<PAGE> 1
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, 1998
-------------------------------------------------
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 12, 1998 , the number of shares outstanding of the registrant's
common stock was 2,838,985.
<PAGE> 2
SOUTHSIDE BANCSHARES CORP.
<TABLE>
<CAPTION>
INDEX
PAGE
----
<S> <C> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income for
the six months and three months ended
June 30, 1998 and June 30, 1997 4
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantative and Qualitative Disclosures
Regarding Market Risk - There have been
no material changes from the information
provided in the 12/31/97 Annual Report on
Form 10-K
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
2
<PAGE> 3
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(dollars in thousands except share data)
(unaudited)
<TABLE>
<CAPTION>
JUNE 30, December 31,
ASSETS 1998 1997
----------------- --------------
<S> <C> <C>
Cash and due from banks $ 19,756 $ 18,302
Due from banks-interest bearing 11,597 -
Federal funds sold 14,700 17,200
Investments in debt securities:
Available-for-sale, at market value 88,170 73,460
Held-to-maturity, at amortized cost
(approximate market value of $105,414
in 1998, and $100,838 in 1997) 104,287 99,679
-------- --------
Total investments in debt securities 192,457 173,139
-------- --------
Loans, net of unearned discount 367,579 326,437
Less allowance for possible loan losses 6,370 6,120
-------- --------
Loans, net 361,209 320,317
-------- --------
Bank premises and equipment 14,123 10,866
Other assets 14,699 10,040
-------- --------
TOTAL ASSETS $628,541 $549,864
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 63,513 $ 61,308
Interest-bearing demand and savings 218,462 195,804
Time deposits 254,587 226,251
-------- --------
Total deposits 536,562 483,363
Securities sold under agreements to repurchase 2,283 5,333
FHLB borrowings 19,867 -
Other liabilities 5,919 4,515
-------- --------
Total liabilities 564,631 493,211
-------- --------
Commitments and contingent liabilities
Shareholders' equity:
Cumulative preferred stock, no par value, 1,000,000 shares
authorized and unissued - -
Common stock, $1 par value, 15,000,000 shares authorized,
2,995,126 shares issued and outstanding in 1998 and
2,859,010 in 1997 2,995 2,859
Surplus 11,105 6,023
Retained earnings 53,092 50,841
Unearned employee stock ownership plan shares (1,285) (1,384)
Treasury stock, at cost, 67,340 and 61,340 shares, respectively (2,063) (1,820)
Net unrealized gains on available-for-sale securities 66 134
-------- --------
Total shareholders' equity 63,910 56,653
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $628,541 $549,864
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SIX AND THREE MONTHS ENDED
JUNE 30, 1998 AND 1997
(dollars in thousands except share data)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
--------- --------- ---------- ----------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 14,355 $ 13,305 $ 7,179 $ 6,808
Interest on investments in debt securities:
Taxable 4,504 4,901 2,255 2,458
Exempt from Federal income taxes 696 618 371 310
Interest on short-term investments 592 370 322 217
--------- --------- -------- --------
TOTAL INTEREST INCOME 20,147 19,194 10,127 9,793
--------- --------- -------- --------
INTEREST EXPENSE:
Interest on interest-bearing demand and savings deposits 3,140 2,856 1,588 1,446
Interest on time deposits 5,989 5,941 2,960 3,000
Interest on securities sold under agreements to repurchase 102 86 46 52
Interest on FHLB borrowings 93 - 93 -
Interest on debt of employee stock ownership plan - 71 - 34
--------- --------- -------- --------
TOTAL INTEREST EXPENSE 9,324 8,954 4,687 4,532
--------- --------- -------- --------
NET INTEREST INCOME 10,823 10,240 5,440 5,261
Provision for possible loan losses 30 30 15 15
--------- --------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 10,793 10,210 5,425 5,246
--------- --------- -------- --------
NONINTEREST INCOME:
Trust department 538 505 275 268
Service charges on deposit accounts 639 650 326 329
Net gains (losses) on sale of other real estate
owned and other foreclosed property 15 (22) 18 (7)
Other 277 256 124 117
--------- --------- -------- --------
TOTAL NONINTEREST INCOME 1,469 1,389 743 707
--------- --------- -------- --------
NONINTEREST EXPENSES:
Salaries and employee benefits 3,984 3,684 1,972 1,880
Net occupancy and equipment expense 1,080 1,192 544 603
Data processing 231 229 120 122
Other 2,319 2,306 1,161 1,189
--------- --------- -------- --------
TOTAL NONINTEREST EXPENSES 7,614 7,411 3,797 3,794
--------- --------- -------- --------
INCOME BEFORE FEDERAL INCOME TAX EXPENSE 4,648 4,188 2,371 2,159
Federal income tax expense 1,288 1,109 649 578
--------- --------- -------- --------
NET INCOME $ 3,360 $ 3,079 $ 1,722 $ 1,581
--------- --------- -------- --------
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gains (losses) on available-for-sale securities (68) 61 (90) 315
--------- --------- -------- --------
COMPREHENSIVE INCOME $3,292 $3,140 $1,632 $1,896
====== ====== ====== ======
SHARE DATA:
Earnings per common share - basic $1.24 $1.13 $0.64 $0.58
===== ===== ==== ====
Earnings per share - diluted $1.20 $1.11 $0.62 $0.57
===== ===== ===== =====
Dividends paid per common share $0.41 $0.33 $0.21 $0.17
===== ===== ===== =====
Average common shares outstanding 2,707,237 2,738,799 2,708,281 2,739,926
========= ========= ========= =========
Average common shares outstanding
including potentially diluted shares 2,789,289 2,781,265 2,794,619 2,795,138
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 3,360 $ 3,079
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 688 821
Provision for possible loan losses 30 30
Other operating activities, net (699) (1,124)
-------- --------
Total adjustments 19 (273)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,379 2,806
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase (decrease) in Federal funds sold 2,500 (500)
Proceeds from maturities of and principal payments on
debt securities 31,718 24,136
Purchases of debt securities (40,982) (15,855)
Net decrease (increase) in loans 4,918 (16,821)
Recoveries of loans previously charged off 173 636
Proceeds from sales of other real estate owned and other
foreclosed property 69 165
Cash and cash equivalents acquired, net of cash paid 8,238 -
Purchases of bank premises and equipment (1,901) (790)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES 4,731 (9,029)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits 9,199 900
Net (decrease) increase in time deposits (11,263) 2,545
Net (decrease) increase in securities sold under agreements to repurchase (3,050) 8,070
Net increase in FHLB borrowings 11,497 -
Payments to acquire treasury stock (333) (26)
Cash dividends paid (1,109) (903)
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (4,941) 10,586
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS 13,051 4,363
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 18,302 17,156
-------- --------
CASH AND CASH EQUIVALENTS, END OF QUARTER $ 31,353 $ 21,519
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowings $ 9,430 $ 9,050
Income taxes 1,430 1,510
======== ========
Noncash transactions:
Transfers to other real estate owned in settlement of loans $ 48 $ 106
Issuance of stock in financing of acquisition 5,178 -
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(unaudited)
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, 1997.
Operating results for the six months ended June 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998.
The Company adopted the provisions of Statement on Financial Accounting
Standards (SFAS) No. 130- Reporting Comprehensive Income (SFAS 130)
retroactively on January 1, 1998. SFAS 130 established standards for reporting
and displaying income and its components (revenues, gains and losses) in a full
set of general purpose financial statements. The statement requires all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. Comparative financial
statements provided for earlier periods have been restated to reflect the
application of SFAS 130. The implementation of SFAS 130 did not have a material
impact on the Company's consolidated financial statements. The Company's source
of comprehensive income is unrealized gains or losses on available-for-sale
securities. The accumulated effect of such comprehensive income is included in
shareholders' equity in the consolidated financial statements.
6
<PAGE> 7
ACQUISITION
On June 29, 1998, the Company acquired Public Service Bank, FSB (PSB) and
merged PSB into the Company's subsidiary bank, South Side National Bank in St.
Louis. As of June 29, 1998, PSB had total assets of $73,731,000, total loans of
$46,318,000, and total deposits of $55,264,000. PSB has three offices in the St.
Louis metropolitan area. The Company paid approximately $8,634,000 in cash and
stock to acquire PSB, in a transaction accounted for under the purchase method
of accounting. The excess of the purchase price over the fair market value of
the assets acquired, approximately $3,500,000, is included in the total of other
assets on the Company's consolidated financial statements. Because the
transaction closed as of the end of the Company's second quarter, the
acquisition had no significant effect on the Company's earnings for the six
months or the three months ended June 30, 1998.
The following information presents unaudited pro forma condensed results of
operations of the Company for the three months and the six months ended June 30,
1998 and 1997, combined with the acquisition of PSB, as if the Company completed
the transaction on January 1, 1997.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
(In thousands, except share data)
<S> <C> <C> <C> <C>
Net interest income................................................... $5,836 $5,698 $11,708 $11,076
Provision for possible loan losses.................................... 21 21 42 42
Net income (loss)..................................................... $1,772 $1,612 $3,463 $3,103
======= ====== ====== ======
Average shares of outstanding......................................... 2,844,397 2,876,042 2,843,353 2,874,915
========= ========= ========= =========
Average shares outstanding, including potentially dilutive shares..... 2,930,735 2,931,254 2,925,405 2,917,381
========= ========= ========= =========
Earnings (loss) per common share:
Basic........................................................ $.62 $.56 $1.22 $1.08
==== ===== ===== =====
Diluted...................................................... $.60 $.55 $1.18 $1.06
==== ===== ===== =====
</TABLE>
The unaudited pro forma condensed results of operations reflect the
application of the purchase method of accounting for PSB and certain other
assumptions. Purchase accounting adjustments have been applied to investment
securities, bank premises and equipment, deferred tax assets and liabilities and
excess cost required to reflect the assets acquired and liabilities assumed at
fair value. The resulting premiums and discounts are amortized or accreted to
income consistent with the accounting policies of the Company.
7
<PAGE> 8
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, 1998 and 1997.
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.
Statements contained in this Report and in future filings by the Company
with the Securities and Exchange Commission, in the Company's press releases and
in oral statements made with the approval of an authorized executive officer
which are not historical or current facts are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 (Section 27A of the Securities Act of 1993, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended). Such statements
are based on management's beliefs, and assumptions made by and information
currently available to management and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those currently anticipated or projected. When used in
the Company's documents or oral presentations, the words "anticipates,"
"believes," "estimates," "expects," "intends," "forecasts," "plan," "projects,"
and similar expressions are intended to identify such forward-looking
statements. There can be no assurance that such forward-looking statements will
in fact transpire. The following important factors, risks and uncertainties,
among others, could cause actual results to differ materially from such
forward-looking statements: (1) credit risk, (2) interest rate risk, (3)
competition, (4) changes in the regulatory environment and (5) changes in
general business and economic trends. The foregoing list should not be construed
as exhaustive and the Company disclaims any obligation to subsequently update or
revise any forward-looking statements after the date of this Report.
8
<PAGE> 9
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, 1998 December 31, 1997 June 30, 1997
---------------- ------------------- --------------
EARNINGS
<S> <C> <C> <C>
Total interest income $ 20,147 $ 39,355 $ 19,194
Total interest expense 9,324 18,243 8,954
-------- -------- --------
Net interest income 10,823 21,112 10,240
Provision for possible loan losses 30 60 30
-------- -------- --------
Net interest income after provision for possible
loan losses $ 10,793 $ 21,052 $ 10,210
======== ======== ========
Net income $ 3,360 $ 6,302 $ 3,079
======== ======== ========
SHARE DATA
Earning per common share:
Basic $ 1.24 $ 2.30 $ 1.13
Diluted 1.20 2.25 1.11
Dividends paid per common share .41 .70 .33
Book value 22.44 20.90 20.14
Tangible book value 21.14 20.81 20.04
Shares outstanding (period-end)(1) 2,847,485 2,797,670 2,743,014
Average shares outstanding 2,707,237 2,735,859 2,738,799
Average shares outstanding, including
potentially dilutive shares 2,789,289 2,798,105 2,781,265
FINANCIAL POSITION
Total assets $628,541 $549,864 $540,894
Total deposits 536,562 483,363 470,721
Total loans, net of unearned discount 367,579 326,437 311,166
Allowance for possible loan losses 6,370 6,120 6,150
Goodwill 3,722 240 279
Short-term borrowings 2,283 5,333 9,693
FHLB borrowings 19,867 - -
Debt of employee stock ownership plan - - 1,581
Total shareholders' equity 63,910 56,653 55,241
</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, 1998(2) December 31, 1997 June 30, 1997(2)
------------- ----------------- -------------
<S> <C> <C> <C>
Loan-to-deposit ratio 68.51% 67.53% 66.10%
Allowance for possible loan losses to total loans 1.73 1.87 1.98
Dividend payout ratio(3) 33.01 30.43 29.20
Return on average assets 1.21 1.18 1.16
Return on average shareholders' equity 11.64 11.44 11.41
Net interest margin on average interest-
earning assets 4.31 4.34 4.27
Average shareholders' equity to average total
assets 10.43 10.28 10.19
Tier I leverage capital to adjusted total
consolidated assets less intangibles 10.92 10.34 10.34
Tier I capital to risk-weighted assets 15.86 16.12 16.54
Total capital to risk-weighted assets 17.12 17.38 17.80
</TABLE>
(1) Shares outstanding at June 30, 1998, December 31, 1997, and June 30, 1997
include 80,301, 86,478, 92,655 shares, respectively, held by ESOP which
have not been allocated to participants' accounts and thus are not
considered outstanding for purposes of computing book value and tangible
book value per share. These unallocated shares are also excluded from the
average shares outstanding used to compute earnings per common share.
(2) Statistical information is annualized where applicable.
(3) Dividends paid per common share divided by basic earnings per common share.
9
<PAGE> 10
Item 2. (continued)
FINANCIAL POSITION
Total consolidated assets of the Company have increased $78,677,000 during
1998 to $628,541,000 at June 30, 1998 compared to $549,864,000 at December 31,
1997. The majority of the increase is attributable to the PSB acquisition.
LOAN PORTFOLIO
The Company's loan portfolio consists of business loans to small and medium
size companies, commercial, construction 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
collateral. The following table is a breakdown of the Company's loan portfolio
as of the end of the periods indicated.
<TABLE>
<CAPTION>
(in thousands)
JUNE 30, 1998 December 31, 1997 June 30, 1997
------------- ----------------- -------------
<S> <C> <C> <C>
Commercial, financial and agricultural $ 69,694 $ 69,168 $ 63,094
Real estate-commercial 97,529 98,759 86,552
Real estate-construction 33,350 30,836 28,114
Real estate-residential 131,367 92,028 97,005
Consumer 23,653 23,627 25,606
Industrial revenue bonds 4,996 5,517 5,861
Other 6,990 6,502 4,934
-------- -------- --------
$367,579 $326,437 $311,166
======== ======== ========
</TABLE>
The Company's loan portfolio totaled $367,579,000 at June 30, 1998, which
represents an increase of $41,142,000, or 12.6%, since December 31, 1997. The
loan growth was due to the acquisition of PSB during the second quarter of 1998,
which included $46,318,000 in real estate loans, primarily residential.
Excluding the PSB loans acquired, total loans have decreased by $5,176,000
during 1998. The majority of this decline was in the residential real estate
loan portfolio. The Company viewed both PSB's residential real estate loan
portfolio and their secondary market mortgage operation as valuable components
of the acquisition, which compliment the Company's current balance sheet
structure and operating philosophy.
SUMMARY OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
(in thousands)
SIX MONTHS ENDED Twelve Months Ended Six Months Ended
JUNE 30, 1998 December 31, 1997 June 30, 1997
------------- ----------------- -------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $ 6,120 $ 5,602 $ 5,602
Provision charged to expense 30 60 30
Loans charged off (210) (367) (118)
Recoveries 173 825 636
Balance of allowance for possible loan
losses of PSB at date of acquisition 257 - -
------- ------- -------
BALANCE AT END OF PERIOD $ 6,370 $ 6,120 $ 6,150
======= ======= =======
</TABLE>
The balance of the allowance for possible loan losses increased by $250,000
during the first six months of 1998, primarily as a result of the PSB
acquisition. In addition, the Company has recorded provisions for possible loan
losses during the first three months of $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 was 1.73% as
of June 30, 1998 compared to 1.87% and 1.98% at December 31, 1997 and June 30,
1997, respectively. The reduction as of June 30, 1998 reflects the addition of
the residential portfolio of PSB.
10
<PAGE> 11
Item 2. (continued)
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
(dollars in thousands)
JUNE 30, 1998 December 31, 1997 June 30, 1997
------------- ----------------- -------------
<S> <C> <C> <C>
Nonaccrual loans $ 2,845 $ 2,977 $ 1,385
Loans past due 90 days or more and still
accruing interest 1,132 517 95
------- ------- -------
TOTAL NONPERFORMING LOANS 3,977 3,494 1,480
Other real estate owned 936 1,024 976
------- ------- -------
TOTAL NONPERFORMING ASSETS $ 4,913 $ 4,518 $ 2,456
======= ======= =======
RATIOS:
Total nonperforming loans as % of total loans 1.08% 1.07% 0.48%
Nonperforming assets as % of total loans and
other real estate owned 1.33 1.38 0.79
Nonperforming assets as % of total assets 0.78 0.82 0.45
</TABLE>
Nonperforming assets totaled $4,913,000 or 0.78% of total assets at June 30,
1998 compared to $4,518,000 or 0.82% and $2,456,000 or 0.45% at December 31,
1997 and June 30, 1997, respectively. Fluctuations in the level of nonperforming
assets are a normal part of the Company's business, however, management is
cognizant of the need to continually ensure that nonperforming assets remain at
acceptably low levels.
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, 1998, there were no concentrations of loans
exceeding 10% of total loans which were not disclosed as a category of loans
detailed on page 9.
INVESTMENTS IN DEBT SECURITIES
Investments in debt securities have increased $19,318,000 since December 31,
1997 due in part to the PSB acquisition, which included $10,226,000 in
investment securities. The remainder of the increase was attributable to a
return on equity enhancement strategy employed by the Company's lead bank. To
utilize a portion of the bank's excess capital capacity, the bank borrowed
approximately $10,000,000 in FHLB advances to fund the purchase of
mortgage-backed and municipal securities. Overall, the investment 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 management, has resulted in
a stable investment portfolio.
DEPOSITS
Total deposits increased $53,199,000 during the first six months of 1998 as
a result of the PSB acquisition during the second quarter of 1998, which
included $55,264,000 in deposits. Excluding the PSB deposits acquired, total
deposits have declined $2,065,000 for the year. This decline is largely the
result of the Company's subsidiary banks being less aggressive with respect to
the interest rates being paid on deposits than some of their competitors.
11
<PAGE> 12
Item 2. (continued)
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase (REPOs) declined $3,050,000
during the first six months of 1998, due to normal daily fluctuations in the
balances of the underlying accounts. The majority of the Company's REPOs are
used by larger commercial customers as a daily cash management tool, therefore,
depending on their individual liquidity positions, the balances in these
accounts can vary considerably.
FHLB BORROWINGS
The $19,867,000 increase in FHLB borrowings was due in part to $8,370,000 in
FHLB borrowings acquired as part of the PSB acquisition. In addition,
$10,000,000 of FHLB borrowings was obtained as part of the aforementioned return
on equity enhancement strategy. The remainder of the borrowings are being used
by one of the Company's subsidiary banks to help in funding longer term fixed
rate residential real estate loans. This program allows the bank to offer rates
competitive to those offered by secondary-market mortgage operations, with the
added benefit of letting the customer know their loan will not be sold or the
servicing transferred several times over the life of the loan.
12
<PAGE> 13
Item 2. (continued)
ASSET/LIABILITY MANAGEMENT
As reflected on the Repricing and Interest Rate Sensitivity Analysis below,
the Company has a reasonably well-balanced interest rate sensitivity position.
The Company's current one-year cumulative gap is 1.07x. 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.
REPRICING AND INTEREST RATE SENSITIVITY ANALYSIS
(dollars in thousands)
JUNE 30, 1998
<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:
Interest-bearing due from banks $ 11,597 $ - $ - $ - $ 11,597
Federal funds sold 14,700 - - - 14,700
Investments available-for-sale 20,698 16,481 37,445 13,546 88,170
Investments held-to-maturity 9,805 16,170 55,520 22,792 104,287
Loans, net of unearned discount (1) 187,280 57,368 84,409 38,522 367,579
--------- --------- -------- -------- --------
Total interest-earning assets 244,080 90,019 177,374 74,860 586,333
--------- --------- -------- -------- --------
Cumulative interest-earning assets 244,080 334,099 511,473 586,333 586,333
--------- --------- -------- -------- --------
Interest-bearing liabilities:
Interest-bearing demand deposits 53,089 30,336 37,921 30,336 151,682
Savings deposits 23,373 13,356 16,695 13,356 66,780
Time deposits under $100,000 49,126 89,674 65,842 - 204,642
Time deposits $100,000 and over 27,441 18,162 4,342 - 49,945
Securities sold under agreements to repurchase 2,283 - - - 2,283
FHLB borrowings - 6,000 13,867 - 19,867
--------- --------- -------- -------- --------
Total interest-bearing liabilities 155,312 157,528 138,667 43,692 495,199
--------- --------- -------- -------- --------
Cumulative interest-bearing liabilities 155,312 312,840 451,507 495,199 495,199
--------- --------- -------- -------- --------
Gap analysis:
Interest sensitivity gap $ 88,768 $(67,509) $ 38,707 $ 31,168 $ 91,134
========= ======== ======== ======== ========
Cumulative interest
sensitivity gap $ 88,768 $ 21,259 $ 59,966 $ 91,134 $ 91,134
========= ========= ======== ======== ========
Cumulative gap ratio of interest-
earning assets to interest-bearing
liabilities 1.57x 1.07x 1.13x 1.18x 1.18x
===== ===== ===== ===== =====
</TABLE>
(1) Nonaccrual loans are reported in the "Over 1 year through 5 years" column.
13
<PAGE> 14
Item 2. (continued)
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 17.12%, 17.38% and 17.80% as of June 30, 1998,
December 31, 1997, and June 30, 1997, respectively, which included Tier I
capital ratios of 15.86%, 16.12%, and 16.54%, 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 securities of the Company. The Company's Tier I leverage
ratios were 10.92%, 10.34%, and 10.34% at June 30, 1998, December 31, 1997, and
June 30, 1997, respectively.
RESULTS OF OPERATIONS
EARNINGS SUMMARY
Net income was $3,360,000 for the six months ended June 30, 1998 compared to
$3,079,000 for the six months ended June 30, 1997, which represents a $281,000
or 9% increase over the prior year. The increase was largely due to the net
effect of increases in net interest income and noninterest income, partially
offset by an increase in noninterest expense. Net income for the second quarter
of 1998 was $1,722,000 compared to $1,581,000 in the second quarter of 1997.
This increase in second quarter earnings was attributable to the same factors
that affected the year-to-date earnings.
Basic earnings per common share were $1.24 for the first half of 1998
compared to $1.13 for the first half of 1997, and the earnings per common share
were $0.64 and $0.58 for the second quarter of 1998 and 1997, respectively. Net
income for the first six months of 1998 resulted in an annualized return on
average assets (ROA) of 1.21% compared to 1.16% in the prior year, and an
annualized return on average shareholders' equity (ROE) of 11.64% compared to
11.41% in the prior year. ROE continues to be negatively impacted by the
Company's strong equity position.
NET INTEREST INCOME
As reflected in the Selected Statistical Information table on the following
page, net interest income on a tax- equivalent basis increased by $599,000 in
the first six months of 1998 when compared to the first six months of 1997. The
increase in net interest income was the result of a combination of an increase
in average earning assets, and an increase in the net interest margin. The major
factor contributing to both increases was the loan portfolio. The average
balance of loans outstanding increased $22,348,000 or 7.4%, while the average
rate earned on the portfolio increased by two basis points to 8.92%. Because the
PSB acquisition was completed on June 29, 1998, it had virtually no effect on
either average assets or net interest income for the first half of 1998.
14
<PAGE> 15
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)
SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
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) $323,863 $14,449 8.92% $301,515 $13,416 8.90%
Investments in debt securities:
Taxable(4) 151,008 4,504 5.97 160,966 4,901 6.09
Exempt from Federal income tax (3) (4) 25,745 1,055 8.19 22,390 944 8.44
Short-term investments 22,115 592 5.35 14,996 370 4.93
-------- ------- -------- -------
Total interest-earning assets/interest
income/overall yield (3) 522,731 20,600 7.88 499,867 19,631 7.85
------- ===== ------- ====
Allowance for possible loan losses (6,081) (5,855)
Cash and due from banks 15,551 14,607
Other assets 21,165 20,997
-------- --------
TOTAL ASSETS $553,366 $529,616
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand and savings deposits $199,330 3,140 3.15% $187,022 2,856 3.05%
Time deposits 224,721 5,989 5.33 224,640 5,941 5.29
Short-term borrowings 4,632 102 4.40 3,907 86 4.40
Other borrowings 3,099 93 6.00 - - -
Debt of employee stock ownership plan - - - 1,690 71 8.40
-------- ------- -------- -------
Total interest-bearing
liabilities/interest-
expense/overall rate 431,782 9,324 4.32 417,259 8,954 4.29
------- ==== ------- ====
Non-interest-bearing demand deposits 59,358 53,807
Other liabilities 4,490 4,571
Shareholders' equity 57,736 53,979
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $553,366 $529,616
======= ========
NET INTEREST INCOME $11,276 $10,677
======= =======
NET INTEREST MARGIN ON AVERAGE
INTEREST-EARNING ASSETS 4.31% 4.27%
==== ====
</TABLE>
(1) Interest income includes loan origination fees.
(2) Average balance includes nonaccrual loans.
(3) Interest yields are presented on a tax-equivalent basis.
(4) Includes investments available-for-sale.
15
<PAGE> 16
Item 2. (continued)
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 1998. 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 increased $80,000 during the first six months of 1998 and
$36,000 during the second quarter of 1998 in comparison to the comparable
periods in the prior year. These increases were due in part to an increase in
trust department revenue, as well as, gains on the sales of other real estate
owned.
NONINTEREST EXPENSE
Noninterest expense for the first half of 1998 increased $203,000 when
compared to the first half of the prior year, as a result of increases in
salaries and employee benefits. The increase in salaries and employee benefits
expense was due, in part, to normal pay increases, as well compensation expense
related to the Company's Employee Stock Ownership Plan. This increase was
partially offset by a decrease in occupancy and equipment expense. Noninterest
expense for the second quarter was comparable to the prior year, as an increase
in personnel expense was largely offset by a decrease in occupancy and equipment
expense.
INCOME TAXES
Federal income tax expense for the first six months of 1998 was $1,288,000
compared to $1,109,000 in the first six months of 1997. The Company's effective
tax rate continues to increase, and was 27.71% for the first half of 1998,
compared to 26.48% for the first half of 1997. This increase is caused by the
fact that taxable income is increasing but the Company's tax-exempt income from
municipal securities and loans has remained relatively the same. As part of the
equity enhancement strategy, approximately half of the securities purchased were
municipal securities which should aid the Company in managing its effective tax
rate.
EFFECT OF NEW ACCOUNTING STANDARDS
During 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
131, Disclosures about Segments of an Enterprise on Related Information (SFAS
131). SFAS 131 establishes standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires those enterprises report selected information about operating segments
in interim financial reports issued to shareholders. Additionally, SFAS 131
establishes standards for related disclosures about products and services,
geographical areas, and major customers superseding SFAS No. 14, Financial
Reporting for Segments of a Business Enterprise. The Company does not believe
expanded disclosure information will be required to be included in its
consolidated financial statements beginning in 1998.
FASB 133, Accounting for Derivative Instruments and Hedging Activities,
which was issued in June 1998, establishes accounting and reporting standards
for derivative instruments and hedging activities. Under FASB 133, derivatives
are recognized on the balance sheet at fair value as an asset or liability.
Changes in the fair value of derivatives are reported as a component of other
comprehensive income or recognized as earnings through the income statement
depending on the nature of the instrument. FASB 133 is effective for all
quarters of fiscal years beginning after June 15, 1999 with earlier adoption
permitted. The Company is currently evaluating FASB 133's effect.
16
<PAGE> 17
Item 2. (continued)
COMMON STOCK - MARKET PRICE AND DIVIDENDS
The table below sets forth the high, low and 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.
<TABLE>
<CAPTION>
Book Dividends Paid Per
High Bid Low Bid Close Value Market/Book Common Share
-------- ------- ----- ----- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
2ND QUARTER - 1998 $44.75 $36.25 $36.25 $22.44 161.54% $0.21
1st Quarter - 1998 37.75 34.25 37.75 21.33 176.98 0.20
4th Quarter - 1997 35.50 33.25 34.50 20.90 165.07 0.19
3rd Quarter - 1997 40.50 33.50 33.50 20.57 162.86 0.18
2nd Quarter - 1997 37.00 21.50 37.00 20.14 183.71 0.17
1st Quarter - 1997 25.00 22.75 24.50 19.60 125.00 0.16
</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, 1998. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's regular Annual Meeting of Shareholders was held on April 23,
1998. 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 III Directors, each to
serve for a term of three years, and (ii) ratified the adoption of an amendment
to the Corporation's Articles of Incorporation increasing the number of
authorized shares from 6,000,000 to 16,000,000, consisting of 15,000,000 shares
of Common Stock of the Corporation and 1,000,000 shares of Preferred Stock of
the Corporation and (iii) ratified the adoption of the
17
<PAGE> 18
Southside Bancshares Corp. 1998 Stock Option Plan and (iiii) 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, 1998.
Management's Director nominees were: Douglas P. Helein, Earle J. Kennedy,
Jr., and Daniel J. Queen.
The Directors elected at the meeting were: Douglas P. Helein, Earle J.
Kennedy, Jr., and Daniel J. Queen. The names of each of the Directors whose term
of office as a Director continued after the meeting is as follows: Norville K.
McClain (term expiring 1999); Richard G. Schroeder, Sr. (term expiring 1999);
Thomas M. Teschner (term expiring 1999); Joseph W. Beetz (term expiring 2000);
Ralph Crancer, Jr. (term expiring 2000); Howard F. Etling (term expiring 2000);
Douglas P. Helein (term expiring 2001); Earle J. Kennedy, Jr. (term expiring
2001); and Daniel J. Queen (term expiring 2001).
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>
Douglas P. Helein 1,940,971 0 4,005
Earle J. Kennedy, Jr. 1,940,131 840 4,005
Daniel J. Queen 1,940,971 0 4,005
</TABLE>
With respect to the ratification of an amendment to the Corporation's
Articles of Incorporation increasing the number of authorized shares from
6,000,000 to 16,000,000, consisting of 15,000,000 shares of Common Stock of the
Corporation and 1,000,000 shares of Preferred Stock of the Corporation, there
were 1,855,494 shares voted "For" and 71,783 shares voted "Against", with 17,741
shares abstaining.
With respect to the ratification of the Southside Bancshares Corp. 1998
Stock Option Plan, there were 1,689,025 shares voted "For" and 68,339 shares
voted "Against", with 35,304 shares abstaining.
With respect to the ratification of the appointment of KPMG Peat Marwick
LLP, there were 1,929,534 shares voted "For" and 5,169 shares voted "Against",
with 9,915 shares abstaining.
ITEM 5. Other Information
The Securities and Exchange Commission ("SEC") recently adopted amendments
to its rules under the Securities Exchange Act of 1934 (the "Exchange Act")
regarding the submission by shareholders of proposals intended to be presented
at meetings of shareholders. These amendments, which became effective on June
29, 1998, included provisions authorizing companies to exercise discretionary
voting authority with respect to shareholder proposals for which a company did
not receive notice within a specified time period prior to a meeting of its
shareholders or that otherwise did not satisfy certain requirements specified
in such amendments.
Under the Company's bylaws, in order for any business to be transacted at
an annual meeting of shareholders, other than business proposed by or at the
direction of the Company's Board of Directors, notice thereof must be received
from the proposing shareholder by the Secretary of the Company, accompanied or
promptly followed by such supporting information as the Secretary shall
reasonably request, not less than 75 days prior to the date of such annual
meeting. Since, under Company's bylaws, the 1999 Annual Meeting of
Shareholders would be held on April 22, 1999, notice of such proposals must be
received by the Company on or before February 6, 1999. Management proxies will
be authorized to exercise discretionary voting authority with respect to any
shareholder proposal not included in the Company's Proxy Statement for its 1999
Annual Meeting unless (a) the Company receives notice of such proposal on or
before February 6, 1999 and the proposal otherwise satisfies the requirements
of the Company's bylaws, and (b) the additional conditions set forth in SEC
Rule 14a-4(c)(2)(i)-(iii) under the Exchange Act are satisfied.
ITEM 6. Exhibits and Reports on Form 8-K
Exhibit 10(a) - Employment Agreement, as amended
Reports on 8-K
None
18
<PAGE> 19
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 12, 1998 /s/ Thomas M. Teschner
- --------------- ---------------------------------
Thomas M. Teschner
President
(Principal Executive Officer)
August 12, 1998 /s/ Joseph W. Pope
- --------------- ---------------------------------
Joseph W. Pope
Senior Vice President and Chief
Financial Officer (Principal
Financial Officer, Controller,
and Principal Accounting Officer)
19
<PAGE> 20
FORM 10-Q
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
10(a) Employment Agreement, as amended
<PAGE> 1
EXHIBIT 10(a)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
this 27th day of April, 1995, by and among SOUTHSIDE BANCSHARES CORP., a
Missouri corporation (the "Company"), SOUTH SIDE NATIONAL BANK IN ST.
LOUIS, a National Bank (the "Bank") and THOMAS M. TESCHNER ("Employee").
RECITALS
A. The Company is engaged in the business of a Bank Holding Company
within the meaning of the Bank Holding Company Act of 1956, as amended.
B. The Bank is engaged in the business of a National Bank.
C. Each of the Company and the Bank desire to employ Employee as
President and Chief Executive Officer, and Employee desires to be so employed by
the Company and the Bank, all upon the terms set forth herein and, for the
purpose of effecting the same, the Board of Directors of the Company and the
Board of Directors of the Bank have approved this Employment Agreement and
authorized its execution and delivery on the Company's behalf and the Bank's
behalf to the Employee.
D. The services of the Employee, his experience and knowledge of the
affairs of the Company and the Bank, and his reputation and contacts in the
industry are extremely valuable to the Company and the Bank.
E. The Company and the Bank consider the establishment and maintenance
of sound and vital management to be a part of each of their overall corporate
strategies and to be essential to protecting and enhancing each of their best
interests and the best interests of each of their subsidiaries, depositors and
shareholders.
AGREEMENT
To assure each of the Company and the Bank of the Employee's continued
dedication, the availability of his advice and counsel to the Boards of
Directors of the Company and the Bank and the availability of his management
skills to the Company and the Bank,
<PAGE> 2
and to induce the Employee to remain and continue in the employ of the Company
and the Bank and for other good and valuable consideration, the receipt and
adequacy whereof each party hereby acknowledges, the Company, the Bank and the
Employee hereby agree as follows:
1. Employment. The Company agrees to employ Employee as President and
Chief Executive Officer of the Company, the Bank agrees to employ Employee as
President and Chief Executive Officer of the Bank, and Employee agrees to
continue to be so employed during the term of this Agreement, upon the terms and
conditions hereinafter set forth.
2. Duties. During the term of this Agreement, Employee is to devote
his time, attention and best efforts in carrying out his duties as President and
Chief Executive Officer of the Company and the Bank, which duties include those
as from time to time hereafter may be specified in the Company's and Bank's
By-laws, such other duties as are appropriate for an employee holding a position
of President and Chief Executive Officer in the Company's and the Bank's
businesses, and such other duties as may reasonably be assigned to Employee by
the Company or the Bank. Employee covenants and agrees to diligently and
faithfully serve the Company and the Bank in the capacities set forth above and
to devote such of his professional energies, attention, time, care and best
efforts as is reasonably necessary to the performance of services and the
fulfillment of duties normally associated with the above capacities.
Nothing in this Section 2 shall be construed as preventing Employee
from investing assets in such form or manner as will not require his services in
the daily operations of the affairs of the companies in which such investments
are made.
3. Term of Employment. Employment of Employee pursuant to this
Agreement by the Company and the Bank shall commence on the date hereof, and
shall continue for an initial period of three (3) years from such date. Unless
written notice of intent not to renew has been delivered on or before either the
first year anniversary of this Agreement or each successive yearly anniversary
thereafter, the term of Employee's employment pursuant to this Agreement shall
be automatically renewed for a new three (3) year term.
In the event such notice of intent not to renew is properly delivered,
this Agreement, along with all corresponding rights, duties, and covenants,
automatically shall expire at the end of the
2
<PAGE> 3
initial term or successive term then in progress, subject to the fulfillment of
the continuing rights, duties and obligations as may otherwise be expressly
provided for herein.
4. Place of Performance. In connection with Employee's employment
hereunder, Employee is to be based at the principal executive offices of the
Company and the Bank, except for required travel in connection with the business
of the Company or the Bank. The Company and the Bank are to furnish Employee
with office space, stenographic and secretarial assistance and such other
facilities and services as are suitable to Employee's position in the Company's
and the Bank's businesses and as are adequate for the performance of his duties
hereunder.
5. Compensation. As full consideration for all services rendered by
Employee to the Company and the Bank hereunder, the Company and the Bank shall
compensate Employee in the following manner, it being agreed and understood that
such compensation is the total of the sums to be paid or benefits provided by
the Company and the Bank, and in no event shall the Company or the Bank be
required to duplicate any such compensation or benefit which is otherwise
provided by one of them.
(a) Annual Base Salary. The Company and the Bank shall pay
Employee an initial annual base salary hereunder of $140,000, payable in equal
monthly installments or at such other intervals as may be agreed upon in writing
by the Company, the Bank and Employee. Employee's annual base salary shall be
reviewed at least annually, while this Agreement is in force, to ascertain
whether, in the judgement of the Company's and the Bank's Boards of Directors,
such annual salary should be increased. Notwithstanding the foregoing, in the
event the Company or the Bank approve an annual percentage increase in the
annual salary paid per Company or Bank employee (the "Percentage Increase"),
Employee's annual base salary shall be increased by a percentage which is not to
be less than the greater of the Percentage Increase of the Company or the Bank.
For purposes of this Section, the annual salary paid per Company or Bank
employee is to be computed by dividing (i) the aggregate dollar amount of all
annual base salaries to be paid or previously paid, as the case may be, to the
Company or the Bank employees so entitled (excluding Employee and his annual
base salary), by (ii) the number of such Company or Bank employees, as the case
may be. If Employee's annual base salary is so increased, such salary is not to
be thereafter decreased during the term of this Agreement, and the obligation of
the Company and the Bank
3
<PAGE> 4
hereunder to pay Employee's annual salary thereafter shall relate to such
increased salary.
(b) Other Benefits. In addition to his annual base salary, Employee
shall be entitled during the term of this Agreement to:
(i) participate in any and all incentive bonus plans of the
Company and the Bank now or hereafter in effect, including without limitation
the Company's Annual Incentive Plan, at a level or levels commensurate with
Employee's position with the Company and the Bank;
(ii) participate in any and all employee welfare plans,
employee benefit plans, stock purchase plans and similar plans of the Company
and the Bank now or hereafter in effect and open to participation by qualifying
employees of the Company and the Bank generally, including accidental death
insurance, group life insurance, group disability insurance, medical and health
plans, sick pay, dental plans, retirement plans, savings plans, cafeteria plans,
supplemental retirement plans, employee stock purchase plans and employee stock
ownership plans; and
(iii) enjoy certain personal benefits provided by the Company
and the Bank, including:
(A) reimbursement in full of all business, travel and
entertainment expenses reasonably incurred by Employee in performing his duties
hereunder;
(B) four (4) weeks of fully paid vacation during each
calendar year at a time or times selected by Employee;
(C) those holidays designated by the Company and the
Bank during which the Company's and the Bank's normal business operations are
closed;
(D) the use of an automobile, to be replaced every
three (3) years, of such model and type as is befitting the position of
Employee, such use to be provided during the unexpired portion of this
Agreement; and
(E) reimbursement of Employee's dues and initiation or
other fees in Greenbriar Hills Country Club, located in St. Louis County,
Missouri and such other professional associations, societies, service
organizations, luncheon clubs and
4
<PAGE> 5
country clubs as are approved by the Company and the Bank.
(c) Legal Fees. The Company and the Bank agree to reimburse Employee
for any and all legal fees and expenses incurred by Employee in connection with
this Agreement and the transactions contemplated hereby and/or in connection
with any action or proceeding initiated by the Company, the Bank or Employee
with respect to any of the terms and conditions of this Agreement, whether or
not any such action or proceeding is decided favorably to Employee and whether
or not this Agreement has been terminated.
6. Termination. The employment of Employee hereunder by the Company
and the Bank may be terminated under the circumstances set forth below.
(a) Termination for Cause. The Company and the Bank may terminate
Employee's employment hereunder for cause. For purposes hereof, "cause" shall
mean: (i) any willful misconduct by Employee resulting in indictment for an
alleged felony; (ii) a violation of any material provision of this Agreement by
Employee; or (iii) any willful failure (other than a failure resulting from
disability or death) by Employee substantially to perform any reasonable
directions of the Company's Board of Directors or the Bank's Board of Directors
(collectively, the "Boards") within sixty (60) days (or such longer period if
more than sixty (60) days are required to substantially perform such directions
with reasonable diligence and Employee has commenced performance within such
sixty (60) days) after written demand for substantial compliance by the Boards,
which written demand is to specifically identify the manner in which the Boards
believe that Employee has not substantially performed. Notwithstanding the
foregoing, the employment of Employee hereunder may not be terminated for cause
unless and until (A) reasonable notice is given to Employee setting forth the
reasons the Company and the Bank intend to terminate Employee's employment, (B)
Employee is provided an opportunity to be heard before the Boards, with counsel,
and (C) after such hearing or opportunity to be heard, written notice of final
termination of employment for cause is delivered to Employee setting forth the
specific reasons therefor and the prospective effective date of such
termination. In addition, termination for cause shall require the affirmative
votes of at least two-thirds of each of the entire Boards (excluding Employee if
Employee is a director). Employee will not be entitled to any further
compensation hereunder for any period subsequent to the effective date of such
termination for cause except for a severance payment (to be paid on the
effective date of such termination) equal to the greater of (1) one-third of
5
<PAGE> 6
Employee's then current annual base salary, or (2) a severance payment computed
in accordance with the Company's or the Bank's then existing severance payment
policy.
(b) Termination Due to Disability. In the event of Employee's
disability, the Company and the Bank shall continue to make payments to Employee
hereunder for a period of six (6) months subsequent to such disability. If, at
the end of such six (6) month period, Employee remains disabled, the Company and
the Bank may terminate Employee's employment hereunder upon thirty (30) days'
written notice to Employee setting forth the prospective effective date of such
termination. Such termination due to disability shall require the affirmative
votes of at least two-thirds of each of the entire Boards (excluding Employee if
Employee is a director). During any period of disability and prior to the
effective date of any termination due to disability, Employee shall continue to
receive the compensation payable to him hereunder. On the effective date of such
termination due to disability, the Company and the Bank shall pay Employee a
severance payment equal to the greater of (i) one-third of Employee's then
current annual base salary, or (ii) a severance payment computed in accordance
with the Company's and the Bank's then existing severance payment policy.
Employee shall not be entitled to any additional compensation from the Company
or the Bank for any period subsequent to the effective date of such termination
except for payments to Employee under the Company's or the Bank's disability
benefit plans (the "Disability Plans"). Notwithstanding the foregoing, in the
event the Disability Plans in force as of the date of this Agreement (the
"Current Disability Plans") are amended and such amendment or amendments reduce
or terminate benefits payable to Employee thereunder, the Company and the Bank
shall pay Employee an amount equal to the difference between (A) the amount of
benefits Employee would have been entitled to receive under the Current
Disability Plans after the effective date of such termination, and (B) the
amount of benefits Employee is actually paid under the Disability Plans after
the effective date of such termination. For purposes hereof, "disability" and
"disabled" shall mean the inability of Employee to perform his duties hereunder
due to illness or injury as determined by a physician acceptable to the Company,
the Bank and Employee.
(c) Termination Due to Death. In the event of the death of
Employee during the Term of employment hereunder, the Company and the Bank shall
pay to Employee's designated beneficiary, or if no beneficiary has been
designated, to Employee's estate, no later than thirty (30) days following the
date of Employee's death, the
6
<PAGE> 7
benefits payable under the Company's and the Bank's accidental death, life
insurance and similar plans for employees (the "Death Benefit Plans"). In the
event the Death Benefit Plans in force as of the date of this Agreement (the
"Current Death Benefit Plans") are amended and such amendment or amendments
reduce or terminate benefits payable to Employee or his beneficiaries
thereunder, the Company and the Bank shall pay Employee's designated
beneficiary, or if no beneficiary has been designated, Employee's estate, within
ninety (90) days after the date of Employee's death, a lump sum amount equal to
the difference between (i) the aggregate sum which would have been payable to
Employee or his beneficiaries under the Current Death Benefit Plans, and (ii)
the aggregate sum which is payable to Employee or his beneficiaries under the
Death Benefit Plans. The obligations of the Company and the Bank to pay Employee
additional compensation hereunder shall terminate at such time as the Company
and the Bank shall fully comply with their obligations under this Section 6(c).
(d) Breach by the Company or the Bank. In the event the Company or
the Bank breaches any material provision of this Agreement and such breach is
not cured within ten (10) days after delivery of written notice thereof to the
Company or the Bank by Employee, identifying the breach with reasonable
particularity, Employee may at his sole option, in addition to any other remedy
available to him, cease to perform his duties hereunder and terminate this
Agreement and his employment with the Company and the Bank. In such event, any
and all amounts payable to Employee hereunder shall become immediately due and
payable, and Employee shall have no obligation to mitigate.
(e) Continuation of Health Benefits After Termination.
Notwithstanding anything to the contrary herein, the Company and the Bank shall
provide Employee with a continuation of the welfare benefits of health and
medical insurance for three (3) full years from the effective date of any
termination of Employee's employment hereunder (other than a termination due to
death) at the sole cost and expense of the Company and the Bank. These benefits
shall be provided to Employee at the same coverage level as in effect as of
Employee's effective date of termination. These welfare benefits shall be
discontinued prior to the end of the three (3) year period in the event Employee
has available substantially similar benefits from a subsequent employer, as
determined by the Boards.
7. Change in Control.
7
<PAGE> 8
(a) Employment Terminations in Connection with a Change in Control.
In the event of a Qualifying Termination (as defined below) within six (6) full
calendar months prior to the effective date of a Change in Control of the
Company and/or the Bank, or within three (3) years following the effective date
of a Change in Control, then in lieu of all other benefits provided to Employee
under the provisions of this Agreement, the Company and the Bank shall pay to
Employee and provide him with the following severance benefits:
(1) An Amount equal to three (3) times the highest rate of
Employee's annual base salary rate in effect at any time during the term of this
Agreement up to and including the effective date of termination;
(2) An Amount equal to three (3) times the highest annual bonus
of Employee prior to the effective date of termination;
(3) An amount equal to Employee's unpaid annual salary and
accrued vacation pay through the effective date of termination; and
(4) A continuation of the welfare benefits of health and medical
insurance for three (3) full years from the effective date of termination at the
sole cost and expense of the Company and the Bank. These benefits shall be
provided to Employee at the same coverage level as in effect as of Employee's
effective date of termination. These welfare benefits shall be discontinued
prior to the end of the three (3) year period in the event Employee has
available substantially similar benefits from a subsequent employer, as
determined by the Boards.
For purposes of this Section 7, a Qualifying Termination shall mean any
termination of Employee's employment hereunder OTHER THAN: (1) by the Company
and the Bank for Cause (as provided in Section 6(a) hereof); or (2) by reason of
Employee's death (as provided in Section 6(c) hereof) or disability (as provided
in Section 6(d) hereof). Notwithstanding anything to the contrary herein,
Employee may voluntarily terminate his employment hereunder at any time for any
reason whatsoever within the period beginning on the effective date of a Change
in Control and ending six (6) months thereafter and such voluntary termination
shall be a Qualifying Termination for purposes of this Section 7 and Employee
shall thereupon receive the payments and other benefits set forth in this
Section 7.
8
<PAGE> 9
(b) Definition of "Change in Control". A Change in Control of the
Company and/or the Bank shall be deemed to have occurred as of the first day any
one or more of the following conditions shall have been satisfied:
(1) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any other entity or any
group of persons (other the Southside Bancshares Corp. 1993 Non-Qualified
Employee Stock Ownership Plan) acting in concert becomes the beneficial owner,
as that concept is defined in Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, of
the securities of the Company and/or the Bank possessing twenty-five percent
(25%) or more of the voting power for the election of directors of the Company
and/or the Bank;'
(2) There shall be consummated any consolidation, merger or
other business combination involving the Company and/or the Bank or the
securities of the Company and/or the Bank in which holders of voting securities
of the Company and/or the Bank, as the case may be, immediately prior to such
consummation own, as a group, immediately after such consummation, voting
securities of the Company and/or the Bank, as the case may be (or if the Company
or the Bank does not survive such transaction(s), voting securities of the
corporation(s) surviving such transaction(s)) having less than fifty percent
(50%) of the total voting power in an election of directors of the Company
and/or the Bank (or such other surviving corporation(s));
(3) During any period of two (2) consecutive years, individuals
who at the beginning of such period constitute the directors of the Company
and/or the Bank cease for any reason to constitute at least a majority thereof;
(4) Removal by the stockholders of the Company and/or the Bank
of all or a majority of the incumbent directors of the Company or the Bank,
respectively, other than a removal for Cause; or
(5) There shall be consummated any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company and/or the Bank (on a
consolidated basis) to a party which is not controlled by or under common
control with the Company and/or the Bank, as the case may be.
9
<PAGE> 10
(c) Limitation on Change in Control Benefits. Notwithstanding
any other provision of this Agreement, if any portion of the benefits provided
in Section 7(a) herein (the "Benefits") or any other payment under this
Agreement, or under any other agreement with or plan of the Company (in the
aggregate, the "Total Payments") would constitute an "excess parachute payment"
as defined and valued in Section 280G(b) of the Internal Revenue Code of 1986,
as amended (the "Code"), then the payments to be made to Employee under this
Agreement shall be reduced such that the value of the aggregate Total Payments
that Employee is entitled to receive shall be one dollar ($1.00) less than the
maximum amount which Employee may receive without becoming subject to the tax
imposed by Section 49999 of the Code, or which the Company and/or the Bank may
pay without loss of deduction under Section 280G(a) of the Code.
Within sixty (60) days following delivery of the notice of employment
termination by Employee or the Company and the Bank pursuant to the terms of
this Agreement, or notice by the Company and the Bank to Employee of their
belief that there is a payment or benefit due Employee which will result in an
"excess parachute payment" as defined in Section 280G(b) of the Code, Employee,
the Company and the Bank, at the Company's and the Bank's expense, shall obtain
the opinion of such legal counsel, which need may not be unqualified, as
Employee may choose, which sets forth: (i) the amount of Employee's "annualized
includible compensation for the base period" (as defined in Code Section
280G(d)(1)); (ii) the present value of the Total Payments; and (iii) the amount
and present value of any "excess parachute payment." The opinion of such legal
counsel shall be supported by the opinion of a certified public accounting firm.
Such opinion shall be binding upon the Company, the Bank and Employee.
In the event that such opinion determines that there would be an
"excess parachute payment," the benefits provided in Section 7(a) herein, or any
other payment determined by such counsel to be includible in the Total Payments
shall be reduced or eliminated as specified by Employee in writing delivered to
the Company and the Bank within thirty (30) days of Employee's receipt of such
opinion, or, if Employee fails to so notify the Company and the Bank, then as
the Company and the Bank shall reasonably determine so that under the basis of
calculations set forth in such opinion there will be no "excess parachute
payment."
The provisions of this Section 7(c), including the calculations,
notices and opinion provided for herein shall be
10
<PAGE> 11
based upon the conclusive presumption that: (i) the compensation and benefits
provided for in Section 7(a) herein, and (ii) any other compensation earned
prior to the effective date of employment termination by Employee pursuant to
the Company's and the Bank's compensation programs (if such payments would have
been made in the future in any event, even though the timing of such payment is
triggered by the Change in Control), are reasonable.
(d) Subsequent Imposition of Excise Tax. If, notwithstanding
compliance with the provisions of Section 7(c) herein, it is ultimately
determined by a court or pursuant to a final determination by the Internal
revenue Service that any portion of the Total Payments is considered to be a
"parachute payment" subject to the excise tax under Section 4999 of the Code,
which was not contemplated to be a "parachute payment" at the time of payment
(so as to accurately determine whether a limitation should have been applied to
the Total Payments to maximize the net benefit to Employee, as provided in
Section 7(c) hereof), Employee shall be entitled to receive a lump sum cash
payment sufficient to place Employee in the same net after-tax position,
computed by using the "Special Tax Rate" as such term is defined below, that
Employee would have been in had such payment not been subject to such excise
tax, and had Employee not incurred any interest charges or penalties with
respect to the imposition of such excise tax. For purposes of this Agreement,
the "Special Tax Rate" shall be the highest effective federal and state marginal
tax rates applicable to Employee in the year in which the payment contemplated
under this Section 7(d) is made.
8. Noncompete. In the event Employee is terminated for cause or
Employee improperly terminates his own employment hereunder, during the period
beginning on the date of such termination of Employee's employment and
continuing for six (6) months after such date, Employee may not, without the
prior written approval of the Board, either individually or with or through an
Affiliate of Employee, contact or solicit any customers, depositors or clients
of the Company, the Bank or any of their subsidiaries.
9. Confidential Information.
(a) Immediately upon Employee's termination of employment, Employee
is to deliver to the president of the Company, the Bank or to the Boards all
materials and things relating to Employee's employment by the Company and the
Bank, including any and all materials and things embodying any of the
confidential information described in Section 8(b). Employee may neither retain
11
<PAGE> 12
any copies or reproductions thereof nor deliver any such materials and things or
copies or reproductions thereof to any third person.
(b) Employee acknowledges that, in the course of his employment with
the Company and the Bank, he will become acquainted with confidential and
proprietary information of the Company and the Bank. Employee agrees that he
will not, without the prior written consent of the Company and the Bank,
disclose or make any use of such confidential or proprietary information except
in the ordinary course of his employment with the Company and the Bank or except
as may be requested by the Company and the Bank or otherwise be required by
applicable law.
10. Dissemination of Information. During the term of his employment
with the Company and the Bank, and for a period of five (5) years thereafter,
Employee will not disclose or otherwise provide information or documents (other
than in the ordinary course of employment with the Company and the Bank) to any
person regarding the Company or the Bank (a) without the prior written consent
of the Company and the Bank, (b) except to regulatory officials having
jurisdiction over Employee, or (c) except as required by law or legal process or
in connection with any legal proceeding to which he is a party or is otherwise
subject. In any event, Employee will immediately notify the Boards of any and
all requests or demands for such information or documents. This Section applies
to all information and documents regarding the Company and the Bank, whether or
not the same is confidential.
11. Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular and vice versa,
references to one gender include all genders, "including" is not limiting, and
"or" has the inclusive meaning represented by the phrase "and/or". The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Article, section and subsection references are to this Agreement
unless otherwise specified.
12. Amendment and Modification. No amendment, modification, supplement,
termination, consent or waiver of any provision of this Agreement, nor consent
to any departure herefrom, will in any event be effective unless the same is in
writing and is signed by the party against whom enforcement of the same is
sought. Any waiver of any provision of this Agreement and any consent to any
departure from the terms of any provision of this Agreement is to be
12
<PAGE> 13
effective only in the specific instance and for the specific purpose for which
given.
13. Approvals and Consents. If any provision hereof requires the
approval or consent of any party to any act or omission, such approval or
consent is not to be unreasonably withheld or delayed except as set forth
herein.
14. Assignments. No party may assign or transfer any of its rights or
obligations under this Agreement to any other person without the prior written
consent of the other parties.
15. Captions. Captions contained in this Agreement have been inserted
herein only as a matter of convenience and in no way define, limit, extend or
describe the scope of this Agreement or the intent of any provision hereof.
16. Compliance with Law. None of the terms or provisions of this
Agreement require any of the parties to take any action prohibited by, or
contrary to, applicable law.
17. Counterparts. This Agreement may be executed by the parties on any
number of separate counterparts, and all such counterparts so executed
constitute one agreement binding on all the parties notwithstanding that all the
parties are not signatories to the same counterpart.
18. Entire Agreement. This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements, letters of intent, understandings, negotiations and
discussions of the parties, whether oral or written.
19. Failure or Delay. No failure on the part of any party to exercise,
and no delay in exercising, any right, power or privilege hereunder operates as
a waiver thereof; nor does any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege. No notice to or demand on any
party in any case entitles such party to any other or further notice or demand
in similar or other circumstances.
20. Further Assurances. The parties will execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purpose of this Agreement.
13
<PAGE> 14
21. Governing Law. This Agreement and the rights and obligations of the
parties hereunder are to be governed by and construed and interpreted in
accordance with the laws of the State of Missouri applicable to contracts made
and to be performed wholly within Missouri, without regard to choice or conflict
of laws rules.
22. No Joint Venture or Partnership. The parties agree that nothing
contained herein is to be construed as making the parties joint venturers or
partners.
23. Notices. All notices, consents, requests, demands and other
communications hereunder are to be in writing, and are deemed to have been duly
given or made: (a) when delivered in person, (b) three days after deposited in
the United States mail, first class postage prepaid, (c) in the case of
telegraph or overnight courier services, one business day after delivery to the
telegraph company or overnight courier service with payment provided for, or (d)
in the case of telex or telecopy, when sent, verification received, in each case
addressed as follows:
(i) If to the Employee: His last known address shown on the
Records of the Company and the Bank.
(ii) If to the Company: Southside Bancshares Corp.
Attention: Corporate Secretary
3606 Gravois Avenue
St. Louis, Missouri 63116
(iii) If to the Bank: South Side National Bank
Attention: Cashier
3606 Gravois Avenue
St. Louis, Missouri 63116
or to such other address as any party may designate by notice to the other
parties in accordance with the terms of this Section.
24. Publicity. Any publicity release, advertisement, filing, public
statement or announcement made by or at the request of any party regarding this
Agreement is to be first reviewed by and must be satisfactory to the other
parties.
25. Remedies Cumulative. Each and every right granted hereunder and the
remedies provided for under this Agreement are
14
<PAGE> 15
cumulative and are not exclusive of any remedies or rights that may be available
to any party at law, in equity, or otherwise.
26. Severability. Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction is, as to such jurisdiction,
ineffective to the extent of any such prohibition, unenforceability or
nonauthorization without invalidating the remaining provisions hereof, or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction, unless the ineffectiveness of such provision would result in
such a material change as to cause completion of the transactions contemplated
hereby to be unreasonable.
27. Specific Performance and Injunctive Relief. Each party recognizes
that, if it fails to perform, observe or discharge any of its obligations under
this Agreement, no remedy at law will provide adequate relief to the other
parties. Therefore, each party is hereby authorized to demand specific
performance of this Agreement, and is entitled to temporary and permanent
injunctive relief, in a court of competent jurisdiction at any time when any
other party fails to comply with any of the provisions of this Agreement
applicable to it. To the extent permitted by Applicable Law, each party hereby
irrevocably waives any defense that it might have based on the adequacy of a
remedy at law which might be asserted as a bar to such remedy of specific
performance or injunctive relief.
28. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO MAY BE BROUGHT IN THE
COURTS OF THE STATE OF MISSOURI OR ANY COURT OF THE UNITED STATES OF AMERICA FOR
THE EASTERN DISTRICT OF MISSOURI, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF SUCH COURTS. THE PARTIES
IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH ANY OF THEM MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS. EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO EACH OF THE
OTHER PARTIES AT ITS ADDRESS PROVIDED HEREIN, SUCH SERVICE TO BECOME EFFECTIVE
30 DAYS AFTER SUCH MAILING.
15
<PAGE> 16
29. Successors and Assigns. All provisions of this Agreement are
binding upon, inure to the benefit of, and are enforceable by or against, the
parties and their respective heirs, executors, administrators or other legal
representatives and permitted successors and assigns.
30. Third-Party Beneficiary. This Agreement is solely for the benefit
of the parties and their respective successors and permitted assigns, and no
other person has any right, benefit, priority or interest under, or because of
the existence of, this Agreement.
31. Waiver of Jury Trial. Each party waives the right to a trial by
jury.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
16
<PAGE> 17
32. Signatory Warranty. Each party executing this Agreement warrants
that he is authorized to do so on behalf of the party for whom he signs this
Agreement.
SOUTHSIDE BANCSHARES CORP.
By: /s/ Howard F. Etling
--------------------------------
SOUTH SIDE NATIONAL BANK
By: /s/ Howard F. Etling
--------------------------------
Employee
By: /s/ Thomas M. Teschner
--------------------------------
17
<PAGE> 18
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement (this "Amendment") is made and
entered into this 1st day of April, 1997, by and among SOUTHSIDE BANCSHARES,
INC., a Missouri corporation (the "Company"), SOUTH SIDE NATIONAL BANK IN ST.
LOUIS, a National Bank (the "Bank") and THOMAS M. TESCHNER ("Employee").
RECITALS
WHEREAS, the Company, the Bank and Employee are parties to that certain
Employment Agreement dated April 27, 1995 (the "Agreement"); and
WHEREAS, the parties wish to amend the Agreement as set forth herein;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties agree as follows:
1. Ratification of Agreement. The terms of the Agreement are hereby
ratified and confirmed in their entirety subject to the amendments made herein.
2. Section 7(a). The last sentence of subsection (a) of Section 7 of
the Agreement is deleted in its entirety and is hereby replaced with the
following:
Notwithstanding anything to the contrary herein, Employee may
voluntarily terminate his employment hereunder at any time for any
reason whatsoever within the period beginning on the effective date of
a Change in Control and ending two (2) years thereafter and such
voluntary termination shall be a Qualifying Termination for purposes of
this Section 7 and Employee shall thereupon receive the payments and
other benefits set forth in this Section 7.
3. Section 7(c). Subsection (c) of Section 7 of the Agreement is
deleted in its entirety and is hereby replaced with the following:
(c) Payment of Excise Tax. Within sixty (60) days following
delivery of the notice of employment termination by Employee or the
Company and the Bank pursuant to the terms of this Agreement, or notice
by Employee of his belief that there is a payment or benefit due
Employee which will result in an "excess parachute payment" as defined
in Section 280G(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), Employee, the Company and the Bank, at the Company's and
the Bank's expense, shall obtain the opinion of the Company's legal
counsel, which need may not be unqualified, which sets forth: (i) the
<PAGE> 19
amount of Employee's "annualized includible compensation for the base
period" (as defined in Code Section 280G(d)(1)); (ii) the present value
of the benefits provided in Section 7(a) herein or any other payment
under this Agreement, or under any other agreement with or plan of the
Company (in the aggregate, the "Total Payments"); and (iii) the amount
and present value of any "excess parachute payment;" and (iv) the
amount and present value of the excise tax on any such "excess
parachute payment." The opinion of such legal counsel shall be
supported by the opinion of a certified public accounting firm. Such
opinion shall be binding upon the Company, the Bank and Employee.
If it is determined by the Company's legal counsel that any portion of
the Total Payments constitutes a "parachute payment" subject to the
excise tax of Section 4999 of the Code, Employee shall be entitled to
receive from the Company and the Bank a lump sum cash payment
sufficient to place Employee in the same net after tax position that
Employee would have been in had such payment not been subject to such
excise tax.
The provisions of this Section 7(c), including the calculations,
notices and opinion provided for herein shall be based upon the
conclusive presumption that: (i) the compensation and benefits provided
for in Section 7(a) herein, and (ii) any other compensation earned
prior to the effective date of employment termination by Employee
pursuant to the Company's and the Bank's compensation programs,
including, without limitation, the Company's 1993 Non-Qualified Stock
Option Plan (if such payments would have been made in the future in any
event, even though the timing of such payment is triggered by the
Change in Control), are reasonable.
Section 7(d). Subsection (d) of Section 7 of the Agreement is deleted
in its entirety and is hereby replaced with the following:
(d) Subsequent Imposition of Excise Tax. If it is ultimately
determined by a court or pursuant to a final determination by the
Internal Revenue Service, that the amount of Total Payments
constituting a "parachute payment" subject to the Excise Tax of Section
4999 of the Code is greater than the amount so determined by legal
counsel pursuant to Section 7(c) herein, Employee shall be entitled to
receive an additional lump sum cash payment sufficient to place
Employee in the same net after tax position that Employee would have
been in had such payment not been subject to such excise tax and had
Employee not incurred any interest or penalties with respect to the
imposition of such excise tax.
2
<PAGE> 20
4. Section 7(f). The following provision is hereby added as a
separate subsection (f) to Section 7 of the Agreement:
(f) Other Benefits Upon Termination. On the effective date of
any termination of Employee's employment hereunder (other than a
termination for cause or due to death), (i) the Company and the Bank
shall transfer title to Employee's membership in Greenbriar Hills
Country Club to Employee; and (ii) Employee shall receive the title to
the automobile then being provided to him in accordance with Section
5(b)(iii)(D).
5. Effect of Amendment. In the event of any conflict or inconsistency
between the terms and conditions of this Amendment and the Agreement, the terms
and conditions of this Amendment shall control. Except as provided in this
Amendment, the terms and conditions of the Agreement shall remain unchanged and
in full force and effect.
6. Counterparts. This Amendment may be executed by the parties on any
number of separate counterparts, and all such counterparts so executed
constitute one agreement binding on all the parties notwithstanding that all the
parties are not signatories to the same counterpart.
6. Governing Law. This Amendment and the rights and obligations of
the parties hereunder are to be governed by and construed and interpreted in
accordance with the laws of the State of Missouri applicable to contracts made
and to be performed wholly within Missouri, without regard to choice or conflict
of laws rules.
[remainder of page intentionally left blank]
3
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date and year first above written.
SOUTHSIDE BANCSHARES CORP.
By: /s/ Howard F. Etling
--------------------------------------
Name: Howard F. Etling
------------------------------------
SOUTH SIDE NATIONAL BANK
By: /s/ Howard F. Etling
--------------------------------------
Name: Howard F. Etling
------------------------------------
EMPLOYEE
By: /s/ Thomas M. Teschner
--------------------------------------
4
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SOUTHSIDE BANCSHARE'S CORP.'S QUARTERLY REPORT ON FORM 10Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH DOCUMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 19,756
<INT-BEARING-DEPOSITS> 11,597
<FED-FUNDS-SOLD> 14,700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 88,170
<INVESTMENTS-CARRYING> 104,287
<INVESTMENTS-MARKET> 105,414
<LOANS> 367,579
<ALLOWANCE> 6,370
<TOTAL-ASSETS> 628,541
<DEPOSITS> 536,562
<SHORT-TERM> 22,150
<LIABILITIES-OTHER> 5,919
<LONG-TERM> 0
0
0
<COMMON> 2,995
<OTHER-SE> 60,915
<TOTAL-LIABILITIES-AND-EQUITY> 628,541
<INTEREST-LOAN> 14,355
<INTEREST-INVEST> 5,200
<INTEREST-OTHER> 592
<INTEREST-TOTAL> 20,147
<INTEREST-DEPOSIT> 9,129
<INTEREST-EXPENSE> 9,324
<INTEREST-INCOME-NET> 10,823
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,614
<INCOME-PRETAX> 4,648
<INCOME-PRE-EXTRAORDINARY> 4,648
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,360
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.20
<YIELD-ACTUAL> 4.31
<LOANS-NON> 2,845
<LOANS-PAST> 1,132
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,120
<CHARGE-OFFS> 210
<RECOVERIES> 173
<ALLOWANCE-CLOSE> 6,370
<ALLOWANCE-DOMESTIC> 6,370
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
