Prosperity Bancshares, Inc.

Good morning. Welcome to the Prosperity Bank Shares, Inc. fourth 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 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 telephone keypad. To withdraw from the question queue, please press star, then two. Please note, 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 Bank Shares' fourth 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 several weeks. I'm Charlotte Rasche, General Counsel, Prosperity Bank Shares. And here with me today is David Zalman, Senior Chairman and Chief Executive Officer. H.E. Tim Tamanis, Jr., Chairman. Osobek Osmanov, Chief Financial Officer. Eddie Saffity, Vice Chairman. Kevin Hannigan, 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 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 moderator, MJ. Before we begin, let me make the usual disclaimers. Certain of the matters discussed in this presentation may constitute forward-looking statements for 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 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 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 Zolman.

Thank you, Charlotte. I'd like to welcome and thank everyone listening to our fourth quarter 2022 conference call. Our annualized return on average assets for the three months ended December 31st, 2022, was 1.47%. And our annualized return on average tangible common equity came in at 16.2%. Prosperity's efficiency ratio was 40.8% for the three months ending December 31, 2022. Our net income was 137.9 million for the three months ending December 31st. And that was compared with 126 million for the same period in 2021, which represented an increase of 8.7%. The net income per diluted common share was $1.51 for the three months ending December 31, 2022, compared with $1.38 for the same period in 21. which represented an increase of 9.4%. Our net income was $524 million for the year ended December 31st, 2022, compared with $519 million for 2021, an increase of $5 million, or 1%. Net income for diluted common share was $5.73 for the year ending December 31st, 2022, compared to $5.60 for 2021, an increase of 2.3%. Our loans excluding warehouse purchase program and PPP loans at December 31st, 2022 were $18 billion compared with $16.7 billion at December 31, 2021, an increase of $1.4 billion, or 8.5%. Our linked quarter loans, excluding warehouse purchase program and PPP loans, increased $518 million, or 3%, 11.8% annualized, from the 17.6 billion at September 30, 2022. Our deposits at December 31, 2022 were 28.5 billion, a decrease of 2.2 billion or 7.3% when you compare it to 30.8 billion at December 31, 2021, primarily due to a decrease in public fund deposits. Linked quarter deposits decreased 766 million or 2.6% from the 29.3 billion at September 30, 2022. Our period end and average non-interest bearing deposits saw small increases. But as mentioned earlier, most of the decrease in the total deposits was in the public fund category. Our asset quality non-performing assets totaled 27 million or eight basis points of quarterly average interest earning assets at December 31st, 2022. And that's compared with 28 million or nine basis points of quarterly average interest earning assets at December 31st, 2021. The allowance for credit losses on loans and off-balance sheet credit exposure was 311 million at December 31st, 2022, compared with 316 million last year, December 31st, 2021, and 312 million at September 30, 2022. We are excited about our pending mergers with First Bank Shares of Texas and Lone Star State Bank Shares. The combined banks will add approximately $3 billion in assets and increase our market share in the West Texas areas of Lubbock, Midland, and Odessa, as well as provide entry into new markets to us in Wichita Falls, Amarillo, and the Horseshoe Bay, Marble Falls, and Fredericksburg areas in Central Texas. The transactions are pending regulatory and shareholder approvals and are expected to close during the first half of 2023, although delays could occur. During the fourth quarter of 2022, Prosperity continued to see growth in loans, which we expect will continue into 2023. The growth comes from loans as well as existing loans not paying off as fast as they did when rates were low and it was opportunistic for borrowers to repay or move the loans. Consumer spending remains strong, especially in the tourism, restaurant, and hospitality sectors. Real estate sales and pricing have been affected by the increase in rates, but we expect that because of inventory levels and the population growth, the impact will be less in Texas and Oklahoma. We believe that the economies in Texas and Oklahoma will outperform other states over the next several years as companies and individuals continue to move to the states because of lower tax rates and a business-friendly political environment. We expect that companies will need more infrastructure and buildings and consumers will need more housing and places to spend their money and both will need banks to finance the growth. While the net interest margin at some banks has improved immediately because of higher rates, we expect prosperity in that interest margin to continue to improve over the next several years as our bond portfolio, which yielded 1.96% during the fourth quarter of 2022, re-prices to higher yields, assuming that rates normalized near the current rate. Overall, we are excited about the growth and future of our company. I would like to thank 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 Osobek Osmanov, our Chief Financial Officer, to discuss some of the specific financial results we achieved. Osobek.