GlobeNewswire Inc | Jul 22, 2020 06:30AM EDT

July 22, 2020

-- Second quarter diluted earnings per share of $0.65, an increase of 18.2% compared to same period in 2019; -- Second quarter net income of $21.6 million, an increase of 15.8% compared to same period in 2019; -- Linked quarter deposits increased $331.4 million; -- Annualized return on second quarter average tangible equity of 15.24%(1); -- Allowance for loan losses to total loans, 1.55%; -- Nonperforming assets remain low at 0.24% of total assets.

TYLER, Texas, July 22, 2020 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (Southside or the Company) (NASDAQ:SBSI) today reported its financial results for the quarter ended June30, 2020. Southside reported net income of $21.6 million for the three months ended June 30, 2020, an increase of $2.9 million, or 15.8%, compared to $18.6 million for the same period in 2019. Earnings per diluted common share increased $0.10, or 18.2%, to $0.65 for the three months ended June 30, 2020, from $0.55 for the same period in 2019. The annualized return on average shareholders equity for the three months ended June 30, 2020 was 10.82%, compared to 9.68% for the same period in 2019.The annualized return on average assets was 1.17% for the three months ended June 30, 2020, compared to 1.20% for the same period in 2019.

Solid second quarter financial results reflect the strength of our balance sheet, capital position, and underlying earnings, stated Lee R. Gibson, President and Chief Executive Officer of Southside. Net income of $21.6 million and earnings per share of $0.65, are two of the highlights for the quarter after recording a $5.2 million provision for credit losses, largely related to the novel coronavirus (COVID-19). Asset quality remains solid with nonperforming assets as a percent of total assets unchanged on a linked quarter basis at 0.24%. Linked quarter, our net interest spread increased six basis points and net interest margin decreased one basis point. Approximately $308 million of Paycheck Protection Program (PPP) loans made during the quarter had a slight negative impact on both our net interest spread and margin during the quarter.

Loans, including those made through the PPP, increased $251.6 million, or 7.0%, during the quarter. Loans, net of PPP loans, decreased approximately $57 million. While our loan growth expectations are lower for the remainder of the year due to the uncertainty of COVID-19, we continue to look for loan growth opportunities.

In June of 2020, we froze all future benefit accruals in our defined benefit retirement plan (Retirement Plan) to remaining active employed participants, effective December 31, 2020, following a freeze to new entrants into the Retirement Plan as of December 31, 2005. As a result of the decision in June 2020 to freeze future benefits, the Retirement Plan liability was remeasured as of June 30, 2020. As a result of the freeze of future benefits and remeasurement, we recorded a curtailment expense of approximately $163,000 and a decrease to our accumulated other comprehensive income, included in shareholders equity, of approximately $6.0 million, the latter due primarily to the decrease in the discount rate from 3.41% to 2.78%. As a result of the remeasurement of the liability at June 30, 2020, we expect an increase of approximately $450,000, or 33.2%, to retirement expense during the last half of this year, compared to the first six months of 2020. Utilizing the current assumptions, we expect the freeze of all future benefit accruals will result in a reduction in retirement expense, included in salaries and employee benefits, of approximately $2 million during 2021.

Like much of the nation, COVID-19 continues to impact the communities we serve. I remain extremely proud of our Southside team, their great attitudes and the manner in which they have embraced change, while continuing to provide outstanding customer service during this challenging time. Throughout this pandemic, our primary concern has been and remains the safety of our customers and employees. To that end, some of our methods and delivery channels have temporarily changed to provide the high level of quality service our customers expect and receive. Utilizing the strength of our balance sheet, liquidity and capital position, we believe we are well positioned to continue growing our Texas franchise.

Operating Results for the Three Months Ended June30, 2020

Net income was $21.6 million for the three months ended June 30, 2020, compared to $18.6 million for the same period in 2019, an increase of $2.9 million, or 15.8%. Earnings per diluted common share were $0.65 for the three months ended June 30, 2020, compared to $0.55 for the same period in 2019, an increase of 18.2%. The increase in net income was largely driven by a decrease in interest expense, an increase in noninterest income and a decrease in income tax expense, partially offset by an increase in the provision for credit losses and a decrease in interest income. Annualized returns on average assets and average shareholders equity for the three months ended June 30, 2020 were 1.17% and 10.82%, respectively.Our efficiency ratio (FTE)(1) was48.29% for the three months ended June 30, 2020, compared to 51.91% for the three months ended March31, 2020.

Net interest income for the three months ended June 30, 2020 was $47.3 million compared to $43.1 million for the same period in 2019. Linked quarter, net interest income increased $2.6 million, or 5.7%, compared to $44.7 million during the three months ended March31, 2020. The increase in net interest income compared to the same period in 2019 and the linked quarter was due primarily 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 decrease in average yield on our interest earning assets during the three months ended June 30, 2020.

Our tax equivalent net interest margin(1) was 3.02% for the three months ended June 30, 2020 compared to3.17% for the same period in 2019. The decrease was due to the shift in interest earning assets from higher yielding loans into securities and lower yielding average PPP loan balances included during the three months ended June 30, 2020. Our tax equivalent net interest margin linked quarter decreased one basis point compared to 3.03% for the three months ended March31, 2020.

Noninterest income was $12.2 million for the three months ended June 30, 2020, an increase of 8.3%, compared to $11.3 million for the same period in 2019. The increase was primarily due to 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, other noninterest income and trust fees. On a linked quarter basis, noninterest income decreased $3.3 million, or 21.3%, due to a $2.9 million decrease in net gain on sale of securities available for sale and a decrease in deposit services income, partially offset by an increase in gain on sale of loans.

Noninterest expense was $29.9 million for the three months ended June 30, 2020, a slight increase compared to $29.7 million for the same period in 2019. The increase was the result of increases in salaries and employee benefits, net occupancy expense and software and data processing expense, partially offset by decreases in advertising, travel and entertainment expense, FDIC insurance, other noninterest expense and amortization of intangibles. On a linked quarter basis, noninterest expense decreased $0.7 million, or 2.2%, compared to the three months ended March31, 2020. The decrease was due to decreases in salaries and employee benefits and advertising, travel and entertainment expenses, partially offset by increases in other noninterest expense and net occupancy expense.

Income tax expense decreased $0.8 million for the three months ended June 30, 2020 compared to the same period in 2019. On a linked quarter basis, income tax expense increased $2.3 million. Our effective tax rate (ETR) decreased to 11.5% for the three months ended June 30, 2020 compared to 16.1% for the three months ended June30, 2019 and increased compared to 10.8% for the three months ended March31, 2020. The lower ETR for the three months ended June 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 June 30, 2020.

Operating Results for the Six Months Ended June 30, 2020

Net income was $25.5 million for the six months ended June 30, 2020, compared to $37.4 million for the same period in 2019, a decrease of $11.9 million, or 31.8%. Earnings per diluted common share were $0.76 for the six months ended June 30, 2020, compared to $1.11 for the same period in 2019, a decrease of 31.5%. 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 noninterest expense, as well as a decrease in interest income, partially offset by a decrease in interest expense, an increase in noninterest income and a decrease in income tax expense. The increase in the provision for credit losses for the six months ended June 30, 2020, was primarily due to the recent developments 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 six months ended June 30, 2020 were 0.72% and 6.31%, respectively.Our efficiency ratio (FTE)(1) was50.06% for the six months ended June 30, 2020, compared to 52.53% for the six months ended June 30, 2019.

Net interest income for the six months ended June 30, 2020 was $92.0 million, compared to $84.3 million during the same period in 2019, an increase of $7.7 million, or 9.2%. The increase in net interest income compared to the same period in 2019 was due primarily 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 six months ended June 30, 2020.

Our tax equivalent net interest margin(1) was 3.02% for the six months ended June 30, 2020, compared to3.12% 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 six months ended June 30, 2020.

Noninterest income was $27.7 million for the six months ended June 30, 2020, an increase of 33.2%, compared to $20.8 million for the same period in 2019. The increase was primarily due to 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 $60.4 million for the six months ended June 30, 2020, compared to $59.3 million for the same period in 2019, an increase of $1.0 million, or 1.8%. The increase was primarily due to increases in salaries and employee benefits, net occupancy expense and software and data processing expense, partially offset by decreases in FDIC insurance, other noninterest expense, advertising, travel and entertainment expense and amortization of intangibles.

Income tax expense decreased $3.4 million for the six months ended June 30, 2020, compared to the same period in 2019. Our ETR was approximately 11.4% and 15.2% for the six months ended June 30, 2020 and 2019, respectively. The lower ETR for the six months ended June 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 June30, 2020, we had $7.33 billion in total assets, compared to $6.75 billion at December31, 2019 and $6.37 billion at June30, 2019.

Loans at June30, 2020 were $3.85 billion, an increase of $392.4 million, or 11.3%, compared to $3.46 billion at June30, 2019. Linked quarter loans increased $251.6 million, or 7.0%, from $3.60 billion at March31, 2020. The linked quarter net increase in our loans consisted primarily of increases of $255.2 million of commercial loans and $55.7 million of commercial real estate loans, partially offset by decreases of $33.2 million of construction loans and $26.1 million in 1-4 family residential loans. The increase in commercial loans is due entirely to $308.4 million of PPP loans at June 30, 2020.

Securities at June30, 2020 were $2.80 billion, an increase of $564.0 million, or 25.2%, compared to $2.24 billion at June30, 2019. The increase occurred primarily during the first quarter of 2020, with the remainder of the increase occurring during each of the last two quarters of 2019. Linked quarter, securities decreased $147.6 million, or 5.0%, from $2.95 billion at March31, 2020 due to the sale of primarily Texas municipal securities and mortgage related securities.

Deposits at June30, 2020 were $5.07 billion, an increase of $591.3 million, or 13.2%, compared to $4.48 billion at June30, 2019. Linked quarter, deposits increased $331.4 million, or 7.0%, from $4.74 billion at March31, 2020, primarily due to an increase in commercial noninterest bearing checking accounts, and to a lesser extent, an increase in individual noninterest bearing checking accounts. These increases were largely driven by PPP loan disbursements deposited into our noninterest bearing commercial accounts.

CECL Adoption and Asset Quality

During the first quarter, 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 June30, 2020 were $17.6 million, or 0.24% of total assets, an increase of $0.2 million, or 0.9%, compared to $17.4 million, or 0.26% of total assets, at December31, 2019, and a slight increase from $17.4 million, or 0.24% of total assets, at March31, 2020. During the three months ended June 30, 2020, nonaccrual loans increased $0.4 million, or 8.0%.

The allowance for loan losses increased to $59.9 million, or 1.55% of total loans at June30, 2020, compared to $24.8 million, or 0.69% of total loans, at December31, 2019, and $53.6 million, or 1.49% of total loans, at March31, 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 June 30, 2020, we recorded provision for credit losses for loans of $6.3 million, compared to a provision for loan losses of $2.5 million for the three months ended June 30, 2019 and a provision for credit losses of $24.1 million for the three months ended March31, 2020. The provision for credit losses for the six months ended June 30, 2020 was $30.4 million, compared to $1.6 million for the six months ended June30, 2019. The increase during 2020 was primarily due to the application of the CECL model and the economic impact of COVID-19 on macroeconomic factors used in the CECL methodology, including the potential for credit deterioration. 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 $0.1 million for the three months ended June 30, 2020, compared to net charge-offs of $2.0 million for the three months ended June 30, 2019 and $0.5 million of net charge-offs for the three months ended March31, 2020. Net charge-offs were $0.7 million for the six months ended June 30, 2020, compared to $3.9 million for the six months ended June30, 2019.

For the three months ended June 30, 2020, we recorded a reversal of provision for credit losses for off-balance-sheet credit exposures of $1.1 million, compared to a provision of $25,000 for the three months ended June 30, 2019 and a provision of $1.2 million, for the three months ended March31, 2020. The reversal of provision of $1.1 million for the three months ended June 30, 2020 was a result of a lower balance of off-balance-sheet credit exposures compared to the three months ended March 31, 2020. The provision for credit losses for off-balance-sheet credit exposures for the six months ended June 30, 2020 was $0.1 million, compared to a reversal of provision of $31,000 for the six months ended June30, 2019. The balance of the allowance for off-balance-sheet credit exposures at June30, 2020 was $6.4 million, and is included in other liabilities.

Dividend

Southside Bancshares, Inc. declared a second quarter cash dividend of $0.31 per share on May 7, 2020, which was paid on June 4, 2020, to all shareholders of record as of May 21, 2020.

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(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 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 second quarter ended June30, 2020 financial results on Wednesday, July 22, 2020 at 9:00 a.m. CDT.The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 3667014 or by identifying Southside Bancshares, Inc., Second 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 July 22, 2020 through 12:00 p.m. CDT August 3, 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 six months ended June 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 $7.33 billion in assets as of June30, 2020, that owns 100% of Southside Bank.Southside Bank currently has 59 branches in Texas and operates a network of 80 ATMs/ITMs.

During March 2020, the World Health Organization declared COVID-19 a global pandemic in response to the rapidly growing outbreak of the virus. COVID-19 has significantly impacted local, national and global economies due to stay-at-home orders and social distancing guidelines. In compliance with social distancing guidelines issued by federal, state and local governments, we initially closed all of our grocery store branches. As stay-at-home orders were issued by local governments in our market areas to combat the spread of the virus, we closed all traditional lobbies and wealth management and trust offices to walk-in customers, however, most of these traditional locations were offering certain services by appointment only. All other banking services were available to customers through our drive-thrus, ATMs/ITMs and automated telephone, internet and mobile banking products. After careful consideration and implementation of additional precautions, all locations were reopened on June 1, 2020. We have since made adjustments to select branch hours and openings, and we continue to closely monitor the COVID-19 situation.

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 Julie Shamburger at (903) 531-7134, or julie.shamburger@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, 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 Jun30, Mar31, Dec31, Sep30, Jun30,ASSETS Cash and due $ 81,271 $ 71,727 $ 66,949 $ 92,300 $ 77,319 from banksInterestearning 19,535 40,486 43,748 22,524 54,642 depositsFederal funds ? ? ? ? 560 soldSecuritiesavailable forsale, at 2,679,521 2,813,024 2,358,597 2,240,381 2,088,787 estimatedfair valueSecuritiesheld tomaturity, at 120,384 134,491 134,863 140,955 147,091 net carryingvalueTotal 2,799,905 2,947,515 2,493,460 2,381,336 2,235,878 securitiesFederal HomeLoan Bank 55,689 54,696 50,087 45,039 44,718 stock, atcostLoans held 3,392 1,830 383 1,000 1,812 for saleLoans 3,852,571 3,601,002 3,568,204 3,499,917 3,460,143 Less:Allowance for (59,868 ) (53,638 ) (24,797 ) (25,129 ) (24,705 )loan lossesNet loans 3,792,703 3,547,364 3,543,407 3,474,788 3,435,438 Premises &equipment, 147,715 146,212 143,912 141,683 140,105 netGoodwill 201,116 201,116 201,116 201,116 201,116 Otherintangible 11,450 12,381 13,361 14,391 15,471 assets, netBank ownedlife 114,248 101,066 100,498 99,916 99,294 insuranceOther assets 102,587 149,245 91,992 67,982 66,517 Total assets $ 7,329,611 $ 7,273,638 $ 6,748,913 $ 6,542,075 $ 6,372,870 LIABILITIESAND SHAREHOLDERS'EQUITYNoninterestbearing $ 1,398,179 $ 1,065,708 $ 1,040,112 $ 1,038,695 $ 1,028,861 depositsInterestbearing 3,672,365 3,673,415 3,662,657 3,452,072 3,450,395 depositsTotal 5,070,544 4,739,123 4,702,769 4,490,767 4,479,256 depositsOtherborrowingsand Federal 1,165,463 1,492,270 1,001,102 988,577 849,821 Home LoanBankborrowingsSubordinatednotes, net ofunamortized 98,663 98,619 98,576 98,532 98,490 debtissuancecostsTrustpreferredsubordinateddebentures, 60,253 60,251 60,250 60,249 60,248 net ofunamortizeddebt issuancecostsOther 117,083 87,575 81,636 93,497 97,290 liabilitiesTotal 6,512,006 6,477,838 5,944,333 5,731,622 5,585,105 liabilitiesShareholders' 817,605 795,800 804,580 810,453 787,765 equityTotalliabilitiesand $ 7,329,611 $ 7,273,638 $ 6,748,913 $ 6,542,075 $ 6,372,870 shareholders'equity

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

Three Months Ended 2020 2019 Jun30, Mar31, Dec31, Sep30, Jun30,Income Statement:Total interest $ 58,495 $ 60,752 $ 60,533 $ 60,555 $ 60,672 incomeTotal interest 11,224 16,051 17,357 18,182 17,541 expenseNet interest 47,271 44,701 43,176 42,373 43,131 incomeProvision forcredit losses ^ 5,245 25,247 2,508 1,005 2,506 (1)Net interestincome after 42,026 19,454 40,668 41,368 40,625 provision forcredit lossesNoninterest incomeDeposit services 5,532 6,279 6,647 6,753 6,652 Net gain on saleof securities 2,662 5,541 42 42 416 available forsaleGain on sale of 683 170 104 131 181 loansTrust fees 1,221 1,305 1,685 1,523 1,520 Bank owned life 650 569 582 622 559 insuranceBrokerage 499 580 531 555 477 servicesOther 946 1,054 874 1,485 1,449 Totalnoninterest 12,193 15,498 10,465 11,111 11,254 incomeNoninterest expenseSalaries andemployee 18,629 19,643 19,406 18,388 17,891 benefitsNet occupancy 3,668 3,311 3,234 3,430 3,289 Advertising,travel & 292 832 791 593 733 entertainmentATM expense 233 224 236 232 246 Professional 1,082 1,195 1,142 1,192 1,069 feesSoftware and 1,295 1,227 1,259 1,116 1,086 data processingCommunications 506 493 485 480 489 FDIC insurance 174 25 ? ? 437 Amortization of 931 980 1,030 1,080 1,129 intangiblesOther ^(1) 3,046 2,590 3,361 2,515 3,331 Totalnoninterest 29,856 30,520 30,944 29,026 29,700 expenseIncome beforeincome tax 24,363 4,432 20,189 23,453 22,179 expenseIncome tax 2,809 479 2,854 3,661 3,569 expenseNet income $ 21,554 $ 3,953 $ 17,335 $ 19,792 $ 18,610 Common Share Data:Weighted-averagebasic shares 33,016 33,691 33,790 33,773 33,726 outstandingWeighted-averagediluted shares 33,083 33,805 33,934 33,901 33,876 outstandingCommon sharesoutstanding end 33,032 33,012 33,823 33,795 33,749 of periodEarnings per common shareBasic $ 0.65 $ 0.12 $ 0.51 $ 0.59 $ 0.55 Diluted 0.65 0.12 0.51 0.58 0.55 Book value per 24.75 24.11 23.79 23.98 23.34 common shareTangible bookvalue per common 18.32 17.64 17.45 17.60 16.92 share ^(2)Cash dividendspaid per common 0.31 0.31 0.34 0.31 0.31 share SelectedPerformance Ratios:Return on 1.17 % 0.23 % 1.03 % 1.23 % 1.20 %average assetsReturn onaverage 10.82 1.93 8.42 9.78 9.68 shareholders?equityReturn onaverage tangible 15.24 3.11 11.97 13.96 14.12 common equity ^(2)Average yield onearning assets 3.69 4.06 4.12 4.28 4.42 (FTE) ^(2)Average rate oninterest bearing 0.87 1.30 1.46 1.60 1.61 liabilitiesNet interestspread (FTE) ^ 2.82 2.76 2.66 2.68 2.81 (2)Net interestmargin (FTE) ^ 3.02 3.03 2.98 3.03 3.17 (2)Average earningassets toaverage interest 129.03 126.22 128.00 128.33 128.99 bearingliabilitiesNoninterestexpense to 1.63 1.78 1.85 1.80 1.91 average totalassetsEfficiency ratio 48.29 51.91 53.87 50.53 51.44 (FTE) ^(2)

(1) 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.(2) 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 Jun30, Mar31, Dec31, Sep30, Jun30,Nonperforming $ 17,600 $ 17,403 $ 17,449 $ 29,747 $ 29,363 Assets:Nonaccrual loans 5,639 5,221 4,963 17,148 16,376 ^(1)Accruing loanspast due more ? ? ? ? ? than 90 days ^(1)Troubled debtrestructured 11,367 11,448 12,014 11,683 11,918 loans^ (2)Other real estate 586 734 472 912 1,069 ownedRepossessed 8 ? ? 4 ? assets Asset Quality Ratios:Nonaccruing loans 0.15 % 0.14 % 0.14 % 0.49 % 0.47 %to total loansAllowance forloan losses to 1,061.68 1,027.35 499.64 146.54 150.86 nonaccruing loansAllowance forloan losses to 340.16 308.21 142.11 84.48 84.14 nonperformingassetsAllowance forloan losses to 1.55 1.49 0.69 0.72 0.71 total loansNonperformingassets to total 0.24 0.24 0.26 0.45 0.46 assetsNet charge-offs(recoveries) to 0.01 0.06 0.32 0.07 0.23 average loans Capital Ratios: Shareholders?equity to total 11.15 10.94 11.92 12.39 12.36 assetsCommon equity 13.68 12.81 14.07 14.19 14.02 tier 1 capitalTier 1 risk-based 15.06 14.13 15.46 15.61 15.46 capitalTotal risk-based 18.51 17.35 18.43 18.65 18.52 capitalTier 1 leverage 9.05 9.45 10.18 10.46 10.48 capitalPeriod endtangible equityto period end 8.50 8.25 9.03 9.40 9.28 tangible assets^(3)Averageshareholders? 10.86 11.94 12.28 12.54 12.36 equity to averagetotal assets

(1) 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.(2) Prior to the adoption of CECL, included $0.8 million in PCI loans restructured as of December31, 2019, September30, 2019 and June30, 2019.(3) 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 Jun30, Mar31, Dec31, Sep30, Jun30,CompositionReal Estate Loans:Construction $ 570,801 $ 603,952 $ 644,948 $ 621,040 $ 579,565 1-4 Family 761,815 787,875 787,562 792,638 782,073 ResidentialCommercial 1,406,541 1,350,818 1,250,208 1,236,307 1,251,248 Commercial Loans 639,162 383,984 401,521 382,077 389,521 Municipal Loans 377,428 375,934 383,960 366,906 357,028 Loans to 96,824 98,439 100,005 100,949 100,708 IndividualsTotal Loans $ 3,852,571 $ 3,601,002 $ 3,568,204 $ 3,499,917 $ 3,460,143 Summary ofChanges in Allowances:Allowance for Loan LossesBalance atbeginning of $ 53,638 $ 24,797 $ 25,129 $ 24,705 $ 24,155 periodImpact of CECLadoption^ (1) - ? 5,072 ? ? ? cumulative effectadjustmentImpact of CECLadoption -purchased loans ? 231 ? ? ? with creditdeteriorationLoans charged-off (546 ) (995 ) (3,251 ) (1,000 ) (2,397 )Recoveries of 436 451 411 419 441 loans charged-offNet loans(charged-off) (110 ) (544 ) (2,840 ) (581 ) (1,956 )recoveredProvision for(reversal of) for 6,340 24,082 2,508 1,005 2,506 loan lossesBalance at end of $ 59,868 $ 53,638 $ 24,797 $ 25,129 $ 24,705 period Allowance forOff-Balance-Sheet Credit ExposuresBalance atbeginning of $ 7,460 $ 1,455 $ 1,540 $ 1,859 $ 1,834 periodImpact of CECL ? 4,840 ? ? ? adoption^ (1)Provision for(reversal of)off-balance-sheet (1,095 ) 1,165 (85 ) (319 ) 25 credit exposures^(2)Balance at end of $ 6,365 $ 7,460 $ 1,455 $ 1,540 $ 1,859 periodTotal Allowance $ 66,233 $ 61,098 $ 26,252 $ 26,669 $ 26,564 for Credit Losses

(1) 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. (2) 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)

Six Months Ended June30, 2020 2019Income Statement: Total interest income $ 119,247 $ 119,699 Total interest expense 27,275 35,443 Net interest income 91,972 84,256 Provision for credit losses ^(1) 30,492 1,588 Net interest income after provision for credit losses 61,480 82,668 Noninterest income Deposit services 11,811 12,638 Net gain on sale of securities available for sale 8,203 672 Gain on sale of loans 853 274 Trust fees 2,526 3,061 Bank owned life insurance 1,219 1,103 Brokerage services 1,079 994 Other 2,000 2,050 Total noninterest income 27,691 20,792 Noninterest expense Salaries and employee benefits 38,272 35,937 Net occupancy 6,979 6,464 Advertising, travel & entertainment 1,124 1,580 ATM expense 457 426 Professional fees 2,277 2,383 Software and data processing 2,522 2,162 Communications 999 976 FDIC insurance 199 859 Amortization of intangibles 1,911 2,308 Other ^(1) 5,636 6,232 Total noninterest expense 60,376 59,327 Income before income tax expense 28,795 44,133 Income tax expense 3,288 6,706 Net income $ 25,507 $ 37,427 Common Share Data: Weighted-average basic shares outstanding 33,353 33,711 Weighted-average diluted shares outstanding 33,445 33,862 Common shares outstanding end of period 33,032 33,749 Earnings per common share Basic $ 0.76 $ 1.11 Diluted 0.76 1.11 Book value per common share 24.75 23.34 Tangible book value per common share ^(2) 18.32 16.92 Cash dividends paid per common share 0.62 0.61 Selected Performance Ratios: Return on average assets 0.72 % 1.20 %Return on average shareholders? equity 6.31 10.00 Return on average tangible common equity ^(2) 9.06 14.75 Average yield on earning assets (FTE) ^(2) 3.87 4.37 Average rate on interest bearing liabilities 1.08 1.61 Net interest spread (FTE) ^(2) 2.79 2.76 Net interest margin (FTE) ^(2) 3.02 3.12 Average earning assets to average interest bearing 127.66 128.34 liabilitiesNoninterest expense to average total assets 1.70 1.91 Efficiency ratio (FTE) ^(2) 50.06 52.53

(1) 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.(2) Refer to Non-GAAP Reconciliation at the end of the financial statement tables in this Earnings Release for a reconciliation of this non-GAAP financial measure to the nearest GAAP financial measure.

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

Six Months Ended June30, 2020 2019Nonperforming Assets: $ 17,600 $ 29,363 Nonaccrual loans ^(1) 5,639 16,376 Accruing loans past due more than 90 days ^(1) ? ? Troubled debt restructured loans^ (2) 11,367 11,918 Other real estate owned 586 1,069 Repossessed assets 8 ? Asset Quality Ratios: Nonaccruing loans to total loans 0.15 % 0.47 %Allowance for loan losses to nonaccruing loans 1,061.68 150.86 Allowance for loan losses to nonperforming assets 340.16 84.14 Allowance for loan losses to total loans 1.55 0.71 Nonperforming assets to total assets 0.24 0.46 Net charge-offs (recoveries) to average loans 0.04 0.24 Capital Ratios: Shareholders? equity to total assets 11.15 12.36 Common equity tier 1 capital 13.68 14.02 Tier 1 risk-based capital 15.06 15.46 Total risk-based capital 18.51 18.52 Tier 1 leverage capital 9.05 10.48 Period end tangible equity to period end tangible 8.50 9.28 assets^ (3)Average shareholders? equity to average total assets 11.38 12.03

(1) 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.(2) Prior to the adoption of CECL, included $0.8 million in PCI loans restructured as of June30, 2019.(3) 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)

Six Months Ended June30,Loan Portfolio Composition 2020 2019Real Estate Loans: Construction $ 570,801 $ 579,565 1-4 Family Residential 761,815 782,073 Commercial 1,406,541 1,251,248 Commercial Loans 639,162 389,521 Municipal Loans 377,428 357,028 Loans to Individuals 96,824 100,708 Total Loans $ 3,852,571 $ 3,460,143 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 (1,541 ) (4,682 )Recoveries of loans charged-off 887 780 Net loans (charged-off) recovered (654 ) (3,902 )Provision for (reversal of) for loan losses 30,422 1,588 Balance at end of period $ 59,868 $ 24,705 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 70 (31 )credit exposures ^(2)Balance at end of period $ 6,365 $ 1,859 Total Allowance for Credit Losses $ 66,233 $ 26,564

(1) 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. (2) 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 June30, 2020 March31, 2020 Average Average Average Average Balance Interest Yield/ Balance Interest Yield/ Rate RateASSETS Loans ^(1) $ 3,826,383 $ 39,766 4.18 % $ 3,587,143 $ 42,554 4.77 %Loans held for 3,213 28 3.50 % 831 9 4.36 %saleSecurities: Taxableinvestment 94,247 732 3.12 % 70,293 512 2.93 %securities ^(2)Tax-exemptinvestment 1,320,772 11,560 3.52 % 888,906 7,837 3.55 %securities ^(2)Mortgage-backedand related 1,359,941 9,044 2.67 % 1,598,374 11,534 2.90 %securities ^(2)Total 2,774,960 21,336 3.09 % 2,557,573 19,883 3.13 %securitiesFederal HomeLoan Bankstock, at cost, 67,582 360 2.14 % 62,976 425 2.71 %and equityinvestmentsInterestearning 24,097 23 0.38 % 40,236 180 1.80 %depositsTotal earning 6,696,235 61,513 3.69 % 6,248,759 63,051 4.06 %assetsCash and due 78,326 76,739 from banksAccruedinterest and 660,411 611,017 other assetsLess:Allowance (55,908 ) (30,373 ) for loan lossesTotal assets $ 7,379,064 $ 6,906,142 LIABILITIES ANDSHAREHOLDERS? EQUITYSavings $ 426,420 187 0.18 % $ 384,863 237 0.25 %accountsCertificates of 1,187,665 4,817 1.63 % 1,362,427 6,346 1.87 %depositsInterestbearing demand 2,013,770 1,225 0.24 % 1,975,837 3,336 0.68 %accountsTotal interestbearing 3,627,855 6,229 0.69 % 3,723,127 9,919 1.07 %depositsFederal HomeLoan Bank 1,197,097 2,929 0.98 % 999,070 3,974 1.60 %borrowingsSubordinatednotes, net ofunamortized 98,641 1,412 5.76 % 98,597 1,411 5.76 %debt issuancecostsTrust preferredsubordinateddebentures, net 60,252 491 3.28 % 60,234 600 4.01 %of unamortizeddebt issuancecostsOther 205,724 163 0.32 % 69,846 147 0.85 %borrowingsTotal interestbearing 5,189,569 11,224 0.87 % 4,950,874 16,051 1.30 %liabilitiesNoninterestbearing 1,310,651 1,042,341 depositsAccruedexpenses and 77,431 88,168 otherliabilitiesTotal 6,577,651 6,081,383 liabilitiesShareholders? 801,413 824,759 equityTotalliabilities and $ 7,379,064 $ 6,906,142 shareholders?equityNet interest $ 50,289 $ 47,000 income (FTE)Net interest 3.02 % 3.03 %margin (FTE)Net interest 2.82 % 2.76 %spread (FTE)

(1) Interest on loans includes net fees on loans that are not material in amount.(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of June30, 2020 and March31, 2020, loans totaling $5.6 million and $5.2 million, respectively, were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

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

Three Months Ended December31, 2019 September30, 2019 Average Average Average Average Balance Interest Yield/ Balance Interest Yield/ Rate RateASSETS Loans ^(1) $ 3,540,274 $ 43,166 4.84 % $ 3,477,187 $ 43,780 5.00 %Loans held for 1,114 9 3.21 % 2,497 26 4.13 %saleSecurities: Taxableinvestment 10,083 86 3.38 % 3,000 26 3.44 %securities ^(2)Tax-exemptinvestment 699,868 6,431 3.65 % 555,835 5,328 3.80 %securities ^(2)Mortgage-backedand related 1,674,503 12,197 2.89 % 1,660,331 12,569 3.00 %securities ^(2)Total 2,384,454 18,714 3.11 % 2,219,166 17,923 3.20 %securitiesFederal HomeLoan Bankstock, at cost, 59,743 437 2.90 % 57,108 422 2.93 %and equityinvestmentsInterestearning 44,039 247 2.23 % 26,746 206 3.06 %depositsTotal earning 6,029,624 62,573 4.12 % 5,782,704 62,357 4.28 %assetsCash and due 72,018 73,815 from banksAccruedinterest and 574,124 570,657 other assetsLess:Allowance (25,618 ) (24,938 ) for loan lossesTotal assets $ 6,650,148 $ 6,402,238 LIABILITIES ANDSHAREHOLDERS? EQUITYSavings $ 372,798 262 0.28 % $ 367,615 270 0.29 %accountsCertificates of 1,204,392 6,172 2.03 % 1,118,410 6,011 2.13 %depositInterestbearing demand 1,936,969 4,067 0.83 % 1,966,764 5,085 1.03 %accountsTotal interestbearing 3,514,159 10,501 1.19 % 3,452,789 11,366 1.31 %depositsFederal HomeLoan Bank 1,019,844 4,716 1.83 % 881,088 4,647 2.09 %borrowingsSubordinatednotes, net ofunamortized 98,554 1,426 5.74 % 98,511 1,425 5.74 %debt issuancecostsTrust preferredsubordinateddebentures, net 60,250 643 4.23 % 60,248 685 4.51 %of unamortizeddebt issuancecostsOther 17,874 71 1.58 % 13,401 59 1.75 %borrowingsTotal interestbearing 4,710,681 17,357 1.46 % 4,506,037 18,182 1.60 %liabilitiesNoninterestbearing 1,049,211 1,020,325 depositsAccruedexpenses and 73,408 72,923 otherliabilitiesTotal 5,833,300 5,599,285 liabilitiesShareholders? 816,848 802,953 equityTotalliabilities and $ 6,650,148 $ 6,402,238 shareholders?equityNet interest $ 45,216 $ 44,175 income (FTE)Net interest 2.98 % 3.03 %margin (FTE)Net interest 2.66 % 2.68 %spread (FTE)

(1) Interest on loans includes net fees on loans that are not material in amount.(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of December31, 2019 and September30, 2019, loans totaling $5.0 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.Average Balances and Average Yields and Rates (Annualized) (Unaudited)(Dollars in thousands)

Three Months Ended June30, 2019 Average Interest Average Balance Yield/RateASSETS Loans ^(1) $ 3,387,323 $ 43,559 5.16 %Loans held for sale 1,965 21 4.29 %Securities: Taxable investment securities^ (2) 3,000 27 3.61 %Tax-exempt investment securities^ (2) 459,996 4,513 3.94 %Mortgage-backed and related securities 1,680,109 13,246 3.16 %^(2)Total securities 2,143,105 17,786 3.33 %Federal Home Loan Bank stock, at cost, 52,311 440 3.37 %and equity investmentsInterest earning deposits 66,017 411 2.50 %Federal funds sold 3,365 39 4.65 %Total earning assets 5,654,086 62,256 4.42 %Cash and due from banks 78,757 Accrued interest and other assets 534,835 Less:Allowance for loan losses (24,838 ) Total assets $ 6,242,840 LIABILITIES AND SHAREHOLDERS? EQUITY Savings accounts $ 365,205 262 0.29 %Certificates of deposit 1,119,464 5,861 2.10 %Interest bearing demand accounts 1,969,593 5,334 1.09 %Total interest bearing deposits 3,454,262 11,457 1.33 %Federal Home Loan Bank borrowings 755,748 3,899 2.07 %Subordinated notes, net of unamortized 98,469 1,410 5.74 %debt issuance costsTrust preferred subordinateddebentures, net of unamortized debt 60,247 718 4.78 %issuance costsOther borrowings 14,530 57 1.57 %Total interest bearing liabilities 4,383,256 17,541 1.61 %Noninterest bearing deposits 1,014,746 Accrued expenses and other liabilities 73,494 Total liabilities 5,471,496 Shareholders? equity 771,344 Total liabilities and shareholders? $ 6,242,840 equityNet interest income (FTE) $ 44,715 Net interest margin (FTE) 3.17 %Net interest spread (FTE) 2.81 %

(1) Interest on loans includes net fees on loans that are not material in amount.(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of June30, 2019, loans totaling $16.4 million were on nonaccrual status. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

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

Six Months Ended June30, 2020 June30, 2019 Average Average Average Average Balance Interest Yield/ Balance Interest Yield/ Rate RateASSETS Loans ^(1) $ 3,706,763 $ 82,320 4.47 % $ 3,342,244 $ 85,769 5.17 %Loans held for 2,022 37 3.68 % 1,292 28 4.37 %saleSecurities: Taxableinvestment 82,270 1,244 3.04 % 3,000 55 3.70 %securities^ (2)Tax-exemptinvestment 1,104,839 19,397 3.53 % 559,041 10,245 3.70 %securities^ (2)Mortgage-backedand related 1,479,157 20,578 2.80 % 1,663,926 25,720 3.12 %securities ^(2)Total 2,666,266 41,219 3.11 % 2,225,967 36,020 3.26 %securitiesFederal HomeLoan Bankstock, at cost, 65,279 785 2.42 % 53,034 795 3.02 %and equityinvestmentsInterestearning 32,167 203 1.27 % 65,357 797 2.46 %depositsFederal funds ? ? ? 5,489 86 3.16 %soldTotal earning 6,472,497 124,564 3.87 % 5,693,383 123,495 4.37 %assetsCash and due 77,533 80,940 from banksAccruedinterest and 635,540 523,926 other assetsLess:Allowance (43,141 ) (25,943 ) for loan lossesTotal assets $ 7,142,429 $ 6,272,306 LIABILITIES ANDSHAREHOLDERS? EQUITYSavings $ 405,642 424 0.21 % $ 362,947 520 0.29 %accountsCertificates of 1,275,046 11,163 1.76 % 1,136,738 11,558 2.05 %depositInterestbearing demand 1,994,803 4,561 0.46 % 1,976,205 10,620 1.08 %accountsTotal interestbearing 3,675,491 16,148 0.88 % 3,475,890 22,698 1.32 %depositsFederal HomeLoan Bank 1,098,083 6,903 1.26 % 785,901 8,356 2.14 %borrowingsSubordinatednotes, net ofunamortized 98,619 2,823 5.76 % 98,448 2,810 5.76 %debt issuancecostsTrust preferredsubordinateddebentures, net 60,252 1,091 3.64 % 60,247 1,447 4.84 %of unamortizeddebt issuancecostsOther 137,785 310 0.45 % 15,653 132 1.70 %borrowingsTotal interestbearing 5,070,230 27,275 1.08 % 4,436,139 35,443 1.61 %liabilitiesNoninterestbearing 1,176,496 1,000,623 depositsAccruedexpenses and 82,617 81,167 otherliabilitiesTotal 6,329,343 5,517,929 liabilitiesShareholders? 813,086 754,377 equityTotalliabilities and $ 7,142,429 $ 6,272,306 shareholders?equityNet interest $ 97,289 $ 88,052 income (FTE)Net interest 3.02 % 3.12 %margin (FTE)Net interest 2.79 % 2.76 %spread (FTE)

(1) Interest on loans includes net fees on loans that are not material in amount.(2) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

Note: As of June30, 2020 and 2019, loans totaling $5.6 million and $16.4 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 Six Months Ended 2020 2019 June30, Jun30, Mar31, Dec31, Sep30, Jun30, 2020 2019Reconciliationof return onaverage commonequity to return onaveragetangiblecommon equity:Net income $ 21,554 $ 3,953 $ 17,335 $ 19,792 $ 18,610 $ 25,507 $ 37,427 After-taxamortization 735 774 814 853 892 1,510 1,823 expenseAdjusted netincomeavailable to $ 22,289 $ 4,727 $ 18,149 $ 20,645 $ 19,502 $ 27,017 $ 39,250 commonshareholders Averageshareholders' $ 801,413 $ 824,759 $ 816,848 $ 802,953 $ 771,344 $ 813,086 $ 754,377 equityLess: Averageintangibles (213,135 ) (214,104 ) (215,101 ) (216,169 ) (217,266 ) (213,620 ) (217,849 )for the periodAveragetangible $ 588,278 $ 610,655 $ 601,747 $ 586,784 $ 554,078 $ 599,466 $ 536,528 shareholders'equity Return onaverage 15.24 % 3.11 % 11.97 % 13.96 % 14.12 % 9.06 % 14.75 %tangiblecommon equity Reconciliationof book valueper share to tangible bookvalue pershare:Common equityat end of $ 817,605 $ 795,800 $ 804,580 $ 810,453 $ 787,765 $ 817,605 $ 787,765 periodLess:Intangible (212,566 ) (213,497 ) (214,477 ) (215,507 ) (216,587 ) (212,566 ) (216,587 )assets at endof periodTangiblecommonshareholders' $ 605,039 $ 582,303 $ 590,103 $ 594,946 $ 571,178 $ 605,039 $ 571,178 equity at endof period Total assetsat end of $ 7,329,611 $ 7,273,638 $ 6,748,913 $ 6,542,075 $ 6,372,870 $ 7,329,611 $ 6,372,870 periodLess:Intangible (212,566 ) (213,497 ) (214,477 ) (215,507 ) (216,587 ) (212,566 ) (216,587 )assets at endof periodTangibleassets at end $ 7,117,045 $ 7,060,141 $ 6,534,436 $ 6,326,568 $ 6,156,283 $ 7,117,045 $ 6,156,283 of period Period endtangibleequity to 8.50 % 8.25 % 9.03 % 9.40 % 9.28 % 8.50 % 9.28 %period endtangibleassets Common sharesoutstanding 33,032 33,012 33,823 33,795 33,749 33,032 33,749 end of periodTangible bookvalue per $ 18.32 $ 17.64 $ 17.45 $ 17.60 $ 16.92 $ 18.32 $ 16.92 common share Reconciliationof efficiencyratio toefficiencyratio (FTE),net interestmargin to net interestmargin (FTE)and netinterestspread to netinterestspread (FTE):Net interest $ 47,271 $ 44,701 $ 43,176 $ 42,373 $ 43,131 $ 91,972 $ 84,256 income (GAAP)Tax equivalent adjustments:Loans 679 668 653 641 598 1,347 1,196 Tax-exemptinvestment 2,339 1,631 1,387 1,161 986 3,970 2,600 securitiesNet interestincome (FTE) ^ 50,289 47,000 45,216 44,175 44,715 97,289 88,052 (1)Noninterest 12,193 15,498 10,465 11,111 11,254 27,691 20,792 incomeNonrecurring (2,662 ) (5,541 ) (42 ) (42 ) (557 ) (8,203 ) (386 )income ^(2)Total revenue $ 59,820 $ 56,957 $ 55,639 $ 55,244 $ 55,412 $ 116,777 $ 108,458 Noninterest $ 29,856 $ 30,520 $ 30,944 $ 29,026 $ 29,700 $ 60,376 $ 59,327 expensePre-taxamortization (931 ) (980 ) (1,030 ) (1,080 ) (1,129 ) (1,911 ) (2,308 )expenseNonrecurring (39 ) 29 56 (33 ) (67 ) (10 ) (49 )expense ^(3)Adjustednoninterest $ 28,886 $ 29,569 $ 29,970 $ 27,913 $ 28,504 $ 58,455 $ 56,970 expense Efficiency 50.85 % 54.10 % 55.92 % 52.23 % 52.95 % 52.44 % 54.43 %ratioEfficiencyratio (FTE) ^ 48.29 % 51.91 % 53.87 % 50.53 % 51.44 % 50.06 % 52.53 %(1) Average $ 6,696,235 $ 6,248,759 $ 6,029,624 $ 5,782,704 $ 5,654,086 $ 6,472,497 $ 5,693,383 earning assets Net interest 2.84 % 2.88 % 2.84 % 2.91 % 3.06 % 2.86 % 2.98 %marginNet interestmargin (FTE) ^ 3.02 % 3.03 % 2.98 % 3.03 % 3.17 % 3.02 % 3.12 %(1) Net interest 2.64 % 2.61 % 2.52 % 2.55 % 2.69 % 2.62 % 2.63 %spreadNet interestspread (FTE) ^ 2.82 % 2.76 % 2.66 % 2.68 % 2.81 % 2.79 % 2.76 %(1)

(1) These amounts are presented on a fully taxable-equivalent basis and are non-GAAP measures.(2) 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.(3) These adjustments may include foreclosure expenses, in the periods where applicable.