FORM 11-K
AMENDMENT N0. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 33-39386
A. Full title of the plan and the address of plan, if different from that
of the issuer named below:
TEXAS REGIONAL BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(including 401(k) provisions)
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
TEXAS REGIONAL BANCSHARES, INC.
3900 North 10th Street, 11th floor
McAllen, Texas 78501
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REQUIRED INFORMATION
ITEM 1 AND 2. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
Administrative Committee
Texas Regional Bancshares, Inc.
Employee Stock Ownership Plan
(With 401(k) Provisions):
We have audited the accompanying statements of net assets available for plan
benefits of Texas Regional Bancshares, Inc. Employee Stock Ownership Plan (with
401(k) provisions) as of December 31, 1998 and 1997 and the related statements
of changes in net assets available for plan benefits for the years then ended.
These financial statements are the responsibility of the Plan administrator. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Plan administrator, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of Texas
Regional Bancshares, Inc. Employee Stock Ownership Plan (with 401(k) provisions)
as of December 31, 1998 and 1997, and the changes in net assets available for
plan benefits for the years ended December 31, 1998 and 1997, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The information contained in the Schedule
is presented for the purpose of additional analysis and is not a required part
of the basic financial statements but is supplementary information required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. The information in
the Schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ KPMG PEAT MARWICK LLP
Houston, Texas
April 9, 1999
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TEXAS REGIONAL BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(With 401(k) Provisions)
Statements of Net Assets Available for Plan Benefits
December 31, 1998 and 1997
ASSETS 1998 1997
----------- -----------
Investments, at fair value (note 3):
Certificates of deposit $ 983,534 753,564
U.S. government securities -- 293
Common stock 13,383,275 15,743,429
Participant loans 4,449 --
----------- -----------
Total investments 14,371,258 16,497,286
----------- -----------
Cash 44,463 134,960
Employer contributions receivable -- 8,988
----------- -----------
Net assets available for plan benefits $14,415,721 16,641,234
=========== ===========
See accompanying notes to financial statements.
2
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TEXAS REGIONAL BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(With 401(k) Provisions)
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 1998 and 1997
1998 1997
------------ ------------
Investment income:
Net (depreciation) appreciation in
fair value of common stock (note 3) $ (2,772,518) 3,952,624
Interest 55,250 40,847
Dividends 234,268 161,751
Employer contributions 480,000 648,988
Employee contributions 614,191 400,594
------------ ------------
Total additions (1,388,809) 5,204,804
------------ ------------
Benefits paid to participants 836,704 700,458
------------ ------------
Net (decrease) increase in net
assets available for plan benefits (2,225,513) 4,504,346
Net assets available for plan benefits:
Beginning of year 16,641,234 12,136,888
------------ ------------
End of year $ 14,415,721 16,641,234
============ ============
See accompanying notes to financial statements.
3
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TEXAS REGIONAL BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(With 401(k) Provisions)
Notes to Financial Statements
December 31, 1998 and 1997
(1) DESCRIPTION OF THE PLAN
The following description of Texas Regional Bancshares, Inc.'s (the
Company) Employee Stock Ownership Plan (with 401(k) provisions) (the ESOP
or Plan) provides only general information. Participants should refer to
the plan agreement for a more complete description of the Plan's
provisions.
(A) GENERAL
The Texas Regional Bancshares, Inc. Employee Stock Ownership Plan (with
401(k) provisions) is a defined contribution plan established effective
January 1, 1990 for eligible employees of Texas Regional Bancshares,
Inc. and its subsidiary. The ESOP is a complete amendment and
restatement of the Texas Regional Bancshares, Inc. Target Benefit Plan
(the Target Benefit Plan), a target benefit plan established effective
January 1, 1984 for eligible employees of the Company and its
subsidiaries.
The Plan is a stock bonus plan containing Section 401(k) features that
is intended to qualify under Section 401(a) of the Internal Revenue
Code, as amended (the Code). The Plan is also designed to be an
employee stock ownership plan under Section 4975(e)(7) of the Code. It
is subject to the provisions of the Employee Retirement Income
Security Act of 1974. All employees who participated in the Company's
Target Benefit Plan continue to participate in the ESOP. Each other
employee is eligible to participate in the ESOP on January 1 or July 1
immediately following the completion of one year of service, as
defined in the Plan provided the employee has attained the age of 21.
(B) CONTRIBUTIONS
A participant may authorize the Company and its subsidiary
(collectively referred to as Employer) to reduce his salary and
contribute to the 401(k) account an amount which shall not be less than
one (1) percent or more than fifteen (15) percent of the participant's
compensation. Such contributions when taken into account with other
employer contributions shall not exceed the maximum deferral percentage
computed in accordance with Internal Revenue Code 401(k)(3).
The Employer may make a Discretionary Matching Contribution (Matching
Contribution), a Discretionary Basic Contribution (Basic Contribution)
and a Discretionary Optional Contribution (Optional Contribution). All
Employer Contributions shall be determined at the sole discretion of
the Board of Directors of the Company.
A Matching Contribution may be made on behalf of each participant up to
a maximum of one hundred (100) percent of the participant's salary
reduction contribution. The maximum Matching Contribution shall be
based on a participant's salary reduction contribution; however, the
Matching Contribution shall not exceed four (4) percent of a
participant's compensation.
Contributions to the Plan are subject to limitations.
4 (continued)
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TEXAS REGIONAL BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(With 401(k) Provisions)
Notes to Financial Statements
December 31, 1998 and 1997
(C) PARTICIPANT ACCOUNTS
Each participant's account is adjusted annually with the amount of
Employer contributions, participants' contributions, if any,
forfeitures and Plan earnings. Employer optional contributions and
forfeitures are allocated in proportion to the amount that each
participant's adjusted compensation, as defined, bears to the aggregate
of all such participant's adjusted compensation at the end of the plan
year. The Basic Contribution, if any, is allocated as of the
anniversary date, defined as the 31st day of December (last day of Plan
year), among the entitled participants in a manner necessary to satisfy
the nondiscrimination requirements of the Code. Employer Matching
Contributions, if any, are allocated as of the anniversary date among
the participants based upon their salary reduction contributions.
(D) VESTING
Participants are immediately vested in their 401(k) contributions and
Employer Basic and Matching Contributions plus allocated earnings
thereon. Vesting in the remainder of their accounts is based on years
of service. A participant is 100 percent vested after six years of
service, upon death, upon reaching normal retirement age or upon
becoming disabled. The Plan is not considered top heavy under the Code
Section 416.
(E) PARTICIPANT LOANS
Participants may borrow from their accounts up to a maximum equal to
the lesser of $50,000 or 50 percent of their account balance. Loan
terms shall not exceed five years unless the loan is for the primary
residence of the participant. The loans are secured by the balance in
the participant's account and bear interest at a rate commensurate with
local prevailing rates as determined by the Administrative Committee.
(F) PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and
to terminate the Plan subject to the provisions of ERISA. The amounts
in the Plan's participant accounts are then distributed to the Plan's
participants who become automatically 100% vested upon Plan
termination.
(G) PAYMENT OF BENEFITS
On termination of service, with the approval of the Administrative
Committee, a participant may elect to receive either the normal form of
payment which is a straight life annuity if single or a qualified joint
and survivor annuity if married or one of the optional forms of
payment. The optional forms of payment include a lump-sum amount equal
to the vested balance of the account, installments certain not to
exceed the greater of the life expectancy of the participant or the
joint lives and last survivor expectancies of the participant and the
participant's designated beneficiary, a combination of the previous
methods of payment or a direct rollover to a rollover account.
5 (continued)
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TEXAS REGIONAL BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(With 401(k) Provisions)
Notes to Financial Statements
December 31, 1998 and 1997
(H) ADMINISTRATION AND TRUSTEES
The general administration of the Plan is performed by the
Administrative Committee appointed by the Board of Directors of the
Company. This administrator has broad powers regarding supervision and
administration of the Plan.
Pursuant to the terms of the Plan, the Company's Board of Directors has
appointed three members to act on a Board of Trustees. Among other
duties, the Board of Trustees is responsible for receiving and
investing contributions, managing investments, making payments to
members in accordance with the Plan and performing other actions as
directed by the administrator.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the accrual
basis of accounting.
(B) USE OF ESTIMATES
The Plan administrator has made a number of estimates and assumptions
relating to reporting of assets to prepare these financial statements
in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(C) INVESTMENTS
All of the investments of the Plan are held in trust by the Company and
the Federal Reserve. All investments are stated at fair value except
participant loans which are at contract value. Unrealized appreciation
or depreciation in the fair value of investments held at year end and
realized gain or loss on sales of investments during the year are
determined using the realized value at the beginning of the year or
cost if acquired since that date. Purchases and sales of securities are
recorded on a trade date basis. Interest income is recorded on the
accrual basis. Dividends are recorded on the record date.
(D) TAX STATUS
The Plan obtained its latest determination letter on July 29, 1993, in
which the Internal Revenue Service stated that the plan, as then
designated, was in compliance with the applicable requirements of the
Internal Revenue Code. The Plan has been amended since receiving the
determination letter. The Plan has not applied for a new determination
letter. The Plan administrator believes the Plan is currently designed
and operated in compliance with the applicable requirements of the
Internal Revenue Code. Therefore, they believe that the Plan was
qualified and tax exempt as of the financial statement date.
6 (continued)
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TEXAS REGIONAL BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(With 401(k) Provisions)
Notes to Financial Statements
December 31, 1998 and 1997
(E) EXPENSES
All expenses incident to the administration of the Plan may be paid by
the Company and, if not paid by the Company, shall be paid by the Plan.
The Company elected to pay all expenses in the years ended December 31,
1998 and 1997.
(3) INVESTMENTS COMPRISING AT LEAST 5% OF NET ASSETS AVAILABLE FOR PLAN
BENEFITS
The following individual investments comprised at least 5% of net assets
available for plan benefits at December 31, 1998.
IDENTITY OF ISSUE, DESCRIPTION FAIR
BORROWER, OR SIMILAR PARTY OF INVESTMENT COST VALUE
---------------------------- --------------------- ----------- -----------
Texas Regional Bancshares, Common stock, 533,966 $ 4,244,725 13,383,275
Inc. shares, $1 par value
7
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SCHEDULE
TEXAS REGIONAL BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(With 401(k) Provisions)
Item 27(a) - Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
IDENTITY OF ISSUE,
BORROWER, LESSOR, FAIR
OR SIMILAR PARTY DESCRIPTION OF INVESTMENT COST VALUE
- -------------------------------- -------------------------------------- -------------- --------------
<S> <C> <C> <C>
Certificates of deposit:
* Texas State Bank 5.00%, due March 1, 1999 $ 50,262 50,262
* Texas State Bank 6.00%, due March 1, 1999 262,764 262,764
* Texas State Bank 5.75%, due June 2, 1999 228,125 228,125
* Texas State Bank 5.65%, due September 2, 1999 64,258 64,258
* Texas State Bank 5.65%, due September 2, 1999 164,998 164,998
* Texas State Bank 4.50%, due December 1, 1999 213,127 213,127
Common stock:
* Texas Regional Common stock 533,966 shares,
Bancshares, Inc. $1 par value 4,244,725 13,383,275
- Participant loans, bearing
interest at 6%, due in
2003 4,449 4,449
-------------- --------------
$ 5,232,708 14,371,258
============== ==============
</TABLE>
* Party-in-interest
See accompanying independent auditors' report
8
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustee (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXAS REGIONAL BANCSHARES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
(Including 401(k) provisions)
Date: ___________________________ ______________________________________
G. E. Roney
Trustee
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INDEX TO EXHIBITS FILED HEREWITH
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------- ------- ------------
1 Independent Auditors' Consent
EXHIBIT 1
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Texas Regional Bancshares, Inc.:
We consent to the incorporation by reference in the Registration Statement on
Form S-8 of Texas Regional Bancshares, Inc. (filed under Securities and Exchange
Commission File No. 33-39386) of our report dated April 9, 1999, relating to
the statement of net assets available for plan benefits of Texas Regional
Bancshares, Inc. Employee Stock Ownership Plan (with 401(k) provisions) at
December 31, 1998, the related statement of changes in net assets available for
plan benefits for the year ended December 31, 1998, which report appears in the
December 31, 1998 annual report of Form 11-K of Texas Regional Bancshares, Inc.
Employee Stock Ownership Plan (with 401(k) provisions).
/s/ KPMG PEAT MARWICK LLP
Houston, Texas
June 22, 1999
