Southside Bancshares, Inc. Announces Net Income for the Three and Six Months Ended June 30, 2015

TYLER, Texas, July 23, 2015 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. ("Southside" or the "Company") (NASDAQ:SBSI) today reported its financial results for the three and six months ended June 30, 2015.

Southside reported net income of $11.2 million for the three months ended June 30, 2015, an increase of $707,000, or 6.8%, when compared to $10.5 million for the same period in 2014. Net income for the six months ended June 30, 2015 increased $1.9 million, or 10.0%, to $20.5 million when compared to $18.7 million for the same period in 2014.

Diluted earnings per common share were $0.44 and $0.53 for the three months ended June 30, 2015 and 2014, respectively, a decrease of $0.09, or 17.0%. For the six months ended June 30, 2015, diluted earnings per common share decreased $0.13, or 13.8%, to $0.81 when compared to $0.94 for the same period in 2014.

The return on average shareholders' equity for the six months ended June 30, 2015 was 9.55%, compared to 13.80% for the same period in 2014. The return on average assets was 0.86% for the six months ended June 30, 2015, compared to 1.09% for the same period in 2014.

"Our Company had solid results this quarter and we are on target to deliver on our merger-related expense commitments," stated Sam Dawson, President and Chief Executive Officer of Southside Bancshares, Inc. "We recorded approximately $1.3 million, net of tax, of merger-related expense during the second quarter and approximately $3.3 million, net of tax, for the six months. Our balance sheet remained strong, as evidenced by solid asset quality, liquidity and capital."

"As of June 30, 2015, the integration related to the OmniAmerican ("Omni") acquisition was almost complete and most of the cost savings associated with the acquisition should be realized beginning in the third quarter. We continue to review the combined organization to pursue additional operational efficiencies and opportunities for revenue generation and cost containment."

"Total loans increased $5.2 million during the second quarter more than offsetting the continued roll off of the indirect automobile loan portfolio included in the Omni acquisition of approximately $26 million and payoffs in our 1-4 family residential and commercial loan portfolios. During the quarter commercial real estate loans increased $36.4 million, construction loans increased $12.1 million and municipal loans increased $3.7 million. Based on loans committed and the activity in our pipeline, we are anticipating healthy overall net loan growth during 2015. We are focused on executing on our business plan and we continue to add value to our customers and the communities we serve."

Loans and Deposits

For the six months ended June 30, 2015, total loans decreased by $1.3 million, when compared to December 31, 2014. During the six months ended June 30, 2015, other real estate loans increased $53.6 million, construction loans increased $5.8 million, commercial loans increased $2.6 million, 1-4 family real estate loans decreased $6.1 million, municipal loans decreased $1.0 million, and loans to individuals decreased $56.2 million.

Nonperforming assets increased during the first six months of 2015 by $15.5 million, to $27.8 million, or 0.57% of total assets, compared to 0.26% at December 31, 2014 primarily due to the downgrade of one large commercial borrowing relationship to impaired status.

During the six months ended June 30, 2015, the allowance for loan losses increased $3.5 million, to $16.8 million, or 0.8% of total loans, compared to 0.6% at December 31, 2014, as a result of the additional provision associated with the increase of impaired loans. The allowance for loan losses as a percentage of total loans decreased from the comparable period in 2014 from 1.32%, as a result of the loans acquired in connection with the Omni acquisition measured at fair value at the acquisition date with no carryover of the allowance for loan loss and the sale of the loans purchased by Southside Financial Group, Inc., both of which occurred in the second half of 2014.

During the six months ended June 30, 2015, deposits, net of brokered deposits, increased $88.8 million, or 2.6%, compared to December 31, 2014. During this six-month period, public fund deposits increased $39.6 million.

Net Interest Income for the Three Months

Net interest income increased $5.0 million, or 18.1%, to $32.9 million for the three months ended June 30, 2015, when compared to $27.9 million for the same period in 2014. The increase in net interest income was primarily the result of the increase in interest income of $5.7 million, compared to the same period in 2014, which was a result of the increase in total loans. For the three months ended June 30, 2015, our net interest spread decreased to 3.30%, compared to 3.79% for the same period in 2014. The net interest margin decreased to 3.39% for the three months ended June 30, 2015, compared to 3.94% for the same period in 2014. The net interest spread and margin each decreased as a result of the decrease in the yield on interest-earning assets, which more than offset the decrease in the yield on interest-bearing liabilities compared to the same period in 2014.

Net Interest Income for the Six Months

Net interest income increased $10.9 million, or 19.6%, to $66.7 million for the six months ended June 30, 2015, when compared to $55.7 million for the same period in 2014. The increase in net interest income was primarily the result of the increase in interest income of $12.0 million, compared to the same period in 2014, which was a result of the increase in total loans. For the six months ended June 30, 2015, our net interest spread decreased to 3.36%, compared to 3.79% for the same period in 2014. The net interest margin decreased to 3.44% for the six months ended June 30, 2015, compared to 3.93% for the same period in 2014. The net interest spread and margin each decreased as a result of the decrease in the yield on interest-earning assets, which more than offset the decrease in the yield on interest-bearing liabilities compared to the same period in 2014.

Net Income for the Three Months

Net income increased $707,000, or 6.8%, for the three months ended June 30, 2015, to $11.2 million when compared to the same period in 2014. The increase was primarily the result of an increase in interest income of $5.7 million and an increase in noninterest income of $1.9 million combined with a decrease in provision for loan loss of $2.4 million, which were partially offset by a $7.5 million increase in noninterest expense and a $1.1 million increase in income tax expense.

Noninterest expense increased $7.5 million, or 36.7%, for the three months ended June 30, 2015, compared to the same period in 2014, primarily due to increases in salaries and employee benefits expense, occupancy expense, ATM and debit card expense, software and data processing expense and other noninterest expense which were partially offset by a decrease in professional fees.

Net Income for the Six Months

Net income increased $1.9 million, or 10.0%, for the six months ended June 30, 2015, to $20.5 million when compared to the same period in 2014. The increase was primarily the result of an increase in interest income of $12.0 million and an increase in noninterest income of $7.1 million combined with a decrease in provision for loan loss of $2.7 million, which were partially offset by a $17.0 million increase in noninterest expense and a $1.9 million increase in income tax expense.

Noninterest expense increased $17.0 million, or 41.9%, for the six months ended June 30, 2015, compared to the same period in 2014, primarily due to increases in salaries and employee benefits expense, occupancy expense, ATM and debit card expense, software and data processing expense and other noninterest expense which were partially offset by a decrease in professional fees.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $4.9 billion in assets that owns 100% of Southside Bank. Southside Bank currently has 64 banking centers in Texas and operates a network of over 70 ATMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at www.southside.com/investor. Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data. To receive e-mail notification of company news, events and stock activity, please register on the E-mail Notification portion of the website. Questions or comments may be directed to Deborah Wilkinson at (817) 367-4962, or deborah.wilkinson@southside.com.

Forward-Looking Statements

Certain statements of other than historical fact that are contained in this document and in other written material, press releases and oral statements issued by or on behalf of the Company, may be considered to be "forward-looking statements" within the meaning of and subject to the protections of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. These statements may include words such as "expect," "estimate," "project," "anticipate," "appear," "believe," "could," "should," "may," "likely," "intend," "probability," "risk," "target," "objective," "plans," "potential," and similar expressions. Forward-looking statements are statements with respect to the Company's beliefs, plans, expectations, objectives, goals, anticipations, assumptions, estimates, intentions and future performance and are subject to significant known and unknown risks and uncertainties, which could cause the Company's actual results to differ materially from the results discussed in the forward-looking statements. For example, discussions about trends in asset quality, capital, liquidity, the pace of loan growth, merger-related integration cost savings, earnings and certain market risk disclosures, including the impact of interest rate and other economic uncertainty, are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future.

Additional information concerning the Company and its business, including additional factors that could materially affect the Company's financial results, is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 under "Forward-Looking Information" and Item 1A. "Risk Factors," and in the Company's other filings with the Securities and Exchange Commission. The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

Loan Portfolio Composition

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

RESULTS OF OPERATIONS

The analysis below shows average interest earning assets and interest bearing liabilities together with the average yield on the interest earning assets and the average cost of the interest bearing liabilities.

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

(2) Interest income includes taxable-equivalent adjustments of $1,047 and $1,000 for the three months ended June 30, 2015 and 2014, respectively.

(3) Interest income includes taxable-equivalent adjustments of $3,108 and $3,011 for the three months ended June 30, 2015 and 2014, respectively.

(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

(5) Represents the issuance of junior subordinated debentures.

Note: As of June 30, 2015 and 2014, loans on nonaccrual status totaled $21,223 and $9,620, respectively. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

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

(2) Interest income includes taxable-equivalent adjustments of $2,097 and $2,017 for the six months ended June 30, 2015 and 2014, respectively.

(3) Interest income includes taxable-equivalent adjustments of $6,077 and $5,895 for the six months ended June 30, 2015 and 2014, respectively.

(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

(5) Represents the issuance of junior subordinated debentures.

Note: As of June 30, 2015 and 2014, loans on nonaccrual status totaled $21,223 and $9,620, respectively. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.