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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
 
Commission file number: 000-12247
SOUTHSIDE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Texas
 
75-1848732
(State or Other Jurisdiction of
 Incorporation or Organization)
(I.R.S. Employer
 Identification No.)
1201 S. Beckham Avenue,
Tyler,
Texas
75701
(Address of Principal Executive Offices)(Zip Code)
903-531-7111
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $1.25 par valueSBSINASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No  

The number of shares of the issuer’s common stock, par value $1.25, outstanding as of April 26, 2022 was 32,121,923 shares.



TABLE OF CONTENTS
 




SOUTHSIDE BANCSHARES, INC.
Glossary of Acronyms, Abbreviations and Terms

The acronyms, abbreviations and terms listed below are used in various sections of this Form 10-Q, including "Item 1. Financial Statements" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations."

Entities:
Southside Bancshares, Inc.Bank holding company for Southside Bank
Southside BankTexas state bank and wholly owned subsidiary of Southside Bancshares, Inc.
CompanyCombined entities of Southside Bancshares, Inc. and its subsidiaries, including Southside Bank
BankSouthside Bank
SouthsideSouthside Bancshares, Inc.
Other Acronyms, Abbreviations and Terms:
2021 Form 10-K
Company’s Annual Report on Form 10-K for the year ended December 31, 2021
401(k) Plan401(k) Defined Contribution Plan
Acquired Retirement PlanOmniAmerican Bank defined benefit pension plan
AFSAvailable for sale
ALCOAsset/Liability Committee
AOCIAccumulated other comprehensive income or loss
ASCAccounting Standards Codification
ASUAccounting Standards Update issued by the FASB
ATMAutomated teller machines
Basel CommitteeBasel Committee on Banking Supervision
BOLIBank owned life insurance
CARES ActCoronavirus Aid, Relief, and Economic Security Act
CDsCertificates of deposit
CECLASU No. 2016-13, Financial Instruments- Credit Losses, also known as Current Expected Credit Losses
CET1Common Equity Tier 1
CMOsCollateralized mortgage obligations
COVID-19Novel strain of coronavirus
Dodd-Frank ActDodd-Frank Wall Street Reform and Consumer Protection Act of 2010
Economic Aid ActEconomic Aid to Hard-Hit Small Business, Nonprofits and Venues Act
ESOPEmployee Stock Ownership Plan
ETREffective tax rate
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
Federal ReserveThe Board of Governors of the Federal Reserve System
FHLBFederal Home Loan Bank
FRBNYFederal Reserve Bank of New York
FRDWFederal Reserve Discount Window
FTEFully-taxable equivalents measurements
GAAPUnited States generally accepted accounting principles
GSEsU.S. government-sponsored enterprises
Southside Bancshares, Inc. |1

GuidelinesInteragency Guidelines Prescribing Standards for Safety and Soundness adopted by federal banking agencies
HTMHeld to maturity
ITMInteractive teller machines
LIBORLondon Interbank Offered Rate
MBSMortgage-backed securities
MVPEMarket value of portfolio equity
OREOOther real estate owned
PCDPurchased financial assets with credit deterioration under CECL
PCIFinancial assets purchased credit impaired under ASC 310-30 prior to CECL
PPP Paycheck Protection Program
PPP FacilityPaycheck Protection Program Lending Facility
Repurchase agreementsSecurities sold under agreements to repurchase
Restoration PlanNonfunded supplemental retirement plan
Retirement PlanDefined benefit pension plan
ROURight-of-use
SBASmall Business Administration
SECSecurities and Exchange Commission
SOFRSecured Overnight Financing Rate provided by the Federal Reserve Bank of New York
TDRTroubled debt restructurings
U.S.United States

Southside Bancshares, Inc. |2

PART I.   FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share amounts)
March 31,
2022
December 31,
2021
 
ASSETS  
Cash and due from banks$90,399 $91,120 
Interest earning deposits72,158 110,633 
Federal funds sold24,550  
Total cash and cash equivalents187,107 201,753 
Securities:
Securities AFS, at estimated fair value (amortized cost of $2,117,597 and $2,655,594, respectively)
2,065,984 2,764,325 
Securities HTM (estimated fair value of $462,621 and $95,235, respectively)
474,319 90,780 
FHLB stock, at cost3,757 14,375 
Equity investments11,475 11,841 
Loans held for sale1,576 1,684 
Loans:  
Loans3,800,916 3,645,162 
Less:  Allowance for loan losses(35,524)(35,273)
Net loans3,765,392 3,609,889 
Premises and equipment, net142,880 142,509 
Operating lease ROU assets14,751 15,073 
Goodwill201,116 201,116 
Other intangible assets, net6,273 6,895 
Interest receivable28,367 39,145 
Deferred tax asset, net19,116  
Unsettled trades to sell securities47,019  
BOLI131,923 131,232 
Other assets18,060 28,985 
Total assets$7,119,115 $7,259,602 
   
LIABILITIES AND SHAREHOLDERS’ EQUITY  
Deposits:  
Noninterest bearing$1,630,056 $1,644,775 
Interest bearing4,440,343 4,077,552 
Total deposits6,070,399 5,722,327 
Other borrowings30,196 23,219 
FHLB borrowings3,871 344,038 
Subordinated notes, net of unamortized debt issuance costs98,569 98,534 
Trust preferred subordinated debentures, net of unamortized debt issuance costs60,261 60,260 
Deferred tax liability, net 17,808 
Unsettled trades to purchase securities2,053 18,995 
Operating lease liabilities16,388 16,676 
Other liabilities53,137 45,573 
Total liabilities6,334,874 6,347,430 
   
Off-balance-sheet arrangements, commitments and contingencies (Note 12)
  
Shareholders’ equity:  
Common stock:  ($1.25 par value, 80,000,000 shares authorized, 37,976,640 shares issued at March 31, 2022 and 37,968,969 shares issued at December 31, 2021)
47,471 47,461 
Paid-in capital781,814 780,501 
Retained earnings193,739 179,813 
Treasury stock: (shares at cost, 5,682,651 at March 31, 2022 and 5,616,917 at December 31, 2021)
(158,512)(155,308)
AOCI(80,271)59,705 
Total shareholders’ equity784,241 912,172 
Total liabilities and shareholders’ equity$7,119,115 $7,259,602 
The accompanying notes are an integral part of these consolidated financial statements.
Southside Bancshares, Inc. |3


SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
Three Months Ended
March 31,
 20222021
Interest income:  
Loans$34,888 $36,038 
Taxable investment securities4,608 2,323 
Tax-exempt investment securities10,219 8,965 
MBS4,017 6,088 
FHLB stock and equity investments113 136 
Other interest earning assets28 15 
Total interest income53,873 53,565 
Interest expense:  
Deposits3,237 2,597 
FHLB borrowings366 1,908 
Subordinated notes998 2,395 
Trust preferred subordinated debentures356 351 
Other borrowings10 11 
Total interest expense4,967 7,262 
Net interest income48,906 46,303 
Provision for (reversal of) credit losses294 (10,149)
Net interest income after provision for credit losses48,612 56,452 
Noninterest income:  
Deposit services6,628 6,125 
Net gain (loss) on sale of securities AFS(1,543)2,003 
Gain on sale of loans178 593 
Trust fees1,494 1,383 
BOLI691 626 
Brokerage services809 780 
Other2,468 2,113 
Total noninterest income10,725 13,623 
Noninterest expense:  
Salaries and employee benefits19,969 20,044 
Net occupancy3,656 3,560 
Advertising, travel & entertainment737 437 
ATM expense281 238 
Professional fees927 991 
Software and data processing1,631 1,312 
Communications503 525 
FDIC insurance472 454 
Amortization of intangibles622 766 
Other2,397 2,907 
Total noninterest expense31,195 31,234 
Income before income tax expense28,142 38,841 
Income tax expense3,146 4,750 
Net income$24,996 $34,091 
Earnings per common share – basic$0.77 $1.04 
Earnings per common share – diluted$0.77 $1.04 
Cash dividends paid per common share$0.34 $0.32 
The accompanying notes are an integral part of these consolidated financial statements.
Southside Bancshares, Inc. |4


SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands)
Three Months Ended
March 31,
20222021
Net income$24,996 $34,091 
Other comprehensive income (loss):  
Securities AFS and transferred securities:
Change in unrealized holding gain (loss) on AFS securities during the period(161,901)(48,979)
Change in net unrealized loss on securities transferred from AFS to HTM(39,144) 
Reclassification adjustment for amortization related to AFS and HTM debt securities243 416 
Reclassification adjustment for net (gain) loss on sale of AFS securities, included in net income1,543 (2,003)
Derivatives:
Change in net unrealized gain (loss) on effective cash flow hedge interest rate swap derivatives20,546 11,023 
Reclassification adjustment of net (gain) loss related to derivatives designated as cash flow hedges1,322 1,568 
Pension plans:
Amortization of net actuarial loss and prior service credit, included in net periodic benefit cost206 641 
Other comprehensive income (loss), before tax(177,185)(37,334)
Income tax (expense) benefit related to items of other comprehensive income (loss)37,209 7,840 
Other comprehensive income (loss), net of tax(139,976)(29,494)
Comprehensive income (loss)$(114,980)$4,597 

The accompanying notes are an integral part of these consolidated financial statements.
Southside Bancshares, Inc. |5


SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except share and per share data)
 Common
Stock
Paid In
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
Balance at December 31, 2021$47,461 $780,501 $179,813 $(155,308)$59,705 $912,172 
Net income— — 24,996 — — 24,996 
Other comprehensive income (loss)— — — — (139,976)(139,976)
Issuance of common stock for dividend reinvestment plan (7,671 shares)
10 312 — — — 322 
Purchase of common stock (82,285 shares)
— — — (3,358)— (3,358)
Stock compensation expense— 819 — — — 819 
Net issuance of common stock under employee stock plans (16,551 shares)
— 182 (67)154 — 269 
Cash dividends paid on common stock ($0.34 per share)
— — (11,003)— — (11,003)
Balance at March 31, 2022$47,471 $781,814 $193,739 $(158,512)$(80,271)$784,241 


Balance at December 31, 2020$47,419 $771,511 $111,208 $(123,921)$69,080 $875,297 
Net income— — 34,091 — — 34,091 
Other comprehensive income (loss)— — — — (29,494)(29,494)
Issuance of common stock for dividend reinvestment plan (8,918 shares)
11 321 — — — 332 
Purchase of common stock (427,396 shares)
— — — (15,213)— (15,213)
Stock compensation expense— 674 — — — 674 
Net issuance of common stock under employee stock plans (126,260 shares)
— 2,309 (41)1,118 — 3,386 
Cash dividends paid on common stock ($0.32 per share)
— — (10,476)— — (10,476)
Balance at March 31, 2021$47,430 $774,815 $134,782 $(138,016)$39,586 $858,597 

The accompanying notes are an integral part of these consolidated financial statements.
Southside Bancshares, Inc. |6






SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 Three Months Ended
March 31,
 20222021
OPERATING ACTIVITIES:  
Net income$24,996 $34,091 
Adjustments to reconcile net income to net cash provided by operations:  
Depreciation and net amortization2,765 2,882 
Securities premium amortization (discount accretion), net4,804 6,083 
Loan (discount accretion) premium amortization, net(132)(223)
Provision for (reversal of) credit losses294 (10,149)
Stock compensation expense819 674 
Deferred tax expense (benefit)285 2,161 
Net gain (loss) on sale of AFS securities1,543 (2,003)
Loss on impairment of investments38  
Net loss on premises and equipment334 227 
Gross proceeds from sales of loans held for sale5,114 15,987 
Gross originations of loans held for sale(5,006)(14,907)
Net (gain) loss on OREO (2)
Net change in:  
Interest receivable10,778 11,270 
Other assets(74)6,459 
Interest payable728 (1,026)
Other liabilities38,091 10,891 
Net cash provided by (used in) operating activities85,377 62,415 
INVESTING ACTIVITIES:  
Securities AFS:
Purchases(126,240)(127,713)
Sales118,952 37,097 
Maturities, calls and principal repayments50,269 99,787 
Securities HTM:  
Maturities, calls and principal repayments2,216 10,871 
Proceeds from redemption of FHLB stock and equity investments11,041 16,240 
Purchases of FHLB stock and equity investments(57)(9,629)
Net loan paydowns (originations)(155,667)(59,211)
Purchases of premises and equipment(2,806)(2,396)
Proceeds from sales of premises and equipment3 94 
Net proceeds from sales of OREO 106 
Proceeds from sales of repossessed assets30 44 
Net cash provided by (used in) investing activities(102,259)(34,710)
(continued)
Southside Bancshares, Inc. | 7



SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(UNAUDITED)
(in thousands)
 Three Months Ended
March 31,
 20222021
FINANCING ACTIVITIES:  
Net change in deposits348,066 160,308 
Net change in other borrowings6,977 (857)
Proceeds from FHLB borrowings117,000 4,009,977 
Repayment of FHLB borrowings(457,167)(4,176,974)
Net proceeds from issuance of subordinated notes (59)
Proceeds from stock option exercises332 3,412 
Cash paid to tax authority related to tax withholding on share-based awards(63)(26)
Purchase of common stock(2,228)(14,127)
Proceeds from the issuance of common stock for dividend reinvestment plan322 332 
Cash dividends paid(11,003)(10,476)
Net cash provided by (used in) financing activities2,236 (28,490)
Net (decrease) increase in cash and cash equivalents(14,646)(785)
Cash and cash equivalents at beginning of period201,753 108,408 
Cash and cash equivalents at end of period$187,107 $107,623 
SUPPLEMENTAL DISCLOSURES FOR CASH FLOW INFORMATION:  
Interest paid$4,239 $8,288 
Income taxes paid$ $250 
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:  
Loans transferred to other repossessed assets and real estate through foreclosure$31 $424 
Transfer of AFS to HTM securities$424,895 $ 
Unsettled trades to purchase securities$(2,053)$23,473 
Unsettled trades to sell securities$47,019 $ 
Unsettled trades to repurchase common stock$(1,130)$(1,086)

The accompanying notes are an integral part of these consolidated financial statements.



Southside Bancshares, Inc. |8

SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


1.    Summary of Significant Accounting and Reporting Policies
Basis of Presentation
In this report, the words “the Company,” “we,” “us,” and “our” refer to the combined entities of Southside Bancshares, Inc. and its subsidiaries, including Southside Bank.  The words “Southside” and “Southside Bancshares” refer to Southside Bancshares, Inc.  The words “Southside Bank” and “the Bank” refer to Southside Bank.
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, not all information required by GAAP for complete financial statements is included in these interim statements. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included.  Such adjustments consisted only of normal recurring items.  The preparation of these consolidated financial statements in accordance with GAAP requires the use of management’s estimates.  These estimates are subjective in nature and involve matters of judgment.  Actual amounts could differ from these estimates.
Interim results are not necessarily indicative of results for a full year.  These financial statements should be read in conjunction with the financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2021. 
Accounting Changes and Reclassifications
Certain prior period amounts may be reclassified to conform to current year presentation.
Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or other reference rates expected to be discontinued. ASU 2020-04 also provides for a one-time sale and/or transfer to AFS or trading to be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. ASU 2020-04 was effective for all entities as of March 12, 2020 and through December 31, 2022. Companies can apply the ASU as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. The guidance requires companies to apply the guidance prospectively to contract modifications and hedging relationships while the one-time election to sell and/or transfer debt securities classified as HTM may be made any time after March 12, 2020. Additionally, in January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope,” which provided additional clarification that certain optional expedients and exceptions noted above apply to derivative instruments that use an interest rate for margining, discounting or contract price alignment that is modified as a result of reference rate reform. We established an officer level committee to guide our transition from LIBOR and are transitioning to alternative rates consistent with industry timelines. We continue to evaluate our LIBOR exposure, and note that we have the option to have certain of our interest rate swaps fall back to an adjusted SOFR index. Additionally, we anticipate the trust preferred subordinated debentures will transition to a SOFR index once the Federal Reserve completes the relevant rule. We have identified our products that utilize LIBOR and have implemented enhanced fallback language to facilitate the transition to alternative reference rates. We are evaluating existing systems and have begun offering alternative rates. We are no longer offering LIBOR indexed rates on newly originated loans. ASU 2020-04 and ASU 2021-01 are not expected to have a material impact on our consolidated financial statements.
In March 2022, the FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 eliminates the accounting guidance for TDRs, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan. Additionally, ASU 2022-02 requires an entity to disclose current-period gross write-offs by year of origination for financing receivables within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. ASU 2022-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 for companies that have adopted CECL, which we adopted on January 1, 2020. Early adoption is permitted. The guidance should be applied prospectively with the option to use a modified retrospective transition method for the recognition and measurement of TDRs, resulting in a cumulative-effect adjustment to retained earnings. ASU 2022-02 is not expected to have a material impact on our consolidated financial statements.
Southside Bancshares, Inc. |9

2.     Earnings Per Share

Earnings per share on a basic and diluted basis are calculated as follows (in thousands, except per share amounts):
Three Months Ended
March 31,
 20222021
Basic and Diluted Earnings:  
Net income$24,996 $34,091 
Basic weighted-average shares outstanding32,357 32,829 
Add:  Stock awards180 108 
Diluted weighted-average shares outstanding32,537 32,937 
Basic earnings per share:
Net income$0.77 $1.04 
Diluted earnings per share:
Net income$0.77 $1.04 
For the three months ended March 31, 2022, there were no anti-dilutive shares. For the three months ended March 31, 2021, there were approximately 679,000 anti-dilutive shares.

Southside Bancshares, Inc. |10

3.     Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component are as follows (in thousands):
Three Months Ended March 31, 2022
Unrealized Gains (Losses) on SecuritiesUnrealized Gains (Losses) on DerivativesRetirement PlansTotal
Beginning balance, net of tax$84,716 $(1,257)$(23,754)$59,705 
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications(201,045)20,546  (180,499)
Reclassification adjustments included in net income1,786 1,322 206 3,314 
Income tax (expense) benefit41,844 (4,593)(42)37,209 
Net current-period other comprehensive income (loss), net of tax(157,415)17,275 164 (139,976)
Ending balance, net of tax$(72,699)$16,018 $(23,590)$(80,271)
Three Months Ended March 31, 2021
Unrealized Gains (Losses) on SecuritiesUnrealized Gains (Losses) on DerivativesRetirement PlansTotal
Beginning balance, net of tax$116,078 $(17,091)$(29,907)$69,080 
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications(48,979)11,023  (37,956)
Reclassification adjustments included in net income(1,587)1,568 641 622 
Income tax (expense) benefit10,619 (2,644)(135)7,840 
Net current-period other comprehensive income (loss), net of tax(39,947)9,947 506 (29,494)
Ending balance, net of tax$76,131 $(7,144)$(29,401)$39,586 



Southside Bancshares, Inc. |11

The reclassification adjustments out of accumulated other comprehensive income (loss) included in net income are presented below (in thousands):
Three Months Ended
March 31,
20222021
Unrealized gains and losses on securities transferred:
Amortization of unrealized gains and losses (1)
$