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

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TYLER, Texas, Oct. 28, 2016 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. ("Southside" or the "Company") (NASDAQ: SBSI) today reported its financial results for the three and nine months ended September 30, 2016.

Southside reported net income of $12.9 million for the three months ended September 30, 2016, an increase of $1.1 million, or 9.4%, compared to $11.8 million for the same period in 2015. Net income for the nine months ended September 30, 2016 increased $5.5 million, or 16.9%, to $37.8 million when compared to $32.3 million for the same period in 2015.

Diluted earnings per common share were $0.49 and $0.44 for the three months ended September 30, 2016 and 2015, respectively, an increase of $0.05, or 11.4%. For the nine months ended September 30, 2016, diluted earnings per common share increased $0.22, or 18.2%, to $1.43 when compared to $1.21 for the same period in 2015.

The return on average shareholders' equity for the nine months ended September 30, 2016 was 10.87%, compared to 9.93% for the same period in 2015. The return on average assets was 0.98% for the nine months ended September 30, 2016, compared to 0.90% for the same period in 2015.

"We are pleased to report that during the third quarter our net income increased 9.4% compared to the same period in 2015," stated Sam Dawson, Chief Executive Officer of Southside Bancshares, Inc. "Loans increased $99.3 million, or 4.2%, on a linked quarter basis and we sold a significant portion of nonperforming assets. We incurred approximately $400,000 of net expense during the quarter associated with the sale of the nonperforming assets. Our nonperforming assets to total assets ratio has declined to 0.29%. Loan commitments made during 2016 began to fund at a greater pace during the third quarter, which we anticipate continuing through the fourth quarter. We believe that we continue to have an opportunity to book a number of quality loans and that our pipeline remains solid. During the third quarter, we prepaid a lease at approximately 59% of the remaining lease payments on a Fort Worth operations facility that was recently vacated. The cost of prepaying this lease, combined with writing off the leasehold improvements, was $1.8 million. We anticipate that the savings going forward will be approximately $45,000 a month."

"The decrease in the net interest margin during the third quarter on a linked quarter basis was primarily reflective of a decrease in the average yield on loans and securities. Average loan yields decreased primarily as a result of a decrease in purchase accretion of $487,000 compared to the second quarter. Average security yields decreased due to overall lower interest rates which was slightly offset by an increase in average total securities during the third quarter."

"In September 2016, we issued $100.0 million of 5.50% Fixed-to-Floating Rate Subordinated Notes due 2026. This debt initially bears interest at a fixed rate of 5.50% through September 29, 2021 and thereafter, adjusts quarterly at a floating rate equal to three-month LIBOR plus 429.7 basis points. We plan to use the proceeds from the issuance of the notes for general corporate purposes and to finance the activities of our subsidiaries."

"Our team members continue to execute on our business plan of quality loan growth, revenue generating opportunities, innovative financial services and delivery channels and cost containment."

Loans and Deposits

For the nine months ended September 30, 2016, total loans increased by $51.9 million, or 2.1%, when compared to December 31, 2015. The net increase in our loans was comprised of increases of $124.6 million of commercial real estate loans, $28.1 million of construction loans, and $5.8 million of municipal loans, which were partially offset by decreases of $51.4 million of commercial loans, $44.6 million of loans to individuals, and $10.7 million of 1-4 family residential loans. Loans with oil and gas industry exposure totaled 1.13% of the loan portfolio at September 30, 2016.

Nonperforming assets decreased during the nine months ended September 30, 2016 by $16.5 million, or 50.7%, to $16.0 million, or 0.29% of total assets, when compared to 0.63% at December 31, 2015.

During the nine months ended September 30, 2016, the allowance for loan losses decreased $3.7 million, or 19.0%, to $16.0 million, or 0.64% 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.

During the nine months ended September 30, 2016, deposits, net of brokered deposits, increased $151.1 million, or 4.5%, compared
to December 31, 2015. During this nine-month period, public fund deposits increased $67.6 million.

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

Net interest income increased $0.6 million, or 1.9%, to $33.9 million for the three months ended September 30, 2016, when compared to $33.3 million for the same period in 2015. The increase in net interest income was the result of the increase in interest income of $2.9 million, which was primarily a result of the increase in the loan and securities portfolio, compared to the same period in 2015. The increase in interest income was partially offset by an increase in interest expense of $2.3 million. For the three months ended September 30, 2016, our net interest spread decreased to 3.06%, compared to 3.25% for the same period in 2015, due to higher rates paid on interest-bearing liabilities along with a slight decrease in the yield on interest-earning assets. Our net interest margin decreased to 3.19% for the three months ended September 30, 2016, compared to 3.35% for the same period in 2015. The net interest spread and margin on a linked quarter basis decreased from 3.24% and 3.35%, respectively.

Net Interest Income for the Nine Months Ended September 30, 2016

Net interest income increased $4.9 million, or 4.9%, to $104.9 million for the nine months ended September 30, 2016, when compared to $100.0 million for the same period in 2015. The increase in net interest income was due to the increase in interest income of $10.7 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 $5.7 million. For the nine months ended September 30, 2016, our net interest spread decreased to 3.23%, compared to 3.32% 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 nine months ended September 30, 2016, compared to 3.41% for the same period in 2015.

Net Income for the Three Months Ended September 30, 2016

Net income increased $1.1 million, or 9.4%, for the three months ended September 30, 2016, to $12.9 million when compared to the same period in 2015. The increase was primarily the result of a $2.9 million increase in interest income, a $2.4 million increase in noninterest income and a $0.6 million decrease in provision for loan losses, partially offset by a $2.3 million increase in interest expense, a $1.8 million increase in noninterest expense, and a $0.8 million increase in income tax expense.

Noninterest income increased $2.4 million, or 25.3%, for the three months ended September 30, 2016 compared to the same period in 2015, primarily due to increases in net gain on sale of securities available for sale and gain on sale of loans.

Noninterest expense increased $1.8 million, or 6.7%, for the three months ended September 30, 2016, compared to the same period in 2015, primarily due to increases in occupancy expense, professional fees, and other noninterest expense partially offset by decreases in salaries and employee benefits, advertising, travel and entertainment, and telephone and communication expense.

Net Income for the Nine Months Ended September 30, 2016

Net income increased $5.5 million, or 16.9%, for the nine months ended September 30, 2016, to $37.8 million when compared to the same period in 2015. The increase was primarily the result of a $10.7 million increase in interest income, a $3.6 million increase in noninterest income and a $0.9 million decrease in noninterest expense, partially offset by a $5.7 million increase in interest expense, a $2.6 million increase in income tax expense and a $1.3 million increase in provision for loan losses.

Noninterest income increased $3.6 million, or 12.4%, for the nine months ended September 30, 2016 compared to the same period in 2015, primarily due to increases in net gain on sale of securities available for sale and gain on sale of loans.

Noninterest expense decreased $0.9 million, or 1.0%, for the nine months ended September 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 telephone and communication expense, partially offset by increases in professional fees, occupancy expense, and ATM and debit card expense.

Conference Call

Southside's management team will host a conference call to discuss its third quarter 2016 financial results on Friday, October 28, 2016 at 9:00 am CDT. The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 95800526 or by identifying "Southside Bancshares, Inc., Third 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 October 28, 2016 through November 9, 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. 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. 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 $5.5 billion in assets as of September 30, 2016, that owns 100% of Southside Bank. Southside Bank currently has 61 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)
  
ASSETS  As of  
  2016   2015 
Sept. 30,June 30,Mar. 31,Dec. 31,Sept. 30,
     
Cash and due from banks$  54,255 $  45,663 $  52,324 $  54,288 $  52,311 
Interest earning deposits 144,833  18,450  16,130  26,687  19,583 
Securities available for sale, at estimated fair value 1,622,128  1,416,335  1,332,381  1,460,492  1,374,995 
Securities held to maturity, at carrying value 775,682  784,925  784,579  784,296  771,914 
Federal Home Loan Bank stock, at cost 51,901  47,702  47,550  51,047  43,446 
Loans held for sale 5,301  5,883  4,971  3,811  4,883 
Loans 2,483,641  2,384,321  2,443,231  2,431,753  2,239,146 
Less: Allowance for loan losses (15,993) (14,908) (21,799) (19,736) (18,402)
Net loans 2,467,648  2,369,413  2,421,432  2,412,017  2,220,744 
Premises & equipment, net 106,777  107,242  107,556  107,929  109,087 
Goodwill 91,520  91,520  91,520  91,520  91,520 
Other intangible assets, net 5,060  5,534  6,029  6,548  7,090 
Bank owned life insurance 97,002  96,375  95,718  95,080  94,303 
Other assets 42,796  45,886  58,743  68,281  47,518 
Total assets$5,464,903 $5,034,928 $5,018,933 $5,161,996 $4,837,394 


LIABILITIES AND SHAREHOLDERS' EQUITY     
Noninterest bearing deposits$  747,270 $  679,831 $  698,695 $  672,470 $  681,618 
Interest bearing deposits 2,834,117  2,890,418  2,920,673  2,782,937  2,646,259 
Total deposits 3,581,387  3,570,249  3,619,368  3,455,407  3,327,877 
Short-term obligations 720,634  385,717  259,646  647,836  445,008 
Long-term obligations 621,640  559,071  622,222  562,512  558,786 
Other liabilities 68,682  47,591  60,121  52,179  58,575 
Total liabilities 4,992,343  4,562,628  4,561,357  4,717,934  4,390,246 
Shareholders' equity 472,560  472,300  457,576  444,062  447,148 
Total liabilities and shareholders' equity$5,464,903 $5,034,928 $5,018,933 $5,161,996 $4,837,394 


Income Statement: At or For the Three Months Ended 
  2016   2015 
Sept. 30,June 30,Mar. 31,Dec. 31,Sept. 30,
     
Total interest income$  41,132 $  41,089 $  43,012 $  39,964 $  38,211 
Total interest expense 7,202  6,711  6,396  5,268  4,928 
Net interest income 33,930  34,378  36,616  34,696  33,283 
Provision for loan losses 1,631  3,768  2,316  1,951  2,276 
Net interest income after provision for loan losses 32,299  30,610  34,300  32,745  31,007 
Noninterest income     
Deposit services 5,335  5,099  5,085  4,990  5,213 
Net gain on sale of securities available for sale 2,343  728  2,441  204  875 
Gain on sale of loans 818  873  643  578  305 
Trust income 867  869  855  871  835 
Bank owned life insurance income 656  647  674  640  661 
Brokerage services 551  535  575  555  540 
Other 1,162  619  1,323  977  932 
Total noninterest income 11,732  9,370  11,596  8,815  9,361 
Noninterest expense     
Salaries and employee benefits 15,203  14,849  17,732  16,420  15,733 
Occupancy expense 4,569  2,993  3,335  3,263  3,316 
Advertising, travel & entertainment 588  722  685  726  642 
ATM and debit card expense 868  736  712  1,086  617 
Professional fees 1,148  1,478  1,338  1,517  825 
Software and data processing expense 736  739  749  771  819 
Telephone and communications 407  468  484  372  534 
FDIC insurance 643  645  638  619  624 
FHLB prepayment fees   148       
Other 4,263  3,035  3,734  3,656  3,525 
Total noninterest expense 28,425  25,813  29,407  28,430  26,635 
Income before income tax expense 15,606  14,167  16,489  13,130  13,733 
Income tax expense 2,741  2,772  2,973  1,438  1,971 
Net income$  12,865 $  11,395 $  13,516 $  11,692 $  11,762 
Common share data:     
Weighted-average basic shares outstanding 26,262  26,230  26,449  26,653  26,632 
Weighted-average diluted shares outstanding 26,415  26,349  26,519  26,745  26,721 
Shares outstanding end of period 26,278  26,251  26,222  26,670  26,645 
Net income per common share     
Basic$  0.49 $  0.43 $  0.51 $  0.44 $  0.44 
Diluted 0.49  0.43  0.51  0.44  0.44 
Book value per common share 17.98  17.99  17.46  16.66  16.78 
Cash dividend paid per common share
 0.24  0.24  0.23  0.31  0.23 
Selected Performance Ratios:               
Return on average assets 0.98% 0.90% 1.07% 0.92% 0.96%
Return on average shareholders' equity 10.78  9.91  11.96  10.35  10.65 
Average yield on interest earning assets 3.78  3.93  4.06  3.80  3.79 
Average rate on interest bearing liabilities 0.72  0.69  0.66  0.54  0.54 
Net interest spread 3.06  3.24  3.40  3.26  3.25 
Net interest margin 3.19  3.35  3.51  3.35  3.35 
Average interest earnings assets to average interest bearing liabilities 120.40  120.21  119.62  120.29  121.61 
Noninterest expense to average total assets 2.17  2.05  2.33  2.25  2.18 
Efficiency ratio 53.88  52.85  57.47  58.45  56.60 


Income Statement:At or For the
Nine Months Ended
September 30,
 2016  2015 
  
Total interest income$  125,233 $  114,568 
Total interest expense 20,309  14,591 
Net interest income 104,924  99,977 
Provision for loan losses 7,715  6,392 
Net interest income after provision for loan losses 97,209  93,585 
Noninterest income  
Deposit services 15,519  15,122 
Net gain on sale of securities available for sale 5,512  3,456 
Gain on sale of loans 2,334  1,504 
Trust income 2,591  2,548 
Bank owned life insurance income 1,977  1,983 
Brokerage services 1,661  1,651 
Other 3,104  2,816 
Total noninterest income 32,698  29,080 
Noninterest expense  
Salaries and employee benefits 47,784  50,801 
Occupancy expense 10,897  9,620 
Advertising, travel & entertainment 1,995  1,982 
ATM and debit card expense 2,316  2,046 
Professional fees 3,964  2,360 
Software and data processing expense 2,224  3,087 
Telephone and communications 1,359  1,606 
FDIC insurance 1,926  1,891 
FHLB prepayment fees 148   
Other 11,032  11,126 
Total noninterest expense 83,645  84,519 
Income before income tax expense 46,262  38,146 
Income tax expense 8,486  5,841 
Net income$  37,776 $  32,305 
   
Common share data:  
Weighted-average basic shares outstanding 26,314  26,611 
Weighted-average diluted shares outstanding 26,425  26,700 
Net income per common share  
Basic$  1.43 $  1.21 
Diluted 1.43  1.21 
Book value per common share 17.98  16.78 
Cash dividend paid per common share 0.71  0.69 
       
Selected Performance Ratios:  
Return on average assets 0.98% 0.90%
Return on average shareholders' equity 10.87  9.93 
Average yield on interest earning assets 3.92  3.85 
Average yield on interest bearing liabilities 0.69  0.53 
Net interest spread 3.23  3.32 
Net interest margin 3.35  3.41 
Average interest earnings assets to average interest bearing liabilities 120.08  120.07 
Noninterest expense to average total assets 2.18  2.34 
Efficiency ratio 54.78  59.63 



 Southside Bancshares, Inc.
Selected Financial Data (Unaudited)
(In thousands)

Three Months Ended
   2016   2015 
Sept. 30,June 30,Mar. 31,Dec. 31,Sept. 30,
Nonperforming assets$  16,008 $  24,510 $  34,046 $  32,480 $  33,621 
Nonaccrual loans (1) 8,536  11,767  21,927  20,526  20,988 
Accruing loans past due more than 90 days (1) 1  6  7  3   
Restructured loans (2) 7,193  12,477  11,762  11,143  11,772 
Other real estate owned 237  237  265  744  793 
Repossessed assets
 41  23  85  64  68 
Asset Quality Ratios:               
Nonaccruing loans to total loans 0.34% 0.49% 0.90% 0.84% 0.94%
Allowance for loan losses to nonaccruing loans 187.36  126.69  99.42  96.15  87.68 
Allowance for loan losses to nonperforming assets 99.91  60.82  64.03  60.76  54.73 
Allowance for loan losses to total loans 0.64  0.63  0.89  0.81  0.82 
Nonperforming assets to total assets 0.29  0.49  0.68  0.63  0.70 
Net charge-offs to average loans
 0.09  1.77  0.04  0.11  0.13 
Capital Ratios:               
Shareholders' equity to total assets 8.65  9.38  9.12  8.60  9.24 
Average shareholders' equity to average total assets 9.10  9.11  8.94  8.92  9.03 


(1)  Excludes purchased credit impaired ("PCI") loans measured at fair value at acquisition.
(2)  Includes $3.2 million, $8.3 million, $7.4 million, $7.5 million, and $6.8 million in PCI loans restructured as of September 30, 2016,
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$466,323 $425,595 $464,750 $438,247 $342,282 
1-4 Family Residential 644,746  633,400  644,826  655,410  678,431 
Commercial 759,795  694,272  657,962  635,210  537,161 
Commercial Loans 191,154  197,896  233,857  242,527  228,272 
Municipal Loans 293,949  292,909  286,217  288,115  262,384 
Loans to Individuals 127,674  140,249  155,619  172,244  190,616 
Total Loans$2,483,641 $2,384,321 $2,443,231 $2,431,753 $2,239,146 
                

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
 September 30, 2016 June 30, 2016 
 AVG
BALANCE
INTERESTAVG
YIELD/
RATE
AVG
BALANCE
INTERESTAVG
YIELD/
RATE
ASSETS                  
INTEREST EARNING ASSETS:                  
Loans (1) (2)$2,436,349 $  26,750  4.37%$  2,426,733 $  27,275  4.52%
Loans Held For Sale 6,718  54  3.20% 4,984  40  3.23%
Securities:      
Investment Securities (Taxable) (4) 61,238  251  1.63% 22,010  107  1.96%
Investment Securities (Tax-Exempt) (3) (4) 690,635  8,911  5.13% 657,568  8,636  5.28%
Mortgage-backed Securities (4) 1,492,271  9,399  2.51% 1,450,868  9,366  2.60%
Total Securities 2,244,144  18,561  3.29% 2,130,446  18,109  3.42%
FHLB stock and other investments, at cost 54,085  186  1.37% 52,952  185  1.41%
Interest Earning Deposits 57,598  89  0.61% 57,493  61  0.43%
Total Interest Earning Assets 4,798,894  45,640  3.78% 4,672,608  45,670  3.93%
NONINTEREST EARNING ASSETS:      
Cash and Due From Banks 49,418    47,079   
Bank Premises and Equipment 107,318    107,842   
Other Assets 278,599    270,141   
Less: Allowance for Loan Losses (14,989)   (22,377)  
Total Assets$5,219,240   $  5,075,293   
LIABILITIES AND SHAREHOLDERS' EQUITY      
INTEREST BEARING LIABILITIES:      
Savings Deposits$  248,364  71  0.11%$  244,639  68  0.11%
Time Deposits 949,019  2,073  0.87% 976,600  1,927  0.79%
Interest Bearing Demand Deposits 1,634,898  1,460  0.36% 1,727,431  1,520  0.35%
Total Interest Bearing Deposits 2,832,281  3,604  0.51% 2,948,670  3,515  0.48%
Short-term Interest Bearing Liabilities 608,130  1,122  0.73% 385,858  906  0.94%
Long-term Interest Bearing Liabilities – FHLB Dallas 472,470  1,857  1.56% 492,296  1,874  1.53%
Subordinated Notes (5) 12,823  189  5.86%     %
Long-term Debt (6) 60,234  430  2.84% 60,233  416  2.78%
Total Interest Bearing Liabilities 3,985,938  7,202  0.72% 3,887,057  6,711  0.69%
NONINTEREST BEARING LIABILITIES:      
Demand Deposits 702,539    682,360   
Other Liabilities 55,783    43,360   
Total Liabilities 4,744,260    4,612,777   
SHAREHOLDERS' EQUITY 474,980    462,516   
Total Liabilities and Shareholders' Equity$5,219,240   $  5,075,293   
NET INTEREST INCOME $  38,438   $  38,959  
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS   3.19%   3.35%
NET INTEREST SPREAD   3.06%   3.24%


(1) Interest on loans includes net fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $1,064 and $1,082 for the three months ended September 30, 2016 and June 30, 2016, respectively.
(3) Interest income includes taxable-equivalent adjustments of $3,444 and $3,499 for the three months ended September 30, 2016 and June 30, 2016, respectively.
(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.
(5) The unamortized debt issuance costs deducted from the carrying amount of the subordinated notes totaled approximately $220,000 for the three months ended September 30, 2016.
(6) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheets for the three months ended September 30, 2016 and June 30, 2016 reflect a decrease in long-term debt of $77,000 and $78,000, respectively.
 
Note: As of September 30, 2016 and June 30, 2016, loans on nonaccrual status totaled $8,536 and $11,767, 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.


 March 31, 2016Three Months Ended
December 31, 2015
 
 AVG
BALANCE
INTERESTAVG
YIELD/
RATE
AVG
BALANCE
INTERESTAVG
YIELD/
RATE
ASSETS      
INTEREST EARNING ASSETS:                  
Loans (1) (2)$  2,434,837 $  28,793  4.76%$  2,318,162 $  25,865  4.43%
Loans Held For Sale 3,581  32  3.59% 2,740  30  4.34%
Securities:      
Investment Securities (Taxable) (4) 41,659  214  2.07% 81,344  416  2.03%
Investment Securities (Tax-Exempt) (3) (4) 635,766  8,494  5.37% 637,993  8,645  5.38%
Mortgage-backed Securities (4) 1,454,343  9,391  2.60% 1,493,020  9,215  2.45%
Total Securities 2,131,768  18,099  3.41% 2,212,357  18,276  3.28%
FHLB stock and other investments, at cost 55,116  217  1.58% 53,643  75  0.55%
Interest Earning Deposits 51,246  70  0.55% 34,147  23  0.27%
Total Interest Earning Assets 4,676,548  47,211  4.06% 4,621,049  44,269  3.80%
NONINTEREST EARNING ASSETS:      
Cash and Due From Banks 55,732    53,267   
Bank Premises and Equipment 107,941    108,812   
Other Assets 262,081    258,837   
Less: Allowance for Loan Losses (20,088)   (18,720)  
Total Assets$  5,082,214   $  5,023,245   
LIABILITIES AND SHAREHOLDERS' EQUITY      
INTEREST BEARING LIABILITIES:      
Savings Deposits$  235,492  65  0.11%$  232,561  61  0.10%
Time Deposits 915,316  1,723  0.76% 833,141  1,477  0.70%
Interest Bearing Demand Deposits 1,717,717  1,468  0.34% 1,594,109  1,117  0.28%
Total Interest Bearing Deposits 2,868,525  3,256  0.46% 2,659,811  2,655  0.40%
Short-term Interest Bearing Liabilities 413,985  696  0.68% 630,998  600  0.38%
Long-term Interest Bearing Liabilities – FHLB Dallas 566,825  2,039  1.45% 490,396  1,638  1.33%
Long-term Debt (5) 60,232  405  2.70% 60,231  375  2.47%
Total Interest Bearing Liabilities 3,909,567  6,396  0.66% 3,841,436  5,268  0.54%
NONINTEREST BEARING LIABILITIES:      
Demand Deposits 672,865    686,574   
Other Liabilities 45,390    47,155   
Total Liabilities 4,627,822    4,575,165   
SHAREHOLDERS' EQUITY 454,392    448,080   
Total Liabilities and Shareholders' Equity$  5,082,214   $  5,023,245   
NET INTEREST INCOME $  40,815   $  39,001  
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS   3.51%   3.35%
NET INTEREST SPREAD   3.40%   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 $1,060 and $1,068 for the three months ended March 31, 2016 and December 31, 2015, respectively.
(3) Interest income includes taxable-equivalent adjustments of $3,139 and $3,237 for the three months ended March 31, 2016 and December 31, 2015, respectively.
(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.
(5) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheets for the three months ended March 31, 2016 and December 31, 2015 reflect a decrease in long-term debt of $79,000 and $80,000, respectively.
 
Note: As of March 31, 2016 and December 31, 2015, loans on nonaccrual status totaled $21,927 and $20,526, 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
September 30, 2015 
 AVG
BALANCE
INTERESTAVG
YIELD/
RATE
ASSETS   
INTEREST EARNING ASSETS:         
Loans (1) (2)$2,200,241 $  24,779  4.47%
Loans Held For Sale 5,327  52  3.87%
Securities:   
Investment Securities (Taxable) (4) 86,105  475  2.19%
Investment Securities (Tax-Exempt) (3) (4) 638,767  8,750  5.43%
Mortgage-backed Securities (4) 1,441,129  8,318  2.29%
Total Securities 2,166,001  17,543  3.21%
FHLB stock and other investments, at cost 45,963  65  0.56%
Interest Earning Deposits 26,216  15  0.23%
Total Interest Earning Assets 4,443,748  42,454  3.79%
NONINTEREST EARNING ASSETS:   
Cash and Due From Banks 49,285   
Bank Premises and Equipment 110,028   
Other Assets 262,956   
Less: Allowance for Loan Losses (17,021)  
Total Assets$4,848,996   
LIABILITIES AND SHAREHOLDERS' EQUITY   
INTEREST BEARING LIABILITIES:   
Savings Deposits$  232,903  60  0.10%
Time Deposits 833,962  1,360  0.65%
Interest Bearing Demand Deposits 1,600,454  1,065  0.26%
Total Interest Bearing Deposits 2,667,319  2,485  0.37%
Short-term Interest Bearing Liabilities 398,905  354  0.35%
Long-term Interest Bearing Liabilities – FHLB Dallas 527,591  1,720  1.29%
Long-term Debt (5) 60,229  369  2.43%
Total Interest Bearing Liabilities 3,654,044  4,928  0.54%
NONINTEREST BEARING LIABILITIES:   
Demand Deposits 715,326   
Other Liabilities 41,606   
Total Liabilities 4,410,976   
SHAREHOLDERS' EQUITY 438,020   
Total Liabilities and Shareholders' Equity$4,848,996   
NET INTEREST INCOME $  37,526  
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS   3.35%
NET INTEREST SPREAD   3.25%


(1) Interest on loans includes net fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustment of $1,044 for the three months ended September 30, 2015.
(3) Interest income includes taxable-equivalent adjustment of $3,199 for the three months ended September 30, 2015.
(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.
(5) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheet for the three months ended September 30, 2015 reflects a decrease in long-term debt of $82,000.
 
Note: As of September 30, 2015, loans on nonaccrual status totaled $20,988. 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)
Nine Months Ended
 September 30, 2016 September 30, 2015 
 AVG
BALANCE
INTERESTAVG
YIELD/
RATE
AVG
BALANCE
INTERESTAVG
YIELD/
RATE
ASSETS      
INTEREST EARNING ASSETS:      
Loans (1) (2)$2,432,652 $  82,818  4.55%$2,192,804 $  74,606  4.55%
Loans Held For Sale 5,100  126  3.30% 3,675  125  4.55%
Securities:      
Investment Securities (Taxable) (4) 41,708  572  1.83% 74,169  1,171  2.11%
Investment Securities (Tax-Exempt) (3) (4) 661,430  26,041  5.26% 637,110  26,336  5.53%
Mortgage-backed Securities (4) 1,465,923  28,156  2.57% 1,411,553  24,446  2.32%
Total Securities 2,169,061  54,769  3.37% 2,122,832  51,953  3.27%
FHLB stock and other investments, at cost 54,051  588  1.45% 44,204  223  0.67%
Interest Earning Deposits 55,378  220  0.53% 41,348  78  0.25%
Total Interest Earning Assets 4,716,242  138,521  3.92% 4,404,863  126,985  3.85%
NONINTEREST EARNING ASSETS:      
Cash and Due From Banks 50,738    52,108   
Bank Premises and Equipment 107,699    111,341   
Other Assets 270,301    268,105   
Less: Allowance for Loan Losses (19,136)   (15,914)  
Total Assets$5,125,844   $4,820,503   
LIABILITIES AND SHAREHOLDERS' EQUITY      
INTEREST BEARING LIABILITIES:      
Savings Deposits$  242,852  204  0.11%$  232,326  172  0.10%
Time Deposits 946,986  5,723  0.81% 850,175  4,035  0.63%
Interest Bearing Demand Deposits 1,693,135  4,448  0.35% 1,666,718  3,300  0.26%
Total Interest Bearing Deposits 2,882,973  10,375  0.48% 2,749,219  7,507  0.37%
Short-term Interest Bearing Liabilities 469,831  2,724  0.77% 301,689  650  0.29%
Long-term Interest Bearing Liabilities – FHLB Dallas 510,392  5,770  1.51% 557,519  5,349  1.28%
Subordinated Notes (5) 4,305  189  5.86%     %
Long-term Debt (6) 60,233  1,251  2.77% 60,228  1,085  2.41%
Total Interest Bearing Liabilities 3,927,734  20,309  0.69% 3,668,655  14,591  0.53%
NONINTEREST BEARING LIABILITIES:      
Demand Deposits 685,982    676,911   
Other Liabilities 48,120    39,764   
Total Liabilities 4,661,836    4,385,330   
SHAREHOLDERS' EQUITY 464,008    435,173   
Total Liabilities and Shareholders' Equity$5,125,844   $4,820,503   
NET INTEREST INCOME $  118,212   $  112,394  
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS   3.35%   3.41%
NET INTEREST SPREAD   3.23%   3.32%


(1) Interest on loans includes net fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $3,206 and $3,141 for the nine months ended September 30, 2016 and 2015, respectively.
(3) Interest income includes taxable-equivalent adjustments of $10,082 and $9,276 for the nine months ended September 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) The unamortized debt issuance costs deducted from the carrying amount of the subordinated notes totaled approximately $74,000 for the nine months ended September 30, 2016.
(6) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheets for the nine months ended September 30, 2016 and 2015 reflect a decrease in long-term debt of $78,000 and $83,000, respectively.
 
Note: As of September 30, 2016 and 2015, loans on nonaccrual status totaled $8,536 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.
 

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