<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Southside Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SOUTHSIDE BANCSHARES, INC.
1201 South Beckham Avenue
Tyler, Texas 75701
March 31, 1998
Dear Shareholders:
On Wednesday, April 22, 1998, our shareholders will gather at the Southside
Bank (Main Bank Lobby), 1201 South Beckham Avenue, Tyler, to consider several
propositions that are important to Southside Bancshares, Inc. and Southside
Bank. The matters to be considered at the meeting include:
1. Election of three Directors to serve until the 2001 Annual
Shareholders' Meeting;
2. Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent accountants for the current fiscal year; and
3. Transaction of other business that may properly come before the
meeting or any adjournments.
Your attendance and vote are important and you are encouraged to vote by
completing the enclosed proxy card and returning it in the envelope provided.
Shareholders of record at the close of business on March 2, 1998, are entitled
to vote at the meeting.
Management will also report on operations and other matters affecting the
Corporation, as well as respond to your questions. After the meeting, officers
and directors will be available to visit with you.
Sincerely yours,
/s/ B. G. HARTLEY
- -----------------
B. G. Hartley
Chairman of the Board
<PAGE> 3
SOUTHSIDE BANCSHARES, INC.
1201 South Beckham Avenue
Tyler, Texas 75701
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
APRIL 22, 1998
NOTICE IS HEREBY GIVEN THAT THE ANNUAL MEETING OF SHAREHOLDERS OF
SOUTHSIDE BANCSHARES, INC. (HEREINAFTER THE "CORPORATION" OR THE "COMPANY")
WILL BE HELD AT SOUTHSIDE BANK (MAIN BANK LOBBY), 1201 SOUTH BECKHAM AVENUE,
TYLER, TEXAS, ON APRIL 22, 1998 AT 4:30 P.M., LOCAL TIME, TO CONSIDER AND VOTE
UPON THE FOLLOWING MATTERS:
1. To elect three (3) Directors to serve until the 2001 Annual
Shareholders' Meeting;
2. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants for the Corporation for the year ending
December 31, 1998; and
3. To transact such other business that may properly come before
the meeting or any adjournments.
Only shareholders who are registered on the Corporation's books as
owners of shares at the close of business on March 2, 1998, are entitled to
vote at the meeting.
Please date, sign, and return the enclosed proxy immediately in the
envelope provided. It is important that you sign and return the proxy, even
though you actually plan to attend the meeting in person. You may revoke the
proxy at any time before the proxy is exercised by giving written notice to the
Secretary of the Corporation or by advising the Secretary at the meeting.
By Order of the Board of Directors
/s/ B. G. HARTLEY
------------------------------------------
B. G. Hartley
Chairman of the Board
Tyler, Texas
March 31, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, IT IS REQUESTED THAT THE
ENCLOSED FORM OF PROXY BE PROPERLY EXECUTED AND PROMPTLY RETURNED TO SOUTHSIDE
BANCSHARES, INC. IN THE ENCLOSED ADDRESSED ENVELOPE.
<PAGE> 4
SOUTHSIDE BANCSHARES, INC.
1201 South Beckham Avenue
Tyler, Texas 75701
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1998
TO OUR SHAREHOLDERS:
This Proxy Statement is being furnished to shareholders of Southside
Bancshares, Inc. (the "Corporation") in connection with the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on April 22, 1998, at the time
and place and for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders, and at any adjournments thereof. This Proxy Statement
and applicable form of proxy are first being sent to the shareholders of the
Corporation on or about March 31, 1998.
REVOCABILITY OF PROXY
If your proxy is executed and returned, it will be voted as you direct.
Additionally, if your proxy is executed and returned, it will be voted to
approve the minutes of the last Shareholders' Meeting. This will not amount to
a ratification of the action taken at that meeting nor will it indicate
approval or disapproval of that action. Your proxy may be revoked by notice in
writing, to the Secretary of the Corporation at its principal office at any
time, or by advising the Secretary at the meeting and voting your shares in
person. Your attendance at the meeting will not constitute automatic
revocation of the proxy.
PERSONS MAKING THE SOLICITATION
The proxy is being solicited by the Board of Directors. The cost of soliciting
your proxy will be borne entirely by the Corporation and no other person or
persons will bear such costs either directly or indirectly. In addition to the
use of the mails, proxies may be solicited by personal interview, telephone and
telegram by directors, officers, and employees of the Corporation.
OUTSTANDING SHARES AND VOTING RIGHTS
The close of business on March 2, 1998, has been fixed as the record date for
determining the shareholders of the Corporation entitled to notice of and to
vote at the Annual Meeting. Each share of Common Stock is entitled to one
vote. In the election of three Directors, to serve until the 2001 Annual
Shareholders' Meeting, the three nominees receiving the highest number of votes
will be elected. For all other matters a majority of votes cast shall decide
each matter submitted to the Shareholders at the meeting. Abstentions and
broker non-votes are each included in the determination of the number of shares
present for determining a quorum, but will have no effect on the outcome of any
of the proposals. At the close of business on March 2, 1998, there were
3,361,393 shares of Common Stock outstanding and eligible to be voted on each
matter.
CERTAIN SHAREHOLDERS
As of this date, the Corporation knows of no person or entity that is a
beneficial owner of more than 5% of the outstanding Common Stock of the
Corporation.
1
<PAGE> 5
ELECTION OF DIRECTORS
(PROPOSAL 1)
There are three classes of directors, each of which are comprised of three
directors, or a total of nine directors constituting the full Board of
Directors. One class of directors is elected each year for a three-year term.
On June 12, 1997, the Board of Directors voted to amend the Corporation's
bylaws and increase the number of directors from eight to nine. Director Murph
Wilson tendered his resignation from the 1999 class, Sam Dawson was elected by
the Board to fill the vacancy, and the Board re-elected Director Wilson to the
class of 1998. The three nominees identified below are nominees for election
at the 1998 Annual Meeting for a three-year term expiring at the 2001 Annual
Meeting. All of the nominees are currently directors of the Corporation and
Southside Bank (a wholly-owned subsidiary).
Unless otherwise instructed, proxies received in response to this solicitation
will be voted in favor of the election of the persons nominated by management
for directors of the Corporation. While it is not expected that any of the
nominees will be unable to qualify or accept office, if for any reason one or
more shall be unable to do so, the proxies will be voted for the substitute
nominee(s) selected by the Board of Directors of the Corporation.
<TABLE>
<CAPTION>
INITIAL SHARES
NOMINEES FOR DIRECTORS - ELECTION BENEFICIALLY PERCENT
TERMS TO EXPIRE AT THE 1998 ANNUAL MEETING TO OWNED OF
BOARD (12-31-97)(1) CLASS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
FRED E. BOSWORTH (80) - Mr. Bosworth has been Chairman of the Board of
Bosworth & Associates, Inc., an independent insurance agency, since
1982, until his retirement in November 1997. He has been associated 1983 50,213 1.5%
with the insurance industry in various capacities since 1935. (2)
- ---------------------------------------------------------------------------------------------------------------
B. G. HARTLEY (68) - Mr. Hartley became Chairman of the Board of the
Corporation in 1983, having previously served as President. He is
also Chairman of the Board and Chief Executive Officer of Southside 1982 55,693 1.7%
Bank, having served as Southside Bank's Chief Executive Officer since (3)
its opening in 1960. He is a member of the American Bankers
Association Board of Directors, a member of the Board of Directors of
East Texas Medical Center Regional Healthcare Systems and Chairman of
Texas Taxpayers and Research Association. He is also a Trustee of the
R. W. Fair Foundation. He is Chairman of the Texas Bankers General
Agency, Inc. and a Trustee and a member of the Executive Committee of
Texas College.
- ---------------------------------------------------------------------------------------------------------------
MURPH WILSON (85) - Mr. Wilson has been a partner in the law firm of
Wilson, Sheehy, Knowles, Robertson and Cornelius since 1953, and a
practicing attorney since 1938. He was a charter member of the Board 1982 46,801 1.4%
of Directors of the Sabine River Authority. He has also served as (4)
Chairman of the Board of Directors of Southside Bank.
- ---------------------------------------------------------------------------------------------------------------
DIRECTORS CONTINUING UNTIL THE 1999 ANNUAL MEETING
- ---------------------------------------------------------------------------------------------------------------
ROLLINS CALDWELL (76) - Mr. Caldwell is a private investor who served
as President of Caldwell Welding Supply Company for 37 years. He
currently is involved in equipment and real estate leasing. 1990 55,198 1.6%
- ---------------------------------------------------------------------------------------------------------------
SAM DAWSON (50) - Mr. Dawson is Executive Vice President and Secretary
of the Corporation serving since 1990. He joined Southside Bank in
1974 and currently is President and Chief Operating Officer of 1997 25,398 *
Southside Bank. He is a Director of East Texas Medical Center (5)
Hospital, Cancer Institute and ETMC Rehabilitation Hospital. He is
also a Director of the Tyler Area Chamber of Commerce.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
INITIAL SHARES
ELECTION BENEFICIALLY PERCENT
TO BOARD OWNED OF
(12-31-97)(1) CLASS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
WILLIAM SHEEHY (57) - Mr. Sheehy has been a partner in the law firm of
Wilson, Sheehy, Knowles, Robertson and Cornelius since 1971, and a
practicing attorney since 1964. Mr. Sheehy serves as Southside Bank's 1983 20,265 *
outside general counsel. (6)
- -----------------------------------------------------------------------------------------------------------------
DIRECTORS CONTINUING UNTIL THE 2000 ANNUAL MEETING
- -----------------------------------------------------------------------------------------------------------------
HERBERT C. BUIE (67) - Mr. Buie is Chief Executive Officer of Tyler
Packing Company, Inc., a meat processing firm. He was initially
employed by Tyler Packing in 1947, and acquired the corporation 1988 124,434 3.7%
several years later. He has served on the Board of Directors of the (7)
Church of God, School of Theology, since 1979 and also serves on the
Board of Directors of the University of Texas Health Center and the
Development Board of Directors of the University of Texas-Tyler. He
also serves on the Boards of Directors of the East Texas Regional Food
Bank and the Texas Chest Foundation.
- -----------------------------------------------------------------------------------------------------------------
ROBBIE N. EDMONSON (65) - Mr. Edmonson is President of the
Corporation, serving since 1983. He joined Southside Bank as Vice
President in 1968, and currently is Vice Chairman of the Board of 1982 28,932 *
Directors and Chief Administrative Officer of Southside Bank. (8)
- -----------------------------------------------------------------------------------------------------------------
W. D. (JOE) NORTON (61) - Mr. Norton has been the owner of W. D.
Norton, Inc., dba Overhead Door, since 1988. He also owns Norton
Equipment Company. Mr. Norton served as President and principal 1988 51,499 1.5%
shareholder of Norton Companies of Texas, Inc., for 25 years. He is a
Director of the Tyler Area Chamber of Commerce.
- -----------------------------------------------------------------------------------------------------------------
ALL DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS OF THE CORPORATION AND
ITS SUBSIDIARY AS A GROUP (11 PERSONS).
492,668 14.6%
(9)
</TABLE>
- ------------------
* LESS THAN 1%
1) Unless otherwise indicated, each person has sole voting and
dispositive power with respect to the shares set forth
opposite his name.
2) Included in the total are 1,278 shares owned by Bosworth and
Associates, Inc., in which Mr. Bosworth served as Chairman of
the Board of Directors until November, 1997. Mr. Bosworth
disclaims beneficial ownership of these shares. Mr. Bosworth
owns 24,468 shares in his name and 24,467 shares in a life
estate.
3) Mr. Hartley has sole voting and dispositive power with respect
to 34,153 shares and is Trustee for Patrick Hartley with sole
voting and dispositive power with respect to 4,115 shares. He
also holds sole voting power with respect to 4,029 shares
owned in the Corporation's ESOP Plan, in which he is 100%
vested. He does not hold dispositive power. Also included in
the total are 2,090 shares owned by Mr. Hartley's wife, Billie
Boyd Hartley, of which Mr. Hartley disclaims all beneficial
interest and 11,306 shares subject to incentive stock options
that are exercisable within 60 days of the Record Date.
3
<PAGE> 7
4) Mr. Wilson has sole voting power with respect to 45,523
shares, owned individually. Also included in the total are
1,278 shares owned individually by Mr. Wilson's wife, Emily
Wilson. Mr. Wilson disclaims all beneficial interest in the
shares owned by his wife.
5) Mr. Dawson holds sole voting and dispositive power with
respect to 4,371 shares and holds sole voting power with
respect to 2,126 shares owned in the Corporation's ESOP Plan,
in which he is 100% vested. He does not hold dispositive
power. Also included in the total are 18,325 shares subject
to incentive stock options that are exercisable within 60 days
of the Record Date. Mr. Dawson's wife, Kay Dawson, owns 576
shares of which he disclaims all beneficial interest and are
included in the total.
6) Mr. Sheehy has sole voting power with respect to 16,743
shares, owned individually. Mr. Sheehy has a beneficial
interest in 3,522 shares owned by Southside Bank, Custodian
for William Sheehy IRA and directs voting of these shares.
7) Mr. Buie has sole voting power with respect to 120,967 shares,
owned individually. Also included in the total are 1,914
shares owned by Mr. Buie's wife, Melvina Buie, and 788 shares
owned by Mrs. Buie as Trustee for Herbert Rex Buie and 765
shares owned by Mrs. Buie as Trustee for Robin J. Buie. Mr.
Buie disclaims beneficial ownership of these 3,467 shares.
8) Mr. Edmonson holds sole voting and dispositive power with
respect to 14,086 shares and holds voting power with respect
to 3,118 shares, owned in the Corporation's ESOP Plan, in
which he is 100% vested. He does not hold dispositive power.
Also included in the total are 11,728 shares subject to
incentive stock options that are exercisable within 60 days of
the Record Date.
9) Mr. Jeryl Story, Senior Executive Vice President of Southside
Bancshares, Inc., holds joint voting and dispositive power
with his wife, Kathlyn C. Story, with respect to 151 shares
and sole voting, but not dispositive power, with respect to
2,177 shares owned in the Corporation's ESOP plan, in which he
is 100% vested. Also included in the total are 18,325 shares
subject to incentive stock options that are exercisable within
60 days of the Record Date, for a total 20,653 shares. Lee
Gibson, Executive Vice President of the Corporation and of
Southside Bank, holds sole voting power, but not dispositive
power, with respect to 1,923 shares owned in the Corporation's
ESOP plan, in which he is 100% vested. Also included in the
total are 11,659 shares subject to incentive stock options
that are exercisable within 60 days of the Record Date, for a
total of 13,582 shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
BOARD MEETINGS, COMMITTEES AND ATTENDANCE
The Board of Directors of the Corporation met eleven times during the fiscal
year. All directors were present for at least 75% of the meetings of the Board
and committees on which they served. Each director of the Corporation also
serves as a director of Southside Bank.
The Board of Directors of the Corporation has only one standing committee (the
Incentive Stock Option Committee) but its wholly owned subsidiary, Southside
Bank, has several standing committees to assist the Boards of Directors of
Southside Bank and of the Corporation in the discharge of their respective
responsibilities. The committees and the purpose and composition of these
committees with respect to persons who are directors of the Corporation and
Southside Bank are as follows:
EXECUTIVE COMMITTEE OF SOUTHSIDE BANK
The Executive Committee is authorized to act on behalf of the Board of
Directors of Southside Bank between scheduled meetings of the Board, subject to
certain limitations. The committee is comprised of Messrs. Bosworth, Buie,
Caldwell, Norton, Sheehy and Wilson, who are directors of Southside Bank and
directors of the Corporation, but are not officers or employees of either
Southside Bank or of the Corporation. Also serving are Messrs. Hartley,
Edmonson, and Dawson who are directors and officers of the Corporation and
Southside Bank. Mr. Jeryl Story is an officer and advisory director of
Southside Bank and Mr. Lee Gibson is an officer of the Corporation, the bank
and an advisory director of the bank. The Executive Committee of Southside
Bank meets weekly to discharge its responsibilities.
4
<PAGE> 8
In addition, the members of the Executive Committee comprise the Loan/Discount
Committee of Southside Bank. It is their responsibility to monitor credit
quality and review extensions of credit. During the fiscal year, the
Loan/Discount Committee of Southside Bank met weekly.
TRUST COMMITTEE OF SOUTHSIDE BANK
The Trust Committee of Southside Bank is responsible for the oversight of the
operations and activities of the Trust Department. Messrs. Bosworth, Edmonson,
Hartley and Dawson, directors of the Corporation and Southside Bank, serve on
this committee. Messrs. Richard Babb, Michael Gollob, and Titus Jones (an
officer of Southside Bank), are directors of Southside Bank, and serve as
members of the Trust Committee. Kathy Hayden, an officer of Southside Bank,
also serves on this committee. Messrs. Babb, Bosworth and Gollob are not
officers or employees of the Corporation or Southside Bank. The Trust
Committee meets monthly.
AUDIT-COMPLIANCE AND ELECTRONIC DATA PROCESSING COMMITTEE OF SOUTHSIDE BANK
The Audit-Compliance and Electronic Data Processing Committee of Southside Bank
is responsible for monitoring the internal audit functions, internal accounting
procedures and controls and for ensuring compliance with all appropriate
statutes. The Audit-Compliance and Electronic Data Processing Committee is
comprised solely of directors of Southside Bank who are not officers or
employees. Those directors are Messrs. Alton Cade, Jr., Michael Gollob, and
James R. Hicks. The Audit-Compliance and Electronic Data Processing Committee
of Southside Bank meets monthly.
INVESTMENT/ASSET-LIABILITY COMMITTEE OF SOUTHSIDE BANK
The Investment/Asset-Liability Committee is responsible for reviewing Southside
Bank's overall funding mix, asset- liability management policies and investment
policies. The members of the Committee are: Messrs. Buie and Norton who are
directors of the Corporation and Southside Bank; and Hoyt N. Berryman, Jr., who
is a director of Southside Bank; none of the foregoing individuals are officers
or employees of the Corporation or Southside Bank. Messrs. Hartley, Edmonson,
Dawson and Gibson serve on the committee with Southside Bank officers George
Hall, Titus Jones, Jeryl Story, Lonny Uzzell and Andy Wall. The
Investment/Asset-Liability Committee meets monthly.
INCENTIVE STOCK OPTION COMMITTEE OF SOUTHSIDE BANCSHARES, INC.
The Incentive Stock Option Committee is primarily responsible for administering
the Southside Bancshares, Inc. 1993 Incentive Stock Option Plan. The Incentive
Stock Option Committee consists solely of non-employee directors of the
Corporation and includes Messrs. Bosworth, Buie and Norton. The committee did
not meet in 1997. Stock options granted in 1997 were approved by the full
Board of Directors.
DIRECTOR COMPENSATION
The Corporation does not compensate its directors for committee service. Each
director is paid according to the compensation schedule of Southside Bank.
Officers of Southside Bank, who are also bank directors, are paid for the
scheduled directors' meeting, the Annual Shareholders' Meeting and the Annual
Director Retainer.
The current director compensation schedule for Southside Bank is as
follows:
<TABLE>
<S> <C>
DIRECTOR (MONTHLY) $500 per meeting
------------------------------------------------------------------
EXECUTIVE (WEEKLY) $200 per meeting
------------------------------------------------------------------
TRUST (MONTHLY) $ 50 per meeting
------------------------------------------------------------------
AUDIT AND COMPLIANCE (MONTHLY) $ 50 per meeting
------------------------------------------------------------------
INVESTMENT/ASSET-LIABILITY (MONTHLY) $ 50 per meeting
------------------------------------------------------------------
ANNUAL DIRECTOR RETAINER $500 per year
------------------------------------------------------------------
ANNUAL SHAREHOLDER MEETING $500 per meeting
</TABLE>
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following information is furnished for the last three fiscal years ended
December 31, with respect to the executive officers of Southside Bank who
received compensation in excess of $100,000. The Corporation does not pay its
executive officers a salary; therefore, this information relates to
compensation paid by Southside Bank.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
- -----------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS * OTHER ANNUAL
COMPENSATION
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B. G. HARTLEY - Chairman of the Board of the 1997 $200,000 $35,000 $ 5,700
Corporation; Chairman of the Board and Chief 1996 200,000 35,000 12,536
Executive Officer of Southside Bank 1995 200.000 35,000 9,343
- -----------------------------------------------------------------------------------------------------------------------
ROBBIE N. EDMONSON - President of the Corporation; 1997 $120,833 $15,333 $ 5,700
Vice Chairman of the Board and Chief 1996 130,000 16,250 11,550
Administrative Officer of Southside Bank 1995 130,000 15,625 9,501
- -----------------------------------------------------------------------------------------------------------------------
SAM DAWSON - Executive Vice President and 1997 $110,000 $13,750 $ 5,700
Secretary of the Corporation; President of 1996 95,000 11,875 9,909
Southside Bank 1995 90,000 11,250 8,362
- -----------------------------------------------------------------------------------------------------------------------
JERYL STORY - Senior Executive Vice President of 1997 $105,000 $13,125 $ 5,700
Southside Bank 1996 95,000 11,875 10,002
1995 90,000 11,250 8,434
- -----------------------------------------------------------------------------------------------------------------------
LEE GIBSON, CPA - Executive Vice President of the 1997 $100,000 $12,500 $ 5,700
Corporation; Executive Vice President of Southside 1996 92,292 11,531 7,736
Bank 1995 87,500 10,938 8,332
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Each executive officer received director fees from Southside Bank in 1997,
1996 and 1995 of $5,700, $6,100 and $5,700 respectively. ESOP contributions
comprise the remaining amount.
REPORT ON EXECUTIVE COMPENSATION
GENERAL
The purpose of this report is to provide insight into the practice and
philosophy of the Board of Directors in establishing the compensation for the
Executive Officers of Southside Bank and to elaborate on the relationship
between corporate performance and executive compensation. All monetary
compensation for Executive Officers of the Corporation and Southside Bank is
paid solely by Southside Bank. Since neither the Corporation nor Southside
Bank has a formal compensation committee, the Executive Committee of Southside
Bank is responsible for executive compensation recommendations. The
recommendations are presented to the Board of Directors of Southside Bank for
final approval.
Management and the Executive Committee keep abreast of current executive
compensation issues, trends and levels as a result of financial industry
contacts and peer group information. The Chief Executive Officer, B. G.
Hartley, initially develops and presents executive compensation recommendations
to the Executive Committee with respect to all Executive Officers. Salaries
are approved once a year in January and bonuses are approved in June and
December. The Executive Committee acts upon the recommendations and then
requests approval of the full Board of Directors of Southside Bank. After a
review and discussion by the Board of Directors, the compensation package for
all Executive Officers is acted upon. In determining the proper levels of
executive compensation, the Executive Committee considers the financial health
of the Corporation and Southside Bank. As a result, executive compensation is
affected by the financial performance of the Corporation and Southside Bank,
although specific correlation to financial performance is not established
either for a group or an individual and in the final analysis salaries are a
subjective determination of the Board of Directors. The total return on the
Corporation's Common Stock is not a
6
<PAGE> 10
significant factor in determining executive compensation. The Common Stock of
the Corporation is not traded on any market nor is there a market maker.
Supply and demand of the stock can at times have much more effect on the total
return of the Common Stock than financial performance by the Corporation or
Southside Bank. Because of this limited trading market, the actual performance
of the Corporation's stock price is not a significant factor in assessing
executive performance or arriving at executive compensation.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Company's Board of Directors considers the factors mentioned above,
primarily the financial well-being of the Corporation and peer group
compensation trends, in determining the compensation of the Chief Executive
Officer. Following an analysis of marketplace data and a subjective assessment
of the Chief Executive Officer's contribution to the Corporation, the Executive
Committee recommends, and the Board of Directors of Southside Bank approves,
the annual salary and bonus of the Chief Executive Officer. This report should
provide insight into the decision making process regarding executive officer
compensation. It is the intent of the Board of Directors of the Corporation
and of Southside Bank that executive compensation be commensurate with the
executive officer's level of responsibility and contribution in operating a
sound and profitable financial institution.
BOARD OF DIRECTORS OF SOUTHSIDE BANCSHARES, INC.
<TABLE>
<S> <C> <C>
FRED E. BOSWORTH SAM DAWSON JOE NORTON
HERBERT C. BUIE ROBBIE N. EDMONSON WILLIAM SHEEHY
ROLLINS CALDWELL B. G. HARTLEY MURPH WILSON
</TABLE>
COMPARATIVE OF FIVE YEAR TOTAL RETURN FOR
THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Southside Bancshares, Inc. $100 $143 $130 $195 $264 $281
- ---------------------------------------------------------------------------------------------------------------
Dow Jones Banks 100 109 104 167 236 352
- ---------------------------------------------------------------------------------------------------------------
Regional Banks South 100 103 101 155 217 321
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 11
1993 INCENTIVE STOCK OPTION PLAN
The purpose of the following table is to report grants of stock options to the
Executive Officers named in the Summary Compensation Table during 1997. No
stock appreciation rights have been granted. Stock options were granted in
1993, 1995, 1996 and 1997 pursuant to the 1993 Incentive Stock Option Plan.
None were granted in 1994.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
INDIVIDUAL GRANTS (1) RATES OF STOCK PRICE
APPRECIATION FOR OPTION
TERM (2)
- ---------------------------------------------------------------------------------------------------------------------
PERCENT OF
NAME OPTIONS TOTAL OPTIONS EXERCISE OR EXPIRATION AT 5% AT 10%
GRANTED GRANTED BASE PRICE DATE ANNUAL ANNUAL
(3) TO EMPLOYEES IN ($/SH) (4) GROWTH GROWTH
FISCAL YEAR (3)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B. G. HARTLEY 6,000 8.33% $17.75 06-05-07 $66,977 $169,733
- ---------------------------------------------------------------------------------------------------------------------
ROBBIE N. EDMONSON 5,000 6.94% $17.75 06-05-07 $55,814 $141,444
- ---------------------------------------------------------------------------------------------------------------------
SAM DAWSON 6,000 8.33% $17.75 06-05-07 $66,977 $169,733
- ---------------------------------------------------------------------------------------------------------------------
JERYL STORY 5,500 7.64% $17.75 06-05-07 $61,395 $155,589
- ---------------------------------------------------------------------------------------------------------------------
LEE GIBSON 5,500 7.64% $17.75 06-05-07 $61,395 $155,589
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
1) Options are granted at fair market value on the date of grant.
One-fifth of the options vest annually beginning in 1998. The options
are scheduled to expire in June 2007.
2) The dollar amounts under these columns are the result of calculations
at 5% and 10% rates set by the Securities and Exchange Commission and
are not intended to forecast possible future price appreciation of the
Corporation's stock.
3) Options listed in the table above are not adjusted for the stock
dividend declared in October 1996. The shares were increased by 5%
and the exercise price decreased to $16.90 per share.
4) Each option agreement governing that option provides that upon the
dissolution or liquidation of the Corporation, a merger or
consolidation in which the Corporation is not the surviving
corporation, a sale or conveyance of all or substantially all of its
assets, or a transaction or series of related transactions in which
another corporation makes a tender offer or exchange offer for or
becomes the owner of 50% or more of the total combined voting power of
all classes of stock of the Corporation, the optionee may exercise the
option at any time prior to the termination of the option without
regard to the extent that option would have been exercisable under the
cumulative installment provisions of his or her option agreement.
8
<PAGE> 12
The following table discloses for each of the Executive Officers named in the
Summary Compensation Table the values of their options at December 31, 1997.
AGGREGATED OPTIONS EXERCISABLE IN 1997 AND
DECEMBER 31, 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT DECEMBER 31, 1997 OPTIONS AT DECEMBER 31, 1997 (1)
- -------------------------------------------------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B. G. HARTLEY 9,101 23,868 $ 73,108 $119,513
- -------------------------------------------------------------------------------------------------------------
ROBBIE N. EDMONSON 9,523 22,499 $ 77,953 $114,959
- -------------------------------------------------------------------------------------------------------------
SAM DAWSON 16,120 23,230 $153,687 $112,189
- -------------------------------------------------------------------------------------------------------------
JERYL STORY 16,120 22,705 $153,687 $111,743
- -------------------------------------------------------------------------------------------------------------
LEE GIBSON 9,454 22,705 $ 77,161 $111,743
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on $17.75 per share of Common Stock, which was the fair market value
of a share of Common Stock on December 31, 1997.
DEFINED BENEFIT RETIREMENT PLAN
The Corporation has a retirement plan for eligible employees of the Corporation
and Southside Bank that is designed to comply with the requirements of the
Employee Retirement Income Security Act of 1974, the entire cost of which is
provided by Corporation contributions. Compensation covered by the plan
includes all cash and cash equivalent forms including bonus reported for
federal income tax purposes [including compensation deferred under IRC 401(K)].
The years of credited service under the plan as of December 31, 1997, for each
person named in the current compensation table on the preceding page are as
follows: B. G. Hartley - 37 years (37 years at age 67); Robbie N. Edmonson -
29 years (29 years at age 65); Sam Dawson - 23 years (38 years at age 65);
Jeryl Story 18 years (37 years at age 65) and Lee Gibson 13 years (37 years at
age 65).
The following table shows the anticipated annual benefit, computed on a
ten-year certain and life basis, payable upon the normal retirement as of
December 31, 1997, of a vested Executive Officer of the Corporation at age 65
after 15, 20, 25, 30, or 35 years of credited service at specified annual
compensation levels.
<TABLE>
<CAPTION>
FINAL 60 MONTHS AVERAGE YEARS OF CREDITED SERVICE AT RETIREMENT
---------------------------------------------------------------------
ANNUAL COMPENSATION 15 20 25 30 35
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$130,000 $ 47,907 $ 63,876 $ 73,345 $ 82,814 $ 92,283
- -----------------------------------------------------------------------------------------------------
155,000 57,657 76,876 88,345 99,814 111,283
- -----------------------------------------------------------------------------------------------------
180,000 67,407 89,876 103,345 116,814 130,283
- -----------------------------------------------------------------------------------------------------
205,000 77,157 102,876 118,345 133,814 149,283
- -----------------------------------------------------------------------------------------------------
225,000 84,957 113,276 130,345 147,414 164,483
- -----------------------------------------------------------------------------------------------------
250,000 94,707 126,276 145,345 164,414 183,483
- -----------------------------------------------------------------------------------------------------
300,000 114,207 152,276 175,345 198,414 221,483
- -----------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 13
NOTE: Benefits under the employer's qualified plan, Retirement Plan for
Subsidiaries of Southside Bancshares, Inc., are subject to the maximum annual
benefit limitation during 1998 under Section 415 of the Internal Revenue Code
(IRC) of $130,000. In addition, compensation that can be considered by the
plan is limited during 1998 to $160,000, as provided by Section 401(a)(17) of
the IRC. These IRC limitations are subject to annual cost-of-living
adjustments. The employer has adopted a nonqualified plan that pays to the
employee amounts restricted by the IRC. Hence, the benefits shown represent
the total amount the employee would receive from both plans and are not subject
to any deduction for social security benefits or other offset amounts. In
accordance with the provisions in the defined benefit plan, which is available
to all employees age 65 that choose to continue employment, Messrs. Hartley and
Edmonson received benefits earned under the plan in 1997 of $146,187 and
$81,627, respectively.
RETIREMENT BENEFIT RESTORATION PLAN
On August 1, 1991, the Board of Directors voted unanimously to approve and
adopt a nonqualified Retirement Benefit Restoration Plan that would reinstate
retirement benefits to those employees whose benefits are restricted under the
limitation as set forth in Section 415 of the Internal Revenue Code of 1986
(IRC). The plan was amended effective January 1, 1994, to also restore any
benefits restricted by Section 401(a)(17) of the IRC. The restoration plan
will reinstate any retirement benefit, previously provided by the Corporation's
Defined Benefit Plan, but restricted as a result of legislation enacted to
limit retirement benefits. In 1997 the Restoration Plan paid Messrs. Hartley
and Edmonson, $59,825 and $2,284, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN
The Corporation has an Employee Stock Ownership Plan which was established to
attract, reward and retain valuable employees. The plan is established for the
exclusive benefit of the employees of the Corporation and Southside Bank. The
ESOP, which is a qualified retirement plan, is designed to invest in the
securities of the Corporation and allocate the stock to all eligible full-time
employees of the Corporation and Southside Bank after completion of one year's
service. Full vesting occurs upon completion of six years credited service.
The Corporation did not make a contribution to the plan during the fiscal year
ended December 31, 1997.
401(k) EMPLOYEE SAVINGS PLAN
The Corporation also sponsors a 401-K Employee Savings Plan. All full-time
employees of the Corporation and Southside Bank are eligible to contribute to
the Plan. The Corporation does not contribute to the plan. Employees, through
salary reduction, are able to contribute up to 20% of their salary (not to
exceed $9,500 in 1997) to the qualified plan. Since participation is voluntary
and the Corporation does not contribute, participants are 100% vested.
Withdrawals from the Plan are allowed at age 59 1/2, upon disability or death,
at the occurrence of a financial hardship or termination of employment.
OFFICERS LONG-TERM DISABILITY INCOME PLAN
There is a Long-Term Disability Income Plan (the "Disability Plan"), which
covers certain officers of the Corporation and Southside Bank in the event they
become disabled. Individuals are automatically covered under the plan if they
(a) have been elected as an officer of either the Corporation or Southside
Bank, (b) have been an employee of the Corporation or Southside Bank for three
years and (c) receive earnings of $50,000 or more on an annual basis. The
Disability Plan provides that should a covered individual become totally
disabled a benefit of at least 66.7% of current salary, not to exceed $10,000
per month, is available through this plan, the retirement plan and Social
Security. The benefits paid out of the Disability Plan may be limited by the
benefits paid to the individual under the terms of other Corporate-sponsored
benefit plans and Social Security. The annual cost of the Disability Plan is
approximately $14,000.
10
<PAGE> 14
DEFERRED COMPENSATION PLAN
Southside Bank has a deferred compensation agreement with seven of its
executive officers, which provides for payment of an amount over a maximum
period of fifteen years after retirement or death. If an executive officer
leaves the bank's employ or is terminated with good cause by the Board of
Directors of Southside Bank, no benefits are payable under the plan. The
deferred compensation agreements are as follows: Mr. Hartley - $800,000
payable over 15 years; Mr. Edmonson - $360,000 payable over 10 years; Mr.
Dawson - $500,000 payable over 10 years, Mr. Story and Mr. Gibson each $400,000
payable over 10 years. The present value of the future benefits assuming a
discount rate of 7 1/2% is as follows: B. G. Hartley $577,000; Robbie N.
Edmonson $253,000; Sam Dawson $32,000, Jeryl Story $17,000 and Lee Gibson
$11,000. The benefits provided by the compensation plan are in addition to
those of the Retirement Plan of the Corporation. Southside Bank has acquired a
life insurance policy on each executive, with the bank as beneficiary, to cover
the cost of the deferred compensation plan.
TRANSACTIONS WITH DIRECTORS, OFFICERS AND ASSOCIATES
Certain of the executive officers and directors of the Corporation (and their
associates) have been customers of Southside Bank and have been granted loans
in the ordinary course of business. All loans or other extensions of credit
made by Southside Bank to executive officers and directors of the Corporation
and Southside Bank were made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collection or present unfavorable
features. The Corporation expects similar transactions to occur with its
executive officers and directors as well as directors and officers of Southside
Bank.
The law firm of Wilson, Sheehy, Knowles, Robertson and Cornelius, of which
Directors Murph Wilson and William Sheehy are partners, has provided legal
services to the Corporation and Southside Bank for many years and continues to
do so during the current fiscal year. The Corporation and Southside Bank paid
the law firm $148,000 for services rendered in calendar year 1997. During
1997, the Corporation and Southside Bank paid Bosworth and Associates, Inc., of
which Fred E. Bosworth was Chairman of the Board, approximately $55,269 for
insurance premiums for various insurance policies.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company believes its Executive Officers and Directors have complied with
all applicable Section 16(a) filing requirements on a timely basis.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee of the Board of Directors
during 1996. In addition, the Company did not pay any compensation to its
Executive Officers during 1996. See "Executive Compensation." The
compensation of the Executive Officers of Southside Bank is determined by the
Executive Committee of Southside Bank and the Board of Directors of Southside
Bank, which is comprised of all of the directors of the Company, including
Messrs. Hartley and Edmonson (who are each Executive Officers of Southside Bank
and the Company).
For information concerning transactions by the Company and Southside Bank with
certain members of the Executive Committee of Southside Bank, please see
"Transactions with Directors, Officers and Associates."
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 2)
The Board of Directors has selected Coopers & Lybrand L.L.P. as independent
accountants to audit the financial statements of the Corporation for fiscal
year 1998. Coopers & Lybrand L.L.P. has served as the Corporation's
independent accountants since August 1991. A representative of Coopers &
Lybrand L.L.P. will be in attendance at the
11
<PAGE> 15
Annual Meeting to answer questions from shareholders. If this proposal to
ratify the appointment of Coopers & Lybrand L.L.P. is not approved, the Board
of Directors will reconsider the appointment of independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
ANNUAL REPORT TO SHAREHOLDERS
Form 10-K is integrated into the Annual Report to Shareholders for the fiscal
year ended December 31, 1997, which accompanies this Proxy Statement. The
Annual Report does not constitute outside solicitation materials. Additional
copies of Form 10-K are available at no expense to the shareholder upon written
request addressed to the Secretary of the Corporation, Post Office Box 8444,
Tyler, Texas 75711.
SHAREHOLDER'S PROPOSALS
A shareholder must submit his proposal to the Secretary of the Corporation on
or before December 15, 1998, for consideration at the Corporation's Annual
Meeting to be held in 1999.
GENERAL
The Board of Directors knows of no other business other than that set forth
above to be transacted at the meeting, but if other matters requiring a vote of
the shareholders arise, the persons designated as proxies will vote the shares
of Common Stock represented by the proxies in accordance with their judgment on
such matters. If a shareholder specifies a different choice on the proxy, his
shares of Common Stock will be voted in accordance with the specification so
made.
/s/ B. G. HARTLEY
--------------------------------
B. G. HARTLEY,
CHAIRMAN OF THE BOARD
Tyler, Texas
March 31, 1998
12
<PAGE> 16
PROXY SOUTHSIDE BANCSHARES, INC.
The undersigned hereby (a) acknowledges receipt of the Notice of Annual
Meeting of Shareholders of Southside Bancshares, Inc. (the "Corporation") to be
held at Southside Bank (Main Bank Lobby), 1201 South Beckham Ave., Tyler,
Texas, on April 22, 1998 at 4:30 p.m., local time, and the Proxy Statement in
connection therewith, and (b) appoints Rollins Caldwell, Sam Dawson, and
William Sheehy and each of them, his proxies with full power of substitution
and revocation, for and in the name, place and stead of the undersigned, to vote
upon and act with respect to all of the shares of Common Stock of the
Corporation standing in the name of the undersigned or with respect to which
the undersigned is entitled to vote and act at said meeting or at any
adjournment thereof, and the undersigned directs that his proxy be voted as
follows:
<TABLE>
<S> <C>
ELECTION OF THREE DIRECTOR NOMINEES [ ] FOR nominees listed below except as marked to the contrary below
TO SERVE UNTIL THE 2001 ANNUAL MEETING [ ] WITHHOLD AUTHORITY by writing nominee's name in space below
---------------------------------------------------------------------
Fred Bosworth, B.G. Hartley, Murph Wilson
RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND, L.L.P. AS THE CORPORATION'S INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
APPROVAL OF SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
If more than one of the proxies above shall be present in person or by
substitute at the meeting or any adjournment thereof, the majority of said
proxies so present and voting, either in person or by substitute, shall
exercise all of the powers hereby given.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE; IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR EACH OF THE MATTERS SPECIFICALLY REFERRED TO ABOVE.
(continued on reverse side)
<PAGE> 17
The undersigned hereby revokes any proxy or proxies heretofore given to
vote upon or act with respect to such stock and hereby ratifies and confirms all
that said proxies, their substitutes, or any of them, may lawfully do by virtue
hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION.
Dated: , 1998
-----------------------------------
------------------------------------------------
Signature
------------------------------------------------
(Signature if held jointly)
Please date the proxy and sign your name exactly
as it appears hereon. Where there is more than
one owner, each should sign. When signing as an
attorney, administrator, executor, guardian or
trustee, please add your title as such. If
executed by a corporation, the proxy should be
signed by a duly authorized officer. Please sign
the proxy and return it promptly whether or not
you expect to attend the meeting. You may
nevertheless vote in person if you do attend.
