As filed with the Securities and Exchange Commission on July 19, 2001
Registration No. 333-63212
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SOUTHSIDE BANCSHARES CORP.
(Exact name of registrant as specified in its charter)
MISSOURI 6021 43-1262037
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
3606 GRAVOIS AVENUE
ST. LOUIS, MISSOURI 63116
(314) 776-7000
(Address, including ZIP code, and telephone number, including area
code, of registrant's principal executive offices)
------------------------
THOMAS M. TESCHNER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SOUTHSIDE BANCSHARES CORP.
3606 GRAVOIS AVENUE
ST. LOUIS, MISSOURI 63116
(314) 776-7000
(Name, address, including ZIP code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
JOHN K. PRUELLAGE, ESQ. THOMAS A. LITZ, ESQ.
TOM W. ZOOK, ESQ. THOMAS E. PROOST, ESQ.
LEWIS, RICE & FINGERSH, L.C. THOMPSON COBURN LLP
500 N. BROADWAY, STE. 2000 ONE FIRSTAR PLAZA
ST. LOUIS, MISSOURI 63102 ST. LOUIS, MISSOURI 63101
(314) 444-7600 (TELEPHONE) (314) 552-6000 (TELEPHONE)
(314) 241-6056 (FAX) (314) 552-7000 (FAX)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES
TO THE PUBLIC: As soon as practicable after the effective date of this
Registration Statement.
If any of the securities being registered on this Form are being
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an
offering under Rule 462(b) of the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _______________
If this form is a post-effective amendment filed under Rule 462(d)
of the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering. / / ______________
--------------------------
CALCULATION OF REGISTRATION FEE
==============================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE REGISTRATION
(1)(2) FEE (2)
------------------------------------------------------------------------------------------------------------------------------
Common Stock, $1.00 par value.... 12,554,073 shares (2) $160,700,616 $40,176(3)
==============================================================================================================================
(1) Based upon an estimate of the sum of: (a) 8,897,111 shares of common stock,
into which shares of Allegiant Bancorp common stock, $0.01 par value,
will be converted; (b) 1,641,028 additional shares of Southside common
stock to be issued to Southside shareholders; (c) 1,532,934 additional
shares of common stock of Southside into which Allegiant Bancorp common
stock issuable under certain Allegiant Bancorp benefit plans will be
converted; and (d) 483,000 additional shares of common stock of Southside
issuable under Southside benefit plans, all as set forth in the merger
agreement as described herein.
(2) Estimated solely for purposes of calculating the registration fee. With
regard to shares described in: note 1(a) above, the registration fee
was calculated based on the provisions of Rule 457(f), using the
average of the high and low prices of Allegiant Bancorp common stock of
$12.02 per share as reported by the Nasdaq National Market on June 12,
2001; note 1(b) above, the registration fee was calculated based on the
provisions of Rule 457(c), using the average of the high and low prices
of Southside common stock of $14.70 per share reported by the Nasdaq
Small Cap Market on June 12, 2001; and notes 1(c) and (d) above, the
registration fee was calculated based on the provisions of Rule
457(h)(1), each using the average of the high and low prices of
Southside common stock of $14.70 per share as reported by the Nasdaq
Small Cap Market on June 12, 2001.
(3) Previously paid on June 18, 2001.
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT AS MAY
BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT
OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON THE
DATE THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
================================================================================
Allegiant Southside
Bancorp, Inc. Bancshares Corp.
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
Allegiant Bancorp, Inc. has agreed to acquire Southside Bancshares
Corp. This proposed strategic business combination will create the fifth
largest banking institution headquartered in the State of Missouri.
Following the merger, the merged company will have assets of $2.0 billion,
$1.3 billion in loans and over $1.5 billion in deposits, with total
shareholders' equity of $139.5 million.
In the merger, each share of Southside common stock that you hold
will be converted into the right to receive either 1.39 shares of common
stock of the merged company, $14.00 in cash, or a combination of the two.
Each Southside shareholder will have the opportunity to elect the
form of consideration to be received, subject to a reallocation so that
one-half of the Southside common stock outstanding is converted into cash
and the remainder is converted into common stock of the merged company. We
expect that the merger will be tax-free for all Allegiant Bancorp shareholders
and for Southside shareholders with respect to the stock of the merged company
they receive. Southside shareholders who receive cash in the merger may have\
to recognize income or gain.
THE EXCHANGE RATIO IS FIXED, MEANING THAT IT WILL NOT BE ADJUSTED
BASED ON CHANGES IN THE PRICES OF THE COMMON STOCK OF ALLEGIANT BANCORP OR
SOUTHSIDE PRIOR TO THE CLOSING. Therefore, the value of the merged
company's common stock, if any, which you will receive in the merger may
increase or decrease after the merger.
Based on the closing price of Allegiant Bancorp common stock
of $ on , 2001, the 1.39 exchange ratio represented approximately
$ in value for each share of Southside common stock to be converted into
shares of the merged company's common stock in the merger. We urge you to obtain
current market price quotations for Allegiant Bancorp and Southside common
stock. The common stock of Allegiant Bancorp is traded on the Nasdaq National
Market under the symbol "ALLE." The common stock of Southside is traded on the
Nasdaq Small Cap Market under the symbol "SBCO."
For tax reasons which are discussed in this joint proxy statement/
prospectus, the form of the transaction calls for Allegiant Bancorp to merge
into Southside. However, simultaneously with the merger, the merged company
will change its name to "Allegiant Bancorp, Inc." and the board of directors
and executive officers of Allegiant Bancorp will be the board of directors
and executive officers of the merged company, except that Southside will
designate two persons to serve on the merged company's board of directors.
In addition, the articles of incorporation and bylaws of the merged company
will be substantially similar to those of Allegiant Bancorp, as described in
this joint proxy statement/prospectus. Accordingly, the merged company will
effectively be Allegiant Bancorp. Immediately after the merger, Allegiant
Bancorp's and Southside's shareholders will hold approximately 60.2% and
39.8%, respectively, of the merged company's common stock.
Each company will hold a meeting of its shareholders to vote on
this merger proposal. Whether or not you plan to attend your meeting, please
take the time to vote by completing and mailing the enclosed proxy card. The
date of both the Allegiant Bancorp and Southside meetings is , 2001. We
enthusiastically join the other members of our respective boards of
directors in unanimously recommending that our respective shareholders vote
"FOR" the merger.
/s/ Marvin S. Wool /s/ Norville K. McClain
Marvin S. Wool Norville K. McClain
Chairman of the Board Chairman of the Board
Allegiant Bancorp, Inc. Southside Bancshares Corp.
FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH YOU SHOULD CONSIDER
IN EVALUATING THE MERGER, SEE "RISK FACTORS" BEGINNING ON PAGE 16.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE
ISSUED UNDER THIS DOCUMENT OR DETERMINED IF THIS DOCUMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED THROUGH THIS DOCUMENT ARE NOT SAVINGS OR
DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF
EITHER OF OUR COMPANIES, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER FEDERAL OR STATE
GOVERNMENTAL AGENCY.
This joint proxy statement/prospectus is dated , 2001 and
is being first mailed on or about , 2001.
ALLEGIANT BANCORP, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2001
To the Shareholders of
Allegiant Bancorp:
We will hold a special meeting of shareholders of Allegiant Bancorp,
Inc., a Missouri corporation, on , 2001, at .m., local time, at our
headquarters, 2122 Kratky Road, St. Louis, Missouri 63114, for the purpose
of considering and voting upon the following:
1. A proposal to approve Allegiant Bancorp's acquisition of Southside
Bancshares Corp. under the Agreement and Plan of Merger, dated
as of April 30, 2001, by and between Allegiant Bancorp and
Southside Bancshares Corp., a Missouri corporation, and the
transactions contemplated by the merger agreement. For tax
reasons, the form of the transaction calls for Allegiant
Bancorp to merge into Southside, however, the surviving company
will effectively be Allegiant Bancorp, as more fully described
in the accompanying joint proxy statement/prospectus. The merged
company will be called Allegiant Bancorp, Inc. and Allegiant
Bancorp's current board of directors and executive officers
generally will serve as the directors and executive officers of
the merged company.
2. To transact any other business as may properly be brought
before the special meeting or any adjournments or
postponements of the special meeting.
We have fixed the close of business on , 2001 as the record
date for determining those shareholders entitled to vote at the special meeting
and any adjournments or postponements of the special meeting. Accordingly,
only shareholders of record on that date are entitled to notice of, and to
vote at, the special meeting and any adjournments or postponements of the
special meeting.
/s/ Kevin R. Farrell
Kevin R. Farrell
Secretary
St. Louis, Missouri
, 2001
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON,
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE. THE ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. IF YOU PLAN TO
ATTEND THE MEETING YOU SHOULD PROMPTLY SUBMIT YOUR PROXY INDICATING YOUR
INTENT TO ATTEND.
THE BOARD OF DIRECTORS OF ALLEGIANT BANCORP UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS IT
CONTEMPLATES.
SOUTHSIDE BANCSHARES CORP.
3606 GRAVOIS AVENUE
ST. LOUIS, MISSOURI 63116
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2001
-------------------------------
NOTICE IS HEREBY GIVEN that we will hold the annual meeting of
shareholders of Southside Bancshares Corp. at South Side National Bank's
Telegraph Road facility, located at 4111 Telegraph Road in South St. Louis
County, Missouri 63129, at p.m. on , 2001. The purpose of the meeting is:
1. To elect four directors, each to serve for a three-year term or
until their earlier resignation or removal.
2. To consider a proposal to approve the acquisition of Southside
by Allegiant Bancorp, Inc. under the plan of merger set forth in
the merger agreement between Southside and Allegiant Bancorp and
the transactions contemplated by that agreement. For tax reasons
described in this joint proxy statement/prospectus, the form of
the transaction calls for Allegiant Bancorp to merge into
Southside, however, Allegiant Bancorp will effectively be the
surviving company in the merger. The merged company will be called
Allegiant Bancorp, Inc. and Allegiant Bancorp's current board of
directors and executive officers generally will serve as the
directors and executive officers of the merged company.
3. To act upon any other business that may properly come before the
annual meeting or any adjournment thereof.
These items of business are described in the accompanying joint
proxy statement/prospectus. You may vote your shares at the annual meeting
if you are a shareholder of record on , 2001.
By Order of the Board of Directors
/s/ Laura L. Thomas
Laura L. Thomas
Secretary to the Board
St. Louis, Missouri
, 2001
Please sign, date and return the enclosed proxy as soon as
possible, whether or not you plan to attend the meeting. We have enclosed a
postage-paid return envelope for your convenience. You may withdraw your
proxy at any time prior to or at the meeting.
If your shares are not registered in your own name, please advise
the shareholder of record (your bank, broker, etc.) that you wish to attend.
The shareholder of record must provide you with evidence of your ownership
so that you may be admitted to the meeting.
Shareholders representing a majority of the shares of Southside's
outstanding stock must be present or represented by proxy at the annual
meeting for a quorum to be present. To ensure the presence of a quorum at
the annual meeting, please return your proxy early.
Your board of directors recommends that you vote "FOR" the nominees
for director and "FOR" approval of the plan of merger.
TABLE OF CONTENTS
Page
----
ADDITIONAL INFORMATION.................................iii
QUESTIONS AND ANSWERS ABOUT THE
MERGER AND THE SHAREHOLDERS' MEETINGS..................1
SUMMARY..................................................3
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................8
COMPARATIVE UNAUDITED PER SHARE DATA.....................9
SUMMARY CONSOLIDATED FINANCIAL DATA.....................10
SUMMARY PRO FORMA COMBINED CONSOLIDATED FINANCIAL
INFORMATION...........................................15
RISK FACTORS............................................16
FORWARD-LOOKING STATEMENTS..............................23
ALLEGIANT BANCORP SPECIAL MEETING.......................24
Matters to Be Considered...........................24
Proxies............................................24
Solicitation of Proxies............................24
Record Date and Voting Rights......................25
Recommendation of Allegiant Bancorp Board
of Directors.....................................25
SOUTHSIDE ANNUAL MEETING................................26
Matters to Be Considered...........................26
Proxies............................................26
Election Forms.....................................26
Solicitation of Proxies............................27
Record Date and Voting Rights......................27
Recommendation of Southside Board
of Directors.....................................27
THE MERGER..............................................28
General Description of the Merger..................28
Resale of Merged Company Stock.....................28
Voting Agreements..................................29
Interests of Certain Persons in the Merger.........29
Background of the Merger; Boards' Recommendations
and Reasons for the Merger.......................32
Opinion of Allegiant Bancorp's Financial Advisor...39
Analysis of Legg Mason.............................41
Opinion of Southside's Financial Advisor...........44
Conditions of the Merger...........................50
Representations and Warranties.....................51
Termination of the Merger Agreement................52
Effect of Termination..............................53
Waiver and Amendment...............................54
Indemnification....................................54
Acquisition Proposals..............................54
Closing Date.......................................55
Surrender of Southside Stock Certificates and
Receipt of Merger Consideration..................55
Fractional Shares..................................56
Dissenters' Rights.................................56
Regulatory Approvals...............................58
Conduct of Business Pending the Merger.............58
Accounting Treatment...............................59
Management and Operations after the Merger.........60
Certain Federal Income Tax Consequences
Of The Merger....................................60
Consequences to Southside Shareholders.............62
PRO FORMA UNAUDITED COMBINED
CONSOLIDATED FINANCIAL INFORMATION....................65
INFORMATION ABOUT ALLEGIANT BANCORP.....................70
General............................................70
Recent Acquisition.................................71
INFORMATION ABOUT SOUTHSIDE.............................72
General............................................72
Competition........................................72
Employees..........................................73
Properties.........................................73
Legal Proceedings..................................73
Nonperforming Assets...............................78
Repricing and Interest Rate Sensitivity Analysis...81
Distribution of Average Assets, Liabilities
and Shareholders' Equity; Interest Rates and
Interest Differential Condensed Average
Balance Sheet and Average Interest Rates.........83
Liquidity..........................................98
Capital Resources..................................99
Election of Southside Directors...................100
Security Ownership of Management and
Certain Beneficial Owners.......................102
Executive Compensation............................104
Executive Contracts...............................105
Compensation Committee Interlocks and
Insider Participation...........................109
Audit Committee Report............................109
Audit and Related Fees............................110
Comparison of Five-Year Cumulative Total Return...110
- i -
Interests of Management in Certain Transactions...111
Section 16(a) Beneficial Ownership Reporting
Compliance......................................111
Form 10-K.........................................111
INFORMATION REGARDING COMMON STOCK OF THE
MERGED COMPANY.......................................112
Description of Merged Company Common Stock........112
COMPARATIVE RIGHTS OF SHAREHOLDERS.....................114
Authorized Capital Stock..........................114
Size of Board of Directors........................114
Cumulative Voting for Directors...................114
Classes of Directors..............................115
Qualifications of Directors.......................115
Filling Vacancies on the Board....................115
Removal of Directors..............................116
Notice of Shareholder Proposals and Director
Nominations.....................................116
Anti-Takeover Provisions--Business Combinations...117
Shareholder Action Without a Meeting..............119
Calling Special Meetings of Shareholders..........119
Notice of Meetings................................119
Amendments to Charter.............................120
Amendment of Bylaws...............................120
SUPERVISION AND REGULATION.............................121
Liability for Bank Subsidiaries...................121
Capital Requirements..............................122
Dividend Restrictions.............................123
Deposit Insurance Assessments.....................123
Supervisory Assessments...........................123
Depositor Preference Statute......................123
Brokered Deposits.................................124
Interstate Banking and Branching..................124
Control Acquisitions..............................124
Gramm-Leach-Bliley................................124
Future Legislation................................125
LEGAL MATTERS..........................................125
EXPERTS................................................125
INDEPENDENT PUBLIC ACCOUNTANTS.........................125
SHAREHOLDER PROPOSALS..................................125
Allegiant Bancorp.................................125
Southside.........................................126
Merged Company....................................126
OTHER MATTERS..........................................127
WHERE YOU CAN FIND MORE INFORMATION....................127
SOUTHSIDE BANCSHARES CORP. INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS....................F-1
Annex A -- Agreement and Plan of Merger, dated as of April 30, 2001, by and
between, Allegiant Bancorp and Southside
Annex B -- Form of Opinion of Legg Mason Wood Walker, Incorporated to the Board
of Directors of Allegiant Bancorp
Annex C -- Form of Opinion of Stifel, Nicolaus & Company, Incorporated to the
Board of Directors of Southside
Annex D -- Section 351.455, R.S.Mo. Concerning Dissenters' Rights
Annex E -- Amended and Restated Articles of Incorporation of the Merged
Company
Annex F -- Amended and Restated Bylaws of the Merged Company
Annex G -- Southside Audit Committee Charter
- ii -
ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important
business and financial information about Allegiant Bancorp and Southside
from other documents filed with the SEC that are not delivered with or
included in this joint proxy statement/prospectus. This information is
available to you without charge upon your written or oral request. You can
obtain the documents incorporated by reference in this joint proxy
statement/prospectus, including our respective Annual Reports on Form 10-K,
without charge, by requesting them in writing or by telephone from the
appropriate company at the following addresses and telephone numbers:
Allegiant Bancorp, Inc. Southside Bancshares Corp.
2122 Kratky Road 3606 Gravois Avenue
St. Louis, Missouri 63114 St. Louis, Missouri 63116
Attention: Thomas A. Daiber Attention: Joseph W. Pope
Telephone: (314) 692-8200 Telephone: (314) 416-4111
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY
, 2001 IN ORDER TO RECEIVE THEM BEFORE THE MEETINGS.
See "Where You Can Find More Information" on page 127.
- iii -
QUESTIONS AND ANSWERS
ABOUT THE MERGER AND THE SHAREHOLDERS' MEETINGS
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: We believe the merger is in the best interests of both companies and
our respective shareholders. Allegiant Bancorp's board of directors
believes that the acquisition of Southside will bring together two
complementary institutions to create a strategically, operationally and
financially strong company that is positioned for further growth.
Southside's board of directors believes that merging with Allegiant
Bancorp provides significant value to Southside shareholders and the
option to participate in the opportunities for growth offered by the
merged company.
You should review the reasons for the merger described in greater
detail at pages 30 through 37.
Q: WHAT DO I NEED TO DO NOW?
A: You should carefully read and consider the information contained in
this document. Then, please fill out, sign and mail your proxy card in
the enclosed return envelope as soon as possible so that your shares
may be represented at your meeting. If a returned card is signed but
does not specify a choice, your proxy will be voted "FOR" the matters
being considered at the meeting. In addition, Southside shareholders
should fill out, sign and mail their election forms, designating the
form of merger consideration they wish to receive, along with their
proxies.
Q: WHAT IF I DON'T VOTE OR I ABSTAIN FROM VOTING?
A: If you do not vote or you abstain from voting, your abstention will count
as a "NO" vote on the merger and the related transactions.
Q: IF MY SHARES ARE HELD BY MY BROKER IN "STREET NAME," WILL MY BROKER VOTE
MY SHARES AND SUBMIT MY ELECTION FORM FOR ME?
A: Your broker will vote your shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker
to vote your shares. If you do not provide your broker with
instructions on how to vote your shares held in "street name," your
broker will not be permitted to vote your shares, which will have the
effect of a "NO" vote on the merger and the related transactions. If you
are a Southside shareholder, your broker will need to submit an election
form on your behalf, so you must direct your broker how you wish the
election to be made as to your shares.
Q: WHAT IF I DO NOT RETURN MY ELECTION FORM?
A: If you do not return your election form, then you will receive the
merger consideration in the form allocated to you in accordance with
the merger agreement, which could be cash, common stock of the merged
company or a combination of cash and common stock of the merged
company.
Q: ARE SOUTHSIDE SHAREHOLDERS GUARANTEED TO RECEIVE THE FORM OF MERGER
CONSIDERATION--CASH, COMMON STOCK OR A COMBINATION--THEY REQUEST
ON THEIR ELECTION FORMS?
A: No. Because 50% of Southside's outstanding shares will be converted
into cash and the other 50% into common stock of the merged company,
some shareholders likely will receive a form of consideration they did
not elect or a different proportion of cash and common stock than they
elected. The reallocation procedures are described in greater detail in
this joint proxy statement/prospectus.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You may change your vote at any time before your proxy is voted at
the meeting. You can do this in one of three ways. First, you can send
a written notice stating that you would like to revoke your proxy.
Second, you can complete and submit a new proxy card. If you choose
either of these two methods you must submit your notice of revocation or
your new proxy card to your company before its meeting. If you are an
Allegiant Bancorp shareholder, submit your notice of revocation or new
proxy card to Allegiant Bancorp, Inc., 2122 Kratky Road, St. Louis,
Missouri 63114, Attention: Corporate Secretary. If you are a Southside
shareholder, submit your notice of revocation or new proxy card to
Southside Bancshares Corp., 4111 Telegraph Road, St. Louis, Missouri
63129, Attention: Laura L. Thomas. Third, you may attend the meeting
and vote in person. Simply attending the meeting, however, will not
revoke your proxy. You must request a ballot and vote the ballot at the
meeting. If you have instructed a broker to vote your shares, you must
follow directions received from your broker to change your vote.
- 1 -
Q: SHOULD I SEND IN MY STOCK CERTIFICATE NOW?
A: No. After the merger is completed, Southside shareholders will receive
written instructions for exchanging their stock certificates for the
consideration to be received by them in the merger. Unless otherwise
requested, Allegiant Bancorp shareholders need not do anything with
their stock certificates as their stock certificates will automatically
represent shares of common stock of the merged company.
- 2 -
SUMMARY
This brief summary highlights selected information from this document.
It does not contain all of the information that is important to you. We urge
you to carefully read the entire document and the other documents to which
this document refers to fully understand the merger. See "Where You Can Find
More Information." Many items in this summary include a page reference
directing you to a more complete description of that item.
THE MERGER (PAGE 28)
In the merger, Allegiant Bancorp will acquire Southside. For tax
reasons discussed below, the form of the transaction calls for Allegiant
Bancorp to merge into Southside. However, the merged company will be called
Allegiant Bancorp, Inc. and the existing board of directors and executive
officers of Allegiant Bancorp will be the board of directors and executive
officers of the merged company, except that Southside will designate two
persons to serve on the merged company's board of directors. Accordingly,
Allegiant Bancorp effectively will be the merged company. We expect to
complete the merger in the fourth quarter of 2001.
We have attached a copy of the merger agreement to this document as
Annex A.
-------
OUR REASONS FOR THE MERGER (PAGES 32 - 39)
We are proposing the merger because we believe that:
* the merged company will have an opportunity to grow and compete
successfully in a consolidating financial services industry and
will be able to achieve financial performance beyond what our two
companies could achieve separately;
* we can combine our two operations successfully and manage them
more efficiently to create cost savings our two companies
could not achieve separately; and
* the combination will permit us to further enhance our presence in
our markets and in our core businesses, including those that
generate fee income.
WHAT SOUTHSIDE'S SHAREHOLDERS WILL RECEIVE (PAGE 28)
Upon completion of the merger, each share of Southside common stock
will automatically be converted into the right to receive either 1.39 shares
of common stock of the merged company, $14.00 in cash, or a combination of
the two. On the election form provided with this joint proxy statement/
prospectus, Southside shareholders have the opportunity to elect the form
of merger consideration they prefer to receive. The merger consideration
Southside shareholders elect to receive likely will be reallocated
so that 50% of the Southside shares will be converted into cash and the
other 50% will be converted into common stock of the merged company.
Generally, if a reallocation is necessary:
* first, shares for which election forms were not received will be
designated, to the extent necessary on a pro rata basis, to receive
the undersubscribed consideration;
* then, if necessary, holders who elected to receive a combination of
cash and stock as merger consideration will be designated, to the
extent necessary on a pro rata basis, to receive the
undersubscribed consideration; and
* then, if necessary, holders who elected to receive only the
oversubscribed consideration will be designated, to the extent
necessary on a pro rata basis, to receive the undersubscribed
consideration.
The merged company will not issue any fractional shares in the
merger. Instead, Southside shareholders will receive cash for any fractional
share of common stock owed to them. The amount of cash Southside shareholders
will receive for any fractional shares will be calculated by multiplying the
fractional share interest by $14.00.
After we complete the merger, Southside shareholders will receive
instructions to surrender their Southside common stock certificates to
receive the cash consideration and/or new certificates representing the
merged company's common stock.
Because the exchange ratio is fixed and because the market price of the
common stock of the merged company will fluctuate, the market value of the
stock of the merged company you will receive in the merger may increase or
decrease after the merger.
- 3 -
WHAT ALLEGIANT BANCORP SHAREHOLDERS WILL RECEIVE (PAGE 28)
Each share of Allegiant Bancorp common stock will be converted into one
share of common stock of the merged company. Unless otherwise notified,
Allegiant Bancorp shareholders will not need to surrender their stock
certificates or exchange them for new ones.
RECOMMENDATIONS (PAGES 32 - 39)
Allegiant Bancorp shareholders. The Allegiant Bancorp board of
directors believes that the merger is fair to the Allegiant Bancorp
shareholders and in their best interests. Allegiant Bancorp's board
unanimously recommends that Allegiant Bancorp shareholders vote "FOR" the
merger agreement and the related transactions.
Southside shareholders. The Southside board of directors believes that
the merger is fair to Southside shareholders and in their best interests.
Southside's board unanimously recommends that Southside shareholders vote
"FOR" the merger agreement and the related transactions.
OPINIONS OF FINANCIAL ADVISORS (PAGES 39 - 50)
Allegiant Bancorp shareholders. Legg Mason Wood Walker, Incorporated
delivered a written opinion to the Allegiant Bancorp board of directors
that, as of the date of this joint proxy statement/prospectus, the
consideration to be paid in the merger to Southside's shareholders is
fair to Allegiant Bancorp, from a financial point of view. We have
attached this opinion to this document as Annex B. Allegiant Bancorp
-------
shareholders should read it completely to understand the assumptions made,
matters considered and limitations of the review undertaken by Legg Mason in
providing its opinion.
Southside shareholders. Stifel, Nicolaus & Company, Incorporated
delivered a written opinion to the Southside board of directors that, as of
the date of this joint proxy statement/prospectus, the consideration payable
to Southside shareholders under the merger agreement is fair to the Southside
shareholders, from a financial point of view. We have attached this opinion
to this document as Annex C. Southside shareholders should read this opinion
-------
completely to understand the assumptions made, matters considered and
limitations of the review undertaken by Stifel, Nicolaus in providing its
opinion.
DISSENTERS' RIGHTS (PAGE 56)
You have the right under Missouri law to dissent from the merger and
obtain payment in cash of the fair value of your Allegiant Bancorp and/or
Southside common stock as of the day prior to your shareholder's meeting. To
exercise dissenters' rights, you must:
* if you are an Allegiant Bancorp shareholder, deliver a written
objection to Allegiant Bancorp prior to or at the Allegiant Bancorp
shareholders' meeting;
* if you are a Southside shareholder, deliver a written objection to
Southside prior to or at the Southside shareholders' meeting;
* not vote in favor of approving the merger agreement; and
* deliver to the merged company within 20 days after the merger a
written demand for payment of the fair value of your common stock,
which may or may not be more than what you would have received in
the merger.
We have attached a copy of Missouri's dissenters' rights statute to this
document as Annex D.
-------
ACCOUNTING TREATMENT (PAGE 59)
We intend to account for the merger under the purchase method of
accounting.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGE 60)
You generally will not recognize any gain or loss for U.S. federal
income tax purposes as a result of the conversion of your Allegiant Bancorp
or Southside common stock into shares of the merged company common stock.
However, Southside shareholders who receive cash in the conversion may have to
recognize income or gain. You should consult your own tax advisor for a full
understanding of the merger's tax consequences that are particular to you.
Southside will not be required to complete the merger unless it
receives a legal opinion that the merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code. The Internal Revenue Service may, however,
disagree with this opinion.
- 4 -
Both Allegiant Bancorp and Southside shareholders will also be required
to file certain information with their federal income tax returns and to
retain certain records with regard to the merger.
THE DISCUSSION OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE
IS FOR GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS THAT MAY APPLY TO A HOLDER
OF SOUTHSIDE COMMON STOCK. SHAREHOLDERS OF SOUTHSIDE ARE STRONGLY URGED TO
CONSULT THEIR TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
THEM OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
TAX REASONS FOR THE STRUCTURE OF THE MERGER (PAGES 32-37)
The form of the merger calls for Allegiant Bancorp to merge into
Southside, however, the merged company will be called Allegiant Bancorp,
Inc. and Allegiant Bancorp effectively will be the merged company. Allegiant
Bancorp proposed this form of merger to Southside to afford future
flexibility for a possible transaction in which First Banks, Inc.,
Southside's largest shareholder, could exchange stock in the merged company
to acquire certain of Southside's bank subsidiaries. The transaction
structure makes it possible, under certain circumstances, for that exchange
to be completed generally on a tax-free basis to First Banks and, possibly,
to the merged company. Allegiant believes that this structure makes it more
likely that First Banks will vote its shares of Southside common stock in
favor of the merger. Although before the parties entered into the merger
agreement Allegiant and First Banks discussed a possible exchange, the
discussions were terminated at the request of Southside, and there currently
is no agreement, arrangement, or understanding with respect to any
post-merger transaction with First Banks.
THE COMPANIES (PAGES 70 AND 72)
Allegiant Bancorp Inc.
2122 Kratky Road
St. Louis, Missouri 63114
(314) 692-8200
(314) 692-8500 (fax)
Allegiant Bancorp is a bank holding company organized under the laws of
Missouri and registered under the federal Bank Holding Company Act. Through
its bank subsidiary, Allegiant Bank, Allegiant Bancorp offers full-service
community banking and personal trust services to individuals, businesses and
municipalities in the St. Louis metropolitan area. Allegiant Bank's services
include commercial, real estate and installment loans, checking, savings and
time deposit accounts, personal trust and other fiduciary services and other
financial services such as securities brokerage, insurance and safe deposit
boxes.
As of March 31, 2001, Allegiant Bancorp reported, on a consolidated
basis, total assets of $1.1 billion, loans of $855.1 million, deposits
of $893.5 million and shareholders' equity of $80.6 million.
Southside Bancshares Corp.
3606 Gravois Avenue
St. Louis, Missouri 63101
(314) 776-7000
(314) 776-2332 (fax)
Southside Bancshares Corp. is a bank holding company organized under the
laws of Missouri and registered under the federal Bank Holding Company Act.
Southside operates through its subsidiary banks, South Side National Bank in
St. Louis, State Bank of Jefferson County, Bank of Ste. Genevieve and The Bank
of St. Charles County. Southside is primarily engaged in offering commercial,
real estate and installment lending, checking, savings and time deposit
accounts, personal trust and other fiduciary services and other financial
services such as securities brokerage, insurance and safe deposit boxes.
As of March 31, 2001, Southside reported, on a consolidated basis,
total assets of $772.7 million, loans of $474.3 million, deposits of $614.1
million and shareholders' equity of $72.1 million.
THE MEETINGS (PAGES 24 AND 26)
Allegiant Bancorp shareholders. The Allegiant Bancorp special meeting
will be held on , 2001 at m., local time, at Allegiant Bancorp's
headquarters, 2122 Kratky Road, St. Louis, Missouri 63114. At the Allegiant
Bancorp special meeting, Allegiant Bancorp's shareholders will be asked:
* to approve the merger agreement and the related transactions; and
* to act on other matters that may properly be submitted to a vote at
the Allegiant Bancorp special meeting.
Southside shareholders. The Southside annual meeting will be held on
, 2001 at m.,
- 5 -
local time, at Southside's Telegraph Road facility located at 4111 Telegraph
Road, St. Louis, Missouri 63129. At the Southside annual meeting, Southside's
shareholders will be asked:
* to elect four directors;
* to approve the merger agreement and the related transactions; and
* to act on other matters that may properly be submitted to a vote at
the Southside annual meeting.
RECORD DATES; VOTES REQUIRED (PAGES 25 AND 27)
Allegiant Bancorp shareholders. You can vote at the Allegiant Bancorp
special meeting if you owned Allegiant Bancorp common stock at the close of
business on , 2001. On that date, there were shares of Allegiant
Bancorp common stock outstanding and entitled to vote. You can cast one vote
for each share of Allegiant Bancorp common stock that you owned on that date.
Approval of the merger agreement and the related transactions requires the
approval of the holders of at least two-thirds of Allegiant Bancorp's
outstanding shares.
As of , 2001, Allegiant Bancorp directors and executive officers
held approximately 31.1% of the outstanding shares of Allegiant Bancorp common
stock entitled to vote at the Allegiant Bancorp special meeting. The
Allegiant Bancorp directors and executive officers have agreed to vote
their shares of Allegiant Bancorp common stock for approval of the merger
agreement. As a result, in order to approve the merger agreement, holders of
approximately 51.7% of the remaining outstanding shares of Allegiant Bancorp
common stock must vote in favor of approval of the merger agreement for the
merger agreement to be approved.
Southside shareholders. You can vote at the Southside annual meeting if
you owned Southside common stock at the close of business on , 2001.
On that date, Southside had shares of common stock outstanding and entitled
to vote. You can cast one vote for each share of Southside common stock you
owned on that date. In order to approve the merger agreement and the related
transactions, the holders of at least two-thirds of Southside's outstanding
shares must vote in favor of approval of the merger agreement.
As of , 2001, Southside's directors and executive
officers had sole voting power over approximately 19.6% of the outstanding
shares of Southside common stock entitled to vote at the Southside meeting. The
Southside directors and executive officers have agreed to vote those shares of
Southside common stock for approval of the merger agreement. As a result, in
order to approve the merger agreement, holders of approximately 59.0% of the
remaining outstanding shares of Southside common stock must vote in favor of
approving the merger agreement for the merger agreement to be approved.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 50)
Our obligations to complete the merger depend on a number of conditions
being met. These include:
* Allegiant Bancorp shareholders' approval of the merger;
* Southside shareholders' approval of the merger;
* approval of the merger by the necessary federal and state regulatory
authorities;
* the absence of any order, injunction, decree, law or regulation that
would prohibit the merger or make it illegal; and
* receipt by Southside of an opinion, subject to various limitations,
that, for U.S. federal income tax purposes, Southside shareholders
who receive their merger consideration in common stock of the merged
company will not recognize any gain or loss as a result of the merger,
except in connection with the receipt of cash instead of fractional
shares.
Where the law permits, either of us could choose to waive a condition
to our obligation to complete the merger even though that condition has not
been satisfied. We cannot be certain when, or if, the conditions to the
merger will be satisfied or waived or that the merger will be completed.
REGULATORY APPROVALS (PAGE 58)
We cannot complete the merger unless it is approved by the Board of
Governors of the Federal Reserve System. Once the Federal Reserve Board
approves the merger, we have to wait from 15 to 30 days before we can
complete it. During that time, the Department of Justice may challenge the
merger.
As of the date of this document, we have not yet received the required
approvals. While we do not know of any reason why we would not be able to
obtain the necessary approvals in a timely manner, we cannot be certain when
or if we will receive them.
- 6 -
TERMINATION OF THE MERGER AGREEMENT; EXPENSES (PAGE 52)
We can mutually agree at any time to terminate the merger agreement
without completing the merger, even if our respective shareholders have
approved it. Also, either of us may terminate the merger agreement in a
number of other situations, including:
* the final denial of a required regulatory approval;
* the failure of either party to obtain the required shareholder vote;
* an unremedied breach of the merger agreement by the other party, so
long as the party that is seeking to terminate the merger agreement
has not itself breached the merger agreement; and
* the failure to complete the merger by March 31, 2002.
In addition, Southside may terminate the merger agreement if
Southside's board of directors determines that it has a fiduciary obligation
to its shareholders to accept a tender offer or any written offer with respect
to a merger, share exchange, sale of a material portion of its assets or other
business combination proposal by a party other than Allegiant Bancorp.
Southside may also terminate the merger agreement if holders of 10% or more of
its outstanding shares provide the required notice of intent to exercise their
dissenters' rights and do not vote for the merger.
If the merger agreement is terminated under certain circumstances, a
party may be entitled to receive a termination fee from the other party
equal to the greater of either 5% of the merger consideration or $5 million.
WAIVER AND AMENDMENT (PAGE 54)
We may jointly amend the merger agreement, and each of us may waive our
right to require the other party to adhere to the terms and conditions of
the merger agreement. However, we may not do so after our shareholders
approve the merger if the amendment or waiver reduces or changes the
consideration that you will receive or adversely affects the tax
consequences of the merger consideration you will receive.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER THAT DIFFER FROM YOUR
INTERESTS (PAGE 29)
Some of the directors and officers of Southside have interests in the
merger that may differ from, or that may be in addition to, the interests of
other shareholders of Southside. These interests exist because of employment
or severance agreements that the officers entered into with Southside and
rights that Southside officers and directors have under Southside's benefit
plans. These employment and severance agreements provide the officers with
severance benefits if their employment is terminated following the merger,
and the merger causes the accelerated vesting of certain benefits under
the plans.
The members of each of Allegiant Bancorp's and Southside's board of
directors knew about these additional interests and considered them when
they agreed to the merger.
STOCK OPTIONS (PAGE 31)
Under the merger agreement, each stock option to buy Southside common
stock granted under Southside's stock option plans that is outstanding and
not yet exercised immediately before completion of the merger will become an
option to buy the merged company's common stock. The number of shares of
the merged company's common stock subject to each new stock option, as
well as the exercise price of that stock option, will be adjusted to reflect
the exchange ratio in the merger. Each stock option to buy Allegiant Bancorp
common stock under Allegiant Bancorp's stock option plans that is
outstanding and not yet exercised immediately before completing the merger
will become an option to buy the merged company's common stock under the
terms of and at the price set forth in the Allegiant Bancorp stock option.
MATERIAL DIFFERENCES IN THE RIGHTS OF ALLEGIANT BANCORP SHAREHOLDERS AND
SOUTHSIDE SHAREHOLDERS (PAGE 114)
The rights of Allegiant Bancorp shareholders are governed by Missouri
law and by Allegiant Bancorp's articles of incorporation and bylaws. The
rights of Southside shareholders are governed by Missouri law and by
Southside's articles of incorporation and bylaws. Upon completion of the
merger, the rights of the merged company's shareholders will be governed
by Missouri law and the articles of incorporation and bylaws of the
merged company, which will be based upon those of Allegiant Bancorp. We
have attached copies of the articles of incorporation and bylaws of the
merged company as Annexes E and F, respectively.
---------------
- 7 -
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Allegiant Bancorp common stock is traded on the Nasdaq National
Market under the symbol "ALLE." The closing sale per share price reported
for Allegiant Bancorp common stock on April 30, 2001, the last trading date
preceding the public announcement of the merger, was $10.45. Southside
common stock is traded on the Nasdaq Small Cap Market under the symbol
"SBCO." The closing per share bid price reported for Southside common stock
on April 30, 2001, the last date on which Southside common stock traded
preceding the public announcement of the merger, was $12.00.
The following table sets forth for the periods indicated the high
and low sales prices and bid prices per share, respectively, of Allegiant
Bancorp and Southside common stock as reported on the Nasdaq National Market
and Nasdaq Small Cap Market, respectively, along with the quarterly cash
dividends per share declared. The per share prices do not include
adjustments for markups, markdowns or commissions.
ALLEGIANT BANCORP SOUTHSIDE
--------------------------------------- ---------------------------------------
SALES PRICE BID PRICE
---------------------- CASH DIVIDEND ----------------------- CASH DIVIDEND
HIGH LOW DECLARED HIGH LOW DECLARED
---- --- -------- ---- --- --------
1999
----
First Quarter......... $ 12.875 $ 8.958 $ 0.050 $ 13.000 $ 10.750 $0.080
Second Quarter........ 12.000 8.500 0.050 11.630 10.000 0.080
Third Quarter......... 11.500 9.000 0.050 11.310 9.000 0.080
Fourth Quarter........ 10.000 8.500 0.050 9.750 8.310 0.080
2000
----
First Quarter......... $ 12.000 $ 6.750 $ 0.050 $ 10.000 $ 7.500 $0.080
Second Quarter........ 9.938 8.250 0.055 9.250 6.500 0.080
Third Quarter......... 10.500 8.625 0.055 10.000 7.375 0.080
Fourth Quarter........ 9.895 8.000 0.055 8.500 6.875 0.080
2001
----
First Quarter......... $ 11.313 $ 8.875 $ 0.055 $ 11.500 $ 7.375 $0.080
Second Quarter........ 12.730 9.600 0.120 15.000 10.870 0.080
Third Quarter
(through July 17,
2001)............. 13.050 12.370 15.000 14.750
The market value of the aggregate consideration that Southside
shareholders will receive in the merger is approximately $120.0 million
based on 8,415,528 shares of Southside common stock outstanding and
Allegiant Bancorp's closing stock price of $10.45 on April 30, 2001, the last
trading date preceding public announcement of the transaction. The closing
prices of Allegiant Bancorp and Southside common stock on April 30, 2001 and
, 2001, and the implied value to be received in the merger by Southside
shareholders who receive merged company common stock for each share of
Southside common stock on these dates, were as follows:
VALUE OF MERGER
CONSIDERATION PER SHARE
OF SOUTHSIDE COMMON STOCK
TO SOUTHSIDE SHAREHOLDERS
ALLEGIANT BANCORP SOUTHSIDE WHO RECEIVE
COMMON STOCK COMMON STOCK COMMON STOCK
------------ ------------ ------------
April 30, 2001................... $10.45 $12.00 $14.53
, 2001..............
Of course, the market price of Allegiant Bancorp and Southside
common stock will fluctuate prior to the merger, while the exchange ratio is
fixed. You should obtain current stock price quotations for Allegiant
Bancorp common stock and Southside common stock. Southside shareholders who
receive cash will receive a fixed amount of $14.00 per share.
In connection with the merger, Allegiant Bancorp intends to set an
initial regular annual dividend rate on the merged company's common stock
of $0.24 per share, payable quarterly. The timing and amount of future
dividends paid by the merged company are subject to determination by the
merged company's board of directors in its discretion and will depend upon
earnings, cash requirements and the financial condition of the merged
company and its subsidiaries, applicable government regulations and other
factors deemed relevant by the merged company's board of directors.
The ability of the merged company to pay dividends will depend on the
ability of its affiliate banks to pay dividends to the merged company.
- 8 -
COMPARATIVE UNAUDITED PER SHARE DATA
The following table shows historical information about our
companies' earnings per share, dividends per share and book value per share,
and similar information reflecting the merger and related financing,
which we refer to as "pro forma" information. In presenting the comparative
pro forma information for the time periods shown, we assumed that we were
merged and the related financing completed throughout those periods.
We present this information to reflect the fact that in the merger
50% of Southside's common stock outstanding will be converted into 1.39 shares
of common stock of the merged company and the remaining 50% will be converted
into $14.00 cash.
We expect that we will incur merger and integration charges as a
result of combining our companies. We also anticipate that the merger will
provide the merged company with financial benefits that include reduced
operating expenses. Also, we currently expect that the merged company will
pay a quarterly cash dividend at an annual rate of $0.24 per share after
completing the merger, subject to a determination of its board of directors
in its discretion to do so. This intended change in dividend policy is not
reflected in the pro forma dividend information in the table. The pro forma
information, while helpful in illustrating the financial characteristics of
the merged company under one set of assumptions, does not reflect the
anticipated financial expenses and benefits and, accordingly, does not attempt
to predict or suggest future results. It also does not necessarily reflect
what the historical results of the merged company would have been had our
companies been merged during the periods presented.
The information in the following table is based on, and you should
read it together with, the historical financial information and the related
notes contained or incorporated by reference in this joint proxy
statement/prospectus.
ALLEGIANT BANCORP/
SOUTHSIDE SOUTHSIDE
ALLEGIANT BANCORP SOUTHSIDE PRO FORMA PRO FORMA
REPORTED REPORTED COMBINED EQUIVALENT
-------- -------- -------- ----------
BOOK VALUE PER SHARE
March 31, 2001...................... $ 9.11 $ 8.71 $ 9.30 $ 12.93
December 31, 2000................... 8.75 8.42 9.10 12.65
CASH DIVIDENDS DECLARED PER SHARE
Three months ended March 31, 2001... $ 0.055 $ 0.08 $ 0.055 $ 0.076
Year ended December 31, 2000........ 0.22 0.32 0.22 0.31
BASIC EARNINGS PER SHARE
Three months ended March 31, 2001... $ 0.29 $ 0.19 $ 0.18 $ 0.25
Year ended December 31, 2000........ 1.09 0.78 0.46 0.64
DILUTED EARNINGS PER SHARE
Three months ended March 31, 2001... $ 0.29 $ 0.18 $ 0.18 $ 0.25
Year ended December 31, 2000........ 1.08 0.77 0.46 0.64
Southside pro forma equivalent amounts were determined by multiplying
the corresponding pro forma amounts by 1.39.
- 9 -
SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables set forth certain summary historical
consolidated financial information for each of our companies. Allegiant
Bancorp's and Southside's balance sheet data and income statement data as of
and for the five years in the period ended December 31, 2000 are taken from
each of our respective audited consolidated financial statements. Allegiant
Bancorp's and Southside's balance sheet data and income statement data as of
and for the three months ended March 31, 2001 and 2000 are taken from our
respective unaudited consolidated financial statements. This data includes
all adjustments which are, in the opinion of our respective managements,
necessary to present a fair statement of these periods and of a normal
recurring nature. Results for the three months ended March 31, 2001 do not
necessarily indicate results for the entire year. You should read this
financial data in conjunction with Southside's consolidated financial
statements, and the related notes, included in this joint proxy statement/
prospectus and Allegiant Bancorp's financial statements and the related notes
incorporated herein by reference, and in conjunction with the unaudited pro
forma combined consolidated financial information, including the related notes,
appearing elsewhere in this joint proxy statement/prospectus.
- 10 -
ALLEGIANT BANCORP, INC.
SUMMARY CONSOLIDATED FINANCIAL DATA
AS OF OR FOR THE THREE AS OF OR FOR THE
MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- --------------------------------------------
2001 2000 2000 1999 1998
---- ---- ---- ---- ----
EARNINGS (IN THOUSANDS)
Interest income................................ $ 22,480 $ 15,569 $ 71,973 $ 52,112 $ 49,218
Interest expense............................... 13,460 8,401 40,521 26,601 27,267
Net interest income............................ 9,020 7,168 31,452 25,511 21,951
Provision for loan losses...................... 850 715 3,500 2,546 2,420
Other income................................... 2,757 1,249 6,462 4,843 9,324
Other expense.................................. 6,533 4,931 22,582 18,762 21,295
Income taxes................................... 1,833 1,136 4,797 3,644 3,026
Net income..................................... 2,561 1,635 7,035 5,402 4,534
BALANCE SHEET (IN THOUSANDS)
Total assets................................... 1,143,152 783,933 1,135,724 728,492 596,274
Earning assets................................. 1,048,788 717,737 1,042,018 677,600 547,437
Investment securities.......................... 149,018 60,854 134,296 60,797 54,780
Loans, net of unearned income.................. 855,145 665,822 813,971 615,191 495,668
Deposits....................................... 893,506 604,380 858,084 548,466 450,766
Indebtedness:
Short-term borrowings....................... 25,660 17,961 32,762 18,861 14,542
Federal Home Loan Bank advances............. 118,473 79,700 142,189 80,210 66,125
Other borrowings............................ 17,250 29,900 17,250 12,650 13,150
Shareholders' equity........................... 80,584 47,787 77,806 47,991 48,104
Allowance for loan losses...................... 12,020 9,007 11,433 8,315 6,442
SELECTED RATIOS
Performance Ratios:
Return on average assets (1)................ 0.91% 0.87% 0.83% 0.83% 0.73%
Return on average equity (1)................ 12.82 13.55 13.21 10.60 10.14
Net interest rate margin (1)................ 3.50 4.08 3.99 4.17 3.82
Efficiency ratio............................ 55.47 58.54 59.56 61.81 68.07
Average assets per employee (in thousands).. $ 3,862 $ 3,663 $ 3,665 $ 2,904 $ 2,612
Asset Quality Ratios:
Nonperforming loans to total loans.......... 0.88% 0.15% 0.38% 0.10% 0.36%
Nonperforming assets to total assets........ 0.69 0.29 0.29 0.14 0.30
Allowance for loan losses to total loans.... 1.40 1.35 1.40 1.35 1.30
Allowance for loan losses to nonperforming
loans..................................... 159.46 876.17 366.09 1,324.20 362.32
Net charge-offs to average loans (1)........ 0.12 0.04 0.19 0.12 0.25
Allegiant Bancorp Capital Ratios:
Total risk-based capital.................... 10.97 9.92 10.79 10.23 8.68
Tier 1 risk-based capital................... 9.71 8.50 9.53 8.80 7.42
Tier 1 leverage capital..................... 7.66 7.22 8.71 7.47 5.83
Allegiant Bank Capital Ratios:
Total risk-based capital.................... 11.92 11.46 11.65 11.52 10.93
Tier 1 risk-based capital................... 10.67 10.20 10.40 10.27 9.68
Tier 1 leverage capital..................... 8.39 8.67 9.50 8.89 7.61
Ratio of Earnings to Fixed Charges:
Including deposit interest.................. 1.31 1.31 1.29 1.34 1.28
Excluding deposit interest.................. 2.33 2.17 2.27 2.45 2.38
AS OF OR FOR THE
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
---- ----
EARNINGS (IN THOUSANDS)
Interest income................................ $ 37,765 $ 25,056
Interest expense............................... 21,466 14,999
Net interest income............................ 16,299 10,057
Provision for loan losses...................... 2,397 1,448
Other income................................... 3,298 1,393
Other expense.................................. 13,069 7,019
Income taxes................................... 1,716 1,175
Net income..................................... 2,415 1,808
BALANCE SHEET (IN THOUSANDS)
Total assets................................... 608,237 377,564
Earning assets................................. 558,138 360,161
Investment securities.......................... 76,869 60,559
Loans, net of unearned income.................. 484,863 291,926
Deposits....................................... 484,641 308,670
Indebtedness:
Short-term borrowings....................... 15,729 11,637
Federal Home Loan Bank advances............. 47,475 31,500
Other borrowings............................ 13,650 7,663
Shareholders' equity........................... 42,071 16,386
Allowance for loan losses...................... 5,193 3,100
SELECTED RATIOS
Performance Ratios:
Return on average assets (1)................ 0.52% 0.59%
Return on average equity (1)................ 9.55 12.17
Net interest rate margin (1)................ 3.71 3.39
Efficiency ratio............................ 66.69 61.30
Average assets per employee (in thousands).. $ 2,216 $ 2,835
Asset Quality Ratios:
Nonperforming loans to total loans.......... 0.28% 0.24%
Nonperforming assets to total assets........ 0.28 0.18
Allowance for loan losses to total loans.... 1.07 1.06
Allowance for loan losses to nonperforming
loans..................................... 377.12 447.98
Net charge-offs to average loans (1)........ 0.19 0.21
Allegiant Bancorp Capital Ratios:
Total risk-based capital.................... 8.14 8.55
Tier 1 risk-based capital................... 6.39 6.10
Tier 1 leverage capital..................... 6.15 4.38
Allegiant Bank Capital Ratios:
Total risk-based capital.................... 9.35 10.06
Tier 1 risk-based capital................... 8.27 8.87
Tier 1 leverage capital..................... 7.76 6.37
Ratio of Earnings to Fixed Charges:
Including deposit interest.................. 1.19 1.20
Excluding deposit interest.................. 1.96 1.99
- 11 -
AS OF OR FOR THE THREE AS OF OR FOR THE
MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- --------------------------------------------
2001 2000 2000 1999 1998
---- ---- ---- ---- ----
OTHER DATA
Number of St. Louis area banking facilities at
period end................................... 23 15 23 15 13
Goodwill amortization (in thousands)........... $ 237 $ 237 $ 949 $ 980 $ 910
PER SHARE DATA
Basic earnings per share (2)................... $ 0.29 $ 0.27 $ 1.09 $ 0.84 $ 0.72
Diluted earnings per share (2)................. 0.29 0.26 1.08 0.83 0.68
Dividends declared............................. 0.055 0.05 0.22 0.20 0.12
Book value at period end....................... 9.11 7.87 8.75 7.73 7.36
AS OF OR FOR THE
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
---- ----
OTHER DATA
Number of St. Louis area banking facilities at
period end................................... 11 6
Goodwill amortization (in thousands)........... $ 358 $ 67
PER SHARE DATA
Basic earnings per share (2)................... $ 0.54 $ 0.55
Diluted earnings per share (2)................. 0.49 0.48
Dividends declared............................. 0.08 0.06
Book value at period end....................... 6.88 4.80
----------------------
(1) On an annualized basis.
(2) Based on weighted-average common shares outstanding.
All share and per share amounts included above have been restated
to reflect: (1) a 10% stock dividend paid in January 1996; (2) a 10% stock
dividend paid in January 1997; (3) a five-for-four stock split effected in
January 1998; and (4) a six-for-five stock split effected in January 1999.
For purposes of the above table: (1) short-term borrowings consist
of federal funds purchased, repurchase agreements and amounts due in 12
months or less on Allegiant Bancorp's term debt; and (2) other borrowings
consist of amounts due in more than 12 months on Allegiant Bancorp's term
debt and Allegiant Bancorp subordinated debentures and convertible
subordinated debentures which were outstanding during certain periods
presented.
The efficiency ratio is the quotient of other expense over the sum
of net interest income and other income.
For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of earnings before income taxes plus interest and one-half
of rental expense. Fixed charges, excluding interest on deposits, consist of
interest on indebtedness and one-half of rental expense (which is deemed
representative of the interest factor). Fixed charges, including interest on
deposits, consist of the foregoing items plus interest on deposits.
- 12 -
SOUTHSIDE BANCSHARES CORP.
SUMMARY CONSOLIDATED FINANCIAL DATA
AS OF OR FOR THE THREE AS OF OR FOR THE
MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ --------------------------------------------
2001 2000 2000 1999 1998
---- ---- ---- ---- ----
EARNINGS (IN THOUSANDS)
Interest income................................ $ 13,081 $ 11,760 $ 49,827 $ 43,168 $ 42,227
Interest expense............................... 7,247 5,870 26,482 20,263 19,857
Net interest income............................ 5,834 5,890 23,345 22,905 22,370
Provision for loan losses...................... 159 81 361 45 62
Other income................................... 1,162 1,042 4,404 3,558 3,331
Other expense.................................. 4,675 4,506 18,543 17,509 15,774
Income taxes................................... 609 671 2,358 2,706 3,055
Net income..................................... 1,553 1,674 6,487 6,203 6,810
BALANCE SHEET (IN THOUSANDS)
Total assets .................................. 772,658 690,027 737,427 678,152 610,293
Earning assets................................. 713,129 627,289 674,234 615,262 568,819
Investment securities.......................... 201,205 214,587 194,445 220,225 181,931
Loans, net of unearned income.................. 474,330 405,321 463,406 392,437 356,988
Deposits....................................... 614,087 528,446 574,194 515,810 523,289
Indebtedness:
Short-term borrowings....................... 6,036 8,605 13,702 8,603 2,949
Federal Home Loan Bank advances............. 70,906 81,878 70,947 83,921 14,287
Other borrowings............................ 2,691 988 2,888 1,186 --
Shareholders' equity........................... 72,122 65,162 69,401 64,408 64,964
Allowance for loan losses...................... 5,318 4,825 5,179 5,830 6,192
SELECTED RATIOS
Performance Ratios:
Return on average assets (1)................ 0.83% 0.98% 0.92% 0.97% 1.15%
Return on average equity (1)................ 8.81 10.34 9.76 9.54 11.12
Net interest rate margin (1)................ 3.51 3.94 3.76 4.05 4.15
Efficiency ratio............................ 66.82 65.00 66.82 66.16 61.38
Asset Quality Ratios:
Nonperforming loans to total loans.......... 1.00 1.07 0.98 1.76 1.27
Nonperforming loans to total assets......... 0.61 0.63 0.62 1.02 0.75
Allowance for loan losses to total loans.... 1.12 1.19 1.12 1.49 1.73
Allowance for loan losses to total
nonperforming loans....................... 112.08 110.95 114.10 84.30 136.08
Net charge-offs to average loans (1)........ -- 0.27 0.23 0.11 0.07
Southside Capital Ratios:
Total risk-based capital.................... 14.00 15.97 14.72 16.12 17.41
Tier 1 risk-based capital................... 12.98 14.87 13.66 14.87 16.15
Tier 1 leverage capital..................... 9.05 9.61 9.15 9.81 10.01
Ratio of Earnings to Fixed Charges:
Including deposit Interest.................. 1.14 1.17 1.15 1.17 1.19
Excluding deposit Interest.................. 1.92 1.76 1.80 1.80 1.91
AS OF OR FOR THE
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
---- ----
EARNINGS (IN THOUSANDS)
Interest income................................ $ 39,320 $ 37,868
Interest expense............................... 18,243 17,526
Net interest income............................ 21,077 20,342
Provision for loan losses...................... 60 60
Other income................................... 2,832 2,670
Other expense.................................. 14,851 14,241
Income taxes................................... 2,696 2,553
Net income..................................... 6,302 6,158
BALANCE SHEET (IN THOUSANDS)
Total assets .................................. 549,864 527,907
Earning assets................................. 516,776 495,257
Investment securities.......................... 173,139 187,294
Loans, net of unearned income.................. 326,437 294,463
Deposits....................................... 483,363 467,276
Indebtedness:
Short-term borrowings....................... 5,333 1,623
Federal Home Loan Bank advances............. -- --
Other borrowings............................ -- 1,779
Shareholders' equity........................... 56,653 52,841
Allowance for loan losses...................... 6,120 5,602
SELECTED RATIOS
Performance Ratios:
Return on average assets (1)................ 1.18% 1.20%
Return on average equity (1)................ 11.44 12.27
Net interest rate margin (1)................ 4.34 4.42
Efficiency ratio............................ 62.11 61.89
Asset Quality Ratios:
Nonperforming loans to total loans.......... 1.07 0.40
Nonperforming loans to total assets......... 0.64 0.22
Allowance for loan losses to total loans.... 1.87 1.90
Allowance for loan losses to total
nonperforming loans....................... 175.16 473.54
Net charge-offs to average loans (1)........ -- 0.03
Southside Capital Ratios:
Total risk-based capital.................... 17.38 17.88
Tier 1 risk-based capital................... 16.12 16.62
Tier 1 leverage capital..................... 10.34 10.12
Ratio of Earnings to Fixed Charges:
Including deposit Interest.................. 1.18 1.18
Excluding deposit Interest.................. 1.85 1.83
- 13 -
AS OF OR FOR THE THREE AS OF OR FOR THE
MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------
2001 2000 2000 1999 1998
---- ---- ---- ---- ----
PER SHARE DATA
Basic earnings per share (2)................... $ 0.19 $ 0.20 $ 0.78 $ 0.74 $ 0.82
Diluted earnings per share (2)................. 0.18 0.20 0.77 0.72 0.80
Dividends declared............................. 0.08 0.08 0.32 0.32 0.29
Book value at period end....................... 8.71 7.74 8.42 7.66 7.70
AS OF OR FOR THE
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
---- ----
PER SHARE DATA
Basic earnings per share (2)................... $ 0.77 $ 0.76
Diluted earnings per share (2)................. 0.75 0.75
Dividends declared............................. 0.23 0.17
Book value at period end....................... 6.97 6.43
---------------------
(1) On an annualized basis.
(2) Based on the weighted average common shares outstanding. Excludes shares
held by employee stock ownership plan which have not been allocated
to participants' accounts.
All share and per share amounts included above have been restated to
reflect: (1) a ten-for-one stock split effected in February 1996; and
(2) a three-for-one stock split effected in November 1998.
For purposes of the above table, short-term borrowings consist
of federal funds purchased and repurchase agreements.
The efficiency ratio is the quotient of other expense over the sum of
net interest income and other income.
For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of earnings before income taxes plus interest and one-half
of rental expense. Fixed charges, excluding interest on deposits, consist of
interest on indebtedness and one-half of rental expense (which is deemed
representative of the interest factor). Fixed charges, including interest on
deposits, consist of the foregoing items plus interest on deposits.
- 14 -
SUMMARY PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain summary unaudited pro forma
combined consolidated financial information for our companies giving effect
to the merger and the related financing, including issuance of trust
preferred securities and additional bank borrowings. The income statement
information presented gives effect to the merger and the related financing
as if each occurred on the first day of each period presented. The balance
sheet information presented gives effect to the merger and the related
financing as if each occurred on March 31, 2001. The following pro forma
historical information does not reflect any cost savings which we expect to
achieve subsequent to the merger.
You should read this pro forma financial information in conjunction
with each of Allegiant Bancorp's and Southside's consolidated financial
statements, and the related notes, included or incorporated by reference in
this joint proxy statement/prospectus, and in conjunction with the unaudited
pro forma combined consolidated financial information, including the related
notes, appearing elsewhere in this joint proxy statement/prospectus. The
unaudited pro forma combined consolidated financial information may not be
indicative of the results of operations that actually would have occurred if
the merger and the related financing had occurred on the dates assumed above
or of the results of operations that may be achieved in the future.
PRO FORMA PRO FORMA
AS OF OR FOR THE AS OF OR FOR THE
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 2001 DECEMBER 31, 2000
------------------ -----------------
EARNINGS (IN THOUSANDS)
Interest income............................................. $ 35,361 $ 140,163
Interest expense............................................ 22,268 86,626
Net interest income......................................... 13,093 53,537
Provision for loan losses................................... 1,009 4,492
Other income................................................ 3,919 12,692
Other expense............................................... 11,957 53,424
Income taxes................................................ 1,722 3,420
Net income.................................................. 2,324 4,893
BALANCE SHEET (IN THOUSANDS)
Total assets................................................ $1,967,200
Earning assets.............................................. 1,778,937
Investment securities....................................... 350,223
Net loans................................................... 1,333,475
Deposits.................................................... 1,502,593
Indebtedness:
Short-term borrowings.................................... 21,738
Federal Home Loan Bank Advances.......................... 184,378
Other borrowings......................................... 94,900
Shareholders' equity........................................ 133,496
Allowance for loan losses................................... 17,338
ASSET QUALITY RATIOS
Nonperforming loans to total loans.......................... 0.92%
Nonperforming assets to total assets........................ 0.74
Allowance for loan losses to nonperforming loans............ 141.15
Allowance for loan losses to total loans.................... 1.30
Net charge-offs to average loans (1)........................ 0.08
PER SHARE DATA
Basic earnings per share (2)................................ $ 0.18
Diluted earnings per share (2).............................. 0.18
Dividends declared.......................................... 0.055
Book value at period end.................................... 9.30
------------
(1) On an annualized basis.
(2) Based on weighted-average common shares outstanding. Data does not
reflect any cost savings which we expect to achieve subsequent to the
merger.
- 15 -
RISK FACTORS
You should carefully consider the following risk factors in
determining whether to vote to approve the merger.
RISK FACTORS RELATING TO THE MERGED COMPANY AND ITS INDUSTRY
THE MERGED COMPANY'S ALLOWANCE FOR LOAN LOSSES MAY NOT BE ADEQUATE TO
COVER ACTUAL LOAN LOSSES.
The merged company's loan customers may not repay their loans
according to their terms, and the customers' collateral securing the payment
of their loans may be insufficient to assure repayment. Credit losses are
inherent in the lending business and could harm the merged company's
operating results.
Each of our managements make various assumptions and judgments
about the collectibility of our respective loan portfolios and provide
allowances for potential losses based on a number of factors. If the
assumptions are wrong, the allowance for loan losses may not be sufficient to
cover the merged company's loan losses. The merged company may have to
increase the allowance in the future. Additions to the merged company's
allowance for loan losses would decrease its net income.
THE MERGED COMPANY'S EXPOSURE TO CREDIT RISK IS INCREASED BY ITS
COMMERCIAL REAL ESTATE, CONSTRUCTION AND BUSINESS LENDING.
Commercial real estate, commercial business and construction lending
generally involve a higher degree of credit risk than single-family
residential lending. These loans involve larger loan balances to a single
borrower or groups of related borrowers. These loans are also more
susceptible to a risk of loss during a downturn in the business cycle. The
underwriting, review and monitoring that will be performed by the merged
company's officers and directors cannot eliminate all of the risks related to
these loans.
THE MERGED COMPANY'S COMMERCIAL REAL ESTATE LOANS WILL GENERALLY
HAVE HIGHER PRINCIPAL AMOUNTS AND MAY HAVE BALLOON PAYMENTS.
Commercial real estate loans involve greater risk because
they generally involve higher principal amounts and are dependent, in
large part, on sufficient income from the property securing the loan
to cover operating expenses and loan payments. In addition, many
commercial real estate loans are not fully amortized over the loan
period, but have balloon payments due at maturity. A borrower's ability
to make a balloon payment typically will depend on being able to either
refinance the loan or timely sell the underlying property. Because
these loans depend on the successful operation, sale and refinancing
of property, they may be affected to a greater extent than residential
loans by adverse conditions in real estate markets or the economy. As
of March 31, 2001, Allegiant Bancorp had $311.8 million and Southside
had $170.8 million in commercial real estate loans, including multi-
family residential loans.
THE MERGED COMPANY'S CONSTRUCTION LOANS WILL BE BASED UPON
ESTIMATES OF CONSTRUCTION COSTS AND PROPERTY VALUES, AND THESE
ESTIMATES MAY BE INACCURATE.
Risk of loss on a construction loan depends largely upon
whether the merged company properly estimates construction costs and
a property's value at completion of construction. Construction loans
often require disbursement of substantial funds with repayment
dependent in part on the success of the ultimate project and the
borrower's ability to sell or lease the property or refinance the
indebtedness. During the construction phase, a number of factors can
result in delays and cost overruns. If the estimate of value is
inaccurate, the value of the property securing the merged company's
loans may be insufficient to ensure full repayment when completed
through sale, a permanent loan or seizure of collateral. As of
March 31, 2001, Allegiant Bancorp had $129.8 million and Southside had
$28.1 million in construction loans.
- 16 -
BUSINESS BORROWERS' ABILITY TO REPAY THE MERGED COMPANY'S LOANS WILL
SUBSTANTIALLY DEPEND UPON THEIR COMMERCIAL SUCCESS, AND THE VALUE OF
THEIR COLLATERAL MAY BE DIFFICULT TO APPRAISE AND MAY CHANGE OVER TIME.
Unlike residential mortgage loans that are based on the
borrower's ability to repay the loan from the borrower's income and
are secured by real property with a value that is usually readily
ascertainable, commercial business loans are typically based on the
borrower's ability to repay the loan from the cash flow of the
business. These loans involve greater risk because the availability
of funds to repay the loan depends substantially on the success of
the business itself. In addition, the collateral securing the
loans may depreciate over time, be difficult to appraise and
fluctuate in value based on the success of the business. As of
March 31, 2001, Allegiant Bancorp had $178.3 million and Southside
had $80.3 million in commercial business loans.
CHANGES IN THE LOCAL ECONOMIC CONDITIONS COULD ADVERSELY AFFECT THE MERGED
COMPANY'S LOAN PORTFOLIO.
The merged company's success will depend to a great extent upon
the general economic conditions of the St. Louis metropolitan area. Unlike
larger banks that are more geographically diversified, the merged company
will provide banking and financial services to customers primarily in the
St. Louis metropolitan area. The merged company's commercial, real estate
and construction loans, the ability of the borrowers to repay these loans
and the value of the collateral securing these loans will be impacted by
local economic conditions. Favorable economic conditions may not exist in
the merged company's market.
THE MERGED COMPANY MAY EXPERIENCE DIFFICULTIES IN MANAGING ITS GROWTH.
As part of its overall growth strategy following the merger, the
merged company may decide to acquire banks and related businesses which
its board of directors believes provide a strategic fit with its business.
To the extent that the merged company does grow, it may not be able to
adequately and profitably manage its growth. In addition, the merged
company may not obtain regulatory approval for future acquisitions proposed
to be undertaken in the future. The merged company will account for the
proposed merger and possible future acquisitions under the purchase method
of accounting which could adversely affect future results of operations.
THE MERGED COMPANY AND ITS SHAREHOLDERS WILL BE SUBJECTED TO SPECIAL
RISKS IF IT EFFECTS FUTURE ACQUISITIONS.
Acquiring other banks and businesses will involve risks commonly
associated with acquisitions, including:
* potential exposure to liabilities of any banks or other
businesses acquired by the merged company;
* difficulty and expense of integrating the operations and personnel
of any banks or other businesses acquired by the merged company;
* possible increases in leverage resulting from borrowings needed
to finance an acquisition or augment regulatory capital;
* potential disruption to the merged company's business;
* potential diversion of the merged company's management's time
and attention;
* impairment of relationships with and the possible loss of
key employees and customers of any banks or other businesses
acquired by the merged company; and
* incurrence of expense if the merged company accounts for an
acquisition as a purchase and dilution to its shareholders
if it uses its common stock as consideration for the acquisition.
- 17 -
IT MAY BE DIFFICULT FOR THE MERGED COMPANY TO MAINTAIN ALLEGIANT BANCORP'S
HISTORICAL GROWTH RATE.
Allegiant Bancorp completed various acquisitions and opened
additional branches in the past few years that significantly enhanced its
rate of growth. The merged company may not continue to sustain this rate
of growth or grow at all. Competition for suitable acquisition candidates is
intense. The merged company may target acquisition candidates that a
variety of larger financial institutions with substantially greater
resources than it also may be interested in acquiring, which may make it
more difficult or expensive for the merged company to acquire any
candidate.
THE LOSS OF CERTAIN KEY PERSONNEL COULD ADVERSELY AFFECT THE MERGED
COMPANY'S OPERATIONS.
The merged company's success will depend in large part on the
retention of a limited number of key management, lending and other banking
personnel. The merged company will likely undergo a difficult transition
period if it loses the services of any of these individuals. In recognition
of this risk, Allegiant Bancorp owns and is the beneficiary of an insurance
policy on the life of its President and Chief Executive Officer providing
death benefits of $2.0 million. The merged company will not be the
beneficiary of any insurance policy on the life of any other key employee
and Allegiant Bancorp does not believe that the proceeds from the insurance
policy on its President and Chief Executive Officer would fully compensate
it for the loss of his services in the event of his death.
The merged company's success also depends on the experience of
its banking facilities' managers and lending officers and on their
relationships with the customers and communities they serve. The loss of
these key persons could negatively impact the affected banking operations.
The merged company may not be able to retain its current key personnel or
attract additional qualified key persons as needed.
CHANGES IN INTEREST RATES MAY REDUCE THE MERGED COMPANY'S NET INTEREST INCOME.
Like other financial institutions, net interest income will affect
the merged company's results of operations. Net interest income is the
difference between interest earned on loans and investments and interest
expense incurred on deposits and other borrowings. The merged company's net
interest income will be impacted by changes in market rates of interest, the
interest rate sensitivity of its assets and liabilities, prepayments on its
loans and investments and limits on increases in the rates of interest
charged on its residential real estate loans.
CHANGES IN MARKET RATES OF INTEREST WILL BE BEYOND THE MERGED COMPANY'S
CONTROL.
The merged company will not be able to predict or control changes
in market rates of interest. Market rates of interest are affected by regional
and local economic conditions, as well as monetary policies of the Board of
Governors of the Federal Reserve. The following factors also may affect market
interest rates:
* inflation;
* slow or stagnant economic growth or recession;
* unemployment;
* money supply;
* international disorders;
* instability in domestic and foreign financial markets; and
* other factors beyond the merged company's control.
Market rates of interest will impact the amounts earned on the
merged company's assets such as loans and securities and the amounts paid on
its liabilities such as deposits and borrowings.
- 18 -
THE MERGED COMPANY'S NET INTEREST INCOME WILL BE AFFECTED BY THE INTEREST
RATE SENSITIVITY OF ITS ASSETS AND LIABILITIES.
Certain assets and liabilities customarily held by financial
institutions may react in different degrees to changes in market interest
rates. In addition, interest rates on some types of assets and liabilities
may fluctuate prior to changes in broader market interest rates, while rates
on other types may lag behind. Allegiant Bancorp and Southside continually
take measures intended to manage the risks from changes in market interest
rates, and management will continue to do so for the merged company.
Allegiant Bancorp's and Southside's positions are slightly asset-sensitive
and, therefore, in a declining interest rate environment, their net interest
income will decrease because their assets will reprice faster than their
liabilities.
INSIDERS WILL EFFECTIVELY CONTROL THE MERGED COMPANY'S FUTURE OPERATIONS
AS A RESULT OF THE CONCENTRATION OF CONTROL OF ITS COMMON STOCK.
Allegiant Bancorp's executive officers and directors currently
beneficially own approximately 32% of its outstanding common stock and, upon
completion of the merger, will own approximately 20% of the merged
company's outstanding common stock. As a result, these insiders will
effectively control the election of the merged company's board of
directors and thus its direction and future operations, and the merged
company's other shareholders may lack an effective vote with respect to
these matters.
WE CANNOT PREDICT HOW CHANGES IN TECHNOLOGY WILL IMPACT THE MERGED
COMPANY'S BUSINESS.
The financial services industry, including the banking sector, is
increasingly affected by advances in technology, including developments in:
* telecommunications;
* data processing;
* automation;
* Internet banking;
* telebanking; and
* debit cards and so-called "smart cards."
The merged company's ability to compete successfully in the
future will depend on whether it can anticipate and respond to technological
changes. To develop these and other new technologies, the merged company
will likely make additional capital investments. Although Allegiant Bancorp
continually invests in new technology and Allegiant Bancorp's management
will continue to do so for the merged company, the merged company may
not have sufficient resources or access to the necessary technology to
remain competitive in the future.
THE BANKING BUSINESS IS HIGHLY COMPETITIVE.
The merged company will operate in a competitive environment. In
the St. Louis metropolitan area, other commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds, insurance
companies, brokerage and investment banking firms and other financial
intermediaries offer similar services. Many of these competitors have
substantially greater resources and lending limits and may offer certain
services that the merged company will not provide. In addition, the
extensive regulations that will govern the merged company and its banks
may not apply to some of our non-bank competitors. The merged company's
profitability will depend upon the ability of its banks to compete in their
market area.
- 19 -
THE MERGED COMPANY WILL BE SUBJECT TO EXTENSIVE AND CONSTANTLY CHANGING
REGULATION.
The banking industry is heavily regulated under both federal and
state law. These regulations are primarily intended to protect depositors
and the Federal Deposit Insurance Corporation, not creditors or
shareholders. The merged company, and each of its non-bank subsidiaries,
will be subject to the supervision of the Federal Reserve Board, in addition
to other regulatory organizations. Regulations affecting banks and financial
services companies undergo continuous change, and the ultimate effect of
such changes cannot be predicted. Federal and state governments may modify
regulations and laws at any time, and may enact new legislation. These
modifications or new laws may harm the merged company.
RISK FACTORS RELATING TO THE MERGER
ALLEGIANT BANCORP'S PROPOSED ACQUISITION OF SOUTHSIDE IS SUBJECT TO A NUMBER
OF CONDITIONS, MANY OF WHICH ARE BEYOND EITHER COMPANY'S CONTROL.
The completion of the merger depends on a number of conditions being
satisfied. These conditions include the following:
* approval by Allegiant Bancorp's shareholders of the merger
agreement and the related transactions;
* Southside shareholders' approval of the merger agreement and the
related transactions;
* approval of the acquisition by the necessary federal and state
regulatory authorities;
* the absence of any order, injunction, decree, law or regulation
that would prohibit the acquisition or make it illegal; and
* receipt by Southside of an opinion that, for U.S. federal
income tax purposes, Southside shareholders who receive
their merger consideration in the form of the merged
company's common stock will not recognize any gain or loss
as a result of the acquisition, except in connection with
the payment of cash instead of fractional shares.
The merger will be completed only if all conditions to the merger are
satisfied or waived. Many of the conditions to the merger are beyond either
party's control. Allegiant Bancorp and Southside cannot be certain when, or
if, the conditions to the acquisition will be satisfied or waived, or that
the merger will be completed.
ALLEGIANT BANCORP WILL NEED TO OBTAIN OUTSIDE FINANCING IN ORDER TO RAISE
THE CASH PORTION OF THE MERGER CONSIDERATION.
In order to finance the cash consideration to be paid in the merger
and estimated transaction costs and expenses of approximately $65.0 million,
Allegiant Bancorp intends, shortly before the merger, to publicly offer $30.0
million of trust preferred securities and borrow up to $35.0 million from a
bank. Allegiant Bancorp makes no assurance that it will successfully obtain
this financing or that the terms will be favorable to the merged company.
Although obtaining financing is not a condition to completing the merger,
Allegiant Bancorp will be required to pay a termination fee to Southside
under certain circumstances if Allegiant Bancorp is not able to pay the cash
consideration at the effective time of the merger.
THE MERGED COMPANY WILL HAVE INCREASED ITS LEVERAGE AND DIMINISHED
LIQUIDITY.
To pay for the Southside acquisition, Allegiant Bancorp expects to
offer trust preferred securities and intends to borrow money from a bank.
Through these transactions, Allegiant Bancorp expects to incur additional
indebtedness of approximately $65.0 million. Increased indebtedness may
reduce the merged company's flexibility to respond to changing business
and economic conditions or fund the capital expenditure or working capital
needs of its subsidiaries because the merged company will require
additional funds to service its indebtedness. In addition, covenants the
merged company makes to its lender will limit the merged company's
ability to incur additional indebtedness, and the leverage may cause
potential lenders to be unwilling to loan funds to the merged company
in the future. To the extent permitted by the merged company's regulators,
it will require greater dividends from its
- 20 -
subsidiaries than those historically received in order to satisfy its debt
services. If its subsidiaries pay dividends to the merged company, they will
have less capital to address their capital expenditure and working capital
needs.
THE INTEGRATION OF SOUTHSIDE'S BUSINESS WITH ALLEGIANT BANCORP'S BUSINESS
MAY BE DIFFICULT.
Even though Allegiant Bancorp has acquired other financial services
businesses in the past, it has not completed an acquisition as large as the
merger with Southside. The success of this merger will depend on a number of
factors, including, but not limited to, the merged company's ability to:
* integrate Southside's operations with the operations of
Allegiant Bancorp;
* maintain existing relationships with Allegiant Bancorp's depositors
and the depositors of Southside to minimize withdrawals of deposits
subsequent to the acquisition;
* maintain and enhance existing relationships with borrowers to limit
unanticipated losses from Allegiant Bancorp's loans and the loans
of Southside;
* achieve expected cost savings and revenue enhancements from the
merged company;
* control the incremental non-interest expense to maintain overall
operating efficiencies;
* retain and attract qualified personnel; and
* compete effectively in the communities served by Allegiant Bancorp
and Southside, and in nearby communities.
The merged company's failure to successfully integrate Southside
with Allegiant Bancorp may harm its financial condition and results of
operations.
SOUTHSIDE SHAREHOLDERS MAY NOT RECEIVE THE FORM OF MERGER CONSIDERATION THEY
SELECT.
The merger agreement provides that one-half of the outstanding
shares of Southside common stock will be converted into common stock of the
merged company and the other half will be converted into cash. Although
Southside shareholders will have the opportunity to elect the form of merger
consideration they prefer to receive, the merger agreement provides for a
reallocation of merger consideration among the Southside shareholders to
achieve the 50%/50% split of stock and cash.
If you are a Southside shareholder, depending on which form of
merger consideration you elect to receive and which form of merger
consideration other Southside shareholders elect to receive, you may not
receive all or a portion of the merger consideration in the form you elect.
In addition, if you elect a combination of cash and common stock, you will
be subject to reallocation before the shareholders who elect to receive all
cash or all common stock, and, therefore, the consideration that you receive
could be all in the form of undersubscribed consideration. This may result
in adverse tax consequences to you. You will not know which form of merger
consideration you will receive until after we complete the merger.
THE FIXED EXCHANGE RATIO MAY ADVERSELY AFFECT THE VALUE OF YOUR SHARES.
If the merger is completed, Southside shareholders who do not
receive $14.00 cash per share for their Southside shares will receive a
number of shares of the merged company's common stock based on a fixed
exchange ratio of 1.39 shares of the merged company's common stock for
each share of Southside's common stock. Allegiant Bancorp shareholders will
receive one share of the merged company's common stock for each share of
Allegiant Bancorp's common stock. Because the market value of Allegiant
Bancorp and Southside common stock may fluctuate, the value of the
consideration you receive for your shares may also fluctuate. The market
value of the Allegiant Bancorp and Southside common stock could fluctuate
for any number of reasons, including those specific to Allegiant Bancorp and
Southside and those that influence trading prices of equity securities
generally.
- 21 -
PERSONS WHO RECEIVE ALL CASH IN THE MERGER WILL NOT PARTICIPATE IN FUTURE
GROWTH.
Southside shareholders who elect and receive all cash in the merger,
or who otherwise receive all cash in the merger as a result of the reallocation
of consideration under the merger agreement, will not own any interest in the
merged company, which will not afford them the opportunity to participate in
future growth, if any, in the value of the merged company.
THE MERGED COMPANY'S SHARES OF COMMON STOCK WILL NOT BE FDIC INSURED.
Neither the Federal Deposit Insurance Corporation nor any other
governmental agency will insure the shares of the merged company's common
stock. Therefore, the value of your shares in the merged company will be
based on their market value and may decline to zero.
THERE WILL BE A SUBSTANTIAL NUMBER OF SHARES ELIGIBLE FOR FUTURE RESALE.
Upon consummation of the merger, the merged company will have
outstanding an aggregate of approximately 14.7 million shares of common
stock. Future sales of substantial amounts of the merged company's common
stock, including shares issued upon the exercise of stock options, by Allegiant
Bancorp's or Southside's current shareholders, or the perception that such
sales could occur, could adversely affect the market price of the merged
company's common stock. We make no prediction as to the effect, if any, that
future sales of shares, or the availability of shares for future sale, will
have on market price of the merged company's common stock.
ANTI-TAKEOVER DEFENSES MAY DELAY OR PREVENT FUTURE MERGERS.
Provisions contained in the merged company's articles of
incorporation and bylaws and certain provisions of Missouri law could make
it more difficult for a third party to acquire the merged company, even
if doing so might be beneficial to the merged company's shareholders.
These provisions could limit the price that some investors might be willing
to pay in the future for shares of the merged company's common stock
and may have the effect of delaying or preventing a change in control.
QUARTERLY OPERATING RESULTS MAY VARY.
Allegiant Bancorp and Southside's quarterly operating results have
varied in the past and the merged company's quarterly operating results
may continue to vary in future periods. Quarterly operating results may vary
for a number of reasons, including demand for the merged company's
products and services, inflation and other factors described in this joint
proxy statement/prospectus.
THE MERGED COMPANY'S STOCK PRICE MAY BE VOLATILE.
The trading price of the merged company's common stock may be
volatile. The market for the merged company's common stock may experience
significant price and volume fluctuations in response to a number of factors
including actual or anticipated quarterly variations in operating results,
changes in expectations of future financial performance, changes in
estimates by securities analysts, governmental regulatory action, banking
industry reform measures, customer relationship developments and other
factors, many of which will be beyond the merged company's control.
Furthermore, the stock market in general, and the market for banks
and bank holding companies in particular, has experienced extreme volatility
that often has been unrelated to the operating performance of particular
companies. These broad market and industry fluctuations may adversely affect
the trading price of the merged company's common stock, regardless of
actual operating performance.
- 22 -
FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus contains forward-looking
statements that involve risks and uncertainties. You can identify these
forward-looking statements because they discuss the operations of the merged
company after the merger or may include terms such as "believes,"
"anticipates," "intends," "expects," or similar expressions and may include
discussions of future strategy. Each of Allegiant Bancorp and Southside
caution you not to rely unduly on any forward-looking statements
in this joint proxy statement/prospectus. The merged company's actual
results could differ materially from the forward-looking statements. The
risk factors described above under "Risk Factors" could cause or contribute
to these differences and apply to all forward-looking statements wherever
they appear in this joint proxy statement/prospectus. However, there could
be other factors not listed above that may affect the merged company.
We may not update these risk factors or publicly announce revisions to
forward-looking statements contained in this joint proxy statement/prospectus.
- 23 -
ALLEGIANT BANCORP SPECIAL MEETING
This section contains information for Allegiant Bancorp
shareholders about the Allegiant Bancorp special shareholders' meeting that
has been called to vote upon the merger agreement and the transactions
contemplated thereby.
Allegiant Bancorp is mailing this joint proxy statement/prospectus
to you, as an Allegiant Bancorp shareholder, on or about , 2001.
Together with this document, Allegiant Bancorp also is sending to you a notice
of the Allegiant Bancorp special meeting and a form of proxy that Allegiant
Bancorp's board is soliciting for use at the special meeting. The special
meeting will be held on , , 2001, at ,
local time at 2122 Kratky Road, St. Louis, Missouri 63114.
MATTERS TO BE CONSIDERED
The purpose of the special meeting is to vote on the approval of
the merger agreement and the transactions contemplated thereby. At the
special meeting, Allegiant Bancorp shareholders also may vote on any other
matters that may properly be submitted to a vote at the special meeting. You
also may be asked to vote on a proposal to adjourn or postpone the special
meeting. Allegiant Bancorp could use any adjournment or postponement for the
purpose, among others, of allowing more time to solicit votes to approve the
merger agreement and the related transactions.
PROXIES
The accompanying form of proxy is for use at the special meeting if
you are unable or do not desire to attend in person. You can revoke the
proxy at any time before the vote is taken at the special meeting by
submitting to Allegiant Bancorp's corporate secretary written notice of
revocation or a properly executed proxy of a later date, or by attending the
special meeting and electing to vote in person. Written notices of
revocation and other communications with respect to the revocation of
Allegiant Bancorp proxies should be addressed to:
Allegiant Bancorp, Inc.
2122 Kratky Road
St. Louis, Missouri 63114
Attention: Corporate Secretary
All shares represented by valid proxies Allegiant Bancorp receives
through this solicitation, and not revoked before they are exercised, will
be voted in the manner specified in this paragraph. If you make no
specification on your proxy card, your proxy will be voted "FOR" the
proposal to approve the merger agreement and the transactions contemplated
thereby. Allegiant Bancorp's board does not presently know of any other
matters that may be presented for action at the special meeting. If other
matters do properly come before the special meeting, Allegiant Bancorp intends
that shares represented by proxies in the form accompanying this document will
be voted by and at the discretion of the persons named in the proxies. However,
proxies that vote against approval of the merger will not be voted in favor
of any adjournment or postponement of the special meeting to solicit
additional proxies.
SOLICITATION OF PROXIES
Allegiant Bancorp will bear the entire cost of soliciting proxies
from you. In addition to soliciting proxies by mail, Allegiant Bancorp will
request banks, brokers and other record holders to send proxies and proxy
material to the beneficial owners of Allegiant Bancorp common stock and
secure their voting instructions, if necessary. Allegiant Bancorp will
reimburse those record holders for their reasonable expenses in taking those
actions. If necessary, Allegiant Bancorp also may use several of its regular
employees or directors, who will not be specially compensated, to solicit
proxies from Allegiant Bancorp shareholders, either personally or by
telephone, telegram, fax, letter or special delivery letter.
- 24 -
RECORD DATE AND VOTING RIGHTS
, 2001 is the record date for determining the
Allegiant Bancorp shareholders entitled to notice of and to vote at the special
meeting. At that time, there were shares of Allegiant Bancorp common
stock held by approximately holders of record.
To have a quorum that permits Allegiant Bancorp to conduct business
at the special meeting, there must be present at the meeting, whether in
person or through return of a proxy card, holders of Allegiant Bancorp
common stock representing a majority of the shares outstanding and entitled
to vote on the record date. You are entitled to one vote for each
outstanding share of Allegiant Bancorp common stock you held as of the close
of business on , 2001, the record date.
Holders of shares of Allegiant Bancorp common stock present in
person at the special meeting but not voting, and shares of Allegiant
Bancorp common stock for which Allegiant Bancorp has received proxies
indicating that its holders have abstained, will be counted as present at
the special meeting for purposes of determining whether there is a quorum
for transacting business. Shares held in street name that have been
designated by brokers on proxy cards as not voted will not be counted as
votes cast for or against any proposal. These broker non-votes will,
however, be counted for purposes of determining whether a quorum exists.
Under Missouri law, approval of the merger by Allegiant Bancorp
requires the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Allegiant Bancorp common stock. Thus, abstentions and
broker non-votes will have the same effect as votes against approval of the
merger agreement. Accordingly, the Allegiant Bancorp board of directors urges
you to complete, date and sign the accompanying proxy and return it promptly
in the enclosed, postage-paid envelope.
As of the record date, Allegiant Bancorp's directors and executive
officers beneficially owned approximately 2.9 million shares of Allegiant
Bancorp common stock, entitling them to exercise approximately 32% of the
voting power of the Allegiant Bancorp common stock entitled to vote at the
special meeting. Each director and executive officer of Allegiant Bancorp
has executed a separate voting agreement to vote each share of Allegiant
Bancorp common stock that he or she owns "FOR" approval of the merger. As a
result, holders of approximately 3.0 million shares of the approximately
remaining 5.8 million shares of Allegiant Bancorp common stock entitled
to vote on the merger must vote in favor of the merger in order for it to
be approved by Allegiant Bancorp shareholders.
RECOMMENDATION OF ALLEGIANT BANCORP BOARD OF DIRECTORS
The Allegiant Bancorp board of directors has approved the merger
agreement and the related transactions. The Allegiant Bancorp board believes
that the merger agreement and the transactions it contemplates, including
the merger, are fair to, and are in the best interests of, Allegiant Bancorp
and Allegiant Bancorp shareholders and recommends that Allegiant Bancorp
shareholders vote "FOR" approval of the merger.
- 25 -
SOUTHSIDE ANNUAL MEETING
This section contains information for Southside shareholders about
the Southside annual shareholders' meeting.
MATTERS TO BE CONSIDERED
The purpose of the annual meeting is (1) to elect four directors,
each to serve for a three-year term or until their earlier resignation or
removal, and (2) to vote on a proposal to approve the plan of merger between
Southside and Allegiant Bancorp set forth in the merger agreement and the
transactions contemplated by that agreement. Southside discusses matters
related to the election of directors beginning on page 100 of this joint
proxy statement/prospectus. Southside discusses matters related to the
merger agreement beginning on page 26 of this joint proxy statement/
prospectus. You also may be asked to vote upon a proposal to adjourn
or postpone the annual meeting. Southside could use any adjournment
or postponement for the purpose, among others, of allowing more time to
solicit votes to approve the merger.
PROXIES
The accompanying form of proxy is for use at the Southside annual
meeting if you are unable or do not desire to attend in person. You can
revoke your proxy at any time before the vote is taken at the annual meeting
by submitting to Southside's corporate secretary written notice of
revocation or a properly executed proxy of a later date, or by attending the
annual meeting and electing to vote in person. Written notices of revocation
and other communications about revoking your proxy should be addressed to:
Southside Bancshares Corp.
3606 Gravois Avenue
St. Louis, Missouri 63116
Attention: Laura L. Thomas
All shares represented by valid proxies Southside receives through
this solicitation, and not revoked before they are exercised, will be voted
in the manner specified in this paragraph. If you make no specification on
your proxy card, your proxy will be voted "FOR" the four nominees for
director and "FOR" the proposal to approve the merger and the transactions
contemplated thereby and to authorize a vote for adjournment. Southside's
board does not know of any other matters that may be presented for action at
the annual meeting. If other matters do properly come before the annual
meeting, Southside intends that shares represented by proxies in the form
accompanying this document will be voted by and at the discretion of the
persons named in the proxies. However, proxies that vote against approval of
the merger will not be voted in favor of any adjournment or postponement of
the annual meeting to solicit additional proxies.
ELECTION FORMS
Southside shareholders received with this joint proxy
statement/prospectus an election form. Using this form, each Southside
shareholder may choose whether the shareholder wishes to receive:
(1) $14.00 in cash,
(2) 1.39 shares of the merged company's common stock, or
(3) a combination of cash and shares of the merged company's
common stock,
for each share of Southside stock held. Southside shareholders should fill
out the election forms and mail them to the following address:
UMB Bank, n.a.
Securities Transfer Division
928 Grand Boulevard, 13th Floor
Kansas City, Missouri 64106
Attention: Ms. Sandy Wilsbacher
- 26 -
by , 2001. If an election form is not received
by , 2001, the shareholder will be deemed to have elected the
form of consideration which is undersubscribed by the Southside shareholders
who timely submit election forms.
SOLICITATION OF PROXIES
Southside will bear the entire cost of soliciting proxies from its
shareholders, except that Allegiant Bancorp has agreed to pay all costs and
expenses of printing and mailing this document and all filing and other fees
relating to the merger paid to the SEC. In addition to solicitation of
proxies by mail, Southside will request banks, brokers and other record
holders to send proxies and proxy material to the beneficial owners of the
stock and secure their voting instructions. Southside will reimburse those
record holders for their reasonable expenses in taking those actions. If
necessary, Southside also may use its directors and employees, who will not
be specially compensated, to solicit proxies from its shareholders, either
personally or by telephone or mail.
RECORD DATE AND VOTING RIGHTS
, 2001 is the record date for determining the
Southside shareholders entitled to notice of and to vote at the annual meeting.
At that time, shares of Southside common stock were outstanding,
held by holders of record.
To have a quorum that permits Southside to conduct business at the
annual meeting, Southside requires the presence, whether in person or by
proxy, of the holders of Southside common stock representing a majority of
the shares outstanding and entitled to vote on the record date. Each
Southside shareholder is entitled to one vote for each outstanding share of
Southside common stock held as of the close of business on the record date.
Shares of Southside stock present in person at the annual meeting
but not voting, and shares of Southside common stock that are marked
"withhold authority" with respect to the election of a director or which are
marked "abstain" with respect to approval of the merger, will be counted as
present at the annual meeting for purposes of determining whether a quorum
is present for transacting business. Shares held in street name that have
been designated by brokers on proxy cards as not voted will not be counted
as votes cast for or against any proposal. These broker non-votes will,
however, be counted for purposes of determining whether a quorum exists.
The election of each nominee for director must be approved by
holders of a majority of the shares of Southside common stock entitled to
vote on the election of directors and present, in person or by proxy, at the
annual meeting. Cumulative voting for the election of directors is not
applicable.
Under Missouri law, approval of the merger by Southside requires
the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Southside common stock. Thus, abstentions and broker
non-votes will have the same effect as votes against approval of the merger.
Accordingly, Southside's board of directors urges you to complete, date and
sign the accompanying proxy and return it promptly in the enclosed,
postage-paid envelope.
As of the record date, directors and executive officers of
Southside had sole voting power over approximately 1.7 million shares of
Southside common stock, entitling them to exercise approximately 19.6% of the
voting power of the Southside common stock entitled to vote at the annual
meeting. Each director and executive officer of Southside has agreed to vote
each share of Southside common stock over which he or she has sole voting
power "FOR" approval of the merger. As a result, holders of at least
approximately 59.0% of the remaining outstanding shares of Southside common
stock entitled to vote on the merger agreement must vote in favor of the
merger agreement in order for it to be approved by Southside shareholders.
RECOMMENDATION OF SOUTHSIDE BOARD OF DIRECTORS
The Southside board of directors recommends that you vote "FOR"
each of the nominees for director. Also, the Southside board of directors
also has unanimously approved the merger agreement and the transactions it
contemplates, including the merger. The Southside board believes that the
merger agreement and the transactions it
- 27 -
contemplates, including the merger, are fair to, and are in the best
interests of, Southside and its shareholders and recommends that Southside
shareholders vote "FOR" approval of the merger.
THE MERGER
This summary of the material terms and provisions of the merger
agreement and the voting agreements is qualified in its entirety by
reference to such documents. The merger agreement is attached as Annex A to
-------
this joint proxy statement/prospectus, and the forms of the voting agreements
have been filed by each of Allegiant Bancorp and Southside with the SEC. We
incorporate each of these documents into this summary by reference. The
merger agreement is a complex document that is not easily summarized. We
urge you to read the merger agreement in its entirety.
GENERAL DESCRIPTION OF THE MERGER
Subject to satisfaction or waiver of all conditions in the merger
agreement, on the closing date Allegiant Bancorp will merge with and into
Southside. Upon completion of the merger, Allegiant Bancorp's corporate
existence will terminate and Southside will continue as the surviving
entity. As a result of the merger:
* each share of Southside common stock issued and outstanding
immediately prior to the effective time of the merger will be
converted into the right to receive either: (1) $14.00 in
cash; (2) 1.39 shares of common stock of the merged company;
or (3) a combination of cash and shares of common stock of the
merged company; and
* each share of Allegiant Bancorp common stock issued and
outstanding immediately prior to the effective time of the
merger will be converted into one share of common stock of
the merged company.
Each Southside shareholder will have the opportunity to elect
the proportion of cash and merged company common stock the shareholder
desires to receive in exchange for the shareholder's shares of Southside
common stock. However, each shareholder's election likely will be reallocated
in accordance with the procedure set forth in the merger agreement to ensure
that one-half of the Southside common stock is converted into cash in the
amount of $14.00 per share and the remainder is converted into common stock of
the merged company based upon the exchange ratio of 1.39 shares of common stock
of the merged company for each share of Southside common stock.
The amount and nature of the consideration was established through
arm's-length negotiations between Allegiant Bancorp and Southside and their
respective advisors and reflects the balancing of a number of countervailing
factors. The total amount of the consideration reflects a price both parties
concluded was appropriate. The parties have structured the merger, in part,
to have the favorable tax attributes of a "reorganization" for federal income
tax purposes.
We cannot assure you that the current fair market value of
Allegiant Bancorp or Southside common stock will be equivalent to the fair
market value of Allegiant Bancorp or Southside common stock on the effective
date of the merger. The fair market value of the merged company's common
stock received by the Allegiant Bancorp and Southside shareholders may be
greater than or less than the current fair market value of Allegiant Bancorp
or Southside common stock due to numerous market factors.
RESALE OF MERGED COMPANY STOCK
The shares of the merged company's common stock to be issued in
the merger will be freely transferable except by certain directors,
executive officers and shareholders of Allegiant Bancorp and Southside who
are deemed to be "affiliates" of Allegiant Bancorp and Southside,
respectively. The shares of the merged company common stock issued to
Southside's and Allegiant Bancorp's affiliates will be restricted in their
transferability in accordance with the rules and regulations promulgated by
the SEC.
- 28 -
VOTING AGREEMENTS
In addition to and in connection with the execution of the merger
agreement, each of the directors and executive officers of Allegiant Bancorp
and Southside executed separate voting agreements.
ALLEGIANT BANCORP VOTING AGREEMENTS. The Allegiant Bancorp voting
agreement provides that the Allegiant Bancorp director and/or executive
officer will vote all of the shares of Allegiant Bancorp common stock over
which the director and/or executive officer has sole voting power in favor of
the merger agreement and the related transactions. The Allegiant Bancorp voting
agreements relate to an approximate aggregate of 2.9 million shares of
Allegiant Bancorp common stock, or approximately 31.1% of the shares entitled
to vote on the merger. In addition, until the earliest to occur of the
effective time of the merger or the termination of the merger agreement,
each director and/or executive officer further agreed that he or she will
not vote any such shares in favor of the approval of any other competing
acquisition proposal involving Allegiant Bancorp and a third party. Each
director and/or executive officer also agreed that he or she will not transfer
shares of Allegiant Bancorp common stock over which he or she has sole voting
and investment power other than pursuant to the merger or with the consent of
Southside.
SOUTHSIDE VOTING AGREEMENTS. The Southside voting agreement
provides that the Southside director and/or executive officer will vote all
of the shares of Southside common stock over which the director and/or
executive officer has sole voting power in favor of the merger agreement and the
related transactions. The Southside voting agreements relate to an approximate
aggregate of 1.7 million shares of Southside common stock, or approximately
19.6% of the shares entitled to vote on the merger. In addition, until the
earliest to occur of the effective time of the merger or the termination of
the merger agreement, each director and/or executive officer further agreed
that he or she will not vote any such shares in favor of the approval of any
other competing acquisition proposal involving Southside and a third party.
Each director and/or executive officer also agreed that he or she will not
transfer shares of Southside common stock over which he or she has sole voting
and investment power other than pursuant to the merger or with the consent of
Allegiant Bancorp.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Some of Southside's executive officers and directors have certain
interests in the merger that differ from the interests of Southside
shareholders generally. The boards of directors of Southside and Allegiant
Bancorp were aware of these interests and considered them, among other
matters, in approving the merger agreement.
EMPLOYMENT AGREEMENTS. Under the merger agreement, the merged
company will honor all of Southside's obligations under the employment
agreements with Thomas M. Teschner and Joseph W. Pope. Each employment
agreement provides for participation in incentive compensation plans and
arrangements and employee benefit plans, including retirement, medical,
health, life and other insurance coverage, that may be made available to
other executives. The annual base salaries for 2001 for Messrs. Teschner and
Pope are $240,000 and $100,000, respectively.
The employment agreements of Messrs. Teschner and Pope also provide
for severance payments following a "change in control" of Southside as
follows:
* if Mr. Teschner is terminated within three years of, or
voluntarily terminates his employment within two years of, a
change in control, Mr. Teschner will be entitled to, among
other ancillary severance benefits, an amount equal to three
times his highest annual salary plus three times his highest
annual bonus plus his unpaid annual salary and accrued
vacation pay through the effective date of termination and a
continuation of welfare and health benefits for a period of
three years after termination. If the payment of the benefit
constitutes a "parachute payment" under Sections 280G and 4999
of the Internal Revenue Code, Southside or the merged
company will be obligated to pay to Mr. Teschner a lump sum
cash payment sufficient to put Mr. Teschner in the same net
after-tax position he would have been in had the benefit not
been subject to the excise tax under Section 4999 of the
Internal Revenue Code. The merger of Southside and Allegiant
Bancorp constitutes a change of control under Mr. Teschner's
employment agreement; and
- 29 -
* if Mr. Pope is terminated without cause before the later of:
the expiration of six months after the merger or April 27,
2002, Mr. Pope will be entitled to a lump sum payment of
$100,000. If Mr. Pope voluntarily terminates his employment 60
days or more after the merger, Mr. Pope will be entitled to
the unpaid portion of his $100,000 annual salary and a bonus,
which bonus will not be less than $27,325, whether or not
such payments have accrued.
DEFERRED COMPENSATION AGREEMENTS. Southside entered into deferred
compensation agreements with the following directors: Thomas M. Teschner,
Earle J. Kennedy, Jr., Norville K. McClain, Daniel J. Queen and Joseph W.
Beetz. The agreements provide that upon the director's termination from the
board of directors, Southside will be obligated to pay to the director the
amount of compensation deferred by such director under the terms of the
deferred compensation agreement plus interest. The interest paid on the
deferred compensation ranges from 6% to 15%, depending upon the annual
percentage increase in the price of Southside common stock. Southside will
be obligated to pay the deferred compensation to a director in one lump sum
within 60 days from the termination of his membership on the board of directors.
After the merger is completed, Southside will only designate two people to serve
on the merged company's board of directors resulting in the majority of
Southside's existing board no longer serving as directors. Therefore most,
if not all, of the current Southside directors with deferred compensation
agreements will be entitled to receive amounts under their deferred
compensation agreements shortly after the merger is completed.
Southside also has a separate deferred compensation agreement with
Thomas M. Teschner. Mr. Teschner's deferred compensation agreement provides
for an award of performance stock at the end of each year as described on
page 108 of this joint proxy statement/prospectus. Mr. Teschner's deferred
compensation agreement was amended in 2001 to provide that in the event of a
change in control of Southside, any grant of Southside performance stock that
would have otherwise been made at the end of a calendar year will be made as
of the date of the change in control. The merger of Allegiant Bancorp and
Southside constitutes a change of control under Mr. Teschner's deferred
compensation agreement.
SALARY CONTINUATION AGREEMENTS. Southside has entered into salary
continuation agreements with Thomas M. Teschner and Joseph W. Pope. Both
salary continuation agreements provide for the payment of the benefit amount
under the plan set forth in the salary continuation agreement in the case of
retirement, termination of employment or a reduction in salary or job
responsibilities. Under the terms of their respective agreements, Messrs.
Teschner and Pope will be eligible to receive benefits, the amounts of which
will depend upon: (1) the age of retirement; reason for termination of
employment and whether a change of control has occurred; (2) years of service
after the effective date of the salary continuation agreement; and (3) the
amount vested in the plan. Messrs. Teschner and Pope become 100% vested in
the plan after their respective salary continuation agreements have been in
effect for 10 years from December 1, 1999.
Under the terms of each of Messrs. Teschner's and Pope's respective
agreements, they are entitled to receive 100% of the accrued benefit based
on the number of years of participation in the plan in the event Southside
experiences a change of control while they are active employees and they are
terminated for any reason, other than for cause, or their job duties and/or
compensation are reduced. The cash payment is payable within 30 days of the
termination of employment following a change of control. If the payment of
the benefit constitutes a "parachute payment" under Sections 280G and 4999
of the Internal Revenue Code, (1) Southside or the merged company must pay
Mr. Teschner a lump sum cash payment sufficient to put him in the same net
after-tax position he would have been in had the benefit not been subject
to the excise tax under Section 4999 of the Internal Revenue Code; and
(2) neither Southside nor the merged company must pay to Mr. Pope any amount
that would constitute a "parachute payment." The merger of Southside and
Allegiant Bancorp constitutes a change of control under each of these salary
continuation agreements. As a result, if the merger is completed and
termination of employment or reduction of job duties and/or compensation
occurs before December 1, 2001, Mr. Teschner would be entitled to receive
$29,307 and Mr. Pope would be entitled to receive $5,406 under their
respective salary continuation agreements. If their termination of employment
or reduction in job duties and/or compensation occurs after December 1, 2001,
but before December 1, 2002, Messrs. Teschner and Pope would be entitled to
receive $62,178 and $11,468, respectively, under their respective salary
continuation agreements.
Severance Program. Southside's severance plan provides that regular
full-time Southside employees employed by Southside for three consecutive
calendar years are eligible for severance benefits in the event that the
- 30 -
employee's employment is terminated for reasons that are not prejudicial to
Southside and its subsidiaries, in Southside's sole discretion. Southside
employees who are eligible for severance benefits will receive one week of
salary for each year of service to Southside up to a maximum of 10 weeks.
SOUTHSIDE STOCK OPTIONS. Under the merger agreement, as of the
closing date of the merger, each outstanding and unexercised option granted
under the Southside 1993 Non-Qualified Stock Option Plan and the Southside
1998 Stock Option Plan will be converted into an option to purchase shares
of the common stock of the merged company upon the same terms and
conditions under the stock option plan from which it was originally issued.
However, the options will remain exercisable throughout their stated term
regardless of any provision contained in the option agreement that the option
terminates upon termination of the employee's employment with Southside. The
number of shares subject to each converted option will equal the original
number of shares of Southside common stock subject to the original option
multiplied by 1.39. The exercise price of the converted option will equal
the exercise price per share under the original option divided by 1.39 and
rounded to the nearest cent.
The following table sets forth information as to the outstanding
options of the following directors and executive officers as of the date of
this joint proxy statement/prospectus:
VESTED AS A RESULT
OF THE MERGER
--------------------------------------------------------
NAME NUMBER OF OPTIONS HELD SOUTHSIDE SHARES MERGED COMPANY SHARES
---- ---------------------- -------------------------- --------------------------
VESTED AS A VESTED AS A
CURRENTLY RESULT OF THE CURRENTLY RESULT OF THE
VESTED MERGER VESTED MERGER
--------- ------------- --------- -------------
Thomas M. Teschner 390,000 330,000 60,000 458,700 83,400
Joseph W. Pope 48,000 48,000 -- 66,720 --
INDEMNIFICATION RIGHTS. Under the merger agreement, Southside and
Allegiant Bancorp have agreed that the merged company will provide certain
continuing indemnification and insurance benefits for officers, directors
and employees of Southside.
SOUTHSIDE DIRECTORS. The merger agreement provides that two persons
(1) who were directors of Southside as of April 30, 2001, the date of the
merger agreement, (2) who, immediately after the closing date of the merger,
hold the greatest number of shares of common stock of the merged company,
including, for this purpose, shares subject to stock options, among all of
the directors of Southside, and (3) who are reasonably acceptable to Allegiant
Bancorp, will be elected to serve on the board of directors of the merged
company for two- and three-year terms, respectively. However, Southside may
replace either or both of the nominees prior to the effective time of the
merger, subject to Allegiant Bancorp's consent.
LETTER AGREEMENTS. In connection with the execution of the merger
agreement, Southside and Allegiant Bancorp entered into a letter agreement
setting forth the following additional agreements of the parties:
* each of Joseph W. Pope, Laurie R. Pennycook, Mitchell D. Baden,
Alan Pohlman, Rick Francis and Bill Miles, all of whom
are employees of Southside, will have, at their option, within
six months after the effective date of the merger, the right
to purchase for book value the vehicle that Southside
currently provides to such individuals;
* Thomas M. Teschner will have the right, at his option, within
six months after the effective date of the merger, to purchase
the life insurance policy maintained by Southside on his life
for the cash surrender value of the policy at the time of
purchase;
* Thomas M. Teschner will have the right, at his option, within
six months after the effective date of the merger, to purchase
the country club membership maintained by Southside for his
benefit for an amount equal to the initiation fee paid by
Southside; and
- 31 -
* if Thomas M. Teschner is elected to the board of directors of
the merged company after the effective date of the merger,
he will also be elected to the board of directors of Allegiant
Bank or its successor.
Thomas M. Teschner also entered into a letter agreement with
Allegiant Bancorp in which he agreed to consider any reasonable proposal
regarding his post-closing consulting services provided it includes the
following:
* Mr. Teschner would agree, for a period of 12 months following
the effective date of the merger, to provide consulting
services related to the transition of the merged company and
other operational matters that arise as a result of the merger
on an as-needed basis not to exceed 20 hours per month to be
performed at such times as the parties may mutually agree. Mr.
Teschner would be entitled to receive additional compensation
for providing the consulting services;
* if any amounts paid to Mr. Teschner for his consulting
services were determined to be "parachute payments," the
merged company would pay to Mr. Teschner a lump sum cash
payment sufficient to place him in the same net after tax
position he would have been in had such payments not been
subject to an excise tax;
* any payments to Mr. Teschner for his consulting services would
be secured by assets of Allegiant Bancorp or a letter of
credit, at the option of Mr. Teschner; and
* any agreements between Mr. Teschner and the merged company
concerning his consulting services would not prohibit Mr.
Teschner from engaging in the business of banking whether or
not in competition with the merged company.
BACKGROUND OF THE MERGER; BOARDS' RECOMMENDATIONS AND REASONS FOR THE MERGER
Southside's board of directors regularly reviews the organization's
business and strategic plans and objectives to determine ways to enhance
shareholder value. Early in the first quarter of 2000, Southside's board of
directors retained Stifel, Nicolaus & Company, Incorporated to assist it in
evaluating its strategic alternatives, including a possible sale or other
business combination involving Southside. Southside and Stifel entered into
an agreement which included an approved list of institutions Stifel would
contact to inquire about their willingness to consider entering into a
transaction with Southside. Throughout early 2000, several parties,
including Allegiant Bancorp, were contacted to determine their interest in a
transaction with Southside. No transactions resulted from these contacts.
On June 22, 2000, Southside's board of directors terminated the
agreement with Stifel. During this period the Southside board also discussed
the possibility of initiating a stock repurchase program in an effort to
increase shareholder value. On July 27, 2000, the Southside board approved a
stock repurchase program to repurchase up to 5% of Southside's outstanding
shares in the open market or in private negotiated transactions over the
next several months. On August 24, 2000, the Southside board approved
borrowing from a bank up to $5 million for the proposed stock repurchase
program.
It became evident during 2000 that various members of Southside's
board of directors held different views on the direction that Southside
should be pursuing. In an effort to bring about a more unified and focused
approach to developing a strategic direction for Southside, five of
Southside's ten directors, Douglas P. Helein, Earle J. Kennedy, Jr.,
Norville K. McClain, Daniel J. Queen and Richard G. Schroeder, Sr., notified
Southside's board of directors and management of their desire to liquidate
their stock holdings in Southside and, if they did so, their willingness to
relinquish their board positions.
As a result of further discussions with Southside's board and
management, the Southside board determined that any sale of these directors'
shares should be accomplished by means of a modified "Dutch auction" tender
offer which would allow all shareholders of Southside to sell their shares
of Southside stock to Southside within a price range established by the
Southside board with the advice of a financial consultant. The Southside
board believed that this would allow the tendering directors the opportunity
to liquidate their holdings in Southside without the negative impact
normally associated with the sale of large positions. The Southside board
also believed that this
- 32 -
would allow other Southside shareholders the opportunity to participate
on the same terms and would allow Southside to use its excess capital
in a manner which Southside's board and management believed would help
maximize shareholder value in the long term.
In January 2001, Southside initiated a modified Dutch auction
tender offer to purchase 1.1 million shares of its common stock,
representing approximately 12.2% of Southside's outstanding shares, at a
cash price per share of between $10.75 and $12.25. In the offer, Southside
reserved the right to increase to up to approximately 1.5 million the number
of shares subject to the tender offer, representing approximately 16.4% of
the then outstanding shares. The tender offer was subject to a number of
conditions before it could be completed, including a condition that no party
propose a merger, business combination or other similar transaction
involving Southside prior to the expiration of the tender offer. The tender
offer was originally scheduled to expire on February 14, 2001.
During the period shortly before and shortly after the commencement
of the tender offer, management of First Banks, Inc., Southside's largest
shareholder which owns approximately 20% of its stock, and Southside's
Chairman, Norville K. McClain, had several discussions regarding a proposed
tender offer.
Shortly after the tender offer was publicly announced,
representatives of Allegiant Bancorp notified representatives of Southside
that Allegiant Bancorp was interested in discussing a proposed business
combination with Southside under which Southside's shareholders who desired
to receive cash for their shares at a premium to the highest Dutch auction
price could do so, while making available the opportunity for the remaining
Southside shareholders to exchange their shares for Allegiant Bancorp stock
with a market price even greater than the cash consideration. Initially,
Southside's advisor stated to Allegiant Bancorp that Southside was not
interested in pursuing such transaction and that Southside intended to
proceed with the tender offer.
Thereafter, Mr. McClain inquired of Allegiant Bancorp as to whether
it continued to be interested in a possible transaction. Allegiant Bancorp
advised that it was interested in negotiating a mutually acceptable
transaction in accordance with its earlier expression of interest and said
that it would make a proposal in writing. On January 25, 2001, Southside's
board established a special committee comprised of Messrs. McClain,
Schroeder and Teschner, to explore indications of interest regarding a
possible business combination.
On January 31, 2001, Southside received separate non-binding
expressions of interest from each of First Banks and Allegiant Bancorp. Each
proposal was subject to various conditions, including the completion of
satisfactory due diligence. First Banks' proposal was to acquire all
outstanding shares of Southside stock not already owned by First Banks for
$11.00 cash per share. Allegiant Bancorp's original offer was to acquire all
outstanding shares of Southside stock for between $12.50 and $13.50 per
share in cash and/or Allegiant Bancorp stock, with a limit on the number of
shares of Allegiant Bancorp stock to be issued in the transaction.
On January 31, 2001, First Banks amended its Schedule 13D filed
with the SEC in which it stated that it had determined that it may be
advisable to explore the possibility of some form of business combination
involving First Banks and Southside and that it had expressed interest in
discussing the possibility of such a business combination with Southside and
a willingness to enter into a confidentiality agreement so as to allow First
Banks to conduct due diligence with respect to Southside and its operations.
On February 1, 2001, Southside filed an amendment to its tender
offer documents with the SEC. In the filing, Southside stated that, in
response to the letters received on January 31, 2001, the Southside board
had determined to explore the possibility of engaging in a merger or other
business combination transaction with another financial institution. The
Southside board also extended the expiration date of its tender offer to
March 14, 2001.
By letter dated February 2, 2001, Allegiant Bancorp reaffirmed the
non-binding proposal contained in its letter of January 31, 2001, and also
expressed a willingness to consider an all cash transaction with Southside.
Southside's representatives then requested that Allegiant Bancorp
execute a confidentiality agreement and a non-solicitation agreement as a
condition to being permitted to conduct a due diligence review of Southside.
The parties executed a confidentiality agreement, dated February 2, 2001,
and a non-solicitation agreement, dated February 3, 2001, under which,
respectively, the parties agreed to preserve the confidentiality of the
information
- 33 -
exchanged during the negotiations and not to solicit each other's customers
or employees. On February 3, 2001, Allegiant Bancorp's due diligence team
conducted an on-site review at Southside's facility.
On February 8, 2001, Allegiant Bancorp's senior management briefed
its board at an informal meeting. Allegiant Bancorp's board confirmed its
direction to management to pursue negotiations for a possible transaction.
By letter dated February 12, 2001, Allegiant Bancorp reconfirmed
its expression of interest in an acquisition. Under the terms of its
proposal, Southside's shareholders would be entitled to elect between cash
in the amount of $12.50 per share or 1.136 shares of Allegiant Bancorp
stock, subject to limitations so that 50% of the consideration would be cash
and 50% would be stock. Allegiant Bancorp also proposed that Southside agree
to negotiate with Allegiant Bancorp exclusively for a 30-day period as an
inducement for Allegiant Bancorp to devote the time and expense associated
with negotiating a definitive agreement.
Southside subsequently requested that Allegiant Bancorp modify its
expression of interest to include an all-cash acquisition proposal. By
letter dated February 16, 2001, Allegiant Bancorp reiterated the combination
cash and stock proposal included in its letter of February 12, 2001 and also
submitted an alternative all cash proposal at $11.375 per share.
During February 2001, Allegiant Bancorp's representatives engaged
in various discussions with representative of First Banks. In view of
the level of First Banks' ownership of Southside, Allegiant Bancorp wanted
to determine whether First Banks would support a transaction between
Allegiant Bancorp and Southside consistent with the proposal submitted by
Allegiant Bancorp. On February 19, 2001, representatives of Allegiant
Bancorp and its counsel met with representatives of First Banks and its
counsel to discuss the positions of the respective companies. The First
Banks representatives advised the Allegiant Bancorp representatives that
First Banks was interested in a transaction in which First Banks would
surrender its Southside shares and approximately $12.6 million of cash in
exchange for three of Southside's subsidiary banks, The Bank of St. Charles,
State Bank of Jefferson County and Bank of Ste. Genevieve. First Banks and
Allegiant Bancorp had been advised that this transaction could be structured
as a tax-free split-off in which First Banks would acquire three bank
subsidiaries of Southside without recognizing taxable income with respect to
its shares of Southside surrendered.
At a subsequent meeting on February 19, 2001, representatives of
Southside, Southside's special committee, Allegiant Bancorp, First Banks,
and their respective counsel, met to discuss the parties' interest in a
possible transaction. At that meeting the Allegiant Bancorp representatives
advised the group that Allegiant Bancorp desired to pursue the proposal
described in Allegiant Bancorp's letter, dated February 16, 2001. The
Allegiant Bancorp and First Banks representatives also summarized the
exploratory discussions regarding a possible split-off of the three
Southside banking subsidiaries in conjunction with an Allegiant
Bancorp-Southside business combination.
By letter dated February 22, 2001, Southside formally retained
Stifel to serve as Southside's financial advisor in connection with a
possible business combination involving Southside. At a meeting on February
22, 2001, the Southside board reviewed the two non-binding expressions of
interest from First Banks and Allegiant Bancorp. The Southside board then
determined that Stifel should canvas the market to determine whether there
were any other parties interested in submitting a proposal to Southside for
a possible business combination transaction. The board also agreed to permit
First Banks to commence due diligence. The board then scheduled a special
meeting for March 9, 2001 to review the results of Stifel's efforts and to
review any changes to the two expressions of interest. From time to time
during the period prior to March 9, 2001, Stifel representatives also
discussed Allegiant Bancorp's proposal with its representatives in order to
obtain more information regarding Allegiant Bancorp's plans.
At the March 9, 2001 special meeting, Stifel reported the results
of its efforts. Stifel reported that it had contacted 22 companies, five of
which were not contacted in the previous year. Of the 22 companies
contacted, six indicated an interest in Southside. Of these six, only two,
First Banks and Allegiant Bancorp, submitted proposals. Stifel also reported
that First Banks had completed its due diligence and that its preference was
to acquire two of Southside's subsidiary banks, State Bank of Jefferson
County and Bank of Ste. Genevieve, rather than the entire organization.
Stifel also reported that, by letter dated March 8, 2001, Allegiant Bancorp
had changed its proposal so that Southside shareholders would be entitled to
elect between cash in the amount of $12.50 per share or a fixed
- 34 -
number of shares of Allegiant Bancorp stock based upon an exchange ratio to
be mutually agreed upon by the parties, subject to a 50%/50% split of cash
and stock. Stifel indicated that it would continue working with Allegiant
Bancorp on its proposal and report to the board at the next regularly
scheduled monthly board meeting. The Southside board also, among other
things, extended the expiration date of the tender offer until May 1, 2001
and filed amended tender offer documents with the SEC on March 13, 2001.
Between March 9 and March 29, Stifel had discussions with another
financial institution regarding its interest in submitting a proposal
regarding a business combination with Southside. By letter dated March 28,
2001, this other financial institution submitted a proposal to acquire
Southside for a combination of $12.50 per share in cash and a fixed number
of Southside's shares of stock. The merger consideration had a weighted
average value of approximately $11.50 per share as of March 28, 2001.
In response to Stifel's request that Allegiant Bancorp increase the
consideration payable to Southside's shareholders in Allegiant Bancorp's
proposal, by letter dated March 28, 2001, Allegiant Bancorp increased the
proposed price to $13.50 in a combination cash and stock transaction and to
$12.00 in an all cash transaction. Allegiant Bancorp's proposal also
indicated that, immediately after the acquisition, Allegiant Bancorp would
exchange three of Southside's subsidiary banks, The Bank of St. Charles
County, Bank of Ste. Genevieve and State Bank of Jefferson County, with First
Banks for all of its shares of Southside stock and $12.6 million in cash.
On March 29, 2001, the Southside board held its regularly scheduled
meeting. On or around March 29, 2001, representatives of First Banks advised
representatives of Southside that First Banks was still interested in
pursuing an all cash acquisition of Southside. At the meeting, Stifel
reviewed with the Southside board the proposals it had received. After
extensive discussions about the three proposals, the board decided to
request that the three interested parties submit proposed definitive
agreements. After that meeting a representative of Stifel requested that
each of the three parties submit a definitive agreement containing the terms
of their respective proposal. Stifel also advised Allegiant Bancorp that
Southside's board was unwilling to agree to an exclusivity arrangement.
During the week of April 1, 2001, Allegiant Bancorp and First Banks
held discussions regarding structuring the proposed split-off of the three
Southside subsidiary banks. On April 6, 2001, counsel for Allegiant Bancorp
circulated a preliminary draft of the merger agreement to representatives of
Southside and First Banks, which provided that, immediately prior to the
merger, First Banks would acquire the three Southside subsidiary banks, and
then Southside would merge into Allegiant Bancorp.
Southside objected to having First Banks as a party to the merger
agreement because it did not want to have First Banks treated any
differently in the merger than any of the other Southside shareholders.
Accordingly, on April 6, 2001, Allegiant Bancorp's counsel circulated a
draft merger agreement under which Southside would merge into Allegiant
Bancorp and a draft of a separate purchase agreement which provided that,
immediately after the merger, the split-off of The Bank of St. Charles,
State Bank of Jefferson County and Bank of Ste. Genevieve to First Banks would
be effected.
Southside continued to object to having the transaction with First
Banks as any part of the proposed business combination with Southside
because it did not want to have First Banks treated any differently in the
merger than any of the other Southside shareholders. In response, on April
13, 2001 Allegiant Bancorp's counsel circulated a revised draft merger
agreement which provided that Southside would merge into Allegiant Bancorp,
but which did not contain any provision regarding the acquisition of any
Southside banks by First Banks.
Subsequently, Stifel requested that each of the three parties
confirm in writing their highest bids. By letter, dated April 17, 2001,
Allegiant Bancorp proposed a transaction under which it would pay $12.00 per
share in cash or $14.00 per share in cash and 1.39 shares of Allegiant common
stock in a combination cash and stock transaction.
Allegiant Bancorp and First Banks held further discussions
regarding the parties' respective positions, and on April 17, 2001,
Allegiant Bancorp's counsel circulated a draft merger agreement providing
for Allegiant Bancorp to merge into Southside. In response to Stifel's
request, the agreement provided for merger consideration of $14.00 per
share, consisting one-half of cash and one-half merged company common
stock. The reason for the change in structure was to preserve the
possibility of a tax advantaged split-off of the certain Southside banks to
First Banks
- 35 -
after the merger if the merged company and First Banks were to negotiate
a mutually acceptable transaction at that time. Also during these discussions
First Banks advised Allegiant Bancorp that it would not execute an agreement
to vote for the Allegiant Bancorp-Southside transaction, unless the parties
also entered into an agreement which gave First Banks a put right and
included certain negative covenants of the merged company to prevent it
from frustrating First Banks' ability to increase its ownership of the
merged company, including a possible acquisition of control.
On April 18, 2001, the Southside board held a special directors
meeting. The Southside board reviewed with Stifel the financial aspects of the
several different proposed definitive agreements submitted by Allegiant Bancorp,
the proposed definitive agreement submitted by First Banks, and the two
alternative proposed definitive agreements submitted by the other financial
institution, one for an all-stock transaction and one for a combination cash and
stock transaction. Stifel reviewed with the Southside board the major financial
terms of each definitive agreement. Stifel noted that Allegiant Bancorp
increased its offer for the 50% cash, 50% stock transaction to an exchange
ratio of 1.39 shares of stock for each share of Southside stock and $14.00
in cash per share for each share of Southside stock. Upon a detailed review
of the proposed agreements, the board committee was unanimously authorized
to negotiate a definitive agreement with Allegiant Bancorp for a part cash,
part stock transaction and to report back to the full board of directors
prior to any final agreement.
On April 19, 2001, Allegiant Bancorp's board discussed the status
of the negotiations at its meeting following the annual meeting of its
shareholders. The board confirmed its desire to approve the transaction,
with or without the contractual provisions requested by First Banks.
On April 20, 2001, Allegiant Bancorp formalized its engagement of
Legg Mason to serve as its financial advisor in connection with a possible
business combination with Southside.
Southside later informed Allegiant Bancorp that, for various
reasons including the fact that it wanted each of its shareholders to be
treated the same in the merger, Southside did not want to be involved in any
respects with a split-off of certain Southside banks to First Banks, whether
such split-off occurred prior to or after the merger. As a result, on April
24, 2001, Southside's counsel circulated comments to the April 13, 2001
merger agreement draft submitted by Allegiant Bancorp.
On April 25, 2001, representatives from Allegiant Bancorp and
Southside met to negotiate certain terms and conditions of the merger
agreement. Also on April 26, 2001, Southside's legal counsel conducted its
due diligence investigation of Allegiant Bancorp which included review of
provided documents and financial information regarding Allegiant Bancorp.
On April 26, 2001, Allegiant Bancorp's legal counsel conducted its
due diligence investigation of Southside, which was in addition to counsel's
review of Southside's publicly filed documents which had been occurring
since merger negotiations began. The due diligence review included review of
provided documents and financial information regarding Southside.
On April 26, 2001, the Southside board met with its legal and
financial advisors to review in detail the terms of the proposed merger
agreement with Allegiant Bancorp. The Southside board also reviewed the
draft disclosure schedule, an amendment to the Southside Rights Agreement
which would keep the Rights Agreement from being triggered upon execution of
the merger agreement, and the voting agreements to be signed by each
director and executive officer. The Southside board agreed to review all
relevant materials and hold a meeting the next day, April 27th, to again
consider the proposed transaction.
Negotiations continued through April 27, 2001, including, in
accordance with Allegiant Bancorp's request, negotiations regarding the
structure of the merger. On April 27, 2001, the parties agreed that the
merger would be structured as Allegiant Bancorp merging into Southside. As a
condition to this approach and at the request of Southside, Allegiant
Bancorp agreed to terminate all discussions with First Banks regarding the
split-off and that, prior to the close of the merger, Allegiant Bancorp
would not discuss or negotiate the split-off with First Banks. Southside
also requested that Allegiant Bancorp indemnify the Southside shareholders
who receive stock in the merger against any tax liabilities they may incur
as a result of their receipt of merged company stock in the merger. The
purpose of Southside's requests was to make sure that each of its
shareholders would be treated the same in the
- 36 -
merger and to make sure that nothing would be done by Allegiant Bancorp and
First Banks before or after the merger that could jeopardize the tax-free
nature of the merger applicable to the stock component of the merger
consideration. On April 27, 2001, Allegiant Bancorp terminated negotiations
with First Banks regarding the bank split-offs and informed First Banks of
its agreement with Southside.
On April 27, 2001, Southside's board held a special meeting to
further consider the merger agreement and the transactions contemplated
thereby. Stifel representatives presented a financial analysis of the
consideration to be received by Southside's shareholders in the merger.
Stifel orally advised Southside's board that it was Stifel's opinion that
the merger consideration payable to Southside's shareholders in the merger
was fair, from a financial point of view, to Southside's shareholders.
Stifel provided a written opinion to that effect on April 30, 2001. The
Southside board unanimously approved the merger agreement and the
transactions contemplated thereby, the voting agreements and the amendment
to the Rights Agreement, subject to the negotiation of the final terms of
the definitive agreements by Southside management and legal counsel. The
Southside board also determined that, because not all of the conditions to
the tender offer had been satisfied, Southside would terminate the tender
offer if the merger agreement with Allegiant Bancorp was signed.
Also on April 27, 2001, Allegiant Bancorp's board held a special
meeting to consider the agreement and plan of merger and the transactions
contemplated thereby, which the parties' representatives had negotiated.
Allegiant Bancorp's management reviewed the development of the transaction
since the preceding board meeting on April 19, 2001. Legg Mason
representatives presented a financial analysis of the consideration to be
received by Southside's shareholders in the merger. Legg Mason orally
advised Allegiant Bancorp's board that it was Legg Mason's opinion that the
merger consideration payable to Southside's shareholders in the merger was
fair, from a financial point of view, to Allegiant Bancorp and that Legg
Mason's written opinion to that effect would be included in the proxy
materials issued in connection with a shareholders' meeting held to vote on
the merger. Allegiant Bancorp's counsel reviewed the terms of the
transaction documents. Thereafter, the board discussed the advisability of
the proposed merger, the merger agreement and the transactions contemplated
thereby. At the conclusion of the discussion, Allegiant Bancorp's board
voted unanimously to approve the merger, the merger agreement and the
transactions contemplated thereby and to recommend that its shareholders
vote for approval and adoption of the merger, the merger agreement and the
transactions contemplated thereby.
Final negotiations for the definitive merger agreement continued
through April 30, 2001. On April 30, 2001, the merger agreement and the
voting agreements were executed by the parties after the close of trading on
the Nasdaq National Market. Shortly thereafter Southside and Allegiant
Bancorp jointly announced the proposed merger. On May 1, 2001, Southside
filed documents with the SEC terminating the tender offer.
ALLEGIANT BANCORP BOARD RECOMMENDATION AND REASONS FOR THE MERGER.
Allegiant Bancorp's board believes that the merger is fair to, and in the
best interests of, Allegiant Bancorp and its shareholders. Accordingly,
Allegiant Bancorp's board of directors unanimously approved the merger
agreement and unanimously recommends that its shareholders vote "FOR" the
merger.
Allegiant Bancorp's board of directors believes that the merger
presents a unique opportunity to combine two financial institutions to
create a community-based banking and financial services company with the
capability to offer a full range of financial products and services through
a powerful distribution network in the greater St. Louis area.
In reaching its decision to approve the merger agreement, the
board consulted with Allegiant Bancorp's management, as well as with Allegiant
Bancorp's financial and legal advisors, and considered a variety of factors,
including the following:
* Allegiant Bancorp's knowledge of its company's business,
operations, financial condition, earnings and prospects;
* The business, operations, financial condition, earnings and
prospects of Southside. In making this determination, Allegiant
Bancorp took into account the results of its due diligence review
of Southside;
- 37 -
* The unique opportunity for growth represented by Southside in
view of the board's assessment of the attractiveness of other
acquisition candidates in Allegiant Bancorp's market area;
* The consistency of the merger with Allegiant Bancorp's business
strategy;
* Allegiant Bancorp's expectation that the merged company
would benefit from greater economies of scale than either
Allegiant Bancorp or Southside could benefit separately in its
consumer banking, commercial banking, asset management and
other businesses;
* Allegiant Bancorp's view that the combination of Allegiant
Bancorp and Southside presents manageable execution risk in
view of the similar markets and customer demographics served
by Allegiant Bancorp and Southside, the geographic area to be
served by the merged company, the similar business lines and
business cultures of the two companies and Allegiant Bancorp
management's prior experience in integrating acquisitions;
* The fact that the Allegiant Bancorp identity and brand would be
continued by the merged company after the merger;
* The complementary nature of the business of Allegiant Bancorp
and Southside;
* Allegiant Bancorp's belief that both Allegiant Bancorp's and
Southside's senior management share a common vision about
the importance of delivering financial performance and
shareholder value and that the managements and employees of
Allegiant Bancorp and Southside possess complementary skills
and expertise;
* The structure of the merger and the terms of the merger
agreement and related agreements;
* The opinion of Legg Mason Wood Walker, Incorporated, Allegiant
Bancorp's financial advisor, that the amount of consideration
to be paid by Allegiant Bancorp in the merger agreement is
fair, from a financial point of view, to Allegiant Bancorp
shareholders; and
* The perceived likelihood that the merger will be approved by the
appropriate regulatory authorities.
This discussion of the information and factors considered by
Allegiant Bancorp's board of directors is not intended to be exhaustive but
includes all material factors the board considered. In reaching the
determination to approve and recommend the merger, Allegiant Bancorp's board
of directors did not assign any relative or specific weights to the
foregoing factors, and individual directors may have given differing weights
to different factors. Allegiant Bancorp's board of directors is unanimous in
its recommendation that Allegiant Bancorp shareholders vote "FOR" the merger
agreement and the transactions contemplated thereby.
SOUTHSIDE BOARD RECOMMENDATION AND REASONS FOR THE MERGER. In
reaching the decision to approve the merger, Southside's board of directors
consulted with Southside's management, as well as its financial and legal
advisors, and considered many factors, including the following:
* The formation of the merged company as a Missouri financial
institution with more than $1.9 billion in total assets;
* The increased economic value for Southside's shareholders because
the merger provides a premium over the Southside market price
existing immediately before the announcement of the transaction;
* The opportunity for shareholders to elect cash or stock, subject
to reallocation of the oversubscribed form of consideration;
- 38 -
* The opportunity for Southside shareholders who receive stock
of the merged company to continue their investment in a
regional bank holding company through a tax-free transaction;
* The advice from Stifel, Nicolaus & Company, Incorporated,
Southside's financial advisor, that the amount of
consideration to be received by Southside's shareholders in
the merger is fair, from a financial point of view, to
Southside shareholders;
* Increasingly competitive conditions in the marketplace for
financial institutions;
* The ability to combine Southside's operations with an
attractive bank holding company which shares many of
Southside's goals of providing exemplary regional banking
services, but which also offers a larger market area and
larger asset base to allow for enhanced service in the future;
* The possibility for employees of Southside to have more
opportunities for employment and the possibility for customers
of Southside to have more diverse products and services from a
larger banking organization; and
* The terms of the merger agreement and related agreements.
This discussion of the various factors considered by the board of
directors of Southside is not, and is not intended to be, exhaustive. It is
not necessarily in the order of importance to the board of directors or any
particular director. Southside's board of directors did not quantify or
otherwise assign relative weights to the specific factors considered in
reaching its determination due to the variety of factors considered. In
addition, each director may have given different weights to different
factors.
Southside's board of directors believes that the merger and the
related transactions are fair to, and in the best interests of, Southside
and its shareholders. Accordingly, Southside's board of directors has
unanimously approved the merger and unanimously recommends that Southside
shareholders vote "FOR" the merger.
OPINION OF ALLEGIANT BANCORP'S FINANCIAL ADVISOR
At a meeting of the board of directors on April 27, 2001, Allegiant
Bancorp's directors discussed and considered the terms of the proposed
merger. At that meeting Legg Mason Wood Walker, Incorporated, Allegiant
Bancorp's financial advisor, submitted an opinion to Allegiant Bancorp's
board of directors that, based upon the matters set forth in such opinion,
the consideration to be paid by Allegiant Bancorp in the merger was fair,
from a financial point of view, to Allegiant Bancorp. Legg Mason has
confirmed its opinion by delivery of an updated written opinion to Allegiant
Bancorp's board of directors dated the date of this joint proxy
statement/prospectus.
The full text of Legg Mason's opinion dated the date of this document,
which sets forth assumptions made, procedures followed, matters considered,
and limits on the review undertaken by Legg Mason is attached as Annex B to
-------
this joint proxy statement/prospectus and is incorporated herein by reference.
Allegiant Bancorp's shareholders are urged to read the Legg Mason opinion
in its entirety.
On April 20, 2001, Allegiant Bancorp retained Legg Mason as its
financial advisor in connection with Allegiant Bancorp's consideration of a
possible merger with Southside and to render an opinion with respect to the
fairness to Allegiant Bancorp, from a financial point of view, of the
consideration to be paid by Allegiant Bancorp in the merger. Legg Mason is
engaged in the business of providing a range of investment banking services
to clients and regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
On April 27, 2001, the board of directors of Allegiant Bancorp held a
meeting to evaluate the proposed merger. At this meeting, Legg Mason rendered
its oral opinion that, as of that date and based upon and subject to the
factors and assumptions set forth in its opinion, the consideration to be paid
by Allegiant Bancorp in the merger
- 39 -
was fair, from a financial point of view, to Allegiant Bancorp. Following
this meeting, Legg Mason delivered a written opinion dated April 27, 2001
to the board of directors of Allegiant Bancorp. Legg Mason subsequently
confirmed and updated its opinion in writing by delivering to the board
of directors of Allegiant Bancorp a written opinion dated as of the date
of this document. In updating its opinion, Legg Mason performed procedures
to update certain of its analyses and reviewed the assumptions used in
its analyses and the factors considered in connection with its earlier
opinion.
The full text of the Legg Mason opinion, which sets forth a
description of the procedures followed, assumptions made, matters considered
and limits on the review undertaken in connection with the opinion, is
attached to this document as Annex B and is incorporated herein by
-------
reference. Shareholders are urged to read the opinion in its entirety. Legg
Mason's opinion is directed to the Allegiant Bancorp board of directors
and relates only to the fairness, from a financial point of view, of the
amount of consideration to be paid in the merger. In addition, Legg Mason's
opinion does not address any other aspect of the proposed merger or any
related transaction and does not constitute a recommendation to any
shareholder as to how such shareholder should vote at the special meeting.
This summary of the opinion is qualified in its entirety by reference to the
full text of the opinion.
In rendering its opinion, Legg Mason, among other things:
* reviewed a draft of the form of the definitive merger agreement and
related documents;
* reviewed the audited consolidated financial statements of
Allegiant Bancorp for the twelve-month periods ended December 31,
2000, 1999, 1998, and 1997;
* reviewed the unaudited financial statements of Allegiant Bancorp
for the three-month period ended March 31, 2001;
* reviewed the audited consolidated financial statements of
Southside for the twelve-month periods ended December 31, 2000,
1999, 1998, and 1997;
* reviewed publicly available information concerning Allegiant
Bancorp and Southside primarily related to company press releases
and proxy statements;
* reviewed forecast financial statements of Allegiant Bancorp and
Southside furnished to Legg Mason by the management of Allegiant
Bancorp;
* reviewed and analyzed publicly available financial and stock
market data relating to public companies that Legg Mason deemed
relevant to its inquiry;
* reviewed the reported prices and trading activity of the
publicly-traded securities of Allegiant Bancorp and Southside;
* analyzed publicly available information concerning the terms of
merger and acquisition transactions that Legg Mason considered
relevant to its inquiry;
* held meetings and discussions with officers and employees of
Allegiant Bancorp and Southside concerning the operations,
financial condition, and future prospects of Allegiant Bancorp
and Southside; and
* conducted other financial studies, analyses and investigations
and considered other information as it deemed necessary or
appropriate for purposes of its opinion.
Legg Mason also considered additional financial and other factors as
it deemed appropriate under the circumstances and took into account its
assessment of general economic, market and financial conditions and its
experience in similar transactions, as well as its experience in securities
valuation and its knowledge of financial
- 40 -
institutions, including banks, bank holding companies, thrifts and finance
companies generally. Legg Mason's opinion was based upon conditions as they
existed on, and information provided to it by, the date of the opinion.
In connection with its review, Legg Mason assumed and relied upon the
accuracy and completeness of all financial and other information supplied to
it by Allegiant Bancorp and Southside or publicly available, and did not
independently verify that information. Legg Mason further relied upon the
assurances of management of Allegiant Bancorp and Southside that they are
unaware of any facts that would make that information incomplete or
misleading. In particular, Legg Mason relied upon the management of
Allegiant as to the proper accounting treatment of the merger, including the
impact of the pro forma adjustments on the financial statements. Legg Mason
also relied upon the managements of Allegiant and Southside as to the
reasonableness and achievability of the financial projections, and the
assumptions and bases therein, provided to it or prepared for Allegiant Bancorp
and Southside, and Legg Mason assumed that those projections were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of management as to the future operating performance of Allegiant
Bancorp and Southside, including the tax benefits, cost savings and operating
synergies to result from or follow the merger. Legg Mason had no reason to
believe those projections were incorrect. In addition, Legg Mason assumed
the year-to-date financial results of both Allegiant Bancorp and Southside are
not materially different than the 2001 budgets provided to it. Neither Allegiant
Bancorp nor Southside publicly discloses internal management projections of the
type provided to Legg Mason in connection with Legg Mason's review of the
merger. The projections were not prepared with the expectation of
public disclosure. The projections were based on numerous variables and
assumptions that are inherently uncertain, including without limitation,
factors related to general economic and competitive conditions. Accordingly,
actual results could vary significantly from those set forth in such
projections.
Legg Mason has not been requested to make, and has not made, an
independent appraisal or evaluation of the assets, properties or liabilities
of Southside and it has not been furnished with any such appraisal or
evaluation. Estimates of values of companies and assets do not purport to be
appraisals or necessarily reflect the prices at which companies and assets
may actually be sold. Because such estimates are inherently subject to
uncertainty, Legg Mason assumes no responsibility for their accuracy. Legg
Mason did not review any of the books and records of Southside or assumed
any responsibility for conducting a physical inspection of the properties,
branches or facilities of Southside. Legg Mason assumed that the merger
will be consummated on the terms and conditions described in the form of the
merger agreement reviewed by it. In addition, Legg Mason has assumed all
material liabilities of Allegiant Bancorp and Southside are reflected in their
financial statements. Furthermore, Legg Mason has expressed no opinion as to
the value of or the price or trading range at which the shares of Allegiant
Bancorp will trade in the future.
Analysis of Legg Mason. The following summary describes the primary
analyses performed by Legg Mason in reaching its opinion. You should
understand that the order of analyses, and the results of those analyses,
described does not represent relative importance or weight given to such
analyses by Legg Mason.
Merger Overview. Legg Mason noted that the total value of the
consideration to paid in the merger was approximately $118 million
which will be paid 50% in the form of cash of $14.00 per share of Southside
common stock and 50% in the form of 1.39 shares of merged company common stock
per share of Southside common stock. Each Southside shareholder will be
entitled to elect the form of consideration to be received, subject to pro
ration of the oversubscribed pool of consideration. Legg Mason determined
that the $14.00 per Southside share represented the following multiples:
SOUTHSIDE BASIS MULTIPLE
--------------- --------
Last twelve month earnings per share.......................18.21x
Book value per share........................................1.70x
Tangible book value per share...............................1.90x
- 41 -
ACCRETION/DILUTION ANALYSIS. Legg Mason analyzed the pro forma
financial impact of the merger, on both a GAAP basis and a cash basis,
on Allegiant Bancorp's fully diluted earnings per share. For purposes of these
analyses, Legg Mason assumed that the merger would close in the fourth
quarter of 2001 and utilized earnings per share projections provided by
management of Allegiant Bancorp for Allegiant Bancorp and Southside for 2002.
Legg Mason performed this analysis using Allegiant Bancorp management's
assumptions with respect to operating synergies, including the phase-in period
for achieving those synergies. Legg Mason's analyses showed that the merger,
compared to continued operation of Allegiant Bancorp on a stand-alone basis,
would be accretive to both Allegiant Bancorp's GAAP and cash estimated earnings
in 2002.
SELECTED MERGERS. Legg Mason then compared the ratios generated by
the merger to those of other selected bank merger transactions. The ratios
used were based upon the acquisition price of these transactions relative to the
last twelve months GAAP earnings, reported book value, and reported tangible
book value. In addition, Legg Mason reviewed the implied core deposit premium
of the merger versus that of the comparable merger transactions. The information
analyzed was compiled from both public filings with the SEC and a data firm that
monitors and publishes transaction summaries and descriptions of mergers and
acquisitions in the financial services industry. The data used for the
comparable transactions was as of the announcement date of those transactions.
Legg Mason selected fifteen domestic bank mergers that were announced
since January 1, 1999 as the comparable transactions. These select
transactions include the following:
BUYER SELLER
----- ------
BB&T Corporation BankFirst Corporation
City National Corporation The Pacific Bank, N.A.
Community Bank System, Incorporated First Liberty Bank Corporation
Compass Bancshares, Incorporated FirsTier Corporation
Fifth Third Bancorp Peoples Bank Corporation of Indianapolis
First Charter Corporation Carolina First Bancshares, Incorporated
Fulton Financial Corporation Drovers Bancshares Corporation
Harris Bankcorp, Incorporated First National Bancorp, Incorporated
Old Kent Financial Corporation Grand Premier Financial, Incorporated
Old Kent Financial Corporation Merchants Bancorp, Incorporated
Old National Bancorp ANB Corporation
U.S. Bancorp Scripps Financial Corporation
Wells Fargo & Company Brenton Banks, Incorporated
Wells Fargo & Company Michigan Financial Corporation
WesBanco, Incorporated American Bancorporation
Additionally, Legg Mason analyzed all bank mergers announced since
January 1, 2000 where the announced transaction value was between $50
million and $250 million or the target's assets at announcement were between
$300 million and $1.5 billion in both the Midwest and the United States.
The table below compares the implied ratios of the merger to the
comparable merger:
SELECT MIDWEST U.S.
ALLEGIANT/ TRANSACTIONS TRANSACTIONS TRANSACTIONS
TRANSACTION RATIO SOUTHSIDE MEDIAN MEDIAN MEDIAN
----------------- --------- ------ ------ ------
Price/Last twelve month
earnings per share (1).................... 18.21x 19.10x 19.44x 18.05x
Price/Book value per share................... 1.70x 2.29x 2.47x 2.41x
Price/Tangible book value per share.......... 1.90x 2.47x 2.61x 2.54x
Core deposit premium......................... 10.62% 18.27% 25.91% 17.08%
----------------
(1) Earnings per share excludes any extraordinary items which may have
affected earnings.
- 42 -
SELECTED PEER GROUP ANALYSIS. Legg Mason reviewed the historical
financial and market performance of Southside and its peer group based on
financial measures including earnings performance, efficiency ratio, capital
adequacy and asset quality, and measures of market performance, including
price to book values, price to tangible book values, and price to last
twelve month earnings. The information analyzed was compiled from both
public filings with the SEC and a data firm that monitors and publishes
financial and market information for companies in the financial services
industry. Legg Mason used these measurements to estimate relative value of
the companies.
The comparable companies used by Legg Mason were twelve banking
institutions headquartered in Illinois, Indiana, Iowa, and Missouri having
assets between $500 million and $1 billion, referred to as the Select
Group.
Additionally, Legg Mason reviewed the historical financial and market
performance of all banks headquartered in Illinois, Indiana, Iowa, and
Missouri, referred to as the Midwest Group, all domestic banks with assets
between $500 million and $1 billion, referred to as the U.S. Asset Group,
and all domestic banks, referred to as the U.S. Group.
The following table compares the historical financial performance
ratios of Southside to its peer groups:
SELECT MIDWEST U.S. ASSET U.S.
GROUP GROUP GROUP GROUP
FINANCIAL RATIO SOUTHSIDE MEDIAN MEDIAN MEDIAN MEDIAN
--------------- --------- ------ ------ ------ ------
Return on average assets.................... 0.92% 0.83% 0.92% 1.02% 1.06%
Return on average equity.................... 9.76 10.06 12.74 12.67 12.34
Net interest margin......................... 3.76 3.85 3.71 4.31 4.32
Efficiency ratio ........................... 66.82 63.77 60.68 60.57 61.50
Non-interest income/Average assets.......... 0.62 0.75 0.87 0.86 0.84
Total equity/Total assets................... 9.41 8.03 7.82 8.54 8.78
Total loans/Total deposits.................. 80.71 87.26 85.87 82.78 84.45
Non-performing assets/Total assets.......... 0.83 0.50 0.38 0.38 0.35
Legg Mason also compared the market performance ratios of Southside's
peer groups to the implied ratios resulting from the merger. Legg Mason
reviewed merger control premiums that approximate the median 1-day and
30-day stock price premiums realized in the select transactions listed
above. Legg Mason, then applied the average of the control premiums which
represented a 45% merger control premium to the market performance ratios of
Southside's peer groups. The analysis showed a price to last twelve month
earnings multiple implied in the merger of 18.2x versus a range of
16.7x to 18.3x for the peer groups. The price to book value and price to
tangible book value multiples implied in the merger of 1.7x and 1.9x,
respectively, compared with ranges of 1.6x to 2.0x book value and 1.8x to
2.1x tangible book value.
DISCOUNTED CASH FLOW ANALYSIS. Legg Mason performed a discounted cash
flow analysis that uses an estimated stream of cash flows which would be
derived from Southside following the merger to determine theoretical
valuation ranges. The analysis assumed the following:
* projected 2002 net income of Southside based on management
estimates, with assumed average net income growth of 10.00% for
2003 through calendar year 2006;
* pre-tax cost savings to be achieved in the merger of $5.3
million in 2002 and thereafter and net revenue enhancements of
$2.6 million in 2002 grown by 10% in 2003 and thereafter;
* terminal multiples of 7 to 15 times earnings for estimated 2006
earnings; and
* discount rates of 10% to 14%.
- 43 -
Based on such assumptions, Legg Mason's analysis implied the following
theoretical range of values for Southside:
NET PRESENT VALUE
-----------------
Low valuation.............................$98.3 million
Mid-point valuation......................$129.5 million
High valuation...........................$165.9 million
Legg Mason observed that the implied value of the merger is
within this range and is below both the mid-point and high valuations.
Additionally, Legg Mason estimated internal rates of return using a
present value analysis over a five-year period, which Allegiant Bancorp may
realize from the merger given the above assumptions in addition to
earnings growth rates of 8.00% to 12.00% and terminal multiples of 7 to 15
times earnings for estimated 2006 earnings. Based on these assumptions,
Legg Mason projected internal rates of returns ranging from 16.0% to 32.3%.
Legg Mason stated that the discounted cash flow analysis is a
widely-used valuation methodology but noted that it relies on numerous
assumptions, including earnings growth rates, cost savings, terminal values
and discount rates. The analysis does not purport to be indicative of the
actual value or expected value of Southside or the actual returns or
expected returns which Allegiant Bancorp may achieve from this merger.
This summary provides a description of the material analyses
prepared by Legg Mason in connection with the rendering of its opinion. The
preparation of the fairness opinion is not necessarily susceptible to
partial analysis or summary description. Legg Mason believes that its
analyses must be considered as a whole and that selecting portions of its
analyses without considering all analyses would create an incomplete view of
the processes underlying the analyses set forth in Legg Mason's presentation
and opinion. The ranges of valuations resulting from any particular analysis
described above should not be taken to be Legg Mason's view of the actual
value of Southside. The fact that any specific analysis has been referred to
in the summary above is not meant to indicate that such analysis was given
greater weight than any other analyses.
Pursuant to its engagement letter with Legg Mason, Allegiant Bancorp
agreed to pay Legg Mason a non-refundable financial advisory fee of $25,000
upon signing the engagement letter, a non-refundable fee of $250,000 upon
delivery of Legg Mason's fairness opinion and a fee of $250,000 upon, and
contingent upon the consummation of the merger. Allegiant Bancorp has also
agreed to reimburse Legg Mason for its reasonable out-of-pocket expenses,
including the fees and expenses of legal counsel retained by Legg Mason.
Allegiant Bancorp has also agreed to indemnify Legg Mason, its affiliates,
and their respective partners, directors, officers, agents, consultants,
employees and controlling persons against certain liabilities, including
liabilities under the federal securities laws. In addition, Legg Mason has
provided, and may provide in the future, certain investment banking services
to Allegiant Bancorp from time to time, for which it has received, and would
receive, customary compensation, including acting as financial advisor for
Allegiant Bancorp in connection with the merger agreement. Legg Mason will
receive a fee for managing an underwritten offering of trust preferred
securities of Allegiant Bancorp, the proceeds of which will be used to
partially fund the cash portion of the merger.
OPINION OF SOUTHSIDE'S FINANCIAL ADVISOR
Southside retained Stifel, Nicolaus & Company, Incorporated as its
financial advisor in connection with the merger because Stifel is a
nationally recognized investment banking firm with substantial expertise in
transactions similar to the merger. Stifel is an investment banking and
securities firm with membership on all principal United States securities
exchanges. As part of its investment banking activities, Stifel regularly
engages in the independent valuation of businesses and securities in
connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
In connection with the April 27, 2001 meeting of the board of
directors of Southside, Stifel rendered its oral opinion that, as of such
date, the consideration payable under the agreement was fair to the holders
of Southside
- 44 -
common stock from a financial point of view. Stifel delivered a written
opinion to the same effect on April 30, 2001. Stifel confirmed its
prior opinion by delivery of its written opinion to the Southside board of
directors, dated the date of this joint proxy statement/prospectus, that,
based upon and subject to the various considerations set forth herein, as of
the date hereof the consideration payable under the merger agreement is fair
to the holders of Southside common stock from a financial point of view.
The full text of Stifel's opinion as of the date hereof, which sets
forth the assumptions made, matters considered and limitations of the review
undertaken, is attached as Annex C to this joint proxy statement/prospectus
-------
and is incorporated herein by reference, and should be read in its entirety
in connection with this joint proxy statement/prospectus.
No limitations were imposed by Southside on the scope of Stifel's
investigation or the procedures to be followed by Stifel in rendering its
opinion. Stifel was not requested to and did not make any recommendation to
Southside's board of directors as to the form or amount of the consideration
to be paid to Southside or its shareholders, which was determined through
arm's length negotiations between the parties. In arriving at its opinion,
Stifel did not ascribe a specific range of values to Southside. Its opinion
is based on the financial and comparative analyses described below. Stifel's
opinion was directed solely to Southside's board of directors for its use in
connection with its consideration of the merger. Stifel's opinion addressed
only the fairness of the consideration to be received from a financial point
of view, did not address any other aspect of the merger, and was not
intended to be and does not constitute a recommendation to any shareholder
of Southside as to how such shareholder should vote with respect to the
merger. Stifel was not requested to opine as to, and its opinion does not
address, Southside's underlying business decision to proceed with or effect
the merger or the relative merits of the merger compared to any alternative
transaction that might be available to Southside.
In connection with its April 27, 2001 opinion and its written
opinion dated the date hereof, Stifel, among other things:
* reviewed the form of the merger agreement as executed on
April 30, 2001;
* reviewed the financial statements of Southside and Allegiant
Bancorp included in their respective Form 10-Ks for the five
years in the period ended December 31, 2000;
* reviewed certain internal financial analyses and forecasts for
Southside and Allegiant Bancorp prepared by their respective
managements;
* conducted conversations with Southside's and Allegiant
Bancorp's senior management regarding recent developments and
each management's respective financial forecasts for Southside
and Allegiant Bancorp;
* interviewed members of Southside's and Allegiant Bancorp's
respective senior managements regarding factors which affect
each entity's business;
* compared certain financial and securities data of Southside
and Allegiant Bancorp with various other companies whose
securities are traded in public markets and reviewed the
historical stock prices and trading volumes of the common
stock of Southside and Allegiant Bancorp;
* reviewed the financial terms of certain other business
combinations; and
* conducted such other financial studies, analyses and
investigations as it deemed appropriate for purposes of its
opinion.
Stifel also took into account its assessment of general economic,
market and financial conditions and its experience in other transactions, as
well as its experience in securities valuations and its knowledge of the
commercial banking industry generally.
- 45 -
In rendering its opinion, Stifel relied upon and assumed, without
independent verification, the accuracy and completeness of all of the
financial and other information that was provided to it or that was
otherwise reviewed by it and did not assume any responsibility for
independently verifying any of that information. With respect to the
financial forecasts supplied to Stifel, including, without limitation,
projected cost savings and operating synergies resulting from the merger,
Stifel assumed that they were reasonably prepared on the basis reflecting
the best currently available estimates and judgments of the managements of
Southside and Allegiant Bancorp as to the future operating and financial
performance of Southside and Allegiant Bancorp, that they would be realized
in the amounts and time periods estimated and that they provided a
reasonable basis upon which Stifel could form its opinion. Stifel also
assumed that there were no material changes in the assets, liabilities,
financial condition, results of operations, business or prospects of either
Southside or Allegiant Bancorp since the date of the last financial
statements made available to it. Stifel also assumed, without independent
verification and with Southside's consent, that the aggregate allowances for
loan losses set forth in the financial statements of Southside and Allegiant
Bancorp are in the aggregate adequate to cover all such losses. Stifel did
not make or obtain any independent evaluation, appraisal or physical
inspection of Southside's or Allegiant Bancorp's assets or liabilities, the
collateral securing any of such assets or liabilities, or the collectibility
of any such assets nor did it review loan or credit files of Southside or
Allegiant Bancorp. Stifel relied on advice of Southside's counsel and
accountants as to all legal and accounting matters with respect to
Southside, the merger agreement and the transactions contemplated thereby.
Stifel assumed, with Southside's consent, that there are no factors that
would delay, or subject to any adverse conditions, any necessary regulatory or
governmental approval and that all conditions to the merger will be
satisfied and not waived.
In rendering its opinion, Stifel assumed, as contemplated by the
merger agreement, that: (1) the merger will be consummated as provided in
the merger agreement, (2) will constitute a tax-free reorganization as to
the shares of merged company common stock received by shareholders of
Allegiant Bancorp and Southside and (3) will be accounted for under the
purchase accounting method. Stifel's opinion was necessarily based on
economic, market, financial and other conditions as they existed on, and on
the information made available to it as of, the date of its opinion.
Stifel's opinion does not imply any conclusion as to the price or trading
range of the Southside common stock or the Allegiant Bancorp common stock,
which may vary depending upon various factors, including changes in interest
rates, dividend rates, market conditions, economic conditions and other
factors that influence the price of securities.
The financial forecasts furnished to Stifel for Southside and
Allegiant Bancorp and estimates of cost savings and operating synergies
resulting from the merger were prepared by the managements of Southside and
Allegiant Bancorp and constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. As a matter
of policy, Southside and Allegiant Bancorp do not publicly disclose internal
management forecasts, projections or estimates of the type furnished to
Stifel in connection with its analysis of the financial terms of the merger,
and the forecasts and estimates were not prepared with a view towards public
disclosure. These forecasts and estimates were based on numerous variables
and assumptions which are inherently uncertain and which may not be within
the control of the management of either Southside or Allegiant Bancorp,
including, without limitation, factors related to the integration of
Southside and Allegiant Bancorp and general economic, regulatory and
competitive conditions. Accordingly, actual results could vary materially
from those set forth in the forecasts and estimates.
In connection with rendering its April 27, 2001 opinion, Stifel
performed a variety of financial analyses that are summarized below. This
summary does not purport to be a complete description of the analyses.
Stifel believes that its analyses and the summary set forth herein must be
considered as a whole and that selecting portions of the analyses and the
factors considered, without considering all factors and analyses, could
create an incomplete view of the analyses and processes underlying its
opinions. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analysis or summary description. In its analyses, Stifel made numerous
assumptions with respect to industry performance, business and economic
conditions, and other matters, many of which are beyond the control of
Southside or Allegiant Bancorp. Any estimates contained in Stifel's analyses
are not necessarily indicative of actual future values or results, which may
be significantly more or less favorable than suggested by the estimates.
Estimates of values of companies do not purport to be appraisals or necessarily
reflect the actual prices at which companies or their securities actually may
be sold. No company or transaction utilized in Stifel's analyses was identical
to Southside or Allegiant Bancorp or the merger. Accordingly, an analysis of
the results described below is not mathematical. Rather, it involves complex
considerations and judgments concerning differences in financial and
operating characteristics of the companies and
- 46 -
other facts that could affect the public trading value of the companies
to which they are being compared. None of the analyses performed by Stifel
was assigned a greater significance by Stifel than any other. The analyses
described below does not purport to be indicative of actual future results,
or to reflect the prices at which Southside common stock or Allegiant
Bancorp common stock may trade in the public markets.
The following is a summary of the financial analyses performed by
Stifel in connection with providing its opinion on April 27, 2001. In
connection with its written opinion dated as of the date of this joint proxy
statement/prospectus, Stifel performed procedures to update certain of its
analyses and review the assumptions on which such analyses were based and
the factors considered in connection therewith. In updating its opinion,
Stifel did not utilize any methods of analysis in addition to those
described.
PRO FORMA EFFECT OF THE MERGER. Stifel reviewed certain estimated
future operating and financial information developed by Southside and
Allegiant Bancorp and certain estimated future operating and financial
information for the pro forma combined entity resulting from the merger for
the twelve-month periods ending December 31, 2001 and December 31, 2002.
Based on this analysis, Stifel compared certain of Southside's estimated
future per share results with the estimated figures for the pro forma
combined entity. Stifel compared Southside's estimated future stand-alone
earnings per share with such estimated figures for the pro forma combined
entity. On a pro forma basis, the merger is forecast to be accretive to the
merged company's earnings per share for the twelve-month periods ending
December 31, 2001 and December 31, 2002. Stifel also reviewed certain
historical financial information in order to determine the effect of the
merger on Southside's book value and tangible book value. Based on this
analysis, at December 31, 2000, on a pro forma basis the merger is forecast
to be accretive to the merged company's book value per share and tangible
book value per share. Stifel also compared Southside's stand-alone common
stock dividends per share with the estimated figures for the pro forma
combined entity. On a pro forma basis, the merger is forecast to be
accretive to the merged company's dividends per share.
ANALYSIS OF BANK MERGER TRANSACTIONS. Stifel analyzed certain
information relating to recent transactions in the banking industry,
consisting of (1) 150 acquisitions announced between April 23, 2000 and
April 23, 2001, involving sellers in all regions of the United States with
announced transactions values and excluding merger of equals transactions,
referred to below as Group A, (2) 38 acquisitions announced between April
23, 2000 and April 23, 2001, involving sellers in the midwestern region of
the United States with announced transactions values and excluding merger of
equals transactions, referred to below as Group B and (3) 31 acquisitions
announced between April 23, 2000 and April 23, 2001, involving sellers in
the midwestern region of the United States with announced transactions
values, using purchase accounting, and excluding merger of equals
transactions, referred to below as Group C. Stifel calculated the following
ratios with respect to the merger and the selected transactions:
SOUTHSIDE/ GROUP A SELECTED TRANSACTIONS
ALLEGIANT BANCORP ---------------------------------------------------
RATIOS ----------------- 25TH PERCENTILE MEDIAN 75TH PERCENTILE
------ --------------- ------ ---------------
Deal Price Per Share/ Book Value
Per Share........................ 178.4% 147.2% 182.5% 240.9%
Deal Price Per Share/Tangible Book
Value Per Share.................. 187.5% 148.8% 186.1% 251.2%
Adjusted Deal Price/6.50% Equity........ 213.6% 163.6% 210.4% 273.7%
Deal Price Per Share/Last 12
Months Earnings Per Share........ 18.6x 13.8x 17.6x 21.8x
Deal Price/Assets....................... 16.8% 12.7% 16.8% 21.7%
Premium over Tangible Book
Value/Deposits................... 10.1% 5.2% 9.4% 13.9%
Deal Price/Deposits.................... 21.6% 15.1% 20.5% 26.4%
- 47 -
SOUTHSIDE/ GROUP B SELECTED TRANSACTIONS
ALLEGIANT BANCORP ---------------------------------------------------
RATIOS ----------------- 25TH PERCENTILE MEDIAN 75TH PERCENTILE
------ --------------- ------ ---------------
Deal Price Per Share/ Book Value
Per Share........................ 178.4% 140.6% 158.3% 203.5%
Deal Price Per Share/Tangible Book
Value Per Share.................. 187.5% 142.2% 161.5% 209.1%
Adjusted Deal Price/6.50% Equity........ 213.6% 156.7% 187.4% 245.8%
Deal Price Per Share/Last 12
Months Earnings Per Share........ 18.6x 13.6x 17.4x 19.3x
Deal Price/Assets....................... 16.8% 11.6% 14.6% 21.4%
Premium over Tangible Book
Value/Deposits................... 10.1% 4.6% 7.2% 11.6%
Deal Price/Deposits..................... 21.6% 13.7% 18.0% 26.7%
SOUTHSIDE/ GROUP C SELECTED TRANSACTIONS
ALLEGIANT BANCORP ---------------------------------------------------
RATIOS ----------------- 25TH PERCENTILE MEDIAN 75TH PERCENTILE
------ --------------- ------ ---------------
Deal Price Per Share/ Book Value
Per Share........................ 178.4% 136.8% 151.3% 177.4%
Deal Price Per Share/Tangible Book
Value Per Share.................. 187.5% 139.1% 151.8% 177.4%
Adjusted Deal Price/6.50% Equity........ 213.6% 153.0% 171.7% 210.0%
Deal Price Per Share/Last 12
Months Earnings Per Share........ 18.6x 12.8x 15.9x 18.8x
Deal Price/Assets....................... 16.8% 11.6% 13.5% 17.9%
Premium over Tangible Book
Value/Deposits................... 10.1% 4.3% 5.4% 9.2%
Deal Price/Deposits..................... 21.6% 13.6% 16.8% 21.5%
This analysis resulted in a range of imputed values for Southside
common stock of between $13.54 and $14.59 based on the median multiples for
Group A, between $11.90 and $13.35 based on the median multiples for Group
B, and between $11.10 and $12.21 based on the median multiples for Group C.
PRESENT VALUE ANALYSIS. Applying discounted cash flow analysis to
the theoretical future earnings and dividends of Southside, Stifel compared
the consideration to be received in exchange for one share of Southside
common stock under the terms of the merger agreement as executed on April
30, 2001 to the calculated future value of one share of Southside's common
stock on a stand-alone basis. The analysis was based upon management's
projected earnings growth, a range of assumed price/earnings ratios, and
discount rates of 15.0%, 17.5% and 20.0%, respectively. Stifel selected the
range of terminal price/earnings ratios on the basis of past and current
trading multiples for other publicly traded comparable commercial banks. The
stand-alone present value of Southside's common stock calculated on this
basis ranged from $6.00 to $9.00 per share.
DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow
analysis, Stifel estimated the net present value of the future streams of
after-tax cash flow that Southside could produce to benefit a potential
acquiror, referred to below as dividendable net income. In this analysis,
Stifel assumed that Southside would perform in accordance with management's
estimates and calculated assumed after-tax distributions to a potential
acquiror such that its tangible common equity ratio would be maintained at
6.5% of assets. Stifel calculated the sum of the assumed perpetual
dividendable net income streams per share beginning in the year 2001,
discounted to present values at assumed discount rates ranging from 13.0% to
17.0%. This discounted cash flow analysis indicated an implied equity value
reference range of $12.20 to $18.76 per share of Southside's common stock.
This analysis did not purport to be indicative of actual future results and
did not purport to reflect the prices at which shares of Southside's common
stock may trade in the public markets. A discounted cash flow analysis was
included because it is a widely used valuation methodology, but the results
of such methodology are highly dependent upon the numerous assumptions that
must be made, including estimated revenue enhancements, earnings growth
rates, dividend payout rates and discount rates.
CONTRIBUTION ANALYSIS. Stifel reviewed certain financial
information for Southside and Allegiant Bancorp for the twelve-month period
ended December 31, 2000, including net interest income, non-interest income,
non-interest expense, net income, total assets, total loans, loan loss
reserves, total deposits, total equity and total tangible equity. In
addition, Stifel reviewed projected net income for the twelve-month periods
ending December 31, 2001 and December 31, 2002 and projected cash net income
for the twelve-month period ending December 31, 2002 for
- 48 -
Southside and Allegiant Bancorp prepared by their respective managements.
Stifel then compared the financial information for Southside to the pro
forma combined figures for Southside and Allegiant Bancorp. The contribution
analysis for these financials indicated that Southside would contribute
between 31% and 50% of the pro forma combined figures for Southside and
Allegiant Bancorp. This analysis resulted in a range of imputed values for
Southside common stock of between $4.91 and $10.68 based on Southside's
contribution to the pro forma combined figures for Southside and Allegiant
Bancorp.
ANALYSIS OF PREMIUM TO MARKET PRICE FOR MERGER TRANSACTIONS. Stifel
analyzed the premiums paid to the then current market price one day, one
week and one month prior to the date of announcement of a transaction for
541 transactions in the bank and thrift industries announced in the United
States between April 24, 1996 and April 23, 2001. Stifel calculated the
following ratios with respect to the merger and such transactions:
MARKET PREMIUM DATA
SOUTHSIDE/ TRANSACTIONS ANNOUNCED BETWEEN
ALLEGIANT BANCORP 4/24/96 AND 4/23/01
----------------- ---------------------------------------------------
25TH PERCENTILE MEDIAN 75TH PERCENTILE
--------------- ------ ---------------
Premium to stock price 1 day prior to
announcement 21.4% 11.3% 22.5% 37.9%
Premium to stock price 1 week prior to
announcement 24.0 15.2 27.1 43.4
Premium to stock price 1 month prior to
announcement 26.8 18.7 32.0 48.1
This analysis resulted in a range of imputed values for Southside
common stock of between $14.40 and $14.85 based on the median premiums for
such transactions. Additionally, the merger consideration represented a 78%
premium to the closing price of Southside's common stock of $8.00 per share
on January 8, 2001, the day immediately preceding the public announcement of
its Dutch auction tender offer.
Comparison of Selected Companies. Stifel reviewed and compared
certain multiples and ratios for the merger with a peer group of nine
selected banks with assets between $500 million and $900 million which
Stifel deemed to be relevant. The group of selected banks consisted of ABC
Bancorp, First State Bancorporation, MetroCorp Bancshares, Inc., Oak Hill
Financial, Inc., Bank of the Ozarks, Inc., PrivateBancorp, Inc., Summit
Bancshares, Inc., Team Financial, Inc., and Vail Banks, Inc. In order to
calculate a range of imputed values for a share of Southside common stock,
Stifel applied a 32.0% control premium to the trading prices of the selected
group of comparable companies and compared the resulting theoretical offer
price to each of book value, tangible book value, adjusted 6.5% equity,
latest twelve month earnings, estimated 2001 earnings as provided by
Institutional Brokers Estimate System, assets, tangible book value to
deposits and deposits. Stifel then applied the resulting range of multiples
and ratios for the peer group specified above to the appropriate financial
results of Southside. This analysis resulted in a range of imputed values
for Southside common stock of between $10.55 and $13.95 based on the median
multiples and ratios for the peer group. The 32.0% control premium selected
by Stifel was based on a five-year analysis of market premiums paid in bank
and thrift merger transactions.
Additionally, Stifel calculated the following ratios with respect
to the nine selected comparable companies after application of the 32.0%
control premium:
- 49 -
RATIOS
SOUTHSIDE/
ALLEGIANT BANCORP NINE SELECTED COMPARABLE COMPANIES
----------------- ---------------------------------------------
MINIMUM MEDIAN MAXIMUM
------- ------ -------
Deal Price Per Share/Book Value
Per Share........................ 178.4% 90.2% 157.6% 282.8%
Deal Price Per Share/Tangible Book
Value Per Share.................. 187.5% 124.2% 183.4% 360.1%
Adjusted Deal Price/6.50% Equity........ 213.6% 88.8% 187.8% 352.2%
Deal Price Per Share/Last 12
Months Earnings Per Share........ 18.6x 11.3x 14.7x 18.5x
Deal Price Per Share/Estimated
2001 Earnings Per Share.......... 17.3x 10.5x 12.8x 15.1x
Deal Price/Assets....................... 16.8% 6.7% 13.8% 25.4%
Premium over Tangible Book
Value/Deposits................... 10.1% 1.6% 7.4% 18.8%
Deal Price/Deposits..................... 21.6% 8.1% 17.1% 29.1%
As discussed earlier, Stifel's opinion was among the many factors
taken into consideration by Southside's board in making its determination to
approve the merger.
Under the terms of Stifel's engagement, Southside paid Stifel a
nonrefundable cash fee of $25,000 upon the execution of the engagement
letter, a nonrefundable cash fee of $75,000 upon the signing of the
definitive agreement and a nonrefundable cash fee of $25,000 at the time of
mailing of the joint proxy statement/prospectus. In addition, Southside has
agreed to pay Stifel an additional fee of 1.00% of the total aggregate
consideration paid in the transaction, less the fees already paid, subject
to and conditioned upon consummation of the merger. Southside has also
agreed to reimburse Stifel for certain out-of-pocket expenses and has agreed
to indemnify Stifel, its affiliates and their respective partners,
directors, officers, agents, consultants, employees and controlling persons
against certain liabilities, including liabilities under the federal
securities laws.
In the ordinary course of its business, Stifel actively trades
equity securities of Southside and Allegiant Bancorp for its own account and
for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.
CONDITIONS OF THE MERGER
Before Allegiant Bancorp and Southside are obligated to complete
the merger, various conditions, including the following, must be satisfied:
* The Federal Reserve Board and any other required federal and/or
state regulatory agency must approve the merger agreement
and the merger, and all waiting periods after the approvals
required by law or regulation must expire;
* The registration statement, of which this joint proxy
statement/prospectus is a part, registering shares of
Southside common stock to be issued in the merger, must be
declared effective and not be subject to a stop order or any
threatened stop order;
* Allegiant Bancorp and Southside must not be subject to any
order, decree, litigation or injunction of a court or agency
of competent jurisdiction that enjoins or prohibits the
consummation of the merger;
* The shareholders of each of Allegiant Bancorp and Southside
must approve the merger;
* The representations and warranties of each company made in the
merger agreement must be true and correct as of the effective
time of the merger and each company must have received a
certificate of the chief executive officer and chief financial
officer of the other company to that effect;
- 50 -
* Each company must have obtained all material permits,
authorizations, consents, waivers and approvals required of it
for the lawful consummation of the merger;
* Each company must have performed in all material respects its
obligations required to be performed under the merger
agreement prior to the effective time of the merger and
delivered to the other company a certificate of its chief
executive officer and chief financial officer to that effect; and
* Since April 30, 2001, there must have been no material
adverse effect on the other company or its subsidiaries, taken
as a whole.
In addition to the mutual conditions described above, Allegiant Bancorp
is not required to complete the merger unless it receives a fairness opinion
from Legg Mason dated on or shortly before the date of mailing of the joint
proxy statement/prospectus, stating that the consideration to be received by
Allegiant Bancorp's shareholders in the merger is fair, from a financial point
of view, to Allegiant Bancorp's shareholders. This condition has been satisfied
as Legg Mason has delivered the opinion set forth in Annex B to this joint
-------
proxy statement/prospectus.
In addition to the mutual conditions described above, Southside is
not obligated to complete the merger unless the following conditions are
also satisfied:
* Thompson Coburn LLP, Allegiant Bancorp's counsel, must have
delivered to Southside an opinion, dated as of the effective
date of the merger, that:
- the merger will qualify as a reorganization under
Section 368(a)(1)(A) of the Internal Revenue Code;
- both Southside and Allegiant Bancorp will be considered
parties to the reorganization under the Internal Revenue
Code;
- no gain or loss will be recognized by Southside as a result
of the merger; and
- no gain or loss will be recognized by the shareholders of
Southside who receive common stock of the merged company,
except with respect to cash received (1) from such
shareholder's election for cash, (2) as a result of
reallocation of cash under the merger agreement, (3) as a
result of the exercise of dissenter's rights or (4) in
lieu of fractional shares in the merged company;
* Two directors of Southside must have been appointed to the
board of directors of the merged company in accordance with
merger agreement; and
* Stifel, Nicolaus must have delivered a reaffirmation of its
fairness opinion to Southside, dated on or shortly before the
date of mailing of the joint proxy statement/prospectus,
stating that the consideration to be received by Southside's
shareholders in the merger agreement is fair, from a financial
point of view, to Southside shareholders. This condition has
been satisfied as Stifel, Nicolaus has delivered the opinion
set forth in Annex C to this joint proxy statement/prospectus.
-------
REPRESENTATIONS AND WARRANTIES
The merger agreement contains extensive representations and
warranties by Allegiant Bancorp and Southside. These include, among other
things, representations and warranties by Allegiant Bancorp and Southside to
each other as to:
* the organization and good standing of each * regulatory approval delays;
company and its subsidiaries; * the documents, including financial statements
* the shareholder vote of each company required to and other reports, filed by each company
approve the merger and the transactions with the applicable regulatory
contemplated thereby; authorities including the Federal Reserve
- 51 -
* each company's capital structure; Board, FDIC, state regulatory agencies,
* each company's authority relative to the self-regulatory organizations and the SEC;
execution and delivery of, and performance * all interests held by each company;
of its obligations under, the merger * loans, commitments and contracts;
agreement; * the absence of material conflicts between each
* the absence of material adverse changes since company's obligations under the merger
December 31, 2000; agreement and its charter documents and
* agreements with regulatory agencies; material contracts to which it is a party
* the absence of undisclosed liabilities; or by which it is bound;
* the accuracy of the information supplied by each * litigation;
company for inclusion in this proxy * taxes and tax regulatory matters;
statement/prospectus and related documents; * directors' and officers' insurance;
* the absence of actions that would keep the * compliance with laws;
transaction from qualifying as a * allowance for loan and lease losses and
reorganization under the Internal Revenue non-performing assets;
Code; * obligations to brokers and finders; and
* consents and approvals required; * environmental liability.
Southside made additional representations and warranties to Allegiant
Bancorp as to:
* the conduct of Southside and its subsidiaries * property insurance;
since December 31, 2000; * labor matters;
* the absence of registration obligations with * employee benefit plans and related matters; and
respect to Southside's common stock; * the absence of interest rate management
* title to and condition of assets; instruments.
* real property;
* the existence of material interests of certain
persons;
Allegiant Bancorp also made additional representations and warranties to
Southside as to:
* the termination of its negotiations with First * the absence of change in control payments.
Banks with regard to the disposition of certain
subsidiaries of the merged company to First
Banks; and
TERMINATION OF THE MERGER AGREEMENT
Allegiant Bancorp's and Southside's board of directors may mutually
agree to terminate the merger agreement at any time prior to the date the
articles of merger are filed with the Missouri Secretary of State and become
effective, whether before or after approval of the merger by Southside's
shareholders.
Allegiant Bancorp's or Southside's board of directors may
unilaterally terminate the merger agreement:
* at any time after March 31, 2002, if the merger is not completed
by such date, provided that the terminating party has not breached
the merger agreement;
* if any governmental authority whose approval is required for
completion of the merger has issued a final non-appealable
denial of such approval;
* if the shareholders of Allegiant Bancorp or Southside do not
approve the merger;
* if the other party commits a material breach, not waived or
cured within 30 days after written notice, of any representation,
warranty, covenant or agreement contained in the merger
agreement; or
- 52 -
* if the other party does not fulfill those obligations which are
conditions to closing.
Southside also may terminate the merger agreement if:
* as of the time immediately after the Southside annual shareholders'
meeting holders of 10% or more of Southside's outstanding
common stock have taken all action necessary to exercise and
perfect their dissenters' rights;
* Allegiant Bancorp does not deliver the merger consideration to
the exchange agent for distribution to the Southside
shareholders; or
* it receives a bona fide superior proposal as described in the
merger agreement.
In addition, Allegiant Bancorp may terminate the merger agreement
if Southside's board of directors, or any committee thereof, resolves to or
takes any of the following actions:
* withdraws or modifies, in any manner adverse to Allegiant Bancorp,
its approval or recommendation of the merger;
* fails to reaffirm its approval or recommendation of the merger
upon Allegiant Bancorp's request; or
* approves or recommends any different form of business combination
for Southside involving a party other than Allegiant
Bancorp or its affiliates.
EFFECT OF TERMINATION
If the merger agreement is terminated, it will become void and
there will be no liability on the part of any party or their respective
officers and directors, except that:
* confidentiality obligations survive termination;
* Allegiant Bancorp will pay all printing, mailing and filing
expenses with respect to the registration statement and this
joint proxy statement/prospectus;
* in the case of termination due to a continued material
volitional breach of any representation, warranty, covenant or
agreement, after notice and opportunity to cure, the breaching
party will not be relieved of liability to the non-breaching
party arising from the intentional, deliberate or willful
breach of any representation, warranty, covenant or agreement
contained in the merger agreement;
* if the merger agreement is terminated: (1) by Southside as a
result of an adverse change in the recommendation of the merger
by its board of directors; (2) by Allegiant Bancorp as a result
of Southside's breach of a representation, warranty, covenant or
agreement of Southside contained in the merger agreement or the
failure of the board of directors of Southside to comply with its
obligation to recommend the merger to the shareholders of
Southside; or (3) by either Southside or Allegiant Bancorp if the
merger agreement is terminated because the merger has not occurred
prior to March 31, 2002 as a result of a third party superior
business combination proposal that has not been withdrawn or
consummated, Southside will pay to Allegiant Bancorp a termination
fee equal to the greater of either 5% of the aggregate merger
consideration to be paid to the shareholders of Southside in
connection with the merger agreement or $5 million; and
* if the merger agreement is terminated: (1) by Southside as a
result of Allegiant Bancorp's breach of a representation,
warranty, covenant or agreement contained in the merger agreement,
or the failure of Allegiant Bancorp to deliver the consideration
to be paid to the shareholders of Southside in connection with the
merger; (2) by Allegiant Bancorp if the merger agreement is
terminated because the merger has not occurred prior to March 31,
2002 as a result of the shareholders of Allegiant
- 53 -
Bancorp not approving the merger agreement; or (3) by Southside or
Allegiant Bancorp because the parties are unable to satisfy the
conditions necessary to complete the merger as a result of the
shareholders of Allegiant Bancorp not approving the merger
agreement, then Allegiant Bancorp will pay to Southside a
termination fee equal to the greater either 5% of the aggregate
merger consideration to be paid to the shareholders of Southside
in connection with the merger agreement or $5 million.
WAIVER AND AMENDMENT
Subject to compliance with applicable law, the merger agreement may
be amended by action taken or authorized by each company's board of directors,
at any time before or after approval of the shareholders of Southside. However,
after approval of the merger by Allegiant Bancorp's shareholders, any amendment
of the merger agreement that (1) changes the amount or the form of the
consideration to be delivered to the Allegiant Bancorp shareholders or (2)
adversely affects the tax treatment to Allegiant Bancorp shareholders requires
the further approval of Allegiant Bancorp's shareholders. Likewise, after
approval of the merger by Southside's shareholders, any amendment of the merger
agreement that (1) changes the amount or the form of the consideration to be
delivered to Southside's shareholders or (2) adversely affects the tax treatment
to Southside shareholders requires the further approval of Southside's
shareholders. Any amendment to the merger agreement requires an instrument
in writing signed on behalf of both of Allegiant Bancorp and Southside.
Any term, condition or provision of the merger agreement may be
waived in writing at any time by the party which is, or whose shareholders
are, entitled to the benefits thereof.
INDEMNIFICATION
Allegiant Bancorp and Southside have agreed to indemnify and hold
harmless each other and their officers, directors and controlling persons
against any and all losses, claims, damages or liabilities to which the
other party may become subject under the Securities Act, the Securities
Exchange Act or other federal or state law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities, or
actions in respect thereof, arise primarily out of any information furnished
or material fact omitted by the other party and included or excluded, as the
case may be, in this joint proxy statement/prospectus.
Allegiant Bancorp and Southside have also agreed that the merged
company will, after the effective date of the merger, indemnify and hold
harmless each shareholder of Southside who is a shareholder at the effective
date of the merger for any tax, including interest, additions to tax and
penalties, that is assessed or otherwise becomes due and owing with respect
to common stock of the merged company received by such shareholder of
Southside under the merger agreement. In the case of any tax loss that is
indemnifiable under the merger agreement, the amount of merger consideration
to be paid to the affected shareholder will be increased by an additional
cash payment sufficient to put the recipient in the position the shareholder
would have been in but for the tax liability.
ACQUISITION PROPOSALS
Southside has agreed that it will not and it will not authorize its
representatives to solicit, encourage, initiate or knowingly facilitate the
submission of a proposal to acquire the stock or assets of Southside or any
of its subsidiaries. In addition, Southside and its representatives will not
enter into negotiations or discussions concerning a proposal to acquire the
stock or assets of Southside or grant any waiver or release with regard to
any of the equity securities of Southside or its subsidiaries. However, if
Southside's board of directors determines in good faith that failing to take
such action would be inconsistent with its fiduciary duties under applicable
law, Southside may participate in negotiations concerning a proposal to
acquire the common stock or assets of Southside. In addition, Southside must
obtain advice from outside counsel and independent financial advisors that
acceptance of the proposal is a proper exercise of the board's fiduciary
duties. If the board of directors of Southside determines that it would be
inconsistent with its fiduciary duties not to accept a third party proposal
that it believes is superior to the transaction with Allegiant Bancorp under
the merger agreement, Southside will be obligated to pay to Allegiant
Bancorp a termination fee equal to the greater of either 5% of the aggregate
value of merger consideration to be paid to the shareholders of Southside
in the merger or $5 million.
- 54 -
CLOSING DATE
The merger will be completed and become effective upon the filing
of articles of merger with the Missouri Secretary of State. Under the merger
agreement, unless otherwise agreed to by the parties, the closing date of
the merger will occur on the date Allegiant Bancorp notifies Southside in
writing but: (1) not earlier than the satisfaction or waiver of all of the
conditions to the merger agreement and (2) not later than the last day of
the calendar month during which all conditions to the merger agreement have
been satisfied or waived or have become capable of being satisfied.
SURRENDER OF SOUTHSIDE STOCK CERTIFICATES AND RECEIPT OF MERGER CONSIDERATION
At the effective time of the merger, each outstanding share of
common stock of Allegiant Bancorp will be converted into the right to
receive one share of common stock of the merged company and each
outstanding share of Southside common stock will be converted into the right
to receive (1) 1.39 shares of the common stock of the merged company, (2)
the right to receive $14.00 in cash or (3) a combination of common stock of
the merged company and cash.
Each Southside shareholder will have the opportunity to elect to
receive common stock of the merged company, cash or a combination of
common stock of the merged company and cash. However, the elections of the
Southside shareholders likely will be reallocated so that half of Southside's
outstanding common stock is converted into common stock of the merged
company and the remainder is converted into cash. An election form was
mailed to each Southside shareholder along with this joint proxy
statement/prospectus.
Within five business days after the effective time of the merger,
the exchange agent will mail to each Southside shareholder of record as of
the effective time notification of the effectiveness of the merger. The
exchange agent also will provide a letter of transmittal and instructions
as to the procedure for the surrender of the stock certificates evidencing
the Southside common stock and the receipt of the merger consideration to
be distributed to the shareholder. It will be the responsibility of each
holder of shares of Southside common stock to submit all certificates
formerly evidencing such holder's shares of Southside common stock to the
exchange agent. No dividends or other distributions will be paid to a
former Southside shareholder with respect to shares of common stock of the
merged company until that shareholder's properly completed letter of
transmittal and stock certificates formerly representing Southside common
stock, or, in lieu of the certificates, evidence of a lost, stolen or
destroyed certificate and/or insurance bond as the exchange agent may
reasonably require, are delivered to the exchange agent. All dividends or
other distributions on the common stock of the merged company declared
between the closing date of the merger and the date of the surrender of
a stock certificate will be held for the benefit of the shareholder and
will be paid to the shareholder, without interest, upon the surrender of
such stock certificate(s) or documentation and/or insurance bond in lieu
of the certificate(s).
Under the reallocation procedures described below, shareholders
who fail to return their election form prior to the election deadline
will receive whichever form of consideration, cash or common stock,
that has been undersubscribed. In the event that a reallocation is
required as a result of the oversubscription of cash or common stock,
as the case may be, shareholders who elect a combination of cash and
common stock will be subject to reallocation before the shareholders who
elect only cash or only common stock, depending upon the extent to which
either the cash consideration or common stock has been oversubscribed. As a
result, shareholders who elect a combination of cash and common stock could
end up receiving all of their merger consideration in the form of the
undersubscribed consideration.
If Southside shareholders elect, as set forth on the election
forms distributed to the Southside shareholders by the exchange agent, to
receive cash in excess of the amount of cash available under the merger
agreement, then
* first, common stock will be allocated to the shareholders that
elected to receive all common stock, the shareholders that did
not return election forms and that common stock portion elected
by the shareholders choosing a combined distribution;
* second, UMB Bank, n.a., as exchange agent, will reallocate,
on a pro rata basis, the portion of the cash distribution elected
by the shareholders requesting a combination of cash and common
stock to decrease the amount of cash and increase the amount of
common stock elected until one-half of the Southside shares are
converted into cash under the merger agreement; and
- 55 -
* third, if after that reallocation any of the common stock
consideration remains unallocated, UMB Bank, n.a. will
reallocate, on a pro rata basis to shareholders requesting a
cash distribution, common stock of the merged company in lieu of
cash until one-half of the shares of Southside are converted
into common stock of the merged company.
If Southside shareholders elect, as set forth on the election forms
distributed to the Southside shareholders by the exchange agent, to receive
common stock distributions in excess of the number of shares of common stock
of the merged company available under the merger agreement, then
* first, cash will be allocated to the shareholders that elected to
receive all cash and that cash portion elected by the shareholders
choosing a combined distribution;
* second, the shareholders that did not return election forms will
be allocated, on a pro rata basis, cash until one-half of the
Southside common stock is converted into common stock of the merged
company;
* third, if necessary, UMB Bank, n.a. will reallocate, on a pro
rata basis, the portion of the common stock distribution elected
by the shareholders requesting a combination of cash and common
stock to increase the amount of cash and decrease the amount of
common stock elected until one-half of the Southside common
stock is converted into common stock of the merged company; and
* fourth, if after that reallocation any of the cash consideration
remains unallocated, UMB Bank, n.a. will reallocate, on a pro
rata basis, cash in lieu of common stock to the shareholders
electing a common stock distribution until one-half of the
Southside common stock is converted into common stock of the
merged company.
FRACTIONAL SHARES
No fractional shares of common stock of the merged company will
be issued to the former shareholders of Southside in connection with the
merger. Each holder of Southside common stock who otherwise would be
entitled to receive a fraction of a share of common stock of the merged
company will receive in lieu thereof cash, without interest, in an amount
equal to the holder's fractional share interest multiplied by $14.00. Cash
received by Southside shareholders in lieu of fractional shares may give
rise to taxable income.
DISSENTERS' RIGHTS
Each of Allegiant Bancorp's and Southside's shareholders who elect
to dissent from the merger and who follow the procedure set forth in Section
351.455 of The General and Business Corporation Law of Missouri will be
entitled to receive a payment in cash for his or her shares in lieu of any
merger consideration. The following summary of Section 351.455 is not
intended to be a complete statement of the law and is qualified in its
entirety by reference thereto, the full text of which is set forth as Annex D
-------
to this joint proxy statement/prospectus. Neither Allegiant Bancorp nor
Southside intends to send to their shareholders notifications of deadlines
or other applicable dates under Missouri law with respect to dissenters'
rights. Such shareholders receiving cash upon exercise of dissenters' rights
may recognize gain for federal income tax purposes.
The shareholders of each company may assert dissenters' rights only
by complying with all of the following requirements:
* Allegiant Bancorp shareholders asserting dissenters' rights
must deliver to Allegiant Bancorp prior to or at their
special meeting a written objection to the merger agreement.
The objection should be delivered or mailed in time to arrive
before the special meeting to Allegiant Bancorp, 2122 Kratky
Road, St. Louis, Missouri 63114, Attention: Thomas A. Daiber.
Southside shareholders asserting dissenters' rights must
deliver to Southside prior to or at their annual meeting a
written objection to the merger agreement. The objection
should be delivered or mailed in time to arrive before the
annual meeting to Southside, 4111 Telegraph Road, St. Louis,
Missouri 63129, Attention: Joseph W. Pope. The written
objections must be made in addition to, and separate from, any
proxy or other vote against
- 56 -
adoption of the merger agreement. Neither a vote against, a
failure to vote for, or an abstention from voting will satisfy
the requirement that a written objection be delivered to such
shareholder's respective company before the vote is taken. Unless
a shareholder files the written objection as provided above, he
or she will not have any dissenters' rights of appraisal;
* The shareholder must not vote in favor of approval of the merger
agreement; and
* The shareholder must deliver to the merged company within 20
days after the effective time of the merger a written demand
for payment of the fair value of his or her shares of either
Southside or Allegiant Bancorp common stock, as the case may
be, as of the day prior to the date of such company's
shareholders' meeting. That demand must include a statement of
the number of shares of Allegiant Bancorp or Southside, as the
case may be, common stock owned. The demand must be mailed or
delivered to the merged company at Allegiant Bancorp, 2122
Kratky Road, St. Louis, Missouri 63114, Attention: Thomas A.
Daiber. Any shareholder who fails to make a written demand for
payment within the 20-day period after the effective time of
the merger will be conclusively presumed to have consented to
the merger agreement and will be bound by its terms. Neither a
vote against the merger agreement nor the written objection
prior to the meeting referred above satisfies this written
demand requirement.
A beneficial owner of shares of either Allegiant Bancorp or
Southside common stock who is not the record owner of that common stock may
not assert dissenters' rights. If the shares of either company's common
stock are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, or by a nominee or are held in "street name" by a
brokerage firm or bank, the written demand asserting dissenters' rights must
be executed by the fiduciary, nominee, broker or bank. If the shares of the
dissenting shareholder's common stock are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the demand must be
executed by all joint owners. An authorized agent, including an agent for
two or more joint owners, may execute the demand for a shareholder of
record; however, the agent must identify the record owner and expressly
disclose the fact that, in executing the demand, he or she is acting as
agent for the record owner.
If within 30 days of the effective time of the merger the value of
a dissenting shareholder's shares of either company's common stock is agreed
upon between the shareholder and the merged company, the merged company
will make payment to the shareholder within 90 days after the effective
time, upon the shareholder's surrender of his or her certificates. Upon
payment of the agreed value, the dissenting shareholder will cease to have
any interest in such shares or in the merged company.
If the dissenting shareholder and the merged company do not agree
on the fair value of the shares within 30 days after the effective time of
the merger, the dissenting shareholder may, within 60 days after the
expiration of the 30-day period, file a petition in St. Louis County Circuit
Court asking for a finding and a determination of the fair value of the
shares. The dissenting shareholder is entitled to judgment against the
merged company for the amount of such fair value as of the day prior to the
date on which such vote was taken adopting the merger agreement, together
with interest thereon to the date of judgment. The judgment is payable only
upon and simultaneously with the surrender to the merged company
certificates representing said shares. Upon payment of the judgment, the
dissenting shareholder will cease to have any interest in such shares or in
the merged company. Unless the dissenting shareholder files the petition
within the 60-day period, the shareholder and all persons claiming under
such shareholder will be conclusively presumed to have adopted and ratified
the merger agreement, and will be bound by the terms thereof.
The right of a dissenting shareholder to be paid the fair value for
his or her shares will cease if the shareholder fails to comply with the
procedures of Section 351.455 or if the merger agreement is terminated for
any reason.
Shareholders of either company considering demanding the purchase
of their shares at fair value should keep in mind that the fair value of
their shares determined under Section 351.455 could be more, the same, or
less than the merger consideration to which they are entitled to under the
merger if they do not demand the purchase of their shares at fair value.
- 57 -
The summary set forth above does not purport to be a complete
statement of the provisions of Section 351.455 relating to the rights of
dissenting shareholders and is qualified in its entirety by reference to
Section 351.455, which is included as Annex D to this joint proxy
-------
statement/prospectus. Allegiant Bancorp or Southside shareholders intending
to exercise their dissenters' rights are urged to review carefully the
provisions set forth in Annex D and to consult with legal counsel so as to
-------
be in compliance with the required procedures.
REGULATORY APPROVALS
In addition to approval by Allegiant Bancorp's and Southside's
shareholders, the Federal Reserve Board must approve the merger. As bank
holding companies, Allegiant Bancorp and Southside are subject to regulation
under the Bank Holding Company Act of 1956. Allegiant Bancorp and Southside
will file all required applications seeking approval of the merger with the
appropriate regulatory authorities.
Under the Bank Holding Company Act, the Federal Reserve Board can
withhold approval of the merger if, among other things, it determines that
the effect of the merger would be to substantially lessen competition in the
relevant market. In addition, the Federal Reserve Board is required to
consider whether the combined organization meets the requirements of the
Community Reinvestment Act of 1977 by assessing the involved entities'
respective records of meeting the credit needs of the local communities in
which they are chartered, consistent with the safe and sound operation of
such institutions. In its review, the Federal Reserve Board also is required
to examine the financial and managerial resources and future prospects of
the combined organization and analyze the capital structure and soundness of
the resulting entity. The Federal Reserve Board has the authority to deny an
application if it concludes that the combined organization would have
inadequate capital.
The merger cannot be completed prior to receipt of all required
approvals. We cannot assure you whether or when the required regulatory
approvals for the merger will be obtained, or, if the merger is approved,
whether the approvals will contain any unacceptable conditions. Likewise we
cannot assure you that the Department of Justice will not challenge the
merger during the waiting period set aside for challenges after receipt of
approval from the Federal Reserve Board.
In addition, Allegiant Bank, Allegiant Bancorp's subsidiary bank,
is regulated and examined by the Missouri Division of Finance. Thus, the
merger also requires the approval of the Missouri Division of Finance.
Allegiant Bancorp and Southside are not aware of any governmental
approvals or actions that may be required for consummation of the merger
other than as described above. Should any other approval or action be
required, it is presently contemplated that such approval or action would be
sought. We cannot assure you that any necessary regulatory approvals or
actions will be timely received or taken, that no action will be brought
challenging such approval or action or, if a challenge is brought, as to the
result of a possible challenge, or that any approval or action will not be
conditioned in a manner that would cause the parties to abandon the merger.
CONDUCT OF BUSINESS PENDING THE MERGER
Under the merger agreement, Allegiant Bancorp and Southside have
agreed to conduct their respective businesses and to cause their
subsidiaries to conduct their businesses in the usual and ordinary course
consistent with past and current practices and will use their best efforts
to maintain and preserve their business organization, employees and business
relationships and to retain key officers and employees until the effective
date of the merger. However, the merger agreement allows Allegiant Bancorp
to enter into the following transactions: (1) any agreement with respect to
the possible acquisition by Allegiant Bancorp of third party businesses
which are not significant, (2) to entertain, negotiate or enter into any
agreement with respect to the possible acquisition of Allegiant Bancorp by a
third party, or (3) transactions to finance its obligations under the merger
agreement. In addition, each company agreed to use its best efforts to
maintain and preserve its respective business organizations and advantageous
business relationships.
- 58 -
Southside also agreed that without the prior written consent of
Allegiant Bancorp, Southside and its subsidiaries will not:
* make any changes in the number of their issued and outstanding
shares or in their respective charters or bylaws except upon
the exercise of options under the Southside option plans;
* enter into or amend any employment, severance or similar
agreement or arrangement with any director, officer or
employee except increases in compensation to employees who are
not directors or officers consistent with past practices or,
with Allegiant Bancorp's consent, to directors and officers;
* (1) make, renew, increase, modify or extend the maturity date of
any loan or credit commitment to any person or entity in an
amount equal to or in excess of $5.0 million or in any amount
which when aggregated with all loans to that person or entity
would in the aggregate equal an amount of $5.0 million or more,
except that Southside may honor any contractual obligations
existing on April 30, 2001; or (2) increase the aggregate
amount of any credit facility by more than $500,000 to any
particular person or entity;
* declare, set aside or pay any stock dividend, cash dividend or
other distribution. Southside may, however, continue to
declare and pay its regular quarterly cash dividend until the
closing date at a rate not exceeding $0.08 per share;
* do or fail to do anything that will cause a breach of, or
default under, any contract, agreement, commitment,
obligation, appointment, plan, trust or other arrangement to
which Southside or its subsidiaries is a party or by which
either Southside or its subsidiaries is otherwise bound where
such breach would have a material adverse effect on Southside;
* issue, sell, grant, confer or award any of its equity
securities except that Southside may issue shares of Southside
common stock upon the exercise of Southside stock options;
* take any action that would prevent the merger from qualifying
as a tax-free reorganization;
* other than in the ordinary course of business, consistent with
past practice, incur any indebtedness for borrowed money or
assume, guarantee or endorse or otherwise become responsible
for obligations of other individuals or entities;
* materially restructure or change its investment portfolio for
its own account of greater than $2 million for U.S. Treasury
or federal agency securities and $500,000 for all other investment
instruments; or
* agree, in writing or otherwise, to take any of the actions
described above.
Allegiant Bancorp also agreed not to take certain actions until the
merger is completed, without the written consent of Southside. Allegiant
Bancorp agreed not to and agreed not to permit its subsidiaries to:
* take or cause, or permit any of its subsidiaries to take, any
action that would prevent the merger from qualifying as a
tax-free reorganization; or
* take any action, except to the extent required by law, that
would make the representations and warranties of Allegiant
Bancorp contained in the merger agreement to be untrue or
incorrect in any material respect.
ACCOUNTING TREATMENT
We expect to use the purchase method of accounting to account for
the merger. As required by generally accepted accounting principles, under
purchase accounting, the assets and liabilities of Southside as of the
closing date will be recorded at their respective estimated fair market
values and added to those of Allegiant Bancorp.
- 59 -
Financial statements of Allegiant Bancorp issued after the consummation
of the merger would reflect those values as well as the results of operations
of Southside and Allegiant Bancorp beginning after the closing date of the
merger. Financial statements of Allegiant Bancorp issued before consummation
of the merger will not be restated to reflect Southside's historical financial
position or results of operations. The unaudited pro forma combined
consolidated financial statements contained in this joint proxy statement/
prospectus have been prepared using the purchase method of accounting to
account for the merger.
The Financial Accouting Standards Board has issued an exposure
draft for business combinations. This exposure draft, if adopted, may have
significant impact on the accounting for this transaction and future
amortization of goodwill.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
BOARD OF DIRECTORS. Once the merger is completed, the board of
directors of Allegiant Bancorp immediately prior to the effective time of
the merger will be the board of directors of the merged company, and those
directors will hold office in accordance with the merged company's bylaws
and applicable law. In addition, two persons (1) who are directors of
Southside as of April 30, 2001, (2) who, immediately after the closing
date of the merger, hold the greatest number of shares of merged company
common stock among all of the directors of Southside, including common stock
issuable under options, and (3) who are approved by Allegiant Bancorp, will
be elected to serve on the merged company's board of directors for two-
and three-year terms, respectively. Southside may replace either or both of
the nominees prior to the effective date of the merger subject to Allegiant
Bancorp's consent.
MANAGEMENT. We anticipate that the current officers and management of
Allegiant Bancorp will be the officers and management of the merged
company. Shaun R. Hayes will serve as President and Chief Executive Officer,
Marvin S. Wool will serve as the Chairman of the Board and Thomas A. Daiber
will serve as a Senior Vice President and Chief Financial Officer.
ARTICLES OF INCORPORATION AND BYLAWS. The articles of incorporation
and bylaws of the merged company will be in substantially similar form as
the current articles of incorporation and bylaws of Allegiant Bancorp and
have been included with this joint proxy statement/prospectus as
Annexes E and F, respectively. The articles of incorporation will be amended
---------------
to reflect, among other things, (1) the name change of the merged company
from Southside Bancshares Corp. to Allegiant Bancorp, Inc. and (2) a change in
the number of authorized shares to 30,000,000, par value $0.01. There is a
discussion regarding the articles of incorporation and bylaws of the
merged company beginning on page 114.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
In the opinion of Thompson Coburn LLP, tax counsel to Allegiant
Bancorp, subject to the qualifications set forth below, the following
summary sets forth the material U.S. federal income tax consequences to (a)
the holders of Allegiant Bancorp common stock who exchange such stock for
the merged company's common stock in the merger, and (b) the holders prior
to the merger of Southside common stock who receive (1) an amount of cash
equal to $14.00 per share for their Southside common stock, (2) 1.39 shares of
common stock of the merged company per share for their Southside common stock,
or (3) a combination of the cash distribution and stock distribution.
The following summary addresses only such shareholders who hold
their Allegiant Bancorp common stock or Southside common stock as a capital
asset, and does not address all the tax consequences that may be relevant to
particular shareholders in light of their individual circumstances or to
shareholders that are subject to special rules, including, without
limitation, financial institutions, tax-exempt organizations, insurance
companies, dealers in securities or foreign currencies, foreign holders,
persons that hold shares as a hedge against currency risk or a
constructive sale or conversion transaction or holders who acquired their
shares due to the exercise of employee stock options or otherwise as
compensation or the application of the alternative minimum tax. In addition,
the following summary does not address the tax consequences of the merger or
the conversion to holders of Allegiant Bancorp or Southside common stock
options or stock warrants or debt instruments. The following summary is
based upon the Internal Revenue Code of 1986, as amended, laws, Treasury
regulations, administrative rulings and
- 60 -
court decisions in effect as of the date hereof, all of which are subject
to change, possibly with retroactive effect. Tax consequences under state,
local and foreign laws also are not addressed.
No ruling has been, or will be, sought from the Internal Revenue
Service as to the U.S. federal income tax consequences of the merger or the
conversion. It is a condition to the consummation of the merger that
Southside receive an opinion from Thompson Coburn LLP to the effect that,
among other things, based upon relevant facts, representations and
reasonable assumptions, the merger will qualify as a reorganization within
the meaning of Section 368(a)(1)(A) of the Internal Revenue Code. The
issuance of the opinion is conditioned on, among other things, such tax
counsel's receipt of representation letters from each of Southside and
Allegiant Bancorp, in each case, in form and substance reasonably
satisfactory to counsel. The opinion is not binding on the Internal Revenue
Service.
Consequences to Allegiant Bancorp Shareholders. Based on the above
assumptions and qualifications, in the opinion of Thompson Coburn LLP, for
federal income tax purposes: (a) the merger will qualify as a reorganization
under Section 368(a)(1)(A) of the Internal Revenue Code, (b) both Allegiant
Bancorp and Southside will be parties to the reorganization within the
meaning of Section 368 of the Internal Revenue Code, (c) neither Allegiant
Bancorp nor Southside will recognize any gain or loss as a result of the
merger, and (d) shareholders of Allegiant Bancorp who exchange their
Allegiant Bancorp common stock for common stock of the merged company in the
merger will not recognize income, gain or loss, except in the case of cash
received by any shareholder of Allegiant Bancorp who exercises dissenters'
rights.
A holder of Allegiant Bancorp common stock who exercises
dissenters' rights and exchanges Allegiant Bancorp stock for cash will
generally be treated as if the shares were redeemed by the merged company in
exchange for the cash. Whether the cash received by a dissenting Allegiant
Bancorp shareholder will be treated as an "exchange" resulting in capital
gain or capital loss to the shareholder or as ordinary dividend income is
determined by treating that holder as if shares of the merged company's
common stock having a fair market value equal to the amount of cash paid to
the Allegiant Bancorp shareholder had been distributed by the merged company
to the holder and then the shares were redeemed by the merged company in
return for the cash, under the tests of Section 302 of the Internal Revenue
Code, as described below. If the hypothetical redemption constitutes an
"exchange" under Section 302 of the Internal Revenue Code, taking into
account the holder's actual and constructive ownership of the merged
company's common stock under Section 318 of the Internal Revenue Code, as
described below, the cash will be treated as an amount realized, and the
holder will recognize capital gain or loss measured by the difference
between the holder's adjusted basis for the Allegiant Bancorp common stock
and the cash received. If the hypothetical redemption does not qualify as an
"exchange" under Section 302 of the Internal Revenue Code, the cash received
by the dissenting Allegiant Bancorp holder will be treated as ordinary
dividend income.
In general, whether this hypothetical redemption constitutes an
"exchange" will depend upon whether and to what extent the hypothetical
redemption reduces the holder's percentage stock ownership in the merged
company. The hypothetical redemption will be treated as an "exchange" if the
hypothetical redemption is (a) "in complete redemption," (b) "substantially
disproportionate" or (c) "not essentially equivalent to a dividend" under
Section 302 of the Internal Revenue Code.
In general, the determination of whether the hypothetical
redemption will be "substantially disproportionate" will require a
comparison of (x) the percentage of the outstanding voting stock of the
merged company that the holder of Allegiant Bancorp common stock actually
and constructively owned immediately before the hypothetical redemption by
the merged company and (y) the percentage of the outstanding voting stock of
the merged company actually and constructively owned by the holder
immediately after the hypothetical redemption by the merged company.
Generally, the hypothetical redemption will be substantially
disproportionate to a holder of Allegiant Bancorp common stock if the
percentage described in (y) above is less than 80% of the percentage
described in (x) above. Whether the hypothetical redemption is "not
essentially equivalent to a dividend" with respect to the holder will depend
on the holder's particular circumstances. In order for the hypothetical
redemption to be "not essentially equivalent to a dividend," the
hypothetical redemption must result in a "meaningful reduction" in the
holder's percentage stock ownership of the merged company's common stock.
The Internal Revenue Service has ruled that a minority shareholder in a
publicly traded corporation whose relative stock interest is minimal and
that exercises no control with respect to corporate affairs is considered to
have a "meaningful
- 61 -
reduction" generally if the shareholder has some reduction in the
shareholder's percentage stock ownership. Shareholders should consult
their tax advisors as to the applicability of this ruling.
In applying the constructive ownership provisions of Section 318 of
the Internal Revenue Code, a holder of Allegiant Bancorp common stock may be
deemed to own stock that is owned by other persons, such as a family member,
a trust, corporation or other entities. Since the constructive ownership
provisions are complex, shareholders should consult their tax advisors as to
the applicability of these provisions.
Any capital gain recognized by any holder of Allegiant Bancorp
common stock under the above discussion will be long-term if the holder has
held the Allegiant Bancorp shares for more than 12 months at the time of the
closing of the merger. In the case of a non-corporate holder, that long-term
capital gain will be subject to a maximum federal income tax of 20%. The
deductibility of capital losses may be limited for both corporate and non-
corporate holders.
Each Allegiant Bancorp holder's aggregate tax basis in the merged
company's common stock received in the merger will be the same as the
holder's aggregate tax basis in the Allegiant Bancorp common stock exchanged
for the merged company shares. The holding period of the merged company
common stock received by an Allegiant Bancorp holder in the merger will
include the holding period of the Allegiant Bancorp common stock surrendered
in exchange therefor.
Consequences to Southside Shareholders. Based on the above
assumptions and qualifications, in the opinion of Thompson Coburn LLP, the
conversion of Southside common stock will qualify as a recapitalization
under Section 368(a)(1)(E) of the Internal Revenue Code with respect to
those holders of Southside common stock who receive either the stock
consideration or the combined distribution of cash and the merged company's
common stock.
A holder of Southside common stock who exchanges all his or her
Southside common stock solely for the merged company's common stock will
not recognize income, gain or loss for U.S. federal income tax purposes,
except with respect to cash received in lieu of fractional shares of the
merged company's stock.
Holders of Southside common stock who receive cash in lieu of
fractional shares of the merged company's common stock in the conversion
generally will be treated as if the fractional shares of the merged
company's common stock had been distributed to them as part of the
conversion and then redeemed by the merged company in exchange for the
cash actually distributed in lieu of the fractional shares, with the
redemption qualifying as an "exchange" under Section 302 of the Internal
Revenue Code, as described below. Consequently, those holders generally will
recognize capital gain or loss with respect to the cash payments they
receive in lieu of fractional shares measured by the difference between the
amount of cash received and the tax basis allocated to the fractional
shares.
A holder of Southside common stock who exchanges his or her
Southside common stock actually owned solely for cash, while any Southside
common stock owned constructively by that holder under Section 318 of the
Internal Revenue Code, as described below, is also exchanged solely for
cash, will recognize capital gain or loss measured by the difference between
the holder's adjusted basis for the Southside common stock exchanged and the
cash received.
A holder of Southside common stock who exchanges his or her
Southside common stock actually owned for a combined distribution of cash
and common stock of the merged company will recognize income or gain in an
amount equal to the lesser of (a) the amount of cash received or (b) the
gain realized on the exchange. The gain realized equals the fair market value
of the merged company's common stock received, plus the amount of cash
received, less the holder's adjusted tax basis in the shares of Southside
common stock exchanged by the holder.
- 62 -
A holder of Southside common stock who exchanges his or her
Southside common stock actually owned solely for cash under the cash
distribution, while any Southside common stock owned constructively by the
holder under Section 318 of the Internal Revenue Code, as described below,
is exchanged in full or part for stock of the merged company, will be
treated as if that Southside common stock exchanged for cash was redeemed by
the merged company in return for such cash.
Whether the cash received by a holder, as described in the
immediately preceding two paragraphs, will be treated as capital gain or as
ordinary dividend income is determined by treating that holder as if shares
of the merged company having a fair market value equal to the cash paid to
the holder had been distributed by the merged company to the holder and
then the shares of the merged company's common stock were redeemed by the
merged company in return for the cash, under the tests of Section 302 of
the Internal Revenue Code, as described below. If this hypothetical
redemption constitutes an "exchange" under Section 302 of the Internal
Revenue Code, taking into account the holder's actual and constructive
ownership of Southside common stock under Section 318 of the Code, the
holder of Southside common stock who receives cash will recognize capital
gain measured by the difference between that holder's adjusted basis for the
Southside common stock exchanged and the cash received. If the hypothetical
redemption does not qualify as an "exchange," the cash received by the
holder will be treated as ordinary dividend income.
In general, whether this hypothetical redemption constitutes an
"exchange" will depend upon whether and to what extent the hypothetical
redemption reduces the holder's percentage stock ownership in the merged
company. The hypothetical redemption will be treated as an "exchange" if the
hypothetical redemption is (a) "substantially disproportionate" or (b) "not
essentially equivalent to a dividend" under Section 302 of the Internal
Revenue Code.
In general, the determination of whether the hypothetical
redemption will be "substantially disproportionate" will require a
comparison of (x) the percentage of the outstanding voting stock of
Southside that the holder of Southside common stock actually and
constructively owned immediately before the hypothetical redemption by the
merged company and (y) the percentage of the outstanding voting stock of
the merged company actually and constructively owned by the holder
immediately after the hypothetical redemption by the merged company.
Generally, the hypothetical redemption will be substantially
disproportionate to a holder of Southside common stock if the percentage
described in (y) above is less than 80% of the percentage described in (x)
above. Whether the hypothetical redemption is "not essentially equivalent to
a dividend" with respect to the holder will depend on the holder's
particular circumstances. In order for the hypothetical redemption to be
"not essentially equivalent to a dividend," the hypothetical redemption must
result in a "meaningful reduction" in the holder's percentage stock
ownership of the merged company's common stock. The Internal Revenue
Service has ruled that a minority shareholder in a publicly traded
corporation whose relative stock interest is minimal and that exercises no
control with respect to corporate affairs is considered to have a
"meaningful reduction" generally if such shareholder has some reduction in
such shareholder's percentage stock ownership. Holders should consult their
tax advisors as to the applicability of the ruling.
In applying the constructive ownership provisions of Section 318 of
the Internal Revenue Code, a holder of Southside common stock may be deemed
to own stock that is owned by other persons, such as a family member, a
trust, corporation or other entities. Since the constructive ownership
provisions are complex, holders should consult their tax advisors as to
the applicability of these provisions.
A holder of Southside common stock who exercises dissenters' rights
and exchanges Southside common stock solely for cash will generally be
treated in the same manner as a holder who exchanges his or her Southside
common stock solely for cash in accordance with the above discussion, which
includes taking into account Southside common stock owned actually and
constructively.
Any capital gain recognized by any holder of Southside common stock
under the above discussion will be long-term if the holder has held the
Southside shares for more than 12 months at the time of the conversion. In
the case of a non-corporate holder, that long-term capital gain may be
subject to a maximum federal income tax of 20%. The deductibility of capital
losses may be limited for both corporate and non-corporate holders
Southside will not recognize any gain or loss as a result of the
conversion.
- 63 -
No loss may be recognized by a Southside holder from the combined
distribution of cash and the merged company's common stock or the stock
distribution.
Each holder's aggregate tax basis in the merged company's common
stock received in the conversion will be the same as the holder's aggregate
tax basis in the Southside common stock exchanged, decreased by the amount
of cash received in the conversion and by the amount of any tax basis
allocable to any fractional share interest for which cash is received and
increased by any gain recognized in the conversion. The holding period of
the merged company's common stock received by a holder in the conversion
will include the holding period of the Southside common stock exchanged in
the conversion to the extent the Southside common stock exchanged is held as
a capital asset at the time of the conversion.
Extraordinary Dividend to Corporate Holders of Allegiant Bancorp
or Southside Common Stock. If the merger or the conversion is treated to
any extent as an ordinary dividend to a corporate shareholder of Allegiant
Bancorp or Southside, the amount of the dividend should generally be eligible
for the 70% dividends received deduction, subject to the limitations of
Sections 246 and 246A of the Internal Revenue Code.
In addition, the amount of any taxable dividend to a corporate
shareholder may be an "extraordinary dividend" as defined in Section 1059 of
the Internal Revenue Code. Under that section, if a corporate shareholder
receives an extraordinary dividend with respect to any stock that has been
held for two years or less, the nontaxed portion of the dividend (generally
the portion eligible for the dividends received deduction) would reduce the
shareholder's tax basis with respect to that stock at the time of any
disposition thereof, thereby increasing any taxable gain recognized on a
subsequent disposition. If the nontaxed portion exceeds the corporate
shareholder's tax basis in such stock, the corporate shareholder must treat
the excess as additional gain in the taxable year in which the extraordinary
dividend is received. In the case of any redemption of stock, including a
hypothetical redemption in connection with the merger or conversion, any
amount treated as a taxable dividend to a corporate shareholder will be
treated as an extraordinary dividend without regard to the holding period of
the stock or the magnitude of the taxable dividend.
We strongly urge corporate holders of Allegiant Bancorp and
Southside common stock to consult their tax advisors concerning the
application of Section 1059 of the Internal Revenue Code to any dividend
income recognized as a result of the merger or conversion.
Backup Withholding. Holders of Allegiant Bancorp and Southside
common stock, other than certain exempt recipients, may be subject to backup
withholding at a rate of 31% with respect to any cash payment received in the
merger or the conversion. However, backup withholding will not apply to any
holder who either (a) furnishes a correct taxpayer identification number and
certifies that he or she is not subject to backup withholding by completing the
substitute Form W-9 that will be included as part of the transmittal letter,
or (b) otherwise proves to the merged company and its exchange agent that the
holder is exempt from backup withholding.
Allegiant Bancorp and Southside shareholders will also be required
to file certain information with their federal income tax returns and to
retain certain records with regard to the merger and the conversion.
THE DISCUSSION OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH
ABOVE IS FOR GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS THAT MAY APPLY TO A HOLDER
OF ALLEGIANT BANCORP OR SOUTHSIDE COMMON STOCK. WE STRONGLY ENCOURAGE
SHAREHOLDERS OF ALLEGIANT BANCORP AND SOUTHSIDE TO CONSULT THEIR TAX
ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER
AND THE CONVERSION, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
- 64 -
PRO FORMA UNAUDITED COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following is the unaudited pro forma combined consolidated
financial information for Allegiant Bancorp and for Southside giving effect
to the merger and the related financing, including issuance of trust
preferred securities and additional bank borrowings. The balance sheet
information presented gives effect to the merger and the related financing
as if each occurred on March 31, 2001. The income statement information
presented gives effect to the merger and the related financing as if each
occurred on the first day of each period presented. In addition, the
unaudited pro forma combined consolidated income statement information for
the year ended December 31, 2000 gives effect to Allegiant Bancorp's
acquisition of Equality Bancorp, Inc., which was completed on November 15,
2000, as if that acquisition had occurred on January 1, 2000. The following
pro forma historical information does not reflect any cost savings which
Allegiant Bancorp and Southside expect to achieve subsequent to the merger.
You should read the unaudited pro forma combined consolidated
financial information in conjunction with the accompanying Notes to
Unaudited Pro Forma Combined Consolidated Financial Information and with
Allegiant Bancorp's historical financial statements which are incorporated
by reference in this joint proxy statement/prospectus and Southside's
historical financial statements and related notes which are included as part
of this joint proxy statement/prospectus. This unaudited pro forma combined
consolidated financial information may not be indicative of the results
of operations that actually would have occurred if the merger, and the
related financing, had occurred on the dates assumed above or of the results
of operations that may be achieved in the future. In addition, the unaudited
pro forma combined consolidated income statement information for the year
ended December 31, 2000 is not necessarily indicative of the results of
operations that actually would have occurred if the acquisition of Equality
had occurred on the date assumed.
- 65 -
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2001
(IN THOUSANDS)
PRO FORMA
PRO FORMA COMBINED
ALLEGIANT BANCORP SOUTHSIDE ADJUSTMENTS CONSOLIDATED
----------------- --------- ----------- ------------
ASSETS
Cash and due from banks..................... $ 32,922 $ 16,034 $ (5,259)(1) $ 43,697
Fed funds .................................. 45,960 37,594 -- 83,554
Investment securities:
Available-for-sale....................... 144,154 168,969 -- 313,123
Held-to-maturity......................... 4,864 32,236 -- 37,100
----------- ----------- ----------- ------------
Total securities......................... 149,018 201,205 -- 350,223
Loans:
Commercial loans......................... 178,301 80,325 -- 258,626
Real estate loans........................ 640,741 357,150 4,000 (2) 1,001,891
Consumer loans........................... 36,103 36,855 -- 72,958
----------- ----------- ----------- ------------
Total loans............................ 855,145 474,330 4,000 1,333,475
Allowance for loan losses.............. 12,020 5,318 -- 17,338
----------- ----------- ----------- ------------
Net loans.............................. 843,125 469,012 4,000 1,316,137
Loans held for sale......................... 10,685 -- -- 10,685
Premises and equipment...................... 19,705 16,998 10,000 (2) 46,703
Intangible assets........................... 10,537 3,320 42,649 (3) 56,506
Other assets................................ 31,200 28,495 -- 59,695
----------- ----------- ----------- ------------
Total assets........................... $ 1,143,152 $ 772,658 $ 51,390 $ 1,967,200
=========== =========== =========== ============
LIABILITIES
Deposits:
Non-interest bearing deposits............ $ 94,070 $ 73,076 $ -- $ 167,146
Interest bearing deposits................ 799,436 541,011 (5,000)(2) 1,335,447
----------- ----------- ----------- ------------
Total deposits......................... 893,506 614,087 (5,000) 1,502,593
Short-term borrowings....................... 95,507 6,036 -- 101,543
Long-term debt.............................. 48,626 73,597 30,000 (2,4) 152,223
Guaranteed preferred beneficial interests
in subordinated debentures............... 17,250 -- 30,000 (5) 47,250
Other liabilities........................... 7,679 6,816 9,600 (2) 24,095
----------- ----------- ------------ ------------
Total liabilities...................... 1,062,568 700,536 64,600 1,827,704
----------- ----------- ----------- ------------
SHAREHOLDERS' EQUITY
Common stock................................ 94 8,985 (8,927)(6) 152
Surplus..................................... 60,155 5,468 53,386 (7) 119,009
Retained earnings........................... 18,266 63,484 (63,484)(8) 18,266
ESOP........................................ -- (741) 741 (9) --
Treasury stock, at cost..................... -- (6,156) 6,156 (10) --
Accumulated other comprehensive income...... 2,069 1,082 (1,082)(11) 2,069
----------- ----------- ----------- ------------
Total shareholders' equity............. 80,584 72,122 (13,210) 139,496
----------- ----------- ----------- ------------
Total liabilities and shareholders'
equity............................... $ 1,143,152 $ 772,658 $ 51,390 $ 1,967,200
=========== =========== =========== ============
The accompanying notes are an integral part of the unaudited pro forma
combined consolidated financial information.
- 66 -
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
PRO FORMA
PRO FORMA COMBINED
ALLEGIANT BANCORP SOUTHSIDE ADJUSTMENTS CONSOLIDATED
----------------- --------- ----------- ------------
INTEREST INCOME
Interest and fees on loans................... $ 19,636 $ 9,748 $ (200)(12) $ 29,184
Interest on investment securities............ 2,395 2,991 -- 5,386
Interest on over night investments........... 449 342 -- 791
----------- ----------- ----------- ------------
Total interest income..................... 22,480 13,081 (200) 35,361
INTEREST EXPENSE
Interest on deposits......................... 10,686 6,102 83 (l) 16,871
Interest on borrowings....................... 2,774 1,145 1,478 (2,4,5) 5,397
----------- ----------- ----------- ------------
Total interest expense.................... 13,460 7,247 1,561 22,268
----------- ----------- ----------- ------------
Net interest income..................... 9,020 5,834 (1,761) 13,093
Provision for loan losses.................... 850 159 -- 1,009
----------- ----------- ----------- ------------
Net interest income after provision
for loan losses....................... 8,170 5,675 (1,761) 12,084
NON-INTEREST INCOME
Service charges on deposits.................. 956 398 -- 1,354
All other income............................. 1,801 764 -- 2,565
----------- ----------- ----------- ------------
Total non-interest income................. 2,757 1,162 -- 3,919
NON-INTEREST EXPENSE
Salaries and other employee benefits......... 3,596 2,492 -- 6,088
Occupancy and equipment expense.............. 1,041 683 38 (12) 1,762
All other expense............................ 1,896 1,500 711 (3) 4,107
----------- ----------- ----------- ------------
Total non-interest expense................ 6,533 4,675 749 11,957
----------- ----------- ----------- ------------
Income (loss) before tax..................... 4,394 2,162 (2,510) 4,046
Income tax (benefit)......................... 1,833 609 (720)(13) 1,722
----------- ----------- ----------- ------------
Net income (loss)....................... $ 2,561 $ 1,553 $ (1,790) $ 2,324
=========== =========== =========== ============
PER SHARE DATA
Basic earnings per common share.............. $ 0.29 $ 0.19 $ 0.18
Diluted earnings per common share............ 0.29 0.18 0.18
Average common shares-basic.................. 8,824,643 8,263,280 12,956,283
Average common shares-diluted................ 8,887,050 8,430,550 13,102,325
The accompanying notes are an integral part of the unaudited pro forma
combined consolidated financial information.
- 67 -
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
PRO FORMA
EQUALITY PRO FORMA COMBINED
ALLEGIANT BANCORP BANCORP, INC. SOUTHSIDE ADJUSTMENTS CONSOLIDATED
----------------- ------------- --------- ----------- ------------
INTEREST INCOME
Interest and fees on loans............ $ 66,776 $ 8,299 $ 36,388 $ (800)(12) $ 110,663
Interest on investment securities..... 4,914 10,447 12,924 -- 28,285
Interest on over night investments.... 283 417 515 -- 1,215
---------- ---------- ---------- ------- -----------
Total interest income.............. 71,973 19,163 49,827 (800) 140,163
INTEREST EXPENSE
Interest on deposits.................. 31,540 6,144 20,733 334 (12) 58,751
Interest on borrowings................ 8,981 7,237 5,749 5,908 (2,4,5) 27,875
---------- ---------- ---------- ------- -----------
Total interest expense............. 40,521 13,381 26,482 6,242 86,626
---------- ---------- ---------- ------- -----------
Net interest income.............. 31,452 5,782 23,345 (7,042) 53,537
Provision for loan losses............. 3,500 631 361 -- 4,492
---------- ---------- ---------- ------- -----------
Net interest income after
provision for loan losses...... 27,952 5,151 22,984 (7,042) 49,045
NON-INTEREST INCOME
Service charges on deposits........... 3,111 -- 1,602 -- 4,713
All other income...................... 3,351 1,826 2,802 -- 7,979
---------- ---------- ---------- ------- -----------
Total non-interest income.......... 6,462 1,826 4,404 -- 12,692
NON-INTEREST EXPENSE
Salaries and other employee benefits.. 11,386 5,408 9,402 -- 26,196
Occupancy and equipment............... 3,338 700 2,817 150 (12) 7,005
All other expense..................... 7,858 3,198 6,324 2,843 (3) 20,223
---------- ---------- ---------- ------- -----------
Total non-interest expense......... 22,582 9,306 18,543 2,993 53,424
Income (loss) before tax.............. 11,832 (2,329) 8,845 (10,035) 8,313
Income tax (benefit).................. 4,797 (858) 2,358 (2,877)(13) 3,420
---------- ---------- ---------- ------- -----------
Net income (loss)................ $ 7,035 $ (1,471) $ 6,487 $(7,158) $ 4,893
========== ========== ========== ======= ===========
PER SHARE
Basic earnings (loss) per common share $ 1.09 $ (0.64) $ 0.78 $ 0.46
Diluted earnings (loss) per common
share............................... 1.08 (0.64) 0.77 0.46
Average common shares-basic........... 6,460,250 2,294,350 8,363,828 10,642,164
Average common shares-diluted......... 6,495,067 2,305,911 8,437,139 10,713,637
The accompanying notes are an integral part of the unaudited pro forma
combined consolidated financial information.
- 68 -
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
NOTE 1--BASIS OF PRESENTATION
The unaudited pro forma combined consolidated financial information
assumes that the merger of Allegiant Bancorp and Southside will be accounted
for under the purchase accounting method and is based on the historical
consolidated financial statements of Allegiant Bancorp and Southside. The
mark to market adjustments are based upon conditions as of March 31, 2001.
Allegiant Bancorp has not completed a review of Southside's accounting
policies. As a result of this review, it might be necessary to restate
certain amounts in the financial statements of the merged company to conform
to Allegiant Bancorp's accounting policies. Allegiant Bancorp does not
expect to make any material restatements.
The Financial Accounting Standards Board has issued an exposure
draft for business combinations. This exposure draft, if adopted, may have a
significant impact on the accounting for this transaction and future
amortization of goodwill.
Allegiant Bancorp completed the acquisition of Equality Bancorp,
Inc. on November 15, 2000. The Equality acquisition was accounted for under
the purchase accounting method, and its results are included in Allegiant
Bancorp's financial statements beginning on that date. Equality's fiscal
year end was March 31, so the results in the pro forma income statement for
the year ended December 31, 2000 include the fourth quarter of Equality's
fiscal year ended March 31, 2000 plus its results from April 1, 2000 through
November 15, 2000.
NOTE 2--SHAREHOLDERS' EQUITY
Under the terms of the merger agreement between Allegiant Bancorp
and Southside, holders of Allegiant Bancorp common stock will receive one
share of the merged company's common stock for each share of Allegiant
Bancorp common stock owned. Allegiant Bancorp had approximately 8.9 million
shares of common stock outstanding at May 1, 2001, which shares will be
exchanged for the same number shares of the merged company's common stock.
Subject to reallocation in accordance with the merger agreement, one-half of
the Southside common stock will be converted into cash in the amount of $14.00
per share and the remainder will be converted into common stock of the merged
company based upon the exchange ratio of 1.39 common shares of the
merged company for each Southside share. The merged company will have
approximately 14.7 million common shares outstanding after the merger. The
common stock in the unaudited pro forma combined consolidated balance sheet
has been adjusted to reflect the par value amount of shares of the merged
company.
NOTE 3--PRO FORMA ADJUSTMENTS (DOLLARS IN THOUSANDS)
(1) To record net cash received from the Southside Employee Stock
Option Plan to repay note, cash paid for merger related
compensation costs and cash paid for estimated transaction
costs.
(2) To record purchase accounting mark to market adjustments.
(3) To record estimated goodwill of $42,649 and reflect goodwill
amortization over a 15-year period.
(4) To record bank loan of $35,000 and interest expense at a rate
of 7.5%.
(5) To record issuance of trust preferred securities of $30,000
and interest expense at a rate of 9.5%.
(6) To eliminate Southside common stock of $8,985 and record
issuance of $58 of the merged company stock.
(7) To eliminate Southside surplus of $5,468 and record surplus of
$58,854 on the stock issued by the merged company.
(8) To eliminate Southside retained earnings of $63,484.
(9) To record payoff of Southside ESOP note receivable of $741 and
distribution of unallocated shares.
(10) To record elimination of Southside treasury stock of $6,156.
(11) To eliminate Southside's accumulated other comprehensive income.
(12) To record accretion and/or amortization of purchase accounting
adjustments.
(13) To reflect impact of taxes at a 40% rate.
- 69 -
INFORMATION ABOUT ALLEGIANT BANCORP
GENERAL
Allegiant Bancorp is a bank holding company headquartered in
St. Louis, Missouri. Its bank subsidiary, Allegiant Bank, offers full-service
banking and personal trust services to individuals, commercial business and
municipalities in the St. Louis metropolitan area. Allegiant Bancorp's
services include commercial, real estate and installment loans, checking,
savings and time deposit accounts, personal trust and other fiduciary
services and other financial services such as securities brokerage,
insurance and safe deposit boxes. As of March 31, 2001, Allegiant Bancorp
reported, on a consolidated basis, total assets of $1.14 billion, loans of
$855.1 million, deposits of $893.5 million and shareholders' equity of $80.6
million.
Since its inception in 1989, Allegiant Bancorp has grown rapidly
through a combination of internal growth and acquisitions of other financial
institutions. Allegiant Bancorp's internal growth has been achieved by
positioning Allegiant Bank as one of the leading St. Louis community banks.
Allegiant Bancorp supplemented its growth by acquiring ten branch locations
in its community from three different thrifts, with the primary goals of
expanding its branch network in the St. Louis market and increasing its
earnings per share. Allegiant Bancorp has also acquired a mortgage company
and an asset management firm. In December 1998, Allegiant Bancorp sold four
branches located in more rural markets in northeast Missouri, in order to
focus its operations exclusively in the St. Louis metropolitan area. In
November 2000, Allegiant Bancorp acquired Equality, a community based thrift
holding company with seven branches in the St. Louis area and total assets
of approximately $300.0 million. While this transaction significantly
improved Allegiant Bancorp's market coverage, the consolidation of the
branch networks also allowed it to increase its average deposits per branch,
which management believes to be key to improving efficiency. Allegiant
Bancorp's acquisition of Equality was accretive to its earnings per share for
the quarter ended March 31, 2001.
Since the beginning of 1998, Allegiant Bancorp has focused on
improving the profitability of its banking operations. As a result,
Allegiant Bancorp has reduced the amount of one- to four-family mortgages
that it held in its loan portfolio and has increased its amount of higher
yielding commercial loans. Allegiant Bancorp has hired approximately 22
banking professionals averaging more than 10 years of experience in the St.
Louis metropolitan area to help grow its commercial loans and deposits.
Allegiant Bancorp has also implemented company-wide cost control efforts to
enhance efficiencies throughout its operations. These steps taken since the
beginning of 1998 have improved its efficiency, return on average assets,
return on average equity and earnings per share.
The St. Louis metropolitan area is the 18th largest metropolitan area
in the United States with a population of approximately 2.6 million. The St.
Louis metropolitan area is home to 15 Fortune 1000 companies, such as
Anheuser-Busch Companies, Inc., The May Department Stores Company and
Emerson Electric Co. Over the past several years, there has been a number of
acquisitions of financial institutions in Allegiant Bancorp's market area by
larger regional or national out-of-town financial institutions. These
acquisitions have included: NationsBank Corporation's, now known as
BankAmerica Corporation, acquisition of Boatmen's Bancshares, Inc., Union
Planters Corporation's acquisition of Magna Group, Inc. and Firstar
Corporation's, now known as U.S. Bancorp, acquisition of Mercantile
Bancorporation Inc.
Allegiant Bancorp's management believes that it has benefited from
these acquisitions because Allegiant Bancorp has been committed since its
inception to building a strong, customer-friendly community bank. As a
community bank, Allegiant Bancorp is able to respond quickly to its
customers through local decision-making and through tailoring products and
services to meet their needs. Allegiant Bancorp's management believes market
coverage is important. After completing the merger, the merged company
will have 35 banking facilities in the St. Louis metropolitan area,
resulting in it having at least one branch within a 20-minute drive from all
principal sectors of the community. Allegiant Bancorp also became the
official bank of the St. Louis Rams football team in March 2000, which has
further increased its recognition throughout the community.
Allegiant Bancorp's management team is comprised of experienced
individuals who average more than 15 years in the banking or financial
services industries. Allegiant Bancorp's directors and executive officers
own approximately 32% of its outstanding common stock. If the merger were
completed today, those directors and executive officers would own
approximately 20% of the merged company's outstanding common stock.
- 70 -
At March 31, 2001, Allegiant Bancorp reported non-interest bearing
deposits of $94.1 million and $799.4 million of interest bearing deposits.
Interest bearing deposits included $175.3 million of money market and
checking accounts, $28.3 million of savings accounts, $480.7 million of
certificates of deposit with individual amounts up to $100,000, and $78.6
million of certificates of deposit with individual amounts in excess of
$100,000.
At March 31, 2001, Allegiant Bancorp's outstanding loans totaled
$855.1 million. This total consisted primarily of $311.8 million of
commercial and multi-family residential real estate loans, $129.8 million of
real estate construction loans and $178.3 million of commercial, financial,
agricultural, municipal and industrial development loans. These loans
comprised 72.5% of Allegiant Bancorp's portfolio. Other components of
Allegiant Bancorp's loan portfolio include one- to four-family residential
real estate and consumer loans.
RECENT ACQUISITION
On November 15, 2000, Allegiant Bancorp acquired Equality Bancorp,
Inc., the parent company of Equality Savings Bank, a Missouri
state-chartered savings bank headquartered in St. Louis with seven
locations, primarily in the southern half of the greater St. Louis, Missouri
metropolitan area. In connection with the acquisition, Allegiant Bancorp
exchanged approximately 2.7 million shares of its common stock for all of
the outstanding common stock of Equality. At closing, Equality reported
total assets of $300.4 million. Based upon the net book value of the
Equality assets at closing, no goodwill was recorded. Allegiant Bancorp's
acquisition of Equality increased the number of its outstanding common
shares to approximately 8.9 million at December 31, 2000. Also, during
November, Equality's systems were successfully integrated into those of
Allegiant Bancorp, including the conversion of all computer systems and
records.
- 71 -
INFORMATION ABOUT SOUTHSIDE
GENERAL
Southside was incorporated under the laws of the State of Missouri
in January 1982. Southside has operated as a registered bank holding company
under the Bank Holding Company Act of 1956, as amended, since 1983 when
South Side National Bank in St. Louis merged with a wholly-owned subsidiary
of Southside. Southside and its subsidiaries had consolidated total assets
of $772.7 million at March 31, 2001. The following table shows the total
assets at March 31, 2001, before elimination of intercompany accounts, of
each of Southside's subsidiary banks, all of which are located in Missouri.
TOTAL ASSETS AT
MARCH 31, 2001
SUBSIDIARY BANKS (IN THOUSANDS)
------------------------------------------- --------------
South Side National Bank in St. Louis $518,008
State Bank of Jefferson County 79,314
Bank of Ste. Genevieve 101,275
The Bank of St. Charles County 67,280
Southside's subsidiary banks, which currently operate 16 banking
offices in Missouri, are engaged in the general banking business of
accepting funds for deposit, making loans, renting safe deposit boxes and
performing other customary banking services provided by banks of similar
size and character. Southside's principal office is located at 3606 Gravois
Avenue, in St. Louis, Missouri 63116.
Customers of the subsidiary banks are also offered fiduciary
services through the trust department of South Side National Bank in St.
Louis. At March 31, 2001, the combined market value of trust assets,
including fiduciary and custodial accounts, was approximately $212.3
million. These assets are not reflected in the consolidated financial
statements, as they do not represent assets of Southside.
The responsibility for the management of the subsidiary banks
remains with the officers and directors of the respective banks. Southside
provides its subsidiary banks with assistance and service in auditing,
record keeping, tax planning, trust operations, new business development,
lending, regulatory compliance and human resources management.
At March 31, 2001, Southside reported non-interest bearing deposits
of $73.1 million and $541.0 million of interest bearing deposits. Interest
bearing deposits included $173.4 million of money market and checking
accounts, $58.5 million of savings accounts, $253.8 million of certificates
of deposit with individual amounts up to $100,000, and $55.3 million of
certificates of deposit with individual amounts in excess of $100,000.
At March 31, 2001, Southside had total outstanding loans of $474.3
million. Of this total, 58.9% was comprised of $170.8 million of commercial
and multi-family residential real estate loans, $28.1 million of real estate
construction loans and $80.3 million of commercial, financial and
agricultural loans. Other loans in Southside's portfolio are one- to
four-family residential real estate, consumer and other loans.
COMPETITION
Southside and its subsidiaries encounter substantial competition in
all aspects of their banking activities. New banks may be established in the
market areas of the subsidiary banks, and the location of existing banks may
be moved on occasion. In addition, competing banks and competing bank
holding companies are continuing to establish separate banking facilities or
branches which have been permitted under Missouri law since 1972. New or
relocated banks and facilities may have a tendency to increase the
competition faced by the subsidiary banks. Missouri law permits unlimited,
state-wide branching for both national and state-chartered banks, subject to
certain criteria.
As lenders, the subsidiary banks compete not only with other banks
but also with savings and loan associations, credit unions, finance
companies, insurance companies and other non-banking financial institutions
- 72 -
that offer credit. The subsidiary banks also compete for savings and time
deposits with other banks, savings and loan associations, credit unions,
money market and mutual funds, and issuers of commercial paper, securities
and various forms of fixed and variable income investments. The principal
competitive factors in the markets for deposits and loans are interest rates
paid and interest rates charged, along with related services. Accessibility
to customers is also a substantial factor.
EMPLOYEES
Southside has 7 officers, the majority of whom are also officers of
South Side National Bank in St. Louis. South Side National Bank in St. Louis
is a national banking organization that employs approximately 165 full-time
and 19 part-time employees. State Bank of Jefferson County, Bank of Ste.
Genevieve, and The Bank of St. Charles County are Missouri state-chartered
banks that employ an approximate total of 86 full-time and 18 part-time
employees.
PROPERTIES
Southside owns several properties through its subsidiaries. South
Side National Bank in St. Louis, a subsidiary of Southside, owns the
following properties:
* a nine-story banking and office building at 3606 Gravois Avenue,
St. Louis, Missouri 63116, and the adjacent drive-up
facilities and three parking lots;
* the land and bank building located at its branch facility at
10330 Gravois Road, St. Louis, Missouri 63126;
* the land and bank building at 9914 Kennerly Road in St. Louis
County upon which its South County branch is located;
* the land and bank building located at 6025 Chippewa, St. Louis,
Missouri 63109;
* the land and bank buildings at 10385 West Florissant,
Ferguson, Missouri 63136, 8440 Morganford Road, St. Louis County,
Missouri 63123, 840 Meramec Station Road, St. Louis,
Missouri 63088, and 3420 Iowa Street, St. Louis, Missouri
63118; and
* the land and the building at 4111 Telegraph Road, St. Louis
County, Missouri 63129.
State Bank of Jefferson County owns the following properties:
* the land and a two-story building at its main banking office at
224 S. Main Street, DeSoto, Missouri 63020;
* the land and a one-story building housing its facility located
at 2000 Rock Road, DeSoto, Missouri 63020; and
* banking facility located at 100 Scenic Plaza Drive, Herculaneum,
Missouri 63048.
Bank of Ste. Genevieve owns the land, a one-story building and an
adjacent parking lot at its main banking office at Second and Market
Streets, Ste. Genevieve, Missouri 63670 and the land and one-story building
at its facility at 710 Parkwood Drive, Ste. Genevieve, Missouri 63670.
The Bank of St. Charles County owns the land and a two-story
building at its banking facility at 6004 Highway 94 South, St. Charles,
Missouri 63304 and the land and a one-story building at its facility located
at 750 First Capitol Drive, St. Charles, Missouri 63301.
Southside's management believes the physical properties of the
subsidiary banks are suitable and adequate and are being productively
utilized.
LEGAL PROCEEDINGS
In the normal course of business, Southside has certain litigation
pending. In the opinion of management, after consultation with legal
counsel, none of the litigation is expected to have a material adverse
effect on the consolidated financial condition of Southside.
- 73 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF SOUTHSIDE
OVERVIEW. Southside's net income is derived primarily from the net
interest income of its subsidiary banks. Net interest income is the difference
or spread between the interest income the subsidiary banks receive from their
loan and investment portfolios and their cost of funds, consisting primarily
of the interest paid on deposits and borrowings. The levels of provisions
for loan losses, noninterest income and noninterest expense also affect net
income.
As a registered bank holding company, Southside is subject to
supervision and regulation by the Board of Governors of the Federal Reserve
System under the Bank Holding Company Act of 1956. Of the Southside
subsidiaries, the Bank of Ste. Genevieve is subject to federal regulation
by the Federal Reserve System, South Side National Bank in St. Louis is
subject to federal supervision and regulation by the Office of the Comptroller
of the Currency and both the State Bank of Jefferson County and The Bank of
St. Charles County are subject to federal regulation by the Federal Deposit
Insurance Corporation. Additionally, each Southside subsidiary, with the
exception of South Side National Bank in St. Louis, is subject to supervision
and regulation by the Missouri Division of Finance.
RESULTS OF OPERATIONS
Quarter Ended March 31, 2001 Compared to Quarter Ended March 31,
2000.
Net Income. Net income was $1.6 million for the three months ended
----------
March 31, 2001 compared to $1.7 million for the three months ended March 31,
2000, which represented a 7% decrease compared to the prior year period. The
decrease in first quarter earnings can be attributed to a combination of
factors. First, net interest income declined $60,000 on a quarter comparison
due to the sharp decline in interest rates during the first quarter. These
rate cuts caused the prime-lending rate to decrease 150 basis points during the
quarter. Commercial and home equity loans tied to the prime-lending rate and
yields on Federal funds sold are adjusted downward instantaneously with
these interest rate cuts; however, deposits and borrowing costs typically
adjust over time as deposits and borrowings mature and interest rates on
transaction and savings deposits are gradually changed to reflect the
current interest rate environment. Second, in light of Southside's continued
growth, the provision for loan losses increased $80,000 in the first quarter
of 2001 compared to the prior year first quarter. Finally, noninterest
expense was $170,000 higher in the first quarter of 2001 compared to 2000.
Basic and diluted earnings per common share were $0.19 and $0.18,
respectively, for the first quarter of 2001, compared to $0.20 and $0.20 for
the first quarter of 2000, respectively. Net income for the first quarter of
2001 resulted in an annualized return on average assets of 0.83% compared to
0.98% in the first quarter of 2000, and an annualized return on average
shareholders' equity of 8.81% compared to 10.34% the first quarter of 2000.
Net Interest Income. As reflected in the table on the following
-------------------
page, net interest income on a tax-equivalent basis decreased by $60,000
in the first quarter of 2001 when compared to the first quarter of
2000. Net interest income decreased because the yield on average earnings
assets remained relatively unchanged, but Southside's cost of funds
increased 49 basis points to 4.81%. This increase in the cost of funds more
than offset the additional interest income generated by a $69.1 million
increase in average-earning assets. Much of the asset growth over the past
three quarters was funded through an 11-month certificate of deposit
promotion. When the prime-lending rate dropped 150 basis points during the
first quarter 2001, it caused a very narrow interest margin when matched
against the rates offered during the promotion. The deposits will begin to
mature during the third quarter of this year. As these deposits reprice in
the current interest rate environment, it is expected to provide Southside
with some relief from the downward pressure on the net interest margin.
- 74 -
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL
CONDENSED AVERAGE BALANCE SHEET AND AVERAGE INTEREST RATES
THREE MONTHS ENDED MARCH 31,
-------------------------------------------------------------------------
2001 2000
---------------------------------- -----------------------------------
AVERAGE AVERAGE
INTEREST YIELD/ INTEREST YIELD/
AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE
BALANCE EXPENSE PAID (3) BALANCE EXPENSE PAID (3)
--------- -------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
ASSETS
Loans, net of unearned discount (1)(2)(3)...... $ 467,073 $ 9,796 8.39% $ 395,625 $ 8,317 8.41%
Investments in debt securities:
Taxable (4).................................. 169,284 2,642 6.24 186,585 2,973 6.37
Exempt from federal income tax (3)(4)........ 28,646 529 7.38 31,400 595 7.58
Short-term investments......................... 25,826 342 5.30 8,124 110 5.42
--------- -------- ---------- --------
Total interest-earning
assets/interest
income/overall yield (3).............. 690,829 13,309 7.71 621,734 11,995 7.72
-------- --------
Allowance for loan losses...................... (5,209) (5,818)
Cash and due from banks........................ 16,763 16,820
Other assets................................... 48,992 49,360
--------- ----------
Total assets............................ $ 751,375 $ 682,096
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand and savings deposits... $ 222,502 1,679 3.02 $ 227,550 1,773 3.12
Time deposits.................................. 296,309 4,423 5.97 221,049 2,798 5.06
Short-term borrowings.......................... 9,651 130 5.39 9,300 106 4.56
FHLB borrowings................................ 70,934 958 5.40 83,984 1,171 5.58
Other borrowings............................... 1,900 39 8.21 -- -- --
Debt of Employee Stock Ownership Plan.......... 960 18 7.50 1,153 22 4.32
--------- -------- ---------- --------
Total interest-bearing
liabilities/interest-
expense/overall rate.................. 602,256 7,247 4.81 543,036 5,870 4.32
-------- --------
Non-interest-bearing demand deposits........... 71,562 69,775
Other liabilities.............................. 7,037 4,500
Shareholders' equity........................... 70,520 64,785
--------- ----------
Total liabilities and shareholders'
equity................................ $ 751,375 $ 682,096
========= ==========
Net interest income..................... $ 6,062 $ 6,125
======== ========
Net interest margin on average
interest-earning assets...................... 3.51 3.94
==== ====
----------------
(1) Interest income includes loan origination fees.
(2) Average balance includes nonaccrual loans.
(3) Interest yields are presented on a tax-equivalent basis. Nontaxable
income has been adjusted upwardly by the amount of federal income tax
that would have been paid if the income had been taxable at a rate of
34%, adjusted downward by the disallowance of the interest cost to
carry nontaxable loans and securities.
(4) Includes investments available-for-sale.
Provision for Loan Losses. The provision for loan losses increased
-------------------------
to $160,000 during the first quarter of 2001 from $80,000 in 2000. The
increase in the provision for loan losses was largely due to the significant
loan growth achieved over the past several quarters resulting in increased
risk. With additional loan growth projected in 2001, management anticipates
that a larger provision for loan losses, as compared to the prior year,
will continue throughout the year. Based on Southside's analysis of the
adequacy of the allowance for loan losses, management determined it
was appropriate to increase the provision for loan losses in 2001.
Management will continue to assess the adequacy of the allowance for loan
losses on a regular basis throughout the year.
Noninterest Income. Noninterest income increased $120,000 during
------------------
the first quarter of 2001 in comparison to the first quarter of the prior
year. The increase was due in large part to a $70,000 increase in the
gains on sales of loans. As mentioned previously, with the decrease in
interest rates during the first quarter, Southside experienced a shift in
customer preference from adjustable rate loan products to fixed rate
mortgage loan products, which are sold into the secondary market. The
increase in these gains is directly the result of a significant increase
in the volume of
- 75 -
loans being sold into secondary market. In addition,
increases in service charge and other revenue contributed to the increase in
noninterest income.
Noninterest Expense. Noninterest expense increased
--------------------
$170,000 during the first quarter of 2001 in comparison to the first quarter
of 2000. The increase was mainly the result of a $220,000 increase in
salaries and employee benefits, which was partially offset by a $70,000
decrease in other expense. The increase in salaries and employee benefits
was due in part to normal increases, as well as increased health insurance
costs and higher personnel costs resulting from an extremely tight labor
market, which forced Southside to make salary adjustments to attract and
retain qualified employees. The decrease in other expenses was due to small
decreases in a variety of normal operating expenditures.
Income Taxes. Income tax expense for the first quarter of
-------------
2001 was $610,000 compared to $670,000 in the first quarter of 2000.
Southside's combined federal and state effective tax rate decreased slightly
to 28.17% in 2001, compared to 28.61% in 2000. Southside's effective tax
rate is impacted by tax-exempt loan and investment security income, income
generated by the company-owned life insurance, which is exempt from federal
and state income taxes and federal and state tax credits associated with
Southside's investment in low- and moderate-income housing projects.
Effect of New Accounting Standards. Statement of Financial
----------------------------------
Accounting Standards (SFAS) 133, Accounting for Derivative Instruments and
Hedging Activities, which was issued in June 1998, establishes accounting
and reporting standards for derivative instruments and hedging activities.
Under SFAS 133, derivatives are recognized on the balance sheet at fair
value as an asset or liability. Changes in the fair value of derivatives are
reported as a component of other comprehensive income or recognized as
earnings through the income statement depending on the nature of the
instrument. In June 1999, the FASB issued SFAS 137 - Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133, an Amendment of FASB Statement No. 133,
which defers the effective date of SFAS 133 from fiscal years beginning
after June 15, 1999 to fiscal years beginning after June 15, 2000. Initial
application should be as of the beginning of an entity's fiscal quarter; on
that date, hedging relationships must be designated and documented under the
provisions of SFAS 133, as amended. Earlier application of all of the
provisions is encouraged but is permitted only as of the beginning of any
fiscal quarter that begins after the issuance date of SFAS 133, as amended.
Additionally, SFAS 133, as amended should not be applied retroactively to
financial statements of prior periods. In June 2000, the FASB issued SFAS
No. 138 - Accounting for Derivative Instruments and Hedging Activities, an
Amendment of FASB Statement No. 133, which addresses a limited number of
issues causing implementation difficulties for numerous entities that apply
SFAS 133, as amended. SFAS 138 amends the accounting and reporting standards
of SFAS 133, as amended, for certain derivative instruments, certain hedging
activities and for decisions made by the FASB relating to the Derivatives
Implementation Group process. The adoption of SFAS 133 on January 1,
2001 did not have a material impact on the financial condition and results
of operations of Southside. Southside generally does not utilize derivative
instruments in its interest rate management process.
Loan Portfolio. Southside's loan portfolio consists of
--------------
business loans to small- and medium- size companies, commercial,
construction and residential real estate loans, and consumer loans.
Traditionally, the majority of the loan portfolio has focused on real estate
as an integral component of a credit's underlying source of collateral. The
following table is a breakdown of Southside's loan portfolio as of the end
of the periods indicated.
AS OF AS OF AS OF
MARCH 31, 2001 DECEMBER 31, 2000 MARCH 31, 2000
-------------------- ----------------------- --------------------
(IN THOUSANDS)
Commercial, financial and agricultural. $ 80,325 $ 78,586 $ 73,397
Real estate-commercial................. 170,818 157,771 137,858
Real estate-construction............... 28,091 28,808 19,790
Real estate-residential................ 158,241 161,252 141,460
Consumer .............................. 26,642 27,189 23,857
Other loans............................ 10,213 9,800 8,959
-------- -------- --------
Total.............................. $474,330 $463,406 $405,321
======== ======== ========
Southside's loan portfolio totaled $474.3 million at March 31,
2001, which represented an increase of $10.9 million, or 2.36%, since
December 31, 2000, and an increase of $69.0 million, or 17.03%, over the
past 12 months.
- 76 -
These increases in the loan portfolio were the result of Southside
continuing to execute elements of its strategic business plan, as
Southside's banking subsidiaries continue to attract customers who are
dissatisfied with the service level of the area's larger financial
institutions. The decrease in residential real estate loans can be
attributed to the drop in interest rates during 2001. In contrast to 2000
when the majority of the residential real estate loan customers were opting
for adjustable rate mortgage products, some of those same customers are now
refinancing their adjustable rate mortgages into longer term fixed rate
mortgage products, which are sold into the secondary market.
Allowance for Loan Losses and Risk Elements. Implicit in lending
-------------------------------------------
activities is the consideration that losses will be experienced and the
amount of such losses will vary from time to time, depending upon the risk
characteristics of the portfolio, as affected by economic conditions,
competition, and the financial experience of borrowers. The allowance for
loan losses, which is designed to provide for probable losses inherent in
the lending process, is increased by the provision for loan losses charged
to expense and decreased by the amount of loans charged off, net of
recoveries. The allowance for loan losses provides for anticipated probable
loan losses and is maintained at a level commensurate with management's
evaluation of the risks inherent in the subsidiary banks' loan portfolios.
In order to identify potential risks in the loan portfolios of the
subsidiary banks, monthly reports, which contain information on the overall
characteristics of the subsidiary banks' loan portfolios and specific
analyses of loans requiring special attention, including nonperforming and
certain criticized loans, are reviewed by each subsidiary bank's senior
management personnel and board of directors. In addition, Southside performs
periodic examinations of individual loans and of the overall loan portfolio
of each banking subsidiary through Southside's loan review process.
The balance of the allowance for loan losses increased by $140,000
during the first quarter of 2001. The increase in the allowance was due to
the fact that net charge offs for the quarter were $20,000, and Southside
recorded a provision for loan losses of $160,000. Based upon Southside's
internal analysis of the adequacy of the allowance for loan losses, management
of Southside believes the level is adequate to cover probable losses inherent
in the loan portfolio under current conditions. The ratio of allowance for
loan losses as a percentage of total loans was 1.12% as of March 31, 2001
compared to 1.12% and 1.19% at December 31, 2000 and March 31, 2000,
respectively.
Southside's management records provisions for loan losses in
amounts sufficient to result in an allowance for loan losses that covers
current net charge-offs and probable losses believed to be inherent in the
loan portfolio. Amounts charged against current income are based on such
factors as past loan loss experience as it relates to current portfolio mix,
evaluation of potential losses in the loan portfolio, prevailing economic
conditions, and regular reviews of the portfolio conducted by loan officers,
internal loan review staff, and bank regulatory agencies. The loan review
process entails analyzing the borrower's financial condition, payment
performance, impact of economic and business conditions on certain
borrowers, loan concentration risk, sufficiency of collateral, and any other
known risks inherent in borrowing relationships. This process is used as the
basis for determining the adequacy of the allowance for loan losses.
Southside's management believes the allowance for loan losses is adequate to
cover probable losses in the loan portfolio under current conditions.
- 77 -
NONPERFORMING ASSETS
AS OF AS OF AS OF
MARCH 31, 2001 DECEMBER 31, 2000 MARCH 31, 2000
-------------- ----------------- --------------
(DOLLARS IN THOUSANDS)
Nonaccrual loans........................ $ 4,602 $ 4,200 $ 4,287
Loans past due 90 days or more and
still accruing interest............. 143 339 62
-------- -------- --------
Total nonperforming loans........... 4,745 4,539 4,349
Other real estate owned................. 1,574 1,597 947
-------- -------- --------
Total nonperforming assets.......... $ 6,319 $ 6,136 $ 5,296
======== ======== ========
RATIOS
Total nonperforming loans as % of total 1.00% 0.98% 1.07%
loans...............................
Total nonperforming assets as % of total
loans and other real estate owned... 1.33 1.32 1.30
Total nonperforming assets as % of
total assets........................ 0.82 0.83 0.77
Total allowance for loan losses as a %
of nonperforming loans.............. 112.08 114.10 110.95
Nonperforming assets totaled $6.3 million, or 0.82% of total
assets, at March 31, 2001 compared to $6.1 million, or 0.83%, and $5.3
million, or 0.77%, at December 31, 2000 and March 31, 2000, respectively.
Nonaccrual loans increased $402,000 during the first quarter of 2001 and
accounted for the majority of the increase in nonperforming assets.
A loan is reported as impaired when it is probable that a creditor
will be unable to collect all amounts due according to the contractual terms
of the loan agreement. Southside's loan policy generally requires that a
credit meeting the above criteria be placed on nonaccrual status.
Additionally, loans which are past due more than 90 days as to payment of
principal or interest are also considered to be impaired. These loans are
included in the total of nonperforming assets.
Loans past due less than 90 days generally are not considered
impaired; however, a loan which is current as to payments may be determined
by management to demonstrate some of the characteristics of an impaired
loan. In these cases, the loan is classified as impaired while management
evaluates the appropriate course of action. Southside's primary basis for
measurements of impaired loans is the collateral underlying the identified
loan.
Any loans classified for regulatory purposes, but not included
above in nonperforming loans, do not represent material credits about which
management is aware of any information which causes management to have
serious doubts as to the borrower's ability to comply with the loan
repayment terms or which management reasonably expects will materially
impact future operating results or capital resources. As of March 31, 2001,
there were no concentrations of loans exceeding 10% of total loans, which
were not disclosed as a category of loans.
Investments in Debt and Equity Securities. Investments in
-----------------------------------------
debt and equity securities have increased $6.8 million since December 31,
2000 due in large part to the deposit growth experienced during the year.
With additional loan growth and some certificate of deposit runoff expected
during 2001, management anticipates the investment portfolio may decline
through investment security maturities and paydowns on mortgage-backed
securities.
Deposits. Total deposits increased $39.9 million during
--------
the first quarter of 2001, due largely to a decision made during 2000 to
replace short-term borrowed funds, used to fund loan growth, with
certificates of deposit. The increase in time deposits during the first
quarter of 2001 was $26.4 million. Management continues to monitor the rates
being offered, the impact of the deposits on rate sensitivity and the extent
to which Southside is able to cross-sell additional products and services to
new time deposit customers. In addition, interest-bearing demand and
- 78 -
savings accounts also increased during the first quarter by $17.6 million. Much
of this increase can be attributed to the volatility in the stock market during
the first quarter and customers' desire to increase their cash positions.
Securities Sold Under Agreements to Repurchase. Securities
----------------------------------------------
sold under agreements to repurchase, known as REPOs, decreased $1.9 million
during 2001. The majority of Southside's REPOs are used by larger commercial
customers as a daily cash management tool. Therefore, depending on their
individual liquidity positions, the balances in these accounts can vary
considerably.
Federal Home Loan Bank Borrowings. Federal Home Loan Bank
---------------------------------
borrowings are used by Southside for a variety of purposes. Approximately
$48.0 million of the borrowings has been used to fund leveraged strategies,
whereby Southside borrowed funds and used the proceeds to purchase
investment securities. The yield on the investments exceeds the borrowing
cost and provides Southside with additional net interest income.
Approximately $1.8 million of the borrowings has been used by one of
Southside's subsidiary banks to fund longer-term fixed rate residential real
estate loans. The remaining $21.0 million is used by Southside to meet
short-term liquidity needs.
Other Borrowings. The $1.9 million balance in this category
----------------
represents borrowings from an unaffiliated financial institution under a
$5.0 million line of credit. The line of credit was established to provide
the resources necessary to fund Southside's stock repurchase plan announced
during the third quarter of 2000. The plan authorizes Southside to
repurchase a total of 430,000 common shares, or 5% of Southside's
outstanding shares. As of the date the repurchase program was terminated,
Southside had repurchased 200,100 common shares under the repurchase program
at an average cost of $10.29 per common share. Southside has terminated its
repurchase program in connection with entering into the merger agreement.
Debt of Employee Stock Ownership Plan. The decrease in the
-------------------------------------
debt of the employee stock ownership plan was due to the annual principal
reduction on the loan, which is paid in March each year.
Asset/Liability Management. Southside's overall goal in
--------------------------
asset/liability management is to achieve a reasonable balance of
rate-sensitive assets with rate-sensitive liabilities in order to minimize
the impact of changing rates on net income. As assets and liabilities tend
to become more rate sensitive, whether due to customer demands or
Southside's initiatives, it becomes more important that rates earned are
matched with rates paid and that repricing dates are matched so the next
earning interval will have both components at current rates. Assets and
liabilities that mature or are repriced in one year or less are considered
in the financial services industry to be "rate sensitive." This means that
as rates in the marketplace change, the rates on these assets or liabilities
will soon be impacted. Given a reasonably balanced rate sensitivity position
if rates are increasing, Southside will have more interest income and more
interest expense. Conversely, if rates are decreasing, Southside will have
less interest income and less interest expense.
Short-term interest rate sensitive positions are critical
in managing net interest income, as they have an immediate impact on
earnings during periods of changing interest rates. Interest rate
sensitivity is measured by interest-sensitive gaps defined as the difference
between interest-sensitive assets and interest-sensitive liabilities within
any specific time period. A positive or negative interest-sensitive gap
demonstrates the relative exposure to interest rate movements. To the extent
that these gaps are close to zero, net interest income is protected from
interest rate fluctuations for the specific time period being examined.
Examples of interest-sensitive assets and liabilities include commercial loans
whose interest rates are tied to the prime commercial lending rate and money
market deposit accounts whose interest rates are tied to the three-month
treasury bill rate. The objective of an interest sensitivity analysis is
to measure the potential impact of changes in the levels of market interest
rates on net interest income.
Southside's management believes maintenance of appropriate
rate-sensitive positions is imperative in maintaining an adequate degree of
liquidity and acceptable profit margins and has structured its deposit,
investment, and loan portfolios accordingly. Southside's management believes
it has maintained an adequate liquidity position and management will
endeavor to do so in the future.
As reflected on the Repricing and Interest Rate Sensitivity
Analysis on the following page, Southside has a reasonably well-balanced
interest rate sensitivity position. Southside's current one-year
cumulative gap is 0.96x. Management believes a one-year cumulative
gap ratio in a range of 0.80x - 1.20x indicates an entity is not subject to
- 79 -
undue interest rate risk. A one-year cumulative gap ratio of 1.00x indicates
that an institution has an equal amount of assets and liabilities repricing
within twelve months. A ratio in excess of 1.00x indicates more assets than
liabilities will be repriced during the period indicated, and a ratio less
than 1.00x indicates more liabilities than assets will be repriced during
the period indicated. However, actual experience may differ because of the
assumptions used in the allocation of deposits and other factors, which are
beyond management's control. Among the significant assumptions used in
preparing the Repricing and Interest Rate Sensitivity Analysis is that
interest-bearing demand and savings deposits are not 100% rate sensitive
within the period of three months or less. As a result, these deposits are
allocated between the repricing categories based on historical analyses
performed by Southside's subsidiary banks. In addition, Federal Home Loan
Bank borrowings are categorized based on the first available call date of
the individual borrowings versus their final maturity.
Additionally, the following analysis includes the available-
for-sale securities spread throughout their respective repricing
and/or maturity horizons, even though such securities are available for
immediate liquidity should the need arise in any particular time horizon.
- 80 -
REPRICING AND INTEREST RATE SENSITIVITY ANALYSIS
AS OF
MARCH 31, 2001
----------------------------------------------------------------
OVER OVER
3 MONTHS 1 YEAR
3 MONTHS THROUGH THROUGH OVER
OR LESS 12 MONTHS 5 YEARS 5 YEARS TOTAL
----------- ------------ ----------- ---------- ---------
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS
Interest-bearing deposits in banks.......... $ 325 $ -- $ -- $ -- $ 325
Federal funds sold.......................... 37,594 -- -- -- 37,594
Investments available-for-sale.............. 28,924 20,250 71,547 48,248 168,969
Investments held-to-maturity................ 5,888 6,973 8,670 10,705 32,236
Loans, net of unearned discount (1)......... 285,515 45,565 127,194 16,056 474,330
---------- ----------- --------- --------- --------
Total interest-earning assets...... 358,246 72,788 207,411 75,009 713,454
---------- ----------- --------- --------- --------
Cumulative interest-earning assets.......... 358,246 431,034 638,445 713,454 713,454
---------- ----------- --------- --------- --------
INTEREST-BEARING LIABILITIES
Interest-bearing demand deposits............ 71,608 45,118 41,357 15,315 173,398
Savings deposits............................ 16,467 14,651 21,129 6,264 58,511
Time deposits under $100,000................ 56,231 146,788 50,659 136 253,814
Time deposits $100,000 and over............. 16,268 34,180 4,840 -- 55,288
Securities sold under agreements to
repurchase............................. 6,036 -- -- -- 6,036
FHLB borrowings............................. 30,000 8,000 31,152 1,754 70,906
Other borrowings............................ -- 1,900 -- -- 1,900
Debt of Employee Stock Ownership
Plan .................................. -- -- 791 -- 791
---------- ----------- --------- --------- --------
Total interest-bearing liabilities. 196,610 250,637 149,928 23,469 620,644
---------- ----------- --------- --------- --------
Cumulative interest-bearing liabilities..... 196,610 447,247 597,175 620,644 620,644
---------- ----------- --------- --------- --------
GAP ANALYSIS
Interest sensitivity gap.................... $ 161,636 $ (177,849) $ 57,483 $ 51,540 $ 92,810
========== =========== ========= ========= ========
Cumulative interest sensitivity gap......... $ 161,636 $ (16,213) $ 41,270 $ 92,810 $ 92,810
========== =========== ========= ========= ========
Cumulative gap ratio of interest-earning
assets to interest-bearing............. 1.82x 0.96x 1.07x 1.15x 1.15x
===== ===== ===== ===== =====
-----------
(1) Nonaccrual loans are reported in the "Over 1 year through 5 years"
column.
Year Ended December 31, 2000 Compared to Years Ended December 31,
1999 and 1998.
Net Income. Net income was $6.5 million, $6.2 million and $6.8 million
----------
for the years ended December 31, 2000, 1999 and 1998, respectively, which
resulted in diluted earnings per common share of $0.77, $0.72 and $0.80 in
each of those years. The $280,000 increase in net income during 2000 was
attributable to increases in net interest and noninterest income, which were
partially offset by an increase in the provision for loan losses and
noninterest expense, as the growth achieved over the past few years began to
provide accretive effects to earnings. The decrease in net income in 1999
versus 1998 was $0.61 million, and was largely due to an increase in
operating expenses associated with Southside's expansion efforts in 1998 and
1999. In June 1998, Southside acquired two facilities as part of its
acquisition of Public Service Bank, fsb, and in 1999, Southside opened its
sixteenth and seventeenth branches.
Net income in 2000 resulted in a return on average assets, referred
to as ROA, of 0.92%, compared to 0.97% and 1.15% in 1999 and 1998,
respectively. The decrease in Southside's ROA was due to continued asset
- 81 -
growth at Southside's subsidiary banks; however, a competitive deposit
environment forced Southside to fund the asset growth with short-term
borrowings and certificates of deposit. Both represented an increase in
Southside's cost of funds and further squeezed the interest margin. This
tightening of the net interest margin coupled with an increase in
operating expense caused earnings growth to lag behind asset growth.
Southside's return on equity, referred to as ROE, in 2000 was 9.76%,
compared to 9.54% and 11.12% in 1999 and 1998, respectively. The increase
in ROE in 2000 was due in part to the increase in earnings. In addition,
Southside continued its efforts to better utilize excess capital includin
growth of the organization and the repurchase of common stock.
Net Interest Income. Net interest income on a tax-equivalent
-------------------
basis increased by $410,000, $890,000 and $990,000 in 2000, 1999 and
1998, respectively. For the third consecutive year, the increase in
net interest income was the result of an increase in average interest-
earning assets, partially offset by a decrease in the net interest
margin on average interest-earning assets. Higher interest rates during 2000
caused the average yield on interest-earning assets to increase 36 basis
points to 7.85%. This interest rate environment, combined with a tightening
of liquidity caused Southside's cost of funds to increase 62 basis points to
4.70%. Higher short-term interest rates caused an increase in both
interest-bearing demand deposits and short-term borrowing costs. Strong
asset growth caused Southside to utilize Federal Home Loan Bank borrowings
to fund loan growth in the first half of 2000. During the second half of the
year, Southside replaced a portion of the borrowings and additional loan
growth with an 11-month certificate of deposit promotion. While this
promotion was highly successful in easing Southside's short-term liquidity
needs, the interest rate paid to attract these deposits contributed to the
increase in the cost of funds.
The increase in net interest income in 1999 was also the result
of an increase in average-earning assets, which was partially offset
by a decrease in the net interest margin. Competition for lending
relationships and an increase in adjustable rate mortgage loans combined to
drive the average yield on the loan portfolio down by 33 basis points to
8.37% in 1999 from 8.70% in the prior year. In addition, the $40 million
leverage strategies also added to the decline in the net interest margin.
Southside designed these strategies to match maturities of investments and
borrowings and earn a spread on the difference between the cost of the
borrowings and the interest earned on the assets purchased. The strategies
executed in 1999 were designed to provide a spread of 85 to 185 basis points
depending on fluctuations in the interest-rate environment during the life
of the underlying securities. While these strategies had a positive effect
on net interest income, they reduced net interest margin. Southside's
deposit and borrowing costs declined from 4.30% in 1998 to 4.08% in 1999.
Because of minimal loan growth in the first half of 1999, Southside's
management was not aggressive in deposit pricing throughout much of 1999.
- 82 -
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL
CONDENSED AVERAGE BALANCE SHEET AND AVERAGE INTEREST RATES
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
2000 1999 1998
---------------------------- ---------------------------- -----------------------------
AVERAGE AVERAGE AVERAGE
INTEREST YIELD/ INTEREST YIELD/ INTEREST YIELD/
AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE
BALANCE EXPENSE PAID (3) BALANCE EXPENSE PAID (3) BALANCE EXPENSE PAID (3)
---------------------------- ---------------------------- -----------------------------
(DOLLARS IN THOUSANDS)
ASSETS
Loans, net of
unearned discount (1)(2)(3)...... $430,819 $36,565 8.49% $355,874 $29,783 8.37% $345,902 $30,085 8.70%
Investments in debt securities:
Taxable (4)...................... 177,796 11,428 6.43 179,546 10,823 6.03 153,345 9,172 5.98
Exempt from federal income
taxes (3)(4)................... 30,170 2,267 7.51 32,521 2,492 7.66 29,020 2,326 8.01
Short-term investments............... 7,964 515 6.47 21,720 1,048 4.83 24,975 1,261 5.05
-------- ------- -------- ------- -------- -------
Total interest-earning assets/
interest income/overall
yield (3)..................... 646,749 50,775 7.85 589,661 44,146 7.49 553,242 42,844 7.74
------- ------- -------
Allowance for loan losses............ (5,175) (6,143) (6,160)
Cash and due from banks and interest-
bearing deposits with banks...... 17,380 18,665 15,097
Other assets......................... 49,892 34,193 27,945
-------- -------- --------
Total assets.................. $708,846 $636,376 $590,124
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand deposits..... $164,134 5,874 3.58% $154,909 4,798 3.10% $146,149 4,848 3.32%
Savings deposits..................... 61,382 1,500 2.44 65,113 1,579 2.43 61,632 1,535 2.49
Time deposits under $100,000......... 198,371 11,011 5.55 187,002 9,353 5.00 188,065 9,997 5.32
Time deposits $100,000 and over...... 41,251 2,348 5.69 44,817 2,164 4.83 52,026 2,721 5.23
Short-term borrowings................ 13,608 757 5.56 3,489 145 4.16 3,289 146 4.44
FHLB borrowings...................... 83,101 4,861 5.85 41,406 2,198 5.31 10,659 610 5.72
Other borrowings..................... 578 52 9.00 -- -- -- -- -- --
Debt of Employee Stock Ownership
Plan............................. 1,053 79 7.50 347 26 7.50 -- -- --
-------- ------ -------- ------- -------- -------
Total interest-bearing
liabilities/interest
expense/overall rate....... 563,478 26,482 4.70 497,083 20,263 4.08 461,820 19,857 4.30
------- ------- -------
Noninterest-bearing demand deposits.. 73,231 67,759 62,235
Other liabilities.................... 5,687 6,504 4,813
Shareholders' equity................. 66,450 65,030 61,256
-------- -------- --------
Total liabilities and
shareholders' equity....... $708,846 $636,376 $590,124
======== ======== ========
Net interest income.................. $24,293 $23,883 $22,987
======= ======= =======
Net interest margin on average
interest-earning assets.......... 3.76% 4.05% 4.15%
==== ==== ====
----------------------
(1) Interest income includes loan origination fees.
(2) Average balance includes nonaccrual loans.
(3) Interest yields are presented on a tax-equivalent basis. Nontaxable
income has been adjusted upward by the amount of federal income tax that
would have been paid if the income had been taxable at a rate of 34%,
adjusted downward by the disallowance of the interest cost to carry
nontaxable loans and securities.
(4) Includes investments available-for-sale.
- 83 -
The following table sets forth on a tax-equivalent basis,
for the periods indicated, a summary of Southside's changes in interest
income and interest expense resulting from changes in volume and changes in
rates. The change in interest due to both volume and rate has been allocated
in proportion to the relationship of the absolute dollar amounts of the
change in each.
ANALYSIS OF CHANGES IN NET INCOME DUE TO CHANGES IN VOLUME AND CHANGES IN RATES
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
2000 COMPARED TO 1999 1999 COMPARED TO 1998
--------------------------------- ----------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE IN DUE TO CHANGE IN
NET -------------------- NET --------------------
INCREASE AVERAGE AVERAGE INCREASE AVERAGE AVERAGE
(DECREASE) VOLUME RATE (DECREASE) VOLUME RATE
---------- ------ ---- ---------- ------ ----
(IN THOUSANDS)
CHANGES IN INTEREST INCOME ON:
Loans..................................... $ 6,782 $ 6,350 $ 432 $ (302) $ 855 $ (1,157)
Investment securities:
Taxable.............................. 605 (107) 712 1,651 1,574 77
Exempt from federal income taxes.......... (225) (177) (48) 166 271 (105)
Short-term investments.................... (533) (811) 278 (213) (160) (53)
------- -------- ------- ------- ------- --------
Total interest income................ 6,629 5,255 1,374 1,302 2,540 (1,238)
------- -------- ------- ------- ------- --------
CHANGES IN INTEREST EXPENSE ON:
Interest-bearing demand
deposits............................. 1,076 299 777 (50) 282 (332)
Savings deposits.......................... (79) (86) 7 44 83 (39)
Time deposits under $100,000.............. 1,658 590 1,068 (644) (56) (588)
Time deposits $100,000
and over............................. 184 (181) 365 (557) (359) (198)
Short-term borrowings..................... 612 548 64 (1) 9 (10)
FHLB borrowings........................... 2,663 2,419 244 1,588 1,635 (47)
Other borrowings.......................... 52 52 -- -- -- --
ESOP debt ................................ 53 53 -- 26 26 --
-------- -------- ------- ------- ------- --------
Total interest expense............... 6,219 3,694 2,525 406 1,620 (1,214)
-------- -------- ------- ------- ------- --------
Change in net interest income............. $ 410 $ 1,561 $(1,151) $ 896 $ 920 $ (24)
======== ======== ======= ======= ======= ========
Provision for Loan Losses. Management records provisions for loan
-------------------------
losses in amounts sufficient to result in an allowance for loan losses that
covers probable losses believed to be inherent in the loan portfolio.
Amounts charged against current income are based on such factors as past
loan loss experience as it relates to current portfolio mix, evaluation of
potential losses in the loan portfolio, prevailing economic conditions, and
regular reviews of the portfolio conducted by loan officers, loan review
staff, and bank regulatory agencies. The provision for loan losses increased
$316,000 to $361,000 in 2000, compared to $45,000 in the prior year. The
increase in the provision was largely the result of loan growth achieved
over the past several quarters resulting in increased risk. The provision
for loan losses was relatively low in 1999, largely due to the fact that
Southside experienced a relatively low level of net charge-offs during 1999.
The provision for loan losses was $361,000 in 2000, $45,000 in 1999, and
$62,000 in 1998.
Noninterest Income. Southside's noninterest income increased
------------------
$850,000 to $4.4 million in 2000 compared to $3.6 million the prior
year. The increase was due to a $150,000 increase in service
charge income resulting from Southside's management's commitment to
improving results in this area and a $910,000 increase in other income. The
increase in other income was largely the result of earnings on the cash
surrender value of company-owned life insurance polices, which were
purchased to offset the cost of deferred director fee and salary
continuation programs at Southside and at its subsidiary banks. These two
increases were partially offset by a $210,000 decline in gains on sales of
loans. During most of 2000, borrowers continued to choose adjustable rate
loan products, which are not sold into the secondary market; however, as
interest rates on long-term fixed rate mortgage products and adjustable rate
mortgage products began to converge, borrowers moved back into fixed rate
loan products.
Noninterest income increased $230,000 in 1999 to $3.6
million. The increase was due to increases in trust fees, service charges,
and other income, as well as a decrease in losses on the other real estate
owned, known as
- 84 -
OREO, all of which were partially offset by a decrease in gains on sales
of loans. The increase in trust fee income was largely due to another
strong year in the stock market, as well as continued growth in
Southside's personal trust business, which is the most profitable area
within the trust department. The increase in service charge revenue resulted
from pricing changes implemented in the current year to bring Southside's
service charges in line with its competitors. The decrease in losses on the
sales of OREO was due to the fact that there were no net gains or losses on
the sales of properties in 1999. The decrease in gains on sales of loans was
due, in large part, to the increasing interest rate environment during 1999.
By the second half of the year, virtually all of the loans being generated
were adjustable rate mortgages. These loans, which Southside keeps for its
own portfolio, do not generate secondary market fee income. The increase in
other income was due to earnings on company-owned life insurance purchased
to offset the cost of deferred board fee and salary continuation programs
which were established for directors and officers of Southside and the
subsidiary banks.
Noninterest Expense. Noninterest expense increased $1.0
-------------------
million during 2000. This increase was the result of increases in each of
the expense categories. Salaries and employee benefit expenses increased
$470,000, or 5%, due in large part to normal pay increases. The $80,000
increase in occupancy expense was mainly due to having an entire year of
costs associated with the branches opened in 1999. The $50,000 increase in
data processing expense was the result of Southside's continuing investment
in technology, which allows Southside to offer a wide range of products and
services to its customers. The increase in advertising expense was planned
as part of Southside's strategic business plan to grow the organization. The
$190,000 increase in attorney's fees can be attributed to the costs
associated with working certain problem credits through the collection
process and legal fees associated with Southside's tender offer to purchase
shares through a modified "Dutch Auction." Other noninterest expense
remained relatively unchanged from the prior year.
Noninterest expense increased $1.7 million during 1999.
The increase in noninterest expense can largely be attributed to Southside's
recent expansion efforts. Salaries and benefits increased $690,000 from 1998
to 1999. Approximately one half of the increase was due to normal wage
increases, the remainder was due to a full year of personnel costs for the
two Public Service Bank branches versus only a half year in 1998, and the
personnel costs associated with the two branches opened in 1999. The
$490,000 increase in occupancy expense was also the result of these new
branches. The increase in data processing expense of $180,000 included the
additional costs of operating the new facilities, as well as costs for
finalizing Southside's Y2K preparedness. The increase in other expenses was
also due to costs associated with the additional facilities, including
supplies, telephone and other bank services.
Income Taxes. Income tax expense was $2.4 million in 2000
------------
compared to $2.7 million and $3.1 million in 1999 and 1998, respectively.
Southside's effective tax rate decreased to 26.7% in 2000, compared to 30.3%
in 1999 and 31.1% in 1998. The decrease in the effective tax rate in 2000
was due to an increase in low-income housing tax credits and the purchase of
company-owned life insurance, the earnings on which are exempt from federal
and state income tax.
Effects of Inflation. Persistent high rates of inflation
--------------------
can have a significant effect on the reported financial condition and
results of operations of all industries. However, the asset and liability
structure of a bank is substantially different from that of an industrial
company, in that virtually all assets and liabilities of a bank are monetary
in nature. Accordingly, changes in interest rates may have a significant
impact on a bank's performance. Interest rates do not necessarily move in
the same direction, or in the same magnitude, as the prices of other goods
and services.
Inflation does have an impact on the growth of total assets in
the banking industry, often resulting in a need to increase equity
capital at higher than normal rates to maintain an appropriate
equity-to-assets ratio.
Although it is obvious that inflation affects the growth
of total assets, it is difficult to measure the impact precisely. Only new
assets acquired in each year are directly affected, so a simple adjustment
of asset totals by use of an inflation index is not meaningful. The results
of operations also have been affected by inflation, but again there is no
simple way to measure the effect on the various categories of income and
expense.
Interest rates in particular are significantly affected by
inflation, but neither the timing nor the magnitude of the changes coincide
with changes in standard measurements of inflation such as the Consumer
Price Index.
- 85 -
Additionally, changes in interest rates on some types of consumer deposits
may be delayed. These factors in turn affect the composition of sources of
funds by reducing the growth of deposits that are less interest rate-
sensitive and increasing the need for funds that are more interest rate-
sensitive.
Financial Instrument Market Value. As disclosed in note 15
---------------------------------
to Southside's consolidated financial statements, included with this joint
proxy statement/prospectus, the fair value of financial instrument assets
exceeded the balance sheet amounts of those instruments by $230,000 and
$3.5 million as of December 31, 2000 and 1999, respectively, while the fair
value of financial instrument liabilities was less than the balance sheet
amounts of those instruments by $2.0 million and $80,000 as of December 31,
2000 and 1999, respectively.
Such comparative information reflects the effect of the
current rate environment, as well as Southside's asset/liability and credit
risk management programs. The fair value estimates are based on existing
financial instruments at December 31, 2000 and do not reflect amounts which
would be ultimately realized in the normal course of business.
Balance Sheet Analysis. Total consolidated assets of
----------------------
Southside increased $59.3 million to $737.4 million at December 31, 2000
compared to $678.2 million at December 31, 1999. In addition, as of
December 31, 2000, total assets have increased by $187.6 million, or 34%,
since December 31, 1997. Beginning in 1998, Southside's strategic business
plan placed increased emphasis on growth of the organization. This has
included the acquisition of Public Service Bank in June 1998, the opening of
two facilities during 1999, and increased marketing efforts over the past
several years. These efforts have resulted in a compounded annual growth
rate over the past three years of approximately 10%, compared to approximately
2% for the three-year period ended December 31, 1997. Southside's investment
in increasing the size of the organization has not come without cost. A highly
competitive market place for both loans and deposits has caused a decline in
the net interest margin on average earning assets, and the additional
locations added in 1998 and 1999 have increased operating expenses.
Consequently, earnings growth has not kept pace with asset growth in recent
years. However, Southside's management continues to believe that the growth
achieved over the past few years will allow Southside to achieve enhanced
efficiency levels, expand its lending capacity, and offer a greater variety
of products and services to its customers because fixed costs can be spread
over a larger customer base.
Investment Portfolio. The carrying value of Southside's
--------------------
investment portfolio decreased $25.8 million from December 31, 1999 to
December 31, 2000 as a result of growth in the loan portfolio. Because of
the increase in Southside's loan portfolio, the majority of the maturities
and paydowns in the investment portfolio were utilized to fund loan growth.
The carrying value of Southside's investment portfolio
increased $38.3 million during 1999 due to two leverage strategies executed
during 1999, which totaled $40.0 million. Similar to the strategy implemented
in 1998, Southside borrowed $40.0 million from the Federal Home Loan Bank to
fund the purchase of mortgage-backed securities. Southside's management
established procedures to monitor the performance of these strategies on a
monthly basis to ensure they meet the original projections and continue to
provide a reasonable spread between the return on the assets purchased and
the cost of the borrowings. Excluding the effects of the leverage strategy,
Southside's portfolio declined slightly during 1999 because of growth in the
loan portfolio.
Southside's investment portfolio has historically provided
a stable earnings base, a secondary source of liquidity, and is one of the
primary means of adjusting interest rate sensitivity, thereby managing
interest-rate risk. The investment portfolio contains a mixture of debt
securities in terms of the types of securities, interest rates, and maturity
distribution. This diversity, as well as management's conservative
philosophy towards risk management, has resulted in a solid investment
portfolio. Debt securities included in the held-to-maturity category are
stated at cost, adjusted for amortization of premiums and accretion of
discounts, in Southside's consolidated financial statements. Debt securities
included in the available-for sale-category are recorded in Southside's
consolidated financial statements at fair value.
- 86 -
The amortized cost and fair value of Southside's available-for-sale
and held-to-maturity debt securities at December 31, 2000, 1999 and 1998 are
shown below:
INVESTMENT PORTFOLIO
AS OF
DECEMBER 31,
----------------------------------------------------------------------------
2000 1999 1998
---------------------- --------------------- --------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
---- ----- ---- ----- ---- -----
(IN THOUSANDS)
AVAILABLE-FOR-SALE
U.S. Treasury securities and
obligations of U.S. Government
agencies and corporations........ $ 63,095 $ 63,140 $ 58,168 $ 56,970 $ 35,368 $ 35,835
State and municipal securities...... 9,425 9,410 8,970 8,452 6,487 6,543
Other securities.................... 5,258 5,258 4,915 4,914 2,321 2,323
-------- -------- -------- -------- -------- --------
77,778 77,808 72,053 70,336 44,176 44,701
Mortgage-backed securities.......... 81,016 80,220 91,801 88,294 53,328 53,194
-------- -------- -------- -------- -------- --------
Total.......................... $158,794 $158,028 $163,854 $158,630 $ 97,504 $ 97,895
======== ======== ======== ======== ======== ========
HELD-TO-MATURITY
U.S. Treasury securities and
obligations of U.S. Government
agencies and corporations........ $ 14,899 $ 14,874 $ 36,784 $ 36,576 $ 55,769 $ 56,614
State and municipal securities...... 20,039 20,300 23,165 23,094 25,647 26,568
Other securities.................... -- -- 579 569 -- --
-------- -------- -------- -------- -------- --------
34,938 35,174 60,528 60,239 81,416 83,182
Mortgage-backed securities.......... 1,479 1,486 1,067 1,077 2,620 2,659
-------- -------- -------- -------- -------- --------
Total.......................... $ 36,417 $ 36,660 $ 61,595 $ 61,316 $ 84,036 $ 85,841
======== ======== ======== ======== ======== ========
- 87 -
The following table summarizes the carrying values and weighted
average yields of investments in debt securities by contractual maturities.
Actual maturities will differ from contractual maturities because borrowers
have the right to prepay obligations with or without prepayment penalties. A
maturity distribution for mortgage-backed securities has not been prepared
due to their accelerated prepayment characteristics.
AS OF
DECEMBER 31, 2000
------------------------------------------------------------
AVAILABLE FOR SALE HELD TO MATURITY
CARRYING AVERAGE CARRYING AVERAGE
-------- ------- -------- -------
(DOLLARS IN THOUSANDS)
U.S. TREASURY SECURITIES AND OBLIGATIONS OF U.S.
Within 1 year ......................................... $ 11,801 6.09% $ 10,955 5.71%
After 1 but within 5 years ............................ 43,672 6.78 2,224 5.25
After 5 but within 10 years ........................... 6,747 6.63 1,720 5.94
After 10 years ........................................ 920 7.16 -- --
--------- ---------
Total ............................................. $ 63,140 6.64 $ 14,899 5.68
========= =========
OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS
Within 1 year ......................................... $ -- -- $ 1,520 7.86
After 1 but within 5 years ............................ 666 6.35 8,175 7.59
After 5 but within 10 years ........................... 3,430 6.79 7,494 7.56
After 10 years ........................................ 5,314 7.20 2,850 7.37
--------- ---------
Total ............................................. $ 9,410 7.00 $ 20,039 7.56
========= =========
OTHER DEBT SECURITIES
Within 1 year ......................................... $ -- -- $ -- --
After 1 but within 5 years ............................ -- -- -- --
After 5 but within 10 years ........................... 100 6.28 -- --
After 10 years ........................................ -- -- -- --
--------- ---------
Total ............................................. $ 100 6.28 $ -- --
========= =========
TOTAL INVESTMENT SECURITIES (EXCLUDING MORTGAGE-BACKED)
Within 1 year ......................................... $ 11,801 6.09 $ 12,475 5.97
After 1 but within 5 years ............................ 44,338 6.77 10,399 7.09
After 5 but within 10 years ........................... 10,277 6.82 9,214 7.26
After 10 years ........................................ 6,234 7.19 2,850 7.32
--------- ---------
Total ............................................ $ 72,650 6.71 $ 34,938 6.75
========= =========
Other securities - no stated maturity equity .......... $ 5,158 6.75 $ -- --
Mortgage-backed securities ............................ 80,220 6.98 1,479 7.02
--------- ---------
Total ............................................ $ 158,028 6.85 $ 36,417 6.76
========= ==== ========= ====
Southside had designated certain debt securities with a
fair value of approximately $158.0 million and $158.6 million as
available-for-sale at December 31, 2000 and 1999, respectively, with the
differences of $770,000 and $5.2 million, respectively, between the fair
value and amortized cost of such securities being recorded as an adjustment
to the carrying value of the securities. The offsetting adjustment is
recorded, net of the related tax effect, in shareholders' equity. Debt
securities with an amortized cost of $36.4 million and $61.6 million at
December 31, 2000 and 1999, respectively, remained as held-to-maturity
securities, to be used for Southside's longer-term liquidity needs. The
held-to-maturity securities at December 31, 2000 and 1999 reflected fair
values of $36.7 million and $61.3 million, respectively, which represented
a net unrealized gain of $240,000 in 2000 and a net unrealized loss of
$280,000 in 1999. Because it is not management's intention to sell
securities from the portfolio, these gains or losses are not anticipated to
be realized by Southside. The decrease in the held-to-maturity portfolio
over the past few years was largely due to maturities and the fact that most
new security purchases are placed in the available-for-sale category.
There were no sales of securities during 2000, 1999 or 1998.
- 88 -
At December 31, 2000, there were no securities of a single
issuer that exceeded 10% of shareholders' equity.
Loans. Total loans increased $71.0 million during 2000
-----
due largely to growth in Southside's commercial and residential real estate
loan portfolios. While competition for lending relationships remained strong
during 2000, Southside was able to build on the momentum generated during
1999 and increase the loan portfolio by an additional 18.08% during 2000.
Southside's management believes it is important to achieve growth in all
sectors of Southside's loan portfolio, which helps ensure diversification
and mitigate credit risk.
Commercial, financial and agricultural loans increased $4.6 million
during 2000. This increase was due to normal growth from new loan
relationships, as Southside continues to get opportunities to develop credit
relationships with borrowers seeking the type of personalized service
Southside is able to provide.
Commercial real estate loans increased by $21.1 million during
2000. This growth was the result of Southside's continued focus on
attracting borrowers seeking personal service from their lending
institution, the additional personnel hired in prior years who have been
able to bring established lending relationships with them, and the increased
involvement of subsidiary bank directors.
Real estate construction loans increased by $9.7 million during
2000. After declining each of the past two years, activity in this area
increased during 2000. This increase also can be attributed to increased
involvement of subsidiary bank directors.
Residential real estate loans increased $30.2 million during 2000.
The growth in this category includes both traditional one-to-four family and
home equity loans. The acquisition of Public Service Bank in 1998 provided
Southside with the necessary infrastructure to increase its participation in
the residential lending area. Initially, Southside's management anticipated
that Southside would sell the majority of the loans into the secondary
market. However, the interest rate environment during 2000 caused most
customers to choose adjustable rate mortgage products. Southside typically
retains adjustable rate mortgage loans as they can be managed within the
framework of its overall asset/liability management philosophy. Long-term
fixed rate loans are not as easy to match with deposits or borrowings and
have traditionally been sold into the secondary market. With interest rates
projected to decline during 2001, Southside's management anticipates some of
the loans made during 1999 and 2000 will be refinanced into the secondary
market during 2001.
Southside's consumer loans increased $4.1 million during 2000. This
increase can be attributed to a combination of increased marketing efforts
in the retail area aimed at generating additional consumer loan business and
Southside's addition of several new sources of indirect consumer loans.
Industrial revenue bonds increased $1.5 million during 2000 due to
the addition of one new credit, which was partially offset by normal
principal payments on existing loans.
The decrease in other loans was due to normal principal reductions
during the year. Very few types of credits fall into this category;
accordingly, new loan generation is minimal.
Total loans increased $35.5 million during 1999 due largely to
increases in commercial and residential real estate loans. The increase in
the commercial real estate portfolio was the result of Southside's focus on
attracting borrowers seeking personal service, experienced lenders hired in
1998 and 1999 who were able to bring established lending relationships to
the bank and increased involvement of subsidiary bank directors. The
increase in the residential real estate portfolio was due to an increased
demand for adjustable rate mortgage loans.
- 89 -
The table below sets forth the components of Southside's loan
portfolio for each of the last five years:
LOAN PORTFOLIO--TYPES OF LOANS
AS OF
DECEMBER 31,
-------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(IN THOUSANDS)
Commercial, financial, and
agricultural................. $ 78,586 $ 73,943 $ 68,166 $ 69,168 $ 62,016
Real estate-commercial........... 157,771 136,697 115,214 98,759 82,045
Real estate-construction......... 28,808 19,078 21,993 30,836 26,067
Real estate-residential.......... 161,252 131,074 119,917 92,028 96,039
Consumer......................... 27,189 23,130 22,219 23,627 17,304
Industrial revenue bonds......... 5,339 3,879 4,717 5,517 6,373
Other loans...................... 4,461 4,636 4,762 6,502 4,619
-------- -------- -------- -------- --------
Total........................ $463,406 $392,437 $356,988 $326,437 $294,463
======== ======== ======== ======== ========
The following table shows the remaining maturities of
selected loan categories at December 31, 2000:
AS OF
DECEMBER 31, 2000
-----------------------------------------------------------
ONE YEAR OVER ONE UP OVER
OR LESS(1) TO 5 YEARS 5 YEARS TOTAL
---------- ---------- ------- -----
(IN THOUSANDS)
Commercial, financial
and agricultural.......................... $51,635 $22,365 $4,586 $ 78,586
Real estate-construction.................... 16,644 9,655 2,509 28,808
Other loans................................. 651 3,810 -- 4,461
------- ------- ------ --------
Total................................... $68,930 $35,830 $7,095 $111,855
======= ======= ====== ========
----------------------------
(1) Demand loans, loans having no stated schedule of repayments and no stated
maturity, and overdrafts are reported as due "One year or less."
Asset Quality. The following table summarizes, at the
-------------
dates presented, Southside's non-performing assets by category:
RISK ELEMENTS--NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
AS OF
DECEMBER 31,
---------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Nonaccrual loans..................................... $ 4,200 $ 6,695 $ 3,189 $ 2,977 $ 1,037
Loans past due 90 days or more and still accruing
interest........................................... 339 221 1,361 517 146
------- ------- ------- ------- -------
Total nonperforming loans....................... 4,539 6,916 4,550 3,494 1,183
Other real estate owned.............................. 1,597 835 886 1,024 860
------- ------- ------- ------- -------
Total nonperforming assets...................... $ 6,136 $ 7,751 $ 5,436 $ 4,518 $ 2,043
======= ======= ======= ======= =======
RATIOS
Nonperforming loans as % of total loans.............. 0.98% 1.76% 1.27% 1.07% 0.40%
Nonperforming assets as % of total loans and
other real estate owned......................... 1.32 1.97 1.52 1.38 0.69
Nonperforming assets as % of total assets............ 0.83 1.14 0.89 0.82 0.39
Allowance for loan losses as % of nonperforming loans 114.10 84.30 136.09 175.16 473.54
Southside's nonperforming loans totaled $4.5 million, or
0.98% of the loan portfolio, at December 31, 2000 compared to $6.9 million,
or 1.76% of the loan portfolio, at December 31, 1999. Nonperforming assets
totaled $6.1 million, or 0.83% of total assets, at December 31, 2000
compared to $7.8 million, or 1.14% of total assets, at December 31, 1999.
The decrease in both nonperforming loans and nonperforming assets in 2000
was caused by the disposition of one commercial credit totaling
approximately $1.9 million. A portion of the collateral securing the credit
was sold and the proceeds were used to reduce the outstanding principal
balance. The remaining balance of $1.1 million, for which there was a
specific allocation in the allowance for loan losses, was charged against the
- 90 -
allowance for loan losses. Southside's management continues to
aggressively pursue collection of the remaining collateral on this credit.
However, because of the uncertainties involved in the collection process,
Southside's management believes charging off the balance in 2000 was the
appropriate course of action.
The 1999 increase in both nonperforming loans and
nonperforming assets was caused by an increase in nonaccrual loans, which
was the result of the addition of loans of two commercial borrowers. As
discussed previously, one of these credits went through the disposition
process in 2000. The other borrower is currently in the process of
liquidating collateral to satisfy their obligations and sufficient reserves
have been allocated within the allowance for loan losses should there be any
shortfall.
Any loans classified for regulatory purposes, but not
included above in nonperforming loans, do not represent material credits.
Southside's management is not aware of any information which causes
management to have serious doubts as to the borrower's ability to comply
with the loan repayment terms or which management reasonably expects will
materially impact future operating results or capital resources. As of
December 31, 2000, there were no concentrations of loans exceeding 10%
of total loans, which were not disclosed as a category of loans in note 3
to the consolidated financial statements of Southside included in this
joint proxy statement/prospectus.
The amounts received in cash and recognized as interest
income on nonaccrual loans were $50,000, $60,000 and $190,000 for the years
ended December 31, 2000, 1999 and 1998, respectively. If the contractual
interest on these loans had been recognized, such income would have been
$480,000, $620,000 and $250,000 for the years ended December 31, 2000, 1999
and 1998, respectively. There were no restructured loans at December 31,
2000 or 1999.
Allowance for Loan Losses. The following table summarizes, for the
-------------------------
years indicated, activity in the allowance for Southside's loan losses,
including amounts of loans charged off, amounts of recoveries and additions
to the allowance charged to operating expense.
SUMMARY OF THE ALLOWANCE FOR LOAN LOSSES
AS OF
DECEMBER 31,
-------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Balance at beginning of year..................... $ 5,830 $ 6,192 $ 6,120 $ 5,602 $ 5,635
Provision charged to expense..................... 361 45 62 60 60
Allowance of Public Service Bank at acquisition.. -- -- 257 -- --
Loans charged off................................ (1,487) (670) (536) (367) (1,219)
Recoveries....................................... 475 263 289 825 1,126
------- ------- -------- ------- -------
Net (charge-offs) recoveries................ (1,012) (407) (247) 458 (93)
------- ------- -------- ------- -------
Balance at end of year........................... $ 5,179 $ 5,830 $ 6,192 $ 6,120 $ 5,602
======= ======= ======= ======= =======
RATIOS
Allowance for loan losses:
As % of total loans......................... 1.12% 1.49% 1.73% 1.87% 1.90%
As multiple of net charge-offs.............. 5.1x 14.3x 25.1x * 60.2x
Net charge-offs:
As % of average total loans................. 0.23% 0.11% 0.07% * 0.03%
As % of allowance for
loan losses at year end.................. 19.54 6.98 3.99 * 1.66
------------------------------------
* Ratios are not applicable for 1997, as recoveries exceeded charge-offs for
the year.
- 91 -
The following table analyzes the loan loss experience of
Southside for the periods indicated:
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Average loans outstanding, net of
unearned discount........................ $ 430,819 $ 355,874 $ 345,902 $ 311,266 $ 295,683
Allowance at beginning of year.............. 5,830 6,192 6,120 5,602 5,635
LOANS CHARGED OFF
Commercial, financial and
agricultural........................... 1,279 249 296 139 878
Real estate - commercial.................... -- -- -- -- 76
Real estate - construction.................. -- -- -- -- --
Real estate - residential................... 36 95 2 77 17
Consumer.................................... 147 291 223 134 193
Industrial revenue bonds.................... -- -- -- -- --
Other....................................... 25 35 15 17 55
---------- ---------- ---------- ---------- ----------
Total loans charged off.............. $ 1,487 $ 670 $ 536 $ 367 $ 1,219
========== ========== ========== ========== ==========
RECOVERIES
Commercial, financial and
agricultural........................... 259 116 152 687 869
Real estate - commercial.................... -- -- -- -- 66
Real estate - construction.................. 7 14 14 15 --
Real estate - residential................... 36 33 38 47 105
Consumer.................................... 158 95 80 70 77
Industrial revenue bonds.................... -- -- -- -- --
Other....................................... 15 5 5 6 9
---------- ---------- ---------- ---------- ----------
Total recoveries..................... $ 475 $ 263 $ 289 $ 825 $ 1,126
========== ========== ========== ========== ==========
Net loans charged off (recovered).... $ 1,012 $ 407 $ 247 $ (458) $ 93
========== ========== ========== ========== ==========
Provisions charged to operating expense..... $ 361 $ 45 $ 62 $ 60 $ 60
========== ========== ========== ========== ==========
Allowance of Public Service Bank at
acquisition............................ $ -- $ -- $ 257 $ -- $ --
---------- ---------- ---------- ---------- ----------
Allowance at end of year.................... $ 5,179 $ 5,830 $ 6,192 $ 6,120 $ 5,602
========== ========== ========== ========== ==========
Ratio of net charge-offs during
year to average loan outstanding......... 0.23% 0.11% 0.07% * 0.03%
-------------------------------------
* Ratio is not applicable for 1997, as recoveries exceeded charge-offs for the year.
- 92 -
The following table sets forth for the end of each reported period,
a breakdown of the allowance for loan losses by major categories of loans
and the percentage of loans in each category to total loans at the dates
indicated:
YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
----------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------- -------------------- -------------------- -------------------- --------------------
PERCENT PERCENT PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
IN EACH IN EACH IN EACH IN EACH IN EACH
CATEGORY CATEGORY CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL TO TOTAL
ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS ALLOWANCE LOANS
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Commercial,
financial and
agricultural.... $1,479 16.9% $2,030 18.8% $2,392 19.1% $2,320 21.2% $2,502 21.0%
Real estate-
Commercial...... 1,500 34.1 1,500 34.8 1,500 32.3 1,500 30.3 1,500 27.9
Real estate-
Construction.... 500 6.2 500 4.9 500 6.2 500 9.4 300 8.9
Real estate-
Residential..... 1,000 34.8 1,000 33.4 1,000 33.6 1,000 28.2 800 32.6
Consumer loans
to individuals.. 500 5.9 500 5.9 500 6.2 500 7.2 200 5.8
Industrial
revenue bonds... 100 1.1 100 1.0 100 1.3 100 1.7 100 2.2
Other loans
(Unallocated)..... 100 1.0 200 1.2 200 1.3 200 2.0 200 1.6
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total......... $5,179 100.0% $5,830 100.0% $6,192 100.0% $6,120 100.0% $5,602 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
The allowance for loan losses at December 31, 2000 was $5.2
million, or 1.12% of the total loans outstanding, compared to $5.8 million,
or 1.49%, in 1999 and $6.2 million, or 1.73%, in 1998. The balance of the
allowance for loan losses decreased $651,000 in 2000, as net charge-offs
exceeded the provision for the year. The increase in net charge-offs was
primarily due to the disposition of one large commercial credit, which is
discussed in more detail above. This decrease in the allowance, coupled with
loan growth during the year, caused the allowance as a percentage of total
loans to decrease to 1.12% at December 31, 2000. Southside increased the
provision during 2000 in light of the increase in the loan portfolio. The
$362,000 decrease in the allowance for loan losses during 1999 was the
result of net charge-offs exceeding the provision amount for the year.
Deposits. Deposits are the primary funding source for
--------
Southside's subsidiary banks and are acquired from a broad base of local
markets, including both individual and commercial customers. Total deposits
increased $58.4 million in 2000 and decreased $7.5 million in 1999.
The increase in deposits during 2000 was largely to fund
continued loan growth. This growth necessitated taking a more aggressive
approach towards attracting and retaining deposits in order to meet current
and future liquidity needs. To accomplish this, Southside began a
certificate of deposit promotion priced near the upper end of deposit
pricing in its local markets. The promotion began in July, and over the
second half of 2000 resulted in approximately $48.0 million in new
certificates of deposit relationships. In total, certificates of deposit
increased $62.6 million during 2000. This increase was partially offset by a
$3.3 million decrease in interest-bearing demand deposits and a $3.5
million decrease in savings deposits. Both decreases were due in large part
to the aforementioned certificates of deposit promotion. Because of the
attractive rate, some of Southside's money market and savings customers
decided to take advantage of the higher yield offered on the certificates of
deposit. Also contributing to the increase in total deposits were
noninterest-bearing demand deposits, which increased $2.6 million due
largely to deposit accounts associated with new lending relationships. As
Southside attracted customers in both the commercial and residential real
estate portfolio, rate incentives were offered, which encouraged customers
to also develop deposit relationships with it.
The decrease in deposits during 1999 was largely due to a
continued decline in certificates of deposit. In 1997 and 1998, certificates
of deposit represented 47% of Southside's total deposits. In 1999,
certificates of deposit
- 93 -
represent only 43% of deposits. This decline was caused by several factors.
First, Southside was not overly aggressive in its certificates of deposit
pricing because the loan-to-deposit ratio lagged behind its peer group.
Secondly, customers continued to liquidate certificates of deposit in order
to invest into mutual funds, equity securities and other investment
alternatives. Third, through much of 1999, depositors appeared more inclined
to keep their funds liquid, partially explaining the increase in money market
deposits, with the rising interest rate environment. Finally, Y2K concerns
also prompted some deposit customers to liquidate their certificates of
deposit at maturity during 1999. The decline in certificates of deposit was
partially offset by a $16.4 million increase in interest-bearing demand
deposits and a $4.1 million increase in noninterest-bearing demand deposits.
These increases can largely be attributed to customer preference for liquidity
in light of potential Y2K concerns.
The following tables shows the classification of deposits
at December 31, 2000, 1999 and 1998:
AS OF
DECEMBER 31,
-------------------------------------------------------------------------
2000 1999 1998
--------------------- ------------------- -------------------
PERCENT PERCENT PERCENT
OF TOTAL OF TOTAL OF TOTAL
AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS
------ -------- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)
Noninterest-bearing demand deposits.... $ 77,196 14% $ 74,577 14% $ 70,436 13%
Interest-bearing demand deposits....... 155,516 27 158,826 31 142,411 27
Savings deposits....................... 58,810 10 62,322 12 65,351 13
Time deposits under $100,000........... 234,709 41 178,857 35 196,930 38
--------- --- --------- --- --------- ---
Total core deposits............... 526,231 92 474,582 92 475,128 91
Time deposits $100,000 and over ....... 47,963 8 41,228 8 48,161 9
--------- --- --------- --- --------- ---
Total deposits.................... $ 574,194 100% $ 515,810 100% $ 523,289 100%
========= === ========= === ========= ===
The following table shows the amount of time deposits
$100,000 and over by time remaining until maturity at December 31, 2000,
1999 and 1998:
AS OF
DECEMBER 31,
---------------------------------------
2000 1999 1998
-------- -------- --------
(IN THOUSANDS)
Three months or less................................... $ 8,474 $ 19,385 $ 29,546
Over three through six months.......................... 12,782 8,317 6,371
Over six through twelve months......................... 19,442 10,942 8,096
Over twelve months..................................... 7,265 2,584 4,148
-------- -------- --------
Total............................................. $ 47,963 $ 41,228 $ 48,161
======== ======== ========
The following table reflects the average daily balances, by
category, for the years ended December 31, 2000, 1999, and 1998, and their
weighted average interest rates for the respective years:
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------------------------------------
2000 1999 1998
-------------------- ------------------- --------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
------- ---- ------- ---- ------- ----
(DOLLARS IN THOUSANDS)
Noninterest-bearing demand deposits..... $ 73,231 --% $ 67,759 --% $ 62,235 --%
Interest-bearing demand deposits........ 164,134 3.58 154,909 3.10 146,149 3.32
Savings deposits........................ 61,382 2.44 65,113 2.43 61,632 2.49
Time deposits under $100,000............ 198,371 5.55 187,002 5.00 188,065 5.32
Time deposits $100,000 and over......... 41,251 5.69 44,817 4.83 52,026 5.23
--------- --------- ---------
Total.............................. $ 538,369 $ 519,600 $ 510,107
========= ========= =========
- 94 -
Short-term Borrowings. Short-term borrowings are an
---------------------
alternative to other funding sources and consist primarily of federal funds
purchased and securities sold under agreements to repurchase.
Securities sold under agreements to repurchase represent
an alternative used by larger commercial deposit customers as a cash
management tool. Utilizing a daily REPO sweep account, commercial customers
can earn interest on their excess funds, while still ensuring these balances
are available to cover their operating needs. As with any transaction
oriented cash management account, the balances fluctuate based on the
customer's cash requirements on a given day. These accounts continue to gain
favor with many of our commercial customers, which is evidenced by the
increased balance in 1999 and 2000.
The following table is a summary of short-term borrowings
at December 31, 2000, 1999 and 1998:
AS OF
DECEMBER 31,
-----------------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
Federal funds purchased.............................. $ 5,750 $ 1,000 $ --
Securities sold under agreements
to repurchase...................................... 7,952 7,603 2,949
-------- ------- -------
Total........................................... $ 13,702 $ 8,603 $ 2,949
======== ======= =======
The average daily balances, weighted average daily interest
rates, maximum month-end amounts outstanding, and average interest
rates for the years-ended for short-term borrowings were as follows:
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------------------------------
2000 1999 1998
-------------------- -------------------- -------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
------- ---- ------- ---- ------- ----
(DOLLARS IN THOUSANDS)
Federal funds purchased................... $ 6,917 6.62% $ 448 4.24% $ -- --%
Securities sold under agreements to
repurchase........................... 6,691 4.47 3,041 4.14 3,289 4.44
-------- -------- --------
$ 13,608 $ 3,489 $ 3,289
======== ======== ========
Total maximum short-term borrowings
outstanding at any month end during
the year................................ $ 28,602 $ 8,603 $ 6,802
======== ======== ========
Average short-term borrowings
rate at end of year.................. 5.38% 4.20% 4.44%
Federal Home Loan Bank Borrowings. The balance of Federal
---------------------------------
Home Loan Bank borrowings decreased $13.0 million during 2000, as Southside
replaced some of the borrowings used to fund loan growth with deposits.
The balance of Federal Home Loan Bank borrowings increased
$69.6 million during 1999. This increase was due in part to the two
leverage strategies totaling $40.0 million implemented in 1999. The remainder
of the increase was borrowings of Southside's lead bank to fund short-term
liquidity needs.
Other Borrowings. In August 2000, Southside established a
----------------
$5.0 million line of credit with UMB Bank, n.a. The purpose of this credit
facility is to provide funding for stock repurchases by Southside. During
2000, Southside funded the repurchase of 200,100 shares of common stock with
$1.9 million in borrowings on this line of credit. The note bears interest
at the prime lending rate minus 50 basis points, is secured by all of the
outstanding common stock of the Bank of Ste. Genevieve and matures on August
28, 2001.
Debt of Employee Stock Ownership Plan. In September 1999,
-------------------------------------
Southside's Employee Stock Ownership Plan borrowed $1.2 million from an
unaffiliated financial institution. Previously, this debt was financed
through South Side National Bank in St. Louis, the proceeds of which were
used to purchase shares of Southside's common
- 95 -
stock. The debt is guaranteed by Southside and thus is reflected on
Southside's consolidated balance sheet. The decrease during 2000 was
due to the $198,000 annual principal payment due on the debt.
Interest Rate Sensitivity. Interest rate sensitivity is a
-------------------------
key component of asset/liability management and is related to liquidity
because each is affected by maturing assets and sources of funds. Interest
sensitivity, however, also takes into consideration those assets and
liabilities with interest rates, which are subject to change prior to
maturity. The objective of interest sensitivity management is to optimize
earnings results, while managing, within internal policy constraints,
interest rate risk. Southside's policy on interest rate sensitivity is to
manage exposure to potential risk associated with changing interest rates by
maintaining a balance sheet posture in which annual net interest income is
not significantly affected by interest rate movements. The total absence of
risk, as well as excessive risk, can result in less than acceptable returns;
therefore, Southside manages its interest sensitivity risk between those two
extremes.
The table on the following page is an analysis of interest-
sensitive assets and liabilities at December 31, 2000 over various
time horizons. Because such an analysis does not capture many factors which
determine interest rate risk, Southside has put more emphasis on the use of
a simulation model to measure its exposure to changes in interest rates.
Under different rate and growth assumptions, these projections enable
Southside to adjust its strategies to protect the net interest margin
against significant rate fluctuations. Uniform sensitivity reports and
guidelines are used by all subsidiary banks of Southside. As of December 31,
2000, model projections indicated annual net interest income would change by
less than 10% should rates rise or fall within 200 basis points from their
current level. Based on historical analysis performed by Southside's
subsidiary banks, interest-bearing demand and savings deposits have proven
to be very stable core deposits even through interest rate fluctuations.
Accordingly, Southside's management believes these deposits are not 100%
rate sensitive within the period of three months or less. As a result, as of
December 31, 2000 these deposits were allocated between the four repricing
categories using the analysis performed by each of the four banks, which
resulted in the following breakdown on a consolidated basis: three months or
less--37%, three months through 12 months--38%, over one year through five
years--25%, and over five years--0%.
As reflected on the Repricing and Interest Rate Sensitivity
Analysis on the following page, Southside has a well-balanced
interest rate sensitivity position. Generally, a one-year gap ratio in a
range of .80x--1.20x indicates an entity is not subject to any undue
interest rate risk. As of December 31, 2000, Southside's one-year gap of
.95x was within an acceptable range.
- 96 -
REPRICING AND INTEREST RATE SENSITIVITY ANALYSIS
AS OF
DECEMBER 31, 2000
------------------------------------------------------------------------
OVER OVER
3 MONTHS 1 YEAR
3 MONTHS THROUGH THROUGH OVER
OR LESS 12 MONTHS 5 YEARS 5 YEARS TOTAL
------- --------- ------- ------- -----
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS
Interest-bearing deposits with banks..... $ 896 $ -- $ -- $ -- $ 896
Federal funds sold....................... 16,383 -- -- -- 16,383
Investments available-for-sale........... 25,950 16,747 66,196 49,135 158,028
Investments held-to-maturity............. 4,040 9,915 10,398 12,064 36,417
Loans, net of unearned discount (1)...... 275,234 43,450 127,691 17,031 463,406
---------- ---------- ---------- ---------- ----------
Total interest-earning assets....... 322,503 70,112 204,285 78,230 675,130
---------- ---------- ---------- ---------- ----------
Cumulative interest-earning assets....... 322,503 392,615 596,900 675,130 675,130
---------- ---------- ---------- ---------- ----------
INTEREST-BEARING LIABILITIES
Interest-bearing demand deposits......... 63,497 56,221 35,798 -- 155,516
Savings deposits......................... 16,335 25,459 17,016 -- 58,810
Time deposits under $100,000............. 48,285 128,520 57,800 104 234,709
Time deposits $100,000 and over.......... 8,760 32,224 6,979 -- 47,963
Federal funds purchased.................. 5,750 -- -- -- 5,750
Securities sold under agreements
to repurchase......................... 7,952 -- -- -- 7,952
Other borrowings......................... -- 1,900 600 -- 2,500
FHLB borrowings.......................... 30,000 8,000 31,170 1,777 70,947
Debt of Employee Stock
Ownership Plan...................... -- -- 988 -- 988
---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities.. 180,579 252,324 150,351 1,881 585,135
---------- ---------- ---------- ---------- ----------
Cumulative interest-bearing
liabilities......................... 180,579 432,903 583,254 585,135 585,135
---------- ---------- ---------- ---------- ----------
GAP ANALYSIS
Interest sensitivity gap................. $ 141,924 $ (182,212) $ 53,934 $ 76,349 $ 89,995
========== ========== ========== ========== ==========
Cumulative interest
sensitivity gap....................... $ 141,924 $ (40,288) $ 13,646 $ 89,995 $ 89,995
========== ========== ========== ========== ==========
Cumulative gap ratio of interest-
earning assets to interest-bearing
liabilities........................... 1.79x .91x 1.02x 1.15x 1.15x
----------------------------
(1) Nonaccrual loans are reported in the "over 1 year through 5 years" column.
Southside measures the impact of interest rate changes on its
income statement through the use of gap analysis. The gap represents the net
position of assets and liabilities subject to repricing in specified time
periods. During any given time period, if the amount of rate-sensitive
liabilities exceeds the amount of rate-sensitive assets, a company would
generally be considered negatively gapped and would benefit from falling
rates over that period of time. Conversely, a positively gapped company
would generally benefit from rising rates.
Southside has structured its assets and liabilities to mitigate the
risk of either a rising or falling interest rate environment. Depending upon
its assessment of economic factors such as the magnitude and direction of
projected interest rates over the short and long term, Southside generally
operates within guidelines set by its asset/liability policy and attempts to
maximize its returns within an acceptable degree of risk. Southside's
intention is to maintain a gap position at the one-year horizon of between
0.75% and 1.25%. Southside's position at December 31, 2000 was 0.91%.
Southside manages its gap position at the one-year horizon as well as
monitors the cumulative gap position for succeeding time frames.
- 97 -
LIQUIDITY
Southside's Asset/Liability Management Committee formulates
guidelines for and monitors the composition of assets and liabilities.
The objective is to meet earnings goals by producing the optimal yield
and maturity mix consistent with interest rate expectations and projected
liquidity needs.
Achieving these goals is the central role of liquidity management,
which must ensure that Southside has ready access to sufficient funds to
meet existing commitments and future financial obligations. In addition,
liquidity management enables Southside to withstand fluctuations in deposit
levels and to provide for customers' credit needs in a timely and
cost-effective manner. Liquidity management, therefore, is viewed from both
an asset and liability perspective.
Asset liquidity is normally provided through the maturities of
various assets, the receipt of loan payments, and the interest collected on
assets. Additionally, as part of its overall asset/liability management
strategy, Southside designates certain investment securities as
available-for-sale. In the event that liquidity needs arise, these
securities are available to be converted to cash.
The most important source of liquidity for Southside is deposit
liquidity, which is the ability to raise new funds and renew maturing
liabilities. Southside's long-term customer relationships in the various
local markets are the foundation of Southside's long-term liquidity.
- 98 -
Short-term liquidity needs arise from continuous fluctuations in
the flow of funds on both sides of the balance sheet. Southside's subsidiary
banks control their own asset/liability mix within guidelines of Southside's
policy and their individual loan demand and deposit structure, with guidance
from the Asset/Liability Management Committee. Other than South Side
National Bank in St. Louis, Southside's subsidiary banks do not generally
borrow funds.
As the parent company, Southside maintains its liquidity position
and provides for its cash flow needs through dividends and management fees
received from its subsidiary banks.
Southside's management believes that it has historically maintained
an adequate liquidity position and will endeavor to continue to do so in the
future.
CAPITAL RESOURCES
Southside's management reviews various capital measures monthly
to ensure that they are within internal guidelines and within external
guidelines as established by law, and Southside's management believes that
Southside's current capital position is adequate to support its banking
operations. Southside management believes that, as of December 31, 2000,
Southside exceeds the capital adequacy requirements established by the
Federal Reserve Board.
Southside's total capital ratios under the risk-weighted guidelines
at December 31, 2000 and 1999 were 14.72% and 16.12%, respectively, which
included Tier I capital ratios of 13.66% and 14.87%, respectively. In
addition, Southside and its subsidiary banks must maintain a minimum Tier I
leverage ratio (Tier I capital to adjusted total assets) of at least 3%.
Southside's Tier I leverage ratios were 9.15% and 9.81% at December 31, 2000
and 1999, respectively. These ratios are well above the minimum
risk-weighted capital requirements.
The following is a summary of data and ratios pertaining to
Southside's capital position at December 31, 2000, 1999 and 1998:
AS OF
DECEMBER 31,
------------------------------------
2000 1999 1998
---- ---- ----
(DOLLARS IN THOUSANDS)
RISK-BASED CAPITAL
Tier I capital................................... $ 66,518 $ 64,086 $ 61,036
Total capital.................................... 71,697 69,478 65,778
Risk-weighted assets............................. 486,962 430,943 377,905
RISK-BASED CAPITAL RATIOS
Tier I capital to risk-weighted assets........... 13.66% 14.87% 16.15%
Minimum requirement.............................. 4.00 4.00 4.00
Total capital to risk-weighted assets............ 14.72 16.12 17.41
Minimum requirement.............................. 8.00 8.00 8.00
TIER I CAPITAL
Tier I capital................................... $ 66,518 $ 64,086 $ 61,036
Average fourth quarter total consolidated
assets less intangibles........................ 727,246 653,410 609,771
LEVERAGE CAPITAL RATIOS
Tier I capital to average total consolidated
assets less intangibles........................ 9.15% 9.81% 10.01%
Minimum requirement.............................. 3.00 3.00 3.00
- 99 -
ELECTION OF SOUTHSIDE DIRECTORS
The following information is provided for the benefit of Southside
shareholders in connection with the election of directors for Southside.
Assuming that the merger is approved, the newly elected Southside directors,
together with the continuing Southside directors, will serve as directors of
Southside until the merger is completed. After the merger is completed, the
board of directors of the merged company will consist of all of the
current directors of Allegiant Bancorp and two of the then current directors
of Southside.
NOMINEES
Douglas P. Helein, Earle J. Kennedy, Jr., Daniel J. Queen
and Steven C. Roberts are the nominees for election to the Southside board
of directors. All four are presently members of the Southside board of
directors.
INFORMATION ABOUT NOMINEES AND OTHER DIRECTORS
Southside's articles of incorporation and bylaws provide for
Southside to have not less than nine nor more than 15 directors divided
into three classes as nearly equal as possible with one class to be elected
annually for a three-year term. The board of directors has fixed the number
of directors at ten.
The following table indicates each nominee's and each continuing
director's: (1) age, (2) principal occupation or employment for the past
five years, (3) other directorships, and (4) first year as a director of
Southside. Information about the business experience of each director has
been furnished by such director or has been obtained from Southside's
records.
Nominees for Class III: term to expire in 2004, or when the merger is completed
DIRECTOR
--------
NAME AGE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS SINCE
---- --- -------------------- ------------------- -----
Douglas P. Helein 49 Insurance Broker, Welsch, Flatness & -- 1992
Lutz, Inc. (insurance agency)
Earle J. Kennedy, Jr. 72 Retired -- 1978
Daniel J. Queen 60 President, Highland Diversified, Inc. State Bank of Jefferson 1992
(operates grocery stores) County (subsidiary of
Southside)
Steven C. Roberts 48 President and Chief Operating South Side National Bank in 2000
Officer, Roberts Broadcasting Company St. Louis (subsidiary of
(commercial television station) Southside); Falcon Products,
Inc.; Alamosa PCS
- 100 -
Class I: term to expire in 2002, or when the merger is completed
DIRECTOR
--------
NAME AGE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS SINCE
---- --- -------------------- ------------------- -----
Norville K. McClain 71 President, Essex Contracting, Inc. South Side National Bank in 1988
(building contractor and developer) St. Louis (subsidiary of
Southside)
Richard G. Schroeder, Sr. 60 President, St. Louis Fabrication South Side National Bank in 1994
Services, Inc. (steel fabrication St. Louis (subsidiary of
company) (February 1980 - July 2000) Southside)
Thomas M. Teschner 44 President and Chief Executive Chairman, South Side National 1992
Officer, Southside Bancshares Corp. Bank in St. Louis; Bank of
St. Genevieve; The Bank of
President and Chief Executive St. Charles County; and State
Officer, South Side National Bank in Bank of Jefferson County
St. Louis (subsidiaries of Southside)
Class II: term to expire in 2003, or when the merger is completed
DIRECTOR
--------
NAME AGE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS SINCE
---- --- -------------------- ------------------- -----
Joseph W. Beetz 72 President, Joseph H. Beetz Plumbing -- 1978
Company, Inc. (plumbing contractor)
Howard F. Etling 86 Publisher Emeritus, Journal Newspapers -- 1962
Joseph W. Pope 35 Senior Vice President and Chief -- 2000
Financial Officer, Southside Bancshares
Corp.
Senior Vice President,
South Side National Bank in St. Louis
COMMITTEES
Southside's board of directors has an audit committee
and a compensation committee. The audit committee:
* monitors the internal accounting controls and practices of
Southside and reports its findings to the board of directors;
* members are Mr. Beetz, Mr. Etling, Mr. Helein, Mr. Kennedy,
Mr. Queen, Mr. McClain and Mr. Schroeder; and
* met four times in 2000.
Southside's compensation committee:
* approves compensation levels for executive officers;
* members are Mr. Beetz, Mr. Etling, Mr. Helein, Mr. Kennedy,
Mr. Queen, Mr. McClain and Mr. Schroeder; and
* met one time in 2000.
- 101 -
Southside does not have a standing nominating committee, and no
other committee performs a similar function. The Southside board of
directors makes all recommendations for nominees to the Southside board of
directors. Southside shareholders may not nominate individuals to serve as
directors.
MEETINGS. In 2000, the Southside board of directors held 12 regular
meetings and four special meetings. Each of the Southside directors attended
at least 75% of the total number of meetings of the board of directors and
committees on which they served.
DIRECTOR COMPENSATION. Each Southside director receives an annual
retainer of $35,400 payable in equal monthly installments. A director of
Southside who also serves as a director for one of Southside's subsidiary
banks receives additional director fees from that bank.
The directors may elect to defer their director fees under
Southside's deferred compensation plan for directors. Under the deferred
compensation plan, a director may defer all or a portion of his director's
fees in exchange for post-retirement income or pre-retirement death
benefits. The amount deferred by a director is placed into a deferral
account which accrues interest at a rate between 6% and 15% annually, with
the exact return based upon the increase in Southside's stock price from
year to year. The benefits that participants are entitled to after leaving
the board are discussed on page 28 of this joint proxy statement/prospectus.
Southside did not pay any other remuneration to any non-employee
director or for special assignments.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following tables set forth as of June 12, 2001 the number of
shares of stock owned beneficially by (1) each Southside director (including
nominees for director), (2) each Southside executive officer named in the
summary compensation table, (3) Southside directors and executive officers
as a group and (4) any person Southside knows to be the beneficial owner of
more than 5% of Southside's outstanding shares of stock. The following
tables also set forth pro forma information regarding the beneficial
ownership of the merged company's common stock by these same persons
assuming (1) that the merger was completed on June 12, 2001 (2) all of these
persons elected to receive shares of stock of the merged company in
exchange for their shares of Southside stock and (3) all of these persons
received shares of stock of the merged company in exchange for their
shares of Southside stock.
- 102 -
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP (1) BENEFICIAL OWNERSHIP
BEFORE MERGER AFTER MERGER
------------------------------ ----------------------------
SOLE VOTING OTHER PERCENT SOLE VOTING OTHER PERCENT
DIRECTORS AND AND INVESTMENT BENEFICIAL OF AND INVESTMENT BENEFICIAL OF
EXECUTIVE OFFICERS POWER OWNERSHIP CLASS(2) POWER OWNERSHIP CLASS
------------------ -------------- --------- -------- -------------- --------- -------
Joseph W. Beetz................ 57,390 -- *% 79,772 -- *%
Howard F. Etling............... 166,142 -- 1.87 230,937 -- 1.53
Douglas P. Helein.............. 398,320 4.49 553,664 -- 3.68
Earle J. Kennedy, Jr. ......... 10,020 143,670 (3) 1.73 13,927 199,701 1.42
Norville K. McClain............ 291,091 1,029,539 (4) 14.90 404,616 -- 2.69
Joseph W. Pope................. 66,472 (5) -- * 92,396 -- *
Daniel J. Queen................ 235,946 -- 2.66 327,964 -- 2.18
Steven C. Roberts.............. 15,500 -- * 21,545 -- *
Richard G. Schroeder, Sr. ..... -- 99,000 (6) 1.11 -- 137,610 *
Thomas M. Teschner............. 407,254 (7) 1,097,743 (4)(8) 16.98 566,083 198,016 5.08
Directors and executive
officers as a group
(10 persons).................. 1,648,135 (9) 1,325,251 (4) 33.55% 2,290,907 411,039 17.95%
---------------------------
* Less than 1%
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP (1) BENEFICIAL OWNERSHIP
BEFORE MERGER AFTER MERGER
------------------------- ------------------------
SOLE VOTING SOLE VOTING
AND OTHER PERCENT AND OTHER PERCENT
NAME AND ADDRESS OF INVESTMENT BENEFICIAL OF INVESTMENT BENEFICIAL OF
OTHER PRINCIPAL SECURITY HOLDERS POWER OWNERSHIP CLASS(2) POWER OWNERSHIP CLASS
-------------------------------- ---------- --------- -------- ---------- --------- -------
Southside Bancshares Corp. (4)...... -- 1,029,539 11.62% -- -- --
Employee Stock Ownership Plan
(With 401(k) Provisions)
3606 Gravois Avenue
St. Louis, Missouri 63116
First Banks, Inc. (10).............. 1,583,460 -- 17.87% 2,201,009 -- 14.62%
135 North Meramec
Clayton, Missouri 63105
-------------------------------------
(1) The information set forth is based upon information furnished to
Southside by the named persons or entities. Beneficial ownership is
determined under SEC rules and includes shares of Southside stock for
which a person directly or indirectly has or shares voting power or
investment power or both and shares of Southside stock which may be
acquired upon the exercise of stock options that are exercisable or
will become exercisable within 60 days.
(2) The percentages are based on the total number of outstanding shares
of Southside common stock, 8,415,528, plus the total number of shares
of Southside stock for which beneficial ownership may be acquired
under stock options that are exercisable or that will become
exercisable within 60 days, 446,000, for a total of 8,861,528 shares.
(3) Shares for which Mr. Kennedy has shared voting and investment power
with his wife.
(4) Includes 1,029,539 shares held by the Southside Bancshares Corp.
Employee Stock Ownership Plan With 401(k) Provisions. Mr. McClain and
Mr. Teschner are trustees of the plan. Participants in the plan have
voting power over shares of stock allocated to their plan accounts.
The trustees will vote these shares of stock as directed by the
participants. If a participant fails to provide direction, the
trustees will vote those shares in their discretion. Except for
74,254 shares of stock allocated to Mr. Teschner's account under the
plan, Mr. Teschner and Mr. McClain disclaim any personal interest in
all of the shares of stock held by the plan.
- 103 -
(5) Includes 15,162 shares of stock allocated to Mr. Pope's account under
the employee stock ownership plan and 48,000 shares of stock that Mr.
Pope may acquire beneficial ownership of under stock options that are
exercisable or will become exercisable within 60 days.
(6) Includes shares for which Mr. Schroeder has shared voting and
investment power with his wife.
(7) Includes 74,254 shares of stock allocated to Mr. Teschner's account
under the employee stock ownership plan and 330,000 shares of stock
that Mr. Teschner may acquire beneficial ownership of under stock
options that are exercisable or will become exercisable within 60
days.
(8) Includes 142,458 shares of stock for which Mr. Teschner has shared
voting and investment power.
(9) Includes 89,416 shares of stock allocated to the accounts of the
executive officers of Southside under the employee stock ownership
plan and 378,000 shares of stock that the executive officers and
directors may acquire beneficial ownership of under stock options
that are exercisable or will become exercisable within 60 days.
(10) Not included are 16,920 shares of stock owned by James F. Dierberg
and 371,760 shares of stock owned by Investors of America, L.P. The
directors and executive officers of First Securities America, Inc.,
the general partners of Investors of America, L.P., and other members
of their families, including James F. Dierberg, control First Banks,
Inc. directly or indirectly.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the
compensation paid or accrued in 2000, 1999 and 1998 for Southside's chief
executive officer and for Southside's other named executive officer.
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION
--------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (1) BONUS (2) COMPENSATION (3)
--------------------------- ---- ---------- --------- ----------------
Thomas M. Teschner 2000 $227,000 $105,000 $104,885
President, Chief Executive Officer 1999 215,000 115,000 109,997
and Director 1998 215,000 100,000 103,124
Joseph W. Pope 2000 95,000 22,500 17,451
Senior Vice President, 1999 90,000 25,000 10,418
Chief Financial Officer and 1998 85,000 25,000 9,771
Director
-----------------------------------
(1) Includes deferred compensation contributed by Mr. Teschner and Mr.
Pope to the employee stock ownership plan.
(2) Includes amounts paid in accordance with the Southside executive
compensation program discussed in the compensation committee report
section of this joint proxy statement/prospectus.
(3) Consists of Southside's contributions and allocations to the employee
stock ownership plan ($12,079 in 2000, $12,433 in 1999 and $13,009 in
1998 for Mr. Teschner, and $8,520 in 2000, $9,504 in 1999 and $8,861
in 1998 for Mr. Pope), director's fees from Southside and its
subsidiaries ($55,850 in 2000, of which $35,400 was deferred, $53,600
in 1999, of which $44,000 was deferred, and $47,550 in 1998, of which
$39,550 was deferred, for Mr. Teschner, and $8,000 in 2000 for Mr.
Pope), and life insurance premiums ($4,083 in 2000, $4,249 in 1999
and $4,438 in 1998 for Mr. Teschner, and $931 in 2000, $914 in 1999
and $910 in 1998 for Mr. Pope). The amounts also reflect $32,873,
$39,715 and $38,127 paid to Mr. Teschner in 2000, 1999 and 1998,
respectively, as grants of performance stock awards under the
deferred compensation agreement described on page 28 of this joint
proxy statement/prospectus and in the compensation committee report
section of this joint proxy statement/prospectus. The 2000 grant
represents 4,457.36 shares of performance stock. The 1999 and 1998
grants represent 4,538.86 and 3,112.39 shares of performance stock,
respectively.
- 104 -
The following table sets forth information concerning (1) the
number of shares of Southside's stock acquired in 2000 upon the exercise of
stock options and (2) the number of shares of Southside's stock that may be
acquired upon the exercise of stock options outstanding and the value of
such options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL YEAR OPTIONS/SARS AT FISCAL
SHARES END (1) YEAR-END (2)
ACQUIRED VALUE ----------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
Thomas M. Teschner 0 $0 258,000(3) 132,000(5) $161,310 $12,540
Joseph W. Pope 0 $0 42,000(4) 6,000(6) $ 91,770 $ 6,270
--------------------------------------------
(1) All amounts represent shares of stock underlying stock options at
December 31, 2000.
(2) Pre-tax gain. The value of the unexercised in-the-money stock options
is based upon a December 31, 2000 closing bid price of $7.375 per
share.
(3) Includes 30,000 shares of Southside stock underlying stock options
having an exercise price of $3.67 per share, 48,000 shares of
Southside stock underlying stock options having an exercise price of
$6.33 per share and 180,000 shares of Southside stock underlying stock
options having an exercise price of $8.00 per share.
(4) Includes 18,000 shares of Southside stock underlying stock options
having an exercise price of $3.67 per share and 24,000 shares of
Southside stock underlying stock options having an exercise price of
$6.33 per share.
(5) Includes 12,000 shares of Southside stock underlying stock options
having an exercise price of $6.33 per share and 120,000 shares of
Southside stock underlying stock options having an exercise price of
$8.00 per share.
(6) Includes 6,000 shares of Southside stock underlying stock options having
an exercise price of $6.33 per share.
EXECUTIVE CONTRACTS
THOMAS M. TESCHNER'S EMPLOYMENT CONTRACT. Southside and South Side
National Bank in St. Louis have entered into an employment agreement with
Thomas M. Teschner, President and Chief Executive Officer of Southside and
the bank. Mr. Teschner's employment agreement is effective through April 27,
2004 and automatically renews each year on the employment agreement's
anniversary date for a new three-year term unless notice not to renew is
delivered on or before the anniversary date.
Under the employment agreement, Southside or the bank may terminate
Mr. Teschner's employment at any time for cause or disability. The agreement
defines cause as willful misconduct resulting in indictment for an alleged
felony, violation of any material provision of the agreement or any willful
failure to substantially perform any reasonable directions of Southside's or
the bank's board of directors within 60 days after written demand. Removal
for cause requires the affirmative vote of at least two-thirds of each of
Southside's and the bank's board of directors. A disability is defined as
the inability of Mr. Teschner to perform his duties under the employment
agreement due to illness or injury as determined by a physician acceptable
to Southside, the bank and Mr. Teschner.
Upon termination for cause or disability, Mr. Teschner is entitled
to receive a severance payment equal to the greater of (1) one-third of his
current annual base salary or (2) a severance payment computed in accordance
with Southside's or the bank's then existing severance policy. After
termination of employment for cause, or if Mr. Teschner improperly
terminates his own employment, Mr. Teschner will not for a period of six
months after termination solicit customers or clients of Southside, the bank
or any of their subsidiaries without the prior approval of the board of
directors.
Upon Mr. Teschner's death during the term of the agreement, his
beneficiary or estate is entitled to the benefits payable under the
accidental death, life insurance and similar plans for employees of
Southside and the bank. In the event that such death benefit plans are
amended to reduce or terminate benefits, Mr. Teschner's beneficiary or
estate is entitled to a lump sum payment equal to the difference between the
sum that would have been payable under the death benefit plans as of the
date of the agreement and the sum payable under the amended plans.
- 105 -
The benefits that Mr. Teschner is entitled to under his employment
agreement upon a change of control of Southside or the bank are discussed on
page 28 of this joint proxy statement/prospectus.
THOMAS M. TESCHNER'S SALARY CONTINUATION AGREEMENT. Southside and
Thomas M. Teschner have also entered into a salary continuation agreement
which provides for payments to Mr. Teschner in the event he retires, is
terminated or Southside experiences a change in control. If Mr. Teschner
retires at age 65 or later, Southside will pay him an annual benefit equal
to 90% of his annual salary on the date the plan was established, increased
each plan year by 3.5% compounded annually. The plan also provides for early
retirement between the ages of 55 and 64. If Mr. Teschner retires at age 55,
he will receive 50% of the normal retirement benefit. If Mr. Teschner retires
after reaching age 55, he will receive an additional 5% of the normal
retirement benefit for each year of employment until the percentage equals
100% at age 65.
In the event Southside experiences a change of control while
Mr. Teschner is an active employee of Southside and Mr. Teschner's employment
is terminated other than for cause, or his job duties and/or compensation
are reduced, Southside will pay him a lump sum amount, to be determined
depending on the number of years of participation in the plan by Mr. Teschner.
If Mr. Teschner's employment with Southside is terminated before he reaches
age 55 and while he suffers a disability, Mr. Teschner may elect to receive
reduced benefit payments at age 65 or a lump sum payment similar to a
voluntary termination of employment.
The benefits that Mr. Teschner is entitled to under his salary
continuation agreement in the event Southside experiences a change of
control are discussed on page 28 of this joint proxy statement/prospectus.
Southside is not required to make any payments under the agreement
if Mr. Teschner's employment is terminated by Southside for gross negligence
or gross neglect of duties, commission of a felony involving moral turpitude
or fraud, dishonesty or willful violation of any law committed in connection
with his employment and resulting in his personal financial benefit to
Southside's detriment.
THOMAS M. TESCHNER'S LIFE INSURANCE AGREEMENT. Southside and Thomas
M. Teschner through his irrevocable insurance trust have entered into a
split dollar agreement by which Southside has agreed to share with the trust
the proceeds of a life insurance policy on Mr. Teschner's life in lieu of
the benefits payable under his salary continuation agreement. Specifically,
the trust will receive $3,474,940 from the insurance policy if Mr. Teschner
dies before reaching age 65. The proceeds payable to the trust decrease on
an annual basis by the amount of any retirement payments received by Mr.
Teschner under the salary continuation agreement. Southside pays the
premiums on the policy, and the cost of the insurance is included in Mr.
Teschner's gross income for federal income tax purposes.
JOSEPH W. POPE'S EMPLOYMENT CONTRACT. Southside entered into an
employment agreement with Joseph W. Pope, Senior Vice President and Chief
Financial Officer of Southside. Mr. Pope's employment agreement is effective
through April 26, 2002 and may be extended by mutual consent of the parties
upon such terms as they may agree.
Under the employment agreement, Southside may terminate Mr. Pope's
employment at any time for cause, which is defined to include commission of
a felony, evidence of substance abuse and willful failure to perform any
reasonable directions after 10 days' written notice. Southside may also
terminate Mr. Pope's employment at any time without cause upon providing
written notice to Mr. Pope of such termination.
In the event Southside terminates Mr. Pope without cause, Mr. Pope
is entitled to receive $100,000, less applicable taxes and withholdings. In
the event Mr. Pope dies during the term of the employment agreement, the
employment agreement terminates and all payments and benefits under the
employment agreement will terminate as of the date of Mr. Pope's death.
Under the employment agreement, if Mr. Pope's employment is
terminated without cause during the period ending upon the later of (1) the
expiration of six months following completion of the merger, or (2) April
27, 2002, Mr. Pope is entitled to receive a lump sum payment of $100,000. In
addition, Mr. Pope may voluntarily terminate his employment after 60 days or
more following the merger. If Mr. Pope makes such election, he is entitled to
receive, in addition to other amounts payable outside the employment
agreement, the unpaid portion of his annual salary and a bonus, which bonus
will not be less than $27,325, whether or not such payments have accrued.
- 106 -
JOSEPH W. POPE'S SALARY CONTINUATION AGREEMENT. Southside and
Joseph W. Pope have entered into a salary continuation agreement which
provides for payments to Mr. Pope in the event he retires, is terminated or
Southside experiences a change in control. If Mr. Pope retires at age 65 or
later, Southside will pay him an annual benefit equal to 90% of his annual
salary on the date the plan was established, increased each plan year by
3.5% compounded annually. The plan also provides for early retirement
between the ages of 55 and 64. If Mr. Pope retires at age 55, he will
receive 50% of the normal retirement benefit. If Mr. Pope retires after
reaching age 55, he will receive an additional 5% of the normal retirement
benefit for each year of employment until the percentage equals 100% at age 65.
In the event Southside experiences a change of control while
Mr. Pope is an active employee and Mr. Pope's employment is terminated other
than for cause, or his job duties and/or compensation are reduced, Southside
will pay him a lump sum amount, to be determined depending on the number of
years of participation in the plan by Mr. Pope. If Mr. Pope's employment
with Southside is terminated before he reaches age 55 and while he suffers a
disability, Mr. Pope may elect to receive a reduced benefit payment at age
65 or a lump sum payment similar to a voluntary termination of employment.
The benefits that Mr. Pope is entitled to under his salary
continuation agreement in the event that Southside experiences a change of
control are discussed on page 28 of this joint proxy statement/prospectus.
Southside is not required to make any payments under the agreement
if Mr. Pope's employment is terminated by Southside for gross negligence or
gross neglect of duties, commission of a felony involving moral turpitude or
fraud, dishonesty or willful violation of any law committed in connection
with his employment and resulting in his personal financial benefit to
Southside's detriment. In addition, Southside is not obligated to make any
payments to Mr. Pope under the agreement, except in the event of a change of
control, until he has been employed with Southside or its subsidiaries for
ten years.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Southside compensation committee establishes and administers
Southside's executive compensation program. The Southside compensation
committee established the program (1) to link individual compensation and
Southside's performance and (2) to provide for both short- and long-term
incentive programs that align the economic interests of Southside management
and Southside shareholders. In developing the program, the Southside
compensation committee engaged an independent third party to assist in the
design of the executive compensation program. Based upon recommendations of
the independent third party, as well as competitive competition analysis,
the committee adopted an annual incentive plan. Information for determining
the competitive compensation levels was obtained from a bank cash
compensation survey prepared by the Bank Administrative Institute, as well
as an independent survey of financial institutions in Missouri and Illinois
with total assets of $300 million to $1 billion. The group surveyed for the
purpose of determining competitive compensation levels is different than
those used for comparative purposes in the performance graph on page 110 of
this joint proxy statement/prospectus. The Southside compensation committee
believes that the survey group used for determining executive compensation
more closely represents Southside's actual competition for executive talent.
The plan's basic goals are:
* to maintain base salary levels relatively close to the market
median for financial institutions in Southside's peer group,
and
* to provide for annual incentive opportunities based on the
achievement of established business plan goals with annual
incentives comparable with the market median for financial
institutions in Southside's peer group, with additional upside
potential for performance significantly above the
predetermined goals.
The Southside compensation committee reviews the program on an
annual basis to determine what changes, if any, need to be made in light of
present facts and circumstances. Southside's executive compensation program
consists of the following components:
- 107 -
* Salary. For executive officers, the compensation committee
uses competitive compensation data and then considers
experience levels to determine actual compensation levels.
* Bonus Plan. The compensation committee approves annual bonuses
for certain executive officers of Southside based upon the
formula provided for in the plan. Under the plan, officers who
substantially impact Southside's performance are eligible to
receive annual incentive awards if Southside achieves
certain performance goals based on profitability, asset
quality and general performance as compared to Southside's
peers and prior years. Profitability measures include return
on average assets for Southside and its bank subsidiaries.
Measures of asset quality include total nonperforming loans
and total nonperforming assets. Actual award opportunity
levels depend on whether Southside achieves established
performance goals. The maximum incentive award for 2000 was
set at 150% of the target award level. The target award level
ranges from 15% to 50% of annual salary. In order to achieve
the maximum award level, Southside generally should have met
or exceeded 100% of established performance goals. In the
event the performance goals are exceeded, the award level
could range up to 75% of annual salary. The compensation
committee retains the right to further increase annual
incentive awards if individual contributions warrant.
* Stock Options. The plan itself does not provide for issuance
of stock based awards, although the overall executive
compensation program does provide for stock options. The
Southside Bancshares Corp. 1993 Non-Qualified Stock Option
Plan and the Southside Bancshares Corp. 1998 Stock Option Plan
allow the compensation committee to periodically grant options
to key executives of Southside. Southside did not grant any
stock options in 2000.
* Deferred Compensation. In 1996, the compensation committee
established a deferred compensation arrangement to compensate
certain executive officers for certain limitations imposed
upon their participation in Southside's qualified benefit
plans. Under this arrangement, the executives and Southside
enter into a deferred compensation agreement which provides
for an award of performance stock each year based on the sum
of the following:
- an amount determined by multiplying the executive's
excess 401(k) amount by the sum of the highest federal
and applicable state income tax rates in effect for
the year in question, plus
- an amount equal to (1) Southside's matching
contribution percentage under the employee stock
ownership plan for such year multiplied by the
executive's gross annual compensation, determined
without regard to the agreement, less (2) the employer
matching contributions actually made to the employee
stock ownership plan for the benefit of the executive,
plus
- an amount determined by (1) multiplying Southside's
total discretionary basic and optional contributions
to the employee stock ownership plan, plus
forfeitures, by a fraction, the numerator of which is
the executive's gross annual compensation for such
year, determined without regard to the agreement, and
the denominator of which is total compensation of all
employee stock ownership plan participants, less (2)
the amount actually contributed to the employee stock
ownership plan by Southside, plus forfeitures
allocated, for the benefit of the executive.
The award is converted to performance shares based on the
closing bid price of Southside's stock on the last business
day of each such year in the case of the first two items
above, and $5.33 per share in the case of the last item above.
The performance shares issued under this agreement are deemed
to be the equivalent of one share of Southside stock. The
performance shares constitute a potential right to receive
payment and do not confer any dividend rights, voting rights
or any other rights of a shareholder with respect to Southside
common stock.
The executives are entitled to receive payment under the
agreement upon the occurrence of one of several events
including (1) a change in control, (2) termination of
employment, (3) retirement, (4) death or (5) total disability.
The amount to be paid upon the occurrence of one of these
events is
- 108 -
the number of performance shares credited to the executive's
account multiplied by the midpoint of the bid and ask price
of Southside's stock as of the close of business on the date
of payment.
* Salary Continuation. Southside has established a salary
continuation plan designed to pay key executives post
retirement benefits based on their length of service with
Southside. The plan has a ten-year vesting schedule to qualify
for payment of the accrued benefits in the event of termination
of employment and requires the executive officer to work until
age 65 to qualify for full benefit payments under the plan.
The plan further carries a life insurance feature that pays
full retirement benefits to the executive officer's
beneficiaries in the event the executive dies prior to normal
retirement, while still in Southside's employment.
The President and Chief Executive Officer's compensation for 2000
consisted of:
* Base Salary. $227,000.
* Bonus. $105,000. The bonus paid during 2000 related to the
1999 bonus plan. Because the plan requires performance bonuses
to be based on actual results, it is not feasible to pay
bonuses during the fiscal year to which the bonus applies. The
bonus amount paid in 2000 was computed in accordance with the
plan and represented approximately 46% of Mr. Teschner's
annual salary.
* Deferred Compensation. As described above, the committee
established a deferred compensation arrangement to compensate
executive officers for certain limitations imposed upon their
participation in Southside's qualified benefit plans. Under
the plan, a grant of 4,457.36 shares of performance stock,
having a value on the date of grant of $32,895 ($7.375 per
share), was credited to Mr. Teschner's performance stock
account as of December 31, 2000 for the 2000 fiscal year.
* Salary Continuation Plan. The total benefit accrual for Mr.
Teschner in 2000 was $29,307.
* Stock Options. There were no stock options granted during
2000.
* Other Compensation. All other compensation paid to Mr.
Teschner is described in the summary compensation table
previously set forth.
Southside Compensation Committee
Joseph W. Beetz Norville K. McClain
Howard F. Etling Earle J. Kennedy, Jr.
Douglas P. Helein Richard G. Schroeder, Sr.
Daniel J. Queen
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, the members of the Southside compensation committee
were Joseph W. Beetz, Howard F. Etling, Norville K. McClain, Douglas P.
Helein, Earle J. Kennedy, Jr., Daniel J. Queen and Richard G. Schroeder, Sr.
During 2000, no member of the Southside compensation committee was an
officer or employee of Southside or any of its subsidiaries, and no member
of the Southside compensation committee was formerly an officer of Southside
or any of its subsidiaries. In addition, none of Southside's executive
officers served as a director or member of the compensation committee of
another company one of whose executive officers served as one of Southside's
directors or on the compensation committee.
AUDIT COMMITTEE REPORT
The Southside audit committee assists the Southside board of
directors in fulfilling its responsibilities for Southside's internal
control structure and financial reporting practices by reviewing the audited
financial
- 109 -
information which is provided to its shareholders and others, the system of
internal controls that management and the board of directors have established
and the internal and external audit processes.
The Southside audit committee has seven independent directors who
met four times in 2000. The Southside audit committee operates under a
written charter adopted by the board of directors that is attached to this
joint proxy statement/prospect as Annex G.
-------
Southside management is responsible for Southside's internal
controls, financial reporting process and compliance with laws and
regulations and ethical business standards. KPMG LLP, Southside's
independent accountant, is responsible for performing an independent audit
of Southside's consolidated financial statements in accordance with
generally accepted auditing standards and to issue a report on the financial
statements.
The Southside audit committee has reviewed and discussed the
audited financial statements with management. The Southside audit committee
has discussed with KPMG LLP the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committee).
The Southside audit committee has received the written disclosures and the
letter from KPMG LLP required by Independence Standards Board Standard No. 1
and has discussed KPMG LLP's independence with KPMG LLP.
Based on the review and the discussions with management and KPMG
LLP, the Southside audit committee recommended to the board of directors
that the audited financial statements be included in Southside's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000 for filing
with the SEC.
Southside Audit Committee
Joseph W. Beetz Norville K. McClain
Howard F. Etling Earle J. Kennedy, Jr.
Douglas P. Helein Richard G. Schroeder, Sr.
Daniel J. Queen
AUDIT AND RELATED FEES
AUDIT FEES
The aggregate fee for professional services rendered by KPMG LLP
for the audit of Southside's annual financial statements for the year ended
December 31, 2000 and the review of the financial statements included in
Southside's quarterly reports on Form 10-Q for 2000 was approximately $173,000.
ALL OTHER FEES
KPMG LLP billed Southside $69,175 in the aggregate for additional
audit and consulting services. The Southside audit committee has determined
that the provision of these services is compatible with maintaining KPMG LLP's
independence.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph summarizes cumulative returns experienced by
Southside's shareholders from December 29, 1995 through December 29, 2000
compared to the S&P 500 Index and the Nasdaq Banks Index.
SOUTHSIDE STOCK PERFORMANCE CHART
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Nasdaq Banks Index 100 126.16 206.38 182.09 167.55 192.14
S&P 500 100 122.96 163.89 210.76 255.10 232.12
Southside 100 145.59 225.68 226.09 181.02 182.58
The foregoing table assumes $100 invested on December 29, 1995 in Southside's
stock, the S&P 500 Index, and the Nasdaq Banks Index. Total return assumes
reinvestment of dividends. All plotted points are based on amounts for the
last business day of December for each of the years represented.
- 110 -
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Southside and its subsidiary banks have had, and expect to have in
the future, loans and other banking transactions in the ordinary course of
business with a number of their officers and directors and their associates.
These transactions were made, and will be 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, and will not, involve more than normal risk of
collectibility or present other unfavorable features.
During the previous fiscal year, Southside's subsidiaries had
commercial transactions in the ordinary course of business with companies
with which certain of Southside's directors are affiliated. No significant
business or personal relationships with Southside's subsidiaries existed by
virtue of a person's position with Southside or with Southside's
subsidiaries or ownership interest in Southside.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SEC rules require Southside to disclose late filings of reports of
stock ownership and changes in stock ownership by its directors and
executive officers and certain large shareholders. To the best of
Southside's knowledge, all of the required filings were made on a timely
basis in 2000.
FORM 10-K
Copies of Southside's annual report on Form 10-K for the year ended
December 31, 2000, including financial statements certified by Southside's
independent accountants, are available on request, by contacting Joseph W.
Pope, c/o Southside Bancshares Corp., 3606 Gravois Avenue, St. Louis,
Missouri 63116; (314) 416-4111.
- 111 -
INFORMATION REGARDING COMMON STOCK OF THE MERGED COMPANY
As a result of the merger, your rights as a shareholder of the
merged company will be governed by Missouri law and articles of
incorporation and bylaws of the merged company, the texts of which are
attached hereto as Annexes E and F, respectively. The following summarizes
---------------
the material terms of the capital stock of the merged company and is
qualified in its entirety by reference to the applicable provisions of
federal law governing bank holding companies, Missouri law and the merged
company's articles of incorporation and bylaws.
DESCRIPTION OF MERGED COMPANY COMMON STOCK
The merged company will be authorized to issue 30 million shares
of its common stock. All of the shares of merged company common stock
issued in the merger to Allegiant Bancorp shareholders and Southside
shareholders will be validly issued, fully paid and non-assessable.
VOTING AND OTHER RIGHTS. The holders of common stock of the merged
company will be entitled to one vote per share, and in general, a majority
of votes cast with respect to a matter will be sufficient to authorize
action by shareholders of the merged company. Directors are to be elected
by a plurality of the votes cast, and, unlike Southside shareholders,
shareholders of the merged company will be able to cumulate their votes in
the election of directors. However, an affirmative vote of 80% of the shares
of common stock of the merged company will be required in order to: (1)
remove a director without cause, (2) approve a business combination unless
approved by 75% of the board of directors, or (3) amend provisions of the
merged company's articles of incorporation relating to the foregoing.
NO PREEMPTIVE OR CONVERSION RIGHTS. The holders of common stock of
the merged company will not be entitled to preemptive rights, redemption
privileges, sinking fund privileges or conversion rights.
ASSETS UPON DISSOLUTION. In the event of liquidation, holders of
common stock of the merged company would be entitled to receive
proportionately any assets legally available for distribution to shareholders
with respect to shares held by them.
DISTRIBUTIONS. Shareholders of the merged company will be entitled
to receive the dividends or distributions that the board of directors of
the merged company may declare out of funds legally available for these
payments. Under Missouri law, the merged company generally may not authorize
and make distributions if, after giving effect to the distribution, it would
be unable to meet its debts as they become due in the usual course of
business or if the corporation's total assets would be less than the sum of
its total liabilities plus, the amount that would be needed, if it were to be
dissolved at the time of distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to
the rights of those receiving the distribution.
As a bank holding company, the ability of the merged company to
pay distributions will be affected by the ability of its banking
subsidiaries to pay dividends. The ability of the merged company, as well
as its subsidiaries, to pay dividends in the future currently is, and could
be further, influenced by bank regulatory requirements and capital
guidelines.
RESTRICTIONS ON OWNERSHIP. The Bank Holding Company Act requires
any bank holding company to obtain the approval of the Federal Reserve Board
prior to acquiring 5% or more of the common stock of the merged company.
The Change in Bank Control Act requires any person, other than a bank
holding company, to obtain prior approval of the Federal Reserve Board prior
to acquiring 10% or more of common stock of the merged company. Any holder
of 25% or more of common stock of the merged company, or a holder of 5% or
more if such holder otherwise exercises a controlling influence over the
merged company, is subject to regulation as a bank holding company under
the Bank Holding Company Act.
Transferability of Common Stock. The shares of common stock of the
merged company to be issued to Southside shareholders in the merger have been
registered under the Securities Act. They may be traded freely by you without
restriction. The shares of the merged company common stock issued to Southside's
and Allegiant Bancorp's "affiliates" will be restricted in their transferability
in accordance with the rules and regulations
- 112 -
promulgated by the SEC. These "affiliates" include certain directors,
executive officers and holders of 5% or more of the outstanding shares,
of either Allegiant Bancorp or Southside who are deemed to be
"affiliates" of Allegiant Bancorp or Southside, respectively, under the
federal securities laws.
- 113 -
COMPARATIVE RIGHTS OF SHAREHOLDERS
The rights of Southside and Allegiant Bancorp shareholders are
governed by both The General and Business Corporation Law of Missouri and by
their respective articles of incorporation and bylaws. Following the merger,
the merged company will have the articles of incorporation and bylaws
which are attached to this joint proxy statement/prospectus as Annexes E and F,
---------------
respectively, which are substantially similar to those of Allegiant Bancorp.
This summary is qualified in its entirety by reference to the articles of
incorporation and bylaws of Allegiant Bancorp, Southside and the merged
company.
AUTHORIZED CAPITAL STOCK
A corporation may only issue the number of shares of its capital
stock that it is authorized to issue.
Allegiant Bancorp/Merged company Southside
Upon completion of the merger, the authorized capital Southside's articles of incorporation provide that it
stock of the merged company will be 30,000,000 may issue up to 15,000,000 shares of common stock and
shares of common stock, which is an increase from the 1,000,000 shares of preferred stock.
20,000,000 shares of common stock Allegiant Bancorp
is currently authorized to issue. The merged company
will not have any authorized shares of preferred stock.
SIZE OF BOARD OF DIRECTORS
A corporation may have any number of directors.
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's articles of incorporation and bylaws Southside's articles of incorporation provide that the
provide that its board of directors will consist of not board will have a minimum of 9 and a maximum of 15
less than six nor more than 24 directors. The exact number members. Southside's bylaws provide that its board of
is determined by action of the board of directors. directors will fix the number of members of the board.
Currently, Allegiant Bancorp has 12 directors. Immediately Currently, Southside has ten directors.
following the merger, the merged company will have 14
directors and will adopt the provisions of Southside
regarding the size of its board of directors.
CUMULATIVE VOTING FOR DIRECTORS
Unlike straight voting, where a shareholder casts all of his or her
votes for or against a nominee for director, cumulative voting entitles each
shareholder to cast an aggregate number of votes equal to the number of
voting shares held, multiplied by the number of directors to be elected.
Each shareholder may cast all of their votes for one nominee or distribute
them among two or more nominees. The result is that holders of less
than a majority of the outstanding shares of voting stock may have the
ability to elect one or more members of the board. Where cumulative voting
is not permitted, the holders of a majority of outstanding shares of voting
stock of a corporation elect the entire board of directors of the corporation.
This prevents the election of any directors by the holders of less than a
majority of the votes. Missouri law requires cumulative voting, unless a
corporation's articles of incorporation or bylaws provide otherwise.
- 114 -
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's shareholders have a right to Southside's shareholders do not have a right to
cumulative voting in the election of directors. cumulative voting in the election of directors.
Shareholders of the merged company will have the
same right.
CLASSES OF DIRECTORS
A corporation may divide its directors into classes so that each
director stands for election once every two or three years.
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's articles of incorporation and bylaws Southside's articles of incorporation and bylaws contain
provide that Allegiant Bancorp's board of directors is substantially identical provisions as Allegiant Bancorp's
divided into three classes of directors as nearly equal in articles of incorporation and bylaws.
number as possible, with each class being elected to a
staggered three-year term. The merged company will
have the same provision, in the form set forth in
Southside's articles of incorporation and bylaws.
QUALIFICATIONS OF DIRECTORS
A corporation may have certain qualifications that an individual
must meet before he or she can serve as a director.
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's bylaws provide that directors Southside's bylaws do not have an age requirement for
appointed or elected in the year 2000 or later will have directors. Southside's bylaws require that a person
their term expire at the first annual shareholders' must own at least 10,000 shares of common stock of
meeting following that director's 70th birthday. Southside in order to serve as a director.
Allegiant Bancorp does not have any stock ownership
requirement for its directors. The merged company
will have the same age limitation and lack of ownership
requirement as Allegiant Bancorp.
FILLING VACANCIES ON THE BOARD
Sometimes, a director does not serve the director's entire term as
a director.
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's bylaws provide that Allegiant Southside's bylaws provide that a majority vote of the
Bancorp's shareholders will fill a vacancy on Allegiant directors then serving in office may fill any vacancy
Bancorp's board by election at any shareholders' meeting. occurring on Southside's board of directors, without the
However, if at least two-thirds of the directors remain approval of shareholders.
in office, those directors may, by an affirmative majority
vote, fill the vacancies until the shareholders fill the
vacancies at a special or annual meeting. The merged
company will have the same provision.
- 115 -
REMOVAL OF DIRECTORS
Under some circumstances, a director of a corporation may be
removed from office prior to the expiration of his or her term.
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's articles of incorporation and bylaws Southside's articles of incorporation and bylaws
are silent on the removal of directors. Any director of a provide that any director may be removed by the
Missouri corporation may be removed for cause by a majority shareholders without cause upon the affirmative vote of
of the board of directors if that director fails to meet the holders of not less than 80% of the shares entitled
the qualifications for director or is in breach of any to vote generally in the election of directors except,
agreement with the corporation relating to the director's that if less than the entire board of directors is to
service to the corporation as a director or employee. In be removed without cause, no director may be removed if
addition, one or more directors or the entire board of the votes cast against the director's removal would be
directors may be removed, with or without cause, by a vote sufficient to elect the director if then cumulatively
of the holders of a majority of the shares then entitled voted at an election of the class of directors of which
to vote at an election of directors. If less than the such director is a part. A director may also be
entire board is to be removed, no one of the directors removed for cause by the affirmative vote of the
may be removed if the votes cast against his removal would holders of a majority of the shares entitled to vote
be sufficient to elect him or her, or, if there be classes upon an election, at a meeting called expressly for
of directors, at an election of the class of directors of that purpose.
which he or she is a part. The merged company will have
Southside's super-majority vote requirement for removal of
directors provision in its articles of incorporation.
NOTICE OF SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Under some circumstances, shareholders of a
corporation may make proposals to be brought before a
shareholders' meeting for shareholders to vote upon and may
nominate individuals to serve as directors.
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's bylaws permit shareholders entitled to Southside's bylaws provide that a shareholder may
vote to nominate candidates for election to Allegiant propose a matter to be brought before a shareholder
Bancorp's board of directors and to introduce other meeting by providing notice thereof, accompanied or
business that is a proper matter for shareholder action in promptly followed by such supporting information as
connection with any annual or special meeting. In either Southside's secretary shall reasonably request, not
case, the shareholder must provide notice to Allegiant less than 75 days prior to the date of any annual
Bancorp's secretary not less than 60 days nor more than 90 meeting or more than seven days after the mailing of
days prior to the first anniversary of the preceding notice of any special meeting.
year's annual meeting except, that in the event that the
date of the annual meeting is advanced by more than 30
days or delayed by more than 60 days from such anniversary
date, notice must be delivered not earlier than the 90th
day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to
such annual meeting or the 10th day following the day on
which public announcement of the date of such meeting is
first made by Allegiant Bancorp or, with respect to an
election to be held at a special meeting of shareholders,
not earlier than the 90th day
- 116 -
Allegiant Bancorp/Merged company Southside
prior to that special meeting and not later than the close
of business on the later of the 60th day prior to such
special meeting or the 10th day following the public
announcement of the special meeting.
The bylaws require the shareholder's notice of proposal
to set forth:
* the name and address of the shareholder who intends
to present the proposal for a vote;
* a representation that the shareholder is a holder of
record of shares entitled to vote at the meeting;
* a description of all agreements, arrangements or
understandings between the shareholder and any other
shareholder relating to the proposal to be voted on
and any financial or contractual interest of either
shareholder in the outcome of the vote; and
* all other information regarding the proposal to be
voted on and the shareholder intending to present the
proposal for a vote as would be required to be included
in a proxy statement soliciting the vote of shareholders
in respect of the proposal according to the proxy rules
of the Securities and Exchange Commission.
The merged company will adopt Allegiant Bancorp's notice
of shareholder proposals and director nominations provision.
ANTI-TAKEOVER PROVISIONS--BUSINESS COMBINATIONS
Missouri law contains business combination statutes
that protect Missouri corporations from hostile takeovers,
and from actions following such a takeover, by prohibiting
some transactions once an acquirer has gained a significant
ownership position in the corporation.
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's articles and bylaws are silent on this Southside's articles provide that, in addition to any
issue, therefore the general law of Missouri applies. shareholder vote required by law, the affirmative vote of
the holders of not less than 80% of the common shares
The merged company will adopt Southside's anti-takeover of Southside then entitled to vote generally in the
provision in its articles of incorporation. election of directors is required to approve a business
combination transaction involving Southside, except that
any business combination may be approved by the holders
of at least two-thirds of the outstanding shares of
Southside's stock if the business combination is
- 117 -
Allegiant Bancorp/Merged company Southside
approved by not less than 75% of the entire board of directors of
Southside.
Southside's articles define a business combination to include:
* any merger or consolidation of Southside or any of its
subsidiaries with any person or entity that beneficially owns 5%
or more of the outstanding shares of Southside common stock,
referred to as a substantial shareholder;
* any sale of all or substantially all of the assets of Southside
or its subsidiaries to a substantial shareholder;
* the adoption of any plan for the liquidation of Southside
proposed by a substantial shareholder; or
* any recapitalization of Southside that would increase a
substantial shareholder's proportionate share of any class of
outstanding Southside securities.
On May 27, 1993, the Southside board of directors adopted
a shareholder protection rights plan, also known as a
"poison pill," designed to protect shareholders from
coercive or unfair takeover tactics by a hostile acquiror
seeking to gain control of Southside without offering a
fair price to all of its shareholders. The purpose of the
plan is to discourage hostile tactics that impair the
board's ability to fully represent the interests of all
shareholders. The plan is only triggered upon the occurrence
of certain events, including a business combination.
As part of its approval of the merger, Southside amended the
plan so that the rights issued under the plan did not become
exercisable upon execution of the merger agreement and so
that the plan will terminate immediately prior to the
effective time of the merger.
- 118 -
SHAREHOLDER ACTION WITHOUT A MEETING
Under some circumstances, shareholders may act
by written consent rather than by holding a shareholders'
meeting.
Allegiant Bancorp/Merged company Southside
Under Allegiant Bancorp's bylaws, written action of Under Southside's bylaws, all action by its shareholders
shareholders in lieu of a meeting is permitted only if the must be effected at a duly called shareholder meeting
consent is signed by all of the shareholders entitled to and may not be effected by written consent.
vote with respect to the subject matter.
The merged company will adopt Southside's provision
concerning Shareholder action by consent.
CALLING SPECIAL MEETINGS OF SHAREHOLDERS
Only certain individuals have the authority to call special
shareholders' meetings.
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's bylaws provide that special meetings Under Southside's bylaws, special meetings can be
of shareholders may be called by the chairman of the board called by the secretary upon the request of the
or by the board of directors or by the secretary upon the president or a majority of the board of directors or
written request of shareholders owning at least 50% of upon the written request of holders of not less than
Allegiant Bancorp's outstanding capital stock. 80% of all of the outstanding shares of Southside
common stock.
The merged company will adopt Southside's provision
concerning individuals having the authority to call
special meetings.
NOTICE OF MEETINGS
Shareholders must receive notice of a shareholders' meeting.
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's bylaws require that notice of any Southside's bylaws require that notice of any meeting,
special meeting be served on each shareholder, personally annual or special, be delivered or given to each
or by mail, not less than ten nor more than 60 days before shareholder entitled to vote thereat, not less than ten
such meeting. The merged company will have the same days nor more than 50 days prior to the meeting.
provision.
- 119 -
AMENDMENTS TO CHARTER
Under some circumstances, a corporation may amend its articles of
incorporation.
Allegiant Bancorp/Merged company Southside
Under Missouri law, shareholders must approve a proposed Southside's articles of incorporation provide for
amendment to the articles of incorporation by a vote of amendments as prescribed by law. Under Missouri law,
the holders of a majority of the outstanding shares shareholders must approve a proposed amendment to the
entitled to vote. The merged company will adopt articles of incorporation by a vote of the holders of a
Southside's provision relating to amendments to majority of the outstanding shares entitled to vote.
its articles of incorporation. In addition, any amendment, alteration or repeal of certain
provisions of Southside's articles of incorporation requires the
affirmative vote of the holders of at least 80% of the
outstanding shares of stock generally entitled to vote at
meetings. These include the provisions regarding:
* election and terms of directors;
* vote required for business combinations;
and
* amending, altering, changing or repealing
the foregoing provisions in the articles of
incorporation.
AMENDMENT OF BYLAWS
Under some circumstances, a corporation may amend its bylaws.
Allegiant Bancorp/Merged company Southside
Allegiant Bancorp's articles of incorporation vest the Southside's articles of incorporation provide that the
power in the Allegiant Bancorp board of directors to make, directors may repeal, amend and alter the bylaws of
alter, amend or repeal the bylaws. The Allegiant Bancorp Southside, except that the paramount power to repeal,
bylaws give the power to the directors or shareholders to amend or alter the bylaws of Southside or adopt new
amend, repeal or adopt new or additional bylaws at any bylaws is vested in the shareholders of Southside and
regular or special meeting of the shareholders or of the may be exercised by majority vote at any annual or special
board of directors. The merged company will have the meeting, unless a greater vote is otherwise required.
same provisions. In addition, any amendment, alteration or repeal
of certain provisions of Southside's bylaws requires the
affirmative vote of the holders of at least 80% of the
outstanding shares of stock generally entitled to vote at
meetings. These include provisions regarding:
* the calling of special meetings of shareholders;
* shareholder actions without a meeting; and
* qualifications and number of directors.
- 120 -
SUPERVISION AND REGULATION
The following discussion briefly describes the material regulations
governing bank holding companies and their subsidiaries, and provides specific
information relevant to Allegiant Bancorp and Southside. In addition, these
regulations will govern the merged company as applicable. These regulations
are intended primarily for the protection of depositors and the federal
deposit insurance funds and not for the protection of security holders.
To the extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to those provisions.
A change in the statutes, regulations or regulatory policies applicable to
Allegiant Bancorp, Southside or the merged company or their respective
subsidiaries may have a material adverse effect on Allegiant Bancorp, Southside
or the merged company.
As bank holding companies, Allegiant Bancorp and Southside are
subject to regulation under the Bank Holding Company Act, and to inspection,
examination and supervision by the Federal Reserve Board. Under the Bank
Holding Company Act, bank holding companies generally may not acquire the
ownership or control of more than 5% of the voting shares, or substantially
all the assets, of any company, including a bank or another bank holding
company, without the Federal Reserve Board's prior approval. Also, bank
holding companies generally may engage only in banking and other activities
that are determined by the Federal Reserve Board to be closely related to
banking.
Allegiant Bank is subject to primary federal regulation and
examination by the FDIC. In addition, Allegiant Bank is regulated and
examined by the Missouri Division of Finance. Of the Southside subsidiaries,
South Side National Bank in St. Louis is subject to primary regulation by
the Office of Comptroller of Currency. The Bank of Ste. Genevieve is subject
to primary federal regulation by the Federal Reserve Board. The State Bank
of Jefferson County and The Bank of St. Charles County are subject to
primary federal regulation by the Federal Deposit Insurance Corporation.
Additionally, the Southside subsidiaries, with the exception of South Side
National Bank in St. Louis, are regulated and examined by the Missouri
Division of Finance. Allegiant Bancorp and Southside and their respective
subsidiaries also are affected by general economic conditions, the fiscal
and monetary policies of the federal government and the Federal Reserve
Board, and by various other governmental requirements and regulations.
LIABILITY FOR BANK SUBSIDIARIES
Under current Federal Reserve Board policy, a bank holding company
is expected to act as a source of financial and managerial strength to each
of its subsidiary banks and to maintain resources adequate to support each
subsidiary bank. This support may be required at times when the bank holding
company may not have the resources to provide it. In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to
a U.S. federal bank regulatory agency to maintain the capital of a
subsidiary bank would be assumed by the bankruptcy trustee and entitled to
priority of payment.
Allegiant Bank and the Southside bank subsidiaries are FDIC-insured
depository institutions. Any depository institution insured by the FDIC can
be held liable for any loss incurred, or reasonably expected to be incurred,
by the FDIC due to the default of an FDIC-insured depository institution
controlled by the same bank holding company, or for any assistance provided
by the FDIC to an FDIC-insured depository institution controlled by the same
bank holding company that is in danger of default.
"Default" generally means the appointment of a conservator or
receiver. "In danger of default" generally means the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance.
Also, if a default occurred with respect to a bank, any capital
loans to the bank from its parent holding company would be subordinate in
right of payment to payment of the bank's depositors and certain of its
other obligations.
- 121 -
CAPITAL REQUIREMENTS
GENERAL
The Federal Reserve Board imposes risk-based capital requirements
and guidelines on Allegiant Bancorp and Southside which are substantially
similar to the capital requirements and guidelines imposed by the
Federal Reserve Board and the FDIC on the depository institutions under
their jurisdictions. For this purpose, the Federal Reserve Board assigns a
depository institution's or holding company's assets, and some of its
specified off-balance sheet commitments and obligations to various risk
categories. A depository institution's or holding company's qualifying total
capital, in turn, is classified in one of two tiers, depending on type:
Core ("Tier 1") capital Supplementary ("Tier 2") capital
----------------------------------------------------- -------------------------------------------------------
* common shareholders' equity among other items:
* qualifying non-cumulative perpetual * allowances for loan and lease
preferred stock, including related losses, subject to limitations
surplus * perpetual preferred stock and
* minority interests in equity accounts related surplus
of consolidated subsidiaries * hybrid capital instruments
* less goodwill and most intangible mandatory convertible debt
assets securities
* term subordinated debt and
intermediate term preferred stock
and related surplus, subject to
limitations
* unrealized holding gains on equity
securities, subject to limitations
Allegiant Bancorp and Southside currently are required to maintain
Tier 1 capital and "total capital" (the sum of Tier 1 and Tier 2 minus
required deductions) equal to at least 4% and 8%, respectively, of their
total risk-weighted assets, including various off-balance sheet items, such
as standby letters of credit. For a holding company to be considered "well
capitalized" for regulatory purposes, its Tier 1 and total capital ratios
must be at least 6% and 10% on a risk-adjusted basis, respectively. At March
31, 2001, Allegiant Bancorp was well capitalized for Tier 1 capital purposes
with Tier 1 capital to total risk-based assets of 9.71% and adequately
capitalized for total capital purposes with total capital to total
risk-weighted assets of 10.97%. At March 31, 2001, Southside was also well
capitalized for Tier 1 capital purposes with Tier 1 capital to total
risk-based assets of 12.98% and adequately capitalized for total capital
purposes with total capital to total risk-weighted assets of 14.00%.
Federal Reserve Board and FDIC rules require Allegiant Bancorp and
Southside to incorporate market and interest rate risk components into their
risk-based capital standards. Under these market risk requirements, capital
is allocated to support the amount of market risk related to a financial
institution's ongoing trading activities.
The Federal Reserve Board also requires bank holding companies to
maintain a minimum "leverage ratio," Tier 1 capital to average total
consolidated assets, of at least 3% if the holding company has the highest
regulatory rating and meets other requirements, or of at least 4% if the
holding company does not meet these requirements. At March 31, 2001,
Allegiant Bancorp's leverage ratio was 7.66%, and Southside's ratio was
9.05%.
The Federal Reserve Board may set capital requirements higher than
the minimums described above for holding companies whose circumstances
warrant it. For example, holding companies experiencing or anticipating
significant growth may be expected to maintain capital positions
substantially above the minimum supervisory levels without significant
reliance on intangible assets. The Federal Reserve Board has also indicated
that it will consider a "tangible Tier 1 capital leverage ratio," deducting
all intangibles and other indications of capital strength in evaluating
proposals for expansion or new activities.
Allegiant Bank and Southside are subject to similar risk-based and
leverage capital requirements adopted by the FDIC. Allegiant Bank and
Southside were in compliance with the applicable capital requirements as of
March 31, 2001.
- 122 -
Failure to meet capital requirements could subject a bank to a
variety of enforcement remedies, including the termination of deposit
insurance by the FDIC, and to restrictions on its business, which are
described below under "--Federal Deposit Insurance Corporation Improvement
Act of 1991."
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991. The
FDICIA, among other things, identifies five capital categories for insured
depository institutions: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. It requires U.S. federal bank regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements based on these
categories. The FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category
in which an institution is classified. Unless a bank or thrift is well
capitalized, it is subject to restrictions on its ability to offer brokered
deposits and on other aspects of its operations. An undercapitalized bank or
thrift must develop a capital restoration plan and its parent holding
company must guarantee the bank's or thrift's compliance with the plan up to
the lesser of 5% of the bank's or thrift's assets at the time it became
undercapitalized and the amount needed to comply with the plan.
As of March 31, 2001, Allegiant Bank and Southside's subsidiary banks
were well capitalized, based on the prompt corrective action ratios and
guidelines described above. However, a bank's capital category is determined
solely for the purpose of applying the FDIC's prompt corrective action
regulations and the capital category may not constitute an accurate
representation of the bank's overall financial condition or prospects for
other purposes.
DIVIDEND RESTRICTIONS
Federal and state laws limit the amount of dividends Allegiant Bank
can pay Allegiant Bancorp without regulatory approval. Dividend payments by
Allegiant Bank are limited to the undivided profits of the bank, provided
the surplus fund equals at least 40% of the capital account. At March 31,
2001, Allegiant Bank had $30.4 million available for payment of dividends to
Allegiant Bancorp without prior approval of the Missouri Division of Finance
and Southside's subsidiary banks had approximately $12.2 million available
for payment of dividends to Southside without consent of the appropriate
regulatory agency.
In addition, federal bank regulatory authorities have authority to
prohibit Allegiant Bank and Southside and the merged company from engaging
in unsafe or unsound practices in conducting its business. The payment of
dividends, depending upon the financial condition of the bank in question,
could be deemed an unsafe or unsound practice. The ability of the merged
company to pay dividends in the future is currently, and could be further,
influenced by bank regulatory policies and capital guidelines.
DEPOSIT INSURANCE ASSESSMENTS
The deposits of Allegiant Bank and the Southside subsidiary banks
are insured up to regulatory limits by the FDIC, and, accordingly, are
subject to deposit insurance assessments to maintain the Bank Insurance Fund
and/or the Savings Association Insurance Fund administered by the FDIC. The
FDIC has adopted regulations establishing a permanent risk-related deposit
insurance assessment system. Under this system, the FDIC places each insured
bank in one of nine risk categories based on the bank's capitalization and
supervisory evaluations provided to the FDIC by the institution's primary
federal regulator. Each insured bank's insurance assessment rate is then
determined by the risk category in which it is classified by the FDIC.
SUPERVISORY ASSESSMENTS
All Missouri banks are required to pay supervisory assessments to
the Missouri Division of Finance to fund the operations of the Missouri
Division of Finance. The amount of the assessment is calculated based on a
formula established by the Missouri Division of Finance which takes into
account the institution's total assets.
DEPOSITOR PREFERENCE STATUTE
In the "liquidation or other resolution" of an insured depository
institution by any receiver, federal legislation provides that deposits and
certain claims for administrative expenses and employee compensation against
- 123 -
the insured depository institution would be afforded a priority over other
general unsecured claims against that institution, including federal funds
and letters of credit.
BROKERED DEPOSITS
Under FDIC regulations, no FDIC-insured depository institution can
accept brokered deposits unless it is well capitalized or both is adequately
capitalized and receives a waiver from the FDIC. In addition, these
regulations prohibit any depository institution that is not well capitalized
from paying an interest rate on deposits in excess of 75 basis points over
certain prevailing market rates or, unless it provides certain notice to
affected depositors, offering "pass through" deposit insurance on certain
employee benefit plan accounts.
INTERSTATE BANKING AND BRANCHING
Under the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994, subject to certain concentration limits and other requirements:
* bank holding companies, such as Allegiant Bancorp and
Southside, can acquire banks and bank holding companies
located in any state;
* any subsidiary bank of a bank holding company can receive
deposits, renew time deposits, close loans, service loans and
receive loan payments as an agent for any other bank
subsidiary of that bank holding company; and
* banks can acquire branch offices outside their home states by
merging with out-of-state banks, purchasing branches in other
states and establishing de novo branch offices in other
states. The ability of banks to acquire branch offices through
purchase or opening of other branches is contingent, however,
on the host state having adopted legislation "opting in" to
those provisions of Riegle-Neal, which Missouri has done.
In addition, the ability of a bank to merge with a bank located
in another state is contingent on the host state not having
adopted legislation "opting out" of that provision of Riegle-Neal.
CONTROL ACQUISITIONS
The Change in Bank Control Act prohibits a person or group of
persons from acquiring "control" of a bank holding company, unless the
Federal Reserve Board has been notified and has not objected to the
transaction. Under a rebuttable presumption established by the Federal
Reserve Board, the acquisition of 10% or more of a class of voting stock of
a bank holding company with a class of securities registered under Section
12 of the Securities Exchange Act of 1934, such as Allegiant Bancorp or
Southside, would, under the circumstances set forth in the presumption,
constitute acquisition of control of the bank holding company.
In addition, a company is required to obtain the approval of the
Federal Reserve Board under the Bank Holding Company Act before acquiring
25%, 5% in the case of an acquirer that is a bank holding company, or more
of any class of outstanding common stock of a bank holding company, or
otherwise obtaining control or a "controlling influence" over that bank
holding company.
GRAMM-LEACH-BLILEY
Enacted in 1999, the Gramm-Leach-Bliley Financial Services
Modernization Act authorizes affiliations between banking, securities and
insurance firms and authorizes bank holding companies and national banks to
engage in a variety of new financial activities. Among the new activities
that are permitted to bank holding companies are securities and insurance
brokerage, securities underwriting, insurance underwriting and merchant
banking. The Federal Reserve Board, in consultation with the Department of
Treasury, may approve additional financial activities. National bank
subsidiaries are permitted to engage in similar financial activities but
only on an agency basis unless they are one of the 50 largest banks in the
United States. National bank subsidiaries are prohibited from insurance
underwriting, real estate development and merchant banking. Although the
Gramm-
- 124 -
Leach-Bliley Act limits the range of companies with which Southside
and Allegiant Bancorp may affiliate, it may facilitate affiliations with
companies in the financial services industry.
FUTURE LEGISLATION
Various legislation is from time to time introduced in the U.S.
Congress that may change banking statutes and the operating environment of
Allegiant Bancorp, Southside and their subsidiaries in substantial and
unpredictable ways. We cannot accurately predict whether this potential
legislation will ultimately be enacted, and, if enacted, the ultimate effect
that it, or implementing regulations, would have upon the financial,
condition or results of operations of Allegiant Bancorp, Southside or any
of their subsidiaries.
LEGAL MATTERS
Thompson Coburn LLP, St. Louis, Missouri, will opine as to the
qualification of the merger as a reorganization and the tax treatment of the
merged company stock received in connection with the merger under the
Internal Revenue Code and also will opine as to the legality of the common
stock the merged company offered by this joint proxy statement/prospectus.
EXPERTS
The consolidated financial statements of Allegiant Bancorp and its
subsidiaries appearing in Allegiant Bancorp's annual report for the year ended
December 31, 2000 incorporated by reference herein, have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon
incorporated by reference herein such consolidated financial statements are
incorporated herein by reference by this joint proxy statement/prospectus
statement in reliance upon such report given on the authority of such firm
as experts in accounting and auditing.
The consolidated financial statements of Southside and its
subsidiaries as of December 31, 2000 and 1999 and for each of the years in
the three-year period ended December 31, 2000 have been included herein and
in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, and upon the authority of KPMG LLP
as experts in accounting and auditing.
The consolidated financial statements of Equality Bancorp, Inc. and
its subsidiaries as of March 31, 2000 and 1999 and for each of the years in
the three-year period ended March 31, 2000, incorporated by reference in
this joint proxy statement/prospectus, have been incorporated by reference
by this joint proxy statement/prospectus in reliance upon the report of KPMG
LLP, independent certified public accountants, and upon the authority of
KPMG LLP as experts in accounting and auditing.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP served as Southside's independent public accountants for
2000 and has been selected by Southside's board of directors to continue in
such capacity during 2001. Representatives of KPMG LLP are expected to be
present at Southside's annual meeting.
SHAREHOLDER PROPOSALS
ALLEGIANT BANCORP
Allegiant Bancorp's shareholders will not be entitled to submit
proposals for consideration at the special meeting except to the extent the
proposals relate directly to the matters to come before the special meeting
as set forth in this joint proxy statement/prospectus.
Allegiant Bancorp's bylaws provide that shareholder proposals which
do not appear in a proxy statement issued by it may be considered at a
meeting of shareholders only if written notice of the proposal is received
by the Secretary of Allegiant Bancorp not less than 60 and not more than 90
days before the anniversary of the preceding year's annual meeting. However,
if the date of the annual meeting is advanced by more than 30 days or
delayed by
- 125 -
more than 60 days after that anniversary date, the notice of a shareholder
proposal, to be timely, must be received by the Secretary not earlier than
the 90th day prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to the annual meeting or the
tenth day following the day on which public announcement of the meeting date
is first made. Any notice of a shareholder proposal by a shareholder to the
Secretary of Allegiant Bancorp must be accompanied by:
* the name and address of the shareholder who intends to present
the proposal for a vote;
* a representation that the shareholder is a holder of record of
shares entitled to vote at the meeting;
* a description of all agreements, arrangements or
understandings between the shareholder and any other
shareholder relating to the proposal to be voted on and any
financial or contractual interest of either shareholder in the
outcome of the vote; and
* all other information regarding the proposal to be voted on
and the shareholder intending to present the proposal for a
vote as would be required to be included in a proxy statement
soliciting the vote of shareholders in respect of the proposal
according to the proxy rules of the Securities and Exchange
Commission.
Allegiant Bancorp's board of directors will consider and include in
Allegiant Bancorp's proxy statement for the 2002 annual meeting of Allegiant
Bancorp shareholders proposals which meet the regulations of the SEC and
Missouri law and which comply with Allegiant Bancorp's bylaws. In order to be
eligible for inclusion, proposals must be addressed to Allegiant Bancorp's
Secretary and must be received on or before February 19, 2002.
SOUTHSIDE
Southside shareholders will not be entitled to submit proposals for
consideration at the annual meeting except to the extent the proposals
relate directly to the matters to come before the annual meeting as set
forth in this joint proxy statement/prospectus. If the merger is completed,
we do not anticipate that there will be any future meetings of Southside
shareholders.
Southside's bylaws provide that shareholder proposals which do not
appear in the proxy statement may be considered at a meeting of shareholders
only if written notice of the proposal is received by the Secretary of
Southside not less than 75 days prior to the date of any annual meeting or
more than seven days after the mailing of notice of any special meeting.
If the merger is not approved or completed, Southside anticipates
that the 2002 annual meeting of shareholders will be held on April 25, 2002.
If any shareholder of Southside intends to submit a proposal for inclusion
in its proxy statement to be delivered in connection with the 2002 annual
meeting, the proposal and supporting statement, if any, must meet the
requirements established by the SEC for shareholder proposals and must be
received by Southside at its principal executive offices no later than
_________________. Southside suggests that any such proposals, together
with any supporting statement, be submitted by certified mail, return receipt
requested and be directed to the attention of Southside's secretary. Under
Southside's bylaws, other proposals that are not included in the proxy
statement for the 2002 annual meeting will be considered untimely and will
not be considered at that meeting unless they are received by Southside's
secretary prior to February 8, 2002.
MERGED COMPANY
The merged company's bylaws will permit shareholders entitled to
vote to nominate candidates for election to the merged company's board of
directors and to introduce other business that is a proper matter for
shareholder action in connection with any annual or special meeting. In
either case, a shareholder of the merged company must provide notice to
the merged company's secretary not less than 60 days nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting
except, that in the event that the date of the annual meeting is advanced by
more than 30 days or delayed by more than 60 days from such anniversary
date, notice must be delivered not earlier than the 90th day prior to such
annual meeting and not later than the close of business on the later of the
60th day prior to such annual meeting or the 10th day following the day on
which public announcement
- 126 -
of the date of such meeting is first made by merged company or, with respect
to an election to be held at a special meeting of shareholders, not earlier
than the 90th day prior to that special meeting and not later than the close
of business on the later of the 60th day prior to such special meeting or the
10th day following the public announcement of the special meeting.
Any notice of a shareholder proposal by a shareholder to the
secretary of the merged company must be accompanied by:
* the name and address of the shareholder who intends to present
the proposal for a vote;
* a representation that the shareholder is a holder of record of
shares entitled to vote at the meeting;
* a description of all agreements, arrangements or
understandings between the shareholder and any other
shareholder relating to the proposal to be voted on and any
financial or contractual interest of either shareholder in the
outcome of the vote; and
* all other information regarding the proposal to be voted on
and the shareholder intending to present the proposal for a
vote as would be required to be included in a proxy statement
soliciting the vote of shareholders in respect of the proposal
according to the proxy rules of the Securities and Exchange
Commission.
If the merger is completed, the merged company anticipates that
the 2002 annual meeting of shareholders will be held on or about April 25,
2002. Notice of the meeting and proxy statements would be mailed on or about
March 16, 2002. If any shareholder of the merged company intends to submit
a proposal for inclusion in its proxy statement to be delivered in
connection with the 2002 annual meeting, the proposal and supporting
statement, if any, must meet the requirements established by the SEC for
shareholder proposals and must be received by the merged company at its
principal executive offices no later than December 16, 2001. Any such
proposals, together with any supporting statement, should be submitted by
certified mail, return receipt requested and be directed to the attention of
the merged company's secretary. Under the merged company's bylaws, other
proposals that are not included in the proxy statement for the 2002 annual
meeting will be considered untimely and will not be considered at that meeting
unless they are received by the merged company's secretary prior to
December 16, 2002.
OTHER MATTERS
Neither Allegiant Bancorp's nor Southside's board of directors
is aware of any business to come before their respective meetings,
other than those matters described in this joint proxy statement/prospectus.
However, if any other matters should properly come before the meeting,
the proxy holders intend to vote on those matters with their reasonable
business judgment.
WHERE YOU CAN FIND MORE INFORMATION
Southside filed with the SEC under the Securities Act of 1933 the
registration statement which registers the shares of common stock to be
issued to Allegiant Bancorp and Southside shareholders in connection with
the merger. The registration statement, including the attached exhibits and
schedules, contains additional relevant information about Southside and its
stock. The rules and regulations of the SEC allow us to omit certain
information included in the registration statement from this joint proxy
statement/prospectus.
- 127 -
In addition, Allegiant Bancorp (File No. 0-26350) and Southside
(File No. 0-10849) file reports, proxy statements and other information with
the SEC under the Securities Exchange Act of 1934. You may read and copy
this information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates.
The SEC also maintains an Internet world wide web site that
contains reports, proxy statements and other information about issuers, like
Allegiant Bancorp and Southside, who file electronically with the SEC. The
address of that site is http://www.sec.gov.
The SEC allows Allegiant Bancorp and Southside to "incorporate by
reference" information into this joint proxy statement/prospectus. This
means that Southside and Allegiant Bancorp can disclose important
information to you by referring you to another document filed separately
with the SEC. The information incorporated by reference is considered to be
a part of this joint proxy statement/prospectus, except for any information
that is superseded by information that is included directly in this
document.
This joint proxy statement/prospectus incorporates by reference the
documents listed below that Allegiant Bancorp has previously filed with the
SEC.
Annual Report on Form 10-K.......... Year ended December 31, 2000
Quarterly Report on Form 10-Q....... Quarter ended March 31, 2001
Current Reports on Form 8-K ........ Reports dated May 7, 2001
Current Report on Form 8-K.......... Report dated November 30, 2000
This joint proxy statement/prospectus also incorporates by
reference the documents listed below that Southside has previously filed
with the SEC.
Annual Report on Form 10-K.......... Year ended December 31, 2000
Quarterly Report on Form 10-Q....... Quarter ended March 31, 2001
Current Report on Form 8-K ......... Report dated May 7, 2001
You can obtain the documents incorporated by reference in this joint
proxy statement/prospectus, without charge, by requesting them in writing
or by telephone from the appropriate company at the following addresses and
telephone numbers:
Allegiant Bancorp, Inc. Southside Bancshares Corp.
2122 Kratky Road 3606 Gravois Avenue
St. Louis, Missouri 63114 St. Louis, Missouri 63116
Attention: Thomas A. Daiber Attention: Joseph W. Pope
Telephone: (314) 692-8200 Telephone: (314) 416-4111
If you would like to request additional copies of the documents,
please do so by , 2001 to receive them before the meetings. If you
request any documents from either of us, the recepient will mail them to
you by first class mail, or another equally prompt means, within one
business day after request is received.
Neither Allegiant Bancorp nor Southside has authorized anyone to
give any information or make any representation about the merger or the
companies that is different from, or in addition to, that contained in this
joint proxy statement/prospectus or in any of the materials that we have
incorporated into this document. Therefore, if anyone does give you
information of this sort, you should not rely on it. Information in this
joint proxy statement/prospectus about Allegiant Bancorp has been supplied
by Allegiant Bancorp and information about Southside has been supplied by
Southside. The information contained in this document speaks only as of the
date of this document unless the information specifically indicates that
another date applies.
- 128 -
SOUTHSIDE BANCSHARES CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report....................................................................................F-2
Consolidated Balance Sheets as of December 31, 2000 and 1999....................................................F-3
Consolidated Statements of Income for the years ended December 31, 2000, 1999 and 1998..........................F-4
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the years ended
December 31, 2000, 1999 and 1998..........................................................................F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998......................F-6
Notes To Consolidated Financial Statements......................................................................F-7
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000......................F-27
Unaudited Condensed Consolidated Statements of Income for the three months ended March 31, 2001 and 2000........F-28
Unaudited Condensed Consolidated Statement of Shareholders' Equity and Comprehensive Income for the
three months ended March 31, 2001 and the year ended December 31, 2000.....................................F-29
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000....F-30
Notes to Unaudited Condensed Consolidated Financial Statements..................................................F-31
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Southside Bancshares Corp.:
We have audited the accompanying consolidated balance sheets of
Southside Bancshares Corp. and subsidiaries as of December 31, 2000 and
1999, and the related consolidated statements of income, shareholders'
equity and comprehensive income, and cash flows for each of the years in the
three-year period ended December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Southside Bancshares Corp. and subsidiaries as of December 31, 2000 and
1999, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States of
America.
/s/ KPMG LLP
St. Louis, Missouri
February 16, 2001
F-2
SOUTHSIDE BANCSHARES CORP.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
------------------
2000 1999
---- ----
(DOLLARS IN THOUSANDS)
ASSETS
Cash and due from banks............................................................. $ 17,102 $ 19,311
Interest-bearing deposits in banks.................................................. 896 159
---------- ----------
Cash and cash equivalents........................................................ 17,998 19,470
---------- ----------
Federal funds sold.................................................................. 16,383 2,600
Investments in debt and equity securities:
Available-for-sale, at fair value................................................ 158,028 158,630
Held-to-maturity, at amortized cost (fair value
of $36,660 in 2000 and $61,316 in 1999)........................................ 36,417 61,595
---------- ----------
Total investments in debt and equity securities................................ 194,445 220,225
---------- ----------
Loans, net of unearned discount..................................................... 463,406 392,437
Less allowance for loan losses................................................... 5,179 5,830
---------- ----------
Loans, net..................................................................... 458,227 386,607
---------- ----------
Premises and equipment.............................................................. 17,206 17,563
Other assets........................................................................ 33,168 31,687
---------- ----------
Total assets................................................................... $ 737,427 $ 678,152
========== ==========
LIABILITIES
Deposit
Noninterest-bearing.............................................................. $ 77,196 $ 74,577
Interest-bearing................................................................. 496,998 441,233
---------- ----------
Total deposits................................................................. 574,194 515,810
Federal funds purchased............................................................. 5,750 1,000
Securities sold under agreements to repurchase...................................... 7,952 7,603
FHLB borrowings..................................................................... 70,947 83,921
Other borrowings.................................................................... 2,500 600
Debt of Employee Stock Ownership Plan............................................... 988 1,186
Other liabilities................................................................... 5,695 3,624
---------- ----------
Total liabilities.............................................................. 668,026 613,744
---------- ----------
Commitments and contingent liabilities
SHAREHOLDERS' EQUITY
Cumulative preferred stock, no par value, 1,000,000 shares
authorized and unissued.......................................................... -- --
Common stock, $1 par value, 15,000,000 shares authorized,
8,985,378 shares issued in 2000 and 1999......................................... 8,985 8,985
Surplus............................................................................. 5,516 5,431
Retained earnings................................................................... 62,592 58,765
Unearned Employee Stock Ownership Plan shares....................................... (791) (988)
Treasury stock, at cost, 591,850 and 391,750 shares in
2000 and 1999, respectively...................................................... (6,394) (4,335)
Accumulated other comprehensive income (loss)....................................... (507) (3,450)
---------- ----------
Total shareholders' Equity..................................................... 69,401 64,408
---------- ----------
Total liabilities and shareholders' equity..................................... $ 737,427 $ 678,152
========== ==========
See accompanying notes to consolidated financial statements.
F-3
SOUTHSIDE BANCSHARES CORP.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
INTEREST INCOME
Interest and fees on loans........................................... $ 36,388 $ 29,652 $ 30,259
Interest on investments in debt and equity securities available-
for-sale:
Taxable........................................................... 9,769 8,085 4,614
Exempt from Federal income taxes.................................. 422 368 162
Interest on investments in debt securities held-to-maturity:
Taxable........................................................... 1,659 2,738 4,558
Exempt from Federal income taxes.................................. 1,074 1,277 1,373
Interest on short-term investments................................... 515 1,048 1,261
---------- ---------- ----------
Total interest income........................................... 49,827 43,168 42,227
---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits................................................. 20,733 17,894 19,101
Interest on short-term borrowings.................................... 757 145 146
Interest on FHLB borrowings.......................................... 4,861 2,198 610
Other borrowings..................................................... 52 -- --
Interest on debt of Employee Stock Ownership Plan.................... 79 26 --
---------- ---------- ----------
Total interest expense.......................................... 26,482 20,263 19,857
---------- ---------- ----------
Net interest income............................................. 23,345 22,905 22,370
Provision for loan losses............................................ 361 45 62
---------- ---------- ----------
Net interest income after provision for loan losses............. 22,984 22,860 22,308
---------- ---------- ----------
NONINTEREST INCOME
Trust fees........................................................... 1,217 1,225 1,142
Service charges on deposit accounts.................................. 1,602 1,450 1,330
Gains on the sales of loans.......................................... 66 275 430
Net losses on sales of other real estate owned and other
foreclosed property................................................ -- -- (104)
Other................................................................ 1,519 608 533
---------- ---------- ----------
Total noninterest income........................................ 4,404 3,558 3,331
---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits....................................... 9,402 8,934 8,247
Net occupancy and equipment expense.................................. 2,817 2,736 2,251
Data processing...................................................... 803 750 573
Advertising.......................................................... 614 440 420
Attorney fees........................................................ 420 226 327
Other................................................................ 4,487 4,423 3,956
---------- ---------- ----------
Total noninterest expense....................................... 18,543 17,509 15,774
---------- ---------- ----------
Income before income tax expense..................................... 8,845 8,909 9,865
Income tax expense................................................... 2,358 2,706 3,055
---------- ---------- ----------
Net income...................................................... $ 6,487 $ 6,203 $ 6,810
========== ========== ==========
PER SHARE DATA
Earnings per common share - basic.................................... $ 0.78 $ 0.74 $ 0.82
Earnings per common share - diluted.................................. 0.77 0.72 0.80
Dividends paid per common share...................................... 0.32 0.32 0.29
Average common shares outstanding.................................... 8,363,828 8,414,752 8,297,250
Average common shares outstanding, including
potentially dilutive shares........................................ 8,437,139 8,598,161 8,554,635
See accompanying notes to consolidated financial statements.
F-4
SOUTHSIDE BANCSHARES CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
ACCUMULATED
UNEARNED OTHER COM-
COMMON RETAINED ESOP TREASURY PREHENSIVE
STOCK SURPLUS EARNINGS SHARES STOCK INCOME (LOSS) TOTAL
----- ------- -------- ------ ----- ------------- -----
(IN THOUSANDS)
BALANCE AT DECEMBER 31, 1997.......... $ 8,577 $ 305 $ 50,841 $ (1,384) $ (1,820) $ 134 $ 56,653
Comprehensive income:
Net income......................... -- -- 6,810 -- -- -- 6,810
Change in net unrealized gain
(loss) on available-for-sale
securities, net of tax effect.... -- -- -- -- -- 124 124
------- ------- -------- -------- -------- ------- --------
Total comprehensive income......... -- -- 6,810 -- -- 124 6,934
Cash dividends paid ($0.29 per share). -- -- (2,402) -- -- -- (2,402)
Allocation of 37,062 shares to
ESOP participants.................. -- 263 -- 198 -- -- 461
Stock options exercised............... -- (90) -- -- 90 -- --
Issuance of 408,348 common shares
in acquisition..................... 408 4,770 -- -- -- -- 5,178
Purchase of 140,000 common shares
for treasury....................... -- -- -- -- (1,860) -- (1,860)
------- ------- -------- -------- -------- ------- --------
BALANCE AT DECEMBER 31, 1998.......... 8,985 5,248 55,249 (1,186) (3,590) 258 64,964
Comprehensive income:
Net income......................... -- -- 6,203 -- -- -- 6,203
Change in net unrealized gain
(loss) on available-for-sale
securities, net of tax effect.... -- -- -- -- -- (3,708) (3,708)
------- ------- -------- -------- -------- ------- --------
Total comprehensive income......... -- -- 6,203 -- -- (3,708) 2,495
Cash dividends paid ($0.32 per share). -- -- (2,687) -- -- -- (2,687)
Allocation of 37,062 shares to
ESOP participants.................. -- 183 -- 198 -- -- 381
Purchase of 67,730 common shares
for treasury....................... -- -- -- -- (745) -- (745)
------- ------- -------- -------- -------- ------- --------
BALANCE AT DECEMBER 31, 1999.......... 8,985 5,431 58,765 (988) (4,335) (3,450) 64,408
Comprehensive income:
Net income......................... -- -- 6,487 -- -- -- 6,487
Change in net unrealized gain
(loss) on available-for-sale
securities, net of tax effect.... -- -- -- -- -- 2,943 2,943
------- ------- -------- -------- -------- ------- --------
Total comprehensive income......... -- -- 6,487 -- -- 2,943 9,430
Cash dividends paid ($0.32 per share). -- -- (2,660) -- -- -- (2,660)
Allocation of 37,062 shares to
ESOP participants.................. -- 85 -- 197 -- -- 282
Purchase of 200,100 common shares
for treasury....................... -- -- -- -- (2,059) -- (2,059)
------- ------- -------- -------- -------- ------- --------
BALANCE AT DECEMBER 31, 2000.......... $ 8,985 $ 5,516 $ 62,592 $ (791) $ (6,394) $ (507) $ 69,401
======= ======= ======== ======== ======== ======= ========
See accompanying notes to consolidated financial statements.
F-5
SOUTHSIDE BANCSHARES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
----------------------------
2000 1999 1998
---- ---- ----
(DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................................... $ 6,487 $ 6,203 $ 6,810
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................................ 2,126 2,399 1,686
Provision for loan losses.................................................... 361 45 62
Provision for deferred income taxes.......................................... (9) (63) (7)
Net losses on sales of other real estate owned and
other foreclosed property.................................................. -- -- 104
Increase (decrease) in income taxes payable.................................. 714 133 (370)
Increase in accrued interest receivable...................................... (404) (317) (234)
Increase (decrease) in accrued interest payable.............................. 765 (382) 280
Employee Stock Ownership Plan compensation expense........................... 282 381 461
Origination of loans for sale................................................ (4,256) (15,992) (31,798)
Proceeds from sales of loans................................................. 3,886 16,267 32,228
Other operating activities, net.............................................. (833) (735) (1,059)
-------- -------- --------
Net cash provided by operating activities.................................... 9,119 7,939 8,163
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in Federal funds sold................................... $(13,783) $ 27,300 $(12,700)
Proceeds from maturities of and principal payments on debt securities:
Available-for-sale........................................................... 25,808 26,154 31,703
Held-to-maturity............................................................. 25,154 23,603 35,288
Purchases of debt securities:
Available-for-sale........................................................... (20,987) (93,008) (45,927)
Held-to-maturity............................................................. (100) (1,410) (19,811)
Net (increase) decrease in loans................................................ (72,989) (36,532) 14,627
Recoveries of loans previously charged off...................................... 475 263 289
Purchases of premises and equipment............................................. (976) (2,617) (4,423)
Proceeds from sales of other real estate owned ................................. 216 173 241
Purchase of company-owned life insurance........................................ (901) (15,882) --
Cash and cash equivalents acquired, net of cash paid............................ -- -- 8,238
-------- -------- --------
Net cash (used in) provided by investing activities............................. $(58,083) $(71,956) $ 7,525
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in demand and savings deposits.......................... $ (4,203) $ 17,527 $ 5,423
Net increase (decrease) in time deposits........................................ 62,587 (25,006) (20,760)
Net increase in Federal funds purchased......................................... 4,750 1,000 --
Net increase (decrease) in securities sold under agreements to repurchase....... 349 4,654 (2,384)
Proceeds from FHLB borrowings................................................... 28,000 69,800 12,000
Repayments of FHLB borrowings................................................... (40,974) (166) (6,083)
Proceeds from other borrowings................................................. 1,900 -- --
Proceeds from debt of Employee Stock Ownership Plan............................. -- 1,186 --
Repayment of ESOP debt.......................................................... (198) -- --
Purchase of treasury stock...................................................... (2,059) (745) (1,860)
Cash dividends paid............................................................. (2,660) (2,687) (2,402)
-------- -------- --------
Net cash provided by (used in) financing activities............................. 47,492 65,563 (16,066)
-------- -------- --------
Net (decrease) increase in cash and cash equivalents............................ (1,472) 1,546 (378)
Cash and cash equivalents, beginning of year.................................... 19,470 17,924 18,302
-------- -------- --------
Cash and cash equivalents, end of year.......................................... $ 17,998 $ 19,470 $ 17,924
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowings........................................ $ 25,717 $ 20,645 $ 20,137
Income taxes............................................................... 2,165 2,822 3,165
Noncash transactions:
Transfers to other real estate owned in settlement of loans................ $ 969 $ 138 $ 174
Issuance of common shares in acquisition................................... -- -- 5,178
Issuance of stock under stock option plan.................................. -- -- 90
See accompanying notes to consolidated financial statements.
F-6
SOUTHSIDE BANCSHARES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Southside Bancshares Corp. and its banking subsidiaries provide a
full range of banking services to individual and corporate customers
throughout the eastern portions of Missouri, including the City of St. Louis
and the counties of Franklin, Jefferson, St. Charles, St. Francois, Ste.
Genevieve, St. Louis, and Washington, through its four subsidiary banks.
Southside is subject to competition from other financial and
nonfinancial institutions providing financial products in these Missouri
markets. Additionally, Southside is subject to the regulations of certain
Federal and state agencies and undergoes periodic examinations by those
regulatory agencies.
The accounting and reporting policies of Southside conform, in all
material respects, to accounting principles generally accepted in the United
States of America and within the banking industry. The preparation of the
consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make estimates and assumptions, including the determination of the allowance
for loan losses, that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
The more significant of Southside's accounting policies are set
forth below:
Consolidation. The consolidated financial statements include the
accounts of Southside and its banking subsidiaries, after elimination of all
significant intercompany accounts and transactions.
Investments in Debt Securities. At the time of purchase, debt
securities are classified into one of two categories: available-for-sale or
held-to-maturity. Held-to-maturity securities are those securities for which
Southside has the ability and positive intent to hold until maturity. All
other securities not included in held-to-maturity are classified as
available-for-sale.
Available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized gains and
losses, net of the related tax effect, on available-for-sale securities are
excluded from earnings and reported as a separate component of shareholders'
equity until realized. A decline in the market value of any
available-for-sale or held-to-maturity security below cost that is deemed
other than temporary results in a charge to earnings and the establishment
of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the lives of
the respective securities as an adjustment to yield using the interest
method. Dividend and interest income are recognized when earned. Realized
gains and losses for securities classified as available-for-sale are
included in earnings and are derived using the specific-identification
method for determining the cost of securities sold.
Interest on Loans. Interest on commercial, real estate mortgage,
and installment loans is credited to income based on the principal amount
outstanding. Loans are placed on a nonaccrual basis when interest is past
due 90 days or more and when, in the opinion of management, full collection
of principal or interest is unlikely. At the time a loan is placed on
nonaccrual status, interest accrued in the current year but not collected is
charged against current income, with any prior year interest accrued and
unpaid charged against the allowance for loan losses. Subsequent interest
payments received on such loans are applied to principal if there is any
doubt as to the collectibility of such principal; otherwise, such receipts
are recorded as interest income. Loans are returned to accrual status only
when borrowers have brought all past due principal and interest payments
current and, in the opinion of management, the borrowers have demonstrated
the ability to make future payments of principal and interest as scheduled.
F-7
Loan origination fees and certain direct origination costs, to the
extent deemed significant, are deferred and amortized over the life of the
underlying loan.
Allowance for Loan Losses. The allowance for loan losses is
increased by provisions charged to expense and reduced by loans charged off,
net of recoveries. The allowance for loan losses is maintained at a level
considered adequate to provide for probable loan losses based on
management's evaluation of current economic conditions, changes in the
character and size of the loan portfolio, portfolio risk characteristics,
prior loss experience, and results of periodic credit reviews of the loan
portfolio.
Management believes the allowance for loan losses is adequate to
absorb probable losses in the loan portfolio. While management uses
available information to recognize loan losses, future additions to the
allowance may be necessary based on changes in economic conditions.
Additionally, regulatory agencies, as an integral part of their examination
process, periodically review the subsidiary banks' allowances for loan
losses. Such agencies may require the subsidiary banks to increase their
allowances for loan losses based on their judgments and interpretations
about information available to them at the time of their examinations.
A loan is considered impaired when it is probable a creditor will
be unable to collect all amounts due, both principal and interest, according
to the contractual terms of the loan agreement. When measuring impairment,
the expected future cash flows of an impaired loan must be discounted at the
loan's effective interest rate.
Alternatively, impairment can be measured by reference to an
observable market price, if one exists, or the fair value of the collateral
for a collateral-dependent loan. Regardless of the historical method used,
Southside measures impairment based on the fair value of the collateral when
the creditor has determined foreclosure is probable. Additionally,
impairment of a restructured loan is measured by discounting the total
expected future cash flows at the loan's effective rate of interest as
stated in the original loan agreement. Southside continues to use existing
nonaccrual methods for recognizing interest income on impaired loans.
Loans Held for Sale. In its lending activities, Southside
originates residential mortgage loans intended for sale in the secondary
market. Loans held for sale are carried at the lower of cost or fair value,
which is determined on an aggregate basis. Gains or losses on the sale of
loans held for sale are determined on a specific identification method.
Premises and Equipment. Premises and equipment are stated at cost,
less accumulated depreciation. Depreciation is computed using the
straight-line method over periods of 10 to 40 years for buildings and 3 to
15 years for furniture and equipment. Rents collected under lease agreements
for space in subsidiary bank buildings are credited to net occupancy and
equipment expense in the noninterest expense category.
Intangible Assets. Intangible assets, consisting primarily of
goodwill and a core deposit base premium, are included in other assets in
the consolidated balance sheets. Goodwill, the excess of cost over the fair
value of net assets acquired in business combinations accounted for as
purchases, is amortized using the straight-line method over 15 years. The
core deposit base premium is being amortized over 10 years, the estimated
life of the deposit base acquired. Gross intangible assets totaled
$7,178,000 at December 31, 2000 and 1999 with accumulated amortization of
$3,789,000 and $3,406,000, respectively.
Income Taxes. Southside and its subsidiary banks file consolidated
income tax returns.
Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
Treasury Stock. The purchase of Southside's common shares is
recorded at cost. Upon subsequent reissuance, the treasury stock account is
reduced by the average cost basis of such common shares purchased.
F-8
Trust Assets. Assets held by Southside's national banking
subsidiary in a fiduciary or agency capacity for customers are not included
in the consolidated financial statements, as such items are not assets of
Southside or its subsidiary banks. Trust department operating expenses are
included in noninterest expense on the consolidated statements of income.
Earnings Per Common Share. Basic earnings per share (EPS) is
computed by dividing net income by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of Southside.
Cash Equivalents. For purposes of the consolidated statements of
cash flows, Southside considers cash and due from banks and interest-bearing
deposits in banks to be cash and cash equivalents.
Impairment of Long-lived Assets and Long-lived Assets to be
Disposed of. Long-lived assets and certain identifiable intangibles are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flow expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to
sell.
Reclassifications. Certain prior year information has been
reclassified to conform with the current year presentation.
NOTE 2. INVESTMENTS IN DEBT AND EQUITY SECURITIES
The amortized cost and fair values of debt and equity securities
classified as available-for-sale at December 31, 2000 and 1999 are as
follows:
AS OF
DECEMBER 31, 2000
------------------------------------------------
GROSS
UNREALIZED
AMORTIZED ---------- FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(IN THOUSANDS)
U.S. Treasury securities and
obligations of U.S. Government
agencies and corporations................. $ 63,095 $ 273 $ (228) $ 63,140
Obligations of states and
political subdivisions.................... 9,425 30 (45) 9,410
Mortgage-backed securities.................. 81,016 361 (1,157) 80,220
Other securities............................ 5,258 -- -- 5,258
-------- ----- -------- ---------
$158,794 $ 664 $ (1,430) $ 158,028
======== ===== ======== =========
AS OF
DECEMBER 31, 1999
------------------------------------------------
GROSS
UNREALIZED
AMORTIZED ---------- FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(IN THOUSANDS)
U.S. Treasury securities and
obligations of U.S. Government
agencies and corporations................. $ 58,168 $ 1 $ (1,199) $ 56,970
Obligations of states and
political subdivisions.................... 8,970 -- (518) 8,452
Mortgage-backed securities.................. 91,801 5 (3,512) 88,294
Other securities............................ 4,915 -- (1) 4,914
-------- --- -------- ---------
$163,854 $ 6 $ (5,230) $ 158,630
======== === ======== =========
F-9
The amortized cost and fair value of debt and equity securities
classified as available-for-sale at December 31, 2000, by contractual
maturity, are shown below. Expected maturities may differ from contractual
maturities because borrowers have the right to call or prepay obligations
with or without prepayment penalties.
AS OF
DECEMBER 31, 2000
---------------------
AMORTIZED FAIR
COST VALUE
---- -----
(IN THOUSANDS)
Due in one year or less................................. $ 11,806 $ 11,801
Due after one year through five years................... 44,163 44,338
Due after five years through ten years.................. 10,323 10,277
Due after ten years..................................... 6,328 6,234
Mortgage-backed securities.............................. 81,016 80,220
Federal Home Loan Bank stock - no
stated maturity....................................... 4,707 4,707
Federal National Mortgage Association
stock - no stated maturity............................ 5 5
Federal Reserve Bank stock - no stated maturity......... 446 446
--------- ---------
$ 158,794 $ 158,028
========= =========
The amortized cost and fair values of debt securities classified as
held-to-maturity at December 31, 2000 and 1999 are as follows:
AS OF
DECEMBER 31, 2000
-----------------------------------------------
GROSS
UNREALIZED
AMORTIZED ------------------- FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(IN THOUSANDS)
U.S. Treasury securities and
obligations of U.S. Government
agencies and corporations.................. $14,899 $ 5 $(30) $ 14,874
Obligations of states and
political subdivisions..................... 20,039 283 (22) 20,300
Mortgage-backed securities................... 1,479 13 (6) 1,486
------- ----- ---- --------
$36,417 $ 301 $(58) $ 36,660
======= ===== ==== ========
AS OF
DECEMBER 31, 1999
-----------------------------------------------
GROSS
UNREALIZED
AMORIZED ------------------- FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(IN THOUSANDS)
U.S. Treasury securities and
obligations of U.S. Government
agencies and corporations.................. $36,784 $ 27 $ (235) $ 36,576
Obligations of states and
political subdivisions..................... 23,165 226 (297) 23,094
Mortgage-backed securities................... 1,646 10 (10) 1,646
------- ----- ------ --------
$61,595 $ 263 $ (542) $ 61,316
======= ===== ====== ========
The amortized cost and fair value of debt securities classified as
held-to-maturity at December 31, 2000, by contractual maturity, are shown
below. Expected maturities may differ from contractual maturities because
borrowers have the right to call or prepay obligations with or without
prepayment penalties.
F-10
AMORTIZED FAIR
COST VALUE
---- -----
(IN THOUSANDS)
Due in one year or less................................ $ 12,475 $ 12,472
Due after one year through five years.................. 10,399 10,485
Due after five years through ten years................. 9,214 9,367
Due after ten years.................................... 2,850 2,850
Mortgage-backed securities............................. 1,479 1,486
-------- --------
$ 36,417 $ 36,660
======== ========
There were no sales of debt or equity securities during 2000, 1999,
and 1998.
The carrying value of securities pledged to secure deposits and
collateralize borrowings amounted to $135,475,000 and $112,852,000 at
December 31, 2000 and 1999, respectively.
NOTE 3. LOANS
Loans, by category, at December 31, 2000 and 1999 are as follows:
DECEMBER 31,
-----------------
2000 1999
---- ----
(IN THOUSANDS)
Commercial, financial, and agricultural................... $ 78,586 $ 73,943
Real estate - commercial.................................. 157,771 136,697
Real estate - construction................................ 28,808 19,078
Real estate - residential................................. 161,252 131,074
Consumer.................................................. 27,189 23,130
Industrial revenue bonds.................................. 5,339 3,879
Other..................................................... 4,461 4,636
--------- ---------
Total loans.......................................... 463,406 392,437
Less allowance for loan losses............................ 5,179 5,830
--------- ---------
Loans, net........................................... $ 458,227 $ 386,607
========= =========
Southside's banking subsidiaries make agricultural, commercial,
residential, and consumer loans to customers throughout their service area,
which consists primarily of the eastern portion of Missouri, including the
City of St. Louis and the counties of Franklin, Jefferson, St. Charles, St.
Francois, Ste. Genevieve, St. Louis, and Washington. Southside has a
diversified loan portfolio, with no particular concentration of credit in
any one economic sector in this service area; however, a substantial portion
of the portfolio is concentrated in and secured by real estate. The ability
of Southside's borrowers to honor their contractual obligations is dependent
upon the local economies and their effect on the real estate market.
Southside's investment in industrial revenue bonds is classified as
held-to-maturity. The estimated fair value of these instruments was
$5,553,000 and $4,034,000 at December 31, 2000 and 1999, respectively.
F-11
Activity in the allowance for loan losses for the years ended
December 31, 2000, 1999, and 1998 was as follows:
AS OF
DECEMBER 31,
-------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
Balance at beginning of year............................. $ 5,830 $ 6,192 $ 6,120
Provision charged to expense............................. 361 45 62
Allowance of PSB at acquisition.......................... -- -- 257
Loans charged off........................................ (1,487) (670) (536)
Recoveries............................................... 475 263 289
------- ------- -------
Balance at end of year................................... $ 5,179 $ 5,830 $ 6,192
======= ======= =======
A summary of impaired loans, including nonaccrual loans, at
December 31, 2000 and 1999 follows:
AS OF
DECEMBER 31,
-----------------
2000 1999
---- ----
(IN THOUSANDS)
Nonaccrual loans......................................... $4,200 $ 6,695
Impaired loans continuing to accrue interest............. 339 221
------ -------
Total impaired loans................................... $4,539 $ 6,916
====== =======
Allowance for losses on impaired loans................... $1,529 $ 2,753
====== =======
Impaired loans with no related
allowance for loan losses.............................. $ 474 $ 669
====== =======
The average balance of impaired loans was $5,080,000, $5,839,000,
and $5,944,000 for the years ended December 31, 2000, 1999, and 1998,
respectively.
If interest on nonaccrual loans, including amounts computed on
principal balances charged off on such loans, had been accrued, such income
would have been $478,000, $623,000, and $252,000 for the years ended
December 31, 2000, 1999, and 1998, respectively. The amount recognized as
interest income on nonaccrual loans was $48,000, $62,000, and $194,000 for
the years ended December 31, 2000, 1999, and 1998, respectively.
The amount recognized as interest income on other impaired loans
continuing to accrue interest was $31,000, $20,000, and $343,000 for the
years ended December 31, 2000, 1999, and 1998, respectively.
There were no restructured loans at December 31, 2000 and 1999.
Aggregate loan transactions involving executive officers and
directors of Southside and its subsidiaries for the year ended December 31,
2000 are summarized below (in thousands). This summary excludes all loans to
executive officers and directors whose indebtedness to Southside and its
subsidiaries did not exceed $60,000 at any time during 2000.
AGGREGATE BALANCE, DECEMBER 31, 1999........ $ 35,378
New loans and advances...................... 24,970
Repayments.................................. (25,776)
--------
AGGREGATE BALANCE, DECEMBER 31, 2000........ $ 34,572
========
All such loans to executive officers and directors were made in the
normal course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the same time for
comparable transactions with other persons, and did not involve more than
the normal risk of collectibility. There were no loans involving executive
officers and directors, which were on nonaccrual status or past due 90 days
and still accruing interest as of December 31, 2000.
F-12
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment at December 31, 2000 and 1999 are as
follows:
AS OF
DECEMBER 31,
------------------
2000 1999
---- ----
(IN THOUSANDS)
Land...................................................... $ 3,867 $ 3,867
Buildings................................................. 16,307 16,158
Furniture and equipment................................... 7,540 6,911
-------- --------
27,714 26,936
Less accumulated depreciation............................. 10,508 9,373
-------- --------
$ 17,206 $ 17,563
======== ========
Depreciation of premises and equipment charged to net occupancy and
equipment expense amounted to $1,333,000, $1,228,000, and $1,015,000 for
2000, 1999, and 1998, respectively.
Rents collected and credited to net occupancy and equipment expense
amounted to $281,000, $261,000, and $221,000 for 2000, 1999, and 1998,
respectively.
NOTE 5. DEPOSITS
Deposits, by category, at December 31, 2000 and 1999 are as
follows:
AS OF
DECEMBER 31,
-----------------
2000 1999
---- ----
(IN THOUSANDS)
Noninterest-bearing demand deposits..................... $ 77,196 $ 74,577
Interest-bearing demand deposits........................ 155,516 158,826
Savings deposits........................................ 58,810 62,322
Time deposits:
Under $100,000..................................... 234,709 178,857
$100,000 and over.................................. $ 47,963 41,228
---------- ----------
$ 574,194 $ 515,810
========== ==========
A summary of time deposits as of December 31, 2000 by time
remaining until maturity is as follows:
AS OF
DECEMBER 31,
--------------
(IN THOUSANDS)
Due in one year or less................................ $ 212,821
Due after one year through two years................... 44,352
Due after two years through three years................ 14,595
Due after three years through four years............... 7,202
Due after four years through five years................ 3,589
Thereafter............................................. 113
----------
$ 282,672
==========
F-13
Interest paid on deposits consists of the following for the years
ended December 31, 2000, 1999, and 1998:
AS OF
DECEMBER 31,
------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
Interest-bearing demand deposits....................... $ 5,874 $ 4,798 $ 4,848
Savings deposits....................................... 1,500 1,579 1,535
Time deposits:
Under $100,000.................................... 11,011 9,353 9,997
$100,000 and over................................. 2,348 2,164 2,721
------- -------- --------
$20,733 $ 17,894 $ 19,101
======= ======== ========
NOTE 6. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
A summary of securities sold under agreements to repurchase at
December 31, 2000 and 1999 is as follows:
AS OF
DECEMBER 31,
------------------
2000 1999
---- ----
(IN THOUSANDS)
Securities sold under agreements
to repurchase........................................ $7,952 $ 7,603
====== =======
The average balance of securities sold under agreements to
repurchase for 2000, 1999, and 1998 was $6,691,000, $3,041,000, and
$3,289,000, respectively. The maximum month-end balance of such borrowings
for 2000, 1999, and 1998 was $7,952,000, $7,603,000, and $6,802,000,
respectively. The average interest rate paid on securities sold under
agreements to repurchase for 2000, 1999, and 1998 was 4.47%, 4.14%, and
4.44%, respectively.
NOTE 7. FEDERAL HOME LOAN BANK BORROWINGS
Federal Home Loan Bank (FHLB) borrowings at December 31, 2000 and
1999 are as follows:
AS OF
DECEMBER 31,
----------------------
2000 1999
---- ----
(IN THOUSANDS)
Due January 3, 2000, 5.97%........... $ -- $ 18,800
Due October 24, 2000, 5.90%.......... -- 11,000
Due December 15, 2000, 5.80%......... -- 1,000
Due February 26, 2003, 5.65%......... 170 251
Due July 30, 2003, 5.98%............. 1,000 1,000
Due May 8, 2008, 5.63%............... 10,000 10,000
Due March 30, 2009, 4.54% -
repaid in 2000.................. -- 10,000
Due March 30, 2009, 4.95%............ 10,000 10,000
Due March 30, 2009, 5.24%............ 10,000 10,000
Due October 27, 2009, 5.64%.......... 10,000 10,000
Due March 30, 2010, 6.24%............ 8,000 --
Due December 16, 2010, 4.75%......... 10,000 --
Due December 29, 2010, 5.23%......... 10,000 --
Due May 6, 2013, 6.17%............... 443 466
Due May 15, 2013, 6.17%.............. 443 466
Due June 12, 2013, 5.98%............. 444 468
Due July 5, 2013, 6.04%.............. 447 470
-------- --------
$ 70,947 $ 83,921
======== ========
The FHLB borrowings at December 31, 2000 are collateralized by 1-4
family residential real estate loans with a carrying value of $80,299,000,
investment securities with a fair value of $46,640,000 as of December 31,
F-14
2000, and all stock held in the FHLB of Des Moines. All of the FHLB
borrowings have fixed interest rates, and the majority of these borrowings
are callable at the option of the FHLB of Des Moines under certain
conditions.
The FHLB borrowings at December 31, 1999 are collateralized by 1-4
family residential real estate loans with a carrying value of $76,093,000,
investment securities that have been pledged with a fair value of
$49,074,000 as of December 31, 1999, and all stock held in the FHLB of Des
Moines.
Southside's banking subsidiaries, which have an investment in the
capital stock of the FHLB, maintain a total line of credit of approximately
$126,939,000 with the FHLB of Des Moines and had availability under that
line of approximately $55,992,000 at December 31, 2000.
NOTE 8. OTHER BORROWINGS
In August 2000, Southside established a $5,000,000 line of credit
with UMB Bank, N.A. The purpose of this credit facility is to provide
funding for treasury stock purchases by Southside. During 2000, Southside
funded the treasury stock purchases of 200,100 shares with $1,900,000 in
borrowings on this line of credit. The note bears interest at the prime
lending rate minus 50 basis points, is secured by all of the outstanding
common stock of the Bank of Ste. Genevieve and matures on August 28, 2001.
In December 2000, Southside established a $20,000,000 line of
credit with Union Planters Bank, N.A. The purpose of this credit facility is
to provide funding for Southside's Tender Offer to purchase shares through a
modified "Dutch Auction." As of December 31, 2000, Southside had not drawn
on this line of credit.
NOTE 9. INCOME TAXES
The current and deferred portions of income tax expense for 2000,
1999, and 1998 are as follows:
AS OF
DECEMBER 31,
------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
Current.................................................... $2,059 $ 2,354 $ 2,625
State...................................................... 308 415 437
Deferred tax expense....................................... (9) (63) (7)
------ ------- -------
Income tax expense.................................... $2,358 $ 2,706 $ 3,055
====== ======= =======
A reconciliation of expected income tax expense computed by
applying the Federal statutory rate of 34% in 2000, 1999, and 1998 to income
before income tax expense is as follows:
AS OF
DECEMBER 31,
-------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
Computed income tax expense............................... $3,007 $ 3,029 $ 3,354
State taxes, net of Federal benefit....................... 203 274 289
Tax-exempt income......................................... (797) (601) (563)
Goodwill amortization..................................... 133 129 81
Other, net................................................ (188) (125) (106)
------ ------- -------
Income tax expense................................... $2,358 $ 2,706 $ 3,055
====== ======= =======
F-15
The components of deferred tax assets and liabilities at December
31, 2000 and 1999 are as follows:
AS OF
DECEMBER 31,
------------------
2000 1999
---- ----
(IN THOUSANDS)
DEFERRED TAX ASSETS
Allowance for loan losses................................. $1,743 $ 1,958
Available-for-sale securities............................. 259 1,774
Deferred expense.......................................... 452 359
Other..................................................... 31 --
------ -------
Total deferred tax assets............................ 2,485 4,091
------ -------
DEFERRED TAX LIABILITIES
Premises and equipment.................................... (759) (752)
Discount on debt securities, net.......................... (72) (67)
Deferred loan fees........................................ (1) (110)
Other..................................................... -- (3)
------ -------
Total deferred tax liabilities....................... (832) (932)
------ -------
Net deferred tax asset............................... $1,653 $ 3,159
====== =======
Southside has not established a valuation allowance for deferred
tax assets as of December 31, 2000 or 1999 due to management's belief that
all criteria for recognition of the assets have been met.
NOTE 10. EMPLOYEE BENEFIT PLANS
Pension. During 1997, the Board of Directors of Southside voted to
terminate its noncontributory pension plan effective May 31, 1997. The
benefits under the plan were frozen as of March 31, 1997 and plan benefits
ceased to accrue. As the fair value of plan assets exceeded the value of
accumulated benefit obligations as of December 31, 1997, Southside elected
to provide benefits with plan assets. Upon approval by regulatory
authorities and subsequent termination in 1998, all benefits became 100%
vested, and all persons entitled to benefits were eligible to request an
immediate lump-sum settlement of the benefit entitlement. Southside recorded
a pension curtailment gain of approximately $375,000 in 1998 in conjunction
with the termination of the plan.
ESOP. Southside's Board of Directors authorized the adoption
of an employee stock ownership plan with 401(k) provisions (ESOP) for
substantially all employees of Southside.
In April 1995, Southside leveraged the ESOP plan through a
$2,987,000 borrowing from an unaffiliated financial institution, the
proceeds of which were used to purchase 560,010 shares of Southside's common
stock. In September 1997, Southside repaid the unaffiliated financial
institution through borrowings from South Side National Bank in St. Louis.
In September 1999, Southside repaid South Side National Bank in St. Louis
with a borrowing from an unaffiliated financial institution. The note bears
interest at 7.5% at December 31, 2000, requires quarterly interest payments,
and requires annual principal redirections through April 2005. Southside
makes annual contributions to the ESOP equal to the ESOP's debt service less
dividends received by the ESOP. All dividends on unallocated shares received
by the ESOP are used to pay debt service. As the debt is repaid, shares are
released from collateral and allocated to active employees, based on the
proportion of debt service paid in the year. The debt of the ESOP is
recorded as debt and the shares pledged as collateral are reported as
unearned ESOP shares in the consolidated balance sheet. As shares are
released from collateral, Southside reports compensation expense equal to
the current market price of the shares, and the shares become outstanding
for earnings-per-share computations. Dividends on allocated ESOP shares are
recorded as a reduction of retained earnings; dividends on unallocated ESOP
shares are recorded as a reduction of accrued interest. ESOP compensation
expense was $282,000, $381,000, and $461,000 for the years ended December
31, 2000, 1999, and 1998, respectively. The ESOP shares as of December 31,
2000 were as follows:
F-16
AS OF
DECEMBER 31,
------------
Allocated shares...................................... 844,229
Shares released for allocation........................ 37,062
Unreleased shares..................................... 148,248
-----------
Total ESOP shares..................................... 1,029,539
===========
Fair value of unreleased shares at
December 31, 2000................................ $ 1,093,329
===========
In addition, under the 401(k) provisions the ESOP provides for a
50% matching contribution by Southside on employee elective deferral amounts
up to 6% of annual compensation. The matching contributions charged to
expense for the years 2000, 1999, and 1998 were $126,000, $123,000, and
$116,000, respectively.
Stock Options. Southside maintains two stock option plans: a
nonqualified stock option plan under which options to purchase up to 600,000
shares of common stock have been granted to certain executive officers of
Southside and its subsidiary banks, and an incentive stock option plan under
which options to purchase up to 750,000 shares of common stock could be
granted to certain executive officers of Southside and its subsidiary banks.
Options granted under the nonqualified stock option plan vest on a pro rata
basis over a five-year period and expire at the end of ten years from the
date of grant. In 1993, 75,000 options were granted at $3.67 per share. Of
the options granted, 7,200 have been exercised, 16,800 have been forfeited,
and 51,000 are still outstanding. There were no options granted during 1994
or 1995. In 1996, 225,000 options were granted at $6.33 per share. Of the
options granted, 18,000 have been exercised, 27,000 have been forfeited, and
180,000 are still outstanding. In 1997, 300,000 options were granted at
$8.00 per share, all of which remain outstanding as of December 31, 2000.
All of the available options under the nonqualified stock option plan were
granted prior to 1998. No options were granted under the incentive stock
option plan during 1998, 1999, and 2000.
The following table summarizes stock options outstanding as of
December 31, 2000:
WEIGHTED AVERAGE
----------------
REMAINING
CONTRACTUAL
EXERCISE LIFE (IN EXERCISE
PRICE OUTSTANDING YEARS) PRICE
----- ----------- ------ -----
$ 3.67 51,000 3.0
6.33 180,000 5.3
8.00 300,000 6.3
-------
531,000 5.6 $ 7.02
=======
The number of shares exercisable under stock options as of December
31, 2000 were 382,200 with a weighted average exercise price of $6.76.
Southside has adopted the disclosure-only provisions of SFAS 123.
Accordingly, no compensation cost has been recognized for the stock option
plans. Had compensation expense for Southside's stock option plan been
determined based on the fair value at the grant date for awards in 2000,
1999, and 1998 consistent with the provisions of SFAS 123, Southside's net
income and earnings per common share would have been the pro forma amounts
indicated below:
FOR YEAR ENDED
DECEMBER 31,
---------------------------------------
2000 1999 1998
---- ---- ----
Net income - as reported................................ $ 6,487,000 $ 6,203,000 $ 6,810,000
Net income - pro forma.................................. 6,355,000 6,071,000 6,678,000
Earnings per common share - diluted, as reported........ 0.77 0.72 0.80
Earnings per common share - pro forma diluted........... 0.75 0.71 0.78
Pro forma net income reflects only options granted in 1996 and
subsequent years. Therefore, the full impact of calculating compensation
cost for stock options under SFAS 123 is not reflected in the pro forma net
income and earnings per share amounts presented above because compensation
cost is reflected over the options' vesting period of five years and
compensation cost for options granted prior to January 1, 1996 is not
considered.
F-17
The fair value of option grants for 1997 is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions used for grants:
Volatility 30.0%
Risk-free interest rate 6.0%
Expected life 7 years
Expected dividend yield 3.6%
The pro forma information is provided for informational purposes
only and is not necessarily indicative of the results of operations that
would have occurred or of the future anticipated results of operations of
Southside.
Salary Continuation Plan. In November 1999, Southside adopted a
Salary Continuation Plan for several senior management executives to
encourage these executives to continue their employment with Southside. The
plan provides for the payment of supplemental retirement income to the
executives upon reaching retirement age. Each of these executives will
receive, on an annual basis, for a period of 15 years following retirement,
a predetermined annual benefit amount as set forth in their respective
agreements. The benefits of the plan are funded by Southside through the
purchase of life insurance policies. The cash surrender value of the life
insurance policies, totaling $5,347,000 and $4,507,000 as of December 31,
2000 and 1999, respectively, is included in other assets on the consolidated
balance sheet. Expenses related to the plan were $62,000 and $12,000 for the
years ended December 31, 2000 and 1999, respectively.
Deferred Director Fee Plan. In November 1999, Southside adopted a
Deferred Director Fee Plan for its Board of Directors and the Boards of
Directors of its subsidiary banks. The plan allows each director to defer
his monthly director fees. The deferred fees are credited with an interest
factor equal to the percentage increase in the market value of Southside's
common stock from the previous year, subject to a ceiling of 15% and a floor
of 6%. The amount of benefits for each director is stipulated in the
respective director's agreement. The benefits of the plan are funded by
Southside through the purchase of life insurance policies. The cash
surrender value of the life insurance policies, totaling $12,171,000 and
$11,433,000, and as of December 31, 2000, and 1999, respectively, is
included in other assets on the consolidated balance sheet. Expenses related
to the plan were $93,000, and $20,000 for the years ended December 31, 2000
and 1999, respectively.
NOTE 11. EARNINGS PER SHARE
The computation of EPS for 2000, 1999, and 1998 follows:
AS OF
DECEMBER 31,
---------------------------------
2000 1999 1998
---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
BASIC EPS
Net income............................................ $ 6,487 $ 6,203 $ 6,810
Average common shares outstanding..................... 8,363,828 8,414,752 8,297,250
Basic EPS............................................. $ 0.78 $ 0.74 $ 0.82
DILUTED EPS
Net income............................................ $ 6,487 $ 6,203 $ 6,810
Average common shares outstanding..................... 8,363,828 8,414,752 8,297,250
Dilutive potential due to stock options............... 73,311 183,409 257,385
Average number of common shares and
dilutive potential common shares
outstanding...................................... 8,437,139 8,598,161 8,554,635
Diluted EPS........................................... $ 0.77 $ 0.72 $ 0.80
NOTE 12. SUPERVISION AND REGULATION
Southside's subsidiary banks are required to maintain certain daily
reserve balances on hand in accordance with regulatory requirements.
Restricted funds used to meet regulatory reserve requirements amounted to
$856,000 and $517,000 at December 31, 2000 and 1999, respectively.
F-18
Southside is registered with and subject to supervision and
regulation by the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act of 1956 as amended. Southside is also subject to
periodic reporting requirements and regulation by the Securities and
Exchange Commission. All subsidiary banks are subject to regulation by the
Board of Governors of the Federal Reserve System and, in addition, they are
also members of and subject to regulation by the FDIC. The state-chartered
subsidiary banks are subject to supervision and regulation by the Missouri
Division of Finance. The national bank subsidiary is subject to supervision
and regulation by the Office of the Comptroller of the Currency.
The earnings of the subsidiary banks are affected not only by
competing financial institutions and general economic conditions, but also
by the policies of various governmental regulatory authorities and state and
Federal laws, particularly as they relate to powers authorized to banks and
bank holding companies. Southside and all subsidiary banks are also subject
to the provisions of the Community Reinvestment Act.
Subsidiary bank dividends are the principal source of funds for the
payment of dividends by Southside to its shareholders. By regulation,
Southside's national banking subsidiary is prohibited from paying dividends
in excess of its current year's net income plus its retained net income from
the preceding two years, unless prior regulatory approval is obtained. The
subsidiary banks are also required to maintain certain minimum capital
ratios, which further limit their ability to pay dividends to Southside.
Southside's subsidiary banks are subject to various regulatory
capital requirements administered by the Federal banking agencies. Failure
to meet minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary, actions by regulators that, if
undertaken, could have a direct material effect on Southside's consolidated
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, Southside's subsidiary banks must
meet specific capital guidelines that involve quantitative measures of
Southside's subsidiary banks' assets, liabilities, and certain off-balance-
sheet items as calculated under regulatory accounting practices. Southside's
subsidiary banks' capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulations to ensure capital
adequacy require Southside and its subsidiary banks to maintain minimum
amounts and ratios (set forth in the table below) of total and Tier I
capital to risk-weighted assets and of Tier I capital to average assets.
Southside's management believes, as of December 31, 2000, Southside and its
subsidiary banks meet all capital adequacy requirements to which they are
subject.
As of the most recent notification from regulatory authorities, the
subsidiary banks were categorized as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the subsidiary banks must maintain minimum total risk-based,
Tier I risk-based, and Tier I leverage ratios as set forth in the table.
There are no conditions or events since that notification that management
believes have changed the subsidiary banks' categories.
F-19
Southside and its subsidiary banks' actual and required capital
amounts (in thousands) and ratios as of December 31, 2000 and 1999 are as
follows:
AS OF
DECEMBER 31, 2000
-----------------------------------------------------------------------
TO BE
WELL CAPITALIZED
UNDER
PROMPT CORRECTIVE
FOR CAPITAL ACTION
ACTUAL ADEQUACY PURPOSES PROVISIONS
------------------- ------------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS)
Southside.................................. $ 71,697 14.72% $ 38,956 8.00% $ -- --%
SSNB....................................... 44,410 13.61 26,105 8.00 32,631 10.00
SBJC....................................... 6,983 13.62 4,103 8.00 5,129 10.00
BSG........................................ 11,278 18.90 4,775 8.00 5,969 10.00
BSCC....................................... 6,207 13.31 3,731 8.00 4,664 10.00
TIER I CAPITAL (TO RISK-WEIGHTED ASSETS)
Southside.................................. $ 66,518 13.66% $ 19,478 4.00% $ -- --%
SSNB....................................... 41,119 12.60 13,052 4.00 19,579 6.00
SBJC....................................... 6,431 12.54 2,052 4.00 3,077 6.00
BSG........................................ 10,531 17.64 2,387 4.00 3,581 6.00
BSCC....................................... 5,667 12.15 1,866 4.00 2,798 6.00
TIER I CAPITAL (TO ADJUSTED AVERAGE ASSETS)
Southside.................................. $ 66,518 9.15% $ 21,817 3.00% $ -- --%
SSNB....................................... 41,119 8.37 14,731 3.00 24,551 5.00
SBJC....................................... 6,431 8.75 2,204 3.00 3,674 5.00
BSG........................................ 10,531 11.28 2,802 3.00 4,670 5.00
BSCC....................................... 5,667 9.09 1,871 3.00 3,118 5.00
AS OF
DECEMBER 31, 1999
------------------------------------------------------------------------
TO BE
WELL CAPITALIZED
UNDER
PROMPT CORRECTIVE
FOR CAPITAL ACTION
ACTUAL ADEQUACY PURPOSES PROVISIONS
------------------- ------------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
TOTAL CAPITAL (TO RISK-WEIGHTED ASSETS)
Southside.................................. $ 69,478 16.12% $ 34,475 8.00% $ -- --%
SSNB....................................... 42,469 15.48 21,946 8.00 27,433 10.00
SBJC....................................... 6,676 14.86 3,593 8.00 4,492 10.00
BSG........................................ 10,640 18.21 4,673 8.00 5,842 10.00
BSCC....................................... 5,855 13.17 3,556 8.00 4,446 10.00
TIER I CAPITAL (TO RISK-WEIGHTED ASSETS)
Southside.................................. $ 64,086 14.87% $ 17,238 4.00% $ -- --%
SSNB....................................... 39,034 14.23 10,973 4.00 16,460 6.00
SBJC....................................... 6,114 13.61 1,797 4.00 2,695 6.00
BSG........................................ 9,909 16.96 2,337 4.00 3,505 6.00
BSCC....................................... 5,299 11.92 1,778 4.00 2,667 6.00
TIER I CAPITAL (TO ADJUSTED AVERAGE ASSETS)
Southside.................................. $ 64,086 9.81% $ 19,602 3.00% $ -- --%
SSNB....................................... 39,034 9.02 12,983 3.00 21,639 5.00
SBJC....................................... 6,114 9.36 1,960 3.00 3,266 5.00
BSG........................................ 9,909 10.86 2,736 3.00 4,560 5.00
BSCC....................................... 5,299 8.86 1,796 3.00 2,993 5.00
F-20
NOTE 13. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY
Following are condensed financial statements of Southside
Bancshares Corp. (parent company only) for the periods indicated:
CONDENSED BALANCE SHEETS
AS OF
DECEMBER 31,
---------------------
ASSETS 2000 1999
---- ----
(IN THOUSANDS)
Cash................................................ $ 216 $ 155
Investment in subsidiary banks...................... 66,618 60,738
Other assets........................................ 6,771 5,679
------- --------
Total assets...................................... $73,605 $ 66,572
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
ESOP debt........................................... $ 988 $ 1,186
Other liabilities................................... 3,216 978
Shareholders' equity................................ 69,401 64,408
------- --------
Total liabilities and shareholders' equity........ $73,605 $ 66,572
======= ========
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
REVENUE
Dividends received from subsidiary banks................. $4,550 $ 7,200 $ 8,300
Other ................................................... 589 359 343
------ ------- -------
Total revenue.......................................... 5,139 7,559 8,643
------ ------- -------
EXPENSES
Interest expense......................................... 131 96 121
Other.................................................... 2,192 1,689 2,012
------ ------- -------
Total expenses......................................... 2,323 1,785 2,133
------ ------- -------
Income before income tax benefit and un-
distributed earnings of subsidiary banks............... 2,816 5,774 6,510
Income tax benefit....................................... 584 404 489
------ ------- -------
Income before undistributed earnings
of subsidiary banks.................................... 3,400 6,178 6,999
Undistributed earnings (loss) of subsidiary banks........ 3,087 25 (189)
------ ------- -------
Net income............................................. $6,487 $ 6,203 $ 6,810
====== ======= =======
F-21
CONDENSED STATEMENTS OF CASH FLOWS
YEAR ENDED
DECEMBER 31,
---------------------------------
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................. $ 6,487 $ 6,203 $ 6,810
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed (earnings) losses
of subsidiary banks............................... (3,087) (25) 189
Other operating activities, net...................... 579 596 781
------- ------- -------
Net cash provided by operating activities............ 3,979 6,774 7,780
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of company-owned life insurance............... (901) (4,052) --
Cash paid to acquire PSB............................... -- -- (3,456)
------- ------- -------
Net cash used in investing activities................ (901) (4,052) (3,456)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for ESOP debt................................. (198) (1,384) (197)
Proceeds from ESOP debt................................ -- 1,186 --
Proceeds from other borrowings......................... 1,900 -- --
Purchase of treasury stock............................. (2,059) (745) (1,860)
Cash dividends paid.................................... (2,660) (2,687) (2,402)
------- ------- -------
Net cash used in financing activities................ (3,017) (3,630) (4,459)
------- ------- -------
Net (decrease) increase in cash...................... 61 (908) (135)
Cash, beginning of year................................ 155 1,063 1,198
------- ------- -------
Cash, end of year...................................... $ 216 $ 155 $ 1,063
======= ======= =======
Supplemental disclosures of cash flow information -
cash paid during the year for:
Interest on debt..................................... $ 139 $ 88 $ 121
Income taxes......................................... 2,165 2,822 3,165
NOTE 14. CONTINGENCIES
In the normal course of business, Southside had certain litigation
pending at December 31, 2000. In the opinion of management, after
consultation with legal counsel, none of this litigation is expected to have
a material adverse effect on the consolidated financial condition of
Southside.
NOTE 15. DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
Southside is party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. Those instruments may involve, to varying
degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the consolidated balance sheets. The amounts of those
instruments reflect the extent of involvement Southside has in particular
classes of financial instruments.
Southside's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. Southside uses the same credit policies in
making commitments and conditional obligations as it does for financial
instruments included on the consolidated balance sheets.
F-22
Following is a summary of Southside's off-balance-sheet financial
instruments at December 31, 2000 and 1999:
AS OF
DECEMBER 31,
------------------
2000 1999
---- ----
(IN THOUSANDS)
Financial instruments whose contractual amounts represent:
Commitments to extend credit........................ $62,454 $ 63,597
Standby letters of credit........................... 2,364 1,254
Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee.
Of the total commitments to extend credit at December 31, 2000 and
1999, $5,996,000 and $9,126,000, respectively, represent fixed rate loan
commitments. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. Southside evaluates each customer's
creditworthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by Southside
upon extension of credit, is based on management's credit evaluation of the
counterpart. Collateral held varies, but includes residential or
income-producing commercial property, marketable securities, inventory,
accounts receivable, and premises and equipment.
Standby letters of credit written are conditional commitments
issued by Southside to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support public and private
borrowing arrangements. Southside's policy is to issue letters of credit,
which have a maximum expiration date of one year. The credit risk involved
in issuing letters of credit is essentially the same as that involved in
extending loans to customers.
Following is a summary of the carrying amounts and fair values of
Southside's financial instruments, which were on the consolidated balance
sheets at December 31, 2000 and 1999:
AS OF
DECEMBER 31,
--------------------------------------------------------------
2000 1999
-------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
(IN THOUSANDS)
BALANCE SHEET ASSETS
Cash and due from banks....................... $ 17,102 $ 17,102 $ 19,311 $ 19,311
Interest-bearing deposits in banks............ 896 896 159 159
Federal funds sold ........................... 16,383 16,383 2,600 2,600
Investments in debt securities:
Available-for-sale......................... 158,028 158,028 158,630 158,630
Held-to-maturity........................... 36,417 36,660 61,595 61,316
Loans, net.................................... 458,227 458,217 386,607 383,369
Accrued interest receivable................... $ 4,818 $ 4,818 $ 4,414 $ 4,414
========= ======== ========= =========
BALANCE SHEET LIABILITIES
Deposits...................................... $ 574,194 $574,194 $ 515,810 $ 515,810
Federal funds purchased....................... 5,750 5,750 1,000 1,000
Securities sold under agreements to
repurchase................................. 7,952 7,952 7,603 7,603
FHLB borrowings............................... 70,947 68,964 83,921 84,000
Other borrowings.............................. 2,500 2,500 600 600
ESOP debt..................................... 988 988 1,186 1,186
Accrued interest payable...................... $ 2,561 $ 2,561 $ 1,796 $ 1,796
========= ======== ========= =========
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
F-23
Cash and Other Short-term Instruments. Cash and due from banks,
interest-bearing deposits with banks, Federal funds sold and purchased,
accrued interest receivable, accrued interest payable, securities sold under
agreements to repurchase, U.S. Treasury tax and loan notes, and other
short-term borrowings are either demand instruments or reprice in a short
time period. Accordingly, the carrying amount is a reasonable estimate of
fair value.
Debt Securities. The fair value of debt securities in which
Southside has invested to hold to maturity and investments available-for-
sale is based on quoted market prices or dealer quotes.
Loans. The fair value of loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining
maturities.
Deposits. The fair value of deposits is the amount payable on
demand, as such carrying value approximates fair value on such items.
FHLB Borrowings. The fair value of FHLB borrowings is estimated by
discounting the future cash flows using currently quoted interest rates for
FHLB borrowings for the same maturity date.
Debt of Employee Stock Ownership Plan. The estimate of the fair
value of ESOP debt is the carrying value of the debt. Due to interest rates
and risk characteristics, carrying value is a reasonable approximation of
fair value.
Other Borrowings. The estimate of the fair value of other borrowing
is the carrying value of the debt. Due to interest rates and risk
characteristics, carrying value is a reasonable approximation of fair value.
Commitments to Extend Credit and Standby Letters of Credit. The
fair value of commitments to extend credit and standby letters of credit is
estimated using the fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements, the likelihood of
the counter parties drawing on such financial instruments, and the present
creditworthiness of such counter parties. Southside believes such
commitments have been made on terms which are competitive in the markets in
which it operates; however, no premium or discount is offered thereon and,
accordingly, Southside has not assigned a value to such instruments for
purposes of this disclosure.
Limitations. Fair value estimates are made at a specific point in
time, based on relevant market information and information about the
financial instrument. These estimates do not reflect any premium or discount
that could result from offering for sale at one time Southside's entire
holdings of a particular financial instrument. Because no market exists for
a significant portion of Southside's financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance-
sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. For example, Southside has a
trust department that contributes net fee income annually. The trust
department is not considered a financial instrument, and its value has
not been incorporated into the fair value estimates. Other assets and
liabilities that are not considered financial assets or liabilities include
property, equipment, and goodwill. In addition, the tax ramifications
related to the realization of the unrealized gains and losses can have a
significant effect on fair value estimates and have not been considered in
the estimates of fair value.
NOTE 16. SHAREHOLDER PROTECTION RIGHTS PLAN
On May 27, 1993, Southside's Board of Directors adopted a
Shareholder Protection Rights Plan (the Plan).
F-24
Under the terms of the Plan, one Preferred Share Purchase Right
(Right) is attached to each share of common stock and trades automatically
with such shares. The Rights, which can be redeemed by Southside's Board of
Directors in certain circumstances and expire by their terms on May 27,
2003, have no voting rights.
The Rights become exercisable and will trade separately from the
common stock ten days after a person or a group either becomes the
beneficial owner or announces an intention to commence a tender offer for
25% or more of Southside's outstanding common stock. When exercisable, each
Right entitles the registered holder to purchase from Southside 1/100th of a
share of a new series of Junior Participating Preferred Stock, Series D,
substantially equal to one share of common stock without voting rights, at
an exercise price of $37.50 per unit. In the event a person acquires
beneficial ownership of 25% or more of Southside's common stock, holders of
Rights (other than the acquiring person or group) may purchase, at the
Rights' then-current exercise price, common stock or its equivalent of
Southside having a value at that time equal to twice the exercise price. In
the event Southside merges into or otherwise transfers 50% or more of its
assets or earnings power to any person after the Rights become exercisable,
holders of Rights may purchase, at the then-current exercise price, common
stock or its equivalent of the acquiring entity having a value at that time
equal to twice the exercise price.
NOTE 17. SEGMENT INFORMATION
The responsibility for management of the subsidiary banks remains
with the officers and directors of the respective banks. The financial
performance of Southside is measured internally by subsidiary bank results
and key performance measures. The following table shows the financial
information of Southside's subsidiary banks, South Side National Bank in
St. Louis (SSNB), State Bank of Jefferson County (SBJC), Bank of Ste.
Genevieve County (BSG), and The Bank of St. Charles County (BSCC) for 2000,
1999, and 1998. The "Other" column includes the Parent Company and all
intercompany elimination entries.
YEAR ENDED DECEMBER 31, 2000
-----------------------------------------------------------------------------
CONSOLI-
SSNB SBJC BSG BSCC OTHER DATED
---- ---- --- ---- ----- -----
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS
Net interest income................ $ 14,841 $ 2,689 $ 3,683 $ 2,263 $ (131) $ 23,345
Provision for loan losses.......... 300 18 -- 43 -- 361
Noninterest income................. 2,794 378 515 400 317 4,404
Noninterest expense................ 11,367 1,928 1,829 1,499 1,920 18,543
Income tax expense (benefit)....... 1,488 354 747 353 (584) 2,358
Net income......................... 4,480 767 1,622 768 (1,150) 6,487
AVERAGE BALANCES
Loans.............................. $ 278,301 $ 52,412 $ 57,263 $ 42,843 $ -- $ 430,819
Assets............................. 475,240 72,115 92,842 62,273 6,376 708,846
Deposits........................... 339,170 62,178 80,563 56,458 -- 538,369
FINANCIAL RATIOS
Return on assets................... 0.94% 1.06% 1.75% 1.23% --% 0.92%
Return on equity................... 10.88 12.36 16.45 14.27 -- 9.76
Net interest margin................ 3.59 4.22 4.34 3.99 -- 3.76
F-25
YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------------------------
CONSOLI-
SSNB SBJC BSG BSCC OTHER DATED
---- ---- --- ---- ----- -----
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS
Net interest income............... $ 14,844 $ 2,360 $ 3,567 $ 2,230 $ (96) $ 22,905
Provision for loan losses......... -- 45 -- -- -- 45
Noninterest income................ 2,553 261 364 289 91 3,558
Noninterest expense............... 11,268 1,631 1,758 1,431 1,421 17,509
Income tax expense (benefit)...... 1,707 318 707 378 (404) 2,706
Net income........................ 4,422 627 1,466 710 (1,022) 6,203
AVERAGE BALANCES
Loans............................. $ 222,511 $ 42,617 $ 52,618 $ 38,128 $ -- $ 355,874
Assets............................ 421,761 62,700 90,230 58,255 3,430 636,376
Deposits.......................... 332,615 56,198 78,368 52,759 (340) 519,600
FINANCIAL RATIOS
Return on assets.................. 1.05% 1.00% 1.62% 1.22% -- 0.97%
Return on equity.................. 10.07 10.39 15.56 13.93 -- 9.54
Net interest margin............... 4.11 4.19 4.34 4.04 -- 4.05
YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------------------------
CONSOLI-
SSNB SBJC BSG BSCC OTHER DATED
---- ---- --- ---- ----- -----
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS
Net interest income............... $ 14,422 $ 2,359 $ 3,546 $ 2,164 $ (121) $ 22,370
Provision for loan losses......... 2 60 -- -- -- 62
Noninterest income................ 2,434 218 340 266 73 3,331
Noninterest expense............... 9,710 1,305 1,647 1,370 1,742 15,774
Income tax expense (benefit)...... 2,024 423 721 376 (489) 3,055
Net income........................ 5,120 789 1,518 684 (1,301) 6,810
AVERAGE BALANCES
Loans............................. $ 216,473 $ 40,651 $ 53,086 $ 37,076 $(1,384) $ 345,902
Assets............................ 386,987 58,838 89,524 55,477 (702) 590,124
Deposits.......................... 329,975 52,481 78,039 50,412 (800) 510,107
FINANCIAL RATIOS
Return on assets.................. 1.32% 1.34% 1.70% 1.23% -- 1.15%
Return on equity.................. 13.41 13.20 15.58 14.71 -- 11.12
Net interest margin............... 4.57 4.39 4.35 4.22 -- 4.15
F-26
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF AS OF
MARCH 31, 2001 DECEMBER 31, 2000
-------------- -----------------
(IN THOUSANDS)
ASSETS
Cash and due from banks.................................................... $ 15,709 $ 17,102
Interest-bearing deposits in banks......................................... 325 896
--------- ---------
Cash and cash equivalents............................................. 16,034 17,998
--------- ---------
Federal funds sold......................................................... 37,594 16,383
Investments in debt and equity securities:
Available-for-sale, at fair value..................................... 168,969 158,028
Held-to-maturity, at amortized cost (fair value
of $32,814 in 2001 and $36,660 in 2000)............................ 32,236 36,417
--------- ---------
Total investments in debt and equity securities.................... 201,205 194,445
--------- ---------
Loans, net of unearned discount............................................ 474,330 463,406
Less allowance for loan losses........................................ 5,318 5,179
--------- ---------
Loans, net......................................................... 469,012 458,227
--------- ---------
Premises and equipment..................................................... 16,998 17,206
Other assets............................................................... 31,815 33,168
--------- ---------
Total Assets....................................................... $ 772,658 $ 737,427
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand.............................................. $ 73,076 $ 77,196
Interest-bearing demand and savings..................................... 231,909 214,326
Time deposits........................................................... 309,102 282,672
--------- ---------
Total deposits..................................................... 614,087 574,194
Federal funds purchased.................................................... -- 5,750
Securities sold under agreements to repurchase............................. 6,036 7,952
FHLB borrowings............................................................ 70,906 70,947
Other borrowings........................................................... 1,900 1,900
Debt of Employee Stock Ownership Plan...................................... 791 988
Other liabilities.......................................................... 6,816 6,295
--------- ---------
Total liabilities.................................................. 700,536 668,026
--------- ---------
Commitments and contingent liabilities
Shareholders' equity:
Cumulative preferred stock, no par value, 1,000,000 shares
authorized and unissued............................................... -- --
Common stock, $1 par value, 15,000,000 shares authorized,
8,985,378 shares issued in 2001 and 2000.............................. 8,985 8,985
Surplus................................................................. 5,468 5,516
Retained earnings....................................................... 63,484 62,592
Unearned Employee Stock Ownership Plan shares........................... (741) (791)
Treasury stock, at cost, 569,850 shares in 2001 and
591,850 shares in 2000................................................ (6,156) (6,394)
Accumulated other comprehensive income (loss)........................... 1,082 (507)
--------- --------
Total shareholders' equity......................................... 72,122 69,401
--------- ---------
Total Liabilities And Shareholders' Equity......................... $ 772,658 $ 737,427
========= =========
See accompanying notes to condensed consolidated financial statements.
F-27
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
AS OF
THREE MONTHS ENDED
MARCH 31,
--------------------------
2001 2000
----------- -----------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
INTEREST INCOME
Interest and fees on loans.............................................. $ 9,748 $ 8,284
Interest on investments in debt and equity securities:
Taxable.............................................................. 2,642 2,973
Exempt from federal income taxes..................................... 349 393
Interest on short-term investments...................................... 342 110
----------- -----------
Total interest income.............................................. 13,081 11,760
----------- -----------
INTEREST EXPENSE
Interest on interest-bearing demand and savings deposits................ 1,679 1,773
Interest on time deposits............................................... 4,423 2,798
Interest on federal fund purchased...................................... 52 31
Interest on Securities sold under agreements to repurchase.............. 78 75
Interest on Federal Home Loan Bank borrowings........................... 958 1,171
Interest on other borrowings............................................ 39 --
Interest on debt of Employee Stock Ownership Plan....................... 18 22
----------- -----------
Total interest expense............................................. 7,247 5,870
----------- -----------
Net interest income................................................ 5,834 5,890
Provision for loan losses............................................... 159 81
----------- -----------
Net interest income after provision for loan losses................ 5,675 5,809
----------- -----------
NONINTEREST INCOME
Trust fees.............................................................. 287 288
Service charges on deposit accounts..................................... 398 378
Gains on the sales of loans............................................. 76 2
Other................................................................... 401 374
----------- -----------
Total noninterest income........................................... 1,162 1,042
----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits.......................................... 2,492 2,275
Net occupancy and equipment expense..................................... 683 679
Data processing......................................................... 211 190
Other................................................................... 1,289 1,362
----------- -----------
Total noninterest expense.......................................... 4,675 4,506
----------- -----------
Income before income tax expense................................... 2,162 2,345
Income tax expense...................................................... 609 671
----------- -----------
Net income......................................................... $ 1,553 $ 1,674
=========== ===========
PER SHARE DATA
Earnings per common share - basic....................................... $ .19 $ .20
Earnings per common share - diluted..................................... .18 .20
Dividends paid per common share......................................... .08 .08
Average common shares outstanding....................................... 8,263,280 8,408,318
Average common shares outstanding, including
potentially dilutive shares.......................................... 8,430,550 8,502,146
See accompanying notes to condensed consolidated financial statements.
F-28
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (UNAUDITED)
ACCUMULATED
UNEARNED OTHER COM-
COMMON RETAINED ESOP TREASURY PREHENSIVE
STOCK SURPLUS EARNINGS SHARES STOCK INCOME (LOSS) TOTAL
----- ------- -------- ------ ----- ------------- -----
(DOLLARS IN THOUSANDS)
BALANCE AT DECEMBER 31, 1999.......... $ 8,985 $ 5,431 $ 58,765 $ (988) $ (4,335) $ (3,450) $ 64,408
Comprehensive income:
Net income....................... -- -- 6,487 -- -- -- 6,487
Change in net unrealized gain
(loss) on available-for-sale
securities, net of tax effect.. -- -- -- -- -- 2,943 2,943
------- ------- -------- ------- -------- -------- --------
Total comprehensive income... -- -- 6,487 -- -- 2,943 9,430
Cash dividends paid ($.32 per share).. -- -- (2,660) -- -- -- (2,660)
Allocation of 37,062 shares to
ESOP participants................ -- 85 -- 197 -- -- 282
Purchase of 200,100 common shares
for treasury..................... -- -- -- -- (2,059) -- (2,059)
------- ------- -------- ------- --------- -------- ---------
BALANCE AT DECEMBER 31, 2000.......... $ 8,985 $ 5,516 $ 62,592 $ (791) $ (6,394) $ (507) $ 69,401
Comprehensive income:
Net income....................... -- -- 1,553 -- -- -- 1,553
Change in net unrealized gain
(loss) on available-for-sale
securities, net of tax effect.. -- -- -- -- -- 1,589 1,589
------- ------- -------- ------- -------- -------- --------
Total comprehensive income... -- -- 1,553 -- -- 1,589 3,142
Cash dividends paid ($.08 per share).. -- -- (661) -- -- -- (661)
Allocation of 9,265 shares to
ESOP participants................ -- 51 -- 50 -- -- 101
Exercise of 22,000 stock options...... -- (99) -- -- 238 -- 139
------- ------- -------- ------- -------- -------- --------
BALANCE AT MARCH 31, 2001............. $ 8,985 $ 5,468 $ 63,484 $ (741) $ (6,156) $ 1,082 $ 72,122
======= ======= ======== ======= ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
F-29
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
----------------------
2001 2000
-------- --------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................................... $ 1,553 $ 1,674
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ................................................ 432 559
Provision for loan losses .................................................... 159 81
Gains on sale of loans ....................................................... (76) (2)
Other operating activities, net .............................................. (1,096) 778
Originations of loans for sale ............................................... (6,460) (318)
Proceeds from sale of loans .................................................. 5,529 320
-------- --------
Net cash provided by operating activities .................................. 2,233 3,092
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in Federal funds sold .............................................. (21,211) (4,781)
Proceeds from maturities of and principal payments on debt securities ........... 20,569 14,593
Purchases of debt securities .................................................... (25,007) (9,566)
Net increase in loans ........................................................... (9,971) (14,255)
Recoveries of loans previously charged off ...................................... 34 141
Purchases of premises and equipment ............................................. (78) (416)
Proceeds from sales of other real estate owned and other foreclosed property .... -- 14
-------- --------
Net cash used in investing activities ........................................ (35,664) (14,270)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand and savings deposits ..................................... 13,463 11,797
Net increase (decrease) in time deposits ........................................ 26,430 (839)
Net decrease in Federal funds purchased ......................................... (5,750) --
Net decrease in securities sold under agreements to repurchase .................. (1,916) (2)
Proceeds from FHLB borrowings ................................................... -- 8,000
Repayments of FHLB borrowings ................................................... (41) (10,043)
Repayment of ESOP debt .......................................................... (197) (198)
Stock options exercised ......................................................... 139 --
Cash dividends paid ............................................................. (661) (673)
-------- --------
Net cash provided by financing activities .................................... 31,467 9,724
-------- --------
Net decrease in cash and cash equivalents .................................... (1,964) (1,454)
Cash and cash equivalents, beginning of period .................................. 17,998 19,470
-------- --------
Cash and cash equivalents, end of period ........................................ $ 16,034 $ 18,016
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowings ........................................ $ 7,084 $ 5,861
Income taxes ............................................................... 200 50
Noncash transactions:
Transfers to other real estate owned in settlement of loans ................ -- 144
See accompanying notes to condensed consolidated financial statements.
F-30
SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. They do not include all information and footnotes required
by accounting principles generally accepted in the United States of America
for complete consolidated financial statements. In the opinion of
management, all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation have been included. For further
information, refer to Southside's Annual Report on Form 10-K for the year
ended December 31, 2000. Operating results for the three months ended March
31, 2001 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2001.
NOTE 2. SEGMENT INFORMATION
The responsibility for management of the subsidiary banks remains
with the officers and directors of the respective banks. The financial
performance of Southside is measured internally by subsidiary bank results
and key performance measures. The following tables show the financial
information of Southside's subsidiary banks, South Side National Bank in St.
Louis (SSNB), State Bank of Jefferson County (SBJC), Bank of Ste. Genevieve
County (BSG), and The Bank of St. Charles County (BSCC) for the three months
ended March 31, 2001 and 2000. The "Other" column includes Southside and all
intercompany elimination entries.
THREE MONTHS ENDED MARCH 31, 2001
------------------------------------------------------------------
CONSOLI-
SSNB SBJC BSG BSCC OTHER DATED
--------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS
Net interest income (loss)...... $ 3,753 $ 689 $ 902 $ 547 $ (57) $ 5,834
Provision for loan losses....... 150 9 -- -- -- 159
Noninterest income.............. 751 92 136 101 82 1,162
Noninterest expense............. 2,914 485 423 366 487 4,675
Income tax expense (benefit).... 384 92 202 87 (156) 609
Net income (loss)............... 1,056 195 413 195 (306) 1,553
AVERAGE BALANCES
Loans........................... $ 310,366 $ 54,946 $ 58,358 $ 43,403 $ -- $467,073
Assets.......................... 502,784 76,572 99,573 65,689 6,757 751,375
Deposits........................ 376,926 67,342 86,565 59,540 -- 590,373
FINANCIAL RATIOS
Return on assets................ 0.84% 1.02% 1.66% 1.19% -- 0.83%
Return on equity................ 9.33 11.90 15.79 13.63 -- 8.81
Net interest margin............. 3.40 4.06 3.99 3.91 -- 3.51
F-31
THREE MONTHS ENDED MARCH 31, 2000
------------------------------------------------------------------
CONSOLI-
SSNB SBJC BSG BSCC OTHER DATED
--------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS
Net interest income............. $ 3,743 $ 636 $ 946 $ 587 $ (22) $ 5,890
Provision for loan losses....... 75 -- -- 6 -- 81
Noninterest income.............. 669 88 119 95 71 1,042
Noninterest expense............. 2,782 464 444 371 445 4,506
Income tax expense (benefit).... 432 79 198 98 (136) 671
Net income (loss)............... 1,123 181 423 207 (260) 1,674
AVERAGE BALANCES
Loans........................... $ 248,278 $ 48,309 $ 56,522 $ 42,516 $ -- $395,625
Assets.......................... 452,741 68,142 93,338 62,321 5,554 682,096
Deposits........................ 321,691 58,812 81,288 56,662 (79) 518,374
FINANCIAL RATIOS
Return on assets................ 0.99% 1.06% 1.81% 1.33% -- 0.98%
Return on equity................ 11.18 11.89 17.65 15.80 -- 10.34
Net interest margin............. 3.78 4.20 4.46 4.18 -- 3.94
F-32
ANNEX A
-------
AGREEMENT AND PLAN OF MERGER
BETWEEN
SOUTHSIDE BANCSHARES CORP.,
A MISSOURI CORPORATION,
AND
ALLEGIANT BANCORP, INC.,
A MISSOURI CORPORATION
-------------------------
APRIL 30, 2001
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER......................................................................................2
1.01 The Merger......................................................................................2
1.02 Closing.........................................................................................2
1.03 Effective Time..................................................................................2
1.04 Additional Actions..............................................................................2
1.05 Articles of Incorporation and By-Laws...........................................................2
1.06 Board of Directors and Officers; Executive Offices..............................................3
1.07 Conversion of Securities........................................................................3
1.08 Conversion Election Procedures..................................................................4
1.09 Exchange Procedures.............................................................................9
1.10 No Fractional Shares...........................................................................11
1.11 Dissenting Shares..............................................................................12
1.12 Closing of Stock Transfer Books................................................................12
1.13 Anti-Dilution..................................................................................13
1.14 Tax Consequences...............................................................................13
1.15 Material Adverse Effect........................................................................13
1.16 Knowledge......................................................................................13
1.17 Disclosure Schedules; Standard.................................................................14
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SOUTHSIDE....................................................15
2.01 Organization and Authority.....................................................................15
2.02 Subsidiaries...................................................................................15
2.03 Capitalization.................................................................................16
2.04 Authorization..................................................................................16
2.05 Southside Financial Statements.................................................................17
2.06 Southside Reports..............................................................................18
2.07 Title to and Condition of Assets...............................................................18
2.08 Real Property..................................................................................19
2.09 Taxes..........................................................................................21
2.10 Material Adverse Effect........................................................................21
2.11 Loans, Commitments and Contracts...............................................................21
2.12 Absence of Defaults............................................................................24
2.13 Litigation and Other Proceedings...............................................................24
2.14 Directors' and Officers' Insurance.............................................................24
2.15 Compliance with Laws...........................................................................24
2.16 Labor..........................................................................................26
2.17 Material Interests of Certain Persons..........................................................26
2.18 Allowance for Loan and Lease Losses; Non-Performing Assets; Financial Assets...................26
2.19 Employee Benefits Plans........................................................................28
2.20 Conduct of Southside Since December 31, 2000...................................................29
- i -
Page
----
2.21 Absence of Undisclosed Liabilities.............................................................30
2.22 Joint Proxy Statement/Prospectus...............................................................30
2.23 Registration Obligations.......................................................................30
2.24 Tax and Regulatory Matters.....................................................................31
2.25 Brokers and Finders............................................................................31
2.26 Interest Rate Risk Management Instruments......................................................31
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ALLEGIANT....................................................31
3.01 Organization and Authority.....................................................................31
3.02 Subsidiaries...................................................................................32
3.03 Capitalization of Allegiant....................................................................32
3.04 Authorization..................................................................................32
3.05 Allegiant Financial Statements.................................................................34
3.06 Allegiant Reports..............................................................................34
3.07 Environmental Matters..........................................................................34
3.08 Taxes..........................................................................................34
3.09 Loans, Commitments and Contracts...............................................................35
3.10 Absence of Defaults............................................................................38
3.11 Litigation and Other Proceedings...............................................................38
3.12 Compliance with Laws...........................................................................38
3.13 Allowance for Loan and Lease Losses; Non-Performing Assets; Financial Assets...................40
3.14 Absence of Undisclosed Liabilities.............................................................41
3.15 Material Adverse Effect........................................................................41
3.16 Joint Proxy Statement/Prospectus...............................................................41
3.17 Tax and Regulatory Matters.....................................................................41
3.18 Brokers and Finders............................................................................42
3.19 No Negotiations................................................................................42
3.20 Change of Control Payments.....................................................................42
ARTICLE IV CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME................................................42
4.01 Conduct of Businesses Prior to the Effective Time..............................................42
4.02 Forbearances of Southside......................................................................43
4.03 Acquisition Proposals; Board Recommendation....................................................45
4.04 Forbearances of Allegiant......................................................................47
ARTICLE V ADDITIONAL AGREEMENTS..........................................................................47
5.01 Access and Information; Due Diligence..........................................................47
5.02 Regulatory Matters.............................................................................48
5.03 Shareholder Approval...........................................................................48
5.04 Current Information............................................................................49
5.05 Conforming Entries.............................................................................49
5.06 Agreements of Affiliates.......................................................................50
5.07 Expenses.......................................................................................50
5.08 Miscellaneous Agreements and Consents..........................................................51
5.09 Employee Agreements and Benefits...............................................................51
- ii -
Page
----
5.10 Press Releases.................................................................................53
5.11 State Takeover Statutes........................................................................53
5.12 Directors' and Officers' Indemnification and Insurance.........................................53
5.13 Tax Matters....................................................................................54
5.14 Employee Stock Options.........................................................................54
5.15 Exemption from Liability under Section 16(b): Allegiant Insiders..............................55
5.16 Exemption from Liability under Section 16(b): Southside Insiders..............................56
5.17 No Negotiations................................................................................56
ARTICLE VI CONDITIONS.....................................................................................56
6.01 Conditions to Each Party's Obligation To Effect the Merger.....................................56
6.02 Conditions to Obligations of Southside.........................................................57
6.03 Conditions to Obligations of Allegiant.........................................................58
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER..............................................................59
7.01 Termination....................................................................................59
7.02 Effect of Termination..........................................................................61
7.03 Amendment......................................................................................62
7.04 Waiver.........................................................................................62
ARTICLE VIII GENERAL PROVISIONS.............................................................................62
8.01 Non-Survival of Representations, Warranties and Agreements.....................................62
8.02 Indemnification................................................................................63
8.03 No Assignment; Successors and Assigns..........................................................65
8.04 Severability...................................................................................66
8.05 No Implied Waiver..............................................................................66
8.06 Headings.......................................................................................66
8.07 Entire Agreement...............................................................................66
8.08 Counterparts...................................................................................66
8.09 Notices........................................................................................66
8.10 Governing Law..................................................................................67
APPENDIX I - Defined Terms
LIST OF EXHIBITS
Exhibits A-1 and A-2 - Voting Agreements
Exhibit B - Agreement of Affiliates
- iii -
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), is made and
entered into as of April 30, 2001 by and between SOUTHSIDE BANCSHARES CORP.,
a Missouri corporation ("Southside"), and ALLEGIANT BANCORP, INC., a
Missouri corporation ("Allegiant").
WHEREAS, each of Southside and Allegiant is registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended (the
"BHCA"); and
WHEREAS, the respective Boards of Directors of Southside and
Allegiant have approved the merger of Allegiant with and into Southside (the
"Merger") pursuant to the terms and subject to the conditions contained in
this Agreement; and
WHEREAS, as an inducement to Allegiant to enter into this
Agreement, concurrently with the execution hereof, each director and/or
executive officer of Southside in his or her capacity as a shareholder of
Southside has entered into a Voting Agreement with Allegiant substantially
in the form attached hereto as Exhibit A-1 (each a "Southside Voting
-----------
Agreement" and, together, the "Southside Voting Agreements"), pursuant to
which, among other things, each such shareholder has agreed to vote in favor
of this Agreement, the Merger and the transactions contemplated hereby and
thereby; and
WHEREAS, as an inducement to Southside to enter into this
Agreement, concurrently with the execution hereof, each director and/or
executive officer of Allegiant in his or her capacity as a shareholder of
Allegiant, has entered into a Voting Agreement with Southside substantially
in the form attached hereto as Exhibit A-2 (each a "Allegiant Voting
-----------
Agreement;" and, together, the "Allegiant Voting Agreements" and, together
with the Southside Voting Agreements, the "Voting Agreements"), pursuant to
which, among other things, each such shareholder has agreed to vote in favor
of this Agreement, the Merger and the transactions contemplated hereby; and
WHEREAS, all terms defined herein are set forth on Appendix I hereto;
----------
and
WHEREAS, the parties desire to provide certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties
agree as follows:
ARTICLE I
---------
THE MERGER
----------
1.01 The Merger. Subject to the terms and conditions of this
----------
Agreement, Allegiant shall be merged with and into Southside in accordance
with Chapter 351 of the Missouri Revised Statutes (the "Missouri Statute"),
and the separate corporate existence of Allegiant shall cease. Southside
shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Missouri.
1.02 Closing. The closing (the "Closing") of the Merger, unless
-------
the parties hereto shall otherwise mutually agree, shall take place at the
offices of Thompson Coburn LLP in St. Louis, Missouri, at 10:00 a.m., local
time, on the date that the Effective Time occurs (the "Closing Date").
1.03 Effective Time. The Merger shall become effective (the
--------------
"Effective Time") upon the filing of Articles of Merger with the Office of
the Secretary of State of the State of Missouri. Unless otherwise mutually
agreed in writing by Allegiant and Southside, subject to the terms and
conditions of this Agreement, the Effective Time shall occur on such date as
Allegiant shall notify Southside in writing (such notice to be at least five
(5) business days in advance of the Effective Time) but (A) not earlier than
the satisfaction or waiver of all conditions set forth in Article VI (the
"Approval Date") and (B) not later than the last business day of the
calendar month during which the Approval Date occurs; provided, however,
that Allegiant may postpone the Effective Time to the earliest time which
will result in shareholders of Southside receiving a quarterly dividend only
from Southside or only from Surviving Corporation (in the case of those
shareholders of Southside who receive Surviving Corporation Common Stock in
the Merger), but not from both, for the calendar quarter in which the
Effective Time occurs. On the Closing Date, Southside and Allegiant will
cause the Merger to be consummated by delivering to the Secretary of State
of the State of Missouri, for filing, Articles of Merger, in such form as
required by, and executed and acknowledged in accordance with, the relevant
provisions of the Missouri Statute.
1.04 Additional Actions. If, at any time after the Effective
------------------
Time, the Surviving Corporation shall consider or be advised that any
further deeds, assignments or assurances in law or any other acts are
necessary or desirable to (a) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to
or under any of the rights, properties or assets of Allegiant, or (b)
otherwise carry out the purposes of this Agreement, Allegiant shall be
deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments or assurances in
law and to do all acts necessary or proper to vest, perfect or confirm title
to and possession of such rights, properties or assets in the Surviving
Corporation and otherwise to carry out the purposes of this Agreement, and
the officers and directors of the Surviving Corporation are authorized in
the name of Allegiant or otherwise to take any and all such action.
1.05 Articles of Incorporation and By-Laws. Subject to the
-------------------------------------
terms and conditions of this Agreement, the Articles of Incorporation and
By-Laws of the Surviving Corporation shall be in
- 2 -
the form to be mutually agreed upon by the parties hereto as promptly as
practicable following the date hereof and in any event prior to the mailing
of the Joint Proxy Statement/Prospectus; provided, that such Articles of
Incorporation and By-Laws shall be substantially identical to the Articles of
Incorporation and By-Laws of Allegiant, with such changes as approved by
Allegiant; provided, further, that the Articles of Incorporation shall
provide that the number of authorized shares of common stock shall be
30,000,000, par value $0.01 per share.
1.06 Board of Directors and Officers; Executive Offices. At the
--------------------------------------------------
Effective Time, the directors and officers of Allegiant immediately prior to
the Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation following the Merger, and such directors and officers
shall hold office in accordance with Surviving Corporation's By-Laws and
applicable law. Effective as of the Effective Time, the two persons (a) who
are directors of Southside as of the date hereof, (b) who, immediately after
the Effective Time, hold the greatest number of shares of Surviving
Corporation Common Stock among all of the directors of Southside (which, for
this purpose, shall include shares of Surviving Corporation Common Stock
issuable upon the exercise of the Southside Employee Stock Options
immediately after the Effective Time) and (c) who are approved by Allegiant,
such approval not to be unreasonably withheld, shall be elected to serve on
Surviving Corporation's Board of Directors for terms expiring at Surviving
Corporation's annual meetings in 2003 and 2004, respectively. Southside may
replace either or both of the nominees prior to the Effective Date, subject
to Allegiant's consent, not to be unreasonably withheld. Immediately after
the Effective Time, the locations of the headquarters and principal
executive offices of the Surviving Corporation shall be those of Allegiant
prior to the Effective Time.
1.07 Conversion of Securities. At the Effective Time, by virtue
------------------------
of the Merger and without any action on the part of Allegiant, Southside or
the holder of any of the following securities:
(a) subject to Sections 1.08(f), 1.10, 1.11 and 1.13
hereof, each share of common stock, $1.00 par value, of Southside
and the associated "Rights" under the Rights Agreement (the
"Southside Rights Agreement"), dated as of May 27, 1993, as
amended, by and between Mellon Investor Services LLC (as successor
to Boatmen's Trust Company) as Rights Agent and Southside
(collectively, the "Southside Common Stock") issued and outstanding
at the Effective Time shall cease to be outstanding and shall be
converted into and become one of the following:
(i) the right to receive an amount in cash equal
to $14.00 (the "Cash Distribution"); or
(ii) the right to receive 1.39 shares of common
stock, $0.01 par value, of Surviving Corporation (the
"Surviving Corporation Common Stock") (the "Stock
Distribution"); or
(iii) the right to receive a combination of the
Cash Distribution and Stock Distribution (the "Combined
Distribution");
- 3 -
as the holder thereof shall elect or be deemed to have elected
pursuant to Section 1.08 of this Agreement (the aggregate of the
Cash Distributions, Stock Distributions and the Combined
Distributions, payable and/or issuable upon conversion of the
Southside Common Stock pursuant to this Agreement at the Effective
Time is referred to as the "Southside Merger Consideration");
(b) subject to Section 1.11, each share of the common
stock, $0.01 par value, of Allegiant (the "Allegiant Common Stock")
issued and outstanding immediately prior to the Effective Time,
shall be converted into one share of the Surviving Corporation
Common Stock (the shares of Surviving Corporation Common Stock
issuable at the Effective Time pursuant to the conversion of the
Allegiant Common Stock pursuant to this Agreement is referred to as
the "Allegiant Merger Consideration" and, together with the
Southside Merger Consideration, the "Merger Consideration"); and
(c) shares of Southside Common Stock or Allegiant Common
Stock held by Southside or any of its wholly owned "Subsidiaries"
(as defined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission (the "SEC")), or by Allegiant or
any of its wholly owned Subsidiaries, in each case other than in a
fiduciary capacity or as a result of debts previously contracted,
shall be canceled and shall not be exchanged at or after the
Effective Time for the Merger Consideration. In addition, no
Dissenting Shares shall be converted pursuant to this Section 1.07
but shall be treated in accordance with the procedures set forth in
Section 1.11 of this Agreement.
1.08 Conversion Election Procedures.
------------------------------
(a) Concurrently with the mailing to the shareholders of
Southside and Allegiant of the Joint Proxy Statement/Prospectus,
including the prospectus contained in the Registration Statement on
Form S-4 to be filed with the SEC by Southside for the purpose of
registering the shares of Surviving Corporation Common Stock to be
exchanged for Southside and Allegiant Common Stock pursuant to the
provisions of this Agreement (the "Registration Statement"),
Allegiant shall cause the Exchange Agent to mail to each holder of
record of Southside Common Stock a form of election (an "Election
Form") on which such holder shall make the election as provided for
in Section 1.08(b) of this Agreement. Allegiant also shall cause an
Election Form and other appropriate materials for the purpose of
making the election provided for in Section 1.08(b) of this
Agreement to be sent to each holder of Southside Common Stock who
Southside advises Allegiant (pursuant to Section 1.12(b)) has
become a holder of Southside Common Stock after the record date of
the special meeting of shareholders of Southside called pursuant to
Section 5.03(a). "Exchange Agent" shall mean UMB Bank, N.A. or such
other bank or trust company or affiliate thereof selected by
Allegiant and reasonably acceptable to Southside to effect the
exchange of certificates formerly representing shares of Southside
Common Stock (the "Certificates") for the Southside Merger
Consideration.
(b) Each Election Form shall specify the amount of each
type of Southside Merger Consideration elected by each holder of
Southside Common Stock in the form of
- 4 -
either the Cash Distribution, the Stock Distribution or the Combined
Distribution and shall permit each such holder to propose to
receive, as provided in Section 1.07 of this Agreement, (i) the Cash
Distribution (in which case, such holder's shares of Southside
Common Stock shall be deemed to be and shall be referred to herein
as "Cash Election Shares"), (ii) the Stock Distribution (in which
case, such holder's shares of Southside Common Stock shall be deemed
to be and shall be referred to herein as "Stock Election Shares"),
or (iii) the Combined Distribution (in which case, such holder's
shares of Southside Common Stock shall be deemed to be and shall be
referred to herein as "Combined Election Shares"). If a holder
chooses a Combined Distribution, then the holder shall specify on
the Election Form the percentage of the Combined Distribution
requested to be received as a Cash Distribution and the percentage
of the Combined Distribution to be received as a Stock Distribution.
(c) Any shares of Southside Common Stock with respect to
which the holder thereof shall not, as of the Election Deadline,
have made an election to receive either the Cash Distribution, the
Stock Distribution or the Combined Distribution (such holder's
shares being deemed to be and shall be referred to herein as "No
Election Shares") by submitting to the Exchange Agent an effective,
properly completed Election Form, shall be deemed to be Stock
Election Shares, except as set forth in Section 1.08(f) of this
Agreement. "Election Deadline" shall mean 5:00 P.M., local time, on
the date of the special meeting of shareholders of Southside called
to vote upon this Agreement, the Merger and the transactions
contemplated thereby.
(d) For purposes of Section 1.08(f) of this Agreement, (i)
any Southside Dissenting Shares shall be deemed to be Cash Election
Shares; provided, however, that such Southside Dissenting Shares
shall in all cases be payable in cash and shall not be subject to
pro rata reduction, if required, of the Cash Distribution payable
in conversion of the other Cash Election Shares as set forth in
Section 1.08(f) of this Agreement, and (ii) Southside Common Stock
that is issuable upon the exercise of any stock options granted by
Southside (the "Southside Employee Stock Options") that are
unexercised as of the Effective Time shall not be converted into
cash or Surviving Corporation Common Stock in connection with the
Merger, but shall instead be converted into stock options to
acquire shares of Surviving Corporation Common Stock as described
in Section 5.14 hereof. Notwithstanding the foregoing, nothing in
this Agreement shall be deemed to prohibit the exercise of
Southside Employee Stock Options prior to the Effective Time in
accordance with their terms (in which case the shares of Southside
Common Stock issued upon such exercise shall be converted into cash
or Surviving Corporation Common Stock as provided herein).
(e) Any election for purposes of Section 1.08(b) of this
Agreement shall be effective only if the Exchange Agent shall have
received the properly completed Election Form by the Election
Deadline. Any Election Form may be revoked or changed by the person
submitting such Election Form or any other person to whom the
shares that are the subject of an Election Form are subsequently
transferred. Such revocation or change shall be effected by written
notice by such person to the Exchange Agent; provided such notice
is received by the Exchange Agent at or prior to the Election
Deadline. All
- 5 -
Election Forms shall be deemed to be revoked if the Exchange Agent
is notified in writing by either Allegiant or Southside that this
Agreement has been terminated in accordance with its terms. The
Exchange Agent shall have reasonable discretion to determine when
any election, modification or revocation is received or whether any
such election, modification or revocation is effective, consistent
with the duty of the Exchange Agent to give effect to such
elections, modifications or revocations to the maximum extent
possible.
(f) As soon as practicable after the Election Deadline,
Allegiant, after consulting with Southside, shall cause the
Exchange Agent to allocate among the holders of Southside Common
Stock the rights to receive the Cash Distribution, the Stock
Distribution and/or the Combined Distribution, pursuant to the
Merger after the Effective Time, under the circumstances set forth
below (provided, if there is no reallocation of any form of
Southside Merger Consideration resulting from the following, then
the holder shall receive that form of Southside Merger
Consideration designated in such holder's Election Form):
(i) If the number of shares of Surviving
Corporation Common Stock issuable in respect of the Stock
Election Shares and the Stock Distribution portion of the
Combined Election Shares is less than the Stock Conversion
Number, then:
(A) First, all of the Stock Election
Shares (including No Election Shares) and the
portion of the Stock Distribution specified or
deemed specified on the Election Forms by holders
of Combination Election Shares shall be converted
into the right to receive the number of shares of
Surviving Corporation Common Stock elected
pursuant to the applicable Election Forms; and
(B) Second, the Exchange Agent shall
reallocate the portion of the Cash Distribution
specified or deemed specified in the Election
Forms by holders of Combined Election Shares such
that all of the holders of Combined Election
Shares will receive in the aggregate the lesser
of (a) the total number of shares of Surviving
Corporation Common Stock into which all Combined
Election Shares are convertible, and (b) the
number of shares of Surviving Corporation Common
Stock which will equal the number of shares by
which the Stock Election Shares and Combined
Election Shares are less than the Stock
Conversion Number, to be allocated among each
holder based upon the total amount of Cash
Distribution requested to be received by such
holder of Combined Election Shares as compared
with the total amount of Cash Distribution
requested to be received by all such holders.
Such holders shall receive the balance of the
Southside Merger Consideration, if any, to which
each such holder is entitled to receive pursuant
to the Merger in cash (determined by (x) dividing
the total Stock Distribution to be received by
such holder after giving effect to the
reallocation described in this Section 1.08(f) by
1.39, (y) subtracting the result in (x) from the
number of shares of Southside
- 6 -
Common Stock owned by such holder at the Effective
Time, and (z) multiplying the difference
determined in (y) by $14.00 per share); and
(C) Third, if any portion of the Stock
Distribution remains unallocated pursuant to
clauses (A) and (B), the Exchange Agent shall
reallocate the portion of the Southside Merger
Consideration payable to each holder of Cash
Election Shares (other than Dissenting Shares)
(based upon the number of Cash Election Shares
(other than Dissenting Shares) owned by such
holder as compared with the total number of Cash
Election Shares (other than Dissenting Shares)
owned by all such holders), such that all of the
holders of Cash Election Shares will receive in
the aggregate the number of shares of Surviving
Corporation Common Stock which will equal the
number of shares by which the Stock Election
Shares and the Combined Election Shares
(including the Combined Election Shares converted
pursuant to clause (B) above) are less than the
Stock Conversion Number, and such holders shall
receive the balance of the Southside Merger
Consideration, if any, to which each such holder
is entitled to receive pursuant to the Merger in
cash (determined by (x) dividing the total Stock
Distribution to be received by such holder after
giving effect to the reallocation described in
this Section 1.08(f) by 1.39, (y) subtracting the
result in (x) from the number of shares of
Southside Common Stock owned by such holder at
the Effective Time, and (z) multiplying the
difference determined in (y) by $14.00 per
share).
(ii) If the number of shares of Surviving
Corporation Common Stock issuable in respect of the Stock
Election Shares (including No Election Shares) and the
Stock Distribution portion of the Combined Election Shares
is greater than the Stock Conversion Number, then the
Exchange Agent shall determine the aggregate number of
shares of Surviving Corporation Common Stock issuable
pursuant to the Stock Distribution portion of the Combined
Distribution and to the Stock Distribution and shall
subtract from such number the Stock Conversion Number (the
difference is hereinafter referred to as the "Excess
Shares"), and then:
(A) First, all of the Cash Election
Shares and the portion of the Cash Distribution
specified or deemed specified on the Election
Forms by holders of Combination Election Shares
shall be converted into the right to receive the
Cash Distribution elected pursuant to the
applicable Election Forms; and
(B) Second, the Exchange Agent shall
reallocate the Southside Merger Consideration
payable to the holders of the No Election Shares
so as to reduce the number of Excess Shares to
zero, or as close as possible to zero. The number
of shares of Surviving Corporation Common Stock
to be received by each such holder shall be
reduced by the lesser of the total number of
shares of Surviving Corporation Common Stock
issuable to
- 7 -
such holder as Southside Merger Consideration, and
a number determined by (x) multiplying the number
of Excess Shares outstanding by (y) the holder's
pro rata percentage of the aggregate No Election
Shares (based upon the number of No Election
Shares owned by such holder as compared with the
total number of No Election Shares). In lieu of
the issuance of such shares of Surviving
Corporation Common Stock, the holders of No
Election Shares shall receive a cash payment equal
to $14.00 for each such share of Southside Common
Stock not so converted into the right to receive
Surviving Corporation Common Stock; and
(C) Third, if the reallocation set forth
in clause (B) immediately above is not sufficient
to reduce the number of Excess Shares to zero,
then the Exchange Agent shall thereafter
reallocate the Southside Merger Consideration
payable to each holder of Combined Election
Shares so as to reduce the number of Excess
Shares to zero, or as close as possible to zero.
The number of shares of Surviving Corporation
Common Stock to be received by each such holder
shall be reduced by the lesser of the total
number of shares of Surviving Corporation Common
Stock issuable to such holder as Southside Merger
Consideration, and a number determined by (x)
multiplying the number of Excess Shares deemed
outstanding after giving effect to the
reallocation set forth in clause (B) immediately
above by (y) the holder's pro rata percentage of
the aggregate Stock Distribution requested by all
of the holders of the Combined Election Shares
(based upon the total amount of Stock
Distribution requested to be received by such
holder of Combined Election Shares as compared
with the total amount of Stock Distribution
requested to be received by all holders of
Combined Election Shares). In lieu of the
issuance of such shares of Surviving Corporation
Common Stock, the holders of Combined Election
Shares shall receive a cash payment equal to
$14.00 for each such share of Southside Common
Stock not converted into the right to receive
Surviving Corporation Common Stock; and
(D) Fourth, if the reallocation set
forth in clause (C) immediately above is not
sufficient to reduce the number of Excess Shares
to zero, then the Exchange Agent shall thereafter
reallocate the Southside Merger Consideration
payable to the holders of the Stock Election
Shares so as to reduce the number of Excess
Shares to zero. The number of shares of Surviving
Corporation Common Stock to be received by each
such holder shall be reduced by a number
determined by (x) multiplying the number of
Excess Shares deemed outstanding after giving
effect to the reallocation described in clauses
(B) and (C) immediately above by (y) the holder's
pro rata percentage of the aggregate Stock
Election Shares (not including the No Election
Shares) (based upon the number of Stock Election
Shares (not including the No Election Shares)
owned by such holder as compared with the total
number of Stock Election Shares (not including
the No Election Shares) owned by all holders). In
lieu of the
- 8 -
issuance of such shares of Surviving Corporation
Common Stock, the holders of Stock Election Shares
shall receive a cash payment equal to $14.00 for
each such share of Southside Common Stock not
converted into the right to receive Surviving
Corporation Common Stock.
The term "Stock Conversion Number" shall mean a number of shares of
Surviving Corporation Common Stock determined by dividing the
number of shares of Southside Common Stock outstanding immediately
prior to the Effective Time by two, and multiplying the resulting
number by 1.39 (as such exchange ratio may be adjusted herein).
(g) The computation of Excess Shares, the pro rata
computations utilized in the reallocations and the reallocated
payments of the Southside Merger Consideration contemplated by
Section 1.08(f) of this Agreement shall be made by the Exchange
Agent in the reasonable exercise of its discretion.
(h) Each separate entry on the Southside Shareholder List
shall be presumed to represent a separate and distinct holder of
record of Southside Common Stock. Shares held of record by a bank,
trust company, broker, dealer or other recognized nominee shall be
deemed to be held by a single holder unless the nominee advises the
Exchange Agent otherwise in writing. In such case, each of the
beneficial owners will be treated as a separate holder and either
directly or through such nominee may submit a separate Election
Form for shares of Southside Common Stock that are beneficially
owned.
(i) Any provisions of the preceding clauses of this
Section 1.08 to the contrary notwithstanding, if a holder of
Southside Common Stock in two or more different names so certifies
in writing on or before the Election Deadline, such shareholder may
submit a single Election Form for all such shares subject to the
certification and shall be treated for purposes of this Section
1.08 as a single holder.
1.09 Exchange Procedures.
-------------------
(a) Immediately prior to the Effective Time, (i) Allegiant
shall deliver to the Exchange Agent cash, in immediately available
funds, equal to the aggregate Cash Distribution; and (ii) Southside
shall deliver to the Exchange Agent irrevocable instructions
consistent with this Agreement to issue shares of Surviving
Corporation Common Stock equal to the aggregate Stock Distribution.
Such cash shall be held in trust by the Exchange Agent in an
interest bearing account for disbursement to holders of Southside
Common Stock or return to the Surviving Corporation as set forth
herein.
(b) At the Effective Time, Southside and Allegiant shall
be deemed to have granted the Exchange Agent the requisite power
and authority to effect for Southside and Allegiant the issuance of
the number of shares of Surviving Corporation to be issued in the
Merger and the payment of the amount of cash to be paid in the
Merger.
- 9 -
(c) Within five (5) business days after the Effective
Time, Allegiant shall cause the Exchange Agent to mail or cause to
be mailed to holders of Certificates, as identified on the
Southside Shareholder List, letters advising such holders of the
effectiveness of the Merger and instructing such holders to tender
such Certificates to the Exchange Agent, or in lieu thereof, such
evidence of lost, stolen or mutilated Certificates and such surety
bond or other security as the Exchange Agent may reasonably require
(the "Required Documentation").
(d) Subject to Section 1.12, after the Effective Time,
each holder of a Certificate that surrenders such Certificate or in
lieu thereof, the Required Documentation, to the Exchange Agent,
with a properly completed and executed letter of transmittal with
respect to such Certificate (in form reasonably satisfactory to
Allegiant and Southside), will be entitled to a certificate or
certificates representing the stock component of the Southside
Merger Consideration and/or a payment representing the cash
component of the Southside Merger Consideration as set forth in
Sections 1.07 and 1.08.
(e) After the Effective Time, each outstanding
Certificate, until duly surrendered to the Exchange Agent, shall be
deemed to evidence ownership of the Southside Merger Consideration
into which the stock previously represented by such Certificate
shall have been converted pursuant to this Agreement.
(f) After the Effective Time, holders of Certificates
shall cease to have rights with respect to the stock previously
represented by such Certificates, and their sole rights shall be to
exchange such Certificates for the Southside Merger Consideration
to which the shareholder may be entitled pursuant to the provisions
of Sections 1.07 and 1.08 hereof. After the closing of the transfer
books as described in Section 1.12(a) hereof, there shall be no
further transfer on the records of Southside of Certificates, and
if such Certificates are presented to Southside for transfer, they
shall be canceled against delivery of the Southside Merger
Consideration. Neither Surviving Corporation nor the Exchange Agent
shall be obligated to deliver the Southside Merger Consideration
until such holder surrenders the Certificates or furnishes the
Required Documentation as provided herein. Surviving Corporation
shall have the right to withhold any applicable taxes. No interest
shall accrue on Cash Distributions or the cash portion of the
Combined Distributions specified in the Election Forms pursuant to
Section 1.08(b). No dividends or distributions declared after the
Effective Time on the Surviving Corporation Common Stock will be
remitted to any person entitled to receive Surviving Corporation
Common Stock under this Agreement until such person surrenders the
Certificate representing the right to receive such Surviving
Corporation Common Stock or furnishes the Required Documentation,
at which time such dividends or distributions shall be remitted to
such person, without interest and less any taxes that may have been
imposed thereon. Certificates surrendered for exchange by an
"affiliate" of Southside as determined pursuant to Section 5.06,
shall not be exchanged until Surviving Corporation has received a
written agreement from such affiliate if required pursuant to
Section 5.06 hereof.
- 10 -
(g) At any time following the sixth (6th) month after the
Effective Time, the Surviving Corporation shall be entitled to
require the Exchange Agent to deliver to it any portion of the
funds which had been made available to the Exchange Agent pursuant
to Section 1.09(a) and not disbursed to holders of shares of
Southside Common Stock (including, without limitation, all interest
and other income received by the Exchange Agent in respect of all
amounts of funds made available to it), and thereafter each such
holder shall be entitled to look only to the Surviving Corporation
(subject to abandoned property, escheat and other similar laws),
and only as general creditors thereof, with respect to any
Southside Merger Consideration that may be payable upon due
surrender of the Certificates held by such holder (or the Required
Documentation). If any Certificates (or the Required Documentation)
shall not have been surrendered immediately prior to such date on
which the Southside Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of
any Regulatory Authority, any such cash, shares, dividends or
distributions payable in respect of such Certificate shall, to the
extent permitted by applicable law or regulation, become the
property of the Surviving Corporation, free and clear of all claims
or interest of any person previously entitled thereto.
Notwithstanding the foregoing, neither the Surviving Corporation
nor the Exchange Agent shall be liable to any holder of a share of
Southside Common Stock for any Southside Merger Consideration
delivered in respect of such share of Southside Common Stock to a
public official pursuant to any abandoned property, escheat or
other similar laws.
(h) Unless otherwise required by Allegiant or Surviving
Corporation, holders of certificates formerly representing
Allegiant Common Stock shall not be required to exchange such
certificates for certificates representing Surviving Corporation
Common Stock; provided, however, that if an exchange of such
certificates is required by law or applicable rule or regulation,
Allegiant will cause the Surviving Corporation to arrange for such
exchange in accordance with the other provisions of this Agreement.
(i) Surviving Corporation will pay to the applicable
taxing authority in strict accordance with applicable laws all
taxes withheld by Surviving Corporation in accordance with this
Agreement.
1.10 No Fractional Shares. Notwithstanding any other provision of
--------------------
this Agreement, neither certificates nor scrip for fractional shares of
Surviving Corporation Common Stock shall be issued in the Merger. Each
holder of Southside Common Stock who otherwise would have been entitled to a
fraction of a share of Surviving Corporation Common Stock (after taking into
account all shares of Southside Common Stock held by such holder) shall
receive (by check from the Exchange Agent, mailed to the shareholder with
the certificate(s) for Surviving Corporation Common Stock which such holder
is to receive pursuant to the Merger) in lieu thereof, cash (without
interest and subject to the payment of any applicable withholding taxes) in
an amount determined by multiplying the fractional share interest to which
such holder would otherwise be entitled by $14.00. No such holder shall be
entitled to dividends, voting rights or any other rights in respect of any
fractional share.
- 11 -
1.11 Dissenting Shares.
-----------------
(a) "Dissenting Shares" means any shares of Southside
Common Stock or Allegiant Common Stock held by any holder who
becomes entitled to payment of the fair value of such shares under
Section 351.455 of the Missouri Statute. Any holders of Dissenting
Shares shall be entitled to payment for such shares only to the
extent permitted by and in accordance with the provisions of the
Missouri Statute; provided, however, that if, in accordance with
the Missouri Statute, any holder of Dissenting Shares shall forfeit
such right to payment of the fair value of such Dissenting Shares,
(i) each such share which represented Southside Common Stock shall
thereupon be No Election Shares and (ii) each such share which
represented Allegiant Common Stock shall be deemed to have been
converted into and to have become exchangeable for, as of the
Effective Time, the right to receive one share of Surviving
Corporation Common Stock.
(b) Southside shall give to Allegiant (i) prompt notice of
any written objections to the Merger and/or any written demands for
the payment of the fair value of any shares of Southside Common
Stock, withdrawals of such demands, and any other instruments
served pursuant to Section 351.455 of the Missouri Statute received
by Southside, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands under the
Missouri Statute. Southside shall not voluntarily make any payment
with respect to demands for payment of fair value and shall not,
except with the prior consent of Allegiant (which shall not be
unreasonably withheld, delayed or conditioned), settle or offer to
settle any such demands.
1.12 Closing of Stock Transfer Books.
-------------------------------
(a) The stock transfer books of Southside shall be closed
at the end of business on the business day immediately preceding
the Closing Date. In the event of a transfer of ownership of
Southside Common Stock that is not registered in the transfer
records prior to the closing of such record books, the Southside
Merger Consideration issuable or payable with respect to such stock
may be delivered to the transferee, if the Certificate or
Certificates representing such stock (or the Required
Documentation) is presented to the Exchange Agent accompanied by
all documents required to evidence and effect such transfer and all
applicable stock transfer taxes are paid.
(b) At the Effective Time, Southside shall cause its
transfer agent to provide Allegiant and the Exchange Agent with a
complete and verified list of registered holders of Southside
Common Stock based upon its stock transfer books or corporate
records as of the closing of said transfer books, including the
names, addresses, certificate numbers and taxpayer identification
numbers of such holders (the "Southside Shareholder List").
Allegiant and the Exchange Agent shall be entitled to rely upon the
Southside Shareholder List to establish the identity of those
persons entitled to receive the Southside Merger Consideration,
which list shall be conclusive with respect thereto. In the event
of a dispute with respect to ownership of stock represented by any
Certificate, the Exchange Agent shall be entitled to deposit any
Southside Merger Consideration
- 12 -
represented thereby in escrow with an independent third party and
thereafter be relieved with respect to any claims thereto.
1.13 Anti-Dilution. If between the date of this Agreement and the
-------------
Effective Time a share of Allegiant Common Stock shall be changed into a
different number of shares of Allegiant Common Stock or a different class of
shares (or if a record date is established within such period for such
purpose) by reason of reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or if a stock dividend
thereon shall be declared with a record date within such period, then
appropriate and proportionate adjustment or adjustments will be made to the
Stock Distribution and the Surviving Corporation Common Stock portion of the
Combined Distributions as specified in the Election Forms pursuant to
Section 1.08(b) or as further adjusted pursuant to Section 1.08(f) such that
each holder of Southside Common Stock shall be entitled to receive such
number of shares of Surviving Corporation Common Stock or other securities
as such shareholder would have received pursuant to such reclassification,
recapitalization, split-up, combination, exchange of shares or readjustment
or as a result of such stock dividend if such had been declared by the
Surviving Corporation and had the record date therefor been immediately
following the Effective Time.
1.14 Tax Consequences. It is intended that the Merger will
----------------
constitute a reorganization within the meaning of Section 368(a)(1)(A) of
the Code and that this Agreement shall constitute a "plan of reorganization"
for purposes of Section 368 of the Code. Each of Southside and Allegiant
hereby agree to file any and all tax returns in a manner consistent with the
qualification as such.
1.15 Material Adverse Effect. As used in this Agreement, the term
-----------------------
"Material Adverse Effect" with respect to either Southside or Allegiant, as
the case may be, means any condition, event, change or occurrence that has a
material adverse effect on the condition (financial or otherwise),
properties, business or results of operations, of such entity and its
Subsidiaries, taken as a whole, as reflected, respectively, in the Southside
Financial Statements or the Allegiant Financial Statements, as the case may
be; it being understood that a Material Adverse Effect shall not include:
(i) a change with respect to, or effect on, such entity and its Subsidiaries
resulting from a change in law, rule, regulation, generally accepted
accounting principles or regulatory accounting principles; (ii) a change
with respect to, or effect on, such entity and its Subsidiaries resulting
from any other matter affecting depository institutions generally including,
without limitation, changes in general economic conditions and changes in
prevailing interest and deposit rates; (iii) a change disclosed in,
respectively, the Southside Financial Statements or the Allegiant Financial
Statements, as the case may be; or (iv) in the case of Southside, any
financial change resulting from adjustments made pursuant to Section 5.05 or
5.08(b) hereof.
1.16 Knowledge. As used in this Agreement, the term "knowledge" or
---------
"best knowledge" shall mean those facts known by the executive officers of
Allegiant or Southside, as the case may be.
- 13 -
1.17 Disclosure Schedules; Standard.
------------------------------
(a) Southside has delivered to Allegiant a confidential
schedule and Allegiant has delivered to Southside a confidential
schedule (respectively, its "Disclosure Schedule"), executed by
Southside and Allegiant concurrently with the delivery and
execution hereof, setting forth, among other things, items the
disclosures of which shall be necessary or appropriate either in
response to an express disclosure requirement contained in a
provision hereof or as an exception to one or more representations
or warranties contained in Article II hereof, in the case of
Southside, or Article III hereof, in the case of Allegiant;
provided that (i) no such item shall be required to be set forth in
the Disclosure Schedule as an exception to a representation or
warranty if its absence would not be reasonably likely to result in
the related representation or warranty being deemed untrue or
incorrect under the standard established by Section 1.17(b) hereof,
and (ii) the mere inclusion of an item in the Disclosure Schedule
as an exception to a representation or warranty shall not be deemed
an admission by Southside or Allegiant, as the case may be, that
such item represents a material exception or a fact, event or
circumstance or that such item is reasonably likely to result in a
Material Adverse Effect.
(b) No representation or warranty of Southside contained
in Article II hereof or Allegiant contained in Article III hereof
shall be deemed untrue or incorrect, and Southside and Allegiant,
as the case may be, shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of
any fact, event or circumstance unless such fact, event or
circumstance, individually or taken together with all other facts,
events or circumstances inconsistent with any representation or
warranty contained in Article II hereof, in the case of Southside,
or Article III hereof, in the case of Allegiant, has had a Material
Adverse Effect on the party making such representation or warranty.
(c) Southside and Allegiant shall be permitted to update
and supplement their respective Disclosure Schedules so as to
disclose exceptions to one or more representations or warranties
contained in Article II hereof in the case of Southside and Article
III hereof in the case of Allegiant which are a result of events
which occur after the date hereof; provided, however, that,
anything herein to the contrary notwithstanding, (i) no exceptions
or other information set forth on any such updated or supplemented
Disclosure Schedule shall be deemed to cure any representation or
warranty which was not true and correct as of the date of this
Agreement, and (ii) the exceptions and other information set forth
on any such updated or supplemented Disclosure Schedule shall not
be taken into consideration in determining, for purposes of this
Agreement, whether the conditions set forth in Section 6.02(a) in
the case of Southside, and Section 6.03(a) hereof in the case of
Allegiant shall have been satisfied, and (iii) this Section 1.17(c)
shall not relieve any party of its obligations under any covenant
set forth herein.
- 14 -
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF SOUTHSIDE
-------------------------------------------
As an inducement to Allegiant to enter into and perform its
obligations under this Agreement, and notwithstanding any examinations,
inspections, audits or other investigations made by Allegiant, subject to
Section 1.17 hereof and except as set forth in a section of the Disclosure
Schedule corresponding to the relevant Section of Article II set forth
below, Southside hereby represents and warrants to Allegiant as follows:
2.01 Organization and Authority. Southside is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State
of Missouri, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and has the corporate power and
authority to own its properties and assets and to carry on its business as
it is now being conducted. Southside is registered as a bank holding company
with the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") under the BHCA. True and complete copies of the Articles of
Incorporation, charter and By-Laws of Southside, and the Articles of
Association and By-Laws of each Southside Subsidiary, each as in effect on
the date of this Agreement, are attached hereto as Schedule 2.01.
-------------
2.02 Subsidiaries.
------------
(a) Schedule 2.02 sets forth a complete and correct list
-------------
of all of Southside's Subsidiaries (each a "Southside Subsidiary"
and, collectively, the "Southside Subsidiaries"), and all
outstanding Equity Securities of each Southside Subsidiary, all of
which are owned directly or indirectly by Southside. "Equity
Securities" of an issuer means capital stock or other equity
securities of such issuer, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, shares of
any capital stock or other equity securities of such issuer, or
contracts, commitments, understandings or arrangements by which
such issuer is or may become bound to issue additional shares of
its capital stock or other equity securities of such issuer, or
options, warrants, scrip or rights to purchase, acquire, subscribe
to, calls on or commitments for any shares of its capital stock or
other equity securities. All of the outstanding shares of capital
stock of the Southside Subsidiaries owned directly or indirectly by
Southside are validly issued, fully paid and nonassessable and are
owned free and clear of any lien, claim, charge, option,
encumbrance, agreement, mortgage, pledge, security interest or
restriction (a "Lien") with respect thereto. Each of the Southside
Subsidiaries is a corporation, bank or savings bank duly
incorporated or organized and validly existing under the laws of
its jurisdiction of incorporation or organization, and has
corporate power and authority to own or lease its properties and
assets and to carry on its business as it is now being conducted.
Each of the Southside Subsidiaries is duly qualified to do business
in each jurisdiction where its ownership or leasing of property or
the conduct of its business requires it to be so qualified. Neither
Southside nor any Southside Subsidiary owns beneficially, directly
or indirectly, any shares of any class of Equity Securities or
similar interests of any corporation, bank,
- 15 -
business trust, association or organization, or any interest in a
partnership or joint venture of any kind, other than those
identified as Southside Subsidiaries in Schedule 2.02 hereof.
-------------
(b) SOUTH SIDE NATIONAL BANK ("SNB") is a national banking
association duly organized and validly existing under the laws of
the United States of America. Each of the Southside Subsidiaries,
except SNB, are commercial banks duly organized, validly existing
and in good standing under the laws of the State of Missouri. The
deposits of the Southside Subsidiaries are insured by the Federal
Deposit Insurance Corporation (the "FDIC") under the Federal
Deposit Insurance Act of 1950, as amended (the "FDI Act").
2.03 Capitalization. The authorized capital stock of Southside
--------------
consists of 15,000,000 shares of Southside Common Stock, of which, as of
December 31, 2000, 8,393,528 shares were issued and outstanding and
1,000,000 shares of cumulative preferred stock, no par value, of which no
shares were issued and outstanding. As of December 31, 2000, Southside had
reserved 1,281,000 shares of Southside Common Stock for issuance under
Southside's stock option and incentive plans (including grants reflected in
the Southside Board of Directors' minutes), a list of which is set forth on
Schedule 2.03 (the "Southside Stock Plans"), pursuant to which options
-------------
("Southside Employee Stock Options") covering 531,000 shares of Southside
Common Stock were outstanding as of December 31, 2000. Since December 31,
2000, no Equity Securities of Southside have been issued, other than shares
of Southside Common Stock which may have been issued upon the exercise of
Southside Stock Options. Except for the Southside Stock Plans and the
Southside Rights Agreement, Southside does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the issuance of any share of
Southside Common Stock or any other Equity Securities of Southside. No
shares of Southside Common Stock have been issued nor are any shares of
Southside Common Stock issuable in violation of any preemptive rights. All
of the issued and outstanding shares of Southside Common Stock are validly
issued, fully paid and nonassessable, and have not been issued in violation
of any preemptive right of any shareholder of Southside. At the Effective
Time, the Surviving Corporation Common Stock to be issued in the Merger will
be duly authorized, validly issued, fully paid and nonassessable, and will
not be issued in violation of any preemptive right of any shareholder of
Southside.
2.04 Authorization.
-------------
(a) Southside has the corporate power and authority to
enter into this Agreement and the Southside and Allegiant Voting
Agreements, and to carry out its obligations under the Southside
and Allegiant Voting Agreements and, subject to the approval of
this Agreement, the Merger and the transactions contemplated
thereby by the shareholders of Southside and the Regulatory
Authorities, to carry out its obligations under this Agreement. The
only shareholder vote required for Southside to approve this
Agreement, the Merger and the transactions contemplated hereby and
thereby is the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Southside Common Stock
entitled to vote at a meeting called for such purpose. The
execution, delivery and performance of this Agreement and the
Southside and Allegiant Voting Agreements by Southside and the
consummation by Southside of the transactions
- 16 -
contemplated hereby and thereby in accordance with and subject to
the terms of this Agreement and the Southside and Allegiant Voting
Agreements have been duly authorized by the Board of Directors of
Southside. Each of the Southside and Allegiant Voting Agreements
and, subject to the approval of Southside's shareholders and subject
to the receipt of such approvals of the Regulatory Authorities as
may be required by statute or regulation, this Agreement, is a valid
and binding obligation of Southside enforceable against Southside in
accordance with its respective terms. Southside's Board of Directors
has taken all actions so that none of the Rights, Article Twelve of
Southside's Articles of Incorporation, Sections 351.407 and 351.459
of the Missouri Statutes or any other Missouri antitakeover measure,
whether pursuant to Southside's Articles of Incorporation or Bylaws,
applicable Missouri law, or otherwise will apply to the Merger or
this Agreement or the transactions contemplated hereby.
(b) Neither the execution nor delivery nor performance by
Southside of this Agreement or the Southside or Allegiant Voting
Agreements, nor the consummation by Southside of the transactions
contemplated hereby or thereby, nor compliance by Southside with
any of the provisions hereof or thereof, will (i) violate, conflict
with, or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of, any
Lien upon any of the properties or assets of Southside or any of
the Southside Subsidiaries under any of the terms, conditions or
provisions of (x) its Articles of Incorporation, charter or By-Laws
or (y) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which
Southside or any of the Southside Subsidiaries is a party or by
which it may be bound, or to which Southside or any of the
Southside Subsidiaries or any of the properties or assets of
Southside or any of the Southside Subsidiaries may be subject, or
(ii) subject to compliance with the statutes and regulations
referred to in subsection (c) of this Section 2.04, violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Southside or any of the Southside
Subsidiaries or any of their respective properties or assets.
(c) Other than in connection or in compliance with the
provisions of the Missouri Statute, the Securities Act of 1933, as
amended, and the rules and regulations thereunder (collectively,
the "Securities Act"), the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange
Act"), the securities or blue sky laws of the various states or
filings, consents, reviews, authorizations, approvals or exemptions
required under the BHCA, the FDI Act or any required approvals of
any other Regulatory Authority, no notice to, filing with,
exemption or review by, or authorization, consent or approval of,
any public body or authority is necessary for the consummation by
Southside of the transactions contemplated by this Agreement.
2.05 Southside Financial Statements.
------------------------------
(a) Attached hereto as Schedule 2.05(a) is a copy of
----------------
Southside's Form 10-K for the year ended December 31, 2000, and the
consolidated unaudited balance sheets,
- 17 -
statements of operations, and changes in shareholders' equity for
each month ended and as of January 31, 2001, February 28, 2001, and
March 31, 2001.
(b) The financial statements contained in the documents
referenced in Schedule 2.05(a) are referred to collectively as the
----------------
"Southside Financial Statements." The Southside Financial
Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP"), consistently applied, during the
periods involved, and present fairly the consolidated financial
position of Southside and the Southside Subsidiaries at the dates
thereof and the consolidated results of operations, changes in
shareholders' equity and cash flows, as applicable, of Southside
and the Southside Subsidiaries for the periods stated therein,
subject to the exclusion in the monthly financial statements of
footnotes required by GAAP and to normal year-end adjustments which
are not individually or in the aggregate material. The Southside
Financial Statements are derived from the books and records of
Southside and the Southside Subsidiaries, which are complete and
accurate in all respects and have been maintained in accordance
with good business practices.
2.06 Southside Reports. Since January 1, 1997, each of Southside
-----------------
and the Southside Subsidiaries has timely filed any and all Southside
Reports, together with any required amendments thereto, that it was required
to file with any Regulatory Authority. As of each of their respective dates,
the Southside Reports complied in all material respects with all the rules
and regulations promulgated by the (i) the SEC, (ii) the Federal Reserve
Board, (iii) the FDIC and (iv) any federal, state, municipal or local
government, securities, banking, savings and loan, environmental, insurance
and other governmental or regulatory authority, and the agencies and staffs
thereof (the entities in the foregoing clauses (i) through (iv) being
referred to herein collectively as the "Regulatory Authorities" and
individually as a "Regulatory Authority"), having jurisdiction over the
affairs of it, and the Southside Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. All
material reports and statements filed with any such Regulatory Authority are
collectively referred to herein as the "Southside Reports." With respect to
Southside Reports filed with the Regulatory Authorities, there is no
material unresolved violation, criticism or exception by any Regulatory
Authority with respect to any report or statement filed by, or any
examinations of, Southside or any of the Southside Subsidiaries.
2.07 Title to and Condition of Assets.
--------------------------------
(a) Except as may be reflected in the Southside Financial
Statements and with the exception of all "Real Property" (which is
the subject of Section 2.08 hereof), Southside and the Southside
Subsidiaries have, and at the Closing Date will have, good and
marketable title to their owned properties and assets, including,
without limitation, those reflected in the Southside Financial
Statements (except those disposed of in the ordinary course of
business since the date thereof), free and clear of any Liens,
except for Liens for (i) taxes, assessments or other governmental
charges not yet delinquent, (ii) as set forth or described in the
Southside Financial Statements, prior to the Effective Time,
- 18 -
and (iii) pledge to secure deposits and other immaterial Liens
incurred in the ordinary course of business.
(b) No material properties or assets that are reflected as
owned by Southside or any of the Southside Subsidiaries in the
Southside Financial Statements as of December 31, 2000, have been
sold, leased, transferred, assigned or otherwise disposed of since
such date, except in the ordinary course of business.
(c) The operation by Southside or the Southside
Subsidiaries of all furniture, fixtures, vehicles, machinery and
equipment and computer software owned or used by Southside or the
Southside Subsidiaries is in compliance in all material respects
with all applicable laws, ordinances and rules and regulations of
any governmental authority having jurisdiction over such use.
2.08 Real Property.
-------------
(a) A list of each parcel of real property owned by
Southside or any of the Southside Subsidiaries (other than real
property acquired in foreclosure or in lieu of foreclosure in the
course of the collection of loans and being held by Southside or a
Southside Subsidiary for disposition as required by law) is set
forth in Schedule 2.08(a) under the heading "Owned Real Property"
----------------
(such real property being herein referred to as the "Owned Real
Property"). A list of each parcel of real property leased by
Southside or any of the Southside Subsidiaries is also set forth in
Schedule 2.08(a) under the heading "Leased Real Property" (such
----------------
real property being herein referred to as the "Leased Real
Property"). Southside shall update Schedule 2.08(a) within ten (10)
----------------
days of acquiring any Owned Real Property or leasing any Leased
Real Property after the date hereof. Collectively, the Owned Real
Property and the Leased Real Property are herein referred to as the
"Real Property."
(b) There is no pending action involving Southside or any
of the Southside Subsidiaries as to the title of or the right to use
any of the Real Property.
(c) Neither Southside nor any of the Southside
Subsidiaries has any interest in any real property other than as
described above in Section 2.08(a) except interests as a mortgagee,
any real property acquired in foreclosure or in lieu of foreclosure
and being held for disposition as required by law and property held
by any Southside Subsidiary in its fiduciary capacity.
(d) To the knowledge of Southside, none of the buildings,
structures or other improvements located on the Real Property
encroaches upon or over any adjoining parcel of real estate or any
easement or right-of-way or "setback" line and all such buildings,
structures and improvements are located and constructed in
conformity with all applicable zoning ordinances and building
codes.
(e) None of the buildings, structures or improvements
located on the Owned Real Property are the subject of any official
complaint or notice by any governmental
- 19 -
authority of violation of any applicable zoning ordinance or
building code, and there is no zoning ordinance, building code, use
or occupancy restriction or condemnation action or proceeding
pending, or, to the knowledge of Southside, threatened, with respect
to any such building, structure or improvement.
(f) Southside and the Southside Subsidiaries have, and at
the Closing Date will have, good and marketable title to their
respective Owned Real Properties, except (i) as may be reflected in
the Southside Financial Statements, (ii) such easements, Liens,
defects or encumbrances as do not individually or in the aggregate
materially adversely affect the use or value of the parcel of the
Owned Real Property, (iii) taxes, assessments or other governmental
charges not yet delinquent, (iv) Liens arising out of deposits in
connection with workmen's compensation, unemployment insurance, old
age pensions or other social security or retirement benefits
legislation, (v) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds or other obligations
of a like nature arising in the ordinary course of business, (vi)
Liens imposed by law, such as mechanics', workmen's, materialmen's,
landlord's, carriers' or other like Liens arising in the ordinary
course of business which secure payment of obligations which are
not past due, and (vi) other immaterial Liens and encumbrances
incurred in the ordinary course of business.
(g) Neither Southside nor any of the Southside
Subsidiaries has caused or allowed the generation, treatment,
storage, disposal or release at any Real Property of any Toxic
Substance, except in accordance in all material respects with all
applicable federal, state and local laws and regulations. "Toxic
Substance" means any hazardous, toxic or dangerous substance,
pollutant, waste, gas or material, including, without limitation,
petroleum and petroleum products, metals, liquids, semi-solids or
solids, that are regulated under any federal, state or local
statute, ordinance, rule, regulation or other law pertaining to
environmental protection, contamination, quality, waste management
or cleanup. There are no underground storage tanks located on, in
or under any Owned Real Property or Leased Real Property.
(h) Each of the leases for the Leased Real Property is in
full force and effect on the date hereof and has not been modified
or amended in any respect from the forms heretofore provided to
Allegiant. Neither Southside, nor to the knowledge of Southside,
any third party is in default under any leases for Southside Leased
Property nor has any event occurred which, through the passage of
time or the giving of notice (including, without limitation, the
consummation of the transactions contemplated by this Agreement),
or both, would constitute a default thereunder or would cause the
acceleration of any obligation of any party thereto or the creation
of a lien or encumbrance upon any of Southside's assets. The leases
for the Leased Real Property are the valid and binding obligations
of Southside and the Southside Subsidiaries thereto and, to the
knowledge of Southside, the other parties thereto in accordance
with their terms and conditions, except as the enforceability
thereof against the parties thereto may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws now or
hereafter in effect relating to the enforcement of creditors'
rights generally, and except that equitable principles may limit
the right to obtain specific performance or other
- 20 -
equitable remedies. Southside has delivered complete and correct
copies of all the leases for the Leased Real Property to Allegiant.
2.09 Taxes. Southside and each Southside Subsidiary have timely
-----
filed all material income tax returns required to be filed ("Southside
Returns"). Each of Southside and the Southside Subsidiaries has paid, or set
up adequate reserves on the Southside Financial Statements for the payment
of, all income taxes shown on the Southside Returns required to be paid in
respect of the periods covered by such Southside Returns. Neither Southside
nor any Southside Subsidiary has any material liability for any such income
taxes in excess of the amounts so paid or reserves so established and, to
the knowledge of Southside, no material deficiencies for any such income
tax, have been proposed, asserted or assessed in writing (tentatively or
definitely) against Southside or any of the Southside Subsidiaries which
have not been settled or would not be covered by existing reserves. Neither
Southside nor any of the Southside Subsidiaries is delinquent in the payment
of any material income tax nor has it requested any extension of time within
which to file any income tax returns in respect of any fiscal year which
have not since been filed and no requests for waivers of the time to assess
any tax are pending. No federal or state income tax return of Southside or
any Southside Subsidiaries has been audited by the IRS or any state tax
authority for the three (3) most recent full calendar years. There is no
deficiency or refund litigation with respect to the Southside Returns.
Neither Southside nor any of the Southside Subsidiaries has extended or
waived any statute of limitations that is currently in effect on the
assessment of any tax due.
2.10 Material Adverse Effect. Since December 31, 2000, there
------------------------
has been no Material Adverse Effect on Southside and the Southside
Subsidiaries, taken as a whole.
2.11 Loans, Commitments and Contracts.
--------------------------------
(a) Schedule 2.11(a) contains a complete and accurate
----------------
listing of all contracts entered into with respect to deposits and
repurchase agreements of $5,000,000 or more, as of March 31, 2001,
by account, and all loan agreements, notes, security agreements,
bankers' acceptances, outstanding letters of credit, participation
agreements, and other documents relating to or involving extensions
of credit by Southside or any of the Southside Subsidiaries and all
loan commitments and commitments to issue letters of credit and
other commitments to extend credit with respect to any one entity
in excess of $5,000,000 to which Southside or any of the Southside
Subsidiaries is a party or by which it is bound, by account.
(b) Except for the contracts and agreements required to be
listed on Schedule 2.11(b) and the loans required to be listed on
----------------
Schedule 2.11(f), neither Southside nor any of the Southside
----------------
Subsidiaries is a party to or is bound by any:
(i) agreement, contract, arrangement,
understanding or commitment with any labor union;
(ii) material franchise or license agreement,
excluding software license agreements entered into in the
ordinary course of business;
- 21 -
(iii) employment, severance, termination pay,
agency, consulting or similar agreement or commitment in
respect of personal services;
(iv) material agreement, arrangement or
commitment (A) not made in the ordinary course of
business, and (B) pursuant to which Southside or any of
the Southside Subsidiaries is or may become obligated to
invest in or contribute to any Southside Subsidiary other
than pursuant to Southside Employee Plans or agreements
relating to joint ventures or partnerships set forth in
Schedule 2.02, true and complete copies of which have been
-------------
furnished to Allegiant;
(v) agreement, indenture or other instrument not
disclosed in the Southside Financial Statements relating
to the borrowing of money by Southside or any of the
Southside Subsidiaries or the guarantee by Southside or
any of the Southside Subsidiaries of any such obligation
(other than trade payables or instruments related to
transactions entered into in the ordinary course of
business by Southside or any of the Southside
Subsidiaries, such as deposits, Federal Home Loan Bank
("FHLB") and Federal Funds borrowings and repurchase and
reverse repurchase agreements), other than such
agreements, indentures or instruments providing for annual
payments of less than $200,000;
(vi) contract containing covenants which limit
the ability of Southside or any of the Southside
Subsidiaries to compete in any line of business or with
any person or which involves any restrictions on the
geographical area in which, or method by which, Southside
or any of the Southside Subsidiaries may carry on their
respective businesses (other than as may be required by
law or any applicable Regulatory Authority);
(vii) lease with annual rental payments
aggregating $100,000 or more;
(viii) loans or other obligations payable or
owing to any officer, director or employee except (A)
salaries, wages and directors' fees or other compensation
incurred and accrued in the ordinary course of business
and (B) obligations due in respect of any depository
accounts maintained by any of the foregoing with Southside
or any of the Southside Subsidiaries in the ordinary
course of business; or
(ix) other agreement, contract, arrangement,
understanding or commitment involving an obligation by
Southside or any of the Southside Subsidiaries of more
than $250,000 that cannot be canceled without cost or
penalty upon notice of 30 days or less, other than
contracts entered into in respect of deposits, loan
agreements and commitments, notes, security agreements,
repurchase and reverse repurchase agreements, bankers'
acceptances, outstanding letters of credit and commitments
to issue letters of credit, participation agreements and
other documents relating to transactions entered into by
Southside or any of the Southside Subsidiaries in the
ordinary course of business.
- 22 -
(c) Southside and/or the Southside Subsidiaries carry
property, liability, director and officer errors and omissions,
products liability and other insurance coverage as set forth in
Schedule 2.11(c) under the heading "Insurance."
----------------
(d) True, correct and complete copies of the agreements,
contracts, leases, insurance policies and other documents referred
to in Schedules 2.11(a), (b) and (c) have been or shall be
------------------------------
furnished or made available to Allegiant.
(e) Except as set forth on the applicable schedule, each
of the agreements, contracts, leases, insurance policies and other
documents referred to in Schedules 2.11 (a), (b) and (c) is a
-------------------------------
valid, binding and enforceable obligation of Southside or the
Southside Subsidiary who is a party thereto and to Southside's
knowledge, the other parties sought to be bound thereby, except as
the enforceability thereof against the parties thereto may be
limited by bankruptcy, insolvency, reorganization, moratorium and
other laws now or hereafter in effect relating to the enforcement
of creditors' rights generally, and except that equitable
principles may limit the right to obtain specific performance or
other equitable remedies.
(f) Schedule 2.11(f) under the heading "Loans" contains a
----------------
true, correct and complete listing, as of March 31, 2001, by
account, of (i) all loans in excess of $500,000 of Southside or any
of the Southside Subsidiaries that have been accelerated during the
past three months; (ii) all loan commitments or lines of credit of
Southside or any of the Southside Subsidiaries in excess of
$500,000 which have been terminated by Southside or any of the
Southside Subsidiaries during the past three months by reason of
default or adverse developments in the condition of the borrower or
other events or circumstances affecting the credit of the borrower;
(iii) all loans, lines of credit and loan commitments in excess of
$500,000, as to which Southside or any of the Southside
Subsidiaries has given written notice of its intent to terminate
during the past three months; (iv) with respect to all loans in
excess of $500,000 all notification letters and other written
communications from Southside or any of the Southside Subsidiaries
to any of their respective borrowers, customers or other parties
during the past three months wherein Southside or any of the
Southside Subsidiaries has requested or demanded that actions be
taken to correct existing defaults or facts or circumstances which
may become defaults; (v) each borrower, customer or other party
which has notified Southside or any of the Southside Subsidiaries
during the past three months of, or has asserted against Southside
or any of the Southside Subsidiaries, in each case in writing, any
"lender liability" or similar claim, and, to the knowledge of
Southside, each borrower, customer or other party which has given
Southside or any of the Southside Subsidiaries any oral
notification of, or orally asserted to or against Southside or any
of the Southside Subsidiaries, any such claim; or (vi) all loans in
excess of $250,000 (A) that are contractually past due 90 days or
more in the payment of principal and/or interest, (B) that are on
non-accrual status, (C) that have been classified "doubtful,"
"loss" or the equivalent thereof by any Regulatory Authority, (D)
where a reasonable doubt exists as to the timely future
collectibility of principal and/or interest, whether or not
interest is still accruing or the loan is less than 90 days past
due, (E) the interest rate terms have been reduced and/or the
- 23 -
maturity dates have been extended subsequent to the agreement under
which the loan was originally created due to concerns regarding the
borrower's ability to pay in accordance with such initial terms, or
(F) where a specific reserve allocation exists in connection
therewith.
2.12 Absence of Defaults. Neither Southside nor any of the
-------------------
Southside Subsidiaries is in violation of its Articles of Incorporation,
charter or By-Laws or in default under any material agreement, commitment,
arrangement, lease, insurance policy or other instrument, whether entered
into in the ordinary course of business or otherwise and whether written or
oral, and, to the knowledge of Southside, no third party is in default
thereunder, nor has any event occurred which, through the passage of time or
the giving of notice (including, without limitation, the consummation of the
transactions contemplated by this Agreement), or both, would constitute a
default thereunder or would cause the acceleration of any obligation of any
party thereto or the creation of a lien or encumbrance upon Southside or any
of the Southside Subsidiaries' assets.
2.13 Litigation and Other Proceedings. Except as otherwise
--------------------------------
disclosed in the Southside Financial Statements, neither Southside nor any
of the Southside Subsidiaries is a party to any pending or, to the knowledge
of Southside, threatened claim, action, suit, investigation or proceeding,
or is subject to any order, judgment or decree. Without limiting the
generality of the foregoing, there are no actions, suits or proceedings
pending or, to the knowledge of Southside, threatened against Southside or
any of the Southside Subsidiaries or any of their respective officers or
directors by any shareholder of Southside or any of the Southside
Subsidiaries (or any former shareholder of Southside or any of the Southside
Subsidiaries) or involving claims under the Community Reinvestment Act of
1977, as amended, the Bank Secrecy Act, the fair lending laws or any other
similar laws.
2.14 Directors' and Officers' Insurance. Each of Southside and the
----------------------------------
Southside Subsidiaries has taken or will take all requisite action
(including, without limitation, the making of claims and the giving of
notices) pursuant to its directors' and officers' liability insurance policy
or policies in order to preserve all rights thereunder with respect to all
matters (other than matters arising in connection with this Agreement and
the transactions contemplated hereby) occurring prior to the Effective Time
that are known to Southside.
2.15 Compliance with Laws.
--------------------
(a) Southside and each of the Southside Subsidiaries have
all permits, licenses, authorizations, orders and approvals of, and
have made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit them to
own or lease their respective properties and assets and to carry on
their respective businesses as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals
are in full force and effect and, to the knowledge of Southside, no
suspension or cancellation of any of them is threatened; and all
such filings, applications and registrations are current.
(b) (i) Each of Southside and the Southside Subsidiaries
has complied with all laws, regulations and orders (including,
without limitation, zoning ordinances, building
- 24 -
codes, Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and securities, tax, environmental, civil rights, and
occupational health and safety laws and regulations including,
without limitation, in the case of Southside or any Southside
Subsidiary that is a bank or savings association, banking
organization, banking corporation or trust company, all statutes,
rules, regulations and policy statements pertaining to the conduct
of a banking, deposit-taking, lending or related business, or to the
exercise of trust powers) and governing instruments applicable to it
and to the conduct of its business, and (ii) neither Southside nor
any of the Southside Subsidiaries is in default under, and no event
has occurred which, with the lapse of time or notice or both, could
result in the default under, the terms of any judgment, order, writ,
decree, permit, or license of any Regulatory Authority or court,
whether federal, state, municipal or local, and whether at law or in
equity.
(c) Neither Southside nor any of the Southside
Subsidiaries is subject to or reasonably likely to incur a
liability as a result of its ownership, operation, or use of any
Southside Property of Southside (whether directly or, to the
knowledge of Southside, as a consequence of such Southside Property
being acquired in foreclosure or in lieu of foreclosure or being
part of the investment portfolio of Southside or any of the
Southside Subsidiaries) (A) that is contaminated by or contains any
Toxic Substance, including, without limitation, petroleum and
petroleum products, asbestos, PCBs, pesticides, herbicides and any
other substance or waste that is hazardous to human health or the
environment and regulated by federal, state or local law, or (B) on
which any Toxic Substance has been stored, disposed of, placed or
used at the Southside Property or in the construction of structures
thereon. "Southside Property" shall include all property (real or
personal, tangible or intangible) owned or controlled by Southside
or any of the Southside Subsidiaries, including, without
limitation, property acquired under foreclosure or in lieu of
foreclosure, property in which any venture capital or similar unit
of Southside or any of the Southside Subsidiaries has an interest
and, to the knowledge of Southside, property held by Southside or
any of the Southside Subsidiaries in its capacity as a trustee. No
claim, action, suit or proceeding is pending or, to the knowledge
of Southside, threatened, and no material claim has been asserted
against Southside or any of the Southside Subsidiaries relating to
Southside Property of Southside or any of the Southside
Subsidiaries before any court or other Regulatory Authority or
arbitration tribunal relating to Toxic Substances, pollution or the
environment, and there is no outstanding judgment, order, writ,
injunction, decree or award against or affecting Southside or any
of the Southside Subsidiaries with respect to the same.
(d) Neither Southside nor any of the Southside
Subsidiaries has received any notification or communication that
has not been finally resolved from any Regulatory Authority (i)
asserting that Southside or any of the Southside Subsidiaries or
any Southside Property is not in substantial compliance with any of
the statutes, regulations or ordinances that such Regulatory
Authority enforces, (ii) threatening to revoke any license,
franchise, permit or governmental authorization, including, without
limitation, such company's status as an insured depository
institution under the FDI Act, or (iii) requiring or threatening to
require Southside or any of the Southside Subsidiaries, or
indicating that Southside or any of the Southside Subsidiaries may
be required, to enter
- 25 -
into a cease and desist order, agreement or memorandum of
understanding or any other agreement restricting or limiting or
purporting to direct, restrict or limit in any manner the operations
of Southside or any of the Southside Subsidiaries, including,
without limitation, any restriction on the payment of dividends. No
such cease and desist order, agreement or memorandum of
understanding or other agreement is currently in effect.
(e) Neither Southside nor any of the Southside
Subsidiaries is required by Section 32 of the FDI Act to give prior
notice to any federal banking agency of the proposed addition of an
individual to its board of directors or the employment of an
individual as a senior executive officer.
2.16 Labor. No work stoppage involving Southside or any of the
-----
Southside Subsidiaries is pending or, to the knowledge of Southside,
threatened. Neither Southside nor any of the Southside Subsidiaries is
involved in, or, to the knowledge of Southside, threatened with or affected
by, any labor dispute, arbitration, lawsuit or administrative proceeding.
None of the employees of Southside or the Southside Subsidiaries are
represented by any labor union or any collective bargaining organization.
2.17 Material Interests of Certain Persons. Except as set forth in
-------------------------------------
Southside's Form 10-K for the year ended December 31, 2000, no officer or
director of Southside or any of the Southside Subsidiaries, or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act)
of any such officer or director, has any interest in any contract or
property (real or personal, tangible or intangible), used in, or pertaining
to the business of, Southside or any of the Southside Subsidiaries, which
would be material to Southside or any of the Southside Subsidiaries.
2.18 Allowance for Loan and Lease Losses; Non-Performing Assets;
------------------------------------------------------------
Financial Assets.
----------------
(a) All of the accounts, notes and other receivables that
are reflected in the Southside Financial Statements as of December
31, 2000, were acquired in the ordinary course of business and were
collectible in full in the ordinary course of business, except for
probable loan and lease losses that are adequately provided for in
the allowance for loan and lease losses reflected in such Southside
Financial Statements, and the collection experience of Southside
and the Southside Subsidiaries since December 31, 2000 to the date
hereof, has not deviated in any material and adverse manner from
the credit and collection experience of Southside and the Southside
Subsidiaries, taken as a whole, for the year ended December 31,
2000.
(b) The allowances for loan losses contained in the
Southside Financial Statements were established in accordance with
the past practices and experiences of Southside and the Southside
Subsidiaries, and the allowance for loan and lease losses shown on
the consolidated balance sheet of Southside and the Southside
Subsidiaries as of December 31, 2000, was adequate in all material
respects under the requirements of GAAP, or regulatory accounting
principles, as the case may be, to provide for probable losses on
loans and leases (including, without limitation, accrued interest
receivable) and
- 26 -
credit commitments (including, without limitation, stand-by letters
of credit) as of the date of such balance sheet.
(c) Schedule 2.18(c) sets forth as of March 31, 2001 all
----------------
assets classified by Southside as real estate acquired through
foreclosure or repossession, including foreclosed assets.
(d) As of December 31, 2000, the aggregate amount of all
Non-Performing Assets on the books of Southside and the Southside
Subsidiaries did not exceed $6,500,000. "Non-Performing Assets"
shall mean (i) all loans (A) that are contractually past due 90
days or more in the payment of principal and/or interest, (B) that
are on nonaccrual status, (C) that have been classified "doubtful,"
"loss" or the equivalent thereof by any Regulatory Agency or (D)
where the interest rate terms have been reduced and/or the maturity
dates have been extended subsequent to the agreement under which
the loan was originally created due to concerns regarding the
borrower's ability to pay in accordance with such initial terms,
and (ii) all assets classified by Southside or its Subsidiaries,
for purposes of this Section 2.18, or Allegiant or its
Subsidiaries, for purposes of Section 3.13, as real estate acquired
through foreclosure or in lieu of foreclosure, including
in-substance foreclosures, and all other assets acquired through
foreclosure or in lieu of foreclosure.
(e) All loans receivable (including discounts) and accrued
interest entered on the books of Southside and the Southside
Subsidiaries arose out of bona fide arm's length transactions, were
made for good and valuable consideration in the ordinary course of
Southside's or the appropriate Southside Subsidiary's respective
business, and the notes or other evidences of indebtedness with
respect to such loans or discounts are true and genuine and are
what they purport to be. To the knowledge of Southside, the loans,
discounts and the accrued interest reflected on the books of
Southside and the Southside Subsidiaries are subject to no
defenses, set-offs or counterclaims (including, without limitation,
those afforded by usury or truth-in-lending laws), except as may be
provided by bankruptcy, insolvency or similar laws affecting
creditors' rights generally or by general principles of equity.
(f) The notes and other evidences of indebtedness
evidencing the loans described in Section 2.18(e) above, and all
pledges, mortgages, deeds of trust and other collateral documents
or security instruments relating thereto are and will be, in all
material respects, valid, true, genuine and enforceable, and what
they purport to be. Southside and each of the Southside
Subsidiaries has good and valid title to the investment securities
shown on the Southside Financial Statements and all securities
entered on the books of Southside or the appropriate Southside
Subsidiary subsequent to March 31, 2001, except for those sold or
redeemed in the ordinary course of business. A complete and
accurate list of such investment securities as of March 31, 2001 is
attached as Schedule 2.18(f).
----------------
- 27 -
2.19 Employee Benefit Plans.
----------------------
(a) Schedule 2.19(a) lists all pension, retirement,
----------------
supplemental retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, medical, disability,
workers' compensation, vacation, group insurance, severance and
other employee benefit, incentive and welfare policies, contracts,
plans and arrangements, and all trust agreements related thereto,
maintained by or contributed to by Southside or any of the
Southside Subsidiaries in respect of any of the present or former
directors, officers, or other employees of and/or consultants to
Southside or any of the Southside Subsidiaries (collectively,
"Southside Employee Plans"). Southside has furnished Allegiant with
the following documents with respect to each Southside Employee
Plan: (i) a true and complete copy of all written documents
comprising such Southside Employee Plan (including amendments and
individual agreements relating thereto) or, if there is no such
written document, an accurate and complete description of the
Southside Employee Plan; (ii) the most recently filed Form 5500 or
Form 5500-C/R (including all schedules thereto), if applicable;
(iii) the most recent financial statements and actuarial reports,
if any; (iv) the summary plan description currently in effect and
all material modifications thereof, if any; and (v) the most recent
IRS determination letter, if any.
(b) All Southside Employee Plans have been maintained and
operated in all material respects in accordance with their terms
and the material requirements of all applicable statutes, orders,
rules and final regulations, including, without limitation, to the
extent applicable, ERISA and the Internal Revenue Code of 1986, as
amended (the "Code"). All contributions required to be made to
Southside Employee Plans have been made or reserved on the
Southside Financial Statements with respect to periods ending on or
prior to the date of the Southside Financial Statements.
(c) With respect to each of the Southside Employee Plans
which is a pension plan (as defined in Section 3(2) of ERISA)(the
"Pension Plans"): (i) each Pension Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has
been determined to be so qualified by the IRS and such
determination letter may still be relied upon, and each related
trust is exempt from taxation under Section 501(a) of the Code;
(ii) the present value of all benefits vested and all benefits
accrued under each Pension Plan which is subject to Title IV of
ERISA did not, in each case, as of the last applicable annual
valuation date (as indicated on Schedule 2.19(a)), exceed the value
----------------
of the assets of the Pension Plan allocable to such vested or
accrued benefits; (iii) there has been no "prohibited transaction,"
as such term is defined in Section 4975 of the Code or Section 406
of ERISA, which could subject any Pension Plan or associated trust,
or Southside or any of the Southside Subsidiaries, to any material
tax or penalty; (iv) no defined benefit Pension Plan or any trust
created thereunder has been terminated, nor has there been any
"reportable events" with respect to any Pension Plan, as that term
is defined in Section 4043 of ERISA since January 1, 1990; and (v)
no Pension Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in
Section 302 of ERISA (whether or not waived). No Pension Plan is a
"multiemployer plan," as that term is defined in Section 3(37) of
ERISA.
- 28 -
(d) Except as reflected on the Southside Financial
Statements or the notes thereto, neither Southside nor any of the
Southside Subsidiaries has any liability for any post-retirement
health, medical or similar benefit of any kind whatsoever, except
as required by statute or regulation.
(e) Neither Southside nor any of the Southside
Subsidiaries has any material liability under ERISA or the Code as
a result of its being a member of a group described in Sections
414(b), (c), (m) or (o) of the Code.
(f) Neither the execution nor delivery of this Agreement,
nor the consummation of any of the transactions contemplated
hereby, will (i) result in any payment (including, without
limitation, severance, unemployment compensation or golden
parachute payment) becoming due to any director or employee of
Southside or any of the Southside Subsidiaries from any of such
entities, (ii) increase any benefit otherwise payable under any of
the Southside Employee Plans or (iii) result in the acceleration of
the time of payment of any such benefit.
2.20 Conduct of Southside Since December 31, 2000. From and after
--------------------------------------------
December 31, 2000 through the date hereof, except as set forth in the
Southside Financial Statements or the Southside Reports: (i) Southside and
the Southside Subsidiaries have conducted their respective businesses in the
ordinary and usual course consistent with past practices; (ii) except upon
the exercise of Southside Stock Options, neither Southside nor any of the
Southside Subsidiaries has issued, sold, granted, conferred or awarded any
of its Equity Securities, or any corporate debt securities which would be
classified under GAAP as long-term debt on the balance sheets of Southside
or the Southside Subsidiaries; (iii) Southside has not effected any stock
split or adjusted, combined, reclassified or otherwise changed its
capitalization; (iv) Southside has not declared, set aside or paid any
dividend (other than its regular quarterly dividends in amounts not
exceeding the last quarterly dividend prior to December 31, 2000 and with
normal record and payment dates consistent with prior practice) or other
distribution in respect of its capital stock, or purchased, redeemed,
retired, repurchased or exchanged, or otherwise acquired or disposed of,
directly or indirectly, any of its Equity Securities, whether pursuant to
the terms of such Equity Securities or otherwise; (v) neither Southside nor
any of the Southside Subsidiaries has incurred any obligation or liability
(absolute or contingent), except liabilities incurred in the ordinary course
of business or in connection with the transactions contemplated by this
Agreement, or subjected to Lien any of its assets or properties other than
in the ordinary course of business consistent with past practice; (vi)
neither Southside nor any of the Southside Subsidiaries has discharged or
satisfied any Lien or paid any obligation or liability (absolute or
contingent), other than in the ordinary course of business; (vii) neither
Southside nor any of the Southside Subsidiaries has sold, assigned,
transferred, leased, exchanged, or otherwise disposed of any of its
properties or assets other than for a fair consideration in the ordinary
course of business; (viii) except as required by contract or law, neither
Southside nor any of the Southside Subsidiaries has (A) increased the rate
of compensation of, or paid any bonus to, any of its directors, officers, or
other employees, except normal increases in the ordinary course consistent
with past practice, (B) entered into any new, or amended or supplemented any
existing, employment, management, consulting, deferred compensation,
severance, or other similar
- 29 -
contract, (C) entered into, terminated, or substantially modified any of the
Southside Employee Plans or (D) agreed to do any of the foregoing; (ix)
neither Southside nor any Southside Subsidiary has suffered any material
damage, destruction, or loss, whether as the result of fire, explosion,
earthquake, accident, casualty, labor trouble, requisition, or taking of
property by any Regulatory Authority, flood, windstorm, embargo, riot, act of
God or the enemy, or other casualty or event, and whether or not covered by
insurance; (x) neither Southside nor any of the Southside Subsidiaries has
canceled or compromised any debt, except for debts charged off or compromised
in accordance with the past practice of Southside and the Southside
Subsidiaries; and (xi) neither Southside nor any of the Southside
Subsidiaries has entered into any material transaction, contract or
commitment outside the ordinary course of its business, except in connection
with the transactions contemplated by this Agreement.
2.21 Absence of Undisclosed Liabilities. Neither Southside nor any
----------------------------------
of the Southside Subsidiaries has any debts, liabilities or obligations
individually, or in the aggregate, whether accrued, absolute, contingent or
otherwise and whether due or to become due, which would be required to be
reflected in the Southside Financial Statements or the notes thereto in
accordance with GAAP except: (i) debts, liabilities or obligations reflected
on the Southside Financial Statements and the notes thereto; (ii) operating
leases reflected on Schedule 2.11(b); and (iii) debts, liabilities or
----------------
obligations incurred since December 31, 2000 in the ordinary and usual
course of their respective businesses, none of which are for breach of
contract, breach of warranty, torts, infringements or lawsuits.
2.22 Joint Proxy Statement/Prospectus. None of the information
--------------------------------
regarding Southside or any of the Southside Subsidiaries to be supplied by
Southside for inclusion or included in (i) the Registration Statement; (ii)
the Joint Proxy Statement/Prospectus to be mailed to Southside's
shareholders in connection with the meeting to be called to consider this
Agreement and the Merger (the "Joint Proxy Statement/Prospectus") or (iii)
any other documents to be filed with any Regulatory Authority in connection
with the transactions contemplated hereby will, at the respective times such
documents are filed with any Regulatory Authority and, with respect to the
Registration Statement, when it becomes effective and with respect to the
Joint Proxy Statement/Prospectus, when mailed to the shareholders of
Southside or Allegiant, be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements therein (in the case of the Proxy Statement/Prospectus, in light
of the circumstances under which such statements were made) not misleading
or any amendment thereof or supplement thereto, at the time of the meeting
of Southside's or Allegiant's shareholders referred to in Section 5.03, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for such meeting
(in the case of the Proxy Statement/Prospectus, in light of the
circumstances under which such statements were made). All documents which
Southside or any of the Southside Subsidiaries is responsible for filing
with any Regulatory Authority in connection with the Merger will comply as
to form in all material respects with the provisions of applicable law.
2.23 Registration Obligations. Neither Southside nor any of the
------------------------
Southside Subsidiaries is under any obligation, contingent or otherwise,
which will survive the Effective Time by reason
- 30 -
of any agreement to register any transaction involving any of its securities
under the Securities Act.
2.24 Tax and Regulatory Matters. Neither Southside nor any of the
--------------------------
Southside Subsidiaries has taken, agreed to take or will take any action or
has any knowledge of any fact or circumstance that would (i) prevent the
Merger from qualifying as a reorganization within the meaning of Section
368(a)(1)(A) of the Code, or (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement.
2.25 Brokers and Finders. Except for Stifel, Nicolaus & Company,
-------------------
Incorporated, whose fees will be paid by Southside, neither Southside nor
any of the Southside Subsidiaries nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Southside or any of the Southside Subsidiaries in connection with this
Agreement or the transactions contemplated hereby.
2.26 Interest Rate Risk Management Instruments. Neither Southside
-----------------------------------------
nor any Southside Subsidiary has any interest rate swaps, caps, floors and
option agreements and other interest rate risk management arrangements to
which Southside or any of the Southside Subsidiaries is a party or by which
any of their properties or assets may be bound.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF ALLEGIANT
-------------------------------------------
As an inducement to Southside to enter into and perform its
obligations under this Agreement, and notwithstanding any examinations,
inspections, audits or other investigations made by Southside, subject to
Section 1.17 hereof and except as set forth in a section of the Disclosure
Schedule corresponding to the relevant Section of Article III set forth
below, Allegiant hereby represents and warrants to Southside as follows:
3.01 Organization and Authority. Allegiant is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State
of Missouri, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and has corporate power and
authority to own its properties and assets and to carry on its business as
it is now being conducted. Allegiant is registered as a bank holding company
with the Federal Reserve Board under the BHCA. True and complete copies of
the Articles of Incorporation, charter and By-Laws of Allegiant, and the
Articles of Association and By-Laws of each Allegiant Subsidiary, each as in
effect on the date of this Agreement, are attached hereto as Schedule 3.01.
-------------
- 31 -
3.02 Subsidiaries.
------------
(a) Schedule 3.02 sets forth a complete and correct list
-------------
of all of Allegiant's Subsidiaries (each a "Allegiant Subsidiary"
and, collectively, the "Allegiant Subsidiaries"), and all
outstanding Equity Securities of each Allegiant Subsidiary, all of
which are owned directly or indirectly by Allegiant. All of the
outstanding shares of capital stock of the Allegiant Subsidiaries
owned directly or indirectly by Allegiant are validly issued, fully
paid and nonassessable and are owned free and clear of any Lien
with respect thereto. Each of the Allegiant Subsidiaries is a
corporation, bank or savings bank duly incorporated or organized
and validly existing under the laws of its jurisdiction of
incorporation or organization, and has corporate power and
authority to own or lease its properties and assets and to carry on
its business as it is now being conducted. Each of the Allegiant
Subsidiaries is duly qualified to do business in each jurisdiction
where its ownership or leasing of property or the conduct of its
business requires it to be so qualified.
(b) ALLEGIANT BANK ("AB") is a banking association duly
organized and validly existing under the laws of the State of
Missouri. The deposits of AB are insured by the FDIC under the FDI
Act.
3.03 Capitalization of Allegiant. The authorized capital stock of
---------------------------
Allegiant consists of 20,000,000 shares of Allegiant Common Stock, of which,
as of March 31, 2001, 8,897,111 shares were issued and outstanding. As of
March 31, 2001, Allegiant had reserved 711,700 shares of Allegiant Common
Stock for issuance under various employee and/or director stock option,
incentive and/or benefit plans (collectively, "Allegiant Employee/Director
Stock Grants"). From March 31, 2001 through the date of this Agreement, no
shares of Allegiant Common Stock have been issued, excluding any such shares
which may have been issued in connection with the Investment Plan or
Allegiant Employee/Director Stock Grants. Except for the Allegiant Dividend
Reinvestment Plan (the "Investment Plan"), Allegiant does not have and is
not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the issuance of any
share of Allegiant Common Stock or any other Equity Securities of Allegiant.
Neither Allegiant nor any Allegiant Subsidiary has taken or agreed to take
any action or has any knowledge of any fact or circumstance and neither
Allegiant nor Allegiant will take any action that would (i) prevent the
transactions contemplated hereby from qualifying as a reorganization within
the meaning of Section 368(a)(1)(A) of the Code, or (ii) materially impede
or delay receipt of any approval referred to in Section 6.01(b) or the
consummation of the transactions contemplated by this Agreement. Except as
set forth above, there are no other Equity Securities of Allegiant
outstanding. All of the issued and outstanding shares of Allegiant Common
Stock are validly issued, fully paid, and nonassessable, and have not been
issued in violation of any preemptive right of any shareholder of Allegiant.
3.04 Authorization.
-------------
(a) Allegiant has the corporate power and authority to
enter into this Agreement and the Southside and Allegiant Voting
Agreements and to carry out its obligations under the Southside and
Allegiant Voting Agreements and, subject to the
- 32 -
approval of this Agreement, the Merger and the transactions
contemplated thereby by the shareholders of Allegiant and the
Regulatory Authorities, to carry out its obligations under this
Agreement. The only shareholder vote required for Allegiant to
approve this Agreement, the Merger and the transactions contemplated
hereby and thereby is the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Allegiant Common Stock
entitled to vote at a meeting called for such purpose. The
execution, delivery and performance of this Agreement and the
Southside and Allegiant Voting Agreements by Allegiant and the
consummation by Allegiant of the transactions contemplated hereby
and thereby and the consummation by Allegiant of the transactions
contemplated hereby and thereby in accordance with and subject to
the terms of this Agreement and the Southside and Allegiant Voting
Agreements have been duly authorized by all requisite corporate
action of Allegiant, except, in the case of this Agreement, for the
approval of this Agreement and the transactions contemplated hereby
by the Allegiant shareholders. The Southside and Allegiant Voting
Agreements are and, subject to the receipt of such approvals of the
Allegiant shareholders and the Regulatory Authorities as may be
required by statute or regulation, this Agreement is, a valid and
binding obligation of Allegiant enforceable against it in accordance
with their respective terms. Allegiant's Board of Directors has
taken all actions so that no Missouri antitakeover measure, whether
pursuant to Allegiant's Articles of Incorporation or Bylaws,
applicable Missouri law, or otherwise will apply to the Merger or
this Agreement or the transactions contemplated hereby.
(b) Neither the execution, delivery and performance by
Allegiant of this Agreement or the Southside or Allegiant Voting
Agreements, nor the consummation by Allegiant of the transactions
contemplated hereby or thereby, nor compliance by Allegiant with
any of the provisions hereof or thereof, will (i) violate, conflict
with or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both,
would constitute a default) or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of, any
Lien upon any of the properties or assets of Allegiant or any of
the Allegiant Subsidiaries under any of the terms, conditions or
provisions of (x) its Articles of Incorporation, charter or
By-Laws, or (y) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to
which Allegiant or any of the Allegiant Subsidiaries is a party or
by which it may be bound, or to which Allegiant or any of the
Allegiant Subsidiaries or any of the properties or assets of
Allegiant or the Allegiant Subsidiaries may be subject, or (ii)
subject to compliance with the statutes and regulations referred to
in subsection (c) of this Section 3.04, violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Allegiant or any of the Allegiant
Subsidiaries or any of their respective properties or assets.
(c) Other than in connection with or in compliance with
the provisions of the Missouri Statute, the Securities Act, the
Exchange Act, the securities or blue sky laws of the various states
or filings, consents, reviews, authorizations, approvals or
exemptions required under the BHCA, the FDI Act or any required
approvals of any other Regulatory Authority, no notice to, filing
with, exemption or review by, or authorization, consent or
- 33 -
approval of, any public body or authority is necessary for the
consummation by Allegiant of the transactions contemplated by this
Agreement.
3.05 Allegiant Financial Statements.
------------------------------
(a) Attached hereto as Schedule 3.05(a) is a copy of
----------------
Allegiant's Form 10-K for the year ended December 31, 2000, and the
consolidated unaudited balance sheets, statements of operations,
changes in shareholders' equity for the each month ended and as of
January 31, 2001, February 28, 2001, and March 31, 2001.
(b) The financial statements contained in the documents
referenced in Schedule 3.05(a) are referred to collectively as the
----------------
"Allegiant Financial Statements." The Allegiant Financial
Statements have been prepared in accordance with GAAP, consistently
applied, during the periods involved, and present fairly the
consolidated financial position of Allegiant and the Allegiant
Subsidiaries at the dates thereof and the consolidated results of
operations, changes in shareholders' equity and cash flows, as
applicable, of Allegiant and the Allegiant Subsidiaries for the
periods stated therein, subject to the exclusion in the monthly
financial statements of footnotes required by GAAP and to normal
year-end adjustments which are not individually or in the aggregate
material. The Allegiant Financial Statements are derived from the
books and records of Allegiant and the Allegiant Subsidiaries,
which are complete and accurate in all respects and have been
maintained in accordance with good business practices.
3.06 Allegiant Reports. Since January 1, 1997, each of Allegiant
-----------------
and its Subsidiaries has timely filed any and all Allegiant Reports,
together with any required amendments thereto, that it was required to file
with any Regulatory Authority. All such reports and statements filed with
any such Regulatory Authority are collectively referred to herein as the
"Allegiant Reports." As of its respective date, each Allegiant Report
complied in all material respects with all the rules and regulations
promulgated by the applicable Regulatory Authority and did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. With respect to Allegiant Reports filed with the Regulatory
Authorities, there is no material unresolved violation, criticism or
exception by any Regulatory Authority with respect to any report or
statement filed by, or any examinations of, Allegiant or any of the
Allegiant Subsidiaries.
3.07 Environmental Matters. Neither Allegiant nor any of the
---------------------
Allegiant Subsidiaries has caused or allowed the generation, treatment,
storage, disposal or release at any of its owned or leased real properties
of any Toxic Substance, except in accordance in all material respects with
all applicable federal, state and local laws and regulations. There are no
underground storage tanks located on, in or under any real property owned or
leased by Allegiant or any Allegiant Subsidiary.
3.08 Taxes. Allegiant and each Allegiant Subsidiary have timely
-----
filed all material income tax returns required to be filed ("Allegiant
Returns"). Each of Allegiant and the Allegiant Subsidiaries has paid, or set
up adequate reserves on the Allegiant Financial Statements
- 34 -
for the payment of, all income taxes shown on the Allegiant Returns required
to be paid in respect of the periods covered by such Allegiant Returns.
Neither Allegiant nor any Allegiant Subsidiary has any material liability for
any such income taxes in excess of the amounts so paid or reserves so
established and, to the knowledge of Allegiant, no material deficiencies for
any such income tax, have been proposed, asserted or assessed in writing
(tentatively or definitely) against Allegiant or any of the Allegiant
Subsidiaries which have not been settled or would not be covered by existing
reserves. Neither Allegiant nor any of the Allegiant Subsidiaries is
delinquent in the payment of any material income tax nor has it requested any
extension of time within which to file any income tax returns in respect of
any fiscal year which have not since been filed and no requests for waivers
of the time to assess any tax are pending. No federal or state income tax
return of Allegiant or any Allegiant Subsidiaries has been audited by the IRS
or any state tax authority for the three (3) most recent full calendar years.
There is no deficiency or refund litigation with respect to the Allegiant
Returns. Neither Allegiant nor any of the Allegiant Subsidiaries has extended
or waived any statute of limitations that is currently in effect on the
assessment of any tax due.
3.09 Loans, Commitments and Contracts.
--------------------------------
(a) Schedule 3.09(a) contains a complete and accurate
----------------
listing of all contracts entered into with respect to deposits and
repurchase agreements of $5,000,000 or more, as of March 31, 2001,
by account, and all loan agreements, notes, security agreements,
bankers' acceptances, outstanding letters of credit, participation
agreements, and other documents relating to or involving extensions
of credit by Allegiant or any of the Allegiant Subsidiaries and all
loan commitments and commitments to issue letters of credit and
other commitments to extend credit with respect to any one entity
in excess of $5,000,000 to which Allegiant or any of the Allegiant
Subsidiaries is a party or by which it is bound, by account.
(b) Except for the contracts and agreements required to be
listed on Schedule 3.09(a) and the loans required to be listed on
----------------
Schedule 3.09(f), neither Allegiant nor any of the Allegiant
----------------
Subsidiaries is a party to or is bound by any:
(i) agreement, contract, arrangement,
understanding or commitment with any labor union;
(ii) material franchise or license agreement,
excluding software license agreements entered into in the
ordinary course of business;
(iii) employment, severance, termination pay,
agency, consulting or similar agreement or commitment in
respect of personal services;
(iv) material agreement, arrangement or
commitment (A) not made in the ordinary course of
business, and (B) pursuant to which Allegiant or any of
the Allegiant Subsidiaries is or may become obligated to
invest in or contribute to any Allegiant Subsidiary other
than pursuant to Allegiant employee benefit plans or
- 35 -
agreements relating to joint ventures or partnerships set
forth in Schedule 3.02, true and complete copies of which
-------------
have been furnished to Southside;
(v) agreement, indenture or other instrument not
disclosed in the Allegiant Financial Statements relating
to the borrowing of money by Allegiant or any of the
Allegiant Subsidiaries or the guarantee by Allegiant or
any of the Allegiant Subsidiaries of any such obligation
(other than trade payables or instruments related to
transactions entered into in the ordinary course of
business by Allegiant or any of the Allegiant
Subsidiaries, such as deposits, FHLB and Federal Funds
borrowings and repurchase and reverse repurchase
agreements), other than such agreements, indentures or
instruments providing for annual payments of less than
$200,000;
(vi) contract containing covenants which limit
the ability of Allegiant or any of the Allegiant
Subsidiaries to compete in any line of business or with
any person or which involves any restrictions on the
geographical area in which, or method by which, Allegiant
or any of the Allegiant Subsidiaries may carry on their
respective businesses (other that as may be required by
law or any applicable Regulatory Authority);
(vii) lease with annual rental payments
aggregating $100,000 or more;
(viii) loans or other obligations payable or
owing to any officer, director or employee except (A)
salaries, wages and directors' fees or other compensation
incurred and accrued in the ordinary course of business
and (B) obligations due in respect of any depository
accounts maintained by any of the foregoing with Allegiant
or any of the Allegiant Subsidiaries in the ordinary
course of business; or
(ix) other agreement, contract, arrangement,
understanding or commitment involving an obligation by
Allegiant or any of the Allegiant Subsidiaries of more
than $250,000 that cannot be canceled without cost or
penalty upon notice of 30 days or less, other than
contracts entered into in respect of deposits, loan
agreements and commitments, notes, security agreements,
repurchase and reverse repurchase agreements, bankers'
acceptances, outstanding letters of credit and commitments
to issue letters of credit, participation agreements and
other documents relating to transactions entered into by
Allegiant or any of the Allegiant Subsidiaries in the
ordinary course of business and not involving extensions
of credit with respect to any one entity or related group
of entities in excess of $1,000,000.
(c) Allegiant and/or the Allegiant Subsidiaries carry
property, liability, director and officer errors and omissions,
products liability and other insurance coverage as set forth in
Schedule 3.09(c) under the heading "Insurance."
----------------
- 36 -
(d) True, correct and complete copies of the agreements,
contracts, leases, insurance policies and other documents referred
to in Schedules 3.09(a), (b) and (c) have been or shall be
------------------------------
furnished or made available to Southside.
(e) Except as set forth on the applicable schedule, each
of the agreements, contracts, leases, insurance policies and other
documents referred to in Schedules 3.09 (a), (b) and (c) is a
-------------------------------
valid, binding and enforceable obligation of the Allegiant or the
Allegiant Subsidiary who is a party thereto and to Allegiant's
knowledge, the other parties sought to be bound thereby, except as
the enforceability thereof against the parties thereto may be
limited by bankruptcy, insolvency, reorganization, moratorium and
other laws now or hereafter in effect relating to the enforcement
of creditors' rights generally, and except that equitable
principles may limit the right to obtain specific performance or
other equitable remedies.
(f) Schedule 3.09(f) under the heading "Loans" contains a
----------------
true, correct and complete listing, as of March 31, 2001, by
account, of (i) all loans in excess of $500,000 of Allegiant or any
of the Allegiant Subsidiaries that have been accelerated during the
past three months; (ii) all loan commitments or lines of credit of
Allegiant or any of the Allegiant Subsidiaries in excess of
$500,000 which have been terminated by Allegiant or any of the
Allegiant Subsidiaries during the past three months by reason of
default or adverse developments in the condition of the borrower or
other events or circumstances affecting the credit of the borrower;
(iii) all loans, lines of credit and loan commitments in excess of
$500,000, as to which Allegiant or any of the Allegiant
Subsidiaries has given written notice of its intent to terminate
during the past three months; (iv) with respect to all loans in
excess of $500,000 all notification letters and other written
communications from Allegiant or any of the Allegiant Subsidiaries
to any of their respective borrowers, customers or other parties
during the past three months wherein Allegiant or any of the
Allegiant Subsidiaries has requested or demanded that actions be
taken to correct existing defaults or facts or circumstances which
may become defaults; (v) each borrower, customer or other party
which has notified Allegiant or any of the Allegiant Subsidiaries
during the past three months of, or has asserted against Allegiant
or any of the Allegiant Subsidiaries, in each case in writing, any
"lender liability" or similar claim, and, to the knowledge of
Allegiant, each borrower, customer or other party which has given
Allegiant or any of the Allegiant Subsidiaries any oral
notification of, or orally asserted to or against Allegiant or any
of the Allegiant Subsidiaries, any such claim; or (vi) all loans in
excess of $250,000 (A) that are contractually past due 90 days or
more in the payment of principal and/or interest, (B) that are on
non-accrual status, (C) that have been classified "doubtful,"
"loss" or the equivalent thereof by any Regulatory Authority, (D)
where a reasonable doubt exists as to the timely future
collectibility of principal and/or interest, whether or not
interest is still accruing or the loan is less than 90 days past
due, (E) the interest rate terms have been reduced and/or the
maturity dates have been extended subsequent to the agreement under
which the loan was originally created due to concerns regarding the
borrower's ability to pay in accordance with such initial terms, or
(F) where a specific reserve allocation exists in connection
therewith.
- 37 -
3.10 Absence of Defaults. Neither Allegiant nor any of the
-------------------
Allegiant Subsidiaries is in violation of its Articles of Incorporation,
charter or By-Laws or in default under any material agreement, commitment,
arrangement, lease, insurance policy or other instrument, whether entered
into in the ordinary course of business or otherwise and whether written or
oral, and, to the knowledge of Allegiant, no third party is in default
thereunder, nor has any event occurred which, through the passage of time or
the giving of notice (including, without limitation, the consummation of the
transactions contemplated by this Agreement), or both, would constitute a
default thereunder or would cause the acceleration of any obligation of any
party thereto or the creation of a lien or encumbrance upon Allegiant or any
of the Allegiant Subsidiaries' assets.
3.11 Litigation and Other Proceedings. Except as otherwise
--------------------------------
disclosed in the Allegiant Financial Statements, neither Allegiant nor any
of the Allegiant Subsidiaries is a party to any pending or, to the knowledge
of Allegiant, threatened claim, action, suit, investigation or proceeding,
or is subject to any order, judgment or decree. Without limiting the
generality of the foregoing, there are no actions, suits or proceedings
pending or, to the knowledge of Allegiant, threatened against Allegiant or
any of the Allegiant Subsidiaries or any of their respective officers or
directors by any shareholder of Allegiant or any of the Allegiant
Subsidiaries (or any former shareholder of Allegiant or any of the Allegiant
Subsidiaries) or involving claims under the Community Reinvestment Act of
1977, as amended, the Bank Secrecy Act, the fair lending laws or any other
similar laws.
3.12 Compliance with Laws.
--------------------
(a) Allegiant and each of the Allegiant Subsidiaries have
all permits, licenses, authorizations, orders and approvals of, and
have made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit them to
own or lease their respective properties and assets and to carry on
their respective businesses as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals
are in full force and effect and, to the knowledge of Allegiant, no
suspension or cancellation of any of them is threatened; and all
such filings, applications and registrations are current.
(b) (i) Each of Allegiant and the Allegiant Subsidiaries
has complied with all laws, regulations and orders (including,
without limitation, zoning ordinances, building codes, ERISA, and
securities, tax, environmental, civil rights, and occupational
health and safety laws and regulations including, without
limitation, in the case of Allegiant or any Allegiant Subsidiary
that is a bank or savings association, banking organization,
banking corporation or trust company, all statutes, rules,
regulations and policy statements pertaining to the conduct of a
banking, deposit-taking, lending or related business, or to the
exercise of trust powers) and governing instruments applicable to
it and to the conduct of its business, and (ii) neither Allegiant
nor any of the Allegiant Subsidiaries is in default under, and no
event has occurred which, with the lapse of time or notice or both,
could result in the default under, the terms of any judgment,
order, writ, decree, permit, or license of any Regulatory Authority
or court, whether federal, state, municipal or local, and whether
at law or in equity.
- 38 -
(c) Neither Allegiant nor any of the Allegiant
Subsidiaries is subject to or reasonably likely to incur a
liability as a result of its ownership, operation, or use of any
Allegiant Property of Allegiant (whether directly or, to the
knowledge of Allegiant, as a consequence of such Allegiant Property
being acquired in foreclosure or in lieu of foreclosure or being
part of the investment portfolio of Allegiant or any of the
Allegiant Subsidiaries) (A) that is contaminated by or contains any
Toxic Substance, including, without limitation, petroleum and
petroleum products, asbestos, PCBs, pesticides, herbicides and any
other substance or waste that is hazardous to human health or the
environment and regulated by federal, state or local law, or (B) on
which any Toxic Substance has been stored, disposed of, placed or
used at the Allegiant Property or in the construction of structures
thereon. "Allegiant Property" shall include all property (real or
personal, tangible or intangible) owned or controlled by Allegiant
or any of the Allegiant Subsidiaries, including, without
limitation, property acquired under foreclosure or in lieu of
foreclosure, property in which any venture capital or similar unit
of Allegiant or any of the Allegiant Subsidiaries has an interest
and, to the knowledge of Allegiant, property held by Allegiant or
any of the Allegiant Subsidiaries in its capacity as a trustee. No
claim, action, suit or proceeding is pending or, to the knowledge
of Allegiant, threatened, and no material claim has been asserted
against Allegiant or any of the Allegiant Subsidiaries relating to
Allegiant Property of Allegiant or any of the Allegiant
Subsidiaries before any court or other Regulatory Authority or
arbitration tribunal relating to Toxic Substances, pollution or the
environment, and there is no outstanding judgment, order, writ,
injunction, decree or award against or affecting Allegiant or any
of the Allegiant Subsidiaries with respect to the same.
(d) Neither Allegiant nor any of the Allegiant
Subsidiaries has received any notification or communication that
has not been finally resolved from any Regulatory Authority (i)
asserting that Allegiant or any of the Allegiant Subsidiaries or
any Allegiant Property is not in substantial compliance with any of
the statutes, regulations or ordinances that such Regulatory
Authority enforces, (ii) threatening to revoke any license,
franchise, permit or governmental authorization, including, without
limitation, such company's status as an insured depository
institution under the FDI Act, or (iii) requiring or threatening to
require Allegiant or any of the Allegiant Subsidiaries, or
indicating that Allegiant or any of the Allegiant Subsidiaries may
be required, to enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting or
limiting or purporting to direct, restrict or limit in any manner
the operations of Allegiant or any of the Allegiant Subsidiaries,
including, without limitation, any restriction on the payment of
dividends. No such cease and desist order, agreement or memorandum
of understanding or other agreement is currently in effect.
(e) Neither Allegiant nor any of the Allegiant
Subsidiaries is required by Section 32 of the FDI Act to give prior
notice to any federal banking agency of the proposed addition of an
individual to its board of directors or the employment of an
individual as a senior executive officer.
- 39 -
3.13 Allowance for Loan and Lease Losses; Non-Performing Assets;
-----------------------------------------------------------
Financial Assets.
-----------------
(a) All of the accounts, notes and other receivables that
are reflected in the Allegiant Financial Statements as of December
31, 2000, were acquired in the ordinary course of business and were
collectible in full in the ordinary course of business, except for
probable loan and lease losses that are adequately provided for in
the allowance for loan and lease losses reflected in such Allegiant
Financial Statements, and the collection experience of Allegiant
and the Allegiant Subsidiaries since December 31, 2000 to the date
hereof, has not deviated in any material and adverse manner from
the credit and collection experience of Allegiant and the Allegiant
Subsidiaries, taken as a whole, for the three months ended December
31, 2000.
(b) The allowances for loan losses contained in the
Allegiant Financial Statements were established in accordance with
the past practices and experiences of Allegiant and the Allegiant
Subsidiaries, and the allowance for loan and lease losses shown on
the consolidated balance sheet of Allegiant and the Allegiant
Subsidiaries as of December 31, 2000, were adequate in all material
respects under the requirements of GAAP, or regulatory accounting
principles, as the case may be, to provide for probable losses on
loans and leases (including, without limitation, accrued interest
receivable) and credit commitments (including, without limitation,
stand-by letters of credit) as of the date of such balance sheet.
(c) Schedule 3.13(c) sets forth as of March 31, 2001 all
----------------
assets classified by Allegiant as real estate acquired through
foreclosure or repossession, including foreclosed assets.
(d) As of December 31, 2000, the aggregate amount of all
Non-Performing Assets on the books of Allegiant and the Allegiant
Subsidiaries did not exceed $3,400,000.
(e) All loans receivable (including discounts) and accrued
interest entered on the books of Allegiant and the Allegiant
Subsidiaries arose out of bona fide arm's length transactions, were
made for good and valuable consideration in the ordinary course of
Allegiant's or the appropriate Allegiant Subsidiary's respective
business, and the notes or other evidences of indebtedness with
respect to such loans or discounts are true and genuine and are
what they purport to be. To the knowledge of Allegiant, the loans,
discounts and the accrued interest reflected on the books of
Allegiant and the Allegiant Subsidiaries are subject to no
defenses, set-offs or counterclaims (including, without limitation,
those afforded by usury or truth-in-lending laws), except as may be
provided by bankruptcy, insolvency or similar laws affecting
creditors' rights generally or by general principles of equity.
(f) The notes and other evidences of indebtedness
evidencing the loans described in Section 3.13 above, and all
pledges, mortgages, deeds of trust and other collateral documents
or security instruments relating thereto are and will be, in all
material respects, valid, true, genuine and enforceable, and what
they purport to be.
- 40 -
Allegiant and each of the Allegiant Subsidiaries has good and valid
title to the investment securities shown on the Allegiant Financial
Statements and all securities entered on the books of Allegiant or
the appropriate Allegiant Subsidiary subsequent to December 31,
2000, except for those sold or redeemed in the ordinary course of
business. A complete and accurate list of such investment securities
as of December 31, 2000 is attached as Schedule 3.13(f). Such list
----------------
shall be updated each month in writing until the Closing.
3.14 Absence of Undisclosed Liabilities. Neither Allegiant nor any
----------------------------------
of the Allegiant Subsidiaries has any debts, liabilities or obligations
equal to or exceeding $50,000 individually, or $100,000 in the aggregate,
whether accrued, absolute, contingent or otherwise and whether due or to
become due, which would be required to be reflected in the Allegiant
Financial Statements or the notes thereto in accordance with GAAP except:
(i) debts, liabilities or obligations reflected on the Allegiant Financial
Statements and the notes thereto; (ii) operating leases reflected on
Schedule 3.09(b); and (iii) debts, liabilities or obligations incurred since
----------------
December 31, 2000 in the ordinary and usual course of their respective
businesses, none of which are for breach of contract, breach of warranty,
torts, infringements or lawsuits.
3.15 Material Adverse Effect. Since December 31, 2000, there
------------------------
has been no Material Adverse Effect on Allegiant and the Allegiant
Subsidiaries, taken as a whole.
3.16 Joint Proxy Statement/Prospectus. None of the information
--------------------------------
regarding Allegiant or any of the Allegiant Subsidiaries to be supplied by
Allegiant for inclusion or included in (i) the Registration Statement, (ii)
the Joint Proxy Statement/Prospectus, or (iii) any other documents to be
filed with any Regulatory Authority in connection with the transactions
contemplated hereby will, at the respective times such documents are filed
with any Regulatory Authority and, with respect to the Registration
Statement, when it becomes effective and, with respect to the Joint Proxy
Statement/Prospectus, when mailed to the shareholders of Southside or
Allegiant, be false or misleading with respect to any material fact, or omit
to state any material fact necessary in order to make the statements therein
(in the case of the Proxy Statement/Prospectus, in light of the
circumstances under which such statements were made) not misleading or, in
the case of the Joint Proxy Statement/Prospectus or any amendment thereof or
supplement thereto, at the time of the meeting of Southside's or Allegiant's
shareholders referred to in Section 5.03, be false or misleading with
respect to any material fact, or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of any proxy for such meeting (in the case of the Proxy
Statement/Prospectus, in light of the circumstances under which such
statements were made). All documents which Allegiant is responsible for
filing with any Regulatory Authority in connection with the Merger will
comply as to form in all material respects with the provisions of applicable
law.
3.17 Tax and Regulatory Matters. Neither Allegiant nor any of the
--------------------------
Allegiant Subsidiaries has taken, agreed to take or will take any action or
has any knowledge of any fact or circumstance that would (i) prevent the
Merger from qualifying as a reorganization within the meaning of Section
368(a)(1)(A) of the Code, or (ii) materially impede or delay receipt of any
approval referred to in Section 6.01(b) or the consummation of the
transactions contemplated by this Agreement.
- 41 -
3.18 Brokers and Finders. Except for Legg Mason Wood Walker,
-------------------
Incorporated, neither Allegiant nor any of the Allegiant Subsidiaries nor
any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has
acted directly or indirectly for Allegiant in connection with this Agreement
or the transactions contemplated hereby.
3.19 No Negotiations. The parties hereto acknowledge that
---------------
Allegiant has engaged in certain preliminary discussions with First Banks,
Inc., a Missouri corporation ("First Banks"), regarding a possible
transaction which could have resulted in the disposition of certain Southside
Subsidiaries to First Banks in connection with the Merger. Allegiant hereby
represents and warrants to Southside that such discussions have been
terminated and Allegiant has no agreement, arrangement or understanding with
First Banks with respect to such possible transaction or other similar
transaction involving First Banks, its associates or its affiliates.
3.20 Change of Control Payments. Neither the execution nor
--------------------------
delivery of this Agreement, nor the consummation of any of the transactions
contemplated hereby, will (i) result in any payment (including, without
limitation, severance, unemployment compensation or golden parachute
payment) becoming due to any director or employee of Allegiant or any of the
Allegiant Subsidiaries from any of such entities, (ii) increase any benefit
otherwise payable under any of the Allegiant Employee Plans or (iii) result
in the acceleration of the time of payment of any such benefit; provided,
however, employees or directors of Allegiant may be paid merit based
discretionary awards based upon job performance related to the transactions
contemplated hereby.
ARTICLE IV
----------
CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME
-------------------------------------------------
4.01 Conduct of Businesses Prior to the Effective Time. During the
-------------------------------------------------
period from the date of this Agreement to the Effective Time, Southside and
each of the Southside Subsidiaries shall conduct their businesses according
to the ordinary and usual course consistent with past and current practices
and shall use their best efforts to maintain and preserve their business
organization, employees and advantageous business relationships and retain
the services of their officers and key employees. During the period from the
date of this Agreement to the Effective Time, Allegiant and each of the
Allegiant Subsidiaries shall conduct their businesses according to the
ordinary and usual course consistent with past and current practices and
shall use their best efforts to maintain and preserve their business
organization, employees and advantageous business relationships and retain
the services of their officers and key employees; provided, however,
Allegiant may take such actions as are necessary or desirable to finance its
obligations under the Merger (although the obligations of Allegiant to
consummate the transactions contemplated hereby are not contingent or
conditioned upon Allegiant's receipt of any such financing) and nothing
herein shall prevent Allegiant from entertaining, negotiating or entering
into any agreement with respect to the possible acquisition of Allegiant by
a third party (provided that Allegiant shall promptly advise Southside with
respect to any such matters and, in
- 42 -
the event of any such agreement or transaction with a third party prior to
the Effective Time and as a condition thereto, mutually satisfactory
amendments shall be made to this Agreement to place the Southside
shareholders in the same position (economic or otherwise) they would have
been in had such agreement or transaction been entered into after the
Effective Time). Allegiant covenants and agrees that prior to the Effective
Time, it shall not enter into any agreement pursuant to which Allegiant
agrees to acquire a third party business which would be deemed to be
"significant" to Allegiant on a consolidated basis under any of the
conditions of Rule 1-02(w) of SEC Regulation S-X. The parties acknowledge
that the taking by Allegiant of any actions permitted pursuant to this
Section 4.01 shall not be deemed a breach, for any purpose, of a
representation or warranty hereunder that relates to the subject matter of
such actions.
4.02 Forbearances of Southside. Except as set forth in Schedule
------------------------- --------
4.02, and except to the extent required by law, regulation or Regulatory
----
Authority or contemplated by or expressly permitted pursuant to the terms of
this Agreement, or with the prior written consent of Allegiant during the
period from the date of this Agreement to the Effective Time (which consent
shall not be unreasonably withheld, delayed or conditioned), Southside shall
not and shall not permit any of the Southside Subsidiaries to:
(a) declare, set aside or pay any dividends or other
distributions, directly or indirectly, in respect of its capital
stock, other than its regular quarterly dividends in amounts not
exceeding the last quarterly dividend and with normal record and
payment dates consistent with prior practice;
(b) except as otherwise set forth in Section 5.09(d),
enter into or amend any employment, severance or similar agreement
or arrangement with any director, officer or employee, or
materially modify any of the Southside Employee Plans or grant any
salary or wage increase or materially increase any employee benefit
(including incentive or bonus payments), except (i) normal
individual increases in compensation to employees who are not
directors or officers consistent with past practice or, with the
consent of Allegiant not to be unreasonably withheld, to directors
and officers, and (ii) as required by law or contract;
(c) propose or adopt any amendments to its Articles of
Incorporation or other charter document or By-Laws, except as
contemplated hereby;
(d) issue, sell, grant, confer or award any of its Equity
Securities, except that the Southside may issue shares of Southside
Common Stock upon exercise of the Southside Stock Options
outstanding on the date of this Agreement, or effect any stock
split or adjust, combine, reclassify or otherwise change its
capitalization as it existed on the date of this Agreement, other
than with respect to its KSOP;
(e) purchase, redeem, retire, repurchase or exchange, or
otherwise acquire or dispose of, directly or indirectly, any of its
Equity Securities, whether pursuant to the terms of such Equity
Securities or otherwise;
- 43 -
(f) cause or permit any Southside Subsidiary to enter
into, renew or increase any loan or credit commitment (including
stand-by letters of credit) to, or invest or agree to invest in any
person or entity or modify any of the material provisions or renew
or otherwise extend the maturity date of any existing loan or
credit commitment (collectively, "Lend to") in an amount equal to
or in excess of $5,000,000 or in any amount which, when aggregated
with any and all loans or credit commitments of Southside and the
Southside Subsidiaries to such person or entity, would be equal to
or in excess of $5,000,000 without the prior written consent of
Allegiant; provided, however, that nothing in this paragraph shall
prohibit Southside or any Southside Subsidiary from honoring any
contractual obligation in existence on the date of this Agreement.
Notwithstanding this Section 4.02(f), Southside shall be authorized
without first consulting with Allegiant or obtaining Allegiant's
prior written consent, to cause or permit Southside and the
Southside Subsidiaries to increase the aggregate amount of any
credit facilities theretofore established in favor of any
particular person or entity (each a "Pre-Existing Facility"),
provided that the aggregate amount of any and all such increases to
any particular person or entity shall not be in excess of $500,000;
(g) take any action that would (i) prevent or impede the
Merger from qualifying as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code, or (ii) materially impede or
delay the consummation of the transactions contemplated by this
Agreement or the ability of Allegiant or Southside to obtain any
approval of any Regulatory Authority required for the transactions
contemplated by this Agreement or to perform its covenants and
agreements under this Agreement;
(h) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed
money or assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for the obligations of
any other individual, corporation or other entity;
(i) materially restructure or change its investment
securities portfolio, through purchases, sales or otherwise, or the
manner in which the portfolio is classified or reported, or execute
individual investment transactions for its own account of greater
than $2,000,000 for U.S. Treasury or Federal Agency Securities and
$500,000 for all other investment instruments;
(j) agree in writing or otherwise to take any of the
foregoing actions or engage in any activity, enter into any
transaction or intentionally take or omit to take any other act
which would make any of the representations and warranties in
Article II of this Agreement untrue or incorrect in any material
respect if made anew after engaging in such activity, entering into
such transaction, or taking or omitting such other act; or
(k) enter into, increase or renew any loan or credit
commitment (including standby letters of credit) to any executive
officer or director of Southside or any of the Southside
Subsidiaries, any holder of 10% or more of the outstanding shares
of Southside Common Stock, or any entity controlled, directly or
indirectly, by any of the foregoing or engage in any transaction
with any of the foregoing which is of the type or nature sought
- 44 -
to be regulated in 12 U.S.C. Section 371c and 12 U.S.C. Section
371c-1. For purposes of this subsection (k), "control" shall have
the meaning associated with that term under 12 U.S.C. Section 371c.
4.03 Acquisition Proposals; Board Recommendation.
-------------------------------------------
(a) Southside agrees that it shall not, nor shall it
authorize or knowingly permit any officer, director, employee,
investment banker, attorney, accountant, agent or other advisor or
representative of Southside, directly or indirectly, to (i)
solicit, initiate or knowingly facilitate or encourage the
submission of any Acquisition Proposal for Southside from and after
the date hereof, (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information
with respect to, or take any other action knowingly to facilitate
any inquiries or the making of any proposal that constitutes an
Acquisition Proposal for Southside from and after the date hereof,
(iii) grant any waiver or release under any standstill or similar
agreement with respect to any class of Southside Equity Securities
or (iv) enter into any agreement with respect to any Acquisition
Proposal for Southside; provided, however, that if, at any time
prior to the Southside shareholder approval pursuant to Section
5.03(a), Southside's Board of Directors reasonably determines in
good faith, after consultation with and receipt of advice from
outside counsel and independent financial advisor of Southside,
that failing to take such action would be inconsistent with its
fiduciary duties to Southside's shareholders under applicable law,
Southside may, in response to an Acquisition Proposal for Southside
made after the date of this Agreement which was not solicited by
Southside or its representatives or agents and which did not
otherwise result from a breach of this Section 4.03, and which is
reasonably likely to lead to a Superior Proposal, and subject to
compliance with Section 4.03(c); (x) furnish information with
respect to Southside to any person pursuant to a customary
confidentiality agreement including customary standstill provisions
(as determined by Southside after consultation with its outside
counsel) and (y) participate in negotiations regarding such
Acquisition Proposal for Southside. "Acquisition Proposal" means
any inquiry, proposal or offer relating to any direct or indirect
acquisition or purchase, in one transaction or a series of related
transactions, of 15% or more of the assets of Southside or any of
the Southside Subsidiaries or 15% or more of any class of Equity
Securities of Southside or any of its Subsidiaries, any tender
offer or exchange offer that if consummated would result in any
person beneficially owning 15% or more of any class of Equity
Securities of Southside or any of the Southside Subsidiaries, any
merger, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving Southside or any of the Southside Subsidiaries, other
than the negotiations with Allegiant, or any other transaction the
consummation of which could reasonably be expected to impede,
interfere with, prevent or materially delay the Merger or which
could reasonably be expected to dilute materially the benefits to
Allegiant of the Merger.
(b) Neither the Board of Directors of Southside nor any
committee thereof shall (i) withdraw, or propose publicly to
withdraw, in a manner adverse to Allegiant, the approval or
recommendation by such Board of Directors or such committee of the
Merger or this Agreement, (ii) subject to Section 4.03(d), modify,
or propose publicly to
- 45 -
modify, in a manner adverse to Allegiant the approval or
recommendation by such Board of Directors or such committee of the
Merger or this Agreement, (iii) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal for
Southside or (iv) approve or recommend, or propose to approve or
recommend, or execute or enter into, any letter of intent, agreement
in principle, merger agreement, acquisition agreement, option
agreement or other similar agreement or propose publicly or agree to
do any of the foregoing related to any Acquisition Proposal for
Southside. Notwithstanding the foregoing, if at any time prior to
receipt of Southside shareholder approval of this Agreement, the
Merger and the transactions contemplated hereby, the Board of
Directors of Southside reasonably determines, in good faith after
consultation with the independent financial advisor of Southside,
that it has received an Acquisition Proposal for Southside that
constitutes a Superior Proposal which did not result from a breach
of Southside's obligations under this Section 4.03 and also
reasonably determines that failure to do one of the following would
be inconsistent with its fiduciary duties to Southside's
shareholders under applicable law, the Board of Directors of
Southside may (subject to this and the following sentences), after
paying to Allegiant the Southside Termination Fee, (x) withdraw or
modify its approval or recommendation of this Agreement, the Merger
and the transactions contemplated hereby, (y) approve or recommend
the Superior Proposal or (z) terminate this Agreement (and
concurrently with or after such termination, if it so chooses, cause
Southside to enter into any agreement with respect to the Superior
Proposal), but in each of the cases set forth in clause (x), (y) or
(z), only at a time prior to the Southside shareholder approval
pursuant to Section 5.03(a) and only at a time that is after the
tenth (10th) calendar day following Allegiant's receipt of written
notice advising Allegiant that the Board of Directors of Southside
has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person
making such Superior Proposal. For all purposes of this Agreement, a
"Superior Proposal" means any bona fide proposal made by a third
party to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, 100% of the Southside
Securities then outstanding (whether pursuant to a tender or
exchange offer, merger, consolidation, share exchange, or other
business combination) or all or substantially all the assets of
Southside and otherwise on terms which the Board of Directors of
Southside determines in its good faith judgment (based on a written
opinion of Southside's financial advisor) to be materially more
favorable to Southside and its shareholders than the Merger (taking
into account any changes to the financial and other contractual
terms of this Agreement proposed by Allegiant in response to such
proposal, the person making the proposal, any legal or regulatory
considerations and all other relevant financial and strategic
considerations, including the timing of the consummation of such
transactions) and for which financing, to the extent required, is
then committed or which, in the good faith judgment of the Board of
Directors of Southside, is reasonably capable of being obtained by
such third party, provided that such proposal is reasonably
determined by the Board of Directors of Southside, in good faith and
after due inquiry, to be likely to be consummated.
(c) In addition to the obligations of Southside set forth
in paragraphs (a) and (b) of this Section 4.03, Southside shall
promptly (meaning within 48 hours) advise Allegiant orally and in
writing of any request for information or of any Acquisition
- 46 -
Proposal for Southside, the material terms and conditions of such
request or Acquisition Proposal for Southside and the identity of
the person making such request or Acquisition Proposal for
Southside. Southside will keep Allegiant reasonably informed of the
status and details (including amendments or proposed amendments) of
any such request or Acquisition Proposal for Southside. If, after
Southside receives a Superior Proposal, Allegiant desires to
continue negotiations with Southside with respect to the
transactions provided for in this Agreement, Southside agrees to
negotiate in good faith with Allegiant.
(d) Nothing contained in this Section 4.03 shall prohibit
Southside from taking and disclosing to its shareholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to Southside's
shareholders if, in the good faith judgment of the Board of
Directors of Southside, after consultation with outside counsel,
failure to so disclose would be inconsistent with its fiduciary
duties to Southside's shareholders under the Missouri Statute;
provided, however, neither Southside nor its Board of Directors nor
any committee thereof shall, except as permitted by Section
4.03(b), withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to the Merger or this Agreement
or approve or recommend, or propose publicly to approve or
recommend, an Acquisition Proposal for Southside.
4.04 Forbearances of Allegiant. During the period from the date of
-------------------------
this Agreement to the Closing Date, Allegiant shall not, without the prior
consent of Southside, agree in writing or otherwise to engage in any
activity, enter into any transaction or take or omit to take any other
action:
(a) that would (i) prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section
368(a)(1)(A) of the Code or (ii) materially impede or delay the
consummation of the transactions contemplated by this Agreement or
the ability of Allegiant or Southside to obtain any necessary
approvals of any Regulatory Authority required for the transactions
contemplated by this Agreement or to perform its covenants and
agreements under this Agreement; or
(b) except to the extent required by law, regulation or
any Regulatory Authority or contemplated by or expressly permitted
pursuant to the terms of this Agreement, which would make any of
the representations and warranties of Article III of this Agreement
untrue or incorrect in any material respect if made anew after
engaging in such activity, entering into such transaction, or
taking or omitting such other action.
ARTICLE V
---------
ADDITIONAL AGREEMENTS
---------------------
5.01 Access and Information; Due Diligence. Allegiant and
-------------------------------------
Southside shall each afford to the other, and to the other's accountants,
counsel and other representatives, full access during normal business hours,
during the period prior to the Effective Time, to all their
- 47 -
respective properties, books, contracts, commitments and records and, during
such period, each shall furnish promptly to the other (i) a copy of each
report, schedule and other document filed or received by it during such
period pursuant to the requirements of federal and state securities laws and
(ii) all other information concerning its business, properties and personnel
as the other may reasonably request. Each party shall, and shall cause its
advisors and representatives to, (A) hold confidential all information
obtained in connection with any transaction contemplated hereby with respect
to the other party and its Subsidiaries which is not otherwise public
knowledge; (B) in the event of a termination of this Agreement, return all
documents (including copies thereof) obtained hereunder from the other party
or any of its Subsidiaries to such other party or its Subsidiaries and (C)
use its best efforts to cause all information obtained pursuant to this
Agreement or in connection with the negotiation of this Agreement to be
treated as confidential and not use, or knowingly permit others to use, any
such information unless such information becomes generally available to the
public.
5.02 Regulatory Matters.
------------------
(a) Within forty-five (45) days after the date hereof and
so long as Southside and its accountants and advisors have
cooperated with the preparation of the Registration Statement,
Allegiant shall prepare and, subject to the review and consent of
Southside, Southside shall file with the SEC the Registration
Statement (or the equivalent in the form of preliminary proxy
materials) with respect to the shares of Surviving Corporation
Common Stock to be issued in the Merger and the exercise of the
Allegiant Stock Options after the Effective Time and shall use its
best efforts to cause the Registration Statement to become
effective. Within forty-five (45) days after the date hereof and so
long as Southside and its accountants and advisors have cooperated
with the preparation of such applications, Allegiant shall prepare
and, subject to the review and consent of Southside, file an
application for approval of the Merger with the Federal Reserve
Board, and such additional Regulatory Authorities as may require an
application. Southside shall take any action required to be taken
under any applicable state blue sky or securities laws in
connection with the issuance of such shares and the exercise of
such options, and Allegiant and the Allegiant Subsidiaries shall
furnish Southside all information concerning Allegiant and the
Allegiant Subsidiaries and the shareholders thereof as Southside
may reasonably request in connection with any such action.
(b) Southside and Allegiant shall cooperate and use their
respective best efforts to prepare all documentation, to effect all
filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Regulatory Authorities
necessary to consummate the transactions contemplated by this
Agreement.
5.03 Shareholder Approval.
--------------------
(a) Southside shall call a special meeting of its
shareholders to be held as soon as is reasonably possible for the
purpose of voting upon this Agreement, the Merger and the
transactions contemplated hereby, including, but not limited to,
the issuance of the Surviving Corporation Common Stock in the
Merger. In connection with such meeting, Allegiant shall prepare,
subject to the review and consent of Southside, the Joint Proxy
- 48 -
Statement/Prospectus (which shall be part of the Registration
Statement to be filed with the SEC by Southside) and mail the same
to the shareholders of Southside. The Board of Directors of
Southside shall submit for approval of Southside's shareholders the
matters to be voted upon at such meeting. The Board of Directors of
Southside hereby does and will recommend this Agreement, the Merger
and the transactions contemplated hereby to the shareholders of
Southside and use its reasonable best efforts to obtain any vote of
Southside's shareholders necessary for the approval of this
Agreement, subject to Section 4.03.
(b) Allegiant shall call a special meeting of its
shareholders to be held as soon as is reasonably possible for the
purpose of voting upon this Agreement, the Merger and the
transactions contemplated hereby. In connection with such meeting,
Allegiant shall prepare, subject to the review and consent of
Southside, the Joint Proxy Statement/Prospectus (which shall be
part of the Registration Statement to be filed with the SEC by
Southside) and mail the same to the shareholders of Allegiant. The
Board of Directors of Allegiant shall submit for approval of
Allegiant's shareholders the matters to be voted upon at such
meeting. The Board of Directors of Allegiant hereby does and will
recommend this Agreement, the Merger and the transactions
contemplated hereby to the shareholders of Allegiant and use its
reasonable best efforts to obtain any vote of Allegiant's
shareholders necessary for the approval of this Agreement.
5.04 Current Information. During the period from the date of this
-------------------
Agreement to the Closing Date, (i) Southside and Allegiant will promptly
furnish the other party with copies of all monthly and other interim
financial statements as the same become available and shall cause one or
more of its designated representatives to confer on a regular and frequent
basis with representatives of the other party, and (ii) Allegiant shall
promptly furnish to Southside copies of all filings by Allegiant with each
of the Federal Reserve Board, any other Regulatory Authority and the SEC.
Each party shall promptly notify the other party of the following events
immediately upon learning of the occurrence thereof, describing the same
and, if applicable, the steps being taken by the affected party with respect
thereto: (a) the occurrence of any event which could cause any
representation or warranty of such party or any schedule, statement, report,
notice, certificate or other writing furnished by such party to be untrue or
misleading in any material respect; (b) any Material Adverse Effect to
Southside or Allegiant; (c) the issuance or commencement of any governmental
and/or regulatory agency complaint, investigation or hearing or any
communications indicating that the same may be contemplated and, as to any
such matter which shall now or hereafter be in effect, any communications
pertaining thereto; or (d) the institution or the threat of any material
litigation involving Southside or Allegiant. Until the Effective Time,
Southside shall deliver to Allegiant monthly reports in form and pursuant to
past timing as Southside has historically provided to its board members.
5.05 Conforming Entries.
------------------
(a) Notwithstanding that Southside believes that Southside
and Southside Subsidiaries have established all reserves and taken
all provisions for probable loan losses required by GAAP and
applicable laws, rules and regulations, Southside recognizes that
Allegiant may have adopted different loan, accrual and reserve
policies
- 49 -
(including loan classifications and levels of reserves for probable
loan losses). From and after the date of this Agreement, Southside
and Allegiant shall consult and cooperate with each other with
respect to conforming the loan, accrual and reserve policies of
Southside and the Southside Subsidiaries, to those policies of
Allegiant, as specified in each case in writing to Southside, based
upon such consultation and as hereinafter provided.
(b) In addition, from and after the date of this
Agreement, Southside and Allegiant shall consult and cooperate with
each other with respect to determining appropriate Southside
accruals, reserves and charges to establish and take in respect of
excess equipment write-off or write-down of various assets and
other appropriate charges and accounting adjustments taking into
account the parties' business plans following the Merger, as
specified in each case in writing to Southside, based upon such
consultation and as hereinafter provided.
(c) Southside and Allegiant shall consult and cooperate
with each other with respect to determining the amount and the
timing for recognizing for financial accounting purposes
Southside's expenses of the Merger and the restructuring charges,
if any, related to or to be incurred in connection with the Merger.
(d) With respect to clauses (a) through (c) of this
Section 5.05, it is the objective of Allegiant and Southside that
such reserves, accruals, charges and divestitures, if any, to be
taken shall be consistent with GAAP and shall be taken no earlier
than immediately prior to the Merger on the Closing Date.
5.06 Agreements of Affiliates. Allegiant shall use its best
------------------------
efforts to cause each person who is determined to be an "affiliate" of
Allegiant for purposes of Rule 145 under the Securities Act to deliver to
Allegiant, as of the date hereof, or as soon as practicable hereafter, a
written agreement in substantially the form set forth as Exhibit B to this
---------
Agreement providing that each such person will agree not to sell, pledge,
transfer or otherwise dispose of the shares of Surviving Corporation Common
Stock to be received by such person in the Merger during the period
designated in such letter and thereafter in compliance with the applicable
provisions of the Securities Act. Upon reasonable request of Allegiant,
Southside shall use its best efforts to cause each person who is determined
to be an "affiliate" of Southside to deliver to Allegiant, as of the date
hereof, or as soon as practicable hereafter, a written agreement in
substantially the form set forth as Exhibit B to this Agreement providing
---------
that each such person will agree not to sell, pledge, transfer or otherwise
dispose of the shares of Surviving Corporation Common Stock to be received by
such person in the Merger during the period designated in such letter and
thereafter in compliance with the applicable provisions of the Securities
Act.
5.07 Expenses. Each party hereto shall bear its own expenses
--------
incident to preparing, entering into and carrying out this Agreement and to
consummating the Merger; provided, however, that Allegiant shall pay all
printing expenses and filing fees incurred in connection with this
Agreement, the Registration Statement and the Joint Proxy
Statement/Prospectus.
- 50 -
5.08 Miscellaneous Agreements and Consents.
-------------------------------------
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its respective best
efforts to take, or cause to be taken, all commercially reasonable
actions, and to do, or cause to be done, all commercially
reasonable things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as expeditiously as
possible, including, without limitation, using its respective best
efforts to take all commercially reasonable actions to lift or
rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the
transactions contemplated hereby. Each party shall, and shall cause
each of its respective Subsidiaries to, use its best efforts to
obtain consents of all third parties and Regulatory Authorities
necessary or, in the opinion of Allegiant, desirable for the
consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing, no party shall be obligated to agree
to a material restriction or condition in order to obtain such
approvals and consents.
(b) Southside, prior to the Effective Time, shall (i)
consult and cooperate with Allegiant regarding the implementation
on or after the Effective Time of those policies and procedures
established by Allegiant for the governance of Southside's
Subsidiaries and not otherwise referenced in Section 5.05 hereof,
including, without limitation, policies and procedures pertaining
to the accounting, asset/liability management, audit, credit, human
resources, treasury and legal functions, and (ii) at the reasonable
request of Allegiant, conform on or after the Effective Time
Southside's existing policies and procedures in respect of such
matters to Allegiant's policies and procedures or, in the absence
of any existing Southside policy or procedure regarding any such
function, introduce Allegiant's policies or procedures in respect
thereof, unless to do so would cause Southside or any of the
Southside Subsidiaries to be in violation of any law, rule or
regulation or requirement of any Regulatory Authority having
jurisdiction over Southside and/or the Southside Subsidiary
affected thereby.
5.09 Employee Agreements and Benefits.
--------------------------------
(a) Following the Effective Time, Allegiant and Southside
agree that they shall cause the Surviving Corporation to assume and
honor in accordance with their terms all employment, severance,
deferred compensation, split-dollar insurance and other
compensation contracts set forth on Schedule 2.11(b) between
----------------
Southside, any of the Southside Subsidiaries, and any current or
former director, officer, employee or agent thereof, and all
provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under the Southside Employee
Plans.
(b) Subject to Sections 5.09(d) and 5.14, the provisions
of the Southside Stock Plans and any other plan, program or
arrangement providing for the issuance or grant of any other
interest in respect of the Equity Securities of Southside or any of
the Southside Subsidiaries shall be deleted and terminated as of
the Effective Time.
- 51 -
(c) Allegiant and Southside agree that, except as set
forth in Sections 5.09(b) and 5.09(d) hereof, the Southside
Employee Plans shall not be terminated by reason of the Merger but
shall continue thereafter as plans of the Surviving Corporation
until such time as the employees of Southside and the Southside
Subsidiaries are integrated into Surviving Corporation's employee
benefit plans (which plans, to the extent practicable, shall be the
same as Allegiant's employee benefit plans) available to other
employees of Surviving Corporation, subject to the terms and
conditions specified in such plans and to such changes therein as
may be necessary to reflect the consummation of the Merger.
Allegiant and Southside agree that Surviving Corporation shall take
such steps as are necessary or required to integrate the employees
of Southside and the Southside Subsidiaries into Surviving
Corporation's employee benefit plans available to other employees
of Surviving Corporation and its Subsidiaries as soon as
practicable after the Effective Time, with (i) full credit for
prior service with Southside or any of the Southside Subsidiaries
for purposes of vesting and eligibility for participation and
benefit allocation (but not benefit accruals under any defined
benefit plan), and co-payments and deductibles, (ii) waiver of all
waiting periods, evidence of insurability and pre-existing
condition exclusions or penalties, (iii) full credit for claims
arising prior to the Effective Time for purposes of deductibles,
out-of-pocket maximums, benefit maximums and all other similar
limitations for the applicable plan year in which the Merger is
consummated, and (iv) full credit for vacation accrued by employees
of Southside and the Southside Subsidiaries on or before the
Effective Time. Allegiant and Southside agree that Surviving
Corporation shall provide COBRA coverage for the periods and
otherwise to the extent required by applicable law for employees
and former employees of Southside and the Southside Subsidiaries
(and their dependents and qualified beneficiaries) who are eligible
for COBRA coverage under the group health plans of Southside and
the Southside Subsidiaries. Allegiant and Southside agree that
Surviving Corporation shall provide severance benefits for
employees of Southside and the Southside Subsidiaries who terminate
employment within six (6) months following the Effective Time equal
to one week of salary for each year of service, vesting after three
(3) years, not to exceed a total of ten (10) weeks of salary, and
thereafter such employees shall receive the same severance benefits
that Surviving Corporation provides to all other employees of
Surviving Corporation and the Surviving Corporation Subsidiaries
and shall receive credit for their years of service with Southside
and the Southside Subsidiaries. Surviving Corporation shall not
take any action which will adversely affect the participation of
the employees of Southside and the Southside Subsidiaries in any
Section 125 plan maintained by Southside and the Southside
Subsidiaries during the calendar year in which the Closing occurs.
(d) Prior to the Effective Time, Southside shall split the
Southside Employee Stock Ownership Plan with 401(k) Provisions (the
"KSOP") into two plans, one plan to consist of the employee stock
ownership plan portion of the KSOP (the "ESOP") and one plan to
consist of the 401(k) portion of the KSOP (the "401(k)"). As of the
Effective Time, the ESOP shall be terminated and immediately
following the Effective Time each Acquisition Loan (as defined in
the KSOP) shall be repaid in full with an amount of unallocated
cash or shares of Surviving Corporation stock held in the ESOP
having an aggregate fair market value equal to the unpaid balance
of any such Loan at the time of
- 52 -
payment. All ESOP accounts shall fully vest and be nonforfeitable as
of the termination of the ESOP. Following the date of this
Agreement, Southside shall amend the KSOP to provide for its
division into two plans and for the termination of the ESOP
consistent with the foregoing provisions, subject to Allegiant's
review and consent, not to be unreasonably withheld.
As soon as practicable after the receipt of a favorable
determination letter from the Internal Revenue Service ("IRS") as
to the tax qualified status of the ESOP upon its termination under
the Code (the "Final Determination Letter"), distributions of the
benefits under the ESOP shall be made. From and after the date of
this Agreement, in anticipation of such termination and
distribution, Southside and its representatives before the
Effective Time and Allegiant and Southside agree that Surviving
Corporation and its representatives after the Effective Time shall
use their best efforts to apply for and to obtain such favorable
Final Determination Letter from the IRS.
5.10 Press Releases. Except to the extent disclosure may be
--------------
required by applicable law, Southside and Allegiant shall consult with each
other as to the form and substance of any proposed press release or other
proposed public disclosure of matters related to this Agreement or any of
the transactions contemplated hereby, and each party shall have the right to
reasonably approve any proposed press release.
5.11 State Takeover Statutes. Southside and Allegiant will
-------------------------
take all steps necessary to exempt the transactions contemplated by this
Agreement from any applicable Missouri state takeover law.
5.12 Directors' and Officers' Indemnification and Insurance.
------------------------------------------------------
(a) Allegiant and Southside agree that the Merger shall
not affect or diminish any of the duties and obligations of
indemnification of Southside, Allegiant or any of their respective
Subsidiaries existing as of the Effective Time in favor of
employees, agents, directors or officers of Southside, Allegiant or
any of their respective Subsidiaries arising by virtue of their
respective Articles of Incorporation, charters or By-Laws in the
form in effect at the date of this Agreement or arising by
operation of law or arising by virtue of any contract, resolution
or other agreement or document existing at the date of this
Agreement, and Allegiant and Southside agree that Surviving
Corporation shall continue such duties and obligations in full
force and effect for so long as they would (but for the Merger)
otherwise survive and continue in full force and effect. To the
extent that Southside's or Allegiant's respective existing
directors' and officers' liability insurance policy would provide
coverage for any action or omission occurring prior to the
Effective Time, Southside or Allegiant, as applicable, agrees to
give proper notice to the insurance carrier and to Surviving
Corporation of any potential claim thereunder so as to preserve
Southside's or Allegiant's, as applicable, rights to such insurance
coverage.
(b) After the Effective Time, Allegiant and Southside
agree that Surviving Corporation will provide, or cause to be
provided, such coverage to the officers and directors of Southside
and the Southside Subsidiaries who shall continue as officers and
- 53 -
directors of the Surviving Corporation and its Subsidiaries to the
same extent that Allegiant provides or causes to be provided such
coverage to the other officer and directors of Surviving
Corporation and its Subsidiaries.
(c) For a period of six (6) years after the Effective
Time, Allegiant and Southside agree that Surviving Corporation
shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by
Southside covering past or future claims with respect to periods
before the Effective Time (provided that Allegiant and Southside
agree that Surviving Corporation may substitute therefor policies
of comparable coverage with respect to claims arising from facts or
events which occurred before the Effective Time); provided,
however, that Surviving Corporation shall not be required to pay
premiums for such insurance which exceed in the aggregate 150% of
the last annual premium paid prior to the date hereof, but in such
case shall purchase as much coverage as possible for such amount.
Prior to the Effective Time, Allegiant may request Southside to,
and Southside shall, purchase insurance coverage, on such terms and
conditions as shall be acceptable to Allegiant. Southside may
purchase, as it deems necessary or appropriate, insurance coverage
of directors and officers or a rider or endorsement to its existing
policy, providing for coverage for securities laws claims and
similar claims which could result from the transactions
contemplated hereby; provided, however, any amount of such coverage
in excess of $20,000 shall be counted against the 150% limit
provided above and Allegiant shall have the opportunity to provide
similar coverage through its insurance carrier if it is determined
that such premiums will be lower than those available to Southside.
5.13 Tax Matters.
-----------
(a) Prior to the Effective Time, each party shall
cooperate with the other party and shall use its reasonable best
efforts to cause the Merger to qualify as a reorganization under
Section 368(a)(1)(A) of the Code, and will not take any action
reasonably likely to cause the Merger not so to qualify. Allegiant
and Southside agree that Surviving Corporation, for the benefit of
the Southside shareholders, shall not take any action after the
Effective Time that would cause the Merger not to so qualify.
(b) Each party shall cooperate with the other party and
shall use its reasonable best efforts to obtain the opinion
referred to in Section 6.02(e) and in connection therewith, each of
Southside and Allegiant shall deliver to such counsel customary and
reasonable representation letters in form and substance reasonably
satisfactory to such counsel.
5.14 Employee Stock Options.
----------------------
(a) At the Effective Time, without any action on the part
of any holder of any such option, each Southside Stock Option that
is outstanding and unexercised immediately prior thereto shall
cease to represent a right to acquire shares of Southside Common
Stock and shall be converted automatically into an option to
purchase shares of Surviving Corporation Common Stock in an amount
and at an exercise price determined
- 54 -
as provided below (and otherwise subject to the terms of the
Southside Stock Plan under which it was issued and the Southside
Stock Option Agreement by which it is evidenced and the agreements
evidencing grants thereunder, provided that all SouthSide Stock
Options shall be exercisable throughout their stated terms
regardless of any provisions therein pursuant to which they would
otherwise terminate or expire at an earlier time due to the
termination of employment of the holder thereof):
(i) The number of shares of Surviving Corporation
Common Stock to be subject to each such Southside Stock
Option shall be equal to the product of (A) the number of
shares of Southside Common Stock purchasable upon exercise
of the Southside Stock Option immediately prior to the
Effective Time and (B) 1.39 (as such exchange ratio may be
adjusted as provided herein), the product being rounded,
if necessary, up or down, to the nearest whole share;
provided, however, that each Southside Stock Option shall,
in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split,
stock dividend, recapitalization or other similar
transaction subsequent to the Effective Time; and
(ii) The exercise price per share of Surviving
Corporation Common Stock under the new option shall be
equal to the exercise price per share of Southside Common
Stock under the Southside Stock Option immediately prior
to the Effective Time divided by 1.39 (as such exchange
ratio may be adjusted as provided herein), provided that
such exercise price shall be rounded to the nearest whole
cent.
(b) At the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any such option,
each option to purchase shares of Allegiant Common Stock (each, an
"Allegiant Option") that is outstanding and unexercised immediately
prior thereto shall be assumed by the Surviving Corporation and
shall cease to represent the right to acquire shares of Allegiant
Common Stock and shall be converted into an option to purchase
shares of Surviving Corporation Common Stock, on the same terms and
conditions as are in effect immediately prior to the Effective
Time, except that all references to Allegiant shall be deemed to be
references to the Surviving Corporation.
5.15 Exemption from Liability under Section 16(b): Allegiant
-------------------------------------------------------
Insiders. Assuming that Allegiant delivers to Southside the Allegiant
--------
Section 16 Information (as defined below) in a timely fashion prior to the
Effective Time, the board of directors of Southside, or a committee of
Non-Employee Directors thereof (as such term is defined for purposes of Rule
16b-3(d) under the Exchange Act), shall reasonably promptly thereafter and
in any event prior to the Effective Time adopt a resolution providing in
substance that the receipt by the Allegiant Insiders (as defined below) of
Surviving Corporation Common Stock in exchange for shares of Allegiant
Common Stock, and of options to purchase shares of Surviving Corporation
Common Stock upon conversion of options to purchase shares of Allegiant
Common Stock, in each case pursuant to the transactions contemplated hereby
and to the extent such securities are listed in the Allegiant Section 16
Information, are intended to be exempt from liability pursuant to Section
- 55 -
16(b) under the Exchange Act such that any such receipt shall be so exempt.
"Allegiant Section 16 Information" shall mean information accurate in all
respects regarding the Allegiant Insiders, the number of shares of Allegiant
Common Stock held by each such Allegiant Insider and expected to be
exchanged for Surviving Corporation Common Stock in the Merger, and the
number and description of the options to purchase shares of Allegiant Common
Stock held by each such Allegiant Insider and expected to be converted into
options to purchase shares of Surviving Corporation Common Stock in
connection with the Merger. "Allegiant Insiders" shall mean those officers
and directors of Allegiant who are subject to the reporting requirements of
Section 16(a) of the Exchange Act and who are listed in the Allegiant
Section 16 Information.
5.16 Exemption from Liability under Section 16(b): Southside
-------------------------------------------------------
Insiders. The board of directors of Southside, or a committee of
--------
Non-Employee Directors thereof (as such term is defined for purposes of Rule
16b-3(d) under the Exchange Act), may, as it deems necessary or advisable,
adopt a resolution providing in substance that the receipt by the Southside
Insiders (as defined below) of Surviving Corporation Common Stock in
exchange for shares of Southside Common Stock, and of options to purchase
shares of Surviving Corporation Common Stock upon conversion of options to
purchase shares of Southside Common Stock, in each case pursuant to the
transactions contemplated hereby and to the extent such securities are
listed in the Southside Section 16 Information, are intended to be exempt
from liability pursuant to Section 16(b) under the Exchange Act such that
any such receipt shall be so exempt. "Southside Section 16 Information"
shall mean information accurate in all respects regarding the Southside
Insiders, the number of shares of Southside Common Stock held by each such
Southside Insider and expected to be exchanged for Surviving Corporation
Common Stock in the Merger, and the number and description of the options to
purchase shares of Southside Common Stock held by each such Southside
Insider and expected to be converted into options to purchase shares of
Surviving Corporation Common Stock in connection with the Merger. "Southside
Insiders" shall mean those officers and directors of Southside who are
subject to the reporting requirements of Section 16(a) of the Exchange Act
and who are listed in the Southside Section 16 Information.
5.17 No Negotiations. Allegiant covenants and agrees that, prior
---------------
to the Effective Time, it will not enter into any negotiations, discussions,
agreements, arrangements or understandings with First Banks regarding a
possible transaction which would result in the disposition of any Southside
Subsidiaries to First Banks.
ARTICLE VI
----------
CONDITIONS
----------
6.01 Conditions to Each Party's Obligation To Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver at or prior to the Effective Time of
the following conditions:
(a) Shareholder Approval. The approval of this Agreement,
--------------------
the Merger and the transactions contemplated thereby shall have
received the requisite vote of shareholders of Southside and
Allegiant at the special meetings of shareholders or any
adjournment thereof called pursuant to Section 5.03 hereof.
- 56 -
(b) Regulatory Approval. This Agreement and the
-------------------
transactions contemplated hereby shall have been approved by the
Federal Reserve Board and any other Regulatory Agencies whose
approval is required for consummation of the transactions
contemplated hereby and all requisite waiting periods imposed by
the foregoing shall have expired.
(c) Effectiveness of Registration Statement. The
---------------------------------------
Registration Statement shall have been declared effective and shall
not be subject to a stop order or any threatened stop order.
(d) No Judicial Prohibition. Neither Southside nor
-------------------------
Allegiant shall be subject to any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits
the consummation of the Merger.
6.02 Conditions to Obligations of Southside. The obligations of
--------------------------------------
Southside to effect the Merger shall be subject to the fulfillment or waiver
at or prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations
------------------------------
and warranties of Allegiant set forth in Article III of this
Agreement (subject to the standard set forth in Section 1.17(b))
shall be true and correct as of the date of this Agreement and as
of the Effective Time (as though made on and as of the Effective
Time, except (i) to the extent such representations and warranties
are by their express provisions made as of a specified date or
period, and (ii) for the effect of transactions contemplated by
this Agreement), and Southside shall have received a certificate of
any authorized officer of Allegiant, signing solely in his capacity
as an officer of Allegiant, to such effect.
(b) Performance of Obligations. Allegiant shall have
--------------------------
performed in all material respects all obligations required to be
performed by it under this Agreement prior to the Effective Time,
and Southside shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of Allegiant, signing
solely in their capacities as officers of Allegiant, to such
effect.
(c) Permits, Authorizations, etc. Allegiant shall have
-----------------------------
obtained any and all material permits, authorizations, consents,
waivers and approvals required for the lawful consummation of the
Merger.
(d) No Material Adverse Effect. Since the date of this
--------------------------
Agreement, there shall have been no Material Adverse Effect on
Allegiant and its Subsidiaries, taken as a whole.
(e) Tax Opinion of Allegiant's Counsel. Southside shall
----------------------------------
have received an opinion of counsel to Allegiant which provides
that it may be relied upon by the shareholders of Southside, in
form and substance reasonably satisfactory to Southside, on the
basis of relevant facts, the representations referred to in Section
5.13 and reasonable assumptions set forth in such opinion, dated as
of the date of the Effective Time, to the effect that (i) the
Merger will qualify for federal income tax purposes as a
reorganization under Section 368(a)(1)(A) of the Code, (ii) both
Southside and Allegiant are each parties
- 57 -
to the reorganization within the meaning of Section 368 of the Code,
(iii) no gain or loss will be recognized by Southside as a result of
the Merger, and (iv) no gain or loss will be recognized by the
shareholders of Southside who exchange all of their Southside Common
Stock solely for Allegiant Common Stock pursuant to the Merger
(except with respect to cash received pursuant to a Cash
Distribution or a Combination Distribution, the exercise of
Dissenters Rights or in lieu of a fractional share interest in
Allegiant Common Stock).
(f) Election of Designees. Surviving Corporation's Board
---------------------
of Directors shall have elected the designees of Southside to
Surviving Corporation's Board of Directors pursuant to Section
1.06.
(g) Reaffirmation of Opinion. Southside shall have
------------------------
received, on or shortly before the date of the mailing of the Joint
Proxy Statement/Prospectus, from its investment banker, Stifel,
Nicolaus & Company, Incorporated, the reaffirmation of the opinion
of such investment banker, originally rendered and delivered to
Southside at the meeting of the Board of Directors of Southside at
which this Agreement was approved by such Board of Directors, to
the effect that the transactions contemplated by this Agreement,
including the Merger, are fair to Southside and its shareholders
from a financial point of view.
6.03 Conditions to Obligations of Allegiant. The obligations of
--------------------------------------
Allegiant to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations
------------------------------
and warranties of Southside set forth in Article II of this
Agreement (subject to the standard set forth in Section 1.17(b))
shall be true and correct as of the date of this Agreement and as
of the Effective Time (as though made on and as of the Effective
Time, except (i) to the extent such representations and warranties
are by their express provisions made as of a specific date or
period, and (ii) for the effect of transactions contemplated by
this Agreement) and Allegiant shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of
Southside, signing solely in their capacities as officers of
Southside, to such effect.
(b) Performance of Obligations. Southside shall have
--------------------------
performed in all material respects all obligations required to be
performed by it under this Agreement prior to the Effective Time,
and Allegiant shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer, signing solely in
their capacities as officers of Southside, to that effect.
(c) Permits, Authorizations, etc. Southside shall have
-----------------------------
obtained any and all material permits, authorizations, consents,
waivers and approvals required for the lawful consummation by it of
the Merger.
- 58 -
(d) No Material Adverse Effect. Since the date of this
--------------------------
Agreement, there shall have been no Material Adverse Effect on
Southside and the Southside Subsidiaries, taken as a whole.
(e) Reaffirmation of Opinion. Allegiant shall have
------------------------
received, on or shortly before the date of the mailing of the Joint
Proxy Statement/Prospectus, from its investment banker, Legg Mason
Wood Walker, Incorporated, the reaffirmation of the opinion of such
investment banker, originally rendered and delivered to Allegiant
at the meeting of the Board of Directors of Allegiant at which this
Agreement was approved by such Board of Directors, to the effect
that the transactions contemplated by this Agreement, including the
Merger, are fair to Allegiant and its shareholders from a financial
point of view.
ARTICLE VII
-----------
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
7.01 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing Date, whether before or after approval by the shareholders
of Southside, only:
(a) by mutual written consent by the Board of Directors of
Allegiant and by the Board of Directors of Southside;
(b) by the Board of Directors of Allegiant or the Board of
Directors of Southside at any time after March 31, 2002, if the
Merger shall not theretofore have been consummated (provided that
the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein);
(c) by the Board of Directors of Allegiant or the Board of
Directors of Southside if (i) the Federal Reserve Board or any
other federal and/or state Regulatory Authority whose approval is
required for the consummation of the transactions contemplated
hereby has denied approval of the Merger and such denial has become
final and nonappealable, (ii) the shareholders of Southside shall
not have approved this Agreement at the meeting referred to in
Section 5.03(a) or at any adjournment thereof, or (iii) the
shareholders of Allegiant shall not have approved this Agreement at
the meeting referred to in Section 5.03(b) or at any adjournment
thereof;
(d) by the Board of Directors of Southside, in the event
(i) of a breach by Allegiant of any representation or warranty of
Allegiant contained herein (subject to the standard set forth in
Section 1.17(b)) or a material volitional breach by Allegiant of
any covenant or agreement to Southside contained herein, which
breach of representation, warranty, covenant or agreement is not
cured within 30 days after written notice thereof is given to
Allegiant by Southside or is not waived by Southside during such
period, or (ii) any of the conditions set forth in Sections 6.01 or
6.02 hereof shall have become incapable of fulfillment;
- 59 -
(e) by the Board of Directors of Allegiant, in the event
(i) of a breach by Southside of any representation or warranty of
Southside contained herein (subject to the standard set forth in
Section 1.17(b)) or a material volitional breach by Southside of
any covenant or agreement to Allegiant contained herein, which
breach of representation, warranty, covenant or agreement is not
cured within 30 days after written notice thereof is given to
Southside by Allegiant or is not waived by Allegiant during such
period, or (ii) any of the conditions set forth in Sections 6.01 or
6.03 hereof shall have become incapable of fulfillment;
(f) by Allegiant, (i) if there shall have occurred an
adverse change in the Southside Recommendation (or the Board of
Directors of Southside have resolved to take such action); (ii) if
there shall have occurred a material breach of Section 4.03 by
Southside or any of its officers, directors, employees, advisors or
agents, including, without limitation, by failing to promptly
notify Allegiant as required thereunder; (iii) Southside shall have
failed to include in the Joint Proxy Statement/Prospectus the
recommendation of the Board of Directors of Southside in favor of
the adoption and approval of this Agreement and the approval of the
Merger; (iv) the Board of Directors of Southside shall have
approved, endorsed or recommended any Acquisition Proposal of
Southside; (v) a tender or exchange offer relating to securities of
Southside shall have been commenced and Southside shall not have
sent to its shareholders, within ten (10) business days after the
commencement of such tender or exchange offer, a statement
disclosing that Southside recommends rejection of such tender or
exchange offer; or (vi) Southside or Southside's Board of Directors
or any committee thereof shall have resolved to do or permit any of
the foregoing;
(g) by Southside, pursuant to the provisions of Section
4.03(b), provided that it has complied with all provisions thereof,
including the notice provisions therein, and that it complies with
applicable requirements relating to the payment (including the
timing of any payment) of the Southside Termination Fee (provided
in no event shall Southside be required to pay the Southside
Termination Fee under more than one provision of this Agreement);
(h) by Southside in the event that, immediately prior to
the Effective Time, Allegiant shall not have delivered to the
Exchange Agent pursuant to Section 1.09(a) hereof, cash, in
immediately available funds, equal to the aggregate Cash
Distribution; and
(i) by Southside if the holders of 10% or more of the
outstanding shares of Southside Common Stock shall, as of the time
immediately after the Southside shareholders' meeting held pursuant
to Section 5.03(a), have taken all actions then required under
Missouri law to exercise and perfect their dissenter's rights.
The party desiring to terminate this Agreement pursuant to the preceding
paragraph (b), (c), (d), (e), (f), (g), (h) or (i) shall give written notice
of such termination to the other parties hereto in accordance with Section
8.09 below.
- 60 -
7.02 Effect of Termination.
---------------------
(a) In the event of termination of this Agreement as
provided in Section 7.01 above, this Agreement shall forthwith
become void and there shall be no liability on the part of
Allegiant or Southside or their respective officers or directors
except as set forth in the second sentence of Section 5.01 and in
Sections 5.07, 7.02(b) and 7.02(c) which obligations shall survive
such termination.
(b) In the event that (A) an Acquisition Proposal shall
have been made known to Southside or any of the Southside
Subsidiaries or has been made directly to holders of Southside
Common Stock generally or any person shall have publicly announced
an intention (whether or not conditional) to make an Acquisition
Proposal and such Acquisition Proposal or announced intention shall
not have been withdrawn and thereafter this Agreement is terminated
by any party pursuant to Section 7.01(b), or (B) this Agreement is
terminated by (x) Southside pursuant to Section 7.01(g), or (y) by
Allegiant pursuant to Section 7.01(e)(i) or 7.01(f), then Southside
shall promptly, but in no event later than two (2) days after the
date of such termination, pay Allegiant a fee equal to the greater
of 5% of the aggregate value of the Merger Consideration
(determined as of the date of such termination) and $5 million (the
"Southside Termination Fee"), payable by wire transfer of same day
funds. Anything to the contrary in this Agreement notwithstanding,
the Southside Termination Fee shall be the only liability that
Southside shall have to Allegiant in the event that this Agreement
is terminated under the circumstances described in this Section
7.02(b). Southside acknowledges that the agreements contained in
this 7.02 are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Allegiant would
not enter into this Agreement; accordingly, if Southside fails to
promptly pay any amount due pursuant to this Section 7.02, and in
order to obtain such payment, Allegiant commences a suit which
results in a judgment against Southside for the Southside
Termination Fee, Southside shall also pay to Allegiant its costs
and expenses (including attorneys' fees) in connection with such
suit, together with interest on the amount of the Southside
Termination Fee at the prime rate of Bank of America, N.A. in
effect on the date such payment was required to be made.
(c) In the event that this Agreement is terminated (x) by
Southside pursuant to Section 7.01(d)(i) or Section 7.01(h), (y) by
Allegiant or Southside pursuant to Section 7.01(c)(iii) or (z) by
Allegiant pursuant to Section 7.01(b) or 7.01(e)(ii) or Southside
pursuant to Section 7.01(d)(ii) (provided, for purposes of this
clause (z), only if such termination is a result of failure to
fulfill the condition with respect to Allegiant shareholder
approval in Section 6.01(a)), then Allegiant shall promptly, but in
no event later than two (2) days after the date of such
termination, pay Southside a fee equal to the greater of 5% of the
aggregate value of the Merger Consideration (determined as of the
date of such termination) and $5 million (the "Allegiant
Termination Fee"), payable by wire transfer of same day funds.
Anything to the contrary in this Agreement notwithstanding, the
Allegiant Termination Fee shall be the only liability that
Allegiant shall have to Southside in the event that this Agreement
is terminated under the circumstances described in this Section
7.02(c). Allegiant acknowledges that the
- 61 -
agreements contained in this 7.02 are an integral part of the
transactions contemplated by this Agreement, and that, without these
agreements, Southside would not enter into this Agreement;
accordingly, if Allegiant fails to promptly pay any amount due
pursuant to this Section 7.02, and in order to obtain such payment,
Southside commences a suit which results in a judgment against
Allegiant for the Allegiant Termination Fee, Allegiant shall also
pay to Southside its costs and expenses (including attorneys' fees)
in connection with such suit, together with interest on the amount
of the Allegiant Termination Fee at the prime rate of Bank of
America, N.A. in effect on the date such payment was required to be
made.
7.03 Amendment. This Agreement, the Exhibits and the Schedules
---------
hereto may be amended by the parties hereto, by action taken by or on behalf
of the respective Boards of Directors of Allegiant and Southside, at any
time before or after approval of this Agreement by the shareholders of
Southside; provided, however, that after any such approval by the
shareholders of Southside no such modification shall (A) alter or change the
amount of Merger Consideration to be received by holders of Southside Common
Stock as provided in this Agreement or (B) adversely affect the tax
treatment to holders of Southside Common Stock as a result of the receipt of
the Merger Consideration; and provided, further, however, that after any
such approval by the shareholders of Allegiant no such modification shall
(A) alter or change the amount of Merger Consideration to be received by
holders of Allegiant Common Stock as provided in this Agreement or (B)
adversely affect the tax treatment to holders of Allegiant Common Stock as a
result of the receipt of the Merger Consideration. This Agreement, the
Exhibits and the Schedules hereto may not be amended except by an instrument
in writing signed on behalf of each of Allegiant and Southside.
7.04 Waiver. Any term, condition or provision of this Agreement
------
may be waived in writing at any time by the party which is, or whose
shareholders or stockholders, as the case may be, are, entitled to the
benefits thereof.
ARTICLE VIII
------------
GENERAL PROVISIONS
------------------
8.01 Non-Survival of Representations, Warranties and Agreements.
----------------------------------------------------------
No investigation by the parties hereto made heretofore or hereafter shall
affect the representations and warranties of the parties which are contained
herein and each such representation and warranty shall survive such
investigation. Except as set forth below, all representations, warranties
and agreements in this Agreement of Allegiant and Southside or in any
instrument delivered by Allegiant or Southside pursuant to or in connection
with this Agreement shall expire at the Effective Time. In the event of
consummation of the Merger, the agreements contained in or referred to in
Sections 1.04-1.13, 5.07, 5.09, 5.12, 5.13(a), 5.14, 8.01 and 8.02 shall
survive the Effective Time.
- 62 -
8.02 Indemnification.
---------------
(a) Allegiant and Southside shall, and Allegiant and
Southside agree that Surviving Corporation shall (hereinafter, in
such capacity being referred to as the "Indemnifying Party") agree
to indemnify and hold harmless each other and their officers,
directors and controlling persons (each such other party being
hereinafter referred to, individually and/or collectively, as the
"Indemnified Party") against any and all losses, claims, damages or
liabilities, joint or several, to which the Indemnified Party may
become subject under the Securities Act, the Exchange Act or other
federal or state law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions
in respect thereof): (i) arise primarily out of any information
furnished by the Indemnifying Party and included in the
Registration Statement as originally filed or in any amendment
therefor and supplement thereof, or in the Joint Proxy
Statement/Prospectus, or in any amendment therefor or supplement
thereof, or are based primarily upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement as originally filed or in any amendment
therefor and supplement thereof, or in the Joint Proxy
Statement/Prospectus, or in any amendment therefor or supplement
thereof, and provided for inclusion thereof by the Indemnifying
Party or (ii) arise primarily out of or are based primarily upon
the omission or alleged omission by the Indemnifying Party in
supplying information to be included in the Registration Statement
as originally filed or in any amendment therefor and supplement
thereof, or in the Joint Proxy Statement/Prospectus, or in any
amendment therefor and supplement thereof, a material fact required
to be stated therein or necessary to make the statements made
therein not misleading, and agrees to reimburse each such
Indemnified Party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, no Indemnified Party shall be entitled to be
indemnified or held harmless hereunder for such party's gross
negligence or willful misconduct.
(b) Allegiant and Southside agree that Surviving
Corporation agrees to indemnify and hold harmless each shareholder
of Southside who is a shareholder at the Effective Time for any
federal, state or local income tax (including interest, additions
to tax, and penalties) that is assessed or otherwise becomes due
and owing with respect to Surviving Corporation Common Stock
received by such shareholder of Southside with respect to Stock
Election Shares or the Stock Distribution portion of Combination
Election Shares pursuant to the Merger to the extent that the
receipt by such shareholder of such Surviving Corporation Common
Stock in the Merger is taxable to such shareholder with respect to
the receipt by such shareholder of Stock Election Shares or the
Stock Distribution portion of Combination Election Shares for
federal, state or local income tax purposes (a "Tax Loss"). In the
case of any Tax Loss that is indemnifiable pursuant to this Section
8.02(b), the amount that shall be paid by Surviving Corporation
pursuant to the foregoing provisions of this Section 8.02(b) (the
"Amount") shall be increased, in addition to the Amount, by an
additional cash payment (the "Additional Payment") sufficient to
put the recipient shareholder in the position such that the Amount
plus the Additional Payment shall, after deduction of all net
income and other taxes required to be paid by such shareholder in
respect of the receipt of the Amount and the
- 63 -
Additional Payment (taking into account any allowable credits or
deductions arising therefrom), be equal to the Amount (such increase
being deemed to mean that the Amount is paid on an "After-Tax
Basis"). Such calculations shall be made with respect to all such
income taxes on the assumption that the recipient is subject to net
income taxation at the highest applicable federal, state and local
combined marginal income tax rate (the "Combined Tax Rate").
If as a result of a Tax Loss occurring with respect to any taxable
year under circumstances that require Surviving Corporation to make
any payments described in this Section 8.02(b) with respect to such
Tax Loss, any shareholder entitled to such payments shall recognize
with respect to any taxable year in which such Tax Loss occurs or
any subsequent year ending within three (3) years after the
Effective Time any deduction, loss, credit, increased loss or
reduced gain as a result of an increase in adjusted basis of the
Surviving Corporation shares received pursuant to the Merger or
other benefit that would not otherwise have been recognized but for
such Tax Loss, such benefit shall either be taken into account in
determining the amount payable to such shareholder pursuant to this
Section 8.02(b), or to the extent such benefit was not so taken
into account at the time the Amounts and Additional Amounts were
paid pursuant to this Section 8.02(b) and if such benefits are
recognized and taken into account in a year subsequent to a year
with respect to which the Tax Loss occurs, but within three (3)
years thereof, then such shareholder shall pay to Surviving
Corporation (without adjustment for time value of money) an amount
equal on an After-Tax Basis to the sum of (i) the reduction in
federal, state and local income taxes, if any (computed on the
assumption that such taxes are paid at the Combined Tax Rate),
recognized by such shareholder attributable to any Tax Loss
previously indemnified by Surviving Corporation hereunder and (ii)
the reduction in federal, state and local income taxes realized by
such shareholder as a direct result of any payment pursuant to this
sentence.
If the IRS proposes in writing in a 30-day letter or notice of
deficiency an adjustment which may result in a Tax Loss, such
affected shareholder shall, within sixty (60) days of its receipt,
notify Surviving Corporation in writing of such adjustment and any
reason stated therefor and of all action taken or proposed to be
taken by the IRS and the proposed date for the commencement of such
action (it being understood, however, that a defective notice shall
not be cause for Surviving Corporation not to make any payment
hereunder unless Surviving Corporation is actually prejudiced
thereby). If Surviving Corporation shall request in writing within
thirty (30) days after the date of such notification of Surviving
Corporation that such matter be contested, the shareholder, at
Surviving Corporation's sole cost and expense, shall be obligated
to contest such proposed adjustment, including in any appropriate
court of law (provided, however, that such shareholder shall not be
obligated to appeal any adverse determination to the United States
Supreme Court) and such shareholder and its counsel (who shall be
selected at the sole discretion of Surviving Corporation) shall
consult in good faith with Surviving Corporation regarding the
conduct of such contest; provided, however, if there are issues
being contested with the IRS in addition to the one giving rise to
the Tax Loss, the shareholder may retain counsel of his choice.
Counsel selected by such shareholder and counsel selected by
Surviving Corporation shall cooperate in contesting the merger;
- 64 -
provided, further, that such shareholder shall not settle or
otherwise compromise any such issue giving rise to any Tax Loss
without the prior written consent of Surviving Corporation, if the
effect of such settlement or compromise would be to impose
liability on Surviving Corporation hereunder. Otherwise, any Amount
and Additional Payment payable to any shareholder in the event of
an unfavorable resolution of a contest shall be payable no sooner
than ten (10) days after the Final Determination (as hereinafter
defined) with respect to such contest.
Any Amount and Additional Amount payable to any shareholder
hereunder shall be paid no later than thirty (30) days after
receipt of a written demand therefor from such shareholder, setting
forth in detail the computation of such amount, but such payment
shall not be due prior to the earlier of (i) the date such
shareholder would pay additional income taxes on account of such
Tax Loss (including any estimated taxes with respect thereto) or
(ii) the date such shareholder shall suffer a reduction in the
amount of any refund of income taxes that the shareholder would
have been entitled to receive but for such Tax Loss.
"Final Determination" with respect to a Tax Loss shall mean the
earlier of (i) a decision, judgment, decree or other order by any
court of competent jurisdiction, which decision, judgment, decree
or other order has become final (e.g., when all allowable appeals
thereof have been exhausted by either party to the action or the
time for filing such appeal has expired) or the acceptance of the
terms of an administrative determination if Surviving Corporation
consents in writing to such acceptance, or (ii) the date of
execution of a closing agreement entered into under Section 7121 of
the Code or any other settlement agreement entered into in
connection with an administrative or judicial proceeding.
Notwithstanding the foregoing, Surviving Corporation shall not
indemnify any shareholder pursuant to this Section 8.02(b) to the
extent that the Tax Loss is attributable, in whole or in part, to
(i) any change in statute, code, ordinance or regulation occurring
after the Effective Time which causes a Tax Loss, (ii) any failure
by any shareholder to report the Merger in accordance with the
intended treatment under this Agreement as a transaction under
Section 368(a)(1)(A) of the Code, (iii) a knowing failure by a
shareholder to take reasonable action or to furnish reasonable
cooperation to Surviving Corporation which prevents Allegiant from
diligently fulfilling its obligations under this Section 8.02(b),
(iv) any knowing and material written misrepresentation made by
Southside or any officer or employee thereof to Surviving
Corporation's counsel in connection with the rendering of the tax
opinion contemplated by Section 6.02(e) hereof or (v) any material
breach by Southside or any Southside Subsidiary of its
representation and warranty under Section 2.24 hereof.
8.03 No Assignment; Successors and Assigns. This Agreement shall
-------------------------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors (including any corporation deemed to be a successor
corporation of any of the parties by operation of law) and assigns, but
neither this Agreement nor any right or obligation set forth in any
provision hereof may be transferred or assigned (except by operation of law)
by any party hereto without the prior
- 65 -
written consent of the other party, and any purported transfer or assignment
in violation of this Section 8.03 shall be void and of no effect. Surviving
Corporation shall be deemed to be a successor to Allegiant and Southside
hereunder. There shall not be any third party beneficiaries of any provisions
hereof except for Sections 1.06, 1.08, 1.09, 1.10, 5.09, 5.12, 5.13, 5.14 and
8.02 which may be enforced against Allegiant or Southside, as the case may
be, by the parties therein identified or described.
8.04 Severability. Nothing in this Agreement shall be construed to
------------
require any party (or any subsidiary of a party) to take any action or fail
to take any action in violation of any applicable law, rule or regulation.
Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remaining
provisions of this Agreement.
8.05 No Implied Waiver. No failure or delay on the part of any
-----------------
party hereto to exercise any right, power or privilege hereunder or under
any instrument executed pursuant hereto shall operate as a waiver nor shall
any single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege.
8.06 Headings. Article, section, subsection and paragraph titles,
--------
captions and headings herein are inserted only as a matter of convenience
and for reference, and in no way define, limit, extend or describe the scope
of this Agreement or the intent of any provision hereof.
8.07 Entire Agreement. This Agreement and the Schedules and
----------------
Exhibits hereto constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior negotiations,
representations, warranties, commitments, offers, letters of interest or
intent, proposal letters, contracts, writings or other agreements or
understandings with respect thereto. No waiver, and no modification or
amendment, of any provision of this Agreement, shall be effective unless
specifically made in writing and duly signed by all parties thereto.
8.08 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and any party to this Agreement may execute and deliver this
Agreement by executing and delivering any of such counterparts, each of
which when executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.
8.09 Notices. All notices, requests, demands, claims or other
-------
communications hereunder shall be in writing and shall be deemed to be duly
received (a) on the date given if delivered personally or by cable,
telegram, telex or facsimile or (b) on the date received if mailed by
registered or certified mail (return receipt requested), to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
- 66 -
(i) if to Southside:
Southside Bancshares Corp.
3606 Gravois Avenue
St. Louis, Missouri 63116
Attention: Thomas M. Teschner
Facsimile: 314-776-2332
Copy to:
Lewis, Rice & Fingersh, L.C.
500 N. Broadway
St. Louis, Missouri 63102
Attention: John K. Pruellage
Facsimile: 314-241-6056
(ii) if to Allegiant
Allegiant Bancorp, Inc.
2122 Kratky Road
St. Louis, Missouri 63114
Attention: Shaun R. Hayes
Facsimile: (314) 692-8500
Copy to:
Thompson Coburn, LLP
One Firstar Plaza
St. Louis, Missouri 63101
Attention: Thomas A. Litz
Facsimile: (314) 552-7000
8.10 Governing Law. This Agreement shall be governed by and
--------------
controlled as to validity, enforcement, interpretation, effect and in all
other respects by the internal laws of the State of Missouri applicable to
contracts made in that state.
* * *
[Remainder of page intentionally left blank.]
- 67 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
and Plan of Merger to be signed by their respective officers thereunto duly
authorized and their respective corporate seals to be affixed hereto, all as
of the date first written above.
Attest: SOUTHSIDE BANCSHARES CORP.
/s/ Joseph W. Pope By /s/ Thomas M. Teschner
------------------------------------ ----------------------------------
Name: Joseph W. Pope Name: Thomas M. Teschner
------------------------------- -------------------------------
Title: President and Chief Executive
------------------------------
Officer
------------------------------
Attest: ALLEGIANT BANCORP, INC.
/s/ Thomas A. Daiber By /s/ Shaun R. Hayes
------------------------------------ ----------------------------------
Name: Thomas A. Daiber Name: Shaun R. Hayes
------------------------------- -------------------------------
Title: President and Chief Executive
------------------------------
Officer
------------------------------
- 68 -
APPENDIX I
----------
The following terms are defined in the following sections:
Term: Section
---- -------
401(k)......................................................................................5.09(d)
AB..........................................................................................3.02(b)
Accumulated Funding Deficiency..............................................................2.19(c)
Acquisition Proposal........................................................................4.03(a)
Additional Payment..........................................................................8.02
After-Tax Basis.............................................................................8.02(b)
Agreement...................................................................................Recitals
Allegiant Common Stock......................................................................1.07(b)
Allegiant Employee Stock Options............................................................1.08(d)
Allegiant Employee/Director Stock Grants....................................................3.03
Allegiant Financial Statements..............................................................3.05(b)
Allegiant Insiders..........................................................................5.15
Allegiant Merger Consideration..............................................................1.07(b)
Allegiant Option............................................................................5.14(b)
Allegiant Property..........................................................................3.12(c)
Allegiant Reports...........................................................................3.06
Allegiant Returns...........................................................................3.08
Allegiant Section 16 Information............................................................5.15
Allegiant Subsidiary/Subsidiaries...........................................................3.02(a)
Allegiant Termination Fee...................................................................7.02(c)
Allegiant Voting Agreement/Agreements.......................................................Recitals
Allegiant...................................................................................Recitals
Amount......................................................................................8.02(b)
Approval Date...............................................................................1.03
Associate...................................................................................2.17
Best Knowledge..............................................................................1.16
BHCA........................................................................................Recitals
Cash Distribution...........................................................................1.07(a)(i)
Cash Election Shares........................................................................1.08(b)
Certificates................................................................................1.08(a)
Closing Date................................................................................1.02
Closing.....................................................................................1.02
Code........................................................................................2.19(b)
Combined Distribution.......................................................................1.07(a)(iii)
Combined Election Shares....................................................................1.08(b)
Combined Tax Rate...........................................................................8.02(b)
Disclosure Schedule.........................................................................1.17(a)
Dissenting Shares...........................................................................1.11(a)
Doubtful....................................................................................2.11(f)
Effective Time..............................................................................1.03
- 2 -
Election Deadline...........................................................................1.08(c)
Election Form...............................................................................1.08(a)
Equity Securities...........................................................................2.02(a)
ERISA.......................................................................................2.15(b)
ESOP........................................................................................5.09(d)
Excess Shares...............................................................................1.08(f)(ii)
Exchange Act................................................................................2.04(c)
Exchange Agent..............................................................................1.08(a)
FDI Act.....................................................................................2.02(b)
FDIC........................................................................................2.02(b)
Federal Reserve Board.......................................................................2.01
FHLB........................................................................................2.11(b)(v)
Final Determination Letter..................................................................5.09
Final Determination.........................................................................8.02
First Banks.................................................................................3.19
GAAP........................................................................................2.05(b)
Indemnified Party...........................................................................8.02(a)
Indemnifying Party..........................................................................8.02(a)
Insurance...................................................................................2.11(c); 3.09(c)
Investment Plan.............................................................................3.03
IRS.........................................................................................5.09(d)
Joint Proxy Statement/Prospectus............................................................2.22
Knowledge...................................................................................1.16
KSOP........................................................................................5.09(d)
Leased Real Property........................................................................2.08(a)
Lender Liability............................................................................2.11(f)
Lend to.....................................................................................4.02(f)
Lien........................................................................................2.02(a)
Loans.......................................................................................2.11(f); 3.09(f)
Loss........................................................................................2.11(f)
Material Adverse Effect.....................................................................1.15
Merger Consideration .......................................................................1.07(b)
Merger......................................................................................Recitals
Missouri Statute............................................................................1.01
Multiemployer Plan..........................................................................2.19(c)
No Election Shares..........................................................................1.08(c)
Non-Performing Assets.......................................................................2.18(d)
Owned Real Property.........................................................................2.08(a)
Pension Plans...............................................................................2.19(c)
Plan of Reorganization......................................................................1.14
Pre-Existing Facility.......................................................................4.02(f)
Prohibited Transaction......................................................................2.19(c)
Qualified...................................................................................2.19(c)
Real Property...............................................................................2.08(a)
Registration Statement......................................................................1.08(a)
Regulatory Authorities/Authority............................................................2.06
- 3 -
Required Documentation......................................................................1.09(c)
Reportable Events...........................................................................2.19(c)
Rights......................................................................................1.07(a)
SEC.........................................................................................1.07(c)
Securities Act..............................................................................2.04(c)
Service.....................................................................................8.02
Significant Event...........................................................................4.01
SNB.........................................................................................2.02(b)
Southside Common Stock......................................................................1.07(a)
Southside Employee Plans....................................................................2.19(a)
Southside Employee Stock Options............................................................2.03
Southside Financial Statements..............................................................2.05(b)
Southside Insiders..........................................................................5.6
Southside Merger Consideration..............................................................1.07(a)(iii)
Southside Property..........................................................................2.15(c)
Southside Reports...........................................................................2.06
Southside Returns...........................................................................2.09
Southside Rights Agreement..................................................................1.07(a)
Southside Section 16 Information............................................................5.16
Southside Shareholder List..................................................................1.12(b)
Southside Stock Plans.......................................................................2.03
Southside Subsidiary/Subsidiaries...........................................................2.02(a)
Southside Termination Fee...................................................................7.02(b)
Southside Voting Agreement/Agreements.......................................................Recitals
Southside...................................................................................Recitals
Stock Conversion Number.....................................................................1.08(f)(ii)
Stock Distribution..........................................................................1.07(a)(ii)
Stock Election Shares.......................................................................1.08(b)
Subsidiaries................................................................................1.07(c)
Superior Proposal ..........................................................................4.03(b)
Surviving Corporation Common Stock..........................................................1.07(a)(ii)
Surviving Corporation.......................................................................1.01
Tax Loss....................................................................................8.02(b)
Toxic Substance.............................................................................2.08(g)
Voting Agreements ..........................................................................Recitals
- 4 -
ANNEX B
-------
[form of fairness opinion of Legg Mason Wood Walker, Incorporated]
________, 2001
The Board of Directors
Allegiant Bancorp, Inc.
2122 Kratky Road
St. Louis, MO 63114
Attention: Marvin S. Wool, Chairman
Members of the Board of Directors:
We are advised that Allegiant Bancorp, Inc. (collectively,
"Allegiant" or the "Company") has entered into an Agreement and Plan of
Merger (the "Agreement") with Southside Bancshares Corp. ("Southside"),
pursuant to which Allegiant will merge into Southside, and the surviving
corporation will be renamed Allegiant Bancorp, Inc., on terms and conditions
as more fully set forth in the Agreement (the transaction is referred to
herein as the "Transaction"). In the Transaction, each outstanding share of
Southside common stock will be converted into the right to receive, at the
option of the holder thereof, either (i) cash equal to the "Cash
Distribution" (as defined in the Agreement), or (ii) that number of shares
of the common stock equal to the "Stock Distribution" (as defined in the
Agreement) or (iii) a combination of the Cash Distribution and Stock
Distribution, the "Combined Distribution" (as defined in the Agreement).
You have requested our opinion, as investment bankers, as to the
fairness to the Company, from a financial point of view, of the amount of
consideration to be paid by the Company in the Transaction.
For purposes of rendering this opinion, we have, among other
things:
(i) reviewed a draft of the form of the definitive Agreement and
certain related documents;
(ii) reviewed the audited consolidated financial statements of
Allegiant for the twelve month periods ended December 31,
2000, 1999, 1998 and 1997;
The Board of Directors ______, 2001
Allegiant Bancorp, Inc. Page 2
(iii) reviewed the unaudited financial statements of Allegiant for
the three month period ended March 31, 2001;
(iv) reviewed the audited consolidated financial statements of
Southside for the twelve month periods ended December 31,
2000, 1999, 1998 and 1997;
(v) reviewed certain publicly available information concerning
Allegiant and Southside;
(vi) reviewed forecast financial statements of Allegiant and
Southside furnished to us by the senior management of Allegiant;
(vii) reviewed and analyzed certain publicly available financial
and stock market data with respect to operating statistics
relating to selected public companies that we deemed
relevant to our inquiry;
(viii) reviewed the reported prices and trading activity of the
publicly-traded securities of Allegiant and Southside;
(ix) analyzed certain publicly available information concerning the
terms of selected merger and acquisition transactions that
we considered relevant to our inquiry;
(x) held meetings and discussions with certain officers and
employees of Allegiant and Southside concerning the
operations, financial condition and future prospects of
Allegiant and Southside; and
(xi) conducted such other financial studies, analyses and
investigations and considered such other information as we
deemed necessary or appropriate for purposes of our opinion.
In connection with our review, we have assumed and relied upon the
accuracy and completeness of all financial and other information supplied to
us by Allegiant and Southside or publicly available, and we have not
independently verified such information. We have further relied upon the
assurances of management of Allegiant and Southside that they are unaware of
any facts that would make such information incomplete or misleading. We have
relied upon the management of Allegiant as to the way to account for the
transaction, including the pro forma adjustments impact on the financial
statements. We also have relied upon the managements of Allegiant and
Southside, and Southside management gave assurances as to projections
provided by Allegiant, as to the reasonableness and achievability of the
financial projections (and the assumptions and bases therein) provided to us
or prepared for Allegiant and Southside, and we have assumed that such
projections have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of management as to the future
operating performance of Allegiant and Southside, including without
limitation the tax benefits, cost savings and operating synergy to be
enjoyed by Allegiant and Southside after the Transaction. Furthermore, we
have no reason to believe such projections are incorrect. In addition, we
have assumed the year-to-date financial results are not materially different
than the 2001 budget
The Board of Directors ______, 2001
Allegiant Bancorp, Inc. Page 3
provided to us. Neither Allegiant nor Southside publicly discloses
internal management projections of the type provided to Legg Mason in
connection with Legg Mason's review of the Transaction. Such projections
were not prepared with the expectation of public disclosure. The projections
were based on numerous variables and assumptions that are inherently
uncertain, including without limitation, factors related to general economic
and competitive conditions. Accordingly, actual results could vary
significantly from those set forth in such projections.
We have not been requested to make, and have not made, an
independent appraisal or evaluation of the assets, properties or liabilities
of Southside and we have not been furnished with any such appraisal or
evaluation. Estimates of values of companies and assets do not purport to be
appraisals or necessarily reflect the prices at which companies and assets
may actually be sold. Because such estimates are inherently subject to
uncertainty, Legg Mason assumes no responsibility for their accuracy. We
have not reviewed any of the books and records of Southside or assumed any
responsibility for conducting a physical inspection of the properties,
branches or facilities of Southside. We have assumed that the Transaction
will be consummated on the terms and conditions described in the form of the
Agreement reviewed by us. In addition, we have assumed all material
liabilities of Allegiant and Southside are reflected in their financial
statements. Furthermore, Legg Mason has expressed no opinion as to the value
of or the price of trading range at which the shares of Allegiant will trade
in the future. Further, this opinion is based upon prevailing market
conditions and other circumstances and conditions existing on the date
hereof. It is understood that subsequent developments may affect the
conclusions reached in this opinion and that we do not have any obligation
to update, revise or reaffirm this opinion.
It is understood that this letter is directed to the Company's
Board of Directors. The opinion expressed herein is provided for the use of
the Company's Board of Directors in its evaluation of the proposed
Transaction and does not constitute a recommendation to any shareholder of
the Company either of the Transaction or as to how such shareholder should
vote on or otherwise respond to the Transaction. In addition, this letter
does not constitute a recommendation of the Transaction over any other
alternative transaction which may be available to the Company and does not
address the underlying business decision of the Board of Directors of the
Company to proceed with or effect the Transaction. This letter is not to be
quoted or referred to, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other document used in connection
with the offering or sale of securities, nor shall this letter be used for
any other purposes, without the prior written consent of Legg Mason Wood
Walker, Incorporated; provided that this Opinion may be included in its
entirety in any filing made by the Company with the Securities and Exchange
Commission with respect to the Transaction.
Legg Mason will receive a fee for providing this Opinion to the
Board of Directors of Allegiant and an additional fee which is contingent
upon the consummation of Transaction. In addition, Legg Mason will receive a
fee for underwriting a trust preferred of the Company where the use of
proceeds will be used to partially fund the "Cash Distribution" and the
"Combined Distribution".
The Board of Directors ______, 2001
Allegiant Bancorp, Inc. Page 4
Based upon and subject to the foregoing, we are of the opinion
that, as of the date hereof, the amount of consideration to be paid by
Allegiant in the Transaction is fair to Allegiant from a financial point of
view.
Very truly yours,
ANNEX C
-------
[Form of Stifel, Nicolaus & Company, Incorporated Opinion]
, 2001
Board of Directors
Southside Bancshares Corp.
3606 Gravois Avenue
St. Louis, MO 63116
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Southside Bancshares Corp. ("Southside") of the
consideration to be received by such shareholders pursuant to the Agreement
and Plan of Merger (the "Agreement"), dated as of April 30, 2001, between
Southside and Allegiant Bancorp, Inc. ("Allegiant"). The Agreement provides
for the merger (the "Merger") of Allegiant with and into Southside, with
Southside as the surviving corporation (sometimes referred to herein as the
"Surviving Corporation").
Subject to the terms of the Agreement, at the effective time of the Merger,
(1) each share of common stock, $1.00 par value per share, of Southside and
the associated "Rights" under the Rights Agreement, dated as of May 27, 1993
(collectively, the "Southside Common Stock"), will be converted into one of
the following: (a) the right to receive an amount in cash equal to $14.00 (the
"Cash Distribution"); or (b) the right to receive 1.39 shares of common stock,
$0.01 par value per share, of the Surviving Corporation (the "Surviving
Corporation Common Stock") (the "Stock Distribution"); or (c) the right to
receive a combination of the Cash Distribution and Stock Distribution (the
"Combined Distribution"), in each case as the holder thereof may elect or be
deemed to have elected pursuant to the Agreement (the aggregate of the Cash
Distributions, Stock Distributions and the Combined Distributions, payable
and/or issuable upon conversion of the Southside Common Stock pursuant to the
Agreement at the effective time of the Merger is referred to as the "Southside
Merger Consideration"), and (2) each share of the common stock, $0.01 par
value, of Allegiant will be converted into one share of Surviving Corporation
Common Stock.
Board of Directors -- Southside Bancshares, Inc.
, 2001
Page 2
For the purposes of our opinion, we have assumed that the Merger will be
consummated as provided in the Agreement and will constitute a tax-free
reorganization to the extent contemplated by the Agreement.
Stifel, Nicolaus & Company, Incorporated ("Stifel"), as part of its investment
banking services, is regularly engaged in the independent valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. We
are familiar with Southside and Allegiant and have completed our financial
analysis of this transaction. In the ordinary course of its business, Stifel
actively trades equity securities of Southside and Allegiant for its own
account and for the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities.
In rendering our opinion, we have reviewed, among other things: the form of
the Agreement as executed on April 30, 2001; the financial statements of
Southside and Allegiant included in their respective 10-Ks for the 5 years
ended December 31, 2000, and their respective 10-Qs for the quarter ended
March 31, 2001; and certain internal financial analyses and forecasts for
Southside and Allegiant prepared by their respective management. We have
conducted conversations with Southside's and Allegiant's senior management
regarding recent developments and management's financial forecasts for
Southside and Allegiant. In addition, we have spoken to members of Southside's
and Allegiant's senior management regarding factors which affect each entity's
business. We have also compared certain financial and securities data of
Southside and Allegiant with various other companies whose securities are
traded in public markets, reviewed the historical stock prices and trading
volumes of the common stock of Southside and Allegiant, reviewed the financial
terms of certain other business combinations and conducted such other
financial studies, analyses and investigations as we deemed appropriate for
purposes of this opinion. We also took into account our assessment of general
economic, market and financial conditions and our experience in other
transactions, as well as our experience in securities valuations and our
knowledge of the commercial banking industry generally.
In rendering our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all of the financial and other
information that was provided to us or that was otherwise reviewed by us and
have not assumed any responsibility for independently verifying any of such
information. With respect to the financial forecasts supplied to us (including
without limitation, projected cost savings and operating synergies resulting
from the Merger), we have assumed that they were reasonably prepared on the
basis reflecting the best currently available estimates and judgments of the
management of Southside and Allegiant as to the future operating and financial
performance of Southside and Allegiant, that they would be realized in the
amounts and time periods estimated and that they provided a reasonable basis
upon which we could form our opinion. We also assumed that there were no
material changes in the assets, liabilities, financial condition, results of
operations, business or prospects of either Southside or Allegiant since the
date of the last financial statements made available to us. We
Board of Directors -- Southside Bancshares, Inc.
, 2001
Page 3
have also assumed, without independent verification and with your consent,
that the aggregate allowances for loan losses set forth in the financial
statements of Southside and Allegiant are in the aggregate adequate to cover
all such losses. We did not make or obtain any independent evaluation,
appraisal or physical inspection of Southside's or Allegiant's assets or
liabilities, the collateral securing any of such assets or liabilities, or the
collectibility of any such assets nor did we review loan or credit files of
Southside or Allegiant. We relied on advice of Southside's counsel as to all
legal matters with respect to Southside, the Agreement and the transactions
and other matters contained or contemplated therein. We have assumed, with
your consent, that there are no factors that would delay or subject to any
adverse conditions any necessary regulatory or governmental approval and that
all conditions to the Merger will be satisfied and not waived.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as
of, the date of this letter. Our opinion is directed to the Board of Directors
of Southside for its information and assistance in connection with its
consideration of the financial terms of the Merger and does not constitute a
recommendation to any shareholder as to how such shareholder should vote on
the proposed transaction, nor have we expressed any opinion as to the prices
at which any securities of Southside or Allegiant might trade in the future.
Except as required by applicable law, including without limitation federal
securities laws, our opinion may not be published or otherwise used or
referred to, nor shall any public reference to Stifel be made, without our
prior written consent.
Based upon the foregoing and such other factors as we deem relevant, we are of
the opinion, as of the date hereof, that the Southside Merger Consideration to
be received by the shareholders of Southside pursuant to the Agreement is fair
to such shareholders from a financial point of view.
Very truly yours,
ANNEX D
-------
SELECTED PROVISIONS OF MISSOURI LAW GOVERNING DISSENTER'S RIGHTS
RSMo 351.455. SHAREHOLDER WHO OBJECTS TO MERGER MAY DEMAND VALUE OF SHARES,
WHEN.
1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the
meeting of shareholders at which the plan of merger or consolidation
is submitted to a vote, a written objection to such plan of merger
or consolidation, and shall not vote in favor thereof, and such
shareholder, within twenty days after the merger or consolidation
is effected, shall make written demand on the surviving or new
corporation for payment of the fair value of his shares as of the
day prior to the date on which the vote was taken approving the
merger or consolidation, the surviving or new corporation shall
pay to such shareholder, upon surrender of his certificate or
certificates representing said shares, the fair value thereof. Such
demand shall state the number and class of the shares owned by such
dissenting shareholder. Any shareholder failing to make demand
within the twenty day period shall be conclusively presumed to have
consented to the merger or consolidation and shall be bound by the
terms thereof.
2. If within thirty days after the date on which such merger or
consolidation was effected the value of such shares is agreed upon
between the dissenting shareholder and the surviving or new
corporation, payment therefor shall be made within ninety days
after the date on which such merger or consolidation was effected,
upon the surrender of his certificate or certificates representing
said shares. Upon payment of the agreed value the dissenting
shareholder shall cease to have any interest in such shares or in
the corporation.
3. If within such period of thirty days the shareholder and the surviving
or new corporation do not so agree, then the dissenting shareholder
may, within sixty days after the expiration of the thirty day
period, file a petition in any court of competent jurisdiction
within the county in which the registered office of the surviving or
new corporation is situated, asking for a finding and determination
of the fair value of such shares, and shall be entitled to judgment
against the surviving or new corporation for the amount of such fair
value as of the day prior to the date on which such vote was taken
approving such merger or consolidation, together with interest
thereon to the date of such judgment. The judgment shall be payable
only upon and simultaneously with the surrender to the surviving or
new corporation of the certificate or certificates representing said
shares. Upon the payment of the judgment, the dissenting shareholder
shall cease to have any interest in such shares, or in the surviving
or new corporation. Such shares may be held and disposed of by
the surviving or new corporation as it may see fit. Unless the
dissenting shareholder shall file such petition within the time
herein limited, such shareholder and all persons claiming under him
shall be conclusively presumed to have approved and ratified the
merger or consolidation, and shall be bound by the terms thereof.
4. The right of a dissenting shareholder to be paid the fair value of
his shares as herein provided shall cease if and when the
corporation shall abandon the merger or consolidation.
(L. 1990 H.B. 1432)
ANNEX E
-------
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ALLEGIANT BANCORP, INC.
(FORMERLY SOUTHSIDE BANCSHARES CORP.)
ARTICLE ONE
-----------
The name of the Corporation is: Allegiant Bancorp, Inc.
ARTICLE TWO
-----------
The address, including street and number, if any, of the
Corporation's registered office in this State is 3606 Gravois Avenue, St.
Louis, Missouri 63116 and the name of the registered agent at such address is
William E. Muhlke.
ARTICLE THREE
-------------
The aggregate number, class and par value, if any, of shares which
the Corporation shall have authority to issue shall be: thirty million
(30,000,000) shares of Common Stock with a par value of One Cent ($0.01)
each.
The preferences, qualifications, limitations, restrictions and the
special or relative rights, including, convertible rights, if any, in respect
of the shares of each class are as follows: None.
ARTICLE FOUR
------------
No holder of shares of the capital stock of the Corporation shall
have any preemptive or preferential right to subscribe for, purchase or
receive any additional shares of capital stock of the Corporation or rights
or options to purchase additional shares of capital stock of the Corporation
or securities convertible into or carrying rights or options to purchase
additional shares of the capital stock of the Corporation.
ARTICLE FIVE
------------
The names and places of residence of each incorporator is as
follows: Peter W. Herzog, 22 Picardy Lane, St. Louis, MO 63124.
ARTICLE SIX
-----------
The number of directors to constitute the Board of Directors shall
initially be eleven (11); provided, however, that such number may be fixed,
from time to time, at not less than a minimum of nine (9) nor more than a
maximum of fifteen (15), by or in the manner provided in, the Bylaws of the
Corporation, and any such change shall be reported to the Secretary of State
of the State of Missouri within thirty (30) calendar days of such change. The
Directors shall be divided into three classes: Class I, Class II and Class
III. Such classes shall be as nearly equal in number as possible. The term of
office
of the initial Class I Directors shall expire at the annual meeting of
Shareholders of the Corporation in 1984; the term of office of the initial
Class II Directors shall expire at the annual meeting of Shareholders of the
Corporation in 1985; and the term of office of the initial Class III
Directors shall expire at the annual meeting of Shareholders of the
Corporation in 1986; or in each case when their respective successors are
elected and have qualified. Thereafter, the directors chosen to succeed those
whose term then expire shall be identified as being of the same class as the
directors they succeed and shall be elected for a term of three (3) years
expiring at the third succeeding annual meeting or thereafter when their
respective successors are elected and have qualified. If the number of
directors is changed, any increase or decrease in directors shall be
apportioned among the classes so as to maintain all classes as nearly equal
in number as possible, and any additional director elected to any class shall
hold office for a term which shall expire with the term of the directors in
such class.
At a meeting called expressly for that purpose, a director of the
Corporation or the entire Board of Directors of the Corporation may be
removed without cause only upon the affirmative vote of the holders of not
less than eighty percent (80%) of the shares entitled to vote generally in
the election of directors; provided, however, that, if less than the entire
Board of Directors is to be so removed without cause, no one of the directors
may be removed if the votes cast against such director's removal would be
sufficient to elect such director if then cumulatively voted at an election
of the Class of directors of which such director is a part. At a meeting
called expressly for that purpose, a director may be removed by the
Shareholders for cause by the affirmative vote of the holders of a majority
of the shares entitled to vote upon his election.
ARTICLE SEVEN
-------------
The duration of the Corporation is perpetual.
ARTICLE EIGHT
-------------
The power to make, alter, amend or repeal the Bylaws of the
Corporation is hereby vested in the Board of Directors.
ARTICLE NINE
------------
Except as otherwise specifically provided by statute, all powers of
management and direct control of the Corporation shall be vested in the Board
of Directors.
ARTICLE TEN
-----------
The corporation is formed for the following purposes:
To acquire, invest in, hold, distribute, hypothecate, sell or
otherwise transfer interests in various state and national banking
associations, to exercise all of the powers of an interest holder under the
terms of such associations' charters and Bylaws and to exercise all other
powers permitted a bank holding company pursuant to the Bank Holding Company
Act, 12 U.S.C. Sections 1841 et seq.
-- ---
To have and to exercise all powers necessary or incident to carrying
out its corporate purposes; to exercise all other powers permitted by law,
and to possess and enjoy all rights and powers which now or at any time
hereafter may be granted to or exercised by a corporation of this character.
- 2 -
ARTICLE ELEVEN
--------------
The personal liability of a Director to the Corporation or its
Shareholders for monetary damages for breach of his or her fiduciary duty as
a Director is hereby eliminated; provided, however, that such provision shall
not eliminate or limit the liability of a Director (a) for any breach of the
Director's duty of loyalty to the Corporation or its Shareholders, (b) for
acts or omissions not taken in the Director's subjective good faith or which
involve intentional misconduct or a knowing violation of the law by the
Director, (c) Section 351.345 of the General and Business Corporation Law of
the State of Missouri, or (d) for any transaction from which the Director
derived an improper personal benefit.
ARTICLE TWELVE
--------------
The approval of any Business Combination shall, in addition to any
affirmative vote required by law, require the affirmative vote of the holders
of not less than eighty percent (80%) of the common shares of the Corporation
then entitled to vote generally in the election of Directors of the
Corporation; provided, however, that any such Business Combination may be
approved on the affirmative vote required by law if such Business Combination
is approved by not less than a seventy-five percent (75%) majority of the
entire Board of Directors of the Corporation. As used herein, the term
"Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any
subsidiary of the Corporation with (a) any Substantial Shareholder, or (b)
any other corporation which, after such merger or consolidation, would be a
Substantial Shareholder, regardless of which entity survives;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to or with
any Substantial Shareholder of all or substantially all of the assets of the
Corporation or any subsidiary of the Corporation, or both;
(iii) the adoption of any plan or proposal for the liquidation
of the Corporation proposed by or on behalf of a Substantial Shareholder; or
(iv) any transaction involving the Corporation or any of its
subsidiaries, including the issuance or transfer of, or any recapitalization
of, the Corporation of any of its subsidiaries, or any merger or consolidation
of the Corporation with any of its subsidiaries (whether or not involving a
Substantial Shareholder), if the transaction would have the effect, directly
or indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of the Corporation or
any subsidiary, of which a Substantial Shareholder is the Beneficial Owner.
As used herein, the term "Substantial Shareholder" shall mean and
include any individual corporation, partnership or other persons or entity
which, together with its "Affiliates" or "Associates" (as such terms were
defined as of February 1, 1987, in Rule 12b-2 under the Securities Exchange
Act of 1934), is the "Beneficial Owner" (as determined in accordance with the
criteria set forth as of February 1, 1987) in the aggregate of more than five
percent (5%) of the outstanding shares of the Corporation entitled to vote
generally in an election of Directors; and any affiliate or associate of any
such individual, corporation, partnership or other person or entity.
- 3 -
ARTICLE THIRTEEN
----------------
The Corporation reserves the right to amend, alter, change or repeal
any provisions contained in these Articles of Incorporation in the manner now
or hereafter prescribed by law, and all rights conferred upon shareholders
herein are granted subject to this reservation; provided, however, that any
amendment, alteration, change or repeal of the provisions of Article Six,
Article Twelve or this provisio to Article Thirteen shall, in addition to any
affirmative vote required by law, require the affirmative vote of the holders
of eighty percent (80%) of the common shares of the Corporation then entitled
to vote at a meeting of Shareholders called for such purpose.
- 4 -
ANNEX F
-------
AMENDED AND RESTATED
BY-LAWS OF
ALLEGIANT BANCORP, INC.
(FORMERLY SOUTHSIDE BANCSHARES CORP.)
ARTICLE I - OFFICES
-------------------
The principal office of the Corporation shall be located in the
County of St. Louis, Missouri. The Corporation may have offices at such other
places, both within and without the State of Missouri, as the Board of
Directors may from time to time designate.
ARTICLE II - SEAL
-----------------
The corporate seal shall have inscribed thereon the name of the
Corporation.
ARTICLE III - SHAREHOLDERS' MEETINGS
------------------------------------
Section 1. Place of Meeting. All meetings of the shareholders shall
---------------------------
be held at the office of the Corporation or at such other place within or
without the State of Missouri as may be designated by the Chairman of the
Board or the Board of Directors.
Section 2. Annual Meeting. The annual meeting of shareholders shall
-------------------------
be held at the time designated by the Board of Directors of the Corporation
in the month of April, in each year, or at such other date or time as shall
be determined by the Chairman of the Board or the Board of Directors, for the
purpose of electing directors and for the transaction of such other business
as may come before the meeting.
Section 3. Quorum. The holders of a majority of the stock issued and
-----------------
outstanding, present in person or represented by proxy, shall be requisite
and shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by law, by the
Corporation's Articles of Incorporation or by these By-Laws.
Section 4. Voting. Except as otherwise required by law or by the
-----------------
Corporation's Articles of Incorporation, at each meeting of the shareholders,
every shareholder shall be entitled to vote in person, or by proxy appointed
by an instrument in writing subscribed by such shareholder, or by his duly
authorized attorney, and he shall have one vote for each share of stock
registered in his name at the time of the closing of the transfer books for
said meeting.
The vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the statutes or of the Articles of Incorporation a different
vote is required, in which case such express provision shall govern and
control the decision of such question.
Section 5. Notice of Meeting. Notice of any special or annual
----------------------------
meeting shall be served personally on each shareholder or shall be mailed to
each shareholder at such address as appears on the stockbook of the
Corporation not less than ten (10) days nor more than sixty (60) days before
such meeting. Service or mailing of such notice shall be made by the
Secretary; but in case the Secretary shall
refuse or neglect to serve or mail such notice upon each shareholder as
herein provided, then such service may be made by any officer or director of
the Corporation. The notice of any special meeting shall state the purpose or
purposes of the proposed meeting.
Section 6. Special Meetings. Special meetings of the Shareholders
---------------------------
will be called by the Secretary upon request of the President or a majority
of the members of the Board of Directors or upon the written request of the
holders of not less than eighty percent (80%) of all the outstanding shares
of the Corporation's stock entitled to vote at such meeting. Notwithstanding
the provisions of any Articles of the Articles of Incorporation or any other
Article herein, this section of the Bylaws may not be amended or repealed
without the consent of the holders of eighty percent (80%) of the outstanding
shares of the Corporation.
Section 7. Waiver of Notice. Any shareholder may waive notice of any
---------------------------
meeting of the shareholders, by a writing signed by him, or by his duly
authorized attorney, either before or after the time of such meeting. A copy
of such waiver shall be entered in the minutes, and shall be deemed to be the
notice required by law or by these By-Laws. Any shareholder present in
person, or represented by proxy, at any meeting of the shareholders shall be
deemed to have thereby waived notice of such meeting, except where a
shareholder attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 8. Informal Meetings. Actions shall be taken by the
----------------------------
Shareholders only at annual or special meetings of Shareholders, and
Shareholders may not act by written consent. This Section of the Bylaws may
not be altered, amended or repealed except by an affirmative vote of at least
eighty percent (80%) of the total number of Directors or by eighty percent
(80%) of the Shareholders of the Corporation, as provided by the Articles
of Incorporation.
Section 9. Shareholders Entitled to Vote. The Board of Directors may
----------------------------------------
prescribe a period not exceeding sixty (60) or less than ten days prior to
any meeting of the shareholders during which no transfer of stock on the
books of the Corporation may be made. The Board of Directors may fix a day
not more than sixty (60) or less than ten days prior to the holding of any
meeting of the shareholders as the day as of which shareholders are entitled
to notice of and to vote at such meeting.
Section 10. List of Voters. A complete list of all shareholders
--------------------------
entitled to vote at any annual and special meeting shall be compiled at least
ten days before such meeting by the officer or agent having charge of the
transfer books for shares of stock of the Corporation. Such list shall be
compiled in alphabetical order with the address of and the number of shares
held by each shareholder, and the list shall be kept on file at the
registered office of the Corporation for a period, beginning at least ten
days prior to such meeting and ending on the date of such meeting. Such list
shall be open to inspection by any shareholder for such period during usual
business hours. Such list also shall be produced and kept open at the time
and place of such meeting and shall be subject to the inspection of any
shareholder during this meeting. The original share ledger or transfer book,
or a duplicate thereof, shall be prima facie evidence as to who are the
shareholders entitled to examine such list or share ledger or transfer books,
or to vote any meeting of shareholders. Failure to comply with the
requirements of this section shall not affect the validity of any action
taken at such meeting.
Section 11. Proxies. A shareholder may, at any annual or special
-------------------
meeting, vote either in person or by proxy executed in writing by the
shareholder or his duly authorized attorney in fact. Such proxy shall be
filed with the Secretary of the Corporation before or at the time of the
meeting. No proxy shall be valid after eleven months from the date of
execution unless otherwise provided in the proxy.
Section 12. Organization. The Chairman of the Board, and in his
------------------------
absence, the Chief Executive Officer or the President, and in the absence of
both the Chairman of the Board and the Chief Executive
- 2 -
Officer or the President, any Vice-President chosen by the shareholders
present, shall preside at each meeting of shareholders and shall act as
chairman thereof. The Secretary, and in his absence the Assistant Secretary,
and in the absence of both the Secretary and the Assistant Secretary, a
Secretary pro tem, chosen by the shareholders present, shall act as Secretary
of all meetings of the shareholders.
Section 13. Adjournment. If at any meeting of the shareholders a
-----------------------
quorum shall fail to attend at the time and place for which the meeting was
called or if the business of such meeting shall not be completed, the
shareholders present in person or represented by proxy may, by a majority
vote, adjourn the meeting from day to day or from time to time, not exceeding
ninety (90) days from such adjournment without further notice until a quorum
shall attend or the business thereof shall be completed. At any such
adjourned meeting any business may be transacted which might have been
transacted at the meeting as originally called.
Section 14. Notice of Shareholder Business and Nominations.
----------------------------------------------------------
(A) Annual Meetings of Shareholders. (1) Nominations of persons for
-------------------------------
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the shareholders may be made at an annual
meeting of shareholders (a) pursuant to the Corporation's notice of meeting,
(b) by or at the direction of the Board of Directors or (c) by any
shareholder of the Corporation who was a shareholder of record at the time of
giving of notice provided for in this By-law, who is entitled to vote at the
meeting and who has complied with the notice procedures set forth in this
By-law.
(2) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to clause (c) of paragraph
(A)(1) of this By-law, the shareholder must have given timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a shareholder's
notice shall be delivered to the Secretary at the principal executive offices
of the Corporation not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more
than 30 days or delayed by more than 60 days from such anniversary date,
notice by the shareholder to be timely must be so delivered not earlier than
the 90th day prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to such annual meeting or the
10th day following the day on which public announcement of the date of such
meeting is first made by the Corporation. Such shareholder's notice shall set
forth: (a) as to each person whom the shareholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (b) as to
any other business that the shareholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such shareholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (c) as to the shareholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such shareholder,
as they appear on the Corporation's books, and of such beneficial owner and
(ii) the class and number of shares of the Corporation that are owned
beneficially and of record by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this By-law to the contrary, in the event that the number
of directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees for
director
- 3 -
or specifying the size of the increased Board of Directors made by
the Corporation at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a shareholder's notice required by this
By-law also shall be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Corporation not later
than the close of business on the 10th day following the day on which such
public announcement is made by the Corporation.
(B) Special Meetings of Shareholders. Only such business shall be
--------------------------------
conducted at a special meeting of shareholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made at
a special meeting of shareholders at which directors are to be elected
pursuant to the Corporation's notice of meeting (a) by or at the direction of
the Board of Directors or (b) by any shareholder of the Corporation who is a
shareholder of record at the time of giving of notice provided for in this
By-law, who shall be entitled to vote at the meeting and who complies with
the notice procedures set forth in this By-law. Nominations by shareholders
of persons for election to the Board of Directors may be made at such a
special meeting of shareholders if the shareholder's notice required by
paragraph (A)(2) of this By-law shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the 90th day
prior to such special meeting and not later than the close of business on the
later of the 60th day prior to such special meeting or the 10th day following
the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected
at such meeting.
(C) General. (1) (1) Only such persons who are nominated in
-------
accordance with the procedures set forth in this By-law shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance with
the procedures set forth in this By-law. Except as otherwise provided by law,
the Articles of Incorporation or these By-laws, the Chairman of the meeting
shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this By-law and, if any proposed nomination
or business is not in compliance with this By-law, to declare that such
defective proposal or nomination shall be disregarded.
(2) For purposes of this By-law, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-law,
a shareholder also shall comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this By-law. Nothing in this By-law shall be deemed to
affect any rights of shareholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE IV - DIRECTORS
----------------------
Section 1. Powers of the Board. The business of the Corporation shall
------------------------------
be managed by its Board of Directors which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute
or by the Articles of Incorporation or by these By-Laws directed or required
to be exercised or done by the shareholders.
- 4 -
Section 2. Qualifications and Number. The business of the Corporation
-------------------------
shall be managed under the direction of its Board of Directors and each Director
shall be a natural person of full age. In order to be qualified for nomination
for, and election to, the Corporation's Board of Directors, a person must own a
minimum of 1,000 shares of common stock of the Corporation. For purposes of
this paragraph, the requisite number of shares may be owned (i) by the
Director in his own name; (ii) by the Director's spouse (whether in his
or her own name or jointly with the Director); (iii) by any trust for which
the Director is the trustee or co-trustee and also the grantor or the sole
beneficiary; (iv) by a custodian or broker for the account of either the
Director, the Director's spouse or a trust described in (iii), above; or
(v) by the Director's minor child, provided such shares were given to the
child by the Director or the Director's spouse in accordance with the Uniform
Gift to Minors Act.
The number of Directors which shall constitute the whole Board shall be fixed,
from time to time, by resolutions adopted by the Board, but shall not be less
than nine (9) persons nor more than fifteen (15). The Board shall be divided
into three classes as nearly equal in number as possible whose term expires at
different times. When the initial Board is elected, two (2) Directors shall
be elected for a term of one (1) year; two (2) Directors for a term of two (2)
years; and three (3) Directors for a term of three (3) years. At each
subsequent annual Shareholders' meeting, successors to the class of
Directors whose term expire that year shall be elected to hold office for
a term of three (3) years. Notwithstanding the provisions of any other
Article herein, this section of the Bylaws may not be amended or repealed
without the consent of the holders of eighty percent (80%) of the outstanding
shares of the Corporation.
ARTICLE V - MEETING OF THE BOARD
--------------------------------
Section 1. Place of Meeting. Meetings of the Board of Directors of the
---------------------------
Corporation, both regular and special, may be held at any place either within
or without the State of Missouri, and unless otherwise designated as herein
provided, shall be held at the office of the Corporation.
Section 2. First Meeting of New Board. The first meeting of each
-------------------------------------
newly elected Board of Directors for the purpose of electing officers and
transacting such other business as may come before the meeting shall be held
immediately after the final adjournment of the annual meeting of the
shareholders. No notice of such annual meeting of Directors need be given,
provided a quorum shall be present. If, for any reason, such meeting of the
Directors is not or cannot be held as herein prescribed, the officers may be
elected at any meeting of the Directors thereafter called for such purpose
pursuant to these By-Laws.
Section 3. Regular Meetings. Regular meetings of the Board of
---------------------------
Directors may be held at such time and place as shall from time to time be
determined by resolution of the Board.
Section 4. Notice of Regular Meetings. After the time and place of
-------------------------------------
regular meetings shall have been determined, no notice of any regular
meetings need be given. Notice of any change in the place of holding any
regular meeting or any adjournment of a regular meeting shall be given by
mail or telegram not less than forty-eight (48) hours before such meeting, to
all Directors who were absent at the time such action was taken.
- 5 -
Section 5. Special Meetings. Special meetings of the Board for any
---------------------------
purpose or purposes may be called by the Chairman of the Board or President
on three (3) days' notice to each Director either personally or by mail or by
telegram. Upon like notice, the Secretary of the Corporation, upon the
written request of a majority of the Directors, shall call a special meeting
of the Board. Such request shall state the purpose or purposes of the
proposed meeting. The officer calling the special meeting may designate the
place for holding same.
Section 6. Quorum. At all meetings of the Board, a majority of the
-----------------
Directors shall constitute a quorum for the transaction of business and the
act of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except where otherwise
provided by law or by these By-Laws. If a quorum shall not be present at any
meeting of the Board of Directors, the Directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting until a quorum shall be present.
Section 7. Waiver of Notice. Any Director may waive notice of any
---------------------------
meeting of the Board by a writing signed by him either before or after the
time of such meeting. A copy of such waiver shall be entered in the minutes
and shall be deemed to be the notice required by law or by these By-Laws. Any
Director present in person at any meeting of the Board shall be deemed to
have thereby waived notice of such meeting except where a Director attends a
meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
Section 8. Informal Meetings. Whenever the vote of Directors at a meeting
----------------------------
thereof is required or permitted to be taken in connection with any corporate
action by any provisions of the statutes or of the Articles of Incorporation,
the meeting, any notice thereof, and vote of Directors thereat may be
dispensed with if all the Directors who would have been entitled to vote upon
the action if such meeting were held shall consent in writing to such
corporate action being taken. Such written consent shall be filed with the
minutes of the Board.
Section 9. Compensation. Unless otherwise restricted by the Articles
-----------------------
of Incorporation or these By-laws, the Board of Directors shall have the
authority to fix the compensation of Directors. The Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as Director. No such payment shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
Section 10. Presumption of Assent. A Director of the Corporation
---------------------------------
shall be presumed to have assented to the action taken on any corporate
matter at a Board of Directors meeting at which he is present, unless his
dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the Secretary of the meeting
before the adjournment thereof or shall forward such dissent by certified
mail to the Secretary of the Corporation immediately after the adjournment of
the meeting. A Director who voted in favor of such action may not so dissent.
Section 11. Vacancies. All vacancies in the office of Directors shall
---------------------
be filled by election by the shareholders, except as herein provided.
Vacancies not exceeding one-third (1/3) of the whole number of the Board may
be filled by the affirmative vote of the majority of the Directors then in
office, and the Directors so elected may hold office until such vacancies are
filled by the shareholders at a special or annual meeting.
- 6 -
Section 12. Organization. The Chairman of the Board, and in his
------------------------
absence, the Chief Executive Officer or the President, and in the absence of
the Chairman of the Board and the Chief Executive Officer or the President, a
Chairman pro tem, chosen by the Directors present shall preside at each
meeting of the Directors and shall act as Chairman thereof. The Secretary,
and in his absence, the Assistant Secretary, and in the absence of the
Secretary and the Assistant Secretary, a Secretary pro tem, chosen by the
Directors present shall act as Secretary of all meetings of the Directors.
Section 13. Minutes and Statements. The Board of Directors shall
----------------------------------
cause to be kept a complete record of their meetings and acts, and of the
proceedings of the shareholders.
ARTICLE VI - COMMITTEES
-----------------------
Section 1. Executive Committee. The Board of Directors, by resolution
------------------------------
adopted by a majority of the whole Board, may designate two or more Directors
to constitute an Executive Committee, which committee shall have and exercise
all of the authority of the Board of Directors in the management of the
Corporation, but the designation of the committee and the delegation thereto
of authority shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed on him by law, by the Articles
of Incorporation or by these By-Laws. The Executive Committee shall keep a
complete record of its activities and regularly report them to the Board of
Directors at every meeting thereof. All action taken by the Executive
Committee shall be subject to revision, alteration or change by the Board of
Directors, provided that rights of third persons shall not be affected
thereby.
Section 2. Meetings of the Executive Committee. A majority of the
----------------------------------------------
Executive Committee shall constitute a quorum for the transaction of
business. The Executive Committee may determine the time and place for its
meetings, the notice necessary therefor and its rules of procedure.
Section 3. Other Committees. The Board of Directors shall have the
---------------------------
power to establish and designate, by resolution passed by a majority of the
Board of Directors, such other committees as it shall deem appropriate or
expedient for the furtherance of the objectives and purposes of the
Corporation and to delegate to such committees those powers which, in its
discretion, it feels are necessary and desirable. A majority of the members
of any such committee shall constitute a quorum thereof and no acts of any
such committee shall be valid unless proved by the affirmative vote or
consent of the majority of such committee constituting a quorum at any such
meeting. Any such committee shall keep regular minutes of its proceedings and
shall report the same to the Board of Directors from time to time. Any such
committee shall meet whenever necessary upon three days' prior written notice
to all members thereof.
ARTICLE VII - OFFICERS
----------------------
Section 1. Officers. The permitted officers of this Corporation will
-------------------
include a Chairman of the Board, the Chief Executive Officer, the President,
one or more Vice Presidents, a Secretary, one or more Assistant Secretaries,
a Treasurer, and one or more Assistant Treasurers, all of whom shall be
chosen by the Board of Directors. Any person may hold two or more offices.
Section 2. Subordinate Officers and Employees. The Board of Directors
---------------------------------------------
may appoint such other officers and agents as it may deem necessary who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board.
Section 3. Compensation. The Board of Directors shall from time to
-----------------------
time, in its discretion, fix or alter the compensation of any officer or
agent.
- 7 -
Section 4. Bond. The Directors shall direct and require good and
---------------
sufficient fidelity bonds on all active officers and employees, whether or
not they draw salary or compensation, which bonds shall provide for indemnity
to the Corporation on account of any losses sustained by it as the result of
any dishonest, fraudulent or criminal act or omission committed or omitted by
them acting independently or in collusion or combination with any person or
persons. The bonds may be individual, schedule or blanket form, and the
premiums therefor may be paid by the Corporation.
Section 5. Tenure of Office and Removal. The officers of the
---------------------------------------
Corporation shall hold office until their successors are chosen and qualify.
Any officer elected or appointed by the Board of Directors may be removed at
any time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the
Board of Directors.
Section 6. Chairman of the Board. The Chairman of the Board shall
--------------------------------
provide overall direction and guidance to the Corporation. He or she shall
preside at all meetings of the shareholders and of the Board of Directors.
The Chairman shall in general perform all duties incident to the office of
Chairman of the Board and such other duties as may be prescribed by the Board
of Directors from time to time.
Section 7. Chief Executive Officer. The Chief Executive Officer shall
----------------------------------
have the primary responsibility for and the general control and management of
all of the business and affairs of the Corporation, under the direction of
the Board of Directors. He shall have power to select and appoint all
necessary officers and employees of the Corporation except such officers as
under these By-Laws are to be elected by the Board of Directors, to remove
all appointed officers or employees whenever he shall deem necessary, and to
make new appointments to fill the vacancies. He shall have the power of
suspension from office for cause of any elected officer, which shall be
forthwith declared in writing to the Board of Directors. Whenever in his
opinion it may be necessary, he shall define the duties of any officer or
employee of the Corporation which are not prescribed in these By-Laws or by
resolution of the Board of Directors. He also shall be an Assistant Secretary
and shall have such other authority and shall perform such other duties as
may be assigned to him by the Board of Directors.
Section 8. President. The President (if one shall have been elected
--------------------
by the Board of Directors) shall have such powers and discharge such duties
as may be assigned to him from time to time by the Board of Directors, the
Chairman of the Board or the senior officer to whom he reports. If the office
of Chairman of the Board and Chief Executive Officer is held by another
person, the President shall be the chief operating officer of the
Corporation. He also shall be an Assistant Secretary and shall have such
other authority and shall perform such other duties as may be assigned to him
by the Board of Directors.
Section 9. Vice-President. The Vice-Presidents, if any, in the order
-------------------------
designated by the Board of Directors, shall, in the absence or disability of
the President, perform the duties and exercise the powers of the President
and shall perform such other duties and have such other powers as the Board
of Directors, Chairman of the Board, the Chief Executive Officer or the
President may from time to time prescribe.
Section 10. The Secretary. The Secretary shall attend all meetings
-------------------------
of the shareholders of the Corporation and of the Board of Directors and
shall record all of the proceedings of such meetings in minute books kept for
that purpose. He shall keep in safe custody the corporate seal of the
Corporation and is authorized to affix the same to all instruments requiring
the Corporation's seal. He shall have charge of the corporate records, and,
except to the extent authority may be conferred upon any transfer agent or
registrar duly appointed by the Board of Directors, he shall maintain the
Corporation's books, registers, stock certificate and stock transfer books
and stock ledgers, and such other books, records and papers as the Board of
Directors may from time to time entrust to him. He shall give or cause to be
given
- 8 -
proper notice of all meetings of shareholders and Directors as required by
law and the By-Laws, shall, with the President or a Vice-President, sign the
stock certificates of the Corporation, and shall perform such other duties as
may from time to time be prescribed by the Board of Directors, Chairman of
the Board, the Chief Executive Officer or the President.
Section 11. The Assistant Secretary. Each Assistant Secretary, if
-----------------------------------
any, shall assist the Secretary in the performance of his duties, and may at
any time perform any of the duties of the Secretary; in case of the death,
resignation, absence or disability of the Secretary, the duties of the
Secretary shall be performed by an Assistant Secretary, and each Assistant
Secretary shall have such other powers and perform such other duties as, from
time to time, may be assigned to him by the Board of Directors.
Section 12. Treasurer. The Treasurer, if any, shall have the custody
---------------------
of the corporate funds and securities, and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation,
and shall deposit all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the Corporation as may
be ordered by the Board, taking proper vouchers for such disbursements, and
shall render to the Chairman of the Board and Directors at the regular
meetings of the Board, or whenever they may require it, an account of all his
transactions as Treasurer, and of the financial condition of the Corporation.
Section 13. The Assistant Treasurer. Each Assistant Treasurer, if
-----------------------------------
any, shall assist the Treasurer in the performance of his duties, and may at
any time perform any of the duties of the Treasurer; in case of the death,
resignation, absence or disability of the Treasurer, the duties of the
Treasurer shall be performed by an Assistant Treasurer, and each Assistant
Treasurer shall have such other powers and perform such other duties as, from
time to time may be assigned to him by the Board of Directors.
ARTICLE VIII - RESIGNATIONS
---------------------------
Any Director or officer may resign his office at any time, such
resignation to be made in writing and to take effect from the time of its
receipt by the Corporation, unless some different time be fixed in the
resignation, and then from that time. The acceptance of a resignation shall
not be required to make it effective.
ARTICLE IX - CERTIFICATES OF STOCK AND TRANSFERS
------------------------------------------------
Section 1. Form and Execution of Certificate. The Board of Directors
--------------------------------------------
shall prescribe the form of the certificates of stock of the Corporation. The
certificates shall be signed by the Chairman of the Board, the Chief
Executive Officer or President and by the Secretary or Assistant Secretary
and shall be sealed with the seal of the Corporation and all be numbered
consecutively. The name of the owner of the certificates of stock, number of
shares of stock represented thereby, and the date of issue shall be recorded
on the books of the Corporation. The persons who may own stock of the
corporation and the number of shares which may be owned by any such persons
are restricted in accordance with the Articles of Incorporation.
Section 2. Transfer of Shares. Shares of stock may be transferred by
-----------------------------
endorsement thereon of the signature of the proprietor, his agent, attorney
or legal representative and the delivery of the certificate; but such
transfer shall not be valid against the Corporation until the same is so
entered on the books of the Corporation and the old certificate is
surrendered for cancellation.
- 9 -
Section 3. Record Owner. The Corporation shall be entitled to treat
-----------------------
the person in whose name any shares of stock is registered as owner thereof
for the following purposes: capitalization, consolidation, merger,
reorganization, sale of assets, liquidation or otherwise; for votes,
approvals and consents by shareholders; for notice to the shareholders; and
for all other purposes whatever. The Corporation shall not be bound to
recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not the Corporation shall have notice
thereof, except as expressly required by the law or these By-Laws.
Section 4. Closing of Stock Transfer Books - Fixing Record Date. The
---------------------------------------------------------------
Board of Directors shall have power to close the stock transfer books of the
Corporation for a period not exceeding sixty (60) or less than 10 days
preceding the date of any meeting of shareholders, or the date for payment of
any dividend, or the date for the allotment of rights, or the date when any
change, conversion, or exchange of capital stock shall go into effect;
provided, however, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding
sixty (60) or less than 10 days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date for
the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the shareholders entitled to notice of, and to vote at any
such meeting and any adjournment thereof, or entitled to receive payment of
any such dividend or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of capital
stock, and in such case such shareholders and only such shareholders as shall
be shareholders of record on the date so fixed shall be entitled to notice
of, and to vote at such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment or rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
Section 5. Lost, Mutilated or Destroyed Stock Certificates. Upon
----------------------------------------------------------
presentation to the Corporation of a proper affidavit attesting the loss,
destruction or mutilation of any certificate or shares of stock to the
Corporation, the Board of Directors may direct the issuance of a new
certificate in lieu of and to replace the certificate so alleged to be lost,
destroyed or mutilated. The Board of Directors may require as a condition
precedent to the issuance of a new certificate any or all of the following:
(A) Additional evidence of the loss, destruction or mutilation
claimed;
(B) Advertisement of the loss in such manner that the Board of
Directors may direct or approve;
(C) A bond or agreement of indemnity in such form and amount, with
or without such sureties as the Board of Directors may approve; or
(D) The order or approval of a Court. The Corporation may recognize
the person in whose name the new certificate, or any certificate thereafter
is issued as owner of the shares described therein for all purposes until the
owner of the original certificate or transferee thereof without notice and
for value shall enjoin the Corporation and the holder of any new certificate,
or any certificate issued in exchange or substitution therefrom, from so
acting.
Section 6. Transfer Agent and Register. The Board of Directors may
--------------------------------------
appoint a transfer agent and/or a registrar of transfers and may require all
certificates of shares to bear the signature of such transfer agent and of
such registrar of transfers, or as the Board of Directors may otherwise
direct.
- 10 -
Section 7. Regulations. The Board of Directors shall have the power
----------------------
and authority to make all rules and regulations as the Board of Directors
shall deem expedient regulating in the issue, transfer, and registration of
certificates for shares in this Corporation.
Section 8. Transfer Book. Transfer books shall be maintained under
------------------------
the direction of the Secretary, showing the ownership and transfer of all
certificates of stock issued by the Corporation.
ARTICLE X - DEALINGS WITH COMPANIES IN WHICH
--------------------------------------------
DIRECTORS MAY HAVE AN INTEREST
------------------------------
Inasmuch as the Directors of this Corporation are or may be persons
of diversified business interests, and likely to be connected with other
corporations with which from time to time this Corporation may have business
dealings, no contract or other transaction between this Corporation and any
other corporation shall be affected by the fact that Directors of this
Corporation are interested in, or are directors or officers of such other
corporation.
ARTICLE XI - MISCELLANEOUS PROVISIONS
-------------------------------------
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
----------------------
determined by the Board of Directors.
Section 2. Inspection of Books. The Directors shall determine from
------------------------------
time to time whether, and, if allowed, when and under what conditions and
regulations the accounts and books of the Corporation (except such as may by
statute be specifically open to inspection) or any of them shall be open to
inspection of the shareholders, and shareholders' rights in this respect are
and shall be restricted and limited accordingly.
Section 3. Checks and Notes. All checks and drafts on the
---------------------------
Corporation's bank accounts and all bills of exchange and promissory notes,
and all acceptances, obligations and other instruments for the payment of
money, shall be signed by such officer or officers or agent or agents as
shall be thereunto duly authorized from time to time by the Board of
Directors; provided, that checks drawn on the Corporation's payroll, dividend
and special accounts may bear the facsimile signatures, affixed thereto by a
mechanical device, of such officers or agents as the Board of Directors may
authorize.
Section 4. Contracts. The Board of Directors may authorize any
--------------------
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the Corporation,
and such authority may be general or confined to specific instances.
Section 5. Loans. No material loans shall be contracted on behalf
----------------
of the Corporation and no material evidences of indebtedness shall be issued
in its name unless authorized by resolution of the Board of Directors. Such
authority may be general or confined to specific instances.
Section 6. Dividends. The Board of Directors may declare such
--------------------
dividends as they in their discretion see fit whenever the condition of the
Corporation, in their opinion, shall warrant the same. The Board may declare
dividends in cash, in property or in capital stock.
Section 7. Notices. Whenever, under the provisions of these By-Laws
------------------
notice is required to be given to any Director, officer or shareholder, it
shall not be construed to mean personal notice, but such notice may be given
in writing by depositing the same in the post office or letter box, in a
postpaid sealed wrapper addressed to such shareholder, officer or Director at
such address as appears on the records of
- 11 -
the Corporation, and such notice shall be deemed to be given at the time when
the same shall be thus mailed.
ARTICLE XII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
-------------------------------------------------------
Section 1. Indemnification of Directors and Officers. The
----------------------------------------------------
Corporation shall and does hereby indemnify any person who is or was a
director or officer of the Corporation or any subsidiary against any and all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement incurred by such person in connection with any civil, criminal,
administrative or investigative action, suit, proceeding or claim (including
any action by or in the right of the Corporation or a subsidiary) by reason
of the fact that such person is or was serving in such capacity; provided,
--------
however, that no such person shall be entitled to any indemnification
-------
pursuant to this subsection (1) on account of conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest or to
have constituted willful misconduct.
Section 2. Indemnification of Others. The Corporation may, to the
------------------------------------
extent that the Board of Directors deems appropriate and as set forth in a
by-law or resolution, indemnify any person who is or was an employee or agent
of the Corporation or any subsidiary or who is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including
an employee benefit plan) against any and all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred by such
person in connection with any civil, criminal, administrative or
investigative action, suit, proceeding or claim (including an action by or in
the right of the Corporation or a subsidiary) by reason of the fact that such
person is or was serving in such capacity; provided, however, that no such
-------- -------
person shall be entitled to any indemnification pursuant to this subsection
(2) on account of conduct which is finally adjudged to have been knowingly
fraudulent or deliberately dishonest or to have constituted willful
misconduct.
Section 3. Advancement of Expenses. The Corporation may, to the
----------------------------------
extent that the Board of Directors deems appropriate, make advances of
expenses, including attorneys' fees, incurred prior to the final disposition
of a civil, criminal, administrative or investigative action, suit,
proceeding or claim (including an action by or in the right of the
Corporation or a subsidiary) to any person to whom indemnification is or may
be available under this Article; provided, however, that prior to making any
-------- -------
advances, the Corporation shall receive a written undertaking by or on behalf
of such person to repay such amounts advanced in the event that it shall be
ultimately determined that such person is not entitled to such
indemnification.
Section 4. Indemnification Not Exclusive. The indemnification and
----------------------------------------
other rights provided by this Article shall not be deemed exclusive of any
other rights to which a person to whom indemnification is or may be otherwise
available under these Articles of Incorporation, the By-laws or any
agreement, vote of shareholders or disinterested directors or otherwise, may
be entitled. This Corporation is authorized to purchase and maintain
insurance on behalf of the Corporation or any person to whom indemnification
is or may be available against any liability asserted against such person in,
or arising out of, such person's status as director, officer, employee or
agent of the Corporation, any of its subsidiaries or another corporation,
partnership, joint venture, trust or other enterprise (including an employee
benefit plan) which such person is serving at the request of the corporation.
Section 5. Right to Rely. Each person to whom indemnification is
------------------------
granted under Section 1 of this Article XII is entitled to rely upon the
indemnification and other rights granted hereby as a contract with the
Corporation and such person and such person's heirs, executors, administrator
and estate shall be entitled to enforce against the Corporation all
indemnification and other rights granted to such person
- 12 -
by Sections 1, 3 and 5 of this Article XII. The indemnification and other
rights granted by Sections 1, 3, 5 and 7 of this Article XII shall survive
amendment, modification or repeal of this Article XII, and no such amendment,
modification or repeal shall act to reduce, terminate or otherwise adversely
affect the rights to indemnification granted hereby, with respect to any
expenses, judgments, fines and amounts paid in settlement incurred by a
person to whom indemnification is granted under Section 1 of this Article
XII, or limitation of liability granted under Section 7 of this Article XII,
with respect to an action, suit, proceeding or claim that arises out of acts
or omissions of such person that occurred prior to the effective date of such
amendment, modification or repeal.
Any indemnification granted by the Board of Directors pursuant to
Section 2 of this Article XII, shall inure to the person to whom the
indemnification is granted, and such person's heirs, executors, administrator
and estate; provided, however, that such indemnification may be changed,
-------- -------
modified or repealed, at any time or from time to time, at the discretion of
the Board of Directors and the survival of such indemnification shall be in
accordance with terms determined by the Board of Directors.
Section 6. Subsidiary. For the purposes of this Article XII,
---------------------
"subsidiary" shall mean any corporation, partnership, joint venture, trust or
other enterprise of which a majority of the equity or ownership interest is
directly or indirectly owned by the Corporation.
Section 7. Limitation of Liability. The personal liability of the
----------------------------------
directors to the Corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director is hereby eliminated; provided,
--------
however, that this provision does not eliminate or limit the liability of a
-------
director for any breach of a director's duty of loyalty to the Corporation or
its shareholders, for acts or omissions not in subjective good faith or which
involve intentional misconduct or a knowing violation of the law, liability
under Section 351.345 (improper dividends), or for any transaction from which
the director derived an improper personal benefit.
- 13 -
ANNEX G
-------
SOUTHSIDE BANCSHARES CORP. AUDIT COMMITTEE CHARTER
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist
the Board in fulfilling its oversight responsibilities. The Audit
Committee's primary duties and responsibilities are to:
* Monitor the integrity of the Company's financial reporting
process and systems of internal controls regarding finance,
accounting and legal compliance.
* Monitor the independence and performance of the Company's
independent auditors and internal auditing function.
* Provide an avenue of communication among the independent
auditors, management, the internal auditing function, and the
Board of Directors.
The Audit Committee shall have the authority to conduct any
investigation appropriate to fulfilling its responsibilities, and
it has direct access to the independent auditors as well as
anyone in the organization. The Audit Committee shall have the
ability to retain, at the Company's expense, special legal,
accounting, or other consultants or experts it deems necessary in
the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the independence and experience
requirements of The NASDAQ Stock Market. The Audit Committee shall
be comprised of three or more directors as determined by the Board,
each of whom shall be independent nonexecutive directors, free from
any relationship that would interfere with the exercise of his or
her independent judgment. All members of the Committee shall have a
basic understanding of finance and accounting and shall be able to
read and understand fundamental financial statements, and at least
one member of the Committee shall have accounting or related
financial management expertise.
Audit Committee members shall be appointed by the Board upon the
recommendation of the Nominating Committee. If an audit committee
Chair is not designated or present, the members of the Committee may
designate a Chair by majority vote of the Committee membership.
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall
prepare and/or approve an agenda in advance of each meeting. The
Committee should meet privately in executive session at least
annually with management, the director of the internal auditing
department, the independent auditors, and as a committee to discuss
any matters that the Committee or each of these groups believe
should be discussed.
In addition, the Committee, or at least its Chair, should
communicate with management and the independent auditors quarterly
to review the Company's financial statements and significant
findings based upon the auditor's limited review procedures.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
Review Procedures
-----------------
1. Review and reassess the adequacy of this Charter at least
annually. Submit the Charter to the Board of Directors
for approval and have the document published at least
every three years in accordance with the regulations of
the Securities and Exchange Commission.
2. Review the Company's annual audited financial statements
and any reports or other financial information to be
submitted to any governmental body, or the public,
including any certification, report, opinion or review
rendered by the independent auditors prior to filing or
distribution. Review should include discussion with
management and independent auditors of significant
issues regarding accounting principles, practices, and
judgments.
3. In consultation with the management, the independent
auditors, and the internal auditors, consider the
integrity of the Company's financial reporting processes
and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor,
control, and report such exposures. Review significant
findings prepared by the independent auditors and the
internal auditing function together with management's
responses.
4. Review with financial management and the independent
auditors the Company's quarterly financial statements
prior to filing or distribution. Discuss any significant
changes to the Company's accounting principles and any
items required to be communicated by the independent
auditors in accordance with SAS 61. The Chair of the
Committee may represent the entire Audit Committee of
this review.
Independent Auditors
--------------------
5. The independent auditors are ultimately accountable to
the Audit Committee and the Board of Directors. The
Audit Committee shall review the independence and
performance of the auditors and annually recommend to
the Board of Directors the appointment of the
independent auditors or approve any proposed discharge
of the independent auditors when circumstances warrant.
6. Approve the fees and other significant compensation to be
paid to the independent auditors.
7. On an annual basis, the Committee should review and
discuss with the independent auditors all significant
relationships they have with the Company that could
impair the independent auditors' independence.
8. Review the independent auditors audit plan - discuss
scope, staffing, locations, reliance upon management,
and internal audit and general audit approach.
9. Prior to releasing the year-end earnings, discuss the
results of the audit with the independent auditors.
Discuss certain matters required to be communicated to
audit committees in accordance with AICPA SAS 61.
2
10. Consider the independent auditor's judgments about
quality and appropriateness of the Company's accounting
principles as applied in its financial reporting.
Internal Audit Function and Legal Compliance
--------------------------------------------
11. Review the internal audit plan, changes in plan,
activities, and qualifications of the internal auditors,
as needed.
12. Approve the fees for internal audit services.
13. Review significant reports prepared by the internal audit
department together with management's response and
follow-up to these reports.
14. On at least an annual basis, review with the Company's
counsel, any legal matters that could have a significant
impact on the organization's financial statements, the
Company's compliance with applicable laws and regulations,
and inquiries received from regulators or governmental
agencies.
Other Audit Committee Responsibilities
--------------------------------------
15. Annually prepare a report to shareholders as required by
the Securities and Exchange Commission. The report
should be included in the Company's annual proxy
statement.
16. Perform any other activities consistent with this Charter,
the Company's by-laws, and governing law, as the
Committee or Board deems necessary or appropriate.
17. Maintain minutes of meetings and periodically report to
the Board of Directors on significant results of the
foregoing activities.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations,
to resolve disagreements, if any, between management and the independent
auditor to assure or to assure compliance with laws and regulations and the
Company's Code of Conduct.
3
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Sections 351.355(1) and (2) of The General and Business Corporation
Law of the State of Missouri provide that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful,
except that, in the case of an action or suit by or in the right of the
corporation, the corporation may not indemnify such persons against
judgments and fines and no person shall be indemnified as to any claim,
issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation, unless and only to the extent that the court in which the
action or suit was brought determines upon application that such person is
fairly and reasonably entitled to indemnity for proper expenses. Section
351.355(3) provides that, to the extent that a director, officer, employee
or agent of the corporation has been successful in the defense of any such
action, suit or proceeding or any claim, issue or matter therein, he shall
be indemnified against expenses, including attorneys' fees, actually and
reasonably incurred in connection with such action, suit or proceeding.
Section 351.355(7) provides that a corporation may provide additional
indemnification to any person indemnifiable under subsection (1) or (2),
provided such additional indemnification is authorized by the corporation's
articles of incorporation or an amendment thereto or by a shareholder
approved bylaw or agreement, and provided further that no person shall
thereby be indemnified against conduct which was finally adjudged to have
been knowingly fraudulent, deliberately dishonest or willful misconduct or
which involved an accounting for profits under Section 16(b) of the
Securities Exchange Act of 1934.
Article XII of Allegiant Bancorp's bylaws, which will be the bylaws
of the merged company, provides its directors and officers the
indemnification specified in subsections (1) and (2) and the additional
indemnification authorized in subsection (7) above.
The merged company's directors and officers are insured under
directors' and officers' liability insurance policies, subject to certain
limits, retention, exceptions and other terms and conditions of such policy,
against liability for any actual or alleged error, misstatement, misleading
statement, act or omission, or neglect or breach of duty by the directors or
officers of the merged company, individually or collectively, or any
matter claimed against them solely by reason of their being directors or
officers of the merged company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. EXHIBITS. See Exhibit Index.
B. FINANCIAL STATEMENT SCHEDULES. Not Applicable.
II-1
ITEM 22. UNDERTAKINGS
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Southside under the foregoing provisions, or otherwise, Southside
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Southside of expenses
incurred or paid by a director, officer or controlling person of Southside in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, Southside will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(2) Southside hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of Southside's
annual report under Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report under Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) Southside hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(4) Southside undertakes that every prospectus (a) that is filed
under paragraph (3) immediately preceding, or (b) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415 (Section 230.415 of this
chapter), will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offering therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(5) Southside hereby undertakes to respond to requests for
information that is incorporated by reference into the joint proxy statement/
prospectus under Item 4, 10(b), 11 or 13 of this form, within one business
day of receipt of such request and to send the incorporated documents by
first class mail or other equally prompt means. This includes information
contained in the documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(6) Southside hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
(7) Southside hereby undertakes:
(a) To file during any period in which offers and sales
are being made, a post-effective amendment to this Registration
Statement:
* To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
* To reflect in the prospectus any facts or
events arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof), which
II-2
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement.
* To include any material information with respect
to the plan of distribution not previously disclosed
in the Registration Statement or any material change
to such information in the Registration Statement.
(b) That for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant has duly caused this Registration Statement relating to
the merger with Allegiant Bancorp, Inc. to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of St. Louis, State of
Missouri, on July 19, 2001.
SOUTHSIDE BANCSHARES CORP.
By /s/ Thomas M. Teschner
-------------------------------------------
Name: Thomas M. Teschner
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Thomas M. Teschner Director, President and July 19, 2001
--------------------------------- Chief Executive Officer
Thomas M. Teschner
/s/ Joseph W. Pope Director, Senior Vice President July 19, 2001
--------------------------------- and Chief Financial Officer
Joseph W. Pope
* Director July 19, 2001
---------------------------------
Joseph W. Beetz
* Director July 19, 2001
---------------------------------
Howard F. Etling
* Director July 19, 2001
---------------------------------
Douglas P. Helein
* Director July 19, 2001
---------------------------------
Earle J. Kennedy, Jr.
* Chairman of the Board July 19, 2001
---------------------------------
Norville K. McClain
* Director July 19, 2001
---------------------------------
Daniel J. Queen
II-4
Signature Title Date
--------- ----- ----
* Director July 19, 2001
---------------------------------
Steven C. Roberts
* Director July 19, 2001
---------------------------------
Richard G. Schroeder, Sr.
*By: /s/ Thomas M. Teschner July 19, 2001
-----------------------------
Thomas M. Teschner,
As Attorney-In-Fact
II-5
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
2.1 Agreement and Plan of Merger, dated as of April 30, 2001, by and between Allegiant Bancorp, and Southside, filed
as Exhibit 2 to Southside's Form 8-K dated May 8, 2001, is hereby incorporated by reference.
3.1 Restated Articles of Incorporation of Southside filed as Exhibit 3(a) to Southside's Registration Statement on
Form S-4/A on May 8, 1998, incorporated herein by reference.
3.2 Amended and Restated Bylaws of Southside as amended December 28, 1995, June 24, 1999, and March 9, 2001.**
4.1 Rights Agreement dated as of May 27, 1993 between Southside and Boatmen's Trust Company filed as Exhibits
1 and 2 to Southside's Registration Statement on Form 8-A on May 27, 1993, incorporated herein by reference.
4.2 Amendment No. 1 to Rights Agreement, dated as of April 30, 2001, between Southside and Mellon Investor Services
LLC as successor to Boatmen's Trust Company.**
5.1 Opinion of Thompson Coburn LLP.*
8.1 Opinion of Thompson Coburn LLP as to certain tax matters in the merger.*
10.1 Employment Agreement dated April 27, 1995 between Southside, South Side National Bank in St. Louis and Thomas M.
Teschner, as amended, filed as Exhibit 10(a) to Southside's Report on Form 10-Q for the quarterly period ended
June 30, 1998, incorporated herein by reference.
10.2 Southside 1993 Non-Qualified Stock Option Plan, filed as Exhibit 10(e) to Southside's Report on Form 10-K
for the fiscal year ended December 31, 1994, incorporated herein by reference.
10.3 Deferred Compensation Agreement dated April 25, 1996 between Thomas M. Teschner and Southside, filed
as Exhibit 10(c) to Southside's Report on Form 10-Q for the quarterly period ended September 30, 1998,
incorporated herein by reference.
10.4 Third Amendment to Deferred Compensation Agreement dated April 27, 2001 between Thomas M. Teschner and
Southside.**
10.5 Southside Deferred Compensation Plan for Directors filed as Exhibit 10(d) to Southside's Report on Form
10-K for the fiscal year ended December 31, 1996, incorporated herein by reference.
10.6 Southside 1998 Stock Option Plan, filed as Exhibit 10(e) to Southside's Report on Form 10-K for the fiscal
year ended December 31, 1998, incorporated hereby by reference.
10.7 Salary Continuation Agreement dated December 1, 1999 between Thomas M. Teschner and Southside, filed as Exhibit
10(f) to Southside's Report on Form 10-K for the fiscal year ended December 31, 1999, incorporated herein by
reference.
10.8 Salary Continuation Agreement dated December 1, 1999 between Joseph W. Pope and Southside, filed as Exhibit
10(g) to Southside's Report on Form 10-K for the fiscal year ended December 31, 1999, incorporated herein by
reference.
10.9 First Amendment to Southside Deferred Compensation Plan for Directors dated December 1, 1999 between
Southside and Thomas M. Teschner, filed as Exhibit 10(h) to Southside's Report on Form 10-K for the fiscal year
ended December 31, 1999, incorporated herein by reference.
10.10 First Amendment to Southside Deferred Compensation Plan for Directors dated December 1, 1999 between
Southside and Daniel J. Queen, filed as Exhibit 10(i) to Southside's Report on Form 10-K for the fiscal year
ended December 31, 1999, incorporated herein by reference.
10.11 First Amendment to Southside Deferred Compensation Plan for Directors dated December 1, 1999 between
Southside and Earle J. Kennedy, Jr., filed as Exhibit 10(j) to Southside's Report on Form 10-K for the fiscal year
ended December 31, 1999, incorporated herein by reference.
10.12 First Amendment to Southside Deferred Compensation Plan for Directors dated December 1, 1999 between
Southside and Norville K. McClain, filed as Exhibit 10(k) to Southside's Report on Form 10-K for the fiscal year
ended December 31, 1999, incorporated herein by reference.
10.13 Southside Split Dollar Agreement dated December 1, 1999 between Southside and the Thomas M. Teschner
Irrevocable Trust, dated November 18, 1999, filed as Exhibit 10(l) to
II-6
Southside's Report on Form 10-K for the fiscal year ended December 31, 1999, incorporated herein by reference.
10.14 Employment Agreement dated April 27, 2001 between Joseph W. Pope and Southside.**
10.15 Deferred Compensation Agreement, dated January 1, 2001, between Southside and Joseph W. Beetz.**
10.16 Second Amendment to Deferred Compensation Agreement, dated April 25, 1996, between Thomas M. Teschner and
Southside, filed as Exhibit 10(c) to Southside's Report on Form 10-Q for the quarterly period ended June 30,
1998, incorporated herein by reference.
23.1 Consent of Ernst & Young LLP with regard to the use of its report on Allegiant Bancorp's financial statements.
23.2 Consent of KPMG LLP with regard to the use of its report on Southside's financial statements.
23.3 Consent of KPMG LLP with regard to the use of its report on Equality Bancorp, Inc.'s financial statements.
23.4 Consent of Legg Mason Wood Walker, Incorporated with respect to its opinion.**
23.5 Consent of Stifel, Nicolaus and Company, Incorporated with respect to its opinion.**
23.6 Consent of Thompson Coburn LLP included in exhibit 5.1 hereto.*
23.7 Consent of Marvin S. Wool.**
23.8 Consent of Shaun R. Hayes.**
23.9 Consent of Robert L. Chambers.**
23.10 Consent of Leland B. Curtis.**
23.11 Consent of Kevin R. Farrell.**
23.12 Consent of Richard C. Fellhauer.**
23.13 Consent of Leon A. Felman.**
23.14 Consent of Michael R. Hogan.**
23.15 Consent of C. Virginia Kirkpatrick.**
23.16 Consent of Robert E. Wallace, Jr.**
23.17 Consent of John L. Weiss.**
23.18 Consent of Lee S. Wielansky.**
24.1 Power of Attorney.**
-----------
* To be filed by amendment.
**Previously filed on June 18, 2001.
II-7
PROXY
ALLEGIANT BANCORP, INC
2122 KRATKY ROAD
ST. LOUIS, MISSOURI 63114
For the Special Meeting of Shareholders to be held , 2001
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder(s) of ALLEGIANT BANCORP, INC., does
hereby nominate, constitute and appoint Shawn R. Hayes and Thomas A. Daiber,
or each of them (with full power to act alone), true and lawful proxies and
attorneys-in-fact, with full power of substitution, for the undersigned and
in the name, place and stead of the undersigned to vote all of the shares of
common stock, $0.01 par value, of Allegiant Bancorp, Inc. standing in the
name of the undersigned on its books at the close of business on , 2001
at the Special Meeting of Shareholders to be held at Allegiant Bancorp's
headquarters, 2122 Kratky Road, St. Louis, Missouri, on , ,
2001, at .m., Central Time, and at any adjournments or postponements
thereof, with all the powers the undersigned would possess if personally
present, as follows:
1. To consider and vote upon the approval of the Agreement and Plan of
Merger, dated as of April 30, 2001, by and between Allegiant Bancorp
and Southside Bancshares Corp., a Missouri corporation, and the
transactions contemplated by the agreement, including the merger of
Allegiant Bancorp into Southside upon the terms and subject to the
conditions set forth in the merger agreement, as more fully described
in the accompanying joint proxy statement/prospectus.
/ / FOR / / AGAINST / / ABSTAIN
2. To transact such other business as may properly come before the
special meeting or any adjournments or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
ISSUE SHARES OF ALLEGIANT BANCORP COMMON STOCK UNDER THE MERGER AGREEMENT.
The undersigned hereby revokes any other proxies to vote at such
meeting and hereby ratifies and confirms all that the proxies and attorneys-
in-fact, or each of them, appointed hereunder may lawfully do by virtue
hereof. Said proxies and attorneys-in-fact, without limiting their general
authority, are specifically authorized to vote in accordance with their
best judgment with respect to all matters incident to the conduct of the
special meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN
HEREIN, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL LISTED ABOVE.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY BY
, 2001 USING THE ENVELOPE PROVIDED.
Check appropriate box and Date , 2001
indicate changes below:
Address Change? / / Name Change? / /
-------------------------------
-------------------------------
Signature(s) In Box
When signing as attorney, executor,
administrator, trustee or guardian,
please give your full title. If more
than one person holds the power to
vote the same shares, all must sign.
All joint owners must sign. The
undersigned hereby acknowledges
receipt of the notice of Special
Meeting and the Joint Proxy
Statement/Prospectus (with all
enclosures and attachments), dated
, 2001, relating to the special
meeting.
SOUTHSIDE BANCSHARES CORP.
3606 GRAVOIS AVENUE
ST. LOUIS, MISSOURI 63116
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF SOUTHSIDE BANCSHARES CORP.
The undersigned hereby appoints Mitchell P. Baden and Laurie A.
Pennycook, and each of them, with or without the other, attorneys and
proxies, with full power of substitution and revocation, to vote all of the
shares of common stock of Southside Bancshares Corp. which the undersigned
is entitled to vote at the annual meeting of shareholders of the company to
be held at South Side National Bank's Telegraph Road facility, located at
4111 Telegraph Road, South St. Louis County, Missouri, on ________,
________, 2001, at _______ p.m., and at any adjournments thereof: (1) as
hereinafter specified upon the proposals listed below and as more
particularly described in the company's joint proxy statement/prospectus,
receipt of which is hereby acknowledged; and (2) in their discretion upon
such other matters as may properly come before the annual meeting of
shareholders.
A VOTE FOR THE FOLLOWING PROPOSALS (AS DESCRIBED IN GREATER DETAIL IN THE
---
JOINT PROXY STATEMENT/PROSPECTUS) IS RECOMMENDED BY THE BOARD OF DIRECTORS.
1. Election of directors: Douglas P. Helein, Earle J. Kennedy, Jr.,
Daniel J. Queen and Steven C. Roberts.
/ / FOR all nominees listed (except as marked to the contrary).
/ / WITHHOLD AUTHORITY to vote for .
----------------------------
/ / WITHHOLD AUTHORITY to vote for all nominees listed.
2. Approval of the plan of merger between Southside and Allegiant
Bancorp, Inc. set forth in the merger agreement.
/ / FOR / / AGAINST / / ABSTAIN
-- Fold here and return in the enclosed envelope --
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THE
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2. IF ANY OTHER MATTERS PROPERLY COME
BEFORE THE ANNUAL MEETING, THE PROXY HOLDERS WILL VOTE THE SHARES OF COMMON
STOCK REPRESENTED BY YOUR PROXY IN THEIR DISCRETION.
(YOU ARE REQUESTED TO COMPLETE, DATE, SIGN, AND RETURN THIS PROXY PROMPTLY)
Dated , 2001
----------------- ------------------------------------
Print Name:
-------------------------
IMPORTANT: Please date this proxy
and sign exactly as your name(s)
appears thereon. If stock is held
jointly, signature should include
both names. Executors,
administrators, trustees, guardians,
corporate officers and others
signing in a representative capacity
should so indicate.
PROXY MUST BE RETURNED BY , 2001 / / Please check box if you plan to
------- attend the annual meeting.
SOUTHSIDE SHAREHOLDERS
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING,
PLEASE SIGN, DATE AND PROMPTLY RETURN THIS SOUTHSIDE PROXY CARD IN THE
ENVELOPE PROVIDED. IF YOU PLAN TO ATTEND THE ANNUAL MEETING AND ARE A
SHAREHOLDER OF RECORD, PLEASE MARK THE PROXY CARD APPROPRIATELY AND RETURN
IT. HOWEVER, IF YOUR SHARES ARE NOT REGISTERED IN YOUR OWN NAME, PLEASE
ADVISE THE SHAREHOLDER OF RECORD (YOUR BANK, BROKER, ETC.) THAT YOU WISH TO
ATTEND. THAT FIRM MUST PROVIDE YOU WITH EVIDENCE OF YOUR OWNERSHIP WHICH
WILL ENABLE YOU TO GAIN ADMITTANCE TO THE ANNUAL MEETING.
FORM OF ELECTION FORM
IN CONNECTION WITH THE MERGER OF ALLEGIANT BANCORP, INC. AND
SOUTHSIDE BANCSHARES CORP.
TO: SOUTHSIDE BANCSHARES CORP. SHAREHOLDERS
Under the terms of the Agreement and Plan of Merger, dated April
30, 2001, by and between Allegiant Bancorp, Inc. and Southside Bancshares
Corp., you may elect to receive the merger consideration to be paid to you in
the form of: (1) $14.00 in cash for each share of Southside common stock you
hold; (2) 1.39 shares of common stock of the merged company for each share
of Southside common stock you hold; or (3) a combination of cash and shares of
common stock of the merged company based on the foregoing exchange rates and
as designated by you.
You should elect to receive your account balance after the above date
BUT BEFORE , 2001 by completing the attached Request For
Distribution Form and returning it to:
UMB Bank n.a.
Securities Transfer Division
928 Grand Avenue
P.O. Box 410064
Kansas City, Missouri 64141
You may return this form, along with your completed proxy, in the
enclosed envelope.
Your election is subject to reallocation under the merger agreement
to ensure that one-half of the outstanding shares of Southside common stock
are converted into cash in the amount of $14.00 per share and the remaining
outstanding shares of Southside common stock are converted into common
stock of the merged company based upon an exchange ratio of 1.39 shares of
the merged company for each share of Southside common stock. As a result,
you will not know which form of merger consideration you are to receive until
after the merger is completed.
ELECTION FORMS WHICH ARE FILLED OUT INCORRECTLY OR WHICH ARE NOT
RECEIVED BY , 2001 SHALL RECEIVE THE FORM OF MERGER
CONSIDERATION AS DETERMINED UNDER THE MERGER AGREEMENT.
PLEASE READ THE JOINT PROXY STATEMENT/PROSPECTUS BEFORE MAKING YOUR
INVESTMENT DECISION.
FORM OF REQUEST FOR DISTRIBUTION
IN CONNECTION WITH THE MERGER OF ALLEGIANT BANCORP, INC. AND
SOUTHSIDE BANCSHARES CORP.
The undersigned shareholder(s) of SOUTHSIDE BANCSHARES CORP. hereby
elect(s) to receive the merger consideration which is to be delivered pursuant
to the Agreement and Plan of Merger, dated as of April 30, 2001, between
Southside Bancshares Corp. and Allegiant Bancorp, Inc., in the form designated
below.
/ / (check (X) if applicable) Election to receive a distribution of only
cash as merger consideration for the shares of common stock
of Southside held by the undersigned as of June , 2001.
/ / (check (X) if applicable) Election to receive a distribution of
only shares of common stock of the merged company as merger
consideration in exchange for the shares of Southside common stock
held by the undersigned as of June , 2001.
/ / (check (X) if applicable) Election to receive shares of common stock
of the merged company as merger consideration in exchange for ____%
of the shares of Southside common stock held by the undersigned as of
, 2001 and the remainder of merger consideration to be paid to the
undersigned as a cash distribution.
In making the election marked above, I understand that an
investment in shares of common stock of the merged company involves
substantial risks, including the loss of the entire investment in the shares
as further described in the joint proxy statement/prospectus delivered to
me. In addition, I understand that my election is subject to reallocation
under the merger agreement.
THE TRANSFER AGENT, UMB BANK, N.A., WILL DISTRIBUTE YOUR ACCOUNT IN
THE MANNER WHICH YOU DIRECT HEREBY. IF NO DIRECTION IS GIVEN OR IF THIS
REQUEST FOR DISTRIBUTION IS FILLED OUT INCORRECTLY, YOU WILL RECEIVE THE FORM
OF MERGER CONSIDERATION AS DETERMINED UNDER THE MERGER AGREEMENT.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS REQUEST FOR
DISTRIBUTION USING THE ENVELOPE PROVIDED. YOU MUST SEND THIS REQUEST
DISTRIBUTION IN AS WELL AS THE PROXY CARD. YOU SHOULD RETURN THE REQUEST
FOR DISTRIBUTION EVEN IF YOU INTEND TO VOTE AGAINST THE MERGER. THIS REQUEST
FOR DISTRIBUTION WILL NOT COUNT AS A VOTE "FOR" OR "AGAINST" THE MERGER.
Date , 2001
---------------
------------------------------
------------------------------
Signature(s) In Box
When signing as attorney,
executor, administrator,
trustee or guardian, please
give your full title. If more
than one person holds the
power to vote the same shares,
all must sign. All joint
owners must sign. The
undersigned hereby
acknowledges receipt this
Request for Distribution and
the accompanying Election
Notice.
2