<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ----------------------
Commission file number 0-10849
-------
SOUTHSIDE BANCSHARES CORP.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-1262037
------------------------------------- -------------------------------------
(State or other jurisdiction of (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
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
At NOVEMBER 10, 2000, the number of shares outstanding of the registrant's
common stock was 8,393,528.
<PAGE> 2
SOUTHSIDE BANCSHARES CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Part I. FINANCIAL INFORMATION (unaudited)
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at September 30, 2000 and
December 31, 1999 3
Condensed Consolidated Statements of Income for the nine and three months ended
September 30, 2000 and September 30, 1999 4
Condensed Consolidated Statements of Shareholders' Equity and Comprehensive
Income for the nine months ended September 30, 2000
and the year ended December 31, 1999 5
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and September 30, 1999 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk -
There have been no material changes from the information provided in the
December 31, 1999 Annual Report on Form 10-K.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
</TABLE>
<PAGE> 3
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
(dollars in thousands except share data)
(unaudited)
<TABLE>
<CAPTION>
ASSETS 2000 1999
---------- ----------
<S> <C> <C>
Cash and due from banks $ 18,273 $ 19,311
Interest-bearing deposits in banks 657 159
----------- ---------
Cash and cash equivalents 18,930 19,470
----------- ---------
Federal funds sold 6,209 2,600
Investments in debt securities:
Available for sale, at fair value 157,740 158,630
Held to maturity, at amortized cost (fair value of $41,815
in 2000, and $61,316 in 1999) 41,835 61,595
----------- ---------
Total investments in debt securities 199,575 220,225
----------- ---------
Loans, net of unearned discount 456,044 392,437
Less allowance for loan losses 5,121 5,830
----------- ---------
Loans, net 450,923 386,607
----------- ---------
Premises and equipment 17,475 17,563
Other assets 31,942 31,687
----------- ---------
Total assets $ 725,054 $ 678,152
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 73,637 $ 74,577
Interest-bearing demand and savings 220,534 221,148
Time deposits 264,200 220,085
----------- ---------
Total deposits 558,371 515,810
Federal funds purchased 1,850 1,000
Securities sold under agreements to repurchase 6,063 7,603
FHLB borrowings 82,993 83,921
Other borrowings 1,900 --
Debt of Employee Stock Ownership Plan 988 1,186
Other liabilities 6,329 4,224
----------- ---------
Total liabilities 658,494 613,744
----------- ---------
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 2000 and 1999 8,985 8,985
Surplus 5,497 5,431
Retained earnings 61,730 58,765
Unearned Employee Stock Ownership Plan shares (840) (988)
Treasury stock, at cost, 591,850 shares in 2000 and 391,750 shares in 1999 (6,394) (4,335)
Accumulated other comprehensive loss (2,418) (3,450)
----------- ---------
Total shareholders' equity 66,560 64,408
----------- ---------
Total liabilities and shareholders' equity $ 725,054 $ 678,152
=========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
Nine and three months ended September 30, 2000 and 1999
(dollars in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 26,523 $ 22,028 $ 9,468 $ 7,357
Interest on investments in debt securities:
Taxable 8,734 7,865 2,809 2,884
Exempt from Federal income taxes 1,133 1,234 367 415
Interest on short-term investments 299 951 88 240
---------- ---------- ---------- ----------
Total interest income 36,689 32,078 12,732 10,896
---------- ---------- ---------- ----------
Interest expense:
Interest on interest-bearing demand and savings deposits 5,541 4,672 1,899 1,651
Interest on time deposits 9,232 8,714 3,459 2,813
Interest on Federal funds purchased 394 6 170 6
Interest on securities sold under agreements to
repurchase 226 87 78 26
Interest on FHLB borrowings 3,709 1,371 1,322 584
Interest on other borrowings 8 -- 8 --
Interest on debt of Employee Stock Ownership Plan 60 4 19 4
---------- ---------- ---------- ----------
Total interest expense 19,170 14,854 6,955 5,084
---------- ---------- ---------- ----------
Net interest income 17,519 17,224 5,777 5,812
Provision for loan losses 276 45 98 15
---------- ---------- ---------- ----------
Net interest income after provision for
loan losses 17,243 17,179 5,679 5,797
---------- ---------- ---------- ----------
Noninterest income:
Trust fees 913 912 277 312
Service charges on deposit accounts 1,204 1,070 413 369
Gains on the sales of loans 30 260 25 46
Other 1,164 407 420 143
---------- ---------- ---------- ----------
Total noninterest income 3,311 2,649 1,135 870
---------- ---------- ---------- ----------
Noninterest expenses:
Salaries and employee benefits 6,962 6,815 2,325 2,286
Net occupancy and equipment expense 2,084 2,062 732 696
Data processing 582 556 212 179
Other 4,117 3,915 1,293 1,327
---------- ---------- ---------- ----------
Total noninterest expense 13,745 13,348 4,562 4,488
---------- ---------- ---------- ----------
Income before income tax expense 6,809 6,480 2,252 2,179
Income tax expense 1,841 1,917 617 646
---------- ---------- ---------- ----------
Net income $ 4,968 $ 4,563 $ 1,635 $ 1,533
========== ========== ========== ==========
Share data:
Earnings per common share - basic $ .59 $ .54 $ .19 $ .18
Earnings per common share - diluted .58 .53 .19 .18
Dividends paid per common share .24 .24 .08 .08
Average common shares outstanding 8,406,432 8,410,986 8,393,393 8,417,354
========== ========== ========== ==========
Average common shares outstanding, including
potentially dilutive shares 8,493,772 8,614,671 8,498,791 8,594,946
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders' Equity and
Comprehensive Income
Nine months ended September 30, 2000 and year ended December 31, 1999
(dollars in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
UNEARNED COMPREHENSIVE
COMMON RETAINED ESOP TREASURY INCOME
STOCK SURPLUS EARNINGS SHARES STOCK (LOSS) TOTAL
---------- ---------- ---------- ----------- ---------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
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 ($.32
per share) -- -- (2,687) -- -- -- (2,687)
Allocation of 37,062 shares
to ESOP participants -- 183 -- 198 -- -- 381
Purchase of 67,730 common
shares for treasury -- -- -- -- (745) -- (745)
------- ------- -------- -------- ------- ------- -------
Balance at December 31, 1999 8,985 5,431 58,765 (988) (4,335) (3,450) 64,408
Comprehensive income:
Net income -- -- 4,968 -- -- -- 4,968
Change in net unrealized
gain (loss) on available
for sale securities,
net of tax effect -- -- -- -- -- 1,032 1,032
------- ------- -------- -------- ------- ------- -------
Total comprehensive
income -- -- 4,968 -- -- 1,032 6,000
Cash dividends paid ($.24
per share) -- -- (2,003) -- -- -- (2,003)
Allocation of 27,797 shares
to ESOP participants -- 66 -- 148 -- -- 214
Purchase of 200,100 common
shares for treasury -- -- -- -- (2,059) -- (2,059)
------- ------- -------- -------- ------- ------- -------
Balance at September 30,
2000 $ 8,985 5,497 61,730 (840) (6,394) (2,418) 66,560
======= ======= ======== ======== ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 2000 and 1999
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,968 4,563
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,609 1,790
Provision for loan losses 276 45
Gains on sale of loans (30) (260)
Other operating activities, net 1,198 (693)
Originations of loans for sale (1,966) (7,563)
Proceeds from sale of loans 1,845 10,355
---------- -----------
Net cash provided by operating activities 7,900 8,237
---------- -----------
Cash flows from investing activities:
Net (increase) decrease in Federal funds sold (3,609) 24,600
Proceeds from maturities of and principal payments on debt securities 37,818 40,203
Purchases of debt securities (15,921) (80,649)
Net increase in loans (64,996) (6,063)
Recoveries of loans previously charged off 405 239
Purchases of premises and equipment (928) (2,225)
Proceeds from sales of other real estate owned and other foreclosed property 208 131
---------- -----------
Net cash used in investing activities (47,023) (23,764)
---------- -----------
Cash flows from financing activities:
Net (decrease) increase in demand and savings deposits (1,554) 7,163
Net increase (decrease) in time deposits 44,115 (14,742)
Net increase in federal funds purchased 850 --
Net decrease in securities sold under agreements to repurchase (1,540) (1,085)
Proceeds from FHLB borrowings 9,200 30,000
Repayments of FHLB borrowings (10,128) (124)
Proceeds from other borrowings 1,900 --
Proceeds from debt of Employee Stock Ownership Plan -- 1,186
Repayment of ESOP debt (198) --
Purchases of treasury stock (2,059) (558)
Cash dividends paid (2,003) (2,017)
---------- -----------
Net cash provided by financing activities 38,583 19,823
---------- -----------
Net (decrease) increase in cash and cash equivalents (540) 4,296
Cash and cash equivalents, beginning of period 19,740 17,924
---------- -----------
Cash and cash equivalents, end of period $ 18,930 22,220
========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings $ 18,588 15,086
Income taxes 1,245 2,246
Noncash transactions -
Transfers to other real estate owned in settlement of loans 150 62
========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2000 and December 31, 1999
(unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all
information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements. In the
opinion of management, all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation have been
included. For further information, refer to Southside Bancshares Corp.'s
(the Company) Annual Report on Form 10-K for the year ended December 31,
1999. Operating results for the nine months ended September 30, 2000 are
not necessarily indicative of the results that may be expected for the
year ending December 31, 2000.
(2) 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 tables show the
financial information of the Company's subsidiary banks, South Side
National Bank in St. Louis (SSNB), State Bank of Jefferson County
(SBJC), Bank of Ste. Genevieve County (BSG), and The Bank of St. Charles
County (BSCC) for the nine and three months ended September 30, 2000 and
1999. The "Other" column includes the Parent Company and all
intercompany elimination entries.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 2000
-------------------------------------------------------------------------
SSNB SBJC BSG BSCC OTHER CONSOLIDATED
-------- -------- --------- --------- ---------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Results of Operations:
Net interest income $ 11,069 2,019 2,769 1,730 (68) 17,519
Provision for loan losses 225 12 -- 39 -- 276
Noninterest income 2,093 282 399 299 238 3,311
Noninterest expense 8,446 1,445 1,386 1,122 1,346 13,745
Income tax expense (benefit) 1,136 266 568 275 (404) 1,841
Net income 3,355 578 1,214 593 (772) 4,968
Average Balances:
Loans 269,968 51,523 56,936 42,806 -- 421,233
Assets 468,637 71,657 92,655 62,245 6,398 701,592
Deposits 330,272 61,843 80,499 56,376 (200) 528,790
Financial Ratios:
Return on assets .95% 1.08% 1.75% 1.27% -- .94%
Return on equity 10.98% 12.55% 16.65% 14.86% -- 10.12%
Net interest margin 3.63% 4.26% 4.36% 4.00% -- 3.80%
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------------------------------------------
SSNB SBJC BSG BSCC OTHER CONSOLIDATED
-------- -------- ---------- --------- ------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Results of Operations:
Net interest income $ 11,223 1,748 2,655 1,672 (74) 17,224
Provision for loan losses -- 45 -- -- -- 45
Noninterest income 1,927 186 273 209 54 2,649
Noninterest expense 8,441 1,192 1,368 1,067 1,280 13,348
Income tax expense (benefit) 1,291 234 473 279 (360) 1,917
Net income 3,418 463 1,087 535 (940) 4,563
Average Balances:
Loans 220,362 41,346 51,400 37,255 71 350,434
Assets 416,806 61,815 89,901 57,745 1,348 627,615
Deposits 334,285 55,557 78,125 52,263 (455) 519,775
Financial Ratios:
Return on assets 1.09% 1.00% 1.61% 1.23% -- .97%
Return on equity 10.25% 10.26% 15.38% 14.09% -- 9.35%
Net interest margin 4.18% 4.18% 4.39% 4.03% -- 4.09%
======== ======== ======== ======== ======== ========
</TABLE>
7
<PAGE> 8
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2000 and December 31, 1999
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 2000
----------------------------------------------------------
SSNB SBJC BSG BSCC OTHER CONSOLIDATED
-------- ------- ------- ------- ------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Results of Operations:
Net interest income $ 3,645 694 902 563 (27) 5,777
Provision for loan losses 75 6 -- 17 -- 98
Noninterest income 677 96 177 103 82 1,135
Noninterest expense 2,782 485 475 375 445 4,562
Income tax expense (benefit) 378 98 191 84 (134) 617
Net income 1,087 201 413 190 (256) 1,635
Average Balances:
Loans 291,978 54,051 57,174 43,420 -- 446,623
Assets 486,101 73,551 91,217 61,829 7,222 719,920
Deposits 342,212 63,559 78,721 55,642 (252) 539,882
Financial Ratios:
Return on assets .87% 1.10% 1.81% 1.23% -- .90%
Return on equity 10.48% 12.91% 16.63% 13.94% -- 10.02%
Net interest margin 3.45% 4.28% 4.30% 3.96% -- 3.66%
========= ====== ======= ====== ===== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------
SSNB SBJC BSG BSCC OTHER CONSOLIDATED
-------- ------- ------- ------- ------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Results of Operations:
Net interest income $ 3,762 603 913 559 (25) 5,812
Provision for loan losses -- 15 -- -- -- 15
Noninterest income 615 65 99 74 17 870
Noninterest expense 2,794 447 457 366 424 4,488
Income tax expense (benefit) 447 67 169 92 (129) 646
Net income 1,136 139 386 175 (303) 1,533
Average Balances:
Loans 215,291 43,820 54,496 37,951 210 351,768
Assets 423,893 62,908 90,007 57,904 2,078 636,790
Deposits 332,433 56,599 78,009 52,139 (420) 518,760
Financial Ratios:
Return on assets 1.07% .88% 1.72% 1.21% -- .96%
Return on equity 10.22% 10.54% 15.27% 14.20% -- 9.29%
Net interest margin 4.21% 4.15% 4.39% 4.02% -- 4.05%
========= ====== ======= ====== ===== ========
</TABLE>
8
<PAGE> 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This discussion is presented to provide an understanding of Southside
Bancshares Corp. and subsidiaries (the "Company" or "Registrant") consolidated
financial condition and the results of operations for the nine and three months
ended September 30, 2000.
The Company's net income is derived primarily from the net interest income
of its subsidiary banks. Net interest income is the difference (or spread)
between the interest income the subsidiary banks receive from their loan and
investment portfolios and their cost of funds, consisting primarily of the
interest paid on deposits and borrowings. Net income is also affected by the
levels of provisions for loan losses, noninterest income, and noninterest
expense.
Statements contained in this Report and in future filings by the Company
with the Securities and Exchange Commission, in the Company's press releases and
in oral statements made with the approval of an authorized executive officer
which are not historical or current facts are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 (Section 27A of the Securities Act of 1993, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended). Such statements
are based on management's beliefs, and assumptions made by and information
currently available to management and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those currently anticipated or projected. When used in
the Company's documents or oral presentations, the words "anticipates,"
"believes," "estimates," "expects," "intends," "forecasts," "plan," "projects,"
and similar expressions are intended to identify such forward-looking
statements. There can be no assurance that such forward-looking statements will
in fact transpire. The following important factors, risks and uncertainties,
among others, could cause actual results to differ materially from such
forward-looking statements: (1) credit risk, (2) interest rate risk, (3)
competition, (4) changes in the regulatory environment and (5) changes in
general business and economic trends. The foregoing list should not be construed
as exhaustive and the Company disclaims any obligation to subsequently update or
revise any forward-looking statements after the date of this Report.
9
<PAGE> 10
Item 2. (continued)
FINANCIAL HIGHLIGHTS
COMPARISON OF SELECTED FINANCIAL DATA
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 DECEMBER 31, 1999 1999
--------------- ------------------ ---------------
<S> <C> <C> <C>
Earnings:
Total interest income $ 36,689 43,168 32,078
Total interest expense 19,170 20,163 14,854
---------- ---------- ----------
Net interest income 17,519 22,905 17,224
Provision for loan losses 276 45 45
---------- ---------- ----------
Net interest income after provision for loan losses $ 17,243 22,860 17,179
========== ========== ==========
Net income $ 4,968 6,203 4,563
========== ========== ==========
Share Data:
Earning per common share:
Basic $ .59 .74 .54
Diluted .58 .72 .53
Dividends paid per common share .24 .32 .24
Book value(1) 8.08 7.66 7.66
Tangible book value(1) 7.65 7.21 7.20
Shares outstanding (period-end)(1) 8,393,528 8,593,628 8,613,628
Average shares outstanding 8,406,432 8,414,752 8,410,986
Average shares outstanding, including potentially
dilutive shares 8,493,772 8,598,161 8,614,671
========== ========== ==========
Financial Position:
Total assets $ 725,054 678,152 631,988
Total deposits 558,371 515,810 515,710
Total loans, net of unearned discount 456,044 392,437 360,084
Allowance for loan losses 5,121 5,830 6,103
Short-term borrowings 7,913 8,603 1,864
FHLB borrowings 82,993 83,921 44,163
Other borrowings 1,900 -- --
Debt of Employee Stock Ownership Plan 988 1,186 1,186
Total shareholders' equity 66,560 64,408 64,457
========== ========== ==========
</TABLE>
SELECTED RATIOS
The table below summarizes various selected ratios as of the end of the periods
indicated.
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, ENDED SEPTEMBER 30,
2000(2) DECEMBER 31, 1999 1999(2)
--------------- ------------------ ---------------
<S> <C> <C> <C>
Loan-to-deposit ratio 81.67% 76.08% 69.82%
Allowance for loan losses to total loans 1.12 1.49 1.69
Dividend payout ratio 40.68 43.24 44.44
Return on average assets .94 .97 .97
Return on average shareholders' equity 10.12 9.54 9.35
Net interest margin on average interest-earning assets 3.80 4.05 4.09
Average shareholders' equity to average total assets 9.33 10.22 10.37
Tier I leverage capital to adjusted total consolidated assets
less intangibles 9.14 9.81 10.02
Tier I capital to risk-weighted assets 13.79 14.87 16.34
Total capital to risk-weighted assets 14.87 16.12 17.60
===== ===== =====
</TABLE>
(1) Shares outstanding at September 30, 2000, December 31, 1999 and September
30, 1999 include 157,513, 185,310, 194,576 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. These unallocated shares are also excluded
from the average shares outstanding used to compute earnings per common
share.
(2) Statistical information is annualized where applicable.
10
<PAGE> 11
Item 2. (continued)
FINANCIAL POSITION
Total consolidated assets of the Company have increased $46,902,000 during
the first nine months of 2000 to $725,054,000 at September 30, 2000 compared to
$678,152,000 at December 31, 1999. In addition, total assets of the Company have
also increased $93,066,000, or 15%, since the end of the third quarter of 1999.
The Company's strategic business plan includes growth as one of the Company's
priorities, with that goal in mind, two new locations were opened during 1999.
Over the past several quarters, the Company has experienced significant growth
in loans, deposits and total assets.
LOAN PORTFOLIO
The Company's loan portfolio consists of business loans to small and
medium size companies, commercial, construction and residential real estate
loans, and consumer loans. Traditionally, the majority of the loan portfolio has
focused on real estate as an integral component of a credit's underlying source
of collateral. The following table is a breakdown of the Company's loan
portfolio as of the end of the periods indicated.
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
2000 DECEMBER 31, 1999 1999
------------------ ---------------------- ------------------
(in thousands)
<S> <C> <C> <C>
Commercial, financial and agricultural $ 76,954 73,943 65,566
Real estate-commercial 156,099 136,697 124,771
Real estate-construction 25,983 19,078 22,249
Real estate-residential 160,198 131,074 116,554
Consumer 27,128 23,130 23,095
Industrial revenue bonds 5,435 3,879 3,438
Other 4,247 4,636 4,411
------------------ ---------------------- ------------------
$ 456,044 392,437 360,084
================== ====================== ==================
</TABLE>
The Company's loan portfolio totaled $456,044,000 at September 30, 2000,
which represents an increase of $63,607,000 or 16.21%, since December 31, 1999,
and an increase of $95,960,000 or 26.65%, over the past twelve months. These
increases in the loan portfolio were the result of the Company continuing to
execute elements of its strategic business plan, as discussed in the Company's
1999 Annual Report. In addition, the rising interest rate environment during the
first part of 2000 prompted many residential real estate loan customers to opt
for adjustable rate mortgage loan products versus long-term fixed rate loan
products. Adjustable rate mortgages are typically held by the Company, where as
fixed rate loans are usually sold into the secondary market.
SUMMARY OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 DECEMBER 31, 1999 1999
------------------ ---------------------- ------------------
(in thousands)
<S> <C> <C> <C>
Balance at beginning of period $ 5,830 6,192 6,192
Provision charged to expense 276 45 45
Loans charged off (1,390) (670) (373)
Recoveries 405 263 239
------------------ ---------------------- ------------------
Balance at end of period $ 5,121 5,830 6,103
================== ====================== ==================
</TABLE>
11
<PAGE> 12
Item 2. (continued)
The balance of the allowance for loan losses decreased by $709,000 during
the first nine months of 2000. The decrease in the allowance was largely due to
the charge off of $1,071,000 in loans to one commercial borrower, which is
discussed in more detail below. In addition, the Company recorded a provision
for loan losses of $276,000 for the nine months ended September 30, 2000. Based
upon the Company's internal analysis of the adequacy of the allowance for loan
losses, management of the Company believes the level is adequate to cover losses
inherent in the loan portfolio under current conditions. The ratio of allowance
for loan losses as a percentage of total loans was 1.12% as of September 30,
2000 compared to 1.49% and 1.69% at December 31, 1999 and September 30, 1999,
respectively.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
2000 DECEMBER 31, 1999 1999
------------------ ---------------------- ------------------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans $ 4,771 6,695 4,430
Loans past due 90 days or more and still
accruing interest 637 221 994
------------------ ---------------------- ------------------
Total nonperforming loans 5,408 6,916 5,424
Other real estate owned 784 835 817
------------------ ---------------------- ------------------
Total nonperforming assets $ 6,192 7,751 6,241
================== ====================== ==================
Ratios:
Total nonperforming loans as % of total loans 1.19% 1.76% 1.51%
Nonperforming assets as % of total loans and
other real estate owned 1.36 1.97 1.73
Nonperforming assets as % of total assets .85 1.14 .99
Allowance for loan losses as a % of
nonperforming loans 94.69% 84.30% 112.52%
================== ====================== ==================
</TABLE>
Nonperforming assets totaled $6,192,000 or .85% of total assets at
September 30, 2000 compared to $7,751,000 or 1.14% and $6,241,000 or .99% at
December 31, 1999 and September 30, 1999, respectively. Nonaccrual loans
declined $1,924,000 during the first nine months of 2000 and accounted for the
majority of the reduction in nonperforming assets. This decrease was largely due
to the disposition of one commercial credit totaling approximately $1,900,000. A
portion of the collateral securing the credit was sold and the proceeds were
used to reduce the outstanding principal balance. The remaining balance of
$1,071,000, for which there was a specific allocation in the allowance for loan
losses at December 31, 1999, was charged against the allowance for loan losses.
Management continues to aggressively pursue collection of the remaining
collateral on this credit, however, because of the uncertainties involved in the
collection process, management believes charging off the balance in 2000 was the
appropriate course of action.
A loan is 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. Additionally, loans which are
past due more than 90 days as to 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 measurements of impaired loans
is the collateral underlying the identified loan.
12
<PAGE> 13
Item 2. (continued)
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 September 30, 2000, there were no concentrations of
loans exceeding 10% of total loans, which were not disclosed as a category of
loans, detailed on page 11.
INVESTMENTS IN DEBT SECURITIES
Investments in debt securities have decreased $20,650,000 since December
31, 1999, due to the loan growth experienced during the year. With additional
loan growth projected for the remainder of 2000, management anticipates the
investment portfolio will decline further during the last three months of 2000
through investment security maturities and paydowns on mortgage-backed
securities.
DEPOSITS
Total deposits have increased $42,561,000 during 2000, due largely to a
decision made during the second quarter of 2000 to replace short-term borrowed
funds, used to fund loan growth, with certificates of deposit. Since the
promotion began in July of this year, time deposits have increased $44,115,000.
Management is satisfied with the results of the promotion, but continues to
monitor the rates being offered, the impact of the deposits on rate sensitivity
and the extent to which we are able to cross-sell additional products and
services to new time deposit customers. Noninterest-bearing demand,
interest-bearing demand and savings accounts declined slightly in comparison to
year-end 1999, as a result of normal fluctuations in these account types.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase (REPOs) decreased
$1,540,000 during 2000. The majority of the Company's REPOs are used by larger
commercial customers as a daily cash management tool, therefore, depending on
their individual liquidity positions, the balances in these accounts can vary
considerably.
FEDERAL HOME LOAN BANK (FHLB) BORROWINGS
FHLB borrowings are used by the Company for a variety of purposes.
Approximately $50,000,000 of the borrowings have been used to fund leveraged
strategies, whereby the Company borrowed funds and used the proceeds to purchase
investment securities. The yield on the investments exceeds the borrowing cost
and provides the Company with additional net interest income. Approximately
$1,800,000 of the borrowings have been used by one of the Company's subsidiary
banks to fund longer-term fixed rate residential real estate loans. The
remaining $31,000,000 is used by the Company to meet short-term liquidity needs.
OTHER BORROWINGS
The $1,900,000 balance in this category represents borrowings from an
unaffiliated financial institution under a $5 million line of credit. The line
of credit was established to provide the resources necessary to fund the
Company's stock repurchase plan announced during the third quarter of this year.
The plan authorizes the Company to repurchase a total of 430,000 common shares
or 5% of the Company's outstanding common shares. Through the end of the third
quarter, the Company had repurchased 200,100 shares under the repurchase program
at an average cost of $10.29 per common share.
DEBT OF EMPLOYEE STOCK OWNERSHIP PLAN
The decrease in the debt of the Employee Stock Ownership Plan was due to
the annual principal reduction on the loan, which is paid in March each year.
13
<PAGE> 14
Item 2. (continued)
ASSET/LIABILITY MANAGEMENT
As reflected on the Repricing and Interest Rate Sensitivity Analysis on
the following page, the Company has a reasonably well-balanced interest rate
sensitivity position. The Company's current one-year cumulative gap is .91x.
Management believes a one-year cumulative gap ratio in a range of 0.80x - 1.20x
indicates an entity is not subject to undue interest rate risk. A one-year
cumulative gap ratio of 1.00x indicates that an institution has an equal amount
of assets and liabilities repricing within twelve months. A ratio in excess of
1.00x indicates more assets than liabilities will be repriced during the period
indicated, and a ratio less than 1.00x indicates more liabilities than assets
will be repriced during the period indicated. However, actual experience may
differ because of the assumptions used in the allocation of deposits and other
factors, which are beyond management's control. Among the significant
assumptions used in preparing the Repricing and Interest Rate Sensitivity
Analysis is that interest-bearing demand and savings deposits are not 100% rate
sensitive within the period of three months or less. As a result, these deposits
are allocated between the repricing categories based on historical analyses
performed by the Company's subsidiary banks. In addition, FHLB borrowings are
categorized based on the first available call date of the individual borrowings
versus their final maturity.
14
<PAGE> 15
Item 2. (continued)
Additionally, the following analysis includes the available-for-sale
securities spread throughout their respective repricing and/or maturity
horizons, even though such securities are available for immediate liquidity
should the need arise in any particular time horizon.
REPRICING AND INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
----------------------------------------------------------------------
OVER OVER
3 MONTHS 1 YEAR
3 MONTHS THROUGH THROUGH OVER
OR LESS 12 MONTHS 5 YEARS 5 YEARS TOTAL
------------- -------------- ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits in banks $ 657 -- -- -- 657
Federal funds sold 6,209 -- -- -- 6,209
Investments available-for-sale 22,005 17,550 63,185 55,000 157,740
Investments held-to-maturity 5,403 8,944 13,463 14,025 41,835
Loans, net of unearned discount(1) 256,686 55,587 126,416 17,355 456,044
----------- ----------- ---------- ---------- ----------
Total interest-earning assets 290,960 82,081 203,064 86,380 662,485
----------- ----------- ---------- ---------- ----------
Cumulative interest-earning assets 290,960 373,041 576,105 662,485 662,485
----------- ----------- ---------- ---------- ----------
Interest-bearing liabilities:
Interest-bearing demand deposits 65,301 58,202 36,487 -- 159,990
Savings deposits 16,808 26,118 17,618 -- 60,544
Time deposits under $100,000 46,153 104,246 69,712 -- 220,111
Time deposits $100,000 and over 15,382 19,092 9,615 -- 44,089
Federal funds purchased 1,850 -- -- -- 1,850
Securities sold under agreements to
repurchase 6,063 -- -- -- 6,063
FHLB borrowings 41,000 8,000 32,192 1,801 82,993
Other borrowings -- 1,900 -- -- 1,900
Debt of Employee Stock Ownership
Plan -- 198 790 -- 988
----------- ----------- ---------- ---------- ----------
Total interest-bearing liabilities 192,557 217,756 166,414 1,801 578,528
----------- ----------- ---------- ---------- ----------
Cumulative interest-bearing liabilities 192,557 410,313 576,727 578,528 578,528
----------- ----------- ---------- ---------- ----------
Gap analysis:
Interest sensitivity gap $ 98,403 (135,675) 36,650 84,579 83,957
=========== =========== ========== ========== ==========
Cumulative interest sensitivity gap $ 98,403 (37,272) (622) 83,957 83,957
=========== =========== ========== ========== ==========
Cumulative gap ratio of interest-earning
assets to interest-bearing 1.51 .91 1.00 1.15 1.15
=========== =========== ========== ========== ==========
</TABLE>
(1) Nonaccrual loans are reported in the "Over 1 year through 5 years" column.
15
<PAGE> 16
Item 2. (continued)
CAPITAL RESOURCES
The regulatory capital guidelines require banking organizations to
maintain a minimum total capital ratio of 8% of risk-weighted assets (of which
at least 4% must be Tier I capital). The Company's total capital ratios under
the risk-weighted guidelines were 14.87%, 16.12% and 17.60% as of September 30,
2000, December 31, 1999, and September 30, 1999, respectively, which included
Tier I capital ratios of 13.79%, 14.87%, and 16.34%, respectively. These ratios
are well above the minimum risk-weighted capital requirements.
In addition, the Company and its subsidiary banks must maintain a minimum
Tier I leverage ratio (Tier I capital to total adjusted consolidated assets) of
at least 3%. Capital, as defined under these guidelines, is total shareholders'
equity less goodwill and excluding unrealized gains and losses on
available-for-sale securities of the Company. The Company's Tier I leverage
ratios were 9.14%, 9.81%, and 10.02% at September 30, 2000, December 31, 1999,
and September 30, 1999, respectively. As of September 30, 2000, all of the
Company's subsidiary banks were well capitalized under the regulatory framework
for prompt corrective action.
RESULTS OF OPERATIONS
EARNINGS SUMMARY
Net income was $4,968,000 for the nine months ended September 30, 2000
compared to $4,563,000 for the nine months ended September 30, 1999, which
represents a $405,000 or a 9% increase over the prior year. Net income for the
third quarter was $1,635,000 compared to $1,533,000 earned in the third quarter
of the prior year. The increase in earnings for the first nine months of 2000
was due to increases in net interest and noninterest income, which were
partially offset by an increase in noninterest expense. The increase in third
quarter net income was due to an increase in noninterest income, which was
offset by an increase in noninterest expense, as well as a decrease in net
interest income.
Basic earnings per common share were $.59 and $.19 for the first nine
months and third quarter of 2000, respectively, compared to $.54 and $.18 for
the first nine months and third quarter of 1999, respectively. Net income for
the first nine months of 2000 resulted in an annualized return on average assets
(ROA) of .94% compared to .97% in the prior year, and an annualized return on
average shareholders' equity (ROE) of 10.12% compared to 9.35% in the prior
year.
NET INTEREST INCOME
As reflected in the Condensed Consolidated Average Balance Sheets and
Average Interest Rates table on the following page, net interest income on a
tax-equivalent basis increased by $270,000 in the first nine months of 2000 when
compared to the first nine months of 1999. Net interest income increased because
of an increase in average interest-earning assets, which were $54,330,000 higher
in 2000; however, a decrease in the Company's net interest margin to 3.80%
negated much of the impact of the increase in average earnings assets.
Competition continues to have a dramatic impact on the Company's asset liability
management philosophy and pricing of loans and deposits. With no indication that
competition will ease in the foreseeable future, management believes that banks
will be forced to work with smaller net interest margins in the upcoming
quarters and years. Competition was not the only factor contributing to the
decline in the net interest margin. In December 1999, the Company invested
approximately $16,000,000 in bank-owned life insurance polices to offset the
cost of the deferred director fee and salary continuation plans. These assets
are classified under other noninterest earning assets on the balance sheet, and
the increase in the cash surrender value of the policies is treated as other
income. Inclusion of these assets, and the related income in the computation of
net interest margin calculation would improve the Company's 2000 net interest
margin by 15 basis points to 3.95%.
16
<PAGE> 17
Item 2. (continued)
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES
AND INTEREST DIFFERENTIAL
CONDENSED CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE INTEREST RATES
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------
2000 1999
--------------------------------- ---------------------------------
AVERAGE AVERAGE
INTEREST RATES INTEREST RATES
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID(3) BALANCE EXPENSE PAID(3)
--------- ---------- --------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans, net of unearned discount (1) (2) (3) $ 421,233 26,650 8.44% $ 350,363 22,128 8.42%
Investments in debt securities:
Taxable(4) 181,883 8,734 6.40 176,064 7,865 5.96
Exempt from Federal income tax (3) (4) 30,541 1,717 7.49 32,453 1,870 7.68
Short-term investments 6,212 299 6.42 26,659 951 4.76
--------- -------- --------- -------
Total interest-earning assets/interest
income/overall yield (3) 639,869 37,400 7.79 585,539 32,814 7.47
-------- ======== ------- ========
Allowance for loan losses (5,196) (6,185)
Cash and due from banks 17,211 18,153
Other assets 49,708 30,108
--------- ---------
Total assets $ 701,592 $ 627,615
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand and savings deposits $ 227,559 5,541 3.25 $ 219,408 4,672 2.84
Time deposits 228,469 9,232 5.39 233,842 8,714 4.97
Short-term borrowings 14,575 620 5.67 2,856 93 4.34
FHLB borrowings 85,171 3,709 5.81 34,451 1,371 5.31
Other borrowings 118 8 9.00 -- -- --
Debt of Employees Stock Ownership Plan 1,054 60 7.59 71 4 7.50
--------- -------- --------- -------
Total interest-bearing liabilities/interest-
expense/overall rate 556,946 19,170 4.59 490,628 14,854 4.04
-------- ======== ------- ========
Non-interest-bearing demand deposits 72,762 66,525
Other liabilities 6,424 5,369
Shareholders' equity 65,460 65,093
--------- ---------
Total liabilities and shareholders'
equity $ 701,592 $ 627,615
========= =========
Net interest income 18,230 17,960
======== =======
Net interest margin on average
interest-earning assets 3.80% 4.09%
======== ========
</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 up 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.
17
<PAGE> 18
Item 2. (continued)
PROVISION FOR LOAN LOSSES
The provision for loan losses increased to $276,000 during the first nine
months of 2000 from $45,000 in 1999. The increase in the provision for loan
losses was largely due to the significant loan growth achieved over the past
several quarters. With additional loan growth projected in 2000, management
anticipates the provision for loan losses will continue throughout the year.
Based on the Company's analysis of the adequacy of the allowance for loan
losses, management determined it was appropriate to increase the provisions for
loan losses in 2000. Management will continue to assess the adequacy of the
allowance for loan losses on a regular basis throughout the year.
NONINTEREST INCOME
Noninterest income increased $662,000 during the first nine months of 2000
in comparison to the first nine months of the prior year. The increase was due
to a $134,000 increase in service charge income resulting from management's
commitment to improving results in this area and a $757,000 increase in other
income. The increase in other income was the result of earnings on the cash
surrender value of company-owned life insurance policies, which were purchased
to offset the cost of deferred directors fees and salary continuation programs
at the Company and at its subsidiary banks. These two increases were partially
offset by a $230,000 decline in gains on sales of loans. During most of the
first nine months of 2000, borrowers continued to choose adjustable rate loan
products, which are not sold into the secondary market; however, as interest
rates on long-term fixed rate mortgage products and adjustable rate mortgage
products begin to converge, borrowers appear to be moving back into fixed rate
loan products. This trend will bode well for noninterest income in future
periods if it continues. Noninterest income for the third quarter increased
$265,000 over the third quarter of 1999, due largely to the same factors as
noted above.
NONINTEREST EXPENSE
Noninterest expense increased $397,000 during the first nine months of
2000 in comparison to the first nine months of 1999. The increase was the result
of increases in each of the expense categories. Salaries and employees benefits
increased $147,000 or 2% due in large part to normal pay increases. The slight
increase in occupancy expense was mainly due to having an entire year of costs
associated with the branches open in 1999. The increase in data processing
expense was the result of the Company's continuing investment in technology,
which allows the Company to offer a wide range of products and services to its
customers. Other noninterest expense increased $202,000 during 2000 because of a
$160,000 increase in advertising expense and a $91,000 increase in attorneys'
fees. These two increases were partially offset by declines in several other
noninterest expense categories. The increase in advertising expense was planned
as part of the Company's strategic business plan to grow the organization. The
increase in attorney's fees can be attributed to the costs associated with
working certain problem credits through the collection process. Third quarter
noninterest expense increased $74,000 over the previous year, as a result of
increases in salaries and employee benefits, occupancy and equipment expense and
data processing, all of which were partially offset by a slight decline in other
noninterest expense.
INCOME TAXES
Income tax expense for the first nine months of 2000 was $1,841,000
compared to $1,917,000 in the first nine months of 1999. The Company's combined
Federal and state effective tax rate decreased to 27.04% in 2000, compared to
29.58% in 1999. The income tax expense and effective tax rate for the third
quarter of 2000 were $617,000 and 27.40%, compared to $646,000 and 29.65% in the
third quarter of 1999. These decreases are largely due to the income generated
by the company-owned life insurance, which is exempt from Federal and state
income taxes and Federal and state tax credits associated with the Company's
investment in low- and moderate-income housing projects.
18
<PAGE> 19
Item 2. (continued)
EFFECT OF NEW ACCOUNTING STANDARDS
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. In June 2000, the FASB issued SFAS No. 138 - Accounting for Derivative
Instruments and Hedging Activities, an Amendment of FASB Statement No. 133,
which addresses a limited number of issues causing implementation difficulties
for numerous entities that apply SFAS 133, as amended. SFAS 138 amends the
accounting and reporting standards of SFAS 133, as amended, for certain
derivative instruments, certain hedging activities and for decisions made by the
FASB relating to the Derivatives Implementation Group (DIG) process. The Company
has reviewed the potential impact of implementing SFAS 133 and does not believe
the impact on the consolidated financial statements will be material.
COMMON STOCK - MARKET PRICE AND DIVIDENDS
The table below sets forth the high, low and closing bid prices of the
Company's common stock for the periods presented. The Company's common stock is
traded on the National Association of Securities Dealers Automated Quotation
System/Small-Cap Market System ("NASDAQ/SCM") under the symbol SBCO.
Accordingly, information included below represents the high and low bid prices
of the common stock reported on NASDAQ/SCM.
<TABLE>
<CAPTION>
DIVIDENDS
PAID PER
BOOK MARKET/ COMMON
HIGH BID LOW BID CLOSE VALUE BOOK SHARE
------------ ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
3rd Quarter - 2000 $ 10.00 7.375 8.00 8.08 99.01% $ .08
2nd Quarter - 2000 9.25 6.50 7.438 7.91 94.03 .08
1st Quarter - 2000 10.00 7.50 7.625 7.75 98.39 .08
4th Quarter - 1999 9.75 8.31 8.75 7.66 114.23 .08
3rd Quarter - 1999 11.31 9.00 9.50 7.66 124.02 .08
2nd Quarter - 1999 11.63 10.00 11.3125 7.63 148.26 .08
1st Quarter - 1999 13.00 10.75 11.625 7.76 149.81 .08
======== ========= ======== ======= ======= ========
</TABLE>
19
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the normal course of business, the Company had certain routine lawsuits
pending at September 30, 2000. In the opinion of management, after consultation
with legal counsel, none of these lawsuits will have a material adverse effect
on the consolidated financial condition of the Company.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHSIDE BANCSHARES CORP.
----------------------------------------
November 10, 2000 /s/ Thomas M. Teschner
----------------- ----------------------------------------
Thomas M. Teschner
President
(Principal Executive Officer)
November 10, 2000 /s/ Joseph W. Pope
----------------- ----------------------------------------
Joseph W. Pope
Senior Vice President and Chief
Financial Officer (Principal Financial
Officer, Controller, and Principal
Accounting Officer)
21
