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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to ____________.
Commission File Number: 000-25051
A. FULL TITLE OF THE PLAN AND THE ADDRESS OF THE PLAN, IF
DIFFERENT FROM THAT OF THE ISSUER NAMED BELOW:
PROSPERITY BANCSHARES, INC.
401(K) PROFIT SHARING PLAN
B. NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN AND
THE ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICE:
PROSPERITY BANCSHARES, INC.
3040 POST OAK BOULEVARD
HOUSTON, TEXAS 77056
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TRANBARGER & WELGE, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
================================================================================
1010 American Bank Plaza, Corpus Christi, TX 78475 (361)884-2821
To the Audit Committee of
the Prosperity Bancshares, Inc.
401K Profit Sharing Plan
We have audited the accompanying statement of net assets available for benefits
of Prosperity Bancshares, Inc. 401K Profit Sharing Plan as of December 31, 1998
and the related statement of changes in net assets available for benefits for
the year then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the statement of net
assets available for the benefits of the Plan for the year ended December 31,
1997
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of Prosperity
Bancshares, Inc. 401K Profit Sharing Plan as of December 31, 1998 and the
changes in its nets assets available for benefits for the year then ended in
conformity with generally accepted accounting principles.
/s/ Tranbarger & Welge, L.L.P.
Corpus Christi, Texas
December 13, 1999
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
1998 1997
At fair value (Unaudited)
<S> <C> <C>
Hartford 20th Century Ultra $ 45,009 $ 125,459
Hartford Fidelity Advisor Growth 76,733 128,284
Hartford Fidelity Advisor Overseas 8,566 16,161
Hartford Capital Appreciation 59,116 71,846
Hartford Index Stock Fund 32,778 54,477
Hartford Fidelity Advisor Income and Growth Fund 27,969 41,743
Hartford Fixed Account 130,239 4,656
First Prosperity Bank CD's 659,974 755,968
Prosperity Company Stock 1,123,165 275,246
---------- ----------
Net Assets Available For Benefits $2,163,549 $1,473,840
========== ==========
</TABLE>
See accompanying notes.
2
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998
<TABLE>
<S> <C>
ADDITIONS
Additions to net assets attributed to:
Net appreciation in fair value of investments $ 385,193
Interest and dividends 72,323
-----------
457,516
Contributions:
Participants' 229,418
Employer's 110,173
-----------
339,591
Loans made (43,841)
Loans paid 4,838
-----------
(39,003)
-----------
TOTAL ADDITIONS 758,104
DEDUCTIONS
Deductions from net assets attributed to rollovers
or withdrawals paid to participants 68,395
-----------
Net increase in assets available for benefits 689,709
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of the year 1,473,840
-----------
End of year $ 2,163,549
===========
</TABLE>
See accompanying notes.
3
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 DESCRIPTION OF PLAN
The following description of the Prosperity Bancshares, Inc. 401K Profit Sharing
Plan ("the Plan") provide only general information. Participants should refer to
the Plan agreement for a more complete description of the Plan's provisions.
o The Plan was established in 1984 by Prosperity Bancshares, Inc. and was
amended and restated effective October 1, 1996. The Plan is a 401(k)
Retirement profit-sharing Plan with a Cash-or-Deferred Arrangement covering
substantially all employees who have completed three months of service and
age of 21 years. A third party known as Continental Benefit Administrators,
Inc. appointed by the Company administers the Plan.
o Contributions- The Plan includes a "401(k) arrangement," under which the
employee may specify what portion of compensation will be contributed to
the Trust as the Employee's Elective Contributions, but the annual
contribution may not exceed the lessor of $9,500 or fifteen percent (15%)
of the Participant's total compensation from the Bank for the year. The
Bank will contribute to the Plan on a Participant's behalf a matching
contribution, equal to a discretionary percentage, to be determined by the
Bank, of the amount by which a Participant's salary is reduced.
o Any employee of the Bank will be eligible to participate in the Plan
following completion of three months of service and upon reaching
twenty-one (21) years of age.
o Vesting in the employer contributions to the Plan is ratably (20% at the
end of each year of service as a participant in the plan) over a six-year
period. Participants are vested immediately in their contributions to the
Plan.
o The employee may choose from the various investments available as defined
in the Plan document. The employee is required to execute an allocation
agreement to direct contributions to the respective investments.
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 1 DESCRIPTION OF PLAN (CONTINUED)
o The Plan provides for the employees to borrow up to one-half of their
vested account balance. These are repaid in equal installments, payable at
least monthly over a period no greater than sixty months. Interest will be
charged at the then-prevailing rate charged by commercial lenders under
similar circumstances.
o Normal retirement age is 65 years. Options for payment of plan benefits are
(1) qualified joint and survivor annuities, (2) single payment of the
employee's entire benefit, (3) equal installments over a fixed period not
to exceed the employee's life expectancy or the joint and last survivor's
life expectancy, or (4) payments in the form of a joint and survivor
annuity. The Plan does permit hardship distributions. In order to qualify
for such hardship withdrawal, the Participant must demonstrate that an
immediate and necessary financial hardship has been incurred.
o Any forfeiture subject to allocation during each Plan Year shall be
allocated among all Participants of all Participating employees in
accordance with the provisions of the Plan. On the basis of the information
furnished by the administrator, the Trustee shall keep separate books and
records concerning the affairs of each Participant hereunder as to the
accounts and credits of each participating employee.
o The Plan reinvests all dividends and other earnings automatically into the
respective accounts.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared using the accrual method of
accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. Shares of registered investment
companies are valued at quoted market prices, which represent the net asset
value of the shares held by the Plan at year-end. The Bank's stock is valued at
its quoted market price. Participant loan receivables are valued at cost that
approximates fair value.
5
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certificates of deposit are valued based on amortized cost or original cost plus
accrued interest.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
NOTE 3 PLAN TERMINATION
Although it has not expressed any intent to do so, the Bank has the right under
the Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts
NOTE 4 DISCONTINUANCE
As of the date of discontinuance, no further contributions will be accepted,
certain expenses which are due and unpaid will be determined and the remaining
value of the participant's account will be distributed in accordance with
written instructions received from participant.
NOTE 5 RELATED PARTY TRANSACTIONS
Investment transactions in the Prosperity Bancshares, Inc., certificates of
deposit and bank stock are administered by the Trustee. These transactions
qualify as party-in-interest.
NOTE 6 TAX STATUS
The Internal Revenue Service has determined and informed Continental Benefit
Administrators, Inc. (third-party administrator) by a letter dated August 19,
1992 that the Plan and related trust are designed in accordance with applicable
sections of the Internal Revenue Code ("IRC"). On July 12, 1995, the Bank
received a favorable tax determination ruling from the Internal Revenue Service
regarding the Plan.
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 7 INVESTMENTS
The Plan's investments are held in an insurance company administered trust fund.
The following table presents investments at December 31, 1998 and 1997.
<TABLE>
<CAPTION>
Investments at fair value:
1998 1997
(Unaudited)
<S> <C> <C>
Hartford 20th Century Ultra $ 45,009 $ 125,459
Hartford Fidelity Advisor Growth 76,733 128,284
Hartford Fidelity Advisor Overseas 8,566 16,161
Hartford Capital Appreciation 59,116 71,846
Hartford Index Stock Fund 32,778 54,477
Hartford Fidelity Advisor Income and Growth Fund 27,969 41,743
Hartford Fixed Account 130,239 4,656
Prosperity Bancshares, Inc. CD's 659,974 755,968
Prosperity Bancshares, Inc. Stock 1,123,165 275,246
---------- ----------
$2,163,549 $1,473,840
========== ==========
</TABLE>
Upon enrollment in the Plan, a participant may direct their contributions in
various increments totaling 100% in any of the nine investment options
According to the Plan document, balances of the Hartford Investments includes
balances of loans made to participants. Payments by the participants on the
loans are allocated to the respective Hartford Investments based on the
participant's allocation authorization. The balance of the participant's loans
at December 31, 1998 was $39,003.
NOTE 8 SUBSEQUENT EVENT
Subsequent to December 31, 1998 the Bank changed third party administrators. In
addition, the Bank revised the Plan document to include changes in the trustee
and the investment options from an insurance company administered trust fund to
mutual funds.
7
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustee has duly caused this annual report to be signed in its behalf by the
undersigned hereunto duly authorized.
December 17, 1999 PROSPERITY BANCSHARES, INC. 401(K)
PROFIT SHARING PLAN
/s/ Michael Harris
--------------------------------
Michael Harris
Trustee
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
23.1 Consent of Tranbarger & Welge, L.L.P.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of Prosperity Bancshares, Inc. of our report dated
December 13, 1999 on our audit of the financial statements of the Prosperity
Bancshares, Inc. 401(k) Profit Sharing Plan Ownership Plan as of December 31,
1998, which report is included in this Annual Report on Form 11-K.
TRANBARGER & WELGE, L.L.P.
/s/ Tranbarger & Welge, L.L.P.
Corpus Christi, Texas
December 17, 1999
