SOUTHSIDE BANCSHARES, INC.
(Exact name
of registrant as specified in its charter)
|
|
TEXAS
|
75-1848732
|
(State or
other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
1201 S. Beckham, Tyler,
Texas
|
75701
|
(Address of
principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
Small
reporting company o
|
(Do not check
if a smaller reporting company)
|
TABLE OF CONTENTS
|
|
June
30,
|
December
31,
|
|||||||
ASSETS
|
2008
|
2007
|
||||||
Cash and due
from banks
|
$ | 63,848 | $ | 74,040 | ||||
Interest
earning deposits
|
401 | 1,414 | ||||||
Federal funds
sold
|
2,150 | 550 | ||||||
Total cash
and cash equivalents
|
66,399 | 76,004 | ||||||
Investment
securities:
|
||||||||
Available for
sale, at estimated fair value
|
110,581 | 109,928 | ||||||
Held to
maturity, at cost
|
477 | 475 | ||||||
Mortgage-backed
and related securities:
|
||||||||
Available for
sale, at estimated fair value
|
851,331 | 727,553 | ||||||
Held to
maturity, at cost
|
173,453 | 189,965 | ||||||
Federal Home
Loan Bank and FRB stock, at cost
|
28,859 | 19,850 | ||||||
Other
investments, at cost
|
2,067 | 2,069 | ||||||
Loans held
for sale
|
2,792 | 3,361 | ||||||
Loans:
|
||||||||
Loans
|
978,269 | 961,230 | ||||||
Less: allowance
for loan loss
|
(11,527 | ) | (9,753 | ) | ||||
Net
Loans
|
966,742 | 951,477 | ||||||
Premises and
equipment, net
|
39,881 | 40,249 | ||||||
Goodwill
|
22,034 | 21,639 | ||||||
Other
intangible assets, net
|
1,694 | 1,925 | ||||||
Interest
receivable
|
12,363 | 11,784 | ||||||
Deferred tax
asset
|
6,227 | 4,320 | ||||||
Other
assets
|
38,888 | 35,723 | ||||||
TOTAL
ASSETS
|
$ | 2,323,788 | $ | 2,196,322 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
Deposits:
|
||||||||
Noninterest
bearing
|
$ | 411,213 | $ | 357,083 | ||||
Interest
bearing
|
1,086,859 | 1,173,408 | ||||||
Total
Deposits
|
1,498,072 | 1,530,491 | ||||||
Short-term
obligations:
|
||||||||
Federal funds
purchased and repurchase agreements
|
9,245 | 7,023 | ||||||
FHLB
advances
|
212,956 | 353,792 | ||||||
Other
obligations
|
2,500 | 2,500 | ||||||
Total
Short-term obligations
|
224,701 | 363,315 | ||||||
Long-term
obligations:
|
||||||||
FHLB advances
|
362,584 | 86,247 | ||||||
Long-term
debt
|
60,311 | 60,311 | ||||||
Total
Long-term obligations
|
422,895 | 146,558 | ||||||
Other
liabilities
|
36,844 | 23,132 | ||||||
TOTAL
LIABILITIES
|
2,182,512 | 2,063,496 | ||||||
Off-Balance-Sheet
Arrangements, Commitments and Contingencies (Note 12)
|
||||||||
Minority
interest in Southside Financial Group
|
287 | 498 | ||||||
Shareholders'
equity:
|
||||||||
Common stock
- $1.25 par, 20,000,000 shares authorized, 15,623,653
shares
|
||||||||
issued
in 2008 and 14,865,134 shares issued in 2007
|
19,529 | 18,581 | ||||||
Paid-in
capital
|
129,620 | 115,250 | ||||||
Retained
earnings
|
22,290 | 26,187 | ||||||
Treasury
stock (1,731,570 and 1,724,857 shares at cost)
|
(23,115 | ) | (22,983 | ) | ||||
Accumulated
other comprehensive loss
|
(7,335 | ) | (4,707 | ) | ||||
TOTAL
SHAREHOLDERS' EQUITY
|
140,989 | 132,328 | ||||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 2,323,788 | $ | 2,196,322 |
Three
Months
|
Six
Months
|
|||||||||||||||
Ended June
30,
|
Ended June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Interest
income
|
||||||||||||||||
Loans
|
$ | 17,767 | $ | 12,733 | $ | 36,063 | $ | 25,247 | ||||||||
Investment
securities – taxable
|
390 | 616 | 1,070 | 1,452 | ||||||||||||
Investment
securities – tax-exempt
|
1,160 | 505 | 1,978 | 1,012 | ||||||||||||
Mortgage-backed
and related securities
|
12,020 | 10,163 | 23,993 | 21,097 | ||||||||||||
Federal Home
Loan Bank stock and other investments
|
214 | 330 | 476 | 700 | ||||||||||||
Other
interest earning assets
|
24 | 33 | 91 | 69 | ||||||||||||
Total
interest income
|
31,575 | 24,380 | 63,671 | 49,577 | ||||||||||||
Interest
expense
|
||||||||||||||||
Deposits
|
7,868 | 10,025 | 18,623 | 19,590 | ||||||||||||
Short-term
obligations
|
1,839 | 2,776 | 5,139 | 6,722 | ||||||||||||
Long-term
obligations
|
3,973 | 1,518 | 6,644 | 3,178 | ||||||||||||
Total
interest expense
|
13,680 | 14,319 | 30,406 | 29,490 | ||||||||||||
Net interest
income
|
17,895 | 10,061 | 33,265 | 20,087 | ||||||||||||
Provision for
loan losses
|
2,947 | 217 | 5,186 | 334 | ||||||||||||
Net interest
income after provision for loan losses
|
14,948 | 9,844 | 28,079 | 19,753 | ||||||||||||
Noninterest
income
|
||||||||||||||||
Deposit
services
|
4,667 | 4,270 | 9,084 | 8,198 | ||||||||||||
Gain on
securities available for sale
|
3,660 | 6 | 5,752 | 435 | ||||||||||||
Gain on sale
of loans
|
847 | 724 | 1,312 | 1,069 | ||||||||||||
Trust
income
|
619 | 576 | 1,212 | 1,040 | ||||||||||||
Bank owned
life insurance income
|
758 | 268 | 1,068 | 532 | ||||||||||||
Other
|
736 | 818 | 1,561 | 1,526 | ||||||||||||
Total
noninterest income
|
11,287 | 6,662 | 19,989 | 12,800 | ||||||||||||
Noninterest
expense
|
||||||||||||||||
Salaries and
employee benefits
|
8,806 | 7,298 | 17,519 | 14,402 | ||||||||||||
Occupancy
expense
|
1,427 | 1,190 | 2,815 | 2,358 | ||||||||||||
Equipment
expense
|
329 | 242 | 641 | 470 | ||||||||||||
Advertising,
travel & entertainment
|
496 | 449 | 960 | 870 | ||||||||||||
ATM and debit
card expense
|
304 | 242 | 592 | 496 | ||||||||||||
Director
fees
|
147 | 141 | 291 | 268 | ||||||||||||
Supplies
|
206 | 188 | 383 | 336 | ||||||||||||
Professional
fees
|
353 | 240 | 787 | 551 | ||||||||||||
Postage
|
182 | 155 | 366 | 303 | ||||||||||||
Telephone and
communications
|
257 | 193 | 515 | 384 | ||||||||||||
Other
|
1,974 | 1,118 | 3,963 | 2,254 | ||||||||||||
Total
noninterest expense
|
14,481 | 11,456 | 28,832 | 22,692 | ||||||||||||
Income before
income tax expense
|
11,754 | 5,050 | 19,236 | 9,861 | ||||||||||||
Provision for
income tax expense
|
3,223 | 463 | 5,159 | 1,511 | ||||||||||||
Net
Income
|
$ | 8,531 | $ | 4,587 | $ | 14,077 | $ | 8,350 | ||||||||
Earnings per
common share –basic
|
$ | 0.62 | $ | 0.33 | $ | 1.02 | $ | 0.61 | ||||||||
Earnings per
common share –diluted
|
$ | 0.60 | $ | 0.32 | $ | 0.99 | $ | 0.59 | ||||||||
Dividends
declared per common share
|
$ | 0.13 | $ | 0.12 | $ | 0.25 | $ | 0.23 |
Comprehensive
Income
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Treasury
Stock
|
Accumulated
Other
Compre-
hensive
Income
(Loss)
|
Total
Share-holders
Equity
|
||||||||||||||||||||||
Balance at
December 31, 2006
|
$ | 17,594 | $ | 100,736 | $ | 29,648 | $ | (22,850 | ) | $ | (14,524 | ) | $ | 110,604 | ||||||||||||||
Net
Income
|
$ | 8,350 | 8,350 | 8,350 | ||||||||||||||||||||||||
Other
comprehensive
income,
net of tax
Unrealized losses on securities,
net of
reclassification
adjustment
(see Note 3)
|
(1,533 | ) | (1,533 | ) | (1,533 | ) | ||||||||||||||||||||||
Adjustment
to net periodic
benefit cost
(see Note 3)
|
173 | 173 | 173 | |||||||||||||||||||||||||
Comprehensive
income
|
$ | 6,990 | ||||||||||||||||||||||||||
Common stock
issued (108,634 shares)
|
137 | 788 | 925 | |||||||||||||||||||||||||
Stock
compensation expense
|
14 | 14 | ||||||||||||||||||||||||||
Tax benefit
of incentive stock options
|
21 | 21 | ||||||||||||||||||||||||||
Dividends
paid on common stock
|
(2,927 | ) | (2,927 | ) | ||||||||||||||||||||||||
Purchase of
6,120 shares of common stock
|
(133 | ) | (133 | ) | ||||||||||||||||||||||||
Stock
dividend
|
776 | 12,903 | (13,679 | ) | - | |||||||||||||||||||||||
Balance at
June 30, 2007
|
$ | 18,507 | $ | 114,462 | $ | 21,392 | $ | (22,983 | ) | $ | (15,884 | ) | $ | 115,494 | ||||||||||||||
Balance at
December 31, 2007
|
$ | 18,581 | $ | 115,250 | $ | 26,187 | $ | (22,983 | ) | $ | (4,707 | ) | $ | 132,328 | ||||||||||||||
Net
Income
|
$ | 14,077 | 14,077 | 14,077 | ||||||||||||||||||||||||
Other
comprehensive income, net
of
tax
Unrealized
losses on
securities, net
of
reclassification
adjustment (see
Note
3)
|
(2,913 | ) | (2,913 | ) | (2,913 | ) | ||||||||||||||||||||||
Adjustment
to net periodic
benefit cost
(see Note 3)
|
285 | 285 | 285 | |||||||||||||||||||||||||
Comprehensive
income
|
$ | 11,449 | ||||||||||||||||||||||||||
Common stock
issued (99,306 shares)
|
124 | 796 | 920 | |||||||||||||||||||||||||
Stock
compensation expense
|
7 | 7 | ||||||||||||||||||||||||||
Tax benefit
of incentive stock options
|
145 | 145 | ||||||||||||||||||||||||||
Cumulative
effect of adoption of a new accounting principle on January 1, 2008 (see
Note 11)
|
(351 | ) | (351 | ) | ||||||||||||||||||||||||
Dividends
paid on common stock
|
(3,377 | ) | (3,377 | ) | ||||||||||||||||||||||||
Purchase of
6,713 shares of common stock
|
(132 | ) | (132 | ) | ||||||||||||||||||||||||
Stock
dividend
|
824 | 13,422 | (14,246 | ) | - | |||||||||||||||||||||||
Balance at
June 30, 2008
|
$ | 19,529 | $ | 129,620 | $ | 22,290 | $ | (23,115 | ) | $ | (7,335 | ) | $ | 140,989 |
Six Months
Ended
June
30,
|
||||||||
2008
|
2007
|
|||||||
OPERATING
ACTIVITIES:
|
||||||||
Net
income
|
$ | 14,077 | $ | 8,350 | ||||
Adjustments
to reconcile net income to net cash provided
by operations:
|
||||||||
Depreciation
|
1,209 | 1,085 | ||||||
Amortization
of premium
|
3,667 | 2,445 | ||||||
Accretion of
discount and loan fees
|
(1,900 | ) | (1,314 | ) | ||||
Provision for
loan losses
|
5,186 | 334 | ||||||
Stock
compensation expense
|
7 | 14 | ||||||
(Increase) decrease
in interest receivable
|
(579 | ) | 189 | |||||
(Increase)
decrease in other assets
|
(1,457 | ) | 1,585 | |||||
Net change in
deferred taxes
|
(382 | ) | (1,077 | ) | ||||
Decrease in
interest payable
|
(638 | ) | (134 | ) | ||||
Increase
(decrease) in other liabilities
|
1,886 | (434 | ) | |||||
Decrease
(increase) in loans held for sale
|
569 | (1,133 | ) | |||||
Gain on
securities available-for-sale
|
(5,752 | ) | (435 | ) | ||||
Loss on sale
of assets
|
18 | - | ||||||
Loss on sale
of other real estate owned
|
86 | 1 | ||||||
Earnings
allocated to minority interest
|
196 | - | ||||||
Net cash
provided by operating activities
|
16,193 | 9,476 | ||||||
INVESTING
ACTIVITIES:
|
||||||||
Proceeds from
sales of investment securities available for sale
|
73,858 | 4,953 | ||||||
Proceeds from
sales of mortgage-backed securities available for sale
|
148,645 | 51,430 | ||||||
Proceeds from
maturities of investment securities available for sale
|
64,505 | 57,891 | ||||||
Proceeds from
maturities of mortgage-backed securities available for
sale
|
62,586 | 50,874 | ||||||
Proceeds from
maturities of mortgage-backed securities held to maturity
|
17,776 | 20,596 | ||||||
Proceeds from
redemption of Federal Home Loan Bank stock
|
619 | 10,729 | ||||||
Purchases of
investment securities available for sale
|
(136,184 | ) | (51,789 | ) | ||||
Purchases of
mortgage-backed securities available for sale
|
(326,961 | ) | (60,474 | ) | ||||
Purchases of
mortgage-backed securities held to maturity
|
(1,664 | ) | (2,180 | ) | ||||
Purchases of
Federal Home Loan Bank stock and other investments
|
(9,626 | ) | (654 | ) | ||||
Net increase
in loans
|
(22,266 | ) | (10,048 | ) | ||||
Purchases of
premises and equipment
|
(1,201 | ) | (3,712 | ) | ||||
Proceeds from
sales of premises and equipment
|
358 | - | ||||||
Proceeds from
sales of other real estate owned
|
139 | 334 | ||||||
Proceeds from
sales of repossessed assets
|
2,108 | 191 | ||||||
Net cash
(used in) provided by investing activities
|
(127,308 | ) | 68,141 |
Six Months
Ended
|
||||||||
June
30,
|
||||||||
2008
|
2007
|
|||||||
FINANCING
ACTIVITIES:
|
||||||||
Net
increase in demand and savings accounts
|
88,978
|
21,773
|
||||||
Net
(decrease) increase in certificates of deposit
|
(122,340
|
)
|
31,944
|
|||||
Net
increase (decrease) in federal funds purchased and repurchase
agreements
|
2,222
|
(5,675
|
)
|
|||||
Proceeds
from FHLB Advances
|
9,423,627
|
2,786,999
|
||||||
Repayment
of FHLB Advances
|
(9,288,126
|
)
|
(2,909,400
|
)
|
||||
Net
capital distributions from minority interest investment in consolidated
entities
|
(407
|
)
|
-
|
|||||
Tax
benefit of incentive stock options
|
145
|
21
|
||||||
Purchases
of common stock
|
(132
|
)
|
(133
|
)
|
||||
Proceeds
from the issuance of common stock
|
920
|
925
|
||||||
Dividends
paid
|
(3,377
|
)
|
(2,927
|
)
|
||||
Net
cash provided by (used in) financing activities
|
101,510
|
(76,473
|
)
|
|||||
Net
(decrease) increase in cash and cash equivalents
|
(9,605
|
)
|
1,144
|
|||||
Cash and cash
equivalents at beginning of period
|
76,004
|
55,012
|
||||||
Cash and cash
equivalents at end of period
|
$
|
66,399
|
$
|
56,156
|
||||
SUPPLEMENTAL
DISCLOSURES FOR CASH FLOW INFORMATION:
|
||||||||
Interest
paid
|
$
|
31,044
|
$
|
29,624
|
||||
Income
taxes paid
|
5,425
|
2,000
|
||||||
SUPPLEMENTAL
DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Acquisition
of other repossessed assets and real estate through
foreclosure
|
$
|
3,484
|
$
|
197
|
||||
Payment
of 5% stock dividend
|
14,246
|
13,679
|
||||||
Adjustment
to pension liability
|
(262
|
)
|
(262
|
)
|
||||
Unsettled
trades to purchase securities
|
(17,874
|
)
|
(941
|
)
|
||||
Unsettled
trades to sell securities
|
725
|
-
|
Three
Months
|
Six
Months
|
|||||||||||||||
Ended June
30,
|
Ended June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Basic
Earnings and Shares:
|
||||||||||||||||
Net
Income
|
$
|
8,531
|
$
|
4,587
|
$
|
14,077
|
$
|
8,350
|
||||||||
Weighted-average
basic shares outstanding
|
13,843
|
13,688
|
13,824
|
13,660
|
||||||||||||
Basic
Earnings Per Share:
|
||||||||||||||||
Net
Income
|
$
|
0.62
|
$
|
0.33
|
$
|
1.02
|
$
|
0.61
|
||||||||
Diluted
Earnings and Shares:
|
||||||||||||||||
Net
Income
|
$
|
8,531
|
$
|
4,587
|
$
|
14,077
|
$
|
8,350
|
||||||||
Weighted-average
basic shares outstanding
|
13,843
|
13,688
|
13,824
|
13,660
|
||||||||||||
Add: Stock
options
|
347
|
421
|
351
|
442
|
||||||||||||
Weighted-average
diluted shares outstanding
|
14,190
|
14,109
|
14,175
|
14,102
|
||||||||||||
Diluted
Earnings Per Share:
|
||||||||||||||||
Net
Income
|
$
|
0.60
|
$
|
0.32
|
$
|
0.99
|
$
|
0.59
|
Six Months
Ended June 30, 2008
|
||||||||||||
Before-Tax
|
Tax
(Expense)
|
Net-of-Tax
|
||||||||||
Amount
|
Benefit
|
Amount
|
||||||||||
Unrealized
losses on securities:
|
||||||||||||
Unrealized
holding gains arising during period
|
$ | 1,337 | $ | (511 | ) | $ | 826 | |||||
Less: reclassification
adjustment for gains
|
||||||||||||
included
in net income
|
5,752 | (2,013 | ) | 3,739 | ||||||||
Net
unrealized losses on securities
|
(4,415 | ) | 1,502 | (2,913 | ) | |||||||
Change
in pension plans
|
262 | 23 | 285 | |||||||||
Other
comprehensive loss
|
$ | (4,153 | ) | $ | 1,525 | $ | (2,628 | ) |
Three Months
Ended June 30, 2008
|
||||||||||||
Before-Tax
|
Tax
(Expense)
|
Net-of-Tax
|
||||||||||
Amount
|
Benefit
|
Amount
|
||||||||||
Unrealized
losses on securities:
|
||||||||||||
Unrealized
holding losses arising during period
|
$ | (9,626 | ) | $ | 3,369 | $ | (6,257 | ) | ||||
Less: reclassification
adjustment for gains
|
||||||||||||
included
in net income
|
3,660 | (1,281 | ) | 2,379 | ||||||||
Net
unrealized losses on securities
|
(13,286 | ) | 4,650 | (8,636 | ) | |||||||
Change
in pension plans
|
141 | (49 | ) | 92 | ||||||||
Other
comprehensive loss
|
$ | (13,145 | ) | $ | 4,601 | $ | (8,544 | ) |
Six Months
Ended June 30, 2007
|
||||||||||||
Before-Tax
|
Tax
(Expense)
|
Net-of-Tax
|
||||||||||
Amount
|
Benefit
|
Amount
|
||||||||||
Unrealized
losses on securities:
|
||||||||||||
Unrealized
holding losses arising during period
|
$ | (1,888 | ) | $ | 642 | $ | (1,246 | ) | ||||
Less: reclassification
adjustment for gains
|
||||||||||||
included
in net income
|
435 | (148 | ) | 287 | ||||||||
Net
unrealized losses on securities
|
(2,323 | ) | 790 | (1,533 | ) | |||||||
Change in
pension plans
|
262 | (89 | ) | 173 | ||||||||
Other
comprehensive loss
|
$ | (2,061 | ) | $ | 701 | $ | (1,360 | ) |
Three Months
Ended June 30, 2007
|
||||||||||||
Before-Tax
|
Tax
(Expense)
|
Net-of-Tax
|
||||||||||
Amount
|
Benefit
|
Amount
|
||||||||||
Unrealized
losses on securities:
|
||||||||||||
Unrealized
holding losses arising during period
|
$ | (5,556 | ) | $ | 1,889 | $ | (3,667 | ) | ||||
Less: reclassification
adjustment for gains
|
||||||||||||
included
in net income
|
6 | (2 | ) | 4 | ||||||||
Net
unrealized losses on securities
|
(5,562 | ) | 1,891 | (3,671 | ) | |||||||
Change
in pension plans
|
104 | (35 | ) | 69 | ||||||||
Other
comprehensive loss
|
$ | (5,458 | ) | $ | 1,856 | $ | (3,602 | ) |
June 30,
2008
|
||||||||||||||||
AVAILABLE FOR
SALE:
|
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Estimated
Market Value
|
||||||||||||
Investment
Securities:
|
||||||||||||||||
U.S.
Treasury
|
$ | 4,865 | $ | - | $ | 3 | $ | 4,862 | ||||||||
Government
Sponsored Enterprise Debentures
|
16,367 | - | 18 | 16,349 | ||||||||||||
State
and Political Subdivisions
|
83,144 | 1,334 | 944 | 83,534 | ||||||||||||
Other
Stocks and Bonds
|
6,711 | - | 875 | 5,836 | ||||||||||||
Mortgage-backed
Securities:
|
||||||||||||||||
U.S.
Government Agencies
|
96,447 | 1,202 | 576 | 97,073 | ||||||||||||
Government
Sponsored Enterprises
|
753,126 | 4,810 | 3,678 | 754,258 | ||||||||||||
Total
|
$ | 960,660 | $ | 7,346 | $ | 6,094 | $ | 961,912 |
June 30,
2008
|
||||||||||||||||
HELD TO
MATURITY:
|
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Estimated
Market Value
|
||||||||||||
Investment
Securities:
|
||||||||||||||||
Other
Stocks and Bonds
|
$ | 477 | $ | 9 | $ | - | $ | 486 | ||||||||
Mortgage-backed
Securities:
|
||||||||||||||||
U.S.
Government Agencies
|
24,346 | 76 | 63 | 24,359 | ||||||||||||
Government
Sponsored Enterprises
|
149,107 | 607 | 352 | 149,362 | ||||||||||||
Total
|
$ | 173,930 | $ | 692 | $ | 415 | $ | 174,207 |
December 31,
2007
|
||||||||||||||||
AVAILABLE FOR
SALE:
|
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Estimated
Market Value
|
||||||||||||
Investment
Securities:
|
||||||||||||||||
U.S.
Treasury
|
$ | 4,880 | $ | 8 | $ | 2 | $ | 4,886 | ||||||||
Government
Sponsored Enterprise Debentures
|
31,764 | 3 | 8 | 31,759 | ||||||||||||
State
and Political Subdivisions
|
64,868 | 1,599 | 223 | 66,244 | ||||||||||||
Other
Stocks and Bonds
|
7,586 | - | 547 | 7,039 | ||||||||||||
Mortgage-backed
Securities:
|
||||||||||||||||
U.S.
Government Agencies
|
88,937 | 1,234 | 451 | 89,720 | ||||||||||||
Government
Sponsored Enterprises
|
628,768 | 5,847 | 1,555 | 633,060 | ||||||||||||
Other
Private Issues
|
4,773 | - | - | 4,773 | ||||||||||||
Total
|
$ | 831,576 | $ | 8,691 | $ | 2,786 | $ | 837,481 |
December 31,
2007
|
||||||||||||||||
HELD TO
MATURITY:
|
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Estimated
Market Value
|
||||||||||||
Investment
Securities:
|
||||||||||||||||
Other
Stocks and Bonds
|
$ | 475 | $ | 2 | $ | - | $ | 477 | ||||||||
Mortgage-backed
Securities:
|
||||||||||||||||
U.S.
Government Agencies
|
25,965 | 36 | 58 | 25,943 | ||||||||||||
Government
Sponsored Enterprises
|
164,000 | 501 | 531 | 163,970 | ||||||||||||
Total
|
$ | 190,440 | $ | 539 | $ | 589 | $ | 190,390 |
At
|
At
|
|||||||
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Real Estate
Loans:
|
||||||||
Construction
|
$ | 97,083 | $ | 96,356 | ||||
1-4
Family Residential
|
240,149 | 237,888 | ||||||
Other
|
203,109 | 211,280 | ||||||
Commercial
Loans
|
167,963 | 154,171 | ||||||
Municipal
Loans
|
120,194 | 112,523 | ||||||
Loans to
Individuals
|
149,771 | 149,012 | ||||||
Total
Loans
|
$ | 978,269 | $ | 961,230 |
Three
Months
Ended June
30,
|
Six
Months
Ended June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Allowance
for Loan Losses
|
||||||||||||||||
Balance at
beginning of period
|
$
|
10,611
|
$
|
7,261
|
$
|
9,753
|
$
|
7,193
|
||||||||
Provision for
loan losses
|
2,947
|
217
|
5,186
|
334
|
||||||||||||
Loans charged
off
|
(2,542
|
)
|
(616
|
)
|
(4,400
|
)
|
(1,209
|
)
|
||||||||
Recoveries of
loans charged off
|
511
|
505
|
988
|
1,049
|
||||||||||||
Balance at
end of period
|
$
|
11,527
|
$
|
7,367
|
$
|
11,527
|
$
|
7,367
|
||||||||
Reserve for
Unfunded Loan Commitments
|
||||||||||||||||
Balance at
beginning of period
|
$
|
70
|
$
|
–
|
$
|
50
|
$
|
–
|
||||||||
Provision
for losses on unfunded loan
commitments
|
(64
|
)
|
–
|
(44
|
)
|
–
|
||||||||||
Balance
at end of period
|
$
|
6
|
$
|
–
|
$
|
6
|
$
|
–
|
Remainder of
2008
|
$ | 215 | ||
2009
|
383 | |||
2010
|
319 | |||
2011
|
255 | |||
2012
|
198 | |||
Thereafter
|
324 | |||
$ | 1,694 |
7.
|
Long-term Obligations
|
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
(dollars in
thousands)
|
||||||||
Federal Home
Loan Bank Advances (1)
|
||||||||
Varying
maturities to 2028
|
$ | 362,584 | $ | 86,247 | ||||
Long-term
Debt (2)
|
||||||||
Southside
Bancshares Statutory Trust III Due 2033 (3)
|
20,619 | 20,619 | ||||||
Southside
Statutory Trust IV Due 2037 (4)
|
23,196 | 23,196 | ||||||
Southside
Statutory Trust V Due 2037 (5)
|
12,887 | 12,887 | ||||||
Magnolia
Trust Company I Due 2035 (6)
|
3,609 | 3,609 | ||||||
Total
Long-term Debt
|
60,311 | 60,311 | ||||||
Total
Long-term Obligations
|
$ | 422,895 | $ | 146,558 |
|
(2)
|
This
long-term debt consists of trust preferred securities that qualify under
the risk-based capital guidelines as Tier 1 capital, subject to certain
limitations.
|
|
(3)
|
This debt
carries an adjustable rate of 5.74063% through September 29, 2008 and
adjusts quarterly at a rate equal to three-month LIBOR plus 294 basis
points.
|
|
(4)
|
This debt
carries a fixed rate of 6.518% through October 30, 2012 and thereafter,
adjusts quarterly at a rate equal to three-month LIBOR plus 130 basis
points.
|
|
(5)
|
This debt
carries a fixed rate of 7.48% through December 15, 2012 and thereafter,
adjusts quarterly at a rate equal to three-month LIBOR plus 225 basis
points.
|
|
(6)
|
This debt
carries an adjustable rate of 4.43813% through August 24, 2008 and adjust
quarterly at a rate equal to three-month LIBOR plus 180 basis
points.
|
Six Months
Ended June 30,
|
||||||||||||||||
Defined
Benefit
|
||||||||||||||||
Pension
Plan
|
Restoration
Plan
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Service
cost
|
$
|
620
|
$
|
665
|
$
|
43
|
$
|
31
|
||||||||
Interest
cost
|
1,212
|
1,156
|
114
|
84
|
||||||||||||
Expected
return on assets
|
(1,495
|
)
|
(1,264
|
)
|
–
|
–
|
||||||||||
Transition
obligation recognition
|
–
|
–
|
–
|
1
|
||||||||||||
Net loss
recognition
|
208
|
241
|
76
|
42
|
||||||||||||
Prior service
credit amortization
|
(21
|
)
|
(21
|
)
|
(1
|
)
|
(1
|
)
|
||||||||
Net periodic
benefit cost
|
$
|
524
|
$
|
777
|
$
|
232
|
$
|
157
|
||||||||
Three Months
Ended June 30,
|
||||||||||||||||
Defined
Benefit
|
||||||||||||||||
Pension
Plan
|
Restoration
Plan
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Service
cost
|
$
|
293
|
$
|
356
|
$
|
28
|
$
|
16
|
||||||||
Interest
cost
|
594
|
566
|
69
|
39
|
||||||||||||
Expected
return on assets
|
(763
|
)
|
(631
|
)
|
–
|
–
|
||||||||||
Transition
obligation recognition
|
–
|
–
|
–
|
–
|
||||||||||||
Net loss
recognition
|
95
|
105
|
57
|
10
|
||||||||||||
Prior service
credit amortization
|
(11
|
)
|
(11
|
)
|
–
|
–
|
||||||||||
Net periodic
benefit cost
|
$
|
208
|
$
|
385
|
$
|
154
|
$
|
65
|
||||||||
Six Months
Ended
June 30,
2008
|
||||||||
Number of
Options
|
Weighted
Average Grant-Date Fair Value
|
|||||||
Nonvested at
beginning of the period
|
6,030
|
$
|
4.91
|
|||||
Vested
|
(6,030
|
)
|
$
|
4.91
|
||||
Nonvested at
end of period
|
–
|
$
|
–
|
Number of
Options
|
Weighted
Average Exercise Prices
|
Weighted
Average Remaining Contract Life (Years)
|
Aggregate
Intrinsic Value
(in
thousands)
|
||||||
Outstanding
at December 31, 2007
|
500,510
|
$
|
5.52
|
–
|
–
|
||||
Exercised
|
(78,334
|
)
|
$
|
6.05
|
–
|
–
|
|||
Cancelled
|
–
|
$
|
–
|
–
|
–
|
||||
Outstanding
at June 30, 2008
|
422,176
|
$
|
5.42
|
1.75
|
$
|
5,694
|
|||
Exercisable
at June 30, 2008
|
422,176
|
$
|
5.42
|
1.75
|
$
|
5,694
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
Input
|
Input
|
Input
|
Fair
Value
|
|||||||||||||
Securities
available for sale
|
$ | 5,364 | $ | 956,548 | $ | - | $ | 961,912 |
June
30,
|
||||||||
2008
|
2007
|
|||||||
Unused
commitments:
|
||||||||
Due in one
year or less
|
$
|
84,096
|
$
|
87,271
|
||||
Due after one
year
|
61,578
|
30,691
|
||||||
Total
|
$
|
145,674
|
$
|
117,962
|
·
|
general
economic conditions, either globally, nationally, in the State of Texas,
or in the specific markets
|
·
|
legislation,
regulatory changes or changes in monetary or fiscal policy that adversely
affect the businesses in which we are engaged, including the Federal
Reserve’s actions with respect to interest
rates;
|
·
|
adverse
changes in the status or financial condition of the Government Sponsored
Enterprises (the “GSEs”) impacting the GSEs’ guarantees or ability to pay
or issue debt;
|
·
|
economic or
other disruptions caused by acts of terrorism in the United States, Europe
or other areas;
|
·
|
changes in
the interest rate yield curve such as flat, inverted or steep yield
curves, or changes in the interest rate environment that impact interest
margins and may impact prepayments on the mortgage-backed securities
portfolio;
|
·
|
unexpected
outcomes of, and the costs associated with, existing or new litigation
involving us;
|
·
|
changes
impacting the leverage strategy;
|
·
|
our ability
to monitor interest rate risk;
|
·
|
significant
increases in competition in the banking and financial services
industry;
|
·
|
changes in
consumer spending, borrowing and saving
habits;
|
·
|
technological
changes;
|
·
|
our ability
to increase market share and control
expenses;
|
·
|
the effect of
changes in federal or state tax
laws;
|
·
|
the effect of
compliance with legislation or regulatory
changes;
|
·
|
the effect of
changes in accounting policies and
practices;
|
·
|
risks of
mergers and acquisitions including the related time and cost of
implementing transactions and the potential failure to achieve expected
gains, revenue growth or expense
savings;
|
·
|
credit risks
of borrowers, including any increase in those risks due to changing
economic conditions;
|
·
|
risks related
to loans secured by real estate, including the risk that the value and
marketability of collateral could
decline;
|
·
|
increases in
the Company’s non-performing
assets;
|
·
|
the Company’s
ability to maintain adequate liquidity to fund its operations and growth;
and
|
·
|
failure of
assumptions underlying allowance for loan losses and other
estimates.
|