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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): July 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))
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common stock, $1.25 par value per share
 
SBSI
 
NASDAQ Global Select Market
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 July 26, 2019, Southside Bancshares, Inc. issued a press release announcing its financial results for the second quarter ended June 30, 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:  July 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
SECOND QUARTER ENDED JUNE 30, 2019



Second quarter net income was $18.6 million and earnings per diluted common share were $0.55
Linked quarter loans increased $155.0 million, or 4.7%, to $3.46 billion from $3.31 billion
Linked quarter net interest margin (FTE) increased 10 basis points from 3.07% to 3.17%
Second quarter annualized return on average shareholders’ equity of 9.68% and return on average tangible common equity of 14.12% (1) 
Second quarter annualized return on average assets of 1.20%
Linked quarter nonperforming assets as a percent of total assets decreased from 0.61% to 0.46%

Tyler, Texas, (July 26, 2019) Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the quarter ended June 30, 2019. Southside reported net income of $18.6 million for the three months ended June 30, 2019, a decrease of $1.6 million, or 7.9%, compared to $20.2 million for the same period in 2018. Earnings per diluted common share decreased $0.02, or 3.5%, to $0.55 for the three months ended June 30, 2019, from $0.57 for the same period in 2018. The annualized return on average shareholders’ equity for the three months ended June 30, 2019 was 9.68%, compared to 10.79% for the same period in 2018.  The annualized return on average assets was 1.20% for the three months ended June 30, 2019, compared to 1.30% for the same period in 2018.

“I am extremely pleased to report that Southside had an outstanding second quarter highlighted by a linked quarter increase in loans of $155 million, increases in net interest margin and spread of ten basis points, and a 24.6% decrease in linked quarter nonperforming assets as a percentage of assets to 0.46%”, stated Lee R. Gibson, President and Chief Executive Officer of Southside. “The strong loan growth resulted from a combination of closing and funding several loans that had been in our pipeline for some time and a slowdown in large prepayments.”
“The ten basis point increase in the net interest margin and spread on a linked quarter basis was due to an increase in average loans as a percent of earning assets and in part to a nonrecurring loss on a fair value hedge interest rate swap of $507,000 recorded in net interest income during the first quarter. We expect loan revenue during the third quarter will benefit from the full impact of the loan growth that we experienced during the second quarter. During the second quarter, we recorded approximately $2.5 million in provision expense, of which approximately $1.3 million was directly related to the second quarter loan growth. Economic conditions in our East Texas markets continue to be good while economic conditions in our DFW and Austin markets remain strong.”
“I’m also pleased to share that we are preparing to expand our footprint. On July 23, 2019, we filed for regulatory approval to open a retail in-store branch in Kingwood, Texas, located in Montgomery County. Kingwood is a community located northeast of Houston, approximately 15 miles south of our Splendora branch. We anticipate opening this new location in November 2019 pending regulatory approval.”

Operating Results for the Three Months Ended June 30, 2019
Net income was $18.6 million for the three months ended June 30, 2019 compared with $20.2 million for the same period in 2018, a decrease of $1.6 million, or 7.9%. Net income per diluted common share was $0.55 for the three months ended June 30, 2019 compared with $0.57 for the same period in 2018, a decrease of 3.5%. The decrease in net income was largely driven by the increase in provision for loan losses, noninterest expense and income tax expense, partially offset by an increase in noninterest income. Annualized returns on average assets and average shareholders’ equity for the three months ended June 30, 2019 were 1.20% and 9.68%, respectively.  Our efficiency ratio (FTE) was 51.44% (1) for the three months ended June 30, 2019, an improvement from 53.66% for the three months ended March 31, 2019.
Net interest income before provision for loan losses for the three months ended June 30, 2019 and 2018 was $43.1 million. Linked quarter, net interest income before provision for loan losses increased $2.0 million, or 4.9%, to $43.1 million, compared with $41.1 million during the three months ended March 31, 2019. The increase in net interest income for the linked quarter was due to the


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increase in interest income on our interest earning assets, primarily a result of the mix in our earning assets during the second quarter ended June 30, 2019.
Our tax equivalent net interest margin was 3.17% for the three months ended June 30, 2019 compared with 3.19% for the same period in 2018. The decrease was primarily due to the higher rates paid on interest bearing liabilities. Our tax equivalent net interest margin increased 10 basis points when compared to 3.07% for the three months ended March 31, 2019. This increase was due to an increase in average loans as a percent of earning assets and in part to a nonrecurring loss on a fair value hedge interest rate swap of $507,000 recorded in net interest income during the first quarter.
Noninterest income was $11.3 million for the three months ended June 30, 2019, an increase compared with $11.0 million for the same period in 2018. The increase was primarily due to a net gain on sale of securities, an increase in deposit services income and other noninterest income, partially offset by decreases in bank owned life insurance income and trust fees. On a linked quarter basis, noninterest income increased $1.7 million, or 18.0%, primarily due to an increase in deposit services income, an increase in net gain on sale of securities, an increase in swap fee income and a nonrecurring partial loss on fair value hedge interest rate swaps during the first quarter of 2019.
Noninterest expense was $29.7 million for the three months ended June 30, 2019 compared with $29.3 million for the same period in 2018, an increase of $0.4 million, or 1.5%. The increase was primarily due to an increase in salaries and employee benefits and other noninterest expense, partially offset by the decrease in acquisition expense. On a linked quarter basis, noninterest expense increased $0.1 million, or 0.2%, compared with the three months ended March 31, 2019.
Income tax expense increased $0.2 million for the three months ended June 30, 2019 compared to the same period in 2018. On a linked quarter basis, income tax expense increased $0.4 million. Our effective tax rate (“ETR”) increased to 16.1% for the three months ended June 30, 2019 compared to 14.3% for the three months ended March 31, 2019 and June 30, 2018. The higher ETR for the period was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income.
Operating Results for the Six Months Ended June 30, 2019
Net income was $37.4 million for the six months ended June 30, 2019 compared with $36.5 million for the same period in 2018, an increase of $1.0 million, or 2.7%. Net income per diluted common share was $1.11 for the six months ended June 30, 2019 compared with $1.04 for the same period in 2018, an increase of 6.7%. The increase in net income was largely driven by the increase in interest income, as well as the decrease in provision for loan losses and noninterest expense, partially offset by an increase in interest expense and income tax expense. Annualized returns on average assets and average shareholders’ equity for the six months ended June 30, 2019 were 1.20% and 10.00%, respectively.  Our efficiency ratio (FTE) was 52.53% (1) for the six months ended June 30, 2019.
Net interest income before provision for loan losses for the six months ended June 30, 2019 was $84.3 million compared with $87.2 million during the same period in 2018, a decrease of $3.0 million, or 3.4%. The decrease in net interest income was due to higher funding costs of our interest bearing liabilities partially offset by the increase in interest income on our interest earning assets, a result of higher rates and a shift in the mix of earning assets.
Our tax equivalent net interest margin was 3.12% for the six months ended June 30, 2019 compared with 3.19% for the same period in 2018. The decrease was primarily due to the higher rates paid on interest bearing liabilities.
Noninterest income was $20.8 million for the six months ended June 30, 2019, a slight increase compared with $20.6 million for the same period in 2018. The increase was primarily due to a net gain on sale of securities and an increase in deposit services income, partially offset by decreases in bank owned life insurance, trust fees and other noninterest income.
Noninterest expense was $59.3 million for the six months ended June 30, 2019 compared with $60.9 million for the same period in 2018, a decrease of $1.6 million, or 2.6%. The decrease was primarily due to a decrease in acquisition expense, net occupancy expense and amortization of intangibles, partially offset by increases in salaries and employee benefits, professional fees and software and data processing expense.
Income tax expense increased $1.3 million for the six months ended June 30, 2019 compared to the same period in 2018. Our ETR was approximately 15.2% and 13.0% for the six months ended June 30, 2019 and 2018, respectively.
Balance Sheet Data
At June 30, 2019, we had $6.37 billion in total assets compared with $6.12 billion at December 31, 2018 and $6.22 billion at March 31, 2019.
Loans at June 30, 2019 were $3.46 billion, an increase of $147.3 million, or 4.4%, compared with $3.31 billion at December 31, 2018. Linked quarter loans increased $155.0 million, or 4.7%, from $3.31 billion at March 31, 2019. The linked quarter net increase in our loans consisted of increases of $146.9 million of commercial real estate loans, $21.5 million of commercial loans,

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$14.0 million of municipal loans and $0.6 million of loans to individuals, partially offset by decreases of $23.8 million of construction loans and $4.1 million of 1-4 family residential loans.
Securities at June 30, 2019 were $2.24 billion, an increase of $83.5 million, or 3.9%, compared with $2.15 billion at December 31, 2018. Linked quarter securities increased $212.2 million, or 10.5%, from $2.02 billion at March 31, 2019.
Deposits at June 30, 2019 were $4.48 billion, an increase of $54.2 million, or 1.2%, compared with $4.43 billion at December 31, 2018. Linked quarter deposits decreased $88.6 million, or 1.9%, from $4.57 billion at March 31, 2019 primarily due to a decrease in brokered and public fund deposits.
Asset Quality
Nonperforming assets at June 30, 2019 were $29.4 million, or 0.46% of total assets, a decrease of $13.5 million, or 31.6%, compared to $42.9 million, or 0.70% of total assets, at December 31, 2018, and $38.1 million, or 0.61% of total assets, at March 31, 2019. During the three months ended June 30, 2019, our nonaccrual loans decreased $1.3 million and our accruing loans past due more than 90 days decreased $7.9 million due to one commercial real estate loan relationship that paid in full.
The allowance for loan losses at June 30, 2019 was $24.7 million, or 0.71% of total loans, compared to $27.0 million, or 0.82% of total loans at December 31, 2018, and $24.2 million, or 0.73% of total loans at March 31, 2019. The increase in the allowance for the linked quarter was primarily the result of growth in the loan portfolio.
For the three months ended June 30, 2019, we recorded provision for loan losses of $2.5 million compared with a $1.3 million provision expense for the three months ended June 30, 2018 and a partial reversal of provision of $0.9 million for the three months ended March 31, 2019. The provision for loan losses for the six months ended June 30, 2019 was $1.6 million compared with $5.0 million for the six months ended June 30, 2018.
Net charge-offs were $2.0 million for the three months ended June 30, 2019 compared with $0.4 million for the three months ended June 30, 2018 and $1.9 million for the three months ended March 31, 2019. Net charge-offs for the second quarter of 2019 were primarily related to a previously reserved write-down on a large nonaccrual commercial real estate loan. Net charge-offs were $3.9 million for the six months ended June 30, 2019 compared with $0.7 million for the six months ended June 30, 2018.
Dividend
Southside Bancshares, Inc. declared a second quarter cash dividend of $0.31 per share on May 9, 2019, which was paid on June 6, 2019, to all shareholders of record as of May 23, 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.


Conference Call
Southside's management team will host a conference call to discuss its second quarter ended June 30, 2019 financial results on Friday, July 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 9381487 or by identifying “Southside Bancshares, Inc., Second 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 July 26, 2019 through August 7, 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 six months ended June 30, 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.

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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 $6.37 billion in assets as of June 30, 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 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 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.

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


 
As of
 
2019
 
2018
 
June 30,
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
ASSETS
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
77,319

 
$
81,981

 
$
87,375

 
$
85,103

 
$
78,534

Interest earning deposits
54,642

 
184,612

 
23,884

 
70,685

 
138,685

Federal funds sold
560

 
3,350

 
9,460

 
18,284

 
14,850

Securities available for sale, at estimated fair value
2,088,787

 
1,876,255

 
1,989,436

 
1,939,277

 
2,037,994

Securities held to maturity, at carrying value
147,091

 
147,431

 
162,931

 
163,365

 
164,276

Total securities
2,235,878

 
2,023,686

 
2,152,367

 
2,102,642

 
2,202,270

Federal Home Loan Bank stock, at cost
44,718

 
35,269

 
32,583

 
32,291

 
42,994

Loans held for sale
1,812

 
384

 
601

 
954

 
4,566

Loans
3,460,143

 
3,305,110

 
3,312,799

 
3,274,524

 
3,270,883

Less: Allowance for loan losses
(24,705
)
 
(24,155
)
 
(27,019
)
 
(26,092
)
 
(25,072
)
Net loans
3,435,438

 
3,280,955

 
3,285,780

 
3,248,432

 
3,245,811

Premises & equipment, net
140,105

 
138,290

 
135,972

 
133,939

 
132,578

Goodwill
201,116

 
201,116

 
201,116

 
201,116

 
201,246

Other intangible assets, net
15,471

 
16,600

 
17,779

 
19,009

 
20,287

Bank owned life insurance
99,294

 
98,704

 
98,160

 
97,611

 
97,059

Other assets
66,517

 
152,249

 
78,417

 
95,288

 
71,293

Total assets
$
6,372,870

 
$
6,217,196

 
$
6,123,494

 
$
6,105,354

 
$
6,250,173

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Noninterest bearing deposits
$
1,028,861

 
$
1,038,116

 
$
994,680

 
$
1,033,572

 
$
1,038,907

Interest bearing deposits
3,450,395

 
3,529,777

 
3,430,350

 
3,519,940

 
3,469,834

Total deposits
4,479,256

 
4,567,893

 
4,425,030

 
4,553,512

 
4,508,741

Other borrowings and Federal Home Loan Bank borrowings
849,821

 
628,498

 
755,875

 
570,242

 
784,754

Subordinated notes, net of unamortized debt
issuance costs
98,490

 
98,448

 
98,407

 
98,366

 
98,326

Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,248

 
60,247

 
60,246

 
60,244

 
60,243

Other liabilities
97,290

 
104,077

 
52,645

 
70,484

 
46,299

          Total liabilities
5,585,105

 
5,459,163

 
5,392,203

 
5,352,848

 
5,498,363

Shareholders' equity
787,765

 
758,033

 
731,291

 
752,506

 
751,810

Total liabilities and shareholders' equity
$
6,372,870

 
$
6,217,196

 
$
6,123,494

 
$
6,105,354

 
$
6,250,173




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


 
Three Months Ended
 
2019
 
2018
 
June 30,
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
Income Statement:
 
 
 
 
 
 
 
 
 
Total interest income
$
60,672

 
$
59,027

 
$
58,022

 
$
57,152

 
$
56,797

Total interest expense
17,541

 
17,902

 
15,612

 
14,742

 
13,686

Net interest income
43,131

 
41,125

 
42,410

 
42,410

 
43,111

Provision for loan losses
2,506

 
(918
)
 
2,446

 
975

 
1,281

Net interest income after provision for loan losses
40,625

 
42,043

 
39,964

 
41,435

 
41,830

Noninterest income
 
 
 
 
 
 
 
 
 
Deposit services
6,652

 
5,986

 
6,325

 
6,317

 
6,261

Net gain (loss) on sale of securities available for sale
416

 
256

 
61

 
(741
)
 
(332
)
Gain on sale of loans
181

 
93

 
101

 
303

 
173

Trust fees
1,520

 
1,541

 
1,573

 
1,568

 
1,931

Bank owned life insurance
559

 
544

 
554

 
552

 
1,185

Brokerage services
477

 
517

 
499

 
532

 
506

Other
1,449

 
601

 
1,021

 
1,491

 
1,283

Total noninterest income
11,254

 
9,538

 
10,134

 
10,022

 
11,007

Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
17,891

 
18,046

 
17,823

 
17,628

 
16,633

Net occupancy
3,289

 
3,175

 
3,475

 
3,396

 
3,360

Acquisition expense

 

 
118

 
437

 
1,026

Advertising, travel & entertainment
733

 
847

 
786

 
648

 
775

ATM expense
246

 
180

 
250

 
251

 
243

Professional fees
1,069

 
1,314

 
1,189

 
824

 
952

Software and data processing
1,086

 
1,076

 
1,057

 
977

 
939

Communications
489

 
487

 
477

 
354

 
478

FDIC insurance
437

 
422

 
455

 
435

 
484

Amortization of intangibles
1,129

 
1,179

 
1,228

 
1,279

 
1,328

Other
3,331

 
2,901

 
3,338

 
2,733

 
3,056

Total noninterest expense
29,700

 
29,627

 
30,196

 
28,962

 
29,274

Income before income tax expense
22,179

 
21,954

 
19,902

 
22,495

 
23,563

Income tax expense
3,569

 
3,137

 
2,521

 
2,192

 
3,360

Net income
$
18,610

 
$
18,817

 
$
17,381

 
$
20,303

 
$
20,203

 
 
 
 
 
 
 
 
 
 
Common share data:
 
 
 
Weighted-average basic shares outstanding
33,726

 
33,697

 
34,611

 
35,114

 
35,062

Weighted-average diluted shares outstanding
33,876

 
33,846

 
34,748

 
35,288

 
35,233

Common shares outstanding end of period
33,749

 
33,718

 
33,725

 
35,160

 
35,084

Net income per common share
 
 
 
 
 
 
 
 
 
Basic
$
0.55

 
$
0.56

 
$
0.50

 
$
0.58

 
$
0.58

Diluted
0.55

 
0.56

 
0.50

 
0.58

 
0.57

Book value per common share
23.34

 
22.48

 
21.68

 
21.40

 
21.43

Tangible book value per common share (1)
16.92

 
16.02

 
15.19

 
15.14

 
15.11

Cash dividends paid per common share
0.31

 
0.30

 
0.32

 
0.30

 
0.30

 
 
 
 
 
 
 
 
 
 
Selected Performance Ratios:
 
 
 
 
 
 
 
 
 
Return on average assets
1.20
%
 
1.21
%
 
1.14
%
 
1.30
%
 
1.30
%
Return on average shareholders’ equity
9.68

 
10.35

 
9.30

 
10.61

 
10.79

Return on average tangible common equity (1)
14.12

 
15.44

 
13.95

 
15.70

 
16.13

Average yield on earning assets (FTE) (1)
4.42

 
4.33

 
4.32

 
4.18

 
4.15

Average rate on interest bearing liabilities
1.61

 
1.62

 
1.46

 
1.36

 
1.25

Net interest spread (FTE) (1)
2.81

 
2.71

 
2.86

 
2.82

 
2.90

Net interest margin (FTE) (1)
3.17

 
3.07

 
3.21

 
3.14

 
3.19

Average earning assets to average interest bearing liabilities
128.99

 
127.70

 
131.07

 
131.12

 
130.22

Noninterest expense to average total assets
1.91

 
1.91

 
1.98

 
1.86

 
1.89

Efficiency ratio (FTE) (1)
51.44

 
53.66

 
52.18

 
48.91

 
47.56

(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 Summary (Unaudited)
(Dollars in thousands)


 
Three Months Ended
 
2019
 
2018
 
June 30,
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
Nonperforming assets:
$
29,363

 
$
38,111

 
$
42,906

 
$
39,638

 
$
42,423

Nonaccrual loans (1)
16,376

 
17,691

 
35,770

 
32,526

 
35,351

Accruing loans past due more than 90 days (1)

 
7,927

 

 

 
7

Restructured loans (2)
11,918

 
11,490

 
5,930

 
5,699

 
5,860

Other real estate owned
1,069

 
978

 
1,206

 
1,413

 
1,137

Repossessed assets

 
25

 

 

 
68

 
 
 
 
 
 
 
 
 
 
Asset Quality Ratios:
 
 
 
 
 
 
 
 
 
Nonaccruing loans to total loans
0.47
%
 
0.54
%
 
1.08
%
 
0.99
 %
 
1.08
%
Allowance for loan losses to nonaccruing loans
150.86

 
136.54

 
75.54

 
80.22

 
70.92

Allowance for loan losses to nonperforming assets
84.14

 
63.38

 
62.97

 
65.83

 
59.10

Allowance for loan losses to total loans
0.71

 
0.73

 
0.82

 
0.80

 
0.77

Nonperforming assets to total assets
0.46

 
0.61

 
0.70

 
0.65

 
0.68

Net charge-offs (recoveries) to average loans
0.23

 
0.24

 
0.18

 
(0.01
)
 
0.05

 
 
 
 
 
 
 
 
 
 
Capital Ratios:
 
 
 
 
 
 
 
 
 
Shareholders’ equity to total assets
12.36

 
12.19

 
11.94

 
12.33

 
12.03

Common equity tier 1 capital
14.02

 
14.38

 
14.77

 
15.90

 
15.49

Tier 1 risk-based capital
15.46

 
15.88

 
16.29

 
17.43

 
17.02

Total risk-based capital
18.52

 
19.06

 
19.59

 
20.75

 
20.31

Tier 1 leverage capital
10.48

 
10.18

 
10.64

 
11.06

 
10.76

Period end tangible equity to period end tangible assets (3)
9.28

 
9.01

 
8.68

 
9.05

 
8.80

Average shareholders’ equity to average total assets
12.36

 
11.70

 
12.23

 
12.28

 
12.06


(1)
Excludes purchased credit impaired ("PCI") loans measured at fair value at acquisition if the timing and amount of cash flows expected to be collected from those sales can be reasonably estimated.
(2)
Includes $0.8 million, $0.7 million, $3.1 million, $3.2 million and $2.9 million in PCI loans restructured as of June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, and June 30, 2018, respectively.
(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.
 

Loan Portfolio Composition
The following table sets forth loan totals by category for the periods presented (in thousands):
 
Three Months Ended
 
2019
 
2018
 
June 30,
 
Mar. 31,
 
Dec. 31,
 
Sept. 30,
 
June 30,
Real Estate Loans:
 
 
 
 
 
 
 
 
 
Construction
$
579,565

 
$
603,411

 
$
507,732

 
$
484,254

 
$
487,286

1-4 Family Residential
782,073

 
786,198

 
794,499

 
791,274

 
791,359

Commercial
1,251,248

 
1,104,378

 
1,194,118

 
1,218,714

 
1,245,936

Commercial Loans
389,521

 
367,995

 
356,649

 
322,873

 
282,723

Municipal Loans
357,028

 
343,026

 
353,370

 
344,792

 
345,595

Loans to Individuals
100,708

 
100,102

 
106,431

 
112,617

 
117,984

Total Loans
$
3,460,143

 
$
3,305,110

 
$
3,312,799

 
$
3,274,524

 
$
3,270,883




Page-7


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


 
Six Months Ended
 
2019
 
2018
 
June 30,
 
June 30,
Income Statement:
 
 
 
Total interest income
$
119,699

 
$
113,991

Total interest expense
35,443

 
26,747

Net interest income
84,256

 
87,244

Provision for loan losses
1,588

 
5,016

Net interest income after provision for loan losses
82,668

 
82,228

Noninterest income
 
 
 
Deposit services
12,638

 
12,440

Net gain (loss) on sale of securities available for sale
672

 
(1,159
)
Gain on sale of loans
274

 
288

Trust fees
3,061

 
3,691

Bank owned life insurance
1,103

 
1,817

Brokerage services
994

 
956

Other
2,050

 
2,584

Total noninterest income
20,792

 
20,617

Noninterest expense
 
 
 
Salaries and employee benefits
35,937

 
35,192

Net occupancy
6,464

 
6,943

Acquisition expense

 
1,858

Advertising, travel & entertainment
1,580

 
1,460

ATM expense
426

 
589

Professional fees
2,383

 
2,022

Software and data processing
2,162

 
1,962

Communications
976

 
1,016

FDIC insurance
859

 
981

Amortization of intangibles
2,308

 
2,706

Other
6,232

 
6,212

Total noninterest expense
59,327

 
60,941

Income before income tax expense
44,133

 
41,904

Income tax expense
6,706

 
5,450

Net income
$
37,427

 
$
36,454

 
 
 
 
Common share data:
 
 
 
Weighted-average basic shares outstanding
33,711

 
35,042

Weighted-average diluted shares outstanding
33,862

 
35,217

Common shares outstanding end of period
33,749

 
35,084

Net income per common share
 
 
 
Basic
$
1.11

 
$
1.04

Diluted
1.11

 
1.04

Book value per common share
23.34

 
21.43

Tangible book value per common share (1)
16.92

 
15.11

Cash dividends paid per common share
0.61

 
0.58

 
 
 
 
Selected Performance Ratios:
 
 
 
Return on average assets
1.20
%
 
1.16
%
Return on average shareholders’ equity
10.00

 
9.77

Return on average tangible common equity (1)
14.75

 
14.71

Average yield on earning assets (FTE) (1)
4.37

 
4.12

Average rate on interest bearing liabilities
1.61

 
1.20

Net interest spread (FTE) (1)
2.76

 
2.92

Net interest margin (FTE) (1)
3.12

 
3.19

Average earning assets to average interest bearing liabilities
128.34

 
128.72

Noninterest expense to average total assets
1.91

 
1.94

Efficiency ratio (FTE) (1)
52.53

 
49.43

(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-8


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


 
Six Months Ended
 
2019
 
2018
 
June 30,
 
June 30,
Nonperforming assets:
$
29,363

 
$
42,423

Nonaccrual loans (1)
16,376

 
35,351

Accruing loans past due more than 90 days (1)

 
7

Restructured loans (2)
11,918

 
5,860

Other real estate owned
1,069

 
1,137

Repossessed assets

 
68

 
 
 
 
Asset Quality Ratios:
 
 
 
Nonaccruing loans to total loans
0.47
%
 
1.08
%
Allowance for loan losses to nonaccruing loans
150.86

 
70.92

Allowance for loan losses to nonperforming assets
84.14

 
59.10

Allowance for loan losses to total loans
0.71

 
0.77

Nonperforming assets to total assets
0.46

 
0.68

Net charge-offs (recoveries) to average loans
0.24

 
0.04

 
 
 
 
Capital Ratios:
 
 
 
Shareholders’ equity to total assets
12.36

 
12.03

Common equity tier 1 capital
14.02

 
15.49

Tier 1 risk-based capital
15.46

 
17.02

Total risk-based capital
18.52

 
20.31

Tier 1 leverage capital
10.48

 
10.76

Period end tangible equity to period end tangible assets (3)
9.28

 
8.80

Average shareholders’ equity to average total assets
12.03

 
11.88


(1)
Excludes PCI loans measured at fair value at acquisition if the timing and amount of cash flows expected to be collected from those sales can be reasonably estimated.
(2)
Includes $0.8 million and $2.9 million in PCI loans restructured as of June 30, 2019 and June 30, 2018, respectively.
(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.


Page-9


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
 
June 30, 2019
 
March 31, 2019
 
Avg Balance
 
Interest
 
Avg Yield/Rate
 
Avg Balance
 
Interest
 
Avg Yield/Rate
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Loans (1)
$
3,387,323

 
$
43,559

 
5.16
%
 
$
3,296,665

 
$
42,210

 
5.19
%
Loans held for sale
1,965

 
21

 
4.29
%
 
611

 
7

 
4.65
%
Securities:
 
 
 
 
 
 
 
 
 
 
 
Taxable investment securities (2)
3,000

 
27

 
3.61
%
 
3,000

 
28

 
3.79
%
Tax-exempt investment securities (2)
459,996

 
4,513

 
3.94
%
 
659,187

 
5,732

 
3.53
%
Mortgage-backed and related securities (2)
1,680,109

 
13,246

 
3.16
%
 
1,647,564

 
12,474

 
3.07
%
Total securities
2,143,105

 
17,786

 
3.33
%
 
2,309,751

 
18,234

 
3.20
%
Federal Home Loan Bank stock, at cost, and equity investments
52,311

 
440

 
3.37
%
 
53,764

 
355

 
2.68
%
Interest earning deposits
66,017

 
411

 
2.50
%
 
64,690

 
386

 
2.42
%
Federal funds sold
3,365

 
39

 
4.65
%
 
7,635

 
47

 
2.50
%
Total earning assets
5,654,086

 
62,256

 
4.42
%
 
5,733,116

 
61,239

 
4.33
%
Cash and due from banks
78,757

 
 
 
 
 
83,147

 
 
 
 
Accrued interest and other assets
534,835

 
 
 
 
 
513,738

 
 
 
 
Less:  Allowance for loan losses
(24,838
)
 
 
 
 
 
(27,060
)
 
 
 
 
Total assets
$
6,242,840

 
 
 
 
 
$
6,302,941

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
Savings accounts
$
365,205

 
262

 
0.29
%
 
$
360,664

 
258

 
0.29
%
Certificates of deposits
1,119,464

 
5,861

 
2.10
%
 
1,154,203

 
5,697

 
2.00
%
Interest bearing demand accounts
1,969,593

 
5,334

 
1.09
%
 
1,982,891

 
5,286

 
1.08
%
Total interest bearing deposits
3,454,262

 
11,457

 
1.33
%
 
3,497,758

 
11,241

 
1.30
%
Federal Home Loan Bank borrowings
755,748

 
3,899

 
2.07
%
 
816,389

 
4,457

 
2.21
%
Subordinated notes, net of unamortized debt issuance costs
98,469

 
1,410

 
5.74
%
 
98,428

 
1,400

 
5.77
%
Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,247

 
718

 
4.78
%
 
60,246

 
729

 
4.91
%
Other borrowings
14,530

 
57

 
1.57
%
 
16,788

 
75

 
1.81
%
Total interest bearing liabilities
4,383,256

 
17,541

 
1.61
%
 
4,489,609

 
17,902

 
1.62
%
Noninterest bearing deposits
1,014,746

 
 
 
 
 
986,343

 
 
 
 
Accrued expenses and other liabilities
73,494

 
 
 
 
 
89,768

 
 
 
 
Total liabilities
5,471,496

 
 
 
 
 
5,565,720

 
 
 
 
Shareholders’ equity
771,344

 
 
 
 
 
737,221

 
 
 
 
Total liabilities and shareholders’ equity
$
6,242,840

 
 
 
 
 
$
6,302,941

 
 
 
 
Net interest income (FTE)
 
 
$
44,715

 
 
 
 
 
$
43,337

 
 
Net interest margin (FTE)
 
 
 
 
3.17
%
 
 
 
 
 
3.07
%
Net interest spread (FTE)
 
 
 
 
2.81
%
 
 
 
 
 
2.71
%

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

Note: As of June 30, 2019 and March 31, 2019, loans totaling $16.4 million and $17.7 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-10


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


 
Three Months Ended
 
December 31, 2018
 
September 30, 2018
 
Avg Balance
 
Interest
 
Avg Yield/Rate
 
Avg Balance
 
Interest
 
Avg Yield/Rate
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Loans (1)
$
3,289,840

 
$
41,320

 
4.98
%
 
$
3,286,664

 
$
40,396

 
4.88
%
Loans held for sale
633

 
8

 
5.01
%
 
1,841

 
25

 
5.39
%
Securities:
 
 
 
 
 
 
 
 
 
 
 
Taxable investment securities (2)
13,066

 
103

 
3.13
%
 
4,285

 
36

 
3.33
%
Tax-exempt investment securities (2)
722,162

 
7,828

 
4.30
%
 
795,397

 
8,132

 
4.06
%
Mortgage-backed and related securities (2)
1,434,982

 
10,394

 
2.87
%
 
1,418,114

 
10,086

 
2.82
%
Total securities
2,170,210

 
18,325

 
3.35
%
 
2,217,796

 
18,254

 
3.27
%
Federal Home Loan Bank stock, at cost, and equity investments
44,304

 
393

 
3.52
%
 
54,216

 
377

 
2.76
%
Interest earning deposits
36,098

 
411

 
4.52
%
 
77,977

 
414

 
2.11
%
Federal funds sold
16,967

 
97

 
2.27
%
 
16,072

 
77

 
1.90
%
Total earning assets
5,558,052

 
60,554

 
4.32
%
 
5,654,566

 
59,543

 
4.18
%
Cash and due from banks
79,544

 
 
 
 
 
78,623

 
 
 
 
Accrued interest and other assets
452,257

 
 
 
 
 
477,737

 
 
 
 
Less:  Allowance for loan losses
(26,231
)
 
 
 
 
 
(25,646
)
 
 
 
 
Total assets
$
6,063,622

 
 
 
 
 
$
6,185,280

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
Savings accounts
$
361,407

 
257

 
0.28
%
 
$
362,405

 
258

 
0.28
%
Certificates of deposit
1,123,101

 
5,170

 
1.83
%
 
1,173,672

 
4,744

 
1.60
%
Interest bearing demand accounts
1,968,786

 
4,908

 
0.99
%
 
1,953,904

 
4,495

 
0.91
%
Total interest bearing deposits
3,453,294

 
10,335

 
1.19
%
 
3,489,981

 
9,497

 
1.08
%
Federal Home Loan Bank borrowings
612,134

 
3,066

 
1.99
%
 
654,153

 
3,108

 
1.88
%
Subordinated notes, net of unamortized debt issuance costs
98,385

 
1,431

 
5.77
%
 
98,346

 
1,423

 
5.74
%
Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,245

 
699

 
4.60
%
 
60,244

 
684

 
4.50
%
Other borrowings
16,405

 
81

 
1.96
%
 
9,651

 
30

 
1.23
%
Total interest bearing liabilities
4,240,463

 
15,612

 
1.46
%
 
4,312,375

 
14,742

 
1.36
%
Noninterest bearing deposits
1,034,556

 
 
 
 
 
1,064,797

 
 
 
 
Accrued expenses and other liabilities
47,234

 
 
 
 
 
48,699

 
 
 
 
Total liabilities
5,322,253

 
 
 
 
 
5,425,871

 
 
 
 
Shareholders’ equity
741,369

 
 
 
 
 
759,409

 
 
 
 
Total liabilities and shareholders’ equity
$
6,063,622

 
 
 
 
 
$
6,185,280

 
 
 
 
Net interest income (FTE)
 
 
$
44,942

 
 
 
 
 
$
44,801

 
 
Net interest margin (FTE)
 
 
 
 
3.21
%
 
 
 
 
 
3.14
%
Net interest spread (FTE)
 
 
 
 
2.86
%
 
 
 
 
 
2.82
%

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

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



Page-11


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


 
Three Months Ended
 
June 30, 2018
 
Avg Balance
 
Interest
 
Avg Yield/Rate
ASSETS
 
 
 
 
 
Loans (1)
$
3,285,756

 
$
39,865

 
4.87
%
Loans held for sale
1,794

 
19

 
4.25
%
Securities:
 
 
 
 
 
Taxable investment securities (2)
6,891

 
51

 
2.97
%
Tax-exempt investment securities (2)
802,611

 
8,004

 
4.00
%
Mortgage-backed and related securities (2)
1,439,810

 
10,210

 
2.84
%
Total securities
2,249,312

 
18,265

 
3.26
%
Federal Home Loan Bank stock, at cost, and equity investments
54,729

 
411

 
3.01
%
Interest earning deposits
92,291

 
400

 
1.74
%
Federal funds sold
16,251

 
71

 
1.75
%
Total earning assets
5,700,133

 
59,031

 
4.15
%
Cash and due from banks
75,560

 
 
 
 
Accrued interest and other assets
473,142

 
 
 
 
Less:  Allowance for loan losses
(24,558
)
 
 
 
 
Total assets
$
6,224,277

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
Savings accounts
$
360,340

 
208

 
0.23
%
Certificates of deposit
1,175,230

 
4,303

 
1.47
%
Interest bearing demand accounts
1,981,427

 
4,070

 
0.82
%
Total interest bearing deposits
3,516,997

 
8,581

 
0.98
%
Federal Home Loan Bank borrowings
692,386

 
3,007

 
1.74
%
Subordinated notes, net of unamortized debt issuance costs
98,306

 
1,407

 
5.74
%
Trust preferred subordinated debentures, net of unamortized debt issuance costs
60,243

 
658

 
4.38
%
Other borrowings
9,283

 
33

 
1.43
%
Total interest bearing liabilities
4,377,215

 
13,686

 
1.25
%
Noninterest bearing deposits
1,045,298

 
 
 
 
Accrued expenses and other liabilities
50,843

 
 
 
 
Total liabilities
5,473,356

 
 
 
 
Shareholders’ equity
750,921

 
 
 
 
Total liabilities and shareholders’ equity
$
6,224,277

 
 
 
 
Net interest income (FTE)
 
 
$
45,345

 
 
Net interest margin (FTE)
 
 
 
 
3.19
%
Net interest spread (FTE)
 
 
 
 
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 June 30, 2018, loans totaling $35.4 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-12


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


 
Six Months Ended
 
June 30, 2019
 
June 30, 2018
 
Avg Balance
 
Interest
 
Avg Yield/Rate
 
Avg Balance
 
Interest
 
Avg Yield/Rate
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Loans (1)
$
3,342,244

 
$
85,769

 
5.17
%
 
$
3,293,090

 
$
79,266

 
4.85
%
Loans held for sale
1,292

 
28

 
4.37
%
 
1,669

 
30

 
3.62
%
Securities:
 
 
 
 
 
 
 
 
 
 
 
Investment securities (taxable) (2)
3,000

 
55

 
3.70
%
 
23,022

 
278

 
2.44
%
Investment securities (tax-exempt) (2)
559,041

 
10,245

 
3.70
%
 
803,844

 
16,004

 
4.01
%
Mortgage-backed and related securities (2)
1,663,926

 
25,720

 
3.12
%
 
1,498,151

 
21,104

 
2.84
%
Total securities
2,225,967

 
36,020

 
3.26
%
 
2,325,017

 
37,386

 
3.24
%
Federal Home Loan Bank stock, at cost, and other investments
53,034

 
795

 
3.02
%
 
60,831

 
825

 
2.73
%
Interest earning deposits
65,357

 
797

 
2.46
%
 
99,848

 
799

 
1.61
%
Federal funds sold
5,489

 
86

 
3.16
%
 
14,759

 
120

 
1.64
%
Total earning assets
5,693,383

 
123,495

 
4.37
%
 
5,795,214

 
118,426

 
4.12
%
Cash and due from banks
80,940

 
 
 
 
 
76,789

 
 
 
 
Accrued interest and other assets
523,926

 
 
 
 
 
483,086

 
 
 
 
Less:  Allowance for loan losses
(25,943
)
 
 
 
 
 
(22,791
)
 
 
 
 
Total assets
$
6,272,306

 
 
 
 
 
$
6,332,298

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
Savings deposits
$
362,947

 
520

 
0.29
%
 
$
357,073

 
392

 
0.22
%
Time deposits
1,136,738

 
11,558

 
2.05
%
 
1,172,658

 
8,198

 
1.41
%
Interest bearing demand deposits
1,976,205

 
10,620

 
1.08
%
 
1,995,214

 
7,442