Prosperity Bancshares, Inc.

Good morning and welcome to the Prosperity Bank Shares third 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. 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 Rasche. Please go ahead.

Thank you. Good morning, ladies and gentlemen, and welcome to Prosperity Bank Shares' third 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, Osobek Osmanov, Chief Financial Officer, Eddie Saffody, Vice Chairman, Kevin Hannigan, President and Chief Operating Officer, Randy Hester, Chief Lending 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 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 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. 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 third quarter 2024 conference call. I'm pleased to announce that the Board of Directors approved increasing the fourth quarter 2024 dividend to 58 cents per share from the 56 cents per share that was paid in the prior four quarters. The increase reflects the continued confidence the board has in our company and our markets. The compound annual growth rate in dividends declared from 2003 to 2024 was 11%. We continue to share our success with our shareholders through the payment of dividends and opportunistic stock repurchases, while also continuing to grow our capital. Our tangible capital increased 218 million from September 30, 2023 to September 30, 2024. This is the amount Prosperity retained after paying 212 million in dividends and repurchasing $75 million of our common stock during this period, reflecting Prosperity's stable earnings. Prosperity's tangible book value per share has a compound annual growth rate of 11% for the last 21 years or since 2003. Prosperity reported net income of $127 million for the quarter ended September 30, 2024, compared with 112 million for the same period in 2023. The net income per diluted common share was $1.34 for the quarter ended September 30, 2024, compared with $1.20 for the same period in 2023, an 11.7% increase. Prosperity earnings were primarily impacted by a higher net interest margin. The net interest margin on a tax-equivalent basis was 2.95%. where the three months ended September 30, 2024, compared to 2.72% for the same period, September 30, 2023. As mentioned in previous calls, our net interest margin should continue to improve to more normal levels as our assets reprice. Prosperity continues to exhibit solid operating metrics with annualized returns on tangible equity of 13.5% and return on assets of 1.28% for the third quarter of 2024. Loans were 22.3 billion at September 30, 2024, an increase of 948 million or 4.4% compared with 21.4 billion at September 30, 2023. Linked quarter loans increased $60 million. Excluding the loans acquired in the Lone Star merger and new production by the acquired lending operation since April 1, 2024, loans at September 30, 2024 decreased by $161 million compared with September 30, 2023. The reduction in loans is not unusual for prosperity as we are still working through loans acquired from the first capital bank. If the terms and conditions of any acquired loan does not meet certain standards, we exit the asset. Over the years, this process has resulted in lower non-performing and charged-off loans and makes us a stronger bank that can withstand various banking cycles. Our shareholders have come to expect this. For deposits worth $28 billion at September 30, 2024, an increase of $774 million, or 2.8%, compared with $27.3 billion at September 30, 2023. Link quarter deposits increased $154 million from $27.9 billion at June 30, 2024. Excluding deposits assumed in the Lone Star merger at September 30, 2024, deposits decreased by $361 million compared with September 30, 2023, and increased by 206 million compared with June 30, 2024. We're encouraged that the deposits are stabilizing and that core deposits have grown slightly compared with the previous quarter after the effects of the bank failures in 2023. Importantly, Prosperity has not purchased any broker deposits during this turbulent time. Our non-performing assets total 89.9 million or 25 basis points of quarterly average interest earning assets at September 30, 2024, compared with 69.5 million or 20 basis points of quarterly average interest earning assets at September 30, 2023, and 89.6 million or 25 basis points of quarterly average interest earning assets at June 30, 2024. with a significant portion of the balance for each period attributable to the acquired loans. The allowance for credit losses on loans and off-balance sheet credit exposure was 392 million at September 30, 2024, compared with 89.9 million in non-performing assets as of September 30, 2024. Our net charge-offs were 12 million for the nine months ended September 30, 2024, compared with 18.9 million for the nine months ended September 30, 2023. We continue to have conversations with other bankers considering strategic opportunities. We believe that higher technology and staffing costs, funding costs, loan competition, succession planning, concerns, and increased regulatory burden all point to continued consolidation. We remain ready to move forward in the event a transaction materializes and will be beneficial to our company's long-term future and will increase shareholder value. An estimated 1,000 to 1,300 people move to Texas every day based on the U.S. Census Bureau. In 2023, 473,000 people moved to Texas, which equates to approximately 40,000 per month or 1,300 per day. The Texas and Oklahoma economies continue to benefit from companies relocating from states with higher taxes and more regulation. This, combined with people moving to the states, requires additional housing and infrastructure, a driver for loans, and increased business opportunities. We believe our bank is located in two of the best states we can be for future growth and continued prosperity. Thanks again for your support of our company. Let me turn over our discussion to Osobek Osmanov, our Chief Financial Officer, to discuss the specific financial results we achieved. Osobek?