NASDAQ Global Select Market Symbol - 'SBSI' TYLER, Texas, Nov. 8
/PRNewswire-FirstCall/ -- Southside Bancshares, Inc. ("Southside"
or the "Company") today reported its financial results for the
three and nine months ended September 30, 2007. Southside reported
net income of $3.5 million for the three months ended September 30,
2007, a decrease of $552,000, or 13.6%, when compared to $4.1
million for the same period in 2006. Net income for the nine months
ended September 30, 2007, increased $1.0 million to $11.9 million
from $10.8 million, or 9.5%, for the same period in 2006. B. G.
Hartley, Chairman and Chief Executive Officer, stated, "The third
quarter, while not as financially rewarding as comparable quarters,
could turn out to be one of the more memorable quarters for
Southside. The decrease in third quarter 2007 net income is largely
due to an increase in provision for loan losses of $394,000,
primarily a result of loan growth during the quarter and a decrease
of $128,000 in the gain on sales of securities available for sale.
Our earnings for the nine months ended September 30, 2007 remain
well ahead of last year as net income increased $1.0 million when
compared to the same period in 2006. During the third quarter, we
announced the acquisition, through our wholly-owned subsidiary
Southside Bank, of a 50 percent interest in Southside Financial
Group, LLC. ("SFG"). SFG will buy consumer loans secured by
automobiles, primarily through the purchase of existing automobile
portfolios from lenders throughout the United States. In addition
to our investment in SFG, we issued $35 million of trust preferred
securities, through two subsidiary trusts, to fund our acquisition
of Fort Worth Bancshares, Inc., which we completed on October 10,
2007. This acquisition expands our footprint into the dynamic
markets of Fort Worth, Arlington and Austin and is a tremendous
opportunity which should significantly enhance our overall
franchise value." "During the third quarter we also opened our
sixth full service grocery store branch in our largest market area,
the city of Tyler," stated B. G. Hartley. "We continue to make
investments with a focus on long-term shareholder value. While some
of these investments will negatively impact short-term earnings, we
believe the long-term potential franchise value and benefits
associated with these investments will significantly outweigh the
costs. In summary, we believe this quarter will prove to be a
significant and memorable quarter for both our shareholders and
Southside." Earnings per fully diluted share decreased $0.04, or
13.3%, to $0.26 for the three months ended September 30, 2007, when
compared to $0.30 for the same period in 2006. Earnings per fully
diluted share increased $0.07, or 8.6%, to $0.88 for the nine
months ended September 30, 2007, compared to $0.81 for the same
period in 2006. The return on average shareholders' equity for the
nine months ended September 30, 2007 increased to 13.68%, compared
to 13.26%, for the same period in 2006. The annual return on
average assets increased to 0.86%, for the nine months ended
September 30, 2007, compared to 0.78%, for the same period in 2006.
Loan and Deposit Growth The Company experienced solid loan growth
during the three months ended September 30, 2007, as loans
increased $26.8 million, or 3.5%, to $795.6 million from $768.7
million at June 30, 2007. During the third quarter SFG purchased
approximately $11.4 million of automobile portfolios which are
reflected in loans to individuals. Loan growth during 2007 occurred
primarily in construction loans, loans to individuals, commercial
loans, and municipal 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 footprint 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. We believe the Fort Worth Bancshares, Inc. and
SFG acquisitions dovetail nicely into this strategy, and we expect
these acquisitions to result in future loan growth." During the
three months ended September 30, 2007, deposits increased $18.0
million, or 1.3%, to $1.35 billion from $1.34 billion at June 30,
2007. The overall growth in deposits during the three months ended
September 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 $127,000, or 1.2%, to $10.2 million for the three months
ended September 30, 2007, when compared to $10.4 million for the
same period in 2006. Net interest income decreased $1.1 million, or
3.6%, to $30.3 for the nine months ended September 30, 2007, when
compared to $31.5 million for the same period in 2006. The slight
increase in our net interest margin reflects the volume changes
combined with the rate changes. The decrease in our net interest
spread reflects an increase in the average short-term borrowing
rates that exceeded the increase in the yields on the average
earning assets. For the three months ended September 30, 2007 when
compared to the same period in 2006, the Company's net interest
spread decreased to 1.65%, from 1.75%, while during the same
periods the net interest margin increased slightly to 2.52% from
2.51%. Compared to the previous quarter, the net interest margin
and net interest spread decreased to 2.52% and 1.65%, respectively,
for the three months ended September 30, 2007 from 2.57% and 1.71%
for the three months ended June 30, 2007. This was due in part to
an increase in leverage at a lower net interest margin and spread
and the issuance of trust preferred securities in mid August 2007
related to our acquisition in mid October 2007. Net Income for the
Three Months and Nine Months The decrease in net income for the
three months ended September 30, 2007 was primarily a result of the
increase in the provision for loan loss and noninterest expense.
The increase in net income for the nine months ended September 30,
2007 was primarily attributable to an increase in noninterest
income and a decrease in income tax expense. Noninterest income,
excluding gain on sale of available for sale securities, increased
$345,000, or 5.8%, and $1.9 million, or 11.1%, for the three and
nine months ended September 30, 2007, compared to the same periods
in 2006. The increase in noninterest income was primarily the
result of increases in deposit services income, trust income, and
other income. Income tax expense decreased $174,000, or 15.1%, and
$337,000, or 11.9%, for the three and nine months ended September
30, 2007, when compared to the same periods 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 $779,000, which was partially offset by an
increase in our estimated margin tax of $183,000, net of federal
income tax. Provision for loan losses increased $394,000, or
174.3%, for the three months ended September 30, 2007, compared to
the same period in 2006 primarily as a result of the increase in
loans and the investment in the automobile loan portfolios.
Noninterest expense increased $422,000, or 3.8%, and $117,000, or
0.3%, for the three and nine months ended September 30, 2007,
compared to the same periods in 2006. The increase in noninterest
expense for the three months ended September 30, 2007 was primarily
a result of an increase in salaries and employee benefits of
$298,000, or 4.3%, compared to the same period in 2006, primarily
the result of an increase in health claims, an increase in salary
expense associated with the addition of Southside Financial Group
during August, which was partially offset by a decrease in defined
benefit expense. About Southside Bancshares, Inc. Southside
Bancshares, Inc. is a bank holding company with approximately $1.9
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 September 30, December 31,
September 30, 2007 2006 2006 (dollars in thousands) (unaudited)
Selected Financial Condition Data (at end of period): Total assets
$1,904,029 $1,890,976 $ 1,881,291 Loans 795,588 759,147 741,534
Allowance for loan losses 7,668 7,193 7,354 Mortgage-backed and
related securities: Available for sale, at estimated fair value
665,244 643,164 656,787 Held to maturity, at cost 197,798 226,162
236,259 Investment securities: Available for sale, at estimated
fair value 87,671 98,952 85,679 Held to maturity, at cost 1,354
1,351 1,349 Federal Home Loan Bank stock, at cost 17,004 25,614
26,308 Deposits 1,354,323 1,282,475 1,210,881 Long-term obligations
149,795 149,998 164,887 Shareholders' equity 123,096 110,604
116,649 Nonperforming assets 2,177 2,110 2,599 Nonaccrual loans
1,307 1,333 1,213 Loans 90 days past due 466 128 625 Restructured
loans 167 220 223 Other real estate owned 172 351 441 Repossessed
assets 65 78 97 Asset Quality Ratios: Nonaccruing loans to total
loans 0.16% 0.18% 0.16% Allowance for loan losses to nonaccruing
loans 586.69 539.61 606.27 Allowance for loan losses to
nonperforming assets 352.23 340.90 282.95 Allowance for loan losses
to total loans 0.96 0.95 0.99 Nonperforming assets to total assets
0.11 0.11 0.14 Net charge-offs to average loans 0.08 0.14 0.13
Capital Ratios: Shareholders' equity to total assets 6.47 5.85 6.20
Average shareholders' equity to average total assets 6.28 5.99 5.91
LOAN PORTFOLIO COMPOSITION The following table sets forth loan
totals by category for the periods presented: At At At September
30, December 31, September 30, 2007 2006 2006 (in thousands)
(unaudited) Real Estate Loans: Construction $ 56,714 $ 39,588 $
35,717 1-4 Family Residential 225,381 227,354 226,128 Other 178,847
181,047 176,636 Commercial Loans 125,809 118,962 114,090 Municipal
Loans 110,084 106,155 100,994 Loans to Individuals 98,753 86,041
87,969 Total Loans $ 795,588 $ 759,147 $ 741,534 At or for the At
or for the Three Months Nine Months Ended September 30, Ended
September 30, 2007 2006 2007 2006 (dollars in thousands) (dollars
in thousands) (unaudited) (unaudited) Selected Operating Data:
Total interest income $25,475 $25,101 $75,052 $71,595 Total
interest expense 15,240 14,739 44,730 40,127 Net interest income
10,235 10,362 30,322 31,468 Provision for loan losses 620 226 954
955 Net interest income after provision for loan losses 9,615
10,136 29,368 30,513 Noninterest income Deposit services 4,274
4,036 12,472 11,452 Gain on sale of securities available for sale
126 254 561 478 Gain on sale of loans 424 521 1,493 1,363 Trust
income 522 423 1,562 1,230 Bank owned life insurance income 273 260
805 769 Other 784 692 2,310 1,959 Total noninterest income 6,403
6,186 19,203 17,251 Noninterest expense Salaries and employee
benefits 7,242 6,944 21,644 21,674 Occupancy expense 1,261 1,224
3,619 3,598 Equipment expense 268 239 738 667 Advertising, travel
& entertainment 363 366 1,233 1,290 ATM and debit card expense
247 254 743 699 Director fees 126 131 394 443 Supplies 151 152 487
504 Professional fees 413 373 964 1,006 Postage 165 155 468 460
Telephone and communications 193 175 577 529 Other 1,113 1,107
3,367 3,247 Total noninterest expense 11,542 11,120 34,234 34,117
Income before income tax expense 4,476 5,202 14,337 13,647
Provision for income tax expense 976 1,150 2,487 2,824 Net income
$3,500 $4,052 $11,850 $10,823 Common share data: Weighted-average
basic shares outstanding 13,091 12,896 13,036 12,852
Weighted-average diluted shares outstanding 13,454 13,394 13,437
13,351 Net income per common share Basic $0.27 $0.31 $0.91 $0.84
Diluted 0.26 0.30 0.88 0.81 Book value per common share - - 9.39
9.03 Cash dividend declared per common share 0.12 0.11 0.35 0.33
Selected Performance Ratios: Return on average assets 0.75% 0.86%
0.86% 0.78% Return on average shareholders' 11.75 14.67 13.68 13.26
Average yield on interest earning 6.00 5.81 5.97 5.70 Average yield
on interest bearing 4.35 4.06 4.30 3.79 Net interest spread 1.65
1.75 1.67 1.91 Net interest margin 2.52 2.51 2.52 2.61 Average
interest earnings assets to average interest 125.22 123.12 124.66
122.82 Noninterest expense to average 2.47 2.35 2.48 2.47
Efficiency ratio 66.45 64.66 66.63 67.12 AVERAGE BALANCES AND
YIELDS (dollars in thousands) (unaudited) Nine Months Ended
September 30, 2007 September 30, 2006 AVG AVG AVG AVG BALANCE
INTEREST YIELD BALANCE INTEREST YIELD ASSETS INTEREST EARNING
ASSETS: Loans (1) (2) $770,653 $39,937 6.93% $713,764 $35,564 6.66%
Loans Held For Sale Securities: 3,857 149 5.16% 4,783 191 5.34%
Investment Securities (Taxable)(4) 54,444 2,004 4.92% 55,865 1,906
4.56% Investment Securities (Tax-Exempt)(3)(4) 41,831 2,221 7.10%
44,793 2,389 7.13% Mortgage-backed and Related Securities (4)
839,505 32,079 5.11% 887,269 32,907 4.96% Total Securities 935,780
36,304 5.19% 987,927 37,202 5.03% Federal Home Loan Bank stock and
other investments, at cost 20,071 945 6.29% 28,467 1,046 4.91%
Interest Earning Deposits 586 26 5.93% 703 24 4.56% Federal Funds
Sold 2,102 80 5.09% 1,038 37 4.77% Total Interest Earning Assets
1,733,049 77,441 5.97% 1,736,682 74,064 5.70% NONINTEREST EARNING
ASSETS: Cash and Due From Banks 41,898 43,823 Bank Premises and
Equipment 34,374 33,420 Other Assets 43,046 41,307 Less: Allowance
for Loan Loss (7,326) (7,212) Total Assets $1,845,041 $1,848,020
LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST BEARING LIABILITIES:
Savings Deposits $51,825 505 1.30% $50,806 479 1.26% Time Deposits
547,659 20,055 4.90% 450,543 14,340 4.26% Interest Bearing Demand
Deposits 396,075 9,421 3.18% 350,740 6,965 2.66% Total Interest
Bearing Deposits 995,559 29,981 4.03% 852,089 21,784 3.42%
Short-term Interest Bearing Liabilities 269,344 9,771 4.85% 380,764
12,236 4.30% Long-term Interest Bearing Liabilities - FHLB Dallas
97,662 3,315 4.54% 160,517 4,864 4.05% Long-term Debt (5) 27,662
1,663 8.04% 20,619 1,243 7.95% Total Interest Bearing Liabilities
1,390,227 44,730 4.30% 1,413,989 40,127 3.79% NONINTEREST BEARING
LIABILITIES: Demand Deposits 319,854 313,043 Other Liabilities
19,178 11,827 Total Liabilities 1,729,259 1,738,859 SHAREHOLDERS'
EQUITY 115,782 109,161 Total Liabilities and Shareholders' Equity
$1,845,041 $1,848,020 NET INTEREST INCOME $32,711 $33,937 NET YIELD
ON AVERAGE EARNING ASSETS 2.52% 2.61% NET INTEREST SPREAD 1.67%
1.91% (1) Interest on loans includes fees on loans that are not
material in amount. (2) Interest income includes taxable-equivalent
adjustments of $1,705 and $1,710 for the nine months ended
September 30, 2007 and 2006, respectively. (3) Interest income
includes taxable-equivalent adjustments of $684 and $759 for the
nine months ended September 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, IV, and V in
connection with the issuance by Southside Statutory Trust III of
$20 million of trust preferred securities, Southside Statutory
Trust IV of $22.5 million of trust preferred securities and
Southside Statutory Trust V of $12.5 million of trust preferred
securities. Note: As of September 30, 2007 and 2006, loans totaling
$1,307 and $1,213, 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 September 30,
2007 September 30, 2006 AVG AVG AVG AVG BALANCE INTEREST YIELD
BALANCE INTEREST YIELD ASSETS INTEREST EARNING ASSETS: Loans (1)
(2) $ 777,509 $13,678 6.98% $731,345 $12,612 6.84% Loans Held For
Sale Securities: 3,804 53 5.53% 5,054 74 5.81% Investment
Securities (Taxable)(4) 44,743 552 4.89% 48,530 569 4.65%
Investment Securities (Tax-Exempt)(3)(4) 43,679 772 7.01% 44,398
798 7.13% Mortgage-backed and Related Securities (4) 851,985 10,982
5.11% 912,751 11,521 5.01% Total Securities 940,407 12,306 5.19%
1,005,679 12,888 5.08% Federal Home Loan Bank stock and other
investments, at cost 17,226 245 5.64% 27,309 352 5.11% Interest
Earning Deposits 655 9 5.45% 726 7 3.83% Federal Funds Sold 2,028
28 5.48% 1,718 22 5.08% Total Interest Earning Assets 1,741,629
26,319 6.00% 1,771,831 25,955 5.81% NONINTEREST EARNING ASSETS:
Cash and Due From Banks 40,381 39,685 Bank Premises and Equipment
35,204 33,197 Other Assets 42,431 40,230 Less: Allowance for Loan
Loss (7,381) (7,356) Total Assets $1,852,264 $1,877,587 LIABILITIES
AND SHAREHOLDERS' EQUITY INTEREST BEARING LIABILITIES: Savings
Deposits $51,846 171 1.31% $51,089 167 1.30% Time Deposits 561,382
6,983 4.94% 484,344 5,513 4.52% Interest Bearing Demand Deposits
402,884 3,237 3.19% 336,778 2,446 2.88% Total Interest Bearing
Deposits 1,016,112 10,391 4.06% 872,211 8,126 3.70% Short-term
Interest Bearing Liabilities 247,088 3,049 4.90% 403,981 4,649
4.57% Long-term Interest Bearing Liabilities - FHLB Dallas 86,147
997 4.59% 142,352 1,519 4.23% Long-term Debt(5) 41,518 803 7.67%
20,619 445 8.44% Total Interest Bearing Liabilities 1,390,865
15,240 4.35% 1,439,163 14,739 4.06% NONINTEREST BEARING
LIABILITIES: Demand Deposits 323,130 315,404 Other Liabilities
20,134 13,427 Total Liabilities 1,734,129 1,767,994 SHAREHOLDERS'
EQUITY 118,135 109,593 Total Liabilities and Shareholders' Equity
$1,852,264 $1,877,587 NET INTEREST INCOME $11,079 $11,216 NET YIELD
ON AVERAGE EARNING ASSETS 2.52% 2.51% NET INTEREST SPREAD 1.65%
1.75% (1) Interest on loans includes fees on loans that are not
material in amount. (2) Interest income includes taxable-equivalent
adjustments of $597 for both of the three month periods ended
September 30, 2007 and 2006, respectively. (3) Interest income
includes taxable-equivalent adjustments of $247 and $257 for the
three months ended September 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, IV, and V in
connection with the issuance by Southside Statutory Trust III of
$20 million of trust preferred securities, Southside Statutory
Trust IV of $22.5 million of trust preferred securities and
Southside Statutory Trust V of $12.5 million of trust preferred
securities. Note: As of September 30, 2007 and 2006, loans totaling
$1,307 and $1,213, 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: Susan Hill of Southside Bancshares, Inc.,
+1-903-531-7220, Web site: http://www.southside.com/
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