Market Overview

Southside Bancshares, Inc. Announces Net Income for the Three and Six Months Ended June 30, 2015

Share:

TYLER, Texas, July 23, 2015 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. ("Southside" or the "Company") (NASDAQ: SBSI) today reported its financial results for the three and six months ended June 30, 2015.

Southside reported net income of $11.2 million for the three months ended June 30, 2015, an increase of $707,000, or 6.8%, when compared to $10.5 million for the same period in 2014. Net income for the six months ended June 30, 2015 increased $1.9 million, or 10.0%, to $20.5 million when compared to $18.7 million for the same period in 2014.

Diluted earnings per common share were $0.44 and $0.53 for the three months ended June 30, 2015 and 2014, respectively, a decrease of $0.09, or 17.0%. For the six months ended June 30, 2015, diluted earnings per common share decreased $0.13, or 13.8%, to $0.81 when compared to $0.94 for the same period in 2014.

The return on average shareholders' equity for the six months ended June 30, 2015 was 9.55%, compared to 13.80% for the same period in 2014. The return on average assets was 0.86% for the six months ended June 30, 2015, compared to 1.09% for the same period in 2014.

"Our Company had solid results this quarter and we are on target to deliver on our merger-related expense commitments," stated Sam Dawson, President and Chief Executive Officer of Southside Bancshares, Inc. "We recorded approximately $1.3 million, net of tax, of merger-related expense during the second quarter and approximately $3.3 million, net of tax, for the six months. Our balance sheet remained strong, as evidenced by solid asset quality, liquidity and capital."

"As of June 30, 2015, the integration related to the OmniAmerican ("Omni") acquisition was almost complete and most of the cost savings associated with the acquisition should be realized beginning in the third quarter. We continue to review the combined organization to pursue additional operational efficiencies and opportunities for revenue generation and cost containment."

"Total loans increased $5.2 million during the second quarter more than offsetting the continued roll off of the indirect automobile loan portfolio included in the Omni acquisition of approximately $26 million and payoffs in our 1-4 family residential and commercial loan portfolios. During the quarter commercial real estate loans increased $36.4 million, construction loans increased $12.1 million and municipal loans increased $3.7 million. Based on loans committed and the activity in our pipeline, we are anticipating healthy overall net loan growth during 2015. We are focused on executing on our business plan and we continue to add value to our customers and the communities we serve."

Loans and Deposits

For the six months ended June 30, 2015, total loans decreased by $1.3 million, when compared to December 31, 2014. During the six months ended June 30, 2015, other real estate loans increased $53.6 million, construction loans increased $5.8 million, commercial loans increased $2.6 million, 1-4 family real estate loans decreased $6.1 million, municipal loans decreased $1.0 million, and loans to individuals decreased $56.2 million.

Nonperforming assets increased during the first six months of 2015 by $15.5 million, to $27.8 million, or 0.57% of total assets, compared to 0.26% at December 31, 2014 primarily due to the downgrade of one large commercial borrowing relationship to impaired status.

During the six months ended June 30, 2015, the allowance for loan losses increased $3.5 million, to $16.8 million, or 0.8% of total loans, compared to 0.6% at December 31, 2014, as a result of the additional provision associated with the increase of impaired loans. The allowance for loan losses as a percentage of total loans decreased from the comparable period in 2014 from 1.32%, as a result of the loans acquired in connection with the Omni acquisition measured at fair value at the acquisition date with no carryover of the allowance for loan loss and the sale of the loans purchased by Southside Financial Group, Inc., both of which occurred in the second half of 2014.

During the six months ended June 30, 2015, deposits, net of brokered deposits, increased $88.8 million, or 2.6%, compared to December 31, 2014. During this six-month period, public fund deposits increased $39.6 million.

Net Interest Income for the Three Months

Net interest income increased $5.0 million, or 18.1%, to $32.9 million for the three months ended June 30, 2015, when compared to $27.9 million for the same period in 2014. The increase in net interest income was primarily the result of the increase in interest income of $5.7 million, compared to the same period in 2014, which was a result of the increase in total loans. For the three months ended June 30, 2015, our net interest spread decreased to 3.30%, compared to 3.79% for the same period in 2014. The net interest margin decreased to 3.39% for the three months ended June 30, 2015, compared to 3.94% for the same period in 2014. The net interest spread and margin each decreased as a result of the decrease in the yield on interest-earning assets, which more than offset the decrease in the yield on interest-bearing liabilities compared to the same period in 2014.

Net Interest Income for the Six Months

Net interest income increased $10.9 million, or 19.6%, to $66.7 million for the six months ended June 30, 2015, when compared to $55.7 million for the same period in 2014. The increase in net interest income was primarily the result of the increase in interest income of $12.0 million, compared to the same period in 2014, which was a result of the increase in total loans. For the six months ended June 30, 2015, our net interest spread decreased to 3.36%, compared to 3.79% for the same period in 2014. The net interest margin decreased to 3.44% for the six months ended June 30, 2015, compared to 3.93% for the same period in 2014. The net interest spread and margin each decreased as a result of the decrease in the yield on interest-earning assets, which more than offset the decrease in the yield on interest-bearing liabilities compared to the same period in 2014.

Net Income for the Three Months

Net income increased $707,000, or 6.8%, for the three months ended June 30, 2015, to $11.2 million when compared to the same period in 2014. The increase was primarily the result of an increase in interest income of $5.7 million and an increase in noninterest income of $1.9 million combined with a decrease in provision for loan loss of $2.4 million, which were partially offset by a $7.5 million increase in noninterest expense and a $1.1 million increase in income tax expense.

Noninterest expense increased $7.5 million, or 36.7%, for the three months ended June 30, 2015, compared to the same period in 2014, primarily due to increases in salaries and employee benefits expense, occupancy expense, ATM and debit card expense, software and data processing expense and other noninterest expense which were partially offset by a decrease in professional fees.

Net Income for the Six Months

Net income increased $1.9 million, or 10.0%, for the six months ended June 30, 2015, to $20.5 million when compared to the same period in 2014. The increase was primarily the result of an increase in interest income of $12.0 million and an increase in noninterest income of $7.1 million combined with a decrease in provision for loan loss of $2.7 million, which were partially offset by a $17.0 million increase in noninterest expense and a $1.9 million increase in income tax expense.

Noninterest expense increased $17.0 million, or 41.9%, for the six months ended June 30, 2015, compared to the same period in 2014, primarily due to increases in salaries and employee benefits expense, occupancy expense, ATM and debit card expense, software and data processing expense and other noninterest expense which were partially offset by a decrease in professional fees.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $4.9 billion in assets that owns 100% of Southside Bank. Southside Bank currently has 64 banking centers in Texas and operates a network of over 70 ATMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at 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 Deborah Wilkinson at (817) 367-4962, or deborah.wilkinson@southside.com.

Forward-Looking Statements

Certain statements of other than historical fact that are contained in this document and in other written material, press releases 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 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," "likely," "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 about trends in asset quality, capital, liquidity, the pace of loan growth, merger-related integration cost savings, earnings and certain market risk disclosures, including the impact of interest rate and other economic uncertainty, 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.

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, 2014 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
June 30,
2015
At
 December 31,
2014
At
June 30,
2014
  (dollars in thousands)
  (unaudited)
       
Selected Financial Condition Data (at end of period):      
       
Total assets $ 4,856,018 $ 4,807,261 $ 3,498,662
Loans 2,179,863 2,181,133 1,391,285
Allowance for loan losses 16,822 13,292 18,408
Loans held for sale 7,431 2,899 755
Mortgage-backed securities:      
Available for sale, at estimated fair value 1,094,802 1,142,002 751,740
Held to maturity, at carrying value 356,669 253,496 260,659
Investment securities:      
Available for sale, at estimated fair value 371,019 306,706 351,908
Held to maturity, at carrying value 387,212 388,823 390,221
Federal Home Loan Bank stock, at cost 37,769 39,942 25,512
Deposits 3,468,683 3,374,417 2,601,478
Long-term obligations 632,565 660,363 566,021
Shareholders' equity 431,674 425,243 283,960
Nonperforming assets 27,794 12,277 14,535
Nonaccrual loans 21,223 4,096 9,620
Accruing loans past due more than 90 days 30 4 4
Restructured loans 5,667 5,874 4,036
Other real estate owned 787 1,738 383
Repossessed assets 87 565 492
       
Asset Quality Ratios:      
Nonaccruing loans to total loans 0.97% 0.19% 0.69%
Allowance for loan losses to nonaccruing loans 79.26 324.51 191.35
Allowance for loan losses to nonperforming assets 60.52 108.27 126.65
Allowance for loan losses to total loans 0.77 0.61 1.32
Nonperforming assets to total assets 0.57 0.26 0.42
Net charge-offs to average loans 0.05 1.44 1.07
       
Capital Ratios:      
Shareholders' equity to total assets 8.89 8.85 8.12
Average shareholders' equity to average total assets 9.02 8.27 7.88

Loan Portfolio Composition

The following table sets forth loan totals by category for the periods presented:

  At
June 30,
2015
At
 December 31,
2014
At
June 30,
2014
  (in thousands)
  (unaudited)
Real Estate Loans:      
Construction $ 249,313 $ 243,486 $ 164,668
1-4 Family Residential 683,146 689,288 391,675
Other 538,841 485,226 271,858
Commercial Loans 237,972 235,356 156,893
Municipal Loans 256,492 257,492 239,883
Loans to Individuals 214,099 270,285 166,308
Total Loans $ 2,179,863 $ 2,181,133 $ 1,391,285
     
  At or For the
Three Months Ended
June 30,
At or For the
Six Months Ended
June 30,
  2015 2014 2015 2014
  (dollars in thousands)
  (unaudited)
Selected Operating Data:        
Total interest income $ 37,750 $ 32,086 $ 76,357 $ 64,325
Total interest expense 4,845 4,230 9,661 8,577
Net interest income 32,905 27,856 66,696 55,748
Provision for loan losses 268 2,650 4,116 6,783
Net interest income after provision for loan losses 32,637 25,206 62,580 48,965
Noninterest income        
Deposit services 4,920 3,794 9,909 7,432
Net gain on sale of securities available for sale 105 498 2,581 509
Gain on sale of loans 822 81 1,199 161
Trust income 820 762 1,713 1,542
Bank owned life insurance income 653 307 1,322 621
Other 1,099 1,073 2,743 2,056
Total noninterest income 8,419 6,515 19,467 12,321
Noninterest expense        
Salaries and employee benefits 16,869 13,092 35,068 26,194
Occupancy expense 2,593 1,786 6,052 3,540
Advertising, travel & entertainment 683 605 1,340 1,148
ATM and debit card expense 750 302 1,429 619
Professional fees 793 1,304 1,535 2,231
Software and data processing expense 1,237 486 2,268 987
Telephone and communications 603 320 1,072 598
FDIC insurance 629 434 1,267 882
Other 3,768 2,097 7,603 4,409
Total noninterest expense 27,925 20,426 57,634 40,608
Income before income tax expense 13,131 11,295 24,413 20,678
Income tax expense 1,967 838 3,870 1,997
Net income $ 11,164 $ 10,457 $ 20,543 $ 18,681
         
Common share data:        
Weighted-average basic shares outstanding 25,337 19,776 25,330 19,769
Weighted-average diluted shares outstanding 25,425 19,873 25,414 19,862
Net income per common share        
Basic $ 0.44 $ 0.53 $ 0.81 $ 0.94
Diluted 0.44 0.53 0.81 0.94
Book value per common share 17.03 14.35
Cash dividend paid per common share 0.23 0.21 0.46 0.42
     
  At or For the
Three Months Ended
June 30,
At or For the
Six Months Ended
June 30,
  2015 2014 2015 2014
  (unaudited) (unaudited)
Selected Performance Ratios:        
Return on average assets 0.93% 1.22% 0.86% 1.09%
Return on average shareholders' equity 10.30 15.09 9.55 13.80
Average yield on interest earning assets 3.83 4.46 3.89 4.46
Average yield on interest bearing liabilities 0.53 0.67 0.53 0.67
Net interest spread 3.30 3.79 3.36 3.79
Net interest margin 3.39 3.94 3.44 3.93
Average interest earnings assets to average interest bearing liabilities 120.22 127.57 119.28 125.58
Noninterest expense to average total assets 2.34 2.37 2.42 2.36
Efficiency ratio 59.98 53.51 61.04 53.40

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)
Three Months Ended
 
  June 30, 2015 June 30, 2014
  AVG   AVG AVG   AVG
  BALANCE INTEREST YIELD BALANCE INTEREST YIELD
ASSETS            
INTEREST EARNING ASSETS:            
Loans (1)(2) $ 2,188,886 $ 24,889 4.56% $ 1,371,609 $ 19,302 5.64%
Loans Held For Sale 3,675 45 4.91% 335 3 3.59%
Securities:            
Investment Securities (Taxable) (4) 86,561 459 2.13% 31,250 143 1.84%
Investment Securities (Tax-Exempt)(3)(4) 627,405 8,752 5.60% 655,865 9,032 5.52%
Mortgage-backed Securities (4) 1,400,389 7,666 2.20% 1,125,085 7,557 2.69%
Total Securities 2,114,355 16,877 3.20% 1,812,200 16,732 3.70%
FHLB stock and other investments, at cost 42,741 65 0.61% 28,109 38 0.54%
Interest Earning Deposits 39,609 29 0.29% 34,693 22 0.25%
Total Interest Earning Assets 4,389,266 41,905 3.83% 3,246,946 36,097 4.46%
NONINTEREST EARNING ASSETS:            
Cash and Due From Banks 49,760     42,887    
Bank Premises and Equipment 111,384     53,108    
Other Assets 259,319     126,015    
Less: Allowance for Loan Loss (17,059)     (18,635)    
Total Assets $ 4,792,670     $ 3,450,321    
LIABILITIES AND SHAREHOLDERS' EQUITY            
INTEREST BEARING LIABILITIES:            
Savings Deposits $ 234,097 59 0.10% $ 116,390 34 0.12%
Time Deposits 853,410 1,313 0.62% 603,903 1,070 0.71%
Interest Bearing Demand Deposits 1,701,559 1,121 0.26% 1,223,788 880 0.29%
Total Interest Bearing Deposits 2,789,066 2,493 0.36% 1,944,081 1,984 0.41%
Short-term Interest Bearing Liabilities 232,471 154 0.27% 32,777 56 0.69%
Long-term Interest Bearing Liabilities – FHLB Dallas 569,302 1,837 1.29% 508,128 1,836 1.45%
Long-term Debt (5) 60,311 361 2.40% 60,311 354 2.35%
Total Interest Bearing Liabilities 3,651,150 4,845 0.53% 2,545,297 4,230 0.67%
NONINTEREST BEARING LIABILITIES:            
Demand Deposits 669,068     597,852    
Other Liabilities 37,607     29,241    
Total Liabilities 4,357,825     3,172,390    
SHAREHOLDERS' EQUITY 434,845     277,931    
Total Liabilities and Shareholders' Equity $ 4,792,670     $ 3,450,321    
NET INTEREST INCOME   $ 37,060     $ 31,867  
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS     3.39%     3.94%
NET INTEREST SPREAD     3.30%     3.79%

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) Interest income includes taxable-equivalent adjustments of $1,047 and $1,000 for the three months ended June 30, 2015 and 2014, respectively.

(3) Interest income includes taxable-equivalent adjustments of $3,108 and $3,011 for the three months ended June 30, 2015 and 2014, respectively.

(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

(5) Represents the issuance of junior subordinated debentures.

Note: As of June 30, 2015 and 2014, loans on nonaccrual status totaled $21,223 and $9,620, respectively. Our 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)
Six Months Ended
 
  June 30, 2015 June 30, 2014
  AVG   AVG AVG   AVG
  BALANCE INTEREST YIELD BALANCE INTEREST YIELD
ASSETS            
INTEREST EARNING ASSETS:            
Loans (1) (2) $ 2,189,023 $ 49,827 4.59% $ 1,368,110 $ 38,677 5.70%
Loans Held For Sale 2,835 73 5.19% 379 8 4.26%
Securities:            
Investment Securities (Taxable)(4) 68,102 696 2.06% 28,856 266 1.86%
Investment Securities (Tax-Exempt)(3)(4) 636,269 17,586 5.57% 649,639 17,874 5.55%
Mortgage-backed Securities (4) 1,396,519 16,128 2.33% 1,136,608 15,239 2.70%
Total Securities 2,100,890 34,410 3.30% 1,815,103 33,379 3.71%
FHLB stock and other investments, at cost 43,311 158 0.74% 29,855 108 0.73%
Interest Earning Deposits 49,040 63 0.26% 51,947 65 0.25%
Total Interest Earning Assets 4,385,099 84,531 3.89% 3,265,394 72,237 4.46%
NONINTEREST EARNING ASSETS:            
Cash and Due From Banks 53,542     44,430    
Bank Premises and Equipment 112,006     52,699    
Other Assets 270,806     123,572    
Less: Allowance for Loan Loss (15,351)     (18,641)    
Total Assets $ 4,806,102     $ 3,467,454    
LIABILITIES AND SHAREHOLDERS' EQUITY            
INTEREST BEARING LIABILITIES:            
Savings Deposits $ 232,033 112 0.10% $ 114,052 69 0.12%
Time Deposits 858,416 2,675 0.63% 620,631 2,233 0.73%
Interest Bearing Demand Deposits 1,700,399 2,235 0.27% 1,239,645 1,798 0.29%
Total Interest Bearing Deposits 2,790,848 5,022 0.36% 1,974,328 4,100 0.42%
Short-term Interest Bearing Liabilities 252,276 296 0.24% 60,952 127 0.42%
Long-term Interest Bearing Liabilities – FHLB Dallas 572,731 3,629 1.28% 504,617 3,644 1.46%
Long-term Debt (5) 60,311 714 2.39% 60,311 706 2.36%
Total Interest Bearing Liabilities 3,676,166 9,661 0.53% 2,600,208 8,577 0.67%
NONINTEREST BEARING LIABILITIES:            
Demand Deposits 657,386     566,782    
Other Liabilities 38,827     27,392    
Total Liabilities 4,372,379     3,194,382    
SHAREHOLDERS' EQUITY 433,723     273,072    
Total Liabilities and Shareholders' Equity $ 4,806,102     $ 3,467,454    
NET INTEREST INCOME   $ 74,870     $ 63,660  
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS     3.44%     3.93%
NET INTEREST SPREAD     3.36%     3.79%

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) Interest income includes taxable-equivalent adjustments of $2,097 and $2,017 for the six months ended June 30, 2015 and 2014, respectively.

(3) Interest income includes taxable-equivalent adjustments of $6,077 and $5,895 for the six months ended June 30, 2015 and 2014, respectively.

(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

(5) Represents the issuance of junior subordinated debentures.

Note: As of June 30, 2015 and 2014, loans on nonaccrual status totaled $21,223 and $9,620, respectively. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.
 

company logo

View Comments and Join the Discussion!
 

Partner Center