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Southside Bancshares, Inc. Announces Net Income for the Three Months and Year Ended December 31, 2015

TYLER, Texas, Jan. 29, 2016 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the three months and year ended December 31, 2015.

Southside reported net income of $11.7 million for the three months ended December 31, 2015, an increase of $15.6 million, or 396.4%, when compared to a net loss of $3.9 million for the same period in 2014. Net income for the year ended December 31, 2015 increased $23.2 million, or 111.2%, to $44.0 million when compared to $20.8 million for the same period in 2014.

Diluted earnings (losses) per common share were $0.46 and $(0.19) for the three months ended December 31, 2015 and 2014, respectively, an increase of $0.65, or 342.1%. For the year ended December 31, 2015, diluted earnings per common share increased $0.69, or 66.3%, to $1.73 when compared to $1.04 for the same period in 2014.

The return on average shareholders’ equity for the year ended December 31, 2015 was 10.04%, compared to 7.24% for the same period in 2014. The return on average assets was 0.90% for the year ended December 31, 2015 when compared to 0.60% for the same period in 2014.

“We are delighted with the outstanding financial results achieved during the fourth quarter and year ended December 31, 2015,” stated Sam Dawson, Chief Executive Officer of Southside Bancshares, Inc. “For the second quarter in a row, we experienced double digit annualized loan growth as both prior and current quarter loan commitments funded. Annualized loan growth during the fourth quarter was 34.4%. For the year we achieved loan growth of 11.5%, in line with our expectations. Approximately 50% of the loan growth during the fourth quarter was booked in December, enhancing the anticipated increase in loan revenue during the first quarter of 2016. We are pleased to report loan production remains strong, especially in Austin and Fort Worth. Southside’s balance sheet, asset quality, liquidity and capital all remain solid, allowing for continued steady growth in our market areas.”

“On January 28, 2016, the Board of Directors approved a Stock Repurchase Plan. The Board authorized the repurchase, from time to time, of up to five percent of the issued and outstanding common stock, or approximately 1.27 million shares, in open market purchases and privately negotiated transactions at prevailing market prices. We believe repurchasing shares in a company we know quite well, Southside Bancshares, Inc., at current market prices, is prudent. The Company has no obligation to repurchase any shares under the Stock Repurchase Plan and may suspend or discontinue it at any time.”

“In late December, we offered an early retirement package to 24 of our employees with an acceptance deadline of January 29, 2016. One employee accepted the offer in December and expense was recorded of approximately $160,000, net of tax. An additional 15 employees have accepted the early retirement package in 2016 and we will record an estimated one-time expense of approximately $1.3 million, net of tax, during the quarter ended March 31, 2016. We currently estimate the annual cost savings associated with the early retirement packages to be approximately $1.0 million, net of tax. The merger-related expense reductions resulting from our acquisition of OmniAmerican Bancorp, Inc. (“OmniAmerican”) should be complete after recording approximately $208,000, net of tax, of merger-related expense during the fourth quarter. During 2015, we recorded $3.6 million, net of tax, of merger-related expense. During the fourth quarter we also incurred expenses related to branch closings of approximately $270,000, net of tax.”

“We continue to focus on additional operational efficiencies and revenue generating and cost containment opportunities. We are utilizing a consultant for assistance with this effort and incurred professional fees of approximately $310,000, net of tax, 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.”

“Loans increased $192.6 million during the fourth quarter of 2015, more than offsetting the continued roll off of the indirect automobile loan portfolio and payoffs in our 1-4 family residential loans. During the quarter, commercial real estate loans increased $98 million, construction loans increased $96 million, municipal loans increased $26 million and commercial loans increased $14 million. Based on loans committed and activity in our pipeline, we continue to anticipate healthy overall net loan growth during 2016. We are focused on executing our business plan and we continue to add value to our customers and the communities we serve.”

Loans and Deposits

For the year ended December 31, 2015, total loans increased by $250.6 million, or 11.5%, when compared to December 31, 2014. During the year ended December 31, 2015, construction loans increased $170.4 million, other real estate loans increased $167.0 million, municipal loans increased $30.6 million, commercial loans increased $16.1 million, 1-4 family real estate loans decreased $35.5 million and loans to individuals decreased $98.0 million, primarily as a result of the decrease in the indirect automobile loan portfolio. Our oil and gas exposure in the loan portfolio remained minimal at 1.34% of the loan portfolio at December 31, 2015.

Nonperforming assets increased for the year ended December 31, 2015 by $20.2 million, or 164.6%, to $32.5 million, or 0.63% of total assets, when compared to 0.26% at December 31, 2014, primarily due to the downgrade of one large commercial borrowing relationship to impaired status during the first quarter of 2015 and the restructure of a large purchase credit impaired commercial loan during the third quarter of 2015.

During the year ended December 31, 2015, the allowance for loan losses increased $6.4 million, or 48.5%, to $19.7 million, or 0.8% of total loans, when compared to 0.6% at December 31, 2014, as a result of the additional provision associated with loan growth and impaired loans.

During the year ended December 31, 2015, deposits, net of brokered deposits, increased $18.1 million, or 0.5%, compared to December 31, 2014. During this period, public fund deposits increased $56.8 million.

Net Interest Income for the Three Months

Net interest income increased $9.3 million, or 36.9%, to $34.7 million for the three months ended December 31, 2015, when compared to $25.4 million for the same period in 2014. The increase in net interest income was primarily the result of the increase in interest income of $10.4 million, compared to the same period in 2014, which was a result of the increase in total loans and total securities. For the three months ended December 31, 2015, our net interest spread decreased to 3.26%, compared to 3.29% for the same period in 2014, primarily as a result of the merger with OmniAmerican. The net interest margin decreased to 3.35% for the three months ended December 31, 2015, compared to 3.42% 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 rate on interest-bearing liabilities compared to the same period in 2014, primarily as a result of the merger with OmniAmerican. The net interest spread and margin on a linked quarter basis were unchanged at 3.26% and 3.35%, respectively.

Net Interest Income for the Year

Net interest income increased $27.9 million, or 26.1%, to $134.7 million for the year ended December 31, 2015, when compared to $106.8 million for the same period in 2014. The increase in net interest income was primarily the result of the increase in interest income of $30.8 million, compared to the same period in 2014, which was a result of the increase in total loans and total securities. For the year ended December 31, 2015, our net interest spread decreased to 3.31%, compared to 3.63% for the same period in 2014. The net interest margin decreased to 3.40% for the year ended December 31, 2015, compared to 3.77% 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 rate on interest-bearing liabilities compared to the same period in 2014.

Net Income for the Three Months

Net income increased $15.6 million, or 396.4%, for the three months ended December 31, 2015, to $11.7 million when compared to the same period in 2014. The increase was primarily the result of an increase in interest income of $10.4 million combined with a decrease in provision for loan loss of $1.3 million and a decrease in noninterest expense of $8.6 million, which were partially offset by a $5.4 million increase in income tax expense.

Noninterest expense decreased $8.6 million, or 23.3%, for the three months ended December 31, 2015, compared to the same period in 2014, primarily due to decreases in salaries and employee benefits expense, professional fees, software and data processing expense and FHLB prepayment fees, which were partially offset by increases in occupancy expense and ATM and debit card expense.

Net Income for the Year

Net income increased $23.2 million, or 111.2%, for the year ended December 31, 2015, to $44.0 million when compared to the same period in 2014. The increase was primarily the result of an increase in interest income of $30.8 million and an increase in noninterest income of $13.4 million, combined with a decrease in provision for loan loss of $6.6 million, which were partially offset by a $15.3 million increase in noninterest expense and a $9.4 million increase in income tax expense.

Noninterest expense increased $15.3 million, or 15.6%, for the year ended December 31, 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, telephone and communications expense and other noninterest expense which were partially offset by decreases in professional fees and software and data processing expense.

Conference Call

Southside's management team will host a conference call to discuss its fourth quarter and year end 2015 results on Friday, January 29, 2016 at 9:00 am CST. The call can be accessed by dialing 877-340-9220 and by identifying the conference ID number 26660694 or by identifying “Southside Bancshares, Inc., Fourth Quarter and Year End 2015 Earnings Call.” To listen to the call via webcast, register at www.southside.com/about/investor-relations.

For those unable to listen to the conference call live, a recording of the conference call with be available from approximately 3:00 pm CST January 29, 2016 through February 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. 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.

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. That is, 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 an alternative to GAAP-basis financial statements, and other bank holding companies may define or calculate these or similar measures differently.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $5.2 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/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 and revenue growth, merger-related expense reductions, the benefits of the Share Repurchase Plan, 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.

SOUTHSIDE BANCSHARES, INC.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share data)
As of
2015 2014
Dec. 31, Sept 30, June 30, Mar. 31, Dec. 31,
ASSETS
Cash and due from banks$54,288 $52,311 $50,406 $55,055 $64,001
Interest-bearing deposits26,687 19,583 26,623 52,123 20,654
Investment securities:
Available for sale, at estimated fair value366,639 301,627 371,019 293,735 306,706
Held to maturity, at carrying value385,496 386,385 387,212 388,106 388,823
Mortgage-backed securities:
Available for sale, at estimated fair value1,093,853 1,073,368 1,094,802 1,140,140 1,142,002
Held to maturity, at carrying value398,800 385,529 356,669 249,430 253,496
Federal Home Loan Bank stock, at cost51,047 43,446 37,769 39,978 39,942
Loans held for sale3,811 4,883 7,431 4,096 2,899
Loans2,431,753 2,239,146 2,179,863 2,174,614 2,181,133
Less: Allowance for loan losses(19,736) (18,402) (16,822) (16,926) (13,292)
Net loans2,412,017 2,220,744 2,163,041 2,157,688 2,167,841
Premises & equipment, net107,929 109,087 110,493 111,903 112,860
Goodwill91,520 91,520 90,571 90,394 91,372
Other intangible assets, net6,548 7,090 7,654 8,242 8,844
Bank owned life insurance95,080 94,303 93,673 93,021 92,384
Other assets68,361 47,599 58,655 48,482 115,437
Total assets$5,162,076 $4,837,475 $4,856,018 $4,732,393 $4,807,261
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits$672,470 $681,618 $715,966 $680,122 $661,014
Interest-bearing deposits2,782,937 2,646,259 2,752,717 2,815,218 2,713,403
Total deposits3,455,407 3,327,877 3,468,683 3,495,340 3,374,417
Short-term obligations647,836 445,008 284,783 143,371 301,605
Long-term obligations562,592 558,867 632,565 609,856 660,363
Other liabilities52,179 58,575 38,313 49,012 45,633
Total liabilities4,718,014 4,390,327 4,424,344 4,297,579 4,382,018
Shareholders' equity444,062 447,148 431,674 434,814 425,243
Total liabilities and shareholders' equity$5,162,076 $4,837,475 $4,856,018 $4,732,393 $4,807,261


At or For the Three Months Ended
2015 2014
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
Income Statement:
Total interest income$39,964 $38,211 $37,750 $38,607 $29,613
Total interest expense 5,267 4,926 4,845 4,816 4,259
Net interest income 34,697 33,285 32,905 33,791 25,354
Provision for loan losses 1,951 2,276 268 3,848 3,287
Net interest income after provision for loan losses 32,746 31,009 32,637 29,943 22,067
Noninterest income
Deposit services 4,990 5,213 4,920 4,989 3,988
Net gain on sale of securities available for sale 204 875 105 2,476 1,170
Impairment of investment in SFG Finance, LLC (516)
Gain on sale of loans 578 305 822 377 54
Trust income 871 835 820 893 805
Bank owned life insurance income 640 661 653 669 393
Other 1,532 1,472 1,611 1,384 1,255
Total noninterest income 8,815 9,361 8,931 10,788 7,149
Noninterest expense
Salaries and employee benefits 16,420 15,733 16,869 18,199 21,829
Occupancy expense 3,263 3,316 3,105 3,199 1,946
Advertising, travel & entertainment 726 642 683 657 582
ATM and debit card expense 1,086 617 750 679 385
Professional fees 1,517 825 793 742 4,464
Software and data processing expense 771 819 1,237 1,031 3,099
Telephone and communications 372 534 603 469 332
FDIC insurance 619 624 629 638 446
FHLB prepayment fees 539
Other 3,657 3,527 3,768 3,835 3,457
Total noninterest expense 28,431 26,637 28,437 29,449 37,079
Income (loss) before income tax expense 13,130 13,733 13,131 11,282 (7,863)
Income tax expense (benefit) 1,438 1,971 1,967 1,903 (3,918)
Net income (loss)$11,692 $11,762 $11,164 $9,379 $(3,945)
Common share data:
Weighted-average basic shares outstanding 25,380 25,360 25,337 25,322 20,757
Weighted-average diluted shares outstanding 25,467 25,445 25,425 25,403 20,757
Shares outstanding end of period 25,396 25,373 25,351 25,331 25,317
Net income (loss) per common share
Basic$0.46 $0.46 $0.44 $0.37 $(0.19)
Diluted 0.46 0.46 0.44 0.37 (0.19)
Cash dividend paid per common share 0.31 0.23 0.23 0.23 0.32
Selected Performance Ratios:
Return on average assets 0.92% 0.96% 0.93% 0.79% (0.43)%
Return on average shareholders’ equity 10.35 10.65 10.30 8.79 (4.94)
Average yield on interest earning assets 3.80 3.79 3.83 3.95 3.92
Average rate on interest bearing liabilities 0.54 0.53 0.53 0.53 0.63
Net interest spread 3.26 3.26 3.30 3.42 3.29
Net interest margin 3.35 3.35 3.39 3.50 3.42
Average interest earnings assets to average interest bearing liabilities 120.29 121.61 120.22 118.36 125.71
Noninterest expense to average total assets 2.25 2.18 2.38 2.48 4.04
Efficiency ratio 58.45 56.59 60.43 61.85 60.04


At or For the
Year Ended
December 31,
2015 2014
Income Statement:
Total interest income$154,532 $123,778
Total interest expense 19,854 16,956
Net interest income 134,678 106,822
Provision for loan losses 8,343 14,938
Net interest income after provision for loan losses 126,335 91,884
Noninterest income
Deposit services 20,112 15,280
Net gain on sale of securities available for sale 3,660 2,830
Impairment of investment in SFG Finance, LLC (2,755)
Gain on sale of loans 2,082 323
Trust income 3,419 3,145
Bank owned life insurance income 2,623 1,334
Other 5,999 4,332
Total noninterest income 37,895 24,489
Noninterest expense
Salaries and employee benefits 67,221 60,821
Occupancy expense 12,883 7,259
Advertising, travel & entertainment 2,708 2,219
ATM and debit card expense 3,132 1,331
Professional fees 3,877 7,827
Software and data processing expense 3,858 4,629
Telephone and communications 1,978 1,222
FDIC insurance 2,510 1,765
FHLB prepayment fees 539
Other 14,787 10,092
Total noninterest expense 112,954 97,704
Income before income tax expense 51,276 18,669
Income tax expense (benefit) 7,279 (2,164)
Net income$43,997 $20,833
Common share data:
Weighted-average basic shares outstanding 25,350 20,028
Weighted-average diluted shares outstanding 25,435 20,127
Net income per common share
Basic$1.74 $1.04
Diluted 1.73 1.04
Book value per common share 17.49 16.80
Cash dividend paid per common share 1.00 0.96
Selected Performance Ratios:
Return on average assets 0.90% 0.60%
Return on average shareholders’ equity 10.04 7.24
Average yield on interest earning assets 3.84 4.29
Average rate on interest bearing liabilities 0.53 0.66
Net interest spread 3.31 3.63
Net interest margin 3.40 3.77
Average interest earnings assets to average interest bearing liabilities 120.12 126.26
Noninterest expense to average total assets 2.32 2.81
Efficiency ratio 59.32 55.42


Southside Bancshares, Inc.
Selected Financial Data (Unaudited)
(In thousands)
Three Months Ended
2015 2014
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
Nonperforming assets 32,480 33,621 27,794 27,262 12,277
Nonaccrual loans (1) 20,526 20,988 21,223 20,321 4,096
Accruing loans past due more than 90 days (1) 3 30 1 4
Restructured loans (1) 11,143 11,772 5,667 5,782 5,874
Other real estate owned 744 793 787 985 1,738
Repossessed assets 64 68 87 173 565
Asset Quality Ratios:
Nonaccruing loans to total loans 0.84% 0.94% 0.97% 0.93% 0.19%
Allowance for loan losses to nonaccruing loans 96.15 87.68 79.26 83.29 324.51
Allowance for loan losses to nonperforming assets 60.76 54.73 60.52 62.09 108.27
Allowance for loan losses to total loans 0.81 0.82 0.77 0.78 0.61
Nonperforming assets to total assets 0.63 0.70 0.57 0.58 0.26
Net charge-offs to average loans 0.11 0.13 0.07 0.04 0.88
Capital Ratios:
Shareholders’ equity to total assets 8.60 9.24 8.89 9.19 8.85
Average shareholders’ equity to average total assets 8.92 9.03 9.07 8.98 8.71
(1) Excludes purchased credit impaired loans measured at fair value at acquisition for the three months ended December 31, 2014.
Loan Portfolio Composition
The following table sets forth loan totals by category for the periods presented:
Real Estate Loans:
Construction$438,247 342,282 $295,633 $275,960 $267,830
1-4 Family Residential 655,410 678,431 683,944 693,137 690,895
Other 635,210 537,161 500,906 470,877 468,171
Commercial Loans 242,527 228,272 228,789 241,100 226,460
Municipal Loans 288,115 262,384 256,492 252,756 257,492
Loans to Individuals 172,244 190,616 214,099 240,784 270,285
Total Loans$2,431,753 $2,239,146 $2,179,863 $2,174,614 $2,181,133

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
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 Loss(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 March 31, 2015
AVG AVG
AVG YIELD/ AVG YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
ASSETS
INTEREST EARNING ASSETS:
Loans (1)(2)$2,188,886 $24,889 4.56% $2,189,163 $24,938 4.62%
Loans Held For Sale3,675 45 4.91% 1,987 28 5.71%
Securities:
Investment Securities (Taxable) (4)86,561 459 2.13% 49,437 237 1.94%
Investment Securities (Tax-Exempt)(3)(4)627,405 8,752 5.60% 645,231 8,834 5.55%
Mortgage-backed Securities (4)1,400,389 7,666 2.20% 1,392,606 8,462 2.46%
Total Securities2,114,355 16,877 3.20% 2,087,274 17,533 3.41%
FHLB stock and other investments, at cost42,741 65 0.61% 43,886 93 0.86%
Interest Earning Deposits39,609 29 0.29% 58,576 34 0.24%
Total Interest Earning Assets4,389,266 41,905 3.83% 4,380,886 42,626 3.95%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks49,760 57,367
Bank Premises and Equipment111,384 112,635
Other Assets259,319 282,421
Less: Allowance for Loan Loss(17,059) (13,625)
Total Assets$4,792,670 $4,819,684
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits$234,097 59 0.10% $229,946 53 0.09%
Time Deposits853,410 1,313 0.62% 863,477 1,362 0.64%
Interest Bearing Demand Deposits1,701,559 1,121 0.26% 1,699,225 1,114 0.27%
Total Interest Bearing Deposits2,789,066 2,493 0.36% 2,792,648 2,529 0.37%
Short-term Interest Bearing Liabilities232,471 154 0.27% 272,302 142 0.21%
Long-term Interest Bearing Liabilities – FHLB Dallas569,302 1,837 1.29% 576,199 1,792 1.26%
Long-term Debt (5)60,311 361 2.40% 60,311 353 2.37%
Total Interest Bearing Liabilities3,651,150 4,845 0.53% 3,701,460 4,816 0.53%
NONINTEREST BEARING LIABILITIES:
Demand Deposits669,068 645,573
Other Liabilities37,607 40,058
Total Liabilities4,357,825 4,387,091
SHAREHOLDERS’ EQUITY434,845 432,593
Total Liabilities and Shareholders’ Equity$4,792,670 $4,819,684
NET INTEREST INCOME $37,060 $37,810
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS 3.39% 3.50%
NET INTEREST SPREAD 3.30% 3.42%

(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 $1,050 for the three months ended June 30, 2015 and March 31, 2015, respectively.
(3) Interest income includes taxable-equivalent adjustments of $3,108 and $2,969 for the three months ended June 30, 2015 and March 31, 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, 2015 and March 31, 2015, loans on nonaccrual status totaled $21,223 and $20,321, 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, 2014
AVG
AVG YIELD/
BALANCE INTEREST RATE
ASSETS
INTEREST EARNING ASSETS:
Loans (1)(2)$1,529,467 $17,601 4.57%
Loans Held For Sale41,666 35 0.33%
Securities:
Investment Securities (Taxable) (4)30,867 139 1.79%
Investment Securities (Tax-Exempt)(3)(4)638,849 8,775 5.45%
Mortgage-backed Securities (4)1,051,385 6,898 2.60%
Total Securities1,721,101 15,812 3.64%
FHLB stock and other investments, at cost28,942 37 0.51%
Interest Earning Deposits69,701 43 0.24%
Total Interest Earning Assets3,390,877 33,528 3.92%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks45,009
Bank Premises and Equipment63,598
Other Assets154,958
Less: Allowance for Loan Loss(13,445)
Total Assets$3,640,997
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits$138,724 35 0.10%
Time Deposits625,896 1,043 0.66%
Interest Bearing Demand Deposits1,278,924 899 0.28%
Total Interest Bearing Deposits2,043,544 1,977 0.38%
Short-term Interest Bearing Liabilities95,484 271 1.13%
Long-term Interest Bearing Liabilities – FHLB Dallas497,948 1,652 1.32%
Long-term Debt (5)60,311 359 2.36%
Total Interest Bearing Liabilities2,697,287 4,259 0.63%
NONINTEREST BEARING LIABILITIES:
Demand Deposits594,326
Other Liabilities32,360
Total Liabilities3,323,973
SHAREHOLDERS’ EQUITY317,024
Total Liabilities and Shareholders’ Equity$3,640,997
NET INTEREST INCOME $29,269
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS 3.42%
NET INTEREST SPREAD 3.29%

(1) Interest on loans includes net fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustment of $874 for the three months ended December 31, 2014.
(3) Interest income includes taxable-equivalent adjustment of $3,041 for the three months ended December 31, 2014.
(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, 2014, loans on nonaccrual status totaled $4,096. 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)
Years Ended
December 31, 2015 December 31, 2014
AVG AVG
AVG YIELD/ AVG YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
ASSETS
INTEREST EARNING ASSETS:
Loans (1) (2)$2,224,401 $100,471 4.52% $1,420,802 $74,450 5.24%
Loans Held For Sale3,439 155 4.51% 11,012 47 0.43%
Securities:
Investment Securities (Taxable)(4)75,977 1,587 2.09% 33,168 615 1.85%
Investment Securities (Tax-Exempt)(3)(4)637,333 34,981 5.49% 659,219 36,263 5.50%
Mortgage-backed Securities (4)1,432,087 33,661 2.35% 1,056,095 28,207 2.67%
Total Securities2,145,397 70,229 3.27% 1,748,482 65,085 3.72%
FHLB stock and other investments, at cost46,584 298 0.64% 28,684 181 0.63%
Interest Earning Deposits39,533 101 0.26% 54,853 139 0.25%
Total Interest Earning Assets4,459,354 171,254 3.84% 3,263,833 139,902 4.29%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks52,400 43,342
Bank Premises and Equipment110,704 55,680
Other Assets265,851 133,641
Less: Allowance for Loan Loss(16,621) (17,177)
Total Assets$4,871,688 $3,479,319
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits$232,385 233 0.10% $121,453 136 0.11%
Time Deposits845,882 5,512 0.65% 610,178 4,287 0.70%
Interest Bearing Demand Deposits1,648,416 4,417 0.27% 1,231,711 3,530 0.29%
Total Interest Bearing Deposits2,726,683 10,162 0.37% 1,963,342 7,953 0.41%
Short-term Interest Bearing Liabilities384,694 1,250 0.32% 64,160 624 0.97%
Long-term Interest Bearing Liabilities – FHLB Dallas540,600 6,987 1.29% 497,296 6,955 1.40%
Long-term Debt (5)60,311 1,455 2.41% 60,311 1,424 2.36%
Total Interest Bearing Liabilities3,712,288 19,854 0.53% 2,585,109 16,956 0.66%
NONINTEREST BEARING LIABILITIES:
Demand Deposits679,346 576,770
Other Liabilities41,627 29,672
Total Liabilities4,433,261 3,191,551
SHAREHOLDERS’ EQUITY438,427 287,768
Total Liabilities and Shareholders’ Equity$4,871,688 $3,479,319
NET INTEREST INCOME $151,400 $122,946
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS 3.40% 3.77%
NET INTEREST SPREAD 3.31% 3.63%

(1) Interest on loans includes net fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $4,209 and $3,899 for the years ended December 31, 2015 and 2014, respectively.
(3) Interest income includes taxable-equivalent adjustments of $12,513 and $12,225 for the years ended December 31, 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 December 31, 2015 and 2014, loans on nonaccrual status totaled $20,526 and $4,096, 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.

Source:Southside Bancshares, Inc.