Prosperity Bancshares, Inc.

Good morning, and welcome to this Prosperity Bank Share Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the... After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Charlotte Rashi, please go ahead.

Thank you. Good morning, ladies and gentlemen, and welcome to Prosperity Bank Shares' second quarter 2022 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 Rashi, Executive Vice President and General Counsel of Prosperity Bank Shares. And here with me today is David Zalman, Senior Chairman and Chief Executive Officer, H.E. Tim Tamanis, Jr., Chairman, Alsobek Osmanov, Chief Financial Officer, Eddie Safody, Vice Chairman, Kevin Hannigan, President and Chief Operating Officer, Randy Hester, Chief Lending Officer, Merle Carnes, Chief Credit Officer, Maze 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 Osobek Osmanov, who will review some of our recent financial statistics, and Tim Tamanis, 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 operator. 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 or performance of Prosperity Bank shares to be materially different from future results or performance expressed or implied by such forward-looking statements. Additional information concerning factors that could cause the actual results to be materially different than those in the forward-looking statements can be found in Prosperity Bank shares 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 Davis Allman.

Thank you, Charlotte. I would like to welcome and thank everyone listening to our second quarter 2022 conference call. For the second quarter of 2022, Prosperity had strong earnings, core loan growth, continued sound asset quality, impressive cost controls, and a return on average tangible common equity of 15.7%. We are optimistic about our company, which is evidenced by a repurchase of 981,000 shares of our stock during the second quarter. With regard to earnings on a linked quarter basis, our net income was 128 million for the three months ended June 30, 2022. That's compared with 122 million for the three months ended March 31, 22. An increase of 6.2 million or 5%. Our net income per diluted common share was $1.40 for the three months ended June 30, 22, compared with the $1.33 for the three months ended March 2022. Our annualized return on average assets for the three months ended June 30, 2022, were 1.36%. And the annualized return on average tangible common equity for the three months ending June 30, 2022, again, was 15.7%. With regard to loans, loans on June 30, 2022 were $18.2 billion, a decrease of $1 billion or 5.4% compared with $19 billion on June 30, 2021, primarily due to decreases in warehouse purchase program, PPP loans, and structured commercial real estate loans. Excluding the warehouse purchase program, and the PPP loans, loans on June 30, 2022 were $17 billion compared to $16.4 billion on June 30, 2021, an increase of $667 million or 4.1%. Our linked quarter loans, excluding warehouse purchase program and PPP loans, increased $406 million or 2.4%, 9.8% annualized. Bottom line, excluding the warehouse purchase program loans and the PPP loans, we saw a 4.1% growth year over year and a 9.8% annualized growth quarter over quarter. Our deposits on June 30, 2022 were $29.9 billion. an increase of $755 million or 2.6% compared with the $29.1 billion on June 30, 2021. Our linked quarter deposits decreased $1.2 billion or 3.9% from $31.1 billion on March 31, 2022. The decrease in deposits was primarily due to seasonality. As previously mentioned, we have over 500 municipal customers such as cities, schools, and counties that use the tax dollars they receive in December and January throughout the year, resulting in declining account balances in the second and third quarters of the year. Also contributing to the decrease was our public fund customers moving their investment funds to other places now offering higher rates that were not available to these customers before the recent interest rate increases. With regard to asset quality, our non-performing assets totaled 22 million or seven basis points of quarterly average interest earning assets on June 30, 2022. And that was compared with 33 million or 11 basis points of quarterly average interest earning assets on June 30, 2021, a 34% decrease in non-performing assets. The allowance for credit losses on loans and off balance sheet credit exposure was 313 million on June 30, 2022. With regard to acquisitions, we continue to have conversations with bankers considering opportunities. We believe that higher technology costs, salary increases, loan competition, funding costs, succession planning concerns, and increased regulatory burden all point to continued consolidation. With regard to the economy and overall, Texas and Oklahoma continue to shine as more people and companies move to the states. For example, according to CNBC, Texas added more jobs over the last year than the 25 lowest job growth states combined. Further, during the last year, the Dallas-Fort Worth area added 295,000 jobs, three times its annual average annual growth, and the Houston area added 185,000 jobs. Unemployment remains unusually low. Prosperity continues to focus on building core customer relationships, maintaining sound asset quality, and operating the bank in an efficient manner. while investing in ever-changing technology and product distribution channels. We intend to grow the company both organically and through mergers and acquisitions. I want to thank everyone in our company for helping to make it the success it has become. Thanks again for your support of our company. Let me turn over our discussion to Osobek Osmanov, our Chief Financial Officer, to discuss some of the specific financial results we achieved.