Southside Bancshares, Inc. Announces Financial Results for the Third Quarter Ended September 30, 2020

Southside Bancshares, Inc.
·39 min read
  • Third quarter diluted earnings per share of $0.82, an increase of 41.4% compared to same period in 2019;

  • Third quarter net income of $27.1 million, an increase of 36.8% compared to same period in 2019;

  • Annualized return on third quarter average tangible equity of 17.73% (1) ;

  • Nonperforming assets remain low at 0.23% of total assets;

  • Total COVID-19 modified loans decreased 76.5%, to $76.5 million;

  • Allowance for loan losses to total loans, 1.45%.

TYLER, Texas, Oct. 23, 2020 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (Southside or the Company) (NASDAQ: SBSI) today reported its financial results for the quarter ended September 30, 2020.  Southside reported net income of $27.1 million for the three months ended September 30, 2020, an increase of $7.3 million, or 36.8%, compared to $19.8 million for the same period in 2019.  Earnings per diluted common share increased $0.24, or 41.4%, to $0.82 for the three months ended September 30, 2020, from $0.58 for the same period in 2019.  The annualized return on average shareholders equity for the three months ended September 30, 2020 was 12.89%, compared to 9.78% for the same period in 2019.  The annualized return on average assets was 1.48% for the three months ended September 30, 2020, compared to 1.23% for the same period in 2019.

I am delighted to report Southsides strong third quarter financial results, stated Lee R. Gibson, President and Chief Executive Officer of Southside. We reported a return on third quarter average tangible equity of 17.73% as net income increased 36.8% compared to the same period in 2019, largely driven by a decrease in provision for credit losses and an increase in net interest income that was partially offset by an increase in noninterest expense.  Asset quality metrics remain solid with nonperforming assets to total assets decreasing to 0.23%.  As of October 20, 2020 and since the release of our second quarter results in July, total COVID-19 modified loans have decreased approximately $249 million, or 76.5%, from $326 million as of July 20, to $76.5 million, or 2.2% of total loans, net of Paycheck Protection Program (PPP) loans.  On a linked quarter basis our net interest margin (1) remained unchanged at 3.02%, while the net interest spread (1) increased two basis points to 2.84%.

During the third quarter loans decreased $62.6 million primarily due to a few large payoffs in commercial real estate loans.  Our loan pipeline is growing as lending opportunities in our markets are steadily increasing.  Our balance sheet, capital position and underlying earnings continue to be a source of strength, as reflected in our third quarter results.

On October 3, Southside celebrated its 60th Anniversary with various activities, including a customer appreciation day in our branches.  We were honored to virtually ring the Nasdaq Opening Bell in celebration of our 60th anniversary on September 28.  Over the last 60 years, we have experienced tremendous growth, expanded our footprint to many communities in Texas and formed meaningful long-standing relationships with our customers.  We have been blessed with exceptional team members and customers who have played an integral role in our success and together, we look forward to further expanding and growing Southsides Texas franchise.  

While the pandemic continues to impact the markets we serve and many uncertainties remain, we are encouraged by the increased economic activity in our markets.  I continue to be extremely proud of the dedication and professionalism consistently shown by our team members as they safely and efficiently serve our customers and I want to thank each of them publicly.

Operating Results for the Three Months Ended September 30, 2020

Net income was $27.1 million for the three months ended September 30, 2020, compared to $19.8 million for the same period in 2019, an increase of $7.3 million, or 36.8%.  Earnings per diluted common share were $0.82 for the three months ended September 30, 2020, compared to $0.58 for the same period in 2019, an increase of 41.4%.  The increase in net income was largely driven by the increase in net interest income and the decrease in the provision for credit losses, partially offset by an increase in noninterest expense.  Annualized returns on average assets and average shareholders equity for the three months ended September 30, 2020 were 1.48% and 12.89%, respectively.  Our efficiency ratio (FTE) (1) was 50.07% for the three months ended September 30, 2020, compared to 48.29% for the three months ended June 30, 2020. 

Net interest income for the three months ended September 30, 2020 was $46.6 million compared to $42.4 million for the same period in 2019.  The increase in net interest income compared to the same period in 2019 was primarily due to the decrease in interest expense on our interest bearing liabilities, a result of lower funding costs, partially offset by a decrease in interest income due to a decrease in the average yield on our interest earning assets during the three months ended September 30, 2020.  Linked quarter, net interest income decreased $0.7 million, or 1.4%, compared to $47.3 million during the three months ended June 30, 2020.  The decrease was primarily due to decreases in interest income on mortgage related securities and loans, partially offset by decreases in interest expense on deposits and FHLB borrowings.

Our tax equivalent net interest margin (1) was 3.02% for the three months ended September 30, 2020, compared to 3.03% for the same period in 2019.  Our tax equivalent net interest margin linked quarter remained unchanged from 3.02% for the three months ended June 30, 2020.

Noninterest income was $11.1 million for the three months ended September 30, 2020 and 2019, with only a slight increase of $30,000, or 0.3%.  On a linked quarter basis, noninterest income decreased $1.1 million, or 8.6%, due to a $2.6 million decrease in net gain on sale of securities available for sale, partially offset by an increase in deposit services income, other noninterest income and gain on sale of loans.

Noninterest expense was $31.6 million for the three months ended September 30, 2020, an increase of $2.6 million, or 8.9%, compared to $29.0 million for the same period in 2019. The increase was the result of increases in other noninterest expense, salaries and employee benefits and FDIC insurance.  On a linked quarter basis, noninterest expense increased $1.8 million, or 5.9%, compared to the three months ended June 30, 2020.  The increase was due to increases in salaries and employee benefits, other noninterest expense and FDIC insurance.

Income tax expense increased $0.1 million for the three months ended September 30, 2020 compared to the same period in 2019.  On a linked quarter basis, income tax expense increased $1.0 million, or 34.7%.  Our effective tax rate (ETR) decreased to 12.3% for the three months ended September 30, 2020 compared to 15.6% for the three months ended September 30, 2019 and increased compared to 11.5% for the three months ended June 30, 2020.  The lower ETR for the three months ended September 30, 2020, as compared to the same period in 2019, was primarily due to an increase in tax-exempt income as a percentage of pre-tax income for the three months ended September 30, 2020.  On a linked quarter basis, the increase in ETR for the three months ended September 30, 2020 was due to a decrease in tax-exempt income as a percentage of pre-tax income.

Operating Results for the Nine Months Ended September 30, 2020

Net income was $52.6 million for the nine months ended September 30, 2020, compared to $57.2 million for the same period in 2019, a decrease of $4.6 million, or 8.1%.  Earnings per diluted common share were $1.58 for the nine months ended September 30, 2020, compared to $1.69 for the same period in 2019, a decrease of 6.5%.  The decrease in net income was primarily driven by an increase in the provision for credit losses after adopting ASU 2016-13 (2) (CECL) and an increase in noninterest expense, partially offset by an increase in net interest income, an increase in noninterest income and a decrease in income tax expense.  The increase in the provision for credit losses for the nine months ended September 30, 2020 was primarily due to the economic environment related to COVID-19 and the resulting impact on the economic assumptions used in the CECL model.  The adoption of CECL (2) replaced the incurred loss model with an expected credit loss methodology.  Annualized returns on average assets and average shareholders equity for the nine months ended September 30, 2020 were 0.98% and 8.56%, respectively.  Our efficiency ratio (FTE) (1) was 50.06%  for the nine months ended September 30, 2020, compared to 51.85% for the nine months ended September 30, 2019. 

Net interest income for the nine months ended September 30, 2020 was $138.6 million, compared to $126.6 million during the same period in 2019, an increase of $11.9 million, or 9.4%.  The increase in net interest income compared to the same period in 2019 was due to the decrease in interest expense on our interest bearing liabilities, a result of lower funding costs on our interest bearing liabilities, partially offset by a decrease in interest income due to a lower yield on our interest earning assets during the nine months ended September 30, 2020.

Our tax equivalent net interest margin (1) was 3.02% for the nine months ended September 30, 2020, compared to 3.09% for the same period in 2019.  The decrease was due to the shift in interest earning assets from higher yielding loans into securities and to a lesser extent, lower yielding average PPP loan balances included during the nine months ended September 30, 2020.

Noninterest income was $38.8 million for the nine months ended September 30, 2020, an increase of 21.7%, compared to $31.9 million for the same period in 2019.  The increase was due to the increases in net gain on sale of securities available for sale and gain on sale of loans, partially offset by decreases in deposit services income and trust fees.

Noninterest expense was $92.0 million for the nine months ended September 30, 2020, compared to $88.4 million for the same period in 2019, an increase of $3.6 million, or 4.1%.  The increase was the result of increases in salaries and employee benefits, other noninterest expense, net occupancy expense and software and data processing expense, partially offset by decreases in amortization of intangibles and advertising, travel and entertainment expense.

Income tax expense decreased $3.3 million, or 31.8%, for the nine months ended September 30, 2020, compared to the same period in 2019.  Our ETR was approximately 11.9% and 15.3% for the nine months ended September 30, 2020 and 2019, respectively.  The lower ETR for the nine months ended September 30, 2020, as compared to the same period in 2019, was primarily due to an increase in tax-exempt income as a percentage of pre-tax income.

Balance Sheet Data

At September 30, 2020, we had $7.19 billion in total assets, compared to $6.75 billion at December 31, 2019 and $6.54 billion at September 30, 2019.

Loans at September 30, 2020 were $3.79 billion, an increase of $290.1 million, or 8.3%, compared to $3.50 billion at September 30, 2019.  Linked quarter loans decreased $62.6 million, or 1.6%, from $3.85 billion at June 30, 2020.  The linked quarter net decrease in loans consisted primarily of decreases of $79.3 million of commercial real estate loans, $23.5 million of 1-4 family residential loans and $10.0 million of commercial loans, partially offset by increases of $39.6 million of construction loans, $9.9 million of municipal loans and $0.7 million of loans to individuals.  On a linked quarter basis, our PPP loans, net of deferred fees and included in the commercial loan category, increased $3.3 million, or 1.1%, from $299.5 million to $302.8 million.   

Securities at September 30, 2020 were $2.75 billion, an increase of $367.3 million, or 15.4%, compared to $2.38 billion at September 30, 2019.  The increase occurred primarily during the first quarter of 2020.  Linked quarter, securities decreased $51.3 million, or 1.8%, from $2.80 billion at June 30, 2020 primarily due to principal pay downs of mortgage related securities.

Deposits at September 30, 2020 were $5.10 billion, an increase of $612.3 million, or 13.6%, compared to $4.49 billion at September 30, 2019, largely driven by PPP loan disbursements deposited into our commercial accounts, stimulus checks deposited during the second quarter and an increase in public fund deposits.  Linked quarter, deposits increased $32.5 million, or 0.6%, from $5.07 billion at June 30, 2020, primarily due to an increase in individual interest bearing savings accounts, commercial interest bearing checking accounts and brokered certificates of deposits. 

CECL Adoption and Asset Quality

During the first quarter of 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses, often referred to as CECL. Upon the adoption of CECL, we recorded a cumulative-effect adjustment that decreased retained earnings by $7.8 million, net of tax. This adjustment was the result of a $5.3 million increase in the allowance for loan losses, from $24.8 million at December 31, 2019 to $30.1 million upon adoption, including $0.2 million for purchased loans with credit deterioration, and a $4.8 million increase in other liabilities related to the allowance for off-balance-sheet credit exposures. 

Based on the credit quality of our securities portfolio, the adoption of CECL did not result in the recording of an allowance for credit losses on our held-to-maturity securities.

Nonperforming assets at September 30, 2020 were $16.8 million, or 0.23% of total assets, a decrease of $0.6 million, or 3.6%, compared to $17.4 million, or 0.26% of total assets, at December 31, 2019, and a decrease from $17.6 million, or 0.24% of total assets, at June 30, 2020.  During the three months ended September 30, 2020, nonaccrual loans increased $0.3 million, or 5.9%.

The allowance for loan losses increased to $55.1 million, or 1.45% of total loans at September 30, 2020, compared to $24.8 million, or 0.69% of total loans, at December 31, 2019.  The allowance for loan losses was $59.9 million, or 1.55% of total loans at June 30, 2020.  The increase year-to-date is due to the adoption of CECL and the economic uncertainty related to the COVID-19 pandemic and resulting expected losses. 

For the three months ended September 30, 2020, we recorded a reversal of provision for credit losses for loans of $4.4 million, compared to a provision for loan losses of $1.0 million for the three months ended September 30, 2019 and a provision for credit losses of $6.3 million for the three months ended June 30, 2020.  The provision for credit losses for the nine months ended September 30, 2020 was $26.0 million, compared to $2.6 million for the nine months ended September 30, 2019.  The increase during 2020 was primarily due to the economic impact of COVID-19 on macroeconomic factors used in the CECL methodology, including the potential for credit deterioration.  The partial reversal of provision for credit losses during the three months ended September 30, 2020, was largely driven by an improvement in the economic forecasts and the decrease in commercial real estate loans.  However, if the COVID-19 pandemic and economic impact is prolonged, it is likely that credit losses and nonperforming assets may increase.  Net charge-offs were $0.4 million for the three months ended September 30, 2020, compared to net charge-offs of $0.6 million for the three months ended September 30, 2019 and $0.1 million of net charge-offs for the three months ended June 30, 2020.   Net charge-offs were $1.0 million for the nine months ended September 30, 2020, compared to $4.5 million for the nine months ended September 30, 2019.

For the three months ended September 30, 2020 and 2019, we recorded a reversal of provision for credit losses for off-balance-sheet credit exposures of $0.3 million and a reversal of provision of $1.1 million for the three months ended June 30, 2020.  The reversal of provision of $0.3 million for the three months ended September 30, 2020 was a result of an improvement in economic forecasts and a lower balance of off-balance-sheet credit exposures compared to the three months ended June 30, 2020.  The reversal of provision for credit losses for off-balance-sheet credit exposures for the nine months ended September 30, 2020 was $0.3 million, compared to a reversal of provision of $0.4 million for the nine months ended September 30, 2019.  The balance of the allowance for off-balance-sheet credit exposures at September 30, 2020 was $6.0 million, and is included in other liabilities.

Dividend

Southside Bancshares, Inc. declared a third quarter cash dividend of $0.31 per share on August 6, 2020, which was paid on September 3, 2020, to all shareholders of record as of August 20, 2020.

_______________
(1)  Refer to Non-GAAP Financial Measures below and to Non-GAAP Reconciliation at the end of the financial statement tables in this Earnings Release for more information and for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

(2) We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020.  ASU 2016-13 replaced the incurred loss model with an expected loss methodology that is referred to as current expected credit loss. Adoption of this guidance on January 1, 2020, resulted in a cumulative-effect adjustment to reduce retained earnings by $7.8 million, net of tax.  Due to the adoption of the guidance under the modified retrospective approach, prior periods have not been adjusted and thus may not be comparable. 


Conference Call

Southside's management team will host a conference call to discuss its third quarter ended September 30, 2020 financial results on Friday, October 23, 2020 at 9:00 a.m. CDT.  The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 6077847 or by identifying Southside Bancshares, Inc., Third Quarter 2020 Earnings Call.  To listen to the call via webcast, register at https://investors.southside.com.

For those unable to listen to the conference call live, a recording will be available from approximately 12:00 p.m. CDT October 23, 2020 through 11:00 a.m. CST November 4, 2020 by accessing the company website, https://investors.southside.com.

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% for the three and nine months ended September 30, 2020 and 2019 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.

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 reflected in the respective earning asset categories as listed in the Average Balances with Average Yields and Rates tables.

A reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $7.19 billion in assets as of September 30, 2020, that owns 100% of Southside Bank.  Southside Bank currently has 57 branches in Texas and operates a network of 80 ATMs/ITMs.  

To learn more about Southside Bancshares, Inc., please visit our investor relations website at https://investors.southside.com.  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 Lindsey Bailes at (903) 630-7965, or lindsey.bailes@southside.com.

Forward-Looking Statements

Certain statements of other than historical fact that are contained in this press release and in other written material, documents 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 managements 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 Companys 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.  The most recent factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the negative impact of the COVID-19 pandemic on our business, financial position, operations and prospects, including our ability to continue our business activities in certain communities we serve, the duration of the pandemic and its continued effects on financial markets, a reduction in financial transactions and business activities resulting in decreased deposits and reduced loan originations, increases in unemployment rates impacting our borrowers' ability to repay their loans, our ability to manage liquidity in a rapidly changing and unpredictable market, additional interest rate changes by the Federal Reserve and other government actions in response to the pandemic, including additional quarantines, regulations or laws enacted to counter the effects of the COVID-19 pandemic on the economy.

Additional information concerning the Company and its business, including additional factors that could materially affect the Companys financial results, is included in the Companys Annual Report on Form 10-K for the year ended December 31, 2019, under Part I - Item 1. Forward Looking Information and Part I - Item 1A. Risk Factors, the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and the quarter ended June 30, 2020, under Part II - Item 1A. Risk Factors and in the Companys 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.


Southside Bancshares, Inc.
Consolidated Financial Summary (Unaudited)
(Dollars in thousands)

 

As of

 

2020

 

2019

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

ASSETS

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

81,643

 

 

 

$

81,271

 

 

 

$

71,727

 

 

 

$

66,949

 

 

 

$

92,300

 

 

Interest earning deposits

14,561

 

 

 

19,535

 

 

 

40,486

 

 

 

43,748

 

 

 

22,524

 

 

Securities available for sale, at estimated fair value

2,633,519

 

 

 

2,679,521

 

 

 

2,813,024

 

 

 

2,358,597

 

 

 

2,240,381

 

 

Securities held to maturity, at net carrying value

115,089

 

 

 

120,384

 

 

 

134,491

 

 

 

134,863

 

 

 

140,955

 

 

Total securities

2,748,608

 

 

 

2,799,905

 

 

 

2,947,515

 

 

 

2,493,460

 

 

 

2,381,336

 

 

Federal Home Loan Bank stock, at cost

35,860

 

 

 

55,689

 

 

 

54,696

 

 

 

50,087

 

 

 

45,039

 

 

Loans held for sale

8,686

 

 

 

3,392

 

 

 

1,830

 

 

 

383

 

 

 

1,000

 

 

Loans

3,789,975

 

 

 

3,852,571

 

 

 

3,601,002

 

 

 

3,568,204

 

 

 

3,499,917

 

 

Less: Allowance for loan losses

(55,110

)

 

 

(59,868

)

 

 

(53,638

)

 

 

(24,797

)

 

 

(25,129

)

 

Net loans

3,734,865

 

 

 

3,792,703

 

 

 

3,547,364

 

 

 

3,543,407

 

 

 

3,474,788

 

 

Premises & equipment, net

147,169

 

 

 

147,715

 

 

 

146,212

 

 

 

143,912

 

 

 

141,683

 

 

Goodwill

201,116

 

 

 

201,116

 

 

 

201,116

 

 

 

201,116

 

 

 

201,116

 

 

Other intangible assets, net

10,569

 

 

 

11,450

 

 

 

12,381

 

 

 

13,361

 

 

 

14,391

 

 

Bank owned life insurance

114,928

 

 

 

114,248

 

 

 

101,066

 

 

 

100,498

 

 

 

99,916

 

 

Other assets

92,955

 

 

 

102,587

 

 

 

149,245

 

 

 

91,992

 

 

 

67,982

 

 

Total assets

$

7,190,960

 

 

 

$

7,329,611

 

 

 

$

7,273,638

 

 

 

$

6,748,913

 

 

 

$

6,542,075

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

Noninterest bearing deposits

$

1,363,228

 

 

 

$

1,398,179

 

 

 

$

1,065,708

 

 

 

$

1,040,112

 

 

 

$

1,038,695

 

 

Interest bearing deposits

3,739,798

 

 

 

3,672,365

 

 

 

3,673,415

 

 

 

3,662,657

 

 

 

3,452,072

 

 

Total deposits

5,103,026

 

 

 

5,070,544

 

 

 

4,739,123

 

 

 

4,702,769

 

 

 

4,490,767

 

 

Other borrowings and Federal Home Loan Bank borrowings

994,512

 

 

 

1,165,463

 

 

 

1,492,270

 

 

 

1,001,102

 

 

 

988,577

 

 

Subordinated notes, net of unamortized debt
issuance costs

98,708

 

 

 

98,663

 

 

 

98,619

 

 

 

98,576

 

 

 

98,532

 

 

Trust preferred subordinated debentures, net of unamortized debt issuance costs

60,254

 

 

 

60,253

 

 

 

60,251

 

 

 

60,250

 

 

 

60,249

 

 

Other liabilities

95,312

 

 

 

117,083

 

 

 

87,575

 

 

 

81,636

 

 

 

93,497

 

 

Total liabilities

6,351,812

 

 

 

6,512,006

 

 

 

6,477,838

 

 

 

5,944,333

 

 

 

5,731,622

 

 

Shareholders' equity

839,148

 

 

 

817,605

 

 

 

795,800

 

 

 

804,580

 

 

 

810,453

 

 

Total liabilities and shareholders' equity

$

7,190,960

 

 

 

$

7,329,611

 

 

 

$

7,273,638

 

 

 

$

6,748,913

 

 

 

$

6,542,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars in thousands)

 

Three Months Ended

 

2020

 

2019

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

Income Statement:

 

 

 

 

 

 

 

 

 

Total interest income

$

55,677

 

 

$

58,495

 

 

$

60,752

 

 

$

60,533

 

 

$

60,555

 

Total interest expense

9,091

 

 

11,224

 

 

16,051

 

 

17,357

 

 

18,182

 

Net interest income

46,586

 

 

47,271

 

 

44,701

 

 

43,176

 

 

42,373

 

Provision for credit losses (1)

(4,746

)

 

5,245

 

 

25,247

 

 

2,508

 

 

1,005

 

Net interest income after provision for credit losses

51,332

 

 

42,026

 

 

19,454

 

 

40,668

 

 

41,368

 

Noninterest income

 

 

 

 

 

 

 

 

 

Deposit services

6,129

 

 

5,532

 

 

6,279

 

 

6,647

 

 

6,753

 

Net gain on sale of securities available for sale

78

 

 

2,662

 

 

5,541

 

 

42

 

 

42

 

Gain on sale of loans

1,071

 

 

683

 

 

170

 

 

104

 

 

131

 

Trust fees

1,253

 

 

1,221

 

 

1,305

 

 

1,685

 

 

1,523

 

Bank owned life insurance

680

 

 

650

 

 

569

 

 

582

 

 

622

 

Brokerage services

564

 

 

499

 

 

580

 

 

531

 

 

555

 

Other

1,366

 

 

946

 

 

1,054

 

 

874

 

 

1,485

 

Total noninterest income

11,141

 

 

12,193

 

 

15,498

 

 

10,465

 

 

11,111

 

Noninterest expense

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

19,344

 

 

18,629

 

 

19,643

 

 

19,406

 

 

18,388

 

Net occupancy

3,595

 

 

3,668

 

 

3,311

 

 

3,234

 

 

3,430

 

Advertising, travel & entertainment

519

 

 

292

 

 

832

 

 

791

 

 

593

 

ATM expense

271

 

 

233

 

 

224

 

 

236

 

 

232

 

Professional fees

961

 

 

1,082

 

 

1,195

 

 

1,142

 

 

1,192

 

Software and data processing

1,215

 

 

1,295

 

 

1,227

 

 

1,259

 

 

1,116

 

Communications

495

 

 

506

 

 

493

 

 

485

 

 

480

 

FDIC insurance

469

 

 

174

 

 

25

 

 

 

 

 

Amortization of intangibles

881

 

 

931

 

 

980

 

 

1,030

 

 

1,080

 

Other (1)

3,866

 

 

3,046

 

 

2,590

 

 

3,361

 

 

2,515

 

Total noninterest expense

31,616

 

 

29,856

 

 

30,520

 

 

30,944

 

 

29,026

 

Income before income tax expense

30,857

 

 

24,363

 

 

4,432

 

 

20,189

 

 

23,453

 

Income tax expense

3,783

 

 

2,809

 

 

479

 

 

2,854

 

 

3,661

 

Net income

$

27,074

 

 

$

21,554

 

 

$

3,953

 

 

$

17,335

 

 

$

19,792

 

 

 

 

 

 

 

 

 

 

 

Common Share Data:

 

 

 

Weighted-average basic shares outstanding

33,047

 

 

33,016

 

 

33,691

 

 

33,790

 

 

33,773

 

Weighted-average diluted shares outstanding

33,098

 

 

33,083

 

 

33,805

 

 

33,934

 

 

33,901

 

Common shares outstanding end of period

33,072

 

 

33,032

 

 

33,012

 

 

33,823

 

 

33,795

 

Earnings per common share

 

 

 

 

 

 

 

 

 

Basic

$

0.82

 

 

$

0.65

 

 

$

0.12

 

 

$

0.51

 

 

$

0.59

 

Diluted

0.82

 

 

0.65

 

 

0.12

 

 

0.51

 

 

0.58

 

Book value per common share

25.37

 

 

24.75

 

 

24.11

 

 

23.79

 

 

23.98

 

Tangible book value per common share (2)

18.97

 

 

18.32

 

 

17.64

 

 

17.45

 

 

17.60

 

Cash dividends paid per common share

0.31

 

 

0.31

 

 

0.31

 

 

0.34

 

 

0.31

 

 

 

 

 

 

 

 

 

 

 

Selected Performance Ratios:

 

 

 

 

 

 

 

 

 

Return on average assets

1.48

 %

 

1.17

%

 

0.23

%

 

1.03

%

 

1.23

%

Return on average shareholders equity

12.89

 

 

10.82

 

 

1.93

 

 

8.42

 

 

9.78

 

Return on average tangible common equity (2)

17.73

 

 

15.24

 

 

3.11

 

 

11.97

 

 

13.96

 

Average yield on earning assets (FTE) (2)

3.57

 

 

3.69

 

 

4.06

 

 

4.12

 

 

4.28

 

Average rate on interest bearing liabilities

0.73

 

 

0.87

 

 

1.30

 

 

1.46

 

 

1.60

 

Net interest spread (FTE) (2)

2.84

 

 

2.82

 

 

2.76

 

 

2.66

 

 

2.68

 

Net interest margin (FTE) (2)

3.02

 

 

3.02

 

 

3.03

 

 

2.98

 

 

3.03

 

Average earning assets to average interest bearing liabilities

131.92

 

 

129.03

 

 

126.22

 

 

128.00

 

 

128.33

 

Noninterest expense to average total assets

1.73

 

 

1.63

 

 

1.78

 

 

1.85

 

 

1.80

 

Efficiency ratio (FTE) (2)

50.07

 

 

48.29

 

 

51.91

 

 

53.87

 

 

50.53

 

  1. Upon adoption of CECL on January 1, 2020, the provision for credit losses is the sum of the provision for loan losses and the provision for off-balance-sheet credit exposures.  Prior to the adoption of CECL, the provision for off-balance-sheet credit exposures was included in other noninterest expense.

  2. Refer to Non-GAAP Reconciliation at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.



Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars and shares in thousands, except per share data)

 

Three Months Ended

 

2020

 

2019

 

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

Nonperforming Assets:

$

16,822

 

 

$

17,600

 

 

$

17,403

 

 

$

17,449

 

 

$

29,747

 

Nonaccrual loans (1)

5,971

 

 

5,639

 

 

5,221

 

 

4,963

 

 

17,148

 

Accruing loans past due more than 90 days (1)

 

 

 

 

 

 

 

 

 

Troubled debt restructured loans (2)

10,307

 

 

11,367

 

 

11,448

 

 

12,014

 

 

11,683

 

Other real estate owned

536

 

 

586

 

 

734

 

 

472

 

 

912

 

Repossessed assets

8

 

 

8

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

Asset Quality Ratios:

 

 

 

 

 

 

 

 

 

Nonaccruing loans to total loans

0.16

%

 

0.15

%

 

0.14

%

 

0.14

%

 

0.49

%

Allowance for loan losses to nonaccruing loans

922.96

 

 

1,061.68

 

 

1,027.35

 

 

499.64

 

 

146.54

 

Allowance for loan losses to nonperforming assets

327.61

 

 

340.16

 

 

308.21

 

 

142.11

 

 

84.48

 

Allowance for loan losses to total loans

1.45

 

 

1.55

 

 

1.49

 

 

0.69

 

 

0.72

 

Nonperforming assets to total assets

0.23

 

 

0.24

 

 

0.24

 

 

0.26

 

 

0.45

 

Net charge-offs (recoveries) to average loans

0.04

 

 

0.01

 

 

0.06

 

 

0.32

 

 

0.07

 

 

 

 

 

 

 

 

 

 

 

Capital Ratios:

 

 

 

 

 

 

 

 

 

Shareholders equity to total assets

11.67

 

 

11.15

 

 

10.94

 

 

11.92

 

 

12.39

 

Common equity tier 1 capital

14.24

 

 

13.68

 

 

12.81

 

 

14.07

 

 

14.19

 

Tier 1 risk-based capital

15.63

 

 

15.06

 

 

14.13

 

 

15.46

 

 

15.61

 

Total risk-based capital

19.03

 

 

18.51

 

 

17.35

 

 

18.43

 

 

18.65

 

Tier 1 leverage capital

9.50

 

 

9.05

 

 

9.45

 

 

10.18

 

 

10.46

 

Period end tangible equity to period end tangible assets (3)

8.99

 

 

8.50

 

 

8.25

 

 

9.03

 

 

9.40

 

Average shareholders equity to average total assets

11.49

 

 

10.86

 

 

11.94

 

 

12.28

 

 

12.54

 

  1. Prior to the adoption of CECL, excluded purchased credit impaired loans measured at fair value at acquisition if the timing and amount of cash flows expected to be collected from those sales could be reasonably estimated.

  2. Prior to the adoption of CECL, included $0.8 million in PCI loans restructured as of December 31, 2019 and September 30, 2019.

  3. Refer to the Non-GAAP Reconciliation at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.



Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars in thousands)

 

Three Months Ended

 

2020

 

2019

Loan Portfolio Composition

Sep 30,

 

Jun 30,

 

Mar 31,

 

Dec 31,

 

Sep 30,

Real Estate Loans:

 

 

 

 

 

 

 

 

 

  Construction

$

610,394

 

 

 

$

570,801

 

 

 

$

603,952

 

 

 

$

644,948

 

 

 

$

621,040

 

 

  1-4 Family Residential

738,343

 

 

 

761,815

 

 

 

787,875

 

 

 

787,562

 

 

 

792,638

 

 

  Commercial

1,327,233

 

 

 

1,406,541

 

 

 

1,350,818

 

 

 

1,250,208

 

 

 

1,236,307

 

 

Commercial Loans

629,170

 

 

 

639,162

 

 

 

383,984

 

 

 

401,521

 

 

 

382,077

 

 

Municipal Loans

387,286

 

 

 

377,428

 

 

 

375,934

 

 

 

383,960

 

 

 

366,906

 

 

Loans to Individuals

97,549

 

 

 

96,824

 

 

 

98,439

 

 

 

100,005

 

 

 

100,949

 

 

Total Loans

$

3,789,975

 

 

 

$

3,852,571

 

 

 

$

3,601,002

 

 

 

$

3,568,204

 

 

 

$

3,499,917

 

 

 

 

 

 

 

 

 

 

 

 

Summary of Changes in Allowances:

 

 

 

 

 

 

 

 

 

Allowance for Loan Losses

 

 

 

 

 

 

 

 

 

Balance at beginning of period

$

59,868

 

 

 

$

53,638

 

 

 

$

24,797

 

 

 

$

25,129

 

 

 

$

24,705

 

 

Impact of CECL adoption (1) - cumulative effect adjustment

 

 

 

 

 

 

5,072

 

 

 

 

 

 

 

 

Impact of CECL adoption - purchased loans with credit deterioration

 

 

 

 

 

 

231

 

 

 

 

 

 

 

 

Loans charged-off

(718

)

 

 

(546

)

 

 

(995

)

 

 

(3,251

)

 

 

(1,000

)

 

Recoveries of loans charged-off

361

 

 

 

436

 

 

 

451

 

 

 

411

 

 

 

419

 

 

Net loans (charged-off) recovered

(357

)

 

 

(110

)

 

 

(544

)

 

 

(2,840

)

 

 

(581

)

 

Provision for (reversal of) for loan losses

(4,401

)

 

 

6,340

 

 

 

24,082

 

 

 

2,508

 

 

 

1,005

 

 

Balance at end of period

$

55,110

 

 

 

$

59,868

 

 

 

$

53,638

 

 

 

$

24,797

 

 

 

$

25,129

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for Off-Balance-Sheet Credit Exposures

 

 

 

 

 

 

 

 

 

Balance at beginning of period

$

6,365

 

 

 

$

7,460

 

 

 

$

1,455

 

 

 

$

1,540

 

 

 

$

1,859

 

 

Impact of CECL adoption (1)

 

 

 

 

 

 

4,840

 

 

 

 

 

 

 

 

Provision for (reversal of) off-balance-sheet credit exposures (2)

(345

)

 

 

(1,095

)

 

 

1,165

 

 

 

(85

)

 

 

(319

)

 

Balance at end of period

$

6,020

 

 

 

$

6,365

 

 

 

$

7,460

 

 

 

$

1,455

 

 

 

$

1,540

 

 

Total Allowance for Credit Losses

$

61,130

 

 

 

$

66,233

 

 

 

$

61,098

 

 

 

$

26,252

 

 

 

$

26,669

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020.  ASU 2016-13 replaced the incurred loss model with an expected loss methodology that is referred to as current expected credit losses (CECL).  Adoption of this guidance on January 1, 2020, resulted in a cumulative-effect adjustment to reduce retained earnings by $7.8 million, net of tax. 

  2. Prior to the adoption of CECL on January 1, 2020, the provision for off-balance-sheet credit exposures was included in other noninterest expense.



Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars and shares in thousands, except per share data)

 

Nine Months Ended

 

September 30,

 

2020

 

2019

Income Statement:

 

 

 

Total interest income

$

174,924

 

 

$

180,254

 

Total interest expense

36,366

 

 

53,625

 

Net interest income

138,558

 

 

126,629

 

Provision for credit losses (1)

25,746

 

 

2,593

 

Net interest income after provision for credit losses

112,812

 

 

124,036

 

Noninterest income

 

 

 

Deposit services

17,940

 

 

19,391

 

Net gain on sale of securities available for sale

8,281

 

 

714

 

Gain on sale of loans

1,924

 

 

405

 

Trust fees

3,779

 

 

4,584

 

Bank owned life insurance

1,899

 

 

1,725

 

Brokerage services

1,643

 

 

1,549

 

Other

3,366

 

 

3,535

 

Total noninterest income

38,832

 

 

31,903

 

Noninterest expense

 

 

 

Salaries and employee benefits

57,616

 

 

54,325

 

Net occupancy

10,574

 

 

9,894

 

Advertising, travel & entertainment

1,643

 

 

2,173

 

ATM expense

728

 

 

658

 

Professional fees

3,238

 

 

3,575

 

Software and data processing

3,737

 

 

3,278

 

Communications

1,494

 

 

1,456

 

FDIC insurance

668

 

 

859

 

Amortization of intangibles

2,792

 

 

3,388

 

Other (1)

9,502

 

 

8,747

 

Total noninterest expense

91,992

 

 

88,353

 

Income before income tax expense

59,652

 

 

67,586

 

Income tax expense

7,071

 

 

10,367

 

Net income

$

52,581

 

 

$

57,219

 

 

 

 

 

Common Share Data:

 

 

 

Weighted-average basic shares outstanding

33,250

 

 

33,732

 

Weighted-average diluted shares outstanding

33,331

 

 

33,878

 

Common shares outstanding end of period

33,072

 

 

33,795

 

Earnings per common share

 

 

 

Basic

$

1.58

 

 

$

1.70

 

Diluted

1.58

 

 

1.69

 

Book value per common share

25.37

 

 

23.98

 

Tangible book value per common share (2)

18.97

 

 

17.60

 

Cash dividends paid per common share

0.93

 

 

0.92

 

 

 

 

 

Selected Performance Ratios:

 

 

 

Return on average assets

0.98

%

 

1.21

%

Return on average shareholders equity

8.56

 

 

9.93

 

Return on average tangible common equity (2)

12.05

 

 

14.47

 

Average yield on earning assets (FTE) (2)

3.77

 

 

4.34

 

Average rate on interest bearing liabilities

0.96

 

 

1.61

 

Net interest spread (FTE) (2)

2.81

 

 

2.73

 

Net interest margin (FTE) (2)

3.02

 

 

3.09

 

Average earning assets to average interest bearing liabilities

129.07

 

 

128.34

 

Noninterest expense to average total assets

1.71

 

 

1.87

 

Efficiency ratio (FTE) (2)

50.06

 

 

51.85

 

  1. Upon adoption of CECL on January 1, 2020, the provision for credit losses is the sum of the provision for loan losses and the provision for off-balance-sheet credit exposures.  Prior to the adoption of CECL, the provision for off-balance-sheet credit exposures was included in other noninterest expense.

  2. Refer to Non-GAAP Reconciliation at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.



Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars in thousands)

 

Nine Months Ended

 

September 30,

 

2020

 

2019

Nonperforming Assets:

$

16,822

 

 

$

29,747

 

Nonaccrual loans (1)

5,971

 

 

17,148

 

Accruing loans past due more than 90 days (1)

 

 

 

Troubled debt restructured loans (2)

10,307

 

 

11,683

 

Other real estate owned

536

 

 

912

 

Repossessed assets

8

 

 

4

 

 

 

 

 

Asset Quality Ratios:

 

 

 

Nonaccruing loans to total loans

0.16

%

 

0.49

%

Allowance for loan losses to nonaccruing loans

922.96

 

 

146.54

 

Allowance for loan losses to nonperforming assets

327.61

 

 

84.48

 

Allowance for loan losses to total loans

1.45

 

 

0.72

 

Nonperforming assets to total assets

0.23

 

 

0.45

 

Net charge-offs (recoveries) to average loans

0.04

 

 

0.18

 

 

 

 

 

Capital Ratios:

 

 

 

Shareholders equity to total assets

11.67

 

 

12.39

 

Common equity tier 1 capital

14.24

 

 

14.19

 

Tier 1 risk-based capital

15.63

 

 

15.61

 

Total risk-based capital

19.03

 

 

18.65

 

Tier 1 leverage capital

9.50

 

 

10.46

 

Period end tangible equity to period end tangible assets (3)

8.99

 

 

9.40

 

Average shareholders equity to average total assets

11.42

 

 

12.21

 

  1. Prior to the adoption of CECL, excluded purchased credit impaired loans measured at fair value at acquisition if the timing and amount of cash flows expected to be collected from those sales could be reasonably estimated.

  2. Prior to the adoption of CECL, included $0.8 million in PCI loans restructured as of September 30, 2019.

  3. Refer to the Non-GAAP Reconciliation at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.



Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars and shares in thousands, except per share data)

 

Nine Months Ended

 

September 30,

Loan Portfolio Composition

2020

 

2019

Real Estate Loans:

 

 

 

Construction

$

610,394

 

 

 

$

621,040

 

 

1-4 Family Residential

738,343

 

 

 

792,638

 

 

Commercial

1,327,233

 

 

 

1,236,307

 

 

Commercial Loans

629,170

 

 

 

382,077

 

 

Municipal Loans

387,286

 

 

 

366,906

 

 

Loans to Individuals

97,549

 

 

 

100,949

 

 

Total Loans

$

3,789,975

 

 

 

$

3,499,917

 

 

 

 

 

 

Summary of Changes in Allowances:

 

 

 

Allowance for Loan Losses

 

 

 

Balance at beginning of period

$

24,797

 

 

 

$

27,019

 

 

Impact of CECL adoption (1) - cumulative effect adjustment

5,072

 

 

 

 

 

Impact of CECL adoption - purchased loans with credit deterioration

231

 

 

 

 

 

Loans charged-off

(2,259

)

 

 

(5,682

)

 

Recoveries of loans charged-off

1,248

 

 

 

1,199

 

 

Net loans (charged-off) recovered

(1,011

)

 

 

(4,483

)

 

Provision for (reversal of) for loan losses

26,021

 

 

 

2,593

 

 

Balance at end of period

$

55,110

 

 

 

$

25,129

 

 

 

 

 

 

Allowance for Off-Balance-Sheet Credit Exposures

 

 

 

Balance at beginning of period

$

1,455

 

 

 

$

1,890

 

 

Impact of CECL adoption (1)

4,840

 

 

 

 

 

Provision for (reversal of) off-balance-sheet credit exposures (2)

(275

)

 

 

(350

)

 

Balance at end of period

$

6,020

 

 

 

$

1,540

 

 

Total Allowance for Credit Losses

$

61,130

 

 

 

$

26,669

 

 

 

 

 

 

 

 

 

 

 

 

  1. We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020.  ASU 2016-13 replaced the incurred loss model with an expected loss methodology that is referred to as current expected credit losses (CECL).  Adoption of this guidance on January 1, 2020, resulted in a cumulative-effect adjustment to reduce retained earnings by $7.8 million, net of tax. 

  2. Prior to the adoption of CECL on January 1, 2020, the provision for off-balance-sheet credit exposures was included in other noninterest expense.



Southside Bancshares, Inc.
Average Balances and Average Yields and Rates (Annualized) (Unaudited)
(Dollars in thousands)

The 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 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 and Non-GAAP Reconciliation for more information.

 

Three Months Ended

 

September 30, 2020

 

June 30, 2020

 

Average Balance

 

Interest

 

Average Yield/Rate

 

Average Balance

 

Interest

 

Average Yield/Rate

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Loans (1)

$

3,815,989

 

 

 

$

38,842

 

 

4.05

%

 

$

3,826,383

 

 

 

$

39,766

 

 

4.18

%

Loans held for sale

3,934

 

 

 

31

 

 

3.13

%

 

3,213

 

 

 

28

 

 

3.50

%

Securities:

 

 

 

 

 

 

 

 

 

 

 

Taxable investment securities (2)

145,724

 

 

 

1,175

 

 

3.21

%

 

94,247

 

 

 

732

 

 

3.12

%

Tax-exempt investment securities (2)

1,295,179

 

 

 

11,418

 

 

3.51

%

 

1,320,772

 

 

 

11,560

 

 

3.52

%

Mortgage-backed and related securities (2)

1,209,913

 

 

 

7,048

 

 

2.32

%

 

1,359,941

 

 

 

9,044

 

 

2.67

%

Total securities

2,650,816

 

 

 

19,641

 

 

2.95

%

 

2,774,960

 

 

 

21,336

 

 

3.09

%

Federal Home Loan Bank stock, at cost, and equity investments

60,528

 

 

 

249

 

 

1.64

%

 

67,582

 

 

 

360

 

 

2.14%Interest earning deposits17,668 17 0.38% 24,097 23 0.38%Total earning assets6,548,935 58,780 3.57% 6,696,235 61,513 3.69%Cash and due from banks80,368 78,326 Accrued interest and other assets699,351 660,411 Less: Allowance for loan losses(61,212) (55,908) Total assets$7,267,442 $7,379,064 LIABILITIES AND SHAREHOLDERS’ EQUITY Savings accounts$461,895 192 0.17% $426,420 187 0.18%Certificates of deposits1,172,179 3,568 1.21% 1,187,665 4,817 1.63%Interest bearing demand accounts2,069,751 1,102 0.21% 2,013,770 1,225 0.24%Total interest bearing deposits3,703,825 4,862 0.52% 3,627,855 6,229 0.69%Federal Home Loan Bank borrowings1,037,855 2,369 0.91% 1,197,097 2,929 0.98%Subordinated notes, net of unamortized debt issuance costs98,686 1,427 5.75% 98,641 1,412 5.76%Trust preferred subordinated debentures, net of unamortized debt issuance costs60,253 378 2.50% 60,252 491 3.28%Other borrowings63,526 55 0.34% 205,724 163 0.32%Total interest bearing liabilities4,964,145 9,091 0.73% 5,189,569 11,224 0.87%Noninterest bearing deposits1,371,748 1,310,651 Accrued expenses and other liabilities96,219 77,431 Total liabilities6,432,112 6,577,651 Shareholders’ equity835,330 801,413 Total liabilities and shareholders’ equity$7,267,442 $7,379,064 Net interest income (FTE) $49,689 $50,289 Net interest margin (FTE) 3.02% 3.02%Net interest spread (FTE) 2.84% 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 September 30, 2020 and June 30, 2020, loans totaling $6.0 million and $5.6 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.



Southside Bancshares, Inc.
Average Balances and Average Yields and Rates (Annualized) (Unaudited)
(Dollars in thousands)

Three Months Ended

March 31, 2020

December 31, 2019

Average Balance

Interest

Average Yield/Rate

Average Balance

Interest

Average Yield/Rate

ASSETS

Loans (1)

$

3,587,143

$

42,554

4.77

%

$

3,540,274

$

43,166

4.84

%

Loans held for sale

831

9

4.36

%

1,114

9

3.21

%

Securities:

Taxable investment securities (2)

70,293

512

2.93

%

10,083

86

3.38

%

Tax-exempt investment securities (2)

888,906

7,837

3.55

%

699,868

6,431

3.65

%

Mortgage-backed and related securities (2)

1,598,374

11,534

2.90

%

1,674,503

12,197

2.89

%

Total securities

2,557,573

19,883

3.13

%

2,384,454

18,714

3.11

%

Federal Home Loan Bank stock, at cost, and equity investments

62,976

425

2.71

%

59,743

437

2.90

%

Interest earning deposits

40,236

180

1.80

%

44,039

247

2.23

%

Total earning assets

6,248,759

63,051

4.06

%

6,029,624

62,573

4.12

%

Cash and due from banks

76,739

72,018

Accrued interest and other assets

611,017

574,124

Less: Allowance for loan losses

(30,373

)

(25,618

)

Total assets

$

6,906,142

$

6,650,148

LIABILITIES AND SHAREHOLDERS’ EQUITY

Savings accounts

$

384,863

237

0.25

%

$

372,798

262

0.28

%

Certificates of deposit

1,362,427

6,346

1.87

%

1,204,392

6,172

2.03

%

Interest bearing demand accounts

1,975,837

3,336

0.68

%

1,936,969

4,067

0.83

%

Total interest bearing deposits

3,723,127

9,919

1.07

%

3,514,159

10,501

1.19

%

Federal Home Loan Bank borrowings

999,070

3,974

1.60

%

1,019,844

4,716

1.83

%

Subordinated notes, net of unamortized debt issuance costs

98,597

1,411

5.76

%

98,554

1,426

5.74

%

Trust preferred subordinated debentures, net of unamortized debt issuance costs

60,234

600

4.01

%

60,250

643

4.23

%

Other borrowings

69,846

147

0.85

%

17,874

71

1.58

%

Total interest bearing liabilities

4,950,874

16,051

1.30

%

4,710,681

17,357

1.46

%

Noninterest bearing deposits

1,042,341

1,049,211

Accrued expenses and other liabilities

88,168

73,408

Total liabilities

6,081,383

5,833,300

Shareholders’ equity

824,759

816,848

Total liabilities and shareholders’ equity

$

6,906,142

$

6,650,148

Net interest income (FTE)

$

47,000

$

45,216

Net interest margin (FTE)

3.03

%

2.98

%

Net interest spread (FTE)

2.76

%

2.66

%

  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 March 31, 2020 and December 31, 2019, loans totaling $5.2 million and $5.0 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.



Southside Bancshares, Inc.
Average Balances and Average Yields and Rates (Annualized) (Unaudited)
(Dollars in thousands)

Three Months Ended

September 30, 2019

Average Balance

Interest

Average Yield/Rate

ASSETS

Loans (1)

$

3,477,187

$

43,780

5.00

%

Loans held for sale

2,497

26

4.13

%

Securities:

Taxable investment securities (2)

3,000

26

3.44

%

Tax-exempt investment securities (2)

555,835

5,328

3.80

%

Mortgage-backed and related securities (2)

1,660,331

12,569

3.00

%

Total securities

2,219,166

17,923

3.20

%

Federal Home Loan Bank stock, at cost, and equity investments

57,108

422

2.93

%

Interest earning deposits

26,746

206

3.06

%

Total earning assets

5,782,704

62,357

4.28

%

Cash and due from banks

73,815

Accrued interest and other assets

570,657

Less: Allowance for loan losses

(24,938

)

Total assets

$

6,402,238

LIABILITIES AND SHAREHOLDERS’ EQUITY

Savings accounts

$

367,615

270

0.29

%

Certificates of deposit

1,118,410

6,011

2.13

%

Interest bearing demand accounts

1,966,764

5,085

1.03

%

Total interest bearing deposits

3,452,789

11,366

1.31

%

Federal Home Loan Bank borrowings

881,088

4,647

2.09

%

Subordinated notes, net of unamortized debt issuance costs

98,511

1,425

5.74

%

Trust preferred subordinated debentures, net of unamortized debt issuance costs

60,248

685

4.51

%

Other borrowings

13,401

59

1.75

%

Total interest bearing liabilities

4,506,037

18,182

1.60

%

Noninterest bearing deposits

1,020,325

Accrued expenses and other liabilities

72,923

Total liabilities

5,599,285

Shareholders’ equity

802,953

Total liabilities and shareholders’ equity

$

6,402,238

Net interest income (FTE)

$

44,175

Net interest margin (FTE)

3.03

%

Net interest spread (FTE)

2.68

%

  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 September 30, 2019, loans totaling $17.1 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.



Southside Bancshares, Inc.
Average Balances and Average Yields and Rates (Annualized) (Unaudited)
(Dollars in thousands)

Nine Months Ended

September 30, 2020

September 30, 2019

Average Balance

Interest

Average Yield/Rate

Average Balance

Interest

Average Yield/Rate

ASSETS

Loans (1)

$

3,743,437

$

121,162

4.32

%

$

3,387,719

$

129,549

5.11

%

Loans held for sale

2,664

68

3.41

%

1,698

54

4.25

%

Securities:

Taxable investment securities (2)

103,576

2,419

3.12

%

3,000

81

3.61

%

Tax-exempt investment securities (2)

1,168,749

30,815

3.52

%

557,961

15,573

3.73

%

Mortgage-backed and related securities (2)

1,388,754

27,626

2.66

%

1,662,715

38,289

3.08

%

Total securities

2,661,079

60,860

3.05

%

2,223,676

53,943

3.24

%

Federal Home Loan Bank stock, at cost, and equity investments

63,683

1,034

2.17

%

54,407

1,217

2.99

%

Interest earning deposits

27,299

220

1.08

%

52,345

1,003

2.56

%

Federal funds sold

3,639

86

3.16

%

Total earning assets

6,498,162

183,344

3.77

%

5,723,484

185,852

4.34

%

Cash and due from banks

78,484

78,539

Accrued interest and other assets

656,952

538,248

Less: Allowance for loan losses

(49,208

)

(25,604

)

Total assets

$

7,184,390

$

6,314,667

LIABILITIES AND SHAREHOLDERS’ EQUITY

Savings accounts

$

424,530

616

0.19

%

$

364,520

790

0.29

%

Certificates of deposit

1,240,506

14,731

1.59

%

1,130,561

17,569

2.08

%

Interest bearing demand accounts

2,019,968

5,663

0.37

%

1,973,024

15,705

1.06

%

Total interest bearing deposits

3,685,004

21,010

0.76

%

3,468,105

34,064

1.31

%

Federal Home Loan Bank borrowings

1,077,861

9,272

1.15

%

817,978

13,003

2.13

%

Subordinated notes, net of unamortized debt issuance costs

98,642

4,250

5.76

%

98,470

4,235

5.75

%

Trust preferred subordinated debentures, net of unamortized debt issuance costs

60,252

1,469

3.26

%

60,247

2,132

4.73

%

Other borrowings

112,851

365

0.43

%

14,894

191

1.71

%

Total interest bearing liabilities

5,034,610

36,366

0.96

%

4,459,694

53,625

1.61

%

Noninterest bearing deposits

1,242,055

1,007,263

Accrued expenses and other liabilities

87,170

76,963

Total liabilities

6,363,835

5,543,920

Shareholders’ equity

820,555

770,747

Total liabilities and shareholders’ equity

$

7,184,390

$

6,314,667

Net interest income (FTE)

$

146,978

$

132,227

Net interest margin (FTE)

3.02

%

3.09

%

Net interest spread (FTE)

2.81

%

2.73

%

  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 September 30, 2020 and 2019, loans totaling $6.0 million and $17.1 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.



Southside Bancshares, Inc.
Non-GAAP Reconciliation (Unaudited)
(Dollars and shares in thousands, except per share data)

The following tables set forth the reconciliation of return on average common equity to return on average tangible common equity, book value per share to tangible book value per share, net interest income to net interest income adjusted to a fully taxable-equivalent basis assuming a 21% marginal tax rate for interest earned on tax-exempt assets such as municipal loans and investment securities, along with the calculation of total revenue, adjusted noninterest expense, efficiency ratio (FTE), net interest margin (FTE) and net interest spread (FTE) for the applicable periods presented.

Three Months Ended

Nine Months Ended

2020

2019

September 30,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

2020

2019

Reconciliation of return on average common equity to return on average tangible common equity:

Net income

$

27,074

$

21,554

$

3,953

$

17,335

$

19,792

$

52,581

$

57,219

After-tax amortization expense

696

735

774

814

853

2,206

2,677

Adjusted net income available to common shareholders

$

27,770

$

22,289

$

4,727

$

18,149

$

20,645

$

54,787

$

59,896

Average shareholders' equity

$

835,330

$

801,413

$

824,759

$

816,848

$

802,953

$

820,555

$

770,747

Less: Average intangibles for the period

(212,221

)

(213,135

(214,104

)

(215,101

)

(216,169

)

(213,150

)

(217,283

)

Average tangible shareholders' equity

$

623,109

$

588,278

$

610,655

$

601,747

$

586,784

$

607,405

$

553,464

Return on average tangible common equity

17.73

%

15.24

%

3.11

%

11.97

%

13.96

%

12.05

%

14.47

%

Reconciliation of book value per share to tangible book value per share:

Common equity at end of period

$

839,148

$

817,605

$

795,800

$

804,580

$

810,453

$

839,148

$

810,453

Less: Intangible assets at end of period

(211,685

)

(212,566

(213,497

)

(214,477

)

(215,507

)

(211,685

)

(215,507

)

Tangible common shareholders' equity at end of period

$

627,463

$

605,039

$

582,303

$

590,103

$

594,946

$

627,463

$

594,946

Total assets at end of period

$

7,190,960

$

7,329,611

$

7,273,638

$

6,748,913

$

6,542,075

$

7,190,960

$

6,542,075

Less: Intangible assets at end of period

(211,685

)

(212,566

(213,497

)

(214,477

)

(215,507

)

(211,685

)

(215,507

)

Tangible assets at end of period

$

6,979,275

$

7,117,045

$

7,060,141

$

6,534,436

$

6,326,568

$

6,979,275

$

6,326,568

Period end tangible equity to period end tangible assets

8.99

%

8.50

%

8.25

%

9.03

%

9.40

%

8.99

%

9.40

%

Common shares outstanding end of period

33,072

33,032

33,012

33,823

33,795

33,072

33,795

Tangible book value per common share

$

18.97

$

18.32

$

17.64

$

17.45

$

17.60

$

18.97

$

17.60

Reconciliation of efficiency ratio to efficiency ratio (FTE), net interest margin to net interest margin (FTE) and net interest spread to net interest spread (FTE):

Net interest income (GAAP)

$

46,586

$

47,271

$

44,701

$

43,176

$

42,373

$

138,558

$

126,629

Tax equivalent adjustments:

Loans

688

679

668

653

641

2,035

1,837

Tax-exempt investment securities

2,415

2,339

1,631

1,387

1,161

6,385

3,761

Net interest income (FTE) (1)

49,689

50,289

47,000

45,216

44,175

146,978