News Details

• Third quarter net income of $29.3 million;
• Third quarter earnings per diluted common share of $0.90;
• Annualized linked quarter loan growth, net of Paycheck Protection Program (“PPP”) loans, 7.9%;
• Annualized linked quarter deposit growth of 13.5%;
• Linked quarter net interest margin increased to 3.16%;
• Annualized return on third quarter average assets of 1.61%;
• Annualized return on third quarter average tangible common equity of 17.10% ⁽¹⁾ ; and
• Nonperforming assets decreased to 0.17% of total assets.

TYLER, Texas, Oct. 26, 2021 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended September 30, 2021. Southside reported net income of $29.3 million for the three months ended September 30, 2021, an increase of $2.2 million, or 8.2%, compared to $27.1 million for the same period in 2020. Earnings per diluted common share were $0.90 and $0.82 for the three months ended September 30, 2021 and 2020, respectively. The annualized return on average shareholders’ equity for the three months ended September 30, 2021 and 2020 was 12.89%. The annualized return on average assets was 1.61% for the three months ended September 30, 2021, compared to 1.48% for the same period in 2020.

“We reported outstanding third quarter financial results, highlighted by annualized linked quarter deposit and loan growth, net of PPP loans, of 13.5% and 7.9%, respectively, an increase in our net interest margin to 3.16%, net income of $29.3 million and continued strong asset quality,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “These results could not have been achieved without the tremendous efforts and contributions of the entire Southside team and for this, I am extremely proud and grateful.”

“On September 30, 2021, we redeemed our 5.5% coupon $100 million subordinated notes due 2026, which will have a positive impact on our net interest margin in the fourth quarter. We expensed $1.1 million during the third quarter in connection with the redemption of the subordinated notes.”

“Our loan pipeline is strong, however, anticipated payoffs in the fourth quarter will generate some continued headwinds. We remain encouraged by the continued strong economic conditions in the market areas we serve.”

Operating Results for the Three Months Ended September 30, 2021

Net income was $29.3 million for the three months ended September 30, 2021, compared to $27.1 million for the same period in 2020, an increase of $2.2 million, or 8.2%. Earnings per diluted common share were $0.90 and $0.82 for the three months ended September 30, 2021 and 2020, respectively. The increase in net income was primarily a result of an increase in noninterest income and net interest income, partially offset by an increase in income tax expense. Annualized returns on average assets and average shareholders’ equity for the three months ended September 30, 2021 were 1.61% and 12.89%, respectively, compared to 1.48% and 12.89, respectively, for the three months ended September 30, 2020. Our efficiency ratio and tax equivalent efficiency ratio⁽¹⁾ were 50.64% and 47.92%, respectively, for the three months ended September 30, 2021, compared to 52.77% and 50.07%, respectively, for the three months ended September 30, 2020, and 53.09% and 50.31%, respectively, for the three months ended June 30, 2021.

Net interest income for the three months ended September 30, 2021 was $48.2 million, compared to $46.6 million for the same period in 2020, an increase of 3.5%. The increase in net interest income compared to the same period in 2020 was due to the decrease in interest expense on our interest bearing liabilities due to the overall decline in interest rates and a decline in the average balance of our interest bearing liabilities, partially offset by the decrease in interest income, a result of a decrease in the average balance of our interest earning assets during the three months ended September 30, 2021. Linked quarter, net interest income increased $2.6 million, or 5.6%, compared to $45.6 million during the three months ended June 30, 2021. The increase in net interest income is primarily due to an increase in the average yield and balance on our interest earning assets.

Our net interest margin and tax equivalent net interest margin⁽¹⁾ increased to 2.96% and 3.16%, respectively, for the three months ended September 30, 2021, compared to 2.83% and 3.02%, respectively, for the same period in 2020. Linked quarter, net interest margin and tax equivalent net interest margin⁽¹⁾ increased 10 basis points from 2.86% and 3.06%, respectively, for the three months ended June 30, 2021.

Noninterest income was $12.8 million for the three months ended September 30, 2021, an increase of $1.6 million, or 14.6%, compared to $11.1 million for the same period in 2020. The increase was due to increases in net gain on sale of securities AFS, deposit services income, brokerage services income and trust fees, partially offset by a decrease in gain on sale of loans. On a linked quarter basis, noninterest income increased $1.8 million, or 16.8%, compared to the three months ended June 30, 2021. The increase was due to an increase in net gain on sale of securities available for sale, other noninterest income and deposit services income.

Noninterest expense was $31.8 million for the three months ended September 30, 2021, an increase of $0.1 million, or 0.5%, compared to $31.6 million for the same period in 2020, a result of a $1.1 million loss on the redemption of subordinated notes, as well as a $0.4 million increase in salaries and employee benefits and a $0.3 million increase in software and data processing expense, partially offset by a $1.8 million decrease in other noninterest expense. On a linked quarter basis, noninterest expense increased $1.1 million, or 3.5%, compared to the three months ended June 30, 2021, due to the $1.1 million loss on the redemption of subordinated notes during the three months ended September 30, 2021.

Income tax expense increased $1.2 million for the three months ended September 30, 2021 compared to the same period in 2020. On a linked quarter basis, income tax expense increased $2.1 million, or 72.4%. Our effective tax rate (“ETR”) increased to 14.5% for the three months ended September 30, 2021, compared to 12.3% for the three months ended September 30, 2020. Linked quarter, our ETR increased from 11.9% for the three months ended June 30, 2021. The increase for both periods was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income.

Operating Results for the Nine Months Ended September 30, 2021

Net income was $84.7 million for the nine months ended September 30, 2021, compared to $52.6 million for the same period in 2020, an increase of $32.1 million, or 61.1%. Earnings per diluted common share were $2.59 for the nine months ended September 30, 2021, compared to $1.58 for the same period in 2020, an increase of 63.9%. The increase in net income was a direct result of a reversal of the provision for credit losses compared to a large build-up in the allowance for credit losses in the same period in 2020. Annualized returns on average assets and average shareholders’ equity for the nine months ended September 30, 2021 were 1.60% and 12.80%, respectively, compared to 0.98% and 8.56%, respectively, for the nine months ended September 30, 2020. Our efficiency ratio and tax equivalent efficiency ratio⁽¹⁾ were 52.23% and 49.53%, respectively, for the nine months ended September 30, 2021, compared to 52.55% and 50.06%, respectively, for the nine months ended September 30, 2020.

Net interest income was $140.2 million for the nine months ended September 30, 2021, compared to $138.6 million for the same period in 2020, due to the decrease in interest expense on our interest bearing liabilities, partially offset by the decrease in interest income, both primarily a result of an overall decline in interest rates.

Our net interest margin and tax equivalent net interest margin⁽¹⁾ were 2.94% and 3.14%, respectively, for the nine months ended September 30, 2021, compared to 2.85% and 3.02%, respectively, for the same period in 2020. The increase in net interest margin was due to lower average rates and balances on our interest bearing liabilities, partially offset by a lower average yield on our interest earning assets during the nine months ended September 30, 2021.

Noninterest income was $37.3 million for the nine months ended September 30, 2021, a decrease of 3.9%, compared to $38.8 million for the same period in 2020. The decrease was due to decreases in net gain on sale of securities AFS and gain on sale of loans, partially offset by increases in deposit services income, other noninterest income, brokerage services income and trust fees.

Noninterest expense was $93.7 million for the nine months ended September 30, 2021, compared to $92.0 million for the same period in 2020, an increase of $1.7 million, or 1.9%. The increase was the result of increases in salaries and employee benefits, a loss on the redemption of subordinated notes, increases in FDIC insurance and software and data processing expense, partially offset by decreases in other noninterest expense and amortization of intangibles.

Income tax expense increased $5.5 million, or 78.4%, for the nine months ended September 30, 2021, compared to the same period in 2020. Our ETR was approximately 13.0% and 11.9% for the nine months ended September 30, 2021 and 2020, respectively. The higher ETR for the nine months ended September 30, 2021, as compared to the same period in 2020, was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income.

Balance Sheet Data

At September 30, 2021, we had $7.14 billion in total assets, compared to $7.01 billion at December 31, 2020 and $7.19 billion at September 30, 2020.

Loans at September 30, 2021 were $3.65 billion, a decrease of $142.4 million, or 3.8%, compared to $3.79 billion at September 30, 2020. This decrease was due to a $235.3 million decrease in our PPP loans, a component of the commercial loan category, with a remaining balance of $67.5 million at September 30, 2021, as well as decreases of $188.3 million in construction loans and $77.7 million in 1-4 family residential loans. These decreases were partially offset by increases of $277.9 million in commercial real estate loans, $49.8 million of commercial loans, excluding PPP loans, and $40.0 million in municipal loans. Linked quarter loans increased $5.2 million, or 0.1%, from $3.64 billion at June 30, 2021. The linked quarter net increase in loans consisted of an increase of $174.2 million in commercial real estate loans and $9.9 million of municipal loans. The linked quarter increases were partially offset by decreases of $106.1 million of construction loans, $53.8 million of commercial loans and $17.7 million in 1-4 family loans. The decrease in construction loans was primarily the result of payoffs and completed projects converting to permanent financing. On a linked quarter basis, our PPP loans decreased $64.6 million, or 48.9%, from $132.1 million at June 30, 2021, due to forgiveness payments received from loans funded under the Coronavirus Aid, Relief, and Economic Security Act.

Securities at September 30, 2021 were $2.85 billion, an increase of $97.0 million, or 3.5%, compared to $2.75 billion at September 30, 2020. Linked quarter, securities decreased $15.3 million, or 0.5%, from $2.86 billion at June 30, 2021.

Deposits at September 30, 2021 were $5.33 billion, an increase of $228.6 million, or 4.5%, compared to $5.10 billion at September 30, 2020. Linked quarter, deposits increased $175.5 million, or 3.4%, from $5.16 billion at June 30, 2021.

On March 12, 2020, the Board of the Company increased its authorization under the Stock Repurchase Plan, previously authorized in September 2019, by an additional 1.0 million shares, for a total authorization to repurchase up to 2.0 million shares. During the third quarter ended September 30, 2021, we purchased the remaining 420,204 shares authorized at an average price of $36.74. As of September 30, 2021, there were no authorized shares remaining to be purchased under the Stock Repurchase Plan.

Asset Quality

Nonperforming assets at September 30, 2021 were $12.4 million, or 0.17% of total assets, a decrease of $4.4 million, or 26.1%, compared to $16.8 million, or 0.23% of total assets, at September 30, 2020, and a decrease from $15.3 million, or 0.21% of total assets, at June 30, 2021. During the three months ended September 30, 2021, nonaccrual loans decreased $2.1 million, or 41.5%.

The allowance for loan losses decreased to $38.0 million, or 1.04% of total loans, at September 30, 2021, compared to $55.1 million, or 1.45% of total loans, at September 30, 2020. The decrease was primarily due to an improved economic forecast. The allowance for loan losses was $42.9 million, or 1.18% of total loans, at June 30, 2021.

We recorded a reversal of provision for credit losses for loans of $4.4 million for both of the three month periods ended September 30, 2021 and 2020, as compared to a provision for credit losses of $1.5 million for the three months ended June 30, 2021. The decrease was primarily due to an improved economic forecast as compared to the end of the second quarter. Net charge-offs were $0.5 million for the three months ended September 30, 2021, compared to net charge-offs of $0.4 million for the three months ended September 30, 2020 and $0.1 million of net charge-offs for the three months ended June 30, 2021. Net charge-offs were $0.7 million for the nine months ended September 30, 2021, compared to $1.0 million for the nine months ended September 30, 2020.

We recorded a reversal of provision for credit losses for off-balance-sheet credit exposures of $0.7 million for the three months ended September 30, 2021, as compared to a reversal of provision of $0.3 million for the three months ended September 30, 2020 and a provision of $0.2 million for the three months ended June 30, 2021. For the nine months ended September 30, 2021, we recorded a reversal of provision of $3.3 million, compared to a reversal of provision for credit losses for off-balance-sheet credit exposures of $0.3 million for the nine months ended September 30, 2020. The balance of the allowance for off-balance-sheet credit exposures at September 30, 2021 was $3.1 million and is included in other liabilities.

Dividend

Southside Bancshares, Inc. declared a third quarter cash dividend of $0.33 per share on August 5, 2021, which was paid on September 2, 2021, to all shareholders of record as of August 19, 2021.

Conference Call

Southside's management team will host a conference call to discuss its third quarter ended September 30, 2021 financial results on Tuesday, October 26, 2021 at 11:00 a.m. CDT. The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 5179572 or by identifying “Southside Bancshares, Inc., Third Quarter 2021 Earnings Call.” To listen to the call via webcast, register at https://investors.southside.com.

For those unable to listen to the conference call live, a recording will be available from approximately 2:00 p.m. CDT October 26, 2021 through 1:00 p.m. CST November 7, 2021 by accessing the company website, https://investors.southside.com.

Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of our performance. These include the following fully taxable-equivalent measures (“FTE”): (i) Net interest income (FTE), (ii) net interest margin (FTE), (iii) net interest spread (FTE), and (iv) efficiency ratio (FTE), which include the effects of taxable-equivalent adjustments using a federal income tax rate of 21% 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 and is not permitted under GAAP in the consolidated statements of income. We believe this measure to be the preferred industry measurement of net interest income and that it enhances comparability of net interest income arising from taxable and tax-exempt sources. The most directly comparable financial measure calculated in accordance with GAAP is our net interest income. Net interest margin (FTE) is the ratio of net interest income (FTE) to average earning assets. The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin. Net interest spread (FTE) is the difference in the average yield on average earning assets on a tax-equivalent basis and the average rate paid on average interest bearing liabilities. The most directly comparable financial measure calculated in accordance with GAAP is our net interest spread.

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

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

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

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

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $7.14 billion in assets as of September 30, 2021, that owns 100% of Southside Bank. Southside Bank currently has 55 branches in Texas and operates a network of 73 ATMs/ITMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at https://investors.southside.com. Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data. To receive e-mail notification of company news, events and stock activity, please register on the E-mail Notification portion of the website. Questions or comments may be directed to Lindsey Bailes at (903) 630-7965, or lindsey.bailes@southside.com.

Forward-Looking Statements

Certain statements of other than historical fact that are contained in this press release and in other written materials, 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,” “might,” “will,” “would,” “seek,” “intend,” “probability,” “risk,” “goal,” “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, estimates, intentions and 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 of the effect of our expansion, benefits of the Share Repurchase Plan, trends in asset quality, capital, liquidity, the Company's ability to sell nonperforming assets, expense reductions, planned operational efficiencies and earnings from growth and certain market risk disclosures, including the impact of interest rates, tax reform, inflation 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. Accordingly, our results could materially differ from those that have been estimated. The most recent factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the negative impact of the COVID-19 pandemic and related variants on our business, financial position, operations and prospects, including our ability to continue our business activities in certain communities we serve, the duration of the pandemic and its continued effects on financial markets, a reduction in financial transactions and business activities resulting in decreased deposits and reduced loan originations, increases in unemployment rates impacting our borrowers’ ability to repay their loans, our ability to manage liquidity in a rapidly changing and unpredictable market, additional interest rate changes by the Federal Reserve and other government actions in response to the pandemic, including regulations or laws enacted to counter the effects of the COVID-19 pandemic on the economy.

Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, under “Part I - Item 1. Forward Looking Information” 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)
(Dollars in thousands)

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

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

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

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

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

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

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.

Note: As of September 30, 2021 and June 30, 2021, loans totaling $3.0 million and $5.2 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

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

Note: As of March 31, 2021 and December 31, 2020, loans totaling $5.3 million and $7.7 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.

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

Note: As of September 30, 2020, loans totaling $6.0 million were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

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

Note: As of September 30, 2021 and 2020, loans totaling $3.0 million and $6.0 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

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

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