Q3 2019 Earnings Call
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Taking a conference specialist pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions to ask a question anyway Press Star then one on your telephone keypad to have tried question.
Please note that is being recorded I would like to now turn the conference over to Charlotte Rachi. Please go ahead.
Thank you.
Good morning, ladies and gentlemen, and welcome to prosperity Bancshares' third quarter 2019 earnings Conference call. This call is being broadcast live over the Internet at prosperity Bank, U.S. say dot com and will be available for replay at the same location for the next few weeks I'm sure.
But rashly executive Vice President and General counsel of prosperity Bancshares and here with me today, It's David Zalman, Chairman and Chief Executive Officer.
Agee, Tim to manage junior Vice Chairman also back.
<unk> Chief Financial Officer.
Eddie Saturdays President Randy Hester, Chief lending Officer, Merle Karnes, Chief Credit Officer, and Bob Dal Executive Vice President.
David Zalman, well laid off with a view of the highlights for the reset Florida. He will be followed by also backed off small enough. So we'll do some of our recent financial statistics and Tim to man.
I will discuss our lending activities, including asset quality.
Finally, we will open the call for questions. During the call interested parties may participate lives by following the instructions will be provided by our call moderator Jake.
Before we begin let me make the usual disclaimers.
Certain of the matters discussed in this presentation may constitute forward looking statements for purposes of the federal Securities laws and asked such May involve known and unknown risks uncertainties and other factors, which may cause actual results performance or achievements of prosperity.
Bancshares to be materially different from future results performance or achievements 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.
And and prosperity Bancshares filings with the Securities and Exchange Commission, including forms 10-Q, and TNK and other reports a segments, we have filed with the FTC.
All forward looking statements are expressly qualified in their entirety bodies cautionary statement.
Now, let me turn the call over to David Zalman.
Thank you Charlotte I would like to welcome to thanks, everyone listening to our third quarter 2019 conference call I'm excited to announce at our board of directors voted to increase the board quarter gave it on a 2019 to 46 cents per share a 12 point.
2% increase from the 41 cents per share in the third quarter of 2019.
Our company continues to do well and we want to share that success with our shareholders.
Prosperity Bancshares also repurchased 654000, 0.6 654000 shares of its common stock at an average weighted price 60 359 per share during the third quarter of 2019 and 1 million 400.
It is 73000 shares of is common stock at an average weighted price of 60 410 per share during the first three quarters of 2019.
For the third quarter 2019, we showed impressive returns on average tangible common equity a 14.77% annualized and on average assets of 1.47% annualized.
Our earnings were 81 million.
758000 in the third quarter 2019, compared to 82 million 523004, the same period in 2018, a decrease of $765000. However in the third quarter of 2018.
We had non core loan discount accretion of $3.457 million compared to only 1.283 million such income in the third quarter of 2019 82 million wondering $74000 decrease in non.
Core income.
Our diluted earnings per share were $1.19 cents for the third quarter of 2019 compared to $1.18 for the same period in 2018 and increase of 80 basis points.
Our net income was 246.418 million for the nine month ended September 32019, compared with 238.481 million, where the same period in 2018 and increased upset.
$7.937 million.
Or 3.3%.
Our earnings per diluted common share, where $3 or 55 cents for the nine months into September 32019, compared with $3.42, where the same period in 2018, an increase of 3.8%.
It should be noted that during the nine months ended Septemberthirty 2019.
We had $5.329 million more in net income then during the same period in 2019 again due to non core loan discount accretion income.
Our loans at September 32019, where 10.673 billion an increase of 380 million for 3.7 per cent compared with 10.293 billion at September 32018.
Our linked quarter loans increased 85.970 million or 80 basis points, 3.2% annualized from the 10.587 billion at June 32019.
Our deposits at September 32019 were 16 billion.
[laughter] 30 million, an increase of 196 million or 1.2 per cent compared with the 16.734 billion at September 32019, our late quarter deposits increased 42.291 million.
Our 30 basis points from 16.888 billion at June 32019.
As mentioned in previous calls Prost pretty Germany experience as most of its deposit growth in the fourth and first quarters. Another year and we do not expect that to be different this year.
[noise] completion of our merger with legacy, Texas Financial group remains on schedule as where we see all required regulatory approvals the shareholder meetings for each company are scheduled for next week. The management teams from both companies meet on a weekly basis and share many similar viewpoints both.
Legacies and our goal is to develop people to be the next generation of leaders make every customers experienced easy and enjoyable and operate in a safe and sound manner.
We went to expand our use of technology and our digital products, making it easier for our customers to do business and continue to enhance shareholder value.
We believe our customers remain positive about the economy consumers are still the most positive why we see commercial customers pausing a bit due to geopolitical concerns.
In Texas in Oklahoma unemployment remains low and demand that business is good in our opinion the economy in our market areas remain sustainable.
I want to thank everyone involved in our company for helping to make it the success. It has become thanks again for your support of our company. Let me turn over our discussion to also back our Chief financial officer to discuss some of the specific financial results, which he also but thank you Mr. Zalman good morning, everyone.
Net interest income before provision for credit losses for the three months ended Septemberthirty 2019 was 154 million compared to 157.3 million for the same period in 2018 and decrease of 3.3 million or.
2.1%.
A lower loan discount accretion in the third quarter 2019, partially couldnt contributed to the decrease.
The net interest margin when a tax equivalent basis was 3.16% put a three month ended September thirtyth styles 19.
Compared to 3.15% well the same period installs in 18, and 3.16% well the quarter ended June Thirtyth styles 19.
Excluding purchase accounting adjustments the core net interest margin for the quarter ended September Thirtyth styles, 19 was 3.14% compared to 3.09% for the same period in 2018 and 3.14%.
The quarter ended June Thirtyth 2019.
Non interest income was 30.7 million for the three months and at September Thirtyth 2019, compared to 30 point Sixmillion well the same period in styles and 18.
Non interest expense for the three months ended September Thirtyth 2019 was 80.7 million compared to 81.8 million for the same period and styles in 18.
The efficiency ratio was 43.7% for the three months ended September Thirtyth 2019.
Compared to 43.5% well they same period installed in 18 and 43.74 person for the three months ended June Thirtyth 2019.
The bond portfolio metrics at 930 start 2019 showed a weighted average life of 3.62 years and effective duration of 3.19 and projected annual cash flows of approximately 1.8 billion and with that let me turn over the prison.
Station to Tim Timanus put some details on loans and asset quality.
Thank you also that.
Our nonperforming assets at quarter end September Thirtyth 2019.
Totaled 51 million.
$157000 or 48 basis points of loans and other real estate.
Compared to $41.558 million.
39 basis points at June Thirtyth 2019.
This is an increase of 23% from June Thirtyth 2019.
The September Thirtyth 2019, nonperforming asset total.
Was made up of $50.314 million in loans.
$28000 in repossessed assets.
And $815000 and other real estate.
Oh, the $51.157 million and nonperforming assets, approximately 16 million or 31% or energy credits.
All of which our service company credits.
Since June Thirtyth excuse me since September Thirtyth 2019.
To me and $938000 and nonperforming assets are under contract to be so far have already been removed from the nonperforming asset list.
Net charge offs for the three months ended September Thirtyth 2019.
Were $1.046 million compared to net recoveries of $115000 for the three months ended June Thirtyth 2019.
$1.100 million was added to the allowance for credit losses during the quarter ended September Thirtyth 2019.
Compared to $800000 for the quarter ended June Thirtyth 2019.
The average monthly new loan production for the quarter ended September Thirtyth 2019 was $289 million <unk>.
Compared to $287 million for the quarter ended June Thirtyth 2019.
Loans outstanding.
At September Thirtyth 2019 were 10 billion.
$673 million compared to $10.587 billion at June Thirtyth 2019.
The September Thirtyth 2019 long total is made up of 38% fixed rate loans.
38% floating rate.
And 24% variable rate loans.
I'll now turn it over to Charlotte Rasche.
Thank you Tim at this time, we are prepared to answer your question. Jay can you. Please assist us with questions.
No. We're now beginning to question answer session.
To ask a question you May press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then to at this time, we'll pause momentarily to assemble our roster.
The first question comes from Brady Gailey with KBW. Please go ahead.
Thanks, Good morning, guys.
Good morning.
I just want to start with loan growth and with legacy you know a bell about to close I know in the past when youre doing acquisitions, you've kind of looked at a portfolio of the targets loans and decided to run them off I think I remember in are you guys are Kevin talking about that number being about 500 million for legacy.
Just wondering if an update to that number how how much do you expect to move out of legacy honor the prosperity umbrella that how how does that impact net loan growth for 2020.
Well again, the 500 million that Kevin It mentioned and I think we had mentioned at the same time is probably a close number and what we're talking about how that would exceed or how you know the timeframe that it takes to do that you know that could that could take is up to two years to probably do that so I guess maybe.
Did some bulemia math and said you're growing 5% of year on loans.
Five times, our combined miles again, I don't know if you want to count a big portion of their mortgage warehouse. So you know we have over 10 billion. So that's 5% 500 million a year you add their loans to it so basically it would imply it would affect the 5% organic growth. There's no question I just have to put a pencil to it I. Thank you you probably can do the same thing take.
Take their 7 million or 8 million exclude of mortgage warehouse, and just say, 5% and and subtract out what we're running off is it would probably be a pretty easy calculation.
Got it alright, that's helpful. And then so buybacks continued in the third quarter you bought back about 1% of the company you bought back a little under 64 Bucks a share. The star now is north of 70, <unk> well north of 70, So should we expect that buybacks kind of stop what the stock.
Our trading at this level.
I you know right now I would say the answer that is yes, I mean right now whenever we start buying when we think that the market is really completely out of kilter. We felt like the market was out of kilter at that those prices, we were buying it out and so you know I think what will be there to support we sell a lot of capital.
We're creating a lot of capital we have a lot of earnings.
You add our earnings we haven't you had the earnings they legacy brings to the table I mean, it's 500 million or so a year even after dividends we have a lot of money. So we'll continue to buy if the stock ever.
Code that go disproportionately lower than we think it should be.
Okay and then last question for me is on the margin it's great to see the margin flat when corridor, that's a lot better than most of your peers out there this quarter, but how do you expect the margin to trend towards the back.
Part of the year and end the 2020.
Well the reason probably are our net interest margin did better than our peers. We never went up our net interest margin never went up like the other guys. There because we had a certain amount of fixed rates on our bomb portfolio and our and our loan portfolio. So its rights came down are coming down that helps is at the same time, we have about a three year average life, both on the lump loan portfolio and.
In the bond portfolio going forward, it's it's a it's a little bit harder question. If you look at our bank without legacy and you look at our bank with legacy we run. Both models are now again. These are models in were thrown a lot of information into them. So.
I can't tell you that they're exactly accurate, especially when you combine legacies with ours, because again, we're making it a lot of assumptions, but from what we see we don't think our combined make is gonna be much different than where banks would have been on combined we think that if interest rates don't move we would still see a net interest margin that would increase over.
12, 20, 436 months, if interest rates go down 50 basis points.
We see probably a flat margin if they go down more than 50 basis points, we would see a declining net interest margin I know that's a lot of information, but that's just kind of what we have right now.
That's helpful. Thanks, guys.
The next question comes from Peter Winter with Wedbush. Please.
Please go ahead.
Good morning I.
Hi. This morning color I was just wondering as you guys have had more time to spend with legacy bank and getting ready to close the deal how have you noticed or come across any positive or negative as you.
Dug deeper and getting ready to combine the two banks.
I think that Oh, Oh, I'll start off with a negative side I don't think that we found anything negative I think the loans that we did our due diligence on and the loans it even seeing some of their charge offs this quarter.
We completely identified those in or was there wasn't any there wasn't any surprises in any of that we also I think our management can be have an executive management Committee and we also meet with their executive to manage meeting their executive management, which is Kevin and Maison Tom and Scott.
Aaron and Chuck and we meet with them in our guys. We meet every week and I I would tell you they've been it's been a pleasure to work with them I think that we have we have to make decisions, but the more we work with them I think they're more alike.
There are more like with us and why we think I think it's it's just it's been in my opinion, I know everything and I want to be naive anything can happen, but I think that it's been extremely favorable and and you know Kevin and I still have a bromance going we test almost every night.
[laughter], Okay, [laughter], and then you've assumed 25% cost saves.
Just given your history that seems kind of conservative for you guys are usually be.
The expense saves my I guess my question is.
How quickly do you start to realize the expense saizen and get the full amount.
In the run rate.
Well this again somebody else can jump in and just a minute I'm sure also back or somebody but this is a little bit different in that or even though we're closing the deal well. It in the next few days or so the operational integration doesn't really completely take effect until June of next year. So the I've done some numbers in years yeah.
I also back you may want to jump and I'll give a little bit color yeah.
We probably have a higher level estimates, but then once we close the merger we should have been able to provide more clear guidance on the timing of that caused by the as we look at it the elements of the cost saves changes from preliminary but we still expect to get the 25% cost saves that we announced that the merger and from the timing perspective.
I think we expect to take full advantage on the cost saving 2021, but as you mentioned probably half of the savings going to come in 2020, because since its integration has to take place in 2020, right, you'll probably the start consolidating some of the stuff even before the complete operational integration with the opposite are absolutely right.
There was a few I mean, we working all the different project had a lot of streamline that we're working through that than some of them will be consolidated before even though our media point, but I think a good numbers a 50% of it I think is a good good way of looking at it yeah, I would say, 50% in 2020 and out full advantage in 2021.
That's great thanks very much.
The next question comes from.
Ebrahim Poonawala with bank of America.
Please go ahead.
Good morning.
[laughter] another question around.
The didn't have overexposing fairly soon is there anything foremost securities repositioning Oh that you're doing on the appetite.
In closing that he should be mindful no.
If you can just talk to read your expectations are for the pro forma margin for both banks so combined.
Turning to fourth quarter, or I guess, one key wouldn't be the fourth quarter.
I, probably would start with the a pro forma again. This is just a pro forma and this theater, putting these two models together, but also that we're looking whatever 3.4% margins yeah basically the pro forma you asked about combining those companies right. Now is we don't do much of a balanced is remixing, we're seeing a threeforty right now so you're seeing that I you will see.
See you already see aren't we sold our balance sheet, where we were borrowing.
Money from the federal home loan bank over $1 billion lead cut that down dramatically because it didn't make sense anymore to do that.
Them there from legacy side, you may see a sale a small portion other CMO portfolio I'm not a whole lot, but you'll probably see a little bit of that and Ah you know, you'll probably see us taking money as is our as our bonds mature instead of buying securities. It will use that money to probably fun there.
Oh.
Understood and the 340.
And it doesn't come to your comments earlier, you do we expect that the fortyish margin to stay fairly stable.
Assuming they don't go down more than 50 basis points.
The 340, if interest rates don't move at all we should see a pretty good increase and 12 20 436 months if interest rates go down 50 basis points. He should be flattish if it goes down more than 50 basis points. Then there will be some decline in the net interest margin.
Understood and just so oh separately and don't have just loan growth of business outlook.
Hey look into the fourth quarter into next year, what things looking better or worse I didn't think about the economy, obviously, Texas still doing ray ban.
Appreciate your thought Harrison don't know what the feedback you're getting from clients into how you're thinking about next sort of one pretty quick.
The consumer is doing extremely well manufacturing has slowed a little bit we've seen a businesses that I think we're still doing very well, but again there there their policy and I guess I would say a little bit because of the geopolitical that they're looking down the line and looking at the election. There wondering if somebody really does get into.
In the office that would really raise taxes and start pretty well taxes that I think it just bothers business people to make longer term decisions when they see something like that but overall when you look at it our unemployment rates in Oklahoma, Texas are the lowest they've ever been steel harder to find.
So the employees to work I mean, so it's it's a very good market I would say that from alone side, we continue to see a tremendous amount a lot of payoffs, but more so than at the competition is very very strong out there. We're seeing we're seeing banks that are offering rights that we do.
Bill that we can offer sometimes and so.
I would where we quit by percent organic growth, where this year I think I would change that to maybe 4% because we're just not going to play we're not going to you know I think as Johnny Allison said, we're not going to get the most Stupidest award. So we don't want to do that so we don't we want to be there. So I think that will be competitive, but again, we're not going.
What is not going do stupid things, either so with that I would say that would probably be more like about a 4% growth.
For this year.
Water or thanks for taking my question.
<unk>.
The next question comes from Brad Milsaps with.
Sandler O'neil. Please go ahead.
Hi, good morning.
Good morning.
Just to follow up on Abrahams Kinda Bouchie question I'm, just kind of curious you got an update on how you plan to find or how you plan to approach legacies a warehouse business and then as a part too that you know would you anticipate using some of your liquidity to fund it versus you know I'm more legacy has relied on wholesale.
Funding to the fund that business Im just trying to get a sense of.
Now what the balance sheet kind of looks like <unk> pro forma.
Yeah, I don't know that we'd have the balance sheet exactly the way it is but the.
Fundamentally we intend to use our money to fund the warehouse receipt or I mean, the mortgage warehouse loans again, I remember look at their balance sheet. This quarter. They were borrowing over $2 billion are so it I think that you know there will probably we may increase our borrowings a little bit but for the most part I think what thereof.
Probably be a middle of the ROE will probably try to find most of their most of their loans with our you know with our core deposits basically, but having said that it's not going to work overnight just that easy and we'll have to see where we there their mortgage warehouse loans were higher than they've had had been traditionally do the average of the year. They usually run about a billion sent little over a billion.
I think in this last quarter again, it was closer to 2 billion. So we need to really see what the average is gonna be but again I guess going back fundamentally we intend to fund use our deposits to fund most of their loans, but having said that you may still see as have the moral a billion dollars are so through this transition period till our stuff runs off.
Got it no. That's that's helpful. You other margin was down I think 70 basis points total I'd ask the deal with the warehouse in your 340 NIM Guy does that obviously include the things you're talking about is that they also include any accretion income that you would expect to get in 20.
We didnt include any accretion income in the.
Okay. Okay, and then just one final I'm just we don't want you don't want to start that again as [laughter] I understand I don't.
We don't want a model it either.
Just in terms of diesel I was just curious if you guys could could provide any up thatll be a lot of moving parts with a with legacy coming and you know they've historically, maybe provision at a higher rate than you guys have.
But you have the mark and everything else that goes with diesel. So just kind of curious how to think about you know sort of that aspect as you know once the deals close.
Yeah. This also back are currently were both seems running that parallel on C.. So models I stand alone basis, but you know after the merger will work on that consolidated model like aligning the like qualitative and economic factor assumptions and I think once we go through the process, we'll have better clear picture on the.
Consolidated basis, but if it's standalone I mean, our models showing that we.
We would have about 20 to 30 million up additional a provision related to see so which is about 23% to 34%.
Got it and that's helpful. The charge offs that legacy had this quarter. Obviously I know you identified those but does that change your mark now at closing or are you still stick with the same mark that you identified initially.
Yeah. That's a good question [laughter]. We you know we had 175 million. So you know, let us know just look at it and see.
Okay Fair enough alright, Thank you guys.
Again, if you have a question. Please press Star then one.
The next question comes from Matt I'm Lee with Stephens. Please.
Please go ahead.
Hi, Thanks, Good morning, guys.
Let me Matt.
From a capital planning standpoint, with legacy I believe you will be absorbing some.
Sub debt and trust preferred securities.
Just to remind us of your plans what do you expect could do with this capital and and how quickly you could do it.
Well yeah. So we are playing through I want sway merger of course, we're planning to pay off when did they have matured to comes in so we were not going to keep it in our balance sheet going forward, but I think one of the maturity coming in and 2020.
And the other.
They tend to pay off right away.
Right right Sember 15, it's about $50 million yeah.
Got it so that's the first pay down almost immediately in the sub debt come to do you said in 2020 that right. Yeah. I think it's early October 2020, if I.
I thought it would yeah.
Yeah and next year.
Okay got it.
And then going back to the margin discussion and specifically on the core loan yield.
Once I back out the Accretable income I believe the core loan yields compressed about five that this quarter.
Obviously, you have some variable rate loans to put some pressure on that I was little surprised to see five bips a pressure this quarter any any color you can provide on that.
I you know man I didn't see that again I'd also like you might have gone into that I, you know when I looked at it.
Yeah again, when I compare to income income I Wouldnt you know we had we had probably more accretion last year than this year, So I didnt see.
I didn't see the lower income on loans was off about one of the loans core base, yes, we'd win went down about four basis points on the long, but it's because of their short term a long term rate environment would have so some of those variable in floating loans, we have that a increased but if you look at the over compared to last year.
Yeah, I mean, we weren't core bases at a 487 on loan yield and we had 5%. This year. So that's number year over year like it was better really going he took out the additional accretion we had last year compared to the accretion issue I thought it was actually better compared to last year. Yeah. We went out 13 basis point again, comparing thought it was positive yes, even within this lower.
And it's pretty positive in my mind.
Okay. Thank you for that and then just lastly, a they did the premium amortization expense was about $400000 a higher and the third quarter. Then then into Q, obviously right environments influencing that as you look towards the fourth quarter any any color you can go with it.
How are your expectations on to the premium amortization expense for Fourq you.
Yeah, Hey, referring to the securities portfolio basically I guess.
You know my my General were all feeling as rates are rising I think that you should see a decrease you maybe I would echo <unk> thousand same thing yeah, I think its books I expect that stand alone basis, probably less than what we had 8 million but.
Yes.
I mean really if rates continue to stay where they're at he was crazy the easier seen your seemed at prime rate digest and any overnight, but there's been some good things, which big part of this is if you know our banking or that you do a lot of a lot of our yields dependent on the 10 year Treasury and that's been.
An extremely positive over the last few weeks, it's gone from 1.5 to almost 1.8, so that makes a big difference. The you know when we're buying securities or fixing rights for five years. It makes a big yeah I think its initial seasonality to because summer time, you know there's a lot of homes being bought that's I think it's going to come down at the fourth quarter. So that's gonna help to slow down as.
Well, but is when when that when your tenure went down so much I mean, you saw a lot of refinancing. So if they if we can truly have a yield curve and not have this inverted yield curve you shouldn't see as much of a pay down I would like that the refinancing I guess I referred to.
Okay, I doubt that dramatic one way or the other right right.
Thank you guys.
The next question comes from.
Jon Arfstrom with RBC capital markets. Please go ahead.
Thanks, Good morning, everyone.
Regarding <unk>.
Maybe one for you Tim.
You know credit looks fine, but give us an update on helping AG in energy.
Maybe just even though it's not a huge number touch on the increase in a in NPL.
Well, let me do the the last part of the question first.
<unk>.
The.
Nonperforming list is really made up.
Primarily of or the bulk of it and in four credits that total about $33 million to $34 million.
One of them as a whole mortgage credit.
That we've got about $9 million then.
And the appraisals that we have more or in the $12 million to $13 million range. So on paper.
There isn't a loss there, which we shall see.
Another one is a well service company.
There is about 13 to 14 million outstanding there.
It's actually current they're making the payments timely.
On paper once again in terms of appraisals, there's enough equipment to pay it off.
They also pledged additional real estate that hasn't appraised value about 9 million so.
On paper, we don't think Theres any law so there.
And then the other two credits or commercial real estate credits.
Well, what about 7 million a it's actually current.
We think there's value there we think if we had to foreclose, we probably wouldn't lose anything or wouldn't lose much but once again its current and it's actually.
It's actually performing at this moment.
And then the second one is about 3 billion.
And where we're going to be paid off we think by the end of this week. So.
When you take the 30 334 million that's when these four credits out is it makes our nonperforming look pretty good.
Our agriculture, you know it's not the best.
But.
It's not a dramatic problem either you hear a lot of.
Publicity about the tariffs and all that in the government is covering a lot of these farmers.
With payments from the government in that regard so.
Well I don't think agriculture is booming and doing as well as it could I I don't see any big big problems, there and what was the third part of the question energy energy primarily energy services.
Energies.
And our opinions kind of in the doldrums.
It's not getting significantly better it's not getting significantly worse.
Most of the people that we talk to think that the the oil price is going to fluctuate between 45 and $55.
Over the course of the next year.
The majority of the people that we do business with now can handle that.
Obviously, if those predictions are incorrect and that goes way down that it's a problem for every body.
The service sector seems to be struggling more than the production side right now.
I think because of what I just said I think the forecasts are are flat in terms of pricing of the commodity.
So there's not a whole lot of extra dollars being spent on service work.
We've said overtime that most of the customers that we have.
Our customers at a bit have been at business for a long time.
And if weathered the storms.
They started the last downturn with strong balance sheet those balance sheets were quite a bit.
In 2015, 16, and 17, but there's still alive and are bouncing back a little bit. So I don't see a whole lot of change right now now the credits that that legacy is bringing to the table.
Our more on the production side.
I know that they have a focus on.
Moving some of those out of the bank. So we'll see how that goes.
So I guess I have personally a little less less.
Confidence and where some others are going to be but having said that we've looked at the credits.
We think they're going to be okay, and they're dealing with them. So we don't think theres any major issue there.
Okay.
All that are helpful.
Okay. That's helpful and then.
David maybe one for you I think we all understand their efficiency from a merger and [noise].
Specter runoff from rushing to do that many times, but as you.
Look through this a little bit more and talk with the legacy management team in areas, where you are a bit more optimistic in terms of opportunities for new business.
It's a product line or just larger let me moments.
I think it's a combination of that John I I'm really excited about it I mean, you really have.
Mortgage warehouse I would admit that we don't have the experience that they have in it. So we're there to learn and that they have the commercial real estate.
Portfolio that is it a little bit different than ours, but again I think that does gives us an opportunity to really dominate two to the largest markets in state of Texas, you're going to I mean, we dominate dominate Dallas, we dominate Houston and I think just the size. It we have and what we can offer.
The different products that we can offer were really beefing up right now on a new cash management system and so you combine that with the lenders that we had out there in both markets would become very prevalent and I think it's just I think it's a great opportunity. These guys really are been right to work with as Tim said, they do that some issues maybe.
On the analysis on that.
Oil and gas Niweek Weve identified that you know I think it's something we can work with we've been through many of these things and I just think it's going be a great opportunities that we can move the liquid get a will go on to our next deal.
Okay and then just just one last one you talked earlier about expanded use of technology any area in specific specific or you'd call out where you feel like you have to catch up the quickest where you might be a disadvantage.
I don't know that we have to catch up but for me. If I just think that if you're going to be in business and I talked about this early before this meeting never started I just think almost everything has to be digital it not only in the past things were digital just on your checking account and you could look at your little your phone and all that I think one.
Forward, you're checking account is to be digital your mortgage application has to be digital your I think even small commercial loans are gonna have to be more digital I think everything that we offer people are important on there I mean, I think it's a combination but I think you're gonna have to have the digital platform for everything.
I think that's all we're moving to open up a new account to do just about anything our goal is to really be digital when any block that we offer that's my goal that doesn't happen overnight, but that's really my though really.
Okay. All right. Thanks, good luck with for a close.
Thanks.
The next question comes from Ryan you oriented.
Please go ahead.
Sammy Brian for ramp.
It's close yeah, Okay, right [laughter] right, Brian oriented with no from I'm on attacks.
Hi, everyone.
You know, maybe just going back to the what the pro forma financials are going to look like you know as you kind of put the to balance sheets together I think about you know normalized mortgage warehouse some of the funding efficiencies.
I mean is it's kinda the earning assets land around 28 billion and then you don't do whatever from there based on growth stores, it a little lower or higher and that you know can you help us think about just a point estimate or a range for you know were earning assets might be and call. It six months once.
Most of the dust to settle down the repositioning.
You know again. This is just the also could give me better color on my my gut feeling it's around $30 billion or do you have it also yeah I think it's gonna be around between 20 to 30 billion at all that so total has no. This earning assets already now yeah total assets. If we stand as up nine thought it's about $30 billion to $33 billion right.
Oh yeah.
And then maybe just more broadly on the deal I mean, you certainly referenced.
Do you and Kevin have a hand it off.
You know at the time, there was a lot of concern a narrative that you know maybe cultures didn't match and maybe some of the legacytexas lenders.
You know higher than than expected attrition it could be a key rest for that deal.
I know it hasnt, even close yet so it's early but just any how are you feeling on that next level down at enough you've had a chance to talk with those lenders or Kevin but you know as you look at that next level down do you feel better or worse or about the same on.
Legacytexas commercial lending a lender attrition.
I feel good what we're at they've gotten over 50 or 60, something was 62 sign contracts most of their people all signed contracts to stay with us. So that means you know, they're not endure to life with this but there sure they're giving us a chance in every deal that has been successful in our history, we've done 42.
And only two of them out.
I would say I regret they've been tough to every deal. That's been extremely successful is successful because of the management that stays with it. So the success of the steel truly will be it will be because of the Calvin may.
You know the team, let's see Aaron Chad the team to stay at home it would be those guys, if they're saying and they're they're gonna be part of it there's still going to work on I'm looking at the table around the table right now and I see 10 brought his company over in majority of all his people stay I look at Eddie and he brought his people over majority. This people say so this is this.
Success of any of this thing to have everything is truly make it everybody has to work together and management has to be management has to be part of it. If management is not part of that then it's a it's a tougher deal.
Thank you very much <unk>.
<unk>.
This concludes our question and answer session I would like to now turn the conference back over to Charlotte, Russia for any closing remarks.
Thank you Jay Thank you, ladies and gentleman for taking the time to participate in our call. Today. We appreciate the support that we get for our company and we will continue to work on building shareholder value.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.