SBSI - Southside Bancshares: A Downgrade On A Mixed Picture

2025-05-11 02:19:23 ET

Summary

• Southside Bancshares has shown stagnant revenue and profits, with a declining balance sheet, leading me to downgrade it from a 'hold' to a soft 'sell'.
• Despite good asset quality and a low price-to-earnings ratio, the high price-to-tangible-book multiple and lack of growth are concerning.
• Deposits and loans have decreased, with a notable reduction in brokered deposits, while non-interest income has seen modest growth.
• Given the current economic uncertainty, I recommend a conservative approach, as Southside Bancshares' lack of growth makes it a higher-risk investment.

One bank that has been disappointing in recent months is Southside Bancshares ( SBSI ). Back in August of last year, I decided to rate the business a ‘hold’. This was based on the fact that revenue had been stagnant, and that earnings had been falling for some time. The company had been experiencing a steady growth in deposits, but debt was on the rise and the stock was not cheap enough to justify a bullish assessment. As a result, I ended up arguing that it was a firm with really nothing to offer investors. But I didn't think that the situation was so bad as to justify a ‘sell’ rating. Unfortunately, the market has disagreed with me in this assessment. Since the time of that writing, shares of the business have dropped 7.2% at a time when the S&P 500 is up 5.6%....

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