SOUTHSIDE BANCSHARES INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - 8-K - SOUTHSIDE BANCSHARES INC	a8kearningsrelease3312017.htm

SOUTHSIDE BANCSHARES, INC.

ANNOUNCES FINANCIAL RESULTS FOR THE

THREE MONTHS ENDED MARCH 31, 2017

NASDAQ Global Select Market Symbol - “SBSI”

Tyler, Texas, (April 28, 2017) Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the three months ended March 31, 2017.

Southside reported record net income of $15.0 million for the three months ended March 31, 2017, an increase of $1.5 million, or 10.9%, compared to $13.5 million for the same period in 2016. Diluted earnings per common share were $0.52 for the three months ended March 31, 2017, an increase of $0.01, or 2.0%, compared to $0.51 for the three months ended March 31, 2016.

The return on average shareholders’ equity for the three months ended March 31, 2017 was 11.57%, compared to 11.96% for the same period in 2016. The return on average assets was 1.08% for the three months ended March 31, 2017, compared to 1.07% for the same period in 2016.

“Outstanding first quarter financial results should provide an excellent foundation on which to build 2017,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “Our first quarter results included record net income, a five basis point increase in the net interest margin on a linked quarter basis, an increase in net interest income on a linked quarter basis, a 51.60% efficiency ratio reflective of our ongoing cost containment initiative and a continued decrease in our ratio of nonperforming assets to total assets to 0.25%.”

“Notwithstanding the level of payoffs during the first quarter, our loan pipeline remains healthy and we anticipate loan growth during the remainder of 2017,” Mr. Gibson concluded.

Loans and Deposits

For the three months ended March 31, 2017, total loans decreased by $17.6 million, or 0.7%, compared to December 31, 2016. The net decrease in our loans was comprised primarily of decreases of $17.8 million of construction loans, $14.4 million of 1-4 family residential loans, $12.3 million of loans to individuals and $1.2 million of municipal loans, which were partially offset by increases in commercial real estate loans of $28.3 million. Loans with oil and gas industry exposure totaled 1.14% of the loan portfolio at March 31, 2017, compared to 1.09% at December 31, 2016.

Nonperforming assets decreased during the three months ended March 31, 2017 by $1.0 million, or 6.8%, to $14.1 million, or 0.25% of total assets, compared to 0.27% of total assets at December 31, 2016.

During the three months ended March 31, 2017, the allowance for loan losses increased modestly by $0.6 million, or 3.2%, to $18.5 million, or 0.73% of total loans, compared to 0.70% of total loans at December 31, 2016.

During the three months ended March 31, 2017, deposits, net of brokered deposits, increased $87.3 million, or 2.5%, compared to December 31, 2016.

Net Interest Income for the Three Months Ended March 31, 2017

Net interest income decreased $1.3 million, or 3.6%, to $35.3 million for the three months ended March 31, 2017, compared to $36.6 million for the same period in 2016. The decrease in net interest income was the result of the increase in interest expense of $3.2 million associated with short- and long-term obligations and deposits, which were partially offset by an increase in interest income of $1.9 million, which was a result of the increase in interest income from the securities portfolio, compared to the same period in 2016. For the three months ended March 31, 2017, our net interest spread decreased to 2.93%, compared to 3.40% for the same period in 2016. Our net interest margin decreased to 3.08% for the three months ended March 31, 2017, compared to 3.51% for the same period in 2016. Both the decrease in net interest margin and spread was due to higher rates paid on interest bearing liabilities along with a decrease in the yield on interest earning assets. The decrease in yield on interest earning assets was partially due to lower purchase accretion in 2017 and the $1.3 million recovery of interest income on the payoff of a long-term nonaccrual loan during the first quarter of 2016. The increase in rates paid on interest bearing liabilities was a direct result of the subordinated debt issuance, and to a lesser extent, the decrease in the purchase accretion on the certificate of deposit premium, both having occurred during the third quarter of 2016. The net interest spread and margin on a linked quarter basis increased from 2.90% and 3.03%, respectively, for the three months ended December 31,2016, to 2.93% and 3.08% respectively, for the three months ended March 31,2017.

Net Income for the Three Months Ended March 31, 2017

Net income increased $1.5 million, or 10.9%, for the three months ended March 31, 2017, to $15.0 million compared to the same period in 2016. The increase was primarily the result of a $1.9 million increase in interest income, a $1.2 million decrease in provision for loan losses and a $3.5 million decrease in noninterest expense, partially offset by a $3.2 million increase in interest expense and a $1.9 million decrease in noninterest income.

Noninterest income decreased $1.9 million, or 16.6%, for the three months ended March 31, 2017 compared to the same period in 2016, due primarily to the decrease in net gain on sale of securities available for sale.

Noninterest expense decreased $3.5 million, or 12.1%, for the three months ended March 31, 2017, compared to the same period in 2016, due primarily to decreases in salaries and employee benefits, occupancy expense, professional fees and other noninterest expense. The decrease in salaries and employee benefits is due to a one-time expense of $1.7 million related to the acceptance of early retirement packages of 16 employees during the three months ended March 31, 2016. Occupancy expense decreased due to lower rent expense. Professional fees decreased due to decreases in consulting fees associated with the process improvement and re-branding efforts initiated in January 2016. Other noninterest expense decreased primarily due to a reduction in the provision expense for losses on unfunded loan commitments, losses on other real estate owned, check card losses and a decrease in core deposits intangible amortization expense.

Conference Call

Southside's management team will host a conference call to discuss its first quarter 2017 financial results on Friday, April 28, 2017 at 9:00 am CDT. The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 95297061 or by identifying “Southside Bancshares, Inc., First Quarter 2017 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 April 28, 2017 through May 10, 2017 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. Whenever we present a non-GAAP financial measure in an SEC filing, we are also required to present the most directly comparable financial measure calculated and presented in accordance with GAAP and reconcile the differences between the non-GAAP financial measure and such comparable GAAP measure. 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.

Efficiency ratio. The efficiency ratio, calculated 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 $5.66 billion in assets as of March 31, 2017, that owns 100% of Southside Bank. Southside Bank currently has 60 banking centers in Texas and operates a network of 70 ATMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at www.southside.com/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, 2016, 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
	2017			2016
	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
ASSETS
Cash and due from banks	$	54,345		$	59,363		$	54,255		$	45,663		$	52,324
Interest earning deposits	185,289			102,251			144,833			18,450			16,130
Federal funds sold	7,360			8,040			—			—			—
Securities available for sale, at estimated fair value	1,444,043			1,479,600			1,622,128			1,416,335			1,332,381
Securities held to maturity, at carrying value	929,793			937,487			775,682			784,925			784,579
Federal Home Loan Bank stock, at cost	61,305			61,084			51,901			47,702			47,550
Loans held for sale	5,303			7,641			5,301			5,883			4,971
Loans	2,538,918			2,556,537			2,483,641			2,384,321			2,443,231
Less: Allowance for loan losses	(18,485		)	(17,911		)	(15,993		)	(14,908		)	(21,799		)
Net loans	2,520,433			2,538,626			2,467,648			2,369,413			2,421,432
Premises & equipment, net	105,327			106,003			106,777			107,242			107,556
Goodwill	91,520			91,520			91,520			91,520			91,520
Other intangible assets, net	4,177			4,608			5,060			5,534			6,029
Bank owned life insurance	98,377			97,775			97,002			96,375			95,718
Other assets	148,977			69,769			42,796			45,886			58,743
Total assets	$	5,656,249		$	5,563,767		$	5,464,903		$	5,034,928		$	5,018,933

LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits	$	753,224		$	704,013		$	747,270		$	679,831		$	698,695
Interest bearing deposits	2,952,072			2,829,063			2,834,117			2,890,418			2,920,673
Total deposits	3,705,296			3,533,076			3,581,387			3,570,249			3,619,368
Short-term obligations	960,730			873,615			720,634			385,717			259,646
Long-term obligations	411,310			601,464			621,640			559,071			622,222
Other liabilities	47,447			37,338			68,682			47,591			60,121
Total liabilities	5,124,783			5,045,493			4,992,343			4,562,628			4,561,357
Shareholders' equity	531,466			518,274			472,560			472,300			457,576
Total liabilities and shareholders' equity	$	5,656,249		$	5,563,767		$	5,464,903		$	5,034,928		$	5,018,933



	At or For the Three Months Ended
	2017			2016
	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
Income Statement:
Total interest income	$	44,888		$	43,680		$	41,132		$	41,089		$	43,012
Total interest expense	9,608			9,039			7,202			6,711			6,396
Net interest income	35,280			34,641			33,930			34,378			36,616
Provision for loan losses	1,098			2,065			1,631			3,768			2,316
Net interest income after provision for loan losses	34,182			32,576			32,299			30,610			34,300
Noninterest income
Deposit services	5,114			5,183			5,335			5,099			5,085
Net gain (loss) on sale of securities available for sale	322			(2,676		)	2,343			728			2,441
Gain on sale of loans	701			461			818			873			643
Trust income	890			900			867			869			855
Bank owned life insurance income	634			649			656			647			674
Brokerage services	547			466			551			535			575
Other	1,465			1,730			1,162			619			1,323
Total noninterest income	9,673			6,713			11,732			9,370			11,596
Noninterest expense
Salaries and employee benefits	15,919			16,194			15,203			14,849			17,732
Occupancy expense	2,863			2,825			4,569			2,993			3,335
Advertising, travel & entertainment	583			648			588			722			685
ATM and debit card expense	927			820			868			736			712
Professional fees	939			982			1,148			1,478			1,338
Software and data processing expense	725			687			736			739			749
Telephone and communications	526			572			407			468			484
FDIC insurance	441			215			643			645			638
FHLB prepayment fees	—			—			—			148			—
Other	2,935			2,934			4,263			3,035			3,734
Total noninterest expense	25,858			25,877			28,425			25,813			29,407
Income before income tax expense	17,997			13,412			15,606			14,167			16,489
Income tax expense	3,008			1,839			2,741			2,772			2,973
Net income	$	14,989		$	11,573		$	12,865		$	11,395		$	13,516

Common share data:
Weighted-average basic shares outstanding	28,569			26,866			26,262			26,230			26,449
Weighted-average diluted shares outstanding	28,777			27,049			26,415			26,349			26,519
Shares outstanding end of period	28,587			28,543			26,278			26,251			26,222
Net income per common share
Basic	$	0.52		$	0.43		$	0.49		$	0.43		$	0.51
Diluted	0.52			0.43			0.49			0.43			0.51
Book value per common share	18.59			18.16			17.98			17.99			17.46
Cash dividend paid per common share	0.25			0.30			0.24			0.24			0.23

Selected Performance Ratios:
Return on average assets	1.08		%	0.83		%	0.98		%	0.90		%	1.07		%
Return on average shareholders’ equity	11.57			9.56			10.78			9.91			11.96
Average yield on interest earning assets	3.82			3.73			3.78			3.93			4.06
Average rate on interest bearing liabilities	0.89			0.83			0.72			0.69			0.66
Net interest spread	2.93			2.90			3.06			3.24			3.40
Net interest margin	3.08			3.03			3.19			3.35			3.51
Average interest earnings assets to average interest bearing liabilities	120.04			119.88			120.40			120.21			119.62
Noninterest expense to average total assets	1.87			1.85			2.17			2.05			2.33
Efficiency ratio ⁽¹⁾	51.60			52.00			53.88			52.85			57.47


(1)	See “Non-GAAP Financial Measures.”



	Southside Bancshares, Inc.
	Selected Financial Data (unaudited)
	(dollars in thousands)

	Three Months Ended
	2017			2016
	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
Nonperforming assets:	$	14,079		$	15,105		$	16,008		$	24,510		$	34,046
Nonaccrual loans ⁽¹⁾	7,261			8,280			8,536			11,767			21,927
Accruing loans past due more than 90 days ⁽¹⁾	1			6			1			6			7
Restructured loans ⁽²⁾	6,424			6,431			7,193			12,477			11,762
Other real estate owned	367			339			237			237			265
Repossessed assets	26			49			41			23			85

Asset Quality Ratios:
Nonaccruing loans to total loans	0.29		%	0.32		%	0.34		%	0.49		%	0.90		%
Allowance for loan losses to nonaccruing loans	254.58			216.32			187.36			126.69			99.42
Allowance for loan losses to nonperforming assets	131.29			118.58			99.91			60.82			64.03
Allowance for loan losses to total loans	0.73			0.70			0.64			0.63			0.89
Nonperforming assets to total assets	0.25			0.27			0.29			0.49			0.68
Net charge-offs to average loans	0.08			0.02			0.09			1.77			0.04

Capital Ratios:
Shareholders’ equity to total assets	9.40			9.32			8.65			9.38			9.12
Average shareholders’ equity to average total assets	9.36			8.66			9.10			9.11			8.94


(1)	Excludes purchased credit impaired ("PCI") loans measured at fair value at acquisition.


(2)	Includes $3.0 million, $3.1 million, $3.2 million, $8.3 million, and $7.4 million in PCI loans restructured as of March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016, respectively.

Loan Portfolio Composition

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



	Three Months Ended
	2017		2016
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
Real Estate Loans:
Construction	$	362,367	$	380,175	$	466,323	$	425,595	$	464,750
1-4 Family Residential	622,881		637,239		644,746		633,400		644,826
Commercial	974,307		945,978		759,795		694,272		657,962
Commercial Loans	176,908		177,265		191,154		197,896		233,857
Municipal Loans	297,417		298,583		293,949		292,909		286,217
Loans to Individuals	105,038		117,297		127,674		140,249		155,619
Total Loans	$	2,538,918	$	2,556,537	$	2,483,641	$	2,384,321	$	2,443,231

RESULTS OF OPERATIONS

The “Average Balances with Average Yields and Rates” tables that follow show average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities (dollars in thousands).



	Average Balances with Average Yields and Rates
						(unaudited)
						Three Months Ended
	March 31, 2017							December 31, 2016
	Avg Balance			Interest		Avg Yield/Rate		Avg Balance			Interest		Avg Yield/Rate
ASSETS
Loans ^{(1) (2)}	$	2,549,230		$	28,241	4.49	%	$	2,512,820		$	27,835	4.41	%
Loans held for sale	7,023			48		2.77	%	4,845			36		2.96	%
Securities:
Investment securities (taxable) ⁽⁴⁾	86,511			377		1.77	%	115,057			485		1.68	%
Investment securities (tax-exempt) ^{(3) (4)}	779,772			9,929		5.16	%	812,771			10,352		5.07	%
Mortgage-backed and related securities ⁽⁴⁾	1,570,510			10,045		2.59	%	1,520,045			9,294		2.43	%
Total securities	2,436,793			20,351		3.39	%	2,447,873			20,131		3.27	%
FHLB stock, at cost, and other investments	66,547			298		1.82	%	62,087			210		1.35	%
Interest earning deposits	162,235			346		0.86	%	134,786			165		0.49	%
Federal funds sold	7,217			14		0.79	%	2,972			5		0.67	%
Total earning assets	5,229,045			49,298		3.82	%	5,165,383			48,382		3.73	%
Cash and due from banks	53,528							52,415
Accrued interest and other assets	350,729							359,217
Less: Allowance for loan losses	(18,130		)					(16,467		)
Total assets	$	5,615,172						$	5,560,548
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings deposits	$	252,744		92		0.15	%	$	250,706		76		0.12	%
Time deposits	927,610			2,227		0.97	%	926,021			2,261		0.97	%
Interest bearing demand deposits	1,707,996			1,962		0.47	%	1,646,535			1,543		0.37	%
Total interest bearing deposits	2,888,350			4,281		0.60	%	2,823,262			3,880		0.55	%
Short-term interest bearing liabilities	1,007,546			2,065		0.83	%	869,398			1,428		0.65	%
Long-term interest bearing liabilities – FHLB Dallas	301,775			1,402		1.88	%	457,754			1,837		1.60	%
Subordinated notes ⁽⁵⁾	98,117			1,393		5.76	%	98,011			1,439		5.84	%
Long-term debt ⁽⁶⁾	60,237			467		3.14	%	60,235			455		3.01	%
Total interest bearing liabilities	4,356,025			9,608		0.89	%	4,308,660			9,039		0.83	%
Noninterest bearing deposits	693,729							717,599
Accrued expenses and other liabilities	39,960							52,714
Total liabilities	5,089,714							5,078,973
Shareholders’ equity	525,458							481,575
Total liabilities and shareholders’ equity	$	5,615,172						$	5,560,548
Net interest income				$	39,690						$	39,343
Net interest margin on average earning assets						3.08	%						3.03	%
Net interest spread						2.93	%						2.90	%


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


(2)	Interest income includes taxable-equivalent adjustments of $1,035 and $1,045 for the three months ended March 31, 2017 and December 31, 2016, respectively. See “Non-GAAP Financial Measures.”


(3)	Interest income includes taxable-equivalent adjustments of $3,375 and $3,657 for the three months ended March 31, 2017 and December 31, 2016, respectively. See “Non-GAAP Financial Measures.”


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


(5)	The unamortized discount and debt issuance costs reflected in the carrying amount of the subordinated notes totaled approximately $1.9 million and $2.0 million for the three months ended March 31, 2017 and December 31, 2016, respectively.

(6)

Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheets for the three months ended March 31, 2017 and December 31, 2016 reflect a decrease in long-term debt of $74,000 and $76,000, respectively.

Note: As of March 31, 2017 and December 31, 2016, loans totaling $7,261 and $8,280, respectively, were on nonaccrual status. 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
	September 30, 2016							June 30, 2016
	Avg Balance			Interest		Avg Yield/Rate		Avg Balance			Interest		Avg Yield/Rate
ASSETS
Loans ^{(1) (2)}	$	2,436,349		$	26,750	4.37	%	$	2,426,733		$	27,275	4.52	%
Loans held for sale	6,718			54		3.20	%	4,984			40		3.23	%
Securities:
Investment securities (taxable) ⁽⁴⁾	61,238			251		1.63	%	22,010			107		1.96	%
Investment securities (tax-exempt) ^{(3) (4)}	690,635			8,911		5.13	%	657,568			8,636		5.28	%
Mortgage-backed and related securities ⁽⁴⁾	1,492,271			9,399		2.51	%	1,450,868			9,366		2.60	%
Total securities	2,244,144			18,561		3.29	%	2,130,446			18,109		3.42	%
FHLB stock, at cost, and other investments	54,085			186		1.37	%	52,952			185		1.41	%
Interest earning deposits	57,598			89		0.61	%	57,493			61		0.43	%
Total earning assets	4,798,894			45,640		3.78	%	4,672,608			45,670		3.93	%
Cash and due from banks	49,418							47,079
Accrued interest and other assets	385,917							377,983
Less: Allowance for loan losses	(14,989		)					(22,377		)
Total assets	$	5,219,240						$	5,075,293
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings deposits	$	248,364		71		0.11	%	$	244,639		68		0.11	%
Time deposits	949,019			2,073		0.87	%	976,600			1,927		0.79	%
Interest bearing demand deposits	1,634,898			1,460		0.36	%	1,727,431			1,520		0.35	%
Total interest bearing deposits	2,832,281			3,604		0.51	%	2,948,670			3,515		0.48	%
Short-term interest bearing liabilities	608,130			1,122		0.73	%	385,858			906		0.94	%
Long-term interest bearing liabilities – FHLB Dallas	472,470			1,857		1.56	%	492,296			1,874		1.53	%
Subordinated notes ⁽⁵⁾	12,823			189		5.86	%	—			—		—
Long-term debt ⁽⁶⁾	60,234			430		2.84	%	60,233			416		2.78	%
Total interest bearing liabilities	3,985,938			7,202		0.72	%	3,887,057			6,711		0.69	%
Noninterest bearing deposits	702,539							682,360
Accrued expenses and other liabilities	55,783							43,360
Total liabilities	4,744,260							4,612,777
Shareholders’ equity	474,980							462,516
Total liabilities and shareholders’ equity	$	5,219,240						$	5,075,293
Net interest income				$	38,438						$	38,959
Net interest margin on average earning assets						3.19	%						3.35	%
Net interest spread						3.06	%						3.24	%


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


(2)	Interest income includes taxable-equivalent adjustments of $1,064 and $1,082 for the three months ended September 30, 2016 and June 30, 2016, respectively. See “Non-GAAP Financial Measures.”


(3)	Interest income includes taxable-equivalent adjustments of $3,444 and $3,499 for the three months ended September 30, 2016 and June 30, 2016, respectively. See “Non-GAAP Financial Measures.”


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


(5)	The unamortized discount and debt issuance costs reflected in the carrying amount of the subordinated notes totaled approximately $220,000

for the three months ended September 30, 2016.


(6)	Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs be presented as a direct deduction from the related debt liability, our average long-term debt for the three months ended September 30, 2016 and June 30, 2016 reflect unamortized debt issuance costs of $77,000 and $78,000, respectively.

Note: As of September 30, 2016 and June 30, 2016, loans totaling $8,536 and $11,767, respectively, were on nonaccrual status. 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
	March 31, 2016
	Avg Balance			Interest		Avg Yield/Rate
ASSETS
Loans ^{(1) (2)}	$	2,434,837		$	28,793	4.76	%
Loans held for sale	3,581			32		3.59	%
Securities:
Investment securities (taxable) ⁽⁴⁾	41,659			214		2.07	%
Investment securities (tax-exempt) ^{(3) (4)}	635,766			8,494		5.37	%
Mortgage-backed and related securities ⁽⁴⁾	1,454,343			9,391		2.60	%
Total securities	2,131,768			18,099		3.41	%
FHLB stock, at cost, and other investments	55,116			217		1.58	%
Interest earning deposits	51,246			70		0.55	%
Total earning assets	4,676,548			47,211		4.06	%
Cash and due from banks	55,732
Accrued interest and other assets	370,022
Less: Allowance for loan losses	(20,088		)
Total assets	$	5,082,214
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings deposits	$	235,492		65		0.11	%
Time deposits	915,316			1,723		0.76	%
Interest bearing demand deposits	1,717,717			1,468		0.34	%
Total interest bearing deposits	2,868,525			3,256		0.46	%
Short-term interest bearing liabilities	413,985			696		0.68	%
Long-term interest bearing liabilities – FHLB Dallas	566,825			2,039		1.45	%
Long-term debt ⁽⁵⁾	60,232			405		2.70	%
Total interest bearing liabilities	3,909,567			6,396		0.66	%
Noninterest bearing deposits	672,865
Accrued expenses and other liabilities	45,390
Total liabilities	4,627,822
Shareholders’ equity	454,392
Total liabilities and shareholders’ equity	$	5,082,214
Net interest income				$	40,815
Net interest margin on average earning assets						3.51	%
Net interest spread						3.40	%


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


(2)	Interest income includes taxable-equivalent adjustment of $1,060 for the three months ended March 31, 2016. See “Non-GAAP Financial Measures.”


(3)	Interest income includes taxable-equivalent adjustment of $3,139 for the three months ended March 31, 2016. See “Non-GAAP Financial Measures.”


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


(5)	Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs be presented as a direct deduction from the related debt liability, our average long-term debt for the three months ended March 31, 2016 reflects unamortized debt issuance costs of $79,000.

Note: As of March 31, 2016, loans totaling $21,927 were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

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