NASDAQ Global Select Market Symbol - 'SBSI'
TYLER, Texas, Jan. 29 /PRNewswire-FirstCall/ -- Southside Bancshares, Inc. ('Southside' or the 'Company') today reported its financial results for the three months and year ended December 31, 2008.
Southside reported record net income of $10.4 million for the three months ended December 31, 2008, an increase of $5.5 million, or 114.5%, when compared to $4.8 million for the same period in 2007.
Net income for the year ended December 31, 2008, increased $14.0 million, or 84.0%, to $30.7 million from $16.7 million, for the same period in 2007.
Earnings per diluted share increased $0.39, or 114.7%, to $0.73 for the three months ended December 31, 2008, compared to $0.34 for the same period in 2007. Earnings per diluted share increased $0.98, or 83.1%, to $2.16 for the year ended December 31, 2008, compared to $1.18 for the same period in 2007.
The return on average shareholders' equity for the year ended December 31, 2008, increased to 21.44%, compared to 14.05%, for the same period in 2007. The return on average assets increased to 1.29%, for the year ended December 31, 2008, compared to 0.87%, for the same period in 2007.
'We are exceptionally pleased to report record earnings in a financial environment that few will ever forget,' stated B. G. Hartley, Chairman and Chief Executive Officer. 'Our earnings are the product of the execution of our long-term business plan. Many institutions found 2008 to be a year to question long-held beliefs and methodologies. The events of 2008 strengthened our confidence in our traditional banking model and balance sheet strategies. Rather than be victimized by the tremendous volatility and credit events, we found ourselves in a position to build long-term franchise value.'
'We made the decision to grow assets during 2008, taking advantage of the increasingly attractive economics of financial intermediation. Asset growth consisted primarily of U.S. agency mortgage-backed securities, Texas Permanent School Fund guaranteed municipal securities and loan growth, funded by deposit growth and FHLB advances. Our ability to add assets is a result of our balance sheet discipline executed over a long-term horizon. Should the economics of asset accumulation decrease, we might allow the balance sheet to shrink through run-off or asset sales. However, should the economics become more attractive, we will strategically increase the balance sheet.'
'As 2008 started, there was pronounced weakness in the housing and credit markets. Events unfolded in the last half of the year that forever changed the financial landscape. As the economic fallout spread, many landmark firms ceased to exist in their original form. Some sectors of the economy, even those that most individuals took for granted, literally appeared to stop functioning.'
'In the third quarter earnings release, we remarked that 'we are well aware of the current precarious economic environment and are managing the bank to an increasing standard of protection.' In the fourth quarter, the housing led financial crisis morphed into a full blown economic crisis. Consumer spending slowed dramatically; retailers and automobile manufacturers began experiencing crippling results and unemployment levels intensified. While it appears the economy may be in for a bumpy recovery, we continue to prepare for several possibilities. As the economic crisis unfolded and oil prices plummeted during the fourth quarter, our market areas began to further reflect the economic slowdown. The year 2008 closed on a worse macroeconomic note for the nation than any in recent memory. We are fortunate to have marked this turbulent year by organically building our capital, strategically growing our balance sheet, as well as producing record net income.'
Loan and Deposit Growth
For the three months ended December 31, 2008, total loans increased by $35.2 million, or 3.6%, when compared to September 30, 2008. Management believes that the loan portfolio remains well diversified. During the quarter ended December 31, 2008, construction loans, municipal loans, and loans to individuals increased. When comparing the year ended December 31, 2008 to the comparable period in 2007, total loans grew by $61.3 million, or 6.4%. We are pleased that our loan growth appears well diversified. All loan categories, with the exception of commercial real estate, increased when comparing the year ended December 31, 2008 to the same period in 2007.
During the fourth quarter, as our markets began to experience the economic slowdown, our nonperforming assets increased $7.2 million to $15.8 million, or 0.58% of total assets, due to an increase in nonaccrual loans. In response, we increased our allowance for loan losses during the fourth quarter $3.2 million, to $16.1 million at December 31, 2008. When comparing September 30, 2008 to December 31, 2008, nonaccrual construction loans increased from $2.0 million to $5.7 million and nonaccrual Southside Financial Group ('SFG') loans increased from $1.4 million to $5.4 million.
Deposits increased $76.9 million, or 5.2%, to $1.56 billion during the three months ended December 31, 2008, when compared to September 30, 2008. When comparing the year ended December 31, 2008 to the comparable period in 2007, deposits increased $25.6 million, or 1.7%. Total deposits, net of brokered deposits, increased $118.6 million, or 8.5% for the year ended December 31, 2008, when compared to the same period in 2007.
Net Interest Income
Net interest income increased $9.2 million, or 67.7%, to $22.7 million for the three months ended December 31, 2008, when compared to $13.6 million for the same period in 2007. This is due to an increase in the average yield on our interest earning assets combined with a decrease in the average yield on the average interest bearing liabilities resulting in an increase in our net interest spread and margin. For the three months ended December 31, 2008, our net interest spread increased to 3.49% from 2.16% and our net interest margin increased to 3.96% from 2.94% when compared to the same period in 2007. The net interest margin and net interest spread for the three months ended December 31, 2008, increased to 3.96% and 3.49%, respectively, from 3.68% and 3.13% for the three months ended September 30, 2008. The increase in the yield on interest earning assets for the three months ended December 31, 2008, compared to the same period in 2007, is reflective of an increase in average SFG high yield automobile loans, a 41 basis point increase in the yield on our securities portfolio and an increase in average interest earning assets of $490.5 million, or 25.2%. The decrease in the average yield on interest bearing liabilities is a result of an overall decrease in interest rates and calling $125.4 million of higher yielding brokered deposits during 2008.
Net Income for the Three Months
The increase in net income for the three months ended December 31, 2008, was primarily a result of the increase in net interest income and noninterest income partially offset by an increase in provision for loan loss and noninterest expense. Noninterest income, excluding gain on sale of available for sale securities, increased $55,000, or 0.8%, for the three months ended December 31, 2008, compared to the same period in 2007. During the fourth quarter ended December 31, 2008, bank owned life insurance, which is part of noninterest income, increased $527,000 primarily as a result of a death benefit received on a covered officer. During the three months ended December 31, 2008, we primarily sold a portion of our long duration municipal securities. As a result, we realized a $5.8 million gain on the sale of available for sale securities during the fourth quarter of 2008. It is uncertain if economic conditions or ALCO and investment portfolio objectives that would precipitate sales of available for sale securities will exist in future quarters. Therefore, the Company cannot predict if it will have net gains on sales of available for sale securities in future quarters. Provision for loan losses increased $3.9 million, or 282.2%, for the three months ended December 31, 2008, compared to the same period in 2007 primarily due to changing market conditions and increases in nonperforming loans.
Noninterest expense increased $2.8 million, or 21.6%, for the three months ended December 31, 2008, compared to the same period in 2007. The increase in noninterest expense was primarily a result of the increase in salaries and employee benefits, occupancy expense, professional fees and FDIC expense. The increase in salaries and employee benefits for the three months ended December 31, 2008 was $2.0 million, or 25.8%, compared to the same period in 2007. The increase in salary and benefits is related to an increase in the number of employees, an increase in retirement expenses and normal annual salary increases.
About Southside Bancshares, Inc.
Southside Bancshares, Inc. is a bank holding company with approximately $2.7 billion in assets that owns 100% of Southside Bank. Southside Bank currently has 44 banking centers in Texas and operates a network of 47 ATMs.
To learn more about Southside Bancshares, Inc., please visit our investor relations website at www.southside.com/investor. Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data. To receive e-mail notification of company news, events and stock activity, please register on the E-mail Notification portion of the website. Questions or comments may be directed to Susan Hill at (903) 531-7220, or susan.hill@southside.com.
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, 2007 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
December 31, December 31,
2008 2007
(dollars in thousands)
(unaudited)
Selected Financial Condition Data
(at end of period):
Total assets $2,700,238 $2,196,322
Loans 1,022,549 961,230
Allowance for loan losses 16,112 9,753
Mortgage-backed and related securities:
Available for sale, at estimated fair value 1,026,513 727,553
Held to maturity, at cost 157,287 189,965
Investment securities:
Available for sale, at estimated fair value 278,378 109,928
Held to maturity, at cost 478 475
Federal Home Loan Bank stock, at cost 39,411 19,850
Deposits 1,556,131 1,530,491
Long-term obligations 715,800 146,558
Shareholders' equity 160,617 132,328
Nonperforming assets 15,781 3,946
Nonaccrual loans 14,289 2,913
Loans 90 days past due 593 400
Restructured loans 148 225
Other real estate owned 318 153
Repossessed assets 433 255
Asset Quality Ratios:
Nonaccruing loans to total loans 1.40% 0.30%
Allowance for loan losses to nonaccruing loans 112.76 334.81
Allowance for loan losses to nonperforming assets 102.10 247.16
Allowance for loan losses to total loans 1.58 1.01
Nonperforming assets to total assets 0.58 0.18
Net charge-offs to average loans 0.74 0.09
Capital Ratios:
Shareholders' equity to total assets 5.95 6.02
Average shareholders' equity to average total assets 6.04 6.22
LOAN PORTFOLIO COMPOSITION
The following table sets forth loan totals by category for the periods
presented:
At At
December 31, December 31,
2008 2007
(in thousands)
(unaudited)
Real Estate Loans:
Construction $120,153 $107,397
1-4 Family Residential 238,693 237,979
Other 184,629 200,148
Commercial Loans 165,558 154,171
Municipal Loans 134,986 112,523
Loans to Individuals 178,530 149,012
Total Loans $1,022,549 $961,230
At or for the At or for the
Three Months Years
Ended December 31, Ended December 31,
2008 2007 2008 2007
(dollars in thousands) (dollars in thousands)
(unaudited) (unaudited)
Selected Operating Data:
Total interest income $38,245 $30,689 $136,176 $105,741
Total interest expense 15,505 17,133 60,363 61,863
Net interest income 22,740 13,556 75,813 43,878
Provision for loan losses 5,339 1,397 13,675 2,351
Net interest income after
provision for loan losses 17,401 12,159 62,138 41,527
Noninterest income
Deposit services 4,572 4,808 18,395 17,280
Gain on sale of securities
available for sale 5,760 336 12,334 897
Gain on sale of loans 206 429 1,757 1,922
Trust income 575 544 2,465 2,106
Bank owned life insurance income 864 337 2,246 1,142
Other 717 761 3,105 3,071
Total noninterest income 12,694 7,215 40,302 26,418
Noninterest expense
Salaries and employee benefits 9,707 7,717 37,228 29,361
Occupancy expense 1,440 1,262 5,704 4,881
Equipment expense 337 279 1,305 1,017
Advertising, travel & entertainment 690 579 2,097 1,812
ATM and debit card expense 306 263 1,211 1,006
Director fees 249 211 674 605
Supplies 228 205 812 692
Professional fees 625 304 1,864 1,268
Postage 190 194 755 662
Telephone and communications 265 223 1,050 800
FDIC Insurance 278 173 966 285
Other 1,560 1,641 6,828 4,896
Total noninterest expense 15,875 13,051 60,494 47,285
Income before income tax expense 14,220 6,323 41,946 20,660
Provision for income tax expense 3,851 1,489 11,250 3,976
Net income $10,369 $4,834 $30,696 $16,684
Common share data:
Weighted-average basic shares
Outstanding 13,991 13,776 13,891 13,711
Weighted-average diluted shares
outstanding 14,239 14,141 14,200 14,117
Net income per common share
Basic $0.74 $0.35 $2.21 $1.22
Diluted 0.73 0.34 2.16 1.18
Book value per common share - - 11.45 9.59
Cash dividend declared per common
Share 0.19 0.15 0.60 0.50
Selected Performance Ratios:
Return on average assets 1.58% 0.92% 1.29% 0.87%
Return on average shareholders'
equity 27.85 15.02 21.44 14.05
Average yield on interest earning
assets 6.50 6.44 6.38 6.10
Average yield on interest bearing
liabilities 3.01 4.28 3.30 4.30
Net interest spread 3.49 2.16 3.08 1.80
Net interest margin 3.96 2.94 3.64 2.64
Average interest earnings assets
to average interest bearing
liabilities 118.65 122.36 120.66 124.02
Noninterest expense to average
total assets 2.42 2.47 2.55 2.48
Efficiency ratio 50.30 60.61 54.98 64.86
RESULTS OF OPERATIONS
The analysis below shows average interest earnings assets and interest
bearing liabilities together with the average yield on the interest
earning assets and the average cost of the interest bearing liabilities.
AVERAGE BALANCES AND YIELDS
(dollars in thousands)
(unaudited)
Years Ended
December 31, 2008 December 31, 2007
AVG AVG AVG AVG
BALANCE INTEREST YIELD BALANCE INTEREST YIELD
ASSETS
INTEREST EARNING
ASSETS:
Loans (1)(2) $983,336 $75,445 7.67% $809,906 $58,002 7.16%
Loans Held For Sale 2,487 121 4.87% 3,657 191 5.22%
Securities:
Investment
Securities
(Taxable)(4) 46,537 1,723 3.70% 52,171 2,580 4.95%
Investment
Securities
(Tax-Exempt)
(3)(4) 103,608 7,074 6.83% 43,486 3,065 7.05%
Mortgage-backed
and Related
Securities (4) 1,034,406 55,470 5.36% 852,880 43,767 5.13%
Total
Securities 1,184,551 64,267 5.43% 948,537 49,412 5.21%
FHLB stock and
other
investments,
at cost 31,875 841 2.64% 20,179 1,193 5.91%
Interest Earning
Deposits 1,006 22 2.19% 769 41 5.33%
Federal Funds Sold 4,039 90 2.23% 2,933 144 4.91%
Total Interest
Earning Assets 2,207,294 140,786 6.38% 1,785,981 108,983 6.10%
NONINTEREST
EARNING ASSETS:
Cash and Due
From Banks 45,761 42,724
Bank Premises and
Equipment 40,449 35,746
Other Assets 89,473 51,968
Less: Allowance
for Loan Loss (11,318) (7,697)
Total Assets $2,371,659 $1,908,722
LIABILITIES AND
SHAREHOLDERS'
EQUITY
INTEREST BEARING
LIABILITIES:
Savings Deposits $57,587 736 1.28% $52,106 676 1.30%
Time Deposits 535,921 21,727 4.05% 564,613 27,666 4.90%
Interest Bearing
Demand Deposits 500,955 10,428 2.08% 414,293 13,116 3.17%
Total Interest
Bearing
Deposits 1,094,463 32,891 3.01% 1,031,012 41,458 4.02%
Short-term
Interest
Bearing
Liabilities 290,895 8,969 3.08% 278,002 13,263 4.77%
Long-term
Interest
Bearing
Liabilities
- FHLB Dallas 383,677 14,454 3.77% 95,268 4,357 4.57%
Long-term Debt (5) 60,311 4,049 6.71% 35,802 2,785 7.78%
Total Interest
Bearing
Liabilities 1,829,346 60,363 3.30% 1,440,084 61,863 4.30%
NONINTEREST
BEARING
LIABILITIES:
Demand Deposits 372,160 328,711
Other Liabilities 26,497 20,997
Total
Liabilities 2,228,003 1,789,792
Minority
Interest in SFG 487 151
SHAREHOLDERS'
EQUITY 143,169 118,779
Total Liabilities
and Shareholders'
Equity $2,371,659 $1,908,722
NET INTEREST
INCOME $80,423 $47,120
NET INTEREST
MARGIN ON
AVERAGE
EARNING ASSETS 3.64% 2.64%
NET INTEREST
SPREAD 3.08% 1.80%
(1) Interest on loans includes fees on loans that are not material in
amount.
(2) Interest income includes taxable-equivalent adjustments of $2,446
and $2,289 for the years ended December 31, 2008 and 2007, respectively.
(3) Interest income includes taxable-equivalent adjustments of $2,164
and $953 for the years ended December 31, 2008 and 2007, 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 us 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, Southside Statutory Trust V of $12.5 million
of trust preferred securities and junior subordinated debentures
issued by Fort Worth Bancshares, Inc. to Magnolia Trust Company I in
connection with the issuance by Magnolia Trust Company I of $3.5
million of trust preferred securities.
Note: As of December 31, 2008 and 2007, loans totaling $14,289 and
$2,913, 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
December 31, 2008 December 31, 2007
AVG AVG AVG AVG
BALANCE INTEREST YIELD BALANCE INTEREST YIELD
ASSETS
INTEREST EARNING
ASSETS:
Loans (1)(2) $993,045 $19,627 7.86% $926,387 $18,065 7.74%
Loans Held
For Sale 1,751 22 5.00% 3,063 42 5.44%
Securities:
Investment
Securities
(Taxable)(4) 44,848 346 3.07% 45,426 576 5.03%
Investment
Securities
(Tax-Exempt)
(3)(4) 163,918 2,950 7.16% 48,395 844 6.92%
Mortgage-backed
and Related
Securities(4) 1,184,879 16,594 5.57% 892,567 11,688 5.20%
Total
Securities 1,393,645 19,890 5.68% 986,388 13,108 5.27%
FHLB stock and
other
investments,
at cost 40,115 185 1.83% 20,499 248 4.80%
Interest Earning
Deposits 1,240 - 0.00% 1,313 15 4.53%
Federal Funds Sold 3,803 11 1.15% 5,401 64 4.70%
Total Interest
Earning Assets 2,433,599 39,735 6.50% 1,943,051 31,542 6.44%
NONINTEREST
EARNING ASSETS:
Cash and Due
From Banks 46,270 45,471
Bank Premises
and Equipment 41,383 39,819
Other Assets 97,416 75,480
Less: Allowance
for Loan Loss (13,254) (8,800)
Total Assets $2,605,414 $2,095,021
LIABILITIES AND
SHAREHOLDERS'
EQUITY
INTEREST BEARING
LIABILITIES:
Savings Deposits $59,743 191 1.27% $52,937 171 1.28%
Time Deposits 530,239 4,524 3.39% 614,920 7,611 4.91%
Interest Bearing
Demand Deposits 527,493 2,296 1.73% 468,353 3,695 3.13%
Total Interest
Bearing
Deposits 1,117,475 7,011 2.50% 1,136,210 11,477 4.01%
Short-term
Interest Bearing
Liabilities 266,416 1,844 2.75% 303,693 3,492 4.56%
Long-term
Interest Bearing
Liabilities
- FHLB Dallas 606,905 5,626 3.69% 88,164 1,042 4.69%
Long-term Debt (5) 60,311 1,024 6.75% 59,958 1,122 7.42%
Total Interest
Bearing
Liabilities 2,051,107 15,505 3.01% 1,588,025 17,133 4.28%
NONINTEREST
BEARING
LIABILITIES:
Demand Deposits 385,134 355,289
Other Liabilities 20,708 23,634
Total
Liabilities 2,456,949 1,966,948
Minority
Interest in SFG 374 400
SHAREHOLDERS'
EQUITY 148,091 127,673
Total Liabilities
and Shareholders'
Equity $2,605,414 $2,095,021
NET INTEREST
INCOME $24,230 $14,409
NET INTEREST
MARGIN ON
AVERAGE
EARNING ASSETS 3.96% 2.94%
NET INTEREST SPREAD 3.49% 2.16%
(1) Interest on loans includes fees on loans that are not material in
amount.
(2) Interest income includes taxable-equivalent adjustments of $621 and
$584 for the three months ended December 31, 2008 and 2007, respectively.
(3) Interest income includes taxable-equivalent adjustments of $869 and
$269 for the three months ended December 31, 2008 and 2007, 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 us 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, Southside Statutory Trust V of $12.5 million of
trust preferred securities and junior subordinated debentures issued by
Fort Worth Bancshares, Inc. to Magnolia Trust Company I in connection with
the issuance by Magnolia Trust Company I of $3.5 million of trust
preferred securities.
Note: As of December 31, 2008 and 2007, loans totaling $14,289 and
$2,913,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.
SOURCE Southside Bancshares, Inc.
