FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
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 (I.R.S. Employer
or organization) 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 [ ]
As of July 31, 2001, there were 8,095,835 shares of the registrant's Common
Stock, par value $1.00 per share, outstanding.
1
PROSPERITY BANCSHARES, INC.(SM) AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION Page
Item 1. Interim Financial Statements................................................. 3
Consolidated Balance Sheets as of June 30, 2001 (unaudited) and
December 31, 2000................................................................. 3
Consolidated Statements of Income for the Three and Six Months
Ended June 30, 2001 and 2000 (unaudited).......................................... 4
Consolidated Statements of Shareholders' Equity for the Year Ended December 31,
2000 and for the Six Months Ended June 30, 2001 (unaudited)........................ 5
Consolidated Statements of Cash Flows for the Six Months Ended June
30, 2001 and 2000 (unaudited)...................................................... 6
Notes to Interim Consolidated Financial Statements.................................. 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk................... 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................................ 19
Item 2. Changes in Securities and Use of Proceeds.................................... 19
Item 3. Defaults upon Senior Securities.............................................. 19
Item 4. Submission of Matters to a Vote of Security Holders.......................... 19
Item 5. Other Information............................................................ 19
Item 6. Exhibits and Reports on Form 8-K............................................. 19
Signatures............................................................................ 20
2
PART I - FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
PROSPERITY BANCSHARES, INC.(SM) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2001 2000
-------- -------------
(unaudited)
(Dollars in thousands, except share data)
ASSETS
Cash and due from banks........................... $ 27,706 $ 35,709
Interest-bearing deposits in financial
institutions..................................... 590 1,085
Federal funds sold................................ 14,800 62,369
---------- ----------
Total cash and cash equivalents................. 43,096 99,163
Available for sale securities, at fair value
(amortized cost of $376,600 (unaudited)
and $333,856, respectively)................... 376,983 334,773
Held to maturity securities, at cost (fair value
of $273,867 (unaudited) and $250,171,
respectively)...................... 269,998 252,178
Loans............................................. 430,135 411,203
Less allowance for credit losses.................. (5,593) (5,523)
---------- ----------
Loans, net.................................. 424,542 405,680
Accrued interest receivable....................... 9,651 10,430
Goodwill (net of accumulated amortization of $5,673
(unaudited) and $4,954, respectively)............ 23,322 24,003
Bank premises and equipment, net.................. 14,334 14,487
Other real estate owned........................... -- 545
Other assets...................................... 3,854 4,881
---------- ----------
TOTAL ASSETS...................................... $1,165,780 $1,146,140
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing........................... $ 180,095 $ 187,959
Interest-bearing.............................. 870,275 845,587
---------- ----------
Total deposits.............................. 1,050,370 1,033,546
Federal funds purchased.......................... -- --
Other borrowings................................. 13,623 13,931
Accrued interest payable......................... 3,561 3,480
Other liabilities................................ 3,146 2,850
---------- ----------
Total liabilities........................... 1,070,700 1,053,807
COMPANY-OBLIGATED MANDATORILY REDEEMABLE
TRUST PREFERRED SECURITIES OF SUBSIDIARY
TRUST........................................... 12,000 12,000
SHAREHOLDERS' EQUITY:
Common stock, $1 par value; 50,000,000 shares
authorized; 8,099,411 (unaudited) and 8,075,486,
shares issued at June 30, 2001 and December 31,
2000, respectively; 8,095,835 (unaudited) and
8,071,910 shares outstanding at June 30, 2001
and December 31, 2000, respectively........... 8,099 8,075
Capital surplus.................................. 25,380 26,006
Retained earnings................................ 49,361 45,665
Accumulated other comprehensive income -- net
unrealized gain on available for sale
securities, net of tax of $133 (unaudited)
and $312, respectively....................... 258 605
Less treasury stock, at cost, 3,576 shares at
June 30, 2001 (unaudited) and December 31, 2000. (18) (18)
---------- ----------
Total shareholders' equity.................. 83,080 80,333
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $1,165,780 $1,146,140
========== ==========
See notes to interim consolidated financial statements.
3
PROSPERITY BANCSHARES, INC.(SM) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- ----------------
2001 2000 2001 2000
------- ------- ------ ------
(Dollars in thousands, except per share data)
INTEREST INCOME:
Loans, including fees........ $ 8,866 $ 8,195 $17,739 $16,004
Securities:
Taxable..................... 9,415 7,781 18,193 15,633
Nontaxable.................. 411 371 789 877
70% nontaxable preferred
dividends.................. 344 135 655 203
Deposits in financial
institutions................ 7 20 22 40
Federal funds sold........... 100 334 1,065 840
------- ------- ------- -------
Total interest income...... 19,143 16,836 38,463 33,597
------- ------- ------- -------
INTEREST EXPENSE:
Deposits................... 9,085 7,687 18,851 15,147
Note payable and federal
funds................... 322 316 575 1,033
Other.................... -- 281 -- 351
------- ------- ------- -------
Total interest expense... 9,407 8,284 19,426 16,531
------- ------- ------- -------
NET INTEREST INCOME...... 9,736 8,552 19,037 17,066
PROVISION FOR CREDIT LOSSES.. -- 75 -- 150
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES.. 9,736 8,477 19,037 16,916
------- ------- ------- -------
NONINTEREST INCOME:
Customer service fees...... 1,789 1,560 3,577 3,087
Other...................... 269 316 516 622
------- ------- ------- -------
Total noninterest income.. 2,058 1,876 4,093 3,709
------- ------- ------- -------
NONINTEREST EXPENSE:
Salaries and employee
benefits.................. 3,177 3,183 6,512 6,371
Net occupancy expense...... 474 497 990 978
Data processing............ 520 412 1,025 868
Goodwill amortization...... 340 273 681 547
Depreciation expense....... 383 421 798 826
Minority interest trust
preferred securities...... 288 288 576 575
Merger related expenses.... -- -- 2,425 --
Other...................... 1,555 1,498 2,859 2,931
------- ------- ------- -------
Total noninterest expense. 6,737 6,572 15,866 13,096
------- ------- ------- -------
INCOME BEFORE INCOME TAXES... 5,057 3,781 7,264 7,529
PROVISION FOR INCOME TAXES... 1,487 1,135 2,027 2,271
------- ------- ------- -------
NET INCOME................... $ 3,570 $ 2,646 $ 5,237 $ 5,258
======= ======= ======= =======
EARNINGS PER SHARE
Basic........................ $0.44 $0.33 $0.65 $0.66
======= ======= ======= =======
Diluted...................... $0.43 $0.32 $0.64 $0.64
======= ======= ======= =======
See notes to interim consolidated financial statements.
4
PROSPERITY BANCSHARES, INC.(SM) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
Other
Comprehensive
Income -- Net
Unrealized (Loss)
Common Stock Gain on Avail- Total
--------------------------- Capital Retained able for Sale Treasury Shareholders'
Shares Amount Surplus Earnings Securities Stock Equity
----------------- ------- -------- --------- --------------- --------- --------------
(Amounts in thousands, except share data)
BALANCE AT JANUARY 1, 2000...... 7,999,298 $7,999 $26,005 $37,719 $(2,681) $ (18) $69,024
Net income.................... 10,701 10,701
Net change in unrealized gain
on available for sale securities 3,286 3,286
-------------
Total comprehensive income.... 13,987
-------------
Sale of common stock.......... 76,200 76 259 335
Trust preferred issuance costs (90) (90)
Cash paid to dissenting
shareholder in connection with
the issuance of common
stock in exchange for common
stock of Heritage Bank...... (153) (153)
Cash paid in lieu of
fractional shares............ (12) (15) (15)
Cash dividends declared....... (2,755) (2,755)
--------- ------ ------- -------- -------------- -------- -------------
BALANCE AT DECEMBER 31, 2000.... 8,075,486 8,075 26,006 45,665 605 (18) 80,333
Net income (unaudited).......... 5,237 5,237
Net change in unrealized gain
on available for sale securities
(unaudited)................. (347) (347)
-------------
Total comprehensive income
(unaudited).................. 4,890
-------------
Cash paid to dissenting
shareholder in connection with
the issuance of common stock in
exchange for common stock of
Heritage Bank (unaudited).... (180) (180)
Cash paid to dissenting
shareholders in connection with
the issuance of common stock in
exchange for common stock of
Commercial (unaudited)....... (31,775) (32) (636) (668)
Sale of common stock
(unaudited).................. 55,700 56 190 246
Cash dividends declared
(unaudited).................. (1,541) (1,541)
--------- ------ ------- -------- -------------- -------- -------------
BALANCE AT JUNE 30, 2001
(unaudited).................. 8,099,411 $8,099 $25,380 $49,361 $ 258 $ (18) $83,080
========= ====== ======= ======== ============== ======== =============
See notes to interim consolidated financial statements
5
PROSPERITY BANCSHARES, INC.(SM) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
--------------------
2001 2000
--------- --------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 5,237 $ 5,258
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization......................... 1,480 1,303
Provision for credit losses........................... -- 150
Loss on sale of premises and equipment................ 341 --
Net amortization of premium/discount on investments.. 133 164
Decrease in accrued interest receivable and other
assets.............................................. 1,807 5,760
Increase in accrued interest payable
and other liabilities............................... 654 2,051
--------- --------
Total adjustments................................... 4,415 9,428
--------- --------
Net cash provided by operating activities........... 9,652 14,686
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and principal
paydowns of held to maturity securities............... 131,010 46,777
Purchase of held to maturity securities................. -- (52,579)
Proceeds from maturities and principal
paydowns of available for sale securities............. 40,746 10,875
Purchase of available for sale securities............... (232,446) (15,661)
Net increase in loans................................... (18,932) (15,867)
Purchase of bank premises and equipment................. (1,028) (613)
Proceeds from sale of bank premises and equipment
and other real estate acquired by foreclosure...... 557 --
Net decrease in interest-bearing
deposits in financial institutions.................... -- (297)
--------- --------
Net cash (used in) investing activities............ (80,093) (27,365)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in noninterest-bearing
deposits.............................................. (7,864) 8,577
Net increase (decrease) in interest-bearing deposits.... 24,688 (14,319)
Repayments of line of credit............................ (308) (34,276)
Cash paid to dissenting shareholders.................... (847) --
Payments of cash dividends.............................. (1,542) (1,389)
Sale of common stock.................................... 247 159
--------- --------
Net cash provided by financing activities.......... 14,374 (41,248)
--------- --------
NET (DECREASE) CASH AND CASH EQUIVALENTS................. $ (56,067) $(53,927)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........... 99,163 95,031
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD................. $ 43,096 $ 41,104
========= ========
See notes to interim consolidated financial statements.
6
PROSPERITY BANCSHARES, INC.(SM) AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The interim consolidated financial statements include the accounts of
Prosperity Bancshares, Inc. (SM) (the "Company") and its wholly-owned
subsidiaries, Prosperity Bank (SM) (the "Bank") and Prosperity Holdings, Inc.
These financial statements give retroactive effect to the merger of Commercial
Bancshares, Inc., a Texas corporation ("Commercial") with and into the Company
which was effective on February 23, 2001 and accounted for as a pooling of
interests. All significant inter-company transactions and balances have been
eliminated.
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the financial position, results
of operations and cash flows of the Company on a consolidated basis, and all
such adjustments are of a normal recurring nature. These financial statements
and the notes thereto should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 2000 and the Company's
Current Report on Form 8-K, as amended, dated February 23, 2001. Operating
results for the six month period ended June 30, 2001 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2001.
2. INCOME PER COMMON SHARE
The following table illustrates the computation of basic and diluted
earnings per share (in thousands, except per share data):
Three Months Ended Six Months Ended
June 30, June 30
------------------ ----------------
2001 2000 2001 2000
------- ------ ------ ------
Net income available to common shareholders $3,570 $2,646 $5,237 $5,258
Weighted average common shares outstanding 8,090 8,021 8,073 8,013
Potential dilutive common shares 152 198 161 205
------ ------ ------ ------
Weighted average common shares and equivalents
outstanding 8,242 8,219 8,234 8,218
------ ------ ------ ------
Basic earnings per common share $ 0.44 $ 0.33 $ 0.65 $ 0.66
====== ====== ====== ======
Diluted earnings per common share $ 0.43 $ 0.32 $ 0.64 $ 0.64
====== ====== ====== ======
7
PROSPERITY BANCSHARES, INC.(SM) AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
JUNE 30, 2001
(DOLLARS IN THOUSANDS)
(UNAUDITED)
3. RECENT ACCOUNTING STANDARDS
SFAS No. 133, "Accounting for Derivative Instruments and for Hedging
Activities," establishes accounting and reporting standards for derivative
instruments and requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. Management believes the implementation of this pronouncement on January
1, 2001 did not have a material effect on the Company's financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Statements and financial discussion and analysis contained in the Form 10-Q
that are not historical facts are forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements are based on assumptions and involve a number
of risks and uncertainties, many of which are beyond the Company's control. The
important factors that could cause actual results to differ materially from the
forward-looking statements include, without limitation:
. changes in interest rates and market prices, which could reduce the Company's
net interest margins, asset valuations and expense expectations;
. changes in the levels of loan prepayments and the resulting effects on the
value of the Company's loan portfolio;
. changes in local economic and business conditions which adversely affect the
Company's customers and their ability to transact profitable business with
the company, including the ability of the Company's borrowers to repay their
loans according to their terms or a change in the value of the related
collateral.
. increased competition for deposits and loans adversely affecting rates and
terms;
. the timing, impact and other uncertainties of future acquisitions, including
the Company's ability to identify suitable future acquisition candidates, the
success or failure in the integration of their operations, and the ability to
enter new markets successfully and capitalize on growth opportunities;
. increased credit risk in the Company's assets and increased operating risk
caused by a material change in commercial, consumer and/or real estate loans
as a percentage of the total loan portfolio;
. the failure of assumptions underlying the establishment of and provisions
made to the allowance for credit losses;
. changes in the availability of funds resulting in increased costs or reduced
liquidity;
. increased asset levels and changes in the composition of assets and the
resulting impact on the Company's capital levels and regulatory capital
ratios;
. the Company's ability to acquire, operate and maintain cost effective and
efficient systems without incurring unexpectedly difficult or expensive but
necessary technological changes;
8
. the loss of senior management or operating personnel and the potential
inability to hire qualified personnel at reasonable compensation levels; and
. changes in statutes and government regulations or their interpretations
applicable to bank holding companies and the Company's present and future
banking and other subsidiaries, including changes in tax requirements and tax
rates.
The Company undertakes no obligation to publicly update or otherwise revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
ISSUANCE OF PREFERRED SECURITIES OF PROSPERITY STATUTORY TRUST II
In July 2001, the Company formed Prosperity Statutory Trust II ("Trust II")
and on July 31, 2001, Trust II issued 15,000 Floating Rate Capital Securities
(the "Capital Securities") with an aggregate liquidation value of $15,000,000 to
a third party. Concurrently with the issuance of the Capital Securities, Trust
II issued trust common securities to the Company in the aggregate liquidation
value of $464,000. The proceeds of the issuance of the Capital Securities and
trust common securities were invested in the Company's Floating Rate Junior
Subordinated Deferrable Interest Debentures (the "Junior Subordinated
Debentures"). The Junior Subordinated Debentures will mature on July 31, 2031,
which date may be shortened to a date not earlier than July 31, 2006, if certain
conditions are met (including the Company having received prior approval of the
Federal Reserve and any other required regulatory approvals). These Junior
Subordinated Debentures, which are the only assets of Trust II, are subordinate
and junior in right of payment to all present and future senior indebtedness (as
defined in the Indenture dated July 31, 2001) of the Company. The Junior
Subordinated Debentures will accrue interest at a floating rate equal to 3-Month
LIBOR plus 3.58%, not to exceed 12.50%, payable quarterly. The interest rate on
the Junior Subordinated Debentures for the period from July 31, 2001 through
October 30, 2001 is equal to 7.29%. The quarterly distributions on the Capital
Securities will be paid at the same rate that interest is paid on the Junior
Subordinated Debentures.
The Company has fully and unconditionally guaranteed the Trust II's
obligations under the Capital Securities. Trust II must redeem the Capital
Securities when the Junior Subordinated Debentures are paid at maturity or upon
any earlier prepayment of the Junior Subordinated Debentures. The Junior
Subordinated Debentures may be prepaid if certain events occur, including a
change in the tax status or regulatory capital treatment of the Capital
Securities or a change in existing laws that requires Trust II to register as an
investment company.
For financial reporting purposes, Trust II is treated as a subsidiary of
the Company and consolidated in its corporate financial statements. As of July
31, 2001, a substantial portion of the Capital Securities are treated as Tier 1
capital by the Federal Reserve. The Company received net proceeds of $15.0
million, which will be used for the general corporate purposes of the Company
and Prosperity Bank(SM), including supporting continued expansion activities in
the Houston metropolitan area and surrounding counties through the establishment
and/or acquisition of additional Banking Centers and possible acquisitions.
OVERVIEW
The Company is a registered financial holding company that derives
substantially all of its revenues and income from the operation of Prosperity
Bank/SM/ (the "Bank"). The Bank, which changed its name from First Prosperity
Bank/SM/ on May 1, 2001, is a full-service bank that provides a broad line of
financial products and services to small and medium-sized businesses and
consumers through 29 full-service banking locations in the greater Houston
metropolitan area and thirteen contiguous counties situated south and southwest
of Houston and extending into South Texas.
On February 23, 2001, the Company and Commercial completed a merger whereby
Commercial was merged with and into the Company (the "Merger"). In connection
with the Merger, Heritage Bank, Commercial's wholly owned subsidiary, was merged
with and into the Bank. Similar to its previous acquisitions, management
believes that this merger will enable the Company to achieve certain economies
of scale and savings from the operation of the newly acquired banking offices as
additional Banking Centers. Heritage Bank had 12 full-service banking locations
in the Houston metropolitan area and in three adjacent counties, including
Houston-Bellaire, Cleveland, Cypress, Fairfield, Houston-Downtown, Houston-
Medical Center, Houston-River Oaks, Houston-Tanglewood/Memorial, Houston-Waugh
Drive, Liberty, Magnolia and Wharton.
As a result of the Merger, the holders of Commercial common stock received
155 shares of the Company's common stock, $1.00 par value ("Common Stock") for
each share of Commercial common stock they owned at the
9
effective time ("Effective Time") of the Merger. Based on this exchange ratio,
the Company issued an aggregate of 2,768,610 shares of its Common Stock in
connection with the Merger. In addition, in lieu of issuing shares of Company
Common Stock, cash in the amount of $569,625 was paid to a dissenting
shareholder in March 2001 and cash in the amount of $97,650 was paid to a
dissenting shareholder in May 2001. The options to purchase shares of Commercial
common stock which were outstanding at the Effective Time were converted into
options to purchase 13,330 shares of Company Common Stock. The converted options
will be governed by the original plans under which they were granted. In
connection with this Merger, the Company incurred approximately $2.4 million in
pretax merger-related expenses and other charges (the "Special Charge"). The
transaction was accounted for as a pooling interests and therefore the
historical financial data of the Company has been restated to include the
accounts and operations of Commercial for all periods prior to the Effective
Time of the Merger.
Total assets were $1.17 billion at June 30, 2001 compared with $1.15
billion at December 31, 2000. Total loans increased to $430.1 million at June
30, 2001 from $411.2 million at December 31, 2000, an increase of $18.9
million, or 4.6%. Total deposits were $1.05 billion at June 30, 2001 compared
with $1.03 billion at December 31, 2000, a increase of $16.8 million, or 1.6%.
Shareholders' equity increased $2.8 million or 3.4%, to $83.1 million at June
30, 2001 compared with $80.3 million at December 31, 2000.
RESULTS OF OPERATIONS EXCLUDING MERGER-RELATED EXPENSES
If the Company had not incurred the Special Charge of $2.4 million in
connection with the Merger, net income for the six months ended June 30, 2001
would have been $6.8 million ($0.83 per common share on a diluted basis)
compared with $5.3 million ($0.64 per common share on a diluted basis) for the
six months ended June 30, 2000, an increase of $1.5 million, or 29.6%. The
Company would have posted returns on average common equity of 16.54% and 15.05%,
returns on average assets of 1.17% and 1.04% and efficiency ratios of 57.04% and
61.99% for the six months ended June 30, 2001 and 2000, respectively.
RESULTS OF OPERATIONS AS REPORTED
Net income available to common shareholders was $3.6 million ($0.43 per
common share on a diluted basis) for the quarter ended June 30, 2001 compared
with $2.6 million ($0.32 per common share on a diluted basis) for the quarter
ended June 30, 2000, an increase of $1.0 million, or 34.9%. The Company posted
returns on average common equity of 17.30% and 14.95% and returns on average
assets of 1.22% and 1.05% for the quarters ended June 30, 2001 and 2000,
respectively. For the six months ended June 30, 2001, net income available to
common shareholders was $5.2 million ($0.64 per common share on a diluted basis)
compared with $5.3 million ($0.64 per common share on a diluted basis) for the
same period in 2000, a decrease of $21,000 or 0.4%.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income was $9.7 million for the quarter ended June 30, 2001
compared with $8.6 million for the quarter ended June 30, 2000, an increase of
$1.1 million, or 13.8%. Net interest income increased as a result of an
increase in average interest-earning assets to $1.09 billion for the quarter
ended June 30, 2001 from $937.8 million for the quarter ended June 30, 2000, an
increase of $157.1 million, or 16.7%. The net interest margin on a tax-
equivalent basis decreased to 3.74% from 3.79% for the same periods. Net
interest income increased $1.9 million, or 11.5%, to $19.0 million for the six
months ended June 30, 2001 from $17.1 million for the same period in 2000. This
increase is mainly attributable to higher average interest-earning assets. The
net interest margin on a tax-equivalent basis decreased to 3.67% from 3.73% for
the same periods, primarily due to an increase in the cost of interest-bearing
liabilities from 4.35% to 4.44%.
The Company's net interest income is affected by changes in the amount and mix
of interest-earning assets and interest-bearing liabilities, referred to as a
"volume change." It is also affected by changes in yields earned on interest-
earning assets and rates paid on interest-bearing deposits and other borrowed
funds, referred to as a "rate change."
10
The following table presents for the periods indicated the total dollar
amount of average balances, interest income from average interest-earning assets
and the resultant yields, as well as the interest expense on average interest-
bearing liabilities, expressed both in dollars and rates. Except as indicated in
the footnotes, no tax-equivalent adjustments were made and all average balances
are daily average balances. Any nonaccruing loans have been included in the
table as loans carrying a zero yield.
Three Months Ended June 30,
---------------------------------------------------------------------------
2001 2000
----------------------------------- ------------------------------------
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate (4) Balance Paid Rate (4)
----------- -------- --------- ----------- -------- --------
(Dollars in thousands)
Assets
Interest-earning assets:
Loans.......................................... $ 425,747 $ 8,866 8.33% $ 377,163 $ 8,195 8.69%
Securities(1).................................. 661,122 10,170 6.15 537,745 8,287 6.16
Federal funds sold and other temporary
investments................................... 8,010 107 5.34 22,903 354 6.18
---------- ---------- ---------- --------
Total interest-earning assets................ 1,094,879 19,143 6.99% 937,811 16,836 7.18%
---------- --------
Less allowance for credit losses............... (5,598) (5,173)
---------- ----------
Total interest-earning assets, net
of allowance................................ 1,089,281 932,638
Noninterest-earning assets.................. 76,671 71,719
---------- ----------
Total assets................................. $1,165,952 $1,004,357
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits............... $ 190,484 $ 1,196 2.51% $ 180,897 $ 1,528 3.38%
Savings and money market accounts.............. 241,164 2,057 3.41 212,275 2,020 3.81
Certificates of deposit........................ 424,493 5,832 5.50 314,076 4,139 5.27
Federal funds purchased and other
borrowings.................................... 23,476 322 5.49 38,543 597 6.20
---------- ---------- ---------- --------
Total interest-bearing liabilities........... 879,617 9,407 4.28% 745,791 8,284 4.44%
---------- ---------- ---------- --------
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits............ 184,431 172,537
Company-obligated mandatorily redeemable trust
preferred securities of subsidiary trust.... 12,000 12,000
Other liabilities.............................. 7,366 3,244
---------- ----------
Total liabilities............................ 1,083,414 933,572
---------- ----------
Shareholders' equity............................. 82,538 70,785
---------- ----------
Total liabilities and shareholders' equity... $1,165,952 $1,004,357
========== ==========
Net interest rate spread......................... 2.71% 2.74%
Net interest income and margin(2)................ $ 9,736 3.56% $ 8,552 3.65%
========== ==========
Net interest income and margin
(tax-equivalent basis)(3)....................... $ 10,244 3.74% $ 8,879 3.79%
========== ==========
- --------------------
(1) Yield is based on amortized cost and does not include any component of
unrealized gains or losses.
(2) The net interest margin is equal to net interest income divided by average
interest-earning assets.
(3) In order to make pretax income and resultant yields on tax-exempt
investments and loans comparable to those on taxable investments and loans,
a tax-equivalent adjustment has been computed using a federal income tax
rate of 35% and 34% for the quarters ended June 30, 2001 and June 30, 2000,
respectively.
(4) Annualized.
11
Six Months Ended June 30,
-------------------------------------------------------------------
2001 2000
--------------------------------- ---------------------------------
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate(4) Balance Paid Rate(4)
----------- -------- ------ ----------- -------- -------
(Dollars in thousands)
ASSETS
Interest-earning assets:
Loans........................................... $ 416,609 $ 17,739 8.52% $ 513,386 $16,004 6.23%
Securities(1)................................... 627,824 19,637 6.26 404,502 16,713 8.26
Federal funds sold and other temporary
investments.................................... 39,175 1,087 5.55 29,601 880 5.95
---------- -------- ---------- --------
Total interest-earning assets.................. 1,083,608 38,463 7.10% 947,489 33,597 7.09%
-------- --------
Less allowance for credit losses................ (5,563) (5,130)
---------- ----------
Total interest-earning assets, net
of allowance................................. 1,078,045 942,359
Noninterest-earning assets................... 82,545 73,045
---------- ----------
Total assets.................................. $1,160,590 $1,015,404
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits................ $ 193,994 $ 2,685 2.77% $ 184,800 $ 3,066 3.32%
Savings and money market accounts............... 244,755 4,426 3.62 215,443 4,008 3.72
Certificates of deposit......................... 417,143 11,740 5.63 313,595 8,073 5.15
Federal funds purchased and other
borrowings..................................... 20,091 575 5.72 45,271 1,382 6.11
---------- -------- ---------- --------
Total interest-bearing liabilities............ 875,983 19,426 4.44% 759,109 16,529 4.35%
---------- -------- ---------- --------
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits............. 181,916 170,972
Company-obligated mandatorily redeemable trust
preferred securities of subsidiary trust.... 12,000 12,000
Other liabilities............................... 8,324 3,468
---------- ----------
Total liabilities............................. 1,078,223 945,549
---------- ----------
Shareholders' equity.............................. 82,367 69,855
---------- ----------
Total liabilities and shareholders' equity.... $1,160,590 $1,015,404
========== ==========
Net interest rate spread.......................... 2.66% 2.74%
Net interest income and margin(2)................. $ 19,037 3.51% $ 17,068 3.60%
======== ==========
Net interest income and margin
(tax-equivalent basis)(3)........................ $ 19,905 3.67% $ 17,673 3.73%
======== ==========
- ---------------
(1) Yield is based on amortized cost and does not include any component of
unrealized gains or losses.
(2) The net interest margin is equal to net interest income divided by average
interest-earning assets.
(3) In order to make pretax income and resultant yields on tax-exempt
investments and loans comparable to those on taxable investments and loans,
a tax-equivalent adjustment has been computed using a federal income tax
rate of 35% and 34% for the six months ended June 30, 2001 and June 30,
2000, respectively.
(4) Annualized.
12
The following tables present the dollar amount of changes in interest income
and interest expense for the major components of interest-earning assets and
interest-bearing liabilities and distinguish between the increase (decrease)
related to outstanding balances and the volatility of interest rates for the
periods indicated. For purposes of these tables, changes attributable to both
rate and volume which cannot be segregated have been allocated to rate.
Three Months Ended June 30,
-----------------------------
2001 vs. 2000
-----------------------------
Increase
(Decrease)
Due to
-----------------
Volume Rate Total
-------- ------ -------
(Dollars in thousands)
Interest-earning assets:
Loans........................................... $ 1,056 $ (385) $ 671
Securities...................................... 1,901 (18) 1,883
Federal funds sold and other temporary
investments.................................... (230) (17) (247)
------- ------- ------
Total increase (decrease) in interest income... 2,727 (420) 2,307
------- ------- ------
Interest-bearing liabilities:
Interest-bearing demand deposits................ 81 (413) (332)
Savings and money market accounts............... 275 (238) 37
Certificates of deposit......................... 1,455 238 1,693
Federal funds purchased and other borrowings.... (233) (42) (275)
------- ------- ------
Total increase (decrease)in interest expense... 1,578 (455) 1,123
------- ------- ------
Increase in net interest income.................. $ 1,149 $ 35 $1,184
======= ======= ======
Six Months Ended June 30,
-----------------------------
2001 vs. 2000
-----------------------------
Increase
(Decrease)
Due to
-----------------
Volume Rate Total
------- ------ ------
(Dollars in thousands)
Interest-earning assets:
Loans........................................... $(3,017) $ 4,752 $1,735
Securities...................................... 9,227 (6,303) 2,924
Federal funds sold and other temporary
investments.................................... 285 (78) 207
------- ------- ------
Total increase (decrease) in interest income... 6,495 (1,629) 4,866
------- ------- ------
Interest-bearing liabilities:
Interest-bearing demand deposits................ 153 (534) (381)
Savings and money market accounts............... 545 (127) 418
Certificates of deposit......................... 2,666 1,001 3,667
Federal funds purchased and other borrowings.... (769) (38) (807)
------- ------- ------
Total increase in interest expense............. 2,595 302 2,897
------- ------- ------
Increase (decrease) in net interest income....... $ 3,900 $(1,931) $1,969
======= ======= ======
Provision for Credit Losses
Management actively monitors the Company's asset quality and provides
specific loss provisions when necessary. Loans are charged-off against the
provision for credit losses when appropriate. Although management believes it
uses the best information available to make determinations with respect to the
provision for credit losses, future adjustments may be necessary if economic
conditions differ from the assumptions used in making the initial
13
determinations. As of June 30, 2001, the allowance for credit losses amounted
to $5.6 million, or 1.30% of total loans compared with $5.5 million, or 1.34% of
total loans at December 31, 2000.
Provisions for credit losses are charged to income to bring the total
allowance for credit losses to a level deemed appropriate by management of the
Company based on such factors as historical loan loss experience, industry
diversification of the commercial loan portfolio, the amount of nonperforming
loans and related collateral, the volume growth and composition of the loan
portfolio, current economic conditions that may affect the borrower's ability to
pay and the value of collateral, the evaluation of the loan portfolio through
the internal loan review function and other relevant factors.
There were no provisions for credit losses for the six months ended June
30, 2001, a decrease from the provision of $150,000 for the corresponding period
in 2000. There were no provisions for credit losses for the three months ended
June 30, 2001, a decrease from the provision of $75,000 for the same period in
2000.
Noninterest Income
The Company's primary sources of noninterest income are service charges on
deposit accounts and other banking service related fees. The following table
presents, for the periods indicated, the major categories of noninterest income:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2001 2000 2001 2000
------- ------ ------ ------
(Dollars in thousands)
Service charges on deposit accounts... $1,789 $1,560 $3,577 $3,087
Other noninterest income.............. 269 316 516 622
------ ------ ------ ------
Total noninterest income............. $2,058 $1,876 $4,093 $3,709
====== ====== ====== ======
Noninterest income totaled $2.1 million for the three months ended June 30,
2001 compared with $1.9 million for the same period in 2000, an increase of
$182,000, or 9.7%. Noninterest income increased $384,000, or 10.4%, to $4.1
million for the six months ended June 30, 2001 from $3.7 million for the same
period in 2000.
Noninterest Expense
Noninterest expense totaled $6.7 million for the quarter ended June 30,
2001 compared with $6.6 million for the quarter ended June 30, 2000, an increase
of $167,000, or 2.54%. Noninterest expense totaled $15.9 million for the six
months ended June 30, 2001, an increase of $2.8 million, or 21.2%, from $13.1
million for the same period in 2000. The increase was principally due to the
one-time merger related charges associated with the Merger with Commercial.
14
The following table presents, for the periods indicated, the major
categories of noninterest expense:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2001 2000 2001 2000
------ ------ ------- -------
(Dollars in thousands)
Salaries and employee benefits............... $3,178 $3,183 $ 6,513 $ 6,371
Non-staff expenses:
Net occupancy expense....................... 474 499 990 978
Depreciation................................ 383 420 798 826
Data processing............................. 520 412 1,025 868
Regulatory assessments and FDIC insurance... 71 53 122 101
Ad valorem and franchise taxes.............. 119 143 245 247
Goodwill amortization....................... 340 274 681 547
Minority interest expense trust preferred...
securities................................. 288 288 576 575
Merger related expenses..................... -- -- 2,425 --
Other....................................... 1,364 1,300 2,491 2,583
------ ------ ------- -------
Total non-staff expenses..................... 3,559 3,391 9,353 6,725
Total noninterest expense.................... $6,737 $6,572 $15,866 $13,096
====== ====== ======= =======
Non-staff expenses increased $170,000, or 5.0%, to $3.6 million for the
quarter ended June 30, 2001 compared with the same period in 2000. For the six
month period ended June 30, 2001, non-staff expenses increased $2.6 million, or
39.1%, to $9.4 million from $6.7 million for the same period in 2000.
Income Taxes
Income tax expense increased $352,000, or 31.0%, to $1.5 million for the
three months ended June 30, 2001 from $1.1 million for the same period in 2000.
For the six month period ended June 30, 2001, income tax expense decreased
$244,000, or 10.7%, to $2.0 million from $2.3 million for the same period in
2000. The decrease was primarily attributable to lower pretax net earnings
which resulted from the one time merger related expenses of $2.4 million.
FINANCIAL CONDITION
Loan Portfolio
Total loans were $430.1 million at June 30, 2001, an increase of $18.9
million, or 4.6% from $411.2 million at December 31, 2000. Loan growth occurred
primarily in construction and land development loans. Period end loans
comprised 39.4% of average earning assets at June 30, 2001 compared with 38.8%
at December 31, 2000.
15
The following table summarizes the loan portfolio of the Company by type of
loan as of June 30, 2001 and December 31, 2000:
June 30, December 31,
2001 2000
--------------- ------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in thousands)
Commercial and industrial.... $ 47,105 11.0% $ 46,529 11.3%
Real estate:
Construction and land
development............... 26,569 6.2 20,128 4.9
1-4 family residential...... 176,181 41.0 175,525 42.7
Home equity................. 18,799 4.4 16,762 4.1
Commercial mortgages........ 80,272 18.6 75,896 18.5
Farmland.................... 10,847 2.5 12,218 3.0
Multifamily residential..... 5,861 1.4 2,961 0.7
Agriculture.................. 20,401 4.6 13,251 3.2
Other........................ 3,270 0.8 2,557 0.6
Consumer..................... 40,830 9.5 45,376 11.0
-------- ----- -------- -------
Total loans................ $430,135 100.0% $411,203 100.0%
======== ===== ======== =======
Nonperforming Assets
The Company had $439,000 in nonperforming assets at June 30, 2001 and $1.3
million in nonperforming assets at December 31, 2000. The Company generally
places a loan on nonaccrual status and ceases accruing interest when the payment
of principal or interest is delinquent for 90 days, or earlier in some cases,
unless the loan is in the process of collection and the underlying collateral
fully supports the carrying value of the loan. The Company generally charges
off all loans before attaining nonaccrual status.
The following table presents information regarding nonperforming assets as
of the dates indicated:
June 30, December 31,
2001 2000
-------- ------------
(Dollars in thousands)
Nonaccrual loans........................... $ 414 $ 10
Accruing loans 90 or more days past due.... 25 780
----- ------
Total nonperforming loans................. 439 790
Other real estate.......................... -- 545
----- ------
Total nonperforming assets................ $ 439 $1,335
===== ======
Allowance for Credit Losses
Management actively monitors the Company's asset quality and provides
specific loss allowances when necessary. Loans are charged-off against the
allowance for credit losses when appropriate. Although management believes it
uses the best information available to make determinations with respect to the
allowance for credit losses, future adjustments may be necessary if economic
conditions differ from the assumptions used in making the initial
determinations. As of June 30, 2001, the allowance for credit losses amounted
to $5.6 million, or 1.30% of total loans compared with $5.5 million, or 1.34% of
total loans at December 31, 2000.
16
Set forth below is an analysis of the allowance for credit losses for the
periods indicated:
As of and For the Six As of and For the
Months Ended June 30, Year Ended December 31,
2001 2000
---------------------- -----------------------
(Dollars in thousands)
Average loans outstanding.......................... $416,609 $383,054
======== ========
Gross loans outstanding at end of period........... $430,135 $411,203
======== ========
Allowance for credit losses at
beginning of period............................... $ 5,523 $ 5,031
Balance acquired with the Compass Acquisition...... -- 47
Provision for credit losses........................ -- 275
Charge-offs:
Commercial and industrial......................... (12) (117)
Real estate and agriculture....................... (--) (38)
Consumer.......................................... (41) (63)
Recoveries:
Commercial and industrial......................... 11 43
Real estate and agriculture....................... 84 263
Consumer.......................................... 28 82
-------- --------
Net recoveries (charge-offs)....................... 70 170
-------- --------
Allowance for credit losses at end of period....... $ 5,593 $ 5,523
======== ========
Ratio of allowance to end of period loans.......... 1.30 % 1.34%
Ratio of net (recoveries) charge-offs to average
loans............................................. (0.02)% (0.04)%
Ratio of nonperforming loans to end of
period loans...................................... 0.10% 0.19%
Securities
Securities totaled $647.0 million at June 30, 2001 compared with $587.0
million at December 31, 2000, an increase of $60.0 million, or 10.2%. At June
30, 2001, securities represented 55.5% of total assets compared with 51.2% of
total assets at December 31, 2000.
Premises and Equipment
Premises and equipment, net of accumulated depreciation, totaled $14.3
million at June 30, 2001 and $14.5 million at December 31, 2000.
Deposits
Total deposits were $1.05 billion at June 30, 2001 compared with $1.03
billion at December 31, 2000, an increase of $16.8 million. At June 30, 2001,
noninterest-bearing deposits accounted for 17.1% of total deposits compared with
18.2% of total deposits at December 31, 2000. Interest-bearing deposits totaled
$870.3 million, or 82.9%, of total deposits at June 30, 2001 compared with
$845.6 million, or 81.8%, of total deposits at December 31, 2000.
17
Other Borrowings
The Company had no notes payable and $13.6 million in Federal Home Loan
Bank ("FHLB") advances at June 30, 2001, compared with no notes payable and
$13.9 million in FHLB advances at December 31, 2000. The FHLB advances are
secured by a blanket lien on the Bank's first mortgage loans against one-to-four
family residential properties. The maturity dates range from the years 2004 to
2018 and have interest rates ranging from 5.95% to 6.48%. In addition, the
Company had no federal funds purchased on June 30, 2001 or December 31, 2000.
Liquidity
Effective management of balance sheet liquidity is necessary to fund growth
in earning assets and to pay liability maturities, depository customers'
withdrawal requirements and shareholders' dividends. The Company has numerous
sources of liquidity including a significant portfolio of shorter-term assets,
marketable investment securities (excluding those presently classified as "held-
to-maturity"), increases in customers' deposits, and access to borrowing
arrangements. Available borrowing arrangements maintained by the Company
include federal funds lines with other commercial banks and an advancement
arrangement with the FHLB.
Asset liquidity is provided by cash and assets which are readily marketable
or which will mature in the near future. As of June 30, 2001, the Company had
cash and cash equivalents of $43.1 million, down from $99.2 million at December
31, 2000. The decline was due primarily to a decrease in federal funds sold of
$47.6 million and an increase in loans of $18.9 million.
Capital Resources
Total shareholders' equity was $83.1 million at June 30, 2001 compared with
$80.3 million at December 31, 2000, an increase of $2.8 million, or 3.4%. The
increase was primarily due to net earnings of $5.2 million, offset by cash
dividends paid of $1.5 million and cash paid to dissenting shareholders in
connection with the issuance of common stock in exchange for common stock of
Commercial of $668,000.
Both the Board of Governors of the Federal Reserve System, with respect to the
Company, and the Federal Deposit Insurance Corporation ("FDIC"), with respect to
the Bank, have established certain minimum risk-based capital standards that
apply to bank holding companies and federally insured banks. As of June 30,
2001, the Company's Tier 1 capital, total risk-based capital and leverage
capital ratios were 14.20%, 15.30% and 6.28%, respectively. As of June 30,
2001, the Bank's risk-based capital ratios were above the levels required for
the Bank to be designated as "well capitalized" by the FDIC, with Tier-1
capital, total risk-based capital and leverage capital ratios of 14.04%, 15.15%
and 6.21%, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company manages market risk, which for the Company is primarily interest
rate risk, through its Asset Liability Committee which is composed of senior
officers of the Company, in accordance with policies approved by the Company's
Board of Directors.
The Company uses simulation analysis to examine the potential effects of
market changes on net interest income and market value. It considers
macroeconomic variables, Company strategy, liquidity and other factors as it
quantifies market risk. There have been no material changes of this nature
since December 31, 2000. See the Company's Annual Report on Form 10-K, Item 7
"Management's Discussion and Analysis and Results of Operations-Interest Rate
Sensitivity and Liquidity".
18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
a. Not applicable
b. Not applicable
c. Not applicable
d. Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 18, 2001, the Company held its Annual Meeting of Shareholders to
consider and act upon the following items:
1. A. Virgil Pace, Jr. was elected as a Class I director to serve on the Board
of Directors of the Company until the Company's 2002 Annual Meeting of
Shareholders and until his successor is duly elected and qualified. H.E.
Timanus, Jr. was elected as a Class II director to serve on the Board of
Directors of the Company until the Company's 2003 Annual Meeting of
Shareholders and until his successor is duly elected and qualified. Charles
A. Davis, Jr., Ned S. Holmes, Tracy T. Rudolph, and David Zalman were
elected as a Class III directors, to serve on the Board of Directors of the
Company until the Company's 2004 Annual Meeting of Shareholders and until
their successors are duly elected and qualified. A total of 5,013,576 shares
were voted in favor of the election of each director and 6,855 shares were
withheld from voting for each director other than H.E. Timanus, Jr. A total
of 5,012,646 shares were voted in favor of the election of Mr. Timanus and
7,785 shares were withheld from voting for Mr. Timanus.
The following Class I and Class II directors continued in office after
the Annual Meeting: Harry L. Bayne, James A. Bouligny, J.T. Herin,
Charles Slavik, Harrison Stafford II and Robert Steelhammer.
2. The shareholders ratified the appointment of Deloitte & Touche LLP as the
independent auditors of the books and accounts of the Company for the year
ending December 31, 2001. A total of 5,014,956 shares were voted in favor of
the appointment, 1,030 shares were voted against the appointment and 4,445
shares abstained from voting.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
N/A
b. On May 3, 2001 the Company filed Amendment No. 1 to its Current
Report on Form 8-K filed on March 1, 2001 under Item 2 of Form 8-K to
file the financial statements related to the merger of Commercial with
the Company.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROSPERITY BANCSHARES, INC.
(Registrant)
Date: August 13, 2001 /s/ David Zalman
______________________________
David Zalman
Chief Executive
Officer/President
Date: August 13, 2001 /s/ David Hollaway
______________________________
David Hollaway
Chief Financial Officer
20