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On Tuesday, Raymond (NS:RYMD) James initiated coverage on Southside Bancshares (NYSE:SBSI) stock with a Market Perform rating. Raymond James' stance on the Texas-based bank is neutral, taking into account its above-peer profitability, solid core deposit base, and robust asset quality.
These factors are seen as balanced by an above-peer price to tangible book value (P/TBV) multiple. According to InvestingPro data, the stock currently trades at a P/E ratio of 10.82x and offers a notable dividend yield of 4.77%.
Southside Bancshares, established in 1960 and headquartered in Tyler, Texas, has grown its assets to approximately $8.4 billion. The bank specializes in real estate lending within Texas, serving markets including Dallas, Austin, Houston, and other East Texas areas.
With a market capitalization of $915.62 million and a return on equity of 11%, the bank's growth, although below its peers, is supported by positive migration trends in its operational regions. InvestingPro analysis reveals the bank has maintained dividend payments for 27 consecutive years, with 11 years of consecutive increases, demonstrating strong financial stability.
The bank is recognized for its increasing franchise and scarcity value as one of only four publicly traded banks based in Texas with assets ranging from $5 billion to $15 billion. Management at Southside Bancshares has expressed an interest in mergers and acquisitions to surpass the $10 billion-asset threshold, which is expected to provide the bank with various options in the upcoming cycle.
The analyst notes that Southside Bancshares' strong capital position, with a Common Equity Tier 1 (CET1) ratio of 13.1%, and its appealing franchise, combined with its fundamental strengths, are likely to continue to uphold its valuation above that of its peers. This financial health positions the bank favorably for potential growth and strategic partnerships.
In other recent news, Southside Bancshares reported mixed third-quarter results for 2024, with a net income of $20.5 million and earnings per share of $0.68. Despite a decline from the preceding quarter, the bank saw an increase in net interest income by $1.86 million and a rise in the net interest margin to 2.95%. The company also adjusted its 2024 loan growth target from 5% to 3%, citing expected payoffs as the reason.
Southside Bancshares board member, George H. Henderson, III, has decided not to seek re-election at the upcoming annual shareholder meeting scheduled for May 2025. Henderson's departure is not due to any disagreements with the company regarding its operations, policies, or practices. The company's next steps regarding the board's composition following Henderson's departure will be watched closely by shareholders.
The company has also made significant changes to its corporate governance structure by amending its bylaws to introduce mandatory annual executive sessions and the appointment of a lead independent director. These changes aim to enhance the Board's independent oversight capabilities.
In terms of future plans, Southside Bancshares is expanding its C&I lending initiative with new hires and anticipates noninterest expenses of $37 million for Q4 2024. The company is not currently interested in acquiring any banks for sale but is targeting acquisitions of banks with assets between $1.2 billion and $4 billion along the I-35 corridor. These are the recent developments for Southside Bancshares.
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