Southside Bancshares, Inc. Announces Financial Results for the First Quarter Ended March 31, 2022

  • First quarter net income of $25.0 million;
  • Linked quarter loan growth, net of Paycheck Protection Program (“PPP”) loans, of 4.8%;
  • Annualized return on first quarter average assets of 1.40%;
  • Annualized return on first quarter average tangible common equity of 15.20%(1); and
  • Nonperforming assets remain low at 0.16% of total assets.

TYLER, Texas, April 26, 2022 (GLOBE NEWSWIRE) — Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended March 31, 2022. Southside reported net income of $25.0 million for the three months ended March 31, 2022, a decrease of $9.1 million, or 26.7%, compared to $34.1 million for the same period in 2021. Earnings per diluted common share were $0.77 for the three months ended March 31, 2022, compared to $1.04 for the same period in 2021. The annualized return on average shareholders’ equity for the three months ended March 31, 2022 was 11.42%, compared to 15.82% for the same period in 2021. The annualized return on average assets was 1.40% for the three months ended March 31, 2022, compared to 1.99% for the same period in 2021.

“First quarter financial results for 2022, were highlighted by net income of $25 million, earnings per diluted common share of $0.77, linked quarter loan growth, net of PPP loans, of 4.8%, continued strong asset quality metrics and an efficiency ratio of 48.15%,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “The economic conditions and growth prospects for the markets we serve continue to reflect a solid and positive outlook. The DFW and Austin markets remain among the highest performing markets in the nation. This contributed to our outstanding loan growth during the first quarter. Our loan pipeline remains strong and we remain encouraged about loan growth prospects despite the headwinds of future expected loan payoffs.”

Operating Results for the Three Months Ended March 31, 2022

Net income was $25.0 million for the three months ended March 31, 2022, compared to $34.1 million for the same period in 2021, a decrease of $9.1 million, or 26.7%. Earnings per diluted common share were $0.77 and $1.04 for the three months ended March 31, 2022 and 2021, respectively. The decrease in net income was primarily a result of a provision for credit losses of $0.3 million for the three months ended March 31, 2022, compared to a reversal of provision for credit losses of $10.1 million for the same period in 2021 due to the improved economic forecast during the first quarter of 2021. Annualized returns on average assets and average shareholders’ equity for the three months ended March 31, 2022 were 1.40% and 11.42%, respectively, compared to 1.99% and 15.82%, respectively, for the three months ended March 31, 2021. Our efficiency ratio and tax equivalent efficiency ratio(1) were 50.71% and 48.15%, respectively, for the three months ended March 31, 2022, compared to 53.01% and 50.44%, respectively, for the three months ended March 31, 2021, and 50.34% and 47.61%, respectively, for the three months ended December 31, 2021.

Net interest income for the three months ended March 31, 2022 was $48.9 million, compared to $46.3 million for the same period in 2021, an increase of 5.6%. The increase in net interest income compared to the same period in 2021 was due to the decrease in interest expense on our interest bearing liabilities due to the change in the mix of our interest bearing liabilities, and to a lesser extent, the increase in interest income, a result of the increase in the average balance of investment securities, partially offset by a decrease in the interest income from PPP loans. Linked quarter, net interest income decreased $0.5 million, or 1.0%, compared to $49.4 million during the three months ended December 31, 2021. The decrease in net interest income was primarily due to a decrease in the average yield on our average loans.

Our net interest margin and tax equivalent net interest margin(1) increased to 3.03% and 3.22%, respectively, for the three months ended March 31, 2022, compared to 3.01% and 3.20%, respectively, for the same period in 2021. Linked quarter, net interest margin increased two basis points from 3.01% and tax equivalent net interest margin(1) decreased one basis point from 3.23% for the three months ended December 31, 2021.

Noninterest income was $10.7 million for the three months ended March 31, 2022, a decrease of $2.9 million, or 21.3%, compared to $13.6 million for the same period in 2021. The decrease was due to a net loss on sale of securities available for sale (“AFS”) of $1.5 million for the three months ended March 31, 2022, compared to a net gain of $2.0 million for the same period in 2021 and a decrease in gain on sale of loans, partially offset by increases in deposit services income, other noninterest income and trust fees. On a linked quarter basis, noninterest income decreased $1.3 million, or 10.7%, compared to the three months ended December 31, 2021. The decrease was due to a net loss on sale of securities AFS of $1.5 million for the three months ended March 31, 2022, compared to a $0.5 million net gain on sale of securities AFS for the three months ended December 31, 2021.

Noninterest expense was $31.2 million for both of the three-month periods ended March 31, 2022 and 2021. On a linked quarter basis, noninterest expense decreased $0.1 million, or 0.4%, compared to the three months ended December 31, 2021.

Income tax expense decreased $1.6 million, or 33.8%, for the three months ended March 31, 2022, compared to the same period in 2021. On a linked quarter basis, income tax expense decreased $1.7 million, or 34.6%. Our effective tax rate (“ETR”) decreased to 11.2% for the three months ended March 31, 2022, compared to 12.2% for the three months ended March 31, 2021, and 14.4% for the three months ended December 31, 2021, primarily a result of the increase in tax-exempt income as a percentage of pre-tax income.

Balance Sheet Data

At March 31, 2022, we had $7.12 billion in total assets, compared to $7.26 billion at December 31, 2021 and $7.0 billion at March 31, 2021.

Loans at March 31, 2022 were $3.80 billion, an increase of $84.3 million, or 2.3%, compared to $3.72 billion at March 31, 2021. Our PPP loans, a component of the commercial loan category, decreased $207.0 million over that period due to forgiveness payments received for loans funded under the Coronavirus Aid, Relief, and Economic Security Act. Excluding PPP loans, total loans increased $291.3 million, or 8.3%, due to increases of $374.0 million in commercial real estate loans, $48.8 million in municipal loans and $43.4 million in commercial loans (excluding PPP loans). The increases were partially offset by decreases of $115.5 million in construction loans, $52.6 million in 1-4 family residential loans and $6.8 million in loans to individuals. Excluding a $17.1 million decrease in PPP loans during the quarter, linked quarter loans increased $172.9 million, or 4.8%, due to increases of $124.4 million in commercial real estate loans, $42.3 million in construction loans and $12.1 million in municipal loans. This was partially offset by decreases of $3.3 million in 1-4 family residential loans, $1.9 million in loans to individuals and $0.7 million in commercial loans (excluding PPP loans).

Securities at March 31, 2022 were $2.54 billion, a decrease of $104.8 million, or 4.0%, compared to $2.65 billion at March 31, 2021. Linked quarter, securities decreased $314.8 million, or 11.0%, from $2.86 billion at December 31, 2021, a result of the increase in the unrealized loss in the portfolio, sales of securities, and principal payments, which more than offset the securities purchased during the quarter. During the first quarter, we sold approximately $99 million U.S. Agency MBS and $68.1 million U.S. Treasury Notes due to the rising rate environment. In March of 2022, we transferred AFS taxable municipal securities with fair values of approximately $385.8 million, to held to maturity (“HTM”). Subsequent to the end of the quarter, on April 1, 2022, we transferred tax-free municipal securities and U.S. Agency MBS with fair values of approximately $247.7 million and $28.3 million, respectively, to HTM. All transfers from AFS to HTM were at the fair market value on the date of transfer. There was no impact to the income statement as a result of these transfers.

Deposits at March 31, 2022 were $6.07 billion, an increase of $977.8 million, or 19.2%, compared to $5.09 billion at March 31, 2021. Linked quarter, deposits increased $348.1 million, or 6.1%, from $5.72 billion at December 31, 2021. During the three months ended March 31, 2022, brokered deposits increased $380.8 million, or 129.2%, compared to December 31, 2021, and $594.6 million, or 734.3%, compared to March 31, 2021, associated with funding our cash flow hedge swaps in place of the Federal Home Loan Bank advances to obtain lower cost funding.

On March 1, 2022, our board of directors approved a Stock Repurchase Plan, authorizing the repurchase, from time to time, of up to 1.0 million shares of the Company’s outstanding common stock. Repurchases may be carried out in open market purchases, privately negotiated transactions or pursuant to any trading plan that might be adopted in accordance with Rule 10b5-1 of the Exchange Act. The Company has no obligation to repurchase any shares under the Stock Repurchase Plan and may suspend or discontinue the plan at any time. As of March 31, 2022, we had purchased 82,285 shares of common stock at an average price of $40.81 pursuant to the Stock Repurchase Plan. Subsequent to March 31, 2022 and through April 22, 2022, we purchased 139,737 shares of common stock at an average price of $39.67 pursuant to the Stock Repurchase Plan.

Asset Quality

Nonperforming assets at March 31, 2022 were $11.5 million, or 0.16% of total assets, a decrease of $3.9 million, or 25.5%, compared to $15.4 million, or 0.22% of total assets, at March 31, 2021, and a slight decrease from $11.6 million, or 0.16% of total assets, at December 31, 2021. During the three months ended March 31, 2022, nonaccrual loans decreased $0.2 million, or 7.1%.

The allowance for loan losses decreased to $35.5 million, or 0.93% of total loans, at March 31, 2022, compared to $41.5 million, or 1.12% of total loans, at March 31, 2021. The decrease was primarily due to an improved economic forecast and improved asset quality. The allowance for loan losses was $35.3 million, or 0.97% of total loans, at December 31, 2021.

We recorded a provision for credit losses for loans of $0.3 million for the three months ended March 31, 2022, compared to reversals of provision for credit losses for loans of $7.4 million and $2.7 million for the three months ended March 31, 2021 and December 31, 2021, respectively. Net charge-offs were $15,000 for the three months ended March 31, 2022, compared to $0.2 million for the three months ended March 31, 2021 and $34,000 for the three months ended December 31, 2021.

We recorded a provision for credit losses for off-balance-sheet credit exposures of $28,000 for the three months ended March 31, 2022, compared to reversals of provision of $2.8 million and $0.7 million for the three months ended March 31, 2021 and December 31, 2021, respectively. The balance of the allowance for off-balance-sheet credit exposures at March 31, 2022 was $2.4 million and is included in other liabilities.

Dividend

Southside Bancshares, Inc. declared a first quarter cash dividend of $0.34 per share on February 3, 2022, which was paid on March 3, 2022, to all shareholders of record as of February 17, 2022.

(1) Refer to “Non-GAAP Financial Measures” below and to “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for more information and 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 first quarter ended March 31, 2022 financial results on Tuesday, April 26, 2022 at 11:00 a.m. CDT. The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 2435789 or by identifying “Southside Bancshares, Inc., First Quarter 2022 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 April 26, 2022 through 2:00 p.m. CDT May 8, 2022 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 $7.12 billion in assets as of March 31, 2022, that owns 100% of Southside Bank.  Southside Bank currently has 56 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, the impacts related to or resulting from Russia’s invasion of Ukraine 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 ongoing 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, our ability to manage liquidity in a rapidly changing and unpredictable market, supply chain disruptions, labor shortages and 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, 2021, 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)

  As of
    2022       2021  
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
ASSETS                  
Cash and due from banks $ 90,399     $ 91,120     $ 83,346     $ 92,047     $ 78,304  
Interest earning deposits   72,158       110,633       3,787       36,441       29,319  
Federal funds sold   24,550                          
Securities available for sale, at estimated fair value   2,065,984       2,764,325       2,753,104       2,766,035       2,546,924  
Securities held to maturity, at net carrying value   474,319       90,780       92,479       94,850       98,159  
Total securities   2,540,303       2,855,105       2,845,583       2,860,885       2,645,083  
Federal Home Loan Bank stock, at cost   3,757       14,375       27,248       28,081       18,754  
Loans held for sale   1,576       1,684       1,131       2,510       2,615  
Loans   3,800,916       3,645,162       3,647,585       3,642,346       3,716,598  
Less: Allowance for loan losses   (35,524 )     (35,273 )     (38,022 )     (42,913 )     (41,454 )
Net loans   3,765,392       3,609,889       3,609,563       3,599,433       3,675,144  
Premises & equipment, net   142,880       142,509       142,736       142,835       144,628  
Goodwill   201,116       201,116       201,116       201,116       201,116  
Other intangible assets, net   6,273       6,895       7,553       8,248       8,978  
Bank owned life insurance   131,923       131,232       130,522       116,886       116,209  
Other assets   138,788       95,044       83,106       93,926       78,736  
Total assets $ 7,119,115     $ 7,259,602     $ 7,135,691     $ 7,182,408     $ 6,998,886  
                   
LIABILITIES AND SHAREHOLDERS’ EQUITY                  
Noninterest bearing deposits $ 1,630,056     $ 1,644,775     $ 1,596,781     $ 1,501,120     $ 1,383,371  
Interest bearing deposits   4,440,343       4,077,552       3,734,874       3,655,047       3,709,272  
Total deposits   6,070,399       5,722,327       5,331,655       5,156,167       5,092,643  
Other borrowings and Federal Home Loan Bank borrowings   34,067       367,257       679,928       745,151       687,845  
Subordinated notes, net of unamortized debt
issuance costs
  98,569       98,534       98,500       197,312       197,268  
Trust preferred subordinated debentures, net of unamortized debt issuance costs   60,261       60,260       60,259       60,258       60,256  
Other liabilities   71,578       99,052       87,483       129,120       102,277  
Total liabilities   6,334,874       6,347,430       6,257,825       6,288,008       6,140,289  
Shareholders’ equity   784,241       912,172       877,866       894,400       858,597  
Total liabilities and shareholders’ equity $ 7,119,115     $ 7,259,602     $ 7,135,691     $ 7,182,408     $ 6,998,886  



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

  Three Months Ended
    2022       2021  
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
Income Statement:                  
Total interest income $ 53,873     $ 54,760     $ 55,076     $ 52,586     $ 53,565  
Total interest expense   4,967       5,359       6,870       6,939       7,262  
Net interest income   48,906       49,401       48,206       45,647       46,303  
Provision for (reversal of) credit losses   294       (3,421 )     (5,071 )     1,677       (10,149 )
Net interest income after provision for (reversal of) credit losses   48,612       52,822       53,277       43,970       56,452  
Noninterest income                  
Deposit services   6,628       6,855       6,779       6,609       6,125  
Net gain (loss) on sale of securities available for sale   (1,543 )     463       1,381       15       2,003  
Gain on sale of loans   178       356       299       393       593  
Trust fees   1,494       1,586       1,494       1,496       1,383  
Bank owned life insurance   691       710       637       645       626  
Brokerage services   809       907       846       850       780  
Other   2,468       1,134       1,333       925       2,113  
Total noninterest income   10,725       12,011       12,769       10,933       13,623  
Noninterest expense                  
Salaries and employee benefits   19,969       20,067       19,777       20,004       20,044  
Net occupancy   3,656       3,541       3,532       3,606       3,560  
Advertising, travel & entertainment   737       876       579       475       437  
ATM expense   281       345       311       272       238  
Professional fees   927       849       1,135       1,040       991  
Software and data processing   1,631       1,454       1,503       1,406       1,312  
Communications   503       544       552       612       525  
FDIC insurance   472       464       454       435       454  
Amortization of intangibles   622       658       695       730       766  
Loss on redemption of subordinated notes               1,118              
Other   2,397       2,536       2,107       2,119       2,907  
Total noninterest expense   31,195       31,334       31,763       30,699       31,234  
Income before income tax expense   28,142       33,499       34,283       24,204       38,841  
Income tax expense   3,146       4,812       4,977       2,887       4,750  
Net income $ 24,996     $ 28,687     $ 29,306     $ 21,317     $ 34,091  
                   
Common Share Data:      
Weighted-average basic shares outstanding   32,357       32,311       32,465       32,632       32,829  
Weighted-average diluted shares outstanding   32,537       32,487       32,556       32,799       32,937  
Common shares outstanding end of period   32,294       32,352       32,273       32,675       32,659  
Earnings per common share                  
Basic $ 0.77     $ 0.89     $ 0.90     $ 0.65     $ 1.04  
Diluted   0.77       0.88       0.90       0.65       1.04  
Book value per common share   24.28       28.20       27.20       27.37       26.29  
Tangible book value per common share (1)   17.86       21.77       20.74       20.97       19.86  
Cash dividends paid per common share   0.34       0.39       0.33       0.33       0.32  
                   
Selected Performance Ratios:                  
Return on average assets   1.40 %     1.57 %     1.61 %     1.20 %     1.99 %
Return on average shareholders’ equity   11.42       12.67       12.89       9.73       15.82  
Return on average tangible common equity (1)   15.20       16.80       17.10       13.13       21.22  
Average yield on earning assets (FTE) (1)   3.53       3.55       3.59       3.49       3.67  
Average rate on interest bearing liabilities   0.44       0.46       0.59       0.60       0.64  
Net interest margin (FTE) (1)   3.22       3.23       3.16       3.06       3.20  
Net interest spread (FTE) (1)   3.09       3.09       3.00       2.89       3.03  
Average earning assets to average interest bearing liabilities   141.93       141.21       138.86       137.85       135.56  
Noninterest expense to average total assets   1.75       1.72       1.75       1.73       1.82  
Efficiency ratio (FTE) (1)   48.15       47.61       47.92       50.31       50.44  

(1) Refer to “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.

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

  Three Months Ended
    2022       2021  
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
Nonperforming Assets: $ 11,455     $ 11,609     $ 12,424     $ 15,269     $ 15,367  
Nonaccrual loans   2,357       2,536       3,013       5,154       5,314  
Accruing loans past due more than 90 days                            
Troubled debt restructured loans   9,098       9,073       9,371       9,549       9,641  
Other real estate owned               25       566       412  
Repossessed assets               15              
                   
Asset Quality Ratios:                  
Ratio of nonaccruing loans to:                  
Total loans   0.06 %     0.07 %     0.08 %     0.14 %     0.14 %
Ratio of nonperforming assets to:                  
Total assets   0.16       0.16       0.17       0.21       0.22  
Total loans   0.30       0.32       0.34       0.42       0.41  
Total loans and OREO   0.30       0.32       0.34       0.42       0.41  
Total loans, excluding PPP loans, and OREO   0.30       0.32       0.35       0.43       0.44  
Ratio of allowance for loan losses to:                  
Nonaccruing loans   1,507.17       1,390.89       1,261.93       832.62       780.09  
Nonperforming assets   310.12       303.84       306.04       281.05       269.76  
Total loans   0.93       0.97       1.04       1.18       1.12  
Total loans, excluding PPP loans   0.94       0.98       1.06       1.22       1.19  
Net charge-offs (recoveries) to average loans outstanding               0.05       0.01       0.02  
                   
Capital Ratios:                  
Shareholders’ equity to total assets   11.02       12.57       12.30       12.45       12.27  
Common equity tier 1 capital   13.67       14.17       14.07       14.38       14.71  
Tier 1 risk-based capital   14.86       15.43       15.35       15.71       16.09  
Total risk-based capital   17.50       18.15       18.18       20.95       21.52  
Tier 1 leverage capital   10.39       10.33       10.14       10.21       10.29  
Period end tangible equity to period end tangible assets (1)   8.35       9.99       9.66       9.82       9.55  
Average shareholders’ equity to average total assets   12.28       12.42       12.51       12.38       12.56  

(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.

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

  Three Months Ended
    2022       2021  
Loan Portfolio Composition Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
Real Estate Loans:                  
Construction $ 490,166     $ 447,860     $ 422,095     $ 528,157     $ 605,677  
1-4 Family Residential   647,837       651,140       660,689       678,402       700,430  
Commercial   1,722,577       1,598,172       1,605,132       1,430,900       1,348,551  
Commercial Loans   401,144       418,998       443,708       497,513       564,745  
Municipal Loans   455,155       443,078       427,259       417,398       406,377  
Loans to Individuals   84,037       85,914       88,702       89,976       90,818  
Total Loans $ 3,800,916     $ 3,645,162     $ 3,647,585     $ 3,642,346     $ 3,716,598  
                   
Summary of Changes in Allowances:                  
Allowance for Loan Losses                  
Balance at beginning of period $ 35,273     $ 38,022     $ 42,913     $ 41,454     $ 49,006  
Loans charged-off   (555 )     (489 )     (940 )     (527 )     (795 )
Recoveries of loans charged-off   540       455       437       466       622  
Net loans (charged-off) recovered   (15 )     (34 )     (503 )     (61 )     (173 )
Provision for (reversal of) loan losses   266       (2,715 )     (4,388 )     1,520       (7,379 )
Balance at end of period $ 35,524     $ 35,273     $ 38,022     $ 42,913     $ 41,454  
                   
Allowance for Off-Balance-Sheet Credit Exposures                  
Balance at beginning of period $ 2,384     $ 3,090     $ 3,773     $ 3,616     $ 6,386  
Provision for (reversal of) off-balance-sheet credit exposures   28       (706 )     (683 )     157       (2,770 )
Balance at end of period $ 2,412     $ 2,384     $ 3,090     $ 3,773     $ 3,616  
Total Allowance for Credit Losses $ 37,936     $ 37,657     $ 41,112     $ 46,686     $ 45,070  

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

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

  Three Months Ended
  March 31, 2022   December 31, 2021
  Average
Balance
  Interest   Average
Yield/Rate
  Average
Balance
  Interest   Average
Yield/Rate
ASSETS                      
Loans (1) $ 3,703,980     $ 35,625   3.90 %   $ 3,668,767     $ 36,740   3.97 %
Loans held for sale   928       8   3.50 %     1,980       11   2.20 %
Securities:                      
Taxable investment securities (2)   644,706       4,608   2.90 %     590,104       4,215   2.83 %
Tax-exempt investment securities (2)   1,563,185       12,683   3.29 %     1,508,196       12,699   3.34 %
Mortgage-backed and related securities (2)   566,941       4,017   2.87 %     650,685       4,394   2.68 %
Total securities   2,774,832       21,308   3.11 %     2,748,985       21,308   3.08 %
Federal Home Loan Bank stock, at cost, and equity investments   20,677       113   2.22 %     38,832       175   1.79 %
Interest earning deposits   44,642       24   0.22 %     43,841       22   0.20 %
Federal funds sold   8,651       4   0.19 %              
Total earning assets   6,553,710       57,082   3.53 %     6,502,405       58,256   3.55 %
Cash and due from banks   107,144               103,126          
Accrued interest and other assets   607,235               662,654          
Less:  Allowance for loan losses   (35,636 )             (38,317 )        
Total assets $ 7,232,453             $ 7,229,868          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
Savings accounts $ 652,394       273   0.17 %   $ 624,377       264   0.17 %
Certificates of deposits   563,599       594   0.43 %     632,150       681   0.43 %
Interest bearing demand accounts   3,097,966       2,370   0.31 %     2,558,289       1,289   0.20 %
Total interest bearing deposits   4,313,959       3,237   0.30 %     3,814,816       2,234   0.23 %
Federal Home Loan Bank borrowings   122,783       366   1.21 %     609,310       1,758   1.14 %
Subordinated notes, net of unamortized debt issuance costs   98,552       998   4.11 %     98,517       1,011   4.07 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs   60,261       356   2.40 %     60,259       345   2.27 %
Repurchase agreements   21,494       10   0.19 %     21,874       11   0.20 %
Other borrowings   467                        
Total interest bearing liabilities   4,617,516       4,967   0.44 %     4,604,776       5,359   0.46 %
Noninterest bearing deposits   1,642,973               1,637,914          
Accrued expenses and other liabilities   84,009               88,982          
Total liabilities   6,344,498               6,331,672          
Shareholders’ equity   887,955               898,196          
Total liabilities and shareholders’ equity $ 7,232,453             $ 7,229,868          
Net interest income (FTE)     $ 52,115           $ 52,897    
Net interest margin (FTE)         3.22 %           3.23 %
Net interest spread (FTE)         3.09 %           3.09 %

(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, 2022 and December 31, 2021, loans totaling $2.4 million and $2.5 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.

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

  Three Months Ended
  September 30, 2021   June 30, 2021
  Average Balance   Interest   Average Yield/Rate   Average Balance   Interest   Average Yield/Rate
ASSETS                      
Loans (1) $ 3,662,496     $ 37,744   4.09 %   $ 3,706,959     $ 36,429   3.94 %
Loans held for sale   1,640       12   2.90 %     1,846       13   2.82 %
Securities:                      
Taxable investment securities (2)   532,679       3,853   2.87 %     396,504       2,921   2.95 %
Tax-exempt investment securities (2)   1,453,275       12,315   3.36 %     1,363,678       11,585   3.41 %
Mortgage-backed and related securities (2)   738,287       4,405   2.37 %     847,206       4,647   2.20 %
Total securities   2,724,241       20,573   3.00 %     2,607,388       19,153   2.95 %
Federal Home Loan Bank stock, at cost, and equity investments   39,786       111   1.11 %     35,883       108   1.21 %
Interest earning deposits   39,382       24   0.24 %     43,175       17   0.16 %
Total earning assets   6,467,545       58,464   3.59 %     6,395,251       55,720   3.49 %
Cash and due from banks   99,113               90,735          
Accrued interest and other assets   684,917               656,245          
Less:  Allowance for loan losses   (43,052 )             (41,768 )        
Total assets $ 7,208,523             $ 7,100,463          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
Savings accounts $ 598,118       249   0.17 %   $ 571,907       231   0.16 %
Certificates of deposit   629,718       789   0.50 %     658,708       936   0.57 %
Interest bearing demand accounts   2,496,037       1,196   0.19 %     2,459,335       1,172   0.19 %
Total interest bearing deposits   3,723,873       2,234   0.24 %     3,689,950       2,339   0.25 %
Federal Home Loan Bank borrowings   656,474       1,865   1.13 %     669,633       1,817   1.09 %
Subordinated notes, net of unamortized debt issuance costs   195,204       2,417   4.91 %     197,284       2,423   4.93 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs   60,258       345   2.27 %     60,257       349   2.32 %
Repurchase agreements   21,634       9   0.17 %     22,024       11   0.20 %
Total interest bearing liabilities   4,657,443       6,870   0.59 %     4,639,148       6,939   0.60 %
Noninterest bearing deposits   1,551,298               1,485,383          
Accrued expenses and other liabilities   97,954               97,137          
Total liabilities   6,306,695               6,221,668          
Shareholders’ equity   901,828               878,795          
Total liabilities and shareholders’ equity $ 7,208,523             $ 7,100,463          
Net interest income (FTE)     $ 51,594           $ 48,781    
Net interest margin (FTE)         3.16 %           3.06 %
Net interest spread (FTE)         3.00 %           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, 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)

  Three Months Ended
  March 31, 2021
  Average Balance   Interest   Average Yield/Rate
ASSETS          
Loans (1) $ 3,634,053     $ 36,754   4.10 %
Loans held for sale   2,803       20   2.89 %
Securities:          
Taxable investment securities (2)   295,968       2,323   3.18 %
Tax-exempt investment securities (2)   1,300,991       11,176   3.48 %
Mortgage-backed and related securities (2)   940,815       6,088   2.62 %
Total securities   2,537,774       19,587   3.13 %
Federal Home Loan Bank stock, at cost, and equity investments   35,635       136   1.55 %
Interest earning deposits   31,169       15   0.20 %
Total earning assets   6,241,434       56,512   3.67 %
Cash and due from banks   86,634          
Accrued interest and other assets   677,230          
Less:  Allowance for loan losses   (49,240 )        
Total assets $ 6,956,058          
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Savings accounts $ 517,182       209   0.16 %
Certificates of deposit   736,099       1,229   0.68 %
Interest bearing demand accounts   2,342,299       1,159   0.20 %
Total interest bearing deposits   3,595,580       2,597   0.29 %
Federal Home Loan Bank borrowings   727,513       1,908   1.06 %
Subordinated notes, net of unamortized debt issuance costs   197,252       2,395   4.92 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs   60,256       351   2.36 %
Repurchase agreements   23,522       11   0.19 %
Total interest bearing liabilities   4,604,123       7,262   0.64 %
Noninterest bearing deposits   1,389,020          
Accrued expenses and other liabilities   89,222          
Total liabilities   6,082,365          
Shareholders’ equity   873,693          
Total liabilities and shareholders’ equity $ 6,956,058          
Net interest income (FTE)     $ 49,250    
Net interest margin (FTE)         3.20 %
Net interest spread (FTE)         3.03 %

(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, 2021, loans totaling $5.3 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.

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.

  Three Months Ended
    2022       2021  
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
Reconciliation of return on average common equity to return on average tangible common equity:         
Net income $ 24,996     $ 28,687     $ 29,306     $ 21,317     $ 34,091  
After-tax amortization expense   491       520       549       577       605  
Adjusted net income available to common shareholders $ 25,487     $ 29,207     $ 29,855     $ 21,894     $ 34,696  
                   
Average shareholders’ equity $ 887,955     $ 898,196     $ 901,828     $ 878,795     $ 873,693  
Less: Average intangibles for the period   (207,774 )     (208,412 )     (209,097 )     (209,808 )     (210,563 )
Average tangible shareholders’ equity $ 680,181     $ 689,784     $ 692,731     $ 668,987     $ 663,130  
                   
Return on average tangible common equity   15.20 %     16.80 %     17.10 %     13.13 %     21.22 %
                   
Reconciliation of book value per share to tangible book value per share:         
Common equity at end of period $ 784,241     $ 912,172     $ 877,866     $ 894,400     $ 858,597  
Less: Intangible assets at end of period   (207,389 )     (208,011 )     (208,669 )     (209,364 )     (210,094 )
Tangible common shareholders’ equity at end of period $ 576,852     $ 704,161     $ 669,197     $ 685,036     $ 648,503  
                   
Total assets at end of period $ 7,119,115     $ 7,259,602     $ 7,135,691     $ 7,182,408     $ 6,998,886  
Less: Intangible assets at end of period   (207,389 )     (208,011 )     (208,669 )     (209,364 )     (210,094 )
Tangible assets at end of period $ 6,911,726     $ 7,051,591     $ 6,927,022     $ 6,973,044     $ 6,788,792  
                   
Period end tangible equity to period end tangible assets   8.35 %     9.99 %     9.66 %     9.82 %     9.55 %
                   
Common shares outstanding end of period   32,294       32,352       32,273       32,675       32,659  
Tangible book value per common share $ 17.86     $ 21.77     $ 20.74     $ 20.97     $ 19.86  
                   
Reconciliation of efficiency ratio to efficiency ratio (FTE), net interest margin to net interest margin (FTE) and net interest spread to net interest spread (FTE):         
Net interest income (GAAP) $ 48,906     $ 49,401     $ 48,206     $ 45,647     $ 46,303  
Tax equivalent adjustments:                  
Loans   745       740       722       722       736  
Tax-exempt investment securities   2,464       2,756       2,666       2,412       2,211  
Net interest income (FTE) (1)   52,115       52,897       51,594       48,781       49,250  
Noninterest income   10,725       12,011       12,769       10,933       13,623  
Nonrecurring income (2)   706       (463 )     (1,381 )     (15 )     (2,003 )
Total revenue $ 63,546     $ 64,445     $ 62,982     $ 59,699     $ 60,870  
                   
Noninterest expense $ 31,195     $ 31,334     $ 31,763     $ 30,699     $ 31,234  
Pre-tax amortization expense   (622 )     (658 )     (695 )     (730 )     (766 )
Nonrecurring expense (3)   22       8       (888 )     64       236  
Adjusted noninterest expense $ 30,595     $ 30,684     $ 30,180     $ 30,033     $ 30,704  
Efficiency ratio   50.71 %     50.34 %     50.64 %     53.09 %     53.01 %
Efficiency ratio (FTE) (1)   48.15 %     47.61 %     47.92 %     50.31 %     50.44 %
                   
Average earning assets $ 6,553,710     $ 6,502,405     $ 6,467,545     $ 6,395,251     $ 6,241,434  
Net interest margin   3.03 %     3.01 %     2.96 %     2.86 %     3.01 %
Net interest margin (FTE) (1)   3.22 %     3.23 %     3.16 %     3.06 %     3.20 %
Net interest spread   2.89 %     2.88 %     2.79 %     2.70 %     2.84 %
Net interest spread (FTE) (1)   3.09 %     3.09 %     3.00 %     2.89 %     3.03 %

(1) These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.
(2) These adjustments may include net gain or loss on sale of securities available for sale and other investment income or loss in the periods where applicable.
(3) These adjustments may include loss on redemption of subordinated notes, foreclosure expenses and branch closure expenses, in the periods where applicable.

 

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