Southside Bancshares, Inc. Announces Record Net Income for the Three Months and Year Ended December 31, 2009

NASDAQ Global Select Market Symbol - 'SBSI'

Jan 28, 2010, 18:34 ET from Southside Bancshares, Inc.

TYLER, Texas, Jan. 28 /PRNewswire-FirstCall/ -- Southside Bancshares, Inc. ("Southside" or the "Company") (Nasdaq: SBSI) today reported its financial results for the three months and year ended December 31, 2009.

Southside reported record net income of $10.4 million for the three months ended December 31, 2009, an increase of $8,000, or 0.1%, when compared to the same period in 2008.

Net income for the year ended December 31, 2009, increased $13.7 million, or 44.6%, to a record $44.4 million from $30.7 million for the same period in 2008.  

Diluted earnings per share decreased $0.01, or 1.4%, to $0.69 for the three months ended December 31, 2009, when compared to $0.70 for the same period in 2008.  Diluted earnings per share increased $0.90, or 43.7%, to $2.96 for the year ended December 31, 2009, compared to $2.06 for the same period in 2008.

The return on average shareholders' equity for the year ended December 31, 2009, increased to 23.69% compared to 21.44%, for the same period in 2008.  The annual return on average assets increased to 1.58% for the year ended December 31, 2009, compared to 1.29% for the same period in 2008.

"We are exceptionally pleased to report record annual net income, earnings per share and cash dividends paid to our shareholders," stated B. G. Hartley, Chairman and Chief Executive Officer of Southside Bancshares, Inc.  "In addition, we achieved new deposit and loan highs and organically grew our capital position and capital ratios.  Our business plan has always been to have a securities portfolio that complements our balance sheet.  During periods of growing loan demand and lower credit costs, our securities portfolio is likely to represent a smaller portion of our income statement.  However, 2009 was a year of slack credit demand as well as elevated credit costs.  Our business plan is designed such that our investment portfolio performance should help mitigate slower loan growth and higher credit costs.  Our management team believes we successfully executed our strategic business plan.   Due to the extraordinary volatility in the capital markets, we were able to surpass our goals, transforming 2009 into a truly remarkable and landmark year for Southside."  

"As a result of the benchmarks achieved, we are able to make two significant announcements.  The Board of Directors has approved a 21.4% increase in the cash dividend, from $0.14 to $0.17 per common stock share.  Given the significant achievements in 2009, we believe an increase in the common stock cash dividend is appropriate.  We are especially pleased to be in a position to continue increasing the cash dividend throughout several economic cycles."  

"In a separate action, the Board of Directors authorized a stock repurchase plan.  The Board authorized the purchase of up to $6,000,000 of common stock open market purchases at prevailing market prices to be reassessed on a quarterly basis.  2009 was a year of significant gains on the sales of available for sale securities as we repositioned the investment portfolio and benefited from market dislocation.  We believe investing a portion of those revenues in a firm we know quite well, Southside Bancshares, Inc., is prudent."

"As 2009 began, the economy was rapidly contracting.  However, the government policies developed in the latter half of 2008 prevented even more serious damage to our financial system.  As we entered mid-year, the rapid contraction ceased.  Many economists believe the recession ended in the latter part of 2009.  However, overall economic growth is likely to be muted by continuing high unemployment and the decline in real estate.  We continue to manage the bank prudently and are well aware that the economic recovery could be uneven.  The year 2010 could be marked by a dramatic change in several areas, most notably Federal Reserve posture, financial regulation, and health care.  As always, we will adjust our strategy as appropriate in order to successfully serve shareholders, employees and our communities."  

"Our credit losses during 2009 were concentrated in construction and development loans originated by our Fort Worth acquisition and high yield secondary automobile loans purchased by Southside Financial Group.  Our nonperforming assets appeared to stabilize during the fourth quarter as nonperforming assets increased a modest 1.1%.  We are fortunate that the East Texas economy has performed significantly better than the national economy.  We continue to closely monitor our loan portfolio and proactively work with our borrowers."

"During 2009, we were fortunate that our net interest margin remained solid as we restructured our securities portfolio to prepare for a more normal fixed income environment.  The Federal Reserve has signaled they will cease buying agency mortgage-backed securities in the first half of 2010 and are likely to prepare the fixed income market for eventual increases in overnight money market rates sometime during 2010.  We are preparing for this eventuality in a number of ways.  We continue to issue longer term brokered CDs with call options that Southside controls.  Should rates rise, it is likely these brokered CDs will not be called and will continue to be a source of funding until maturity.  However, should rates fall, we have the option to call these CDs and replace them with more advantageous funding.  Given the uncertainty about the direction of interest rates, we value the flexibility this strategy offers.  We continue to evaluate our agency mortgage-backed portfolio.  We focus considerable energy on the average coupon of the mortgage-backed portfolio.  As rates rise and prepayments slow, the book income of higher coupon bonds is designed to increase along with market interest rates.  Finally, we have a moderate allocation of bank qualified municipals in the investment portfolio.  That allocation currently offers significant income as well as cash flow surety.  Our municipal bonds offer complementary economics to our shorter, high coupon agency mortgage-backed portfolio.  As the market returns to a more normal environment, it is unlikely the high security gains experienced throughout 2009 will be repeated in subsequent quarters.  However, it is important to note that these gains translated into increased capital through earnings which can support franchise growth and the opportunity to expand our traditional banking services.  We are committed to further strengthening our franchise as opportunities become clearer."

"From our roots as a small Texas community bank, 50 years ago, to a $3 billion community bank as of December 31, 2009, we remain dedicated to serving our market areas, employees and shareholders.  The strength of our balance sheet, combined with the talent and experience of our employees, provides us a wonderful opportunity to continue building our franchise and assisting our market areas for the next 50 years."

Loan and Deposit Growth

For the three months ended December 31, 2009, total loans increased $17.9 million, or 1.8%, compared to September 30, 2009.  For the year ended December 31, 2009, total loans increased $11.0 million, or 1.1%, compared to December 31, 2008.    The increase occurred primarily in three categories municipal loans, other real estate loans and loans to individuals.  

Nonperforming assets appeared to stabilize during the fourth quarter increasing $246,000, or 1.1%, to $23.5 million, or 0.78%, of total assets, for the three months ended December 31, 2009 when compared to September 30, 2009.  This increase is primarily related to construction and development loans, most of which are 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 December 31, 2009, deposits, net of brokered deposits, increased $48.8 million, or 2.9%, compared to September 30, 2009.  When comparing December 31, 2009 to December 31, 2008, deposits, net of brokered deposits, increased $223.0 million, or 14.7%.  The year over year increase in deposits is the result of an increase in public fund deposits combined with an overall increase in core deposits.  Much of the increase in the public fund deposits is temporary and is expected to roll-off over the next twelve months.  

Net Interest Income

Net interest income increased $2.4 million, or 10.7%, to $25.2 million for the three months ended December 31, 2009, when compared to $22.7 million for the same period in 2008.  For the three months ended December 31, 2009, when compared to the same period in 2008, our net interest spread increased to 3.62% from 3.49%.  The net interest margin remained unchanged at 3.96% for the three months ended December 31, 2009 and December 31, 2008.  Compared to the three months ended September 30, 2009, the net interest spread for the three months ended December 31, 2009 increased to 3.62% from 3.35%.  The net interest margin for the three months ended December 31, 2009, increased to 3.96% from 3.73% when compared to the three months ended September 30, 2009.  While credit spreads for agency mortgage-backed securities tightened during the fourth quarter ended December 31, 2009, the yield curve, the spread between short-term U.S. Treasuries and ten year U.S. Treasuries, increased and the slope remains steep.

Net Income for the Three Months

The increase in net income for the three months ended December 31, 2009, when compared to the same period in 2008, was primarily a result of an increase in security gains, an increase in net interest income, a decrease in provision for loan losses and a decrease in provision for income tax expense which were partially offset by an increase in other-than-temporary impairment losses on the $3 million of Trust Preferred Securities we owned at December 31, 2009 and an increase in noninterest expense.

Noninterest expense increased $3.1 million, or 19.2%, for the three months ended December 31, 2009, compared to the same period in 2008.  The increase in noninterest expense was primarily a result of increases in personnel expense, occupancy expense, FDIC insurance expense and other expense.  The increase in personnel expense was associated with our overall growth and expansion, an increase in retirement expense and health insurance expense, normal salary increases for existing personnel and an increase in incentive pay, all of which are reflected in salaries and employee benefits which increased a combined $1.6 million, or 16.8%, when compared to the same period in 2008.  Occupancy expense increased $248,000, or 17.2%, due to the addition of a new banking facility and the overall bank growth.  FDIC insurance premiums increased $485,000, or 174.5%, due to an increase in FDIC insurance premium rates and an increase in deposits, when compared to the same period in 2008.  Other expense increased $340,000, or 20.1%, when compared to the same period in 2008.  The increase in other expense was primarily due to losses on other real estate and retirement of assets.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $3.0 billion in assets that owns 100% of Southside Bank.  Southside Bank currently has 44 banking centers in Texas and operates a network of 48 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 other 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 potential profitability of such expansion, trends in asset quality and earnings from growth, and certain market risk disclosures, including the impact of potential interest rate increases, 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
                                            December 31,      December 31,
                                                2009              2008
                                                ----              ----
                                                (dollars in thousands)
                                                      (unaudited)
    
    Selected Financial Condition Data
     (at end of period):
    
    Total assets                             $3,024,288        $2,700,238
    Loans                                     1,033,576         1,022,549
    Allowance for loan losses                    19,896            16,112
    Mortgage-backed and related
     securities:
      Available for sale, at estimated
       fair value                             1,238,182         1,026,513
      Held to maturity, at cost                 242,665           157,287
    Investment securities:
      Available for sale, at estimated
       fair value                               265,060           278,378
      Held to maturity, at cost                   1,493               478
    Federal Home Loan Bank stock, at
     cost                                        38,629            39,411
    Deposits                                  1,870,421         1,556,131
    Long-term obligations                       592,830           715,800
    Shareholders' equity                        202,249           161,089
    Nonperforming assets                         23,453            15,781
      Nonaccrual loans                           18,629            14,289
      Loans 90 days past due                        323               593
      Restructured loans                          1,972               148
      Other real estate owned                     1,875               318
      Repossessed assets                            654               433
    
    Asset Quality Ratios:
    Nonaccruing loans to total loans               1.80%             1.40%
    Allowance for loan losses to
     nonaccruing loans                           106.80            112.76
    Allowance for loan losses to
     nonperforming assets                         84.83            102.10
    Allowance for loan losses to total
     loans                                         1.92              1.58
    Nonperforming assets to total assets           0.78              0.58
    Net charge-offs to average loans               1.11              0.74
    
    Capital Ratios:
    Shareholders' equity to total assets           6.67              5.95
    Average shareholders' equity to
     average total assets                          6.66              6.04
    
    

LOAN PORTFOLIO COMPOSITION

The following table sets forth loan totals by category for the periods presented:

    
    
    
                                      At                 At
                                 December 31,        December 31,
                                     2009                2008
                                     ----                ----
                                          (in thousands)
                                            (unaudited)
    Real Estate Loans:
      Construction                   $88,566           $120,153
      1-4 Family Residential         234,379            238,693
      Other                          212,731            184,629
    Commercial Loans                 159,529            165,558
    Municipal Loans                  150,111            134,986
    Loans to Individuals             188,260            178,530
                                     -------            -------
    Total Loans                   $1,033,576         $1,022,549
                                  ==========         ==========
    
    
    
    
    
                            At or for the                  At or for the
                            Three Months                       Years
                           Ended December 31,            Ended December 31,
                          -------------------           --------------------
                          2009           2008           2009            2008
                          ----           ----           ----            ----
                               (dollars in                 (dollars in
                                thousands)                  thousands)
                               (unaudited)                 (unaudited)
    
    Selected
     Operating Data:
    Total interest
     income              $37,407        $38,245       $145,193       $136,176
    Total interest
     expense              12,241         15,505         52,672         60,363
                          ------         ------         ------         ------
    Net interest
     income               25,166         22,740         92,521         75,813
    Provision for
     loan losses           5,113          5,339         15,093         13,675
                           -----          -----         ------         ------
    Net interest
     income after
     provision for
     loan losses          20,053         17,401         77,428         62,138
                          ------         ------         ------         ------
    Noninterest
     income
      Deposit services     4,634          4,572         17,629         18,395
      Gain on sale of
       securities
       available for
       sale                7,033          5,760         33,446         12,334
    
        Total other-
         than-temporary
         impairment
         losses             (103)             -         (5,730)             -
        Portion of loss
         recognized in
         other
         comprehensive
         income (before
         taxes)             (467)             -          2,730              -
                            ----            ---          -----            ---
        Net impairment
         losses
         recognized in
         earnings           (570)             -         (3,000)             -
    
      Gain (loss) on
       sale of loans         (34)           206          1,240          1,757
      Trust income           626            575          2,456          2,465
      Bank owned life
       insurance income      362            864          1,724          2,246
      Other                  803            717          3,179          3,105
                             ---            ---          -----          -----
        Total noninterest
         income           12,854         12,694         56,674         40,302
                          ------         ------         ------         ------
    Noninterest
     expense
      Salaries and
       employee
       benefits           11,342          9,707         42,505         37,228
      Occupancy expense    1,688          1,440          6,372          5,704
      Equipment expense      476            337          1,718          1,305
      Advertising,
       travel &
       entertainment         795            690          2,344          2,097
      ATM and debit
       card expense          308            306          1,296          1,211
      Director fees          305            249            785            674
      Supplies               191            228            863            812
      Professional fees      561            625          2,218          1,864
      Postage                245            190            872            755
      Telephone and
       communications        371            265          1,424          1,050
      FDIC Insurance         763            278          3,943            966
      Other                2,029          1,689          7,290          6,686
                           -----          -----          -----          -----
        Total noninterest
         expense          19,074         16,004         71,630         60,352
                          ------         ------         ------         ------
    Income before
     income tax
     expense              13,833         14,091         62,472         42,088
    Provision for
     income tax
     expense               3,588          3,851         16,609         11,250
                           -----          -----         ------         ------
    Net income            10,245         10,240         45,863         30,838
        Less: Net
         (income) loss
         attributable to
         the
         noncontrolling
         interest            132            129         (1,467)          (142)
                             ---            ---         ------           ----
    Net income
     attributable to
     parent              $10,377        $10,369        $44,396        $30,696
                         =======        =======        =======        =======
    Common share data 
     attributable 
     to parent:
    Weighted-average 
     basic shares 
     outstanding          14,948         14,692         14,869         14,588
    Weighted-average 
     diluted shares 
     outstanding          15,033         14,950         15,004         14,913
    Net income per 
     common share
      Basic                $0.69          $0.70          $2.98          $2.10
      Diluted               0.69           0.70           2.96           2.06
    Book value per 
     common share              -              -          13.47          10.90
    Cash dividend 
     declared per 
     common share           0.34           0.19           0.75           0.60
    
    
    
    
    
    
                              At or for the           At or for the
                               Three Months               Years
                            Ended December 31,      Ended December 31,
                            -------------------    -------------------
                            2009           2008    2009           2008
                            ----           ----    ----           ----
                          (dollars in thousands)  (dollars in thousands)
                                (unaudited)             (unaudited)
    
    Selected Performance
     Ratios:
    Return on average
     assets                  1.39%          1.58%   1.58%          1.29%
    Return on average
     shareholders' equity   19.89          27.85   23.69          21.44
    Average yield on
     interest earning
     assets                  5.71           6.50    5.82           6.38
    Average yield on
     interest bearing
     liabilities             2.09           3.01    2.39           3.30
    Net interest spread      3.62           3.49    3.43           3.08
    Net interest margin      3.96           3.96    3.81           3.64
    Average interest
     earnings assets to
     average interest      
     bearing liabilities   119.08         118.65  119.37         120.66
    Noninterest expense to
     average total assets    2.56           2.44    2.55           2.54
    Efficiency ratio        54.83          50.71   55.57          54.85
    
    

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)
                                  Years Ended
    
                                      December 31, 2009
                           -----------------------------------------
                             AVG                               AVG
                           BALANCE          INTEREST          YIELD
                           --------         --------         -------
    ASSETS
    INTEREST EARNING
     ASSETS:
    Loans (1) (2)         $1,021,770          $73,654          7.21%
    Loans Held For
     Sale                      4,098              161          3.93%
    Securities:
      Investment
       Securities
       (Taxable)(4)           42,598            1,055          2.48%
      Investment
       Securities
       (Tax-
       Exempt)(3)(4)         174,003           12,203          7.01%
      Mortgage-backed
       and Related
       Securities (4)      1,320,766           65,463          4.96%
                           ---------           ------
        Total Securities   1,537,367           78,721          5.12%
    FHLB stock and
     other
     investments, at
     cost                     40,786              235          0.58%
    Interest Earning
     Deposits                 21,243              137          0.64%
    Federal Funds
     Sold                      3,925               17          0.43%
                               -----              ---
    Total Interest
     Earning Assets        2,629,189          152,925          5.82%
    NONINTEREST
     EARNING ASSETS:
    Cash and Due
     From Banks               43,504
    Bank Premises
     and Equipment            45,231
    Other Assets             112,702
      Less:  Allowance
       for Loan Loss         (17,622)
                             -------
    Total Assets          $2,813,004
                          ==========
    LIABILITIES AND
     SHAREHOLDERS'
     EQUITY
    INTEREST BEARING
     LIABILITIES:
    Savings Deposits         $65,896              442          0.67%
    Time Deposits            688,854           16,360          2.37%
    Interest Bearing
     Demand Deposits         573,937            5,880          1.02%
                             -------            -----
    Total Interest
     Bearing
     Deposits              1,328,687           22,682          1.71%
    Short-term
     Interest
     Bearing
     Liabilities             209,048            4,696          2.25%
    Long-term
     Interest
     Bearing
     Liabilities –
     FHLB Dallas             604,425           21,885          3.62%
    Long-term Debt
     (5)                      60,311            3,409          5.65%
                              ------            -----
    Total Interest
     Bearing
     Liabilities           2,202,471           52,672          2.39%
    NONINTEREST
     BEARING
     LIABILITIES:
    Demand Deposits          379,991
    Other
     Liabilities              42,318
                              ------
    Total
     Liabilities           2,624,780
    
    SHAREHOLDERS'
     EQUITY (6)              188,224
                             -------
    Total
     Liabilities and
     Shareholders'
     Equity               $2,813,004
                          ==========
    NET INTEREST
     INCOME                                  $100,253
                                             ========
    NET INTEREST
     MARGIN ON
     AVERAGE EARNING
     ASSETS                                                    3.81%
                                                               ====
    NET INTEREST
     SPREAD                                                    3.43%
                                                               ====
    
    
    
    
                                       December 31, 2008
                            ---------------------------------------
                              AVG                             AVG
                            BALANCE         INTEREST         YIELD
                            --------        --------         ------
    ASSETS
    INTEREST
     EARNING
     ASSETS:
    Loans (1) (2)           $983,336         $75,445          7.67%
    Loans Held For
     Sale                      2,487             121          4.87%
    Securities:
      Investment
       Securities
       (Taxable)(4)           46,537           1,723          3.70%
      Investment
       Securities
       (Tax-
       Exempt)(3)(4)         103,608           7,074          6.83%
      Mortgage-
       backed and
       Related
       Securities (4)      1,034,406          55,470          5.36%
                           ---------          ------
        Total
         Securities        1,184,551          64,267          5.43%
    FHLB stock and
     other
     investments,
     at cost                  31,875             841          2.64%
    Interest
     Earning
     Deposits                  1,006              22          2.19%
    Federal Funds
     Sold                      4,039              90          2.23%
                               -----             ---
    Total Interest
     Earning Assets        2,207,294         140,786          6.38%
    NONINTEREST
     EARNING
     ASSETS:
    Cash and Due
     From Banks               45,761
    Bank Premises
     and Equipment            40,449
    Other Assets              89,473
      Less:
       Allowance for
       Loan Loss             (11,318)
                             -------
    Total Assets          $2,371,659
                          ==========
    LIABILITIES AND
     SHAREHOLDERS'
     EQUITY
    INTEREST
     BEARING
     LIABILITIES:
    Savings
     Deposits                $57,587             736          1.28%
    Time Deposits            535,921          21,727          4.05%
    Interest
     Bearing Demand
     Deposits                500,955          10,428          2.08%
                             -------          ------
    Total Interest
     Bearing
     Deposits              1,094,463          32,891          3.01%
    Short-term
     Interest
     Bearing
     Liabilities             290,895           8,969          3.08%
    Long-term
     Interest
     Bearing
     Liabilities –
     FHLB Dallas             383,677          14,454          3.77%
    Long-term Debt
     (5)                      60,311           4,049          6.71%
                              ------           -----
    Total Interest
     Bearing
     Liabilities           1,829,346          60,363          3.30%
    NONINTEREST
     BEARING
     LIABILITIES:
    Demand Deposits          372,160
    Other
     Liabilities              26,497
                              ------
    Total
     Liabilities           2,228,003
    
    SHAREHOLDERS'
     EQUITY (6)              143,656
                             -------
    Total
     Liabilities
     and
     Shareholders'
     Equity               $2,371,659
                          ==========
    NET INTEREST
     INCOME                                  $80,423
                                             =======
    NET INTEREST
     MARGIN ON
     AVERAGE
     EARNING ASSETS                                           3.64%
                                                              ====
    NET INTEREST
     SPREAD                                                   3.08%
                                                              ====
    (1) Interest on loans includes fees on loans that are not material in 
        amount.
    (2) Interest income includes taxable-equivalent adjustments of $3,136 and
        $2,446 for the years ended December 31, 2009 and 2008, respectively.
    (3) Interest income includes taxable-equivalent adjustments of $4,596 and
        $2,164 for the years ended December 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 $815 and $487 
        for the years ended December 31, 2009 and 2008, respectively.
     
    Note: As of December 31, 2009 and 2008, loans totaling $18,629 and 14,289,
    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, 2009
                                  ----------------------------------------
                                    AVG                              AVG
                                  BALANCE          INTEREST         YIELD
                                  --------         --------         ------
    ASSETS
    INTEREST EARNING
     ASSETS:
    Loans (1) (2)                $1,024,695         $18,149          7.03%
    Loans Held For Sale               3,790              45          4.71%
    Securities:
      Investment
       Securities
       (Taxable)(4)                  13,785              45          1.30%
      Investment
       Securities (Tax-
       Exempt)(3)(4)                226,190           4,112          7.21%
      Mortgage-backed
       and Related
       Securities (4)             1,448,318          17,475          4.79%
                                  ---------          ------
        Total Securities          1,688,293          21,632          5.08%
    FHLB stock and
     other investments,
     at cost                         40,623              40          0.39%
    Interest Earning
     Deposits                        11,936              16          0.53%
    Federal Funds Sold                    -               -             -
                                        ---             ---
    Total Interest
     Earning Assets               2,769,337          39,882          5.71%
    NONINTEREST EARNING
     ASSETS:
    Cash and Due From
     Banks                           41,882
    Bank Premises and
     Equipment                       46,535
    Other Assets                    121,286
      Less:  Allowance
       for Loan Loss                (18,212)
                                    -------
    Total Assets                 $2,960,828
                                 ==========
    LIABILITIES AND
     SHAREHOLDERS'
     EQUITY
    INTEREST BEARING
     LIABILITIES:
    Savings Deposits                $68,230              90          0.52%
    Time Deposits                   747,563           3,763          2.00%
    Interest Bearing
     Demand Deposits                620,645           1,297          0.83%
                                    -------           -----
    Total Interest
     Bearing Deposits             1,436,438           5,150          1.42%
    Short-term
     Interest Bearing
     Liabilities                    288,393           1,341          1.84%
    Long-term Interest
     Bearing
     Liabilities – FHLB
     Dallas                         540,511           4,927          3.62%
    Long-term Debt (5)               60,311             823          5.41%
                                     ------             ---
    Total Interest
     Bearing
     Liabilities                  2,325,653          12,241          2.09%
    NONINTEREST BEARING
     LIABILITIES:
    Demand Deposits                 384,750
    Other Liabilities                42,607
                                     ------
    Total Liabilities             2,753,010
    
    SHAREHOLDERS'
     EQUITY (6)                     207,818
                                    -------
    Total Liabilities
     and Shareholders'
     Equity                      $2,960,828
                                 ==========
    NET INTEREST INCOME                             $27,641
                                                    =======
    NET INTEREST MARGIN
     ON AVERAGE EARNING
     ASSETS                                                          3.96%
                                                                     ====
    NET INTEREST SPREAD                                              3.62%
                                                                     ====
    
    
    
    
    
                                        
                                              December 31, 2008
                                  ---------------------------------------
                                    AVG                              AVG
                                  BALANCE          INTEREST         YIELD
                                  --------         --------         ------
    ASSETS
    INTEREST EARNING
     ASSETS:
    Loans (1) (2)                  $993,045         $19,627          7.86%
    Loans Held For Sale               1,751              22          5.00%
    Securities:
      Investment
       Securities
       (Taxable)(4)                  44,848             346          3.07%
      Investment
       Securities (Tax-
       Exempt)(3)(4)                163,918           2,950          7.16%
      Mortgage-backed
       and Related
       Securities (4)             1,184,879          16,594          5.57%
                                  ---------          ------  
        Total Securities          1,393,645          19,890          5.68%
    FHLB stock and
     other investments,
     at cost                         40,115             185          1.83%
    Interest Earning
     Deposits                         1,240               -          0.00%
    Federal Funds Sold                3,803              11          1.15%
                                      -----             ---  
    Total Interest
     Earning Assets               2,433,599          39,735          6.50%
    NONINTEREST EARNING
     ASSETS:
    Cash and Due From
     Banks                           46,270
    Bank Premises and
     Equipment                       41,383
    Other Assets                     97,416
      Less:  Allowance
       for Loan Loss                (13,254)
                                    -------
    Total Assets                 $2,605,414
                                 ==========
    LIABILITIES AND
     SHAREHOLDERS'
     EQUITY
    INTEREST BEARING
     LIABILITIES:
    Savings Deposits                $59,743             191          1.27%
    Time Deposits                   530,239           4,524          3.39%
    Interest Bearing
     Demand Deposits                527,493           2,296          1.73%
                                    -------           -----  
    Total Interest
     Bearing Deposits             1,117,475           7,011          2.50%
    Short-term
     Interest Bearing
     Liabilities                    266,416           1,844          2.75%
    Long-term Interest
     Bearing
     Liabilities – FHLB
     Dallas                         606,905           5,626          3.69%
    Long-term Debt (5)               60,311           1,024          6.75%
                                     ------           -----  
    Total Interest
     Bearing
     Liabilities                  2,051,107          15,505          3.01%
    NONINTEREST BEARING
     LIABILITIES:
    Demand Deposits                 385,134
    Other Liabilities                20,708
                                     ------
    Total Liabilities             2,456,949
    
    SHAREHOLDERS'
     EQUITY (6)                     148,465
                                    -------
    Total Liabilities
     and Shareholders'
     Equity                      $2,605,414
                                 ==========
    NET INTEREST INCOME                             $24,230  
                                                    =======  
    NET INTEREST MARGIN
     ON AVERAGE EARNING
     ASSETS                                                          3.96%
                                                                     ====
    NET INTEREST SPREAD                                              3.49%
                                                                     ====
    
    (1) Interest on loans includes fees on loans that are not material in 
        amount.
    (2) Interest income includes taxable-equivalent adjustments of $831 and 
        $621 for the three months ended December 31, 2009 and 2008, 
        respectively.
    (3) Interest income includes taxable-equivalent adjustments of $1,644 and
        $869 for the three months ended December 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 $879 and $374 
        for the three months ended December 31, 2009 and 2008, respectively.
     
    Note: As of December 31, 2009 and 2008, loans totaling $18,629 and 
    $14,289, 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.



RELATED LINKS

http://www.southside.com