increased deposit market share, and bolstered presence in the Texas Hill Country.
Pending merger with American Bank Holding Corporation: Strengthens presence and operations in South Texas and Central Texas, including San Antonio. Combined with the Texas Partners acquisition, will result in 10 banking centers in the San Antonio area.
Dividend increase: Board approved increasing the fourth quarter 2025 dividend to $0.60 per share from $0.58 per share, reflecting confidence in the company and markets.
Net income growth: Net income for Q3 2025 was $137.6 million, up from $127.3 million in Q3 2024, an 8.2% increase in net income per diluted share.
Net interest margin improvement: Net interest margin on a tax equivalent basis increased to 3.24% in Q3 2025 from 2.95% in Q3 2024, driven by higher net interest income.
Loan and deposit metrics: Loans (excluding Warehouse Purchase Program loans) decreased by $160 million to $20.7 billion, while deposits increased by $308 million to $27.7 billion in Q3 2025.
Focus on acquisitions and consolidation: Actively pursuing acquisitions, including pending mergers, and engaging in discussions with other banks to address challenges like higher costs, competition, and regulatory burdens.
Competitive Lending Environment: The company faces an extremely competitive lending environment with aggressive terms and conditions being offered by competitors, leading to decisions not to participate in certain cases.
Nonperforming Assets: Nonperforming assets increased to $119 million as of September 30, 2025, compared to $110 million at June 30, 2025, indicating a slight deterioration in asset quality.
Loan Paydowns: Borrowers are using their own cash to pay down balances and are not drawing on their lines, leading to a decrease in loans outstanding.
Regulatory Burden: The company acknowledges that regulatory burdens are a challenge, particularly in the context of ongoing and future acquisitions.
Succession Planning: Concerns about succession planning are highlighted as a potential risk in the context of industry consolidation.
Higher Costs: The company faces higher technology and staffing costs, which could impact profitability.
Economic Moderation: The Texas economy, while strong, is showing signs of moderation due to factors such as tariffs and immigration policies, which could indirectly impact the company’s operations.
Net Interest Margin: The net interest margin on a tax equivalent basis is expected to continue improving over the next 24 to 36 months, with interest rates either increasing or decreasing by 200 basis points.
Fair Value Loan Income: Fair value loan income for the fourth quarter of 2025 is expected to be in the range of $2 million to $3 million.
Noninterest Expense: Noninterest expense for the fourth quarter of 2025 is projected to be in the range of $141 million to $143 million.
Economic Outlook: Texas and Oklahoma economies are expected to remain strong, with Texas continuing to attract major corporations due to its pro-business environment and no state income tax. Oklahoma is projected to demonstrate resilience and modest growth, outpacing national averages in key areas like unemployment and population expansion.
Dividend Increase: The Board of Directors approved increasing the fourth quarter 2025 dividend to $0.60 per share from $0.58 per share that was paid in the prior 4 quarters.
Dividend Growth Rate: The compound annual growth rate in dividends declared from 2003 to 2025 was 10.7%.
Stock Repurchases: The company continues to share its success with shareholders through opportunistic stock repurchases while also continuing to grow its capital.
The earnings call presents a mixed picture. While there are positive signs such as improved efficiency ratios and active buyback plans, concerns about slow loan growth and increased net charge-offs are notable. The Q&A session reveals cautious optimism about the future, but the lack of specific guidance and some unclear responses from management temper enthusiasm. Overall, the sentiment seems balanced, resulting in a neutral prediction for the stock price movement over the next two weeks.
The earnings call highlighted several challenges: decreased deposits, increased non-performing assets, and regulatory delays in acquisitions. While there was a new share repurchase program, the lack of dividend updates and declining net income due to special assessments and merger expenses overshadowed positive aspects. The Q&A section did not provide additional clarity. Given the competitive pressures and economic uncertainties, the overall sentiment is negative, likely resulting in a stock price decrease of 2% to 8%.
The earnings call reveals mixed signals: improved efficiency ratio and stable nonperforming assets are positive, but there's a notable decrease in revenue. The Q&A highlights stable loan growth and potential M&A activities, which are positive, but concerns about nonperforming assets and unclear strategic expansion plans balance this out. The absence of market cap data limits the impact assessment, leading to a neutral sentiment rating.
The earnings call presents a mixed picture: strong EPS and net income growth, but challenges in loan production and deposit fluctuations. The Q&A reveals concerns about loan growth and unclear management responses regarding the balance sheet. The market strategy involves M&A, but no immediate shareholder returns are planned. Despite strong financial metrics, the lack of clear guidance and potential risks from nonperforming assets and economic conditions suggest a neutral stock price movement.
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