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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
(No fee required)
For the fiscal year ended December 31, 1998.
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 23, 1999, 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 $68,256,000.
At March 23, 1999, the number of shares outstanding of the Registrant's
common stock, $1.00 par value, was 8,638,978.
DOCUMENTS INCORPORATED BY REFERENCE
1) Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1998 (Part I and Part II); and
(2) Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders scheduled for April 22, 1999 (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. On June 29, 1998, Southside
acquired 100% of the outstanding common stock of Public Service Bank, FSB
("PSB") in exchange for a combination of cash and common stock of the Registrant
in a transaction accounted for under the purchase method of accounting. At
acquisition, PSB had total assets of $73.7 million which were immediately merged
into South Side National Bank in St. Louis. The Registrant and its subsidiaries
had, at December 31, 1998, consolidated total assets of approximately $610
million. The following table shows the year of acquisition, total assets, total
loans and total deposits at December 31, 1998, before elimination of
intercompany accounts, 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 $408,058 $232,453 $345,452
State Bank of Jefferson County 1983 $ 59,057 $ 39,393 $ 52,889
Bank of Ste. Genevieve 1985 $ 87,267 $ 50,214 $ 75,794
The Bank of St. Charles
County 1986 $ 56,940 $ 36,312 $ 51,682
The Registrant's subsidiary banks, which operated 16 banking offices in
Missouri during 1998, 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, 1998, the combined market value
of fiduciary and custodial assets under management of the trust department was
approximately $279 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.
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Southside has seven 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 258 and 31, respectively, on December 31, 1998.
The information on page 4 and pages 49-52 of the Southside Bancshares
Corp. 1998 Annual Report to Shareholders is incorporated herein by reference.
(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 quarterly and annual reports 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 bank holding companies to 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
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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 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 that 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 requires 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.
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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 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 43 and 44 of the Southside Bancshares Corp. 1998
Annual Report to Shareholders 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.
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(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 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. 1998 Annual Report to Shareholders, 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 good credit quality in
recent years, approximately 51% of its loans at December 31,
1998 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 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
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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.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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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)
--------------------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------------------
Commercial, financial
and agricultural $68,166 $69,168 $62,016 $62,214 $69,219
Real estate-commercial 115,214 98,759 82,045 88,321 82,807
Real estate-construction 21,993 30,836 26,067 15,510 11,019
Real estate-residential 119,917 92,028 96,039 102,418 108,134
Consumer 22,219 23,627 17,304 17,626 18,334
Industrial revenue bonds 4,717 5,517 6,373 7,789 9,311
Other loans 4,762 6,502 4,619 9,946 2,573
------------ ----------- ---------- ---------- ----------
TOTAL LOANS $356,988 $326,437 $294,463 $303,824 $301,397
============ =========== ========== ========== ==========
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, 1998.
(in thousands)
---------------------------------------------------------------------
One year Over one up Over
or less* to 5 years 5 years Total
---------------------------------------------------------------------
Commercial, financial
and agricultural $43,752 $22,121 $2,293 $68,166
Real estate-construction 19,549 1,364 1,080 21,993
Other loans 4,757 5 -- 4,762
-------- --------- -------- --------
TOTAL $68,058 $23,490 $3,373 $94,921
======== ========= ======== ========
* 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, 1998 (in thousands).
Loans with predetermined interest rates $21,304
Loans with floating or adjustable interest rates 5,559
-------
TOTAL $26,863
=======
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II. Summary of Loan Loss Experience
The information under the caption Allowance for Possible Loan Losses
and Risk Elements on pages 8 through 11 of the Southside Bancshares Corp. 1998
Annual Report to Shareholders is incorporated herein by reference.
The following table analyzes the loan loss experience of the Registrant
for the periods indicated:
(dollars in thousands)
Years Ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------
Average loans outstanding, net of
unearned discount $345,902 $311,266 $295,683 $297,480 $294,749
======== ======== ======== ======== ========
Allowance at beginning of year $ 6,120 $ 5,602 $ 5,635 $ 7,144 $ 8,334
======== ======== ======== ======== ========
Loans charged off:
Commercial, financial and 296 139 878 1,606 821
agricultural
Real estate - residential 2 77 93 294 1,302
Consumer 238 151 248 274 195
-------- -------- -------- -------- --------
Total loans charged off 536 367 1,219 2,174 2,318
-------- -------- -------- -------- --------
Recoveries:
Commercial, financial and 152 687 869 661 276
agricultural
Real estate - mortgage 52 62 171 186 568
Consumer 85 76 86 75 91
-------- -------- -------- -------- --------
Total recoveries 289 825 1,126 922 935
-------- -------- -------- -------- --------
Net loans charged off (recovered) 247 (458) 93 1,252 1,383
-------- -------- -------- -------- --------
Provisions charged to
operating expense 62 60 60 70 193
-------- -------- -------- -------- --------
Allowance of Bay-Hermann-
Berger Bank at sale - - - (327) -
-------- -------- -------- -------- --------
Allowance of PSB at acquisition 257 - - - -
-------- -------- -------- -------- --------
Allowance at end of year $ 6,192 $ 6,120 $ 5,602 $ 5,635 $ 7,144
======== ======== ======== ======== ========
Ratio of net charge-offs during
year to average loans outstanding 0.07% * 0.03% 0.42% 0.47%
======= ======= ======= =======
* 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)
-----------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------------------------------------------------------
Percent of Percent of Percent of Percent of Percent of
Loans in Each Loans in Each Loans in Each Loans in Each Loans in Each
Category To Category To Category To Category To Category To
Allowance Total Loans Allowance Total Loans Allowance Total Loans Allowance Total Loans Allowance Total Loans
--------- ----------- --------- ----------- --------- ----------- --------- ----------- --------- -----------
Commercial,
financial and
agricultural $3,992 20.4% $3,920 23.0% $3,902 23.2% $3,935 23.0% $5,094 26.0%
Real estate -
construction 500 6.2% 500 9.4% 300 8.9% 300 5.1% 300 3.7%
Real estate -
mortgage 1,000 65.9% 1,000 58.4% 1,000 60.5% 1,000 62.8% 1,500 63.4%
Consumer loans to
individuals 500 6.2% 500 7.2% 200 5.8% 200 5.8% 200 6.1%
Other loans
(Unallocated) 200 1.3% 200 2.0% 200 1.6% 200 3.3% 50 0.8%
------ ----- ------ ----- ------ ----- ------- ------ ------- ------
$6,192 100.0% $6,120 100.0% $5,602 100.0% $ 5,635 100.0% $ 7,144 100.0%
====== ===== ====== ===== ====== ===== ======= ====== ======= ======
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III. Investment Portfolio
The information contained in note 3 of the Notes to Consolidated
Financial Statements on pages 37 and 38 of the Southside Bancshares Corp. 1998
Annual Report to Shareholders 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, 1998
------------------------------------------------------------------------
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 $4,652 5.74% $17,641 6.13%
After 1 but within 5 years 22,422 5.80 32,288 5.92
After 5 but within 10 years 7,764 6.06 5,840 6.01
After 10 years 997 6.35 -- --
----- -------
Total 35,835 5.86 55,769 5.99
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS:
Within 1 year -- -- 1,931 5.96
After 1 but within 5 years -- -- 8,262 5.40
After 5 but within 10 years 300 5.61 10,785 5.18
After 10 years 6,243 6.98 4,669 4.83
----- ------
Total 6,543 6.92 25,647 5.25
OTHER DEBT SECURITIES:
Within 1 year -- -- -- --
After 1 but within 5 years -- -- -- --
After 5 but within 10 years 102 6.29 -- --
After 10 years -- -- -- --
------- -------
Total 102 6.29 -- --
TOTAL INVESTMENT SECURITIES (EXCLUDING MORTGAGE-BACKED
AND OTHER SECURITIES):
Within 1 year 4,652 5.74 19,572 6.11
After 1 but within 5 years 22,422 5.80 40,550 5.82
After 5 but within 10 years 8,166 5.97 16,625 5.47
After 10 years 7,240 6.88 4,669 4.83
----- ---- ----- ----
Total 42,480 6.02 81,416 5.76
OTHER SECURITIES - NO STATED MATURITY EQUITY 2,221 6.50 -- --
MORTGAGE-BACKED SECURITIES 53,194 5.85 2,620 6.17
------ -----
Total $97,895 5.94% $84,036 5.77%
======= ==== ======= ====
* 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, 1998. 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 1998,
adjusted for the disallowance of interest cost to carry nontaxable
securities.
10
12
ITEM 2. PROPERTIES
The Registrant owned the following physical properties as of December
31, 1998:
South Side National Bank in St. Louis, a subsidiary of the Registrant,
owns a nine-story banking and office building at 3606 Gravois Avenue, St. Louis,
Missouri 63116, and the adjacent drive-up facilities and three parking lots. The
Registrant and this subsidiary are currently the only tenants 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 $32,000. This subsidiary 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 $86,000. This
subsidiary also owns the land and bank building located at 6025 Chippewa, St.
Louis, Missouri 63109. This is a three-story building, and the second and third
floors are leased to tenants for an annual rental of approximately $47,000. This
subsidiary also owns the land and bank buildings at 10385 West Florissant,
Ferguson, Missouri 63136, 8440 Morganford Road, St. Louis County, Missouri
63123, 840 Meramec Station Road, St. Louis, Missouri 63088, and 3420 Iowa
Street, St. Louis, Missouri 63118. This subsidiary leases a branch facility at
4666 Lansdowne, St. Louis, Missouri 63116. In addition, this subsidiary owns
land and the building at 4111 Telegraph Road in St. Louis County, where the
Company opened its tenth branch in 1999.
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 and
is currently constructing a third banking facility, which is expected to be
completed during 1999.
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 45 of the Southside Bancshares Corp. 1998 Annual
Report to Shareholders is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
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 PRINCIPAL OCCUPATIONS OR EMPLOYMENT SINCE
COMPANY JANUARY 1, 1994
------------------------------- -----------------------------------------
Thomas M. Teschner (42) President and Chief Executive Officer, Southside
President and Chief Executive Bancshares Corp.; President and Chief Executive
Officer Officer, South Side National Bank in St. Louis.
Joseph W. Pope (33) Chief Financial Officer and Senior Vice President,
Senior Vice President and Southside Bancshares Corp. (Since April 1995); Vice
Chief Financial Officer President, South Side National Bank in 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 8, 1999 was 8,638,978 shares, and the market
price for the Common Stock on March 23, 1999 was $11.625 bid; $12.125 asked.
The information on page 27 of the Southside Bancshares Corp. 1998
Annual Report to Shareholders is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information on page 5 of the Southside Bancshares Corp. 1998 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 27 of the Southside Bancshares Corp.
1998 Annual Report to Shareholders is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information on pages 16 and 17 of the Southside Bancshares Corp.
1998 Annual Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information on pages 29 through 48 of the Southside Bancshares
Corp. 1998 Annual Report to Shareholders is incorporated herein by reference.
12
14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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 22,
1999 is incorporated herein by reference. The information on page 14 of the
Southside Bancshares Corp. Proxy Statement for the Annual Meeting of
Shareholders scheduled for April 22, 1999, 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 7 through 11 of the Southside Bancshares Corp.
Proxy Statement for the Annual Meeting of Shareholders scheduled for April 22,
1999 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information on pages 2 through 4 of the Southside Bancshares Corp.
Proxy Statement for the Annual Meeting of Shareholders scheduled for April 22,
1999, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information on page 14 of the Southside Bancshares Corp. Proxy
Statement for the Annual Meeting of Shareholders scheduled for April 22, 1999,
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, 1998 and 1997
Consolidated Statements of Income -
Years Ended December 31, 1998, 1997 and 1996
13
15
Consolidated Statements of Shareholders' Equity and
Comprehensive Income Years Ended December 31, 1998,
1997 and 1996
Consolidated Statements of Cash Flows Years Ended December 31,
1998, 1997 and 1996
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 3(a) to the Registrant's Registration Statement on Form S-4/A
on May 8, 1998, 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, as amended, filed as Exhibit 10(a) to the Registrant's Report on Form
10-Q for the quarterly period ended June 30, 1998, 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., as amended, filed as
Exhibit 10(c) to the Registrant's Report on Form 10-Q for the quarterly period
ended September 30, 1998, 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.
10(e) Southside Bancshares Corp. 1998 Stock Option Plan.
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, 1998.
21 List of Subsidiaries.
23 Independent Auditors' Consent of KPMG LLP.
14
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, 1998:
1 Form 8-K, dated October 5, 1998, reporting under Item 5
a news release announcing Registrant's three-for-one stock split payable in the
form of a stock dividend on November 15, 1998 to shareholders of record on
November 2, 1998.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
15
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 25, 1999
By /s/ Joseph W. Pope
-------------------------------------------
Joseph W. Pope
Senior Vice President and Chief Financial Officer
(Principal Financial Officer, Controller and
Principal Accounting Officer)
March 25, 1999
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 25, 1999 Date: March 25, 1999
/s/ Thomas M. Teschner /s/ Douglas P. Helein
- ----------------------------------- -----------------------------------
Thomas M. Teschner Douglas P. Helein
President, Chief Executive Officer Director
and Director
Date: March 25, 1999 Date: March 25, 1999
/s/ Norville K. McClain /s/ Earle J. Kennedy, Jr.
- ----------------------------------- -----------------------------------
Norville K. McClain Earle J. Kennedy, Jr.
Director Director
Date: March 25, 1999 Date: March 25, 1999
18
/s/ Daniel J. Queen /s/ Richard G. Schroeder, Sr.
- ----------------------------------- ----------------------------------
Daniel J. Queen Richard G. Schroeder, Sr.
Director Director
Date: March 25, 1999 Date: March 25, 1999
19
EXHIBIT INDEX
-------------
REGULATION S-K
EXHIBIT DESCRIPTION REPORT
NO. ----------- PAGE
- -------------- NO.
------
3(a) Restated Articles of Incorporation of the Registrant *
filed as Exhibit 3(a) to the Registrant's
Registration Statement on Form S-4/A on May 8, 1998,
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 *
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, 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, as amended, filed as Exhibit
10(a) to the Registrant's Report on Form 10-Q for the
quarterly period ended June 30, 1998, 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., as amended, filed as Exhibit 10(c) to the
Registrant's Report on Form 10-Q for the quarterly
period ended September 30, 1998, 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.
10(e) Southside Bancshares Corp. 1998 Stock Option Plan.
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,
1998
21 List of Subsidiaries, filed herewith.
23 Independent Auditors' Consent of KPMG LLP, filed
herewith.
27 Financial Data Schedule, filed herewith.
* Incorporated by reference.