Core Points - Southside Bancshares, Inc. declared a regular quarterly cash dividend of $0.36 per common share, scheduled for payment on December 6, 2024, to shareholders of record on November 21, 2024 [1] - As of September 30, 2024, Southside Bancshares, Inc. has approximately $8.36 billion in assets [2] - Southside Bank operates 53 branches and a network of 72 ATMs/ITMs across East Texas, Southeast Texas, and major metropolitan areas including Dallas/Fort Worth, Austin, and Houston [2] - The bank offers a comprehensive range of financial products and services, including consumer and commercial loans, mortgages, deposit accounts, treasury management, and wealth management [2]

Core Viewpoint - The article emphasizes the importance of value investing and highlights Southside Bancshares (SBSI) as a strong candidate for value investors due to its attractive financial metrics and Zacks Rank of 2 (Buy) [4][7]. Financial Metrics - SBSI has a Forward P/E ratio of 10.90, significantly lower than the industry average of 14.04, indicating potential undervaluation [4]. - The stock's P/B ratio stands at 1.21, compared to the industry's average of 1.98, suggesting that SBSI is undervalued relative to its book value [5]. - SBSI's P/CF ratio is 9.93, which is attractive when compared to the industry's average of 16.98, further supporting the notion of undervaluation [6]. Historical Performance - Over the past year, SBSI's Forward P/E has fluctuated between 8.93 and 13.13, with a median of 10.83, indicating a stable valuation range [4]. - The P/B ratio has varied from 0.98 to 1.35, with a median of 1.17, reflecting consistent valuation metrics [5]. - The P/CF ratio has seen a range from 6.51 to 10.98, with a median of 8.86, reinforcing the stock's cash flow attractiveness [6]. Investment Outlook - Given the strength of its earnings outlook and favorable financial metrics, SBSI is positioned as one of the strongest value stocks in the market [7].

Core Viewpoint - Southside Bancshares, Inc. is transferring its common stock listing from Nasdaq to the New York Stock Exchange, effective November 15, 2024, under the ticker symbol "SBSI" [1][2]. Company Overview - Southside Bancshares, Inc. is headquartered in Tyler, Texas, and has approximately $8.36 billion in assets as of the end of 2023 [3]. - The company operates 53 branches and two loan production offices, along with a network of 72 ATMs/ITMs across East Texas, Southeast Texas, Dallas/Fort Worth, and Austin [3]. - Since its IPO in 1998, Southside has experienced significant growth, surpassing $1 billion in assets in 2000 and reaching nearly $8.5 billion by the end of 2023 [2]. Market Position - The CEO of Southside Bancshares expressed excitement about joining the NYSE, highlighting the strong and fast-growing markets in Texas [2]. - The NYSE's Global Head of Listings welcomed Southside as a valuable addition to its community, which includes numerous Texas-based companies and leading banks [3].

Earnings of Southside Bancshares, Inc. (NASDAQ: NASDAQ: SBSI ) will most probably grow in upcoming quarters thanks to low loan growth. On the other hand, slight margin contraction will restrict the earnings growth. Overall, I'm expecting earnings to grow by 5.3% to $2.97 per share in Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expres ...

Financial Performance - Southside Bancshares reported a net income of $20.5 million for Q3 2024, an increase of $2.1 million or 11.2% compared to $18.4 million in Q3 2023 [2][3] - Earnings per diluted common share rose to $0.68, up $0.08 or 13.3% from $0.60 in the same period last year [2][3] - The annualized return on average assets was 0.98%, compared to 0.93% in Q3 2023, while the return on average shareholders' equity increased to 10.13% from 9.50% [2][3] Net Interest Income - Net interest income for Q3 2024 was $55.5 million, an increase of $2.2 million or 4.1% from the same period in 2023 [4] - The net interest margin decreased to 2.82% from 2.85% year-over-year, but increased from 2.74% in the previous quarter [5] Noninterest Income and Expense - Noninterest income decreased to $8.2 million, down $2.7 million or 24.6% compared to $10.8 million in Q3 2023, primarily due to losses on the sale of securities [6] - Noninterest expense increased by $0.8 million or 2.2% to $36.3 million, driven by higher salaries and employee benefits [7] Tax Expense - Income tax expense rose by $1.3 million or 40.7% compared to Q3 2023, with an effective tax rate of 17.6% [8] Year-to-Date Performance - For the nine months ended September 30, 2024, net income was $66.7 million, a decrease of $2.7 million or 3.8% from $69.4 million in the same period of 2023 [9] - Noninterest income for the nine months was $29.5 million, down $3.9 million or 11.6% compared to $33.3 million in 2023 [11] Balance Sheet Highlights - Total assets as of September 30, 2024, were $8.36 billion, an increase from $8.28 billion at the end of 2023 [12] - Loans increased to $4.58 billion, up $157.4 million or 3.6% year-over-year [13] - Total deposits rose to $6.44 billion, an increase of $86.1 million or 1.4% compared to the same period in 2023 [13] Asset Quality - Nonperforming assets were $7.7 million, or 0.09% of total assets, an increase from $4.4 million or 0.05% a year earlier [16] - The allowance for loan losses totaled $44.3 million, or 0.97% of total loans, compared to $41.8 million or 0.94% a year earlier [16] Capital Resources and Liquidity - Total available contingent liquidity was $2.23 billion as of September 30, 2024 [15] - The company did not repurchase any common stock under its Stock Repurchase Plan during the third quarter [15]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) [Third Quarter 2024 Performance Summary](index=1&type=section&id=Third%20Quarter%202024%20Performance%20Summary) Southside Bancshares reported a net income of $20.5 million for the third quarter of 2024, an 11.2% increase year-over-year, with diluted earnings per share rising to $0.68. The performance was supported by a linked-quarter increase in net interest income and margin, alongside continued strong asset quality with nonperforming assets at just 0.09% of total assets Q3 2024 Key Financial Metrics | Metric | Q3 2024 | Change (YoY) | | :--- | :--- | :--- | | Net Income | $20.5 million | +11.2% | | Diluted EPS | $0.68 | +13.3% | | Annualized ROA | 0.98% | +5 bps | | Annualized Return on Tangible Common Equity (Non-GAAP) | 13.69% | +52 bps | | Nonperforming Assets to Total Assets | 0.09% | +4 bps | - Management highlighted a linked-quarter increase of **$1.86 million** in net interest income and an **8 basis point** increase in net interest margin to **2.95%**[2](index=2&type=chunk) - During the quarter, the company sold **$28 million** of lower-yielding municipal securities, incurring a **$1.9 million** loss, and reinvested the proceeds into higher-yielding agency mortgage-backed securities[2](index=2&type=chunk) [Operating Results](index=1&type=section&id=Operating%20Results) [Operating Results for the Three Months Ended September 30, 2024](index=1&type=section&id=Operating%20Results%20for%20the%20Three%20Months%20Ended%20September%2030%2C%202024) For the third quarter of 2024, net income rose to $20.5 million from $18.4 million in Q3 2023, driven by a $2.2 million increase in net interest income and a lower provision for credit losses. This was partially offset by a $2.7 million decrease in noninterest income, mainly due to a net loss on the sale of AFS securities and an impairment charge. The efficiency ratio improved both year-over-year and on a linked-quarter basis Q3 2024 vs. Q3 2023 Performance | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $20.5 million | $18.4 million | +11.2% | | Diluted EPS | $0.68 | $0.60 | +$0.08 | | Net Interest Income | $55.5 million | $53.3 million | +4.1% | | Noninterest Income | $8.2 million | $10.8 million | -24.6% | | Noninterest Expense | $36.3 million | $35.6 million | +2.2% | - Net interest margin (tax-equivalent) was **2.95%**, down from **3.02%** in Q3 2023 but up from **2.87%** in Q2 2024[3](index=3&type=chunk) - Noninterest income was negatively impacted by a net loss on the sale of AFS securities and a **$868,000** impairment charge related to a subsequent sale of municipal securities on October 1[3](index=3&type=chunk)[4](index=4&type=chunk) - The effective tax rate increased to **17.6%** from **14.5%** in Q3 2024, primarily due to a decrease in tax-exempt income as a percentage of pre-tax income[4](index=4&type=chunk) [Operating Results for the Nine Months Ended September 30, 2024](index=2&type=section&id=Operating%20Results%20for%20the%20Nine%20Months%20Ended%20September%2030%2C%202024) For the first nine months of 2024, net income decreased by 3.8% to $66.7 million compared to the same period in 2023. The decline was primarily due to lower noninterest income and higher noninterest and income tax expenses, which more than offset a modest increase in net interest income and a lower provision for credit losses Nine Months 2024 vs. 2023 Performance | Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $66.7 million | $69.4 million | -3.8% | | Diluted EPS | $2.20 | $2.24 | -1.8% | | Net Interest Income | $162.4 million | $160.5 million | +1.2% | | Noninterest Income | $29.5 million | $33.3 million | -11.6% | | Noninterest Expense | $109.0 million | $105.4 million | +3.4% | - The tax-equivalent net interest margin for the nine-month period decreased to **2.90%** from **3.13%** in the prior year period[5](index=5&type=chunk) - The efficiency ratio (tax-equivalent) deteriorated to **53.35%** for the nine months ended September 30, 2024, from **51.44%** for the same period in 2023[5](index=5&type=chunk) [Financial Condition](index=2&type=section&id=Financial%20Condition) [Balance Sheet Analysis](index=2&type=section&id=Balance%20Sheet%20Analysis) As of September 30, 2024, total assets stood at $8.36 billion, showing growth from both year-end and the prior year. Loans increased 3.6% year-over-year to $4.58 billion, though they experienced a slight linked-quarter decline. Total deposits grew 1.4% year-over-year to $6.44 billion. The cost of total deposits saw a minor linked-quarter decrease to 2.38% Key Balance Sheet Items | Item | Sep 30, 2024 | Dec 31, 2023 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Total Assets | $8.36 billion | $8.28 billion | $7.97 billion | | Total Loans | $4.58 billion | $4.52 billion | $4.42 billion | | Total Deposits | $6.44 billion | $6.55 billion | $6.35 billion | - Linked quarter, loans decreased by **$11.3 million** (**0.2%**), primarily driven by declines in commercial real estate and municipal loans[7](index=7&type=chunk) - Estimated uninsured deposits were **35.9%**. Excluding collateralized public funds and affiliate deposits, the estimated uninsured and uncollateralized portion was **19.2%**[8](index=8&type=chunk) - The cost of total deposits for Q3 2024 was **2.38%**, a **one basis point** decrease from the prior quarter. The cost of interest-bearing deposits remained stable at **3.01%** linked-quarter[8](index=8&type=chunk) [Capital Resources and Liquidity](index=3&type=section&id=Capital%20Resources%20and%20Liquidity) The company's capital ratios and liquidity position remain solid. No common stock was repurchased during the third quarter under the existing plan. As of September 30, 2024, Southside had $2.23 billion in total available contingent liquidity - No shares were purchased during Q3 2024 under the Stock Repurchase Plan[9](index=9&type=chunk) - Total available contingent liquidity, net of outstanding borrowings, was **$2.23 billion**, sourced from FHLB advances, the Federal Reserve Discount Window, and correspondent bank lines of credit[9](index=9&type=chunk) [Asset Quality](index=3&type=section&id=Asset%20Quality) Asset quality remains strong, with nonperforming assets at a low 0.09% of total assets, despite a slight increase from prior periods. The allowance for loan losses was increased to 0.97% of total loans, reflecting heightened economic concerns for office and multifamily markets. The provision for credit losses for loans was $2.3 million for the quarter Nonperforming Assets (NPA) Trend | Metric | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | NPA / Total Assets | 0.09% | 0.08% | 0.05% | | Total NPAs | $7.7 million | $6.9 million | $4.4 million | - The allowance for loan losses increased to **$44.3 million**, or **0.97%** of total loans, up from **0.92%** in the prior quarter, mainly due to economic concerns in the CECL model for office and multifamily markets[10](index=10&type=chunk) Quarterly Credit Loss Provision and Charge-offs | Metric | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Provision for Credit Losses (Loans) | $2.3 million | ($0.9 million) | $6.3 million | | Net Charge-offs | $0.4 million | $0.3 million | $0.9 million | [Shareholder Information](index=3&type=section&id=Shareholder%20Information) [Dividend](index=3&type=section&id=Dividend) Southside Bancshares, Inc. declared and paid a third-quarter cash dividend of $0.36 per common share - A cash dividend of **$0.36** per share was declared on August 8, 2024, and paid on September 5, 2024[11](index=11&type=chunk) [Conference Call](index=4&type=section&id=Conference%20Call) The company will host a conference call on October 24, 2024, at 11:00 a.m. CDT to discuss its third-quarter financial results. A webcast and replay will be available on the company's investor relations website - Management will host a conference call to discuss Q3 2024 results on Thursday, October 24, 2024, at 11:00 a.m. CDT[12](index=12&type=chunk) [Other Information](index=4&type=section&id=Other%20Information) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) The company utilizes several non-GAAP financial measures, such as fully taxable-equivalent (FTE) net interest income, net interest margin, and efficiency ratio, to supplement its GAAP-based financial statements. Management believes these measures provide a better basis for performance evaluation and peer comparison by adjusting for the tax-favored status of certain income - Key non-GAAP measures include net interest income (FTE), net interest margin (FTE), net interest spread (FTE), and efficiency ratio (FTE)[13](index=13&type=chunk) - These measures adjust tax-exempt interest income to a tax-equivalent basis using a **21%** federal income tax rate to enhance comparability between taxable and tax-exempt sources of income[13](index=13&type=chunk)[14](index=14&type=chunk) [About Southside Bancshares, Inc.](index=5&type=section&id=About%20Southside%20Bancshares%2C%20Inc.) Southside Bancshares, Inc. is a bank holding company headquartered in Texas with approximately $8.36 billion in assets as of September 30, 2024. Its subsidiary, Southside Bank, operates 54 branches within the state - As of September 30, 2024, the company has approximately **$8.36 billion** in assets and operates **54 branches** in Texas through its subsidiary, Southside Bank[18](index=18&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section provides a standard safe harbor warning that the press release contains forward-looking statements subject to significant risks and uncertainties. Key factors that could cause actual results to differ include the impact of higher inflation, interest rate fluctuations, and general economic or recessionary concerns - The company identifies significant risk factors that could affect future performance, including ongoing high inflation, interest rate fluctuations, economic concerns, and their potential impact on deposits and loan originations[19](index=19&type=chunk) [Financial Statements and Supplementary Data](index=6&type=section&id=Financial%20Statements%20and%20Supplementary%20Data) [Consolidated Financial Summary (Balance Sheet)](index=6&type=section&id=Consolidated%20Financial%20Summary%20(Balance%20Sheet)) Presents the company's consolidated balance sheet as of September 30, 2024, with comparative data for the preceding quarters and the prior year, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheet (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Net Loans | $4,533,772 | $4,481,836 | | Total Securities | $2,696,840 | $2,603,347 | | **Total Assets** | **$8,362,263** | **$8,284,914** | | **Liabilities & Equity** | | | | Total Deposits | $6,435,702 | $6,549,681 | | Total Liabilities | $7,557,009 | $7,511,626 | | Shareholders' Equity | $805,254 | $773,288 | | **Total Liabilities & Equity** | **$8,362,263** | **$8,284,914** | [Consolidated Financial Highlights (Income Statement)](index=7&type=section&id=Consolidated%20Financial%20Highlights%20(Income%20Statement)) Provides a detailed quarterly consolidated income statement, including breakdowns of interest and noninterest income and expenses, leading to net income. It also includes key per-share data and performance ratios Consolidated Income Statement (in thousands) | Account | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Net Interest Income | $55,464 | $53,608 | $53,273 | | Provision for Credit Losses | $2,389 | ($485) | $6,987 | | Total Noninterest Income | $8,171 | $11,557 | $10,836 | | Total Noninterest Expense | $36,332 | $35,765 | $35,553 | | **Net Income** | **$20,524** | **$24,673** | **$18,449** | | **Diluted EPS** | **$0.68** | **$0.81** | **$0.60** | [Asset Quality and Capital Ratios](index=8&type=section&id=Asset%20Quality%20and%20Capital%20Ratios) This section details the components of nonperforming assets and key asset quality ratios. It also presents various regulatory capital ratios, demonstrating the company's capital adequacy Asset Quality Ratios | Ratio | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Nonperforming Assets / Total Assets | 0.09% | 0.08% | 0.05% | | Allowance for Loan Losses / Total Loans | 0.97% | 0.92% | 0.94% | Capital Ratios | Ratio | Sep 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | | Common Equity Tier 1 Capital | 13.07% | 12.27% | | Total Risk-Based Capital | 16.59% | 15.71% | | Tier 1 Leverage Capital | 9.61% | 9.61% | [Loan Portfolio and Allowance for Credit Losses](index=10&type=section&id=Loan%20Portfolio%20and%20Allowance%20for%20Credit%20Losses) Offers a breakdown of the loan portfolio by major categories such as real estate, commercial, and municipal loans. It also includes a detailed reconciliation of the allowance for credit losses for both loans and off-balance-sheet exposures Loan Portfolio Composition (in thousands) | Loan Category | Sep 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | | Commercial Real Estate | $2,422,612 | $2,117,306 | | Construction | $585,817 | $720,515 | | 1-4 Family Residential | $755,406 | $689,492 | | Commercial Loans | $358,854 | $385,816 | | **Total Loans** | **$4,578,048** | **$4,420,633** | Allowance for Loan Losses Reconciliation - Q3 2024 (in thousands) | Item | Amount | | :--- | :--- | | Balance at beginning of period (Jun 30, 2024) | $42,407 | | Net Charge-offs | ($408) | | Provision for loan losses | $2,277 | | **Balance at end of period (Sep 30, 2024)** | **$44,276** | [Year-to-Date Financial Highlights](index=11&type=section&id=Year-to-Date%20Financial%20Highlights) Summarizes the company's financial performance for the nine-month period ending September 30, 2024, comparing key income statement items, per-share data, and performance ratios against the same period in 2023 Nine Months Ended Sep 30, Financial Summary (in thousands) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Net Interest Income | $162,420 | $160,542 | | Provision for Credit Losses | $1,962 | $6,873 | | Total Noninterest Income | $29,452 | $33,333 | | Total Noninterest Expense | $108,978 | $105,395 | | **Net Income** | **$66,708** | **$69,376** | | **Diluted EPS** | **$2.20** | **$2.24** | [Average Balances and Yields](index=15&type=section&id=Average%20Balances%20and%20Yields) Provides detailed tables showing the average balances for all earning assets and interest-bearing liabilities, along with their respective average yields and rates on a fully taxable-equivalent (FTE) basis for quarterly and year-to-date periods Q3 2024 Average Balances and Rates (FTE) | Metric | Value | | :--- | :--- | | Average Earning Assets | $7.82 billion | | Average Yield on Earning Assets | 5.51% | | Average Interest Bearing Liabilities | $6.09 billion | | Average Rate on Interest Bearing Liabilities | 3.28% | | Net Interest Margin (FTE) | 2.95% | | Net Interest Spread (FTE) | 2.23% | [Non-GAAP Reconciliation](index=19&type=section&id=Non-GAAP%20Reconciliation) This section provides the necessary reconciliations of reported GAAP financial measures to the non-GAAP measures discussed in the report. It includes reconciliations for return on average tangible common equity, tangible book value per share, and the FTE efficiency ratio, clarifying the adjustments made Reconciliation of Net Income to Adjusted Net Income (for ROATCE) - Q3 2024 (in thousands) | Item | Amount | | :--- | :--- | | Net Income (GAAP) | $20,524 | | After-tax amortization expense | $220 | | **Adjusted Net Income (Non-GAAP)** | **$20,744** | Reconciliation of Net Interest Income to FTE Basis - Q3 2024 (in thousands) | Item | Amount | | :--- | :--- | | Net Interest Income (GAAP) | $55,464 | | Tax-equivalent adjustments | $2,620 | | **Net Interest Income (FTE, Non-GAAP)** | **$58,084** |

TYLER, Texas, Oct. 10, 2024 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. ("Southside") (NASDAQ: SBSI), the holding company for Southside Bank, announced today it will release its third quarter financial results before the market opens on Thursday, October 24, 2024. Southside will host a conference call to discuss its results on Thursday, October 24, 2024, at 11:00 a.m. CDT. The call will be hosted by Lee R. Gibson, CEO, Julie Shamburger, CFO, and Lindsey Bailes, VP, Investor Relations. Following prepared ...

Core Viewpoint - Southside Bancshares (SBSI) has received a Zacks Rank 1 (Strong Buy) upgrade due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system focuses on changes in earnings estimates, which have a strong correlation with near-term stock price movements [4][6]. - Rising earnings estimates indicate an improvement in the company's underlying business, suggesting that investors may push the stock price higher [5][10]. Earnings Estimate Revisions - For the fiscal year ending December 2024, Southside Bancshares is expected to earn $2.96 per share, reflecting a 4.2% increase from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for Southside Bancshares has increased by 9.6%, indicating positive sentiment among analysts [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade of Southside Bancshares to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

TYLER, Texas, Sept. 03, 2024 (GLOBE NEWSWIRE) -- Southside Bank, a subsidiary of Southside Bancshares, Inc. (Nasdaq: SBSI), has announced the opening of a new Loan Production Office (LPO) at 9595 Six Pines Drive, Bld 8, Level 2, Ste 8210 in The Woodlands. The Bank indicated their new LPO, opened on September 3, 2024, will specifically target the Commercial & Industrial (C&I) sector and business owners in greater North Houston and the surrounding areas. This expansion represents Southside's continued commitm ...

[Glossary of Acronyms, Abbreviations and Terms](index=4&type=section&id=GLOSSARY%20OF%20ACRONYMS%2C%20ABBREVIATIONS%20AND%20TERMS) The report provides a comprehensive glossary of acronyms, abbreviations, and terms to ensure clarity and understanding of financial and banking-specific terminology - The report provides a comprehensive glossary of acronyms, abbreviations, and terms used throughout the Form 10-Q to ensure clarity and understanding of financial and banking-specific terminology[6](index=6&type=chunk)[7](index=7&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) [Part I. Financial Information](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements of Southside Bancshares, Inc. and its subsidiaries for the quarter ended June 30, 2024, including balance sheets, income statements, statements of comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes on significant accounting policies, earnings per share, securities, loans, borrowings, derivatives, fair value measurements, and income taxes [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific points in time, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2024 | December 31, 2023 | |:------------------------|:--------------|:------------------| | Total Assets | $8,357,702 | $8,284,914 | | Total Liabilities | $7,556,732 | $7,511,626 | | Total Shareholders' Equity| $800,970 | $773,288 | - Total assets increased by **$72.8 million (0.9%)** from December 31, 2023, to June 30, 2024, driven by increases in securities and FHLB stock, partially offset by decreases in cash and cash equivalents[11](index=11&type=chunk)[36](index=36&type=chunk)[294](index=294&type=chunk) [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net income Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |:------------------------|:---------------------------------|:---------------------------------| | Total Interest Income | $104,186 | $86,876 | | Total Interest Expense | $50,578 | $32,960 | | Net Interest Income | $53,608 | $53,916 | | Net Income | $24,673 | $24,893 | | Basic EPS | $0.81 | $0.81 | | Diluted EPS | $0.81 | $0.81 | | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:------------------------|:-------------------------------|:-------------------------------| | Total Interest Income | $206,944 | $167,724 | | Total Interest Expense | $99,988 | $60,455 | | Net Interest Income | $106,956 | $107,269 | | Net Income | $46,184 | $50,927 | | Basic EPS | $1.52 | $1.64 | | Diluted EPS | $1.52 | $1.64 | - Net income for the three months ended June 30, 2024, slightly decreased by **$0.22 million (0.9%)** to **$24.7 million**, while for the six months ended June 30, 2024, it decreased by **$4.7 million (9.3%)** to **$46.2 million**, primarily due to increased interest expense and noninterest expense[38](index=38&type=chunk)[293](index=293&type=chunk) [Consolidated Statements of Comprehensive Income](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the total comprehensive income, which includes net income and other comprehensive income (loss) items not recognized in the income statement Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |:----------------------------------------|:---------------------------------|:---------------------------------| | Net Income | $24,673 | $24,893 | | Other Comprehensive Income (Loss), net of tax | ($95) | $17,619 | | Comprehensive Income (Loss) | $24,578 | $42,512 | | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------------------------|:-------------------------------|:-------------------------------| | Net Income | $46,184 | $50,927 | | Other Comprehensive Income (Loss), net of tax | $2,508 | $21,763 | | Comprehensive Income (Loss) | $48,692 | $72,690 | - Other comprehensive income (loss) significantly decreased for both the three and six months ended June 30, 2024, compared to the prior year, primarily due to changes in unrealized gains/losses on AFS securities and derivatives[14](index=14&type=chunk)[39](index=39&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) This section details the changes in the company's shareholders' equity over time, reflecting net income, dividends, and other equity transactions Shareholders' Equity Changes (in thousands) | Metric | December 31, 2023 | June 30, 2024 | |:----------------------------------------|:------------------|:--------------| | Total Shareholders' Equity (Beginning) | $773,288 | $773,288 | | Net Income | $46,184 | $46,184 | | Other Comprehensive Income (Loss) | $2,508 | $2,508 | | Cash Dividends Paid | ($21,797) | ($21,797) | | Purchase of Common Stock | ($1,510) | ($1,510) | | Total Shareholders' Equity (Ending) | $773,288 | $800,970 | - Total shareholders' equity increased by **$27.7 million (3.6%)** to **$801.0 million** at June 30, 2024, from **$773.3 million** at December 31, 2023, driven by net income and other comprehensive income, partially offset by cash dividends and stock repurchases[41](index=41&type=chunk)[42](index=42&type=chunk)[68](index=68&type=chunk)[294](index=294&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities, providing insight into the company's liquidity Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------------------------|:-------------------------------|:-------------------------------| | Net Cash Provided by Operating Activities | $44,312 | ($82,917) | | Net Cash Used in Investing Activities | ($146,431) | ($219,068) | | Net Cash Provided by (Used in) Financing Activities | ($36,860) | $168,896 | | Net Increase (Decrease) in Cash and Cash Equivalents | ($108,514) | $7,861 | | Cash and Cash Equivalents at End of Period | $451,996 | $207,113 | - Net cash provided by operating activities significantly improved to **$44.3 million** for the six months ended June 30, 2024, compared to a net cash used of **$82.9 million** in the prior year, primarily due to changes in other liabilities and other assets[53](index=53&type=chunk) - Net cash used in financing activities was **$36.9 million** for the six months ended June 30, 2024, a substantial shift from **$168.9 million** provided in the prior year, mainly due to a decrease in other borrowings and net change in deposits, partially offset by FHLB borrowings[45](index=45&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and additional information supporting the consolidated financial statements [1. Summary of Significant Accounting and Reporting Policies](index=14&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20and%20Reporting%20Policies) This section outlines the key accounting principles and methods used in preparing the financial statements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information, with adjustments consisting only of normal recurring items and interim results not necessarily indicative of full-year results[48](index=48&type=chunk) [2. Earnings Per Share](index=14&type=section&id=2.%20Earnings%20Per%20Share) This section details the calculation of basic and diluted earnings per share, a key profitability metric Earnings Per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |:----------------------------------------|:---------------------------------|:---------------------------------| | Net Income Available to Common Shareholders | $24,658 | $24,883 | | Basic Weighted-Average Shares Outstanding | 30,280 | 30,721 | | Diluted Weighted-Average Shares Outstanding | 30,312 | 30,754 | | Basic Earnings Per Share | $0.81 | $0.81 | | Diluted Earnings Per Share | $0.81 | $0.81 | | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------------------------|:-------------------------------|:-------------------------------| | Net Income Available to Common Shareholders | $46,157 | $50,908 | | Basic Weighted-Average Shares Outstanding | 30,271 | 31,045 | | Diluted Weighted-Average Shares Outstanding | 30,310 | 31,099 | | Basic Earnings Per Share | $1.52 | $1.64 | | Diluted Earnings Per Share | $1.52 | $1.64 | - Anti-dilutive shares were approximately **649 thousand** for the three months ended June 30, 2024, compared to **686 thousand** in the prior year, indicating a slight reduction in potential dilution[25](index=25&type=chunk) [3. Accumulated Other Comprehensive Income (Loss)](index=15&type=section&id=3.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) This section provides a breakdown of accumulated other comprehensive income (loss), including unrealized gains and losses on securities and derivatives Accumulated Other Comprehensive Income (Loss) (AOCI) (in thousands) | Component | June 30, 2024 (Net of Tax) | December 31, 2023 (Net of Tax) | |:----------------------------------------|:---------------------------|:-------------------------------| | Unrealized Gains (Losses) on Securities | ($109,881) | ($107,499) | | Unrealized Gains (Losses) on Derivatives| $17,444 | $12,803 | | Retirement Plans | ($18,517) | ($18,766) | | Total AOCI | ($110,954) | ($113,462) | - Total AOCI improved to a loss of **$110.95 million** at June 30, 2024, from a loss of **$113.46 million** at December 31, 2023, primarily due to an increase in unrealized gains on derivatives, partially offset by increased unrealized losses on securities[26](index=26&type=chunk)[60](index=60&type=chunk) Reclassification Adjustments out of AOCI (Net of Tax) (in thousands) | Item | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | |:----------------------------------------|:---------------------------------|:-------------------------------| | Amortization of unrealized gains/losses | ($1,634) | ($3,232) | | Realized net gain (loss) on sale of AFS securities | ($445) | ($459) | | Realized net gain (loss) on interest rate swap derivatives | $4,568 | $9,815 | | Amortization of pension plan net actuarial loss | ($116) | ($249) | | Total Reclassifications | $2,373 | $5,875 | [4. Securities](index=18&type=section&id=4.%20Securities) This section provides a detailed breakdown of the company's investment securities portfolio, including available-for-sale (AFS) and held-to-maturity (HTM) categories Securities Portfolio (in thousands) | Security Type (AFS) | Amortized Cost (June 30, 2024) | Fair Value (June 30, 2024) | |:------------------------|:-------------------------------|:---------------------------| | U.S. Treasury | $172,732 | $172,746 | | State & Political Subdivisions | $499,234 | $456,381 | | Corporate Bonds & Other | $14,607 | $13,563 | | MBS Residential | $762,472 | $758,534 | | MBS Commercial | $5,221 | $4,720 | | Total AFS | $1,454,266 | $1,405,944 | | Security Type (HTM) | Amortized Cost (June 30, 2024) | Fair Value (June 30, 2024) | |:------------------------|:-------------------------------|:---------------------------| | State & Political Subdivisions | $1,040,476 | $899,246 | | Corporate Bonds & Other | $147,061 | $133,835 | | MBS Residential | $88,510 | $79,676 | | MBS Commercial | $29,928 | $27,690 | | Total HTM | $1,305,975 | $1,140,447 | - The total securities portfolio increased by **$108.6 million (4.2%)** to **$2.71 billion** at June 30, 2024, from **$2.60 billion** at December 31, 2023, primarily due to purchases of MBS and U.S. Treasury Bills, partially offset by sales of municipal bonds[294](index=294&type=chunk)[295](index=295&type=chunk) Interest Income on Securities (in thousands) | Security Type | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:------------------------|:-------------------------------|:-------------------------------| | U.S. Treasury | $4,089 | $4,523 | | State & Political Subdivisions | $28,157 | $34,000 | | Corporate Bonds & Other | $3,528 | $3,598 | | MBS | $21,203 | $8,159 | | Total | $56,977 | $50,280 | - Net realized loss from AFS securities sales was **$0.581 million** for the six months ended June 30, 2024, which included a net gain of **$4.0 million** from unwinding fair value hedges on municipal securities[126](index=126&type=chunk) [5. Loans and Allowance for Loan Losses](index=24&type=section&id=5.%20Loans%20and%20Allowance%20for%20Loan%20Losses) This section details the composition of the loan portfolio and the allowance for loan losses, reflecting credit quality and risk management Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2024 | December 31, 2023 | |:--------------------------|:--------------|:------------------| | Construction Real Estate | $546,040 | $789,744 | | 1-4 Family Residential | $738,037 | $696,738 | | Commercial Real Estate | $2,472,771 | $2,168,451 | | Commercial Loans | $359,807 | $366,893 | | Municipal Loans | $416,986 | $441,168 | | Loans to Individuals | $55,724 | $61,516 | | Total Loans | $4,589,365 | $4,524,510 | | Less: Allowance for Loan Losses | $42,407 | $42,674 | | Net Loans | $4,546,958 | $4,481,836 | - Total loans increased by **$64.9 million (1.4%)** to **$4.59 billion** at June 30, 2024, compared to December 31, 2023, driven by commercial real estate and 1-4 family residential loans, partially offset by decreases in construction, municipal, commercial, and individual loans[88](index=88&type=chunk)[294](index=294&type=chunk) Nonperforming Assets (in thousands) | Metric | June 30, 2024 | December 31, 2023 | Change (%) YoY | |:--------------------------|:--------------|:------------------|:---------------| | Nonaccrual Loans | $6,110 | $3,889 | 57.1% | | Restructured Loans | $145 | $13 | 1015.4% | | OREO | $648 | $99 | 554.5% | | Repossessed Assets | $15 | $0 | 100.0% | | Total Nonperforming Assets| $6,918 | $4,001 | 72.9% | | Ratio of Nonperforming Assets to Total Assets | 0.08% | 0.05% | | - The allowance for loan losses decreased by **$0.267 million (0.6%)** to **$42.4 million** at June 30, 2024, representing 0.92% of total loans, compared to 0.94% at December 31, 2023[83](index=83&type=chunk) [6. Borrowing Arrangements](index=31&type=section&id=6.%20Borrowing%20Arrangements) This section details the company's various borrowing arrangements, including FHLB advances and other short-term and long-term debt Borrowing Arrangements (in thousands) | Metric | June 30, 2024 | December 31, 2023 | |:----------------------------------------|:--------------|:------------------| | Other Borrowings (End of Period) | $201,418 | $509,820 | | FHLB Borrowings (End of Period) | $562,282 | $212,648 | | Weighted Average Interest Rate (Other Borrowings) | 5.8% | 4.9% | | Weighted Average Interest Rate (FHLB Borrowings) | 4.1% | 2.5% | - FHLB borrowings significantly increased by **$349.6 million (164.4%)** to **$562.3 million** at June 30, 2024, from **$212.6 million** at December 31, 2023, while other borrowings decreased by **$308.4 million (60.5%)** primarily due to a **$300.0 million** decrease in FRDW borrowings[294](index=294&type=chunk) - The Bank had approximately **$1.78 billion** in additional funding available from FHLB and **$377.4 million** from the FRDW at June 30, 2024[76](index=76&type=chunk)[176](index=176&type=chunk)[295](index=295&type=chunk) [7. Long-term Debt](index=32&type=section&id=7.%20Long-term%20Debt) This section outlines the company's long-term debt obligations, including subordinated notes and trust preferred subordinated debentures Long-term Debt (in thousands) | Debt Type | June 30, 2024 | December 31, 2023 | |:----------------------------------------|:--------------|:------------------| | Subordinated Notes, net | $91,970 | $93,877 | | Trust Preferred Subordinated Debentures, net | $60,272 | $60,270 | | Total Long-term Debt | $152,242 | $154,147 | - The Company repurchased **$2.0 million** of its **$100 million** fixed-to-floating rate subordinated notes during the six months ended June 30, 2024[178](index=178&type=chunk) [8. Employee Benefit Plans](index=34&type=section&id=8.%20Employee%20Benefit%20Plans) This section provides information on the company's employee retirement and restoration plans, including net periodic benefit costs Net Periodic Benefit Cost (Income) (in thousands) | Plan Type | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:------------------------|:-------------------------------|:-------------------------------| | Retirement Plan | ($330) | ($38) | | Acquired Retirement Plan| ($38) | ($30) | | Restoration Plan | $455 | $430 | | Total | $87 | $362 | - The net periodic benefit cost (income) for the Retirement Plan improved significantly, moving from a cost of **$38 thousand** in 2023 to an income of **$330 thousand** in 2024 for the six-month period[208](index=208&type=chunk) [9. Derivative Financial Instruments and Hedging Activities](index=35&type=section&id=9.%20Derivative%20Financial%20Instruments%20and%20Hedging%20Activities) This section describes the company's use of derivative instruments, primarily interest rate swaps, to manage interest rate risk and their classification as hedges or non-hedging instruments - The Company uses interest rate derivative instruments, including interest rate swaps, to manage exposure to interest rate risk, designating them as cash flow hedges, fair value hedges, or non-hedging instruments[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) Derivative Positions Outstanding (Notional Amounts in thousands) | Derivative Type | Notional Amount (June 30, 2024) | Notional Amount (December 31, 2023) | |:------------------------|:--------------------------------|:------------------------------------| | Swaps-Cash Flow Hedge | $940,000 | $1,010,000 | | Swaps-Fair Value Hedge | $722,090 | $453,440 | | Swaps-Non-hedging (Financial Institution) | $243,673 | $248,073 | | Swaps-Non-hedging (Customer) | $243,673 | $248,073 | - During the six months ended June 30, 2024, the Company entered into an additional **$50 million** cash flow hedge swap while **$120 million** of cash flow hedge swaps matured[295](index=295&type=chunk) Amounts Included in Consolidated Statements of Income Related to Interest Rate Swap Agreements (in thousands) | Item | Six Months Ended June 30, 2024 | |:----------------------------------------|:-------------------------------| | Gain (loss) in interest expense on deposits | $7,849 | | Gain (loss) in interest expense on FHLB borrowings | $4,575 | | Gain (loss) in interest income on tax-exempt investment securities | $5,103 | | Gain (loss) in interest income on MBS | $266 | | Gain (loss) in interest income on loans | $87 | | Other noninterest income (non-hedging) | $53 | [10. Fair Value Measurement](index=39&type=section&id=10.%20Fair%20Value%20Measurement) This section explains how fair value is measured for various financial instruments, categorizing them into a three-level hierarchy based on input observability - Fair value measurements are categorized into a three-level hierarchy based on the observability of inputs, with Level 1 for unadjusted quoted prices in active markets, Level 2 for observable inputs other than Level 1, and Level 3 for unobservable inputs[191](index=191&type=chunk) Recurring Fair Value Measurements (June 30, 2024, in thousands) | Asset Type | Carrying Amount | Level 1 | Level 2 | Level 3 | |:------------------------|:----------------|:----------|:------------|:--------| | U.S. Treasury | $172,746 | $172,746 | — | — | | State & Political Subdivisions | $456,381 | — | $456,381 | — | | MBS Residential | $758,534 | — | $758,534 | — | | Equity Investments | $5,229 | $5,229 | — | — | | Interest Rate Swaps (Assets) | $66,044 | — | $66,044 | — | | Interest Rate Swaps (Liabilities) | $23,973 | — | $23,973 | — | Nonrecurring Fair Value Measurements (June 30, 2024, in thousands) | Asset Type | Carrying Amount | Level 1 | Level 2 | Level 3 | |:------------------------|:----------------|:--------|:--------|:--------| | Foreclosed Assets | $663 | — | — | $663 | | Collateral-Dependent Loans | $9,213 | — | — | $9,213 | [11. Income Taxes](index=45&type=section&id=11.%20Income%20Taxes) This section provides details on the company's income tax expense, including current and deferred components, and the effective tax rate Income Tax Expense (in thousands) | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | |:------------------------|:---------------------------------|:-------------------------------| | Current Income Tax Expense | $5,055 | $9,819 | | Deferred Income Tax Expense (Benefit) | $157 | $15 | | Total Income Tax Expense| $5,212 | $9,834 | - The effective tax rate (ETR) increased to **17.4%** for the three months and **17.6%** for the six months ended June 30, 2024, compared to **15.5%** and **15.2%** for the same periods in 2023, primarily due to a decrease in net tax-exempt income as a percentage of pre-tax income[254](index=254&type=chunk)[333](index=333&type=chunk) [12. Off-Balance-Sheet Arrangements, Commitments and Contingencies](index=46&type=section&id=12.%20Off-Balance-Sheet%20Arrangements%2C%20Commitments%20and%20Contingencies) This section outlines the company's off-balance-sheet financial instruments, including commitments to extend credit and standby letters of credit Financial Instruments with Off-Balance-Sheet Risk (in thousands) | Instrument | June 30, 2024 | December 31, 2023 | |:--------------------------|:--------------|:------------------| | Commitments to Extend Credit | $943,360 | $1,082,327 | | Standby Letters of Credit | $12,428 | $10,823 | | Total | $955,788 | $1,093,150 | Allowance for Off-Balance-Sheet Credit Exposures (in thousands) | Metric | June 30, 2024 | December 31, 2023 | |:--------------------------|:--------------|:------------------| | Balance at End of Period | $3,208 | $3,932 | - Total off-balance-sheet financial instruments decreased by **$137.4 million (12.6%)** to **$955.8 million** at June 30, 2024, from **$1.09 billion** at December 31, 2023, primarily due to a decrease in commitments to extend credit[230](index=230&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Company's financial condition, changes in financial condition, and results of operations for the quarter ended June 30, 2024, covering economic conditions, deposits, capital resources, liquidity, balance sheet strategy, and detailed analysis of net interest income, noninterest income, noninterest expense, income taxes, loan composition, and asset quality [Forward-Looking Statements](index=47&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements subject to significant known and unknown risks and uncertainties, including impacts from higher inflation, elevated interest rates, general economic conditions, and regulatory changes, which could cause actual results to differ materially[258](index=258&type=chunk)[259](index=259&type=chunk) [Critical Accounting Estimates](index=49&type=section&id=Critical%20Accounting%20Estimates) This section discusses the critical accounting estimates that involve significant judgment and assumptions about uncertain matters, such as the allowance for credit losses - Critical accounting estimates, including the allowance for credit losses on loans and off-balance-sheet credit exposure, involve significant judgment and assumptions about uncertain matters, with no significant changes noted as of June 30, 2024[260](index=260&type=chunk) [Non-GAAP Financial Measures](index=50&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the use of non-GAAP financial measures by management to supplement performance evaluation and enhance comparability - Management uses non-GAAP measures like Net Interest Income (FTE), Net Interest Margin (FTE), and Net Interest Spread (FTE) to supplement performance evaluation, adjusting for the tax-favored status of certain income to enhance comparability[288](index=288&type=chunk) Non-GAAP Financial Measures (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |:------------------------|:---------------------------------|:---------------------------------| | Net Interest Income (GAAP)| $53,608 | $53,916 | | Net Interest Income (FTE) | $56,292 | $57,051 | | Net Interest Margin (FTE) | 2.87% | 3.17% | | Net Interest Spread (FTE) | 2.13% | 2.55% | | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:------------------------|:-------------------------------|:-------------------------------| | Net Interest Income (GAAP)| $106,956 | $107,269 | | Net Interest Income (FTE) | $112,376 | $113,651 | | Net Interest Margin (FTE) | 2.87% | 3.19% | | Net Interest Spread (FTE) | 2.15% | 2.58% | [Overview](index=51&type=section&id=OVERVIEW) This section provides a high-level summary of the company's financial performance and key factors influencing its condition [Economic Conditions](index=51&type=section&id=Economic%20Conditions) This section discusses the prevailing economic environment and its impact on the company's operations and outlook - Despite elevated inflation and higher interest rates, the economic outlook for the Company's Texas markets remains solid and positive, supported by job and population growth[290](index=290&type=chunk) [Deposits](index=51&type=section&id=Deposits) This section analyzes the company's deposit base, including changes in total deposits, composition, and cost - Total deposits decreased by **$53.7 million (0.8%)** to **$6.50 billion** at June 30, 2024, with noninterest-bearing deposits representing approximately **21.0%** of the total[291](index=291&type=chunk) Cost of Deposits | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |:----------------------------|:---------------------------------|:---------------------------------| | Cost of Interest Bearing Deposits | 3.01% | 2.03% | | Cost of Total Deposits | 2.39% | 1.50% | | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------------|:-------------------------------|:-------------------------------| | Cost of Interest Bearing Deposits | 2.99% | 1.92% | | Cost of Total Deposits | 2.37% | 1.42% | - Estimated uninsured deposits were **36.4%** of total deposits, and **19.4%** when excluding affiliate and public fund deposits, as of June 30, 2024[291](index=291&type=chunk) [Capital Resources and Liquidity](index=51&type=section&id=Capital%20Resources%20and%20Liquidity) This section evaluates the company's capital adequacy and available liquidity sources to meet financial obligations - The Company's capital ratios and contingent liquidity sources remain solid, with **$377.4 million** available from the FRDW and **$1.78 billion** from FHLB at June 30, 2024[292](index=292&type=chunk)[293](index=293&type=chunk)[295](index=295&type=chunk) Liquidity Lines (June 30, 2024, in thousands) | Source | Line of Credit | Borrowings | Available for Future Liquidity | |:----------------------------------------|:---------------|:-----------|:-------------------------------| | FHLB Advances | $2,344,153 | $562,282 | $1,781,871 | | Federal Reserve Discount Window | $377,381 | — | $377,381 | | Correspondent Bank Lines of Credit | $80,000 | — | $80,000 | | Federal Reserve Bank Term Funding Program | $113,415 | $113,415 | — | | Total Liquidity Lines | $2,914,949 | $675,697 | $2,239,252 | - BTFP borrowings totaled **$113.4 million** at June 30, 2024, at a cost of **5.40%**, compared to **$117.7 million** at **4.37%** at December 31, 2023[292](index=292&type=chunk) [Financial Condition](index=52&type=section&id=Financial%20Condition) This section provides an overview of the company's overall financial health, including changes in assets, liabilities, and equity - Total assets increased by **$72.8 million (0.9%)** to **$8.36 billion** at June 30, 2024, from **$8.28 billion** at December 31, 2023, driven by growth in the securities portfolio and FHLB stock[294](index=294&type=chunk) - Loans increased by **$64.9 million (1.4%)** to **$4.59 billion**, primarily due to commercial real estate and 1-4 family residential loans, while nonperforming assets increased by **$2.9 million (72.9%)** to **$6.9 million**[294](index=294&type=chunk) - Total shareholders' equity increased by **$27.7 million (3.6%)** to **$801.0 million**, representing **9.6%** of total assets, compared to **9.3%** at December 31, 2023[294](index=294&type=chunk) [Balance Sheet Strategy](index=53&type=section&id=Balance%20Sheet%20Strategy) This section describes the company's approach to managing its balance sheet, including interest rate sensitivity and funding sources - The Company's balance sheet strategy involves managing interest rate sensitivity, utilizing wholesale funding (brokered deposits, FHLB, FRDW, BTFP) for investments primarily in U.S. agency MBS and long-term municipal securities[295](index=295&type=chunk) - The securities portfolio increased to **$2.71 billion** at June 30, 2024, from **$2.60 billion** at December 31, 2023, with purchases of **$408.9 million** in U.S. Treasury Bills and **$249.5 million** in MBS[295](index=295&type=chunk) - Wholesale funding as a percentage of deposits (excluding brokered deposits) decreased to **23.3%** at June 30, 2024, from **25.5%** at December 31, 2023[269](index=269&type=chunk) [Operating Results](index=55&type=section&id=Operating%20Results) This section analyzes the company's financial performance from its core operations, including net interest income, noninterest income, and expenses [Net Interest Income](index=55&type=section&id=Net%20Interest%20Income) This section examines the primary source of a bank's earnings, calculated as the difference between interest earned on assets and interest paid on liabilities Net Interest Income (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |:------------------------|:---------------------------------|:---------------------------------| | Total Interest Income | $104,186 | $86,876 | | Total Interest Expense | $50,578 | $32,960 | | Net Interest Income | $53,608 | $53,916 | | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:------------------------|:-------------------------------|:-------------------------------| | Total Interest Income | $206,944 | $167,724 | | Total Interest Expense | $99,988 | $60,455 | | Net Interest Income | $106,956 | $107,269 | - Net interest income for the three months ended June 30, 2024, declined slightly by **$0.308 million (0.6%)** to **$53.6 million**, and for the six months, it decreased by **$0.313 million (0.3%)** to **$107.0 million**, primarily due to a significant increase in interest expense on liabilities[273](index=273&type=chunk)[299](index=299&type=chunk) Net Interest Margin and Spread (FTE) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |:------------------------|:---------------------------------|:---------------------------------| | Net Interest Margin (FTE) | 2.87% | 3.17% | | Net Interest Spread (FTE) | 2.13% | 2.55% | | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:------------------------|:-------------------------------|:-------------------------------| | Net Interest Margin (FTE) | 2.87% | 3.19% | | Net Interest Spread (FTE) | 2.15% | 2.58% | [Noninterest Income](index=61&type=section&id=Noninterest%20Income) This section analyzes income generated from sources other than interest, such as deposit service charges, gains on securities, and brokerage services Noninterest Income (in thousands) | Category | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change (%) | |:------------------------|:---------------------------------|:---------------------------------|:-----------| | Deposit Services | $6,157 | $6,291 | (2.1)% | | Net gain (loss) on sale of securities AFS | ($563) | ($3,455) | 83.7% | | Net gain on sale of equity securities | — | $2,642 | (100.0)% | | BOLI | $1,767 | $756 | 133.7% | | Brokerage Services | $1,081 | $904 | 19.6% | | Total Noninterest Income| $11,557 | $10,464 | 10.4% | | Category | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change (%) | |:------------------------|:-------------------------------|:-------------------------------|:-----------| | Deposit Services | $12,142 | $12,713 | (4.5)% | | Net gain (loss) on sale of securities AFS | ($581) | ($5,601) | 89.6% | | Net gain on sale of equity securities | — | $5,058 | (100.0)% | | BOLI | $2,551 | $2,431 | 4.9% | | Brokerage Services | $2,095 | $1,601 | 30.9% | | Total Noninterest Income| $21,281 | $22,497 | (5.4)% | - Noninterest income increased by **10.4%** for the three months ended June 30, 2024, primarily due to a decrease in net loss on AFS securities sales and higher BOLI income, despite the absence of equity securities gains seen in the prior year[309](index=309&type=chunk) - For the six months, noninterest income decreased by **5.4%**, mainly due to the absence of significant equity securities gains and lower deposit services income, partially offset by reduced AFS securities losses[309](index=309&type=chunk) [Noninterest Expense](index=62&type=section&id=Noninterest%20Expense) This section details the company's operating expenses not directly related to interest, such as salaries, software, and occupancy costs Noninterest Expense (in thousands) | Category | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Change (%) | |:------------------------|:---------------------------------|:---------------------------------|:-----------| | Salaries and Employee Benefits | $21,984 | $21,376 | 2.8% | | Software and Data Processing | $2,860 | $2,264 | 26.3% | | FDIC Insurance | $977 | $1,220 | (19.9)% | | Amortization of Intangibles | $307 | $442 | (30.5)% | | Total Noninterest Expense | $35,765 | $34,993 | 2.2% | | Category | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Change (%) | |:------------------------|:-------------------------------|:-------------------------------|:-----------| | Salaries and Employee Benefits | $45,097 | $43,232 | 4.3% | | Software and Data Processing | $5,716 | $4,319 | 32.3% | | Net Occupancy | $7,112 | $7,424 | (4.2)% | | Professional Fees | $2,229 | $2,564 | (13.1)% | | Total Noninterest Expense | $72,646 | $69,842 | 4.0% | - Total noninterest expense increased by **2.2%** for the three months and **4.0%** for the six months ended June 30, 2024, primarily due to higher salaries and employee benefits and software and data processing costs[312](index=312&type=chunk)[330](index=330&type=chunk) - Salaries and employee benefits increased due to normal salary increases and approximately **$0.618 million** associated with future cost reductions[312](index=312&type=chunk) [Income Taxes](index=63&type=section&id=Income%20Taxes) This section analyzes the company's income tax expense and effective tax rate, explaining factors influencing tax liabilities - Pre-tax income for the three months ended June 30, 2024, increased by **1.4%** to **$29.9 million**, while for the six months, it decreased by **6.7%** to **$56.0 million**[333](index=333&type=chunk) Effective Tax Rate (ETR) | Period | ETR (June 30, 2024) | ETR (June 30, 2023) | |:------------------------|:--------------------|:--------------------| | Three Months Ended | 17.4% | 15.5% | | Six Months Ended | 17.6% | 15.2% | - The increase in ETR was primarily due to a decrease in net tax-exempt income as a percentage of pre-tax income[333](index=333&type=chunk) [Composition of Loans](index=64&type=section&id=Composition%20of%20Loans) This section provides a detailed breakdown of the loan portfolio by type, illustrating the company's lending activities and concentrations Loan Totals by Class (in thousands) | Loan Type | June 30, 2024 | December 31, 2023 | June 30, 2023 | |:--------------------------|:--------------|:------------------|:--------------| | Construction Real Estate | $546,040 | $789,744 | $657,354 | | 1-4 Family Residential | $738,037 | $696,738 | $684,878 | | Commercial Real Estate | $2,472,771 | $2,168,451 | $2,100,338 | | Commercial Loans | $359,807 | $366,893 | $383,724 | | Municipal Loans | $416,986 | $441,168 | $435,211 | | Loans to Individuals | $55,724 | $61,516 | $67,538 | | Total Loans | $4,589,365 | $4,524,510 | $4,329,043 | - Total loans increased by **$64.9 million (1.4%)** compared to December 31, 2023, with significant increases in commercial real estate and 1-4 family residential loans, partially offset by decreases in construction and municipal loans[88](index=88&type=chunk) [Nonperforming Assets](index=64&type=section&id=Nonperforming%20Assets) This section analyzes assets that are not generating income or are at risk of default, providing insight into asset quality and credit risk Nonperforming Assets (in thousands) | Metric | June 30, 2024 | December 31, 2023 | June 30, 2023 | Change (%) vs. Dec 31, 2023 | Change (%) vs. June 30, 2023 | |:--------------------------|:--------------|:------------------|:--------------|:----------------------------|:-----------------------------| | Nonaccrual Loans | $6,110 | $3,889 | $3,017 | 57.1% | 102.5% | | Restructured Loans | $145 | $13 | — | 1,015.4% | 100.0% | | OREO | $648 | $99 | — | 554.5% | 100.0% | | Repossessed Assets | $15 | — | $42 | 100.0% | (64.3)% | | Total Nonperforming Assets| $6,918 | $4,001 | $3,059 | 72.9% | 126.2% | | Ratio of Nonperforming Assets to Total Assets | 0.08% | 0.05% | 0.04% | | | - Total nonperforming assets increased by **72.9%** to **$6.9 million** at June 30, 2024, compared to **$4.0 million** at December 31, 2023, primarily due to a significant rise in nonaccrual loans and OREO[81](index=81&type=chunk)[294](index=294&type=chunk) [Allowance for Credit Losses – Loans](index=65&type=section&id=Allowance%20for%20Credit%20Losses%20%E2%80%93%20Loans) This section discusses the allowance for credit losses specifically related to the loan portfolio, reflecting management's estimate of future loan losses - The allowance for loan losses decreased by **$0.267 million (0.6%)** to **$42.4 million** at June 30, 2024, representing **0.92%** of total loans, compared to **0.94%** at December 31, 2023[83](index=83&type=chunk) Loan Charge-offs and Recoveries (in thousands) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:------------------------|:-------------------------------|:-------------------------------| | Loan Charge-offs | $1,355 | $1,370 | | Recoveries | $791 | $792 | | Net Charge-offs | $564 | $578 | - The Company recorded a provision for credit losses for loans of **$0.297 million** for the six months ended June 30, 2024, compared to **$0.366 million** in the prior year[83](index=83&type=chunk) [Allowance for Credit Losses – Off-Balance-Sheet Credit Exposures](index=66&type=section&id=Allowance%20for%20Credit%20Losses%20%E2%80%93%20Off-Balance-Sheet%20Credit%20Exposures) This section details the allowance for credit losses associated with off-balance-sheet items, such as loan commitments and letters of credit Allowance for Off-Balance-Sheet Credit Exposures (in thousands) | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | |:------------------------|:---------------------------------|:-------------------------------| | Balance at Beginning of Period | $2,820 | $3,932 | | Provision for (reversal of) off-balance-sheet credit exposures | $388 | ($724) | | Balance at End of Period| $3,208 | $3,208 | - The allowance for off-balance-sheet credit exposures decreased by **$0.724 million** for the six months ended June 30, 2024, to **$3.2 million**, compared to a reversal of **$0.480 million** in the prior year[85](index=85&type=chunk) [Capital Resources and Liquidity (MD&A)](index=67&type=section&id=Capital%20Resources%20and%20Liquidity%20(MD%26A)) This section, within the MD&A, further discusses the company's capital adequacy and liquidity management strategies - Total shareholders' equity increased by **$27.7 million (3.6%)** to **$801.0 million** at June 30, 2024, representing **9.6%** of total assets[68](index=68&type=chunk) Key Equity Ratios | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |:----------------------------------------|:---------------------------------|:---------------------------------| | Return on Average Assets | 1.19% | 1.29% | | Return on Average Shareholders' Equity | 12.46% | 13.32% | | Dividend Payout Ratio – Basic | 44.44% | 43.21% | | Average Shareholders' Equity to Average Total Assets | 9.52% | 9.72% | | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |:----------------------------------------|:-------------------------------|:-------------------------------| | Return on Average Assets | 1.11% | 1.34% | | Return on Average Shareholders' Equity | 11.74% | 13.62% | | Dividend Payout Ratio – Basic | 47.37% | 42.68% | | Average Shareholders' Equity to Average Total Assets | 9.43% | 9.83% | - The Company and Southside Bank met all capital adequacy requirements under Basel III Capital Rules as of June 30, 2024[74](index=74&type=chunk) [Branch Closures](index=70&type=section&id=Branch%20Closures) This section reports on the company's decisions regarding the closure of certain branch locations - The Company announced plans to close a retail grocery store branch in Kingwood on November 2, 2024, and closed a traditional branch in Jasper on May 3, 2024, due to proximity to another branch[78](index=78&type=chunk) [Recent Accounting Pronouncements](index=70&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 1 for information on recently issued accounting standards and their potential impact - Refer to Note 1 – Summary of Significant Accounting and Reporting Policies for information on recent accounting pronouncements[91](index=91&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the Company's exposure to market risks, primarily interest rate risk, and the strategies employed to manage it, highlighting the use of net income simulation analysis and Market Value of Portfolio Equity (MVPE) modeling to assess the impact of various interest rate scenarios on net interest income - The Company uses net income simulation and MVPE modeling to manage interest rate risk, quantifying the effects of various interest rate scenarios on projected net interest income over the next 12 months[92](index=92&type=chunk) Anticipated Impact on Net Interest Income (Next 12 Months) | Rate Projection | June 30, 2024 | June 30, 2023 | |:----------------|:--------------|:--------------| | Increase 100 bps| 3.78% | 4.38% | | Increase 200 bps| 7.13% | 9.11% | | Decrease 50 bps | (3.00)% | (3.04)% | | Decrease 100 bps| (4.85)% | (6.29)% | | Decrease 200 bps| (6.95)% | (12.81)% | - Economic conditions, including record inflation and higher interest rates, continue to impact growth prospects and could negatively affect consumer and commercial borrowers[96](index=96&type=chunk) [Item 4. Controls and Procedures](index=71&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting occurring during the quarter - The CEO and CFO evaluated and concluded that disclosure controls and procedures were effective as of June 30, 2024[97](index=97&type=chunk) - No material changes were made to internal control over financial reporting during the quarter ended June 30, 2024[98](index=98&type=chunk) [Part II. Other Information](index=71&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=71&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is involved in various litigation in the normal course of business, but management believes any resulting liability will not materially affect its financial position, results of operations, or liquidity - Management believes that any liability from ongoing litigation will not have a material effect on the Company's financial position, results of operations, or liquidity[99](index=99&type=chunk) [Item 1A. 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 2023 Form 10-K - No material changes in risk factors were reported compared to the 2023 Form 10-K[99](index=99&type=chunk) [Item 2. 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) The Company's board of directors approved a Stock Repurchase Plan in July 2023, authorizing the repurchase of up to 1.0 million shares, and during the three months ended June 30, 2024, the Company repurchased 57,966 shares at an average price of $26.22 per share - The Stock Repurchase Plan, approved on July 20, 2023, authorizes the repurchase of up to **1.0 million** shares[64](index=64&type=chunk) Issuer Purchases of Equity Securities (Three Months Ended June 30, 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | |:----------------------------|:---------------------------------|:-----------------------------| | April 1, 2024 - April 30, 2024 | — | — | | May 1, 2024 - May 31, 2024 | 9,290 | $26.33 | | June 1, 2024 - June 30, 2024| 48,676 | $26.20 | | Total | 57,966 | $26.22 | - As of June 30, 2024, **583,066** shares remained available for repurchase under the plan[64](index=64&type=chunk) [Item 3. Defaults Upon Senior Securities](index=72&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The Company reported no defaults upon senior securities for the period - There were no defaults upon senior securities[65](index=65&type=chunk)[317](index=317&type=chunk) [Item 4. Mine Safety Disclosures](index=72&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) The Company has no mine safety disclosures to report - No mine safety disclosures were reported[66](index=66&type=chunk) [Item 5. Other Information](index=72&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No directors or executive officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2024 - No directors or executive officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2024[318](index=318&type=chunk) [Item 6. Exhibits](index=73&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including certifications, articles of incorporation, bylaws, and XBRL interactive data files - The report includes certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, and 32)[339](index=339&type=chunk) - Interactive Data Files (XBRL) are provided, including schema, calculation, label, presentation, and definition linkbases, along with the cover page interactive data file[339](index=339&type=chunk) [Signatures](index=74&type=section&id=SIGNATURES) This section includes the required signatures from the company's principal executive and financial officers, certifying the accuracy of the report - The report is signed by Lee R. Gibson, President and Chief Executive Officer, and Julie N. Shamburger, Chief Financial Officer, on July 26, 2024[338](index=338&type=chunk)[342](index=342&type=chunk)