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Southside Bancshares, Inc. Announces Net Income for the Three Months and Year Ended December 31, 2011

(January 26, 2012)

TYLER, Texas, Jan. 26, 2012 (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, 2011.



Southside reported net income of $10.7 million for the three months ended December 31, 2011, an increase of $3.2 million, or 42.0%, when compared to the same period in 2010. The gain on sale of available for sale securities increased $295,000, or $192,000, net of income tax expense, to $3.1 million for the three months ended December 31, 2011 from $2.8 million for the same period in 2010. Net income for the year ended December 31, 2011 increased $1.1 million, or 2.8%, to $40.6 million when compared to $39.5 million for the same period in 2010. The gain on sale of available for sale securities decreased $13.1 million, or $8.5 million, net of income tax expense, to $12.7 million for the year ended December 31, 2011 when compared to $25.8 million for the same period in 2010.



Diluted earnings per common share increased $0.19, or 41.3%, to $0.65 for the three months ended December 31, 2011 when compared to $0.46 for the same period in 2010. For the year ended December 31, 2011, diluted earnings per common share increased $0.08, or 3.3%, to $2.47 when compared to $2.39 for the same period in 2010.


The return on average shareholders' equity for the year ended December 31, 2011, was 16.93%, a decrease when compared to 18.16% for the same period in 2010. The annual return on average assets decreased to 1.29% for the year ended December 31, 2011 from 1.32% for the same period in 2010.




"We are extraordinarily pleased to report that Southside's net income for the year ended December 31, 2011 increased $1.1 million, or 2.8%, when compared to 2010," said B. G. Hartley, Chairman of the Board of Southside Bancshares, Inc. "Our 2011 results were driven by an increase in net interest income due to a strategic increase in earning assets and an increase in our net interest margin. In addition to favorable net interest income, earnings were positively impacted by a decrease in our credit costs as nonperforming assets continued to decrease. These positive factors were offset in part by a decrease in gain on sale of securities, due to less strategic restructuring of the investment portfolio during 2011."



"Our net income for 2011 represents the second highest level of earnings in the history of Southside. Net income in 2011 of $40.6 million was exceeded only by net income in 2009 of $44.4 million. Earnings in 2009 were driven by $33.4 million in gain on sale of securities, $20.7 million more than in 2011. Our 2011 income was driven by an increase in net interest income as well as the decrease in our credit costs. Therefore, we consider 2011 to be one of our best years ever."



"Our business model has produced exceptional financial results for several years. As the economic crisis unfolded in 2008, we began that year with what we believed would prove to be a fortress balance sheet. That balance sheet served us well as we did not participate significantly in the global recession. Our return on average shareholders equity has exceeded 16.9% during each of the last four years and our financial results have enabled us to increase our cash dividend at an annualized rate of 21.7%. Total shareholders' equity has increased from $132.3 million at December 31, 2007 to $261.9 million at December 31, 2011. This represents an increase of $129.6, or 97.9%. We are exceptionally pleased to have organically almost doubled our shareholders' equity over the past four years. We believe very few banks have achieved these benchmarks during the last four years."



"During the fourth quarter we began to experience meaningful loan growth as loans increased $46.8 million from September 30, 2011. We anticipate loan growth will continue during 2012 as we are experiencing increased demand in many of our market areas. We believe credit conditions have improved and are encouraging our loan officers to evaluate credit decisions in light of this current outlook. The fourth quarter also saw a continued increase in deposits to fund our earning assets."



"Effective execution of our business model was the driving force behind our successful 2011 financial results. Proactive management of our franchise is built on four cornerstones; first, providing our customers with a high touch, convenient banking experience with superior products while also maintaining a competitive cost structure. Second, providing prudent credit to our customers in the markets we serve. Third, managing our balance sheet, investments and funding, in a manner to complement and assist with the overall business model objectives. And last, but certainly not least, providing our stakeholders an attractive value proposition."



"We begin 2012 under new leadership, as Sam Dawson was elected Chief Executive Officer earlier this month. The Board and I have full confidence in Sam's leadership. Sam has been an integral part of the design and execution of our dynamic business model. As a result, we anticipate continued proactive management of our model as well as continued financial success."



Loans and Deposits



For the three months ended December 31, 2011, total loans increased by $46.8 million, or 4.5% when compared to September 30, 2011. During the three months ended December 31, 2011, real estate 1-4 family increased $19.2 million, municipal loans increased $8.1 million, real estate construction loans increased $7.5 million, loans to individuals increased $4.5 million, real estate other increased 3.9 million, and commercial loans increased $3.4 million. For the year ended December 31, 2011, total loans increased by $9.3 million, or 0.9% when compared to December 31, 2010.



Nonperforming assets increased $28,000, or 0.2% to $13.2 million, or 0.40% of total assets at December 31, 2011, when compared to September 30, 2011. Nonperforming assets as a percent of total assets were 0.41% at September 30, 2011. Nonperforming assets decreased by $4.5 million, or 25.5%, to $13.2 million, or 0.40% of total assets, at December 31, 2011, when compared to December 31, 2010. This decrease is primarily a result of a decrease in nonaccrual and restructured loans.



During the three months ended December 31, 2011, deposits net of brokered deposits, increased $30.3 million, or 1.4%, compared to September 30, 2011. During the year ended December 31, 2011, deposits, net of brokered deposits, increased $184.8 million, or 9.4%, compared to December 31, 2010. 



Net Interest Income



Net interest income increased $2.2 million, or 10.0%, to $24.6 million for the three months ended December 31, 2011, when compared to $22.3 million for the same period in 2010. For the three months ended December 31, 2011, our net interest spread increased to 3.24% from 3.10% for the same period in 2010. The net interest margin increased to 3.48% for the three months ended December 31, 2011 compared to 3.40% for the same period in 2010. The increase in our net interest margin and net interest spread for the three months ended December 30, 2011 compared to the same period in 2010 is primarily a result of a decrease in the cost of our interest bearing liabilities of 45 basis points that exceeded the decrease in the yield on our earnings assets of 31 basis points. The net interest margin and net interest spread for the three months ended December 31, 2011 decreased to 3.48% and 3.24%, respectively, from 3.61% and 3.35% for the three months ended September 30, 2011. The decrease in the net interest margin and net interest spread for the three months ended December 31, 2011 compared to the three months ended September 30, 2011 is a result of an increase in the average securities portfolio of $140.5 million, which generally have lower yields which more than offset the increase in average loans of $38.2 million, which generally have higher yields. 



Net interest income increased $9.3 million, or 10.9%, to $95.4 million for the year ended December 31, 2011, when compared to $86.1 million for the same period in 2010. For the year ended December 31, 2011, our net interest spread increased to 3.34% from 3.07% for the same period in 2010. The net interest margin increased to 3.61% for the year ended December 31, 2011 compared to 3.39% for the same period in 2010. The increase in our net interest margin and spread for the year ended December 31, 2011 compared to the same period in 2010 is primarily a result of slower prepayments on our mortgage-backed securities during 2011. During the first six months of 2010 prepayments increased significantly due to announcements by Fannie Mae and Freddie Mac that they would repurchase delinquent loans that had not been repurchased for several months and that they would begin repurchasing these delinquent loans in a more timely manner. In addition the cost of our interest bearing liabilities decreased 46 basis points during the year ended December 31, 2011 when compared to the same period in 2010, while the yield on our earning assets only decreased 19 basis points during the same period.



Net Income for the Three Months



The increase in net income for the three months ended December 31, 2011, when compared to the same period in 2010, was a result of an increase in net interest income and a decrease in the provision for loan losses.



Noninterest expense decreased $424,000, or 2.3%, for the three months ended December 31, 2011, compared to the same period in 2010. 



Net Income for the Year



The increase in net income for the year ended December 31, 2011, when compared to the same period in 2010, was a result of an increase in net interest income and a decrease in the provision for loan losses which was partially offset by a decrease in noninterest income that was driven by a decrease in security gains.



Noninterest expense increased $1.0 million, or 1.4%, for the year ended December 31, 2011, compared to the same period in 2010. The increase in noninterest expense was a result of increases in personnel expense associated with our overall growth and expansion, occupancy expense due to added facilities, and professional fees due to legal fees and consulting fees associated with the acquisition of Southside Financial Group, LLC which were partially offset by a decrease in FDIC insurance premium expense.



About Southside Bancshares, Inc.



Southside Bancshares, Inc. is a bank holding company with approximately $3.31 billion in assets that owns 100% of Southside Bank. Southside Bank currently has 48 banking centers in Texas and operates a network of 50 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," "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 and earnings and certain market risk disclosures, including the impact of interest rate 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, 2010 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

 

December 31,

December 31,

 

2011

2010

 

(dollars in thousands)

 

 

(unaudited)

 

 

 

 

Selected Financial Condition Data (at end of period):

 

 

 

 

 

Total assets 

$ 3,308,400

$ 2,999,621

Loans 

1,087,230

1,077,920

Allowance for loan losses 

18,540

20,711

Mortgage-backed and related securities:

 

 

 Available for sale, at estimated fair value 

1,347,003

946,043

 Held to maturity, at cost 

374,730

417,862

Investment securities:

 

 

 Available for sale, at estimated fair value 

286,399

299,344

 Held to maturity, at cost 

1,496

1,495

Federal Home Loan Bank stock, at cost 

33,869

34,712

Deposits 

2,321,671

2,134,428

Long-term obligations 

321,035

433,790

Equity 

261,905

215,436

Nonperforming assets 

13,188

17,709

 Nonaccrual loans 

10,299

14,524

 Accruing loans past due more than 90 days 

5

7

 Restructured loans 

2,109

2,320

 Other real estate owned 

453

220

 Repossessed assets 

322

638

 

 

 

Asset Quality Ratios:

 

 

Nonaccruing loans to total loans 

0.95%

1.35%

Allowance for loan losses to nonaccruing loans 

180.02

142.60

Allowance for loan losses to nonperforming assets 

140.58

116.95

Allowance for loan losses to total loans 

1.71

1.92

Nonperforming assets to total assets 

0.40

0.59

Net charge-offs to average loans 

0.92

1.25

 

 

 

Capital Ratios:

 

 

Shareholders' equity to total assets 

7.92

7.15

Average shareholders' equity to average total assets 

7.64

7.24




















































































LOAN PORTFOLIO COMPOSITION

 

 

 

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

 

 

 

 

At

At

 

December 31,

December 31,

 

2011

2010

 

(in thousands)

 

(unaudited)

Real Estate Loans:

 

 

 Construction 

$ 111,361

$ 115,094

 1-4 Family Residential 

247,479

219,031

 Other 

206,519

200,723

Commercial Loans 

143,552

148,761

Municipal Loans 

207,261

196,594

Loans to Individuals 

171,058

197,717

Total Loans

$ 1,087,230

$ 1,077,920






































































































































































































































































































































































































 

 

 

 

 

 

 

At or for the

At or for the

 

Three Months

Years

 

Ended December 31,

Ended December 31,

 

2011

2010

2011

2010

 

(dollars in thousands)

(dollars in thousands)

 

(unaudited)

(unaudited)

 

 

 

 

 

Selected Operating Data:

 

 

 

 

Total interest income

$ 32,756

$ 32,809

$ 131,038

$ 131,374

Total interest expense

8,191

10,477

35,631

45,307

Net interest income

24,565

22,332

95,407

86,067

Provision for loan losses

2,044

4,409

7,496

13,737

Net interest income after provision for loan losses

22,521

17,923

87,911

72,330

Noninterest income

 

 

 

 

Deposit services

3,938

4,075

15,943

16,819

Gain on sale of securities available for sale

3,060

2,765

12,732

25,789

 

 

 

 

 

Total other-than-temporary impairment losses


– 

– 

(39)

Portion of loss recognized in other comprehensive

 

 

 

 

income (before taxes)




(36)

Net impairment losses recognized in earnings




(75)

 

 

 

 

 

Gain on sale of loans

263

554

1,230

1,751

Trust income

642

632

2,610

2,368

Bank owned life insurance income

252

288

1,087

1,155

Other

929

861

3,950

3,589

Total noninterest income

9,084

9,175

37,552

51,396

Noninterest expense

 

 

 

 

Salaries and employee benefits

10,828

10,909

45,421

43,957

Occupancy expense

1,840

1,755

7,205

6,780

Equipment expense

497

458

2,055

1,899

Advertising, travel & entertainment

720

622

2,414

2,319

ATM and debit card expense

271

223

987

825

Director fees

330

360

914

950

Supplies

175

237

746

902

Professional fees

577

652

2,160

2,015

Postage

182

188

725

800

Telephone and communications

358

375

1,325

1,443

FDIC Insurance

107

737

1,817

2,909

Other

1,919

1,712

6,579

6,515

Total noninterest expense

17,804

18,228

72,348

71,314

Income before income tax expense

13,801

8,870

53,115

52,412

Provision for income tax expense

3,089

1,670

11,175

11,966

Net income

10,712

7,200

41,940

40,446

 Less: Net (income) loss attributable to the noncontrolling interest


346

(1,358)

(955)

Net income attributable to Southside Bancshares, Inc.

$ 10,712

$ 7,546

$ 40,582

$ 39,491

 

 

 

 

 

Common share data attributable to Southside Bancshares, Inc:

 

 

 

 

Weighted-average basic shares outstanding

16,473

16,402

16,448

16,522

Weighted-average diluted shares outstanding

16,483

16,407

16,456

16,550

Net income per common share

 

 

 

 

Basic

$ 0.65

$ 0.46

$ 2.47

$ 2.39

Diluted

0.65

0.46

2.47

2.39

Book value per common share



15.88

13.05

Cash dividend declared per common share

0.38

0.34

0.90

0.85

























































































































 

 

 

 

At or for the

At or for the

 

Three Months

Years

 

Ended December 31,

Ended December 31,

 

2011

2010

2011

2010

 

(unaudited)

(unaudited)

 

 

 

 

 

Selected Performance Ratios:

 

 

 

 

Return on average assets

1.28%

0.97%

1.29%

1.32%

Return on average shareholders' equity

16.17

13.37

16.93

18.16

Average yield on interest earning assets

4.52

4.83

4.82

5.01

Average yield on interest bearing liabilities

1.28

1.73

1.48

1.94

Net interest spread

3.24

3.10

3.34

3.07

Net interest margin

3.48

3.40

3.61

3.39

 

 

 

 

 

Average interest earnings assets to average interest

bearing liabilities 

122.03

120.82

 121.75

119.85

Noninterest expense to average total assets

2.13

2.34

2.31

2.38

Efficiency ratio

53.16

57.43

55.21

58.39


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)

 

Years Ended

 

December 31, 2011

December 31, 2010

 

AVG

BALANCE

INTEREST

AVG

YIELD

AVG

BALANCE

INTEREST

AVG

YIELD

ASSETS

 

 

 

 

 

 

INTEREST EARNING ASSETS:

 

 

 

 

 

 

Loans (1) (2)

$ 1,054,882

$ 70,533

6.69%

$1,031,858

$73,230

7.10%

Loans Held For Sale

3,415

133

3.89%

5,123

189

3.69%

Securities:

 

 

 

 

 

 

 Investment Securities (Taxable)(4)

6,056

64

1.06%

9,156

91

0.99%

 Investment Securities (Tax-Exempt)(3)(4)

293,044

18,776

6.41%

245,874

16,515

6.72%

 Mortgage-backed and Related Securities (4)

1,531,088

51,467

3.36%

1,460,785

50,130

3.43%

 Total Securities

1,830,188

70,307

3.84%

1,715,815

66,736

3.89%

FHLB stock and other investments, at cost

30,937

233

0.75%

37,973

259

0.68%

Interest Earning Deposits

7,833

18

0.23%

13,880

32

0.23%

Total Interest Earning Assets

2,927,255

141,224

4.82%

2,804,649

140,446

5.01%

NONINTEREST EARNING ASSETS:

 

 

 

 

 

 

Cash and Due From Banks

41,280

 

 

43,881

 

 

Bank Premises and Equipment

50,627

 

 

48,709

 

 

Other Assets

138,297

 

 

124,052

 

 

Less: Allowance for Loan Loss

(18,965)

 

 

(19,135)

 

 

Total Assets

$ 3,138,494

 

 

$ 3,002,156

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

INTEREST BEARING LIABILITIES:

 

 

 

 

 

 

Savings Deposits

$ 86,417

215

0.25%

$ 74,668

324

0.43%

Time Deposits

860,614

11,229

1.30%

741,712

13,514

1.82%

Interest Bearing Demand Deposits

807,344

4,203

0.52%

723,315

5,131

0.71%

Total Interest Bearing Deposits

1,754,375

15,647

0.89%

1,539,695

18,969

1.23%

Short-term Interest Bearing Liabilities

297,960

6,577

2.21%

309,649

7,563

2.44%

Long-term Interest Bearing Liabilities – FHLB Dallas

291,586

10,141

3.48%

430,485

15,500

3.60%

Long-term Debt (5)

60,311

3,266

5.42%

60,311

3,275

5.43%

Total Interest Bearing Liabilities

2,404,232

35,631

1.48%

2,340,140

45,307

1.94%

NONINTEREST BEARING LIABILITIES:

 

 

 

 

 

 

Demand Deposits

459,594

 

 

415,162

 

 

Other Liabilities

33,875

 

 

28,132

 

 

Total Liabilities

2,897,701

 

 

2,783,434

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY (6)

240,793

 

 

218,722

 

 

Total Liabilities and Shareholders' Equity

$ 3,138,494

 

 

$ 3,002,156

 

 

NET INTEREST INCOME

 

$ 105,593

 

 

$ 95,139

 

NET INTEREST MARGIN ON AVERAGE EARNING ASSETS

 

 

3.61%

 

 

3.39%

NET INTEREST SPREAD

 

 

3.34%

 

 

3.07%

 

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

(2) Interest income includes taxable-equivalent adjustments of $3,930 and $3,446 for the years ended December 31, 2011 and December 31, 2010, respectively.

(3) Interest income includes taxable-equivalent adjustments of $6,256 and $5,626 for the years ended December 31, 2011 and December 31, 2010, 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 Fort Worth Bancshares, Inc. to Magnolia Trust Company I in connection with the issuance by Magnolia Trust Company I of $3.5 million of trust preferred securities.

(6) Includes average equity of noncontrolling interest of $1,112 and $1,248 for the years ended December 31, 2011 and December 31, 2010, respectively.

 

 

 

 

 

 

 

Note: As of December 31, 2011 and 2010, loans totaling $10,299 and $14,524, respectively, were on nonaccrual status. The policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate










































































































































































































 

AVERAGE BALANCES AND YIELDS

 

(dollars in thousands)

 

(unaudited)

 

Three Months Ended

 

December 31, 2011

December 31, 2010

 

AVG

BALANCE

INTEREST

AVG

YIELD

AVG

BALANCE

INTEREST

AVG

YIELD

ASSETS

 

 

 

 

 

 

INTEREST EARNING ASSETS:

 

 

 

 

 

 

Loans (1) (2)

$ 1,069,612

$ 17,090

6.34%

$ 1,061,101

$ 18,709

7.00%

Loans Held For Sale

3,418

33

3.83%

6,944

64

3.66

Securities:

 

 

 

 

 

 

 Investment Securities (Taxable)(4)

6,103

15

0.98%

8,816

19

0.86%

 Investment Securities (Tax-Exempt)(3)(4)

282,042

4,578

6.44%

262,018

4,239

6.42%

 Mortgage-backed and Related Securities (4)

1,700,180

13,568

3.17%

1,512,196

12,193

3.20%

 Total Securities

1,988,325

18,161

3.62%

1,783,030

16,451

3.66%

FHLB stock and other investments, at cost

33,285

51

0.61%

36,496

59

0.64%

Interest Earning Deposits

3,886

3

0.31%

9,067

13

0.57%

Total Interest Earning Assets

3,098,526

35,338

4.52%

2,896,638

35,296

4.83%

NONINTEREST EARNING ASSETS:

 

 

 

 

 

 

Cash and Due From Banks

38,938

 

 

44,349

 

 

Bank Premises and Equipment

50,794

 

 

50,123

 

 

Other Assets

147,327

 

 

124,386

 

 

Less: Allowance for Loan Loss

(18,093)

 

 

(19,302)

 

 

Total Assets

$ 3,317,492

 

 

$ 3,096,194

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 


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