<PAGE> 1
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, 1999
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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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
CONTENTS
Report of Independent Auditors
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits......................... 2
Statements of Changes in Net Assets Available for Benefits.............. 3
Notes to Financial Statements........................................... 4
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[JOHN S. LUBY, CPA LETTERHEAD]
REPORT OF INDEPENDENT AUDITOR
To the Audit Committee of
the Prosperity Bancshares, Inc.
401K Profit Sharing Plan
I have audited the accompanying statement of net assets available for benefits
of Prosperity Bancshares, Inc. 401K Profit Sharing Plan as of December 31, 1999
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. My responsibility is to express an opinion on these financial
statements based on my audit. The financial statements of Prosperity Bancshares,
Inc. 401K Profit Sharing Plan for the year ended December 31, 1998 was audited
by other auditors whose report dated December 13, 1999, expressed an unqualified
opinion on those statements.
I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the 1999 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, 1999 and the
changes in its net assets available for benefits for the year then ended in
conformity with generally accepted accounting principles.
Corpus Christi, Texas /s/ JOHN S. LUBY, CPA
July 12, 2000
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
-----------------------------------
<S> <C> <C>
ASSETS
Cash $ 10,873 $ -
First Prosperity Bank - Certificates of Deposit 1,098,325 659,974
Prosperity Bancshares, Inc. Equities 1,648,128 1,123,165
Loans 108,960 -
Hartford 20th Century Ultra - 45,009
Hartford Fidelity Advisor Growth - 76,733
Hartford Fidelity Advisor Overseas - 8,566
Hartford Capital Appreciation - 59,116
Hartford Index Stock Fund - 32,778
Hartford Fidelity Advisor Income and Growth Fund - 27,969
Hartford Fixed Account - 130,239
U.S. Government Securities Fund 143,192 -
Fundamental Investors 28,338 -
New Economy Fund 5,782 -
New Perspective Fund 431,636 -
Washington Mutual Investment Fund 151,277 -
Capital Income Builder 11,840 -
Cash Management Trust Of AM 566,449 -
Capital World Growth and Income 55,541 -
American Balance Fund 103,964 -
Bond Fund America 149,123 -
Euro Pacific Growth Fund 36,442 -
Growth Fund of America 55,355 -
American High Income Trust 544 -
Intermediate Bond Fund of America 13,147 -
Investment Company of America 331,034 -
AMCAP Fund 21,375 -
Income Fund of America 7,569 -
American Mutual Fund 9,581 -
Small Cap World Fund 9,632 -
-----------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 4,998,107 $ 2,163,549
===================================
</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
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1999 1998
--------------------------------
<S> <C> <C>
ADDITIONS
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Net appreciation in fair value of investments $ 480,955 $ 346,190
Interest and dividends 140,559 72,323
--------------------------------
621,514 418,513
CONTRIBUTIONS:
Participants' Rollovers 1,897,818 -
Participants' Elective Deferrals 370,277 229,418
Employer's 182,454 110,173
--------------------------------
2,450,549 339,591
--------------------------------
TOTAL ADDITIONS 3,072,063 758,104
DEDUCTIONS
Deductions from net assets attributable to rollovers
or withdrawals paid to participants 233,705 68,395
Administrative expenses 3,800 -
--------------------------------
237,505 68,395
--------------------------------
Net increase in assets available for benefits 2,834,558 689,709
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of Year 2,163,549 1,473,840
--------------------------------
End of Year $ 4,998,107 $ 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, 1999 AND 1998
1. DESCRIPTION OF PLAN
The following description of the Prosperity Bancshares, Inc. 401K Profit Sharing
Plan ("the Plan") provides only general information. Participants should refer
to the Summary Plan Description for a more complete description of the Plan's
provisions.
GENERAL
The Plan is a defined contribution plan covering all full-time employees of
First Prosperity Bank (the "Bank") who have completed at least three months of
service and are twenty-one or older. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA).
CONTRIBUTIONS
Each year, participants may contribute up to 15% of pretax annual compensation,
as defined in the Plan. Participants may also contribute amounts representing
distributions from other qualified defined benefit or defined contribution
plans. The Bank, at its discretion, may contribute to the Plan, on a
Participant's behalf, a matching contribution which is determined annually. In
1999 and 1998, the Bank matched 50% of the employees' contributions.
Upon enrollment, a participant may direct contributions in any increment to any
of the Plan's fund options. Participants may change their investments options
quarterly. Employer contributions are matched to the funds designated by the
participant.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions and
allocations of (a) the Company's contributions and (b) plan earnings, and is
charged with an allocation of administrative expenses. Allocations are based on
participant earnings or account balances, as defined. Forfeited balances of
terminated participants' nonvested accounts are used to reduce future company
contributions. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's account.
4
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
1. DESCRIPTION OF PLAN (CONTINUED)
VESTING
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Bank contribution portion of their accounts plus actual
earnings thereon is based on years of continuous service. A participant is
vested ratably (20% at the end of the second year as a participant in the plan)
over a six-year period.
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50% of their vested account balance.
Loan terms generally range from 1-5 years, but can be longer if loan is used to
purchase principal residence. The loans are secured by the balance in the
participant's account and bear interest at a rate commensurate with local
prevailing rates. Principal and interest is paid ratably through monthly payroll
deductions.
PAYMENT OF BENEFITS
On termination of service, a participant may receive a lump-sum amount, equal to
the vested value of his or her account, or upon death, disability or retirement,
elect to receive payment from the following options: (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.
FORFEITURES
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.
5
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
1. DESCRIPTION OF PLAN (CONTINUED)
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared on the accrual basis 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. The participant loans are valued at their outstanding
balances, which approximate fair value. 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
RECLASSIFICATION
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
6
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
3. INVESTMENTS
The Plan's investments in 1999 are held in separate mutual funds, certificates
of deposit, and equity stock of the Bank while the investments in 1998 were held
in an insurance company administered trust fund. The following table presents
investments at December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Investments at fair value: 1999 1998
<S> <C> <C>
Cash $ 10,873 $ -
First Prosperity Bank - Certificates of Deposit 1,098,325 659,974
Prosperity Bancshares, Inc. Equities 1,648,128 1,123,165
Loans 108,960 -
Hartford 20th Century Ultra - 45,009
Hartford Fidelity Advisor Growth - 76,733
Hartford Fidelity Advisor Overseas - 8,566
Hartford Capital Appreciation - 59,116
Hartford Index Stock Fund - 32,778
Hartford Fidelity Advisor Income and Growth Fund - 27,969
Hartford Fixed Account - 130,239
U.S. Government Securities Fund 143,192 -
Fundamental Investors 28,338 -
New Economy Fund 5,782 -
New Perspective Fund 431,636 -
Washington Mutual Investment Fund 151,277 -
Capital Income Builder 11,840 -
Cash Management Trust Of AM 566,449 -
Capital World Growth and Income 55,541 -
American Balance Fund 103,964 -
Bond Fund America 149,123 -
Euro Pacific Growth Fund 36,442 -
Growth Fund of America 55,355 -
American High Income Trust 544 -
Intermediate Bond Fund of America 13,147 -
Investment Company of America 331,034 -
AMCAP Fund 21,375 -
</TABLE>
7
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
3. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
Income Fund of America $ 7,569 $ -
American Mutual Fund 9,581 -
Small Cap World Fund 9,632 -
--------------------------------
Net Assets Available for Benefits $ 4,998,107 $ 2,163,549
================================
</TABLE>
Upon enrollment in the Plan, a participant may direct their contributions in
various increments totaling 100% in any of the investment options.
According to the Plan document prior to change of administrators, balances of
the Hartford Investments in 1998 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.
4. TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
stating that the Plan is qualified under Section 401(a) of the Internal Revenue
Code (the "Code") and, therefore, the related trust is exempt from taxation.
Once qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The Plan Administrator believes the Plan is being
operated in compliance with the applicable requirements of the Code and,
therefore, believes that the Plan is qualified and the related trust is exempt.
5. RELATED PARTY TRANSACTIONS
Investment transactions in the First Prosperity Bank Certificates of Deposit and
Prosperity Bancshares, Inc. Equities are administered by the Trustee. These
transactions qualify as party-in-interest transactions.
6. CHANGE IN ADMINISTRATORS
During June 1999, 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.
8
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PROSPERITY BANCSHARES, INC.
401K PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
7. ROLLOVERS FROM UNION STATE BANK OF EAST BERNARD 401K PLAN
Effective June 1, 1999, the individual account balances of all participants in
the Union State Bank of East Bernard 401K Profit Sharing Plan were rolled-over
into the Plan. This amount has been included on the Statement of Changes in Net
Assets Available for Benefits as Participants' Contributions - Rollovers.
9
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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.
July 13, 2000 PROSPERITY BANCSHARES, INC.
401(k) PROFIT SHARING PLAN
/s/ Michael Harris
-----------------------------------
Michael Harris
Trustee
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
23.1 Consent of John S. Luby, CPA
