Prosperity Bancshares, Inc.

Good day and welcome to the Prosperity Bancshares, Inc. first quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. If your question has been answered and you wish to withdraw yourself, please press star then 2. Please note, today's event is being recorded. I would now like to turn the conference over to Charlotte Rasche. Please go ahead.

Thank you. Good morning, ladies and gentlemen, and welcome to Prosperity Bancshares' first quarter 2020 earnings conference call. This call is being broadcast live over the internet at prosperitybankusa.com and will be available for replay at the same location for the next few weeks. I'm Charlotte Rasche, Executive Vice President and General Counsel of Prosperity Bancshares, and on the call with me today is David Zalman, Senior Chairman and Chief Executive Officer, H.E Timanus, Jr., Chairman, Asylbek Osmonov, Chief Financial Officer, Eddie Safady, Vice Chairman, Kevin Hanigan, President and Chief Operating Officer, Randy Hester, Chief Lending Officer, Merle Carnes, Chief Credit Officer, Mays Davenport, Director of Corporate Strategy, and Bob Dowdell, Executive Vice President. David Zalman will lead off with a review of the highlights for the recent quarter. He will be followed by Asylbek Osmonov who will review some of our recent financial statistics and Tim Timanus who will discuss our lending activities, including asset quality. Finally, we will open the call for questions. During the call, interested parties may participate live by following the instructions that will be provided by our call moderator, Eric. Before we begin, let me make the usual disclaimers. Certain of the matters discussed in this presentation may constitute forward-looking statements for the purposes of the federal securities laws, and as such, may involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of prosperity bankshares to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. Additional information concerning factors that could cause actual results to be materially different than those in the forward-looking statements can be found in Prosperity Bancshares' filings with the Securities and Exchange Commission, including Forms 10-Q and 10-K and other reports and statements we have filed with the SEC. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Now let me turn the call over to David Zalman.

Thank you, Charlotte. I'd like to welcome and thank everyone listening to our first quarter 2020 conference call. Our merger with Legacy Texas was completed on November 1, 2019, and our management teams continue to find commonalities and strengths that we expect will benefit our company, our shareholders, and associates going forward. Our planned operational integration remains on schedule for June of this year. In our efforts to continue to enhance shareholder value, Prosperity repurchased 2,092,000 shares of its common stock at an average weighted price of $52.59 per share during the first quarter of 2020. The net income was $130 million for the three months ended March 31, 2020, compared with $82 million for the same period in 2019. Our earnings per diluted common share were $1.39 for the three months ended March 31, 2020. compared with $1.18 for the same period in 2019, a 17.8% increase. For the first quarter of 2020 on an annualized basis, return on average assets was 1.67%, return on average common equity was 8.86%, and return on average tangible common equity was 20.1%. Prosperity's efficiency ratio, excluding net gains on the set of assets and taxes, was 42.9%, where the three months ended March 31, 2020. Our loans at March 31, 2020 were $19.1 billion, an increase of $8.7 billion, or 83.7%, compared with the $10.4 billion at March 31, 2019. Lean quarter loans increased $281 million, 1.5%, or 6% annualized compared with the $18.8 billion at December 31, 2019. Our deposits at March 31, 2020 were $23.8 billion, an increase of $6.6 billion or 38.5% compared with the $17.1 billion at March 31, 2019. Our lead quarter deposits decreased $373 million or 1.5% from the $24.2 billion at December 31, 2019. A portion of this decrease was due to our planned reduction of higher cost and broker deposits assumed in the Legacy Texas merger. Excluding deposits we assumed in the merger and new deposits we generated at the acquired banking centers since November 1, 2019, deposits at March 31, 2020 grew $1 billion, or 6%, compared with March 31, 2019. and Drew 162 million non-basis points or 3.6% annualized compared with December 31, 2019. Our non-performing assets totaled $67 million or 25 basis points of quarterly average interest earning assets at March 31, 2020 compared with $40 million or 21 basis points of quarterly average interest earning assets at March 31, 2019 and 62 million or 25 basis points of quarterly average interest earning assets at December 31, 2019. The increase during the first quarter of 2020 was primarily due to the merger. During the first quarter of 2020, Prosperity increased its allowance for credit losses to $327 million from $87 million in the fourth quarter of 2019 after adopting Accounting Standard ASU 2016-13, also known as CECL. The amount of the allowance is based on our CECL methodology. We believe these additional reserves should help to insulate the company during these challenging and unprecedented times. Our allowance for credit losses to total loans excluding the Warehouse Purchase Program loans now stand at 1.88% compared with 51 basis points at December 31, 2019. With regard to acquisitions, as one would expect, conversations with other bankers regarding potential acquisition opportunities have subsided. However, we remain ready to enter into negotiations when it's right for all parties and is appropriately accretive to our existing shareholders. While today's challenges are certainly extraordinary, Prosperity has a deep management team with experience in navigating and adopting in difficult times. We enter this economic downturn from a position of strength with sound credit quality, robust capital and liquidity, and solid operating fundamentals. We believe that our team will see us through, and we remain confident in our long-term future. I would like to thank every associate at Prosperity. Throughout the past several months, while dealing with various personal challenges related to the pandemic, our retail team operated at full capacity, enabling us to keep our locations open and serve our customers' daily needs. Additionally, our operational staff and lending team were crucial in accepting, processing, and submitting thousands of SBA PPP applications and closing the loans, working around the clock to assist our customers. Thanks again for your support of our company. Let me turn over our discussion to Asylbek, our Chief Financial Officer, to discuss some of the specific financial results we achieved.