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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 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.
SOURCE Southside Bancshares, Inc.
http://www.southside.com
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