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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Definitive Additional Materials
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Southside Bancshares, Inc.
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(Name of Registrant as Specified In Its Charter)
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SOUTHSIDE BANCSHARES, INC.
1201 South Beckham Avenue
Tyler, Texas 75701
March 20, 2001
Dear Shareholders:
On Thursday, April 19, 2001, our shareholders will gather at Willow
Brook Country Club, 3205 West Erwin Street, Tyler, Texas to consider several
propositions that are important to Southside Bancshares, Inc. (hereinafter the
"Corporation") and Southside Bank (hereinafter the "bank"). The matters to be
considered at the meeting include:
1. Election of three Directors to serve until the 2004 Annual
Shareholders' Meeting, and
2. Transaction of other business that may properly come before the
meeting or any adjournments.
Your attendance and vote are important and you are encouraged to vote
by completing the enclosed proxy card and returning it in the envelope provided.
Shareholders of record at the close of business on March 15, 2001 are entitled
to vote at the meeting.
Management will also report on operations and other matters affecting
the Corporation, as well as respond to your questions. After the meeting,
officers and directors will be available to visit with you.
Sincerely yours,
/s/ B. G. HARTLEY
B. G. Hartley
Chairman of the Board
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SOUTHSIDE BANCSHARES, INC.
1201 South Beckham Avenue
Tyler, Texas 75701
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
APRIL 19, 2001
NOTICE IS HEREBY GIVEN THAT THE ANNUAL MEETING OF SHAREHOLDERS OF
SOUTHSIDE BANCSHARES, INC. WILL BE HELD AT WILLOW BROOK COUNTRY CLUB, 3205 WEST
ERWIN STREET, TYLER, TEXAS, ON APRIL 19, 2001 AT 4:00 P.M., LOCAL TIME, TO
CONSIDER AND VOTE UPON THE FOLLOWING MATTERS:
1. To elect three Directors to serve until the 2004 Annual
Shareholders' Meeting, and
2. To transact other business that may properly come before the meeting
or any adjournments.
Only shareholders registered on the Corporation's books as owners of
shares at the close of business on March 15, 2001 are entitled to vote at the
meeting.
Please date, sign, and return the enclosed proxy immediately in the
envelope provided. It is important that you sign and return the proxy, even
though you actually plan to attend the meeting in person. You may revoke the
proxy at any time before the proxy is exercised by giving written notice to the
Secretary of the Corporation or by advising the Secretary at the meeting.
By Order of the Board of Directors
/s/ B. G. HARTLEY
----------------------------------------
B. G. Hartley
Chairman of the Board
Tyler, Texas
March 20, 2001
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, IT IS REQUESTED THAT THE ENCLOSED
FORM OF PROXY BE PROPERLY EXECUTED AND PROMPTLY RETURNED TO SOUTHSIDE
BANCSHARES, INC. IN THE ENCLOSED ADDRESSED ENVELOPE.
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SOUTHSIDE BANCSHARES, INC.
1201 South Beckham Avenue
Tyler, Texas 75701
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 19, 2001
TO OUR SHAREHOLDERS:
This Proxy Statement is being furnished to shareholders of Southside Bancshares,
Inc. (the "Corporation") in connection with the Annual Meeting of Shareholders
(the "Annual Meeting") to be held on April 19, 2001, at the time and place and
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders, and at any adjournments thereof. This Proxy Statement and
applicable form of proxy are first being sent to the shareholders of the
Corporation on or about March 20, 2001.
REVOCABILITY OF PROXY
IF YOUR PROXY IS EXECUTED AND RETURNED, IT WILL BE VOTED AS YOU DIRECT. IF NO
DIRECTION IS PROVIDED, THE PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND
THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO VOTING ON ANY OTHER
MATTERS PRESENTED FOR VOTE. ADDITIONALLY, IF YOUR PROXY IS EXECUTED AND
RETURNED, IT WILL BE VOTED TO APPROVE THE MINUTES OF THE LAST SHAREHOLDERS'
MEETING. THIS VOTE WILL NOT AMOUNT TO A RATIFICATION OF THE ACTION TAKEN AT THAT
MEETING NOR WILL IT INDICATE APPROVAL OR DISAPPROVAL OF THAT ACTION. YOUR PROXY
MAY BE REVOKED BY NOTICE IN WRITING, TO THE SECRETARY OF THE CORPORATION AT ITS
PRINCIPAL OFFICE AT ANY TIME, OR BY ADVISING THE SECRETARY AT THE MEETING THAT
YOU WISH TO REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON. YOUR ATTENDANCE AT
THE MEETING WILL NOT CONSTITUTE AUTOMATIC REVOCATION OF THE PROXY.
PERSONS MAKING THE SOLICITATION
The Board of Directors is soliciting the proxy. The cost of soliciting your
proxy will be borne entirely by the Corporation and no other person or persons
will bear such costs either directly or indirectly. In addition to the use of
the mails, proxies may be solicited by personal interview, telephone and
telegram by directors, officers, and employees of the Corporation.
OUTSTANDING SHARES AND VOTING RIGHTS
The close of business on March 15, 2001 has been fixed as the record date for
determining the shareholders of the Corporation entitled to notice of and to
vote at the Annual Meeting. Each share of Common Stock is entitled to one vote.
In the election of three Directors to serve until the 2004 Annual Shareholders'
Meeting, the nominees receiving the highest number of votes will be elected. For
all other matters a majority of votes cast shall decide each matter submitted to
the Shareholders at the meeting. Abstentions and broker non-votes are each
included in the determination of the number of shares present for determining a
quorum, but will have no effect on the outcome of any of the proposals. At the
close of business on February 28, 2001, there were 7,495,916 shares of Common
Stock outstanding and eligible to be voted on each matter.
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CERTAIN SHAREHOLDERS
As of this date, the Corporation knows of no person or entity that is a
beneficial owner of more than 5% of the outstanding Common Stock of the
Corporation.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP served as the Corporation's independent public
accountants for the fiscal year ended December 31, 2000 and is serving in such
capacity for the current fiscal year. The appointment of independent public
accountants is made annually by the Board. The decision of the Board is based on
both the audit scope and estimated audit fees. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the annual meeting and
will have the opportunity to make a statement if they desire to do so and to
respond to appropriate questions of shareholders.
ELECTION OF DIRECTORS
(PROPOSAL 1)
Three classes of directors, two of which are comprised of three directors and
one which is comprised of four directors, for a total of ten (10) directors,
constitute the full Board of Directors. One class of directors is elected each
year for a three-year term.
The three nominees identified below are nominees for election at the Annual
Meeting for a three-year term expiring at the 2004 Annual Meeting of
Shareholders. All of the nominees are currently directors of the Corporation and
Southside Bank (a wholly owned subsidiary).
Unless otherwise instructed, proxies received in response to this solicitation
will be voted in favor of the election of the persons nominated by management
for directors of the Corporation. While it is not expected that any of the
nominees will be unable to qualify or accept office, if for any reason one or
more shall be unable to do so, the proxies will be voted for the substitute
nominee(s) selected by the Board of Directors of the Corporation.
INITIAL SHARES
NOMINEES FOR DIRECTORS - ELECTION BENEFICIALLY PERCENT
TERMS TO EXPIRE AT THE 2004 ANNUAL MEETING TO OWNED OF
BOARD (12-31-00)(1) CLASS
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FRED E. BOSWORTH (82) - Mr. Bosworth was Chairman of the Board of Bosworth &
Associates, Inc., an independent insurance agency, from 1975, until his 1983 113,302 1.5%
retirement in November 1997 and presently serves as Honorary Chairman. He has (2)
been associated with the insurance industry in various capacities since 1935.
B. G. HARTLEY (71) - Mr. Hartley became Chairman of the Board of the Corporation
in 1983, having previously served as President. He is also Chairman of the Board 1982 180,139 2.4%
and Chief Executive Officer of Southside Bank, having served as Southside Bank's (3)
Chief Executive Officer since its opening in 1960. He is Chairman of the
American Bankers Association National BankPac Committee, a former member of the
American Bankers Association Board of Directors, a member of the Board of
Directors of East Texas Medical Center Regional Healthcare Systems and past
Chairman of Texas Taxpayers and Research Association. He is also a Trustee of
the R. W. Fair Foundation. He is Chairman of the Texas Bankers General Agency,
Inc. and a Trustee and a member of the Executive Committee of Texas College.
PAUL W. POWELL (67) - Mr. Powell is a Director of Southside Bank, a member of
the Board of Directors of the Robert M. Rogers Foundation, serves on the Board 1999 5,856 *
of Regents at Baylor University and is Chairman of the Board of Trinity Mother
Frances Health System. He presently serves as the Dean of Truett Theological
Seminary-Waco. He was Chairman and Chief Executive Officer of the Southern
Baptist Annuity Board and also was pastor of Green Acres Baptist Church.
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DIRECTORS CONTINUING UNTIL THE 2002 ANNUAL MEETING INITIAL SHARES
ELECTION BENEFICIALLY PERCENT
TO OWNED OF
BOARD (12-31-00)(1) CLASS
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ROLLINS CALDWELL (79) - Mr. Caldwell is a private investor who served as 1990 49,457 *
President of Caldwell Welding Supply Corporation for 37 years. He currently is
involved in real estate leasing.
SAM DAWSON (53) - Mr. Dawson is President and Secretary of the Corporation, 1997 109,271 1.4
having served in that capacity since 1998. He joined Southside Bank in 1974 (4)
and currently is President and Chief Operating Officer of Southside Bank. He is
a Director of East Texas Medical Center Hospital, Cancer Institute and ETMC
Rehabilitation Hospital. He is also a Director of the Texas Bankers Association.
WILLIAM SHEEHY (60) - Mr. Sheehy has been a partner in the law firm of 1983 49,421 *
Wilson, Sheehy, Knowles, Robertson and Cornelius since 1971, and a (5)
practicing attorney since 1964. Mr. Sheehy serves as Southside Bank's outside
general counsel and is a former Director of the Texas Association of Bank
Counsel.
DIRECTORS CONTINUING UNTIL THE 2003 ANNUAL MEETING
HERBERT C. BUIE (70) - Mr. Buie has been Chief Executive Officer of Tyler
Packing Corporation, Inc., a meat processing firm since 1955. He serves on the 1988 299,212 3.9%
Boards of Directors of the Church of God (School of Theology), the University of (6)
Texas Health Center, the Development Board of Directors of the University of
Texas-Tyler, the East Texas Regional Food Bank, the Salvation Army, Tyler
Economic Development Council, Texas Chest Foundation and East Texas Communities
Foundation.
ROBBIE N. EDMONSON (68) - Mr. Edmonson is Vice Chairman of the Corporation,
having served in that capacity since 1998. He joined Southside Bank as Vice 1982 104,630 1.4%
President in 1968 and currently is Vice Chairman of the Board of Directors of (7)
Southside Bank.
W. D. (JOE) NORTON (64) - Mr. Norton has been the owner of W. D. Norton, Inc.,
dba Overhead Door, since 1988. He also owns Norton Equipment Company and is a 1988 119,287 1.6%
general partner in Norton Leasing Limited, LLP. Mr. Norton served as President (8)
and was a principal shareholder of Norton Companies of Texas, Inc. for 25 years.
MICHAEL D. GOLLOB (67) - Mr. Gollob is senior officer and founder of the
certified public accounting firm of Gollob, Morgan, Peddy & Co. P.C. He is a 1999 63,615 *
Director of Southside Bank and also serves on the Texas Prepaid Higher Education (9)
Tuition Board.
NAMED EXECUTIVE OFFICERS
JERYL STORY (49) - Mr. Story is Executive Vice President of the Corporation N/A 91,708 1.2%
and Senior Executive Vice President and a Director of Southside Bank. He joined (10)
Southside Bank in 1979 and is responsible for all lending functions of the bank.
LEE GIBSON (44) - Mr. Gibson is Executive Vice President and Chief Financial
Officer of the Corporation and Southside Bank. He is also a Director of N/A 50,848 *
Southside Bank. He joined Southside Bank in 1984 and in addition to being the (11)
Chief Financial Officer is responsible for management of the bank's investment
portfolio.
ALL DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS OF THE CORPORATION AND ITS 1,236,746 16.3
SUBSIDIARY AS A GROUP (12 PERSONS).
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*LESS THAN 1%
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1) Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares set forth opposite his name.
2) Mr. Bosworth owns 56,652 shares, individually, and holds a life estate
in 56,650 shares.
3) Mr. Hartley has sole voting and investment power with respect to 71,722
shares and is Trustee for Patrick Hartley with sole voting and
investment power with respect to 10,003 shares. He also holds sole
voting power, but not investment power, with respect to 10,069 shares
owned in the Corporation's ESOP Plan, in which he is 100% vested. Also
included in the total are 13,298 shares owned by Mr. Hartley's wife,
Billie Boyd Hartley, of which Mr. Hartley disclaims all beneficial
interest and 75,047 shares subject to incentive stock options that are
exercisable within 60 days of the Record Date.
4) Mr. Dawson holds sole voting and investment power with respect to
34,647 shares and holds sole voting power, but not investment power,
with respect to 5,417 shares owned in the Corporation's ESOP Plan, in
which he is 100% vested. Also included in the total are 67,776 shares
subject to incentive stock options that are exercisable within 60 days
of the Record Date. Mr. Dawson's wife, Kay Dawson, owns 1,431 shares,
of which he disclaims all beneficial interest, but are included in the
total.
5) Mr. Sheehy has sole voting and investment power with respect to 41,264
shares owned individually. Mr. Sheehy owns 8,157 shares in an
individual retirement account and holds sole voting and investment
power in these shares.
6) Mr. Buie has sole voting and investment power with respect to 291,096
shares owned individually. Also included in the total are 4,434 shares
owned by Mr. Buie's wife, Melvina Buie, and 1,907 shares owned by Mrs.
Buie as Trustee for Herbert Rex Buie and 1,775 shares owned by Mrs.
Buie as Trustee for Robin J. Buie. Mr. Buie disclaims beneficial
ownership of these 8,116 shares.
7) Mr. Edmonson holds sole voting and investment power with respect to
27,681 shares and holds voting power, but not investment power, with
respect to 7,663 shares, owned in the Corporation's ESOP Plan, in which
he is 100% vested. Also included in the total are 69,286 shares subject
to incentive stock options that are exercisable within 60 days of the
Record Date.
8) Mr. Norton has sole voting and investment power with respect to 116,835
shares and is custodian for Meredith Ann Shave for 2,452 shares, of
which he disclaims all beneficial interest.
9) Mr. Gollob holds sole voting and investment power with respect to
50,401 shares owned individually. Mr. Gollob also owns 12,705 shares in
an individual retirement account and holds sole voting and investment
power in these shares. His wife, Laverne Gollob, has 509 shares in an
individual retirement account and Mr. Gollob disclaims beneficial
interest in these shares.
10) Mr. Story owns 15,898 shares and holds sole voting and investment power
for these shares. In addition he holds joint voting and investment
power with his wife, Kathlyn C. Story, with respect to 353 shares and
sole voting, but not investment power, with respect to 5,518 shares
owned in the Corporation's ESOP plan, in which he is 100% vested. Also
included in the total are 69,939 shares subject to incentive stock
options that are exercisable within 60 days of the Record Date.
11) Mr. Gibson holds sole voting power, but not investment power, with
respect to 4,946 shares owned in the Corporation's ESOP plan, in which
he is 100% vested. In addition he holds 21 shares as Southwest
Securities/Lee R. Gibson for Natalie Diane Gibson and disclaims all
beneficial interest in these 21 shares. Also included in the total are
45,881 shares subject to incentive stock options that are exercisable
within 60 days of the Record Date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
BOARD MEETINGS, COMMITTEES AND ATTENDANCE
The Board of Directors of the Corporation met nine times during the fiscal year.
All directors were present for at least 75% of the meetings of the Board and
committees on which they served. Each director of the Corporation also serves as
a director of Southside Bank.
The Board of Directors of the Corporation has only two standing committees (the
Incentive Stock Option Committee and the Audit Committee), but its wholly owned
subsidiary, Southside Bank, has several standing committees to assist the Board
of Directors of Southside Bank and the Corporation in the discharge of their
respective responsibilities. The purpose and composition of these committees
with respect to persons who are directors of the Corporation and Southside Bank
are as follows:
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AUDIT COMMITTEE OF SOUTHSIDE BANCSHARES, INC.
The Audit Committee of Southside Bancshares, Inc. is responsible for oversight
of Management's financial reporting, including oversight of financial reports
and other financial information provided by the Corporation to governmental or
regulatory agencies. The committee also monitors the internal audit function,
internal accounting procedures and assures compliance with all appropriate
statutes. The committee consists of Messrs. Buie, Gollob and Norton, all of whom
are non-employee directors. Mr. Gollob, a senior officer of a CPA firm, serves
as chairman of the Audit Committee. The committee met twelve times in 2000.
The Board of Directors has adopted a formal written "Charter" which is attached
as an appendix to the proxy. The Charter outlines the purpose of the Audit
Committee, delineates the membership requirements and addresses the key
responsibilities of the committee.
The following is the report of the Audit Committee with respect to the
Corporation's audited financial statements for the fiscal year ended December
31, 2000, which include the consolidated balance sheets of the Corporation as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 2000, 1999 and 1998, and the notes
thereto. The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed with the SEC," nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the 1934 Securities Exchange Act, as amended, except to the
extent that the Corporation specifically incorporates it by reference in such
filing.
REVIEW WITH MANAGEMENT
The Audit Committee has reviewed and discussed the Corporation's audited
financial statements with management.
REVIEW AND DISCUSSIONS WITH INDEPENDENT ACCOUNTANTS
The Audit Committee held twelve meetings in conjunction with the full board
during the Corporation's fiscal year ended December 31, 2000. The Audit
Committee has discussed with PricewaterhouseCoopers LLP, the Corporation's
independent accountants, the matters required to be discussed by SAS 61
(Codification of Statements on Accounting Standards) that includes, among other
items, matters related to the conduct of the audit of the Corporation's
financial statements.
The Audit Committee has also received written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independent Standards Board Standard No.
1 (that relates to the accountant's independence from the Corporation and its
related entities) and has discussed with PricewaterhouseCoopers LLP their
independence from the Corporation.
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for professional
services rendered for the audit of Southside Bancshares, Inc. annual financial
statements for the fiscal year ended December 31, 2000 and for the reviews of
the financial statements included in Southside Bancshares, Inc. Quarterly
Reports on Form 10-Q for that fiscal year were $111,550.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PricewaterhouseCoopers LLP billed no fees for professional services rendered to
the Corporation for information technology services relating to financial
information systems design and implementation for the fiscal year ended December
31, 2000.
ALL OTHER FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for services rendered to
the Corporation other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees", for the fiscal
year ended December 31, 2000 were $93,196.
The Audit Committee did consider the effect of the fees listed under the
headings "Financial Information Service Design and Implementation Fees" and "All
Other Fees," on the auditors' independence.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
SOUTHSIDE BANCSHARES, INC.
W. D. (Joe) Norton Herbert Buie Michael Gollob
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INCENTIVE STOCK OPTION COMMITTEE OF SOUTHSIDE BANCSHARES, INC.
The Incentive Stock Option Committee is primarily responsible for administering
the Southside Bancshares, Inc. 1993 Incentive Stock Option Plan. The Incentive
Stock Option Committee consists solely of non-employee directors of the
Corporation and includes Messrs. Bosworth, Buie and Norton. Stock options
granted in 2000 were approved after review by the full Board of Directors of the
Corporation. The Incentive Stock Option Committee did not formally meet, since
action was taken by the full board.
EXECUTIVE COMMITTEE OF SOUTHSIDE BANK
The Executive Committee is authorized to act on behalf of the Board of Directors
of Southside Bank between scheduled meetings of the Board, subject to certain
limitations. The committee is comprised of Messrs. Bosworth, Buie, Caldwell,
Gollob, Norton, Powell and Sheehy, who are directors of Southside Bank and
directors of the Corporation, but are not officers or employees of either
Southside Bank or of the Corporation. Also serving are Messrs. Hartley,
Edmonson, and Dawson who are directors and officers of the Corporation and
Southside Bank and Messrs. Story and Gibson who are officers of the Corporation
and Southside Bank and directors of Southside Bank. The Executive Committee of
Southside Bank meets weekly to discharge its responsibilities and met 52 times
in 2000.
In addition, the members of the Executive Committee comprise the Loan/Discount
Committee of Southside Bank. It is their responsibility to monitor credit
quality and review extensions of credit. The Loan/Discount Committee of
Southside Bank meets weekly and met 52 times in 2000.
TRUST COMMITTEE OF SOUTHSIDE BANK
The Trust Committee of Southside Bank is responsible for the oversight of the
operations and activities of the Trust Department. Messrs. Bosworth, Edmonson,
Gollob, Hartley and Dawson, directors of the Corporation and Southside Bank,
serve on this committee. Mr. Richard Babb is a director of Southside Bank and
serves as a member of the Trust Committee. Lee Gibson, Kathy Hayden, Titus
Jones, Jeryl Story and Cayla Washburn, officers of Southside Bank, also serve on
this committee. Messrs. Babb, Bosworth and Gollob are not officers or employees
of the Corporation or Southside Bank. The Trust Committee meets monthly and met
eleven times in 2000.
AUDIT-COMPLIANCE/ELECTRONIC DATA PROCESSING COMMITTEE OF SOUTHSIDE BANK
The Audit-Compliance/Electronic Data Processing Committee of Southside Bank is
responsible for monitoring the internal audit functions, internal accounting
procedures and controls and for ensuring compliance with all appropriate
statutes. The Audit-Compliance/Electronic Data Processing Committee is comprised
solely of directors of Southside Bank who are not officers or employees. Those
directors are Messrs. Alton Cade, Jr., Michael Gollob, and James R. Hicks. The
Audit-Compliance/ Electronic Data Processing Committee met twelve times in 2000.
INVESTMENT/ASSET-LIABILITY COMMITTEE OF SOUTHSIDE BANK
The Investment/Asset-Liability Committee is responsible for reviewing Southside
Bank's overall funding mix, asset-liability management policies and investment
policies. The members of the Committee are Messrs. Buie, Norton and Powell who
are directors of the Corporation and Southside Bank, and Hoyt N. Berryman, Jr.
who is a director of Southside Bank. None of the foregoing individuals are
officers or employees of the Corporation or Southside Bank. Messrs. Hartley,
Edmonson, Dawson, Gibson and Story serve on the committee with George Hall,
Titus Jones, Brian McCabe, Lonny Uzzell and Andy Wall, each an officer of
Southside Bank. The Investment/Asset-Liability Committee met thirteen times in
2000.
COMPENSATION COMMITTEE OF SOUTHSIDE BANK
The committee conducts an annual review of compensation of the executive
officers and develops incentive compensation programs when appropriate. The
committee also reviews and develops recommendations for director compensation,
including committee service fees.
The Compensation Committee consists of Messrs. Buie, Bosworth, Hartley, Norton
and Powell. All committee members, except Mr. Hartley, are outside directors.
Mr. Hartley, an executive officer of the Corporation, abstains from voting in
all matters that relate directly to his compensation package. The committee met
once last year.
DIRECTOR COMPENSATION
In 2000, the Corporation did not compensate directors for board or committee
service; however, beginning in January 2001 the Corporation will compensate its
nonemployee directors with an annual retainer of $6,000. Nonemployee Directors
are compensated for board/committee service by the bank with fees ranging from
$100 to $500 depending
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on the type of meeting. They also receive an annual retainer of $1,000 for
service as a bank director. Officers of the Corporation, who are also directors
of Southside Bank, are paid the annual bank retainer and for board of director
meetings only.
EXECUTIVE COMPENSATION
The following information is furnished for the last three fiscal years ended
December 31, with respect to the chief executive officer and the four (4)
highest paid executive officers receiving at least $100,000 in compensation. The
corporation does not pay its executive officers a salary, therefore, this
information relates to compensation paid by Southside Bank. The named executive
officers have not received awards of restricted stock or securities underlying
stock options or stock appreciation rights or payouts under long term incentive
plans during 2000, 1999, or 1998.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
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OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL SALARY COMPENSA- COMPENSATIONS
POSITION YEAR (1) BONUS TION* (2)(3)(4)(5)
------------------ ---- ------ ----- ------------ -------------
B. G. HARTLEY - 2000 $200,000 $ 70,000 $ 7,500 $ 53,978
Chairman of the Board of 1999 200,000 70,000 7,000 53,978
the Corporation; Chairman 1998 200,000 60,000 7,000 54,952
of the Board and Chief
Executive Officer of
Southside Bank
SAM DAWSON - 2000 $150,000 $ 53,750 $ 7,500 $ 0
President and 1999 140,000 52,500 7,000 0
Secretary of the 1998 125,000 40,625 7,000 0
Corporation; President and
Chief Operating Officer of
Southside Bank
JERYL STORY - 2000 $135,000 $ 51,875 $ 7,500 $ 0
Executive Vice President 1999 125,000 50,625 7,000 0
of the Corporation and 1998 115,000 39,375 7,000 0
Senior Executive Vice
President of Southside Bank
LEE GIBSON, CPA - 2000 $130,000 $ 66,250 $ 7,500 $ 0
Executive Vice President 1999 120,000 50,000 7,000 0
of the Corporation; 1998 110,000 38,750 7,000 0
Executive Vice President
of Southside Bank
*Each executive officer who is also a director of Southside Bank received
director fees from the bank in 2000, 1999 and 1998 of $7,500, $7,000, and $7,000
respectively.
1) Includes amounts deferred at the officer's election pursuant to the
Corporation's 401(k) plan.
2) The Corporation did not grant any SARs in fiscal 2000.
3) Includes amounts paid under the Corporation's Retirement Benefit
Restoration Plan.
4) Excludes any benefits paid out of the Corporation's long-term
Disability Income Plan.
5) Southside Bank has a deferred compensation agreement with certain
executive officers that provides for payment of an amount over a
maximum period of fifteen years. If the officer leaves the bank's
employ or is terminated with good cause by the Board of Directors of
Southside Bank, no benefits are payable under the plan, unless change
of control provisions are triggered. If a change of control does occur
the definition of "good reason" changes, under certain conditions, to
the same as retirement and benefits are effectuated immediately. The
deferred compensation agreements are as follows: Mr. Hartley - $377,000
payable at inception; $800,000 payable over 15 years; Mr. Dawson -
$500,000 payable over 10 years; and Mr. Story and Mr. Gibson each
$400,000 payable over 10 years. The present value of the future
benefits assuming a discount rate of 7.50% is as follows: B. G. Hartley
$868,000; Sam Dawson $50,000; Jeryl Story $26,000, and Lee Gibson
$17,000.
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REPORT ON EXECUTIVE COMPENSATION
GENERAL
The purpose of this report is to provide insight into the practice and
philosophy of the Board of Directors in establishing the compensation for the
Executive Officers of Southside Bank and to elaborate on the relationship
between corporate performance and executive compensation.
Executive Officer salary levels reflect an individual's responsibilities and
experience and the Compensation Committee's view of competitive marketplace
conditions. Compensation levels for executives are established after considering
measures including, but not limited to, financial performance of the Corporation
and the Bank and labor market conditions. Furthermore, qualitative factors such
as commitment, leadership, teamwork and community involvement are considered in
compensation deliberations.
In the final analysis, compensation adjustments are based on a broad spectrum of
factors rather than one or two specific performance goals. The Compensation
Committee recognizes the importance of aligning the shareholders interest and
executive compensation.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee, when reviewing the compensation of the Chief
Executive Officer, evaluates the factors mentioned above including initiation
and implementation of successful business strategies, maintenance of an
effective management team and various personal qualities including leadership,
commitment as well as professional and community standing.
After reviewing the Corporation's 2000 results in the context of comparison to
corporate peers, as well as his individual contributions, the Compensation
Committee concluded that the Chief Executive Officer, B. G. Hartley, performed
with skill and dedication during 2000. The year was marked by record-breaking
performances on several levels and Mr. Hartley deserves a large measure of the
credit for these accomplishments. Finally the Compensation Committee believes
that Mr. Hartley has set the stage for the continued success of the bank by
leading a seasoned executive staff that has displayed skill in guiding the bank
through an ever-changing financial services market in East Texas.
SUBMITTED BY THE COMPENSATION COMMITTEE OF SOUTHSIDE BANK
Herbert Buie Fred Bosworth W. D. (Joe) Norton Paul Powell
COMPARATIVE OF FIVE YEAR TOTAL RETURN FOR
THE YEAR ENDED DECEMBER 31, 2000
[GRAPH]
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Southside Bancshares, Inc. $100 $101 $111 $106 $108
Dow Jones Banks Index* $100 $150 $159 $140 $165
Dow Jones US Total Market Index* $100 $132 $165 $202 $183
*Dow Jones (DJ) replaced its old DJ-US Equity Index, which covered 80% of the US
market with the new DJ-US Total Market Index, which covers 95% of the market. DJ
also restructured its industry classifications dropping the DJ Regional
Banks-South index and replacing it with the new DJ Banks Index.
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1993 INCENTIVE STOCK OPTION PLAN
The purpose of the following table is to report grants of stock options to the
Executive Officers named in the Summary Compensation Table during 2000. No stock
appreciation rights have been granted. Stock options were granted in 1993, 1995,
1996, 1997, 1998, 1999 and 2000 under the 1993 Incentive Stock Option Plan. None
were granted in 1994.
================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
================================================================================
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM (1)
---------------------------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED EXERCISE OR EXPIRATION AT 5% AT 10%
OPTIONS TO EMPLOYEES IN BASE PRICE DATE ANNUAL ANNUAL
NAME GRANTED FISCAL YEAR ($/SH) (2) GROWTH GROWTH
---- ---------- --------------- ----------- ----------- ------ ------
B. G. HARTLEY 36,750 13.13 $7.38 08-31-10 $170,520 $432,180
SAM DAWSON 26,250 9.38 $7.38 08-31-10 $121,800 308,700
JERYL STORY 26,250 9.38 $7.38 08-31-10 $121,800 308,700
LEE GIBSON 26,250 9.38 $7.38 08-31-10 $121,800 308,700
1) The dollar amounts under these columns are the result of calculations at 5%
and 10% rates set by the Securities and Exchange Commission and are not
intended to forecast possible future price appreciation of the
Corporation's stock.
2) One-fifth of the options vest annually beginning in 2001. The options are
scheduled to expire August 20, 2010. Each option agreement governing that
option provides that upon the dissolution or liquidation of the
Corporation, a merger or consolidation in which the Corporation is not the
surviving corporation, a sale or conveyance of all or substantially all of
its assets, or a transaction or series of related transactions in which
another corporation makes a tender offer or exchange offer for or becomes
the owner of 50% or more of the total combined voting power of all classes
of stock of the Corporation, the optionee may exercise the option at any
time prior to the termination of the option without regard to the extent
that option would have been exercisable under the cumulative installment
provisions of his or her option agreement.
THE FOLLOWING TABLE DISCLOSES FOR EACH OF THE EXECUTIVE OFFICERS NAMED IN THE
SUMMARY COMPENSATION TABLE THE VALUES OF THEIR OPTIONS AT DECEMBER 31, 2000.
--------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
--------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, DECEMBER 31, 2000
2000 (1)
--------------------------------------------------------------------------------------------------------------------------
SHARES
ACQUIRED ON VALUE
EXERCISE REALIZED EXERCIS- UNEXERCIS- EXERCIS-
NAME (#) (2) ABLE ABLE ABLE UNEXERCISABLE
------------- ------------ ------------ ------------ ------------ ------------ -------------
B. G. HARTLEY 0 $ 0 69,942 62,771 $ 228,617 $ 60,398
SAM DAWSON 0 $ 0 62,671 52,271 $ 187,463 $ 50,003
JERYL STORY 1,050 $ 6,254 75,167 51,786 $ 261,536 $ 49,484
LEE GIBSON 5,250 $ 19,120 44,776 51,786 $ 106,622 $ 49,484
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1) The dollar value is calculated by determining the difference between the
fair market value of a share of common stock as of December 31, 2000, which
was $8.37 per share, and the exercise price of the option.
2) The "value realized" represents the difference between the exercise price
of the option shares and the market price of the option shares on the date
the option was exercised, without tax considerations.
DEFINED BENEFIT RETIREMENT PLAN
The Corporation has a retirement plan for eligible employees of the Corporation
and Southside Bank that is designed to comply with the requirements of the
Employee Retirement Income Security Act of 1974, the entire cost of which is
provided by Corporation contributions. Compensation covered by the plan includes
all cash and cash equivalent forms including bonuses reported for federal income
tax purposes [including compensation deferred under IRC 401(K)].
The years of credited service under the plan as of December 31, 2000 for each
person named in the current compensation table are as follows: Hartley - 40
years (39 years at age 70); Dawson - 26 years (38 years at age 65); Story - 21
years (37 years at age 65) and Gibson - 16 years (37 years at age 65).
The following table shows the anticipated annual benefit, computed on a ten-year
certain and life basis, payable upon the normal retirement as of December 31,
2000, of a vested Executive Officer of the Corporation at age 65 after 15, 20,
25, 30, or 35 years of credited service at specified annual compensation levels.
FINAL 60 MONTHS AVERAGE YEARS OF CREDITED SERVICE AT RETIREMENT
-------------------------------------------------------------------------------------
ANNUAL COMPENSATION 15 20 25 30 35
------------------------------- ------------ ------------ ------------ ------------ -------------
$ 100,000 $ 35,651 $ 47,534 $ 54,418 $ 61,301 $ 68,185
125,000 45,401 60,534 69,418 78,301 87,185
150,000 55,151 73,534 84,418 95,301 106,185
175,000 64,901 86,534 99,418 112,301 125,185
200,000 74,651 99,534 114,418 129,301 144,185
225,000 84,401 112,534 129,418 146,301 163,185
250,000 94,151 125,534 144,418 163,301 182,185
300,000 113,651 151,534 174,418 197,301 220,185
NOTE: Benefits under the employer's qualified plan, Retirement Plan for
Subsidiaries of Southside Bancshares, Inc., are subject to the maximum annual
benefit limitation during 2001 under Section 415 of the Internal Revenue Code
(IRC) of $140,000. In addition, compensation that can be considered by the plan
is limited during 2001 to $170,000, as provided by Section 401(a)(17) of the
IRC. These IRC limitations are subject to annual cost-of-living adjustments. The
employer has adopted a non-qualified plan which pays to the employee any amounts
restricted by the IRC. Hence, the benefits shown represent the total amount the
employee would receive from both plans and are not subject to any deduction for
social security benefits or other offset amounts. In accordance with the
provisions in the defined benefit plan, which is available to all employees age
65 that choose to continue employment, Mr. Hartley received benefits earned
under the plan in 2000 of $152,035.
TRANSACTIONS WITH DIRECTORS, OFFICERS AND ASSOCIATES
Certain of the executive officers and directors of the Corporation (and their
associates) have been customers of Southside Bank and have been granted loans in
the ordinary course of business. All loans or other extensions of credit made by
Southside Bank to executive officers and directors of the Corporation and
Southside Bank were made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and did not involve more
than the normal risk of collection or present unfavorable features. The
Corporation expects similar transactions to occur with its executive officers
and directors as well as directors and officers of Southside Bank.
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The law firm of Wilson, Sheehy, Knowles, Robertson and Cornelius, of which
Director William Sheehy is a partner, has provided legal services to the
Corporation and Southside Bank for many years and continues to do so during the
current fiscal year. The Corporation and Southside Bank paid the law firm
$134,400 for services rendered in calendar year 2000 some of which was
reimbursed by bank customers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
A Form 4 disclosure was filed late for B. G. Hartley, Robbie N. Edmonson, Sam
Dawson, Jeryl Story and Lee Gibson due to an oversight with respect to the
Corporation's Incentive Stock Option Plan and the reporting of annual grants.
Information was timely filed regarding Incentive Stock Option vesting and the
exercising of these options, as well as other acquisitions and dispositions of
stock. A second Form 4 filing for the above officers was delivered one day late
because of an express delivery problem.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation of the Executive Officers of Southside Bank is determined by
the Compensation Committee of Southside Bank and the Board of Directors of
Southside Bank, which is comprised of all of the directors of the Corporation,
including Messrs. Hartley and Dawson (who are each Executive Officers of
Southside Bank and the Corporation).
For information concerning transactions by the Corporation and Southside Bank
with certain members of the Board of Directors of Southside Bank, please see
"Transactions with Directors, Officers and Associates."
ANNUAL REPORT TO SHAREHOLDERS
The Corporation's Annual Report on Form 10-K, as integrated into the Annual
Report to Shareholders for the fiscal year ended December 31, 2000 accompanies
this Proxy Statement. The Annual Report does not constitute outside solicitation
materials. Additional copies of Form 10-K are available at no expense and
exhibits to the Form 10-K are available for a copying expense, to any
shareholder upon written request addressed to the Secretary of the Corporation,
Post Office Box 8444, Tyler, Texas 75711.
SHAREHOLDER'S PROPOSALS
Any shareholder wishing to have a proposal considered for inclusion in the Board
of Directors' proxy solicitation materials for the 2002 Annual Meeting must, in
addition to other applicable requirements, set forth their proposal in writing
and file it with the Secretary of the Corporation on or before December 21,
2001. The Board of Directors will review any proposals received by that date and
will determine whether applicable requirements have been met for including the
proposal in the 2002 proxy solicitation materials. Any shareholder wishing to
have a proposal considered for the 2002 Annual Meeting, but who does not submit
the proposal for inclusion in the Board of Directors' proxy, must submit the
proposal as set forth above on or before February 5, 2002. If the proposal is
not received by that date, the persons named as proxies in the proxy
solicitation materials will use their discretion in voting the proxies when
those matters are raised at the meeting.
GENERAL
The Board of Directors knows of no other business other than that set forth
above to be transacted at the meeting, but if other matters requiring a vote of
the shareholders arise, the persons designated as proxies will vote the shares
of Common Stock represented by the proxies in accordance with their judgment on
such matters. If a shareholder specifies a different choice on the proxy, his
shares of Common Stock will be voted in accordance with the specification so
made.
/s/ B. G. HARTLEY
--------------------------------
B. G. HARTLEY
CHAIRMAN OF THE BOARD
Tyler, Texas
March 20, 2001
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APPENDIX 1
SOUTHSIDE BANCSHARES
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
PURPOSE
The primary purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its responsibility to oversee management's conduct of the
Corporation's financial reporting process. This includes a review of the
financial reports and other financial information provided by the Corporation to
any governmental or regulatory body, the public or other users thereof; the
Corporation's systems of internal accounting and financial controls and the
annual independent audit of the Corporation's financial statements; and the
Corporation's legal compliance and ethics programs as established by management
and the Board.
In discharging its oversight role, the Audit Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Corporation and the power to retain
outside counsel, auditors or other experts for this purpose. The Board of the
Audit Committee is in place to represent the Corporation's shareholders;
accordingly, the outside auditor is ultimately accountable to the Board and the
Audit Committee.
The Audit Committee shall review the adequacy of this Charter on an annual
basis.
MEMBERSHIP
The Audit Committee shall be comprised of not less than three members of the
Board, and the Audit Committee's composition will meet the requirements of the
Audit Committee Policy of the NASD.
Accordingly, all of the members will be directors:
1. Who have no relationship to the Corporation that may interfere with the
exercise of their independence from management and the Corporation; and
2. Who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Audit Committee. In
addition, at least one member of the Audit Committee will have accounting
or related financial management expertise.
KEY RESPONSIBILITIES
The Audit Committee's job is one of oversight and it recognizes that the
Corporation's management is responsible for preparing the Corporation's
financial statements and that the outside auditors are responsible for auditing
those financial statements. Additionally, the Audit Committee recognizes that
financial management, including the internal audit staff as well as the outside
auditors, has more time, knowledge and more detailed information on the
Corporation than do Audit Committee members; consequently, in carrying out its
oversight responsibilities, the Audit Committee is not providing any expert or
special assurance as to the Corporation's financial statements or any
professional certification as to the outside auditor's work.
The following functions shall be the common recurring activities of the Audit
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Audit Committee may diverge from this
guide under appropriate circumstances.
1. The Audit Committee shall review with management and the outside auditors
the audited financial statements to be included in the Corporation's Annual
Report on Form 10-K and review and consider with the outside auditors the
matters required to be discussed by Statement of Audit Standards No. 61.
2. As a whole, or through the Audit Committee chair, the Audit Committee shall
review with the outside auditors the Corporation's interim financial
results to be included in the Corporation's quarterly reports to be filed
with the Securities and Exchange Commission and the matters required to be
discussed by SAS No. 61; this review will occur prior to the Corporation's
filing of the Form 10-Q.
3. The Audit Committee shall discuss with management and the outside auditors
the quality and adequacy of the Corporation's internal controls.
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4. The Audit Committee shall:
o Request from the outside auditors annually, a formal written statement
delineating all relationships between the auditor and the Corporation
consistent with Independence Standards Board Standard No. 1;
o Discuss with the outside auditors any such disclosed relationships and
their impact on the outside auditor's independence; and
o Recommend that the Board take appropriate action to oversee the
independence of the outside auditor.
5. The Audit Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the outside auditor. The
Corporation's independent accountants are ultimately accountable to the
Board and the Audit Committee.
----------
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PROXY SOUTHSIDE BANCSHARES, INC.
The undersigned hereby acknowledges (a) receipt of the Notice of Annual
Meeting of Shareholders of Southside Bancshares, Inc. (the "Corporation") to be
held at Willow Brook Country Club, 3205 West Erwin Street, Tyler, Texas, on
April 19, 2001 at 4:00 p.m., local time, and the Proxy Statement in connection
therewith, and (b) Rollins Caldwell, Sam Dawson and William Sheehy and each of
them, proxies with full power of substitution and revocation, for and in the
name, place and stead of the undersigned, to vote upon and act with respect to
all of the shares of Common Stock of the Corporation standing in the name of the
undersigned or with respect to which the undersigned is entitled to vote and act
at said meeting or at any adjournment thereof, and the undersigned directs this
proxy be voted as follows:
ELECTION OF THREE DIRECTOR NOMINEES [ ] FOR nominees listed below except as marked to the contrary below
TO SERVE UNTIL THE 2004 ANNUAL MEETING [ ] WITHHOLD AUTHORITY by writing nominee's name in space below
---------------------------------------------------------------------
Fred E. Bosworth, B. G. Hartley and Paul W. Powell
APPROVAL OF SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS THEREOF.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
If more than one of the proxies above shall be present in person or by
substitute at the meeting or any adjournment thereof, the majority of said
proxies so present and voting, either in person or by substitute, shall exercise
all of the powers hereby given.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE; IF NO SPECIFICATION IS
MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE MATTERS SPECIFICALLY REFERRED TO
ABOVE.
(continued on reverse side)
18
The undersigned hereby revokes any proxy or proxies heretofore given to
vote upon or act with respect to such stock and hereby ratifies and confirms all
that said proxies, their substitutes, or any of them, may lawfully do by virtue
hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION.
Dated ,2001
----------------------------
----------------------------------------
Signature
----------------------------------------
Signature (if held jointly)
Please date the proxy and sign your name
exactly as it appears hereon. Where
there is more than one owner, each
should sign. When signing as an
attorney, administrator, executor,
guardian or trustee, please add your
title as such. If executed by a
corporation, the proxy should be signed
by a duly authorized officer. Please
sign the proxy and return it promptly
whether or not you expect to attend the
meeting. You may nevertheless vote in
person if you do attend.