Southside Bancshares, Inc. Announces Financial Results for the First Quarter Ended March 31, 2024

Rhea-AI Summary

Southside Bancshares, Inc. reported first quarter financial results for the period ended March 31, 2024. Key highlights include net income of $21.5 million, linked quarter loan growth of 1.2%, earnings per diluted common share of $0.71, annualized return on assets of 1.03%, and nonperforming assets at 0.10% of total assets.

Positive

• Positive: Southside Bancshares, Inc. reported solid financial results with net income of $21.5 million and linked quarter loan growth of 1.2%. Nonperforming assets remained low at 0.10% of total assets. The company is focusing on cost containment opportunities to save approximately $3.5 million annually.
• Negative: There was a decrease in net income by $4.5 million, or 17.4%, compared to the same period in 2023. Earnings per diluted common share decreased by 14.5%, and there was a decrease in the annualized return on average assets and equity. Net interest income decreased by $1.1 million, and there was an increase in noninterest expense.
• Negative: Nonperforming assets increased by 150.9% compared to the previous year, with nonaccrual loans seeing a significant rise due to commercial real estate and commercial loan relationships.

Negative

• None.

Insights

Financial Analyst

Reviewing Southside Bancshares, Inc.'s financial results indicates several notable shifts. While loan growth shows stability with a 1.2% linked quarter increase, there's a marked 17.4% year-over-year decline in net income, which echoes in the reduced earnings per share from $0.83 to $0.71. The dip in noninterest income and escalated noninterest expenses are contributors to this downturn, impacting the bottom line. The efficiency ratios have also worsened from the previous year, suggesting higher costs relative to revenue generated. Investors should consider the effect cost containment strategies may have in the coming quarters, as projected savings could enhance profitability margins, providing potential long-term benefits. However, the increased cost of deposits indicating a competitive market for retaining deposits, combined with the elevated effective tax rate, could pressure future earnings. Asset quality remains a strength, with low nonperforming assets at 0.10%, though the uptick from the previous year warrants monitoring.

Market Analyst

From a market perspective, Southside's strategic focus on cost containment and revenue generation is critical amidst the reported earnings contraction. The loan portfolio has shown diversity with growth in commercial and residential loans, despite a reduction in construction and commercial loans. However, the financial sector may face headwinds with changing interest rates and economic pressures that could influence investor sentiment. The investor should be aware of the company's capital adequacy and liquidity which remain robust, signaling strength and resilience. Yet, the increase in the cost of funds points to a challenging rate environment that may affect net interest margins. Monitoring the company's adaptation to these market conditions will be essential for assessing future performance.

Investment Strategist

Southside's financial results warrant a strategic lens focusing on the balance between risk and growth. The absence of common stock repurchases during the quarter underlines a conservative capital allocation approach, possibly to bolster liquidity or support dividend payouts. This can be seen as a prudent move in uncertain economic climates and as a signal that the company may prioritize financial stability over aggressive buybacks. The utilization of the Federal Reserve’s Bank Term Funding Program to reduce funding costs hints at proactive liquidity management. For an investor analyzing Southside's investment potential, balancing the company's strong fundamentals with the broader economic trends in the banking sector will be important to determine the attractiveness of the stock.

• First quarter net income of $21.5 million;

• Linked quarter loan growth of 1.2%;

• First quarter earnings per diluted common share of $0.71;

• Annualized return on first quarter average assets of 1.03%;

• Annualized return on first quarter average tangible common equity of 15.07%⁽¹⁾; and

• Nonperforming assets remain low at 0.10% of total assets.

TYLER, Texas, April 25, 2024 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended March 31, 2024. Southside reported net income of $21.5 million for the three months ended March 31, 2024, a decrease of $4.5 million, or 17.4%, compared to $26.0 million for the same period in 2023. Earnings per diluted common share decreased $0.12, or 14.5%, to $0.71 for the three months ended March 31, 2024, from $0.83 for the same period in 2023. The annualized return on average shareholders’ equity for the three months ended March 31, 2024, was 11.02%, compared to 13.92% for the same period in 2023. The annualized return on average assets was 1.03% for the three months ended March 31, 2024, compared to 1.38% for the same period in 2023.

“Linked quarter, loans increased an annualized 4.7%, while our deposits remained flat.” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “Net interest income decreased $1.1 million, and the net interest margin decreased 13 basis points. The maturity of three low interest rate cash flow swaps along with ongoing higher funding costs were the primary reasons for the decrease. There are no additional swaps maturing this year. During the quarter, we began evaluating cost containment opportunities. Through retirement, a reduction in workforce, and attrition during 2024, we currently anticipate annualized cost savings of approximately $3.5 million, 80% of which should be reflected beginning in the third quarter this year and 100% in 2025. We expensed approximately $618,000 during the quarter associated with these cost reductions. In the coming months we will continue to evaluate further cost containment and revenue generating opportunities.”

Operating Results for the Three Months Ended March 31, 2024

Net income was $21.5 million for the three months ended March 31, 2024, compared to $26.0 million for the same period in 2023, a decrease of $4.5 million, or 17.4%. Earnings per diluted common share were $0.71 and $0.83 for the three months ended March 31, 2024 and 2023, respectively. The decrease in net income was primarily a result of the decrease in noninterest income and the increase in noninterest expense. Annualized returns on average assets and average shareholders’ equity for the three months ended March 31, 2024 were 1.03% and 11.02%, respectively, compared to 1.38% and 13.92%, respectively, for the three months ended March 31, 2023. Our efficiency ratio and tax-equivalent efficiency ratio⁽¹⁾ were 57.95% and 55.54%, respectively, for the three months ended March 31, 2024, compared to 53.57% and 50.99%, respectively, for the three months ended March 31, 2023, and 53.30% and 50.86%, respectively, for the three months ended December 31, 2023.

Net interest income for the three months ended March 31, 2024 was $53.3 million, a decrease of only $5,000 from the same period in 2023. Linked quarter, net interest income decreased $1.1 million, or 2.1%, compared to $54.5 million during the three months ended December 31, 2023. The decrease in net interest income was largely due to increases in the average rate paid on our interest bearing liabilities and average balance of our interest bearing liabilities, partially offset by the increase in the average balance of interest earning assets and the increase in the average yield of interest earning assets. During the first quarter of 2024, three of our lower rate cash flow swaps which totaled $120.0 million matured and the rate associated with the funding increased over 4.0%.

Our net interest margin and tax-equivalent net interest margin⁽¹⁾ decreased to 2.72% and 2.86%, respectively, for the three months ended March 31, 2024, compared to 3.02% and 3.21%, respectively, for the same period in 2023. Linked quarter, net interest margin and tax-equivalent net interest margin⁽¹⁾ decreased from 2.83% and 2.99%, respectively for the three months ended December 31, 2023.

Noninterest income was $9.7 million for the three months ended March 31, 2024, a decrease of $2.3 million, or 19.2%, compared to $12.0 million for the same period in 2023. The decrease was due to a $2.4 million net gain on sale of equity securities during the three months ended March 31, 2023, as well as a decrease in bank owned life insurance (“BOLI”) income due to a death benefit realized in 2023, a loss on sale of loans, and decreases in deposit services income and other noninterest income during the three months ended March 31, 2024. These decreases were partially offset by a decrease in net loss on sale of securities available for sale (“AFS”) and an increase in brokerage services income during the three months ended March 31, 2024. On a linked quarter basis, noninterest income increased $7.2 million, or 288.8%, compared to the three months ended December 31, 2023. The increase was due to a net loss on sale of AFS of $10.4 million for the three months ended December 31, 2023, partially offset by a decrease in BOLI income related to a $2.0 million death benefit realized in the fourth quarter of 2023.

Noninterest expense increased $2.0 million, or 5.8%, to $36.9 million for the three months ended March 31, 2024, compared to $34.8 million for the same period in 2023, due to increases in salaries and employee benefits, software and data processing expense, FDIC insurance and other noninterest expense, partially offset by decreases in net occupancy expense and professional fees. On a linked quarter basis, noninterest expense increased by $1.7 million, or 4.8%, compared to the three months ended December 31, 2023, due to an increase in salaries and employee benefits expense primarily due to normal salary increases effective in the first quarter of 2024 and approximately $618,000 associated with future cost reductions.

Income tax expense increased $0.1 million, or 1.7%, for the three months ended March 31, 2024, compared to the same period in 2023. On a linked quarter basis, income tax expense increased $2.4 million, or 109.5%. Our effective tax rate (“ETR”) increased to 17.7% for the three months ended March 31, 2024, compared to 14.9% for the three months ended March 31, 2023, and increased from 11.3% for the three months ended December 31, 2023. The higher ETR for the three months ended March 31, 2024 compared to the same period in 2023, was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income.

Balance Sheet Data

At March 31, 2024, Southside had $8.35 billion in total assets, compared to $8.28 billion at December 31, 2023 and $7.79 billion at March 31, 2023.

Loans at March 31, 2024 were $4.58 billion, an increase of $424.7 million, or 10.2%, compared to $4.15 billion at March 31, 2023. Linked quarter, loans increased $52.9 million, or 1.2%, due to increases of $244.9 million in commercial real estate loans and $23.8 million in 1-4 family residential loans. These increases were partially offset by decreases of $190.3 million in construction loans, $13.9 million in municipal loans, $8.8 million in commercial loans, and $2.7 million in loans to individuals.

Securities at March 31, 2024 were $2.71 billion, a decrease of $33.6 million, or 1.2%, compared to $2.75 billion at March 31, 2023. Linked quarter, securities increased $108.8 million, or 4.2%, from $2.60 billion at December 31, 2023.

Deposits at March 31, 2024 were $6.55 billion, an increase of $707.5 million, or 12.1%, compared to $5.84 billion at March 31, 2023, primarily due to an increase in brokered deposits of $314.6 million, or 67.3%, and an increase in public fund deposits of $281.3 million, or 31.3%. Linked quarter, deposits decreased $3.9 million, or 0.1%, from $6.55 billion at December 31, 2023.

At March 31, 2024, we had 179,889 total deposit accounts with an average balance of $32,000. Our estimated uninsured deposits was 36.5% as of March 31, 2024. When excluding affiliate deposits (Southside-owned deposits) and public fund deposits (all collateralized), our total estimated deposits without insurance or collateral was 18.5% as of March 31, 2024. We continued to increase interest rates paid on deposits during the first quarter in order to retain deposits and to remain competitive with current pricing in the market. Our noninterest bearing deposits represent approximately 20.8% of total deposits. Linked quarter, our cost of interest bearing deposits increased 14 basis points from 2.83% in the prior quarter to 2.97%. Linked quarter, our cost of total deposits increased 16 basis points from 2.20% in the prior quarter to 2.36%.

Our cost of interest bearing deposits increased 115 basis points, from 1.82% for the three months ended March 31, 2023, to 2.97% for the three months ended March 31, 2024. Our cost of total deposits increased 102 basis points, from 1.34% for the three months ended March 31, 2023, to 2.36% for the three months ended March 31, 2024.

Capital Resources and Liquidity

Our capital ratios and contingent liquidity sources remain solid. During the first quarter ended March 31, 2024, we did not purchase any common stock pursuant to our Stock Repurchase Plan. Under this plan, repurchases of our outstanding common stock 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. We have not purchased any common stock pursuant to the Stock Repurchase Plan subsequent to March 31, 2024.

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 March 31, 2024, our BTFP borrowings of $116.1 million were at a cost of 5.40%. As of March 31, 2024, our total available contingent liquidity, net of current outstanding borrowings, was $2.35 billion, consisting of FHLB advances, Federal Reserve Discount Window and correspondent bank lines of credit.

Asset Quality

Nonperforming assets at March 31, 2024 were $8.0 million, or 0.10% of total assets, an increase of $4.8 million, or 150.9%, compared to $3.2 million, or 0.04% of total assets, at March 31, 2023. Linked quarter, nonperforming assets increased $4.0 million from $4.0 million at December 31, 2023 due primarily to an increase of $3.8 million, or 98.2%, in nonaccrual loans, largely the result of one commercial real estate loan and one commercial loan relationship. Since March 31, 2024, we have received approximately $1.6 million combined, of payments on the commercial loan relationship and the payoff of one larger residential real estate loan.

The allowance for loan losses totaled $43.6 million, or 0.95% of total loans, at March 31, 2024, compared to $36.3 million, or 0.87% of total loans, at March 31, 2023. The allowance for loan losses was $42.7 million, or 0.94% of total loans, at December 31, 2023.

For the three months ended March 31, 2024, we recorded a provision for credit losses for loans of $1.2 million, compared to $0.1 million and $2.2 million for the three months ended March 31, 2023 and December 31, 2023, respectively. Net charge-offs were $0.3 million for the three months ended March 31, 2024, compared to net charge-offs of $0.3 million and $1.3 million for the three months ended March 31, 2023 and December 31, 2023, respectively.

We recorded a reversal of provision for credit losses on off-balance-sheet credit exposures of $1.1 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively, and a provision for credit losses on off-balance-sheet credit exposures of $0.1 million for the three months ended December 31, 2023. The decrease in provision for the three months ended March 31, 2024, compared to the same period in 2023, was due to a lower balance of off-balance-sheet credit exposure as these were funded during the period. The balance of the allowance for off-balance-sheet credit exposures at March 31, 2024 and 2023, was $2.8 million and $3.6 million, respectively, and is included in other liabilities.

Dividend

Southside Bancshares, Inc. declared a first quarter cash dividend of $0.36 per share on February 1, 2024, which was paid on February 29, 2024, to all shareholders of record as of February 15, 2024.

__________________

(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, 2024 financial results on Thursday, April 25, 2024 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/BI45f96322574d452abfa8520cda8fa8b2 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 $8.35 billion in assets as of March 31, 2024, 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 changes in interest rates 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, 2023, under “Part I - Item 1. Forward Looking Information” and “Part I - 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
	2024				2023
	Mar 31,				Dec 31,				Sep 30,				Jun 30,				Mar 31,
ASSETS
Cash and due from banks	$	96,744			$	122,021			$	105,601			$	114,707			$	101,109
Interest earning deposits		307,257				391,719				106,094				14,059				151,999
Federal funds sold		65,372				46,770				114,128				78,347				57,384
Securities available for sale, at estimated fair value		1,405,221				1,296,294				1,335,560				1,339,821				1,437,222
Securities held to maturity, at net carrying value		1,306,898				1,307,053				1,307,886				1,308,472				1,308,457
Total securities		2,712,119				2,603,347				2,643,446				2,648,293				2,745,679
Federal Home Loan Bank stock, at cost		27,958				11,936				12,778				10,801				16,696
Loans held for sale		756				10,894				1,382				1,666				407
Loans		4,577,368				4,524,510				4,420,633				4,329,043				4,152,644
Less: Allowance for loan losses		(43,557	)			(42,674	)			(41,760	)			(36,303	)			(36,332	)
Net loans		4,533,811				4,481,836				4,378,873				4,292,740				4,116,312
Premises & equipment, net		139,491				138,950				139,473				139,801				141,363
Goodwill		201,116				201,116				201,116				201,116				201,116
Other intangible assets, net		2,588				2,925				3,295				3,702				4,144
Bank owned life insurance		136,604				136,330				135,737				134,951				134,635
Other assets		130,047				137,070				130,545				167,069				121,501
Total assets	$	8,353,863			$	8,284,914			$	7,972,468			$	7,807,252			$	7,792,345
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits	$	1,358,827			$	1,390,407			$	1,431,285			$	1,466,756			$	1,543,413
Interest bearing deposits		5,186,933				5,159,274				4,918,286				4,650,931				4,294,807
Total deposits		6,545,760				6,549,681				6,349,571				6,117,687				5,838,220
Other borrowings and Federal Home Loan Bank borrowings		770,151				722,468				608,038				683,348				958,810
Subordinated notes, net of unamortized debt issuance costs		93,913				93,877				93,838				93,796				98,710
Trust preferred subordinated debentures, net of unamortized debt issuance costs		60,271				60,270				60,269				60,267				60,266
Other liabilities		95,846				85,330				132,157				86,993				85,309
Total liabilities		7,565,941				7,511,626				7,243,873				7,042,091				7,041,315
Shareholders' equity		787,922				773,288				728,595				765,161				751,030
Total liabilities and shareholders' equity	$	8,353,863			$	8,284,914			$	7,972,468			$	7,807,252			$	7,792,345

Southside Bancshares, Inc. Consolidated Financial Highlights (Unaudited) (Dollars and shares in thousands, except per share data)
	Three Months Ended
	2024				2023
	Mar 31,				Dec 31,				Sep 30,				Jun 30,				Mar 31,
Income Statement:
Total interest income	$	102,758			$	98,939			$	93,078			$	86,876			$	80,848
Total interest expense		49,410				44,454				39,805				32,960				27,495
Net interest income		53,348				54,485				53,273				53,916				53,353
Provision for (reversal of) credit losses		58				2,281				6,987				(74	)			(40	)
Net interest income after provision for (reversal of) credit losses		53,290				52,204				46,286				53,990				53,393
Noninterest income
Deposit services		5,985				6,305				6,479				6,291				6,422
Net gain (loss) on sale of securities available for sale		(18	)			(10,386	)			11				(3,455	)			(2,146	)
Net gain on sale of equity securities		—				—				—				2,642				2,416
Gain (loss) on sale of loans		(436	)			178				96				185				104
Trust fees		1,336				1,431				1,522				1,490				1,467
Bank owned life insurance		784				2,602				790				756				1,675
Brokerage services		1,014				944				760				904				697
Other		1,059				1,427				1,178				1,651				1,398
Total noninterest income		9,724				2,501				10,836				10,464				12,033
Noninterest expense
Salaries and employee benefits		23,113				21,152				21,241				21,376				21,856
Net occupancy		3,362				3,474				3,796				3,690				3,734
Advertising, travel & entertainment		950				1,127				1,062				854				1,050
ATM expense		325				318				358				320				355
Professional fees		1,154				1,315				1,472				1,192				1,372
Software and data processing		2,856				2,644				2,432				2,264				2,055
Communications		449				435				359				348				327
FDIC insurance		943				892				902				1,220				544
Amortization of intangibles		337				370				407				442				478
Other		3,392				3,456				3,524				3,287				3,078
Total noninterest expense		36,881				35,183				35,553				34,993				34,849
Income before income tax expense		26,133				19,522				21,569				29,461				30,577
Income tax expense		4,622				2,206				3,120				4,568				4,543
Net income	$	21,511			$	17,316			$	18,449			$	24,893			$	26,034
Common Share Data:
Weighted-average basic shares outstanding		30,262				30,235				30,502				30,721				31,372
Weighted-average diluted shares outstanding		30,305				30,276				30,543				30,754				31,464
Common shares outstanding end of period		30,284				30,249				30,338				30,532				31,121
Earnings per common share
Basic	$	0.71			$	0.57			$	0.60			$	0.81			$	0.83
Diluted		0.71				0.57				0.60				0.81				0.83
Book value per common share		26.02				25.56				24.02				25.06				24.13
Tangible book value per common share		19.29				18.82				17.28				18.35				17.54
Cash dividends paid per common share		0.36				0.37				0.35				0.35				0.35
Selected Performance Ratios:
Return on average assets		1.03	%			0.85	%			0.93	%			1.29	%			1.38	%
Return on average shareholders’ equity		11.02				9.31				9.50				13.32				13.92
Return on average tangible common equity (1)		15.07				13.10				13.17				18.59				19.36
Average yield on earning assets (FTE) (1)		5.38				5.30				5.15				5.00				4.76
Average rate on interest bearing liabilities		3.22				3.04				2.84				2.45				2.14
Net interest margin (FTE) (1)		2.86				2.99				3.02				3.17				3.21
Net interest spread (FTE) (1)		2.16				2.26				2.31				2.55				2.62
Average earning assets to average interest bearing liabilities		127.71				131.65				133.24				134.12				137.67
Noninterest expense to average total assets		1.77				1.73				1.79				1.82				1.85
Efficiency ratio (FTE) (1)		55.54				50.86				52.29				51.06				50.99
(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
	2024				2023
	Mar 31,				Dec 31,				Sep 30,				Jun 30,				Mar 31,
Nonperforming Assets:	$	7,979			$	4,001			$	4,381			$	3,059			$	3,180
Nonaccrual loans		7,709				3,889				4,316				3,017				3,169
Accruing loans past due more than 90 days		—				—				—				—				—
Restructured loans		151				13				15				—				—
Other real estate owned		119				99				50				—				—
Repossessed assets		—				—				—				42				11
Asset Quality Ratios:
Ratio of nonaccruing loans to:
Total loans		0.17	%			0.09	%			0.10	%			0.07	%			0.08	%
Ratio of nonperforming assets to:
Total assets		0.10				0.05				0.05				0.04				0.04
Total loans		0.17				0.09				0.10				0.07				0.08
Total loans and OREO		0.17				0.09				0.10				0.07				0.08
Ratio of allowance for loan losses to:
Nonaccruing loans		565.01				1,097.30				967.56				1,203.28				1,146.48
Nonperforming assets		545.90				1,066.58				953.21				1,186.76				1,142.52
Total loans		0.95				0.94				0.94				0.84				0.87
Net charge-offs (recoveries) to average loans outstanding		0.03				0.11				0.08				0.03				0.03
Capital Ratios:
Shareholders’ equity to total assets		9.43				9.33				9.14				9.80				9.64
Common equity tier 1 capital		12.43				12.28				12.27				12.32				12.73
Tier 1 risk-based capital		13.47				13.32				13.31				13.37				13.81
Total risk-based capital		15.92				15.73				15.71				15.68				16.28
Tier 1 leverage capital		9.22				9.39				9.61				9.69				9.83
Period end tangible equity to period end tangible assets (1)		7.17				7.04				6.75				7.37				7.19
Average shareholders’ equity to average total assets		9.35				9.13				9.76				9.72				9.94
(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
	2024				2023
Loan Portfolio Composition	Mar 31,				Dec 31,				Sep 30,				Jun 30,				Mar 31,
Real Estate Loans:
Construction	$	599,464			$	789,744			$	720,515			$	657,354			$	591,894
1-4 Family Residential		720,508				696,738				689,492				684,878				672,595
Commercial		2,413,345				2,168,451				2,117,306				2,100,338				1,990,861
Commercial Loans		358,053				366,893				385,816				383,724				388,182
Municipal Loans		427,225				441,168				441,512				435,211				438,566
Loans to Individuals		58,773				61,516				65,992				67,538				70,546
Total Loans	$	4,577,368			$	4,524,510			$	4,420,633			$	4,329,043			$	4,152,644
Summary of Changes in Allowances:
Allowance for Loan Losses
Balance at beginning of period	$	42,674			$	41,760			$	36,303			$	36,332			$	36,515
Loans charged-off		(634	)			(1,572	)			(1,262	)			(737	)			(633	)
Recoveries of loans charged-off		347				284				378				430				362
Net loans (charged-off) recovered		(287	)			(1,288	)			(884	)			(307	)			(271	)
Provision for (reversal of) loan losses		1,170				2,202				6,341				278				88
Balance at end of period	$	43,557			$	42,674			$	41,760			$	36,303			$	36,332
Allowance for Off-Balance-Sheet Credit Exposures
Balance at beginning of period	$	3,932			$	3,853			$	3,207			$	3,559			$	3,687
Provision for (reversal of) off-balance-sheet credit exposures		(1,112	)			79				646				(352	)			(128	)
Balance at end of period	$	2,820			$	3,932			$	3,853			$	3,207			$	3,559
Total Allowance for Credit Losses	$	46,377			$	46,606			$	45,613			$	39,510			$	39,891

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.

Southside Bancshares, Inc. Average Balances and Average Yields and Rates (Annualized) (Unaudited) (Dollars in thousands)
	Three Months Ended
	March 31, 2024												December 31, 2023
	Average Balance				Interest				Average Yield/Rate				Average Balance				Interest				Average Yield/Rate
ASSETS
Loans (1)	$	4,559,602			$	68,849				6.07	%		$	4,473,618			$	67,886				6.02	%
Loans held for sale		8,834				18				0.82	%			1,858				27				5.77	%
Securities:
Taxable investment securities (2)		780,423				6,967				3.59	%			852,023				7,970				3.71	%
Tax-exempt investment securities (2)		1,285,922				13,168				4.12	%			1,456,187				15,688				4.27	%
Mortgage-backed and related securities (2)		764,713				10,119				5.32	%			581,548				6,865				4.68	%
Total securities		2,831,058				30,254				4.30	%			2,889,758				30,523				4.19	%
Federal Home Loan Bank stock, at cost, and equity investments		40,063				333				3.34	%			24,674				296				4.76	%
Interest earning deposits		380,181				5,202				5.50	%			150,763				2,054				5.41	%
Federal funds sold		62,599				838				5.38	%			93,149				1,286				5.48	%
Total earning assets		7,882,337				105,494				5.38	%			7,633,820				102,072				5.30	%
Cash and due from banks		114,379												110,380
Accrued interest and other assets		441,783												374,120
Less: Allowance for loan losses		(42,973	)											(41,822	)
Total assets	$	8,395,526											$	8,076,498
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings accounts	$	604,529				1,424				0.95	%		$	610,453				1,432				0.93	%
Certificates of deposit		941,947				10,341				4.42	%			910,759				9,691				4.22	%
Interest bearing demand accounts		3,634,936				26,433				2.92	%			3,469,120				24,498				2.80	%
Total interest bearing deposits		5,181,412				38,198				2.97	%			4,990,332				35,621				2.83	%
Federal Home Loan Bank borrowings		607,033				5,950				3.94	%			262,709				1,430				2.16	%
Subordinated notes, net of unamortized debt issuance costs		93,895				956				4.10	%			93,859				965				4.08	%
Trust preferred subordinated debentures, net of unamortized debt issuance costs		60,270				1,175				7.84	%			60,269				1,195				7.87	%
Repurchase agreements		92,177				967				4.22	%			96,622				1,008				4.14	%
Other borrowings		137,287				2,164				6.34	%			294,683				4,235				5.70	%
Total interest bearing liabilities		6,172,074				49,410				3.22	%			5,798,474				44,454				3.04	%
Noninterest bearing deposits		1,338,384												1,424,961
Accrued expenses and other liabilities		100,014												115,388
Total liabilities		7,610,472												7,338,823
Shareholders’ equity		785,054												737,675
Total liabilities and shareholders’ equity	$	8,395,526											$	8,076,498
Net interest income (FTE)					$	56,084											$	57,618
Net interest margin (FTE)										2.86	%											2.99	%
Net interest spread (FTE)										2.16	%											2.26	%
(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, 2024 and December 31, 2023, loans totaling $7.7 million and $3.9 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, 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
	Average Balance				Interest				Average Yield/Rate
ASSETS
Loans (1)	$	4,128,775			$	55,453				5.45	%
Loans held for sale		1,662				20				4.88	%
Securities:
Taxable investment securities (2)		690,864				5,712				3.35	%
Tax-exempt investment securities (2)		1,692,700				16,466				3.95	%
Mortgage-backed and related securities (2)		455,811				4,329				3.85	%
Total securities		2,839,375				26,507				3.79	%
Federal Home Loan Bank stock, at cost, and equity investments		31,470				245				3.16	%
Interest earning deposits		87,924				1,033				4.76	%
Federal funds sold		72,630				837				4.67	%
Total earning assets		7,161,836				84,095				4.76	%
Cash and due from banks		107,765
Accrued interest and other assets		398,709
Less: Allowance for loan losses		(36,690	)
Total assets	$	7,631,620
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings accounts	$	665,919				1,313				0.80	%
Certificates of deposit		787,887				5,407				2.78	%
Interest bearing demand accounts		2,983,218				13,186				1.79	%
Total interest bearing deposits		4,437,024				19,906				1.82	%
Federal Home Loan Bank borrowings		404,199				3,141				3.15	%
Subordinated notes, net of unamortized debt issuance costs		98,693				999				4.11	%
Trust preferred subordinated debentures, net of unamortized debt issuance costs		60,265				1,031				6.94	%
Repurchase agreements		65,435				492				3.05	%
Other borrowings		136,700				1,926				5.71	%
Total interest bearing liabilities		5,202,316				27,495				2.14	%
Noninterest bearing deposits		1,588,725
Accrued expenses and other liabilities		81,829
Total liabilities		6,872,870
Shareholders’ equity		758,750
Total liabilities and shareholders’ equity	$	7,631,620
Net interest income (FTE)					$	56,600
Net interest margin (FTE)										3.21	%
Net interest spread (FTE)										2.62	%
(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, loans totaling $3.2 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.

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.

Southside Bancshares, Inc. Non-GAAP Reconciliation (Unaudited) (Dollars and shares in thousands, except per share data)
	Three Months Ended
	2024				2023
	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	$	21,511			$	17,316			$	18,449			$	24,893			$	26,034
After-tax amortization expense		266				292				322				349				378
Adjusted net income available to common shareholders	$	21,777			$	17,608			$	18,771			$	25,242			$	26,412
Average shareholders' equity	$	785,054			$	737,675			$	770,194			$	749,827			$	758,750
Less: Average intangibles for the period		(203,910	)			(204,267	)			(204,658	)			(205,086	)			(205,555	)
Average tangible shareholders' equity	$	581,144			$	533,408			$	565,536			$	544,741			$	553,195
Return on average tangible common equity		15.07	%			13.10	%			13.17	%			18.59	%			19.36	%
Reconciliation of book value per share to tangible book value per share:
Common equity at end of period	$	787,922			$	773,288			$	728,595			$	765,161			$	751,030
Less: Intangible assets at end of period		(203,704	)			(204,041	)			(204,411	)			(204,818	)			(205,260	)
Tangible common shareholders' equity at end of period	$	584,218			$	569,247			$	524,184			$	560,343			$	545,770
Total assets at end of period	$	8,353,863			$	8,284,914			$	7,972,468			$	7,807,252			$	7,792,345
Less: Intangible assets at end of period		(203,704	)			(204,041	)			(204,411	)			(204,818	)			(205,260	)
Tangible assets at end of period	$	8,150,159			$	8,080,873			$	7,768,057			$	7,602,434			$	7,587,085
Period end tangible equity to period end tangible assets		7.17	%			7.04	%			6.75	%			7.37	%			7.19	%
Common shares outstanding end of period		30,284				30,249				30,338				30,532				31,121
Tangible book value per common share	$	19.29			$	18.82			$	17.28			$	18.35			$	17.54
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)	$	53,348			$	54,485			$	53,273			$	53,916			$	53,353
Tax-equivalent adjustments:
Loans		656				680				674				673				697
Tax-exempt investment securities		2,080				2,453				2,474				2,462				2,550
Net interest income (FTE) (1)		56,084				57,618				56,421				57,051				56,600
Noninterest income		9,724				2,501				10,836				10,464				12,033
Nonrecurring income (2)		18				8,376				(11	)			226				(1,221	)
Total revenue	$	65,826			$	68,495			$	67,246			$	67,741			$	67,412
Noninterest expense	$	36,881			$	35,183			$	35,553			$	34,993			$	34,849
Pre-tax amortization expense		(337	)			(370	)			(407	)			(442	)			(478	)
Nonrecurring expense (3)		17				22				17				36				3
Adjusted noninterest expense	$	36,561			$	34,835			$	35,163			$	34,587			$	34,374
Efficiency ratio		57.95	%			53.30	%			54.86	%			53.54	%			53.57	%
Efficiency ratio (FTE) (1)		55.54	%			50.86	%			52.29	%			51.06	%			50.99	%
Average earning assets	$	7,882,337			$	7,633,820			$	7,418,157			$	7,225,168			$	7,161,836
Net interest margin		2.72	%			2.83	%			2.85	%			2.99	%			3.02	%
Net interest margin (FTE) (1)		2.86	%			2.99	%			3.02	%			3.17	%			3.21	%
Net interest spread		2.02	%			2.10	%			2.14	%			2.37	%			2.44	%
Net interest spread (FTE) (1)		2.16	%			2.26	%			2.31	%			2.55	%			2.62	%
(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.

FAQ

What was the first quarter net income for Southside Bancshares, Inc.?

Southside Bancshares, Inc. reported a first quarter net income of $21.5 million.

What was the linked quarter loan growth percentage for Southside Bancshares, Inc.?

Southside Bancshares, Inc. experienced a linked quarter loan growth of 1.2%.

What was the earnings per diluted common share for Southside Bancshares, Inc. in the first quarter?

Southside Bancshares, Inc. reported earnings per diluted common share of $0.71 for the first quarter.

What was the annualized return on assets for Southside Bancshares, Inc. in the first quarter?

Southside Bancshares, Inc. achieved an annualized return on assets of 1.03% in the first quarter.

What was the percentage of nonperforming assets to total assets for Southside Bancshares, Inc.?

Nonperforming assets for Southside Bancshares, Inc. remained low at 0.10% of total assets.

What cost containment measures is Southside Bancshares, Inc. focusing on?

Southside Bancshares, Inc. is focusing on cost containment opportunities to save approximately $3.5 million annually.

What was the decrease in net income for Southside Bancshares, Inc. compared to the same period in 2023?

Southside Bancshares, Inc. experienced a decrease of $4.5 million, or 17.4%, in net income compared to the same period in 2023.

What was the increase in noninterest expense for Southside Bancshares, Inc. in the first quarter?

Noninterest expense for Southside Bancshares, Inc. increased by $2.0 million, or 5.8%, in the first quarter.

How did nonperforming assets change for Southside Bancshares, Inc. compared to the previous year?

Nonperforming assets for Southside Bancshares, Inc. increased by 150.9% compared to the previous year.