Southside Bancshares, Inc. Announces Financial Results for the First Quarter Ended March 31, 2022


  • First quarter net income of $25.0 million;
  • Linked quarter loan growth, net of Paycheck Protection Program (“PPP”) loans, of 4.8%;
  • Annualized return on first quarter average assets of 1.40%;
  • Annualized return on first quarter average tangible common equity of 15.20%(1); and
  • Nonperforming assets remain low at 0.16% of total assets.

TYLER, Texas, April 26, 2022 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended March 31, 2022. Southside reported net income of $25.0 million for the three months ended March 31, 2022, a decrease of $9.1 million, or 26.7%, compared to $34.1 million for the same period in 2021. Earnings per diluted common share were $0.77 for the three months ended March 31, 2022, compared to $1.04 for the same period in 2021. The annualized return on average shareholders’ equity for the three months ended March 31, 2022 was 11.42%, compared to 15.82% for the same period in 2021. The annualized return on average assets was 1.40% for the three months ended March 31, 2022, compared to 1.99% for the same period in 2021.

“First quarter financial results for 2022, were highlighted by net income of $25 million, earnings per diluted common share of $0.77, linked quarter loan growth, net of PPP loans, of 4.8%, continued strong asset quality metrics and an efficiency ratio of 48.15%,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “The economic conditions and growth prospects for the markets we serve continue to reflect a solid and positive outlook. The DFW and Austin markets remain among the highest performing markets in the nation. This contributed to our outstanding loan growth during the first quarter. Our loan pipeline remains strong and we remain encouraged about loan growth prospects despite the headwinds of future expected loan payoffs.”

Operating Results for the Three Months Ended March 31, 2022

Net income was $25.0 million for the three months ended March 31, 2022, compared to $34.1 million for the same period in 2021, a decrease of $9.1 million, or 26.7%. Earnings per diluted common share were $0.77 and $1.04 for the three months ended March 31, 2022 and 2021, respectively. The decrease in net income was primarily a result of a provision for credit losses of $0.3 million for the three months ended March 31, 2022, compared to a reversal of provision for credit losses of $10.1 million for the same period in 2021 due to the improved economic forecast during the first quarter of 2021. Annualized returns on average assets and average shareholders’ equity for the three months ended March 31, 2022 were 1.40% and 11.42%, respectively, compared to 1.99% and 15.82%, respectively, for the three months ended March 31, 2021. Our efficiency ratio and tax equivalent efficiency ratio(1) were 50.71% and 48.15%, respectively, for the three months ended March 31, 2022, compared to 53.01% and 50.44%, respectively, for the three months ended March 31, 2021, and 50.34% and 47.61%, respectively, for the three months ended December 31, 2021.

Net interest income for the three months ended March 31, 2022 was $48.9 million, compared to $46.3 million for the same period in 2021, an increase of 5.6%. The increase in net interest income compared to the same period in 2021 was due to the decrease in interest expense on our interest bearing liabilities due to the change in the mix of our interest bearing liabilities, and to a lesser extent, the increase in interest income, a result of the increase in the average balance of investment securities, partially offset by a decrease in the interest income from PPP loans. Linked quarter, net interest income decreased $0.5 million, or 1.0%, compared to $49.4 million during the three months ended December 31, 2021. The decrease in net interest income was primarily due to a decrease in the average yield on our average loans.

Our net interest margin and tax equivalent net interest margin(1) increased to 3.03% and 3.22%, respectively, for the three months ended March 31, 2022, compared to 3.01% and 3.20%, respectively, for the same period in 2021. Linked quarter, net interest margin increased two basis points from 3.01% and tax equivalent net interest margin(1) decreased one basis point from 3.23% for the three months ended December 31, 2021.

Noninterest income was $10.7 million for the three months ended March 31, 2022, a decrease of $2.9 million, or 21.3%, compared to $13.6 million for the same period in 2021. The decrease was due to a net loss on sale of securities available for sale (“AFS”) of $1.5 million for the three months ended March 31, 2022, compared to a net gain of $2.0 million for the same period in 2021 and a decrease in gain on sale of loans, partially offset by increases in deposit services income, other noninterest income and trust fees. On a linked quarter basis, noninterest income decreased $1.3 million, or 10.7%, compared to the three months ended December 31, 2021. The decrease was due to a net loss on sale of securities AFS of $1.5 million for the three months ended March 31, 2022, compared to a $0.5 million net gain on sale of securities AFS for the three months ended December 31, 2021.

Noninterest expense was $31.2 million for both of the three-month periods ended March 31, 2022 and 2021. On a linked quarter basis, noninterest expense decreased $0.1 million, or 0.4%, compared to the three months ended December 31, 2021.

Income tax expense decreased $1.6 million, or 33.8%, for the three months ended March 31, 2022, compared to the same period in 2021. On a linked quarter basis, income tax expense decreased $1.7 million, or 34.6%. Our effective tax rate (“ETR”) decreased to 11.2% for the three months ended March 31, 2022, compared to 12.2% for the three months ended March 31, 2021, and 14.4% for the three months ended December 31, 2021, primarily a result of the increase in tax-exempt income as a percentage of pre-tax income.

Balance Sheet Data

At March 31, 2022, we had $7.12 billion in total assets, compared to $7.26 billion at December 31, 2021 and $7.0 billion at March 31, 2021.

Loans at March 31, 2022 were $3.80 billion, an increase of $84.3 million, or 2.3%, compared to $3.72 billion at March 31, 2021. Our PPP loans, a component of the commercial loan category, decreased $207.0 million over that period due to forgiveness payments received for loans funded under the Coronavirus Aid, Relief, and Economic Security Act. Excluding PPP loans, total loans increased $291.3 million, or 8.3%, due to increases of $374.0 million in commercial real estate loans, $48.8 million in municipal loans and $43.4 million in commercial loans (excluding PPP loans). The increases were partially offset by decreases of $115.5 million in construction loans, $52.6 million in 1-4 family residential loans and $6.8 million in loans to individuals. Excluding a $17.1 million decrease in PPP loans during the quarter, linked quarter loans increased $172.9 million, or 4.8%, due to increases of $124.4 million in commercial real estate loans, $42.3 million in construction loans and $12.1 million in municipal loans. This was partially offset by decreases of $3.3 million in 1-4 family residential loans, $1.9 million in loans to individuals and $0.7 million in commercial loans (excluding PPP loans).

Securities at March 31, 2022 were $2.54 billion, a decrease of $104.8 million, or 4.0%, compared to $2.65 billion at March 31, 2021. Linked quarter, securities decreased $314.8 million, or 11.0%, from $2.86 billion at December 31, 2021, a result of the increase in the unrealized loss in the portfolio, sales of securities, and principal payments, which more than offset the securities purchased during the quarter. During the first quarter, we sold approximately $99 million U.S. Agency MBS and $68.1 million U.S. Treasury Notes due to the rising rate environment. In March of 2022, we transferred AFS taxable municipal securities with fair values of approximately $385.8 million, to held to maturity (“HTM”). Subsequent to the end of the quarter, on April 1, 2022, we transferred tax-free municipal securities and U.S. Agency MBS with fair values of approximately $247.7 million and $28.3 million, respectively, to HTM. All transfers from AFS to HTM were at the fair market value on the date of transfer. There was no impact to the income statement as a result of these transfers.

Deposits at March 31, 2022 were $6.07 billion, an increase of $977.8 million, or 19.2%, compared to $5.09 billion at March 31, 2021. Linked quarter, deposits increased $348.1 million, or 6.1%, from $5.72 billion at December 31, 2021. During the three months ended March 31, 2022, brokered deposits increased $380.8 million, or 129.2%, compared to December 31, 2021, and $594.6 million, or 734.3%, compared to March 31, 2021, associated with funding our cash flow hedge swaps in place of the Federal Home Loan Bank advances to obtain lower cost funding.

On March 1, 2022, our board of directors approved a Stock Repurchase Plan, authorizing the repurchase, from time to time, of up to 1.0 million shares of the Company’s outstanding common stock. Repurchases may be carried out in open market purchases, privately negotiated transactions or pursuant to any trading plan that might be adopted in accordance with Rule 10b5-1 of the Exchange Act. The Company has no obligation to repurchase any shares under the Stock Repurchase Plan and may suspend or discontinue the plan at any time. As of March 31, 2022, we had purchased 82,285 shares of common stock at an average price of $40.81 pursuant to the Stock Repurchase Plan. Subsequent to March 31, 2022 and through April 22, 2022, we purchased 139,737 shares of common stock at an average price of $39.67 pursuant to the Stock Repurchase Plan.

Asset Quality

Nonperforming assets at March 31, 2022 were $11.5 million, or 0.16% of total assets, a decrease of $3.9 million, or 25.5%, compared to $15.4 million, or 0.22% of total assets, at March 31, 2021, and a slight decrease from $11.6 million, or 0.16% of total assets, at December 31, 2021. During the three months ended March 31, 2022, nonaccrual loans decreased $0.2 million, or 7.1%.

The allowance for loan losses decreased to $35.5 million, or 0.93% of total loans, at March 31, 2022, compared to $41.5 million, or 1.12% of total loans, at March 31, 2021. The decrease was primarily due to an improved economic forecast and improved asset quality. The allowance for loan losses was $35.3 million, or 0.97% of total loans, at December 31, 2021.

We recorded a provision for credit losses for loans of $0.3 million for the three months ended March 31, 2022, compared to reversals of provision for credit losses for loans of $7.4 million and $2.7 million for the three months ended March 31, 2021 and December 31, 2021, respectively. Net charge-offs were $15,000 for the three months ended March 31, 2022, compared to $0.2 million for the three months ended March 31, 2021 and $34,000 for the three months ended December 31, 2021.

We recorded a provision for credit losses for off-balance-sheet credit exposures of $28,000 for the three months ended March 31, 2022, compared to reversals of provision of $2.8 million and $0.7 million for the three months ended March 31, 2021 and December 31, 2021, respectively. The balance of the allowance for off-balance-sheet credit exposures at March 31, 2022 was $2.4 million and is included in other liabilities.

Dividend

Southside Bancshares, Inc. declared a first quarter cash dividend of $0.34 per share on February 3, 2022, which was paid on March 3, 2022, to all shareholders of record as of February 17, 2022.

(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, 2022 financial results on Tuesday, April 26, 2022 at 11:00 a.m. CDT. The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 2435789 or by identifying “Southside Bancshares, Inc., First Quarter 2022 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 26, 2022 through 2:00 p.m. CDT May 8, 2022 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 $7.12 billion in assets as of March 31, 2022, that owns 100% of Southside Bank.  Southside Bank currently has 56 branches in Texas and operates a network of 73 ATMs/ITMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at https://investors.southside.com. Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data. To receive e-mail notification of company news, events and stock activity, please register on the E-mail Notification portion of the website. Questions or comments may be directed to Lindsey Bailes at (903) 630-7965, or lindsey.bailes@southside.com.

Forward-Looking Statements

Certain statements of other than historical fact that are contained in this press release and in other written materials, documents and oral statements issued by or on behalf of the Company may be considered to be “forward-looking statements” within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date.  These statements may include words such as “expect,” “estimate,” “project,” “anticipate,” “appear,” “believe,” “could,” “should,” “may,” “might,” “will,” “would,” “seek,” “intend,” “probability,” “risk,” “goal,” “target,” “objective,” “plans,” “potential,” and similar expressions.  Forward-looking statements are statements with respect to the Company’s beliefs, plans, expectations, objectives, goals, anticipations, assumptions, estimates, intentions and future performance and are subject to significant known and unknown risks and uncertainties, which could cause the Company's actual results to differ materially from the results discussed in the forward-looking statements. For example, discussions of the effect of our expansion, benefits of the Share Repurchase Plan, trends in asset quality, capital, liquidity, the Company's ability to sell nonperforming assets, expense reductions, planned operational efficiencies and earnings from growth and certain market risk disclosures, including the impact of interest rates, tax reform, inflation, the impacts related to or resulting from Russia’s invasion of Ukraine and other economic factors are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future.  Accordingly, our results could materially differ from those that have been estimated. The most recent factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the ongoing impact of the COVID-19 pandemic and related variants on our business, financial position, operations and prospects, including our ability to continue our business activities in certain communities we serve, the duration of the pandemic and its continued effects on financial markets, a reduction in financial transactions and business activities resulting in decreased deposits and reduced loan originations, our ability to manage liquidity in a rapidly changing and unpredictable market, supply chain disruptions, labor shortages and 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, 2021, under “Part I - Item 1. Forward Looking Information” and in the Company’s other filings with the Securities and Exchange Commission.  The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.


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

 As of
  2022   2021 
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
ASSETS         
Cash and due from banks$90,399  $91,120  $83,346  $92,047  $78,304 
Interest earning deposits 72,158   110,633   3,787   36,441   29,319 
Federal funds sold 24,550             
Securities available for sale, at estimated fair value 2,065,984   2,764,325   2,753,104   2,766,035   2,546,924 
Securities held to maturity, at net carrying value 474,319   90,780   92,479   94,850   98,159 
Total securities 2,540,303   2,855,105   2,845,583   2,860,885   2,645,083 
Federal Home Loan Bank stock, at cost 3,757   14,375   27,248   28,081   18,754 
Loans held for sale 1,576   1,684   1,131   2,510   2,615 
Loans 3,800,916   3,645,162   3,647,585   3,642,346   3,716,598 
Less: Allowance for loan losses (35,524)  (35,273)  (38,022)  (42,913)  (41,454)
Net loans 3,765,392   3,609,889   3,609,563   3,599,433   3,675,144 
Premises & equipment, net 142,880   142,509   142,736   142,835   144,628 
Goodwill 201,116   201,116   201,116   201,116   201,116 
Other intangible assets, net 6,273   6,895   7,553   8,248   8,978 
Bank owned life insurance 131,923   131,232   130,522   116,886   116,209 
Other assets 138,788   95,044   83,106   93,926   78,736 
Total assets$7,119,115  $7,259,602  $7,135,691  $7,182,408  $6,998,886 
          
LIABILITIES AND SHAREHOLDERS' EQUITY         
Noninterest bearing deposits$1,630,056  $1,644,775  $1,596,781  $1,501,120  $1,383,371 
Interest bearing deposits 4,440,343   4,077,552   3,734,874   3,655,047   3,709,272 
Total deposits 6,070,399   5,722,327   5,331,655   5,156,167   5,092,643 
Other borrowings and Federal Home Loan Bank borrowings 34,067   367,257   679,928   745,151   687,845 
Subordinated notes, net of unamortized debt
issuance costs
 98,569   98,534   98,500   197,312   197,268 
Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,261   60,260   60,259   60,258   60,256 
Other liabilities 71,578   99,052   87,483   129,120   102,277 
Total liabilities 6,334,874   6,347,430   6,257,825   6,288,008   6,140,289 
Shareholders' equity 784,241   912,172   877,866   894,400   858,597 
Total liabilities and shareholders' equity$7,119,115  $7,259,602  $7,135,691  $7,182,408  $6,998,886 



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

 Three Months Ended
  2022   2021 
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
Income Statement:         
Total interest income$53,873  $54,760  $55,076  $52,586  $53,565 
Total interest expense 4,967   5,359   6,870   6,939   7,262 
Net interest income 48,906   49,401   48,206   45,647   46,303 
Provision for (reversal of) credit losses 294   (3,421)  (5,071)  1,677   (10,149)
Net interest income after provision for (reversal of) credit losses 48,612   52,822   53,277   43,970   56,452 
Noninterest income         
Deposit services 6,628   6,855   6,779   6,609   6,125 
Net gain (loss) on sale of securities available for sale (1,543)  463   1,381   15   2,003 
Gain on sale of loans 178   356   299   393   593 
Trust fees 1,494   1,586   1,494   1,496   1,383 
Bank owned life insurance 691   710   637   645   626 
Brokerage services 809   907   846   850   780 
Other 2,468   1,134   1,333   925   2,113 
Total noninterest income 10,725   12,011   12,769   10,933   13,623 
Noninterest expense         
Salaries and employee benefits 19,969   20,067   19,777   20,004   20,044 
Net occupancy 3,656   3,541   3,532   3,606   3,560 
Advertising, travel & entertainment 737   876   579   475   437 
ATM expense 281   345   311   272   238 
Professional fees 927   849   1,135   1,040   991 
Software and data processing 1,631   1,454   1,503   1,406   1,312 
Communications 503   544   552   612   525 
FDIC insurance 472   464   454   435   454 
Amortization of intangibles 622   658   695   730   766 
Loss on redemption of subordinated notes       1,118       
Other 2,397   2,536   2,107   2,119   2,907 
Total noninterest expense 31,195   31,334   31,763   30,699   31,234 
Income before income tax expense 28,142   33,499   34,283   24,204   38,841 
Income tax expense 3,146   4,812   4,977   2,887   4,750 
Net income$24,996  $28,687  $29,306  $21,317  $34,091 
          
Common Share Data:   
Weighted-average basic shares outstanding 32,357   32,311   32,465   32,632   32,829 
Weighted-average diluted shares outstanding 32,537   32,487   32,556   32,799   32,937 
Common shares outstanding end of period 32,294   32,352   32,273   32,675   32,659 
Earnings per common share         
Basic$0.77  $0.89  $0.90  $0.65  $1.04 
Diluted 0.77   0.88   0.90   0.65   1.04 
Book value per common share 24.28   28.20   27.20   27.37   26.29 
Tangible book value per common share (1) 17.86   21.77   20.74   20.97   19.86 
Cash dividends paid per common share 0.34   0.39   0.33   0.33   0.32 
          
Selected Performance Ratios:         
Return on average assets 1.40%  1.57%  1.61%  1.20%  1.99%
Return on average shareholders’ equity 11.42   12.67   12.89   9.73   15.82 
Return on average tangible common equity (1) 15.20   16.80   17.10   13.13   21.22 
Average yield on earning assets (FTE) (1) 3.53   3.55   3.59   3.49   3.67 
Average rate on interest bearing liabilities 0.44   0.46   0.59   0.60   0.64 
Net interest margin (FTE) (1) 3.22   3.23   3.16   3.06   3.20 
Net interest spread (FTE) (1) 3.09   3.09   3.00   2.89   3.03 
Average earning assets to average interest bearing liabilities 141.93   141.21   138.86   137.85   135.56 
Noninterest expense to average total assets 1.75   1.72   1.75   1.73   1.82 
Efficiency ratio (FTE) (1) 48.15   47.61   47.92   50.31   50.44 

(1) Refer to “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.


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

 Three Months Ended
  2022   2021 
 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
Nonperforming Assets:$11,455  $11,609  $12,424  $15,269  $15,367 
Nonaccrual loans 2,357   2,536   3,013   5,154   5,314 
Accruing loans past due more than 90 days              
Troubled debt restructured loans 9,098   9,073   9,371   9,549   9,641 
Other real estate owned       25   566   412 
Repossessed assets       15       
          
Asset Quality Ratios:         
Ratio of nonaccruing loans to:         
Total loans 0.06%  0.07%  0.08%  0.14%  0.14%
Ratio of nonperforming assets to:         
Total assets 0.16   0.16   0.17   0.21   0.22 
Total loans 0.30   0.32   0.34   0.42   0.41 
Total loans and OREO 0.30   0.32   0.34   0.42   0.41 
Total loans, excluding PPP loans, and OREO 0.30   0.32   0.35   0.43   0.44 
Ratio of allowance for loan losses to:         
Nonaccruing loans 1,507.17   1,390.89   1,261.93   832.62   780.09 
Nonperforming assets 310.12   303.84   306.04   281.05   269.76 
Total loans 0.93   0.97   1.04   1.18   1.12 
Total loans, excluding PPP loans 0.94   0.98   1.06   1.22   1.19 
Net charge-offs (recoveries) to average loans outstanding       0.05   0.01   0.02 
          
Capital Ratios:         
Shareholders’ equity to total assets 11.02   12.57   12.30   12.45   12.27 
Common equity tier 1 capital 13.67   14.17   14.07   14.38   14.71 
Tier 1 risk-based capital 14.86   15.43   15.35   15.71   16.09 
Total risk-based capital 17.50   18.15   18.18   20.95   21.52 
Tier 1 leverage capital 10.39   10.33   10.14   10.21   10.29 
Period end tangible equity to period end tangible assets (1) 8.35   9.99   9.66   9.82   9.55 
Average shareholders’ equity to average total assets 12.28   12.42   12.51   12.38   12.56 

(1) Refer to the “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.


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

 Three Months Ended
  2022   2021 
Loan Portfolio CompositionMar 31, Dec 31, Sep 30, Jun 30, Mar 31,
Real Estate Loans:         
Construction$490,166  $447,860  $422,095  $528,157  $605,677 
1-4 Family Residential 647,837   651,140   660,689   678,402   700,430 
Commercial 1,722,577   1,598,172   1,605,132   1,430,900   1,348,551 
Commercial Loans 401,144   418,998   443,708   497,513   564,745 
Municipal Loans 455,155   443,078   427,259   417,398   406,377 
Loans to Individuals 84,037   85,914   88,702   89,976   90,818 
Total Loans$3,800,916  $3,645,162  $3,647,585  $3,642,346  $3,716,598 
          
Summary of Changes in Allowances:         
Allowance for Loan Losses         
Balance at beginning of period$35,273  $38,022  $42,913  $41,454  $49,006 
Loans charged-off (555)  (489)  (940)  (527)  (795)
Recoveries of loans charged-off 540   455   437   466   622 
Net loans (charged-off) recovered (15)  (34)  (503)  (61)  (173)
Provision for (reversal of) loan losses 266   (2,715)  (4,388)  1,520   (7,379)
Balance at end of period$35,524  $35,273  $38,022  $42,913  $41,454 
          
Allowance for Off-Balance-Sheet Credit Exposures         
Balance at beginning of period$2,384  $3,090  $3,773  $3,616  $6,386 
Provision for (reversal of) off-balance-sheet credit exposures 28   (706)  (683)  157   (2,770)
Balance at end of period$2,412  $2,384  $3,090  $3,773  $3,616 
Total Allowance for Credit Losses$37,936  $37,657  $41,112  $46,686  $45,070 



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, 2022 December 31, 2021
 Average
Balance
 Interest Average
Yield/Rate
 Average
Balance
 Interest Average
Yield/Rate
ASSETS           
Loans (1)$3,703,980  $35,625 3.90% $3,668,767  $36,740 3.97%
Loans held for sale 928   8 3.50%  1,980   11 2.20%
Securities:           
Taxable investment securities (2) 644,706   4,608 2.90%  590,104   4,215 2.83%
Tax-exempt investment securities (2) 1,563,185   12,683 3.29%  1,508,196   12,699 3.34%
Mortgage-backed and related securities (2) 566,941   4,017 2.87%  650,685   4,394 2.68%
Total securities 2,774,832   21,308 3.11%  2,748,985   21,308 3.08%
Federal Home Loan Bank stock, at cost, and equity investments 20,677   113 2.22%  38,832   175 1.79%
Interest earning deposits 44,642   24 0.22%  43,841   22 0.20%
Federal funds sold 8,651   4 0.19%       
Total earning assets 6,553,710   57,082 3.53%  6,502,405   58,256 3.55%
Cash and due from banks 107,144       103,126     
Accrued interest and other assets 607,235       662,654     
Less:  Allowance for loan losses (35,636)      (38,317)    
Total assets$7,232,453      $7,229,868     
LIABILITIES AND SHAREHOLDERS’ EQUITY           
Savings accounts$652,394   273 0.17% $624,377   264 0.17%
Certificates of deposits 563,599   594 0.43%  632,150   681 0.43%
Interest bearing demand accounts 3,097,966   2,370 0.31%  2,558,289   1,289 0.20%
Total interest bearing deposits 4,313,959   3,237 0.30%  3,814,816   2,234 0.23%
Federal Home Loan Bank borrowings 122,783   366 1.21%  609,310   1,758 1.14%
Subordinated notes, net of unamortized debt issuance costs 98,552   998 4.11%  98,517   1,011 4.07%
Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,261   356 2.40%  60,259   345 2.27%
Repurchase agreements 21,494   10 0.19%  21,874   11 0.20%
Other borrowings 467            
Total interest bearing liabilities 4,617,516   4,967 0.44%  4,604,776   5,359 0.46%
Noninterest bearing deposits 1,642,973       1,637,914     
Accrued expenses and other liabilities 84,009       88,982     
Total liabilities 6,344,498       6,331,672     
Shareholders’ equity 887,955       898,196     
Total liabilities and shareholders’ equity$7,232,453      $7,229,868     
Net interest income (FTE)  $52,115     $52,897  
Net interest margin (FTE)    3.22%     3.23%
Net interest spread (FTE)    3.09%     3.09%

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

Note: As of March 31, 2022 and December 31, 2021, loans totaling $2.4 million and $2.5 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, 2021 June 30, 2021
 Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
ASSETS           
Loans (1)$3,662,496  $37,744 4.09% $3,706,959  $36,429 3.94%
Loans held for sale 1,640   12 2.90%  1,846   13 2.82%
Securities:           
Taxable investment securities (2) 532,679   3,853 2.87%  396,504   2,921 2.95%
Tax-exempt investment securities (2) 1,453,275   12,315 3.36%  1,363,678   11,585 3.41%
Mortgage-backed and related securities (2) 738,287   4,405 2.37%  847,206   4,647 2.20%
Total securities 2,724,241   20,573 3.00%  2,607,388   19,153 2.95%
Federal Home Loan Bank stock, at cost, and equity investments 39,786   111 1.11%  35,883   108 1.21%
Interest earning deposits 39,382   24 0.24%  43,175   17 0.16%
Total earning assets 6,467,545   58,464 3.59%  6,395,251   55,720 3.49%
Cash and due from banks 99,113       90,735     
Accrued interest and other assets 684,917       656,245     
Less:  Allowance for loan losses (43,052)      (41,768)    
Total assets$7,208,523      $7,100,463     
LIABILITIES AND SHAREHOLDERS’ EQUITY           
Savings accounts$598,118   249 0.17% $571,907   231 0.16%
Certificates of deposit 629,718   789 0.50%  658,708   936 0.57%
Interest bearing demand accounts 2,496,037   1,196 0.19%  2,459,335   1,172 0.19%
Total interest bearing deposits 3,723,873   2,234 0.24%  3,689,950   2,339 0.25%
Federal Home Loan Bank borrowings 656,474   1,865 1.13%  669,633   1,817 1.09%
Subordinated notes, net of unamortized debt issuance costs 195,204   2,417 4.91%  197,284   2,423 4.93%
Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,258   345 2.27%  60,257   349 2.32%
Repurchase agreements 21,634   9 0.17%  22,024   11 0.20%
Total interest bearing liabilities 4,657,443   6,870 0.59%  4,639,148   6,939 0.60%
Noninterest bearing deposits 1,551,298       1,485,383     
Accrued expenses and other liabilities 97,954       97,137     
Total liabilities 6,306,695       6,221,668     
Shareholders’ equity 901,828       878,795     
Total liabilities and shareholders’ equity$7,208,523      $7,100,463     
Net interest income (FTE)  $51,594     $48,781  
Net interest margin (FTE)    3.16%     3.06%
Net interest spread (FTE)    3.00%     2.89%

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

Note: As of September 30, 2021 and June 30, 2021, loans totaling $3.0 million and $5.2 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.


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

 Three Months Ended
 March 31, 2021
 Average Balance Interest Average Yield/Rate
ASSETS     
Loans (1) $3,634,053  $36,754 4.10%
Loans held for sale 2,803   20 2.89%
Securities:     
Taxable investment securities (2) 295,968   2,323 3.18%
Tax-exempt investment securities (2) 1,300,991   11,176 3.48%
Mortgage-backed and related securities (2) 940,815   6,088 2.62%
Total securities 2,537,774   19,587 3.13%
Federal Home Loan Bank stock, at cost, and equity investments 35,635   136 1.55%
Interest earning deposits 31,169   15 0.20%
Total earning assets 6,241,434   56,512 3.67%
Cash and due from banks 86,634     
Accrued interest and other assets 677,230     
Less:  Allowance for loan losses (49,240)    
Total assets$6,956,058     
LIABILITIES AND SHAREHOLDERS’ EQUITY     
Savings accounts$517,182   209 0.16%
Certificates of deposit 736,099   1,229 0.68%
Interest bearing demand accounts 2,342,299   1,159 0.20%
Total interest bearing deposits 3,595,580   2,597 0.29%
Federal Home Loan Bank borrowings 727,513   1,908 1.06%
Subordinated notes, net of unamortized debt issuance costs 197,252   2,395 4.92%
Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,256   351 2.36%
Repurchase agreements 23,522   11 0.19%
Total interest bearing liabilities 4,604,123   7,262 0.64%
Noninterest bearing deposits 1,389,020     
Accrued expenses and other liabilities 89,222     
Total liabilities 6,082,365     
Shareholders’ equity 873,693     
Total liabilities and shareholders’ equity$6,956,058     
Net interest income (FTE)  $49,250  
Net interest margin (FTE)    3.20%
Net interest spread (FTE)    3.03%

(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, loans totaling $5.3 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
  2022   2021 
 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$24,996  $28,687  $29,306  $21,317  $34,091 
After-tax amortization expense 491   520   549   577   605 
Adjusted net income available to common shareholders$25,487  $29,207  $29,855  $21,894  $34,696 
          
Average shareholders' equity$887,955  $898,196  $901,828  $878,795  $873,693 
Less: Average intangibles for the period (207,774)  (208,412)  (209,097)  (209,808)  (210,563)
Average tangible shareholders' equity$680,181  $689,784  $692,731  $668,987  $663,130 
          
Return on average tangible common equity 15.20%  16.80%  17.10%  13.13%  21.22%
          
Reconciliation of book value per share to tangible book value per share:         
Common equity at end of period$784,241  $912,172  $877,866  $894,400  $858,597 
Less: Intangible assets at end of period (207,389)  (208,011)  (208,669)  (209,364)  (210,094)
Tangible common shareholders' equity at end of period$576,852  $704,161  $669,197  $685,036  $648,503 
          
Total assets at end of period$7,119,115  $7,259,602  $7,135,691  $7,182,408  $6,998,886 
Less: Intangible assets at end of period (207,389)  (208,011)  (208,669)  (209,364)  (210,094)
Tangible assets at end of period$6,911,726  $7,051,591  $6,927,022  $6,973,044  $6,788,792 
          
Period end tangible equity to period end tangible assets 8.35%  9.99%  9.66%  9.82%  9.55%
          
Common shares outstanding end of period 32,294   32,352   32,273   32,675   32,659 
Tangible book value per common share$17.86  $21.77  $20.74  $20.97  $19.86 
          
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)$48,906  $49,401  $48,206  $45,647  $46,303 
Tax equivalent adjustments:         
Loans 745   740   722   722   736 
Tax-exempt investment securities 2,464   2,756   2,666   2,412   2,211 
Net interest income (FTE) (1) 52,115   52,897   51,594   48,781   49,250 
Noninterest income 10,725   12,011   12,769   10,933   13,623 
Nonrecurring income (2) 706   (463)  (1,381)  (15)  (2,003)
Total revenue$63,546  $64,445  $62,982  $59,699  $60,870 
          
Noninterest expense$31,195  $31,334  $31,763  $30,699  $31,234 
Pre-tax amortization expense (622)  (658)  (695)  (730)  (766)
Nonrecurring expense (3) 22   8   (888)  64   236 
Adjusted noninterest expense$30,595  $30,684  $30,180  $30,033  $30,704 
Efficiency ratio 50.71%  50.34%  50.64%  53.09%  53.01%
Efficiency ratio (FTE) (1) 48.15%  47.61%  47.92%  50.31%  50.44%
          
Average earning assets$6,553,710  $6,502,405  $6,467,545  $6,395,251  $6,241,434 
Net interest margin 3.03%  3.01%  2.96%  2.86%  3.01%
Net interest margin (FTE) (1) 3.22%  3.23%  3.16%  3.06%  3.20%
Net interest spread 2.89%  2.88%  2.79%  2.70%  2.84%
Net interest spread (FTE) (1) 3.09%  3.09%  3.00%  2.89%  3.03%

(1) These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.
(2) These adjustments may include net gain or loss on sale of securities available for sale and other investment income or loss in the periods where applicable.
(3) These adjustments may include loss on redemption of subordinated notes, foreclosure expenses and branch closure expenses, in the periods where applicable.