Southside Bancshares (SBSI) 8-K Results of Operations and Financial Condition

EXHIBIT 99.1

SOUTHSIDE BANCSHARES, INC.

ANNOUNCES NET INCOME FOR THE

THREE MONTHS ENDED MARCH 31, 2015

NASDAQ Global Select Market Symbol - “SBSI”

Tyler, Texas, (April 30, 2015) Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the three months ended March 31, 2015.

Southside reported net income of $9.4 million for the three months ended March 31, 2015, an increase of $1.2 million, or 14.0%, when compared to $8.2 million for the same period in 2014. Diluted earnings per common share were $0.37 and $0.41 for the three months ended March 31, 2015 and 2014, respectively, a decrease of $0.04, or 9.8%.

The return on average shareholders’ equity for the three months ended March 31, 2015 was 8.79%, compared to 12.44% for the same period in 2014.  The return on average assets was 0.79% for the three months ended March 31, 2015 when compared to 0.96% for the same period in 2014.

“During the first quarter ended March 31, 2015 our net income increased 14% to $9.4 million,” stated Sam Dawson, President and Chief Executive Officer of Southside Bancshares, Inc. “Our net interest margin improved on a linked quarter basis to 3.50% from 3.42% for the three months ended December 31, 2014. Partially offsetting what was a positive first quarter, our provision for loan loss was higher than anticipated due primarily to a large credit being placed on nonaccrual with a large loan loss reserve.”

“We successfully completed most of the critical integration projects related to our acquisition of OmniAmerican Bancorp, Inc. (“OABC”) in the fourth quarter of 2014, including the conversion of the core computer system in March 2015. With most of these projects now complete, we expect to realize meaningful cost savings beginning in the second quarter.”

“Total loans decreased $6.5 million during the quarter as a result of the continued roll off of the indirect automobile loan portfolio, which decreased $29 million, and payoffs in our construction and municipal loan portfolios. These were partially offset by a $17 million increase in commercial real estate loans and a $14 million increase in commercial loans. Based on loans funded in April and activity in our pipeline, we continue to anticipate healthy overall net loan growth during the remainder of 2015.”

Loans and Deposits

For the three months ended March 31, 2015, total loans decreased by $6.5 million, or 0.3%, when compared to December 31, 2014.  During the three months ended March 31, 2015, other real estate loans increased $17.3 million, commercial loans increased $14.1 million, 1-4 family real estate loans increased $2.7 million, municipal loans decreased $4.7 million, construction loans decreased $6.3 million and loans to individuals decreased $29.5 million.

Nonperforming assets increased during the first three months of 2015 by $15.5 million, or 126.1%%, to $27.8 million, or 0.59% of total assets, when compared to 0.26% at December 31, 2014 primarily due to the downgrade of one large commercial borrowing relationship to impaired status.

During the three months ended March 31, 2015, the allowance for loan losses increased $3.6 million, or 27.3%, to $16.9 million, or 0.8% of total loans, when compared to 0.6% at December 31, 2014, as a result of the additional provision associated with the increase of impaired loans. The allowance for loan losses as a percentage of total loans decreased from the comparable period in 2014 from 1.37%, as a result of the loans acquired in connection with the OABC acquisition measured at fair value at the acquisition date with no carryover of the allowance for loan loss and the sale of the loans purchased by Southside Financial Group, Inc., both of which occurred in the fourth quarter of 2014.

During the three months ended March 31, 2015, deposits, net of brokered deposits, increased $120.9 million, or 3.6%, compared to December 31, 2014. During this three-month period, public fund deposits increased $103.3 million.

Net Interest Income for the Three Months

Net interest income increased $5.9 million, or 21.1%, to $33.8 million for the three months ended March 31, 2015, when compared to $27.9 million for the same period in 2014. The increase in net interest income was primarily the result of the increase in interest income of $6.4 million, compared to the same period in 2014. For the three months ended March 31, 2015, our net interest spread decreased to 3.42%, compared to 3.80% for the same period in 2014.  The net interest margin decreased to 3.50% for the three months ended March 31, 2015, compared to 3.93% for the same period in 2014.  The net interest spread and margin each decreased as a result of the decrease in the yield on interest-earning assets, which more than offset the decrease in the yield on interest-bearing liabilities compared to the same period in 2014.

Net Income for the Three Months

Net income increased $1.2 million, or 14.0%, for the three months ended March 31, 2015, to $9.4 million when compared to the same period in 2014. The increase was primarily the result of an increase in interest income of $6.4 million combined with an increase in noninterest income of $5.2 million, which were partially offset by a $9.5 million increase in noninterest expense and a $744,000 increase in income tax expense.

Noninterest expense increased $9.5 million, or 47.2%, for the three months ended March 31, 2015, compared to the same period in 2014, primarily due to increases in salaries and employee benefits expense, occupancy expense, ATM and debit card expense, software and data processing expense and other noninterest expense.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $4.7 billion in assets that owns 100% of Southside Bank.  Southside Bank currently has 64 banking centers in Texas and operates a network of 70 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 Deborah Wilkinson at (817) 367-4962, or deborah.wilkinson@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, 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,” “likely,” “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 about trends in asset quality, capital, liquidity, the pace of loan growth, merger-related integration cost savings, earnings and certain market risk disclosures, including the impact of interest rate and other economic uncertainty, 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.  

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, 2014 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 March 31, 2015			At December 31, 2014			At March 31, 2014
	(dollars in thousands)
	(unaudited)
Selected Financial Condition Data (at end of period):
Total assets	$	4,732,393		$	4,807,261		$	3,434,344
Loans	2,174,614			2,181,133			1,370,393
Allowance for loan losses	16,926			13,292			18,787
Loans held for sale	4,096			2,899			207
Mortgage-backed securities:
Available for sale, at estimated fair value	1,140,140			1,142,002			915,061
Held to maturity, at carrying value	249,430			253,496			265,627
Investment securities:
Available for sale, at estimated fair value	293,735			306,706			259,662
Held to maturity, at carrying value	388,106			388,823			390,889
Federal Home Loan Bank stock, at cost	39,978			39,942			27,331
Deposits	3,495,340			3,374,417			2,546,843
Long-term obligations	609,856			660,363			566,871
Shareholders' equity	434,814			425,243			271,393
Nonperforming assets	27,764			12,277			10,889
Nonaccrual loans	20,823			4,096			5,869
Accruing loans past due more than 90 days	1			4			—
Restructured loans	5,782			5,874			4,090
Other real estate owned	985			1,738			476
Repossessed assets	173			565			454
Asset Quality Ratios:
Nonaccruing loans to total loans	0.96		%	0.19		%	0.43		%
Allowance for loan losses to nonaccruing loans	81.29			324.51			320.11
Allowance for loan losses to nonperforming assets	60.96			108.27			172.53
Allowance for loan losses to total loans	0.78			0.61			1.37
Nonperforming assets to total assets	0.59			0.26			0.32
Net charge-offs to average loans	0.04			1.44			1.26
Capital Ratios:
Shareholders’ equity to total assets	9.19			8.85			7.90
Average shareholders’ equity to average total assets	8.98			8.27			7.70

Loan Portfolio Composition

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

	At March 31, 2015		At December 31, 2014		At March 31, 2014
	(in thousands)
	(unaudited)
Real Estate Loans:
Construction	$	237,236	$	243,486	$	135,237
1-4 Family Residential	691,955		689,288		395,809
Other	502,476		485,226		272,868
Commercial Loans	249,407		235,356		154,524
Municipal Loans	252,756		257,492		240,114
Loans to Individuals	240,784		270,285		171,841
Total Loans	$	2,174,614	$	2,181,133	$	1,370,393

	At or For the Three Months Ended March 31,
	2015		2014
	(dollars in thousands)
	(unaudited)
Selected Operating Data:
Total interest income	$	38,607	$	32,239
Total interest expense	4,816		4,347
Net interest income	33,791		27,892
Provision for loan losses	3,848		4,133
Net interest income after provision for loan losses	29,943		23,759
Noninterest income
Deposit services	4,989		3,638
Net gain on sale of securities available for sale	2,476		11
Gain on sale of loans	377		80
Trust income	893		780
Bank owned life insurance income	669		314
Other	1,644		983
Total noninterest income	11,048		5,806
Noninterest expense
Salaries and employee benefits	18,199		13,102
Occupancy expense	3,459		1,754
Advertising, travel & entertainment	657		543
ATM and debit card expense	679		317
Professional fees	742		927
Software and data processing expense	1,031		501
Telephone and communications	469		278
FDIC insurance	638		448
Other	3,835		2,312
Total noninterest expense	29,709		20,182
Income before income tax expense	11,282		9,383
Income tax expense	1,903		1,159
Net income	$	9,379	$	8,224

Common share data:
Weighted-average basic shares outstanding	25,322		19,761
Weighted-average diluted shares outstanding	25,403		19,850
Net income per common share
Basic	$	0.37	$	0.41
Diluted	0.37		0.41
Book value per common share	17.17		13.73
Cash dividend paid per common share	0.23		0.21

	At or For the Three Months Ended March 31,
	2015		2014
	(unaudited)
Selected Performance Ratios:
Return on average assets	0.79	%	0.96	%
Return on average shareholders’ equity	8.79		12.44
Average yield on interest earning assets	3.95		4.46
Average yield on interest bearing liabilities	0.53		0.66
Net interest spread	3.42		3.80
Net interest margin	3.50		3.93
Average interest earnings assets to average interest bearing liabilities	118.36		123.66
Noninterest expense to average total assets	2.50		2.35
Efficiency ratio	62.07		53.30

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, 2015							March 31, 2014
	AVG					AVG		AVG					AVG
	BALANCE			INTEREST		YIELD		BALANCE			INTEREST		YIELD
ASSETS
INTEREST EARNING ASSETS:
Loans (1)(2)	$	2,189,163		$	24,938	4.62	%	$	1,364,571		$	19,375	5.76	%
Loans Held For Sale	1,987			28		5.71	%	425			5		4.77	%
Securities:
Investment Securities (Taxable) (4)	49,437			237		1.94	%	26,436			123		1.89	%
Investment Securities (Tax-Exempt)(3)(4)	645,231			8,834		5.55	%	643,343			8,842		5.57	%
Mortgage-backed Securities (4)	1,392,606			8,462		2.46	%	1,148,259			7,682		2.71	%
Total Securities	2,087,274			17,533		3.41	%	1,818,038			16,647		3.71	%
FHLB stock and other investments, at cost	43,886			93		0.86	%	31,619			70		0.90	%
Interest Earning Deposits	58,576			34		0.24	%	69,392			43		0.25	%
Total Interest Earning Assets	4,380,886			42,626		3.95	%	3,284,045			36,140		4.46	%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks	57,367							45,991
Bank Premises and Equipment	112,635							52,286
Other Assets	282,421							121,102
Less:  Allowance for Loan Loss	(13,625		)					(18,648		)
Total Assets	$	4,819,684						$	3,484,776
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits	$	229,946		53		0.09	%	$	111,687		35		0.13	%
Time Deposits	863,477			1,362		0.64	%	637,546			1,163		0.74	%
Interest Bearing Demand Deposits	1,699,225			1,114		0.27	%	1,255,678			918		0.30	%
Total Interest Bearing Deposits	2,792,648			2,529		0.37	%	2,004,911			2,116		0.43	%
Short-term Interest Bearing Liabilities	272,302			142		0.21	%	89,440			71		0.32	%
Long-term Interest Bearing Liabilities – FHLB Dallas	576,199			1,792		1.26	%	501,066			1,808		1.46	%
Long-term Debt (5)	60,311			353		2.37	%	60,311			352		2.37	%
Total Interest Bearing Liabilities	3,701,460			4,816		0.53	%	2,655,728			4,347		0.66	%
NONINTEREST BEARING LIABILITIES:
Demand Deposits	645,573							535,349
Other Liabilities	40,058							25,540
Total Liabilities	4,387,091							3,216,617
SHAREHOLDERS’ EQUITY	432,593							268,159
Total Liabilities and Shareholders’ Equity	$	4,819,684						$	3,484,776
NET INTEREST INCOME				$	37,810						$	31,793
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS						3.50	%						3.93	%
NET INTEREST SPREAD						3.42	%						3.80	%

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) Interest income includes taxable-equivalent adjustments of $1,050 and $1,017 for the three months ended March 31, 2015 and 2014, respectively.

(3) Interest income includes taxable-equivalent adjustments of $2,969 and $2,884 for the three months ended March 31, 2015 and 2014, respectively.

(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

(5) Represents the issuance of junior subordinated debentures.

Note: As of March 31, 2015 and 2014, loans on nonaccrual status totaled $20,823 and $5,869, respectively. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.