PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=6&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20%28UNAUDITED%29) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, and cash flows, with detailed notes [Consolidated Balance Sheets](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2025, total assets were $8.34 billion, a decrease from $8.52 billion at December 31, 2024, primarily driven by reductions in securities and loans Consolidated Balance Sheets (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$8,339,966** | **$8,517,448** | | Net loans | $4,557,512 | $4,616,713 | | Total securities (AFS & HTM) | $2,730,030 | $2,813,128 | | Total cash and cash equivalents | $390,095 | $426,161 | | **Total Liabilities** | **$7,532,766** | **$7,705,506** | | Total deposits | $6,631,964 | $6,654,248 | | FHLB borrowings | $511,526 | $731,909 | | **Total Shareholders' Equity** | **$807,200** | **$811,942** | [Consolidated Statements of Income](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Net income for Q2 2025 was $21.8 million, a decrease from $24.7 million in Q2 2024, primarily due to lower net interest income and higher expenses Consolidated Statements of Income Highlights (in thousands, except per share data) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | Net Interest Income | $54,266 | $53,608 | $108,118 | $106,956 | | Provision for (reversal of) credit losses | $622 | $(485) | $1,380 | $(427) | | Total Noninterest Income | $12,145 | $11,557 | $22,368 | $21,281 | | Total Noninterest Expense | $39,257 | $35,765 | $76,346 | $72,646 | | **Net Income** | **$21,813** | **$24,673** | **$43,320** | **$46,184** | | **Earnings per share – diluted** | **$0.72** | **$0.81** | **$1.42** | **$1.52** | [Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20%28LOSS%29) Comprehensive income for Q2 2025 was $12.1 million, down from $24.6 million in Q2 2024, driven by a net loss in other comprehensive income Consolidated Statements of Comprehensive Income (Loss) (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | Net Income | $21,813 | $24,673 | $43,320 | $46,184 | | Other comprehensive income (loss), net of tax | $(9,671) | $(95) | $(16,587) | $2,508 | | **Comprehensive income (loss)** | **$12,142** | **$24,578** | **$26,733** | **$48,692** | [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS%27%20EQUITY) Shareholders' equity decreased to $807.2 million at June 30, 2025, primarily due to dividends, treasury stock purchases, and other comprehensive loss - Key drivers for the change in shareholders' equity during the first six months of 2025 include net income of **$43.3 million**, offset by other comprehensive loss of **$16.6 million**, cash dividends of **$21.8 million**, and common stock repurchases of **$11.9 million**[15](index=15&type=chunk)[152](index=152&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended June 30, 2025, net cash provided by operating activities was $29.9 million, while net cash used in financing activities was $251.6 million Six Months Ended June 30, 2025 Cash Flow Summary (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $29,885 | $74,777 | | Net cash provided by (used in) investing activities | $185,602 | $(146,431) | | Net cash provided by (used in) financing activities | $(251,553) | $(36,860) | | **Net increase (decrease) in cash and cash equivalents** | **$(36,066)** | **$(108,514)** | [Notes to Consolidated Financial Statements](index=13&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations of accounting policies and financial data, including securities, loans, borrowings, and derivatives - The company's securities portfolio (AFS and HTM) totaled **$2.73 billion** at June 30, 2025, with unrealized losses of **$68.7 million** in the AFS portfolio and **$192.1 million** in the HTM portfolio, primarily due to changes in interest rates[30](index=30&type=chunk) - Total loans decreased to **$4.60 billion** at June 30, 2025. Nonperforming assets increased significantly to **$32.9 million** (**0.39% of total assets**) from **$3.6 million** at year-end 2024, mainly due to a **$27.5 million** commercial real estate loan being restructured[46](index=46&type=chunk)[59](index=59&type=chunk)[149](index=149&type=chunk) - The company utilizes interest rate swaps to manage interest rate risk. As of June 30, 2025, it had **$810.0 million** in cash flow hedges and **$631.1 million** in fair value hedges by notional amount[82](index=82&type=chunk)[84](index=84&type=chunk)[90](index=90&type=chunk) - Off-balance-sheet commitments, primarily commitments to extend credit, totaled **$821.0 million** at June 30, 2025, a decrease from **$881.7 million** at year-end 2024[121](index=121&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=48&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial condition and results, highlighting decreased net income due to higher expenses and credit loss provisions [Overview](index=52&type=section&id=MD%26A_Overview) Net income for Q2 2025 was $21.8 million, down 11.6% from Q2 2024, primarily due to higher noninterest expense and credit loss provisions Key Performance Indicators | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (millions) | $21.8 | $24.7 | $43.3 | $46.2 | | Diluted EPS | $0.72 | $0.81 | $1.42 | $1.52 | - Total assets decreased by **$177.5 million** (**2.1%**) to **$8.34 billion** at June 30, 2025, from December 31, 2024[147](index=147&type=chunk) - Nonperforming assets increased significantly to **$32.9 million** (**0.39% of total assets**) at June 30, 2025, up from **$3.6 million** at year-end, primarily due to a single **$27.5 million** commercial real estate loan restructure[149](index=149&type=chunk) [Balance Sheet Strategy](index=54&type=section&id=MD%26A_Balance_Sheet_Strategy) The company actively manages its balance sheet, maintaining significant liquidity and utilizing wholesale funding and derivatives - The company has substantial available liquidity, including **$1.87 billion** from FHLB and **$383.6 million** from the FRDW as of June 30, 2025[155](index=155&type=chunk) - Cash flow hedges with a notional value of **$810 million** were in place to hedge brokered deposits and FHLB advances, mitigating interest rate risk[156](index=156&type=chunk) - During H1 2025, the company sold **$119.6 million** of MBS, resulting in a net realized loss of **$554,000**, and purchased **$171.3 million** in new MBS as part of its portfolio management[163](index=163&type=chunk) [Results of Operations](index=56&type=section&id=MD%26A_Results_of_Operations) Net interest income for Q2 2025 increased 1.2% YoY to $54.3 million, with the net interest margin expanding to 2.95% Net Interest Margin (FTE) Comparison | Period | Net Interest Margin (FTE) | Net Interest Spread (FTE) | | :--- | :--- | :--- | | Q2 2025 | 2.95% | 2.27% | | Q2 2024 | 2.87% | 2.13% | | H1 2025 | 2.91% | 2.23% | | H1 2024 | 2.87% | 2.15% | - Noninterest expense for Q2 2025 increased by **$3.5 million** (**9.8%**) YoY, primarily due to a **$1.2 million** one-time charge for a branch demolition and increased professional fees[192](index=192&type=chunk)[201](index=201&type=chunk) - The effective tax rate for Q2 2025 was **17.8%**, slightly higher than **17.4%** in Q2 2024, mainly due to increased state income tax expense[202](index=202&type=chunk) [Loan Portfolio and Asset Quality](index=64&type=section&id=MD%26A_Loan%20Portfolio) Total loans decreased 1.3% to $4.60 billion at June 30, 2025, while nonperforming assets surged to $32.9 million due to a commercial real estate loan restructure Loan Composition (in thousands) | Loan Type | June 30, 2025 | Dec 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Construction | $470,380 | $537,827 | (12.5)% | | Commercial Real Estate | $2,606,072 | $2,579,735 | 1.0% | | Commercial loans | $380,612 | $363,167 | 4.8% | | Municipal loans | $363,746 | $390,968 | (7.0)% | | **Total loans** | **$4,601,933** | **$4,661,597** | **(1.3)%** | Asset Quality Ratios | Ratio | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Nonperforming assets to total assets | 0.39% | 0.04% | | Allowance for loan losses to total loans | 0.97% | 0.96% | - The allowance for loan losses decreased slightly to **$44.4 million** at June 30, 2025, from **$44.9 million** at December 31, 2024[216](index=216&type=chunk) [Capital Resources and Liquidity](index=67&type=section&id=MD%26A_Capital_and_Liquidity) The company maintains a strong and well-capitalized position with robust liquidity and significant borrowing capacity Regulatory Capital Ratios (Consolidated) | Ratio | June 30, 2025 | For Capital Adequacy | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 13.36% | 4.50% | | Tier 1 Capital | 14.41% | 6.00% | | Total Capital | 16.91% | 8.00% | | Tier 1 Leverage | 10.03% | 4.00% | - Shareholders' equity decreased by **$4.7 million** in H1 2025, as net income of **$43.3 million** was offset by **$21.8 million** in dividends, **$16.6 million** in OCI loss, and **$11.9 million** in share repurchases[219](index=219&type=chunk) - The company maintains significant liquidity sources, including approximately **$1.87 billion** in additional funding capacity from the FHLB and **$383.6 million** from the FRDW as of June 30, 2025[229](index=229&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate risk, managed through net income simulation and MVPE modeling, indicating an asset-sensitive position Anticipated Impact on Net Interest Income Over Next 12 Months | Rate Scenario | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | +200 bps | +5.34% | +7.13% | | +100 bps | +2.69% | +3.78% | | -50 bps | (0.65)% | (3.00)% | | -100 bps | (1.06)% | (4.85)% | | -200 bps | (1.51)% | (6.95)% | - The company's interest rate risk profile shows it is asset-sensitive, meaning net interest income is expected to rise in a rising rate environment and fall in a declining rate environment. The sensitivity to rate changes has decreased compared to the prior year[238](index=238&type=chunk)[239](index=239&type=chunk) [Controls and Procedures](index=71&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the reporting period[242](index=242&type=chunk) - No material changes were made to internal control over financial reporting during the quarter ended June 30, 2025[243](index=243&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=71&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various litigation in the normal course of business, with no expected material effect on its financial position - Management does not expect ongoing litigation to have a material effect on the company's financial condition[244](index=244&type=chunk) [Risk Factors](index=71&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes in risk factors were reported since the 2024 Form 10-K[245](index=245&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During Q2 2025, the company repurchased 424,435 shares of common stock at an average price of $28.13 per share under its repurchase plan Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | 196,419 | $27.08 | | May 2025 | — | — | | June 2025 | 228,016 | $29.04 | | **Total** | **424,435** | **$28.13** | - The stock repurchase plan was approved on July 20, 2023, authorizing the repurchase of up to **1.0 million shares**[246](index=246&type=chunk) [Other Information](index=72&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No directors or executive officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q2 2025 - No directors or executive officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q2 2025[250](index=250&type=chunk) [Exhibits](index=73&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and interactive data files

Financial Data and Key Metrics Changes - The company reported net income of $21,800,000 for Q2 2025, resulting in diluted earnings per share of $0.72, an increase of 1.4% compared to the previous quarter [5][14] - The annualized return on average assets was 1.07%, and the annualized return on average tangible common equity was 14.38% [5] - The net interest margin increased by nine basis points to 2.95%, while net interest income rose by $414,000 to $54,300,000 [5][20] - Total loans increased by $34,700,000 or 0.8% linked quarter, primarily driven by commercial real estate loans [14][18] Business Line Data and Key Metrics Changes - New loan production for Q2 totaled approximately $293,000,000, significantly higher than the $142,000,000 produced in Q1 [8] - Commercial real estate loans were the largest source of payoffs, totaling approximately $150,000,000 in Q2 [9] - The average rate of loans funded during Q2 was approximately 6.9% [15] - Nonperforming assets remained low at 0.39% of total assets, unchanged from the previous quarter [12][15] Market Data and Key Metrics Changes - The Texas markets served by the company continue to report job and population growth, reflecting a positive economic outlook [6][7] - The loan pipeline increased to $2,100,000,000, up from $1,900,000,000 at the end of Q1, indicating strong future loan production potential [10][30] Company Strategy and Development Direction - The company is optimistic about potential hiring and client acquisition opportunities due to recent M&A activity in Texas [24] - The company is focusing on expanding its Commercial and Industrial (C&I) initiative, which now represents approximately 30% of the total pipeline, up from 25% [10][11] - The company is facing increased competition from debt funds, which are pricing deals aggressively, impacting the competitive landscape [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the economic conditions and growth prospects, despite uncertainties related to tariff negotiations [6][7] - The company anticipates moderated payoffs and new loan production consistent with the first half of 2025, slightly lowering loan growth guidance to 3% to 4% year over year [10][14] - Management believes that net loan growth will positively impact the net interest margin for the latter half of the year [36] Other Important Information - The company repurchased 424,435 shares of common stock at an average price of $28.13 during Q2 [19] - The allowance for credit losses decreased slightly to $48,300,000, and the allowance for loan losses as a percentage of total loans decreased to 0.97% [15][18] - Noninterest income, excluding net loss on the sales of AFS securities, increased by $1,400,000 or 12.7% linked quarter [20] Q&A Session Summary Question: Potential dislocation opportunities from recent deals in Texas - Management acknowledged the potential to acquire talent from recent acquisitions and expressed interest in participating in future strategic opportunities [24] Question: Update on multifamily credit restructuring - The loan continues to perform well with positive leasing activity, and management anticipates it will move out of the bank by year-end [26] Question: Confirmation on lowered loan growth outlook - Management confirmed the outlook was adjusted due to softer growth but noted a solid pipeline and increased loan production momentum [27][30] Question: Insights on net interest margin direction - Management indicated that the margin has some tailwinds regardless of loan growth, with expectations for continued improvement [36] Question: Deposit competition and pricing outlook - Management reported not seeing significant pressure on deposit pricing and anticipates some relief in the second half of the year [40]

Core Points - Southside Bancshares, Inc. will celebrate the 65th anniversary of Southside Bank by ringing the opening bell at the New York Stock Exchange on July 28, 2025 [1][2] - CEO Lee R. Gibson emphasized the company's commitment to supporting Texas communities since its inception in 1960, highlighting the milestone as a reflection of the team's hard work and dedication [2] - As of June 30, 2025, Southside Bancshares, Inc. has approximately $8.34 billion in assets and operates 53 branches and 71 ATMs/ITMs across East Texas and major metropolitan areas [3] Company Overview - Southside Bancshares, Inc. is headquartered in Tyler, Texas, and wholly owns Southside Bank, which has been serving customers since 1960 [3] - The bank offers a comprehensive range of financial products and services, including consumer and commercial loans, mortgages, deposit accounts, treasury management, and wealth management [3] - The company maintains a community-focused approach, aiming to help individuals and businesses thrive in their respective communities [3]

Company Performance - Southside Bancshares reported quarterly earnings of $0.72 per share, exceeding the Zacks Consensus Estimate of $0.69 per share, but down from $0.82 per share a year ago, representing an earnings surprise of +4.35% [1] - The company posted revenues of $68.84 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.39%, compared to year-ago revenues of $67.85 million [2] - Over the last four quarters, Southside Bancshares has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Market Comparison - Southside Bancshares shares have declined approximately 3.5% since the beginning of the year, while the S&P 500 has gained 8.2% [3] - The company's current Zacks Rank is 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.70 on revenues of $69.2 million, and for the current fiscal year, it is $2.81 on revenues of $273.7 million [7] - The outlook for the industry, specifically the Banks - Southwest sector, is favorable, ranking in the top 17% of over 250 Zacks industries, suggesting that stocks in the top 50% outperform those in the bottom 50% by more than 2 to 1 [8]

Core Viewpoint - Southside Bancshares, Inc. reported a decrease in net income and earnings per share for the second quarter of 2025 compared to the same period in 2024, primarily due to increased noninterest expenses and provisions for credit losses, despite growth in net interest income and noninterest income [1][3][10]. Financial Performance - Net income for the three months ended June 30, 2025, was $21.8 million, down from $24.7 million in 2024, a decrease of 11.6% [1][3]. - Earnings per diluted common share decreased to $0.72 from $0.81, a decline of 11.1% [1][3]. - Annualized return on average shareholders' equity was 10.73%, down from 12.46% in the same period last year [1][3]. - Annualized return on average assets was 1.07%, compared to 1.19% in 2024 [1][3]. Income and Expenses - Net interest income increased to $54.3 million, a rise of 1.2% from $53.9 million in the previous quarter [4][6]. - Noninterest income rose to $12.1 million, up 5.1% from $11.6 million in 2024 [6][11]. - Noninterest expenses increased by 9.8% to $39.3 million, primarily due to higher professional fees and salaries [8][14]. Asset Quality - Nonperforming assets increased to $32.9 million, or 0.39% of total assets, compared to $6.9 million, or 0.08% of total assets, in 2024 [23][24]. - The allowance for loan losses was $44.4 million, or 0.97% of total loans, slightly up from 0.92% in the previous year [24]. Balance Sheet Highlights - Total assets as of June 30, 2025, were $8.34 billion, a decrease from $8.52 billion at the end of 2024 [16][38]. - Total loans were $4.60 billion, a slight increase of 0.3% from $4.59 billion in 2024 [16][17]. - Total deposits increased to $6.63 billion, up 2.1% from $6.50 billion in 2024 [18][19]. Capital and Liquidity - The company had $2.33 billion in total available contingent liquidity as of June 30, 2025 [22][21]. - The company repurchased 424,435 shares of common stock at an average price of $28.13 per share during the second quarter [21].

[Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) [Q2 2025 Financial Highlights](index=1&type=section&id=Q2%202025%20Financial%20Highlights) Southside Bancshares' Q2 2025 net income fell **11.6%** to **$21.8 million**, with diluted EPS at **$0.72**, despite an improved net interest margin Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $21.8 million | $24.7 million | -$2.9 million | -11.6% | | Diluted EPS | $0.72 | $0.81 | -$0.09 | -11.1% | | Return on Avg. Assets (ROA) | 1.07% | 1.19% | -12 bps | -10.1% | | Return on Avg. Equity (ROE) | 10.73% | 12.46% | -173 bps | -13.9% | - Key linked-quarter improvements include a **9 basis point** increase in the tax-equivalent net interest margin to **2.95%** and a **$414,000** increase in net interest income[3](index=3&type=chunk) - Nonperforming assets remained low at **0.39%** of total assets[6](index=6&type=chunk) [CEO's Statement](index=1&type=section&id=CEO%27s%20Statement) CEO Lee R. Gibson praised Q2 2025 results, noting improved net interest margin and core deposit growth, projecting **3-4%** full-year loan growth - Deposits, excluding public fund and brokered deposits, increased by **$90.1 million** on a linked-quarter basis[3](index=3&type=chunk) - Total loan growth was strong in June at **$104 million**, and the company anticipates **3-4%** loan growth for the full year 2025[3](index=3&type=chunk) - A one-time expense of **$1.2 million** was incurred during the quarter for the write-off and demolition of an existing branch being replaced[3](index=3&type=chunk) [Detailed Operating Results](index=1&type=section&id=Detailed%20Operating%20Results) [For the Three Months Ended June 30, 2025](index=1&type=section&id=For%20the%20Three%20Months%20Ended%20June%2030%2C%202025) Q2 2025 net income decreased **11.6%** to **$21.8 million**, driven by higher noninterest expense and credit loss provisions, despite some revenue growth Q2 2025 Income Statement Summary (vs. Q2 2024) | Item | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $54.3M | $53.6M | +$0.7M | | Noninterest Income | $12.1M | $11.6M | +$0.6M | | Noninterest Expense | $39.3M | $35.8M | +$3.5M | | Provision for Credit Losses | $0.6M | ($0.5M) | +$1.1M | | Net Income | $21.8M | $24.7M | -$2.9M | [Net Interest Income](index=1&type=section&id=Net%20Interest%20Income) Net interest income for Q2 2025 increased **1.2%** YoY to **$54.3 million**, with tax-equivalent net interest margin expanding to **2.95%** Net Interest Margin Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Margin | 2.82% | 2.74% | 2.74% | | Tax-Equivalent NIM | 2.95% | 2.86% | 2.87% | [Noninterest Income](index=1&type=section&id=Noninterest%20Income) Noninterest income rose **5.1%** YoY to **$12.1 million**, primarily due to reduced AFS securities loss and increased other noninterest income - The YoY increase was mainly due to a decrease in net loss on sale of AFS securities, and increases in other noninterest income and trust fees[5](index=5&type=chunk) - On a linked-quarter basis, noninterest income grew **18.8%**, largely due to higher swap fee income[5](index=5&type=chunk)[7](index=7&type=chunk) [Noninterest Expense](index=2&type=section&id=Noninterest%20Expense) Noninterest expense increased by **9.8%** YoY to **$39.3 million**, largely due to a **$1.2 million** one-time branch demolition charge and higher fees - The increase was primarily driven by other noninterest expense, professional fees, and salaries and employee benefits[8](index=8&type=chunk) - A significant component of the increase was a one-time **$1.2 million** charge for the demolition of an old branch facility[8](index=8&type=chunk) [Income Tax Expense](index=2&type=section&id=Income%20Tax%20Expense) Income tax expense decreased **9.5%** YoY to **$4.7 million**, with the effective tax rate at **17.8%** due to higher state income tax Effective Tax Rate (ETR) | Period | ETR | | :--- | :--- | | Q2 2025 | 17.8% | | Q1 2025 | 18.0% | | Q2 2024 | 17.4% | [For the Six Months Ended June 30, 2025](index=2&type=section&id=For%20the%20Six%20Months%20Ended%20June%2030%2C%202025) For H1 2025, net income was **$43.3 million**, down **6.2%** YoY, with diluted EPS at **$1.42**, due to increased expenses and provisions Six-Month Performance Comparison (2025 vs. 2024) | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Income | $43.3 million | $46.2 million | -6.2% | | Diluted EPS | $1.42 | $1.52 | -6.6% | | Net Interest Income | $108.1 million | $107.0 million | +1.1% | | Noninterest Income | $22.4 million | $21.3 million | +5.1% | | Noninterest Expense | $76.3 million | $72.6 million | +5.1% | - The tax-equivalent net interest margin for the six-month period improved to **2.91%** from **2.87%** in H1 2024[11](index=11&type=chunk) [Balance Sheet and Asset Quality](index=2&type=section&id=Balance%20Sheet%20and%20Asset%20Quality) [Balance Sheet Analysis](index=2&type=section&id=Balance%20Sheet%20Analysis) As of June 30, 2025, total assets were **$8.34 billion**, with total loans at **$4.60 billion** and deposits at **$6.63 billion**, and **21.1%** uninsured deposits Key Balance Sheet Items (as of June 30, 2025) | Item | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $8.34 billion | $8.52 billion | $8.36 billion | | Total Loans | $4.60 billion | $4.66 billion | $4.59 billion | | Total Securities | $2.73 billion | $2.81 billion | $2.71 billion | | Total Deposits | $6.63 billion | $6.65 billion | $6.50 billion | - Linked-quarter loan growth of **$34.7 million** was driven by increases in commercial real estate, construction, and commercial loans[15](index=15&type=chunk) - Estimated deposits without insurance or collateral were **21.1%** of total deposits as of June 30, 2025[18](index=18&type=chunk) [Asset Quality](index=4&type=section&id=Asset%20Quality) Nonperforming assets significantly increased to **$32.9 million** (**0.39%** of total assets), mainly due to a **$27.5 million** restructured commercial real estate loan - Nonperforming assets increased by **$26.0 million** YoY, primarily due to a **$27.4 million** increase in restructured loans[22](index=22&type=chunk) - The increase in restructured loans was caused by the maturity extension of a **$27.5 million** commercial real estate loan to allow for an extended lease-up period[22](index=22&type=chunk) Allowance for Loan Losses | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Allowance for Loan Losses | $44.4M | $44.6M | $42.4M | | % of Total Loans | 0.97% | 0.98% | 0.92% | - The company recorded a provision for credit losses for loans of **$0.7 million** in Q2 2025, compared to a reversal of **$0.9 million** in Q2 2024[24](index=24&type=chunk) [Capital, Liquidity, and Dividends](index=4&type=section&id=Capital%20%2C%20Liquidity%2C%20and%20Dividends) [Capital Resources and Liquidity](index=4&type=section&id=Capital%20Resources%20and%20Liquidity) The company maintained strong capital, repurchasing **424,435 shares** at **$28.13** per share, with total available contingent liquidity at **$2.33 billion** - During Q2 2025, the company repurchased **424,435 shares** at an average price of **$28.13** per share under its Stock Repurchase Plan[20](index=20&type=chunk) - Total available contingent liquidity, including FHLB advances and Federal Reserve Discount Window access, was **$2.33 billion** as of quarter-end[21](index=21&type=chunk) [Dividend Declaration](index=4&type=section&id=Dividend%20Declaration) Southside Bancshares declared a Q2 cash dividend of **$0.36** per share, paid on June 5, 2025 - A cash dividend of **$0.36** per share was declared for the second quarter of 2025[26](index=26&type=chunk) [Supplementary Information](index=5&type=section&id=Supplementary%20Information) [Conference Call Information](index=5&type=section&id=Conference%20Call%20Information) Management scheduled a conference call for July 25, 2025, at 11:00 a.m. CDT to discuss Q2 2025 results, with webcast and dial-in options available - The conference call to discuss Q2 2025 results is scheduled for Friday, July 25, 2025, at 11:00 a.m. CDT[28](index=28&type=chunk) - Participants can access the call via webcast for listen-only mode or register for a dial-in number to participate in the Q&A session[28](index=28&type=chunk)[29](index=29&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like FTE net interest income and efficiency ratio, adjusted using a **21%** federal tax rate for comparability - The report uses non-GAAP measures including fully taxable-equivalent (FTE) adjustments for net interest income, net interest margin, and the efficiency ratio[31](index=31&type=chunk) - These adjustments use a **21%** federal income tax rate to make tax-exempt interest income comparable to taxable income, which management believes enhances comparability[31](index=31&type=chunk)[32](index=32&type=chunk) - A reconciliation of non-GAAP measures to the most directly comparable GAAP measures is provided at the end of the financial statement tables[36](index=36&type=chunk) [Financial Tables (Appendix)](index=7&type=section&id=Financial%20Tables%20%28Appendix%29) [Consolidated Financial Summary (Balance Sheet)](index=7&type=section&id=Consolidated%20Financial%20Summary%20%28Balance%20Sheet%29) This section provides the unaudited consolidated balance sheet as of June 30, 2025, with comparative data for preceding quarters [Consolidated Financial Highlights (Income Statement & Ratios)](index=8&type=section&id=Consolidated%20Financial%20Highlights%20%28Income%20Statement%20%26%20Ratios%29) This section presents unaudited consolidated income statement, common share data, and performance ratios for Q2 and H1 2025 [Asset Quality and Capital Ratios](index=10&type=section&id=Asset%20Quality%20and%20Capital%20Ratios) This section details nonperforming assets, asset quality ratios, and capital ratios for Q2 and H1 2025, with comparative data [Loan Portfolio and Allowance for Credit Losses](index=11&type=section&id=Loan%20Portfolio%20and%20Allowance%20for%20Credit%20Losses) This section provides a breakdown of the loan portfolio and changes in allowances for credit losses on securities, loans, and off-balance-sheet exposures [Average Balances and Yields](index=16&type=section&id=Average%20Balances%20and%20Yields) This section contains detailed tables showing average balances for assets and liabilities, along with their average yields and rates on a fully taxable-equivalent basis [Non-GAAP Reconciliation](index=20&type=section&id=Non-GAAP%20Reconciliation) This section provides reconciliation tables bridging non-GAAP financial measures to their nearest GAAP equivalents

Financial Performance - Total interest and dividend income for Q1 2025 was $100,288,000, a decrease of 1.43% from $102,758,000 in Q1 2024[13] - Net interest income after provision for credit losses was $53,094,000 in Q1 2025, slightly down from $53,290,000 in Q1 2024[13] - Noninterest income increased to $10,223,000 in Q1 2025, compared to $9,724,000 in Q1 2024, reflecting a growth of 5.14%[13] - Net income for Q1 2025 was $21,507,000, a marginal decrease from $21,511,000 in Q1 2024[13] - Earnings per common share remained stable at $0.71 for both Q1 2025 and Q1 2024[13] - The provision for credit losses was $758,000 in Q1 2025, compared to a reversal of $58,000 in Q1 2024[13] - Net income for the three months ended March 31, 2025, was $21,507,000, slightly down from $21,511,000 in the same period of 2024[18] - Net cash provided by operating activities decreased to $23,940,000 from $58,292,000 year-over-year[18] - The company reported a net change in deposits of $(63,422,000) for the quarter, compared to $(3,926,000) in the previous year[19] - The company experienced a net loss on consumer receivables of $0 for the current quarter, compared to a loss of $512,000 in the previous year[18] Assets and Liabilities - Total liabilities and shareholders' equity decreased from $8,517,448,000 in the previous quarter to $8,343,300,000[12] - The balance of total shareholders' equity increased to $816,623,000 as of March 31, 2025, from $811,942,000 at the end of 2024[16] - Total cash and cash equivalents at the end of the period were $430,971,000, compared to $469,373,000 at the end of the same period in 2024[19] - Total loans amounted to $4.567 billion as of March 31, 2025, down from $4.662 billion as of December 31, 2024[46] - The allowance for loan losses was $44.623 million as of March 31, 2025, compared to $44.884 million as of December 31, 2024[46] - Total deposits decreased to $6.591 billion at March 31, 2025, from $6.654 billion at December 31, 2024, reflecting a decline of about 1%[113] - The company's securities portfolio decreased by 2.7% from $2.81 billion at December 31, 2024, to $2.74 billion at March 31, 2025[153] Loan Performance - Total nonperforming assets increased to $32.2 million as of March 31, 2025, compared to $3.6 million as of December 31, 2024[59] - The company reported $4.25 million in nonaccrual loans as of March 31, 2025, up from $3.19 million at the end of 2024[59] - Restructured loans rose significantly to $27.5 million due to the extension of maturity on a commercial real estate loan[60] - The total past due loans amounted to $13.06 million as of March 31, 2025, with a total current loan balance of $4.55 billion[58] - The company reported a total of $613 thousand in current period gross charge-offs across all loan categories[56] - The company recorded a provision for credit losses of $42,000 for the three months ended March 31, 2025, down from $1.2 million in the same period in 2024[200] Capital and Equity - Total shareholders' equity increased by $4.7 million, or 0.6%, to $816.6 million, representing 9.8% of total assets as of March 31, 2025[202] - The company met all capital adequacy requirements as of March 31, 2025, and intends to maintain capital at levels acceptable to regulatory authorities[207] - Common Equity Tier 1 ratio for consolidated was 13.44% and for bank only was 15.58% as of March 31, 2025[208] - Average shareholders' equity to average total assets increased to 9.75% as of March 31, 2025, compared to 9.35% for the same period in 2024[210] Interest Rates and Funding - The weighted average interest rate on other borrowings was 5.3% for the three months ended March 31, 2025, down from 5.7% at December 31, 2024[67] - The average yield on interest earning assets decreased to 5.23% from 5.38% for the three months ended March 31, 2025, compared to the same period in 2024[168] - Total wholesale funding as a percentage of deposits decreased to 19.2% from 24.9% at December 31, 2024[159] - Brokered deposits decreased to $546.1 million at March 31, 2025, from $742.8 million at December 31, 2024[160] - The company has access to approximately $1.79 billion in additional funding from FHLB, collateralized by securities and loans[211] Tax and Regulatory - The income tax expense for the three months ended March 31, 2025, was $4.721 million, resulting in an effective tax rate (ETR) of 18.0%, compared to $4.622 million and an ETR of 17.7% for the same period in 2024[115] - The effective tax rate (ETR) increased to 18.0% for the three months ended March 31, 2025, compared to 17.7% for the same period in 2024, mainly due to higher state income tax expenses[185] Future Plans - In March 2025, the company announced plans to open a new branch in Bellwood Park, Tyler, Texas in 2026[214]

Financial Data and Key Metrics Changes - The company reported net income of $21,500,000 for Q1 2025, resulting in diluted earnings per share of $0.71, with an annualized return on average assets of 1.03% and an annualized return on average tangible common equity of 14.14% [5][14] - There was a linked quarter decrease of $94,400,000 or 2% in loans, primarily due to payoff activity in the commercial real estate (CRE) portfolio [5][14] - The net interest margin increased by three basis points to 2.86%, and net interest income rose by $145,000 [6][19] Business Line Data and Key Metrics Changes - First quarter commercial loan production totaled approximately $142,000,000, representing a 46% increase over Q1 2024, with only $52,000,000 funded during the quarter [8] - The loan pipeline exceeds $1,900,000,000, the largest in the last 24 to 36 months, with a balanced mix of approximately 45% term loans and 55% construction loans [10] - Nonperforming assets remained low at 0.39% of total assets, despite an increase in classified loans to $67,000,000 from $48,000,000 [12][15] Market Data and Key Metrics Changes - The Texas economy is anticipated to grow at a faster pace than the overall projected U.S. growth rate, contributing to a healthy market environment [6] - The average rate of loans funded during the first quarter was approximately 7.3%, with loans exposed to the oil and gas industry totaling $111,000,000 or 2.4% of total loans [15] Company Strategy and Development Direction - The company anticipates mid-single digit loan growth for 2025, despite the first quarter's loan reduction [5][14] - There is a focus on expanding the commercial and industrial (C and I) initiative, which now represents approximately 25% of the total pipeline [11] - The company is optimistic about loan growth and is making progress in the C and I space, particularly in Houston [11][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the operating environment, despite uncertainties related to market conditions and tariff negotiations [6] - The company expects to see positive impacts on margins due to anticipated repricing of the CD portfolio and new swaps implemented [31][32] - Management is confident in maintaining mid-single digit loan growth guidance for the year, supported by a dynamic loan pipeline [62] Other Important Information - The securities portfolio decreased by $76,900,000 or 2.7% from the previous quarter, primarily due to maturities and principal payments [16] - The company did not repurchase any shares during the first quarter but has repurchased 196,419 shares at an average price of $26.82 per share after the quarter [18] Q&A Session Summary Question: Loan pipeline and growth guidance - The loan pipeline of $1,900,000,000 is the largest in two years, with expectations of 25% to 30% pull-through historically [26] - The guidance for mid-single digit loan growth remains intact despite some unexpected payoffs [62] Question: Margin outlook - The company anticipates a positive impact on margins as a portion of the CD portfolio matures and reprices lower [31] Question: Expense management - Expenses came in lower than budgeted due to decreases in salaries and employee benefits, with no targeted reductions implemented [38] Question: Credit quality and restructured loans - A large construction loan in Austin, Texas was extended and moved to nonperforming status, but the borrower has not missed payments and leasing activity is positive [40]

Financial Data and Key Metrics Changes - The company reported net income of $21,500,000 for the first quarter of 2025, resulting in diluted earnings per share of $0.71, with an annualized return on average assets of 1.03% and an annualized return on average tangible common equity of 14.14% [5][14] - There was a linked quarter decrease in loans of $94,400,000 or 2%, primarily due to payoff activity in the commercial real estate (CRE) portfolio [5][14] - The net interest margin increased by three basis points to 2.86%, and net interest income rose by $145,000 or 0.3% compared to the linked quarter [6][20] Business Line Data and Key Metrics Changes - First quarter commercial loan production totaled approximately $142,000,000, representing a 46% increase over the first quarter of 2024, with only $52,000,000 funded during the quarter [9][10] - The average rate of loans funded during the first quarter was approximately 7.3% [15] - Nonperforming assets remained low at 0.39% of total assets, with classified loans totaling $67,000,000 as of March 31, compared to $48,000,000 on December 31 [12][15] Market Data and Key Metrics Changes - The company noted that the Texas economy is anticipated to grow at a faster pace than the overall projected U.S. growth rate [6] - The securities portfolio decreased by $76,900,000 or 2.7% from the previous quarter, driven primarily by maturities and principal payments [16] Company Strategy and Development Direction - The company anticipates mid-single digit loan growth for the year despite the first quarter's loan reduction, with a loan pipeline exceeding $1,900,000,000, the largest in the last 24 to 36 months [5][10] - The company is expanding its commercial and industrial (C and I) initiatives, which now represent approximately 25% of the total pipeline [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current market conditions and the potential for loan growth, despite recent uncertainties related to tariff announcements and negotiations [6] - The company expects to see a positive impact on margins due to anticipated repricing of the CD portfolio and new swaps implemented in the second quarter [33][34] Other Important Information - The company did not purchase any shares of common stock during the first quarter but has repurchased 196,419 shares at an average price of $26.82 per share after the quarter ended [19] - The effective tax rate for the first quarter was 18%, with an estimated annual effective tax rate of 18% for 2025 [22] Q&A Session Summary Question: Can you discuss the loan pipeline and guidance for loan growth? - Management confirmed that the loan pipeline is the largest seen in a while, with expectations of 25% to 30% pull-through historically [28] Question: What is the outlook for the margin given the CD portfolio? - Management anticipates a positive impact on the margin as a portion of the CD portfolio matures and reprices lower [33] Question: Can you provide context on the recent expense reductions? - The decrease in expenses was not due to targeted reductions but rather a result of lower salaries and employee benefits, along with other factors [39] Question: What is the status of the restructured CRE credit? - The restructured loan is located in Austin, Texas, and while it was moved to nonperforming status, the borrower has not missed any payments and leasing activity is positive [41] Question: What is the outlook for swap fee income? - Management expects swap fee income to increase in the upcoming quarters, projecting it to be several times higher than the first quarter [51]

Group 1 - Southside Bancshares (SBSI) reported quarterly earnings of $0.71 per share, exceeding the Zacks Consensus Estimate of $0.67 per share, with an earnings surprise of 5.97% [1] - The company posted revenues of $66.43 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.85%, compared to year-ago revenues of $65.81 million [2] - Over the last four quarters, Southside Bancshares has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] Group 2 - The stock has underperformed the market, losing about 10.2% since the beginning of the year, while the S&P 500 declined by 6% [3] - The current consensus EPS estimate for the coming quarter is $0.71 on $68.5 million in revenues, and for the current fiscal year, it is $2.84 on $275.9 million in revenues [7] - The Zacks Industry Rank for Banks - Southwest is currently in the top 5% of over 250 Zacks industries, indicating strong performance potential [8]