Third quarter new loan production totaled approximately $500 million, a significant increase from the second quarter production of $290 million. The unfunded portion of this quarter’s production is expected to fund over the next six to nine quarters, with third quarter payoffs totaling approximately $116 million, an improvement from the second quarter payoffs of $200 million.
Commercial real estate payoffs in the third quarter included approximately 15 loans secured by various properties. Two retail properties were refinanced with other bank lenders offering fixed rates below target spreads, impacting the loan pipeline, which currently stands at $1.8 billion, down from a mid-quarter dip to $1.5 billion. Credit quality remains strong.
Non-performing assets increased to approximately $2.7 million during the third quarter, concentrated in a previously disclosed multifamily loan. The expectation is for this loan to be refinanced or right-sized before year-end, with non-performing assets at 0.42% of total assets.
Net income for the third quarter was $4.9 million, a decrease of 77.5% from the previous quarter, with loans totaling $4.77 billion as of September 30. The average rate of loans funded during the quarter was approximately 6.7%, and loans with oil and gas industry exposure were $70.6 million or 1.5% of total loans.
The securities portfolio was $2.56 billion as of September 30, with a net unrealized loss of $15.4 million, primarily due to restructuring of the available-for-sale securities portfolio. Liquidity resources remain solid, with $2.87 billion in liquidity lines available as of September 30.
The company repurchased 26,692 shares of its common stock during the third quarter and issued $150 million of 7% subordinated notes on August 14. Capital ratios remain strong, with all capital ratios above the threshold for well-capitalized. Net interest margin and spread for the quarter were 2.94% and 2.26% respectively, with an increase in net interest income of $1.45 million compared to the previous quarter.
Non-interest income increased by $260,000 primarily due to trust fees, and non-interest expense decreased by $1.7 million, driven by the write-off of a branch and software expense reduction. The efficiency ratio decreased to 52.99% as of September 30.
There were no purchases of common stock since September 30, with an effective tax rate of 3.7% for the quarter. The company expects non-interest expense to be around $38 million for the fourth quarter and an annual effective tax rate of 16.6% for 2025.
Read more at Yahoo Finance: Southside Q3 2025 Earnings Call Transcript