SBSI Southside Bancshares Inc

Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ: SBSI) today reported its financial results for the quarter ended June 30, 2023. Southside reported net income of $24.9 million for the three months ended June 30, 2023, a decrease of $0.5 million, or 2.0%, compared to $25.4 million for the same period in 2022. Earnings per diluted common share increased $0.02, or 2.5%, to $0.81 for the three months ended June 30, 2023, from $0.79 for the same period in 2022. The annualized return on average shareholders’ equity for the three months ended June 30, 2023 was 13.32%, compared to 13.33% for the same period in 2022.  The annualized return on average assets was 1.29% for the three months ended June 30, 2023, compared to 1.42% for the same period in 2022.

“Southside reported excellent financial results for the second quarter, highlighted by earnings per share of $0.81, an 18.59% return on tangible common equity, a linked quarter increase in loans of 4.2%, and continued strong asset quality metrics,” stated Lee R. Gibson, President and Chief Executive Officer of Southside. “Approximately 80% of our loan growth occurred in June. Linked quarter, deposits net of brokered and public fund deposits increased $73.1 million, or 1.6%. Our tax-equivalent net interest margin linked quarter decreased four basis points primarily due to increased deposit pricing pressure, partially offset by a 22 basis point increase in the yield on average loans and a 21 basis point increase in the yield on average securities.”

Operating Results for the Three Months Ended June 30, 2023

Net income was $24.9 million for the three months ended June 30, 2023, compared to $25.4 million for the same period in 2022, a decrease of $0.5 million, or 2.0%. Earnings per diluted common share were $0.81 and $0.79 for the three months ended June 30, 2023 and 2022, respectively. The decrease in net income was primarily a result of increases in noninterest expense and income tax expense, partially offset by increases in net interest income and noninterest income. Annualized returns on average assets and average shareholders’ equity for the three months ended June 30, 2023 were 1.29% and 13.32%, respectively, compared to 1.42% and 13.33%, respectively, for the three months ended June 30, 2022.  Our efficiency ratio and tax-equivalent efficiency ratio(1) were 53.54% and 51.06%, respectively, for the three months ended June 30, 2023, compared to 50.61% and 47.74%, respectively, for the three months ended June 30, 2022, and 53.57% and 50.99%, respectively, for the three months ended March 31, 2023.

Net interest income for the three months ended June 30, 2023 was $53.9 million, compared to $51.1 million for the same period in 2022, an increase of 5.6%. The increase in net interest income was due to the increase in interest income, a result of the increase in the average yield and the average balance of interest earning assets, partially offset by an increase in interest expense on our interest bearing liabilities due to higher interest rates and an increase in the average balance of our interest bearing liabilities. Linked quarter, net interest income increased $0.6 million, or 1.1%, compared to $53.4 million during the three months ended March 31, 2023. The increase in net interest income was largely due to the increase in the average yield of interest earning assets, which more than offset the increase in the average balance and average rate paid on our interest bearing liabilities.

Our net interest margin and tax-equivalent net interest margin(1) decreased to 2.99% and 3.17%, respectively, for the three months ended June 30, 2023, compared to 3.07% and 3.30%, respectively, for the same period in 2022. Linked quarter, net interest margin and tax-equivalent net interest margin(1) decreased from 3.02% and 3.21%, respectively for the three months ended March 31, 2023.

Noninterest income was $10.5 million for the three months ended June 30, 2023, an increase of $1.4 million, or 15.0%, compared to $9.1 million for the same period in 2022. The increase was due to a net gain on sale of equity securities and an increase in other noninterest income, partially offset by an increase in net loss on sale of securities available for sale (“AFS”) and decreases in deposit services income and brokerage services income. On a linked quarter basis, noninterest income decreased $1.6 million, or 13.0%, compared to the three months ended March 31, 2023. The decrease was due to an increase in net loss on sale of securities AFS and a decrease in bank owned life insurance (“BOLI”) income related to death benefits realized in the first quarter of 2023, partially offset by increases in other noninterest income, net gain on sale of equity securities and brokerage services income.

Noninterest expense increased $2.9 million, or 9.0%, to $35.0 million for the three months ended June 30, 2023, compared to $32.1 million for the same period in 2022. The primary increase was in salaries and employee benefits. Several additional expense categories increased during the three months ended June 30, 2023, including FDIC insurance, other noninterest expense and software and data processing expense. On a linked quarter basis, noninterest expense increased by $0.1 million, or 0.4%, compared to the three months ended March 31, 2023.

Income tax expense increased $1.3 million, or 38.6%, for the three months ended June 30, 2023, compared to the same period in 2022. On a linked quarter basis, income tax expense increased $25,000, or 0.6%. Our effective tax rate (“ETR”) increased to 15.5% for the three months ended June 30, 2023, compared to 11.5% for the three months ended June 30, 2022, and increased from 14.9% for the three months ended March 31, 2023. The higher ETR for the three months ended June 30, 2023 was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income as compared to the same period in 2022.

Operating Results for the Six Months Ended June 30, 2023

Net income was $50.9 million for the six months ended June 30, 2023, compared to $50.4 million for the same period in 2022, an increase of $0.5 million, or 1.0%. Earnings per diluted common share were $1.64 for the six months ended June 30, 2023, compared to $1.56 for the same period in 2022, an increase of 5.1%. The increase in net income was primarily a result of increases in net interest income and noninterest income, partially offset by increases in noninterest expense and income tax expense. Returns on average assets and average shareholders’ equity for the six months ended June 30, 2023 were 1.34% and 13.62%, respectively, compared to 1.41% and 12.31%, respectively, for the six months ended June 30, 2022.  Our efficiency ratio and tax-equivalent efficiency ratio(1) were 53.55% and 51.02%, respectively, for the six months ended June 30, 2023, compared to 50.66% and 47.94%, respectively, for the six months ended June 30, 2022.

Net interest income was $107.3 million for the six months ended June 30, 2023, compared to $100.0 million for the same period in 2022, due to the increase in interest income, a result of the increase in the average yield and balance of our interest earning assets, partially offset by the increase in average rate paid and average balance of our interest bearing liabilities.

Our net interest margin and tax-equivalent net interest margin(1) were 3.01% and 3.19%, respectively, for the six months ended June 30, 2023, compared to 3.05% and 3.26%, respectively, for the same period in 2022. The decrease in net interest margin was due to larger average rate and balance increases on our interest-bearing liabilities when compared to the interest earning assets during the six months ended June 30, 2023.

Noninterest income was $22.5 million for the six months ended June 30, 2023, an increase of $2.7 million, or 13.5%, compared to $19.8 million for the same period in 2022. The increase was due to a net gain on sale of equity securities and an increase in BOLI income related to death benefits realized in the first quarter of 2023, partially offset by an increase in net loss on sale of securities AFS and decreases in other noninterest income, deposit services income and brokerage services income.

Noninterest expense was $69.8 million for the six months ended June 30, 2023, compared to $63.3 million for the same period in 2022, an increase of $6.5 million, or 10.3%. The primary increase was in salaries and employee benefits. Several additional expense categories increased, including other noninterest expense, software and data processing expense and FDIC insurance.

Income tax expense increased $2.7 million, or 41.4%, for the six months ended June 30, 2023, compared to the same period in 2022. Our ETR was approximately 15.2% and 11.3% for the six months ended June 30, 2023 and 2022, respectively. The higher ETR for the six months ended June 30, 2023, as compared to the same period in 2022, was primarily due to a decrease in tax-exempt income as a percentage of pre-tax income.

Balance Sheet Data

At June 30, 2023, Southside had $7.81 billion in total assets, compared to $7.56 billion at December 31, 2022 and $7.61 billion at June 30, 2022.

Loans at June 30, 2023 were $4.33 billion, an increase of $366.0 million, or 9.2%, compared to $3.96 billion at June 30, 2022. Linked quarter, loans increased $176.4 million, or 4.2%, due to increases of $109.5 million in commercial real estate loans, $65.5 million in construction loans and $12.3 million in 1-4 family residential loans. These increases were partially offset by decreases of $4.5 million in commercial loans, $3.4 million in municipal loans and $3.0 million in loans to individuals.

Securities at June 30, 2023 were $2.65 billion, a decrease of $168.7 million, or 6.0%, compared to $2.82 billion at June 30, 2022. Linked quarter, securities decreased $97.4 million, or 3.5%, from $2.75 billion at March 31, 2023. The linked quarter net decrease was due to the sale of municipal bonds and mortgage-backed securities.

Deposits at June 30, 2023 were $6.12 billion, a decrease of $130.7 million, or 2.1%, compared to $6.25 billion at June 30, 2022. Linked quarter, deposits increased $279.5 million, or 4.8%, from $5.84 billion at March 31, 2023. During the three months ended June 30, 2023, brokered deposits increased $302.7 million, or 64.7%, compared to March 31, 2023, as the funding of our cash flow hedge swaps partially transitioned from other borrowings to brokered deposits to obtain lower cost funding.

At June 30, 2023, we had 180,865 total deposit accounts with an average balance of $30,000. At June 30, 2023, our deposit accounts consisted of the following (dollars in thousands):

		June 30, 2023
		Balance			Number of Accounts		Average Balance			% of Total Deposits
Individual non-maturity		$	2,195,950		149,887		$	15		35.9	%
Commercial non-maturity			1,746,652		21,054			83		28.6	%
Certificates of deposits			602,745		9,223			65		9.8	%
Public funds			802,195		701			1,144		13.1	%
Total deposits, excluding brokered deposits			5,347,542		180,865		$	30		87.4	%
Brokered deposits			770,145		—			—		12.6	%
Total deposits		$	6,117,687							100.0	%

At June 30, 2023, our estimated uninsured deposits, excluding affiliate deposits (Southside-owned deposits) and public funds (all collateralized), was 21.4%. At June 30, 2023, estimated uninsured deposits consisted of the following (dollars in thousands):

		June 30, 2023
		Balance			Uninsured Balance				% of Uninsured Total Deposits
Affiliate deposits		$	21,583		$	21,333			0.3		%
Customer deposits			4,523,764			1,309,550			21.4		%
Brokered deposits			770,145			—			—		%
Public funds			802,195			775,739			12.7		%
Total		$	6,117,687			2,106,622			34.4		%
Excluding public funds (collateralized)						(775,739	)		(12.7	)	%
Excluding affiliate deposits						(21,333	)		(0.3	)	%
Total estimated uninsured deposits					$	1,309,550			21.4		%

We continued to increase interest rates paid on deposits during the quarter in order to retain deposits. Our noninterest bearing deposits represent 24.0% of total deposits. Linked quarter, our cost of interest bearing deposits increased 21 basis points from 1.82% in the prior quarter to 2.03%. Linked quarter, our cost of total deposits increased 16 basis points from 1.34% in the prior quarter to 1.50%.

Our cost of interest bearing deposits increased 157 basis points, from 0.35% for the six months ended June 30, 2022, to 1.92% for the six months ended June 30, 2023. Our cost of total deposits increased 117 basis points, from 0.25% for the six months ended June 30, 2022 to 1.42% for the six months ended June 30, 2023.

Capital Resources and Liquidity

Our capital ratios and contingent liquidity sources remain solid. During the second quarter ended June 30, 2023, we purchased the remaining 618,831 shares of the Company’s common stock at an average price of $30.27 authorized pursuant to the Stock Repurchase Plan with no authorized shares remaining to be purchased as of June 30, 2023. On July 20, 2023, our board of directors approved a Stock Repurchase Plan authorizing the repurchase of up to 1.0 million shares of the Company’s outstanding common stock. Repurchases may be carried out in open market purchases, privately negotiated transactions or pursuant to any trading plan that might be adopted in accordance with Rule 10b5-1 of the Exchange Act, as amended. The Company has no obligation to repurchase any shares under the Stock Repurchase Plan and may modify, suspend or discontinue the plan at any time. As of July 25, 2023, no shares have been purchased under this recent Stock Repurchase Plan.

We utilized the Federal Reserve’s Bank Term Funding Program (“BTFP”) to reduce our overall funding costs and to enhance our interest rate risk position. As of June 30, 2023, our BTFP borrowings of $296.2 million were at a cost of 4.46%.

The table below shows our total lines of credit, current borrowings as of June 30, 2023, total amounts available for future borrowings, and swapped value (in thousands):

		June 30, 2023
		Line of Credit				Borrowings				Total Available for Future Liquidity			Swapped
FHLB advances		$	1,979,115			$	183,007			$	1,796,108		$	180,000
Federal Reserve discount window			693,551				100,000				593,551			—
Correspondent bank lines of credit			62,500				—				62,500			—
Federal Reserve Bank Term Funding Program			296,866				296,158				708			—
Total liquidity lines		$	3,032,032			$	579,165			$	2,452,867		$	180,000

Asset Quality

Nonperforming assets at June 30, 2023 were $3.1 million, or 0.04% of total assets, a decrease of $8.8 million, or 74.1%, compared to $11.8 million, or 0.16% of total assets, at June 30, 2022. The decrease in nonperforming assets was primarily due to the adoption of ASU 2022-02 on January 1, 2023, which allowed for the prospective exclusion of loan modifications that are performing but would have previously required disclosure as troubled debt restructures in nonperforming assets. Linked quarter, nonperforming assets decreased slightly from $3.2 million at March 31, 2023.

The allowance for loan losses totaled $36.3 million, or 0.84% of total loans, at June 30, 2023, compared to $35.4 million, or 0.89% of total loans, at June 30, 2022. The decrease in the allowance as a percentage of total loans was primarily due to improved asset quality and the increase in the total loan portfolio when compared to June 30, 2022. The allowance for loan losses was $36.3 million, or 0.87% of total loans, at March 31, 2023.

For the three month period ended June 30, 2023, we recorded a provision for credit losses for loans of $0.3 million, compared to a reversal of provision for credit losses for loans of $0.1 million and a provision for credit losses of $0.1 million for the three month periods ended June 30, 2022 and March 31, 2023, respectively. Net charge-offs were $0.3 million for the three months ended June 30, 2023, compared to net recoveries of $37,000 for the three months ended June 30, 2022 and net charge-offs of $0.3 million for the three months ended March 31, 2023. Net charge-offs were $0.6 million for the six months ended June 30, 2023, compared to net recoveries of $22,000 for the six months ended June 30, 2022.

We recorded a reversal of provision for credit losses for off-balance-sheet credit exposures of $0.4 million and $0.5 million for the three month periods ended June 30, 2023 and 2022, respectively and $0.1 million for the three months ended March 31, 2023. We recorded a reversal of provision for credit losses for off-balance-sheet credit exposures of $0.5 million for both of the six-month periods ended June 30, 2023 and 2022. The balance of the allowance for off-balance-sheet credit exposures at June 30, 2023 and 2022, was $3.2 million and $1.9 million, respectively, and is included in other liabilities.

Dividend

Southside Bancshares, Inc. declared a second quarter cash dividend of $0.35 per share on May 4, 2023, which was paid on June 6, 2023, to all shareholders of record as of May 23, 2023.

(1) Refer to “Non-GAAP Financial Measures” below and to “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for more information and for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

Conference Call

Southside's management team will host a conference call to discuss its second quarter ended June 30, 2023 financial results on Tuesday, July 25, 2023 at 11:00 a.m. CDT. The conference call can be accessed by webcast, for listen-only mode, on the company website, https://investors.southside.com, under Events.

Those interested in participating in the question and answer session, or others who prefer to call-in, can register at https://register.vevent.com/register/BI8f91599282bd40e58e2908cc56c04bda to receive the dial-in number and unique code to access the conference call seamlessly. While not required, it is recommended that those wishing to participate register 10 minutes prior to the conference call to ensure a more efficient registration process.

For those unable to attend the live event, a webcast recording will be available on the company website, https://investors.southside.com, for at least 30 days, beginning approximately two hours following the conference call.

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 (“FTE”): (i) Net interest income (FTE), (ii) net interest margin (FTE), (iii) net interest spread (FTE), and (iv) efficiency ratio (FTE), which include the effects of taxable-equivalent adjustments using a federal income tax rate of 21% to increase tax-exempt interest income to a tax-equivalent basis. Interest income earned on certain assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments.

Net interest income (FTE), net interest margin (FTE) and net interest spread (FTE). Net interest income (FTE) is a non-GAAP measure that adjusts for the tax-favored status of net interest income from certain loans and investments and is not permitted under GAAP in the consolidated statements of income. We believe this measure to be the preferred industry measurement of net interest income and that 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 (FTE) is the ratio of net interest income (FTE) to average earning assets. The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin. Net interest spread (FTE) is the difference in the average yield on average earning assets on a tax-equivalent basis and the average rate paid on average interest bearing liabilities. The most directly comparable financial measure calculated in accordance with GAAP is our net interest spread.

Efficiency ratio (FTE).  The efficiency ratio (FTE) is a non-GAAP measure that provides a measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. The ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense, excluding amortization expense on intangibles and certain nonrecurring expense by the sum of net interest income (FTE) and noninterest income, excluding net gain (loss) on sale of securities available for sale and certain nonrecurring impairments. The most directly comparable financial measure calculated in accordance with GAAP is our efficiency ratio.

These non-GAAP financial measures should not be considered alternatives to GAAP-basis financial statements and other bank holding companies may define or calculate these non-GAAP measures or similar measures differently. Whenever we present a non-GAAP financial measure in an SEC filing, we are also required to present the most directly comparable financial measure calculated and presented in accordance with GAAP and reconcile the differences between the non-GAAP financial measure and such comparable GAAP measure.

Management believes adjusting net interest income, net interest margin and net interest spread to a fully taxable-equivalent basis is a standard practice in the banking industry as these measures provide useful information to make peer comparisons. Tax-equivalent adjustments are reflected in the respective earning asset categories as listed in the “Average Balances with Average Yields and Rates” tables.

A reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $7.81 billion in assets as of June 30, 2023, that owns 100% of Southside Bank.  Southside Bank currently has 55 branches in Texas and operates a network of 73 ATMs/ITMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at https://investors.southside.com. Our investor relations site provides a detailed overview of our activities, financial information and historical stock price data.  To receive email notification of company news, events and stock activity, please register on the website under Resources and Investor Email Alerts. Questions or comments may be directed to Lindsey Bailes at (903) 630-7965, or lindsey.bailes@southside.com.

Forward-Looking Statements

Certain statements of other than historical fact that are contained in this press release and in other written materials, documents and oral statements issued by or on behalf of the Company may be considered to be “forward-looking statements” within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date.  These statements may include words such as “expect,” “estimate,” “project,” “anticipate,” “appear,” “believe,” “could,” “should,” “may,” “might,” “will,” “would,” “seek,” “intend,” “probability,” “risk,” “goal,” “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 of the effect of our expansion, benefits of the Share Repurchase Plan, trends in asset quality, capital, liquidity, the Company's ability to sell nonperforming assets, expense reductions, planned operational efficiencies and earnings from growth and certain market risk disclosures, including the impact of interest rates, tax reform, inflation, the impacts related to or resulting from other economic factors are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations.  By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future.  Accordingly, our results could materially differ from those that have been estimated. The most significant factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the ongoing impact of higher inflation levels, higher interest rates and general economic and recessionary concerns, all of which could impact economic growth and could cause a reduction in financial transactions and business activities, including decreased deposits and reduced loan originations, our ability to manage liquidity in a rapidly changing and unpredictable market, supply chain disruptions, labor shortages and additional interest rate increases by the Federal Reserve.

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, 2022, under “Part I - Item 1. Forward Looking Information” and “Part I - Item 1A. Risk Factors,” “the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, under Part II - 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)(Dollars in thousands)
	As of
		2023								2022
	Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
ASSETS
Cash and due from banks	$	114,707			$	101,109			$	106,143			$	110,620			$	111,099
Interest earning deposits		14,059				151,999				9,276				3,476				12,910
Federal funds sold		78,347				57,384				83,833				81,031				48,280
Securities available for sale, at estimated fair value		1,339,821				1,437,222				1,299,014				1,424,562				1,733,354
Securities held to maturity, at net carrying value		1,308,472				1,308,457				1,326,729				1,151,205				1,083,672
Total securities		2,648,293				2,745,679				2,625,743				2,575,767				2,817,026
Federal Home Loan Bank stock, at cost		10,801				16,696				9,190				12,887				13,726
Loans held for sale		1,666				407				667				421				815
Loans		4,329,043				4,152,644				4,147,691				4,063,495				3,963,041
Less: Allowance for loan losses		(36,303	)			(36,332	)			(36,515	)			(36,506	)			(35,449	)
Net loans		4,292,740				4,116,312				4,111,176				4,026,989				3,927,592
Premises & equipment, net		139,801				141,363				141,256				142,653				142,772
Goodwill		201,116				201,116				201,116				201,116				201,116
Other intangible assets, net		3,702				4,144				4,622				5,137				5,687
Bank owned life insurance		134,951				134,635				133,911				133,394				132,675
Other assets		167,069				121,501				131,703				160,256				192,363
Total assets	$	7,807,252			$	7,792,345			$	7,558,636			$	7,453,747			$	7,606,061
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits	$	1,466,756			$	1,543,413			$	1,671,562			$	1,759,959			$	1,735,488
Interest bearing deposits		4,650,931				4,294,807				4,526,457				4,421,200				4,512,921
Total deposits		6,117,687				5,838,220				6,198,019				6,181,159				6,248,409
Other borrowings and Federal Home Loan Bank borrowings		683,348				958,810				374,511				318,252				212,179
Subordinated notes, net of unamortized debt issuance costs		93,796				98,710				98,674				98,639				98,604
Trust preferred subordinated debentures, net of unamortized debt issuance costs		60,267				60,266				60,265				60,264				60,262
Other liabilities		86,993				85,309				81,170				87,797				254,825
Total liabilities		7,042,091				7,041,315				6,812,639				6,746,111				6,874,279
Shareholders' equity		765,161				751,030				745,997				707,636				731,782
Total liabilities and shareholders' equity	$	7,807,252			$	7,792,345			$	7,558,636			$	7,453,747			$	7,606,061

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars and shares in thousands, except per share data)
	Three Months Ended
		2023										2022
	Jun 30,					Mar 31,					Dec 31,					Sep 30,					Jun 30,
Income Statement:
Total interest income	$	86,876				$	80,848				$	75,128				$	66,880				$	57,100
Total interest expense		32,960					27,495					18,286					11,365					6,022
Net interest income		53,916					53,353					56,842					55,515					51,078
Provision for (reversal of) credit losses		(74	)				(40	)				2,086					1,494					(633	)
Net interest income after provision for (reversal of) credit losses		53,990					53,393					54,756					54,021					51,711
Noninterest income
Deposit services		6,291					6,422					6,478					6,241					6,496
Net gain (loss) on sale of securities available for sale		(3,455	)				(2,146	)				—					(99	)				(2,177	)
Net gain on sale of equity securities		2,642					2,416					—					—					—
Gain on sale of loans		185					104					36					109					208
Trust fees		1,490					1,467					1,571					1,407					1,520
Bank owned life insurance		756					1,675					516					720					720
Brokerage services		904					697					727					701					1,098
Other		1,651					1,398					1,438					1,190					1,232
Total noninterest income		10,464					12,033					10,766					10,269					9,097
Noninterest expense
Salaries and employee benefits		21,376					21,856					20,967					21,368					20,329
Net occupancy		3,690					3,734					3,973					3,847					3,654
Advertising, travel & entertainment		854					1,050					1,188					789					716
ATM expense		320					355					360					317					356
Professional fees		1,192					1,372					1,473					1,412					1,147
Software and data processing		2,264					2,055					1,741					1,736					1,739
Communications		348					327					387					497					509
FDIC insurance		1,220					544					511					485					477
Amortization of intangibles		442					478					515					550					586
Other		3,287					3,078					2,446					2,463					2,593
Total noninterest expense		34,993					34,849					33,561					33,464					32,106
Income before income tax expense		29,461					30,577					31,961					30,826					28,702
Income tax expense		4,568					4,543					4,293					3,875					3,297
Net income	$	24,893				$	26,034				$	27,668				$	26,951				$	25,405
Common Share Data:
Weighted-average basic shares outstanding		30,721					31,372					31,896					32,112					32,119
Weighted-average diluted shares outstanding		30,754					31,464					31,964					32,221					32,251
Common shares outstanding end of period		30,532					31,121					31,547					32,127					32,108
Earnings per common share
Basic	$	0.81				$	0.83				$	0.87				$	0.84				$	0.79
Diluted		0.81					0.83					0.87					0.84					0.79
Book value per common share		25.06					24.13					23.65					22.03					22.79
Tangible book value per common share		18.35					17.54					17.13					15.61					16.35
Cash dividends paid per common share		0.35					0.35					0.38					0.34					0.34
Selected Performance Ratios:
Return on average assets		1.29		%			1.38		%			1.47		%			1.43		%			1.42		%
Return on average shareholders’ equity		13.32					13.92					15.08					14.23					13.33
Return on average tangible common equity (1)		18.59					19.36					21.35					19.94					18.62
Average yield on earning assets (FTE) (1)		5.00					4.76					4.43					4.00					3.66
Average rate on interest bearing liabilities		2.45					2.14					1.48					0.92					0.52
Net interest margin (FTE) (1)		3.17					3.21					3.40					3.36					3.30
Net interest spread (FTE) (1)		2.55					2.62					2.95					3.08					3.14
Average earning assets to average interest bearing liabilities		134.12					137.67					143.66					142.83					144.54
Noninterest expense to average total assets		1.82					1.85					1.78					1.77					1.79
Efficiency ratio (FTE) (1)		51.06					50.99					46.38					47.42					47.74
(1) Refer to “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars in thousands)
	Three Months Ended
		2023								2022
	Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
Nonperforming Assets:	$	3,059			$	3,180			$	10,862			$	11,717			$	11,815
Nonaccrual loans		3,017				3,169				2,846				3,039				3,119
Accruing loans past due more than 90 days		—				—				—				—				—
Restructured loans (1)		—				—				7,849				8,481				8,568
Other real estate owned		—				—				93				162				128
Repossessed assets		42				11				74				35				—
Asset Quality Ratios:
Ratio of nonaccruing loans to:
Total loans		0.07	%			0.08	%			0.07	%			0.07	%			0.08	%
Ratio of nonperforming assets to:
Total assets		0.04				0.04				0.14				0.16				0.16
Total loans		0.07				0.08				0.26				0.29				0.30
Total loans and OREO		0.07				0.08				0.26				0.29				0.30
Ratio of allowance for loan losses to:
Nonaccruing loans		1,203.28				1,146.48				1,283.03				1,201.25				1,136.55
Nonperforming assets		1,186.76				1,142.52				336.17				311.56				300.03
Total loans		0.84				0.87				0.88				0.90				0.89
Net charge-offs (recoveries) to average loans outstanding		0.03				0.03				0.05				0.02				—
Capital Ratios:
Shareholders’ equity to total assets		9.80				9.64				9.87				9.49				9.62
Common equity tier 1 capital		12.32				12.73				12.63				12.98				12.83
Tier 1 risk-based capital		13.37				13.81				13.70				14.07				13.94
Total risk-based capital		15.68				16.28				16.11				16.50				16.38
Tier 1 leverage capital		9.69				9.83				9.96				10.09				10.34
Period end tangible equity to period end tangible assets (2)		7.37				7.19				7.35				6.92				7.10
Average shareholders’ equity to average total assets		9.72				9.94				9.72				10.02				10.64
(1) Pursuant to our adoption of ASU 2022-02, effective January 1, 2023, we prospectively discontinued the recognition and measurement guidance previously required on troubled debt restructures. As a result, “restructured” loans beginning March 31, 2023 exclude any loan modifications that are performing but would have previously required disclosure as troubled debt restructures.
(2) Refer to the “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars in thousands)
	Three Months Ended
		2023								2022
Loan Portfolio Composition	Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
Real Estate Loans:
Construction	$	657,354			$	591,894			$	559,681			$	554,345			$	520,484
1-4 Family Residential		684,878				672,595				663,519				646,692				640,706
Commercial		2,100,338				1,990,861				1,987,707				1,901,921				1,834,734
Commercial Loans		383,724				388,182				412,064				433,538				428,974
Municipal Loans		435,211				438,566				450,067				449,219				457,239
Loans to Individuals		67,538				70,546				74,653				77,780				80,904
Total Loans	$	4,329,043			$	4,152,644			$	4,147,691			$	4,063,495			$	3,963,041
Summary of Changes in Allowances:
Allowance for Loan Losses
Balance at beginning of period	$	36,332			$	36,515			$	36,506			$	35,449			$	35,524
Loans charged-off		(737	)			(633	)			(864	)			(686	)			(479	)
Recoveries of loans charged-off		430				362				383				449				516
Net loans (charged-off) recovered		(307	)			(271	)			(481	)			(237	)			37
Provision for (reversal of) loan losses		278				88				490				1,294				(112	)
Balance at end of period	$	36,303			$	36,332			$	36,515			$	36,506			$	35,449
Allowance for Off-Balance-Sheet Credit Exposures
Balance at beginning of period	$	3,559			$	3,687			$	2,091			$	1,891			$	2,412
Provision for (reversal of) off-balance-sheet credit exposures		(352	)			(128	)			1,596				200				(521	)
Balance at end of period	$	3,207			$	3,559			$	3,687			$	2,091			$	1,891
Total Allowance for Credit Losses	$	39,510			$	39,891			$	40,202			$	38,597			$	37,340

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars in thousands)
	Six Months Ended
	June 30,
		2023					2022
Income Statement:
Total interest income	$	167,724				$	110,973
Total interest expense		60,455					10,989
Net interest income		107,269					99,984
Provision for (reversal of) credit losses		(114	)				(339	)
Net interest income after provision for (reversal of) credit losses		107,383					100,323
Noninterest income
Deposit services		12,713					13,124
Net gain (loss) on sale of securities available for sale		(5,601	)				(3,720	)
Net gain on sale of equity securities		5,058					—
Gain on sale of loans		289					386
Trust fees		2,957					3,014
Bank owned life insurance		2,431					1,411
Brokerage services		1,601					1,907
Other		3,049					3,700
Total noninterest income		22,497					19,822
Noninterest expense
Salaries and employee benefits		43,232					40,298
Net occupancy		7,424					7,310
Advertising, travel & entertainment		1,904					1,453
ATM expense		675					637
Professional fees		2,564					2,074
Software and data processing		4,319					3,370
Communications		675					1,012
FDIC insurance		1,764					949
Amortization of intangibles		920					1,208
Other		6,365					4,990
Total noninterest expense		69,842					63,301
Income before income tax expense		60,038					56,844
Income tax expense		9,111					6,443
Net income	$	50,927				$	50,401
Common Share Data:
Weighted-average basic shares outstanding		31,045					32,237
Weighted-average diluted shares outstanding		31,099					32,394
Common shares outstanding end of period		30,532					32,108
Earnings per common share
Basic	$	1.64				$	1.56
Diluted		1.64					1.56
Book value per common share		25.06					22.79
Tangible book value per common share		18.35					16.35
Cash dividends paid per common share		0.70					0.68
Selected Performance Ratios:
Return on average assets		1.34		%			1.41		%
Return on average shareholders’ equity		13.62					12.31
Return on average tangible common equity (1)		18.98					16.75
Average yield on earning assets (FTE) (1)		4.88					3.60
Average rate on interest bearing liabilities		2.30					0.48
Net interest margin (FTE) (1)		3.19					3.26
Net interest spread (FTE) (1)		2.58					3.12
Average earning assets to average interest bearing liabilities		135.85					143.24
Noninterest expense to average total assets		1.84					1.77
Efficiency ratio (FTE) (1)		51.02					47.94
(1) Refer to “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars in thousands)
	Six Months Ended
	June 30,
		2023				2022
Nonperforming Assets:	$	3,059			$	11,815
Nonaccrual loans		3,017				3,119
Accruing loans past due more than 90 days		—				—
Restructured loans (1)		—				8,568
Other real estate owned		—				128
Repossessed assets		42				—
Asset Quality Ratios:
Ratio of nonaccruing loans to:
Total loans		0.07	%			0.08	%
Ratio of nonperforming assets to:
Total assets		0.04				0.16
Total loans		0.07				0.30
Total loans and OREO		0.07				0.30
Ratio of allowance for loan losses to:
Nonaccruing loans		1,203.28				1,136.55
Nonperforming assets		1,186.76				300.03
Total loans		0.84				0.89
Net charge-offs (recoveries) to average loans outstanding		0.03				—
Capital Ratios:
Shareholders’ equity to total assets		9.80				9.62
Common equity tier 1 capital		12.32				12.83
Tier 1 risk-based capital		13.37				13.94
Total risk-based capital		15.68				16.38
Tier 1 leverage capital		9.69				10.34
Period end tangible equity to period end tangible assets (2)		7.37				7.10
Average shareholders’ equity to average total assets		9.83				11.47
(1) Pursuant to our adoption of ASU 2022-02, effective January 1, 2023, we prospectively discontinued the recognition and measurement guidance previously required on troubled debt restructures. As a result, “restructured” loans beginning March 31, 2023 exclude any loan modifications that are performing but would have previously required disclosure as troubled debt restructures.
(2) Refer to the “Non-GAAP Reconciliation” at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars in thousands)
	Six Months Ended
	June 30,
Loan Portfolio Composition		2023				2022
Real Estate Loans:
Construction	$	657,354			$	520,484
1-4 Family Residential		684,878				640,706
Commercial		2,100,338				1,834,734
Commercial Loans		383,724				428,974
Municipal Loans		435,211				457,239
Loans to Individuals		67,538				80,904
Total Loans	$	4,329,043			$	3,963,041
Summary of Changes in Allowances:
Allowance for Loan Losses
Balance at beginning of period	$	36,515			$	35,273
Loans charged-off		(1,370	)			(1,034	)
Recoveries of loans charged-off		792				1,056
Net loans (charged-off) recovered		(578	)			22
Provision for (reversal of) loan losses		366				154
Balance at end of period	$	36,303			$	35,449
Allowance for Off-Balance-Sheet Credit Exposures
Balance at beginning of period	$	3,687			$	2,384
Provision for (reversal of) off-balance-sheet credit exposures		(480	)			(493	)
Balance at end of period	$	3,207			$	1,891
Total Allowance for Credit Losses	$	39,510			$	37,340

The tables that follow show average earning assets and interest bearing liabilities together with the average yield on the earning assets and the average rate of the interest bearing liabilities for the periods presented. The interest and related yields presented are on a fully taxable-equivalent basis and are therefore non-GAAP measures. See “Non-GAAP Financial Measures” and “Non-GAAP Reconciliation” for more information.

Southside Bancshares, Inc.Average Balances and Average Yields and Rates (Annualized) (Unaudited)(Dollars in thousands)
	Three Months Ended
	June 30, 2023										March 31, 2023
	Average Balance				Interest			Average Yield/Rate			Average Balance				Interest			Average Yield/Rate
ASSETS
Loans (1)	$	4,197,130			$	59,334		5.67	%		$	4,128,775			$	55,453		5.45	%
Loans held for sale		1,664				23		5.54	%			1,662				20		4.88	%
Securities:
Taxable investment securities (2)		925,445				8,773		3.80	%			690,864				5,712		3.35	%
Tax-exempt investment securities (2)		1,562,232				16,182		4.15	%			1,692,700				16,466		3.95	%
Mortgage-backed and related securities (2)		401,427				3,830		3.83	%			455,811				4,329		3.85	%
Total securities		2,889,104				28,785		4.00	%			2,839,375				26,507		3.79	%
Federal Home Loan Bank stock, at cost, and equity investments		21,480				379		7.08	%			31,470				245		3.16	%
Interest earning deposits		56,604				742		5.26	%			87,924				1,033		4.76	%
Federal funds sold		59,186				748		5.07	%			72,630				837		4.67	%
Total earning assets		7,225,168				90,011		5.00	%			7,161,836				84,095		4.76	%
Cash and due from banks		103,559										107,765
Accrued interest and other assets		419,420										398,709
Less:  Allowance for loan losses		(36,512	)									(36,690	)
Total assets	$	7,711,635									$	7,631,620
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings accounts	$	648,560				1,430		0.88	%		$	665,919				1,313		0.80	%
Certificates of deposit		797,992				6,365		3.20	%			787,887				5,407		2.78	%
Interest bearing demand accounts		2,841,818				13,884		1.96	%			2,983,218				13,186		1.79	%
Total interest bearing deposits		4,288,370				21,679		2.03	%			4,437,024				19,906		1.82	%
Federal Home Loan Bank borrowings		211,309				1,032		1.96	%			404,199				3,141		3.15	%
Subordinated notes, net of unamortized debt issuance costs		97,804				994		4.08	%			98,693				999		4.11	%
Trust preferred subordinated debentures, net of unamortized debt issuance costs		60,266				1,100		7.32	%			60,265				1,031		6.94	%
Repurchase agreements		97,915				883		3.62	%			65,435				492		3.05	%
Other borrowings		631,447				7,272		4.62	%			136,700				1,926		5.71	%
Total interest bearing liabilities		5,387,111				32,960		2.45	%			5,202,316				27,495		2.14	%
Noninterest bearing deposits		1,490,445										1,588,725
Accrued expenses and other liabilities		84,252										81,829
Total liabilities		6,961,808										6,872,870
Shareholders’ equity		749,827										758,750
Total liabilities and shareholders’ equity	$	7,711,635									$	7,631,620
Net interest income (FTE)					$	57,051									$	56,600
Net interest margin (FTE)								3.17	%									3.21	%
Net interest spread (FTE)								2.55	%									2.62	%
(1) Interest on loans includes net fees on loans that are not material in amount.
(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of June 30, 2023 and March 31, 2023, loans totaling $3.0 million and $3.2 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Southside Bancshares, Inc.Average Balances and Average Yields and Rates (Annualized) (Unaudited)(Dollars in thousands)
	Three Months Ended
	December 31, 2022										September 30, 2022
	Average Balance				Interest			Average Yield/Rate			Average Balance				Interest			Average Yield/Rate
ASSETS
Loans (1)	$	4,103,429			$	52,650		5.09	%		$	4,012,547			$	45,992		4.55	%
Loans held for sale		1,087				15		5.47	%			606				7		4.58	%
Securities:
Taxable investment securities (2)		622,004				4,804		3.06	%			626,136				4,896		3.10	%
Tax-exempt investment securities (2)		1,730,233				15,652		3.59	%			1,750,952				14,455		3.28	%
Mortgage-backed and related securities (2)		483,914				4,614		3.78	%			520,501				4,770		3.64	%
Total securities		2,836,151				25,070		3.51	%			2,897,589				24,121		3.30	%
Federal Home Loan Bank stock, at cost, and equity investments		22,616				212		3.72	%			24,013				101		1.67	%
Interest earning deposits		10,974				108		3.90	%			18,664				105		2.23	%
Federal funds sold		84,858				774		3.62	%			46,106				269		2.31	%
Total earning assets		7,059,115				78,829		4.43	%			6,999,525				70,595		4.00	%
Cash and due from banks		108,200										102,840
Accrued interest and other assets		356,248										433,532
Less:  Allowance for loan losses		(36,602	)									(35,706	)
Total assets	$	7,486,961									$	7,500,191
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings accounts	$	676,654				758		0.44	%		$	685,947				481		0.28	%
Certificates of deposit		645,972				3,035		1.86	%			588,212				1,452		0.98	%
Interest bearing demand accounts		3,119,682				9,894		1.26	%			3,164,961				5,954		0.75	%
Total interest bearing deposits		4,442,308				13,687		1.22	%			4,439,120				7,887		0.70	%
Federal Home Loan Bank borrowings		189,939				1,623		3.39	%			173,838				1,078		2.46	%
Subordinated notes, net of unamortized debt issuance costs		98,657				1,013		4.07	%			98,621				1,004		4.04	%
Trust preferred subordinated debentures, net of unamortized debt issuance costs		60,264				901		5.93	%			60,263				669		4.40	%
Repurchase agreements		37,416				117		1.24	%			30,530				54		0.70	%
Other borrowings		85,033				945		4.41	%			98,174				673		2.72	%
Total interest bearing liabilities		4,913,617				18,286		1.48	%			4,900,546				11,365		0.92	%
Noninterest bearing deposits		1,757,568										1,746,245
Accrued expenses and other liabilities		88,024										101,881
Total liabilities		6,759,209										6,748,672
Shareholders’ equity		727,752										751,519
Total liabilities and shareholders’ equity	$	7,486,961									$	7,500,191
Net interest income (FTE)					$	60,543									$	59,230
Net interest margin (FTE)								3.40	%									3.36	%
Net interest spread (FTE)								2.95	%									3.08	%
(1) Interest on loans includes net fees on loans that are not material in amount.
(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of December 31, 2022 and September 30, 2022, loans totaling $2.8 million and $3.0 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Southside Bancshares, Inc.Average Balances and Average Yields and Rates (Annualized) (Unaudited)(Dollars in thousands)
	Three Months Ended
	June 30, 2022
	Average Balance				Interest			Average Yield/Rate
ASSETS
Loans (1)	$	3,847,614			$	39,088		4.07	%
Loans held for sale		1,776				18		4.07	%
Securities:
Taxable investment securities (2)		617,603				4,632		3.01	%
Tax-exempt investment securities (2)		1,653,871				13,599		3.30	%
Mortgage-backed and related securities (2)		417,057				3,238		3.11	%
Total securities		2,688,531				21,469		3.20	%
Federal Home Loan Bank stock, at cost, and equity investments		17,663				77		1.75	%
Interest earning deposits		77,894				125		0.64	%
Federal funds sold		37,343				79		0.85	%
Total earning assets		6,670,821				60,856		3.66	%
Cash and due from banks		100,231
Accrued interest and other assets		446,136
Less:  Allowance for loan losses		(35,895	)
Total assets	$	7,181,293
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings accounts	$	670,187				326		0.20	%
Certificates of deposit		518,104				578		0.45	%
Interest bearing demand accounts		3,175,385				3,360		0.42	%
Total interest bearing deposits		4,363,676				4,264		0.39	%
Federal Home Loan Bank borrowings		55,990				224		1.60	%
Subordinated notes, net of unamortized debt issuance costs		98,586				1,000		4.07	%
Trust preferred subordinated debentures, net of unamortized debt issuance costs		60,262				471		3.13	%
Repurchase agreements		30,055				18		0.24	%
Other borrowings		6,549				45		2.76	%
Total interest bearing liabilities		4,615,118				6,022		0.52	%
Noninterest bearing deposits		1,702,985
Accrued expenses and other liabilities		98,870
Total liabilities		6,416,973
Shareholders’ equity		764,320
Total liabilities and shareholders’ equity	$	7,181,293
Net interest income (FTE)					$	54,834
Net interest margin (FTE)								3.30	%
Net interest spread (FTE)								3.14	%
(1) Interest on loans includes net fees on loans that are not material in amount.
(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of June 30, 2022, loans totaling $3.1 million were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Southside Bancshares, Inc.Average Balances and Average Yields and Rates (Annualized) (Unaudited)(Dollars in thousands)
	Six Months Ended
	June 30, 2023										June 30, 2022
	Average Balance				Interest			AverageYield/Rate			Average Balance				Interest			AverageYield/Rate
ASSETS
Loans (1)	$	4,163,141			$	114,787		5.56	%		$	3,776,194			$	74,713		3.99	%
Loans held for sale		1,663				43		5.21	%			1,354				26		3.87	%
Securities:
Taxable investment securities (2)		808,803				14,485		3.61	%			631,079				9,240		2.95	%
Tax-exempt investment securities (2)		1,627,105				32,648		4.05	%			1,608,779				26,282		3.29	%
Mortgage-backed and related securities (2)		428,469				8,159		3.84	%			491,585				7,255		2.98	%
Total securities		2,864,377				55,292		3.89	%			2,731,443				42,777		3.16	%
FHLB stock, at cost, and equity investments		26,448				624		4.76	%			19,161				190		2.00	%
Interest earning deposits		72,177				1,775		4.96	%			61,360				149		0.49	%
Federal funds sold		65,871				1,585		4.85	%			23,077				83		0.73	%
Total earning assets		7,193,677				174,106		4.88	%			6,612,589				117,938		3.60	%
Cash and due from banks		105,650										103,669
Accrued interest and other assets		408,908										522,167
Less:  Allowance for loan losses		(36,601	)									(35,766	)
Total assets	$	7,671,634									$	7,202,659
LIABILITIES AND SHAREHOLDERS’ EQUITY
Savings accounts	$	657,192				2,743		0.84	%		$	661,339				599		0.18	%
CDs		792,967				11,772		2.99	%			540,726				1,172		0.44	%
Interest bearing demand accounts		2,912,127				27,070		1.87	%			3,136,890				5,730		0.37	%
Total interest bearing deposits		4,362,286				41,585		1.92	%			4,338,955				7,501		0.35	%
FHLB borrowings		307,221				4,173		2.74	%			89,202				590		1.33	%
Subordinated notes, net of unamortized debt issuance costs		98,246				1,993		4.09	%			98,569				1,998		4.09	%
Trust preferred subordinated debentures, net of unamortized debt issuance costs		60,266				2,131		7.13	%			60,261				827		2.77	%
Repurchase agreements		81,765				1,375		3.39	%			25,798				28		0.22	%
Other borrowings		385,440				9,198		4.81	%			3,525				45		2.57	%
Total interest bearing liabilities		5,295,224				60,455		2.30	%			4,616,310				10,989		0.48	%
Noninterest bearing deposits		1,539,313										1,673,145
Accrued expenses and other liabilities		82,833										87,408
Total liabilities		6,917,370										6,376,863
Shareholders’ equity		754,264										825,796
Total liabilities and shareholders’ equity	$	7,671,634									$	7,202,659
Net interest income (FTE)					$	113,651									$	106,949
Net interest margin (FTE)								3.19	%									3.26	%
Net interest spread (FTE)								2.58	%									3.12	%
(1) Interest on loans includes net fees on loans that are not material in amount.
(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of June 30, 2023 and 2022, loans totaling $3.0 million and $3.1 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

The following tables set forth the reconciliation of return on average common equity to return on average tangible common equity, book value per share to tangible book value per share, net interest income to net interest income adjusted to a fully taxable-equivalent basis assuming a 21% marginal tax rate for interest earned on tax-exempt assets such as municipal loans and investment securities, along with the calculation of total revenue, adjusted noninterest expense, efficiency ratio (FTE), net interest margin (FTE) and net interest spread (FTE) for the applicable periods presented.

Southside Bancshares, Inc.Non-GAAP Reconciliation (Unaudited)(Dollars and shares in thousands, except per share data)
		Three Months Ended																									Six Months Ended
			2023										2022															2023					2022
		Jun 30,					Mar 31,					Dec 31,					Sep 30,					Jun 30,					Jun 30,					Jun 30,
Reconciliation of return on average common equity to return on average tangible common equity:
Net income		$	24,893				$	26,034				$	27,668				$	26,951				$	25,405				$	50,927				$	50,401
After-tax amortization expense			349					378					407					435					463					727					954
Adjusted net income available to common shareholders		$	25,242				$	26,412				$	28,075				$	27,386				$	25,868				$	51,654				$	51,355
Average shareholders' equity		$	749,827				$	758,750				$	727,752				$	751,519				$	764,320				$	754,264				$	825,796
Less: Average intangibles for the period			(205,086	)				(205,555	)				(206,049	)				(206,591	)				(207,163	)				(205,319	)				(207,467	)
Average tangible shareholders' equity		$	544,741				$	553,195				$	521,703				$	544,928				$	557,157				$	548,945				$	618,329
Return on average tangible common equity			18.59		%			19.36		%			21.35		%			19.94		%			18.62		%			18.98		%			16.75		%
Reconciliation of book value per share to tangible book value per share:
Common equity at end of period		$	765,161				$	751,030				$	745,997				$	707,636				$	731,782				$	765,161				$	731,782
Less: Intangible assets at end of period			(204,818	)				(205,260	)				(205,738	)				(206,253	)				(206,803	)				(204,818	)				(206,803	)
Tangible common shareholders' equity at end of period		$	560,343				$	545,770				$	540,259				$	501,383				$	524,979				$	560,343				$	524,979
Total assets at end of period		$	7,807,252				$	7,792,345				$	7,558,636				$	7,453,747				$	7,606,061				$	7,807,252				$	7,606,061
Less: Intangible assets at end of period			(204,818	)				(205,260	)				(205,738	)				(206,253	)				(206,803	)				(204,818	)				(206,803	)
Tangible assets at end of period		$	7,602,434				$	7,587,085				$	7,352,898				$	7,247,494				$	7,399,258				$	7,602,434				$	7,399,258
Period end tangible equity to period end tangible assets			7.37		%			7.19		%			7.35		%			6.92		%			7.10		%			7.37		%			7.10		%
Common shares outstanding end of period			30,532					31,121					31,547					32,127					32,108					30,532					32,108
Tangible book value per common share		$	18.35				$	17.54				$	17.13				$	15.61				$	16.35				$	18.35				$	16.35
Reconciliation of efficiency ratio to efficiency ratio (FTE), net interest margin to net interest margin (FTE) and net interest spread to net interest spread (FTE):
Net interest income (GAAP)		$	53,916				$	53,353				$	56,842				$	55,515				$	51,078				$	107,269				$	99,984
Tax-equivalent adjustments:
Loans			673					697					744					742					762					1,370					1,507
Tax-exempt investment securities			2,462					2,550					2,957					2,973					2,994					5,012					5,458
Net interest income (FTE) (1)			57,051					56,600					60,543					59,230					54,834					113,651					106,949
Noninterest income			10,464					12,033					10,766					10,269					9,097					22,497					19,822
Nonrecurring income (2)			226					(1,221	)				—					99					2,177					(995	)				2,883
Total revenue		$	67,741				$	67,412				$	71,309				$	69,598				$	66,108				$	135,153				$	129,654
Noninterest expense		$	34,993				$	34,849				$	33,561				$	33,464				$	32,106				$	69,842				$	63,301
Pre-tax amortization expense			(442	)				(478	)				(515	)				(550	)				(586	)				(920	)				(1,208	)
Nonrecurring expense (3)			36					3					26					87					39					39					61
Adjusted noninterest expense		$	34,587				$	34,374				$	33,072				$	33,001				$	31,559				$	68,961				$	62,154
Efficiency ratio			53.54		%			53.57		%			48.92		%			50.09		%			50.61		%			53.55		%			50.66		%
Efficiency ratio (FTE) (1)			51.06		%			50.99		%			46.38		%			47.42		%			47.74		%			51.02		%			47.94		%
Average earning assets		$	7,225,168				$	7,161,836				$	7,059,115				$	6,999,525				$	6,670,821				$	7,193,677				$	6,612,589
Net interest margin			2.99		%			3.02		%			3.19		%			3.15		%			3.07		%			3.01		%			3.05		%
Net interest margin (FTE) (1)			3.17		%			3.21		%			3.40		%			3.36		%			3.30		%			3.19		%			3.26		%
Net interest spread			2.37		%			2.44		%			2.74		%			2.87		%			2.91		%			2.40		%			2.90		%
Net interest spread (FTE) (1)			2.55		%			2.62		%			2.95		%			3.08		%			3.14		%			2.58		%			3.12		%
(1) These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.
(2) These adjustments may include net gain or loss on sale of securities available for sale, net gain on sale of equity securities, BOLI income related to death benefits realized and other investment income or loss in the periods where applicable.
(3) These adjustments may include foreclosure expenses and branch closure expenses, in the periods where applicable.