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| 8-K - 8-K - SOUTHSIDE BANCSHARES INC | a8kearningsrelease06302016.htm |
EXHIBIT 99.1
SOUTHSIDE BANCSHARES, INC.
ANNOUNCES FINANCIAL RESULTS FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2016
NASDAQ Global Select Market Symbol - “SBSI”
Tyler, Texas, (July 29, 2016) Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the three and six months ended June 30, 2016.
Southside reported net income of $11.4 million for the three months ended June 30, 2016, an increase of $231,000, or 2.1%, compared to $11.2 million for the same period in 2015. Net income for the six months ended June 30, 2016 increased $4.4 million, or 21.3%, to $24.9 million when compared to $20.5 million for the same period in 2015.
Diluted earnings per common share were $0.43 and $0.42 for the three months ended June 30, 2016 and 2015, respectively, an increase of $0.01, or 2.4%. For the six months ended June 30, 2016, diluted earnings per common share increased $0.17, or 22.1%, to $0.94 when compared to $0.77 for the same period in 2015.
The return on average shareholders’ equity for the six months ended June 30, 2016 was 10.93%, compared to 9.55% for the same period in 2015. The return on average assets was 0.99% for the six months ended June 30, 2016, compared to 0.86% for the same period in 2015.
“The second quarter results reflect an increase in net income for the quarter, a significant reduction in our nonperforming assets and continued success in our cost containment efforts,” stated Sam Dawson, Chief Executive Officer of Southside Bancshares, Inc. “While loan payoffs outpaced loans funded during the second quarter, we believe the second half of the year will produce solid loan growth based on the increase in our pipeline and loans currently expected to close in the very near future. Negotiated foreclosures began on two loans comprising approximately 62% of our nonperforming loans at March 31, 2016 subsequent to the end of the second quarter and partial charge-offs were recorded to reflect the estimated net selling price of the remaining assets at June 30, 2016. We currently anticipate cash sales in excess of $8 million of nonperforming assets related to these two loans prior to the end of the third quarter. Our nonperforming asset ratio to total assets also decreased to 0.49%.”
“The decrease in the net interest margin during the second quarter was reflective of a decrease in average loans on a linked quarter basis and a $1.3 million recovery of interest income on the payoff of a long-time nonaccrual loan during the first quarter of 2016. During the quarter we prepaid $63 million of higher cost FHLB advances that resulted in a prepayment fee of $148,000.”
“We continued to execute on our business plan of quality loan growth, cost containment, operational efficiencies and revenue generating opportunities. We incurred professional fees in connection with this effort of approximately $525,000 during the quarter. The anticipated results are operational efficiencies through changes in our back office processes, revised branch models commensurate with today's customer delivery preferences and enhanced noninterest income programs, which should continue to be implemented throughout the remainder of 2016. Noninterest expense decreased during the second quarter and our efficiency ratio decreased to 52.85%.”
Loans and Deposits
For the six months ended June 30, 2016, total loans decreased by $47.4 million, or 2.0%, when compared to December 31, 2015. The net decrease in our loans was comprised of decreases of $44.6 million of commercial loans, $32.0 million of loans to individuals, $22.0 million of 1-4 family residential loans, and $12.7 million of construction loans which were partially offset by increases of $59.1 million of commercial real estate loans and $4.8 million of municipal loans. Loans with oil and gas industry exposure totaled 1.19% of the loan portfolio at June 30, 2016.
Nonperforming assets decreased during the first six months of 2016 by $8.0 million, or 24.5%, to $24.5 million, or 0.49% of total assets, when compared to 0.63% at December 31, 2015.
During the six months ended June 30, 2016, the allowance for loan losses decreased $4.8 million, or 24.5%, to $14.9 million, or 0.63% of total loans, when compared to 0.81% at December 31, 2015, as a result of partial charge-offs of two large impaired commercial borrowing relationships.
During the six months ended June 30, 2016, deposits, net of brokered deposits, increased $118.8 million, or 3.5%, compared to December 31, 2015. During this six-month period, public fund deposits increased $93.5 million.
Net Interest Income for the Three Months Ended June 30, 2016
Net interest income increased $1.5 million, or 4.5%, to $34.4 million for the three months ended June 30, 2016, when compared to $32.9 million for the same period in 2015. The increase in net interest income was the result of the increase in interest income of $3.3 million which was primarily a result of the increase in the loan portfolio, compared to the same period in 2015. The increase in interest income was partially offset by an increase in interest expense of $1.9 million. For the three months ended June 30, 2016, our net interest spread decreased to 3.24%, compared to 3.30% for the same period in 2015, due to higher rates paid on interest-bearing liabilities, which more than offset the increase in the yield on interest-earning assets. Our net interest margin decreased to 3.35% for the three months ended June 30, 2016, compared to 3.39% for the same period in 2015. The net interest spread and margin on a linked quarter basis decreased from 3.40% and 3.51%, respectively, primarily due to a $1.3 million recovery of interest income on the payoff of a long-time nonaccrual loan during the first quarter.
Net Interest Income for the Six Months Ended June 30, 2016
Net interest income increased $4.3 million, or 6.4%, to $71.0 million for the six months ended June 30, 2016, when compared to $66.7 million for the same period in 2015. The increase in net interest income was due to the increase in interest income of $7.7 million which was primarily a result of the increase in the loan portfolio, compared to the same period in 2015, and a $1.3 million recovery of interest income on the payoff of a long-time nonaccrual loan during the first quarter of 2016. The increase in interest income was partially offset by an increase in interest expense of $3.4 million. For the six months ended June 30, 2016, our net interest spread decreased to 3.32%, compared to 3.36% for the same period in 2015, due to higher rates paid on interest-bearing liabilities, which more than offset the increase in the yield on interest-earning assets. Our net interest margin decreased slightly to 3.43% for the six months ended June 30, 2016, compared to 3.44% for the same period in 2015.
Net Income for the Three Months Ended June 30, 2016
Net income increased $231,000, or 2.1%, for the three months ended June 30, 2016, to $11.4 million when compared to the same period in 2015. The increase was primarily the result of an increase in interest income of $3.3 million and a decrease of $2.6 million in noninterest expense, which were partially offset by a $3.5 million increase to provision for loan losses, a $1.9 million increase to interest expense, and a $0.8 million increase to income tax expense.
Noninterest expense decreased $2.6 million, or 9.2%, for the three months ended June 30, 2016, compared to the same period in 2015, primarily due to decreases in salaries and employee benefits expense, software and data processing expense, and other noninterest expense which were partially offset by an increase in professional fees.
Net Income for the Six Months Ended June 30, 2016
Net income increased $4.4 million, or 21.3%, for the six months ended June 30, 2016, to $24.9 million when compared to the same period in 2015. The increase was primarily the result of an increase in interest income of $7.7 million and a decrease of $2.7 million in noninterest expense combined with a $1.2 million increase to noninterest income which were partially offset by a $3.4 million increase to interest expense, a $2.0 million increase to provision for loan losses and a $1.9 million increase in income tax expense.
Noninterest expense decreased $2.7 million, or 4.6%, for the six months ended June 30, 2016, compared to the same period in 2015, primarily due to decreases in salaries and employee benefits expense, software and data processing expense, and other noninterest expense which were partially offset by an increase in professional fees.
Conference Call
Southside's management team will host a conference call to discuss its second quarter 2016 financial results on Friday, July 29, 2016 at 9:00 am CDT. The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 47285374 or by identifying “Southside Bancshares, Inc., Second Quarter 2016 Earnings Call.” To listen to the call via web-cast, register at www.southside.com/about/investor-relations.
For those unable to listen to the conference call live, a recording of the conference call will be available from approximately 3:00 pm CDT July 29, 2016 through August 10, 2016 by accessing the company website, www.southside.com/about/investor-relations.
Non-GAAP Financial Measures
Our accounting and reporting policies conform to generally accepted accounting principles (GAAP) in the United States and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of our performance. These include the following fully-taxable equivalent measures: tax-equivalent net interest income,
tax-equivalent net interest margin, tax-equivalent net interest spread, and tax-equivalent efficiency ratio, which include the effects of taxable-equivalent adjustments using a federal income tax rate of 35% to increase tax-exempt interest income to a tax-equivalent basis. Tax-equivalent adjustments are reported in Notes 2 and 3 to the Average Balances with Average Yields and Rates tables under Results of Operations below.
Tax-equivalent net interest income, net interest margin and net interest spread. Net interest income on a tax-equivalent basis is a non-GAAP measure that adjusts for the tax-favored status of net interest income from loans and investments. We believe this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. The most directly comparable financial measure calculated in accordance with GAAP is our net interest income. Net interest margin on a tax-equivalent basis is net interest income on a tax-equivalent basis divided by average interest-earning assets on a tax-equivalent basis. The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin. Net interest spread on a tax-equivalent basis is the difference in the average yield on average interest-earning assets on a tax equivalent basis and the average rate paid on average interest-bearing liabilities. The most directly comparable financial measure calculated in accordance with GAAP is our net interest spread.
Tax-equivalent efficiency ratio. The efficiency ratio on a tax-equivalent basis is a non-GAAP measure that provides a measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. The ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense, excluding amortization of intangibles and certain non-recurring expense by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains (losses) on sales of investment securities and certain non-recurring impairments.
These non-GAAP financial measures should not be considered alternatives to GAAP-basis financial statements, and other bank holding companies may define or calculate these non-GAAP measures or similar measures differently.
About Southside Bancshares, Inc.
Southside Bancshares, Inc. is a bank holding company with approximately $5.0 billion in assets that owns 100% of Southside Bank. Southside Bank currently has 60 banking centers in Texas and operates a network of over 70 ATMs.
To learn more about Southside Bancshares, Inc., please visit our investor relations website at www.southside.com/about/investor-relations. 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 safe harbor 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 and estimates about the Company's 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 and revenue growth, the Company's ability to sell nonperforming assets, expense reductions, the benefits of the Share Repurchase Plan, planned operational efficiencies, earnings and certain market risk disclosures, including the impact of interest rates and other economic factors, 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, 2015 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.
SOUTHSIDE BANCSHARES, INC. | |||||||||||||||||||
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) | |||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||
As of | |||||||||||||||||||
2016 | 2015 | ||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||
ASSETS | |||||||||||||||||||
Cash and due from banks | $ | 45,663 | $ | 52,324 | $ | 54,288 | $ | 52,311 | $ | 50,406 | |||||||||
Interest earning deposits | 18,450 | 16,130 | 26,687 | 19,583 | 26,623 | ||||||||||||||
Securities available for sale, at estimated fair value | 1,416,335 | 1,332,381 | 1,460,492 | 1,374,995 | 1,465,821 | ||||||||||||||
Securities held to maturity, at carrying value | 784,925 | 784,579 | 784,296 | 771,914 | 743,881 | ||||||||||||||
Federal Home Loan Bank stock, at cost | 47,702 | 47,550 | 51,047 | 43,446 | 37,769 | ||||||||||||||
Loans held for sale | 5,883 | 4,971 | 3,811 | 4,883 | 7,431 | ||||||||||||||
Loans | 2,384,321 | 2,443,231 | 2,431,753 | 2,239,146 | 2,179,863 | ||||||||||||||
Less: Allowance for loan losses | (14,908 | ) | (21,799 | ) | (19,736 | ) | (18,402 | ) | (16,822 | ) | |||||||||
Net loans | 2,369,413 | 2,421,432 | 2,412,017 | 2,220,744 | 2,163,041 | ||||||||||||||
Premises & equipment, net | 107,242 | 107,556 | 107,929 | 109,087 | 110,493 | ||||||||||||||
Goodwill | 91,520 | 91,520 | 91,520 | 91,520 | 90,571 | ||||||||||||||
Other intangible assets, net | 5,534 | 6,029 | 6,548 | 7,090 | 7,654 | ||||||||||||||
Bank owned life insurance | 96,375 | 95,718 | 95,080 | 94,303 | 93,673 | ||||||||||||||
Other assets | 45,963 | 58,822 | 68,361 | 47,599 | 58,655 | ||||||||||||||
Total assets | $ | 5,035,005 | $ | 5,019,012 | $ | 5,162,076 | $ | 4,837,475 | $ | 4,856,018 | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||
Noninterest bearing deposits | $ | 679,831 | $ | 698,695 | $ | 672,470 | $ | 681,618 | $ | 715,966 | |||||||||
Interest bearing deposits | 2,890,418 | 2,920,673 | 2,782,937 | 2,646,259 | 2,752,717 | ||||||||||||||
Total deposits | 3,570,249 | 3,619,368 | 3,455,407 | 3,327,877 | 3,468,683 | ||||||||||||||
Short-term obligations | 385,717 | 259,646 | 647,836 | 445,008 | 284,783 | ||||||||||||||
Long-term obligations | 559,148 | 622,301 | 562,592 | 558,867 | 632,565 | ||||||||||||||
Other liabilities | 47,591 | 60,121 | 52,179 | 58,575 | 38,313 | ||||||||||||||
Total liabilities | 4,562,705 | 4,561,436 | 4,718,014 | 4,390,327 | 4,424,344 | ||||||||||||||
Shareholders' equity | 472,300 | 457,576 | 444,062 | 447,148 | 431,674 | ||||||||||||||
Total liabilities and shareholders' equity | $ | 5,035,005 | $ | 5,019,012 | $ | 5,162,076 | $ | 4,837,475 | $ | 4,856,018 | |||||||||
At or For the Three Months Ended | |||||||||||||||||||
2016 | 2015 | ||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||
Income Statement: | |||||||||||||||||||
Total interest income | $ | 41,089 | $ | 43,012 | $ | 39,964 | $ | 38,211 | $ | 37,750 | |||||||||
Total interest expense | 6,710 | 6,395 | 5,267 | 4,926 | 4,845 | ||||||||||||||
Net interest income | 34,379 | 36,617 | 34,697 | 33,285 | 32,905 | ||||||||||||||
Provision for loan losses | 3,768 | 2,316 | 1,951 | 2,276 | 268 | ||||||||||||||
Net interest income after provision for loan losses | 30,611 | 34,301 | 32,746 | 31,009 | 32,637 | ||||||||||||||
Noninterest income | |||||||||||||||||||
Deposit services | 5,099 | 5,085 | 4,990 | 5,213 | 4,920 | ||||||||||||||
Net gain on sale of securities available for sale | 728 | 2,441 | 204 | 875 | 105 | ||||||||||||||
Gain on sale of loans | 873 | 643 | 578 | 305 | 822 | ||||||||||||||
Trust income | 869 | 855 | 871 | 835 | 820 | ||||||||||||||
Bank owned life insurance income | 647 | 674 | 640 | 661 | 653 | ||||||||||||||
Brokerage services | 535 | 575 | 555 | 540 | 472 | ||||||||||||||
Other | 619 | 1,323 | 977 | 932 | 1,139 | ||||||||||||||
Total noninterest income | 9,370 | 11,596 | 8,815 | 9,361 | 8,931 | ||||||||||||||
Noninterest expense | |||||||||||||||||||
Salaries and employee benefits | 14,849 | 17,732 | 16,420 | 15,733 | 16,869 | ||||||||||||||
Occupancy expense | 2,993 | 3,335 | 3,263 | 3,316 | 3,105 | ||||||||||||||
Advertising, travel & entertainment | 722 | 685 | 726 | 642 | 683 | ||||||||||||||
ATM and debit card expense | 736 | 712 | 1,086 | 617 | 750 | ||||||||||||||
Professional fees | 1,478 | 1,338 | 1,517 | 825 | 793 | ||||||||||||||
Software and data processing expense | 739 | 749 | 771 | 819 | 1,237 | ||||||||||||||
Telephone and communications | 468 | 484 | 372 | 534 | 603 | ||||||||||||||
FDIC insurance | 645 | 638 | 619 | 624 | 629 | ||||||||||||||
FHLB prepayment fees | 148 | — | — | — | — | ||||||||||||||
Other | 3,036 | 3,735 | 3,657 | 3,527 | 3,768 | ||||||||||||||
Total noninterest expense | 25,814 | 29,408 | 28,431 | 26,637 | 28,437 | ||||||||||||||
Income before income tax expense | 14,167 | 16,489 | 13,130 | 13,733 | 13,131 | ||||||||||||||
Income tax expense | 2,772 | 2,973 | 1,438 | 1,971 | 1,967 | ||||||||||||||
Net income | $ | 11,395 | $ | 13,516 | $ | 11,692 | $ | 11,762 | $ | 11,164 | |||||||||
Common share data: | |||||||||||||||||||
Weighted-average basic shares outstanding | 26,230 | 26,449 | 26,653 | 26,632 | 26,608 | ||||||||||||||
Weighted-average diluted shares outstanding | 26,349 | 26,519 | 26,745 | 26,721 | 26,701 | ||||||||||||||
Shares outstanding end of period | 26,251 | 26,222 | 26,670 | 26,645 | 26,623 | ||||||||||||||
Net income per common share | |||||||||||||||||||
Basic | $ | 0.43 | $ | 0.51 | $ | 0.44 | $ | 0.44 | $ | 0.42 | |||||||||
Diluted | 0.43 | 0.51 | 0.44 | 0.44 | 0.42 | ||||||||||||||
Book value per common share | 17.99 | 17.46 | 16.66 | 16.78 | 16.22 | ||||||||||||||
Cash dividend paid per common share | 0.24 | 0.23 | 0.31 | 0.23 | 0.23 | ||||||||||||||
Selected Performance Ratios: | ||||||||||||||
Return on average assets | 0.90 | % | 1.07 | % | 0.92 | % | 0.96 | % | 0.93 | % | ||||
Return on average shareholders’ equity | 9.91 | 11.96 | 10.35 | 10.65 | 10.30 | |||||||||
Average yield on interest earning assets | 3.93 | 4.06 | 3.80 | 3.79 | 3.83 | |||||||||
Average rate on interest bearing liabilities | 0.69 | 0.66 | 0.54 | 0.53 | 0.53 | |||||||||
Net interest spread | 3.24 | 3.40 | 3.26 | 3.26 | 3.30 | |||||||||
Net interest margin | 3.35 | 3.51 | 3.35 | 3.35 | 3.39 | |||||||||
Average interest earnings assets to average interest bearing liabilities | 120.21 | 119.62 | 120.29 | 121.61 | 120.22 | |||||||||
Noninterest expense to average total assets | 2.05 | 2.33 | 2.25 | 2.18 | 2.38 | |||||||||
Efficiency ratio | 52.85 | 57.47 | 58.45 | 56.59 | 60.43 | |||||||||
At or For the Six Months Ended | |||||||
June 30, | |||||||
2016 | 2015 | ||||||
Income Statement: | |||||||
Total interest income | $ | 84,101 | $ | 76,357 | |||
Total interest expense | 13,105 | 9,661 | |||||
Net interest income | 70,996 | 66,696 | |||||
Provision for loan losses | 6,084 | 4,116 | |||||
Net interest income after provision for loan losses | 64,912 | 62,580 | |||||
Noninterest income | |||||||
Deposit services | 10,184 | 9,909 | |||||
Net gain on sale of securities available for sale | 3,169 | 2,581 | |||||
Gain on sale of loans | 1,516 | 1,199 | |||||
Trust income | 1,724 | 1,713 | |||||
Bank owned life insurance income | 1,321 | 1,322 | |||||
Brokerage services | 1,110 | 1,111 | |||||
Other | 1,942 | 1,884 | |||||
Total noninterest income | 20,966 | 19,719 | |||||
Noninterest expense | |||||||
Salaries and employee benefits | 32,581 | 35,068 | |||||
Occupancy expense | 6,328 | 6,304 | |||||
Advertising, travel & entertainment | 1,407 | 1,340 | |||||
ATM and debit card expense | 1,448 | 1,429 | |||||
Professional fees | 2,816 | 1,535 | |||||
Software and data processing expense | 1,488 | 2,268 | |||||
Telephone and communications | 952 | 1,072 | |||||
FDIC insurance | 1,283 | 1,267 | |||||
FHLB prepayment fees | 148 | — | |||||
Other | 6,771 | 7,603 | |||||
Total noninterest expense | 55,222 | 57,886 | |||||
Income before income tax expense | 30,656 | 24,413 | |||||
Income tax expense | 5,745 | 3,870 | |||||
Net income | $ | 24,911 | $ | 20,543 | |||
Common share data: | |||||||
Weighted-average basic shares outstanding | 26,340 | 26,600 | |||||
Weighted-average diluted shares outstanding | 26,434 | 26,689 | |||||
Net income per common share | |||||||
Basic | $ | 0.94 | $ | 0.77 | |||
Diluted | 0.94 | 0.77 | |||||
Book value per common share | 17.99 | 16.22 | |||||
Cash dividend paid per common share | 0.47 | 0.46 | |||||
Selected Performance Ratios: | |||||
Return on average assets | 0.99 | % | 0.86 | % | |
Return on average shareholders’ equity | 10.93 | 9.55 | |||
Average yield on interest earning assets | 4.00 | 3.89 | |||
Average yield on interest bearing liabilities | 0.68 | 0.53 | |||
Net interest spread | 3.32 | 3.36 | |||
Net interest margin | 3.43 | 3.44 | |||
Average interest earnings assets to average interest bearing liabilities | 119.91 | 119.28 | |||
Noninterest expense to average total assets | 2.19 | 2.43 | |||
Efficiency ratio | 55.22 | 61.14 | |||
Southside Bancshares, Inc. | |||||||||||||||||||
Selected Financial Data (Unaudited) | |||||||||||||||||||
(In thousands) | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
2016 | 2015 | ||||||||||||||||||
June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||
Nonperforming assets | $ | 24,510 | $ | 34,046 | $ | 32,480 | $ | 33,621 | $ | 27,794 | |||||||||
Nonaccrual loans (1) | 11,767 | 21,927 | 20,526 | 20,988 | 21,223 | ||||||||||||||
Accruing loans past due more than 90 days (1) | 6 | 7 | 3 | — | 30 | ||||||||||||||
Restructured loans (2) | 12,477 | 11,762 | 11,143 | 11,772 | 5,667 | ||||||||||||||
Other real estate owned | 237 | 265 | 744 | 793 | 787 | ||||||||||||||
Repossessed assets | 23 | 85 | 64 | 68 | 87 | ||||||||||||||
Asset Quality Ratios: | |||||||||||||||||||
Nonaccruing loans to total loans | 0.49 | % | 0.90 | % | 0.84 | % | 0.94 | % | 0.97 | % | |||||||||
Allowance for loan losses to nonaccruing loans | 126.69 | 99.42 | 96.15 | 87.68 | 79.26 | ||||||||||||||
Allowance for loan losses to nonperforming assets | 60.82 | 64.03 | 60.76 | 54.73 | 60.52 | ||||||||||||||
Allowance for loan losses to total loans | 0.63 | 0.89 | 0.81 | 0.82 | 0.77 | ||||||||||||||
Nonperforming assets to total assets | 0.49 | 0.68 | 0.63 | 0.70 | 0.57 | ||||||||||||||
Net charge-offs to average loans | 1.77 | 0.04 | 0.11 | 0.13 | 0.07 | ||||||||||||||
Capital Ratios: | |||||||||||||||||||
Shareholders’ equity to total assets | 9.38 | 9.12 | 8.60 | 9.24 | 8.89 | ||||||||||||||
Average shareholders’ equity to average total assets | 9.11 | 8.94 | 8.92 | 9.03 | 9.07 | ||||||||||||||
(1) | Excludes purchased credit impaired ("PCI") loans measured at fair value at acquisition. |
(2) | Includes $8.3 million, $7.4 million, $7.5 million, and $6.8 million in PCI loans restructured as of June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, respectively. |
Loan Portfolio Composition
The following table sets forth loan totals by category for the periods presented:
Real Estate Loans: | |||||||||||||||||||
Construction | $ | 425,595 | $ | 464,750 | $ | 438,247 | $ | 342,282 | $ | 295,633 | |||||||||
1-4 Family Residential | 633,400 | 644,826 | 655,410 | 678,431 | 683,944 | ||||||||||||||
Commercial | 694,272 | 657,962 | 635,210 | 537,161 | 500,906 | ||||||||||||||
Commercial Loans | 197,896 | 233,857 | 242,527 | 228,272 | 228,789 | ||||||||||||||
Municipal Loans | 292,909 | 286,217 | 288,115 | 262,384 | 256,492 | ||||||||||||||
Loans to Individuals | 140,249 | 155,619 | 172,244 | 190,616 | 214,099 | ||||||||||||||
Total Loans | $ | 2,384,321 | $ | 2,443,231 | $ | 2,431,753 | $ | 2,239,146 | $ | 2,179,863 | |||||||||
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 rate of the interest bearing liabilities.
AVERAGE BALANCES WITH AVERAGE YIELDS AND RATES | |||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
(unaudited) | |||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||
June 30, 2016 | March 31, 2016 | ||||||||||||||||||||
AVG | AVG | ||||||||||||||||||||
AVG | YIELD/ | AVG | YIELD/ | ||||||||||||||||||
BALANCE | INTEREST | RATE | BALANCE | INTEREST | RATE | ||||||||||||||||
ASSETS | |||||||||||||||||||||
INTEREST EARNING ASSETS: | |||||||||||||||||||||
Loans (1)(2) | $ | 2,426,733 | $ | 27,275 | 4.52 | % | $ | 2,434,837 | $ | 28,793 | 4.76 | % | |||||||||
Loans Held For Sale | 4,984 | 40 | 3.23 | % | 3,581 | 32 | 3.59 | % | |||||||||||||
Securities: | |||||||||||||||||||||
Investment Securities (Taxable) (4) | 22,010 | 107 | 1.96 | % | 41,659 | 214 | 2.07 | % | |||||||||||||
Investment Securities (Tax-Exempt)(3)(4) | 657,568 | 8,636 | 5.28 | % | 635,766 | 8,494 | 5.37 | % | |||||||||||||
Mortgage-backed Securities (4) | 1,450,868 | 9,366 | 2.60 | % | 1,454,343 | 9,391 | 2.60 | % | |||||||||||||
Total Securities | 2,130,446 | 18,109 | 3.42 | % | 2,131,768 | 18,099 | 3.41 | % | |||||||||||||
FHLB stock and other investments, at cost | 52,952 | 185 | 1.41 | % | 55,116 | 217 | 1.58 | % | |||||||||||||
Interest Earning Deposits | 57,493 | 61 | 0.43 | % | 51,246 | 70 | 0.55 | % | |||||||||||||
Total Interest Earning Assets | 4,672,608 | 45,670 | 3.93 | % | 4,676,548 | 47,211 | 4.06 | % | |||||||||||||
NONINTEREST EARNING ASSETS: | |||||||||||||||||||||
Cash and Due From Banks | 47,079 | 55,732 | |||||||||||||||||||
Bank Premises and Equipment | 107,842 | 107,941 | |||||||||||||||||||
Other Assets | 270,219 | 262,160 | |||||||||||||||||||
Less: Allowance for Loan Losses | (22,377 | ) | (20,088 | ) | |||||||||||||||||
Total Assets | $ | 5,075,371 | $ | 5,082,293 | |||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||
INTEREST BEARING LIABILITIES: | |||||||||||||||||||||
Savings Deposits | $ | 244,639 | 68 | 0.11 | % | $ | 235,492 | 65 | 0.11 | % | |||||||||||
Time Deposits | 976,600 | 1,927 | 0.79 | % | 915,316 | 1,723 | 0.76 | % | |||||||||||||
Interest Bearing Demand Deposits | 1,727,431 | 1,520 | 0.35 | % | 1,717,717 | 1,468 | 0.34 | % | |||||||||||||
Total Interest Bearing Deposits | 2,948,670 | 3,515 | 0.48 | % | 2,868,525 | 3,256 | 0.46 | % | |||||||||||||
Short-term Interest Bearing Liabilities | 385,858 | 906 | 0.94 | % | 413,985 | 696 | 0.68 | % | |||||||||||||
Long-term Interest Bearing Liabilities – FHLB Dallas | 492,296 | 1,874 | 1.53 | % | 566,825 | 2,039 | 1.45 | % | |||||||||||||
Long-term Debt (5) | 60,311 | 415 | 2.77 | % | 60,311 | 404 | 2.69 | % | |||||||||||||
Total Interest Bearing Liabilities | 3,887,135 | 6,710 | 0.69 | % | 3,909,646 | 6,395 | 0.66 | % | |||||||||||||
NONINTEREST BEARING LIABILITIES: | |||||||||||||||||||||
Demand Deposits | 682,360 | 672,865 | |||||||||||||||||||
Other Liabilities | 43,360 | 45,390 | |||||||||||||||||||
Total Liabilities | 4,612,855 | 4,627,901 | |||||||||||||||||||
SHAREHOLDERS’ EQUITY | 462,516 | 454,392 | |||||||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 5,075,371 | $ | 5,082,293 | |||||||||||||||||
NET INTEREST INCOME | $ | 38,960 | $ | 40,816 | |||||||||||||||||
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS | 3.35 | % | 3.51 | % | |||||||||||||||||
NET INTEREST SPREAD | 3.24 | % | 3.40 | % | |||||||||||||||||
(1) | Interest on loans includes net fees on loans that are not material in amount. |
(2) | Interest income includes taxable-equivalent adjustments of $1,082 and $1,060 for the three months ended June 30, 2016 and March 31, 2016, respectively. |
(3) | Interest income includes taxable-equivalent adjustments of $3,499 and $3,139 for the three months ended June 30, 2016 and March 31, 2016, 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 June 30, 2016 and March 31, 2016, loans on nonaccrual status totaled $11,767 and $21,927, 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.
Three Months Ended | |||||||||||||||||||||
December 31, 2015 | September 30, 2015 | ||||||||||||||||||||
AVG | AVG | ||||||||||||||||||||
AVG | YIELD/ | AVG | YIELD/ | ||||||||||||||||||
BALANCE | INTEREST | RATE | BALANCE | INTEREST | RATE | ||||||||||||||||
ASSETS | |||||||||||||||||||||
INTEREST EARNING ASSETS: | |||||||||||||||||||||
Loans (1)(2) | $ | 2,318,162 | $ | 25,865 | 4.43 | % | $ | 2,200,241 | $ | 24,779 | 4.47 | % | |||||||||
Loans Held For Sale | 2,740 | 30 | 4.34 | % | 5,327 | 52 | 3.87 | % | |||||||||||||
Securities: | |||||||||||||||||||||
Investment Securities (Taxable) (4) | 81,344 | 416 | 2.03 | % | 86,105 | 475 | 2.19 | % | |||||||||||||
Investment Securities (Tax-Exempt)(3)(4) | 637,993 | 8,645 | 5.38 | % | 638,767 | 8,750 | 5.43 | % | |||||||||||||
Mortgage-backed Securities (4) | 1,493,020 | 9,215 | 2.45 | % | 1,441,129 | 8,318 | 2.29 | % | |||||||||||||
Total Securities | 2,212,357 | 18,276 | 3.28 | % | 2,166,001 | 17,543 | 3.21 | % | |||||||||||||
FHLB stock and other investments, at cost | 53,643 | 75 | 0.55 | % | 45,963 | 65 | 0.56 | % | |||||||||||||
Interest Earning Deposits | 34,147 | 23 | 0.27 | % | 26,216 | 15 | 0.23 | % | |||||||||||||
Total Interest Earning Assets | 4,621,049 | 44,269 | 3.80 | % | 4,443,748 | 42,454 | 3.79 | % | |||||||||||||
NONINTEREST EARNING ASSETS: | |||||||||||||||||||||
Cash and Due From Banks | 53,267 | 49,285 | |||||||||||||||||||
Bank Premises and Equipment | 108,812 | 110,028 | |||||||||||||||||||
Other Assets | 258,917 | 263,038 | |||||||||||||||||||
Less: Allowance for Loan Losses | (18,720 | ) | (17,021 | ) | |||||||||||||||||
Total Assets | $ | 5,023,325 | $ | 4,849,078 | |||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||
INTEREST BEARING LIABILITIES: | |||||||||||||||||||||
Savings Deposits | $ | 232,561 | 61 | 0.10 | % | $ | 232,903 | 60 | 0.10 | % | |||||||||||
Time Deposits | 833,141 | 1,477 | 0.70 | % | 833,962 | 1,360 | 0.65 | % | |||||||||||||
Interest Bearing Demand Deposits | 1,594,109 | 1,117 | 0.28 | % | 1,600,454 | 1,065 | 0.26 | % | |||||||||||||
Total Interest Bearing Deposits | 2,659,811 | 2,655 | 0.40 | % | 2,667,319 | 2,485 | 0.37 | % | |||||||||||||
Short-term Interest Bearing Liabilities | 630,998 | 600 | 0.38 | % | 398,905 | 354 | 0.35 | % | |||||||||||||
Long-term Interest Bearing Liabilities – FHLB Dallas | 490,396 | 1,638 | 1.33 | % | 527,591 | 1,720 | 1.29 | % | |||||||||||||
Long-term Debt (5) | 60,311 | 374 | 2.46 | % | 60,311 | 367 | 2.41 | % | |||||||||||||
Total Interest Bearing Liabilities | 3,841,516 | 5,267 | 0.54 | % | 3,654,126 | 4,926 | 0.53 | % | |||||||||||||
NONINTEREST BEARING LIABILITIES: | |||||||||||||||||||||
Demand Deposits | 686,574 | 715,326 | |||||||||||||||||||
Other Liabilities | 47,155 | 41,606 | |||||||||||||||||||
Total Liabilities | 4,575,245 | 4,411,058 | |||||||||||||||||||
SHAREHOLDERS’ EQUITY | 448,080 | 438,020 | |||||||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 5,023,325 | $ | 4,849,078 | |||||||||||||||||
NET INTEREST INCOME | $ | 39,002 | $ | 37,528 | |||||||||||||||||
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS | 3.35 | % | 3.35 | % | |||||||||||||||||
NET INTEREST SPREAD | 3.26 | % | 3.26 | % | |||||||||||||||||
(1) | Interest on loans includes net fees on loans that are not material in amount. |
(2) | Interest income includes taxable-equivalent adjustments of $1,068 and $1,044 for the three months ended December 31, 2015 and September 30, 2015, respectively. |
(3) | Interest income includes taxable-equivalent adjustments of $3,237 and $3,199 for the three months ended December 31, 2015 and September 30, 2015, 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 December 31, 2015 and September 30, 2015, loans on nonaccrual status totaled $20,526 and $20,988, 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.
Three Months Ended | ||||||||||
June 30, 2015 | ||||||||||
AVG | ||||||||||
AVG | YIELD/ | |||||||||
BALANCE | INTEREST | RATE | ||||||||
ASSETS | ||||||||||
INTEREST EARNING ASSETS: | ||||||||||
Loans (1)(2) | $ | 2,188,886 | $ | 24,889 | 4.56 | % | ||||
Loans Held For Sale | 3,675 | 45 | 4.91 | % | ||||||
Securities: | ||||||||||
Investment Securities (Taxable) (4) | 86,561 | 459 | 2.13 | % | ||||||
Investment Securities (Tax-Exempt)(3)(4) | 627,405 | 8,752 | 5.60 | % | ||||||
Mortgage-backed Securities (4) | 1,400,389 | 7,666 | 2.20 | % | ||||||
Total Securities | 2,114,355 | 16,877 | 3.20 | % | ||||||
FHLB stock and other investments, at cost | 42,741 | 65 | 0.61 | % | ||||||
Interest Earning Deposits | 39,609 | 29 | 0.29 | % | ||||||
Total Interest Earning Assets | 4,389,266 | 41,905 | 3.83 | % | ||||||
NONINTEREST EARNING ASSETS: | ||||||||||
Cash and Due From Banks | 49,760 | |||||||||
Bank Premises and Equipment | 111,384 | |||||||||
Other Assets | 259,319 | |||||||||
Less: Allowance for Loan Losses | (17,059 | ) | ||||||||
Total Assets | $ | 4,792,670 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
INTEREST BEARING LIABILITIES: | ||||||||||
Savings Deposits | $ | 234,097 | 59 | 0.10 | % | |||||
Time Deposits | 853,410 | 1,313 | 0.62 | % | ||||||
Interest Bearing Demand Deposits | 1,701,559 | 1,121 | 0.26 | % | ||||||
Total Interest Bearing Deposits | 2,789,066 | 2,493 | 0.36 | % | ||||||
Short-term Interest Bearing Liabilities | 232,471 | 154 | 0.27 | % | ||||||
Long-term Interest Bearing Liabilities – FHLB Dallas | 569,302 | 1,837 | 1.29 | % | ||||||
Long-term Debt (5) | 60,311 | 361 | 2.40 | % | ||||||
Total Interest Bearing Liabilities | 3,651,150 | 4,845 | 0.53 | % | ||||||
NONINTEREST BEARING LIABILITIES: | ||||||||||
Demand Deposits | 669,068 | |||||||||
Other Liabilities | 37,607 | |||||||||
Total Liabilities | 4,357,825 | |||||||||
SHAREHOLDERS’ EQUITY | 434,845 | |||||||||
Total Liabilities and Shareholders’ Equity | $ | 4,792,670 | ||||||||
NET INTEREST INCOME | $ | 37,060 | ||||||||
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS | 3.39 | % | ||||||||
NET INTEREST SPREAD | 3.30 | % | ||||||||
(1) | Interest on loans includes net fees on loans that are not material in amount. |
(2) | Interest income includes taxable-equivalent adjustment of $1,047 for the three months ended June 30, 2015. |
(3) | Interest income includes taxable-equivalent adjustment of $3,108 for the three months ended June 30, 2015. |
(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 June 30, 2015, loans on nonaccrual status totaled $21,223. Our 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 WITH AVERAGE YIELDS AND RATES | |||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||
(unaudited) | |||||||||||||||||||||
Six Months Ended | |||||||||||||||||||||
June 30, 2016 | June 30, 2015 | ||||||||||||||||||||
AVG | AVG | ||||||||||||||||||||
AVG | YIELD/ | AVG | YIELD/ | ||||||||||||||||||
BALANCE | INTEREST | RATE | BALANCE | INTEREST | RATE | ||||||||||||||||
ASSETS | |||||||||||||||||||||
INTEREST EARNING ASSETS: | |||||||||||||||||||||
Loans (1) (2) | $ | 2,430,783 | $ | 56,068 | 4.64 | % | $ | 2,189,023 | $ | 49,827 | 4.59 | % | |||||||||
Loans Held For Sale | 4,283 | 72 | 3.38 | % | 2,835 | 73 | 5.19 | % | |||||||||||||
Securities: | |||||||||||||||||||||
Investment Securities (Taxable)(4) | 31,835 | 321 | 2.03 | % | 68,102 | 696 | 2.06 | % | |||||||||||||
Investment Securities (Tax-Exempt)(3)(4) | 646,667 | 17,130 | 5.33 | % | 636,269 | 17,586 | 5.57 | % | |||||||||||||
Mortgage-backed Securities (4) | 1,452,605 | 18,757 | 2.60 | % | 1,396,519 | 16,128 | 2.33 | % | |||||||||||||
Total Securities | 2,131,107 | 36,208 | 3.42 | % | 2,100,890 | 34,410 | 3.30 | % | |||||||||||||
FHLB stock and other investments, at cost | 54,034 | 402 | 1.50 | % | 43,311 | 158 | 0.74 | % | |||||||||||||
Interest Earning Deposits | 54,255 | 131 | 0.49 | % | 49,040 | 63 | 0.26 | % | |||||||||||||
Total Interest Earning Assets | 4,674,462 | 92,881 | 4.00 | % | 4,385,099 | 84,531 | 3.89 | % | |||||||||||||
NONINTEREST EARNING ASSETS: | |||||||||||||||||||||
Cash and Due From Banks | 51,406 | 53,542 | |||||||||||||||||||
Bank Premises and Equipment | 107,891 | 112,006 | |||||||||||||||||||
Other Assets | 266,186 | 270,806 | |||||||||||||||||||
Less: Allowance for Loan Losses | (21,233 | ) | (15,351 | ) | |||||||||||||||||
Total Assets | $ | 5,078,712 | $ | 4,806,102 | |||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||
INTEREST BEARING LIABILITIES: | |||||||||||||||||||||
Savings Deposits | $ | 240,066 | 133 | 0.11 | % | $ | 232,033 | 112 | 0.10 | % | |||||||||||
Time Deposits | 945,958 | 3,650 | 0.78 | % | 858,416 | 2,675 | 0.63 | % | |||||||||||||
Interest Bearing Demand Deposits | 1,722,573 | 2,988 | 0.35 | % | 1,700,399 | 2,235 | 0.27 | % | |||||||||||||
Total Interest Bearing Deposits | 2,908,597 | 6,771 | 0.47 | % | 2,790,848 | 5,022 | 0.36 | % | |||||||||||||
Short-term Interest Bearing Liabilities | 399,922 | 1,602 | 0.81 | % | 252,276 | 296 | 0.24 | % | |||||||||||||
Long-term Interest Bearing Liabilities – FHLB Dallas | 529,561 | 3,913 | 1.49 | % | 572,731 | 3,629 | 1.28 | % | |||||||||||||
Long-term Debt (5) | 60,311 | 819 | 2.73 | % | 60,311 | 714 | 2.39 | % | |||||||||||||
Total Interest Bearing Liabilities | 3,898,391 | 13,105 | 0.68 | % | 3,676,166 | 9,661 | 0.53 | % | |||||||||||||
NONINTEREST BEARING LIABILITIES: | |||||||||||||||||||||
Demand Deposits | 677,612 | 657,386 | |||||||||||||||||||
Other Liabilities | 44,247 | 38,827 | |||||||||||||||||||
Total Liabilities | 4,620,250 | 4,372,379 | |||||||||||||||||||
SHAREHOLDERS’ EQUITY | 458,462 | 433,723 | |||||||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 5,078,712 | $ | 4,806,102 | |||||||||||||||||
NET INTEREST INCOME | $ | 79,776 | $ | 74,870 | |||||||||||||||||
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS | 3.43 | % | 3.44 | % | |||||||||||||||||
NET INTEREST SPREAD | 3.32 | % | 3.36 | % | |||||||||||||||||
(1) | Interest on loans includes net fees on loans that are not material in amount. |
(2) | Interest income includes taxable-equivalent adjustments of $2,142 and $2,097 for the six months ended June 30, 2016 and 2015, respectively. |
(3) | Interest income includes taxable-equivalent adjustments of $6,638 and $6,077 for the six months ended June 30, 2016 and 2015, 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 June 30, 2016 and 2015, loans on nonaccrual status totaled $11,767 and $21,223, 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.