Exhibit 99.1
SOUTHSIDE BANCSHARES, INC. ANNOUNCES AN INCREASE IN FOURTH QUARTER AND ANNUAL
EARNINGS
TYLER, Texas, Jan. 25 /PRNewswire-FirstCall/ -- Southside Bancshares, Inc.
(Nasdaq: SBSI) ("Southside" or the "Company") reports financial results for
the three months and year ended December 31, 2006.
Net income increased 19.8%, or $692,000 for the three months ended December
31, 2006, to $4.2 million from $3.5 million for the same period in 2005. For the
year ended December 31, 2006, net income increased $410,000, or 2.8% to $15.0
million when compared to $14.6 million for the same period in 2005.
B. G. Hartley, Chairman and Chief Executive Officer, stated, "Southside had
an excellent and especially gratifying year during 2006. Our success in
achieving these results was due to the significant progress we made on a number
of previously discussed key initiatives, intended to increase revenues and
contain costs. The success of the initiatives more than offset the additional
operating expenses associated with opening four de novo branches since September
30, 2005, and the increasingly challenging interest rate environment experienced
during 2006."
Earnings per fully diluted share increased 22.2%, or $0.06 and 2.6%, or
$0.03 for the three months and year ended December 31, 2006, to $0.33 and $1.18,
respectively, when compared to $0.27 and $1.15 for the same periods in 2005.
The return on average shareholders' equity for the three months and year
ended December 31, 2006 were 14.11% and 13.48%, respectively, compared to 13.05%
and 13.88%, respectively, for the same periods in 2005. The annual return on
average assets were 0.88% and 0.81%, respectively, for the three months and year
ended December 31, 2006, compared to 0.79% and 0.86%, respectively, for the same
periods in 2005.
Loan and Deposit Growth
The Company continued to experience solid loan growth during the three
months ended December 31, 2006, as loans increased $17.6 million, or 2.4%, to
$759.1 million from $741.5 million at September 30, 2006. During the year ended
December 31, 2006, Southside experienced strong loan growth as loans increased
$78.8 million, or 11.6%, to $759.1 million from $680.4 million at December 31,
2005. Loan growth during 2006 has occurred primarily in commercial loans, 1-4
family residential loans, and commercial real estate loans. The consistent
growth in loans is significant given the increasing competition in the Texas
banking markets we serve. Additionally, the 2006 loan growth was accompanied by
a 31.0% decrease in nonperforming assets.
Commenting on the loan growth, B. G. Hartley said, "Our marketplace in Texas
has continued to expand over the past several years through the opening of
branches in strategic market areas. Positioning for future success, with de novo
branching a key element, remains a central part of our business strategy. In
addition to the loan and deposit growth, another critical portion of Southside's
business strategy is the focus on increasing the number of accounts and
relationships. Continued growth in the number of deposit accounts should provide
Southside significant opportunities to enhance fee income. Our goal is to become
the primary financial provider for these account holders, thereby creating value
from within by utilizing this additional organic growth source.
During the three months ended December 31, 2006, deposits increased $71.6
million, or 5.9%, to $1.28 billion from $1.21 billion at September 30, 2006.
During the year ended December 31, 2006, the Company's deposits increased $171.7
million, or 15.5% to $1.28 billion from $1.11 billion at December 31, 2005.
Approximately $68.0 million of the overall growth in deposits during 2006
resulted from our expanding branch network and continued market penetration.
Price related competition for deposits has intensified. While the Company has
attempted to maintain a disciplined deposit pricing strategy, the current
competitive environment could pressure the net interest margin in the coming
quarters. The remaining $103.7 million of the deposit growth was the result of
the Company issuing callable-brokered certificates of deposits with long-term
maturities where the Company controls numerous call options. Brokered deposits
at December 31, 2006 totaled $123.5 million compared to $19.8 million at
December 31, 2005. We believe these callable-brokered CDs offer the Company
significant long-term flexibility.
Net Interest Income
Net interest income decreased $81,000, or 0.8% to $10.2 million for the
three months ended December 31, 2006, when compared to $10.3 million for the
same period in 2005. The net interest margin and net interest spread were
impacted by the significant increase in short-term interest rates during 2005
and 2006 combined with significantly smaller increases in long-term interest
rates. This resulted in an inverted yield curve, where short-term interest rates
were higher than long-term interest rates. As a result, the Company's net
interest margin and net interest spread decreased to 2.45% and 1.65%,
respectively, for the three months ended December 31, 2006 compared to 2.72% and
2.13%, respectively, for the same period in 2005 and 2.51% and 1.75%,
respectively, for the three months ended September 30, 2006. Should the yield
curve remain inverted or invert more, the Company's net interest margin and
spread could come under additional pressure during 2007.
Net Income for the Three Months
The increase in net income for the three months ended December 31, 2006 was
primarily attributable to an increase in noninterest income and a decrease in
provision for loan losses. Noninterest income, excluding gain on sale of
available for sale securities, increased $721,000, or 13.7%, for the three
months ended December 31, 2006, compared to the same period in 2005. The
increases in noninterest income were primarily results of increases in deposit
services income, trust income, gain on sale of loans, and other income.
Provision for loan losses decreased $391,000, or 75.8%, for the three months
ended December 31, 2006, compared to the same period in 2005.
Partially offsetting the increase in net income, Federal income tax expense
increased $497,000, or 63.8%, for the three months ended December 31, 2006, when
compared to the same period in 2005. Federal income tax expense increased as a
result of the decrease in tax-exempt income as a percentage of pre-tax income
for the three months ended December 31, 2006, when compared to the same period
in 2005.
Net Income for the Year
The increase in net income for the year ended December 31, 2006 was
primarily attributable to an increase in net interest income, noninterest income
and a decrease in provision for loan losses. Net interest income increased
$409,000, or 1.0%, for the year ended December 31, 2006 when compared to the
same period in 2005. Net interest income increased as a result of increases in
the Company's average interest earning assets during the year ended December 31,
2006 when compared to the same period in 2005, which more than offset the
decrease in the Company's net interest spread and margin during the same period.
Noninterest income, excluding gain on sale of available for sale securities,
increased $1.7 million, or 8.2%, for the year ended December 31, 2006, when
compared to the same period in 2005. The increases in noninterest income were
primarily results of increases in deposit services income, trust income, and
other income. Gain on sale of securities available for sale increased $515,000,
or 225.9%, for the year ended December 31, 2006 compared to the same period in
2005. Provision for loan losses decreased $383,000, or 26.2%, for the year ended
December 31, 2006, compared to the same period in 2005.
The following items partially offset the increase in net income for the year
ended December 31, 2006, when compared to the same period in 2005. Noninterest
expense increased $1.8 million, or 4.2%, for the year ended December 31, 2006,
compared to the same period in 2005. Noninterest expense increased primarily as
a result of increases in salary and employee benefits, occupancy expense, and
ATM expense. Salaries and employee benefits increased $796,000, or 2.9%, during
the year ended December 31, 2006, when compared to the same period in 2005, due
to normal salary increases and higher staffing levels associated with the
Company's continued branch expansion and regional lending initiative. Occupancy
expense increased $520,000, or 12.2%, ATM expense increased $307,000, or 47.4%,
and Federal income tax expense increased $807,000, or 24.5%, for the year ended
December 31, 2006, when compared to the same period in 2005. Occupancy expense
increased primarily due to branch expansion and Federal income tax expense
increased as a result of the decrease in tax-exempt income as a percentage of
pre-tax income for the year ended December 31, 2006 when compared to the same
period in 2005.
About Southside Bancshares, Inc.
Southside Bancshares, Inc. is a bank holding company with approximately
$1.89 billion in assets that owns 100% of Southside Bank. Southside Bank
currently has 35 banking centers in East Texas and operates a network of 40
ATMs.
To learn more about Southside Bancshares, Inc., please visit our investor
relations website at http://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, 2005 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,
2006 2005
------------ ------------
(dollars in thousands)
(unaudited)
Selected Financial Condition Data
(at end of period)
Total assets $ 1,890,976 $ 1,783,462
Loans 759,147 680,364
Allowance for loan losses 7,193 7,090
Mortgage-backed and related
securities:
Available for sale, at estimated
fair value 643,164 592,435
Held to maturity, at cost 226,162 229,321
Investment securities:
Available for sale, at estimated
fair value 98,952 121,240
Held to maturity, at cost 1,351 ---
Federal Home Loan Bank stock, at cost 25,614 28,729
Deposits 1,282,475 1,110,813
Long-term obligations 149,998 229,032
Shareholders' equity 110,604 109,290
Nonperforming assets 2,110 3,057
Nonaccrual loans 1,333 1,731
Loans 90 days past due 128 945
Restructured loans 220 226
Other real estate owned 351 145
Repossessed assets 78 10
Asset Quality Ratios:
Nonaccruing loans to total loans 0.18% 0.25%
Allowance for loan losses to
nonaccruing loans 539.61 409.59
Allowance for loan losses to
nonperforming assets 340.90 231.93
Allowance for loan losses to total
loans 0.95 1.04
Nonperforming assets to total assets 0.11 0.17
Net charge-offs to average loans 0.14 0.20
Capital Ratios:
Shareholders' equity to total assets 5.85 6.13
Average shareholders' equity to
average total assets 5.99 6.20
LOAN PORTFOLIO COMPOSITION
The following table sets forth loan totals by category for the periods
presented:
At At
December 31, December 31,
2006 2005
------------ ------------
(in thousands)
(unaudited)
Real Estate Loans:
Construction $ 39,588 $ 35,765
1-4 Family Residential 227,354 199,812
Other 181,047 162,147
Commercial Loans 118,962 91,456
Municipal Loans 106,155 109,003
Loans to Individuals 86,041 82,181
Total Loans $ 759,147 $ 680,364
At or for the At or for the
Three Months Ended Years Ended
December 31, December 31,
---------------------------- ----------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
(dollars in thousands) (dollars in thousands)
(unaudited) (unaudited)
Selected Operating Data:
Total interest income $ 25,357 $ 21,079 $ 96,952 $ 79,681
Total interest expense 15,157 10,798 55,284 38,422
Net interest income 10,200 10,281 41,668 41,259
Provision for loan losses 125 516 1,080 1,463
Net interest income after provision
for loan losses 10,075 9,765 40,588 39,796
Noninterest income
Deposit services 4,030 3,745 15,482 14,594
Gain on sale of securities available
for sale 265 260 743 228
Gain on sale of loans 454 374 1,817 1,807
Trust income 481 389 1,711 1,422
Bank owned life insurance income 298 278 1,067 951
Other 702 458 2,661 2,246
Total noninterest income 6,230 5,504 23,481 21,248
Noninterest expense
Salaries and employee benefits 6,601 6,697 28,275 27,479
Occupancy expense 1,179 1,078 4,777 4,257
Equipment expense 232 223 899 847
Advertising, travel & entertainment 452 510 1,742 1,967
ATM expense 256 181 955 648
Director fees 144 218 587 677
Supplies 133 173 637 628
Professional fees 380 485 1,386 1,339
Postage 158 149 618 572
Telephone & communications 194 157 723 593
Other 1,121 1,132 4,368 4,152
Total noninterest expense 10,850 11,003 44,967 43,159
Income before Federal income tax
expense 5,455 4,266 19,102 17,885
Provision for Federal income tax
expense 1,276 779 4,100 3,293
Net income $ 4,179 $ 3,487 $ 15,002 $ 14,592
Common Share Data:
Weighted-average basic shares
outstanding 12,322 12,123 12,260 12,046
Weighted-average diluted shares
outstanding 12,778 12,637 12,732 12,638
Net income per common share
Basic $ 0.34 $ 0.29 $ 1.22 $ 1.21
Diluted 0.33 0.27 1.18 1.15
Book value per common share --- --- 8.95 8.98
Cash dividend declared per common
share 0.14 0.13 0.47 0.46
Selected Performance Ratios:
Return on average assets 0.88% 0.79% 0.81% 0.86%
Return on average shareholders' equity 14.11 13.05 13.48 13.88
Average yield on interest earning
assets 5.84 5.35 5.74 5.27
Average yield on interest bearing
liabilities 4.19 3.22 3.89 2.96
Net interest spread 1.65 2.13 1.85 2.31
Net interest margin 2.45 2.72 2.57 2.85
Average interest earning assets to
average interest
bearing liabilities 123.44 122.79 122.98 122.17
Noninterest expense to average total
assets 2.28 2.50 2.42 2.54
Efficiency ratio 63.73 66.92 66.27 65.27
AVERAGE BALANCES AND YIELDS
(dollars in thousands)
(unaudited)
Years Ended
December 31, 2006 December 31, 2005
---------------------------------------- ------------------------------------
AVG. AVG. AVG. AVG.
BALANCE INTEREST YIELD BALANCE INTEREST YIELD
------------ ------------ -------- ------------ ------------ ------
ASSETS
INTEREST EARNING
ASSETS:
Loans (1) (2) $ 722,252 $ 48,397 6.70% $ 657,938 $ 40,927 6.22%
Loans Held for Sale 4,651 246 5.29% 4,469 212 4.74%
Securities:
Investment Securities
(Taxable) (4) 54,171 2,498 4.61% 51,431 1,978 3.85%
Investment Securities
(Tax-Exempt) (3) (4) 43,931 3,134 7.13% 66,023 4,696 7.11%
Mortgage-backed
and Related
Securities (4) 891,015 44,401 4.98% 773,973 34,584 4.47%
Federal Home Loan
Bank Stock & Other
Investments, at cost 27,969 1,409 5.04% 28,099 1,032 3.67%
Interest Earning
Deposits 692 35 5.06% 644 24 3.73%
Federal Funds Sold 1,148 57 4.97% 995 30 3.02%
Total Interest
Earning Assets 1,745,829 100,177 5.74% 1,583,572 83,483 5.27%
NONINTEREST EARNING
ASSETS:
Cash and Due From
Banks 42,906 42,280
Bank Premises and
Equipment 33,298 31,504
Other Assets 42,716 45,625
Less: Allowance for
Loan Losses (7,231) (6,945)
Total Assets $ 1,857,518 $ 1,696,036
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST BEARING
LIABILITIES:
Savings Deposits $ 50,764 645 1.27% $ 50,502 524 1.04%
Time Deposits 467,174 20,516 4.39% 354,360 11,221 3.17%
Interest Bearing
Demand Deposits 349,375 9,529 2.73% 313,815 5,476 1.74%
Short-term Interest
Bearing Liabilities 376,696 16,534 4.39% 282,283 9,892 3.50%
Long-term Interest
Bearing Liabilities
- FHLB 154,983 6,379 4.12% 274,673 10,004 3.64%
Long-term Debt (5) 20,619 1,681 8.04% 20,619 1,305 6.24%
Total Interest Bearing
Liabilities 1,419,611 55,284 3.89% 1,296,252 38,422 2.96%
NONINTEREST BEARING
LIABILITIES:
Demand Deposits 314,241 280,036
Other Liabilities 12,403 14,649
Total Liabilities 1,746,255 1,590,937
SHAREHOLDERS' EQUITY 111,263 105,099
Total Liabilities
and Shareholders'
Equity $ 1,857,518 $ 1,696,036
NET INTEREST INCOME $ 44,893 $ 45,061
NET YIELD ON AVERAGE
EARNING ASSETS 2.57% 2.85%
NET INTEREST SPREAD 1.85% 2.31%
(1) Interest on loans includes fees on loans which are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $2,230 and
$2,287 for the years ended December 31, 2006 and 2005, respectively.
(3) Interest income includes taxable-equivalent adjustments of $995 and $1,515
for the years ended December 31, 2006 and 2005, respectively.
(4) For the purpose of calculating the average yield, the average balance of
securities is presented at historical cost.
(5) Southside Statutory Trust III
Note: As of December 31, 2006 and 2005, loans totaling $1,333 and $1,731,
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, 2006 December 31, 2005
---------------------------------------- ------------------------------------
AVG. AVG. AVG. AVG.
BALANCE INTEREST YIELD BALANCE INTEREST YIELD
------------ ------------ -------- ------------ ------------ ------
ASSETS
INTEREST EARNING
ASSETS:
Loans (1) (2) $ 747,439 $ 12,833 6.81% $ 678,937 $ 10,884 6.36%
Loans Held for Sale 4,259 55 5.12% 4,474 52 4.61%
Securities:
Investment Securities
(Taxable) (4) 49,146 592 4.78% 50,059 527 4.18%
Investment Securities
(Tax-Exempt) (3) (4) 41,372 745 7.14% 55,709 1,005 7.16%
Mortgage-backed
and Related
Securities (4) 902,131 11,494 5.05% 811,805 9,205 4.50%
Federal Home Loan Bank
Stock & Other
Investments, at cost 26,490 363 5.44% 29,324 296 4.00%
Interest Earning
Deposits 660 11 6.61% 580 9 6.16%
Federal Funds Sold 1,473 20 5.39% 481 5 4.12%
Total Interest Earning
Assets 1,772,970 26,113 5.84% 1,631,369 21,983 5.35%
NONINTEREST EARNING
ASSETS:
Cash and Due From
Banks 40,185 44,363
Bank Premises and
Equipment 32,938 33,542
Other Assets 46,897 42,972
Less: Allowance for
Loan Losses (7,287) (7,026)
Total Assets $ 1,885,703 $ 1,745,220
LIABILITIES AND
SHAREHOLDERS' EQUITY
INTEREST BEARING
LIABILITIES:
Savings Deposits $ 50,639 166 1.30% $ 49,416 143 1.15%
Time Deposits 516,526 6,176 4.74% 376,090 3,350 3.53%
Interest Bearing
Demand Deposits 345,325 2,564 2.95% 327,987 1,727 2.09%
Short-term Interest
Bearing Liabilities 364,624 4,298 4.68% 327,861 3,082 3.73%
Long-term Interest
Bearing Liabilities
- FHLB 138,563 1,515 4.34% 226,595 2,129 3.73%
Long-term Debt (5) 20,619 438 8.31% 20,619 367 6.96%
Total Interest Bearing
Liabilities 1,436,296 15,157 4.19% 1,328,568 10,798 3.22%
NONINTEREST BEARING
LIABILITIES:
Demand Deposits 317,794 295,426
Other Liabilities 14,112 15,256
Total Liabilities 1,768,202 1,639,250
SHAREHOLDERS' EQUITY 117,501 105,970
Total Liabilities
and Shareholders'
Equity $ 1,885,703 $ 1,745,220
NET INTEREST INCOME $ 10,956 $ 11,185
NET YIELD ON AVERAGE
EARNING ASSETS 2.45% 2.72%
NET INTEREST SPREAD 1.65% 2.13%
(1) Interest on loans includes fees on loans which are not material in amount.
(2) Interest income includes taxable-equivalent adjustments of $520 and $574
for the three months ended December 31, 2006 and 2005, respectively.
(3) Interest income includes taxable-equivalent adjustments of $236 and $330
for the three months ended December 31, 2006 and 2005, respectively.
(4) For the purpose of calculating the average yield, the average balance of
securities is presented at historical cost.
(5) Southside Statutory Trust III
Note: As of December 31, 2006 and 2005, loans totaling $1,333 and $1,731,
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- 01/25/2007
/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)