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Southside Bancshares, Inc. Announces Financial Results for the Third Quarter Ended September 30, 2023
Source: Nasdaq GlobeNewswire / 26 Oct 2023 04:45:01 America/Chicago
- Third quarter net income of $18.4 million;
- Linked quarter loan growth of 2.1%;
- Third quarter earnings per diluted common share of $0.60;
- Annualized return on third quarter average assets of 0.93%;
- Annualized return on third quarter average tangible common equity of 13.17%(1); and
- Nonperforming assets remain low at 0.05% of total assets.
TYLER, Texas, Oct. 26, 2023 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended September 30, 2023. Southside reported net income of $18.4 million for the three months ended September 30, 2023, a decrease of $8.5 million, or 31.5%, compared to $27.0 million for the same period in 2022. Earnings per diluted common share decreased $0.24, or 28.6%, to $0.60 for the three months ended September 30, 2023, from $0.84 for the same period in 2022. The annualized return on average shareholders’ equity for the three months ended September 30, 2023, was 9.50%, compared to 14.23% for the same period in 2022. The annualized return on average assets was 0.93% for the three months ended September 30, 2023, compared to 1.43% for the same period in 2022.
“Southside reported third quarter earnings per diluted common share of $0.60, and a 13.17% return on average tangible common equity,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “Linked quarter net income decreased due to recording a $7.0 million provision for credit losses. The increase in provision for credit losses was driven by increased economic and repricing concerns forecasted in our CECL model while our asset quality metrics remained strong with a ratio of nonperforming assets to total assets of 0.05%. Linked quarter, loans increased $91.6 million, or 2.1% and deposits increased $231.9 million, or 3.8%. The increase in deposits was due to an increase in public funds primarily from two of our contractual municipal depositories. Our tax-equivalent net interest margin linked quarter decreased 15 basis points primarily due to these higher cost deposits along with continued overall higher funding costs.”
Operating Results for the Three Months Ended September 30, 2023
Net income was $18.4 million for the three months ended September 30, 2023, compared to $27.0 million for the same period in 2022, a decrease of $8.5 million, or 31.5%. Earnings per diluted common share were $0.60 and $0.84 for the three months ended September 30, 2023 and 2022, respectively. The decrease in net income was primarily a result of the increase in the provision for credit losses, the decrease in net interest income and the increase in noninterest expense, partially offset by the decrease in income tax expense and the increase in noninterest income. Annualized returns on average assets and average shareholders’ equity for the three months ended September 30, 2023 were 0.93% and 9.50%, respectively, compared to 1.43% and 14.23%, respectively, for the three months ended September 30, 2022. Our efficiency ratio and tax-equivalent efficiency ratio(1) were 54.86% and 52.29%, respectively, for the three months ended September 30, 2023, compared to 50.09% and 47.42%, respectively, for the three months ended September 30, 2022, and 53.54% and 51.06%, respectively, for the three months ended June 30, 2023.
Net interest income for the three months ended September 30, 2023 was $53.3 million, compared to $55.5 million for the same period in 2022, a decrease of 4.0%. The decrease in net interest income was due to the increase in interest expense on our interest bearing liabilities due to higher interest rates and an increase in the average balance of our interest bearing liabilities, partially offset by the increase in interest income, a result of the increase in the average yield and average balance of interest earning assets. Linked quarter, net interest income decreased $0.6 million, or 1.2%, compared to $53.9 million during the three months ended June 30, 2023. The decrease in net interest income was largely due to the increase in the average rate paid on our interest bearing liabilities, partially offset by increases in the average yield of interest earning assets and average balance of interest earning assets.
Our net interest margin and tax-equivalent net interest margin(1) decreased to 2.85% and 3.02%, respectively, for the three months ended September 30, 2023, compared to 3.15% and 3.36%, respectively, for the same period in 2022. Linked quarter, net interest margin and tax-equivalent net interest margin(1) decreased from 2.99% and 3.17%, respectively for the three months ended June 30, 2023.
Noninterest income was $10.8 million for the three months ended September 30, 2023, an increase of $0.6 million, or 5.5%, compared to $10.3 million for the same period in 2022. The increase was primarily due to increases in deposit services income and trust fees. On a linked quarter basis, noninterest income increased $0.4 million, or 3.6%, compared to the three months ended June 30, 2023. The increase was due to a net gain on sale of securities AFS during the third quarter, partially offset by decreases in net gain on sale of equity securities and other noninterest income.
Noninterest expense increased $2.1 million, or 6.2%, to $35.6 million for the three months ended September 30, 2023, compared to $33.5 million for the same period in 2022, due to increases in other noninterest expense, software and data processing expense and FDIC insurance. On a linked quarter basis, noninterest expense increased by $0.6 million, or 1.6%, compared to the three months ended June 30, 2023.
Income tax expense decreased $0.8 million, or 19.5%, for the three months ended September 30, 2023, compared to the same period in 2022. On a linked quarter basis, income tax expense decreased $1.4 million, or 31.7%. Our effective tax rate (“ETR”) increased to 14.5% for the three months ended September 30, 2023, compared to 12.6% for the three months ended September 30, 2022, and decreased from 15.5% for the three months ended June 30, 2023. The higher ETR for the three months ended September 30, 2023 compared to the same period in 2022, was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income.
Operating Results for the Nine Months Ended September 30, 2023
Net income was $69.4 million for the nine months ended September 30, 2023, compared to $77.4 million for the same period in 2022, a decrease of $8.0 million, or 10.3%. Earnings per diluted common share were $2.24 for the nine months ended September 30, 2023, compared to $2.39 for the same period in 2022, a decrease of 6.3%. The decrease in net income was primarily a result of increases in noninterest expense, provision for credit losses and income tax expense, partially offset by increases in net interest income and noninterest income. Returns on average assets and average shareholders’ equity for the nine months ended September 30, 2023 were 1.20% and 12.21%, respectively, compared to 1.42% and 12.92%, respectively, for the nine months ended September 30, 2022. Our efficiency ratio and tax-equivalent efficiency ratio(1) were 53.99% and 51.44%, respectively, for the nine months ended September 30, 2023, compared to 50.46% and 47.76%, respectively, for the nine months ended September 30, 2022.
Net interest income was $160.5 million for the nine months ended September 30, 2023, compared to $155.5 million for the same period in 2022, due to the increase in interest income, a result of the increase in the average yield and average balance of our interest earning assets, partially offset by the increase in average rate paid and average balance of our interest bearing liabilities.
Our net interest margin and tax-equivalent net interest margin(1) were 2.95% and 3.13%, respectively, for the nine months ended September 30, 2023, compared to 3.08% and 3.29%, respectively, for the same period in 2022. The decrease in net interest margin was due to larger average rate and balance increases on our interest-bearing liabilities when compared to the interest earning assets during the nine months ended September 30, 2023.
Noninterest income was $33.3 million for the nine months ended September 30, 2023, an increase of $3.2 million, or 10.8%, compared to $30.1 million for the same period in 2022. The increase was due to a net gain on sale of equity securities and an increase in BOLI income related to death benefits realized in the first quarter of 2023, partially offset by an increase in net loss on sale of securities AFS and a decrease in other noninterest income.
Noninterest expense was $105.4 million for the nine months ended September 30, 2023, compared to $96.8 million for the same period in 2022, an increase of $8.6 million, or 8.9%, due to increases in salaries and employee benefits, other noninterest expense, software and data processing expense and FDIC insurance.
Income tax expense increased $1.9 million, or 18.5%, for the nine months ended September 30, 2023, compared to the same period in 2022. Our ETR was approximately 15.0% and 11.8% for the nine months ended September 30, 2023 and 2022, respectively. The higher ETR for the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income.
Balance Sheet Data
At September 30, 2023, Southside had $7.97 billion in total assets, compared to $7.56 billion at December 31, 2022 and $7.45 billion at September 30, 2022.
Loans at September 30, 2023 were $4.42 billion, an increase of $357.1 million, or 8.8%, compared to $4.06 billion at September 30, 2022. Linked quarter, loans increased $91.6 million, or 2.1%, due to increases of $63.2 million in construction loans, $17.0 million in commercial real estate loans, $6.3 million in municipal loans, $4.6 million in 1-4 family residential loans, and $2.1 million in commercial loans. These increases were partially offset by a decrease of $1.5 million in loans to individuals.
Securities at September 30, 2023 were $2.64 billion, an increase of $67.7 million, or 2.6%, compared to $2.58 billion at September 30, 2022. Linked quarter, securities decreased $4.8 million, or 0.2%, from $2.65 billion at June 30, 2023.
Deposits at September 30, 2023 were $6.35 billion, an increase of $168.4 million, or 2.7%, compared to $6.18 billion at September 30, 2022. Linked quarter, deposits increased $231.9 million, or 3.8%, from $6.12 billion at June 30, 2023. During the three months ended September 30, 2023, public fund deposits increased $265.8 million, or 33.1%, and brokered deposits increased $19.6 million, or 2.5%, compared to June 30, 2023.
At September 30, 2023, we had 181,094 total deposit accounts with an average balance of $31,000. Our estimated uninsured deposits was 36.2% as of September 30, 2023. When excluding affiliate deposits (Southside-owned deposits) and public fund deposits (all collateralized), our total estimated deposits without insurance or collateral was 19.4% as of September 30, 2023. We continued to increase interest rates paid on deposits during the quarter in order to retain deposits. Our noninterest bearing deposits represent approximately 23% of total deposits. Linked quarter, our cost of interest bearing deposits increased 55 basis points from 2.03% in the prior quarter to 2.58%. Linked quarter, our cost of total deposits increased 48 basis points from 1.50% in the prior quarter to 1.98%.
Our cost of interest bearing deposits increased 169 basis points, from 0.47% for the nine months ended September 30, 2022, to 2.16% for the nine months ended September 30, 2023. Our cost of total deposits increased 128 basis points, from 0.34% for the nine months ended September 30, 2022, to 1.62% for the nine months ended September 30, 2023.
Capital Resources and Liquidity
Our capital ratios and contingent liquidity sources remain solid. During the third quarter ended September 30, 2023, we purchased 212,388 shares of the Company’s common stock at an average price of $29.39 authorized pursuant to the Stock Repurchase Plan. Repurchases may be carried out in open market purchases, privately negotiated transactions or pursuant to any trading plan that might be adopted in accordance with Rule 10b5-1 of The Securities Exchange Act of 1934, as amended. The Company has no obligation to repurchase any shares under the Stock Repurchase Plan and may modify, suspend or discontinue the plan at any time. Subsequent to September 30, 2023, and through October 24, 2023, we purchased 141,480 shares of common stock at an average price of $28.56 pursuant to the Stock Repurchase Plan.
We utilized the Federal Reserve’s Bank Term Funding Program (“BTFP”) to reduce our overall funding costs and to enhance our interest rate risk position. As of September 30, 2023, our BTFP borrowings of $291.3 million were at a cost of 4.46%. As of September 30, 2023, out total available contingent liquidity, net of current outstanding borrowings, was $2.4 billion, consisting of FHLB advances, Federal Reserve Discount Window and correspondent bank lines of credit.
Asset Quality
Nonperforming assets at September 30, 2023 were $4.4 million, or 0.05% of total assets, a decrease of $7.3 million, or 62.6%, compared to $11.7 million, or 0.16% of total assets, at September 30, 2022. The decrease in nonperforming assets was primarily due to the adoption of ASU 2022-02 on January 1, 2023, which allowed for the prospective exclusion of loan modifications that are performing but would have previously required disclosure as troubled debt restructures in nonperforming assets. Linked quarter, nonperforming assets increased from $3.1 million at June 30, 2023 due to an increase of $1.3 million, or 43.1%, in nonaccrual loans.
The allowance for loan losses totaled $41.8 million, or 0.94% of total loans, at September 30, 2023, compared to $36.5 million, or 0.90% of total loans, at September 30, 2022. The increase in the allowance as a percentage of total loans was primarily due to increased economic and repricing concerns forecasted in our CECL model when compared to September 30, 2022. The allowance for loan losses was $36.3 million, or 0.84% of total loans, at June 30, 2023.
For the three month period ended September 30, 2023, we recorded a provision for credit losses for loans of $6.3 million, compared to a provision for credit losses for loans of $1.3 million and $0.3 million for the three month periods ended September 30, 2022 and June 30, 2023, respectively. Net charge-offs were $0.9 million for the three months ended September 30, 2023, compared to net charge-offs of $0.2 million and $0.3 million for the three months ended September 30, 2022 and June 30, 2023, respectively. Net charge-offs were $1.5 million for the nine months ended September 30, 2023, compared to net charge-offs of $0.2 million for the nine months ended September 30, 2022.
We recorded a provision for credit losses for off-balance-sheet credit exposures of $0.6 million and $0.2 million for the three month periods ended September 30, 2023 and 2022, respectively, and a reversal of provision for credit losses for off-balance-sheet credit exposures of $0.4 million for the three months ended June 30, 2023. We recorded a provision for credit losses for off-balance-sheet credit exposures of $0.2 million for the nine months ended September 30, 2023 and a reversal of provision for credit losses for off-balance-sheet credit exposures of $0.3 million for the nine months ended September 30, 2022. The balance of the allowance for off-balance-sheet credit exposures at September 30, 2023 and 2022, was $3.9 million and $2.1 million, respectively, and is included in other liabilities.
Dividend
Southside Bancshares, Inc. declared a third quarter cash dividend of $0.35 per share on August 3, 2023, which was paid on September 1, 2023, to all shareholders of record as of August 17, 2023.
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(1) Refer to “Non-GAAP Financial Measures” below and to “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for more information and for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.
Conference Call
Southside's management team will host a conference call to discuss its third quarter ended September 30, 2023 financial results on Thursday, October 26, 2023 at 11:00 a.m. CDT. The conference call can be accessed by webcast, for listen-only mode, on the company website, https://investors.southside.com, under Events.
Those interested in participating in the question and answer session, or others who prefer to call-in, can register at https://register.vevent.com/register/BIf8ba20b3feef4841a0555bb85ebcd27b to receive the dial-in number and unique code to access the conference call seamlessly. While not required, it is recommended that those wishing to participate, register 10 minutes prior to the conference call to ensure a more efficient registration process.
For those unable to attend the live event, a webcast recording will be available on the company website, https://investors.southside.com, for at least 30 days, beginning approximately two hours following the conference call.
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 (“FTE”): (i) Net interest income (FTE), (ii) net interest margin (FTE), (iii) net interest spread (FTE), and (iv) efficiency ratio (FTE), which include the effects of taxable-equivalent adjustments using a federal income tax rate of 21% to increase tax-exempt interest income to a tax-equivalent basis. Interest income earned on certain assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments.
Net interest income (FTE), net interest margin (FTE) and net interest spread (FTE). Net interest income (FTE) is a non-GAAP measure that adjusts for the tax-favored status of net interest income from certain loans and investments and is not permitted under GAAP in the consolidated statements of income. We believe this measure to be the preferred industry measurement of net interest income and that 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 (FTE) is the ratio of net interest income (FTE) to average earning assets. The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin. Net interest spread (FTE) is the difference in the average yield on average 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.
Efficiency ratio (FTE). The efficiency ratio (FTE) 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 expense on intangibles and certain nonrecurring expense by the sum of net interest income (FTE) and noninterest income, excluding net gain (loss) on sale of securities available for sale and certain nonrecurring impairments. The most directly comparable financial measure calculated in accordance with GAAP is our efficiency ratio.
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. 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.
Management believes adjusting net interest income, net interest margin and net interest spread to a fully taxable-equivalent basis is a standard practice in the banking industry as these measures provide useful information to make peer comparisons. Tax-equivalent adjustments are reflected in the respective earning asset categories as listed in the “Average Balances with Average Yields and Rates” tables.
A reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.
About Southside Bancshares, Inc.
Southside Bancshares, Inc. is a bank holding company with approximately $7.97 billion in assets as of September 30, 2023, that owns 100% of Southside Bank. Southside Bank currently has 55 branches in Texas and operates a network of 73 ATMs/ITMs.
To learn more about Southside Bancshares, Inc., please visit our investor relations website at https://investors.southside.com. Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data. To receive email notification of company news, events and stock activity, please register on the website under Resources and Investor Email Alerts. Questions or comments may be directed to Lindsey Bailes at (903) 630-7965, or lindsey.bailes@southside.com.
Forward-Looking Statements
Certain statements of other than historical fact that are contained in this press release and in other written materials, documents 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,” “might,” “will,” “would,” “seek,” “intend,” “probability,” “risk,” “goal,” “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 of the effect of our expansion, benefits of the Share Repurchase Plan, trends in asset quality, capital, liquidity, the Company's ability to sell nonperforming assets, expense reductions, planned operational efficiencies and earnings from growth and certain market risk disclosures, including the impact of interest rates, tax reform, inflation, the impacts related to or resulting from 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. Accordingly, our results could materially differ from those that have been estimated. The most significant factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the ongoing impact of higher inflation levels, higher interest rates and general economic and recessionary concerns, all of which could impact economic growth and could cause a reduction in financial transactions and business activities, including decreased deposits and reduced loan originations, our ability to manage liquidity in a rapidly changing and unpredictable market, supply chain disruptions, labor shortages and additional interest rate increases by the Federal Reserve.
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, 2022, under “Part I - Item 1. Forward Looking Information” and “Part I - Item 1A. Risk Factors,” the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, under “Part II - 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)
(Dollars in thousands)As of 2023 2022 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, ASSETS Cash and due from banks $ 105,601 $ 114,707 $ 101,109 $ 106,143 $ 110,620 Interest earning deposits 106,094 14,059 151,999 9,276 3,476 Federal funds sold 114,128 78,347 57,384 83,833 81,031 Securities available for sale, at estimated fair value 1,335,560 1,339,821 1,437,222 1,299,014 1,424,562 Securities held to maturity, at net carrying value 1,307,886 1,308,472 1,308,457 1,326,729 1,151,205 Total securities 2,643,446 2,648,293 2,745,679 2,625,743 2,575,767 Federal Home Loan Bank stock, at cost 12,778 10,801 16,696 9,190 12,887 Loans held for sale 1,382 1,666 407 667 421 Loans 4,420,633 4,329,043 4,152,644 4,147,691 4,063,495 Less: Allowance for loan losses (41,760 ) (36,303 ) (36,332 ) (36,515 ) (36,506 ) Net loans 4,378,873 4,292,740 4,116,312 4,111,176 4,026,989 Premises & equipment, net 139,473 139,801 141,363 141,256 142,653 Goodwill 201,116 201,116 201,116 201,116 201,116 Other intangible assets, net 3,295 3,702 4,144 4,622 5,137 Bank owned life insurance 135,737 134,951 134,635 133,911 133,394 Other assets 130,545 167,069 121,501 131,703 160,256 Total assets $ 7,972,468 $ 7,807,252 $ 7,792,345 $ 7,558,636 $ 7,453,747 LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest bearing deposits $ 1,431,285 $ 1,466,756 $ 1,543,413 $ 1,671,562 $ 1,759,959 Interest bearing deposits 4,918,286 4,650,931 4,294,807 4,526,457 4,421,200 Total deposits 6,349,571 6,117,687 5,838,220 6,198,019 6,181,159 Other borrowings and Federal Home Loan Bank borrowings 608,038 683,348 958,810 374,511 318,252 Subordinated notes, net of unamortized debt issuance costs 93,838 93,796 98,710 98,674 98,639 Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,269 60,267 60,266 60,265 60,264 Other liabilities 132,157 86,993 85,309 81,170 87,797 Total liabilities 7,243,873 7,042,091 7,041,315 6,812,639 6,746,111 Shareholders' equity 728,595 765,161 751,030 745,997 707,636 Total liabilities and shareholders' equity $ 7,972,468 $ 7,807,252 $ 7,792,345 $ 7,558,636 $ 7,453,747 Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars and shares in thousands, except per share data)Three Months Ended 2023 2022 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Income Statement: Total interest income $ 93,078 $ 86,876 $ 80,848 $ 75,128 $ 66,880 Total interest expense 39,805 32,960 27,495 18,286 11,365 Net interest income 53,273 53,916 53,353 56,842 55,515 Provision for (reversal of) credit losses 6,987 (74 ) (40 ) 2,086 1,494 Net interest income after provision for (reversal of) credit losses 46,286 53,990 53,393 54,756 54,021 Noninterest income Deposit services 6,479 6,291 6,422 6,478 6,241 Net gain (loss) on sale of securities available for sale 11 (3,455 ) (2,146 ) — (99 ) Net gain on sale of equity securities — 2,642 2,416 — — Gain on sale of loans 96 185 104 36 109 Trust fees 1,522 1,490 1,467 1,571 1,407 Bank owned life insurance 790 756 1,675 516 720 Brokerage services 760 904 697 727 701 Other 1,178 1,651 1,398 1,438 1,190 Total noninterest income 10,836 10,464 12,033 10,766 10,269 Noninterest expense Salaries and employee benefits 21,241 21,376 21,856 20,967 21,368 Net occupancy 3,796 3,690 3,734 3,973 3,847 Advertising, travel & entertainment 1,062 854 1,050 1,188 789 ATM expense 358 320 355 360 317 Professional fees 1,472 1,192 1,372 1,473 1,412 Software and data processing 2,432 2,264 2,055 1,741 1,736 Communications 359 348 327 387 497 FDIC insurance 902 1,220 544 511 485 Amortization of intangibles 407 442 478 515 550 Other 3,524 3,287 3,078 2,446 2,463 Total noninterest expense 35,553 34,993 34,849 33,561 33,464 Income before income tax expense 21,569 29,461 30,577 31,961 30,826 Income tax expense 3,120 4,568 4,543 4,293 3,875 Net income $ 18,449 $ 24,893 $ 26,034 $ 27,668 $ 26,951 Common Share Data: Weighted-average basic shares outstanding 30,502 30,721 31,372 31,896 32,112 Weighted-average diluted shares outstanding 30,543 30,754 31,464 31,964 32,221 Common shares outstanding end of period 30,338 30,532 31,121 31,547 32,127 Earnings per common share Basic $ 0.60 $ 0.81 $ 0.83 $ 0.87 $ 0.84 Diluted 0.60 0.81 0.83 0.87 0.84 Book value per common share 24.02 25.06 24.13 23.65 22.03 Tangible book value per common share 17.28 18.35 17.54 17.13 15.61 Cash dividends paid per common share 0.35 0.35 0.35 0.38 0.34 Selected Performance Ratios: Return on average assets 0.93 % 1.29 % 1.38 % 1.47 % 1.43 % Return on average shareholders’ equity 9.50 13.32 13.92 15.08 14.23 Return on average tangible common equity (1) 13.17 18.59 19.36 21.35 19.94 Average yield on earning assets (FTE) (1) 5.15 5.00 4.76 4.43 4.00 Average rate on interest bearing liabilities 2.84 2.45 2.14 1.48 0.92 Net interest margin (FTE) (1) 3.02 3.17 3.21 3.40 3.36 Net interest spread (FTE) (1) 2.31 2.55 2.62 2.95 3.08 Average earning assets to average interest bearing liabilities 133.24 134.12 137.67 143.66 142.83 Noninterest expense to average total assets 1.79 1.82 1.85 1.78 1.77 Efficiency ratio (FTE) (1) 52.29 51.06 50.99 46.38 47.42 (1) Refer to “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.
Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars in thousands)Three Months Ended 2023 2022 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Nonperforming Assets: $ 4,381 $ 3,059 $ 3,180 $ 10,862 $ 11,717 Nonaccrual loans 4,316 3,017 3,169 2,846 3,039 Accruing loans past due more than 90 days — — — — — Restructured loans (1) 15 — — 7,849 8,481 Other real estate owned 50 — — 93 162 Repossessed assets — 42 11 74 35 Asset Quality Ratios: Ratio of nonaccruing loans to: Total loans 0.10 % 0.07 % 0.08 % 0.07 % 0.07 % Ratio of nonperforming assets to: Total assets 0.05 0.04 0.04 0.14 0.16 Total loans 0.10 0.07 0.08 0.26 0.29 Total loans and OREO 0.10 0.07 0.08 0.26 0.29 Ratio of allowance for loan losses to: Nonaccruing loans 967.56 1,203.28 1,146.48 1,283.03 1,201.25 Nonperforming assets 953.21 1,186.76 1,142.52 336.17 311.56 Total loans 0.94 0.84 0.87 0.88 0.90 Net charge-offs (recoveries) to average loans outstanding 0.08 0.03 0.03 0.05 0.02 Capital Ratios: Shareholders’ equity to total assets 9.14 9.80 9.64 9.87 9.49 Common equity tier 1 capital 12.27 12.32 12.73 12.63 12.98 Tier 1 risk-based capital 13.31 13.37 13.81 13.70 14.07 Total risk-based capital 15.71 15.68 16.28 16.11 16.50 Tier 1 leverage capital 9.61 9.69 9.83 9.96 10.09 Period end tangible equity to period end tangible assets (2) 6.75 7.37 7.19 7.35 6.92 Average shareholders’ equity to average total assets 9.76 9.72 9.94 9.72 10.02 (1) Pursuant to our adoption of ASU 2022-02, effective January 1, 2023, we prospectively discontinued the recognition and measurement guidance previously required on troubled debt restructures. As a result, “restructured” loans beginning March 31, 2023, exclude any loan modifications that are performing but would have previously required disclosure as troubled debt restructures.
(2) Refer to the “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars in thousands)Three Months Ended 2023 2022 Loan Portfolio Composition Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Real Estate Loans: Construction $ 720,515 $ 657,354 $ 591,894 $ 559,681 $ 554,345 1-4 Family Residential 689,492 684,878 672,595 663,519 646,692 Commercial 2,117,306 2,100,338 1,990,861 1,987,707 1,901,921 Commercial Loans 385,816 383,724 388,182 412,064 433,538 Municipal Loans 441,512 435,211 438,566 450,067 449,219 Loans to Individuals 65,992 67,538 70,546 74,653 77,780 Total Loans $ 4,420,633 $ 4,329,043 $ 4,152,644 $ 4,147,691 $ 4,063,495 Summary of Changes in Allowances: Allowance for Loan Losses Balance at beginning of period $ 36,303 $ 36,332 $ 36,515 $ 36,506 $ 35,449 Loans charged-off (1,262 ) (737 ) (633 ) (864 ) (686 ) Recoveries of loans charged-off 378 430 362 383 449 Net loans (charged-off) recovered (884 ) (307 ) (271 ) (481 ) (237 ) Provision for (reversal of) loan losses 6,341 278 88 490 1,294 Balance at end of period $ 41,760 $ 36,303 $ 36,332 $ 36,515 $ 36,506 Allowance for Off-Balance-Sheet Credit Exposures Balance at beginning of period $ 3,207 $ 3,559 $ 3,687 $ 2,091 $ 1,891 Provision for (reversal of) off-balance-sheet credit exposures 646 (352 ) (128 ) 1,596 200 Balance at end of period $ 3,853 $ 3,207 $ 3,559 $ 3,687 $ 2,091 Total Allowance for Credit Losses $ 45,613 $ 39,510 $ 39,891 $ 40,202 $ 38,597 Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars in thousands)Nine Months Ended September 30, 2023 2022 Income Statement: Total interest income $ 260,802 $ 177,853 Total interest expense 100,260 22,354 Net interest income 160,542 155,499 Provision for (reversal of) credit losses 6,873 1,155 Net interest income after provision for (reversal of) credit losses 153,669 154,344 Noninterest income Deposit services 19,192 19,365 Net gain (loss) on sale of securities available for sale (5,590 ) (3,819 ) Net gain on sale of equity securities 5,058 — Gain on sale of loans 385 495 Trust fees 4,479 4,421 Bank owned life insurance 3,221 2,131 Brokerage services 2,361 2,608 Other 4,227 4,890 Total noninterest income 33,333 30,091 Noninterest expense Salaries and employee benefits 64,473 61,666 Net occupancy 11,220 11,157 Advertising, travel & entertainment 2,966 2,242 ATM expense 1,033 954 Professional fees 4,036 3,486 Software and data processing 6,751 5,106 Communications 1,034 1,509 FDIC insurance 2,666 1,434 Amortization of intangibles 1,327 1,758 Other 9,889 7,453 Total noninterest expense 105,395 96,765 Income before income tax expense 81,607 87,670 Income tax expense 12,231 10,318 Net income $ 69,376 $ 77,352 Common Share Data: Weighted-average basic shares outstanding 30,862 32,195 Weighted-average diluted shares outstanding 30,916 32,341 Common shares outstanding end of period 30,338 32,127 Earnings per common share Basic $ 2.25 $ 2.40 Diluted 2.24 2.39 Book value per common share 24.02 22.03 Tangible book value per common share 17.28 15.61 Cash dividends paid per common share 1.05 1.02 Selected Performance Ratios: Return on average assets 1.20 % 1.42 % Return on average shareholders’ equity 12.21 12.92 Return on average tangible common equity (1) 16.98 17.74 Average yield on earning assets (FTE) (1) 4.97 3.74 Average rate on interest bearing liabilities 2.49 0.63 Net interest margin (FTE) (1) 3.13 3.29 Net interest spread (FTE) (1) 2.48 3.11 Average earning assets to average interest bearing liabilities 134.94 143.10 Noninterest expense to average total assets 1.82 1.77 Efficiency ratio (FTE) (1) 51.44 47.76 (1) Refer to “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.
Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars in thousands)Nine Months Ended September 30, 2023 2022 Nonperforming Assets: $ 4,381 $ 11,717 Nonaccrual loans 4,316 3,039 Accruing loans past due more than 90 days — — Restructured loans(1) 15 8,481 Other real estate owned 50 162 Repossessed assets — 35 Asset Quality Ratios: Ratio of nonaccruing loans to: Total loans 0.10 % 0.07 % Ratio of nonperforming assets to: Total assets 0.05 0.16 Total loans 0.10 0.29 Total loans and OREO 0.10 0.29 Ratio of allowance for loan losses to: Nonaccruing loans 967.56 1,201.25 Nonperforming assets 953.21 311.56 Total loans 0.94 0.90 Net charge-offs (recoveries) to average loans outstanding 0.05 0.01 Capital Ratios: Shareholders’ equity to total assets 9.14 9.49 Common equity tier 1 capital 12.27 12.98 Tier 1 risk-based capital 13.31 14.07 Total risk-based capital 15.71 16.50 Tier 1 leverage capital 9.61 10.09 Period end tangible equity to period end tangible assets(2) 6.75 6.92 Average shareholders’ equity to average total assets 9.81 10.97 (1) Pursuant to our adoption of ASU 2022-02, effective January 1, 2023, we prospectively discontinued the recognition and measurement guidance previously required on troubled debt restructures. As a result, “restructured” loans beginning March 31, 2023, exclude any loan modifications that are performing but would have previously required disclosure as troubled debt restructures.
(2) Refer to the “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars in thousands)Nine Months Ended September 30, Loan Portfolio Composition 2023 2022 Real Estate Loans: Construction $ 720,515 $ 554,345 1-4 Family Residential 689,492 646,692 Commercial 2,117,306 1,901,921 Commercial Loans 385,816 433,538 Municipal Loans 441,512 449,219 Loans to Individuals 65,992 77,780 Total Loans $ 4,420,633 $ 4,063,495 Summary of Changes in Allowances: Allowance for Loan Losses Balance at beginning of period $ 36,515 $ 35,273 Loans charged-off (2,632 ) (1,720 ) Recoveries of loans charged-off 1,170 1,505 Net loans (charged-off) recovered (1,462 ) (215 ) Provision for (reversal of) loan losses 6,707 1,448 Balance at end of period $ 41,760 $ 36,506 Allowance for Off-Balance-Sheet Credit Exposures Balance at beginning of period $ 3,687 $ 2,384 Provision for (reversal of) off-balance-sheet credit exposures 166 (293 ) Balance at end of period $ 3,853 $ 2,091 Total Allowance for Credit Losses $ 45,613 $ 38,597 Southside Bancshares, Inc.
Average Balances and Average Yields and Rates (Annualized) (Unaudited)
(Dollars in thousands)The tables that follow show average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities for the periods presented. The interest and related yields presented are on a fully taxable-equivalent basis and are therefore non-GAAP measures. See “Non-GAAP Financial Measures” and “Non-GAAP Reconciliation” for more information.
Three Months Ended September 30, 2023 June 30, 2023 Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate ASSETS Loans (1) $ 4,396,184 $ 64,758 5.84 % $ 4,197,130 $ 59,334 5.67 % Loans held for sale 1,537 26 6.71 % 1,664 23 5.54 % Securities: Taxable investment securities (2) 912,789 8,731 3.79 % 925,445 8,773 3.80 % Tax-exempt investment securities (2) 1,510,044 16,232 4.26 % 1,562,232 16,182 4.15 % Mortgage-backed and related securities (2) 442,908 4,426 3.96 % 401,427 3,830 3.83 % Total securities 2,865,741 29,389 4.07 % 2,889,104 28,785 4.00 % Federal Home Loan Bank stock, at cost, and equity investments 22,363 265 4.70 % 21,480 379 7.08 % Interest earning deposits 37,891 535 5.60 % 56,604 742 5.26 % Federal funds sold 94,441 1,253 5.26 % 59,186 748 5.07 % Total earning assets 7,418,157 96,226 5.15 % 7,225,168 90,011 5.00 % Cash and due from banks 106,348 103,559 Accrued interest and other assets 400,850 419,420 Less: Allowance for loan losses (36,493 ) (36,512 ) Total assets $ 7,888,862 $ 7,711,635 LIABILITIES AND SHAREHOLDERS’ EQUITY Savings accounts $ 622,246 1,458 0.93 % $ 648,560 1,430 0.88 % Certificates of deposit 949,894 9,443 3.94 % 797,992 6,365 3.20 % Interest bearing demand accounts 3,189,048 20,050 2.49 % 2,841,818 13,884 1.96 % Total interest bearing deposits 4,761,188 30,951 2.58 % 4,288,370 21,679 2.03 % Federal Home Loan Bank borrowings 230,184 1,174 2.02 % 211,309 1,032 1.96 % Subordinated notes, net of unamortized debt issuance costs 93,817 962 4.07 % 97,804 994 4.08 % Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,268 1,178 7.75 % 60,266 1,100 7.32 % Repurchase agreements 104,070 1,048 4.00 % 97,915 883 3.62 % Other borrowings 317,913 4,492 5.61 % 631,447 7,272 4.62 % Total interest bearing liabilities 5,567,440 39,805 2.84 % 5,387,111 32,960 2.45 % Noninterest bearing deposits 1,441,738 1,490,445 Accrued expenses and other liabilities 109,490 84,252 Total liabilities 7,118,668 6,961,808 Shareholders’ equity 770,194 749,827 Total liabilities and shareholders’ equity $ 7,888,862 $ 7,711,635 Net interest income (FTE) $ 56,421 $ 57,051 Net interest margin (FTE) 3.02 % 3.17 % Net interest spread (FTE) 2.31 % 2.55 % (1) Interest on loans includes net fees on loans that are not material in amount.
(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.Note: As of September 30, 2023 and June 30, 2023, loans totaling $4.3 million and $3.0 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.
Southside Bancshares, Inc.
Average Balances and Average Yields and Rates (Annualized) (Unaudited)
(Dollars in thousands)Three Months Ended March 31, 2023 December 31, 2022 Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate ASSETS Loans (1) $ 4,128,775 $ 55,453 5.45 % $ 4,103,429 $ 52,650 5.09 % Loans held for sale 1,662 20 4.88 % 1,087 15 5.47 % Securities: Taxable investment securities (2) 690,864 5,712 3.35 % 622,004 4,804 3.06 % Tax-exempt investment securities (2) 1,692,700 16,466 3.95 % 1,730,233 15,652 3.59 % Mortgage-backed and related securities (2) 455,811 4,329 3.85 % 483,914 4,614 3.78 % Total securities 2,839,375 26,507 3.79 % 2,836,151 25,070 3.51 % Federal Home Loan Bank stock, at cost, and equity investments 31,470 245 3.16 % 22,616 212 3.72 % Interest earning deposits 87,924 1,033 4.76 % 10,974 108 3.90 % Federal funds sold 72,630 837 4.67 % 84,858 774 3.62 % Total earning assets 7,161,836 84,095 4.76 % 7,059,115 78,829 4.43 % Cash and due from banks 107,765 108,200 Accrued interest and other assets 398,709 356,248 Less: Allowance for loan losses (36,690 ) (36,602 ) Total assets $ 7,631,620 $ 7,486,961 LIABILITIES AND SHAREHOLDERS’ EQUITY Savings accounts $ 665,919 1,313 0.80 % $ 676,654 758 0.44 % Certificates of deposit 787,887 5,407 2.78 % 645,972 3,035 1.86 % Interest bearing demand accounts 2,983,218 13,186 1.79 % 3,119,682 9,894 1.26 % Total interest bearing deposits 4,437,024 19,906 1.82 % 4,442,308 13,687 1.22 % Federal Home Loan Bank borrowings 404,199 3,141 3.15 % 189,939 1,623 3.39 % Subordinated notes, net of unamortized debt issuance costs 98,693 999 4.11 % 98,657 1,013 4.07 % Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,265 1,031 6.94 % 60,264 901 5.93 % Repurchase agreements 65,435 492 3.05 % 37,416 117 1.24 % Other borrowings 136,700 1,926 5.71 % 85,033 945 4.41 % Total interest bearing liabilities 5,202,316 27,495 2.14 % 4,913,617 18,286 1.48 % Noninterest bearing deposits 1,588,725 1,757,568 Accrued expenses and other liabilities 81,829 88,024 Total liabilities 6,872,870 6,759,209 Shareholders’ equity 758,750 727,752 Total liabilities and shareholders’ equity $ 7,631,620 $ 7,486,961 Net interest income (FTE) $ 56,600 $ 60,543 Net interest margin (FTE) 3.21 % 3.40 % Net interest spread (FTE) 2.62 % 2.95 % (1) Interest on loans includes net fees on loans that are not material in amount.
(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.Note: As of March 31, 2023 and December 31, 2022, loans totaling $3.2 million and $2.8 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.
Southside Bancshares, Inc.
Average Balances and Average Yields and Rates (Annualized) (Unaudited)
(Dollars in thousands)Three Months Ended September 30, 2022 Average Balance Interest Average Yield/Rate ASSETS Loans (1) $ 4,012,547 $ 45,992 4.55 % Loans held for sale 606 7 4.58 % Securities: Taxable investment securities (2) 626,136 4,896 3.10 % Tax-exempt investment securities (2) 1,750,952 14,455 3.28 % Mortgage-backed and related securities (2) 520,501 4,770 3.64 % Total securities 2,897,589 24,121 3.30 % Federal Home Loan Bank stock, at cost, and equity investments 24,013 101 1.67 % Interest earning deposits 18,664 105 2.23 % Federal funds sold 46,106 269 2.31 % Total earning assets 6,999,525 70,595 4.00 % Cash and due from banks 102,840 Accrued interest and other assets 433,532 Less: Allowance for loan losses (35,706 ) Total assets $ 7,500,191 LIABILITIES AND SHAREHOLDERS’ EQUITY Savings accounts $ 685,947 481 0.28 % Certificates of deposit 588,212 1,452 0.98 % Interest bearing demand accounts 3,164,961 5,954 0.75 % Total interest bearing deposits 4,439,120 7,887 0.70 % Federal Home Loan Bank borrowings 173,838 1,078 2.46 % Subordinated notes, net of unamortized debt issuance costs 98,621 1,004 4.04 % Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,263 669 4.40 % Repurchase agreements 30,530 54 0.70 % Other borrowings 98,174 673 2.72 % Total interest bearing liabilities 4,900,546 11,365 0.92 % Noninterest bearing deposits 1,746,245 Accrued expenses and other liabilities 101,881 Total liabilities 6,748,672 Shareholders’ equity 751,519 Total liabilities and shareholders’ equity $ 7,500,191 Net interest income (FTE) $ 59,230 Net interest margin (FTE) 3.36 % Net interest spread (FTE) 3.08 % (1) Interest on loans includes net fees on loans that are not material in amount.
(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.Note: As of September 30, 2022, loans totaling $3.0 million were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.
Southside Bancshares, Inc.
Average Balances and Average Yields and Rates (Annualized) (Unaudited)
(Dollars in thousands)Nine Months Ended September 30, 2023 September 30, 2022 Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate ASSETS Loans(1) $ 4,241,676 $ 179,545 5.66 % $ 3,855,844 $ 120,705 4.19 % Loans held for sale 1,620 69 5.69 % 1,102 33 4.00 % Securities: Taxable investment securities (2) 843,846 23,216 3.68 % 629,413 14,136 3.00 % Tax-exempt investment securities (2) 1,587,656 48,880 4.12 % 1,656,691 40,737 3.29 % Mortgage-backed and related securities (2) 433,335 12,585 3.88 % 501,330 12,025 3.21 % Total securities 2,864,837 84,681 3.95 % 2,787,434 66,898 3.21 % FHLB stock, at cost, and equity investments 25,071 889 4.74 % 20,796 291 1.87 % Interest earning deposits 60,623 2,310 5.09 % 46,972 254 0.72 % Federal funds sold 75,499 2,838 5.03 % 30,837 352 1.53 % Total earning assets 7,269,326 270,332 4.97 % 6,742,985 188,533 3.74 % Cash and due from banks 105,885 103,390 Accrued interest and other assets 406,160 492,173 Less: Allowance for loan losses (36,564 ) (35,746 ) Total assets $ 7,744,807 $ 7,302,802 LIABILITIES AND SHAREHOLDERS’ EQUITY Savings accounts $ 645,415 4,201 0.87 % $ 669,632 1,080 0.22 % CDs 845,851 21,215 3.35 % 556,728 2,624 0.63 % Interest bearing demand accounts 3,005,449 47,120 2.10 % 3,146,350 11,684 0.50 % Total interest bearing deposits 4,496,715 72,536 2.16 % 4,372,710 15,388 0.47 % FHLB borrowings 281,260 5,347 2.54 % 117,724 1,668 1.89 % Subordinated notes, net of unamortized debt issuance costs 96,753 2,955 4.08 % 98,587 3,002 4.07 % Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,266 3,309 7.34 % 60,262 1,496 3.32 % Repurchase agreements 89,282 2,423 3.63 % 27,393 82 0.40 % Other borrowings 362,684 13,690 5.05 % 35,421 718 2.71 % Total interest bearing liabilities 5,386,960 100,260 2.49 % 4,712,097 22,354 0.63 % Noninterest bearing deposits 1,506,431 1,697,779 Accrued expenses and other liabilities 91,784 92,161 Total liabilities 6,985,175 6,502,037 Shareholders’ equity 759,632 800,765 Total liabilities and shareholders’ equity $ 7,744,807 $ 7,302,802 Net interest income (FTE) $ 170,072 $ 166,179 Net interest margin (FTE) 3.13 % 3.29 % Net interest spread (FTE) 2.48 % 3.11 % (1) Interest on loans includes net fees on loans that are not material in amount.
(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.Note: As of September 30, 2023 and 2022, loans totaling $4.3 million and $3.0 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.
Southside Bancshares, Inc.
Non-GAAP Reconciliation (Unaudited)
(Dollars and shares in thousands, except per share data)The following tables set forth the reconciliation of return on average common equity to return on average tangible common equity, book value per share to tangible book value per share, net interest income to net interest income adjusted to a fully taxable-equivalent basis assuming a 21% marginal tax rate for interest earned on tax-exempt assets such as municipal loans and investment securities, along with the calculation of total revenue, adjusted noninterest expense, efficiency ratio (FTE), net interest margin (FTE) and net interest spread (FTE) for the applicable periods presented.
Three Months Ended Nine Months Ended 2023 2022 2023 2022 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Sep 30, Sep 30, Reconciliation of return on average common equity to return on average tangible common equity: Net income $ 18,449 $ 24,893 $ 26,034 $ 27,668 $ 26,951 $ 69,376 $ 77,352 After-tax amortization expense 322 349 378 407 435 1,048 1,389 Adjusted net income available to common shareholders $ 18,771 $ 25,242 $ 26,412 $ 28,075 $ 27,386 $ 70,424 $ 78,741 Average shareholders' equity $ 770,194 $ 749,827 $ 758,750 $ 727,752 $ 751,519 $ 759,632 $ 800,765 Less: Average intangibles for the period (204,658 ) (205,086 ) (205,555 ) (206,049 ) (206,591 ) (205,096 ) (207,172 ) Average tangible shareholders' equity $ 565,536 $ 544,741 $ 553,195 $ 521,703 $ 544,928 $ 554,536 $ 593,593 Return on average tangible common equity 13.17 % 18.59 % 19.36 % 21.35 % 19.94 % 16.98 % 17.74 % Reconciliation of book value per share to tangible book value per share: Common equity at end of period $ 728,595 $ 765,161 $ 751,030 $ 745,997 $ 707,636 $ 728,595 $ 707,636 Less: Intangible assets at end of period (204,411 ) (204,818 ) (205,260 ) (205,738 ) (206,253 ) (204,411 ) (206,253 ) Tangible common shareholders' equity at end of period $ 524,184 $ 560,343 $ 545,770 $ 540,259 $ 501,383 $ 524,184 $ 501,383 Total assets at end of period $ 7,972,468 $ 7,807,252 $ 7,792,345 $ 7,558,636 $ 7,453,747 $ 7,972,468 $ 7,453,747 Less: Intangible assets at end of period (204,411 ) (204,818 ) (205,260 ) (205,738 ) (206,253 ) (204,411 ) (206,253 ) Tangible assets at end of period $ 7,768,057 $ 7,602,434 $ 7,587,085 $ 7,352,898 $ 7,247,494 $ 7,768,057 $ 7,247,494 Period end tangible equity to period end tangible assets 6.75 % 7.37 % 7.19 % 7.35 % 6.92 % 6.75 % 6.92 % Common shares outstanding end of period 30,338 30,532 31,121 31,547 32,127 30,338 32,127 Tangible book value per common share $ 17.28 $ 18.35 $ 17.54 $ 17.13 $ 15.61 $ 17.28 $ 15.61 Reconciliation of efficiency ratio to efficiency ratio (FTE), net interest margin to net interest margin (FTE) and net interest spread to net interest spread (FTE): Net interest income (GAAP) $ 53,273 $ 53,916 $ 53,353 $ 56,842 $ 55,515 $ 160,542 $ 155,499 Tax-equivalent adjustments: Loans 674 673 697 744 742 2,044 2,249 Tax-exempt investment securities 2,474 2,462 2,550 2,957 2,973 7,486 8,431 Net interest income (FTE) (1) 56,421 57,051 56,600 60,543 59,230 170,072 166,179 Noninterest income 10,836 10,464 12,033 10,766 10,269 33,333 30,091 Nonrecurring income (2) (11 ) 226 (1,221 ) — 99 (1,006 ) 2,982 Total revenue $ 67,246 $ 67,741 $ 67,412 $ 71,309 $ 69,598 $ 202,399 $ 199,252 Noninterest expense $ 35,553 $ 34,993 $ 34,849 $ 33,561 $ 33,464 $ 105,395 $ 96,765 Pre-tax amortization expense (407 ) (442 ) (478 ) (515 ) (550 ) (1,327 ) (1,758 ) Nonrecurring expense (3) 17 36 3 26 87 56 148 Adjusted noninterest expense $ 35,163 $ 34,587 $ 34,374 $ 33,072 $ 33,001 $ 104,124 $ 95,155 Efficiency ratio 54.86 % 53.54 % 53.57 % 48.92 % 50.09 % 53.99 % 50.46 % Efficiency ratio (FTE) (1) 52.29 % 51.06 % 50.99 % 46.38 % 47.42 % 51.44 % 47.76 % Average earning assets $ 7,418,157 $ 7,225,168 $ 7,161,836 $ 7,059,115 $ 6,999,525 $ 7,269,326 $ 6,742,985 Net interest margin 2.85 % 2.99 % 3.02 % 3.19 % 3.15 % 2.95 % 3.08 % Net interest margin (FTE) (1) 3.02 % 3.17 % 3.21 % 3.40 % 3.36 % 3.13 % 3.29 % Net interest spread 2.14 % 2.37 % 2.44 % 2.74 % 2.87 % 2.31 % 2.90 % Net interest spread (FTE) (1) 2.31 % 2.55 % 2.62 % 2.95 % 3.08 % 2.48 % 3.11 % (1) These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.
(2) These adjustments may include net gain or loss on sale of securities available for sale, net gain on sale of equity securities, BOLI income related to death benefits realized and other investment income or loss in the periods where applicable.
(3) These adjustments may include foreclosure expenses and branch closure expenses, in the periods where applicable.
