SCHEDULE 14A
(RULE 14(a) - 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 [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
TEXAS REGIONAL 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)(4) 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 is 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>
[LOGO] TEXAS REGIONAL BANCSHARES, INC.
G. E. Roney
Chairman of the Board, President & 3900 North Tenth Street, 11th Floor
Chief Executive Officer McAllen, Texas 78501
March 22, 1999
Dear Shareholder:
You are cordially invited to attend the annual meeting of the shareholders
which will be held at 4:30 p.m. Monday, April 26, 1999 at the McAllen Country
Club, 615 Wichita, McAllen, Texas 78503.
The notice of the meeting and proxy statement on the following pages detail
the formal business scheduled for discussion. The Texas Regional Bancshares,
Inc. 1998 Annual Report is enclosed and provides you with material which reviews
the financial results for the year 1998.
In order for you to be represented at the annual shareholders' meeting,
please complete, sign, date and return the enclosed proxy form promptly. The
proxy form includes authority to vote all of your shares of Class A Voting
Common Stock.
By returning the completed proxy form, you are assured of representation.
Should you attend the annual shareholders' meeting in McAllen, you retain the
right to revoke your proxy and vote in person even though you have previously
mailed the enclosed proxy form.
Your directors, officers and employees join me in expressing our
appreciation for your continued support.
Yours very truly,
/s/ G. E. RONEY
G. E. RONEY
Chairman of the Board, President &
Chief Executive Officer
<PAGE>
TEXAS REGIONAL BANCSHARES, INC.
3900 North Tenth Street, 11th Floor
McALLEN, TEXAS 78501
NOTICE OF ANNUAL MEETING APRIL 26, 1999
The annual meeting of shareholders of Texas Regional Bancshares, Inc. (the
"Company") will be held at the McAllen Country Club, 615 Wichita, McAllen,
Texas 78503 on April 26, 1999 at 4:30 p.m. for the following purposes:
1. TO ELECT DIRECTORS.
2. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY BE BROUGHT BEFORE THE
MEETING AND ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
Stockholders of record of the Company's Class A Voting Common Stock at the
close of business on March 8, 1999 are entitled to notice of and to vote at the
annual meeting and any postponements or adjournments thereof.
A copy of the Company's annual report containing financial data and a
summary of operations for 1998 accompanies this notice.
By Order of the Board of Directors,
/s/ NANCY F. SCHULTZ
NANCY F. SCHULTZ
Senior Vice President, Secretary
& Treasurer
McAllen, Texas
March 22, 1999
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE AT
YOUR EARLIEST CONVENIENCE.
<PAGE>
TEXAS REGIONAL BANCSHARES, INC.
3900 North Tenth Street, 11th Floor
McALLEN, TEXAS 78501
---------------------------
PROXY STATEMENT
---------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
With this Proxy Statement, the Board of Directors of Texas Regional
Bancshares, Inc. ("Texas Regional" or the "Company") is soliciting proxies
(the "Proxies") for use at the 1999 annual meeting of the shareholders of the
Company. The enclosed Notice of Annual Meeting describes the purposes for which
the meeting has been called. The 1999 annual meeting will be held at the McAllen
Country Club, 615 Wichita, McAllen, Texas, on April 26, 1999 at 4:30 p.m. The
proxies will be used at that meeting and at any and all postponements and
adjournments of the meeting. The Company first mailed or delivered this Proxy
Statement and the Proxies to the shareholders on or about March 22, 1999.
Holders of record of the Company's Class A Voting Common Stock ("Common
Stock") at the close of business on March 8, 1999 may cast one vote for each
share held on each matter which comes before the meeting. Holders of a majority
of the shares of Common Stock outstanding on March 8, 1999 must attend the
meeting, either in person or by proxy, to constitute a quorum. As of March 8,
1999, the Company had issued and outstanding 14,411,583 shares of Common Stock.
Generally, the holders of at least a majority of the shares represented at
the annual meeting must vote affirmatively on any matter coming before the
meeting for approval of the action. This Proxy Statement describes the vote
required if any proposed action requires approval by a greater or lesser number
of shares.
The Company maintains its principal executive offices at 3900 North 10th
Street, 11th Floor, McAllen, Texas 78501.
Any shareholder of record entitled to vote at the annual meeting may revoke
a proxy before it has been voted. To revoke a proxy, the shareholder should
deliver to the Company either a written notice of revocation or a duly executed
proxy bearing a later date or the shareholder may attend the meeting, revoke the
proxy and vote in person. Attendance at the annual meeting will not, in itself,
constitute revocation of a previously granted proxy.
A shareholder entitled to vote for the election of directors can withhold
authority to vote for all nominees for directors or can withhold authority to
vote for certain nominees for directors. Abstentions are included in the
determination of the number of shares present and voting but are not counted for
purposes of determining whether a proposal has been approved. Broker nonvotes
are not included in the determination of the number of shares present and are
not counted for purposes of determining whether a proposal has been approved.
The Company will bear the cost of soliciting proxies. The Company will
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their reasonable expenses incurred in forwarding soliciting materials to
beneficial owners of stock held of record by such persons. Proxies may be
solicited by directors, officers or employees of the Company personally or by
further mailing, telephone, telegram or facsimile without additional
compensation other than their regular compensation.
ITEM 1 -- ELECTION OF DIRECTORS
In early 1999, a longtime member of the Company's Board of Directors, Joe
M. Kilgore, passed away unexpectedly. As a consequence, the Board of Directors
of the Company has amended the Bylaws to reduce the number of directors from
eight to seven. The shareholders will elect all 7 directors at the annual
1
<PAGE>
meeting. The proxy holders named in the proxies being solicited will vote for
the election of the 7 persons named below, unless a shareholder withholds
authorization to do so. The Board of Directors of the Company does not
contemplate that any of the nominees will be unable to serve. However, if any
nominee is unable to serve or for good cause will not serve, the proxy holders
may vote for the election of a substitute nominee in the exercise of their own
judgment.
Each person elected as a director will hold office until the next annual
meeting of shareholders and until his successor has been elected and qualified.
The name and age of each nominee and the year in which each nominee became a
director of the Company are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION(1) AGE SINCE
- ---------------------------- ------------------------------------------------------------ --- --------
<S> <C> <C> <C>
Morris Atlas Senior and Managing Partner, 72 1994
Atlas & Hall L.L.P.
Frank N. Boggus Chairman of the Board, 70 1983
Boggus Motor Company, Inc.
Robert G. Farris President, Valley Transit Company 68 1983
C. Kenneth Landrum, M.D. Gynecologist (Retired) 69 1994
G. E. Roney Chairman of the Board, President and Chief Executive 68 1985
Officer, Texas Regional Bancshares, Inc. and Chairman of the
Board, Chief Executive Officer and Trust Officer, Texas
State Bank(2)
Julie G. Uhlhorn Chairman of the Board, Rio Grande Equipment Company Inc. 68 1983
Jack Whetsel Investments 78 1985
</TABLE>
- ------------
(1) Each of the foregoing persons has been engaged in the principal occupation
indicated for the past five years, except that Dr. Landrum's principal
occupation was as a medical doctor practicing with Landrum-Chester OB-GYN
Associates prior to his retirement in 1994.
(2) Subsidiary of the Company.
All persons named above are directors of the Company at the present time.
The only family relationships between directors, executive officers of the
Company or persons nominated or chosen by the Company to become a director or
executive officer are as follows:
Douglas G. Bready, a Director and Executive Vice President of Texas
State Bank is the son-in-law of G. E. Roney, the Chairman of the Board &
Chief Executive Officer of the Company and Texas State Bank;
Tudor G. Uhlhorn, a Director of Texas State Bank, is the son of Julie
G. Uhlhorn, a member of the Board of Directors of the Company and Texas
State Bank;
Robert R. Farris, a Director of Texas State Bank, is the son of Robert
G. Farris, a member of the Board of Directors of the Company and Texas
State Bank; and
Robert F. Boggus, a Director of Texas State Bank, is the son of Frank
N. Boggus, a member of the Board of Directors of the Company and Texas
State Bank.
BOARD MEETINGS AND COMMITTEES
During 1998, the Board of Directors held twelve meetings and the committees
described below each held the number of meetings indicated. Each director
attended at least 75% of the total number of meetings of the Board of Directors
and Committees on which such director served.
The Company has an Audit Committee and a Stock Option and Compensation
Committee but does not have a Nominating Committee. In addition, Company
directors serve as Trustees of the Texas Regional
2
<PAGE>
Bancshares, Inc. Employee Stock Ownership Trust (the "KSOP Trust") which
administers assets held pursuant to the Company's Employee Stock Ownership Plan
(with 401k provisions) (the "KSOP Plan").
During 1998, Messrs. Boggus, Landrum, Atlas, and Mrs. Uhlhorn were members
of the Audit Committee whose function is to recommend independent auditors to
the Board of Directors and review the scope of proposed audits, the adequacy of
the Company's accounting procedures and controls, and the services performed by
the auditors. Mr. Kilgore also served on the Audit Committee prior to his death.
The Audit Committee held five meetings in 1998.
During 1998, Messrs. Atlas, Boggus, Farris, Landrum and Whetsel were
members of the Stock Option and Compensation Committee, which recommends to the
Board of Directors the compensation and stock options to be granted to the
Company's officers. Mr. Kilgore also served on the Stock Option and Compensation
Committee prior to his death. The Stock Option and Compensation Committee held
three meetings during 1998.
The Trustees of the KSOP Trust hold and invest the KSOP Trust's assets. The
Trustees held four meetings during 1998. The Trustees of the KSOP Trust are
Messrs. Atlas, Boggus and Roney. Mr. Kilgore also served as a Trustee of the
KSOP Trust prior to his death in early 1999.
COMPENSATION OF DIRECTORS
The Company pays directors and advisory directors $800 for each Texas
Regional Board of Directors meeting and reimburses all directors for
out-of-pocket expenses incurred in attending meetings. Mr. Roney also receives
compensation from the Company as an executive officer of the Company and Texas
State Bank, as indicated below.
EXECUTIVE OFFICERS
The Company's executive officers are elected annually by the Board of
Directors, each to serve a one-year term or until his or her successor is
elected and qualified. The name, age, year each first became an executive
officer and current and proposed position held at the Company by each executive
officer are as follows:
<TABLE>
<CAPTION>
OFFICER
NAME AGE SINCE CURRENT POSITION
----------- --- ------- -------------------
<S> <C> <C> <C>
G. E. Roney 68 1985 Chairman of the Board, President &
Chief Executive Officer
R. T. Pigott, Jr. 44 1998(1) Executive Vice President &
Chief Financial Officer
Nancy F. Schultz 58 1985 Senior Vice President, Secretary &
Treasurer
</TABLE>
- ------------
(1) Prior to joining the Company in December 1998, Mr. Pigott was Vice President
and Chief Financial Officer of Autobond Acceptance Corporation from April
1997 to August 1998 and served as Executive Vice President & Chief Financial
Officer of Franklin Federal Bancorp. and its predecessors from May 1985 to
January 1997.
3
<PAGE>
The Company's subsidiary, Texas State Bank, has the following senior
executive officers. The name, age, year each first became an officer and current
position held at Texas State Bank are as follows:
<TABLE>
<CAPTION>
OFFICER
NAME AGE SINCE CURRENT POSITION
- ----------- --- ------- -----------------
<S> <C> <C> <C>
G. E. Roney 68 1985 Chairman of the Board, Chief Executive
Officer & Trust Officer
Paul S. Moxley 54 1986 President & Secretary of the Board
Danny L. Buttery 51 1985(2) President -- Harlingen location
Frank A. Kavanagh 52 1992(3) President -- Mission location
Douglas G. Bready 43 1985 Executive Vice President
</TABLE>
- ------------
(2) Includes service before and since the merger of Harlingen State Bank into
Texas State Bank.
(3) Includes service in other positions with the Company's subsidiary, Texas
State Bank, including President of the Weslaco location and Chief Lending
Officer.
COMPENSATION COMMITTEE INTERLOCKS
Prior to June 1994 Frank N. Boggus served as President of the Company and
currently serves on the Stock Option and Compensation Committee. However, Mr.
Boggus is not now, nor was he at the time of his service as an officer, an
employee of the Company. Mr. Boggus does not receive compensation from the
Company or Texas State Bank other than director fees and outside director
bonuses indicated above.
4
<PAGE>
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth compensation information with respect to the
Chief Executive Officer and the four most highly compensated executive officers
of the Company.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION NUMBER OF
NAME AND --------------------------------- STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS GRANTED COMPENSATION(2)
- ------------------------------------- --------- ---------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
G. E. Roney 1998 $ 579,336 $ 0 74,864 $ 93,348
Chairman of the Board, President 1997 464,299 100,000 0 97,030
& Chief Executive Officer of the 1996 407,436 300,000 0 100,555
Company and Chairman of the
Board, Chief Executive Officer
and Trust Officer of the Bank
Paul S. Moxley 1998 195,896 0 10,000 5,606
President & Secretary of the 1997 187,956 20,000 0 9,177
Board of Directors of Texas 1996 170,269 38,000 0 13,406
State Bank
Danny L. Buttery 1998 177,788 0 9,000 4,318
President of the Bank's 1997 175,226 14,000 0 8,000
Harlingen location 1996 164,947 28,000 0 12,000
Frank A. Kavanagh 1998 190,728 0 9,000 5,918
President of the 1997 183,944 20,000 0 9,600
Bank's Mission location 1996 168,564 30,000 0 13,500
Douglas G. Bready 1998 145,273 0 9,000 5,371
Executive Vice President 1997 126,746 14,000 0 8,420
of the Bank's McAllen location 1996 111,675 26,500 0 12,436
</TABLE>
- ------------
(1) Includes wages, automobile allowances and director fees.
(2) Includes the Company's optional and matching contribution for each listed
executive officer under the KSOP Plan. KSOP Plan contributions are based
upon the lesser of the amounts set forth in the table above or the maximum
allowable under the KSOP Plan. In addition, with regard to Mr. Roney, the
amount indicated includes $87,430 accrued during each of 1998, 1997 and 1996
pursuant to the Deferred Compensation Plan adopted by the Company for the
benefit of Mr. Roney, described in the Report of the Compensation Committee.
5
<PAGE>
OPTION GRANTS
The following tables set forth information concerning stock options granted
during 1998 to the executive officers named above.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR
-----------------------------------------------------------------------------------
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS EXERCISE OPTION TERM(2)
OPTIONS GRANTED TO PRICE PER EXPIRATION ------------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
- ------------------------------------- ----------- ----------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
G. E. Roney 74,864 33.27 $ 33.875 7-1-2003 $ 700,727 $ 1,548,188
Paul S. Moxley 10,000 4.44 33.875 7-1-2003 93,600 206,800
Danny L. Buttery 9,000 4.00 33.875 7-1-2003 84,240 186,120
Frank A. Kavanagh 9,000 4.00 33.875 7-1-2003 84,240 186,120
Douglas G. Bready 9,000 4.00 33.875 7-1-2003 84,240 186,120
</TABLE>
- ------------
(1) The options to purchase one-fourth of the shares listed for each of the
executive officers are exercisable commencing on July 1, 1998 and an
additional one-fourth of the options are exercisable beginning July 1 of
each year thereafter. In addition to the options granted as indicated, the
Company in December 1998 granted options to purchase an aggregate of 9,000
shares of Common Stock to R. T. Pigott, Jr., at fair market value as of the
date of grant of $27.375 per share. [One-fourth of Mr. Pigott's options are
exercisable on July 1, 1999, and an additional one-fourth will be
exercisable commencing on July 1 of each year thereafter.]
(2) The dollar amounts under these columns are the result of calculations at 5%
and 10% compounded annual rates. The 5% and 10% rates of growth are for
illustrative purposes only as required by the Securities and Exchange
Commission. They are not intended to forecast the future price of the
Company's Common Stock.
The options granted as described in the foregoing table were granted pursuant to
the Company's 1997 Nonstatutory Stock Option Plan and the Company's 1997
Incentive Stock Option Plan.
The following table sets forth as to each of the named executive officers
information with respect to option exercises during 1998 and the status of their
options on December 31, 1998.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
------------------------------------------------------------------------------------------------
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS AT
VALUE REALIZED OPTIONS FISCAL
SHARES (MARKET PRICE AT AT FISCAL YEAR-END YEAR-END(1)
ACQUIRED ON EXERCISE LESS ---------------------------- ----------------------------
NAME EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. E. Roney 0 $0 294,417 80,523 $ 4,448,211 $ 330,586
Paul S. Moxley 0 0 7,000 9,000 61,031 20,344
Danny L. Buttery 0 0 6,750 8,250 61,031 20,344
Frank A. Kavanagh 0 0 3,750 8,250 20,344 20,344
Douglas G. Bready 0 0 6,188 8,062 53,409 17,794
</TABLE>
- ------------
(1) Calculated by subtracting the exercise price from the fair market value of
the underlying Common Stock. For purposes of this table, fair market value
is deemed to be $25.0625, the closing price per share for the Common Stock
as reported on the NASDAQ National Market System on December 31, 1998.
6
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The Board of Directors set the close of business on March 8, 1999 as the
record date for the determination of shareholders entitled to notice of and to
vote at the 1999 annual meeting (the "Record Date"). On the Record Date there
were 14,411,583 shares of the Company's Common Stock. Each share of Common Stock
is entitled to one vote on each matter to be acted upon at the meeting. Neither
the Company's Articles of Incorporation nor its Bylaws provide for cumulative
voting rights. A nominee for a director position must receive the affirmative
vote of the holders of a majority of the shares of Common Stock represented at
the meeting to be elected.
The following table sets forth certain information regarding the ownership
of the Company's voting securities as of the Record Date by each shareholder who
is known by the Company to own beneficially more than 5% of the Company's
outstanding voting securities. The table also includes information regarding
ownership by each director, each executive officer named in the Cash
Compensation Table and all executive officers and directors as a group.
The number of shares of Common Stock beneficially owned by each person as
indicated in the table is determined under rules of the Securities and Exchange
Commission and the information is not necessarily indicative of beneficial
ownership for any other purpose. Except as otherwise noted, the indicated
shareholders have sole voting and investment power over the number of shares
shown.
COMMON STOCK
------------------
NAME OF BENEFICIAL OWNER NUMBER %
- ------------------------------------- --------- ---
Morris Atlas(1)...................... 106,052 .74%
Frank N. Boggus(2)................... 213,206 1.48%
Douglas G. Bready(3)................. 29,529 .20%
Danny L. Buttery(4).................. 28,690 .20%
Robert G. Farris(5).................. 22,459 .16%
Frank A. Kavanagh(6)................. 14,083 .10%
C. Kenneth Landrum, M.D.(7).......... 121,720 .84%
Paul S. Moxley(8).................... 160,844 1.12%
Neuberger Berman, LLC and
Neuberger Berman Management, Inc.
605 Third Ave
New York, NY 10158-3698............ 767,350 5.32%
G. E. Roney(9)
3900 North Tenth Street, 11th Floor
McAllen, Texas 78501............... 1,270,732 8.64%
Julie G. Uhlhorn(10)................. 225,829 1.57%
Wanger Asset Management, L.P., of
which
Wanger Asset Management Ltd. is the
general partner
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606............ 720,000 5.00%
Jack Whetsel(11)..................... 261,337 1.81%
All officers and directors as a group
(13 persons)(12)................... 2,148,266 14.58%
--------- ---
- ------------
(1) The total includes 3,000 shares held by Mr. Atlas' wife.
(2) The total includes 159,810 shares owned by four companies controlled by Mr.
Boggus.
(3) The total includes 4,224 shares held by Mr. Bready's wife, 829 shares held
by an independent trustee for Mr. Bready's IRA, 648 shares held by an
independent trustee for Mr. Bready's wife's IRA, 15,369 shares allocated to
Mr. Bready's account as a participant in the KSOP Plan and 6,188 shares Mr.
Bready has the right to acquire within 60 days through the exercise of
options. Not included in the total are 1,312 shares which represent options
granted in 1995, and 6,750 shares which represents
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
7
<PAGE>
options granted in 1998 and not presently exercisable by Mr. Bready. See
"Executive Compensation -- Option Grants".
(4) The total includes 21,940 shares allocated to Mr. Buttery's account as a
participant in the KSOP Plan and 6,750 shares Mr. Buttery has the right to
acquire within 60 days through the exercise of options. Not included in the
total are 1,500 shares which represent options granted in 1995, and 6,750
shares which represents options granted in 1998 and not presently
exercisable by Mr. Buttery. See "Executive Compensation -- Option
Grants".
(5) The total includes 3,578 shares held by Mr. Farris' wife. Mr. Farris
disclaims beneficial ownership of his wife's shares.
(6) The total includes 10,333 shares allocated to Mr. Kavanagh's account as a
participant in the KSOP and 3,750 shares Mr. Kavanagh has the right to
acquire within 60 days through the exercise of options. Not included in the
total are 1,500 shares which represent options granted in 1995 and 6,750
shares which represents options granted in 1998 and not presently
exercisable by Mr. Kavanagh. See "Executive Compensation -- Option
Grants".
(7) The total includes 25,387 shares held by a trust for the benefit of Dr.
Landrum, 12,086 shares held by a trust for Dr. Landrum's pension plan,
3,000 shares held in a Charitable Trust where Dr. Landrum acts as Trustee
and 80,247 shares held in a trust for the benefit of Dr. Landrum's wife.
Dr. Landrum disclaims beneficial ownership of his wife's shares.
(8) The total includes 609 shares held by Mr. Moxley's wife, 24,120 shares
allocated to Mr. Moxley's account as a participant in the KSOP Plan,
111,337 shares held by trusts at Texas State Bank for which Mr. Moxley, Mr.
Roney, Mrs. Uhlhorn and Mr. Whetsel serve as trustees along with other
individuals who are not directors of the Company in which Mr. Moxley has no
interest as a beneficiary and 7,000 shares Mr. Moxley has the right to
acquire within 60 days through the exercise of options. Not included in the
total are 1,500 shares which represent the options granted in 1995, and
7,500 shares which represents options granted in 1998 and not presently
exercisable by Mr. Moxley. See "Executive Compensation -- Option Grants".
(9) The total includes 97,323 shares held by Mr. Roney's wife, 7,803 shares
held by Mr. Roney's wife as trustee, 4,500 shares held by a trust for the
benefit of Mr. Roney's wife, 106,837 shares held by trusts at Texas State
Bank for which Mr. Roney, Mr. Moxley, Mrs. Uhlhorn and Mr. Whetsel serve as
trustees along with other individuals who are not directors of the Company
but in which Mr. Roney has no interest as beneficiary, 7,281 shares held by
a company partly owned by Mr. Roney, 69,292 shares allocated to Mr. Roney's
account as a participant in the KSOP Plan, 294,417 shares Mr. Roney has the
right to acquire within 60 days through the exercise of options. Not
included in the total are 24,375 shares which represent options granted in
1995, and 56,148 shares which represents options granted in 1998 and not
presently exercisable by Mr. Roney. See "Executive Compensation -- Option
Grants".
(10) The total includes 40,524 shares which represent Mrs. Uhlhorn's beneficial
interests in a trust, 40,281 shares held by a partnership owned 30% by Mrs.
Uhlhorn and 111,337 shares held by trusts at Texas State Bank for which
Mrs. Uhlhorn, Mr. Roney, Mr. Moxley and Mr. Whetsel serve as trustees along
with other individuals who are not directors of the Company but in which
Mrs. Uhlhorn has no interest as a beneficiary.
(11) The total includes 111,337 shares held by trusts at Texas State Bank for
which Mr. Whetsel, Mr. Moxley, Mrs. Uhlhorn and Mr. Roney serve as trustees
along with other individuals who are not directors of the Company but in
which Mr. Whetsel has no interest as a beneficiary, 75,000 shares held in a
trust for the benefit of Mr. Whetsel and 75,000 held in a trust for the
benefit of Mr. Whetsel's wife.
(12) Includes 1,546,975 shares as to which directors and officers have sole
voting power, 601,291 shares as to which they have shared voting power,
1,376,246 shares as to which they have sole investment power and 772,020
shares as to which they have shared investment power. In addition, included
in this total are 324,005 shares the officers have a right to acquire
within 60 days through the exercise of options.
8
<PAGE>
STOCK OPTION AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILINGS.
REPORT OF THE COMPENSATION COMMITTEE
This Report of the Compensation Committee of the Board of the Directors of
Texas Regional Bancshares, Inc. describes the basis upon which the Committee has
made recommendations concerning the 1998 compensation payable to the officers of
the Company and its wholly-owned subsidiary, Texas State Bank. It has been the
duty of the Compensation Committee to consider the compensation of all officers,
including the officers named in the compensation tables contained in the Proxy
Statement included with the Notice of Annual Meeting of Shareholders of the
Company scheduled for April 1999.
COMPENSATION PHILOSOPHY
The Compensation Committee seeks to make compensation decisions based on
long-term growth and performance objectives of the Company. As in prior years,
the Compensation Committee during 1998 emphasized the Company's growth in total
assets and book value and the earnings of the Company in its consideration of
compensation decisions. During 1998, in particular, the Committee considered the
significant increases in responsibilities of the senior management of the
Company as a result of the increased size of the organization, in part as a
result of the acquisitions in 1998 of Brownsville National Bank, Texas Bank &
Trust Co. of Brownsville and Bank of Texas of Raymondville.
For 1998, as in recent prior years, the compensation program has been based
on the following principles:
o The Company recognizes that a competitive pay program helps attract
and retain quality personnel and the Company is committed to being
competitive in its compensation programs. To ensure that pay is
competitive, the Company regularly compares its pay practices with
those of other financial institutions, particularly banks and bank
holding companies, in the markets served by the Company. From time to
time the Company modifies pay parameters based on this review.
o The Company makes salary adjustments and other compensation awards to
officers and other key management personnel rewards upon a combination
of performance company-wide, performance of the business unit for
which they are responsible, and individual performance. Among the
performance standards reviewed in 1998 were sustained growth
objectives and an ability to maximize profitability of individual
business units, or contain costs within those units. For officers for
whom community relationships are significant, the Company also
considers the activities undertaken by those officers and the sense of
the Board members of the community perceptions of the officers. Those
officers with supervisory authority have also been evaluated, and
compensation in part determined, on their ability to interact both
with persons who work for them and persons who work with them. In each
case, the performance criteria are subjective and therefore the
compensation decisions are not based upon a mathematical application
of performance criteria.
o The Company also considers the success of the organization as a whole
in matters relative to compensation of individual officers. At those
times when the organization's profitability and growth are strong, the
Company believes that the officers and other employees of the
organization should be entitled to compensation adjustments as a
result of the availability of resources which they helped create.
In the Company's ongoing evaluation program, senior officers set objectives
and goals for junior officers and other employees reporting to them, evaluate
the employees and officers on performance, and
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compare the results to the performance of others in the Company. Managers,
including the chief executive officer, review the results of individual officers
and employees, and consider other evaluation information in making
recommendations to the Compensation Committee as to compensation for the
officers of the Company and the Bank. The Committee considered these evaluations
and recommendations for purposes of the Committee's compensation recommendations
to the Board of Directors of each of the Company and Texas State Bank. The
Committee also made a separate recommendation for the compensation of the chief
executive officer based in part on the evaluation of the chief executive officer
made by the Board of Directors. In 1998, the recommendations of the Compensation
Committee were accepted by the Board of Directors of the Company and the Bank.
In evaluating compensation, the Company is aware of the limitations on
deductibility of compensation paid to highly compensated persons as imposed by
Internal Revenue Code section 162(m). While the Company does not at this time
have any executive officer within the range of compensation for which
limitations are imposed by that provision, the Compensation Committee's policy
is to review the impact of section 162(m), and the requirements imposed on
performance-based compensation described in that section, in the context of any
qualifying compensation that may be proposed to be paid in the future.
COMPENSATION PROGRAM COMPONENTS
The Compensation Committee regularly reviews the Company's compensation
programs to ensure that the components of the compensation program will allow
the Company to successfully attract and retain key employees. The compensation
program components available to the employees of the Company are:
BASE SALARY. Base Salary levels are largely determined based upon
comparison with peer group members as well as potential competitors and
other companies which might seek to employ officers and employees of the
Company. Actual salaries are based upon individual performance
contributions in accordance with the compensation philosophy of the
Company.
BONUSES. The officers of the Company in 1997 were granted
performance-based bonuses as a component of their compensation. However,
bonuses were not granted during 1998. In lieu of bonuses, the Committee
recommended that the Company award stock options to executive officers,
managers and other key employees during 1998, as indicated below. Bonuses
have historically been awarded based on profitability of the Company. Loan
losses recognized during the third quarter of 1998, particularly those
related to the effect of last summer's drought on lending customers
involved with agriculture, affected the Company's overall profitability for
1998.
EMPLOYEE STOCK OWNERSHIP PROGRAM. The Committee believes that
participation in the employee stock ownership program of the Company
encourages the officers and other employees of the Company to work toward
the long-term goals and objectives of the Company. Decisions relative to
contributions to the employee stock ownership program are made annually,
with the aggregate amount based on a resolution of the Board of Directors,
with individual allocations based on a formula. Any participant in the Plan
who was employed by the Company as of December 31, 1998 and credited with
at least 1,000 hours of service was eligible to participate in
contributions to the Plan for 1998.
STOCK OPTIONS. The Stock Option and Compensation Committee believes
that stock options provide an appropriate incentive to encourage
management, particularly senior management, to maximize shareholder
returns. The Committee also decided to eliminate bonuses for most managers
for 1998, and to instead recommend that stock options be granted to
encourage managers to help the Company achieve its objectives of long-term
growth in shareholder value. Accordingly, during 1998, the Stock Option and
Compensation Committee recommended, and the Board of Directors granted,
stock options to purchase an aggregate of 234,000 shares of the Company's
Common Stock to an aggregate of 40 employees during 1998. Included in this
total are options to purchase an aggregate of 9,000 shares of the Company's
Common Stock granted in December 1998 to the Company's new Chief Financial
Officer, R.T. Pigott, Jr. Options granted in 1998 were granted pursuant to
the Texas Regional Bancshares, Inc., 1997 Nonstatutory Stock Option Plan
and the Texas Regional Bancshares,
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Inc., 1997 Incentive Stock Option Plan, approved by the shareholders at the
annual meeting of the shareholders in 1998.
DEFERRED COMPENSATION PLAN. In 1993, the Company adopted a Deferred
Compensation Plan for the Company's chief executive officer, Glen E. Roney.
The Deferred Compensation Plan provides for payments of $100,000 per year
for fifteen years beginning October 29, 2002, with such payments to be made
to his designated beneficiary in the event of his death prior to full
payout. The Plan benefits will be accelerated in the event that Mr. Roney
should die before October 29, 2002, while still in the employ of the
Company (with certain exceptions). The Company has established a Trust from
which the deferred compensation payments are to be made, which is to be
funded in an amount to be determined periodically at the discretion of the
Board of Directors. An aggregate of $87,430 was transferred by the Company
to the Trust during 1998. Funding of the Trust is to be accelerated in the
event of the occurrence of certain defined events, including a change of
control of the Company.
DISCUSSION OF CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee reviewed compensation of the Chief Executive
Officer of the Company for fiscal year 1998 in connection with his individual
performance for the Company. The following were some of the qualitative and
quantitative measures of the Company's performance considered by the Committee
in making recommendations for the Chief Executive Officer's compensation:
o Growth of the Company and the corresponding growth in the Chief
Executive Officer's responsibilities for the Company, including both
internal growth and growth as a result of the 1998 acquisitions of
Brownsville National Bank, Texas Bank & Trust Co. of Brownsville and
Bank of Texas of Raymondville.
o Profitability of the Company and its subsidiary and the capital of the
Company and its subsidiary in relation to regulatory guidelines.
o The ability of the Company and its senior management to work
cooperatively with regulatory authorities and the morale of personnel
in the organization.
o Perception of the Compensation Committee as to the acceptance of the
organization in the community.
Specifically, in making compensation recommendations for the chief
executive officer for compensation payable during 1998, the Compensation
Committee considered as significant the fact that the Company successfully
negotiated the acquisitions of Brownsville National Bank, Texas Bank & Trust
Co., and Bank of Texas, in the aggregate allowing the Company to enter the
Brownsville, Texas, market with an immediate, substantial presence in that
market. The Committee also considered the increase in book value per share of
the Company's Class A Voting Common Stock from $11.22 at December 31, 1997, to
$12.31 at December 31, 1998. The critical role of the chief executive officer as
spokesperson for the Company in the public market was also considered.
11
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The Compensation Committee also reviewed the base salary and bonus for the
Chief Executive Officer in the context of the compensation packages available
for executives of similar-sized financial institutions, and the Committee
considered the significant dependence of the organization on the continued
involvement of the Chief Executive Officer with the organization, and the need
to treat the Chief Executive Officer fairly in light of the responsibilities he
has undertaken for the growth and development of the organization.
Stock Option and Compensation
Committee
of the Board of Directors of
Texas Regional Bancshares, Inc.*
Morris Atlas
Frank N. Boggus
Robert G. Farris
C. Kenneth Landrum, M.D.
Jack Whetsel
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* Joe M. Kilgore served as the Chairman of the Stock Option and Compensation
Committee during 1998 and until his untimely death in early 1999, prior to the
preparation of this report.
12
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PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the S&P 500 Index and to the CRSP Total Return Index for NASDAQ
Bank Stocks for the last five years. The CRSP Total Return Index is prepared by
The Center for Research in Securities Prices (CRSP) at the University of Chicago
for NASDAQ. The graph assumes that the value of the investment of the Company's
Common Stock and each index was $100 at December 31, 1993 and that all dividends
were reinvested.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Texas Regional Bancshares, Inc.
Proxy graph coordinants for the 1998 Proxy Statement graph
1993 1994 1995 1996 1997 1998
TRBS 100 108 153 307 417 349
S&P500 100 101 140 172 230 296
NASDAQ Bank stks 100 100 148 196 328 325
13
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TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 1998 as in prior years, Company officers and directors and their
related parties have had banking transactions with Texas State Bank. All such
transactions have been in the ordinary course of business, on substantially the
same terms including interest rates and collateral, as those prevailing for
comparable transactions with others, and have not included more than the normal
risk of collectibility or other unfavorable features.
Texas State Bank, along with other banks in the Rio Grande Valley, sells
credit life insurance for Texas State Life Insurance Company. G.E. Roney,
Chairman of the Board and Chief Executive Officer of the Company, owns
thirty-three percent of Texas State Life Insurance Company. Texas State Bank
received $537,654 in commission fee income from Texas State Life Insurance
Company for the year ended December 31, 1998.
Mr. Morris Atlas, a Director of the Company, is a partner in the law firm
of Atlas & Hall L.L.P. His firm received fees for legal services rendered to the
Company and its subsidiary during 1998, but the amount of the fees received did
not exceed either 5% of his firm's gross revenues for 1998 or 5% of the
Company's total operating expenses for the year ended December 31, 1998.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3, 4 and 5 (and amendments) furnished
to the Company during 1998 and in 1999 through the date of this Proxy Statement,
and written representations from reporting persons that no Form 5 was required,
the Company believes that no officer or director has failed to report
transactions in the Company's securities on a timely basis.
INDEPENDENT PUBLIC ACCOUNTANTS
On October 29, 1998, the Company engaged KPMG LLP (formerly KPMG Peat
Marwick, LLP) to examine its financial statements for the year ended December
31, 1998. Normal practice of the Board of Directors is to select the Company's
independent public accountants at a Board meeting subsequent to the annual
meeting. The Audit Committee has not yet made a recommendation to the Board of
Directors concerning the appointment of auditors for the year ending December
31, 1999. The Company expects the Audit Committee to make a recommendation for
the selection of the auditors to the Board of Directors at a meeting of the
Board held after the annual meeting.
The Company expects a representative of KPMG LLP to be present at the
annual meeting of shareholders to make a statement if such firm desires to do so
and to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Shareholders who desire to have a proposal considered for inclusion in the
Company's proxy materials for the 2000 Annual Meeting of Shareholders must
submit the proposal to the Company no later than November 23, 1999. Shareholders
who intend to present a proposal at the 2000 Annual Meeting of Shareholders
without inclusion of such proposal in the Company's proxy materials must provide
notice of such proposal to the Company no later than February 6, 2000. Any
shareholder proposal must comply with applicable requirements of the proxy
solicitation rules of the Securities and Exchange Commission.
OTHER BUSINESS
The Board of Directors does not know of any other matters likely to be
brought before the meeting for action. However, if any matters do properly come
before the meeting, the enclosed proxy grants authority to vote on the matter in
accordance with the judgment of the persons voting the proxy.
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<PAGE>
FORM 10-K
UPON WRITTEN REQUEST, THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1998, TO EACH PERSON WHOSE PROXY IS BEING SOLICITED. APPLICABLE RULES REQUIRE
THAT FORM 10-K, WHICH INCLUDES FINANCIAL STATEMENTS AND SCHEDULES, BE FILED BY
THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS FOR COPIES OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K MUST BE IN WRITING AND SHOULD BE
DIRECTED TO ANN M. SEFCIK, CONTROLLER & ASSISTANT SECRETARY, TEXAS REGIONAL
BANCSHARES, INC., P. O. BOX 5910, MCALLEN, TEXAS 78502-5910.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ NANCY F. SCHULTZ
NANCY F. SCHULTZ
Senior Vice President, Secretary &
Treasurer
March 22, 1999
15
<PAGE>
PROXY TEXAS REGIONAL BANCSHARES, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 26, 1999
The undersigned hereby appoints Frank N. Boggus, G.E. Roney and Jack
Whetsel, and each of them, as the lawful agents and Proxies of the undersigned
(with all the powers the undersigned would possess if personally present,
including full power of substitution), and hereby authorizes them to represent
and to vote, as designated below and on the reverse side hereof, all the shares
of Class A Voting Common Stock of Texas Regional Bancshares, Inc. held of record
by the undersigned on March 8, 1999, at the Annual Meeting of Shareholders of
Texas Regional Bancshares, Inc. to be held at 615 Wichita, McAllen, Texas 78503
on April 26, 1999 at 4:30 p.m., or any adjournment or postponement thereof.
By execution this proxy confers discretionary authority to vote on matters
incident to the conduct of the meeting and to elect any person as director if a
nominee named on the reverse side is unable to serve or for good cause will not
serve. If any other matter should properly come before the meeting, then the
persons named as proxies will also have discretionary authority to vote this
proxy with respect thereto in accordance with their judgment.
It is understood that when properly executed, this proxy will be voted in
the manner directed herein by the undersigned shareholder. Where no choice is
specified by the Shareholder, the proxy will be voted OFORO the proposal set
forth in 1, on the reverse side.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
4504--TEXAS REGIONAL BANCSHARES, INC.
<PAGE>
TEXAS REGIONAL BANCSHARES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
[ ]
1. ELECTION OF DIRECTORS For Withold For All
Nominees: Morris Atlas, All All (Except)
Frank N. Boggus, [ ] [ ] [ ]
Robert G. Farris,
C. Kenneth Landrum, M.D., _________________________________________
G.E. Roney, LIST ALL NOMINEE EXEPTIONS FOR WHOM
Julie G. Uhlhorn AUTHORITY TO VOTE IS WITHELD.
and Jack Whetsel.
The undersigned hereby revokes all previous
proxies relating to the shares of
Class A Voting Common Stock covered hereby
and confirms all that said Proxy may do by
virtue hereof.
Dated: ______________________________, 1999
Signature(s)_______________________________
-------------------------------------------
This proxy must be signed exactly as the
name appears hereon. Executors,
administrators, trustees, etc., should give
full title as such. If the signer is a
corporation, please sign full corporate
name by duly authorized officer.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
4504--TEXAS REGIONAL BANCSHARES, INC.
