Exhibit 99.1
SOUTHSIDE BANCSHARES, INC.
ANNOUNCES RECORD EARNINGS FOR THE
THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2008
NASDAQ Global Select Market Symbol - "SBSI"
Tyler, Texas (Oct. 27, 2008) Southside Bancshares, Inc. (“Southside” or the “Company”) today reported its financial results for the three and nine months ended September 30, 2008.
Southside reported record net income of $6.3 million for the three months ended September 30, 2008, an increase of $2.8 million, or 78.6%, when compared to $3.5 million for the same period in 2007.
Net income for the nine months ended September 30, 2008, increased $8.5 million, or 71.5%, to $20.3 million from $11.9 million, for the same period in 2007.
Earnings per fully diluted share increased $0.19, or 76.0%, to $0.44 for the three months ended September 30, 2008, compared to $0.25 for the same period in 2007. Earnings per fully diluted share increased $0.59, or 70.2%, to $1.43 for the nine months ended September 30, 2008, compared to $0.84 for the same period in 2007.
The return on average shareholders’ equity for the nine months ended September 30, 2008, increased to 19.19%, compared to 13.68%, for the same period in 2007. The return on average assets increased to 1.18%, for the nine months ended September 30, 2008, compared to 0.86%, for the same period in 2007.
“2008 will be remembered as the year of the credit crisis, liquidity pressures and unparalleled volatility. As financial markets became increasingly dysfunctional, the global government response became increasingly aggressive. Current economic troubles are not the product of recent decisions, but rather are the result of decisions made over many years. Fortunately for Southside, the product of our long term decisions did not result in a third quarter marked by crisis management or reactive behavior. Rather, we were able to concentrate on executing our business plan designed to positively impact current earnings and enhance future franchise value” stated B. G. Hartley, Chairman and CEO of Southside Bancshares, Inc. “Against this backdrop of financial uncertainty, we are exceptionally pleased to announce record net income for the third quarter and nine months ended September 30, 2008. The earnings reported today continue to be in large measure the result of strategic investments and decisions initiated, in some cases, years ago. I would like to update you on a few of our initiatives and benchmarks.”
“For several quarters up to and ending June 30, 2007, the size of our balance sheet was in a period of no growth or actual shrinkage. Beginning with the third quarter of 2007 we began deliberately increasing the size of the balance sheet and as of September 30, 2008 assets had grown from $1.8 billion at June 30, 2007 to $2.5 billion. Asset growth during this period included $152.3 million due to the acquisition of Fort Worth National Bank (“FWNB”) in October of 2007, $113.0 million in loan growth (including Southside Financial Group “SFG”) and a $397.2 million increase in the securities portfolio. Funding for these earning assets was accomplished through an increase in deposits (net of brokered CDs) of $266.3 million, $100.9 million of which were due to the acquisition of FWNB, an increase in wholesale funding of $348.8 million and an increase in capital of $65.4 million (including trust preferred securities). The economics associated with this growth is more attractive than we have seen in several years. At Southside we are well aware of the current precarious economic environment and are managing the bank to an increasing standard of protection.”
“Southside’s strong commitment to traditional banking remains unwavering. Our loan growth is a product of the success of our many lending initiatives and programs coupled with the hard work and dedication of our seasoned lending team. SFG continues to perform as planned. We continue to believe SFG will be a meaningful contributor to future earnings. Each of the banking offices of FWNB is now a branch of Southside Bank as the merger of Southside Bank and FWNB was completed on September 29, 2008. We believe this merger will allow us to further integrate FWNB, increasing the synergies of the two entities. Southside has traditionally built its banking franchise on a foundation of strong banking talent. Also, during the third quarter we were able to attract several seasoned lending professionals most of whom are located in our Fort Worth footprint. We anticipate the Fort Worth metropolitan area will continue to be a major driver of our future growth.”
“In the investment portfolio, we managed our agency mortgage-backed securities to profit from the overall weaker real estate market. Our entire mortgage-backed portfolio continues to be comprised of U. S. agency securities (Ginnie Mae, Fannie Mae and Freddie Mac). The average coupon in the mortgage-backed securities portfolio ended the quarter at 6.08%, an increase from 5.70% at September 30, 2007.”
The management of the funding for any successful financial institution needs to be a core competency. Our funding is comprised of core deposit relationships, as well as, wholesale funding in order to complete the picture. We believe our overall funding strategy provides us appropriate funding for our earning assets. Our funding objectives go well beyond quarterly earnings and include long-term economics, as well as, overall soundness. As on the asset side, our funding goals are concentrated on maximizing franchise value.
“2008 has been a year marked by several historic economic events. At Southside, as we evaluate the financial landscape, our posture is best described as both cautious and constructive. We firmly believe in the long-term financial success of our great nation. Just as we believe today’s decisions will pave the way for Southside’s future success we believe the same is true for the United States.
Loan and Deposit Growth
For the three months ended September 30, 2008, total loans increased by $9.1 million, or 0.93%, when compared to June 30, 2008. Management believes that the loan portfolio remains well diversified. During the quarter ended September 30, 2008, construction and commercial real estate loan categories decreased along with commercial and municipal loan portfolios, while 1-4 family real estate and loans to individuals increased. When comparing the period ended September 30, 2008 to the comparable period in 2007, total loans grew by $191.8 million, or 24.1%. Approximately $87.8 million of the increase at September 30, 2008 is related to FWNB, which was purchased in October of 2007, and approximately $73.8 million is related to SFG automobile loans. The remaining $30.2 million increase is due to loan growth at Southside Bank. We are pleased that our loan growth appears well diversified as all loan categories increased when comparing September 30, 2008 to the same period in 2007.
Nonperforming assets increased $915,000, or 12.0%, for the three months ended September 30, 2008, when compared to June 30, 2008. The increase in nonperforming assets is primarily due to an increase in nonaccrual loans and loans 90 days past due at Southside Bank. The ratio of non-performing assets to total assets increased slightly to 0.34% from 0.33% at June 30, 2008. Nonperforming assets increased $6.4 million, or 293.2%, when comparing September 30, 2008 to September 30, 2007. The ratio of non-performing assets to total assets increased but remained relatively low at 0.34%. In addition, approximately $1.4 million of SFG automobile loans were in nonaccrual status at September 30, 2008 compared to zero at September 30, 2007. This increase is a result of the $73.8 million in auto loan purchases by SFG currently in Southside’s loan portfolio.
Deposits, net of brokered deposits, decreased $13.9 million, or 0.93%, to $1.5 billion during the three months ended September 30, 2008, when compared to June 30, 2008. When comparing the period ended September 30, 2008 to the comparable period in 2007, deposits, net of brokered deposits, increased $248.3 million, or 20.2%. Approximately $100.9 million of the increase at September 30, 2008, is related to FWNB, which was purchased in October of 2007, and approximately $147.4 million of organic deposit growth at Southside Bank.
Net Interest Income
Net interest income increased $9.6 million, or 93.5%, to $19.8 million for the three months ended September 30, 2008, when compared to $10.2 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 September 30, 2008, our net interest spread increased to 3.13% from 1.65% and our net interest margin increased to 3.68% from 2.52% when compared to the same period in 2007. The net interest margin and net interest spread for the three months ended September 30, 2008, increased to 3.68% and 3.13%, respectively, from 3.65% and 3.06% for the three months ended June 30, 2008. The increase in the yield on interest earning assets for the three months ended September 30, 2008, compared to the same period in 2007, is reflective of the purchase of $73.8 million of high yield automobile loans by SFG, the addition of approximately $87.8 million of loans associated with FWNB, a 12 basis point increase in the yield on our securities portfolio and an increase in average interest earning assets of $516.0 million, or 29.6%. 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 high yield brokered deposits during 2008.
Net Income for the Three Months
The increase in net income for the three months ended September 30, 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 available for sale securities, increased $520,000, or 8.3%, for the three months ended September 30, 2008, compared to the same period in 2007. The increase in noninterest income was primarily the result of increases in deposit services income, trust income and other income. During the three months ended September 30, 2008, we primarily sold specific low coupon mortgage-backed securities where the risk reward profile had changed. As a result, we realized an $822,000 gain on the sale of available for sale securities during the third quarter of 2008. Provision for loan losses increased $2.5 million, or 408.1%, for the three months ended September 30, 2008, compared to the same period in 2007 primarily as a result of the $73.8 million investment in the automobile loan portfolios combined with an increase in reserve percentages associated with two of the loan categories due to changing market conditions.
Noninterest expense increased $4.2 million, or 36.8%, for the three months ended September 30, 2008, compared to the same period in 2007. Due to the acquisition of FWNB during the fourth quarter of 2007 and SFG in the third quarter of 2007, most noninterest expense categories experienced increases. The increase in noninterest expense was primarily a result of the increase in salaries and employee benefits, occupancy expense and other expense. The increase in salaries and employee benefits for the three months ended September 30, 2008 was $2.8 million, or 38.1%, compared to the same period in 2007. The increase in salary and benefits is related to normal annual salary increases, new employees and $1.2 million of this increase is related to a retirement agreement for the Chairman and CEO payable over a five year period, only after the executive retires, which replaces a previous post-retirement agreement.
About Southside Bancshares, Inc.
Southside Bancshares, Inc. is a bank holding company with approximately $2.5 billion in assets that owns 100% of Southside Bank. Southside Bank currently has 44 banking centers in Texas and operates a network of 45 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 susanh@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 | | | At | |
| | | September 30, | | | December 31, | | | September 30, | |
| | | 2008 | | | 2007 | | | 2007 | |
| | | (dollars in thousands) | |
| | | (unaudited) | |
| | | | | | | | | | |
| Selected Financial Condition Data (at end of period): | | | | | | | | | |
| | | | | | | | | | |
| Total assets | | $ | 2,524,098 | | | $ | 2,196,322 | | | $ | 1,904,029 | |
| Loans | | | 987,375 | | | | 961,230 | | | | 795,588 | |
| Allowance for loan losses | | | 12,928 | | | | 9,753 | | | | 7,668 | |
| Mortgage-backed and related securities: | | | | | | | | | | | | |
| Available for sale, at estimated fair value | | | 1,011,955 | | | | 727,553 | | | | 665,244 | |
| Held to maturity, at cost | | | 165,288 | | | | 189,965 | | | | 197,798 | |
| Investment securities: | | | | | | | | | | | | |
| Available for sale, at estimated fair value | | | 121,509 | | | | 109,928 | | | | 87,671 | |
| Held to maturity, at cost | | | 477 | | | | 475 | | | | 1,354 | |
| Federal Home Loan Bank stock, at cost | | | 34,317 | | | | 19,850 | | | | 17,004 | |
| Deposits | | | 1,479,192 | | | | 1,530,491 | | | | 1,354,323 | |
| Long-term obligations | | | 589,905 | | | | 146,558 | | | | 149,795 | |
| Shareholders’ equity | | | 142,427 | | | | 132,328 | | | | 123,096 | |
| Nonperforming assets | | | 8,561 | | | | 3,946 | | | | 2,177 | |
| Nonaccrual loans | | | 6,192 | | | | 2,913 | | | | 1,307 | |
| Loans 90 days past due | | | 1,320 | | | | 400 | | | | 466 | |
| Restructured loans | | | 158 | | | | 225 | | | | 167 | |
| Other real estate owned | | | 549 | | | | 153 | | | | 172 | |
| Repossessed assets | | | 342 | | | | 255 | | | | 65 | |
| | | | | | | | | | | | | |
| Asset Quality Ratios: | | | | | | | | | | | | |
| Nonaccruing loans to total loans | | | 0.63 | % | | | 0.30 | % | | | 0.16 | % |
| Allowance for loan losses to nonaccruing loans | | | 208.79 | | | | 334.81 | | | | 586.69 | |
| Allowance for loan losses to nonperforming assets | | | 151.01 | | | | 247.16 | | | | 352.23 | |
| Allowance for loan losses to total loans | | | 1.31 | | | | 1.01 | | | | 0.96 | |
| Nonperforming assets to total assets | | | 0.34 | | | | 0.18 | | | | 0.11 | |
| Net charge-offs to average loans | | | 0.70 | | | | 0.09 | | | | 0.08 | |
| | | | | | | | | | | | | |
| Capital Ratios: | | | | | | | | | | | | |
| Shareholders’ equity to total assets | | | 5.64 | | | | 6.02 | | | | 6.47 | |
| Average shareholders’ equity to average total assets | | | 6.17 | | | | 6.22 | | | | 6.28 | |
LOAN PORTFOLIO COMPOSITION
The following table sets forth loan totals by category for the periods presented:
| | | At | | | At | | | At | |
| | | September 30, | | | December 31, | | | September 30, | |
| | | 2008 | | | 2007 | | | 2007 | |
| | | | | | (in thousands) | | | | |
| | | | | | (unaudited) | | | | |
| Real Estate Loans: | | | | | | | | | |
| Construction | | $ | 99,235 | | | $ | 107,397 | | | $ | 56,714 | |
| 1-4 Family Residential | | | 244,988 | | | | 237,979 | | | | 225,381 | |
| Other | | | 185,248 | | | | 200,148 | | | | 178,847 | |
| Commercial Loans | | | 165,929 | | | | 154,171 | | | | 125,809 | |
| Municipal Loans | | | 118,568 | | | | 112,523 | | | | 110,084 | |
| Loans to Individuals | | | 173,407 | | | | 149,012 | | | | 98,753 | |
| Total Loans | | $ | 987,375 | | | $ | 961,230 | | | $ | 795,588 | |
| | | | | | | | | | | | | |
| | | At or for the | | | At or for the | |
| | | Three Months | | | Nine Months | |
| | | Ended September 30, | | | Ended September 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| | | (dollars in thousands) | | | (dollars in thousands) | |
| | | (unaudited) | | | (unaudited) | |
| | | | | | | | | | | | | |
| Selected Operating Data: | | | | | | | | | | | | |
| Total interest income | | $ | 34,260 | | | $ | 25,475 | | | $ | 97,931 | | | $ | 75,052 | |
| Total interest expense | | | 14,452 | | | | 15,240 | | | | 44,858 | | | | 44,730 | |
| Net interest income | | | 19,808 | | | | 10,235 | | | | 53,073 | | | | 30,322 | |
| Provision for loan losses | | | 3,150 | | | | 620 | | | | 8,336 | | | | 954 | |
| Net interest income after provision for loan losses | | | 16,658 | | | | 9,615 | | | | 44,737 | | | | 29,368 | |
| Noninterest income | | | | | | | | | | | | | | | | |
| Deposit services | | | 4,739 | | | | 4,274 | | | | 13,823 | | | | 12,472 | |
| Gain on securities available for sale | | | 822 | | | | 126 | | | | 6,574 | | | | 561 | |
| Gain on sale of loans | | | 239 | | | | 424 | | | | 1,551 | | | | 1,493 | |
| Trust income | | | 678 | | | | 522 | | | | 1,890 | | | | 1,562 | |
| Bank owned life insurance income | | | 314 | | | | 273 | | | | 1,382 | | | | 805 | |
| Other | | | 827 | | | | 784 | | | | 2,388 | | | | 2,310 | |
| Total noninterest income | | | 7,619 | | | | 6,403 | | | | 27,608 | | | | 19,203 | |
| Noninterest expense | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 10,002 | | | | 7,242 | | | | 27,521 | | | | 21,644 | |
| Occupancy expense | | | 1,449 | | | | 1,261 | | | | 4,264 | | | | 3,619 | |
| Equipment expense | | | 327 | | | | 268 | | | | 968 | | | | 738 | |
| Advertising, travel & entertainment | | | 447 | | | | 363 | | | | 1,407 | | | | 1,233 | |
| ATM and debit card expense | | | 313 | | | | 247 | | | | 905 | | | | 743 | |
| Director fees | | | 134 | | | | 126 | | | | 425 | | | | 394 | |
| Supplies | | | 201 | | | | 151 | | | | 584 | | | | 487 | |
| Professional fees | | | 452 | | | | 413 | | | | 1,239 | | | | 964 | |
| Postage | | | 199 | | | | 165 | | | | 565 | | | | 468 | |
| Telephone and communications | | | 270 | | | | 193 | | | | 785 | | | | 577 | |
| FDIC Insurance | | | 220 | | | | 38 | | | | 688 | | | | 112 | |
| Other | | | 1,773 | | | | 1,075 | | | | 5,268 | | | | 3,255 | |
| Total noninterest expense | | | 15,787 | | | | 11,542 | | | | 44,619 | | | | 34,234 | |
| Income before income tax expense | | | 8,490 | | | | 4,476 | | | | 27,726 | | | | 14,337 | |
| Provision for income tax expense | | | 2,240 | | | | 976 | | | | 7,399 | | | | 2,487 | |
| Net income | | $ | 6,250 | | | $ | 3,500 | | | $ | 20,327 | | | $ | 11,850 | |
| Common share data: | | | | | | | | | | | | |
| Weighted-average basic shares outstanding | | | 13,925 | | | | 13,746 | | | | 13,858 | | | | 13,689 | |
| Weighted-average diluted shares outstanding | | | 14,210 | | | | 14,127 | | | | 14,187 | | | | 14,111 | |
| Net income per common share | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.45 | | | $ | 0.26 | | | $ | 1.47 | | | $ | 0.87 | |
| Diluted | | | 0.44 | | | | 0.25 | | | | 1.43 | | | | 0.84 | |
| Book value per common share | | | - | | | | - | | | | 10.19 | | | | 8.94 | |
| Cash dividend declared per common share | | | 0.16 | | | | 0.12 | | | | 0.41 | | | | 0.35 | |
| Selected Performance Ratios: | | | | | | | | | | | | | | | | |
| Return on average assets | | | 1.03 | % | | | 0.75 | % | | | 1.18 | % | | | 0.86 | % |
| Return on average shareholders’ equity | | | 17.47 | | | | 11.75 | | | | 19.19 | | | | 13.68 | |
| Average yield on interest earning assets | | | 6.23 | | | | 6.00 | | | | 6.33 | | | | 5.97 | |
| Average yield on interest bearing liabilities | | | 3.10 | | | | 4.35 | | | | 3.41 | | | | 4.30 | |
| Net interest spread | | | 3.13 | | | | 1.65 | | | | 2.92 | | | | 1.67 | |
| Net interest margin | | | 3.68 | | | | 2.52 | | | | 3.52 | | | | 2.52 | |
| Average interest earnings assets to average interest bearing liabilities | | | 121.82 | | | | 125.22 | | | | 121.45 | | | | 124.66 | |
| Noninterest expense to average total assets | | | 2.60 | | | | 2.47 | | | | 2.60 | | | | 2.48 | |
| Efficiency ratio | | | 56.35 | | | | 66.45 | | | | 56.88 | | | | 66.63 | |
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) | |
| | | Nine Months Ended | |
| | | September 30, 2008 | | | September 30, 2007 | |
| | | AVG BALANCE | | | INTEREST | | | AVG YIELD | | | AVG BALANCE | | | INTEREST | | | AVG YIELD | |
| ASSETS | | | | | | | | | | | | | | | | | | |
| INTEREST EARNING ASSETS: | | | | | | | | | | | | | | | | | | |
| Loans(1) (2) | | $ | 980,076 | | | $ | 55,818 | | | | 7.61 | % | | $ | 770,653 | | | $ | 39,937 | | | | 6.93 | % |
| Loans Held For Sale | | | 2,734 | | | | 99 | | | | 4.84 | % | | | 3,857 | | | | 149 | | | | 5.16 | % |
| Securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment Securities (Taxable)(4) | | | 47,105 | | | | 1,377 | | | | 3.90 | % | | | 54,444 | | | | 2,004 | | | | 4.92 | % |
| Investment Securities (Tax-Exempt)(3)(4) | | | 83,357 | | | | 4,124 | | | | 6.61 | % | | | 41,831 | | | | 2,221 | | | | 7.10 | % |
| Mortgage-backed and Related Securities (4) | | | 983,882 | | | | 38,876 | | | | 5.28 | % | | | 839,505 | | | | 32,079 | | | | 5.11 | % |
| Total Securities | | | 1,114,344 | | | | 44,377 | | | | 5.32 | % | | | 935,780 | | | | 36,304 | | | | 5.19 | % |
| FHLB stock and other investments, at cost | | | 29,108 | | | | 656 | | | | 3.01 | % | | | 20,071 | | | | 945 | | | | 6.29 | % |
| Interest Earning Deposits | | | 928 | | | | 22 | | | | 3.17 | % | | | 586 | | | | 26 | | | | 5.93 | % |
| Federal Funds Sold | | | 4,118 | | | | 79 | | | | 2.56 | % | | | 2,102 | | | | 80 | | | | 5.09 | % |
| Total Interest Earning Assets | | | 2,131,308 | | | | 101,051 | | | | 6.33 | % | | | 1,733,049 | | | | 77,441 | | | | 5.97 | % |
| NONINTEREST EARNING ASSETS: | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and Due From Banks | | | 45,590 | | | | | | | | | | | | 41,898 | | | | | | | | | |
| Bank Premises and Equipment | | | 40,135 | | | | | | | | | | | | 34,374 | | | | | | | | | |
| Other Assets | | | 86,988 | | | | | | | | | | | | 43,046 | | | | | | | | | |
| Less: Allowance for Loan Loss | | | (10,667 | ) | | | | | | | | | | | (7,326 | ) | | | | | | | | |
| Total Assets | | $ | 2,293,354 | | | | | | | | | | | $ | 1,845,041 | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | |
| INTEREST BEARING LIABILITIES: | | | | | | | | | | | | | | | | | | | | | | | | |
| Savings Deposits | | $ | 56,863 | | | | 545 | | | | 1.28 | % | | $ | 51,825 | | | | 505 | | | | 1.30 | % |
| Time Deposits | | | 537,829 | | | | 17,203 | | | | 4.27 | % | | | 547,659 | | | | 20,055 | | | | 4.90 | % |
| Interest Bearing Demand Deposits | | | 492,051 | | | | 8,132 | | | | 2.21 | % | | | 396,075 | | | | 9,421 | | | | 3.18 | % |
| Total Interest Bearing Deposits | | | 1,086,743 | | | | 25,880 | | | | 3.18 | % | | | 995,559 | | | | 29,981 | | | | 4.03 | % |
| Short-term Interest Bearing Liabilities | | | 299,125 | | | | 7,125 | | | | 3.18 | % | | | 269,344 | | | | 9,771 | | | | 4.85 | % |
| Long-term Interest Bearing Liabilities – FHLB Dallas | | | 308,725 | | | | 8,828 | | | | 3.82 | % | | | 97,662 | | | | 3,315 | | | | 4.54 | % |
| Long-term Debt (5) | | | 60,311 | | | | 3,025 | | | | 6.70 | % | | | 27,662 | | | | 1,663 | | | | 8.04 | % |
| Total Interest Bearing Liabilities | | | 1,754,904 | | | | 44,858 | | | | 3.41 | % | | | 1,390,227 | | | | 44,730 | | | | 4.30 | % |
| NONINTEREST BEARING LIABILITIES: | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand Deposits | | | 367,786 | | | | | | | | | | | | 319,854 | | | | | | | | | |
| Other Liabilities | | | 28,623 | | | | | | | | | | | | 19,178 | | | | | | | | | |
| Total Liabilities | | | 2,151,313 | | | | | | | | | | | | 1,729,259 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Minority Interest in SFG | | | 525 | | | | | | | | | | | | - | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| SHAREHOLDERS’ EQUITY | | | 141,516 | | | | | | | | | | | | 115,782 | | | | | | | | | |
| Total Liabilities and Shareholders’ Equity | | $ | 2,293,354 | | | | | | | | | | | $ | 1,845,041 | | | | | | | | | |
| NET INTEREST INCOME | | | | | | $ | 56,193 | | | | | | | | | | | $ | 32,711 | | | | | |
| NET YIELD ON AVERAGE EARNING ASSETS | | | | | | | | | | | 3.52 | % | | | | | | | | | | | 2.52 | % |
| NET INTEREST SPREAD | | | | | | | | | | | 2.92 | % | | | | | | | | | | | 1.67 | % |
(1) Interest on loans includes fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $1,825 and $1,705 for the nine months ended September 30, 2008 and 2007, respectively.
(3) Interest income includes taxable-equivalent adjustments of $1,295 and $684 for the nine months ended September 30, 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 September 30, 2008 and 2007, loans totaling $6,192 and $1,307, respectively, were on nonaccrual status. The policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.
| | | AVERAGE BALANCES AND YIELDS | |
| | | (dollars in thousands) | |
| | | (unaudited) | |
| | | Three Months Ended | |
| | | September 30, 2008 | | | September 30, 2007 | |
| | | AVG BALANCE | | | INTEREST | | | AVG YIELD | | | AVG BALANCE | | | INTEREST | | | AVG YIELD | |
| ASSETS | | | | | | | | | | | | | | | | | | |
| INTEREST EARNING ASSETS: | | | | | | | | | | | | | | | | | | |
| Loans(1) (2) | | $ | 985,953 | | | $ | 18,630 | | | | 7.52 | % | | $ | 777,509 | | | $ | 13,678 | | | | 6.98 | % |
| Loans Held For Sale | | | 2,099 | | | | 29 | | | | 5.50 | % | | | 3,804 | | | | 53 | | | | 5.53 | % |
| Securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment Securities (Taxable)(4) | | | 37,826 | | | | 307 | | | | 3.23 | % | | | 44,743 | | | | 552 | | | | 4.89 | % |
| Investment Securities (Tax-Exempt)(3)(4) | | | 76,646 | | | | 1,291 | | | | 6.70 | % | | | 43,679 | | | | 772 | | | | 7.01 | % |
| Mortgage-backed and Related Securities (4) | | | 1,119,217 | | | | 14,883 | | | | 5.29 | % | | | 851,985 | | | | 10,982 | | | | 5.11 | % |
| Total Securities | | | 1,233,689 | | | | 16,481 | | | | 5.31 | % | | | 940,407 | | | | 12,306 | | | | 5.19 | % |
| FHLB stock and other investments, at cost | | | 33,810 | | | | 180 | | | | 2.12 | % | | | 17,226 | | | | 245 | | | | 5.64 | % |
| Interest Earning Deposits | | | 530 | | | | 2 | | | | 1.50 | % | | | 655 | | | | 9 | | | | 5.45 | % |
| Federal Funds Sold | | | 1,559 | | | | 8 | | | | 2.04 | % | | | 2,028 | | | | 28 | | | | 5.48 | % |
| Total Interest Earning Assets | | | 2,257,640 | | | | 35,330 | | | | 6.23 | % | | | 1,741,629 | | | | 26,319 | | | | 6.00 | % |
| NONINTEREST EARNING ASSETS: | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and Due From Banks | | | 45,061 | | | | | | | | | | | | 40,381 | | | | | | | | | |
| Bank Premises and Equipment | | | 40,473 | | | | | | | | | | | | 35,204 | | | | | | | | | |
| Other Assets | | | 86,542 | | | | | | | | | | | | 42,431 | | | | | | | | | |
| Less: Allowance for Loan Loss | | | (11,614 | ) | | | | | | | | | | | (7,381 | ) | | | | | | | | |
| Total Assets | | $ | 2,418,102 | | | | | | | | | | | $ | 1,852,264 | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | |
| INTEREST BEARING LIABILITIES: | | | | | | | | | | | | | | | | | | | | | | | | |
| Savings Deposits | | $ | 58,646 | | | | 188 | | | | 1.28 | % | | $ | 51,846 | | | | 171 | | | | 1.31 | % |
| Time Deposits | | | 497,663 | | | | 4,502 | | | | 3.60 | % | | | 561,382 | | | | 6,983 | | | | 4.94 | % |
| Interest Bearing Demand Deposits | | | 511,599 | | | | 2,567 | | | | 2.00 | % | | | 402,884 | | | | 3,237 | | | | 3.19 | % |
| Total Interest Bearing Deposits | | | 1,067,908 | | | | 7,257 | | | | 2.70 | % | | | 1,016,112 | | | | 10,391 | | | | 4.06 | % |
| Short-term Interest Bearing Liabilities | | | 279,502 | | | | 1,986 | | | | 2.83 | % | | | 247,088 | | | | 3,049 | | | | 4.90 | % |
| Long-term Interest Bearing Liabilities – FHLB Dallas | | | 445,590 | | | | 4,231 | | | | 3.78 | % | | | 86,147 | | | | 997 | | | | 4.59 | % |
| Long-term Debt (5) | | | 60,311 | | | | 978 | | | | 6.45 | % | | | 41,518 | | | | 803 | | | | 7.67 | % |
| Total Interest Bearing Liabilities | | | 1,853,311 | | | | 14,452 | | | | 3.10 | % | | | 1,390,865 | | | | 15,240 | | | | 4.35 | % |
| NONINTEREST BEARING LIABILITIES: | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand Deposits | | | 382,940 | | | | | | | | | | | | 323,130 | | | | | | | | | |
| Other Liabilities | | | 39,105 | | | | | | | | | | | | 20,134 | | | | | | | | | |
| Total Liabilities | | | 2,275,356 | | | | | | | | | | | | 1,734,129 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Minority Interest in SFG | | | 425 | | | | | | | | | | | | - | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| SHAREHOLDERS’ EQUITY | | | 142,321 | | | | | | | | | | | | 118,135 | | | | | | | | | |
| Total Liabilities and Shareholders’ Equity | | $ | 2,418,102 | | | | | | | | | | | $ | 1,852,264 | | | | | | | | | |
| NET INTEREST INCOME | | | | | | $ | 20,878 | | | | | | | | | | | $ | 11,079 | | | | | |
| NET YIELD ON AVERAGE EARNING ASSETS | | | | | | | | | | | 3.68 | % | | | | | | | | | | | 2.52 | % |
| NET INTEREST SPREAD | | | | | | | | | | | 3.13 | % | | | | | | | | | | | 1.65 | % |
(1) Interest on loans includes fees on loans that are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $630 and $597 for the three months ended September 30, 2008 and 2007, respectively.
(3) Interest income includes taxable-equivalent adjustments of $440 and $247 for the three months ended September 30, 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 September 30, 2008 and 2007, loans totaling $6,192 and $1,307, 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.
