UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 000-25051
PROSPERITY BANCSHARES, INC.SM
(Exact name of registrant as specified in its charter)
| TEXAS |
74-2331986 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
4295 San Felipe
Houston, Texas 77027
(Address of principal executive offices, including zip code)
(713) 693-9300
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
As of May 8, 2003, there were 18,944,027 shares of the registrant’s Common Stock, par value $1.00 per share, outstanding.
PROSPERITY BANCSHARES, INC.SM AND SUBSIDIARIES
| PART I—FINANCIAL INFORMATION |
Page | |||
| Item 1. |
3 | |||
| Consolidated Balance Sheets as of March 31, 2003 (unaudited ) and December 31, 2002 |
3 | |||
| Consolidated Statements of Income for the Three Months Ended March 31, 2003 and 2002 (unaudited) |
4 | |||
| 5 | ||||
| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 (unaudited) |
6 | |||
| 7 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
9 | ||
| Item 3. |
18 | |||
| Item 4. |
18 | |||
| PART II—OTHER INFORMATION |
||||
| Item 1. |
19 | |||
| Item 2. |
19 | |||
| Item 3. |
19 | |||
| Item 4. |
19 | |||
| Item 5. |
19 | |||
| Item 6. |
19 | |||
| 20 | ||||
2
PART I – FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
PROSPERITY BANCSHARES, INC.SM AND SUBSIDIARIES
| March 31, 2003 |
December 31, 2002 |
|||||||
| (unaudited) |
(unaudited) |
|||||||
| (Dollars in thousands, except share data) |
||||||||
| ASSETS |
||||||||
| Cash and due from banks |
$ |
52,460 |
|
$ |
66,806 |
| ||
| Federal funds sold |
|
3,138 |
|
|
13,993 |
| ||
| Total cash and cash equivalents |
|
55,598 |
|
|
80,799 |
| ||
| Interest-bearing deposits in financial institutions |
|
399 |
|
|
498 |
| ||
| Available for sale securities, at fair value (amortized cost of $270,237 (unaudited) and $305,158, respectively) |
|
274,488 |
|
|
309,219 |
| ||
| Held to maturity securities, at cost (fair value of $800,296 (unaudited) and $660,261, respectively) |
|
781,861 |
|
|
641,098 |
| ||
| Loans |
|
656,568 |
|
|
679,559 |
| ||
| Less allowance for credit losses |
|
(9,318 |
) |
|
(9,580 |
) | ||
| Loans, net |
|
647,250 |
|
|
669,979 |
| ||
| Accrued interest receivable |
|
9,235 |
|
|
10,348 |
| ||
| Goodwill |
|
67,989 |
|
|
68,290 |
| ||
| Core Deposit intangibles, net of accumulated amortization of $386,000 and $192,000 respectively |
|
4,236 |
|
|
4,120 |
| ||
| Bank premises and equipment, net |
|
27,469 |
|
|
27,010 |
| ||
| Other real estate owned |
|
527 |
|
|
219 |
| ||
| Other assets |
|
10,334 |
|
|
10,676 |
| ||
| TOTAL |
$ |
1,879,386 |
|
$ |
1,822,256 |
| ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| LIABILITIES: |
||||||||
| Deposits: |
||||||||
| Noninterest-bearing |
$ |
312,104 |
|
$ |
327,699 |
| ||
| Interest-bearing |
|
1,322,161 |
|
|
1,258,912 |
| ||
| Total deposits |
|
1,634,265 |
|
|
1,586,611 |
| ||
| Other borrowings |
|
39,966 |
|
|
37,939 |
| ||
| Accrued interest payable |
|
2,254 |
|
|
2,550 |
| ||
| Other liabilities |
|
9,637 |
|
|
7,417 |
| ||
| Total liabilities |
|
1,686,122 |
|
|
1,634,517 |
| ||
| COMPANY-OBLIGATED MANDATORILY REDEEMABLE TRUST PREFERREED SECURITIES OF SUBSIDIARY TRUSTS |
|
33,000 |
|
|
33,000 |
| ||
| SHAREHOLDERS’ EQUITY: |
||||||||
| Common stock, $1 par value; 50,000,000 shares authorized; 18,950,635 (unaudited) and 18,903,028 shares issued at March 31, 2003 and December 31, 2002, respectively; 18,943,483 (unaudited) and 18,895,876 shares outstanding at March 31, 2003 and December 31, 2002, respectively |
|
18,951 |
|
|
18,903 |
| ||
| Capital surplus |
|
60,464 |
|
|
60,312 |
| ||
| Retained earnings |
|
78,123 |
|
|
72,917 |
| ||
| Accumulated other comprehensive income — net unrealized gains on available for sale securities, net of tax of $1,488 (unaudited) and $1,424, respectively |
|
2,763 |
|
|
2,644 |
| ||
| Less treasury stock, at cost, 7,152 shares at March 31, 2003 (unaudited) and December 31, 2002, respectively |
|
(37 |
) |
|
(37 |
) | ||
| Total shareholders’ equity |
|
160,264 |
|
|
154,739 |
| ||
| TOTAL |
$ |
1,879,386 |
|
$ |
1,822,256 |
| ||
See notes to interim consolidated financial statements.
3
PROSPERITY BANCSHARES, INC.SM AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended March 31, | ||||||
| 2003 |
2002 | |||||
| (Dollars in thousands, except per share data) | ||||||
| INTEREST INCOME: |
||||||
| Loans, including fees |
$ |
11,430 |
$ |
7,756 | ||
| Securities: |
||||||
| Taxable |
|
9,864 |
|
9,816 | ||
| Nontaxable |
|
426 |
|
390 | ||
| 70% nontaxable preferred dividends |
|
452 |
|
352 | ||
| Federal funds sold |
|
34 |
|
64 | ||
| Deposits in financial institutions |
|
6 |
|
2 | ||
| Total interest income |
|
22,212 |
|
18,380 | ||
| INTEREST EXPENSE: |
||||||
| Deposits |
|
5,826 |
|
6,149 | ||
| Note payable and other borrowings |
|
255 |
|
207 | ||
| Total interest expense |
|
6,081 |
|
6,356 | ||
| NET INTEREST INCOME |
|
16,131 |
|
12,024 | ||
| PROVISION FOR CREDIT LOSSES |
|
120 |
|
120 | ||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES |
|
16,011 |
|
11,904 | ||
| NONINTEREST INCOME: |
||||||
| Customer service fees |
|
3,255 |
|
1,858 | ||
| Other |
|
566 |
|
303 | ||
| Total noninterest income |
|
3,821 |
|
2,161 | ||
| NONINTEREST EXPENSE: |
||||||
| Salaries and employee benefits |
|
5,407 |
|
3,909 | ||
| Net occupancy expense |
|
954 |
|
612 | ||
| Depreciation expense |
|
605 |
|
373 | ||
| Data processing |
|
615 |
|
457 | ||
| Communications expense |
|
618 |
|
400 | ||
| Core deposit intangibles amortization |
|
193 |
|
— | ||
| Minority interest trust preferred securities |
|
569 |
|
498 | ||
| Other |
|
1,539 |
|
1,413 | ||
| Total noninterest expense |
|
10,500 |
|
7,662 | ||
| INCOME BEFORE INCOME TAXES |
|
9,332 |
|
6,403 | ||
| PROVISION FOR INCOME TAXES |
|
2,943 |
|
1,912 | ||
| NET INCOME |
$ |
6,389 |
$ |
4,491 | ||
| EARNINGS PER SHARE |
||||||
| Basic |
$ |
0.34 |
$ |
0.28 | ||
| Diluted |
$ |
0.33 |
$ |
0.27 | ||
See notes to interim consolidated financial statements.
4
PROSPERITY BANCSHARES, INC.SM AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| Common Stock |
Capital Surplus |
Retained Earnings |
Accumulated Other Comprehensive Income |
Treasury Stock |
Total Shareholders’ Equity |
||||||||||||||||||||
| Shares |
Amount |
||||||||||||||||||||||||
| (Amounts in thousands, except share data) |
|||||||||||||||||||||||||
| BALANCE AT JANUARY 1, 2002 |
|
16,218,022 |
$ |
16,218 |
$ |
16,865 |
|
$ |
55,462 |
|
$ |
217 |
$ |
(37 |
|||||||||||