GlobeNewswire Inc | Oct 23, 2020 06:30AM EDT

October 23, 2020

-- Third quarter diluted earnings per share of $0.82, an increase of 41.4% compared to same period in 2019; -- Third quarter net income of $27.1 million, an increase of 36.8% compared to same period in 2019; -- Annualized return on third quarter average tangible equity of 17.73%(1); -- Nonperforming assets remain low at 0.23% of total assets; -- Total COVID-19 modified loans decreased 76.5%, to $76.5 million; -- Allowance for loan losses to total loans, 1.45%.

TYLER, Texas, Oct. 23, 2020 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (Southside or the Company) (NASDAQ: SBSI) today reported its financial results for the quarter ended September30, 2020. Southside reported net income of $27.1 million for the three months ended September 30, 2020, an increase of $7.3 million, or 36.8%, compared to $19.8 million for the same period in 2019. Earnings per diluted common share increased $0.24, or 41.4%, to $0.82 for the three months ended September 30, 2020, from $0.58 for the same period in 2019. The annualized return on average shareholders equity for the three months ended September 30, 2020 was 12.89%, compared to 9.78% for the same period in 2019.The annualized return on average assets was 1.48% for the three months ended September 30, 2020, compared to 1.23% for the same period in 2019.

I am delighted to report Southsides strong third quarter financial results, stated Lee R. Gibson, President and Chief Executive Officer of Southside. We reported a return on third quarter average tangible equity of 17.73% as net income increased 36.8% compared to the same period in 2019, largely driven by a decrease in provision for credit losses and an increase in net interest income that was partially offset by an increase in noninterest expense. Asset quality metrics remain solid with nonperforming assets to total assets decreasing to 0.23%. As of October 20, 2020 and since the release of our second quarter results in July, total COVID-19 modified loans have decreased approximately $249 million, or 76.5%, from $326 million as of July 20, to $76.5 million, or 2.2% of total loans, net of Paycheck Protection Program (PPP) loans. On a linked quarter basis our net interest margin(1) remained unchanged at 3.02%, while the net interest spread(1) increased two basis points to 2.84%.

During the third quarter loans decreased $62.6 million primarily due to a few large payoffs in commercial real estate loans. Our loan pipeline is growing as lending opportunities in our markets are steadily increasing. Our balance sheet, capital position and underlying earnings continue to be a source of strength, as reflected in our third quarter results.

On October 3, Southside celebrated its 60th Anniversary with various activities, including a customer appreciation day in our branches. We were honored to virtually ring the Nasdaq Opening Bell in celebration of our 60th anniversary on September 28. Over the last 60 years, we have experienced tremendous growth, expanded our footprint to many communities in Texas and formed meaningful long-standing relationships with our customers. We have been blessed with exceptional team members and customers who have played an integral role in our success and together, we look forward to further expanding and growing Southsides Texas franchise.

While the pandemic continues to impact the markets we serve and many uncertainties remain, we are encouraged by the increased economic activity in our markets. I continue to be extremely proud of the dedication and professionalism consistently shown by our team members as they safely and efficiently serve our customers and I want to thank each of them publicly.

Operating Results for the Three Months Ended September30, 2020

Net income was $27.1 million for the three months ended September 30, 2020, compared to $19.8 million for the same period in 2019, an increase of $7.3 million, or 36.8%. Earnings per diluted common share were $0.82 for the three months ended September 30, 2020, compared to $0.58 for the same period in 2019, an increase of 41.4%. The increase in net income was largely driven by the increase in net interest income and the decrease in the provision for credit losses, partially offset by an increase in noninterest expense. Annualized returns on average assets and average shareholders equity for the three months ended September 30, 2020 were 1.48% and 12.89%, respectively.Our efficiency ratio (FTE)(1) was50.07% for the three months ended September 30, 2020, compared to 48.29% for the three months ended June30, 2020.

Net interest income for the three months ended September 30, 2020 was $46.6 million compared to $42.4 million for the same period in 2019. The increase in net interest income compared to the same period in 2019 was primarily due to the decrease in interest expense on our interest bearing liabilities, a result of lower funding costs, partially offset by a decrease in interest income due to a decrease in the average yield on our interest earning assets during the three months ended September 30, 2020. Linked quarter, net interest income decreased $0.7 million, or 1.4%, compared to $47.3 million during the three months ended June30, 2020. The decrease was primarily due to decreases in interest income on mortgage related securities and loans, partially offset by decreases in interest expense on deposits and FHLB borrowings.

Our tax equivalent net interest margin(1) was 3.02% for the three months ended September 30, 2020, compared to3.03% for the same period in 2019. Our tax equivalent net interest margin linked quarter remained unchanged from 3.02% for the three months ended June30, 2020.

Noninterest income was $11.1 million for the three months ended September 30, 2020 and 2019, with only a slight increase of $30,000, or 0.3%. On a linked quarter basis, noninterest income decreased $1.1 million, or 8.6%, due to a $2.6 million decrease in net gain on sale of securities available for sale, partially offset by an increase in deposit services income, other noninterest income and gain on sale of loans.

Noninterest expense was $31.6 million for the three months ended September 30, 2020, an increase of $2.6 million, or 8.9%, compared to $29.0 million for the same period in 2019. The increase was the result of increases in other noninterest expense, salaries and employee benefits and FDIC insurance. On a linked quarter basis, noninterest expense increased $1.8 million, or 5.9%, compared to the three months ended June30, 2020. The increase was due to increases in salaries and employee benefits, other noninterest expense and FDIC insurance.

Income tax expense increased $0.1 million for the three months ended September 30, 2020 compared to the same period in 2019. On a linked quarter basis, income tax expense increased $1.0 million, or 34.7%. Our effective tax rate (ETR) decreased to 12.3% for the three months ended September 30, 2020 compared to 15.6% for the three months ended September30, 2019 and increased compared to 11.5% for the three months ended June30, 2020. The lower ETR for the three months ended September 30, 2020, as compared to the same period in 2019, was primarily due to an increase in tax-exempt income as a percentage of pre-tax income for the three months ended September 30, 2020. On a linked quarter basis, the increase in ETR for the three months ended September 30, 2020 was due to a decrease in tax-exempt income as a percentage of pre-tax income.

Operating Results for the Nine Months Ended September 30, 2020

Net income was $52.6 million for the nine months ended September 30, 2020, compared to $57.2 million for the same period in 2019, a decrease of $4.6 million, or 8.1%. Earnings per diluted common share were $1.58 for the nine months ended September 30, 2020, compared to $1.69 for the same period in 2019, a decrease of 6.5%. The decrease in net income was primarily driven by an increase in the provision for credit losses after adopting ASU 2016-13(2) (CECL) and an increase in noninterest expense, partially offset by an increase in net interest income, an increase in noninterest income and a decrease in income tax expense. The increase in the provision for credit losses for the nine months ended September 30, 2020 was primarily due to the economic environment related to COVID-19 and the resulting impact on the economic assumptions used in the CECL model. The adoption of CECL(2) replaced the incurred loss model with an expected credit loss methodology. Annualized returns on average assets and average shareholders equity for the nine months ended September 30, 2020 were 0.98% and 8.56%, respectively.Our efficiency ratio (FTE)(1) was50.06% for the nine months ended September 30, 2020, compared to 51.85% for the nine months ended September 30, 2019.

Net interest income for the nine months ended September 30, 2020 was $138.6 million, compared to $126.6 million during the same period in 2019, an increase of $11.9 million, or 9.4%. The increase in net interest income compared to the same period in 2019 was due to the decrease in interest expense on our interest bearing liabilities, a result of lower funding costs on our interest bearing liabilities, partially offset by a decrease in interest income due to a lower yield on our interest earning assets during the nine months ended September 30, 2020.

Our tax equivalent net interest margin(1) was 3.02% for the nine months ended September 30, 2020, compared to3.09% for the same period in 2019. The decrease was due to the shift in interest earning assets from higher yielding loans into securities and to a lesser extent, lower yielding average PPP loan balances included during the nine months ended September 30, 2020.

Noninterest income was $38.8 million for the nine months ended September 30, 2020, an increase of 21.7%, compared to $31.9 million for the same period in 2019. The increase was due to the increases in net gain on sale of securities available for sale and gain on sale of loans, partially offset by decreases in deposit services income and trust fees.

Noninterest expense was $92.0 million for the nine months ended September 30, 2020, compared to $88.4 million for the same period in 2019, an increase of $3.6 million, or 4.1%. The increase was the result of increases in salaries and employee benefits, other noninterest expense, net occupancy expense and software and data processing expense, partially offset by decreases in amortization of intangibles and advertising, travel and entertainment expense.

Income tax expense decreased $3.3 million, or 31.8%, for the nine months ended September 30, 2020, compared to the same period in 2019. Our ETR was approximately 11.9% and 15.3% for the nine months ended September 30, 2020 and 2019, respectively. The lower ETR for the nine months ended September 30, 2020, as compared to the same period in 2019, was primarily due to an increase in tax-exempt income as a percentage of pre-tax income.

Balance Sheet Data

At September30, 2020, we had $7.19 billion in total assets, compared to $6.75 billion at December31, 2019 and $6.54 billion at September30, 2019.

Loans at September30, 2020 were $3.79 billion, an increase of $290.1 million, or 8.3%, compared to $3.50 billion at September30, 2019. Linked quarter loans decreased $62.6 million, or 1.6%, from $3.85 billion at June30, 2020. The linked quarter net decrease in loans consisted primarily of decreases of $79.3 million of commercial real estate loans, $23.5 million of 1-4 family residential loans and $10.0 million of commercial loans, partially offset by increases of $39.6 million of construction loans, $9.9 million of municipal loans and $0.7 million of loans to individuals. On a linked quarter basis, our PPP loans, net of deferred fees and included in the commercial loan category, increased $3.3 million, or 1.1%, from $299.5 million to $302.8 million.

Securities at September30, 2020 were $2.75 billion, an increase of $367.3 million, or 15.4%, compared to $2.38 billion at September30, 2019. The increase occurred primarily during the first quarter of 2020. Linked quarter, securities decreased $51.3 million, or 1.8%, from $2.80 billion at June30, 2020 primarily due to principal pay downs of mortgage related securities.

Deposits at September30, 2020 were $5.10 billion, an increase of $612.3 million, or 13.6%, compared to $4.49 billion at September30, 2019, largely driven by PPP loan disbursements deposited into our commercial accounts, stimulus checks deposited during the second quarter and an increase in public fund deposits. Linked quarter, deposits increased $32.5 million, or 0.6%, from $5.07 billion at June30, 2020, primarily due to an increase in individual interest bearing savings accounts, commercial interest bearing checking accounts and brokered certificates of deposits.

CECL Adoption and Asset Quality

During the first quarter of 2020, we adopted ASU 2016-13,Financial Instruments - Credit Losses, often referred to as CECL. Upon the adoption of CECL, we recorded a cumulative-effect adjustment that decreased retained earnings by $7.8 million, net of tax. This adjustment was the result of a $5.3 million increase in the allowance for loan losses, from $24.8 million at December 31, 2019 to $30.1 million upon adoption, including $0.2 million for purchased loans with credit deterioration, and a $4.8 million increase in other liabilities related to the allowance for off-balance-sheet credit exposures.

Based on the credit quality of our securities portfolio, the adoption of CECL did not result in the recording of an allowance for credit losses on our held-to-maturity securities.

Nonperforming assets at September30, 2020 were $16.8 million, or 0.23% of total assets, a decrease of $0.6 million, or 3.6%, compared to $17.4 million, or 0.26% of total assets, at December31, 2019, and a decrease from $17.6 million, or 0.24% of total assets, at June30, 2020. During the three months ended September 30, 2020, nonaccrual loans increased $0.3 million, or 5.9%.

The allowance for loan losses increased to $55.1 million, or 1.45% of total loans at September30, 2020, compared to $24.8 million, or 0.69% of total loans, at December31, 2019. The allowance for loan losses was $59.9 million, or 1.55% of total loans at June30, 2020. The increase year-to-date is due to the adoption of CECL and the economic uncertainty related to the COVID-19 pandemic and resulting expected losses.

For the three months ended September 30, 2020, we recorded a reversal of provision for credit losses for loans of $4.4 million, compared to a provision for loan losses of $1.0 million for the three months ended September 30, 2019 and a provision for credit losses of $6.3 million for the three months ended June30, 2020. The provision for credit losses for the nine months ended September 30, 2020 was $26.0million, compared to $2.6 million for the nine months ended September30, 2019. The increase during 2020 was primarily due to the economic impact of COVID-19 on macroeconomic factors used in the CECL methodology, including the potential for credit deterioration. The partial reversal of provision for credit losses during the three months ended September 30, 2020, was largely driven by an improvement in the economic forecasts and the decrease in commercial real estate loans. However, if the COVID-19 pandemic and economic impact is prolonged, it is likely that credit losses and nonperforming assets may increase. Net charge-offs were $0.4million for the three months ended September 30, 2020, compared to net charge-offs of $0.6 million for the three months ended September 30, 2019 and $0.1 million of net charge-offs for the three months ended June30, 2020. Net charge-offs were $1.0million for the nine months ended September 30, 2020, compared to $4.5 million for the nine months ended September30, 2019.

For the three months ended September 30, 2020 and 2019, we recorded a reversal of provision for credit losses for off-balance-sheet credit exposures of $0.3 million and a reversal of provision of $1.1 million for the three months ended June30, 2020. The reversal of provision of $0.3 million for the three months ended September 30, 2020 was a result of an improvement in economic forecasts and a lower balance of off-balance-sheet credit exposures compared to the three months ended June 30, 2020. The reversal of provision for credit losses for off-balance-sheet credit exposures for the nine months ended September 30, 2020 was $0.3 million, compared to a reversal of provision of $0.4 million for the nine months ended September30, 2019. The balance of the allowance for off-balance-sheet credit exposures at September30, 2020 was $6.0 million, and is included in other liabilities.

Dividend

Southside Bancshares, Inc. declared a third quarter cash dividend of $0.31 per share on August 6, 2020, which was paid on September 3, 2020, to all shareholders of record as of August 20, 2020.

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

(2) We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020. ASU 2016-13 replaced the incurred loss model with an expected loss methodology that is referred to as current expected credit loss. Adoption of this guidance on January 1, 2020, resulted in a cumulative-effect adjustment to reduce retained earnings by $7.8 million, net of tax. Due to the adoption of the guidance under the modified retrospective approach, prior periods have not been adjusted and thus may not be comparable.

Conference Call

Southside's management team will host a conference call to discuss its third quarter ended September30, 2020 financial results on Friday, October 23, 2020 at 9:00 a.m. CDT.The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 6077847 or by identifying Southside Bancshares, Inc., Third Quarter 2020 Earnings Call.To listen to the call via webcast, register at https://investors.southside.com.

For those unable to listen to the conference call live, a recording will be available from approximately 12:00 p.m. CDT October 23, 2020 through 11:00 a.m. CST November 4, 2020 by accessing the company website, https://investors.southside.com.

Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles (GAAP) in the United States and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of our performance. These include the following fully taxable-equivalent measures (FTE): (i) Net interest income (FTE), (ii) Net interest margin (FTE), (iii) Net interest spread (FTE), and (iv) Efficiency ratio (FTE), which include the effects of taxable-equivalent adjustments using a federal income tax rate of 21% for the three and nine months ended September 30, 2020 and 2019 to increase tax-exempt interest income to a tax-equivalent basis. Interest income earned on certain assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than taxable investments.

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

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

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

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

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

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $7.19 billion in assets as of September30, 2020, that owns 100% of Southside Bank.Southside Bank currently has 57 branches in Texas and operates a network of 80 ATMs/ITMs.

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

Forward-Looking Statements

Certain statements of other than historical fact that are contained in this press release and in other written material, documents and oral statements issued by or on behalf of the Company may be considered to be forward-looking statements within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995.These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing managements views as of any subsequent date.These statements may include words such as expect, estimate, project, anticipate, appear, believe, could, should, may, likely, intend, probability, risk, target, objective, plans, potential, and similar expressions.Forward-looking statements are statements with respect to the Companys beliefs, plans, expectations, objectives, goals, anticipations, assumptions and estimates about the Company's future performance and are subject to significant known and unknown risks and uncertainties, which could cause the Company's actual results to differ materially from the results discussed in the forward-looking statements.For example, discussions about trends in asset quality, capital, liquidity, the pace of loan and revenue growth, the Company's ability to sell nonperforming assets, expense reductions, planned operational efficiencies, earnings, successful integration of completed acquisitions and certain market risk disclosures, including the impact of interest rates, tax reform and other economic factors, are based upon information presently available to management and are dependent on choices about key model characteristics and assumptions and are subject to various limitations.By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future.The most recent factor that could cause future results to differ materially from those anticipated by our forward-looking statements include the negative impact of the COVID-19 pandemic on our business, financial position, operations and prospects, including our ability to continue our business activities in certain communities we serve, the duration of the pandemic and its continued effects on financial markets, a reduction in financial transactions and business activities resulting in decreased deposits and reduced loan originations, increases in unemployment rates impacting our borrowers' ability to repay their loans, our ability to manage liquidity in a rapidly changing and unpredictable market, additional interest rate changes by the Federal Reserve and other government actions in response to the pandemic, including additional quarantines, regulations or laws enacted to counter the effects of the COVID-19 pandemic on the economy.

Additional information concerning the Company and its business, including additional factors that could materially affect the Companys financial results, is included in the Companys Annual Report on Form 10-K for the year ended December31, 2019, under Part I - Item 1. Forward Looking Information and Part I - Item 1A. Risk Factors, the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and the quarter ended June 30, 2020, under Part II - Item 1A. Risk Factors and in the Companys other filings with the Securities and Exchange Commission.The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

Southside Bancshares, Inc.Consolidated Financial Summary (Unaudited)(Dollars in thousands)

As of 2020 2019 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,ASSETS Cash and due from $ 81,643 $ 81,271 $ 71,727 $ 66,949 $ 92,300 banksInterest earning 14,561 19,535 40,486 43,748 22,524 depositsSecuritiesavailable for sale, 2,633,519 2,679,521 2,813,024 2,358,597 2,240,381 at estimated fairvalueSecurities held tomaturity, at net 115,089 120,384 134,491 134,863 140,955 carrying valueTotal securities 2,748,608 2,799,905 2,947,515 2,493,460 2,381,336 Federal Home Loan 35,860 55,689 54,696 50,087 45,039 Bank stock, at costLoans held for sale 8,686 3,392 1,830 383 1,000 Loans 3,789,975 3,852,571 3,601,002 3,568,204 3,499,917 Less: Allowance for (55,110 ) (59,868 ) (53,638 ) (24,797 ) (25,129 ) loan lossesNet loans 3,734,865 3,792,703 3,547,364 3,543,407 3,474,788 Premises & 147,169 147,715 146,212 143,912 141,683 equipment, netGoodwill 201,116 201,116 201,116 201,116 201,116 Other intangible 10,569 11,450 12,381 13,361 14,391 assets, netBank owned life 114,928 114,248 101,066 100,498 99,916 insuranceOther assets 92,955 102,587 149,245 91,992 67,982 Total assets $ 7,190,960 $ 7,329,611 $ 7,273,638 $ 6,748,913 $ 6,542,075 LIABILITIES ANDSHAREHOLDERS' EQUITYNoninterest bearing $ 1,363,228 $ 1,398,179 $ 1,065,708 $ 1,040,112 $ 1,038,695 depositsInterest bearing 3,739,798 3,672,365 3,673,415 3,662,657 3,452,072 depositsTotal deposits 5,103,026 5,070,544 4,739,123 4,702,769 4,490,767 Other borrowingsand Federal Home 994,512 1,165,463 1,492,270 1,001,102 988,577 Loan BankborrowingsSubordinated notes,net of unamortized 98,708 98,663 98,619 98,576 98,532 debtissuance costsTrust preferredsubordinateddebentures, net of 60,254 60,253 60,251 60,250 60,249 unamortized debtissuance costsOther liabilities 95,312 117,083 87,575 81,636 93,497 Total liabilities 6,351,812 6,512,006 6,477,838 5,944,333 5,731,622 Shareholders' 839,148 817,605 795,800 804,580 810,453 equityTotal liabilitiesand shareholders' $ 7,190,960 $ 7,329,611 $ 7,273,638 $ 6,748,913 $ 6,542,075 equity

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars in thousands)

Three Months Ended 2020 2019 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,Income Statement:Total interest $ 55,677 $ 58,495 $ 60,752 $ 60,533 $ 60,555 incomeTotal interest 9,091 11,224 16,051 17,357 18,182 expenseNet interest 46,586 47,271 44,701 43,176 42,373 incomeProvision forcredit losses ^ (4,746 ) 5,245 25,247 2,508 1,005 (1)Net interestincome after 51,332 42,026 19,454 40,668 41,368 provision forcredit lossesNoninterest incomeDeposit services 6,129 5,532 6,279 6,647 6,753 Net gain on saleof securities 78 2,662 5,541 42 42 available forsaleGain on sale of 1,071 683 170 104 131 loansTrust fees 1,253 1,221 1,305 1,685 1,523 Bank owned life 680 650 569 582 622 insuranceBrokerage 564 499 580 531 555 servicesOther 1,366 946 1,054 874 1,485 Totalnoninterest 11,141 12,193 15,498 10,465 11,111 incomeNoninterest expenseSalaries andemployee 19,344 18,629 19,643 19,406 18,388 benefitsNet occupancy 3,595 3,668 3,311 3,234 3,430 Advertising,travel & 519 292 832 791 593 entertainmentATM expense 271 233 224 236 232 Professional 961 1,082 1,195 1,142 1,192 feesSoftware and 1,215 1,295 1,227 1,259 1,116 data processingCommunications 495 506 493 485 480 FDIC insurance 469 174 25 ? ? Amortization of 881 931 980 1,030 1,080 intangiblesOther ^(1) 3,866 3,046 2,590 3,361 2,515 Totalnoninterest 31,616 29,856 30,520 30,944 29,026 expenseIncome beforeincome tax 30,857 24,363 4,432 20,189 23,453 expenseIncome tax 3,783 2,809 479 2,854 3,661 expenseNet income $ 27,074 $ 21,554 $ 3,953 $ 17,335 $ 19,792 Common Share Data:Weighted-averagebasic shares 33,047 33,016 33,691 33,790 33,773 outstandingWeighted-averagediluted shares 33,098 33,083 33,805 33,934 33,901 outstandingCommon sharesoutstanding end 33,072 33,032 33,012 33,823 33,795 of periodEarnings per common shareBasic $ 0.82 $ 0.65 $ 0.12 $ 0.51 $ 0.59 Diluted 0.82 0.65 0.12 0.51 0.58 Book value per 25.37 24.75 24.11 23.79 23.98 common shareTangible bookvalue per common 18.97 18.32 17.64 17.45 17.60 share ^(2)Cash dividendspaid per common 0.31 0.31 0.31 0.34 0.31 share SelectedPerformance Ratios:Return on 1.48 % 1.17 % 0.23 % 1.03 % 1.23 %average assetsReturn onaverage 12.89 10.82 1.93 8.42 9.78 shareholders?equityReturn onaverage tangible 17.73 15.24 3.11 11.97 13.96 common equity ^(2)Average yield onearning assets 3.57 3.69 4.06 4.12 4.28 (FTE) ^(2)Average rate oninterest bearing 0.73 0.87 1.30 1.46 1.60 liabilitiesNet interestspread (FTE) ^ 2.84 2.82 2.76 2.66 2.68 (2)Net interestmargin (FTE) ^ 3.02 3.02 3.03 2.98 3.03 (2)Average earningassets toaverage interest 131.92 129.03 126.22 128.00 128.33 bearingliabilitiesNoninterestexpense to 1.73 1.63 1.78 1.85 1.80 average totalassetsEfficiency ratio 50.07 48.29 51.91 53.87 50.53 (FTE) ^(2)

-- Upon adoption of CECL on January 1, 2020, the provision for credit losses is the sum of the provision for loan losses and the provision for off-balance-sheet credit exposures. Prior to the adoption of CECL, the provision for off-balance-sheet credit exposures was included in other noninterest expense. -- Refer to Non-GAAP Reconciliation at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars and shares in thousands, except per share data)

Three Months Ended 2020 2019 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,Nonperforming $ 16,822 $ 17,600 $ 17,403 $ 17,449 $ 29,747 Assets:Nonaccrual loans 5,971 5,639 5,221 4,963 17,148 ^(1)Accruing loanspast due more ? ? ? ? ? than 90 days ^(1)Troubled debtrestructured 10,307 11,367 11,448 12,014 11,683 loans^ (2)Other real estate 536 586 734 472 912 ownedRepossessed 8 8 ? ? 4 assets Asset Quality Ratios:Nonaccruing loans 0.16 % 0.15 % 0.14 % 0.14 % 0.49 %to total loansAllowance forloan losses to 922.96 1,061.68 1,027.35 499.64 146.54 nonaccruing loansAllowance forloan losses to 327.61 340.16 308.21 142.11 84.48 nonperformingassetsAllowance forloan losses to 1.45 1.55 1.49 0.69 0.72 total loansNonperformingassets to total 0.23 0.24 0.24 0.26 0.45 assetsNet charge-offs(recoveries) to 0.04 0.01 0.06 0.32 0.07 average loans Capital Ratios: Shareholders?equity to total 11.67 11.15 10.94 11.92 12.39 assetsCommon equity 14.24 13.68 12.81 14.07 14.19 tier 1 capitalTier 1 risk-based 15.63 15.06 14.13 15.46 15.61 capitalTotal risk-based 19.03 18.51 17.35 18.43 18.65 capitalTier 1 leverage 9.50 9.05 9.45 10.18 10.46 capitalPeriod endtangible equityto period end 8.99 8.50 8.25 9.03 9.40 tangible assets^(3)Averageshareholders? 11.49 10.86 11.94 12.28 12.54 equity to averagetotal assets

-- Prior to the adoption of CECL, excluded purchased credit impaired loans measured at fair value at acquisition if the timing and amount of cash flows expected to be collected from those sales could be reasonably estimated. -- Prior to the adoption of CECL, included $0.8 million in PCI loans restructured as of December31, 2019 and September30, 2019. -- Refer to the Non-GAAP Reconciliation at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars in thousands)

Three Months Ended 2020 2019Loan Portfolio Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,CompositionReal Estate Loans: Construction $ 610,394 $ 570,801 $ 603,952 $ 644,948 $ 621,040 1-4 Family 738,343 761,815 787,875 787,562 792,638 Residential Commercial 1,327,233 1,406,541 1,350,818 1,250,208 1,236,307 Commercial Loans 629,170 639,162 383,984 401,521 382,077 Municipal Loans 387,286 377,428 375,934 383,960 366,906 Loans to Individuals 97,549 96,824 98,439 100,005 100,949 Total Loans $ 3,789,975 $ 3,852,571 $ 3,601,002 $ 3,568,204 $ 3,499,917 Summary of Changes in Allowances:Allowance for Loan LossesBalance at beginning $ 59,868 $ 53,638 $ 24,797 $ 25,129 $ 24,705 of periodImpact of CECLadoption^ (1) - ? ? 5,072 ? ? cumulative effectadjustmentImpact of CECLadoption - purchased ? ? 231 ? ? loans with creditdeteriorationLoans charged-off (718 ) (546 ) (995 ) (3,251 ) (1,000 ) Recoveries of loans 361 436 451 411 419 charged-offNet loans(charged-off) (357 ) (110 ) (544 ) (2,840 ) (581 ) recoveredProvision for(reversal of) for loan (4,401 ) 6,340 24,082 2,508 1,005 lossesBalance at end of $ 55,110 $ 59,868 $ 53,638 $ 24,797 $ 25,129 period Allowance forOff-Balance-Sheet Credit ExposuresBalance at beginning $ 6,365 $ 7,460 $ 1,455 $ 1,540 $ 1,859 of periodImpact of CECL ? ? 4,840 ? ? adoption^ (1)Provision for(reversal of) (345 ) (1,095 ) 1,165 (85 ) (319 ) off-balance-sheetcredit exposures ^(2)Balance at end of $ 6,020 $ 6,365 $ 7,460 $ 1,455 $ 1,540 periodTotal Allowance for $ 61,130 $ 66,233 $ 61,098 $ 26,252 $ 26,669 Credit Losses

-- We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020. ASU 2016-13 replaced the incurred loss model with an expected loss methodology that is referred to as current expected credit losses (CECL). Adoption of this guidance on January 1, 2020, resulted in a cumulative-effect adjustment to reduce retained earnings by $7.8 million, net of tax. -- Prior to the adoption of CECL on January 1, 2020, the provision for off-balance-sheet credit exposures was included in other noninterest expense.

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars and shares in thousands, except per share data)

Nine Months Ended September 30, 2020 2019Income Statement: Total interest income $ 174,924 $ 180,254 Total interest expense 36,366 53,625 Net interest income 138,558 126,629 Provision for credit losses ^(1) 25,746 2,593 Net interest income after provision for credit losses 112,812 124,036 Noninterest income Deposit services 17,940 19,391 Net gain on sale of securities available for sale 8,281 714 Gain on sale of loans 1,924 405 Trust fees 3,779 4,584 Bank owned life insurance 1,899 1,725 Brokerage services 1,643 1,549 Other 3,366 3,535 Total noninterest income 38,832 31,903 Noninterest expense Salaries and employee benefits 57,616 54,325 Net occupancy 10,574 9,894 Advertising, travel & entertainment 1,643 2,173 ATM expense 728 658 Professional fees 3,238 3,575 Software and data processing 3,737 3,278 Communications 1,494 1,456 FDIC insurance 668 859 Amortization of intangibles 2,792 3,388 Other ^(1) 9,502 8,747 Total noninterest expense 91,992 88,353 Income before income tax expense 59,652 67,586 Income tax expense 7,071 10,367 Net income $ 52,581 $ 57,219 Common Share Data: Weighted-average basic shares outstanding 33,250 33,732 Weighted-average diluted shares outstanding 33,331 33,878 Common shares outstanding end of period 33,072 33,795 Earnings per common share Basic $ 1.58 $ 1.70 Diluted 1.58 1.69 Book value per common share 25.37 23.98 Tangible book value per common share ^(2) 18.97 17.60 Cash dividends paid per common share 0.93 0.92 Selected Performance Ratios: Return on average assets 0.98 % 1.21 %Return on average shareholders? equity 8.56 9.93 Return on average tangible common equity ^(2) 12.05 14.47 Average yield on earning assets (FTE) ^(2) 3.77 4.34 Average rate on interest bearing liabilities 0.96 1.61 Net interest spread (FTE) ^(2) 2.81 2.73 Net interest margin (FTE) ^(2) 3.02 3.09 Average earning assets to average interest bearing 129.07 128.34 liabilitiesNoninterest expense to average total assets 1.71 1.87 Efficiency ratio (FTE) ^(2) 50.06 51.85

-- Upon adoption of CECL on January 1, 2020, the provision for credit losses is the sum of the provision for loan losses and the provision for off-balance-sheet credit exposures. Prior to the adoption of CECL, the provision for off-balance-sheet credit exposures was included in other noninterest expense. -- Refer to Non-GAAP Reconciliation at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars in thousands)

Nine Months Ended September 30, 2020 2019Nonperforming Assets: $ 16,822 $ 29,747 Nonaccrual loans ^(1) 5,971 17,148 Accruing loans past due more than 90 days ^(1) ? ? Troubled debt restructured loans^ (2) 10,307 11,683 Other real estate owned 536 912 Repossessed assets 8 4 Asset Quality Ratios: Nonaccruing loans to total loans 0.16 % 0.49 %Allowance for loan losses to nonaccruing loans 922.96 146.54 Allowance for loan losses to nonperforming assets 327.61 84.48 Allowance for loan losses to total loans 1.45 0.72 Nonperforming assets to total assets 0.23 0.45 Net charge-offs (recoveries) to average loans 0.04 0.18 Capital Ratios: Shareholders? equity to total assets 11.67 12.39 Common equity tier 1 capital 14.24 14.19 Tier 1 risk-based capital 15.63 15.61 Total risk-based capital 19.03 18.65 Tier 1 leverage capital 9.50 10.46 Period end tangible equity to period end tangible assets 8.99 9.40 ^ (3)Average shareholders? equity to average total assets 11.42 12.21

-- Prior to the adoption of CECL, excluded purchased credit impaired loans measured at fair value at acquisition if the timing and amount of cash flows expected to be collected from those sales could be reasonably estimated. -- Prior to the adoption of CECL, included $0.8 million in PCI loans restructured as of September30, 2019. -- Refer to the Non-GAAP Reconciliation at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

Southside Bancshares, Inc.Consolidated Financial Highlights (Unaudited)(Dollars and shares in thousands, except per share data)

Nine Months Ended September 30,Loan Portfolio Composition 2020 2019Real Estate Loans: Construction $ 610,394 $ 621,040 1-4 Family Residential 738,343 792,638 Commercial 1,327,233 1,236,307 Commercial Loans 629,170 382,077 Municipal Loans 387,286 366,906 Loans to Individuals 97,549 100,949 Total Loans $ 3,789,975 $ 3,499,917 Summary of Changes in Allowances: Allowance for Loan Losses Balance at beginning of period $ 24,797 $ 27,019 Impact of CECL adoption^ (1) - cumulative effect 5,072 ? adjustmentImpact of CECL adoption - purchased loans with 231 ? credit deteriorationLoans charged-off (2,259 ) (5,682 ) Recoveries of loans charged-off 1,248 1,199 Net loans (charged-off) recovered (1,011 ) (4,483 ) Provision for (reversal of) for loan losses 26,021 2,593 Balance at end of period $ 55,110 $ 25,129 Allowance for Off-Balance-Sheet Credit Exposures Balance at beginning of period $ 1,455 $ 1,890 Impact of CECL adoption^ (1) 4,840 ? Provision for (reversal of) off-balance-sheet (275 ) (350 ) credit exposures ^(2)Balance at end of period $ 6,020 $ 1,540 Total Allowance for Credit Losses $ 61,130 $ 26,669

-- We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020. ASU 2016-13 replaced the incurred loss model with an expected loss methodology that is referred to as current expected credit losses (CECL). Adoption of this guidance on January 1, 2020, resulted in a cumulative-effect adjustment to reduce retained earnings by $7.8 million, net of tax. -- Prior to the adoption of CECL on January 1, 2020, the provision for off-balance-sheet credit exposures was included in other noninterest expense.

Southside Bancshares, Inc.Average Balances and Average Yields and Rates (Annualized) (Unaudited)(Dollars in thousands)

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

Three Months Ended September 30, 2020 June 30, 2020 Average Average Average Balance Interest Yield/ Average Balance Interest Yield/ Rate RateASSETS Loans ^(1) $ 3,815,989 $ 38,842 4.05 % $ 3,826,383 $ 39,766 4.18 %Loans held for 3,934 31 3.13 % 3,213 28 3.50 %saleSecurities: Taxableinvestment 145,724 1,175 3.21 % 94,247 732 3.12 %securities ^(2)Tax-exemptinvestment 1,295,179 11,418 3.51 % 1,320,772 11,560 3.52 %securities ^(2)Mortgage-backedand related 1,209,913 7,048 2.32 % 1,359,941 9,044 2.67 %securities ^(2)Total securities 2,650,816 19,641 2.95 % 2,774,960 21,336 3.09 %Federal HomeLoan Bank stock,at cost, and 60,528 249 1.64 % 67,582 360 2.14 %equityinvestmentsInterest earning 17,668 17 0.38 % 24,097 23 0.38 %depositsTotal earning 6,548,935 58,780 3.57 % 6,696,235 61,513 3.69 %assetsCash and due 80,368 78,326 from banksAccrued interest 699,351 660,411 and other assetsLess:Allowance (61,212 ) (55,908 ) for loan lossesTotal assets $ 7,267,442 $ 7,379,064 LIABILITIES ANDSHAREHOLDERS? EQUITYSavings accounts $ 461,895 192 0.17 % $ 426,420 187 0.18 %Certificates of 1,172,179 3,568 1.21 % 1,187,665 4,817 1.63 %depositsInterest bearing 2,069,751 1,102 0.21 % 2,013,770 1,225 0.24 %demand accountsTotal interest 3,703,825 4,862 0.52 % 3,627,855 6,229 0.69 %bearing depositsFederal HomeLoan Bank 1,037,855 2,369 0.91 % 1,197,097 2,929 0.98 %borrowingsSubordinatednotes, net of 98,686 1,427 5.75 % 98,641 1,412 5.76 %unamortized debtissuance costsTrust preferredsubordinateddebentures, net 60,253 378 2.50 % 60,252 491 3.28 %of unamortizeddebt issuancecostsOther borrowings 63,526 55 0.34 % 205,724 163 0.32 %Total interestbearing 4,964,145 9,091 0.73 % 5,189,569 11,224 0.87 %liabilitiesNoninterest 1,371,748 1,310,651 bearing depositsAccrued expensesand other 96,219 77,431 liabilitiesTotal 6,432,112 6,577,651 liabilitiesShareholders? 835,330 801,413 equityTotalliabilities and $ 7,267,442 $ 7,379,064 shareholders?equityNet interest $ 49,689 $ 50,289 income (FTE)Net interest 3.02 % 3.02 %margin (FTE)Net interest 2.84 % 2.82 %spread (FTE)

-- Interest on loans includes net fees on loans that are not material in amount. -- For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of September30, 2020 and June30, 2020, loans totaling $6.0 million and $5.6 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Southside Bancshares, Inc.Average Balances and Average Yields and Rates (Annualized) (Unaudited)(Dollars in thousands)

Three Months Ended March 31, 2020 December 31, 2019 Average Average Average Balance Interest Yield/ Average Balance Interest Yield/ Rate RateASSETS Loans ^(1) $ 3,587,143 $ 42,554 4.77 % $ 3,540,274 $ 43,166 4.84 %Loans held for 831 9 4.36 % 1,114 9 3.21 %saleSecurities: Taxableinvestment 70,293 512 2.93 % 10,083 86 3.38 %securities ^(2)Tax-exemptinvestment 888,906 7,837 3.55 % 699,868 6,431 3.65 %securities ^(2)Mortgage-backedand related 1,598,374 11,534 2.90 % 1,674,503 12,197 2.89 %securities ^(2)Total securities 2,557,573 19,883 3.13 % 2,384,454 18,714 3.11 %Federal HomeLoan Bank stock,at cost, and 62,976 425 2.71 % 59,743 437 2.90 %equityinvestmentsInterest earning 40,236 180 1.80 % 44,039 247 2.23 %depositsTotal earning 6,248,759 63,051 4.06 % 6,029,624 62,573 4.12 %assetsCash and due 76,739 72,018 from banksAccrued interest 611,017 574,124 and other assetsLess:Allowance (30,373 ) (25,618 ) for loan lossesTotal assets $ 6,906,142 $ 6,650,148 LIABILITIES ANDSHAREHOLDERS? EQUITYSavings accounts $ 384,863 237 0.25 % $ 372,798 262 0.28 %Certificates of 1,362,427 6,346 1.87 % 1,204,392 6,172 2.03 %depositInterest bearing 1,975,837 3,336 0.68 % 1,936,969 4,067 0.83 %demand accountsTotal interest 3,723,127 9,919 1.07 % 3,514,159 10,501 1.19 %bearing depositsFederal HomeLoan Bank 999,070 3,974 1.60 % 1,019,844 4,716 1.83 %borrowingsSubordinatednotes, net of 98,597 1,411 5.76 % 98,554 1,426 5.74 %unamortized debtissuance costsTrust preferredsubordinateddebentures, net 60,234 600 4.01 % 60,250 643 4.23 %of unamortizeddebt issuancecostsOther borrowings 69,846 147 0.85 % 17,874 71 1.58 %Total interestbearing 4,950,874 16,051 1.30 % 4,710,681 17,357 1.46 %liabilitiesNoninterest 1,042,341 1,049,211 bearing depositsAccrued expensesand other 88,168 73,408 liabilitiesTotal 6,081,383 5,833,300 liabilitiesShareholders? 824,759 816,848 equityTotalliabilities and $ 6,906,142 $ 6,650,148 shareholders?equityNet interest $ 47,000 $ 45,216 income (FTE)Net interest 3.03 % 2.98 %margin (FTE)Net interest 2.76 % 2.66 %spread (FTE)

-- Interest on loans includes net fees on loans that are not material in amount. -- For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of March31, 2020 and December31, 2019, loans totaling $5.2 million and $5.0 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Southside Bancshares, Inc.Average Balances and Average Yields and Rates (Annualized) (Unaudited)(Dollars in thousands)

Three Months Ended September 30, 2019 Average Balance Interest Average Yield/RateASSETS Loans ^(1) $ 3,477,187 $ 43,780 5.00 %Loans held for sale 2,497 26 4.13 %Securities: Taxable investment securities^ (2) 3,000 26 3.44 %Tax-exempt investment securities^ (2) 555,835 5,328 3.80 %Mortgage-backed and related 1,660,331 12,569 3.00 %securities ^(2)Total securities 2,219,166 17,923 3.20 %Federal Home Loan Bank stock, at 57,108 422 2.93 %cost, and equity investmentsInterest earning deposits 26,746 206 3.06 %Total earning assets 5,782,704 62,357 4.28 %Cash and due from banks 73,815 Accrued interest and other assets 570,657 Less:Allowance for loan losses (24,938 ) Total assets $ 6,402,238 LIABILITIES AND SHAREHOLDERS? EQUITY Savings accounts $ 367,615 270 0.29 %Certificates of deposit 1,118,410 6,011 2.13 %Interest bearing demand accounts 1,966,764 5,085 1.03 %Total interest bearing deposits 3,452,789 11,366 1.31 %Federal Home Loan Bank borrowings 881,088 4,647 2.09 %Subordinated notes, net of 98,511 1,425 5.74 %unamortized debt issuance costsTrust preferred subordinateddebentures, net of unamortized debt 60,248 685 4.51 %issuance costsOther borrowings 13,401 59 1.75 %Total interest bearing liabilities 4,506,037 18,182 1.60 %Noninterest bearing deposits 1,020,325 Accrued expenses and other 72,923 liabilitiesTotal liabilities 5,599,285 Shareholders? equity 802,953 Total liabilities and shareholders? $ 6,402,238 equityNet interest income (FTE) $ 44,175 Net interest margin (FTE) 3.03 %Net interest spread (FTE) 2.68 %

-- Interest on loans includes net fees on loans that are not material in amount. -- For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of September30, 2019, loans totaling $17.1 million were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Southside Bancshares, Inc.Average Balances and Average Yields and Rates (Annualized) (Unaudited)(Dollars in thousands)

Nine Months Ended September 30, 2020 September 30, 2019 Average Average Average Balance Interest Yield/ Average Balance Interest Yield/ Rate RateASSETS Loans ^(1) $ 3,743,437 $ 121,162 4.32 % $ 3,387,719 $ 129,549 5.11 %Loans held for 2,664 68 3.41 % 1,698 54 4.25 %saleSecurities: Taxableinvestment 103,576 2,419 3.12 % 3,000 81 3.61 %securities^ (2)Tax-exemptinvestment 1,168,749 30,815 3.52 % 557,961 15,573 3.73 %securities^ (2)Mortgage-backedand related 1,388,754 27,626 2.66 % 1,662,715 38,289 3.08 %securities ^(2)Total securities 2,661,079 60,860 3.05 % 2,223,676 53,943 3.24 %Federal HomeLoan Bank stock,at cost, and 63,683 1,034 2.17 % 54,407 1,217 2.99 %equityinvestmentsInterest earning 27,299 220 1.08 % 52,345 1,003 2.56 %depositsFederal funds ? ? ? 3,639 86 3.16 %soldTotal earning 6,498,162 183,344 3.77 % 5,723,484 185,852 4.34 %assetsCash and due 78,484 78,539 from banksAccrued interest 656,952 538,248 and other assetsLess:Allowance (49,208 ) (25,604 ) for loan lossesTotal assets $ 7,184,390 $ 6,314,667 LIABILITIES ANDSHAREHOLDERS? EQUITYSavings accounts $ 424,530 616 0.19 % $ 364,520 790 0.29 %Certificates of 1,240,506 14,731 1.59 % 1,130,561 17,569 2.08 %depositInterest bearing 2,019,968 5,663 0.37 % 1,973,024 15,705 1.06 %demand accountsTotal interest 3,685,004 21,010 0.76 % 3,468,105 34,064 1.31 %bearing depositsFederal HomeLoan Bank 1,077,861 9,272 1.15 % 817,978 13,003 2.13 %borrowingsSubordinatednotes, net of 98,642 4,250 5.76 % 98,470 4,235 5.75 %unamortized debtissuance costsTrust preferredsubordinateddebentures, net 60,252 1,469 3.26 % 60,247 2,132 4.73 %of unamortizeddebt issuancecostsOther borrowings 112,851 365 0.43 % 14,894 191 1.71 %Total interestbearing 5,034,610 36,366 0.96 % 4,459,694 53,625 1.61 %liabilitiesNoninterest 1,242,055 1,007,263 bearing depositsAccrued expensesand other 87,170 76,963 liabilitiesTotal 6,363,835 5,543,920 liabilitiesShareholders? 820,555 770,747 equityTotalliabilities and $ 7,184,390 $ 6,314,667 shareholders?equityNet interest $ 146,978 $ 132,227 income (FTE)Net interest 3.02 % 3.09 %margin (FTE)Net interest 2.81 % 2.73 %spread (FTE)

-- Interest on loans includes net fees on loans that are not material in amount. -- For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of September30, 2020 and 2019, loans totaling $6.0 million and $17.1 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

Southside Bancshares, Inc.Non-GAAP Reconciliation (Unaudited)(Dollars and shares in thousands, except per share data)

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

Three Months Ended Nine Months Ended 2020 2019 September 30, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, 2020 2019Reconciliationof return onaverage commonequity to return onaveragetangiblecommon equity:Net income $ 27,074 $ 21,554 $ 3,953 $ 17,335 $ 19,792 $ 52,581 $ 57,219 After-taxamortization 696 735 774 814 853 2,206 2,677 expenseAdjusted netincomeavailable to $ 27,770 $ 22,289 $ 4,727 $ 18,149 $ 20,645 $ 54,787 $ 59,896 commonshareholders Averageshareholders' $ 835,330 $ 801,413 $ 824,759 $ 816,848 $ 802,953 $ 820,555 $ 770,747 equityLess: Averageintangibles (212,221 ) (213,135 (214,104 ) (215,101 ) (216,169 ) (213,150 ) (217,283 )for the periodAveragetangible $ 623,109 $ 588,278 $ 610,655 $ 601,747 $ 586,784 $ 607,405 $ 553,464 shareholders'equity Return onaverage 17.73 % 15.24 % 3.11 % 11.97 % 13.96 % 12.05 % 14.47 %tangiblecommon equity Reconciliationof book valueper share to tangible bookvalue pershare:Common equityat end of $ 839,148 $ 817,605 $ 795,800 $ 804,580 $ 810,453 $ 839,148 $ 810,453 periodLess:Intangible (211,685 ) (212,566 (213,497 ) (214,477 ) (215,507 ) (211,685 ) (215,507 )assets at endof periodTangiblecommonshareholders' $ 627,463 $ 605,039 $ 582,303 $ 590,103 $ 594,946 $ 627,463 $ 594,946 equity at endof period Total assetsat end of $ 7,190,960 $ 7,329,611 $ 7,273,638 $ 6,748,913 $ 6,542,075 $ 7,190,960 $ 6,542,075 periodLess:Intangible (211,685 ) (212,566 (213,497 ) (214,477 ) (215,507 ) (211,685 ) (215,507 )assets at endof periodTangibleassets at end $ 6,979,275 $ 7,117,045 $ 7,060,141 $ 6,534,436 $ 6,326,568 $ 6,979,275 $ 6,326,568 of period Period endtangibleequity to 8.99 % 8.50 % 8.25 % 9.03 % 9.40 % 8.99 % 9.40 %period endtangibleassets Common sharesoutstanding 33,072 33,032 33,012 33,823 33,795 33,072 33,795 end of periodTangible bookvalue per $ 18.97 $ 18.32 $ 17.64 $ 17.45 $ 17.60 $ 18.97 $ 17.60 common share Reconciliationof efficiencyratio toefficiencyratio (FTE),net interestmargin to net interestmargin (FTE)and netinterestspread to netinterestspread (FTE):Net interest $ 46,586 $ 47,271 $ 44,701 $ 43,176 $ 42,373 $ 138,558 $ 126,629 income (GAAP)Tax equivalent adjustments:Loans 688 679 668 653 641 2,035 1,837 Tax-exemptinvestment 2,415 2,339 1,631 1,387 1,161 6,385 3,761 securitiesNet interestincome (FTE) ^ 49,689 50,289 47,000 45,216 44,175 146,978 132,227 (1)Noninterest 11,141 12,193 15,498 10,465 11,111 38,832 31,903 incomeNonrecurring (78 ) (2,662 (5,541 ) (42 ) (42 ) (8,281 ) (428 )income ^(2)Total revenue $ 60,752 $ 59,820 $ 56,957 $ 55,639 $ 55,244 $ 177,529 $ 163,702 Noninterest $ 31,616 $ 29,856 $ 30,520 $ 30,944 $ 29,026 $ 91,992 $ 88,353 expensePre-taxamortization (881 ) (931 (980 ) (1,030 ) (1,080 ) (2,792 ) (3,388 )expenseNonrecurring (315 ) (39 29 56 (33 ) (325 ) (82 )expense ^(3)Adjustednoninterest $ 30,420 $ 28,886 $ 29,569 $ 29,970 $ 27,913 $ 88,875 $ 84,883 expense Efficiency 52.77 % 50.85 % 54.10 % 55.92 % 52.23 % 52.55 % 53.69 %ratioEfficiencyratio (FTE) ^ 50.07 % 48.29 % 51.91 % 53.87 % 50.53 % 50.06 % 51.85 %(1) Average $ 6,548,935 $ 6,696,235 $ 6,248,759 $ 6,029,624 $ 5,782,704 $ 6,498,162 $ 5,723,484 earning assets Net interest 2.83 % 2.84 % 2.88 % 2.84 % 2.91 % 2.85 % 2.96 %marginNet interestmargin (FTE) ^ 3.02 % 3.02 % 3.03 % 2.98 % 3.03 % 3.02 % 3.09 %(1) Net interest 2.65 % 2.64 % 2.61 % 2.52 % 2.55 % 2.64 % 2.60 %spreadNet interestspread (FTE) ^ 2.84 % 2.82 % 2.76 % 2.66 % 2.68 % 2.81 % 2.73 %(1)

-- These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures. -- These adjustments may include net gain and loss on sale of securities available for sale and loss on fair value hedges, in the periods where applicable. -- These adjustments may include foreclosure expenses, in the periods where applicable.