Southside Reverses Margin Squeeze as NII Recovers

The Tip Desk · November 9, 2026 · 3 min read

Tax-equivalent net interest margin rose 12 bps to 3.02% and linked-quarter net interest income rose 5.2% to $60.3 million.

Southside Bancshares (SBSI), a Texas bank holding company with $8.87 billion in assets, reversed a second-quarter squeeze in its net interest margin as linked-quarter net interest income recovered.

Tax-equivalent net interest margin rose 12 basis points to 3.02% in the three months ended September 30, 2026, from 2.90% in the second quarter, after an 11 bps compression from 3.01% in the first quarter. GAAP net interest margin moved the same 12 bps to 2.92%.

Net interest income was $60.3 million, up $3.0 million, or 5.2%, from $57.3 million in the second quarter, after a $0.4 million linked-quarter decline in that prior period. The company attributed the third-quarter increase primarily to a higher average yield on interest-earning assets and an extra day in the quarter.

Net income was $28.0 million, or $0.93 a share, versus $4.9 million, or $0.16 a share, a year earlier. The company said the year-over-year increase was driven by a $24.4 million net loss on sale of available-for-sale securities in the third quarter of 2025 and, to a lesser extent, higher net interest income and noninterest income and a lower provision for credit losses, partly offset by higher income tax and noninterest expense. Annualized return on average assets was 1.27% and on average tangible common equity 16.31%.

Noninterest income excluding AFS sale losses was $13.7 million, up 10.7% from a year earlier, but down $0.3 million, or 1.9%, from the second quarter. Trust fees, deposit services and brokerage services rose; BOLI and other income fell. President and Chief Executive Officer Keith Donahoe said trust fees continued to increase, largely on 10% year-to-date growth in assets under management, with brokerage fees also higher.

Noninterest expense was $39.0 million, up $0.3 million, or 0.9%, from the second quarter. The efficiency ratio improved to 53.02% (51.55% tax-equivalent) from 54.42% (52.96%) in the second quarter.

Loans were $4.96 billion, up only $9.1 million, or 0.2%, from June 30, after $3.4 million of modest linked-quarter growth in the second quarter. Commercial loans rose $42.6 million and construction loans fell $57.1 million. Securities were $2.83 billion.

Deposits were $6.01 billion, down $155.6 million, or 2.5%, from June 30, on a $200.2 million drop in public fund deposits, partly offset by a $49.4 million increase in brokered deposits. Cost of interest-bearing deposits fell 4 bps to 2.45% and cost of total deposits 5 bps to 1.89%. Noninterest-bearing deposits were about 23.3% of total deposits.

Nonperforming assets were $15.8 million, or 0.18% of total assets, up from $9.8 million, or 0.11%, at June 30, largely because of a $5.2 million commercial real estate loan past due over 90 days that paid off on October 1, 2026. Classified loans declined to $245.2 million from $260.1 million at June 30. The allowance for loan losses was $46.9 million, or 0.94% of loans. The company recorded a $0.9 million provision for credit losses for loans in the third quarter after a $24,000 reversal in the second quarter; net recoveries were $0.3 million.

The company did not repurchase shares during the third quarter under its Stock Repurchase Plan; 0.8 million authorized shares remained available. After quarter-end through October 26, 2026, it bought 36,474 shares at an average $30.00. A third-quarter cash dividend of $0.37 a share was paid September 3, 2026.