Prosperity Bancshares, Inc.

Good morning and welcome to the Prosperity Bank Shares fourth 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' fourth 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 Tomanis, Jr., Chairman, Osobek Osmanov, Chief Financial Officer, Eddie Saffody, Vice Chairman, Kevin Hannigan, President and Chief Operating Officer, Mays Davenport, Director of Corporate Strategy, and Bob Dowdell, Executive Vice President. Randy Hester, our Chief Lending Officer, is unable to join us today. David Zolman 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. 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 our 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 Solman.

Thank you, Charlotte. I would like to welcome and thank everyone listening to our fourth quarter 2024 conference call. Our net income was $130 million for the three months ending December 31st, 2024, compared with about $95 million for the same period in 2023, an increase of 34 million or 36%. The net income for diluted common share was $1.37 for the three months ended December 31st, 2024, compared with $1.02 for the same period in 2023, an increase of 34%. The changes were primarily due to an increase in net interest income and a decrease in the FDIC Special Assessment. Excluding the merger related expenses and the FDIC Special Assessment, each net of tax, net income was $111 million or $1.19 per diluted common share for the three months ending December 31st, 2023. So when comparing earnings for the fourth quarter of 2024 with the fourth quarter of 2023, excluding the merger related expenses and the FDIC special assessment, the net income increased $18.7 million or 16.8% and diluted earnings per share increased 18 cents or 15.1% for 2024. As previously mentioned, as our assets continue to reprice, Earnings and return on assets have increased. We expect this trend to continue in 2025. Our annualized return on average assets and average tangible common equity for the three months ending December 31st, 2024 were 1.31% and 13.5% respectively. Prosperity's efficiency ratio, excluding the net gains and losses on the sale, write downs, or write up of assets and securities was 46% for the three months ending December 31st, 2024. The net interest margin increased 30 basis points to 3.05% compared with 2.75% for the fourth quarter of 2023. As previously mentioned, we expect a higher net interest margin for 2025 as our assets reprice subject to certain assumptions. On January 21st of 2025, Prosperity Bank shares announced a stock repurchase program under which up to 5% or approximately 4.8 million shares of our outstanding common stock may be acquired over a one-year period expiring on January 21st, 2026 at the discretion of management. With regard to loans, the loans were 22.2 billion at December 31st, 24, an increase of 968 million, or 4.6%, compared with 21.2 billion at December 31st, 2023, primarily due to the merger with Lone Star Bank. Excluding the loans acquired in the merger, and new production at the acquired banking center since April 1st, 2024. Loans at December 31st, 2024 decreased 88 million compared with December 31st, 2023. Overall, when excluding the increase in loans due to the merger, loan growth was essentially flat in 2024. However, we did hear positive comments from our customers after the election. Time will tell. but we should experience organic loan growth in 2025 if our customers follow through with their positive momentum. We also disposed of or worked through a number of problem loans from the first capital acquisition, which reduced total loans. With regard to deposits, deposits were $28.4 billion at December 31st, 2024, an increase of $1.2 billion, or 4.4%. compared with $27.2 billion at December 31, 2023, primarily due to the merger. Linked quarter deposits increased $293 million, or 1%, 4.2% annualized, from $28.1 billion at September 30, 2024. Excluding the deposits assumed in the merger and new deposits generated at the acquired banking centers since April 1st, Deposits at December 31st, 2024 increased by 108 million compared with December 31st, 2023. Deposits started to normalize in 2024 with more deposits coming in than leaving the bank. Prosperity has a strong core deposit base with a low cost of deposits of 1.44% for the fourth quarter of 2024 compared with 1.53% for the third quarter of 2024, a decrease of nine basis points. Additionally, we have non-interest bearing deposits of 9.8 billion representing 34.5% of our total deposits. With regard to asset quality, our non-performing assets totaled 81.5 million are 23 basis points of quarterly average interest earning assets at December 31st, 2024, compared with 72 million or 21 basis points of quarterly average interest earning assets at December 31st, 2023. And 89 million or 25 basis points of quarterly average interest earning assets at September 30, 2024. The allowance for credit losses on loans and off-balance sheet credit exposure was $389 million at December 31, 2024. Prosperity continues to be interested in merger and acquisitions and will pursue a partnership when the transaction makes sense for the shareholders and associates of both institutions. Early indications show that banks are more open to merger transactions with the new administration as it appears that The agencies responsible for transaction approval will be more favorable for entertaining merger proposals. We're excited about the growth and future of our company. The Texas and Oklahoma economies are some of the best in the country. Texas has no state income tax and both Texas and Oklahoma have a business friendly political climate. The Texas population grew more than any other state in 2024 with the addition of 563,000 people, bringing the total population to 31.3 million. Further, according to Forbes in their July 2024 issue, there have been 209 corporate relocations to Texas since 2018. All of this bodes well for our future growth. Prosperity has a strong capital position that provides opportunities to participate in mergers and acquisitions. repurchase stock, or fund organic growth without the need for additional capital. We believe that our net interest margin should continue to expand to a more normal ratio as our assets continue to reprice, thereby increasing our earnings per share. We also have strong core deposits with 34.5% of our deposits in non-interest bearing accounts. I would like to thank all our customers, associates, directors, and shareholders for helping build such a strong, 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.