IR Menu

Press Release

Southside Bancshares, Inc. Announces Financial Results for the Three Months Ended March 31, 2018

Company Release - 5/1/2018 6:30 AM ET

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

Southside reported net income of $16.3 million for the three months ended March 31, 2018, an increase of $1.3 million, or 8.4%, compared to $15.0 million for the same period in 2017.  Earnings per diluted common share decreased $0.05, or 9.8%, to $0.46 for the three months ended March 31, 2018, from $0.51 for the same period in 2017.

The return on average shareholders’ equity for the three months ended March 31, 2018 was 8.75%, compared to 11.57% for the same period in 2017.  The return on average assets was 1.02% for the three months ended March 31, 2018, compared to 1.08% for the same period in 2017.

“Overall, our credit quality remains good, however during the first quarter we placed two commercial real estate loan relationships totaling approximately $30 million on nonaccrual,” stated Lee R. Gibson, President and Chief Executive Officer of Southside.  “One relationship consists of two memory care facilities and the other relationship represents a retail shopping center. The memory care loans are current but the revenue is not sufficient to meet the required debt service.  Both facilities are making progress increasing occupancy and will be reevaluated quarterly. The retail shopping center is losing a tenant that announced during the first quarter the closing or selling of all of its U.S. stores.  This loan is also current but the loss of this tenant, along with the loss of a previous tenant, decreases revenue to a level that is not sufficient to meet the required debt service until the vacant space is leased.  During the first quarter we increased our loan loss reserve by $3.2 million associated with these relationships.”

“During the first quarter we recorded acquisition costs related to the Diboll State Bancshares, Inc. transaction of $832,000, branch closing costs for one Tyler location adjacent to a newly acquired Diboll branch of $249,000 and a loss of $827,000 on the sale of lower-yielding available for sale securities.  In addition, as a result of the Tax Cuts and Jobs Act passed in December 2017, we decided to share a portion of the resulting positive impact on net income with our employees by paying a one-time $1,000 bonus to every full-time employee with an annual base salary less than $100,000. The total expense during the first quarter associated with this one-time bonus was $744,000.”

“On a linked quarter basis our net interest margin and net interest spread increased seven and four points, respectively. During the first quarter we experienced very little loan growth due to higher than anticipated payoffs.  The economic conditions in Texas and our market areas remain solid and the Austin and DFW markets continue to perform exceptionally well.”

“We expect the integration of Diboll State Bancshares, Inc. will be virtually complete during the second quarter, which will allow us to begin to realize additional efficiencies and the associated cost savings in future quarters.  We are thankful for the support we receive from our customers, shareholders, employees and directors.  We look forward to the remainder of 2018.”

Loans and Deposits

For the three months ended March 31, 2018, total loans increased by $15.3 million, or 0.5%, compared to December 31, 2017.  The net increase in our loans was comprised primarily of increases of $20.4 million of commercial real estate loans and $15.5 million of commercial loans, partially offset by decreases in 1-4 family residential loans, loans to individuals, municipal loans, and construction loans.  Energy loans totaled 1.66% of the loan portfolio at March 31, 2018, compared to 1.50% at December 31, 2017.

Nonperforming assets increased during the three months ended March 31, 2018 by $32.0 million, or 305.3%, to $42.4 million, or 0.67% of total assets, compared to $10.5 million, or 0.16% of total assets at December 31, 2017, primarily due to the addition of two commercial real estate relationships consisting of three loans to nonaccrual status during the first quarter.

During the three months ended March 31, 2018, the allowance for loan losses increased by $3.4 million, or 16.5%, to $24.2 million, or 0.73% of total loans, compared to 0.63% of total loans at December 31, 2017.  The increase in the allowance was primarily the result of additional provision recorded on the commercial real estate loans placed on nonaccrual status in the first quarter.

During the three months ended March 31, 2018, deposits, net of brokered deposits, increased $73.5 million, or 1.7%, compared to December 31, 2017.  Public funds deposits increased $45.9 million during the three months ended March 31, 2018, compared to December 31, 2017.

Net Interest Income for the Three Months Ended March 31, 2018

Net interest income increased $8.9 million, or 25.1%, to $44.1 million for the three months ended March 31, 2018, compared to $35.3 million for the same period in 2017.  The increase in net interest income was the result of a $12.3 million increase in interest income primarily from our loan portfolio, partially offset by an increase in interest expense of $3.5 million associated primarily with our deposits, compared to the same period in 2017.

For the three months ended March 31, 2018, our net interest spread (FTE) increased slightly to 2.95%, compared to 2.93% for the same period in 2017.  Our net interest margin (FTE) increased to 3.19% for the three months ended March 31, 2018, compared to 3.08% for the same period in 2017.  Both the increase in net interest spread (FTE) and net interest margin (FTE) was due to an increase in the average yield on earning assets, partially offset by higher average rates paid on interest bearing liabilities.  The increase in the average yield on earning assets during the three months ended March 31, 2018 was the result of increases in the average yields on most of the earning asset categories partially offset by a decrease in the average yield on tax-exempt investment securities.  The increase in average rates paid on interest bearing liabilities was primarily due to rising interest rates during 2017 and 2018.  The net interest spread (FTE) and net interest margin (FTE) increased on a linked quarter basis from 2.91% and 3.12%, respectively, for the three months ended December 31, 2017, to 2.95% and 3.19%, respectively, for the three months ended March 31, 2018.

Net Income for the Three Months Ended March 31, 2018

Net income increased $1.3 million, or 8.4%, for the three months ended March 31, 2018, to $16.3 million compared to the same period in 2017.  The increase was primarily the result of a $12.3 million increase in interest income and a $0.9 million decrease in income tax expense, partially offset by a $5.8 million increase in noninterest expense, a $3.5 million increase in interest expense, and a $2.6 million increase in provision for loan losses.  Noninterest income decreased slightly as a result of losses recorded on the sale of securities in the first quarter of 2018.

Excluding net (loss) gain on sale of securities, noninterest income increased $1.1 million, or 11.6%, for the three months ended March 31, 2018 compared to the same period in 2017.  Deposit services and trust income increased and were partially offset by a decrease in gain on sale of loans. The increase in both deposit services income and trust income was largely related to our merger with Diboll.  In connection with the adoption of Accounting Standards Update 2014-09 revenue recognition guidance effective January 1, 2018, debit card expense and brokerage service expense for the three months ended March 31, 2018, previously reported in ATM and debit card expense and other noninterest expense are now netted with deposit services income and brokerage services income, respectively.  Due to the guidance under the modified retrospective method, prior periods have not been adjusted and therefore, are not comparable.

Noninterest expense increased $5.8 million, or 22.5%, for the three months ended March 31, 2018, compared to the same period in 2017.  The increase in most of our noninterest expense categories is directly attributable to our acquisition of Diboll.  Salaries and employee benefits also increased as a result of one-time bonuses paid as a result of the Tax Cuts and Jobs Act and normal salary increases.

The decrease in income tax expense for the three months ended March 31, 2018 of $0.9 million, or 30.5%, was attributable to the reduced tax rate under the Tax Cuts and Jobs Act resulting in a lower effective tax rate of 11.4% compared to 16.7% for the same period in 2017.

Conference Call

Southside's management team will host a conference call to discuss its first quarter 2018 financial results on Tuesday, May 1, 2018 at 9:00 a.m. CDT.  The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 2096238 or by identifying “Southside Bancshares, Inc., First Quarter 2018 Earnings Call.”  To listen to the call via webcast, register at www.southside.com/about/investor-relations.

For those unable to listen to the conference call live, a recording will be available from approximately 3:00 p.m. CDT May 1, 2018 through May 13, 2018 by accessing the company website, www.southside.com/about/investor-relations.

Non-GAAP Financial Measures

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

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

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

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

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

Non-GAAP Reconciliation          
           
  Three Months Ended
  2018 2017
  Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
Net interest income (GAAP) $44,133  $38,306  $34,960  $35,424  $35,280 
Tax equivalent adjustments:          
Loans 582  1,125  1,103  1,050  1,035 
Investment securities (tax-exempt) 1,619  3,049  3,544  3,229  3,375 
Net interest income (FTE) (1) 46,334  42,480  39,607  39,703  39,690 
Noninterest income 9,610  9,099  9,408  9,293  9,673 
Nonrecurring income (2) 827  483  (627) 75  (122)
Total revenue $56,771  $52,062  $48,388  $49,071  $49,241 
           
Noninterest expense $31,667  $29,933  $25,007  $25,537  $25,858 
Pre-tax amortization expense (1,378) (726) (388) (410) (431)
Nonrecurring expense (3) (1,178) (3,479) (432) (466) (17)
Adjusted noninterest expense $29,111  $25,728  $24,187  $24,661  $25,410 
           
Efficiency ratio 53.35% 53.73% 55.30% 55.06% 56.68%
Efficiency ratio (FTE) (1) 51.28% 49.42% 49.99% 50.26% 51.60%
           
Average earning assets $5,891,352  $5,395,212  $5,199,349  $5,192,897  $5,229,045 
           
Net interest margin 3.04% 2.82% 2.67% 2.74% 2.74%
Net interest margin (FTE) (1) 3.19% 3.12% 3.02% 3.07% 3.08%
           
Net interest spread 2.80% 2.60% 2.47% 2.56% 2.59%
Net interest spread (FTE) (1) 2.95% 2.91% 2.82% 2.89% 2.93%

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

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

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $6.4 billion in assets as of March 31, 2018, that owns 100% of Southside Bank.  Southside Bank currently has 60 branches in Texas and operates a network of 84 ATMs/ITMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at www.southside.com/about/investor-relations.  Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data.  To receive e-mail notification of company news, events and stock activity, please register on the E-mail Notification portion of the website.  Questions or comments may be directed to Suni Davis at (903) 531-7235, or [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, 2017, under “Part I - Item 1. Forward Looking Information” and "Part I - Item 1A. Risk Factors" and in the Company’s other filings with the Securities and Exchange Commission.  The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.


 SOUTHSIDE BANCSHARES, INC.
 CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
 (In thousands, except per share data)
          
          
 As of
 2018 2017
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
ASSETS         
Cash and due from banks$65,480  $79,171  $57,947  $56,033  $54,345 
Interest earning deposits183,241  111,541  120,996  175,039  185,289 
Federal funds sold14,090  7,980  5,570  4,760  7,360 
Securities available for sale, at estimated fair value2,062,539  1,538,755  1,292,072  1,397,811  1,444,043 
Securities held to maturity, at carrying value164,847  909,506  909,844  925,538  929,793 
Federal Home Loan Bank stock, at cost42,676  55,729  61,845  61,561  61,305 
Loans held for sale2,003  2,001  2,177  3,036  5,303 
Loans3,309,627  3,294,356  2,682,766  2,610,198  2,538,918 
Less: Allowance for loan losses(24,220) (20,781) (19,871) (19,241) (18,485)
Net loans3,285,407  3,273,575  2,662,895  2,590,957  2,520,433 
Premises & equipment, net131,625  133,640  107,099  105,938  105,327 
Goodwill201,246  201,246  91,520  91,520  91,520 
Other intangible assets, net21,615  22,993  3,379  3,767  4,177 
Bank owned life insurance100,963  100,368  99,616  99,011  98,377 
Other assets97,465  61,592  69,470  63,511  148,977 
Total assets$6,373,197  $6,498,097  $5,484,430  $5,578,482  $5,656,249 
          
LIABILITIES AND SHAREHOLDERS' EQUITY         
Noninterest bearing deposits$1,055,423  $1,037,401  $781,701  $757,353  $753,224 
Interest bearing deposits3,586,474  3,478,046  2,782,474  2,866,720  2,952,072 
Total deposits4,641,897  4,515,447  3,564,175  3,624,073  3,705,296 
Other borrowings779,990  1,026,859  1,151,639  1,186,506  1,213,670 
Subordinated notes, net of unamortized debt issuance costs98,286  98,248  98,209  98,171  98,133 
Trust preferred subordinated debentures, net of unamortized debt issuance costs60,242  60,241  60,240  60,238  60,237 
Other liabilities46,386  43,162  54,144  62,429  47,447 
Total liabilities5,626,801  5,743,957  4,928,407  5,031,417  5,124,783 
Shareholders' equity746,396  754,140  556,023  547,065  531,466 
Total liabilities and shareholders' equity$6,373,197  $6,498,097  $5,484,430  $5,578,482  $5,656,249 


 At or For the Three Months Ended
 2018 2017
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
Income Statement:         
Total interest income$57,194  $50,104  $46,473  $46,009  $44,888 
Total interest expense13,061  11,798  11,513  10,585  9,608 
Net interest income44,133  38,306  34,960  35,424  35,280 
Provision for loan losses3,735  1,271  960  1,346  1,098 
Net interest income after provision for loan losses40,398  37,035  34,000  34,078  34,182 
Noninterest income         
Deposit services6,179  5,940  5,476  5,255  5,114 
Net (loss) gain on sale of securities available for sale(827) (249) 627  (75) 322 
Gain on sale of loans115  268  347  505  701 
Trust income1,760  1,156  873  899  890 
Bank owned life insurance income632  632  636  635  634 
Brokerage services450  632  561  682  547 
Other1,301  720  888  1,392  1,465 
Total noninterest income9,610  9,099  9,408  9,293  9,673 
Noninterest expense         
Salaries and employee benefits18,559  15,316  14,472  14,984  16,007 
Occupancy expense3,583  3,327  2,981  2,897  2,863 
Acquisition expense832  3,474  405  473   
Advertising, travel & entertainment685  601  487  548  583 
ATM and debit card expense346  1,049  1,024  889  927 
Professional fees1,070  859  996  1,050  939 
Software and data processing expense1,023  882  732  688  725 
Telephone and communications538  444  459  476  526 
FDIC insurance497  442  441  445  441 
Amortization expense on intangibles1,378  726  388  410  431 
Other3,156  2,813  2,622  2,677  2,416 
Total noninterest expense31,667  29,933  25,007  25,537  25,858 
Income before income tax expense18,341  16,201  18,401  17,834  17,997 
Income tax expense2,090  5,870  3,890  3,353  3,008 
Net income$16,251  $10,331  $14,511  $14,481  $14,989 
          
Common share data:   
Weighted-average basic shares outstanding35,022  31,370  29,370  29,318  29,288 
Weighted-average diluted shares outstanding35,200  31,569  29,570  29,519  29,504 
Shares outstanding end of period35,053  35,000  29,433  29,344  29,306 
Net income per common share         
Basic$0.46  $0.33  $0.49  $0.49  $0.51 
Diluted0.46  0.33  0.49  0.49  0.51 
Book value per common share21.29  21.55  18.89  18.64  18.14 
Cash dividend paid per common share0.28  0.30  0.28  0.28  0.25 
          
Selected Performance Ratios:         
Return on average assets1.02% 0.70% 1.03% 1.04% 1.08%
Return on average shareholders’ equity8.75  6.52  10.38  10.70  11.57 
Average yield on earning assets (1)4.09  3.99  3.90  3.88  3.82 
Average rate on interest bearing liabilities1.14  1.08  1.08  0.99  0.89 
Net interest spread (FTE) (1)2.95  2.91  2.82  2.89  2.93 
Net interest margin (FTE) (1)3.19  3.12  3.02  3.07  3.08 
Average earning assets to average interest bearing liabilities127.29  124.73  123.32  121.57  120.04 
Noninterest expense to average total assets1.99  2.03  1.77  1.83  1.87 
Efficiency ratio (FTE) (1)51.28  49.42  49.99  50.26  51.60 

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

 Southside Bancshares, Inc.
 Selected Financial Data (unaudited)
 (dollars in thousands)
          
 Three Months Ended
 2018 2017
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
Nonperforming assets:$42,444  $10,472  $9,119  $9,165  $14,079 
Nonaccrual loans (1)34,545  2,937  3,095  3,034  7,261 
Accruing loans past due more than 90 days (1)4  1      1 
Restructured loans (2)5,839  5,767  5,725  5,884  6,424 
Other real estate owned2,014  1,613  298  233  367 
Repossessed assets42  154  1  14  26 
          
Asset Quality Ratios:         
Nonaccruing loans to total loans1.04% 0.09% 0.12% 0.12% 0.29%
Allowance for loan losses to nonaccruing loans70.11  707.56  642.04  634.18  254.58 
Allowance for loan losses to nonperforming assets57.06  198.44  217.91  209.94  131.29 
Allowance for loan losses to total loans0.73  0.63  0.74  0.74  0.73 
Nonperforming assets to total assets0.67  0.16  0.17  0.16  0.25 
Net charge-offs to average loans0.04  0.05  0.05  0.09  0.08 
          
Capital Ratios:         
Shareholders’ equity to total assets11.71  11.61  10.14  9.81  9.40 
Average shareholders’ equity to average total assets11.69  10.75  9.91  9.72  9.36 

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

Loan Portfolio Composition

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

 Three Months Ended
 2018 2017
 Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
Real Estate Loans:         
Construction$474,791  $475,867  $420,497  $386,853  $362,367 
1-4 Family Residential797,088  805,341  609,159  615,405  622,881 
Commercial1,285,591  1,265,159  1,073,646  1,033,629  974,307 
Commercial Loans281,901  266,422  166,919  172,311  176,908 
Municipal Loans342,404  345,798  322,286  305,023  297,417 
Loans to Individuals127,852  135,769  90,259  96,977  105,038 
Total Loans$3,309,627  $3,294,356  $2,682,766  $2,610,198  $2,538,918 

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

 Average Balances with Average Yields and Rates
 (unaudited)
 Three Months Ended
 March 31, 2018 December 31, 2017
 Avg Balance Interest Avg Yield/Rate Avg Balance Interest Avg Yield/Rate
ASSETS           
Loans (1)$3,300,506  $39,401  4.84% $2,897,444  $34,070  4.67%
Loans held for sale1,543  11  2.89% 2,285  22  3.82%
Securities:           
Investment securities (taxable) (2)39,332  227  2.34% 51,678  237  1.82%
Investment securities (tax-exempt) (2)805,091  8,000  4.03% 775,681  9,197  4.70%
Mortgage-backed and related securities (2)1,557,140  10,894  2.84% 1,461,159  9,931  2.70%
Total securities2,401,563  19,121  3.23% 2,288,518  19,365  3.36%
FHLB stock, at cost, and equity investments67,000  414  2.51% 67,127  380  2.25%
Interest earning deposits107,488  399  1.51% 133,007  418  1.25%
Federal funds sold13,252  49  1.50% 6,831  23  1.34%
Total earning assets5,891,352  59,395  4.09% 5,395,212  54,278  3.99%
Cash and due from banks78,031      60,590     
Accrued interest and other assets493,974      410,528     
Less: Allowance for loan losses(21,005)     (19,963)    
Total assets$6,442,352      $5,846,367     
LIABILITIES AND SHAREHOLDERS’ EQUITY           
Savings deposits$353,770  184  0.21% $293,392  134  0.18%
Time deposits1,170,024  3,895  1.35% 1,031,008  3,178  1.22%
Interest bearing demand deposits2,009,154  3,372  0.68% 1,696,239  2,585  0.60%
Total interest bearing deposits3,532,948  7,451  0.86% 3,020,639  5,897  0.77%
FHLB borrowings928,677  3,632  1.59% 1,137,373  3,935  1.37%
Subordinated notes, net of unamortized debt issuance costs98,267  1,398  5.77% 98,229  1,429  5.77%
Trust preferred subordinated debentures, net of unamortized debt issuance costs60,241  569  3.83% 60,240  532  3.50%
Other borrowings8,103  11  0.55% 9,157  5  0.22%
Total interest bearing liabilities4,628,236  13,061  1.14% 4,325,638  11,798  1.08%
Noninterest bearing deposits1,016,707      846,632     
Accrued expenses and other liabilities44,015      45,613     
Total liabilities5,688,958      5,217,883     
Shareholders’ equity753,394      628,484     
Total liabilities and shareholders’ equity$6,442,352      $5,846,367     
Net interest income (FTE)  $46,334      $42,480   
Net interest margin (FTE)    3.19%     3.12%
Net interest spread (FTE)    2.95%     2.91%

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

Note:  As of March 31, 2018 and December 31, 2017, loans totaling $34.5 million and $2.9 million, respectively, were on nonaccrual status.  Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

 Average Balances with Average Yields and Rates
 (unaudited)
 Three Months Ended
 September 30, 2017 June 30, 2017
 Avg Balance Interest Avg Yield/Rate Avg Balance Interest Avg Yield/Rate
ASSETS           
Loans (1)$2,657,562  $30,378  4.54% $2,557,093  $29,080  4.56%
Loans held for sale5,060  47  3.69% 5,914  60  4.07%
Securities:           
Investment securities (taxable) (2)11,085  58  2.08% 58,168  267  1.84%
Investment securities (tax-exempt) (2)758,828  9,214  4.82% 749,259  9,386  5.02%
Mortgage-backed and related securities (2)1,550,494  10,567  2.70% 1,594,269  10,818  2.72%
Total securities2,320,407  19,839  3.39% 2,401,696  20,471  3.42%
FHLB stock, at cost, and equity investments66,994  329  1.95% 66,744  299  1.80%
Interest earning deposits144,700  506  1.39% 156,124  364  0.94%
Federal funds sold4,626  21  1.80% 5,326  14  1.05%
Total earning assets5,199,349  51,120  3.90% 5,192,897  50,288  3.88%
Cash and due from banks53,220      50,961     
Accrued interest and other assets360,073      358,041     
Less: Allowance for loan losses(19,556)     (18,495)    
Total assets$5,593,086      $5,583,404     
LIABILITIES AND SHAREHOLDERS’ EQUITY           
Savings deposits$260,860  117  0.18% $262,009  121  0.19%
Time deposits988,380  2,878  1.16% 1,014,101  2,723  1.08%
Interest bearing demand deposits1,562,993  2,425  0.62% 1,616,036  2,294  0.57%
Total interest bearing deposits2,812,233  5,420  0.76% 2,892,146  5,138  0.71%
FHLB borrowings1,237,055  4,156  1.33% 1,213,016  3,551  1.17%
Subordinated notes, net of unamortized debt issuance costs98,190  1,413  5.71% 98,151  1,398  5.71%
Trust preferred subordinated debentures, net of unamortized debt issuance costs60,239  520  3.42% 60,238  494  3.29%
Other borrowings8,425  4  0.19% 7,884  4  0.20%
Total interest bearing liabilities4,216,142  11,513  1.08% 4,271,435  10,585  0.99%
Noninterest bearing deposits773,739      729,564     
Accrued expenses and other liabilities48,682      39,819     
Total liabilities5,038,563      5,040,818     
Shareholders’ equity554,523      542,586     
Total liabilities and shareholders’ equity$5,593,086      $5,583,404     
Net interest income (FTE)  $39,607      $39,703   
Net interest margin (FTE)    3.02%     3.07%
Net interest spread (FTE)    2.82%     2.89%

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

Note:  As of September 30, 2017 and June 30, 2017, loans totaling $3.1 million and $3.0 million, respectively, were on nonaccrual status.  Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

 Average Balances with Average Yields and Rates
 (unaudited)
 Three Months Ended
 March 31, 2017
 Avg Balance Interest Avg Yield/Rate
ASSETS     
Loans (1)$2,549,230  $28,241  4.49%
Loans held for sale7,023  48  2.77%
Securities:     
Investment securities (taxable) (2)86,511  377  1.77%
Investment securities (tax-exempt) (2)779,772  9,929  5.16%
Mortgage-backed and related securities (2)1,570,510  10,045  2.59%
Total securities2,436,793  20,351  3.39%
FHLB stock, at cost, and equity investments66,547  298  1.82%
Interest earning deposits162,235  346  0.86%
Federal funds sold7,217  14  0.79%
Total earning assets5,229,045  49,298  3.82%
Cash and due from banks53,528     
Accrued interest and other assets350,729     
Less: Allowance for loan losses(18,130)    
Total assets$5,615,172     
LIABILITIES AND SHAREHOLDERS’ EQUITY     
Savings deposits$252,744  92  0.15%
Time deposits927,610  2,227  0.97%
Interest bearing demand deposits1,707,996  1,962  0.47%
Total interest bearing deposits2,888,350  4,281  0.60%
FHLB borrowings1,302,335  3,464  1.08%
Subordinated notes, net of unamortized debt issuance costs98,117  1,393  5.76%
Trust preferred subordinated debentures, net of unamortized debt issuance costs60,237  467  3.14%
Other borrowings6,986  3  0.17%
Total interest bearing liabilities4,356,025  9,608  0.89%
Noninterest bearing deposits693,729     
Accrued expenses and other liabilities39,960     
Total liabilities5,089,714     
Shareholders’ equity525,458     
Total liabilities and shareholders’ equity$5,615,172     
Net interest income (FTE)  $39,690   
Net interest margin (FTE)    3.08%
Net interest spread (FTE)    2.93%

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

Note: As of March 31, 2017, loans totaling $7.3 million were on nonaccrual status.  Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Primary Logo

Source: Southside Bancshares, Inc.
Copyright 2018, © S&P Global Market Intelligence  Terms of Use