Dr. Laura Murillo interviews David Zalman, Senior Chair of the Board & CEO, Prosperity Bank

Thank you for having me, Laura. That was as good as you... that was so good. Thank you so much. And I want to make sure I've got my Q card here because you have a very long title, so I want to get it right. He's the Senior Chairman of the Board and Chief Executive Officer. Congratulations. Thank you. Well, you have done an extraordinary job with Prosperity Bank, and it has been certainly eye-opening for me as one of your directors on the bank to learn and see how this bank that is here in our region and in Oklahoma as well, I may add, has just grown at such a rapid pace in an industry that can be very volatile. So from your perspective, what's been the secret sauce?

Well, if I can, let me start off by just telling you a little bit about me, and when I tell a little bit about me, it really tells about the secret sauce and the bank because I really only had two jobs in my career. So, I started off selling newspapers. I was always competitive, so I started selling newspapers at 6 years old with my brothers, and we always knew whoever sold the most papers got to be their first. So if you got there first, you got to sell the most too because you were first out on the street. So we've always been very competitive. Starting at a very young age, we were always in business. And then I always worked in my dad's gas station, a Gulf service station. The service stations were different back then than they are today. They changed oil and filter, washed cars, sewed tires, you did just about everything. So we got a lot of experience working there at the same time. So I did that, went to St. Phillips, a Catholic school, growing up for the first eight years, then public school in my high school years, and then went to the University of Texas, graduated with a BBA in 1978. Came back to work at my dad's station after that. One of the oil field guys that was in a real high position in oilfield said, 'You ought to go to that banking in town. They've had a lot of changeover, a lot of management left.' I said okay, so I went and interviewed over there and got a job at the bank there in town. So I started in '78 and stayed there till '86. By the time I started in bookkeeping and finished as the Chief Executive Officer at the bank, until 1986, so a real rapid rise right there. It was a small bank, probably about 50 million when I got there and 100 million when I left. And then there was a group out of Houston. You're probably too young, you don't remember this, but the big banks in Houston at that time were Texas Commerce Bank, First City Bank, and Allied Bank. Allied had a bunch of banks just like we do right now. In fact, I always thought that they were so big, and I look back, they were only around 15 billion. Today we're 40 billion. But I thought they were huge at the time. They were selling some of the outlying banks, so they sold one of their banks to a group out of Houston who was led by Tracy Rudolph. And in a small town in Edin, Tracy asked me if I would come and interview with their directors because they had just gone through a bunch of change and a lot of people had left. I said I don't know that I want to go to Edin, a town of 7,000 people or something like that. Nevertheless, I walked in and he must have told all the directors that I took the job, and they started shaking my hand as a president. But the youngest one was 80 years old, so that's how we got started. Anyway, it was an Allied Bank. They bought it from Allied Bank, this group out of Houston, and it was only $40 million at the time in size, probably about 10 to 15 people working. We had about $1.8 million in capital and about $40 million in assets, and we owed $6 million. So I knew we were going to have to do something. So we tried to build the bank, and we tried to build it first through Victoria. We thought that would be a big market, but that market at that time was really controlled a lot by the First Victoria National Bank, who we have since joined us, and Victoria Bank and Trust, as well as Wells Fargo. So we started just going, and that's when the '80s came. That was '87 through '92, the oil crash just came. The only good thing we had going for us is that we were a small bank, didn't have a lot of capital, but the regulators really loved us because we managed the bank pretty good, and they let us do things that probably today you couldn't do. They let our capital go down. So in that period of time between '87 and '92, we bought a bunch of failed banks, and that helped us get started. Then after that, in '92, we started buying some banks. In '98, we went public on the NASDAQ Stock Exchange. We were a big $300 million at the time in size. So from '98, we went public. In 2001, what really changed our dynamics because we had a lot of banks around Houston, some in Houston, but we were probably more outreach or more rural in nature. And in 2001, we merged with the bank, Ned Holmes' Bank. You know, he's on our board right now, and Tim T. Manis. They had a bank here called Heritage Bank, predominantly in the River Oaks area and some other areas of town. So that changed the whole dynamics of the bank. It made us more of a metropolitan bank. And right after that, Ned and I signed the papers. We were $700 million at the time, they were $300 or $400 million, made it a billion, $1.1 billion. I thought that was just huge at the time. They said you got to get this thing up to $2 billion. I said, '$2 billion? We just took us all these years to get to a billion.' Long story short, once we went public and we started doing things, we bought another bank in Dallas. The first day I announced that, the analysts, our stock went down 10% because they said, 'How could you run a bank in Dallas? You're just in Houston.' Well, after we did it and went a quarter, two quarters, and we did really good at it, everybody loved it. From then on, a lot of banks wanted to join us, still want to join us. So we did a lot of M&A. So the story goes from there. Today we're a $40 billion bank with about 4,000 people, and we started with about 10 or 15 people and $40 million. In capital, market cap of about $7 billion, and we had $1.6 million. So we've had a tremendous amount of success, and that's all been a part of it. My life has always been a part of this at the same time. Recognized by Forbes for the last 10 years, every year since they started, we've been recognized as one of the best banks in the US.

It is. I'm surprised sometimes by the success we've had. It's been very nice. It's been absolutely very good. I've seen a lot of people that, as you see in your profession, you've had people that come in and really help you. We've had a lot of the people that I started with. I laugh sometimes. One of the guys, we really didn't have money, so I gave him a stock certificate when we first started because I couldn't pay him a whole lot of money. He threw it back at me. I said, 'Why'd you do that?' He said, 'I had one of those before. They don't mean anything.' And so that 10,000 shares of stock that I had given him turned, we split four for one and another two for one, and he ended up with about $20 million worth of stock. So a lot of guys made a lot of money, and again, they're retired and I'm still working.

You know, your first statement is exactly right. In fact, my wife asks me all the time, 'Why don't you just quit and let's go travel and retire and all that?' And I don't know that I would be happy doing that. I really, you know, I've never felt like I really had to work because I've enjoyed banking so much. It's never really felt like a job. I like, I had this dream of building something. I remember the Texas Commerce Banks, the First City, and the Allied, and I remember you had something that was really Texas, and I really wanted to build that again. I still do. A lot of people just want to be the biggest bank. We do want to be bigger, we do want to grow. At the same time, I don't want to be big just to be big. I want people to really like us, use us, respect us, and that we give something to them and we give something back to the community. It's got to be a sharing deal. But I really feel like we still have this dream, and even when I'm gone, I'm hoping that the culture that I built with all the younger people that we're putting in right now will follow through too, because I'm hoping that they'll take it to the next level if something happens to me. But I'm not through yet. I'm still competitive. I really want to make something happen. I think what makes this so special is that a lot of banks go out and they just buy a bank or merge with a bank and they let those people go. We are the complete opposite. I mentioned to you Ned Holmes a while ago, one of our first deals, he's still on the board. Tim T. Manis, he's one of our top four guys. Kevin Hanigan and Legacy, which was a $10 billion deal, he's one of our major. Eddie Zapp, who we bought most of, our management team is really made up of people that have joined us. I call us a bank of immigrants.

I think what I really want is my legacy for people to know that I grew up, I worked hard, I was competitive, I fought the fight, I challenged myself every day, and that what we did, hopefully we didn't make too many wrong decisions, and hopefully that we helped a lot of people in the process and built something that's lasting, that's going to help a lot of people for the future going forward. You know, it's crazy, my favorite film of all time was the deal with Jimmy Stewart, 'It's a Wonderful Life.' He's a banker of a savings and loan, and it's so cornball but it's so good. It's one of my favorite movies. I watch it sometimes two or three times a year. But I just want to leave that legacy that they can be proud of, that we tried hard, we were honest, we accomplished things, we fought, we lost some, but we won a whole lot more. That we were just competitors and we were really out there, and to be respected for what we did, what we gave to the community.

Thank you for having me. It's very flattering. Thank you.