Southside Bancshares Net Income Plummets 76% on Securities Losses

TL;DR

**SBSI's Q3 earnings are a disaster, driven by massive securities losses; steer clear until they fix their balance sheet.**

AI Summary

Southside Bancshares, Inc. (SBSI) reported a significant decline in net income for the three months ended September 30, 2025, falling to $4.913 million from $20.524 million in the prior year, a decrease of 76.1%. This was primarily driven by a substantial net loss on the sale of available-for-sale (AFS) securities of $24.395 million, compared to a loss of $1.929 million in the same period of 2024. Total interest and dividend income also decreased to $101.896 million from $105.703 million, a 3.6% decline, while total interest expense decreased by 8.9% to $46.178 million. Net interest income saw a slight increase to $55.718 million from $55.464 million. For the nine months ended September 30, 2025, net income was $48.233 million, down from $66.708 million in 2024, a 27.7% reduction. The company's total assets decreased to $8.383 billion from $8.517 billion at December 31, 2024, while total deposits increased to $6.961 billion from $6.654 billion. The allowance for loan losses increased slightly to $45.294 million from $44.884 million. Strategic outlook includes managing interest rate risk and credit quality in a challenging environment.

Why It Matters

This significant drop in net income, largely due to AFS securities losses, signals potential challenges for SBSI investors, impacting dividend sustainability and future growth prospects. The increase in deposits is a positive, indicating customer confidence, but the overall asset decline suggests a contraction. Competitively, other regional banks might be navigating interest rate environments more effectively, potentially drawing away customers or investment. Employees could face pressure if profitability trends continue, and customers might see changes in lending rates or services as the bank adjusts its strategy. The broader market may view this as a cautionary tale for banks heavily invested in fixed-income securities during periods of interest rate volatility.

Risk Assessment

Risk Level: high — The company reported a net loss on sale of AFS securities of $24.395 million for the three months ended September 30, 2025, a significant increase from $1.929 million in the prior year. This, coupled with a 76.1% decline in net income to $4.913 million, indicates substantial market risk exposure and poor asset management in a volatile interest rate environment.

Analyst Insight

Investors should exercise extreme caution and consider reducing exposure to SBSI given the substantial decline in net income and significant securities losses. Await clear evidence of improved asset-liability management and a stabilized interest rate environment before reconsidering investment.

Financial Highlights

revenue

$101,896,000

total Assets

$8,383,160,000

net Income

$4,913,000

eps

$0.16

cash Position

$466,912,000

revenue Growth

-3.6%

Revenue Breakdown

Key Numbers

• $4.913M — Net income for Q3 2025 (Decreased 76.1% from $20.524 million in Q3 2024)
• $24.395M — Net loss on sale of AFS securities for Q3 2025 (Significantly higher than $1.929 million loss in Q3 2024)
• $101.896M — Total interest and dividend income for Q3 2025 (Decreased 3.6% from $105.703 million in Q3 2024)
• $46.178M — Total interest expense for Q3 2025 (Decreased 8.9% from $50.239 million in Q3 2024)
• $55.718M — Net interest income for Q3 2025 (Slightly increased from $55.464 million in Q3 2024)
• $48.233M — Net income for YTD Q3 2025 (Decreased 27.7% from $66.708 million in YTD Q3 2024)
• $8.383B — Total assets as of September 30, 2025 (Decreased from $8.517 billion at December 31, 2024)
• $6.961B — Total deposits as of September 30, 2025 (Increased from $6.654 billion at December 31, 2024)
• $45.294M — Allowance for loan losses as of September 30, 2025 (Increased from $44.884 million at December 31, 2024)
• $0.16 — Basic EPS for Q3 2025 (Decreased from $0.68 in Q3 2024)

Key Players & Entities

• Southside Bancshares, Inc. (company) — registrant
• Southside Bank (company) — wholly owned subsidiary
• U.S. Securities and Exchange Commission (regulator) — filing authority
• New York Stock Exchange (regulator) — exchange where SBSI is registered
• Federal Home Loan Bank (company) — source of borrowings
• Financial Accounting Standards Board (regulator) — issues accounting standards
• Federal Deposit Insurance Corporation (regulator) — insurance provider
• Board of Governors of the Federal Reserve System (regulator) — federal reserve
• Bloomberg (company) — financial news provider

FAQ

Risk Factors

• Net Loss on Sale of Securities [high — financial]: The company reported a significant net loss of $24.395 million on the sale of available-for-sale (AFS) securities in Q3 2025, a substantial increase from the $1.929 million loss in Q3 2024. This directly impacted net income, causing a 76.1% decline.
• Interest Rate Risk [high — market]: The company faces challenges managing interest rate risk in a dynamic environment. Fluctuations in interest rates can impact net interest income and the fair value of investment securities, as evidenced by the large loss on AFS securities sales.
• Declining Net Income [high — financial]: Net income for Q3 2025 was $4.913 million, a 76.1% decrease from $20.524 million in Q3 2024. Year-to-date net income also fell 27.7% to $48.233 million from $66.708 million. This trend indicates significant pressure on profitability.
• Economic Conditions [medium — market]: The company operates in a challenging economic environment that affects credit quality and loan demand. While the allowance for loan losses saw a slight increase to $45.294 million, continued economic uncertainty poses a risk to asset quality.
• Decreasing Interest and Dividend Income [medium — financial]: Total interest and dividend income decreased by 3.6% to $101.896 million in Q3 2025 from $105.703 million in Q3 2024. This decline, particularly in taxable and tax-exempt investment securities, contributed to lower overall revenue.
• Asset and Liability Management [medium — operational]: The company's total assets decreased to $8.383 billion from $8.517 billion at year-end 2024, while total deposits increased to $6.961 billion. Managing this balance sheet composition, especially with significant FHLB borrowings decreasing from $731.9 million to $101.3 million, requires careful strategy.

Industry Context

Southside Bancshares operates within the highly competitive U.S. banking sector, which is currently navigating a complex environment characterized by fluctuating interest rates and evolving economic conditions. Banks are focused on managing net interest margins, credit quality, and adapting to digital transformation trends. The sector faces ongoing regulatory scrutiny and pressure to maintain capital adequacy.

Regulatory Implications

The banking industry is subject to stringent regulatory oversight from bodies like the Federal Reserve and FDIC. Compliance with capital requirements, liquidity rules, and consumer protection laws is paramount. Changes in monetary policy and economic conditions can trigger increased regulatory focus on areas like credit risk and interest rate risk management.

What Investors Should Do

1. Monitor AFS Securities Strategy
2. Analyze Net Interest Margin Trends
3. Assess Credit Quality Indicators
4. Evaluate Balance Sheet Adjustments

Key Dates

• 2025-09-30: End of Third Quarter 2025 — Reported net income of $4.913 million, a 76.1% decrease year-over-year, largely due to a $24.395 million loss on AFS securities.
• 2025-09-30: Consolidated Balance Sheet Date — Total assets stood at $8.383 billion, down from $8.517 billion at year-end 2024. Total deposits increased to $6.961 billion.
• 2024-12-31: End of Fiscal Year 2024 — Total assets were $8.517 billion and total deposits were $6.654 billion. This serves as the comparative baseline for the current period's asset and deposit changes.

Glossary

Available-for-sale (AFS) securities

Investments in debt or equity securities that are not classified as held-to-maturity or trading securities. They are reported at fair value on the balance sheet, with unrealized gains and losses recorded in other comprehensive income. (A significant net loss of $24.395 million on AFS securities in Q3 2025 heavily impacted the company's net income.)

Held-to-maturity (HTM) securities

Investments in debt securities that the company has the intent and ability to hold until their maturity date. These are reported at amortized cost on the balance sheet. (The company holds $1.263 billion in HTM securities as of September 30, 2025, with an estimated fair value of $1.106 billion.)

Accumulated Other Comprehensive Income (Loss) (AOCI)

A component of shareholders' equity that includes unrealized gains and losses on certain investments (like AFS securities), foreign currency translation adjustments, and pension plan adjustments that have not yet been realized into net income. (AOCI was a negative $108.104 million as of September 30, 2025, reflecting unrealized losses on securities.)

Net Interest Income

The difference between interest income generated by a financial institution's interest-earning assets and the interest expense paid on its interest-bearing liabilities. (Net interest income saw a slight increase to $55.718 million in Q3 2025 from $55.464 million in Q3 2024, indicating stable core lending profitability despite other pressures.)

Allowance for Loan Losses

A contra-asset account that represents the cumulative amount of estimated uncollectible loans. It is used to reduce the carrying value of loans to their net realizable amount. (The allowance increased slightly to $45.294 million from $44.884 million, suggesting a cautious approach to credit quality in the current environment.)

Year-Over-Year Comparison

Compared to the prior year, Southside Bancshares Inc. experienced a substantial 76.1% decline in net income for the third quarter of 2025, primarily driven by a large loss on the sale of available-for-sale securities. Total interest and dividend income also decreased by 3.6%, although net interest income saw a marginal increase. Total assets have slightly decreased, while total deposits have grown, indicating shifts in the company's balance sheet composition. New risks related to significant investment portfolio losses and ongoing interest rate management are more pronounced.

Key Financial Figures

• $1.25 — ange on which registered Common Stock, $1.25 par value SBSI New York Stock Exchange
• $1 — of the issuer's common stock, par value $1.25, outstanding as of October 24, 2025

Filing Documents

• sbsi-20250930.htm (10-Q) — 3700KB
• sbsi_093025ex311.htm (EX-31.1) — 11KB
• sbsi_093025ex312.htm (EX-31.2) — 11KB
• sbsi_093025ex32.htm (EX-32) — 7KB
• 0000705432-25-000207.txt ( ) — 17515KB
• sbsi-20250930.xsd (EX-101.SCH) — 60KB
• sbsi-20250930_cal.xml (EX-101.CAL) — 136KB
• sbsi-20250930_def.xml (EX-101.DEF) — 374KB
• sbsi-20250930_lab.xml (EX-101.LAB) — 913KB
• sbsi-20250930_pre.xml (EX-101.PRE) — 665KB
• sbsi-20250930_htm.xml (XML) — 4321KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) 3 CONSOLIDATED BALANCE SHEETS 3 CONSOLIDATED STATEMENTS OF INCOME 4 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 5 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 6 CONSOLIDATED STATEMENTS OF CASH FLOWS 8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 43

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 65

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 66

OTHER INFORMATION

PART II. OTHER INFORMATION

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS 66

RISK FACTORS

ITEM 1A. RISK FACTORS 66

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 67

DEFAULTS UPON SENIOR SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 67

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES 67

OTHER INFORMATION

ITEM 5. OTHER INFORMATION 67

EXHIBITS

ITEM 6. EXHIBITS 68 EXHIBIT INDEX 68

SIGNATURES

SIGNATURES 69 Table of Contents SOUTHSIDE BANCSHARES, INC. Glossary of Acronyms, Abbreviations and Terms The acronyms, abbreviations and terms listed below are used in various sections of this Form 10-Q, including "Item 1. Financial Statements" and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations." Entities: Southside Bancshares, Inc. Bank holding company for Southside Bank Southside Bank Texas state bank and wholly owned subsidiary of Southside Bancshares, Inc. Company Combined entities of Southside Bancshares, Inc. and its subsidiaries, including Southside Bank Bank Southside Bank Southside Southside Bancshares, Inc. Other Acronyms, Abbreviations and Terms: 2024 Form 10-K Southside Bancshares, Inc. Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025 401(k) Plan 401(k) Defined Contribution Plan Acquired Retirement Plan OmniAmerican Bank defined benefit pension plan AFS Available for sale ALCO Asset/Liability Committee AOCI Accumulated other comprehensive income or loss ASC Accounting Standards Codification ASU Accounting Standards Update issued by the FASB ATM Automated teller machines Basel Committee Basel Committee on Banking Supervision BOLI Bank owned life insurance CDs Certificates of deposit CECL ASC 326, Financial Instruments- Credit Losses, also known as Current Expected Credit Losses CET1 Common Equity Tier 1 CMOs Collateralized mortgage obligations CRE Commercial real estate ESOP Employee Stock Ownership Plan ETR Effective tax rate Exchange Act Securities Exchange Act of 1934, as amended FASB Financial Accounting Standards Board FDIC Federal Deposit Insurance Corporation Federal Reserve The Board of Governors of the Federal Reserve System FHLB Federal Home Loan Bank FRBNY Federal Reserve Bank of New York FRDW Federal Reserve Discount Window FTE Fully-taxable equivalents measurements (non-GAAP) GAAP United States

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS SOUTHSIDE BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share amounts) September 30, 2025 December 31, 2024 ASSETS Cash and due from banks $ 90,519 $ 91,409 Interest earning deposits 365,263 281,945 Federal funds sold 11,130 52,807 Total cash and cash equivalents 466,912 426,161 Securities: Securities AFS, at estimated fair value (amortized cost of $ 1,307,864 and $ 1,587,416 , respectively) 1,292,431 1,533,894 Securities HTM (estimated fair value of $ 1,106,186 and $ 1,113,482 , respectively) 1,263,401 1,279,234 FHLB stock, at cost 9,359 33,818 Equity investments 9,552 9,467 Loans held for sale 497 1,946 Loans: Loans 4,765,289 4,661,597 Less: Allowance for loan losses ( 45,294 ) ( 44,884 ) Net loans 4,719,995 4,616,713 Premises and equipment, net 147,187 141,648 Operating lease ROU assets 12,734 13,860 Goodwill 201,116 201,116 Other intangible assets, net 1,161 1,754 Interest receivable 35,413 46,724 Deferred tax asset, net 30,573 34,492 Unsettled trades to sell securities 9,093 — BOLI 139,697 138,313 Other assets 44,039 38,308 Total assets $ 8,383,160 $ 8,517,448 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest bearing $ 1,411,764 $ 1,357,152 Interest bearing 5,549,823 5,297,096 Total deposits 6,961,587 6,654,248 Other borrowings 99,374 76,443 FHLB borrowings 101,332 731,909 Subordinated notes, net of unamortized debt issuance costs 239,601 92,042 Trust preferred subordinated debentures, net of unamortized debt issuance costs 60,278 60,274 Operating lease liabilities 14,670 15,779 Other liabilities 71,468 74,811 Total liabilities 7,548,310 7,705,506 Off-balance-sheet arrangements, commitments and contingencies (Note 12) Shareholders' equity: Common stock: ($ 1.25 par value, 80,000,000 shares authorized, 38,103,037 shares issued at September 30, 2025 and 38,077,992 shares issued at December 31, 2024) 47,629 47,598 Paid-in c

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Summary of Significant Accounting and Reporting Policies Basis of Presentation In this report, the words "the Company," "we," "us," and "our" refer to the combined entities of Southside Bancshares, Inc. and its subsidiaries, including Southside Bank. The words "Southside" and "Southside Bancshares" refer to Southside Bancshares, Inc. The words "Southside Bank" and "the Bank" refer to Southside Bank. The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, not all information required by GAAP for complete financial statements is included in these interim statements. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. The preparation of these consolidated financial statements in accordance with GAAP requires the use of management's estimates. These estimates are subjective in nature and involve matters of judgment. Actual amounts could differ from these estimates. Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the financial statements and notes thereto in our 2024 Form 10-K. Accounting Changes and Reclassifications Certain prior period amounts may be reclassified to conform to current year presentation. 2. Earnings Per Share Earnings per share on a basic and diluted basis are calculated as follows (in thousands, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Basic and Diluted Earnings: Net income $ 4,913 $ 20,524 $ 48,233 $ 66,708 Less: Earnings allocated to participating securities 3 14 30 41 Net income available to common shareholders

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