TYLER, Texas, Oct. 28, 2016 (GLOBE NEWSWIRE) -- Southside Bancshares, Inc. (“Southside” or the “Company”) (NASDAQ:SBSI) today reported its financial results for the three and nine months ended September 30, 2016.

Southside reported net income of $12.9 million for the three months ended September 30, 2016, an increase of $1.1 million, or 9.4%, compared to $11.8 million for the same period in 2015. Net income for the nine months ended September 30, 2016 increased $5.5 million, or 16.9%, to $37.8 million when compared to $32.3 million for the same period in 2015.

Diluted earnings per common share were $0.49 and $0.44 for the three months ended September 30, 2016 and 2015, respectively, an increase of $0.05, or 11.4%. For the nine months ended September 30, 2016, diluted earnings per common share increased $0.22, or 18.2%, to $1.43 when compared to $1.21 for the same period in 2015.

The return on average shareholders’ equity for the nine months ended September 30, 2016 was 10.87%, compared to 9.93% for the same period in 2015. The return on average assets was 0.98% for the nine months ended September 30, 2016, compared to 0.90% for the same period in 2015.

“We are pleased to report that during the third quarter our net income increased 9.4% compared to the same period in 2015,” stated Sam Dawson, Chief Executive Officer of Southside Bancshares, Inc. “Loans increased $99.3 million, or 4.2%, on a linked quarter basis and we sold a significant portion of nonperforming assets. We incurred approximately $400,000 of net expense during the quarter associated with the sale of the nonperforming assets. Our nonperforming assets to total assets ratio has declined to 0.29%. Loan commitments made during 2016 began to fund at a greater pace during the third quarter, which we anticipate continuing through the fourth quarter. We believe that we continue to have an opportunity to book a number of quality loans and that our pipeline remains solid. During the third quarter, we prepaid a lease at approximately 59% of the remaining lease payments on a Fort Worth operations facility that was recently vacated. The cost of prepaying this lease, combined with writing off the leasehold improvements, was $1.8 million. We anticipate that the savings going forward will be approximately $45,000 a month.”

“The decrease in the net interest margin during the third quarter on a linked quarter basis was primarily reflective of a decrease in the average yield on loans and securities. Average loan yields decreased primarily as a result of a decrease in purchase accretion of $487,000 compared to the second quarter. Average security yields decreased due to overall lower interest rates which was slightly offset by an increase in average total securities during the third quarter.”

“In September 2016, we issued $100.0 million of 5.50% Fixed-to-Floating Rate Subordinated Notes due 2026. This debt initially bears interest at a fixed rate of 5.50% through September 29, 2021 and thereafter, adjusts quarterly at a floating rate equal to three-month LIBOR plus 429.7 basis points. We plan to use the proceeds from the issuance of the notes for general corporate purposes and to finance the activities of our subsidiaries.”

“Our team members continue to execute on our business plan of quality loan growth, revenue generating opportunities, innovative financial services and delivery channels and cost containment.”

Loans and Deposits

For the nine months ended September 30, 2016, total loans increased by $51.9 million, or 2.1%, when compared to December 31, 2015. The net increase in our loans was comprised of increases of $124.6 million of commercial real estate loans, $28.1 million of construction loans, and $5.8 million of municipal loans, which were partially offset by decreases of $51.4 million of commercial loans, $44.6 million of loans to individuals, and $10.7 million of 1-4 family residential loans. Loans with oil and gas industry exposure totaled 1.13% of the loan portfolio at September 30, 2016.

Nonperforming assets decreased during the nine months ended September 30, 2016 by $16.5 million, or 50.7%, to $16.0 million, or 0.29% of total assets, when compared to 0.63% at December 31, 2015.

During the nine months ended September 30, 2016, the allowance for loan losses decreased $3.7 million, or 19.0%, to $16.0 million, or 0.64% of total loans, when compared to 0.81% at December 31, 2015, as a result of partial charge-offs of two large impaired commercial borrowing relationships during the six months ended June 30, 2016.

During the nine months ended September 30, 2016, deposits, net of brokered deposits, increased $151.1 million, or 4.5%, compared
to December 31, 2015. During this nine-month period, public fund deposits increased $67.6 million.

Net Interest Income for the Three Months Ended September 30, 2016

Net interest income increased $0.6 million, or 1.9%, to $33.9 million for the three months ended September 30, 2016, when compared to $33.3 million for the same period in 2015. The increase in net interest income was the result of the increase in interest income of $2.9 million, which was primarily a result of the increase in the loan and securities portfolio, compared to the same period in 2015. The increase in interest income was partially offset by an increase in interest expense of $2.3 million. For the three months ended September 30, 2016, our net interest spread decreased to 3.06%, compared to 3.25% for the same period in 2015, due to higher rates paid on interest-bearing liabilities along with a slight decrease in the yield on interest-earning assets. Our net interest margin decreased to 3.19% for the three months ended September 30, 2016, compared to 3.35% for the same period in 2015. The net interest spread and margin on a linked quarter basis decreased from 3.24% and 3.35%, respectively.

Net Interest Income for the Nine Months Ended September 30, 2016

Net interest income increased $4.9 million, or 4.9%, to $104.9 million for the nine months ended September 30, 2016, when compared to $100.0 million for the same period in 2015. The increase in net interest income was due to the increase in interest income of $10.7 million, which was primarily a result of the increase in the loan portfolio, compared to the same period in 2015, and a $1.3 million recovery of interest income on the payoff of a long-time nonaccrual loan during the first quarter of 2016. The increase in interest income was partially offset by an increase in interest expense of $5.7 million. For the nine months ended September 30, 2016, our net interest spread decreased to 3.23%, compared to 3.32% for the same period in 2015, due to higher rates paid on interest-bearing liabilities, which more than offset the increase in the yield on interest-earning assets. Our net interest margin decreased to 3.35% for the nine months ended September 30, 2016, compared to 3.41% for the same period in 2015.

Net Income for the Three Months Ended September 30, 2016

Net income increased $1.1 million, or 9.4%, for the three months ended September 30, 2016, to $12.9 million when compared to the same period in 2015. The increase was primarily the result of a $2.9 million increase in interest income, a $2.4 million increase in noninterest income and a $0.6 million decrease in provision for loan losses, partially offset by a $2.3 million increase in interest expense, a $1.8 million increase in noninterest expense, and a $0.8 million increase in income tax expense.

Noninterest income increased $2.4 million, or 25.3%, for the three months ended September 30, 2016 compared to the same period in 2015, primarily due to increases in net gain on sale of securities available for sale and gain on sale of loans.

Noninterest expense increased $1.8 million, or 6.7%, for the three months ended September 30, 2016, compared to the same period in 2015, primarily due to increases in occupancy expense, professional fees, and other noninterest expense partially offset by decreases in salaries and employee benefits, advertising, travel and entertainment, and telephone and communication expense.

Net Income for the Nine Months Ended September 30, 2016

Net income increased $5.5 million, or 16.9%, for the nine months ended September 30, 2016, to $37.8 million when compared to the same period in 2015. The increase was primarily the result of a $10.7 million increase in interest income, a $3.6 million increase in noninterest income and a $0.9 million decrease in noninterest expense, partially offset by a $5.7 million increase in interest expense, a $2.6 million increase in income tax expense and a $1.3 million increase in provision for loan losses.

Noninterest income increased $3.6 million, or 12.4%, for the nine months ended September 30, 2016 compared to the same period in 2015, primarily due to increases in net gain on sale of securities available for sale and gain on sale of loans.

Noninterest expense decreased $0.9 million, or 1.0%, for the nine months ended September 30, 2016, compared to the same period in 2015, primarily due to decreases in salaries and employee benefits expense, software and data processing expense, and telephone and communication expense, partially offset by increases in professional fees, occupancy expense, and ATM and debit card expense.

Conference Call

Southside's management team will host a conference call to discuss its third quarter 2016 financial results on Friday, October 28, 2016 at 9:00 am CDT. The call can be accessed by dialing 844-775-2540 and by identifying the conference ID number 95800526 or by identifying “Southside Bancshares, Inc., Third Quarter 2016 Earnings Call.” To listen to the call via web-cast, register at www.southside.com/about/investor-relations.

For those unable to listen to the conference call live, a recording of the conference call will be available from approximately 3:00 pm CDT October 28, 2016 through November 9, 2016 by accessing the company website, www.southside.com/about/investor-relations.

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: tax-equivalent net interest income, tax-equivalent net interest margin, tax-equivalent net interest spread, and tax-equivalent efficiency ratio, which include the effects of taxable-equivalent adjustments using a federal income tax rate of 35% to increase tax-exempt interest income to a tax-equivalent basis. 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. Tax-equivalent adjustments are reported in Notes 2 and 3 to the Average Balances with Average Yields and Rates tables under Results of Operations below.

Tax-equivalent net interest income, net interest margin and net interest spread. Net interest income on a tax-equivalent basis is a non-GAAP measure that adjusts for the tax-favored status of net interest income from 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 on a tax-equivalent basis is net interest income on a tax-equivalent basis divided by average interest-earning assets on a tax-equivalent basis. The most directly comparable financial measure calculated in accordance with GAAP is our net interest margin. Net interest spread on a tax-equivalent basis is the difference in the average yield on average interest-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.

Tax-equivalent efficiency ratio. The efficiency ratio on a tax-equivalent basis 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 of intangibles and certain non-recurring expense by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains (losses) on sales of investment securities and certain non-recurring impairments.

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.

About Southside Bancshares, Inc.

Southside Bancshares, Inc. is a bank holding company with approximately $5.5 billion in assets as of September 30, 2016, that owns 100% of Southside Bank. Southside Bank currently has 61 banking centers in Texas and operates a network of over 70 ATMs.

To learn more about Southside Bancshares, Inc., please visit our investor relations website at www.southside.com/about/investor-relations. 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 Deborah Wilkinson at (817) 367-4962, or deborah.wilkinson@southside.com.

Forward-Looking Statements

Certain statements of other than historical fact that are contained in this document and in other written material, press releases and oral statements issued by or on behalf of the Company may be considered to be “forward-looking statements” within the meaning of and subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. These statements may include words such as “expect,” “estimate,” “project,” “anticipate,” “appear,” “believe,” “could,” “should,” “may,” “likely,” “intend,” “probability,” “risk,” “target,” “objective,” “plans,” “potential,” and similar expressions. Forward-looking statements are statements with respect to the Company’s beliefs, plans, expectations, objectives, goals, anticipations, assumptions 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, the benefits of the Share Repurchase Plan, planned operational efficiencies, earnings and certain market risk disclosures, including the impact of interest rates 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.

Additional information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, under “Forward-Looking Information” and Item 1A. “Risk Factors,” and in the Company’s other filings with the Securities and Exchange Commission. The Company disclaims any obligation to update any factors or to announce publicly the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

	SOUTHSIDE BANCSHARES, INC. CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED) (In thousands, except per share data)
ASSETS							As of
					2016						2015
	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Cash and due from banks	$	54,255		$	45,663		$	52,324		$	54,288		$	52,311
Interest earning deposits		144,833			18,450			16,130			26,687			19,583
Securities available for sale, at estimated fair value		1,622,128			1,416,335			1,332,381			1,460,492			1,374,995
Securities held to maturity, at carrying value		775,682			784,925			784,579			784,296			771,914
Federal Home Loan Bank stock, at cost		51,901			47,702			47,550			51,047			43,446
Loans held for sale		5,301			5,883			4,971			3,811			4,883
Loans		2,483,641			2,384,321			2,443,231			2,431,753			2,239,146
Less: Allowance for loan losses		(15,993	)		(14,908	)		(21,799	)		(19,736	)		(18,402	)
Net loans		2,467,648			2,369,413			2,421,432			2,412,017			2,220,744
Premises & equipment, net		106,777			107,242			107,556			107,929			109,087
Goodwill		91,520			91,520			91,520			91,520			91,520
Other intangible assets, net		5,060			5,534			6,029			6,548			7,090
Bank owned life insurance		97,002			96,375			95,718			95,080			94,303
Other assets		42,796			45,886			58,743			68,281			47,518
Total assets	$	5,464,903		$	5,034,928		$	5,018,933		$	5,161,996		$	4,837,394

LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits	$	747,270		$	679,831		$	698,695		$	672,470		$	681,618
Interest bearing deposits		2,834,117			2,890,418			2,920,673			2,782,937			2,646,259
Total deposits		3,581,387			3,570,249			3,619,368			3,455,407			3,327,877
Short-term obligations		720,634			385,717			259,646			647,836			445,008
Long-term obligations		621,640			559,071			622,222			562,512			558,786
Other liabilities		68,682			47,591			60,121			52,179			58,575
Total liabilities		4,992,343			4,562,628			4,561,357			4,717,934			4,390,246
Shareholders' equity		472,560			472,300			457,576			444,062			447,148
Total liabilities and shareholders' equity	$	5,464,903		$	5,034,928		$	5,018,933		$	5,161,996		$	4,837,394

Income Statement:				At or For the Three Months Ended
					2016						2015
	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Total interest income	$	41,132		$	41,089		$	43,012		$	39,964		$	38,211
Total interest expense		7,202			6,711			6,396			5,268			4,928
Net interest income		33,930			34,378			36,616			34,696			33,283
Provision for loan losses		1,631			3,768			2,316			1,951			2,276
Net interest income after provision for loan losses		32,299			30,610			34,300			32,745			31,007
Noninterest income
Deposit services		5,335			5,099			5,085			4,990			5,213
Net gain on sale of securities available for sale		2,343			728			2,441			204			875
Gain on sale of loans		818			873			643			578			305
Trust income		867			869			855			871			835
Bank owned life insurance income		656			647			674			640			661
Brokerage services		551			535			575			555			540
Other		1,162			619			1,323			977			932
Total noninterest income		11,732			9,370			11,596			8,815			9,361
Noninterest expense
Salaries and employee benefits		15,203			14,849			17,732			16,420			15,733
Occupancy expense		4,569			2,993			3,335			3,263			3,316
Advertising, travel & entertainment		588			722			685			726			642
ATM and debit card expense		868			736			712			1,086			617
Professional fees		1,148			1,478			1,338			1,517			825
Software and data processing expense		736			739			749			771			819
Telephone and communications		407			468			484			372			534
FDIC insurance		643			645			638			619			624
FHLB prepayment fees		—			148			—			—			—
Other		4,263			3,035			3,734			3,656			3,525
Total noninterest expense		28,425			25,813			29,407			28,430			26,635
Income before income tax expense		15,606			14,167			16,489			13,130			13,733
Income tax expense		2,741			2,772			2,973			1,438			1,971
Net income	$	12,865		$	11,395		$	13,516		$	11,692		$	11,762
Common share data:
Weighted-average basic shares outstanding		26,262			26,230			26,449			26,653			26,632
Weighted-average diluted shares outstanding		26,415			26,349			26,519			26,745			26,721
Shares outstanding end of period		26,278			26,251			26,222			26,670			26,645
Net income per common share
Basic	$	0.49		$	0.43		$	0.51		$	0.44		$	0.44
Diluted		0.49			0.43			0.51			0.44			0.44
Book value per common share		17.98			17.99			17.46			16.66			16.78
Cash dividend paid per common share		0.24			0.24			0.23			0.31			0.23
Selected Performance Ratios:
Return on average assets		0.98	%		0.90	%		1.07	%		0.92	%		0.96	%
Return on average shareholders’ equity		10.78			9.91			11.96			10.35			10.65
Average yield on interest earning assets		3.78			3.93			4.06			3.80			3.79
Average rate on interest bearing liabilities		0.72			0.69			0.66			0.54			0.54
Net interest spread		3.06			3.24			3.40			3.26			3.25
Net interest margin		3.19			3.35			3.51			3.35			3.35
Average interest earnings assets to average interest bearing liabilities		120.40			120.21			119.62			120.29			121.61
Noninterest expense to average total assets		2.17			2.05			2.33			2.25			2.18
Efficiency ratio		53.88			52.85			57.47			58.45			56.60

Income Statement:	At or For the Nine Months Ended September 30,
		2016			2015
Total interest income	$	125,233		$	114,568
Total interest expense		20,309			14,591
Net interest income		104,924			99,977
Provision for loan losses		7,715			6,392
Net interest income after provision for loan losses		97,209			93,585
Noninterest income
Deposit services		15,519			15,122
Net gain on sale of securities available for sale		5,512			3,456
Gain on sale of loans		2,334			1,504
Trust income		2,591			2,548
Bank owned life insurance income		1,977			1,983
Brokerage services		1,661			1,651
Other		3,104			2,816
Total noninterest income		32,698			29,080
Noninterest expense
Salaries and employee benefits		47,784			50,801
Occupancy expense		10,897			9,620
Advertising, travel & entertainment		1,995			1,982
ATM and debit card expense		2,316			2,046
Professional fees		3,964			2,360
Software and data processing expense		2,224			3,087
Telephone and communications		1,359			1,606
FDIC insurance		1,926			1,891
FHLB prepayment fees		148			—
Other		11,032			11,126
Total noninterest expense		83,645			84,519
Income before income tax expense		46,262			38,146
Income tax expense		8,486			5,841
Net income	$	37,776		$	32,305
Common share data:
Weighted-average basic shares outstanding		26,314			26,611
Weighted-average diluted shares outstanding		26,425			26,700
Net income per common share
Basic	$	1.43		$	1.21
Diluted		1.43			1.21
Book value per common share		17.98			16.78
Cash dividend paid per common share		0.71			0.69
Selected Performance Ratios:
Return on average assets		0.98	%		0.90	%
Return on average shareholders’ equity		10.87			9.93
Average yield on interest earning assets		3.92			3.85
Average yield on interest bearing liabilities		0.69			0.53
Net interest spread		3.23			3.32
Net interest margin		3.35			3.41
Average interest earnings assets to average interest bearing liabilities		120.08			120.07
Noninterest expense to average total assets		2.18			2.34
Efficiency ratio		54.78			59.63

	Southside Bancshares, Inc. Selected Financial Data (Unaudited) (In thousands) Three Months Ended
					2016						2015
	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
Nonperforming assets	$	16,008		$	24,510		$	34,046		$	32,480		$	33,621
Nonaccrual loans (1)		8,536			11,767			21,927			20,526			20,988
Accruing loans past due more than 90 days (1)		1			6			7			3			—
Restructured loans (2)		7,193			12,477			11,762			11,143			11,772
Other real estate owned		237			237			265			744			793
Repossessed assets		41			23			85			64			68
Asset Quality Ratios:
Nonaccruing loans to total loans		0.34	%		0.49	%		0.90	%		0.84	%		0.94	%
Allowance for loan losses to nonaccruing loans		187.36			126.69			99.42			96.15			87.68
Allowance for loan losses to nonperforming assets		99.91			60.82			64.03			60.76			54.73
Allowance for loan losses to total loans		0.64			0.63			0.89			0.81			0.82
Nonperforming assets to total assets		0.29			0.49			0.68			0.63			0.70
Net charge-offs to average loans		0.09			1.77			0.04			0.11			0.13
Capital Ratios:
Shareholders’ equity to total assets		8.65			9.38			9.12			8.60			9.24
Average shareholders’ equity to average total assets		9.10			9.11			8.94			8.92			9.03

(1)  Excludes purchased credit impaired ("PCI") loans measured at fair value at acquisition.

(2)  Includes $3.2 million, $8.3 million, $7.4 million, $7.5 million, and $6.8 million in PCI loans restructured as of September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, respectively.

Loan Portfolio Composition

The following table sets forth loan totals by category for the periods presented:

Real Estate Loans:
Construction	$	466,323		$	425,595		$	464,750		$	438,247		$	342,282
1-4 Family Residential		644,746			633,400			644,826			655,410			678,431
Commercial		759,795			694,272			657,962			635,210			537,161
Commercial Loans		191,154			197,896			233,857			242,527			228,272
Municipal Loans		293,949			292,909			286,217			288,115			262,384
Loans to Individuals		127,674			140,249			155,619			172,244			190,616
Total Loans	$	2,483,641		$	2,384,321		$	2,443,231		$	2,431,753		$	2,239,146

RESULTS OF OPERATIONS

The analysis below shows average interest earning assets and interest bearing liabilities together with the average yield on the interest earning assets and the average rate of the interest bearing liabilities.

	AVERAGE BALANCES WITH AVERAGE YIELDS AND RATES (dollars in thousands) (unaudited) Three Months Ended
	September 30, 2016									June 30, 2016
	AVG BALANCE			INTEREST			AVG YIELD/ RATE			AVG BALANCE			INTEREST			AVG YIELD/ RATE
ASSETS
INTEREST EARNING ASSETS:
Loans (1) (2)	$	2,436,349		$	26,750			4.37	%	$	2,426,733		$	27,275			4.52	%
Loans Held For Sale		6,718			54			3.20	%		4,984			40			3.23	%
Securities:
Investment Securities (Taxable) (4)		61,238			251			1.63	%		22,010			107			1.96	%
Investment Securities (Tax-Exempt) (3) (4)		690,635			8,911			5.13	%		657,568			8,636			5.28	%
Mortgage-backed Securities (4)		1,492,271			9,399			2.51	%		1,450,868			9,366			2.60	%
Total Securities		2,244,144			18,561			3.29	%		2,130,446			18,109			3.42	%
FHLB stock and other investments, at cost		54,085			186			1.37	%		52,952			185			1.41	%
Interest Earning Deposits		57,598			89			0.61	%		57,493			61			0.43	%
Total Interest Earning Assets		4,798,894			45,640			3.78	%		4,672,608			45,670			3.93	%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks		49,418									47,079
Bank Premises and Equipment		107,318									107,842
Other Assets		278,599									270,141
Less: Allowance for Loan Losses		(14,989	)								(22,377	)
Total Assets	$	5,219,240								$	5,075,293
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits	$	248,364			71			0.11	%	$	244,639			68			0.11	%
Time Deposits		949,019			2,073			0.87	%		976,600			1,927			0.79	%
Interest Bearing Demand Deposits		1,634,898			1,460			0.36	%		1,727,431			1,520			0.35	%
Total Interest Bearing Deposits		2,832,281			3,604			0.51	%		2,948,670			3,515			0.48	%
Short-term Interest Bearing Liabilities		608,130			1,122			0.73	%		385,858			906			0.94	%
Long-term Interest Bearing Liabilities – FHLB Dallas		472,470			1,857			1.56	%		492,296			1,874			1.53	%
Subordinated Notes (5)		12,823			189			5.86	%		—			—			—	%
Long-term Debt (6)		60,234			430			2.84	%		60,233			416			2.78	%
Total Interest Bearing Liabilities		3,985,938			7,202			0.72	%		3,887,057			6,711			0.69	%
NONINTEREST BEARING LIABILITIES:
Demand Deposits		702,539									682,360
Other Liabilities		55,783									43,360
Total Liabilities		4,744,260									4,612,777
SHAREHOLDERS’ EQUITY		474,980									462,516
Total Liabilities and Shareholders’ Equity	$	5,219,240								$	5,075,293
NET INTEREST INCOME				$	38,438								$	38,959
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS								3.19	%								3.35	%
NET INTEREST SPREAD								3.06	%								3.24	%

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) Interest income includes taxable-equivalent adjustments of $1,064 and $1,082 for the three months ended September 30, 2016 and June 30, 2016, respectively.

(3) Interest income includes taxable-equivalent adjustments of $3,444 and $3,499 for the three months ended September 30, 2016 and June 30, 2016, respectively.

(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

(5) The unamortized debt issuance costs deducted from the carrying amount of the subordinated notes totaled approximately $220,000 for the three months ended September 30, 2016.

(6) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheets for the three months ended September 30, 2016 and June 30, 2016 reflect a decrease in long-term debt of $77,000 and $78,000, respectively.

Note: As of September 30, 2016 and June 30, 2016, loans on nonaccrual status totaled $8,536 and $11,767, respectively. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

	March 31, 2016						Three Months Ended December 31, 2015
	AVG BALANCE			INTEREST			AVG YIELD/ RATE			AVG BALANCE			INTEREST			AVG YIELD/ RATE
ASSETS
INTEREST EARNING ASSETS:
Loans (1) (2)	$	2,434,837		$	28,793			4.76	%	$	2,318,162		$	25,865			4.43	%
Loans Held For Sale		3,581			32			3.59	%		2,740			30			4.34	%
Securities:
Investment Securities (Taxable) (4)		41,659			214			2.07	%		81,344			416			2.03	%
Investment Securities (Tax-Exempt) (3) (4)		635,766			8,494			5.37	%		637,993			8,645			5.38	%
Mortgage-backed Securities (4)		1,454,343			9,391			2.60	%		1,493,020			9,215			2.45	%
Total Securities		2,131,768			18,099			3.41	%		2,212,357			18,276			3.28	%
FHLB stock and other investments, at cost		55,116			217			1.58	%		53,643			75			0.55	%
Interest Earning Deposits		51,246			70			0.55	%		34,147			23			0.27	%
Total Interest Earning Assets		4,676,548			47,211			4.06	%		4,621,049			44,269			3.80	%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks		55,732									53,267
Bank Premises and Equipment		107,941									108,812
Other Assets		262,081									258,837
Less: Allowance for Loan Losses		(20,088	)								(18,720	)
Total Assets	$	5,082,214								$	5,023,245
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits	$	235,492			65			0.11	%	$	232,561			61			0.10	%
Time Deposits		915,316			1,723			0.76	%		833,141			1,477			0.70	%
Interest Bearing Demand Deposits		1,717,717			1,468			0.34	%		1,594,109			1,117			0.28	%
Total Interest Bearing Deposits		2,868,525			3,256			0.46	%		2,659,811			2,655			0.40	%
Short-term Interest Bearing Liabilities		413,985			696			0.68	%		630,998			600			0.38	%
Long-term Interest Bearing Liabilities – FHLB Dallas		566,825			2,039			1.45	%		490,396			1,638			1.33	%
Long-term Debt (5)		60,232			405			2.70	%		60,231			375			2.47	%
Total Interest Bearing Liabilities		3,909,567			6,396			0.66	%		3,841,436			5,268			0.54	%
NONINTEREST BEARING LIABILITIES:
Demand Deposits		672,865									686,574
Other Liabilities		45,390									47,155
Total Liabilities		4,627,822									4,575,165
SHAREHOLDERS’ EQUITY		454,392									448,080
Total Liabilities and Shareholders’ Equity	$	5,082,214								$	5,023,245
NET INTEREST INCOME				$	40,815								$	39,001
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS								3.51	%								3.35	%
NET INTEREST SPREAD								3.40	%								3.26	%

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) Interest income includes taxable-equivalent adjustments of $1,060 and $1,068 for the three months ended March 31, 2016 and December 31, 2015, respectively.

(3) Interest income includes taxable-equivalent adjustments of $3,139 and $3,237 for the three months ended March 31, 2016 and December 31, 2015, respectively.

(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

(5) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheets for the three months ended March 31, 2016 and December 31, 2015 reflect a decrease in long-term debt of $79,000 and $80,000, respectively.

Note: As of March 31, 2016 and December 31, 2015, loans on nonaccrual status totaled $21,927 and $20,526, respectively. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

	Three Months Ended September 30, 2015
	AVG BALANCE			INTEREST			AVG YIELD/ RATE
ASSETS
INTEREST EARNING ASSETS:
Loans (1) (2)	$	2,200,241		$	24,779			4.47	%
Loans Held For Sale		5,327			52			3.87	%
Securities:
Investment Securities (Taxable) (4)		86,105			475			2.19	%
Investment Securities (Tax-Exempt) (3) (4)		638,767			8,750			5.43	%
Mortgage-backed Securities (4)		1,441,129			8,318			2.29	%
Total Securities		2,166,001			17,543			3.21	%
FHLB stock and other investments, at cost		45,963			65			0.56	%
Interest Earning Deposits		26,216			15			0.23	%
Total Interest Earning Assets		4,443,748			42,454			3.79	%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks		49,285
Bank Premises and Equipment		110,028
Other Assets		262,956
Less: Allowance for Loan Losses		(17,021	)
Total Assets	$	4,848,996
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits	$	232,903			60			0.10	%
Time Deposits		833,962			1,360			0.65	%
Interest Bearing Demand Deposits		1,600,454			1,065			0.26	%
Total Interest Bearing Deposits		2,667,319			2,485			0.37	%
Short-term Interest Bearing Liabilities		398,905			354			0.35	%
Long-term Interest Bearing Liabilities – FHLB Dallas		527,591			1,720			1.29	%
Long-term Debt (5)		60,229			369			2.43	%
Total Interest Bearing Liabilities		3,654,044			4,928			0.54	%
NONINTEREST BEARING LIABILITIES:
Demand Deposits		715,326
Other Liabilities		41,606
Total Liabilities		4,410,976
SHAREHOLDERS’ EQUITY		438,020
Total Liabilities and Shareholders’ Equity	$	4,848,996
NET INTEREST INCOME				$	37,526
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS								3.35	%
NET INTEREST SPREAD								3.25	%

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) Interest income includes taxable-equivalent adjustment of $1,044 for the three months ended September 30, 2015.

(3) Interest income includes taxable-equivalent adjustment of $3,199 for the three months ended September 30, 2015.

(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

(5) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheet for the three months ended September 30, 2015 reflects a decrease in long-term debt of $82,000.

Note: As of September 30, 2015, loans on nonaccrual status totaled $20,988. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.

	AVERAGE BALANCES WITH AVERAGE YIELDS AND RATES (dollars in thousands) (unaudited) Nine Months Ended
	September 30, 2016									September 30, 2015
	AVG BALANCE			INTEREST			AVG YIELD/ RATE			AVG BALANCE			INTEREST			AVG YIELD/ RATE
ASSETS
INTEREST EARNING ASSETS:
Loans (1) (2)	$	2,432,652		$	82,818			4.55	%	$	2,192,804		$	74,606			4.55	%
Loans Held For Sale		5,100			126			3.30	%		3,675			125			4.55	%
Securities:
Investment Securities (Taxable) (4)		41,708			572			1.83	%		74,169			1,171			2.11	%
Investment Securities (Tax-Exempt) (3) (4)		661,430			26,041			5.26	%		637,110			26,336			5.53	%
Mortgage-backed Securities (4)		1,465,923			28,156			2.57	%		1,411,553			24,446			2.32	%
Total Securities		2,169,061			54,769			3.37	%		2,122,832			51,953			3.27	%
FHLB stock and other investments, at cost		54,051			588			1.45	%		44,204			223			0.67	%
Interest Earning Deposits		55,378			220			0.53	%		41,348			78			0.25	%
Total Interest Earning Assets		4,716,242			138,521			3.92	%		4,404,863			126,985			3.85	%
NONINTEREST EARNING ASSETS:
Cash and Due From Banks		50,738									52,108
Bank Premises and Equipment		107,699									111,341
Other Assets		270,301									268,105
Less: Allowance for Loan Losses		(19,136	)								(15,914	)
Total Assets	$	5,125,844								$	4,820,503
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST BEARING LIABILITIES:
Savings Deposits	$	242,852			204			0.11	%	$	232,326			172			0.10	%
Time Deposits		946,986			5,723			0.81	%		850,175			4,035			0.63	%
Interest Bearing Demand Deposits		1,693,135			4,448			0.35	%		1,666,718			3,300			0.26	%
Total Interest Bearing Deposits		2,882,973			10,375			0.48	%		2,749,219			7,507			0.37	%
Short-term Interest Bearing Liabilities		469,831			2,724			0.77	%		301,689			650			0.29	%
Long-term Interest Bearing Liabilities – FHLB Dallas		510,392			5,770			1.51	%		557,519			5,349			1.28	%
Subordinated Notes (5)		4,305			189			5.86	%		—			—			—	%
Long-term Debt (6)		60,233			1,251			2.77	%		60,228			1,085			2.41	%
Total Interest Bearing Liabilities		3,927,734			20,309			0.69	%		3,668,655			14,591			0.53	%
NONINTEREST BEARING LIABILITIES:
Demand Deposits		685,982									676,911
Other Liabilities		48,120									39,764
Total Liabilities		4,661,836									4,385,330
SHAREHOLDERS’ EQUITY		464,008									435,173
Total Liabilities and Shareholders’ Equity	$	5,125,844								$	4,820,503
NET INTEREST INCOME				$	118,212								$	112,394
NET INTEREST MARGIN ON AVERAGE EARNING ASSETS								3.35	%								3.41	%
NET INTEREST SPREAD								3.23	%								3.32	%

(1) Interest on loans includes net fees on loans that are not material in amount.

(2) Interest income includes taxable-equivalent adjustments of $3,206 and $3,141 for the nine months ended September 30, 2016 and 2015, respectively.

(3) Interest income includes taxable-equivalent adjustments of $10,082 and $9,276 for the nine months ended September 30, 2016 and 2015, respectively.

(4) For the purpose of calculating the average yield, the average balance of securities is presented at historical cost.

(5) The unamortized debt issuance costs deducted from the carrying amount of the subordinated notes totaled approximately $74,000 for the nine months ended September 30, 2016.

(6) Represents issuance of junior subordinated debentures. In connection with the adoption of ASU 2015-03 that requires unamortized debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, our average balance sheets for the nine months ended September 30, 2016 and 2015 reflect a decrease in long-term debt of $78,000 and $83,000, respectively.

Note: As of September 30, 2016 and 2015, loans on nonaccrual status totaled $8,536 and $20,988, respectively. Our policy is to reverse previously accrued but unpaid interest on nonaccrual loans; thereafter, interest income is recorded to the extent received when appropriate.