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Southside Bancshares, Inc. Announces Financial Results for the Three and Six Months Ended June 30, 2016

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TYLER, Texas, July 29, 2016 (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, 2016.

Southside reported net income of $11.4 million for the three months ended June 30, 2016, an increase of $231,000, or 2.1%, compared to $11.2 million for the same period in 2015.  Net income for the six months ended June 30, 2016 increased $4.4 million, or 21.3%, to $24.9 million when compared to $20.5 million for the same period in 2015.

Diluted earnings per common share were $0.43 and $0.42 for the three months ended June 30, 2016 and 2015, respectively, an increase of $0.01, or 2.4%.  For the six months ended June 30, 2016, diluted earnings per common share increased $0.17, or 22.1%, to $0.94 when compared to $0.77 for the same period in 2015.

The return on average shareholders' equity for the six months ended June 30, 2016 was 10.93%, compared to 9.55% for the same period in 2015.  The return on average assets was 0.99% for the six months ended June 30, 2016, compared to 0.86% for the same period in 2015.

"The second quarter results reflect an increase in net income for the quarter, a significant reduction in our nonperforming assets and continued success in our cost containment efforts," stated Sam Dawson, Chief Executive Officer of Southside Bancshares, Inc.  "While loan payoffs outpaced loans funded during the second quarter, we believe the second half of the year will produce solid loan growth based on the increase in our pipeline and loans currently expected to close in the very near future.  Negotiated foreclosures began on two loans comprising approximately 62% of our nonperforming loans at March 31, 2016 subsequent to the end of the second quarter and partial charge-offs were recorded to reflect the estimated net selling price of the remaining assets at June 30, 2016.  We currently anticipate cash sales in excess of $8 million of nonperforming assets related to these two loans prior to the end of the third quarter.  Our nonperforming asset ratio to total assets also decreased to 0.49%."

"The decrease in the net interest margin during the second quarter was reflective of a decrease in average loans on a linked quarter basis and a $1.3 million recovery of interest income on the payoff of a long-time nonaccrual loan during the first quarter of 2016.  During the quarter we prepaid $63 million of higher cost FHLB advances that resulted in a prepayment fee of $148,000."

"We continued to execute on our business plan of quality loan growth, cost containment, operational efficiencies and revenue generating opportunities.  We incurred professional fees in connection with this effort of approximately $525,000 during the quarter.  The anticipated results are operational efficiencies through changes in our back office processes, revised branch models commensurate with today's customer delivery preferences and enhanced noninterest income programs, which should continue to be implemented throughout the remainder of 2016.  Noninterest expense decreased during the second quarter and our efficiency ratio decreased to 52.85%."

Loans and Deposits

For the six months ended June 30, 2016, total loans decreased by $47.4 million, or 2.0%, when compared to December 31, 2015.  The net decrease in our loans was comprised of decreases of $44.6 million of commercial loans, $32.0 million of loans to individuals, $22.0 million of 1-4 family residential loans, and $12.7 million of construction loans which were partially offset by increases of $59.1 million of commercial real estate loans and $4.8 million of municipal loans.  Loans with oil and gas industry exposure totaled 1.19% of the loan portfolio at June 30, 2016.

Nonperforming assets decreased during the first six months of 2016 by $8.0 million, or 24.5%, to $24.5 million, or 0.49% of total assets, when compared to 0.63% at December 31, 2015.

During the six months ended June 30, 2016, the allowance for loan losses decreased $4.8 million, or 24.5%, to $14.9 million, or 0.63% of total loans, when compared to 0.81% at December 31, 2015, as a result of partial charge-offs of two large impaired commercial borrowing relationships.

During the six months ended June 30, 2016, deposits, net of brokered deposits, increased $118.8 million, or 3.5%, compared to December 31, 2015.  During this six-month period, public fund deposits increased $93.5 million.

Net Interest Income for the Three Months Ended June 30, 2016

Net interest income increased $1.5 million, or 4.5%, to $34.4 million for the three months ended June 30, 2016, when compared to $32.9 million for the same period in 2015.  The increase in net interest income was the result of the increase in interest income of $3.3 million which was primarily a result of the increase in the loan portfolio, compared to the same period in 2015.  The increase in interest income was partially offset by an increase in interest expense of $1.9 million.  For the three months ended June 30, 2016, our net interest spread decreased to 3.24%, compared to 3.30% for the same period in 2015, due to higher rates paid on interest-bearing liabilities, which more than offset the increase in the yield on interest-earning assets.  Our net interest margin decreased to 3.35% for the three months ended June 30, 2016, compared to 3.39% for the same period in 2015.  The net interest spread and margin on a linked quarter basis decreased from 3.40% and 3.51%, respectively, primarily due to a $1.3 million recovery of interest income on the payoff of a long-time nonaccrual loan during the first quarter. 

Net Interest Income for the Six Months Ended June 30, 2016

Net interest income increased $4.3 million, or 6.4%, to $71.0 million for the six months ended June 30, 2016, when compared to $66.7 million for the same period in 2015.  The increase in net interest income was due to the increase in interest income of $7.7 million which was primarily a result of the increase in the loan portfolio, compared to the same period in 2015, and a $1.3 million recovery of interest income on the payoff of a long-time nonaccrual loan during the first quarter of 2016.  The increase in interest income was partially offset by an increase in interest expense of $3.4 million.  For the six months ended June 30, 2016, our net interest spread decreased to 3.32%, compared to 3.36% for the same period in 2015, due to higher rates paid on interest-bearing liabilities, which more than offset the increase in the yield on interest-earning assets.  Our net interest margin decreased slightly to 3.43% for the six months ended June 30, 2016, compared to 3.44% for the same period in 2015. 

Net Income for the Three Months Ended June 30, 2016

Net income increased $231,000, or 2.1%, for the three months ended June 30, 2016, to $11.4 million when compared to the same period in 2015.  The increase was primarily the result of an increase in interest income of $3.3 million and a decrease of $2.6 million in noninterest expense, which were partially offset by a $3.5 million increase to provision for loan losses, a $1.9 million increase to interest expense, and a $0.8 million increase to income tax expense. 

Noninterest expense decreased $2.6 million, or 9.2%, for the three months ended June 30, 2016, compared to the same period in 2015, primarily due to decreases in salaries and employee benefits expense, software and data processing expense, and other noninterest expense which were partially offset by an increase in professional fees. 

Net Income for the Six Months Ended June 30, 2016

Net income increased $4.4 million, or 21.3%, for the six months ended June 30, 2016, to $24.9 million when compared to the same period in 2015.  The increase was primarily the result of an increase in interest income of $7.7 million and a decrease of $2.7 million in noninterest expense combined with a $1.2 million increase to noninterest income which were partially offset by a $3.4 million increase to interest expense, a $2.0 million increase to provision for loan losses and a $1.9 million increase in income tax expense. 

Noninterest expense decreased $2.7 million, or 4.6%, for the six months ended June 30, 2016, compared to the same period in 2015, primarily due to decreases in salaries and employee benefits expense, software and data processing expense, and other noninterest expense which were partially offset by an increase in professional fees.

Conference Call

Southside's management team will host a conference call to discuss its second quarter 2016 financial results on Friday, July 29, 2016 at 9:00 am CDT.  The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 47285374 or by identifying "Southside Bancshares, Inc., Second Quarter 2016 Earnings Call."  To listen to the call via web-cast, register at www.southside.com/about/investor-relations

For those unable to listen to the conference call live, a recording of the conference call will be available from approximately 3:00 pm CDT July 29, 2016 through August 10, 2016 by accessing the company website, www.southside.com/about/investor-relations

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: tax-equivalent net interest income, tax-equivalent net interest margin, tax-equivalent net interest spread, and tax-equivalent efficiency ratio, which include the effects of taxable-equivalent adjustments using a federal income tax rate of 35% to increase tax-exempt interest income to a tax-equivalent basis.  Tax-equivalent adjustments are reported in Notes 2 and 3 to the Average Balances with Average Yields and Rates tables under Results of Operations below.

Tax-equivalent net interest income, net interest margin and net interest spread.  Net interest income on a tax-equivalent basis is a non-GAAP measure that adjusts for the tax-favored status of net interest income from loans and investments.  We believe this measure to be the preferred industry measurement of net interest income and 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 on a tax-equivalent basis is net interest income on a tax-equivalent basis divided by average interest-earning assets on a tax-equivalent basis.  The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin.  Net interest spread on a tax-equivalent basis is the difference in the average yield on average interest-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.

Tax-equivalent efficiency ratio.  The efficiency ratio on a tax-equivalent basis 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 of intangibles and certain non-recurring expense by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains (losses) on sales of investment securities and certain non-recurring impairments.

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.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $5.0 billion in assets that owns 100% of Southside Bank.  Southside Bank currently has 60 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/about/investor-relations. 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 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," "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 and estimates about the Company's 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 and revenue growth, the Company's ability to sell nonperforming assets, expense reductions, the benefits of the Share Repurchase Plan, planned operational efficiencies, earnings and certain market risk disclosures, including the impact of interest rates 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.

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, 2015 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.

  
 SOUTHSIDE BANCSHARES, INC.
 CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
 (In thousands, except per share data)
          
 As of
 2016 2015
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
ASSETS         
Cash and due from banks$45,663  $52,324  $54,288  $52,311  $50,406 
Interest earning deposits18,450  16,130  26,687  19,583  26,623 
Securities available for sale, at estimated fair value1,416,335  1,332,381  1,460,492  1,374,995  1,465,821 
Securities held to maturity, at carrying value784,925  784,579  784,296  771,914  743,881 
Federal Home Loan Bank stock, at cost47,702  47,550  51,047  43,446  37,769 
Loans held for sale5,883  4,971  3,811  4,883  7,431 
Loans2,384,321  2,443,231  2,431,753  2,239,146  2,179,863 
Less: Allowance for loan losses(14,908) (21,799) (19,736) (18,402) (16,822)
Net loans2,369,413  2,421,432  2,412,017  2,220,744  2,163,041 
Premises & equipment, net107,242  107,556  107,929  109,087  110,493 
Goodwill91,520  91,520  91,520  91,520  90,571 
Other intangible assets, net5,534  6,029  6,548  7,090  7,654 
Bank owned life insurance96,375  95,718  95,080  94,303  93,673 
Other assets45,963  58,822  68,361  47,599  58,655 
Total assets$5,035,005  $5,019,012  $5,162,076  $4,837,475  $4,856,018 
          
LIABILITIES AND SHAREHOLDERS' EQUITY         
Noninterest bearing deposits$679,831  $698,695  $672,470  $681,618  $715,966 
Interest bearing deposits2,890,418  2,920,673  2,782,937  2,646,259  2,752,717 
Total deposits3,570,249  3,619,368  3,455,407  3,327,877  3,468,683 
Short-term obligations385,717  259,646  647,836  445,008  284,783 
Long-term obligations559,148  622,301  562,592  558,867  632,565 
Other liabilities47,591  60,121  52,179  58,575  38,313 
Total liabilities4,562,705  4,561,436  4,718,014  4,390,327  4,424,344 
Shareholders' equity472,300  457,576  444,062  447,148  431,674 
Total liabilities and shareholders' equity$5,035,005  $5,019,012  $5,162,076  $4,837,475  $4,856,018 


 At or For the Three Months Ended
 2016 2015
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
Income Statement:         
Total interest income$41,089  $43,012  $39,964  $38,211  $37,750 
Total interest expense6,710  6,395  5,267  4,926  4,845 
Net interest income34,379  36,617  34,697  33,285  32,905 
Provision for loan losses3,768  2,316  1,951  2,276  268 
Net interest income after provision for loan losses30,611  34,301  32,746  31,009  32,637 
Noninterest income         
Deposit services5,099  5,085  4,990  5,213  4,920 
Net gain on sale of securities available for sale728  2,441  204  875  105 
Gain on sale of loans873  643  578  305  822 
Trust income869  855  871  835  820 
Bank owned life insurance income647  674  640  661  653 
Brokerage services535  575  555  540  472 
Other619  1,323  977  932  1,139 
Total noninterest income9,370  11,596  8,815  9,361  8,931 
Noninterest expense         
Salaries and employee benefits14,849  17,732  16,420  15,733  16,869 
Occupancy expense2,993  3,335  3,263  3,316  3,105 
Advertising, travel & entertainment722  685  726  642  683 
ATM and debit card expense736  712  1,086  617  750 
Professional fees1,478  1,338  1,517  825  793 
Software and data processing expense739  749  771  819  1,237 
Telephone and communications468  484  372  534  603 
FDIC insurance645  638  619  624  629 
FHLB prepayment fees148         
Other3,036  3,735  3,657  3,527  3,768 
Total noninterest expense25,814  29,408  28,431  26,637  28,437 
Income before income tax expense14,167  16,489  13,130  13,733  13,131 
Income tax expense2,772  2,973  1,438  1,971  1,967 
Net income$11,395  $13,516  $11,692  $11,762  $11,164 


Common share data:   
Weighted-average basic shares outstanding26,230  26,449  26,653  26,632  26,608 
Weighted-average diluted shares outstanding26,349  26,519  26,745  26,721  26,701 
Shares outstanding end of period26,251  26,222  26,670  26,645  26,623 
Net income per common share         
Basic$0.43  $0.51  $0.44  $0.44  $0.42 
Diluted0.43  0.51  0.44  0.44  0.42 
Book value per common share17.99  17.46  16.66  16.78  16.22 
Cash dividend paid per common share0.24  0.23  0.31  0.23  0.23 


Selected Performance Ratios:         
Return on average assets0.90% 1.07% 0.92% 0.96% 0.93%
Return on average shareholders' equity9.91  11.96  10.35  10.65  10.30 
Average yield on interest earning assets3.93  4.06  3.80  3.79  3.83 
Average rate on interest bearing liabilities0.69  0.66  0.54  0.53  0.53 
Net interest spread3.24  3.40  3.26  3.26  3.30 
Net interest margin3.35  3.51  3.35  3.35  3.39 
Average interest earnings assets to average interest bearing liabilities120.21  119.62  120.29  121.61  120.22 
Noninterest expense to average total assets2.05  2.33  2.25  2.18  2.38 
Efficiency ratio52.85  57.47  58.45  56.59  60.43 


 

 At or For the
Six Months Ended
 June 30,
  2016   2015 
Income Statement:   
Total interest income$84,101  $76,357 
Total interest expense13,105  9,661 
Net interest income70,996  66,696 
Provision for loan losses6,084  4,116 
Net interest income after provision for loan losses64,912  62,580 
Noninterest income   
Deposit services10,184  9,909 
Net gain on sale of securities available for sale3,169  2,581 
Gain on sale of loans1,516  1,199 
Trust income1,724  1,713 
Bank owned life insurance income1,321  1,322 
Brokerage services1,110  1,111 
Other1,942  1,884 
Total noninterest income20,966  19,719 
Noninterest expense   
Salaries and employee benefits32,581  35,068 
Occupancy expense6,328  6,304 
Advertising, travel & entertainment1,407  1,340 
ATM and debit card expense1,448  1,429 
Professional fees2,816  1,535 
Software and data processing expense1,488  2,268 
Telephone and communications952  1,072 
FDIC insurance1,283  1,267 
FHLB prepayment fees148   
Other6,771  7,603 
Total noninterest expense55,222  57,886 
Income before income tax expense30,656  24,413 
Income tax expense5,745  3,870 
Net income$24,911  $20,543 
   
Common share data:  
Weighted-average basic shares outstanding26,340  26,600 
Weighted-average diluted shares outstanding26,434  26,689 
Net income per common share   
Basic$0.94  $0.77 
Diluted0.94  0.77 
Book value per common share17.99  16.22 
Cash dividend paid per common share0.47  0.46 
  
Selected Performance Ratios:   
Return on average assets 0.99%  0.86%
Return on average shareholders' equity 10.93   9.55 
Average yield on interest earning assets 4.00   3.89 
Average yield on interest bearing liabilities 0.68   0.53 
Net interest spread 3.32   3.36 
Net interest margin 3.43   3.44 
Average interest earnings assets to average interest bearing liabilities 119.91   119.28 
Noninterest expense to average total assets 2.19   2.43 
Efficiency ratio 55.22   61.14 


 Southside Bancshares, Inc.
 Selected Financial Data (Unaudited)
 (In thousands)
          
 Three Months Ended
 2016 2015
 June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
Nonperforming assets$24,510  $34,046  $32,480  $33,621  $27,794 
Nonaccrual loans (1)11,767  21,927  20,526  20,988  21,223 
Accruing loans past due more than 90 days (1)6  7  3    30 
Restructured loans (2)12,477  11,762  11,143  11,772  5,667 
Other real estate owned237  265  744  793  787 
Repossessed assets23  85  64  68  87 
          
Asset Quality Ratios:         
Nonaccruing loans to total loans0.49% 0.90% 0.84% 0.94% 0.97%
Allowance for loan losses to nonaccruing loans126.69  99.42  96.15  87.68  79.26 
Allowance for loan losses to nonperforming assets60.82  64.03  60.76  54.73  60.52 
Allowance for loan losses to total loans0.63  0.89  0.81  0.82  0.77 
Nonperforming assets to total assets0.49  0.68  0.63  0.70  0.57 
Net charge-offs to average loans1.77  0.04  0.11  0.13  0.07 
          
Capital Ratios:         
Shareholders' equity to total assets9.38  9.12  8.60  9.24  8.89 
Average shareholders' equity to average total assets9.11  8.94  8.92  9.03  9.07 
 
(1) Excludes purchased credit impaired ("PCI") loans measured at fair value at acquisition.
(2) Includes $8.3 million, $7.4 million, $7.5 million, and $6.8 million in PCI loans restructured as of June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, respectively. 
 

Loan Portfolio Composition

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

Real Estate Loans:         
Construction$425,595  $464,750  $438,247  $342,282  $295,633 
1-4 Family Residential633,400  644,826  655,410  678,431  683,944 
Commercial694,272  657,962  635,210  537,161  500,906 
Commercial Loans197,896  233,857  242,527  228,272  228,789 
Municipal Loans292,909  286,217  288,115  262,384  256,492 
Loans to Individuals140,249  155,619  172,244  190,616  214,099 
Total Loans$2,384,321  $2,443,231  $2,431,753  $2,239,146  $2,179,863 
                    

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 rate of the interest bearing liabilities.

 AVERAGE BALANCES WITH AVERAGE YIELDS AND RATES
     (dollars in thousands)    
     (unaudited)    
     Three Months Ended    
 June 30, 2016 March 31, 2016
     AVG     AVG
 AVG   YIELD/ AVG   YIELD/
 BALANCE INTEREST RATE BALANCE INTEREST RATE
ASSETS           
INTEREST EARNING ASSETS:           
Loans (1)(2)$2,426,733  $27,275  4.52% $2,434,837  $28,793  4.76%
Loans Held For Sale4,984  40  3.23% 3,581  32  3.59%
Securities:           
Investment Securities (Taxable) (4)22,010  107  1.96% 41,659  214  2.07%
Investment Securities (Tax-Exempt)(3)(4)657,568  8,636  5.28% 635,766  8,494  5.37%
Mortgage-backed Securities (4)1,450,868  9,366  2.60% 1,454,343  9,391  2.60%
Total Securities2,130,446  18,109  3.42% 2,131,768  18,099  3.41%
FHLB stock and other investments, at cost52,952  185  1.41% 55,116  217  1.58%
Interest Earning Deposits57,493  61  0.43% 51,246  70  0.55%
Total Interest Earning Assets4,672,608  45,670  3.93% 4,676,548  47,211  4.06%
NONINTEREST EARNING ASSETS:           
Cash and Due From Banks47,079      55,732     
Bank Premises and Equipment107,842      107,941     
Other Assets270,219      262,160     
Less: Allowance for Loan Losses(22,377)     (20,088)    
Total Assets$5,075,371      $5,082,293     
LIABILITIES AND SHAREHOLDERS' EQUITY           
INTEREST BEARING LIABILITIES:           
Savings Deposits$244,639  68  0.11% $235,492  65  0.11%
Time Deposits976,600  1,927  0.79% 915,316  1,723  0.76%
Interest Bearing Demand Deposits1,727,431  1,520  0.35% 1,717,717  1,468  0.34%
Total Interest Bearing Deposits2,948,670  3,515  0.48% 2,868,525  3,256  0.46%
Short-term Interest Bearing Liabilities385,858  906  0.94% 413,985  696  0.68%
Long-term Interest Bearing Liabilities – FHLB Dallas492,296  1,874  1.53% 566,825  2,039  1.45%
Long-term Debt (5)60,311  415  2.77% 60,311  404  2.69%
Total Interest Bearing Liabilities3,887,135  6,710  0.69% 3,909,646  6,395  0.66%
NONINTEREST BEARING LIABILITIES:           
Demand Deposits682,360      672,865     
Other Liabilities43,360      45,390     
Total Liabilities4,612,855      4,627,901     
SHAREHOLDERS' EQUITY462,516      454,392     
Total Liabilities and Shareholders' Equity$5,075,371      $5,082,293     
NET INTEREST INCOME  $38,960      $40,816   
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS    3.35%     3.51%
NET INTEREST SPREAD    3.24%     3.40%


(1) Interest on loans includes net fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $1,082 and $1,060 for the three months ended June 30, 2016 and March 31, 2016, respectively.
(3) Interest income includes taxable-equivalent adjustments of $3,499 and $3,139 for the three months ended June 30, 2016 and March 31, 2016, 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, 2016 and March 31, 2016, loans on nonaccrual status totaled $11,767 and $21,927, 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.


     Three Months Ended    
 December 31, 2015 September 30, 2015
     AVG     AVG
 AVG   YIELD/ AVG   YIELD/
 BALANCE INTEREST RATE BALANCE INTEREST RATE
ASSETS           
INTEREST EARNING ASSETS:           
Loans (1)(2)$2,318,162  $25,865  4.43% $2,200,241  $24,779  4.47%
Loans Held For Sale2,740  30  4.34% 5,327  52  3.87%
Securities:           
Investment Securities (Taxable) (4)81,344  416  2.03% 86,105  475  2.19%
Investment Securities (Tax-Exempt)(3)(4)637,993  8,645  5.38% 638,767  8,750  5.43%
Mortgage-backed Securities (4)1,493,020  9,215  2.45% 1,441,129  8,318  2.29%
Total Securities2,212,357  18,276  3.28% 2,166,001  17,543  3.21%
FHLB stock and other investments, at cost53,643  75  0.55% 45,963  65  0.56%
Interest Earning Deposits34,147  23  0.27% 26,216  15  0.23%
Total Interest Earning Assets4,621,049  44,269  3.80% 4,443,748  42,454  3.79%
NONINTEREST EARNING ASSETS:           
Cash and Due From Banks53,267      49,285     
Bank Premises and Equipment108,812      110,028     
Other Assets258,917      263,038     
Less: Allowance for Loan Losses(18,720)     (17,021)    
Total Assets$5,023,325      $4,849,078     
LIABILITIES AND SHAREHOLDERS' EQUITY           
INTEREST BEARING LIABILITIES:           
Savings Deposits$232,561  61  0.10% $232,903  60  0.10%
Time Deposits833,141  1,477  0.70% 833,962  1,360  0.65%
Interest Bearing Demand Deposits1,594,109  1,117  0.28% 1,600,454  1,065  0.26%
Total Interest Bearing Deposits2,659,811  2,655  0.40% 2,667,319  2,485  0.37%
Short-term Interest Bearing Liabilities630,998  600  0.38% 398,905  354  0.35%
Long-term Interest Bearing Liabilities – FHLB Dallas490,396  1,638  1.33% 527,591  1,720  1.29%
Long-term Debt (5)60,311  374  2.46% 60,311  367  2.41%
Total Interest Bearing Liabilities3,841,516  5,267  0.54% 3,654,126  4,926  0.53%
NONINTEREST BEARING LIABILITIES:           
Demand Deposits686,574      715,326     
Other Liabilities47,155      41,606     
Total Liabilities4,575,245      4,411,058     
SHAREHOLDERS' EQUITY448,080      438,020     
Total Liabilities and Shareholders' Equity$5,023,325      $4,849,078     
NET INTEREST INCOME  $39,002      $37,528   
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS    3.35%     3.35%
NET INTEREST SPREAD    3.26%     3.26%
            


(1) Interest on loans includes net fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $1,068 and $1,044 for the three months ended December 31, 2015 and September 30, 2015, respectively.
(3) Interest income includes taxable-equivalent adjustments of $3,237 and $3,199 for the three months ended December 31, 2015 and September 30, 2015, 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 December 31, 2015 and September 30, 2015, loans on nonaccrual status totaled $20,526 and $20,988, 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.


 Three Months Ended
 June 30, 2015
     AVG
 AVG   YIELD/
 BALANCE INTEREST RATE
ASSETS     
INTEREST EARNING ASSETS:     
Loans (1)(2)$2,188,886  $24,889  4.56%
Loans Held For Sale3,675  45  4.91%
Securities:     
Investment Securities (Taxable) (4)86,561  459  2.13%
Investment Securities (Tax-Exempt)(3)(4)627,405  8,752  5.60%
Mortgage-backed Securities (4)1,400,389  7,666  2.20%
Total Securities2,114,355  16,877  3.20%
FHLB stock and other investments, at cost42,741  65  0.61%
Interest Earning Deposits39,609  29  0.29%
Total Interest Earning Assets4,389,266  41,905  3.83%
NONINTEREST EARNING ASSETS:     
Cash and Due From Banks49,760     
Bank Premises and Equipment111,384     
Other Assets259,319     
Less: Allowance for Loan Losses(17,059)    
Total Assets$4,792,670     
LIABILITIES AND SHAREHOLDERS' EQUITY     
INTEREST BEARING LIABILITIES:     
Savings Deposits$234,097  59  0.10%
Time Deposits853,410  1,313  0.62%
Interest Bearing Demand Deposits1,701,559  1,121  0.26%
Total Interest Bearing Deposits2,789,066  2,493  0.36%
Short-term Interest Bearing Liabilities232,471  154  0.27%
Long-term Interest Bearing Liabilities – FHLB Dallas569,302  1,837  1.29%
Long-term Debt (5)60,311  361  2.40%
Total Interest Bearing Liabilities3,651,150  4,845  0.53%
NONINTEREST BEARING LIABILITIES:     
Demand Deposits669,068     
Other Liabilities37,607     
Total Liabilities4,357,825     
SHAREHOLDERS' EQUITY434,845     
Total Liabilities and Shareholders' Equity$4,792,670     
NET INTEREST INCOME  $37,060   
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS    3.39%
NET INTEREST SPREAD    3.30%


(1) Interest on loans includes net fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustment of $1,047 for the three months ended June 30, 2015.
(3) Interest income includes taxable-equivalent adjustment of $3,108 for the three months ended June 30, 2015.
(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, loans on nonaccrual status totaled $21,223.  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 WITH AVERAGE YIELDS AND RATES
     (dollars in thousands)    
     (unaudited)    
     Six Months Ended    
 June 30, 2016 June 30, 2015
     AVG     AVG
 AVG   YIELD/ AVG   YIELD/
 BALANCE INTEREST RATE BALANCE INTEREST RATE
ASSETS           
INTEREST EARNING ASSETS:           
Loans (1) (2)$2,430,783  $56,068  4.64% $2,189,023  $49,827  4.59%
Loans Held For Sale4,283  72  3.38% 2,835  73  5.19%
Securities:           
Investment Securities (Taxable)(4)31,835  321  2.03% 68,102  696  2.06%
Investment Securities (Tax-Exempt)(3)(4)646,667  17,130  5.33% 636,269  17,586  5.57%
Mortgage-backed Securities (4)1,452,605  18,757  2.60% 1,396,519  16,128  2.33%
Total Securities2,131,107  36,208  3.42% 2,100,890  34,410  3.30%
FHLB stock and other investments, at cost54,034  402  1.50% 43,311  158  0.74%
Interest Earning Deposits54,255  131  0.49% 49,040  63  0.26%
Total Interest Earning Assets4,674,462  92,881  4.00% 4,385,099  84,531  3.89%
NONINTEREST EARNING ASSETS:           
Cash and Due From Banks51,406      53,542     
Bank Premises and Equipment107,891      112,006     
Other Assets266,186      270,806     
Less: Allowance for Loan Losses(21,233)     (15,351)    
Total Assets$5,078,712      $4,806,102     
LIABILITIES AND SHAREHOLDERS' EQUITY           
INTEREST BEARING LIABILITIES:           
Savings Deposits$240,066  133  0.11% $232,033  112  0.10%
Time Deposits945,958  3,650  0.78% 858,416  2,675  0.63%
Interest Bearing Demand Deposits1,722,573  2,988  0.35% 1,700,399  2,235  0.27%
Total Interest Bearing Deposits2,908,597  6,771  0.47% 2,790,848  5,022  0.36%
Short-term Interest Bearing Liabilities399,922  1,602  0.81% 252,276  296  0.24%
Long-term Interest Bearing Liabilities – FHLB Dallas529,561  3,913  1.49% 572,731  3,629  1.28%
Long-term Debt (5)60,311  819  2.73% 60,311  714  2.39%
Total Interest Bearing Liabilities3,898,391  13,105  0.68% 3,676,166  9,661  0.53%
NONINTEREST BEARING LIABILITIES:           
Demand Deposits677,612      657,386     
Other Liabilities44,247      38,827     
Total Liabilities4,620,250      4,372,379     
SHAREHOLDERS' EQUITY458,462      433,723     
Total Liabilities and Shareholders' Equity$5,078,712      $4,806,102     
NET INTEREST INCOME  $79,776      $74,870   
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS    3.43%     3.44%
NET INTEREST SPREAD    3.32%     3.36%


(1) Interest on loans includes net fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $2,142 and $2,097 for the six months ended June 30, 2016 and 2015, respectively.
(3) Interest income includes taxable-equivalent adjustments of $6,638 and $6,077 for the six months ended June 30, 2016 and 2015, 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, 2016 and 2015, loans on nonaccrual status totaled $11,767 and $21,223, 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.


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