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DATE

Thursday, April 30, 2026 at 12 p.m. ET

Call participants

  • President and Chief Executive Officer — Keith Donahoe
  • Senior Executive Vice President and Chief Financial Officer — Julie N. Shamburger
  • Senior Executive Vice President and Chief Risk Officer — Sunny Davis

Takeaways

  • Net income -- $23.3 million, up $2.3 million or 10.8% linked-quarter.
  • Diluted earnings per share -- $0.78, up $0.08 or 11.4% from the prior quarter.
  • Loan portfolio -- $4.95 billion, a linked-quarter growth of $128.2 million or 2.7%, primarily from construction and commercial real estate loans.
  • New loan production -- $431 million this quarter, up from $327 million prior quarter; $240 million funded, remainder expected to fund over the next six to nine quarters.
  • Loan pipeline -- $1.3 billion at quarter end, down from $2 billion mid-quarter, with $331 million in "won-but-not-closed" deals.
  • Net interest margin (NIM) -- 3.01%, up three basis points from fiscal Q4 2025 (ended Dec. 31, 2025).
  • Net interest income -- Increased $441,000 or 0.8% linked-quarter, primarily due to lower funding costs after redeeming $93 million of subordinated debt at 7.51%.
  • Nonperforming assets (NPAs) -- $9.7 million, down $28.5 million due to a payoff of a $27.5 million multifamily loan, with NPAs representing 0.11% of total assets.
  • Allowance for credit losses -- $49 million, up from $48.3 million, representing 0.93% of total loans, a decrease of one basis point.
  • Securities portfolio -- $2.87 billion, up $164.3 million or 6.1%, driven by $313.5 million in new mortgage-backed securities (MBS) purchases.
  • AFS securities unrealized loss -- $16.3 million, an increase of $15.5 million from last quarter.
  • Deposits -- Increased by $9.3 million or 0.1% linked-quarter; brokered deposits rose $110.7 million, offset by an $82 million decline in retail deposits and a $19.4 million drop in public fund deposits.
  • Wholesale funding -- Rose $370.5 million to $1.4 billion, including $104.8 million in FHLB advances, $110.7 million in brokered deposits, and $155 million in Fed discount window borrowings, used to support loan and securities growth.
  • Noninterest expense -- $40.6 million, up $3.1 million or 8.3% from the previous quarter, driven by salaries, stock compensation, loss on sub debt redemption, and a one-time retirement expense of $420,000.
  • Efficiency ratio -- 54.98%, up from 52.28%, mainly due to increased expenses.
  • Liquidity -- $2.68 billion in available liquidity lines at quarter end.
  • Capital ratios -- Remained above well-capitalized thresholds; no common stock repurchases this quarter, with 762,000 shares authorized for future buybacks.
  • Multifamily loan downgrades -- Four multifamily and one office loan moved to substandard, all supported by experienced borrowers and equity partners; successful resolutions expected within twelve months.
  • Strategic hires -- Hired a 30-year wealth management veteran to expand the platform in Dallas–Fort Worth.
  • Loan mix and rate structure -- 38% of loans are fixed rate, 62% floating, of which 81% have floors; $344.2 million in fixed-rate loans set to reprice in the next twelve months.
  • Public fund flows -- Deposits showed seasonal declines, anticipated to rise in the second quarter due to Texas-specific property tax collections and disbursements.
  • Noninterest income -- Down $303,000 or 2.3% excluding securities losses, with higher swap fee income offset by declines in deposit services and BOLI income.
  • MBS purchases -- One-third of $313.5 million in new MBS was pre-purchased at discounts for April and May cash flows; yields on new MBS ranged from 4.5% to 5.5%.
  • Interest rate sensitivity -- Management estimates a positive NIM impact if rates remain flat due to asset sensitivity; budget assumes two 25-basis-point cuts in June and September.

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Risks

  • The four downgraded multifamily loans and one office loan face slower lease-up and lower rents than originally underwritten, and a decline in occupancy. All four credits are supported by experienced real estate borrowers, including equity partners providing financial support.
  • The unrealized loss on AFS securities increased to $16.3 million, up $15.5 million quarter over quarter.
  • Wholesale funding reliance increased above budget due to loan growth exceeding expectations, with projections to fund at least half of loan growth with wholesale funding for the remainder of the year.

Summary

Southside Bancshares (SBSI +1.32%) delivered higher net income and improved net interest margin, supported by lower funding costs following the redemption of subordinated debt. Loan growth surpassed expectations, but the loan pipeline narrowed and management continues to forecast mid-single-digit loan growth for the year. Deposit growth was marginal and wholesale funding rose to back asset expansion, and the securities portfolio unrealized loss increased sharply, reflecting market volatility. Strategic expansion of wealth management in Dallas–Fort Worth and a focus on C&I, retail, and industrial warehouse lending were highlighted as drivers for the future.

  • Liquid resources were actively used, including increases in FHLB advances and Fed discount window borrowings, to meet funding demands arising from greater loan and security balances.
  • Hedging activities included unwinding $155 million in municipal loan swaps, slightly improving interest rate risk in declining rate scenarios.
  • No new common stock was repurchased, but management expressed a willingness to be "opportunistic" in future buybacks and emphasized potential M&A as part of the capital deployment strategy.
  • Loan repricing tailwinds are expected as $344.2 million in fixed-rate loans, including $209 million at or below 4%, mature or reset over the next year, potentially adding to net interest margin.
  • Trust and brokerage fees, as well as swap fee income, posted notable increases compared to the prior year, aligning with the company's intentional focus on these business lines.

Industry glossary

  • MBS (Mortgage-backed securities): Asset-backed securities secured by a collection of mortgages, used here as a major part of the bank's investment portfolio.
  • AFS (Available-for-sale securities): Financial instruments not classified as either held-to-maturity or trading securities, marked at fair value with unrealized gains/losses recorded in equity.
  • FHLB (Federal Home Loan Bank) advances: Collateralized borrowings from the Federal Home Loan Bank system, a key wholesale funding source for regional banks.
  • Beta (deposit beta): Measures the percentage of change in deposit rates relative to changes in benchmark interest rates, reflecting bank deposit rate pass-through sensitivity.
  • DSCR (Debt service coverage ratio): Financial metric indicating a loan's cash flow coverage of debt payments, cited as a stability indicator for multifamily assets.
  • BOLI (Bank-owned life insurance): Investment in life insurance policies on employees, used as a source of noninterest income for the bank.

Full Conference Call Transcript

Keith Donahoe: Thank you, Lindsey, and welcome to today's call. We are pleased to report solid financial results for the first quarter of 2026. Highlights include strong linked-quarter loan growth of 2.7%, increased earnings per share of $0.78, improved annualized return on average assets of 1.10%, and an annualized return on average tangible common equity of 14.39%. Lower funding costs resulted in a $441,000 linked-quarter increase in net interest income and an improved NIM of 3.01%. Our funding costs benefited from the February 15 redemption of $93 million of subordinated debt which had an interest rate of 7.51%. Second quarter funding costs will also benefit from this redemption.

First quarter loan growth was driven by strong new loan production combined with lower than expected payoffs. Although we experienced strong first quarter loan growth, we continue to target mid-single-digits for 2026 loan growth due to an expected return to elevated payoffs for the remainder of the year. New loan production of approximately $431 million compared to $327 million in the prior quarter. Of the new loan production, approximately $240 million funded during the quarter with the unfunded portion of this quarter's production expected to fund over the next six to nine quarters. Excluding regular amortization and line of credit activity, first quarter payoffs totaled approximately $113 million and represent the lowest payoff amount during the past four quarters.

The single largest payoff during the quarter was the $27.5 million multifamily loan previously included in our nonperforming asset category. In mid-February, the borrower successfully refinanced the loan balance with a life insurance company. Additional payoffs during the quarter included an office building, several small retail centers, an industrial warehouse, a skilled nursing facility, and several commercial land loans. Our loan pipeline today totals approximately $1.3 billion, down from a mid-quarter peak of about $2 billion. Despite the reduction, our won-but-not-closed category remains healthy at just over $331 million. The pipeline remains well balanced with approximately 44% term loans and 56% construction and/or commercial lines of credit. This is relatively unchanged from the fourth quarter mix.

C&I-related opportunities represent approximately 24% of today's total pipeline, up slightly from year-end’s total of 20%. During the quarter, we migrated four multifamily loans and one office loan to substandard. The two multifamily loans originated as construction loans and are currently experiencing slower lease-up and lower rents than originally underwritten. The remaining two multifamily projects originated as term loans and have experienced a decline in occupancy and reduced rental rates. All four credits are supported by experienced real estate borrowers, including equity partners providing financial support. Over the next six to twelve months, we expect successful resolutions either through open market sales or refinances. Despite this substandard increase, credit quality remained strong.

During the first quarter, nonperforming assets totaled $9.7 million, a decrease of $28.5 million from December 2025; the reduction was primarily related to the previously mentioned $27.5 million multifamily loan which paid off in February. As a percentage of total assets, nonperforming assets remain low at 0.11%. Other first quarter activities included replacing our Woodlands loan production office with a full-service branch, and a new branch in our fast-growing home market of Tyler. Additionally, we are particularly excited to report the hiring of a 30-year wealth management veteran charged with building out our wealth management team and expanding our platform throughout the Dallas–Fort Worth market.

When considering our net income, earnings per share, expanded footprint, and a key hire in our wealth management group, we had an excellent quarter. Overall, the markets we serve remain healthy, and the Texas economy is anticipated to grow at a faster pace than the overall projected U.S. growth rate. With that, I will now turn the call over to Julie.

Julie N. Shamburger: Thank you, Keith. Good morning, everyone, and welcome to our first quarter earnings call. We are pleased to report a solid start to 2026. For the first quarter, we reported net income of $23.3 million, an increase of $2.3 million or 10.8%. Diluted earnings per share were $0.78 for the first quarter, an increase of $0.08 per share linked-quarter or 11.4%. As of March 31, loans were $4.95 billion, a linked-quarter increase of $128.2 million or 2.7%.

The linked-quarter increase was driven by increases of $93.2 million in construction loans, $40.6 million in commercial real estate loans, and $12.2 million in the commercial portfolio, partially offset by decreases of $9.6 million in municipal loans and $7.1 million in one-to-four family residential loans. The average rate of loans funded during the first quarter was approximately 6.3%. As of March 31, our loans with oil and gas industry exposure were $72.1 million or 1.5% of total loans, a slight increase compared to $71 million linked-quarter.

Nonperforming assets decreased to 0.11% of total assets at quarter end, a result of the payoff of the $27.5 million commercial real estate loan restructured in 2025, and to a lesser extent, a decrease in our nonaccrual loans. Our allowance for credit losses increased to $49 million for the linked-quarter from $48.3 million on December 31. Linked-quarter, our allowance for loan losses as a percentage of total loans decreased one basis point to 0.93% at March 31. The securities portfolio increased $164.3 million or 6.1% to $2.87 billion on March 31 when compared to $2.7 billion at year-end. The increase was driven by purchases of $313.5 million in mortgage-backed securities during the first quarter.

As of March 31, we had a net unrealized loss in the AFS securities portfolio of $16.3 million, an increase of $15.5 million compared to $767,000 last quarter. There were no transfers of AFS securities during the first quarter. On March 31, the unrealized gain on the fair value hedges on municipal and mortgage-backed securities was approximately $1.95 million compared to $788,000 linked-quarter. As of March 31, the duration of the total securities portfolio was 7.4 years compared to 7.6 at December 31, and the duration on the AFS portfolio was 4.7 compared to 4.8 years on December 31. At quarter end, our mix of loans and securities was 63%/37%, respectively, a slight shift compared to 64%/36%, respectively, at year-end.

Deposits increased slightly by $9.3 million or 0.1% on a linked-quarter basis. Brokered deposits increased $110.7 million, however, partially offset by a decrease of $82 million in retail deposits and $19.4 million in public fund deposits. We redeemed our $93 million of subordinated notes due in 2030 during February. At the time of the redemption, the notes had an interest rate of 7.51%, and we recorded a loss of $791,000 on the redemption of the notes. We expect to see further savings in our funding costs during the second quarter as a result of the redemption. Our capital ratios remained strong with all capital ratios well above the threshold for well-capitalized.

Liquidity resources remained solid with $2.68 billion in liquidity lines available as of March 31. We did not repurchase any common stock during the first quarter, and we have approximately 762,000 shares remaining that are authorized for repurchase. Our tax-equivalent net interest margin was 3.01%, an increase of three basis points on a linked-quarter basis, up from 2.98% for 2025 Q4. Our tax-equivalent net interest spread for the same period was 2.38%, an increase of seven basis points from 2.31%. The increase in the net interest margin and net interest income is primarily due to lower funding cost.

For the three months ended March 31, we had an increase in net interest income of $441,000 or 0.8% compared to the linked quarter. Noninterest income, excluding the net loss on sale of AFS securities, decreased $303,000 or 2.3% for the linked quarter due to a decrease in deposit services income and a decrease in BOLI income, partially offset by an increase in other noninterest income. Other noninterest income increased primarily due to an increase in swap fee income. Noninterest expense was $40.6 million for the first quarter, an increase of $3.1 million or 8.3% compared to the linked quarter.

The increase was largely driven by an increase in salaries and employee benefits, the loss on the redemption of sub debt, software and data processing, and other noninterest expense. Salary and employee benefits increased due to normal salary and employment tax increases at the beginning of the new year, additional stock compensation, and a one-time retirement expense related to a new split-dollar agreement of approximately $420,000. Other noninterest expense increased primarily due to an increase in non-service cost of retirement expense and a nonrecurring credit received in the fourth quarter. I mentioned during the last call that our budget indicated an increase of approximately 7%.

Absent the loss on redemption and the one-time retirement expense of $420,000, the linked-quarter increase would have been a little over 5%. Our fully taxable equivalent efficiency ratio increased to 54.98% as of March 31, from 52.28% as of December 31, primarily due to the increase in noninterest expense. For 2026, we anticipate noninterest expense of approximately $40.5 million for the remaining quarters. We recorded income tax expense of $5 million compared to $3.8 million in the prior quarter, an increase of $1.25 million. Our effective tax rate was 17.8% for the first quarter, an increase compared to 15.3% last quarter, and we are currently estimating an annual effective tax rate of 17.8% for 2026.

At this time, I will turn the call over to Sunny. Thank you.

Sunny Davis: Thank you, Julie. The MBS purchases in the first quarter have coupons ranging from 4.5% to 5.5%, a duration of seven years, and a yield of 5.24%. Approximately one-third of the purchases occurred late in the quarter and were essentially pre-purchases of April and May cash flows due to an opportunity in the market. These were purchased at discounts, which will act as a hedge to the earlier purchases should prepay speeds increase. This one-third, or approximately $106.6 million at a rate of 5.44%, was not reflected in the yield of the securities portfolio in the first quarter.

We expect to reinvest future cash flows from the securities portfolio into AFS MBS and maintain the balance of securities at approximately $2.7 billion to $2.8 billion. If presented with an opportunity similar to the one in March, we may pre-purchase again. The principal cash flows we received during the quarter were $127 million, or an average of $42.3 million per month, which includes $20 million from the maturity of two MBS balloons held in HTM. I anticipate a pickup in prepays in the second quarter due to a higher MBS balance, lower mortgage rates through early March, and lower spreads.

The spot rate on our CDs was 3.74% at quarter end compared to the average rate of 3.79% for the first quarter. CDs totaling $568 million with an average rate of 3.83% will reprice this quarter. We expect to retain most of these deposits and estimate an interest savings of roughly 10 basis points. Additionally, $1.06 billion with an average rate of 3.79% will reprice by year end. As Julie mentioned in her comments, our public funds decreased. There was some seasonality to this decrease. In Texas, various public fund entities collect ad valorem taxes in the fourth quarter through January of the following year, then disburse some of those funds prior to the end of the first quarter.

There were also construction draws from bond funds we hold for a couple of public funds as well as February debt service payments. I expect public funds in the second quarter to increase from the March 31 balance. Many of our public fund non-maturity accounts have floating rates that adjust as frequently as weekly. We have certain non-maturity deposit accounts with exception pricing, and the last adjustment made to the exception priced accounts was 12/11/2025, following the FOMC's 25 basis point Fed funds reduction on December 10. The beta was 69% on the exception priced accounts, and the beta on all noninterest-bearing, non-maturity deposit accounts net brokered and public funds was approximately 25%.

I estimate using the same beta if there is a short-term rate cut in 2026. We have seen a higher cost on recently acquired deposit accounts versus existing account balances. In the first quarter, new deposit accounts, excluding brokered and public funds, had an average rate of 2.37% versus existing accounts averaging 1.58%. However, the rate on the new accounts in March showed a downward trend to 2.06%. Reciprocal deposits were $363 million at quarter end, a decrease of $13.9 million linked-quarter, primarily due to a reduction in one relationship. Many of these accounts are included in the exception pricing. 84% of reciprocal deposits are commercial, and 16% are consumer.

Our wholesale funding increased $370.5 million linked-quarter to $1.4 billion due primarily to fund the $128.2 million increase in loans and the $164.3 million increase in securities. The increase in wholesale funding includes increases in FHLB advances of $104.8 million, $110.7 million in brokered deposits, and $155 million in Fed discount window borrowings. We utilize a mix of wholesale funding sources and navigate between them based on rate and term offered and the current ALCO strategy. We have increased our collateral at the discount window and will continue to utilize this source of short-term funding due to rate and prepayability. During the first quarter, $245 million of cash flow swaps at a rate of 2.7% matured.

It was, however, necessary to retain the funding, and the rate on the new borrowings is approximately 3.75%. We have another $25 million in cash flow swaps maturing in November at a current rate of 4.62%. After this maturity and some amortization related to past unwinds is fully expensed in October, the rate on our cash flow swaps will drop to approximately 3.53%, assuming SOFR is unchanged. We unwound $155 million in municipal loan swaps during the quarter, creating a small gain that will be accreted over the life of the previously hedged items. This slightly improves our interest rate risk position in rates-down scenarios. We no longer have any municipal loan swaps.

We have a notional of $258.1 million in fair value hedges on municipal and MBS securities. Approximately 38% of our loans have fixed rates and 62% have a floating rate, and approximately 81% of the floating rate loans have floors. We have $344.2 million in fixed rate loans that mature or reprice in the next twelve months. Approximately $209 million of these loans have rates at or below 4%. Approximately $44 million of the loans with rates at or below 4% reprice or mature in the second quarter. We estimate a lift in the NIM as these loans reprice throughout 2026 and during 2027.

Our budget included two short-term rate cuts of 25 basis points—one in June and another in September. Should rates remain at quarter-end levels through year end, we expect a positive impact on the NIM versus budget as we are asset sensitive. Thank you for joining us today. This concludes our comments. We will now open the line for your questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from Brett Rabatin from Stonex Group. Please go ahead.

Brett Rabatin: Hey, good morning, everyone. Wanted to start on the loan growth outlook and the mid-single-digit guide. Solid production in the quarter and lower payoffs aided the first quarter. I think I heard the number of $113 million for payoffs, but that number is expected to go higher. Can you give us any color around what you are expecting for payoffs in 2Q or 3Q? And then on production pace, do you expect that to continue at the current level from 1Q?

Keith Donahoe: Yes. I will start with the production side. We anticipate continuing to produce new loans at a similar rate. We have talked about it internally. We are seeing good activity. The pipeline is down a little bit, but I think that has more to do with the loan officers being hunkered down closing new transactions in the first quarter. They are coming up for air and will rebuild that pipeline. We were fortunate we did not see as many payoffs in the first quarter, but we do know we have a number of real estate assets that are individually rather large that are going through the normal cycle.

We were predominantly a construction lender for a long time, and those have a finite life—they build, lease up, and then move into either a sale in the open market or refinance with other lenders on a permanent basis. We know we have some of that coming. It is too early to call a change in our loan growth at this point because we do know we have a number of projects that our team has to get refinanced or sold.

Brett Rabatin: Okay. Great. Appreciate all the color.

Operator: Your next question comes from Steven Scouten with Piper Sandler. Please go ahead.

Analyst: Thanks, appreciate it. Sticking on that NIM conversation, can you quantify what the expected benefit is in the second quarter on a basis point level from the sub debt? And then what you think you could see from just asset repricing and the CD benefits?

Julie N. Shamburger: On the sub debt, for the three-month quarter it was in the 7.41% range. In the second quarter, the average balance will be about $147 million, and the effective rate will be just over 7% with the amortization of the discount. I have not calculated the precise basis point impact yet, but that 7.41% you see for the first quarter will come down into the low 7s on roughly a $147 million average balance.

Analyst: Okay, that is really helpful. Thank you. And then on the expense front, I think you said $40.5 million per quarter, which probably still keeps you in that 7% range. Would you expect that would allow you to deliver year-over-year operating leverage at this point in time? Is that at least the minimum goal as you think about the progress for the year?

Julie N. Shamburger: Yes. I believe we are going to be at the 7%, hopefully under, but I do not expect us to go over that 7%. A couple of the larger items were front-loaded into the first quarter by the nature of timing. The $40.5 million may be a little heavy for the second quarter, but on average that is probably where we will end up. I am still expecting the 7% annually.

Analyst: And from an operating leverage perspective—thinking about the efficiency ratio and how that all comes together—would you expect that on a year-over-year basis to decline for the full year of 2026?

Julie N. Shamburger: I expect some improvement in the efficiency ratio in the second quarter for sure. The $791,000 loss on redemption was excluded in the calculation of the efficiency ratio, as we have always excluded a one-time loss on redemption. But, for example, the $420,000 that I mentioned was not excluded—appropriately not—and that will not occur again in the second, third, and fourth quarters. So I expect an improvement in the efficiency ratio for the second quarter.

Analyst: Okay. Thanks for the color.

Julie N. Shamburger: Appreciate it.

Operator: Your next question comes from Michael Rose with Raymond James. Please go ahead.

Michael Edward Rose: Hey, good morning, everyone. Thanks for taking my questions. From a capital standpoint, ratios are still really good. I noticed you did not buy back any stock in the quarter. I assume some of that was related to the redemption of the sub debt and some of the other actions in terms of buying securities. Any outlook for what we might expect for repurchases as we move forward?

Keith Donahoe: Yes, we will continue to be opportunistic in that regard. Our stock is doing pretty well right now. Historically, when we have repurchased shares, it is usually when we are seeing some downward pressure. From a capital deployment standpoint, there is a close first and second opportunity—M&A is definitely part of our strategy, and stock buyback is a close second. We are also organically growing, so we are being judicious and will continue to deploy capital where we think we are going to get the fairest return.

Michael Edward Rose: Helpful. Maybe switching gears to fees—nice step-up this quarter, still some good momentum in the trust business, which I know you have invested in. Any updated expectations from last quarter? And was there anything in the other expense line, because that was up both year-over-year and sequentially?

Keith Donahoe: On the trust side, we are really excited that we were able to pick up an individual in the Fort Worth market who has a tremendous amount of experience and a network that I think we will benefit from. I cannot guarantee we will see that lift this year, but it would not surprise me to get a little lift through the rest of the year. She is just getting her feet underneath her, but I am excited and look forward to strong growth in the Fort Worth market. I think we also picked up some fees from swap income.

Julie N. Shamburger: Our trust fees and our brokerage services were both up slightly from the fourth quarter but significantly over 2025. You mentioned year-over-year—those two categories had a really nice increase year-over-year, as well as the swap fee income, as I mentioned earlier.

Keith Donahoe: That is intentional. We have made an intentional approach to continue to generate swap income—granted, that is somewhat market driven—but every relationship manager, with the appropriate customer, is talking to them about swaps.

Julie N. Shamburger: As Sunny mentioned, I think 38% is—

Keith Donahoe: —what our loan book is that is fixed on our balance sheet. That is a significant decline over the last two years, and that was intentional because we wanted to get to a point that we could manage our NIM a little bit better. You have two sides of the equation working at the same time from a funding cost and from a lending perspective, but we are becoming more disciplined in that.

Michael Edward Rose: Alright, very helpful. I will step back. Thanks for taking my questions.

Operator: Your next question comes from Woody Lay with KBW. Please go ahead.

Wood Lay: Hey, thanks for taking my questions. Wanted to start on credit. It was great to see NPAs improve quarter-over-quarter with that restructured loan paying off. You mentioned a couple downgrades in the multifamily book. Given some of the moving pieces, what is your perspective on the local multifamily market and how it is performing? Is it certain markets showing weakness, or individual projects?

Keith Donahoe: To give you a little color, the four multifamily projects that we downgraded—two are in the Houston market, one is in Dallas–Fort Worth, and one is in Austin. We are not unique—any Texas-based lender doing multifamily construction and term loans has seen weakness. I am not concerned about these. They average about $33 million each. We have new appraisals on three of the four assets, and we are sub-60% loan-to-value on those. The real issue is supply. Across the state’s metro markets, there has been a ton of supply. We continue to see concessions offered on rental rates.

The good news is, in several markets we believe vacancy has peaked, so it is a matter of time for these assets to stabilize. We expect one of these will get refinanced by a debt fund before the end of the second quarter—there is a written term sheet. Another borrower is running a sale process now; they started early enough that if they do not get a number they like, they will still have the ability to refinance before maturity. Demand is still there. Each project continues to lease up month-to-month. In three of these projects, if you just let the concessions burn, they are in a more traditional 1.10x to 1.20x DSCR.

Given the borrowers and their equity partners—folks with long track records—we are not overly concerned.

Wood Lay: Each.

Wood Lay: That is really helpful. As you mentioned, oversupply is not new. How has that impacted the loan pipeline and new multifamily projects? Is there less these days, or has underwriting shifted?

Keith Donahoe: We have not modified our underwriting standards, but it has made it more difficult to originate new multifamily projects. I anticipate that to change some toward the end of the year, but right now the vast majority of new opportunities we are seeing are in retail and industrial warehouse. There is a lot of opportunity there, and those underwrite easier in today’s market. Retail across Texas is incredibly strong, driven by continued population in-migration and historically limited new retail development across the state.

Wood Lay: Got it. Appreciate you taking my questions.

Keith Donahoe: Thank you.

Operator: The next question comes from Matt Olney with Stephens. Please go ahead.

Matthew Covington Olney: Good morning. Most of my questions have been addressed. I want to go back to deposit growth. You mentioned some seasonal headwinds for deposit growth in the first quarter. What about the remainder of the year? Do you expect deposit growth to match the loan growth in that mid-single-digit range? Any more color there?

Julie N. Shamburger: I do expect a little bit of deposit growth but believe we are going to be funding at least half of the loan growth with wholesale.

Matthew Covington Olney: Is that a full-year comment, or more near term? What is the timing?

Julie N. Shamburger: We are over budget right now with wholesale because loan growth has exceeded expectations. I expect deposits to pick up in Q2. We will have some more seasonality in Q2 with one particular customer. We are targeting to meet our budgeted deposit growth, and we are looking closer at our strategy to ensure that happens.

Keith Donahoe: We are spending a lot of time on deposit strategy and growth. It is key to what we do, and we are getting everybody focused on it.

Matthew Covington Olney: Appreciate that. On the net interest margin this past quarter, the loan yields looked exceptionally strong. I know you have some nice loan repricing tailwinds. Anything else unusual on that loan yield number this quarter?

Keith Donahoe: No. We are still seeing fierce competition on quality real estate assets. What helped us in the first quarter was a number of closings in areas where we tend to see a little higher spread—some in our homebuilding book and some in lot development. Both categories tend to get a little better spread. I cannot tell you that will continue all year, but one of our specialties is homebuilding activity, and it has been good for us. We bank some of the premier builders in the state. Generally, you get better pricing there. Lot development is similar, though we are being very selective adding new lot developers because it is very submarket specific today, especially in Dallas–Fort Worth.

There are still strong pockets, but five miles down the road you might not want to touch a project. These are developers with deep equity and a lot of experience.

Matthew Covington Olney: Thanks for that. Lastly on credit, I think you addressed multifamily, but we also got that paydown of the $27 million restructured credit from previous quarters. Any more color on the resolution?

Keith Donahoe: Especially given we migrated four other multifamily projects, that one was in the nonperforming asset category, but we felt pretty good about it given the project dynamics. It was refinanced by a life company, and they actually added an additional $1 million in loan proceeds as an earn-out. That gives you some indication of the type of projects we typically finance. Even though it was in the NPA bucket, we were never overly concerned. We obviously watched it closely. I think you can expect similar results from the other four we downgraded—we are not overly concerned with them either.

Matthew Covington Olney: That is helpful. Thanks for all the color.

Operator: The next question comes from Brett Rabatin with Stonex Group. Please go ahead.

Brett Rabatin: A follow-up on the Texas markets. There have been a couple of deals in the market the past few quarters. Are you able to take advantage of the disruption from some of those transactions? How do you view disruption in the Texas markets? And might M&A be a strategy from here—are you actively looking for other partners? Any thoughts on your growth plans in the Texas markets?

Keith Donahoe: In general, there has been disruption in the market, from both a customer standpoint and an employee base. We have been having conversations with prospective employees from larger banks that could be beneficial to us as we cross the $10 billion mark. We will be opportunistic. In addition, one of the C&I customers we picked up in the first quarter came out of a displacement related to an acquisition by an out-of-state organization. The customer had a strong desire to bank with a Texas-based bank. We had been calling on them, and it made for a fairly easy transition. So we are seeing opportunities from both employee and customer standpoints.

Brett Rabatin: And any thoughts on M&A—your appetite, and what you are seeing?

Keith Donahoe: We are continuing to talk. We are open to acquisitions, and that has always been our strategy. Today there is a higher probability of something occurring because of the market dynamics. That will continue to be part of our strategy.

Brett Rabatin: Great. Appreciate the color.

Operator: There are no further questions at this time. I will now turn the call back to Keith Donahoe, President and CEO, for closing remarks.

Keith Donahoe: Thank you everyone for joining us today. We appreciate your interest in Southside Bancshares, Inc. We are optimistic about 2026 and look forward to reporting second quarter earnings during our next call in July.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.