Exhibit 99.1
SOUTHSIDE BANCSHARES, INC. ANNOUNCES ANNUAL EARNINGS
TYLER, Texas, Feb. 2 /PRNewswire-FirstCall/ -- B. G. Hartley, Chairman and
Chief Executive Officer of Southside Bancshares, Inc. (Nasdaq: SBSI),
("Southside Bank or the Company") reported financial results for the year
ended December 31, 2005.
For the three months ended December 31, 2005 Southside reported net income
of $3,487,000, compared to $3,700,000 for the same period in 2004, a decrease of
$213,000, or 5.8%. Earnings per fully diluted share were $0.29 for the three
months ended December 31, 2005 compared to $0.30 for the same period in 2004.
Southside reported net income of $14,592,000 for the year ended December 31,
2005 compared to $16,099,000 for the same period in 2004. The decrease in net
income of $1,507,000, or 9.4%, is a direct result of a reduction in income from
the sale of available for sale securities, net of tax, of $1.7 million when
comparing the year ended December 31, 2005, to the same period in 2004. Earnings
per fully diluted share were $1.21 for the year ended December 31, 2005,
compared to $1.32 for the same period in 2004, a decrease of $0.11, or 8.3%.
When comparing the year ended December 31, 2005 with the same period in 2004,
net income, excluding gains on sales of available for sale securities, net of
tax, reflected a slight increase of $163,000 or 1.1%. Earnings per fully diluted
share attributable to the sale of securities were $0.15 for the year ended
December 31, 2004 compared to $0.01 for the same period in 2005.
The annual return on average shareholders' equity for the year ended
December 31, 2005 was 13.88% compared to 15.31% for the same period in 2004. The
annual return on average assets was 0.86% for the year ended December 31, 2005,
compared to 1.07% for the same period in 2004.
Deposit and Loan Growth
We are pleased to report the Company experienced strong deposit growth
during the three months ended December 31, 2005, as deposits increased $89.5
million. We are gratified deposits continued to grow at an excellent pace during
the fourth quarter with $69.7 million of that growth resulting from our
expanding branch network and continued market penetration. The remaining $19.8
million of the deposit growth was the result of the Company issuing callable
brokered certificates of deposits. These brokered deposits have maturities out
to five years with calls as short as three months. Overall during 2005, deposits
increased $169.8 million, or 18.0%, to $1.1 billion at December 31, 2005 when
compared to December 31, 2004.
During the year ended December 31, 2005, the Company experienced solid loan
growth as loans, net of unearned discount, increased $56.3 million, or 9.0% from
December 31, 2004. The Company's loan growth slowed during the three months
ended December 31, 2005, as loans, net of unearned discount, increased $1.2
million, or 0.2%. The Company anticipates loan growth levels for 2006 will
exceed the percentage growth for the fourth quarter of 2005 and should be more
in line with the percentage growth experienced during the twelve month period
ended December 31, 2005. Asset quality improved as non- performing assets
decreased $466,000, or 13.2%, to $3.1 million at December 31, 2005 when compared
to $3.5 million at December 31, 2004. We believe that the Company's asset
quality ratios as reported in this earnings release remain sound.
Branch Expansion Continues
During the fourth quarter Southside opened its 31st banking center in
Palestine, Texas, approximately 50 miles southwest of Tyler. The addition of the
banking center in Palestine should complement and enhance Southside's southern
expansion efforts which already includes banking centers in Jacksonville and
Bullard. During January 2006 Southside opened a loan production office in
Forney, Texas approximately 20 miles east of Dallas. Southside has also
purchased property in Gun Barrel City where it plans to open a branch facility
during 2006. Southside also expects to open a branch in Athens during 2006. The
Company's ongoing investments in de novo branches has and will continue to
impact short-term earnings, however, the Company believes the potential
long-term benefits to the Company should greatly outweigh the short-term
expense.
Net Interest Income
While net interest income increased for the year ended December 31, 2005, it
was basically flat during the fourth quarter of 2005 as a result of margin
compression. As is impacting all banks, some more than others, short-term yields
increased significantly during 2005 while long-term yields increased less,
creating what is called a flat yield curve, where short-term yields are
relatively flat compared to long-term yields. The result for Southside was a
reduction in the net interest margin to 2.72% for the three months ended
December 31, 2005 when compared to 3.09% for the same period in 2004. For the
twelve months ended December 31, 2005, the net interest margin was 2.85%
compared to 3.08% for the same period in 2004. Should the yield curve remain
flat or invert, the net interest margin could come under additional pressure
during 2006.
Non-Interest Expense
The Company took strategic action during the fourth quarter of 2005,
designed to improve the relationship between compensation and profitability and
reduce expense volatility. As previously announced, the Company reduced future
pension plan volatility by reducing future benefits for current plan
participants and froze entrance to new participants. Additionally, effective in
2006, compensation for a large number of relationship managers was changed to
better align compensation with productivity and profitability. Over the
long-term a greater percentage of this group's total compensation should become
variable.
Net Income
The decrease in net income for the three months ended December 31, 2005,
when compared to the same period in 2004, was primarily attributable to an
increase in noninterest expense of $613,000, or 5.9%, an increase in provision
for loan losses of $116,000, or 29.0% and a decrease in income from the sale of
available for sale securities of $50,000, or 16.1%. Noninterest expense
increased primarily as a result of a $435,000, or 6.9% increase in salaries and
employee benefits due to higher staffing levels as a result of continued branch
expansion and the Company's regional lending initiative, salary increases and
increases in retirement expense.
The following items partially offset the decrease in net income for the
three months ended December 31, 2005, when compared to the same period in 2004.
Noninterest income, excluding gains on sales of securities, was $5.2 million for
the fourth quarter of 2005, an increase of $531,000, or 11.3%, over the fourth
quarter of 2004. The increase was primarily a result of an increase in deposit
services fee income. Provision for federal tax expense of $779,000 for the
fourth quarter of 2005, decreased $39,000, or 4.8%, from the fourth quarter of
2004 primarily as a result of a decrease in taxable income. The effective tax
rate as a percentage of pre-tax income was 18.3% for the three months ended
December 31, 2005 compared to 18.1% for the three months ended December 31,
2004. The increase in the effective tax rate was due to the increase in taxable
income as a percentage of total income.
As discussed above, the decrease in net income for the year ended December
31, 2005, when compared to the same period in 2004 was attributable to a
decrease in gains on available for sale securities. Also contributing to the
decrease in net income was an increase in non-interest expense of $2.8 million,
or 7.0% and an increase in provision for loan losses of $538,000, or 58.2%.
These decreases in net income were partially offset by an increase in net
interest income of $1.9 million, or 4.7%, an increase in non- interest income,
excluding security gains, of $1.9 million, or 9.8%, and a decrease in federal
income tax expense of $659,000, or 16.7%.
About Southside Bancshares
Southside Bancshares, Inc. is a $1.8 billion holding company that owns
100% of Southside Bank. The bank currently has thirty-one banking centers in
East Texas and operates a network of 37 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 Information
Statements in this news release that are based on other than historical fact
are "forward-looking statements" as that term is defined in the Private
Securities Litigation Reform Act of 1995. Forward looking statements provide
current expectations of future events. 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," "believe," "could,"
"should," "may," "intend," "probability," "risk," "target," "objective,"
"plans," "potential," 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, the following:
* general economic conditions, either globally, nationally, in the State
of Texas, or in the specific markets in which the Company operates;
* legislation or regulatory changes which adversely affect the
businesses in which the Company is engaged;
* adverse changes in Government Sponsored Enterprises (the "GSE") status
or financial condition impacting the GSE guarantees or ability to pay or
issue debt;
* economic or other disruptions caused by acts of terrorism in the United
States, Europe or other areas;
* changes in the interest rate yield curve such as flat, inverted or steep
yield curves, or changes in the interest rate environment which impact
interest margins and may impact prepayments on the mortgage- backed
securities portfolio;
* changes impacting 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 changes in federal or state tax laws;
* 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.
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,
2005 2004
------------- -------------
(dollars in thousands)
(unaudited)
Selected Financial Condition Data
(at end of period)
Total assets $ 1,783,462 $ 1,619,643
Loans, net of unearned discount 680,364 624,019
Allowance for loan losses 7,090 6,942
Mortgage-backed and related
securities:
Available for sale 592,435 479,475
Held to maturity 229,321 241,058
Investment securities available for
sale 121,240 133,535
Marketable equity securities
available for sale 29,607 26,819
Deposits 1,110,813 940,986
Long-term obligations 229,032 351,287
Shareholders' equity 109,290 104,697
Nonperforming assets 3,057 3,523
Nonaccrual loans 1,731 2,248
Loans 90 days past due 945 827
Restructured loans 226 193
Other real estate owned 145 214
Repossessed assets 10 41
Assets Quality Ratios:
Nonaccruing loans to total loans 0.25% 0.36%
Allowance for loan losses to
nonaccruing loans 409.59 308.81
Allowance for loan losses to
nonperforming assets 231.93 197.05
Allowance for loan losses to total
loans 1.04 1.11
Nonperforming assets to total assets 0.17 0.22
Net charge-offs to average loans 0.20 0.07
Capital Ratios:
Shareholders' equity to total assets 6.13 6.46
Average shareholders' equity to
average total assets 6.20 6.98
LOAN PORTFOLIO COMPOSITION
The following table sets forth loan totals net of unearned discount by category
for the periods presented:
At At
December 31, December 31,
2005 2004
------------- -------------
(dollars in thousands)
(unaudited)
Real Estate Loans:
Construction $ 35,765 $ 32,877
1-4 Family Residential 199,812 168,784
Other 162,147 153,998
Commercial Loans 91,456 80,808
Municipal Loans 109,003 103,963
Loans to Individuals 82,181 83,589
Total Loans $ 680,364 $ 624,019
At or for the At or for the
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2005 2004 2005 2004
--------- --------- --------- ---------
(dollars in thousands) (dollars in thousands)
(unaudited) (unaudited)
Selected Operating Data:
Total interest income $ 21,079 $ 17,785 $ 79,681 $ 67,000
Total interest expense 10,798 7,500 38,422 27,606
Net interest income 10,281 10,285 41,259 39,394
Provision for loan losses 516 400 1,463 925
Net interest income after
provision for loan losses 9,765 9,885 39,796 38,469
Non-interest income
Deposit services 3,745 3,369 14,594 13,793
Gain on sale of securities
available for sale 260 310 228 2,759
Gain on sale of loans 374 386 1,807 1,644
Trust income 389 354 1,422 1,248
Bank owned life insurance 278 184 951 812
Other 458 420 2,246 1,647
Total non-interest income 5,504 5,023 21,248 21,903
Non-interest expense
Salaries and employee benefits 6,697 6,262 27,479 25,395
Net occupancy expense 1,078 1,021 4,257 4,120
Equipment expense 223 210 847 759
Advertising, travel &
entertainment 510 544 1,967 1,852
ATM expense 181 149 648 628
Director fees 218 208 677 646
Supplies 173 180 628 608
Professional fees 181 240 764 1,023
Postage 149 145 572 561
Other 1,593 1,431 5,320 4,729
Total non-interest expense 11,003 10,390 43,159 40,321
Income before federal tax expense 4,266 4,518 17,885 20,051
Income tax expense 779 818 3,293 3,952
Net income $ 3,487 $ 3,700 $ 14,592 $ 16,099
Common Share Data:
Weighted-average basic shares
outstanding 11,545 11,535 11,471 11,496
Weighted-average diluted shares
outstanding 12,034 12,218 12,035 12,174
Net income per common share
Basic $ 0.30 $ 0.32 $ 1.27 $ 1.40
Diluted 0.29 0.30 1.21 1.32
Book value per common share --- --- 9.43 9.06
Cash dividend declared per common
share 0.13 0.12 0.46 0.42
Selected Performance Ratios:
Return on average assets 0.79% 0.94% 0.86% 1.07%
Return on average shareholders'
equity 13.05 13.51 13.88 15.31
Average yield on interest earning
assets 5.35 5.13 5.27 5.05
Average yield on interest bearing
liabilities 3.22 2.53 2.96 2.41
Net interest spread 2.13 2.60 2.31 2.64
Net interest margin 2.72 3.09 2.85 3.08
Average interest earning
assets to average interest
bearing liabilities 122.79 123.55 122.17 122.62
Non-interest expense to average
total assets 2.50 2.65 2.54 2.68
Efficiency ratio 66.92 64.78 65.27 64.46
AVERAGE BALANCES AND YIELDS
(dollars in thousands)
(unaudited)
Years Ended
December 31, 2005
------------------------------------------------
AVG. AVG.
BALANCE INTEREST YIELD
-------------- -------------- --------------
ASSETS
INTEREST EARNING ASSETS:
Loans (A) (B) $ 657,938 $ 40,927 6.22%
Loans Held for Sale 4,469 212 4.74%
Securities:
Investment Securities (Taxable) (D) 51,431 1,978 3.85%
Investment Securities
(Tax-Exempt) (C) (D) 66,023 4,696 7.11%
Mortgage-backed Securities (D) 773,973 34,584 4.47%
Marketable Equity Securities 28,099 1,032 3.67%
Interest Earning Deposits 644 24 3.73%
Federal Funds Sold 995 30 3.02%
Total Interest Earning Assets 1,583,572 83,483 5.27%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks 42,280
Bank Premises and Equipment 31,504
Other Assets 45,625
Less: Allowance for Loan Loss (6,945)
Total Assets $ 1,696,036
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits $ 50,502 $ 524 1.04%
Time Deposits 354,360 11,221 3.17%
Interest Bearing Demand Deposits 313,815 5,476 1.74%
Short-term Interest Bearing
Liabilities 282,283 9,892 3.50%
Long-term Interest Bearing
Liabilities - FHLB Dallas 274,673 10,004 3.64%
Long-term Debt (E) 20,619 1,305 6.24%
Total Interest Bearing Liabilities 1,296,252 38,422 2.96%
NONINTEREST BEARING LIABILITIES:
Demand Deposits 280,036
Other Liabilities 14,649
Total Liabilities 1,590,937
SHAREHOLDERS' EQUITY 105,099
Total Liabilities and
Shareholders' Equity $ 1,696,036
NET INTEREST INCOME $ 45,061
NET YIELD ON AVERAGE EARNING ASSETS 2.85%
NET INTEREST SPREAD 2.31%
AVERAGE BALANCES AND YIELDS
(dollars in thousands)
(unaudited)
Years Ended
December 31, 2004
------------------------------------------------
AVG. AVG.
BALANCE INTEREST YIELD
-------------- -------------- --------------
ASSETS
INTEREST EARNING ASSETS:
Loans (A) (B) $ 604,658 $ 36,921 6.11%
Loans Held for Sale 3,570 180 5.04%
Securities:
Investment Securities (Taxable) (D) 45,400 1,072 2.36%
Investment Securities
(Tax-Exempt) (C) (D) 75,048 5,333 7.11%
Mortgage-backed Securities (D) 643,323 26,845 4.17%
Marketable Equity Securities 24,309 477 1.96%
Interest Earning Deposits 634 8 1.26%
Federal Funds Sold 6,886 67 0.97%
Total Interest Earning Assets 1,403,828 70,903 5.05%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks 37,881
Bank Premises and Equipment 30,576
Other Assets 40,376
Less: Allowance for Loan Loss (6,597)
Total Assets $ 1,506,064
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits $ 48,456 $ 234 0.48%
Time Deposits 319,083 7,847 2.46%
Interest Bearing Demand Deposits 281,452 2,027 0.72%
Short-term Interest Bearing
Liabilities 181,779 6,499 3.58%
Long-term Interest Bearing
Liabilities - FHLB Dallas 293,499 10,076 3.43%
Long-term Debt (E) 20,619 923 4.40%
Total Interest Bearing Liabilities 1,144,888 27,606 2.41%
NONINTEREST BEARING LIABILITIES:
Demand Deposits 246,477
Other Liabilities 9,534
Total Liabilities 1,400,899
SHAREHOLDERS' EQUITY 105,165
Total Liabilities and
Shareholders' Equity $ 1,506,064
NET INTEREST INCOME $ 43,297
NET YIELD ON AVERAGE EARNING ASSETS 3.08%
NET INTEREST SPREAD 2.64%
(A) Loans are shown net of unearned discount. Interest on loans includes fees
on loans which are not material in amount.
(B) Interest income includes taxable-equivalent adjustments of $2,287 and
$2,216 for the years ended December 31, 2005 and 2004, respectively.
(C) Interest income includes taxable-equivalent adjustments of $1,515 and
$1,687 for the years ended December 31, 2005 and 2004, respectively.
(D) For the purpose of calculating the average yield, the average balance of
securities is presented at historical cost.
(E) Southside Statutory Trust III
Note: As of December 31, 2005 and 2004, loans totaling $1,731 and $2,248,
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, 2005
------------------------------------------------
AVG. AVG.
BALANCE INTEREST YIELD
-------------- -------------- --------------
ASSETS
INTEREST EARNING ASSETS:
Loans (A) (B) $ 678,937 $ 10,884 6.36%
Loans Held for Sale 4,474 52 4.61%
Securities:
Investment Securities (Taxable) (D) 50,059 527 4.18%
Investment Securities
(Tax-Exempt) (C) (D) 55,709 1,005 7.16%
Mortgage-backed Securities (D) 811,805 9,205 4.50%
Marketable Equity Securities 29,324 296 4.00%
Interest Earning Deposits 580 9 6.16%
Federal Funds Sold 481 5 4.12%
Total Interest Earning Assets 1,631,369 21,983 5.35%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks 44,363
Bank Premises and Equipment 33,542
Other Assets 42,972
Less: Allowance for Loan Loss (7,026)
Total Assets $ 1,745,220
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits $ 49,416 $ 143 1.15%
Time Deposits 376,090 3,350 3.53%
Interest Bearing Demand Deposits 327,987 1,727 2.09%
Short-term Interest Bearing
Liabilities 327,861 3,082 3.73%
Long-term Interest Bearing
Liabilities - FHLB Dallas 226,595 2,129 3.73%
Long-term Debt (E) 20,619 367 6.96%
Total Interest Bearing Liabilities 1,328,568 10,798 3.22%
NONINTEREST BEARING LIABILITIES:
Demand Deposits 295,426
Other Liabilities 15,256
Total Liabilities 1,639,250
SHAREHOLDERS' EQUITY 105,970
Total Liabilities and
Shareholders' Equity $ 1,745,220
NET INTEREST INCOME $ 11,185
NET YIELD ON AVERAGE EARNING ASSETS 2.72%
NET INTEREST SPREAD 2.13%
AVERAGE BALANCES AND YIELDS
(dollars in thousands)
(unaudited)
Three Months Ended
December 31, 2004
------------------------------------------------
AVG. AVG.
BALANCE INTEREST YIELD
-------------- -------------- --------------
ASSETS
INTEREST EARNING ASSETS:
Loans (A) (B) $ 617,870 $ 9,493 6.11%
Loans Held for Sale 4,701 46 3.89%
Securities:
Investment Securities (Taxable) (D) 46,998 331 2.80%
Investment Securities
(Tax-Exempt) (C) (D) 74,053 1,327 7.13%
Mortgage-backed Securities (D) 686,953 7,444 4.31%
Marketable Equity Securities 25,202 157 2.48%
Interest Earning Deposits 580 3 2.06%
Federal Funds Sold 1,666 7 1.67%
Total Interest Earning Assets 1,458,023 18,808 5.13%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks 37,824
Bank Premises and Equipment 30,387
Other Assets 42,558
Less: Allowance for Loan Loss (6,814)
Total Assets $ 1,561,978
LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits $ 49,545 $ 82 0.66%
Time Deposits 318,852 2,086 2.60%
Interest Bearing Demand Deposits 285,984 716 1.00%
Short-term Interest Bearing
Liabilities 199,980 1,741 3.46%
Long-term Interest Bearing
Liabilities - FHLB Dallas 305,149 2,616 3.41%
Long-term Debt (E) 20,619 259 4.92%
Total Interest Bearing Liabilities 1,180,129 7,500 2.53%
NONINTEREST BEARING LIABILITIES:
Demand Deposits 263,827
Other Liabilities 9,038
Total Liabilities 1,452,994
SHAREHOLDERS' EQUITY 108,984
Total Liabilities and
Shareholders' Equity $ 1,561,978
NET INTEREST INCOME $ 11,308
NET YIELD ON AVERAGE EARNING ASSETS 3.09%
NET INTEREST SPREAD 2.60%
(A) Loans are shown net of unearned discount. Interest on loans includes fees
on loans which are not material in amount.
(B) Interest income includes taxable-equivalent adjustments of $574 and $591
for the three months ended December 31, 2005 and 2004, respectively.
(C) Interest income includes taxable-equivalent adjustments of $330 and $432
for the three months ended December 31, 2005 and 2004, respectively.
(D) For the purpose of calculating the average yield, the average balance of
securities is presented at historical cost.
(E) Southside Statutory Trust III
Note: As of December 31, 2005 and 2004, loans totaling $1,731 and $2,248,
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.
-0- 02/02/2006
/CONTACT: Susan Hill of Southside Bancshares, Inc., +1-903-531-7220, or
susanh@southside.com /
/Web site: http://www.southside.com
http://www.southside.com/investor /
(SBSI)