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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 8-K 
CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 1, 2018

Southside Bancshares, Inc.
(Exact Name of Registrant as Specified in its Charter)
Texas
0-12247
75-1848732
(State or Other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)


1201 S. Beckham Avenue, Tyler, Texas
 
75701
(Address of Principal Executive Offices)
(Zip Code)

Registrant's telephone number, including area code: (903) 531-7111

NA
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
p
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
p
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
p
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
p
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 











ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On May 1, 2018, Southside Bancshares, Inc. issued a press release announcing financial results for the three months ended March 31, 2018. A copy of the press release is attached as Exhibit 99.1 hereto and is hereby incorporated herein by reference.

The information in this Current Report on Form 8-K, including the attached exhibit, is being furnished as provided in General Instruction B.2 to Form 8-K, to the Securities and Exchange Commission and shall not be deemed to be “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore the information contained in this Current Report on Form 8-K shall not be deemed to be incorporated by reference in any filing with the Securities and Exchange Commission, except as shall be expressly provided by specific reference in such filing.

ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS

(D)
Exhibits.  The following materials are furnished as exhibits to this Current Report on Form 8-K:
Exhibit
Number
 
Description of Exhibit
 
 
 
99.1

 





SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
Southside Bancshares, Inc.
 
 
 
Date:  May 1, 2018
By:
/s/ JULIE N. SHAMBURGER
 
 
Julie N. Shamburger
 
 
Senior Executive Vice President and Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)




(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


EXHIBIT 99.1
SOUTHSIDE BANCSHARES, INC.
ANNOUNCES FINANCIAL RESULTS FOR THE
THREE MONTHS ENDED MARCH 31, 2018
NASDAQ Global Select Market Symbol - “SBSI”


Tyler, Texas, (May 1, 2018) Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the three months ended March 31, 2018.
Southside reported net income of $16.3 million for the three months ended March 31, 2018, an increase of $1.3 million, or 8.4%, compared to $15.0 million for the same period in 2017. Earnings per diluted common share decreased $0.05, or 9.8%, to $0.46 for the three months ended March 31, 2018, from $0.51 for the same period in 2017.
The return on average shareholders’ equity for the three months ended March 31, 2018 was 8.75%, compared to 11.57% for the same period in 2017.  The return on average assets was 1.02% for the three months ended March 31, 2018, compared to 1.08% for the same period in 2017.
“Overall, our credit quality remains good, however during the first quarter we placed two commercial real estate loan relationships totaling approximately $30 million on nonaccrual,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “One relationship consists of two memory care facilities and the other relationship represents a retail shopping center. The memory care loans are current but the revenue is not sufficient to meet the required debt service. Both facilities are making progress increasing occupancy and will be reevaluated quarterly. The retail shopping center is losing a tenant that announced during the first quarter the closing or selling of all of its U.S. stores. This loan is also current but the loss of this tenant, along with the loss of a previous tenant, decreases revenue to a level that is not sufficient to meet the required debt service until the vacant space is leased. During the first quarter we increased our loan loss reserve by $3.2 million associated with these relationships.”
“During the first quarter we recorded acquisition costs related to the Diboll State Bancshares, Inc. transaction of $832,000, branch closing costs for one Tyler location adjacent to a newly acquired Diboll branch of $249,000 and a loss of $827,000 on the sale of lower-yielding available for sale securities. In addition, as a result of the Tax Cuts and Jobs Act passed in December 2017, we decided to share a portion of the resulting positive impact on net income with our employees by paying a one-time $1,000 bonus to every full-time employee with an annual base salary less than $100,000. The total expense during the first quarter associated with this one-time bonus was $744,000.”
“On a linked quarter basis our net interest margin and net interest spread increased seven and four points, respectively. During the first quarter we experienced very little loan growth due to higher than anticipated payoffs. The economic conditions in Texas and our market areas remain solid and the Austin and DFW markets continue to perform exceptionally well.”
“We expect the integration of Diboll State Bancshares, Inc. will be virtually complete during the second quarter, which will allow us to begin to realize additional efficiencies and the associated cost savings in future quarters. We are thankful for the support we receive from our customers, shareholders, employees and directors. We look forward to the remainder of 2018.”
Loans and Deposits
For the three months ended March 31, 2018, total loans increased by $15.3 million, or 0.5%, compared to December 31, 2017. The net increase in our loans was comprised primarily of increases of $20.4 million of commercial real estate loans and $15.5 million of commercial loans, partially offset by decreases in 1-4 family residential loans, loans to individuals, municipal loans, and construction loans. Energy loans totaled 1.66% of the loan portfolio at March 31, 2018, compared to 1.50% at December 31, 2017.
Nonperforming assets increased during the three months ended March 31, 2018 by $32.0 million, or 305.3%, to $42.4 million, or 0.67% of total assets, compared to $10.5 million, or 0.16% of total assets at December 31, 2017, primarily due to the addition of two commercial real estate relationships consisting of three loans to nonaccrual status during the first quarter.
During the three months ended March 31, 2018, the allowance for loan losses increased by $3.4 million, or 16.5%, to $24.2 million, or 0.73% 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 in the first quarter.
During the three months ended March 31, 2018, deposits, net of brokered deposits, increased $73.5 million, or 1.7%, compared to December 31, 2017. Public funds deposits increased $45.9 million during the three months ended March 31, 2018, compared to December 31, 2017.





Net Interest Income for the Three Months Ended March 31, 2018
Net interest income increased $8.9 million, or 25.1%, to $44.1 million for the three months ended March 31, 2018, compared to $35.3 million for the same period in 2017. The increase in net interest income was the result of a $12.3 million increase in interest income primarily from our loan portfolio, partially offset by an increase in interest expense of $3.5 million associated primarily with our deposits, compared to the same period in 2017.
For the three months ended March 31, 2018, our net interest spread (FTE) increased slightly to 2.95%, compared to 2.93% for the same period in 2017. Our net interest margin (FTE) increased to 3.19% for the three months ended March 31, 2018, compared to 3.08% for the same period in 2017. Both the increase in net interest spread (FTE) and net interest margin (FTE) was due to an increase in the average yield on earning assets, partially offset by higher average rates paid on interest bearing liabilities. The increase in the average yield on earning assets during the three months ended March 31, 2018 was the result of increases in the average yields on most of the earning asset categories partially offset by a decrease in the average yield on tax-exempt investment securities. The increase in average rates paid on interest bearing liabilities was primarily due to rising interest rates during 2017 and 2018. The net interest spread (FTE) and net interest margin (FTE) increased on a linked quarter basis from 2.91% and 3.12%, respectively, for the three months ended December 31, 2017, to 2.95% and 3.19%, respectively, for the three months ended March 31, 2018.
Net Income for the Three Months Ended March 31, 2018
Net income increased $1.3 million, or 8.4%, for the three months ended March 31, 2018, to $16.3 million compared to the same period in 2017. The increase was primarily the result of a $12.3 million increase in interest income and a $0.9 million decrease in income tax expense, partially offset by a $5.8 million increase in noninterest expense, a $3.5 million increase in interest expense, and a $2.6 million increase in provision for loan losses. Noninterest income decreased slightly as a result of losses recorded on the sale of securities in the first quarter of 2018.
Excluding net (loss) gain on sale of securities, noninterest income increased $1.1 million, or 11.6%, for the three months ended March 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 our merger with Diboll. In connection with the adoption of Accounting Standards Update 2014-09 revenue recognition guidance effective January 1, 2018, debit card expense and brokerage service expense for the three months ended March 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 $5.8 million, or 22.5%, for the three months ended March 31, 2018, compared to the same period in 2017. The increase in most of our noninterest expense categories is directly attributable to our acquisition of Diboll. Salaries and employee benefits also increased as a result of one-time bonuses paid as a result of the Tax Cuts and Jobs Act and normal salary increases.
The decrease in income tax expense for the three months ended March 31, 2018 of $0.9 million, or 30.5%, was attributable to the reduced tax rate under the Tax Cuts and Jobs Act resulting in a lower effective tax rate of 11.4% compared to 16.7% for the same period in 2017.

Conference Call
Southside's management team will host a conference call to discuss its first quarter 2018 financial results on Tuesday, May 1, 2018 at 9:00 a.m. CDT.  The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 2096238 or by identifying “Southside Bancshares, Inc., First Quarter 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 3:00 p.m. CDT May 1, 2018 through May 13, 2018 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 ended March 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 on a tax-equivalent basis. 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 of intangibles and certain nonrecurring expense by the sum of net interest income (FTE) and noninterest income, excluding gains (losses) on sales of available for sale securities 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 March 31, 2018, the reconciliation of net interest income to net interest income adjusted to a fully taxable-equivalent basis assuming a 21% marginal tax rate for the three months ended March 31, 2018 and a 35% marginal tax rate for the 2017 quarterly periods 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
 
 
2018
 
2017
 
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
 
Mar. 31,
Net interest income (GAAP)
 
$
44,133

 
$
38,306

 
$
34,960

 
$
35,424

 
$
35,280

Tax equivalent adjustments:
 
 
 
 
 
 
 
 
 
 
Loans
 
582

 
1,125

 
1,103

 
1,050

 
1,035

Investment securities (tax-exempt)
 
1,619

 
3,049

 
3,544

 
3,229

 
3,375

Net interest income (FTE) (1)
 
46,334

 
42,480

 
39,607

 
39,703

 
39,690

Noninterest income
 
9,610

 
9,099

 
9,408

 
9,293

 
9,673

Nonrecurring income (2)
 
827

 
483

 
(627
)
 
75

 
(122
)
Total revenue
 
$
56,771

 
$
52,062

 
$
48,388

 
$
49,071

 
$
49,241

 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
 
$
31,667

 
$
29,933

 
$
25,007

 
$
25,537

 
$
25,858

Pre-tax amortization expense
 
(1,378
)
 
(726
)
 
(388
)
 
(410
)
 
(431
)
Nonrecurring expense (3)
 
(1,178
)
 
(3,479
)
 
(432
)
 
(466
)
 
(17
)
Adjusted noninterest expense
 
$
29,111

 
$
25,728

 
$
24,187

 
$
24,661

 
$
25,410

 
 
 
 
 
 
 
 
 
 
 
Efficiency ratio
 
53.35
%
 
53.73
%
 
55.30
%
 
55.06
%
 
56.68
%
Efficiency ratio (FTE) (1)
 
51.28
%
 
49.42
%
 
49.99
%
 
50.26
%
 
51.60
%
 
 
 
 
 
 
 
 
 
 
 
Average earning assets
 
$
5,891,352

 
$
5,395,212

 
$
5,199,349

 
$
5,192,897

 
$
5,229,045

 
 
 
 
 
 
 
 
 
 
 
Net interest margin
 
3.04
%
 
2.82
%
 
2.67
%
 
2.74
%
 
2.74
%
Net interest margin (FTE) (1)
 
3.19
%
 
3.12
%
 
3.02
%
 
3.07
%
 
3.08
%
 
 
 
 
 
 
 
 
 
 
 
Net interest spread
 
2.80
%
 
2.60
%
 
2.47
%
 
2.56
%
 
2.59
%
Net interest spread (FTE) (1)
 
2.95
%
 
2.91
%
 
2.82
%
 
2.89
%
 
2.93
%

(1)
These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.
(2)
Includes net gains and losses on sale of available for sale securities, impairment of investments and other-than-temporary impairment charges.
(3)
Includes acquisition expenses and foreclosure expenses.

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 under Results of Operations.





About Southside Bancshares, Inc.
Southside Bancshares, Inc. is a bank holding company with approximately $6.4 billion in assets as of March 31, 2018, that owns 100% of Southside Bank.  Southside Bank currently has 60 branches in Texas and operates a network of 84 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 Suni Davis at (903) 531-7235, or suni.davis@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.





 
SOUTHSIDE BANCSHARES, INC.
 
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
 
(In thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
2018
 
2017
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
 
Mar. 31,
ASSETS
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
65,480

 
$
79,171

 
$
57,947

 
$
56,033

 
$
54,345

Interest earning deposits
183,241

 
111,541

 
120,996

 
175,039

 
185,289

Federal funds sold
14,090

 
7,980

 
5,570

 
4,760

 
7,360

Securities available for sale, at estimated fair value
2,062,539

 
1,538,755

 
1,292,072

 
1,397,811

 
1,444,043

Securities held to maturity, at carrying value
164,847

 
909,506

 
909,844

 
925,538

 
929,793

Federal Home Loan Bank stock, at cost
42,676

 
55,729

 
61,845

 
61,561

 
61,305

Loans held for sale
2,003

 
2,001

 
2,177

 
3,036

 
5,303

Loans
3,309,627

 
3,294,356

 
2,682,766

 
2,610,198

 
2,538,918

Less: Allowance for loan losses
(24,220
)
 
(20,781
)
 
(19,871
)
 
(19,241
)
 
(18,485
)
Net loans
3,285,407

 
3,273,575

 
2,662,895

 
2,590,957

 
2,520,433

Premises & equipment, net
131,625

 
133,640

 
107,099

 
105,938

 
105,327

Goodwill
201,246

 
201,246

 
91,520

 
91,520

 
91,520

Other intangible assets, net
21,615

 
22,993

 
3,379

 
3,767

 
4,177

Bank owned life insurance
100,963

 
100,368

 
99,616

 
99,011

 
98,377

Other assets
97,465

 
61,592

 
69,470

 
63,511

 
148,977

Total assets
$
6,373,197

 
$
6,498,097

 
$
5,484,430

 
$
5,578,482

 
$
5,656,249

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Noninterest bearing deposits
$
1,055,423

 
$
1,037,401

 
$
781,701

 
$
757,353

 
$
753,224

Interest bearing deposits
3,586,474

 
3,478,046

 
2,782,474

 
2,866,720

 
2,952,072

Total deposits
4,641,897

 
4,515,447

 
3,564,175

 
3,624,073

 
3,705,296

Other borrowings
779,990

 
1,026,859

 
1,151,639

 
1,186,506

 
1,213,670

Subordinated notes, net of unamortized debt issuance costs
98,286

 
98,248

 
98,209

 
98,171

 
98,133

Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,242

 
60,241

 
60,240

 
60,238

 
60,237

Other liabilities
46,386

 
43,162

 
54,144

 
62,429

 
47,447

          Total liabilities
5,626,801

 
5,743,957

 
4,928,407

 
5,031,417

 
5,124,783

Shareholders' equity
746,396

 
754,140

 
556,023

 
547,065

 
531,466

Total liabilities and shareholders' equity
$
6,373,197

 
$
6,498,097

 
$
5,484,430

 
$
5,578,482

 
$
5,656,249







 
At or For the Three Months Ended
 
2018
 
2017
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
 
Mar. 31,
Income Statement:
 
 
 
 
 
 
 
 
 
Total interest income
$
57,194

 
$
50,104

 
$
46,473

 
$
46,009

 
$
44,888

Total interest expense
13,061

 
11,798

 
11,513

 
10,585

 
9,608

Net interest income
44,133

 
38,306

 
34,960

 
35,424

 
35,280

Provision for loan losses
3,735

 
1,271

 
960

 
1,346

 
1,098

Net interest income after provision for loan losses
40,398

 
37,035

 
34,000

 
34,078

 
34,182

Noninterest income
 
 
 
 
 
 
 
 
 
Deposit services
6,179

 
5,940

 
5,476

 
5,255

 
5,114

Net (loss) gain on sale of securities available for sale
(827
)
 
(249
)
 
627

 
(75
)
 
322

Gain on sale of loans
115

 
268

 
347

 
505

 
701

Trust income
1,760

 
1,156

 
873

 
899

 
890

Bank owned life insurance income
632

 
632

 
636

 
635

 
634

Brokerage services
450

 
632

 
561

 
682

 
547

Other
1,301

 
720

 
888

 
1,392

 
1,465

Total noninterest income
9,610

 
9,099

 
9,408

 
9,293

 
9,673

Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
18,559

 
15,316

 
14,472

 
14,984

 
16,007

Occupancy expense
3,583

 
3,327

 
2,981

 
2,897

 
2,863

Acquisition expense
832

 
3,474

 
405

 
473

 

Advertising, travel & entertainment
685

 
601

 
487

 
548

 
583

ATM and debit card expense
346

 
1,049

 
1,024

 
889

 
927

Professional fees
1,070

 
859

 
996

 
1,050

 
939

Software and data processing expense
1,023

 
882

 
732

 
688

 
725

Telephone and communications
538

 
444

 
459

 
476

 
526

FDIC insurance
497

 
442

 
441

 
445

 
441

Amortization expense on intangibles
1,378

 
726

 
388

 
410

 
431

Other
3,156

 
2,813

 
2,622

 
2,677

 
2,416

Total noninterest expense
31,667

 
29,933

 
25,007

 
25,537

 
25,858

Income before income tax expense
18,341

 
16,201

 
18,401

 
17,834

 
17,997

Income tax expense
2,090

 
5,870

 
3,890

 
3,353

 
3,008

Net income
$
16,251

 
$
10,331

 
$
14,511

 
$
14,481

 
$
14,989

 
 
 
 
 
 
 
 
 
 
Common share data:
 
 
 
Weighted-average basic shares outstanding
35,022

 
31,370

 
29,370

 
29,318

 
29,288

Weighted-average diluted shares outstanding
35,200

 
31,569

 
29,570

 
29,519

 
29,504

Shares outstanding end of period
35,053

 
35,000

 
29,433

 
29,344

 
29,306

Net income per common share
 
 
 
 
 
 
 
 
 
Basic
$
0.46

 
$
0.33

 
$
0.49

 
$
0.49

 
$
0.51

Diluted
0.46

 
0.33

 
0.49

 
0.49

 
0.51

Book value per common share
21.29

 
21.55

 
18.89

 
18.64

 
18.14

Cash dividend paid per common share
0.28

 
0.30

 
0.28

 
0.28

 
0.25

 
 
 
 
 
 
 
 
 
 
Selected Performance Ratios:
 
 
 
 
 
 
 
 
 
Return on average assets
1.02
%
 
0.70
%
 
1.03
%
 
1.04
%
 
1.08
%
Return on average shareholders’ equity
8.75

 
6.52

 
10.38

 
10.70

 
11.57

Average yield on earning assets (1)
4.09

 
3.99

 
3.90

 
3.88

 
3.82

Average rate on interest bearing liabilities
1.14

 
1.08

 
1.08

 
0.99

 
0.89

Net interest spread (FTE) (1)
2.95

 
2.91

 
2.82

 
2.89

 
2.93

Net interest margin (FTE) (1)
3.19

 
3.12

 
3.02

 
3.07

 
3.08

Average earning assets to average interest bearing liabilities
127.29

 
124.73

 
123.32

 
121.57

 
120.04

Noninterest expense to average total assets
1.99

 
2.03

 
1.77

 
1.83

 
1.87

Efficiency ratio (FTE) (1)
51.28

 
49.42

 
49.99

 
50.26

 
51.60

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





 
Southside Bancshares, Inc.
 
Selected Financial Data (unaudited)
 
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
2018
 
2017
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
 
Mar. 31,
Nonperforming assets:
$
42,444

 
$
10,472

 
$
9,119

 
$
9,165

 
$
14,079

Nonaccrual loans (1)
34,545

 
2,937

 
3,095

 
3,034

 
7,261

Accruing loans past due more than 90 days (1)
4

 
1

 

 

 
1

Restructured loans (2)
5,839

 
5,767

 
5,725

 
5,884

 
6,424

Other real estate owned
2,014

 
1,613

 
298

 
233

 
367

Repossessed assets
42

 
154

 
1

 
14

 
26

 
 
 
 
 
 
 
 
 
 
Asset Quality Ratios:
 
 
 
 
 
 
 
 
 
Nonaccruing loans to total loans
1.04
%
 
0.09
%
 
0.12
%
 
0.12
%
 
0.29
%
Allowance for loan losses to nonaccruing loans
70.11

 
707.56

 
642.04

 
634.18

 
254.58

Allowance for loan losses to nonperforming assets
57.06

 
198.44

 
217.91

 
209.94

 
131.29

Allowance for loan losses to total loans
0.73

 
0.63

 
0.74

 
0.74

 
0.73

Nonperforming assets to total assets
0.67

 
0.16

 
0.17

 
0.16

 
0.25

Net charge-offs to average loans
0.04

 
0.05

 
0.05

 
0.09

 
0.08

 
 
 
 
 
 
 
 
 
 
Capital Ratios:
 
 
 
 
 
 
 
 
 
Shareholders’ equity to total assets
11.71

 
11.61

 
10.14

 
9.81

 
9.40

Average shareholders’ equity to average total assets
11.69

 
10.75

 
9.91

 
9.72

 
9.36


(1)
Excludes purchased credit impaired ("PCI") loans measured at fair value at acquisition.
(2)
Includes $2.9 million, $2.9 million, $3.0 million, $3.0 million, and $3.0 million in PCI loans restructured as of March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017, and March 31, 2017, respectively.

Loan Portfolio Composition
The following table sets forth loan totals by category for the periods presented:
 
Three Months Ended
 
2018
 
2017
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
 
Mar. 31,
Real Estate Loans:
 
 
 
 
 
 
 
 
 
Construction
$
474,791

 
$
475,867

 
$
420,497

 
$
386,853

 
$
362,367

1-4 Family Residential
797,088

 
805,341

 
609,159

 
615,405

 
622,881

Commercial
1,285,591

 
1,265,159

 
1,073,646

 
1,033,629

 
974,307

Commercial Loans
281,901

 
266,422

 
166,919

 
172,311

 
176,908

Municipal Loans
342,404

 
345,798

 
322,286

 
305,023

 
297,417

Loans to Individuals
127,852

 
135,769

 
90,259

 
96,977

 
105,038

Total Loans
$
3,309,627

 
$
3,294,356

 
$
2,682,766

 
$
2,610,198

 
$
2,538,918







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
 
March 31, 2018
 
December 31, 2017
 
Avg Balance
 
Interest
 
Avg Yield/Rate
 
Avg Balance
 
Interest
 
Avg Yield/Rate
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Loans (1)
$
3,300,506

 
$
39,401

 
4.84
%
 
$
2,897,444

 
$
34,070

 
4.67
%
Loans held for sale
1,543

 
11

 
2.89
%
 
2,285

 
22

 
3.82
%
Securities:
 
 
 
 
 
 
 
 
 
 
 
Investment securities (taxable) (2)
39,332

 
227

 
2.34
%
 
51,678

 
237

 
1.82
%
Investment securities (tax-exempt) (2)
805,091

 
8,000

 
4.03
%
 
775,681

 
9,197

 
4.70
%
Mortgage-backed and related securities (2)
1,557,140

 
10,894

 
2.84
%
 
1,461,159

 
9,931

 
2.70
%
Total securities
2,401,563

 
19,121

 
3.23
%
 
2,288,518

 
19,365

 
3.36
%
FHLB stock, at cost, and equity investments
67,000

 
414

 
2.51
%
 
67,127

 
380

 
2.25
%
Interest earning deposits
107,488

 
399

 
1.51
%
 
133,007

 
418

 
1.25
%
Federal funds sold
13,252

 
49

 
1.50
%
 
6,831

 
23

 
1.34
%
Total earning assets
5,891,352

 
59,395

 
4.09
%
 
5,395,212

 
54,278

 
3.99
%
Cash and due from banks
78,031

 
 
 
 
 
60,590

 
 
 
 
Accrued interest and other assets
493,974

 
 
 
 
 
410,528

 
 
 
 
Less:  Allowance for loan losses
(21,005
)
 
 
 
 
 
(19,963
)
 
 
 
 
Total assets
$
6,442,352

 
 
 
 
 
$
5,846,367

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
Savings deposits
$
353,770

 
184

 
0.21
%
 
$
293,392

 
134

 
0.18
%
Time deposits
1,170,024

 
3,895

 
1.35
%
 
1,031,008

 
3,178

 
1.22
%
Interest bearing demand deposits
2,009,154

 
3,372

 
0.68
%
 
1,696,239

 
2,585

 
0.60
%
Total interest bearing deposits
3,532,948

 
7,451

 
0.86
%
 
3,020,639

 
5,897

 
0.77
%
FHLB borrowings
928,677

 
3,632

 
1.59
%
 
1,137,373

 
3,935

 
1.37
%
Subordinated notes, net of unamortized debt issuance costs
98,267

 
1,398

 
5.77
%
 
98,229

 
1,429

 
5.77
%
Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,241

 
569

 
3.83
%
 
60,240

 
532

 
3.50
%
Other borrowings
8,103

 
11

 
0.55
%
 
9,157

 
5

 
0.22
%
Total interest bearing liabilities
4,628,236

 
13,061

 
1.14
%
 
4,325,638

 
11,798

 
1.08
%
Noninterest bearing deposits
1,016,707

 
 
 
 
 
846,632

 
 
 
 
Accrued expenses and other liabilities
44,015

 
 
 
 
 
45,613

 
 
 
 
Total liabilities
5,688,958

 
 
 
 
 
5,217,883

 
 
 
 
Shareholders’ equity
753,394

 
 
 
 
 
628,484

 
 
 
 
Total liabilities and shareholders’ equity
$
6,442,352

 
 
 
 
 
$
5,846,367

 
 
 
 
Net interest income (FTE)
 
 
$
46,334

 
 
 
 
 
$
42,480

 
 
Net interest margin (FTE)
 
 
 
 
3.19
%
 
 
 
 
 
3.12
%
Net interest spread (FTE)
 
 
 
 
2.95
%
 
 
 
 
 
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 March 31, 2018 and December 31, 2017, loans totaling $34.5 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.





 
Average Balances with Average Yields and Rates
 
(unaudited)
 
Three Months Ended
 
September 30, 2017
 
June 30, 2017
 
Avg Balance
 
Interest
 
Avg Yield/Rate
 
Avg Balance
 
Interest
 
Avg Yield/Rate
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Loans (1)
$
2,657,562

 
$
30,378

 
4.54
%
 
$
2,557,093

 
$
29,080

 
4.56
%
Loans held for sale
5,060

 
47

 
3.69
%
 
5,914

 
60

 
4.07
%
Securities:
 
 
 
 
 
 
 
 
 
 
 
Investment securities (taxable) (2)
11,085

 
58

 
2.08
%
 
58,168

 
267

 
1.84
%
Investment securities (tax-exempt) (2)
758,828

 
9,214

 
4.82
%
 
749,259

 
9,386

 
5.02
%
Mortgage-backed and related securities (2)
1,550,494

 
10,567

 
2.70
%
 
1,594,269

 
10,818

 
2.72
%
Total securities
2,320,407

 
19,839

 
3.39
%
 
2,401,696

 
20,471

 
3.42
%
FHLB stock, at cost, and equity investments
66,994

 
329

 
1.95
%
 
66,744

 
299

 
1.80
%
Interest earning deposits
144,700

 
506

 
1.39
%
 
156,124

 
364

 
0.94
%
Federal funds sold
4,626

 
21

 
1.80
%
 
5,326

 
14

 
1.05
%
Total earning assets
5,199,349

 
51,120

 
3.90
%
 
5,192,897

 
50,288

 
3.88
%
Cash and due from banks
53,220

 
 
 
 
 
50,961

 
 
 
 
Accrued interest and other assets
360,073

 
 
 
 
 
358,041

 
 
 
 
Less:  Allowance for loan losses
(19,556
)
 
 
 
 
 
(18,495
)
 
 
 
 
Total assets
$
5,593,086

 
 
 
 
 
$
5,583,404

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
Savings deposits
$
260,860

 
117

 
0.18
%
 
$
262,009

 
121

 
0.19
%
Time deposits
988,380

 
2,878

 
1.16
%
 
1,014,101

 
2,723

 
1.08
%
Interest bearing demand deposits
1,562,993

 
2,425

 
0.62
%
 
1,616,036

 
2,294

 
0.57
%
Total interest bearing deposits
2,812,233

 
5,420

 
0.76
%
 
2,892,146

 
5,138

 
0.71
%
FHLB borrowings
1,237,055

 
4,156

 
1.33
%
 
1,213,016

 
3,551

 
1.17
%
Subordinated notes, net of unamortized debt issuance costs
98,190

 
1,413

 
5.71
%
 
98,151

 
1,398

 
5.71
%
Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,239

 
520

 
3.42
%
 
60,238

 
494

 
3.29
%
Other borrowings
8,425

 
4

 
0.19
%
 
7,884

 
4

 
0.20
%
Total interest bearing liabilities
4,216,142

 
11,513

 
1.08
%
 
4,271,435

 
10,585

 
0.99
%
Noninterest bearing deposits
773,739

 
 
 
 
 
729,564

 
 
 
 
Accrued expenses and other liabilities
48,682

 
 
 
 
 
39,819

 
 
 
 
Total liabilities
5,038,563

 
 
 
 
 
5,040,818

 
 
 
 
Shareholders’ equity
554,523

 
 
 
 
 
542,586

 
 
 
 
Total liabilities and shareholders’ equity
$
5,593,086

 
 
 
 
 
$
5,583,404

 
 
 
 
Net interest income (FTE)
 
 
$
39,607

 
 
 
 
 
$
39,703

 
 
Net interest margin (FTE)
 
 
 
 
3.02
%
 
 
 
 
 
3.07
%
Net interest spread (FTE)
 
 
 
 
2.82
%
 
 
 
 
 
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 September 30, 2017 and June 30, 2017, loans totaling $3.1 million and $3.0 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.






 
Average Balances with Average Yields and Rates
 
(unaudited)
 
Three Months Ended
 
March 31, 2017
 
Avg Balance
 
Interest
 
Avg Yield/Rate
ASSETS
 
 
 
 
 
Loans (1)
$
2,549,230

 
$
28,241

 
4.49
%
Loans held for sale
7,023

 
48

 
2.77
%
Securities:
 
 
 
 
 
Investment securities (taxable) (2)
86,511

 
377

 
1.77
%
Investment securities (tax-exempt) (2)
779,772

 
9,929

 
5.16
%
Mortgage-backed and related securities (2)
1,570,510

 
10,045

 
2.59
%
Total securities
2,436,793

 
20,351

 
3.39
%
FHLB stock, at cost, and equity investments
66,547

 
298

 
1.82
%
Interest earning deposits
162,235

 
346

 
0.86
%
Federal funds sold
7,217

 
14

 
0.79
%
Total earning assets
5,229,045

 
49,298

 
3.82
%
Cash and due from banks
53,528

 
 
 
 
Accrued interest and other assets
350,729

 
 
 
 
Less:  Allowance for loan losses
(18,130
)
 
 
 
 
Total assets
$
5,615,172

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
Savings deposits
$
252,744

 
92

 
0.15
%
Time deposits
927,610

 
2,227

 
0.97
%
Interest bearing demand deposits
1,707,996

 
1,962

 
0.47
%
Total interest bearing deposits
2,888,350

 
4,281

 
0.60
%
FHLB borrowings
1,302,335

 
3,464

 
1.08
%
Subordinated notes, net of unamortized debt issuance costs
98,117

 
1,393

 
5.76
%
Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,237

 
467

 
3.14
%
Other borrowings
6,986

 
3

 
0.17
%
Total interest bearing liabilities
4,356,025

 
9,608

 
0.89
%
Noninterest bearing deposits
693,729

 
 
 
 
Accrued expenses and other liabilities
39,960

 
 
 
 
Total liabilities
5,089,714

 
 
 
 
Shareholders’ equity
525,458

 
 
 
 
Total liabilities and shareholders’ equity
$
5,615,172

 
 
 
 
Net interest income (FTE)
 
 
$
39,690

 
 
Net interest margin (FTE)
 
 
 
 
3.08
%
Net interest spread (FTE)
 
 
 
 
2.93
%

(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, 2017, loans totaling $7.3 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.



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