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Prosperity foresees loan growth rebound in 2017

Prosperity Bancshares Inc. Chairman and CEO David Zalman said the company expects a better loan market across its footprint in 2017.

"We are more upbeat this year," Zalman said during a Jan. 25 conference call to discuss the company's fourth-quarter 2016 earnings, noting that many of Prosperity's markets have been stressed by oil- and gas-price declines. "We are a lot more optimistic. ... We're seeing a lot more people talk about loans; our customers ask about loans," Zalman said, adding that the economies in Texas and Oklahoma appeared to be on the upswing.

He told analysts and investors on the call that the company expects more "normalized" loan growth as a result. While the company has historically notched organic loan growth of about 8% — outside of the last two years when its growth was hit by energy price declines — Zalman said he expects growth closer to 5% or 6% in 2017.

The company reported net income of $68.8 million, or 99 cents per share, for the fourth quarter of 2016.

The Prosperity chief, who oversaw nine mergers for the company between 2011 and 2015, said the company explored deals last year but ultimately it was unable to secure a transaction it was willing to make for a variety of reasons, including pricing disagreements and cultural sticking points. He also said the U.S. election result and the subsequent run-up in bank stock prices appears to have a mixed effect on potential sellers in the banking industry. While some have indicated that higher valuations would make them more likely to exit, Zalman said, others are focused on potential regulation relief and may favor remaining independent as a result.

Zalman said the company will only see a minor boost from rising rates compared to some other banks, in part because of the large security holdings it has on its balance sheets. "We won't see the full benefit of that for a couple of years," Zalman said.