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Southside Bancshares, Inc. Announces Net Income for the Three Months Ended March 31, 2014

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TYLER, Texas, May 1, 2014 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. ("Southside" or the "Company") (Nasdaq:SBSI) today reported its financial results for the three months ended March 31, 2014.

Southside reported net income of $8.2 million for the three months ended March 31, 2014, a decrease of $818,000, or 9.0%, when compared to $9.0 million for the same period in 2013. Diluted earnings per common share were $0.44 and $0.48 for the three months ended March 31, 2014 and 2013, respectively, a decrease of $0.04, or 8.3%.

The return on average shareholders' equity for the three months ended March 31, 2014, was 12.44%, compared to 14.19% for the same period in 2013. The return on average assets was 0.96% for the three months ended March 31, 2014 compared to 1.14% for the same period in 2013.

"We are pleased to report our financial results for the quarter ended March 31, 2014," stated Sam Dawson, President and Chief Executive Officer of Southside Bancshares, Inc. "During the first quarter of 2014, our net interest income increased 30.0% as our net interest margin improved 61 basis points to 3.93% when compared to the first quarter 2013. We are pleased with our cost containment efforts that resulted in a slight decrease in total noninterest expense. During the first quarter of 2014, our provision for loan losses increased due in part to unusually low provision expense during the first quarter of 2013 and an increase in the level of charge-offs in the consumer portfolio during first quarter 2014 that appear to have since normalized. We are pleased to report at March 31, 2014, our nonperforming asset totals reflected a decrease of $2.7 million from December 31, 2013, of which approximately 76% of the decrease occurred in the consumer portfolio. In addition, our ratio of nonperforming assets to total assets decreased to 0.32% at the end of the quarter."

"We continued to experience solid loan growth and believe this rate of growth should increase as the year continues. The dynamic Texas markets we serve provide our banking professionals and Southside significant growth opportunities. We look forward to building on these financial results during the balance of 2014 and further enhancing our franchise."

Loans and Deposits

For the three months ended March 31, 2014, total loans increased by $19.1 million, or 1.4%, when compared to December 31, 2013. During the three months ended March 31, 2014, other real estate loans increased $10.3 million, construction loans increased $10.0 million, 1-4 family real estate loans increased $5.3 million, loans to individuals increased $2.0 million, municipal loans decreased $5.4 million, and commercial loans decreased $3.1 million.

Nonperforming assets decreased during the first three months of 2014 by $2.7 million, or 20.0%, to $10.9 million, or 0.32% of total assets, when compared to 0.39% at December 31, 2013.

During the three months ended March 31, 2014, deposits, net of brokered deposits, increased $38.0 million, or 1.5%, compared to December 31, 2013. During this three-month period, public fund deposits increased $15.6 million.

Net Interest Income for the Three Months

Net interest income increased $6.4 million, or 30.0%, to $27.9 million for the three months ended March 31, 2014, when compared to $21.5 million for the same period in 2013. For the three months ended March 31, 2014, our net interest spread increased to 3.80% when compared to 3.14% for the same period in 2013. The net interest margin increased to 3.93% for the three months ended March 31, 2014 compared to 3.32% for the same period in 2013. The reason for the increase in the net interest spread and margin was the increase in the yield on the interest earning assets combined with the decrease in the yield on the interest bearing liabilities of 21 basis points compared to the same period in 2013.

Net Income for the Three Months

Net income decreased $818,000, or 9.0%, for the three months ended March 31, 2014, to $8.2 million when compared to the same period in 2013. The decrease was primarily the result of a decrease in noninterest income of $4.4 million and an increase in provision for loan losses of $3.6 million, which was partially offset by a $5.7 million increase in interest income, a $754,000 decrease in interest expense and a $688,000 decrease in provision for income tax expense.

Noninterest expense decreased $137,000, or 0.7%, for the three months ended March 31, 2014, compared to the same period in 2013.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $3.4 billion in assets that owns 100% of Southside Bank. Southside Bank currently has 50 banking centers in Texas and operates a network of 49 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 Susan Hill at (903) 531-7220, or susan.hill@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, a bank holding 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, growth and 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. As a result, actual income gains and losses could materially differ from those that have been estimated.

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, 2013 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 At At
March 31,
2014
December 31,
2013
March 31,
2013
(dollars in thousands)
(unaudited)
Selected Financial Condition Data (at end of period):
Total assets $ 3,434,344 $ 3,445,663 $ 3,312,283
Loans 1,370,393 1,351,273 1,281,647
Allowance for loan losses 18,787 18,877 18,542
Mortgage-backed securities:
Available for sale, at estimated fair value 915,061 840,258 905,107
Held to maturity, at carrying value 265,627 275,569 234,245
Investment securities:
Available for sale, at estimated fair value 259,662 337,429 685,794
Held to maturity, at carrying value 390,889 391,552 1,009
Federal Home Loan Bank stock, at cost 27,331 34,065 25,415
Deposits 2,546,843 2,527,808 2,337,237
Long-term obligations 566,871 559,660 450,115
Shareholders' equity 271,393 259,518 255,898
Nonperforming assets 10,889 13,606 12,581
Nonaccrual loans 5,869 8,088 8,570
Accruing loans past due more than 90 days 3 2
Restructured loans 4,090 3,888 3,317
Other real estate owned 476 726 584
Repossessed assets 454 901 108
Asset Quality Ratios:
Nonaccruing loans to total loans 0.43% 0.60% 0.67%
Allowance for loan losses to nonaccruing loans 320.11 233.40 216.36
Allowance for loan losses to nonperforming assets 172.53 138.74 147.38
Allowance for loan losses to total loans 1.37 1.40 1.45
Nonperforming assets to total assets 0.32 0.39 0.38
Net charge-offs to average loans 1.26 0.82 0.81
Capital Ratios:
Shareholders' equity to total assets 7.90 7.53 7.73
Average shareholders' equity to average total assets 7.70 7.39 8.04
Loan Portfolio Composition
The following table sets forth loan totals by category for the periods presented:
At At At
March 31,
2014
December 31,
2013
March 31,
2013
(in thousands)
(unaudited)
Real Estate Loans:
Construction $ 135,237 $ 125,219 $ 119,326
1-4 Family Residential 395,809 390,499 376,421
Other 272,868 262,536 242,571
Commercial Loans 154,524 157,655 160,831
Municipal Loans 240,114 245,550 215,869
Loans to Individuals 171,841 169,814 166,629
Total Loans $ 1,370,393 $ 1,351,273 $ 1,281,647
At or For the
Three Months Ended
March 31,
2014 2013
(dollars in thousands)
(unaudited)
Selected Operating Data:
Total interest income $ 32,239 $ 26,561
Total interest expense 4,347 5,101
Net interest income 27,892 21,460
Provision for loan losses 4,133 492
Net interest income after provision for loan losses 23,759 20,968
Noninterest income
Deposit services 3,638 3,753
Net gain on sale of securities available for sale 11 4,345
Total other-than-temporary impairment losses (52)
Portion of loss recognized in other comprehensive income (before taxes) 10
Net impairment losses recognized in earnings (42)
Gain on sale of loans 80 319
Trust income 780 720
Bank owned life insurance income 314 254
Other 983 891
Total noninterest income 5,806 10,240
Noninterest expense
Salaries and employee benefits 13,102 13,209
Occupancy expense 1,754 1,871
Advertising, travel & entertainment 543 641
ATM and debit card expense 317 381
Professional fees 927 640
Software and data processing expense 501 543
Telephone and communications 278 451
FDIC insurance 448 421
Other 2,312 2,162
Total noninterest expense 20,182 20,319
Income before income tax expense 9,383 10,889
Provision for income tax expense 1,159 1,847
Net income $ 8,224 $ 9,042
Common share data:
Weighted-average basic shares outstanding 18,818 18,752
Weighted-average diluted shares outstanding 18,902 18,773
Net income per common share
Basic $ 0.44 $ 0.48
Diluted 0.44 0.48
Book value per common share 14.42 13.66
Cash dividend paid per common share 0.21 0.20
At or For the
Three Months Ended
March 31,
2014 2013
(unaudited)
Selected Performance Ratios:
Return on average assets 0.96% 1.14%
Return on average shareholders' equity 12.44 14.19
Average yield on interest earning assets 4.46 4.01
Average yield on interest bearing liabilities 0.66 0.87
Net interest spread 3.80 3.14
Net interest margin 3.93 3.32
Average interest earnings assets to average interest bearing liabilities 123.66 126.82
Noninterest expense to average total assets 2.35 2.56
Efficiency ratio 53.30 66.28

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
March 31, 2014 March 31, 2013
AVG AVG AVG AVG
BALANCE INTEREST YIELD BALANCE INTEREST YIELD
ASSETS
INTEREST EARNING ASSETS:
Loans (1) (2) $ 1,364,571 $ 19,375 5.76% $ 1,267,371 $ 18,628 5.96%
Loans Held For Sale 425 5 4.77% 2,266 16 2.86%
Securities:
Investment Securities (Taxable)(4) 26,436 123 1.89% 90,231 364 1.64%
Investment Securities (Tax-Exempt)(3)(4) 643,343 8,842 5.57% 513,349 6,672 5.27%
Mortgage-backed Securities (4) 1,148,259 7,682 2.71% 1,039,671 3,936 1.54%
Total Securities 1,818,038 16,647 3.71% 1,643,251 10,972 2.71%
FHLB stock and other investments, at cost 31,619 70 0.90% 26,912 65 0.98%
Interest Earning Deposits 69,392 43 0.25% 66,487 43 0.26%
Total Interest Earning Assets 3,284,045 36,140 4.46% 3,006,287 29,724 4.01%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks 45,991 48,660
Bank Premises and Equipment 52,286 50,128
Other Assets 121,102 129,565
Less: Allowance for Loan Loss (18,648) (20,003)
Total Assets $ 3,484,776 $ 3,214,637
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits $ 111,687 35 0.13% $ 104,420 36 0.14%
Time Deposits 637,546 1,163 0.74% 622,244 1,162 0.76%
Interest Bearing Demand Deposits 1,255,678 918 0.30% 1,061,190 872 0.33%
Total Interest Bearing Deposits 2,004,911 2,116 0.43% 1,787,854 2,070 0.47%
Short-term Interest Bearing Liabilities 89,440 71 0.32% 154,291 1,250 3.29%
Long-term Interest Bearing Liabilities – FHLB Dallas 501,066 1,808 1.46% 368,003 1,419 1.56%
Long-term Debt (5) 60,311 352 2.37% 60,311 362 2.43%
Total Interest Bearing Liabilities 2,655,728 4,347 0.66% 2,370,459 5,101 0.87%
NONINTEREST BEARING LIABILITIES:
Demand Deposits 535,349 538,697
Other Liabilities 25,540 46,999
Total Liabilities 3,216,617 2,956,155
SHAREHOLDERS' EQUITY 268,159 258,482
Total Liabilities and Shareholders' Equity $ 3,484,776 $ 3,214,637
NET INTEREST INCOME $ 31,793 $ 24,623
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS 3.93% 3.32%
NET INTEREST SPREAD 3.80% 3.14%
(1) Interest on loans includes net fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $1,017 and $979 for the three months ended March 31, 2014 and 2013, respectively.
(3) Interest income includes taxable-equivalent adjustments of $2,884 and $2,184 for the three months ended March 31, 2014 and 2013, respectively.
(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.
(5) Represents junior subordinated debentures issued by us to Southside Statutory Trust III, IV, and V in connection with the issuance by Southside Statutory Trust III of $20 million of trust preferred securities, Southside Statutory Trust IV of $22.5 million of trust preferred securities, Southside Statutory Trust V of $12.5 million of trust preferred securities and junior subordinated debentures issued by FWBS to Magnolia Trust Company I in connection with the issuance by Magnolia Trust Company I of $3.5 million of trust preferred securities.
Note: As of March 31, 2014 and 2013, loans on nonaccrual status totaled $5,869 and $8,570, 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.

CONTACT: Susan Hill (903)531-7220 susan.hill@southside.com

Source:Southside Bancshares, Inc.