NASDAQ Global Select Market Symbol - 'SBSI' TYLER, Texas, July 23
/PRNewswire-FirstCall/ -- Southside Bancshares, Inc. ("Southside"
or the "Company") (NASDAQ:SBSI) today reported its financial
results for the three and six months ended June 30, 2009. Southside
reported record net income of $9.4 million for the three months
ended June 30, 2009, an increase of $846,000, or 9.9%, when
compared to $8.5 million for the same period in 2008. Net income
for the six months ended June 30, 2009, increased $9.4 million, or
67.1%, to a record $23.5 million from $14.1 million, for the same
period in 2008. Earnings per diluted share increased $0.05, or
8.8%, to $0.62 for the three months ended June 30, 2009, when
compared to $0.57 for the same period in 2008. Earnings per diluted
share increased $0.63, or 67.0%, to $1.57 for the six months ended
June 30, 2009, compared to $0.94 for the same period in 2008. The
return on average shareholders' equity for the six months ended
June 30, 2009, increased to 27.00% compared to 20.06% for the same
period in 2008. The annual return on average assets increased to
1.74% for the six months ended June 30, 2009, compared to 1.27% for
the same period in 2008. "We are pleased to report strong second
quarter earnings. The successful execution of our business plan at
a time when the overall economic headwinds remain a challenge is
gratifying," stated B. G. Hartley, Chairman and CEO of Southside
Bancshares, Inc. "Fifty years ago, we dedicated our operation to
serving our market areas, employees and shareholders. Our
dedication to our shareholders is as strong today as it was when we
opened our doors as a small community bank in East Texas. We look
forward to building our franchise over the next fifty years with
the same commitment and the continued support of our shareholders,
employees and communities." "The national economy has shown some
signs that the pace of decline might be abating. We are indeed
fortunate to be based in Texas, as our economy appears to have
mitigated, thus far, the impact of the significant economic
declines apparent in other areas of the country. Given the general
uncertainty in the market, we continue to manage the bank with an
especially high degree of prudence. Regulatory uncertainty is once
again at the forefront, as fundamental changes to the regulation of
financial institutions are under consideration. Should the
landscape change, we will adjust our practices as needed." "The
current economic and political uncertainty has led to both a
positively sloped interest rate environment (long-term interest
rates significantly higher than short-term interest rates) and to
continued capital market volatility. Although this environment has
led to an increase in our provision for loan losses, it has also
had some favorable ramifications. Our net interest margin remained
solid and as the economics of particular securities evolved, we
also experienced a gain on sale of securities as we repositioned
the securities portfolio as appropriate for the new economics.
These two factors, mitigated by the increase in reserves, produced
record earnings in the first half of 2009. We are keenly aware that
these levels of securities gains are unlikely to be repeated in
future quarters. Our goal is to manage the bank in order for
shareholders and customers to ultimately benefit during this period
of volatility. These current earnings further strengthen our
capital, as well as, support our future growth. Increasing capital
levels provide Southside with the critical flexibility to allow for
continued strategic investments designed to enhance long-term
franchise value." "During the second quarter, the economic
environment continued to present challenges as well as
opportunities. During the quarter ended June 30, 2009, our
deposits, net of brokered deposits, increased slightly by $6.9
million and our loans increased a modest $4.5 million. The fixed
income market presented several opportunities. During the second
quarter, as mortgage credit spreads tightened in the face of
increasing U. S. Treasury interest rates, we repositioned a portion
of our mortgage-backed securities portfolio by selling selected
securities whose market value did not compensate the bank for the
potential funding risk. Later in the quarter, as U. S. Treasury
interest rates increased further, we were able to replace a portion
of those assets with a combination of municipal bonds and U. S.
Agency mortgage-backed securities." "While economic and regulatory
environments may reflect increased levels of volatility at times,
Southside's traditional credit and balance sheet discipline helps
moderate those external forces. Our traditional lending approach is
designed so that only minor changes might be necessary as credit
cycles come and go. During this period of credit volatility, this
approach has allowed us to continue to partner with our customers
in the same manner as we have for almost 50 years. We believe the
communities we serve will benefit from this disciplined approach
during good times and bad as they can look with confidence to
Southside for their everyday banking needs." Loan and Deposit
Growth For the three months ended June 30, 2009, total loans
increased slightly, $4.5 million, or 0.4% compared to March 31,
2009. When comparing June 30, 2009 to June 30, 2008, total loans
increased by $38.7 million, or 4.0%. The increase occurred
primarily in two categories, municipal loans and loans to
individuals. Nonperforming assets increased $2.7 million, or 15.5%
to $20.1 million, or 0.73% of total assets, for the three months
ended June 30, 2009 when compared to March 31, 2009. This increase
is primarily related to construction loans, mostly associated with
the acquisition of Fort Worth National Bank and, to a lesser
extent, loans to individuals purchased by Southside Financial
Group. During the three months ended June 30, 2009, deposits, net
of brokered deposits, increased $6.9 million, or 0.4% compared to
March 31, 2009. When comparing June 30, 2009 to June 30, 2008,
deposits, net of brokered deposits, increased $153.8 million, or
10.3%. The year over year increase in deposits is the result of an
increase in public fund deposits combined with an overall increase
in core deposits. Much of the increase in the public fund deposits
is temporary and is expected to roll-off over the next twelve
months. Net Interest Income Net interest income increased $4.6
million, or 25.5%, to $22.5 million for the three months ended June
30, 2009, when compared to $17.9 million for the same period in
2008. For the three months ended June 30, 2009, when compared to
the same period in 2008, our net interest spread increased to 3.33%
from 3.06% and during the same period the net interest margin
increased to 3.73% from 3.65%. Compared to the previous quarter,
the net interest margin and net interest spread for the three
months ended June 30, 2009 decreased to 3.73% and 3.33%,
respectively, from 3.83% and 3.37% for the three months ended March
31, 2009. Net Income for the Three Months The increase in net
income for the three months ended June 30, 2009 was primarily a
result of security gains and an increase in net interest income
partially offset by an increase in provision for loan losses, an
increase in other-than-temporary impairment, an increase in
noninterest expense and a decrease in noninterest income net of
security gains. Provision for loan losses increased $470,000, or
15.9%, for the three months ended June 30, 2009, compared to the
same period in 2008 due primarily to the increase in nonperforming
construction loans, overall market conditions, as well as loans to
individuals purchased by Southside Financial Group. Noninterest
expense increased $4.0 million, or 27.6%, for the three months
ended June 30, 2009, compared to the same period in 2008. The
increase in noninterest expense was primarily a result of increases
in personnel expense and FDIC insurance expense. The increase in
personnel expense was associated with our overall growth and
expansion, including Southside Financial Group, an increase in
retirement expense and normal salary increases for existing
personnel, all of which are reflected in salaries and employee
benefits which increased a combined $1.7 million, or 18.8%, when
compared to the same period in 2008. FDIC insurance premiums
increased during the period, $1.7 million, or 729.7%, to $1.9
million. The increase is the result of a special FDIC assessment of
$1.3 million and an overall increase in FDIC insurance premium
rates. 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, 2008
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 At June 30, December 31, June 30,
2009 2008 2008 ---- ---- ---- (dollars in thousands) (unaudited)
Selected Financial Condition Data (at end of period): Total assets
$2,743,277 $2,700,238 $2,323,788 Loans 1,016,967 1,022,549 978,269
Allowance for loan losses 18,804 16,112 11,527 Mortgage-backed and
related securities: Available for sale, at estimated fair value
1,052,318 1,026,513 851,331 Held to maturity, at cost 240,704
157,287 173,453 Investment securities: Available for sale, at
estimated fair value 216,869 278,378 110,581 Held to maturity, at
cost 1,493 478 477 Federal Home Loan Bank stock, at cost 39,476
39,411 28,859 Deposits 1,696,535 1,556,131 1,498,072 Long-term
obligations 670,149 715,800 422,895 Shareholders' equity 182,850
161,089 141,276 Nonperforming assets 20,107 15,781 7,646 Nonaccrual
loans 13,491 14,289 5,807 Loans 90 days past due 843 593 907
Restructured loans 1,939 148 170 Other real estate owned 3,262 318
465 Repossessed assets 572 433 297 Asset Quality Ratios:
Nonaccruing loans to total loans 1.33 % 1.40 % 0.59 % Allowance for
loan losses to nonaccruing loans 139.38 112.76 198.50 Allowance for
loan losses to nonperforming assets 93.52 102.10 150.76 Allowance
for loan losses to total loans 1.85 1.58 1.18 Nonperforming assets
to total assets 0.73 0.58 0.33 Net charge-offs to average loans
0.85 0.74 0.70 Capital Ratios: Shareholders' equity to total assets
6.65 5.95 6.07 Average shareholders' equity to average total assets
6.44 6.04 6.33 LOAN PORTFOLIO COMPOSITION The following table sets
forth loan totals by category for the periods presented: At At At
June 30, December 31, June 30, 2009 2008 2008 ---- ---- ---- (in
thousands) (unaudited) Real Estate Loans: Construction $100,012
$120,153 $104,260 1-4 Family Residential 235,365 238,693 240,238
Other 193,167 184,629 195,843 Commercial Loans 164,965 165,558
167,963 Municipal Loans 139,483 134,986 120,194 Loans to
Individuals 183,975 178,530 149,771 ------- ------- ------- Total
Loans $1,016,967 $1,022,549 $978,269 ========== ========== ========
At or for the At or for the Three Months Six Months Ended June 30,
Ended June 30, -------------- -------------- 2009 2008 2009 2008
-------------- -------------- (dollars in thousands)(dollars in
thousands) (unaudited) (unaudited) Selected Operating Data: Total
interest income $35,727 $31,575 $72,387 $63,671 Total interest
expense 13,272 13,680 27,695 30,406 ------ ------ ------ ------ Net
interest income 22,455 17,895 44,692 33,265 Provision for loan
losses 3,417 2,947 7,007 5,186 ----- ----- ----- ----- Net interest
income after provision for loan losses 19,038 14,948 37,685 28,079
------ ------ ------ ------ Noninterest income Deposit services
4,417 4,667 8,452 9,084 Gain on sale of securities available for
sale 5,911 3,660 19,707 5,752 Total other-than-temporary impairment
losses 296 - (5,331) - Portion of loss recognized in other
comprehensive income (before taxes) (833) - 3,894 - ----- --- -----
--- Net impairment losses recognized in earnings (537) - (1,437) -
Gain on sale of loans 547 847 882 1,312 Trust income 574 619 1,137
1,212 Bank owned life insurance income 736 758 1,037 1,068 Other
745 736 1,529 1,561 --- --- ----- ----- Total noninterest income
12,393 11,287 31,307 19,989 ------ ------ ------ ------ Noninterest
expense Salaries and employee benefits 10,460 8,806 20,944 17,519
Occupancy expense 1,565 1,427 2,983 2,815 Equipment expense 414 329
789 641 Advertising, travel & entertainment 494 496 1,003 960
ATM and debit card expense 361 304 660 592 Director fees 166 147
312 291 Supplies 206 206 418 383 Professional fees 455 353 1,085
787 Postage 192 182 380 366 Telephone and communications 363 257
644 515 FDIC Insurance 1,925 232 2,461 468 Other 1,687 1,594 3,126
3,299 ----- ----- ----- ----- Total noninterest expense 18,288
14,333 34,805 28,636 ------ ------ ------ ------ Income before
income tax expense 13,143 11,902 34,187 19,432 Provision for income
tax expense 3,255 3,223 9,401 5,159 ----- ----- ----- ----- Net
income 9,888 8,679 24,786 14,273 Less: Net income attributable to
the noncontrolling interest (511) (148) (1,264) (196) ----- -----
------- ----- Net income attributable to parent $9,377 $8,531
$23,522 $14,077 ====== ====== ======= ======= Common share data
attributable to parent: Weighted-average basic shares outstanding
14,866 14,537 14,808 14,517 Weighted-average diluted shares
Outstanding 14,999 14,901 14,982 14,885 Net income per common share
Basic $0.63 $0.59 $1.59 $0.97 Diluted 0.62 0.57 1.57 0.94 Book
value per common share - - 12.24 9.67 Cash dividend declared per
common share 0.14 0.13 0.27 0.25 Selected Performance Ratios:
Return on average assets 1.36% 1.53% 1.74% 1.27% Return on average
shareholders' equity 20.72 23.82 27.00 20.06 Average yield on
interest earning assets 5.79 6.29 5.97 6.39 Average yield on
interest bearing liabilities 2.46 3.23 2.62 3.59 Net interest
spread 3.33 3.06 3.35 2.80 Net interest margin 3.73 3.65 3.78 3.44
Average interest earnings assets to average interest bearing
liabilities 119.29 122.06 119.29 121.25 Noninterest expense to
average total assets 2.64 2.57 2.57 2.58 Efficiency ratio 58.39
53.04 56.94 56.77 RESULTS OF OPERATIONS The analysis below shows
average interest earning 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) Six Months
Ended June 30, 2009 June 30, 2008 ------------- ------------- AVG
AVG AVG AVG BALANCE INTEREST YIELD BALANCE INTEREST YIELD -------
-------- ----- ------- -------- ----- ASSETS INTEREST EARNING
ASSETS: Loans (1) (2) $1,020,544 $37,618 7.43% $977,105 $37,188
7.65% Loans Held For Sale 4,065 66 3.27% 3,055 70 4.61% Securities:
Investment Securities (Taxable)(4) 55,279 608 2.22% 51,795 1,070
4.15% Investment Securities (Tax-Exempt)(3)(4) 128,207 4,363 6.86%
86,750 2,833 6.57% Mortgage-backed and Related Securities (4)
1,264,529 32,479 5.18% 915,471 23,993 5.27% --------- ------
------- ------ Total Securities 1,448,015 37,450 5.22% 1,054,016
27,896 5.32% FHLB stock and other investments, at cost 41,499 152
0.74% 26,731 476 3.58% Interest Earning Deposits 23,230 63 0.55%
1,129 20 3.56% Federal Funds Sold 7,916 17 0.43% 5,412 71 2.64%
----- --- ----- --- Total Interest Earning Assets 2,545,269 75,366
5.97% 2,067,448 65,721 6.39% NONINTEREST EARNING ASSETS: Cash and
Due From Banks 45,025 45,858 Bank Premises and Equipment 44,005
39,964 Other Assets 108,677 87,214 Less: Allowance for Loan Loss
(16,981) (10,189) -------- -------- Total Assets $2,725,995
$2,230,295 ========== ========== LIABILITIES AND SHAREHOLDERS'
EQUITY INTEREST BEARING LIABILITIES: Savings Deposits $64,198 253
0.79% $55,961 357 1.28% Time Deposits 647,380 8,598 2.68% 558,133
12,701 4.58% Interest Bearing Demand Deposits 547,011 3,207 1.18%
482,170 5,565 2.32% ------- ----- ------- ----- Total Interest
Bearing Deposits 1,258,589 12,058 1.93% 1,096,264 18,623 3.42%
Short-term Interest Bearing Liabilities 176,288 2,335 2.67% 309,044
5,139 3.34% Long-term Interest Bearing Liabilities - FHLB Dallas
638,426 11,556 3.65% 239,541 4,597 3.86% Long-term Debt (5) 60,311
1,746 5.84% 60,311 2,047 6.83% ------ ----- ------ ----- Total
Interest Bearing Liabilities 2,133,614 27,695 2.62% 1,705,160
30,406 3.59% NONINTEREST BEARING LIABILITIES: Demand Deposits
379,416 360,125 Other Liabilities 36,519 23,324 ------ ------ Total
Liabilities 2,549,549 2,088,609 SHAREHOLDERS' EQUITY (6) 176,446
141,686 ------- ------- Total Liabilities and Shareholders' Equity
$2,725,995 $2,230,295 ========== ========== NET INTEREST INCOME
$47,671 $35,315 ======= ======= NET INTEREST MARGIN ON AVERAGE
EARNING ASSETS 3.78% 3.44% ===== ===== NET INTEREST SPREAD 3.35%
2.80% ===== ===== (1) Interest on loans includes fees on loans that
are not material in amount. (2) Interest income includes
taxable-equivalent adjustments of $1,489 and $1,195 for the six
months ended June 30, 2009 and 2008, respectively. (3) Interest
income includes taxable-equivalent adjustments of $1,490 and $855
for the six months ended June 30, 2009 and 2008, 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 FWBS to Magnolia Trust Company I in connection with the
issuance by Magnolia Trust Company I of $3.5 million of trust
preferred securities. (6) Includes average equity of noncontrolling
interest of $772 and $576 for the six months ended June 30, 2009
and 2008, respectively. Note: As of June 30, 2009 and 2008, loans
totaling $13,491 and $5,807, 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
June 30, 2009 June 30, 2008 ------------- ------------- AVG AVG AVG
AVG BALANCE INTEREST YIELD BALANCE INTEREST YIELD ------- --------
----- ------- -------- ----- ASSETS INTEREST EARNING ASSETS: Loans
(1) (2) $1,019,367 $18,600 7.32% $978,109 $18,333 7.54% Loans Held
For Sale 5,605 48 3.43% 3,262 39 4.81% Securities: Investment
Securities (Taxable)(4) 46,310 289 2.50% 42,475 390 3.69%
Investment Securities (Tax-Exempt)(3)(4) 129,863 2,197 6.79% 96,548
1,543 6.43% Mortgage-backed and Related Securities (4) 1,319,194
16,075 4.89% 927,506 12,020 5.21% --------- ------ ------- ------
Total Securities 1,495,367 18,561 4.98% 1,066,529 13,953 5.26% FHLB
stock and other investments, at cost 41,522 48 0.46% 28,478 214
3.02% Interest Earning Deposits 24,521 53 0.87% 725 5 2.77% Federal
Funds Sold 176 1 2.28% 3,838 19 1.99% --- --- ----- --- Total
Interest Earning Assets 2,586,558 37,311 5.79% 2,080,941 32,563
6.29% NONINTEREST EARNING ASSETS: Cash and Due From Banks 42,171
43,634 Bank Premises and Equipment 44,835 39,938 Other Assets
117,500 85,635 Less: Allowance for Loan Loss (17,774) (10,358)
-------- -------- Total Assets $2,773,290 $2,239,790 ==========
========== LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST BEARING
LIABILITIES: Savings Deposits $66,100 116 0.70% $57,996 185 1.28%
Time Deposits 677,871 4,093 2.42% 518,324 5,219 4.05% Interest
Bearing Demand Deposits 553,824 1,477 1.07% 488,099 2,464 2.03%
------- ----- ------- ----- Total Interest Bearing Deposits
1,297,795 5,686 1.76% 1,064,419 7,868 2.97% Short-term Interest
Bearing Liabilities 195,027 1,170 2.41% 258,078 1,839 2.87%
Long-term Interest Bearing Liabilities - FHLB Dallas 615,087 5,548
3.62% 321,995 3,011 3.76% Long-term Debt (5) 60,311 868 5.77%
60,311 962 6.42% ------ --- ------ --- Total Interest Bearing
Liabilities 2,168,220 13,272 2.46% 1,704,803 13,680 3.23%
NONINTEREST BEARING LIABILITIES: Demand Deposits 384,551 368,564
Other Liabilities 38,435 21,908 ------ ------ Total Liabilities
2,591,206 2,095,275 SHAREHOLDERS' EQUITY (6) 182,084 144,515
------- ------- Total Liabilities and Shareholders' Equity
$2,773,290 $2,239,790 ========== ========== NET INTEREST INCOME
$24,039 $18,883 ======= ======= NET INTEREST MARGIN ON AVERAGE
EARNING ASSETS 3.73% 3.65% ===== ===== NET INTEREST SPREAD 3.33%
3.06% ===== ===== (1) Interest on loans includes fees on loans that
are not material in amount. (2) Interest income includes
taxable-equivalent adjustments of $766 and $605 for the three
months ended June 30, 2009 and 2008, respectively. (3) Interest
income includes taxable-equivalent adjustments of $818 and $383 for
the three months ended June 30, 2009 and 2008, 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 FWBS to Magnolia Trust Company I in connection with the
issuance by Magnolia Trust Company I of $3.5 million of trust
preferred securities. (6) Includes average equity of noncontrolling
interest of $605 and $472 for the three months ended June 30, 2009
and 2008, respectively. Note: As of June 30, 2009 and 2008, loans
totaling $13,491 and $5,807, 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: Susan Hill of Southside
Bancshares, Inc., +1-903-531-7220, Web Site:
http://www.southside.com/
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