X
|
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Texas
|
75-1848732
|
(State of
incorporation)
|
(I.R.S.
Employer Identification No.)
|
1201
S. Beckham Avenue, Tyler, Texas
|
75701
|
(Address of
Principal Executive Offices)
|
(Zip
Code)
|
Name of each
exchange
|
|
Title of each
class
|
on which
registered
|
COMMON
STOCK, $1.25 PAR VALUE
|
NASDAQ
Global Select Market
|
YES
|
|
NO
|
ü
|
YES
|
|
NO
|
ü
|
YES
|
ü
|
NO
|
YES
|
|
NO
|
ü
|
TABLE OF CONTENTS
|
|
Subsidiaries
of the Registrant
|
|
Consent of
Independent Registered Public Accounting Firm
|
|
Certification
Pursuant to Section 302
|
|
Certification
Pursuant to Section 302
|
|
Certification
Pursuant to Section 906
|
Capital
Adequacy Ratios
|
||||||||||||||||||||
Regulatory
Minimums
|
Regulatory
Minimums
to be
Well-Capitalized
|
Southside
Bancshares, Inc.
|
Southside
Bank
|
Fort Worth
National Bank
|
||||||||||||||||
Risk-based
capital ratios:
|
||||||||||||||||||||
Tier 1
Capital (1)
|
4.0 | % | 6.0 | % | 14.92 | % | 15.50 | % | 14.54 | % | ||||||||||
Total
risk-based capital (2)
|
8.0 | 10.0 | 17.02 | 16.41 | 15.51 | |||||||||||||||
Tier 1
leverage ratio (3)
|
4.0 | 5.0 | 7.73 | 7.67 | 13.13 |
(1)
|
Common
shareholders’ equity excluding unrealized gains or losses on debt
securities available for sale, unrealized gains on equity securities
available for sale and unrealized gains or losses on cash flow hedges, net
of deferred income taxes; plus certain mandatorily redeemable capital
securities, less nonqualifying intangible assets net of applicable
deferred income taxes, and certain nonfinancial equity investments;
computed as a ratio of risk-weighted assets, as defined in the risk-based
capital guidelines.
|
(2)
|
The sum of
Tier 1 capital, a qualifying portion of the allowance for credit losses,
qualifying subordinated debt and qualifying unrealized gains on available
for sale equity securities; computed as a ratio of risk-weighted assets,
as defined in the risk-based capital
guidelines.
|
(3)
|
Tier 1
capital computed as a percentage of fourth quarter average assets less
nonqualifying intangibles and certain nonfinancial equity
investments.
|
·
|
limit the
interest and other charges collected or contracted for by the
Banks;
|
·
|
govern the
Banks’ disclosures of credit terms to consumer
borrowers;
|
·
|
require the
Banks to provide information to enable the public and public officials to
determine whether they are fulfilling its obligation to help meet the
housing needs of the community it
serves;
|
·
|
prohibit the
Banks from discriminating on the basis of race, creed or other prohibited
factors when they make decisions to extend
credit;
|
·
|
require that
the Banks safeguard the personal nonpublic information of their customers,
provide annual notices to consumers regarding the usage and sharing of
such information, and limit disclosure of such information to third
parties except under specific circumstances;
and
|
·
|
govern the
manner in which the Banks may collect consumer
debts.
|
·
|
require the
Banks to adequately disclose the interest rates and other terms of
consumer deposit accounts;
|
·
|
impose a duty
on the Banks to maintain the confidentiality of consumer financial records
and prescribe procedures for complying with administrative subpoenas of
financial records; and
|
·
|
govern
automatic deposits to and withdrawals from deposit accounts with the Banks
and the rights and liabilities of customers who use automated teller
machines and other electronic banking
services.
|
|
·
|
our ability
to originate loans and obtain
deposits;
|
|
·
|
net interest
rate spreads and net interest rate
margins;
|
|
·
|
our ability
to enter into instruments to hedge against interest rate
risk;
|
|
·
|
the fair
value of our financial assets and liabilities;
and
|
|
·
|
the average
duration of our loan and mortgage-backed securities
portfolio.
|
|
·
|
The ability
to develop, maintain and build upon long-term customer relationships based
on top quality service, high ethical standards and safe, sound
assets.
|
|
·
|
The ability
to expand our market position.
|
|
·
|
The scope,
relevance and pricing of products and services offered to meet customer
needs and demands.
|
|
·
|
The rate at
which we introduce new products and services relative to our
competitors.
|
|
·
|
Customer
satisfaction with our level of
service.
|
|
·
|
Industry and general economic
trends.
|
|
·
|
potential
exposure to unknown or contingent liabilities of the target
company;
|
|
·
|
exposure to
potential asset quality issues of the target
company;
|
|
·
|
difficulty
and expense of integrating the operations and personnel of the target
company;
|
|
·
|
potential
disruption to our business;
|
|
·
|
potential
diversion of our management’s time and
attention;
|
|
·
|
the possible
loss of key employees and customers of the target
company;
|
|
·
|
difficulty in
estimating the value of the target company;
and
|
|
·
|
potential
changes in banking or tax laws or regulations that may affect the target
company.
|
|
·
|
actual or
anticipated variations in quarterly results of
operations;
|
|
·
|
recommendations
by securities analysts;
|
|
·
|
operating and
stock price performance of other companies that investors deem comparable
to us;
|
|
·
|
news reports
relating to trends, concerns and other issues in the financial services
industry;
|
|
·
|
perceptions
in the marketplace regarding us and/or our
competitors;
|
|
·
|
new
technology used, or services offered, by
competitors;
|
|
·
|
significant
acquisitions or business combinations, strategic partnerships, joint
ventures or capital commitments by or involving us or our
competitors;
|
|
·
|
failure to
integrate acquisitions or realize anticipated benefits from
acquisitions;
|
|
·
|
changes in
government regulations; and
|
|
·
|
geopolitical
conditions such as acts or threats of terrorism or military
conflicts.
|
ITEM 2. PROPERTIES
|
|
·
|
Southside
Bank main branch at 1201 South Beckham Avenue, Tyler,
Texas. The executive offices of Southside Bancshares, Inc. are
located at this location;
|
|
·
|
Southside
Bank Annex at 1211 South Beckham Avenue, Tyler, Texas. The
Southside Bank Annex is directly adjacent to the main bank
building. Human Resources, the Trust Department and other
support areas are located in this
building;
|
|
·
|
Operations
Annex at 1221 South Beckham Avenue, Tyler, Texas. Various back
office, lending and training facilities and other support areas are
located in this building;
|
|
·
|
Southside
main branch motor bank facility at 1010 East First Street, Tyler,
Texas;
|
|
·
|
South
Broadway branch at 6201 South Broadway, Tyler,
Texas;
|
|
·
|
South
Broadway branch motor bank facility at 6019 South Broadway, Tyler,
Texas;
|
|
·
|
Downtown
branch at 113 West Ferguson Street, Tyler,
Texas;
|
|
·
|
Gentry
Parkway branch and motor bank facility at 2121 West Gentry Parkway, Tyler,
Texas;
|
|
·
|
Longview main
branch and motor bank facility at 2001 Judson Road, Longview,
Texas;
|
|
·
|
Lindale main
branch and motor bank facility at 2510 South Main Street, Lindale,
Texas;
|
|
·
|
Whitehouse
main branch and motor bank facility at 901 Highway 110 North, Whitehouse,
Texas;
|
|
·
|
Jacksonville
main branch and motor bank facility at 1015 South Jackson Street,
Jacksonville, Texas;
|
|
·
|
Gun Barrel
City main branch at 901 West Main, Gun Barrel City, Texas;
and
|
|
·
|
42 ATM’s
located throughout Smith, Gregg, Cherokee, Anderson and Henderson
Counties.
|
|
·
|
one in
Bullard, Texas;
|
|
·
|
one in
Lindale, Texas;
|
|
·
|
one in Flint,
Texas;
|
|
·
|
one in
Whitehouse, Texas;
|
|
·
|
one in
Chandler, Texas;
|
|
·
|
one in Seven
Points, Texas;
|
|
·
|
one in
Palestine, Texas;
|
|
·
|
one in
Athens, Texas;
|
|
·
|
one in
Hawkins, Texas;
|
|
·
|
three in
Longview, Texas;
|
|
·
|
six in Tyler,
Texas;
|
|
·
|
Gresham loan
production office at 16637 FM 2493, Tyler, Texas;
and
|
|
·
|
Forney loan
production office at 413 North McGraw, Forney,
Texas.
|
|
·
|
Arlington
branch at 2831 W. Park Row, Arlington,
Texas;
|
|
·
|
Fort Worth
branch at 9516 Clifford Street, Fort Worth, Texas;
and
|
|
·
|
3 ATM’s
located in Fort Worth and Arlington,
Texas.
|
|
·
|
Main branch
at 701 W. Magnolia, Fort Worth, Texas;
and
|
|
·
|
Austin loan
production office at 8200 N. Mopac, Ste. 130, Austin,
Texas.
|
|
·
|
1600 E.
Pioneer Parkway, Ste. 300, Arlington,
Texas.
|
ITEM 3. LEGAL
PROCEEDINGS
|
ITEM 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY
HOLDERS
|
ITEM 5. MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS
|
AND ISSUER
PURCHASES OF EQUITY
SECURITIES
|
Year
Ended
|
1st
Quarter
|
2nd
Quarter
|
3rd
Quarter
|
4th
Quarter
|
||||||||||||
December 31,
2007
|
$ | 24.64-21.04 | $ | 22.51-21.11 | $ | 23.93-19.24 | $ | 23.74-18.72 | ||||||||
December 31,
2006
|
$ | 19.77-18.22 | $ | 21.49-18.12 | $ | 25.55-21.59 | $ | 26.18-23.44 |
Year
Ended
|
1st
Quarter
|
2nd
Quarter
|
3rd
Quarter
|
4th
Quarter
|
||||||||||||
December 31,
2007
|
$ | 0.11 | $ | 0.12 | $ | 0.12 | $ | 0.15 | ||||||||
December 31,
2006
|
$ | 0.11 | $ | 0.11 | $ | 0.11 | $ | 0.14 |
Period
Ending
|
||||||||||||||||||||||||
Index
|
12/31/02
|
12/31/03
|
12/31/04
|
12/31/05
|
12/31/06
|
12/31/07
|
||||||||||||||||||
Southside
Bancshares, Inc.
|
100.00 | 133.89 | 177.37 | 168.33 | 229.87 | 196.58 | ||||||||||||||||||
Russell
2000
|
100.00 | 147.25 | 174.24 | 182.18 | 215.64 | 212.26 | ||||||||||||||||||
Southside
Bancshares Peer Group*
|
100.00 | 137.24 | 160.09 | 168.91 | 187.11 | 156.29 |
*Southside
Bancshares’ Peer Group includes the following Texas banks: Cullen/Frost
Bankers, Inc., First Financial
|
||
Bankshares,
Inc., International Bancshares Corporation, MetroCorp Bancshares, Inc.,
Prosperity Bancshares, Inc.,
|
||
Sterling
Bancshares, Inc., Texas Capital Bancshares, Inc. and Franklin Bank
Corp.
|
Source
: SNL Financial LC, Charlottesville, VA
|
ITEM 6. SELECTED FINANCIAL
DATA
|
As of and For
the Years Ended December 31,
|
||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||||||
Balance Sheet
Data:
|
||||||||||||||||||||
Investment
Securities
|
$ | 110,403 | $ | 100,303 | $ | 121,240 | $ | 133,535 | $ | 144,876 | ||||||||||
Mortgage-backed
and Related Securities
|
$ | 917,518 | $ | 869,326 | $ | 821,756 | $ | 720,533 | $ | 590,963 | ||||||||||
Loans, Net of
Allowance for Loan Losses
|
$ | 951,477 | $ | 751,954 | $ | 673,274 | $ | 617,077 | $ | 582,721 | ||||||||||
Total
Assets
|
$ | 2,196,322 | $ | 1,890,976 | $ | 1,783,462 | $ | 1,619,643 | $ | 1,454,952 | ||||||||||
Deposits
|
$ | 1,530,491 | $ | 1,282,475 | $ | 1,110,813 | $ | 940,986 | $ | 872,529 | ||||||||||
Long-term
Obligations
|
$ | 146,558 | $ | 149,998 | $ | 229,032 | $ | 351,287 | $ | 272,694 | ||||||||||
Income
Statement Data:
|
||||||||||||||||||||
Interest
& Deposit Service Income
|
$ | 123,021 | $ | 112,434 | $ | 94,275 | $ | 80,793 | $ | 73,958 | ||||||||||
Net
Income
|
$ | 16,684 | $ | 15,002 | $ | 14,592 | $ | 16,099 | $ | 13,564 | ||||||||||
Per Share
Data:
|
||||||||||||||||||||
Net Income
Per Common Share:
|
||||||||||||||||||||
Basic
|
$ | 1.28 | $ | 1.16 | $ | 1.15 | $ | 1.27 | $ | 1.24 | ||||||||||
Diluted
|
$ | 1.24 | $ | 1.12 | $ | 1.10 | $ | 1.20 | $ | 1.05 | ||||||||||
Cash
Dividends Paid Per Common Share
|
$ | 0.50 | $ | 0.47 | $ | 0.46 | $ | 0.42 | $ | 0.36 |
ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
|
RESULTS
OF
OPERATIONS
|
·
|
general
economic conditions, either globally, nationally, in the State of Texas,
or in the specific markets in which we
operate;
|
·
|
legislation,
regulatory changes or changes in monetary or fiscal policy that adversely
affect the businesses in which we are
engaged;
|
·
|
adverse
changes in the status or financial condition of the government sponsored
enterprises (the “GSEs”) impacting the GSEs’ guarantees or ability to pay
or issue debt;
|
·
|
economic or
other disruptions caused by acts of terrorism in the United States, Europe
or other areas;
|
·
|
changes in
the interest rate yield curve such as flat, inverted or steep yield
curves, or changes in the interest rate environment that impact interest
margins and may impact prepayments on the mortgage-backed securities
portfolio;
|
·
|
unexpected
outcomes of existing or new litigation involving
us;
|
·
|
changes
impacting the leverage strategy;
|
·
|
significant
increases in competition in the banking and financial services
industry;
|
·
|
changes in
consumer spending, borrowing and saving
habits;
|
·
|
technological
changes;
|
·
|
our ability
to increase market share and control
expenses;
|
·
|
the effect of
changes in federal or state tax
laws;
|
·
|
the effect of
compliance with legislation or regulatory
changes;
|
·
|
the effect of
changes in accounting policies and
practices;
|
·
|
the costs and
effects of unanticipated
litigation;
|
·
|
risks of
mergers and acquisitions including the related time and cost of
implementing transactions and the potential failure to achieve expected
gains, revenue growth or expense savings;
and
|
·
|
failure of
assumptions underlying allowance for loan losses and other
estimates.
|
OVERVIEW
|
COMPOSITION
OF DEPOSITS
|
||||||||||||||||
Years Ended
December 31,
|
||||||||||||||||
2007
|
2006
|
2005
|
||||||||||||||
(dollars in
thousands)
|
||||||||||||||||
AVG
BALANCE
|
AVG
YIELD
|
AVG
BALANCE
|
AVG
YIELD
|
AVG
BALANCE
|
AVG
YIELD
|
|||||||||||
Noninterest
Bearing Demand Deposits
|
$
|
328,711
|
N/A
|
$
|
314,241
|
N/A
|
$
|
280,036
|
N/A
|
|||||||
Interest
Bearing Demand Deposits
|
414,293
|
3.17
|
%
|
349,375
|
2.73
|
%
|
313,815
|
1.74
|
%
|
|||||||
Savings
Deposits
|
52,106
|
1.30
|
%
|
50,764
|
1.27
|
%
|
50,502
|
1.04
|
%
|
|||||||
Time
Deposits
|
564,613
|
4.90
|
%
|
467,174
|
4.39
|
%
|
354,360
|
3.17
|
%
|
|||||||
Total
Deposits
|
$
|
1,359,723
|
3.05
|
%
|
$
|
1,181,554
|
2.60
|
%
|
$
|
998,713
|
1.72
|
%
|
AVERAGE
BALANCES AND YIELDS
|
||||||||||||||||||||||||||||||||||||
(dollars in
thousands)
|
||||||||||||||||||||||||||||||||||||
Years
Ended
|
||||||||||||||||||||||||||||||||||||
December 31,
2007
|
December 31,
2006
|
December 31,
2005
|
||||||||||||||||||||||||||||||||||
AVG.
BALANCE
|
INTEREST
|
AVG.
YIELD
|
AVG.
BALANCE
|
INTEREST
|
AVG.
YIELD
|
AVG.
BALANCE
|
INTEREST
|
AVG.
YIELD
|
||||||||||||||||||||||||||||
ASSETS
|
||||||||||||||||||||||||||||||||||||
INTEREST
EARNING ASSETS:
|
||||||||||||||||||||||||||||||||||||
Loans(1)
(2)
|
$ | 809,906 | $ | 58,002 | 7.16 | % | $ | 722,252 | $ | 48,397 | 6.70 | % | $ | 657,938 | $ | 40,927 | 6.22 | % | ||||||||||||||||||
Loans Held
For Sale
|
3,657 | 191 | 5.22 | % | 4,651 | 246 | 5.29 | % | 4,469 | 212 | 4.74 | % | ||||||||||||||||||||||||
Securities:
|
||||||||||||||||||||||||||||||||||||
Inv.
Sec. (Taxable)(4)
|
52,171 | 2,580 | 4.95 | % | 54,171 | 2,498 | 4.61 | % | 51,431 | 1,978 | 3.85 | % | ||||||||||||||||||||||||
Inv.
Sec. (Tax-Exempt)(3)(4)
|
43,486 | 3,065 | 7.05 | % | 43,931 | 3,134 | 7.13 | % | 66,023 | 4,696 | 7.11 | % | ||||||||||||||||||||||||
Mortgage-backed and
related
Sec.(4)
|
852,880 | 43,767 | 5.13 | % | 891,015 | 44,401 | 4.98 | % | 773,973 | 34,584 | 4.47 | % | ||||||||||||||||||||||||
Total
Securities
|
948,537 | 49,412 | 5.21 | % | 989,117 | 50,033 | 5.06 | % | 891,427 | 41,258 | 4.63 | % | ||||||||||||||||||||||||
FHLB stock
and other investments, at cost
|
20,179 | 1,193 | 5.91 | % | 27,969 | 1,409 | 5.04 | % | 28,099 | 1,032 | 3.67 | % | ||||||||||||||||||||||||
Interest
Earning Deposits
|
769 | 41 | 5.33 | % | 692 | 35 | 5.06 | % | 644 | 24 | 3.73 | % | ||||||||||||||||||||||||
Federal Funds
Sold
|
2,933 | 144 | 4.91 | % | 1,148 | 57 | 4.97 | % | 995 | 30 | 3.02 | % | ||||||||||||||||||||||||
Total
Interest Earning Assets
|
1,785,981 | 108,983 | 6.10 | % | 1,745,829 | 100,177 | 5.74 | % | 1,583,572 | 83,483 | 5.27 | % | ||||||||||||||||||||||||
NONINTEREST
EARNING ASSETS:
|
||||||||||||||||||||||||||||||||||||
Cash and Due
From Banks
|
42,724 | 42,906 | 42,280 | |||||||||||||||||||||||||||||||||
Bank Premises
and Equipment
|
35,746 | 33,298 | 31,504 | |||||||||||||||||||||||||||||||||
Other
Assets
|
51,968 | 42,716 | 45,625 | |||||||||||||||||||||||||||||||||
Less: Allowance
for Loan
Loss
|
(7,697 | ) | (7,231 | ) | (6,945 | ) | ||||||||||||||||||||||||||||||
Total
Assets
|
$ | 1,908,722 | $ | 1,857,518 | $ | 1,696,036 |
(1)
|
Interest on
loans includes fees on loans that are not material in
amount.
|
(2)
|
Interest
income includes taxable-equivalent adjustments of $2,289, $2,230 and
$2,287 for the years ended December 31, 2007, 2006 and 2005,
respectively.
|
(3)
|
Interest
income includes taxable-equivalent adjustments of $953, $995 and $1,515
for the years ended December 31, 2007, 2006 and 2005,
respectively.
|
(4)
|
For the
purpose of calculating the average yield, the average balance of
securities is presented at historical
cost.
|
Note:
|
As of
December 31, 2007, 2006 and 2005, loans totaling $2,913, $1,333 and
$1,731, respectively, were on nonaccrual status. The 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 AND YIELDS
|
||||||||||||||||||||||||||||||||||||
(dollars in
thousands)
|
||||||||||||||||||||||||||||||||||||
Years
Ended
|
||||||||||||||||||||||||||||||||||||
December 31,
2007
|
December 31,
2006
|
December 31,
2005
|
||||||||||||||||||||||||||||||||||
AVG.
BALANCE
|
INTEREST
|
AVG.
YIELD
|
AVG.
BALANCE
|
INTEREST
|
AVG.
YIELD
|
AVG.
BALANCE
|
INTEREST
|
AVG.
YIELD
|
||||||||||||||||||||||||||||
LIABILITIES
AND
SHAREHOLDERS'
EQUITY
|
||||||||||||||||||||||||||||||||||||
INTEREST
BEARING
LIABILITIES:
|
||||||||||||||||||||||||||||||||||||
Savings
Deposits
|
$ | 52,106 | $ | 676 | 1.30 | % | $ | 50,764 | $ | 645 | 1.27 | % | $ | 50,502 | $ | 524 | 1.04 | % | ||||||||||||||||||
Time
Deposits
|
564,613 | 27,666 | 4.90 | % | 467,174 | 20,516 | 4.39 | % | 354,360 | 11,221 | 3.17 | % | ||||||||||||||||||||||||
Interest
Bearing Demand Deposits
|
414,293 | 13,116 | 3.17 | % | 349,375 | 9,529 | 2.73 | % | 313,815 | 5,476 | 1.74 | % | ||||||||||||||||||||||||
Total
Interest
Bearing Deposits
|
1,031,012 | 41,458 | 4.02 | % | 867,313 | 30,690 | 3.54 | % | 718,677 | 17,221 | 2.40 | % | ||||||||||||||||||||||||
Short-term
Interest Bearing
Liabilities
|
278,002 | 13,263 | 4.77 | % | 376,696 | 16,534 | 4.39 | % | 282,283 | 9,892 | 3.50 | % | ||||||||||||||||||||||||
Long-term
Interest Bearing Liabilities - FHLB
|
95,268 | 4,357 | 4.57 | % | 154,983 | 6,379 | 4.12 | % | 274,673 | 10,004 | 3.64 | % | ||||||||||||||||||||||||
Long-term
Debt (5)
|
35,802 | 2,785 | 7.78 | % | 20,619 | 1,681 | 8.04 | % | 20,619 | 1,305 | 6.24 | % | ||||||||||||||||||||||||
Total
Interest Bearing Liabilities
|
1,440,084 | 61,863 | 4.30 | % | 1,419,611 | 55,284 | 3.89 | % | 1,296,252 | 38,422 | 2.96 | % | ||||||||||||||||||||||||
NONINTEREST
BEARING LIABILITIES:
|
||||||||||||||||||||||||||||||||||||
Demand
Deposits
|
328,711 | 314,241 | 280,036 | |||||||||||||||||||||||||||||||||
Other
Liabilities
|
20,997 | 12,403 | 14,649 | |||||||||||||||||||||||||||||||||
Total
Liabilities
|
1,789,792 | 1,746,255 | 1,590,937 | |||||||||||||||||||||||||||||||||
Minority
Interest in SFG
|
151 | – | – | |||||||||||||||||||||||||||||||||
SHAREHOLDERS'
EQUITY
|
118,779 | 111,263 | 105,099 | |||||||||||||||||||||||||||||||||
TOTAL
LIABILITIES AND
SHAREHOLDERS'
EQUITY
|
$ | 1,908,722 | $ | 1,857,518 | $ | 1,696,036 | ||||||||||||||||||||||||||||||
NET INTEREST
INCOME
|
$ | 47,120 | $ | 44,893 | $ | 45,061 | ||||||||||||||||||||||||||||||
NET YIELD ON
AVERAGE
EARNING
ASSETS
|
2.64 | % | 2.57 | % | 2.85 | % | ||||||||||||||||||||||||||||||
NET INTEREST
SPREAD
|
1.80 | % | 1.85 | % | 2.31 | % |
(5)
|
Represents
junior subordinated debentures issued by us to Southside Statutory Trust
III, IV and V in connection with the issuance by Southside Statutory Trust
III of $20 million of trust preferred securities, Southside Statutory
Trust IV of $22.5 million of trust preferred securities on August 8, 2007
and Southside Statutory Trust V of $12.5 million of Trust Preferred
Securities on August 10, 2007 and junior subordinated debentures issued by
Fort Worth Bancshares, Inc. to Magnolia Trust Company I in connection with
the issuance by Magnolia Trust Company I of $3.5 million of trust
preferred securities, which we assumed on October 10,
2007.
|
Years Ended
December 31,
|
||||||||||||
2007 Compared
to 2006
|
||||||||||||
Average
|
Average
|
Increase
|
||||||||||
Volume
|
Yield
|
(Decrease)
|
||||||||||
INTEREST
INCOME:
|
||||||||||||
Loans
(1)
|
$
|
6,131
|
$
|
3,474
|
$
|
9,605
|
||||||
Loans Held
For
Sale
|
(52
|
)
|
(3
|
)
|
(55
|
)
|
||||||
Investment
Securities (Taxable)
|
(85
|
)
|
167
|
82
|
||||||||
Investment
Securities (Tax Exempt) (1)
|
(32
|
)
|
(37
|
)
|
(69
|
)
|
||||||
Mortgage-backed
Securities
|
(1,934
|
)
|
1,300
|
(634
|
)
|
|||||||
FHLB stock
and other investments
|
(434
|
)
|
218
|
(216
|
)
|
|||||||
Interest
Earning
Deposits
|
4
|
2
|
6
|
|||||||||
Federal Funds
Sold
|
88
|
(1
|
)
|
87
|
||||||||
Total
Interest
Income
|
3,686
|
5,120
|
8,806
|
|||||||||
INTEREST
EXPENSE:
|
||||||||||||
Savings
Deposits
|
17
|
14
|
31
|
|||||||||
Time
Deposits
|
4,598
|
2,552
|
7,150
|
|||||||||
Interest
Bearing Demand Deposits
|
1,923
|
1,664
|
3,587
|
|||||||||
Short-term
Interest Bearing Liabilities
|
(4,615
|
)
|
1,344
|
(3,271
|
)
|
|||||||
Long-term
FHLB
Advances
|
(2,670
|
)
|
648
|
(2,022
|
)
|
|||||||
Long-term
Debt
|
1,184
|
(80
|
)
|
1,104
|
||||||||
Total
Interest
Expense
|
437
|
6,142
|
6,579
|
|||||||||
Net Interest
Income
|
$
|
3,249
|
$
|
(1,022
|
)
|
$
|
2,227
|
Years Ended
December 31,
|
||||||||||||
2006 Compared
to 2005
|
||||||||||||
Average
|
Average
|
Increase
|
||||||||||
Volume
|
Yield
|
(Decrease)
|
||||||||||
INTEREST
INCOME:
|
||||||||||||
Loans
(1)
|
$
|
4,173
|
$
|
3,297
|
$
|
7,470
|
||||||
Loans Held
For
Sale
|
9
|
25
|
34
|
|||||||||
Investment
Securities (Taxable)
|
110
|
410
|
520
|
|||||||||
Investment
Securities (Tax Exempt) (1)
|
(1,576
|
)
|
14
|
(1,562
|
)
|
|||||||
Mortgage-backed
Securities
|
5,572
|
4,245
|
9,817
|
|||||||||
FHLB stock
and other investments
|
(5
|
)
|
382
|
377
|
||||||||
Interest
Earning
Deposits
|
2
|
9
|
11
|
|||||||||
Federal Funds
Sold
|
5
|
22
|
27
|
|||||||||
Total
Interest
Income
|
8,290
|
8,404
|
16,694
|
|||||||||
INTEREST
EXPENSE:
|
||||||||||||
Savings
Deposits
|
3
|
118
|
121
|
|||||||||
Time
Deposits
|
4,196
|
5,099
|
9,295
|
|||||||||
Interest
Bearing Demand Deposits
|
679
|
3,374
|
4,053
|
|||||||||
Short-term
Interest Bearing Liabilities
|
3,785
|
2,857
|
6,642
|
|||||||||
Long-term
FHLB
Advances
|
(4,796
|
)
|
1,171
|
(3,625
|
)
|
|||||||
Long-term
Debt
|
–
|
376
|
376
|
|||||||||
Total
Interest
Expense
|
3,867
|
12,995
|
16,862
|
|||||||||
Net Interest
Income
|
$
|
4,423
|
$
|
(4,591
|
)
|
$
|
(168
|
)
|
(1)
|
Interest
yields on loans and securities that are nontaxable for federal income tax
purposes are presented on a taxable equivalent
basis.
|
Years
Ended
|
||||||||||||
December 31, |
Percent
|
|||||||||||
2007
|
2006
|
Change
|
||||||||||
(dollars in
thousands)
|
||||||||||||
Deposit
services
|
$ | 17,280 | $ | 15,482 | 11.6 | % | ||||||
Gain on
securities available for
sale
|
897 | 743 | 20.7 | % | ||||||||
Gain on sale
of
loans
|
1,922 | 1,817 | 5.8 | % | ||||||||
Trust
income
|
2,106 | 1,711 | 23.1 | % | ||||||||
Bank owned
life insurance
income
|
1,142 | 1,067 | 7.0 | % | ||||||||
Other
|
3,071 | 2,661 | 15.4 | % | ||||||||
Total
noninterest
income
|
$ | 26,418 | $ | 23,481 | 12.5 | % |
Years
Ended
|
||||||||||||
December 31, |
Percent
|
|||||||||||
2007
|
2006
|
Change
|
||||||||||
(dollars in
thousands)
|
||||||||||||
Salaries and
employee benefits
|
$ | 29,361 | $ | 28,275 | 3.8 | % | ||||||
Occupancy
expense
|
4,881 | 4,777 | 2.2 | % | ||||||||
Equipment
expense
|
1,017 | 899 | 13.1 | % | ||||||||
Advertising,
travel and entertainment
|
1,812 | 1,742 | 4.0 | % | ||||||||
ATM and debit
card expense
|
1,006 | 955 | 5.3 | % | ||||||||
Director
fees
|
605 | 587 | 3.1 | % | ||||||||
Supplies
|
692 | 637 | 8.6 | % | ||||||||
Professional
fees
|
1,268 | 1,386 | (8.5 | %) | ||||||||
Postage
|
662 | 618 | 7.1 | % | ||||||||
Telephone and
communications
|
800 | 723 | 10.7 | % | ||||||||
Other
|
5,181 | 4,368 | 18.6 | % | ||||||||
Total
noninterest expense
|
$ | 47,285 | $ | 44,967 | 5.2 | % |
Years
Ended
|
||||||||||||
December
31,
|
Percent
|
|||||||||||
2006
|
2005
|
Change
|
||||||||||
(dollars in
thousands)
|
||||||||||||
Deposit
services
|
$ | 15,482 | $ | 14,594 | 6.1 | % | ||||||
Gain on
securities available for sale
|
743 | 228 | 225.9 | % | ||||||||
Gain on sale
of loans
|
1,817 | 1,807 | 0.6 | % | ||||||||
Trust
income
|
1,711 | 1,422 | 20.3 | % | ||||||||
Bank owned
life insurance income
|
1,067 | 951 | 12.2 | % | ||||||||
Other
|
2,661 | 2,246 | 18.5 | % | ||||||||
Total
noninterest income
|
$ | 23,481 | $ | 21,248 | 10.5 | % |
Years
Ended
|
||||||||||||
December
31,
|
Percent
|
|||||||||||
2006
|
2005
|
Change
|
||||||||||
(dollars in
thousands)
|
||||||||||||
Salaries and
employee benefits
|
$ | 28,275 | $ | 27,479 | 2.9 | % | ||||||
Occupancy
expense
|
4,777 | 4,257 | 12.2 | % | ||||||||
Equipment
expense
|
899 | 847 | 6.1 | % | ||||||||
Advertising,
travel and entertainment
|
1,742 | 1,967 | (11.4 | %) | ||||||||
ATM and debit
card expense
|
955 | 648 | 47.4 | % | ||||||||
Director
fees
|
587 | 677 | (13.3 | %) | ||||||||
Supplies
|
637 | 628 | 1.4 | % | ||||||||
Professional
fees
|
1,386 | 1,339 | 3.5 | % | ||||||||
Postage
|
618 | 572 | 8.0 | % | ||||||||
Telephone and
communications
|
723 | 593 | 21.9 | % | ||||||||
Other
|
4,368 | 4,152 | 5.2 | % | ||||||||
Total
noninterest expense
|
$ | 44,967 | $ | 43,159 | 4.2 | % |
December
31,
|
||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||||||
Real Estate
Loans:
|
||||||||||||||||||||
Construction
|
$ | 96,356 | $ | 39,588 | $ | 35,765 | $ | 32,877 | $ | 35,306 | ||||||||||
1-4 Family
Residential
|
237,888 | 227,354 | 199,812 | 168,784 | 143,460 | |||||||||||||||
Other
|
211,280 | 181,047 | 162,147 | 153,998 | 144,668 | |||||||||||||||
Commercial
Loans
|
154,171 | 118,962 | 91,456 | 80,808 | 76,432 | |||||||||||||||
Municipal
Loans
|
112,523 | 106,155 | 109,003 | 103,963 | 96,135 | |||||||||||||||
Loans to
Individuals
|
149,012 | 86,041 | 82,181 | 83,589 | 93,134 | |||||||||||||||
Total
Loans
|
$ | 961,230 | $ | 759,147 | $ | 680,364 | $ | 624,019 | $ | 589,135 |
Due in
One
|
After One
but
|
||||||||||
Year
or
|
within
Five
|
After
Five
|
|||||||||
Less*
|
Years
|
Years
|
|||||||||
(in
thousands)
|
|||||||||||
Real Estate
Loans – Construction
|
$
|
68,511
|
$
|
13,651
|
$
|
14,194
|
|||||
Real Estate
Loans – 1-4 Family Residential
|
58,006
|
75,885
|
103,997
|
||||||||
Real Estate
Loans – Other
|
58,966
|
64,184
|
88,130
|
||||||||
Commercial
Loans
|
86,021
|
61,866
|
6,284
|
||||||||
Municipal
Loans
|
7,263
|
21,468
|
83,792
|
||||||||
Loans to
Individuals
|
56,010
|
86,580
|
6,422
|
||||||||
Total
Loans
|
$
|
334,777
|
$
|
323,634
|
$
|
302,819
|
Loans with
Maturities After
|
|||||
One Year for
Which:
|
Interest
Rates are Fixed or Predetermined
|
$ | 365,340 | ||
Interest
Rates are Floating or Adjustable
|
$ | 261,113 |
|
*
|
The volume of
commercial loans due within one year reflects our general policy of
attempting to limit a majority of these loans to a short-term
maturity. Nonaccrual loans totaling $2.9 million are reflected
in the due after five years column.
|
Years Ended
December 31,
|
||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
(dollars in
thousands)
|
||||||||||||||||||||
Average Net
Loans
Outstanding
|
$ | 809,906 | $ | 722,252 | $ | 657,938 | $ | 604,658 | $ | 570,122 | ||||||||||
Balance of
Allowance for Loan Losses at Beginning of Period
|
$ | 7,193 | $ | 7,090 | $ | 6,942 | $ | 6,414 | $ | 6,195 | ||||||||||
Loan
Charge-Offs:
|
||||||||||||||||||||
Real
Estate-Construction
|
– | – | – | – | (17 | ) | ||||||||||||||
Real
Estate-1-4 Family
Residential
|
(33 | ) | (59 | ) | (36 | ) | (142 | ) | (63 | ) | ||||||||||
Real
Estate-Other
|
(7 | ) | (18 | ) | (53 | ) | (3 | ) | – | |||||||||||
Commercial
Loans
|
(95 | ) | (245 | ) | (438 | ) | (375 | ) | (693 | ) | ||||||||||
Loans to
Individuals
|
(2,612 | ) | (2,650 | ) | (2,469 | ) | (523 | ) | (703 | ) | ||||||||||
Total Loan
Charge-Offs
|
(2,747 | ) | (2,972 | ) | (2,996 | ) | (1,043 | ) | (1,476 | ) | ||||||||||
Recovery of
Loans Previously Charged-off:
|
||||||||||||||||||||
Real
Estate-Construction
|
– | – | – | – | – | |||||||||||||||
Real
Estate-1-4 Family
Residential
|
30 | 7 | 20 | – | – | |||||||||||||||
Real
Estate-Other
|
10 | – | – | 27 | 3 | |||||||||||||||
Commercial
Loans
|
98 | 87 | 54 | 323 | 179 | |||||||||||||||
Loans to
Individuals
|
1,909 | 1,901 | 1,607 | 296 | 304 | |||||||||||||||
Total
Recovery of Loans Previously Charged-Off
|
2,047 | 1,995 | 1,681 | 646 | 486 | |||||||||||||||
Net Loan
Charge-Offs
|
(700 | ) | (977 | ) | (1,315 | ) | (397 | ) | (990 | ) | ||||||||||
Allowance for
Loan Losses
Acquired
|
909 | – | – | – | – | |||||||||||||||
Provision for
Loan
Losses
|
2,351 | 1,080 | 1,463 | 925 | 1,209 | |||||||||||||||
Balance of
Allowance for Loan Losses at End of Period
|
$ | 9,753 | $ | 7,193 | $ | 7,090 | $ | 6,942 | $ | 6,414 | ||||||||||
Reserve for
Unfunded Loan Commitments at Beginning of Period
|
$ | – | $ | – | $ | – | $ | – | $ | – | ||||||||||
Provision for
Losses on Unfunded Loan Commitments
|
50 | – | – | – | – | |||||||||||||||
Reserve for
Unfunded Loan Commitments at End of Period
|
$ | 50 | $ | – | $ | – | $ | – | $ | – | ||||||||||
Ratio of Net
Charge-Offs to Average Net Loans Outstanding
|
0.09 | % | 0.14 | % | 0.20 | % | 0.07 | % | 0.17 | % |
Years Ended
December 31,
|
||||||||||||||||||||||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||||||||||||||||||||||
Percent
|
Percent
|
Percent
|
Percent
|
Percent
|
||||||||||||||||||||||||||||||||||||
of
|
of
|
of
|
of
|
of
|
||||||||||||||||||||||||||||||||||||
Loans
|
Loans
|
Loans
|
Loans
|
Loans
|
||||||||||||||||||||||||||||||||||||
to
Total
|
to
Total
|
to
Total
|
to
Total
|
to
Total
|
||||||||||||||||||||||||||||||||||||
Amount
|
Loans
|
Amount
|
Loans
|
Amount
|
Loans
|
Amount
|
Loans
|
Amount
|
Loans
|
|||||||||||||||||||||||||||||||
Real
Estate
|
||||||||||||||||||||||||||||||||||||||||
Construction
|
$ | 1,031 | 10.0 | % | $ | 366 | 5.2 | % | $ | 329 | 5.3 | % | $ | 518 | 5.3 | % | $ | 510 | 6.0 | % | ||||||||||||||||||||
1-4
Family
Residential
|
1,313 | 24.8 | % | 1,221 | 30.0 | % | 1,101 | 29.4 | % | 909 | 27.0 | % | 906 | 24.3 | % | |||||||||||||||||||||||||
Other
|
2,594 | 22.0 | % | 2,327 | 23.8 | % | 2,397 | 23.8 | % | 2,186 | 24.6 | % | 1,798 | 24.6 | % | |||||||||||||||||||||||||
Commercial
Loans
|
2,126 | 16.0 | % | 1,536 | 15.7 | % | 1,482 | 13.4 | % | 1,485 | 13.0 | % | 1,339 | 13.0 | % | |||||||||||||||||||||||||
Municipal
Loans
|
277 | 11.7 | % | 262 | 14.0 | % | 269 | 16.0 | % | 318 | 16.7 | % | 238 | 16.3 | % | |||||||||||||||||||||||||
Loans to
Individuals
|
2,391 | 15.5 | % | 1,394 | 11.3 | % | 1,498 | 12.1 | % | 1,516 | 13.4 | % | 1,622 | 15.8 | % | |||||||||||||||||||||||||
Unallocated
|
21 | 0.0 | % | 87 | 0.0 | % | 14 | 0.0 | % | 10 | 0.0 | % | 1 | 0.0 | % | |||||||||||||||||||||||||
Ending
Balance
|
$ | 9,753 | 100.0 | % | $ | 7,193 | 100.0 | % | $ | 7,090 | 100.0 | % | $ | 6,942 | 100.0 | % | $ | 6,414 | 100.0 | % |
NONPERFORMING
ASSETS
|
||||||||||||||||||||
Years Ended
December 31,
|
||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
(dollars in
thousands)
|
||||||||||||||||||||
Loans 90 Days
Past Due:
|
||||||||||||||||||||
Real
Estate
|
$ | 286 | $ | 64 | $ | 912 | $ | 785 | $ | 248 | ||||||||||
Loans to
Individuals
|
114 | 64 | 33 | 22 | 20 | |||||||||||||||
Commercial
|
– | – | – | 20 | 4 | |||||||||||||||
400 | 128 | 945 | 827 | 272 | ||||||||||||||||
Loans on
Nonaccrual:
|
||||||||||||||||||||
Real
Estate
|
636 | 975 | 970 | 753 | 775 | |||||||||||||||
Loans to
Individuals
|
2,119 | 262 | 381 | 432 | 354 | |||||||||||||||
Commercial
|
158 | 96 | 380 | 1,063 | 418 | |||||||||||||||
2,913 | 1,333 | 1,731 | 2,248 | 1,547 | ||||||||||||||||
Restructured
Loans:
|
||||||||||||||||||||
Real
Estate
|
94 | 97 | 99 | 102 | 109 | |||||||||||||||
Loans to
Individuals
|
120 | 105 | 127 | 85 | 97 | |||||||||||||||
Commercial
|
11 | 18 | – | 6 | 13 | |||||||||||||||
225 | 220 | 226 | 193 | 219 | ||||||||||||||||
Total
Nonperforming Loans
|
3,538 | 1,681 | 2,902 | 3,268 | 2,038 | |||||||||||||||
Other Real
Estate Owned
|
153 | 351 | 145 | 214 | 195 | |||||||||||||||
Repossessed
Assets
|
255 | 78 | 10 | 41 | 48 | |||||||||||||||
Total
Nonperforming Assets
|
$ | 3,946 | $ | 2,110 | $ | 3,057 | $ | 3,523 | $ | 2,281 | ||||||||||
Percentage of
Total Assets
|
0.18 | % | 0.11 | % | 0.17 | % | 0.22 | % | 0.16 | % | ||||||||||
Percentage of
Loans and Leases,
|
||||||||||||||||||||
Net of
Unearned Discount
|
0.41 | % | 0.28 | % | 0.45 | % | 0.56 | % | 0.39 | % |
Valuation
|
Carrying
|
|||||||||||
Total
|
Allowance
|
Value
|
||||||||||
Real Estate
Loans
|
$ | 636 | $ | 92 | $ | 544 | ||||||
Loans to
Individuals
|
2,230 | 396 | 1,834 | |||||||||
Commercial
Loans
|
170 | 65 | 105 | |||||||||
Balance at
December 31, 2007
|
$ | 3,036 | $ | 553 | $ | 2,483 |
Valuation
|
Carrying
|
|||||||||||
Total
|
Allowance
|
Value
|
||||||||||
Real Estate
Loans
|
$ | 975 | $ | 102 | $ | 873 | ||||||
Loans to
Individuals
|
357 | 109 | 248 | |||||||||
Commercial
Loans
|
114 | 14 | 100 | |||||||||
Balance at
December 31, 2007
|
$ | 1,446 | $ | 225 | $ | 1,221 |
|
·
|
Held to
Maturity (“HTM”). Debt securities that management has the
current intent and ability to hold until maturity are classified as HTM
and are carried at their remaining unpaid principal balance, net of
unamortized premiums or unaccreted discounts. Premiums are
amortized and discounts are accreted using the level interest yield method
over the estimated remaining term of the underlying
security.
|
|
·
|
Available for
Sale (“AFS”). Debt and equity securities that will be held for
indefinite periods of time, including securities that may be sold in
response to changes in market interest or prepayment rates, needs for
liquidity and changes in the availability of and the yield of alternative
investments are classified as AFS. These assets are carried at
market value. Market value is determined using quoted market
prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices for similar
securities or estimates from independent pricing
services. Unrealized gains and losses on AFS securities are
excluded from earnings and reported net of tax as a separate component of
shareholders' equity until
realized.
|
December
31,
|
||||||||||||
Available
for Sale:
|
2007
|
2006
|
2005
|
|||||||||
(in
thousands)
|
||||||||||||
Investment
Securities:
|
||||||||||||
U.S.
Treasury
|
$ | 4,886 | $ | 26,383 | $ | 23,770 | ||||||
Government
Sponsored Enterprise Debentures
|
31,759 | 9,923 | 21,525 | |||||||||
State and
Political
Subdivisions
|
66,244 | 55,135 | 68,339 | |||||||||
Other Stocks
and
Bonds
|
7,039 | 7,511 | 7,606 | |||||||||
Mortgage-backed
Securities:
|
||||||||||||
U.S.
Government
Agencies
|
89,720 | 71,399 | 69,732 | |||||||||
Government
Sponsored
Enterprises
|
633,060 | 564,650 | 519,396 | |||||||||
Other Private
Issues
|
4,773 | 7,115 | 3,307 | |||||||||
Total
|
$ | 837,481 | $ | 742,116 | $ | 713,675 |
December
31,
|
||||||||||||
Held to
Maturity:
|
2007
|
2006
|
2005
|
|||||||||
(in
thousands)
|
||||||||||||
Investment
Securities:
|
||||||||||||
Other Stocks
and
Bonds
|
$ | 475 | $ | 1,351 | $ | – | ||||||
Mortgage-backed
Securities:
|
||||||||||||
U.S.
Government
Agencies
|
25,965 | 30,788 | 35,400 | |||||||||
Government
Sponsored
Enterprises
|
164,000 | 195,374 | 193,921 | |||||||||
Total
|
$ | 190,440 | $ | 227,513 | $ | 229,321 |
MATURING
|
||||||||||||||||||
Within 1
Year
|
After 1
But
Within 5
Years
|
After 5
But
Within 10
Years
|
After 10
Years
|
|||||||||||||||
Available
For Sale:
|
Amount
|
Yield
|
Amount
|
Yield
|
Amount
|
Yield
|
Amount
|
Yield
|
||||||||||
(dollars in
thousands)
|
||||||||||||||||||
Investment
Securities:
|
||||||||||||||||||
U.S.
Treasury
|
$
|
4,886
|
3.75
|
%
|
$
|
–
|
–
|
$
|
–
|
–
|
$
|
–
|
–
|
|||||
Government
Sponsored Enterprise Debentures
|
31,759
|
4.31
|
%
|
–
|
–
|
–
|
–
|
–
|
–
|
|||||||||
State and
Political Subdivisions
|
4,437
|
4.80
|
%
|
11,922
|
6.38
|
%
|
22,846
|
6.00
|
%
|
27,039
|
6.66
|
%
|
||||||
Other Stocks
and Bonds
|
–
|
–
|
–
|
–
|
–
|
–
|
7,039
|
7.54
|
%
|
|||||||||
Mortgage-backed
Securities:
|
||||||||||||||||||
U.S.
Government Agencies
|
–
|
–
|
–
|
–
|
7,798
|
4.63
|
%
|
81,922
|
5.65
|
%
|
||||||||
Government
Sponsored Enterprises
|
221
|
4.13
|
%
|
15,066
|
4.61
|
%
|
108,884
|
5.05
|
%
|
508,889
|
5.46
|
%
|
||||||
Other Private
Issues
|
–
|
–
|
–
|
–
|
–
|
–
|
4,773
|
5.48
|
%
|
|||||||||
Total
|
$
|
41,303
|
4.30
|
%
|
$
|
26,988
|
5.39
|
%
|
$
|
139,528
|
5.18
|
%
|
$
|
629,662
|
5.56
|
%
|
MATURING
|
||||||||||||||||||
Within 1
Year
|
After 1
But
Within 5
Years
|
After 5
But
Within 10
Years
|
After 10
Years
|
|||||||||||||||
Held to
Maturity:
|
Amount
|
Yield
|
Amount
|
Yield
|
Amount
|
Yield
|
Amount
|
Yield
|
||||||||||
(dollars in
thousands)
|
||||||||||||||||||
Investment
Securities:
|
||||||||||||||||||
Other Stocks
and Bonds
|
$
|
–
|
–
|
|
$
|
–
|
–
|
$
|
–
|
–
|
$
|
475
|
6.78
|
%
|
||||
Mortgage-backed
Securities:
|
||||||||||||||||||
U.S.
Government Agencies
|
–
|
–
|
|
–
|
–
|
2,004
|
4.54
|
%
|
23,961
|
4.98
|
%
|
|||||||
Government
Sponsored Enterprises
|
–
|
–
|
|
11,938
|
4.48
|
%
|
102,915
|
4.78
|
%
|
49,147
|
5.30
|
%
|
||||||
Total
|
$
|
–
|
–
|
|
$
|
11,938
|
4.48
|
%
|
$
|
104,919
|
4.78
|
%
|
$
|
73,583
|
5.21
|
%
|
Years Ended
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(in
thousands)
|
||||||||||||
Noninterest
Bearing Demand Deposits
|
$ | 357,083 | $ | 325,771 | $ | 310,541 | ||||||
Interest
Bearing Demand
Deposits
|
498,221 | 382,265 | 360,250 | |||||||||
Savings
Deposits
|
52,975 | 50,454 | 48,835 | |||||||||
Time
Deposits
|
622,212 | 523,985 | 391,187 | |||||||||
Total
Deposits
|
$ | 1,530,491 | $ | 1,282,475 | $ | 1,110,813 |
December 31,
2007
|
December 31,
2006
|
|||||||||||||||||||||||
Time
Certificates of Deposit
|
Other Time
Deposits
|
Total
|
Time
Certificates of Deposit
|
Other Time
Deposits
|
Total
|
|||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||
Three months
or
less
|
$ | 79,461 | $ | 21,000 | $ | 100,461 | $ | 48,529 | $ | 28,000 | $ | 76,529 | ||||||||||||
Over three to
six
months
|
44,919 | 21,000 | 65,919 | 35,770 | 21,000 | 56,770 | ||||||||||||||||||
Over six to
twelve months
|
46,458 | 7,000 | 53,458 | 38,534 | 7,000 | 45,534 | ||||||||||||||||||
Over twelve
months
|
37,257 | – | 37,257 | 22,973 | – | 22,973 | ||||||||||||||||||
Total
|
$ | 208,095 | $ | 49,000 | $ | 257,095 | $ | 145,806 | $ | 56,000 | $ | 201,806 |
Years Ended
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(dollars in
thousands)
|
||||||||||||
Federal funds
purchased and repurchase agreements
|
||||||||||||
Balance at
end of
period
|
$
|
7,023
|
$
|
5,675
|
$
|
2,400
|
||||||
Average
amount outstanding during the period (1)
|
4,519
|
8,727
|
6,485
|
|||||||||
Maximum
amount outstanding during the period (3)
|
10,250
|
13,775
|
9,875
|
|||||||||
Weighted
average interest rate during the period (2)
|
5.3%
|
5.2%
|
3.6%
|
|||||||||
Interest rate
at end of
period
|
4.7%
|
5.5%
|
4.3%
|
|||||||||
FHLB
advances
|
||||||||||||
Balance at
end of
period
|
$
|
353,792
|
$
|
322,241
|
$
|
312,271
|
||||||
Average
amount outstanding during the period (1)
|
272,711
|
367,068
|
274,689
|
|||||||||
Maximum
amount outstanding during the period (3)
|
383,059
|
396,416
|
337,808
|
|||||||||
Weighted
average interest rate during the period (2)
|
4.8%
|
4.4%
|
3.5%
|
|||||||||
Interest rate
at end of
period
|
4.1%
|
4.7%
|
3.7%
|
|||||||||
Other
obligations
|
||||||||||||
Balance at
end of
period
|
$
|
2,500
|
$
|
1,605
|
$
|
2,174
|
||||||
Average
amount outstanding during the period (1)
|
772
|
901
|
1,109
|
|||||||||
Maximum
amount outstanding during the period (3)
|
2,500
|
2,500
|
2,500
|
|||||||||
Weighted
average interest rate during the period (2)
|
5.0%
|
4.8%
|
3.0%
|
|||||||||
Interest rate
at end of
period
|
3.6%
|
5.0%
|
4.0%
|
(1)
|
The average
amount outstanding during the period was computed by dividing the total
daily outstanding principal balances by the number of days in the
period.
|
(2)
|
The weighted
average interest rate during the period was computed by dividing the
actual interest expense by the average balance outstanding during the
period.
|
(3)
|
The maximum
amount outstanding at any month-end during the
period.
|
December
31,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
(in
thousands)
|
||||||||
Federal Home
Loan Bank Advances (1)
|
||||||||
Varying
maturities to
2017
|
$ | 86,247 | $ | 129,379 | ||||
Long-term
Debt (2)
|
||||||||
Southside
Statutory Trust III Due 2033 (3)
|
20,619 | 20,619 | ||||||
Southside
Statutory Trust IV Due 2037 (4)
|
23,196 | – | ||||||
Southside
Statutory Trust V Due 2037 (5)
|
12,887 | – | ||||||
Magnolia
Trust Company I Due 2035 (6)
|
3,609 | – | ||||||
Total
Long-term
Debt
|
60,311 | 20,619 | ||||||
Total
Long-term
Obligations
|
$ | 146,558 | $ | 149,998 |
|
(2)
|
This
long-term debt consists of trust preferred securities that qualify under
the risk-based capital guidelines as Tier 1 capital, subject to certain
limitations.
|
|
(3)
|
This debt
carries an adjustable rate of 7.77% through March 30, 2008 and adjusts
quarterly at a rate equal to three-month LIBOR plus 294 basis
points.
|
|
(4)
|
This debt
carries a fixed rate of 6.518% through October 30, 2012 and thereafter,
adjusts quarterly at a rate equal to three-month LIBOR plus 130 basis
points.
|
|
(5)
|
This debt
carries a fixed rate of 7.48% through December 15, 2012 and thereafter,
adjusts quarterly at a rate equal to three-month LIBOR plus 225 basis
points.
|
|
(6)
|
This debt
carries an adjustable rate of 6.815% through February 24, 2008 and adjusts
quarterly at a rate equal to three-month LIBOR plus 180 basis
points.
|
To Be
Well
|
||||||||||||||||||||||||
Capitalized
Under
|
||||||||||||||||||||||||
For Capital
Adequacy
|
Prompt
Corrective
|
|||||||||||||||||||||||
Actual
|
Purposes
|
Action
Provisions
|
||||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||||
As of
December 31, 2007:
|
(dollars in
thousands)
|
|||||||||||||||||||||||
Total Capital
(to Risk Weighted Assets)
|
||||||||||||||||||||||||
Consolidated
|
$ | 182,148 | 17.02 | % | $ | 85,603 | 8.00 | % | N/A | N/A | ||||||||||||||
Southside
Bank
Only
|
$ | 157,854 | 16.41 | % | $ | 76,936 | 8.00 | % | $ | 96,170 | 10.00 | % | ||||||||||||
Fort Worth
National Bank Only
|
$ | 16,745 | 15.51 | % | $ | 8,639 | 8.00 | % | $ | 10,798 | 10.00 | % | ||||||||||||
Tier 1
Capital (to Risk Weighted Assets)
|
||||||||||||||||||||||||
Consolidated
|
$ | 159,690 | 14.92 | % | $ | 42,802 | 4.00 | % | N/A | N/A | ||||||||||||||
Southside
Bank
Only
|
$ | 149,099 | 15.50 | % | $ | 38,468 | 4.00 | % | $ | 57,702 | 6.00 | % | ||||||||||||
Fort Worth
National Bank Only
|
$ | 15,697 | 14.54 | % | $ | 4,319 | 4.00 | % | $ | 6,479 | 6.00 | % | ||||||||||||
Tier 1
Capital (to Average Assets) (1)
|
||||||||||||||||||||||||
Consolidated
|
$ | 159,690 | 7.73 | % | $ | 82,625 | 4.00 | % | N/A | N/A | ||||||||||||||
Southside
Bank Only
|
$ | 149,099 | 7.67 | % | $ | 77,797 | 4.00 | % | $ | 97,246 | 5.00 | % | ||||||||||||
Fort Worth
National Bank Only
|
$ | 15,697 | 13.13 | % | $ | 4,783 | 4.00 | % | $ | 5,979 | 5.00 | % | ||||||||||||
As of
December 31, 2006:
|
||||||||||||||||||||||||
Total Capital
(to Risk Weighted Assets)
|
||||||||||||||||||||||||
Consolidated
|
$ | 152,198 | 17.76 | % | $ | 68,540 | 8.00 | % | N/A | N/A | ||||||||||||||
Southside
Bank
Only
|
$ | 146,458 | 17.09 | % | $ | 68,540 | 8.00 | % | $ | 85,675 | 10.00 | % | ||||||||||||
Tier 1
Capital (to Risk Weighted Assets)
|
||||||||||||||||||||||||
Consolidated
|
$ | 145,005 | 16.93 | % | $ | 34,270 | 4.00 | % | N/A | N/A | ||||||||||||||
Southside
Bank
Only
|
$ | 139,265 | 16.26 | % | $ | 34,270 | 4.00 | % | $ | 51,405 | 6.00 | % | ||||||||||||
Tier 1
Capital (to Average Assets) (1)
|
||||||||||||||||||||||||
Consolidated
|
$ | 145,005 | 7.68 | % | $ | 75,570 | 4.00 | % | N/A | N/A | ||||||||||||||
Southside
Bank
Only
|
$ | 139,265 | 7.37 | % | $ | 75,542 | 4.00 | % | $ | 94,427 | 5.00 | % |
|
(1)
|
Refers to
quarterly average assets as calculated by bank regulatory
agencies.
|
Years Ended
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Return on
Average
Assets
|
0.87%
|
0.81%
|
0.86%
|
|||||||||
Return on
Average Shareholders' Equity
|
14.05%
|
13.48%
|
13.88%
|
|||||||||
Dividend
Payout Ratio -
Basic
|
39.06%
|
40.52%
|
40.00%
|
|||||||||
Dividend
Payout Ratio -
Diluted
|
40.32%
|
41.96%
|
41.82%
|
|||||||||
Average
Shareholders' Equity to Average Total Assets
|
6.22%
|
5.99%
|
6.20%
|
December
31,
|
||||||||
2007
|
2006
|
|||||||
Unused
commitments:
|
||||||||
Due in one
year or
less
|
$ | 96,264 | $ | 61,821 | ||||
Due after one
year
|
30,954 | 43,333 | ||||||
Total
|
$ | 127,218 | $ | 105,154 |
Payments Due
By Period
|
||||||||||||||||||||
Less than 1
Year
|
1-3
Years
|
3-5
Years
|
More than 5
Years
|
Total
|
||||||||||||||||
Contractual
obligations:
|
(in
thousands)
|
|||||||||||||||||||
Long-term
debt, including current maturities (1)
|
$ | – | $ | – | $ | – | $ | 60,311 | $ | 60,311 | ||||||||||
FHLB advances
(2)
|
340,672 | 75,228 | 20,343 | 3,796 | 440,039 | |||||||||||||||
Operating
leases
(3)
|
1,040 | 1,480 | 569 | – | 3,089 | |||||||||||||||
Deferred
compensation agreements (4)
|
641 | 348 | 386 | 2,417 | 3,792 | |||||||||||||||
Time deposits
(5)
|
434,715 | 90,668 | 96,829 | – | 622,212 | |||||||||||||||
Securities
purchased not paid
for
|
6,141 | – | – | – | 6,141 | |||||||||||||||
Capital lease
obligations
|
– | – | – | – | – | |||||||||||||||
Purchase
obligations
|
– | – | – | – | – | |||||||||||||||
Total
contractual
obligations
|
$ | 783,209 | $ | 167,724 | $ | 118,127 | $ | 66,524 | $ | 1,135,584 |
·
|
Floating rate
debt of $20.6 million with a scheduled maturity of 2033, that was indexed
to three-month LIBOR and adjusts on a quarterly basis. The rate
of interest for the first quarter of 2008 associated with this debt is
7.77%.
|
·
|
Floating rate
debt of $3.6 million with a scheduled maturity of 2035, that was indexed
to three-month LIBOR and adjusts on a quarterly basis. The rate
of interest for the first quarter of 2008 associated with this debt is
6.815%.
|
·
|
Debt of $23.2
million with a scheduled maturity of 2037, which carries a fixed rate of
6.518% through October 2012 and thereafter adjusts quarterly at a rate
equal to three-month LIBOR plus 130 basis
points.
|
·
|
Debt of $12.9
million with a scheduled maturity of 2037, which carries a fixed rate of
7.48% through December 2012 and thereafter adjusts quarterly at a rate
equal to three-month LIBOR plus 225 basis
points.
|
ITEM 7A.
|
QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
EXPECTED
MATURITY DATE
|
||||||||||||||||||||||||||||||||
(dollars in
thousands)
|
||||||||||||||||||||||||||||||||
Years Ending
December 31,
|
||||||||||||||||||||||||||||||||
2008
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
Total
|
Fair
Value
|
|||||||||||||||||||||||||
Loans:
|
||||||||||||||||||||||||||||||||
Fixed
Rate
|
$ | 226,144 | $ | 101,447 | $ | 68,805 | $ | 51,234 | $ | 40,256 | $ | 100,950 | $ | 588,836 | $ | 601,861 | ||||||||||||||||
7.12 | % | 7.46 | % | 8.83 | % | 10.28 | % | 12.15 | % | 5.81 | % | 7.77 | % | |||||||||||||||||||
Adjustable
Rate
|
111,994 | 24,010 | 13,505 | 7,490 | 16,887 | 198,956 | 372,842 | 372,842 | ||||||||||||||||||||||||
7.69 | % | 7.14 | % | 7.87 | % | 7.38 | % | 7.21 | % | 6.78 | % | 7.15 | % | |||||||||||||||||||
Mortgage-backed
Securities:
|
||||||||||||||||||||||||||||||||
Fixed
Rate
|
279,651 | 219,378 | 156,764 | 103,024 | 68,677 | 88,496 | 915,990 | 915,938 | ||||||||||||||||||||||||
5.47 | % | 5.32 | % | 5.25 | % | 5.18 | % | 5.06 | % | 4.94 | % | 5.28 | % | |||||||||||||||||||
Adjustable
Rate
|
– | – | – | – | – | 1,528 | 1,528 | 1,528 | ||||||||||||||||||||||||
– | – | – | – | – | 5.03 | % | 5.03 | % | ||||||||||||||||||||||||
Investments
and Other Interest Earning Assets:
|
||||||||||||||||||||||||||||||||
Fixed
Rate
|
62,896 | 2,145 | 3,954 | 3,835 | 1,988 | 53,927 | 128,745 | 128,747 | ||||||||||||||||||||||||
4.37 | % | 5.75 | % | 6.90 | % | 6.10 | % | 6.59 | % | 6.44 | % | 5.42 | % | |||||||||||||||||||
Adjustable
Rate
|
– | – | – | – | – | 5,541 | 5,541 | 5,541 | ||||||||||||||||||||||||
– | – | – | – | – | 7.38 | % | 7.38 | % | ||||||||||||||||||||||||
Total
Interest Earning Assets
|
$ | 680,685 | $ | 346,980 | $ | 243,028 | $ | 165,583 | $ | 127,808 | $ | 449,398 | $ | 2,013,482 | $ | 2,026,457 | ||||||||||||||||
6.28 | % | 6.07 | % | 6.44 | % | 6.88 | % | 7.60 | % | 6.16 | % | 6.37 | % | |||||||||||||||||||
Savings
Deposits
|
$ | 5,297 | $ | 2,649 | $ | 2,649 | $ | 2,649 | $ | 2,649 | $ | 37,082 | $ | 52,975 | $ | 52,975 | ||||||||||||||||
1.29 | % | 1.29 | % | 1.29 | % | 1.29 | % | 1.29 | % | 1.29 | % | 1.29 | % | |||||||||||||||||||
NOW
Deposits
|
126,070 | 5,690 | 5,690 | 5,690 | 5,690 | 79,666 | 228,496 | 228,496 | ||||||||||||||||||||||||
3.61 | % | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | 2.37 | % | |||||||||||||||||||
Money Market
Deposits
|
31,927 | 10,641 | 10,641 | 10,641 | 10,641 | 31,924 | 106,415 | 106,415 | ||||||||||||||||||||||||
3.05 | % | 3.05 | % | 3.05 | % | 3.05 | % | 3.05 | % | 3.05 | % | 3.05 | % | |||||||||||||||||||
Platinum
Money Market
|
91,455 | 13,881 | 13,881 | 13,881 | 13,881 | 16,331 | 163,310 | 163,310 | ||||||||||||||||||||||||
3.95 | % | 3.95 | % | 3.95 | % | 3.95 | % | 3.95 | % | 3.95 | % | 3.95 | % | |||||||||||||||||||
Certificates
of Deposit
|
434,715 | 67,853 | 22,815 | 83,286 | 13,543 | – | 622,212 | 630,210 | ||||||||||||||||||||||||
4.79 | % | 4.86 | % | 4.70 | % | 5.42 | % | 5.09 | % | – | 4.89 | % | ||||||||||||||||||||
FHLB
Advances
|
340,672 | 56,346 | 18,882 | 15,450 | 4,893 | 3,796 | 440,039 | 442,223 | ||||||||||||||||||||||||
3.99 | % | 4.82 | % | 4.55 | % | 5.59 | % | 4.82 | % | 5.16 | % | 4.20 | % | |||||||||||||||||||
Other
Borrowings
|
9,523 | – | – | – | – | 60,311 | 69,834 | 70,203 | ||||||||||||||||||||||||
4.42 | % | – | – | – | – | 7.17 | % | 6.79 | % | |||||||||||||||||||||||
Total
Interest Bearing Liabilities
|
$ | 1,039,659 | $ | 157,060 | $ | 74,558 | $ | 131,597 | $ | 51,297 | $ | 229,110 | $ | 1,683,281 | $ | 1,693,832 | ||||||||||||||||
4.24 | % | 4.44 | % | 3.87 | % | 4.81 | % | 3.67 | % | 3.18 | % | 4.12 | % |
Rate
Sensitive Assets (RSA)
|
1-3
Mos.
|
4-12
Mos.
|
1-5
Yrs.
|
Over 5
Yrs.
|
Total
|
|||||||||||||||
Loans(1)
|
$ | 324,544 | $ | 195,653 | $ | 325,485 | $ | 115,996 | $ | 961,678 | ||||||||||
Securities
|
124,818 | 222,834 | 559,765 | 142,423 | 1,049,840 | |||||||||||||||
Other
Interest Earning Assets
|
1,964 | – | – | – | 1,964 | |||||||||||||||
Total Rate
Sensitive Assets
|
$ | 451,326 | $ | 418,487 | $ | 885,250 | $ | 258,419 | $ | 2,013,482 | ||||||||||
Rate
Sensitive Liabilities (RSL)
|
||||||||||||||||||||
Interest
Bearing Deposits
|
$ | 334,414 | $ | 355,050 | $ | 318,941 | $ | 165,003 | $ | 1,173,408 | ||||||||||
Other
Interest Bearing Liabilities
|
293,822 | 56,373 | 95,571 | 64,107 | 509,873 | |||||||||||||||
Total Rate
Sensitive Liabilities
|
$ | 628,236 | $ | 411,423 | $ | 414,512 | $ | 229,110 | $ | 1,683,281 | ||||||||||
Gap (2)
|
(176,910 | ) | 7,064 | 470,738 | 29,309 | 330,201 | ||||||||||||||
Cumulative
Gap
|
(176,910 | ) | (169,846 | ) | 300,892 | 330,201 | ||||||||||||||
Cumulative
Ratio of RSA to RSL
|
0.72 | 0.84 | 1.21 | 1.20 | 1.20 | |||||||||||||||
Gap/Total
Earning Assets
|
(8.8 | %) | 0.4 | % | 23.4 | % | 1.5 | % | 16.4 | % |
|
(1) Amount
is equal to total loans less nonaccrual loans at December 31,
2007.
|
(2) Gap equals Total RSA minus Total RSL. |
ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
|
|
The
information required by this item is set forth in Part
IV.
|
ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
|
FINANCIAL
DISCLOSURE
|
ITEM 9A. CONTROLS AND
PROCEDURES
|
|
Evaluation
of Disclosure Controls and
Procedures
|
|
Our Chief
Executive Officer ("CEO") and our Chief Financial Officer ("CFO")
undertook an evaluation of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act of 1934, as
amended) as of December 31, 2007 and concluded that our disclosure
controls and procedures were effective as of that
date.
|
|
Management is
responsible for establishing and maintaining adequate internal control
over financial reporting. Internal control over financial
reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934, as amended, as a process designed by, or under the
supervision of, our CEO and CFO and effected by our board of directors,
management and other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
|
|
·
|
pertain to
the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our
assets;
|
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being
made only in accordance with authorizations of our management and
directors; and
|
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on the financial
statements.
|
|
Because of
its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risks
that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may
deteriorate.
|
|
Management
assessed the effectiveness of our internal control over financial
reporting as of December 31, 2007. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in Internal
Control-Integrated Framework.
|
|
Management
has excluded Fort Worth Bancshares, Inc. ("FWNB") from its assessment of
internal control over financial reporting as of December 31, 2007 because
it was acquired by the Company in a purchase business combination in the
fourth quarter of 2007. FWNB is a wholly owned subsidiary whose
total assets and net income represent approximately 7% and
|
|
1%,
respectively, of the related consolidated financial statement amounts as
of and for the year ended December 31, 2007. Based on this
assessment, management concluded that we maintained effective internal
control over financial reporting as of December 31,
2007.
|
|
The
effectiveness of the Company's internal control over financial reporting
as of December 31, 2007 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report
which appears herein.
|
|
Changes
in Internal Control Over Financial
Reporting
|
|
No changes
were made to our internal control over financial reporting (as defined in
Rule 13a-15(f) under the Exchange Act of 1934, as amended) during the last
fiscal quarter of the period covered by this report that materially
affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
|
ITEM 9B.
|
OTHER
INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE
GOVERNANCE
|
|
The
information required by this Item is incorporated herein by reference to
our Proxy Statement (Schedule 14A) for our 2008 Annual Meeting of
shareholders to be filed with the SEC within 120 days of our fiscal
year-end.
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
|
The
information required by this Item is incorporated herein by reference to
our Proxy Statement (Schedule 14A) for our 2008 Annual Meeting of
shareholders to be filed with the SEC within 120 days of our fiscal
year-end.
|
ITEM 12.
|
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
|
|
The other
information required by this Item is incorporated herein by reference to
our Proxy Statement (Schedule 14A) for our 2008 Annual Meeting of
shareholders to be filed with the SEC within 120 days of our fiscal
year-end.
|
ITEM 13.
|
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
|
The
information required by this Item is incorporated herein by reference to
our Proxy Statement (Schedule 14A) for our 2008 Annual Meeting of
shareholders to be filed with the SEC within 120 days of our fiscal
year-end.
|
|
The
information required by this Item is incorporated herein by reference to
our Proxy Statement (Schedule 14A) for our 2008 Annual Meeting of
shareholders to be filed with the SEC within 120 days of our fiscal
year-end.
|
ITEM 15.
|
EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES
|
|
1.
|
Financial
Statements
|
|
The following
consolidated financial statements of Southside Bancshares, Inc. and its
subsidiaries are filed as part of this
report.
|
|
Consolidated
Balance Sheets as of December 31, 2007 and
2006.
|
|
Consolidated
Statements of Income for the years ended December 31, 2007, 2006 and
2005.
|
|
Consolidated
Statements of Shareholders' Equity for the years ended December 31, 2007,
2006 and 2005.
|
|
Consolidated
Statements of Cash Flow for the years ended December 31, 2007, 2006 and
2005.
|
|
Notes to
Consolidated Financial Statements.
|
|
2.
|
Financial
Statement Schedules
|
|
All schedules
are omitted because they are not applicable or not required, or because
the required information is included in the consolidated financial
statements or notes thereto.
|
|
3.
|
Exhibits
|
Exhibit
No.
|
|||
3
(a)(i)
|
–
|
Articles of
Amendment effective May 10, 2000 to Articles of Incorporation of SoBank,
Inc. (now named Southside Bancshares, Inc.) (filed as Exhibit 3(a)(i) to
the Registrant’s Form 10-Q for the quarter ended September 30, 2000
and incorporated herein by reference).
|
|
3
(b)
|
–
|
Bylaws as
amended and restated and in effect on February 28, 2008, of Southside
Bancshares, Inc. (filed as Exhibit 3(b) to the Registrant’s Form 8-K,
filed March 5, 2008, and incorporated herein by
reference).
|
|
4 |
–
|
Management agrees to furnish to the Securities and Exchange Commission, upon request, a copy of any other agreements or instruments of Southside Bancshares, Inc. and its subsidiaries defining the rights of holders of any long-term debt whose authorization does not exceed 10% of total assets. | |
** 10
(a)(i) |
–
|
Deferred Compensation Plan for B. G. Hartley effective February 13, 1984, as amended June 28, 1990, December 15, 1994, November 20, 1995, December 21,1999 and June 29, 2001 (filed as Exhibit 10(a)(i) to the Registrant’s Form 10-Q for the quarter ended June 30, 2001, and incorporated herein by reference). |
** 10
(a)(ii)
|
–
|
Deferred
Compensation Plan for Robbie N. Edmonson effective February 13, 1984,
as amended June 28, 1990 and March 16, 1995 (filed as Exhibit 10(a)(ii) to
the Registrant's Form 10-K for the year ended December 31, 1995, and
incorporated herein by reference).
|
|
10 (a)(iii)
|
Agreement and Plan of Merger dated May 17, 2007, as amended, by and among Southside Bancshares, Inc., Southside Merger Sub, Inc. and Fort Worth Bancshares, Inc. (filed as Exhibit 10(a) to the Registrant's Form 10-Q for the quarter ended September 30, 2007, and incorporated herein by reference). | ||
** 10
(b)
|
–
|
Officers
Long-term Disability Income Plan effective June 25, 1990 (filed as Exhibit
10(b) to the Registrant's Form 10-K for the year ended June 30, 1990,
and incorporated herein by reference).
|
|
** 10
(c)
|
–
|
Retirement
Plan Restoration Plan for the subsidiaries of SoBank, Inc. (now named
Southside Bancshares, Inc.) (filed as Exhibit 10(c) to the Registrant's
Form 10-K for the year ended December 31, 1992, and incorporated
herein by reference).
|
|
** 10
(e)
|
–
|
Form of
Deferred Compensation Agreement dated June 30, 1994 with Andy Wall as
amended November 13, 1995 (filed as Exhibit 10(e) to the Registrant's
Form 10-K for the year ended December 31, 1995, and incorporated herein by
reference).
|
|
** 10
(f)
|
–
|
Form of
Deferred Compensation Agreements dated June 30, 1994 with each of Sam
Dawson, Lee Gibson and Jeryl Story as amended October 15, 1997 and Form of
Deferred Compensation Agreement dated October 15, 1997 with Lonny Uzzell
(filed as Exhibit 10(f) to the Registrant’s Form 10-K for the year ended
December 31, 1997, and incorporated herein by
reference).
|
|
** 10
(g)
|
–
|
Postretirement
Agreement for B. G. Hartley effective June 20, 2001 (filed as
Exhibit
10(g) to the
Registrant’s Form 10-Q for the quarter ended June 30, 2001, and
incorporated herein by reference).
|
|
** 10
(h)
|
–
|
Split dollar
compensation plan dated October 13, 2004, with Jeryl Wayne Story (filed as
exhibit 10(h) to the Registrant’s Form 8-K, filed October 19, 2004, and
incorporated herein by reference).
|
|
** 10
(i)
|
–
|
Split dollar
compensation plan dated September 7, 2004, with Lee R. Gibson, III (filed
as exhibit 10(i) to the Registrant’s Form 8-K, filed October 19, 2004, and
incorporated herein by reference).
|
|
** 10
(j)
|
–
|
Split dollar
compensation plan dated August 27, 2004, with B. G. Hartley (filed as
exhibit 10
(j) to the Registrant’s Form 8-K filed October 19, 2004, and incorporated
herein by
reference).
|
|
** 10
(k)
|
–
|
Split dollar
compensation plan dated August 31, 2004, with Charles E. Dawson (filed as
exhibit 10(k) to the Registrant’s Form 8-K, filed October 19, 2004, and
incorporated herein by
reference).
|
** 10
(l) |
–
|
Employment agreement dated October 22, 2007, by and between Southside Bank and Lee R. Gibson (filed as exhibit 10 (l) to the Registrant’s Form 8-K, filed October 26, 2007, and incorporated herein by reference). | |
** 10
(m) |
–
|
Employment agreement dated October 22, 2007, by and between Southside Bank and Sam Dawson (filed as exhibit 10 (m) to the Registrant’s Form 8-K, filed October 26, 2007, and incorporated herein by reference). | |
* 21
|
–
|
Subsidiaries
of the Registrant.
|
|
* 23
|
–
|
Consent of
Independent Registered Public Accounting Firm.
|
|
* 31.1
|
–
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
* 31.2
|
–
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
* 32
|
–
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
*Filed
herewith.
|
|||
**Compensation
plan, benefit plan or employment contract or
arrangement
|
SOUTHSIDE
BANCSHARES, INC.
|
||
|
||
BY: /s/
|
B. G.
HARTLEY
|
|
B. G.
Hartley, Chairman of the Board
|
||
and Chief
Executive Officer
|
||
(Principal
Executive Officer)
|
||
BY: /s/
|
LEE R.
GIBSON
|
|
Lee R.
Gibson, CPA, Executive Vice President
|
||
and Chief
Financial Officer (Principal Financial
|
||
and
Accounting Officer)
|
||
DATE: MARCH
6, 2008
|
Signature
|
Title
|
Date
|
|
/s/
|
B. G.
HARTLEY
|
||
(B. G.
Hartley)
|
Chief
Executive Officer,
|
March 6,
2008
|
|
Chairman of
the Board
|
|||
and
Director
|
|||
/s/
|
ROBBIE N.
EDMONSON
|
||
(Robbie N.
Edmonson)
|
Vice Chairman
of the Board
|
March 6,
2008
|
|
and
Director
|
|||
/s/
|
SAM
DAWSON
|
||
(Sam
Dawson)
|
President and
Secretary
|
March 6,
2008
|
|
and
Director
|
|||
/s/
|
HERBERT C.
BUIE
|
||
(Herbert C.
Buie)
|
Director
|
March 6,
2008
|
|
/s/
|
ALTON
CADE
|
||
(Alton
Cade)
|
Director
|
March 6,
2008
|
|
/s/
|
MICHAEL D.
GOLLOB
|
||
(Michael D.
Gollob)
|
Director
|
March 6,
2008
|
|
/s/
|
MELVIN B.
LOVELADY
|
||
(Melvin B.
Lovelady)
|
Director
|
March 6,
2008
|
|
/s/
|
JOE
NORTON
|
||
(Joe
Norton)
|
Director
|
March 6,
2008
|
|
/s/
|
PAUL W.
POWELL
|
||
(Paul W.
Powell)
|
Director
|
March 6,
2008
|
|
/s/
|
WILLIAM
SHEEHY
|
||
(William
Sheehy)
|
Director
|
March 6,
2008
|
SOUTHSIDE
BANCSHARES, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||||
(in
thousands, except share amounts)
|
||||||||
December 31,
2007
|
December 31,
2006
|
|||||||
ASSETS
|
||||||||
Cash and due
from
banks
|
$ | 74,040 | $ | 52,537 | ||||
Interest
earning
deposits
|
1,414 | 550 | ||||||
Federal funds
sold
|
550 | 1,925 | ||||||
Total cash
and cash
equivalents
|
76,004 | 55,012 | ||||||
Investment
securities:
|
||||||||
Available for
sale, at estimated fair
value
|
109,928 | 98,952 | ||||||
Held to
maturity, at
cost
|
475 | 1,351 | ||||||
Mortgage-backed
and related securities:
|
||||||||
Available for
sale, at estimated fair
value
|
727,553 | 643,164 | ||||||
Held to
maturity, at
cost
|
189,965 | 226,162 | ||||||
Federal Home
Loan Bank and FRB stock, at
cost
|
19,850 | 25,614 | ||||||
Other
investments, at
cost
|
2,069 | 882 | ||||||
Loans held
for
sale
|
3,361 | 3,909 | ||||||
Loans:
|
||||||||
Loans
|
961,230 | 759,147 | ||||||
Less: allowance
for loan
losses
|
(9,753 |
)
|
(7,193 | ) | ||||
Net
Loans
|
951,477 | 751,954 | ||||||
Premises and
equipment,
net
|
40,249 | 32,641 | ||||||
Goodwill
|
21,639 | – | ||||||
Other
intangible assets,
net
|
1,925 | – | ||||||
Interest
receivable
|
11,784 | 10,110 | ||||||
Deferred tax
asset
|
4,320 | 8,678 | ||||||
Other
assets
|
35,723 | 32,547 | ||||||
TOTAL
ASSETS
|
$ | 2,196,322 | $ | 1,890,976 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
Deposits:
|
||||||||
Noninterest
bearing
|
$ | 357,083 | $ | 325,771 | ||||
Interest
bearing
|
1,173,408 | 956,704 | ||||||
Total
Deposits
|
1,530,491 | 1,282,475 | ||||||
Short-term
obligations:
|
||||||||
Federal funds
purchased and repurchase
agreements
|
7,023 | 5,675 | ||||||
FHLB
advances
|
353,792 | 322,241 | ||||||
Other
obligations
|
2,500 | 1,605 | ||||||
Total
Short-term
obligations
|
363,315 | 329,521 | ||||||
Long-term
obligations:
|
||||||||
FHLB
advances
|
86,247 | 129,379 | ||||||
Long-term
debt
|
60,311 | 20,619 | ||||||
Total
Long-term
obligations
|
146,558 | 149,998 | ||||||
Other
liabilities
|
23,132 | 18,378 | ||||||
TOTAL
LIABILITIES
|
2,063,496 | 1,780,372 | ||||||
Off-Balance-Sheet
Arrangements, Commitments and Contingencies (Note 18)
|
||||||||
Minority
Interest in Southside Financial
Group
|
498 | – | ||||||
Shareholders'
equity:
|
||||||||
Common
stock: ($1.25 par, 20,000,000 shares authorized, 14,865,134 and
14,075,653 shares issued)
|
18,581 | 17,594 | ||||||
Paid-in
capital
|
115,250 | 100,736 | ||||||
Retained
earnings
|
26,187 | 29,648 | ||||||
Treasury
stock (1,724,857 and 1,718,737 shares at
cost)
|
(22,983 |
)
|
(22,850 | ) | ||||
Accumulated
other comprehensive
loss
|
(4,707 |
)
|
(14,524 | ) | ||||
TOTAL
SHAREHOLDERS'
EQUITY
|
132,328 | 110,604 | ||||||
TOTAL
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
$ | 2,196,322 | $ | 1,890,976 |
SOUTHSIDE
BANCSHARES, INC. AND SUBSIDIARIES
|
||||||||||||
CONSOLIDATED
STATEMENTS OF INCOME
|
||||||||||||
(in
thousands, except per share data)
|
Years Ended
December 31,
|
|||||||||||
2007
|
2006
|
2005
|
||||||||||
Interest
income
|
||||||||||||
Loans
|
$
|
55,904
|
$
|
46,413
|
$
|
38,852
|
||||||
Investment
securities –
taxable
|
2,580
|
2,498
|
1,978
|
|||||||||
Investment
securities - tax
exempt
|
2,112
|
2,139
|
3,181
|
|||||||||
Mortgage-backed
and related
securities
|
43,767
|
44,401
|
34,584
|
|||||||||
Federal Home
Loan Bank stock and other investments
|
1,193
|
1,409
|
1,032
|
|||||||||
Other
interest earning
assets
|
185
|
92
|
54
|
|||||||||
Total
interest
income
|
105,741
|
96,952
|
79,681
|
|||||||||
Interest
expense
|
||||||||||||
Deposits
|
41,458
|
30,690
|
17,221
|
|||||||||
Short-term
obligations
|
13,263
|
16,534
|
9,892
|
|||||||||
Long-term
obligations
|
7,142
|
8,060
|
11,309
|
|||||||||
Total
interest
expense
|
61,863
|
55,284
|
38,422
|
|||||||||
Net interest
income
|
43,878
|
41,668
|
41,259
|
|||||||||
Provision for
loan
losses
|
2,351
|
1,080
|
1,463
|
|||||||||
Net interest
income after provision for loan losses
|
41,527
|
40,588
|
39,796
|
|||||||||
Noninterest
income
|
||||||||||||
Deposit
services
|
17,280
|
15,482
|
14,594
|
|||||||||
Gain on
securities available for
sale
|
897
|
743
|
228
|
|||||||||
Gain on sale
of
loans
|
1,922
|
1,817
|
1,807
|
|||||||||
Trust
income
|
2,106
|
1,711
|
1,422
|
|||||||||
Bank owned
life insurance
income
|
1,142
|
1,067
|
951
|
|||||||||
Other
|
3,071
|
2,661
|
2,246
|
|||||||||
Total
noninterest
income
|
26,418
|
23,481
|
21,248
|
|||||||||
Noninterest
expense
|
||||||||||||
Salaries and
employee
benefits
|
29,361
|
28,275
|
27,479
|
|||||||||
Occupancy
expense
|
4,881
|
4,777
|
4,257
|
|||||||||
Equipment
expense
|
1,017
|
899
|
847
|
|||||||||
Advertising,
travel and
entertainment
|
1,812
|
1,742
|
1,967
|
|||||||||
ATM and debit
card
expense
|
1,006
|
955
|
648
|
|||||||||
Director
fees
|
605
|
587
|
677
|
|||||||||
Supplies
|
692
|
637
|
628
|
|||||||||
Professional
fees
|
1,268
|
1,386
|
1,339
|
|||||||||
Postage
|
662
|
618
|
572
|
|||||||||
Telephone and
communications
|
800
|
723
|
593
|
|||||||||
Other
|
5,181
|
4,368
|
4,152
|
|||||||||
Total
noninterest
expense
|
47,285
|
44,967
|
43,159
|
|||||||||
Income before
income tax
expense
|
20,660
|
19,102
|
17,885
|
|||||||||
Provision
(benefit) for income tax
expense
|
||||||||||||
Current
|
4,068
|
8,582
|
1,569
|
|||||||||
Deferred
|
(92
|
)
|
(4,482
|
)
|
1,724
|
|||||||
Total income
taxes
|
3,976
|
4,100
|
3,293
|
|||||||||
Net
Income
|
$
|
16,684
|
$
|
15,002
|
$
|
14,592
|
||||||
Earnings per
common share –
basic
|
$
|
1.28
|
$
|
1.16
|
$
|
1.15
|
||||||
Earnings per
common share –
diluted
|
$
|
1.24
|
$
|
1.12
|
$
|
1.10
|
||||||
Dividends
declared per common
share
|
$
|
0.50
|
$
|
0.47
|
$
|
0.46
|
SOUTHSIDE
BANCSHARES, INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||||||
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
|
||||||||||||||||||||||||||||
(in
thousands, except share amounts)
|
||||||||||||||||||||||||||||
Compre-hensive
Income
|
Common
Stock
|
Paid In
Capital
|
Retained
Earnings
|
Treasury
Stock
|
Accu-
mulated Other
Compre-
hensive
Income
(Loss)
|
Total
Share-
holders’
Equity
|
||||||||||||||||||||||
Balance at
December 31, 2004
|
$ | 15,608 | $ | 75,268 | $ | 33,718 | $ | (17,853 | ) | $ | (2,044 | ) | $ | 104,697 | ||||||||||||||
Net
Income
|
$ | 14,592 | 14,592 | 14,592 | ||||||||||||||||||||||||
Other
comprehensive loss, net of tax
|
||||||||||||||||||||||||||||
Unrealized
losses on securities, net of reclassification adjustment
|
(5,034 | ) | (5,034 | ) | (5,034 | ) | ||||||||||||||||||||||
Minimum
pension liability adjustment
|
2,569 | 2,569 | 2,569 | |||||||||||||||||||||||||
Comprehensive
income
|
$ | 12,127 | ||||||||||||||||||||||||||
Common stock
issued (275,667 shares)
|
345 | 1,703 | 2,048 | |||||||||||||||||||||||||
Tax benefit
of incentive stock options
|
629 | 629 | ||||||||||||||||||||||||||
Dividends
paid on common
stock
|
(5,214 | ) | (5,214 | ) | ||||||||||||||||||||||||
Purchase of
233,550 shares of common stock
|
(4,997 | ) | (4,997 | ) | ||||||||||||||||||||||||
Stock
dividend
|
680 | 10,362 | (11,042 | ) | – | |||||||||||||||||||||||
Balance at
December 31, 2005
|
16,633 | 87,962 | 32,054 | (22,850 | ) | (4,509 | ) | 109,290 | ||||||||||||||||||||
Net
Income
|
$ | 15,002 | 15,002 | 15,002 | ||||||||||||||||||||||||
Other
comprehensive loss, net of tax
|
||||||||||||||||||||||||||||
Unrealized
losses on securities, net of reclassification adjustment
|
(1,883 | ) | (1,883 | ) | (1,883 | ) | ||||||||||||||||||||||
Minimum
pension liability adjustment
|
298 | 298 | 298 | |||||||||||||||||||||||||
Comprehensive
income
|
$ | 13,417 | ||||||||||||||||||||||||||
Adjustment to
initially apply SFAS 158, net of tax
|
(8,430 | ) | (8,430 | ) | ||||||||||||||||||||||||
Common stock
issued (186,658 shares)
|
233 | 1,517 | 1,750 | |||||||||||||||||||||||||
Stock
compensation expense
|
27 | 27 | ||||||||||||||||||||||||||
Tax benefit
of incentive stock options
|
252 | 252 | ||||||||||||||||||||||||||
Dividends
paid on common stock
|
(5,702 | ) | (5,702 | ) | ||||||||||||||||||||||||
Stock
dividend
|
728 | 10,978 | (11,706 | ) | – | |||||||||||||||||||||||
Balance at
December 31, 2006
|
17,594 | 100,736 | 29,648 | (22,850 | ) | (14,524 | ) | 110,604 | ||||||||||||||||||||
Net
Income
|
$ | 16,684 | 16,684 | 16,684 | ||||||||||||||||||||||||
Other
comprehensive income, net of tax
|
||||||||||||||||||||||||||||
Unrealized
gains on securities, net of reclassification adjustment
|
8,691 | 8,691 | 8,691 | |||||||||||||||||||||||||
Adjustment to
net periodic benefit cost
|
1,126 | 1,126 | 1,126 | |||||||||||||||||||||||||
Comprehensive
income
|
$ | 26,501 | ||||||||||||||||||||||||||
Common stock
issued (168,543 shares)
|
211 | 1,430 | 1,641 | |||||||||||||||||||||||||
Stock
compensation expense
|
27 | 27 | ||||||||||||||||||||||||||
Tax benefit
of incentive stock options
|
154 | 154 | ||||||||||||||||||||||||||
Dividends
paid on common stock
|
(6,466 | ) | (6,466 | ) | ||||||||||||||||||||||||
Purchase of
6,120 shares of common stock
|
(133 | ) | (133 | ) | ||||||||||||||||||||||||
Stock
dividend
|
776 | 12,903 | (13,679 | ) | – | |||||||||||||||||||||||
Balance at
December 31, 2007
|
$ | 18,581 | $ | 115,250 | $ | 26,187 | $ | (22,983 | ) | $ | (4,707 | ) | $ | 132,328 |
SOUTHSIDE
BANCSHARES, INC. AND SUBSIDIARIES
|
||||||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOW
|
||||||||||||
(in
thousands)
|
Years Ended
December 31,
|
|||||||||||
2007
|
2006
|
2005
|
||||||||||
OPERATING
ACTIVITIES:
|
||||||||||||
Net
income
|
$
|
16,684
|
$
|
15,002
|
$
|
14,592
|
||||||
Adjustments
to reconcile net income to net cash provided by
operations:
|
||||||||||||
Depreciation
|
2,255
|
2,275
|
2,171
|
|||||||||
Amortization
of
premium
|
4,952
|
5,741
|
8,741
|
|||||||||
Accretion of
discount and loan
fees
|
(2,667
|
)
|
(2,089
|
)
|
(1,120
|
)
|
||||||
Provision for
loan
losses
|
2,351
|
1,080
|
1,463
|
|||||||||
Stock
compensation
expense
|
27
|
27
|
–
|
|||||||||
Increase in
interest
receivable
|
(1,113
|
)
|
(806
|
)
|
(754
|
)
|
||||||
Decrease
(increase) in other
assets
|
2,405
|
(3,436
|
)
|
(8,593
|
)
|
|||||||
Net change in
deferred
taxes
|
(532
|
)
|
(292
|
)
|
400
|
|||||||
Increase in
interest
payable
|
259
|
931
|
1,056
|
|||||||||
(Decrease)
increase in other
liabilities
|
(1,644
|
)
|
1,104
|
(303
|
)
|
|||||||
Decrease
(increase) in loans held for
sale
|
548
|
372
|
(517
|
)
|
||||||||
Gain on
securities available for
sale
|
(897
|
)
|
(743
|
)
|
(228
|
)
|
||||||
Gain on sale
of
assets
|
(41
|
)
|
(1
|
)
|
(66
|
)
|
||||||
Loss (gain)
on sale of other real estate
owned
|
1
|
6
|
(12
|
)
|
||||||||
Impairment of
other real estate
owned
|
13
|
–
|
–
|
|||||||||
Gain on sale
of repossessed
assets
|
(1
|
)
|
–
|
–
|
||||||||
Earnings
allocated to minority
interest
|
(2
|
)
|
–
|
–
|
||||||||
Net cash
provided by operating
activities
|
22,598
|
19,171
|
16,830
|
|||||||||
INVESTING
ACTIVITIES:
|
||||||||||||
Proceeds from
sales of investment securities available for sale
|
25,202
|
52,640
|
93,351
|
|||||||||
Proceeds from
sales of mortgage-backed securities available for sale
|
90,323
|
75,354
|
106,400
|
|||||||||
Proceeds from
maturities of investment securities available for sale
|
95,890
|
24,460
|
70,923
|
|||||||||
Proceeds from
maturities of mortgage-backed securities available for
sale
|
102,584
|
107,029
|
125,720
|
|||||||||
Proceeds from
maturities of mortgage-backed securities held to maturity
|
37,481
|
35,806
|
27,266
|
|||||||||
Proceeds from
maturities of investment securities held to maturity
|
900
|
–
|
–
|
|||||||||
Proceeds from
redemption of FHLB stock
|
11,206
|
4,457
|
–
|
|||||||||
Proceeds from
sale of other
investments
|
44
|
–
|
–
|
|||||||||
Purchases of
investment securities available for sale
|
(130,113
|
)
|
(55,155
|
)
|
(151,280
|
)
|
||||||
Purchases of
investment securities held to
maturity
|
–
|
(1,348
|
)
|
–
|
||||||||
Purchases of
mortgage-backed securities available for sale
|
(254,613
|
)
|
(237,001
|
)
|
(359,007
|
)
|
||||||
Purchases of
mortgage-backed securities held to maturity
|
(2,180
|
)
|
(41,282
|
)
|
(9,538
|
)
|
||||||
Purchases of
FHLB stock and other
investments
|
(5,686
|
)
|
(1,346
|
)
|
(2,788
|
)
|
||||||
Net increase
in
loans
|
(96,898
|
)
|
(81,248
|
)
|
(58,944
|
)
|
||||||
Net cash paid
in
acquisition
|
(32,030
|
)
|
–
|
–
|
||||||||
Purchases of
premises and
equipment
|
(4,581
|
)
|
(1,306
|
)
|
(5,456
|
)
|
||||||
Proceeds from
sales of premises and
equipment
|
–
|
1
|
66
|
|||||||||
Proceeds from
sales of repossessed
assets
|
439
|
426
|
924
|
|||||||||
Proceeds from
sales of other real estate
owned
|
334
|
514
|
225
|
|||||||||
Net cash used
in investing
activities
|
(161,698
|
)
|
(117,999
|
)
|
(162,138
|
)
|
SOUTHSIDE
BANCSHARES, INC. AND SUBSIDIARIES
|
||||||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOW (continued)
|
||||||||||||
(in
thousands)
|
Years Ended
December 31,
|
|||||||||||
2007
|
2006
|
2005
|
||||||||||
FINANCING
ACTIVITIES:
|
||||||||||||
Net increase
in demand and savings accounts
|
114,612
|
38,864
|
98,547
|
|||||||||
Net increase
in certificates of deposit
|
32,183
|
132,636
|
71,277
|
|||||||||
Net
(decrease) increase in federal funds purchased and repurchase
agreements
|
(4,901
|
)
|
3,275
|
(6,100
|
)
|
|||||||
Proceeds from
FHLB advances
|
7,908,163
|
7,456,291
|
3,995,852
|
|||||||||
Repayment of
FHLB advances
|
(7,921,744
|
)
|
(7,525,355
|
)
|
(4,004,737
|
)
|
||||||
Proceeds from
issuance of long-term debt
|
36,083
|
–
|
–
|
|||||||||
Net capital
contributions from minority interest investment in consolidated
entities
|
500
|
–
|
–
|
|||||||||
Tax benefit
of incentive stock options
|
154
|
252
|
629
|
|||||||||
Proceeds from
the issuance of common stock
|
1,641
|
1,750
|
2,048
|
|||||||||
Purchase of
common stock
|
(133
|
)
|
–
|
(4,997
|
)
|
|||||||
Dividends
paid
|
(6,466
|
)
|
(5,702
|
)
|
(5,214
|
)
|
||||||
Net cash
provided by financing activities
|
160,092
|
102,011
|
147,305
|
|||||||||
Net increase
in cash and cash equivalents
|
20,992
|
3,183
|
1,997
|
|||||||||
Cash and cash
equivalents at beginning of year
|
55,012
|
51,829
|
49,832
|
|||||||||
Cash and cash
equivalents at end of year
|
$
|
76,004
|
$
|
55,012
|
$
|
51,829
|
||||||
SUPPLEMENTAL
DISCLOSURES FOR CASH FLOW INFORMATION:
|
||||||||||||
Interest
paid
|
$
|
61,603
|
$
|
54,353
|
$
|
37,365
|
||||||
Income taxes
paid
|
$
|
4,200
|
$
|
3,450
|
$
|
2,700
|
||||||
SUPPLEMENTAL
DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||||||
Acquisition
of other repossessed assets and real estate through
foreclosure
|
$
|
741
|
$
|
1,220
|
$
|
1,037
|
||||||
Adjustment to
initially apply SFAS 158
|
$
|
–
|
$
|
6,276
|
$
|
–
|
||||||
Adjustment to
pension liability
|
$
|
(1,707
|
)
|
$
|
(451
|
)
|
$
|
(3,892
|
)
|
|||
Payment of 5%
stock dividend
|
$
|
13,679
|
$
|
11,706
|
$
|
11,042
|
||||||
Unsettled
trades to purchase securities
|
$
|
(6,141
|
)
|
$
|
–
|
$
|
(7,533
|
)
|
Fair value of
assets acquired
|
$
|
152,344
|
$
|
–
|
$
|
–
|
||||||
Cash paid for
the common stock
|
(36,956
|
)
|
–
|
–
|
||||||||
Liabilities
assumed
|
$
|
115,388
|
$
|
–
|
$
|
–
|
NOTES TO
FINANCIAL
STATEMENTS Southside
Bancshares, Inc. and Subsidiaries
|
1.
|
SUMMARY OF
SIGNIFICANT ACCOUNTING AND REPORTING
POLICIES
|
Year Ended
December 31,
|
||||||||
As Reported
2005
|
Pro
Forma
2005
|
|||||||
FAS123
Charge
|
$ | – | $ | 60 | ||||
Net
Income
|
$ | 14,592 | $ | 14,532 | ||||
Net Income
per Common Share-Basic
|
$ | 1.15 | $ | 1.15 | ||||
Net Income
per Common Share-Diluted
|
$ | 1.10 | $ | 1.10 |
FWBS
|
||||
Cash and cash
equivalents
|
$ | 4,926 | ||
Securities
available for
sale
|
5,544 | |||
FHLB stock
and other
investments
|
946 | |||
Loans
|
105,605 | |||
Premises and
equipment
|
5,282 | |||
Core deposit
intangible
asset
|
2,047 | |||
Goodwill
|
21,639 | |||
Other
assets
|
6,355 | |||
Deposits
|
(100,930 | ) | ||
Other
borrowings
|
(11,858 | ) | ||
Other
liabilities
|
(2,600 | ) | ||
$ | 36,956 |
Years Ended
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Basic
Earnings and Shares:
|
||||||||||||
Net
Income
|
$
|
16,684
|
$
|
15,002
|
$
|
14,592
|
||||||
Weighted-average
basic shares
outstanding
|
13,057
|
12,874
|
12,649
|
|||||||||
Basic
Earnings Per Share:
|
||||||||||||
Net
Income
|
$
|
1.28
|
$
|
1.16
|
$
|
1.15
|
||||||
Diluted
Earnings and Shares:
|
||||||||||||
Net
Income
|
$
|
16,684
|
$
|
15,002
|
$
|
14,592
|
||||||
Weighted-average
basic shares
outstanding
|
13,057
|
12,874
|
12,649
|
|||||||||
Add: Stock
options
|
388
|
496
|
622
|
|||||||||
Weighted-average
diluted shares
outstanding
|
13,445
|
13,370
|
13,271
|
|||||||||
Diluted
Earnings Per Share:
|
||||||||||||
Net
Income
|
$
|
1.24
|
$
|
1.12
|
$
|
1.10
|
4.
|
COMPREHENSIVE
INCOME (LOSS)
|
Year Ended
December 31, 2007
|
||||||||||||
Before-Tax
|
Tax
(Expense)
|
Net-of-Tax
|
||||||||||
Amount
|
Benefit
|
Amount
|
||||||||||
Unrealized
gains on securities:
|
||||||||||||
Unrealized
holding gains arising during period
|
$ | 14,064 | $ | (4,781 | ) | $ | 9,283 | |||||
Less: reclassification
adjustment for gains realized in net income
|
897 | (305 | ) | 592 | ||||||||
Net
unrealized gains
|
13,167 | (4,476 | ) | 8,691 | ||||||||
Change in
pension plans
|
1,707 | (581 | ) | 1,126 | ||||||||
Other
comprehensive income
|
$ | 14,874 | $ | (5,057 | ) | $ | 9,817 |
Year Ended
December 31, 2006
|
||||||||||||
Before-Tax
|
Tax
(Expense)
|
Net-of-Tax
|
||||||||||
Amount
|
Benefit
|
Amount
|
||||||||||
Unrealized
losses on securities:
|
||||||||||||
Unrealized
holding losses arising during period
|
$ | (2,110 | ) | $ | 717 | $ | (1,393 | ) | ||||
Less: reclassification
adjustment for gains realized in net income
|
743 | (253 | ) | 490 | ||||||||
Net
unrealized losses
|
(2,853 | ) | 970 | (1,883 | ) | |||||||
Change in
pension
plans
|
451 | (153 | ) | 298 | ||||||||
Other
comprehensive
loss
|
$ | (2,402 | ) | $ | 817 | $ | (1,585 | ) |
Year Ended
December 31, 2005
|
||||||||||||
Before-Tax
|
Tax
(Expense)
|
Net-of-Tax
|
||||||||||
Amount
|
Benefit
|
Amount
|
||||||||||
Unrealized
losses on securities:
|
||||||||||||
Unrealized
holding losses arising during period
|
$ | (7,399 | ) | $ | 2,515 | $ | (4,884 | ) | ||||
Less: reclassification
adjustment for gains realized in net income
|
228 | (78 | ) | 150 | ||||||||
Net
unrealized losses
|
(7,627 | ) | 2,593 | (5,034 | ) | |||||||
Change in
pension
plans
|
3,892 | (1,323 | ) | 2,569 | ||||||||
Other
comprehensive
loss
|
$ | (3,735 | ) | $ | 1,270 | $ | (2,465 | ) |
Years Ended
December 31,
|
||||||||
2007
|
2006
|
|||||||
Unrealized
gains (losses) on AFS securities
|
$ | 2,836 | $ | (5,855 | ) | |||
Net unfunded
liability for defined benefit plans
|
(7,543 | ) | (8,669 | ) | ||||
Total
|
$ | (4,707 | ) | $ | (14,524 | ) |
5.
|
CASH AND DUE
FROM BANKS
|
6.
|
SECURITIES
|
AVAILABLE FOR
SALE
|
||||||||||||||||
Gross
|
Gross
|
Estimated
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Market
|
|||||||||||||
December 31,
2007
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Investment
Securities:
|
||||||||||||||||
U.S.
Treasury
|
$ | 4,880 | $ | 8 | $ | 2 | $ | 4,886 | ||||||||
Government
Sponsored Enterprise Debentures
|
31,764 | 3 | 8 | 31,759 | ||||||||||||
State and
Political Subdivisions
|
64,868 | 1,599 | 223 | 66,244 | ||||||||||||
Other Stocks
and Bonds
|
7,586 | – | 547 | 7,039 | ||||||||||||
Mortgage-backed
Securities:
|
||||||||||||||||
U.S.
Government Agencies
|
88,937 | 1,234 | 451 | 89,720 | ||||||||||||
Government
Sponsored Enterprises
|
628,768 | 5,847 | 1,555 | 633,060 | ||||||||||||
Other Private
Issues
|
4,773 | – | – | 4,773 | ||||||||||||
Total
|
$ | 831,576 | $ | 8,691 | $ | 2,786 | $ | 837,481 |
HELD TO
MATURITY
|
||||||||||||||||
Gross
|
Gross
|
Estimated
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Market
|
|||||||||||||
December 31,
2007
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Investment
Securities:
|
||||||||||||||||
Other
Stocks and
Bonds
|
$ | 475 | $ | 2 | $ | – | $ | 477 | ||||||||
Mortgage-backed
Securities:
|
||||||||||||||||
U.S.
Government
Agencies
|
25,965 | 36 | 58 | 25,943 | ||||||||||||
Government
Sponsored
Enterprises
|
164,000 | 501 | 531 | 163,970 | ||||||||||||
Total
|
$ | 190,440 | $ | 539 | $ | 589 | $ | 190,390 |
AVAILABLE FOR
SALE
|
||||||||||||||||
Gross
|
Gross
|
Estimated
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Market
|
|||||||||||||
December 31,
2006
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Investment
Securities:
|
||||||||||||||||
U.S.
Treasury
|
$ | 27,104 | $ | – | $ | 721 | $ | 26,383 | ||||||||
Government
Sponsored Enterprise Debentures
|
9,923 | – | – | 9,923 | ||||||||||||
State and
Political Subdivisions
|
54,037 | 1,488 | 390 | 55,135 | ||||||||||||
Other Stocks
and Bonds
|
7,611 | 12 | 112 | 7,511 | ||||||||||||
Mortgage-backed
Securities:
|
||||||||||||||||
U.S.
Government Agencies
|
72,183 | 425 | 1,209 | 71,399 | ||||||||||||
Government
Sponsored Enterprises
|
570,777 | 1,250 | 7,377 | 564,650 | ||||||||||||
Other Private
Issues
|
7,190 | 20 | 95 | 7,115 | ||||||||||||
Total
|
$ | 748,825 | $ | 3,195 | $ | 9,904 | $ | 742,116 |
HELD TO
MATURITY
|
||||||||||||||||
Gross
|
Gross
|
Estimated
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Market
|
|||||||||||||
December 31,
2006
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Investment
Securities:
|
||||||||||||||||
Other
Stocks and
Bonds
|
$ | 1,351 | $ | 7 | $ | 16 | $ | 1,342 | ||||||||
Mortgage-backed
Securities:
|
||||||||||||||||
U.S.
Government
Agencies
|
30,788 | – | 407 | 30,381 | ||||||||||||
Government
Sponsored
Enterprises
|
195,374 | 97 | 3,104 | 192,367 | ||||||||||||
Total
|
$ | 227,513 | $ | 104 | $ | 3,527 | $ | 224,090 |
Less Than 12
Months
|
More Than 12
Months
|
Total
|
||||||||||||||||||||||
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
|||||||||||||||||||
As of
December 31, 2007:
|
||||||||||||||||||||||||
Available for
Sale
|
||||||||||||||||||||||||
U.S.
Treasury
|
$ | 394 | $ | 2 | $ | – | $ | – | $ | 394 | $ | 2 | ||||||||||||
Government
Sponsored Enterprise Debentures
|
13,237 | 8 | – | – | 13,237 | 8 | ||||||||||||||||||
State and
Political Subdivisions
|
537 | 29 | 12,918 | 194 | 13,455 | 223 | ||||||||||||||||||
Other Stocks
and Bonds
|
3,332 | 254 | 3,707 | 293 | 7,039 | 547 | ||||||||||||||||||
Mortgage-Backed
Securities
|
71,071 | 154 | 146,458 | 1,852 | 217,529 | 2,006 | ||||||||||||||||||
Total
|
$ | 88,571 | $ | 447 | $ | 163,083 | $ | 2,339 | $ | 251,654 | $ | 2,786 | ||||||||||||
Held to
Maturity
|
||||||||||||||||||||||||
Mortgage-Backed
Securities
|
$ | 10,975 | $ | 29 | $ | 74,568 | $ | 560 | $ | 85,543 | $ | 589 | ||||||||||||
Total
|
$ | 10,975 | $ | 29 | $ | 74,568 | $ | 560 | $ | 85,543 | $ | 589 | ||||||||||||
As of
December 31, 2006:
|
||||||||||||||||||||||||
Available for
Sale
|
||||||||||||||||||||||||
U.S.
Treasury
|
$ | 13,859 | $ | 135 | $ | 12,524 | $ | 586 | $ | 26,383 | $ | 721 | ||||||||||||
State and
Political Subdivisions
|
1,626 | 13 | 12,524 | 377 | 14,150 | 390 | ||||||||||||||||||
Other Stocks
and Bonds
|
2,632 | 65 | 3,956 | 47 | 6,588 | 112 | ||||||||||||||||||
Mortgage-Backed
Securities
|
199,263 | 1,623 | 317,464 | 7,058 | 516,727 | 8,681 | ||||||||||||||||||
Total
|
$ | 217,380 | $ | 1,836 | $ | 346,468 | $ | 8,068 | $ | 563,848 | $ | 9,904 | ||||||||||||
Held to
Maturity
|
||||||||||||||||||||||||
Other Stocks
and Bonds
|
$ | 862 | $ | 16 | $ | – | $ | – | $ | 862 | $ | 16 | ||||||||||||
Mortgage-Backed
Securities
|
27,912 | 138 | 175,750 | 3,373 | 203,662 | 3,511 | ||||||||||||||||||
Total
|
$ | 28,774 | $ | 154 | $ | 175,750 | $ | 3,373 | $ | 204,524 | $ | 3,527 |
Years Ended
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(in
thousands)
|
||||||||||||
U.S.
Treasury
|
$
|
715
|
$
|
1,042
|
$
|
508
|
||||||
U.S.
Government
Agencies
|
671
|
337
|
723
|
|||||||||
State and
Political
Subdivisions
|
2,692
|
2,727
|
3,564
|
|||||||||
Other Stocks
and
Bonds
|
614
|
531
|
364
|
|||||||||
Mortgage-backed
Securities
|
43,767
|
44,401
|
34,584
|
|||||||||
Total
interest income on
securities
|
$
|
48,459
|
$
|
49,038
|
$
|
39,743
|
Amortized
Cost
|
Fair
Value
|
|||||||
(in
thousands)
|
||||||||
Available for
sale securities:
|
||||||||
Investment
Securities
|
||||||||
Due in one
year or
less
|
$ | 41,092 | $ | 41,082 | ||||
Due after one
year through five years
|
11,765 | 11,922 | ||||||
Due after
five years through ten years
|
22,637 | 22,846 | ||||||
Due after ten
years
|
33,604 | 34,078 | ||||||
109,098 | 109,928 | |||||||
Mortgage-backed
securities
|
722,478 | 727,553 | ||||||
Total
|
$ | 831,576 | $ | 837,481 |
Amortized
Cost
|
Fair
Value
|
|||||||
(in
thousands)
|
||||||||
Held to
maturity securities:
|
||||||||
Investment
Securities
|
||||||||
Due in one
year or
less
|
$ | – | $ | – | ||||
Due after one
year through five years
|
– | – | ||||||
Due after
five years through ten years
|
– | – | ||||||
Due after ten
years
|
475 | 477 | ||||||
475 | 477 | |||||||
Mortgage-backed
securities
|
189,965 | 189,913 | ||||||
Total
|
$ | 190,440 | $ | 190,390 |
7.
|
LOANS AND
ALLOWANCE FOR PROBABLE LOAN LOSSES
|
December
31,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
(in
thousands)
|
||||||||
Real Estate
Loans:
|
||||||||
Construction
|
$ | 96,356 | $ | 39,588 | ||||
1-4 family
residential
|
237,888 | 227,354 | ||||||
Other
|
211,280 | 181,047 | ||||||
Commercial
loans
|
154,171 | 118,962 | ||||||
Municipal
loans
|
112,523 | 106,155 | ||||||
Loans to
individuals
|
149,012 | 86,041 | ||||||
Total
loans
|
961,230 | 759,147 | ||||||
Less: Allowance
for loan
losses
|
9,753 | 7,193 | ||||||
Net
loans
|
$ | 951,477 | $ | 751,954 |
Years Ended
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(in
thousands)
|
||||||||||||
Allowance For
Loan Losses
|
||||||||||||
Balance at
beginning of
year
|
$
|
7,193
|
$
|
7,090
|
$
|
6,942
|
||||||
Provision for
loan
losses
|
2,351
|
1,080
|
1,463
|
|||||||||
Allowance for
loan losses
acquired
|
909
|
–
|
–
|
|||||||||
Loans charged
off
|
(2,747
|
)
|
(2,972
|
)
|
(2,996
|
)
|
||||||
Recoveries of
loans charged
off
|
2,047
|
1,995
|
1,681
|
|||||||||
Balance at
end of
year
|
$
|
9,753
|
$
|
7,193
|
$
|
7,090
|
||||||
Reserve For
Unfunded Loan Commitments
|
||||||||||||
Balance at
beginning of
year
|
$
|
–
|
$
|
–
|
$
|
–
|
||||||
Provision for
losses on unfunded loan commitments
|
50
|
–
|
–
|
|||||||||
Balance at
end of
year
|
$
|
50
|
$
|
–
|
$
|
–
|
Total
|
Valuation
Allowance
|
Carrying
Value
|
||||||||||
(in
thousands)
|
||||||||||||
Real Estate
Loans
|
$
|
636
|
$
|
92
|
$
|
544
|
||||||
Loans to
Individuals
|
2,230
|
396
|
1,834
|
|||||||||
Commercial
Loans
|
170
|
65
|
105
|
|||||||||
Balance at
December 31,
2007
|
$
|
3,036
|
$
|
553
|
$
|
2,483
|
Total
|
Valuation
Allowance
|
Carrying
Value
|
||||||||||
(in
thousands)
|
||||||||||||
Real Estate
Loans
|
$
|
975
|
$
|
102
|
$
|
873
|
||||||
Loans to
Individuals
|
357
|
109
|
248
|
|||||||||
Commercial
Loans
|
114
|
14
|
100
|
|||||||||
Balance at
December 31,
2006
|
$
|
1,446
|
$
|
225
|
$
|
1,221
|
December
31,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
(in
thousands)
|
||||||||
Premises
|
$ | 48,149 | $ | 40,323 | ||||
Furniture and
equipment
|
18,837 | 15,998 | ||||||
66,986 | 56,321 | |||||||
Less:
accumulated
depreciation
|
26,737 | 23,680 | ||||||
Total
|
$ | 40,249 | $ | 32,641 |
Gross
Intangible Assets
|
Accumulated
Amortization
|
Net
Intangible Assets
|
||||||||||
December 31,
2007
|
||||||||||||
Core
deposits
|
$
|
2,047
|
$
|
(122
|
)
|
$
|
1,925
|
|||||
$
|
2,047
|
$
|
(122
|
)
|
$
|
1,925
|
||||||
2008
|
$ | 446 | ||
2009
|
383 | |||
2010
|
319 | |||
2011
|
255 | |||
2012
|
198 | |||
Thereafter
|
324 | |||
$ | 1,925 |
December 31,
2007
|
December 31,
2006
|
|||||||
(in
thousands)
|
||||||||
Savings
deposits
|
$ | 52,975 | $ | 50,454 | ||||
Money market
demand deposits
|
106,415 | 80,510 | ||||||
Platinum
money market deposits
|
163,310 | 106,375 | ||||||
NOW demand
deposits
|
228,496 | 195,380 | ||||||
Certificates
and other time deposits of $100,000 or more
|
257,095 | 201,806 | ||||||
Certificates
and other time deposits under $100,000
|
365,117 | 322,179 | ||||||
Total
|
$ | 1,173,408 | $ | 956,704 |
2008
|
$
|
434,715
|
2009
|
67,853
|
|
2010
|
22,815
|
|
2011
|
83,286
|
|
2012 and
thereafter
|
13,543
|
|
$
|
622,212
|
Years Ended
December 31,
|
||||||||
2007
|
2006
|
|||||||
(dollars in
thousands)
|
||||||||
Federal funds
purchased and repurchase agreements
|
||||||||
Balance at
end of period
|
$ | 7,023 | $ | 5,675 | ||||
Average
amount outstanding during the period (1)
|
4,519 | 8,727 | ||||||
Maximum
amount outstanding during the period (3)
|
10,250 | 13,775 | ||||||
Weighted
average interest rate during the period (2)
|
5.3 | % | 5.2 | % | ||||
Interest rate
at end of period
|
4.7 | % | 5.5 | % | ||||
FHLB
advances
|
||||||||
Balance at
end of period
|
$ | 353,792 | $ | 322,241 | ||||
Average
amount outstanding during the period (1)
|
272,711 | 367,068 | ||||||
Maximum
amount outstanding during the period (3)
|
383,059 | 396,416 | ||||||
Weighted
average interest rate during the period (2)
|
4.8 | % | 4.4 | % | ||||
Interest rate
at end of period
|
4.1 | % | 4.7 | % | ||||
Other
obligations
|
||||||||
Balance at
end of period
|
$ | 2,500 | $ | 1,605 | ||||
Average
amount outstanding during the period (1)
|
772 | 901 | ||||||
Maximum
amount outstanding during the period (3)
|
2,500 | 2,500 | ||||||
Weighted
average interest rate during the period (2)
|
5.0 | % | 4.8 | % | ||||
Interest rate
at end of period
|
3.6 | % | 5.0 | % |
|
(1)
|
The average
amount outstanding during the period was computed by dividing the total
daily outstanding principal balances by the number of days in the
period.
|
|
(2)
|
The weighted
average interest rate during the period was computed by dividing the
actual interest expense by the average balance outstanding during the
period.
|
|
(3)
|
The maximum
amount outstanding at any month-end during the
period.
|
|
13. LONG-TERM
OBLIGATIONS
|
Years Ended
December 31,
|
||||||||
2007
|
2006
|
|||||||
(dollars in
thousands)
|
||||||||
FHLB
advances
|
||||||||
Balance at
end of period
|
$ | 86,247 | $ | 129,379 | ||||
Weighted
average interest rate during the period (1)
|
4.6 | % | 4.1 | % | ||||
Interest rate
at end of period
|
4.8 | % | 4.5 | % | ||||
Long-term
debt (2)
|
||||||||
Balance at
end of period
|
$ | 60,311 | $ | 20,619 | ||||
Weighted
average interest rate during the period (1)
|
7.8 | % | 8.0 | % | ||||
Interest rate
at end of period
|
7.2 | % | 8.3 | % |
Under 1
Year
|
Due 1-5
Years
|
Due 6-10
Years
|
Over 10
Years
|
Total
|
||||||||||||||||
FHLB
advances
|
$ | 1,880 | $ | 80,571 | $ | 3,796 | $ | – | $ | 86,247 | ||||||||||
Long-term
debt
|
– | – | – | 60,311 | 60,311 | |||||||||||||||
Total
long-term obligations
|
$ | 1,880 | $ | 80,571 | $ | 3,796 | $ | 60,311 | $ | 146,558 |
Years Ended
December 31,
|
||||||||
2007
|
2006
|
|||||||
(in
thousands)
|
||||||||
Long-term
Debt
|
||||||||
Southside
Statutory Trust III Due 2033 (3)
|
$ | 20,619 | $ | 20,619 | ||||
Southside
Statutory Trust IV Due 2037 (4)
|
23,196 | – | ||||||
Southside
Statutory Trust V Due 2037 (5)
|
12,887 | – | ||||||
Magnolia
Trust Company I Due 2035 (6)
|
3,609 | – | ||||||
Total
Long-term
Debt
|
$ | 60,311 | $ | 20,619 |
(1)
|
The weighted
average interest rate during the period was computed by dividing the
actual interest expense by the average balance outstanding during the
period.
|
(2)
|
This
long-term debt consists of trust preferred securities that qualify under
the risk-based capital guidelines as Tier 1 capital, subject to certain
limitations.
|
(3)
|
This debt
carries an adjustable rate of 7.77% through March 30, 2008 and adjusts
quarterly at a rate equal to three-month LIBOR plus 294 basis
points.
|
(4)
|
This debt
carries a fixed rate of 6.518% through October 30, 2012 and thereafter,
adjusts quarterly at a rate equal to three-month LIBOR plus 130 basis
points.
|
(5)
|
This debt
carries a fixed rate of 7.48% through December 15, 2012 and thereafter,
adjusts quarterly at a rate equal to three-month LIBOR plus 225 basis
points.
|
(6)
|
This debt
carries an adjustable rate of 6.815% through February 24, 2008 and adjusts
quarterly at a rate equal to three-month LIBOR plus 180 basis
points.
|
2007
|
2006
|
|||||||||||||||
Defined
Benefit
Pension
Plan
|
Restoration
Plan
|
Defined
Benefit
Pension
Plan
|
Restoration
Plan
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Change in
Projected Benefit Obligation:
|
||||||||||||||||
Benefit
obligation at end of prior year
|
$ | 39,615 | $ | 3,050 | $ | 39,510 | $ | 3,518 | ||||||||
Service
cost
|
1,330 | 61 | 1,339 | 68 | ||||||||||||
Interest
cost
|
2,313 | 168 | 2,190 | 183 | ||||||||||||
Actuarial
gain
|
(1,892 | ) | (300 | ) | (1,519 | ) | (630 | ) | ||||||||
Benefits
paid
|
(1,028 | ) | (80 | ) | (1,128 | ) | (80 | ) | ||||||||
Expenses
paid
|
(92 | ) | – | (93 | ) | – | ||||||||||
Plan
change
|
– | – | (684 | ) | (9 | ) | ||||||||||
Benefit
obligation at end of year
|
40,246 | 2,899 | 39,615 | 3,050 | ||||||||||||
Change in
Plan Assets:
|
||||||||||||||||
Fair value of
plan assets at end of prior year
|
34,328 | – | 30,085 | – | ||||||||||||
Actual
return
|
1,518 | – | 3,464 | – | ||||||||||||
Employer
contributions
|
5,000 | 80 | 2,000 | 80 | ||||||||||||
Benefits
paid
|
(1,028 | ) | (80 | ) | (1,128 | ) | (80 | ) | ||||||||
Expenses
paid
|
(92 | ) | – | (93 | ) | – | ||||||||||
Fair value of
plan assets at end of year
|
39,726 | – | 34,328 | – | ||||||||||||
Funded status
at end of year
|
(520 | ) | (2,899 | ) | (5,287 | ) | (3,050 | ) | ||||||||
Accrued
benefit liability recognized
|
$ | (520 | ) | $ | (2,899 | ) | $ | (5,287 | ) | $ | (3,050 | ) | ||||
Accumulated
benefit obligation at end of year
|
$ | 31,179 | $ | 2,185 | $ | 30,281 | $ | 2,062 |
2007
|
||||||||
Defined
Benefit
Pension
Plan
|
Restoration
Plan
|
|||||||
(in
thousands)
|
||||||||
Recognition
of net
loss
|
$ | 483 | $ | 85 | ||||
Recognition
of prior service
credit
|
(42 | ) | (2 | ) | ||||
Net gain
occurring during the
year
|
881 | 300 | ||||||
Recognition
of transition
obligation
|
– | 2 | ||||||
1,322 | 385 | |||||||
Deferred tax
expense
|
(450 | ) | (131 | ) | ||||
Other
comprehensive income, net of
tax
|
$ | 872 | $ | 254 |
2007
|
||||||||
Defined
Benefit
Pension
Plan
|
Restoration
Plan
|
|||||||
(in
thousands)
|
||||||||
Net
loss
|
$ | (11,053 | ) | $ | (978 | ) | ||
Prior service
credit
|
590 | 12 | ||||||
(10,463 | ) | (966 | ) | |||||
Deferred tax
benefit
|
3,558 | 328 | ||||||
Accumulated
other comprehensive loss, net of
tax
|
$ | (6,905 | ) | $ | (638 | ) |
2007
|
2006
|
|||||||||||||||
Defined
Benefit
Pension
Plan
|
Restoration
Plan
|
Defined
Benefit
Pension
Plan
|
Restoration
Plan
|
|||||||||||||
Discount
rate
|
6.25 | % | 6.25 | % | 6.05 | % | 6.05 | % | ||||||||
Compensation
increase rate
|
4.50 | % | 4.50 | % | 4.50 | % | 4.50 | % |
2007
|
2006
|
2005
|
||||||||||
Defined
Benefit Pension Plan
|
(in
thousands)
|
|||||||||||
Service
cost
|
$
|
1,330
|
$
|
1,339
|
$
|
2,011
|
||||||
Interest
cost
|
2,313
|
2,190
|
2,024
|
|||||||||
Expected
return on assets
|
(2,529
|
)
|
(2,324
|
)
|
(2,125
|
)
|
||||||
Net loss
amortization
|
483
|
784
|
643
|
|||||||||
Prior service
(credit) cost amortization
|
(42
|
)
|
(42
|
)
|
1
|
|||||||
Net periodic
benefit cost
|
$
|
1,555
|
$
|
1,947
|
$
|
2,554
|
||||||
Restoration
Plan
|
||||||||||||
Service
cost
|
$
|
61
|
$
|
68
|
$
|
102
|
||||||
Interest
cost
|
168
|
183
|
184
|
|||||||||
Transition
obligation recognition
|
3
|
3
|
3
|
|||||||||
Net loss
amortization
|
85
|
180
|
202
|
|||||||||
Prior service
credit amortization
|
(2
|
)
|
(2
|
)
|
(1
|
)
|
||||||
Net periodic
benefit cost
|
$
|
315
|
$
|
432
|
$
|
490
|
2007
|
2006
|
2005
|
||||||||
Defined
Benefit Pension Plan
|
||||||||||
Discount
rate
|
6.05%
|
5.625%
|
5.75%
|
|||||||
Expected
long-term rate of return on plan assets
|
7.50%
|
7.875%
|
8.50%
|
|||||||
Compensation
increase rate
|
4.50%
|
4.50%
|
4.50%
|
|||||||
Restoration
Plan
|
||||||||||
Discount
rate
|
6.05%
|
5.625%
|
5.75%
|
|||||||
Compensation
increase rate
|
4.50%
|
4.50%
|
4.50%
|
Defined
Benefit
|
Restoration
|
|||||||
Pension
Plan
|
Plan
|
|||||||
Net
Loss
|
$ | 437 | $ | 68 | ||||
Prior service
credit
|
(42 | ) | (2 | ) | ||||
395 | 66 | |||||||
Deferred tax
benefit
|
(134 | ) | (22 | ) | ||||
Other
comprehensive loss, net of tax
|
$ | 261 | $ | 44 |
Percentage of
Plan Assets
at December
31,
|
|||||
2007
|
2006
|
||||
Asset
Category
|
|||||
Equity
securities
|
61.1%
|
65.3%
|
|||
Debt
securities
|
26.8%
|
32.1%
|
|||
Other
|
12.1%
|
2.6%
|
|||
Total
|
100.0%
|
100.0%
|
Defined
Benefit Pension Plan
|
Restoration
Plan
|
|||||||
2008
|
$ | 1,354 | $ | 90 | ||||
2009
|
1,425 | 96 | ||||||
2010
|
1,560 | 104 | ||||||
2011
|
1,638 | 111 | ||||||
2012
|
1,883 | 199 | ||||||
2013 through
2017
|
12,992 | 1,127 | ||||||
$ | 20,852 | $ | 1,727 |
Weighted
|
||||||||
Number
of
|
Average
Grant-
|
|||||||
Options
|
Date Fair
Value
|
|||||||
Nonvested at
beginning of the period
|
12,257 | $ | 4.91 | |||||
Granted
|
– | – | ||||||
Vested
|
(6,127 | ) | $ | 4.91 | ||||
Forfeited
|
(383 | ) | $ | 4.91 | ||||
Nonvested at
end of period
|
5,747 | $ | 4.91 |
2007
|
2006
|
2005
|
||||||||||||||||||||||
Number of
Options
|
Weighted
Average Exercise Prices
|
Number of
Options
|
Weighted
Average Exercise Prices
|
Number of
Options
|
Weighted
Average Exercise Prices
|
|||||||||||||||||||
Outstanding
at beginning of year
|
604,281 | $ | 5.76 | 762,275 | $ | 5.68 | 1,019,124 | $ | 5.38 | |||||||||||||||
Granted
|
– | – | – | – | – | – | ||||||||||||||||||
Exercised
|
(127,241 | ) | $ | 5.65 | (156,462 | ) | $ | 5.29 | (255,208 | ) | $ | 4.48 | ||||||||||||
Forfeited
|
(383 | ) | $ | 12.61 | (1,532 | ) | $ | 12.61 | (1,641 | ) | $ | 6.97 | ||||||||||||
Expired
|
– | – | – | – | – | – | ||||||||||||||||||
Outstanding
at end of year
|
476,657 | $ | 5.79 | 604,281 | $ | 5.76 | 762,275 | $ | 5.68 | |||||||||||||||
Exercisable
at end of year
|
470,910 | $ | 5.71 | 592,024 | $ | 5.62 | 741,586 | $ | 5.49 |
Options
Outstanding
|
Options
Exercisable
|
||||||||||||||
Range of
Exercise Prices
|
Number
Outstanding
|
Weighted
Average Remaining Contract Life in Years
|
Weighted
Average Exercise Price
|
Number
Exercisable
|
Weighted
Average Exercise Price
|
||||||||||
$ |
5.25 to $ 5.89
|
456,650
|
2.00
|
$
|
5.49
|
456,650
|
$
|
5.49
|
|||||||
$ |
12.61 to $ 12.61
|
20,007
|
5.25
|
$
|
12.61
|
14,260
|
$
|
12.61
|
|||||||
$ |
5.25 to $ 12.61
|
476,657
|
2.13
|
$
|
5.79
|
470,910
|
$
|
5.71
|
Number
of
|
Aggregate
|
||||
Shares
|
Intrinsic
Value
|
||||
Options
Outstanding
|
476,657
|
$
|
7,097
|
||
Options
Exercisable
|
470,910
|
$
|
7,049
|
Actual
|
For Capital
Adequacy Purposes
|
To Be Well
Capitalized Under Prompt Corrective Actions Provisions
|
||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||
As of
December 31, 2007:
|
(dollars in
thousands)
|
|||||||||||||||
Total Capital
(to Risk Weighted Assets)
|
||||||||||||||||
Consolidated
|
$
|
182,148
|
17.02
|
%
|
$
|
85,603
|
8.00
|
%
|
N/A
|
N/A
|
||||||
Southside
Bank Only
|
$
|
157,854
|
16.41
|
%
|
$
|
76,936
|
8.00
|
%
|
$
|
96,170
|
10.00
|
%
|
||||
Fort Worth
National Bank Only
|
$
|
16,745
|
15.51
|
%
|
$
|
8,639
|
8.00
|
%
|
$
|
10,798
|
10.00
|
%
|
||||
Tier 1
Capital (to Risk Weighted Assets)
|
||||||||||||||||
Consolidated
|
$
|
159,690
|
14.92
|
%
|
$
|
42,802
|
4.00
|
%
|
N/A
|
N/A
|
||||||
Southside
Bank Only
|
$
|
149,099
|
15.50
|
%
|
$
|
38,468
|
4.00
|
%
|
$
|
57,702
|
6.00
|
%
|
||||
Fort Worth
National Bank Only
|
$
|
15,697
|
14.54
|
%
|
$
|
4,319
|
4.00
|
%
|
$
|
6,479
|
6.00
|
%
|
||||
Tier 1
Capital (to Average Assets) (1)
|
||||||||||||||||
Consolidated
|
$
|
159,690
|
7.73
|
%
|
$
|
82,625
|
4.00
|
%
|
N/A
|
N/A
|
||||||
Southside
Bank Only
|
$
|
149,099
|
7.67
|
%
|
$
|
77,797
|
4.00
|
%
|
$
|
97,246
|
5.00
|
%
|
||||
Fort Worth
National Bank Only
|
$
|
15,697
|
13.13
|
%
|
$
|
4,783
|
4.00
|
%
|
$
|
5,979
|
5.00
|
%
|
||||
As of
December 31, 2006:
|
||||||||||||||||
Total Capital
(to Risk Weighted Assets)
|
||||||||||||||||
Consolidated
|
$
|
152,198
|
17.76
|
%
|
$
|
68,540
|
8.00
|
%
|
N/A
|
N/A
|
||||||
Southside
Bank Only
|
$
|
146,458
|
17.09
|
%
|
$
|
68,540
|
8.00
|
%
|
$
|
85,675
|
10.00
|
%
|
||||
Tier 1
Capital (to Risk Weighted Assets)
|
||||||||||||||||
Consolidated
|
$
|
145,005
|
16.93
|
%
|
$
|
34,270
|
4.00
|
%
|
N/A
|
N/A
|
||||||
Southside
Bank Only
|
$
|
139,265
|
16.26
|
%
|
$
|
34,270
|
4.00
|
%
|
$
|
51,405
|
6.00
|
%
|
||||
Tier 1
Capital (to Average Assets) (1)
|
||||||||||||||||
Consolidated
|
$
|
145,005
|
7.68
|
%
|
$
|
75,570
|
4.00
|
%
|
N/A
|
N/A
|
||||||
Southside
Bank Only
|
$
|
139,265
|
7.37
|
%
|
$
|
75,542
|
4.00
|
%
|
$
|
94,427
|
5.00
|
%
|
Years Ended
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Current tax
provision
|
$
|
4,068
|
$
|
8,582
|
$
|
1,569
|
||||||
Deferred tax
(benefit) expense
|
(92
|
)
|
(4,482
|
)
|
1,724
|
|||||||
Provision for
tax expense charged to operations
|
$
|
3,976
|
$
|
4,100
|
$
|
3,293
|
Assets
|
Liabilities
|
|||||||
Writedowns on
OREO
|
$ | 55 | ||||||
Allowance for
loan losses
|
3,139 | |||||||
Retirement
and other benefit plans
|
(1,740 | ) | ||||||
Unrealized
gains on securities available for sale
|
(1,434 | ) | ||||||
Premises and
equipment
|
(270 | ) | ||||||
FHLB stock
dividends
|
(295 | ) | ||||||
Unfunded
status of defined benefit plan
|
3,886 | |||||||
State
Business Tax Credit
|
762 | |||||||
Other
|
217 | |||||||
Gross
deferred tax assets (liabilities)
|
8,059 | (3,739 | ) | |||||
Net deferred
tax asset at December 31, 2007
|
$ | 4,320 | ||||||
Writedowns on
OREO
|
$ | 71 | ||||||
Allowance for
loan losses
|
2,446 | |||||||
Retirement
and other benefit plans
|
(664 | ) | ||||||
Unrealized
losses on securities available for sale
|
3,016 | |||||||
Premises and
equipment
|
(312 | ) | ||||||
FHLB stock
dividends
|
(1,136 | ) | ||||||
Alternative
minimum tax credit
|
625 | |||||||
Unfunded
status of defined benefit plan
|
4,466 | |||||||
Other
|
166 | |||||||
Gross
deferred tax assets (liabilities)
|
10,790 | (2,112 | ) | |||||
Net deferred
tax asset at December 31, 2006
|
$ | 8,678 |
Years Ended
December 31,
|
||||||||||||||||
2007
|
2006
|
2005
|
||||||||||||||
Amount
|
Percent of
Pre-Tax Income
|
Amount
|
Percent of
Pre-Tax Income
|
Amount
|
Percent of
Pre-Tax Income
|
|||||||||||
Statutory Tax
Expense
|
$
|
7,024
|
34.0%
|
$
|
6,495
|
34.0%
|
$
|
6,081
|
34.0%
|
|||||||
Increase
(Decrease) in Taxes from:
|
||||||||||||||||
Tax Exempt
Interest
|
(2,470
|
)
|
(12.0%
|
)
|
(2,415
|
)
|
(12.6%
|
)
|
(2,808
|
)
|
(15.7%
|
)
|
||||
State
Business Tax
Credit
|
(779
|
)
|
(3.8%
|
)
|
–
|
–
|
–
|
–
|
||||||||
State
Business
Tax
|
106
|
0.5%
|
–
|
–
|
–
|
–
|
||||||||||
Other
Net
|
95
|
0.5%
|
20
|
0.1%
|
20
|
0.1%
|
||||||||||
Provision for
Tax Expense Charged to Operations
|
$
|
3,976
|
19.2%
|
$
|
4,100
|
21.5%
|
$
|
3,293
|
18.4%
|
December
31,
|
||||||||
2007
|
2006
|
|||||||
Unused
commitments:
|
||||||||
Due in one
year or less
|
$ | 96,264 | $ | 61,821 | ||||
Due after one
year
|
30,954 | 43,333 | ||||||
Total
|
$ | 127,218 | $ | 105,154 |
2008
|
$ | 1,040 | ||
2009
|
802 | |||
2010
|
678 | |||
2011
|
437 | |||
2012
|
132 | |||
Thereafter
|
– | |||
$ | 3,089 |
|
Cash and cash
equivalents - The carrying amounts for cash and cash equivalents is
a reasonable estimate of those assets' fair
value.
|
|
Investment and mortgage-backed
and related securities - Fair values for these securities are based
on quoted market prices, where available. If quoted market
prices are not available, fair values are based on quoted market prices
for similar securities or estimates from independent pricing
services.
|
|
FHLB stock and other
investments - The carrying amount of FHLB stock is a reasonable
estimate of those assets’ fair
value.
|
|
Loans receivable - For
adjustable rate loans that reprice frequently and with no significant
change in credit risk, the carrying amounts are a reasonable estimate of
those assets' fair value. The fair value of fixed rate loans is
estimated by discounting the future cash flows using the current rates at
which similar loans would be made to borrowers with similar credit ratings
and for the same remaining maturities. Nonperforming loans are
estimated using discounted cash flow analyses or underlying value of the
collateral where applicable.
|
|
Deposit liabilities -
The fair value of demand deposits, savings accounts, and certain money
market deposits is the amount on demand at the reporting date, that is,
the carrying value. Fair values for fixed rate certificates of
deposits are estimated using a discounted cash flow calculation that
applies interest rates currently being offered for deposits of similar
remaining maturities.
|
|
Federal funds purchased and
repurchase agreements - Federal funds purchased and repurchase
agreements generally have an original term to maturity of one day and thus
are considered short-term borrowings. Consequently, their
carrying value is a reasonable estimate of fair
value.
|
|
FHLB advances - The
fair value of these advances is estimated by discounting the future cash
flows using rates at which advances would be made to borrowers with
similar credit ratings and for the same remaining
maturities.
|
|
Long-term debt - The
carrying amount for floating long-term debt is a reasonable estimate of
the debts’ fair value due to the fact the debt floats based on LIBOR and
resets quarterly. The carrying amount for the fixed rate
long-term debt is estimated by discounting future cash flows using rates
at which fixed rate long-term debt would be made to borrowers with similar
credit ratings and for the remaining
maturities.
|
At December
31, 2007
|
At December
31, 2006
|
|||||||||||||||
Carrying
|
Carrying
|
|||||||||||||||
Amount
|
Fair
Value
|
Amount
|
Fair
Value
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Financial
assets:
|
||||||||||||||||
Cash and cash
equivalents
|
$ | 76,004 | $ | 76,004 | $ | 55,012 | $ | 55,012 | ||||||||
Investment
securities:
|
||||||||||||||||
Available for
sale, at estimated fair value
|
109,928 | 109,928 | 98,952 | 98,952 | ||||||||||||
Held to
maturity, at cost
|
475 | 477 | 1,351 | 1,342 | ||||||||||||
Mortgage-backed
and related securities:
|
||||||||||||||||
Available for
sale, at estimated fair value
|
727,553 | 727,553 | 643,164 | 643,164 | ||||||||||||
Held to
maturity, at cost
|
189,965 | 189,913 | 226,162 | 222,748 | ||||||||||||
Federal Home
Loan Bank stock and
other
investments, at cost
|
21,919 | 21,919 | 26,496 | 26,496 | ||||||||||||
Loans, net of
allowance for loan losses
|
951,477 | 964,502 | 751,954 | 748,473 | ||||||||||||
Loans held
for sale
|
3,361 | 3,361 | 3,909 | 3,909 | ||||||||||||
Financial
liabilities:
|
||||||||||||||||
Retail
deposits
|
$ | 1,530,491 | $ | 1,538,489 | $ | 1,282,475 | $ | 1,281,305 | ||||||||
Federal funds
purchased and repurchase agreements
|
7,023 | 7,023 | 5,675 | 5,675 | ||||||||||||
FHLB
advances
|
440,039 | 442,223 | 451,620 | 448,383 | ||||||||||||
Long-term
debt
|
60,311 | 60,680 | 20,619 | 20,619 |
CONDENSED
BALANCE SHEETS
|
December
31,
|
December
31,
|
||||||
2007
|
2006
|
|||||||
ASSETS
|
||||||||
Cash and due
from banks
|
$ | 5,694 | $ | 4,433 | ||||
Investment in
bank subsidiaries at equity in underlying net assets
|
180,993 | 124,801 | ||||||
Investment in
nonbank subsidiaries at equity in underlying net assets
|
1,717 | 634 | ||||||
Other
assets
|
1,021 | 1,382 | ||||||
TOTAL
ASSETS
|
$ | 189,425 | $ | 131,250 | ||||
LIABILITIES
|
||||||||
Long-term
debt
|
$ | 56,702 | $ | 20,619 | ||||
Other
liabilities
|
395 | 27 | ||||||
TOTAL
LIABILITIES
|
57,097 | 20,646 | ||||||
SHAREHOLDERS'
EQUITY
|
||||||||
Common stock
($1.25 par, 20,000,000 shares authorized: 14,865,134 and 14,075,653 shares
issued)
|
18,581 | 17,594 | ||||||
Paid-in
capital
|
115,250 | 100,736 | ||||||
Retained
earnings
|
26,187 | 29,648 | ||||||
Treasury
stock (1,724,857 and 1,718,737 shares, at cost)
|
(22,983 | ) | (22,850 | ) | ||||
Accumulated
other comprehensive loss
|
(4,707 | ) | (14,524 | ) | ||||
TOTAL
SHAREHOLDERS' EQUITY
|
132,328 | 110,604 | ||||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 189,425 | $ | 131,250 |
Years Ended
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
INCOME
|
(in
thousands)
|
|||||||||||
Dividends
from subsidiary
|
$
|
9,800
|
$
|
7,600
|
$
|
5,400
|
||||||
Interest
income
|
82
|
50
|
39
|
|||||||||
TOTAL
INCOME
|
9,882
|
7,650
|
5,439
|
|||||||||
EXPENSE
|
||||||||||||
Interest
expense
|
2,726
|
1,681
|
1,305
|
|||||||||
Other
|
923
|
907
|
726
|
|||||||||
TOTAL
EXPENSE
|
3,649
|
2,588
|
2,031
|
|||||||||
Income before
income tax expense
|
6,233
|
5,062
|
3,408
|
|||||||||
Income tax
benefit
|
1,213
|
863
|
677
|
|||||||||
Income before
equity in undistributed earnings of subsidiaries
|
7,446
|
5,925
|
4,085
|
|||||||||
Equity in
undistributed earnings of subsidiaries
|
9,238
|
9,077
|
10,507
|
|||||||||
NET
INCOME
|
$
|
16,684
|
$
|
15,002
|
$
|
14,592
|
Years Ended
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(in
thousands)
|
||||||||||||
OPERATING
ACTIVITIES:
|
||||||||||||
Net
Income
|
$
|
16,684
|
$
|
15,002
|
$
|
14,592
|
||||||
Adjustments
to reconcile net income to net cash provided by
operations:
|
||||||||||||
Equity in
undistributed earnings of subsidiaries
|
(9,238
|
)
|
(9,077
|
)
|
(10,507
|
)
|
||||||
Decrease
(increase) in other assets
|
361
|
1,792
|
(2,008
|
)
|
||||||||
Increase
(decrease) in other liabilities
|
368
|
12
|
(10
|
)
|
||||||||
Net cash
provided by operating activities
|
8,175
|
7,729
|
2,067
|
|||||||||
INVESTING
ACTIVITIES:
|
||||||||||||
Cash paid in
acquisition
|
(36,956
|
)
|
–
|
–
|
||||||||
Investment in
subsidiaries
|
(1,083
|
)
|
–
|
–
|
||||||||
Net cash used
in investing activities
|
(38,039
|
)
|
–
|
–
|
||||||||
FINANCING
ACTIVITIES:
|
||||||||||||
Purchase of
common stock
|
(133
|
)
|
–
|
(4,997
|
)
|
|||||||
Proceeds from
issuance of long-term debt
|
36,083
|
–
|
–
|
|||||||||
Proceeds from
issuance of common stock
|
1,641
|
1,750
|
2,048
|
|||||||||
Dividends
paid
|
(6,466
|
)
|
(5,702
|
)
|
(5,214
|
)
|
||||||
Net cash
provided by (used in) financing activities
|
31,125
|
(3,952
|
)
|
(8,163
|
)
|
|||||||
Net increase
(decrease) in cash and cash equivalents
|
1,261
|
3,777
|
(6,096
|
)
|
||||||||
Cash and cash
equivalents at beginning of year
|
4,433
|
656
|
6,752
|
|||||||||
Cash and cash
equivalents at end of year
|
$
|
5,694
|
$
|
4,433
|
$
|
656
|
|
22.QUARTERLY
FINANCIAL INFORMATION OF REGISTRANT
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
(UNAUDITED)
|
|
(in
thousands, except per share data)
|
2007
|
||||||||||||||||
Fourth
|
Third
|
Second
|
First
|
|||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||
Interest
income
|
$ | 30,689 | $ | 25,475 | $ | 24,380 | $ | 25,197 | ||||||||
Interest
expense
|
17,133 | 15,240 | 14,319 | 15,171 | ||||||||||||
Net interest
income
|
13,556 | 10,235 | 10,061 | 10,026 | ||||||||||||
Provision for
loan losses
|
1,397 | 620 | 217 | 117 | ||||||||||||
Noninterest
income
|
7,215 | 6,403 | 6,662 | 6,138 | ||||||||||||
Noninterest
expense
|
13,051 | 11,542 | 11,456 | 11,236 | ||||||||||||
Income before
income tax expense
|
6,323 | 4,476 | 5,050 | 4,811 | ||||||||||||
Provision for
income tax expense
|
1,489 | 976 | 463 | 1,048 | ||||||||||||
Net
income
|
4,834 | 3,500 | 4,587 | 3,763 | ||||||||||||
Earnings per
share
|
||||||||||||||||
Basic:
|
$ | 0.37 | $ | 0.27 | $ | 0.35 | $ | 0.29 | ||||||||
Diluted:
|
$ | 0.36 | $ | 0.26 | $ | 0.34 | $ | 0.28 |
2006
|
||||||||||||||||
Fourth
|
Third
|
Second
|
First
|
|||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||
Interest
income
|
$ | 25,357 | $ | 25,101 | $ | 23,925 | $ | 22,569 | ||||||||
Interest
expense
|
15,157 | 14,739 | 13,388 | 12,000 | ||||||||||||
Net interest
income
|
10,200 | 10,362 | 10,537 | 10,569 | ||||||||||||
Provision for
loan losses
|
125 | 226 | 448 | 281 | ||||||||||||
Noninterest
income
|
6,230 | 6,186 | 5,967 | 5,098 | ||||||||||||
Noninterest
expense
|
10,850 | 11,120 | 11,563 | 11,434 | ||||||||||||
Income before
income tax expense
|
5,455 | 5,202 | 4,493 | 3,952 | ||||||||||||
Provision for
income tax expense
|
1,276 | 1,150 | 950 | 724 | ||||||||||||
Net
income
|
4,179 | 4,052 | 3,543 | 3,228 | ||||||||||||
Earnings per
share
|
||||||||||||||||
Basic:
|
$ | 0.32 | $ | 0.31 | $ | 0.28 | $ | 0.25 | ||||||||
Diluted:
|
$ | 0.31 | $ | 0.30 | $ | 0.27 | $ | 0.24 |
Exhibit
No.
|
INDEX TO EXHIBITS
|
||
3
(a)(i)
|
–
|
Articles of
Amendment effective May 10, 2000 to Articles of Incorporation of SoBank,
Inc. (now named Southside Bancshares, Inc.) (filed as Exhibit 3(a)(i) to
the Registrant’s Form 10-Q for the quarter ended September 30, 2000
and incorporated herein by reference).
|
|
3
(b)
|
–
|
Bylaws as
amended and restated and in effect on February 28, 2008, of Southside
Bancshares, Inc. (filed as Exhibit 3(b) to the Registrant’s Form 8-K,
filed March 5, 2008, and incorporated herein by
reference).
|
|
4
|
–
|
Management
agrees to furnish to the Securities and Exchange Commission, upon request,
a copy of any other agreements or instruments of Southside Bancshares,
Inc. and its subsidiaries defining the rights of holders of any long-term
debt whose authorization does not exceed 10% of total
assets.
|
|
** 10
(a)(i)
|
–
|
Deferred
Compensation Plan for B. G. Hartley effective February 13, 1984, as
amended June 28, 1990, December 15, 1994, November 20, 1995, December
21,1999 and June 29, 2001 (filed as Exhibit 10(a)(i) to the Registrant’s
Form 10-Q for the quarter ended June 30, 2001, and incorporated herein by
reference).
|
|
** 10
(a)(ii)
|
–
|
Deferred
Compensation Plan for Robbie N. Edmonson effective February 13, 1984,
as amended June 28, 1990 and March 16, 1995 (filed as Exhibit 10(a)(ii) to
the Registrant's Form 10-K for the year ended December 31, 1995, and
incorporated herein by reference).
|
|
10(a)(iii)
|
–
|
Agreement and Plan of Merger dated May 17, 2007, as amended, by and among Southside Bancshares, Inc., Southside Merger Sub, Inc. and Fort Worth Bancshares, Inc. (filed as Exhibit 10(a) to the Registrant's Form 10-Q for the quarter ended September 30, 2007, and incorporated herein by reference). | |
** 10
(b)
|
–
|
Officers
Long-term Disability Income Plan effective June 25, 1990 (filed as Exhibit
10(b) to the Registrant's Form 10-K for the year ended June 30, 1990,
and incorporated herein by reference).
|
|
** 10
(c)
|
–
|
Retirement
Plan Restoration Plan for the subsidiaries of SoBank, Inc. (now named
Southside Bancshares, Inc.) (filed as Exhibit 10(c) to the Registrant's
Form 10-K for the year ended December 31, 1992, and incorporated
herein by reference).
|
|
** 10
(e)
|
–
|
Form of
Deferred Compensation Agreement dated June 30, 1994 with Andy Wall as
amended November 13, 1995 (filed as Exhibit 10(e) to the Registrant's
Form 10-Kfor the year ended December 31, 1995, and incorporated herein by
reference).
|
|
** 10
(f)
|
–
|
Form of
Deferred Compensation Agreements dated June 30, 1994 with each of Sam
Dawson, Lee Gibson and Jeryl Story as amended October 15, 1997 and Form of
Deferred Compensation Agreement dated October 15, 1997 with Lonny Uzzell
(filed as Exhibit 10(f) to the Registrant’s Form 10-K for the year ended
December 31, 1997, and incorporated herein by
reference).
|
** 10
(g)
|
–
|
Postretirement
Agreement for B. G. Hartley effective June 20, 2001 (filed as
Exhibit
10(g) to the
Registrant’s Form 10-Q for the quarter ended June 30, 2001, and
incorporated herein by reference).
|
|
** 10
(h)
|
–
|
Split dollar
compensation plan dated October 13, 2004, with Jeryl Wayne Story (filed as
exhibit 10(h) to the Registrant’s Form 8-K, filed October 19, 2004, and
incorporated herein by reference).
|
|
** 10
(i)
|
–
|
Split dollar
compensation plan dated September 7, 2004, with Lee R. Gibson, III (filed
as exhibit 10(i) to the Registrant’s Form 8-K, filed October 19, 2004, and
incorporated herein by reference).
|
|
** 10
(j)
|
–
|
Split dollar
compensation plan dated August 27, 2004, with B. G. Hartley (filed as
exhibit 10
(j) to the Registrant’s Form 8-K filed October 19, 2004, and incorporated
herein by
reference).
|
|
** 10
(k)
|
–
|
Split dollar
compensation plan dated August 31, 2004, with Charles E. Dawson (filed as
exhibit 10(k) to the Registrant’s Form 8-K, filed October 19, 2004, and
incorporated herein by reference).
|
|
** 10
(l)
|
–
|
Employment
agreement dated October 22, 2007, by and between Southside Bank and Lee R.
Gibson (filed as exhibit 10 (l) to the Registrant’s Form 8-K, filed
October 26, 2007, and incorporated herein by
reference).
|
|
** 10
(m)
|
–
|
Employment
agreement dated October 22, 2007, by and between Southside Bank and Sam
Dawson (filed as exhibit 10 (m) to the Registrant’s Form 8-K, filed
October 26, 2007, and incorporated herein by
reference).
|
|
* 21
|
–
|
Subsidiaries
of the Registrant.
|
|
* 23
|
–
|
Consent of
Independent Registered Public Accounting Firm.
|
|
* 31.1
|
–
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
* 31.2
|
–
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
* 32
|
–
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
*Filed
herewith.
|
|||
**Compensation
plan, benefit plan or employment contract or
arrangement
|
|||