NASDAQ Global Select Market Symbol - 'SBSI'



    TYLER, Texas, July 25 /EMWNews/ -- Southside Bancshares,

Inc. ("Southside" or the "Company") (Nasdaq: SBSI) today reported its

financial results for the three and six months ended June 30, 2008.



    Southside reported record net income of $8.5 million for the three

months ended June 30, 2008, an increase of $3.9 million, or 86.0%, when

compared to $4.6 million for the same period in 2007.



    Net income for the six months ended June 30, 2008, increased $5.7

million, or 68.6% to $14.1 million from $8.4 million, for the same period

in 2007.



    Earnings per fully diluted share increased $0.28, or 87.5%, to $0.60

for the three months ended June 30, 2008, when compared to $0.32 for the

same period in 2007. Earnings per fully diluted share increased $0.40, or

67.8%, to $0.99 for the six months ended June 30, 2008, compared to $0.59

for the same period in 2007.



    The return on average shareholders' equity for the six months ended

June 30, 2008, increased to 20.06%, compared to 14.70%, for the same period

in 2007. The return on average assets increased to 1.27%, for the six

months ended June 30, 2008, compared to 0.91%, for the same period in 2007.



    "Our unwavering objective remains creating superior long-term returns

for our shareholders," stated B. G. Hartley, Chairman and CEO of Southside

Bancshares, Inc. "To that end, we remain committed to making investments

designed to enhance franchise value. Given the global economic

uncertainties and chaotic conditions under which some in the financial

industry are struggling, we are especially pleased to announce record net

income for the second quarter and six months ended June 30, 2008. The

earnings reported today are in large measure the result of strategic

investments and decisions initiated, in some cases, years ago. I would like

to report on a few initiatives and benchmarks on which we are currently

focused. We anticipate many of these results will positively impact

earnings well into the future."



    "Our regional lending initiative continues to bear fruit. Total loans

increased $17.0 million, or 1.8%, during the first half of 2008. We have

increased our focus on traditional, less volatile core deposits. Total

deposits, net of brokered deposits, increased $95.5 million, or 6.8%,

during the first six months of 2008. During the first half of 2008, we

called $123.4 million of brokered deposits issued in a higher rate

environment. We have replaced them with lower rate long-term advances at

the FHLB. We use the same rigorous methodology to determine appropriate

funding sources as we do to determine appropriate asset classes. The

current economic troubles have forced many in the financial services

industry to return to the basics. Southside, however, did not feel the need

to depart from basic community banking."



    "We continue to make progress with respect to our two major

acquisitions. Fort Worth National Bank is rapidly integrating into the

Southside network. During the third quarter we anticipate introducing the

Southside name into the Fort Worth National Bank markets. As the

integration continues to progress, we anticipate further synergies in

lending and deposit activities. We are also working to reduce total

non-interest expense as we increase the economies of scale. Southside has

traditionally built businesses with available proven talent. The Fort Worth

metropolitan area has a large, dynamic labor pool, and we have been able to

capitalize on the current turmoil in the financial sector by, successfully

recruiting several banking professionals. We expect to begin integrating

these individuals into the Southside franchise during the third quarter.

Southside Financial Group ("SFG") continues to progress according to plan.

We are especially pleased to have added Gary Perdue to SFG. We believe we

are putting the pieces into place for SFG to be a meaningful contributor to

future earnings."



    "In the investment portfolio, we have realigned our agency

mortgage-backed securities to profit from a slower, less robust real estate

market. Our entire mortgage-backed portfolio is comprised of U. S. Agency

securities. As real estate continued to weaken during 2008, we reviewed our

investment portfolio and identified certain securities with poor economics

in the event that housing turnover (as well as simple refinancing) slowed

appreciably. Put simply, specific lower coupon bonds tended to have that

exposure. We liquidated lower coupon bonds and replaced them with higher

coupon securities that actually performed better as housing slowed. The net

result was an increase in the average coupon for our mortgage-backed

securities portfolio of just slightly over 30 basis points."



    "Determining the appropriate size of the balance sheet is one of the

critical decisions any bank makes. At Southside, the balance sheet is not

merely the result of a series of micro-decisions, but rather the size is

controlled based on the economics of assets compared to the economics of

funding. Our balance sheet has grown recently after a period of slight

shrinkage during portions of 2006 and 2007. As a large number of firms are

forced to shrink their balance sheet, the economics of funding additional

assets has become advantageous to us. As this economic situation persists,

we will continue to add assets as they become available. These assets, may

include investment securities, loans, a branch network, as well as

traditional organic and non-organic growth. We believe we are fortunate to

be in a position to increase the size of the balance sheet at a time when

some in the financial sector are forced to reduce assets."



    Loan and Deposit Growth



    For the three months ended June 30, 2008, total loans decreased

slightly by $2.6 million, or 0.27%. Management believes that the loan

portfolio remains well diversified. During the quarter ended June 30, 2008,

all real estate loan categories decreased along with loans to individuals

while commercial and municipal loan portfolios increased. When comparing

the period ended June 30, 2008 to the comparable period in 2007, total

loans grew by $209.5 million, or 27.3%. Approximately $90.5 million of the

increase is due to the purchase of Fort Worth National Bank in October of

2007 and approximately $63.0 million of SFG automobile loans. The remaining

$56.0 million increase is due to loan growth at Southside Bank. We are

pleased that our loan growth is well diversified as all loan categories

increased when comparing June 30, 2008 to the same period in 2007.



    Nonperforming assets decreased $487,000, or 6.0%, for the three months

ended June 30, 2008, when compared to March 31, 2008. The ratio of

non-performing assets to total assets decreased to one third of one percent

or 0.33% from 0.36% at March 31, 2008. Nonperforming assets increased $5.3

million, or 229.0%, when comparing June 30, 2008 to June 30, 2007. The

ratio of non-performing assets to total assets increased but remained

relatively low at 0.33%. It is important to note that approximately $3.0

million of the nonperforming assets represents two loan relationships

placed in nonaccrual during the six months ended June 30, 2008 and while we

believe these loans are properly classified, based on information currently

available, we do not believe there will be any significant nonreserved

losses associated with these two loan relationships. In addition,

approximately $1.2 million of SFG automobile loans were in nonaccrual

status at June 30, 2008 compared to zero at June 30, 2007. This increase is

a result of the $63 million in auto loan purchases by SFG beginning in

September 2007.



    Deposits, net of brokered deposits, increased $89.4 million, or 6.4%,

to $1.5 billion during the three months ended June 30, 2008, when compared

to March 31, 2008. During the quarter we called $32.2 million of brokered

deposits. When comparing the period ended June 30, 2008 to the comparable

period in 2007, deposits, net of brokered deposits, increased $280.2

million, or 23.1%. Approximately $104.0 million of the increase is due to

the purchase of Fort Worth National Bank and approximately $176.0 million

of core deposit growth at Southside Bank.



    Net Interest Income



    Net interest income increased $7.8 million, or 77.9%, to $17.9 million

for the three months ended June 30, 2008, when compared to $10.1 million

for the same period in 2007. This is a result of an increase in the average

yield on our interest earning assets combined with a decrease in the

average yield on the average interest bearing liabilities. The increase in

the yield on interest earning assets is reflective of the purchase of $63.0

million of high yield auto loans by SFG, the addition of approximately

$90.5 million of loans associated with the acquisition of Fort Worth

National Bank, an 11 basis point increase in the yield on our securities

portfolio and an increase in average interest earning assets of $392.1

million, or 23.2%. The decrease in the average yield on interest bearing

liabilities is a result of an overall decrease in interest rates and

calling $123.4 million of high yield brokered deposits during 2008. For the

three months ended June 30, 2008, our net interest spread increased to

3.06% from 1.71% and our net interest margin increased to 3.65% from 2.57%

when compared to the same period in 2007. The net interest margin and net

interest spread for the three months ended June 30, 2008, increased to

3.65% and 3.06%, respectively, from 3.22% and 2.55% for the three months

ended March 31, 2008.



    Net Income for the Three Months



    The increase in net income for the three months ended June 30, 2008,

was primarily a result of the increase in net interest income and

noninterest income partially offset by an increase in provision for loan

loss and noninterest expense. Noninterest income, excluding gain on

available for sale securities, increased $971,000, or 14.6%, for the three

months ended June 30, 2008, compared to the same period in 2007. The

increase in noninterest income was primarily the result of increases in

deposit services income, gain on sale of loans and bank owned life

insurance income primarily as a result of a death benefit on a retired

officer. During the three months ended June 30, 2008, we primarily sold

specific low coupon mortgage-backed securities where the risk reward

profile had changed along with long duration municipal securities. As a

result, we realized a $3.7 million gain on the sale of available for sale

securities during the second quarter of 2008. Provision for loan losses

increased $2.7 million, or 1,258.1%, for the three months ended June 30,

2008, compared to the same period in 2007 primarily as a result of the $63

million investment in the automobile loan portfolios.



    Noninterest expense increased $3.0 million, or 26.4%, for the three

months ended June 30, 2008, compared to the same period in 2007. Due to the

acquisition of Fort Worth National Bank during the fourth quarter of 2007

and SFG in the third quarter of 2007, most noninterest expense categories

experienced increases. The increase in noninterest expense was primarily a

result of the increase in salaries and employee benefits, occupancy expense

and other expense. The increase in salaries and employee benefits for the

three months ended June 30, 2008 were $1.5 million, or 20.7%, compared to

the same period in 2007.

    About Southside Bancshares, Inc.



    Southside Bancshares, Inc. is a bank holding company with approximately

$2.3 billion in assets that owns 100% of Southside Bank and Fort Worth

National Bank. Southside Bank and Fort Worth National Bank currently have

44 banking centers in Texas and operate a network of 45 ATMs.



    To learn more about Southside Bancshares, Inc., please visit our

investor relations website at http://www.southside.com/investor. 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 Susan Hill at (903) 531-7220, or [email protected].



    Forward-Looking Statements



    Certain statements of other than historical fact that are contained in

this document and in written material, press releases and oral statements

issued by or on behalf of the Company, a bank holding company, may be

considered to be "forward-looking statements" within the meaning of and

subject to the 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," "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, estimates,

intentions and 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 of the effect of the

Company's expansion, including expectations of the costs and profitability

of such expansion, trends in asset quality and earnings from growth, and

certain market risk disclosures 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. As a

result, actual income gains and losses could materially differ from those

that have been estimated.



    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, 2007 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.










                                         At              At             At

                                       June 30,      December 31,     June 30,

                                        2008             2007          2007

                                                (dollars in thousands)

                                                     (unaudited)

    Selected Financial Condition

     Data (at end of period):



    Total assets                     $2,323,788      $2,196,322    $1,821,776

    Loans                               978,269         961,230       768,739

    Allowance for loan losses            11,527           9,753         7,367

    Mortgage-backed and related

     securities:

      Available for sale, at

       estimated fair value             851,331         727,553       599,326

      Held to maturity, at cost         173,453         189,965       207,262

    Investment securities:

      Available for sale, at

       estimated fair value             110,581         109,928        88,566

      Held to maturity, at cost             477             475         1,353

    Federal Home Loan Bank and

     Federal Reserve stock, at cost      28,859          19,850        15,540

    Deposits                          1,498,072       1,530,491     1,336,350

    Long-term obligations               422,895         146,558       110,012

    Shareholders' equity                140,989         132,328       115,494

    Nonperforming assets                  7,646           3,946         2,324

      Nonaccrual loans                    5,807           2,913         1,637

      Loans 90 days past due                907             400           408

      Restructured loans                    170             225           179

      Other real estate owned               465             153            23

      Repossessed assets                    297             255            77



    Asset Quality Ratios:

    Nonaccruing loans to total loans       0.59%           0.30%         0.21%

    Allowance for loan losses to

     nonaccruing loans                   198.50          334.81        450.03

    Allowance for loan losses to

     nonperforming assets                150.76          247.16        317.00

    Allowance for loan losses to

     total loans                           1.18            1.01          0.96

    Nonperforming assets to total

     assets                                0.33            0.18          0.13

    Net charge-offs to average loans       0.70            0.09          0.04



    Capital Ratios:

    Shareholders' equity to total

     assets                                6.07            6.02          6.34

    Average shareholders' equity to

     average total assets                  6.33            6.22          6.22







    LOAN PORTFOLIO COMPOSITION



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

presented:



                                        At              At            At

                                      June 30,      December 31,    June 30,

                                       2008            2007          2007

                                                  (in thousands)

                                                   (unaudited)

    Real Estate Loans:

      Construction                    $97,083         $96,356       $46,876

      1-4 Family Residential          240,149         237,888       223,996

      Other                           203,109         211,280       177,918

    Commercial Loans                  167,963         154,171       125,609

    Municipal Loans                   120,194         112,523       110,416

    Loans to Individuals              149,771         149,012        83,924

    Total Loans                      $978,269        $961,230      $768,739







                                   At or for the           At or for the

                                    Three Months             Six Months

                                   Ended June 30,          Ended June 30,

                                 2008        2007         2008        2007

                               (dollars in thousands)   (dollars in thousands)

                                    (unaudited)             (unaudited)



    Selected Operating Data:

    Total interest income      $31,575      $24,380      $63,671      $49,577

    Total interest expense      13,680       14,319       30,406       29,490

    Net interest income         17,895       10,061       33,265       20,087

    Provision for loan losses    2,947          217        5,186          334

    Net interest income

     after provision for loan

     losses                     14,948        9,844       28,079       19,753

    Noninterest income

      Deposit services           4,667        4,270        9,084        8,198

      Gain on securities

       available for sale        3,660            6        5,752          435

      Gain on sale of loans        847          724        1,312        1,069

      Trust income                 619          576        1,212        1,040

      Bank owned life insurance

       income                      758          268        1,068          532

      Other                        736          818        1,561        1,526

        Total noninterest

         income                 11,287        6,662       19,989       12,800

    Noninterest expense

      Salaries and employee

       benefits                  8,806        7,298       17,519       14,402

      Occupancy expense          1,427        1,190        2,815        2,358

      Equipment expense            329          242          641          470

      Advertising, travel &

       entertainment               496          449          960          870

      ATM and debit card expense   304          242          592          496

      Director fees                147          141          291          268

      Supplies                     206          188          383          336

      Professional fees            353          240          787          551

      Postage                      182          155          366          303

      Telephone and

       communications              257          193          515          384

      Other                      1,974        1,118        3,963        2,254

        Total noninterest

         expense                14,481       11,456       28,832       22,692

    Income before income

     tax expense                11,754        5,050       19,236        9,861

    Provision for income

     tax expense                 3,223          463        5,159        1,511

    Net income                  $8,531       $4,587      $14,077       $8,350



    Common share data:

    Weighted-average basic

     shares outstanding         13,843       13,688       13,824       13,660

    Weighted-average

     diluted shares

     outstanding                14,190       14,109       14,175       14,102

    Net income per common

     share

      Basic                      $0.62        $0.33        $1.02        $0.61

      Diluted                     0.60         0.32         0.99         0.59

    Book value per common

     share                           -            -        10.15         8.41

    Cash dividend declared

     per common share             0.13         0.12         0.25         0.23



    Selected Performance Ratios:

    Return on average assets      1.53%        1.02%        1.27%        0.91%

    Return on average

     shareholders' equity        23.82        15.79        20.06        14.70

    Average yield on interest

     earning assets               6.29         5.98         6.39         5.96

    Average yield on interest

     bearing liabilities          3.23         4.27         3.59         4.28

    Net interest spread           3.06         1.71         2.80         1.68

    Net interest margin           3.65         2.57         3.44         2.52

    Average interest earnings

     assets to average

     interest bearing

     liabilities                122.06       125.70       121.25       124.37

    Noninterest expense to

     average total assets         2.60         2.55         2.60         2.49

    Efficiency ratio             53.59        65.47        57.17        66.72





    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 cost of the interest bearing liabilities.








                                     AVERAGE BALANCES AND YIELDS

                                       (dollars in thousands)

                                            (unaudited)

                                          Six Months Ended

                               June 30, 2008              June 30, 2007

                           AVG               AVG       AVG               AVG

                         BALANCE  INTEREST  YIELD    BALANCE  INTEREST  YIELD

    ASSETS

    INTEREST EARNING ASSETS:

    Loans(1) (2)        $977,105   $37,188   7.65%  $767,168   $26,259   6.90%

    Loans Held For

     Sale                  3,055        70   4.61%     3,884        96   4.98%

    Securities:

      Investment

       Securities

       (Taxable)(4)       51,795     1,070   4.15%    59,374     1,452   4.93%

      Investment

       Securities

       (Tax-Exempt)(3)(4) 86,750     2,833   6.57%    40,893     1,449   7.15%

      Mortgage-backed and

       Related

       Securities (4)    915,471    23,993   5.27%   833,161    21,097   5.11%

        Total

         Securities    1,054,016    27,896   5.32%   933,428    23,998   5.18%

    FHLB stock and

     other investments,

     at cost              26,731       476   3.58%    21,517       700   6.56%

    Interest Earning

     Deposits              1,129        20   3.56%       551        17   6.22%

    Federal Funds Sold     5,412        71   2.64%     2,140        52   4.90%

    Total Interest

     Earning

     Assets            2,067,448    65,721   6.39% 1,728,688    51,122   5.96%

    NONINTEREST

     EARNING ASSETS:

    Cash and Due From

     Banks                45,858                      42,669

    Bank Premises and

     Equipment            39,964                      33,952

    Other Assets          87,214                      43,359

      Less: Allowance

       for Loan Loss     (10,189)                     (7,298)

    Total Assets      $2,230,295                  $1,841,370



    LIABILITIES AND

     SHAREHOLDERS'

     EQUITY

    INTEREST

     BEARING

     LIABILITIES:

    Savings Deposits     $55,961       357   1.28%   $51,815       334   1.30%

    Time Deposits        558,133    12,701   4.58%   540,684    13,072   4.88%

    Interest Bearing

    Demand Deposits      482,170     5,565   2.32%   392,614     6,184   3.18%

      Total Interest

       Bearing

       Deposits        1,096,264    18,623   3.42%   985,113    19,590   4.01%

    Short-term

     Interest

     Bearing

     Liabilities         309,044     5,139   3.34%   280,657     6,722   4.83%

    Long-term

     Interest

     Bearing

     Liabilities --

     FHLB Dallas         239,541     4,597   3.86%   103,515     2,318   4.52%

    Long-term Debt(5)     60,311     2,047   6.83%    20,619       860   8.30%

    Total Interest

     Bearing

     Liabilities       1,705,160    30,406   3.59% 1,389,904    29,490   4.28%

    NONINTEREST

     BEARING

     LIABILITIES:

    Demand Deposits      360,125                     318,189

    Other Liabilities     23,324                      18,692

    Total

     Liabilities       2,088,609                   1,726,785



    Minority Interest

     in SFG                  576                           -



    SHAREHOLDERS'

     EQUITY              141,110                     114,585

    Total Liabilities

     and Shareholders'

     Equity           $2,230,295                  $1,841,370

    NET INTEREST

     INCOME                        $35,315                     $21,632

    NET YIELD ON

     AVERAGE EARNING

     ASSETS                                  3.44%                       2.52%

    NET INTEREST

     SPREAD                                  2.80%                       1.68%



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

         amount.

    (2)  Interest income includes taxable-equivalent adjustments of $1,195 and

         $1,108 for the six months ended June 30, 2008 and 2007, respectively.

    (3)  Interest income includes taxable-equivalent adjustments of $855 and

         $437 for the six months ended June 30, 2008 and 2007, respectively.

    (4)  For the purpose of calculating the average yield, the average balance

         of securities is presented at historical cost.

    (5)  Represents junior subordinated debentures issued by us to Southside

         Statutory Trust III, IV, and V in connection with the issuance by

         Southside Statutory Trust III of $20 million of trust preferred

         securities, Southside Statutory Trust IV of $22.5 million of trust

         preferred securities, Southside Statutory Trust V of $12.5 million of

         trust preferred securities and junior subordinated debentures issued

         by Fort Worth Bancshares, Inc. to Magnolia Trust Company I in

         connection with the issuance by Magnolia Trust Company I of $3.5

         million of trust preferred securities.



    Note: As of June 30, 2008 and 2007, loans totaling $5,807 and $1,637,

respectively, were on nonaccrual status. The 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 AND YIELDS

                                          (dollars in thousands)

                                                (unaudited)

                                             Three Months Ended

                                 June 30, 2008              June 30, 2007

                             AVG              AVG       AVG               AVG

                           BALANCE INTEREST  YIELD    BALANCE  INTEREST  YIELD

    ASSETS

    INTEREST EARNING ASSETS:

    Loans(1) (2)          $978,109  $18,333   7.54%  $768,744   $13,238  6.91%

    Loans Held For

     Sale                    3,262       39   4.81%     4,458        55  4.95%

    Securities:

      Investment

       Securities

       (Taxable)(4)         42,475      390   3.69%    50,584       616  4.88%

      Investment Securities

       (Tax-Exempt)(3)(4)   96,548    1,543   6.43%    40,747       726  7.15%

      Mortgage-backed and

       Related

       Securities (4)      927,506   12,020   5.21%   804,026    10,163  5.07%

        Total Securities 1,066,529   13,953   5.26%   895,357    11,505  5.15%

    FHLB stock and

     other investments,

     at cost                28,478      214   3.02%    17,778       330  7.45%

    Interest Earning

     Deposits                  725        5   2.77%       550        10  7.29%

    Federal Funds Sold       3,838       19   1.99%     1,945        23  4.74%

    Total Interest

     Earning Assets      2,080,941   32,563   6.29% 1,688,832    25,161  5.98%

    NONINTEREST EARNING

     ASSETS:

    Cash and Due

     From Banks             43,634                     40,259

    Bank Premises

     and Equipment          39,938                     35,342

    Other Assets            85,635                     42,910

      Less: Allowance

       for Loan Loss       (10,358)                    (7,360)

    Total Assets        $2,239,790                 $1,799,983



    LIABILITIES AND

     SHAREHOLDERS' EQUITY

    INTEREST BEARING

     LIABILITIES:

    Savings Deposits       $57,996      185   1.28%   $52,454       170  1.30%

    Time Deposits          518,324    5,219   4.05%   548,969     6,711  4.90%

    Interest Bearing

     Demand Deposits       488,099    2,464   2.03%   395,653     3,144  3.19%

    Total Interest

     Bearing

     Deposits            1,064,419    7,868   2.97%   997,076    10,025  4.03%

    Short-term

     Interest Bearing

     Liabilities           258,078    1,839   2.87%   231,818     2,776  4.80%

    Long-term Interest

     Bearing Liabilities

     -- FHLB Dallas        321,995    3,011   3.76%    94,082     1,086  4.63%

    Long-term

     Debt (5)               60,311      962   6.42%    20,619       432  8.29%

    Total Interest

     Bearing

     Liabilities         1,704,803   13,680   3.23% 1,343,595    14,319  4.27%

    NONINTEREST BEARING

     LIABILITIES:

    Demand Deposits        368,564                    320,966

    Other Liabilities       21,908                     18,927

    Total

     Liabilities         2,095,275                  1,683,488



    Minority Interest

     in SFG                    472                          -



    SHAREHOLDERS'

     EQUITY                144,043                    116,495

    Total Liabilities

     and Shareholders'

     Equity             $2,239,790                 $1,799,983

    NET INTEREST

     INCOME                         $18,883                     $10,842

    NET YIELD ON

     AVERAGE EARNING

     ASSETS                                   3.65%                      2.57%

    NET INTEREST SPREAD                       3.06%                      1.71%



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

         amount.

    (2)  Interest income includes taxable-equivalent adjustments of $605 and

         $560 for the three months ended June 30, 2008 and 2007, respectively.

    (3)  Interest income includes taxable-equivalent adjustments of $383 and

         $221 for the three months ended June 30, 2008 and 2007, respectively.

    (4)  For the purpose of calculating the average yield, the average balance

         of securities is presented at historical cost.

    (5)  Represents junior subordinated debentures issued by us to Southside

         Statutory Trust III, IV, and V in connection with the issuance by

         Southside Statutory Trust III of $20 million of trust preferred

         securities, Southside Statutory Trust IV of $22.5 million of trust

         preferred securities, Southside Statutory Trust V of $12.5 million of

         trust preferred securities and junior subordinated debentures issued

         by Fort Worth Bancshares, Inc. to Magnolia Trust Company I in

         connection with the issuance by Magnolia Trust Company I of $3.5

         million of trust preferred securities.



    Note: As of June 30, 2008 and 2007, loans totaling $5,807 and $1,637,

respectively, were on nonaccrual status. The policy is to reverse

previously accrued but unpaid interest on nonaccrual loans; thereafter,

interest income is recorded to the extent received when appropriate.