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CST: 21/08/2019 16:16:20   

Southside Bancshares, Inc. Announces Financial Results for the Three Months and Year Ended December 31, 2018

201 Days ago

TYLER, Texas, Feb. 01, 2019 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the three months and year ended December 31, 2018.

Southside reported net income of $17.4 million for the three months ended December 31, 2018, an increase of $7.1 million, or 68.2%, compared to $10.3 million for the same period in 2017. Southside reported net income of $74.1 million for the year ended December 31, 2018, an increase of $19.8 million, or 36.5%, compared to $54.3 million for the same period in 2017.

Earnings per diluted common share increased $0.17, or 51.5%, to $0.50 for the three months ended December 31, 2018, from $0.33 for the same period in 2017. Earnings per diluted common share increased $0.30, or 16.6%, to $2.11 for the year ended December 31, 2018, from $1.81 for the same period in 2017.

The return on average shareholders’ equity for the year ended December 31, 2018 was 9.87%, compared to 9.65% for the same period in 2017. The return on average assets was 1.19% for the year ended December 31, 2018, compared to 0.96% for the same period in 2017.

“We reported net income of $17.4 million, an increase in our net margin and spread and an increase in total loans during the fourth quarter,” stated Lee R. Gibson, President and Chief Executive Officer of Southside.

“During the fourth quarter we experienced an increase in our loans of $38.3 million, largely driven by growth in our commercial loan portfolio and to a lesser extent construction loans and municipal loans. For the year ended December 31, 2018, loans increased slightly by $18.4 million. We believe our loan pipeline is solid for the first quarter of 2019 with a number of loans expected to fund, however, we also expect a number of loan payoffs during the first quarter, partially offsetting those funded. Loan growth during the quarter was partially responsible for the seven basis point increase in our net interest margin and the four basis point increase in our net interest spread, on a linked quarter basis. Economic conditions in our Texas markets remain solid. Current economic projections for 2019 for Texas are positive with the Austin and DFW markets projected to continue to experience robust economies, driven by company relocations and overall population growth.”

“On October 25, 2018 the Company's Board of Directors approved a Stock Repurchase Plan. The Board authorized the repurchase, from time to time, of up to 1,500,000 shares of common stock in open market purchases and privately negotiated transactions at prevailing market prices. During the fourth quarter we purchased approximately 1.46 million shares of our common stock at an average price of $32.34. The remaining shares authorized for repurchase were repurchased in January 2019.”

Loans and Deposits

For the year ended December 31, 2018, total loans increased by $18.4 million, or 0.6%, to $3.31 billion, compared to December 31, 2017. The net increase in our loans was comprised of increases of $90.2 million of commercial loans, $31.9 million of construction loans and $7.6 million of municipal loans, partially offset by decreases of $71.0 million of commercial real estate loans, $29.3 million of loans to individuals and $10.8 million of 1-4 family loans.

Nonperforming assets increased during the year ended December 31, 2018 by $32.4 million, or 309.7%, to $42.9 million, or 0.70% of total assets, compared to $10.5 million, or 0.16% of total assets at December 31, 2017, primarily due to the addition of four commercial real estate loans to nonaccrual status during the year, one of which was added during the fourth quarter.

During the year ended December 31, 2018, the allowance for loan losses increased by $6.2 million, or 30.0%, to $27.0 million, or 0.82% of total loans, compared to 0.63% of total loans at December 31, 2017. The increase in the allowance was primarily the result of additional provision recorded on the commercial real estate loans placed on nonaccrual status.

During the year ended December 31, 2018, deposits, net of brokered deposits, decreased $270.8 million, or 6.1%, compared to December 31, 2017, due primarily to the decrease in public fund deposits of $221.7 million.

Net Interest Income and Net Interest Margin for the Three Months Ended December 31, 2018

Net interest income increased $4.1 million, or 10.7%, to $42.4 million for the three months ended December 31, 2018, compared to $38.3 million for the same period in 2017. The increase in net interest income was the result of a $7.9 million increase in interest income primarily from our loan portfolio, partially offset by an increase in interest expense of $3.8 million compared to the same period in 2017. The increase in interest expense related directly to our deposits and was partially offset by a decrease in interest expense on our Federal Home Loan Bank (“FHLB”) borrowings.

For the three months ended December 31, 2018, our net interest margin (FTE) increased to 3.21%, compared to 3.12% for the same period in 2017. The increase in net interest margin (FTE) was due primarily to the change in the mix of earning assets during 2018 as a result of the acquisition of Diboll State Bancshares, Inc. (“Diboll”) on November 30, 2017, as well as an increase in the average yields on earning assets, partially offset by higher average rates paid on interest bearing liabilities. The increases in average yields and rates paid were primarily due to rising interest rates during 2017 and 2018. For the three months ended December 31, 2018, our net interest spread (FTE) decreased to 2.86%, from 2.91% for the same period in 2017.

Net Interest Income and Net Interest Margin for the Year Ended December 31, 2018

Net interest income increased $28.1 million, or 19.5%, to $172.1 million for the year ended December 31, 2018, compared to $144.0 million for the same period in 2017. The increase in net interest income was the result of a $41.7 million increase in interest income primarily from our loan portfolio, partially offset by an increase in interest expense of $13.6 million compared to the same period in 2017. The increase in interest expense related directly to our deposits and was partially offset by a decrease in interest expense on our FHLB borrowings.

For the year ended December 31, 2018, our net interest margin (FTE) increased to 3.18%, compared to 3.07% for the same period in 2017. The increase in net interest margin (FTE) was due primarily to the change in the mix of earning assets as a result of the acquisition of Diboll during 2018, as well as an increase in the average yields on earning assets, partially offset by higher average rates paid on interest bearing liabilities. The increases in average yields and rates paid were primarily due to rising interest rates during 2017 and 2018. For the year ended December 31, 2018, our net interest spread (FTE) decreased slightly to 2.88%, from 2.89% for the same period in 2017.

Net Income for the Three Months Ended December 31, 2018

Net income increased $7.1 million, or 68.2%, for the three months ended December 31, 2018, to $17.4 million compared to the same period in 2017. The increase was the result of a $7.9 million increase in interest income, a $3.3 million decrease in income tax expense and a $1.0 million increase in noninterest income, partially offset by a $3.8 million increase in interest expense, a $1.2 million increase in provision for loan losses, and a $0.3 million increase in noninterest expense.

The majority of the increase in noninterest income was a result of an increase in deposit services and trust income largely related to the acquisition of Diboll. In connection with the adoption of Accounting Standards Update 2014-09 (“ASU 2014-09”) revenue recognition guidance effective January 1, 2018, debit card expense and brokerage service expense for the three months ended December 31, 2018, previously reported in ATM and debit card expense and other noninterest expense are now netted with deposit services income and brokerage services income, respectively. Due to the guidance under the modified retrospective method, prior periods have not been adjusted and therefore, are not comparable.

Income tax expense decreased $3.3 million for the three months ended December 31, 2018 compared to the same period in 2017, due to recording a $2.4 million discrete income tax expense in December 2017 related to the remeasurement of our net deferred tax asset and due to a lower tax rate effective for 2018, both in connection with the Tax Cuts and Jobs Act. The reduced tax rate effective for 2018 resulted in a lower effective tax rate of 12.7% for the three months ended December 31, 2018, compared to 36.2% for the same period in 2017. Excluding the net impact of discrete tax items, our effective tax rate was approximately 12.5% and 21.3% for the three months ended December 31, 2018 and 2017, respectively.

Net Income for the Year Ended December 31, 2018

Net income increased $19.8 million, or 36.5%, for the year ended December 31, 2018, to $74.1 million compared to the same period in 2017. The increase was primarily the result of a $41.7 million increase in interest income, a $6.0 million decrease in income tax expense and a $3.3 million increase in noninterest income, partially offset by a $13.8 million increase in noninterest expense, a $13.6 million increase in interest expense and a $3.8 million increase in provision for loan losses.

Excluding net (loss) gain on sale of securities available for sale, noninterest income increased $5.8 million, or 15.6%, for the year ended December 31, 2018, compared to the same period in 2017. Deposit services and trust income increased and were partially offset by a decrease in gain on sale of loans. The increase in both deposit services income and trust income was largely related to the acquisition of Diboll. With the adoption of ASU 2014-09, debit card expense and brokerage service expense for the year ended December 31, 2018, previously reported in ATM and debit card expense and other noninterest expense, are now netted with deposit services income and brokerage services income, respectively. Due to the guidance under the modified retrospective method, prior periods have not been adjusted and therefore, are not comparable.

Noninterest expense increased $13.8 million, or 12.9%, for the year ended December 31, 2018, to $120.1 million, compared to the same period in 2017. The increase in most of our noninterest expense categories was directly attributable to the integration of Diboll into our operations.

Income tax expense decreased $6.0 million for the year ended December 31, 2018 compared to the same period in 2017. The Tax Cuts and Jobs Act reduced the U.S. federal corporate tax rate from 35% to 21%. The decrease in the income tax expense and effective tax rate for the year ended December 31, 2018 was due to the lower corporate tax rate and a $0.8 million discrete tax benefit recorded during 2018 compared to a $2.4 million discrete income tax expense for the year ended December 31, 2017 associated with the remeasurement of our net deferred tax asset. The reduced tax rate effective for 2018 resulted in a lower effective tax rate of 12.1% compared to 22.9% for the same period in 2017. Excluding the net impact of discrete tax items, our effective tax rate was approximately 13.0% and 19.5% for the year ended December 31, 2018 and 2017, respectively.

Conference Call

Southside's management team will host a conference call to discuss its fourth quarter and year end December 31, 2018 financial results on Friday, February 1, 2019 at 9:00 a.m. CST. The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 9677865 or by identifying “Southside Bancshares, Inc., Fourth Quarter and Year End 2018 Earnings Call.” To listen to the call via webcast, register at www.southside.com/about/investor-relations.

For those unable to listen to the conference call live, a recording will be available from approximately 11:30 a.m. CST February 1, 2019 through February 13, 2019 by accessing the company website, www.southside.com/about/investor-relations.

Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of our performance. These include the following fully taxable-equivalent measures (“FTE”): (i) Net interest income (FTE), (ii) Net interest margin (FTE), (iii) Net interest spread (FTE), and (iv) Efficiency ratio (FTE), which include the effects of taxable-equivalent adjustments using a federal income tax rate of 21% and 35% for the three months and year ended December 31, 2018 and 2017, respectively, to increase tax-exempt interest income to a tax-equivalent basis. Interest income earned on certain assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments.

Net interest income (FTE), Net interest margin (FTE) and Net interest spread (FTE). Net interest income (FTE) is a non-GAAP measure that adjusts for the tax-favored status of net interest income from certain loans and investments. We believe this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. The most directly comparable financial measure calculated in accordance with GAAP is our net interest income. Net interest margin (FTE) is the ratio of net interest income (FTE) to average earning assets. The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin. Net interest spread (FTE) is the difference in the average yield on average earning assets on a tax-equivalent basis and the average rate paid on average interest bearing liabilities. The most directly comparable financial measure calculated in accordance with GAAP is our net interest spread.

Efficiency ratio (FTE). The efficiency ratio (FTE) is a non-GAAP measure that provides a measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. The ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense, excluding amortization expense on intangibles and certain nonrecurring expense by the sum of net interest income (FTE) and noninterest income, excluding net gain (loss) on sale of securities available for sale and certain nonrecurring impairments. The most directly comparable financial measure calculated in accordance with GAAP is our efficiency ratio.

These non-GAAP financial measures should not be considered alternatives to GAAP-basis financial statements and other bank holding companies may define or calculate these non-GAAP measures or similar measures differently. Whenever we present a non-GAAP financial measure in an SEC filing, we are also required to present the most directly comparable financial measure calculated and presented in accordance with GAAP and reconcile the differences between the non-GAAP financial measure and such comparable GAAP measure.

In the following table we present, for the five quarterly periods ended December 31, 2018 and for the years ended December 31, 2018 and 2017, the reconciliation of net interest income to net interest income adjusted to a fully taxable-equivalent basis assuming a 21% marginal tax rate for 2018 and a 35% marginal tax rate for 2017 for interest earned on tax-exempt assets such as municipal loans and investment securities (dollars in thousands), along with the calculation of total revenue, adjusted noninterest expense, efficiency ratio (FTE), net interest margin (FTE) and net interest spread (FTE).

Non-GAAP Reconciliation                            
                             
    Three Months Ended   Years Ended
    2018   2017   2018   2017
    Dec. 31,   Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Dec. 31,   Dec. 31,
Net interest income (GAAP)   $ 42,410     $ 42,410     $ 43,111     $ 44,133     $ 38,306     $ 172,064     $ 143,970  
Tax equivalent adjustments:                            
Loans   599     590     583     582     1,125     2,354     4,313  
Investment securities (tax-exempt)   1,933     1,801     1,651     1,619     3,049     7,004     13,197  
Net interest income (FTE) (1)   44,942     44,801     45,345     46,334     42,480     181,422     161,480  
Noninterest income   10,134     10,022     11,007     9,610     9,099     40,773     37,473  
Nonrecurring income (2)   (66 )   741     (304 )   827     483     1,198     (191 )
Total revenue   $ 55,010     $ 55,564     $ 56,048     $ 56,771     $ 52,062     $ 223,393     $ 198,762  
                             
Noninterest expense   $ 30,196     $ 28,962     $ 29,274     $ 31,667     $ 29,933     $ 120,099     $ 106,335  
Pre-tax amortization expense   (1,228 )   (1,279 )   (1,328 )   (1,378 )   (726 )   (5,213 )   (1,955 )
Nonrecurring expense (3)   (264 )   (507 )   (1,287 )   (1,178 )   (3,479 )   (3,236 )   (4,394 )
Adjusted noninterest expense   $ 28,704     $ 27,176     $ 26,659     $ 29,111     $ 25,728     $ 111,650     $ 99,986  
                             
Efficiency ratio   54.70 %   51.11 %   49.54 %   53.35 %   53.73 %   52.16 %   55.16 %
Efficiency ratio (FTE) (1)   52.18 %   48.91 %   47.56 %   51.28 %   49.42 %   49.98 %   50.30 %
                             
Average earning assets   $ 5,558,052     $ 5,654,566     $ 5,700,133     $ 5,891,352     $ 5,395,212     $ 5,699,985     $ 5,254,431  
                             
Net interest margin   3.03 %   2.98 %   3.03 %   3.04 %   2.82 %   3.02 %   2.74 %
Net interest margin (FTE) (1)   3.21 %   3.14 %   3.19 %   3.19 %   3.12 %   3.18 %   3.07 %
                             
Net interest spread   2.68 %   2.65 %   2.75 %   2.80 %   2.60 %   2.72 %   2.56 %
Net interest spread (FTE) (1)   2.86 %   2.82 %   2.90 %   2.95 %   2.91 %   2.88 %   2.89 %


(1)  These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.
(2)  These adjustments may include net gain and loss on sale of securities available for sale, impairment of investments, other-than-temporary impairment charges and additional bank owned life insurance income realized as a result of the death benefits for a retired covered officer, in the periods where applicable.
(3)  These adjustments may include acquisition expenses, foreclosure expenses and branch closure expenses, in the periods where applicable.

Management believes adjusting net interest income, net interest margin and net interest spread to a fully taxable-equivalent basis is a standard practice in the banking industry as these measures provide useful information to make peer comparisons. Tax-equivalent adjustments are reported in the respective earning asset categories as listed in the “Average Balances with Average Yields and Rates” tables.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $6.12 billion in assets as of December 31, 2018, that owns 100% of Southside Bank. Southside Bank currently has 59 branches in Texas and operates a network of 82 ATMs/ITMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at www.southside.com/about/investor-relations. Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data. To receive e-mail notification of company news, events and stock activity, please register on the E-mail Notification portion of the website. Questions or comments may be directed to Julie Shamburger at (903) 531-7134, or julie.shamburger@southside.com.

Forward-Looking Statements

Certain statements of other than historical fact that are contained in this document and in other written material, press releases and oral statements issued by or on behalf of the Company may be considered to be “forward-looking statements” within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. These statements may include words such as “expect,” “estimate,” “project,” “anticipate,” “appear,” “believe,” “could,” “should,” “may,” “likely,” “intend,” “probability,” “risk,” “target,” “objective,” “plans,” “potential,” and similar expressions. Forward-looking statements are statements with respect to the Company’s beliefs, plans, expectations, objectives, goals, anticipations, assumptions and estimates about the Company's future performance and are subject to significant known and unknown risks and uncertainties, which could cause the Company's actual results to differ materially from the results discussed in the forward-looking statements. For example, discussions about trends in asset quality, capital, liquidity, the pace of loan and revenue growth, the Company's ability to sell nonperforming assets, expense reductions, planned operational efficiencies, earnings, successful integration of completed acquisitions and certain market risk disclosures, including the impact of interest rates, tax reform and other economic factors, are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future.

Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, under “Part I - Item 1. Forward Looking Information” and "Part I - Item 1A. Risk Factors" and in the Company’s other filings with the Securities and Exchange Commission. The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

CONTACT:
Julie Shamburger
(903) 531-7134
julie.shamburger@southside.com



  SOUTHSIDE BANCSHARES, INC.
  CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
  (In thousands, except per share data)
                   
                   
  As of
  2018   2017
  Dec. 31,   Sept. 30,   June 30,   Mar. 31,   Dec. 31,
ASSETS                  
Cash and due from banks $ 87,375     $ 85,103     $ 78,534     $ 65,480     $ 79,171  
Interest earning deposits 23,884     70,685     138,685     183,241     111,541  
Federal funds sold 9,460     18,284     14,850     14,090     7,980  
Securities available for sale, at estimated fair value 1,989,436     1,939,277     2,037,994     2,062,539     1,538,755  
Securities held to maturity, at carrying value 162,931     163,365     164,276     164,847     909,506  
Federal Home Loan Bank stock, at cost 32,583     32,291     42,994     42,676     55,729  
Loans held for sale 601     954     4,566     2,003     2,001  
Loans 3,312,799     3,274,524     3,270,883     3,309,627     3,294,356  
Less: Allowance for loan losses (27,019 )   (26,092 )   (25,072 )   (24,220 )   (20,781 )
Net loans 3,285,780     3,248,432     3,245,811     3,285,407     3,273,575  
Premises & equipment, net 135,972     133,939     132,578     131,625     133,640  
Goodwill 201,116     201,116     201,246     201,246     201,246  
Other intangible assets, net 17,779     19,009     20,287     21,615     22,993  
Bank owned life insurance 98,160     97,611     97,059     100,963     100,368  
Other assets 78,417     95,288     71,293     97,465     61,592  
Total assets $ 6,123,494     $ 6,105,354     $ 6,250,173     $ 6,373,197     $ 6,498,097  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
Noninterest bearing deposits $ 994,680     $ 1,033,572     $ 1,038,907     $ 1,055,423     $ 1,037,401  
Interest bearing deposits 3,430,350     3,519,940     3,469,834     3,586,474     3,478,046  
Total deposits 4,425,030     4,553,512     4,508,741     4,641,897     4,515,447  
Other borrowings 755,875     570,242     784,754     779,990     1,026,859  
Subordinated notes, net of unamortized debt issuance costs 98,407     98,366     98,326     98,286     98,248  
Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,246     60,244     60,243     60,242     60,241  
Other liabilities 52,645     70,484     46,299     46,386     43,162  
Total liabilities 5,392,203     5,352,848     5,498,363     5,626,801     5,743,957  
Shareholders' equity 731,291     752,506     751,810     746,396     754,140  
Total liabilities and shareholders' equity $ 6,123,494     $ 6,105,354     $ 6,250,173     $ 6,373,197     $ 6,498,097  



  At or For the Three Months Ended
  2018   2017
  Dec. 31,   Sept. 30,   June 30,   Mar. 31,   Dec. 31,
Income Statement:                  
Total interest income $ 58,022     $ 57,152     $ 56,797     $ 57,194     $ 50,104  
Total interest expense 15,612     14,742     13,686     13,061     11,798  
Net interest income 42,410     42,410     43,111     44,133     38,306  
Provision for loan losses 2,446     975     1,281     3,735     1,271  
Net interest income after provision for loan losses 39,964     41,435     41,830     40,398     37,035  
Noninterest income                  
Deposit services 6,325     6,317     6,261     6,179     5,940  
Net gain (loss) on sale of securities available for sale 61     (741 )   (332 )   (827 )   (249 )
Gain on sale of loans 101     303     173     115     268  
Trust income 1,573     1,568     1,931     1,760     1,156  
Bank owned life insurance income 554     552     1,185     632     632  
Brokerage services 499     532     506     450     632  
Other 1,021     1,491     1,283     1,301     720  
     Total noninterest income 10,134     10,022     11,007     9,610     9,099  
Noninterest expense                  
Salaries and employee benefits 17,823     17,628     16,633     18,559     15,316  
Occupancy expense 3,475     3,396     3,360     3,583     3,327  
Acquisition expense 118     437     1,026     832     3,474  
Advertising, travel & entertainment 786     648     775     685     601  
ATM and debit card expense 250     251     243     346     1,049  
Professional fees 1,189     824     952     1,070     859  
Software and data processing expense 1,057     977     939     1,023     882  
Telephone and communications 477     354     478     538     444  
FDIC insurance 455     435     484     497     442  
Amortization expense on intangibles 1,228     1,279     1,328     1,378     726  
Other 3,338     2,733     3,056     3,156     2,813  
     Total noninterest expense 30,196     28,962     29,274     31,667     29,933  
Income before income tax expense 19,902     22,495     23,563     18,341     16,201  
Income tax expense 2,521     2,192     3,360     2,090     5,870  
Net income $ 17,381     $ 20,303     $ 20,203     $ 16,251     $ 10,331  
                   
Common share data:      
Weighted-average basic shares outstanding 34,611     35,114     35,062     35,022     31,370  
Weighted-average diluted shares outstanding 34,748     35,288     35,233     35,200     31,569  
Shares outstanding end of period 33,725     35,160     35,084     35,053     35,000  
Net income per common share                  
Basic $ 0.50     $ 0.58     $ 0.58     $ 0.46     $ 0.33  
Diluted 0.50     0.58     0.57     0.46     0.33  
Book value per common share 21.68     21.40     21.43     21.29     21.55  
Cash dividend paid per common share 0.32     0.30     0.30     0.28     0.30  
                   
Selected Performance Ratios:                  
Return on average assets 1.14 %   1.30 %   1.30 %   1.02 %   0.70 %
Return on average shareholders’ equity 9.30     10.61     10.79     8.75     6.52  
Average yield on earning assets (FTE) (1) 4.32     4.18     4.15     4.09     3.99  
Average rate on interest bearing liabilities 1.46     1.36     1.25     1.14     1.08  
Net interest spread (FTE) (1) 2.86     2.82     2.90     2.95     2.91  
Net interest margin (FTE) (1) 3.21     3.14     3.19     3.19     3.12  
Average earning assets to average interest bearing liabilities 131.07     131.12     130.22     127.29     124.73  
Noninterest expense to average total assets 1.98     1.86     1.89     1.99     2.03  
Efficiency ratio (FTE) (1) 52.18     48.91     47.56     51.28     49.42  


(1) These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures. See “Non-GAAP Financial Measures” for more information, including a reconciliation to GAAP.



  At or For the
Years Ended
  December 31,
  2018   2017
Income Statement:      
Total interest income $ 229,165     $ 187,474  
Total interest expense 57,101     43,504  
Net interest income 172,064     143,970  
Provision for loan losses 8,437     4,675  
Net interest income after provision for loan losses 163,627     139,295  
Noninterest income      
Deposit services 25,082     21,785  
Net (loss) gain on sale of securities available for sale (1,839 )   625  
Gain on sale of loans 692     1,821  
Trust income 6,832     3,818  
Bank owned life insurance income 2,923     2,537  
Brokerage services 1,987     2,422  
Other 5,096     4,465  
     Total noninterest income 40,773     37,473  
Noninterest expense      
Salaries and employee benefits 70,643     60,779  
Occupancy expense 13,814     12,068  
Acquisition expense 2,413     4,352  
Advertising, travel & entertainment 2,894     2,219  
ATM and debit card expense 1,090     3,889  
Professional fees 4,035     3,844  
Software and data processing expense 3,996     3,027  
Telephone and communications 1,847     1,905  
FDIC insurance 1,871     1,769  
Amortization expense on intangibles 5,213     1,955  
Other 12,283     10,528  
     Total noninterest expense 120,099     106,335  
Income before income tax expense 84,301     70,433  
Income tax expense 10,163     16,121  
Net income $ 74,138     $ 54,312  


Common share data:    
Weighted-average basic shares outstanding 34,951     29,841  
Weighted-average diluted shares outstanding 35,116     30,047  
Net income per common share      
Basic $ 2.12     $ 1.82  
Diluted 2.11     1.81  
Book value per common share 21.68     21.55  
Cash dividend paid per common share 1.20     1.11  


   
Selected Performance Ratios:      
Return on average assets 1.19 %   0.96 %
Return on average shareholders’ equity 9.87     9.65  
Average yield on earning assets (FTE) (1) 4.18     3.90  
Average yield on interest bearing liabilities 1.30     1.01  
Net interest spread (FTE) (1) 2.88     2.89  
Net interest margin (FTE) (1) 3.18     3.07  
Average earning assets to average interest bearing liabilities 129.89     122.42  
Noninterest expense to average total assets 1.93     1.88  
Efficiency ratio (FTE) (1) 49.98     50.30  


(1)  These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures. See “Non-GAAP Financial Measures” for more information, including a reconciliation to GAAP.



  Southside Bancshares, Inc.
  Selected Financial Data (unaudited)
  (dollars in thousands)
                   
  Three Months Ended
  2018   2017
  Dec. 31,   Sept. 30,   June 30,   Mar. 31,   Dec. 31,
Nonperforming assets: $ 42,906     $ 39,638     $ 42,423     $ 42,444     $ 10,472  
Nonaccrual loans (1) 35,770     32,526     35,351     34,545     2,937  
Accruing loans past due more than 90 days (1)         7     4     1  
Restructured loans (2) 5,930     5,699     5,860     5,839     5,767  
Other real estate owned 1,206     1,413     1,137     2,014     1,613  
Repossessed assets         68     42     154  
                   
Asset Quality Ratios:                  
Nonaccruing loans to total loans 1.08 %   0.99 %   1.08 %   1.04 %   0.09 %
Allowance for loan losses to nonaccruing loans 75.54     80.22     70.92     70.11     707.56  
Allowance for loan losses to nonperforming assets 62.97     65.83     59.10     57.06     198.44  
Allowance for loan losses to total loans 0.82     0.80     0.77     0.73     0.63  
Nonperforming assets to total assets 0.70     0.65     0.68     0.67     0.16  
Net charge-offs (recoveries) to average loans 0.18     (0.01 )   0.05     0.04     0.05  
                   
Capital Ratios:                  
Shareholders’ equity to total assets 11.94     12.33     12.03     11.71     11.61  
Average shareholders’ equity to average total assets 12.23     12.28     12.06     11.69     10.75  


(1)  Excludes purchased credit impaired ("PCI") loans measured at fair value at acquisition if the timing and amount of cash flows expected to be collected from those sales can be reasonably estimated.
(2)  Includes $3.1 million, $3.2 million, $2.9 million, $2.9 million, and $2.9 million in PCI loans restructured as of December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017, respectively.


Loan Portfolio Composition

The following table sets forth loan totals by category for the periods presented:

  Three Months Ended
  2018   2017
  Dec. 31,   Sept. 30,   June 30,   Mar. 31,   Dec. 31,
Real Estate Loans:                  
Construction $ 507,732     $ 484,254     $ 487,286     $ 474,791     $ 475,867  
1-4 Family Residential 794,499     791,274     791,359     797,088     805,341  
Commercial 1,194,118     1,218,714     1,245,936     1,285,591     1,265,159  
Commercial Loans 356,649     322,873     282,723     281,901     266,422  
Municipal Loans 353,370     344,792     345,595     342,404     345,798  
Loans to Individuals 106,431     112,617     117,984     127,852     135,769  
Total Loans $ 3,312,799     $ 3,274,524     $ 3,270,883     $ 3,309,627     $ 3,294,356  



The “Average Balances with Average Yields and Rates” tables that follow show average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities (dollars in thousands) for the periods presented. The interest and related yields presented are on a fully taxable-equivalent basis and are therefore non-GAAP measures. See "Non-GAAP Financial Measures" for more information.

  Average Balances with Average Yields and Rates
  (unaudited)
  Three Months Ended
  December 31, 2018   September 30, 2018
  Avg Balance   Interest   Avg Yield/Rate   Avg Balance   Interest   Avg Yield/Rate
ASSETS                      
Loans (1) $ 3,289,840     $ 41,320     4.98 %   $ 3,286,664     $ 40,396     4.88 %
Loans held for sale 633     8     5.01 %   1,841     25     5.39 %
Securities:                      
Investment securities (taxable) (2) 13,066     103     3.13 %   4,285     36     3.33 %
Investment securities (tax-exempt) (2) 722,162     7,828     4.30 %   795,397     8,132     4.06 %
Mortgage-backed and related securities (2) 1,434,982     10,394     2.87 %   1,418,114     10,086     2.82 %
     Total securities 2,170,210     18,325     3.35 %   2,217,796     18,254     3.27 %
FHLB stock, at cost, and equity investments 44,304     393     3.52 %   54,216     377     2.76 %
Interest earning deposits 36,098     411     4.52 %   77,977     414     2.11 %
Federal funds sold 16,967     97     2.27 %   16,072     77     1.90 %
Total earning assets 5,558,052     60,554     4.32 %   5,654,566     59,543     4.18 %
Cash and due from banks 79,544             78,623          
Accrued interest and other assets 452,257             477,737          
Less: Allowance for loan losses (26,231 )           (25,646 )        
Total assets $ 6,063,622             $ 6,185,280          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
Savings deposits $ 361,407     257     0.28 %   $ 362,405     258     0.28 %
Time deposits 1,123,101     5,170     1.83 %   1,173,672     4,744     1.60 %
Interest bearing demand deposits 1,968,786     4,908     0.99 %   1,953,904     4,495     0.91 %
Total interest bearing deposits 3,453,294     10,335     1.19 %   3,489,981     9,497     1.08 %
FHLB borrowings 612,134     3,066     1.99 %   654.153     3.108     1.88 %
Subordinated notes, net of unamortized debt issuance costs 98,385     1,431     5.77 %   98,346     1,423     5.74 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,245     699     4.60 %   60,244     684     4.50 %
Other borrowings 16,405     81     1.96 %   9,651     30     1.23 %
Total interest bearing liabilities 4,240,463     15,612     1.46 %   4,312,375     14,742     1.36 %
Noninterest bearing deposits 1,034,556             1,064,797          
Accrued expenses and other liabilities 47,234             48,699          
Total liabilities 5,322,253             5,425,871          
Shareholders’ equity 741,369             759,409          
Total liabilities and shareholders’ equity $ 6,063,622             $ 6,185,280          
Net interest income (FTE)     $ 44,942             $ 44,801      
Net interest margin (FTE)         3.21 %           3.14 %
Net interest spread (FTE)         2.86 %           2.82 %


(1)  Interest on loans includes net fees on loans that are not material in amount.
(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of December 31, 2018 and September 30, 2018, loans totaling $35.8 million and $32.5 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.



  Average Balances with Average Yields and Rates
  (unaudited)
  Three Months Ended
  June 30, 2018   March 31, 2018
  Avg Balance   Interest   Avg Yield/Rate   Avg Balance   Interest   Avg Yield/Rate
ASSETS                      
Loans (1) $ 3,285,756     $ 39,865     4.87 %   $ 3,300,506     $ 39,401     4.84 %
Loans held for sale 1,794     19     4.25 %   1,543     11     2.89 %
Securities:                      
Investment securities (taxable) (2) 6,891     51     2.97 %   39,332     227     2.34 %
Investment securities (tax-exempt) (2) 802,611     8,004     4.00 %   805,091     8,000     4.03 %
Mortgage-backed and related securities (2) 1,439,810     10,210     2.84 %   1,557,140     10,894     2.84 %
     Total securities 2,249,312     18,265     3.26 %   2,401,563     19,121     3.23 %
FHLB stock, at cost, and equity investments 54,729     411     3.01 %   67,000     414     2.51 %
Interest earning deposits 92,291     400     1.74 %   107,488     399     1.51 %
Federal funds sold 16,251     71     1.75 %   13,252     49     1.50 %
Total earning assets 5,700,133     59,031     4.15 %   5,891,352     59,395     4.09 %
Cash and due from banks 75,560             78,031          
Accrued interest and other assets 473,142             493,974          
Less: Allowance for loan losses (24,558 )           (21,005 )        
Total assets $ 6,224,277             $ 6,442,352          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
Savings deposits $ 360,340     208     0.23 %   $ 353,770     184     0.21 %
Time deposits 1,175,230     4,303     1.47 %   1,170,024     3,895     1.35 %
Interest bearing demand deposits 1,981,427     4,070     0.82 %   2,009,154     3,372     0.68 %
Total interest bearing deposits 3,516,997     8,581     0.98 %   3,532,948     7,451     0.86 %
FHLB borrowings 692,386     3,007     1.74 %   928,677     3,632     1.59 %
Subordinated notes, net of unamortized debt issuance costs 98,306     1,407     5.74 %   98,267     1,398     5.77 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,243     658     4.38 %   60,241     569     3.83 %
Other borrowings 9,283     33     1.43 %   8,103     11     0.55 %
Total interest bearing liabilities 4,377,215     13,686     1.25 %   4,628,236     13,061     1.14 %
Noninterest bearing deposits 1,045,298             1,016,707          
Accrued expenses and other liabilities 50,843             44,015          
Total liabilities 5,473,356             5,688,958          
Shareholders’ equity 750,921             753,394          
Total liabilities and shareholders’ equity $ 6,224,277             $ 6,442,352          
Net interest income (FTE)     $ 45,345             $ 46,334      
Net interest margin (FTE)         3.19 %           3.19 %
Net interest spread (FTE)         2.90 %           2.95 %


(1)  Interest on loans includes net fees on loans that are not material in amount.
(2)  For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of June 30, 2018 and March 31, 2018, loans totaling $35.4 million and $34.5 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.



  Average Balances with Average Yields and Rates
  (unaudited)
  Three Months Ended
  December 31, 2017
  Avg Balance   Interest   Avg Yield/Rate
ASSETS          
Loans (1) $ 2,897,444     $ 34,070     4.67 %
Loans held for sale 2,285     22     3.82 %
Securities:          
Investment securities (taxable) (2) 51,678     237     1.82 %
Investment securities (tax-exempt) (2) 775,681     9,197     4.70 %
Mortgage-backed and related securities (2) 1,461,159     9,931     2.70 %
     Total securities 2,288,518     19,365     3.36 %
FHLB stock, at cost, and equity investments 67,127     380     2.25 %
Interest earning deposits 133,007     418     1.25 %
Federal funds sold 6,831     23     1.34 %
Total earning assets 5,395,212     54,278     3.99 %
Cash and due from banks 60,590          
Accrued interest and other assets 410,528          
Less: Allowance for loan losses (19,963 )        
Total assets $ 5,846,367          
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Savings deposits $ 293,392     134     0.18 %
Time deposits 1,031,008     3,178     1.22 %
Interest bearing demand deposits 1,696,239     2,585     0.60 %
Total interest bearing deposits 3,020,639     5,897     0.77 %
FHLB borrowings 1,137,373     3,935     1.37 %
Subordinated notes, net of unamortized debt issuance costs 98,229     1,429     5.77 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,240     532     3.50 %
Other borrowings 9,157     5     0.22 %
Total interest bearing liabilities 4,325,638     11,798     1.08 %
Noninterest bearing deposits 846,632          
Accrued expenses and other liabilities 45,613          
Total liabilities 5,217,883          
Shareholders’ equity 628,484          
Total liabilities and shareholders’ equity $ 5,846,367          
Net interest income (FTE)     $ 42,480      
Net interest margin (FTE)         3.12 %
Net interest spread (FTE)         2.91 %


(1)  Interest on loans includes net fees on loans that are not material in amount.
(2)  For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of December 31, 2017, loans totaling $2.9 million were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.



  Average Balances with Average Yields and Rates
  (unaudited)
  Years Ended
  December 31, 2018   December 31, 2017
  Avg Balance   Interest   Avg Yield/Rate   Avg Balance   Interest   Avg Yield/Rate
ASSETS                      
Loans (1) $ 3,290,651     $ 160,982     4.89 %   $ 2,666,265     $ 121,769     4.57 %
Loans held for sale 1,451     63     4.34 %   5,058     177     3.50 %
Securities:                      
Investment securities (taxable) (2) 15,790     417     2.64 %   51,654     939     1.82 %
Investment securities (tax-exempt) (2) 781,127     31,964     4.09 %   765,854     37,726     4.93 %
Mortgage-backed and related securities (2) 1,462,055     41,584     2.84 %   1,543,826     41,361     2.68 %
     Total securities 2,258,972     73,965     3.27 %   2,361,334     80,026     3.39 %
FHLB stock, at cost, and equity investments 54,998     1,595     2.90 %   66,855     1,306     1.95 %
Interest earning deposits 78,266     1,624     2.07 %   148,924     1,634     1.10 %
Federal funds sold 15,647     294     1.88 %   5,995     72     1.20 %
Total earning assets 5,699,985     238,523     4.18 %   5,254,431     204,984     3.90 %
Cash and due from banks 77,946             54,590          
Accrued interest and other assets 473,639             369,872          
Less: Allowance for loan losses (24,378 )           (19,042 )        
Total assets $ 6,227,192             $ 5,659,851          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
Savings deposits $ 359,509     907     0.25 %   $ 267,345     464     0.17 %
Time deposits 1,160,423     18,112     1.56 %   990,553     11,006     1.11 %
Interest bearing demand deposits 1,978,140     16,845     0.85 %   1,645,557     9,266     0.56 %
Total interest bearing deposits 3,498,072     35,864     1.03 %   2,903,455     20,736     0.71 %
FHLB borrowings 720,785     12,813     1.78 %   1,222,033     15,106     1.24 %
Subordinated notes, net of unamortized debt issuance costs 98,327     5,659     5.76 %   98,172     5,633     5.74 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,243     2,610     4.33 %   60,238     2,013     3.34 %
Other borrowings 10,880     155     1.42 %   8,120     16     0.20 %
Total interest bearing liabilities 4,388,307     57,101     1.30 %   4,292,018     43,504     1.01 %
Noninterest bearing deposits 1,040,447             761,370          
Accrued expenses and other liabilities 47,176             43,440          
Total liabilities 5,475,930             5,096,828          
Shareholders’ equity 751,262             563,023          
Total liabilities and shareholders’ equity $ 6,227,192             $ 5,659,851          
Net interest income (FTE)     $ 181,422             $ 161,480      
Net interest margin (FTE)         3.18 %           3.07 %
Net interest spread (FTE)         2.88 %           2.89 %


(1)  Interest on loans includes net fees on loans that are not material in amount.
(2)  For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of December 31, 2018 and 2017, loans totaling $35.8 million and $2.9 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

 

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