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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
SOUTHSIDE BANCSHARES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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SOUTHSIDE BANCSHARES, INC.
1201 South Beckham Avenue
Tyler, Texas 75701
March 19, 2002
Dear Shareholders:
On Thursday, April 18, 2002, our shareholders of common stock 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 2005 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 for our common stock at the close of business on March
14, 2002 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
SOUTHSIDE BANCSHARES, INC.
1201 South Beckham Avenue
Tyler, Texas 75701
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
APRIL 18, 2002
NOTICE IS HEREBY GIVEN THAT THE ANNUAL MEETING OF SHAREHOLDERS OF
SOUTHSIDE BANCSHARES, INC. COMMON STOCK WILL BE HELD AT WILLOW BROOK COUNTRY
CLUB, 3205 WEST ERWIN STREET, TYLER, TEXAS, ON APRIL 18, 2002 AT 4:00 P.M.,
LOCAL TIME, TO CONSIDER AND VOTE UPON THE FOLLOWING MATTERS:
1. To elect three directors to serve until the 2005 Annual
Shareholders' Meeting, and
2. To transact other business that may properly come before the meeting
or any adjournments.
Only shareholders of common stock registered on the Corporation's books
as owners of shares at the close of business on March 14, 2002 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
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B. G. Hartley
Chairman of the Board
Tyler, Texas
March 19, 2002
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.
SOUTHSIDE BANCSHARES, INC.
1201 South Beckham Avenue
Tyler, Texas 75701
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 18, 2002
TO OUR SHAREHOLDERS:
This Proxy Statement is being furnished to shareholders of common stock of
Southside Bancshares, Inc. (the "Corporation") in connection with the Annual
Meeting of Shareholders of common stock (the "Annual Meeting") to be held on
April 18, 2002, at the time and place and for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders of Common Stock, and at
any adjournments thereof. This Proxy Statement and applicable form of proxy are
first being sent to the shareholders of common stock of the Corporation on or
about March 19, 2002.
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 14, 2002 has been fixed as the record date for
determining the shareholders of common stock of the Corporation entitled to
notice of and to vote at the Annual Meeting. Holders of common stock are
entitled to one vote per share. In the election of three directors to serve
until the 2005 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 approximately 7,803,539 shares of common stock outstanding and
eligible to be voted on each matter.
CERTAIN SHAREHOLDERS
The Corporation is aware of only one shareholder of common stock who has a
beneficial ownership interest of five percent or more, as of December 31, 2001.
Southside Bank, Tyler, Texas has advised the Corporation that, in its capacity
as a Bank fiduciary of various trusts and estates, it may be deemed the
beneficial owner of 473,402 shares of common stock (or 6.1% of the outstanding
common shares). The Bank also advised that none of the beneficiaries it
represented in a fiduciary capacity individually own five percent or more of the
Corporation's common stock.
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INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP served as the Corporation's independent public
accountants for the fiscal year ended December 31, 2001 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 that 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 2005 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. The address
for each of the directors and named executive officers is 1201 South Beckham
Avenue, Tyler, Texas 75701.
INITIAL SHARES PERCENT
ELECTION BENEFICIALLY OF
NOMINEES FOR DIRECTORS - TO BOARD OWNED CLASS
TERMS TO EXPIRE AT THE 2005 ANNUAL MEETING (12-31-01)(1) (12-31-01)
ROLLINS CALDWELL (80) - Mr. Caldwell is a private investor who served as 1990 53,130 *
President of Caldwell Welding Supply Corporation for 37 years. He
currently is involved in real estate leasing.
SAM DAWSON (54) - Mr. Dawson is President and Secretary of the Corporation, 1997 127,852 1.6
having served in that capacity since 1998. He joined Southside Bank in 1974 (2)
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 also serves as a director of the Camp Tyler
Foundation and Tyler Junior College Foundation.
WILLIAM SHEEHY (61) - Mr. Sheehy has been a partner in the law firm of 1983 52,894 *
Wilson, Sheehy, Knowles, Robertson and Cornelius since 1971, and a (3)
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 (71) - Mr. Buie has been Chief Executive Officer of Tyler 1988 315,260 4.0%
Packing Corporation, Inc., a meat-processing firm, since 1955. He serves on (4)
the Boards of Directors of the Church of God (School of Theology), the
University of 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 (69) - Mr. Edmonson is Vice Chairman of the Corporation, 1982 106,246 1.4%
having served in that capacity since 1998. He joined Southside Bank as (5)
Vice President in 1968 and currently is Vice Chairman of the Board of
Directors of Southside Bank.
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INITIAL SHARES PERCENT
ELECTION BENEFICIALLY OF
DIRECTORS CONTINUING UNTIL THE 2003 ANNUAL MEETING- TO BOARD OWNED CLASS
CONTINUED (12-31-01)(1) (12-31-01)
W. D. (JOE) NORTON (65) - Mr. Norton has been the owner of W. D. Norton, 1988 125,311 1.6%
Inc., dba Overhead Door, since 1988. He also owns Norton Equipment Corporation (6)
and is a general partner in Norton Leasing Limited, LLP. Mr. Norton served as
President and was a principal shareholder of Norton Companies of Texas, Inc.
for 25 years.
MICHAEL D. GOLLOB (68) - Mr. Gollob is the senior officer and founder of the 1999 68,123 *
certified public accounting firm of Gollob, Morgan, Peddy & Co. P.C organizing (7)
the firm in 1982. He is a director of Southside Bank and also serves on the
Texas Prepaid Higher Education Tuition Board.
DIRECTORS CONTINUING UNTIL THE 2004 ANNUAL MEETING
FRED E. BOSWORTH (83) - Mr. Bosworth was Chairman of the Board of Bosworth & 1983 118,968 1.5%
Associates, Inc., an independent insurance agency, from 1975 until his (8)
retirement in November 1997 and presently serves as Honorary Chairman. He has
been associated with the insurance industry in various capacities since 1935.
B. G. HARTLEY (72) - Mr. Hartley became Chairman of the Board of the Corporation 1982 202,277 2.6%
in 1983, having previously served as President. He is also Chairman of the Board (9)
and Chief Executive Officer of Southside Bank, having served as Southside Bank's
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 (68) - Mr. Powell serves as the Dean of the Truett Theological 1999 10,714 *
Seminary at Baylor University. For the past four years he has served on the
Board of Directors of the Robert M. Rogers Foundation and is also Chairman of
the Board of Trinity Mother Frances Health System. He also served as Chairman
and Chief Executive Officer of the Southern Baptist Annuity Board and was also
pastor of Green Acres Baptist Church, Tyler.
NAMED EXECUTIVE OFFICERS
JERYL STORY (50) - Mr. Story is Executive Vice President of the Corporation N/A 109,105 1.4%
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 (45) - Mr. Gibson is Executive Vice President and Chief Financial N/A 43,921 *
Officer of the Corporation and Southside Bank. He is also a director of (11)
Southside Bank. He joined Southside Bank in 1984 and in addition to being the
Chief Financial Officer is responsible for management of the Bank's investment
portfolio. He is a member of the Board of Directors of the Federal Home Loan
Bank of Dallas.
ALL DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS OF THE CORPORATION AND ITS 1,333,801 17.1%
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 of common stock set forth opposite his
name. In addition, all Incentive Stock Option Plan transactions and all
Employee Stock Option Plan transactions are incorporated to reflect
activity within 60 days of the record date.
2) Mr. Dawson holds sole voting and investment power with respect to
36,381 shares and holds sole voting power, but not investment power,
with respect to 6,070 shares owned in the Corporation's ESOP Plan, in
which he is 100% vested. Also included in the total are 83,863 shares
subject to incentive stock options that are exercisable within 60 days
of the record date. Mr. Dawson's wife, Kay Dawson, owns 1,538 shares,
of which he disclaims all beneficial interest, but are included in the
total.
3) Mr. Sheehy has sole voting and investment power with respect to 44,329
shares owned individually. Mr. Sheehy owns 8,565 shares in an
individual retirement account and holds sole voting and investment
power in these shares.
4) Mr. Buie has sole voting and investment power with respect to 305,652
shares owned individually. Mr. Buie owns 1,050 shares in an individual
retirement account and holds sole voting and investment power in these
shares. Also included in the total are 4,656 shares owned by Mr. Buie's
wife, Melvina Buie, and 2,038 shares owned by Mrs. Buie as Trustee for
Herbert Rex Buie and 1,864 shares owned by Mrs. Buie as Trustee for
Robin J. Buie. Mr. Buie disclaims beneficial ownership of these 8,558
shares.
5) Mr. Edmonson holds sole voting and investment power with respect to
45,393 shares and holds voting power, but not investment power, with
respect to 8,352 shares, owned in the Corporation's ESOP Plan, in which
he is 100% vested. Also included in the total are 52,501 shares subject
to incentive stock options that are exercisable within 60 days of the
record date.
6) Mr. Norton has sole voting and investment power with respect to 122,677
shares and is custodian for Meredith Ann Norton for 2,634 shares, of
which he disclaims all beneficial interest.
7) Mr. Gollob holds sole voting and investment power with respect to
53,833 shares owned individually. Mr. Gollob also owns 13,755 shares in
an individual retirement account and holds sole voting and investment
power in these shares. His wife, Laverne Gollob, has 535 shares in an
individual retirement account and Mr. Gollob disclaims beneficial
interest in these shares.
8) Mr. Bosworth owns 59,485 shares, individually, and holds a life estate
in 59,483 shares.
9) Mr. Hartley has sole voting and investment power with respect to 72,339
shares and is Trustee for Patrick Hartley with sole voting and
investment power with respect to 10,746 shares. He also holds sole
voting power, but not investment power, with respect to 11,142 shares
owned in the Corporation's ESOP Plan, in which he is 100% vested. Also
included in the total are 14,347 shares owned by Mr. Hartley's wife,
Billie Boyd Hartley, (1,941 of those shares are owned in the
Corporation's ESOP Plan) all of which Mr. Hartley disclaims all
beneficial interest and 93,703 shares subject to incentive stock
options that are exercisable within 60 days of the record date.
10) Mr. Story owns 20,568 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 371 shares and
sole voting, but not investment power, with respect to 6,162 shares
owned in the Corporation's ESOP plan, in which he is 100% vested. Also
included in the total are 82,004 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 5,555 shares owned in the Corporation's ESOP plan, in which
he is 100% vested. In addition he holds 23 shares as Southwest
Securities/Lee R. Gibson Custodian for Natalie Diane Gibson and
disclaims all beneficial interest in these 23 shares. Also included in
the total are 38,343 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
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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:
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 and are considered independent under the rules of the
Nasdaq Stock Market. Mr. Gollob, a senior officer of a CPA firm, serves as
chairman of the Audit Committee. The committee met twelve times in 2001.
The Board of Directors has adopted a formal written "Charter" which outlines the
purpose of the Audit Committee, delineates the membership requirements and
addresses the key responsibilities of the committee (see below).
SOUTHSIDE BANCSHARES, INC
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 and the
Audit Committee are 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.
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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.
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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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, 2001, which include the consolidated balance sheets of the Corporation as of
December 31, 2001 and 2000, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 2001, 2000 and 1999, 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, 2001. 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. Based on the above, the Audit Committee
recommended that the Board include the financial statements in the 10-K.
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, 2001 and for the reviews of
the financial statements included in Southside Bancshares, Inc. Quarterly
Reports on Form 10-Q for that fiscal year were $114,000.
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, 2001.
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, 2001 were $21,113.
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.
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SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
SOUTHSIDE BANCSHARES, INC.
Herbert Buie Michael Gollob W. D. (Joe) Norton
Chairman of the Committee
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. The Incentive Stock
Option Committee did not formally meet in 2001 and no options were granted
during the year.
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 2001.
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 2001.
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. Jeryl Story and Lee Gibson, officers
of the Corporation and Southside Bank and directors of Southside Bank, serve as
members of the Trust Committee. Kathy Hayden, Titus Jones 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 twelve times in 2001.
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 2001.
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, directors and officers of Southside Bank,
serve on the committee with George Hall, Titus Jones, Brian McCabe, Lonny
Uzzell, Andy Wall and Cayla Washburn, each an officer of Southside Bank. The
Investment/Asset-Liability Committee met thirteen times in 2001.
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 of
the Corporation and Southside Bank. Mr. Hartley, an executive officer of the
Corporation, abstains from voting in all matters that relate directly to his
compensation package. The committee met three times last year.
7
Director Compensation
In January 2001 the Corporation compensated its nonemployee directors with an
annual retainer of $6,000. The Bank compensates nonemployee directors for
board/committee service with fees ranging from $200 to $500 depending on the
type of meeting and they receive an annual retainer of $1,000 for service as a
bank director as well. Officers of the Corporation, who are also directors of
Southside Bank, are paid an annual retainer and compensated 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 highest paid named
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 2001, 2000 and 1999.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------------------------------------------------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSA- COMPENSATIONS
(1) TION* (2)(3)(4)(5)
---------------------------- ------------ -------------- ------------- --------------- ----------------
B. G. HARTLEY - 2001 $250,000 $103,750 $7,500 $53,798
Chairman of the Board of 2000 200,000 70,000 7,500 53,978
the Corporation; Chairman 1999 200,000 70,000 7,000 53,978
of the Board and Chief
Executive Officer of
Southside Bank
SAM DAWSON - President and 2001 $165,000 $70,625 $7,500 $ 0
Secretary of the 2000 150,000 53,750 7,500 0
Corporation; President and 1999 140,000 52,500 7,000 0
Chief Operating Officer of
Southside Bank
JERYL STORY - 2001 $148,500 $68,563 $7,500 $ 0
Executive Vice President 2000 135,000 51,875 7,500 0
of the Corporation and 1999 125,000 50,625 7,000 0
Senior Executive Vice
President of Southside Bank
LEE GIBSON, CPA - 2001 $143,000 $67,875 $7,500 $ 0
Executive Vice President 2000 130,000 66,250 7,500 0
of the Corporation; 1999 120,000 50,000 7,000 0
Executive Vice President
of Southside Bank
*Each executive officer that is also a director of Southside Bank received
director fees from the Bank in 2001, 2000, and 1999 of $7,500, $7,500, 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 2001.
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
specific period of 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 - $422,000
payable at inception, $957,000 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
$1,024,000; Sam Dawson $101,000; Jeryl Story $53,000, and Lee Gibson
$35,000.
8
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 2001 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 2001. 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, 2001
[CHART]
1997 1998 1999 2000 2001
------------- ------------ ------------ ------------- ------------
Southside Bancshares, Inc. Common Stock $100 $ 79 $ 80 $ 79 $126
Dow Jones Banks Index* $100 $106 $ 93 $110 $109
Dow Jones US Total Market Index* $100 $125 $153 $139 $122
*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.
Southside Bancshares, Inc. common stock began trading on the Nasdaq National
Market on May 7, 1998. SBSI data represented above is based entirely on
Nasdaq trading records making the actual reporting period from May 7, 1998
through December 31, 2001 instead of a full five-year period.
9
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 2001. 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.
The following table discloses for each of the Executive Officers named in the
Summary Compensation Table the values of their options at December 31, 2001.
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 DEC. 31, 2001 DEC. 31, 2001 (1)
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------
B. G. HARTLEY 0 $ 0 93,703 45,649 $681,980 $244,965
SAM DAWSON 0 $ 0 83,863 36,829 $593,687 $196,278
JERYL STORY 14,725 $ 94,486 82,004 36,574 $579,610 $194,850
LEE GIBSON 22,476 $116,325 42,343 36,574 $252,749 $194,850
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, 2001, which
was $12.55 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 following table shows the anticipated annual benefit, based on assumptions
and may vary from the actual amounts shown, computed on a ten-year certain and
life basis, payable upon the normal retirement as of December 31, 2001, 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 $ 35,450 $ 47,267 $ 54,083 $ 60,900 $ 67,717
150,000 54,950 73,267 84,083 94,900 105,717
200,000 74,450 99,267 114,083 128,900 143,717
250,000 93,950 125,267 144,083 162,900 181,717
300,000 113,450 151,267 174,083 196,900 219,717
450,000 171,950 229,267 264,083 298,900 333,717
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 2002 under Section 415 of the Internal Revenue Code
(IRC) of $160,000. In addition, compensation that can be considered by the plan
is limited during 2002 to $200,000, as provided by Section 401(a)(17) of the
IRC. These IRC limitations are subject to annual cost-of-living adjustments.
The years of credited service under the plan as of December 31, 2001 for each
person named in the current compensation table are as follows: Hartley - 41
years (39 years at age 70); Dawson - 27 years (38 years at age 65); Story - 22
years (37 years at age 65) and Gibson - 17 years (37 years at age 65).
10
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 in 2001 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.
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
$145,000 for services rendered in calendar year 2001 some of which was
reimbursed by Bank customers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
A Form 4 disclosure was filed 46 days late for Herbert C. Buie due to an
oversight with respect to a purchase of 1,000 shares of common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of Southside Bank determines the compensation
recommendations for the Executive Officers of Southside Bank. The Board of
Directors of Southside Bank considers the recommendations of the Compensation
Committee and approves the compensation of the Executive Officers. The Board of
Directors of Southside Bank 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) and Jeryl Story and Lee Gibson
(who are each Executive Officers of Southside Bank and the Corporation and
directors of Southside Bank).
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, 2001 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 of common stock wishing to have a proposal considered for
inclusion in the Board of Directors' proxy solicitation materials for the 2003
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 November 19, 2002. 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 2003 proxy solicitation materials.
Any shareholder wishing to have a proposal considered for the 2003 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 2, 2003. 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.
11
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 19, 2002
12
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 2002
--------------------------------,
--------------------------------------------
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.
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 18, 2002 at 4:00 p.m., local time, and the Proxy Statement in connection
therewith, and (b) Herbert C. Buie, Robbie N. Edmonson, W. D. (Joe) Norton and
Michael D. Gollob 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 2005 ANNUAL MEETING [ ] WITHHOLD AUTHORITY by writing nominee's name in space below
-----------------------------------------------------------------
Rollins Caldwell, Sam Dawson and William Sheehy
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)