UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy Statement
Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934
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Preliminary
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Southside
Bancshares, Inc.
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(Name of
Registrant as Specified In Its Charter)
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(Name of
Person(s) Filing Proxy Statement, if other than the
Registrant)
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SOUTHSIDE
BANCSHARES, INC.
1201 South Beckham
Avenue
Tyler, Texas
75701
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD APRIL 15, 2010
Dear
Shareholder:
You are cordially invited to attend the Annual
Meeting of Shareholders of Southside Bancshares, Inc. (the “Company”) to be held
at Willow Brook Country Club, 3205 West Erwin Street, Tyler, Texas, on Thursday,
April 15, 2010 at 4:00 p.m., local time, for the purposes of considering and
acting upon the following:
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1.
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the election
of four nominees named in this proxy statement as members of the board of
directors of the Company (“the Board”) to serve until the Annual Meeting
of Shareholders in 2013 and the election of one nominee named in this
proxy statement as a member of the Board to serve until the Annual Meeting
of Shareholders in 2011;
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2.
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the
ratification of the appointment by our Audit Committee of
PricewaterhouseCoopers LLP (“PwC”) to serve as the independent registered
public accounting firm for the Company for the year ended December 31,
2010; and
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3.
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the
transaction of such other business that may properly come before the
Annual Meeting or any adjournment
thereof.
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Management will
also report on operations and other matters affecting the
Company. After the meeting, the Company’s officers and directors will
be available to answer your questions. Representatives from PwC, the
Company’s independent registered public accounting firm, are expected to be in
attendance and available to answer your questions or make a statement if they so
desire.
Only holders of
common stock registered on the Company’s books as owners of shares at the close
of business on March 2, 2010, are entitled to vote at the Annual
Meeting.
Your attendance and vote are
important. Please sign, date and return the enclosed proxy
immediately in the envelope provided or you may vote your shares by telephone or
Internet. It is important that you sign and return the proxy or vote
by telephone or Internet, even if you actually plan to attend the meeting in
person. Your proxy may be revoked prior to the Annual Meeting by
notice in writing to the Corporate Secretary at the Company’s principal office
at any time, or by advising the Corporate Secretary at the Annual Meeting that
you wish to revoke your proxy and vote your shares in person.
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By Order of
the Board of Directors,
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| /s/ B. G. Hartley | ||
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B. G.
Hartley
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Chairman of
the Board
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Tyler,
Texas
March 12,
2010
WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, IT IS REQUESTED THAT YOU PROPERLY EXECUTE
AND PROMPTLY RETURN THE ENCLOSED FORM OF PROXY TO OUR TRANSFER AGENT,
COMPUTERSHARE INVESTOR SERVICES, IN THE ENCLOSED ADDRESSED ENVELOPE OR VOTE YOUR
SHARES BY TELEPHONE OR INTERNET.
TABLE OF
CONTENTS
SOUTHSIDE
BANCSHARES, INC.
1201 South Beckham
Avenue
Tyler, Texas
75701
PROXY STATEMENT
FOR
THE
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD APRIL 15, 2010
TO
OUR SHAREHOLDERS:
This proxy
statement is being furnished to holders of the common stock of Southside
Bancshares, Inc. (the “Company”) in connection with the Company’s Annual Meeting
of Shareholders (the “Annual Meeting”) to be held on Thursday, April 15, 2010,
at 4:00 p.m. at Willow Brook Country Club, 3205 West Erwin Street, Tyler, Texas,
and at any adjournments thereof, for the purposes of considering and acting upon
the following:
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1.
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the election
of four nominees named in this proxy statement as members of the Board to
serve until the Annual Meeting of Shareholders in 2013 and the election of
one nominee named in this proxy statement as a member of the Board to
serve until the Annual Meeting of Shareholders in
2011;
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2.
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the
ratification of the appointment by our Audit Committee of
PricewaterhouseCoopers LLP (“PwC”) to serve as the independent registered
public accounting firm for the Company for the year ending December 31,
2010; and
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3.
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the
transaction of such other business that may properly come before the
Annual Meeting or any adjournment
thereof.
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This Proxy
Statement and applicable form of proxy, as well as, the Annual Report and Form
10-K of the Company for the year ended December 31, 2009, including financial
statements, are first being sent to shareholders on or about March 12,
2010.
VOTING OF PROXY
If your proxy is
executed and returned, it will be voted as you direct. If no
direction is provided, the proxy will be voted as follows:
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FOR the
election of all the nominees named in this proxy statement as directors;
and
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FOR the
ratification of the appointment of
PwC.
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The proxies will
use their discretion with respect to voting on any other matters presented for a
vote. Additionally, if your proxy is executed and returned, it will
be voted to approve the minutes of the last Annual Meeting. This vote
will not amount to a ratification of the action taken at that meeting nor will
it indicate approval or disapproval of that action.
If your shares are
registered in your name as the shareholder of record, you may vote by mail,
telephone or the Internet by following the instructions below:
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To vote by
mail, complete, sign, and return the enclosed proxy card in the envelope
provided to: Proxy Services, c/o Computershare Investor
Services, P.O. Box 43102, Providence, RI,
02940-5068.
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To vote by
telephone, call toll free 1-800-652-VOTE (8683) within the United States
on a touch tone telephone and follow the instructions provided by the
recorded message.
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To vote using
the Internet, access the voting site at www.investorvote.com/SBSI and
follow the voting instructions set forth on the secured
website.
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The telephone and
Internet procedures are designed to authenticate the shareholder’s identity and
to allow shareholders to vote their shares and confirm that their voting
instructions have been properly recorded. Shareholders who vote by
telephone or Internet do not need to return the proxy card. Proxies
submitted by telephone or Internet must be recorded by 1:00 a.m., central time
on April 15, 2010.
1
If you hold your
shares in “street name” in a stock brokerage account or through a bank, trust or
other nominee, the
broker or other nominee is considered the record holder and you are the
beneficial owner of the shares. Beneficial owners vote their street name
shares by instructing their broker or other nominee how to vote using the voting
instruction form provided by the broker or nominee. Brokers have
authority to vote in their discretion on “routine” matters if they do not
receive voting instructions from the beneficial owner of the
shares. Please note that under recent rule changes effective January
1, 2010, the election of directors is no longer considered a routine
matter. Consequently, if you do not give your broker or nominee
specific voting instructions with respect to the election of directors, your
street name shares will not be counted in determining the number of shares
necessary for approval of a nominee but will instead be treated as a broker
non-vote (see “Quorum, Voting Rights and Procedures” below).
If
you hold your shares in street name and want to vote in person at the Annual
Meeting, you must obtain from your broker or nominee a legal proxy issued in
your name giving you the right to vote the shares directly at the meeting.
You will not be entitled to vote at the meeting unless you present such a proxy
to the Company at that time.
IMPORTANT NOTICE: Regarding the Availability of Proxy
Materials for the Shareholder Meeting to be Held on April 15, 2010.
The enclosed proxy
materials are also available to you on the Internet. You are
encouraged to review all of the information contained in the proxy materials
before voting.
The
Company’s Proxy Statement and Annual Report are available at:
http://www.southside.com/investor/proxymaterials
SPECIAL
NOTICE: To Shareholders with Shares in Broker Accounts
Due to the stock
exchange rules which took effect January 1, 2010, your broker is prohibited from
voting your street name shares in elections for directors unless you instruct in
writing how you want your shares voted. Consequently, your street
name shares will not be voted in connection with the election of directors
unless you timely respond to your broker’s request for voting
instructions.
REVOCABILITY
OF PROXY
Your proxy may be
revoked prior to the Annual Meeting by notice in writing to the Corporate
Secretary at the Company’s principal office, located at 1201 South Beckham
Avenue, Tyler, Texas 75701, at any time, or by advising the Corporate Secretary
at the Annual Meeting that you wish to revoke your proxy and vote your shares in
person. Your attendance at the Annual Meeting will not constitute
automatic revocation of the proxy.
PERSONS
MAKING THE SOLICITATION
The Company’s Board
is soliciting the proxy. The expense of soliciting your proxy will be
borne entirely by the Company and no other person or persons will bear such
costs either directly or indirectly. Proxies will be solicited
principally by mail, but may also be solicited by personal interview, telephone
and email by directors, officers and employees of the Company who will receive
no additional compensation. The Altman Group, Inc. has been retained
by the Company to assist in the solicitation of proxies for a fee of $6,500,
plus expenses.
RECORD
DATE AND OUTSTANDING SHARES
The Company’s Board
has fixed the close of business on March 2, 2010, as the record date for
determining the holders of common stock of the Company entitled to notice of and
to vote at the Annual Meeting. At the close of business on March 2,
2010, there were approximately 15,000,459 shares of common stock outstanding and
eligible to be voted on each matter. Each share of common stock
carries one vote.
QUORUM,
VOTING RIGHTS AND PROCEDURES
The approval of all
proposals brought before the Annual Meeting requires that a quorum be present at
the Annual Meeting. The presence, in person or by properly executed
proxy, of the holders of a majority of the shares of common stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum. In
the event that a quorum is not represented in person or by proxy at the Annual
Meeting, a majority of shares represented at that time may adjourn the Annual
Meeting to allow the solicitation of additional proxies or other measures to
obtain a quorum.
Each shareholder is
entitled to one vote on each proposal per share of common stock held as of the
record date.
2
Proposal 1, the
election of four directors to serve until the 2013 Annual Meeting and the
election of one director to serve until the 2011 Annual Meeting requires
approval by a “plurality” of the votes cast by the shares of common stock
entitled to vote in the election. This means that the five nominees
for director who receive the highest number of properly cast votes will be
elected as directors even if those nominees do not receive a majority of the
votes cast. Shares represented by proxies that are marked “withhold”
for the election of one or more director nominees or that are not voted (whether
by abstention, broker non-vote or otherwise) will not be counted in determining
the number of votes cast for those persons.
Proposal 2 and 3,
the ratification of PwC as the Company’s independent registered public
accounting firm, or any other matter that may properly come before the Annual
Meeting, require approval by a majority of the shares of common stock entitled
to vote and represented at the meeting in person or by proxy.
EFFECT
OF WITHHOLD VOTES, ABSTENTIONS AND BROKER NON-VOTES
Shares represented
at the Annual Meeting that are withheld or abstained from voting and broker
non-votes will be considered present for the purposes of determining a quorum at
the Annual Meeting. Shares represented by proxies that are marked
“withhold” for the election of one or more director nominees or that are not
voted (whether by abstention, broker non-vote or otherwise) will not be counted
in determining the number of votes cast for those
persons. For all other proposals, express abstentions will be
included in vote totals and, as such, will have the same effect on proposals as
a vote against such proposals. Broker non-votes (i.e., the submission
of a proxy by a broker or nominee specifically indicating the lack of
discretionary authority to vote on the matter), if any, will not be included in
vote totals and, as such, will have no effect on any proposal.
ELECTION OF DIRECTORS
(PROPOSAL
1)
The Board is
classified into three classes, all of which are comprised of four directors, for
a total of 12 directors. One class of directors is elected each year
for a three-year term. At the Annual Meeting, five directors are to
be elected, four for a term of three years and one for a term of one
year. Under NASDAQ listing rules, a majority of the Board must be
comprised of independent directors. The Board has determined that
each director nominated, except for B. G. Hartley, is independent under NASDAQ
listing rules.
The five nominees
identified below are nominees for election at the Annual Meeting for a
three-year term expiring at the 2013 Annual Meeting with the exception of
Preston L. Smith, who will join the class of directors standing for reelection
at the 2011 Annual Meeting:
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Term
Expiring 2013
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Term
Expiring 2011
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· Alton
Cade
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· Preston L.
Smith
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· B. G.
Hartley
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· Paul W.
Powell
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· Don W.
Thedford
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Alton Cade, B. G.
Hartley, Paul W. Powell, Preston L. Smith and Don W. Thedford are currently
directors of the Company and its subsidiary, Southside Bank. All of
the nominees except Mr. Smith and Mr. Thedford were previously elected to the
Board by shareholders. In August 2009, the Board was expanded by two
members, and, upon the recommendation of the Nominating Committee, Mr. Smith and
Mr. Thedford were appointed to fill vacancies created. For
biographical information on the nominees, please see “Information about Our
Directors, Nominees and Executive Officers.”
Unless otherwise
instructed, proxies received in response to this solicitation will be voted in
favor of the election of the persons nominated by the Nominating Committee for
directors of the Company. While it is not expected that any of the
nominees will be unable to qualify or accept office, if for any reason one or
more shall be unable to do so, the proxies will be voted for the substitute
nominee(s) selected by the Board of the Company.
The
Board recommends a vote FOR the election of each of the individuals nominated
for election as a director.
3
INFORMATION ABOUT OUR DIRECTORS, NOMINEES AND EXECUTIVE
OFFICERS
The following table
sets forth information regarding our nominees for director, our continuing
directors and our executive officers. Our Board is divided among
three classes, with members of each class serving three-year terms.
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NOMINEES
FOR DIRECTOR
TERMS
TO EXPIRE AT THE 2013 ANNUAL MEETING
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INITIAL
ELECTION
TO
BOARD
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ALTON CADE (73) – Mr.
Cade was the co-owner and President of Cade’s Building Materials from 1975
until his retirement on January 1, 2007. He is the President
and owner of Cochise Company, Inc., a real estate and investment company
he formed in 1960. In addition, he is the managing partner of a
family ranch and investment company. He has served as an
Elder/Trustee of Glenwood Church of Christ since 1977. Mr. Cade
has served on the Board since 2003 and prior to that on the Southside Bank
Board for over ten years. Mr. Cade’s management and business
skills combined with his knowledge of real estate and years of experience
on the Board, qualify him to be a member of the Board.
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2003
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B. G. HARTLEY (80) – Mr.
Hartley became Chairman of the Board of the Company in 1983. He
is also the Chief Executive Officer of the Company and Chairman of the
Board and Chief Executive Officer of Southside Bank, having served as
Southside Bank’s Chief Executive Officer since its opening in
1960. He is a former member of the American Bankers Association
(“ABA”) Board of Directors, past Chairman of the ABA National BankPac
Committee and a past member of the Administrative Committee of the ABA
Government Relations Council. He is currently a member of the
board of directors of East Texas Medical Center Regional Healthcare
Systems and past Chairman of the Texas Taxpayers and Research
Association. He is also a member of the Development Boards of
the University of Texas at Tyler and the University of Texas Health Center
at Tyler. Mr. Hartley has 50 years of banking experience, both
in management and as a board member and has served on the Board since
1982, all of which qualify him to be a member of the
Board.
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1982
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PAUL W. POWELL (76) –
Mr. Powell is Dean Emeritus of the Truett Theological Seminary at Baylor
University, where he also served as Dean and Special Assistant to the
University President. He serves as an Officer of the Robert M.
Rogers Foundation and is a former Chairman of the Board of Trinity Mother
Frances Health System. In addition, he served as President and
Chief Executive Officer of the Southern Baptist Annuity Board and was also
pastor of Green Acres Baptist Church, Tyler. Mr. Powell’s
leadership skills in several capacities, his knowledge of the health care
industry, his CEO experience with the Southern Baptist Annuity Board,
combined with his years of experience on the Board, qualify him to be a
member of the Board.
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1999
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DON W. THEDFORD (60) –
Mr. Thedford has been the President of Don’s TV & Appliance, Inc.
since 1979. He is a member of the National Appliance Retail
Dealers Association and the Nationwide Marketing Group. Mr.
Thedford’s management and leadership skills running his business for over
30 years combined with his overall knowledge of business and finance,
qualify him to be a member of the Board.
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2009
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NOMINEE
FOR DIRECTOR
TERM
TO EXPIRE AT THE 2011 ANNUAL MEETING
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PRESTON L. SMITH (53) –
Mr. Smith is the President and owner of PSI Production, Inc. He
is an active member of the Independent Petroleum Association of America
and served as its Northeast Texas Representative to the Board of Directors
from 1999 to 2005. Mr. Smith serves on the Board of Trustees
for All Saints Episcopal School of Tyler, is Chairman of the Board of
Trinity Mother Frances Health System, and is past President of the East
Texas State Fair Association. Mr. Smith’s management and
leadership skills, combined with his knowledge of oil and gas and the
health care industry, qualify him to be a member of the
Board.
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2009
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DIRECTORS
CONTINUING UNTIL THE 2011 ANNUAL MEETING
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INITIAL
ELECTION
TO
BOARD
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SAM DAWSON (62) – Mr.
Dawson is President and Secretary of the Company, having served in that
capacity since 1998. He joined Southside Bank in 1974 and is
currently President, Chief Operating Officer and a director of Southside
Bank. He is a director of East Texas Medical Center (“ETMC”)
Hospital, Cancer Institute and ETMC Rehabilitation
Hospital. Mr. Dawson has over 35 years of banking experience
and has served on this Board since 1997, all of which qualify him to be a
member of the Board.
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1997
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MELVIN B. LOVELADY (73)
– Mr. Lovelady is a CPA. He is a member of the American
Institute of Certified Public Accountants, the Texas Society of Certified
Public Accountants and the East Texas Chapter of the Texas Society of
Certified Public Accountants. He was a founding member of Henry
& Peters Financial Services, LLC, organized in 2000 (now Bridge-Wealth
Management, LLC). He was an officer and shareholder of the
accounting firm, Henry & Peters, PC from November 1987 through
December 31, 2004. Prior to joining Henry & Peters, PC, he
was a partner in the accounting firm of Squyres Johnson Squyres &
Co. He is a member of the Development Board of the University
of Texas at Tyler, the board of directors of the Tyler Junior College
Foundation, the University of Texas at Tyler Foundation, the A. W. Riter,
Jr. Family Foundation, the board of directors of the Hospice of East
Texas, and a Trustee of the R. W. Fair Foundation. Mr. Lovelady
is a CPA, a former partner with two accounting firms and a current or
prior member of numerous boards, including serving on this Board since
2005, all of which qualify him to be a member of the
Board.
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2005
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4
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WILLIAM SHEEHY (69) –
Mr. Sheehy retired December 31, 2006 as senior partner of the law firm of
Wilson, Sheehy, Knowles, Robertson & Cornelius PC. Mr.
Sheehy is a former director of the Texas Association of Bank
Counsel. Mr. Sheehy brings to our Board an extraordinary
understanding of our business, history and organization. He was
a senior partner of a law firm prior to his retirement and has served on
this Board since 1983, all of which qualify him to be a member of the
Board.
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1983
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DIRECTORS
CONTINUING UNTIL THE 2012 ANNUAL MEETING
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INITIAL
ELECTION
TO
BOARD
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HERBERT C. BUIE (79) –
Mr. Buie has been Chief Executive Officer of Tyler Packing Corporation,
Inc., a meat-processing firm, since 1955. He serves on the
Boards of Directors of the University of Texas Health Center at Tyler, the
development board of directors of the University of Texas at Tyler, the
East Texas Regional Food Bank, The Salvation Army, Tyler Economic
Development Council, Texas Chest Foundation and East Texas Communities
Foundation. Mr. Buie brings to our Board an extraordinary
understanding of our business, history and organization, as well as
management, leadership and business skills. These skills,
combined with his service on numerous boards, including this Board since
1988, qualify him to be a member of the Board.
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1988
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ROBBIE N. EDMONSON (78)
– Mr. Edmonson is Vice Chairman of the Board of the Company, having served
in that capacity since 1998. He joined Southside Bank as Vice
President in 1968 and currently is Vice Chairman of the board of directors
of Southside Bank and Chief Administrative Officer of Southside
Bank. Mr. Edmonson has over 45 years of banking experience and
has served on this Board since 1982, both of which qualify him to be a
member of the Board.
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1982
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JOE NORTON (73) – Mr.
Norton owned Norton Equipment Company and is a general partner in Norton
Leasing Ltd., LLP. Mr. Norton served as President and was a
principal shareholder of Norton Companies of Texas, Inc. for 25
years. He also owned W. D. Norton, Inc. d/b/a Overhead Door,
for 16 years. Mr. Norton brings to our Board an extraordinary
understanding of our business, history and organization, as well as
management, business and leadership skills. These skills,
combined with serving on this Board since 1988, qualify him to be a member
of the Board.
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1988
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JOHN R. (BOB) GARRETT
(56) – Mr. Garrett is a residential and commercial Real Estate Developer
and President of Fair Oil Company, a Tyler based oil and gas exploration
and production company. Mr. Garrett is also Vice President of
the R. W. Fair Foundation, a member of the Board of Regents of Stephen F.
Austin State University, currently serves as a member of the University of
Texas Health Science Center at Tyler development board and serves as a
director of the Tyler Economic Development Council. He is a
past president of both the Tyler Area Builders Association and the Texas
Association of Builders and former Texas Representative on the executive
committee of the National Association of Homebuilders. He is a
former member of the board of the Tyler Area Chamber of Commerce and
former director of the Texas National Housing Research
Center. Mr. Garrett brings to our Board extensive knowledge in
the areas of residential and commercial real estate and oil and gas, as
well as management, leadership and business skills and experience serving
on numerous boards, all of which qualify him to be a member of the
Board.
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2009
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EXECUTIVE
OFFICERS
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JERYL STORY (58) – Mr.
Story currently serves as Senior Executive Vice President of the
Company. He has served as an executive of the Company since
2000. He joined Southside Bank in 1979 and is currently Senior
Executive Vice President and director of Southside Bank and is responsible
for all lending functions.
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LEE R. GIBSON, CPA (53) – Mr. Gibson
currently serves as Senior Executive Vice President and Chief Financial
Officer of the Company and Southside Bank. He has served as an
executive of the Company and the Bank since 2000. He is also a
director of Southside Bank. He joined Southside Bank in 1984
and in addition to being the Chief Financial Officer is responsible for
management of the investment portfolio and asset-liability management for
the Company. He is Chairman of the board of directors of the
Federal Home Loan Bank of Dallas, Chairman of the Council of Federal Home
Loan Banks, President of the East Texas Area Council of Boy Scouts and
serves on the Board of the East Texas Boy Scout Foundation and the Board
of the Tyler Junior College Foundation.
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MICHAEL L. COOGAN, CFA
(50) – Mr. Coogan joined Southside Bank as Executive Vice President and
Treasurer in early 2009. He has over 25 years experience in
investment management. He is responsible for investment
portfolio execution as well as sharing in the management
duties.
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5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
The following table
sets forth information regarding beneficial ownership of our common stock as of
February 12, 2010, for the following persons:
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·
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each person
known by us to beneficially own more than 5% of our outstanding common
stock;
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·
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each of our
directors;
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each of our
executive officers included in our Summary Compensation Table;
and
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all of our
directors and executive officers as a
group.
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Unless otherwise
indicated, the address of each of the named individuals is 1201 South Beckham
Avenue, Tyler, Texas 75701.
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Name
Of Beneficial Owner
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Amount
and Nature of Beneficial Ownership (1)
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Percent
Of Class
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Herbert C.
Buie(2)
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463,902
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3.1%
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Alton
Cade(3)
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45,729
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*
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Sam
Dawson(4)
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115,528
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*
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|
Robbie N.
Edmonson(5)
|
79,568
|
*
|
|
John R. (Bob)
Garrett
|
1,067
|
*
|
|
B. G.
Hartley(6)
|
269,864
|
1.8%
|
|
Melvin B.
Lovelady(7)
|
10,500
|
*
|
|
Joe
Norton(8)
|
175,420
|
1.2%
|
|
Paul W.
Powell
|
45,661
|
*
|
|
William
Sheehy(9)
|
91,868
|
*
|
|
Preston
Smith
|
-
|
*
|
|
Don W.
Thedford
|
2,573
|
*
|
|
Jeryl
Story(10)
|
102,774
|
*
|
|
Lee R.
Gibson(11)
|
32,490
|
*
|
|
Michael L.
Coogan
|
2,931
|
*
|
|
All
directors, nominees and executive officers of the company as a group (15
persons).
|
1,439,875
|
9.6%
|
* Less
than 1% of total outstanding shares (14,988,726) as of February 12,
2010.
|
(1)
|
Unless
otherwise indicated, each person has sole voting and investment power with
respect to the shares of common stock set forth opposite his
name. In addition, shares beneficially owned include stock
acquirable by exercise of stock options exercisable within 60 days of
February 12, 2010.
|
|
(2)
|
Mr. Buie has
sole voting and investment power with respect to 421,272 shares owned
individually. Mr. Buie owns 25,481 shares in individual
retirement accounts and has sole voting and investment power in these
shares. Also included in the total are 11,376 shares owned by
Mr. Buie’s wife, 3,014 shares owned by Mrs. Buie as trustee for their son
and 2,759 shares owned by Mrs. Buie as trustee for their
daughter. Mr. Buie disclaims beneficial ownership of these
17,149 shares, which are included in the
total.
|
|
(3)
|
Mr. Cade has
joint voting and investment power with his wife with respect to 22,695
shares and also owns 19,682 shares as President of Cochise Company,
Inc. Mr. Cade has voting and investment power, as trustee of
the Cade Residuary Trust, which owns 3,352
shares.
|
|
(4)
|
Mr. Dawson
holds sole voting and investment power with respect to 83,606 shares and
has sole voting power, but not investment power, with respect to 11,075
shares owned in the Company’s ESOP Plan, in which he is 100%
vested. Included in the total are 18,230 shares subject to
incentive stock options that are exercisable within 60 days of February
12, 2010. Also, included in the total are 2,617 shares owned by
Mr. Dawson’s wife, of which he disclaims all beneficial
ownership.
|
6
|
(5)
|
Mr. Edmonson
has sole voting and investment power with respect to 64,740 shares and has
voting power, but not investment power, with respect to 14,828 shares,
owned in the Company’s ESOP Plan, in which he is 100%
vested.
|
|
(6)
|
Mr. Hartley
has sole voting and investment power with respect to 224,136
shares. He also has sole voting power, but not investment
power, with respect to 20,001 shares owned in the Company’s ESOP Plan, in
which he is 100% vested. Also included in the total are 25,727
shares owned by Mr. Hartley’s wife (3,590 of those shares are owned in the
Company’s ESOP Plan) of which Mr. Hartley disclaims beneficial
ownership.
|
|
(7)
|
Mr. Lovelady
has joint voting and investment power with his wife with respect to 10,500
shares owned jointly.
|
|
(8)
|
Mr. Norton
has sole voting and investment power with respect to 168,035
shares. Mr. Norton is custodian for his granddaughter for 4,722
shares and his grandson for 2,663 shares, which are included in the
total. Mr. Norton disclaims beneficial ownership of these 7,385
shares.
|
|
(9)
|
Mr. Sheehy
has sole voting and investment power with respect to 79,209 shares owned
individually and 12,659 shares in an individual retirement
account.
|
|
(10)
|
Mr. Story
owns 91,457 shares and has sole voting and investment power for these
shares. In addition, he has joint voting and investment power
with his wife with respect to 83 shares and sole voting, but not
investment power, with respect to 11,234 shares owned in the Company’s
ESOP plan, in which he is 100%
vested.
|
|
(11)
|
Mr. Gibson
has sole voting power and investment power with respect to 590 shares
owned individually. He also has sole voting power, but not
investment power, with respect to 10,167 shares owned in the Company’s
ESOP plan, in which he is 100% vested. Also included in the
total are 21,733 shares subject to incentive stock options that are
exercisable within 60 days of February 12,
2010.
|
CORPORATE GOVERNANCE
Board
Leadership Structure
As is common
practice among public companies in the United States, the Board has appointed
the Company’s Chief Executive Officer (“CEO”) to serve as Chairman of the
Board. In his position as CEO, Mr. Hartley has primary responsibility
for the day-to-day operations of the Company and provides consistent leadership
of the Company’s key strategic objectives. In his role as Chairman of
the Board, he sets the strategic priorities for the Board, presides over its
meetings and communicates its strategic findings and guidance to
management. The Board believes that the combination of these two
roles provides more consistent communication and coordination throughout the
organization, which results in a more effective and efficient implementation of
corporate strategy and is important in unifying the Company's strategy behind a
single vision.
Board
of Directors Meeting Attendance
The Board of the
Company met 13 times during the fiscal year. No member of the Board
attended less that 75% of the aggregate meetings of the Board and all committees
on which such director served during 2009, except Mr. Edmonson whose absences
were the result of illness. All, except two, of the Company’s
directors were in attendance at the Company’s 2009 Annual
Meeting. Although the Company has not adopted a formal written policy
with respect to director attendance at meetings, we encourage our directors to
attend each annual meeting of shareholders and all meetings of the Board and
committees on which the directors serve.
Independent
Directors
The Company’s
common stock is listed on the NASDAQ Global Select Market. NASDAQ
listing rules require that a majority of our directors be “independent
directors,” as defined in the NASDAQ listing rules. The Board has
affirmatively determined that all of the Company’s directors, other than Messrs.
Hartley, Edmonson and Dawson, are independent directors under the NASDAQ listing
rules.
Shareholder
Communication with the Board of Directors
The Company has
adopted a procedure by which shareholders may send communications as defined
within Item 7(h) of Schedule 14A under the Exchange Act to one or more members
of the Board by writing to such director(s) or to the whole Board in care of the
Corporate Secretary, Southside Bancshares, Inc., Post Office Box 8444, Tyler,
Texas 75711. Any such communications will be promptly distributed by
the Corporate Secretary to such individual director(s) or to all directors if
addressed to the whole Board.
7
Code
of Ethics
The Company has
adopted a Code of Ethics, applicable to all directors and executive officers of
the Company. The Code of Ethics is available on the Company’s
website, www.southside.com/investor, under the topic Corporate
Governance. Within the time period required by the Securities and
Exchange Commission (“SEC”) and the NASDAQ Global Select Market, we will post on
our website any amendment to our Code of Ethics and any waiver applicable to any
of our directors, executive officers or senior financial officers.
Procedures
for Reporting Concerns about Accounting, Internal Accounting Controls or
Auditing Matters
Management of the
Company has established a Whistle Blower Policy, which includes a fraud
hotline. This is a toll free, 24-hour, seven-day-a-week
hotline. This is a confidential service in which officers and
employees can speak with an independent company regarding any questionable
accounting or auditing matters, including, but not limited to, the following:
fraud or deliberate error in the preparation, evaluation, review or audit of any
financial statement of the Company; fraud or deliberate error in the recording
and maintaining of financial records of the Company; deficiencies in or
noncompliance with the Company’s internal accounting controls; misrepresentation
or false statement to or by a senior officer or accountant regarding a matter
contained in the financial records, financial reports or audit reports of the
Company; or deviation from full and fair reporting of the Company’s financial
condition. Any complaints received by the independent company will be
reported directly to the Chairman of the Audit Committee and to the head of the
Company’s Internal Audit department. Complaints will be reviewed by
Internal Audit under the direction of the Audit Committee. Complaints
submitted will be promptly investigated and appropriate corrective action will
be taken, as warranted by the investigation. Management is committed
to comply with all applicable securities laws and regulations and therefore,
encourage officers and employees to raise concerns regarding any suspected
violations of those standards by using the fraud hotline.
Southside
Bancshares, Inc. Board Committees
The Board of the
Company has three standing committees:
|
·
|
Audit
Committee;
|
|
·
|
Nominating
Committee; and
|
|
·
|
Compensation
Committee.
|
Southside
Bank Board Committees
The board of
directors of Southside Bank has five standing committees:
|
·
|
Executive
Committee;
|
|
·
|
Loan/Discount
Committee;
|
|
·
|
Trust
Committee;
|
|
·
|
Compliance/EDP/CRA
Committee; and
|
|
·
|
Investment/Asset-Liability
Committee.
|
These committees
were formed to assist the boards of directors of Southside Bank and the Company
in the discharge of their respective responsibilities. The purpose
and composition of these committees with respect to persons who are directors of
the Company and Southside Bank are described below.
Board
Oversight of Risk
The Company’s Board
of Directors recognizes that, although day-to-day risk management is primarily
the responsibility of the Company’s management team, the Board plays a critical
role in the oversight of risk. The Board believes that an important
part of its responsibilities is to assess the major risks the Company faces and
review the Company’s options for monitoring and controlling these
risks. The Board assumes responsibility for the Company’s overall
risk assessment. The Audit Committee has specific responsibility for
oversight of risks associated with financial accounting and audits, as well as
internal control over financial reporting. This includes the
Company’s risk assessment and management policies, the Company’s major financial
risk exposure and the steps taken by management to monitor and mitigate such
exposure. The Compensation Committee oversees the risks relating to
the Company’s compensation policies and practices, as well as management
development and leadership succession, in the Company’s various business
units. The Board as a whole examines specific business risks
including but not limited to credit risk, interest rate risk and operations
risk, in its regular reviews on a company-wide basis as part of its regular
strategic reviews.
8
In addition to
periodic reports from the Audit Committee and Compensation Committee about the
risks over which they have oversight, the Board receives presentations
throughout the year from management that include discussion of significant risks
specific to their area as necessary. Periodically, at Board meetings,
management discusses matters of particular importance or concern, including any
significant areas of risk requiring Board attention.
COMMITTEES OF THE
COMPANY
Audit Committee of Southside Bancshares, Inc.
The Audit Committee
of the Board consists of seven directors as named below. Each member
of the Audit Committee is an independent director as defined by the current
NASDAQ listing rules and applicable SEC rules. In addition, the
Nominating Committee of the Board has unanimously determined that Mr. Lovelady,
a CPA, qualifies as an “audit committee financial expert” as defined by the
SEC. Mr. Lovelady is retired from the accounting firm of Henry &
Peters, PC, and is currently associated with Bridge Wealth Management, LLC as a
CPA and a Registered Representative. The Nominating Committee of the
Board has unanimously determined that all Audit Committee members are
financially literate under the current NASDAQ listing rules.
The Audit Committee
is primarily responsible for the engagement of the independent registered public
accounting firm, oversight of the Company’s financial statements and controls,
assessing and ensuring the independence, qualifications, and performances of the
independent registered public accounting firm, approving the services and fees
of the independent registered public accounting firm and reviewing and approving
the annual audited financial statements for the Company before issuance, subject
to the approval of the Board. The Audit Committee manages the
Company’s relationship with its independent registered public accounting firm,
who report directly to the Audit Committee. The Audit Committee also
monitors the internal audit function, internal accounting procedures and assures
compliance with all appropriate statutes. The Audit Committee has the
authority to obtain advice and assistance from outside legal, accounting or
other advisors as the Audit Committee deems necessary to carry out its duties,
with funding from the Company for such advice and assistance. No
members of the Audit Committee received any compensation from the Company during
the last fiscal year other than directors’ fees. The Committee met 18
times during 2009.
Audit
Committee Charter
The Board has
adopted a formal written Audit Committee charter that outlines the purpose of
the Audit Committee, delineates the membership requirements and addresses the
key responsibilities of the Audit Committee. A copy of the Audit
Committee charter may be obtained at the Company’s website,
www.southside.com/investor, under the topic Corporate Governance.
Audit
Committee Continuing Education
The audit committee
of a publicly traded company’s board of directors plays a crucial role in the
corporate governance of that company. It is responsible for
overseeing the company’s accounting and financial reporting, as well as for
monitoring and evaluating the independent and internal audit
processes. The importance of the audit committee’s role has grown
tremendously in recent years as a result of the passage of the Sarbanes-Oxley
Act of 2002. The enactment of Sarbanes-Oxley raised the level of
performance required for board of directors and audit committee
members. To ensure each director and Audit Committee member clearly
understands his responsibilities, the Company provides each member of the Audit
Committee and other directors the opportunity for continuing
education. In addition to audit materials the Audit Committee
receives throughout the year, the Audit Committee has determined that each
member should attempt to attend a training class at a minimum every three
years. During 2009 Audit Committee Chairman Melvin B. Lovelady
attended a conference hosted by Professional Development Institute sponsored by
North Texas State University on Accounting and Financial Reporting, covering
updates on the Financial Accounting Standards Board (“FASB”), International
Accounting Standards Board, SEC and Public Company Accounting Oversight Board
(“PCAOB”). The conference also covered the state of the economy,
implementation issues, understanding corporate fraud and presented a fresh look
at issues under the Foreign Corrupt Practices Act. All but one member
of the Audit Committee attended a conference hosted by PwC in 2009 covering
topics such as corporate governance matters, adapting legislative actions and
pricing concerns affecting consumer finance, increasing permissible tax
deductions, and navigating the world of structured finance. Some
members of the Audit Committee also attended a conference hosted by Bank
Director covering such topics as the role of the Audit Committee chairman and
the Audit Committee members, risk management and the Audit Committee’s relations
with internal and external auditors as well as with the CEO.
9
Audit Committee Report
The following is
the report of the Audit Committee with respect to the Company’s audited
financial statements for fiscal year ended December 31, 2009.
The Audit Committee
has reviewed and discussed the Company’s audited financial statements with
management, the internal auditor and PwC, the Company’s independent registered
public accounting firm, with and without management present. The
Audit Committee included in its review of the independent registered public
accounting firm’s examinations, management’s assertion on design and
effectiveness of the Company’s internal controls, and the quality of the
Company’s financial reporting. The Audit Committee also reviewed the
Company’s procedures and internal control processes designed to ensure full,
fair, and adequate financial reporting and disclosures, including procedures for
certifications by the Company’s Chief Executive Officer and Chief Financial
Officer that are required in periodic reports filed by the Company with the
SEC. The Audit Committee is satisfied that the internal control
system is adequate and that the Company employs appropriate accounting and
auditing procedures.
The Audit Committee
also has discussed with PwC matters relating to the auditor’s judgments about
the quality, as well as the acceptability, of the Company’s accounting
principles as applied in its financial reporting as required by AU Section 380,
“The Auditor’s Communication with those Charged with Governance.” In
addition, the Audit Committee has discussed with PwC their independence from
management and the Company, as well as the matters in the written disclosures
received from PwC and required by applicable requirements of the
PCAOB. The Audit Committee received a letter from PwC confirming its
independence and discussed it with PwC. The Audit Committee discussed
and reviewed with PwC critical accounting policies and practices, internal
controls, other material written communications to management, and the scope of
PwC audits and all fees paid to PwC during the fiscal year. The Audit
Committee adopted guidelines requiring review and pre-approval by the Audit
Committee of audit and non-audit services performed by PwC for the
Company. The Audit Committee has reviewed and considered the
compatibility of PwC’s performance of non-audit services with the maintenance of
PwC independence as the Company’s independent registered public accounting
firm.
Based on the Audit
Committee’s review and discussions referred to above, the Audit Committee
recommended to the Company’s board of directors that the Company’s audited
consolidated financial statements and report on management’s assertion on the
design and effectiveness of internal control over financial reporting be
included in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2009 for filing with the SEC.
Submitted by the
Audit Committee of the board of directors of Southside Bancshares,
Inc.
|
Melvin B.
Lovelady, CPA, Chairman
|
Joe
Norton
|
|
Herbert C.
Buie
|
Paul W.
Powell
|
|
Alton
Cade
|
William
Sheehy
|
|
John R. (Bob)
Garrett
|
Nominating
Committee of Southside Bancshares, Inc.
The Nominating
Committee is responsible for identifying, screening and nominating candidates
for election to the Board. The Committee is comprised of Messrs. Buie
(Chairman), Norton, Powell and Sheehy, each of whom is an independent director
of the Company, as defined by the current NASDAQ listing rules, and a director
of Southside Bank. The Nominating Committee met six times in
2009.
The Nominating
Committee seeks to create a Board that is, as a whole, strong in its collective
knowledge and diversity of skills and experience and background with respect to
accounting and finance, management and leadership, business judgment, industry
knowledge and corporate governance. When the Nominating Committee
reviews a potential new candidate, it looks specifically at the candidate’s
qualifications in light of the needs of the Board and the Company at that time,
given the then-current mix of director attributes.
The Company’s Board
of Directors has established the following process for the identification and
selection of candidates for director. The Nominating Committee, in
consultation with the Chairman of the Board, annually reviews the appropriate
experience, skills and characteristics required of Board members in the context
of the current membership of the Board to determine whether the Board would
better be enhanced by the addition of one or more directors. This
review includes, among other relevant factors in the context of the perceived
needs of the Board at that time, issues of experience, reputation, judgment,
diversity and skills. The Nominating Committee, when considering
diversity, gives strong consideration to a wide range of diversity factors as a
matter of practice when evaluating candidates to the Board and incumbent
directors, but the Committee does not have a formal policy regarding Board
diversity.
10
The Nominating
Committee identifies candidates to the Board by introduction from management,
members of the Board, employees or other sources, and shareholders that satisfy
the Company’s policy regarding shareholder recommended
candidates. The Nominating Committee does not evaluate director
candidates recommended by shareholders differently than director candidates
recommended by other sources. Shareholders wishing to submit
recommendations for the 2011 Annual Meeting should write to the Nominating
Committee in care of the Assistant Corporate Secretary, Southside Bancshares,
Inc., Post Office Box 8444, Tyler, Texas 75711. Any such shareholder
must follow the procedures set forth in the Company’s bylaws. For a
nomination to be included in the Company’s proxy statement, the shareholder must
meet and evidence the minimum eligibility requirements specified in Exchange Act
Rule 14a-8 and must submit, within the same timeframe for submitting a
shareholder proposal required by Rule 14a-8: (1) name, mailing address,
telephone number, email address, resume, business history, listing of other past
and present directorships and director committees, banking industry experience
and other relevant information; (2) explain in the submission why the
shareholder believes the candidate would be an appropriate director for the
Company and the benefits and attributes that the candidate will provide to the
Company in serving as a director; (3) provide evidence of ownership of the
Company’s securities along with the recommendation; and (4) indicate whether the
Company may identify the shareholder in any public disclosures that it makes
regarding the consideration of the director
candidate. Recommendations must be filed with the Assistant Corporate
Secretary on or before November 12, 2010 in order to be included in the proxy
statement for the 2011 Annual Meeting. See “Shareholder
Proposals.”
In considering
board of director candidates, the Nominating Committee takes into consideration
all factors that it deems appropriate, including, but not limited to, the
individual’s character, education, experience, knowledge, skills and ownership
of the Company’s stock. The Nominating Committee will also consider
the extent of the individual’s experience in business, education or public
service, his or her ability to bring a desired range of skills, diverse
perspectives and experience to the Board and whether the individual possesses
high ethical standards, a strong sense of professionalism and is capable of
serving the interests of shareholders. A candidate should possess a
working knowledge of the Company’s current local market
areas. Additionally, the Nominating Committee will consider the
number of boards the candidate currently serves on when assessing whether the
candidate has the appropriate amount of time to devote to serving on the
Company’s Board. The Nominating Committee is not obligated to
nominate any individual for election. No shareholder recommendations
or nominations have been received by the Company for this Annual
Meeting. Accordingly, no rejections or refusals of such candidates
have been made by the Company.
In addition, the
Nominating Committee is responsible for identifying, screening, and nominating
candidates for election to the Compensation Committee and Audit Committee and
designating individuals, if any, as an “audit committee financial expert.” These
nominations are then submitted to the Board for final approval.
Nominating
Committee Charter
The Board has
adopted a formal written Nominating Committee charter which outlines the purpose
of the Nominating Committee, delineates the membership requirements and
addresses the key responsibilities of the Nominating Committee. A
copy of the Nominating Committee charter may be found on the Company’s website,
www.southside.com/investor, under the topic Corporate Governance.
Compensation
Committee of Southside Bancshares, Inc.
The Compensation
Committee of the Company determines the compensation recommendations for the
executive officers of the Company, all of whom are also executive officers of
Southside Bank. The boards of directors of the Company and Southside
Bank consider the recommendations of the Compensation Committee and approve the
compensation of the executive officers.
The Compensation
Committee consists of Messrs. Buie, Norton (Chairman), Powell and Sheehy, each
of whom is a non-employee, independent director of the Company, as defined by
the current NASDAQ listing rules, and a director of Southside
Bank. The Committee met five times in 2009.
Compensation
Committee Charter
The Board has
adopted a formal written Compensation Committee charter which outlines the
purpose of the Compensation Committee, delineates the membership requirements
and addresses the key responsibilities of the Compensation
Committee. A copy of the Compensation Committee charter may be found
on the Company’s website, www.southside.com/investor, under the topic Corporate
Governance.
11
Compensation
Committee Interlocks and Insider Participation
None of the members
of the Compensation Committee, during the fiscal year ended December 31, 2009,
is a current or former officer or employee of the Company.
During the fiscal
year ended December 31, 2009:
|
·
|
No executive
officer of the Company served as a member of the compensation committee or
other board committee performing similar functions (or on the board of
directors of any entity without such a committee) of another entity, one
of whose executive officers served on the Compensation Committee of the
Company.
|
|
·
|
No executive
officer of the Company served on the board of directors of another entity,
one of whose executive officers served on the Compensation Committee of
the Company.
|
|
·
|
No executive
officer of the Company served as a member of the compensation committee or
other board committee performing similar functions (or on the board of
directors of any entity without such a committee) of another entity, one
of whose executive officers served as a director of the
Company.
|
For information
concerning transactions by the Company and Southside Bank with certain members
of the board of directors of Southside Bank, please see “Transactions with
Directors, Officers and Associates.”
Compensation Committee Report
The Compensation
Committee oversees and makes recommendations for all aspects of executive
officer compensation. The board of directors of the Company considers
the recommendations of the Compensation Committee and approves the compensation
of the executive officers. In fulfilling its oversight
responsibilities, the Compensation Committee reviewed and discussed with
management the Compensation Discussion and Analysis in this proxy
statement.
In reliance on the
review and discussion referred to above, the Compensation Committee recommended
to the board of directors of the Company that the Compensation Discussion and
Analysis be included in the Company’s annual report on Form 10-K for the fiscal
year ended December 31, 2009 and its proxy statement on Schedule 14A to be filed
in connection with the Company’s 2010 Annual Meeting, each of which will be
filed with the SEC.
This report shall
not be deemed to be incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, and shall not otherwise be deemed filed under such acts.
Submitted by the
Compensation Committee of the board of directors of Southside Bancshares,
Inc.
Joe Norton,
Chairman
Herbert C.
Buie
Paul W.
Powell
William
Sheehy
EXECUTIVE OFFICER AND DIRECTOR
COMPENSATION
Compensation Discussion and Analysis
Overview
of Compensation Program
The Compensation
Committee of the Board (“the Committee”) has responsibility for reviewing and
establishing the Company’s compensation programs, consistent with the Company’s
compensation philosophy. Later in this proxy statement under the
heading “Executive Compensation” you will find a series of tables containing
specific information about the compensation earned or paid in 2009 to the
Company’s Chief Executive Officer, Chief Financial Officer and the next three
most highly compensated executive officers for fiscal year 2009, who are
referred to as the “named executive officers” or “NEOs.” The Committee attempts
to ensure that the total compensation paid to the NEOs is fair, reasonable, and
competitive.
12
The Committee
conducts an annual base salary and bonus compensation level review of the NEOs
and develops incentive compensation programs when appropriate. The
Committee periodically engages outside consultants, as needed, but did not do so
in 2009. During 2009, the Compensation Committee reviewed internally
prepared peer bank information to assist in determining compensation levels for
NEOs. The company does not have specific performance goals for the
NEOs but instead reviews each NEOs contribution to the overall performance of
the Company, changes in duties, responsibilities, and the overall banking
environment, requirements placed on the NEO in order to meet performance
standards, skills and talents demonstrated during the year and leadership skills
when determining compensation. The Committee reviewed with management
the design and operation of the incentive compensation arrangements for the NEOs
and other employees of Southside Bank for the purpose of determining whether
such programs might encourage inappropriate risk-taking that could have a
material adverse effect on the Company. The Committee concluded the
NEO incentive plans and policies do not encourage the NEOs or other employees to
take risks that are reasonably likely to have a material adverse effect on the
long-term well-being of the Company. The Committee also reviews and
develops recommendations for director compensation, including committee service
fees. The Committee has access to outside consultants, as needed, to
prepare an independent executive compensation review to assist in determining
compensation levels for the NEOs, as needed.
Compensation
Philosophy and Objectives
The Committee
believes that the most effective executive compensation plan is one that is
designed to reward long-term and strategic performance, and which aligns
executives’ interests with those of the shareholders with the ultimate objective
of improving long-term shareholder value. The Committee evaluates
both performance and compensation to ensure that the Company maintains its
ability to attract and retain superior officers in key positions and that
compensation provided to key officers remains competitive relative to the
compensation paid to similarly situated executives of our peer companies (as
discussed below). To that end, the Committee believes executive
compensation provided by the Company to its NEOs should include both cash and
other benefits that reward performance.
Role
of Executive Officers in Compensation Decisions
The Committee makes
recommendations to the Board regarding all compensation decisions for the
NEOs. The Chief Executive Officer provides input regarding the
performance of the other NEOs and makes recommendations for compensation amounts
payable to the other NEOs. These recommendations are based on the
Chief Executive Officer’s personal observation of each NEOs performance,
commitment and contribution to the Company. The Chief Executive
Officer is not involved with any aspect of determining his own pay.
Setting
Executive Compensation
Based on the
compensation objectives noted above, the Committee has structured the NEOs’
annual compensation to be competitive and to motivate and reward the NEOs for
their performance.
In furtherance of
this, the Committee occasionally engages an outside consulting firm to conduct a
peer review of its overall compensation program for the NEOs. The
most recent peer review was conducted in 2007. During Committee
discussions regarding setting NEO compensation for 2008, the Committee utilized
an Executive Compensation Review prepared by Clark Consulting specifically for
the Committee. This Executive Compensation Review consisted of a
custom peer group selected by Clark Consulting based on asset size, location and
performance (the “Compensation Peer Group”). The Compensation Peer
Group is comprised of banks in Texas and surrounding states, against which Clark
Consulting and the Committee believes the Company competes for
talent. The companies comprising the Compensation Peer Group
are:
|
BancFirst
Corporation
|
Southwest
Bancorp, Inc.
|
|
IBERIABANK
Corporation
|
Pinnacle
Financial Partners, Inc.
|
|
First
Financial Bankshares, Inc.
|
CoBiz
Financial Inc.
|
|
First State
Bancorporation
|
Cadence
Financial Corporation
|
|
Centennial
Bank Holdings, Inc.
|
Green
Bankshares, Inc.
|
|
Simmons First
National Corporation
|
First M&F
Corporation
|
|
Renasant
Corporation
|
Enterprise
Financial Services Corp
|
|
Bank of the
Ozarks, Inc.
|
Trinity
Capital Corporation
|
|
Great
Southern Bancorp, Inc.
|
Encore
Bancshares, Inc.
|
|
Home
Bancshares, Inc.
|
MetroCorp
Bancshares, Inc.
|
The Compensation
Peer Group data is used for comparative purposes only. The Committee
evaluated the NEOs compensation and reviewed and discussed performance, job
responsibilities and tenure for each NEO position. Based on this
review and discussion of each NEO, the Committee determined the NEOs’ total
compensation. While the Committee did not engage a compensation
consultant or conduct a specific peer group review in 2009, it continued the
compensation programs in place for 2008 without significant
deviation. There is no pre-established policy or target for the
allocation among different types of compensation. In determining the
appropriate mix of compensation, the Committee takes into consideration that the
Company did not utilize the equity-based compensation plan as part of its
executive officer compensation program when considering compensation for
2009.
13
2009
Executive Compensation Components
For the fiscal year
ended December 31, 2009, the principal components of compensation for NEOs
were:
|
·
|
Base
salary;
|
|
·
|
Bonus;
|
|
·
|
Retirement
benefits;
|
|
·
|
Perquisites
and other personal benefits; and
|
|
·
|
Health and
welfare benefits
|
Base
Salary
The Company
provides NEOs and other employees with a base salary to compensate them for
services rendered during the fiscal year. Base salary ranges for NEOs
are determined for each executive based on their position and responsibility by
using available market data adjusted for duties and
responsibilities.
During the review
of base salaries for executives, the Committee primarily considers:
|
·
|
Compensation
Peer Group data;
|
|
·
|
internal
review of the executive’s compensation, both individually and relative to
our other officers;
|
|
·
|
overall
individual performance of the
executive;
|
|
·
|
scope of
responsibilities;
|
|
·
|
experience;
and
|
|
·
|
tenure with
the Company.
|
Salary levels are
typically considered annually as part of the Company’s performance review
process as well as upon a promotion or other change in job
responsibility. Merit based increases to salaries of NEOs are based
on the Committee’s assessment after considering recommendations of the Chief
Executive Officer. The NEO salary increase was approved by the
Committee for 2009 resulting from the Chief Executive Officer’s recommendations,
a review of peer group and salary survey information and NEO and company
performance. In making its final decision the Committee also
considered the lack of equity incentives to offer as part of a compensation
package. After considering all of the relevant factors and
performance of each executive the Committee increased Mr. Hartley’s base salary
11% for 2009, effective January 1, 2009, and increased Mr. Dawson’s, Mr.
Gibson’s and Mr. Story’s base salary 11%, effective February 1,
2009.
Bonus
All officers and
employees of the Company have historically been paid an annual bonus equal to
12.5% of base salary. While referred to as a bonus, the 12.5% has been paid to
all employees for over 30 years and is considered by most employees as part of
their base salary and is often referred to as deferred compensation, even though
it is paid in the same calendar year and approved as a bonus by the
Board. The Committee has in prior years recommended a special year
end bonus in excess of the 12.5% bonus for NEOs, based on a combination of
individual and Company performance. The Committee determined that a
special year end bonus was warranted based on overall record Company performance
during 2009. The Committee considered the increase in net income,
earnings per share, return on shareholders equity and other performance metrics,
combined with overall Company objectives achieved and individual NEO
performance. Based on these factors the Committee recommended a
$150,000 special year end bonus for Mr. Hartley, Mr. Dawson, Mr. Story and Mr.
Gibson and an $80,000 special year end bonus for Mr. Coogan.
Retirement
Benefits
Retirement benefits
fulfill an important role within the Company’s overall executive compensation
program because they provide a financial security component which promotes
retention. We place great value on the long-term commitment that many
of our employees and the NEOs have made to us and aim to incent those
individuals to remain with the Company and to act in a manner that will provide
longer-term benefits to the Company. The Company believes that its
retirement program is comparable to those offered by the banks in our
Compensation Peer Group and, as a result, are needed to ensure that our
executive compensation remains competitive.
14
Our retirement
plans are designed to encourage employees to take an active role in planning,
saving and investing for retirement. The Company maintains a 401(k)
plan (the “401(k) Plan”), a tax-qualified, defined contribution plan in which
substantially all of our employees, including the NEOs, are eligible to
participate. The Company also maintains a tax-qualified, defined
benefit pension plan (the “Pension Plan”) pursuant to which participants are
entitled to benefits based on final average monthly compensation and years of
credited service. In addition, the Company maintains a non-qualified
supplemental retirement plan (the “Restoration Plan”) which provides benefits in
addition to the Pension Plan. The Pension Plan and the Restoration
Plan are described in more detail under the Pension Benefits table in this Proxy
Statement.
The Company has
entered into deferred compensation agreements with each of the NEOs, with the
exception of Mr. Coogan, that provide for the payment of a stated amount over a
specific period of years. These deferred compensation agreements are
described in more detail under the Pension Benefits table in this Proxy
Statement.
The Company has
also entered into split dollar agreements with each of the NEOs, with the
exception of Mr. Coogan, which allow the executives to designate the
beneficiaries of death benefits under a life insurance policy. These
agreements are described in more detail under the summary compensation table in
this Proxy Statement.
15
2009
(Equity) Incentive Plan
The Southside
Bancshares, Inc. 2009 Equity Incentive Plan provides for the grant of equity
awards to our employees, officers or directors. The primary purpose
of the Plan is to promote our success by linking the personal interests of our
employees, officers, directors and consultants to those of our shareholders, and
by providing participants with an incentive for outstanding
performance. Currently, we have not granted any awards from the 2009
Equity Incentive Plan. A consultant has been engaged to prepare a
plan for the Compensation Committee to consider. This plan may
include both incentive stock option and restricted stock option awards that
could be granted. As of the filing date of this report the
Compensation Committee has not taken up this matter.
Perquisites
and Other Personal Benefits
The Company
provides NEOs with perquisites and other personal benefits that the Company and
the Committee believe are reasonable and consistent with its overall
compensation program to better enable the Company to attract and retain superior
employees for key positions. The committee periodically reviews the
levels of perquisites and other personal benefits provided to
NEOs. The Committee did not review perquisites during 2009, and there
were no changes in the types of perquisites provided in
2009. Perquisites provided to NEOs during 2009 were Company paid club
dues and a Company provided automobile, with the exception of Mr. Coogan, who
received a fixed monthly car allowance. Club memberships are made
available to various officers who are expected to routinely need a place to
entertain customers or prospective customers. NEOs are the only
officers with Company owned vehicles, while others are paid a fixed monthly
mileage allowance.
Health
and Welfare Benefits
The Company offers
a standard range of health and welfare benefits on a uniform basis and subject
to insurance policy limitations to employees, including NEOs, and their eligible
dependents. The benefits are designed to attract and retain employees
and provide security to employees for their health and welfare
needs. The benefits include: medical, prescription, dental, employee
life, group life, and flexible spending accounts. NEOs participate in
these employee benefit plans, which are generally available to full-time
employees on the same terms as a similarly situated employee. Another
benefit available to officers at or above the Vice President level and meeting a
salary requirement, is a bank provided long-term disability insurance policy
which includes accidental death and travel insurance plans and
programs.
Severance
The Company entered
into Employee Agreements with Sam Dawson, President and Chief Operating Officer,
and Lee R. Gibson, Senior Executive Vice President and Chief Financial Officer
in October 2007. The Board determined that it was in the best
interests of the Company to retain the services and encourage the continued
attention and dedication of Messrs. Dawson and Gibson to their assigned
duties. The severance and change in control termination amounts were
negotiated based on these NEOs tenure, scope of responsibilities and other
provisions in the agreement.
For a further
discussion of the terms of the Employment Agreements, please see the discussion
on page 18.
Tax
and Accounting Considerations
Section 162(m) of
the Internal Revenue Code places a limit of $1 million on the amount of
compensation that we may deduct in any year with respect to any one of our
NEOs. This limitation does not apply to compensation that meets the
requirements under Section 162(m) for “qualifying performance-based”
compensation. The committee intends to maximize deductibility of
executive compensation while retaining some discretion needed to compensate
executives in a manner commensurate with performance and the competitive
landscape for executive talent.
16
Executive
Compensation
The following table
sets forth the compensation earned by or paid to each of the NEOs for the fiscal
years ended December 31, 2009, 2008 and 2007. This information
related to compensation paid to the NEOs by Southside Bank, as the Company does
not directly pay compensation to the NEOs.
2009 SUMMARY COMPENSATION TABLE
|
Name
and Principal Position
|
Year
|
Salary
($)
(1)
|
Bonus
(2)
|
Change
in
Pension
Value
(3)
|
All
Other
Compensation
(4)
|
Total
|
|||||
|
B. G. Hartley – Chairman
of the Board and Chief Executive Officer of the Company and Southside
Bank.
|
2009
|
$
|
505,050
|
$
|
213,245
|
$
|
–
|
$
|
96,811
|
$
|
815,106
|
|
2008
|
$
|
455,000
|
$
|
156,875
|
$
|
–
|
$
|
85,514
|
$
|
697,389
|
|
|
2007
|
$
|
422,500
|
$
|
97,813
|
$
|
–
|
$
|
86,573
|
$
|
606,886
|
|
|
Lee R. Gibson, CPA –
Senior Executive Vice President and Chief Financial Officer of the Company
and Southside Bank and Director of Southside Bank.
|
2009
|
$
|
330,250
|
$
|
191,350
|
$
|
191,050
|
$
|
18,368
|
$
|
731,018
|
|
2008
|
$
|
300,000
|
$
|
137,500
|
$
|
176,221
|
$
|
50,761
|
$
|
664,482
|
|
|
2007
|
$
|
277,500
|
$
|
79,688
|
$
|
121,981
|
$
|
20,453
|
$
|
499,622
|
|
|
Sam Dawson – President,
Secretary and Director of the Company; President, Chief Operating Officer
and Director of Southside Bank.
|
2009
|
$
|
350,065
|
$
|
193,831
|
$
|
464,997
|
$
|
21,547
|
$
|
1,030,440
|
|
2008
|
$
|
318,000
|
$
|
114,750
|
$
|
347,479
|
$
|
51,987
|
$
|
832,216
|
|
|
2007
|
$
|
300,500
|
$
|
82,563
|
$
|
336,836
|
$
|
21,552
|
$
|
741,451
|
|
|
Jeryl Story – Senior
Executive Vice President of the Company and Southside Bank and Director of
Southside Bank.
|
2009
|
$
|
330,250
|
$
|
191,350
|
$
|
297,592
|
$
|
15,886
|
$
|
835,078
|
|
2008
|
$
|
300,000
|
$
|
112,500
|
$
|
240,490
|
$
|
17,567
|
$
|
670,557
|
|
|
2007
|
$
|
286,000
|
$
|
105,750
|
$
|
243,427
|
$
|
48,802
|
$
|
683,979
|
|
|
Michael L. Coogan, CFA –
Executive Vice President and Treasurer of Southside Bank.
|
2009
|
$
|
222,769
|
$
|
133,277
|
$
|
–
|
$
|
25,750
|
$
|
381,796
|
|
2008
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
|
|
2007
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
|
|
(1)
|
Includes
amounts deferred at the officer’s election pursuant to the company’s
401(k) Plan.
|
|
(2)
|
Reflects a
regular annual bonus equal to approximately 12.5% of base salary, and for
2009 also reflects a special year end bonus of $150,000 paid to each of
Mr. Hartley, Mr. Gibson, Mr. Dawson and Mr. Story and a special year end
bonus of $80,000 and an initial signing bonus of $25,000 paid to Mr.
Coogan.
|
|
(3)
|
The amounts
reported in this column reflect the aggregate actuarial increase in the
present value of the NEOs benefits under the Pension Plan and the
Restoration Plan determined using interest rate and mortality rate
assumptions consistent with those used in the Company’s financial
statements. The changes in pension values for the NEOs under
the Pension Plan were as follows: Mr. Hartley – ($45,079); Mr. Gibson –
$65,310, Mr. Dawson – $154,457 and Mr. Story – $103,421. The
change in pension value for the NEOs under the Restoration Plan were as
follows: Mr. Hartley – ($16,004); Mr. Gibson – $125,740, Mr. Dawson –
$310,540 and Mr. Story – $194,171. Mr. Coogan is not a
participant in the Pension Plan or the Restoration
Plan. Descriptions of the Pension Plan and Restoration Plan
follow the Pension Benefits table in this Proxy
Statement.
|
17
|
(4)
|
Amounts
included in this column are as
follows:
|
|
Hartley
|
Gibson
|
Dawson
|
Story
|
Coogan
|
||||||
|
Life
Insurance (a)
|
$
|
31,037
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
|
Tax
Gross Ups (b)
|
43,927
|
526
|
1,318
|
846
|
–
|
|||||
|
Director
Fees from Southside Bank (c)
|
8,000
|
8,000
|
8,000
|
7,500
|
–
|
|||||
|
Company
Provided Automobile (d)
|
5,849
|
4,926
|
3,112
|
4,173
|
19,800
|
|||||
|
Club
Dues (e)
|
7,998
|
4,916
|
9,117
|
3,367
|
–
|
|||||
|
Moving
Expense
|
–
|
–
|
–
|
–
|
5,950
|
|||||
|
Total
|
$
|
96,811
|
$
|
18,368
|
$
|
21,547
|
$
|
15,886
|
$
|
25,750
|
|
(a)
|
Mr. Hartley
was paid a bonus to pay life insurance
premiums.
|
|
(b)
|
The Company
paid gross-up bonuses in accordance with the split dollar agreements
during 2009. In addition, Mr. Hartley was paid a gross up bonus
associated with reimbursement of life insurance premiums of
$19,863.
|
|
(c)
|
Mr. Hartley,
Mr. Gibson, Mr. Dawson and Mr. Story are also directors of Southside Bank
and received director fees in 2009 for their service. Mr.
Coogan is not a director and did not receive any director fees in
2009.
|
|
(d)
|
Mr. Hartley,
Mr. Gibson, Mr. Dawson, and Mr. Story have use of a Company provided
automobile. The incremental cost to the Company during 2009
included fuel, maintenance costs and insurance. Mr. Coogan
received an auto allowance of
$19,800.
|
|
(e)
|
The
incremental cost of Company-provided club dues to the
NEOs.
|
Employment
Agreements
The Company
maintains employment agreements with Sam Dawson, President and Chief Operating
Officer, and Lee R. Gibson, Senior Executive Vice President and Chief Financial
Officer (the “Employment Agreements”). The Employment Agreements were
entered into as of October 22, 2007 and initially extended through October 22,
2010, with automatic one year term extensions beginning on the first anniversary
of the effective date, until a party gives 90 days notice of
non-renewal. The agreements are now in effect until October 22,
2012.
Mr. Dawson’s
Employment Agreement initially provided for an annual base salary of $300,500
and Mr. Gibson’s Employment Agreement initially provided for an annual base
salary of $277,500, each to be reviewed no less frequently than annually by the
Committee. The Employment Agreements entitle Messrs. Dawson and
Gibson to receive an annual incentive payment of not less than 12.5% of base
salary. The amount actually awarded and paid to the executives each
year will be determined by the Committee and may be based on specific
performance criteria.
The Employment
Agreements entitle Messrs. Dawson and Gibson to participate in all incentive,
savings and retirement plans or programs and welfare and fringe benefits which
are generally available to officers of the Company of comparable
levels. Finally, the Employment Agreements state that the Company may
pay country club annual dues and expenses for each of Messrs. Dawson and
Gibson.
The Employment
Agreements also provide Messrs. Dawson and Gibson with severance benefits in the
event of certain terminations of employment. These benefits are
described in “Potential Payments upon Termination or Change in Control” on page
23 of this proxy statement.
Split
Dollar Agreements
In 2004, the
Company entered into split dollar agreements with NEOs, Hartley, Dawson, Story
and Gibson. The agreements provide that the Company will be the
beneficiary of Bank Owned Life Insurance (commonly referred to as BOLI) insuring
the executives’ lives. The agreements provide the executives with the
right to designate the beneficiaries of the death benefits guaranteed in each
agreement. The agreements originally provided for death benefits of
an initial aggregate amount of $3.3 million. The individual amounts
are increased annually on the anniversary date of the agreement by an inflation
adjustment factor of 5%. As of December 31, 2009, the expected death
benefits totaled $4.2 million. The agreements also state that before
and after the executive’s retirement dates, the Company will pay an annual
gross-up bonus to the executive in an amount sufficient to enable the executive
to pay federal income tax on both the economic benefit and on the gross-up bonus
itself. The expense associated with the post retirement liability was
$70,000 for the year ended December 31, 2009.
18
OUTSTANDING EQUITY AWARDS AT
YEAR-END
The following table
provides information regarding options outstanding for the NEOs as of December
31, 2009. The NEOs do not have any outstanding stock
awards.
|
Name
|
Number
of Securities Underlying Unexercised Options (#) Exercisable
(1)
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration Date
|
|
|
B.
G. Hartley
|
–
|
–
|
$
|
–
|
–
|
|
Lee
R. Gibson, CPA
|
21,733
|
–
|
4.76
|
8/31/2010
|
|
|
Sam
Dawson
|
18,230
|
–
|
4.76
|
8/31/2010
|
|
|
Jeryl
Story
|
–
|
–
|
–
|
–
|
|
|
Michael
L. Coogan, CFA
|
–
|
–
|
–
|
–
|
|
|
(1)
|
Reflects
awards of time-vesting stock options granted under the 1993 Incentive
Stock Option Plan. All options listed above are fully
vested. The options vested at a rate of 20% per year over the
first five years of the ten year option
term.
|
|
|
2009 OPTION EXERCISES AND STOCK
VESTED
|
The table below
shows the number of shares and the value realized upon exercise of stock options
acquired under the 1993 Incentive Stock Option Plan, on exercise and the value
realized on exercise for each of the NEOs for the year ended December 31,
2009.
|
Option
Awards
|
||||
|
Name
|
Number
of Shares Acquired on Exercise (#)
|
Value
Realized on Exercise ($) (1)
|
||
|
B. G.
Hartley
|
82,678
|
|
$ |
679,270
|
|
Lee
R. Gibson, CPA
|
14,511
|
203,672
|
||
|
Sam
Dawson
|
27,686
|
456,554
|
||
|
Jeryl
Story
|
20,858
|
344,091
|
||
|
Michael
L. Coogan, CFA
|
–
|
–
|
||
|
(1)
|
The “value
realized” represents the difference between the exercise price of the
option shares and the market price of the option shares on the date the
option was exercised.
|
19
EQUITY COMPENSATION PLAN INFORMATION
The table below
provides information as of December 31, 2009 regarding shares of common stock
that may be issued under the Company’s equity compensation plans.
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options, warrants,
and rights (a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a))
(c)
|
|
Equity
compensation plans approved by security holders
|
102,959 (1)
|
$ 5.40
|
1,050,000
(2)
|
|
Equity
compensation plans not approved by security holders
|
–
|
–
|
–
|
|
Total
|
102,959
|
$ 5.40
|
1,050,000
|
(1) Reflects
stock options outstanding under the Company’s 1993 Incentive Stock Option
Plan.
|
(2)
|
Reflects
shares available for issuance pursuant to the grant or exercise of awards
(including full-value stock awards) under the Company’s 2009 Incentive
Plan.
|
2009 PENSION BENEFITS
The table below
shows the number of years of service credited to each NEO, the actuarial present
value of each NEOs accumulated benefits (determined using interest rate and
mortality rate assumptions described below), and the amount of payments during
2009 to each of the NEOs, under each of the Pension Plan, Restoration Plan and
deferred compensation agreements.
|
Name
|
Plan
Name
|
Number
of Years Credited Service (#)
|
Present
Value of Accumulated Benefit ($)
|
Payments
During Last Fiscal Year ($)
|
||
|
B. G.
Hartley
|
Pension
Plan
|
N/A
|
$
|
868,145
|
$
|
152,035
|
|
Restoration
Plan
|
N/A
|
308,221
|
53,978
|
|||
|
Deferred
Compensation Agreement
|
N/A
|
1,252,000
|
–
|
|||
|
Retirement
Agreement
|
N/A
|
1,181,000
|
–
|
|||
|
Lee
R. Gibson, CPA
|
Pension
Plan
|
25.417
|
$
|
560,557
|
$
|
–
|
|
Restoration
Plan
|
25.417
|
489,807
|
–
|
|||
|
Deferred
Compensation Agreement
|
N/A
|
115,000
|
–
|
|||
|
Sam
Dawson
|
Pension
Plan
|
35.5
|
$
|
1,400,670
|
$
|
–
|
|
Restoration
Plan
|
35.5
|
1,345,979
|
–
|
|||
|
Deferred
Compensation Agreement
|
N/A
|
305,000
|
–
|
|||
|
Jeryl
Story
|
Pension
Plan
|
30.167
|
$
|
914,491
|
$
|
–
|
|
Restoration
Plan
|
30.167
|
792,801
|
–
|
|||
|
Deferred
Compensation Agreement
|
N/A
|
169,000
|
–
|
|||
|
Michael
L. Coogan, CFA
|
Pension Plan
(1)
|
N/A
|
$
|
–
|
$
|
–
|
|
Restoration
Plan (1)
|
N/A
|
–
|
–
|
|||
|
Deferred
Compensation Agreement
|
N/A
|
–
|
–
|
(1) Mr.
Coogan is not eligible to participate in the Pension Plan or the Restoration
Plan.
20
Pension
Plan
The Pension Plan is
a tax-qualified, defined benefit pension plan pursuant to which participants are
entitled to benefits based on final average monthly compensation and years of
credited service.
On November 3,
2005, our Board approved amendments to the Pension Plan which affected future
participation in the Pension Plan and reduced the accrual of future
benefits. Entrance into the Pension Plan by new employees was frozen
effective December 31, 2005. Employees hired after December 31, 2005
are not eligible to participate in the plan. All other employees are
eligible to participate under the plan on the first day of the month coincident
with or next following the first anniversary of hire. Eligible
participants include any person on the payroll whose wages are subject to
withholding for the purpose of federal income tax. Certain
hourly-paid security personnel are excluded. All of our NEOs at
December 31, 2009 were eligible to participate, with the exception of Mr.
Coogan. Employees are vested upon the earlier of five years credited
service or the employee attaining 60 years of age. Benefits are
payable monthly commencing on the later of age 65 or the participant’s date of
retirement. Eligible participants may retire at reduced benefit
levels after reaching age 55.
The benefits under
the Pension Plan are determined using the following formula, stated as a single
life annuity with 120 payments guaranteed, payable at normal retirement age,
which is defined as 65 under the Pension Plan.
Formula (1) and
Formula (2), calculated using Credit Service at Normal Retirement Date,
multiplied by a service ratio and summed as described below:
|
The fraction
in which the numerator is Credited
|
|||
|
Formula
(1)
|
x
|
Service as of
12/31/05 and the denominator is
|
|
|
Credited
Service at Normal Retirement Date
|
|||
|
plus
|
|||
|
Formula
(2)
|
The fraction
in which the numerator is Credited
|
||
|
x
|
Service
earned after 12/31/05 and the
|
||
|
denominator
is Credited Service at Normal
|
|||
|
Retirement
Date
|
Formula (1) is an amount
equal to:
2% of Final Average
Monthly Compensation times Credited Service up to 20 years, PLUS
1% of Final Average
Monthly Compensation times Credited Service, if any, in excess of 20 years,
PLUS
0.60% of that
portion of Final Average Monthly Compensation which exceeds Monthly Covered
Compensation times Credited Service up to 35 years
Formula (2) is an amount
equal to:
0.90% of Final
Average Monthly Compensation times Credited Service, PLUS
0.54% of that
portion of Final Average Monthly Compensation which exceeds Monthly Covered
Compensation times Credited Service up to 35 years
Benefit Formula
Definitions
Credit
Service
A participant’s
years of credited service are based on the number of years an employee works for
the Company. The Company has no policy to grant extra years of
credited service.
Final Average Monthly
Compensation (FAMC)
The monthly average
of the 60 consecutive months’ compensation during the participant’s period of
credited service that gives the highest average. Compensation
generally includes all gross income received by the participant for services
actually rendered in the course of employment, with certain exclusions, plus any
elective deferrals under Section 125 and Section
404(g)(c). Compensation in the Pension Plan is limited as
required.
21
Covered
Compensation
A rounded 35-year
average of the Maximum Taxable Wages (MTW) under social security. The
table in effect during the calendar year proceeding termination or retirement is
used.
Mr. Hartley began
receiving payments out of the Pension Plan without retiring upon reaching age 65
under prior language in the plan that allowed all participants to begin
receiving payments at age 65, regardless of their employment
status. The Pension Plan was amended several years ago and
participants must now retire to be eligible to receive payments out of the
plan. All participants receiving payments out of the Pension Plan at
the time of the amendment were grandfathered so as to allow them to continue
receiving payments out of the plan, which included Mr. Hartley. For
the purposes of the Pension Plan, Mr. Hartley is receiving payments as if he
were retired. None of the other NEOs were in pay status under the
Pension Plan at the time of the amendment, and thus were not
grandfathered.
The pension
disclosures have been computed using the FASB ASC Topic 715, “Compensation -
Retirement Benefits” assumptions from the financial statements as of the pension
measurement date of December 31, 2009, except the FASB ASC Topic 715 retirement
age has been replaced by the normal retirement age for this calculation (and the
benefit valued is only the accrued, not the projected, benefit).
|
FASB ASC
Topic 715 Discount Rate as of 12/31/08
|
6.10%
|
|
FASB ASC
Topic 715 Discount Rate as of 12/31/09
|
6.10%
|
|
Expected
Retirement Age
|
65
|
|
Post-Retirement
Mortality
|
RP - 2000
Mortality Table for males and females
|
|
Pre-Retirement
Mortality, Disability or Turnover
|
None
|
|
Form of
Payment
|
|
|
· Qualified
Retirement Plan
|
10-Year
Certain & Life Annuity
|
|
· Nonqualified
Restoration Plan
|
10-Year
Certain & Life Annuity
|
For a further
discussion of the FASB ASC Topic 715 assumptions, please see Note 13 to our
consolidated financial statements on Form 10-K, filed with the SEC on March 5,
2010.
Restoration
Plan
The annual
retirement income benefit of NEOs under the Pension Plan is subject to certain
limitations imposed by the Internal Revenue Code. Under one such
limitation, in determining the benefit accrued for a year under the Pension
Plan, the benefit formula excludes a NEOs compensation above a specified
compensation limit. In 2009, for example, the ceiling was $245,000,
which means that the compensation of NEOs in excess of that amount was not
considered in the benefit formula for purposes of determining benefits under the
Pension Plan. The Company maintains the Restoration Plan, a
non-qualified supplemental retirement plan which provides additional benefits by
taking into account the excess compensation not taken into account under the
Pension Plan. The Restoration Plan is unfunded and noncontributory,
which means that benefits are paid from the general assets of the Company and
the NEOs are not required to make any contributions. The formula and
assumptions used to calculate the benefit payable pursuant to the Restoration
Plan are the same as those used under the Pension Plan described above, except
that the amounts payable under the Restoration Plan are reduced by the amounts
payable under the Pension Plan.
Deferred
Compensation Agreements
The Company entered
into a deferred compensation agreement with Mr. Hartley effective February 13,
1984. The Company entered into deferred compensation agreements with
each of Messrs. Dawson, Story and Gibson effective June 30, 1994. The
deferred compensation agreements provide additional compensation to the
executives upon retirement or other qualifying termination of
service.
22
Mr. Hartley’s
deferred compensation agreement entered into in 1984 provides that, upon a
termination of employment by reason of death, retirement or an involuntary
termination by the Company other than for cause, he will be entitled to receive
$467,000 immediately and $1,106,000 payable monthly over 15 years.
Under the terms of
their deferred compensation agreements, entered into in 1994, Messrs. Dawson,
Story, and Gibson are entitled to receive $500,000, $400,000, and $400,000,
respectively, payable monthly over 10 years, if the executive remains in the
employment of Southside Bank until his retirement (on or after age 65), or upon
permanent disability or death, whichever occurs first. If the
executive’s employment is involuntarily terminated by the Company for any reason
other than for “good cause” (as defined in the agreements), such termination
shall be treated the same as a retirement, and the executive shall be entitled
to receive the payments. If, prior to a Change in Control (as defined
in the agreements), the executive terminates his employment prior to attainment
of age 65 for any reason other than death or disability, no amounts shall be due
such executive under his deferred compensation agreement. If, after a
Change in Control, the executive terminates employment prior to attainment of
age 65 for any reason other than death, disability, or for “good reason” (as
defined in the agreements), no amounts shall be due to the executive under his
agreement. After a Change in Control, a termination by the executive
for “good reason” shall be treated the same as a retirement, and the executive
shall be entitled to receive the payments.
Potential
Payments Upon Termination or Change in Control
The following
discussion summarizes the compensation benefits payable to the NEOs in the event
of a termination of employment under various circumstances, assuming that a
termination of employment occurred on December 31, 2009.
Employment
Agreements
The Company does
not have employment agreements with Messrs. Hartley, Story and Coogan providing
for specific benefits upon a termination of employment. In general,
upon termination of their employment, Messrs. Hartley, Story and Coogan would
receive compensation and benefits for which he had already
vested. This would include accrued but unpaid salary, accrued and
unused vacation pay, and any balance under the 401(k) plan.
The Company has
employment agreements with Messrs. Dawson and Gibson, which govern the terms of
each executive’s payments and benefits upon termination or Change in Control, as
summarized below.
Termination by the executive except
for Good Reason; termination by the Company with Cause. If an
executive terminates his employment without Good Reason (as defined in the
Employment Agreements) or the Company terminates the executive’s employment with
Cause (as defined in the Employment Agreements), the executive will be entitled
to receive his accrued salary and previously vested benefits. In this
event, no special severance benefits are payable.
Termination by the executive for
Good Reason; termination by the Company without Cause. If an executive
terminates his employment for Good Reason or the Company terminates the
executive’s employment without Cause, the executive will be entitled to receive
a single lump sum equal to:
|
·
|
a severance
payment equal to the executive’s monthly salary multiplied by the number
of months remaining in the term of the Employment Agreement (which would
be between 24 and 36 months), plus
$10,000;
|
|
·
|
a pro-rata
bonus equal to the product of (i) the executive’s Target Bonus (as defined
in the Employment Agreements) for the termination year and (ii) a
fraction, the numerator of which is the number of days in the current
fiscal year through the termination date, and the denominator of which is
365;
|
|
·
|
his accrued
salary;
|
|
·
|
accrued pay
in lieu of unused vacation; and
|
|
·
|
any vested
compensation deferred by the executive (unless otherwise required by an
agreement).
|
Additionally, all
equity awards will become immediately vested and exercisable as of the date of
termination. Finally, the executive will be entitled to any other
amounts or benefits under any other plan pursuant to which the executive is
eligible to receive benefits, to the extent officers of a comparable level at
the Company received such benefits prior to the date of termination (“Other
Benefits”).
23
Termination due to death or
Disability. If an executive’s employment is terminated due to
death or Disability (as defined in the Employment Agreements), he (or his
estate) will receive accrued salary and Other Benefits.
Change in
Control. If an executive’s employment is terminated due to a
Change in Control, he will be entitled to the same payments and benefits as if
he had been terminated without Cause. However, instead of the
severance payment described above, the severance payment will be calculated as
follows:
(a) if the
termination occurs more than six (6) months prior to a Change of Control or more
than two (2) years after the occurrence of a Change of Control, the severance
payment shall be the product of two times the sum of (1) the executive’s salary
in effect as of the termination (ignoring any decrease in the salary unless
consented to by the executive), and (2) the greater of the average of the annual
bonuses earned by the executive for the two fiscal years in which annual bonuses
were paid immediately preceding the year in which the termination occurs, or the
executive’s Target Bonus for the year in which the termination occurs;
or
(b) if the
termination occurs within six months prior or within two years after the
occurrence of a Change of Control, the severance payment shall be the product of
2.99 times the sum of (1) the executive’s salary in effect as of the
termination, and (2) the greater of the average of the annual bonuses earned by
the executive for the two fiscal years in which annual bonuses were paid
immediately preceding the year in which the termination occurs, or the
executive’s Target Bonus for the year in which the termination
occurs.
Gross-Ups. The
Employment Agreements also state that in the event that any of the severance
benefits described above are subject to federal excise taxes under the “golden
parachute” provisions under Section 280G of the Internal Revenue Code, the
payments will be reduced to the extent necessary to avoid such excise taxes, but
only if such reduction would result in a greater net benefit for the
executive.
Restrictive
Covenants. The Employment Agreements contain confidentiality
provisions and subject Messrs. Dawson and Gibson to certain non-complete and
non-solicitation obligations during the term of employment with the Company and
for a one-year period following termination of employment.
Split
Dollar Agreements
Under the terms of
the split dollar agreements with Messrs. Hartley, Dawson, Story and Gibson, upon
a termination of employment by reason of death, disability (as defined in the
split dollar agreements), or retirement at or after age 65, or a termination
following a Change in Control (as defined in the split dollar agreements),
payment of the specified benefits under the split dollar agreements would be
triggered. If the executive’s employment is terminated for Cause (as
defined in the split dollar agreements), he will forfeit benefits under the
split dollar agreements.
Pension
Plan, Restoration Plan and Deferred Compensation Agreements
For a description
of the termination or Change in Control benefits under the Pension Plan,
Restoration Plan and deferred compensation agreements, please see the discussion
following the Pension Benefits for Fiscal Year 2009 table.
Retirement
Agreement with Mr. Hartley
On November 7,
2008, the Company, Southside Bank and Mr. Hartley, entered into a Retirement
Agreement.
The Retirement
Agreement terminates and replaces the Post Retirement Agreement, dated June 20,
2001, by and among the Company, Southside Bank and Mr. Hartley.
24
The Retirement
Agreement provides that if Mr. Hartley voluntarily retires as an employee and
officer of the Company, he shall simultaneously retire as an employee and
officer of Southside Bank, but that the parties expect that he shall continue
his services on the boards of directors of the Company and Southside
Bank.
The Retirement
Agreement provides that in each of the five years after his “separation from
service” (as defined under Section 409A of the Internal Revenue Code of 1986),
regardless of whether the separation is by reason of retirement, death or
otherwise, the Company shall pay Mr. Hartley $250,000 per year, subject to a 5%
increase per year after the first year. The Company shall continue to
make payments to Mr. Hartley’s estate or beneficiaries in the event of his death
during the five year period. In addition, Mr. Hartley shall be
entitled to participate in all plans, programs, practices and policies
maintained by the Company at that time with respect to retirement or termination
of employment.
Director
Compensation
The Company
compensated its non-employee directors $1,000 per month in
2009. Members of the Audit Committee are paid $500 per month and the
Chairman of the Audit Committee is paid $900 per month. The Company’s
Nominating and Compensation Committee members are paid $400 per meeting
attended. The non-employee directors of the Company were paid a
year-end bonus of $10,000 for their service.
The Company’s
non-employee directors, who are also directors of Southside Bank, are paid $500
per Loan and Discount committee meeting and $400 per all other Southside Bank
committee meetings, $500 per regular Southside Bank board meetings and an annual
bonus of $1,500. Officers of the Company, who are directors of
Southside Bank, are paid $500 per regular Southside Bank board meeting and an
annual bonus of $1,500.
B. G. Hartley, the
Company’s Chairman of the Board and Chief Executive Officer and Sam Dawson, the
Company’s President and Secretary, are not included in the table below, as they
are officers of the Company, and thus received no compensation for their service
as directors of the Company. The compensation received by Messrs.
Hartley and Dawson as officers and directors of Southside Bank are shown in the
Summary Compensation table.
2009 DIRECTOR SUMMARY COMPENSATION
TABLE
The table below
summarizes the compensation paid by the Company to directors for the year ended
December 31, 2009.
|
Name
(a)
|
Fees
Earned or
Paid
in Cash ($)
|
All
Other
Compensation
($)
|
Total
|
||
|
Herbert
C. Buie (1)
|
$
|
73,300
|
–
|
$
|
73,300
|
|
Alton
Cade (2)
|
60,800
|
–
|
60,800
|
||
|
John
R. (Bob) Garrett (3)
|
60,300
|
–
|
60,300
|
||
|
Michael
D. Gollob, CPA (4)
|
29,900
|
–
|
29,900
|
||
|
Melvin
B. Lovelady, CPA (5)
|
74,500
|
–
|
74,500
|
||
|
Joe
Norton (6)
|
74,600
|
–
|
74,600
|
||
|
Paul
W. Powell (7)
|
75,100
|
–
|
75,100
|
||
|
William
Sheehy (8)
|
73,700
|
–
|
73,700
|
||
|
Robbie
N. Edmonson (9)
|
6,000
|
–
|
6,000
|
||
|
Preston
Smith (10)
|
38,400
|
–
|
38,400
|
||
|
Don
W. Thedford (11)
|
44,400
|
–
|
44,400
|
||
|
(1)
|
Herbert C.
Buie was compensated $44,900 and $28,400 for serving as director of
Southside Bank and Southside Bancshares, Inc.,
respectively.
|
|
(2)
|
Alton Cade
was compensated $32,400 and $28,400 for serving as director of Southside
Bank and Southside Bancshares, Inc.,
respectively.
|
|
(3)
|
John R. (Bob)
Garrett was compensated $36,400 and $23,900 for serving as director of
Southside Bank and Southside Bancshares, Inc.,
respectively.
|
|
(4)
|
Michael D.
Gollob, CPA was compensated $23,900 and $6,000 for serving as director of
Southside Bank and Southside Bancshares, Inc.,
respectively.
|
|
(5)
|
Melvin B.
Lovelady, CPA was compensated $41,300 and $33,200 for serving as director
of Southside Bank and Southside Bancshares, Inc.,
respectively.
|
|
(6)
|
Joe Norton
was compensated $46,200 and $28,400 for serving as director of Southside
Bank and Southside Bancshares, Inc.,
respectively.
|
|
(7)
|
Paul W.
Powell was compensated $46,700 and $28,400 for serving as director of
Southside Bank and Southside Bancshares, Inc.,
respectively.
|
|
(8)
|
William
Sheehy was compensated $45,700 and $28,000 for serving as director of
Southside Bank and Southside Bancshares, Inc.,
respectively.
|
|
(9)
|
Robbie N.
Edmonson, the Company’s Vice Chairman of the Board, is an officer and
director of Southside Bank and Southside Bancshares, Inc. and was
compensated $6,000 for serving as director of Southside
Bank. Mr. Edmonson is an officer of Southside Bancshares, Inc.
and thus received no compensation for his service as director of Southside
Bancshares, Inc.
|
|
(10)
|
Preston L.
Smith was compensated $24,400 and $14,000 for serving as director of
Southside Bank and Southside Bancshares, Inc.,
respectively.
|
|
(11)
|
Don W.
Thedford was compensated $30,400 and $14,000 for serving as director of
Southside Bank and Southside Bancshares, Inc.,
respectively.
|
25
|
COMMITTEES OF SOUTHSIDE
BANK
|
Executive
Committee and Loan/Discount Committee of Southside Bank
The Executive
Committee is authorized to act on behalf of the board of directors of Southside
Bank between scheduled meetings of the Board, subject to certain
limitations. The committee is comprised of Messrs. Buie, Cade,
Garrett, Lovelady, Norton, Powell, Sheehy, Smith and Thedford, who are directors
of Southside Bank and directors of the Company but are not officers or employees
of either Southside Bank or the Company. Also serving are Messrs.
Hartley (Chairman), Edmonson and Dawson who are directors and officers of the
Company and Southside Bank and Messrs. Story and Gibson who are officers of the
Company and Southside Bank and directors of Southside Bank. In
addition, the members of the Executive Committee comprise the Loan/Discount
Committee of Southside Bank. It is the Loan/Discount Committee’s
responsibility to monitor credit quality, review extensions of credit and
approve selected credits in accordance with the loan policy. The
Executive Committee and the Loan/Discount Committee of Southside Bank met weekly
to discharge responsibilities of both committees at a combined meeting and met
51 times in 2009.
Trust
Committee of Southside Bank
The Trust Committee
of Southside Bank is responsible for the oversight of the operations and
activities of the Trust Department. Messrs. Buie, Edmonson, Hartley,
Lovelady, Norton, Powell, Sheehy, and Dawson (Chairman), directors of the
Company and Southside Bank, serve on this committee. Dr. John Walker
and Michael Gollob are advisory directors of Southside Bank and serve as members
of the Trust Committee. Jeryl Story serves as a member of the Trust
Committee and Lee Gibson serves as an advisory member, and both are officers of
the Company and Southside Bank and directors of Southside Bank. Doug
Bolles, Raymond Cozby, George Hall, Kathy Hayden and Cayla Washburn, officers of
Southside Bank, also serve on this committee. Messrs. Buie, Gollob,
Lovelady, Norton, Powell, Sheehy, and Walker are not officers or employees of
the Company or Southside Bank. The Trust Committee met 12 times in
2009.
Compliance,
Electronic Data Processing (EDP) and Community Reinvestment Act (CRA) Committee
of Southside Bank
The
Compliance/EDP/CRA Committee of Southside Bank is responsible for ensuring
compliance with all appropriate statutes and reviews electronic data processing
and community reinvestment activities. The Compliance/EDP/CRA
Committee is comprised solely of persons who are directors of the Company and
Southside Bank who are not officers or employees. Those directors are
Messrs. Buie, Cade, Garrett, Lovelady (Chairman), Norton, Powell and
Sheehy. The Compliance/EDP/CRA Committee met 12 times in
2009.
Investment/Asset-Liability
Committee of Southside Bank
The
Investment/Asset-Liability Committee is responsible for reviewing Southside
Bank’s overall asset and funding mix, asset-liability management policies and
investment policies. The members of the Committee are Messrs. Buie,
Lovelady, Norton, Powell and Sheehy who are directors of the Company and
Southside Bank, and Hoyt N. Berryman, Jr. who is an advisory director of
Southside Bank. None of the foregoing individuals are officers or
employees of the Company or Southside Bank. Messrs. Dawson, Edmonson,
and Hartley, who are officers and directors of the Company and Southside Bank
serve with Messrs. Gibson (Chairman) and Story, officers of the Company and
Southside Bank and directors of Southside Bank. Also serving on the
committee are Peter Boyd, Jane Coker, George Hall, Randal Hendrix and Lonny
Uzzell, officers and advisory directors of Southside Bank. Tim
Alexander, Bill Clawater, Michael L. Coogan, Brian McCabe, Mike Northcutt, and
Cayla Washburn, each officers of Southside Bank also serve on the
committee. The Investment/Asset-Liability Committee met 11 times in
2009.
26
TRANSACTIONS WITH DIRECTORS, OFFICERS AND
ASSOCIATES
Certain of the
executive officers and directors of the Company and Southside Bank (and their
associates) have been customers of Southside Bank and have been granted loans in
the ordinary course of business. Southside Bank is subject to Federal
Reserve Regulation O, which governs loans to directors, executive officers and
certain shareholders of banks and bank holding companies. All loans
or other extensions of credit made by Southside Bank to executive officers and
directors of the Company and Southside Bank were made in the ordinary course of
business on substantially the same terms, including interest rates, maturities
and collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of collection or
present other features that are unfavorable to Southside Bank. Prior
approval by a majority of the board of directors, with the interested party
abstaining, must be obtained for any loan to a director or a director’s related
interest(s) which, when aggregated with all loans to the director and/or to that
director’s related interest(s) exceed 10% of Southside Bank’s capital plus
unimpaired surplus. Prior approval requirements for individual
advances for the board of directors will be satisfied by annual Board approval
of a line of credit for a director’s personal borrowing and similar approval of
a line of credit for director-owned or controlled business
borrowing. All advances made pursuant to an approved line of credit
within 12 months of the date of approval shall be treated as
approved. Loans to persons employed by Southside Bank who are
considered under Regulations of the Federal Reserve Board to be executive
officers shall be subject to prior approval by the board of
directors. The Company expects similar transactions to occur in the
future with its executive officers and directors as well as directors and
officers of Southside Bank. In addition, Billie Boyd Hartley, the
spouse of B. G. Hartley, and Jane Hartley Coker, the daughter of B. G. Hartley
are employed by Southside Bank and received compensation of $167,107 and
$239,015, respectively, in 2009. The board of directors reviews and
discusses each potential transaction with a director, executive officer,
significant shareholder or any of their immediate family members and votes to
approve or disapprove the transaction. Directors or executive
officers who are interested in a particular transaction do not vote on the
transaction with respect to which they are interested. While the
Company’s Board has not adopted a formal written policy with respect to
transactions with related persons, it may elect to do so in the
future.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of
the Securities Exchange Act of 1934 requires the Company’s executive officers
and directors, and any persons who own more than 10% of the Company’s common
stock, to file reports of initial ownership of the Company’s common stock and
subsequent changes in that ownership with the SEC. Executive
officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all forms they file pursuant
to Section 16(a). Based solely upon a review of the copies of the
forms furnished to the Company, or written representations from certain
reporting persons that no Form 5’s were required, the Company believes that
during fiscal year 2009 all Section 16(a) filing requirements were complied with
except:
Director John R.
(Bob) Garrett filed a late Form 4 on December 3, 2009 to report the purchase of
68 shares of the Company’s common stock on November 3, 2009, and the purchase of
69 shares of the Company’s common stock on November 17, 2009.
Michael L. Coogan
filed a late Form 4 on March 6, 2009 to report the purchase of 500 shares of the
Company’s common stock on February 24, 2009.
27
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
PwC served as the
Company’s independent registered public accounting firm for the fiscal year
ended December 31, 2009 and has been selected by the Audit Committee as the
Company’s independent registered public accounting firm for the year ending
December 31, 2010. The Company’s Audit Committee makes the
appointment of the independent registered public accounting firm
annually. The decision of the Audit Committee is based on both the
audit scope and estimated audit fees. Representatives of PwC are
expected to be present at the Annual Meeting and will have the opportunity to
make a statement if they desire to do so, and to respond to appropriate
questions.
Independent
Auditor Fees
The following table
represents aggregate fees incurred for the Company for fiscal years ended
December 31, 2009 and 2008, by PwC, the Company’s independent registered public
accounting firm. All fees were pre-approved by the Audit
Committee.
|
YEARS
ENDED
|
||||
|
2009
|
2008
|
|||
|
Audit Fees
(a)
|
$
|
482,799
|
$
|
405,000
|
|
Audit-Related
Fees (b)
|
5,000
|
5,000
|
||
|
Tax Fees
(c)
|
33,105
|
93,169
|
||
|
All Other
Fees (d)
|
1,599
|
1,599
|
||
|
Total Fees
(e)
|
$
|
522,503
|
$
|
504,768
|
|
(a)
|
In fiscal
year 2009, the fees relating to various accounting and audit matters
remained at $405,000. We also incurred fees of $77,799 for
services primarily related to audit procedures performed over the 2009
implementation of our new general ledger and loan accounting system and
the assessment of the other-than-temporary impairment accounting specific
to our pooled trust preferred investment securities.
|
|
(b)
|
Fees for
services related to student loan attestation.
|
|
(c)
|
Fees for
services during 2009 for federal tax preparation, advice and planning were
$22,850, research and consultation were $8,130 and research and
consultation relating to the reorganization were
$2,125.
|
|
(d)
|
Fees for use
of the PwC online research financial library.
|
|
(e)
|
The above
fees exclude $16,728 and $17,295 in out-of-pocket reimbursed travel
expenses for the years ended December 31, 2009 and 2008,
respectively.
|
28
Auditor
Fees Pre-approval Policy
In 2008, the Audit
Committee readopted a formal policy concerning approval of audit and non-audit
services to be provided by the independent registered public accounting firm to
the Company, currently PwC. The Policy requires that all services PwC
may provide to the Company, including audit services and permitted audit-related
and non-audit services, be pre-approved by the Committee. The
Committee pre-approved all audit and non-audit services provided by PwC during
2009.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS
(PROPOSAL 2)
The Audit Committee
of the Board has selected PwC to serve as the Company’s independent registered
public accounting firm for the year ending December 31, 2010 and to serve until
the next annual meeting in April 2011. PwC has served as the
Company’s independent registered public accounting firm since
1991. We have been advised by PwC that neither it nor any of its
members had any financial interest, direct or indirect, in us nor has it had any
connection with us or any of our subsidiaries in any capacity other than
independent auditors. The Board recommends that you vote for the
ratification of the selection of PwC. Shareholder ratification of the
selection of PwC as our independent registered public accounting firm is not
required by our certificate of formation, bylaws or
otherwise. Nevertheless, the Board is submitting this matter to the
shareholders as what we believe is a matter of good corporate
practice. If the shareholders do not ratify the appointment of PwC,
then the appointment of an independent registered public accounting firm will be
reconsidered by our Audit Committee. Even if the appointment is
ratified, the Audit Committee in its discretion may direct the appointment of a
different independent registered public accounting firm at any time during the
year if it is determined that such a change would be in the best interest of the
Company and its shareholders. Representatives of PwC are expected to
be present at the Annual Meeting and will have the opportunity to make a
statement if they desire to do so, and to respond to appropriate
questions.
The
Board recommends a vote FOR the ratification of PricewaterhouseCoopers LLP as
the Company’s independent registered public accounting firm for the year
2010.
ANNUAL REPORT TO SHAREHOLDERS
The
Company’s Annual Report on Form 10-K, as integrated into the Annual Report to
Shareholders for the fiscal year ended December 31, 2009, accompanies this Proxy
Statement. The Annual Report does not constitute outside solicitation
materials. Additional copies of Form 10-K are available at no
expense; exhibits to Form 10-K are available for a copying expense to any
shareholder by sending a written request to the Corporate Secretary of the
Company, Post Office Box 8444, Tyler, Texas 75711. The Company’s
public filings with the SEC may also be obtained free at the Company’s website:
www.southside.com/investor, under the topic Documents.
SHAREHOLDER PROPOSALS
SEC rules establish
the eligibility requirements and the procedures that must be followed for a
shareholder’s proposal to be included in the Board’s proxy solicitation
materials. Under those rules, any shareholder wishing to have a
proposal considered for inclusion in the Board’s proxy solicitation materials
for the 2011 Annual Meeting must set forth his or her proposal in writing and
file it with the Secretary of the Company on or before November 12,
2010. Proposals must comply with all applicable SEC
rules. The Board will review any proposals received by that date and
will determine whether applicable requirements have been met for including the
proposal in the 2011 proxy solicitation materials.
In addition, the
Company’s bylaws establish advance notice procedures that must be followed for a
shareholder proposal to be presented at an Annual Meeting but not included in
the Board’s proxy solicitation materials. Any shareholder wishing to
have a proposal considered for the 2011 Annual Meeting, but who does not submit
the proposal for inclusion in the Board’s proxy, assuming that the 2011 Annual
Meeting occurs on a date that is not more than 30 days before or 60 days after
the anniversary of the Annual Meeting, must submit the proposal as set forth
above not earlier than December 16, 2010 and no later than January 15,
2011.
29
For any proposal
that is not submitted for inclusion in next year’s proxy solicitation materials,
but is submitted for presentation at the 2011 Annual Meeting, SEC rules permit
the persons named as proxies in the proxy solicitation materials to vote proxies
in its discretion if: (1) the proposal is received before January 15, 2011 and
we advise shareholders in the 2011 proxy solicitation materials about the nature
of the matter and how management intends to vote on such matter, or (2) the
proposal is not received before January 15, 2011.
The Board does not
know of any other business, other than that set forth above, to be transacted at
the Annual Meeting. However, if any other matters requiring a vote of
the shareholders properly come before the Annual Meeting, the persons designated
as Proxies will vote the shares of common stock represented by the proxies in
accordance with their best judgment on such matters. If a shareholder
specifies a different choice on the proxy, those shares of common stock will be
voted in accordance with the specification so made.
|
|
||
| /s/ B. G. Hartley | ||
|
B.
G. Hartley
|
||
|
Chairman
of the Board
|
Tyler,
Texas
March 12,
2010
30
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| 000000000.000000 ext | 000000000.000000 ext | |||||
| 000000000.000000 ext | 000000000.000000 ext | |||||
 |
MR
A SAMPLE
DESIGNATION
(IF ANY)
ADD
1
ADD
2
ADD
3
ADD
4
ADD
5
ADD
6
|
Electronic
Voting Instructions
You
can vote by Internet or telephone!
Available
24 hours a day, 7 days a week!
Instead
of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy.
VALIDATION
DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies
submitted by the Internet or telephone must be received by 1:00 a.m.,
Central Time, on April 15, 2010.
|
||||
 |
||||||
 |
Vote
by Internet
|
|||
|
•
|
Log
on to the Internet and go to
|
|||
|
www.investorvote.com/SBSI
|
||||
|
•
|
Follow
the steps outlined on the secured website.
|
|||
 |
Vote
by telephone
|
|||
|
•
|
Call
toll free 1-800-652-VOTE (8683) within the USA, US territories &
Canada any time on a touch tone telephone. There is NO
CHARGE to you for the call.
|
|||
|
•
|
Follow
the instructions provided by the recorded
message.
|
|||
|
Using
a black
ink pen,
mark your votes with an X
as shown in this example. Please do not write outside the
designated areas.
|
S
|
|
Annual
Meeting Proxy Card
|
|
1234 5678 9012 345
|
|
q PLEASE FOLD ALONG THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE q
|
|
A Items — The Board of Directors
recommends a vote FOR the listed nominees and
FOR Item
2.
|
|
1.
Election of Directors:
|
For
|
Withhold
|
For
|
Withhold
|
For
|
Withhold
|
|||
|
É
|
|||||||||
|
01
- Alton Cade
|
£
|
£
|
02
- B. G. Hartley
|
£
|
£
|
03
- Paul W. Powell
|
£
|
£
|
|
|
04
- Preston L. Smith
|
£
|
£
|
05
- Don W. Thedford
|
£
|
£
|
|
For
|
Against
|
Abstain
|
||
|
2.
Ratify the appointment by our Audit Committee of PricewaterhouseCoopers
LLP to serve as the independent registered public accounting firm for the
Company for the year ended December 31, 2010.
|
£
|
£
|
£
|
B
Non-Voting
Items
|
Change
of Address — Please print new address below.
|
Comments
— Please print your comments below.
|
|
C
Authorized Signatures — This section must be completed for your vote to
be counted. — Date and Sign Below
Please
sign exactly as name(s) appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, corporate officer, trustee,
guardian, or custody
|
Date
(mm/dd/yyyy) — Please print date below.
|
Signature
1 — Please keep signature within the box.
|
Signature
2 — Please keep signature within the box.
|
||
|
/
/
|
 |
C 1234567890 J N T
5 1 B V 0 2 4 3 2 8 1
|
MR A SAMPLE (THIS AREA IS SET UP TO
ACCOMMODATE
140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE
AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE
AND
|
É
|
<STOCK#> 015DFD
|
q PLEASE FOLD ALONG THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE. q
|
|
Proxy
— Southside Bancshares, Inc.
|
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY.
The
Annual Meeting will be held at Willow Brook Country Club
3205
West Erwin Street, Tyler, Texas, on Thursday, April 15, 2010, at 4:00
p.m.
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
to be held on April 15, 2010. The Company’s Proxy Statement and Annual Report
are available at http://www.southside.com/investor/proxymaterials.
Melvin B.
Lovelady, William Sheehy, Herbert C. Buie, Joe Norton, and John R. (Bob)
Garrett, or any of them, each with the power of substitution, are hereby
authorized to represent and vote the shares of the undersigned, with all the
powers which the undersigned would possess if personally present, at the Annual
Meeting of Shareholders of Southside Bancshares, Inc. to be held on April 15,
2010, or at any postponement or adjournment thereof.
THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
AS FOLLOWS: FOR Alton Cade, FOR B. G. Hartley, FOR Paul W. Powell, FOR Preston
L. Smith, and FOR Don W. Thedford; FOR Item 2 - Ratification of the appointment
by our Audit Committee of PricewaterhouseCoopers LLP as our independent
registered public accounting firm for the year ending December 31,
2010.
In their
discretion, the Proxies are authorized to vote upon such other business as may
properly come before the meeting or any adjournments.
If more
than one of the proxies above shall be present in person or by substitute at the
meeting or any adjournment hereof, the majority of said proxies so present and
voting, either in person or by substitute, shall exercise all of the powers
hereby given. The undersigned hereby revokes any proxy or proxies heretofore
given to vote upon or act with respect to such stock and hereby ratifies and
confirms all that said proxies, their substitutes, or any of them, may lawfully
do by virtue hereof.
(Continued
and to be voted on reverse side.)