• Southside Bancshares, Inc. Announces Financial Results for the First Quarter Ended March 31, 2023

    ソース: Nasdaq GlobeNewswire / 25 4 2023 04:45:01   America/Chicago

    • First quarter net income of $26.0 million;
    • First quarter earnings per diluted common share of $0.83;
    • Annualized return on first quarter average assets of 1.38%;
    • Annualized return on first quarter average tangible common equity of 19.36%(1); and
    • Nonperforming assets decreased to 0.04% of total assets.

    TYLER, Texas, April 25, 2023 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended March 31, 2023. Southside reported net income of $26.0 million for the three months ended March 31, 2023, an increase of $1.0 million, or 4.2%, compared to $25.0 million for the same period in 2022. Earnings per diluted common share increased $0.06, or 7.8%, to $0.83 for the three months ended March 31, 2023, from $0.77 for the same period in 2022. The annualized return on average shareholders’ equity for the three months ended March 31, 2023 was 13.92%, compared to 11.42% for the same period in 2022.  The annualized return on average assets was 1.38% for the three months ended March 31, 2023, compared to 1.40% for the same period in 2022.

    “The strength of our balance sheet and sound business plan, combined with the granularity of our loans and deposits, all contributed to Southside’s resilience during the recent uncertainty in the banking industry,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “First quarter financial results for 2023 were highlighted by net income of $26.0 million, earnings per diluted common share of $0.83, a 1.38% return on average assets, and continued strong asset quality with nonperforming assets to total assets decreasing to 0.04%. Our tax-equivalent net interest margin linked quarter decreased 19 basis points due to increased deposit pricing pressure and measures taken to maintain additional cash at the Federal Reserve. Our deposits, net of brokered deposits and public funds, decreased 3.4% linked quarter, with approximately 78% of that occurring prior to the recent events in the banking industry.”

    “As we move forward, we believe our conservative underwriting guidelines combined with our balance sheet and business plan, position us well to continue to produce a solid return profile.”

    Operating Results for the Three Months Ended March 31, 2023

    Net income was $26.0 million for the three months ended March 31, 2023, compared to $25.0 million for the same period in 2022, an increase of $1.0 million, or 4.2%. Earnings per diluted common share were $0.83 and $0.77 for the three months ended March 31, 2023 and 2022, respectively. The increase in net income was primarily a result of increases in net interest income and noninterest income, partially offset by an increase in noninterest expense and income tax expense. Annualized returns on average assets and average shareholders’ equity for the three months ended March 31, 2023 were 1.38% and 13.92%, respectively, compared to 1.40% and 11.42%, respectively, for the three months ended March 31, 2022.  Our efficiency ratio and tax-equivalent efficiency ratio(1) were 53.57% and 50.99%, respectively, for the three months ended March 31, 2023, compared to 50.71% and 48.15%, respectively, for the three months ended March 31, 2022, and 48.92% and 46.38%, respectively, for the three months ended December 31, 2022.

    Net interest income for the three months ended March 31, 2023 was $53.4 million, compared to $48.9 million for the same period in 2022, an increase of 9.1%. The increase in net interest income was due to the increase in interest income, a result of the increase in the average yield and the average balance of interest earning assets, partially offset by an increase in interest expense on our interest bearing liabilities due to higher interest rates and to a lesser extent, an increase in the average balance of our interest bearing liabilities. Linked quarter, net interest income decreased $3.5 million, or 6.1%, compared to $56.8 million during the three months ended December 31, 2022. The decrease in net interest income was due largely to the increase in the average rate paid on interest bearing liabilities, which more than offset the increase in the average yield earned on interest earning assets.

    Our net interest margin and tax-equivalent net interest margin(1) decreased slightly to 3.02% and 3.21%, respectively, for the three months ended March 31, 2023, compared to 3.03% and 3.22%, respectively, for the same period in 2022. Linked quarter, net interest margin and tax-equivalent net interest margin(1) decreased from 3.19% and 3.40%, respectively for the three months ended December 31, 2022.

    Noninterest income was $12.0 million for the three months ended March 31, 2023, an increase of $1.3 million, or 12.2%, compared to $10.7 million for the same period in 2022. The increase was due to a net gain on sale of equity securities and an increase in bank owned life insurance (“BOLI”) income related to death benefits realized, partially offset by a decrease in other noninterest income and an increase in net loss on sale of securities available for sale (“AFS”). On a linked quarter basis, noninterest income increased $1.3 million, or 11.8%, compared to the three months ended December 31, 2022. The increase was due to a net gain on sale of equity securities and an increase in BOLI income, partially offset by an increase in net loss on sale of securities AFS.

    Noninterest expense increased $3.7 million, or 11.7%, to $34.8 million for the three months ended March 31, 2023, compared to $31.2 million for the same period in 2022. The primary increase was in salaries and employee benefits. Several additional expense categories increased during the three months ended March 31, 2023, including other noninterest expense, professional fees, software and data processing expense and advertising, travel and entertainment expense. On a linked quarter basis, noninterest expense increased by $1.3 million, or 3.8%, compared to the three months ended December 31, 2022, primarily due to increases in salaries and employee benefits and other noninterest expense.

    Income tax expense increased $1.4 million, or 44.4%, for the three months ended March 31, 2023, compared to the same period in 2022. On a linked quarter basis, income tax expense increased $0.3 million, or 5.8%. Our effective tax rate (“ETR”) increased to 14.9% for the three months ended March 31, 2023, compared to 11.2% for the three months ended March 31, 2022, and increased from 13.4% for the three months ended December 31, 2022. The higher ETR for the three months ended March 31, 2023 was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income as compared to the same period in 2022.

    Balance Sheet Data

    At March 31, 2023, Southside had $7.79 billion in total assets, compared to $7.56 billion at December 31, 2022 and $7.12 billion at March 31, 2022.

    Loans at March 31, 2023 were $4.15 billion, an increase of $351.7 million, or 9.3%, compared to $3.80 billion at March 31, 2022. Linked quarter, loans increased $5.0 million, or 0.1%, due to increases of $32.2 million in construction loans, $9.1 million in 1-4 family residential loans and $3.2 million in commercial real estate loans. These increases were partially offset by decreases of $23.9 million in commercial loans, $11.5 million in municipal loans and $4.1 million in loans to individuals.

    Securities at March 31, 2023 were $2.75 billion, an increase of $205.4 million, or 8.1%, compared to $2.54 billion at March 31, 2022. Linked quarter, securities increased $119.9 million, or 4.6%, from $2.63 billion at December 31, 2022. The linked quarter net increase was due to the purchase of U.S. Treasury Bills, partially offset by a decrease in mortgage-backed securities and municipal bonds.

    Deposits at March 31, 2023 were $5.84 billion, a decrease of $232.2 million, or 3.8%, compared to $6.07 billion at March 31, 2022. Linked quarter, deposits decreased $359.8 million, or 5.8%, from $6.20 billion at December 31, 2022. During the three months ended March 31, 2023, brokered deposits decreased $191.8 million, or 29.1%, compared to December 31, 2022, and decreased $208.1 million, or 30.8%, compared to March 31, 2022, as the funding of our cash flow hedge swaps partially transitioned from brokered deposits to Federal Home Loan Bank advances and other borrowings to obtain lower cost funding.

    At March 31, 2023, we had 180,516 total deposit accounts with an average balance of $30,000. At March 31, 2023, our deposit accounts consisted of the following (dollars in thousands):

      March 31, 2023
      Balance Number of Accounts Average
     Balance
     % of Total Deposits
       
    Individual non-maturity $2,328,776 150,070 $16 39.9%
    Commercial non-maturity  1,646,832 21,027  78 28.2%
    Certificates of deposits  496,672 8,707  57 8.5%
    Public funds  898,467 712  1,262 15.4%
    Total deposits, excluding brokered deposits  5,370,747 180,516 $30 92.0%
             
    Brokered deposits  467,473    8.0%
    Total deposits $5,838,220     100.0%
               

    At March 31, 2023, our estimated uninsured deposits, excluding affiliate deposits (Southside-owned deposits) and public funds (all collateralized), was 26.5%. At March 31, 2023, estimated uninsured deposits consisted of the following (dollars in thousands):

      March 31, 2023
      Balance Uninsured
     Balance
     % of Uninsured Total Deposits
       
    Affiliate deposits $21,807 $21,470  0.4%
    Customer deposits  4,450,473  1,545,304  26.5%
    Brokered deposits  467,473     
    Public funds  898,467  870,076  14.9%
    Total $5,838,220  2,436,850  41.7%
           
    Excluding public funds (collateralized)    (870,076) (14.9)%
    Excluding affiliate deposits    (21,470) (0.4)%
    Total estimated uninsured deposits   $1,545,304  26.5%
              

    We continued to increase interest rates paid on deposits during the quarter in order to retain deposits. Our noninterest bearing deposits represent 26.4% of total deposits. Linked quarter, our cost of interest bearing deposits increased 60 basis points from 1.22% in the prior quarter to 1.82%. Our cost of total deposits for the first quarter of 2023 increased 46 basis points from 0.88% in the prior quarter to 1.34%.

    Our cost of interest bearing deposits increased 152 basis points, from 0.30% for the three months ended March 31, 2022, to 1.82% for the three months ended March 31, 2023. Our cost of total deposits increased 112 basis points, from 0.22% at March 31, 2022 to 1.34% at March 31, 2023.

    Capital Resources and Liquidity

    Our capital ratios and contingent liquidity sources remain solid. During the first quarter ended March 31, 2023, we purchased 457,394 shares of the Company’s common stock at an average price of $34.89 pursuant to the Stock Repurchase Plan. As of March 31, 2023, approximately 618,831 authorized shares remained available for purchase. Subsequent to March 31, 2023, and through April 20, 2023, we purchased 177,406 shares of common stock at an average price of $33.02 pursuant to the Stock Repurchase Plan. We utilized the Federal Reserve’s Bank Term Funding Program (“BTFP”) to reduce our overall funding costs and to enhance our interest rate risk position. As of March 31, 2023, our BTFP borrowings of $198.4 million were at a cost of 4.37%.

    The table below shows our total lines of credit, current borrowings as of March 31, 2023, total amounts available for future borrowings, and swapped value (in thousands):

      March 31, 2023
      Line of Credit  Borrowings  Total Available for Future Liquidity Swapped
       
    FHLB advances $1,866,515  $333,183  $1,533,332 $180,000
    Federal Reserve discount window  632,832   350,000   282,832  350,000
    Correspondent bank lines of credit  62,500      62,500  
    Federal Reserve Bank Term Funding Program  201,539   198,416   3,123  
    Total liquidity lines $2,763,386  $881,599  $1,881,787 $530,000
                   

    Asset Quality

    Nonperforming assets at March 31, 2023 were $3.2 million, or 0.04% of total assets, a decrease of $8.3 million, or 72.2%, compared to $11.5 million, or 0.16% of total assets, at March 31, 2022, and a decrease from $10.9 million, or 0.14% of total assets, at December 31, 2022. The decrease in nonperforming assets was primarily due to the adoption of ASU 2022-02 on January 1, 2023, which allowed for the prospective exclusion of loan modifications that are performing, but would have previously required disclosure as troubled debt restructures in nonperforming assets.

    The allowance for loan losses totaled $36.3 million, or 0.87% of total loans, at March 31, 2023, compared to $35.5 million, or 0.93% of total loans, at March 31, 2022. The decrease in the allowance as a percentage of total loans was primarily due to improved asset quality and the increase in the total loan portfolio when compared to March 31, 2022. The allowance for loan losses was $36.5 million, or 0.88% of total loans, at December 31, 2022.

    For the three month period ended March 31, 2023, we recorded a provision for credit losses for loans of $0.1 million, compared to a provision for credit losses for loans of $0.3 million and $0.5 million for the three month periods ended March 31, 2022 and December 31, 2022, respectively. Net charge-offs were $0.3 million for the three months ended March 31, 2023, compared to net charge-offs of $15,000 for the three months ended March 31, 2022 and net charge-offs of $0.5 million for the three months ended December 31, 2022.

    We recorded a reversal of provision for credit losses for off-balance-sheet credit exposures of $0.1 million and a provision of $28,000 for the three month periods ended March 31, 2023 and 2022, respectively, compared to a provision of $1.6 million for the three months ended December 31, 2022. The balance of the allowance for off-balance-sheet credit exposures at March 31, 2023 and 2022, was $3.6 million and $2.4 million, respectively, and is included in other liabilities.

    Dividend

    Southside Bancshares, Inc. declared a first quarter cash dividend of $0.35 per share on February 2, 2023, which was paid on March 2, 2023, to all shareholders of record as of February 16, 2023.

    _______________

    (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, 2023 financial results on Tuesday, April 25, 2023 at 11:00 a.m. CDT.  The conference call can be accessed by webcast, for listen-only mode, on the company website, https://investors.southside.com, under Events.

    Those interested in participating in the question and answer session, or others who prefer to call-in, can register at https://register.vevent.com/register/BIe5a240bdfc0c44f5be9b8bd0dd371150 to receive the dial-in number and unique code to access the conference call seamlessly. While not required, it is recommended that those wishing to participate register 10 minutes prior to the conference call to ensure a more efficient registration process.

    For those unable to attend the live event, a webcast recording will be available on the company website, https://investors.southside.com, for at least 30 days, beginning approximately two hours following the conference call.

    Non-GAAP Financial Measures

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

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

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

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

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

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

    About Southside Bancshares, Inc.

    Southside Bancshares, Inc. is a bank holding company with approximately $7.79 billion in assets as of March 31, 2023, that owns 100% of Southside Bank.  Southside Bank currently has 55 branches in Texas and operates a network of 73 ATMs/ITMs.

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

    Forward-Looking Statements

    Certain statements of other than historical fact that are contained in this press release and in other written materials, documents and oral statements issued by or on behalf of the Company may be considered to be “forward-looking statements” within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date.  These statements may include words such as “expect,” “estimate,” “project,” “anticipate,” “appear,” “believe,” “could,” “should,” “may,” “might,” “will,” “would,” “seek,” “intend,” “probability,” “risk,” “goal,” “target,” “objective,” “plans,” “potential,” and similar expressions.  Forward-looking statements are statements with respect to the Company’s beliefs, plans, expectations, objectives, goals, anticipations, assumptions, estimates, intentions and future performance and are subject to significant known and unknown risks and uncertainties, which could cause the Company's actual results to differ materially from the results discussed in the forward-looking statements.  For example, discussions of the effect of our expansion, benefits of the Share Repurchase Plan, trends in asset quality, capital, liquidity, the Company's ability to sell nonperforming assets, expense reductions, planned operational efficiencies and earnings from growth and certain market risk disclosures, including the impact of interest rates, tax reform, inflation, the impacts related to or resulting from 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 significant factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the ongoing impact of higher inflation levels, higher interest rates and general economic and recessionary concerns, all of which could impact economic growth and could cause a reduction in financial transactions and business activities, including decreased deposits and reduced loan originations, our ability to manage liquidity in a rapidly changing and unpredictable market, supply chain disruptions, labor shortages and additional interest rate increases by the Federal Reserve.

    Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, 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
      2023   2022 
     Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
    ASSETS         
    Cash and due from banks$101,109  $106,143  $110,620  $111,099  $90,399 
    Interest earning deposits 151,999   9,276   3,476   12,910   72,158 
    Federal funds sold 57,384   83,833   81,031   48,280   24,550 
    Securities available for sale, at estimated fair value 1,437,222   1,299,014   1,424,562   1,733,354   2,065,984 
    Securities held to maturity, at net carrying value 1,308,457   1,326,729   1,151,205   1,083,672   474,319 
    Total securities 2,745,679   2,625,743   2,575,767   2,817,026   2,540,303 
    Federal Home Loan Bank stock, at cost 16,696   9,190   12,887   13,726   3,757 
    Loans held for sale 407   667   421   815   1,576 
    Loans 4,152,644   4,147,691   4,063,495   3,963,041   3,800,916 
    Less: Allowance for loan losses (36,332)  (36,515)  (36,506)  (35,449)  (35,524)
    Net loans 4,116,312   4,111,176   4,026,989   3,927,592   3,765,392 
    Premises & equipment, net 141,363   141,256   142,653   142,772   142,880 
    Goodwill 201,116   201,116   201,116   201,116   201,116 
    Other intangible assets, net 4,144   4,622   5,137   5,687   6,273 
    Bank owned life insurance 134,635   133,911   133,394   132,675   131,923 
    Other assets 121,501   131,703   160,256   192,363   138,788 
    Total assets$7,792,345  $7,558,636  $7,453,747  $7,606,061  $7,119,115 
              
    LIABILITIES AND SHAREHOLDERS' EQUITY         
    Noninterest bearing deposits$1,543,413  $1,671,562  $1,759,959  $1,735,488  $1,630,056 
    Interest bearing deposits 4,294,807   4,526,457   4,421,200   4,512,921   4,440,343 
    Total deposits 5,838,220   6,198,019   6,181,159   6,248,409   6,070,399 
    Other borrowings and Federal Home Loan Bank borrowings 958,810   374,511   318,252   212,179   34,067 
    Subordinated notes, net of unamortized debt
    issuance costs
     98,710   98,674   98,639   98,604   98,569 
    Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,266   60,265   60,264   60,262   60,261 
    Other liabilities 85,309   81,170   87,797   254,825   71,578 
    Total liabilities 7,041,315   6,812,639   6,746,111   6,874,279   6,334,874 
    Shareholders' equity 751,030   745,997   707,636   731,782   784,241 
    Total liabilities and shareholders' equity$7,792,345  $7,558,636  $7,453,747  $7,606,061  $7,119,115 


    Southside Bancshares, Inc.
    Consolidated Financial Highlights (Unaudited)
    (Dollars and shares in thousands, except per share data)
     
     Three Months Ended
      2023   2022 
     Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
    Income Statement:         
    Total interest income$80,848  $75,128  $66,880  $57,100  $53,873 
    Total interest expense 27,495   18,286   11,365   6,022   4,967 
    Net interest income 53,353   56,842   55,515   51,078   48,906 
    Provision for (reversal of) credit losses (40)  2,086   1,494   (633)  294 
    Net interest income after provision for (reversal of) credit losses 53,393   54,756   54,021   51,711   48,612 
    Noninterest income         
    Deposit services 6,422   6,478   6,241   6,496   6,628 
    Net gain (loss) on sale of securities available for sale (2,146)     (99)  (2,177)  (1,543)
    Net gain on sale of equity securities 2,416             
    Gain on sale of loans 104   36   109   208   178 
    Trust fees 1,467   1,571   1,407   1,520   1,494 
    Bank owned life insurance 1,675   516   720   720   691 
    Brokerage services 697   727   701   1,098   809 
    Other 1,398   1,438   1,190   1,232   2,468 
           Total noninterest income 12,033   10,766   10,269   9,097   10,725 
    Noninterest expense         
    Salaries and employee benefits 21,856   20,967   21,368   20,329   19,969 
    Net occupancy 3,734   3,973   3,847   3,654   3,656 
    Advertising, travel & entertainment 1,050   1,188   789   716   737 
    ATM expense 355   360   317   356   281 
    Professional fees 1,372   1,473   1,412   1,147   927 
    Software and data processing 2,055   1,741   1,736   1,739   1,631 
    Communications 327   387   497   509   503 
    FDIC insurance 544   511   485   477   472 
    Amortization of intangibles 478   515   550   586   622 
    Other 3,078   2,446   2,463   2,593   2,397 
           Total noninterest expense 34,849   33,561   33,464   32,106   31,195 
    Income before income tax expense 30,577   31,961   30,826   28,702   28,142 
    Income tax expense 4,543   4,293   3,875   3,297   3,146 
    Net income$26,034  $27,668  $26,951  $25,405  $24,996 
              
    Common Share Data:   
    Weighted-average basic shares outstanding 31,372   31,896   32,112   32,119   32,357 
    Weighted-average diluted shares outstanding 31,464   31,964   32,221   32,251   32,537 
    Common shares outstanding end of period 31,121   31,547   32,127   32,108   32,294 
    Earnings per common share         
    Basic$0.83  $0.87  $0.84  $0.79  $0.77 
    Diluted 0.83   0.87   0.84   0.79   0.77 
    Book value per common share 24.13   23.65   22.03   22.79   24.28 
    Tangible book value per common share (1) 17.54   17.13   15.61   16.35   17.86 
    Cash dividends paid per common share 0.35   0.38   0.34   0.34   0.34 
              
    Selected Performance Ratios:         
    Return on average assets 1.38%  1.47%  1.43%  1.42%  1.40%
    Return on average shareholders’ equity 13.92   15.08   14.23   13.33   11.42 
    Return on average tangible common equity (1) 19.36   21.35   19.94   18.62   15.20 
    Average yield on earning assets (FTE) (1) 4.76   4.43   4.00   3.66   3.53 
    Average rate on interest bearing liabilities 2.14   1.48   0.92   0.52   0.44 
    Net interest margin (FTE) (1) 3.21   3.40   3.36   3.30   3.22 
    Net interest spread (FTE) (1) 2.62   2.95   3.08   3.14   3.09 
    Average earning assets to average interest bearing liabilities 137.67   143.66   142.83   144.54   141.93 
    Noninterest expense to average total assets 1.85   1.78   1.77   1.79   1.75 
    Efficiency ratio (FTE) (1) 50.99   46.38   47.42   47.74   48.15 

    (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
      2023   2022 
     Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
    Nonperforming Assets:$3,180  $10,862  $11,717  $11,815  $11,455 
    Nonaccrual loans 3,169   2,846   3,039   3,119   2,357 
    Accruing loans past due more than 90 days              
    Restructured loans (1)    7,849   8,481   8,568   9,098 
    Other real estate owned    93   162   128    
    Repossessed assets 11   74   35       
              
    Asset Quality Ratios:         
    Ratio of nonaccruing loans to:         
    Total loans 0.08%  0.07%  0.07%  0.08%  0.06%
    Ratio of nonperforming assets to:         
    Total assets 0.04   0.14   0.16   0.16   0.16 
    Total loans 0.08   0.26   0.29   0.30   0.30 
    Total loans and OREO 0.08   0.26   0.29   0.30   0.30 
    Ratio of allowance for loan losses to:         
    Nonaccruing loans 1,146.48   1,283.03   1,201.25   1,136.55   1,507.17 
    Nonperforming assets 1,142.52   336.17   311.56   300.03   310.12 
    Total loans 0.87   0.88   0.90   0.89   0.93 
    Net charge-offs (recoveries) to average loans outstanding 0.03   0.05   0.02       
              
    Capital Ratios:         
    Shareholders’ equity to total assets 9.64   9.87   9.49   9.62   11.02 
    Common equity tier 1 capital 12.73   12.63   12.98   12.83   13.67 
    Tier 1 risk-based capital 13.81   13.70   14.07   13.94   14.86 
    Total risk-based capital 16.28   16.11   16.50   16.38   17.50 
    Tier 1 leverage capital 9.83   9.96   10.09   10.34   10.39 
    Period end tangible equity to period end tangible assets (2) 7.19   7.35   6.92   7.10   8.35 
    Average shareholders’ equity to average total assets 9.94   9.72   10.02   10.64   12.28 

    (1)  Pursuant to our adoption of ASU 2022-02, effective January 1, 2023, we prospectively discontinued the recognition and measurement guidance previously required on troubled debt restructures. As a result, “restructured” loans as of March 31, 2023 exclude any loan modifications that are performing but would have previously required disclosure as troubled debt restructures.
    (2)  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
      2023   2022 
    Loan Portfolio CompositionMar 31, Dec 31, Sep 30, Jun 30, Mar 31,
    Real Estate Loans:         
    Construction$591,894  $559,681  $554,345  $520,484  $490,166 
    1-4 Family Residential 672,595   663,519   646,692   640,706   647,837 
    Commercial 1,990,861   1,987,707   1,901,921   1,834,734   1,722,577 
    Commercial Loans 388,182   412,064   433,538   428,974   401,144 
    Municipal Loans 438,566   450,067   449,219   457,239   455,155 
    Loans to Individuals 70,546   74,653   77,780   80,904   84,037 
    Total Loans$4,152,644  $4,147,691  $4,063,495  $3,963,041  $3,800,916 
              
    Summary of Changes in Allowances:         
    Allowance for Loan Losses         
    Balance at beginning of period$36,515  $36,506  $35,449  $35,524  $35,273 
    Loans charged-off (633)  (864)  (686)  (479)  (555)
    Recoveries of loans charged-off 362   383   449   516   540 
    Net loans (charged-off) recovered (271)  (481)  (237)  37   (15)
    Provision for (reversal of) loan losses 88   490   1,294   (112)  266 
    Balance at end of period$36,332  $36,515  $36,506  $35,449  $35,524 
              
    Allowance for Off-Balance-Sheet Credit Exposures         
    Balance at beginning of period$3,687  $2,091  $1,891  $2,412  $2,384 
    Provision for (reversal of) off-balance-sheet credit exposures (128)  1,596   200   (521)  28 
    Balance at end of period$3,559  $3,687  $2,091  $1,891  $2,412 
    Total Allowance for Credit Losses$39,891  $40,202  $38,597  $37,340  $37,936 


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

    Southside Bancshares, Inc.
    Average Balances and Average Yields and Rates (Annualized) (Unaudited)
    (Dollars in thousands)
     
     Three Months Ended
     March 31, 2023 December 31, 2022
     Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
    ASSETS           
    Loans (1)$4,128,775  $55,453 5.45% $4,103,429  $52,650 5.09%
    Loans held for sale 1,662   20 4.88%  1,087   15 5.47%
    Securities:           
    Taxable investment securities (2) 690,864   5,712 3.35%  622,004   4,804 3.06%
    Tax-exempt investment securities (2) 1,692,700   16,466 3.95%  1,730,233   15,652 3.59%
    Mortgage-backed and related securities (2) 455,811   4,329 3.85%  483,914   4,614 3.78%
          Total securities 2,839,375   26,507 3.79%  2,836,151   25,070 3.51%
    Federal Home Loan Bank stock, at cost, and equity investments 31,470   245 3.16%  22,616   212 3.72%
    Interest earning deposits 87,924   1,033 4.76%  10,974   108 3.90%
    Federal funds sold 72,630   837 4.67%  84,858   774 3.62%
    Total earning assets 7,161,836   84,095 4.76%  7,059,115   78,829 4.43%
    Cash and due from banks 107,765       108,200     
    Accrued interest and other assets 398,709       356,248     
    Less:  Allowance for loan losses (36,690)      (36,602)    
    Total assets$7,631,620      $7,486,961     
    LIABILITIES AND SHAREHOLDERS’ EQUITY           
    Savings accounts$665,919   1,313 0.80% $676,654   758 0.44%
    Certificates of deposit 787,887   5,407 2.78%  645,972   3,035 1.86%
    Interest bearing demand accounts 2,983,218   13,186 1.79%  3,119,682   9,894 1.26%
    Total interest bearing deposits 4,437,024   19,906 1.82%  4,442,308   13,687 1.22%
    Federal Home Loan Bank borrowings 404,199   3,141 3.15%  189,939   1,623 3.39%
    Subordinated notes, net of unamortized debt issuance costs 98,693   999 4.11%  98,657   1,013 4.07%
    Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,265   1,031 6.94%  60,264   901 5.93%
    Repurchase agreements 65,435   492 3.05%  37,416   117 1.24%
    Other borrowings 136,700   1,926 5.71%  85,033   945 4.41%
    Total interest bearing liabilities 5,202,316   27,495 2.14%  4,913,617   18,286 1.48%
    Noninterest bearing deposits 1,588,725       1,757,568     
    Accrued expenses and other liabilities 81,829       88,024     
    Total liabilities 6,872,870       6,759,209     
    Shareholders’ equity 758,750       727,752     
    Total liabilities and shareholders’ equity$7,631,620      $7,486,961     
    Net interest income (FTE)  $56,600     $60,543  
    Net interest margin (FTE)    3.21%     3.40%
    Net interest spread (FTE)    2.62%     2.95%

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

    Note: As of March 31, 2023 and December 31, 2022, loans totaling $3.2 million and $2.8 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, 2022 June 30, 2022
     Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
    ASSETS           
    Loans (1)$4,012,547  $45,992 4.55% $3,847,614  $39,088 4.07%
    Loans held for sale 606   7 4.58%  1,776   18 4.07%
    Securities:           
    Taxable investment securities (2) 626,136   4,896 3.10%  617,603   4,632 3.01%
    Tax-exempt investment securities (2) 1,750,952   14,455 3.28%  1,653,871   13,599 3.30%
    Mortgage-backed and related securities (2) 520,501   4,770 3.64%  417,057   3,238 3.11%
          Total securities 2,897,589   24,121 3.30%  2,688,531   21,469 3.20%
    Federal Home Loan Bank stock, at cost, and equity investments 24,013   101 1.67%  17,663   77 1.75%
    Interest earning deposits 18,664   105 2.23%  77,894   125 0.64%
    Federal funds sold 46,106   269 2.31%  37,343   79 0.85%
    Total earning assets 6,999,525   70,595 4.00%  6,670,821   60,856 3.66%
    Cash and due from banks 102,840       100,231     
    Accrued interest and other assets 433,532       446,136     
    Less:  Allowance for loan losses (35,706)      (35,895)    
    Total assets$7,500,191      $7,181,293     
    LIABILITIES AND SHAREHOLDERS’ EQUITY           
    Savings accounts$685,947   481 0.28% $670,187   326 0.20%
    Certificates of deposit 588,212   1,452 0.98%  518,104   578 0.45%
    Interest bearing demand accounts 3,164,961   5,954 0.75%  3,175,385   3,360 0.42%
    Total interest bearing deposits 4,439,120   7,887 0.70%  4,363,676   4,264 0.39%
    Federal Home Loan Bank borrowings 173,838   1,078 2.46%  55,990   224 1.60%
    Subordinated notes, net of unamortized debt issuance costs 98,621   1,004 4.04%  98,586   1,000 4.07%
    Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,263   669 4.40%  60,262   471 3.13%
    Repurchase agreements 30,530   54 0.70%  30,055   18 0.24%
    Other borrowings 98,174   673 2.72%  6,549   45 2.76%
    Total interest bearing liabilities 4,900,546   11,365 0.92%  4,615,118   6,022 0.52%
    Noninterest bearing deposits 1,746,245       1,702,985     
    Accrued expenses and other liabilities 101,881       98,870     
    Total liabilities 6,748,672       6,416,973     
    Shareholders’ equity 751,519       764,320     
    Total liabilities and shareholders’ equity$7,500,191      $7,181,293     
    Net interest income (FTE)  $59,230     $54,834  
    Net interest margin (FTE)    3.36%     3.30%
    Net interest spread (FTE)    3.08%     3.14%

    (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, 2022 and June 30, 2022, loans totaling $3.0 million and $3.1 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 (Unaudited)
    (Dollars in thousands)
     
     Three Months Ended
     March 31, 2022
     Average Balance Interest Average Yield/Rate
    ASSETS     
    Loans (1) $3,703,980  $35,625 3.90%
    Loans held for sale 928   8 3.50%
    Securities:     
    Taxable investment securities (2) 644,706   4,608 2.90%
    Tax-exempt investment securities (2) 1,563,185   12,683 3.29%
    Mortgage-backed and related securities (2) 566,941   4,017 2.87%
          Total securities 2,774,832   21,308 3.11%
    Federal Home Loan Bank stock, at cost, and equity investments 20,677   113 2.22%
    Interest earning deposits 44,642   24 0.22%
    Federal funds sold 8,651   4 0.19%
    Total earning assets 6,553,710   57,082 3.53%
    Cash and due from banks 107,144     
    Accrued interest and other assets 607,235     
    Less:  Allowance for loan losses (35,636)    
    Total assets$7,232,453     
    LIABILITIES AND SHAREHOLDERS’ EQUITY     
    Savings accounts$652,394   273 0.17%
    Certificates of deposit 563,599   594 0.43%
    Interest bearing demand accounts 3,097,966   2,370 0.31%
    Total interest bearing deposits 4,313,959   3,237 0.30%
    Federal Home Loan Bank borrowings 122,783   366 1.21%
    Subordinated notes, net of unamortized debt issuance costs 98,552   998 4.11%
    Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,261   356 2.40%
    Repurchase agreements 21,494   10 0.19%
    Other borrowings 467     
    Total interest bearing liabilities 4,617,516   4,967 0.44%
    Noninterest bearing deposits 1,642,973     
    Accrued expenses and other liabilities 84,009     
    Total liabilities 6,344,498     
    Shareholders’ equity 887,955     
    Total liabilities and shareholders’ equity$7,232,453     
    Net interest income (FTE)  $52,115  
    Net interest margin (FTE)    3.22%
    Net interest spread (FTE)    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, loans totaling $2.4 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
       2023   2022 
      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 $26,034  $27,668  $26,951  $25,405  $24,996 
    After-tax amortization expense  378   407   435   463   491 
    Adjusted net income available to common shareholders $26,412  $28,075  $27,386  $25,868  $25,487 
               
    Average shareholders' equity $758,750  $727,752  $751,519  $764,320  $887,955 
    Less: Average intangibles for the period  (205,555)  (206,049)  (206,591)  (207,163)  (207,774)
    Average tangible shareholders' equity $553,195  $521,703  $544,928  $557,157  $680,181 
               
    Return on average tangible common equity  19.36%  21.35%  19.94%  18.62%  15.20%
               
    Reconciliation of book value per share to tangible book value per share:          
    Common equity at end of period $751,030  $745,997  $707,636  $731,782  $784,241 
    Less: Intangible assets at end of period  (205,260)  (205,738)  (206,253)  (206,803)  (207,389)
    Tangible common shareholders' equity at end of period $545,770  $540,259  $501,383  $524,979  $576,852 
               
    Total assets at end of period $7,792,345  $7,558,636  $7,453,747  $7,606,061  $7,119,115 
    Less: Intangible assets at end of period  (205,260)  (205,738)  (206,253)  (206,803)  (207,389)
    Tangible assets at end of period $7,587,085  $7,352,898  $7,247,494  $7,399,258  $6,911,726 
               
    Period end tangible equity to period end tangible assets  7.19%  7.35%  6.92%  7.10%  8.35%
               
    Common shares outstanding end of period  31,121   31,547   32,127   32,108   32,294 
    Tangible book value per common share $17.54  $17.13  $15.61  $16.35  $17.86 
               
    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) $53,353  $56,842  $55,515  $51,078  $48,906 
    Tax-equivalent adjustments:          
    Loans  697   744   742   762   745 
    Tax-exempt investment securities  2,550   2,957   2,973   2,994   2,464 
    Net interest income (FTE) (1)  56,600   60,543   59,230   54,834   52,115 
    Noninterest income  12,033   10,766   10,269   9,097   10,725 
    Nonrecurring income (2)  (1,221)     99   2,177   706 
    Total revenue $67,412  $71,309  $69,598  $66,108  $63,546 
               
    Noninterest expense $34,849  $33,561  $33,464  $32,106  $31,195 
    Pre-tax amortization expense  (478)  (515)  (550)  (586)  (622)
    Nonrecurring expense (3)  3   26   87   39   22 
    Adjusted noninterest expense $34,374  $33,072  $33,001  $31,559  $30,595 
               
    Efficiency ratio  53.57%  48.92%  50.09%  50.61%  50.71%
    Efficiency ratio (FTE) (1)  50.99%  46.38%  47.42%  47.74%  48.15%
               
    Average earning assets $7,161,836  $7,059,115  $6,999,525  $6,670,821  $6,553,710 
               
    Net interest margin  3.02%  3.19%  3.15%  3.07%  3.03%
    Net interest margin (FTE) (1)  3.21%  3.40%  3.36%  3.30%  3.22%
               
    Net interest spread  2.44%  2.74%  2.87%  2.91%  2.89%
    Net interest spread (FTE) (1)  2.62%  2.95%  3.08%  3.14%  3.09%

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


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