Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document


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): April 26, 2019

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 April 26, 2019, Southside Bancshares, Inc. issued a press release announcing financial results for the three months ended March 31, 2019. 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:  April 26, 2019
By:
/s/ JULIE N. SHAMBURGER
 
 
Julie N. Shamburger, CPA
 
 
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, 2019



First quarter earnings per diluted common share increased 21.7% to $0.56 compared with first quarter 2018
First quarter net income increased 15.8% to $18.8 million compared with first quarter 2018
Linked quarter nonperforming assets decreased 11.2% to 0.61% of total assets for first quarter 2019
First quarter annualized return on average assets of 1.21%
First quarter annualized return on average shareholders’ equity of 10.35% and return on average tangible common equity of 15.44% (1) 
Linked quarter noninterest-bearing deposits increased 4.4% in first quarter 2019


Tyler, Texas, (April 26, 2019) Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the three months ended March 31, 2019. Southside reported net income of $18.8 million for the three months ended March 31, 2019, an increase of $2.6 million, or 15.8%, compared to $16.3 million for the same period in 2018. Earnings per diluted common share increased $0.10, or 21.7%, to $0.56 for the three months ended March 31, 2019, from $0.46 for the same period in 2018. The return on average shareholders’ equity for the three months ended March 31, 2019 was 10.35%, compared to 8.75% for the same period in 2018.  The return on average assets was 1.21% for the three months ended March 31, 2019, compared to 1.02% for the same period in 2018.

“The first quarter results provide an excellent start for 2019,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “First quarter earnings per share increased 21.7% and net income increased 15.8% when compared to the first quarter 2018. On a linked quarter basis nonperforming assets decreased 11.2%, to 0.61% of total assets due primarily to the sale of three nonperforming loans, which was also the primary reason for the decrease in the provision for loan losses this quarter.”

“Our tax-equivalent net interest margin on a linked quarter basis decreased from 3.21% to 3.07%, due in part to a loss on a fair value hedge interest rate swap of $0.5 million recorded in net interest income. During the last month of the quarter, as interest rates decreased, we sold a little more than $520 million of lower yielding available for sale securities at an overall net gain of $256,000. These sales were partially offset by purchases of securities during the quarter at higher yields.”
Operating Results for the Three Months Ended March 31, 2019
Net income was $18.8 million for the three months ended March 31, 2019 compared with $16.3 million for the same period in 2018, an increase of $2.6 million, or 15.8%. Net income per diluted common share was $0.56 for the three months ended March 31, 2019 compared with $0.46 for the same period in 2018, an increase of 21.7%. The increase in net income was largely driven by the decrease in provision for loan losses and noninterest expense, as well as the increase in interest income, partially offset by an increase in interest expense and income tax expense. Annualized returns on average assets and average shareholders’ equity for the three months ended March 31, 2019 were 1.21% and 10.35%, respectively.  Our efficiency ratio (FTE) was 53.66% (1) for the three months ended March 31, 2019.


(1) 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.
Page-1


Net interest income before provision for loan losses for the three months ended March 31, 2019 was $41.1 million compared with $44.1 million during the same period in 2018, a decrease of $3.0 million, or 6.8%. Linked quarter net interest income before provision for loan losses decreased $1.3 million, or 3.0%, to $41.1 million, compared with $42.4 million during the three months ended December 31, 2018. The decrease in net interest income for both periods was due to the increase in interest expense on our interest bearing liabilities that more than offset the increase in interest income on our interest earning assets.
Our tax equivalent net interest margin was 3.07% for the three months ended March 31, 2019 compared with 3.19% for the same period in 2018 and 3.21% for the three months ended December 31, 2018. The decrease during both periods was primarily due to the higher rates paid on interest bearing liabilities.
Noninterest income was $9.5 million for the three months ended March 31, 2019, a slight decrease compared with $9.6 million for the same period in 2018. The decrease was primarily due to a decrease in deposit services income, trust income and a partial loss on a fair value hedge interest rate swap included in other noninterest income, partially offset by an increase in net gain on sale of securities. On a linked quarter basis, noninterest income decreased $0.6 million, or 5.9%, primarily due to a decrease in deposit services income and a partial loss on a fair value hedge interest rate swap during the first quarter of 2019.
Noninterest expense was $29.6 million for the three months ended March 31, 2019 compared with $31.7 million for the same period in 2018, a decrease of $2.0 million, or 6.4%. The decrease was primarily due to a decrease in salaries and employee benefits, net occupancy expense, acquisition expense and amortization expense. On a linked quarter basis, noninterest expense decreased $0.6 million, or 1.9%, compared with the three months ended December 31, 2018. This decrease primarily resulted from a decrease in net occupancy expense and other noninterest expense, partially offset by an increase in salary and employee benefits.
Income tax expense increased $1.0 million for the three months ended March 31, 2019 compared to the same period in 2018. Our effective tax rate (“ETR”) was approximately 14.3% and 11.4% for the three months ended March 31, 2019 and 2018, respectively. On a linked quarter basis, income tax expense increased $0.6 million and the ETR increased to 14.3% for the first quarter of 2019 from 12.7% for the three months ended December 31, 2018. The higher ETR for both periods was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income.
Balance Sheet Data
At March 31, 2019, we had $6.22 billion in total assets compared with $6.37 billion at March 31, 2018 and $6.12 billion at December 31, 2018.
Loans at March 31, 2019 were $3.305 billion, a decrease of $4.5 million, or 0.1%, compared with $3.310 billion at March 31, 2018. Linked quarter loans decreased $7.7 million, or 0.2%, from $3.313 billion at December 31, 2018. The linked quarter net decrease in our loans consisted of decreases of $89.7 million of commercial real estate loans, $10.3 million of municipal loans, $8.3 million of 1-4 family residential loans, and $6.3 million of loans to individuals, partially offset by increases of $95.7 million of construction loans and $11.3 million of commercial loans.
Securities at March 31, 2019 were $2.02 billion, a decrease of $203.7 million, or 9.1%, compared with $2.23 billion at March 31, 2018. Linked quarter securities decreased $128.7 million, or 6.0%, from $2.15 billion at December 31, 2018.
Deposits at March 31, 2019 were $4.57 billion, a decrease of $74.0 million, or 1.6%, compared with $4.64 billion at March 31, 2018 due to a decrease in public fund deposits that more than offset an increase in brokered deposits. Linked quarter deposits increased $142.9 million, or 3.2%, from $4.43 billion at December 31, 2018 primarily due to an increase in brokered deposits.
Asset Quality
Nonperforming assets decreased during the three months ended March 31, 2019 by $4.8 million, or 11.2%, to $38.1 million, or 0.61% of total assets, compared to $42.9 million, or 0.70% of total assets at December 31, 2018. During the three months ended March 31, 2019, our nonaccrual loans decreased $18.1 million primarily due to the sale of three commercial real estate loans of approximately $16.7 million. Our accruing loans past due more than 90 days increased $7.9 million, consisting of one commercial real estate loan relationship that subsequently paid off in full on April 15, 2019. Additionally, our restructured loans increased $5.6 million primarily due to the renegotiation of a commercial real estate loan.
During the three months ended March 31, 2019, the allowance for loan losses decreased by $2.9 million, or 10.6%, to $24.2 million, or 0.73% of total loans, compared to $27.0 million, or 0.82%, of total loans at December 31, 2018. The decrease in the allowance was primarily the result of $1.2 million in charge-offs associated with three nonaccrual loans sold during the first quarter of 2019 that were previously in nonaccrual status and a partial reversal of provision associated with these loans in the first quarter.

Page-2


For the three months ended March 31, 2019, we reversed provision for loan losses of $0.9 million compared with a $3.7 million provision expense for the three months ended March 31, 2018 and a $2.4 million provision expense for the three months ended December 31, 2018.
Net charge-offs were $1.9 million for the three months ended March 31, 2019 compared with $0.3 million for the three months ended March 31, 2018 and $1.5 million for the three months ended December 31, 2018. Net charge-offs for the first quarter of 2019 were primarily related to three nonaccrual commercial real estate loans sold during the first quarter.
Dividend
Southside Bancshares, Inc. declared a first quarter cash dividend of $0.30 per share on February 7, 2019, which was paid on March 7, 2019, to all shareholders of record as of February 21, 2019.

Conference Call
Southside's management team will host a conference call to discuss its first quarter ended March 31, 2019 financial results on Friday, April 26, 2019 at 9:00 a.m. CDT.  The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 1357433 or by identifying “Southside Bancshares, Inc., First Quarter 2019 Earnings Call.”  To listen to the call via webcast, register at http://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 April 26, 2019 through May 8, 2019 by accessing the company website, http://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 months ended March 31, 2019 and 2018 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 reported in the respective earning asset categories as listed in the “Average Balances with Average Yields and Rates” tables.

Page-3



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 $6.22 billion in assets as of March 31, 2019, that owns 100% of Southside Bank.  Southside Bank currently has 59 branches in Texas and operates a network of 81 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 Lindsey Bibby at (903) 630-7965, or [email protected]

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, 2018, 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.

Page-4


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


 
As of
 
2019
 
2018
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
 
Mar. 31,
ASSETS
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
81,981

 
$
87,375

 
$
85,103

 
$
78,534

 
$
65,480

Interest earning deposits
184,612

 
23,884

 
70,685

 
138,685

 
183,241

Federal funds sold
3,350

 
9,460

 
18,284

 
14,850

 
14,090

Securities available for sale, at estimated fair value
1,876,255

 
1,989,436

 
1,939,277

 
2,037,994

 
2,062,539

Securities held to maturity, at carrying value
147,431

 
162,931

 
163,365

 
164,276

 
164,847

Total securities
2,023,686

 
2,152,367

 
2,102,642

 
2,202,270

 
2,227,386

Federal Home Loan Bank stock, at cost
35,269

 
32,583

 
32,291

 
42,994

 
42,676

Loans held for sale
384

 
601

 
954

 
4,566

 
2,003

Loans
3,305,110

 
3,312,799

 
3,274,524

 
3,270,883

 
3,309,627

Less: Allowance for loan losses
(24,155
)
 
(27,019
)
 
(26,092
)
 
(25,072
)
 
(24,220
)
Net loans
3,280,955

 
3,285,780

 
3,248,432

 
3,245,811

 
3,285,407

Premises & equipment, net
138,290

 
135,972

 
133,939

 
132,578

 
131,625

Goodwill
201,116

 
201,116

 
201,116

 
201,246

 
201,246

Other intangible assets, net
16,600

 
17,779

 
19,009

 
20,287

 
21,615

Bank owned life insurance
98,704

 
98,160

 
97,611

 
97,059

 
100,963

Other assets
152,249

 
78,417

 
95,288

 
71,293

 
97,465

Total assets
$
6,217,196

 
$
6,123,494

 
$
6,105,354

 
$
6,250,173

 
$
6,373,197

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Noninterest bearing deposits
$
1,038,116

 
$
994,680

 
$
1,033,572

 
$
1,038,907

 
$
1,055,423

Interest bearing deposits
3,529,777

 
3,430,350

 
3,519,940

 
3,469,834

 
3,586,474

Total deposits
4,567,893

 
4,425,030

 
4,553,512

 
4,508,741

 
4,641,897

Other borrowings
628,498

 
755,875

 
570,242

 
784,754

 
779,990

Subordinated notes, net of unamortized debt issuance costs
98,448

 
98,407

 
98,366

 
98,326

 
98,286

Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,247

 
60,246

 
60,244

 
60,243

 
60,242

Other liabilities
104,077

 
52,645

 
70,484

 
46,299

 
46,386

          Total liabilities
5,459,163

 
5,392,203

 
5,352,848

 
5,498,363

 
5,626,801

Shareholders' equity
758,033

 
731,291

 
752,506

 
751,810

 
746,396

Total liabilities and shareholders' equity
$
6,217,196

 
$
6,123,494

 
$
6,105,354

 
$
6,250,173

 
$
6,373,197




Page-5


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


 
At or For the Three Months Ended
 
2019
 
2018
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
 
Mar. 31,
Income Statement:
 
 
 
 
 
 
 
 
 
Total interest income
$
59,027

 
$
58,022

 
$
57,152

 
$
56,797

 
$
57,194

Total interest expense
17,902

 
15,612

 
14,742

 
13,686

 
13,061

Net interest income
41,125

 
42,410

 
42,410

 
43,111

 
44,133

Provision for loan losses
(918
)
 
2,446

 
975

 
1,281

 
3,735

Net interest income after provision for loan losses
42,043

 
39,964

 
41,435

 
41,830

 
40,398

Noninterest income
 
 
 
 
 
 
 
 
 
Deposit services
5,986

 
6,325

 
6,317

 
6,261

 
6,179

Net gain (loss) on sale of securities available for sale
256

 
61

 
(741
)
 
(332
)
 
(827
)
Gain on sale of loans
93

 
101

 
303

 
173

 
115

Trust income
1,541

 
1,573

 
1,568

 
1,931

 
1,760

Bank owned life insurance income
544

 
554

 
552

 
1,185

 
632

Brokerage services
517

 
499

 
532

 
506

 
450

Other
601

 
1,021

 
1,491

 
1,283

 
1,301

Total noninterest income
9,538

 
10,134

 
10,022

 
11,007

 
9,610

Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
18,046

 
17,823

 
17,628

 
16,633

 
18,559

Net occupancy expense
3,175

 
3,475

 
3,396

 
3,360

 
3,583

Acquisition expense

 
118

 
437

 
1,026

 
832

Advertising, travel & entertainment
847

 
786

 
648

 
775

 
685

ATM expense
180

 
250

 
251

 
243

 
346

Professional fees
1,314

 
1,189

 
824

 
952

 
1,070

Software and data processing expense
1,076

 
1,057

 
977

 
939

 
1,023

Telephone and communications
487

 
477

 
354

 
478

 
538

FDIC insurance
422

 
455

 
435

 
484

 
497

Amortization expense on intangibles
1,179

 
1,228

 
1,279

 
1,328

 
1,378

Other
2,901

 
3,338

 
2,733

 
3,056

 
3,156

Total noninterest expense
29,627

 
30,196

 
28,962

 
29,274

 
31,667

Income before income tax expense
21,954

 
19,902

 
22,495

 
23,563

 
18,341

Income tax expense
3,137

 
2,521

 
2,192

 
3,360

 
2,090

Net income
$
18,817

 
$
17,381

 
$
20,303

 
$
20,203

 
$
16,251

 
 
 
 
 
 
 
 
 
 
Common share data:
 
 
 
Weighted-average basic shares outstanding
33,697

 
34,611

 
35,114

 
35,062

 
35,022

Weighted-average diluted shares outstanding
33,846

 
34,748

 
35,288

 
35,233

 
35,200

Common shares outstanding end of period
33,718

 
33,725

 
35,160

 
35,084

 
35,053

Net income per common share
 
 
 
 
 
 
 
 
 
Basic
$
0.56

 
$
0.50

 
$
0.58

 
$
0.58

 
$
0.46

Diluted
0.56

 
0.50

 
0.58

 
0.57

 
0.46

Book value per common share
22.48

 
21.68

 
21.40

 
21.43

 
21.29

Tangible book value per common share (1)
16.02

 
15.19

 
15.14

 
15.11

 
14.94

Cash dividends paid per common share
0.30

 
0.32

 
0.30

 
0.30

 
0.28

 
 
 
 
 
 
 
 
 
 
Selected Performance Ratios:
 
 
 
 
 
 
 
 
 
Return on average assets
1.21
%
 
1.14
%
 
1.30
%
 
1.30
%
 
1.02
%
Return on average shareholders’ equity
10.35

 
9.30

 
10.61

 
10.79

 
8.75

Return on average tangible common equity (1)
15.44

 
13.95

 
15.70

 
16.13

 
13.28

Average yield on earning assets (FTE) (1)
4.33

 
4.32

 
4.18

 
4.15

 
4.09

Average rate on interest bearing liabilities
1.62

 
1.46

 
1.36

 
1.25

 
1.14

Net interest spread (FTE) (1)
2.71

 
2.86

 
2.82

 
2.90

 
2.95

Net interest margin (FTE) (1)
3.07

 
3.21

 
3.14

 
3.19

 
3.19

Average earning assets to average interest bearing liabilities
127.70

 
131.07

 
131.12

 
130.22

 
127.29

Noninterest expense to average total assets
1.91

 
1.98

 
1.86

 
1.89

 
1.99

Efficiency ratio (FTE) (1)
53.66

 
52.18

 
48.91

 
47.56

 
51.28

(1)
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.

Page-6


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


 
Three Months Ended
 
2019
 
2018
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
 
Mar. 31,
Nonperforming assets:
$
38,111

 
$
42,906

 
$
39,638

 
$
42,423

 
$
42,444

Nonaccrual loans (1)
17,691

 
35,770

 
32,526

 
35,351

 
34,545

Accruing loans past due more than 90 days (1)(2)
7,927

 

 

 
7

 
4

Restructured loans (3)
11,490

 
5,930

 
5,699

 
5,860

 
5,839

Other real estate owned
978

 
1,206

 
1,413

 
1,137

 
2,014

Repossessed assets
25

 

 

 
68

 
42

 
 
 
 
 
 
 
 
 
 
Asset Quality Ratios:
 
 
 
 
 
 
 
 
 
Nonaccruing loans to total loans
0.54
%
 
1.08
%
 
0.99
 %
 
1.08
%
 
1.04
%
Allowance for loan losses to nonaccruing loans
136.54

 
75.54

 
80.22

 
70.92

 
70.11

Allowance for loan losses to nonperforming assets
63.38

 
62.97

 
65.83

 
59.10

 
57.06

Allowance for loan losses to total loans
0.73

 
0.82

 
0.80

 
0.77

 
0.73

Nonperforming assets to total assets
0.61

 
0.70

 
0.65

 
0.68

 
0.67

Net charge-offs (recoveries) to average loans
0.24

 
0.18

 
(0.01
)
 
0.05

 
0.04

 
 
 
 
 
 
 
 
 
 
Capital Ratios:
 
 
 
 
 
 
 
 
 
Shareholders’ equity to total assets
12.19

 
11.94

 
12.33

 
12.03

 
11.71

Common equity tier 1 capital
14.38

 
14.77

 
15.90

 
15.49

 
14.76

Tier 1 risk-based capital
15.88

 
16.29

 
17.43

 
17.02

 
16.26

Total risk-based capital
19.06

 
19.59

 
20.75

 
20.31

 
19.45

Tier 1 leverage capital
10.18

 
10.64

 
11.06

 
10.76

 
10.17

Period end tangible equity to period end tangible assets (4)
9.01

 
8.68

 
9.05

 
8.80

 
8.51

Average shareholders’ equity to average total assets
11.70

 
12.23

 
12.28

 
12.06

 
11.69


(1)
Excludes purchased credit impaired ("PCI") loans measured at fair value at acquisition if the timing and amount of cash flows expected to be collected from those sales can be reasonably estimated.
(2)
The loan relationship at March 31, 2019 paid off in full on April 15, 2019.
(3)
Includes $0.7 million, $3.1 million, $3.2 million, $2.9 million and $2.9 million in PCI loans restructured as of March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018, and March 31, 2018, respectively.
(4)
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.
 

Loan Portfolio Composition
The following table sets forth loan totals by category for the periods presented (in thousands):
 
Three Months Ended
 
2019
 
2018
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
 
Mar. 31,
Real Estate Loans:
 
 
 
 
 
 
 
 
 
Construction
$
603,411

 
$
507,732

 
$
484,254

 
$
487,286

 
$
474,791

1-4 Family Residential
786,198

 
794,499

 
791,274

 
791,359

 
797,088

Commercial
1,104,378

 
1,194,118

 
1,218,714

 
1,245,936

 
1,285,591

Commercial Loans
367,995

 
356,649

 
322,873

 
282,723

 
281,901

Municipal Loans
343,026

 
353,370

 
344,792

 
345,595

 
342,404

Loans to Individuals
100,102

 
106,431

 
112,617

 
117,984

 
127,852

Total Loans
$
3,305,110

 
$
3,312,799

 
$
3,274,524

 
$
3,270,883

 
$
3,309,627



Page-7


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
 
March 31, 2019
 
December 31, 2018
 
Avg Balance
 
Interest
 
Avg Yield/Rate
 
Avg Balance
 
Interest
 
Avg Yield/Rate
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Loans (1)
$
3,296,665

 
$
42,210

 
5.19
%
 
$
3,289,840

 
$
41,320

 
4.98
%
Loans held for sale
611

 
7

 
4.65
%
 
633

 
8

 
5.01
%
Securities:
 
 
 
 
 
 
 
 
 
 
 
Investment securities (taxable) (2)
3,000

 
28

 
3.79
%
 
13,066

 
103

 
3.13
%
Investment securities (tax-exempt) (2)
659,187

 
5,732

 
3.53
%
 
722,162

 
7,828

 
4.30
%
Mortgage-backed and related securities (2)
1,647,564

 
12,474

 
3.07
%
 
1,434,982

 
10,394

 
2.87
%
Total securities
2,309,751

 
18,234

 
3.20
%
 
2,170,210

 
18,325

 
3.35
%
FHLB stock, at cost, and equity investments
53,764

 
355

 
2.68
%
 
44,304

 
393

 
3.52
%
Interest earning deposits
64,690

 
386

 
2.42
%
 
36,098

 
411

 
4.52
%
Federal funds sold
7,635

 
47

 
2.50
%
 
16,967

 
97

 
2.27
%
Total earning assets
5,733,116

 
61,239

 
4.33
%
 
5,558,052

 
60,554

 
4.32
%
Cash and due from banks
83,147

 
 
 
 
 
79,544

 
 
 
 
Accrued interest and other assets
513,738

 
 
 
 
 
452,257

 
 
 
 
Less:  Allowance for loan losses
(27,060
)
 
 
 
 
 
(26,231
)
 
 
 
 
Total assets
$
6,302,941

 
 
 
 
 
$
6,063,622

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
Savings deposits
$
360,664

 
258

 
0.29
%
 
$
361,407

 
257

 
0.28
%
Time deposits
1,154,203

 
5,697

 
2.00
%
 
1,123,101

 
5,170

 
1.83
%
Interest bearing demand deposits
1,982,891

 
5,286

 
1.08
%
 
1,968,786

 
4,908

 
0.99
%
Total interest bearing deposits
3,497,758

 
11,241

 
1.30
%
 
3,453,294

 
10,335

 
1.19
%
FHLB borrowings
816,389

 
4,457

 
2.21
%
 
612,134

 
3,066

 
1.99
%
Subordinated notes, net of unamortized debt issuance costs
98,428

 
1,400

 
5.77
%
 
98,385

 
1,431

 
5.77
%
Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,246

 
729

 
4.91
%
 
60,245

 
699

 
4.60
%
Other borrowings
16,788

 
75

 
1.81
%
 
16,405

 
81

 
1.96
%
Total interest bearing liabilities
4,489,609

 
17,902

 
1.62
%
 
4,240,463

 
15,612

 
1.46
%
Noninterest bearing deposits
986,343

 
 
 
 
 
1,034,556

 
 
 
 
Accrued expenses and other liabilities
89,768

 
 
 
 
 
47,234

 
 
 
 
Total liabilities
5,565,720

 
 
 
 
 
5,322,253

 
 
 
 
Shareholders’ equity
737,221

 
 
 
 
 
741,369

 
 
 
 
Total liabilities and shareholders’ equity
$
6,302,941

 
 
 
 
 
$
6,063,622

 
 
 
 
Net interest income (FTE)
 
 
$
43,337

 
 
 
 
 
$
44,942

 
 
Net interest margin (FTE)
 
 
 
 
3.07
%
 
 
 
 
 
3.21
%
Net interest spread (FTE)
 
 
 
 
2.71
%
 
 
 
 
 
2.86
%

(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, 2019 and December 31, 2018, loans totaling $17.7 million and $35.8 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.


Page-8


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


 
Three Months Ended
 
September 30, 2018
 
June 30, 2018
 
Avg Balance
 
Interest
 
Avg Yield/Rate
 
Avg Balance
 
Interest
 
Avg Yield/Rate
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Loans (1)
$
3,286,664

 
$
40,396

 
4.88
%
 
$
3,285,756

 
$
39,865

 
4.87
%
Loans held for sale
1,841

 
25

 
5.39
%
 
1,794

 
19

 
4.25
%
Securities:
 
 
 
 
 
 
 
 
 
 
 
Investment securities (taxable) (2)
4,285

 
36

 
3.33
%
 
6,891

 
51

 
2.97
%
Investment securities (tax-exempt) (2)
795,397

 
8,132

 
4.06
%
 
802,611

 
8,004

 
4.00
%
Mortgage-backed and related securities (2)
1,418,114

 
10,086

 
2.82
%
 
1,439,810

 
10,210

 
2.84
%
Total securities
2,217,796

 
18,254

 
3.27
%
 
2,249,312

 
18,265

 
3.26
%
FHLB stock, at cost, and equity investments
54,216

 
377

 
2.76
%
 
54,729

 
411

 
3.01
%
Interest earning deposits
77,977

 
414

 
2.11
%
 
92,291

 
400

 
1.74
%
Federal funds sold
16,072

 
77

 
1.90
%
 
16,251

 
71

 
1.75
%
Total earning assets
5,654,566

 
59,543

 
4.18
%
 
5,700,133

 
59,031

 
4.15
%
Cash and due from banks
78,623

 
 
 
 
 
75,560

 
 
 
 
Accrued interest and other assets
477,737

 
 
 
 
 
473,142

 
 
 
 
Less:  Allowance for loan losses
(25,646
)
 
 
 
 
 
(24,558
)
 
 
 
 
Total assets
$
6,185,280

 
 
 
 
 
$
6,224,277

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
Savings deposits
$
362,405

 
258

 
0.28
%
 
$
360,340

 
208

 
0.23
%
Time deposits
1,173,672

 
4,744

 
1.60
%
 
1,175,230

 
4,303

 
1.47
%
Interest bearing demand deposits
1,953,904

 
4,495

 
0.91
%
 
1,981,427

 
4,070

 
0.82
%
Total interest bearing deposits
3,489,981

 
9,497

 
1.08
%
 
3,516,997

 
8,581

 
0.98
%
FHLB borrowings
654,153

 
3,108

 
1.88
%
 
692,386

 
3,007

 
1.74
%
Subordinated notes, net of unamortized debt issuance costs
98,346

 
1,423

 
5.74
%
 
98,306

 
1,407

 
5.74
%
Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,244

 
684

 
4.50
%
 
60,243

 
658

 
4.38
%
Other borrowings
9,651

 
30

 
1.23
%
 
9,283

 
33

 
1.43
%
Total interest bearing liabilities
4,312,375

 
14,742

 
1.36
%
 
4,377,215

 
13,686

 
1.25
%
Noninterest bearing deposits
1,064,797

 
 
 
 
 
1,045,298

 
 
 
 
Accrued expenses and other liabilities
48,699

 
 
 
 
 
50,843

 
 
 
 
Total liabilities
5,425,871

 
 
 
 
 
5,473,356

 
 
 
 
Shareholders’ equity
759,409

 
 
 
 
 
750,921

 
 
 
 
Total liabilities and shareholders’ equity
$
6,185,280

 
 
 
 
 
$
6,224,277

 
 
 
 
Net interest income (FTE)
 
 
$
44,801

 
 
 
 
 
$
45,345

 
 
Net interest margin (FTE)
 
 
 
 
3.14
%
 
 
 
 
 
3.19
%
Net interest spread (FTE)
 
 
 
 
2.82
%
 
 
 
 
 
2.90
%

(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, 2018 and June 30, 2018, loans totaling $32.5 million and $35.4 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.



Page-9


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


 
Three Months Ended
 
March 31, 2018
 
Avg Balance
 
Interest
 
Avg Yield/Rate
ASSETS
 
 
 
 
 
Loans (1)
$
3,300,506

 
$
39,401

 
4.84
%
Loans held for sale
1,543

 
11

 
2.89
%
Securities:
 
 
 
 
 
Investment securities (taxable) (2)
39,332

 
227

 
2.34
%
Investment securities (tax-exempt) (2)
805,091

 
8,000

 
4.03
%
Mortgage-backed and related securities (2)
1,557,140

 
10,894

 
2.84
%
Total securities
2,401,563

 
19,121

 
3.23
%
FHLB stock, at cost, and equity investments
67,000

 
414

 
2.51
%
Interest earning deposits
107,488

 
399

 
1.51
%
Federal funds sold
13,252

 
49

 
1.50
%
Total earning assets
5,891,352

 
59,395

 
4.09
%
Cash and due from banks
78,031

 
 
 
 
Accrued interest and other assets
493,974

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

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
Savings deposits
$
353,770

 
184

 
0.21
%
Time deposits
1,170,024

 
3,895

 
1.35
%
Interest bearing demand deposits
2,009,154

 
3,372

 
0.68
%
Total interest bearing deposits
3,532,948

 
7,451

 
0.86
%
FHLB borrowings
928,677

 
3,632

 
1.59
%
Subordinated notes, net of unamortized debt issuance costs
98,267

 
1,398

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

 
569

 
3.83
%
Other borrowings
8,103

 
11

 
0.55
%
Total interest bearing liabilities
4,628,236

 
13,061

 
1.14
%
Noninterest bearing deposits
1,016,707

 
 
 
 
Accrued expenses and other liabilities
44,015

 
 
 
 
Total liabilities
5,688,958

 
 
 
 
Shareholders’ equity
753,394

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

 
 
 
 
Net interest income (FTE)
 
 
$
46,334

 
 
Net interest margin (FTE)
 
 
 
 
3.19
%
Net interest spread (FTE)
 
 
 
 
2.95
%

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

Note: As of March 31, 2018, loans totaling $34.5 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.


Page-10


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

In the following tables we present 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
 
 
2019
 
2018
 
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
 
Mar. 31,
Reconciliation of return on average common equity
to return on average tangible common equity:
 
 
 
 
 
 
 
 
 
 
Net Income
 
$
18,817

 
$
17,381

 
$
20,303

 
$
20,203

 
$
16,251

After-tax amortization expense
 
931

 
970

 
1,010

 
1,049

 
1,089

   Adjusted net income available to common shareholders
 
$
19,748

 
$
18,351

 
$
21,313

 
$
21,252

 
$
17,340

 
 
 
 
 
 
 
 
 
 
 
Average shareholders' equity
 
$
737,221

 
$
741,369

 
$
759,409

 
$
750,921

 
$
753,394

Less: Average intangibles for the period
 
(218,438
)
 
(219,645
)
 
(220,956
)
 
(222,342
)
 
(223,708
)
   Average tangible shareholders' equity
 
$
518,783

 
$
521,724

 
$
538,453

 
$
528,579

 
$
529,686

 
 
 
 
 
 
 
 
 
 
 
Return on average tangible common equity
 
15.44
%
 
13.95
%
 
15.70
%
 
16.13
%
 
13.28
%
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of book value per share to tangible book
value per share:
 
 
 
 
 
 
 
 
 
 
Common equity at end of period
 
$
758,033

 
$
731,291

 
$
752,506

 
$
751,810

 
$
746,396

Less: Intangible assets at end of period
 
(217,716
)

(218,895
)
 
(220,125
)
 
(221,533
)
 
(222,861
)
   Tangible common shareholders' equity at end of period
 
$
540,317

 
$
512,396

 
$
532,381

 
$
530,277

 
$
523,535

 
 
 
 
 
 
 
 
 
 
 
Total assets at end of period
 
$
6,217,196

 
$
6,123,494

 
$
6,105,354

 
$
6,250,173

 
$
6,373,197

Less: Intangible assets at end of period
 
(217,716
)
 
(218,895
)
 
(220,125
)
 
(221,533
)
 
(222,861
)
   Tangible assets at end of period
 
$
5,999,480

 
$
5,904,599

 
$
5,885,229

 
$
6,028,640

 
$
6,150,336

 
 
 
 
 
 
 
 
 
 
 
Period end tangible equity to period end tangible assets
 
9.01
%
 
8.68
%
 
9.05
%
 
8.80
%
 
8.51
%
 
 
 
 
 
 
 
 
 
 
 
Common shares outstanding end of period
 
33,718

 
33,725

 
35,160

 
35,084

 
35,053

Tangible book value per common share
 
$
16.02

 
$
15.19

 
$
15.14

 
$
15.11

 
$
14.94

 
 
 
 
 
 
 
 
 
 
 
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)
 
$
41,125

 
$
42,410

 
$
42,410

 
$
43,111

 
$
44,133

Tax equivalent adjustments:
 
 
 
 
 
 
 
 
 
 
Loans
 
598

 
599

 
590

 
583

 
582

Investment securities (tax-exempt)
 
1,614

 
1,933

 
1,801

 
1,651

 
1,619

Net interest income (FTE) (1)
 
43,337

 
44,942

 
44,801

 
45,345

 
46,334

Noninterest income
 
9,538

 
10,134

 
10,022

 
11,007

 
9,610

Nonrecurring income (2)
 
171

 
(66
)
 
741

 
(304
)
 
827

Total revenue
 
$
53,046

 
$
55,010

 
$
55,564

 
$
56,048

 
$
56,771

 
 
 
 
 
 
 
 
 
 
 
Noninterest expense
 
$
29,627

 
$
30,196

 
$
28,962

 
$
29,274

 
$
31,667

Pre-tax amortization expense
 
(1,179
)
 
(1,228
)
 
(1,279
)
 
(1,328
)
 
(1,378
)
Nonrecurring expense (3)
 
18

 
(264
)
 
(507
)
 
(1,287
)
 
(1,178
)
Adjusted noninterest expense
 
$
28,466

 
$
28,704

 
$
27,176

 
$
26,659

 
$
29,111

 
 
 
 
 
 
 
 
 
 
 
Efficiency ratio
 
56.00
%
 
54.70
%
 
51.11
%
 
49.54
%
 
53.35
%
Efficiency ratio (FTE) (1)
 
53.66
%
 
52.18
%
 
48.91
%
 
47.56
%
 
51.28
%
 
 
 
 
 
 
 
 
 
 
 
Average earning assets
 
$
5,733,116

 
$
5,558,052

 
$
5,654,566

 
$
5,700,133

 
$
5,891,352

 
 
 
 
 
 
 
 
 
 
 
Net interest margin
 
2.91
%
 
3.03
%
 
2.98
%
 
3.03
%
 
3.04
%
Net interest margin (FTE) (1)
 
3.07
%
 
3.21
%
 
3.14
%
 
3.19
%
 
3.19
%
 
 
 
 
 
 
 
 
 
 
 
Net interest spread
 
2.56
%
 
2.68
%
 
2.65
%
 
2.75
%
 
2.80
%
Net interest spread (FTE) (1)
 
2.71
%
 
2.86
%
 
2.82
%
 
2.90
%
 
2.95
%

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

Page-11
(Back To Top)