Southside Bancshares, Inc. Announces Net Income for the Three and Nine Months Ended September 30, 2015

TYLER, Texas, Oct. 30, 2015 (GLOBE NEWSWIRE) — Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the three and nine months ended September 30, 2015.

Southside reported net income of $11.8 million for the three months ended September 30, 2015, an increase of $5.7 million, or 92.9%, when compared to $6.1 million for the same period in 2014.  Net income for the nine months ended September 30, 2015 increased $7.5 million, or 30.4%, to $32.3 million when compared to $24.8 million for the same period in 2014.

Diluted earnings per common share were $0.46 and $0.31 for the three months ended September 30, 2015 and 2014, respectively, an increase of $0.15, or 48.4%.  For the nine months ended September 30, 2015, diluted earnings per common share increased $0.02, or 1.6%, to $1.27 when compared to $1.25 for the same period in 2014.

The return on average shareholders’ equity for the nine months ended September 30, 2015 was 9.93%, compared to 11.92% for the same period in 2014.  The return on average assets was 0.90% for the nine months ended September 30, 2015, compared to 0.97% for the same period in 2014.

“We are extremely pleased with our financial results this quarter,” stated Sam Dawson, President and Chief Executive Officer of Southside Bancshares, Inc.  “During the quarter we experienced double digit annualized loan growth of 10.8% as both prior and current quarter loan commitments began to fund.  Over two-thirds of this loan growth was booked in September, elevating our anticipation of increases in revenue during the fourth quarter.  We are pleased to report loan production remains strong in all of our markets, especially in our Fort Worth and Austin markets.  The merger related expense reductions are virtually complete, as evidenced by the linked quarter total noninterest expense decline in each of the three quarters during 2015.  We recorded approximately $0.1 million, net of tax, of merger-related expense during the third quarter and approximately $3.4 million, net of tax, of merger-related expense for the nine months.  Southside’s balance sheet, asset quality, liquidity and capital all remain strong, allowing for continued strong growth in our market areas.”

“With the integration of OmniAmerican basically complete, we are now focusing on additional operational efficiencies and revenue generating and cost containment opportunities.  This effort was commenced earlier this year and should be complete by the summer of 2016.  The anticipated results are an enhanced customer experience, operational efficiencies and an increase in net income.”

“Loans increased $59.3 million during the quarter which more than offset the payoffs in our 1-4 family residential loans and the decrease in loans to individuals resulting primarily from the continued roll off in the indirect automobile loan portfolio, which decreased by approximately $23.0 million.  During the quarter, construction loans increased $46.6 million, other real estate loans increased $36.3 million and municipal loans increased $5.9 million.  Based on loans committed and activity in our pipeline, we continue to anticipate healthy overall net loan growth during 2015.  We are focused on executing our business plan as we continue to add value to our customers and the communities we serve.”

Loans and Deposits

For the nine months ended September 30, 2015, total loans increased by $58.0 million, when compared to December 31, 2014.  During the nine months ended September 30, 2015, construction loans increased $74.5 million, other real estate loans increased $69.0 million, municipal loans increased $4.9 million, commercial loans increased $1.8 million, 1-4 family real estate loans decreased $12.5 million, and loans to individuals decreased $79.7 million primarily as a result of the decrease in the indirect automobile loan portfolio.  Our oil and gas exposure in the loan portfolio remained minimal at September 30, 2015 with direct oil and gas exposure of 1.48% of the loan portfolio and total direct and indirect oil and gas exposure of 2.69% of the loan portfolio.

Nonperforming assets increased during the nine months of 2015 by $21.3 million, to $33.6 million, or 0.70% of total assets, compared to 0.26% at December 31, 2014 primarily due to the downgrade of one large commercial borrowing relationship to impaired status during the first quarter of 2015 and the restructure of a large purchase credit impaired commercial loan during the three months ended September 30, 2015.

During the nine months ended September 30, 2015, the allowance for loan losses increased $5.1 million, to $18.4 million, or 0.8% of total loans, compared to 0.6% at December 31, 2014, as a result of the additional provision associated with loan growth and impaired loans.  The allowance for loan losses as a percentage of total loans decreased from the comparable period in 2014 from 1.0%, as a result of the loans acquired in connection with the OmniAmerican Bancorp, Inc. acquisition measured at fair value at the acquisition date with no carryover of the allowance for loan loss and the sale of the subprime automobile loans purchased by Southside Financial Group, Inc., both of which occurred in the second half of 2014.

During the nine months ended September 30, 2015, deposits, net of brokered deposits, decreased $87.1 million, or 2.6%, compared to December 31, 2014.  During this nine-month period, public fund deposits decreased $64.0 million due to seasonal fluctuations and the demand for higher interest rates on certain deposits.

Net Interest Income for the Three Months

Net interest income increased $7.6 million, or 29.4%, to $33.3 million for the three months ended September 30, 2015, when compared to $25.7 million for the same period in 2014.  The increase in net interest income was primarily the result of the increase in interest income of $8.4 million, compared to the same period in 2014, which was a result of the increase in total loans.  For the three months ended September 30, 2015, our net interest spread decreased to 3.26%, compared to 3.65% for the same period in 2014.  The net interest margin decreased to 3.35% for the three months ended September 30, 2015, compared to 3.80% for the same period in 2014.  The net interest spread and margin each decreased as a result of the decrease in the yield on interest-earning assets, which more than offset the decrease in the yield on interest-bearing liabilities compared to the same period in 2014.

Net Interest Income for the Nine Months

Net interest income increased $18.5 million, or 22.7%, to $100.0 million for the nine months ended September 30, 2015, when compared to $81.5 million for the same period in 2014.  The increase in net interest income was primarily the result of the increase in interest income of $20.4 million, compared to the same period in 2014, which was a result of the increase in total loans and total securities.  For the nine months ended September 30, 2015, our net interest spread decreased to 3.32%, compared to 3.75% for the same period in 2014.  The net interest margin decreased to 3.41% for the nine months ended September 30, 2015, compared to 3.89% for the same period in 2014.  The net interest spread and margin each decreased as a result of the decrease in the yield on interest-earning assets, which more than offset the decrease in the yield on interest-bearing liabilities compared to the same period in 2014.

Net Income for the Three Months

Net income increased $5.7 million, or 92.9%, for the three months ended September 30, 2015, to $11.8 million when compared to the same period in 2014.  The increase was primarily the result of an increase in interest income of $8.4 million and an increase in noninterest income of $4.1 million combined with a decrease in provision for loan loss of $2.6 million, which were partially offset by a $6.4 million increase in noninterest expense and a $2.2 million increase in income tax expense.

Noninterest expense increased $6.4 million, or 31.8%, for the three months ended September 30, 2015, compared to the same period in 2014, primarily due to increases in salaries and employee benefits expense, occupancy expense, ATM and debit card expense, software and data processing expense and other noninterest expense which were partially offset by a decrease in professional fees.

Net Income for the Nine Months

Net income increased $7.5 million, or 30.4%, for the nine months ended September 30, 2015, to $32.3 million when compared to the same period in 2014.  The increase was primarily the result of an increase in interest income of $20.4 million and an increase in noninterest income of $11.2 million combined with a decrease in provision for loan loss of $5.3 million, which were partially offset by a $23.4 million increase in noninterest expense and a $4.1 million increase in income tax expense.

Noninterest expense increased $23.4 million, or 38.6%, for the nine months ended September 30, 2015, compared to the same period in 2014, primarily due to increases in salaries and employee benefits expense, occupancy expense, ATM and debit card expense, software and data processing expense and other noninterest expense which were partially offset by a decrease in professional fees.

Conference Call

Southside’s management team will host a conference call to discuss its third quarter 2015 results on Friday, October 30, 2015 at 9:30 am CDT.  The call can be accessed by dialing 877-340-9220 and by identifying the conference ID number 65900393 or by identifying “Southside Bancshares, Inc., Third Quarter 2015 Earnings Call.”  To listen to call via webcast, register at www.southside.com/about/investor-relations.

For those unable to listen to the conference call live, a recording of the conference call with be available from approximately 3:00 pm CDT October 30, 2015 through November 10, 2015 by accessing the company website, www.southside.com/about/investor-relations.

Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles (GAAP) in the United States and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of our performance. These include the following fully-taxable equivalent measures: tax-equivalent net interest income, tax-equivalent net interest margin, tax-equivalent net interest spread, and tax-equivalent efficiency ratio., which include the effects of taxable-equivalent adjustments using a federal income tax rate of 35% to increase tax-exempt interest income to a tax-equivalent basis.  Tax-equivalent adjustments are reported in Notes 2 and 3 to the Average Balances with Average Yields and Rates tables under Results of Operations below.

Tax-equivalent net interest income, net interest margin and net interest spread.  Net Interest Income on a tax-equivalent basis is a non-GAAP measure that adjusts for the tax-favored status of net interest income from loans and investments. We believe this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. The most directly comparable financial measure calculated in accordance with GAAP is our net interest income. Net interest margin on a tax-equivalent basis is net interest income on a tax-equivalent basis divided by average interest-earning assets on a tax-equivalent basis.  Net interest spread on a tax-equivalent basis is the difference in the average yield on average interest-earning assets on a tax equivalent basis and the average rate paid on average interest-bearing liabilities.

Tax-equivalent efficiency ratio.  The efficiency ratio on a tax-equivalent basis is a non-GAAP measure that provides a measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense, excluding amortization of intangibles and certain non-recurring expense by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains (losses) on sales of investment securities and certain non-recurring impairments.

These non-GAAP financial measures should not be considered an alternative to GAAP-basis financial statements, and other bank holding companies may define or calculate these or similar measures differently.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $4.8 billion in assets that owns 100% of Southside Bank.  Southside Bank currently has 61 banking centers in Texas and operates a network of over 70 ATMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at www.southside.com/investor.  Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data.  To receive e-mail notification of company news, events and stock activity, please register on the E-mail Notification portion of the website.  Questions or comments may be directed to Deborah Wilkinson at (817) 367-4962, or deborah.wilkinson@southside.com.

Forward-Looking Statements

Certain statements of other than historical fact that are contained in this document and in other written material, press releases and oral statements issued by or on behalf of the Company, may be considered to be “forward-looking statements” within the meaning of and subject to the protections of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date.  These statements may include words such as “expect,” “estimate,” “project,” “anticipate,” “appear,” “believe,” “could,” “should,” “may,” “likely,” “intend,” “probability,” “risk,” “target,” “objective,” “plans,” “potential,” and similar expressions.  Forward-looking statements are statements with respect to the Company’s beliefs, plans, expectations, objectives, goals, anticipations, assumptions, estimates, intentions and future performance and are subject to significant known and unknown risks and uncertainties, which could cause the Company’s actual results to differ materially from the results discussed in the forward-looking statements.  For example, discussions about trends in asset quality, capital, liquidity, the pace of loan and revenue growth, merger-related integration cost savings, earnings and certain market risk disclosures, including the impact of interest rate and other economic uncertainty, are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations.  By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future.

Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 under “Forward-Looking Information” and Item 1A. “Risk Factors,” and in the Company’s other filings with the Securities and Exchange Commission.  The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

   
  SOUTHSIDE BANCSHARES, INC.
  CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
  (In thousands, except per share data)
                   
                   
  As of
  2015   2014
  Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,
ASSETS                  
Cash and due from banks $ 52,311     $ 50,406     $ 55,055     $ 64,001     $ 49,937  
Interest-bearing deposits 19,583     26,623     52,123     20,654     19,284  
Investment securities:                  
Available for sale, at estimated fair value 301,627     371,019     293,735     306,706     321,221  
Held to maturity, at carrying value 386,385     387,212     388,106     388,823     389,529  
Mortgage-backed securities:                  
Available for sale, at estimated fair value 1,073,368     1,094,802     1,140,140     1,142,002     674,529  
Held to maturity, at carrying value 385,529     356,669     249,430     253,496     256,528  
Federal Home Loan Bank stock, at cost 43,446     37,769     39,978     39,942     24,435  
Loans held for sale 4,883     7,431     4,096     2,899     75,436  
Loans 2,239,146     2,179,863     2,174,614     2,181,133     1,398,674  
Less: Allowance for loan losses (18,402 )   (16,822 )   (16,926 )   (13,292 )   (13,415 )
Net loans 2,220,744     2,163,041     2,157,688     2,167,841     1,385,259  
Premises & equipment, net 109,087     110,493     111,903     112,860     53,889  
Goodwill 91,520     90,571     90,394     91,372     22,034  
Other intangible assets, net 7,090     7,654     8,242     8,844     100  
Bank owned life insurance 94,303     93,673     93,021     92,384     46,890  
Other assets 47,599     58,655     48,482     115,437     48,960  
Total assets $ 4,837,475     $ 4,856,018     $ 4,732,393     $ 4,807,261     $ 3,368,031  
                   
LIABILITIES AND SHAREHOLDERS’ EQUITY                  
Noninterest-bearing deposits $ 681,618     $ 715,966     $ 680,122     $ 661,014     $ 585,415  
Interest-bearing deposits 2,646,259     2,752,717     2,815,218     2,713,403     1,858,149  
Total deposits 3,327,877     3,468,683     3,495,340     3,374,417     2,443,564  
Short-term obligations 445,008     284,783     143,371     301,605     53,924  
Long-term obligations 558,867     632,565     609,856     660,363     536,315  
Other liabilities 58,575     38,313     49,012     45,633     43,119  
Total liabilities 4,390,327     4,424,344     4,297,579     4,382,018     3,076,922  
Shareholders’ equity 447,148     431,674     434,814     425,243     291,109  
Total liabilities and shareholders’ equity $ 4,837,475     $ 4,856,018     $ 4,732,393     $ 4,807,261     $ 3,368,031  
 

 
  At or For the Three Months Ended
  2015   2014
  Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,
Income Statement:                  
Total interest income $ 38,211     $ 37,750     $ 38,607     $ 29,613     $ 29,840  
Total interest expense 4,926     4,845     4,816     4,259     4,120  
Net interest income 33,285     32,905     33,791     25,354     25,720  
Provision for loan losses 2,276     268     3,848     3,287     4,868  
Net interest income after provision for loan losses 31,009     32,637     29,943     22,067     20,852  
Noninterest income                  
Deposit services 5,213     4,920     4,989     3,988     3,860  
Net gain on sale of securities available for sale 875     105     2,476     1,170     1,151  
Impairment of investment in SFG Finance, LLC             (516 )   (2,239 )
Gain on sale of loans 305     822     377     54     108  
Trust income 835     820     893     805     798  
Bank owned life insurance income 661     653     669     393     320  
Other 1,227     1,099     1,644     1,255     1,021  
Total noninterest income 9,116     8,419     11,048     7,149     5,019  
Noninterest expense                  
Salaries and employee benefits 15,733     16,869     18,199     21,829     12,798  
Occupancy expense 3,071     2,593     3,459     1,946     1,773  
Advertising, travel & entertainment 642     683     657     582     489  
ATM and debit card expense 617     750     679     385     327  
Professional fees 825     793     742     4,464     1,132  
Software and data processing expense 819     1,237     1,031     3,099     543  
Telephone and communications 534     603     469     332     292  
FDIC insurance 624     629     638     446     437  
FHLB prepayment fees             539      
Other 3,527     3,768     3,835     3,457     2,226  
Total noninterest expense 26,392     27,925     29,709     37,079     20,017  
Income (loss) before income tax expense 13,733     13,131     11,282     (7,863 )   5,854  
Income tax expense (benefit) 1,971     1,967     1,903     (3,918 )   (243 )
Net income (loss) $ 11,762     $ 11,164     $ 9,379     $ (3,945 )   $ 6,097  

Common share data:      
Weighted-average basic shares outstanding 25,360     25,337     25,322     20,757     19,809  
Weighted-average diluted shares outstanding 25,445     25,425     25,403     20,757     19,915  
Shares outstanding end of period 25,373     25,351     25,331     25,317     19,863  
Net income (loss) per common share                  
Basic $ 0.46     $ 0.44     $ 0.37     $ (0.19 )   $ 0.31  
Diluted 0.46     0.44     0.37     (0.19 )   0.31  
Cash dividend paid per common share 0.23     0.23     0.23     0.32     0.22  

Selected Performance Ratios:                  
Return on average assets 0.96 %   0.93 %   0.79 %   (0.43 )%   0.72 %
Return on average shareholders’ equity 10.65     10.30     8.79     (4.94 )   8.41  
Average yield on interest earning assets 3.79     3.83     3.95     3.92     4.32  
Average yield on interest bearing liabilities 0.53     0.53     0.53     0.63     0.67  
Net interest spread 3.26     3.30     3.42     3.29     3.65  
Net interest margin 3.35     3.39     3.50     3.42     3.80  
Average interest earnings assets to average interest bearing liabilities 121.61     120.22     118.36     125.71     128.27  
Noninterest expense to average total assets 2.16     2.34     2.50     4.04     2.38  
Efficiency ratio 56.36     59.98     62.07     60.04     55.05  
                             

   
  At or For the
Nine Months Ended
  September 30,
  2015   2014
Income Statement:      
Total interest income $ 114,568     $ 94,165  
Total interest expense 14,587     12,697  
Net interest income 99,981     81,468  
Provision for loan losses 6,392     11,651  
Net interest income after provision for loan losses 93,589     69,817  
Noninterest income      
Deposit services 15,122     11,292  
Net gain on sale of securities available for sale 3,456     1,660  
Impairment of investment in SFG Finance, LLC     (2,239 )
Gain on sale of loans 1,504     269  
Trust income 2,548     2,340  
Bank owned life insurance income 1,983     941  
Other 3,970     3,077  
Total noninterest income 28,583     17,340  
Noninterest expense      
Salaries and employee benefits 50,801     38,992  
Occupancy expense 9,123     5,313  
Advertising, travel & entertainment 1,982     1,637  
ATM and debit card expense 2,046     946  
Professional fees 2,360     3,363  
Software and data processing expense 3,087     1,530  
Telephone and communications 1,606     890  
FDIC insurance 1,891     1,319  
Other 11,130     6,635  
Total noninterest expense 84,026     60,625  
Income before income tax expense 38,146     26,532  
Income tax expense 5,841     1,754  
Net income $ 32,305     $ 24,778  

Common share data:    
Weighted-average basic shares outstanding 25,340     19,782  
Weighted-average diluted shares outstanding 25,424     19,881  
Net income per common share      
Basic $ 1.27     $ 1.25  
Diluted 1.27     1.25  
Book value per common share 17.62     14.66  
Cash dividend paid per common share 0.69     0.64  

   
Selected Performance Ratios:      
Return on average assets 0.90 %   0.97 %
Return on average shareholders’ equity 9.93     11.92  
Average yield on interest earning assets 3.85     4.42  
Average yield on interest bearing liabilities 0.53     0.67  
Net interest spread 3.32     3.75  
Net interest margin 3.41     3.89  
Average interest earnings assets to average interest bearing liabilities 120.06     126.45  
Noninterest expense to average total assets 2.33     2.37  
Efficiency ratio 59.48     53.94  

   
  Southside Bancshares, Inc.
  Selected Financial Data (Unaudited)
  (In thousands)
                   
  Three Months Ended
  2015   2014
  Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,
Nonperforming assets 33,621     27,794     27,262     12,277     9,864  
Nonaccrual loans 20,988     21,223     20,321     4,096     4,685  
Accruing loans past due more than 90 days     30     1     4     1  
Restructured loans 11,772     5,667     5,782     5,874     4,388  
Other real estate owned 793     787     985     1,738     383  
Repossessed assets 68     87     173     565     407  
                   
Asset Quality Ratios:                  
Nonaccruing loans to total loans 0.94 %   0.97 %   0.93 %   0.19 %   0.33 %
Allowance for loan losses to nonaccruing loans 87.68     79.26     83.29     324.51     286.34  
Allowance for loan losses to nonperforming assets 54.73     60.52     62.09     108.27     136.00  
Allowance for loan losses to total loans 0.82     0.77     0.78     0.61     0.96  
Nonperforming assets to total assets 0.70     0.57     0.58     0.26     0.29  
Net charge-offs to average loans 0.13     0.07     0.04     0.88     2.76  
                   
Capital Ratios:                  
Shareholders’ equity to total assets 9.24     8.89     9.19     8.85     8.64  
Average shareholders’ equity to average total assets 9.03     9.07     8.98     8.71     8.61  

Loan Portfolio Composition
 
The following table sets forth loan totals by category for the periods presented:
 
Real Estate Loans:                  
Construction $ 342,282     $ 295,633     $ 275,960     $ 267,830     $ 178,127  
1-4 Family Residential 678,431     683,944     693,137     690,895     394,889  
Other 537,161     500,906     470,877     468,171     332,519  
Commercial Loans 228,272     228,789     241,100     226,460     162,356  
Municipal Loans 262,384     256,492     252,756     257,492     256,319  
Loans to Individuals 190,616     214,099     240,784     270,285     74,464  
Total Loans $ 2,239,146     $ 2,179,863     $ 2,174,614     $ 2,181,133     $ 1,398,674  
 

RESULTS OF OPERATIONS

The analysis below shows average interest earning assets and interest bearing liabilities together with the average yield on the interest earning assets and the average rate of the interest bearing liabilities.

   
  AVERAGE BALANCES WITH AVERAGE YIELDS AND RATES
          (dollars in thousands)        
          (unaudited)        
          Three Months Ended        
  September 30, 2015   June 30, 2015
          AVG           AVG
  AVG       YIELD/   AVG       YIELD/
  BALANCE   INTEREST   RATE   BALANCE   INTEREST   RATE
ASSETS                      
INTEREST EARNING ASSETS:                      
Loans (1)(2) $ 2,200,241     $ 24,779     4.47 %   $ 2,188,886     $ 24,889     4.56 %
Loans Held For Sale 5,327     52     3.87 %   3,675     45     4.91 %
Securities:                      
Investment Securities (Taxable) (4) 86,105     475     2.19 %   86,561     459     2.13 %
Investment Securities (Tax-Exempt)(3)(4) 638,767     8,750     5.43 %   627,405     8,752     5.60 %
Mortgage-backed Securities (4) 1,441,129     8,318     2.29 %   1,400,389     7,666     2.20 %
Total Securities 2,166,001     17,543     3.21 %   2,114,355     16,877     3.20 %
FHLB stock and other investments, at cost 45,963     65     0.56 %   42,741     65     0.61 %
Interest Earning Deposits 26,216     15     0.23 %   39,609     29     0.29 %
Total Interest Earning Assets 4,443,748     42,454     3.79 %   4,389,266     41,905     3.83 %
NONINTEREST EARNING ASSETS:                      
Cash and Due From Banks 49,285             49,760          
Bank Premises and Equipment 110,028             111,384          
Other Assets 263,038             259,319          
Less: Allowance for Loan Loss (17,021 )           (17,059 )        
Total Assets $ 4,849,078             $ 4,792,670          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
INTEREST BEARING LIABILITIES:                      
Savings Deposits $ 232,903     60     0.10 %   $ 234,097     59     0.10 %
Time Deposits 833,962     1,360     0.65 %   853,410     1,313     0.62 %
Interest Bearing Demand Deposits 1,600,454     1,065     0.26 %   1,701,559     1,121     0.26 %
Total Interest Bearing Deposits 2,667,319     2,485     0.37 %   2,789,066     2,493     0.36 %
Short-term Interest Bearing Liabilities 398,905     354     0.35 %   232,471     154     0.27 %
Long-term Interest Bearing Liabilities – FHLB Dallas 527,591     1,720     1.29 %   569,302     1,837     1.29 %
Long-term Debt (5) 60,311     367     2.41 %   60,311     361     2.40 %
Total Interest Bearing Liabilities 3,654,126     4,926     0.53 %   3,651,150     4,845     0.53 %
NONINTEREST BEARING LIABILITIES:                      
Demand Deposits 715,326             669,068          
Other Liabilities 41,606             37,607          
Total Liabilities 4,411,058             4,357,825          
SHAREHOLDERS’ EQUITY 438,020             434,845          
Total Liabilities and Shareholders’ Equity $ 4,849,078             $ 4,792,670          
NET INTEREST INCOME     $ 37,528             $ 37,060      
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS         3.35 %           3.39 %
NET INTEREST SPREAD         3.26 %           3.30 %
                       

  (1 ) Interest on loans includes net fees on loans that are not material in amount.
  (2 ) Interest income includes taxable-equivalent adjustments of $1,044 and $1,047 for the three months ended September 30, 2015 and June 30, 2015, respectively.
  (3 ) Interest income includes taxable-equivalent adjustments of $3,199 and $3,108 for the three months ended September 30, 2015 and June 30, 2015, respectively.
  (4 ) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.
  (5 ) Represents the issuance of junior subordinated debentures.
   

Note: As of September 30, 2015 and June 30, 2015, loans on nonaccrual status totaled $20,988 and $21,223, respectively.  Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

                   
          Three Months Ended        
  March 31, 2015   December 31, 2014
          AVG           AVG
  AVG       YIELD/   AVG       YIELD/
  BALANCE   INTEREST   RATE   BALANCE   INTEREST   RATE
ASSETS                      
INTEREST EARNING ASSETS:                      
Loans (1)(2) $ 2,189,163     $ 24,938     4.62 %   $ 1,529,467     $ 17,601     4.57 %
Loans Held For Sale 1,987     28     5.71 %   41,666     35     0.33 %
Securities:                      
Investment Securities (Taxable) (4) 49,437     237     1.94 %   30,867     139     1.79 %
Investment Securities (Tax-Exempt)(3)(4) 645,231     8,834     5.55 %   638,849     8,775     5.45 %
Mortgage-backed Securities (4) 1,392,606     8,462     2.46 %   1,051,385     6,898     2.60 %
Total Securities 2,087,274     17,533     3.41 %   1,721,101     15,812     3.64 %
FHLB stock and other investments, at cost 43,886     93     0.86 %   28,942     37     0.51 %
Interest Earning Deposits 58,576     34     0.24 %   69,701     43     0.24 %
Total Interest Earning Assets 4,380,886     42,626     3.95 %   3,390,877     33,528     3.92 %
NONINTEREST EARNING ASSETS:                      
Cash and Due From Banks 57,367             45,009          
Bank Premises and Equipment 112,635             63,598          
Other Assets 282,421             154,958          
Less: Allowance for Loan Loss (13,625 )           (13,445 )        
Total Assets $ 4,819,684             $ 3,640,997          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
INTEREST BEARING LIABILITIES:                      
Savings Deposits $ 229,946     53     0.09 %   $ 138,724     35     0.10 %
Time Deposits 863,477     1,362     0.64 %   625,896     1,043     0.66 %
Interest Bearing Demand Deposits 1,699,225     1,114     0.27 %   1,278,924     899     0.28 %
Total Interest Bearing Deposits 2,792,648     2,529     0.37 %   2,043,544     1,977     0.38 %
Short-term Interest Bearing Liabilities 272,302     142     0.21 %   95,484     271     1.13 %
Long-term Interest Bearing Liabilities – FHLB Dallas 576,199     1,792     1.26 %   497,948     1,652     1.32 %
Long-term Debt (5) 60,311     353     2.37 %   60,311     359     2.36 %
Total Interest Bearing Liabilities 3,701,460     4,816     0.53 %   2,697,287     4,259     0.63 %
NONINTEREST BEARING LIABILITIES:                      
Demand Deposits 645,573             594,326          
Other Liabilities 40,058             32,360          
Total Liabilities 4,387,091             3,323,973          
SHAREHOLDERS’ EQUITY 432,593             317,024          
Total Liabilities and Shareholders’ Equity $ 4,819,684             $ 3,640,997          
NET INTEREST INCOME     $ 37,810             $ 29,269      
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS         3.50 %           3.42 %
NET INTEREST SPREAD         3.42 %           3.29 %
                       

  (1 ) Interest on loans includes net fees on loans that are not material in amount.
  (2 ) Interest income includes taxable-equivalent adjustments of $1,050 and $874 for the three months ended March 31, 2015 and December 31, 2014, respectively.
  (3 ) Interest income includes taxable-equivalent adjustments of $2,969 and $3,041 for the three months ended March 31, 2015 and December 31, 2014, respectively.
  (4 ) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.
  (5 ) Represents the issuance of junior subordinated debentures.
   

Note: As of  March 31, 2015 and December 31, 2014, loans on nonaccrual status totaled $20,321 and $4,096, respectively.  Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

   
  Three Months Ended
  September 30, 2014
          AVG
  AVG       YIELD/
  BALANCE   INTEREST   RATE
ASSETS          
INTEREST EARNING ASSETS:          
Loans (1)(2) $ 1,416,061     $ 18,172     5.09 %
Loans Held For Sale 1,277     4     1.24 %
Securities:          
Investment Securities (Taxable) (4) 43,951     210     1.90 %
Investment Securities (Tax-Exempt)(3)(4) 698,438     9,614     5.46 %
Mortgage-backed Securities (4) 902,406     6,070     2.67 %
Total Securities 1,644,795     15,894     3.83 %
FHLB stock and other investments, at cost 26,123     36     0.55 %
Interest Earning Deposits 45,726     31     0.27 %
Total Interest Earning Assets 3,133,982     34,137     4.32 %
NONINTEREST EARNING ASSETS:          
Cash and Due From Banks 39,533          
Bank Premises and Equipment 53,626          
Other Assets 132,724          
Less: Allowance for Loan Loss (18,029 )        
Total Assets $ 3,341,836          
LIABILITIES AND SHAREHOLDERS’ EQUITY          
INTEREST BEARING LIABILITIES:          
Savings Deposits $ 118,745     32     0.11 %
Time Deposits 573,893     1,011     0.70 %
Interest Bearing Demand Deposits 1,168,888     833     0.28 %
Total Interest Bearing Deposits 1,861,526     1,876     0.40 %
Short-term Interest Bearing Liabilities 39,146     226     2.29 %
Long-term Interest Bearing Liabilities – FHLB Dallas 482,241     1,659     1.36 %
Long-term Debt (5) 60,311     359     2.36 %
Total Interest Bearing Liabilities 2,443,224     4,120     0.67 %
NONINTEREST BEARING LIABILITIES:          
Demand Deposits 578,866          
Other Liabilities 32,058          
Total Liabilities 3,054,148          
SHAREHOLDERS’ EQUITY 287,688          
Total Liabilities and Shareholders’ Equity $ 3,341,836          
NET INTEREST INCOME     $ 30,017      
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS         3.80 %
NET INTEREST SPREAD         3.65 %
 

  (1 ) Interest on loans includes net fees on loans that are not material in amount.
  (2 ) Interest income includes taxable-equivalent adjustment of $1,008 for the three months ended September 30, 2014.
  (3 ) Interest income includes taxable-equivalent adjustment of $3,289 for the three months ended September 30, 2014.
  (4 ) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.
  (5 ) Represents the issuance of junior subordinated debentures.
   

Note: As of  September 30, 2014, loans on nonaccrual status totaled $4,685.  Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

   
  AVERAGE BALANCES WITH AVERAGE YIELDS AND RATES
          (dollars in thousands)        
          (unaudited)        
          Nine Months Ended        
  September 30, 2015   September 30, 2014
          AVG           AVG
  AVG       YIELD/   AVG       YIELD/
  BALANCE   INTEREST   RATE   BALANCE   INTEREST   RATE
ASSETS                      
INTEREST EARNING ASSETS:                      
Loans (1) (2) $ 2,192,804     $ 74,606     4.55 %   $ 1,384,269     $ 56,849     5.49 %
Loans Held For Sale 3,675     125     4.55 %   682     12     2.35 %
Securities:                      
Investment Securities (Taxable)(4) 74,169     1,171     2.11 %   33,943     476     1.87 %
Investment Securities (Tax-Exempt)(3)(4) 637,110     26,336     5.53 %   666,084     27,488     5.52 %
Mortgage-backed Securities (4) 1,411,553     24,446     2.32 %   1,057,683     21,309     2.69 %
Total Securities 2,122,832     51,953     3.27 %   1,757,710     49,273     3.75 %
FHLB stock and other investments, at cost 44,204     223     0.67 %   28,597     144     0.67 %
Interest Earning Deposits 41,348     78     0.25 %   49,850     96     0.26 %
Total Interest Earning Assets 4,404,863     126,985     3.85 %   3,221,108     106,374     4.42 %
NONINTEREST EARNING ASSETS:                      
Cash and Due From Banks 52,108             42,780          
Bank Premises and Equipment 111,341             53,012          
Other Assets 268,188             126,457          
Less: Allowance for Loan Loss (15,914 )           (18,435 )        
Total Assets $ 4,820,586             $ 3,424,922          
LIABILITIES AND SHAREHOLDERS’ EQUITY                      
INTEREST BEARING LIABILITIES:                      
Savings Deposits $ 232,326     172     0.10 %   $ 115,633     101     0.12 %
Time Deposits 850,175     4,035     0.63 %   604,881     3,244     0.72 %
Interest Bearing Demand Deposits 1,666,718     3,300     0.26 %   1,215,800     2,631     0.29 %
Total Interest Bearing Deposits 2,749,219     7,507     0.37 %   1,936,314     5,976     0.41 %
Short-term Interest Bearing Liabilities 301,689     650     0.29 %   53,604     353     0.88 %
Long-term Interest Bearing Liabilities – FHLB Dallas 557,519     5,349     1.28 %   497,076     5,303     1.43 %
Long-term Debt (5) 60,311     1,081     2.40 %   60,311     1,065     2.36 %
Total Interest Bearing Liabilities 3,668,738     14,587     0.53 %   2,547,305     12,697     0.67 %
NONINTEREST BEARING LIABILITIES:                      
Demand Deposits 676,911             570,854          
Other Liabilities 39,764             28,765          
Total Liabilities 4,385,413             3,146,924          
SHAREHOLDERS’ EQUITY 435,173             277,998          
Total Liabilities and Shareholders’ Equity $ 4,820,586             $ 3,424,922          
NET INTEREST INCOME     $ 112,398             $ 93,677      
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS         3.41 %           3.89 %
NET INTEREST SPREAD         3.32 %           3.75 %
 

  (1 ) Interest on loans includes net fees on loans that are not material in amount.
  (2 ) Interest income includes taxable-equivalent adjustments of $3,141 and $3,025 for the nine months ended September 30, 2015 and 2014, respectively.
  (3 ) Interest income includes taxable-equivalent adjustments of $9,276 and $9,184 for the nine months ended September 30, 2015 and 2014, respectively.
  (4 ) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.
  (5 ) Represents the issuance of junior subordinated debentures.
   

Note: As of  September 30, 2015 and 2014, loans on nonaccrual status totaled $20,988 and $4,685, respectively.  Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.