Prosperity Bancshares, Inc.

Hello and welcome to the Prosperity Bank Shares Inc. first quarter 2024 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, and to withdraw from the question queue, please press star, then two. As a reminder, this conference is being recorded. I would now like to hand the call to Charlotte Rasche. Please go ahead. Thank you.

Good morning, ladies and gentlemen, and welcome to Prosperity Bank Shares' first quarter 2024 earnings conference call. This call is being broadcast live on our website and will be available for replay for the next few weeks. I'm Charlotte Rasche, 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 Saffity, Vice Chairman, Kevin Hannigan, President and Chief Operating Officer, Randy Hester, Chief Lending Officer, Mays Davenport, Director of Corporate Strategy, and Bob Dowdell, Executive Vice President. David 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 Tomanis, who will discuss our lending activities, including asset quality. Finally, we will open the call for questions. 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 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 David Zalman.

Thank you, Charlotte. I'd like to welcome and thank everyone listening to our first quarter 2024 conference call. We are excited to announce that on April 1st, 2024, we completed the merger of Lone Star State Bank Shares, Inc. and Lone Star Bank, headquartered in Lubbock, Texas. The operational integration is scheduled for late October 2024 when Lone Star customers will have full access to our 288 full service locations. We welcome the Lone Star customers and associates to Prosperity and will work hard to win your trust. Prosperity continues to focus on long-term relationships and our customer success while maintaining strong asset quality and earnings and a fair return to shareholders. Prosperity maintained a high tangible equity to tangible asset ratio of 10.33% for the first quarter of 2024 while sharing earnings with our shareholders. Prosperity repurchased 567,692 shares of common stock during the first quarter of 2024 in addition to the quarterly dividend. In 2023, Prosperity's total capital return to shareholders from dividends and share repurchases was $278 million. For the three months ended March 31st, 2024, the net income was $110 million, or $1.18 per diluted common share, compared with $95 million or $1.02 per diluted common share for the three months ended December 31st, 2023. The change was primarily due to higher interest income and lower FDIC assessments. For the three months ended March 31st, 2024, the annualized return on average assets was 1.13%, and the annualized return on average tangible equity was 12.06% and the efficiency ratio was 49%. The loans were $21,265,000,000 at March 31st, 2024, an increase of $84 million or 40 basis points, 1.6% annualized from the $21,181,000,000 at December 31st, 2023. The loans increased $1,931,000,000, or 10%, compared with the $19,334,000,000 at March 31, 2023. The loans, excluding warehouse purchase program loans and loans acquired in the merger of First Bank shares, increased $115 million, or 60 basis points, or 2.4% annualized during the first quarter of 2024. Our deposits appear to have stabilized and core deposits have increased modestly. Deposits were $27,176,000,000 at March 31st, 2024, a decrease of $4.3 million from the $27,180,000,000 at December 31st, 2023. Deposits increased 171 million or 60 basis points compared with the 27 billion, 4 million at March 31st, 2023. Deposits excluding public fund deposits increased $109 million during the first quarter with no broker deposits purchased. The net interest margin on a tax equivalent basis was 2.79% for the three months ending March 31st, 2024, compared with 2.75% for the three months ended December 31, 2023. Based on our models, we believe our net interest margin should continue to improve to a more normalized level as our bond portfolio and loan portfolio reprice. Our average net interest margin from 2012 to 2022 was 3.37% compared with our net interest margin of 2.79% for the first quarter of 2024. Our non-performing assets totaled 83 million or 24 basis points of quarterly average interest earning assets at March 31st, 2024 compared with 72 million or 21 basis points of quarterly average earning assets at December 31st, 2023. Our non-performing assets are higher than our historical levels primarily due to acquired loans. We expect to reduce our non-performing assets ratio to a more normal level within a year. The $2.4 trillion Texas economy is now the eighth largest economy in the world, larger than Russia, Canada, Italy, and others. Texas is the top state for Fortune 500 headquartered companies, currently at 55, and was named the 2023 State of the Year for Best in Nation Business Climate and Job Row. Texas added 369,600 non-farm jobs in 2023. the most in the nation. We believe the Texas and Oklahoma economy should outperform most other states. As previously mentioned, the merger of Lone Star State Bank shares was completed on April 1st, 2024, and the operational integration is scheduled for late October 2024. We're excited to have the Lone Star Associates on the prosperity team. We continue to have active conversation with other bankers regarding potential acquisition opportunities and hope to continue to grow through thoughtful mergers and acquisitions. Overall, I want to thank all our associates for helping create the success we have had. We have a strong team and a deep bench at Prosperity, and we'll continue to work hard to help our customers and our associates succeed and to increase shareholder value. Thank you 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 that we achieved.