<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to _________________________
Commission file number 0-10849
-------
SOUTHSIDE BANCSHARES CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-1262037
- --------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3606 GRAVOIS AVENUE, ST. LOUIS, MISSOURI 63116
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 776-7000
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- ______
At AUGUST 14, 1996, the number of shares outstanding of the
registrant's common stock was 2,847,150.
<PAGE>
SOUTHSIDE BANCSHARES CORP.
INDEX
Page
----
Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Income for
the six months and three months ended
June 30, 1996 and June 30, 1995 4
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 1996 and June 30, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(dollars in thousands except share data)
(unaudited)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1996 1995
ASSETS --------- ------------
<S> <C> <C>
Cash and due from banks $ 16,454 $ 16,912
Due from banks - interest-bearing 17 18
Federal funds sold 14,650 19,100
Investments in debt securities:
Available-for-sale, at market value 60,267 50,152
Held-to-maturity, at amortized cost
(approximate market value of $111,942
in 1996, and $110,494 in 1995) 112,356 109,622
-------- --------
Total investments in debt securities 172,623 159,774
-------- --------
Loans, net of unearned discount
Less allowance for possible loan losses 294,642 303,824
(5,301) (5,635)
-------- --------
Loans, net 289,341 298,189
-------- --------
Bank premises and equipment 10,446 10,777
Other assets 8,650 8,138
-------- --------
TOTAL ASSETS $512,181 $512,908
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Deposits:
Noninterest-bearing demand $ 55,011 $ 60,999
Interest-bearing demand and savings 186,104 183,758
Time deposits 212,746 212,810
-------- --------
Total deposits 453,861 457,567
Short-term borrowings 2,383 779
Debt of employee stock ownership plan 1,779 2,987
Other liabilities 4,157 4,275
-------- --------
Total liabilities 462,180 465,608
-------- --------
Commitments and contingent liabilities
Shareholders' equity:
Cumulative preferred stock, no par value, 1,000,000 shares
authorized and unissued - -
Common stock, $1 par value, 5,000,000 shares authorized,
2,859,010 shares issued and outstanding in 1996 and 1995 2,859 2,859
Surplus 5,784 5,766
Retained earnings 43,960 41,655
Unearned employee stock ownership plan shares (1,680) (2,688)
Treasury stock, 11,860 shares in 1996 and 9,630 shares in 1995 (220) (167)
Net unrealized holding losses on available-for-sale securities (702) (125)
-------- --------
Total shareholders' equity 50,001 47,300
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $512,181 $512,908
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SIX AND THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(dollars in thousands except share data)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 13,130 $ 13,191 $ 6,439 $ 6,582
Interest on investments in debt securities:
Taxable 4,242 4,151 2,257 2,038
Exempt from Federal income taxes 635 643 311 315
Interest on short-term investments 536 290 300 177
--------- --------- --------- ---------
TOTAL INTEREST INCOME 18,543 18,275 9,307 9,112
--------- --------- --------- ---------
INTEREST EXPENSE:
Interest on interest-bearing demand and savings deposits 2,773 2,938 1,413 1,459
Interest on time deposits 5,756 5,178 2,857 2,693
Interest on short-term borrowings 51 118 22 37
Interest on debt of employee stock ownership plan 95 55 37 55
Interest on subordinated capital notes - 119 - 18
--------- --------- --------- ---------
TOTAL INTEREST EXPENSE 8,675 8,408 4,329 4,262
--------- --------- --------- ---------
NET INTEREST INCOME 9,868 9,867 4,978 4,850
Provision for possible loan losses 30 40 15 15
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE
LOAN LOSSES 9,838 9,827 4,963 4,835
--------- --------- --------- ---------
NONINTEREST INCOME:
Trust department 457 467 240 244
Service charges on deposit accounts 625 597 319 297
Net gains (losses) on sale of other real estate owned
and other foreclosed property (23) (130) (35) 56
Settlement of litigation - 1,400 - -
Gain on sale of Bay-Hermann-Berger Bank - 825 - -
Other 404 335 184 200
--------- --------- --------- ---------
TOTAL NONINTEREST INCOME 1,463 3,494 708 797
--------- --------- --------- ---------
NONINTEREST EXPENSES:
Salaries and employee benefits 3,650 3,492 1,892 1,748
Net occupancy and equipment expense 1,177 1,012 597 509
Data processing 243 298 150 150
Federal Deposit Insurance Corporation assessment 69 544 36 268
Attorney fees 110 416 64 81
Other 2,021 2,147 1,060 1,019
--------- --------- --------- ---------
TOTAL NONINTEREST EXPENSES 7,270 7,909 3,799 3,775
--------- --------- --------- ---------
INCOME BEFORE FEDERAL INCOME TAX EXPENSE 4,031 5,412 1,872 1,857
Federal income tax expense 1,124 1,473 513 496
--------- --------- --------- ---------
NET INCOME $ 2,907 $ 3,939 $ 1,359 $ 1,361
========= ========= ========= =========
SHARE DATA:
Earnings per common share $ 1.08 $ 1.50 $ 0.50 $ 0.51
========= ========= ========= =========
Dividends paid per common share $ 0.22 $ 0.165 $ 0.12 $ 0.10
========= ========= ========= =========
Average common shares outstanding 2,691,667 2,622,408 2,739,985 2,653,377
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,907 $ 3,939
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,041 827
Provision for possible loan losses 30 40
Gain on sale of Bay-Hermann-Berger Bank - (825)
Other operating activities, net (764) (560)
-------- --------
Total adjustments 307 (518)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,214 3,421
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in Federal funds sold 4,450 (3,700)
Proceeds from maturities of and principal payments on
debt securities 22,068 12,555
Purchases of debt securities (36,102) (6,778)
Net (increase) decrease in loans 8,375 (8,451)
Recoveries of loans previously charged off 443 399
Proceeds from the sale of Bay-Hermann-Berger Bank,
net of cash transferred - 2,213
Proceeds from sales of other real estate owned and other
foreclosed property 119 920
Purchases of bank premises and equipment (269) (820)
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (916) (3,662)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand and savings deposits (3,642) (21,400)
Net increase (decrease) in time deposits (64) 19,365
Net increase (decrease) in short-term borrowings 1,604 (115)
Payments to acquire treasury stock (53) -
Repayment of subordinated capital notes - (4,190)
Cash dividends paid (602) (434)
Proceeds from issuance of common stock - 4,217
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (2,757) (2,557)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (459) (2,798)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 16,930 19,028
-------- --------
CASH AND CASH EQUIVALENTS, END OF QUARTER $ 16,471 $ 16,230
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowings $ 8,700 $ 8,175
Income taxes 1,570 1,280
======== ========
Noncash transactions:
Transfers to other real estate owned in settlement of loans $ 370 $ 538
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SOUTHSIDE BANCSHARES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. They do not include all information and footnotes
required by generally accepted accounting principles for complete consolidated
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. For further information, refer to Southside Bancshares Corp.'s
(the Company) Annual Report on Form 10-K for the year ended December 31, 1995.
Operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
2. LITIGATION
On February 27, 1995, the Company settled a lawsuit in which the Company's
subsidiary, South Side National Bank in St. Louis (South Side), was the
plaintiff. Under the terms of the settlement agreement executed by the parties,
South Side received a cash payment of $1,400,000, which was offset by remaining
legal expenses of approximately $300,000. The litigation arose from a
$1,500,000 payment made by the Company in 1992 (and charged to earnings in
1991). The settlement amount is included in the 1995 condensed consolidated
statement of income as "Settlement of litigation" in noninterest income. The
related legal fees have been included in noninterest expense as part of
"Attorney fees".
3. SALE OF BAY-HERMANN-BERGER BANK
On March 17, 1995, the Company sold its wholly owned subsidiary, Bay-
Hermann-Berger Bank (the Bank), in an all cash transaction with an unaffiliated
institution. The purchasing institution paid approximately $3,145,000 for all
of the Bank's common stock, which resulted in a pretax gain to the Company of
$825,000. This gain is disclosed in the 1995 condensed consolidated statement of
income as a separate component of noninterest income. Bay-Hermann-Berger Bank
was the smallest of the Company's five subsidiary banks, and with total assets
of $24,157,000 as of December 31, 1994, represented only 4.67% of total
consolidated assets as of that date. Accordingly, the sale of the Bank did not
represent the disposition of a significant segment of the Company's business, as
defined in paragraph 13 of Accounting Principles Board Opinion No. 30.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This discussion is presented to provide an understanding of Southside
Bancshares Corp. and subsidiaries (the "Company" or "Registrant") consolidated
financial condition and the results of operations for the six months ended June
30, 1996 and 1995.
The Company's net income is derived primarily from the net interest income
of its subsidiary banks. Net interest income is the difference (or spread)
between the interest income the subsidiary banks receive from their loan and
investment portfolios and their cost of funds, consisting primarily of the
interest paid on deposits and borrowings. Net income is also affected by the
levels of provisions for possible loan losses, noninterest income, and
noninterest expense.
6
<PAGE>
Item 2. (continued)
FINANCIAL HIGHLIGHTS
COMPARISON OF SELECTED FINANCIAL DATA
(dollars in thousands except share data)
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended Six Months Ended
June 30, 1996 December 31, 1995 June 30, 1995
---------------- ------------------- ----------------
<S> <C> <C> <C>
EARNINGS
Total interest income $ 18,543 $ 37,263 $ 18,275
Total interest expense 8,675 17,335 8,408
--------- --------- ---------
Net interest income 9,868 19,928 9,867
Provision for possible loan losses 30 70 40
Net interest income after provision for possible --------- --------- ---------
loan losses $ 9,838 $ 19,858 $ 9,827
========= ========= =========
Net income $ 2,907 $ 6,734 $ 3,939
========= ========= =========
SHARE DATA/(1)/
Net income $ 1.08 $ 2.55 $ 1.50
Dividends paid .22 .365 .165
Book value 18.25 17.64 16.75
Tangible book value 18.12 17.49 16.59
Shares outstanding (period-end) 2,847,150 2,849,650 2,855,000
FINANCIAL POSITION
Total assets $ 512,181 $ 512,908 $ 499,118
Total deposits 453,861 457,567 444,381
Total loans, net of unearned discount 294,642 303,824 297,345
Allowance for possible loan losses 5,301 5,635 5,893
Short-term borrowings 2,383 779 3,052
Debt of employee stock ownership plan 1,779 2,987 2,987
Total shareholders' equity 50,001 47,300 44,699
</TABLE>
SELECTED RATIOS
The table below summarizes various selected ratios as of the end of the periods
indicated.
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended Six Months Ended
June 30, 1996/(2)/ December 31, 1995 June 30, 1995/(2)/
------------------ ------------------- ------------------
<S> <C> <C> <C>
Loan-to-deposit ratio 64.92% 66.40% 66.91%
Allowance for possible loan losses to total
loans 1.80 1.85 1.98
Return on average assets 1.14 1.33(3) 1.57(3)
Return on average shareholders' equity 11.89 15.47(3) 19.11(3)
Net interest margin on average interest-
earning assets 4.30 4.41 4.42
Average shareholders' equity to average total
assets 9.59 8.62 8.23
Tier I leverage capital to adjusted total
consolidated assets less intangibles 9.83 9.27 8.98
Tier I capital to risk-weighted assets 16.49 14.94 14.57
Total capital to risk-weighted assets 17.75 16.20 15.83
</TABLE>
(1) Share Data has been adjusted on a retroactive basis to reflect the effects
of the ten for one stock split on February 15, 1996.
(2) Statistical information is annualized where applicable.
(3) Includes the gain on sale of Bay-Hermann-Berger Bank and the net litigation
settlement. Excluding the after-tax effect of these two nonrecurring items,
the return on average assets and shareholders' equity as of December 31,
1995 would have been 1.06% and 12.32%, respectively and as of June 30, 1995
would have been 1.03% and 12.47%, respectively.
7
<PAGE>
Item 2. (continued)
FINANCIAL POSITION
Total consolidated assets of the Company remained relatively unchanged at
$512,181,000 at June 30, 1996 compared to $512,908,000 at December 31, 1995.
LOAN PORTFOLIO
The Company's loan portfolio consists of business loans to small and medium
size companies, commercial and residential real estate loans, and consumer
loans. Traditionally, the majority of the loan portfolio has focused on real
estate as an integral component of a credit's underlying source of repayment.
The following table is a breakdown of the Company's loan portfolio as of the end
of the periods indicated.
SUMMARY OF LOAN PORTFOLIO COMPONENTS
<TABLE>
<CAPTION>
(in thousands)
JUNE 30, 1996 December 31, 1995 June 30, 1995
-------------- ----------------- --------------
<S> <C> <C> <C>
Commercial, financial and agricultural $ 64,874 $ 62,214 $ 61,551
Real estate-commercial 84,638 88,321 80,809
Real estate-construction 19,595 15,510 11,719
Real estate-residential 97,256 102,418 106,926
Consumer 16,559 17,626 17,765
Industrial revenue bonds 7,289 7,789 8,136
Other 4,431 9,946 10,439
-------- -------- --------
$294,642 $303,824 $297,345
======== ======== ========
</TABLE>
The Company's loan portfolio totaled $294,642,000 at June 30, 1996. This
represents a decline of approximately $9.2 million since December 31, 1995;
however, total loans increased by $2.8 million during the second quarter. This
second quarter loan growth helped offset the $12 million shrinkage the portfolio
experienced during the first quarter of 1996. The majority of the decline in the
first quarter was the result of a few larger commercial and real estate loan
payoffs, as well as, normal activity on operating lines of credit. The increase
in the second quarter can be attributed to the net effects of loan payoffs in
the "Other" loan category being more than offset by new commercial loan
fundings, and advances to borrowers in the construction industry. The increase
in the commercial loan portfolio is a result of management's focus on replacing
the loan payoffs in other segments of the loan portfolio. The increase in the
construction portfolio is a normal occurrence for this segment of economy.
Weather in the Midwest is more conducive to the construction industry during the
second and third quarters, consequently the borrowers tend to utilize their
lines of credit to the greatest capacity during these two quarters. The decrease
in the "Other" loan category was the result of the payoff of two bank stock
loans which totalled approximately $5.3 million. As competition for borrowing
relationships continues to increase, management continues to weigh both the
short and long-term effects of retaining lending relationships, and while the
Company would prefer to retain these relationships, doing so can result in
unacceptable long-term results.
8
<PAGE>
Item 2. (continued)
SUMMARY OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
(dollars in thousands)
SIX MONTHS ENDED Twelve Months Ended Six Months Ended
JUNE 30, 1996 December 31, 1995 June 30, 1995
------------- ----------------- -------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $ 5,635 $ 7,144 $ 7,144
Provision charged to expense 30 70 40
Loans charged off (807) (2,174) (1,363)
Recoveries 443 922 399
Adjustment due to sale of Bay-Hermann-
Berger Bank - (327) (327)
------- ------- ---------
BALANCE AT END OF PERIOD $ 5,301 $ 5,635 $ 5,893
======= ======= =========
RATIOS:
Allowance for possible loan losses
as % of total loans 1.80% 1.85% 1.98%
Allowance for possible loan losses
as % of nonperforming loans 110.79 172.11 176.86
Allowance for possible loan losses
as multiple of net charge-offs (1) 7.3X 4.5x 6.1x
(1) Statistical information is annualized where applicable.
</TABLE>
The balance of the allowance for possible loan losses declined by $334,000
during the first six months of 1996, largely due to net charge-offs of $364,000.
The provision for possible loan losses during the first six months was $30,000.
Based upon the Company's internal analysis of the adequacy of the allowance for
possible loan losses, management of the Company believes the level is adequate
to cover actual and potential losses in the loan portfolio under current
conditions.
The ratio of allowance for possible loan losses as a percentage of total
loans declined to 1.80% as of June 30, 1996 compared to 1.85% and 1.98% at
December 31, 1995 and June 30, 1995, respectively, largely due to the
aforementioned net charge-offs during the first half of the year. The ratio of
the allowance for possible loan losses to nonperforming loans declined to
110.79% at June 30, 1996 compared to 172.11% and 176.86% as of December 31, 1995
and June 30, 1995, respectively. This decrease was primarily the result of an
increase in nonperforming loans which is more fully described on the following
page.
9
<PAGE>
Item 2. (continued)
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
(dollars in thousands)
June 30, 1996 December 31, 1995 June 30, 1995
------------- ----------------- -------------
<S> <C> <C> <C>
Nonaccrual loans $ 2,718 $ 1,811 $ 2,212
Loans past due 90 days and still accruing interest 2,067 1,463 1,120
------- ------- -------
TOTAL NONPERFORMING LOANS 4,785 3,274 3,332
Other real estate owned 769 554 1,323
------- ------- -------
TOTAL NONPERFORMING ASSETS $ 5,554 $ 3,828 $ 4,655
======= ======= =======
RATIOS:
Total nonperforming loans as % of total loans 1.63% 1.08% 1.12%
Nonperforming assets as % of total loans and
other real estate owned 1.88 1.26 1.56
Nonperforming assets as % of total assets 1.09 0.75 0.93
</TABLE>
Nonperforming assets totaled $5,554,000 or 1.09% of total assets at June
30, 1996 compared to $3,828,000 or 0.75% and $4,655,000 or 0.93% at December 31,
1995 and June 30, 1995, respectively. The increase in nonaccrual loans was the
result of a commercial credit totaling $1.3 million which deteriorated during
the first half of 1996, and was placed on nonaccrual status in June. The
increase in loans 90 days past due and still accruing interest was due to an
$800,000 commercial borrowing relationship which also began experiencing
difficulties during the first half of 1996. Management anticipates resolving
both of these credits through the work out process during the third quarter of
1996. While management understands that nonperforming asset levels are going to
fluctuate periodically throughout the year, it is management's commitment to
continue to monitor and maintain an acceptable level of nonperforming assets.
Other real estate owned increased $215,000 during the first six months of
1996. These properties are recorded at the lower of cost or their estimated net
realizable value, which means the properties are recorded on the balance sheet
of the Company at an amount no greater than the amount of the net proceeds
expected to be received upon the sale of the property.
Any loans classified for regulatory purposes, but not included above in
nonperforming loans, do not represent material credits about which management is
aware of any information which causes management to have serious doubts as to
the borrower's ability to comply with the loan repayment terms or which
management reasonably expects will materially impact future operating results or
capital resources. As of June 30, 1996, there were no concentrations of loans
exceeding 10% of total loans which were not disclosed as a category of loans
detailed on page 8.
INVESTMENTS IN DEBT SECURITIES
Investments in debt securities have increased approximately $12.8 million
since December 31, 1995. As a result of the decrease in the loan portfolio
during the first six months of 1996, the Company had additional funds available
to invest in securities. In addition, the yield curve steepened during the
first six months of 1996, which resulted in a wider spread between short-term
and intermediate-term investment securities. This increased spread made the
purchase of securities in the intermediate-term category more attractive, and
therefore, management took advantage of this situation.
The portfolio contains a mixture of debt securities in terms of the types
of securities, interest rates, and maturity distribution. Management believes
this diversity, as well as its conservative philosophy towards risk
10
<PAGE>
Item 2. (continued)
management, has resulted in a solid investment portfolio.
The following table summarizes the amortized cost and estimated market
value of the Company's available-for-sale and held-to-maturity debt securities
at June 30, 1996.
<TABLE>
<CAPTION>
(in thousands)
AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------ ---------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government agencies and corporations $16,205 $15,985 $ 84,748 $ 83,816
Obligations of states and political subdivisions 530 537 21,705 22,204
Other debt securities 1,279 1,280 370 369
------- ------- -------- -------
18,014 17,802 106,823 106,389
Mortgage-backed securities 43,006 42,465 5,533 5,553
------- ------- -------- --------
$61,020 $60,267 $112,356 $111,942
======= ======= ======== ========
</TABLE>
DEPOSITS
Total deposits declined approximately $3.7 million during the first six
months of 1996. This decrease was due largely to a decline in noninterest-
bearing demand deposits. Depending on the funding needs of the Company's
customers, the balances in these accounts can fluctuate significantly on a daily
basis. In addition, customers continue to become more sophisticated in managing
their cash positions, and are finding more ways to keep their noninterest-
bearing deposits at a minimum.
The following table presents deposits by category as of the end of the periods
indicated.
<TABLE>
<CAPTION>
(dollars in thousands)
June 30, 1996 December 31, 1995 June 30, 1995
------------- ----------------- -------------
<S> <C> <C> <C>
Noninterest-bearing demand deposits $ 55,011 $ 60,999 $ 57,010
Interest-bearing demand deposits 124,447 123,624 116,192
Savings deposits 61,657 60,134 64,157
Time deposits under $100,000 174,146 176,200 176,957
-------- -------- --------
Total core deposits 415,261 420,957 414,316
Time deposits $100,000 and over/(1)/ 38,600 36,610 30,065
-------- -------- --------
Total deposits $453,861 $457,567 $444,381
======== ======== ========
</TABLE>
/(1)/ Deposits which are generally deemed highly interest rate sensitive.
SHORT-TERM BORROWINGS
Short-term borrowings consist of securities sold under agreements to
repurchase and a U.S. Treasury tax and loan note account. The following is a
summary of short-term borrowings as of the end of the periods indicated.
<TABLE>
<CAPTION>
(dollars in thousands)
June 30, 1996 December 31, 1995 June 30, 1995
------------- ----------------- -------------
<S> <C> <C> <C>
Securities sold under agreements to repurchase $ 610 $307 $1,268
U.S. Treasury tax and loan note account 1,773 472 1,784
------ ---- ------
$2,383 $779 $3,052
====== ==== ======
</TABLE>
11
<PAGE>
Item 2. (continued)
The balance of the U. S. Treasury tax and loan note account, which houses
federal tax deposits on an interim basis, fluctuates based on the cash flow
needs of the U. S. Treasury Department. They periodically draw down the balance
in this account and then allow it to be replenished. The maximum balance in the
account is $2 million.
ASSET/LIABILITY MANAGEMENT
The table on the following page is an analysis of the Company's interest
rate-sensitive assets and liabilities as of June 30, 1996. Because such an
analysis does not capture all of the factors which determine interest rate risk,
the Company also utilizes a simulation model to measure its exposure to changes
in interest rates. Under different rate and growth assumptions, these
projections enable the Company to adjust its strategies to protect the net
interest margin against significant rate fluctuations. Uniform sensitivity
reports and guidelines are used by all subsidiary banks of the Company. Based
on the Company's historical analysis, interest-bearing demand and savings
deposits have proven to be very stable core deposits even with significant
interest rate fluctuations. Accordingly, management believes these deposits are
not 100% rate-sensitive within the period of three months or less. As a result,
these deposits have been allocated between four repricing categories as follows:
three months or less - 35%, over three months through 12 months - 20%, over one
year through five years - 25%, and over five years - 20%.
As reflected on the Repricing and Interest Rate Sensitivity Analysis on the
following page, the Company has a reasonably well-balanced interest rate
sensitivity position. The Company's current one-year cumulative gap is 1.01x.
Generally, a one-year cumulative gap ratio in a range of 0.80x - 1.20x indicates
an entity is not subject to undue interest rate risk. A one-year cumulative gap
ratio of 1.00x indicates that an institution has an equal amount of assets and
liabilities repricing within twelve months. A ratio in excess of 1.00x indicates
more assets than liabilities will be repriced during the period indicated, and a
ratio less than 1.00x indicates more liabilities than assets will be repriced
during the period indicated. However, actual experience may differ because of
the assumptions used in the allocation of deposits and other factors which are
beyond management's control. Additionally, the following analysis includes the
available-for-sale securities spread throughout their respective repricing
and/or maturity horizons, even though such securities are available for
immediate liquidity should the need arise in any particular time horizon.
12
<PAGE>
Item 2. (continued)
REPRICING AND INTEREST RATE SENSITIVITY ANALYSIS
(dollars in thousands)
JUNE 30, 1996
<TABLE>
<CAPTION>
Over Over
3 months 1 year
3 months through through Over
or less 12 months 5 years 5 years Total
-------- --------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Due from banks - interest-bearing $ 17 $ - $ - $ - $ 17
Federal funds sold 14,650 - - - 14,650
Investments available-for-sale 11,878 11,446 36,424 519 60,267
Investments held-to-maturity 8,114 15,820 72,555 15,267 112,356
Loans, net of unearned discount (1) 124,766 60,326 90,302 19,248 294,642
-------- --------- -------- -------- --------
Total interest-earning assets 160,025 87,592 199,281 35,034 481,932
-------- --------- -------- -------- --------
Cumulative interest-earning assets 160,025 247,617 446,898 481,932 481,932
-------- --------- -------- -------- --------
Interest-bearing liabilities:
Interest-bearing demand deposits 43,556 24,889 31,113 24,889 124,447
Savings deposits 21,580 12,331 15,415 12,331 61,657
Time deposits under $100,000 41,217 62,314 70,615 - 174,146
Time deposits $100,000 and over 17,364 16,685 4,551 - 38,600
Short-term borrowings 2,383 - - - 2,383
Debt of employee stock ownership plan 1,779 - - - 1,779
-------- --------- -------- -------- --------
Total interest-bearing liabilities 127,879 116,219 121,694 37,220 403,012
-------- --------- -------- -------- --------
Cumulative interest-bearing liabilities 127,879 244,098 365,792 403,012 403,012
-------- --------- -------- -------- --------
Gap analysis:
Interest sensitivity gap $ 32,146 $ (28,627) $ 77,587 $ (2,186) $ 78,920
======== ========= ======== ======== ========
Cumulative interest
sensitivity gap $ 32,146 $ 3,519 $ 81,106 $ 78,920 $ 78,920
======== ========= ======== ======== ========
Cumulative gap ratio of interest-
earning assets to interest-bearing
liabilities 1.25x 1.01x 1.22x 1.20x 1.20x
===== ===== ===== ===== =====
</TABLE>
(1) Nonaccrual loans are reported in the "Over 1 year through 5 years"
column.
CAPITAL RESOURCES
The regulatory capital guidelines require banking organizations to maintain
a minimum total capital ratio of 8% of risk-weighted assets (of which at least
4% must be Tier I capital). The Company's total capital ratios under the risk-
weighted guidelines were 17.75%, 16.20% and 15.83% as of June 30, 1996, December
31, 1995, and June 30, 1995, respectively, which included Tier I capital ratios
of 16.49%, 14.94%, and 14.57%, respectively. These ratios are well above the
minimum risk-weighted capital requirements.
In addition, the Company and its subsidiary banks must maintain a minimum
Tier I leverage ratio (Tier I capital to total adjusted consolidated assets) of
at least 3%. Capital, as defined under these guidelines, is total shareholders'
equity less goodwill and excluding unrealized holding gains and losses on
available-for-sale
13
<PAGE>
Item 2. (continued)
securities of the Company. The Company's Tier I leverage ratios were 9.83%,
9.27%, and 8.98% at June 30, 1996, December 31, 1995, and June 30, 1995,
respectively.
Management reviews the various capital measures monthly and takes
appropriate action to ensure that they are within internal and external
guidelines as established by law. Management believes that the Company's current
capital and liquidity positions are adequate to support its banking operations.
RESULTS OF OPERATIONS
EARNINGS SUMMARY
Net income was $2,907,000 for the six months ended June 30, 1996 compared
to $3,939,000 for the six months ended June 30, 1995. This decrease can be
attributed to the effects of two nonrecurring items which occurred during the
first six months of 1995. The first item was the gain on the sale of
Bay-Hermann-Berger Bank of $825,000, with the resulting net after-tax gain being
$640,000. The second item was the litigation settlement received by South Side
National Bank of $1,400,000, from which attorney fees of approximately $300,000
were paid. After factoring in the estimated taxes due, the after-tax net gain
was approximately $730,000. Excluding these two nonrecurring items, core net
earnings for the first six months of 1995 were $2,569,000. Therefore, excluding
the effects of these nonrecurring items, the Company achieved a $338,000, or
13%, increase in core net earnings in the first six months of 1996 versus the
first six months of 1995. Because these nonrecurring items occurred in the first
half of the prior year, they will distort the comparisons for the remainder of
1996.
Net income for the second quarter of 1996 was $1,359,000 compared to
$1,361,000 in the second quarter of 1995. This consistency in net income on a
comparative basis was the result of a $128,000 increase in net interest income
being offset by losses on the sales of other real estate owned.
Earnings per common share were $1.08 for the first six months of 1996
compared to $1.50 for the first six months of 1995, or $0.98 after consideration
of the aforementioned nonrecurring items. The earnings per common share amounts
were $.50 and $.51 for the second quarter of 1996 and 1995, respectively. The
earnings per common share amounts have been retroactively adjusted for the ten-
for-one stock split which occurred on February 15, 1996. The first six months
net income of 1996 results in an annualized return on average assets (ROA) of
1.14% and a return on average shareholders' equity (ROE) of 11.89%. While these
ratios are below the comparable ratios from the first six months of 1995 because
of the aforementioned nonrecurring items, they are competitive with our peers in
the industry.
NET INTEREST INCOME
As reflected in the Selected Statistical Information table on the following
page, net interest income on a tax-equivalent basis decreased by $21,000 in the
first six months of 1996 when compared to the first six months of 1995. This
decrease was the result of a decline in the net interest margin from 4.42% to
4.30%, which was partially offset by an increase in average earning assets in
1996 compared to 1995. The decline in the net interest margin can be attributed
to a combination of factors. First, the Company has experienced a shift in the
deposit mix, with approximately $14 million in additional time deposits as
compared to the previous year. Secondly, competitive pressure for loans resulted
in a slight decrease in average loans for the first six months of 1996 compared
to the first six months of 1995. Because there was not a proportionate increase
in the loan portfolio to offset the higher cost of funds, the net interest
margin was negatively affected.
14
<PAGE>
Item 2. (continued)
SELECTED STATISTICAL INFORMATION
The following is selected statistical information for Southside Bancshares Corp.
and subsidiaries.
I. Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates
and Interest Differential
Condensed Consolidated Average Balance Sheet and Average Interest Rates
(dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
- --------------------------------------------------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE AVERAGE
INTEREST RATES INTEREST RATES
AVERAGE INCOME\ EARNED\ AVERAGE INCOME\ EARNED\
BALANCE EXPENSE PAID(3) BALANCE EXPENSE PAID(3)
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net of unearned discount (1) (2) (3) $295,367 $13,267 8.98% $295,436 $13,359 9.04%
Investments in debt securities:
Taxable(4) 143,262 4,242 5.92 141,500 4,152 5.87
Exempt from Federal income tax (3) (4) 22,643 971 8.58 22,421 973 8.68
Short-term investments 20,088 536 5.34 9,958 290 5.82
-------- ------- -------- -------
Total interest-earning assets/interest
income/overall yield (3) 481,360 19,016 7.90 469,315 18,774 8.00
------- ==== ------- ====
Allowance for possible loan losses (5,583) (6,558)
Cash and due from banks 15,562 17,268
Other assets 18,485 22,689
-------- --------
TOTAL ASSETS $509,824 $500,714
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand and savings deposits $182,193 2,773 3.04% $188,333 2,938 3.12%
Time deposits 214,721 5,756 5.36 200,722 5,182 5.16
Short-term borrowings 1,912 51 5.33 3,943 118 5.99
Debt of employee stock ownership plan 2,304 95 8.25 1,222 55 9.00
Subordinated capital notes - - - 2,467 119 9.65
-------- ------- -------- -------
Total interest-bearing liabilities/interest-
expense/overall rate 401,130 8,675 4.33 396,687 8,412 4.24
------- ==== ------- ====
Non-interest-bearing demand deposits 54,999 58,656
Other liabilities 4,803 4,153
Shareholders' equity 48,892 41,218
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $509,824 $500,714
======== ========
NET INTEREST INCOME $10,341 $10,362
======= =======
NET INTEREST MARGIN ON AVERAGE INTEREST-EARNING ASSETS 4.30% 4.42%
==== ====
</TABLE>
(1) Interest income includes loan origination fees.
(2) Average balance includes nonaccrual loans.
(3) Interest yields are presented on a tax-equivalent basis. Nontaxable income
has been adjusted upward by the amount of Federal income tax that would
have been paid if the income tax had been taxable at a rate of 34%,
adjusted downward by the disallowance of the interest cost to carry
nontaxable loans and securities subsequent to December 31, 1982.
(4) Includes investments available-for-sale.
15
<PAGE>
Item 2. (continued)
ANALYSIS OF CHANGES IN NET INTEREST INCOME
DUE TO CHANGES IN VOLUME AND CHANGES IN RATES
The following table sets forth on a tax-equivalent basis, for the periods
indicated, a summary of the changes in interest income and interest expense
resulting from changes in the volume and changes in rates. The change in
interest due to both volume and rate has been allocated in proportion to the
relationship of the absolute dollar amounts of the change in each.
FIRST SIX MONTHS 1996 COMPARED TO FIRST SIX MONTHS 1995
(in thousands)
<TABLE>
<CAPTION>
Increase (decrease)
due to change in
Net -------------------
Increase Average Average
(Decrease) Volume Rate
---------- ------- -------
<S> <C> <C> <C>
Changes in interest income on:
Loans $ (92) $ (3) $ (89)
Investments in debt securities:
Taxable 90 53 37
Nontaxable (2) 9 (11)
Short-term investments 246 272 (26)
----- ----- -----
TOTAL INTEREST INCOME 242 331 (89)
----- ----- -----
Changes in interest expense on:
Interest-bearing demand and savings deposits (165) (92) (73)
Time deposits 574 369 205
Short-term borrowings (67) (55) (12)
Debt of employee stock ownership plan 40 45 (5)
Subordinated capital notes (119) (119) -
----- ----- -----
TOTAL INTEREST EXPENSE 263 148 115
----- ----- -----
CHANGE IN NET INTEREST INCOME $ (21) $ 183 $(204)
===== ===== =====
</TABLE>
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses remained at a relatively low level
of $30,000 during the first six months of 1996. Based on the Company's analysis
of the adequacy of the allowance for possible loan losses, management determined
it was not necessary to record significant provisions for possible loan losses.
Management will continue to assess the adequacy of the allowance for possible
loan losses on a regular basis throughout the year.
NONINTEREST INCOME
Noninterest income decreased $2,031,000 when comparing the first six months
of 1996 to the first six months of 1995. However, the decrease was due to the
$825,000 gain on the sale of Bay-Hermann-Berger Bank (described in Note 3) and
the $1,400,000 litigation settlement received by South Side National Bank
(described in Note 2). Excluding the effects of these two items, noninterest
income increased by $194,000 due in part to a decrease in net losses on the sale
of other real estate owned. Other income also increased as a result of
additional revenue generated by the Company's merchant charge card operations.
16
<PAGE>
Item 2. (continued)
Noninterest income in the second quarter of 1996 was $708,000 compared to
$797,000 in the second quarter of 1995. This decrease is largely the result of
losses in the sale of other real estate owned. In the prior year, gains of
$56,000 were recognized on these sales, while in 1996, losses of $35,000 were
recognized during the second quarter.
NONINTEREST EXPENSE
Noninterest expense for the first six months of 1996 was $639,000 less than
the comparable expense from the prior year. This decrease can largely be
attributed to decreases in data processing expense, FDIC assessment, attorney
fees and other expense, which were partially offset by an increase in salaries
and employee benefits and net occupancy and equipment expense. The reduction in
data processing expense was due to the data processing conversion completed in
1995. One of the objectives of the conversion was to reduce the monthly data
processing expense, although a portion of this savings has been offset by an
increase in equipment expense. The decrease in the FDIC assessment was a result
of the Bank Insurance Fund achieving its federally-mandated fully funded level
in 1995. When this occurred, the FDIC assessment rate paid by most institutions
dropped to the minimum level required by law. The Company does, however, still
have a small portion of deposits, which were acquired from the Resolution Trust
Corporation in 1990, which are covered by the Savings Association Insurance
Fund. The Company is assessed a higher premium on these deposits. Attorney fees
in 1995 included the $300,000 in fees pertaining to the litigation settlement at
South Side National Bank. Excluding these fees, the expense was comparable
between the two time periods. The increase in net occupancy and equipment
expense can be partially attributed to the increased equipment cost associated
with the data processing conversion. The remainder of the increase was the
result of a new facility opened by South Side National Bank on February 1, 1996.
This is the seventh location for the Company's lead bank and the thirteenth
location for the organization as a whole.
Noninterest expense during the second quarter of 1996 was $3,799,000 versus
$3,775,000 in the prior year. The increase was the result of increases in
salaries and employee benefits and net occupancy and equipment expense, which
were partially offset by a decline in the FDIC assessment. These fluctuations
are largely attributable to the same factors as the year-to-date information
above.
INCOME TAXES
Federal income tax expense for the first six months of 1996 was $1,124,000
compared to $1,473,000 in the first six months of 1995. The decrease was due to
a decline in the first six months pretax earnings. The effective tax rate
increased to 27.88% in 1996 from 27.21% in 1995. This increase was largely due
to the gain on the sale of Bay-Hermann-Berger Bank during 1995. Because of
differences between the book and tax basis of this asset, the effective tax rate
on the sale, on a book basis, was approximately 22%. Without any comparable
event in the current year, the effective tax rate increased. The effective
income tax rate for the second quarter of 1996 was comparable to the effective
income tax rate for the second quarter of 1995.
EFFECT OF NEW ACCOUNTING STANDARDS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121").
SFAS 121 provides guidance for recognition and measurement of impairment of
long-lived assets, certain
17
<PAGE>
Item 2. (continued)
identifiable intangibles, and goodwill related both to assets to be held and
used and assets to be disposed of. The statement requires entities to perform
separate calculations for assets to be held and used to determine whether
recognition of an impairment loss is required and, if so, to measure impairment.
If the sum of the expected future cash flows, undiscounted and without interest
charges, is less than the asset's carrying amount, an impairment loss can be
recognized. If the sum of the expected future cash flows is more than the
asset's carrying amount, an impairment loss cannot be recognized. Measurement of
an impairment loss is based on the fair value of the asset. SFAS 121 also
requires long-lived assets and certain identifiable intangibles to be disposed
of to be reported at the lower of carrying amount or fair value less cost to
sell.
As of the adoption date of January 1, 1996, the Company had no impaired
long-lived or intangible assets affected by this statement.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123").
Item 2. (continued)
SFAS 123 provides guidance for accounting and reporting standards for
stock-based employee compensation plans. SFAS 123 defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by APB Opinion No. 25, Accounting for Stock
Issued to Employees. Entities electing to remain with the accounting in Opinion
25 must make pro forma disclosures of net income and, if presented, earnings per
share, as if the fair value based method of accounting defined in SFAS 123 and
been applied. Under the fair value based method, compensation cost is measured
at the grant date on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value based
method, compensation cost is the excess, if any, of the quoted market price of
the stock at grant date or other measurement date over the amount an employee
must pay to acquire the stock.
The Company has elected to continue to use the intrinsic value based method
of accounting, and will disclose the effect of the fair value based method in
the 1996 Annual Report Form 10-K.
18
<PAGE>
Item 2. (continued)
COMMON STOCK - MARKET PRICE AND DIVIDENDS
The table below sets forth the high and low closing bid prices of the
Company's common stock for the periods presented. The Company's common stock is
traded on the National Association of Securities Dealers Automated Quotation
System/Small-Cap Market System ("NASDAQ/SCM") under the symbol SBCO.
Accordingly, information included below represents the high and low bid prices
of the common stock reported on NASDAQ/SCM. The information presented has been
retroactively adjusted to reflect the effects of the ten-for-one stock split on
February 15, 1996.
<TABLE>
<CAPTION>
Dividends
Book Paid Per
High Bid Low Bid Close Value Market/Book Common Share
-------- ------- ------ ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
2nd Quarter - 1996 $20.00 $19.00 $20.00 $18.25 109.59% $0.12
1st Quarter - 1996 21.00 19.00 19.00 18.00 105.56 0.10
4th Quarter - 1995 20.00 17.80 20.00 17.64 113.38 0.10
3rd Quarter - 1995 17.80 17.50 17.80 17.15 103.79 0.10
2nd Quarter - 1995 17.00 16.00 17.00 16.75 101.49 0.10
1st Quarter - 1995 16.00 16.00 16.00 15.96 100.25 0.065
</TABLE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the normal course of business, the Company had certain routine lawsuits
pending at June 30, 1996. In the opinion of management, after consultation with
legal counsel, none of these lawsuits will have a material adverse effect on the
consolidated financial condition of the Company.
19
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's regular Annual Meeting of Shareholders was held on April 25,
1996. Proxies for the meeting were solicited pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended.
At the meeting, shareholders (i) elected three Class I Directors, each to
serve for a term of three years, and (ii) ratified the appointment by the Board
of Directors, KPMG Peat Marwick LLP as the firm of independent certified public
accountants to audit the accounts of the Company for the fiscal year ended
December 31, 1996.
Management's Director nominees were: Norville K. McClain, Richard G.
Schroeder, Sr., and Thomas M. Teschner.
The Directors elected at the meeting were: Norville K. McClain, Richard G.
Schroeder, Sr., and Thomas M. Teschner. The names of each of the Directors whose
term of office as a Director continued after the meeting is as follows: Joseph
W. Beetz (term expiring 1997); Ralph Crancer Jr. (term expiring 1997); Howard F.
Etling (term expiring 1997); Douglas P. Helein (term expiring 1998); Earle J.
Kennedy, Jr. (term expiring 1998); Daniel J. Queen (term expiring 1998);
Norville K. McClain (term expiring 1999); Richard G. Schroeder, Sr. (term
expiring 1999); and Thomas M. Teschner (term expiring 1999).
The following is a tabulation of voting for Directors:
<TABLE>
<CAPTION>
Shares Shares Shares
Voted Voted Voted
Nominee For Against Withheld
------------------------- --------- ------- --------
<S> <C> <C> <C>
Norville K. McClain 2,640,380 2,540 18,810
Richard G. Schroeder, Sr. 2,642,920 - 18,810
Thomas M. Teschner 2,636,440 6,480 18,810
</TABLE>
With respect to the ratification of the appointment of KPMG Peat Marwick
LLP, there were 2,645,340 shares voted "For" and 6,860 shares voted "Against",
with 9,530 shares abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHSIDE BANCSHARES CORP.
--------------------------
August 14, 1996 /s/ Thomas M. Teschner
- --------------- --------------------------------------
Thomas M. Teschner
President
(Principal Executive Officer)
August 14, 1996 /s/ Joseph W. Pope
- --------------- --------------------------------------
Joseph W. Pope
Senior Vice President and Chief
Financial Officer (Principal Financial
Officer, Controller, and Principal
Accounting Officer)
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND> This schedule contains summary financial information extracted from
THE SOUTHSIDE BANCSHARES CORP. and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 16,454
<INT-BEARING-DEPOSITS> 17
<FED-FUNDS-SOLD> 14,650
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 60,267
<INVESTMENTS-CARRYING> 112,356
<INVESTMENTS-MARKET> 111,494
<LOANS> 294,642
<ALLOWANCE> (5,301)
<TOTAL-ASSETS> 512,181
<DEPOSITS> 453,861
<SHORT-TERM> 2,383
<LIABILITIES-OTHER> 4,157
<LONG-TERM> 1,779<F1>
<COMMON> 2,859
0
0
<OTHER-SE> 47,142
<TOTAL-LIABILITIES-AND-EQUITY> 512,181
<INTEREST-LOAN> 13,130
<INTEREST-INVEST> 4,877
<INTEREST-OTHER> 536
<INTEREST-TOTAL> 18,543
<INTEREST-DEPOSIT> 8,529
<INTEREST-EXPENSE> 8,675
<INTEREST-INCOME-NET> 9,868
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,270
<INCOME-PRETAX> 4,031
<INCOME-PRE-EXTRAORDINARY> 4,031
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,907
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
<YIELD-ACTUAL> 4.30
<LOANS-NON> 2,718
<LOANS-PAST> 2,067
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,635
<CHARGE-OFFS> 807
<RECOVERIES> 443
<ALLOWANCE-CLOSE> 5,301
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> Represents debt of the Company's Employee Stock Ownership Plan, which is
reflected on the Company's Financial statements according to Generally
Accepted Accounting Principles.
</FN>
</TABLE>
