Financial Data and Key Metrics Changes - The company reported a quarterly net loss of $2.7 million, an improvement from a net loss of $4 million in the prior quarter [3][7] - Net interest income increased by $386,000, leading to a 7 basis point improvement in net interest margin [7][8] - Tangible book value per share remained flat at $14.74 [6] Business Line Data and Key Metrics Changes - Gross loans increased by $32.5 million during the quarter, predominantly in owner-occupied commercial real estate [10] - The yield on loans improved by 4 basis points to 4.57% [8] - The company funded $59 million of loans during the quarter, yielding approximately 7.5% [5] Market Data and Key Metrics Changes - Deposits grew by $25 million, with a 17% increase in non-interest bearing accounts [3][11] - Non-performing assets declined modestly, with non-performing assets to assets and non-performing loans to loans remaining relatively flat at 25 basis points and 33 basis points respectively [12] Company Strategy and Development Direction - The company aims to transform into a more commercially oriented institution, focusing on attracting full banking relationships with small to medium-sized businesses [4] - A strategic plan is in place to develop new relationships and deepen existing ones within the communities served [4] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improvement in yield on interest-earning assets and cost of interest-bearing liabilities, indicating a potential inflection point in net interest margin [4] - The company expects continued balance sheet and interest income growth while remaining disciplined in underwriting standards [5] Other Important Information - The company has robust liquidity with $408 million in untapped borrowing capacity and $211 million in unencumbered available-for-sale securities and unrestricted cash [6] - The allowance for credit losses was released by $301,000, primarily due to loan growth from commitments made in the previous quarter [9][10] Q&A Session Summary Question: Loan growth expectations and multifamily sector performance - Management indicated that they are focusing on growing the commercial book and are monitoring concentration limits in the multifamily space [15] Question: Pipeline activity and future growth - Management noted an improvement in the pipeline, with $60 million of commercial loans in letters of intent [16] Question: Deposit cost progression and margin expectations - Management reported a decrease in deposit costs to 2.9% and anticipates further improvements as rates trend lower [17][19] Question: Expense guidance for 2025 - Management expects operating expenses to remain in the mid to high $13 million range for 2025 [28] Question: Variable compensation metrics for 2025 - The compensation metrics are aligned with growth in loans, deposits, and net interest margin [30] Question: Construction portfolio yields - The yields on the construction portfolio are expected to be between 50 to 100 basis points above the prime rate [31]

Prosperity Bancshares (PB) Q4 2024 Earnings Call January 29, 2025 11:30 AM ET Company Participants Charlotte Rasche - Executive VP & General CounselDavid Zalman - Senior Chairman & CEOAsylbek Osmonov - Chief Financial OfficerTim Timanus - ChairmanKevin Hanigan - President & Chief Operating OfficerJon Arfstrom - Managing Director - Associate Director of US ResearchCatherine Mealor - Managing Director - Equity ResearchMatt Olney - Managing DirectorJon Rau - Vice President Conference Call Participants Manan Go ...

Financial Data and Key Metrics Changes - The company reported a net operating profit of $2.98 billion or $0.54 per share for Q4 2024, with pre-tax pre-provisioned earnings at $41 million or 1.28% [4] - For the full year 2024, operating earnings were $11.94 billion or $2.17 per share, flat compared to 2023 [5] - The net interest margin (NIM) decreased during the quarter but is expected to increase moving forward [5][23] - The allowance for credit losses (ACL) coverage rose to 125 basis points when excluding the mortgage warehouse [16] Business Line Data and Key Metrics Changes - Funded loans saw a small decrease year-over-year, with expectations for positive loan growth in 2025 projected between low to mid-single digits [6] - Criticized loans declined by nearly 20% year-over-year, with total criticized loans at $36.56 million [12][13] - Operating non-interest income increased by $130,000 to $1.45 million, driven by strong performance in government-guaranteed loans [26] Market Data and Key Metrics Changes - The company experienced a 20% reduction in reliance on wholesale funding over the last year [14] - The loan-to-deposit ratio improved from 104% to 89% over the past two years [19] - The company has seen strong deposit growth, allowing for a reduction in brokered CDs and public funds [22] Company Strategy and Development Direction - The company is focused on disciplined loan growth and remixing its deposit portfolio to improve profitability [28] - Management aims to achieve a return on average assets (ROA) exceeding 1% by 2025, driven by loan growth and deposit repricing [5][33] - The company is engaging with a consulting firm to improve operational efficiency and leverage in various business areas [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit risk profile improving and expects net charge-offs to remain around 20 basis points for 2025 [66] - The company anticipates that 2025 will produce positive operating leverage, driven by improved NIM and stronger fee revenues [29] - Management noted that the pipelines for loan production are strong, particularly in Texas, and expects to maintain robust activity in real estate [38][39] Other Important Information - The Chief Financial Officer, Terry Earley, will retire in June 2025 but will continue to assist in a consulting role [80] - The new CFO will be Will Hofford, who has been with the company for thirteen years [81] Q&A Session Summary Question: What are the expectations for achieving a 1% ROA in 2025? - Management believes that loan growth and deposit repricing will be the main drivers to achieve the 1% ROA target in 2025 [33] Question: What is the outlook for loan growth given the current payoffs? - Management indicated that while payoffs are expected to continue, the production side of the business is strong, and they are confident in achieving necessary loan growth [39][41] Question: Can you provide details on the dynamics of non-interest bearing deposits? - Management noted that seasonal fluctuations and intentional exits from expensive deposit relationships contributed to the decline, but they expect non-interest bearing deposits to stabilize between 21% and 23% [60] Question: What is the outlook for government guaranteed loans in 2025? - Management is optimistic about the government guaranteed loan business, citing strong pipelines and production [62][75] Question: What is the expected net charge-off ratio for 2025? - Management expects the net charge-off ratio to remain around 20 basis points for 2025, with confidence in continued credit improvement [66]

Financial Data and Key Metrics Changes - The company originated $36.4 million in loans held for investment, an increase from $28.9 million in the prior sequential quarter [5] - Non-performing assets increased to $2.5 million from $2.1 million in the previous quarter [8] - The net interest margin increased to 2.91% for the quarter ended December 31, 2024, compared to 2.84% for the sequential quarter [9] - The average cost of deposits declined to 123 basis points, down by 4 basis points from the prior quarter [10] - The allowance for credit losses to gross loans held for investment increased by 5 basis points to 66 basis points [9] Business Line Data and Key Metrics Changes - Loans held for investment increased by approximately $5 million compared to the quarter ended September 30, 2024, with increases in single-family and commercial business loans [6] - Loan principal payments and payoffs were $34.3 million, slightly up from $34 million in the previous quarter [6] - The company has loosened some underwriting requirements to encourage higher loan origination volume [6] Market Data and Key Metrics Changes - Real estate investors have reduced their activity due to higher mortgage and interest rates, although moderate activity in loans held for investment continues [6] - There is increased consumer demand for single-family adjustable-rate mortgage products due to higher fixed-rate mortgage interest rates [6] Company Strategy and Development Direction - The company aims for disciplined growth of the loan portfolio, recognizing the shift in monetary policy and the reversal of the inverted yield curve [12] - The company is looking for operating efficiencies to lower operating expenses, with a focus on maintaining a run rate of approximately $7.5 million per quarter [12] - The company has repurchased approximately 64,000 shares of common stock in the December 2024 quarter and has a new stock repurchase plan approved [15] Management's Comments on Operating Environment and Future Outlook - Management believes that mortgage interest rates need to decline for significant acceleration in loan portfolio growth, with a current annual growth rate of approximately 1.9% [20] - There is optimism for growth in calendar 2025, supported by a flattening and upwardly sloping yield curve [21] - Management anticipates continued expansion of the net interest margin in future quarters, despite some headwinds from loan repricing [23][24] Other Important Information - The company has identified $23.7 million or 2.2% of its loans held for investment in areas affected by recent fires in Los Angeles [5] - The company has a strong capital position, exceeding well-capitalized capital ratios, allowing for effective execution of its business plan [14] Q&A Session Summary Question: Loan growth commentary and future acceleration - Management indicated that mortgage interest rates need to decline for significant loan portfolio growth, with a current growth rate of approximately 1.9% [20] Question: Margin trends and funding opportunities - Management expects net interest margin to expand in future quarters, with opportunities to reprice maturing wholesale funding downward [24]