Prosperity Bancshares, Inc.

Good day, and welcome to the Prosperity Bank Shares first quarter 2025 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' first quarter 2025 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, Randy Hester, Chief Lending Officer, Mays Davenport, Director of Corporate Strategy, and Bob Dowdell, Executive Vice President. David Zellman 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 financial statistics, and Tim Tomanas, 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 Bankshare's 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 Zolman.

Thank you, Charlotte. I would like to welcome and thank everyone listening to our first quarter 2025 conference call. We and others believe that prosperity is doing the right thing. Prosperity has been ranked as one of Forbes' best banks since the list inception in 2010 and was ranked in the top 10 for 14 consecutive years. Additionally, Prosperity was named the best overall bank in Texas by Money for 2024-2025 and was ranked among America's best regional banks by Newsweek in 2025. Prosperity continues to focus on long-term relationships and our customers' success while maintaining strong asset quality, solid earnings, and a fair return to shareholders. Prosperity maintained a high tangible equity to tangible asset ratio of 11.2% with tangible equity of $3.9 billion. Our net income was $130 million for the three months ended March 31st, 2025, compared with $110 million for the same period in 2024. an increase of 19.8 million or 17.9%. The net income per diluted common share was $1.37 for the three months ended March 31st, 2025, compared with $1.18 for the same period in 2024, an increase of 16.1%. For the three months ended March 31st, 2025, annualized return on average assets and average tangible common equity were 1.34% on average assets and 13.23% on average tangible common equity, respectively, and the efficiency ratio was 45.7%. These ratios all show considerable improvement compared with the same period in 2024. Loans were 21.9 billion at March 31st, 2025, an increase of $712 million, or 3.3%, compared with 21.2 billion at March 31st, 2024, primarily due to the merger with Lone Star State Bank shares. As of March 31st, 2025, loans excluding warehouse purchase program loans and loans acquired in the Lone Star merger decreased 67.6 million compared with December 31st, 2024. The bank continues to reduce identified loans assumed in recent acquisitions in the amount of 434 million in 2024, and 115 million in the first quarter of 2025. Our deposits were 28 billion at March 31st, 2025, an increase of 851 million, or 3.1%, compared with 27 billion at March 31st, 2024, primarily due to the merger. Linked quarter deposits decreased $354 million from $28.3 billion at December 31, 2024. 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. Prosperity has strong non-interest bearing deposits of 34.5% of total deposits as of March 31st, 2025, with a cost of funds of 1.66% and a cost of deposits of 1.38%. The net interest margin on a tax equivalent basis was 3.14% for the three months ended March 31st, 2025, compared with 2.79% for the same period in 2024 and 3.05% for the three months ending December 31st, 2024. 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 non-performing assets totaled 81.4 million, our 24 basis points of quarterly average interest earning assets at March 31st, 2025, compared with 83 million, our 24 basis points of quarterly average interest earning assets as March 31st, 2024. And again, 81.5 million, our 23 basis points of quarterly average interest earning assets at December 31st, 2024. The allowance for credit losses on loans and off balance sheet credit exposure was 386 million at March 31st, 2025, compared with 366 million at March 31st, 2024. Our current non-performing assets are higher than our historical levels, mainly due to acquired loans and accounting regulations for such loans that mandate we maintain loan balances on our books until they are resolved, despite being reserved for during acquisition. Texas and Oklahoma continue to benefit from strong economies and are home to 58 Fortune 500 headquartered companies. The Texas economy continues to expand. Employment growth was solid and sales tax revenues increased broadly, according to the Federal Reserve Bank of Dallas Texas Economic Indicators, published April 3, 2025. The March 2025 Texas Business Outlook surveys showed continued expansion in wages and benefits all across all sectors. Despite the uncertainty with tariffs, our teams in Texas and Oklahoma are optimistic based on conversations with our customers about their outlook and plans. We continue to be opportunistic, work hard, stay close to our customers and their needs, and maintain a quality loan portfolio. Although there is market volatility, we continue to have active conversation with other bankers regarding potential acquisition opportunities and remain ready to enter into a transaction when it is right for all parties and is appropriately accretive to our existing shareholders. Overall, I want to thank all the associates for helping create the success we have had. We have a strong team and a deep bench at Prosperity and will continue to work hard to help our customers and associates succeed and to increase shareholder value. Thanks again for your support of our company. Let me turn over the discussion to Osobek Osmanov, our Chief Financial Officer to discuss some of the specific financial results we achieved. I'll slow back.