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SOUTHSIDE BANCSHARES CORP.
3606 GRAVOIS AVENUE
ST. LOUIS, MISSOURI 63116
March , 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: SOUTHSIDE BANCSHARES CORP.
ANNUAL REPORT ON FORM 10-K
COMMISSION FILE NO. 0-10849
Ladies and Gentlemen:
On behalf of Southside Bancshares Corp. (the "Company"), a Missouri
corporation, and pursuant to Item 101(a)(1)(iii) of Regulation S-T promulgated
under the Securities Exchange Act of 1934, as amended, enclosed herewith for
filing is the Company's Annual Report on Form 10-K, with exhibits, for its
fiscal year ended December 31, 1997.
The audited financial statements included in the Annual Report to
Shareholders reflect that, effective December 31, 1997, the Company adopted SFAS
No. 128, Earnings Per Share.
If you have any questions with respect to these materials, please call
the undersigned at (314) 577-6628.
Sincerely,
/s/Joseph Pope
Joseph Pope
Attachment
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (No Fee Required)
For the transition period from __________ to __________
Commission File Number 0-10849
SOUTHSIDE BANCSHARES CORP.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
MISSOURI 43-1262037
- -------------------------------------------------------------- -----------------------------------
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
3606 GRAVOIS AVENUE, ST. LOUIS, MISSOURI 63116
- -----------------------------------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (314) 776-7000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------- ---------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1.00 PAR VALUE
(Title of Class)
------------------------------
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by references in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
At March 9, 1998, the aggregate market value, computed by the average
bid and asked prices, of the voting stock held by non-affiliates of the
Registrant was approximately $44,801,161.25.
At March 9, 1998, the number of shares outstanding of the Registrant's
common stock, $1.00 par value, was 2,792,670.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1997 (Part I and Part II); and
(2) Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders scheduled for April 23, 1998 (Part III).
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PART I
ITEM 1. BUSINESS
(a) General
Southside Bancshares Corp. (the "Registrant" or "Southside") was
incorporated under the laws of the State of Missouri on January 25, 1982.
Southside became a registered bank holding company on January 3, 1983, when
South Side National Bank in St. Louis and a wholly-owned subsidiary of the
Registrant were merged on that date. The wholly-owned subsidiary of the
Registrant now continues banking operations under the name "South Side National
Bank in St. Louis." Prior to such merger, the Registrant was not actively
involved in any banking operations. Southside's principal office is located at
3606 Gravois Avenue, St. Louis, Missouri 63116.
Southside, through its subsidiary banks, is primarily engaged in
commercial banking and providing trust services. The Registrant and its
subsidiaries had, at December 31, 1997, consolidated total assets of
approximately $550 million. The following table shows the year of acquisition,
total assets, total loans and total deposits at December 31, 1997, of each of
Southside's wholly-owned subsidiary banks, all of which are located in Missouri.
(in thousands)
Year of -------------------------------------------------------------------
Bank Acquisition Total Assets Total Loans Total Deposits
---- ----------- ------------ ----------- --------------
South Side National Bank
in St. Louis 1983 $353,316 $197,175 $309,297
State Bank of Jefferson County 1983 $ 57,683 $ 41,377 $ 51,533
Bank of Ste. Genevieve 1985 $ 84,805 $ 55,005 $ 74,627
The Bank of St. Charles
County 1986 $ 54,120 $ 34,461 $ 49,311
The Registrant's subsidiary banks, which operated 13 banking offices in
Missouri during 1997, are engaged in the general banking business of
accepting funds for deposit, making loans, renting safe deposit boxes and
performing such other banking services as are usual and customary in banks of
similar size and character. All of the subsidiary banks offer real estate,
commercial and consumer loans. Customers of all subsidiary banks are offered
regular checking, interest-bearing checking, money market, savings,
certificates of deposit and IRA accounts. South Side National Bank in St.
Louis ("SSNB"), State Bank of Jefferson County and The Bank of St. Charles
County also provide Honor and CIRRUS 24-hour automated teller machines. Bank
of Ste. Genevieve has two 24-hour banking machines on the Shazam and CIRRUS
automated teller networks. SSNB also provides a 24-hour automated teller
machine (ATM) at its Customer-Bank Communications Terminal branch in St.
Anthony's Medical Center located at 10010 Kennerly Road, St. Louis County,
Missouri 63128.
Customers of all of the subsidiary banks are also offered the services
of the trust department of SSNB. At December 31, 1997, the combined market value
of fiduciary and custodial assets under management of the trust department was
approximately $307 million, which are not included in the consolidated assets of
the Registrant as they do not represent assets of the Registrant.
The responsibility for the management of the subsidiary banks remains
with the officers and directors of the respective banks. Southside provides the
subsidiary banks with assistance and service in auditing, record keeping, tax
planning, trust operations, new business development, lending, regulatory
compliance and human resources management.
Southside has nine officers. Southside utilizes, to the extent
necessary, the officers, employees and services of its banking subsidiaries. The
total number of full and part-time employees of the Registrant and its
wholly-owned subsidiaries was 220 and 25, respectively, on December 31, 1997.
The information on page 4 and pages 47-50 of the Southside Bancshares
Corp. 1997 Annual Report is incorporated herein by reference.
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(b) Supervision and Regulation
Southside is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "BHCA"), and, as such, is subject
to regulation, supervision and examination by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). Registered bank holding
companies are required to file an annual report with the Federal Reserve Board
and to provide the Federal Reserve Board with such additional information as the
Federal Reserve Board may require pursuant to the BHCA.
The BHCA requires that bank holding companies obtain prior approval
from the Federal Reserve Board before (1) acquiring (except in certain limited
circumstances) direct or indirect ownership or control of more than 5% of the
voting shares of any bank or bank holding company, (2) acquiring all or
substantially all of the assets of any bank or bank holding company, or (3)
merging or consolidating with any other bank holding company. In determining
whether to approve a proposed acquisition, merger or consolidation, the Federal
Reserve Board is required to take into consideration the financial and
managerial resources and future prospects of the company or companies and the
banks concerned, and the convenience and needs of the community to be served.
Missouri law provides that a bank holding company may not obtain
control of any bank or depository financial institution if as a result of the
acquisition, the total deposits in such bank or institution together with the
total deposits of all banks and depository financial institutions located in the
State of Missouri controlled by the bank holding company would exceed 13% of the
total deposits of all depository financial institutions in the state, including
banks, thrifts and credit unions. In computing the total deposits in all banks
controlled by the bank holding company and the bank which the holding company
seeks to acquire, certificates of deposit in the face amount of $100,000 or
more, deposits from sources outside the United States and deposits of banks
other than banks controlled by the bank holding company are to be deducted.
The BHCA further prohibits a bank holding company, with certain
exceptions, from engaging in and from acquiring direct or indirect ownership or
control of more than 5% of the voting shares of any company engaged in a
business other than that of banking, managing and controlling banks, or
furnishing services to its affiliated banks. An exception to this prohibition
provides that a bank holding company may engage in, and may own shares of
companies engaged in, certain businesses which the Federal Reserve Board has
determined to be so closely related to banking as to be a proper incident
thereto. The Federal Reserve Board has adopted regulations specifying areas of
activity which it regards as so closely related to banking or the managing of
banks as to be permissible for bank holding companies under the law, subject to
Board approval in individual cases. The Registrant is not engaged in any such
non-banking activities.
In September 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 was enacted. As of September 29, 1995, bank holding
companies have the right to expand, by acquiring existing banks, into all
states, even those which had theretofore restricted entry, subject to state
deposit caps and a 10% nationwide deposit cap. This legislation also provides
that, subject to future action by individual states, a holding company has the
right, commencing on June 1, 1997, to convert the banks which it owns in
different states to branches of a single bank. States were permitted to "opt
out" of this full interstate branching provision prior to the effective date,
but could not "opt out" of the law allowing bank holding companies from other
states to enter such states. Missouri, in which all of the Registrant's
subsidiary banks are located, did not "opt out" of the interstate branching
provisions of this legislation.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its other subsidiaries, on investments in the
stock or other securities thereof, and on the taking of such stock or securities
as collateral for loans to any borrower. Further, under the BHCA and regulations
of the Federal Reserve Board, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property, or furnishing of services.
The primary subsidiary of the Registrant, South Side National Bank in
St. Louis, is a national bank and, as such, its primary bank regulatory
authority is the Office of the Comptroller of the Currency. A national bank is
also subject to regulations of the Federal Reserve Board and the Federal Deposit
Insurance Corporation. Banks organized under state law which are members of the
Federal Reserve System are regulated and examined primarily by the Federal
Reserve Board and state banking authorities, while banks organized under state
law which are not members of the Federal Reserve System are regulated and
examined primarily by the Federal Deposit Insurance Corporation and state
banking authorities. The Bank of Ste. Genevieve is a state-chartered bank which
is a member of the Federal Reserve System, while State Bank of Jefferson County
and The Bank
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of St. Charles County are state-chartered banks which are not members of the
Federal Reserve System. Regulation by the federal and state banking authorities
is designed to protect depositors rather than shareholders.
Subsidiary bank dividends are the principal source of revenue to the
Registrant although management fees may be charged to cover services rendered to
such subsidiary banks. The ability of each subsidiary bank to pay such dividends
to Southside is subject to limitations established by various state and federal
laws and regulations. Banks organized under either federal or state laws are
limited in the amount of dividends they may declare, depending upon the amount
of their capital and surplus, and in certain instances must obtain regulatory
approval before declaring dividends. Under the National Banking Act, until a
national bank's surplus equals or exceeds the amount of its capital, no dividend
may be declared unless at least one-tenth of the national bank's net profit
earned since declaration of the last dividend has been transferred to surplus.
Under federal law, regulatory approval is required for any dividend by a
national bank or a state-chartered bank which is a member of the Federal Reserve
System if the total of all dividends declared by the bank in any calendar year
would exceed the total of its net income for that year combined with its
retained net income for the preceding two years, less any required transfers to
surplus. Under Missouri law, a state-chartered bank which is not a member of the
Federal Reserve System whose surplus account for each dividend period does not
equal at least 40% of the amount of its capital stock is required to transfer to
its surplus account 10% of its net income for such dividend period. Retained
earnings in excess of any such required transfer to surplus are available for
dividends. In addition, sound banking practices require the maintenance of
adequate levels of capital. Federal regulatory authorities have adopted
standards for the maintenance of capital by banks, and adherence to such
standards may further limit the ability of banks to pay dividends.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies the following capital standards for
depository institutions: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. A depository institution is well capitalized if it
significantly exceeds the minimum level required by regulation for each relevant
capital measure, adequately capitalized if it meets each such measure,
undercapitalized if it fails to meet any such measure, significantly
undercapitalized if it is significantly below any such measure, and critically
undercapitalized if it fails to meet any critical capital level set forth in the
regulations. FDICIA requires a bank that is determined to be undercapitalized to
submit a capital restoration plan, and the bank's holding company must guarantee
that the bank will meet its capital plan, subject to certain limitations. FDICIA
also prohibits banks from making any capital distribution or paying any
management fee if the bank would thereafter be undercapitalized.
FDICIA grants the FDIC authority to impose special assessments on
insured depository institutions to repay FDIC borrowings from the United States
Treasury or other sources and to establish semiannual assessment rates on Bank
Insurance Fund ("BIF") member banks so as to maintain the BIF at the designated
reserve ratio defined in FDICIA. FDICIA also required the FDIC to implement a
risk-based insurance assessment system pursuant to which the premiums paid by a
depository institution are based on the probability that the BIF will incur a
loss in respect of such institution. The FDIC has adopted a deposit insurance
assessment system that places each insured institution in one of nine risk
categories based on the level of its capital, evaluation of its risks by its
primary state or federal supervisor, statistical analysis and other information.
The FDIC has recently adopted an amendment to the BIF risk-based assessment
schedule which effectively eliminated deposit insurance assessments for most
commercial banks and other depository institutions with deposits insured by the
BIF. Under the FDIC amendment, the assessment rates for BIF-insured institutions
range from 0.27% of insured deposits for the most financially troubled BIF
members to 0% of deposits for most well-capitalized institutions, including over
90% of BIF-insured institutions.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996
("EGRPRA") was signed into law on September 30, 1996. Among other matters,
EGRPRA streamlined the non-banking activities application process for
well-capitalized and well-managed bank holding companies. Under EGRPRA,
qualified bank holding companies may commence a regulatory approved non-banking
activity without prior notice to the Federal Reserve Board. Written notice is
required within 10 days after commencing the activity. Under EGRPRA, the prior
notice period is reduced to 12 days in the event of any non-banking acquisition
or share purchase, assuming the size of the acquisition does not exceed 10% of
risk-weighted assets of the acquiring bank holding company and the consideration
does not exceed 15% of Tier I capital. The foregoing prior notice requirement
also applies to commencing non-banking activity de novo which has been
previously approved by order of the Federal Reserve Board, but not yet
implemented by regulations. The Federal Reserve Board has adopted comprehensive
amendments to its regulations under the BHCA that implement the foregoing
provisions of the EGRPRA (including provisions allowing the 12-day prior notice
for acquisitions that exceed the 10% of risk-weighted assets limit, under
certain circumstances) and that also streamline the application/notice process
for acquisitions of banks and bank holding companies and eliminate regulatory
provisions
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the Federal Reserve Board considered unnecessary. EGRPRA also provided for the
recapitalization of the Savings Association Insurance Fund in order to bring
that fund into parity with the BIF.
Because of concerns relating to competitiveness and the safety and
soundness of the banking industry, Congress is considering a number of
wide-ranging proposals for altering the structure, regulation and competitive
relationships of the nation's financial institutions. Within this legislation
are proposals to alter the statutory separation of commercial and investment
banking, to allow a wider range of financial services companies to acquire and
operate commercial banks and to further expand the powers of banks, bank holding
companies and competitors of banks. It cannot be predicted whether or in what
form any of these proposals will be adopted or the extent to which Southside's
business may be affected thereby.
The references in this section to various aspects of supervision and
regulation are brief summaries which do not purport to be complete and which are
qualified in their entirety by reference to applicable laws, rules and
regulations. Any change in applicable laws or regulations may have a material
effect on the business and prospects of Southside. The operations of Southside
may be affected by legislative changes and by the policies of various regulatory
authorities. Southside is unable to predict the nature or the extent of the
effects on its business and earnings that fiscal or monetary policies, economic
controls or new federal or state legislation may have in the future.
The information contained in note 12 of the Notes to Consolidated
Financial Statements on pages 42 and 43 of the Southside Bancshares Corp. 1997
Annual Report is incorporated herein by reference.
(c) Competition
The Registrant and its subsidiaries encounter substantial competition
in all aspects of their banking activities. New banks may be established in the
market areas of the subsidiary banks, and the location of existing banks may be
moved on occasion. In addition, competing banks and competing bank holding
companies are continuing to establish separate banking facilities or branches
which have been permitted under Missouri law since 1972. Any such new or
relocated banks and facilities may have a tendency to increase the competition
faced by the subsidiary banks. Missouri law permits unlimited, state-wide
branching for both national and state-chartered banks, subject to certain
criteria.
As lenders, the subsidiary banks compete not only with other banks but
also with savings and loans associations, credit unions, finance companies,
insurance companies and other non-banking financial institutions that offer
credit. The subsidiary banks also compete for savings and time deposits with
other banks, savings and loan associations, credit unions, money market and
mutual funds, and issuers of commercial paper, securities and various forms of
fixed and variable income investments. The principal competitive factors in the
markets for deposits and loans are interest rates paid and interest rates
charged, along with related services; accessibility to customers is also a
substantial factor.
(d) Monetary Policy and Economic Conditions
The principal sources of funds to banks and bank holding companies are
deposits, stockholders' equity and borrowed funds. Stockholders' equity is
represented by common stock, surplus and retained earnings, as well as current
net income. Borrowed funds include short-, intermediate- and long-term debt, as
well as Federal funds purchased and securities sold under agreements to
repurchase. The availability of these various sources of funds and other
potential sources, such as preferred stock, convertible securities and
commercial paper, and the extent to which they are utilized, depends on many
factors, the most important of which are the monetary policies of the Federal
Reserve Board and the relative costs of different types of funds.
An important function of the Federal Reserve Board is to regulate the
national supply of bank credit. Among the instruments of monetary policy used by
the Federal Reserve Board to implement these objectives are open market
operations in United States Government Securities, changes in the discount rate
on bank borrowings and changes in reserve requirements against bank deposits.
The foregoing means are used in varying combinations to influence overall growth
of bank loans. Investments and deposits may also affect interest rates charged
on loans and paid for deposits. The availability and cost of various sources of
funds are also affected by fiscal policies of the United States Government.
The monetary policies of the Federal Reserve Board and the fiscal
policies of the United States Government have had a significant effect on
operating results of commercial banks in the past and are expected to continue
to do so in the future. No
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prediction can be made as to future changes in interest rates, credit
availability, deposit levels, loan demand or the overall performance of banks
generally and the subsidiaries of Southside in particular.
(e) Statistical Information
The following selected statistical information relative to Southside
and its subsidiaries should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations, the Consolidated
Financial Statements and Notes to Consolidated Financial Statements included in
the Southside Bancshares Corp. 1997 Annual Report, incorporated herein by
reference.
(f) Forward-Looking Statements
Statements contained in this Report and in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases and in oral statements made with the approval of an authorized
executive officer which are not historical or current facts are "forward-looking
statements" made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended). There can be no assurance, in light of these risks and uncertainties,
that such forward-looking statements will in fact transpire. The following
important factors, risks and uncertainties, among others, could cause actual
results to differ materially from such forward-looking statements:
- Credit risk: While the Company has had excellent credit
quality in recent years, approximately 51% of its loans at
December 31, 1997 were in commercial (including commercial
real estate), financial, and agricultural loans. Changes in
local economic conditions could adversely affect credit
quality in the Company's local business loan portfolio.
- Interest rate risk: Although the Company actively manages its
interest rate sensitivity, such management is not an exact
science. Rapid increases or decreases in interest rates could
adversely impact the Company's net interest margin if changes
in its cost of funds do not correspond to the changes in
income yields.
- Competition: The Company's activities involve competition with
other banks as well as other financial institutions and
enterprises. Also, the financial service markets have and
likely will continue to experience substantial changes, which
could significantly change the Company's competitive
environment in the future.
- Legislative and regulatory environment: The Company operates
in a rapidly changing legislative and regulatory environment.
It cannot be predicted how or to what extent future
developments in these areas will affect the Company. These
developments could negatively impact the Company through
increased operating expenses for compliance with new laws and
regulations, restricted access to new products and markets,
reduced barriers for new entrants in the markets in which the
Company competes, or in other ways.
- General business and economic trends: These factors, including
the impact of inflation levels, influence the Company's
results in numerous ways, including operating expense levels,
deposit and loan activity, and availability of trained
individuals needed for future growth.
The foregoing list should not be construed as exhaustive and the
Company disclaims any obligation to subsequently update or revise any
forward-looking statements after the date of this Report.
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SELECTED STATISTICAL INFORMATION
I. Loan Portfolio
A. Types of Loans
The following table shows the classification of loans by major category
at December 31 for the years shown.
(in thousands)
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------
Commercial, financial
and agricultural $69,168 $62,016 $ 62,214 $ 69,219 $ 73,566
Real estate-commercial 98,759 82,045 88,321 82,807 86,258
Real estate-construction 30,836 26,067 15,510 11,019 9,540
Real estate-residential 92,028 96,039 102,418 108,134 110,806
Consumer 23,627 17,304 17,626 18,334 18,849
Industrial revenue bonds 5,517 6,373 7,789 9,311 8,544
Other loans 6,502 4,619 9,946 2,573 668
-------- -------- -------- -------- --------
TOTAL LOANS $326,437 $294,463 $303,824 $301,397 $308,231
======== ======== ======== ======== ========
B. Maturities and Sensitivities of Loans to Changes in Interest
Rates
The following table shows the remaining maturities of selected loan
categories at December 31, 1997.
(in thousands)
----------------------------------------------------------------
One year Over one up Over
or less* to 5 years 5 years Total
----------------------------------------------------------------
Commercial, financial
and agricultural $43,927 $21,432 $3,809 $ 69,168
Real estate-construction 29,441 1,395 - 30,836
Other loans 6,487 15 - 6,502
------- ------- ------ --------
TOTAL $79,855 $22,842 $3,809 $106,506
======= ======= ====== ========
* Demand loans, loans having no stated schedule of repayments and no
stated maturity, and overdrafts are reported as due "One year or less."
The following table shows the amount of loans above having maturities over one
year which have predetermined interest rates, and the amount which have floating
or adjustable interest rates at December 31, 1997 (in thousands).
Loans with predetermined interest rates $21,313
Loans with floating or adjustable interest rates 5,338
-------
$26,651
=======
II. Summary of Loan Loss Experience
The information under the caption Allowance for Loan Losses and Risk
Elements on pages 8 through 10 of the Southside Bancshares Corp. 1997 Annual
Report is incorporated herein by reference.
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The following table analyzes the loan loss experience of the Registrant
for the periods indicated:
(dollars in thousands)
Years Ended December 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------------------------------------------------------------
Average loans outstanding, net of
unearned discount $311,266 $295,683 $297,480 $294,749 $330,869
======== ======== ======== ======== ========
Allowance at beginning of year $ 5,602 $ 5,635 $ 7,144 $ 8,334 $ 9,994
======== ======== ======== ======== ========
Loans charged off:
Commercial, financial and
agricultural 139 878 1,606 821 3,087
Real estate - construction - - - - -
Real estate - residential 77 93 294 1,302 1,884
Consumer 151 248 274 195 528
-------- -------- -------- -------- --------
Total loans charged off 367 1,219 2,174 2,318 5,499
-------- -------- -------- -------- --------
Recoveries:
Commercial, financial and
agricultural 687 869 661 276 615
Real estate - construction - - - - -
Real estate - mortgage 62 171 186 568 531
Consumer 76 86 75 91 85
-------- -------- -------- -------- --------
Total recoveries 825 1,126 922 935 1,231
-------- -------- -------- -------- --------
Net loans (recovered) charged off (458) 93 1,252 1,383 4,268
-------- -------- -------- -------- --------
Provisions charged to
operating expense 60 60 70 193 2,608
-------- -------- -------- -------- --------
Adjustment due to sale of
Bay-Hermann-Berger Bank - - (327) - -
-------- -------- -------- -------- --------
Allowance at end of year $ 6,120 $ 5,602 $ 5,635 $ 7,144 $ 8,334
======== ======== ======== ======== ========
Ratio of net charge-offs during
year to average loans outstanding * 0.03% 0.42% 0.47% 1.29%
======== ======== ======== ========
* Ratio is not applicable for 1997, as recoveries exceeded charge-offs for the
year.
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The following table sets forth at the end of each reported period, a
breakdown of the allowance for possible loan losses by major categories of loans
and the percentage of loans in each category to total loans at the dates
indicated:
Years Ended December 31,
(dollars in thousands)
---------------------------------------------------------------------------------------------------
1997 1996 1995
---------------------------------------------------------------------------------------------------
Percent of Percent of Percent of
Loans in Each Loans in Each Loans in Each
Category To Category To Category To
Allowance Total Loans Allowance Total Loans Allowance Total Loans
--------- ----------- --------- ----------- --------- ------------
Commercial,
financial and
agricultural $3,920 23.0% $3,902 23.2% $3,935 23.0%
Real estate -
construction 500 9.4 300 8.9% 300 5.1%
Real estate -
mortgage 1,000 58.4 1,000 60.5% 1,000 62.8%
Consumer loans to
individuals 500 7.2 200 5.8% 200 5.8%
Other loans
(Unallocated) 200 2.0% 200 1.6% 200 3.3%
------ ----- ------ ------ ------ -----
$6,120 100.0% $5,602 100.0% $5,635 100.0%
====== ===== ====== ====== ====== =====
--------------------------------------------------------------------------
1994 1993
---------------------------------------------------------------------------
Percent of Percent of
Loans in Each Loans in Each
Category To Category To
Allowance Total Loans Allowance Total Loans
--------- ------------ ------------ --------------
Commercial,
financial and
agricultural $5,094 26.0% $5,984 26.6%
Real estate -
construction 300 3.7% 300 3.1%
Real estate -
mortgage 1,500 63.4% 1,500 63.9%
Consumer loans to
individuals 200 6.1% 500 6.2%
Other loans
(Unallocated) 50 0.8% 50 0.2%
------ ----- ------ -----
$7,144 100.0% $8,334 100.0%
====== ===== ====== =====
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III. Investment Portfolio
The information contained in note 2 of the Notes to Consolidated
Financial Statements on pages 36 and 37 of the Southside Bancshares Corp. 1997
Annual Report is incorporated herein by reference. The following table
summarizes the carrying values and weighted average yields of investments in
debt securities by contractual maturity. Actual maturities will differ from
contractual maturities, because borrowers have the right to prepay obligations
with or without prepayment penalties. A maturity distribution for
mortgage-backed securities has not been prepared due to their accelerated
prepayment characteristics.
(dollars in thousands)
DECEMBER 31, 1997
------------------------------------------------------------------------
AVAILABLE FOR SALE HELD TO MATURITY
------------------ ----------------
CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD* VALUE YIELD*
----- ------ ----- ------
U.S. TREASURY SECURITIES AND OBLIGATIONS OF U.S.
GOVERNMENT AGENCIES AND CORPORATIONS:
Within 1 year $ 9,065 5.44% $20,020 5.70%
After 1 but within 5 years 15,472 6.89 47,109 6.12
After 5 but within 10 years 2,521 6.61 4,936 6.46
After 10 years -- -- -- --
------- -------
Total 27,058 6.37 72,065 6.03
======= ==== ======= ====
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS:
Within 1 year 304 7.20 1,872 6.48
After 1 but within 5 years -- -- 8,286 5.78
After 5 but within 10 years -- -- 11,562 5.28
After 10 years -- -- 1,824 5.19
------- -------
Total 304 7.20 23,544 5.55
======= ==== ======= ====
OTHER DEBT SECURITIES:
Within 1 year -- -- -- --
After 1 but within 5 years -- -- -- --
After 5 but within 10 years 100 6.29 -- --
After 10 years -- -- -- --
------- -------
Total 100 6.29 -- --
======= ==== ======= ====
TOTAL INVESTMENT SECURITIES:
Within 1 year 9,369 5.49 21,892 5.77
After 1 but within 5 years 15,472 6.89 55,395 6.07
After 5 but within 10 years 2,621 6.59 16,498 5.63
After 10 years -- -- 1,824 5.19
------- -------
Total 27,462 6.39 95,609 5.91
======= ==== ======= ====
OTHER SECURITIES - NO STATED MATURITY 1,475 6.80 -- --
======= ==== ======= ====
MORTGAGE-BACKED SECURITIES 44,523 6.28 4,070 6.90
======= ==== ======= ====
Total $73,460 6.33 $99,679 5.95
======= ==== ======= ====
* The weighted average yield for each maturity range was calculated using the
yield on each security within that range, weighted by the amortized cost of
each security at December 31, 1997. The yields for obligations of states and
political subdivisions exempt from federal income taxes have been adjusted to
a fully tax-equivalent basis at a maximum tax rate of 34% for 1997, adjusted
for the disallowance of interest cost to carry nontaxable securities.
9
12
ITEM 2. PROPERTIES
The Registrant owned the following physical properties as of December
31, 1997:
South Side National Bank in St. Louis, a subsidiary of the Registrant,
owns a nine-story banking and office building at 3606 Gravois Avenue in St.
Louis, Missouri 63116, and the adjacent drive-up facilities and three parking
lots. The Registrant and this subsidiary occupy all nine stories in the
building. This subsidiary of the Registrant owns the land and bank building
located at its branch facility at 10330 Gravois Road, St. Louis, Missouri
63126. This is a two story building and the lower level and a portion of the
main level are leased to tenants for an annual rental of approximately
$31,000. This subsidiary also owns the land and bank building at 9914 Kennerly
Road in St. Louis County upon which its South County branch is located. This
is a two-story building and the second floor is leased to tenants for an
annual rental of approximately $85,000. This subsidiary also owns the land and
bank buildings at 10385 West Florissant, Ferguson, Missouri 63136, 8440
Morganford Road, St. Louis County, Missouri 63123 and 3420 Iowa Street, St.
Louis, Missouri 63118. This subsidiary leases a branch facility at 4666
Lansdowne, St. Louis, Missouri 63116. In addition, the Registrant owns land at
4111 Telegraph Road in St. Louis County upon which it is currently
constructing a three-story banking facility.
State Bank of Jefferson County owns the land and a two-story building
at its main banking office at 224 S. Main Street, DeSoto, Missouri 63020. The
State Bank of Jefferson County also owns the land and a one-story building
housing its facility located at 2000 Rock Road, DeSoto, Missouri 63020. In
addition, State Bank of Jefferson County owns land in Herculaneum, Missouri,
which was purchased as the site of a third banking facility.
Bank of Ste. Genevieve owns the land, a one-story building and an
adjacent parking lot at its main banking office at Second and Market Streets,
Ste. Genevieve, Missouri 63670 and the land and one-story building at its
facility at 710 Parkwood Drive, Ste. Genevieve, Missouri 63670.
The Bank of St. Charles County owns the land and a two-story building
at its banking facility at 6004 Highway 94 South, St. Charles, Missouri 63304.
This subsidiary bank owns the land and a one-story building at its facility
located at 750 First Capitol Drive, St. Charles, Missouri 63301.
In the opinion of the Registrant's management, the physical properties
of the subsidiary banks are suitable and adequate and are being productively
utilized.
ITEM 3. LEGAL PROCEEDINGS
The information contained in note 14 of the Notes to Consolidated
Financial Statements on page 44 of the Southside Bancshares Corp. 1997 Annual
Report is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
10
13
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the names and ages of the executive officers
of the Registrant and their business history for the past five years:
NAME, AGE AND POSITION WITH THE
COMPANY PRINCIPAL OCCUPATIONS OR EMPLOYMENT SINCE JANUARY 1, 1993
------------------------------- ---------------------------------------------------------
Thomas M. Teschner (41) President and Chief Executive Officer, Southside Bancshares Corp.;
President and Chief Executive Officer President and Chief Executive Officer, South Side National Bank in
St. Louis.
Joseph W. Pope (32) Chief Financial Officer and Senior Vice President, Southside Bancshares
Senior Vice President and Corp. (Since April 1995); Vice President, South Side National Bank in
Chief Financial Officer St. Louis.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The only class of the Registrant's common equity is common stock, $1.00
par value (the "Common Stock"). The number of shares of Common Stock of the
Registrant outstanding at March 9, 1998 was 2,792,670 shares, and the market
price for the Common Stock on March 9, 1998 was $35.375 bid; $36.00 asked.
The information on page 25 of the Southside Bancshares Corp. 1997
Annual Report to Shareholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information on page 5 of the Southside Bancshares Corp. 1997 Annual
Report to Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information on pages 6 through 26 of the Southside Bancshares Corp.
1997 Annual Report to Shareholders is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information on pages 15 and 16 of the Southside Bancshares Corp.
1997 Annual Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information on pages 27 through 46 of the Southside Bancshares
Corp. 1997 Annual Report to Shareholders is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
11
14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information on pages 4 through 6 of the Southside Bancshares Corp.
Proxy Statement for the Annual Meeting of Shareholders scheduled for April 23,
1998 is incorporated herein by reference. The information on page 18 of the
Southside Bancshares Corp. Proxy Statement for the Annual Meeting of
Shareholders scheduled for April 23, 1998, with respect to compliance by the
Registrant's officers and directors with Section 16(a) of the Securities
Exchange Act of 1934, is incorporated herein by reference. The required
information regarding Southside's executive officers is contained in PART I in
the item captioned "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information on pages 10 through 14 of the Southside Bancshares
Corp. Proxy Statement for the Annual Meeting of Shareholders scheduled for
April 23, 1998 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information on pages 3 and 4 of the Southside Bancshares Corp.
Proxy Statement for the Annual Meeting of Shareholders scheduled for April 23,
1998, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information on page 17 of the Southside Bancshares Corp. Proxy
Statement for the Annual Meeting of Shareholders scheduled for April 23, 1998,
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following financial statements of Southside and its consolidated
subsidiaries, and the accountants' report thereon are incorporated
herein by reference in Item 8.
1. Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets -
December 31, 1997 and 1996
Consolidated Statements of Income -
Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity -
Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows -
Years Ended December 31, 1997, 1996 and 1995
12
15
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
All other schedules are omitted because they are not applicable, not
required, or the information is included elsewhere in the
Consolidated Financial Statements or notes thereto.
3. Exhibits:
3(a) Restated Articles of Incorporation of the Registrant
filed as Exhibit 4(a) to the Registrant's
Registration Statement on Form S-8 on May 2, 1994,
incorporated herein by reference.
3(b) Restated Bylaws of the Registrant with amendments
through December 28, 1995 filed as Exhibit 4(b) to
the Registrant's Registration Statement on Form S-8
on January 31, 1996, incorporated herein by
reference.
4(a) Rights Agreement dated as of May 27, 1993 between
the Registrant and Boatmen's Trust Company filed as
Exhibits 1 and 2 to the Registrant's Registration
Statement on Form 8-A on May 27, 1993, incorporated
herein by reference.
10(a) Employment Agreement Dated April 27, 1995 between
Southside Bancshares Corp., South Side National Bank
in St. Louis and Thomas M. Teschner filed as Exhibit
10(b) to the Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1995,
incorporated herein by reference.
10(b) Southside Bancshares Corp. 1993 Non-Qualified Stock
Option Plan, filed as Exhibit 10(e) to the
Registrant's Report on Form 10-K for the fiscal year
ended December 31, 1994, incorporated herein by
reference.
10(c) Deferred Compensation Agreement dated April 25, 1996
between Thomas M. Teschner and Southside Bancshares
Corp. filed as Exhibit 10(c) to the Registrant's
Report on Form 10-K for the fiscal year ended
December 31, 1996, incorporated herein by reference.
10(d) Southside Bancshares Corp. Deferred Compensation
Plan for Directors filed as Exhibit 10(d) to the
Registrant's Report on Form 10-K for the fiscal year
ended December 31, 1996, incorporated herein by
reference.
11 Computation of Net Income Per Common Share
incorporated by reference to Note 11 of the Notes to
the Consolidated Financial Statements.
13 Portions of the Annual Report to Shareholders of the
Registrant for the fiscal year ended December 31,
1997.
21 List of Subsidiaries.
23 Independent Auditors' Consent of KPMG Peat Marwick
LLP.
13
16
27 Financial Data Schedule.
(b) Reports filed on Form 8-K:
The following reports on Form 8-K were filed for the three months
ended December 31, 1997:
None.
14
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SOUTHSIDE BANCSHARES CORP.
By /s/ Thomas M. Teschner
------------------------------------
Thomas M. Teschner
President and Chief Executive
Officer (Principal Executive
Officer)
March 26, 1998
By /s/ Joseph W. Pope
------------------------------------
Joseph W. Pope
Senior Vice President and Chief
Financial Officer (Principal
Financial Officer, Controller and
Principal Accounting Officer)
March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Howard F. Etling /s/ Joseph W. Beetz
- -------------------------------- ----------------------------------
Howard F. Etling Joseph W. Beetz
Chairman of the Board Director
Date: March 26, 1998 Date: March 26, 1998
/s/ Ralph Crancer, Jr. /s/ Douglas P. Helein
- -------------------------------- ----------------------------------
Ralph Crancer, Jr. Douglas P. Helein
Director Director
Date: March 26, 1998 Date: March 26, 1998
/s/ Thomas M. Teschner /s/ Earle J. Kennedy, Jr.
- -------------------------------- ----------------------------------
Thomas M. Teschner Earle J. Kennedy, Jr.
President, Chief Executive Director
Officer and Director
Date: March 26, 1998 Date: March 26, 1998
18
/s/ Norville K. McClain /s/ Richard G. Schroeder, Sr.
- -------------------------------- ----------------------------------
Norville K. McClain Richard G. Schroeder, Sr.
Director Director
Date: March 26, 1998 Date: March 26, 1998
/s/ Daniel J. Queen
- --------------------------------
Daniel J. Queen
Director
Date: March 26, 1998
19
EXHIBIT INDEX
REGULATION S-K REPORT
EXHIBIT PAGE
NO. DESCRIPTION -NO.
------- ----------- ----
3(i) Restated Articles of Incorporation of the Registrant *
filed as Exhibit 4(a) to the * Registrant's
Registration Statement on Form S-8 on May 2, 1994 (No.
33-78454), incorporated herein by reference.
3(ii) Restated Bylaws of the Registrant with amendments *
through December 28, 1995 filed * as Exhibit 4(b) to
the Registrant's Registration Statement (No.
333-00579) on Form S-8 on January 31, 1996,
incorporated herein by reference.
4(a) Rights Agreement dated as of May 27, 1993 between *
Registrant and Boatmen's Trust * Company filed as
Exhibits 1 and 2 to Registrant's Registration
Statement on Form 8-A on June 1, 1993 (No. 0-10849),
incorporated herein by reference.
10(a) Employment Agreement Dated April 27, 1995 between *
Registrant, South Side National Bank in St. Louis and
Thomas M. Teschner filed as Exhibit 10(b) to the
Registrant's Report on Form 10-K for the fiscal year
ended December 31, 1995, incorporated herein by
reference.
10(b) Southside Bancshares Corp. 1993 Non-Qualified Stock *
Option Plan, filed as Exhibit 10(e) to the
Registrant's Report on Form 10-K for the fiscal year
ended December 31, 1994, incorporated herein by
reference.
10(c) Deferred Compensation Agreement dated April 25, 1996 *
between Thomas M. Teschner and Southside Bancshares
Corp. filed as Exhibit 10(c) to the Registrant's
Report on Form 10-K for the fiscal year ended December
31, 1996, incorporated herein by reference.
10(d) Southside Bancshares Corp. Deferred Compensation Plan *
for Directors filed as Exhibit 10(d) to the
Registrant's Report on Form 10-K for the fiscal year
ended December 31, 1996, incorporated herein by
reference.
11 Computation of Net Income Per Common Share *
incorporated by reference to Note 11 of the Notes to
the Consolidated Financial Statements.
13 Portions of the Annual Report to Shareholders of the
Registrant for the fiscal year ended December 31,
1997, filed herewith.
21 List of Subsidiaries, filed herewith.
23 Independent Auditors' Consent of KPMG Peat Marwick
LLP, filed herewith.
27 Financial Data Schedule, filed herewith.
* Incorporated by reference.