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EMPLOYEE BENEFITS

12 Months Ended

Dec. 31, 2023

Employee Benefits Including Defined Benefit Plans and Share-based Compensation Plans [Abstract]

Deferred Compensation Agreements

Southside Bank has deferred compensation agreements with 33 of its executive officers, which generally provide for payment of an aggregate amount of $10.1 million over a maximum period of 15 years after retirement or death. Of the 33 executives included in the agreements, payments have commenced to 11 former executives and/or their beneficiaries. Deferred compensation expense was $86,000, $310,000 and $457,000 for the years ended December 31, 2023, 2022 and 2021, respectively. At December 31, 2023 and 2022, the deferred compensation plan liability totaled $3.2 million and $3.5 million, respectively.

Health Insurance

We provide accident and health insurance for substantially all employees through a self-funded insurance program. The cost of health care benefits was $8.1 million, $8.4 million and $8.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. Our healthcare plan provides health insurance coverage for any retiree having 50 years of service with the Company. In addition, the eligible retiree must have Medicare coverage, including part A, part B and part D. There was one retiree participating in the health insurance plan as of December 31, 2023, 2022 and 2021.

Employee Stock Ownership Plan

We have an ESOP which covers substantially all employees. Contributions to the ESOP are at the sole discretion of the board of directors. We contributed $1.0 million to the ESOP for the years ended December 31, 2023, 2022 and 2021. At December 31, 2023 and 2022, the ESOP owned 366,791 and 345,847 shares of common stock, respectively. These shares are treated as externally held shares for dividend and earnings per share calculations.

Long-term Disability

We have an officer’s long-term disability income policy which provides coverage in the event they become disabled as defined under its terms. Individuals are automatically covered under the policy if they (a) have been elected as an officer, (b) have been an employee of Southside Bank for three years and (c) receive earnings of $50,000 or more on an annual basis. The policy provides, among other things, that should a covered individual become totally disabled he would receive two-thirds of his

current salary, not to exceed $15,000 per month. The benefits paid out of the policy are limited by the benefits paid to the individual under the terms of our other Company-sponsored benefit plans.

Split Dollar Agreements

We originally entered into split dollar agreements with eight of our executive officers. The agreements provide we will be the beneficiary of BOLI insuring the executives’ lives. The agreements provide the executives the right to designate the beneficiaries of the death benefits guaranteed in each agreement. The agreements originally provided for death benefits of an initial aggregate amount of $4.5 million. Prior to an executive’s retirement, their individual amount is increased annually on the anniversary date of the agreement by inflation adjustment factors of either 3% or 5%. As of December 31, 2023, three of the executives remained actively employed with us. Death benefits under this agreement were paid during 2018 for one retired covered officer and during 2013 for one active covered officer. As of December 31, 2023, the estimated death benefits for the seven executives totaled $5.8 million. The agreements also state that after the executive’s retirement, we shall also pay an annual gross-up bonus to the executive in an amount sufficient to enable the executive to pay federal income tax on both the economic benefit and on the gross-up bonus. A credit to expense of $95,000 was required to record the post retirement liability associated with the split dollar post retirement bonus for the year ended December 31, 2023. For the years ended December 31, 2022 and 2021 the expense was $27,000 and $87,000, respectively. For the years ended December 31, 2023 and 2022, the split dollar liability totaled $1.6 million and $1.9 million, respectively.

401(k) Plan

We have a 401(k) Plan covering substantially all employees that permits each participant to make before- or after-tax contributions subject to certain limits imposed by the Internal Revenue Code. Beginning January 1, 2017, eligible employees may participate in the 401(k) Plan after they have worked at least 30 days with the Company. For the years ended December 31, 2023, 2022 and 2021, expense attributable to the 401(k) Plan totaled $2.2 million, $2.0 million and $2.2 million, respectively.

Retirement Plans

We have a defined benefit pension plan pursuant to which participants are entitled to benefits based on final average monthly compensation and years of credited service determined in accordance with plan provisions.

We have a nonfunded supplemental retirement plan for our employees whose benefits under the principal retirement plan are reduced because of compensation deferral elections or limitations under federal tax laws.

Entrance into the Retirement Plan by new employees was frozen effective December 31, 2005. Employees hired after December 31, 2005 are not eligible to participate in the Retirement Plan. All remaining participants in the Retirement Plan are fully vested. Benefits are payable monthly commencing on the later of age 65 or the participant’s date of retirement. Eligible participants may retire at reduced benefit levels after reaching age 55. We contribute amounts to the pension fund sufficient to satisfy funding requirements of the Employee Retirement Income Security Act. Effective December 31, 2020, all future benefit accruals and accrual of benefit service, including consideration of compensation increases, were frozen. No further benefits have been or will be earned by employees since that date.

Retirement Plan assets included 240,666 shares of our stock at December 31, 2023 and December 31, 2022. Our stock included in the Retirement Plan assets was purchased at fair value. During 2023, our funded status improved, and at December 31, 2023, we had a funded status of $8.4 million compared to a funded status of $6.9 million at December 31, 2022. The improvement in the funded status was a result of a greater than expected return on the fair value of plan assets since December 31, 2022, partially offset by a decrease in the discount rate to better reflect the current market conditions at December 31, 2023 compared to December 31, 2022.

In connection with the acquisition of Omni, we acquired the OmniAmerican Bank Defined Benefit Plan which was remeasured at fair value. The Acquired Retirement Plan originally called for benefits to be paid to eligible employees at retirement based primarily upon years of service and the compensation levels at retirement. As of December 31, 2006, the benefits under the Acquired Retirement Plan were frozen by Omni. No further benefits have been or will be earned by employees since that date. In addition, no new participants may be added to the Acquired Retirement Plan after December 31, 2006. During 2023, our funded status improved and at December 31, 2023, we had a funded status of $839,000 compared to a funded status of $749,000 at December 31, 2022. The improvement in the funded status was a result of a greater than expected return on the fair value of plan assets since December 31, 2022, partially offset by a decrease in the discount rate to better reflect the current market conditions at December 31, 2023 compared to December 31, 2022.

We use a measurement date of December 31 for our plans.

Activity in our defined benefit pension plans and restoration plan were as follows (in thousands):


	Years Ended December 31,
	2023						2022						2021
	Retirement Plan		Acquired Retirement Plan		Restoration Plan		Retirement Plan		Acquired Retirement Plan		Restoration Plan		Retirement Plan		Acquired Retirement Plan		Restoration Plan
	(in thousands)
Change in Projected Benefit Obligation:
Benefit obligation at end of prior year	$	69,869	$	2,379	$	15,463	$	94,170	$	3,483	$	19,321	$	96,848	$	3,704	$	18,789

Interest cost	3,771		126		831		2,741		102		578		2,570		92		520
Actuarial (gain) loss	3,856		201		555		(22,997)		(1,076)		(3,763)		(1,381)		(155)		684
Benefits paid	(4,218)		(61)		(673)		(3,950)		(60)		(673)		(3,734)		(59)		(672)
Expenses paid	(113)		(88)		—		(95)		(70)		—		(133)		(99)		—



Settlements	—		(311)		—		—		—		—		—		—		—

Benefit obligation at end of year	73,165		2,246		16,176		69,869		2,379		15,463		94,170		3,483		19,321
Change in Plan Assets:
Fair value of plan assets at end of prior year	76,735		3,128		—		97,439		3,871		—		90,419		3,613		—
Actual return	9,147		417		—		(16,659)		(613)		—		10,887		416		—
Employer contributions	—		—		673		—		—		673		—		—		672
Benefits paid	(4,218)		(61)		(673)		(3,950)		(60)		(673)		(3,734)		(59)		(672)
Expenses paid	(113)		(88)		—		(95)		(70)		—		(133)		(99)		—
Settlements	—		(311)		—		—		—		—		—		—		—

Fair value of plan assets at end of year	81,551		3,085		—		76,735		3,128		—		97,439		3,871		—
(Un)Funded status at end of year	8,386		839		(16,176)		6,866		749		(15,463)		3,269		388		(19,321)
Accrued benefit (liability) asset recognized	$	8,386	$	839	$	(16,176)	$	6,866	$	749	$	(15,463)	$	3,269	$	388	$	(19,321)
Accumulated benefit obligation at end of year	$	73,165	$	2,246	$	16,176	$	69,869	$	2,379	$	15,463	$	94,170	$	3,483	$	19,321

Amounts related to our defined benefit pension plans and restoration plan recognized as a component of other comprehensive income (loss) were as follows (in thousands):


	Years Ended December 31,
	2023						2022						2021
	Retirement Plan		Acquired Retirement Plan		Restoration Plan		Retirement Plan		Acquired Retirement Plan		Restoration Plan		Retirement Plan		Acquired Retirement Plan		Restoration Plan
Recognition of net loss	$	726	$	—	$	30	$	640	$	—	$	255	$	1,002	$	6	$	256


Recognition of gain due to settlement	—		(16)		—		—		—		—		—		—		—
Net gain (loss) occurring during the year	718		29		(555)		493		231		3,763		6,848		361		(685)

	1,444		13		(525)		1,133		231		4,018		7,850		367		(429)
Deferred tax (expense) benefit	(303)		(3)		110		(238)		(48)		(844)		(1,648)		(77)		90
Other comprehensive income (loss), net of tax	$	1,141	$	10	$	(415)	$	895	$	183	$	3,174	$	6,202	$	290	$	(339)

The noncash adjustment to the employee benefit plan assets and/or liabilities, consisting of changes in net loss, was $948,000 and $5.4 million for the years ended December 31, 2023 and 2022, respectively.

Net amounts recognized in net periodic benefit cost and other comprehensive income (loss) were as follows (in thousands):


	December 31, 2023						December 31, 2022
	Retirement Plan		Acquired Retirement Plan		Restoration Plan		Retirement Plan		Acquired Retirement Plan		Restoration Plan
Net loss	$	726	$	—	$	30	$	640	$	—	$	255




Deferred tax expense	(153)		—		(6)		(134)		—		(54)
Accumulated other comprehensive income (loss), net of tax	$	573	$	—	$	24	$	506	$	—	$	201

Amounts recognized as a component of accumulated other comprehensive income (loss) were as follows (in thousands):


	December 31, 2023						December 31, 2022
	Retirement Plan		Acquired Retirement Plan		Restoration Plan		Retirement Plan		Acquired Retirement Plan		Restoration Plan
Net gain (loss)	$	(21,356)	$	113	$	(2,511)	$	(22,800)	$	100	$	(1,986)


Deferred tax (expense) benefit	4,485		(24)		527		4,788		(21)		417

Accumulated other comprehensive income (loss), net of tax	$	(16,871)	$	89	$	(1,984)	$	(18,012)	$	79	$	(1,569)

Net periodic pension cost and postretirement benefit cost included the following components (in thousands):


	Years Ended December 31,
	2023		2022		2021
Retirement Plan:

Interest cost	$	3,771	$	2,741	$	2,570
Expected return on assets	(4,573)		(5,845)		(5,420)
Net loss amortization	726		640		1,002


Net periodic benefit cost (income)	$	(76)	$	(2,464)	$	(1,848)
Acquired Retirement Plan:

Interest cost	$	126	$	102	$	92
Expected return on assets	(187)		(232)		(211)
Net loss amortization	—		—		6

Gain recognized due to settlement	(16)		—		—
Net periodic benefit cost (income)	$	(77)	$	(130)	$	(113)
Restoration Plan:

Interest cost	$	831	$	578	$	520
Net loss amortization	30		255		256


Net periodic benefit cost	$	861	$	833	$	776

The Retirement Plan and Acquired Retirement Plan assets, which consist primarily of marketable equity and debt instruments, are valued using market quotations in active markets for identical assets, market quotations for similar assets in active or non-active markets or the net asset value provided by the plan administrator. The Retirement Plans’ obligations and the annual pension expense are determined by independent actuaries and through the use of a number of assumptions. Key assumptions in measuring the Retirement Plans’ obligations include the discount rate and the estimated future return on plan assets.

In determining the discount rate, we utilized a cash flow matching analysis to determine a range of appropriate discount rates for the defined benefit pension plans and restoration plan. In developing the cash flow matching analysis, we had our actuaries construct a portfolio of high quality noncallable bonds to match as closely as possible the timing of future benefit payments of the Retirement Plans at December 31, 2023. We utilized a bond selection-settlement approach that selects a portfolio of bonds from a universe of high quality corporate bonds rated AA by at least half of the rating agencies available. Based on the results of this cash flow matching analysis, we were able to determine an appropriate discount rate.

The expected long-term rate of return assumption reflects the average return expected based on the investment strategies and asset allocation of the assets invested to provide for the Retirement Plans’ liabilities. We considered broad equity and bond indices, long-term return projections and actual long-term historical Plan performance when evaluating the expected long-term rate of return assumption.

The assumptions used to determine the benefit obligation were as follows:


	December 31, 2023						December 31, 2022
	Retirement Plan		Acquired Retirement Plan		Restoration Plan		Retirement Plan		Acquired Retirement Plan		Restoration Plan
Discount rate	5.13	%	5.13	%	5.13	%	5.46	%	5.46	%	5.46	%

The assumptions used to determine net periodic pension cost and postretirement benefit cost were as follows:


	Years Ended December 31,
	2023		2022		2021
Retirement Plan:
Discount rate	5.46	%	2.95	%	2.65	%
Expected long-term rate of return on plan assets	6.13	%	6.13	%	6.13	%

Acquired Retirement Plan:
Discount rate	5.46	%	2.95	%	2.65	%
Expected long-term rate of return on plan assets	6.13	%	6.13	%	6.13	%

Restoration Plan:
Discount rate	5.46	%	2.95	%	2.65	%

During the three months ended June 30, 2021, we updated our expected long-term rate of return on plan assets for the Retirement Plan and the Acquired Retirement Plan from 6.50% to 6.125%.

Material changes in pension benefit costs may occur in the future due to changes in these assumptions. Future annual amounts could be impacted by changes in the number of Plan participants, changes in the level of benefits provided, changes in the discount rates, changes in the expected long-term rate of return, changes in the level of contributions to the Retirement Plan and other factors.

The major categories of assets in the Plan and the Acquired Retirement Plan are presented in the following table (in thousands). Assets are segregated by the level of the valuation inputs within the fair value hierarchy established by ASC Topic 820 “Fair Value Measurements and Disclosures,” utilized to measure fair value (see “Note 12 – Fair Value Measurement”). Our Restoration Plan is unfunded.


	December 31, 2023				December 31, 2022
	Retirement Plan		Acquired Retirement Plan		Retirement Plan		Acquired Retirement Plan
Level 1:
Cash	$	1,428	$	—	$	605	$	—
Equity securities:
U.S. large cap (1)	28,506		1,055		23,032		1,103
U.S. mid cap (2)	4,323		125		3,594		135
U.S. small cap (3)	11,907		64		12,447		66
International developed (4)	9,317		—		8,161		—
International emerging (2)	1,964		—		1,841		—
International (5)	—		540		—		547
Fixed income securities:
Corporate bonds (6)	—		1,078		—		1,027
U.S. government treasuries (6)	148		—		233		—
Real estate (7)	—		223		—		250

Level 2:
Cash Equivalents	5,957		—		8,543		—





Fixed income securities:
Corporate bonds (6)	1,893		—		1,979		—
U.S. government agencies (6)	4,871		—		4,380		—
Municipal bonds (6)	11,119		—		11,774		—
U.S. agency MBS (8)	118		—		146		—




Total fair value of plan assets	$	81,551	$	3,085	$	76,735	$	3,128

(1)For the Retirement Plan, this category is comprised of broadly diversified “passive” and “active” mutual funds. The Acquired Retirement Plan assets in this category consist of pooled separate accounts invested in mutual funds and domestic stocks.

(2)For the Retirement Plan, this category is comprised of broadly diversified “active” mutual funds. The Acquired Retirement Plan assets in this category consist of pooled separate accounts invested in mutual funds.

(3)For the Retirement Plan, this category is comprised of broadly diversified “passive” and “active” mutual funds and shares of Southside Bancshares stock. The Acquired Retirement Plan assets in this category consist of pooled separate accounts invested in mutual funds.

(4)This category is comprised of a broadly diversified “passive” and “active” mutual funds.

(5)This category is comprised of pooled separate accounts invested in mutual funds and international stocks.

(6)For the Retirement Plan, this category is comprised of individual investment grade securities that are generally HTM. The Acquired Retirement Plan assets in this category consist of pooled separate accounts invested in mutual funds, bonds and fixed income securities.

(7)This category is comprised of a pooled separate account invested in commercial real estate and includes mortgage loans which are backed by the associated properties.

(8)This category is comprised of individual securities that are generally not HTM.

We did not have any plan assets with Level 3 input fair value measurements at December 31, 2023 or 2022.

Our overall investment strategy is to realize long-term growth of the Retirement Plan within acceptable risk parameters, while funding benefit payments from dividend and interest income, to the extent possible. The target allocations for plan assets are 64.0% equities, 35.0% fixed income and 1.0% cash equivalents. Equity securities are diversified among U.S. and international (both developed and emerging), large, mid and small caps, value and growth securities and REITs. The investment objective of equity funds is long-term capital appreciation with current income. Fixed income securities include government agencies, CDs, corporate bonds, municipal bonds and MBS. The investment objective of fixed income funds is to maximize investment return while preserving investment principal. Mutual funds are primarily used for equity and REITs because of the superior

diversification they provide. Subsequent to December 31, 2023, we began the liquidation and reinvestment of the assets in the Retirement Plan using a liability-driven investment strategy.

As of December 31, 2023, expected future benefit payments related to the Retirement Plan, the Acquired Retirement Plan and the Restoration Plan were as follows (in thousands):


	Retirement Plan		Acquired Retirement Plan		Restoration Plan
2024	$	4,415	$	85	$	694
2025	4,616		92		818
2026	4,930		92		1,156
2027	5,115		128		1,406
2028	5,210		373		1,420
2029 through 2033	26,495		564		7,137
	$	50,781	$	1,334	$	12,631

We expect to contribute $725,000 to our Restoration Plan in 2024. We do not expect to make additional contributions to the Retirement Plan or the Acquired Retirement Plan in 2024.

Share-based Incentive Plans

2017 Incentive Plan

On May 10, 2017, our shareholders approved the 2017 Incentive Plan, which is a stock-based incentive compensation plan. A total of 2,460,000 shares of our common stock were reserved and available for issuance pursuant to awards granted under the 2017 Incentive Plan. This amount includes a number of additional shares (not to exceed 410,000) underlying awards outstanding as of May 10, 2017 under the Company’s 2009 Incentive Plan that thereafter terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason. Under the 2017 Incentive Plan, we are authorized to grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and qualified performance-based awards or any combination thereof to selected employees, officers, directors and consultants of the Company and its affiliates. As of December 31, 2023, there were 1,033,423 shares remaining available for grant for future awards.

All share data has been adjusted to give retroactive recognition to stock dividends, where applicable. Reference to incentive plans refers to the 2017 Incentive Plan and predecessor incentive plans.

As of December 31, 2023, 2022 and 2021, there were 201,315, 277,600 and 368,447 unvested awards outstanding, respectively. For the years ended December 31, 2023, 2022 and 2021, there was $3.2 million, $2.9 million and $2.7 million of share-based compensation expense for employees related to the incentive plans, respectively, and $671,000, $605,000 and $570,000 of income tax benefit related to the stock compensation expense, respectively. Director stock compensation expense was $359,000, $342,000, and $306,000 for the years ended December 31, 2023, 2022 and 2021 respectively, and $75,000, $72,000 and $64,000 of income tax benefit related to the director stock compensation expense, respectively.

As of December 31, 2023, 2022 and 2021, there was $5.7 million, $7.4 million and $6.2 million of unrecognized compensation cost related to the incentive plans, respectively. The remaining cost at December 31, 2023 is expected to be recognized over a weighted-average period of 2.3 years.

The fair value of each NQSO is estimated on the date of grant using a Black-Scholes option pricing model. There were no NQSO grants during the years ended December 31, 2023, 2022 or 2021. The NQSOs have contractual terms of 10 years and vest in equal annual installments over either a three- or four-year period.

The fair value of each RSU is the ending stock price on the date of grant. RSUs granted to employees vest in equal annual installments over a period of between three and four years. Director RSUs vest after a period of one year. Directors may elect to defer the receipt of shares and instead receive them on a specified anniversary of grant date or upon the termination of their service on the Board.

The fair value of each PSU is the ending stock price on the date of grant. PSUs granted to executive officers will cliff vest on the third anniversary of the grant date, subject to the grantee’s continued service on such date, and will be earned based on the Company’s ROATCE related to ROATCE of the KBW Nasdaq Regional Bank Index (NASDAQ: KRX), over a 3 year performance period. The PSUs may be earned between a minimum payout of 50%, based on a ROATCE performance threshold of 25th percentile of the Peer Group, a target payout of 100%, based on a ROATCE performance threshold of 50th percentile, and a maximum payout of 150%, based on a performance threshold of 75th percentile or greater. Share payout for performance between the minimum threshold, target and maximum is calculated on a straight line basis, and performance below the minimum threshold results in no share payout.

Each award is evidenced by an award agreement that specifies the option price, if applicable, the duration of the award, the number of shares to which the award pertains and such other provisions as the board of directors determines. Historically, shares issued in connection with stock compensation awards have been issued from available authorized shares. Beginning in the second quarter of 2017, shares were issued from available treasury shares.

Shares issued in connection with stock compensation awards along with other related information are presented in the following table (in thousands, except share amounts):


	Years Ended December 31,
	2023		2022		2021
New shares issued from available treasury shares	99,109		86,500		305,212
Proceeds from stock option exercises	$	1,082	$	790	$	7,672
Intrinsic value of stock options exercised	$	229	$	421	$	3,005

A combined summary of activity in our share-based plans as of December 31, 2023 is presented below. Performance stock units outstanding are presented assuming attainment of the maximum payout rate as set forth by the performance criteria:


	Restricted Stock Units Outstanding						Stock Options Outstanding
	Service Based			Performance Based
	Number of Shares	Weighted- Average Grant-Date Fair Value		Number of Shares	Weighted- Average Grant-Date Fair Value		Number of Shares	Weighted- Average Exercise Price		Weighted- Average Grant-Date Fair Value
Balance, January 1, 2023	225,928	$	36.60	13,514	$	41.74	673,011	$	33.45	$	6.49
Granted	57,966	30.14		15,140	38.89		—	—		—
Stock options exercised	—	—		—	—		(38,556)	28.03		6.77
Stock awards vested	(74,698)	36.57		—	—		—	—		—
Forfeited	(11,253)	36.30		—	—		(3,682)	34.83		5.89
Canceled/expired	—	—		—	—		(10,267)	34.12		6.37
Balance, December 31, 2023	197,943	$	34.76	28,654	$	40.18	620,506	$	33.76	$	6.47

Other information regarding options outstanding and exercisable as of December 31, 2023 is as follows:


					Options Outstanding				Options Exercisable
Range of Exercise Prices					Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life in Years	Number of Shares	Weighted- Average Exercise Price
$	23.66	-	$	25.00	6,153	$	23.66	1.02	6,153	$	23.66
25.01		-	30.00		86,226	26.61		1.48	86,226	26.61
30.01		-	35.00		451,962	34.67		5.06	451,962	34.67
35.01		-	37.28		76,165	37.28		2.87	76,165	37.28

Total					620,506	$	33.76	4.25	620,506	$	33.76

The total intrinsic value of outstanding in-the-money stock options and outstanding in-the-money exercisable stock options was $453,000 for both at December 31, 2023. The weighted-average remaining contractual life of options exercisable at December 31, 2023 was 4.3 years.