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Southside Bancshares, Inc. Announces Financial Results for the First Quarter Ended March 31, 2022
Источник: Nasdaq GlobeNewswire / 26 апр 2022 06:00:01 America/New_York
- First quarter net income of $25.0 million;
- Linked quarter loan growth, net of Paycheck Protection Program (“PPP”) loans, of 4.8%;
- Annualized return on first quarter average assets of 1.40%;
- Annualized return on first quarter average tangible common equity of 15.20%(1); and
- Nonperforming assets remain low at 0.16% of total assets.
TYLER, Texas, April 26, 2022 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended March 31, 2022. Southside reported net income of $25.0 million for the three months ended March 31, 2022, a decrease of $9.1 million, or 26.7%, compared to $34.1 million for the same period in 2021. Earnings per diluted common share were $0.77 for the three months ended March 31, 2022, compared to $1.04 for the same period in 2021. The annualized return on average shareholders’ equity for the three months ended March 31, 2022 was 11.42%, compared to 15.82% for the same period in 2021. The annualized return on average assets was 1.40% for the three months ended March 31, 2022, compared to 1.99% for the same period in 2021.
“First quarter financial results for 2022, were highlighted by net income of $25 million, earnings per diluted common share of $0.77, linked quarter loan growth, net of PPP loans, of 4.8%, continued strong asset quality metrics and an efficiency ratio of 48.15%,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “The economic conditions and growth prospects for the markets we serve continue to reflect a solid and positive outlook. The DFW and Austin markets remain among the highest performing markets in the nation. This contributed to our outstanding loan growth during the first quarter. Our loan pipeline remains strong and we remain encouraged about loan growth prospects despite the headwinds of future expected loan payoffs.”
Operating Results for the Three Months Ended March 31, 2022
Net income was $25.0 million for the three months ended March 31, 2022, compared to $34.1 million for the same period in 2021, a decrease of $9.1 million, or 26.7%. Earnings per diluted common share were $0.77 and $1.04 for the three months ended March 31, 2022 and 2021, respectively. The decrease in net income was primarily a result of a provision for credit losses of $0.3 million for the three months ended March 31, 2022, compared to a reversal of provision for credit losses of $10.1 million for the same period in 2021 due to the improved economic forecast during the first quarter of 2021. Annualized returns on average assets and average shareholders’ equity for the three months ended March 31, 2022 were 1.40% and 11.42%, respectively, compared to 1.99% and 15.82%, respectively, for the three months ended March 31, 2021. Our efficiency ratio and tax equivalent efficiency ratio(1) were 50.71% and 48.15%, respectively, for the three months ended March 31, 2022, compared to 53.01% and 50.44%, respectively, for the three months ended March 31, 2021, and 50.34% and 47.61%, respectively, for the three months ended December 31, 2021.
Net interest income for the three months ended March 31, 2022 was $48.9 million, compared to $46.3 million for the same period in 2021, an increase of 5.6%. The increase in net interest income compared to the same period in 2021 was due to the decrease in interest expense on our interest bearing liabilities due to the change in the mix of our interest bearing liabilities, and to a lesser extent, the increase in interest income, a result of the increase in the average balance of investment securities, partially offset by a decrease in the interest income from PPP loans. Linked quarter, net interest income decreased $0.5 million, or 1.0%, compared to $49.4 million during the three months ended December 31, 2021. The decrease in net interest income was primarily due to a decrease in the average yield on our average loans.
Our net interest margin and tax equivalent net interest margin(1) increased to 3.03% and 3.22%, respectively, for the three months ended March 31, 2022, compared to 3.01% and 3.20%, respectively, for the same period in 2021. Linked quarter, net interest margin increased two basis points from 3.01% and tax equivalent net interest margin(1) decreased one basis point from 3.23% for the three months ended December 31, 2021.
Noninterest income was $10.7 million for the three months ended March 31, 2022, a decrease of $2.9 million, or 21.3%, compared to $13.6 million for the same period in 2021. The decrease was due to a net loss on sale of securities available for sale (“AFS”) of $1.5 million for the three months ended March 31, 2022, compared to a net gain of $2.0 million for the same period in 2021 and a decrease in gain on sale of loans, partially offset by increases in deposit services income, other noninterest income and trust fees. On a linked quarter basis, noninterest income decreased $1.3 million, or 10.7%, compared to the three months ended December 31, 2021. The decrease was due to a net loss on sale of securities AFS of $1.5 million for the three months ended March 31, 2022, compared to a $0.5 million net gain on sale of securities AFS for the three months ended December 31, 2021.
Noninterest expense was $31.2 million for both of the three-month periods ended March 31, 2022 and 2021. On a linked quarter basis, noninterest expense decreased $0.1 million, or 0.4%, compared to the three months ended December 31, 2021.
Income tax expense decreased $1.6 million, or 33.8%, for the three months ended March 31, 2022, compared to the same period in 2021. On a linked quarter basis, income tax expense decreased $1.7 million, or 34.6%. Our effective tax rate (“ETR”) decreased to 11.2% for the three months ended March 31, 2022, compared to 12.2% for the three months ended March 31, 2021, and 14.4% for the three months ended December 31, 2021, primarily a result of the increase in tax-exempt income as a percentage of pre-tax income.
Balance Sheet Data
At March 31, 2022, we had $7.12 billion in total assets, compared to $7.26 billion at December 31, 2021 and $7.0 billion at March 31, 2021.
Loans at March 31, 2022 were $3.80 billion, an increase of $84.3 million, or 2.3%, compared to $3.72 billion at March 31, 2021. Our PPP loans, a component of the commercial loan category, decreased $207.0 million over that period due to forgiveness payments received for loans funded under the Coronavirus Aid, Relief, and Economic Security Act. Excluding PPP loans, total loans increased $291.3 million, or 8.3%, due to increases of $374.0 million in commercial real estate loans, $48.8 million in municipal loans and $43.4 million in commercial loans (excluding PPP loans). The increases were partially offset by decreases of $115.5 million in construction loans, $52.6 million in 1-4 family residential loans and $6.8 million in loans to individuals. Excluding a $17.1 million decrease in PPP loans during the quarter, linked quarter loans increased $172.9 million, or 4.8%, due to increases of $124.4 million in commercial real estate loans, $42.3 million in construction loans and $12.1 million in municipal loans. This was partially offset by decreases of $3.3 million in 1-4 family residential loans, $1.9 million in loans to individuals and $0.7 million in commercial loans (excluding PPP loans).
Securities at March 31, 2022 were $2.54 billion, a decrease of $104.8 million, or 4.0%, compared to $2.65 billion at March 31, 2021. Linked quarter, securities decreased $314.8 million, or 11.0%, from $2.86 billion at December 31, 2021, a result of the increase in the unrealized loss in the portfolio, sales of securities, and principal payments, which more than offset the securities purchased during the quarter. During the first quarter, we sold approximately $99 million U.S. Agency MBS and $68.1 million U.S. Treasury Notes due to the rising rate environment. In March of 2022, we transferred AFS taxable municipal securities with fair values of approximately $385.8 million, to held to maturity (“HTM”). Subsequent to the end of the quarter, on April 1, 2022, we transferred tax-free municipal securities and U.S. Agency MBS with fair values of approximately $247.7 million and $28.3 million, respectively, to HTM. All transfers from AFS to HTM were at the fair market value on the date of transfer. There was no impact to the income statement as a result of these transfers.
Deposits at March 31, 2022 were $6.07 billion, an increase of $977.8 million, or 19.2%, compared to $5.09 billion at March 31, 2021. Linked quarter, deposits increased $348.1 million, or 6.1%, from $5.72 billion at December 31, 2021. During the three months ended March 31, 2022, brokered deposits increased $380.8 million, or 129.2%, compared to December 31, 2021, and $594.6 million, or 734.3%, compared to March 31, 2021, associated with funding our cash flow hedge swaps in place of the Federal Home Loan Bank advances to obtain lower cost funding.
On March 1, 2022, our board of directors approved a Stock Repurchase Plan, authorizing the repurchase, from time to time, of up to 1.0 million shares of the Company’s outstanding common stock. 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 Exchange Act. The Company has no obligation to repurchase any shares under the Stock Repurchase Plan and may suspend or discontinue the plan at any time. As of March 31, 2022, we had purchased 82,285 shares of common stock at an average price of $40.81 pursuant to the Stock Repurchase Plan. Subsequent to March 31, 2022 and through April 22, 2022, we purchased 139,737 shares of common stock at an average price of $39.67 pursuant to the Stock Repurchase Plan.
Asset Quality
Nonperforming assets at March 31, 2022 were $11.5 million, or 0.16% of total assets, a decrease of $3.9 million, or 25.5%, compared to $15.4 million, or 0.22% of total assets, at March 31, 2021, and a slight decrease from $11.6 million, or 0.16% of total assets, at December 31, 2021. During the three months ended March 31, 2022, nonaccrual loans decreased $0.2 million, or 7.1%.
The allowance for loan losses decreased to $35.5 million, or 0.93% of total loans, at March 31, 2022, compared to $41.5 million, or 1.12% of total loans, at March 31, 2021. The decrease was primarily due to an improved economic forecast and improved asset quality. The allowance for loan losses was $35.3 million, or 0.97% of total loans, at December 31, 2021.
We recorded a provision for credit losses for loans of $0.3 million for the three months ended March 31, 2022, compared to reversals of provision for credit losses for loans of $7.4 million and $2.7 million for the three months ended March 31, 2021 and December 31, 2021, respectively. Net charge-offs were $15,000 for the three months ended March 31, 2022, compared to $0.2 million for the three months ended March 31, 2021 and $34,000 for the three months ended December 31, 2021.
We recorded a provision for credit losses for off-balance-sheet credit exposures of $28,000 for the three months ended March 31, 2022, compared to reversals of provision of $2.8 million and $0.7 million for the three months ended March 31, 2021 and December 31, 2021, respectively. The balance of the allowance for off-balance-sheet credit exposures at March 31, 2022 was $2.4 million and is included in other liabilities.
Dividend
Southside Bancshares, Inc. declared a first quarter cash dividend of $0.34 per share on February 3, 2022, which was paid on March 3, 2022, to all shareholders of record as of February 17, 2022.
(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 first quarter ended March 31, 2022 financial results on Tuesday, April 26, 2022 at 11:00 a.m. CDT. The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 2435789 or by identifying “Southside Bancshares, Inc., First Quarter 2022 Earnings Call.” To listen to the call via webcast, register at https://investors.southside.com.
For those unable to listen to the conference call live, a recording will be available from approximately 2:00 p.m. CDT April 26, 2022 through 2:00 p.m. CDT May 8, 2022 by accessing the company website, https://investors.southside.com.
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 $7.12 billion in assets as of March 31, 2022, that owns 100% of Southside Bank. Southside Bank currently has 56 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 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 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 Russia’s invasion of Ukraine and other economic factors are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future. Accordingly, our results could materially differ from those that have been estimated. The most recent factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the ongoing impact of the COVID-19 pandemic and related variants on our business, financial position, operations and prospects, including our ability to continue our business activities in certain communities we serve, the duration of the pandemic and its continued effects on financial markets, a reduction in financial transactions and business activities resulting in decreased deposits and reduced loan originations, our ability to manage liquidity in a rapidly changing and unpredictable market, supply chain disruptions, labor shortages and interest rate changes by the Federal Reserve and other government actions in response to the pandemic, including regulations or laws enacted to counter the effects of the COVID-19 pandemic on the economy.
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, 2021, under “Part I - Item 1. Forward Looking Information” 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 2022 2021 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, ASSETS Cash and due from banks $ 90,399 $ 91,120 $ 83,346 $ 92,047 $ 78,304 Interest earning deposits 72,158 110,633 3,787 36,441 29,319 Federal funds sold 24,550 — — — — Securities available for sale, at estimated fair value 2,065,984 2,764,325 2,753,104 2,766,035 2,546,924 Securities held to maturity, at net carrying value 474,319 90,780 92,479 94,850 98,159 Total securities 2,540,303 2,855,105 2,845,583 2,860,885 2,645,083 Federal Home Loan Bank stock, at cost 3,757 14,375 27,248 28,081 18,754 Loans held for sale 1,576 1,684 1,131 2,510 2,615 Loans 3,800,916 3,645,162 3,647,585 3,642,346 3,716,598 Less: Allowance for loan losses (35,524 ) (35,273 ) (38,022 ) (42,913 ) (41,454 ) Net loans 3,765,392 3,609,889 3,609,563 3,599,433 3,675,144 Premises & equipment, net 142,880 142,509 142,736 142,835 144,628 Goodwill 201,116 201,116 201,116 201,116 201,116 Other intangible assets, net 6,273 6,895 7,553 8,248 8,978 Bank owned life insurance 131,923 131,232 130,522 116,886 116,209 Other assets 138,788 95,044 83,106 93,926 78,736 Total assets $ 7,119,115 $ 7,259,602 $ 7,135,691 $ 7,182,408 $ 6,998,886 LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest bearing deposits $ 1,630,056 $ 1,644,775 $ 1,596,781 $ 1,501,120 $ 1,383,371 Interest bearing deposits 4,440,343 4,077,552 3,734,874 3,655,047 3,709,272 Total deposits 6,070,399 5,722,327 5,331,655 5,156,167 5,092,643 Other borrowings and Federal Home Loan Bank borrowings 34,067 367,257 679,928 745,151 687,845 Subordinated notes, net of unamortized debt
issuance costs98,569 98,534 98,500 197,312 197,268 Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,261 60,260 60,259 60,258 60,256 Other liabilities 71,578 99,052 87,483 129,120 102,277 Total liabilities 6,334,874 6,347,430 6,257,825 6,288,008 6,140,289 Shareholders' equity 784,241 912,172 877,866 894,400 858,597 Total liabilities and shareholders' equity $ 7,119,115 $ 7,259,602 $ 7,135,691 $ 7,182,408 $ 6,998,886 Southside Bancshares, Inc.
Consolidated Financial Highlights (Unaudited)
(Dollars in thousands)Three Months Ended 2022 2021 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Income Statement: Total interest income $ 53,873 $ 54,760 $ 55,076 $ 52,586 $ 53,565 Total interest expense 4,967 5,359 6,870 6,939 7,262 Net interest income 48,906 49,401 48,206 45,647 46,303 Provision for (reversal of) credit losses 294 (3,421 ) (5,071 ) 1,677 (10,149 ) Net interest income after provision for (reversal of) credit losses 48,612 52,822 53,277 43,970 56,452 Noninterest income Deposit services 6,628 6,855 6,779 6,609 6,125 Net gain (loss) on sale of securities available for sale (1,543 ) 463 1,381 15 2,003 Gain on sale of loans 178 356 299 393 593 Trust fees 1,494 1,586 1,494 1,496 1,383 Bank owned life insurance 691 710 637 645 626 Brokerage services 809 907 846 850 780 Other 2,468 1,134 1,333 925 2,113 Total noninterest income 10,725 12,011 12,769 10,933 13,623 Noninterest expense Salaries and employee benefits 19,969 20,067 19,777 20,004 20,044 Net occupancy 3,656 3,541 3,532 3,606 3,560 Advertising, travel & entertainment 737 876 579 475 437 ATM expense 281 345 311 272 238 Professional fees 927 849 1,135 1,040 991 Software and data processing 1,631 1,454 1,503 1,406 1,312 Communications 503 544 552 612 525 FDIC insurance 472 464 454 435 454 Amortization of intangibles 622 658 695 730 766 Loss on redemption of subordinated notes — — 1,118 — — Other 2,397 2,536 2,107 2,119 2,907 Total noninterest expense 31,195 31,334 31,763 30,699 31,234 Income before income tax expense 28,142 33,499 34,283 24,204 38,841 Income tax expense 3,146 4,812 4,977 2,887 4,750 Net income $ 24,996 $ 28,687 $ 29,306 $ 21,317 $ 34,091 Common Share Data: Weighted-average basic shares outstanding 32,357 32,311 32,465 32,632 32,829 Weighted-average diluted shares outstanding 32,537 32,487 32,556 32,799 32,937 Common shares outstanding end of period 32,294 32,352 32,273 32,675 32,659 Earnings per common share Basic $ 0.77 $ 0.89 $ 0.90 $ 0.65 $ 1.04 Diluted 0.77 0.88 0.90 0.65 1.04 Book value per common share 24.28 28.20 27.20 27.37 26.29 Tangible book value per common share (1) 17.86 21.77 20.74 20.97 19.86 Cash dividends paid per common share 0.34 0.39 0.33 0.33 0.32 Selected Performance Ratios: Return on average assets 1.40 % 1.57 % 1.61 % 1.20 % 1.99 % Return on average shareholders’ equity 11.42 12.67 12.89 9.73 15.82 Return on average tangible common equity (1) 15.20 16.80 17.10 13.13 21.22 Average yield on earning assets (FTE) (1) 3.53 3.55 3.59 3.49 3.67 Average rate on interest bearing liabilities 0.44 0.46 0.59 0.60 0.64 Net interest margin (FTE) (1) 3.22 3.23 3.16 3.06 3.20 Net interest spread (FTE) (1) 3.09 3.09 3.00 2.89 3.03 Average earning assets to average interest bearing liabilities 141.93 141.21 138.86 137.85 135.56 Noninterest expense to average total assets 1.75 1.72 1.75 1.73 1.82 Efficiency ratio (FTE) (1) 48.15 47.61 47.92 50.31 50.44 (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 2022 2021 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Nonperforming Assets: $ 11,455 $ 11,609 $ 12,424 $ 15,269 $ 15,367 Nonaccrual loans 2,357 2,536 3,013 5,154 5,314 Accruing loans past due more than 90 days — — — — — Troubled debt restructured loans 9,098 9,073 9,371 9,549 9,641 Other real estate owned — — 25 566 412 Repossessed assets — — 15 — — Asset Quality Ratios: Ratio of nonaccruing loans to: Total loans 0.06 % 0.07 % 0.08 % 0.14 % 0.14 % Ratio of nonperforming assets to: Total assets 0.16 0.16 0.17 0.21 0.22 Total loans 0.30 0.32 0.34 0.42 0.41 Total loans and OREO 0.30 0.32 0.34 0.42 0.41 Total loans, excluding PPP loans, and OREO 0.30 0.32 0.35 0.43 0.44 Ratio of allowance for loan losses to: Nonaccruing loans 1,507.17 1,390.89 1,261.93 832.62 780.09 Nonperforming assets 310.12 303.84 306.04 281.05 269.76 Total loans 0.93 0.97 1.04 1.18 1.12 Total loans, excluding PPP loans 0.94 0.98 1.06 1.22 1.19 Net charge-offs (recoveries) to average loans outstanding — — 0.05 0.01 0.02 Capital Ratios: Shareholders’ equity to total assets 11.02 12.57 12.30 12.45 12.27 Common equity tier 1 capital 13.67 14.17 14.07 14.38 14.71 Tier 1 risk-based capital 14.86 15.43 15.35 15.71 16.09 Total risk-based capital 17.50 18.15 18.18 20.95 21.52 Tier 1 leverage capital 10.39 10.33 10.14 10.21 10.29 Period end tangible equity to period end tangible assets (1) 8.35 9.99 9.66 9.82 9.55 Average shareholders’ equity to average total assets 12.28 12.42 12.51 12.38 12.56 (1) 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 2022 2021 Loan Portfolio Composition Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Real Estate Loans: Construction $ 490,166 $ 447,860 $ 422,095 $ 528,157 $ 605,677 1-4 Family Residential 647,837 651,140 660,689 678,402 700,430 Commercial 1,722,577 1,598,172 1,605,132 1,430,900 1,348,551 Commercial Loans 401,144 418,998 443,708 497,513 564,745 Municipal Loans 455,155 443,078 427,259 417,398 406,377 Loans to Individuals 84,037 85,914 88,702 89,976 90,818 Total Loans $ 3,800,916 $ 3,645,162 $ 3,647,585 $ 3,642,346 $ 3,716,598 Summary of Changes in Allowances: Allowance for Loan Losses Balance at beginning of period $ 35,273 $ 38,022 $ 42,913 $ 41,454 $ 49,006 Loans charged-off (555 ) (489 ) (940 ) (527 ) (795 ) Recoveries of loans charged-off 540 455 437 466 622 Net loans (charged-off) recovered (15 ) (34 ) (503 ) (61 ) (173 ) Provision for (reversal of) loan losses 266 (2,715 ) (4,388 ) 1,520 (7,379 ) Balance at end of period $ 35,524 $ 35,273 $ 38,022 $ 42,913 $ 41,454 Allowance for Off-Balance-Sheet Credit Exposures Balance at beginning of period $ 2,384 $ 3,090 $ 3,773 $ 3,616 $ 6,386 Provision for (reversal of) off-balance-sheet credit exposures 28 (706 ) (683 ) 157 (2,770 ) Balance at end of period $ 2,412 $ 2,384 $ 3,090 $ 3,773 $ 3,616 Total Allowance for Credit Losses $ 37,936 $ 37,657 $ 41,112 $ 46,686 $ 45,070 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 March 31, 2022 December 31, 2021 Average
BalanceInterest Average
Yield/RateAverage
BalanceInterest Average
Yield/RateASSETS Loans (1) $ 3,703,980 $ 35,625 3.90 % $ 3,668,767 $ 36,740 3.97 % Loans held for sale 928 8 3.50 % 1,980 11 2.20 % Securities: Taxable investment securities (2) 644,706 4,608 2.90 % 590,104 4,215 2.83 % Tax-exempt investment securities (2) 1,563,185 12,683 3.29 % 1,508,196 12,699 3.34 % Mortgage-backed and related securities (2) 566,941 4,017 2.87 % 650,685 4,394 2.68 % Total securities 2,774,832 21,308 3.11 % 2,748,985 21,308 3.08 % Federal Home Loan Bank stock, at cost, and equity investments 20,677 113 2.22 % 38,832 175 1.79 % Interest earning deposits 44,642 24 0.22 % 43,841 22 0.20 % Federal funds sold 8,651 4 0.19 % — — — Total earning assets 6,553,710 57,082 3.53 % 6,502,405 58,256 3.55 % Cash and due from banks 107,144 103,126 Accrued interest and other assets 607,235 662,654 Less: Allowance for loan losses (35,636 ) (38,317 ) Total assets $ 7,232,453 $ 7,229,868 LIABILITIES AND SHAREHOLDERS’ EQUITY Savings accounts $ 652,394 273 0.17 % $ 624,377 264 0.17 % Certificates of deposits 563,599 594 0.43 % 632,150 681 0.43 % Interest bearing demand accounts 3,097,966 2,370 0.31 % 2,558,289 1,289 0.20 % Total interest bearing deposits 4,313,959 3,237 0.30 % 3,814,816 2,234 0.23 % Federal Home Loan Bank borrowings 122,783 366 1.21 % 609,310 1,758 1.14 % Subordinated notes, net of unamortized debt issuance costs 98,552 998 4.11 % 98,517 1,011 4.07 % Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,261 356 2.40 % 60,259 345 2.27 % Repurchase agreements 21,494 10 0.19 % 21,874 11 0.20 % Other borrowings 467 — — — — — Total interest bearing liabilities 4,617,516 4,967 0.44 % 4,604,776 5,359 0.46 % Noninterest bearing deposits 1,642,973 1,637,914 Accrued expenses and other liabilities 84,009 88,982 Total liabilities 6,344,498 6,331,672 Shareholders’ equity 887,955 898,196 Total liabilities and shareholders’ equity $ 7,232,453 $ 7,229,868 Net interest income (FTE) $ 52,115 $ 52,897 Net interest margin (FTE) 3.22 % 3.23 % Net interest spread (FTE) 3.09 % 3.09 % (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, 2022 and December 31, 2021, loans totaling $2.4 million and $2.5 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, 2021 June 30, 2021 Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate ASSETS Loans (1) $ 3,662,496 $ 37,744 4.09 % $ 3,706,959 $ 36,429 3.94 % Loans held for sale 1,640 12 2.90 % 1,846 13 2.82 % Securities: Taxable investment securities (2) 532,679 3,853 2.87 % 396,504 2,921 2.95 % Tax-exempt investment securities (2) 1,453,275 12,315 3.36 % 1,363,678 11,585 3.41 % Mortgage-backed and related securities (2) 738,287 4,405 2.37 % 847,206 4,647 2.20 % Total securities 2,724,241 20,573 3.00 % 2,607,388 19,153 2.95 % Federal Home Loan Bank stock, at cost, and equity investments 39,786 111 1.11 % 35,883 108 1.21 % Interest earning deposits 39,382 24 0.24 % 43,175 17 0.16 % Total earning assets 6,467,545 58,464 3.59 % 6,395,251 55,720 3.49 % Cash and due from banks 99,113 90,735 Accrued interest and other assets 684,917 656,245 Less: Allowance for loan losses (43,052 ) (41,768 ) Total assets $ 7,208,523 $ 7,100,463 LIABILITIES AND SHAREHOLDERS’ EQUITY Savings accounts $ 598,118 249 0.17 % $ 571,907 231 0.16 % Certificates of deposit 629,718 789 0.50 % 658,708 936 0.57 % Interest bearing demand accounts 2,496,037 1,196 0.19 % 2,459,335 1,172 0.19 % Total interest bearing deposits 3,723,873 2,234 0.24 % 3,689,950 2,339 0.25 % Federal Home Loan Bank borrowings 656,474 1,865 1.13 % 669,633 1,817 1.09 % Subordinated notes, net of unamortized debt issuance costs 195,204 2,417 4.91 % 197,284 2,423 4.93 % Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,258 345 2.27 % 60,257 349 2.32 % Repurchase agreements 21,634 9 0.17 % 22,024 11 0.20 % Total interest bearing liabilities 4,657,443 6,870 0.59 % 4,639,148 6,939 0.60 % Noninterest bearing deposits 1,551,298 1,485,383 Accrued expenses and other liabilities 97,954 97,137 Total liabilities 6,306,695 6,221,668 Shareholders’ equity 901,828 878,795 Total liabilities and shareholders’ equity $ 7,208,523 $ 7,100,463 Net interest income (FTE) $ 51,594 $ 48,781 Net interest margin (FTE) 3.16 % 3.06 % Net interest spread (FTE) 3.00 % 2.89 % (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, 2021 and June 30, 2021, loans totaling $3.0 million and $5.2 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, 2021 Average Balance Interest Average Yield/Rate ASSETS Loans (1) $ 3,634,053 $ 36,754 4.10 % Loans held for sale 2,803 20 2.89 % Securities: Taxable investment securities (2) 295,968 2,323 3.18 % Tax-exempt investment securities (2) 1,300,991 11,176 3.48 % Mortgage-backed and related securities (2) 940,815 6,088 2.62 % Total securities 2,537,774 19,587 3.13 % Federal Home Loan Bank stock, at cost, and equity investments 35,635 136 1.55 % Interest earning deposits 31,169 15 0.20 % Total earning assets 6,241,434 56,512 3.67 % Cash and due from banks 86,634 Accrued interest and other assets 677,230 Less: Allowance for loan losses (49,240 ) Total assets $ 6,956,058 LIABILITIES AND SHAREHOLDERS’ EQUITY Savings accounts $ 517,182 209 0.16 % Certificates of deposit 736,099 1,229 0.68 % Interest bearing demand accounts 2,342,299 1,159 0.20 % Total interest bearing deposits 3,595,580 2,597 0.29 % Federal Home Loan Bank borrowings 727,513 1,908 1.06 % Subordinated notes, net of unamortized debt issuance costs 197,252 2,395 4.92 % Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,256 351 2.36 % Repurchase agreements 23,522 11 0.19 % Total interest bearing liabilities 4,604,123 7,262 0.64 % Noninterest bearing deposits 1,389,020 Accrued expenses and other liabilities 89,222 Total liabilities 6,082,365 Shareholders’ equity 873,693 Total liabilities and shareholders’ equity $ 6,956,058 Net interest income (FTE) $ 49,250 Net interest margin (FTE) 3.20 % Net interest spread (FTE) 3.03 % (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, 2021, loans totaling $5.3 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.
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 2022 2021 Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Reconciliation of return on average common equity to return on average tangible common equity: Net income $ 24,996 $ 28,687 $ 29,306 $ 21,317 $ 34,091 After-tax amortization expense 491 520 549 577 605 Adjusted net income available to common shareholders $ 25,487 $ 29,207 $ 29,855 $ 21,894 $ 34,696 Average shareholders' equity $ 887,955 $ 898,196 $ 901,828 $ 878,795 $ 873,693 Less: Average intangibles for the period (207,774 ) (208,412 ) (209,097 ) (209,808 ) (210,563 ) Average tangible shareholders' equity $ 680,181 $ 689,784 $ 692,731 $ 668,987 $ 663,130 Return on average tangible common equity 15.20 % 16.80 % 17.10 % 13.13 % 21.22 % Reconciliation of book value per share to tangible book value per share: Common equity at end of period $ 784,241 $ 912,172 $ 877,866 $ 894,400 $ 858,597 Less: Intangible assets at end of period (207,389 ) (208,011 ) (208,669 ) (209,364 ) (210,094 ) Tangible common shareholders' equity at end of period $ 576,852 $ 704,161 $ 669,197 $ 685,036 $ 648,503 Total assets at end of period $ 7,119,115 $ 7,259,602 $ 7,135,691 $ 7,182,408 $ 6,998,886 Less: Intangible assets at end of period (207,389 ) (208,011 ) (208,669 ) (209,364 ) (210,094 ) Tangible assets at end of period $ 6,911,726 $ 7,051,591 $ 6,927,022 $ 6,973,044 $ 6,788,792 Period end tangible equity to period end tangible assets 8.35 % 9.99 % 9.66 % 9.82 % 9.55 % Common shares outstanding end of period 32,294 32,352 32,273 32,675 32,659 Tangible book value per common share $ 17.86 $ 21.77 $ 20.74 $ 20.97 $ 19.86 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) $ 48,906 $ 49,401 $ 48,206 $ 45,647 $ 46,303 Tax equivalent adjustments: Loans 745 740 722 722 736 Tax-exempt investment securities 2,464 2,756 2,666 2,412 2,211 Net interest income (FTE) (1) 52,115 52,897 51,594 48,781 49,250 Noninterest income 10,725 12,011 12,769 10,933 13,623 Nonrecurring income (2) 706 (463 ) (1,381 ) (15 ) (2,003 ) Total revenue $ 63,546 $ 64,445 $ 62,982 $ 59,699 $ 60,870 Noninterest expense $ 31,195 $ 31,334 $ 31,763 $ 30,699 $ 31,234 Pre-tax amortization expense (622 ) (658 ) (695 ) (730 ) (766 ) Nonrecurring expense (3) 22 8 (888 ) 64 236 Adjusted noninterest expense $ 30,595 $ 30,684 $ 30,180 $ 30,033 $ 30,704 Efficiency ratio 50.71 % 50.34 % 50.64 % 53.09 % 53.01 % Efficiency ratio (FTE) (1) 48.15 % 47.61 % 47.92 % 50.31 % 50.44 % Average earning assets $ 6,553,710 $ 6,502,405 $ 6,467,545 $ 6,395,251 $ 6,241,434 Net interest margin 3.03 % 3.01 % 2.96 % 2.86 % 3.01 % Net interest margin (FTE) (1) 3.22 % 3.23 % 3.16 % 3.06 % 3.20 % Net interest spread 2.89 % 2.88 % 2.79 % 2.70 % 2.84 % Net interest spread (FTE) (1) 3.09 % 3.09 % 3.00 % 2.89 % 3.03 % (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 and other investment income or loss in the periods where applicable.
(3) These adjustments may include loss on redemption of subordinated notes, foreclosure expenses and branch closure expenses, in the periods where applicable.
- First quarter net income of $25.0 million;