EFFECT OF WITHHOLD VOTES, ABSTENTIONS AND BROKER NON-VOTES
Shares represented at the Annual Meeting that are withheld or abstain from voting and broker non-votes 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) will be considered present for the purpose of determining a quorum at the Annual Meeting.
For Proposal 1, abstentions and broker non-votes will not be counted in determining whether a director has received a majority of the votes cast for his or her election.
For Proposals 2 and 3 and for any other matter that may properly come before the meeting, abstentions will be included in vote totals and, as such, will have the same effect on those proposals as a vote against such proposals. Broker non-votes will not be included in vote totals and, as such, will have no effect on such proposals.
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PROPOSAL 1 - ELECTION OF DIRECTORS |
(PROPOSAL 1)
The Board is currently comprised of 17 directors. The Board size will be reduced to 15 directors effective as of the date of the Annual Meeting as one director has elected not to stand for re-election at the Annual Meeting and one director has elected to retire effective as of the date of the Annual Meeting. The Board is classified into three classes, twoone of which are currently comprised of six directors and one that is currently comprised of five directors. Following the Annual Meeting, we will continue to have threedirectors and two classes one of which will be comprised of six directors, oneall with three-year terms, with the exception of which will have five directors and one of which will have four directors. One class of directors is elected each year for a three-year term.Alton L. Frailey. Under NASDAQ listing rules, a majority of the Board must be comprised of independent directors. The Board has determined that each director nominatednominee is independent under NASDAQ listing rules, except forwith the exception of Lee R. Gibson, CPA, President and Chief Executive Officer.CEO of the Company and Southside Bank.
The four individualsAs identified below, arethe six nominees for election at the Annual Meeting forwill serve a three-year term expiring at the 20222025 Annual Meeting.
Term Expiring 20222025
•Michael J. Bosworth
•Shannon Dacus
•Alton L. Frailey
•Lee R. Gibson, CPA
•George H. (Trey) Henderson, III
•Donald W. Thedford
All of the nominees are currently directors of the Company and its subsidiary, Southside Bank. All of theall nominees, except George H. (Trey) Henderson, IIIAlton L. Frailey, were previously elected to the Board by the Company's shareholders. Mr. HendersonFrailey was appointed byto the Board as a directoreffective January 1, 2022. All of the Company duringnominees are also current directors of the fourth quarter of 2018.Company's subsidiary, Southside Bank. 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 recommended by the Corporate Governance and Nominating Committee and nominated by the Board as nominees 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 of the nominees shall be unable to do so, the proxies will be voted for the substitute nominee(s) selected by the Board.
The Board recommends a vote FOR the election of each of the individuals nominated for election as a director.director nominees.
Southside Bancshares, Inc.| 2022 Proxy Statement | 3
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INFORMATION ABOUT OUR DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS |
The following table sets forth information regarding our current directors and director nominees forand their knowledge, skills and experience attributes.
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Directors and Nominees | Age | Director Since | Gender | Ethnicity | Knowledge, Skills and Experience |
Executive Experience | Banking/Financial Services Industry | CRE(1) | Accounting/Audit | Risk | Strategic Planning | Corporate Governance | Legal(2) | IT(3) | HR(4) |
Lawrence Anderson, M.D. | 65 | 2010 | Male | White | ü | | | | | ü | | | ü | |
S. Elaine Anderson, CPA | 69 | 2014 | Female | White | ü | ü | | ü | ü | ü | ü | ü | ü | |
Michael J. Bosworth | 71 | 2017 | Male | White | ü | | | ü | ü | ü | | | | |
Herbert C. Buie | 91 | 1988 | Male | White | ü | ü | ü | | | ü | ü | | | |
Patricia A. Callan | 63 | 2014 | Female | White | ü | ü | | | | ü | ü | | | ü |
Shannon Dacus | 53 | 2020 | Female | Hispanic | | ü | | | | | | ü | | |
Alton L. Frailey | 60 | 2022 | Male | African American | ü | | ü | | | ü | ü | | | |
John R. (Bob) Garrett | 68 | 2009 | Male | White | ü | | ü | | | ü | | | | |
Lee R. Gibson, CPA | 65 | 2015 | Male | White | ü | ü | | ü | ü | ü | ü | ü | ü | ü |
George H. (Trey) Henderson, III | 63 | 2018 | Male | White | ü | | ü | | | ü | ü | | | |
Melvin B. Lovelady, CPA | 85 | 2005 | Male | White | | ü | | ü | ü | | ü | | | ü |
Tony K. Morgan, CPA | 72 | 2017 | Male | White | ü | | | ü | | ü | | | | |
John F. Sammons, Jr. | 72 | 2017 | Male | White | ü | | | | | | | | | |
H. J. Shands, III | 66 | 2017 | Male | White | ü | ü | | | | ü | ü | ü | | |
William Sheehy | 81 | 1983 | Male | White | | ü | ü | | ü | | | ü | | |
Preston L. Smith | 66 | 2009 | Male | White | ü | | ü | | ü | ü | ü | ü | | |
Donald W. Thedford | 72 | 2009 | Male | White | ü | | | | | ü | | | | |
(1) Commercial Real Estate (“CRE”), including construction.
(2) Includes regulatory and compliance.
(3) Information Technology (“IT”), which includes information security.
(4) Human Resources (“HR”), which includes executive compensation.
The following table is presented in accordance with Nasdaq Listing Rule 5605:
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Board Diversity Matrix (as of March 30, 2022) |
Board Size: |
Total Number of Directors | 17 |
Gender: | Male | Female | Non- Binary | Gender Undisclosed |
Number of directors based on gender identity | 14 | 3 | — | — |
Number of directors who identify in any of the categories below: |
African American or Black | 1 | — | — | — |
Alaskan Native or American Indian | — | — | — | — |
Asian | — | — | — | — |
Hispanic or Latinx | — | 1 | — | — |
Native Hawaiian or Pacific Islander | — | — | — | — |
White | 13 | 2 | — | — |
Two or More Races or Ethnicities | — | — | — | — |
LGBTQ+ | — |
Southside Bancshares, Inc.| 2022 Proxy Statement | 4
The following table sets forth information regarding our director nominees, our continuing directors and our current 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 20222025 ANNUAL MEETING | INITIAL
ELECTION
TO BOARD |
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MICHAEL J. BOSWORTH (68) (71) –– Mr. Bosworth graduated from Texas Tech University in 1974 and entered the insurance business working for Agency Management Systems until 1977 when heUniversity. He joined Bosworth & Associates in 1977 as an Independent Insurance Agent and Risk Manager. Mr. Bosworth is aHe has attained Certified Insurance Counselor, Certified Work Compensation Advisor and Accredited Advisor of Insurance.Insurance certificates and has extensive experience in Risk Management. Mr. Bosworth has served as the presidentPresident and CEO of Bosworth & Associates since 1987 and serves as the president of the Board of the Independent Insurance Agents of Tyler as well as a past member of the Board of the Independent Insurance Agents of Texas.1987. He is currently on the Board and Executive Committee of Combined Agents of America, President of the board of TMF Covenant Corporation, and is a member of the board of directors of Willow Brook Country Club. Mr. Bosworth and his wife Susan are members of Christ Episcopal Church where he has served on the Vestry as the Senior Warden. Mr. BosworthWarden and chairman of the Endowment Committee. In addition to his current board commitments, he has also served on the following boards: East Texas Communities Foundation, Tyler Economic Development Council, East Texas Communities Foundation, All Saints Episcopal School, American Red Cross of Smith County, Children's Village, Independent Insurance Agents of Tyler and Willow Brook Country Club.the Independent Insurance Agents of Texas. Mr. Bosworth's extensive insurance industry knowledge and experience, as well as his leadership and risk management skills, qualify him to be a member of the Board. | 2017 |
SHANNON DACUS (53) – Ms. Dacus is President and owner of the Dacus Firm, a minority and female-owned business in Tyler, Texas. She has been a licensed and practicing attorney since 1994, with a focus on business litigation. She currently serves as the vice president of both the CHRISTUS Northeast Texas and the Bethesda Health Clinic boards of directors. She also serves on the boards of the Tyler Area Chamber of Commerce and Hospice of East Texas and is the immediate past-chair of the Texas Bar Foundation Board of Trustees. She also served on the board of an East Texas bank for over 4 years, where she served as a member of the Audit Committee and Chair of the Risk and Compliance Committee. Ms. Dacus holds the distinction of being the first Hispanic female to chair the boards of the East Texas Communities Foundation, the Texas Bar Foundation and the Tyler Economic Development Council, among others. She has received numerous honors including Professional of the Year from the Hispanic Business Alliance, the Legacy of Service Award from Women in Tyler, and the Award of Excellence from the Smith County Bar Association. Ms. Dacus' extensive legal background, as well as business management and leadership skills, qualify her to be a member of the Board. | |
ALTON L. FRAILEY (60) – Mr. Frailey is President of Alton L. Frailey & Associates, LLC, specializing in leadership development, community engagement, school board team building, and executive coaching. Mr. Frailey earned his bachelor’s degree in Elementary Education and master’s degree in Educational Administration from Stephen F. Austin State University. He received his superintendent certification from the University of Texas at Tyler. Mr. Frailey has been involved in education for 35 years, serving most recently as the past superintendent for Katy Independent School District, as well as one other district in Texas and one in Ohio. Mr. Frailey served as past chair of the Stephen F. Austin State University Board of Regents, president of the American Association of School Administrators, the Texas Association of School Administrators, and the Urban Superintendents Association of America, as well as chairman of the University Interscholastic League Legislative Council. He served on the boards of directors for the Katy Area Chamber of Commerce, Katy Area Economic Development Council, Junior Achievement of Southeast Texas, West Houston Association and The Bible Seminary. Mr. Frailey has received numerous honors and awards including Texas Music Educators Association Distinguished Administrator, Region 4 Administrator of the Year, Who’s Who in Executives and Professionals, and the Trailblazer Award by South Dallas Business and Professional Women’s Club, Inc. Mr. Frailey's extensive executive experience and knowledge of leadership development, qualify him to be a member of the Board. | |
LEE R. GIBSON, CPA (62)(65) – Mr. Gibson has served as President and Chief Executive Officer (“CEO”) of the Company since January 2017. He has served as President of the Company since December 2015 and as an executive and Chief Financial Officer (“CFO”) of the Company since 2000.from 2000 to 2015. He joined Southside Bank in 1984 and is also a director of Southside Bank. He currently serves as a Director and member& Chair of the Investment Committee offor the Tyler Junior College Foundation, serves as a Director and serves on the finance committeeExecutive Committee Member of the Tyler Economic Development Council.Council and serves as a Board member of the R.W. Fair Foundation and Bethesda Health Clinic. He previously served as Chairman of the Board of Directors of the Federal Home Loan Bank of Dallas for six years and Council of Federal Home Loan Banks for two years. Mr. Gibson has over 3035 years of banking experience, has served on the Board of Southside Bank since 1999, is a CPA and has extensive financial knowledge, which qualify him to be a member of the Board. | 2015 |
GEORGE H. (TREY) HENDERSON, III (60)(63) – Mr. Henderson is the owner of Henderson Mineral, Inc. and a graduate of Texas A&M University with a bachelor's degree of Science in Agricultural Economics. Mr. Henderson currently serves on the Board of Directors for Brookshire Brothers, Overseas Hardwood Company, the Pineywoods Foundation and the George H. Henderson, Jr. Expo Center, and as trustee for the Texas Forestry Association Legislative Board.A&M University 12th Man Foundation. He has worked closely with the Lufkin/Angelina Economic Development Board to bring new businesses to Angelina County. He previously served on the boardBoard of directorsDirectors for First Bank & Trust East Texas. Mr. Henderson has been a member of the Southside Bank board of directors since December 7, 2017. Mr. Henderson's extensive business management and leadership experience, as well as knowledge of the agriculture industry, qualify him to be a member of the Board. | 2018 |
DONALD W. THEDFORD (69)(72) – Mr. Thedford has been the owner and President of Don’s TV & Appliance, Inc., a home appliance and electronics store, since 1979. He is a member of the National Appliance Retail Dealers Association and the BrandSourceNationwide Marketing Group. Mr. Thedford currently serves as a board member of the Smith County Sheriff's Foundation, Shepherd’s Heart Ministry and has previously served on the Board of Directors of the Tyler Area Chamber of Commerce, Better Business Bureau of East Texas, Retail Dealers Association and The Salvation Army. Mr. Thedford’s management and leadership skills operating his business for over 3940 years, combined with his overall knowledge of business and finance, qualify him to be a member of the Board. | 2009 |
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Southside Bancshares, Inc.| 2022 Proxy Statement | 5
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DIRECTORS CONTINUING UNTIL THE 20212024 ANNUAL MEETING | |
S. ELAINE ANDERSON, CPA (66)(69) – Ms. Anderson has a BBA with a major in accounting from Indiana University and has been a licensed CPA since 1976. She served as a director of OmniAmerican Bancorp, Inc. (“OmniAmerican”("OmniAmerican") from 1996 to December 17, 2014 and as independent Chairperson of the Board from May 2010 to December 17, 2014, when OmniAmerican was acquired by the Company. She served for 24 years with Texas Health Resources as Senior Vice President and Chief Compliance Officer prior to retiring in January 2016. In that role, she had responsibilities for compliance, privacy, information security and enterprise risk management. Texas Health Resources is one of the largest nonprofit healthcare systems in the U.S. Her prior professional experience includes serving in various positions with the international accounting firm, PricewaterhouseCoopers from 1980 to 1991. Ms. Anderson currently serves as the Treasurer for Arborlawn United Methodist Church Foundation. Her memberships have included the American Institute of Certified Public Accountants, the Texas Society of Certified Public Accountants and the Health Care Compliance Association. Ms. Anderson's public accounting experience, understanding of financial statements and experience as the Chief Compliance Officer for a large healthcare system qualify her to be a member of the Board. | 2014 |
HERBERT C. BUIE (88)(91) – Mr. Buie has beenwas Chief Executive Officer of Tyler Packing Corporation, Inc., a meat-processing firm, since 1955.from 1955 to 2020. He serves on the Board of Directors of the University of Texas Health Science Center at Tyler, the Development Board of Directors of the University of Texas at Tyler, The Salvation Army, Tyler Economic Development Council and the University of Texas at Tyler Foundation and theFoundation. He serves as Director Emeritus for The Salvation Army, East Texas State Fair.Fair and All Saints Episcopal School. 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 non-profit and other boards, including this Board since 1988, qualify him to be a member of the Board. | 1988 |
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PATRICIA A. CALLAN (60)(63) – Ms. Callan is a principal of Callan Consulting, which has provided sales management, insurance, managed care and healthcare related consulting services in the Dallas/Fort Worth area since 2001. She previously held executive management positions in Texas and Kentucky for regional and national insurance companies and owned an independent insurance agency in Lexington, Kentucky. She also served on the Board of Directors of OmniAmerican from 2006 to December 17, 2014, when OmniAmerican was acquired by the Company. Ms. Callan holds a Texas General Lines License. Ms. Callan's extensive business management and leadership experience qualify her to be a member of the Board. | 2014 |
JOHN R. (BOB) GARRETT (65)(68) – Mr. Garrett is a residential and commercial real estate developer and has served as the President of Fair Oil Company, a Tyler based oil and gas exploration and production company, since 2002. 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 and a member of the University of Texas Health Science Center at Tyler Development Board.Board and the UT Tyler School of Medicine Steering Committee. He is a director of T.B. Butler Publishing, Inc. and a directorformer Chairman of the Meadows Mental Health Policy Institute.Board of Regents at Stephen F. Austin State University. He is a past president of both the Tyler Area Builders Association and the Texas Association of Builders. 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. | 2009 |
TONY K. MORGAN, CPA (69)(72) – Mr. Morgan is a founding partner ofCertified Public Accountant, and retired on January 1, 2021 from Gollob Morgan Peddy P.C., an East Texas public accounting firm.firm in which he was a founding partner. He began his career as an accounting professional in 1972 and now specializesspecialized in Business Valuation and Litigation Support. HeIn addition to being a CPA, he is a CPA,also accredited in Business Valuation and certified in Financial Forensics. Mr. Morgan is a graduate of Stephen F. Austin State University and has served in various community service roles for organizations including East Texas Communities Foundation, Tyler Salvation Army Board, Children's Village, and the East Texas Area Council and Boy Scouts of America. Mr. Morgan's extensive financial background, including being a founding partner of an accounting firm, qualifies him to be a member of the Board. | 2017 |
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Southside Bancshares, Inc.| 2022 Proxy Statement | 6
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DIRECTORS CONTINUING UNTIL THE 20202023 ANNUAL MEETING | |
LAWRENCE ANDERSON, M.D. (62)(65) – Dr. Anderson was the founder of Dermatology Associates of Tyler and served as the medical director from 1996 to 2012. He then served in the same roleas Chief Medical Officer for Oliver Street Dermatology from 2012 to 2016. He is currently2016 and in the Chief Medical Officer and serves on the Board of Derm Growthsame role for US Dermatology Partners a single specialty dermatology group with over 200 medical providers in nine states.until 2019. He is a graduate of Washington State University and Uniformed Services University of Health Sciences in Bethesda, Maryland. He is the Chairman of the University of Texas at Tyler Foundation Board and a published author with a number of publications, presentations and lectures to his credit. Dr. Anderson’s management, leadership skills and healthcare industry knowledge, combined with his knowledge of business and finance, qualify him to be a member of the Board. | 2010 |
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MELVIN B. LOVELADY, CPA (82)(85) – Mr. Lovelady has a BBA with a major in accounting, has been a licensed CPA since 1967, 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. 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 CPA. He is a member of the Board of Directors of the Tyler Junior College Foundation,Hospice of East Texas and the Hospice of East Texas Foundation, as well as a life member of the Alzheimer's AllianceSalvation Army Advisory Board of Smith CountyTyler, Texas and a Trustee of the R. W. Fair Foundation. Mr. Lovelady is 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. | 2005 |
JOHN F. SAMMONS, JR. (69)(72) – Mr. Sammons is the current Chairman and Chief Executive Officer of Mid States Services, Inc., a nationwide distributor of products and services to the corrections industry. He is also the owner of Temple Supply Company with investments in various non-public businesses related to sales to the convenience store industry. Mr. Sammons enjoyed an extensive public service career serving as mayor of Temple, Texas and also served on the Board of the Texas Department of Commerce among numerous other state and national appointments. He was Vice Chairman of the Board of Directors of OmniAmerican from 2009 until December 17, 2014, when OmniAmerican was acquired by the Company. Mr. Sammons' extensive business management background, knowledge of business and finance and skills leading numerous endeavors over 40 years qualify him to be a member of the Board. | 2017 |
H. J. SHANDS, III (63)(66) – Mr. Shands currently servesretired on April 30, 2020 as Southside Regional President, East Texas, having joined the bank as a result ofrole he held since the acquisition of Diboll State Bancshares, Inc. by the Company on November 30, 2017. He is Chairman of the Board of Directors of Balcones Resources, Inc., and is Trustee for the T.L.L.Temple Foundation, the I.D. & Marguerite Fairchild Foundation and Angelina College. He previously served as President and CEO of First Bank & Trust East Texas for 26 years and was Treasurer of Temple Inland Inc., a major manufacturer of corrugated packing and building products, with diversified banking and financial services operations. Mr. Shands served as Vice Chairman of the Finance Commission of Texas where he represented the banking industry for 8 years. He is a Trustee for the T.L.L. Temple Foundation, the I.D. and the Marguerite Fairchild Foundation. He is currently a director for Contractor's Supply Inc. He also served on the Board of Directors and was Past Chairman for CHI Memorial Health Center of East Texas, City of Lufkin 4B Economic Development and First Bank of Conroe, N.A. Mr. Shands' over 40 years of Bankingbanking experience, leadership, business development and management skills qualify him to be a member of the Board. | 2017 |
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WILLIAM SHEEHY (78)(81) – Mr. Sheehy retired on December 31, 2006 as senior partner of the law firm of Wilson, Sheehy, Knowles, Robertson & Cornelius PC, where he had practiced law since 1971. Mr. Sheehy received his law license in 1964 and continuously practiced until his retirement. Mr. Sheehy’s practice was primarily in the area of banking and commercial law, as well as real estate. Within these areas, Mr. Sheehy has extensive experience in reorganizations, acquisitions and transactional events. As part of the banking practice, Mr. Sheehy has experience in loan structuring and collection issues. 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 retirementHis legal experience and has served on this Board since 1983, all of whichbanking expertise qualify him to be a member of the Board. | 1983 |
PRESTON L. SMITH (63)(66) – Mr. Smith has been the President and owner of PSI Production, Inc., a petroleum, exploration and production company since 1985. He is a member of the Independent Petroleum Association of America and served as Northeast Texas Representative to the Board of Directors from 1999 to 2005. Mr. Smith serves as General Partner for the Pineywoods Mitigation Bank and manager for Wildwood Environmental Credit Company.Company that serves as the conservation steward for over 40,000 acres of protected, high value ecosystems. Mr. Smith served on the Board of Trustees for All Saints Episcopal School of Tyler from 1994-2014,1994 to 2014, is Chairman of the Board of CHRISTUS Trinity Mother Frances Health System, and a member of the University of Texas at Tyler Engineering School Advisory Board and member of the Executive Committee of the University of Texas at Tyler Development Board. Mr. Smith’s management and leadership skills, combined with his knowledge of the oil and gas industry, emerging environmentenvironmental credit markets, and the health care industry qualify him to be a member of the Board. | 2009 |
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EXECUTIVE OFFICERS | |
TIM ALEXANDER (62)(65) – Mr. Alexander currently serves as the Chief Lending Officer (“CLO”) of the Company having joined Southside Bank in 2005 and is an advisory director of Southside Bank. Mr. Alexander is a graduate of the University of Texas at Austin with over 35 years of commercial lending experience. He currently serves as a Trustee on the BoardTreasurer of The Great Commission Foundation of theChrist Episcopal Diocese ofChurch in Tyler, Texas. | |
JIM D. ALFRED (63)(66) – Mr. Alfred currently serves as Regional President, Central Texas and joined Southside Bank in 2010. In this role, he is responsible for strategic planning, coordination, and implementation of lending operations in the Central Texas market. Mr. Alfred is a graduate of Texas Tech University with over 3334 years of commercial banking experience. He currently serves on the Governing Board of Make-A-Wish Foundation of Central & South Texas and is a member of the Real Estate Council of Austin and Austin Homebuilders Association. | |
T. L. ARNOLD, JR. (55)(58) – Mr. Arnold currently serves as Senior Executive Vice President and Chief Credit Officer (“CCO”) of the Company and of Southside Bank, as well as advisory director of Southside Bank. He previously served as Executive Vice President and Senior Credit officer of Southside Bank from December 2014 until March 2019. He joined Southside Bank in December 2014, upon the acquisition of OmniAmerican Bank, where he served as Senior Executive Vice President and Chief Credit Officer. Mr. Arnold is a graduate of The University of Texas at Arlington and has over 30 years35 years' experience in the banking and financial services industry. He serves onas President of the Board of Directors for William Mann Community Development Corporation and is actively involved in Meals on Wheels of Tarrant County. |
SUNI DAVIS, CPA (46) – Ms. Davis currently serves as Chief Risk Officer (“CRO”) of the Company and Southside Bank. Ms. Davis obtained her BBA degrees in Finance and Accounting from the University of Texas at Tyler. She joined Southside Bank in 1999 and is responsible for funds management, liquidity and interest rate risk, as well as enterprise risk. Ms. Davis is a member of the audit and risk council of the Financial Managers Society and is the Treasurer of the Financial Managers Society Dallas Chapter. Ms. Davis 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. |
MARK W. DRENNAN (45)(48) – Mr. Drennan currently serves as Regional President, North Texas, having joined the bankSouthside Bank in January 2017. In this role, he is responsible for strategic planning, coordination, and implementation of banklending operations in the North Texas market.market, as well as the Houston Market. Mr. Drennan is a graduate of Texas Tech University with both a BBA and MBA and has over 1822 years of commercial bankbanking experience. Mr. Drennan also graduated from the Stonier National Graduate School of Banking at the University of Pennsylvania. Mr. Drennan previously served as Board Chair of Leadership Fort Worth and on the Board of Directors for the YMCA of Metropolitan Fort Worth. He is also involved with the Real Estate Council of Greater Fort Worth, Fort Worth Chamber of Commerce and Fort Worth Sister Cities International. |
JARED GREEN (41) – Mr. Green currently serves as Regional President, East Texas and joined Southside Bank in 2013. In this role, he is responsible for strategic planning, coordination and implementation of lending operations in the East and Southeast Texas markets. Mr. Green obtained his BBA from Baylor University and his Masters in Finance from The University of Texas at Dallas. He has over 17 years of commercial banking experience. Mr. Green currently serves as a member of the Board of Trustees of The Brook Hill School. |
BRIAN K. MCCABE (58)(61) – Mr. McCabe currently serves as Senior Executive Vice President and Chief Operations Officer of the Company and Southside Bank. He previously served as Executive Vice President of the Company from 2014 until June 2017. He is also an advisory director of Southside Bank. He joined Southside Bank in 1983, and since that time has managed differentvarious operational and electronic banking areas. Mr. McCabe is a graduate of Stephen F. Austin State University, with a degree in Business Data Processing and a minor in finance, and the Southwest Graduate School of Banking. He currently serves on the Boards of East Texas Lighthouse for the Blind and CHRISTUS Trinity Mother Frances Foundation. Mr. McCabe has previously served on the Board of Directors of the Tyler Area Chamber of Commerce, United Way of Smith County and Smith County American Red Cross. | |
JULIE N. SHAMBURGER, CPA (56)(59) – Ms. Shamburger currently serves as Senior Executive Vice President and Chief Financial Officer (“CFO”) of the Company and Southside Bank. She is also an advisory director of Southside Bank. Ms. Shamburger served as Executive Vice President and Chief Accounting Officer from 2011 until April 2016. Ms. Shamburger joined Southside Bank in 1982 and has over 3536 years of accounting experience. Ms. Shamburger is a graduate of the University of Texas at Tyler. Ms. Shamburger provides oversight to the Bank's risk program, fund management and investor relations. She is also responsible for the oversight of regulatory and SEC reporting as well as the daily accounting practices of the Company and Southside Bank. Ms. Shamburger currently serves on the Board of Directors of CASA for Kids of East Texas. Ms. Shamburger 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. |
Southside Bancshares, Inc.| 2022 Proxy Statement | 8
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE |
Southside is committed to operating our business responsibly, and believes our business, shareholders, communities and employees benefit from our commitment to environmental, social and governance (“ESG”) best practices. Highlights of our ESG efforts include:
We are committed to reducing our environmental impact, as we recognize that being a good steward of natural resources is essential to protect and sustain our environment for those we serve and future generations.
Our environmental impact is reduced through several efforts including:
•The use of eStatements and eNotices, approximately 57% of statements and notices were sent electronically as of December 31, 2021;
•An increase in the utilization of digital banking, with customer enrollment up 43% in 2021, compared to 2020;
•We participate in electronic recycling. In 2021, we recycled certain electronic items including; computers, hard drives, servers and printers; and
•During 2021, we implemented the following in our remodels and facility updates where possible: energy efficient windows, LED and smart lighting, low-flow faucets for water conservation, irrigation timers, low maintenance vegetation, spray foam insulation and higher efficiency HVAC, as units were replaced.
We have engaged a third-party to assist in a climate vulnerability assessment, as we work to understand the impact of climate risk on the Bank and our portfolios.
Community
We have a rich history of community involvement and take great pride in serving the communities in which we operate. Our commitment to these communities is reflected through charitable contributions, community service, financial education programs and community development initiatives.
•Community Impact
◦Earned an “Outstanding” rating issued by the Federal Deposit Insurance Corporation with the Community Reinvestment Act (“CRA”) for the 2021 examination, this marks the 8th consecutive “Outstanding” rating for Southside. Since 2000, a total of 13 “Outstanding” ratings have been issued to Large Banks headquartered in Texas, with more than half of the “Outstanding” ratings being issued to Southside;
◦Approximately $790,000 in donations and over 3,000 employee volunteer hours benefiting more than 150 organizations in the communities we serve in 2021;
◦Approximately $482 million in Community Development loans originated in 2021, consisting of Economic Development of $204.1 million, Affordable Housing of $163.4 million, Community Service of $80.8 million and Revitalization and Stabilization of $33.5 million; and
◦Partnered with the Federal Home Loan Bank of Dallas (“FHLB”) to provide a $300,000 Affordable Housing Program (“AHP”) grant to a local nonprofit housing organization. AHP funds are used to benefit households with incomes at or below 80% of the median income in the area. In 2021, we processed 13 rehab projects with AHP funds.
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•Community Education
◦Financial Literacy Sessions with Local Community College – We conduct financial literacy sessions with a local community college throughout the year. During 2021, we reached approximately 350 students through this initiative;
◦Approximately 453 volunteer hours during 2021 for education and financial literacy initiatives; and
◦Community Mortgage Loan Program – A mortgage loan program for low- and moderate-income (“LMI”) individuals. The program allows a loan-to-value up to 100% and a higher than normal debt-to-income. This program helps LMI individuals throughout the Bank’s assessment areas achieve the dream of owning a home.
Employees
Employees are our greatest asset and the success of our business depends on our team and our ability to attract, retain and develop employees. We are committed to creating a diverse and inclusive workforce and are focused on the well-being and professional development of our employees through our many corporate development initiatives.
•Recognized as the best bank to work for in Texas by Bank Director, in their 2021 Ranking Banking study;
•Women and ethnic minorities represent approximately 69% and 36% of our workforce, respectively;
•We have a designated training department and maintain extensive training programs from entry-level to manager-level. All employees, including management, are required to complete the following courses annually: Information and Cybersecurity, Business Continuity Plan, Confidential Information, Bank Secrecy Act (Anti-Money Laundering), Fairness in Lending, Fair Service, Information Security, OFAC Compliance Basics, Elder Abuse and the Community Reinvestment Act. During 2021, employees completed approximately 29,000 hours of training, including over 9,000 hours of personal development and 3,400 hours of compliance training;
•Our corporate mentor program pairs participating employees with a manager or executive level mentor. The program has been successful in facilitating professional development of our employees;
•We are investing in our employees through the engagement of a development coach. This initiative is company-wide and is focused on personal and professional growth of all employees;
•In 2021, we focused on the health and wellness of our employees through several company-wide efforts including: a virtual health and wellness fair, the introduction of a wellness program that allows employees to earn cash rewards, as well as wellness communications and webinars throughout the year;
•The “Southside Serves” volunteer program allows full-time employees to volunteer up to 20 hours of paid time off (“PTO”) each year with an approved organization of their choice. We believe this program not only strengthens our employees and communities but also reflects our strong corporate culture;
•We offer a broad range of benefits including, but not limited to, 15-30 days of annual PTO based on length of employment, sick leave, participation in our Employee Stock Ownership Plan (“ESOP”) and educational reimbursement;
•We offer competitive compensation and benefits and are committed to a fair or living wage for all employees; and
•We have an online reporting system available to employees for confidential reporting of any issues or concerns. During 2021, no issues or concerns were reported.
Cyber Security
During 2021, we appointed a Chief Information Security Officer, who reports directly to the CRO, and segregated the Information Security Department (the “Department”), which was previously within the IT Department. The Department serves to protect the security and confidentiality of customer information, protect against any threats or hazards to the security or integrity of Company information and protect against unauthorized access to, or use of, such information that could result in substantial harm or inconvenience to our customers. During 2021, the Department facilitated a Cyber Security awareness month, in which employees completed training sessions and interactive games on information security best practices including: strong passwords, security awareness, mobile device security, social media and reporting incidents. Over 12,500 sessions were completed during the month. In addition, the Department also conducted information security awareness training throughout the year, with over 4,700 sessions completed during 2021.
Human Rights
Southside values and respects individual human rights and is committed to operating our company in an environment where everyone is treated with dignity and respect. Everyone will be treated without discrimination or harassment based on race, color, religion, gender, sexual orientation, gender identity, national origin, age, veteran status or disability. These same standards apply to our interactions with employees, customers and others with whom we do business, including vendors, contractors and subcontractors. Our Human Rights Statement is available on the Company’s website, https://investors.southside.com, under the topic Governance Documents.
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We believe good governance practices and decision making are the foundation of operating responsibly and necessary for creating long-term shareholder value.
◦Recognized as the best board in Texas by Bank Director, in their 2021 Ranking Banking study;
◦Diversity of our Board continues to be a key priority. Over the past two years, we have increased our Board diversity, with the election of Shannon Dacus in 2020 and the appointment of Alton L. Frailey in 2022;
◦The Board has a policy regarding term limits, which requires Board members to retire on the date of the next Annual Meeting of Shareholders following their 75th birthday. Current Board members who reached the age of 75 prior to February 1, 2020 had the opportunity to stand for re-election for one final term following the end of their current term. We believe this is a best practice for Corporate Governance and will assist with Board refreshment;
◦In 2021, Board members attended trainings on banking and current events in the industry. All directors completed Bank Secrecy Act/Fair Lending training. Directors also attended trainings on ESG, compensation and talent, corporate governance matters, compliance, accounting and bank strategies; and
◦The Board performs a self-assessment annually. Each director performs an assessment on individual performance as well as performance of the board as a whole, including evaluating contributions, strengths and weaknesses. For 2021, the assessment topics included leadership, technology, use of third parties, professional development, enterprise risk management, independence, succession planning, diversity and ESG.
See our Corporate Governance Guidelines on our investor relations website and the discussion below for further information about our Governance Practices.
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Board Leadership Structure
Our Board functions in a collaborative fashion that emphasizes active participation by all of its members. Our business is conducted day-to-day by our officers, under the direction of our CEO and President, Lee R. Gibson, with oversight from the Board, to enhance the long-term value of the Company for its shareholders. Mr. Gibson also serves as a member of the Board, which enables him to communicate the Board's strategic findings and guidance to management. Our Board determines who to appoint as our Chairman based on the knowledge and experience of the peoplemembers then serving on our Board and chooses the person whom it believes best meets the needs of the Company. Based on these factors in 2018, the Board selected John R. (Bob) Garrett to serve as Chairman effective immediately following the 2018 Annual Meeting. Mr. Garrett previously served as Vice Chairman from January 1, 2015 until his selection as Chairman. Mr. Garrett has served on various board committees for the Company and for Southside Bank and has proven to be an integral part of the Board since his election in 2009. The Board selected Donald W. Thedford to serve as Vice Chairman effective immediately following the 2018 Annual Meeting. Mr. Thedford has been on the Board since 2009 and has served on various board committees for both the Company and Southside Bank. Both the Chairman and the Vice Chairman are independent directors and serve as ex-officio nonvoting members of the Audit, Corporate Governance and Nominating, Compensation, Risk, and Information Technology,IT, Digital Banking and Innovation Committees.
Board Oversight of Risk
The Board 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 an important part of its responsibility 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, primarily through the Board's Audit and Risk Committees. 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 Risk Committee assists the Board in fulfilling its responsibility for overseeing and improving the Company's enterprise-wide risk management practices, which includes overseeingensuring that the executive team has identified and assessed the key risks the Company faces and has established a risk management infrastructure capable of addressing those risks. 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 Information Technology, Digital Banking and Innovation Committee is responsible for the oversight of technology risk, which includes cybersecurity. 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 strategic reviews on a Company-wide basis.
In addition to periodic reports from the Audit, Risk, Compensation, and Information Technology,IT, Digital Banking and Innovation Committees about the risks over which they have oversight, the Board receives presentations throughout the year from management that include discussions of significant risks specific to the Company and the banking industry. Periodically, at Board meetings, management discusses matters of particular importance or concern, including any significant areas of risk requiring Board attention. We believe our risk oversight structure is also supported by our current Board leadership structure, with the Chairman of the Board working together with the independent Audit Committee and other standing committees.
Independent Directors
The Company’s common stock is listed on the NASDAQ Global Select Market under the symbol “SBSI.” NASDAQ listing rules require a majority of our directors to be “independent directors,” as defined in the NASDAQ listing rules. The Board has affirmatively determined that all of the Company’s directors, other than Lee R. Gibson and H. J. Shands, III, are independent directors under the NASDAQ listing rules. Each member of the Board’s Audit, Corporate Governance and Nominating and Compensation Committees qualifies as an independent director, and all other Board committees are comprised of a majority of independent directors. All Board committees are chaired by independent directors.
Shareholder Communication with the Board of Directors
The Company has adopted a procedure by which shareholders may send communications to one or more members of the Board by writing to such director(s) or to the Board as a whole in care of the Corporate Secretary, Southside Bancshares, Inc., 1201 South Beckham Avenue, Tyler, Texas 75701. Any such communications will be promptly distributed by the Corporate Secretary to such individual director(s) or to all directors if addressed to the Board as a whole.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics (the “Code”) applicable to all directors, officers and executive officersemployees of the Company.Company and its subsidiaries. The Code of Ethics is available on the Company’s website, http:https://investors.southside.com, under the topic Governance Documents. 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 ourthe Code of Ethics and any waiver applicable to any of our directors, executive officers or senior financial officers. We include our website address throughout this filing only as textual references. The information contained on our website is not incorporated in this proxy statement by reference.
Procedures for Reporting Concerns aboutincluding Accounting, Internal Accounting Controls or Auditing Matters
Management of the Company has established a Whistle Blower Policy. ThisPolicy, which includes an online reporting system as well as a toll-free, 24-hour, seven-day-a-week fraud hotline.available for reporting 24-hours, seven-days-a-week. This is a confidential service by which officers and employees can report to an independent company any issues or concerns, including human resource matters, or any questionable accounting or auditing
Southside Bancshares, Inc.| 2022 Proxy Statement | 12
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 maintainingmaintenance 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. AnyHuman resource complaints received byare reported directly to the independent company will beHuman Resource Director; all other complaints are reported directly to the Chairman of the Audit Committee and to the Chief Audit Executive of the Company. ComplaintsCompany, and will be reviewed by Internal Audit under the direction of the Audit Committee. ComplaintsAll complaints submitted will be promptly investigated and appropriate corrective action will be taken, as warranted by the investigation. Management is committed to complying with all applicable securities laws and regulations and, therefore, encourages officers and employees to raise concerns regarding any suspected violations of those standardsissues or concerns by using the fraud hotline.online reporting system.
Anti-Hedging and Anti-Pledging Policy
The Company maintains an anti-hedging and anti-pledging policy, which prohibits executive officers, directors and employees who receive equity grants from (1) directly or indirectly engaging in any hedging or monetization transactions, such as exchange funds, prepaid variable forward contracts, equity swaps, puts, calls, collars, forward sale contracts and other derivative instruments, through transactions in the Company’s securities or through the use of financial instruments designed for such purpose, (2) engaging in short sale transactions in the Company’s securities or (3) pledging the Company’s securities as collateral for a loan, including through the use of traditional margin accounts with a broker.
The Company maintains this policy becauseto prevent the appearance of a person trading based on inside information, as hedging transactions which might be considered short-term bets onand a margin sale or foreclosure sale could occur at a time when the pricepledger is aware of the Company’s securities, could create the appearance that the person isnonpublic information or during a blackout trading based on inside information.period. In addition, transactions in options may also focus the person’s attention on short-term performance at the expense of the Company's long-term objectives. Finally, the Company maintains this policy because a margin sale or foreclosure sale may occur at a time when the pledger is aware of material nonpublic information or otherwise is not permitted to trade in the Company’s securities and the margin sale or foreclosure sale of the Company’s securities during such time could also create the appearance that the person is trading based on inside information.
Board of Directors Meeting Attendance
The Board of Directors and its committees held the following number of meetings during the fiscal year ended December 31, 2018:
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|
| | | | | | | | | | | | | |
| | Number of Meetings Held in 2018 |
Board | | 19 |
Audit Committee | | 16 |
Nominating Committee | | 3 |
Compensation Committee | | 5 |
Risk Committee | | 4 |
Information Technology, Digital Banking and Innovation Committee | | 4BOARD COMMITTEES |
During 2018, each of our directors attended at least 75% of the aggregate of (1) the total number of meetings of the Board (held during the period for which he or she served as a director) and (2) the total number of meetings held by all committees of the Board on which he or she served (during the periods that he or she served). All of the Company’s directors were in attendance at the Company’s 2018 Annual Meeting except Joe Norton, who retired upon the expiration of his term at the 2018 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.
Southside Bancshares, Inc. Board Committees
The Board has five standing committees:
•Audit Committee;
Nominating Committee;
•Compensation Committee;
Risk Committee; and
Information Technology,•IT, Digital Banking and Innovation Committee;
•Corporate Governance and Nominating Committee; and
•Risk Committee.
Each of the Committees of the Company's Board have a formal written charter, which can be found on the Company’s website, https://investors.southside.com, under the topic Governance Documents.
Southside Bank Board Committees
The board of directors of Southside Bank Board has five standing committees:
•Executive Committee;
•Loan/Discount Committee;
•Trust Committee;
•Compliance/IT/CRA Committee; and
•Investment/Asset-Liability Committee.Committee (ALCO).
The following table presents the compositions of the Committees of both the Company's Board and the Southside Bank Board, as well as the number of meetings held, for the year ended December 31, 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Directors | Southside Bancshares, Inc. | Southside Bank |
Independent | Board | Committees | Board | Committees |
Audit | Compensation | IT, Digital Banking and Innovation | Corporate Governance and Nominating | Risk | Executive/ Loan and Discount | Trust | Compliance /IT CRA | ALCO |
Lawrence Anderson, M.D. | ü | ü | | ü | C | ü | | ü | ü | | | |
S. Elaine Anderson, CPA | ü | ü | ü | | | | C | ü | ü | | ü | ü |
Michael J. Bosworth | ü | ü | | | ü | | ü | ü | ü | ü | | |
Herbert C. Buie | ü | ü | | | | ü | | ü | ü | ü | | |
Patricia A. Callan | ü | ü | | C | ü | ü | | ü | ü | | | |
Shannon Dacus | ü | ü | | | | ü | ü | ü | ü | ü | | |
John R. (Bob) Garrett | ü | C | | | | | | C | C | | | |
Lee R. Gibson, CPA | | ü | | | | | | ü | ü | A | | A |
George H. (Trey) Henderson, III | ü | ü | | ü | | | ü | ü | ü | C | | |
Melvin B. Lovelady, CPA | ü | ü | ü | ü | | | | ü | ü | | ü | ü |
Tony K. Morgan, CPA | ü | ü | C | | ü | | | ü | ü | | C | ü |
John F. Sammons, Jr. | ü | ü | | ü | | ü | | ü | ü | ü | | |
H. J. Shands, III | | ü | | | ü | | ü | ü | ü | | | ü |
William Sheehy | ü | ü | ü | | | | ü | ü | ü | | ü | ü |
Preston L. Smith | ü | ü | ü | | ü | C | | ü | ü | | ü | ü |
Donald W. Thedford | ü | VC | | | | | | VC | ü | | | |
Meetings during 2021 | 15 | 15 | 8 | 4 | 5 | 4 | 13 | 50 | 12 | 12 | 12 |
| | | | | |
C | Chairman |
VC | Vice Chairman |
A | Advisory Member |
Southside Bancshares, Inc.| 2022 Proxy Statement | 14
Board of Directors Meeting Attendance
During 2021, each of our directors attended at least 75% of the aggregate of (1) the total number of meetings of the Board (held during the period for which he or she served as a director) and (2) the total number of meetings held by all committees of the Board on which he or she served (during the periods that he or she served). All of the Company’s directors were in attendance at the Company’s 2021 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.
These committees were formed to assist the boards of directors of the Company and Southside Bank in the discharge of their respective responsibilities. The purpose and composition of these committees areis described below.
COMMITTEES OF THE COMPANY
Audit Committee of Southside Bancshares, Inc.
The Audit Committee of the Board was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, or the Exchange Act,Act. The Corporate Governance and consists of six directors, Melvin B. Lovelady, CPA (Chairman), S. Elaine Anderson, CPA, Alton Cade, Tony K. Morgan, CPA, William Sheehy and Preston L. Smith. Each member of the Audit Committee is an independent director as defined by the current NASDAQ listing rules and applicable SEC rules and each of whom is also a director of Southside Bank. In addition, the Nominating Committee of the Board has unanimously determined that S. Elaine Anderson, CPA, Melvin B. Lovelady, CPA, and Tony K. Morgan, CPA, each qualify as an “audit committee financial expert” as defined by the SEC. The Corporate Governance and Nominating Committee of the Board has also 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 Company's independent registered certified public accounting firm, oversight of the Company’s financial statements and controls, assessing and ensuring the independence, qualifications and performances of the independent registered certified public accounting firm, approving the services and fees of the independent registered certified public accounting firm and reviewing and approving the annual audited financial statements of the Company before issuance, subject to the approval of the Board. The Audit Committee manages the Company’s relationship with its independent registered certified public accounting firm, who reportreports directly to the Audit Committee. The Audit Committee also monitors the internal audit function, internal accounting procedures and assures compliance with all appropriate statutes and regulations. 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 Audit Committee met 16 times during 2018.
Audit Committee Charter
The Board has adopted a formal written Audit Committee charter that outlines the purpose of the Audit Committee, sets forth the membership requirementsCorporate Governance and addresses the key responsibilities of the Audit Committee. A copy of the Audit Committee charter may be obtained at the Company’s website, http://investors.southside.com, under the topic Governance Documents.
Nominating Committee of Southside Bancshares, Inc.
The Corporate Governance and Nominating Committee is responsible for identifying, screening and recommending candidates for election to the Board. During 2018, the Committee was comprised of Preston L. Smith (Chairman), Herbert C. Buie, Melvin B. Lovelady, CPA, John F. Sammons, Jr.Board and William Sheehy, each of whom is an independent director of the Company, as defined by the current NASDAQ listing rules, and each of whom is also a director of Southside Bank. The Nominating Committee met three times in 2018.
Effective March 1, 2019, the Nominating Committee consists of Preston L. Smith (Chairman), Lawrence Anderson, M.D., Herbert C. Buie, Patricia A. Callan and John F. Sammons, Jr., 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 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 Corporate Governance and 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 Corporate Governance and 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 be better enhanced by the addition of one or more directors. In considering board of director candidates, the Corporate Governance and 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 Corporate Governance and 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 the Company's shareholders. A candidate should possess a working knowledge of the Company’s current local market areas. Additionally, the Corporate Governance and 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 Corporate Governance and 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.
The Corporate Governance and 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 Corporate Governance and Nominating Committee does not evaluate director candidates recommended by shareholders differently than director candidates recommended by other sources. Shareholders wishing to submit director candidate recommendations for the 20202023 Annual Meeting should write to the Corporate Governance and Nominating Committee in care of the 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 and the Corporate Governance and Nominating Committee charter. Our bylaws provide that proposals that comply with all rules and requirements of the SEC and are included in our proxy statement are deemeddeemed to comply with the advance notice procedures in our bylaws. RecommendationsShareholder director recommendations must be submitted to the Corporate Secretary on or before December 4, 2019,1, 2022, in order to be included
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in the proxy statement for the 20202023 Annual Meeting. See “Shareholder Proposals.” The Corporate Governance and Nominating Committee is not obligated to recommend any individual proposed by a shareholder as a
nominee for election to the Board. No shareholder recommendations 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 Corporate Governance and Nominating Committee is responsible for identifying, screening and recommending to the Board candidates to serve on the Compensation Committee, Audit Committee, Risk Committee and Information Technology,IT, Digital Banking and Innovation Committee. These recommendations are 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, sets forth 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, http://investors.southside.com, under the topic Governance Documents.
Compensation Committee of Southside Bancshares, Inc.
The Compensation Committee of the Board reviews the Company’s general compensation philosophy and oversees the development of compensation and benefit programs. The Compensation Committee recommends the compensation for the named executive officers of the Company, all of whom are executive officers of the Company and 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 named executive officers. Pursuant to its charter, the Compensation Committee may form and delegate authority and duties to subcommittees as it deems appropriate. Additional information regarding the Compensation Committee’s processes and procedures for consideration of executive compensation is provided in the Compensation Discussion and Analysis below.
During 2018, the Compensation Committee consisted of Patricia A. Callan (Chairman), Melvin B. Lovelady, CPA, John F. Sammons, Jr. and William Sheehy, each of whom is an independent director of the Company, as defined by the current NASDAQ listing rules, and director of Southside Bank. The Committee met five times in 2018.
Effective March 1, 2019, the Compensation Committee consists of Patricia A. Callan (Chairman), Lawrence Anderson, M.D., George H. (Trey) Henderson, III, Melvin B. Lovelady, CPA and John F. Sammons, Jr., each of whom is an independent director of the Company, as defined by the current NASDAQ listing rules, and a director of Southside Bank.
Compensation Committee Charter
The Board has adopted a formal written Compensation Committee charter which outlines the purpose of the Compensation Committee, sets forth 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, http://investors.southside.com, under the topic Governance Documents.
Risk Committee of Southside Bancshares, Inc.
The purpose of the Risk Committee is to assist the Board in fulfilling its oversight responsibilities with regard to the risk appetite of the Company, enterprise-wide risk management, compliance framework and the governance structure that supports it. The primary responsibility of the Risk Committee is to oversee and improve the company-wide risk management practices while assisting the Board by:
Overseeing•Ensuring that the executive team has identified and assessed the key risks the Company faces and has established a risk management infrastructure capable of addressing those risks;
•Overseeing, in conjunction with other Board-level committees or the full Board, if applicable, risks, such as strategic, financial, credit, liquidity, security, property, information technology,IT (including cyber security), legal, regulatory, reputational and other risks;
•Overseeing the division of risk-related responsibilities to each Board committee as clearly as possible and performing a gap analysis to determine the full oversight of any risks is not missed;all risks; and
•Approving, in conjunction with the full Board, the Company’s enterprise-wide risk management framework.
During 2018,In addition to the Risk Committee consisted of William Sheehy (Chairman), S. Elaine Anderson, CPA, Michael J. Bosworth and M. Richard Warner, each of whom is an independent director of the Company, as defined by the current NASDAQ listing rules, and a director of Southside Bank. AlsoCompany's Board members specified above, also serving on the committee is Suni Davis, Chief Risk Officer of the Company and Southside Bank. The Committee met four times in 2018.
Effective March 1, 2019, the Risk Committee consists of William Sheehy (Chairman), S. Elaine Anderson, CPA, Michael J. Bosworth, George H. (Trey) Henderson, III and M. Richard Warner, each of whom is an independent director of the Company, as defined by the current NASDAQ listing rules, and a director of Southside Bank. Also serving on the committee is Suni Davis, Chief Risk OfficerCRO of the Company and Southside Bank.
Risk Committee Charter
The Board has adopted a formal written Risk Committee charter that outlines the purpose of the Risk Committee, sets forth the membership requirements and addresses the key responsibilities of the Risk Committee. A copy of the Risk Committee charter may be found on the Company’s website, http://investors.southside.com, under the topic Governance Documents.
Information Technology,IT, Digital Banking and Innovation Committee of Southside Bancshares, Inc.
The purpose of the Information Technology,IT, Digital Banking and Innovation Committee is to assist the Board in fulfilling its oversight responsibilities with regard to information technology,IT, digital banking and innovation. Specific responsibilities of this committee are:
•Provide oversight on information technologyIT strategies and subjects related to digital innovation, digital banking strategies, products and business/information technology;IT;
•Review management reports and provide oversight of the implementation of major digital banking, technology innovation and business/information technologyIT projects and architecture decisions;
•Review the information technologyIT plan which demonstrates objectives and targets for digital banking, technology innovation and business/information technologyIT risks, proposals and acquisition processes; and
•Ensure the Company’s digital banking, digital innovation and business/information technologyIT programs effectively support its business objectives and strategies.
The Information Technology, Digital Banking and Innovation Committee consists of Larry Anderson, M.D. (Chairman), Patricia A. Callan and Preston L. Smith, each of whom is an independent director ofIn addition to the Company, as defined by the current NASDAQ listing rules, and a director of Southside Bank. AlsoCompany's Board members specified above, also serving on the Committeecommittee are bank officers Cindy Blackstone, Jason Cathey, an officer of Southside Bank, Daniel Sitton, Southside Bank's Director of Information Technology, andRamon Cocolan, Trent Dawson, Justin Hutcheson, Brian K. McCabe, Gordon Roberts, Leigh Anne Rozell and Lora Stockhammer.
Southside Bank's Chief Operations Officer and an advisory director of Southside Bank. The Committee met four times in 2018.Bancshares, Inc.| 2022 Proxy Statement | 16
Information Technology, Digital Banking and Innovation Committee Charter
The Board has adopted a formal written Information Technology, Digital Banking and Innovation Committee charter that outlines the purpose of the Committee, sets forth the meeting requirements, and addresses the key responsibilities of the Committee. A copy of the Information Technology, Digital Banking and Innovation Committee charter may be obtained at the Company’s website, http://investors.southside.com, under the topic Governance Documents
COMMITTEES OF SOUTHSIDE BANK
Executive Committee and Loan/Discount Committee of Southside Bank
The Executive Committee is authorized to act on behalf of the boardBoard of directors of Southside Bank between scheduled Board meetings, of the board, subject to certain limitations. The committee is comprised of John R. (Bob) Garrett (Chairman), Larry Anderson, M.D., S. Elaine Anderson, CPA, Michael J. Bosworth, Herbert C. Buie, Alton Cade, Patricia A. Callan, George H. (Trey) Henderson, III, Melvin B. Lovelady, CPA, Tony K. Morgan, CPA, John F. Sammons, Jr., William Sheehy, Preston L. Smith, Donald W. Thedford and M.Richard Warner, each of whom is a director of the Company and Southside Bank, Joe Norton, a director of Southside Bank, and John F. Walker, M.D., an advisory director of Southside Bank. None of the forgoing individuals are officers or employees of either the Company or Southside Bank. Also serving are Lee R. Gibson and H. J. Shands, III, each of whom is an officer and a director of the Company and Southside Bank and Earl W. (Bill) Clawater, III, an officer and an advisory director 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
In addition to the Loan/Discount CommitteeCompany's Board members specified above, also serving on the committee as an advisory director of Southside Bank met weekly to discharge responsibilities of both committees at combined meetings and met 50 times in 2018.is T. L. Arnold, Jr., Chief Credit Officer.
Trust Committee of Southside Bank
The Trust Committee of Southside Bank is responsible for the oversight of the operations and activities of the Wealth Management and Trust Department. During 2018,In addition to the Company's Board members specified above, also serving on this committee was comprised of Herbert C. Buie, Michael J. Bosworth, Alton Cade, Patricia A. Callanas advisory members are Julie N. Shamburger, Brian K. McCabe and George H. (Trey) Henderson, III, and effective March 1, 2019, the committee consists of Herbert C. Buie, Michael J. Bosworth, Alton Cade, George H. (Trey) Henderson, III and M. Richard Warner, each of whom is a director of the Company and Southside Bank. John F. Walker, M.D. is an advisory directorLonny Uzzell. Officers of Southside Bank and serves as an advisory member ofwho serve on the Trust Committee. Lee R. Gibson serves as an advisory member and is a director and officer of the Company and Southside Bank. Doug Bolles,committee include Ernest King and Kim Partin (Chair), officers of Southside Bank, also serve on this committee. Julie N. Shamburger and Brian K. McCabe are officers of the Company and officers and advisory directors of Southside Bank and are advisory members of the Trust Committee. Lonny Uzzell, an advisory director and officer of Southside Bank, is an advisory member of the Trust Committee. Michael J. Bosworth, Herbert C. Buie, Alton Cade, Patricia A. Callan, George H. (Trey) Henderson, III and John F. Walker, M.D. are not officers or employees of the Company or Southside Bank. The Trust Committee met twelve times in 2018..
Compliance, Information Technology (IT)IT and Community Reinvestment Act (CRA) Committee of Southside Bank
The Compliance/IT/CRA Committee of Southside Bank is responsible for ensuring compliance with all appropriate statutes and reviews information technologyIT and community reinvestment activities. The Compliance/IT/CRA Committee is comprised solely of persons who are directors of the Company and Southside Bank but who are not officers or employees. Those directors are Melvin B. Lovelady, CPA, (Chairman), S. Elaine Anderson, CPA, Alton Cade, Tony K. Morgan, CPA, William Sheehy and Preston L. Smith. The Compliance/IT/CRA Committee met twelve times in 2018.
Investment/Asset-Liability Committee (ALCO) 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. During 2018,In addition to the Company's Board members specified above, officers serving on this committee include Suni Davis (Chair), Julie N. Shamburger, Tim Alexander, T. L. Arnold, Jr., Peter Boyd, Kyle Gibson, Jared Green, Michael Phea, Amanda Reagan and Lonny Uzzell.
Southside Bancshares, Inc.| 2022 Proxy Statement | 17
DIRECTOR COMPENSATION PROGRAM
The Board adopted a Director Compensation Program (the “Program”) for compensating non-employee directors, effective as of the committee were Lawrence Anderson, M.D., S. Elaine Anderson, CPA, Herbert C. Buie, Melvin B. Lovelady, CPA, and Tony K. Morgan, CPA, and effective March 1, 2019,2020 Annual Meeting. Under the committee consistsProgram, non-employee directors are paid an annual retainer of S. Elaine Anderson, CPA, Melvin B. Lovelady, CPA, Tony K. Morgan, CPA, John Sammons, Jr. and William Sheehy, who are all directors$101,000, which is payable in quarterly installments, for each year of his or her service on the Board (each, a “Service Year”). Each Service Year commences on the date of the Company and Southside Bank. None of the forgoing individualsCompany’s Annual Meeting at which Board members are officerselected or employees ofappointed. Non-employee directors do not receive compensation for service on the Company or Southside Bank. Lee R. Gibson,Bank Boards.
In addition to the annual retainer, the following positions received an officeradditional retainer for 2021 as follows:
| | | | | |
Position | Additional Retainer |
Chairman | $48,500 |
Vice Chairman | $23,500 |
Audit Committee Chairman | $23,500 |
Compensation Committee Chairman | $5,000 |
Directors may elect to receive all or a specified portion of their annual cash retainer and directorany additional annual cash retainers in the form of restricted stock units (“RSUs”). The RSUs are granted on or about the first day of the CompanyService Year and Southside Bank, serveshave a value on the committee with Suni Davis (Chair), an officergrant date approximately equal to the amount of the Company and Southside Bank. Tim Alexander and Julie N. Shamburger, each officersannual cash retainer payment that he or she has elected to receive in the form of RSUs. The RSUs vest (become non-forfeitable) on the first anniversary of the Company and Southside Bank and advisory directors of Southside Bank, are also membersgrant date (or, if earlier, on the date of the committee. Also servingCompany’s Annual Meeting that occurs in the year immediately following the year of grant, in the event Grantee is not standing for re-election to the Board at such Annual Meeting) (with accelerated vesting on this committee are Peter Boyd, Earl W. (Bill) Clawater, III and Lonny Uzzell, officers and advisory directorsa pro rata basis in the event of Southside Bank. Kyle Gibson, Amanda Reagan, Jared Green, Michael Phea and Glen Greeney, eachdeath, disability or a change in control of whom is an officerthe Company). Directors may elect to receive shares of Southside Bank, also servecommon stock in settlement of their RSUs on the committee. The Investment/Asset-Liability Committee met twelve timesvesting date, or they may elect to defer the receipt of such shares and instead receive them on a specified anniversary of the grant date or upon termination of their service on the Board (subject, in 2018.each case, to earlier settlement upon a change in control of the Company).
2021 DIRECTOR COMPENSATION
During 2018,The table below summarizes the Company paid its Chairman ofcompensation earned by the Board $10,417 per month. The Vice Chairman ofCompany's directors for the Board and Chairman of the Audit Committee both received directors' fees of $8,333 per month and all remaining non-employee directors received directors' fees of $4,750 per month. In addition, non-employee directors, who are also directors of Southside Bank, were paid $1,000 per regular Southside Bank board meeting. During 2018, the Company and Southside Bank also paid non-employee directors a bonus of $10,000 and $1,500, respectively.
year ended December 31, 2021. Lee R. Gibson, the Company’s President and CEO, and H. J. Shands, III, East Texas Regional President, areis not included in the table below, as they are officershe is an officer of the Company, and thus received no compensation for theirhis service as directors of the Company or Southside Banka director during 2018. Both2021. Mr. Gibson's and Mr. Shands' compensation is shown in the Summary Compensation Table under Executive Compensation.
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Name | | Fees Earned or Paid in Cash ($) (1) | | | | All Other Compensation ($) | | Total ($) |
Lawrence Anderson, M.D. | | $ | 101,000 | | | | | $ | — | | | $ | 101,000 | |
S. Elaine Anderson, CPA | | 101,000 | | | | | — | | | 101,000 | |
Michael J. Bosworth (2) | | 101,000 | | | | | — | | | 101,000 | |
Herbert C. Buie | | 101,000 | | | | | — | | | 101,000 | |
Patricia A. Callan (3) | | 106,000 | | | | | — | | | 106,000 | |
Shannon Dacus (2) | | 101,000 | | | | | — | | | 101,000 | |
John R. (Bob) Garrett (2)(4) | | 149,500 | | | | | — | | | 149,500 | |
George H. (Trey) Henderson, III (2) | | 101,000 | | | | | — | | | 101,000 | |
Melvin B. Lovelady, CPA (5) | | 109,434 | | | | | — | | | 109,434 | |
Tony K. Morgan, CPA (2)(5) | | 116,066 | | | | | — | | | 116,066 | |
John F. Sammons, Jr. (2) | | 101,000 | | | | | — | | | 101,000 | |
H. J. Shands, III | | 101,000 | | | | | — | | | 101,000 | |
William Sheehy | | 101,000 | | | | | — | | | 101,000 | |
Preston L. Smith (2) | | 101,000 | | | | | — | | | 101,000 | |
Donald W. Thedford (6) | | 124,500 | | | | | — | | | 124,500 | |
(1)Amounts reflect fees earned by each non-employee director in 2021 and includes fees earned during 2021 in which directors elected to receive RSUs in lieu of cash. See table below. 2018 DIRECTOR COMPENSATION(2)Director elected to receive a portion of director fees in RSUs in lieu of cash. RSUs were granted on May 14, 2020 and May 12, 2021 based on the portion of fees elected to receive in RSUs for the applicable Service Year and the aggregate grant date fair
Southside Bancshares, Inc.| 2022 Proxy Statement | 18
market value, determined in accordance with FASB ASC Topic 718. The table below summarizes grants with fees forgone in 2021, or the compensation paidportion of grant value earned, during the fiscal year 2021.
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| | May 14, 2020 Grant | | May 12, 2021 Grant |
Name | | 2021 Fees Foregone ($) (a) | | RSUs Granted (#) (b) | | Total Fair Value of Grant ($) (c) | | Settlement Date (d) | | 2021 Fees Foregone ($) (a) | | RSUs Granted (#) (b) | | Total Fair Value of Grant ($) (c) | | Settlement Date (d) |
Michael J. Bosworth | | $ | 27,598 | | | 2,913 | | | $ | 75,738 | | | 5/14/2025 | | $ | 48,550 | | | 1,839 | | | $ | 75,730 | | | 5/12/2024 |
Shannon Dacus | | 14,713 | | | 1,553 | | | 40,378 | | | 5/14/2021 | | 25,899 | | | 981 | | | 40,398 | | | 5/12/2022 |
John R. (Bob) Garrett | | 8,167 | | | 862 | | | 22,412 | | | 5/14/2021 | | 14,362 | | | 544 | | | 22,402 | | | 5/12/2022 |
George H. (Trey) Henderson, III | | 18,398 | | | 1,942 | | | 50,492 | | | 5/14/2021 | | 32,367 | | | 1,226 | | | 50,487 | | | 5/12/2022 |
Tony K. Morgan, CPA | | 18,398 | | | 1,942 | | | 50,492 | | | 5/14/2025 | | 39,891 | | | 1,511 | | | 62,223 | | | 5/12/2026 |
John F. Sammons, Jr. | | 7,352 | | | 776 | | | 20,176 | | | 5/14/2025 | | — | | | — | | | — | | | — | |
Preston L. Smith | | 18,398 | | | 1,942 | | | 50,492 | | | 5/14/2021 | | 32,367 | | | 1,226 | | | 50,487 | | | 5/12/2022 |
(a)Amount included in the Fees Earned column in the 2021 Director Compensation Table, and reflects the portion of the annual cash retainer earned in 2021, which the director has elected to receive in RSUs and will be received in common shares on the settlement date.
(b)Total RSUs granted for the Service Year based on the annual cash retainer or additional cash retainer the director elected to receive in RSUs and the grant date fair market value, determined in accordance with FASB ASC Topic 718. Since a Service Year runs from the date of the Company’s Annual Meeting to the next Annual Meeting, and RSUs are granted on or about the first day of a Service Year, a portion of the May 14, 2020 grant reflects payment for service in calendar year 2020, and a portion of the May 12, 2021 grant reflects payment for service in calendar year 2022.
(c)Aggregate grant date fair market value, determined in accordance with FASB ASC Topic 718.
(d)Settlement date elected by the Company to directorsdirector, in which shares of common stock will be received in settlement of the RSUs.
(3)Compensation includes an additional retainer of $5,000 for serving as Compensation Committee Chairman.
(4)Compensation includes an additional retainer of $48,500 for serving as Chairman of the year ended December 31, 2018.Board.
(5)Compensation includes a pro-rated portion of an additional retainer of $23,500 for serving as Audit Committee Chairman. Melvin B. Lovelady served as the Audit Committee Chairman until the 2021 Annual Meeting; thereafter, Tony K. Morgan, CPA served as the Audit Committee Chairman. Accordingly, the retainer was pro-rated for each Chairman's service.
(6)Compensation includes an additional retainer of $23,500 for serving as Vice Chairman of the Board.
To help promote the alignment of the personal interests of the Company’s directors with the interests of our shareholders, in February 2014 the Company established a stock ownership policy for all non-employee directors. Under this policy, each non-employee director is required to own at least 5,000 shares of the Company’s common stock within five years after the date he or she is first elected as a director and maintain such ownership while serving on the Board. For new directors, the acquisition period is measured using the calendar year, with the director's five-year accumulation period beginning on January 1 of the year following their election. For directors elected prior to February 2014, the policy requires the acquisition of shares over five years by January 1, 2019. To the extent a director is not in compliance with the policy after the five-year accumulation period, any compensation paid to that director must be in the form of stock compensation and the director is required to retain 50% of these stock awards.
The following table sets forth information regarding beneficial ownership of our common stock as of March 21, 2019,23, 2022 for the following persons:
Unless otherwise indicated, the address of each of the named individuals is 1201 South Beckham Avenue, Tyler, Texas 75701.
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(12) | Mr. Sheehy has sole voting and investment power with respect to 131,819 shares owned individually and 18,996 shares in an individual retirement account. |
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(13) | Mr. Smith has joint voting and investment power with his wife with respect to 4,277 shares owned jointly and has sole voting and investment power with respect to 4,906 shares owned individually. Also included in the total are 1,430 shares owned by Mr. Smith's wife, of which he disclaims beneficial ownership. |
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(14) | Mr. Warner has joint voting and investment power with his wife with respect to 4,297 shares owned jointly and has sole voting and investment power with respect to 39,435 shares. Also included in the total are 161,798 shares owned by Mr. Warner's wife, of which he disclaims beneficial ownership. |
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(15) | Mr. Alexander has sole voting and investment power with respect to 2,161 shares owned individually. He also has sole voting power, but not investment power, with respect to 1,740 shares owned in the Company’s ESOP, in which he is 100% vested. Mr. Alexander owns 16,323 shares in an individual retirement account and has sole voting and investment power in these shares. Mr. Alexander is custodian for his grandchild for 18 shares, which are included in the total and disclaims beneficial ownership of these shares. Also included in the total are 5,025 shares subject to stock options that are exercisable within 60 days of the record date. |
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(16) | Mr. McCabe has sole voting and investment power with respect to 13,647 shares owned individually and has sole voting power, but not investment power, with respect to 10,852 shares owned in the Company's ESOP, in which he is 100% vested. Mr. McCabe owns 6,676 shares in an individual retirement account and has sole voting and investment power in these shares. Also included in the total are 11,383 shares subject to stock options that are exercisable within 60 days of the record date. |
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(17) | Ms. Shamburger has sole voting and investment power with respect to 13,165 shares owned individually. She also has sole voting power, but not investment power, with respect to 5,380 shares owned in the Company’s ESOP, in which she is 100% vested. Ms. Shamburger owns 3,660 shares in an individual retirement account and has sole voting and investment power in these shares. Included in the total are 3,250 shares owned by Ms. Shamburger's husband, of which she disclaims beneficial ownership. Also included in the total are 19,309 shares subject to stock options that are exercisable within 60 days of the record date. |
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(18) | Information obtained solely by reference to the Schedule 13G/A filed with the SEC on January 31, 2019 by BlackRock, Inc. (“BlackRock”). BlackRock reported that it has sole voting power over 4,806,437 shares and sole dispositive power over 4,878,860 shares held as of December 31, 2018. BlackRock also reported that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of our common stock and that one person’s interest is more than five percent of our total outstanding common stock, iShares Core S&P Small-Cap ETF. The address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. |
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(19) | Information obtained solely by reference to the Schedule 13G filed with the SEC on February 11, 2019 by The Vanguard Group (“Vanguard”). Vanguard reported that it has sole voting power over 31,630 shares, shared voting power over 6,260 shares, sole dispositive power over 1,859,996 shares and shared dispositive power over 35,708 shares held as of December 31, 2018. The address for Vanguard is 100 Vanguard Blvd, Malvern, PA 19355. |
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(20) | Includes executive officer ownership of 35,183 shares not listed in the table. Included in the 35,183 shares, are 21,601 shares subject to stock options that are exercisable within 60 days of the record date. |
COMPENSATION COMMITTEE REPORT
The Compensation Committee oversees and makes recommendations for all aspects of executive officer compensation. The Board 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 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, 20182021 and its proxy statement on Schedule 14A to be filed in connection with the Company’s 20192022 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.
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Patricia A. Callan, Chairman | Melvin B. Lovelady, CPA |
Lawrence Anderson, M.D. | John F. Sammons, Jr. |
George H. (Trey) Henderson, III | |
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COMPENSATION DISCUSSION AND ANALYSIS |
Overview of Compensation Program
In the paragraphs that follow, we will give an overview and analysis of our compensation programs and policies, the material compensation decisions we have made under those programs and policies, and the material factors that we considered in making those decisions. 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 20182021 to the following executive officers, who are referred to as the “named executive officers” or “NEOs.”
•Lee R. Gibson, CPA - President, Chief Executive Officer and Director of the Company and Southside Bank;
•Julie N. Shamburger, CPA - Senior Executive Vice President and Chief Financial Officer of the Company and Southside Bank and advisory director of Southside Bank;
•Tim Alexander - Chief Lending Officer of the Company and Southside Bank and advisory director of Southside Bank;
•Brian K. McCabe - Senior Executive Vice President and Chief Operations Officer of the Company and Southside Bank and advisory director of Southside Bank; and
H. J. Shands, III•T. L. Arnold, Jr. - Regional President, East Texas and DirectorChief Credit Officer of the Company and Southside Bank and advisory director of Southside Bank.
The Compensation Committee of the Board (the “Committee”) has the responsibility for reviewing and establishing the Company’s compensation programs, consistent with the Company’s compensation philosophy. The Committee attempts to ensure the total compensation paid to the NEOs is fair, reasonable, and competitive. The Committee conducts an annual base salary and bonus compensation level review of the NEOs and occasionally engages outside consultants, as discussed below. When determining compensation opportunities, the Committee typically does not establish specific performance goals for the NEOs, but instead evaluates and reviews each NEO’s contribution to the overall performance of the Company, taking into account any changes in duties or responsibilities, the overall banking environment, skills and talents demonstrated during the year and leadership.
During 2018,2021, 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 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 all director compensation, including committee service fees.compensation.
Southside Bancshares, Inc.| 2022 Proxy Statement | 22
Compensation Philosophy and Objectives
The Committee believes the most effective executive compensation program 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 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, stock-based compensation and other benefits that reward both Company and executive performance. Performance is evaluated in a number of ways. First and most importantly, the Committee evaluates the overall performance of the Company during the year and over a longer term, typically three years. Performance metrics evaluated include profitability, return on equity, ability to pay dividends to shareholders, overall asset quality, capital levels and earnings per share. The Company’s performance is measured against its peers utilizing outside independently produced peer group data. The Committee also takes into consideration the results of outside examinations and audits. The Committee evaluates individual
performance of each NEO in their areas of responsibility and to the Company as a whole, taking into consideration the overall banking environment. Using this information as a guide, the Committee then works through its process of evaluating and setting compensation.
Role of Executive Officers in Compensation Decisions
The Committee makes recommendations to the Board regarding all compensation decisions for the NEOs. The CEO 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 CEO’s personal observation of each NEO's performance, commitment and contribution to the Company. The CEO 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.
The Committee utilizes a Compensation Peer Group for comparative purposes for compensation and performance-related benchmarks, as well as compensation structure. The Committee reviews the Compensation Peer Group annually to ensure continued appropriateness. 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. In 2017,2021, the Committee engaged Pearl Meyer &Meridian Compensation Partners, LLC (“PM&P”Meridian”) to serve as an independent outside consultant to Southside Bancshares, Inc.,the Company, reporting directly to the Committee. PM&P providedMeridian advised the Committee a letter with a statement of independence and the procedures they follow to remain independent. PM&P was engaged to prepare an Executive Compensation Review, specifically for the Committee, which was provided in September 2017. This Executive Compensation Review was based on a custom peer group selected by PM&Ppotential peers based on asset size and location, and performance (the “Compensation Peer Group”). The Compensation Peer Group is comprised of sixteen public commercial banksincluding metropolitan areas, given Southside's operations in Texas, Oklahoma, Arkansas, Alabama, Colorado, Georgia, Iowa, Mississippi, Missouri and South Carolina against which PM&P andmetropolitan areas in Texas. Meridian also advised the Committee believeto expand the Company competes for talent. At the timenumber of the study,companies in the Compensation Peer Group to ensure statistical validity and to account for mergers and acquisitions. The 2021 Compensation Peer Group approved by the Committee was changed from the 2020 Compensation Peer Group, by removing 7 companies: 1st Source Corporate, Enterprise Financial Services Corp, First Busey Corporation, First Merchants Corporation, Great Southern Bancorp, Inc., Lakeland Financial Corporation and Park National Corporation, and adding 11 companies noted in the table below. The new Compensation Peer Group consists of 16 companies ranging in assets ranged from $4.0$3.0 billion to $8.9$14.6 billion, with a median asset size of approximately $6.6 billion.focus on metropolitan areas. The companies comprising the 2021 Compensation Peer Group were:
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Ameris Bancorp | Independent Bank2021 Compensation Peer Group Inc. |
BancFirstRenasant Corporation (RNST)(1) | LegacyTexas Financial Group,Origin Bancorp, Inc. (OBNK) |
Enterprise Financial Services CorpServisFirst Bancshares, Inc. (SFBS) | National Bank Holdings Corporation (NBHC) |
Fidelity SouthernFB Financial Corporation (FBK)(1) | Renasant CorporationAllegiance Bancshares, Inc. (ABTX)(1) |
First Financial Bankshares, Inc. (FFIN) | ServisFirstTriumph Bancorp, Inc. (TBK)(1) |
Veritex Holdings, Inc. (VBTX)(1) | City Holding Company (CHCO)(1) |
Seacoast Banking Corporation of Florida (SBCF) | The First Bancshares, Inc. (FBMS)(1) |
Great SouthernLive Oak Bancshares, Inc. (LOB)(1) | Business First Bancshares, Inc. (BFST)(1) |
Amerant Bancorp, Inc. (AMTB)(1) | Simmons First National Corporation |
Green Bancorp | South State Corporation |
Heartland Financial USA,CBTX, Inc. | State Bank Financial Corporation (CBTX)(1) |
During Committee discussions regarding setting NEO(1) New compensation for 2018, the Committee referenced the 2017 Executive Compensation Review performed by PM&P. The Compensation Peer Group data is used for comparative purposes only. We do not target executive officer pay opportunities at any particular percentile relative to our Compensation Peer Group. The Committee evaluates the NEO's compensation and reviews and discusses performance, job responsibilities and tenure for each NEO position. Based on this review and discussion of each NEO, the Committee determines the NEO's total compensation. There is no pre-established policy or target for the allocation among different types of compensation. In determining the appropriate mix of compensation for 2018, the Committee took into consideration that equity-based compensation would be part of its executive officer compensation program for 2018.peer in 2021
2018 In Review
Southside Bancshares, Inc. financial results for 2018 included a return on average shareholders' equity of 9.87%, and a return on average assets of 1.19%. Net income for 2018 increased $19.8 million, or 36.5%, and diluted earnings per common share increased $0.30, or 16.6%. During 2018, loans increased $18.4 million and nonperforming assets increased to 0.70% of total assets.
20182021 Executive Compensation Components
For the fiscal year ended December 31, 2018,2021, the principal components of compensation for NEOs were:
•Base salary;
•Annual incentive program;
Discretionary bonus;
•Long-term equity incentive awards;
•Retirement benefits;
•Perquisites and other personal benefits; and
•Health and welfare benefits.
Southside Bancshares, Inc.| 2022 Proxy Statement | 23
2021 In Review
Southside Bancshares, Inc. financial results for 2021 included a return on average shareholders' equity of 12.77% and a return on average assets of 1.59%. Net income for 2021 increased $31.2 million, or 38.0%, and diluted earnings per common share increased $1.00, or 40.5%. During 2021, deposits increased 16.0%, loans increased 5.0%, net of loans originated under the Paycheck Protection Program, and nonperforming assets as a percentage of total assets decreased to 0.16%.
Base Salary
The Company provides NEOs and other employees with a base salary to compensate them for services rendered during the fiscal year. Base salaries for NEOs are determined based on their position and responsibility by using comparable market data adjusted for duties and responsibilities.
During the review of base salaries for executives, the Committee primarily considers:
•Compensation Peer Group data;
internal•Internal review of the executive’s compensation, both individually and relative to other officers;
overall•Overall individual performance of the executive;
scope•Scope of responsibilities;
experience;•Experience; and
tenure•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 of performance after considering recommendations of the CEO (other than with respect to himself). The NEO salaries for 20182021 were approved by the Committee based on the CEO’s recommendations for the other NEOs and companyCompany performance.
After considering all of the relevant factors and the performance of each executive, the Committee decided that Lee R. Gibson and Julie N. Shamburger would receive a 5.0%3.0% and 6.3%3.7% increase in base salary for 2018,2021, respectively. Tim Alexander, and Brian K. McCabe and T. L. Arnold, Jr. received a 3.1%1.7%, 3.0% and 9.1%3.6% increase in base salary for 2018,2021, respectively. There was no change in base salary in 2018 for H. J. Shands, III, who became an officer of the Company in connection with the acquisition of Diboll State Bancshares (“Diboll”) effective November, 30, 2017.
Annual Incentive Program
The Company maintainsDuring 2021, the Board approved a performance-based annual incentive bonus program, thenew Annual Incentive Program (“AIP”) for certain of its most senior executive officers.
Participants in The new AIP provides participants with an opportunity to earn cash awards based on achievement of performance measures established by the program for 2018 were Lee R. Gibson, Julie N. Shamburger, Tim Alexander and Brian K. McCabe who had a maximum incentive opportunity equal to 50%, 40%, 40% and 30% of their base salary, respectively.
Committee. We believe a significant amount of executive compensation should be contingent on Company performance. The AIP formalizes this philosophy for our top executives by providing a cash incentive for the attainment of profitable growth and stable financial operating conditions.
Performance measures include quantitative performance goals and a qualitative scorecard. Performance measures are selected based on the role of the participant and their contributions to the Company. For the CEO, CFO, CLO and COO, performance measures selected were Earnings Per Share (“EPS”), Loan Growth, Return on Average Tangible Common Equity (“ROATCE”) and qualitative scorecard. Performance measures selected for the CCO were EPS, Non-Performing Assets (“NPAs”), ROATCE and qualitative scorecard.
For 2018,Weightings are used to differentiate the relative importance or priority of the performance measures. Each participant is assigned a weighting for each performance measure by the Committee, approvedwith a total weighting of 100%. Each performance measure is weighted a minimum of 5%, with the followingtotal quantitative performance goals consisting of 75%, and the qualitative scorecard of 25%. The payout for performance measures allranges from minimum threshold of which are weighted equally:50%, target of 100% and maximum of 150%. Payout for performance between the minimum threshold, target and maximum is calculated on a straight line basis, and performance below the minimum threshold results in no payout.
Earnings per share (“EPS”) growth (fully-diluted);
Loan growth;
Return on average equity (“ROAE”);
Efficiency ratio; and
Non-performing assets (“NPA”)Each participant is assigned a target award by the Committee, calculated as a percentage of base salary for the program year, which represents 100% target payout of all performance measures.
The qualitative scorecard represents 25% of total assets.
We believe a focus on these metrics over time will support sustained performance, and the long-term creation and preservation of shareholder value.
Performance measures,committee sets scorecard goals and weighting are set annually byspecific to each participant at the Committee. In determining the amountbeginning of the annual incentive payment, a threshold levelprogram year. Such goals include developing new programs, succession coaching, developing talent and other strategic initiatives.
See the 2021 Grants of performance is establishedPlan-Based Awards table below for each measure. Participants will earn a cash award based onThreshold, Target and Maximum amounts for the amount by which actual performance exceedsNEOs under the threshold goal as set forth below, up to the set percentage of bonus allocated to each performance measure. In the event the Company's performance is less than the threshold with respect to a particular performance measure, no incentive compensation is payable for that particular measure.AIP.
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|
| | | | |
| Performance Measure | Weighting | Threshold | Award for Achieving Performance Compared to Threshold |
|
| EPS Growth (Fully-Diluted) | 20% | 5.0% | 2.5% for each 1% above the threshold |
| Loan Growth | 20% | 5.0% | 2% for each 1% above the threshold |
| ROAE | 20% | 8.0% | 2.5% for each 1% above the threshold |
| Efficiency Ratio | 20% | 58.0% | 2% for each 1% below the threshold |
| NPAs / Assets | 20% | 0.50% | 1.5% for each 0.01% below the threshold |
The following table presents the actual performance results for 2018 compared to the thresholds for the performance measures and payout levels determined by the resulting Annual Incentive Program percentage earnedcommittee, as well as the actual results and payout as a % of the target for 2018.2021:
| | | | | | | | | | | | | | | | | | | | |
Performance Measure | 50% | 100% | 150% | 2021 | Actual Payout as a % of Target |
Threshold | Target | Maximum | Results |
EPS | $ | 2.59 | | $ | 2.88 | | $ | 3.31 | | $ | 3.39 | | (1) | 150.0% |
Loan Growth | 5.80 | % | 7.20 | % | 10.10 | % | 5.00 | % | | — |
NPAs as a % of Total Assets | 0.60 | % | 0.30 | % | 0.10 | % | 0.16 | % | | 135.0% |
ROATCE | 12.90 | % | 14.30 | % | 16.40 | % | 16.59 | % | (1) | 150.0% |
| | | | | | |
(1) Net income was reduced for net securities gains, net of tax, in the amount of $3.1 million for the purpose of this calculation.
The following table presents payout for each performance measure and total payout for 2021: |
| | | | | | | | | | | | | | |
Performance Measure | 2017 Result | 2018 Result | 2018 Growth | Compared to Threshold | Award | Maximum Award Weighting |
EPS Growth (Fully-Diluted) | $ | 1.81 |
| $ | 2.11 |
| 16.57 | % | 11.57 | % | 28.94 | % | 20.00 | % |
Loan Growth | $ | 3,294,356 |
| $ | 3,312,799 |
| 0.56 | % | (4.44 | )% | — |
| — |
|
ROAE | | 9.87 | % | | 1.87 | % | 4.68 | % | 4.68 | % |
Efficiency Ratio | | 49.98 | % | | 8.02 | % | 16.04 | % | 16.04 | % |
NPAs / Assets | | 0.70 | % | | (0.20 | )% | — |
| — |
|
Annual Incentive Earned | 40.72 | % |
| | | | | | | | | | | | | | | | | | | | |
Performance Measure | Weighting(1) | Actual Payout as a % of Target |
Gibson | Shamburger | Alexander | McCabe | Arnold |
EPS | 40% | 150.0% | 150.0% | 150.0% | 150.0% | 150.0% |
Loan Growth | 15% / 20%(2) | — | — | — | — | N/A |
ROATCE | 15% / 20%(3) | 150.0% | 150.0% | 150.0% | 150.0% | 150.0% |
NPAs as a % of Total Assets | 20% | N/A | N/A | N/A | N/A | 135.0% |
Scorecard | 25% | 96.0% | 96.0% | 92.0% | 84.0% | 96.0% |
Target Payout as a % of Base Salary | 45.0% | 37.5% | 32.5% | 32.5% | 32.5% |
Total Payout (%) | 114.0% | 114.0% | 105.5% | 111.0% | 133.5% |
Total Payout ($) | $377,799 | $181,688 | $180,695 | $122,655 | $139,274 |
| | | | | | |
Based on these results,(1) Each participant has a total weighting of 100%.
(2) Loan Growth has a 15% weighting for Mr. Gibson, Ms. Shamburger and Mr. McCabe, and a 20% weighting for Mr. Alexander.
(3) ROATCE has a 15% weighting for Mr. Alexander and Mr. McCabe each earned 40.72%Arnold, and a 20% weighting for Mr. Gibson, Ms. Shamburger and Mr. McCabe.
Clawback Policy
The AIP includes a clawback policy that provides that if an incentive award payout under the AIP is due to error, omission or fraud (as determined by the Compensation Committee), the participant is required to reimburse the Bank for part or the entire incentive award made to such participant on the basis of their maximum annual incentive opportunity for 2018, or $131,459, $55,372, $81,430 and $36,644 respectively.
Discretionary Bonus
In additionhaving exceeded specific thresholds relating to the AIP,financial results of the Board from timeCompany for performance periods. The Bank may seek to timereclaim incentives within a three-year period of the incentive payout. Reimbursement may determine that it is appropriatebe fulfilled through reductions in compensation or other payments to pay a NEO a discretionary bonus as a reward based on overall Company performance or individual contributions, but not tied to achievement of specific performance numbers. Lee R. Gibson, Julie N. Shamburger, Tim Alexander, Brian K. McCabe and H. J. Shands, III received discretionary bonuses for 2018 in the amounts of $50,000, $30,000, $10,000, $20,000 and $115,000, respectively for their individual contributions, leadership and performance during 2018.participant.
Long-Term Equity Incentive Awards
The Southside Bancshares, Inc. 2017 Incentive Plan (the “2017 Incentive Plan”) provides for the grant of equity awards to our employees, officers, directors and directors.consultants. The primary purpose of the 2017 Incentive Plan is to promote ourCompany 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. The 2017 Incentive Plan outlines the type of incentive awards to be granted under the plan. In 2017, the Committee engaged the services of PM&P to assist in guiding the Committee as to what is comparable and customary relative to the Compensation Peer Group with respect to long-term equity programs.
In 2018, our2021, NEOs were awarded long-term equitygranted awards having a grant date fair value equal to their base salaries as follows: Lee R. Gibson, 50%; Tim Alexander, 35%, Julie N. Shamburger, 35%, Brian K. McCabe, 30% and H. J. Shands, III, 25%. These awards were granted 50% in the form of stock options and 50% in the form oftime-based restricted stock units (“RSUs”), based on grant date fair value. Details of the equity awards granted to the NEOs arethat vest annually in three equal installments, as set forth in the 20182021 Grants of Plan-Based Awards Table below. We anticipate additional grants
Changes to 2022 Incentive Programs
The Committee engaged Meridian to assist in designing a new Long-Term Equity Incentive Program (the "Program"). The Program provides the framework for long-term equity awards consisting of 50% performance-based restrictive stock units (“PSUs”) and 50% time-based restricted stock units ("RSUs"), issuable pursuant to the Company's 2017 Incentive Plan. On February 3, 2022, the Committee granted PSUs and RSUs to the NEOs. The RSUs will vest in equal annual installments over three years, subject to the grantee's continued employment on each vesting date. The PSUs will cliff vest on the third anniversary of the grant date, subject to the grantee's continued employment on such date, and will be made during 2019.earned based on the Company's ROATCE relative to ROATCE of the KBW Nasdaq Regional Bank Index (NASDAQ: KRX) (the “Peer Group”), over a 3 year performance period, beginning January 1, 2022. The PSUs may be earned between a minimum payout of 50%, based on a ROATCE performance threshold of 25th percentile of the Peer Group, a target payout of 100%, based on a ROATCE performance threshold of 50th percentile, and a maximum payout of 150%, based on a performance threshold of 75th percentile or greater. Share payout for performance between the minimum threshold, target and maximum is calculated on a straight line basis, and performance below the minimum threshold results in no share payout.
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Executive Stock Ownership Policy
The Company maintains a stock ownership policy that determines the amount of common stock that should be held by the Company’s executive officers. The policy specifies the value of Company stock (the “Required Market Value”), as a multiple of the executive officer’s base salary in effect as of the time the executive first becomes subject to the policy, which must be held by each executive officer, as follows:
|
| | | | | | | | | | |
| Position | | Multiple |
| Chief Executive Officer | | 3x Base Salary |
| Chief Financial Officer | | 2x Base Salary |
| Chief Lending Officer | | 2x Base Salary |
| Other Executive Officers | | One-half Base Salary |
The CEO, CFO and CLO are strongly encouraged to achieve ownership of a sufficient number of shares to satisfy the Required Market Value within five years of first becoming subject to the policy, and other executive officers are strongly encouraged to comply with the policy within seven years of first becoming subject to the policy.
In order to meet the stock ownership requirement, an executive officer may count all shares of common stock owned by the executive (including shares held in the Company’s 401(k) Plan (the “401(k) Plan”), Employee Stock Ownership Plan (“ESOP”),vested shares held in the Company's ESOP, shares held in an IRA and shares beneficially owned through a trust) and outstanding RSUs, but excluding shares underlying unexercised stock options.
Once an executive officer has obtained shares having a value equal or greater to the Required Market Value, the executive’s ownership requirement is converted into a number of shares determined by dividing the Required Market Value by the then-current stock price (the “Required Share Level”). Once an executive’s Required Share Level is determined, he or she must continue to beneficially own at least that number of shares in order to be in compliance with the policy. An executive’s Required Market Value and Required Share Level will be recalculated in connection with a salary increase relating to a change in title, but otherwise will not change as a result of changes in base salary or fluctuations in the price of the Company’s stock.
Executive officers who are not in compliance with the policy after the applicable five or seven year period are required to retain 50% of the shares received upon exercise or conversion of equity incentive awards.
TheFor each NEO, the following table shows for each NEO the number of shares deemed held under the policy and the percentage of the ownership requirement they have reached.
|
| | | | | |
| | Stock Ownership at | | Stock Held as a % of |
Name | | March 21, 2019 | | Ownership Requirement |
Lee R. Gibson | | 57,491 |
| | 98.2% |
Julie N. Shamburger | | 28,080 |
| | >100% |
Tim Alexander | | 25,147 |
| | >100% |
Brian K. McCabe | | 33,256 |
| | >100% |
H. J. Shands, III | | 294,472 |
| | >100% |
| | | | | | | | | | | | | | |
| | Stock Ownership at | | Stock Held as a % of |
Name | | March 23, 2022 | | Ownership Requirement |
Lee R. Gibson | | 78,935 | | | >100% |
Julie N. Shamburger | | 33,949 | | | >100% |
Tim Alexander | | 28,458 | | | >100% |
Brian K. McCabe | | 36,659 | | | >100% |
T. L. Arnold, Jr. | | 14,380 | | | >100% |
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-termlong-term benefits to the Company. The Company believes its retirement program is comparable to those offered by the banks in our Compensation Peer Group and, as a result, is needed to ensure that our executive compensation remains competitive.
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, 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 maintainsas well as a non-qualified supplemental retirement plan (the “Restoration Plan”) which provides benefits in addition to the Pension Plan. As of June 18, 2020, the Board approved amendments to the Pension Plan and the Restoration Plan to freeze all future benefit accruals and accrual of benefit service, including consideration of compensation increases, effective December 31, 2020. The participants are entitled to benefits based on average monthly compensation and years of credited service as of December 31, 2020. The Pension Plan and the Restoration Plan are described in more detail under the Pension Benefits Table in this proxy statement.
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The Company has entered into deferred compensation agreements with each of the NEOs, with the exception of H. J. Shands, III,T. L. Arnold, Jr., 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 a split dollar agreementagreements with Lee R. Gibson and Julie N. Shamburger, which allowsallow the executiveexecutives to designate the beneficiaries of death benefits under a life insurance policy. This agreement isThese agreements are described in more detail under the Summary Compensation Table in this proxy statement.
Perquisites and Other Personal Benefits
The Company provides NEOs with perquisites and other personal benefits 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 2018, and thereThere were no changes in the types of perquisites provided in 2018.2021. Perquisites provided to NEOs during 20182021 were Company paid club dues for each NEO and a Company provided automobile for Lee R. Gibson, until June 2021, and the full year for Julie N. Shamburger and Tim Alexander. Club memberships are made available to various officers who are expected to routinely entertain customers or prospective customers.
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, vision, employee life, group life, health savings accounts 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 service requirement is a bank-provided long-term disability insurance policy which includes accidental death and travel insurance plans and programs.
Key Employee Retention Compensation
The Company entered into a Key Employee Retention Agreement with H. J. Shands, III on June 12, 2017, in conjunction with the acquisition of Diboll. The agreement provides for a grant of equity awards, which vest over four years, as well as three retention payments, beginning 90 days after the merger effective date and ending at the second anniversary date.
For a further discussion of retention payments, please see the discussion of the Key Employee Retention Agreement in this proxy statement.
Severance
The Company entered into Employee Agreements with Lee R. Gibson in October 2007, Julie N. Shamburger in June 2008, and Brian K. McCabe in November 2008.2008 and T. L. Arnold, Jr. in April 2014, each of which provide for severance payments and benefits in the event the NEO’s employment is terminated by the Company without “cause,” by the executive for “good reason,” or as a result of a “change in control” (as such terms are defined in the employment agreements). The Board determined that it wasproviding severance protection to the NEOs is in the best interest of the Company because providing severance benefits is a necessary tool in the competitive marketplace to attract and retain the services and encourageof talented executives who are critical to the continued attention and dedicationsuccess of these executives to their assigned duties.the Company. The severance and change in control termination amounts were negotiated based on the NEO's tenure, scope of responsibilities and other provisions in the agreement.
For a further discussion of severance payments, please see the terms of the Employment Agreements in this proxy statement.
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. Prior to 2018, the limitation did not apply to compensation that met the requirements under Section 162(m) for “qualifying performance-based” compensation. The exemption from Code Section 162(m)'s deduction limit for performance-based compensation, was repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain written arrangements in place as of November 2, 2017.deductible.
The Committee intends to maximize deductibility of executive compensation while retaining discretion needed to compensate executives in a manner commensurate with performance and the competitive landscape for executive talent.
EXECUTIVE COMPENSATION
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