NASDAQ Global Select Market Symbol - 'SBSI' TYLER, Texas, Jan. 29
/PRNewswire-FirstCall/ -- Southside Bancshares, Inc. ("Southside"
or the "Company") today reported its financial results for the
three months and year ended December 31, 2008. Southside reported
record net income of $10.4 million for the three months ended
December 31, 2008, an increase of $5.5 million, or 114.5%, when
compared to $4.8 million for the same period in 2007. Net income
for the year ended December 31, 2008, increased $14.0 million, or
84.0%, to $30.7 million from $16.7 million, for the same period in
2007. Earnings per diluted share increased $0.39, or 114.7%, to
$0.73 for the three months ended December 31, 2008, compared to
$0.34 for the same period in 2007. Earnings per diluted share
increased $0.98, or 83.1%, to $2.16 for the year ended December 31,
2008, compared to $1.18 for the same period in 2007. The return on
average shareholders' equity for the year ended December 31, 2008,
increased to 21.44%, compared to 14.05%, for the same period in
2007. The return on average assets increased to 1.29%, for the year
ended December 31, 2008, compared to 0.87%, for the same period in
2007. "We are exceptionally pleased to report record earnings in a
financial environment that few will ever forget," stated B. G.
Hartley, Chairman and Chief Executive Officer. "Our earnings are
the product of the execution of our long-term business plan. Many
institutions found 2008 to be a year to question long-held beliefs
and methodologies. The events of 2008 strengthened our confidence
in our traditional banking model and balance sheet strategies.
Rather than be victimized by the tremendous volatility and credit
events, we found ourselves in a position to build long-term
franchise value." "We made the decision to grow assets during 2008,
taking advantage of the increasingly attractive economics of
financial intermediation. Asset growth consisted primarily of U.S.
agency mortgage-backed securities, Texas Permanent School Fund
guaranteed municipal securities and loan growth, funded by deposit
growth and FHLB advances. Our ability to add assets is a result of
our balance sheet discipline executed over a long-term horizon.
Should the economics of asset accumulation decrease, we might allow
the balance sheet to shrink through run-off or asset sales.
However, should the economics become more attractive, we will
strategically increase the balance sheet." "As 2008 started, there
was pronounced weakness in the housing and credit markets. Events
unfolded in the last half of the year that forever changed the
financial landscape. As the economic fallout spread, many landmark
firms ceased to exist in their original form. Some sectors of the
economy, even those that most individuals took for granted,
literally appeared to stop functioning." "In the third quarter
earnings release, we remarked that 'we are well aware of the
current precarious economic environment and are managing the bank
to an increasing standard of protection.' In the fourth quarter,
the housing led financial crisis morphed into a full blown economic
crisis. Consumer spending slowed dramatically; retailers and
automobile manufacturers began experiencing crippling results and
unemployment levels intensified. While it appears the economy may
be in for a bumpy recovery, we continue to prepare for several
possibilities. As the economic crisis unfolded and oil prices
plummeted during the fourth quarter, our market areas began to
further reflect the economic slowdown. The year 2008 closed on a
worse macroeconomic note for the nation than any in recent memory.
We are fortunate to have marked this turbulent year by organically
building our capital, strategically growing our balance sheet, as
well as producing record net income." Loan and Deposit Growth For
the three months ended December 31, 2008, total loans increased by
$35.2 million, or 3.6%, when compared to September 30, 2008.
Management believes that the loan portfolio remains well
diversified. During the quarter ended December 31, 2008,
construction loans, municipal loans, and loans to individuals
increased. When comparing the year ended December 31, 2008 to the
comparable period in 2007, total loans grew by $61.3 million, or
6.4%. We are pleased that our loan growth appears well diversified.
All loan categories, with the exception of commercial real estate,
increased when comparing the year ended December 31, 2008 to the
same period in 2007. During the fourth quarter, as our markets
began to experience the economic slowdown, our nonperforming assets
increased $7.2 million to $15.8 million, or 0.58% of total assets,
due to an increase in nonaccrual loans. In response, we increased
our allowance for loan losses during the fourth quarter $3.2
million, to $16.1 million at December 31, 2008. When comparing
September 30, 2008 to December 31, 2008, nonaccrual construction
loans increased from $2.0 million to $5.7 million and nonaccrual
Southside Financial Group ("SFG") loans increased from $1.4 million
to $5.4 million. Deposits increased $76.9 million, or 5.2%, to
$1.56 billion during the three months ended December 31, 2008, when
compared to September 30, 2008. When comparing the year ended
December 31, 2008 to the comparable period in 2007, deposits
increased $25.6 million, or 1.7%. Total deposits, net of brokered
deposits, increased $118.6 million, or 8.5% for the year ended
December 31, 2008, when compared to the same period in 2007. Net
Interest Income Net interest income increased $9.2 million, or
67.7%, to $22.7 million for the three months ended December 31,
2008, when compared to $13.6 million for the same period in 2007.
This is due to an increase in the average yield on our interest
earning assets combined with a decrease in the average yield on the
average interest bearing liabilities resulting in an increase in
our net interest spread and margin. For the three months ended
December 31, 2008, our net interest spread increased to 3.49% from
2.16% and our net interest margin increased to 3.96% from 2.94%
when compared to the same period in 2007. The net interest margin
and net interest spread for the three months ended December 31,
2008, increased to 3.96% and 3.49%, respectively, from 3.68% and
3.13% for the three months ended September 30, 2008. The increase
in the yield on interest earning assets for the three months ended
December 31, 2008, compared to the same period in 2007, is
reflective of an increase in average SFG high yield automobile
loans, a 41 basis point increase in the yield on our securities
portfolio and an increase in average interest earning assets of
$490.5 million, or 25.2%. The decrease in the average yield on
interest bearing liabilities is a result of an overall decrease in
interest rates and calling $125.4 million of higher yielding
brokered deposits during 2008. Net Income for the Three Months The
increase in net income for the three months ended December 31,
2008, was primarily a result of the increase in net interest income
and noninterest income partially offset by an increase in provision
for loan loss and noninterest expense. Noninterest income,
excluding gain on sale of available for sale securities, increased
$55,000, or 0.8%, for the three months ended December 31, 2008,
compared to the same period in 2007. During the fourth quarter
ended December 31, 2008, bank owned life insurance, which is part
of noninterest income, increased $527,000 primarily as a result of
a death benefit received on a covered officer. During the three
months ended December 31, 2008, we primarily sold a portion of our
long duration municipal securities. As a result, we realized a $5.8
million gain on the sale of available for sale securities during
the fourth quarter of 2008. It is uncertain if economic conditions
or ALCO and investment portfolio objectives that would precipitate
sales of available for sale securities will exist in future
quarters. Therefore, the Company cannot predict if it will have net
gains on sales of available for sale securities in future quarters.
Provision for loan losses increased $3.9 million, or 282.2%, for
the three months ended December 31, 2008, compared to the same
period in 2007 primarily due to changing market conditions and
increases in nonperforming loans. Noninterest expense increased
$2.8 million, or 21.6%, for the three months ended December 31,
2008, compared to the same period in 2007. The increase in
noninterest expense was primarily a result of the increase in
salaries and employee benefits, occupancy expense, professional
fees and FDIC expense. The increase in salaries and employee
benefits for the three months ended December 31, 2008 was $2.0
million, or 25.8%, compared to the same period in 2007. The
increase in salary and benefits is related to an increase in the
number of employees, an increase in retirement expenses and normal
annual salary increases. About Southside Bancshares, Inc. Southside
Bancshares, Inc. is a bank holding company with approximately $2.7
billion in assets that owns 100% of Southside Bank. Southside Bank
currently has 44 banking centers in Texas and operates a network of
47 ATMs. To learn more about Southside Bancshares, Inc., please
visit our investor relations website at
http://www.southside.com/investor. 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 Susan Hill at (903)
531-7220, or . Forward-Looking Statements Certain statements of
other than historical fact that are contained in this document and
in written material, press releases and oral statements issued by
or on behalf of the Company, a bank holding company, may be
considered to be "forward-looking statements" within the meaning of
and subject to the 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," "intend," "probability," "risk," "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 the Company's expansion, including
expectations of the costs and profitability of such expansion,
trends in asset quality and earnings from growth, and certain
market risk disclosures 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. As a result, actual income
gains and losses could materially differ from those that have been
estimated. 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, 2007
under "Forward-Looking Information" and 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. At At December 31, December 31, 2008 2007
(dollars in thousands) (unaudited) Selected Financial Condition
Data (at end of period): Total assets $2,700,238 $2,196,322 Loans
1,022,549 961,230 Allowance for loan losses 16,112 9,753
Mortgage-backed and related securities: Available for sale, at
estimated fair value 1,026,513 727,553 Held to maturity, at cost
157,287 189,965 Investment securities: Available for sale, at
estimated fair value 278,378 109,928 Held to maturity, at cost 478
475 Federal Home Loan Bank stock, at cost 39,411 19,850 Deposits
1,556,131 1,530,491 Long-term obligations 715,800 146,558
Shareholders' equity 160,617 132,328 Nonperforming assets 15,781
3,946 Nonaccrual loans 14,289 2,913 Loans 90 days past due 593 400
Restructured loans 148 225 Other real estate owned 318 153
Repossessed assets 433 255 Asset Quality Ratios: Nonaccruing loans
to total loans 1.40% 0.30% Allowance for loan losses to nonaccruing
loans 112.76 334.81 Allowance for loan losses to nonperforming
assets 102.10 247.16 Allowance for loan losses to total loans 1.58
1.01 Nonperforming assets to total assets 0.58 0.18 Net charge-offs
to average loans 0.74 0.09 Capital Ratios: Shareholders' equity to
total assets 5.95 6.02 Average shareholders' equity to average
total assets 6.04 6.22 LOAN PORTFOLIO COMPOSITION The following
table sets forth loan totals by category for the periods presented:
At At December 31, December 31, 2008 2007 (in thousands)
(unaudited) Real Estate Loans: Construction $120,153 $107,397 1-4
Family Residential 238,693 237,979 Other 184,629 200,148 Commercial
Loans 165,558 154,171 Municipal Loans 134,986 112,523 Loans to
Individuals 178,530 149,012 Total Loans $1,022,549 $961,230 At or
for the At or for the Three Months Years Ended December 31, Ended
December 31, 2008 2007 2008 2007 (dollars in thousands) (dollars in
thousands) (unaudited) (unaudited) Selected Operating Data: Total
interest income $38,245 $30,689 $136,176 $105,741 Total interest
expense 15,505 17,133 60,363 61,863 Net interest income 22,740
13,556 75,813 43,878 Provision for loan losses 5,339 1,397 13,675
2,351 Net interest income after provision for loan losses 17,401
12,159 62,138 41,527 Noninterest income Deposit services 4,572
4,808 18,395 17,280 Gain on sale of securities available for sale
5,760 336 12,334 897 Gain on sale of loans 206 429 1,757 1,922
Trust income 575 544 2,465 2,106 Bank owned life insurance income
864 337 2,246 1,142 Other 717 761 3,105 3,071 Total noninterest
income 12,694 7,215 40,302 26,418 Noninterest expense Salaries and
employee benefits 9,707 7,717 37,228 29,361 Occupancy expense 1,440
1,262 5,704 4,881 Equipment expense 337 279 1,305 1,017
Advertising, travel & entertainment 690 579 2,097 1,812 ATM and
debit card expense 306 263 1,211 1,006 Director fees 249 211 674
605 Supplies 228 205 812 692 Professional fees 625 304 1,864 1,268
Postage 190 194 755 662 Telephone and communications 265 223 1,050
800 FDIC Insurance 278 173 966 285 Other 1,560 1,641 6,828 4,896
Total noninterest expense 15,875 13,051 60,494 47,285 Income before
income tax expense 14,220 6,323 41,946 20,660 Provision for income
tax expense 3,851 1,489 11,250 3,976 Net income $10,369 $4,834
$30,696 $16,684 Common share data: Weighted-average basic shares
Outstanding 13,991 13,776 13,891 13,711 Weighted-average diluted
shares outstanding 14,239 14,141 14,200 14,117 Net income per
common share Basic $0.74 $0.35 $2.21 $1.22 Diluted 0.73 0.34 2.16
1.18 Book value per common share - - 11.45 9.59 Cash dividend
declared per common Share 0.19 0.15 0.60 0.50 Selected Performance
Ratios: Return on average assets 1.58% 0.92% 1.29% 0.87% Return on
average shareholders' equity 27.85 15.02 21.44 14.05 Average yield
on interest earning assets 6.50 6.44 6.38 6.10 Average yield on
interest bearing liabilities 3.01 4.28 3.30 4.30 Net interest
spread 3.49 2.16 3.08 1.80 Net interest margin 3.96 2.94 3.64 2.64
Average interest earnings assets to average interest bearing
liabilities 118.65 122.36 120.66 124.02 Noninterest expense to
average total assets 2.42 2.47 2.55 2.48 Efficiency ratio 50.30
60.61 54.98 64.86 RESULTS OF OPERATIONS The analysis below shows
average interest earnings assets and interest bearing liabilities
together with the average yield on the interest earning assets and
the average cost of the interest bearing liabilities. AVERAGE
BALANCES AND YIELDS (dollars in thousands) (unaudited) Years Ended
December 31, 2008 December 31, 2007 AVG AVG AVG AVG BALANCE
INTEREST YIELD BALANCE INTEREST YIELD ASSETS INTEREST EARNING
ASSETS: Loans (1)(2) $983,336 $75,445 7.67% $809,906 $58,002 7.16%
Loans Held For Sale 2,487 121 4.87% 3,657 191 5.22% Securities:
Investment Securities (Taxable)(4) 46,537 1,723 3.70% 52,171 2,580
4.95% Investment Securities (Tax-Exempt) (3)(4) 103,608 7,074 6.83%
43,486 3,065 7.05% Mortgage-backed and Related Securities (4)
1,034,406 55,470 5.36% 852,880 43,767 5.13% Total Securities
1,184,551 64,267 5.43% 948,537 49,412 5.21% FHLB stock and other
investments, at cost 31,875 841 2.64% 20,179 1,193 5.91% Interest
Earning Deposits 1,006 22 2.19% 769 41 5.33% Federal Funds Sold
4,039 90 2.23% 2,933 144 4.91% Total Interest Earning Assets
2,207,294 140,786 6.38% 1,785,981 108,983 6.10% NONINTEREST EARNING
ASSETS: Cash and Due From Banks 45,761 42,724 Bank Premises and
Equipment 40,449 35,746 Other Assets 89,473 51,968 Less: Allowance
for Loan Loss (11,318) (7,697) Total Assets $2,371,659 $1,908,722
LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST BEARING LIABILITIES:
Savings Deposits $57,587 736 1.28% $52,106 676 1.30% Time Deposits
535,921 21,727 4.05% 564,613 27,666 4.90% Interest Bearing Demand
Deposits 500,955 10,428 2.08% 414,293 13,116 3.17% Total Interest
Bearing Deposits 1,094,463 32,891 3.01% 1,031,012 41,458 4.02%
Short-term Interest Bearing Liabilities 290,895 8,969 3.08% 278,002
13,263 4.77% Long-term Interest Bearing Liabilities - FHLB Dallas
383,677 14,454 3.77% 95,268 4,357 4.57% Long-term Debt (5) 60,311
4,049 6.71% 35,802 2,785 7.78% Total Interest Bearing Liabilities
1,829,346 60,363 3.30% 1,440,084 61,863 4.30% NONINTEREST BEARING
LIABILITIES: Demand Deposits 372,160 328,711 Other Liabilities
26,497 20,997 Total Liabilities 2,228,003 1,789,792 Minority
Interest in SFG 487 151 SHAREHOLDERS' EQUITY 143,169 118,779 Total
Liabilities and Shareholders' Equity $2,371,659 $1,908,722 NET
INTEREST INCOME $80,423 $47,120 NET INTEREST MARGIN ON AVERAGE
EARNING ASSETS 3.64% 2.64% NET INTEREST SPREAD 3.08% 1.80% (1)
Interest on loans includes fees on loans that are not material in
amount. (2) Interest income includes taxable-equivalent adjustments
of $2,446 and $2,289 for the years ended December 31, 2008 and
2007, respectively. (3) Interest income includes taxable-equivalent
adjustments of $2,164 and $953 for the years ended December 31,
2008 and 2007, respectively. (4) For the purpose of calculating the
average yield, the average balance of securities is presented at
historical cost. (5) Represents junior subordinated debentures
issued by us to Southside Statutory Trust III, IV, and V in
connection with the issuance by Southside Statutory Trust III of
$20 million of trust preferred securities, Southside Statutory
Trust IV of $22.5 million of trust preferred securities, Southside
Statutory Trust V of $12.5 million of trust preferred securities
and junior subordinated debentures issued by Fort Worth Bancshares,
Inc. to Magnolia Trust Company I in connection with the issuance by
Magnolia Trust Company I of $3.5 million of trust preferred
securities. Note: As of December 31, 2008 and 2007, loans totaling
$14,289 and $2,913, respectively, were on nonaccrual status. The
policy is to reverse previously accrued but unpaid interest on
nonaccrual loans; thereafter, interest income is recorded to the
extent received when appropriate. AVERAGE BALANCES AND YIELDS
(dollars in thousands) (unaudited) Three Months Ended December 31,
2008 December 31, 2007 AVG AVG AVG AVG BALANCE INTEREST YIELD
BALANCE INTEREST YIELD ASSETS INTEREST EARNING ASSETS: Loans (1)(2)
$993,045 $19,627 7.86% $926,387 $18,065 7.74% Loans Held For Sale
1,751 22 5.00% 3,063 42 5.44% Securities: Investment Securities
(Taxable)(4) 44,848 346 3.07% 45,426 576 5.03% Investment
Securities (Tax-Exempt) (3)(4) 163,918 2,950 7.16% 48,395 844 6.92%
Mortgage-backed and Related Securities(4) 1,184,879 16,594 5.57%
892,567 11,688 5.20% Total Securities 1,393,645 19,890 5.68%
986,388 13,108 5.27% FHLB stock and other investments, at cost
40,115 185 1.83% 20,499 248 4.80% Interest Earning Deposits 1,240 -
0.00% 1,313 15 4.53% Federal Funds Sold 3,803 11 1.15% 5,401 64
4.70% Total Interest Earning Assets 2,433,599 39,735 6.50%
1,943,051 31,542 6.44% NONINTEREST EARNING ASSETS: Cash and Due
From Banks 46,270 45,471 Bank Premises and Equipment 41,383 39,819
Other Assets 97,416 75,480 Less: Allowance for Loan Loss (13,254)
(8,800) Total Assets $2,605,414 $2,095,021 LIABILITIES AND
SHAREHOLDERS' EQUITY INTEREST BEARING LIABILITIES: Savings Deposits
$59,743 191 1.27% $52,937 171 1.28% Time Deposits 530,239 4,524
3.39% 614,920 7,611 4.91% Interest Bearing Demand Deposits 527,493
2,296 1.73% 468,353 3,695 3.13% Total Interest Bearing Deposits
1,117,475 7,011 2.50% 1,136,210 11,477 4.01% Short-term Interest
Bearing Liabilities 266,416 1,844 2.75% 303,693 3,492 4.56%
Long-term Interest Bearing Liabilities - FHLB Dallas 606,905 5,626
3.69% 88,164 1,042 4.69% Long-term Debt (5) 60,311 1,024 6.75%
59,958 1,122 7.42% Total Interest Bearing Liabilities 2,051,107
15,505 3.01% 1,588,025 17,133 4.28% NONINTEREST BEARING
LIABILITIES: Demand Deposits 385,134 355,289 Other Liabilities
20,708 23,634 Total Liabilities 2,456,949 1,966,948 Minority
Interest in SFG 374 400 SHAREHOLDERS' EQUITY 148,091 127,673 Total
Liabilities and Shareholders' Equity $2,605,414 $2,095,021 NET
INTEREST INCOME $24,230 $14,409 NET INTEREST MARGIN ON AVERAGE
EARNING ASSETS 3.96% 2.94% NET INTEREST SPREAD 3.49% 2.16% (1)
Interest on loans includes fees on loans that are not material in
amount. (2) Interest income includes taxable-equivalent adjustments
of $621 and $584 for the three months ended December 31, 2008 and
2007, respectively. (3) Interest income includes taxable-equivalent
adjustments of $869 and $269 for the three months ended December
31, 2008 and 2007, respectively. (4) For the purpose of calculating
the average yield, the average balance of securities is presented
at historical cost. (5) Represents junior subordinated debentures
issued by us to Southside Statutory Trust III, IV, and V in
connection with the issuance by Southside Statutory Trust III of
$20 million of trust preferred securities, Southside Statutory
Trust IV of $22.5 million of trust preferred securities, Southside
Statutory Trust V of $12.5 million of trust preferred securities
and junior subordinated debentures issued by Fort Worth Bancshares,
Inc. to Magnolia Trust Company I in connection with the issuance by
Magnolia Trust Company I of $3.5 million of trust preferred
securities. Note: As of December 31, 2008 and 2007, loans totaling
$14,289 and $2,913,respectively, were on nonaccrual status. The
policy is to reverse previously accrued but unpaid interest on
nonaccrual loans; thereafter, interest income is recorded to the
extent received when appropriate. DATASOURCE: Southside Bancshares,
Inc. CONTACT: Lee Gibson of Southside Bancshares, Inc.,
+1-903-531-7221 Web Site: http://www.southside.com/
Copyright