EXHIBIT 99.1
SOUTHSIDE BANCSHARES, INC.
ANNOUNCES THIRD QUARTER EARNINGS
NASDAQ NATIONAL MARKET SYMBOL - "SBSI"
Tyler, Texas (October 23, 2003) B. G. Hartley, Chairman and Chief Executive
Officer of Southside Bancshares, Inc., reported financial results for the third
quarter and nine months ended September 30, 2003.
"For the nine months ended September 30, 2003 net income decreased $737,000 or
7.2% to $9,534,000 compared to $10,271,000 for the same period in 2002," stated
B. G. Hartley. Net income decreased $1,394,000 or 33.6% to $2,750,000 for the
third quarter ended September 30, 2003 compared to $4,144,000 for the same
period in 2002. Earnings per diluted share were $0.91 and $0.98 for the nine
months ended September 30, 2003 and 2002, respectively, a decrease of $0.07 or
7.1%. Earnings per diluted share were $0.26 and $0.39 for the third quarters
ended September 30, 2003, and 2002.
The annualized return on average shareholders' equity for the nine months ended
September 30, 2003 was 14.96% compared to 18.65% for the same period in 2002.
The annualized return on average assets was 0.95% for the nine months ended
September 30, 2003 compared to 1.07% for the same period in 2002.
On September 4, 2003 Southside Capital Trust I (the "Trust"), a subsidiary of
Southside Bancshares, Inc. announced the redemption on October 6, 2003 of all of
its 8.50% Cumulative Trust Preferred Securities and 8.50% Trust Common
Securities which totaled $20,618,560. Concurrent with the Trust taking such
action Southside Bancshares redeemed all of its $20,618,560 8.50% debentures due
June 30, 2028 (the "Debentures") which were held exclusively by the Trust. In
connection with the redemption of the Debentures, Southside Bancshares expensed
$1,034,000 of unamortized origination cost associated with the Debentures during
the third quarter. Southside Bancshares funded the redemption through the
issuance of $20,000,000 of trust preferred securities and $619,000 of trust
common securities that will adjust quarterly at a rate equal to the three month
LIBOR plus 294 basis points. The initial rate for the trust preferred securities
was 4.08%. This initial lower interest rate should provide interest savings
beginning in the fourth quarter and should provide a better match for the
overall interest rate sensitivity position of Southside Bancshares.
In addition to the amortization expense of $1,034,000 discussed above, the
decrease in net income for the quarter ended September 30, 2003, when compared
to the same period in 2002, was primarily attributable to a 65.8% decrease in
the gains on sales of securities available for sale or $1,345,000 and a 15.6%
decrease in net interest income of $1,344,000. These items were partially offset
by an increase in noninterest income, excluding, security gains of $1,290,000 or
32.8%, primarily as a result of increased deposit fee income and fee income from
the sale of mortgage loans. Provision for loan losses decreased $530,000 due to
total loans declining slightly and the anticipated level of problem assets at
September 30, 2003 remaining consistent with the prior period.
Net interest income decreased as a result of decreases in the Company's net
interest margin and spread during the third quarter of 2003 when compared to the
same period in 2002, which was due in large part to significantly lower mortgage
interest rates and the lower overall interest rate environment during the second
quarter ended June 30, 2003. This led to substantially increased residential
mortgage refinancing nationwide and in the Company's market area combined with
increased repricing of all of the Company's other loan types during the third
quarter ended September 30, 2003. Increased prepayments associated with the
Company's mortgage-backed securities, residential mortgage loans and the
increase in repricing of other loan types could impact the Company's net
interest margin in the future should long-term interest rates decrease to May
and June 2003 levels. During the third quarter 2003 long-term interest rates
increased from the lows experienced during May and June 2003. This caused a
slowing in refinancings which should reduce mortgage prepayments for specific
coupons during the fourth quarter. Other factors that should improve Southside's
net interest margin and spread include new deposit repricing strategies fully
implemented during the second quarter, $31.9 million of fixed rate Federal Home
Loan Bank of Dallas ("FHLB") advances currently at an average rate of 3.86% that
will reprice during the fourth quarter of 2003, and the reduction in interest
expense on $20,000,000 of Southside Bancshares trust preferred securities
beginning during the fourth quarter ended December 31, 2003 as explained above.
In addition, during the first quarter of 2004 $17 million of fixed rate FHLB
advances currently at an average rate of 4.97%, will reprice. The Company's net
interest margin and spread decreased during the third quarter ended September
30, 2003 to 2.57% and 2.11%, respectively when compared to 3.22% and 2.69%,
respectively for the same period in 2002.
Cumulative through October 17, 2003, 607,687 convertible trust preferred shares
were converted into 663,371 shares of the Company's common stock. The total
convertible trust preferred shares converted to date represents 35.9% of the
convertible trust preferred issue. During the nine months ended September 30,
2003, 297,705 convertible trust preferred shares were converted into 330,953
shares of the Company's common stock. During the third quarter ended September
30, 2003, 121,105 convertible trust preferred shares were converted into 136,256
shares of the Company's common stock.
During the third quarter and nine months, the Company repurchased 62,000 and
221,800 shares, respectively of common stock at an average dollar price of
$17.15 and $17.27, respectively. The Company has approximately $170,000
remaining to repurchase stock under the current Board approved level.
At September 30, 2003, assets totaled $1.4 billion compared to $1.3 billion at
September 30, 2002, an increase of $118.0 million or 9.0%. Loans, net of
unearned discount increased $2.1 million or 0.4% from $566.7 million at
September 30, 2002 to $568.8 million at September 30, 2003. Investment and
mortgage-backed securities increased $94.2 million or 15.2% from $620.1 million
at September 30, 2002 to $714.4 million at September 30, 2003. Deposits
increased $60.5 million or 7.7% from $785.8 million at September 30, 2002 to
$846.3 million at September 30, 2003. FHLB advances increased $25.6 million or
6.7% from $380.9 million at September 30, 2002 to $406.5 million at September
30, 2003. Shareholders' equity totaled $87.0 million or 6.11% of total assets at
September 30, 2003 as compared to $78.2 million or 5.99% of total assets at
September 30, 2002, an increase of $8.8 million or 11.2%. At September 30, 2003,
the unrealized gain on available for sale securities was $6.7 million, net of
tax, as compared to $9.3 million, net of tax, at December 31, 2002.
Southside Bancshares, Inc. is a $1.4 billion holding company that owns 100% of
Southside Bank. The bank currently has twenty-four banking centers in East
Texas.
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 web site. Questions or comments may be directed to Ethel Bodenhamer at
(903) 531-7111, or ethelb@southside.com.
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 Southside Bancshares, Inc., a bank holding company, may be
considered to be "forward-looking statements" as that term is defined in the
Private Securities Litigation Reform Act of 1995. These statements may include
words such as "expect," "estimate," "project," "anticipate," "could," "should,"
"intend," "probability," "risk," "target," "objective" and similar expressions.
Forward-looking statements are subject to significant risks and uncertainties
and the Company's actual results may differ materially from the results
discussed in the forward-looking statements. For example, certain market risk
disclosures 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. Other
factors that could cause actual results to differ materially from
forward-looking statements include, but are not limited to general economic
conditions, either nationally or in the State of Texas, legislation or
regulatory changes which adversely affect the businesses in which the Company is
engaged, changes in the interest rate environment which reduce interest margins
and may impact prepayments on the mortgage-backed securities portfolio, changes
effecting the leverage strategy, significant increases in competition in the
banking and financial services industry, changes in consumer spending, borrowing
and saving habits, technological changes, the Company's ability to increase
market share and control expenses, the effect of compliance with legislation or
regulatory changes, the effect of changes in accounting policies and practices
and the costs and effects of unanticipated litigation.
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<Caption>
AT AT
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- -------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
SELECTED FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets .......................................... $ 1,423,596 $ 1,349,186
Loans, net of unearned discount ....................... 568,790 582,241
Allowance for loan losses ............................. 6,540 6,195
Mortgage-backed and related securities available
for sale .............................................. 578,041 489,015
Investment securities available for sale .............. 136,334 151,509
Deposits .............................................. 846,306 814,486
Long-term obligations ................................. 277,975 265,365
Shareholders' equity .................................. 86,963 82,167
Nonperforming assets .................................. 2,320 3,385
Nonaccrual loans .................................... 1,353 2,238
Loans 90 days past due .............................. 401 287
Restructured loans .................................. 259 325
Other real estate owned ............................. 240 524
Repossessed assets .................................. 67 11
ASSET QUALITY RATIOS:
Nonaccruing loans to total loans ...................... 0.24% 0.38%
Allowance for loan losses to nonaccruing loans ........ 483.37 276.81
Allowance for loan losses to nonperforming assets ..... 281.90 183.01
Allowance for loan losses to total loans .............. 1.15 1.06
Nonperforming assets to total assets .................. 0.16 0.25
Net charge-offs to average loans ...................... 0.16 0.33
CAPITAL RATIOS:
Shareholders' equity to total assets .................. 6.11 6.09
Average shareholders' equity to average total assets .. 6.32 5.84
</Table>
<Table>
<Caption>
AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
(UNAUDITED) (UNAUDITED)
SELECTED OPERATING DATA:
Total interest income ................................. $ 14,608 $ 17,723 $ 45,719 $ 52,741
Total interest expense ................................ 7,319 9,090 23,097 27,630
----------- ----------- ----------- -----------
Net interest income ................................... 7,289 8,633 22,622 25,111
Provision for loan losses ............................. -- 530 1,054 1,581
----------- ----------- ----------- -----------
Net interest income after provision for loan losses ... 7,289 8,103 21,568 23,530
----------- ----------- ----------- -----------
Total non-interest income ............................. 5,218 3,928 14,387 11,398
Gains on sale of securities available for sale ........ 699 2,044 4,278 3,087
Total non-interest expense ............................ 10,103 8,983 29,059 25,949
----------- ----------- ----------- -----------
Income before federal tax expense ..................... 3,103 5,092 11,174 12,066
Income tax expense .................................... 353 948 1,640 1,795
----------- ----------- ----------- -----------
Net income ............................................ $ 2,750 $ 4,144 $ 9,534 $ 10,271
=========== =========== =========== ===========
COMMON SHARE DATA:
Weighted-average basic shares outstanding ............. 8,993 8,709 8,885 8,685
Weighted-average diluted shares outstanding ........... 10,981 11,053 11,040 11,130
Net income per common share:
Basic ............................................... 0.30 0.48 1.07 1.18
Diluted ............................................. 0.26 0.39 0.91 0.98
Book value per common share ........................... -- -- 9.63 9.00
Cash dividend declared per common share ............... 0.10 0.07 0.26 0.23
SELECTED PERFORMANCE RATIOS:
Return on average assets .............................. 0.79% 1.27% 0.95% 1.07%
Return on average shareholders' equity ................ 12.77 21.29 14.96 18.65
Average yield on interest earning assets .............. 4.84 6.24 5.23 6.31
Average yield on interest bearing liabilities ......... 2.73 3.55 2.97 3.64
Net interest spread ................................... 2.11 2.69 2.26 2.67
Net interest margin ................................... 2.57 3.22 2.74 3.19
Average interest earning assets to average interest
bearing liabilities ................................. 120.26 117.09 119.59 116.53
Non-interest expense to average total assets .......... 2.91 2.78 2.88 2.71
Efficiency ratio ...................................... 67.09 65.15 69.93 65.11
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