• Southside Bancshares, Inc. Announces Financial Results for the First Quarter Ended March 31, 2021

    Source: Nasdaq GlobeNewswire / 23 Apr 2021 06:00:01   America/New_York

    • Record first quarter net income of $34.1 million, an increase of 762.4%, compared to the same period in 2020;

    • Annualized return on first quarter average assets of 1.99%;

    • Annualized return on first quarter average tangible common equity of 21.22%(1); and

    • Nonperforming assets decreased to 0.22% of total assets.

    TYLER, Texas, April 23, 2021 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended March 31, 2021.  Southside reported net income of $34.1 million for the three months ended March 31, 2021, an increase of $30.1 million, or 762.4%, compared to $4.0 million for the same period in 2020.  Earnings per diluted common share increased $0.92, or 766.7%, to $1.04 for the three months ended March 31, 2021, from $0.12 for the same period in 2020.  The annualized return on average shareholders’ equity for the three months ended March 31, 2021 was 15.82%, compared to 1.93% for the same period in 2020.  The annualized return on average assets was 1.99% for the three months ended March 31, 2021, compared to 0.23% for the same period in 2020.

    “We reported outstanding results for the first quarter, highlighted by record net income, annualized linked quarter loan growth of 6.2%, net of Paycheck Protection Program (“PPP”) loans, continued strong asset quality metrics and annualized linked quarter deposit growth of 13.2%,” stated Lee R. Gibson, President and Chief Executive Officer of Southside.

    “Our record net income and earnings per diluted common share were primarily due to the $35.4 million decrease in provision for credit losses, from $25.2 million for the first quarter ended March 31, 2020, compared to a $10.1 million reversal of provision for the same period in 2021. This was largely due to our continued strong asset quality ratios, overall improvement in economic conditions, including lower unemployment levels, and a significant improvement in the economic forecast for March 2021 when compared to March 2020.”

    “We entered 2021 with an active loan pipeline, several of which closed and were funded during March, contributing to the 6.2% first quarter annualized loan growth. We are encouraged about potential future loan growth as our pipeline continues to remain healthy. We have been actively participating in the second round of the PPP during 2021, and as of April 21, we have originated approximately 1,000 new loans totaling $105 million for small businesses in the market areas we serve.”

    “During February, Texas suffered a major power crisis due to the historic Winter Storm Uri, causing a massive electricity generation failure. This power crisis caused shortages of water, food and heat impacting large portions of the state. In addition, large accumulations of snow and ice created extremely hazardous driving conditions. Our technology facilities continued to operate uninterrupted with the use of backup power systems, allowing those team members with power, to work from home and handle virtually all customer transactions with the assistance of our ATM network for cash needs. Utilizing proven methods and technology, we were able to open the bank virtually until conditions improved with very few team members present and minimal customer inconvenience.”

    “Economic conditions in our market areas continue to improve, bolstered by company relocations and population growth due to individuals moving to Texas from other states. During the first quarter we hired additional revenue producers, one in Austin and two in the DFW area to generate additional loan growth.”

    Operating Results for the Three Months Ended March 31, 2021

    Net income was $34.1 million for the three months ended March 31, 2021, compared to $4.0 million for the same period in 2020, an increase of $30.1 million, or 762.4%.  Earnings per diluted common share were $1.04 for the three months ended March 31, 2021, compared to $0.12 for the same period in 2020, an increase of 766.7%.  The increase in net income was a direct result of a reversal of the provision for credit losses compared to a large build-up in the allowance for credit losses in the same period in 2020.  Annualized returns on average assets and average shareholders’ equity for the three months ended March 31, 2021 were 1.99% and 15.82%, respectively.  Our efficiency ratio and tax equivalent efficiency ratio(1) was 53.01% and 50.44%, respectively, for the three months ended March 31, 2021, compared to 49.86% and 47.36%, respectively, for the three months ended December 31, 2020. 

    Net interest income for the three months ended March 31, 2021 was $46.3 million, compared to $44.7 million for the same period in 2020, an increase of 3.6%.  The increase in net interest income compared to the same period in 2020 was due to the decrease in interest expense on our interest bearing liabilities, a result of an overall decline in interest rates, partially offset by a decrease in interest income due to a decrease in the average yield on our interest earning assets during the three months ended March 31, 2021.  Linked quarter, net interest income decreased $2.4 million, or 4.9%, compared to $48.7 million during the three months ended December 31, 2020.  The decrease in interest income is due to the decrease in the average balance of interest earning assets and the average yield, partially offset by a decline in interest expense driven by the decrease in the average balance of interest bearing liabilities and the average interest rate.

    Our net interest margin and tax equivalent net interest margin(1) increased to 3.01% and 3.20%, respectively, for the three months ended March 31, 2021, compared to 2.88% and 3.03%, respectively, for the same period in 2020.  Linked quarter net interest margin increased one basis point from 3.00% and tax equivalent net interest margin(1) remained unchanged at 3.20% as compared to the three months ended December 31, 2020.

    Noninterest income was $13.6 million for the three months ended March 31, 2021, a decrease of $1.9 million, or 12.1%, compared to $15.5 million for the same period in 2020, due to a $3.5 million decrease in net gain on sale of securities available for sale, partially offset by increases in other noninterest income, gain on sale of loans and brokerage services income.  On a linked quarter basis, noninterest income increased $2.7 million, or 25.0%, compared to the three months ended December 31, 2020, due to increases in net gain on sale of securities available for sale, brokerage services income and other noninterest income, partially offset by decreases in deposit services income and gain on sale of loans.

    Noninterest expense was $31.2 million for the three months ended March 31, 2021, an increase of $0.7 million, or 2.3%, compared to $30.5 million for the same period in 2020.  On a linked quarter basis, noninterest expense decreased $0.1 million, or 0.3%, compared to the three months ended December 31, 2020.

    Income tax expense increased $4.3 million for the three months ended March 31, 2021 compared to the same period in 2020.  On a linked quarter basis, income tax expense increased $0.5 million, or 11.4%.  Our effective tax rate (“ETR”) increased to 12.2% for the three months ended March 31, 2021 compared to 10.8% for the three months ended March 31, 2020 due to a decrease in tax-exempt income as a percentage of pre-tax income.  Linked quarter, our ETR decreased compared to 12.6% for the three months ended December 31, 2020, primarily due to $0.1 million of a discrete tax benefit recorded in connection with equity award transactions in the first quarter of 2021.  

    Balance Sheet Data

    At March 31, 2021, we had $7.0 billion in total assets, compared to $7.01 billion at December 31, 2020 and $7.27 billion at March 31, 2020.

    Loans at March 31, 2021 were $3.72 billion, an increase of $115.6 million, or 3.2%, compared to $3.60 billion at March 31, 2020.  This increase was due to our origination of PPP loans, a component of the commercial loan category, with a balance of $220.9 million at March 31, 2021, offset largely by a decrease in our 1-4 family residential loans.  There were no PPP loans outstanding at March 31, 2020.  Linked quarter loans increased $58.8 million, or 1.6%, from $3.66 billion at December 31, 2020.  The linked quarter net increase in loans consisted primarily of increases of $52.8 million of commercial real estate loans, $23.7 million of construction loans and $7.6 million of commercial loans, partially offset by decreases of $19.5 million of 1-4 family residential loans, $3.2 million of loans to individuals and $2.7 million of municipal loans.  On a linked quarter basis, our PPP loans experienced a net increase of $6.0 million, or 2.8%, from $214.8 million at December 31, 2020, due to additional funding under the renewed Economic Aid Act, which was signed into law on December 27, 2020, partially offset by forgiveness payments received from loans funded under the Coronavirus Aid, Relief, and Economic Security Act.   

    Securities at March 31, 2021 were $2.65 billion, a decrease of $302.4 million, or 10.3%, compared to $2.95 billion at March 31, 2020.  The decrease was primarily due to principal pay downs of mortgage-related securities.  Linked quarter, securities decreased $51.2 million, or 1.9%, from $2.70 billion at December 31, 2020.  The decrease for the linked quarter was primarily a result of the decline in the estimated fair value of the securities portfolio at March 31, 2021, when compared to December 31, 2020.

    Deposits at March 31, 2021 were $5.09 billion, an increase of $353.5 million, or 7.5%, compared to $4.74 billion at March 31, 2020.  Linked quarter, deposits increased $160.3 million, or 3.3%, from $4.93 billion at December 31, 2020.  Both of these increases were largely driven by PPP loan disbursements deposited into our commercial accounts and stimulus checks deposited during the second quarter of 2020 and the first quarter of 2021.

    Asset Quality

    Nonperforming assets at March 31, 2021 were $15.4 million, or 0.22% of total assets, a decrease of $2.0 million, or 11.7%, compared to $17.4 million, or 0.24% of total assets, at March 31, 2020, and a decrease from $17.5 million, or 0.25% of total assets, at December 31, 2020.  During the three months ended March 31, 2021, nonaccrual loans decreased $2.4 million, or 31.1%.

    The allowance for loan losses decreased to $41.5 million, or 1.12% of total loans, at March 31, 2021, compared to $53.6 million, or 1.49% of total loans, at March 31, 2020.  The allowance for loan losses was $49.0 million, or 1.34% of total loans, at December 31, 2020.  The decrease is primarily due to improvement in the economic forecast.

    For the three months ended March 31, 2021, we recorded a reversal of provision for credit losses for loans of $7.4 million, compared to a provision for credit losses for loans of $24.1 million for the three months ended March 31, 2020 and a reversal of provision for credit losses of $5.9 million for the three months ended December 31, 2020. The reversal was primarily due to improvement in the economic forecast in the first quarter of 2021 and its effect on macroeconomic factors used in the CECL model.  The provision in the first quarter of 2020 was due to the estimated economic impact of COVID-19 on the macroeconomic factors, including the potential for credit deterioration.  Net charge-offs were $0.2 million for the three months ended March 31, 2021, compared to net charge-offs of $0.5 million for the three months ended March 31, 2020 and $0.2 million of net charge-offs for the three months ended December 31, 2020.

    For the three months ended March 31, 2021, we recorded a reversal of provision for credit losses for off-balance-sheet credit exposures of $2.8 million and provisions of $1.2 million and $0.4 million for the three months ended March 31, 2020 and December 31, 2020, respectively. The balance of the allowance for off-balance-sheet credit exposures at March 31, 2021 was $3.6 million and is included in other liabilities.

    Dividend

    Southside Bancshares, Inc. declared a first quarter cash dividend of $0.32 per share on February 4, 2021, which was paid on March 4, 2021, to all shareholders of record as of February 18, 2021.

       
       
    (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, 2021 financial results on Friday, April 23, 2021 at 11:00 a.m. CDT.  The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 8276936 or by identifying “Southside Bancshares, Inc., First Quarter 2021 Earnings Call.”  To listen to the call via webcast, register at https://investors.southside.com.

    For those unable to listen to the conference call live, a recording will be available from approximately 2:00 p.m. CDT April 23, 2021 through 2:00 p.m. CDT May 5, 2021 by accessing the company website, https://investors.southside.com.

    Non-GAAP Financial Measures

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

    Net interest income (FTE), net interest margin (FTE) and net interest spread (FTE).  Net interest income (FTE) is a non-GAAP measure that adjusts for the tax-favored status of net interest income from certain loans and investments and is not permitted under GAAP in the consolidated statements of income.  We believe this measure to be the preferred industry measurement of net interest income and that it enhances comparability of net interest income arising from taxable and tax-exempt sources.  The most directly comparable financial measure calculated in accordance with GAAP is our net interest income.  Net interest margin (FTE) is the ratio of net interest income (FTE) to average earning assets.  The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin.  Net interest spread (FTE) is the difference in the average yield on average earning assets on a tax-equivalent basis and the average rate paid on average interest bearing liabilities.  The most directly comparable financial measure calculated in accordance with GAAP is our net interest spread.

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

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

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

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

    About Southside Bancshares, Inc.

    Southside Bancshares, Inc. is a bank holding company with approximately $7.0 billion in assets as of March 31, 2021, that owns 100% of Southside Bank.  Southside Bank currently has 55 branches in Texas and operates a network of 76 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 and estimates about the Company's future performance and are subject to significant known and unknown risks and uncertainties, which could cause the Company's actual results to differ materially from the results discussed in the forward-looking statements.  For example, discussions about trends in asset quality, capital, liquidity, the pace of loan and revenue growth, the Company's ability to sell nonperforming assets, expense reductions, planned operational efficiencies, earnings, successful integration of completed acquisitions and certain market risk disclosures, including the impact of interest rates, tax reform and other economic factors, including the impact of the COVID-19 pandemic on the economy and our operations, 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.  The most recent factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the negative impact of the COVID-19 pandemic on our business, financial position, operations and prospects, including our ability to continue our business activities in certain communities we serve, the duration of the pandemic and its continued effects on financial markets, a reduction in financial transactions and business activities resulting in decreased deposits and reduced loan originations, increases in unemployment rates impacting our borrowers' ability to repay their loans, our ability to manage liquidity in a rapidly changing and unpredictable market, additional interest rate changes by the Federal Reserve and other government actions in response to the pandemic, including regulations or laws enacted to counter the effects of the COVID-19 pandemic on the economy.

    Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, under “Part I - Item 1. Forward Looking Information” and in the Company’s other filings with the Securities and Exchange Commission.  The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.


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

     As of
     2021 2020
     Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
    ASSETS         
    Cash and due from banks$78,304   $87,357   $81,643   $81,271   $71,727  
    Interest earning deposits29,319   21,051   14,561   19,535   40,486  
    Securities available for sale, at estimated fair value2,546,924   2,587,305   2,633,519   2,679,521   2,813,024  
    Securities held to maturity, at net carrying value98,159   108,998   115,089   120,384   134,491  
    Total securities2,645,083   2,696,303   2,748,608   2,799,905   2,947,515  
    Federal Home Loan Bank stock, at cost18,754   25,259   35,860   55,689   54,696  
    Loans held for sale2,615   3,695   8,686   3,392   1,830  
    Loans3,716,598   3,657,779   3,789,975   3,852,571   3,601,002  
    Less: Allowance for loan losses(41,454)  (49,006)  (55,110)  (59,868)  (53,638) 
    Net loans3,675,144   3,608,773   3,734,865   3,792,703   3,547,364  
    Premises & equipment, net144,628   144,576   147,169   147,715   146,212  
    Goodwill201,116   201,116   201,116   201,116   201,116  
    Other intangible assets, net8,978   9,744   10,569   11,450   12,381  
    Bank owned life insurance116,209   115,583   114,928   114,248   101,066  
    Other assets78,736   94,770   92,955   102,587   149,245  
    Total assets$6,998,886   $7,008,227   $7,190,960   $7,329,611   $7,273,638  
              
    LIABILITIES AND SHAREHOLDERS' EQUITY         
    Noninterest bearing deposits$1,383,371   $1,354,815   $1,363,228   $1,398,179   $1,065,708  
    Interest bearing deposits3,709,272   3,577,507   3,739,798   3,672,365   3,673,415  
    Total deposits5,092,643   4,932,322   5,103,026   5,070,544   4,739,123  
    Other borrowings and Federal Home Loan Bank borrowings687,845   855,699   994,512   1,165,463   1,492,270  
    Subordinated notes, net of unamortized debt
    issuance costs
    197,268   197,251   98,708   98,663   98,619  
    Trust preferred subordinated debentures, net of unamortized debt issuance costs60,256   60,255   60,254   60,253   60,251  
    Other liabilities102,277   87,403   95,312   117,083   87,575  
    Total liabilities6,140,289   6,132,930   6,351,812   6,512,006   6,477,838  
    Shareholders' equity858,597   875,297   839,148   817,605   795,800  
    Total liabilities and shareholders' equity$6,998,886   $7,008,227   $7,190,960   $7,329,611   $7,273,638  



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

     Three Months Ended
     2021 2020
     Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
    Income Statement:         
    Total interest income$53,565   $56,904   $55,677   $58,495   $60,752  
    Total interest expense7,262   8,197   9,091   11,224   16,051  
    Net interest income46,303   48,707   46,586   47,271   44,701  
    Provision for credit losses(10,149)  (5,545)  (4,746)  5,245   25,247  
    Net interest income after provision for credit losses56,452   54,252   51,332   42,026   19,454  
    Noninterest income         
    Deposit services6,125   6,419   6,129   5,532   6,279  
    Net gain (loss) on sale of securities available for sale2,003   (24)  78   2,662   5,541  
    Gain on sale of loans593   848   1,071   683   170  
    Trust fees1,383   1,354   1,253   1,221   1,305  
    Bank owned life insurance626   655   680   650   569  
    Brokerage services780   628   564   499   580  
    Other2,113   1,020   1,366   946   1,054  
    Total noninterest income13,623   10,900   11,141   12,193   15,498  
    Noninterest expense         
    Salaries and employee benefits20,044   19,609   19,344   18,629   19,643  
    Net occupancy3,560   3,795   3,595   3,668   3,311  
    Advertising, travel & entertainment437   504   519   292   832  
    ATM expense238   290   271   233   224  
    Professional fees991   986   961   1,082   1,195  
    Software and data processing1,312   1,220   1,215   1,295   1,227  
    Communications525   490   495   506   493  
    FDIC insurance454   456   469   174   25  
    Amortization of intangibles766   825   881   931   980  
    Other2,907   3,140   3,866   3,046   2,590  
    Total noninterest expense31,234   31,315   31,616   29,856   30,520  
    Income before income tax expense38,841   33,837   30,857   24,363   4,432  
    Income tax expense4,750   4,265   3,783   2,809   479  
    Net income$34,091   $29,572   $27,074   $21,554   $3,953  
              
    Common Share Data:   
    Weighted-average basic shares outstanding32,829   33,055   33,047   33,016   33,691  
    Weighted-average diluted shares outstanding32,937   33,125   33,098   33,083   33,805  
    Common shares outstanding end of period32,659   32,951   33,072   33,032   33,012  
    Earnings per common share         
    Basic$1.04   $0.89   $0.82   $0.65   $0.12  
    Diluted1.04   0.89   0.82   0.65   0.12  
    Book value per common share26.29   26.56   25.37   24.75   24.11  
    Tangible book value per common share (1)19.86   20.16   18.97   18.32   17.64  
    Cash dividends paid per common share0.32   0.37   0.31   0.31   0.31  
              
    Selected Performance Ratios:         
    Return on average assets1.99 %  1.64 %  1.48 %  1.17%  0.23% 
    Return on average shareholders’ equity15.82   13.77   12.89   10.82   1.93  
    Return on average tangible common equity (1)21.22   18.71   17.73   15.24   3.11  
    Average yield on earning assets (FTE) (1)3.67   3.70   3.57   3.69   4.06  
    Average rate on interest bearing liabilities0.64   0.68   0.73   0.87   1.30  
    Net interest margin (FTE) (1)3.20   3.20   3.02   3.02   3.03  
    Net interest spread (FTE) (1)3.03   3.02   2.84   2.82   2.76  
    Average earning assets to average interest bearing liabilities135.56   133.56   131.92   129.03   126.22  
    Noninterest expense to average total assets1.82   1.74   1.73   1.63   1.78  
    Efficiency ratio (FTE) (1)50.44   47.36   50.07   48.29   51.91  


    (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
     2021 2020
     Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
    Nonperforming Assets:$15,367   $17,480   $16,822   $17,600   $17,403  
    Nonaccrual loans5,314   7,714   5,971   5,639   5,221  
    Accruing loans past due more than 90 days              
    Troubled debt restructured loans9,641   9,646   10,307   11,367   11,448  
    Other real estate owned412   106   536   586   734  
    Repossessed assets   14   8   8     
              
    Asset Quality Ratios:         
    Ratio of nonaccruing loans to:         
    Total loans0.14%  0.21%  0.16%  0.15%  0.14% 
    Ratio of nonperforming assets to:         
    Total assets0.22   0.25   0.23   0.24   0.24  
    Total loans0.41   0.48   0.44   0.46   0.48  
    Total loans and OREO0.41   0.48   0.44   0.46   0.48  
    Total loans, excluding PPP loans, and OREO0.44   0.51   0.48   0.50   0.48  
    Ratio of allowance for loan losses to:         
    Nonaccruing loans780.09   635.29   922.96   1,061.68   1,027.35  
    Nonperforming assets269.76   280.35   327.61   340.16   308.21  
    Total loans1.12   1.34   1.45   1.55   1.49  
    Total loans, excluding PPP loans1.19   1.42   1.58   1.68   1.49  
    Net charge-offs (recoveries) to average loans outstanding0.02   0.02   0.04   0.01   0.06  
              
    Capital Ratios:         
    Shareholders’ equity to total assets12.27   12.49   11.67   11.15   10.94  
    Common equity tier 1 capital14.71   14.68   14.24   13.68   12.81  
    Tier 1 risk-based capital16.09   16.08   15.63   15.06   14.13  
    Total risk-based capital21.52   21.78   19.03   18.51   17.35  
    Tier 1 leverage capital10.29   9.81   9.50   9.05   9.45  
    Period end tangible equity to period end tangible assets (1)9.55   9.77   8.99   8.50   8.25  
    Average shareholders’ equity to average total assets12.56   11.92   11.49   10.86   11.94  


    (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
     2021 2020
    Loan Portfolio CompositionMar 31, Dec 31, Sep 30, Jun 30, Mar 31,
    Real Estate Loans:         
    Construction$605,677   $581,941   $610,394   $570,801   $603,952  
    1-4 Family Residential700,430   719,952   738,343   761,815   787,875  
    Commercial1,348,551   1,295,746   1,327,233   1,406,541   1,350,818  
    Commercial Loans564,745   557,122   629,170   639,162   383,984  
    Municipal Loans406,377   409,028   387,286   377,428   375,934  
    Loans to Individuals90,818   93,990   97,549   96,824   98,439  
    Total Loans$3,716,598   $3,657,779   $3,789,975   $3,852,571   $3,601,002  
              
    Summary of Changes in Allowances:         
    Allowance for Loan Losses         
    Balance at beginning of period$49,006   $55,110   $59,868   $53,638   $24,797  
    Impact of CECL adoption (1) - cumulative effect adjustment            5,072  
    Impact of CECL adoption - purchased loans with credit deterioration            231  
    Loans charged-off(795)  (595)  (718)  (546)  (995) 
    Recoveries of loans charged-off622   402   361   436   451  
    Net loans (charged-off) recovered(173)  (193)  (357)  (110)  (544) 
    Provision for (reversal of) loan losses(7,379)  (5,911)  (4,401)  6,340   24,082  
    Balance at end of period$41,454   $49,006   $55,110   $59,868   $53,638  
              
    Allowance for Off-Balance-Sheet Credit Exposures         
    Balance at beginning of period$6,386   $6,020   $6,365   $7,460   $1,455  
    Impact of CECL adoption (1)            4,840  
    Provision for (reversal of) off-balance-sheet credit exposures(2,770)  366   (345)  (1,095)  1,165  
    Balance at end of period$3,616   $6,386   $6,020   $6,365   $7,460  
    Total Allowance for Credit Losses$45,070   $55,392   $61,130   $66,233   $61,098  


    (1)We adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” on January 1, 2020.  ASU 2016-13 replaced the incurred loss model with an expected loss methodology that is referred to as current expected credit losses (“CECL”).  Adoption of this guidance on January 1, 2020, resulted in a cumulative-effect adjustment to reduce retained earnings by $7.8 million, net of tax.
      


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

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

     Three Months Ended
     March 31, 2021 December 31, 2020
     Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
    ASSETS           
    Loans (1)$3,634,053  $36,754  4.10% $3,772,158  $39,936  4.21%
    Loans held for sale2,803  20  2.89% 5,012  36  2.86%
    Securities:           
    Taxable investment securities (2)295,968  2,323  3.18% 223,753  1,753  3.12%
    Tax-exempt investment securities (2)1,300,991  11,176  3.48% 1,298,584  11,413  3.50%
    Mortgage-backed and related securities (2)940,815  6,088  2.62% 1,082,302  6,693  2.46%
    Total securities2,537,774  19,587  3.13% 2,604,639  19,859  3.03%
    Federal Home Loan Bank stock, at cost, and equity investments35,635  136  1.55% 46,798  199  1.69%
    Interest earning deposits31,169  15  0.20% 22,938  18  0.31%
    Total earning assets6,241,434  56,512  3.67% 6,451,545  60,048  3.70%
    Cash and due from banks86,634      83,228     
    Accrued interest and other assets677,230      687,894     
    Less:  Allowance for loan losses(49,240)     (55,567)    
    Total assets$6,956,058      $7,167,100     
    LIABILITIES AND SHAREHOLDERS’ EQUITY           
    Savings accounts$517,182  209  0.16% $487,452  201  0.16%
    Certificates of deposits736,099  1,229  0.68% 1,011,482  2,320  0.91%
    Interest bearing demand accounts2,342,299  1,159  0.20% 2,186,406  1,117  0.20%
    Total interest bearing deposits3,595,580  2,597  0.29% 3,685,340  3,638  0.39%
    Federal Home Loan Bank borrowings727,513  1,908  1.06% 896,484  2,125  0.94%
    Subordinated notes, net of unamortized debt issuance costs197,252  2,395  4.92% 158,692  2,051  5.14%
    Trust preferred subordinated debentures, net of unamortized debt issuance costs60,256  351  2.36% 60,255  360  2.38%
    Other borrowings23,522  11  0.19% 29,661  23  0.31%
    Total interest bearing liabilities4,604,123  7,262  0.64% 4,830,432  8,197  0.68%
    Noninterest bearing deposits1,389,020      1,381,120     
    Accrued expenses and other liabilities89,222      101,478     
    Total liabilities6,082,365      6,313,030     
    Shareholders’ equity873,693      854,070     
    Total liabilities and shareholders’ equity$6,956,058      $7,167,100     
    Net interest income (FTE)  $49,250      $51,851   
    Net interest margin (FTE)    3.20%     3.20%
    Net interest spread (FTE)    3.03%     3.02%


    (1)Interest on loans includes net fees on loans that are not material in amount.
    (2)For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.
      
    Note:  As of March 31, 2021 and December 31, 2020, loans totaling $5.3 million and $7.7 million, respectively, were on nonaccrual status.  Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.
     


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

     Three Months Ended
     September 30, 2020 June 30, 2020
     Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
    ASSETS           
    Loans (1)$3,815,989  $38,842  4.05% $3,826,383  $39,766  4.18%
    Loans held for sale3,934  31  3.13% 3,213  28  3.50%
    Securities:           
    Taxable investment securities (2)145,724  1,175  3.21% 94,247  732  3.12%
    Tax-exempt investment securities (2)1,295,179  11,418  3.51% 1,320,772  11,560  3.52%
    Mortgage-backed and related securities (2)1,209,913  7,048  2.32% 1,359,941  9,044  2.67%
    Total securities2,650,816  19,641  2.95% 2,774,960  21,336  3.09%
    Federal Home Loan Bank stock, at cost, and equity investments60,528  249  1.64% 67,582  360  2.14%
    Interest earning deposits17,668  17  0.38% 24,097  23  0.38%
    Total earning assets6,548,935  58,780  3.57% 6,696,235  61,513  3.69%
    Cash and due from banks80,368      78,326     
    Accrued interest and other assets699,351      660,411     
    Less:  Allowance for loan losses(61,212)     (55,908)    
    Total assets$7,267,442      $7,379,064     
    LIABILITIES AND SHAREHOLDERS’ EQUITY           
    Savings accounts$461,895  192  0.17% $426,420  187  0.18%
    Certificates of deposit1,172,179  3,568  1.21% 1,187,665  4,817  1.63%
    Interest bearing demand accounts2,069,751  1,102  0.21% 2,013,770  1,225  0.24%
    Total interest bearing deposits3,703,825  4,862  0.52% 3,627,855  6,229  0.69%
    Federal Home Loan Bank borrowings1,037,855  2,369  0.91% 1,197,097  2,929  0.98%
    Subordinated notes, net of unamortized debt issuance costs98,686  1,427  5.75% 98,641  1,412  5.76%
    Trust preferred subordinated debentures, net of unamortized debt issuance costs60,253  378  2.50% 60,252  491  3.28%
    Other borrowings63,526  55  0.34% 205,724  163  0.32%
    Total interest bearing liabilities4,964,145  9,091  0.73% 5,189,569  11,224  0.87%
    Noninterest bearing deposits1,371,748      1,310,651     
    Accrued expenses and other liabilities96,219      77,431     
    Total liabilities6,432,112      6,577,651     
    Shareholders’ equity835,330      801,413     
    Total liabilities and shareholders’ equity$7,267,442      $7,379,064     
    Net interest income (FTE)  $49,689      $50,289   
    Net interest margin (FTE)    3.02%     3.02%
    Net interest spread (FTE)    2.84%     2.82%


    (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, 2020 and June 30, 2020, loans totaling $6.0 million and $5.6 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, 2020
     Average Balance Interest Average Yield/Rate
    ASSETS     
    Loans (1) $3,587,143   $42,554   4.77% 
    Loans held for sale831   9   4.36% 
    Securities:     
    Taxable investment securities (2)70,293   512   2.93% 
    Tax-exempt investment securities (2)888,906   7,837   3.55% 
    Mortgage-backed and related securities (2)1,598,374   11,534   2.90% 
    Total securities2,557,573   19,883   3.13% 
    Federal Home Loan Bank stock, at cost, and equity investments62,976   425   2.71% 
    Interest earning deposits40,236   180   1.80% 
    Total earning assets6,248,759   63,051   4.06% 
    Cash and due from banks76,739      
    Accrued interest and other assets611,017      
    Less:  Allowance for loan losses(30,373)     
    Total assets$6,906,142      
    LIABILITIES AND SHAREHOLDERS’ EQUITY     
    Savings accounts$384,863   237   0.25% 
    Certificates of deposit1,362,427   6,346   1.87% 
    Interest bearing demand accounts1,975,837   3,336   0.68% 
    Total interest bearing deposits3,723,127   9,919   1.07% 
    Federal Home Loan Bank borrowings999,070   3,974   1.60% 
    Subordinated notes, net of unamortized debt issuance costs98,597   1,411   5.76% 
    Trust preferred subordinated debentures, net of unamortized debt issuance costs60,234   600   4.01% 
    Other borrowings69,846   147   0.85% 
    Total interest bearing liabilities4,950,874   16,051   1.30% 
    Noninterest bearing deposits1,042,341      
    Accrued expenses and other liabilities88,168      
    Total liabilities6,081,383      
    Shareholders’ equity824,759      
    Total liabilities and shareholders’ equity$6,906,142      
    Net interest income (FTE)  $47,000    
    Net interest margin (FTE)    3.03% 
    Net interest spread (FTE)    2.76% 


    (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, 2020, 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.
    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
      2021 2020
      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 $34,091   $29,572   $27,074   $21,554   $3,953  
    After-tax amortization expense 605   652   696   735   774  
    Adjusted net income available to common shareholders $34,696   $30,224   $27,770   $22,289   $4,727  
               
    Average shareholders' equity $873,693   $854,070   $835,330   $801,413   $824,759  
    Less: Average intangibles for the period (210,563)  (211,354)  (212,221)  (213,135)  (214,104) 
    Average tangible shareholders' equity $663,130   $642,716   $623,109   $588,278   $610,655  
               
    Return on average tangible common equity 21.22 % 18.71 % 17.73 % 15.24 % 3.11 %
               
    Reconciliation of book value per share to tangible book value per share:          
    Common equity at end of period $858,597   $875,297   $839,148   $817,605   $795,800  
    Less: Intangible assets at end of period (210,094)  (210,860)  (211,685)  (212,566)  (213,497) 
    Tangible common shareholders' equity at end of period $648,503   $664,437   $627,463   $605,039   $582,303  
               
    Total assets at end of period $6,998,886   $7,008,227   $7,190,960   $7,329,611   $7,273,638  
    Less: Intangible assets at end of period (210,094)  (210,860)  (211,685)  (212,566)  (213,497) 
    Tangible assets at end of period $6,788,792   $6,797,367   $6,979,275   $7,117,045   $7,060,141  
               
    Period end tangible equity to period end tangible assets 9.55 % 9.77 % 8.99 % 8.50 % 8.25 %
               
    Common shares outstanding end of period 32,659   32,951   33,072   33,032   33,012  
    Tangible book value per common share $19.86   $20.16   $18.97   $18.32   $17.64  
               
    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) $46,303   $48,707   $46,586   $47,271   $44,701  
    Tax equivalent adjustments:          
    Loans 736   717   688   679   668  
    Tax-exempt investment securities 2,211   2,427   2,415   2,339   1,631  
    Net interest income (FTE) (1) 49,250   51,851   49,689   50,289   47,000  
    Noninterest income 13,623   10,900   11,141   12,193   15,498  
    Nonrecurring income (2) (2,003)  24   (78)  (2,662)  (5,541) 
    Total revenue $60,870   $62,775   $60,752   $59,820   $56,957  
               
    Noninterest expense $31,234   $31,315   $31,616   $29,856   $30,520  
    Pre-tax amortization expense (766)  (825)  (881)  (931)  (980) 
    Nonrecurring expense (3) 236   (758)  (315)  (39)  29  
    Adjusted noninterest expense $30,704   $29,732   $30,420   $28,886   $29,569  
               
    Efficiency ratio 53.01 % 49.86 % 52.77 % 50.85 % 54.10 %
    Efficiency ratio (FTE) (1) 50.44 % 47.36 % 50.07 % 48.29 % 51.91 %
               
    Average earning assets $6,241,434   $6,451,545   $6,548,935   $6,696,235   $6,248,759  
               
    Net interest margin 3.01 % 3.00 % 2.83 % 2.84 % 2.88 %
    Net interest margin (FTE) (1) 3.20 % 3.20 % 3.02 % 3.02 % 3.03 %
               
    Net interest spread 2.84 % 2.83 % 2.65 % 2.64 % 2.61 %
    Net interest spread (FTE) (1) 3.03 % 3.02 % 2.84 % 2.82 % 2.76 %


    (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 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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