Prosperity Bancshares, Inc.

Good day and welcome to the Prosperity Bancshares fourth quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star and then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on a touch-tone phone. To withdraw your question, please press star and then two. Please note that this 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' fourth quarter 2020 earnings conference call. This call is being broadcast live over the Internet at ProsperityBankUSA.com and will be available for replay for the next few weeks. I'm Charlotte Rasche. Executive Vice President and General Counsel of Prosperity Bancshares. And here 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, Tom. 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 risk and other factors which may cause the actual results or performance of prosperity bankshares to be materially different from future results or performance 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 bankshares filings with the Securities and Exchange Commission, including Forms 10Q and 10K 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 would like to welcome and thank everyone listening to our fourth quarter 2020 conference call. Prosperity reported some of the best results in our history. Much of the success is attributed to the dedicated associates of Prosperity and Legacy Texas who helped make our combination with Legacy Texas so successful. Our annualized return on average assets, average common equity, and average changeable common equity for the three months ending December 31, 2020 work We made 1.63% on average assets. We made 8.98% return on average common equity. And we made a 19.5% return on average tangible common equity. Respectively, prosperity's efficiency ratio, net gains, excluding the net gains and losses on the sell or write-down of assets and taxes, was 40.7% for the three months ended December 30, 2020. Our net income was $137 million for the three months ended December 31, 2020, compared with $86 million for the same period in 2019. However, the net income for the fourth quarter of 2019 included a $46.4 million of merger-related expenses. Our earnings per diluted common share were $1.48 for the three months ended December 31, 2020, compared with $1.01 for the same period in 2019, and were impacted by the merger-related expenses of $46.4 million, or 43 cents, per diluted common share in the fourth quarter of 2019. Our loans at December 31, 2020 were $20.2 billion, an increase of $1.4 billion, or 7.4%, compared with $18.8 billion at December 31, 2019. Our linked quarter loans decreased $548 million, or 2.6%, from $20.7 billion at September 30, 2020, primarily due to a $430 million decrease in PPP loans. In addition, we continue to reduce loans identified at Legacy Texas that we determined to exit. At December 31, 2020, the company had $963 million of PPP loans outstanding. Our deposits at December 31, 2020 were $27.3 billion An increase of $3.1 billion, or 13%, compared with $24.2 billion at December 31, 2019. Lien's quarter deposits increased $901 million, or 3.4%, from $26.4 billion at September 30, 2020. We continue to see increased deposit balances. Some of the money is from stimulus payments and some from increased savings, given the unknowns in the economy. This may begin to change as vaccinations increase and we return to a more normalized daily life. Our asset quality, the non-performing assets decreased $10 million, or 14.3% from the quarter ended September 30, 2020. Our non-performing assets totaled $59 million, or 20 basis points of quarterly average interest earning assets at December 31, 2020 compared with 62 million or 25 basis points of quarterly average interest earning assets at December 31, 2019 and as mentioned 69 million or 24 basis points of quarterly average interest earning assets as of September 30, 2020. With regard to acquisitions, as mentioned in prior conference calls, we believe that the M&A activity will increase, and we saw PNC's acquisition of BBVA announced last quarter, as well as two other large transactions. Bank stock prices have risen, which results in sellers being more active. Further, most banks are facing lower net interest margins and higher operating costs due to technology and other operational investments. We believe that these factors, combined with the unknown regulatory burden going forward, may cause more bankers to explore the strategic alternatives, including a sale. We are open to exploring an acquisition transaction if it makes sense for our shareholders and is appropriately accreted to earnings. With regard to the economy, Texas and Oklahoma continue to benefit from a pro-business attitude. Companies continue to move to Texas. with HP and Oracle announcing a headquarters move and other companies such as Tesla announcing a major expansion into Texas. Also, Samsung recently mentioned a $10 billion plan expansion in the Austin area. The Federal Reserve Bank of Dallas has projected achieving a nationwide 5% GDP growth by year end 2021 and an unemployment rate of 4.5%, noting The first half of the year will be slower, with an expected increase in the second half of the year. We believe Texas will have a higher growth rate and outperform other states over the next several years. We expect that we will face several challenges over the next few years, such as higher tax rates that will affect income and continued lower interest rates that will affect our net interest margin. However, a steeper yield curve could help to mitigate both the issues. I would like to thank all our customers, associates, directors, and shareholders for helping build such a successful bank. Thanks again for your support of our company. Let me turn over our discussion to Asylbek Osmonov, our Chief Financial Officer, to discuss some of the specific financial results we achieved. Asylbek?