<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999.
[ ] 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 (IRS 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
-----------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
------------------------------------------------------------
(Title of Class)
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by references in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 24, 2000, the aggregate market value, computed by the
average bid and asked prices, of the voting stock held by non-affiliates of the
Registrant was approximately $44,048,000.
As of March 24, 2000, the number of shares outstanding of the
Registrant's common stock, $1.00 par value, was 8,593,628.
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference herein include (1) Portions of the
Registrant's Annual Report to Shareholders for the fiscal year ended December
31, 1999 (Part I and Part II); and (2) Portions of the Registrant's Proxy
Statement for the Annual Meeting of Shareholders scheduled for April 27, 2000
(Part III).
<PAGE> 2
PART I
ITEM 1. BUSINESS
(a) General
Southside Bancshares Corp. ("Southside") was incorporated under the
laws of the State of Missouri on January 25, 1982. Southside became a registered
bank holding company on January 3, 1983 when South Side National Bank in St.
Louis and a wholly-owned subsidiary of Southside were merged. The wholly-owned
subsidiary of Southside now continues banking operations under the name "South
Side National Bank in St. Louis." Prior to such merger, Southside was not
actively involved in any banking operations. Southside's principal office is
located at 3606 Gravois Avenue, St. Louis, Missouri 63116.
Southside, through its subsidiary banks, is primarily engaged in
commercial banking and providing trust services. Southside and its subsidiaries
had, at December 31, 1999, consolidated total assets of approximately $678
million. The following table shows the year of acquisition, total assets, total
loans and total deposits at December 31, 1999, before elimination of
intercompany accounts, of each of Southside's wholly-owned subsidiary banks, all
of which are located in Missouri.
<TABLE>
<CAPTION>
(in thousands)
Year of ---------------------------------------------------------
Bank Acquisition Total Assets Total Loans Total Deposits
---- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
South Side National Bank in St. Louis 1983 $ 453,877 $ 245,210 $ 324,575
State Bank of Jefferson County 1983 $ 67,145 $ 47,420 $ 58,142
Bank of Ste. Genevieve 1985 $ 90,552 $ 57,848 $ 77,794
The Bank of St. Charles County 1986 $ 61,131 $ 41,959 $ 55,639
</TABLE>
Southside's subsidiary banks, which operated 17 banking offices in
Missouri during 1999, are engaged in the general banking business of accepting
funds for deposit, making loans, renting safe deposit boxes and performing such
other banking services as are usual and customary in banks of similar size and
character. All of the subsidiary banks offer real estate, commercial and
consumer loans. Customers of all subsidiary banks are offered regular checking,
interest-bearing checking, money market, savings, certificates of deposit and
IRA accounts. South Side National Bank in St. Louis, State Bank of Jefferson
County and The Bank of St. Charles County also provide Honor and CIRRUS 24-hour
automated teller machines. Bank of Ste. Genevieve has two 24-hour banking
machines on the Shazam and CIRRUS automated teller networks. South Side National
Bank in St. Louis also provides a 24-hour automated teller machine at its
Customer-Bank Communications Terminal branch in St. Anthony's Medical Center
located at 10010 Kennerly Road, St. Louis County, Missouri 63128.
Customers of all of the subsidiary banks are also offered the services
of the trust department of South Side National Bank in St. Louis. At December
31, 1999, the combined market value of fiduciary and custodial assets under
management of the trust department was approximately $271 million, which are not
included in the consolidated assets of Southside as they do not represent assets
of Southside.
The responsibility for the management of the subsidiary banks remains
with the officers and directors of the respective banks. Southside provides the
subsidiary banks with assistance and service in auditing, record keeping, tax
planning, trust operations, new business development, lending, regulatory
compliance and human resources management.
Southside has eight officers. Southside utilizes, to the extent
necessary, the officers, employees and services of its banking subsidiaries. On
December 31, 1999, Southside and its wholly-owned subsidiaries had 261 full-time
employees and 34 part-time employees.
The information on page 4 and pages 47-50 of the Southside Bancshares
Corp. 1999 Annual Report to Shareholders is incorporated herein by reference.
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(b) Supervision and Regulation
Southside is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "BHCA"), and, as such, is subject
to regulation, supervision and examination by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). Registered bank holding
companies are required to file quarterly and annual reports with the Federal
Reserve Board and to provide the Federal Reserve Board with such additional
information as the Federal Reserve Board may require pursuant to the BHCA.
The BHCA requires bank holding companies to obtain prior approval from
the Federal Reserve Board before (1) acquiring (except in certain limited
circumstances) direct or indirect ownership or control of more than 5% of the
voting shares of any bank, (2) acquiring all or substantially all of the assets
of any bank, or (3) merging or consolidating with any other bank holding
company. In determining whether to approve a proposed acquisition, merger or
consolidation, the Federal Reserve Board is required to take into consideration
the financial and managerial resources and future prospects of the company or
companies and the banks concerned, and the convenience and needs of the
community to be served.
Missouri law provides that a bank holding company may not obtain
control of any bank or depository financial institution if as a result of the
acquisition the total deposits in such bank or institution together with the
total deposits of all banks and depository financial institutions located in the
State of Missouri controlled by the bank holding company would exceed 13% of the
total deposits of all depository financial institutions in the state, including
banks, thrifts and credit unions. In computing the total deposits in all banks
controlled by the bank holding company and the bank which the holding company
seeks to acquire, certificates of deposit in the face amount of $100,000 or
more, deposits from sources outside the United States and deposits of banks
other than banks controlled by the bank holding company are to be deducted.
The BHCA further prohibits a bank holding company, with certain
exceptions, from engaging in and from acquiring direct or indirect ownership or
control of more than 5% of the voting shares of any company engaged in a
business other than that of banking, managing and controlling banks, or
furnishing services to its affiliated banks. An exception to this prohibition
provides that a bank holding company may engage in, and may own shares of
companies engaged in, certain businesses which the Federal Reserve Board has
determined to be so closely related to banking as to be a proper incident
thereto. The Federal Reserve Board has adopted regulations specifying areas of
activity which it regards as so closely related to banking or the managing of
banks as to be permissible for bank holding companies under the law, subject to
Board approval in individual cases. Southside is not engaged in any such
non-banking activities.
In September 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 was enacted. As of September 29, 1995, bank holding
companies have the right to expand, by acquiring existing banks, into all
states, even those which had theretofore restricted entry, subject to state
deposit caps and a 10% nationwide deposit cap. This legislation also provides
that, subject to future action by individual states, a holding company has the
right, commencing on June 1, 1997, to convert the banks which it owns in
different states to branches of a single bank. States were permitted to "opt
out" of this full interstate branching provision prior to the effective date,
but could not "opt out" of the law allowing bank holding companies from other
states to enter such states. Missouri, in which all of Southside's subsidiary
banks are located, did not "opt out" of the interstate branching provisions of
this legislation.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies the following capital standards for
depository institutions: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. A depository institution is "well capitalized" if it
significantly exceeds the minimum level required by regulation for each relevant
capital measure, "adequately capitalized" if it meets each such measure,
"undercapitalized" if it fails to meet any such measure, "significantly
undercapitalized" if it is significantly below any such measure, and "critically
undercapitalized" if it fails to meet any critical capital level set forth in
the regulations. The FDICIA requires a bank that is determined to be
undercapitalized to submit a capital restoration plan, and the bank's holding
company must guarantee that the bank will meet its capital plan, subject to
certain limitations. The FDICIA also prohibits banks from making any capital
distribution or paying any management fee if the bank would thereafter be
undercapitalized.
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The FDICIA grants the Federal Deposit Insurance Corporation ("FDIC")
authority to impose special assessments on insured depository institutions to
repay FDIC borrowings from the United States Treasury or other sources and to
establish semiannual assessment rates on Bank Insurance Fund ("BIF") member
banks so as to maintain the BIF at the designated reserve ratio defined in
FDICIA. FDICIA also requires the FDIC to implement a risk-based insurance
assessment system pursuant to which the premiums paid by a depository
institution are based on the probability that the BIF will incur a loss in
respect of such institution. The FDIC has adopted a deposit insurance assessment
system that places each insured institution in one of nine risk categories based
on the level of its capital, evaluation of its risks by its primary state or
federal supervisor, statistical analysis and other information.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996
("EGRPRA") was signed into law on September 30, 1996. Among other matters,
EGRPRA streamlined the non-banking activities application process for
well-capitalized and well-managed bank holding companies. Under EGRPRA,
qualified bank holding companies may commence a regulatory approved non-banking
activity without prior notice to the Federal Reserve Board. Written notice is
required within ten days after commencing the activity. Under EGRPRA, the prior
notice period is reduced to 12 days in the event of any non-banking acquisition
or share purchase, assuming the size of the acquisition does not exceed 10% of
risk-weighted assets of the acquiring bank holding company and the consideration
does not exceed 15% of Tier I capital. The foregoing prior notice requirement
also applies to commencing non-banking activity de novo which has been
previously approved by order of the Federal Reserve Board, but not yet
implemented by regulations.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its other subsidiaries, on investments in the
stock or other securities thereof, and on the taking of such stock or securities
as collateral for loans to any borrower. Further, under the BHCA and regulations
of the Federal Reserve Board, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property, or furnishing of services.
The primary subsidiary of Southside, South Side National Bank in St.
Louis, is a national bank and, as such, its primary bank regulatory authority is
the Office of the Comptroller of the Currency. A national bank is also subject
to regulations of the Federal Reserve Board and the FDIC. Banks organized under
state law which are members of the Federal Reserve System are regulated and
examined primarily by the Federal Reserve Board and state banking authorities,
while banks organized under state law which are not members of the Federal
Reserve System are regulated and examined primarily by the Federal Deposit
Insurance Corporation and state banking authorities. The Bank of Ste. Genevieve
is a state-chartered bank which is a member of the Federal Reserve System, while
State Bank of Jefferson County and The Bank of St. Charles County are
state-chartered banks which are not members of the Federal Reserve System.
Regulation by the federal and state banking authorities is designed to protect
depositors rather than shareholders.
Subsidiary bank dividends are the principal source of revenue to
Southside, although management fees may be charged to cover services rendered to
such subsidiary banks. The ability of each subsidiary bank to pay such dividends
to Southside is subject to limitations established by various state and federal
laws and regulations. Banks organized under either federal or state laws are
limited in the amount of dividends that they may declare, depending upon the
amount of their capital and surplus, and in certain instances must obtain
regulatory approval before declaring dividends. Under the National Banking Act,
until a national bank's surplus equals or exceeds the amount of its capital, no
dividend may be declared unless at least one-tenth of the national bank's net
profit earned since declaration of the last dividend has been transferred to
surplus. Under federal law, regulatory approval is required for any dividend by
a national bank or a state-chartered bank which is a member of the Federal
Reserve System if the total of all dividends declared by the bank in any
calendar year would exceed the total of its net income for that year combined
with its retained net income for the preceding two years, less any required
transfers to surplus. Under Missouri law, a state-chartered bank which is not a
member of the Federal Reserve System whose surplus account for each dividend
period does not equal at least 40% of the amount of its capital stock is
required to transfer to its surplus account 10% of its net income for such
dividend period. Retained earnings in excess of any such required transfer to
surplus are available for dividends. In addition, sound banking practices
require the maintenance of adequate levels of capital. Federal regulatory
authorities have adopted standards for the maintenance of capital by banks, and
adherence to such standards may further limit the ability of banks to pay
dividends.
3
<PAGE> 5
On November 12, 1999, President Clinton signed the Gramm-Leach-Bliley
Act, previously known as the Financial Services Modernization Act of 1999 (the
"Financial Services Act"). Among other things, the Financial Services Act
repeals certain restrictions of the Glass-Steagall Act relating to banks
affiliating with securities firms. The Financial Services Act also permits bank
holding companies to engage in a statutorily provided list of financial
activities, including insurance and securities underwriting and agency
activities, and authorizes activities that are "complementary" to financial
activities and "financial in nature." Activities that are expressly deemed to be
financial in nature include, among other things, securities and insurance
underwriting and agency, investment management and merchant banking. The Federal
Reserve Board and the Treasury Department, in cooperation with one another, must
determine what additional activities are "financial in nature." With certain
exceptions, the Financial Services Act similarly expands the authorized
activities of subsidiaries of national banks. The provisions of the Financial
Services Act became effective March 11, 2000.
Bank holding companies that intend to engage in the newly authorized
activities under the Financial Services Act must elect to become "financial
holding companies." Financial holding company status is only available to a bank
holding company if all of its affiliated depository institutions are "well
capitalized" and "well managed," based on applicable banking regulations, and
have a Community Reinvestment Act rating of at least "a satisfactory record of
meeting community credit needs." Financial holding companies and banks may
continue to engage in activities that are financial in nature only if they
continue to satisfy the well capitalized and well managed requirements. Bank
holding companies that do not elect to be financial holding companies or that do
not qualify for financial holding company status may engage only in non-banking
activities deemed "closely related to banking" prior to adoption of the
Financial Services Act.
The Financial Services Act is likely be the subject of extensive rule
making by federal banking regulators and others. The effects of this legislation
will only begin to be understood over the next several years and at this time
cannot be predicted with any certainty.
The references in this section to various aspects of supervision and
regulation are brief summaries which do not purport to be complete and which are
qualified in their entirety by reference to applicable laws, rules and
regulations. Any change in applicable laws or regulations may have a material
effect on the business and prospects of Southside. The operations of Southside
may be affected by legislative changes and by the policies of various regulatory
authorities. Southside is unable to predict the nature or the extent of the
effects on its business and earnings that fiscal or monetary policies, economic
controls or new federal or state legislation may have in the future.
The information contained in note 12 of the Notes to Consolidated
Financial Statements on pages 41-43 of the Southside Bancshares Corp. 1999
Annual Report to Shareholders is incorporated herein by reference.
(c) Competition
Southside and its subsidiaries encounter substantial competition in all
aspects of their banking activities. New banks may be established in the market
areas of the subsidiary banks, and the location of existing banks may be moved
on occasion. In addition, competing banks and competing bank holding companies
are continuing to establish separate banking facilities or branches which have
been permitted under Missouri law since 1972. Any such new or relocated banks
and facilities may have a tendency to increase the competition faced by the
subsidiary banks. Missouri law permits unlimited, state-wide branching for both
national and state-chartered banks, subject to certain criteria.
As lenders, the subsidiary banks compete not only with other banks but
also with savings and loans associations, credit unions, finance companies,
insurance companies and other non-banking financial institutions that offer
credit. The subsidiary banks also compete for savings and time deposits with
other banks, savings and loan associations, credit unions, money market and
mutual funds, and issuers of commercial paper, securities and various forms of
fixed and variable income investments. The principal competitive factors in the
markets for deposits and loans are interest rates paid and interest rates
charged, along with related services; accessibility to customers is also a
substantial factor.
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(d) Monetary Policy and Economic Conditions
The principal sources of funds to banks and bank holding companies are
deposits, stockholders' equity and borrowed funds. Stockholders' equity is
represented by common stock, surplus and retained earnings, as well as current
net income. Borrowed funds include short, intermediate and long-term debt, as
well as Federal Funds purchased and securities sold under agreements to
repurchase. The availability of these various sources of funds and other
potential sources, such as preferred stock, convertible securities and
commercial paper, and the extent to which they are utilized, depends on many
factors, the most important of which are the monetary policies of the Federal
Reserve Board and the relative costs of different types of funds.
An important function of the Federal Reserve Board is to regulate the
national supply of bank credit. Among the instruments of monetary policy used by
the Federal Reserve Board to implement these objectives are open market
operations in United States Government Securities, changes in the discount rate
on bank borrowings and changes in reserve requirements against bank deposits.
The foregoing means are used in varying combinations to influence overall growth
of bank loans. Investments and deposits may also affect interest rates charged
on loans and paid for deposits. The availability and cost of various sources of
funds are also affected by fiscal policies of the United States Government.
The monetary policies of the Federal Reserve Board and the fiscal
policies of the United States Government have had a significant effect on
operating results of commercial banks in the past and are expected to continue
to do so in the future. No prediction can be made as to future changes in
interest rates, credit availability, deposit levels, loan demand or the overall
performance of banks generally and the subsidiaries of Southside in particular.
(e) Statistical Information
The following selected statistical information relative to Southside
and its subsidiaries should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations, the Consolidated
Financial Statements and Notes to Consolidated Financial Statements included in
the Southside Bancshares Corp. 1999 Annual Report to Shareholders, incorporated
herein by reference.
(f) Forward-Looking Statements
Statements contained in this Report and in future filings by Southside
with the Securities and Exchange Commission, in Southside'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 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended). There can be no
assurance, in light of these risks and uncertainties, 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:
- Credit risk: While Southside has had good credit quality in recent
years, approximately 54% of its loans as of December 31, 1999 were
commercial (including commercial real estate), financial, and
agricultural loans. Changes in local economic conditions could
adversely affect credit quality in Southside's loan portfolio.
- Interest rate risk: Although Southside actively manages its
interest rate sensitivity, such management is not an exact
science. Rapid increases or decreases in interest rates could
adversely impact Southside's net interest margin if changes in its
cost of funds do not correspond to the changes in income yields.
- Competition: Southside's activities involve competition with other
banks as well as other financial institutions and enterprises.
Also, the financial service markets have and likely will continue
to experience substantial changes, which could significantly
change Southside's competitive environment in the future.
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- Legislative and regulatory environment: Southside operates in a
rapidly changing legislative and regulatory environment. It cannot
be predicted how or to what extent future developments in these
areas will affect Southside. These developments could negatively
impact Southside through increased operating expenses for
compliance with new laws and regulations, restricted access to new
products and markets, reduced barriers for new entrants in the
markets in which Southside competes, or in other ways.
- Year 2000: Southside and its subsidiaries have agreements with
vendors relating to critical systems and services which could be
negatively impacted if those vendors fail to comply with Year 2000
programming requirements.
- General business and economic trends: These factors, including the
impact of inflation levels, influence Southside's results in
numerous ways, including operating expense levels, deposit and
loan activity, and availability of trained individuals needed for
future growth.
The foregoing list should not be construed as exhaustive and Southside
disclaims any obligation to subsequently update or revise any forward-looking
statements after the date of this Report.
SELECTED STATISTICAL INFORMATION
I. Loan Portfolio
A. Types of Loans
The following table shows the classification of loans by major category
at December 31 for the years shown.
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997 1996 1995
------------- -------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural.......................... $ 73,943 $ 68,166 $ 69,168 $ 62,016 $ 62,214
Real estate-commercial...................... $ 136,697 $ 115,214 $ 98,759 $ 82,045 $ 88,321
Real estate-construction.................... $ 19,078 $ 21,993 $ 30,836 $ 26,067 $ 15,510
Real estate-residential..................... $ 131,074 $ 119,917 $ 92,028 $ 96,039 $ 102,418
Consumer.................................... $ 23,130 $ 22,219 $ 23,627 $ 17,304 $ 17,626
Industrial revenue bonds.................... $ 3,879 $ 4,717 $ 5,517 $ 6,373 $ 7,789
Other loans................................. $ 4,636 $ 4,762 $ 6,502 $ 4,619 $ 9,946
--------- --------- --------- --------- ---------
TOTAL LOANS............................... $ 392,437 $ 356,988 $ 326,437 $ 294,463 $ 303,824
========= ========= ========= ========= =========
</TABLE>
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B. Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table shows the remaining maturities of selected loan
categories at December 31, 1999.
<TABLE>
<CAPTION>
(in thousands)
---------------------------------------------------------------------
One year Over one up Over
or less* to 5 years 5 years Total
----------------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural.......................... $ 27,572 $ 38,255 $ 8,116 $ 73,943
Real estate-construction.................... $ 16,327 $ 2,736 $ 15 $ 19,078
Other loans................................. $ 500 $ 4,136 $ 4,636
-------- -------- -------- --------
TOTAL................................... $ 44,399 $ 45,127 $ 8,131 $ 97,657
======== ======== ======== ========
</TABLE>
* Demand loans, loans having no stated schedule of repayments and no
stated maturity, and overdrafts are reported as due "One year or less."
The following table shows the amount of loans above having maturities over one
year which have predetermined interest rates, and the amount which have floating
or adjustable interest rates at December 31, 1999 (in thousands).
<TABLE>
<CAPTION>
<S> <C>
Loans with predetermined interest rates....................................... $29,637
Loans with floating or adjustable interest rates.............................. $23,621
------
TOTAL.................................................................... $53,258
======
</TABLE>
C. Risk Elements
In addition to the nonaccrual, past due and restructured loan
information included in the Southside Bancshares Corp. 1999 Annual Report to
Shareholders on pages 9-10 and 37, Southside also had potential problem loans
totaling $369,000 at December 31, 1999.
II. Summary of Loan Loss Experience
The information under the caption Allowance for Possible Loan Losses
and Risk Elements on pages 8-10 of the Southside Bancshares Corp. 1999 Annual
Report to Shareholders is incorporated herein by reference.
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The following table analyzes the loan loss experience of Southside for
the periods indicated:
<TABLE>
<CAPTION>
(dollars in thousands)
Years Ended December 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Average loans outstanding, net of
unearned discount........................... $355,874 $345,902 $311,266 $295,683 $297,480
======== ======== ======== ======== ========
Allowance at beginning of year.............. $ 6,192 $ 6,120 $ 5,602 $ 5,635 $ 7,144
======== ======== ======== ======== ========
Loans charged off:
Commercial, financial and
agricultural..................... 249 296 139 878 1,574
Real estate - commercial............... --- --- --- 76 73
Real estate - construction............. --- --- --- --- ---
Real estate - residential.............. 95 2 77 17 221
Consumer............................... 291 223 134 193 274
Industrial revenue bonds............... --- --- --- --- ---
Other.................................. 35 15 17 55 32
-------- -------- -------- -------- --------
Total loans charged off................ 670 536 367 1,219 2,174
======== ======== ======== ======== ========
Recoveries:
Commercial, financial and
agricultural..................... 116 152 687 869 645
Real estate - commercial.............. --- --- --- 66 136
Real estate - construction............. 14 14 15 --- ---
Real estate - residential.............. 33 38 47 105 50
Consumer............................... 95 80 70 77 75
Industrial revenue bonds............... --- --- --- --- ---
Other.................................. 5 5 6 9 16
-------- -------- -------- -------- --------
Total Recoveries....................... 263 289 825 1,126 922
======== ======== ======== ======== ========
Net loans charged off (recovered)........... 407 247 (458) 93 1,252
======== ======== ======== ======== ========
Provisions charged to
operating expense...................... 45 62 60 60 70
======== ======== ======== ======== ========
Allowance of Bay-Hermann-
Berger Bank at sale.................... --- --- --- --- (327)
======== ======== ======== ======== ========
Allowance of PSB at acquisition............. --- 257 --- --- ---
======== ======== ======== ======== ========
Allowance at end of year.................... $ 5,830 $ 6,192 $ 6,120 $ 5,602 $ 5,635
======== ======== ======== ======== ========
Ratio of net charge-offs during
year to average loan outstanding....... 0.11% 0.07% * 0.03% 0.42%
======== ======== ======== ========
</TABLE>
* Ratio is not applicable for 1997, as recoveries exceeded charge-offs for the
year.
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The following table sets forth at the end of each reported period, a
breakdown of the allowance for possible loan losses by major categories of loans
and the percentage of loans in each category to total loans at the dates
indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
(dollars in thousands)
------------------- -------------------- -------------------- -------------------- ---------------------
1999 1998 1997 1996 1995
------------------- -------------------- -------------------- -------------------- ---------------------
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
in Each in Each in Each in Each in Each
Category Category Category Category Category
To Total To Total To Total To Total To Total
Allowance Loans Allowance Loans Allowance Loans Allowance Loans Allowance Loans
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial and
agricultural... $2,030 18.8% $2,392 19.1% $2,320 21.2% $2,502 21.0% $2,535 20.4%
Real estate-
commercial..... $1,500 34.8% $1,500 32.3% $1,500 30.3% $1,500 27.9% $1,500 29.1%
Real estate-
construction... $ 500 4.9% $ 500 6.2% $ 500 9.4% $ 300 8.9% $ 300 5.1%
Real estate-
residential.... $1,000 33.4% $1,000 33.6% $1,000 28.2% $ 800 32.6% $ 800 33.7%
Consumer loans
to individuals $ 500 5.9% $ 500 6.2% $ 500 7.2% $ 200 5.8% $ 200 5.8%
Industrial
revenue
bonds.......... $ 100 1.0% $ 100 1.3% $ 100 1.7% $ 100 2.2% $ 100 2.6%
Other loans
(Unallocated).. $ 200 1.2% $ 200 1.3% $ 200 2.0% $ 200 1.6% $ 200 3.3%
------ ----- ------ ----- ------ ----- ------ ----- ----- -----
Totals........... $5,830 100.0% $6,192 100.0% $6,120 100.0% $5,602 100.0% $5,635 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
9
<PAGE> 11
III. Investment Portfolio
The information contained in note 3 of the Notes to Consolidated
Financial Statements on pages 35-36 of the Southside Bancshares Corp. 1999
Annual Report to Shareholders is incorporated herein by reference. The following
table summarizes the carrying values and weighted average yields of investments
in debt securities by contractual maturity. Actual maturities will differ from
contractual maturities, because borrowers have the right to prepay obligations
with or without prepayment penalties. A maturity distribution for
mortgage-backed securities has not been prepared due to their accelerated
prepayment characteristics.
<TABLE>
<CAPTION>
(dollars in thousands)
DECEMBER 31, 1999
----------------------------------------------------------
AVAILABLE FOR SALE HELD TO MATURITY
------------------ ----------------
CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD* VALUE YIELD*
----- ----- ----- -----
<S> <C> <C> <C> <C>
U.S. TREASURY SECURITIES AND OBLIGATIONS OF U.S.
GOVERNMENT AGENCIES AND CORPORATIONS:
Within 1 year..................................... $ 9,849 5.82% $19,136 5.98%
After 1 but within 5 years........................ $ 36,343 5.66% $12,396 5.66%
After 5 but within 10 years....................... $ 9,878 5.83% $ 5,252 5.92%
After 10 years.................................... $ 900 7.33% --- ---%
-------- -------
Total........................... $ 56,970 5.73% $36,784 5.87%
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS:
Within 1 year..................................... --- --- $ 1,881 8.18%
After 1 but within 5 years........................ --- --- $ 8,210 7.57%
After 5 but within 10 years....................... $ 1,967 7.54% $ 9,709 7.68%
After 10 years.................................... $ 6,484 8.15% $ 3,365 7.31%
-------- -------
Total........................... $ 8,451 8.01% $23,165 7.72%
OTHER DEBT SECURITIES:
Within 1 year..................................... --- --- --- ---
After 1 but within 5 years........................ --- --- --- ---
After 5 but within 10 years....................... $ 100 6.46% --- ---
After 10 years.................................... --- ---% --- ---
-------- -------
Total........................... $ 100 6.46% --- ---
TOTAL INVESTMENT SECURITIES (EXCLUDING MORTGAGE-BACKED AND OTHER SECURITIES):
Within 1 year..................................... $ 9,849 5.82% $21,017 6.15%
After 1 but within 5 years........................ $ 36,343 5.66% $20,606 6.42%
After 5 but within 10 years....................... $ 11,945 6.10% $14,961 7.05%
After 10 years.................................... $ 7,384 8.03% $ 3,365 7.31%
-------- -------
Total........................... $ 65,521 6.03% $59,949 6.53%
OTHER SECURITIES - NO STATED MATURITY EQUITY $ 4,815 6.35% --- ---
MORTGAGE-BACKED SECURITIES $ 88,294 6.66% $ 1,646 7.20%
-------- -------
Total........................... $158,630 6.39% $61,595 6.55%
======== ==== ======= ====
</TABLE>
* The weighted average yield for each maturity range was calculated using the
yield on each security within that range, weighted by the amortized cost of
each security at December 31, 1999. The yields for obligations of states and
political subdivisions exempt from federal income taxes have been adjusted
to a fully tax-equivalent basis at a maximum tax rate of 34% for 1999,
adjusted for the disallowance of interest cost to carry nontaxable
securities.
10
<PAGE> 12
ITEM 2. PROPERTIES
Southside owned the following physical properties as of December 31,
1999:
South Side National Bank in St. Louis, a subsidiary of Southside, owns
a nine-story banking and office building at 3606 Gravois Avenue, St. Louis,
Missouri 63116, and the adjacent drive-up facilities and three parking lots.
Southside and this subsidiary are currently the only tenants in the building.
This subsidiary of Southside owns the land and bank building located at its
branch facility at 10330 Gravois Road, St. Louis, Missouri 63126. This is a two
story building and the lower level and a portion of the main level are leased to
tenants for an annual rental of approximately $32,000. This subsidiary owns the
land and bank building at 9914 Kennerly Road in St. Louis County upon which its
South County branch is located. This is a two-story building and the second
floor is leased to tenants for an annual rental of approximately $86,000. This
subsidiary also owns the land and bank building located at 6025 Chippewa, St.
Louis, Missouri 63109. This is a three-story building, and the second and third
floors are leased to tenants for an annual rental of approximately $47,000. This
subsidiary also owns the land and bank buildings at 10385 West Florissant,
Ferguson, Missouri 63136, 8440 Morganford Road, St. Louis County, Missouri
63123, 840 Meramec Station Road, St. Louis, Missouri 63088, and 3420 Iowa
Street, St. Louis, Missouri 63118. This subsidiary leases a branch facility at
4666 Lansdowne, St. Louis, Missouri 63116. In addition, this subsidiary owns
land and the building at 4111 Telegraph Road in St. Louis County, where
Southside opened its tenth branch in 1999.
State Bank of Jefferson County owns the land and a two-story building
at its main banking office at 224 S. Main Street, DeSoto, Missouri 63020. The
State Bank of Jefferson County owns the land and a one-story building housing
its facility located at 2000 Rock Road, DeSoto, Missouri 63020. The State Bank
of Jefferson County also owns a third banking facility located at 100 Scenic
Plaza Drive, Herculaneum, Missouri 63048.
Bank of Ste. Genevieve owns the land, a one-story building and an
adjacent parking lot at its main banking office at Second and Market Streets,
Ste. Genevieve, Missouri 63670 and the land and one-story building at its
facility at 710 Parkwood Drive, Ste. Genevieve, Missouri 63670.
The Bank of St. Charles County owns the land and a two-story building
at its banking facility at 6004 Highway 94 South, St. Charles, Missouri 63304.
This subsidiary bank owns the land and a one-story building at its facility
located at 750 First Capitol Drive, St. Charles, Missouri 63301.
In the opinion of Southside's management, the physical properties of
the subsidiary banks are suitable and adequate and are being productively
utilized.
ITEM 3. LEGAL PROCEEDINGS
The information contained in note 14 of the Notes to Consolidated
Financial Statements on page 44 of the Southside Bancshares Corp. 1999 Annual
Report to Shareholders is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
<PAGE> 13
EXECUTIVE OFFICERS OF SOUTHSIDE
The following is a list of the names and ages of the executive officers
of Southside and their business history for the past five years:
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH THE COMPANY PRINCIPAL OCCUPATIONS OR EMPLOYMENT SINCE JANUARY 1, 1994
--------------------------------------- ---------------------------------------------------------
<S> <C>
Thomas M. Teschner (43) President and Chief Executive Officer, Southside Bancshares
President and Chief Executive Officer Corp.; President and Chief Executive Officer, South Side National
Bank in St. Louis.
Joseph W. Pope (34) Chief Financial Officer and Senior Vice President, Southside
Senior Vice President and Bancshares Corp. (since April 1995); Vice President, South Side
Chief Financial Officer National Bank in St. Louis.
</TABLE>
PART II
ITEM 5. MARKET FOR SOUTHSIDE'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The only class of Southside's common equity is its common stock, $1.00
par value (the "Common Stock"). The number of shares of Common Stock of
Southside outstanding as of March 24, 2000 was 8,593,628 shares, and the market
price for the Common Stock on March 24, 2000 was $7.625 bid; $7.688 asked.
The information on pages 25-26 of the Southside Bancshares Corp. 1999
Annual Report to Shareholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information on page 5 of the Southside Bancshares Corp. 1999 Annual
Report to Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information on pages 6-26 of the Southside Bancshares Corp. 1999
Annual Report to Shareholders is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information on pages 15-17 of the Southside Bancshares Corp. 1999
Annual Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information on pages 28-46 of the Southside Bancshares Corp. 1999
Annual Report to Shareholders is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
12
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF SOUTHSIDE
The information on pages 2-6 of the Southside Bancshares Corp. Proxy
Statement for the Annual Meeting of Shareholders scheduled for April 27, 2000 is
incorporated herein by reference. The information on page 16 of the Southside
Bancshares Corp. Proxy Statement for the Annual Meeting of Shareholders
scheduled for April 27, 2000, with respect to compliance by Southside's officers
and directors with Section 16(a) of the Securities Exchange Act of 1934, is
incorporated herein by reference. The required information regarding Southside's
executive officers is contained in PART I in the item captioned "Executive
Officers of Southside."
ITEM 11. EXECUTIVE COMPENSATION
The information on pages 8-14 of the Southside Bancshares Corp. Proxy
Statement for the Annual Meeting of Shareholders scheduled for April 27, 2000 is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information on pages 6-7 of the Southside Bancshares Corp. Proxy
Statement for the Annual Meeting of Shareholders scheduled for April 27, 2000,
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information on page 16 of the Southside Bancshares Corp. Proxy
Statement for the Annual Meeting of Shareholders scheduled for April 27, 2000,
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following financial statements of Southside and its consolidated
subsidiaries, and the accountants' report thereon are incorporated herein by
reference in Item 8.
1. Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets -
December 31, 1999 and 1998
Consolidated Statements of Income -
Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Shareholders' Equity and
Comprehensive Income -
Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows -
Years Ended December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
13
<PAGE> 15
2. Financial Statement Schedules:
All other schedules are omitted because they are not
applicable, not required, or the information is included elsewhere in the
Consolidated Financial Statements or notes thereto.
3. Exhibits:
3(a) Restated Articles of Incorporation of Southside filed as
Exhibit 3(a) to Southside's Registration Statement on Form S-4/A on May 8, 1998,
incorporated herein by reference.
3(b) Restated Bylaws of Southside with amendments through
December 28, 1995 filed as Exhibit 4(b) to Southside's Registration Statement on
Form S-8 on January 31, 1996, incorporated herein by reference.
4(a) Rights Agreement dated as of May 27, 1993 between
Southside and Boatmen's Trust Company filed as Exhibits 1 and 2 to Southside's
Registration Statement on Form 8-A on May 27, 1993, incorporated herein by
reference.
10(a) Employment Agreement dated April 27, 1995 between
Southside Bancshares Corp., South Side National Bank in St. Louis and Thomas M.
Teschner, as amended, filed as Exhibit 10(a) to Southside's Report on Form 10-Q
for the quarterly period ended June 30, 1998, incorporated herein by reference.
10(b) Southside Bancshares Corp. 1993 Non-Qualified Stock
Option Plan, filed as Exhibit 10(e) to Southside's Report on Form 10-K for the
fiscal year ended December 31, 1994, incorporated herein by reference.
10(c) Deferred Compensation Agreement dated April 25, 1996
between Thomas M. Teschner and Southside, as amended, filed as Exhibit 10(c) to
Southside's Report on Form 10-Q for the quarterly period ended September 30,
1998, incorporated herein by reference.
10(d) Southside Bancshares Corp. Deferred Compensation Plan
for Directors filed as Exhibit 10(d) to Southside's Report on Form 10-K for the
fiscal year ended December 31, 1996, incorporated herein by reference.
10(e) Southside Bancshares Corp. 1998 Stock Option Plan, filed
as Exhibit 10(e) to Southside's Report on form 10K for the fiscal year ended
December 31, 1998, incorporated herein by reference.
10(f) Salary Continuation Agreement dated December 1, 1999
between Thomas M. Teschner and Southside.
10(g) Salary Continuation Agreement dated December 1, 1999
between Joseph W. Pope and Southside.
10(h) First Amendment to Southside Bancshares Corp. Deferred
Compensation Plan for Directors dated December 1, 1999 between Southside and
Thomas M. Teschner.
10(i) First Amendment to Southside Bancshares Corp. Deferred
Compensation Plan for Directors dated December 1, 1999 between Southside and
Daniel J. Queen.
10(j) First Amendment to Southside Bancshares Corp. Deferred
Compensation Plan for Directors dated December 1, 1999 between Southside and
Earle J. Kennedy, Jr.
10(k) First Amendment to Southside Bancshares Corp. Deferred
Compensation Plan for Directors dated December 1, 1999 between Southside and
Norville K. McClain.
14
<PAGE> 16
10(l) Southside Bancshares Corp. Split Dollar Agreement dated
December 1, 1999 between Southside and the Thomas M. Teschner Irrevocable Trust,
dated November 18, 1999.
11 Computation of Net Income Per Common Share incorporated
by reference to Note 11 of the Notes to the Consolidated Financial Statements.
13 Portions of the Annual Report to Shareholders of the
Registrant for the fiscal year ended December 31, 1999.
21 List of Subsidiaries.
23 Independent Auditors' Consent of KPMG LLP.
27 Financial Data Schedule.
(b) Reports filed on Form 8-K:
No reports on Form 8-K were filed for the three months ended
December 31, 1999.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ Thomas M. Teschner
-------------------------------
Thomas M. Teschner
President and Chief Executive Officer
(Principal Executive Officer)
March 28, 2000
By /s/ Joseph W. Pope
---------------------
Joseph W. Pope
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer,
Controller and Principal
Accounting Officer)
March 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Howard F. Etling /s/ Joseph W. Beetz
- ---------------------------------- -----------------------------------
Howard F. Etling, Director Joseph W. Beetz, Director
Date: March 28, 2000 Date: March 28, 2000
/s/ Thomas M. Teschner /s/ Douglas P. Helein
- ---------------------------------- -----------------------------------
Thomas M. Teschner, President, Douglas P. Helein, Director
Chief Executive Officer
and Director
Date: March 28, 2000 Date: March 28, 2000
/s/ Norville K. McClain /s/ Earle J. Kennedy, Jr.
- ---------------------------------- -----------------------------------
Norville K. McClain, Chairman Earle J. Kennedy, Jr., Director
of the Board
Date: March 28, 2000 Date: March 28, 2000
/s/ Daniel J. Queen /s/ Richard G. Schroeder, Sr.
- ---------------------------------- -----------------------------------
Daniel J. Queen, Director Richard G. Schroeder, Sr., Director
Date: March 28, 2000 Date: March 28, 2000
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
REGULATION S-K
EXHIBIT DESCRIPTION
NO. -----------
-------
<S> <C>
3(a) Restated Articles of Incorporation of Southside filed as
Exhibit 3(a) to Southside's Registration Statement on Form
S-4/A on May 8, 1998, incorporated herein by reference.
3(b) Restated Bylaws of Southside with amendments through
December 28, 1995 filed as Exhibit 4(b) to Southside's
Registration Statement on Form S-8 on January 31, 1996,
incorporated herein by reference.
4(a) Rights Agreement dated as of May 27, 1993 between Southside
and Boatmen's Trust Company filed as Exhibits 1 and 2 to
Southside's Registration Statement on Form 8-A on June 1,
1993, incorporated herein by reference.
10(a) Employment Agreement dated April 27, 1995 between Southside,
South Side National Bank in St. Louis and Thomas M. Teschner,
as amended, filed as Exhibit 10(a) to Southside's Report on
Form 10-Q for the quarterly period ended June 30, 1998,
incorporated herein by reference.
10(b) Southside Bancshares Corp. 1993 Non-Qualified Stock Option
Plan, filed as Exhibit 10(e) to Southside's Report on Form
10-K for the fiscal year ended December 31, 1994,
incorporated herein by reference.
10(c) Deferred Compensation Agreement dated April 25, 1996 between
Thomas M. Teschner and Southside, as amended, filed as
Exhibit 10(c) to Southside's Report on Form 10-Q for the
quarterly period ended September 30, 1998, incorporated
herein by reference.
10(d) Southside Bancshares Corp. Deferred Compensation Plan for
Directors filed as Exhibit 10(d) to Southside's Report on
Form 10-K for the fiscal year ended December 31, 1996,
incorporated herein by reference.
10(e) Southside Bancshares Corp. 1998 Stock Option Plan, filed as
Exhibit 10(e) to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1998, incorporated hereby by
reference.
10(f) Salary Continuation Agreement dated December 1, 1999 between
Thomas M. Teschner and Southside.
10(g) Salary Continuation Agreement dated December 1, 1999 between
Joseph W. Pope and Southside.
10(h) First Amendment to Southside Bancshares Corp. Deferred
Compensation Plan for Directors dated December 1, 1999
between Southside and Thomas M. Teschner.
10(i) First Amendment to Southside Bancshares Corp. Deferred
Compensation Plan for Directors dated December 1, 1999
between Southside and Daniel J. Queen.
10(j) First Amendment to Southside Bancshares Corp. Deferred
Compensation Plan for Directors dated December 1, 1999
between Southside and Earle J. Kennedy, Jr.
10(k) First Amendment to Southside Bancshares Corp. Deferred
Compensation Plan for Directors dated December 1, 1999
between Southside and Norville K. McClain.
10(l) Southside Bancshares Corp. Split Dollar Agreement dated
December 1, 1999 between Southside and the Thomas M. Teschner
Irrevocable Trust, dated November 18, 1999.
11 Computation of Net Income Per Common Share incorporated by
reference to Note 11 of the Notes to the Consolidated
Financial Statements.
13 Portions of the Annual Report to Shareholders of the
Registrant for the fiscal year ended December 31, 1999
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
REGULATION S-K
EXHIBIT DESCRIPTION
NO. -----------
-------
<S> <C>
21 List of Subsidiaries, filed herewith.
23 Independent Auditors' Consent of KPMG LLP, filed herewith.
27 Financial Data Schedule, filed herewith.
</TABLE>
<PAGE> 1
EXHIBIT 10(f)
<PAGE> 2
Exhibit 10(f)
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is effective this 1st day of December, 1999, by and
between SOUTHSIDE BANCSHARES CORP. (the "Company"), with its principal place of
business in St. Louis, Missouri, and THOMAS M. TESCHNER (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1. Definitions. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1. "Change of Control" shall be deemed to have occurred as
of the first day any one more of the following conditions shall have been
satisfied:
(a) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any other entity
or any group of persons (other than the Southside Bancshares Corp.1993
Non-Qualified Employees 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 possessing fifty percent (50%) or more of the voting power for
the election of directors of the Company;
(b) There shall be consummated any consolidation, merger or
other business combination involving the Company or the securities of
the Company in which holders of voting securities of the Company, as
the case may be, immediately prior to such consummation own, as a
group, immediately after such consummation, voting securities of the
Company, as the case may be (or if the Company 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 the directors of the Company (or such
other surviving corporation (s));
(c) During any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the
directors of the Company cease for any reason to constitute at least a
majority thereof;
<PAGE> 3
(d) Removal by the stockholders of the Company of all or a
majority of the incumbent directors of the Company; or
(e) 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 (on a
consolidated basis) to a party which is not controlled by or under
common control with the Company, as the case may be.
1.1.2. "Code" means the Internal Revenue Code of 1986, as
amended. References to a Code section shall be deemed to be to that
section as it now exists and to any successor provision.
1.1.3. "Disability" means, if the Executive is covered by a
Company sponsored disability insurance policy, total disability as
defined in such policy without regard to any waiting period. If the
Executive is not covered by such a policy, Disability means a physical
or mental impairment, non-self-induced, as diagnosed by a medical
doctor selected by the Company, that so incapacitates or disables
Executive such that Executive is no longer able to perform the
essential functions of his position with reasonable accommodation. As a
condition to any benefits, the Company may require the Executive to
submit to such physical or mental evaluations and tests as the
Company's Board of Directors deems appropriate.
1.1.4. "Early Retirement Date" means the date the Executive
attains age fifty-five (55).
1.1.5. "Early Retirement Percentage" means fifty percent (50%)
on the date the Executive attains age fifty-five (55).
1.1.6. "Normal Retirement Date" means the date the Executive
attains age sixty-five (65).
1.1.7. "Plan Year" means the twelve (12) consecutive month
period beginning on the effective date of this Agreement and each
anniversary thereof.
1.1.8. "Termination of Employment" or "Terminates Employment"
means the Executive's ceasing to be employed by the Company for any
reason whatsoever, voluntary or involuntary, other than by reason of an
approved leave of absence.
2
<PAGE> 4
1.1.9. "Discount Rate" shall mean eight percent (8%).
ARTICLE 2
LIFETIME BENEFITS
2.1. Normal Retirement Benefit. If Termination of Executive's
Employment occurs on or after the Normal Retirement Date, the Company shall pay
to the Executive the benefit described in this Section 2.1.
2.1.1. Amount of Benefit. The annual benefit under this
Section 2.1 is One Hundred Ninety-three Thousand Five Hundred Dollars
($193,500.00), which annual amount will be increased each Plan Year,
until the Executive's Normal Retirement Date, by three and one-half
percent (3.5%) compounded annually.
2.1.2. Payment of Benefit. The Company shall pay the annual
benefit determined under subsection 2.1.1 for a period not to exceed
the earlier of fifteen (15) years from Executive's Termination of
Employment or through the month the Executive dies. The Company's
payments shall be made in equal monthly installments (1/12 of the
annual benefit). These equal monthly payments to the Executive will
begin on the last day of the month which follows the month of the
Executive's retirement and continuing until the earlier of the
expiration of one hundred eighty (180) months from the first payment or
the month of the Executive's death.
2.2. Early Retirement Benefit. If Termination of Executive's Employment
occurs on or after the Early Retirement Date but before the Normal Retirement
Date, the Company shall pay to the Executive the benefit described in this
Section 2.2.
2.2.1. Amount of Benefit. The annual benefit under this
Section 2.2 is One Hundred Ninety-three Thousand Five hundred Dollars
($193,500.00) which annual amount will be increased each Plan Year,
until the Executive retires, by three and one-half percent (3.5%)
compounded annually, multiplied by the Early Retirement Percentage.
Five percent (5%) will be added to the Early Retirement Percentage for
each anniversary of the Early Retirement Date following such date on
which the executive continues to be employed until the Early Retirement
Percentage equals one hundred percent (100%).
2.2.2. Payment of Benefit. The Company shall pay the annual
benefit determined under subsection 2.2.1 for a period not to exceed
the earlier of fifteen (15) years from Executive's Termination of
Employment or through the month the Executive dies. The Company's
payments shall be made in equal monthly installments (1/12 of the
annual benefit). These equal monthly payments to the Executive will
begin on the last day of the month which follows the month of the
Executive's retirement under this Section 2.2 and continuing until the
earlier of the expiration of one hundred eighty (180) months from the
first payment or the month of the Executive's death.
3
<PAGE> 5
2.3. Termination of Employment. If Termination of Employment occurs
before the Executive's Early Retirement Date, for reasons other than death or
Disability, the Company shall pay to the Executive the benefit described in this
Section 2.3.
2.3.1. Amount of Benefit. The benefit under this Section 2.3
is the benefit set forth on the attached Schedule A based on the number
of completed Plan Years of employment preceding the Executive's
Termination of Employment multiplied by the vesting percentage at
termination described in 2.3.2.
2.3.2. Vesting Schedule. The Executive shall vest at a rate of
ten percent (10%) for each subsequently completed Plan Year that this
Agreement is in force such that after ten (10) years the Executive
shall be one hundred percent (100%) vested in the benefit.
2.3.3. Payment of Benefit. The Company shall pay the benefit
in a single lump sum to the Executive within thirty (30) days following
the Executive's Termination of Employment.
2.4. Disability Benefit. If the Termination of Employment occurs while
the Executive suffers from a Disability prior to the Early Retirement Date, the
Company shall pay to the Executive the benefit described in this Section 2.4.
2.4.1. Amount and Payment of Benefit. Except as may be
provided by Section 3.2 , the amount of benefit and method of payment
under this Section 2.4 is established by the Executive with a written
election and filed with the Company. The Company shall pay the elected
amount to the Executive in accordance with the written election made by
the Executive. The form of the election shall follow the form and
content found on the attached Exhibit A. The attached Exhibit A,
including the terms governing the Executive's election under this
Section 2.4.1, are incorporated into this Agreement by reference.
2.5. Change of Control Benefit. Upon a Change of Control while the
Executive is in the active service of the Company and (i) the Company thereafter
terminates the Executive; or (ii) the Executive terminates his employment after
either a change in job responsibilities or a reduction in the compensation paid
annually to the Executive prior to his Normal Retirement Date, then the Company
shall pay to the Executive the benefit described in this Section 2.5 in lieu of
any other benefit under this Agreement.
2.5.1. Amount and Payment of Benefit. The benefit under this
Section 2.5 is one hundred percent (100%) of the benefit determined
under Schedule A based on the number of completed Plan Years, in
accordance with Schedule A, on the date of Termination of Employment.
The Company shall pay this benefit to the Executive in a single lump
sum within thirty (30) days from Termination of Employment following a
Change in Control.
4
<PAGE> 6
2.5.2. Parachute Payment. If it is determined that any portion
of the benefit payment to the Executive under this Agreement
constitutes a parachute payment under Section 280G of the Code subject
to the excise tax of Section 4999 of the Code, the Executive shall be
entitled to receive from the Company a lump sum cash payment sufficient
to place the Executive in the same net after tax position that the
Executive would have been in had such payment not been subject to such
excise tax; provided, however, the Executive shall be entitled to a
payment under this Section 2.5.2 only to the extent that the Executive
is not entitled to an equivalent payment under any other agreement.
2.6. Payment of Benefits in Pay Status. Upon a Change of Control where
benefits are in pay status to the Executive following the Executive's
retirement, death, or Disability, one hundred percent (100%) of the present
value of any remaining payments otherwise due pursuant to this Agreement will,
in lieu of such remaining payments, be paid in full in a lump sum within thirty
(30) days after a Change in Control. The Discount Rate shall be used to
determine present value.
ARTICLE 3
DEATH BENEFITS
3.1 Death During Active Service. If the Executive dies while employed
by the Company and prior to receiving any payments under this Agreement, the
Company shall have no obligation to pay to the Executive's beneficiary any
amount under this Agreement.
3.2 Death Subsequent to Either Retirement Date. If the Executive dies
subsequent to the date that he retires and while receiving payments under
Section 2.1 or Section 2.2 of this Agreement, the Company's obligation to make
the final payment under Section 2.1.2 or Section 2.2.2 on the last day of the
month of the Executive's death shall constitute the Company's final obligation
to pay the Executive or the Executive's estate under the terms of this
Agreement.
3.3 Death During Disability. In the event of the Executive's death
following Termination of Employment while suffering a Disability, but where the
termination is prior to Early Retirement Age, the Company shall have no
obligation to pay to the Executive's beneficiary any amount under this
Agreement.
ARTICLE 4
GENERAL LIMITATIONS
Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement:
4.1. Termination for Cause. If the Company terminates the Executive's
employment for any of the following reasons:
4.1.1. Gross negligence or gross neglect of duties;
5
<PAGE> 7
4.1.2. Commission of a felony or of a misdemeanor involving
moral turpitude; or
4.1.3. Fraud, dishonesty or willful violation of any law or
significant Company policy committed in connection with the Executive's
employment and resulting in personal financial benefit to the Executive
and in an adverse effect on the Company.
ARTICLE 5
CLAIMS AND REVIEW PROCEDURES
5.1. Claims Procedure. The Company shall notify the Executive in
writing, within ninety (90) days of his written application for benefits, of his
eligibility or ineligibility for benefits under the Agreement. If the Company
determines that the Executive is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3) a
description of any additional information or material necessary for the claimant
to perfect his or her claim, and a description of why it is needed, and (4) an
explanation of the Agreement's claims review procedure and other appropriate
information as to the steps to be taken if the beneficiary wishes to have the
claim reviewed. If the Company determines that there are special circumstances
requiring additional time to make a decision, the Company shall notify the
Executive of the special circumstances and the date by which a decision is
expected to be made, and may extend the time for up to an additional ninety-day
period.
5.2. Review Procedure. If the Executive is determined by the Company
not to be eligible for benefits, or if the Executive believes that he is
entitled to greater or different benefits, the Executive shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within sixty (60) days after receipt of the notice
issued by the Company. Said petition shall state the specific reasons which the
Executive believes entitle him to benefits or to greater or different benefits.
Within sixty (60) days after receipt by the Company of the petition, the Company
shall afford the Executive (and counsel, if any) an opportunity to present his
position to the Company orally or in writing, and the Executive (or counsel)
shall have the right to review the pertinent documents. The Company shall notify
the Executive of its decision in writing within the sixty-day period, stating
specifically the basis of its decision, written in a manner calculated to be
understood by the Executive and the specific provisions of the Agreement on
which the decision is based. If, because of the need for a hearing, the
sixty-day period is not sufficient, the decision may be deferred for up to
another sixty-day period at the election of the Company, but notice of this
deferral shall be given to the Executive.
ARTICLE 6
AMENDMENTS AND TERMINATION
6.1. Amendment or Termination of Agreement After a Change in Control.
The Company may amend or terminate this Agreement at any time prior to the
Executive's Termination of Employment by written notice to the Executive;
provided, however, that if the Company amends or terminates this Agreement prior
to the Executive's Normal Retirement Date while the Executive is in the active
service of the Company and subsequent to a Change of
6
<PAGE> 8
Control, then the Company shall pay the Executive one hundred percent (100%) of
the benefit determined under Schedule A based on the number of completed Plan
Years, in accordance with Schedule A, on the date of termination of this
Agreement. The Company shall pay this benefit to the Executive in a single lump
sum within thirty (30) days from Termination of Agreement following a Change in
Control.
6.2. Amendment or Termination Prior to a Change in Control. The Company
may amend or terminate this Agreement at any time prior to a Change in Control
by written notice to the Executive.
6.2.1. Subsequent to Executive's Normal Retirement Date. In
the event of any such amendment or termination after payment of
benefits has commenced, the benefit the Executive shall be entitled is
one hundred percent (100%) of the present value of any unpaid benefit
under Article 2. The Discount Rate shall be used to determine present
value. The Company shall pay the benefit under this Section 6.2.1 in a
single lump sum payment within sixty (60) days of amendment or
termination of this Agreement.
6.2.2. Prior to Executive's Normal Retirement Date. If
amendment or termination of this Agreement under Section 6.2 occurs
after the effective date of this Agreement and before payment of
benefits has commenced, the Company shall pay the Executive an amount
equal to one hundred percent (100%) of the amount of accrued benefit
reflected in Schedule A based o completed Plan Years. The Company shall
pay this benefit, if any, to the Executive in a single lump sum payment
within sixty (60) days of Agreement amendment or termination.
ARTICLE 7
MISCELLANEOUS
7.1. Binding Effect. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, administrators and
permitted transferees.
7.2. No Guaranty of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Company, nor does it interfere with the Company's right to
discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executive's right to terminate employment at any
time.
7.3. Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
7.4. Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
7
<PAGE> 9
7.5. Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of Missouri, except to the extent preempted by
the laws of the United States of America.
7.6. Unfunded Arrangement. The Executive is a general unsecured
creditor of the Company for the payment of benefits under this Agreement. The
benefits represent the mere promise by the Company to pay such benefits. The
rights to benefits are not subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors. Any insurance on the Executive's life is a general asset of the
Company to which the Executive has no preferred or secured claim.
7.7. Severability. Without limitation of any other section contained
herein, in case any one or more provisions contained in this Agreement shall for
any reason be held to be invalid, illegal or unenforceable in any other respect,
such invalidity, illegality or unenforceability shall not affect the other
provisions of this Agreement. This Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been a part of this
Agreement and shall be deemed substituted therefore such other provisions as
will most nearly accomplish the intent of the parties to the extent permitted by
applicable law, in case this Agreement or any one or more of its provisions
shall be held to be invalid, illegal or unenforceable by any governmental
regulatory agency or court of competent jurisdiction.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement as of the date indicated below.
/s/ Thomas M. Teschner Date: 12/1/99
THOMAS M. TESCHNER
SOUTHSIDE BANCSHARES CORP.
By: /s/ Joseph W. Pope Date: 12/1/99
Title: Chief Financial Officer
8
<PAGE> 10
EXHIBIT A
EXECUTIVE RETIREMENT BENEFIT ELECTION
THIS ELECTION is made and entered into as of 1st day of December, 1999,
by SOUTHSIDE BANCSHARES CORP. (the "Company") located in St. Louis, Missouri,
pursuant to the Salary Continuation Agreement between the Company and THOMAS M.
TESCHNER (the "Executive") dated December 1, 1999, (the "Agreement").
The Executive, by initialing in ink either OPTION 1 or OPTION 2 below
hereby elects to receive the Disability Benefit described in the elected option
and receive the payment or payments in accordance to the option the Executive
elects.
OPTION 1
(initials)
---------
a. Benefit Amount. The amount of the benefit is the amount set
forth on the attached Schedule A based on the number of completed Plan
Years preceding the Executive's Termination of Employment.
b. Payment of Benefit. The Company shall pay the benefit in a
single lump sum to the Executive within thirty (30) days following the
Executive's Termination of Employment.
OPTION 2
/s/TMT (initials)
---------
a. Benefit Amount. The amount of the benefit is a percentage
of the annual benefit set forth in Section 2.1 determined as of the
Normal Retirement Date. The fraction to be utilized to determine the
percentage has a numerator equal to the amount found on Schedule A of
the Agreement based upon the number of completed Plan Years by the
Executive as of Termination of Employment increased each subsequent
Plan Year until the Executive's Normal Retirement Date by six percent
(6%) and a denominator equal to the amount found on Schedule A of the
Agreement based upon the Executive having completed all Plan Years up
to the Executive's Normal Retirement Date. The Discount Rate as
described in Section 1.1.9 of the Agreement shall be used to determine
the present value.
b. Payment of Benefit. The Company shall pay the annual
benefits for a period of fifteen (15) years from Executive's Normal
Retirement Date. The Company's payments shall be made in equal monthly
installments (1/12th of the annual benefit). These equal monthly
payments to the Executive will begin on the last day of the month which
follows the month of the Executive attaining the Normal Retirement Date
and continuing until the expiration of one hundred eighty (180) months
from the first payment.
9
<PAGE> 11
EXHIBIT A (CONTINUED)
The Executive and Company acknowledge and agree that each and every
election to select a benefit payment pursuant to OPTION 1 or OPTION 2 made under
this EXHIBIT A EXECUTIVE RETIREMENT BENEFIT ELECTION, in order to be valid and
effective, must be made by December 31st of the year prior to the calendar year
preceding the Executive's Termination of Employment.
The Executive and Company agree and acknowledge that any election to
select a benefit payment pursuant to OPTION 1 or OPTION 2 made under this
EXHIBIT A EXECUTIVE RETIREMENT BENEFIT ELECTION not made within the time frame
set forth in the paragraph above shall be null and void. When a null and void
election is made the most recent election which is not null and void shall
determine the method in which the Executive's retirement benefit shall be paid
under Section 2.4.1 of the Agreement.
The Executive and the Company acknowledge and agree that the Company,
in the absence of a valid election by the Executive under this EXHIBIT A
EXECUTIVE RETIREMENT BENEFIT ELECTION, the Company shall pay any benefit under
Section 2.4.1 of this Agreement under OPTION 1 above.
The Executive and the Company understands that the Executive may change
the election set forth above, consistent with the restrictions set forth in this
EXHIBIT A EXECUTIVE RETIREMENT BENEFIT ELECTION, by filing a new written
designation with the Company on a form following this EXHIBIT A EXECUTIVE
RETIREMENT BENEFIT ELECTION.
Executive:
Signature /s/ Thomas M. Teschner Date December 1, 1999
-------------------------- -----------------------------
Accepted by the Company this 1st day of December, 1999.
By: /s/ Joseph W. Pope
Title: Chief Financial Officer
10
<PAGE> 12
SCHEDULE A
SALARY CONTINUATION AGREEMENT BETWEEN
SOUTHSIDE BANCSHARES CORP. AND THOMAS TESCHNER
<TABLE>
<CAPTION>
Plan Year* Completed
before Termination occurs Compensation Balance
------------------------- --------------------
<S> <C>
1 $ 29,307
2 62,178
3 99,068
4 140,500
5 187,069
6 239,456
7 298,447
8 364,947
9 440,002
10 524,835
11 620,875
12 729,812
13 853,658
14 994,840
15 1,156,330
16 1,341,839
17 1,556,131
18 1,805,560
19 2,099,108
20 2,450,713
21 2,886,007
22 3,474,940
End of Schedule
</TABLE>
<PAGE> 13
SCHEDULE A (CONTINUED)
SALARY CONTINUATION AGREEMENT BETWEEN
SOUTHSIDE BANCSHARES CORP. AND THOMAS TESCHNER
* Plan Year means the anniversary year of the date of the Agreement.
To calculate an amount for less than a full Plan Year, take the number of
completed months of service into the current Plan Year and divide by 12.
Then multiply that fraction by the difference between (i) the Plan Year
balance shown above for the Plan Year in which termination occurs and (ii)
the previous Plan Year's balance. Then add that amount to the previous Plan
Year's balance. The result provides credit for all prior full plan years
plus a ratio percentage of the current plan year. For example, if the
Executive leaves the Bank during the 5th plan year four months after the
fourth year plan anniversary, then you would take 4/12 times the balance
shown for Plan Year 5 minus the balance shown for Plan Year 4. Then add
that amount to the balance shown for Plan Year 4 to determine the amount
due as a termination payment.
2
<PAGE> 1
EXHIBIT 10(g)
<PAGE> 2
Exhibit 10(g)
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is effective this 1st day of December, 1999, by and
between SOUTHSIDE BANCSHARES CORP. (the "Company"), with its principal place of
business in St. Louis, Missouri, and JOSEPH W. POPE (the "Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. Whenever used in this Agreement, the following words
and phrases shall have the meanings specified:
1.1.1 "Change of Control" shall be deemed to have occurred as
of the first day any one more of the following conditions shall have been
satisfied:
(a) Any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any other entity
or any group of persons (other than the Southside Bancshares Corp.1993
Non-Qualified Employees 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 possessing fifty percent (50%) or more of the voting power for
the election of directors of the Company;
(b) There shall be consummated any consolidation, merger or
other business combination involving the Company or the securities of
the Company in which holders of voting securities of the Company, as
the case may be, immediately prior to such consummation own, as a
group, immediately after such consummation, voting securities of the
Company, as the case may be (or if the Company 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 the directors of the Company (or such
other surviving corporation (s));
(c) During any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the
directors of the Company cease for any reason to constitute at least a
majority thereof;
<PAGE> 3
(d) Removal by the stockholders of the Company of all or a
majority of the incumbent directors of the Company; or
(e) 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 (on a
consolidated basis) to a party which is not controlled by or under
common control with the Company, as the case may be.
1.1.2 "Code" means the Internal Revenue Code of 1986, as
amended. References to a Code section shall be deemed to be to that
section as it now exists and to any successor provision.
1.1.3 "Disability" means, if the Executive is covered by a
Company sponsored disability insurance policy, total disability as
defined in such policy without regard to any waiting period. If the
Executive is not covered by such a policy, Disability means a physical
or mental impairment, non-self-induced, as diagnosed by a medical
doctor selected by the Company, that so incapacitates or disables
Executive such that Executive is no longer able to perform the
essential functions of his position with reasonable accommodation. As a
condition to any benefits, the Company may require the Executive to
submit to such physical or mental evaluations and tests as the
Company's Board of Directors deems appropriate.
1.1.4 "Early Retirement Date" means the date the Executive
attains age fifty-five (55).
1.1.5 "Early Retirement Percentage" means fifty percent (50%)
on the date the Executive attains age fifty-five (55).
1.1.6 "Normal Retirement Date" means the date the Executive
attains age sixty-five (65).
1.1.7 "Plan Year" means the twelve (12) consecutive month
period beginning on the effective date of this Agreement and each
anniversary thereof.
1.1.8 "Termination of Employment" or "Terminates Employment"
means the Executive's ceasing to be employed by the Company for any
reason whatsoever, voluntary or involuntary, other than by reason of an
approved leave of absence.
1.1.9 "Discount Rate" shall mean eight percent (8%).
2
<PAGE> 4
ARTICLE 2
LIFETIME BENEFITS
2.1 Normal Retirement Benefit. If Termination of Executive's Employment
occurs on or after the Normal Retirement Date, the Company shall pay to the
Executive the benefit described in this Section 2.1.
2.1.1 Amount of Benefit. The annual benefit under this Section
2.1 is Eighty One Thousand and 00/100 Dollars ($81,000.00), which
annual amount will be increased each Plan Year, until the Executive's
Normal Retirement Date, by three and one-half percent (3.5%) compounded
annually.
2.1.2 Payment of Benefit. The Company shall pay the annual
benefit determined under subsection 2.1.1 for a period of fifteen (15)
years from Executive's retirement under this Section 2.1. The Company's
payments shall be made in equal monthly installments (1/12th of the
annual benefit). These equal monthly payments to the Executive will
begin on the last day of the month which follows the month of the
Executive's retirement under this Section 2.1 and continuing until the
expiration of one hundred eighty (180) months from the first payment.
2.2 Early Retirement Benefit. If Termination of Executive's Employment
occurs on or after the Early Retirement Date but before the Normal Retirement
Date, the Company shall pay to the Executive the benefit described in this
Section 2.2.
2.2.1 Amount of Benefit. The annual benefit under this Section
2.2 is Eighty One Thousand and 00/100 Dollars ($81,000.00), which
annual amount will be increased each Plan Year, until the Executive
retires, by three and one-half percent (3.5%) compounded annually,
multiplied by the Early Retirement Percentage. Five percent (5%) will
be added to the Early Retirement Percentage for each anniversary of the
Early Retirement Date following such date on which the executive
continues to be employed until the Early Retirement Percentage equals
one hundred percent (100%).
2.2.2 Payment of Benefit. The Company shall pay the annual
benefit determined under subsection 2.2.1 for a period of fifteen (15)
years from Executive's retirement under this Section 2.2. The Company's
payments shall be made in equal monthly installments (1/12th of the
annual benefit). These equal monthly payments to the Executive will
begin on the last day of the month which follows the month of the
Executive's retirement under this Section 2.2 and continuing until the
expiration of one hundred eighty (180) months from the first payment.
2.3 Termination of Employment. If Termination of Employment occurs
before the Executive's Early Retirement Date, for reasons other than death or
Disability, the Company shall pay to the Executive the benefit described in this
Section 2.3.
3
<PAGE> 5
2.3.1 Amount of Benefit. The benefit under this Section 2.3 is
the benefit set forth on the attached Schedule A based on the number of
completed Plan Years on employment preceding the Executive's
Termination of Employment multiplied by the vesting percentage at
termination described in 2.3.2.
2.3.2 Vesting Schedule. The Executive shall vest at a rate of
ten percent (10%) for each subsequently completed Plan Year that this
Agreement is in force such that after ten (10) years the Executive
shall be one hundred percent (100%) vested in the benefit.
2.3.3 Payment of Benefit. The Company shall pay the benefit in
a single lump sum to the Executive within thirty (30) days following
the Executive's Termination of Employment.
2.4 Disability Benefit. If the Termination of Employment occurs while
the Executive suffers from a Disability prior to the Early Retirement Date, the
Company shall pay to the Executive the benefit described in this Section 2.4.
2.4.1 Amount and Payment of Benefit. Except as may be provided
by Section 3.2 , the amount of benefit and method of payment under this
Section 2.4 is established by the Executive with a written election and
filed with the Company. The Company shall pay the elected amount to the
Executive in accordance with the written election made by the
Executive. The form of the election shall follow the form and content
found on the attached Exhibit A. The attached Exhibit A, including the
terms governing the Executive's election under this Section 2.4.1, are
incorporated into this Agreement by reference.
2.5 Change of Control Benefit. Upon a Change of Control while the
Executive is in the active service of the Company and (i) the Company thereafter
terminates the Executive; or (ii) the Executive terminates his employment after
either a change in job responsibilities or a reduction in the compensation paid
annually to the Executive prior to his Normal Retirement Date, then, subject to
the provisions of Section 2.5.1.1 and Section 5.3, the Company shall pay to the
Executive the benefit described in this Section 2.5 in lieu of any other benefit
under this Agreement.
2.5.1 Amount and Payment of Benefit. The benefit under this
Section 2.5 is one hundred percent (100%) of the benefit determined
under Schedule A based on the number of completed Plan Years, in
accordance with Schedule A, on the date of Termination of Employment.
The Company shall pay this benefit to the Executive in a single lump
sum within thirty (30) days from Termination of Employment following a
Change in Control.
2.5.1.1 Excess Parachute Payment. Notwithstanding any
provision of this Agreement to the contrary, the Company shall
not pay any benefit under this Agreement to the extent the
benefit would be a non-deductible parachute payment under
Section 280G of the Code.
4
<PAGE> 6
2.6 Payment of Benefits in Pay Status. Upon a Change of Control where
benefits are in pay status to the Executive or the Executive's beneficiary
following the Executive's retirement, death, or Disability, one hundred percent
(100%) of the present value of any remaining payments otherwise due pursuant to
this Agreement will, in lieu of such remaining payments, be paid in full in a
lump sum within thirty (30) days after a Change in Control. The Discount Rate
shall be used to determine present value.
2.7 Payment Restriction. Notwithstanding anything to the contrary in
Section 2.2, Section 2.3, or Section 2.4, if the Executive has not been employed
at the Company or any of its subsidiaries for ten (10) years, which ten years
can occur either before or after the effective date of this Agreement, the
Executive will not be entitled to the payment of any benefits under Section 2.3
or Section 2.4.
ARTICLE 3
DEATH BENEFITS
3.1 Death During Active Service. If the Executive dies while employed
by the Company and prior to receiving any payments under this Agreement, the
Company shall pay to the Executive's beneficiary the benefit described in this
Section 3.1.
3.1.1 Amount of Benefit. The annual benefit under this Section
3.1 is Eighty One Thousand and 00/100 Dollars ($81,000.00), which
annual amount will be increased each Plan Year, until the Executive's
Normal Retirement Date, by three and one-half percent (3.5%) compounded
annually.
3.1.2 Payment of Benefit. The Company shall pay the annual
benefit determined under subsection 3.1.1 for a period of fifteen (15)
years from Executive's death under this Section 3.1. The Company's
payments shall be made in equal monthly installments (1/12th of the
annual benefit). These equal monthly payments to the Executive's
beneficiary will begin on the last day of the month which follows the
month of the Executive's death under this Section 3.1 and continuing
until the expiration of one hundred eighty (180) months from the first
payment.
3.2 Death During Disability. In the event of the Executive's death
following Termination of Employment while suffering a Disability, but where the
termination is prior to Early Retirement Age, the Company shall pay the amount
described in this Section 3.2. Payment of a benefit under this section is made
in lieu of any other payments otherwise due the Executive or the Executive's
beneficiary.
3.2.1 Benefit Amount. In the event the Executive has received
payments under Section 2.4.1 of this Agreement prior to death, then no
benefit is provided in this Section 3.2.1. Otherwise, the amount of the
benefit under this Section 3.2.1 is the liability accrued by the
Company upon Termination of Employment, increased by six percent (6%)
compounded annually for each subsequent Plan Year until the Executive's
death.
5
<PAGE> 7
3.2.2 Payment of Benefit. The Company shall pay the benefit
determined under subsection 3.2.1 to the Executive's beneficiary in a
single lump sum within thirty (30) days following the Executive's
death.
3.3 Death During Benefit Period. If the Executive dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.
ARTICLE 4
BENEFICIARIES
4.1 Beneficiary Designations. The Executive shall designate a
beneficiary by filing with the Company a written designation of beneficiary on
an form substantially similar to the form attached as Schedule B. The Executive
may revoke or modify the designation at any time by filing a new designation.
However, designations will only be effective if signed by the Executive and
accepted by the Company during the Executive's lifetime. The Executive's
beneficiary designation shall be deemed automatically revoked if the beneficiary
predeceases the Executive, or if the Executive names a spouse as beneficiary and
the marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall be made to the Executive's surviving
spouse, if any, and if none, to the Executive's surviving children and the
descendants of any deceased child by right of representation, and if no children
or descendants survive, to the Executive's estate.
4.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incompetent, or to a person incapable of handling the
disposition of his or her property, the Company may pay such benefit to the
guardian, legal representative or person having the care or custody of such
minor, incompetent person or incapable person, or to a custodian selected by the
Company under the Missouri Uniform Transfers to Minors Act for the benefit of
such minor. The Company may require proof of incompetency, minority or
guardianship as it may deem appropriate prior to distribution of the benefit.
Such distribution shall completely discharge the Company from all liability with
respect to such benefit.
ARTICLE 5
GENERAL LIMITATIONS
Notwithstanding any provision of this Agreement to the contrary, the Company
shall not pay any benefit under this Agreement:
5.1 Termination for Cause. If the Company terminates the Executive's
employment for any of the following reasons:
5.1.1 Gross negligence or gross neglect of duties;
6
<PAGE> 8
5.1.2 Commission of a felony or of a misdemeanor involving
moral turpitude; or
5.1.3 Fraud, dishonesty or willful violation of any law or
significant Company policy committed in connection with the Executive's
employment and resulting in personal financial benefit to the Executive
and in an adverse effect on the Company.
5.2 Suicide. If the Executive commits suicide and as a result of such
suicide the payment of death proceeds is denied on any policy of insurance owned
by the Company insuring the life of the Executive, no benefits shall be payable.
5.3 Golden Parachute Payment. Notwithstanding any provision of this
Agreement to the contrary, the Company shall not be required to pay any benefit
under this Agreement if, upon the advice of counsel, the Company determines that
the payment of such benefit would be prohibited by 12 C.F.R. Part 359 or any
successor regulations regarding employee compensation promulgated by any
regulatory agency having jurisdiction over the Company or its affiliates. To the
extent possible, such benefit payment shall be proportionately reduced to allow
payment within the fullest extent permissible under applicable law.
ARTICLE 6
CLAIMS AND REVIEW PROCEDURES
6.1 Claims Procedure. The Company shall notify the Executive in
writing, within ninety (90) days of his written application for benefits, of his
eligibility or ineligibility for benefits under the Agreement. If the Company
determines that the Executive is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3) a
description of any additional information or material necessary for the claimant
to perfect his or her claim, and a description of why it is needed, and (4) an
explanation of the Agreement's claims review procedure and other appropriate
information as to the steps to be taken if the beneficiary wishes to have the
claim reviewed. If the Company determines that there are special circumstances
requiring additional time to make a decision, the Company shall notify the
Executive of the special circumstances and the date by which a decision is
expected to be made, and may extend the time for up to an additional ninety-day
period.
6.2 Review Procedure. If the Executive is determined by the Company not
to be eligible for benefits, or if the Executive believes that he is entitled to
greater or different benefits, the Executive shall have the opportunity to have
such claim reviewed by the Company by filing a petition for review with the
Company within sixty (60) days after receipt of the notice issued by the
Company. Said petition shall state the specific reasons which the Executive
believes entitle him to benefits or to greater or different benefits. Within
sixty (60) days after receipt by the Company of the petition, the Company shall
afford the Executive (and counsel, if any) an opportunity to present his
position to the Company orally or in writing, and the Executive (or counsel)
shall have the right to review the pertinent documents. The Company shall notify
the Executive of its decision in writing within the sixty-day period, stating
specifically the basis of its decision, written in a manner calculated to be
understood by the Executive and the specific
7
<PAGE> 9
provisions of the Agreement on which the decision is based. If, because of the
need for a hearing, the sixty-day period is not sufficient, the decision may be
deferred for up to another sixty-day period at the election of the Company, but
notice of this deferral shall be given to the Executive.
ARTICLE 7
AMENDMENTS AND TERMINATION
7.1 Amendment or Termination of Agreement After a Change in Control.
The Company may amend or terminate this Agreement at any time prior to the
Executive's Termination of Employment by written notice to the Executive;
provided, however, that if the Company amends or terminates this Agreement prior
to the Executive's Normal Retirement Date while the Executive is in the active
service of the Company and subsequent to a Change of Control, then, subject to
the provisions of Sections 5.3 and 2.5.1.1, the Company shall pay the Executive
one hundred percent (100%) of the benefit determined under Schedule A based on
the number of completed Plan Years, in accordance with Schedule A, on the date
of termination of this Agreement. The Company shall pay this benefit to the
Executive in a single lump sum within thirty (30) days from Termination of
Agreement following a Change in Control.
7.2 Amendment or Termination Prior to a Change in Control. The Company
may amend or terminate this Agreement at any time prior to a Change in Control
by written notice to the Executive.
7.2.1 Subsequent to Executive's Normal Retirement Date. In the
event of any such amendment or termination after payment of benefits
has commenced, the benefit the Executive shall be entitled is one
hundred percent (100%) of the present value of any unpaid benefit under
Article 2, subject to Sections 5.3 and 2.5.1.1. The Discount Rate shall
be used to determine present value. The Company shall pay the benefit
under this Section 7.2.1 in a single lump sum payment within sixty (60)
days of amendment or termination of this Agreement.
7.2.2 Prior to Executive's Normal Retirement Date. If
amendment or termination of this Agreement under Section 7.2 occurs
after the effective date of this Agreement and before payment of
benefits has commenced, the Company shall pay the Executive an amount
equal to one hundred percent (100%) of the amount of accrued benefit
reflected in Schedule A based on completed Plan Years. The Company
shall pay this benefit, if any, to the Executive in a single lump sum
payment within sixty (60) days of Agreement amendment or termination.
8
<PAGE> 10
ARTICLE 8
MISCELLANEOUS
8.1 Binding Effect. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, administrators and
permitted transferees.
8.2 No Guaranty of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Company, nor does it interfere with the Company's right to
discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executive's right to terminate employment at any
time.
8.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
8.4 Tax Withholding. The Company shall withhold any taxes that are
required to be withheld from the benefits provided under this Agreement.
8.5 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of Missouri, except to the extent preempted by
the laws of the United States of America.
8.6 Unfunded Arrangement. The Executive is a general unsecured creditor
of the Company for the payment of benefits under this Agreement. The benefits
represent the mere promise by the Company to pay such benefits. The rights to
benefits are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors. Any insurance on the Executive's life is a general asset of the
Company to which the Executive has no preferred or secured claim.
8.7 Severability. Without limitation of any other section contained
herein, in case any one or more provisions contained in this Agreement shall for
any reason be held to be invalid, illegal or unenforceable in any other respect,
such invalidity, illegality or unenforceability shall not affect the other
provisions of this Agreement. This Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been a part of this
Agreement and shall be deemed substituted therefore such other provisions as
will most nearly accomplish the intent of the parties to the extent permitted by
applicable law, in case this Agreement or any one or more of its provisions
shall be held to be invalid, illegal or unenforceable by any governmental
regulatory agency or court of competent jurisdiction.
9
<PAGE> 11
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement as of the date indicated below.
/s/ Joseph W. Pope Date: 12/5/99
JOSEPH W. POPE
SOUTHSIDE BANCSHARES CORP.
By: /s/ Thomas M. Teschner Date: 12/5/99
Title: President & CEO
10
<PAGE> 12
SCHEDULE A
SALARY CONTINUATION AGREEMENT BETWEEN
SOUTHSIDE BANCSHARES CORP. AND JOSEPH W. POPE
<TABLE>
<CAPTION>
Plan Year* Completed
Before Termination occurs Compensation Balance
------------------------- --------------------
<S> <C>
1 $ 5,406
2 11,468
3 18,266
4 25,893
5 34,452
6 44,059
7 54,843
8 66,971
9 80,595
10 95,915
11 113,152
12 132,557
13 154,416
14 179,059
15 206,861
16 238,258
17 273,750
18 313,922
19 359,451
20 411,136
21 469,921
22 536,933
23 613,532
24 701,390
25 802,597
</TABLE>
11
<PAGE> 13
SCHEDULE A (CONTINUED)
SALARY CONTINUATION AGREEMENT BETWEEN
SOUTHSIDE BANCSHARES CORP. AND JOSEPH W. POPE
<TABLE>
<CAPTION>
<S> <C>
26 919,840
27 1,056,714
28 1,218,307
29 1,412,535
30 1,653,980
31 1,982,506
End of Schedule
</TABLE>
* Plan Year means the anniversary year of the date of the Agreement.
To calculate an amount for less than a full Plan Year, take the number of
completed months of service into the current Plan Year and divide by 12.
Then multiply that fraction by the difference between (i) the Plan Year
balance shown above for the Plan Year in which termination occurs and (ii)
the previous Plan Year's balance. Then add that amount to the previous Plan
Year's balance. The result provides credit for all prior full plan years
plus a ratio percentage of the current plan year. For example, if the
Executive leaves the Company during the 5th plan year four months after the
fourth year plan anniversary, then you would take 4/12 times the balance
shown for Plan Year 5 minus the balance shown for Plan Year 4. Then add
that amount to the balance shown for Plan Year 4 to determine the amount
due as a termination payment.
12
<PAGE> 14
SCHEDULE B
BENEFICIARY DESIGNATION
I, Joseph W. Pope, designate the following as beneficiary of any death benefits
payable under the Salary Continuation Agreement between myself and SOUTHSIDE
BANCSHARES CORP.:
Primary Beneficiary
Name Melissa A. Pope Relationship Spouse
Address 3081 Cambridge Point Drive, St. Louis, MO 63129
Contingent Beneficiary
Name Alec J. and Michael T. Pope Relationship Children
Address 3081 Cambridge Point Drive, St. Louis, MO 63129
NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND
THE EXACT DATE OF THE TRUST AGREEMENT.
I understand that I may change these beneficiary designations by filing a new
written designation with the Company. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary, in the event of the dissolution of our marriage.
I further understand that this beneficiary designation revokes any and all prior
beneficiary designations.
Consented to by Executive's spouse:
Signature /s/ Joseph W. Pope Signature /s/ Melissa A. Pope
JOSEPH W. POPE
Date 12/5/99 Date 12/7/99
Accepted by the Company this 7th day of December, 1999
By: /s/ Thomas M. Teschner
Title: President and CEO
13
<PAGE> 15
EXHIBIT A
EXECUTIVE RETIREMENT BENEFIT ELECTION
THIS ELECTION is made and entered into as of 5th day of December, 1999,
by SOUTHSIDE BANCSHARES CORP. (the "Company") located in St. Louis, Missouri,
pursuant to the Salary Continuation Agreement between the Company and JOSEPH W.
POPE (the "Executive") dated December 1, 1999, (the "Agreement").
The Executive, by initialing in ink either OPTION 1 or OPTION 2 below
hereby elects to receive the Disability Benefit described in the elected option
and receive the payment or payments in accordance to the option the Executive
elects.
OPTION 1
(initials)
---------
a. Benefit Amount. The amount of the benefit is the amount set
forth on the attached Schedule A based on the number of completed Plan
Years preceding the Executive's Termination of Employment.
b. Payment of Benefit. The Company shall pay the benefit in a
single lump sum to the Executive within thirty (30) days following the
Executive's Termination of Employment.
OPTION 2
/s/ JWP (initials)
---------
a. Benefit Amount. The amount of the benefit is a percentage
of the annual benefit set forth in Section 2.1 determined as of the
Normal Retirement Date. The fraction to be utilized to determine the
percentage has a numerator equal to the amount found on Schedule A of
the Agreement based upon the number of completed Plan Years by the
Executive as of Termination of Employment increased each subsequent
Plan Year until the Executive's Normal Retirement Date by six percent
(6%) and a denominator equal to the amount found on Schedule A of the
Agreement based upon the Executive having completed all Plan Years up
to the Executive's Normal Retirement Date.
b. Payment of Benefit. The Company shall pay the annual
benefits for a period of fifteen (15) years from Executive's Normal
Retirement Date. The Company's payments shall be made in equal monthly
installments (1/12th of the annual benefit). These equal monthly
payments to the Executive will begin on the last day of the month which
follows the month of the Executive attaining the Normal Retirement Date
and continuing until the expiration of one hundred eighty (180) months
from the first payment.
14
<PAGE> 16
EXHIBIT A (CONTINUED)
The Executive and Company acknowledge and agree that each and every
election to select a benefit payment pursuant to OPTION 1 or OPTION 2 made under
this EXHIBIT A EXECUTIVE RETIREMENT BENEFIT ELECTION, in order to be valid and
effective, must be made by December 31st of the year prior to the calendar year
preceding the Executive's Termination of Employment.
The Executive and Company agree and acknowledge that any election to
select a benefit payment pursuant to OPTION 1 or OPTION 2 made under this
EXHIBIT A EXECUTIVE RETIREMENT BENEFIT ELECTION not made within the time frame
set forth in the paragraph above shall be null and void. When a null and void
election is made the most recent election which is not null and void shall
determine the method in which the Executive's retirement benefit shall be paid
under Section 2.4.1 of the Agreement.
The Executive and the Company acknowledge and agree that the Company,
in the absence of a valid election by the Executive under this EXHIBIT A
EXECUTIVE RETIREMENT BENEFIT ELECTION, the Company shall pay any benefit under
Section 2.4.1 of this Agreement under OPTION 1 above.
The Executive and the Company understands that the Executive may change
the election set forth above, consistent with the restrictions set forth in this
EXHIBIT A EXECUTIVE RETIREMENT BENEFIT ELECTION, by filing a new written
designation with the Company on a form following this EXHIBIT A EXECUTIVE
RETIREMENT BENEFIT ELECTION.
Executive:
Signature /s/ Joseph W. Pope Date 12/5/99
Accepted by the Company this 5th day of December, 1999.
By: /s/ Thomas M. Teschner
Title: President and CEO
15
<PAGE> 1
EXHIBIT 10(h)
<PAGE> 2
Exhibit 10(h)
FIRST AMENDMENT
TO SOUTHSIDE BANCSHARES CORP.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
This First Amendment (hereinafter referred to as the "Amendment") is
entered into this 1st day of December, 1999, the effective date, between
SOUTHSIDE BANCSHARES CORP. (the "Company"), with its principal place of business
in St. Louis, Missouri (the "Company"), and THOMAS M. TESCHNER, a director of
the Company (hereinafter referred to as the "Director").
WHEREAS, the Director has served on the Board of Directors of the
Company (hereinafter referred to as the "Board"), and the Board wishes to
provide additional incentives for the Director's continued service; and
WHEREAS, the Director has contributed to the success and profitability
of the Company and is expected to continue such contribution; and
WHEREAS, the Director and the Company have previously entered into a
plan entitled Southside Bancshares Corp. Deferred Compensation Plan for
Directors, dated April 25, 1996, which includes an agreement entitled the
Southside Bancshares Corp. Deferred Compensation Plan for Directors
Participation Agreement executed by the Director (hereinafter collectively
referred to as the "Previous Plan"), which provided that the Company would
provide certain benefits to the Director upon his retirement; and
WHEREAS, the Company and the Director desire to set forth their
Amendment to the Previous Plan as to fees the Director has already deferred and
the continued deferral of a portion of the Director's fees as a deferred
compensation plan and to provide certain additional benefits in the case of the
Director's death while serving as a Director of the Company; and
WHEREAS, the Company and the Director desire to provide the Director,
in lieu of Director's fees already deferred and the deferral of annual
Director's fees of Sixteen Thousand Eight Hundred and 00/100 Dollars
($16,800.00) per year for the next ten (10) years, as compensation for his
services to the Company, a post-retirement income or a pre-retirement death
benefit to his beneficiary.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Company and the Director hereby amend and restate the Previous Plan
as follows:
1. Director agrees that the benefits provided under this Amendment are
in lieu of the benefits accumulated to the Director under the Previous Plan.
2. The liability existing on the financial records on the Company
("Rollover Balance") under the Previous Plan as of the effective date of this
Amendment will be included in the Director's Account as hereinafter defined.
<PAGE> 3
3. Director revokes all prior deferral elections and agrees to a
reduction of the current payment of his compensation for service on the Board by
Sixteen Thousand Eight Hundred and 00/100 Dollars ($16,800.00) per year,
annually deferred in twelve (12) substantially equal monthly installments, for a
period of ten (10) years, or such other amount as shall be elected by the
Director in a signed writing delivered to the Company, and to defer receipt of
such amount until paid pursuant to later provisions of this Amendment.
Compensation reductions under this Amendment shall cease at the earlier of the
end of the deferral period or when said Director attains age sixty (60). The
Director may change the amount of or suspend future deferrals with respect to
fees and retainers earned for calendar years commencing after the date of change
or suspension as he may specify by written notice to the Company. Following any
such suspension, the Director may make a new election to again become a deferral
participant; however, the election to defer shall be irrevocable for the
particular year, and must be made prior to the beginning of the calendar year.
4. The Company will record amounts deferred pursuant to paragraphs 2
and 3 and amounts credited pursuant to paragraph 5 in a separate account
(hereinafter referred to as the "Account") in the financial records of the
Company.
5. Until the Director attains age sixty (60), the Company will credit
interest compounded monthly to the Account as follows: subject to a minimum
annual rate of six percent (6%) and a maximum annual rate of fifteen percent
(15%), a rate equal to the annual percentage increase (the "Annual Rate") of the
stock price of Southside Bancshares Corp (the "Stock Price"). The annual
percentage increase of the Stock Price shall be initially determined utilizing a
fraction that has a numerator calculated by subtracting the closing bid price
one year prior to the effective date of this Amendment from the closing bid
price on the effective date of this Amendment and a denominator equal to the
closing bid price one year prior to the effective date of this Amendment. For
each subsequent year that this Amendment is effective, the Annual Rate will be
determined utilizing a fraction that has a numerator calculated by subtracting
the closing bid price one year prior to each anniversary of effective date of
this Amendment from the closing bid price on each anniversary of effective date
of this Amendment and a denominator equal to the closing bid price one year
prior to the anniversary of effective date of this Amendment. Notwithstanding
the above, at any time during the period the Director is scheduled to make a
deferral under paragraph 3 of this Amendment and the Director fails to defer a
monthly amount under paragraph 3 the annual interest rate the Company will
credit the Account under this paragraph will be six percent (6%), compounded
monthly for the period the Director makes no deferral. Once the Director attains
age sixty (60) or the service of the Director is terminated and payments from
the Account continue to be deferred, the Company will credit interest compounded
monthly to the Account at a rate of six percent (6%) until the balance of the
Account is fully paid.
6. The Account will be unfunded and no assets of the Company will be
segregated with respect to the Account. Further, the Account shall be kept only
for purposes of its identification on the books and records of the Company as a
liability of the Company to the Director, and the Account will be subject to the
claims of general creditors of the Company.
7. Amounts held in the Account or a death benefit will be payable as
indicated in Paragraph 8 upon the first to occur of the following events:
2
<PAGE> 4
(a) termination of the Director's membership on the Board of
the Company other than by death; or
(b) termination of this Agreement pursuant to Paragraph 17; or
(c) the occurrence of the Director's 60th birthday; or
(d) the death of the Director.
The Company shall only have the obligation to complete making payments under
Paragraph 8 to the Director, his/her designated beneficiary, or the estate of
the designated beneficiary pursuant to the applicable subparagraph above.
8.
a. If payment is to be made due to the occurrence of an event
described in 7(a) or in 7(b), subject to provisions of paragraph 9, an amount
equal to the balance in the Account shall be paid to the Director in one lump
sum not later than sixty (60) days following the occurrence of the event.
b. If payment is to be made due to the occurrence of the event
described in 7(c), the balance in the Account shall be paid to the Director in
substantially equal monthly installments over a one hundred eighty (180) month
period commencing on the first day of the month following the Director's
birthday.
c. If payment is to be made due to the occurrence of the event
described in 7(d), the amount payable to the Director's beneficiary shall be the
monthly amount stated in Addendum A multiplied by a fraction the numerator of
which is equal to the sum of: (i) the Rollover Balance, including interest
credited to this amount through the date of the Director's death pursuant to
paragraph 5 of this Amendment; (ii) the amount actually deferred under this
Amendment until the Director's death, including the interest credited to these
deferrals through the date of the Director's death pursuant to paragraph 5 of
this Amendment; (iii) if the Director's death occurs before the ten year
deferral period set forth in paragraph 3 of this Amendment, the projected
amounts that would have been deferred from the date of the Director's death
through the date the Director would have attained age fifty-three (53), based on
the Director's elected deferral amount in effect on the date of the Director's
death; and (iv) the interest that would have been credited to the amounts in
(i), (ii), and (iii) immediately above pursuant to paragraph 5 from the date of
the Director's death until the date the Director would have reached age 60
assuming an Annual Rate that would equal the average annual interest credited to
the Director's Account from the effective date of this Amendment through the
Director's death or, if the Director was not making monthly deferrals at the
date of the Director's death and the Director's death occurred within ten (10)
years of the date of this Amendment, an Annual Rate equal to six percent (6%);
and the denominator of which shall equal the sum of the Rollover Balance and the
projected total deferral that would have occurred if the Director would have
deferred the amount set forth in paragraph 3 for the period set forth in
paragraph 3, including the maximum annual interest credited under paragraph 5 of
this Amendment to the Rollover balance and to the projected deferrals under
paragraph 3; provided, however, under no circumstances shall the monthly benefit
be greater than that stated in Addendum A. Payments to the Director's
3
<PAGE> 5
designated beneficiary shall begin the first day of the month following the
month of the death of the Director.
d. Notwithstanding the foregoing subparagraph (c), if the
Director commits suicide and as a result of such suicide the payment of the
death proceeds is denied on any policy of insurance owned by the Company
insuring the life of the Director, the amount payable to the Director's
designated beneficiary shall be the Account balance on the date of the
Director's death less an amount equal to the sum of any monthly amounts
previously paid the designated beneficiary. Payment to the Director's designated
beneficiary shall be made in a lump sum within sixty (60) days from the denial
of payment of proceeds from any life insurance policy owned by the Company.
9. If payment is to be made under subparagraph 7 (a) and the Director's
termination is due to disability covered under a disability insurance policy,
the Company may, in its sole discretion, defer payment until payments under the
disability policy cease.
10. In the event the Director should die before receiving the payment
due under subparagraph 8(a) or the payments due under subparagraph 8(b), the
remaining payment or payments, as the case may be, shall be paid to the
Director's designated beneficiary.
11. If the Director's designated beneficiary dies before receiving all
payments due, the Company shall pay the remaining payments, in the same form of
pay out as the designated beneficiary has been receiving or is to receive, to
the revocable trust of the Designated beneficiary and, if none, to the estate of
the designated beneficiary.
12. Director may request in a signed writing delivered to the Board,
that the Company pay a hardship distribution to the Director from amounts held
in the Account. Hardship means an unforeseen event or situation that creates an
extraordinary financial need that cannot reasonably be met by other resources of
the Director. The Board shall elect in its sole discretion, without
participation of the Director making the request, whether or not to grant such
request.
13. Any amounts payable to the Director's designated beneficiary
pursuant to this Amendment will be paid to the beneficiary designated by the
Director in a signed writing delivered to the Company. Director has the right to
change his beneficiary designation by delivering to the Company a subsequent
signed writing. If Director does not designate a beneficiary in the manner
described in this paragraph 13, or if the designated beneficiary has predeceased
the Director, then amounts payable hereunder will be payable first to the
Director's surviving spouse; and if the Director has no surviving spouse, then
such amounts will then be payable to the Director's estate or as provided by a
decree of distribution or other proper order by the court having jurisdiction of
such estate. No one other than the Director shall have any right to designate a
beneficiary.
14. The right to receive payments under this Amendment shall not be
assigned or encumbered, or subject to anticipation, garnishment, attachment, or
any other legal process of creditors of the Director or of any designated
beneficiary. If the Director or a designated beneficiary attempts to assign such
right, the Board, in its sole discretion, may suspend, reduce or terminate any
or all rights created by this Amendment as to the Director or the designated
beneficiary attempting said assignment.
4
<PAGE> 6
15. Nothing in this Amendment shall be construed as giving the Director
the right to be retained on the Company's Board. The Director shall remain
subject to discharge at any time and to the same extent as if this Amendment had
not been executed.
16. The Company does not assure or guarantee the tax consequences of
payments provided hereunder or matters beyond its control, and the Director
certifies that his decision to reduce and defer receipt of his compensation is
not due to any reliance upon financial, tax or legal advice given by the Company
or any of its employees.
17. This Amendment may be amended or terminated at any time by the
Company in writing; however, no amendment or termination may reduce amounts
payable to Director or his designated beneficiary below the then Account
balance, without such person's written consent.
18. The Board upon ninety (90) days advance written notice to the
Director may terminate this Amendment and, in the event of such termination,
shall pay an amount equal to the then Account balance in a lump sum to the
Director within sixty (60) days following such termination.
19. While the Company intends that this Plan will result in the
deferral of the imposition of a federal income tax on the funds credited
hereunder until such time as they actually be paid to a Director, nothing herein
shall be construed as a promise, guarantee or other representation by the
Company of such tax effect nor, without limitation, shall the Company be liable
for any taxes, penalties or other amounts incurred by Directors in the event it
is determined by applicable authorities that such deferral was not accomplished,
and the Director should consult his or her own tax advisor(s) to determine the
tax consequences in his or her specific case.
IN WITNESS WHEREOF, the parties hereof have entered into this Amendment
at St. Louis, Missouri, as of the date first above written.
SOUTHSIDE BANCSHARES CORP.
BY: /S/ JOSEPH W. POPE
ITS: CHIEF FINANCIAL OFFICER
DIRECTOR:
/S/ THOMAS W. TESCHNER
THOMAS M. TESCHNER
5
<PAGE> 7
BENEFICIARY DESIGNATION
I, Thomas M. Teschner, designate the following as beneficiary of any death
benefits payable under the First Amendment to Southside Bancshares Corp.
Deferred Compensation Plan for Directors myself and Southside Bancshares Corp.:
Primary Beneficiary
Name Thomas M. Teschner Revocable Trust Relationship
Address 6312 Christopher Winds Court
Contingent Beneficiary (to receive the benefits if there is no surviving Primary
Beneficiary)
Name Susan R. Teschner Relationship Wife
Address 6312 Christopher Winds Court
NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND
THE EXACT DATE OF THE TRUST AGREEMENT.
I understand that I may change these beneficiary designations by filing a new
written designation with the Company. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary, in the event of the dissolution of our marriage.
I further understand that this beneficiary designation revokes all prior
beneficiary designations applicable to this Amendment.
Consented to by Director's spouse:
Director's Signature: Spouse's Signature:
/s/ Thomas M. Teschner /s/ Susan R. Teschner
THOMAS M. TESCHNER
Date: 12-1-99 Date: 12-1-99
Accepted by the Company this 1st day of December, 1999.
By: /s/ Joseph W. Pope
Title: Chief Financial Officer
<PAGE> 8
ADDENDUM A
Sixteen Thousand Nine Hundred Fifty One and 25/100 Dollars ($16,951.25) per
month for one hundred eighty (180) months.
ADDENDUM A - PAGE SOLO
<PAGE> 1
EXHIBIT 10(i)
<PAGE> 2
Exhibit 10(i)
FIRST AMENDMENT
TO SOUTHSIDE BANCSHARES CORP.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
This First Amendment (hereinafter referred to as the "Amendment") is
entered into this 1st day of December, 1999, the effective date, between
SOUTHSIDE BANCSHARES CORP., with its principal place of business in St. Louis,
Missouri (the "Company"), and DANIEL J. QUEEN, a director of the Company
(hereinafter referred to as the "Director").
WHEREAS, the Director has served on the Board of Directors of the
Company (hereinafter referred to as the "Board"), and the Board wishes to
provide additional incentives for the Director's continued service; and
WHEREAS, the Director has contributed to the success and profitability
of the Company and is expected to continue such contribution; and
WHEREAS, the Director and the Company have previously entered into a plan
entitled Southside Bancshares Corp. Deferred Compensation Plan for Directors,
dated April 25, 1996, which includes an agreement entitled the Southside
Bancshares Corp. Deferred Compensation Plan for Directors Participation
Agreement executed by the Director (hereinafter collectively referred to as the
"Previous Plan"), which provided that the Company would provide certain benefits
to the Director upon his retirement; and
WHEREAS, the Company and the Director desire to set forth their Amendment to the
Previous Plan as to fees the Director has already deferred and the continued
deferral of a portion of the Director's fees as a deferred compensation plan and
to provide certain additional benefits in the case of the Director's death while
serving as a Director of the Company; and
WHEREAS, the Company and the Director desire to provide the Director,
in lieu of Director's fees already deferred and the deferral of annual
Director's fees of Thirty Five Thousand Four Hundred and 00/100 Dollars
($35,400.00) per year for the next seven (7) years, as compensation for his
services to the Company, a post-retirement income or a pre-retirement death
benefit to his beneficiary.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Company and the Director hereby amend and restate the Previous Plan
as follows:
1. Director agrees that the benefits provided under this Amendment are in lieu
of the benefits accumulated to the Director under the Previous Plan.
2. The liability existing on the financial records on the Company
("Rollover Balance") under the Previous Plan as of the effective date of this
Amendment will be included in the Director's Account as hereinafter defined.
3. Director revokes all prior deferral elections and agrees to a
reduction of the current payment of his compensation for service on the Board by
Thirty Five Thousand Four Hundred and 00/100 Dollars ($35,400.00) per year,
annually deferred in twelve (12) substantially equal monthly
<PAGE> 3
installments, for a period of seven (7) years, or such other amount as shall be
elected by the Director in a signed writing delivered to the Company, and to
defer receipt of such amount until paid pursuant to later provisions of this
Amendment. Compensation reductions under this Amendment shall cease at the
earlier of the end of the deferral period or when said Director attains age
sixty-five (65). The Director may change the amount of or suspend future
deferrals with respect to fees and retainers earned for calendar years
commencing after the date of change or suspension as he may specify by written
notice to the Company. Following any such suspension, the Director may make a
new election to again become a deferral participant; however, the election to
defer shall be irrevocable for the particular year, and must be made prior to
the beginning of the calendar year.
4. The Company will record amounts deferred pursuant to paragraphs 2
and 3 and amounts credited pursuant to paragraph 5 in a separate account
(hereinafter referred to as the "Account") in the financial records of the
Company.
5. Until the Director attains age sixty-five (65), the Company will
credit interest compounded monthly to the Account as follows: subject to a
minimum annual rate of six percent (6%) and a maximum annual rate of fifteen
percent (15%), a rate equal to the annual percentage increase (the "Annual
Rate") of the stock price of Southside Bancshares Corp (the "Stock Price"). The
annual percentage increase of the Stock Price shall be initially determined
utilizing a fraction that has a numerator calculated by subtracting the closing
bid price one year prior to the effective date of this Amendment from the
closing bid price on the effective date of this Amendment and a denominator
equal to the closing bid price one year prior to the effective date of this
Amendment. For each subsequent year that this Amendment is effective, the Annual
Rate will be determined utilizing a fraction that has a numerator calculated by
subtracting the closing bid price one year prior to each anniversary of
effective date of this Amendment from the closing bid price on each anniversary
of effective date of this Amendment and a denominator equal to the closing bid
price one year prior to the anniversary of effective date of this Amendment.
Notwithstanding the above, at any time the Director fails to defer a monthly
amount under paragraph 3, the annual interest rate the Company will credit the
Account under this paragraph will be six percent (6%), compounded monthly for
the period the Director makes no deferral. Once the Director attains age
sixty-five (65) or the service of the Director is terminated and payments from
the Account continue to be deferred, the Company will credit interest compounded
monthly to the Account at a rate of six percent (6%) until the balance of the
Account is fully paid.
6. The Account will be unfunded and no assets of the Company will be
segregated with respect to the Account. Further, the Account shall be kept only
for purposes of its identification on the books and records of the Company as a
liability of the Company to the Director, and the Account will be subject to the
claims of general creditors of the Company.
7. Amounts held in the Account or a death benefit will be payable as
indicated in Paragraph 8 upon the first to occur of the following events:
(a) termination of the Director's membership on the Board of
the Company other than by death; or
(b) termination of this Agreement pursuant to Paragraph 17; or
2
<PAGE> 4
(c) the occurrence of the Director's 65th birthday; or
(d) the death of the Director.
The Company shall only have the obligation to complete making payments under
Paragraph 8 to the Director, his/her designated beneficiary, or the estate of
the designated beneficiary pursuant to the applicable subparagraph above.
8.
a. If payment is to be made due to the occurrence of an event
described in 7(a) or in 7(b), subject to provisions of paragraph 9, an amount
equal to the balance in the Account shall be paid to the Director in one lump
sum not later than sixty (60) days following the occurrence of the event.
b. If payment is to be made due to the occurrence of the event
described in 7(c), the balance in the Account shall be paid to the Director in
substantially equal monthly installments over a one hundred eighty (180) month
period commencing on the first day of the month following the Director's
birthday.
c. If payment is to be made due to the occurrence of the event
described in 7(d), the amount payable to the Director's beneficiary shall be the
monthly amount stated in Addendum A multiplied by a fraction the numerator of
which is equal to the sum of: (i) the Rollover Balance, including interest
credited to this amount through the date of the Director's death pursuant to
paragraph 5 of this Amendment; (ii) the amount actually deferred under this
Amendment until the Director's death, including the interest credited to these
deferrals through the date of the Director's death pursuant to paragraph 5 of
this Amendment; (iii) the projected amounts that would have been deferred from
the date of the Director's death through the date the Director would have
attained age sixty-five (65), based on the Director's elected deferral amount in
effect on the date of the Director's death; and (iv) the interest that would
have been credited to the amounts in (i), (ii), and (iii) immediately above
pursuant to paragraph 5 from the date of the Director's death until the date the
Director would have reached age 65 assuming an Annual Rate that would equal the
average annual interest credited to the Director's Account from the effective
date of this Amendment through the Director's death or an Annual Rate equal to
six percent (6%) if the Director was not making monthly deferrals at the date of
the Director's death; and the denominator of which shall equal the sum of the
Rollover Balance and the projected total deferral that would have occurred if
the Director would have deferred the amount set forth in paragraph 3 from the
date of this Amendment through the date the Director would have attained age
sixty-five (65), including the maximum annual interest credited under paragraph
5 of this Amendment to the Rollover balance and to the projected deferrals under
paragraph 3; provided, however, under no circumstances shall the monthly benefit
be greater than that stated in Addendum A. Payments to the Director's designated
beneficiary shall begin the first day of the month following the month of the
death of the Director.
d. Notwithstanding the foregoing subparagraph (c), if the
Director commits suicide and as a result of such suicide the payment of the
death proceeds is denied on any policy of insurance owned by the Company
insuring the life of the Director, the amount payable to the Director's
designated beneficiary shall be the Account balance on the date of the
Director's death less an amount equal to the sum of any monthly amounts
previously paid the designated beneficiary.
3
<PAGE> 5
Payment to the Director's designated beneficiary shall be made in a lump sum
within sixty (60) days from the denial of payment of proceeds from any life
insurance policy owned by the Company.
9. If payment is to be made under subparagraph 7 (a) and the Director's
termination is due to disability covered under a disability insurance policy,
the Company may, in its sole discretion, defer payment until payments under the
disability policy cease.
10. In the event the Director should die before receiving the payment
due under subparagraph 8(a) or the payments due under subparagraph 8(b), the
remaining payment or payments, as the case may be, shall be paid to the
Director's designated beneficiary.
11. If the Director's designated beneficiary dies before receiving all
payments due, the Company shall pay the remaining payments, in the same form of
pay out as the designated beneficiary has been receiving or is to receive, to
the revocable trust of the Designated beneficiary and, if none, to the estate of
the designated beneficiary.
12. Director may request in a signed writing delivered to the Board,
that the Company pay a hardship distribution to the Director from amounts held
in the Account. Hardship means an unforeseen event or situation that creates an
extraordinary financial need that cannot reasonably be met by other resources of
the Director. The Board shall elect in its sole discretion, without
participation of the Director making the request, whether or not to grant such
request.
13. Any amounts payable to the Director's designated beneficiary
pursuant to this Amendment will be paid to the beneficiary designated by the
Director in a signed writing delivered to the Company. Director has the right to
change his beneficiary designation by delivering to the Company a subsequent
signed writing. If Director does not designate a beneficiary in the manner
described in this paragraph 13, or if the designated beneficiary has predeceased
the Director, then amounts payable hereunder will be payable first to the
Director's surviving spouse; and if the Director has no surviving spouse, then
such amounts will then be payable to the Director's estate or as provided by a
decree of distribution or other proper order by the court having jurisdiction of
such estate. No one other than the Director shall have any right to designate a
beneficiary.
14. The right to receive payments under this Amendment shall not be
assigned or encumbered, or subject to anticipation, garnishment, attachment, or
any other legal process of creditors of the Director or of any designated
beneficiary. If the Director or a designated beneficiary attempts to assign such
right, the Board, in its sole discretion, may suspend, reduce or terminate any
or all rights created by this Amendment as to the Director or the designated
beneficiary attempting said assignment.
15. Nothing in this Amendment shall be construed as giving the Director
the right to be retained on the Company's Board. The Director shall remain
subject to discharge at any time and to the same extent as if this Amendment had
not been executed.
16. The Company does not assure or guarantee the tax consequences of
payments provided hereunder or matters beyond its control, and the Director
certifies that his decision to
4
<PAGE> 6
reduce and defer receipt of his compensation is not due to any reliance upon
financial, tax or legal advice given by the Company or any of its employees.
17. This Amendment may be amended or terminated at any time by the
Company in writing; however, no amendment or termination may reduce amounts
payable to Director or his designated beneficiary below the then Account
balance, without such person's written consent.
18. The Board upon ninety (90) days advance written notice to the
Director may terminate this Amendment and, in the event of such termination,
shall pay an amount equal to the then Account balance in a lump sum to the
Director within sixty (60) days following such termination.
19. While the Company intends that this Plan will result in the
deferral of the imposition of a federal income tax on the funds credited
hereunder until such time as they actually be paid to a Director, nothing herein
shall be construed as a promise, guarantee or other representation by the
Company of such tax effect nor, without limitation, shall the Company be liable
for any taxes, penalties or other amounts incurred by Directors in the event it
is determined by applicable authorities that such deferral was not accomplished,
and the Director should consult his or her own tax advisor(s) to determine the
tax consequences in his or her specific case.
IN WITNESS WHEREOF, the parties hereof have entered into this Amendment
at St. Louis, Missouri, as of the date first above written.
SOUTHSIDE BANCSHARES CORP.
BY: /S/ THOMAS M. TESCHNER
ITS: PRESIDENT
DIRECTOR:
/S/ DANIEL J. QUEEN
DANIEL J. QUEEN
5
<PAGE> 7
BENEFICIARY DESIGNATION
I, Daniel J. Queen, designate the following as beneficiary of any death benefits
payable under the Second Amendment to Southside Bancshares Corp. Deferred
Compensation Plan for Directors myself and Southside Bancshares Corp.:
Primary Beneficiary
Name Joyce D. Queen Relationship Wife
______________________________________ __________
Address 4603 Hwy 67, DeSota, Missouri 63020
______________________________________
Contingent Beneficiary (to receive the benefits if there is no surviving
Primary Beneficiary)
Name __________________________________ Relationship ___________________
Address _______________________________________________________________
NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND
THE EXACT DATE OF THE TRUST AGREEMENT.
I understand that I may change these beneficiary designations by filing a new
written designation with the Company. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary, in the event of the dissolution of our marriage.
I further understand that this beneficiary designation revokes all prior
beneficiary designations applicable to this Amendment.
Consented to by Director's spouse:
Director's Signature: Spouse's Signature:
__________________________________
/s/ Daniel J. Queen
____________________________________ __________________________________
DANIEL J. QUEEN
Date: December 17, 1999 Date:
______________________________ _____________________________
Accepted by the Company this 17th day of December, 1999.
By: /s/ Thomas M. Teschner
________________________
Title: President
<PAGE> 8
ADDENDUM A
Four Thousand Nine Hundred Forty Nine and 25/100 Dollars ($4,949.25) per month
for one hundred eighty (180) months.
ADDENDUM A - PAGE SOLO
<PAGE> 1
EXHIBIT 10(j)
<PAGE> 2
Exhibit 10(j)
FIRST AMENDMENT
TO SOUTHSIDE BANCSHARES CORP.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
This First Amendment (hereinafter referred to as the "Amendment") is
entered into this 1st day of December, 1999, the effective date, between
SOUTHSIDE BANCSHARES CORP., with its principal place of business in St. Louis,
Missouri (the "Company"), and EARLE J KENNEDY, JR., a director of the Company
(hereinafter referred to as the "Director").
WHEREAS, the Director has served on the Board of Directors of the
Company (hereinafter referred to as the "Board"), and the Board wishes to
provide additional incentives for the Director's continued service; and
WHEREAS, the Director has contributed to the success and profitability
of the Company and is expected to continue such contribution; and
WHEREAS, the Director and the Company have previously entered into a
plan entitled Southside Bancshares Corp. Deferred Compensation Plan for
Directors, dated April 25, 1996, which includes an agreement entitled the
Southside Bancshares Corp. Deferred Compensation Plan for Directors
Participation Agreement executed by the Director (hereinafter collectively
referred to as the "Previous Plan"), which provided that the Company would
provide certain benefits to the Director upon his retirement; and
WHEREAS, the Company and the Director desire to set forth their
Amendment to the Previous Plan as to fees the Director has already deferred and
the continued deferral of a portion of the Director's fees as a deferred
compensation plan and to provide certain additional benefits in the case of the
Director's death while serving as a Director of the Company; and
WHEREAS, the Company and the Director desire to provide the Director,
in lieu of Director's fees already deferred and the deferral of annual
Director's fees of Thirty Five Thousand Four Hundred and 00/100 Dollars
($35,400.00) per year for the next seven (7) years, as compensation for his
services to the Company, a post-retirement income or a pre-retirement death
benefit to his beneficiary.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Company and the Director hereby amend and restate the Previous Plan
as follows:
1. Director agrees that the benefits provided under this Amendment are
in lieu of the benefits accumulated to the Director under the Previous Plan.
2. The liability existing on the financial records on the Company
("Rollover Balance") under the Previous Plan as of the effective date of this
Amendment will be included in the Director's Account as hereinafter defined.
3. Director revokes all prior deferral elections and agrees to a
reduction of the current payment of his compensation for service on the Board by
Thirty Five Thousand Four Hundred and 00/100 Dollars ($35,400.00) per year,
annually deferred in twelve (12) substantially equal monthly installments, for a
period of seven (7) years, or such other amount as shall be elected by the
Director
<PAGE> 3
in a signed writing delivered to the Company, and to defer receipt of such
amount until paid pursuant to later provisions of this Amendment. Compensation
reductions under this Amendment shall cease at the earlier of the end of the
deferral period or when said Director attains age seventy-seven (77). The
Director may change the amount of or suspend future deferrals with respect to
fees and retainers earned for calendar years commencing after the date of change
or suspension as he may specify by written notice to the Company. Following any
such suspension, the Director may make a new election to again become a deferral
participant; however, the election to defer shall be irrevocable for the
particular year, and must be made prior to the beginning of the calendar year.
4. The Company will record amounts deferred pursuant to paragraphs 2
and 3 and amounts credited pursuant to paragraph 5 in a separate account
(hereinafter referred to as the "Account") in the financial records of the
Company.
5. Until the Director attains age seventy-seven (77), the Company will
credit interest compounded monthly to the Account as follows: subject to a
minimum annual rate of six percent (6%) and a maximum annual rate of fifteen
percent (15%), a rate equal to the annual percentage increase (the "Annual
Rate") of the stock price of Southside Bancshares Corp (the "Stock Price"). The
annual percentage increase of the Stock Price shall be initially determined
utilizing a fraction that has a numerator calculated by subtracting the closing
bid price one year prior to the effective date of this Amendment from the
closing bid price on the effective date of this Amendment and a denominator
equal to the closing bid price one year prior to the effective date of this
Amendment. For each subsequent year that this Amendment is effective, the Annual
Rate will be determined utilizing a fraction that has a numerator calculated by
subtracting the closing bid price one year prior to each anniversary of
effective date of this Amendment from the closing bid price on each anniversary
of effective date of this Amendment and a denominator equal to the closing bid
price one year prior to the anniversary of effective date of this Amendment.
Notwithstanding the above, at any time the Director fails to defer a monthly
amount under paragraph 3, the annual interest rate the Company will credit the
Account under this paragraph will be six percent (6%), compounded monthly for
the period the Director makes no deferral. Once the Director attains age
seventy-seven (77) or the service of the Director is terminated and payments
from the Account continue to be deferred, the Company will credit interest
compounded monthly to the Account at a rate of six percent (6%) until the
balance of the Account is fully paid.
6. The Account will be unfunded and no assets of the Company will be
segregated with respect to the Account. Further, the Account shall be kept only
for purposes of its identification on the books and records of the Company as a
liability of the Company to the Director, and the Account will be subject to the
claims of general creditors of the Company.
7. Amounts held in the Account or a death benefit will be payable as
indicated in Paragraph 8 upon the first to occur of the following events:
(a) termination of the Director's membership on the Board of
the Company other than by death; or
(b) termination of this Agreement pursuant to Paragraph 17; or
(c) the occurrence of the Director's 77th birthday; or
2
<PAGE> 4
(d) the death of the Director.
The Company shall only have the obligation to complete making payments under
Paragraph 8 to the Director, his/her designated beneficiary, or the estate of
the designated beneficiary pursuant to the applicable subparagraph above.
8.
a. If payment is to be made due to the occurrence of an event
described in 7(a) or in 7(b), subject to provisions of paragraph 9, an amount
equal to the balance in the Account shall be paid to the Director in one lump
sum not later than sixty (60) days following the occurrence of the event.
b. If payment is to be made due to the occurrence of the event
described in 7(c), the balance in the Account shall be paid to the Director in
substantially equal monthly installments over a thirty-six (36) month period
commencing on the first day of the month following the Director's birthday.
c. If payment is to be made due to the occurrence of the event
described in 7(d), the amount payable to the Director's beneficiary shall be the
monthly amount stated in Addendum A multiplied by a fraction the numerator of
which is equal to the sum of: (i) the Rollover Balance, including interest
credited to this amount through the date of the Director's death pursuant to
paragraph 5 of this Amendment; (ii) the amount actually deferred under this
Amendment until the Director's death, including the interest credited to these
deferrals through the date of the Director's death pursuant to paragraph 5 of
this Amendment; (iii) the projected amounts that would have been deferred from
the date of the Director's death through the date the Director would have
attained age seventy-seven (77), based on the Director's elected deferral amount
in effect on the date of the Director's death; and (iv) the interest that would
have been credited to the amounts in (i), (ii), and (iii) immediately above
pursuant to paragraph 5 from the date of the Director's death until the date the
Director would have reached age 77 assuming an Annual Rate that would equal the
average annual interest credited to the Director's Account from the effective
date of this Amendment through the Director's death or an Annual Rate equal to
six percent (6%) if the Director was not making monthly deferrals at the date of
the Director's death; and the denominator of which shall equal the sum of the
Rollover Balance and the projected total deferral that would have occurred if
the Director would have deferred the amount set forth in paragraph 3 from the
date of this Amendment through the date the Director would have attained age
seventy-seven (77), including the maximum annual interest credited under
paragraph 5 of this Amendment to the Rollover balance and to the projected
deferrals under paragraph 3; provided, however, under no circumstances shall the
monthly benefit be greater than that stated in Addendum A. Payments to the
Director's designated beneficiary shall begin the first day of the month
following the month the Director would have attained age seventy-seven (77).
9. If payment is to be made under subparagraph 7 (a) and the Director's
termination is due to disability covered under a disability insurance policy,
the Company may, in its sole discretion, defer payment until payments under the
disability policy cease.
3
<PAGE> 5
10. In the event the Director should die before receiving the payment
due under subparagraph 8(a) or the payments due under subparagraph 8(b), the
remaining payment or payments, as the case may be, shall be paid to the
Director's designated beneficiary.
11. If the Director's designated beneficiary dies before receiving all
payments due, the Company shall pay the remaining payments, in the same form of
pay out as the designated beneficiary has been receiving or is to receive, to
the revocable trust of the Designated beneficiary and, if none, to the estate of
the designated beneficiary.
12. Director may request in a signed writing delivered to the Board,
that the Company pay a hardship distribution to the Director from amounts held
in the Account. Hardship means an unforeseen event or situation that creates an
extraordinary financial need that cannot reasonably be met by other resources of
the Director. The Board shall elect in its sole discretion, without
participation of the Director making the request, whether or not to grant such
request.
13. Any amounts payable to the Director's designated beneficiary
pursuant to this Amendment will be paid to the beneficiary designated by the
Director in a signed writing delivered to the Company. Director has the right to
change his beneficiary designation by delivering to the Company a subsequent
signed writing. If Director does not designate a beneficiary in the manner
described in this paragraph 13, or if the designated beneficiary has predeceased
the Director, then amounts payable hereunder will be payable first to the
Director's surviving spouse; and if the Director has no surviving spouse, then
such amounts will then be payable to the Director's estate or as provided by a
decree of distribution or other proper order by the court having jurisdiction of
such estate. No one other than the Director shall have any right to designate a
beneficiary.
14. The right to receive payments under this Amendment shall not be
assigned or encumbered, or subject to anticipation, garnishment, attachment, or
any other legal process of creditors of the Director or of any designated
beneficiary. If the Director or a designated beneficiary attempts to assign such
right, the Board, in its sole discretion, may suspend, reduce or terminate any
or all rights created by this Amendment as to the Director or the designated
beneficiary attempting said assignment.
15. Nothing in this Amendment shall be construed as giving the Director
the right to be retained on the Company's Board. The Director shall remain
subject to discharge at any time and to the same extent as if this Amendment had
not been executed.
16. The Company does not assure or guarantee the tax consequences of
payments provided hereunder or matters beyond its control, and the Director
certifies that his decision to reduce and defer receipt of his compensation is
not due to any reliance upon financial, tax or legal advice given by the Company
or any of its employees.
17. This Amendment may be amended or terminated at any time by the
Company in writing; however, no amendment or termination may reduce amounts
payable to Director or his designated beneficiary below the then Account
balance, without such person's written consent.
18. The Board upon ninety (90) days advance written notice to the
Director may terminate this Amendment and, in the event of such termination,
shall pay an amount equal to the
4
<PAGE> 6
then Account balance in a lump sum to the Director within sixty (60) days
following such termination.
19. While the Company intends that this Plan will result in the
deferral of the imposition of a federal income tax on the funds credited
hereunder until such time as they actually be paid to a Director, nothing herein
shall be construed as a promise, guarantee or other representation by the
Company of such tax effect nor, without limitation, shall the Company be liable
for any taxes, penalties or other amounts incurred by Directors in the event it
is determined by applicable authorities that such deferral was not accomplished,
and the Director should consult his or her own tax advisor(s) to determine the
tax consequences in his or her specific case.
IN WITNESS WHEREOF, the parties hereof have entered into this Amendment
at St. Louis, Missouri, as of the date first above written.
SOUTHSIDE BANCSHARES CORP.
By: /s/ Thomas M. Teschner
Its: President & CEO
DIRECTOR:
/s/ Earl J. Kennedy, Jr.
EARLE J. KENNEDY, JR.
5
<PAGE> 7
BENEFICIARY DESIGNATION
I, Earle J. Kennedy, designate the following as beneficiary of any death
benefits payable under the Second Amendment to Southside Bancshares Corp.
Deferred Compensation Plan for Directors myself and Southside Bancshares Corp.:
Primary Beneficiary
Name Earle J. Kennedy & Marjorie L. Kennedy
-- Trustees of The Earle J. Kennedy
Revocable Living Trust Dated 7/1/91 Relationship ______________
Address 18 Squires Lane, St. Louis, Mo. 63131
______________________________________
Contingent Beneficiary (to receive the benefits if there is no surviving Primary
Beneficiary)
Name __________________________________ Relationship ___________________
Address _______________________________________________________________
NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND
THE EXACT DATE OF THE TRUST AGREEMENT.
I understand that I may change these beneficiary designations by filing a new
written designation with the Company. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary, in the event of the dissolution of our marriage.
I further understand that this beneficiary designation revokes all prior
beneficiary designations applicable to this Amendment.
Consented to by Director's spouse:
Director's Signature: Spouse's Signature:
/s/ Earle J. Kennedy, Jr. /s/ Marjorie L. Kennedy
_________________________________ ____________________________________
EARLE J. KENNEDY, JR.
Date: 12/1/99 Date: 12/1/99
__________ __________
Accepted by the Company this 22nd day of December, 1999.
By: /s/ Thomas M. Teschner
______________________
Title: President & CEO
______________________
<PAGE> 8
ADDENDUM A
Seventeen Thousand Nine Hundred Three and 25/100 dollars ($17,903.25) per month
for thirty six (36) months.
ADDENDUM A - PAGE SOLO
<PAGE> 1
EXHIBIT 10(k)
<PAGE> 2
Exhibit 10(k)
FIRST AMENDMENT
TO SOUTHSIDE BANCSHARES CORP.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
This First Amendment (hereinafter referred to as the "Amendment") is
entered into this 1st day of December, 1999, the effective date, between
SOUTHSIDE BANCSHARES CORP., with its principal place of business in St. Louis,
Missouri (the "Company"), and NORVILLE K. MCCLAIN, a director of the Company
(hereinafter referred to as the "Director").
WHEREAS, the Director has served on the Board of Directors of the
Company (hereinafter referred to as the "Board"), and the Board wishes to
provide additional incentives for the Director's continued service; and
WHEREAS, the Director has contributed to the success and profitability
of the Company and is expected to continue such contribution; and
WHEREAS, the Director and the Company have previously entered into a
plan entitled Southside Bancshares Corp. Deferred Compensation Plan for
Directors, dated April 25, 1996, which includes an agreement entitled the
Southside Bancshares Corp. Deferred Compensation Plan for Directors
Participation Agreement executed by the Director (hereinafter collectively
referred to as the "Previous Plan"), which provided that the Company would
provide certain benefits to the Director upon his retirement; and
WHEREAS, the Company and the Director desire to set forth their
Amendment to the Previous Plan as to fees the Director has already deferred and
the continued deferral of a portion of the Director's fees as a deferred
compensation plan and to provide certain additional benefits in the case of the
Director's death while serving as a Director of the Company; and
WHEREAS, the Company and the Director desire to provide the Director,
in lieu of Director's fees already deferred and the deferral of annual
Director's fees of Thirty Five Thousand Four Hundred and 00/100 Dollars
($35,400.00) per year for the next seven (7) years, as compensation for his
services to the Company, a post-retirement income or a pre-retirement death
benefit to his beneficiary.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Company and the Director hereby amend and restate the Previous Plan
as follows:
1. Director agrees that the benefits provided under this Amendment are
in lieu of the benefits accumulated to the Director under the Previous Plan.
2. The liability existing on the financial records on the Company
("Rollover Balance") under the Previous Plan as of the effective date of this
Amendment will be included in the Director's Account as hereinafter defined.
3. Director revokes all prior deferral elections and agrees to a
reduction of the current payment of his compensation for service on the Board by
Thirty Five Thousand Four Hundred and
<PAGE> 3
00/100 Dollars ($35,400.00) per year, annually deferred in twelve (12)
substantially equal monthly installments, for a period of seven (7) years, or
such other amount as shall be elected by the Director in a signed writing
delivered to the Company, and to defer receipt of such amount until paid
pursuant to later provisions of this Amendment. Compensation reductions under
this Amendment shall cease at the earlier of the end of the deferral period or
when said Director attains age seventy-seven (77). The Director may change the
amount of or suspend future deferrals with respect to fees and retainers earned
for calendar years commencing after the date of change or suspension as he may
specify by written notice to the Company. Following any such suspension, the
Director may make a new election to again become a deferral participant;
however, the election to defer shall be irrevocable for the particular year, and
must be made prior to the beginning of the calendar year.
4. The Company will record amounts deferred pursuant to paragraphs 2
and 3 and amounts credited pursuant to paragraph 5 in a separate account
(hereinafter referred to as the "Account") in the financial records of the
Company.
5. Until the Director attains age seventy-seven (77), the Company will
credit interest compounded monthly to the Account as follows: subject to a
minimum annual rate of six percent (6%) and a maximum annual rate of fifteen
percent (15%), a rate equal to the annual percentage increase (the "Annual
Rate") of the stock price of Southside Bancshares Corp (the "Stock Price"). The
annual percentage increase of the Stock Price shall be initially determined
utilizing a fraction that has a numerator calculated by subtracting the closing
bid price one year prior to the effective date of this Amendment from the
closing bid price on the effective date of this Amendment and a denominator
equal to the closing bid price one year prior to the effective date of this
Amendment. For each subsequent year that this Amendment is effective, the Annual
Rate will be determined utilizing a fraction that has a numerator calculated by
subtracting the closing bid price one year prior to each anniversary of
effective date of this Amendment from the closing bid price on each anniversary
of effective date of this Amendment and a denominator equal to the closing bid
price one year prior to the anniversary of effective date of this Amendment.
Notwithstanding the above, at any time the Director fails to defer a monthly
amount under paragraph 3, the annual interest rate the Company will credit the
Account under this paragraph will be six percent (6%), compounded monthly for
the period the Director makes no deferral. Once the Director attains age
seventy-seven (77) or the service of the Director is terminated and payments
from the Account continue to be deferred, the Company will credit interest
compounded monthly to the Account at a rate of six percent (6%) until the
balance of the Account is fully paid.
6. The Account will be unfunded and no assets of the Company will be
segregated with respect to the Account. Further, the Account shall be kept only
for purposes of its identification on the books and records of the Company as a
liability of the Company to the Director, and the Account will be subject to the
claims of general creditors of the Company.
7. Amounts held in the Account or a death benefit will be payable as
indicated in Paragraph 8 upon the first to occur of the following events:
(a) termination of the Director's membership on the Board of
the Company other than by death; or
2
<PAGE> 4
(b) termination of this Agreement pursuant to Paragraph 17; or
(c) the occurrence of the Director's 77th birthday; or
(d) the death of the Director.
The Company shall only have the obligation to complete making payments under
Paragraph 8 to the Director, his/her designated beneficiary, or the estate of
the designated beneficiary pursuant to the applicable subparagraph above.
8.
a. If payment is to be made due to the occurrence of an event
described in 7(a) or in 7(b), subject to provisions of paragraph 9, an amount
equal to the balance in the Account shall be paid to the Director in one lump
sum not later than sixty (60) days following the occurrence of the event.
b. If payment is to be made due to the occurrence of the event
described in 7(c), the balance in the Account shall be paid to the Director in
substantially equal monthly installments over a thirty-six (36) month period
commencing on the first day of the month following the Director's birthday.
c. If payment is to be made due to the occurrence of the event
described in 7(d), the amount payable to the Director's beneficiary shall be the
monthly amount stated in Addendum A multiplied by a fraction the numerator of
which is equal to the sum of: (i) the Rollover Balance, including interest
credited to this amount through the date of the Director's death pursuant to
paragraph 5 of this Amendment; (ii) the amount actually deferred under this
Amendment until the Director's death, including the interest credited to these
deferrals through the date of the Director's death pursuant to paragraph 5 of
this Amendment; (iii) the projected amounts that would have been deferred from
the date of the Director's death through the date the Director would have
attained age seventy-seven (77), based on the Director's elected deferral amount
in effect on the date of the Director's death; and (iv) the interest that would
have been credited to the amounts in (i), (ii), and (iii) immediately above
pursuant to paragraph 5 from the date of the Director's death until the date the
Director would have reached age 77 assuming an Annual Rate that would equal the
average annual interest credited to the Director's Account from the effective
date of this Amendment through the Director's death or an Annual Rate equal to
six percent (6%) if the Director was not making monthly deferrals at the date of
the Director's death; and the denominator of which shall equal the sum of the
Rollover Balance and the projected total deferral that would have occurred if
the Director would have deferred the amount set forth in paragraph 3 from the
date of this Amendment through the date the Director would have attained age
seventy-seven (77), including the maximum annual interest credited under
paragraph 5 of this Amendment to the Rollover balance and to the projected
deferrals under paragraph 3; provided, however, under no circumstances shall the
monthly benefit be greater than that stated in Addendum A. Payments to the
Director's designated beneficiary shall begin the first day of the month
following the month the Director would have attained age seventy-seven (77).
3
<PAGE> 5
9. If payment is to be made under subparagraph 7 (a) and the Director's
termination is due to disability covered under a disability insurance policy,
the Company may, in its sole discretion, defer payment until payments under the
disability policy cease.
10. In the event the Director should die before receiving the payment
due under subparagraph 8(a) or the payments due under subparagraph 8(b), the
remaining payment or payments, as the case may be, shall be paid to the
Director's designated beneficiary.
11. If the Director's designated beneficiary dies before receiving all
payments due, the Company shall pay the remaining payments, in the same form of
pay out as the designated beneficiary has been receiving or is to receive, to
the revocable trust of the Designated beneficiary and, if none, to the estate of
the designated beneficiary.
12. Director may request in a signed writing delivered to the Board,
that the Company pay a hardship distribution to the Director from amounts held
in the Account. Hardship means an unforeseen event or situation that creates an
extraordinary financial need that cannot reasonably be met by other resources of
the Director. The Board shall elect in its sole discretion, without
participation of the Director making the request, whether or not to grant such
request.
13. Any amounts payable to the Director's designated beneficiary
pursuant to this Amendment will be paid to the beneficiary designated by the
Director in a signed writing delivered to the Company. Director has the right to
change his beneficiary designation by delivering to the Company a subsequent
signed writing. If Director does not designate a beneficiary in the manner
described in this paragraph 13, or if the designated beneficiary has predeceased
the Director, then amounts payable hereunder will be payable first to the
Director's surviving spouse; and if the Director has no surviving spouse, then
such amounts will then be payable to the Director's estate or as provided by a
decree of distribution or other proper order by the court having jurisdiction of
such estate. No one other than the Director shall have any right to designate a
beneficiary.
14. The right to receive payments under this Amendment shall not be
assigned or encumbered, or subject to anticipation, garnishment, attachment, or
any other legal process of creditors of the Director or of any designated
beneficiary. If the Director or a designated beneficiary attempts to assign such
right, the Board, in its sole discretion, may suspend, reduce or terminate any
or all rights created by this Amendment as to the Director or the designated
beneficiary attempting said assignment.
15. Nothing in this Amendment shall be construed as giving the Director
the right to be retained on the Company's Board. The Director shall remain
subject to discharge at any time and to the same extent as if this Amendment had
not been executed.
16. The Company does not assure or guarantee the tax consequences of
payments provided hereunder or matters beyond its control, and the Director
certifies that his decision to reduce and defer receipt of his compensation is
not due to any reliance upon financial, tax or legal advice given by the Company
or any of its employees.
4
<PAGE> 6
17. This Amendment may be amended or terminated at any time by the
Company in writing; however, no amendment or termination may reduce amounts
payable to Director or his designated beneficiary below the then Account
balance, without such person's written consent.
18. The Board upon ninety (90) days advance written notice to the
Director may terminate this Amendment and, in the event of such termination,
shall pay an amount equal to the then Account balance in a lump sum to the
Director within sixty (60) days following such termination.
19. While the Company intends that this Plan will result in the
deferral of the imposition of a federal income tax on the funds credited
hereunder until such time as they actually be paid to a Director, nothing herein
shall be construed as a promise, guarantee or other representation by the
Company of such tax effect nor, without limitation, shall the Company be liable
for any taxes, penalties or other amounts incurred by Directors in the event it
is determined by applicable authorities that such deferral was not accomplished,
and the Director should consult his or her own tax advisor(s) to determine the
tax consequences in his or her specific case.
IN WITNESS WHEREOF, the parties hereof have entered into this Amendment
at St. Louis, Missouri, as of the date first above written.
SOUTHSIDE BANCSHARES CORP.
BY: /S/ THOMAS M. TESCHNER
ITS: PRESIDENT & CEO
DIRECTOR:
/S/ NORVILLE K. MCCLAIN
NORVILLE K. MCCLAIN
5
<PAGE> 7
BENEFICIARY DESIGNATION
I, Norville K. McClain, designate the following as beneficiary of any death
benefits payable under the Second Amendment to Southside Bancshares Corp.
Deferred Compensation Plan for Directors myself and Southside Bancshares Corp.:
Primary Beneficiary
Name Dawn L. McClain Relationship Wife
Address 13629 Klondike Road DeSoto, MO 63020
Contingent Beneficiary (to receive the benefits if there is no surviving Primary
Beneficiary)
Name Relationship
Address
NOTE: TO NAME A TRUST AS BENEFICIARY, PLEASE PROVIDE THE NAME OF THE TRUSTEE AND
THE EXACT DATE OF THE TRUST AGREEMENT.
I understand that I may change these beneficiary designations by filing a new
written designation with the Company. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or, if I have
named my spouse as beneficiary, in the event of the dissolution of our marriage.
I further understand that this beneficiary designation revokes all prior
beneficiary designations applicable to this Amendment.
Consented to by Director's spouse:
Director's Signature: Spouse's Signature:
/s/ Norville K. McClain
NORVILLE K. MCCLAIN
Date: December 23, 1999 Date:
Accepted by the Company this 23rd day of December, 1999.
By: /s/ Thomas M. Teschner
Title: President
<PAGE> 8
ADDENDUM A
Eighteen Thousand Six Hundred Seventy Two and 67/100 dollars ($18,672.67) per
month for thirty six (36) months.
ADDENDUM A - PAGE SOLO
<PAGE> 1
EXHIBIT 10(l)
<PAGE> 2
Exhibit 10(l)
SOUTHSIDE BANCSHARES CORP
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT is made and entered into this 1st day of December, 1999,
by and between SOUTHSIDE BANCSHARES CORP a bank holding company located in St.
Louis, Missouri (the "Company"), and the THOMAS M. TESCHNER IRREVOCABLE
INSURANCE TRUST dated November 18, 1999 (the "Trust"). This Agreement shall
append the Split Dollar Endorsement entered into on December 1, 1999, or as
subsequently amended, by and between the aforementioned parties.
INTRODUCTION
WHEREAS, THOMAS M. TESCHNER (the "Executive") has contributed
substantially to the success of the Company. The Company, as a fringe benefit,
is willing to divide the death proceeds of a life insurance policy on the
Executive's life. The Company will pay life insurance premiums from its general
assets.
ARTICLE 1
GENERAL DEFINITIONS
The following terms shall have the meanings specified:
1.1. "Annual Tax Amount" shall mean the individual income tax (computed
using the highest marginal state and federal individual income tax rates for the
year the income is imputed) attributable to the annual imputed income described
in Section 3.2 increased by eight (8%) compounded annually during the
Executive's employment.
1.2. "Insurer" means each of the following: Alexander Hamilton Life
Insurance Company.
1.3. "Policy" means each of the following: insurance policy #AH5061692
issued by Alexander Hamilton Life Insurance Company.
1.4. "Insured" means the Executive.
1.5. "Normal Retirement Date" means the Executive's 65th birthday.
1.6. "Termination of Employment" means the Executive ceasing to be
employed by the Company for any reason whatsoever, other than by reason of an
approved leave of absence.
<PAGE> 3
1.7. "Trustee" refers to the trustee or trustees of the Trust.
1.8. "Shareholder" means the existing owners of all issued and
outstanding stock of the Company as of the date this Agreement is signed.
ARTICLE 2
POLICY OWNERSHIP/INTERESTS
2.1. Company Ownership. The Company is the sole owner of the Policy and
shall have the right to exercise all incidents of ownership. The Company shall
be the direct beneficiary of an amount of death proceeds, less policy loans to
the Company, if any, in excess of: (i) prior to or on the Normal Retirement
Date, $3,474,940.00; and (ii) after the Normal Retirement Date amounts set forth
on the attached Schedule A calculated in accordance with Schedule A.
2.2. Trust's Interest. The Trust shall be the beneficiary of an amount
equal to: (i) prior to or on the Normal Retirement Date, $3,474,940.00; and (ii)
after the Normal Retirement Date amounts set forth on the attached Schedule A
calculated in accordance with Schedule A. The Trust shall also have the right to
elect and change settlement options that may be permitted. Provided, however,
the Executive, the Trust or its transferee beneficiary shall have no rights or
interests in the Policy with respect to that portion of the death proceeds
designated in this section 2.2 upon the Executive's Termination of Employment
prior to Normal Retirement Age.
2.3. Option to Purchase. Prior to the Executive's Normal Retirement
Date, the Company shall not sell, surrender or transfer ownership of the Policy
while this Agreement is in effect without first giving the Trust or the Trust's
transferee the option to purchase the Policy for a period of sixty (60) days
from written notice of such intention. The purchase price shall be an amount
equal to the cash surrender value of the Policy.
2.4. Comparable Coverage. Notwithstanding anything in this Agreement to
the contrary, on or after the Executive's Normal Retirement Date, the Company
shall maintain the Policy in full force and effect and in no event shall the
Company amend, terminate or otherwise abrogate the Trust's interest in the
Policy, unless the Company replaces the Policy with a comparable insurance
policy to cover the benefit provided under this Agreement.
2.5. Termination of Employment Prior to Normal Retirement Date. Should
Termination of Employment occur prior to the Normal Retirement Date, the Company
shall pay to the Executive an amount equal to the sum of each Annual Tax Amount
divided by 1.00 minus the highest marginal combined state and federal individual
income tax rates as of the date of Termination of Employment. The tax rates used
to determine the amount under this section 2.5 shall be the rates in effect for
the year Termination of Employment occurs. The Company shall pay this amount
within sixty (60) days from the date of Termination of Employment.
2
<PAGE> 4
2.6. Parachute Payment. If it is determined that any portion of the
benefit payment to the Executive under Section 2.5 constitutes a parachute
payment under Section 280G of the Code subject to the excise tax of Section 4999
of the Code, the Executive shall be entitled to receive from the Company a lump
sum cash payment sufficient to place the Executive in the same net after tax
position that the Executive would have been in had such payment not been subject
to such excise tax; provided, however, the Executive shall be entitled to a
payment under this Section 2.6 only to the extent that the Executive is not
entitled to an equivalent payment under any other agreement.
ARTICLE 3
PREMIUMS
3.1. Premium Payment. The Company shall pay any premiums due on the
Policy.
3.2. Imputed Income. The Company shall impute income annually to the
Executive in an amount equal to the current term rate for the Executive's age
multiplied by the aggregate death benefit payable to the Executive's
beneficiary. The "current term rate" is the minimum amount required to be
imputed under Revenue Rulings 64-328 and 66-110, or any subsequent applicable
authority.
ARTICLE 4
ASSIGNMENT
The Trust may assign without consideration all of its interests in the
Policy and in this Agreement to any person, entity or other trust. In the event
the Trust shall transfer all of its interest in the Policy, then all of the
Trust's interest in the Policy and in the Agreement shall be vested in its
transferee, who shall be substituted as a party hereunder and the Trust shall
have no further interest in the Policy or in this Agreement.
ARTICLE 5
INSURER
The Insurer shall be bound only by the terms of the Policy. Any
payments the Insurer makes or actions it takes in accordance with the Policy
shall fully discharge it from all claims, suits and demands of all entities or
persons. The Insurer shall not be bound by or be deemed to have notice of the
provisions of this Agreement.
ARTICLE 6
EXECUTIVE
The Executive is not a party to this Agreement or to the corresponding
Endorsement. Except as otherwise provided herein, the Executive shall have no
rights, title or interest hereunder.
3
<PAGE> 5
ARTICLE 7
CLAIMS PROCEDURE
7.1. Claims Procedure. The Company shall notify the Trust, the Trust's
transferee or beneficiary, or any other party who claims a right to an interest
under this Agreement (the "Claimant') in writing, within 90 days of Claimant's
written application for benefits, of his or her eligibility or ineligibility for
benefits under this Agreement. If the Company determines that the Claimant is
not eligible for benefits or full benefits, the notice shall set forth (1) the
specific reasons for such denial, (2) a specific reference to the provisions of
this Agreement on which the denial is based, (3) a description of any additional
information or material necessary for the Claimant to perfect his or her claim,
and a description of why it is needed, and (4) an explanation of this
Agreement's claims review procedure and other appropriate information as to the
steps to be taken if the Claimant wishes to have the claim reviewed. If the
Company determines that there are special circumstances requiring additional
time to make a decision, the Company shall notify the Claimant of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional 90 days.
7.2. Review Procedure. If the Claimant is determined by the Company not
to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within 60 days after receipt of the notice issued by the
Company. Said petition shall state the specific reasons which the Claimant
believes entitle him or her to benefits or to greater or different benefits.
Within 60 days after receipt by the Company of the petition, the Company shall
afford the Claimant (and counsel, if any) an opportunity to present his or her
position to the Company verbally or in writing, and the Claimant (or counsel)
shall have the right to review the pertinent documents. The Company shall notify
the Claimant of its decision in writing within the 60-day period, stating
specifically the basis of its decision, written in a manner calculated to be
understood by the Claimant and the specific provisions of this Agreement on
which the decision is based. If, because of the need for a hearing, the 60-day
period is not sufficient, the decision may be deferred for up to another 60 days
at the election of the Company, but notice of this deferral shall be given to
the Claimant.
ARTICLE 8
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Trustee. However, unless otherwise agreed to by
the Company and the Trust, subject to section 2.3, this Agreement will
automatically terminate upon the Executive's Termination of Employment prior to
Normal Retirement Age.
4
<PAGE> 6
ARTICLE 9
MISCELLANEOUS
9.1. Binding Effect. This Agreement shall bind the Trust and the
Company, their beneficiaries, survivors, executors, administrators and
transferees, and any Policy beneficiary.
9.2. No Guarantee of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Company, nor does it interfere with the Company's right to
discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executive's right to terminate employment at any
time.
9.3. Creditor Claims. The Policy or any comparable policy subject to
this agreement are general assets of the Company and shall be subject to the
claims of the Company's creditors.
9.4. Applicable Law. The Agreement and all rights hereunder shall be
governed by and construed according to the laws of the State of Missouri, except
to the extent preempted by the laws of the United States of America.
9.5. Reorganization. The Company shall not merge or consolidate into or
with another company, or reorganize, or sell substantially all of its assets to
another company, firm or person unless such succeeding or continuing company,
firm or person agrees to assume and discharge the obligations of the Company.
9.6. Notice. Any notice, consent or demand required or permitted to be
given under the provisions of this Split Dollar Agreement by one party to
another shall be in writing, shall be signed by the party giving or making the
same, and may be given either by delivering the same to such other party
personally, or by mailing the same, by United States certified mail, postage
prepaid, to such party, addressed to his or her last known address as shown on
the records of the Company. The date of such mailing shall be deemed the date of
such mailed notice, consent or demand.
9.7. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Trust as to the subject matter hereof. No rights are
granted to the Trust by virtue of this Agreement other than those specifically
set forth herein.
9.8. Administration. The Company shall have powers that are necessary
to administer this Agreement, including but not limited to:
(a) Interpreting the provisions of the Agreement;
(b) Establishing and revising the method of accounting for the
Agreement;
5
<PAGE> 7
(c) Maintaining a record of benefit payments; and
(d) Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement.
9.9. Named Fiduciary. The Company shall be the named fiduciary and plan
administrator under the Agreement. The named fiduciary may delegate to others
certain aspects of the management and operation responsibilities of the plan
including the employment of advisors and the delegation of ministerial duties to
qualified individuals
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
TRUST: COMPANY:
THOMAS M. TESCHNER SOUTHSIDE BANCSHARES CORP
IRREVOCABLE INSURANCE TRUST
BY /S/ JOHN K. PRUELLAGE BY /S/ JOSEPH W. POPE
CO-TRUSTEE TITLE CHIEF FINANCIAL OFFICER
BY
CO-TRUSTEE
6
<PAGE> 8
SPLIT DOLLAR POLICY ENDORSEMENT
SOUTHSIDE BANCSHARES CORP SPLIT DOLLAR AGREEMENT
Policy No. AH506 1692 Insured: THOMAS M. TESCHNER
Supplementing and amending the application for insurance to Alexander Hamilton
Life Insurance Company ("Insurer") on November 24, 1999, the applicant requests
and directs that:
BENEFICIARIES
1. SOUTHSIDE BANCSHARES CORP. a bank holding company located in St.
Louis, Missouri (the "Company"), shall be the direct beneficiary of an amount of
death proceeds, less policy loans to the Company, if any, in excess of: (i)
prior to or on the Normal Retirement Date, $3,474,940.00; and (ii) after the
Normal Retirement Date amounts set forth on the attached Schedule A calculated
in accordance with Schedule A.
2. Subject to the provisions of paragraph (5) below, the THOMAS M.
TESCHNER IRREVOCABLE INSURANCE TRUST (the "Trust") or the Trust's transferee
shall be the beneficiary of an amount equal to: (i) prior to or on the Normal
Retirement Date, $3,474,940.00; and (ii) after the Normal Retirement Date
amounts set forth on the attached Schedule A calculated in accordance with
Schedule A.
OWNERSHIP
3. The Owner of the policy shall be the Company. The Owner shall have
all ownership rights in the Policy except as may be specifically granted to the
Trust or its transferee in paragraph (4) of this endorsement.
4. The Trust or its transferee shall have the right to assign all
rights and interests in the Policy with respect to that portion of the death
proceeds designated in paragraph (2) of this endorsement, and to exercise all
settlement options with respect to such death proceeds.
5. Notwithstanding the provisions of paragraph (4) above, the Trust or
its transferee shall have no rights or interests in the Policy with respect to
that portion of the death proceeds designated in paragraph (2) of this
endorsement if the Insured ceases to be employed by the Company prior to the
Normal Retirement Date of 65 for any reason whatsoever (other than by reason of
a leave of absence which is approved by the Company), unless otherwise agreed to
by the Company and the Executive.
7
<PAGE> 9
MODIFICATION OF ASSIGNMENT PROVISIONS OF THE POLICY
Upon the death of the Insured, the interest of any collateral assignee of the
Owner of the Policy designated in (3) above shall be limited to the portion of
the proceeds described in paragraph (1) above.
OWNERS AUTHORITY
The Insurer is hereby authorized to recognize the Owner's claim to rights
hereunder without investigating the reason for any action taken by the Owner,
including its statement of the amount of premiums it has paid on the Policy. The
signature of the Owner shall be sufficient for the exercise of any rights under
this Endorsement and the receipt of the Owner for any sums received by it shall
be a full discharge and release therefore to the Insurer.
Any transferee's rights shall be subject to this Endorsement.
The owner accepts and agrees to this split dollar endorsement.
Signed at St. Louis, Missouri, this 21st day of December, 1999.
COMPANY:
SOUTHSIDE BANCSHARES CORP.
By /s/ Joseph W. Pope
Its Chief Financial Officer
The Trust accepts and agrees to the foregoing as direct beneficiary of the
portion of the proceeds described in paragraph (2) above.
Signed at St. Louis, Missouri, this 21st day of December, 1999.
TRUST:
THOMAS H. TESCHNER IRREVOCABLE
INSURANCE TRUST
By /s/ John K. Pruellage
Its Co-Trustee
By
Its Co-Trustee
8
<PAGE> 10
SCHEDULE A
SPLIT DOLLAR AGREEMENT BETWEEN
SOUTHSIDE BANCSHARES CORP. AND THOMAS TESCHNER
<TABLE>
<CAPTION>
Age of TRUST INTEREST IN
MR. TESCHNER Death Proceeds
<S> <C>
less than or equal to 65 $3,474,940
66 3,349,917
67 3,214,517
68 3,067,879
69 2,909,070
70 2,737,080
71 2,550,815
72 2,349,090
73 2,130,622
74 1,894,021
75 1,637,783
76 1,360,277
77 1,059,738
78 734,254
79 381,756
greater than or equal to 80 -0-
End of Schedule
</TABLE>
To calculate an amount for less than a full year of age of Executive, take the
number of completed months of service into the current Plan Year and divide by
12. Then multiply that fraction by the difference between (i) the balance for
the birthday prior to Executive's death and (ii) the balance for the next
birthday Executive would have attained had his death not occurred. Then subtract
that amount from the balance for the birthday prior to Executive's death. For
example, if the Executive's death occurs during the 70th year of age four months
after the Executive's birthday, then you would take 4/12 times the balance shown
for Age 70 minus the balance shown for Age 71. Then subtract that amount from
the balance shown for Age 70 to determine the amount due as death benefit
payment.
<PAGE> 1
EXHIBIT 13
SOUTHSIDE BANCSHARES CORP.
Annual Report
December 31, 1999
(With Independent Auditors' Report Thereon)
<PAGE> 2
SOUTHSIDE BANCSHARES CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Letter to Our Shareholders................................................................................ 2
Southside Bancshares Corp. - Organization................................................................. 4
Financial Highlights...................................................................................... 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................................ 6
Statement of Management's Responsibility for Financial Statements......................................... 27
Independent Auditors' Report.............................................................................. 28
Consolidated Financial Statements of Southside Bancshares Corp. and Subsidiaries:
Balance Sheets....................................................................................... 29
Statements of Income................................................................................. 30
Statements of Shareholders' Equity and Comprehensive Income.......................................... 31
Statements of Cash Flows............................................................................. 32
Notes to Consolidated Financial Statements........................................................... 33
Southside Bancshares Corp. and Subsidiaries - Directors and Officers:
Southside Bancshares Corp............................................................................ 47
South Side National Bank in St. Louis................................................................ 48
State Bank of Jefferson County....................................................................... 49
Bank of Ste. Genevieve............................................................................... 49
The Bank of St. Charles County....................................................................... 50
</TABLE>
1
<PAGE> 3
LETTER TO OUR SHAREHOLDERS
Southside Bancshares Corp. and subsidiaries
Dear Shareholders:
As is the case with most major endeavors, only time will give us the
proper prospective to evaluate the addition of our new facilities. The Company
made a strategic decision in 1998 to aggressively pursue growth and expansion
efforts, which the Company believes will be vital to our survival and prosperity
in the rapidly changing landscape of the financial institution industry. I am
pleased to report the expansion has gone extremely well. Over the past two
years, the Company has added four new banking facilities and increased total
assets by more than $128 million. Over time, this growth will assist the
organization in achieving the efficiencies and economies of scale necessary to
be competitive in the financial marketplace of the new millennium; however,
these expansion efforts have resulted in a strain on current period earnings.
Net interest income continues to increase, but higher overhead expenses more
than offset the increased revenue. The Company expects this situation to reverse
itself in future periods, as the new branches generate sufficient revenues to
cover their operating costs. The Company will continue to pursue expansion
opportunities in 2000, but will devote more of our efforts to integrating the
new facilities into our operating structure and improving overall financial
performance.
Net income for 1999 was $6,203,000 resulting in basic earnings per
common share of $.74 compared to $6,810,000 and $.82 in 1998. This decrease was
primarily the result of higher operating costs associated with the new
facilities.
Asset growth from the expansion efforts resulted in an increase in net
interest income, but also contributed to the decline in the return on average
assets to .97% in 1999, compared to 1.15% in 1998. Return on average
shareholders' equity (ROE) declined during 1999 to 9.54% versus 11.12% in the
prior year. Management recognizes the need to improve the Company's ROE, and we
believe that the Company's expansion efforts will ultimately be a vital
component in achieving that goal.
Total assets increased $67,859,000 during 1999. Over the past two
years, total assets have increased $128,288,000 or 23%. Growth alone does not
ensure profitability, however, management believes that continued growth will
allow the Company to achieve better efficiency levels, expand our lending
capacity, and offer a greater variety of products and services to our customers.
During 1999, the Company opened our sixteenth and seventeenth
locations. Both branches represented entries into new markets for the Company
and provide excellent opportunities for growth. The Company has evaluated the
various delivery channels available to financial institution customers, and
while the Internet may be the preferred method of banking in the future, there
are still a large number of customers who appreciate the opportunity to transact
their financial business in a personal manner in their local community.
[PHOTO]
Joseph W. Pope (left) Senior Vice President and Chief Financial Officer and
Thomas M. Teschner, President and CEO of the Company.
2
<PAGE> 4
LETTER TO OUR SHAREHOLDERS (CONT.)
Southside Bancshares Corp. and subsidiaries
The Company will have our Internet banking product available in 2000,
and currently offers telebanking services, debit cards, and a number of ATMs.
The Company believes a niche exists for banks that can offer both personalized
services and current technology to our customers in a cost-effective manner.
The Company's quarterly dividend remained unchanged during 1999 at $.08
per common share and resulted in a dividend yield of 3.66% using the closing
stock price on December 31, 1999. The Company's stock price has declined during
1999, closing on December 31, 1999 at $8.75. The Company was not alone, as many
small-cap bank stocks experienced similar declines. It is impossible for anyone
to predict what stock prices will do in the future, but management continues to
evaluate different alternatives aimed at maximizing shareholder value.
After considerable discussion and hype, Y2K came with little
consequence. The Company has not experienced any significant disruptions in our
financial or operating activities because of Y2K issues, nor have any
significant vendors been unable to supply goods or services to the Company
because of Y2K.
Focusing on what is ahead in 2000 and what opportunities exist for
banks in the new millennium, we can not help but be optimistic about the
Company's future. The atmosphere for community banking organizations to survive
and even prosper appears to be very good.
As always, I would like to take this opportunity to thank our entire
staff, customers, fellow directors, and shareholders for their support during
the past year. I am proud of each of our dedicated employees who work hard in
providing superior customer service.
Sincerely,
Thomas M. Teschner
President and Chief Executive Officer
[PHOTO]
(from left) Richard B. Francis, President-State Bank of Jefferson County;
Patrick J. Uding, President-Bank of Ste. Genevieve; and Alan D. Pohlman,
President- The Bank of St. Charles County
[PHOTO]
(from left) Steven L. Ray, Senior Vice President and Senior Trust Officer;
Laurie A. Pennycook, Senior Vice President, Operations Officer and Cashier; and
Mitchell P. Baden, Executive Vice President and Senior Loan Officer at South
Side National Bank in St. Louis
3
<PAGE> 5
SOUTHSIDE BANCSHARES CORP. - ORGANIZATION
Southside Bancshares Corp. (the Company) was incorporated in 1982 and has
operated as a registered bank holding company since 1983 under the Bank Holding
Company Act of 1956, as amended. The Company and its subsidiaries had
consolidated total assets of $678,152,000 at December 31, 1999. The following
table shows the total assets at December 31, 1999, before elimination of
intercompany accounts, of each of the Company's subsidiary banks, all of which
are located in Missouri.
<TABLE>
<CAPTION>
TOTAL ASSETS AT
DECEMBER 31, 1999
SUBSIDIARY BANKS (IN THOUSANDS)
---------------- --------------
<S> <C>
South Side National Bank in St. Louis (SSNB) $ 453,877
State Bank of Jefferson County (SBJC) 67,145
Bank of Ste. Genevieve (BSG) 90,552
The Bank of St. Charles County (BSCC) 61,131
</TABLE>
The Company's subsidiary banks, which operate 17 banking offices in
Missouri, are engaged in the general banking business of accepting funds for
deposit, making loans, renting safe deposit boxes, and performing such other
banking services as are usual and customary in banks of similar size and
character.
Customers of the subsidiary banks are also offered fiduciary services
through the trust department of South Side National Bank in St. Louis. At
December 31, 1999, the combined market value of fiduciary and custodial assets
under management of the trust department was approximately $271,000,000. These
assets are not reflected in the consolidated financial statements, as they do
not represent assets of the Company.
The responsibility for the management of the subsidiary banks remains with
the officers and directors of the respective banks. The Company provides its
subsidiary banks with assistance and service in auditing, record keeping, tax
planning, trust operations, new business development, lending, regulatory
compliance, and human resources management.
Southside Bancshares Corp. has eight officers, the majority of whom are
also officers of South Side National Bank in St. Louis. South Side National Bank
in St. Louis is a national banking organization and employs 161 full-time and 20
part-time employees. State Bank of Jefferson County, Bank of Ste. Genevieve, and
The Bank of St. Charles County are Missouri state-chartered banks and employ a
total of 92 full-time and 14 part-time employees.
4
<PAGE> 6
FINANCIAL HIGHLIGHTS
FIVE-YEAR COMPARISON OF SELECTED FINANCIAL DATA
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
As of and For the Years Ended December 31,
------------------------------------------------------------------------------------------------
% % % %
Change Change Change Change
1999 99/98 1998 98/97 1997 97/96 1996 96/95 1995
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total interest income $ 43,168 2% $ 42,227 7% $ 39,320 4% $ 37,868 2% $ 37,263
Total interest expense 20,263 2 19,857 9 18,243 4 17,526 1 17,335
Net interest income 22,905 2 22,370 6 21,077 4 20,342 2 19,928
Provision for possible loan
losses 45 (27) 62 3 60 - 60 (14) 70
Net interest income after
provision for possible loan
losses 22,860 2 22,308 6 21,017 4 20,282 2 19,858
Net income 6,203 (9) 6,810 8 6,302 2 6,158 (9) 6,734
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE DATA:
Earnings per common share:
Basic $ 0.74 (10) $ 0.82 6 0.77 1 0.76 (11) 0.85
Diluted 0.72 (10) 0.80 7 0.75 - 0.75 (12) 0.85
Dividends paid per common share 0.32 10 0.29 26 0.23 35 0.17 42 0.12
Book value (1) 7.66 (1) 7.70 10 6.97 8 6.43 9 5.88
Tangible book value (1) 7.21 (1) 7.26 5 6.94 9 6.39 10 5.83
Shares outstanding
(year end)(1) 8,593,628 (1) 8,661,358 2 8,393,010 (1) 8,510,010 - 8,548,950
Average shares outstanding 8,414,752 1 8,297,250 1 8,207,577 1 8,138,325 3 7,931,670
Average shares outstanding,
including potentially
dilutive shares 8,598,161 (1) 8,554,635 2 8,394,315 2 8,190,642 3 7,951,653
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION:
Total assets $ 678,152 11% $ 610,293 11% $ 549,864 4% $ 527,907 3% $ 512,908
Total deposits 515,810 (1) 523,289 8 483,363 3 467,276 2 457,567
Total loans 392,437 10 356,988 9 326,437 11 294,463 (3) 303,824
Allowance for possible loan
losses 5,830 (6) 6,192 1 6,120 9 5,602 (1) 5,635
Short-term borrowings 8,603 192 2,949 (45) 5,333 229 1,623 108 779
FHLB borrowings 83,921 487 14,287 100 - - - - -
Debt of Employee Stock
Ownership Plan 1,186 100 - - - (100) 1,779 (40) 2,987
Total shareholders' equity 64,408 (1) 64,964 15 56,653 7 52,841 12 47,300
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SELECTED RATIOS
<TABLE>
<CAPTION>
As of and For the Years Ended December 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loan-to-deposit ratio 76.08% 68.22% 67.53% 63.02% 66.40%
Allowance for possible loan losses to total loans 1.49 1.73 1.87 1.90 1.85
Dividend payout ratio 43.24 35.37 29.87 22.37 14.12
Return on average assets 0.97 1.15 1.18 1.20 1.33
Return on average shareholders' equity 9.54 11.12 11.44 12.27 15.47
Average shareholders' equity to average total assets 10.22 10.38 10.28 9.75 8.62
Net interest margin on average interest-earning assets 4.05 4.15 4.34 4.42 4.41
Allowance for possible loan losses to nonperforming loans 84.30 136.08 175.16 473.54 172.11
Allowance for possible loan losses as a multiple of net
charge-offs 14.3x 25.1x N/A (2) 60.2x 4.5x
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Shares outstanding at December 31, 1999, 1998, 1997, 1996, and 1995 include
185,310, 222,372, 259,434, 296,496, and 504,000 shares, respectively, held
by the 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.
(2) The ratio was not applicable in 1997 as recoveries exceeded charge-offs for
the year.
5
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion is presented to provide an understanding of the
consolidated financial condition and results of operations for the fiscal year
ended December 31, 1999 and prior years of the Company and its subsidiaries.
As a registered bank holding company, the Company is subject to supervision
and regulation by the Board of Governors of the Federal Reserve System (Federal
Reserve) pursuant to the Bank Holding Company Act of 1956, as amended. All
subsidiary banks are subject to regulation by the Federal Reserve and are also
members of and subject to regulation by the Federal Deposit Insurance
Corporation. The national banking subsidiary, South Side National Bank in St.
Louis (SSNB), is subject to supervision and regulation by the Office of the
Comptroller of the Currency. The three state-chartered banks are subject to
supervision and regulation by the Missouri Division of Finance.
BALANCE SHEET ANALYSIS
Total consolidated assets of the Company increased $67,859,000 to
$678,152,000 at December 31, 1999 compared to $610,293,000 at December 31, 1998.
In addition, total assets have increased by $128,288,000 over the past two
years. The increase during 1999 was the result of normal growth at each of the
Company's four subsidiary banks and two leverage strategies employed by SSNB
totaling $40,000,000. Excluding the effects of the leverage strategy, the 1999
growth rate was 4.56%. The increase during 1998 was largely the result of the
acquisition of Public Service Bank, FSB (PSB) on June 29, 1998 by SSNB. PSB was
immediately merged with and into SSNB, the Company's lead subsidiary bank. As of
the acquisition date, PSB had total assets of $73,731,000. However, assets
attributable to PSB declined due to normal post-acquisition activity. Internal
growth and growth through acquisition have both been key components of the
Company's strategic business plan for the past several years and since 1995,
total assets have increased by $165,244,000, or 32%. Management believes that
growth will allow the Company to achieve enhanced efficiency levels, expand its
lending capacity, and offer a greater variety of products and services to its
customers because fixed costs can be spread over a larger customer base.
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. Management expects real estate to continue to be a major factor in
future loan relationships, but recognizes that continued competitive pressure
from the secondary market for traditional residential loans will result in
further diversification in the portfolio.
The table below sets forth the components of the Company's loan portfolio
for each of the last five years:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997 1996 1995
---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Commercial, financial, and
agricultural $ 73,943 $ 68,166 $ 69,168 $ 62,016 $ 62,214
Real estate - commercial 136,697 115,214 98,759 82,045 88,321
Real estate - construction 19,078 21,993 30,836 26,067 15,510
Real estate - residential 131,074 119,917 92,028 96,039 102,418
Consumer 23,130 22,219 23,627 17,304 17,626
Industrial revenue bonds 3,879 4,717 5,517 6,373 7,789
Other 4,636 4,762 6,502 4,619 9,946
---------- ---------- ----------- ----------- ----------
$ 392,437 $ 356,988 $ 326,437 $ 294,463 $ 303,824
========== ========== =========== =========== ==========
</TABLE>
6
<PAGE> 8
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
Total loans increased $35,449,000 during 1999 due largely to growth in the
Company's commercial and residential real estate loan portfolios. While
competition for lending relationships remained strong during 1999, the Company
was able to achieve loan growth by executing key components of its strategic
business plan. This included the addition of several experienced lenders during
1998 and 1999, an increased emphasis on involving the Boards of Directors of the
Company's subsidiary banks in the business development process, and an increased
focus on residential lending.
Following is a more detailed analysis of the changes in the individual loan
categories during 1999:
|X| Commercial, financial, and agricultural loans increased $5,777,000
during 1999. This increase was due to new loan relationships brought
in by the aforementioned experienced lenders. Management believes it
is important to achieve growth in all sectors of the Company's loan
portfolio, which helps ensure diversification and mitigate credit
risks.
|X| Commercial real estate loans increased by $21,483,000 during 1999.
This growth was the result of the Company's focus on attracting
borrowers seeking personal service from their lending institution; the
additional personnel hired in 1998 and 1999, who have been able to
bring established lending relationships with them; and the increased
involvement of subsidiary bank directors.
|X| Real estate construction loans decreased by $2,915,000 during 1999,
primarily due to a decreased emphasis in this area during 1999. The
Company was without a loan officer specializing in this area for most
of the year, which reduced the new loans developed in this category.
|X| Residential real estate loans increased $11,157,000 during 1999. The
growth in this category includes both traditional one-to-four family
and home equity loans. The acquisition of PSB in 1998 provided the
Company with the necessary infrastructure to increase its
participation in the residential lending area. Initially, it was
anticipated that the majority of the loans would be sold into the
secondary market; however, with interest rates on the rise through
much of 1999, customer demand for adjustable rate mortgage products
increased during the year. Adjustable rate mortgage loans are
typically retained by the Company, as they can be managed within the
framework of the Company's overall asset/liability management
philosophy. Long-term fixed rate loans are not as easy to match with
deposits or borrowings and have traditionally been sold into the
secondary market. With interest rates projected to remain at or above
their current levels, management believes loan growth in this area
will continue in 2000.
|X| Consumer loans increased $911,000 during 1999, after having decreased
slightly during 1998. The increase was largely the result of an
increased emphasis placed on business development by retail bankers.
|X| Industrial revenue bonds continue to decline as normal payments and
early repayments reduce the size of the existing portfolio. In
addition, there is very little new loan origination activity in this
area, as tax law changes in the late 1980s made it more difficult and
less advantageous to pursue this form of financing.
|X| The decrease in other loans was due to normal principal reductions
during the year. Very few types of credits fall into this category;
accordingly, new loan generation is minimal.
Total loans increased $30,551,000 during 1998 principally due to the PSB
acquisition, which included $46,318,000 in mostly residential real estate loans.
Excluding the loans acquired in conjunction with the PSB acquisition, total
loans declined $15,767,000 during 1998. The Company faced a very competitive
lending environment during 1998 in St. Louis and the surrounding communities,
and residential real estate loans continued to pay off through refinancing in
the secondary market. The Company had success in attracting borrowers displaced
or unhappy with merged or acquired lenders; however, this activity was not
sufficient to offset the decline in residential real estate loans.
7
<PAGE> 9
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
ALLOWANCE FOR POSSIBLE LOAN LOSSES AND RISK ELEMENTS
Implicit in lending activities is the consideration that losses will be
experienced and the amount of such losses will vary from time to time, depending
upon the risk characteristics of the portfolio, as affected by economic
conditions, competition, and the financial experience of borrowers. The
allowance for possible loan losses, which is designed to provide for the risk of
loss inherent in the lending process, is increased by the provision for possible
loan losses charged to expense and decreased by the amount of loans charged off,
net of recoveries. The allowance for possible loan losses provides for
anticipated potential loan losses and is maintained at a level commensurate with
management's evaluation of the risks inherent in the subsidiary banks' loan
portfolios. In order to identify potential risks in the loan portfolios of the
subsidiary banks, monthly reports, which contain information on the overall
characteristics of the subsidiary banks' loan portfolios and specific analyses
of loans requiring special attention, including nonperforming and certain
criticized loans, are reviewed by each subsidiary bank's senior management
personnel and Board of Directors. In addition, the Company performs periodic
examinations of individual loans and of the overall loan portfolio of each
banking subsidiary through the Company's loan review process.
SUMMARY OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
(in thousands)
Years Ended December 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $ 6,192 $ 6,120 $ 5,602 $ 5,635 $ 7,144
Provision charged to expense 45 62 60 60 70
Allowance of Bay-Hermann-Berger
Bank at sale - - - - (327)
Allowance of PSB at acquisition - 257 - - -
Loans charged off (670) (536) (367) (1,219) (2,174)
Recoveries 263 289 825 1,126 922
-------- -------- ------- ------- --------
Net (charge-offs) recoveries (407) (247) 458 (93) (1,252)
-------- -------- ------- -------- --------
BALANCE AT END OF YEAR $ 5,830 $ 6,192 $ 6,120 $ 5,602 $ 5,635
======== ======== ======= ======= ========
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
------- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
RATIOS:
Allowance for possible loan losses:
As % of total loans 1.49% 1.73% 1.87% 1.90% 1.85%
As multiple of net charge-offs 14.3x 25.1x * 60.2x 4.5x
Net charge-offs:
As % of average total loans .11% .07% * .03% .42%
As % of allowance for possible
loan losses at year end 6.98 3.99 * 1.66 22.22
</TABLE>
* Ratios are not applicable for 1997, as recoveries exceeded charge-offs for
the year.
8
<PAGE> 10
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
The allowance for possible loan losses at December 31, 1999 was $5,830,000
or 1.49% of the total loans outstanding compared to $6,192,000 or 1.73% in 1998
and $6,120,000 or 1.87% in 1997. The balance of the allowance for possible loan
losses decreased $362,000 in 1999, as net charge-offs exceeded the provision
amount for the year. The decrease, coupled with loan growth during the year,
caused the allowance as a percentage of total loans to decrease to its present
level of 1.49%. The $72,000 increase in the allowance for possible loan losses
during 1998 was largely due to the acquisition of PSB. The balance in the
allowance for possible loan loss at acquisition was $257,000. Also contributing
to the increase was the $62,000 provision for possible loan losses. Partially
offsetting these two amounts were charge-offs, net of recoveries, of $247,000.
Management records provisions for possible loan losses in amounts
sufficient to result in an allowance for possible loan losses that covers
current net charge-offs and risks believed to be inherent in the loan portfolio.
Amounts charged against current income are based on such factors as past loan
loss experience as it relates to current portfolio mix, evaluation of potential
losses in the loan portfolio, prevailing economic conditions, and regular
reviews of the portfolio conducted by loan officers, internal loan review staff,
and bank regulatory agencies. The loan review process entails analyzing the
borrower's financial condition, payment performance, impact of economic and
business conditions on certain borrowers, loan concentration risk, sufficiency
of collateral, and any other known risks inherent in borrowing relationships.
This process is used as the basis for determining the adequacy of the allowance
for possible loan losses. Company management believes the allowance for possible
loan losses is adequate to cover probable losses in the loan portfolio under
current conditions.
The Company has not recorded significant loan loss provisions for the past
five years. This low level of loan loss provision was the result of a relatively
small amount of loan growth during that period, minimal charge-off activity, and
good overall asset quality. Recent loan growth, coupled with the loan growth
projected for 2000, will, in all likelihood, result in an increase in the
provision for possible loan losses in 2000.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
(dollars in thousands)
December 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 6,695 $ 3,189 $ 2,977 $ 1,037 $ 1,811
Past due 90 days or more and still accruing interest 221 1,361 517 146 1,463
-------- -------- ------- ------- --------
TOTAL NONPERFORMING LOANS 6,916 4,550 3,494 1,183 3,274
Other real estate owned 835 886 1,024 860 554
-------- -------- ------- ------- --------
TOTAL NONPERFORMING ASSETS $ 7,751 $ 5,436 $ 4,518 $ 2,043 $ 3,828
======== ======== ======= ======= ========
RATIOS:
Nonperforming loans as % of
total loans 1.76% 1.27% 1.07% 0.40% 1.08%
Nonperforming assets as % of
total loans and other real
estate owned 1.97 1.52 1.38 0.69 1.26
Nonperforming assets as % of
total assets 1.14 0.89 0.82 0.39 0.75
Allowance for possible loan losses
as % of nonperforming loans 84.30 136.09 175.16 473.54 172.11
</TABLE>
Nonperforming loans totaled $6,916,000 or 1.76% of the loan portfolio at
December 31, 1999 compared to $4,550,000 or 1.27% of the loan portfolio at
December 31, 1998. Nonperforming assets totaled $7,751,000 or 1.14% of total
assets at December 31, 1999 compared to $5,436,000 or 0.89% of total assets at
December 31, 1998.
9
<PAGE> 11
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
The increase in both nonperforming loans and nonperforming assets in 1999 was
caused by an increase in nonaccrual loans, which was the result of the addition
of loans to two commercial borrowers. Both borrowers are currently in the
process of liquidating collateral to satisfy their obligations and sufficient
reserves have been allocated within the allowance for possible loan losses
should there be any short-fall.
The 1998 increase in both nonperforming loans and nonperforming assets was
primarily the result of an increase in loans past due 90 days or more and still
accruing interest. The majority of these credits were past due as to maturity
but current as to interest payments.
Current accounting standards require that a loan be reported as impaired
when it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. The Company's loan
policy generally requires that a credit meeting the above criteria be placed on
nonaccrual status; however, loans which are past due 90 days or more as to the
payment of principal or interest are also considered to be impaired. These loans
are included in the total of nonperforming assets. Loans past due less than 90
days are generally not considered impaired; however, a loan which is current as
to payments may be determined by management to demonstrate some of the
characteristics of an impaired loan. In these cases, the loan is classified as
impaired while management evaluates the appropriate course of action. The
Company's primary basis for measurement of impaired loans is the collateral
underlying the identified loan.
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 December 31, 1999, there were no concentrations of
loans exceeding 10% of total loans which were not disclosed as a category of
loans in note 4 to the consolidated financial statements of the Company.
The amounts received in cash and recognized as interest income on
nonaccrual loans were $62,000, $194,000, and $113,000 for the years ended
December 31, 1999, 1998, and 1997, respectively. If the contractual interest on
these loans had been recognized, such income would have been $623,000, $252,000,
and $232,000 for the years ended December 31, 1999, 1998, and 1997,
respectively. There were no restructured loans at December 31, 1999 or 1998.
INVESTMENT PORTFOLIO
The Company's investment portfolio has historically provided a stable
earnings base, a secondary source of liquidity, and is one of the primary means
of adjusting interest rate sensitivity, thereby managing interest-rate risk. The
investment portfolio contains a mixture of debt securities in terms of the types
of securities, interest rates, and maturity distribution. This diversity, as
well as management's conservative philosophy towards risk management, has
resulted in a solid investment portfolio. Debt securities included in the held
to maturity category are stated at cost, adjusted for amortization of premiums
and accretion of discounts, in the Company's consolidated financial statements.
Debt securities included in the available for sale category are recorded in the
consolidated financial statements at their fair value.
The carrying value of the Company's investment portfolio increased
$38,294,000 during 1999 due to two leverage strategies executed during 1999
which totaled $40,000,000. Similar to the strategy implemented in 1998, the
Company borrowed $40,000,000 from the Federal Home Loan Bank (FHLB) to fund the
purchase of mortgage-backed securities. Procedures have been established to
monitor the performance of these strategies on a monthly basis to ensure they
meet the original projections and continue to provide a reasonable spread
between the return on the assets purchased and the cost of the borrowings.
Excluding the effects of the leverage strategy, the Company's portfolio declined
slightly during 1999 because of growth in the loan portfolio.
10
<PAGE> 12
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
The carrying value of the Company's investment portfolio increased by
$8,792,000 during 1998. This increase was due to a combination of factors. The
portfolio increased by $10,222,000 as a result of the PSB acquisition. The
portfolio was further increased by $10,000,000 as a result of a leverage
strategy at the Company's lead bank, which was employed to utilize a portion of
SSNB's excess capital capacity. Both of these factors have been partially offset
by a reduction in investment purchases during the latter part of 1998. With the
yield curve being relatively flat, and very few gaps in the Company's ladder of
maturities, the Company opted to reduce the level of investment purchases during
1998.
The amortized cost and fair value of the Company's available for sale and
held to maturity debt securities at December 31, 1999, 1998, and 1997 are shown
below:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
---------------------- ---------------------- ---------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE FOR SALE:
U.S. Treasury securities
and obligations of U.S.
Government agencies
and corporations $ 58,168 $ 56,970 $ 35,368 $ 35,835 $ 26,899 $ 27,058
Obligations of states and
political subdivisions 8,970 8,452 6,487 6,543 300 304
Other securities 4,915 4,914 2,321 2,323 1,575 1,575
----------- ---------- --------- -------- --------- ----------
72,053 70,336 44,176 44,701 28,774 28,937
Mortgage-backed securities 91,801 88,294 53,328 53,194 44,483 44,523
----------- ---------- --------- -------- --------- ----------
$ 163,854 $ 158,630 $ 97,504 $ 97,895 $ 73,257 $ 73,460
=========== ========== ========= ======== ========= ==========
HELD TO MATURITY:
U.S. Treasury securities
and obligations of U.S.
Government agencies
and corporations $ 36,784 $ 36,576 $ 55,769 $ 56,614 $ 72,065 $ 72,348
Obligations of states and
political subdivisions 23,165 23,094 25,647 26,568 23,544 24,316
Other securities 579 569 - - - -
----------- ---------- --------- -------- --------- ----------
60,528 60,239 81,416 83,182 95,609 96,664
Mortgage-backed securities 1,067 1,077 2,620 2,659 4,070 4,174
----------- ---------- --------- -------- --------- ----------
$ 61,595 $ 61,316 $ 84,036 $ 85,841 $ 99,679 $ 100,838
=========== ========== ========= ======== ========= ==========
</TABLE>
The Company has designated certain debt securities with a fair value of
approximately $158,630,000 and $97,895,000 as available for sale at December 31,
1999 and 1998, respectively, with the differences of $5,224,000 and $391,000,
respectively, between the fair value and amortized cost of such securities being
recorded as an adjustment to the carrying value of the securities. The
offsetting adjustment is recorded, net of the related tax effect, in
shareholders' equity. Debt securities with an amortized cost of $61,595,000 and
$84,036,000 at December 31, 1999 and 1998, respectively, remain as held to
maturity securities, to be used for the Company's longer-term liquidity needs.
The held to maturity securities at December 31, 1999 and 1998 reflected market
values of $61,316,000 and $85,841,000, respectively, which represent a net
unrealized loss of $279,000 in 1999 and a net unrealized gain of $1,805,000 in
1998. Because it is not management's intention to sell securities from the
portfolio, these gains or losses are not anticipated to be realized by the
Company. The increase in the available for sale portfolio was the result of
management placing the securities purchased as part of the leverage strategy and
most new securities purchased in this category. This will give the Company
greater flexibility in reacting to changes in the
11
<PAGE> 13
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
interest rate environment that affect these securities. The decrease in the held
to maturity portfolio was largely due to maturities during the year.
The market value of the Company's portfolio in relationship to the
amortized cost of the portfolio declined significantly during 1999, as interest
rates were on the rise for much of the year.
There were no sales of securities during 1999, 1998, and 1997.
At December 31, 1999, there were no securities of a single issuer that
exceeded 10% of shareholders' equity.
DEPOSITS
Deposits are the primary funding source for the Company's subsidiary banks
and are acquired from a broad base of local markets, including both individual
and commercial customers. Total deposits decreased $7,479,000 in 1999 and
increased $39,926,000 in 1998.
The decrease in deposits during 1999 was largely due to a continued decline
in certificates of deposit. In 1997 and 1998, certificates of deposit
represented 47 percent of the Company's total deposits. In 1999, certificates of
deposit represent only 43 percent of deposits. This decline was caused by
several factors. First, the Company has not been overly aggressive in its
certificates of deposit pricing because the loan-to-deposit ratio continues to
lag behind its peer group. Secondly, it is management's belief that customers
continue to liquidate certificates of deposit in order to invest into mutual
funds, equity securities and other investment alternatives. Third, through much
of 1999, depositors appeared more inclined to keep their funds liquid, partially
explaining the increase in money market deposits, with the rising interest rate
environment. Finally, Y2K concerns also prompted some deposit customers to
liquidate their certificates of deposit at maturity during 1999. The decline in
certificates of deposit was partially offset by a $16,415,000 increase in
interest-bearing demand deposits and a $4,141,000 increase in
noninterest-bearing demand deposits. The increases can largely be attributed to
customer preference for liquidity in light of potential Y2K concerns. Because of
the significant loan growth in 1999, and projected loan growth for 2000,
management will look to reverse the declining certificate of deposit trend in
2000, and efforts will be made to stabilize and possibly increase certificates
of deposit.
The increase in 1998 can be attributed to the PSB acquisition, which
included $55,264,000 in deposits. Excluding the deposits acquired, the Company's
deposits declined $15,338,000 during the year, which was the result of a
combination of two factors. First, management anticipated losing approximately
10-12% of the PSB deposit base subsequent to the acquisition. Depositors unhappy
with the elimination of free checking, changes in service charge routines, less
aggressive certificate of deposit rates, and other variables typically cause
deposit attrition in most "in market" merger transactions. Secondly, with the
Company's loan-to-deposit ratio still below its peer group average and the
addition of the PSB deposits, the Company was less aggressive in pursuing time
deposits during 1998. As a result, excluding the PSB deposits acquired, time
deposits under $100,000 declined by approximately $9,000,000 during 1998.
12
<PAGE> 14
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
The following table shows the breakdown of deposits at December 31, 1999,
1998, and 1997:
<TABLE>
<CAPTION>
(dollars in thousands)
1999 1998 1997
------------------------ ----------------------- ----------------------
Percent Percent Percent
of Total of Total of Total
Amount Deposits Amount Deposits Amount Deposits
----------- --------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing
demand deposits $ 74,577 14% $ 70,436 13% $ 61,308 12%
Interest-bearing demand deposits 158,826 31 142,411 27 139,177 29
Savings deposits 62,322 12 65,351 13 56,627 12
Time deposits under $100,000 178,857 35 196,930 38 172,830 36
----------- ---- ----------- ---- ----------- ----
Total core deposits 474,582 92 475,128 91 429,942 89
Time deposits $100,000 and
over 41,228 8 48,161 9 53,421 11
----------- ---- ----------- ---- ----------- ----
Total deposits $ 515,810 100% $ 523,289 100% $ 483,363 100%
=========== ==== =========== ==== =========== ====
</TABLE>
The following table shows the amount of time deposits $100,000 and over by
time remaining until maturity at December 31, 1999, 1998, and 1997:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
---------- -------- ---------
<S> <C> <C> <C>
Three months or less $ 19,385 $ 29,546 $ 24,733
Over three through six months 8,317 6,371 12,494
Over six through twelve months 10,942 8,096 11,328
Over twelve months 2,584 4,148 4,866
---------- -------- ---------
$ 41,228 $ 48,161 $ 53,421
========== ======== =========
</TABLE>
The following table reflects the average daily balances, by category, at
December 31, 1999, 1998, and 1997, and their weighted average interest rates for
the respective years:
<TABLE>
<CAPTION>
(dollars in thousands)
1999 1998 1997
------------------------ --------------------- -----------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
----------- -------- ----------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand
deposits $ 67,759 - % $ 62,235 - % $ 55,323 -%
Interest-bearing demand deposits 154,909 3.10 146,149 3.32 130,046 3.34
Savings deposits 65,113 2.43 61,632 2.49 58,029 2.51
Time deposits under $100,000 187,002 5.00 188,065 5.32 173,382 5.37
Time deposits $100,000 and over 44,817 4.83 52,026 5.23 52,601 5.32
----------- ==== ----------- ==== ----------- ====
$ 519,600 $ 510,107 $ 469,381
=========== =========== ===========
</TABLE>
SHORT-TERM BORROWINGS
Short-term borrowings are an alternative to other funding sources and
consist primarily of federal funds purchased and securities sold under
agreements to repurchase.
Securities sold under agreements to repurchase (REPO) represent an
alternative used by larger commercial deposit customers as a cash management
tool. Utilizing a daily REPO sweep account, commercial customers can earn
interest on their excess funds, while still ensuring these balances are
available to cover their operating needs. As with any transaction oriented cash
management account, the balances fluctuate based on the customer's cash
requirements on a given day. These accounts continue to gain favor with many of
our commercial customers, which is evidenced by the increased balance in 1999.
13
<PAGE> 15
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
The following table is a summary of short-term borrowings at December 31,
1999, 1998, and 1997:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
---------- -------- --------
<S> <C> <C> <C>
Federal funds purchased $ 1,000 $ - $ -
Securities sold under agreements
to repurchase 7,603 2,949 5,333
---------- -------- --------
$ 8,603 $ 2,949 $ 5,333
========== ======== ========
</TABLE>
The average daily balances, weighted average daily interest rates, maximum
month-end amounts outstanding, and average interest rates at year end for
short-term borrowings were as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
1999 1998 1997
-------------------- ------------------- --------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Federal funds purchased $ 448 4.24% $ - - % $ 42 5.41%
Securities sold under
agreements to
repurchase 3,041 4.14 3,289 4.44 5,053 4.47
--------- -------- ---------
$ 3,489 $ 3,289 $ 5,095
========= ======== =========
Total maximum short-term
borrowings outstanding
at any month end during
the year $ 8,603 $ 6,802 $ 10,693
========= ======== =========
Average short-term borrowings
rate at end of year 4.20% 04.44% 4.40%
==== ===== ====
</TABLE>
FHLB BORROWINGS
The balance of FHLB borrowings increased $69,634,000 during 1999. This
increase was due in part to the two leverage strategies totaling $40,000,000
implemented in 1999. The remainder of the increase was borrowings of the
Company's lead bank to fund short-term liquidity needs.
DEBT OF EMPLOYEE STOCK OWNERSHIP PLAN
In September 1999, the Company's Employee Stock Ownership Plan borrowed
$1,186,000 from an unaffiliated financial institution. Previously, this debt was
financed through South Side National Bank in St. Louis, the proceeds of which
were used to purchase shares of the Company's common stock. The debt is
guaranteed by the Company and thus is reflected on the Company's consolidated
balance sheet.
ASSET/LIABILITY MANAGEMENT
The Company's overall goal in asset/liability management is to achieve a
reasonable balance of rate-sensitive assets with rate-sensitive liabilities in
order to minimize the impact of changing rates on net income. As assets and
liabilities tend to become more rate sensitive, whether due to customer demands
or Company initiatives, it becomes more important that rates earned are matched
with rates paid and that repricing dates are matched so the next earning
interval will have both components at current rates. Assets and liabilities that
mature or are repriced in one year or less are considered in the financial
services industry to be "rate sensitive." This means that as rates in the
marketplace change, the rates on these assets or liabilities will soon be
impacted. Given a reasonably balanced rate
14
<PAGE> 16
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
sensitivity position if rates are increasing, the Company will have more
interest income and more interest expense. Conversely, if rates are decreasing,
the Company will have less interest income and less interest expense.
Short-term interest rate sensitive positions are critical in managing net
interest income, as they have an immediate impact on earnings during periods of
changing interest rates. Interest rate sensitivity is measured by
interest-sensitive gaps defined as the difference between interest-sensitive
assets and interest-sensitive liabilities within any specific time period. A
positive or negative interest-sensitive gap demonstrates the relative exposure
to interest rate movements. To the extent that these gaps are close to zero, net
interest income is protected from interest rate fluctuations for the specific
time period being examined. Examples of interest-sensitive assets and
liabilities include commercial loans whose interest rates are tied to the prime
commercial lending rate and money market deposit accounts whose interest rates
are tied to the three-month treasury bill rate. The objective of an interest
sensitivity analysis is to measure the potential impact of changes in the levels
of market interest rates on net interest income.
Management believes maintenance of appropriate rate-sensitive positions is
imperative in maintaining an adequate degree of liquidity and acceptable profit
margins, and has structured its deposit, investment, and loan portfolios
accordingly. It is the opinion of management that the Company has maintained an
adequate liquidity position and management will endeavor to do so in the future.
RATE SENSITIVITY
Interest rate sensitivity is a key component of asset/liability management
and is related to liquidity because each is affected by maturing assets and
sources of funds. Interest sensitivity, however, also takes into consideration
those assets and liabilities with interest rates which are subject to change
prior to maturity. The objective of interest sensitivity management is to
optimize earnings results, while managing, within internal policy constraints,
interest rate risk. The Company's policy on interest rate sensitivity is to
manage exposure to potential risk associated with changing interest rates by
maintaining a balance sheet posture in which annual net interest income is not
significantly affected by interest rate movements. The total absence of risk, as
well as excessive risk, can result in less than acceptable returns; therefore,
the Company manages its interest sensitivity risk between those two extremes.
The table on the following page is an analysis of interest-sensitive assets
and liabilities at December 31, 1999 over various time horizons. Because such an
analysis does not capture many factors which determine interest rate risk, the
Company has put more emphasis on the use of a simulation model to measure its
exposure to changes in interest rates. Under different rate and growth
assumptions, these projections enable the Company to adjust its strategies to
protect the net interest margin against significant rate fluctuations. Uniform
sensitivity reports and guidelines are used by all subsidiary banks of the
Company. Current model projections indicate annual net interest income would
change by less than 10% should rates rise or fall within 200 basis points from
their current level. Based on the Company's historical analysis,
interest-bearing demand and savings deposits have proven to be very stable core
deposits even through interest rate fluctuations. Accordingly, management
believes these deposits are not 100% rate sensitive within the period of three
months or less. As a result, these deposits have been allocated between the four
repricing categories as follows: three months or less - 35%, three months
through 12 months - 20%, over one year through five years - 25%, and over five
years - 20%.
As reflected on the Repricing and Interest Rate Sensitivity Analysis on the
following page, the Company has a well-balanced interest rate sensitivity
position. Generally, a one-year gap ratio in a range of .80x - 1.20x indicates
an entity is not subject to any undue interest rate risk. The Company's current
one-year gap of 1.01x is within an acceptable range.
15
<PAGE> 17
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
REPRICING AND INTEREST RATE SENSITIVITY ANALYSIS
(dollars in thousands)
December 31, 1999
<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 deposits with banks $ 159 $ - $ - $ - $ 159
Federal funds sold 2,600 - - - 2,600
Investments available for sale 24,643 16,766 58,851 58,370 158,630
Investments held to maturity 7,576 15,088 20,606 18,325 61,595
Loans, net of unearned discount (1) 217,126 39,852 94,724 40,735 392,437
---------- ---------- ---------- ---------- ----------
Total interest-earning assets 252,104 71,706 174,181 117,430 615,421
---------- ---------- ---------- ---------- ----------
Cumulative interest-earning assets 252,104 323,810 497,991 615,421 615,421
---------- ---------- ---------- ---------- ----------
Interest-bearing liabilities:
Interest-bearing demand deposits 55,589 31,765 39,707 31,765 158,826
Savings deposits 21,813 12,464 15,581 12,464 62,322
Time deposits under $100,000 47,516 74,001 56,799 541 178,857
Time deposits $100,000 and over 21,126 17,645 2,457 - 41,228
Federal funds purchased 1,000 - - - 1,000
Securities sold under agreements
to repurchase 7,603 - - - 7,603
FHLB borrowings 18,800 12,000 1,251 51,870 83,921
Debt of Employee Stock
Ownership Plan - - 1,186 - 1,186
---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities 173,447 147,875 116,981 96,640 534,943
---------- ---------- ---------- ---------- ----------
Cumulative interest-bearing
liabilities 173,447 321,322 438,303 534,943 534,943
---------- ---------- ---------- ---------- ----------
Gap analysis:
Interest sensitivity gap $ 78,657 $ (76,169) $ 57,200 $ 20,790 $ 80,478
========== ========== ========== ========== ==========
Cumulative interest
sensitivity gap $ 78,657 $ 2,488 $ 59,688 $ 80,478 $ 80,478
========== ========== ========== ========== ==========
Cumulative gap ratio of interest-
earning assets to interest-bearing
liabilities 1.45X 1.01X 1.14X 1.15X 1.15X
========== ========== ========== ========== ==========
</TABLE>
(1) Nonaccrual loans are reported in the "over 1 year through 5 years" column.
LIQUIDITY
The Company's Asset/Liability Management Committee also formulates
guidelines for and monitors the composition of assets and liabilities. The
objective is to meet earnings goals by producing the optimal yield and maturity
mix consistent with interest rate expectations and projected liquidity needs.
Achieving these goals is the central role of liquidity management, which
must ensure that the Company has ready access to sufficient funds to meet
existing commitments and future financial obligations. In addition, liquidity
management enables the Company to withstand fluctuations in deposit levels and
to provide for customers' credit needs in a timely and cost-effective manner.
Liquidity management, therefore, is viewed from both an asset and liability
perspective.
16
<PAGE> 18
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
Asset liquidity is normally provided through the maturities of various
assets, the receipt of loan payments, and the interest collected on assets.
Additionally, as part of its overall asset/liability management strategy, the
Company designates certain investment securities as available for sale. In the
event that liquidity needs arise, these securities are available to be converted
to cash.
The most important source of liquidity for the Company is deposit
liquidity, which is the ability to raise new funds and renew maturing
liabilities. The Company's long-term customer relationships in the various local
markets are the foundation of the Company's long-term liquidity.
Short-term liquidity needs arise from continuous fluctuations in the flow
of funds on both sides of the balance sheet. The subsidiary banks control their
own asset/liability mix within guidelines of Company policy and their individual
loan demand and deposit structure, with guidance from the Asset/Liability
Management Committee. Other than South Side National Bank in St. Louis, the
subsidiary banks do not generally borrow funds.
As the parent company, Southside Bancshares Corp. maintains its liquidity
position and provides for its cash flow needs through dividends and management
fees received from its subsidiary banks.
It is the opinion of management that the Company has historically
maintained an adequate liquidity position and management will endeavor to
continue to do so in the future.
CAPITAL RESOURCES
A strong capital base is vital to any banking organization as capital
provides a solid foundation for anticipated future asset growth and promotes
depositor and investor confidence.
Assets vary with respect to risk. Some assets, such as cash or short-term
government securities, are practically risk free. Other assets, such as loans,
have increased risk associated with them. Capital requirements depend to some
extent on the degree of risk within a bank's asset categories and the level of
assets in those risk categories.
Bank regulators consider a range of factors when determining capital
adequacy. Such factors include the organization's size, quality and stability of
earnings, risk diversification, management expertise, asset quality, liquidity,
and internal controls. Risk-based capital guidelines define the components of
capital, categorize assets into different risk classes, and include certain
off-balance-sheet items in the calculation of capital requirements.
Off-balance-sheet items are converted into on-balance-sheet credit equivalents
and are categorized into different risk classes to determine the required
capital associated with each class. On-balance-sheet items are also assigned
different risk weights to determine required capital. Together, these two items
comprise the risk-weighted asset denominator of the required capital ratios.
Capital is categorized into two types: Tier I and Tier II. Tier I capital
elements include total shareholders' equity less goodwill and exclude the
effects of net unrealized gains or losses on available for sale securities. Tier
II capital includes other supplementary capital elements, subject to certain
limitations, such as mandatory convertible notes, subordinated debt, and the
allowance for possible loan losses. The maximum amount of the allowance for
possible loan losses which can be included as Tier II capital is 1.25% of
risk-weighted assets.
17
<PAGE> 19
BALANCE SHEET ANALYSIS (CONT.)
Southside Bancshares Corp. and Subsidiaries
The capital guidelines require banking organizations to maintain a minimum
total capital ratio of 8% (of which at least 4% must be Tier I capital). The
Company's total capital ratios under the risk-weighted guidelines at December
31, 1999 and 1998 were 16.12% and 17.41%, respectively, which included Tier I
capital ratios of 14.87% and 16.15%, respectively. In addition, the Company and
its subsidiary banks must maintain a minimum Tier I leverage ratio (Tier I
capital to adjusted total assets) of at least 3%. The Company's Tier I leverage
ratios were 9.81% and 10.01% at December 31, 1999 and 1998, respectively. These
ratios are well above the minimum risk-weighted capital requirements.
All of the subsidiary banks of the Company also exceeded the various
regulatory capital requirements at December 31, 1999, 1998, and 1997. Management
reviews the various capital measures monthly to ensure that they are within
internal guidelines and within external guidelines as established by law, and
management believes that the Company's current capital position is adequate to
support its banking operations.
The following is a summary of data and ratios pertaining to the Company's
capital position at December 31, 1999, 1998, and 1997:
<TABLE>
<CAPTION>
(dollars in thousands)
------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
RISK-BASED CAPITAL:
Tier I capital $ 64,086 $ 61,036 $ 56,279
Total capital 69,478 65,778 60,664
Risk-weighted assets 430,943 377,905 349,079
RISK-BASED CAPITAL RATIOS:
Tier I capital to risk-weighted assets 14.87% 16.15% 16.12%
Minimum requirement 4.00 4.00 4.00
Total capital to risk-weighted assets 16.12 17.41 17.38
Minimum requirement 8.00 8.00 8.00
======= ======= =======
TIER I CAPITAL:
Tier I capital $ 64,086 $ 61,036 $ 56,279
Average fourth quarter total
consolidated assets less
intangibles 653,410 609,771 544,380
LEVERAGE CAPITAL RATIOS:
Tier I capital to average total
consolidated assets less
intangibles 9.81% 10.01% 10.34%
Minimum requirement 3.00 3.00 3.00
=========== =========== ==========
</TABLE>
18
<PAGE> 20
RESULTS OF OPERATIONS
Southside Bancshares Corp. and Subsidiaries
RESULTS OF OPERATIONS
EARNINGS SUMMARY
Net income was $6,203,000, $6,810,000, and $6,302,000 for the years ended
December 31, 1999, 1998, and 1997, respectively, which resulted in basic
earnings per common share of $0.74, $0.82, and $0.77 in each of those years. The
decrease in net income in 1999 versus 1998 was $607,000 or 9%, and was largely
due to an increase in operating expenses associated with the Company's expansion
efforts in 1998 and 1999.
In June 1998, the Company acquired two facilities as part of the PSB
acquisition, and in 1999, the Company opened its sixteenth and seventeenth
branches. Management believes these new locations will be an important part of
the Company's long-term financial success; however, as with most expansion
efforts, they have resulted in a drain on earnings in the current year.
The net income in 1999 results in a return on average assets (ROA) of 0.97%,
compared to 1.15% and 1.18% in 1998 and 1997, respectively. The decrease in the
Company's ROA was due in part to normal growth at the subsidiary banks and the
two leverage strategies implemented in 1999, which caused average assets to
increase. This growth, coupled with the decrease in earnings resulting from
recent expansion efforts, resulted in the ROA decline in the current year. The
Company's ROE in 1999 was 9.54%, compared to 11.12% and 11.44% in 1998 and 1997,
respectively. The decrease in ROE was also due to the decrease in earnings
discussed above.
NET INTEREST INCOME
Net interest income on a tax-equivalent basis increased by $896,000,
$991,000, and $529,000 in 1999, 1998, and 1997, respectively. Again in the
current year, the increase in net interest income was the result of an increase
in average-earnings assets, which was partially offset by a decrease in the net
interest margin. Competition for lending relationships and an increase in
adjustable rate mortgage loans combined to drive the average yield on the loan
portfolio down by 33 basis points to 8.37% in 1999 from 8.70% in the prior year.
In addition, the $40,000,000 leverage strategies executed in the current year
also added to the decline in the net interest margin. The strategy is designed
to match maturities of investments and borrowings and earn a spread on the
difference between the cost of the borrowings and the interest earned on the
assets purchased. The strategies executed in 1999 are designed to provide a
spread of 85 to 185 basis points depending on fluctuations in the interest-rate
environment during the life of the underlying securities. While these strategies
have a positive effect on net interest income, they reduce net interest margin.
The Company's deposit and borrowing costs declined from 4.30% in 1998 to 4.08%
in the current year. Because of minimal loan growth in the first half of 1999,
management was not aggressive in deposit pricing throughout much of 1999. With
the significant loan growth in the second half of the year, management
anticipates the need to be more aggressive with deposit pricing in 2000. This
could put further pressure on the Company's net interest margin in future
periods.
The 1998 increase was the result of an increase in average earning assets,
which was partially offset by a narrowing net interest margin. Average earning
assets increased $46,811,000 during 1998 as a result of the PSB acquisition.
However, interest rate competition in the Company's markets caused the yield on
average earning assets to decline by 21 basis points from 7.95% in 1997 to 7.74%
in 1998. This decrease in yield was due in part to decreases in the prime
lending rate during 1998, as well as the addition of PSB's adjustable rate
mortgage loan portfolio, which had a lower yield than the Company's existing
portfolio at the time of acquisition.
19
<PAGE> 21
RESULTS OF OPERATIONS (CONT.)
Southside Bancshares Corp. and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND AVERAGE INTEREST RATES
<TABLE>
<CAPTION>
(dollars in thousands)
YEAR ENDED DECEMBER 31,
----------------------------------------
1999
----------------------------------------
AVERAGE
INTEREST RATES
AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID
------- ------- ----
<S> <C> <C> <C>
ASSETS:
Loans, net of unearned discount(1)(2)(3) $ 355,874 $ 29,783 8.37%
Investments in debt securities:
Taxable (4) 179,546 10,823 6.03
Exempt from Federal income taxes(3)(4) 32,521 2,492 7.66
Short-term investments 21,720 1,048 4.83
-------- -------
Total interest-earning assets/
interest income/overall yield(3) 589,661 44,146 7.49
------ ====
Allowance for possible loan losses (6,143)
Cash and due from banks and interest-bearing
deposits with banks 18,665
Other assets 34,193
-------
TOTAL ASSETS $ 636,376
=======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing demand deposits $ 154,909 4,798 3.10%
Savings deposits 65,113 1,579 2.43
Time deposits under $100,000 187,002 9,353 5.00
Time deposits $100,000 and over 44,817 2,164 4.83
Short-term borrowings 3,489 145 4.16
FHLB borrowings 41,406 2,198 5.31
Debt of Employee Stock Ownership Plan 347 26 7.50
---------- ------
Total interest-bearing liabilities/
interest expense/overall rate 497,083 20,263 4.08
------ ====
Noninterest-bearing demand deposits 67,759
Other liabilities 6,504
Shareholders' equity 65,030
--------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 636,376
=======
NET INTEREST INCOME $ 23,883
======
NET INTEREST MARGIN ON AVERAGE INTEREST-EARNING ASSETS 4.05%
====
</TABLE>
(1) Interest income includes loan origination fees.
(2) Average balance includes nonaccrual loans.
(3) Interest yields are presented on a tax-equivalent basis. Nontaxable income
has been adjusted upward by the amount of Federal income tax that would have
been paid if the income had been taxable at a rate of 34%, adjusted downward
by the disallowance of the interest cost to carry nontaxable loans and
securities.
(4) Includes investments available for sale.
20
<PAGE> 22
RESULTS OF OPERATIONS (CONT.)
Southside Bancshares Corp. and Subsidiaries
<TABLE>
<CAPTION>
(dollars in thousands)
Years Ended December 31,
- ----------------------------------------------------------------------------
1998 1997
- ----------------------------------- -------------------------------------
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C>
$ 345,902 $ 30,085 8.70% $ 311,266 $ 27,937 8.98%
153,345 9,172 5.98 155,938 9,478 6.08
29,020 2,326 8.01 23,124 1,953 8.45
24,975 1,261 5.05 16,103 871 5.41
-------- ------- -------- --------
553,242 42,844 7.74 506,431 40,239 7.95
------ ==== ------ ====
(6,160) (6,061)
15,097 14,817
27,945 20,622
-------- --------
$ 590,124 $ 535,809
======= =======
$ 146,149 4,848 3.32% $ 130,046 4,346 3.34%
61,632 1,535 2.49 58,029 1,459 2.51
188,065 9,997 5.32 173,382 9,309 5.37
52,026 2,721 5.23 52,601 2,796 5.32
3,289 146 4.44 5,095 228 4.47
10,659 610 5.72 - - -
- - - 1,235 105 8.50
- ------------ ----------- --------- --------
461,820 19,857 4.30 420,388 18,243 4.34
------ ==== ------ ====
62,235 55,323
4,813 5,022
61,256 55,076
-------- --------
$ 590,124 $ 535,809
======= =======
$ 22,987 $ 21,996
====== ======
4.15% 4.34%
==== ====
</TABLE>
21
<PAGE> 23
RESULTS OF OPERATIONS (CONT.)
Southside Bancshares Corp. and Subsidiaries
ANALYSIS OF CHANGES IN NET INTEREST INCOME
DUE TO CHANGES IN VOLUME AND CHANGES IN RATES
The following table sets forth on a tax-equivalent basis, for the periods
indicated, a summary of the changes in interest income and interest expense
resulting from changes in volume and changes in rates. The change in interest
due to both volume and rate has been allocated in proportion to the relationship
of the absolute dollar amounts of the change in each.
<TABLE>
<CAPTION>
(in thousands)
Years Ended December 31,
-------------------------------------------------------------------
1999 COMPARED TO 1998 1998 Compared to 1997
--------------------------------- --------------------------------
INCREASE (DECREASE) Increase (Decrease)
NET DUE TO CHANGE IN Due to Change in
--------------------- Net --------------------
INCREASE AVERAGE AVERAGE Increase Average Average
(DECREASE) VOLUME RATE (Decrease) Volume Rate
---------- ------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Changes in interest income on:
Loans $ (302) $ 855 $(1,157) $ 2,148 $ 3,040 $ (892)
Investment securities:
Taxable 1,651 1,574 77 (306) (154) (152)
Exempt from Federal income
taxes 166 271 (105) 373 479 (106)
Short-term investments (213) (160) (53) 390 451 (61)
------- ------- ------- ------- ------- -------
TOTAL INTEREST INCOME 1,302 2,540 (1,238) 2,605 3,816 (1,211)
------- ------- ------- ------- ------- -------
Changes in interest expense on:
Interest-bearing demand
deposits (50) 282 (332) 502 528 (26)
Savings deposits 44 83 (39) 76 88 (12)
Time deposits under $100,000 (644) (56) (588) 688 776 (88)
Time deposits $100,000
and over (557) (359) (198) (75) (29) (46)
Short-term borrowings (1) 9 (10) (82) (80) (2)
FHLB borrowings 1,588 1,635 (47) 610 610 --
ESOP debt 26 26 -- (105) (105) --
------- ------- ------- ------- ------- -------
TOTAL INTEREST EXPENSE 406 1,620 (1,214) 1,614 1,788 (174)
------- ------- ------- ------- ------- -------
CHANGE IN NET INTEREST INCOME $ 896 $ 920 $ (24) $ 991 $ 2,028 $(1,037)
======= ======= ======= ======= ======= =======
</TABLE>
PROVISION FOR POSSIBLE LOAN LOSSES
Management records provisions for possible loan losses in amounts sufficient
to result in an allowance for possible loan losses that covers current net
charge-offs and risks believed to be inherent in the loan portfolio. Amounts
charged against current income are based on such factors as past loan loss
experience as it relates to current portfolio mix, evaluation of potential
losses in the loan portfolio, prevailing economic conditions, and regular
reviews of the portfolio conducted by loan officers, loan review staff, and bank
regulatory agencies. The provision for possible loan losses was again relatively
low in 1999, largely due to the fact that the Company experienced a relatively
low level of net charge-offs during 1999. The provision for possible loan losses
was $45,000 in 1999, $62,000 in 1998, and $60,000 in 1997. Management
anticipates that loan growth in 2000 will result in an increase in the provision
for possible loan losses.
NONINTEREST INCOME
Noninterest income increased $227,000 in 1999 to $3,558,000. The increase
was due to increases in trust fees, service charges, and other income, as well
as a decrease in losses on the other real estate owned (OREO), all of which were
partially offset by a decrease in gains on sales of loans. The increase in trust
fee income was largely due
22
<PAGE> 24
RESULTS OF OPERATIONS (CONT.)
Southside Bancshares Corp. and Subsidiaries
to another strong year in the stock market, as well as continued growth in the
Company's personal trust business, which is the most profitable area within the
trust department. The increase in service charges revenue resulted from pricing
changes implemented in the current year to bring the Company's service charge in
line with its competitors. The decrease in losses on the sales of OREO was due
to the fact that there were no net gains or losses on the sales of properties in
1999. The decrease in gains on sales of loans was due, in large part, to the
increasing interest rate environment during 1999. By the second half of the
year, virtually all of the loans being generated were adjustable rate mortgages.
These loans, which the Company keeps for its own portfolio, do not generate
secondary market fee income. The increase in other income was due to earnings on
bank owned life insurance purchased to offset the cost of deferred board fee and
salary continuation programs which were established for directors and officers
of the Company and the subsidiary banks.
Noninterest income increased $499,000 in 1998 due to increases in gains on
the sales of loans and trust department revenue. The increase in gains on the
sales of loans was the result of the PSB acquisition. One of the key components
of this transaction was PSB's strong secondary market loan origination
operation. As a commercial banking organization, the Company had not focused on
the secondary market previously. The acquisition of PSB allowed the Company to
enter this line of business with an experienced staff, extensive referral
sources, operating policies and procedures, and a network of investors to
purchase the loans originated. Management had considered entering this market
for some time, but believed a start-up operation in this line of business would
not be profitable for an extended period of time. The Company has consistently
lagged behind its peers in other income, and management viewed this acquisition
as an opportunity to make significant improvements in this area. The increase in
trust department revenue was due to trust department growth during the year.
Although total assets under management declined by approximately $30,000,000
during 1998, the decline was the result of the loss of an $80,000,000 bond
syndication, which was partially offset by $50,000,000 in new personal and
employee benefit trust accounts. The bond syndication account was a relatively
low trust fee account, whereas the new accounts added are generally under the
department's normal fee structure. The increase in net losses in OREO
transactions was part of the normal course of business. Depending on the timing
of foreclosures, buyer interest levels, and other factors, sales of properties
result in small gains or losses.
NONINTEREST EXPENSE
Noninterest expense increased $1,735,000 during 1999. The increase in
noninterest expense can largely be attributed to the Company's recent expansion
efforts. Salaries and benefits increased $687,000 from 1998 to 1999.
Approximately one half of the increase was due to normal wage increases, the
remainder was due to a full year of personnel costs for the two PSB branches
versus only a half year in 1998, and the personnel costs associated with the two
branches opened in 1999. The $485,000 increase in occupancy expense was also the
result of these new branches. The increase in data processing expense of
$177,000 included the additional costs of operating the new facilities, as well
as costs for finalizing the Company's Y2K preparedness. The increase in other
expenses was also due to costs associated with the additional facilities
including supplies, telephone, and other bank services.
Noninterest expense increased $923,000 during 1998. This increase was
primarily the result of the acquisition of PSB. The increase in salaries and
employee benefits resulted from the addition of PSB's employees, the commissions
paid to the mortgage loan originators, and normal pay increases for the
Company's existing employees. These increases in compensation expense were
partially offset by a $375,000 curtailment gain resulting from the termination
of the Company's pension plan. Also contributing to the 1998 increase was an
increase in data processing expense. This was partially the result of conversion
expenses associated with converting PSB's accounts into the Company's data
processing system, as well as expenses associated with Year 2000 testing and
preparedness. Other noninterest expense increased during the year as the Company
increased its commitment to advertising during the year. With the mergers and
consolidations occurring in the Company's markets, management believed it was
the appropriate time to focus on image enhancement and customer awareness. These
increases were partially offset by a
23
<PAGE> 25
RESULTS OF OPERATIONS (CONT.)
Southside Bancshares Corp. and Subsidiaries
decrease in net occupancy expense, which resulted from several large furniture
and equipment items becoming fully depreciated, and an increase in rental
income. With the completion of its lead bank's new three-story banking facility,
a new two-story facility which was opened by the State Bank of Jefferson County
in 1999, and various updates scheduled for its existing locations, management
expects to experience an increase in net occupancy expense in 1999.
INCOME TAXES
Income tax expense was $2,706,000 in 1999 compared to $3,055,000 and
$2,696,000 in 1998 and 1997, respectively. The changes in income tax expense
have been relatively consistent with the changes in pretax income, although the
Company's effective tax rate decreased to 30.3% in 1999 from 31.1% in 1998 and
30.0% in 1997. The decrease in the effective tax rate in 1999 was due to an
increase in low income housing tax credits, an increase in tax-exempt municipal
securities and the purchase of bank-owned life insurance.
THE YEAR 2000 ISSUE
The Company has not experienced any significant disruptions to its financial
or operating activities caused by failure of our computerized systems resulting
from Year 2000 issues. Management does not expect Year 2000 issues to have a
material adverse effect on the Company's operations or financial results in
2000.
The Company has no information that indicates a significant vendor or
service provider may be unable to sell goods or provide services to the Company
or that any significant customer may be unable to purchase from the Company
because of Year 2000 issues. Further, the Company has not received any
notifications from borrowers or regulatory agencies to which it is subject, nor
is it aware of any such information which indicates that a borrower has
experienced significant issues which may impact their ability to service their
loan or which may impact their borrowing agreement terms or covenants, or
significant regulatory action is being or may be taken against the Company, as a
result of Year 2000 issues.
ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) 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 SFAS 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. In June 1999, the FASB issued SFAS 137, Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133, an Amendment of FASB Statement No. 133, which defers
the effective date of SFAS 133 from fiscal years beginning after June 15, 1999
to fiscal years beginning after June 15, 2000. Initial application should be as
of the beginning of an entity's fiscal quarter; on that date, hedging
relationships must be designated and documented pursuant to the provisions of
SFAS 133, as amended. Earlier application of all of the provisions is encouraged
but is permitted only as of the beginning of any fiscal quarter that begins
after the issuance date of SFAS 133, as amended. Additionally, SFAS 133, as
amended, should not be applied retroactively to financial statements of prior
periods. The Company is currently evaluating the requirements of SFAS 133, as
amended, to determine its potential impact on the consolidated financial
statements.
EFFECTS OF INFLATION
Persistent high rates of inflation can have a significant effect on the
reported financial condition and results of operations of all industries.
However, the asset and liability structure of a bank is substantially different
from that of an industrial company, in that virtually all assets and liabilities
of a bank are monetary in nature. Accordingly,
24
<PAGE> 26
RESULTS OF OPERATIONS (CONT.)
Southside Bancshares Corp. and Subsidiaries
changes in interest rates may have a significant impact on a bank's performance.
Interest rates do not necessarily move in the same direction, or in the same
magnitude, as the prices of other goods and services.
Inflation does have an impact on the growth of total assets in the banking
industry, often resulting in a need to increase equity capital at higher than
normal rates to maintain an appropriate equity-to-assets ratio.
Although it is obvious that inflation affects the growth of total assets, it
is difficult to measure the impact precisely. Only new assets acquired in each
year are directly affected, so a simple adjustment of asset totals by use of an
inflation index is not meaningful. The results of operations also have been
affected by inflation, but again there is no simple way to measure the effect on
the various categories of income and expense.
Interest rates in particular are significantly affected by inflation, but
neither the timing nor the magnitude of the changes coincide with changes in
standard measurements of inflation such as the Consumer Price Index.
Additionally, changes in interest rates on some types of consumer deposits may
be delayed. These factors in turn affect the composition of sources of funds by
reducing the growth of deposits that are less interest rate-sensitive and
increasing the need for funds that are more interest rate-sensitive.
FINANCIAL INSTRUMENT MARKET VALUE
As disclosed in note 15 to the Company's consolidated financial statements,
the fair value of financial instrument assets was less than the amounts included
in the balance sheet by $3,517,000 as of December 31, 1999 and exceeded the
balance sheet amounts of those instruments by $11,408,000 as of December 31,
1998, while the fair value of financial instrument liabilities exceeded the
balance sheet amounts of those instruments by $79,000 as of December 31, 1999
and was less than the amounts included in the balance sheet by $1,609,000 as of
December 31, 1998.
Such comparative information reflects the effect of the current rate
environment, as well as the Company's asset/liability and credit risk management
programs. The fair value estimates are based on existing financial instruments
at December 31, 1999 and do not reflect amounts which would be ultimately
realized in the normal course of business.
COMMON STOCK - MARKET PRICE AND DIVIDENDS
The Company's common stock is traded on The NASDAQ Stock Market under the
symbol SBCO.
The table below sets forth the high and low bid prices for the Company's
common stock for the periods presented.
<TABLE>
<CAPTION>
1999 1998
------------------------------------- ---------------------------------------
QUARTER 1ST 2ND 3RD 4TH 1st 2nd 3rd 4th
--- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Low bid $ 10.75 $ 10.00 $ 9.00 $ 8.31 $ 11.42 $ 12.08 $ 11.17 $ 11.75
High bid 13.00 11.63 11.31 9.75 12.58 14.92 13.00 15.00
Dividends paid
per common
share .08 .08 .08 .08 .067 .07 .073 .08
=== === === === ==== === ==== ===
</TABLE>
The market price of the Company's common stock on February 18, 2000 was
$8.625 bid, $8.75 asked. The approximate number of shareholders of the common
stock of the Company as of February 18, 2000 was 1,000.
In 1998, the Company effected a three-for-one stock split. The effects of
this split have been applied to the share and per share data on a retroactive
basis to all of the financial data contained throughout this report.
25
<PAGE> 27
RESULTS OF OPERATIONS (CONT.)
Southside Bancshares Corp. and Subsidiaries
FINANCIAL REPORT
A copy of the Company's 1999 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission, including all exhibits and financial
statements thereto, is available without charge to shareholders on written
request to Joseph W. Pope, Senior Vice President and Chief Financial Officer,
Southside Bancshares Corp., 3606 Gravois Avenue, St. Louis, Missouri 63116.
ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Southside Bancshares Corp. will be
held at 2:00 p.m. on April 27, 2000 at South Side National Bank's Telegraph
facility, which is located at 4111 Telegraph Road, St. Louis, Missouri.
The Company's bylaws require that notice of shareholder nominations for
directors at the Company's Annual Meeting of Shareholders must be received by
the Secretary of the Company not less than 75 days prior to the date of the
Annual Meeting.
TRANSFER AGENT
The Company's transfer agent is UMB Bank, N.A., Securities Transfer
Division, P.O. Box 410064, Kansas City, Missouri 64141-0064, (816) 860-7786.
26
<PAGE> 28
SOUTHSIDE BANCSHARES CORP.
3606 Gravois Avenue
St. Louis, MO 63116
(314) 776-7000
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
February 18, 2000
The management of Southside Bancshares Corp. (the Company) is responsible for
the preparation and integrity of all information contained in the accompanying
consolidated financial statements. The consolidated financial statements have
been prepared in conformity with generally accepted accounting principles
appropriate in the circumstances. In preparing the consolidated financial
statements, management makes informed judgments and estimates.
To help meet this responsibility, the Company maintains a system of internal
control that is reviewed and revised, as necessary, in view of the results of
internal and independent audits, management recommendations, changes in the
Company's business, and other conditions that come to management's attention.
Management believes that the Company's system, taken as a whole, provides
reasonable assurance that (1) transactions are executed in accordance with
management's general or specific authorization, (2) transactions are recorded as
necessary to permit preparation of consolidated financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets, (3) access to assets is permitted only in accordance
with management's general or specific authorization, and (4) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Management also seeks to assure the objectivity and integrity of the Company's
financial data by careful selection of managers, an internal audit function, and
organizational arrangements that provide an appropriate division of
responsibility.
The Company's consolidated financial statements have been audited by KPMG LLP,
independent certified public accountants. Their Independent Auditors' Report,
which is based on an audit made in accordance with generally accepted auditing
standards, expresses an opinion as to the fair presentation of the consolidated
financial statements. In performing their audit, KPMG LLP considers the
Company's internal control to the extent they deem necessary in order to issue
their opinion on the consolidated financial statements.
The Audit Committee of the Board of Directors is composed solely of directors
who are not employees of the Company. The Committee meets periodically and
privately with the independent auditors, the internal auditors, and the
financial officers of the Company to review matters relating to the quality of
the financial reporting of the Company, the related internal controls, and the
scope and results of audit examinations. It is also responsible for recommending
the appointment of the Company's independent auditors, subject to shareholder
approval.
Thomas M. Teschner Joseph W. Pope
President and Chief Executive Officer Senior Vice President and
Chief Financial Officer
27
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Southside Bancshares Corp.:
We have audited the accompanying consolidated balance sheets of Southside
Bancshares Corp. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, shareholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Southside
Bancshares Corp. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
KPMG LLP
St. Louis, Missouri
February 18, 2000
28
<PAGE> 30
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1999 1998
---- ----
<S> <C> <C>
Cash and due from banks............................................ $ 19,311 $ 17,924
Interest-bearing deposits in banks................................. 159 -
------- --------
Cash and cash equivalents............................ 19,470 17,924
------- --------
Federal funds sold................................................. 2,600 29,900
Investments in debt securities:
Available for sale, at fair value............................. 158,630 97,895
Held to maturity, at amortized cost (fair value
of $61,316 in 1999 and $85,841 in 1998).................... 61,595 84,036
------- --------
Total investments in debt securities................. 220,225 181,931
------- -------
Loans, net of unearned discount.................................... 392,437 356,988
Less allowance for possible loan losses....................... 5,830 6,192
------- ---------
Loans, net........................................... 386,607 350,796
------- -------
Premises and equipment............................................. 17,563 16,152
Other assets....................................................... 31,687 13,590
------- ---------
TOTAL ASSETS......................................... $ 678,152 $ 610,293
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing........................................... $ 74,577 $ 70,436
Interest-bearing.............................................. 441,233 452,853
------- -------
Total deposits....................................... 515,810 523,289
Federal funds purchased............................................ 1,000 -
Securities sold under agreements to repurchase..................... 7,603 2,949
FHLB borrowings.................................................... 83,921 14,287
Debt of Employee Stock Ownership Plan.............................. 1,186 -
Other liabilities.................................................. 4,224 4,804
------- -------
Total liabilities.................................... 613,744 545,329
------- -------
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,
8,985,378 shares issued in 1999 and 1998................... 8,985 8,985
Surplus....................................................... 5,431 5,248
Retained earnings............................................. 58,765 55,249
Unearned Employee Stock Ownership Plan shares................. (988) (1,186)
Treasury stock, at cost, 391,750 and 324,020 shares in
1999 and 1998, respectively................................ (4,335) (3,590)
Accumulated other comprehensive income (loss)................. (3,450) 258
------- -------
Total shareholders' equity........................... 64,408 64,964
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........... $ 678,152 $ 610,293
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE> 31
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Interest income:
<S> <C> <C> <C>
Interest and fees on loans......................................... $ 29,652 $ 30,259 $ 27,682
Interest on investments in debt securities available for sale:
Taxable......................................................... 8,085 4,614 4,336
Exempt from Federal income taxes................................ 368 162 24
Interest on investments in debt securities held to maturity:
Taxable......................................................... 2,738 4,558 5,142
Exempt from Federal income taxes................................ 1,277 1,373 1,265
Interest on short-term investments................................. 1,048 1,261 871
---------- ----------- -----------
TOTAL INTEREST INCOME.................................... 43,168 42,227 39,320
---------- ----------- -----------
Interest expense:
Interest on deposits............................................... 17,894 19,101 17,910
Interest on short-term borrowings.................................. 145 146 228
Interest on FHLB borrowings........................................ 2,198 610 -
Interest on debt of Employee Stock Ownership Plan.................. 26 - 105
---------- ----------- -----------
TOTAL INTEREST EXPENSE................................... 20,263 19,857 18,243
---------- ----------- -----------
NET INTEREST INCOME...................................... 22,905 22,370 21,077
Provision for possible loan losses...................................... 45 62 60
---------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES............................. 22,860 22,308 21,017
---------- ----------- -----------
Noninterest income:
Trust fees......................................................... 1,225 1,142 1,046
Service charges on deposit accounts................................ 1,450 1,330 1,330
Gains on the sales of loans........................................ 275 430 35
Net losses on sales of other real estate owned and other
foreclosed property............................................. - (104) (64)
Other.............................................................. 608 533 485
---------- ----------- -----------
TOTAL NONINTEREST INCOME................................. 3,558 3,331 2,832
---------- ----------- -----------
Noninterest expense:
Salaries and employee benefits..................................... 8,934 8,247 7,561
Net occupancy and equipment expense................................ 2,736 2,251 2,384
Data processing.................................................... 750 573 465
Advertising........................................................ 440 420 364
Attorney fees...................................................... 226 327 407
Other.............................................................. 4,423 3,956 3,670
---------- ----------- -----------
TOTAL NONINTEREST EXPENSE................................ 17,509 15,774 14,851
---------- ----------- -----------
INCOME BEFORE INCOME
TAX EXPENSE.......................................... 8,909 9,865 8,998
Income tax expense ..................................................... 2,706 3,055 2,696
---------- ----------- -----------
NET INCOME............................................... $ 6,203 $ 6,810 $ 6,302
========== =========== ===========
SHARE DATA:
Earnings per common share - basic................................. $ 0.74 $ 0.82 $ 0.77
========== =========== ===========
Earnings per common share - diluted................................ $ 0.72 $ 0.80 $ 0.75
========== =========== ===========
Dividends paid per common share.................................... $ 0.32 $ 0.29 $ 0.23
========== =========== ===========
Average common shares outstanding.................................. 8,414,752 8,297,250 8,207,577
========== =========== ===========
Average common shares outstanding, including
potentially dilutive shares..................................... 8,598,161 8,554,635 8,394,315
========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 32
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
ACCUMULATED
UNEARNED OTHER COM-
COMMON RETAINED ESOP TREASURY PREHENSIVE
STOCK SURPLUS EARNINGS SHARES STOCK INCOME (LOSS) TOTAL
----- ------- -------- -------- -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996............ $ 8,577 $ 101 $ 46,448 $ (1,581) $ (450) $ (254) $ 52,841
Comprehensive income:
Net income......................... - - 6,302 - - - 6,302
Change in net unrealized gain
(loss) on available for sale
securities, net of tax effect.... - - - - - 388 388
-------- -------- --------- -------- ------- ------- ---------
Total comprehensive income... - - 6,302 - - 388 6,690
-------- -------- --------- -------- ------- ------- ---------
Cash dividends paid ($.23 per share).... - - (1,909) - - - (1,909)
Allocation of 37,062 shares to
ESOP participants.................. - 204 - 197 - - 401
Purchase of 117,000 common shares
for treasury....................... - - - - (1,370) - (1,370)
-------- -------- --------- -------- ------- ------- ---------
BALANCE AT DECEMBER 31, 1997............ 8,577 305 50,841 (1,384) (1,820) 134 56,653
Comprehensive income:
Net income......................... - - 6,810 - - - 6,810
Change in net unrealized gain
(loss) on available for sale
securities, net of tax effect.... - - - - - 124 124
-------- -------- --------- -------- ------- ------- ---------
Total comprehensive income - - 6,810 - - 124 6,934
Cash dividends paid ($.29 per share).... - - (2,402) - - - (2,402)
Allocation of 37,062 shares to
ESOP participants.................. - 263 - 198 - - 461
Stock options exercised................. - (90) - - 90 - -
Issuance of 408,348 common shares
in acquisition..................... 408 4,770 - - - - 5,178
Purchase of 140,000 common shares
for treasury....................... - - - - (1,860) - (1,860)
-------- -------- --------- -------- ------- ------- ---------
BALANCE AT DECEMBER 31, 1998............ 8,985 5,248 55,249 (1,186) (3,590) 258 64,964
Comprehensive income:
Net income......................... - - 6,203 - - - 6,203
Change in net unrealized gain
(loss) on available for sale
securities, net of tax effect.... - - - - - (3,708) (3,708)
-------- -------- --------- -------- ------- ------- ---------
Total comprehensive income.. - - 6,203 - - (3,708) 2,495
Cash dividends paid ($.32 per share).... - - (2,687) - - - (2,687)
Allocation of 37,062 shares to
ESOP participants.................. - 183 - 198 - - 381
Purchase of 67,730 common shares
for treasury....................... - - - - (745) - (745)
-------- -------- --------- -------- ------- ------- ---------
BALANCE AT DECEMBER 31, 1999............ $ 8,985 $ 5,431 $ 58,765 $ (988) $ (4,335) $(3,450) $ 64,408
======== ======== ========= ======== ======= ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 33
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................... $ 6,203 $ 6,810 $ 6,302
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................................... 2,399 1,686 1,626
Provision for possible loan losses..................................... 45 62 60
Provision for deferred income taxes.................................... (63) (7) (286)
Net losses on sales of other real estate owned and
other foreclosed property........................................ -- 104 64
Increase (decrease) in income taxes payable............................ 133 (370) (245)
(Increase) decrease in accrued interest receivable..................... (317) (234) 34
(Decrease) increase in accrued interest payable........................ (382) 280 32
Employee Stock Ownership Plan compensation expense..................... 381 461 401
Origination of loans for sale.......................................... (15,992) (31,798) (2,933)
Proceeds from sales of loans........................................... 16,267 32,228 2,968
Other operating activities, net........................................ (735) (1,059) 403
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES......................... 7,939 8,163 8,426
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in Federal funds sold................................ 27,300 (12,700) (3,700)
Proceeds from maturities of and principal payments on debt securities:
Available for sale........................................................ 26,154 31,703 14,092
Held to maturity.......................................................... 23,603 35,288 33,461
Purchases of debt securities:
Available for sale........................................................ (93,008) (45,927) (19,391)
Held to maturity.......................................................... (1,410) (19,811) (13,720)
Net (increase) decrease in loans............................................. (36,532) 14,627 (32,631)
Recoveries of loans previously charged off................................... 263 289 825
Purchases of premises and equipment.......................................... (2,617) (4,423) (1,213)
Proceeds from sales of other real estate owned............................... 173 241 258
Purchase of bank-owned life insurance........................................ (15,882) -- --
Cash and cash equivalents acquired, net of cash paid......................... -- 8,238 --
-------- -------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES............... (71,956) 7,525 (22,019)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits.................................. 17,527 5,423 13,477
Net (decrease) increase in time deposits..................................... (25,006) (20,760) 2,610
Net increase in Federal funds purchased...................................... 1,000 -- --
Net increase (decrease) in securities sold under agreements to repurchase.... 4,654 (2,384) 3,710
Net increase (decrease) in FHLB borrowings................................... 69,634 5,917 (1,779)
Proceeds from debt of Employee Stock Ownership Plan.......................... 1,186 -- --
Purchase of treasury stock................................................... (745) (1,860) (1,370)
Cash dividends paid.......................................................... (2,687) (2,402) (1,909)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES............... 65,563 (16,066) 14,739
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................................ 1,546 (378) 1,146
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...................................... 17,924 18,302 17,156
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR............................................ $ 19,470 $ 17,924 $ 18,302
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowings....................................... $ 20,645 $ 20,137 $ 18,275
Income taxes.............................................................. 2,822 3,165 2,969
======== ======== ========
Noncash transactions:
Transfers to other real estate owned in settlement of loans............... $ 138 $ 174 $ 492
Issuance of common shares in acquisition.................................. -- 5,178 --
Issuance of stock under stock option plan................................. -- 90 --
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 34
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997
NOTE 1 -- SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Southside Bancshares Corp. and its banking subsidiaries (the Company)
provide a full range of banking services to individual and corporate customers
throughout the eastern portions of Missouri, including the City of St. Louis and
the counties of Franklin, Jefferson, St. Charles, St. Francois, Ste. Genevieve,
St. Louis, and Washington, through its four subsidiary banks.
The Company is subject to competition from other financial and nonfinancial
institutions providing financial products in these Missouri markets.
Additionally, the Company is subject to the regulations of certain federal and
state agencies and undergoes periodic examinations by those regulatory agencies.
The accounting and reporting policies of the Company conform, in all
material respects, to generally accepted accounting principles within the
banking industry. The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions, including the determination of the allowance for
possible loan losses, that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
The more significant of the Company's accounting policies are set forth
below:
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its banking subsidiaries, after elimination of all significant intercompany
accounts and transactions.
INVESTMENTS IN DEBT SECURITIES
At the time of purchase, debt securities are classified into one of two
categories: available for sale or held to maturity. Held to maturity securities
are those securities for which the Company has the ability and positive intent
to hold until maturity. All other securities not included in held to maturity
are classified as available for sale.
Available for sale securities are recorded at fair value. Held to maturity
securities are recorded at amortized cost, adjusted for the amortization or
accretion of premiums or discounts. Unrealized gains and losses, net of the
related tax effect, on available for sale securities are excluded from earnings
and reported as a separate component of shareholders' equity until realized. A
decline in the market value of any available for sale or held to maturity
security below cost that is deemed other than temporary results in a charge to
earnings and the establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the lives of the
respective securities as an adjustment to yield using the interest method.
Dividend and interest income are recognized when earned. Realized gains and
losses for securities classified as available for sale are included in earnings
and are derived using the specific-identification method for determining the
cost of securities sold.
INTEREST ON LOANS
Interest on commercial, real estate mortgage, and installment loans is
credited to income based on the principal amount outstanding. Loans are placed
on a nonaccrual basis when interest is past due 90 days or more and when, in the
opinion of management, full collection of principal or interest is unlikely. At
the time a loan is placed on nonaccrual status, interest accrued in the current
year but not collected is charged against current income, with any prior year
interest accrued and unpaid charged against the allowance for possible loan
losses. Subsequent interest payments received on such loans are applied to
principal if there is any doubt as to the collectibility of such principal;
otherwise, such receipts are recorded as interest income. Loans are returned to
accrual status only when borrowers have brought all past due principal and
interest payments current and, in the opinion of management, the borrowers have
demonstrated the ability to make future payments of principal and interest as
scheduled.
Loan origination fees and certain direct origination costs, to the extent
deemed significant, are deferred and amortized over the life of the underlying
loan.
33
<PAGE> 35
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is increased by provisions charged
to expense and reduced by loans charged off, net of recoveries. The allowance
for possible loan losses is maintained at a level considered adequate to provide
for probable loan losses based on management's evaluation of current economic
conditions, changes in the character and size of the loan portfolio, portfolio
risk characteristics, prior loss experience, and results of periodic credit
reviews of the loan portfolio.
Management believes the allowance for possible loan losses is adequate to
absorb losses in the loan portfolio. While management uses available information
to recognize loan losses, future additions to the allowance may be necessary
based on changes in economic conditions. Additionally, regulatory agencies, as
an integral part of their examination process, periodically review the
subsidiary banks' allowances for possible loan losses. Such agencies may require
the subsidiary banks to increase their allowances for possible loan losses based
on their judgments and interpretations about information available to them at
the time of their examinations.
A loan is considered impaired when it is probable a creditor will be unable
to collect all amounts due, both principal and interest, according to the
contractual terms of the loan agreement. When measuring impairment, the expected
future cash flows of an impaired loan must be discounted at the loan's effective
interest rate. Alternatively, impairment can be measured by reference to an
observable market price, if one exists, or the fair value of the collateral for
a collateral-dependent loan. Regardless of the historical method used, the
Company measures impairment based on the fair value of the collateral when the
creditor has determined foreclosure is probable. Additionally, impairment of a
restructured loan is measured by discounting the total expected future cash
flows at the loan's effective rate of interest as stated in the original loan
agreement. The Company continues to use existing nonaccrual methods for
recognizing interest income on impaired loans.
LOANS HELD FOR SALE
In its lending activities, the Company originates residential mortgage
loans intended for sale in the secondary market. Loans held for sale are carried
at the lower of cost or fair value, which is determined on an aggregate basis.
Gains or losses on the sale of loans held for sale are determined on a specific
identification method.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation are computed using the straight-line method over periods of 10 to
40 years for buildings and 3 to 15 years for furniture and equipment. Rents
collected under lease agreements for space in subsidiary bank buildings are
credited to occupancy expense in the noninterest expenses category.
INTANGIBLE ASSETS
Intangible assets, consisting primarily of goodwill and a core deposit base
premium, are included in other assets in the consolidated balance sheets.
Goodwill, the excess of cost over the fair value of net assets acquired in
business combinations accounted for as purchases, is amortized using the
straight-line method over 15 years. The core deposit base premium is being
amortized over 10 years, the estimated life of the deposit base acquired. Gross
intangible assets totaled $7,178,000 and $6,672,000 at December 31, 1999 and
1998, respectively, with accumulated amortization of $3,406,000 and $2,998,000,
respectively.
INCOME TAXES
The Company and its subsidiary banks file consolidated income tax returns.
Provisions for income taxes are based on the tax effects of transactions which
are included in the determination of pretax accounting income.
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
TREASURY STOCK
The purchase of the Company's common shares is recorded at cost. Upon
subsequent reissuance, the treasury stock account is reduced by the average cost
basis of such common shares purchased.
TRUST ASSETS
Assets held by the Company's national banking subsidiary in a fiduciary or
agency capacity for customers are not included in the consolidated financial
statements, as such items are not assets of the
34
<PAGE> 36
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
Company or its subsidiaries. Trust department operating expenses are included in
noninterest expenses on the consolidated statements of income.
EARNINGS PER COMMON SHARE
In 1998, the Company effected a three-for-one stock split. The effects of
this split have been applied to the share and per share data on a retroactive
basis to all of the financial data contained throughout the consolidated
financial statements and notes to consolidated financial statements.
Basic earnings per share (EPS) is computed by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity.
CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers cash and due from banks and interest-bearing deposits in banks to be
cash and cash equivalents.
IMPAIRMENT OF LONG-LIVED ASSETS AND
LONG-LIVED ASSETS TO BE DISPOSED OF
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flow expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
RECLASSIFICATIONS
Certain prior year information has been reclassified to conform with the
current year presentation.
NOTE 2 -- 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 had three offices in the St.
Louis metropolitan area. The Company paid approximately $3,456,000 in cash and
issued 408,348 shares of common 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 of approximately $3,900,000 is
included in other assets in the Company's consolidated balance sheets.
NOTE 3 -- INVESTMENTS IN DEBT
SECURITIES
The amortized cost and fair values of debt securities classified as
available for sale at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1999
----------------------------------------
AMOR- GROSS
TIZED UNREALIZED FAIR
COST ---------- VALUE
---- GAINS LOSSES -----
----- ------
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of
U.S. Govern-
ment agencies
and corpora-
tions $ 58,168 $ 1 $ (1,199) $ 56,970
Obligations of
states and
political
subdivisions 8,970 -- (518) 8,452
Mortgage-backed
securities 91,801 5 (3,512) 88,294
Other securities 4,915 -- (1) 4,914
--------- --------- --------- ---------
$ 163,854 $ 6 $ (5,230) $ 158,630
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
(in thousands)
1998
-----------------------------------------
AMOR- GROSS
TIZED UNREALIZED FAIR
COST ---------- VALUE
---- GAINS LOSSES -----
----- ------
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of
U.S. Govern-
ment agencies
and corpora-
tions $ 35,368 $ 467 $ -- $ 35,835
Obligations of
states and
political
subdivisions 6,487 62 (6) 6,543
Mortgage-backed
securities 53,328 269 (403) 53,194
Other securities 2,321 2 -- 2,323
-------- -------- -------- --------
$ 97,504 $ 800 $ (409) $ 97,895
======== ======== ======== ========
</TABLE>
35
<PAGE> 37
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
The amortized cost and fair value of debt securities classified as
available for sale at December 31, 1999, by contractual maturity, are shown
below. Expected maturities may differ from contractual maturities because
borrowers have the right to call or prepay obligations with or without
prepayment penalties.
<TABLE>
<CAPTION>
(in thousands)
AMOR-
TIZED FAIR
COST VALUE
---- -----
<S> <C> <C>
Due in one year or less $ 9,857 $ 9,849
Due after one year through
five years 37,046 36,343
Due after five years through
ten years 12,419 11,945
Due after ten years 7,916 7,384
Mortgage-backed securities 91,801 88,294
Federal Home Loan Bank stock -
no stated maturity 4,364 4,364
Federal National Mortgage Association
stock - no stated maturity 5 5
Federal Reserve Bank stock -
no stated maturity 446 446
-------- --------
$163,854 $158,630
======== ========
</TABLE>
The amortized cost and fair values of debt securities classified as held to
maturity at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1999
-----------------------------------------------
AMOR- GROSS
TIZED UNREALIZED FAIR
COST ---------- VALUE
---- GAINS LOSSES -----
----- ------
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of
U.S. Govern-
ment agencies
and corpora-
tions $ 36,784 $ 27 $ (235) $ 36,576
Obligations of
states and
political
subdivisions 23,165 226 (297) 23,094
Mortgage-backed
securities 1,646 10 (10) 1,646
-------- -------- -------- --------
$ 61,595 $ 263 $ (542) $ 61,316
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
(in thousands)
1998
----------------------------------------------
Amor- Gross
tized Unrealized Fair
Cost ---------- Value
---- Gains Losses -----
----- ------
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of
U.S. Govern-
ment agencies
and corpora-
tions $ 55,769 $ 884 $ (39) $ 56,614
Obligations of
states and
political
subdivisions 25,647 925 (4) 26,568
Mortgage-backed
securities 2,620 39 -- 2,659
-------- -------- -------- --------
$ 84,036 $ 1,848 $ (43) $ 85,841
======== ======== ======== ========
</TABLE>
The amortized cost and fair value of debt securities classified as held to
maturity at December 31, 1999, by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities because borrowers
have the right to call or prepay obligations with or without prepayment
penalties.
<TABLE>
<CAPTION>
(in thousands)
AMOR-
TIZED FAIR
COST VALUE
---- -----
<S> <C> <C>
Due in one year or less $ 21,017 $ 21,038
Due after one year through
five years 20,606 20,584
Due after five years through
ten years 14,961 14,872
Due after ten years 3,365 3,176
Mortgage-backed securities 1,646 1,646
--------- ---------
$ 61,595 $ 61,316
========= =========
</TABLE>
There were no sales of debt securities during 1999, 1998, and 1997.
The carrying value of securities pledged to secure deposits and
collateralize borrowings amounted to $112,852,000 and $57,015,000 at December
31, 1999 and 1998, respectively.
36
<PAGE> 38
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 4 -- LOANS
Loans, by category, at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
---- ----
<S> <C> <C>
Commercial, financial,
and agricultural $ 73,943 $ 68,166
Real estate - commercial 136,697 115,214
Real estate - construction 19,078 21,993
Real estate - residential 131,074 119,917
Consumer 23,130 22,219
Industrial revenue bonds 3,879 4,717
Other 4,636 4,762
-------- --------
Total loans 392,437 356,988
Less allowance for possible
loan losses 5,830 6,192
-------- --------
Loans, net $386,607 $350,796
======== ========
</TABLE>
The Company's banking subsidiaries grant agricultural, commercial,
residential, and consumer loans to customers throughout their service area,
which consists primarily of the eastern portion of Missouri, including the City
of St. Louis and the counties of Franklin, Jefferson, St. Charles, St. Francois,
Ste. Genevieve, St. Louis, and Washington. The Company has a diversified loan
portfolio, with no particular concentration of credit in any one economic sector
in this service area; however, a substantial portion of the portfolio is
concentrated in and secured by real estate. The ability of the Company's
borrowers to honor their contractual obligations is dependent upon the local
economies and their effect on the real estate market.
The Company's investment in industrial revenue bonds are classified as held
to maturity. The estimated fair value of these instruments was $4,034,000 and
$4,906,000 at December 31, 1999 and 1998, respectively.
Transactions in the allowance for possible loan losses for the years ended
December 31, 1999, 1998, and 1997 were as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of
year $ 6,192 $ 6,120 $ 5,602
Provision charged
to expense 45 62 60
Allowance of PSB at acquisition -- 257 --
Loans charged off (670) (536) (367)
Recoveries 263 289 825
------- ------- -------
Balance at end of year $ 5,830 $ 6,192 $ 6,120
======= ======= =======
</TABLE>
A summary of impaired loans, including nonaccrual loans, at December 31,
1999 and 1998 follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
---- ----
<S> <C> <C>
Nonaccrual loans $6,695 $3,189
Impaired loans continuing
to accrue interest 221 3,831
------ ------
Total impaired loans $6,916 $7,020
====== ======
Allowance for possible losses
on impaired loans $2,753 $1,589
====== ======
Impaired loans with no related
allowance for possible
loan losses $ 669 $4,243
====== ======
</TABLE>
The average balance of impaired loans during the year was $5,839,000
$5,944,000, and $2,997,000 at December 31, 1999, 1998, and 1997, respectively.
If interest on nonaccrual loans, including amounts computed on principal
balances charged off on such loans, had been accrued, such income would have
been $623,000, $252,000, and $232,000 for the years ended December 31, 1999,
1998, and 1997, respectively. The amount recognized as interest income on
nonaccrual loans was $62,000, $194,000, and $113,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.
The amount recognized as interest income on other impaired loans continuing
to accrue interest was $20,000, $343,000, and $102,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.
There were no restructured loans at December 31, 1999 and 1998.
Aggregate loan transactions involving executive officers and directors of
the Company and its subsidiaries for the year ended December 31, 1999 are
summarized below (in thousands). This summary excludes all loans to executive
officers and directors whose indebtedness to the Company and its subsidiaries
did not exceed $60,000 at any time during 1999.
<TABLE>
<CAPTION>
<S> <C>
Aggregate balance, December 31, 1998 $ 10,006
New loans and advances 31,166
Advances to new executive officers
and directors 16,008
Repayments (21,802)
--------
Aggregate balance, December 31, 1999 $ 35,378
========
</TABLE>
37
<PAGE> 39
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
All such loans to executive officers and directors were made in the normal
course of business on substantially the same terms, including interest rates and
collateral, as those prevailing at the same time for comparable transactions
with other persons, and did not involve more than the normal risk of
collectibility. There were no loans involving executive officers and directors
which were on nonaccrual status or past due 90 days and still accruing interest
as of December 31, 1999.
NOTE 5 -- PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
---- ----
<S> <C> <C>
Land $ 3,867 $ 3,879
Buildings 16,158 15,804
Furniture and equipment 6,911 6,493
------- -------
26,936 26,176
Less accumulated depreciation 9,373 10,024
------- -------
$17,563 $16,152
======= =======
</TABLE>
Depreciation of premises and equipment charged to net occupancy and
equipment expense amounted to $1,228,000, $1,015,000, and $1,108,000 for 1999,
1998, and 1997, respectively.
Rents collected and credited to net occupancy and equipment expense
amounted to $261,000, $221,000, and $116,000 for 1999, 1998, and 1999,
respectively.
NOTE 6 -- DEPOSITS
Deposits, by category, at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
---- ----
<S> <C> <C>
Noninterest-bearing
demand deposits $ 74,577 $ 70,436
Interest-bearing
demand deposits 158,826 142,411
Savings deposits 62,322 65,351
Time deposits:
Under $100,000 178,857 196,930
$100,000 and over 41,228 48,161
-------- --------
$515,810 $523,289
======== ========
</TABLE>
A summary of time deposits as of December 31, 1999 by time remaining until
maturity is as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Due in one year or less $155,779
Due after one year through two years 40,179
Due after two years through three years 9,491
Due after three years through four years 10,613
Due after four years through five years 3,482
Thereafter 541
--------
$220,085
========
</TABLE>
Interest paid on deposits consists of the following for the years ended
December 31, 1999, 1998, and 1997:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Interest-bearing
demand deposits $ 4,798 $ 4,848 $ 4,346
Savings deposits 1,579 1,535 1,459
Time deposits:
Under $100,000 9,353 9,997 9,309
$100,000 and over 2,164 2,721 2,796
------- ------- -------
$17,894 $19,101 $17,910
======= ======= =======
</TABLE>
NOTE 7 -- SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
A summary of securities sold under agreements to repurchase at December 31,
1999 and 1998 is as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
---- ----
<S> <C> <C>
Securities sold under agree-
ments to repurchase $ 7,603 $2,949
======= ======
</TABLE>
The average balance of securities sold under agreements to repurchase for
1999, 1998, and 1997 was $3,041,000, $3,289,000, and $5,053,000, respectively.
The maximum month-end balance of such borrowings for 1999, 1998, and 1997 was
$7,603,000, $6,802,000, and $9,693,000, respectively. The average interest rate
paid on securities sold under agreements to repurchase for 1999, 1998, and 1997
was 4.14%, 4.44%, and 4.47%, respectively.
38
<PAGE> 40
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 8 -- FEDERAL HOME LOAN BANK BORROWINGS
Federal Home Loan Bank (FHLB) borrowings at December 31, 1999 and 1998 are
as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
---- ----
<S> <C> <C>
Due January 3, 2000, 5.97% $18,800 $ --
Due October 24, 2000, 5.90% 11,000 --
Due December 15, 2000, 5.80% 1,000 1,000
Due February 26, 2003, 5.65% 251 330
Due July 30, 2003, 5.98% 1,000 1,000
Due May 8, 2008, 5.63% 10,000 10,000
Due March 30, 2009, 4.54% 10,000 --
Due March 30, 2009, 4.95% 10,000 --
Due March 30, 2009, 5.24% 10,000 --
Due October 27, 2009, 5.64% 10,000 --
Due May 6, 2013, 6.17% 466 488
Due May 15, 2013, 6.17% 466 488
Due June 12, 2013, 5.98% 468 490
Due July 5, 2013, 6.04% 470 491
------- -------
$83,921 $14,287
======= =======
</TABLE>
The FHLB borrowings at December 31, 1999 are collateralized by 1-4 family
residential real estate loans with a carrying value of $76,093,000, investment
securities that have been pledged with a fair value of $49,074,000 as of
December 31, 1999, and all stock held in the FHLB of Des Moines.
The FHLB borrowings at December 31, 1998 are collarteralized by 1-4 family
residential real estate loans with a carrying value of $73,436,000 as of
December 31, 1998 and all stock held in the FHLB of Des Moines.
The Company's banking subsidiaries, which have an investment in the capital
stock of the FHLB, maintain a total line of credit of approximately $26,027,000
available from the FHLB of Des Moines at December 31, 1999.
NOTE 9 -- INCOME TAXES
The current and deferred portions of income tax expense (benefit) for 1999,
1998, and 1997 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $ 2,354 $ 2,625 $ 2,594
State 415 437 388
Deferred tax expense (63) (7) (286)
------- ------- -------
Income tax expense $ 2,706 $ 3,055 $ 2,696
======= ======= =======
</TABLE>
A reconciliation of expected income tax expense computed by applying the
federal statutory rate of 34% in 1999, 1998, and 1997 to income before income
tax expense is as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Computed income tax expense $ 3,029 $ 3,354 $ 3,059
State taxes, net of Federal benefit 274 289 257
Tax-exempt interest income (601) (563) (517)
Goodwill amoritzation 129 81 42
Other, net (125) (106) (145)
------- ------- -------
Income tax expense $ 2,706 $ 3,055 $ 2,696
======= ======= =======
</TABLE>
The components of deferred tax assets and liabilities at December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for possible loan losses $ 1,958 $ 2,089
Available for sale securities 1,774 --
Deferred expense 359 319
------- -------
Total deferred tax assets 4,091 2,408
------- -------
Deferred tax liabilities:
Available for sale securities -- (130)
Premises and equipment (752) (760)
Discount on debt securities, net (67) (107)
Deferred loan fees (110) (206)
Other (3) (18)
------- -------
Total deferred tax liabilities (932) (1,221)
------- -------
Net deferred tax asset $ 3,159 $ 1,187
======= =======
</TABLE>
The Company has not established a valuation allowance for deferred tax
assets as of December 31, 1999 or 1998 due to management's belief that all
criteria for recognition of the assets have been met.
NOTE 10 -- EMPLOYEE BENEFIT PLANS
PENSION
During 1997, the Board of Directors of the Company voted to terminate the
Company's noncontributory pension plan effective May 31, 1997. The benefits
under the plan were frozen as of March 31, 1997 and plan benefits ceased to
accrue. As the fair value of plan assets exceeded the value of accumulated
benefit obligations as of December 31, 1997, the Company elected to provide
benefits with plan assets. Upon approval by regulatory authorities and
subsequent termination in 1998, all benefits became 100% vested, and all persons
entitled to benefits were eligible to request an immediate lump-sum settlement
of the benefit entitlement. The
39
<PAGE> 41
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
Company recorded a pension curtailment gain of approximately $375,000 in 1998 in
conjunction with the termination of the plan.
ESOP
The Company's Board of Directors authorized the adoption of an employee
stock ownership plan with 401(k) provisions (ESOP) for substantially all
employees of the Company.
In April 1995, the Company leveraged the ESOP plan through a $2,987,000
borrowing from an unaffiliated financial institution, the proceeds of which were
used to purchase 560,010 shares of the Company's common stock. In September
1997, the Company repaid the unaffiliated financial institution through
borrowings from South Side National Bank in St. Louis. In September 1999, the
Company repaid South Side National Bank in St. Louis with a borrowing from an
unaffiliated financial institution. The note bears interest at 7.5% at December
31, 1999, requires quarterly interest payments, and requires annual principal
redirections through April 2005. The Company makes annual contributions to the
ESOP equal to the ESOP's debt service less dividends received by the ESOP. All
dividends on unallocated shares received by the ESOP are used to pay debt
service. As the debt is repaid, shares are released from collateral and
allocated to active employees, based on the proportion of debt service paid in
the year. The debt of the ESOP is recorded as debt and the shares pledged as
collateral is reported as unearned ESOP shares in the consolidated balance
sheet. As shares are released from collateral, the Company reports compensation
expense equal to the current market price of the shares, and the shares become
outstanding for earnings-per-share computations. Dividends on allocated ESOP
shares are recorded as a reduction of retained earnings; dividends on
unallocated ESOP shares are recorded as a reduction of accrued interest. ESOP
compensation expense was $381,000, $461,000, and $401,000 for the years ended
December 31, 1999, 1998, and 1997, respectively. The ESOP shares as of December
31, 1999 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Allocated shares 865,624
Shares released for allocation 37,062
Unreleased shares 185,310
----------
Total ESOP shares 1,087,996
==========
Fair value of unreleased shares at
December 31, 1999 $1,621,000
==========
</TABLE>
In addition, under the 401(k) provisions the ESOP provides for a 50%
matching contribution by the Company on employee elective deferral amounts up to
6% of annual compensation. The matching contribu-tions charged to expense for
the years 1999, 1998, and 1997 were $123,000, $116,000, and $107,000,
respectively.
STOCK OPTIONS
The Company maintains two stock option plans: a nonqualified stock option
plan under which options to purchase up to 600,000 shares of common stock have
been granted to certain executive officers of the Company and its subsidiary
banks, and an incentive stock option plan under which options to purchase up to
750,000 shares of common stock could be granted to certain executive officers of
the Company and its subsidiary banks. Options granted under the nonqualified
stock option plan vest on a pro rata basis over a five-year period and expire at
the end of ten years from the date of grant. In 1993, 75,000 options were
granted at $3.67 per share. Of the options granted, 7,200 have been exercised,
16,800 have been forfeited, and 51,000 are still outstanding. There were no
options granted during 1994 or 1995. In 1996, 225,000 options were granted at
$6.33 per share. Of the options granted, 18,000 have been exercised, 18,000 have
been forfeited, and 189,000 are still outstanding. In 1997, 300,000 options were
granted at $8.00 per share, all of which remain outstanding as of December 31,
1999. All of the available options under the nonqualified stock option plan were
granted prior to 1998. No options were granted under the incentive stock option
plan during 1998 and 1999.
The following table summarizes stock options outstanding as of December 31,
1999:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
----------------
REMAINING
CONTRACTUAL
EXERCISE LIFE (IN EXERCISE
PRICE OUTSTANDING YEARS) PRICE
----- ----------- ------ -----
<S> <C> <C> <C>
$ 3.67 51,000 4.0
$ 6.33 189,000 6.3
$ 8.00 300,000 7.3
====== -------
540,000 6.6 $ 7.01
======= === =======
</TABLE>
The number of shares exercisable under stock options as of December 31,
1999 were 284,400 with a weighted average exercise price of $6.56.
40
<PAGE> 42
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
The Company has adopted the disclosure-only provisions of SFAS 123.
Accordingly, no compensation cost has been recognized for the stock option
plans. Had compensation cost for the Company's stock option plan been determined
based on the fair value at the grant date for awards in 1999, 1998, and 1997
consistent with the provisions of SFAS 123, the Company's net income and
earnings per common share would have been the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income - as reported $ 6,203,000 $ 6,810,000 $ 6,302,000
Net income - pro forma 6,071,000 6,678,000 6,170,000
Earnings per common
share - diluted,
as reported 0.72 0.80 0.75
Earnings per common
share - pro forma
diluted 0.71 0.78 0.74
=========== =========== ===========
</TABLE>
Pro forma net income reflects only options granted in 1996 and subsequent
years. Therefore, the full impact of calculating compensation cost for stock
options under SFAS 123 is not reflected in the pro forma net income and earnings
per share amounts presented above because compensation cost is reflected over
the options' vesting period of five years and compensation cost for options
granted prior to January 1, 1996 is not considered.
The fair value of option grants for 1997 is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants:
<TABLE>
<S> <C>
Volatility 30.0%
Risk-free interest rate 6.0%
Expected life 7 years
Expected dividend yield 3.6%
======
</TABLE>
The pro forma information is provided for informational purposes only and
is not necessarily indicative of the results of operations that would have
occurred or of the future anticipated results of operations of the Company.
SALARY CONTINUATION PLAN
In November 1999, the Company adopted a Salary Continuation Plan for
several senior management executives to encourage these executives to continue
their employment with the Company. The plan provides for the payment of
supplemental retirement income to the executives upon reaching retirement age.
Each of these executives will receive, on an annual basis, for a period of 15
years following retirement, a predetermined annual benefit amount as set forth
in their respective agreements. The benefits of the plan are funded by the
Company through the purchase of life insurance policies. The cash surrender
value of the life insurance policies, totaling $4,507,000 as of December 31,
1999, is included in other assets on the consolidated balance sheet. Expenses
related to the plan were $12,000 for the year ended December 31, 1999.
DEFERRED DIRECTOR FEE PLAN
In November 1999, the Company adopted a Deferred Director Fee Plan for its
Board of Directors and the Boards of Directors of its subsidiary banks. The plan
allows each director to defer his monthly director fees. The deferred fees are
credited with an interest factor equal to the percentage increase in the market
value of the Company's common stock from the previous year, subject to a ceiling
of 15% and a floor of 6%. The amount of benefits for each director is stipulated
in the respective director's agreement. The benefits of the plan are funded by
the Company through the purchase of life insurance policies. The cash surrender
value of the life insurance policies, totaling $11,433,000 as of December 31,
1999, is included in other assets on the consolidated balance sheet. Expenses
related to the plan were $20,000 for the year ended December 31, 1999.
NOTE 11 -- EARNINGS PER SHARE
The computation of EPS for 1999, 1998, and 1997 follows:
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Basic EPS:
Net income $ 6,203 $ 6,810 $ 6,302
========== ========== ==========
Average common shares
outstanding 8,414,752 8,297,250 8,207,577
========== ========== ==========
Basic EPS $ 0.74 $ 0.82 $ 0.77
========== ========== ==========
Diluted EPS:
Net income $ 6,203 $ 6,810 $ 6,302
========== ========== ==========
Average common shares
outstanding 8,414,752 8,297,250 8,207,577
Dilutive potential due to
stock options 183,409 257,385 186,738
---------- ---------- ----------
Average number of
common shares and
dilutive potential
common shares
outstanding 8,598,161 8,554,635 8,394,315
========== ========== ==========
Diluted EPS $ 0.72 $ 0.80 $ 0.75
========== ========== ==========
</TABLE>
NOTE 12 -- SUPERVISION AND REGULATION
The Company's subsidiary banks are required to maintain certain daily
reserve balances on hand in accordance with regulatory requirements. Restricted
funds used to meet regulatory reserve requirements amounted to $517,000 and
$2,473,000 at December 31, 1999 and 1998, respectively.
The Company is registered with and subject to supervision and regulation by
the Board of Governors of the Federal Reserve System pursuant to the Bank
41
<PAGE> 43
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
Holding Company Act of 1956 as amended. The Company is also subject to periodic
reporting requirements and regulation by the Securities and Exchange Commission.
All subsidiary banks are subject to regulation by the Board of Governors of the
Federal Reserve System and, in addition, they are also members of and subject to
regulation by the FDIC. The state-chartered subsidiary banks are subject to
supervision and regulation by the Missouri Division of Finance. The national
bank subsidiary is subject to supervision and regulation by the Office of the
Comptroller of the Currency.
The earnings of the subsidiary banks are affected not only by competing
financial institutions and general economic conditions, but also by the policies
of various governmental regulatory authorities and state and federal laws,
particularly as they relate to powers authorized to banks and bank holding
companies. The Company and all subsidiary banks are also subject to the
provisions of the Community Reinvestment Act.
Subsidiary bank dividends are the principal source of funds for the payment
of dividends by the Company to its shareholders. By regulation, the Company's
national banking subsidiary is prohibited from paying dividends in excess of its
current year's net income plus its retained net income from the preceding two
years, unless prior regulatory approval is obtained. The subsidiary banks are
also required to maintain certain minimum capital ratios, which further limit
their ability to pay dividends to the Company.
The Company's subsidiary banks are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the Company's consolidated financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company's subsidiary banks must meet specific capital
guidelines that involve quantitative measures of the Company's subsidiary
banks' assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Company's subsidiary banks' capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulations to ensure capital adequacy
require the Company and its subsidiary banks to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier I capital to
risk-weighted assets and of Tier I capital to average assets. Management
believes, as of December 31, 1999, the Company and its subsidiary banks meet all
capital adequacy requirements to which they are subject.
As of the most recent notification from regulatory authorities, the
subsidiary banks were categorized as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the subsidiary banks must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
subsidiary banks' categories.
The Company and subsidiary banks' actual and required capital amounts (in
thousands) and ratios as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999
- -------------------------------------------------------------------------------------------
TO BE
WELL CAPITALIZED
UNDER
PROMPT CORRECTIVE
FOR CAPITAL ACTION
ACTUAL ADEQUACY PURPOSES PROVISIONS
------ ------------------ ----------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
TOTAL CAPITAL (TO RISK-
WEIGHTED ASSETS)
COMPANY $69,478 16.12% $34,475 8% $ -- -%
SSNB 42,469 15.48 21,946 8 27,433 10
SBJC 6,676 14.86 3,593 8 4,492 10
BSG 10,640 18.21 4,673 8 5,842 10
BSCC 5,855 13.17 3,556 8 4,446 10
TIER I CAPITAL (TO RISK-
WEIGHTED ASSETS)
COMPANY $64,086 14.87% $17,238 4% $ -- -%
SSNB 39,034 14.23 10,973 4 16,460 6
SBJC 6,114 13.61 1,797 4 2,695 6
BSG 9,909 16.96 2,337 4 3,505 6
BSCC 5,299 11.92 1,778 4 2,667 6
TIER I CAPITAL (TO ADJUSTED
AVERAGE ASSETS)
COMPANY $64,086 9.81% $19,602 3% $ -- -%
SSNB 39,034 9.02 12,983 3 21,639 5
SBJC 6,114 9.36 1,960 3 3,266 5
BSG 9,909 10.86 2,736 3 4,560 5
BSCC 5,299 8.86 1,796 3 2,993 5
</TABLE>
42
<PAGE> 44
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
<TABLE>
<CAPTION>
1998
- -------------------------------------------------------------------------------------------
TO BE
WELL CAPITALIZED
UNDER
PROMPT CORRECTIVE
FOR CAPITAL ACTION
ACTUAL ADEQUACY PURPOSES PROVISIONS
------ ------------------ ----------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-
weighted assets)
Company $65,778 17.41% $30,232 8% $ -- -%
SSNB 43,762 17.27 20,266 8 25,333 10
SBJC 6,332 17.88 2,833 8 3,541 10
BSG 9,766 19.67 3,972 8 4,966 10
BSCC 5,354 14.42 2,971 8 3,713 10
Tier I capital (to risk-
weighted assets)
Company $61,036 16.15% $15,116 4% $ -- -%
SSNB 40,581 16.02 10,133 4 15,200 6
SBJC 5,888 16.63 1,416 4 2,125 6
BSG 9,143 18.41 1,986 4 2,979 6
BSCC 4,889 13.71 1,485 4 2,228 6
Tier I capital (to adjusted
average assets)
Company $61,036 10.01% $18,293 3% $ -- -%
SSNB 40,581 10.02 12,154 3 20,257 5
SBJC 5,888 10.15 1,740 3 2,900 5
BSG 9,143 10.42 2,631 3 4,385 5
BSCC 4,889 8.76 1,674 3 2,790 5
</TABLE>
NOTE 13 -- CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
Following are condensed financial statements of Southside Bancshares Corp.
(parent company only) for the periods indicated:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(in thousands)
ASSETS 1999 1998
---- ----
<S> <C> <C>
Cash $ 155 $ 1,063
Investment in subsidiary banks 60,738 64,538
Other assets 5,679 1,778
------- -------
TOTAL ASSETS $66,572 $67,379
======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
ESOP debt $ 1,186 $ 1,384
Other liabilities 978 1,031
Shareholders' equity 64,408 64,964
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $66,572 $67,379
======= =======
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUE:
Dividends received from
subsidiary banks $ 7,200 $ 8,300 $ 5,050
Other 359 343 368
------- ------- -------
Total revenue 7,559 8,643 5,418
------- ------- -------
EXPENSES:
Interest expense 96 121 139
Other 1,689 2,012 1,952
------- ------- -------
Total expenses 1,785 2,133 2,091
------- ------- -------
Income before income
tax benefit and un-
distributed earnings
of subsidiary banks 5,774 6,510 3,327
Income tax benefit 404 489 496
------- ------- -------
Income before
undistributed earnings
of subsidiary banks 6,178 6,999 3,823
Undistributed earnings (loss) of
subsidiary banks 25 (189) 2,479
------- ------- -------
NET INCOME $ 6,203 $ 6,810 $ 6,302
======= ======= =======
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,203 $ 6,810 $ 6,302
Adjustments to reconcile net income
to net cash provided by
operating activities:
Undistributed (earnings) losses
of subsidiary banks (25) 189 (2,479)
Other operating activities, net 596 781 555
------- ------- -------
Net cash provided
by operating
activities 6,774 7,780 4,378
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of bank-owned life insurance (4,052) -- --
Cash paid to acquire PSB -- (3,456) --
------- ------- -------
Net cash used in
investing activities (4,052) (3,456) --
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for ESOP debt (1,384) (197) (1,779)
Proceeds from ESOP debt 1,186 -- 1,581
Purchase of treasury stock (745) (1,860) (1,370)
Cash dividends paid (2,687) (2,402) (1,909)
------- ------- -------
Net cash used in
financing activities (3,630) (4,459) (3,477)
Net (decrease) ------- ------- -------
increase in cash (908) (135) 901
Cash, beginning of year 1,063 1,198 297
------- ------- -------
Cash, end of year $ 155 $ 1,063 $ 1,198
======= ======= =======
Supplemental disclosures of cash
flow information - cash paid
during the year for:
Interest on debt $ 88 $ 121 $ 139
Income taxes 2,822 3,165 2,969
======= ======= =======
</TABLE>
43
<PAGE> 45
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
NOTE 14 -- CONTINGENCIES
In the normal course of business, the Company had certain litigation
pending at December 31, 1999. In the opinion of management, after consultation
with legal counsel, none of this litigation is expected to have a material
adverse effect on the consolidated financial condition of the Company.
NOTE 15 -- DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
The Company is party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments may involve, to varying degrees, elements
of credit and interest rate risk in excess of the amounts recognized in the
consolidated balance sheets. The amounts of those instruments reflect the extent
of involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for financial instruments included on the
consolidated balance sheets.
Following is a summary of the Company's off-balance-sheet financial
instruments at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
(in thousands)
Contractual Amount
------------------
1999 1998
---- ----
<S> <C> <C>
Financial instruments whose
contractual amounts represent:
Commitments to extend
credit $63,597 $ 53,821
Standby letters of credit 1,254 1,438
======= ========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee.
Of the total commitments to extend credit at December 31, 1999 and 1998,
$9,126,000 and $11,107,000, respectively, represent fixed rate loan commitments.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's creditworthiness on a
case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies, but includes residential or
income-producing commercial property, marketable securities, inventory, accounts
receivable, and premises and equipment.
Standby letters of credit written are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements. The Company's policy is to issue letters of credit which have a
maximum expiration date of one year. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loans to
customers.
Following is a summary of the carrying amounts and fair values of the
Company's financial instruments which were on the consolidated balance sheets at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
-------------------- ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Balance sheet assets:
Cash and due
from banks $ 19,311 $ 19,311 $ 17,924 $ 17,924
Interest-bearing
deposits in
banks 159 159 -- --
Federal funds
sold 2,600 2,600 29,900 29,900
Investments in
debt securities:
Available
for sale 158,630 158,630 97,895 97,895
Held to
maturity 61,595 61,316 84,036 85,841
Loans, net 386,607 383,369 350,796 360,399
Accrued interest
receivable 4,414 4,414 4,097 4,097
======== ======== ======== ========
Balance sheet
liabilities:
Deposits 515,810 515,810 523,289 523,289
Federal funds
Purchased 1,000 1,000 -- --
Securities sold
under agree-
ments to
repurchase 7,603 7,603 2,949 2,949
FHLB borrowings 83,921 84,000 14,287 12,678
ESOP debt 1,186 1,186 -- --
Accrued interest
payable $ 1,796 $ 1,796 $ 2,178 $ 2,178
======== ======== ======== ========
</TABLE>
44
<PAGE> 46
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND OTHER SHORT-TERM INSTRUMENTS
Cash and due from banks, interest-bearing deposits with banks, Federal
funds sold and purchased, accrued interest receivable, accrued interest payable,
securities sold under agreements to repurchase, U.S. Treasury tax and loan
notes, and other short-term borrowings are either demand instruments or reprice
in a short time period. Accordingly, the carrying amount is a reasonable
estimate of fair value.
DEBT SECURITIES
The fair value of debt securities in which the Company has invested to hold
to maturity and investments available for sale are based on quoted market prices
or dealer quotes.
LOANS
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
DEPOSITS
The fair value of deposits is the amount payable on demand, as such
carrying value approximates fair value on such items.
FHLB BORROWINGS
The fair value of FHLB borrowings is estimated by discounting the future
cash flows using currently quoted interest rates for FHLB borrowings for the
same maturity date.
DEBT OF EMPLOYEE STOCK OWNERSHIP PLAN
The estimate of the fair value of ESOP debt is the carrying value of the
debt. Due to interest rates and risk characteristics, carrying value is a
reasonable approximation of fair value.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments to extend credit and standby letters of
credit is estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements, the
likelihood of the counterparties drawing on such financial instruments, and the
present creditworthiness of such counterparties. The Company believes such
commitments have been made on terms which are competitive in the markets in
which it operates; however, no premium or discount is offered thereon and,
accordingly, the Company has not assigned a value to such instruments for
purposes of this disclosure.
LIMITATIONS
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of the
Company's financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance-sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For example, the Company has a trust department that
contributes net fee income annually. The trust department is not considered a
financial instrument, and its value has not been incorporated into the fair
value estimates. Other assets and liabilities that are not considered financial
assets or liabilities include property, equipment, and goodwill. In addition,
the tax ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have not been
considered in the estimates of fair value.
NOTE 16 -- SHAREHOLDER PROTECTION RIGHTS PLAN
On May 27, 1993, the Company's Board of Directors adopted a Shareholder
Protection Rights Plan (the Plan).
Under the terms of the Plan, one Preferred Share Purchase Right (Right) is
attached to each share of common stock and trades automatically with such
shares. The Rights, which can be redeemed by the Company's Board of Directors in
certain circumstances and expire by their terms on May 27, 2003, have no voting
rights.
The Rights become exercisable and will trade separately from the common
stock ten days after a person or a group either becomes the beneficial owner or
announces an intention to commence a tender offer
45
<PAGE> 47
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
for 25% or more of the Company's outstanding common stock. When exercisable,
each Right entitles the registered holder to purchase from the Company 1/100th
of a share of a new series of Junior Participating Preferred Stock, Series D,
substantially equal to one share of common stock without voting rights, at an
exercise price of $37.50 per unit. In the event a person acquires beneficial
ownership of 25% or more of the Company's common stock, holders of Rights (other
than the acquiring person or group) may purchase, at the Rights' then-current
exercise price, common stock or its equivalent of the Company having a value at
that time equal to twice the exercise price. In the event the Company merges
into or otherwise transfers 50% or more of its assets or earnings power to any
person after the Rights become exercisable, holders of Rights may purchase, at
the then-current exercise price, common stock or its equivalent of the acquiring
entity having a value at that time equal to twice the exercise price.
NOTE 17 -- SEGMENT INFORMATION
The responsibility for management of the subsidiary banks remains with the
officers and directors of the respective banks. The financial performance of the
Company is measured internally by subsidiary bank results and key performance
measures. The following table shows the financial information of the Company's
subsidiary banks for 1999, 1998, and 1997. The "Other" column includes the
Parent Company and all intercompany elimination entries.
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
CONSOLI-
SSNB SBJC BSG BSCC OTHER DATED
---- ---- --- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net interest
income $ 14,844 $ 2,360 $ 3,567 $ 2,230 $ (96) $ 22,905
Provision for
possible
loan losses -- 45 -- -- -- 45
Noninterest
income 2,553 261 364 289 91 3,558
Noninterest
expense 11,268 1,631 1,158 1,431 1,421 17,509
Income tax
expense
(benefit) 1,707 318 707 378 (404) 2,706
Net income 4,422 627 1,466 710 (1,022) 6,203
AVERAGE BALANCES
Loans $222,511 $ 42,617 $ 52,618 $ 38,128 $ -- $355,874
Assets 421,761 62,700 90,230 58,255 3,430 636,376
Deposits 332,615 56,198 78,368 52,759 (340) 519,600
FINANCIAL RATIOS
Return on assets 1.05% 1.00% 1.62% 1.22% -- 0.97%
Return on equity 10.07 10.39 15.56 13.93 -- 9.54
Net interest
margin 4.11 4.19 4.34 4.04 -- 4.05
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------------------
CONSOLI-
SSNB SBJC BSG BSCC OTHER DATED
---- ---- --- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net interest
income $ 14,422 $ 2,359 $ 3,546 $ 2,164 $ (121) $ 22,370
Provision for
possible
loan losses 2 60 -- -- -- 62
Noninterest
income 2,434 218 340 266 73 3,331
Noninterest
expense 9,710 1,305 1,647 1,370 1,742 15,774
Income tax
expense
(benefit) 2,024 423 721 376 (489) 3,055
Net income 5,120 789 1,518 684 (1,301) 6,810
AVERAGE BALANCES
Loans $216,473 $ 40,651 $ 53,086 $ 37,076 $ (1,384) $345,902
Assets 386,987 58,838 89,524 55,477 (702) 590,124
Deposits 329,975 52,481 78,039 50,412 (800) 510,107
FINANCIAL RATIOS
Return on assets 1.32% 1.34% 1.70% 1.23% -- 1.15%
Return on equity 13.41 13.20 15.58 14.71 -- 11.12
Net interest
margin 4.57 4.39 4.35 4.22 -- 4.15
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------------------------
CONSOLI-
SSNB SBJC BSG BSCC OTHER DATED
---- ---- --- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net interest
income $ 13,559 $ 2,233 $ 3,529 $ 1,895 $ (139) $ 21,077
Provision for
possible
loan losses -- 60 -- -- -- 60
Noninterest
income 1,993 227 314 225 73 2,832
Noninterest
expense 8,987 1,275 1,644 1,287 1,658 14,851
Income tax
expense
(benefit) 1,791 395 707 299 (496) 2,696
Net income 4,774 730 1,492 534 (1,228) 6,302
AVERAGE BALANCES
Loans $187,014 $ 39,074 $ 52,346 $ 32,832 $ -- $311,266
Assets 344,745 55,415 86,877 47,251 1,521 535,809
Deposits 301,964 49,281 76,885 42,436 (1,185) 469,381
FINANCIAL RATIOS
Return on assets 1.38% 1.32% 1.72% 1.13% -- 1.18%
Return on equity 13.58 12.69 15.74 12.25 -- 11.44
Net interest
margin 4.37 4.35 4.45 4.23 -- 4.34
</TABLE>
46
<PAGE> 48
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
DIRECTORS AND OFFICERS
SOUTHSIDE BANCSHARES CORP.
The name and principal occupation or employment of each director and
officer of Southside Bancshares Corp. and the name and principal business of any
organization by which such person is employed is set forth below:
BOARD OF DIRECTORS
<TABLE>
<S> <C>
JOSEPH W. BEETZ DANIEL J. QUEEN
President President
Joseph H. Beetz Plumbing Company, Inc. Highland Diversified
Director Director
Southside Bancshares Corp. Southside Bancshares Corp.
HOWARD F. ETLING Director
Publisher Emeritus State Bank of Jefferson County
Journal Newspaper RICHARD G. SCHROEDER, SR.
Director President
Southside Bancshares Corp. St. Louis Fabrication Services, Inc.
DOUGLAS P. HELEIN Director
Insurance Broker Southside Bancshares Corp.
Welsch, Flatness & Lutz, Inc. Director
Director South Side National Bank in St. Louis
Southside Bancshares Corp. THOMAS M. TESCHNER
EARLE J. KENNEDY, JR. President and Chief Executive Officer
Former President Southside Bancshares Corp.
Westway Services, Inc. Chairman of the Board,
Director President and Chief Executive Officer
Southside Bancshares Corp. South Side National Bank in St. Louis
NORVILLE K. MCCLAIN Chairman of the Board
President Bank of Ste. Genevieve
Essex Contracting, Inc. Chairman of the Board
Chairman of the Board State Bank of Jefferson County
Southside Bancshares Corp. Chairman of the Board
The Bank of St. Charles County
</TABLE>
OFFICERS
<TABLE>
<S> <C> <C>
THOMAS M. TESCHNER WILLIAM E. MUHLKE JOANNE M. SCHNEIDER
President and Chief Executive Senior Vice President & Controller Secretary to the Board
Officer DAVID J. ABELN LAURA L. THOMAS
JOSEPH W. POPE Vice President/Investments Assistant Secretary to the Board
Senior Vice President and CAROLE A. MATT NANETTE M. BELLER
Chief Financial Officer Vice President/Compliance Assistant Vice President
</TABLE>
47
<PAGE> 49
The following is a summary description of the four subsidiary banks of
Southside Bancshares Corp:
SOUTH SIDE NATIONAL BANK IN ST. LOUIS
The main office of South Side National Bank in St. Louis is located at 3606
Gravois Avenue, St. Louis, Missouri 63116. Facilities are located at 3420 Iowa
Street, St. Louis, Missouri 63118; 9914 Kennerly Road, St. Louis County,
Missouri 63128; 8440 Morganford, St. Louis County, Missouri 63123; 4666
Lansdowne, St. Louis, Missouri 63116; 10385 West Florissant, Ferguson, Missouri
63136; 11330 Gravois, St. Louis, Missouri 63126; 6025 Chippewa, St. Louis,
Missouri 63109; 840 Meramec Station Road, St. Louis, Missouri 63088; and 4111
Telegraph Road, St. Louis, Missouri 63129. A 24-hour automated teller machine is
maintained at St. Anthony's Medical Center, 10010 Kennerly Road, St. Louis
County, Missouri 63128. The Bank has 29 drive-in windows and ten 24-hour
automated teller machines. The Bank is a member of the Honor and CIRRUS
automated teller networks. The Bank serves St. Louis City and St. Louis County.
The total assets of the Bank at December 31, 1999 were $453,877,000. Total
deposits at December 31, 1999 were $324,575,000. Total loans at December 31,
1999 were $245,210,000.
BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
THOMAS M. TESCHNER TIMOTHY DRURY RICHARD G. SCHROEDER, SR.
Chairman of the Board NORVILLE K. MCCLAIN FRANCIS G. SLACK
MITCHELL P. BADEN STEVEN C. ROBERTS JOSEPH S. WEINMANN
FLOYD E. WRIGHT
</TABLE>
OFFICERS
<TABLE>
<S> <C> <C>
THOMAS M. TESCHNER BRENDA L. HUDDLESTON STANLEY K. KIM
Chairman of the Board, President and Vice President & Controller Assistant Vice President
Chief Executive Officer ROBERT D. JOSEPH LARRY G. LOVE
JOANNE M. SCHNEIDER Vice President Assistant Vice President
Secretary to the Board COLETTE A. LETENDRE MILISSA E. MAZANEC
LAURA L. THOMAS Vice President Assistant Vice President
Assistant Secretary to the Board ROBERT S. PAULEY D. MICHAEL MINOR
MITCHELL P. BADEN Vice President Assistant Vice President
Executive Vice President and Senior JUDITH M. SCHULZ DEBRA J. O'SHEA
Loan Officer Vice President Assistant Vice President
JOSEPH W. POPE JOHN R. SHIVERS GLENDA L. POPPLETON
Senior Vice President Vice President Assistant Vice President
LAURIE A. PENNYCOOK PAUL A. STEUBE STACEY N. REINHARDT
Senior Vice President, Operations Vice President Assistant Vice President
Officer & Cashier BRIAN L. WALSTON JAMES R. SHAVER
STEVEN L. RAY Vice President Assistant Vice President
Senior Vice President and Senior Trust DEBRA M. BADER TERRY J. STARK
Officer Assistant Vice President Assistant Vice President
GUS E. ENGELLAND WILLIAM J. BUOL MICHAEL S. STEVENSON
Senior Vice President Assistant Vice President Assistant Vice President
KENNETH E. MARSCHUETZ SHERRY L. BURGER SUSAN L. SUN
Senior Vice President Assistant Vice President Assistant Vice President
CAROLE A. MATT ANNA SMITH-CRAFT CATHY M. THOMPSON
Vice President and Compliance Officer, Assistant Vice President Assistant Vice President
CRA Officer & Bank Secrecy Officer BETTY J. DEFORD CINDY M. THURMAN
DAVID J. ABELN Assistant Vice President Assistant Vice President
Vice President GAIL R. DICKSON JOYCE L. WEBB
JEFFRY M. BERRY Assistant Vice President/Personal Assistant Vice President
Vice President Banker KENNETH R. WHITE
JOHN M. DOHR PAMELA A. HALE Assistant Vice President
Vice President Assistant Vice President JACQUELINE A. YOCHIM
LISA M. FRICK WENDY A. HAMILTON Assistant Vice President/Safe Deposit
Vice President Assistant Vice President
CONNIE E. HORNAK DIANE M. KERTZ
Vice President & Security Officer Assistant Vice President
</TABLE>
48
<PAGE> 50
STATE BANK OF JEFFERSON COUNTY
The main office of State Bank of Jefferson County is located at 224 S. Main
Street, DeSoto, Missouri 63020, a facility is located at 100 Scenic Plaza Drive,
Herculaneum, Missouri 63048, and a facility is located at 2000 Rock Road,
DeSoto, Missouri 63020. The Bank has drive-in windows at all three locations.
The Bank is a member of the Honor and CIRRUS automated teller networks and has a
24-hour automated teller machine at each of its facilities. The Bank serves
Jefferson County, part of Franklin County, Washington County, and St. Francois
County.
The total assets of the Bank at December 31, 1999 were $67,145,000. Total
deposits at December 31, 1999 were $58,142,000. Total loans at December 31, 1999
were $47,420,000.
BOARD OF DIRECTORS
THOMAS M. TESCHNER CLARENCE M. JONES
Chairman of the Board KENNETH MCCLAIN
CLAUDE J. COOK ROBERT G. PURCELL
PAUL F. DICKINSON DANIEL J. QUEEN
RICHARD B. FRANCIS STEVAN H. ROWE
OFFICERS
<TABLE>
<S> <C> <C>
RICHARD B. FRANCIS JIM BIRMINGHAM SHARON MISSEY
President and Chief Executive Vice President Assistant Cashier
Officer KEVIN L. BOREN ELAINE WATTERS
BARBARA A. DONTRICH Vice President Assistant Cashier
Sr. Vice President, Cashier, and PHYLLIS POOLE PAULINE WILLIAMSON
Security Officer Assistant Vice President and Assistant Cashier
MARGARET A. ARMBRUSTER Secretary to the Board KATHLEEN WHITEHEAD
Vice President BRENDA SONA Assistant Cashier
ANN GAMBER Assistant Vice President
Compliance Officer
</TABLE>
BANK OF STE. GENEVIEVE
The main office of Bank of Ste. Genevieve is located at 198 Market Street
in Ste. Genevieve, Missouri 63670, and a facility, Plaza Bank, is located at 710
Parkwood Drive in Ste. Genevieve, Missouri 63670. The Bank has two drive-in
windows at the main office and three drive-in windows and two 24-hour automated
teller machines at the Plaza Bank location and the Family Inn Restaurant, 17050
Bremen Road, Ste. Genevieve, Missouri 63670. The Bank is a member of the CIRRUS
and Shazam automated teller networks. The Bank serves Ste. Genevieve County.
The total assets of the Bank at December 31, 1999 were $90,552,000. Total
deposits at December 31, 1999 were $77,794,000. Total loans at December 31, 1999
were $57,848,000.
BOARD OF DIRECTORS
THOMAS M. TESCHNER CLARENCE J. KERTZ
Chairman of the Board ROY J. PANCHOT
PATRICK J. UDING KENNETH J. REHM
Secretary to the Board GERALD J. TRAUTMAN
MICHEEL E. HORRELL HAROLD J. UDING
OFFICERS
<TABLE>
<S> <C> <C>
PATRICK J. UDING JERRY V. BERGTHOLDT GARY D. FISCHER
President & Chief Executive Assistant Vice President Vice President
Officer MONICA J. KREITLER MARY ANN BAUMAN
WILLIAM E. MILES Assistant Vice President and Assistant Cashier
Senior Vice President, CRA Compliance Officer MARY ELLEN CABRAL
Officer, and Security Officer Executive Secretary
STEPHEN J. ABTS
Vice President and Cashier
</TABLE>
49
<PAGE> 51
THE BANK OF ST. CHARLES COUNTY
The main office of The Bank of St. Charles County is located at 6004
Highway 94 South, Weldon Spring, Missouri 63304, and a facility is located at
750 First Capitol Drive, St. Charles, Missouri 63301. The Bank has a 24-hour
automated teller machine at each location, three drive-in windows in Weldon
Spring, and one drive-in window at 750 First Capitol Drive. The Bank is a member
of the STAR and CIRRUS automated teller networks. The Bank services St.
Charles County.
The total assets of the Bank at December 31, 1999 were $61,131,000. Total
deposits at December 31, 1999 were $55,639,000. Total loans at December 31, 1999
were $41,959,000.
BOARD OF DIRECTORS
THOMAS M. TESCHNER FREDERICK W. DRAKESMITH
Chairman of the Board WILLIAM O. MULLINS
TERRY E. ALEXANDER ALAN D. POHLMAN
MAX E. MCGOWAN LARRY RICHARDSON
TED E. GLOSIER
OFFICERS
<TABLE>
<S> <C> <C>
ALAN D. POHLMAN JUDY M. BRADY LARRY W. NOLTE
President and Chief Vice President and Assistant Vice President
Executive Officer Security Officer SUSAN P. FLEMING
CRAIG D. WOOD JAMIE TATRO Assistant Vice President
Senior Vice President, Cashier, and Assistant Vice President and MARK H. KNOBLAUCH
Secretary to the Board Compliance Officer Assistant Vice President
DON R. HAYNES
Vice President
</TABLE>
50
<PAGE> 1
EXHIBIT 21
<PAGE> 2
Exhibit 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION OF INCORPORATION
<S> <C>
South Side National Bank in St. Louis National bank
State Bank of Jefferson County Missouri state bank
Bank of Ste. Genevieve Missouri state bank
The Bank of St. Charles County Missouri state bank
</TABLE>
<PAGE> 1
EXHIBIT 23
<PAGE> 2
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Southside Bancshares Corp.:
We consent to incorporation by reference in the Registration Statements
on Form S-8 (No. 33-78454, No. 333-00579 and No. 333-91105) of Southside
Bancshares Corp. of our report dated February 18, 2000, relating to the
consolidated balance sheets of Southside Bancshares Corp. and subsidiaries as of
December 31, 1999, and 1998, and the related consolidated statements of income,
shareholders' equity and comprehensive income, and cash flows for each of the
years in the three-year period ended December 31, 1999, which report appears in
the December 31, 1999 annual report on Form 10-K of Southside Bancshares Corp.
/s/ KPMG LLP
St. Louis, Missouri
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SOUTHSIDE
BANCSHARES CORP.'S ANNUAL REPORT ON FORM 10K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH DOCUMENT
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 19,311
<INT-BEARING-DEPOSITS> 159
<FED-FUNDS-SOLD> 2,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 158,630
<INVESTMENTS-CARRYING> 61,595
<INVESTMENTS-MARKET> 61,316
<LOANS> 392,437
<ALLOWANCE> 5,830
<TOTAL-ASSETS> 678,152
<DEPOSITS> 515,810
<SHORT-TERM> 39,403
<LIABILITIES-OTHER> 4,224
<LONG-TERM> 54,307
0
0
<COMMON> 8,985
<OTHER-SE> 55,423
<TOTAL-LIABILITIES-AND-EQUITY> 678,152
<INTEREST-LOAN> 29,652
<INTEREST-INVEST> 12,468
<INTEREST-OTHER> 1,048
<INTEREST-TOTAL> 43,168
<INTEREST-DEPOSIT> 17,894
<INTEREST-EXPENSE> 20,263
<INTEREST-INCOME-NET> 22,905
<LOAN-LOSSES> 45
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 17,509
<INCOME-PRETAX> 8,909
<INCOME-PRE-EXTRAORDINARY> 8,909
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,203
<EPS-BASIC> .74
<EPS-DILUTED> .72
<YIELD-ACTUAL> 4.05
<LOANS-NON> 6,695
<LOANS-PAST> 221
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 369
<ALLOWANCE-OPEN> 6,192
<CHARGE-OFFS> 670
<RECOVERIES> 263
<ALLOWANCE-CLOSE> 5,830
<ALLOWANCE-DOMESTIC> 5,830
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
