UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(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, 2005
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.®
(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.) |
Prosperity Bank Plaza
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 Exchange Act). Yes x No ¨
As of May 3, 2005, there were 27,492,313 shares of the registrant’s Common Stock, par value $1.00 per share, outstanding.
Explanatory Note
The purpose of this Amendment No. 1 on Form 10-Q/A to the Quarterly Report on Form 10-Q of Prosperity Bancshares, Inc. (the “Company”) for the quarter ended March 31, 2005 (the “Original Form 10-Q) is to restate the Company’s interim consolidated financial statements as of and for the three months ended March 31, 2005 to correct amounts on the Company’s consolidated statement of cash flows related to acquisitions as more fully discussed in Note 6 to the accompanying interim consolidated financial statements. Specifically, the amounts presented in the Company’s consolidated statement of cash flows for the three months ended March 31, 2005 in this Amendment No. 1 reflect a correction in the presentation of the Company’s common stock issued in connection with acquisitions to present this activity as a non-cash activity rather than being presented as cash flows in the financing and investing activities sections of the consolidated statement of cash flows. This correction resulted in a decrease in net cash provided by financing activities and a corresponding increase in cash provided by investing activities from those amounts previously presented in the consolidated statement of cash flows. In addition, the Company corrected certain other immaterial miscellaneous items in the consolidated statement of cash flows for the three months ended March 31, 2005. There was no change in the net decrease in cash and cash equivalents. Further, these changes had no effect on the Company’s consolidated statements of income, consolidated balance sheets or consolidated statements of shareholders’ equity.
In addition, the Company has amended Item 4, Controls and Procedures, to update the disclosure regarding disclosure controls and procedures and internal control over financial reporting.
As a result of the restatement, the Company has determined it to be necessary to amend the Original Form 10-Q. This Amendment No. 1 amends and restates in its entirety Part I, Items 1 and 4 and Part II, Item 6 of the Original Form 10-Q. This Amendment No. 1 continues to reflect circumstances as of the date of the filing of the Original Form 10-Q and does not reflect events occurring after the filing of the Original Form 10-Q, or modify or update those disclosures in any way, except as required to reflect the effects of the restatement as described in Note 6 to the accompanying interim consolidated financial statements and to correct certain other immaterial miscellaneous items.
PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES
INDEX TO FORM 10-Q/A
2
PART I – FINANCIAL INFORMATION
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| March 31, 2005 |
December 31, 2004 |
|||||||
| (Dollars in thousands, except share data) |
||||||||
| ASSETS | ||||||||
| Cash and due from banks |
$ | 71,695 | $ | 58,760 | ||||
| Federal funds sold |
55,796 | 79,150 | ||||||
| Total cash and cash equivalents |
127,491 | 137,910 | ||||||
| Interest-bearing deposits in financial institutions |
196 | 200 | ||||||
| Available for sale securities, at fair value (amortized cost of $285,192 and $182,450, respectively) |
279,044 | 177,683 | ||||||
| Held to maturity securities, at cost (fair value of $1,185,580 and $1,124,500, respectively) |
1,207,419 | 1,125,109 | ||||||
| Loans |
1,500,138 | 1,035,513 | ||||||
| Less allowance for credit losses |
(16,934 | ) | (13,105 | ) | ||||
| Loans, net |
1,483,204 | 1,022,408 | ||||||
| Accrued interest receivable |
12,959 | 10,171 | ||||||
| Goodwill |
245,256 | 153,180 | ||||||
| Core deposit intangibles, net of accumulated amortization of $3,515 and $2,792, respectively |
24,883 | 11,492 | ||||||
| Bank premises and equipment, net |
49,996 | 35,793 | ||||||
| Other real estate owned |
720 | 341 | ||||||
| Other assets |
48,579 | 22,941 | ||||||
| TOTAL |
$ | 3,479,747 | $ | 2,697,228 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| LIABILITIES: |
||||||||
| Deposits: |
||||||||
| Noninterest-bearing |
$ | 592,238 | $ | 518,358 | ||||
| Interest-bearing |
2,301,443 | 1,798,718 | ||||||
| Total deposits |
2,893,681 | 2,317,076 | ||||||
| Other borrowings |
43,543 | 13,116 | ||||||
| Securities sold under repurchase agreements |
25,726 | 25,058 | ||||||
| Accrued interest payable |
3,002 | 3,102 | ||||||
| Other liabilities |
12,291 | 15,805 | ||||||
| Junior subordinated debentures |
75,775 | 47,424 | ||||||
| Total liabilities |
3,054,018 | 2,421,581 | ||||||
| SHAREHOLDERS’ EQUITY: |
||||||||
| Preferred stock, $1 par value; 20,000,000 shares authorized; |
— | — | ||||||
| Common stock, $1 par value; 50,000,000 shares authorized; |
27,513 | 22,418 | ||||||
| Capital surplus |
271,916 | 134,288 | ||||||
| Retained earnings |
130,903 | 122,647 | ||||||
| Accumulated other comprehensive income — net unrealized losses on available for sale securities, net of tax benefit of $2,152 and $1,669, respectively |
(3,996 | ) | (3,099 | ) | ||||
| Less treasury stock, at cost, 37,088 shares at March 31, 2005 and December 31, 2004, respectively |
(607 | ) | (607 | ) | ||||
| Total shareholders’ equity |
425,729 | 275,647 | ||||||
| TOTAL |
$ | 3,479,747 | $ | 2,697,228 | ||||
See notes to interim consolidated financial statements.
3
PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended March 31, | ||||||
| 2005 |
2004 | |||||
| (Dollars in thousands, except per share data) | ||||||
| INTEREST INCOME: |
||||||
| Loans, including fees |
$ | 19,670 | $ | 12,313 | ||
| Securities: |
||||||
| Taxable |
13,447 | 13,168 | ||||
| Nontaxable |
346 | 385 | ||||
| 70% nontaxable preferred dividends |
128 | 452 | ||||
| Federal funds sold |
441 | 53 | ||||
| Deposits in other financial institutions |
1 | 1 | ||||
| Total interest income |
34,033 | 26,372 | ||||
| INTEREST EXPENSE: |
||||||
| Deposits |
8,271 | 5,781 | ||||
| Junior subordinated debentures |
889 | 996 | ||||
| Note payable and other borrowings |
396 | 248 | ||||
| Total interest expense |
9,556 | 7,025 | ||||
| NET INTEREST INCOME |
24,477 | 19,347 | ||||
| PROVISION FOR CREDIT LOSSES |
120 | 120 | ||||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES |
24,357 | 19,227 | ||||
| NONINTEREST INCOME: |
||||||
| Customer service fees |
5,408 | 4,760 | ||||
| Other |
1,125 | 512 | ||||
| Total noninterest income |
6,533 | 5,272 | ||||
| NONINTEREST EXPENSE: |
||||||
| Salaries and employee benefits |
8,531 | 6,704 | ||||
| Net occupancy expense |
1,371 | 1,043 | ||||
| Depreciation expense |
970 | 701 | ||||
| Data processing |
596 | 447 | ||||
| Communications expense |
820 | 725 | ||||
| Core deposit intangibles amortization |
723 | 383 | ||||
| Other |
2,823 | 2,456 | ||||
| Total noninterest expense |
15,834 | 12,459 | ||||
| INCOME BEFORE INCOME TAXES |
15,056 | 12,040 | ||||
| PROVISION FOR INCOME TAXES |
4,502 | 3,977 | ||||
| NET INCOME |
$ | 10,554 | $ | 8,063 | ||
| EARNINGS PER SHARE |
||||||
| Basic |
$ | 0.44 | $ | 0.39 | ||
| Diluted |
$ | 0.43 | $ | 0.38 | ||
See notes to interim consolidated financial statements.
4
PROSPERITY BANCSHARES, INC. ® AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
| Common Stock |
Accumulated Other |
Total | ||||||||||||||||||||||
| Shares |
Amount |
Capital Surplus |
Retained Earnings |
Comprehensive Income |
Treasury Stock |
Shareholders’ Equity |
||||||||||||||||||
| (Dollars in thousands, except share data) | ||||||||||||||||||||||||
| BALANCE AT JANUARY 1, 2004 |
20,966,706 | $ | 20,967 | $ | 102,594 | $ | 94,610 | $ | 2,024 | $ | (607 | ) | $ | 219,588 | ||||||||||
| Net income |
34,707 | 34,707 | ||||||||||||||||||||||
| Net change in unrealized (loss) gain on available for sale securities. |
(5,123 | ) | (5,123 | ) | ||||||||||||||||||||
| Total comprehensive income |
29,584 | |||||||||||||||||||||||
| Issuance of common stock in connection with the exercise of stock options |
206,231 | 206 | 840 | 1,046 | ||||||||||||||||||||
| Common stock issued in connection with the Liberty acquisition |
1,245,191 | 1,245 | 30,713 | 31,958 | ||||||||||||||||||||
| Stock option compensation expense |
141 | 141 | ||||||||||||||||||||||
| Cash dividends declared, $0.31 per share |
(6,670 | ) | (6,670 | ) | ||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2004 |
22,418,128 | 22,418 | 134,288 | 122,647 | ) | (3,099 | ) | (607 | ) | 275,647 | ||||||||||||||
| Net income |
10,554 | 10,554 | ||||||||||||||||||||||
| Net change in unrealized loss on available for sale securities |
(897 | ) | (897 | ) | ||||||||||||||||||||
| Total comprehensive income |
9,657 | |||||||||||||||||||||||
| Issuance of common stock in connection with the exercise of stock options |
16,500 | 17 | 59 | 76 | ||||||||||||||||||||
| Common stock issued in connection with the First Capital acquisition |
5,078,856 | 5,079 | 137,439 | 142,518 | ||||||||||||||||||||
| Stock option compensation expense |
130 | 130 | ||||||||||||||||||||||
| Cash dividends declared, $0.0825 |
(2,298 | ) | (2,298 | ) | ||||||||||||||||||||
| BALANCE AT MARCH 31, 2005 |
27,513,484 | $ | 27,513 | $ | 271,916 | $ | 130,903 | $ | (3,996 | ) | $ | (607 | ) | $ | 425,729 | |||||||||
See notes to interim consolidated financial statements.
5
PROSPERITY BANCSHARES, INC. ® AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| (As restated, see Note 6) |
||||||||
| (Dollars in thousands) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 10,554 | $ | 8,063 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
1,693 | 1,084 | ||||||
| Provision for credit losses |
120 | 120 | ||||||
| Net amortization of discount/premium on investments |
897 | 1,259 | ||||||
| Stock option compensation expense |
130 | — | ||||||
| (Gain) loss on sale of other real estate |
(67 | ) | 15 | |||||
| Loss (gain) on sale of premises and equipment |
14 | (68 | ) | |||||
| Decrease (increase) in other assets and accrued interest receivable |
4,045 | (368 | ) | |||||
| (Decrease) increase in accrued interest payable and other liabilities |
(797 | ) | 4,088 | |||||
| Total adjustments |
6,035 | 6,130 | ||||||
| Net cash provided by operating activities |
16,589 | 14,193 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Proceeds from maturities and principal paydowns of held to maturity securities |
55,104 | 62,776 | ||||||
| Purchase of held to maturity securities |
(88,952 | ) | (132,668 | ) | ||||
| Proceeds from maturities and principal paydowns of available for sale securities |
13,986 | 18,545 | ||||||
| Purchase of available for sale securities |
(25,000 | ) | — | |||||
| Net decrease (increase) in loans |
1,484 | (434 | ) | |||||
| Purchase of First Capital Bankers, Inc |
(375 | ) | — | |||||
| Cash and cash equivalents acquired in the purchase of First Capital Bankers, Inc. |
58,972 | — | ||||||
| Purchase of bank premises and equipment |
(338 | ) | (272 | ) | ||||
| Net decrease in interest-bearing deposits in financial institutions |
100 | 112 | ||||||
| Net proceeds from sale of bank premises, equipment, and other real estate |
441 | 485 | ||||||
| Net cash provided by (used in) investing activities |
15,422 | (51,456 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Net decrease in noninterest-bearing deposits |
(13,478 | ) | (24,252 | ) | ||||
| Net (decrease) increase in interest-bearing deposits |
(27,068 | ) | 63,365 | |||||
| Net repayments of lines of credit |
(330 | ) | (184 | ) | ||||
| Net proceeds (repayments) of securities sold under repurchase agreements |
668 | (174 | ) | |||||
| Proceeds from exercise of stock options |
76 | 63 | ||||||
| Payments of cash dividends |
(2,298 | ) | (1,571 | ) | ||||
| Net cash (used in) provided by financing activities |
(42,430 | ) | 37,247 | |||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS |
$ | (10,419 | ) | $ | (16 | ) | ||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
137,910 | 83,713 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 127,491 | $ | 83,697 | ||||
| NONCASH ACTIVITIES: |
||||||||
| Stock issued in connection with the First Capital Bankers, Inc. acquisition |
142,518 | — | ||||||
See notes to interim consolidated financial statements.
6
PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The interim consolidated financial statements include the accounts of Prosperity Bancshares, Inc. ® (the “Company”) and its wholly-owned subsidiaries, Prosperity Bank ®(the “Bank”) and Prosperity Holdings of Delaware, LLC. 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, 2004 and Amendment No. 1 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2004. Operating results for the three month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.
2. INCOME PER COMMON SHARE
The following table illustrates the computation of basic and diluted earnings per share.
| Three Months Ended March 31, | ||||||
| 2005 |
2004 | |||||
| Net income available to shareholders |
$ | 10,554 | $ | 8,063 | ||
| Weighted average shares outstanding |
24,080 | 20,937 | ||||
| Potential dilutive shares from options |
277 | 296 | ||||
| Weighted average shares and equivalents outstanding |
24,357 | 21,233 | ||||
| Basic earnings per share |
$ | 0.44 | $ | 0.39 | ||
| Diluted earnings per share |
$ | 0.43 | $ | 0.38 | ||
The incremental shares for the assumed exercise of the outstanding options were determined by application of the treasury stock method. No options issued by the Company had an anti-dilutive effect as of March 31, 2005 and 2004.
3. NEW ACCOUNTING STANDARDS
SFAS No. 123(R), “Share-Based Payment (Revised 2004).” SFAS 123(R) establishes standards for the accounting for transactions in which an entity (i) exchanges its equity instruments for goods or services, or (ii) incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of the equity instruments. SFAS 123(R) eliminates the ability to account for stock-based compensation using APB 25 and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the date of the grant. The effective date for adoption of SFAS 123R was deferred by the Securities and Exchange Commission (“SEC”) in April 2005. SFAS 123R is now effective for the beginning of the next fiscal year that begins after June 15, 2005.
On March 29, 2005, the SEC issued SAB 107 to provide public companies additional guidance in applying the provisions of FASB Statement No. 123(R), Share-Based Payment. Among other things, SAB 107 describes the SEC staff’s expectations in determining the assumptions that underlie the fair value estimates and discusses the interaction of SFAS 123(R) with certain existing SEC guidance. The guidance is also beneficial to users of financial statements in analyzing the information
7
PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
provided under Statement 123(R). The SAB will be applied upon the adoption of SFAS 123(R) and the Company does not expect its adoption to have a material impact on its consolidated financial position, results of operations or cash flows.
4. RECENT ACQUISITIONS
On March 1, 2005, the Company completed its acquisition of FirstCapital Bankers, Inc. (the “First Capital acquisition”), Corpus Christi, Texas. Under the terms of the agreement, First Capital was merged into the Company and First Capital’s wholly owned subsidiary, FirstCapital Bank, s.s.b. was merged into the Bank. The Company issued approximately 5.079 million shares of its common stock for all of the issued and outstanding capital stock of First Capital and converted all outstanding options to acquire First Capital common stock into options to acquire approximately 234,000 shares of Company common stock. First Capital was privately held and operated thirty-two (32) banking offices in and around Corpus Christi, Houston and Victoria, Texas, five of which were closed and consolidated with existing banking centers of the Company.
The table below summarizes select proforma data for the two combined companies for the periods indicated:
| For the three months ended March 31, | ||||||
| 2005 |
2004 | |||||
| Net interest income |
$ | 28,272 | $ | 25,321 | ||
| Net income. |
11,859 | 9,611 | ||||
| Earnings per share (diluted) |
$ | 0.43 | $ | 0.37 | ||
5. GOODWILL AND CORE DEPOSIT INTANGIBLES
Changes in the carrying amount of the Company’s goodwill and core deposit intangibles (CDI) for three months ended March 31, 2005 were as follows:
| Goodwill |
Core Deposit Intangibles |
|||||||
| Balance as of December 31, 2004 |
$ | 153,180 | $ | 11,492 | ||||
| Amortization |
— | (723 | ) | |||||
| Acquisition of First Capital Bankers, Inc |
92,996 | 14,114 | ||||||
| Acquisition of Village Bank & Trust ssb (deferred taxes) |
76 | — | ||||||
| Acquisition of Liberty Bancshares, Inc (deferred taxes) |
1,177 | — | ||||||
| Acquisitions prior to December 31, 2003 (deferred taxes) |
(2,173 | ) | — | |||||
| Balance as of March 31, 2005 |
$ | 245,256 | $ | 24,883 | ||||
The Company initially records the total premium paid on acquisitions as goodwill. After a third party valuation, core deposit intangibles are identified and reclassified from goodwill to core deposit intangibles on the balance sheet. This reclassification had no effect on total assets, liabilities, shareholders’ equity, net income or cash flows.
6. RESTATEMENT OF INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Subsequent to the issuance of the Company’s March 31, 2005 interim consolidated financial statements, the Company determined that amounts presented in the Company’s consolidated statement of cash flows for the three months ended March 31, 2005 reflected an error in the presentation of the Company’s common stock issued in connection with acquisitions. As a result, the consolidated statement of cash flows for the three months ended March 31, 2005 has been restated to present this activity as a non-cash activity rather than being presented as cash flows in the financing and investing activities sections of the
8
PROSPERITY BANCSHARES, INC.® AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
consolidated statement of cash flows. This correction resulted in a decrease in net cash provided by financing activities and a corresponding increase in cash provided by investing activities of $142.5 million from those amounts previously presented in the consolidated statement of cash flows for the three months ended March 31, 2005. In addition, the Company corrected certain other immaterial miscellaneous items in the consolidated statement of cash flows for the three months ended March 31, 2005. There was no change in the net decrease in cash and cash equivalents. Further, these changes had no effect on the Company’s consolidated statements of income, consolidated balance sheets or consolidated statements of shareholders’ equity.
The effect of the restatement on the Company’s consolidated statement of cash flows for the three months ended March 31, 2005 is reflected in the table below:
Consolidated statement of cash flows:
| As Previously Reported |
As Restated |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Stock option compensation expense |
$ | — | $ | 130 | ||||
| Net cash provided by operating activities |
16,459 | 16,589 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Premium paid for First Capital Bankers, Inc. |
(107,110 | ) | — | |||||
| Net liabilities acquired in the purchase of First Capital Bankers, Inc. (net of acquired cash of $58,972) |
23,189 | — | ||||||
| Purchase of First Capital Bankers, Inc |
— | (375 | ) | |||||
| Cash and cash equivalents acquired in the purchase of First Capital Bankers, Inc. |
— | 58,972 | ||||||
| Net cash (used in) provided by investing activities |
(127,096 | ) | 15,422 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Stock issued in connection with the acquisition of First Capital Bankers, Inc. |
142,518 | — | ||||||
| Stock option compensation expense |
130 | — | ||||||
| Net cash provided by (used in) financing activities |
100,218 | (42,430 | ) | |||||
| Net decrease in cash and cash equivalents |
$ | (10,419 | ) | $ | (10,419 | ) | ||
| NONCASH ACTIVITIES: |
||||||||
| Stock issued in connection with the First Capital Bankers, Inc. acquisition. |
$ | — | $ | 142,518 | ||||
9
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its SEC filings is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosures controls and procedures” in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply judgment in evaluating its controls and procedures.
Management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. Subsequent to the date of that evaluation, management considered the restatement of the Company’s interim consolidated financial statements and concluded that such restatement was the result of a material weakness related to controls over the preparation and review of its consolidated statement of cash flows. Based on such considerations, the Company’s Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2005, the Company’s disclosure controls and procedures were not effective solely because of the material weakness described below. Specifically, the Company did not maintain effective controls to appropriately classify the presentation of the Company’s common stock issued in connection with acquisitions. The amounts presented in the Company’s consolidated statement of cash flows for the three months ended March 31, 2005 reflect a change in the presentation for stock issued in connection with acquisitions to present this activity as a non-cash activity rather than being presented as cash flows in the financing and investing activities sections of the consolidated statement of cash flows. This correction resulted in a decrease in net cash provided by financing activities and a corresponding increase in cash provided by investing activities. The Company also corrected other immaterial miscellaneous items. There was no change in net cash provided by operating activities or in the total net decrease in cash and cash equivalents. Further, these changes had no impact on the Company’s consolidated statements of income, consolidated balance sheets or consolidated statements of shareholders’ equity.
Changes in Internal Control Over Financial Reporting
In an effort to remediate the material weakness in the Company’s internal control over the preparation and review of its consolidated statement of cash flows described above, during the third quarter of 2005 management implemented a process to aid in correctly classifying amounts related to acquisitions reflected in the consolidated statement of cash flows, including a more detailed cash flow statement preparation checklist. Accordingly, management believes this process will remediate the material weakness discussed above. There were no changes in the Company’s internal controls over financial reporting during the first quarter of 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Exhibit Number |
Description of Exhibit | |
| 3.1 | Amended and Restated Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-63267)) | |
| 3.2 | Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended March 31, 2001) | |
| 4.1 | Form of certificate representing shares of Company common stock (incorporated herein by reference to Exhibit 4 to the Company’s Registration Statement on Form S-1 (Registration No. 333-63267)) | |
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| 10.1† | Prosperity Bancshares, Inc. 2004 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-4 (Registration No. 333-121767)) | |
| 10.2† | Amended and Restated Employment Agreement by and between Prosperity Bank and David Zalman (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 18, 2005) | |
| 10.3† | Amended and Restated Employment Agreement by and between Prosperity Bank and H. E. Timanus, Jr. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated January 18, 2005) | |
| 10.4† | Employment Agreement between the Company, Prosperity Bank and D. Michael Hunter (incorporated herein by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-4 (Registration No. 333-121767)) | |
| 10.5† | First Capital Bankers, Inc. 1996 Executive Stock Option Plan (incorporated herein by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 (Registration No. 333-123367)) | |
| 10.6† | First Capital Bankers, Inc. Amended and Restated 1998 Stock Option Plan (incorporated herein by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (Registration No. 333-123367)) | |
| 31.1* | Certification of the Chief Executive Officer pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. | |
| 31.2* | Certification of the Chief Financial Officer pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. | |
| 32.1* | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2* | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. . | |
| * | Filed herewith. |
| † | Management contract or compensatory plan or arrangement. |
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: |
10/28/05 | /s/ David Zalman | ||
| David Zalman | ||||
| Chief Executive Officer/President | ||||
| Date: |
10/28/05 | /s/ David Hollaway | ||
| David Hollaway | ||||
| Chief Financial Officer | ||||
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