NASDAQ Global Select Market Symbol - 'SBSI' TYLER, Texas, Aug. 6
/PRNewswire-FirstCall/ -- Southside Bancshares, Inc. ("Southside"
or the "Company") today reported its financial results for the
three and six months ended June 30, 2007. Net income increased
29.5%, or $1.0 million, for the three months ended June 30, 2007,
to $4.6 million from $3.5 million for the same period in 2006.
Southside reported net income of $8.4 million for the six months
ended June 30, 2007, an increase of $1.6 million, or 23.3%, when
compared to the same period in 2006. B. G. Hartley, Chairman and
Chief Executive Officer, stated "We are pleased with Southside's
outstanding financial results. Credit for these results goes
directly to our tremendous team of employees. During the first six
months of 2007 we made significant progress on a number of
previously discussed key initiatives, intended to increase revenues
and contain costs. The success of the initiatives more than offset
the additional operating expenses associated with opening three de
novo branches since December 31, 2005, and the challenging interest
rate environment experienced during 2007 as noninterest income,
excluding gain on sale of securities available for sale, increased
$1.5 million, or 14.1%, for the six months ended June 30, 2007 when
compared to the same period in 2006, while for the same periods
noninterest expense decreased $305,000, or 1.3%." "Outstanding
financial results were just part of the noteworthy events reported
during the second quarter," stated B. G. Hartley. "On May 17, 2007
we announced the acquisition of Fort Worth National Bank. This
acquisition, which is expected to close during the third quarter,
expands Southside's market to the dynamic markets of Fort Worth,
Arlington and Austin. We are extremely excited about this
significant opportunity. During the second quarter, shareholders
received a 5% stock dividend along with news of a 9.1% increase in
the quarterly cash dividend. In summary, we believe this was an
exceptional quarter for both our shareholders and Southside."
Earnings per fully diluted share increased $0.07, to $0.34 for the
three months ended June 30, 2007, or 25.9%, when compared to $0.27
for the same period in 2006. Earnings per fully diluted share
increased $0.11, to $0.62 for the six months ended June 30, 2007,
or 21.6%, compared to $0.51 for the same period in 2006. The return
on average shareholders' equity for the six months ended June 30,
2007 was 14.70%, compared to 12.53%, for the same period in 2006.
The annual return on average assets was 0.91%, for the six months
ended June 30, 2007, compared to 0.74%, for the same period in
2006. Loan and Deposit Growth The Company continued to experience
loan growth during the six months ended June 30, 2007, as loans
increased $9.6 million, or 1.3%, to $768.7 million from $759.1
million at December 31, 2006. This increase in loans was net of
approximately $6.6 million in student loan sales during the first
six months. Loan growth during 2007 occurred primarily in
construction loans, municipal loans, and commercial loans. The
consistent growth in loans is significant given the increasing
competition in the Texas banking markets we serve. Commenting on
the loan growth, B. G. Hartley said, "Our marketplace in Texas has
continued to expand over the past several years through the opening
of branches in strategic market areas. Positioning for future
success remains a central part of our business strategy and we
believe the Fort Worth National Bank acquisition dovetails nicely
into this strategy." During the six months ended June 30, 2007,
deposits increased a solid $53.9 million, or 4.2%, to $1.34 billion
from $1.28 billion at December 31, 2006. The overall growth in
deposits during the six months ended June 30, 2007 resulted from
our expanding branch network and continued market penetration.
Price-related competition for deposits has intensified. While the
Company has attempted to maintain a disciplined deposit pricing
strategy, the current competitive environment could pressure the
net interest margin in the coming quarters. Net Interest Income Net
interest income decreased $476,000, or 4.5%, to $10.1 million for
the three months ended June 30, 2007, when compared to $10.5
million for the same period in 2006. Net interest income decreased
$1.0 million, or 4.8%, to $20.1 for the six months ended June 30,
2007, when compared to $21.1 million for the same period in 2006.
The net interest margin and net interest spread were impacted by
the significant increase in short-term interest rates during 2006
combined with significantly smaller increases in long-term interest
rates. This resulted in an inverted yield curve for most of 2006
and the first six months of 2007, where short-term interest rates
were higher than long-term interest rates. As a result, the
Company's net interest margin and net interest spread decreased to
2.57% and 1.71%, respectively, for the three months ended June 30,
2007 compared to 2.61% and 1.90%, respectively, for the same period
in 2006. Compared to the previous quarter, the net interest margin
and net interest spread increased to 2.57% and 1.71% respectively,
for the three months ended June 30, 2007 from 2.47% and 1.67% for
the three months ended March 31, 2007. Should the yield curve
invert for long periods of time or invert severely our net interest
margin and spread could come under additional pressure during the
second half of 2007. Net Income for the Three Months and Six Months
The increase in net income for the three and six months ended June
30, 2007 was primarily attributable to an increase in noninterest
income, a decrease in income tax expense, a decrease in noninterest
expense and a decrease in provision for loan losses. Noninterest
income, excluding gain on sale of available for sale securities,
increased $790,000, or 13.5%, and $1.5 million, or 14.1%, for the
three and six months ended June 30, 2007, compared to the same
period in 2006. The increase in noninterest income was primarily
the result of increases in deposit services income, gain on sale of
loans, trust income, and other income. Income tax expense decreased
$487,000, or 51.3%, and $163,000, or 9.7%, for the three and six
months ended June 30, 2007, when compared to the same period in
2006. The decrease in income tax expense was the result of a
one-time state tax credit resulting from a change in Texas tax law
during the second quarter ended June 30, 2007, related to the new
Texas margin tax. The one-time tax credit was $770,000, which was
partially offset by an increase in our estimated margin tax of
$109,000, net of tax. Provision for loan losses decreased $231,000,
or 51.6%, and $395,000, or 54.2%, for the three and six months
ended June 30, 2007, compared to the same period in 2006.
Noninterest expense decreased $107,000, or 0.9%, and $305,000, or
1.3%, for the three and six months ended June 30, 2007, compared to
the same period in 2006. The decrease in noninterest expense for
the six months ended June 30, 2007 was primarily a result of a
decrease in salaries and employee benefits of $328,000, or 2.2%,
compared to the same period in 2006. About Southside Bancshares,
Inc. Southside Bancshares, Inc. is a bank holding company with
approximately $1.82 billion in assets that owns 100% of Southside
Bank. Southside Bank currently has 36 banking centers in East Texas
and operates a network of 41 ATMs. To learn more about Southside
Bancshares, Inc., please visit our investor relations website at
http://www.southside.com/investor. Our investor relations site
provides a detailed overview of our activities, financial
information, and historical stock price data. To receive e-mail
notification of company news, events, and stock activity, please
register on the E-mail Notification portion of the website.
Questions or comments may be directed to Susan Hill at (903)
531-7220, or . Forward-Looking Statements Certain statements of
other than historical fact that are contained in this document and
in written material, press releases and oral statements issued by
or on behalf of the Company, a bank holding company, may be
considered to be "forward-looking statements" within the meaning of
and subject to the protections of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are not
guarantees of future performance, nor should they be relied upon as
representing management's views as of any subsequent date. These
statements may include words such as "expect," "estimate,"
"project," "anticipate," "appear," "believe," "could," "should,"
"may," "intend," "probability," "risk," "target," "objective,"
"plans," "potential," and similar expressions. Forward-looking
statements are statements with respect to the Company's beliefs,
plans, expectations, objectives, goals, anticipations, assumptions,
estimates, intentions and future performance and are subject to
significant known and unknown risks and uncertainties, which could
cause the Company's actual results to differ materially from the
results discussed in the forward-looking statements. For example,
discussions of the effect of the Company's expansion, including
expectations of the costs and profitability of such expansion,
trends in asset quality and earnings from growth, and certain
market risk disclosures are based upon information presently
available to management and are dependent on choices about key
model characteristics and assumptions and are subject to various
limitations. By their nature, certain of the market risk
disclosures are only estimates and could be materially different
from what actually occurs in the future. As a result, actual income
gains and losses could materially differ from those that have been
estimated. Additional information concerning the Company and its
business, including additional factors that could materially affect
the Company's financial results, is included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2006
under "Forward-Looking Information" and Item 1A. "Risk Factors,"
and in the Company's other filings with the Securities and Exchange
Commission. The Company disclaims any obligation to update any
factors or to announce publicly the result of revisions to any of
the forward-looking statements included herein to reflect future
events or developments. At At At June 30, December 31, June 30,
2007 2006 2006 (dollars in thousands) (unaudited) Selected
Financial Condition Data (at end of period) Total assets $1,821,776
$1,890,976 $1,875,676 Loans 768,739 759,147 723,924 Allowance for
loan losses 7,367 7,193 7,346 Mortgage-backed and related
securities: Available for sale, at estimated fair value 599,326
643,164 653,046 Held to maturity, at cost 207,262 226,162 245,812
Investment securities: Available for sale, at estimated fair value
88,566 98,952 88,598 Held to maturity, at cost 1,353 1,351 1,348
Federal Home Loan Bank stock, at cost 15,540 25,614 27,364 Deposits
1,336,350 1,282,475 1,195,058 Long-term obligations 110,012 149,998
157,469 Shareholders' equity 115,494 110,604 105,156 Nonperforming
assets 2,324 2,110 3,237 Nonaccrual loans 1,637 1,333 1,424 Loans
90 days past due 408 128 692 Restructured loans 179 220 239 Other
real estate owned 23 351 841 Repossessed assets 77 78 41 Asset
Quality Ratios: Nonaccruing loans to total loans 0.21% 0.18% 0.20%
Allowance for loan losses to nonaccruing loans 450.03 539.61 515.87
Allowance for loan losses to nonperforming assets 317.00 340.90
226.94 Allowance for loan losses to total loans 0.96 0.95 1.01
Nonperforming assets to total assets 0.13 0.11 0.17 Net charge-offs
to average loans 0.04 0.14 0.14 Capital Ratios: Shareholders'
equity to total assets 6.34 5.85 5.61 Average shareholders' equity
to average total assets 6.22 5.99 5.94 LOAN PORTFOLIO COMPOSITION
The following table sets forth loan totals by category for the
periods presented: At At At June 30, December 31, June 30, 2007
2006 2006 (in thousands) (unaudited) Real Estate Loans:
Construction $46,876 $39,588 $33,084 1-4 Family Residential 223,996
227,354 222,332 Other 177,918 181,047 173,776 Commercial Loans
125,609 118,962 104,623 Municipal Loans 110,416 106,155 105,316
Loans to Individuals 83,924 86,041 84,793 Total Loans $768,739
$759,147 $723,924 At or for the At or for the Three Months Ended
Six Months Ended June 30, June 30, 2007 2006 2007 2006 (dollars in
(dollars in thousands) thousands) (unaudited) (unaudited) Selected
Operating Data: Total interest income $24,380 $23,925 $49,577
$46,494 Total interest expense 14,319 13,388 29,490 25,388 Net
interest income 10,061 10,537 20,087 21,106 Provision for loan
losses 217 448 334 729 Net interest income after provision for loan
losses 9,844 10,089 19,753 20,377 Noninterest income Deposit
services 4,270 3,947 8,198 7,416 Gain on sale of securities
available for sale 6 101 435 224 Gain on sale of loans 724 469
1,069 842 Trust income 576 403 1,040 807 Bank owned life insurance
income 268 265 532 509 Other 818 782 1,526 1,267 Total noninterest
income 6,662 5,967 12,800 11,065 Noninterest expense Salaries and
employee benefits 7,298 7,310 14,402 14,730 Occupancy expense 1,190
1,201 2,358 2,374 Equipment expense 242 225 470 428 Advertising,
travel & entertainment 449 472 870 924 ATM and debit card
expense 242 275 496 445 Director fees 141 167 268 312 Supplies 188
168 336 352 Professional fees 240 318 551 633 Postage 155 155 303
305 Telephone and communications 193 191 384 354 Other 1,118 1,081
2,254 2,140 Total noninterest expense 11,456 11,563 22,692 22,997
Income before income tax expense 5,050 4,493 9,861 8,445 Provision
for income tax expense 463 950 1,511 1,674 Net income $4,587 $3,543
$8,350 $6,771 Common Share Data: Weighted-average basic shares
outstanding 13,035 12,853 13,008 12,830 Weighted-average diluted
shares outstanding 13,436 13,337 13,429 13,326 Net income per
common share Basic $0.35 $0.28 $0.64 $0.53 Diluted 0.34 0.27 0.62
0.51 Book value per common share - - 8.83 8.16 Cash dividend
declared per common share 0.12 0.11 0.23 0.22 Selected Performance
Ratios: Return on average assets 1.02% 0.77% 0.91% 0.74% Return on
average shareholders' equity 15.79 13.30 14.70 12.53 Average yield
on interest earning assets 5.98 5.69 5.96 5.64 Average yield on
interest bearing liabilities 4.27 3.79 4.28 3.65 Net interest
spread 1.71 1.90 1.68 1.99 Net interest margin 2.57 2.61 2.52 2.67
Average interest earning assets to average interest bearing
liabilities 125.70 122.80 124.37 122.67 Noninterest expense to
average total assets 2.55 2.51 2.49 2.53 Efficiency ratio 65.47
67.16 66.72 68.37 AVERAGE BALANCES AND YIELDS (dollars in
thousands) (unaudited) Six Months Ended June 30, 2007 AVG. AVG.
BALANCE INTEREST YIELD ASSETS INTEREST EARNING ASSETS: Loans (1)
(2) $767,168 $26,259 6.90% Loans Held for Sale 3,884 96 4.98%
Securities: Investment Securities (Taxable) (4) 59,374 1,452 4.93%
Investment Securities (Tax-Exempt)(3)(4) 40,893 1,449 7.15%
Mortgage-backed and Related Securities (4) 833,161 21,097 5.11%
Total Securities 933,428 23,998 5.18% Federal Home Loan Bank Stock
& Other Investments, at cost 21,517 700 6.56% Interest Earning
Deposits 551 17 6.22% Federal Funds Sold 2,140 52 4.90% Total
Interest Earning Assets 1,728,688 51,122 5.96% NONINTEREST EARNING
ASSETS: Cash and Due From Banks 42,669 Bank Premises and Equipment
33,952 Other Assets 43,359 Less: Allowance for Loan Loss (7,298)
Total Assets $1,841,370 LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST BEARING LIABILITIES: Savings Deposits $51,815 334 1.30%
Time Deposits 540,684 13,072 4.88% Interest Bearing Demand Deposits
392,614 6,184 3.18% Total Interest Bearing Deposits 985,113 19,590
4.01% Short-term Interest Bearing Liabilities 280,657 6,722 4.83%
Long-term Interest Bearing Liabilities - FHLB 103,515 2,318 4.52%
Long-term Debt (5) 20,619 860 8.30% Total Interest Bearing
Liabilities 1,389,904 29,490 4.28% NONINTEREST BEARING LIABILITIES:
Demand Deposits 318,189 Other Liabilities 18,692 Total Liabilities
1,726,785 SHAREHOLDERS' EQUITY 114,585 Total Liabilities and
Shareholders' Equity $1,841,370 NET INTEREST INCOME $21,632 NET
YIELD ON AVERAGE EARNING ASSETS 2.52% NET INTEREST SPREAD 1.68%
June 30, 2006 AVG. AVG. BALANCE INTEREST YIELD ASSETS INTEREST
EARNING ASSETS: Loans (1) (2) $704,827 $22,952 6.57% Loans Held for
Sale 4,645 117 5.08% Securities: Investment Securities (Taxable)
(4) 59,593 1,337 4.52% Investment Securities (Tax-Exempt)(3)(4)
44,994 1,591 7.13% Mortgage-backed and Related Securities (4)
874,318 21,386 4.93% Total Securities 978,905 24,314 5.01% Federal
Home Loan Bank Stock & Other Investments, at cost 29,056 694
4.82% Interest Earning Deposits 691 17 4.96% Federal Funds Sold 693
15 4.36% Total Interest Earning Assets 1,718,817 48,109 5.64%
NONINTEREST EARNING ASSETS: Cash and Due From Banks 45,926 Bank
Premises and Equipment 33,534 Other Assets 41,854 Less: Allowance
for Loan Loss (7,139) Total Assets $1,832,992 LIABILITIES AND
SHAREHOLDERS' EQUITY INTEREST BEARING LIABILITIES: Savings Deposits
$50,663 312 1.24% Time Deposits 433,362 8,827 4.11% Interest
Bearing Demand Deposits 357,837 4,519 2.55% Total Interest Bearing
Deposits 841,862 13,658 3.27% Short-term Interest Bearing
Liabilities 368,963 7,587 4.15% Long-term Interest Bearing
Liabilities - FHLB 169,749 3,345 3.97% Long-term Debt (5) 20,619
798 7.70% Total Interest Bearing Liabilities 1,401,193 25,388 3.65%
NONINTEREST BEARING LIABILITIES: Demand Deposits 311,844 Other
Liabilities 11,014 Total Liabilities 1,724,051 SHAREHOLDERS' EQUITY
108,941 Total Liabilities and Shareholders' Equity $1,832,992 NET
INTEREST INCOME $22,721 NET YIELD ON AVERAGE EARNING ASSETS 2.67%
NET INTEREST SPREAD 1.99% (1) Interest on loans includes fees on
loans which are not material in amount. (2) Interest income
includes taxable-equivalent adjustments of $1,108 and $1,113 for
the six months ended June 30, 2007 and 2006, respectively. (3)
Interest income includes taxable-equivalent adjustments of $437 and
$502 for the six months ended June 30, 2007 and 2006, respectively.
(4) For the purpose of calculating the average yield, the average
balance of securities is presented at historical cost. (5)
Represents junior subordinated debentures issued by Southside
Bancshares, Inc. to Southside Statutory Trust III in connection
with the issuance of Southside Statutory Trust III of $20 million
of trust preferred securities. Note: As of June 30, 2007 and 2006,
loans totaling $1,637 and $1,424, respectively, were on nonaccrual
status. The policy is to reverse previously accrued but unpaid
interest on nonaccrual loans; thereafter, interest income is
recorded to the extent received when appropriate. AVERAGE BALANCES
AND YIELDS (dollars in thousands) (unaudited) Three Months Ended
June 30, 2007 AVG. AVG. BALANCE INTEREST YIELD ASSETS INTEREST
EARNING ASSETS: Loans (1) (2) $768,744 $13,238 6.91% Loans Held for
Sale 4,458 55 4.95% Securities: Investment Securities (Taxable) (4)
50,584 616 4.88% Investment Securities (Tax-Exempt)(3)(4) 40,747
726 7.15% Mortgage-backed and Related Securities (4) 804,026 10,163
5.07% Total Securities 895,357 11,505 5.15% Federal Home Loan Bank
Stock & Other Investments, at cost 17,778 330 7.45% Interest
Earning Deposits 550 10 7.29% Federal Funds Sold 1,945 23 4.74%
Total Interest Earning Assets 1,688,832 25,161 5.98% NONINTEREST
EARNING ASSETS: Cash and Due From Banks 40,259 Bank Premises and
Equipment 35,342 Other Assets 42,910 Less: Allowance for Loan Loss
(7,360) Total Assets $1,799,983 LIABILITIES AND SHAREHOLDERS'
EQUITY INTEREST BEARING LIABILITIES: Savings Deposits $52,454 170
1.30% Time Deposits 548,969 6,711 4.90% Interest Bearing Demand
Deposits 395,653 3,144 3.19% Total Interest Bearing Deposits
997,076 10,025 4.03% Short-term Interest Bearing Liabilities
231,818 2,776 4.80% Long-term Interest Bearing Liabilities - FHLB
94,082 1,086 4.63% Long-term Debt (5) 20,619 432 8.29% Total
Interest Bearing Liabilities 1,343,595 14,319 4.27% NONINTEREST
BEARING LIABILITIES: Demand Deposits 320,966 Other Liabilities
18,927 Total Liabilities 1,683,488 SHAREHOLDERS' EQUITY 116,495
Total Liabilities and Shareholders' Equity $1,799,983 NET INTEREST
INCOME $10,842 NET YIELD ON AVERAGE EARNING ASSETS 2.57% NET
INTEREST SPREAD 1.71% June 30, 2006 AVG. AVG. BALANCE INTEREST
YIELD ASSETS INTEREST EARNING ASSETS: Loans (1) (2) $715,423
$11,816 6.62% Loans Held for Sale 4,826 64 5.32% Securities:
Investment Securities (Taxable) (4) 51,840 594 4.60% Investment
Securities (Tax-Exempt) (3) (4) 40,557 720 7.12% Mortgage-backed
and Related Securities (4) 897,645 11,149 4.98% Total Securities
990,042 12,463 5.05% Federal Home Loan Bank Stock & Other
Investments, at cost 28,507 350 4.92% Interest Earning Deposits 825
8 3.89% Federal Funds Sold 543 6 4.43% Total Interest Earning
Assets 1,740,166 24,707 5.69% NONINTEREST EARNING ASSETS: Cash and
Due From Banks 43,345 Bank Premises and Equipment 33,549 Other
Assets 39,442 Less: Allowance for Loan Loss (7,200) Total Assets
$1,849,302 LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST BEARING
LIABILITIES: Savings Deposits $51,402 165 1.29% Time Deposits
460,139 4,897 4.27% Interest Bearing Demand Deposits 354,549 2,342
2.65% Total Interest Bearing Deposits 866,090 7,404 3.43%
Short-term Interest Bearing Liabilities 378,536 4,037 4.28%
Long-term Interest Bearing Liabilities - FHLB 151,794 1,534 4.05%
Long-term Debt (5) 20,619 413 7.92% Total Interest Bearing
Liabilities 1,417,039 13,388 3.79% NONINTEREST BEARING LIABILITIES:
Demand Deposits 313,422 Other Liabilities 11,958 Total Liabilities
1,742,419 SHAREHOLDERS' EQUITY 106,883 Total Liabilities and
Shareholders' Equity $1,849,302 NET INTEREST INCOME $11,319 NET
YIELD ON AVERAGE EARNING ASSETS 2.61% NET INTEREST SPREAD 1.90% (1)
Interest on loans includes fees on loans which are not material in
amount. (2) Interest income includes taxable-equivalent adjustments
of $560 and $552 for the three months ended June 30, 2007 and 2006,
respectively. (3) Interest income includes taxable-equivalent
adjustments of $221 and $230 for the three months ended June 30,
2007 and 2006, respectively. (4) For the purpose of calculating the
average yield, the average balance of securities is presented at
historical cost. (5) Represents junior subordinated debentures
issued by Southside Bancshares, Inc. to Southside Statutory Trust
III in connection with the issuance of Southside Statutory Trust
III of $20 million of trust preferred securities. Note: As of June
30, 2007 and 2006, loans totaling $1,637 and $1,424, respectively,
were on nonaccrual status. The policy is to reverse previously
accrued but unpaid interest on nonaccrual loans; thereafter,
interest income is recorded to the extent received when
appropriate. DATASOURCE: Southside Bancshares, Inc. CONTACT: Lee
Gibson, +1-903-531-7221, for Southside Bancshares, Inc. Web site:
http://www.southside.com/
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