Southside Bancshares, Inc. Announces Financial Results For The Second Quarter Ended June 30, 2022

  • Second quarter net income of $25.4 million;
  • Linked quarter loan growth, net of Paycheck Protection Program (“PPP”) loans, of 4.6%;
  • Linked quarter net interest margin (FTE) increased to 3.30%(1);
  • Annualized return on second quarter average assets of 1.42%;
  • Annualized return on second quarter average tangible common equity of 18.62%(1); and
  • Nonperforming assets remain low at 0.16% of total assets.

TYLER, Texas, July 25, 2022 (GLOBE NEWSWIRE) — Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended June 30, 2022. Southside reported net income of $25.4 million for the three months ended June 30, 2022, an increase of $4.1 million, or 19.2%, compared to $21.3 million for the same period in 2021. Earnings per diluted common share increased $0.14, or 21.5%, to $0.79 for the three months ended June 30, 2022, from $0.65 for the same period in 2021. The annualized return on average shareholders’ equity for the three months ended June 30, 2022 was 13.33%, compared to 9.73% for the same period in 2021.  The annualized return on average assets was 1.42% for the three months ended June 30, 2022, compared to 1.20% for the same period in 2021.

“Excellent second quarter financial results for 2022 were highlighted by net income of $25.4 million, earnings per diluted common share of $0.79, annualized linked quarter loan growth of 18%, net of PPP loans, an eight basis point increase in our net interest margin, continued strong asset quality metrics and an efficiency ratio of 47.74%,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “The economic conditions and growth prospects for the markets we serve, even against the headwinds of inflation, continue to reflect a solid and positive overall outlook. Increasing interest rates and rising building costs have taken some of the steam out of the highly robust single family housing market, however there continues to be a shortage of housing in several Texas markets. Loan growth during the first half of the year has been extremely strong. Some of the second quarter loan growth may have a short duration and we anticipate modestly higher loan pay-offs in the second half of this year when compared to the first half. As a result we anticipate loan growth in the second half of the year will slow from the levels we experienced during the first half of the year.”

Operating Results for the Three Months Ended June 30, 2022

Net income was $25.4 million for the three months ended June 30, 2022, compared to $21.3 million for the same period in 2021, an increase of $4.1 million, or 19.2%. Earnings per diluted common share were $0.79 and $0.65 for the three months ended June 30, 2022 and 2021, respectively. The increase in net income was primarily a result of an increase in interest income and a reversal of provision for credit losses, partially offset by net losses on sales of securities available for sale (“AFS”). For the three months ended June 30, 2022, we reversed $0.6 million of provision for credit losses compared to a provision for credit losses of $1.7 million for the same period in 2021. Annualized returns on average assets and average shareholders’ equity for the three months ended June 30, 2022 were 1.42% and 13.33%, respectively, compared to 1.20% and 9.73%, respectively, for the three months ended June 30, 2021.  Our efficiency ratio and tax equivalent efficiency ratio(1) were 50.61% and 47.74%, respectively, for the three months ended June 30, 2022, compared to 53.09% and 50.31%, respectively, for the three months ended June 30, 2021, and 50.71% and 48.15%, respectively, for the three months ended March 31, 2022.

Net interest income for the three months ended June 30, 2022 was $51.1 million, compared to $45.6 million for the same period in 2021, an increase of 11.9%. The increase in net interest income compared to the same period in 2021 was due to the increase in interest income, a result of the increase in the yield and the average balance of interest earning assets, and a decrease in interest expense on our interest bearing liabilities due to the change in the mix of our interest bearing liabilities, partially offset by a decrease in the interest income from PPP loans. Linked quarter, net interest income increased $2.2 million, or 4.4%, compared to $48.9 million during the three months ended March 31, 2022. The increase in net interest income was primarily due to an increase in the average balance and yield on our loans.

Our net interest margin and tax equivalent net interest margin(1) increased to 3.07% and 3.30%, respectively, for the three months ended June 30, 2022, compared to 2.86% and 3.06%, respectively, for the same period in 2021. Linked quarter, net interest margin increased four basis points from 3.03% and tax equivalent net interest margin(1) increased eight basis points from 3.22% for the three months ended March 31, 2022.

Noninterest income was $9.1 million for the three months ended June 30, 2022, a decrease of $1.8 million, or 16.8%, compared to $10.9 million for the same period in 2021. The decrease was due to a net loss on sale of securities AFS of $2.2 million for the three months ended June 30, 2022, compared to a net gain of $15,000 for the same period in 2021 and a decrease in gain on sale of loans, partially offset by increases in other noninterest income and brokerage services income. On a linked quarter basis, noninterest income decreased $1.6 million, or 15.2%, compared to the three months ended March 31, 2022. The decrease was due to a decrease in other noninterest income and additional net losses on sale of securities AFS.

Noninterest expense increased $1.4 million, or 4.6%, to $32.1 million for the three months ended June 30, 2022, compared to $30.7 million for the same period in 2021. The increase was primarily the result of increases in other noninterest expense, salaries and employee benefits, software and data processing expense and advertising, travel and entertainment expense. On a linked quarter basis, noninterest expense increased $0.9 million, or 2.9%, compared to the three months ended March 31, 2022.

Income tax expense increased $0.4 million, or 14.2%, for the three months ended June 30, 2022, compared to the same period in 2021. On a linked quarter basis, income tax expense increased $0.2 million, or 4.8%. Our effective tax rate (“ETR”) decreased to 11.5% for the three months ended June 30, 2022, compared to 11.9% for the three months ended June 30, 2021, and increased from 11.2% for the three months ended March 31, 2022.

Operating Results for the Six Months Ended June 30, 2022

Net income was $50.4 million for the six months ended June 30, 2022, compared to $55.4 million for the same period in 2021, a decrease of $5.0 million, or 9.0%. Earnings per diluted common share were $1.56 for the six months ended June 30, 2022, compared to $1.69 for the same period in 2021, a decrease of 7.7%. The decrease in net income was largely driven by a decrease in the reversals of provision for credit losses and the net losses on the sale of securities AFS, partially offset by the increase in net interest income. For the six months ended June 30, 2022, we reversed $0.3 million of provision for credit losses compared to a reversal of provision for credit losses of $8.5 million for the same period in 2021. Annualized returns on average assets and average shareholders’ equity for the six months ended June 30, 2022 were 1.41% and 12.31%, respectively, compared to 1.59% and 12.75%, respectively, for the six months ended June 30, 2021.  Our efficiency ratio and tax equivalent efficiency ratio(1) were 50.66% and 47.94%, respectively, for the six months ended June 30, 2022, compared to 53.05% and 50.38%, respectively, for the six months ended June 30, 2021.

Net interest income was $100.0 million for the six months ended June 30, 2022, compared to $92.0 million for the same period in 2021, due to the increase in interest income, a result of the increase in the average balance of investment securities and loans, and the decrease in interest expense on our interest bearing liabilities due to the change in the mix of our interest bearing liabilities, partially offset by a decrease in the interest income from PPP loans.

Our net interest margin and tax equivalent net interest margin(1) were 3.05% and 3.26%, respectively, for the six months ended June 30, 2022, compared to 2.93% and 3.13%, respectively, for the same period in 2021. The increase in net interest margin was due to lower average rates on our interest bearing liabilities and higher average balances on our interest earning assets during the six months ended June 30, 2022.

Noninterest income was $19.8 million for the six months ended June 30, 2022, a decrease of 19.3%, compared to $24.6 million for the same period in 2021. The decrease was due to the net loss on sale of securities AFS of $3.7 million for the six months ended June 30, 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 other noninterest income, deposit services income and brokerage services income.

Noninterest expense was $63.3 million for the six months ended June 30, 2022, compared to $61.9 million for the same period in 2021, an increase of $1.4 million, or 2.2%. The increase was the result of increases in software and data processing expense, advertising, travel and entertainment expense, salaries and employee benefits, partially offset by a decrease in the amortization of intangibles.

Income tax expense decreased $1.2 million, or 15.6%, for the six months ended June 30, 2022, compared to the same period in 2021. Our ETR was approximately 11.3% and 12.1% for the six months ended June 30, 2022 and 2021, respectively. The lower ETR for the six months ended June 30, 2022, as compared to the same period in 2021, was primarily due to an increase in tax-exempt income as a percentage of pre-tax income.

Balance Sheet Data

At June 30, 2022, we had $7.61 billion in total assets, compared to $7.26 billion at December 31, 2021 and $7.18 billion at June 30, 2021.

Loans at June 30, 2022 were $3.96 billion, an increase of $320.7 million, or 8.8%, compared to $3.64 billion at June 30, 2021. Our PPP loans, a component of the commercial loan category, decreased $129.1 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 $449.8 million, or 12.8%, due to increases of $403.8 million in commercial real estate loans, $60.6 million in commercial loans (excluding PPP loans) and $39.8 million in municipal loans. The increases were partially offset by decreases of $37.7 million in 1-4 family residential loans, $9.1 million in loans to individuals and $7.6 million in construction loans. Excluding a $10.9 million decrease in PPP loans during the quarter, linked quarter loans increased $173.0 million, or 4.6%, due to increases of $112.1 million in commercial real estate loans, $38.7 million in commercial loans (excluding PPP loans), $30.3 million in construction loans and $2.1 million in municipal loans. These increases were partially offset by decreases of $7.1 million in 1-4 family residential loans and $3.1 million in loans to individuals.      

Securities at June 30, 2022 were $2.82 billion, a decrease of $43.9 million, or 1.5%, compared to $2.86 billion at June 30, 2021. Linked quarter, securities increased $276.7 million, or 10.9%, from $2.54 billion at March 31, 2022, a result of purchases during the quarter that more than offset the sales of securities, principal payments and increase in the unrealized losses in the portfolio. During the second quarter, we transferred additional municipal securities, corporate bonds and U.S. Agency MBS with fair values of approximately $489.1 million, $95.3 million and $28.3 million, respectively, to held to maturity (“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 June 30, 2022 were $6.25 billion, an increase of $1.09 billion, or 21.2%, compared to $5.16 billion at June 30, 2021. Linked quarter, deposits increased $178.0 million, or 2.9%, from $6.07 billion at March 31, 2022. During the three months ended June 30, 2022, brokered deposits decreased $15.9 million, or 2.4%, compared to March 31, 2022, and increased $602.2 million, or 1,047.8%, compared to June 30, 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. During the second quarter ended June 30, 2022, we purchased 223,901 shares of common stock at an average price of $39.49 pursuant to the Stock Repurchase Plan. Subsequent to June 30, 2022 and through July 21, 2022, we purchased 8,613 shares of common stock at an average price of $35.93 pursuant to the Stock Repurchase Plan.

Asset Quality

Nonperforming assets at June 30, 2022 were $11.8 million, or 0.16% of total assets, a decrease of $3.5 million, or 22.6%, compared to $15.3 million, or 0.21% of total assets, at June 30, 2021, and an increase from $11.5 million, or 0.16% of total assets, at March 31, 2022. During the three months ended June 30, 2022, nonaccrual loans increased $0.8 million, or 32.3%, partially offset by a decrease in troubled debt restructured loans of $0.5 million, or 5.8%.

The allowance for loan losses decreased to $35.4 million, or 0.89% of total loans, at June 30, 2022, compared to $42.9 million, or 1.18% of total loans, at June 30, 2021. The decrease was primarily due to an improved economic forecast and improved asset quality, offset slightly by continued economic uncertainty related to inflation and recessionary concerns.   The allowance for loan losses was $35.5 million, or 0.93% of total loans, at March 31, 2022.

We recorded a reversal of provision for credit losses for loans of $0.1 million and a provision of $1.5 million for the three month periods ended June 30, 2022 and 2021, respectively, compared to a provision of $0.3 million for the three months ended March 31, 2022. Net recoveries were $37,000 for the three months ended June 30, 2022, compared to net charge-offs of $61,000 for the three months ended June 30, 2021 and $15,000 for the three months ended March 31, 2022. Net recoveries were $22,000 for the six months ended June 30, 2022, compared to net charge-offs of $0.2 million for the six months ended June 30, 2021.

We recorded a reversal of provision for credit losses for off-balance-sheet credit exposures of $0.5 million and a provision of $0.2 million for the three month periods ended June 30, 2022 and 2021, respectively, compared to a provision of $28,000 for the three months ended March 31, 2022. For the six months ended June 30, 2022 and 2021, we recorded reversals of provision of $0.5 million and $2.6 million, respectively. The balance of the allowance for off-balance-sheet credit exposures at June 30, 2022 was $1.9 million and is included in other liabilities.

Dividend

Southside Bancshares, Inc. declared a second quarter cash dividend of $0.34 per share on May 5, 2022, which was paid on June 2, 2022, to all shareholders of record as of May 19, 2022.

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(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 second quarter ended June 30, 2022 financial results on Monday, July 25, 2022 at 11:00 a.m. CDT.  The conference call can be accessed by webcast, for listen-only mode, on the company website, https://investors.southside.com.

Those interested in participating in the question and answer session, or others who prefer to call-in, can register at https://register.vevent.com/register/BI5d7ab17357d44179bd7d475623aa4f69 to receive the dial-in number and unique code to access the conference call seamlessly. While not required, it is recommended that those wishing to participate register 10 minutes prior to the conference call to ensure a more efficient registration process.

For those unable to attend the live event, a webcast recording will be available on the company website, https://investors.southside.com, for at least 30 days, beginning approximately two hours following the conference call.

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 $7.61 billion in assets as of June 30, 2022, that owns 100% of Southside Bank.  Southside Bank currently has 56 branches in Texas and operates a network of 74 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 significant 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 local, national and global 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, heightened inflation, labor shortages and interest rate increases 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  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
ASSETS                  
Cash and due from banks $ 111,099     $ 90,399     $ 91,120     $ 83,346     $ 92,047  
Interest earning deposits   12,910       72,158       110,633       3,787       36,441  
Federal funds sold   48,280       24,550                    
Securities available for sale, at estimated fair value   1,733,354       2,065,984       2,764,325       2,753,104       2,766,035  
Securities held to maturity, at net carrying value   1,083,672       474,319       90,780       92,479       94,850  
Total securities   2,817,026       2,540,303       2,855,105       2,845,583       2,860,885  
Federal Home Loan Bank stock, at cost   13,726       3,757       14,375       27,248       28,081  
Loans held for sale   815       1,576       1,684       1,131       2,510  
Loans   3,963,041       3,800,916       3,645,162       3,647,585       3,642,346  
Less: Allowance for loan losses   (35,449 )     (35,524 )     (35,273 )     (38,022 )     (42,913 )
Net loans   3,927,592       3,765,392       3,609,889       3,609,563       3,599,433  
Premises & equipment, net   142,772       142,880       142,509       142,736       142,835  
Goodwill   201,116       201,116       201,116       201,116       201,116  
Other intangible assets, net   5,687       6,273       6,895       7,553       8,248  
Bank owned life insurance   132,675       131,923       131,232       130,522       116,886  
Other assets   192,363       138,788       95,044       83,106       93,926  
Total assets $ 7,606,061     $ 7,119,115     $ 7,259,602     $ 7,135,691     $ 7,182,408  
                   
LIABILITIES AND SHAREHOLDERS’ EQUITY                  
Noninterest bearing deposits $ 1,735,488     $ 1,630,056     $ 1,644,775     $ 1,596,781     $ 1,501,120  
Interest bearing deposits   4,512,921       4,440,343       4,077,552       3,734,874       3,655,047  
Total deposits   6,248,409       6,070,399       5,722,327       5,331,655       5,156,167  
Other borrowings and Federal Home Loan Bank borrowings   212,179       34,067       367,257       679,928       745,151  
Subordinated notes, net of unamortized debt issuance costs   98,604       98,569       98,534       98,500       197,312  
Trust preferred subordinated debentures, net of unamortized debt issuance costs   60,262       60,261       60,260       60,259       60,258  
Other liabilities   254,825       71,578       99,052       87,483       129,120  
Total liabilities   6,874,279       6,334,874       6,347,430       6,257,825       6,288,008  
Shareholders’ equity   731,782       784,241       912,172       877,866       894,400  
Total liabilities and shareholders’ equity $ 7,606,061     $ 7,119,115     $ 7,259,602     $ 7,135,691     $ 7,182,408  

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

  Three Months Ended
    2022       2021  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
Income Statement:                  
Total interest income $ 57,100     $ 53,873     $ 54,760     $ 55,076     $ 52,586  
Total interest expense   6,022       4,967       5,359       6,870       6,939  
Net interest income   51,078       48,906       49,401       48,206       45,647  
Provision for (reversal of) credit losses   (633 )     294       (3,421 )     (5,071 )     1,677  
Net interest income after provision for (reversal of) credit losses   51,711       48,612       52,822       53,277       43,970  
Noninterest income                  
Deposit services   6,496       6,628       6,855       6,779       6,609  
Net gain (loss) on sale of securities available for sale   (2,177 )     (1,543 )     463       1,381       15  
Gain on sale of loans   208       178       356       299       393  
Trust fees   1,520       1,494       1,586       1,494       1,496  
Bank owned life insurance   720       691       710       637       645  
Brokerage services   1,098       809       907       846       850  
Other   1,232       2,468       1,134       1,333       925  
    Total noninterest income   9,097       10,725       12,011       12,769       10,933  
Noninterest expense                  
Salaries and employee benefits   20,329       19,969       20,067       19,777       20,004  
Net occupancy   3,654       3,656       3,541       3,532       3,606  
Advertising, travel & entertainment   716       737       876       579       475  
ATM expense   356       281       345       311       272  
Professional fees   1,147       927       849       1,135       1,040  
Software and data processing   1,739       1,631       1,454       1,503       1,406  
Communications   509       503       544       552       612  
FDIC insurance   477       472       464       454       435  
Amortization of intangibles   586       622       658       695       730  
Loss on redemption of subordinated notes                     1,118        
Other   2,593       2,397       2,536       2,107       2,119  
    Total noninterest expense   32,106       31,195       31,334       31,763       30,699  
Income before income tax expense   28,702       28,142       33,499       34,283       24,204  
Income tax expense   3,297       3,146       4,812       4,977       2,887  
Net income $ 25,405     $ 24,996     $ 28,687     $ 29,306     $ 21,317  
                   
Common Share Data:      
Weighted-average basic shares outstanding   32,119       32,357       32,311       32,465       32,632  
Weighted-average diluted shares outstanding   32,251       32,537       32,487       32,556       32,799  
Common shares outstanding end of period   32,108       32,294       32,352       32,273       32,675  
Earnings per common share                  
Basic $ 0.79     $ 0.77     $ 0.89     $ 0.90     $ 0.65  
Diluted   0.79       0.77       0.88       0.90       0.65  
Book value per common share   22.79       24.28       28.20       27.20       27.37  
Tangible book value per common share(1)   16.35       17.86       21.77       20.74       20.97  
Cash dividends paid per common share   0.34       0.34       0.39       0.33       0.33  
                   
Selected Performance Ratios:                  
Return on average assets   1.42 %     1.40 %     1.57 %     1.61 %     1.20 %
Return on average shareholders’ equity   13.33       11.42       12.67       12.89       9.73  
Return on average tangible common equity(1)   18.62       15.20       16.80       17.10       13.13  
Average yield on earning assets (FTE)(1)   3.66       3.53       3.55       3.59       3.49  
Average rate on interest bearing liabilities   0.52       0.44       0.46       0.59       0.60  
Net interest margin (FTE)(1)   3.30       3.22       3.23       3.16       3.06  
Net interest spread (FTE)(1)   3.14       3.09       3.09       3.00       2.89  
Average earning assets to average interest bearing liabilities   144.54       141.93       141.21       138.86       137.85  
Noninterest expense to average total assets   1.79       1.75       1.72       1.75       1.73  
Efficiency ratio (FTE)(1)   47.74       48.15       47.61       47.92       50.31  

(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  
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
Nonperforming Assets: $ 11,815     $ 11,455     $ 11,609     $ 12,424     $ 15,269  
Nonaccrual loans   3,119       2,357       2,536       3,013       5,154  
Accruing loans past due more than 90 days                            
Troubled debt restructured loans   8,568       9,098       9,073       9,371       9,549  
Other real estate owned   128                   25       566  
Repossessed assets                     15        
                   
Asset Quality Ratios:                  
Ratio of nonaccruing loans to:                  
Total loans   0.08 %     0.06 %     0.07 %     0.08 %     0.14 %
Ratio of nonperforming assets to:                  
Total assets   0.16       0.16       0.16       0.17       0.21  
Total loans   0.30       0.30       0.32       0.34       0.42  
Total loans and OREO   0.30       0.30       0.32       0.34       0.42  
Total loans, excluding PPP loans, and OREO   0.30       0.30       0.32       0.35       0.43  
Ratio of allowance for loan losses to:                  
Nonaccruing loans   1,136.55       1,507.17       1,390.89       1,261.93       832.62  
Nonperforming assets   300.03       310.12       303.84       306.04       281.05  
Total loans   0.89       0.93       0.97       1.04       1.18  
Total loans, excluding PPP loans   0.90       0.94       0.98       1.06       1.22  
Net charge-offs (recoveries) to average loans outstanding                     0.05       0.01  
                   
Capital Ratios:                  
Shareholders’ equity to total assets   9.62       11.02       12.57       12.30       12.45  
Common equity tier 1 capital   12.83       13.67       14.17       14.07       14.38  
Tier 1 risk-based capital   13.94       14.86       15.43       15.35       15.71  
Total risk-based capital   16.38       17.50       18.15       18.18       20.95  
Tier 1 leverage capital   10.34       10.39       10.33       10.14       10.21  
Period end tangible equity to period end tangible assets(1)   7.10       8.35       9.99       9.66       9.82  
Average shareholders’ equity to average total assets   10.64       12.28       12.42       12.51       12.38  

(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 Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
Real Estate Loans:                  
Construction $ 520,484     $ 490,166     $ 447,860     $ 422,095     $ 528,157  
1-4 Family Residential   640,706       647,837       651,140       660,689       678,402  
Commercial   1,834,734       1,722,577       1,598,172       1,605,132       1,430,900  
Commercial Loans   428,974       401,144       418,998       443,708       497,513  
Municipal Loans   457,239       455,155       443,078       427,259       417,398  
Loans to Individuals   80,904       84,037       85,914       88,702       89,976  
Total Loans $ 3,963,041     $ 3,800,916     $ 3,645,162     $ 3,647,585     $ 3,642,346  
                   
Summary of Changes in Allowances:                  
Allowance for Loan Losses                  
Balance at beginning of period $ 35,524     $ 35,273     $ 38,022     $ 42,913     $ 41,454  
Loans charged-off   (479 )     (555 )     (489 )     (940 )     (527 )
Recoveries of loans charged-off   516       540       455       437       466  
Net loans (charged-off) recovered   37       (15 )     (34 )     (503 )     (61 )
Provision for (reversal of) loan losses   (112 )     266       (2,715 )     (4,388 )     1,520  
Balance at end of period $ 35,449     $ 35,524     $ 35,273     $ 38,022     $ 42,913  
                   
Allowance for Off-Balance-Sheet Credit Exposures                  
Balance at beginning of period $ 2,412     $ 2,384     $ 3,090     $ 3,773     $ 3,616  
Provision for (reversal of) off-balance-sheet credit exposures   (521 )     28       (706 )     (683 )     157  
Balance at end of period $ 1,891     $ 2,412     $ 2,384     $ 3,090     $ 3,773  
Total Allowance for Credit Losses $ 37,340     $ 37,936     $ 37,657     $ 41,112     $ 46,686  

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

  Six Months Ended
  June 30,
    2022       2021  
Income Statement:      
Total interest income $ 110,973     $ 106,151  
Total interest expense   10,989       14,201  
Net interest income   99,984       91,950  
Provision for (reversal of) credit losses   (339 )     (8,472 )
Net interest income after provision for (reversal of) credit losses   100,323       100,422  
Noninterest income      
Deposit services   13,124       12,734  
Net gain on sale of securities available for sale   (3,720 )     2,018  
Gain on sale of loans   386       986  
Trust fees   3,014       2,879  
Bank owned life insurance   1,411       1,271  
Brokerage services   1,907       1,630  
Other   3,700       3,038  
Total noninterest income   19,822       24,556  
Noninterest expense      
Salaries and employee benefits   40,298       40,048  
Net occupancy   7,310       7,166  
Advertising, travel & entertainment   1,453       912  
ATM expense   637       510  
Professional fees   2,074       2,031  
Software and data processing   3,370       2,718  
Communications   1,012       1,137  
FDIC insurance   949       889  
Amortization of intangibles   1,208       1,496  
Other   4,990       5,026  
Total noninterest expense   63,301       61,933  
Income before income tax expense   56,844       63,045  
Income tax expense   6,443       7,637  
Net income $ 50,401     $ 55,408  
       
Common Share Data:      
Weighted-average basic shares outstanding   32,237       32,730  
Weighted-average diluted shares outstanding   32,394       32,860  
Common shares outstanding end of period   32,108       32,675  
Earnings per common share      
Basic $ 1.56     $ 1.69  
Diluted   1.56       1.69  
Book value per common share   22.79       27.37  
Tangible book value per common share(1)   16.35       20.97  
Cash dividends paid per common share   0.68       0.65  
       
Selected Performance Ratios:      
Return on average assets   1.41 %     1.59 %
Return on average shareholders’ equity   12.31       12.75  
Return on average tangible common equity(1)   16.75       17.13  
Average yield on earning assets (FTE)(1)   3.60       3.58  
Average rate on interest bearing liabilities   0.48       0.62  
Net interest margin (FTE)(1)   3.26       3.13  
Net interest spread (FTE)(1)   3.12       2.96  
Average earning assets to average interest bearing liabilities   143.24       136.72  
Noninterest expense to average total assets   1.77       1.78  
Efficiency ratio (FTE)(1)   47.94       50.38  

(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)

  Six Months Ended
  June 30,
    2022       2021  
Nonperforming Assets: $ 11,815     $ 15,269  
Nonaccrual loans   3,119       5,154  
Accruing loans past due more than 90 days          
Troubled debt restructured loans   8,568       9,549  
Other real estate owned   128       566  
Repossessed assets          
       
Asset Quality Ratios:      
Ratio of nonaccruing loans to:      
Total loans   0.08 %     0.14 %
Ratio of nonperforming assets to:      
Total assets   0.16       0.21  
Total loans   0.30       0.42  
Total loans and OREO   0.30       0.42  
Total loans, excluding PPP loans, and OREO   0.30       0.43  
Ratio of allowance for loan losses to:      
Nonaccruing loans   1,136.55       832.62  
Nonperforming assets   300.03       281.05  
Total loans   0.89       1.18  
Total loans, excluding PPP loans   0.90       1.22  
Net charge-offs (recoveries) to average loans outstanding         0.01  
       
Capital Ratios:      
Shareholders’ equity to total assets   9.62       12.45  
Common equity tier 1 capital   12.83       14.38  
Tier 1 risk-based capital   13.94       15.71  
Total risk-based capital   16.38       20.95  
Tier 1 leverage capital   10.34       10.21  
Period end tangible equity to period end tangible assets(1)   7.10       9.82  
Average shareholders’ equity to average total assets   11.47       12.47  

(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)

  Six Months Ended
  June 30,
Loan Portfolio Composition   2022       2021  
Real Estate Loans:      
Construction $ 520,484     $ 528,157  
1-4 Family Residential   640,706       678,402  
Commercial   1,834,734       1,430,900  
Commercial Loans   428,974       497,513  
Municipal Loans   457,239       417,398  
Loans to Individuals   80,904       89,976  
Total Loans $ 3,963,041     $ 3,642,346  
       
Summary of Changes in Allowances:      
Allowance for Loan Losses      
Balance at beginning of period $ 35,273     $ 49,006  
Loans charged-off   (1,034 )     (1,322 )
Recoveries of loans charged-off   1,056       1,088  
Net loans (charged-off) recovered   22       (234 )
Provision for (reversal of) loan losses   154       (5,859 )
Balance at end of period $ 35,449     $ 42,913  
       
Allowance for Off-Balance-Sheet Credit Exposures      
Balance at beginning of period $ 2,384     $ 6,386  
Provision for (reversal of) off-balance-sheet credit exposures   (493 )     (2,613 )
Balance at end of period $ 1,891     $ 3,773  
Total Allowance for Credit Losses $ 37,340     $ 46,686  

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

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

  Three Months Ended
  June 30, 2022   March 31, 2022
  Average Balance   Interest   Average Yield/Rate   Average Balance   Interest   Average Yield/Rate
ASSETS                      
Loans(1) $ 3,847,614     $ 39,088   4.07 %   $ 3,703,980     $ 35,625   3.90 %
Loans held for sale   1,776       18   4.07 %     928       8   3.50 %
Securities:                      
Taxable investment securities(2)   617,603       4,632   3.01 %     644,706       4,608   2.90 %
Tax-exempt investment securities(2)   1,653,871       13,599   3.30 %     1,563,185       12,683   3.29 %
Mortgage-backed and related securities(2)   417,057       3,238   3.11 %     566,941       4,017   2.87 %
    Total securities   2,688,531       21,469   3.20 %     2,774,832       21,308   3.11 %
Federal Home Loan Bank stock, at cost, and equity investments   17,663       77   1.75 %     20,677       113   2.22 %
Interest earning deposits   77,894       125   0.64 %     44,642       24   0.22 %
Federal funds sold   37,343       79   0.85 %     8,651       4   0.19 %
Total earning assets   6,670,821       60,856   3.66 %     6,553,710       57,082   3.53 %
Cash and due from banks   100,231               107,144          
Accrued interest and other assets   446,136               607,235          
Less:  Allowance for loan losses   (35,895 )             (35,636 )        
Total assets $ 7,181,293             $ 7,232,453          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
Savings accounts $ 670,187       326   0.20 %   $ 652,394       273   0.17 %
Certificates of deposits   518,104       578   0.45 %     563,599       594   0.43 %
Interest bearing demand accounts   3,175,385       3,360   0.42 %     3,097,966       2,370   0.31 %
Total interest bearing deposits   4,363,676       4,264   0.39 %     4,313,959       3,237   0.30 %
Federal Home Loan Bank borrowings   55,990       224   1.60 %     122,783       366   1.21 %
Subordinated notes, net of unamortized debt issuance costs   98,586       1,000   4.07 %     98,552       998   4.11 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs   60,262       471   3.13 %     60,261       356   2.40 %
Repurchase agreements   30,055       18   0.24 %     21,494       10   0.19 %
Other borrowings   6,549       45   2.76 %     467          
Total interest bearing liabilities   4,615,118       6,022   0.52 %     4,617,516       4,967   0.44 %
Noninterest bearing deposits   1,702,985               1,642,973          
Accrued expenses and other liabilities   98,870               84,009          
Total liabilities   6,416,973               6,344,498          
Shareholders’ equity   764,320               887,955          
Total liabilities and shareholders’ equity $ 7,181,293             $ 7,232,453          
Net interest income (FTE)     $ 54,834           $ 52,115    
Net interest margin (FTE)         3.30 %           3.22 %
Net interest spread (FTE)         3.14 %           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 June 30, 2022 and March 31, 2022, loans totaling $3.1 million and $2.4 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

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

  Three Months Ended
  December 31, 2021   September 30, 2021
  Average Balance   Interest   Average Yield/Rate   Average Balance   Interest   Average Yield/Rate
ASSETS                      
Loans(1) $ 3,668,767     $ 36,740   3.97 %   $ 3,662,496     $ 37,744   4.09 %
Loans held for sale   1,980       11   2.20 %     1,640       12   2.90 %
Securities:                      
Taxable investment securities(2)   590,104       4,215   2.83 %     532,679       3,853   2.87 %
Tax-exempt investment securities(2)   1,508,196       12,699   3.34 %     1,453,275       12,315   3.36 %
Mortgage-backed and related securities(2)   650,685       4,394   2.68 %     738,287       4,405   2.37 %
    Total securities   2,748,985       21,308   3.08 %     2,724,241       20,573   3.00 %
Federal Home Loan Bank stock, at cost, and equity investments   38,832       175   1.79 %     39,786       111   1.11 %
Interest earning deposits   43,841       22   0.20 %     39,382       24   0.24 %
Total earning assets   6,502,405       58,256   3.55 %     6,467,545       58,464   3.59 %
Cash and due from banks   103,126               99,113          
Accrued interest and other assets   662,654               684,917          
Less:  Allowance for loan losses   (38,317 )             (43,052 )        
Total assets $ 7,229,868             $ 7,208,523          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
Savings accounts $ 624,377       264   0.17 %   $ 598,118       249   0.17 %
Certificates of deposit   632,150       681   0.43 %     629,718       789   0.50 %
Interest bearing demand accounts   2,558,289       1,289   0.20 %     2,496,037       1,196   0.19 %
Total interest bearing deposits   3,814,816       2,234   0.23 %     3,723,873       2,234   0.24 %
Federal Home Loan Bank borrowings   609,310       1,758   1.14 %     656,474       1,865   1.13 %
Subordinated notes, net of unamortized debt issuance costs   98,517       1,011   4.07 %     195,204       2,417   4.91 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs   60,259       345   2.27 %     60,258       345   2.27 %
Repurchase agreements   21,874       11   0.20 %     21,634       9   0.17 %
Total interest bearing liabilities   4,604,776       5,359   0.46 %     4,657,443       6,870   0.59 %
Noninterest bearing deposits   1,637,914               1,551,298          
Accrued expenses and other liabilities   88,982               97,954          
Total liabilities   6,331,672               6,306,695          
Shareholders’ equity   898,196               901,828          
Total liabilities and shareholders’ equity $ 7,229,868             $ 7,208,523          
Net interest income (FTE)     $ 52,897           $ 51,594    
Net interest margin (FTE)         3.23 %           3.16 %
Net interest spread (FTE)         3.09 %           3.00 %

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

Note: As of December 31, 2021 and September 30, 2021, loans totaling $2.5 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.

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

  Three Months Ended
  June 30, 2021
  Average Balance   Interest   Average Yield/Rate
ASSETS          
Loans(1) $ 3,706,959     $ 36,429   3.94 %
Loans held for sale   1,846       13   2.82 %
Securities:          
Taxable investment securities(2)   396,504       2,921   2.95 %
Tax-exempt investment securities(2)   1,363,678       11,585   3.41 %
Mortgage-backed and related securities(2)   847,206       4,647   2.20 %
    Total securities   2,607,388       19,153   2.95 %
Federal Home Loan Bank stock, at cost, and equity investments   35,883       108   1.21 %
Interest earning deposits   43,175       17   0.16 %
Total earning assets   6,395,251       55,720   3.49 %
Cash and due from banks   90,735          
Accrued interest and other assets   656,245          
Less:  Allowance for loan losses   (41,768 )        
Total assets $ 7,100,463          
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Savings accounts $ 571,907       231   0.16 %
Certificates of deposit   658,708       936   0.57 %
Interest bearing demand accounts   2,459,335       1,172   0.19 %
Total interest bearing deposits   3,689,950       2,339   0.25 %
Federal Home Loan Bank borrowings   669,633       1,817   1.09 %
Subordinated notes, net of unamortized debt issuance costs   197,284       2,423   4.93 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs   60,257       349   2.32 %
Repurchase agreements   22,024       11   0.20 %
Total interest bearing liabilities   4,639,148       6,939   0.60 %
Noninterest bearing deposits   1,485,383          
Accrued expenses and other liabilities   97,137          
Total liabilities   6,221,668          
Shareholders’ equity   878,795          
Total liabilities and shareholders’ equity $ 7,100,463          
Net interest income (FTE)     $ 48,781    
Net interest margin (FTE)         3.06 %
Net interest spread (FTE)         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 June 30, 2021, loans totaling $5.2 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)

  Six Months Ended
  June 30, 2022   June 30, 2021
  Average Balance   Interest   Average Yield/Rate   Average Balance   Interest   Average Yield/Rate
ASSETS                      
Loans(1) $ 3,776,194     $ 74,713   3.99 %   $ 3,670,708     $ 73,183   4.02 %
Loans held for sale   1,354       26   3.87 %     2,321       33   2.87 %
Securities:                      
Taxable investment securities(2)   631,079       9,240   2.95 %     346,514       5,244   3.05 %
Tax-exempt investment securities(2)   1,608,779       26,282   3.29 %     1,332,507       22,761   3.44 %
Mortgage-backed and related securities(2)   491,585       7,255   2.98 %     893,752       10,735   2.42 %
    Total securities   2,731,443       42,777   3.16 %     2,572,773       38,740   3.04 %
Federal Home Loan Bank stock, at cost, and equity investments   19,161       190   2.00 %     35,760       244   1.38 %
Interest earning deposits   61,360       149   0.49 %     37,205       32   0.17 %
Federal funds sold   23,077       83   0.73 %              
Total earning assets   6,612,589       117,938   3.60 %     6,318,767       112,232   3.58 %
Cash and due from banks   103,669               88,696          
Accrued interest and other assets   522,167               666,280          
Less:  Allowance for loan losses   (35,766 )             (45,483 )        
Total assets $ 7,202,659             $ 7,028,260          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
Savings accounts $ 661,339       599   0.18 %   $ 544,696       440   0.16 %
Certificates of deposit   540,726       1,172   0.44 %     697,190       2,165   0.63 %
Interest bearing demand accounts   3,136,890       5,730   0.37 %     2,401,140       2,331   0.20 %
Total interest bearing deposits   4,338,955       7,501   0.35 %     3,643,026       4,936   0.27 %
Federal Home Loan Bank borrowings   89,202       590   1.33 %     698,413       3,725   1.08 %
Subordinated notes, net of unamortized debt issuance costs   98,569       1,998   4.09 %     197,268       4,818   4.93 %
Trust preferred subordinated debentures, net of unamortized debt issuance costs   60,261       827   2.77 %     60,256       700   2.34 %
Repurchase agreements   25,798       28   0.22 %     22,769       22   0.19 %
Other borrowings   3,525       45   2.57 %              
Total interest bearing liabilities   4,616,310       10,989   0.48 %     4,621,732       14,201   0.62 %
Noninterest bearing deposits   1,673,145               1,437,468          
Accrued expenses and other liabilities   87,408               92,802          
Total liabilities   6,376,863               6,152,002          
Shareholders’ equity   825,796               876,258          
Total liabilities and shareholders’ equity $ 7,202,659             $ 7,028,260          
Net interest income (FTE)     $ 106,949           $ 98,031    
Net interest margin (FTE)         3.26 %           3.13 %
Net interest spread (FTE)         3.12 %           2.96 %

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

Note: As of June 30, 2022 and 2021, loans totaling $3.1 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.
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   Six Months Ended
      2022       2021       2022       2021  
    Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,   Jun 30,   Jun 30,
Reconciliation of return on average common equity to return on average tangible common equity:                            
Net income   $ 25,405     $ 24,996     $ 28,687     $ 29,306     $ 21,317     $ 50,401     $ 55,408  
After-tax amortization expense     463       491       520       549       577       954       1,182  
Adjusted net income available to common shareholders   $ 25,868     $ 25,487     $ 29,207     $ 29,855     $ 21,894     $ 51,355     $ 56,590  
                             
Average shareholders’ equity   $ 764,320     $ 887,955     $ 898,196     $ 901,828     $ 878,795     $ 825,796     $ 876,258  
Less: Average intangibles for the period     (207,163 )     (207,774 )     (208,412 )     (209,097 )     (209,808 )     (207,467 )     (210,183 )
Average tangible shareholders’ equity   $ 557,157     $ 680,181     $ 689,784     $ 692,731     $ 668,987     $ 618,329     $ 666,075  
                             
Return on average tangible common equity     18.62 %     15.20 %     16.80 %     17.10 %     13.13 %     16.75 %     17.13 %
                             
Reconciliation of book value per share to tangible book value per share:                            
Common equity at end of period   $ 731,782     $ 784,241     $ 912,172     $ 877,866     $ 894,400     $ 731,782     $ 894,400  
Less: Intangible assets at end of period     (206,803 )     (207,389 )     (208,011 )     (208,669 )     (209,364 )     (206,803 )     (209,364 )
Tangible common shareholders’ equity at end of period   $ 524,979     $ 576,852     $ 704,161     $ 669,197     $ 685,036     $ 524,979     $ 685,036  
                             
Total assets at end of period   $ 7,606,061     $ 7,119,115     $ 7,259,602     $ 7,135,691     $ 7,182,408     $ 7,606,061     $ 7,182,408  
Less: Intangible assets at end of period     (206,803 )     (207,389 )     (208,011 )     (208,669 )     (209,364 )     (206,803 )     (209,364 )
Tangible assets at end of period   $ 7,399,258     $ 6,911,726     $ 7,051,591     $ 6,927,022     $ 6,973,044     $ 7,399,258     $ 6,973,044  
                             
Period end tangible equity to period end tangible assets     7.10 %     8.35 %     9.99 %     9.66 %     9.82 %     7.10 %     9.82 %
                             
Common shares outstanding end of period     32,108       32,294       32,352       32,273       32,675       32,108       32,675  
Tangible book value per common share   $ 16.35     $ 17.86     $ 21.77     $ 20.74     $ 20.97     $ 16.35     $ 20.97  
                             
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)   $ 51,078     $ 48,906     $ 49,401     $ 48,206     $ 45,647     $ 99,984     $ 91,950  
Tax equivalent adjustments:                            
Loans     762       745       740       722       722       1,507       1,458  
Tax-exempt investment securities     2,994       2,464       2,756       2,666       2,412       5,458       4,623  
Net interest income (FTE) (1)     54,834       52,115       52,897       51,594       48,781       106,949       98,031  
Noninterest income     9,097       10,725       12,011       12,769       10,933       19,822       24,556  
Nonrecurring income (2)     2,177       706       (463 )     (1,381 )     (15 )     2,883       (2,018 )
Total revenue   $ 66,108     $ 63,546     $ 64,445     $ 62,982     $ 59,699     $ 129,654     $ 120,569  
                             
Noninterest expense   $ 32,106     $ 31,195     $ 31,334     $ 31,763     $ 30,699     $ 63,301     $ 61,933  
Pre-tax amortization expense     (586 )     (622 )     (658 )     (695 )     (730 )     (1,208 )     (1,496 )
Nonrecurring expense (3)     39       22       8       (888 )     64       61       300  
Adjusted noninterest expense   $ 31,559     $ 30,595     $ 30,684     $ 30,180     $ 30,033     $ 62,154     $ 60,737  
                             
Efficiency ratio     50.61 %     50.71 %     50.34 %     50.64 %     53.09 %     50.66 %     53.05 %
Efficiency ratio (FTE) (1)     47.74 %     48.15 %     47.61 %     47.92 %     50.31 %     47.94 %     50.38 %
                             
Average earning assets   $ 6,670,821     $ 6,553,710     $ 6,502,405     $ 6,467,545     $ 6,395,251     $ 6,612,589     $ 6,318,767  
                             
Net interest margin     3.07 %     3.03 %     3.01 %     2.96 %     2.86 %     3.05 %     2.93 %
Net interest margin (FTE) (1)     3.30 %     3.22 %     3.23 %     3.16 %     3.06 %     3.26 %     3.13 %
                             
Net interest spread     2.91 %     2.89 %     2.88 %     2.79 %     2.70 %     2.90 %     2.77 %
Net interest spread (FTE) (1)     3.14 %     3.09 %     3.09 %     3.00 %     2.89 %     3.12 %     2.96 %

(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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