Southside reported record net income of $14.1 million for the three months ended March 31, 2009, an increase of $8.6 million, or 155.0%, when compared to $5.5 million for the same period in 2008.

Earnings per diluted share increased $0.58, or 156.8%, to $0.95 for the three months ended March 31, 2009, when compared to $0.37 for the same period in 2008.

The return on average shareholders' equity for the three months ended March 31, 2009 increased to 33.78%, compared to 16.14%, for the same period in 2008. The annual return on average assets increased to 2.14%, for the three months ended March 31, 2009, compared to 1.00%, for the same period in 2008.

"We are gratified to report our best quarterly earnings since we opened the doors almost 50 years ago," stated B. G. Hartley, Chairman and Chief Executive Officer. "We are equally pleased that core earnings were also at a record level. The successful execution of our business plan is a tribute to all Southside employees who have effectively guided this franchise in good economic times and otherwise. We feel quite fortunate to be based in the state of Texas. I would like to thank all of our customers for their support and express our eagerness to continue our commitment to serve them in the future. Finally, I appreciate the trust every shareholder puts in our institution. Your continued support of Southside is never taken lightly."

"We remain in an environment of high macroeconomic uncertainty and volatility. This condition has persisted for well over a year now. The capital markets have reflected this dislocation, resulting in a high degree of market volatility. In the fourth quarter of 2008, we realized a $5.8 million gain on sale of securities. In the first quarter of 2009, we realized a $12.9 million gain on sale of securities, net of impairment charges. These gains are a product of the economic times we are currently living through. During this period of extreme volatility, not seen in decades, certain sectors of securities were available for purchase at incredibly attractive prices. Because of the extreme swings in market value, these attractive prices that might have taken years to return to prior levels, returned to levels consistent with a more liquid market in a relatively short period of time, in some cases months. This led to abnormally high security gains that are unlikely to be repeated in future quarters. In an environment where bank capital is scarce, we are fortunate to be in the position to increase capital through earnings in order to support franchise growth. This capital allows Southside the opportunity to further expand traditional banking services."

"You can be assured that we are managing the bank with an acute awareness to the macroeconomic environment. Our earnings ability is the product of a traditional credit and balance sheet discipline. We are committed to maintaining that discipline to allow the bank to prosper in a wide variety of potential economic outcomes. Our veteran management team provides a depth of experience and knowledge that is especially critical during these precarious times."

"At Southside, we have always had a traditional lending approach and have not significantly altered that approach as lending cycles come and go. Therefore, we continue to partner with our customers in the same fashion as we have for almost 50 years. Our commitment to the communities we serve remains strong. Last, but most importantly, we are indeed open for business, eager to make loans, and serve our customers as we have been every day since we started a community bank on Beckham Avenue in Tyler back in 1960."

Loan and Deposit Growth

For the three months ended March 31, 2009, total loans decreased $10.1 million, or 1.0% compared to December 31, 2008. The decrease was a result of the reduction in construction loans which decreased $10.3 million, or 8.6% to $109.8 million at March 31, 2009 from $120.2 million at December 31, 2008.

Nonperforming assets increased $1.6 million, or 10.1% to $17.4 million or 0.63% of total assets, for the three months ended March 31, 2009 when compared to December 31, 2008. This increase is primarily related to construction loans, mostly associated with the acquisition of Fort Worth National Bank and, to a lesser extent, loans to individuals purchased by Southside Financial Group.

During the three months ended March 31, 2009, deposits increased $123.8 million, or 8.0% compared to December 31, 2008. During the first quarter, one of our public fund customers made a substantial deposit, which is the primary reason for this increase. We anticipate this public fund deposit will roll-off over the next twelve to fifteen months.

Net Interest Income

Net interest income increased $6.9 million, or 44.7%, to $22.2 million for the three months ended March 31, 2009, when compared to $15.4 million for the same period in 2008. For the three months ended March 31, 2009 when compared to the same period in 2008, our net interest spread increased to 3.37% from 2.55% and during the same periods the net interest margin increased to 3.83% from 3.22%. Compared to the previous quarter, the net interest margin and net interest spread for the three months ended March 31, 2009 decreased to 3.83% and 3.37%, respectively, from 3.96% and 3.49% for the three months ended December 31, 2008.

Net Income for the Three Months

The increase in net income for the three months ended March 31, 2009 was primarily a result of security gains and an increase in net interest income partially offset by an increase in provision for loan losses, an other-than-temporary impairment, noninterest expense and a decrease in noninterest income net of security gains. Provision for loan losses increased $1.4 million, or 60.3%, for the three months ended March 31, 2009, compared to the same period in 2008 due primarily to the increase in nonperforming construction loans, overall market conditions, as well as loans to individuals purchased by Southside Financial Group.

Noninterest expense increased $2.2 million, or 15.5%, for the three months ended March 31, 2009, compared to the same period in 2008. The increase in noninterest expense was primarily a result of increases in personnel associated with our overall growth and expansion, including Southside Financial Group, an increase in retirement expense and normal salary increases for existing personnel, all of which are reflected in salaries and employee benefits which increased a combined $1.8 million or 20.3%, when compared to the same period in 2008. FDIC insurance premiums also increased during the period.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $2.8 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 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 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, 2008 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                              March 31,      December 31,     March 31,                                2009            2008            2008                                       (dollars in thousands)                                            (unaudited)   Selected Financial    Condition Data (at end    of period):    Total assets              $2,763,872      $2,700,238      $2,262,871   Loans                      1,012,460       1,022,549         980,879   Allowance for loan    losses                       17,432          16,112          10,611   Mortgage-backed and    related securities:     Available for sale, at      estimated fair value    1,136,827       1,026,513         702,928     Held to maturity, at      cost                      223,876         157,287         183,555   Investment securities:     Available for sale, at      estimated fair value      154,756         278,378         179,430     Held to maturity, at      cost                          478             478             476   Federal Home Loan Bank    stock, at cost               39,459          39,411          26,175   Deposits                   1,679,944       1,556,131       1,442,669   Long-term obligations        718,175         715,800         315,873   Shareholders' equity         176,463         161,089         142,407   Nonperforming assets          17,378          15,781           8,133     Nonaccrual loans            11,263          14,289           6,565     Loans 90 days past due       1,527             593             859     Restructured loans             894             148             182     Other real estate owned      3,194             318             121     Repossessed assets             500             433             406    Asset Quality Ratios:   Nonaccruing loans to    total loans                    1.11%           1.40%           0.67%   Allowance for loan    losses to nonaccruing    loans                        154.77          112.76          161.63   Allowance for loan    losses to nonperforming    assets                       100.31          102.10          130.47   Allowance for loan    losses to total loans          1.72            1.58            1.08   Nonperforming assets to    total assets                   0.63            0.58            0.36   Net charge-offs to    average loans                  0.90            0.74            0.57    Capital Ratios:   Shareholders' equity to    total assets                   6.38            5.95            6.28   Average shareholders'    equity to average total    assets                         6.34            6.04            6.22      LOAN PORTFOLIO COMPOSITION    The following table sets forth loan totals by category for the periods   presented:                                  At          At           At                             March 31,  December 31,  March 31,                                2009        2008        2008                                      (in thousands)                                       (unaudited)   Real Estate Loans:     Construction             $109,842    $120,153    $101,574     1-4 Family Residential    238,403     238,693     240,856     Other                     182,838     184,629     205,513   Commercial Loans            164,331     165,558     156,137   Municipal Loans             136,533     134,986     119,015   Loans to Individuals        180,513     178,530     157,784   Total Loans              $1,012,460  $1,022,549    $980,879                                                            At or for the                                                        Three Months                                                       Ended March 31,                                                      2009          2008                                                    (dollars in thousands)                                                         (unaudited)    Selected Operating Data:   Total interest income                           $36,660        $32,096   Total interest expense                           14,423         16,726   Net interest income                              22,237         15,370   Provision for loan losses                         3,590          2,239   Net interest income after provision for loan    losses                                          18,647         13,131   Noninterest income     Deposit services                                4,035          4,417     Gain on sale of securities available for sale  13,796          2,092       Total other-than-temporary impairment losses  (5,627)             -      Portion of loss recognized in other       comprehensive income (before taxes)           4,727              -      Net impairment losses recognized in earnings    (900)             -      Gain on sale of loans                             335            465     Trust income                                      563            593     Bank owned life insurance income                  301            310     Other                                             784            825      Total noninterest income                      18,914          8,702   Noninterest expense     Salaries and employee benefits                 10,484          8,713     Occupancy expense                               1,418          1,388     Equipment expense                                 375            312     Advertising, travel & entertainment               509            464     ATM and debit card expense                        299            288     Director fees                                     146            144     Supplies                                          212            177     Professional fees                                 630            434     Postage                                           188            184     Telephone and communications                      281            258     FDIC Insurance                                    536            236     Other                                           1,439          1,705      Total noninterest expense                     16,517         14,303   Income before income tax expense                 21,044          7,530   Provision for income tax expense                  6,410          1,953   Net income                                       14,634          5,577     Less: Net income attributable to the      noncontrolling interest                         (489)           (31)   Net income attributable to parent               $14,145         $5,546     Common share data attributable to parent:   Weighted-average basic shares outstanding        14,750         14,496   Weighted-average diluted shares outstanding      14,960         14,868   Net income per common share     Basic                                           $0.96          $0.38     Diluted                                          0.95           0.37   Book value per common share                       11.88           9.80   Cash dividend declared per common share            0.13           0.12     Selected Performance Ratios:   Return on average assets                           2.14%          1.00%   Return on average shareholders' equity            33.78          16.14   Average yield on interest earning assets           6.16           6.49   Average yield on interest bearing liabilities      2.79           3.94   Net interest spread                                3.37           2.55   Net interest margin                                3.83           3.22   Average interest earnings assets to average    interest bearing liabilities                    119.49         120.43   Noninterest expense to average total assets        2.50           2.59   Efficiency ratio                                  55.41          61.08      RESULTS OF OPERATIONS   The analysis below shows average interest earning assets and interest   bearing liabilities together with the average yield on the interest   earning assets and the average cost of the interest bearing liabilities.                                  AVERAGE BALANCES AND YIELDS                                    (dollars in thousands)                                         (unaudited)                                      Three Months Ended                             March 31, 2009             March 31, 2008                       AVG               AVG       AVG                AVG                     BALANCE  INTEREST  YIELD    BALANCE  INTEREST   YIELD   ASSETS   INTEREST    EARNING    ASSETS:   Loans(1) (2)    $1,021,735  $19,018  7.55%  $976,099   $18,855     7.77%   Loans Held    For Sale            2,508       18  2.91%     2,849        31     4.38%   Securities:     Investment      Securities      (Taxable)(4)     64,347      319  2.01%    61,115       680     4.48%     Investment      Securities      (Tax-Exempt)      (3)(4)          126,534    2,166  6.94%    76,952     1,290     6.74%     Mortgage-backed      and Related      Securities      (4)           1,209,257   16,404  5.50%   903,436    11,973     5.33%       Total        Securities  1,400,138   18,889  5.47% 1,041,503    13,943     5.38%   FHLB stock    and other    investments,    at cost            41,476      104  1.02%    24,985       262     4.22%   Interest    Earning    Deposits           21,924       10  0.18%     1,534        15     3.93%   Federal Funds    Sold               15,741       16  0.41%     6,984        52     2.99%   Total Interest    Earning Assets  2,503,522   38,055  6.16% 2,053,954    33,158     6.49%   NONINTEREST    EARNING ASSETS:   Cash and Due    From Banks         47,910                    48,081   Bank Premises    and Equipment      43,165                    39,991   Other Assets        99,758                    88,781     Less:      Allowance      for Loan      Loss            (16,180)                  (10,020)   Total Assets    $2,678,175                $2,220,787   LIABILITIES AND    SHAREHOLDERS'    EQUITY   INTEREST BEARING    LIABILITIES:   Savings    Deposits          $62,275      137  0.89%   $53,927       172     1.28%   Time Deposits      620,279    4,505  2.95%   597,942     7,482     5.03%   Interest    Bearing    Demand    Deposits          544,554    1,730  1.29%   476,241     3,101     2.62%     Total      Interest      Bearing      Deposits      1,227,108    6,372  2.11% 1,128,110    10,755     3.83%   Short-term    Interest    Bearing    Liabilities       145,704    1,165  3.24%   360,011     3,300     3.69%   Long-term    Interest    Bearing    Liabilities    - FHLB Dallas     662,026    6,008  3.68%   157,085     1,586     4.06%   Long-term Debt    (5)                60,311      878  5.90%    60,311     1,085     7.24%   Total Interest    Bearing    Liabilities     2,095,149   14,423  2.79% 1,705,517    16,726     3.94%   NONINTEREST    BEARING    LIABILITIES:   Demand Deposits    377,700                   351,686   Other    Liabilities        34,581                    24,728   Total    Liabilities     2,507,430                 2,081,931    SHAREHOLDERS'    EQUITY (6)        170,745                   138,856   Total    Liabilities    and    Shareholders'    Equity         $2,678,175                $2,220,787   NET INTEREST    INCOME                     $23,632                    $16,432   NET INTEREST    MARGIN ON    AVERAGE    EARNING ASSETS                      3.83%                         3.22%   NET INTEREST    SPREAD                              3.37%                         2.55%     (1)  Interest on loans includes fees on loans that are not material in        amount.   (2)  Interest income includes taxable-equivalent adjustments of $723        and $590 for the three months ended March 31, 2009 and 2008,        respectively.   (3)  Interest income includes taxable-equivalent adjustments of $672        and $472 for the three months ended March 31, 2009 and 2008,        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 FWBS to Magnolia Trust Company I        in connection with the issuance by Magnolia Trust Company I of        $3.5 million of trust preferred securities.   (6)  Includes average equity of noncontrolling interest of $941 and        $679 for the three months ended March 31, 2009 and 2008,        respectively.    Note: As of March 31, 2009 and 2008, loans totaling $11,263 and $6,565,         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.  

Southside Bancshares, Inc.

CONTACT: Susan Hill of Southside Bancshares, Inc., +1-903-531-7220,susan.hill@southside.com

Web Site: http://www.southside.com/

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