Bay Street News

Southside Bancshares, Inc. Announces Financial Results for the First Quarter Ended March 31, 2024

TYLER, Texas, April 25, 2024 (GLOBE NEWSWIRE) — Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended March 31, 2024. Southside reported net income of $21.5 million for the three months ended March 31, 2024, a decrease of $4.5 million, or 17.4%, compared to $26.0 million for the same period in 2023. Earnings per diluted common share decreased $0.12, or 14.5%, to $0.71 for the three months ended March 31, 2024, from $0.83 for the same period in 2023. The annualized return on average shareholders’ equity for the three months ended March 31, 2024, was 11.02%, compared to 13.92% for the same period in 2023. The annualized return on average assets was 1.03% for the three months ended March 31, 2024, compared to 1.38% for the same period in 2023.

“Linked quarter, loans increased an annualized 4.7%, while our deposits remained flat.” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “Net interest income decreased $1.1 million, and the net interest margin decreased 13 basis points. The maturity of three low interest rate cash flow swaps along with ongoing higher funding costs were the primary reasons for the decrease. There are no additional swaps maturing this year. During the quarter, we began evaluating cost containment opportunities. Through retirement, a reduction in workforce, and attrition during 2024, we currently anticipate annualized cost savings of approximately $3.5 million, 80% of which should be reflected beginning in the third quarter this year and 100% in 2025. We expensed approximately $618,000 during the quarter associated with these cost reductions. In the coming months we will continue to evaluate further cost containment and revenue generating opportunities.”

Operating Results for the Three Months Ended March 31, 2024

Net income was $21.5 million for the three months ended March 31, 2024, compared to $26.0 million for the same period in 2023, a decrease of $4.5 million, or 17.4%. Earnings per diluted common share were $0.71 and $0.83 for the three months ended March 31, 2024 and 2023, respectively. The decrease in net income was primarily a result of the decrease in noninterest income and the increase in noninterest expense. Annualized returns on average assets and average shareholders’ equity for the three months ended March 31, 2024 were 1.03% and 11.02%, respectively, compared to 1.38% and 13.92%, respectively, for the three months ended March 31, 2023. Our efficiency ratio and tax-equivalent efficiency ratio(1) were 57.95% and 55.54%, respectively, for the three months ended March 31, 2024, compared to 53.57% and 50.99%, respectively, for the three months ended March 31, 2023, and 53.30% and 50.86%, respectively, for the three months ended December 31, 2023.

Net interest income for the three months ended March 31, 2024 was $53.3 million, a decrease of only $5,000 from the same period in 2023. Linked quarter, net interest income decreased $1.1 million, or 2.1%, compared to $54.5 million during the three months ended December 31, 2023. The decrease in net interest income was largely due to increases in the average rate paid on our interest bearing liabilities and average balance of our interest bearing liabilities, partially offset by the increase in the average balance of interest earning assets and the increase in the average yield of interest earning assets. During the first quarter of 2024, three of our lower rate cash flow swaps which totaled $120.0 million matured and the rate associated with the funding increased over 4.0%.

Our net interest margin and tax-equivalent net interest margin(1) decreased to 2.72% and 2.86%, respectively, for the three months ended March 31, 2024, compared to 3.02% and 3.21%, respectively, for the same period in 2023. Linked quarter, net interest margin and tax-equivalent net interest margin(1) decreased from 2.83% and 2.99%, respectively for the three months ended December 31, 2023.

Noninterest income was $9.7 million for the three months ended March 31, 2024, a decrease of $2.3 million, or 19.2%, compared to $12.0 million for the same period in 2023. The decrease was due to a $2.4 million net gain on sale of equity securities during the three months ended March 31, 2023, as well as a decrease in bank owned life insurance (“BOLI”) income due to a death benefit realized in 2023, a loss on sale of loans, and decreases in deposit services income and other noninterest income during the three months ended March 31, 2024. These decreases were partially offset by a decrease in net loss on sale of securities available for sale (“AFS”) and an increase in brokerage services income during the three months ended March 31, 2024. On a linked quarter basis, noninterest income increased $7.2 million, or 288.8%, compared to the three months ended December 31, 2023. The increase was due to a net loss on sale of AFS of $10.4 million for the three months ended December 31, 2023, partially offset by a decrease in BOLI income related to a $2.0 million death benefit realized in the fourth quarter of 2023.

Noninterest expense increased $2.0 million, or 5.8%, to $36.9 million for the three months ended March 31, 2024, compared to $34.8 million for the same period in 2023, due to increases in salaries and employee benefits, software and data processing expense, FDIC insurance and other noninterest expense, partially offset by decreases in net occupancy expense and professional fees. On a linked quarter basis, noninterest expense increased by $1.7 million, or 4.8%, compared to the three months ended December 31, 2023, due to an increase in salaries and employee benefits expense primarily due to normal salary increases effective in the first quarter of 2024 and approximately $618,000 associated with future cost reductions.

Income tax expense increased $0.1 million, or 1.7%, for the three months ended March 31, 2024, compared to the same period in 2023. On a linked quarter basis, income tax expense increased $2.4 million, or 109.5%. Our effective tax rate (“ETR”) increased to 17.7% for the three months ended March 31, 2024, compared to 14.9% for the three months ended March 31, 2023, and increased from 11.3% for the three months ended December 31, 2023. The higher ETR for the three months ended March 31, 2024 compared to the same period in 2023, was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income.

Balance Sheet Data

At March 31, 2024, Southside had $8.35 billion in total assets, compared to $8.28 billion at December 31, 2023 and $7.79 billion at March 31, 2023.

Loans at March 31, 2024 were $4.58 billion, an increase of $424.7 million, or 10.2%, compared to $4.15 billion at March 31, 2023. Linked quarter, loans increased $52.9 million, or 1.2%, due to increases of $244.9 million in commercial real estate loans and $23.8 million in 1-4 family residential loans. These increases were partially offset by decreases of $190.3 million in construction loans, $13.9 million in municipal loans, $8.8 million in commercial loans, and $2.7 million in loans to individuals.

Securities at March 31, 2024 were $2.71 billion, a decrease of $33.6 million, or 1.2%, compared to $2.75 billion at March 31, 2023. Linked quarter, securities increased $108.8 million, or 4.2%, from $2.60 billion at December 31, 2023.

Deposits at March 31, 2024 were $6.55 billion, an increase of $707.5 million, or 12.1%, compared to $5.84 billion at March 31, 2023, primarily due to an increase in brokered deposits of $314.6 million, or 67.3%, and an increase in public fund deposits of $281.3 million, or 31.3%. Linked quarter, deposits decreased $3.9 million, or 0.1%, from $6.55 billion at December 31, 2023.

At March 31, 2024, we had 179,889 total deposit accounts with an average balance of $32,000. Our estimated uninsured deposits was 36.5% as of March 31, 2024. When excluding affiliate deposits (Southside-owned deposits) and public fund deposits (all collateralized), our total estimated deposits without insurance or collateral was 18.5% as of March 31, 2024. We continued to increase interest rates paid on deposits during the first quarter in order to retain deposits and to remain competitive with current pricing in the market. Our noninterest bearing deposits represent approximately 20.8% of total deposits. Linked quarter, our cost of interest bearing deposits increased 14 basis points from 2.83% in the prior quarter to 2.97%. Linked quarter, our cost of total deposits increased 16 basis points from 2.20% in the prior quarter to 2.36%.

Our cost of interest bearing deposits increased 115 basis points, from 1.82% for the three months ended March 31, 2023, to 2.97% for the three months ended March 31, 2024. Our cost of total deposits increased 102 basis points, from 1.34% for the three months ended March 31, 2023, to 2.36% for the three months ended March 31, 2024.

Capital Resources and Liquidity

Our capital ratios and contingent liquidity sources remain solid. During the first quarter ended March 31, 2024, we did not purchase any common stock pursuant to our Stock Repurchase Plan. Under this plan, repurchases of our outstanding common stock 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 Securities Exchange Act of 1934, as amended. The Company has no obligation to repurchase any shares under the Stock Repurchase Plan and may modify, suspend or discontinue the plan at any time. We have not purchased any common stock pursuant to the Stock Repurchase Plan subsequent to March 31, 2024.

We utilized the Federal Reserve’s Bank Term Funding Program (“BTFP”) to reduce our overall funding costs and to enhance our interest rate risk position. As of March 31, 2024, our BTFP borrowings of $116.1 million were at a cost of 5.40%. As of March 31, 2024, our total available contingent liquidity, net of current outstanding borrowings, was $2.35 billion, consisting of FHLB advances, Federal Reserve Discount Window and correspondent bank lines of credit.

Asset Quality

Nonperforming assets at March 31, 2024 were $8.0 million, or 0.10% of total assets, an increase of $4.8 million, or 150.9%, compared to $3.2 million, or 0.04% of total assets, at March 31, 2023. Linked quarter, nonperforming assets increased $4.0 million from $4.0 million at December 31, 2023 due primarily to an increase of $3.8 million, or 98.2%, in nonaccrual loans, largely the result of one commercial real estate loan and one commercial loan relationship. Since March 31, 2024, we have received approximately $1.6 million combined, of payments on the commercial loan relationship and the payoff of one larger residential real estate loan.

The allowance for loan losses totaled $43.6 million, or 0.95% of total loans, at March 31, 2024, compared to $36.3 million, or 0.87% of total loans, at March 31, 2023. The allowance for loan losses was $42.7 million, or 0.94% of total loans, at December 31, 2023.

For the three months ended March 31, 2024, we recorded a provision for credit losses for loans of $1.2 million, compared to $0.1 million and $2.2 million for the three months ended March 31, 2023 and December 31, 2023, respectively. Net charge-offs were $0.3 million for the three months ended March 31, 2024, compared to net charge-offs of $0.3 million and $1.3 million for the three months ended March 31, 2023 and December 31, 2023, respectively.

We recorded a reversal of provision for credit losses on off-balance-sheet credit exposures of $1.1 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively, and a provision for credit losses on off-balance-sheet credit exposures of $0.1 million for the three months ended December 31, 2023. The decrease in provision for the three months ended March 31, 2024, compared to the same period in 2023, was due to a lower balance of off-balance-sheet credit exposure as these were funded during the period. The balance of the allowance for off-balance-sheet credit exposures at March 31, 2024 and 2023, was $2.8 million and $3.6 million, respectively, and is included in other liabilities.

Dividend

Southside Bancshares, Inc. declared a first quarter cash dividend of $0.36 per share on February 1, 2024, which was paid on February 29, 2024, to all shareholders of record as of February 15, 2024.

__________________

(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, 2024 financial results on Thursday, April 25, 2024 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, under Events.

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/BI45f96322574d452abfa8520cda8fa8b2 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 $8.35 billion in assets as of March 31, 2024, that owns 100% of Southside Bank. Southside Bank currently has 55 branches in Texas and operates a network of 73 ATMs/ITMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at https://investors.southside.com. Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data. To receive email notification of company news, events and stock activity, please register on the website under Resources and Investor Email Alerts. 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 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 higher inflation levels, higher interest rates and general economic and recessionary concerns, all of which could impact economic growth and could cause a reduction in financial transactions and business activities, including decreased deposits and reduced loan originations, our ability to manage liquidity in a rapidly changing and unpredictable market, supply chain disruptions, labor shortages and changes in interest rates by the Federal Reserve.

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, 2023, under “Part I – Item 1. Forward Looking Information” and “Part I – Item 1A. Risk Factors” and in the Company’s other filings with the Securities and Exchange Commission. The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

Southside Bancshares, Inc.
Consolidated Financial Summary (Unaudited)
(Dollars in thousands)
 
   
  As of
 
  2024   2023
 
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
 
ASSETS                                        
Cash and due from banks $ 96,744     $ 122,021     $ 105,601     $ 114,707     $ 101,109    
Interest earning deposits   307,257       391,719       106,094       14,059       151,999    
Federal funds sold   65,372       46,770       114,128       78,347       57,384    
Securities available for sale, at estimated fair value   1,405,221       1,296,294       1,335,560       1,339,821       1,437,222    
Securities held to maturity, at net carrying value   1,306,898       1,307,053       1,307,886       1,308,472       1,308,457    
    Total securities   2,712,119       2,603,347       2,643,446       2,648,293       2,745,679    
Federal Home Loan Bank stock, at cost   27,958       11,936       12,778       10,801       16,696    
Loans held for sale   756       10,894       1,382       1,666       407    
Loans   4,577,368       4,524,510       4,420,633       4,329,043       4,152,644    
    Less: Allowance for loan losses   (43,557 )     (42,674 )     (41,760 )     (36,303 )     (36,332 )  
Net loans   4,533,811       4,481,836       4,378,873       4,292,740       4,116,312    
Premises & equipment, net   139,491       138,950       139,473       139,801       141,363    
Goodwill   201,116       201,116       201,116       201,116       201,116    
Other intangible assets, net   2,588       2,925       3,295       3,702       4,144    
Bank owned life insurance   136,604       136,330       135,737       134,951       134,635    
Other assets   130,047       137,070       130,545       167,069       121,501    
    Total assets $ 8,353,863     $ 8,284,914     $ 7,972,468     $ 7,807,252     $ 7,792,345    
                                         
LIABILITIES AND SHAREHOLDERS’ EQUITY                                        
Noninterest bearing deposits $ 1,358,827     $ 1,390,407     $ 1,431,285     $ 1,466,756     $ 1,543,413    
Interest bearing deposits   5,186,933       5,159,274       4,918,286       4,650,931       4,294,807    
    Total deposits   6,545,760       6,549,681       6,349,571       6,117,687       5,838,220    
Other borrowings and Federal Home Loan Bank
borrowings
  770,151       722,468       608,038       683,348       958,810    
Subordinated notes, net of unamortized debt
issuance costs
  93,913       93,877       93,838       93,796       98,710    
Trust preferred subordinated debentures, net of
unamortized debt issuance costs
  60,271       60,270       60,269       60,267       60,266    
Other liabilities   95,846       85,330       132,157       86,993       85,309    
    Total liabilities   7,565,941       7,511,626       7,243,873       7,042,091       7,041,315    
Shareholders’ equity   787,922       773,288       728,595       765,161       751,030    
    Total liabilities and shareholders’ equity $ 8,353,863     $ 8,284,914     $ 7,972,468     $ 7,807,252     $ 7,792,345    
   
Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars and shares in thousands, except per share data)
 
   
  Three Months Ended
 
  2024   2023  
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
 
Income Statement:                                        
Total interest income $ 102,758     $ 98,939     $ 93,078     $ 86,876     $ 80,848    
Total interest expense   49,410       44,454       39,805       32,960       27,495    
Net interest income   53,348       54,485       53,273       53,916       53,353    
Provision for (reversal of) credit losses   58       2,281       6,987       (74 )     (40 )  
Net interest income after provision for (reversal of) credit losses   53,290       52,204       46,286       53,990       53,393    
Noninterest income                                        
    Deposit services   5,985       6,305       6,479       6,291       6,422    
    Net gain (loss) on sale of securities available for sale   (18 )     (10,386 )     11       (3,455 )     (2,146 )  
    Net gain on sale of equity securities                     2,642       2,416    
    Gain (loss) on sale of loans   (436 )     178       96       185       104    
    Trust fees   1,336       1,431       1,522       1,490       1,467    
    Bank owned life insurance   784       2,602       790       756       1,675    
    Brokerage services   1,014       944       760       904       697    
    Other   1,059       1,427       1,178       1,651       1,398    
            Total noninterest income   9,724       2,501       10,836       10,464       12,033    
Noninterest expense                                        
    Salaries and employee benefits   23,113       21,152       21,241       21,376       21,856    
    Net occupancy   3,362       3,474       3,796       3,690       3,734    
    Advertising, travel & entertainment   950       1,127       1,062       854       1,050    
    ATM expense   325       318       358       320       355    
    Professional fees   1,154       1,315       1,472       1,192       1,372    
    Software and data processing   2,856       2,644       2,432       2,264       2,055    
    Communications   449       435       359       348       327    
    FDIC insurance   943       892       902       1,220       544    
    Amortization of intangibles   337       370       407       442       478    
    Other   3,392       3,456       3,524       3,287       3,078    
            Total noninterest expense   36,881       35,183       35,553       34,993       34,849    
Income before income tax expense   26,133       19,522       21,569       29,461       30,577    
Income tax expense   4,622       2,206       3,120       4,568       4,543    
Net income $ 21,511     $ 17,316     $ 18,449     $ 24,893     $ 26,034    
                                         
Common Share Data:                                        
Weighted-average basic shares outstanding   30,262       30,235       30,502       30,721       31,372    
Weighted-average diluted shares outstanding   30,305       30,276       30,543       30,754       31,464    
Common shares outstanding end of period   30,284       30,249       30,338       30,532       31,121    
Earnings per common share                                        
    Basic $ 0.71     $ 0.57     $ 0.60     $ 0.81     $ 0.83    
    Diluted   0.71       0.57       0.60       0.81       0.83    
Book value per common share   26.02       25.56       24.02       25.06       24.13    
Tangible book value per common share   19.29       18.82       17.28       18.35       17.54    
Cash dividends paid per common share   0.36       0.37       0.35       0.35       0.35    
                                         
Selected Performance Ratios:                                        
Return on average assets   1.03 %     0.85 %     0.93 %     1.29 %     1.38 %  
Return on average shareholders’ equity   11.02       9.31       9.50       13.32       13.92    
Return on average tangible common equity (1)   15.07       13.10       13.17       18.59       19.36    
Average yield on earning assets (FTE) (1)   5.38       5.30       5.15       5.00       4.76    
Average rate on interest bearing liabilities   3.22       3.04       2.84       2.45       2.14    
Net interest margin (FTE) (1)   2.86       2.99       3.02       3.17       3.21    
Net interest spread (FTE) (1)   2.16       2.26       2.31       2.55       2.62    
Average earning assets to average interest bearing liabilities   127.71       131.65       133.24       134.12       137.67    
Noninterest expense to average total assets   1.77       1.73       1.79       1.82       1.85    
Efficiency ratio (FTE) (1)   55.54       50.86       52.29       51.06       50.99    
   
(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
 
  2024   2023  
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
 
Nonperforming Assets: $ 7,979     $ 4,001     $ 4,381     $ 3,059     $ 3,180    
Nonaccrual loans   7,709       3,889       4,316       3,017       3,169    
Accruing loans past due more than 90 days                              
Restructured loans   151       13       15                
Other real estate owned   119       99       50                
Repossessed assets                     42       11    
                                         
Asset Quality Ratios:                                        
Ratio of nonaccruing loans to:                                        
Total loans   0.17 %     0.09 %     0.10 %     0.07 %     0.08 %  
Ratio of nonperforming assets to:                                        
Total assets   0.10       0.05       0.05       0.04       0.04    
Total loans   0.17       0.09       0.10       0.07       0.08    
Total loans and OREO   0.17       0.09       0.10       0.07       0.08    
Ratio of allowance for loan losses to:                                        
Nonaccruing loans   565.01       1,097.30       967.56       1,203.28       1,146.48    
Nonperforming assets   545.90       1,066.58       953.21       1,186.76       1,142.52    
Total loans   0.95       0.94       0.94       0.84       0.87    
Net charge-offs (recoveries) to average loans outstanding   0.03       0.11       0.08       0.03       0.03    
                                         
Capital Ratios:                                        
Shareholders’ equity to total assets   9.43       9.33       9.14       9.80       9.64    
Common equity tier 1 capital   12.43       12.28       12.27       12.32       12.73    
Tier 1 risk-based capital   13.47       13.32       13.31       13.37       13.81    
Total risk-based capital   15.92       15.73       15.71       15.68       16.28    
Tier 1 leverage capital   9.22       9.39       9.61       9.69       9.83    
Period end tangible equity to period end tangible assets (1)   7.17       7.04       6.75       7.37       7.19    
Average shareholders’ equity to average total assets   9.35       9.13       9.76       9.72       9.94    
   
(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
 
  2024   2023  
Loan Portfolio Composition Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
 
Real Estate Loans:                                        
    Construction $ 599,464     $ 789,744     $ 720,515     $ 657,354     $ 591,894    
    1-4 Family Residential   720,508       696,738       689,492       684,878       672,595    
    Commercial   2,413,345       2,168,451       2,117,306       2,100,338       1,990,861    
Commercial Loans   358,053       366,893       385,816       383,724       388,182    
Municipal Loans   427,225       441,168       441,512       435,211       438,566    
Loans to Individuals   58,773       61,516       65,992       67,538       70,546    
Total Loans $ 4,577,368     $ 4,524,510     $ 4,420,633     $ 4,329,043     $ 4,152,644    
                                         
Summary of Changes in Allowances:                                        
Allowance for Loan Losses                                        
Balance at beginning of period $ 42,674     $ 41,760     $ 36,303     $ 36,332     $ 36,515    
Loans charged-off   (634 )     (1,572 )     (1,262 )     (737 )     (633 )  
Recoveries of loans charged-off   347       284       378       430       362    
    Net loans (charged-off) recovered   (287 )     (1,288 )     (884 )     (307 )     (271 )  
Provision for (reversal of) loan losses   1,170       2,202       6,341       278       88    
Balance at end of period $ 43,557     $ 42,674     $ 41,760     $ 36,303     $ 36,332    
                                         
Allowance for Off-Balance-Sheet Credit Exposures                                        
Balance at beginning of period $ 3,932     $ 3,853     $ 3,207     $ 3,559     $ 3,687    
Provision for (reversal of) off-balance-sheet credit
exposures
  (1,112 )     79       646       (352 )     (128 )  
Balance at end of period $ 2,820     $ 3,932     $ 3,853     $ 3,207     $ 3,559    
Total Allowance for Credit Losses $ 46,377     $ 46,606     $ 45,613     $ 39,510     $ 39,891    
   

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.

Southside Bancshares, Inc.
Average Balances and Average Yields and Rates (Annualized) (Unaudited)
(Dollars in thousands)
 
   
  Three Months Ended
 
  March 31, 2024   December 31, 2023
 
  Average
Balance
  Interest   Average
Yield/Rate
  Average
Balance
  Interest   Average
Yield/Rate

 
ASSETS                                                
Loans (1) $ 4,559,602     $ 68,849       6.07 %   $ 4,473,618     $ 67,886       6.02 %  
Loans held for sale   8,834       18       0.82 %     1,858       27       5.77 %  
Securities:                                                
     Taxable investment securities (2)   780,423       6,967       3.59 %     852,023       7,970       3.71 %  
     Tax-exempt investment securities (2)   1,285,922       13,168       4.12 %     1,456,187       15,688       4.27 %  
     Mortgage-backed and related securities (2)   764,713       10,119       5.32 %     581,548       6,865       4.68 %  
             Total securities   2,831,058       30,254       4.30 %     2,889,758       30,523       4.19 %  
Federal Home Loan Bank stock, at cost, and equity
investments
  40,063       333       3.34 %     24,674       296       4.76 %  
Interest earning deposits   380,181       5,202       5.50 %     150,763       2,054       5.41 %  
Federal funds sold   62,599       838       5.38 %     93,149       1,286       5.48 %  
Total earning assets   7,882,337       105,494       5.38 %     7,633,820       102,072       5.30 %  
Cash and due from banks   114,379                       110,380                    
Accrued interest and other assets   441,783                       374,120                    
    Less: Allowance for loan losses   (42,973 )                     (41,822 )                  
Total assets $ 8,395,526                     $ 8,076,498                    
LIABILITIES AND SHAREHOLDERS’ EQUITY                                                
Savings accounts $ 604,529       1,424       0.95 %   $ 610,453       1,432       0.93 %  
Certificates of deposit   941,947       10,341       4.42 %     910,759       9,691       4.22 %  
Interest bearing demand accounts   3,634,936       26,433       2.92 %     3,469,120       24,498       2.80 %  
Total interest bearing deposits   5,181,412       38,198       2.97 %     4,990,332       35,621       2.83 %  
Federal Home Loan Bank borrowings   607,033       5,950       3.94 %     262,709       1,430       2.16 %  
Subordinated notes, net of unamortized debt issuance costs   93,895       956       4.10 %     93,859       965       4.08 %  
Trust preferred subordinated debentures, net of unamortized
debt issuance costs
  60,270       1,175       7.84 %     60,269       1,195       7.87 %  
Repurchase agreements   92,177       967       4.22 %     96,622       1,008       4.14 %  
Other borrowings   137,287       2,164       6.34 %     294,683       4,235       5.70 %  
Total interest bearing liabilities   6,172,074       49,410       3.22 %     5,798,474       44,454       3.04 %  
Noninterest bearing deposits   1,338,384                       1,424,961                    
Accrued expenses and other liabilities   100,014                       115,388                    
Total liabilities   7,610,472                       7,338,823                    
Shareholders’ equity   785,054                       737,675                    
Total liabilities and shareholders’ equity $ 8,395,526                     $ 8,076,498                    
Net interest income (FTE)         $ 56,084                     $ 57,618            
Net interest margin (FTE)                   2.86 %                     2.99 %  
Net interest spread (FTE)                   2.16 %                     2.26 %  
   
(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, 2024 and December 31, 2023, loans totaling $7.7 million and $3.9 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Southside Bancshares, Inc.
Average Balances and Average Yields and Rates (Annualized) (Unaudited)
(Dollars in thousands)
 
   
  Three Months Ended
 
  September 30, 2023   June 30, 2023
 
  Average
Balance
  Interest   Average
Yield/Rate
  Average
Balance
  Interest   Average
Yield/Rate

 
ASSETS                                                
Loans (1) $ 4,396,184     $ 64,758       5.84 %   $ 4,197,130     $ 59,334       5.67 %  
Loans held for sale   1,537       26       6.71 %     1,664       23       5.54 %  
Securities:                                                
      Taxable investment securities (2)   912,789       8,731       3.79 %     925,445       8,773       3.80 %  
      Tax-exempt investment securities (2)   1,510,044       16,232       4.26 %     1,562,232       16,182       4.15 %  
      Mortgage-backed and related securities (2)   442,908       4,426       3.96 %     401,427       3,830       3.83 %  
              Total securities   2,865,741       29,389       4.07 %     2,889,104       28,785       4.00 %  
Federal Home Loan Bank stock, at cost, and equity
investments
  22,363       265       4.70 %     21,480       379       7.08 %  
Interest earning deposits   37,891       535       5.60 %     56,604       742       5.26 %  
Federal funds sold   94,441       1,253       5.26 %     59,186       748       5.07 %  
Total earning assets   7,418,157       96,226       5.15 %     7,225,168       90,011       5.00 %  
Cash and due from banks   106,348                       103,559                    
Accrued interest and other assets   400,850                       419,420                    
      Less: Allowance for loan losses   (36,493 )                     (36,512 )                  
Total assets $ 7,888,862                     $ 7,711,635                    
LIABILITIES AND SHAREHOLDERS’ EQUITY                                                
Savings accounts $ 622,246       1,458       0.93 %   $ 648,560       1,430       0.88 %  
Certificates of deposit   949,894       9,443       3.94 %     797,992       6,365       3.20 %  
Interest bearing demand accounts   3,189,048       20,050       2.49 %     2,841,818       13,884       1.96 %  
Total interest bearing deposits   4,761,188       30,951       2.58 %     4,288,370       21,679       2.03 %  
Federal Home Loan Bank borrowings   230,184       1,174       2.02 %     211,309       1,032       1.96 %  
Subordinated notes, net of unamortized debt issuance costs   93,817       962       4.07 %     97,804       994       4.08 %  
Trust preferred subordinated debentures, net of unamortized
debt issuance costs
  60,268       1,178       7.75 %     60,266       1,100       7.32 %  
Repurchase agreements   104,070       1,048       4.00 %     97,915       883       3.62 %  
Other borrowings   317,913       4,492       5.61 %     631,447       7,272       4.62 %  
Total interest bearing liabilities   5,567,440       39,805       2.84 %     5,387,111       32,960       2.45 %  
Noninterest bearing deposits   1,441,738                       1,490,445                    
Accrued expenses and other liabilities   109,490                       84,252                    
Total liabilities   7,118,668                       6,961,808                    
Shareholders’ equity   770,194                       749,827                    
Total liabilities and shareholders’ equity $ 7,888,862                     $ 7,711,635                    
Net interest income (FTE)         $ 56,421                     $ 57,051            
Net interest margin (FTE)                   3.02 %                     3.17 %  
Net interest spread (FTE)                   2.31 %                     2.55 %  
   
(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, 2023 and June 30, 2023, loans totaling $4.3 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
 
  March 31, 2023
 
  Average
Balance
  Interest   Average
Yield/Rate

 
ASSETS                        
Loans (1) $ 4,128,775     $ 55,453       5.45 %  
Loans held for sale   1,662       20       4.88 %  
Securities:                        
      Taxable investment securities (2)   690,864       5,712       3.35 %  
      Tax-exempt investment securities (2)   1,692,700       16,466       3.95 %  
      Mortgage-backed and related securities (2)   455,811       4,329       3.85 %  
              Total securities   2,839,375       26,507       3.79 %  
Federal Home Loan Bank stock, at cost, and equity investments   31,470       245       3.16 %  
Interest earning deposits   87,924       1,033       4.76 %  
Federal funds sold   72,630       837       4.67 %  
Total earning assets   7,161,836       84,095       4.76 %  
Cash and due from banks   107,765                    
Accrued interest and other assets   398,709                    
      Less: Allowance for loan losses   (36,690 )                  
Total assets $ 7,631,620                    
LIABILITIES AND SHAREHOLDERS’ EQUITY                        
Savings accounts $ 665,919       1,313       0.80 %  
Certificates of deposit   787,887       5,407       2.78 %  
Interest bearing demand accounts   2,983,218       13,186       1.79 %  
Total interest bearing deposits   4,437,024       19,906       1.82 %  
Federal Home Loan Bank borrowings   404,199       3,141       3.15 %  
Subordinated notes, net of unamortized debt issuance costs   98,693       999       4.11 %  
Trust preferred subordinated debentures, net of unamortized debt issuance costs   60,265       1,031       6.94 %  
Repurchase agreements   65,435       492       3.05 %  
Other borrowings   136,700       1,926       5.71 %  
Total interest bearing liabilities   5,202,316       27,495       2.14 %  
Noninterest bearing deposits   1,588,725                    
Accrued expenses and other liabilities   81,829                    
Total liabilities   6,872,870                    
Shareholders’ equity   758,750                    
Total liabilities and shareholders’ equity $ 7,631,620                    
Net interest income (FTE)         $ 56,600            
Net interest margin (FTE)                   3.21 %  
Net interest spread (FTE)                   2.62 %  
   
(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, 2023, loans totaling $3.2 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.

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.

Southside Bancshares, Inc.
Non-GAAP Reconciliation (Unaudited)
(Dollars and shares in thousands, except per share data)
 
   
  Three Months Ended
 
  2024   2023  
  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 $ 21,511     $ 17,316     $ 18,449     $ 24,893     $ 26,034    
After-tax amortization expense   266       292       322       349       378    
Adjusted net income available to common shareholders $ 21,777     $ 17,608     $ 18,771     $ 25,242     $ 26,412    
Average shareholders’ equity $ 785,054     $ 737,675     $ 770,194     $ 749,827     $ 758,750    
Less: Average intangibles for the period   (203,910 )     (204,267 )     (204,658 )     (205,086 )     (205,555 )  
Average tangible shareholders’ equity $ 581,144     $ 533,408     $ 565,536     $ 544,741     $ 553,195    
Return on average tangible common equity   15.07 %     13.10 %     13.17 %     18.59 %     19.36 %  
Reconciliation of book value per share to tangible book value per share:                                        
Common equity at end of period $ 787,922     $ 773,288     $ 728,595     $ 765,161     $ 751,030    
Less: Intangible assets at end of period   (203,704 )     (204,041 )     (204,411 )     (204,818 )     (205,260 )  
Tangible common shareholders’ equity at end of period $ 584,218     $ 569,247     $ 524,184     $ 560,343     $ 545,770    
Total assets at end of period $ 8,353,863     $ 8,284,914     $ 7,972,468     $ 7,807,252     $ 7,792,345    
Less: Intangible assets at end of period   (203,704 )     (204,041 )     (204,411 )     (204,818 )     (205,260 )  
Tangible assets at end of period $ 8,150,159     $ 8,080,873     $ 7,768,057     $ 7,602,434     $ 7,587,085    
Period end tangible equity to period end tangible assets   7.17 %     7.04 %     6.75 %     7.37 %     7.19 %  
Common shares outstanding end of period   30,284       30,249       30,338       30,532       31,121    
Tangible book value per common share $ 19.29     $ 18.82     $ 17.28     $ 18.35     $ 17.54    
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) $ 53,348     $ 54,485     $ 53,273     $ 53,916     $ 53,353    
Tax-equivalent adjustments:                                        
Loans   656       680       674       673       697    
Tax-exempt investment securities   2,080       2,453       2,474       2,462       2,550    
Net interest income (FTE) (1)   56,084       57,618       56,421       57,051       56,600    
Noninterest income   9,724       2,501       10,836       10,464       12,033    
Nonrecurring income (2)   18       8,376       (11 )     226       (1,221 )  
Total revenue $ 65,826     $ 68,495     $ 67,246     $ 67,741     $ 67,412    
Noninterest expense $ 36,881     $ 35,183     $ 35,553     $ 34,993     $ 34,849    
Pre-tax amortization expense   (337 )     (370 )     (407 )     (442 )     (478 )  
Nonrecurring expense (3)   17       22       17       36       3    
Adjusted noninterest expense $ 36,561     $ 34,835     $ 35,163     $ 34,587     $ 34,374    
Efficiency ratio   57.95 %     53.30 %     54.86 %     53.54 %     53.57 %  
Efficiency ratio (FTE) (1)   55.54 %     50.86 %     52.29 %     51.06 %     50.99 %  
Average earning assets $ 7,882,337     $ 7,633,820     $ 7,418,157     $ 7,225,168     $ 7,161,836    
Net interest margin   2.72 %     2.83 %     2.85 %     2.99 %     3.02 %  
Net interest margin (FTE) (1)   2.86 %     2.99 %     3.02 %     3.17 %     3.21 %  
Net interest spread   2.02 %     2.10 %     2.14 %     2.37 %     2.44 %  
Net interest spread (FTE) (1)   2.16 %     2.26 %     2.31 %     2.55 %     2.62 %  
   
(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, net gain on sale of equity securities, BOLI income related
          to death benefits realized and other investment income or loss in the periods where applicable.
 
(3)     These adjustments may include foreclosure expenses and branch closure expenses, in the periods where applicable.  
   


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