Q3 2024 Prosperity Bancshares Inc Earnings Call

October 23, 2024

Yes.

Speaker Change: Good morning, and welcome to the prosperity Bancshares third quarter 'twenty 'twenty four earnings conference call all participants will be in listen only mode should.

Unknown Executive: Good morning, and welcome to the Prosperity Bancshares 3rd quarter 2024 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.

Operator: Good morning, and welcome to the prosperity bank shares third quarter 2024 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.

Speaker Change: Should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

Unknown Executive: 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.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, this event is being recorded.

Speaker Change: After today's presentation there'll 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.

Speaker Change: Please note this event is being recorded.

Charlotte Rasche: I would now like to turn the conference over to Charlotte Rasche. Please go ahead.

Speaker Change: I would now like to turn the conference over to Charlotte Rashi. Please go ahead.

Charlotte Rasche: Thank you. Good morning, ladies and gentlemen, and welcome to Prosperity Bancshares' 3rd quarter 2024 earnings conference call. This call is being broadcast live on our website, and will be available for replay for the next few weeks.

Charlotte Rasche: Thank you.

Charlotte Rashi: Thank you.

Charlotte Rasche: Good morning, ladies and gentlemen, and welcome to Prosperity Bancshares third quarter 2024 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 Bancshares. And here with me today is David Zalman, Senior Chairman and Chief Executive Officer, H.E.

Charlotte Rashi: Good morning, ladies and gentlemen, and welcome to prosperity Bancshares' third quarter 2024 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 Bancshares.

Charlotte Rasche: I'm Charlotte Rasche, Executive Vice President and General Counsel of Prosperity Bancshares. And here with me today is David Zalman, Senior Chairman and Chief Executive Officer, H.E.

Charlotte Rashi: And here with me today is David Zalman, Senior Chairman and Chief Executive Officer, H E. Tim to manage junior Chairman I'll come back to US Manav, Chief Financial Officer, Eddie Saturday Vice Chairman.

Charlotte Rasche: Tim to Manage, Junior Chairman, Asylbek Osmonov, Chief Financial Officer, Eddie Safady, Vice Chairman, Kevin Hanigan, President and Chief Operating Officer, Randy Hester, Chief Lending Officer, Mays Davenport, Director of Corporate Strategy, and Bob Dowdell, Executive Vice President. David Zalman will lead off with a review of the highlights for the recent quarter. He will be followed by Asylbek Osmonov, who will review some of our recent financial statistics, and Tim to Manage, who will discuss our lending activities, including asset quality.

Charlotte Rasche: Tim Tumanis, Jr., Chairman, Asylbek Osmonov, Chief Financial Officer, Eddie Safety, Vice Chairman, Kevin Hanigan, President and Chief Operating Officer, Randy Hester, Chief Lending Officer, Mace Davenport, Director of Corporate Strategy, and Bob Dowdell, Executive Vice President. David Zalman will lead off with a review of the highlights for the recent quarter. He will be followed by Asylbek Osmonov, who will review some of our recent financial statistics, and Tim Tumanis, who will discuss our lending activities, including asset quality.

Kevin Hanigan, President and Chief Chief Operating Officer, Randy Hester, Chief Lending Officer, Mays, Davenport director of corporate strategy, and Bob Dowdell Executive Vice President.

Speaker Change: David Zalman will lead off with a review of the highlights for the recent quarter. He will be followed by I'll come back Us Manav.

Speaker Change: Is some of our recent financial statistics, and Tim to manners, who will discuss our lending activities, including asset quality.

Charlotte Rasche: Finally, we will open the call for questions.

Speaker Change: Finally, we will open the call for questions before we begin let me make the usual disclaimers.

Charlotte Rasche: 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 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 Bank Shares' filings with the Securities and Exchange Commission, including forms 10-Q and 10-K, and other reports and statements we have filed.

Charlotte Rasche: 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 as such, may involve known and unknown risks, uncertainties, and other factors which may cause the actual results or performance of prosperity bankshares 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 Bancshares filings with the Securities and Exchange Commission, including Forms 10-Q and 10-K and other reports and statements we have filed.

Speaker Change: Certain of the matters discussed in this presentation may constitute forward looking statements for 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 bancshares to be materially.

Speaker Change: Different from future results or performance expressed or implied by such forward looking statements.

Speaker Change: 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 Bancshares filings with the Securities and Exchange Commission, including forms 10-Q, and 10-K and other reports and statements we have filed.

Charlotte Rasche: All forward-looking statements are expressly qualified in their entirety by these cautionary statements.

Speaker Change: All forward looking statements are expressly qualified in their entirety by these cautionary statements now let me turn the call over to David Zalman. Thank you Charlotte I would like to welcome and thank everyone listening to our third quarter 2024 conference call I'm pleased to announce that the board of directors approved.

Charlotte Rasche: All forward-looking statements are expressly qualified in their entirety by these cautionary statements.

David Zalman: Now, let me turn the call over to David Zalman. Thank you, Charlotte. I would like to welcome and thank everyone listening to our third quarter 2024 conference call.

David Zalman: Now let me turn the call over to David Zalman. Thank you, Charlotte. I would like to welcome and thank everyone listening to our third quarter 2024 conference call.

David Zalman: I'm pleased to announce that the Board of Directors approved increasing the fourth quarter, 2024 dividend to 58 cents per share from the 56 cents per share that was paid in the prior four quarters. The increase reflects the continued confidence the Board has in our company and our markets. The compound annual growth rate in dividends declared from 2003 to 2024 was 11 percent. We continue to share our success with our shareholders through the payment of dividends and opportunistic stock repurchases, while also continuing to grow our capital. Our tangible capital increased $219 million from September 30, 2023, to September 30, 2024.

David Zalman: I'm pleased to announce that the Board of Directors approved increasing the fourth quarter 2024 dividend to 58 cents per share from the 56 cents per share that was paid in the prior four quarters. The increase reflects the continued confidence the board has in our company and our markets. The compound annual growth rate in dividends declared from 2003 to 2024 was 11 percent. We continue to share our success with our shareholders through the payment of dividends and opportunistic stock repurchases, while also continuing to grow our capital. Our tangible capital increased $218 million from September 30, 2023 to September 30, 2024.

Speaker Change: The increase in the fourth quarter 2024 dividend to <unk> 58 per share from <unk> 56 per share that was paid in the prior four quarters the.

Speaker Change: The increase reflects the continued confidence the board has in our company and our markets.

Compound annual growth rate in dividends declared on 2003 to 2024 was 11%.

Speaker Change: We continue to share our success with our shareholders through the payment of dividend and opportunistic stock repurchases, while also continuing to grow our capital.

Speaker Change: Our tangible capital increased 219 million from September 32023 at September 32824. This is the amount prosperity, we tank after paying $212 million in dividends and repurchasing $75 million of arc.

David Zalman: This is the amount Prosperity retained after paying $212 million in dividends and repurchasing $75 million of our common stock during this period, reflecting Prosperity's stable earnings. Further, Prosperity's tangible book value per share has a compound annual growth rate of 11% for the last 21 years, or since 2002, since 2003. Prosperity reported net income of $127 million for the quarter ending September 30, 2024, compared with $112 million for the same period in 2023. The net income per diluted common share was $1.34 for the quarter in September 30, 2024, compared with $1.20 for the same period in 2023, an 11.7% increase.

David Zalman: This is the amount Prosperity retained after paying $212 million in dividends and repurchasing $75 million of our common stock during this period, reflecting Prosperity's stable earnings. Further, Prosperity's tangible book value per share has a compound annual growth rate of 11% for the last 21 years or since 2003. Prosperity reported net income of $127 million for the quarter ended September 30, 2024, compared with $112 million for the same period in 2023. The net income per diluted common share was $1.34 for the quarter ended September 30, 2024, compared with $1.20 for the same period in 2023, an 11.7% increase.

Speaker Change: Common stock during this period, reflecting prosperities stable earnings.

Speaker Change: Further prosperities tangible book value per share has a compound annual growth rate of 11% for the last 21 years or since 2002 since 2003.

Speaker Change: Prosperity reported net income of $127 million for the quarter ended September 32024, compared with $112 million for the same period in 2023.

Speaker Change: The net income per diluted common share was $1 34 for the quarter ended September 32024, compared with $1 20 for the same period in 2023 and 11, 7% increase.

David Zalman: prosperity earnings were primarily impacted by a higher net interest The net interest margin on a tax equivalent basis was 2.95% for the three months ended September 30, 2024, compared to 2.72% for the same period September 30, 2023. As mentioned in previous calls, our net interest margin should continue to improve to more normal levels as our assets reprice. Prosperity continues to exhibit solid operating metrics with annualized returns on tangible equity of 13.5% and return on assets of 1.28% for the third quarter of 2024. Loans were $22.3 billion at September 30, 2024, an increase of $948 million, or 4.4%, compared with $21.4 billion at September 30, 2023.

David Zalman: Prosperity earnings were primarily impacted by a higher net interest margin. The net interest margin on a tax equivalent basis was 2.95% for the three months in September 30, 2024, compared to 2.72% for the same period in September 30, 2023. As I mentioned in previous calls, our net interest margin should continue to improve to more normal levels as our assets reprise. Prosperity continues to exhibit solid operating metrics with annualized returns on tangible equity of 13.5% and return on assets of 1.28% for the third quarter of 2024. Lones were 22.3 billion at September 30, 2024, an increase of 948 million or 4.4% compared with 21.4 billion at September 30, 2023.

Speaker Change: Prosperity earnings were primarily impacted by a higher net interest margin.

Speaker Change: The net interest margin on a tax equivalent basis was 295% for the three months ended September 32024, compared to 2.72% for the same period September 32023.

Speaker Change: As mentioned in previous calls our net interest margin should continue to improve to more normal levels as our assets reprice.

Speaker Change: Prosperity continues to exhibit solid operating metrics with annualized returns on tangible equity of 13, 5% and return on assets of one point to 8% for the third quarter of 2024.

Speaker Change: Loans were $22 3 billion at September 32024, an increase of 948 million or four 4% compared with $21 4 billion at September 32023.

David Zalman: Linked quarter loans increased $60 million.

David Zalman: Linked quarter loans increased $60 million. Excluding the loans acquired in the Lone Star merger and new production by the acquired in an operation since April 1, 2024, loans at September 30, 2024, decreased by 161 million compared with September 30, 2023. The reduction in loans is not unusual for prosperity, as we are still working through loans acquired from the First Capital Bank. If the terms and conditions of any acquired loan do not meet certain standards, we exit the asset. Over the years, this process has resulted in lower non-performing and charged-off loans and makes it a stronger bank that can withstand various banking cycles.

Speaker Change: Linked quarter loans increased $60 million.

Speaker Change: Excluding the loans acquired in the Lone Star merger and new production by the acquired operation Since April one 2024 loans at September 32024 decreased by 161 million compared with September 32023.

David Zalman: Excluding the loans acquired in the Lone Star merger and new production by the acquired lending operation since April 1, 2024, loans at September 30, 2024 decreased by $161 million compared with September 30, 2023. The reduction in loans is not is not unusual for prosperity, as we are still working through loans acquired from the first capital If the terms and conditions of any acquired loan does not meet certain standards, we exit the asset. Over the years, this process has resulted in lower non-performing and charged-off loans and makes us a stronger bank that can withstand various banking cycles.

Reduction in lung is it is not unusual for prosperity as we are still working through the loans acquired from the first capital Bank.

Speaker Change: If the terms and conditions of any acquired loans does not meet certain standards, we exit the asset over the years. This process has resulted in lower nonperforming and charged off loans. It makes us a stronger bank that can withstand various banking cycles, our shareholders have come to expect this.

David Zalman: Our shareholders have come to expect this. For deposits for 28 billion at September 30, 2024, an increase of 774 million are 2.8% compared with 27.3 billion at September 30, 2023. Linked quarter deposits increased 154 million from 27.9 billion at June 30, from 27.9 billion at June 30, 2024, excluding deposits of soon-in-the-loan-star merger. At September 30, 2024, deposits decreased by 361 million, compared with September 30, 2023, and increased by 206 million, compared with June 30, 2024. We encourage that the deposits are stabilizing, and that court deposits have grown slightly compared with the previous quarter after the effects of the bank failures in 2023.

David Zalman: Our shareholders have come to expect For deposits were $28 billion at September 30, 2024, an increase of $774 million, or 2.8%, compared with $27.3 billion at September 30, 2023. Link quarter deposits increased $154 million from $27.9 billion at June 3, 2020. from $27.9 billion at June 30, 2024. Excluding deposits assumed in the Lone Star merger at September 30, 2024, deposits decreased by $361 million compared with September 30, 2023, and increased by $206 million compared with June 30, 2024. We're encouraged that the deposits are stabilizing and that core deposits have grown slightly compared with the previous quarter after the effects of the bank failures in 2023.

Speaker Change: Our deposits were 28 billion at September 32024, an increase of $774 million or two 8% compared with 27 3 billion at September 32023, Lee linked quarter deposits increased 154.

Speaker Change: Again from $27 9 billion at June 30.

Speaker Change: From $27 9 billion at June 32024.

Speaker Change: Excluding deposits assumed in the Lone Star merger at September 32020 for deposits decreased by 361 million compared with September 30 of 2023 and increased by $206 million compared with June 32024.

Speaker Change: We're encouraged that the deposits are stabilizing and their core deposits have grown slightly compared with the previous quarter. After the effects of the bank failures in 2023.

David Zalman: Importantly, Prosperity has not purchased any broker deposits during this turbulent time. Our non-performing assets total of 89.9 million are 25 basis points of quarterly average interest earning assets at September 30, 2024, compared with 69.5 million or 20 basis points of quarterly average interest earning assets at September 30, 2023, and 89.6 million or 25 basis points of quarterly average interest earning assets at June 30, 2024, with a significant portion of the balance for each period attributable to the acquired loans. The allowance for credit losses on loans and off-balance the credit exposure was 392 million at September 30, 2024, compared with 89.9 million and not performing assets as of September 32, 2024.

David Zalman: Importantly, Prosperity has not purchased any broker deposits during this turbulent time. Our non-performing assets total 89.9 million or 25 basis points of quarterly average interest earning assets at September 30, 2024, compared with 69.5 million or 20 basis points of quarterly average interest earning assets at September 30, 2023, and 89.6 million or 25 basis points of quarterly average interest earning assets at June 30, 2024, with a significant portion of the balance for each period attributable to the acquired loan. The allowance for credit losses on loans and off balance sheet credit exposure was $392 million at September 30, 2024, compared with $89.9 million in non-performing assets as of September 30, 2024.

Speaker Change: Importantly, prosperity has not purchased any broker deposits joined this turbulent time.

Speaker Change: Our nonperforming assets totaled $89 9 million or 25 basis points of quarterly average interest, earning assets at September 32024, compared with $69 5 million or 20 basis points of quarterly average interest earning assets at September 32023.

Speaker Change: And $89 6 million or 25 basis points of quarterly average interest, earning assets at June 32024, with a significant portion of the ballots for each period attributable to the acquired loans.

Speaker Change: The allowance for credit losses on loans and off balance sheet credit exposure was 392 million at September 32024.

Speaker Change: Paired with $89 9 million in nonperforming assets as of September 32024.

David Zalman: Our net charge-offs were 12 million for the nine months in the September 30, 2024, compared with 18.9 million for the nine months in the September 30, 2023.

David Zalman: Our net charge-offs were $12 million for the nine months ended September 30, 2024, compared with $18.9 million for the nine months ended September 30, 2023. We continue to have conversations with other bankers considering strategic opportunities. We believe that higher technology and staffing costs, funding costs, loan competition, succession planning, concerns, and increased regulatory burden all point to continued consolidation. We remain ready to move forward in the event a transaction materializes and will be beneficial to our company's long-term future and will increase shareholder value.

Speaker Change: Our net charge offs were 12 million for the nine months ended September 32024, compared with $18 9 million for the nine months ended September 32023.

David Zalman: We continue to have conversations with other bankers considering strategic opportunities. We believe that higher technology and staffing costs, funding costs, loan competition, succession planning concerns, and increased regulatory burden all point to continued consolidation. We remain ready to move forward in the event a transaction materializes and will be beneficial to our company's long-term future and will increase shareholder value. An estimated 1,000 to 1,300 people moved to Texas every day based on the U.S. Census Bureau. In 2023, 473,000 people moved to Texas, which equates to approximately 40,000 per month or 1,300 per day. The Texas and Oklahoma economies continue to benefit from companies relocating from states with higher taxes and more regulation.

Speaker Change: We continue to have conversations with other bankers considering strategic opportunities, we believe that higher technology and staffing costs funding costs loan competition succession planning concerns and increased regulatory burden all point to continued consolidation we remain ready to move forward in the event.

Speaker Change: Hey transaction materializes, it will be beneficial to our company's long term future and will increase shareholder value.

Speaker Change: An estimated 1000 to 1300 people moved to Texas every day.

David Zalman: An estimated 1,000 to 1,300 people move to Texas every day, based on the U.S. Census Bureau. In 2023, 473,000 people moved to Texas, which equates to approximately 40,000 per month or 1,300 per day. The Texas and Oklahoma economies continue to benefit from companies relocating from states with higher taxes and more regulation. This combined with people moving to the states requires additional housing and infrastructure, a driver for loans, and increased business opportunities.

Speaker Change: Just on the U S census Bureau in 2023, 473000 people moved to Texas, which equates to approximately 40000 per month or 1300 per day.

Speaker Change: The Texas and Oklahoma economies continue to benefit from the companies relocating from states with higher taxes and more regulation. This combined with people moving to the state requires additional housing and infrastructure a driver for loans and increased business opportunities. We believe our bank is located in two of the best States weaken.

David Zalman: This combined with people moving to the States requires additional housing and infrastructure, a driver for loans and increased business opportunities.

David Zalman: We believe our bank is located in two of the best states we can be for future growth and continued prosperity. Thanks again for your support of our company.

Asylbek Osmonov: B for future growth and continued prosperity. Thanks again for your support of our company, Let me turn over our discussion to also back house Mono, our Chief financial officer to discuss the specific financial results. We achieved hustle that thank you. Mr. Zalman. Good morning, everyone net interest income before provision for credit losses for the three months and.

Asylbek Osmonov: Let me turn over our discussion to Asylbek Osmonov, our Chief Financial Officer, to discuss the specific financial results we achieved. Asylbek?

Asylbek Osmonov: Let me turn over our discussion to Oslo-Bakosmano, our Chief Financial Officer, to discuss the specific financial results we achieved. Thank you, Mr. Zalman. Good morning, everyone. Net interest income before provision for credit losses for the three months and the September 30, 2024 was 261.7 million and increased of 2.9 million compared to 258.8 million for the quarter ended June 30, 2024. And the increase of 22.2 million compared to 239.5 million for the same period in 2020. Fair Value Loan Income for the third quarter of 2024 was 4.8 million compared to 7.2 million for the second quarter of 2024. Excluding fair value loan income, the core net interest income for the three months and the September 30, 2024, increased 5.3 million compared to the core net June 30, 2024.

Asylbek Osmonov: Thank you, Mr. Zalman. Good morning, everyone. Net interest income before provision for credit losses for the three-month-ended September 30, 2024 was $261.7 million, an increase of $2.9 million compared to $258.8 million for the quarter-ended June 30, 2024, and an increase of $22.2 million compared to $239.5 million for the same period in 2022. Fair Value Loan Income for the third quarter of 2024 was $4.8 million, compared to $7.2 million for the second quarter of 2024. Excluding Fair Value Loan Income, the Core Net Interest Income for the three months ended September 30, 2024, increased $5.3 million, compared to the quarter ended June 30, 2024.

Speaker Change: At September 32024 was $261 7 million, an increase of $2 9 million compared to $258 8 million for the quarter ended June 32024, and the increase of $22 2 million compared to $239 5 million for the same peer.

Asylbek Osmonov: In 2023.

Asylbek Osmonov: Fear Valley loan income for the third quarter of 2024 was $4 8 million compared to $7 2 million for the second quarter of 2024, excluding fair value loan income the core net interest income for the three months ended September 32024 increased $5 3 million compared to that.

Asylbek Osmonov: The quarter ended June 32024.

Asylbek Osmonov: The net interest margin on a tax equal on basis was 2.95% for the three months and the September 30, 2024, compared to 2.94% for the core net June 30, 2024, and 2.72% for the same period in 2023. Excluding purchasing and accounting adjustments, the net interest margin for the three months and the September 30, 2024, was 2.89% compared to 2.86% for the quarter and the June 30, 2024, and 2.68% for the same period in 2023. Non-interest income was 41.1 million for the three months and the September 30, 2024, compared to 46 million for the quarter and the June 30, 2024, and 38.7 million for the same period in 2023.

Asylbek Osmonov: The net interest margin on a tax equivalent basis was 2.95% for the three months ended September 30, 2024, compared to 2.94% for the quarter ended June 30, 2024, and 2.72% for the same period in 2023. Excluding purchase accounting adjustments, the net interest margin for the three months ended September 30, 2024, was 2.89% compared to 2.86% for the quarter ended June 30, 2024, and 2.68% for the same period in 2023. Non-interest income was $41.1 million for the three months ended September 30, 2024, compared to $46 million for the quarter ended June 30, 2024, and $38.7 million for the same period in 2023.

Asylbek Osmonov: The net interest margin on a tactical basis was $2, 95% for the three months ended September 32024, compared to 2.94% for the quarter ended June 30 is 2024 and $2 seven 2% for the same period in 2023.

Asylbek Osmonov: Excluding purchase accounting adjustments the net interest margin for the three months ended September 32024 was 289% compared to $2, 86% for the quarter ended June 32024, and 2.68% for the same period in 2023.

Asylbek Osmonov: Noninterest income was $41 1 million for the three months ended September 32024, compared to $46 million for the quarter ended June 32024, and $38 7 million for the same period in 2023.

Asylbek Osmonov: Higher non-interest income during the second quarter of 2024 was due to a net gain of 10.7 million resulting from the gain on Visa stock conversion, partially offset by the loss on sale of investment securities. Non-interest expense for the three months and the September 30, 2024, was 140.3 million compared to 152.8 million for the core and the June 30, 2024, and 135.7 million for the same period in 2023. Higher non-interest expense during the second quarter of 2024 was primarily due to merger-related expenses of 4.4 million and FDAC special assessment of 3.6 million. For the fourth quarter of 2024, we expect non-interest expense to be in the range of 141 to 143 million.

Asylbek Osmonov: Higher non-interest income during the second quarter of 2024 was due to a net gain of $10.7 million, resulting from the gain on visa stock conversion, partially offset by the loss on sale on investment security. Non-interest expense for the three months ended September 30, 2024 was $140.3 million compared to $152.8 million for the quarter ended June 30, 2024 and $135.7 million for the same period in 2022. Higher non-interest expense during the second quarter of 2024 was primarily due to merger-related expenses of $4.4 million and FDIC special assessment of $3.6 million.

Asylbek Osmonov: Higher noninterest income during the second quarter 2024 was due to a net gain of $10 7 million, resulting from the gain on visa stock conversion, partially offset by the loss on sale on investment Securities.

Asylbek Osmonov: Noninterest expense for the three months ended September 32024 was $140 3 million compared to $152 8 million for the quarter ended June 32024, and $135 7 million for the same period in 2023.

Asylbek Osmonov: Higher noninterest expense during the second quarter 2024 was primarily due to merger related expenses of $4 4 million and MTA. So special assessment of $3 6 million.

Asylbek Osmonov: For the fourth quarter 2024, we expect non-interest expense to be in the range of $141 to $143 million. The efficiency ratio was 46.9% for the three-month-ended September 30th, 2024, compared to 51.8% for the quarter-ended June 30th, 2024, and 48.7% for the same period in 2020.

Asylbek Osmonov: For the fourth quarter of 2024, we expect noninterest expense to be in the range of 141 to 143 million.

Asylbek Osmonov: The efficiency ratio was 46.9% for the three months and the September 30, 2024, compared to 51.8 million. For the quarter and the June 30, 2024, and 48.7% for the same period in 2023.

Asylbek Osmonov: The efficiency ratio was 46, 9% for the three months ended September 32024, compared to 51, 8% for the quarter ended June 32024, and 48, 7% for the same period in 2023.

Asylbek Osmonov: The bond portfolio metrics at $930,024 have a modified duration of 4 and projected annual cash flows of approximately $2 billion.

Asylbek Osmonov: The one portfolio metrics at 9.30, 2024 have a modified duration of 4 and projected annual cash flows of approximately 2 billion.

Speaker Change: The bond portfolio metrics at 930 in 2024 have a modified duration of four and projected annual cash flows of approximately $2 billion and with that let me turn over the presentation to attempt to manage for some details on the loan and asset quality, yes. Thank.

Tim Tumanis: And with that, let me turn over the presentation to Tim Timanis for some details on loan and asset quality. Thank you, Asylbek. Our non-performing asses. Quarter End September 30th, 2024. totaled $89,923,000. 40 basis points of loans and other real estate. compared to $89,570,000 or $40,000. at June 30, 2024. since September 30th, 2024.

Tim Timmanus: And with that, let me turn over the presentation to Tim Timmanus for some details on loan and asset quality. Thank you, also back. Higher non-performing assets at quarter in September 30, 2024 totaled $89 million, $923,000 for 40 basis points of loans and other real estate.

Speaker Change: Thank you also back.

Speaker Change: Our nonperforming assets at quarter end September 30th 2024.

Speaker Change: Totaled $89 million $923000 or.

Speaker Change: 40 basis points of loans and other real estate.

Speaker Change: Compared to $89 million $570000 or 40 basis points at June 30th 2024.

Tim Timmanus: at June 30, 2024. Since September 30, 2024, $2,000,000 in non-performing assets had been removed or put under contract or sale. The September 30, 2024 non-performing asset total was made up of $83,000, $989,000 in loans, $177,000 in repossessed assets, and $5,757,000 in other real estate. Net chargeoffs for the three months ended September 30, 2024, were $5,455,000 compared to net chargeoffs of $4,368,000 for the quarter-ended June 30, 2024. This is a $1,000,000,000 increase on a length quarter basis. There was no addition to the allowance for credit losses during the quarter-ended September 30, 2024, compared to a $9,000,000, $66,000 addition during the quarter-ended June 30, 2024 that resulted from the Loan Store State Bank of West Texas acquisition.

Speaker Change: Since September 30th 2024, $2.200 million in nonperforming assets had been removed or put under contract for sale.

Tim Tumanis: $2,200,000 in non-performing assets have been removed or put under contract for sale. September 30, 2024, non-performing asset total was made up of $83 million $989,000 in loans. $177,000 in repossessed assets. and $5,757,000 in other real estate.

Speaker Change: The September 30th 2024, nonperforming asset total was made up of 83 million.

Speaker Change: $989000 in loans.

Speaker Change: $177000 in repossessed assets.

Speaker Change: And $5 million $757000 in other real estate.

Tim Tumanis: Net charge offs for the three months ended September 30th, 2024. for $5,455,000. Compared to net charge-offs of $4,368,000 for the quarter ended June 30, 2024. This is a $1,087,000 increase. on a length quarter basis.

Speaker Change: Net charge offs for the three months ended September 30th 2024.

Speaker Change: We're $5 million $455000.

Speaker Change: Compared to net charge offs of $4.368 million for the quarter ended June 30th 2024.

Speaker Change: This is a $1.087 million increase.

On a linked quarter basis.

Tim Tumanis: There was no addition to the allowance for credit losses during the quarter ended September 30th, 2024. compared to a $9,066,000 addition during the quarter ended June 30, 2024 that resulted from the Lone Star State Bank of West Texas acquisition.

Speaker Change: There was no addition to the allowance for credit losses during the quarter ended September 32024.

Speaker Change: Compared to a 9.066 million dollar edition during the quarter ended June 30th 2024 that resulted from the Lone Star State Bank of West, Texas acquisition.

Tim Timmanus: No dollars were taken into income from the allowance during the quarter ended September 30, 2024. The average monthly new loan production for the quarter-ended September 30, 2024, was $259 million compared to $278 million for the quarter-ended June 30, 2024. Loans outstanding at September 30, 2024, were approximately $22.381 billion compared to $22.321 billion at June 30, 2024. The September 30, 2024 loan total is made up of 40% fixed-rate loans, 31% floating-rate loans, and 29% variable-rate loans.

Speaker Change: No dollars were taken into income from the allowance during the quarter ended September 30th 2024.

Tim Tumanis: No dollars were taken into income from the allowance during the quarter ended September 30, 2021.

Speaker Change: The average monthly new loan production for the quarter ended September 30th 2024 was $259 million compared to $278 million for the quarter ended June 30th 2024.

Tim Tumanis: The average monthly new lung production for the quarter ended September 30, 2024, was $259 million. compared to $278 million for the quarter ended June 30, 2021. Loans outstanding at September 30, 2024 were approximately $22.381 billion. prepared to $22.321 billion at June 30, 2024. September 30, 2024 Loan Total. is made up of 40% fixed rate. 31% floating rate.

Speaker Change: Loans outstanding at September 30th 2024, or approximately $22.381 billion compared to 22.321 billion at June 32024.

Speaker Change: The September 32024 loan total is made up of 40% fixed rate loans.

Speaker Change: 31% floating rate loans, and 29% variable rate loans.

Tim Tumanis: 29% variable.

Charlotte Rasche: I will now turn it over to Charlotte Rache. Thank you, Tim. At this time, we are prepared to answer your questions. Our call operator will assist us with questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.

Charlotte Rasche: I will now turn it over to Charlotte Rasche.

Speaker Change: I will now turn it over to Charlotte Rasche.

Charlotte Rasche: Thank you, Tim. At this time, we are prepared to answer your questions. Our call operator will assist us with questions.

Charlotte Rasche: Thank you Tim at this time, we are prepared to answer your questions our call operator will assist us with questions.

We will now begin the question and answer session.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: To withdraw your question. Please press Star then two.

Unknown Executive: At this time, we will pause momentarily to assemble our roster.

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Okay.

Unknown Executive: Our first question today is from Menon, Cassalia, with Morgan Stanley. Please go ahead.

Speaker Change: Our first question today is from Monotocous Alea with Morgan Stanley. Please go ahead.

Manan Gosalia: Our first question today is from Manan Gosalia with Morgan Stanley. Please go ahead.

Unknown Executive: Hi, good morning. Good morning. You noted that NIM should continue to improve to more normal levels as the assets reprise. I was wondering how you feel about the NIM guidepost that you speak of. Again, I think we're sticking with what we said. We should exit our NIM at 3-3 at 5-year end. Again, there's a lot of things that go into that. That's a break-stay exactly where they are.

Unknown Executive: I get it.

Speaker Change: Hi, good morning.

Unknown Executive: Good morning. Morning. You noted that NIM should continue to improve to more normal levels as assets reprice. I was wondering how you feel about the NIM guidepost that you've previously given?

Speaker Change: Good morning.

Monotocous Alea: I mean, you you noted a NIM should continue to improve to more normal levels as your assets reprice.

Monotocous Alea: I was wondering how you feel about the NIM guide posted you've previously given.

Unknown Executive: Again, I think we're sticking with what we said.

Speaker Change: Again, I think we're at the.

Speaker Change: We're sticking with what we said we should exit our NIM at three three.

Unknown Executive: We should exit our NIM at 3 at year end. Again, there's a lot of things that go into that. That's if rates stay exactly where they are. If rates go down, of course, we'll have to lower our money market accounts by 25 basis points to exit at 3, but we still plan on exiting the year at a 3% NIM. And then for 12 months ending in 2025, our model is showing that we'll average 3.27% for the year, which means it'll be lower in the beginning of the year and higher at the end of the year.

Speaker Change: At five <unk> at year end again that there is a lot of things that go into that that's a bright stay exactly where they are.

Unknown Executive: If rates go down, of course, we'll have to lower our money market accounts by 25 basis points to exit at 3, but we still plan on exiting the year at a 3% NIM. And then, for 12 months ending in 2025, our model is showing that we'll average 3.27% for the year, which means it'll be lower in the beginning of the year and higher at the end of the year. And then in 26, our model is still projecting 3.65. That's, I'll put a caveat on that.

Speaker Change: <unk> go down of course, we all have to lower our money market accounts by 25 basis points to exited three but we still plan on exiting the year at a 3% NIM.

Speaker Change: And then for 12 months ending in 2025, our model is showing that will average.

Speaker Change: 3.27% for the year, which means it would be lower at the beginning of the year and higher at the end of the year and then in 'twenty six where our models still protecting a 365.

Unknown Executive: And then in 2026, our model is still projecting 3.65%.

Speaker Change: That's put a caveat on that that looks a little strong to me, but that's just what the model showing right now and again those are taking into consideration that the interest rates at the end of the year are prime is seven and a half and a 25 that will fit into prime at a six and a half and a 26.

Unknown Executive: I'll put a caveat on that. That looks a little strong to me, but that's just what the model is showing right now. And again, those are taking into consideration that the interest rates at the end of the year prime is 7.5%, and in 2025, we'll finish the prime at 6.5%, and in 2026, the prime is 6%. So that's the difference that's going into those.

Unknown Executive: That looks a little strong to me, but that's just what the model is showing right now. And again, those are taking into consideration that the interest rates at the end of the year prime is 7.5, and in 25, that we'll finish the prime at 6.5, and in 26 to prime at 6. So that's the difference that's going into those. Got it.

Speaker Change: Prime is sick. So that's the that's the difference.

Speaker Change: Going into detail of those.

Speaker Change: Got it so in in terms of the rate environment, what is the best freight environment feed achieve.

Unknown Executive: Got it. So in terms of the rate environment, what is the best rate environment for you to achieve that NIM of 3.5% or 3.4% or so in the medium term? What are the puts and takes if the short end rates decline another 150 basis points from here? Or if they don't decline as much, where does that put you in terms of that medium term NIM?

Unknown Executive: So, in terms of the rate environment, what is the best rate environment for you to achieve that NIM of 3.5% or 3.4% are showing the medium term? What are the puts and takes if the short end rates decline another 150 basis points from here, or if they don't decline as much, what is that put you in terms of that medium term NIM? Really historic, and I'm just pulling out a sheet of paper just so I'm making sure what I tell you is accurate. But really, it doesn't change a lot in over a 12-month period where their interest rates went up 200 basis points or went down 200 basis points.

Speaker Change: No that that that NIM of three and a half the sand up to three 4% or so in the medium term what are the puts and takes if the short end rates decline another 150 basis points from here.

Speaker Change: Or if they don't decline as much where does that put you in terms of that medium term them.

Unknown Executive: Really historically, and I'm just pulling out a sheet of paper just so I'm making sure what I tell you is accurate, but really, It doesn't, it doesn't change a lot in an over a 12-month period whether interest rates went up 200 basis points or went down 200 basis points. I don't see, I think if interest rates, if interest rates, if interest rates were to stay right now, we'd probably have a little bit higher net interest margin. If they went up, we'd have just a little bit higher net interest margin. If they go down, it's a little bit lower, but they really don't change a whole lot of interest rates going up or down.

Speaker Change: Really historically and I'm, just putting out a sheet of paper just so I'm, making sure what I would tell you is accurate but.

Speaker Change: Really.

Speaker Change: It doesn't it doesn't change a lot over a 12 month period, whether interest rates went up 200 basis points or went down 200 basis points.

Unknown Executive: I don't see; I think of interest rates. If interest rates were, they stayed right now, we probably have a little bit higher net interest margin. If they went up, we have just a little bit higher net interest margin. They go down; it's a little bit lower, but they really don't change a whole lot interest rates going up or down. I think that's up to 200 basis points. I think if they went down more than 200 basis points, then it probably would start to affect us more.

Speaker Change: I don't see.

Speaker Change: Think of interest rate debentures rates.

Speaker Change: Interest rates were like state right now.

Speaker Change: If we'd probably have a little bit.

Speaker Change: Higher net interest margin if they went up we would have just a little bit higher net interest margin.

Speaker Change: Go down into a little bit lower but they they really don't change a whole lot of interest rates going up or down I'd say, that's up to 200 basis points I think if they went down more than 200 basis points than it probably would start to affect us more.

Unknown Executive: I'd say that's up to 200 basis points. I think if they went down more than 200 basis points, then it probably would start to affect us more.

Unknown Executive: Got it. I guess relative to the forward curve of rates, were up or down 50 basis points, it sounds like you can still get some nice NIM expansion from here.

Unknown Executive: Got it. I guess relative to the forward curve, if rates were up or down 50 basis points, it sounds like you can still get some nice MIM expansion from here.

Speaker Change: Got it and say I guess relative to the forward curve if rates were up or down 50 basis points. It sounds like you can still get some nice NIM expansion from here.

Unknown Executive: Now, our models are showing that we everything that we've been saying for the last throughout the year is still going forward for the end of this year and also going forward for for 25 and also going forward for 26 and even 27. So what we're looking forward still looks still looks very good.

Unknown Executive: Now, our models are showing that everything that we've been saying for the last throughout the year is still going forward for the end of this year, and also going forward for 25, and also going forward for 26, and even 27. So what we're looking forward still looks still looks very good for us.

Speaker Change: Our models are showing that we are everything that we've been saying for the last throughout the year is still going forward for the end of this year and also going forward for for 'twenty five.

Speaker Change: 26, and even 'twenty seven.

Speaker Change: But we're looking forward still looks still looks very good for us.

Unknown Executive: Great. Thank you.

Unknown Executive: Great, thank you.

Speaker Change: Great. Thank you.

Catherine Mealor: The next question is from Catherine Mealor with KVW. Please go ahead. Thanks. Good morning. To just follow up on manager's deposit cost, what you're seeing so far. You've got such a low deposit based relative to others. Should we see, you mentioned you might bring money markets down 20 basis points if we get another cut this quarter, but maybe just any kind of commentary you can give them what you've seen so far. And do we actually see deposit costs on the whole down in a couple quarters, or is it more kind of stable? And then more of this nim lift is coming from the asset remix.

Catherine Mealor: The next question is from Catherine Mealor with KBW.

Speaker Change: The next question is from Catherine Mealor with K B W. Please go ahead.

Catherine Mealor: Please go ahead. Thanks.

Thanks, Good morning.

Catherine Mealor: Good morning. To just follow up on that, on just deposit cost, what you're seeing so far, you've got such a low deposit base relative to others. Should we see, you mentioned you might bring money markets down 20 basis points if we get another cut this quarter, but maybe just any kind of commentary you can give on what you've seen so far. And do we actually see deposit costs on the whole down the next couple quarters, or is it more kind of stable? And then, you know, more of this nimblift is coming from the asset. I, you know, again, gut feeling, but if interest rates go where they're at, you know, we should get some repricing on the CDs and, you know, we could have shown a lot of growth that we wanted to in deposits, you know, if we would have came up with a product and said, you know, we're going to pay five and a half percent on a CD and, you know, it would have been easy for us to raise, you know, you can raise 500 or a billion dollars if you wanted to.

Catherine Mealor: All about follow up on managing deposit costs, what you're seeing so far you've got such a low deposit base relative to others should we see you mentioned you might bring money markets down 20 basis points. If we get another cut this quarter, but maybe just any kind of commentary you can give on what you've seen so far and.

Catherine Mealor: We actually see deposit costs on the whole down the next couple of quarters or is it more kind of stable.

Catherine Mealor: And then you know more of this NIM left is coming from the asset remix.

David Zalman: I, you know, again, gut feeling, but if interest rates go where they're at, we should get some repricing on the CDs. And we could have shown a lot of growth that we wanted to in deposits. You know, if we, if we would have came up with a product and said, you know, we're going to pay five and a half percent on a CD. And, you know, it would have been easy for us to raise, you know, you can raise 500 or a billion dollars if you wanted to. But again, we didn't, we didn't want to do that.

Again gut feeling, but if interest rates go where they're at.

Speaker Change: We should get some re pricing on the Cds.

Speaker Change: We are we could have shown a lot of growth that we wanted to and deposits. You know if we can we would it came up with the product and said you know we're gonna pay five 5% on a C D and it would've been easy for us right now.

Speaker Change: You can write 500 or $1 billion. If you wanted to but again, we didn't we didn't want to do that.

David Zalman: But again, we didn't we didn't want to do that. You know, our deposit or CD ratio is only about 16 percent of our deposit. But again, we easily could have raised that up if we wanted to. We didn't. We weren't.

Asylbek Osmonov: You know, our deposit, our CD ratio is only about 16% of our deposits. But again, we easily could have raised that up if we wanted to. We didn't; we weren't; our real focus is on the net interest margin. And that's, that's kind of where we're focused. I think that our basis and also back can jump in any time. We went on this deal. But again, for every 100 basis points down, we have our beta is a 22 basis point for the interest bearing deposits and 13 based on total deposits. And just to get the color, which we're saying right now.

Speaker Change: Our deposit our CD ratio was only about 16% of our deposits, but again, we easily could have raised that up if we wanted to we didn't we weren't our real focus is on this net interest margin and that's that's kind of where we're focused I think that oh our basis.

David Zalman: Our real focus is on this net interest margin. And that's that's kind of where we're focused. I think that our basis in. Asylbek can jump in any time he wants on this deal, but again, for every 100 basis points down, our beta is 22 basis points. For the interest bearing deposits and 13 based on total deposits. And just to add the color, which we're saying right now, so when we had 50 basis cut initially in September, we didn't cut our general rate, but what we did, we cut their special rate we provide to our customers, we cut the rates on those.

Speaker Change: Also back can jump in any time you want on this deal, but again for every 100 basis points.

Speaker Change: Down we our beta is a 22 basis for the interest bearing deposits and 13 based on total deposits and just to add to the color of what we're saying right now so when we had 50 basis cut initial in September we didn't cut our general rate, but what we did with cut their special rates will provide to our customers will cut the rates.

Asylbek Osmonov: So when we had 50 basis cut initially in September, we didn't cut our general rate, but what we did, we cut their special rate, we provide to our customers, we cut the rates on those. And as you remember, we introduced those special CDs, and we cut the rates on those special CDs. And from the maturity wise on CDs, if you look at the total CDs, 75% of those CD will mature within six months, and 91% going to mature within a year. So duration of those CDs is short. So, as they reprise, we should get a benefit on the cost of deposit, cost of funding site.

Speaker Change: On those and as you remember we introduced those special Cds and we've cut the rates on those special Cds and from the maturity wise on Cds. If you look at the total Cds, 75% of those Cds will mature within six months and 91% going to mature within a year so duration.

Asylbek Osmonov: And as you remember, we introduced those special CDs, and we cut the rates on those special CDs. And from the maturity wise on CDs, if you look at the total CDs, 75% of those CD will mature within six months, and 91% going to mature within a year. So duration of those CDs is short. So as they reprise, we should get a benefit on the cost of deposit cost of funding site. And we do expect cost of deposit going down next quarter. And it should go down or net margins improve with the repricing of the $2 billion that rose off of our bond bonds and repricing on our loans.

Speaker Change: Of those two days short so as they reprice, we should get a benefit on the cost of deposits the cost of funding side and we do expect our cost of deposits going down next quarter.

Asylbek Osmonov: And we do expect a cost of deposit going down next quarter. And yeah, it should go down. Our main market is included with the repricing of the $2 billion or rose off of our bond bonds and repricing on our loans. All of that should be a real positive to net interest margin that where we want it to go. And I think overall our exit deposit cost was at the end of the system was lower or lower than average on the Q3. So we project through Wise we're going down. So that's what continues to see as CD reprise.

Speaker Change: It should go down in end March has improved with the repricing of the $2 billion of wells off of our bond bonds in a repricing of our loans all of that should be a real positive to our net interest margin.

Asylbek Osmonov: All of that should be a real positive to make our net interest margin go where we want it to go. And I think overall, our exit to deposit cost was at end of the September was already lower than average on the Q3. So we trajectory wise, we're going down. So that's what continues to see as CD reprice. Probably one caveat, I would say that if interest rates, if they came down, kept coming down at 50 basis points at the shop, that affects it, it takes us a little bit more time to adjust. You know, I think coming down to 25 basis points, we're fine.

Speaker Change: So what we wanted to go and I think overall, our exit the deposit cost was at the end of the September was already lower than average on the Q3 a week.

Speaker Change: Trajectory wise were going down and so that's what contingency is did you reprice, probably one caveat I would say that if interest rates. If they came down kept coming down it 50 basis points at the shot that that effects as it takes us a little bit more time to adjust.

Unknown Executive: Probably one caveat, I would say that if interest rates, if they came down, kept coming down at 50 basis points at the shop, that affects us. It takes us a little bit more time to adjust. I think coming down at 25 basis points, we're fine, but if they come down in bigger increments, it takes us a little bit longer to adjust, I think. Okay, that makes sense. And then some of this growth in the warehouse, as you guided to last quarter. Any outlook to what we should see out of that business for the back half of the year.

Speaker Change: Coming down 25 basis points were fine, but they come down in bigger increments. It takes us a little bit longer to adjust.

Asylbek Osmonov: But if they come down in bigger increments, it takes us a little bit longer to adjust.

Catherine Mealor: Okay, that makes sense.

Speaker Change: Okay that makes sense and then some nice growth in the warehouses as you've guided to last quarter and the outlook, what we should see out of that business for the back half of the year.

Unknown Executive: And then some nice growth in the warehouse as you guided to last quarter. Any outlook to what we should see out of that business for the back half of the year?

Unknown Executive: Sarah, I'll take that one. You're right. We ended up the quarter on a high note of a billion, 229. I think we averaged a billion, 115 for the quarter. So both of those are a little higher than we were forecasting. Just as a data point, we closed last night of the billion, 243. So it's remained pretty strong. The average for this quarter through last night's a billion, 201. I would say it's likely, and again, rates play a factor in this whole equation; it's likely those numbers come down for seasonal weakness in November and December. And if I had to put a number on them and say we would average for the quarter, probably a billion, 50 to maybe a billion one.

Unknown Executive: I'll take that one. You're right, we ended up the quarter on a high note at a billion 229. I think we averaged a billion 115 for the quarter. So both of those are a little higher than we were forecasting. Just as a data point, we closed last night at a billion 243. So it's remained pretty strong. The average for this quarter through last night's a billion 201.

Speaker Change: Sure I'll take that one.

Speaker Change: You're right we ended up the quarter on a high note at $1 billion to 29.

Speaker Change: Averaged 1 billion $1 15 for the quarter so.

Speaker Change: Both of those were a little higher than we were forecasting just as a data point.

Speaker Change: Closed last night at 1 billion $2 43, so what's remain pretty strong.

Speaker Change: The average for this quarter through last night to a billion to a one.

Unknown Executive: I would say it's likely, and again rates play a factor in this whole equation, it's likely those numbers come down for seasonal weakness in November and December. And if I had to put a number on it, I'm going to say we would average for the quarter probably a billion fifty to maybe a billion one. So it's going to come off from the highs we're at today. Frankly, we've enjoyed these hives for a little longer than I have anticipated. Yes, for sure. Okay, great.

Speaker Change: I would say, it's likely and again rates play a factor in this whole equation is.

Speaker Change: Likely those numbers come down for seasonal weakness in November and December.

Speaker Change: And if I, if I had to put a number on it I'm going to say, we would average for the quarter, probably a 1 billion 50 to maybe 1 billion won.

Unknown Executive: So it's going to come off from the highs we're at today. But frankly, we've enjoyed these highs for a little longer than I have anticipated. Yes, for sure. Great. Thank you.

Speaker Change: So it's going to come off from the highs were at today.

Speaker Change: Frankly, we've enjoyed these highs for a little longer than I had anticipated.

Speaker Change: Yeah for sure Okay, great. Thank you.

Unknown Executive: Thank you. Yeah, and just this is a follow up on that. We have recently added one new customer to the warehouse.

Unknown Executive: Yeah, and just this is a follow up on that. We have recently added one new customer to the warehouse. That's the first time in a while we have been letting some customers go. I think we let seven or eight customers go over the course of the last year. This is now going back the other way. We added the customer, and we have had some increases to a couple of other customers. So net net, I think we've added $140 million worth of new commitments so far this month. That's great.

Speaker Change: And just as a follow up on that we have recently added one new customer to the warehouse. That's the first time in a while we've been letting some customers go I think we've got seven or eight customers go over the course of last year.

Unknown Executive: That's the first time in a while we have been letting some customers go. I think we let seven or eight customers go over the course of the last year. This is this is now going back the other way. We added the customer and we have had some increases to a couple other customers. So net net, I think we've added $140 million worth of new commitment. So far, this.

Speaker Change: Well. This is now going back the other way we ended the customer and we have had some increases to a a couple of other customers. So net net I think we've added $140 million worth of new commitments.

Speaker Change: So far this month.

Unknown Executive: Great, thank you.

Speaker Change: Okay, great. Thank you.

Unknown Executive: Thank you.

Ibrahim Punawala: The next question is from Ibrahim Punawala with Bank of America.

Ebrahim Poonawala: The next question is from Ebrahim Poonawala with Bank of America.

Speaker Change: The next question is from Ebrahim, Pune wallet with Bank of America. Please go ahead.

Ibrahim Punawala: Please go ahead. Good morning. I just want to follow up on the name guidance about the David you mentioned. I think the 327 average or fully it implies exiting exterior by 3.4 something around between 3.4, 3.5. And you mentioned some prime rate assumptions that assume another 50 hundred basis points of rate cuts over the next 12 months to get to the 327 issue average for fully at 25. For 2025, the prime rate we have ending at 6.5% and with average 327. I don't have to what the exit is going to be, but it should be higher than the 327.

Ebrahim Poonawala: Please go ahead. Good morning, I just want to follow up on the name Guidance and Outlook. David, you mentioned, I think the 327 average or full year implies exiting next year by 3.4, something around between 3.4, 3.5. And you mentioned some prime rate assumptions.

Speaker Change: Good morning.

Speaker Change: Good morning, Good morning, I, just wanted to follow up on the NIM.

Speaker Change: Guidance and outlook.

David You mentioned I think the key 27 average for full year. It implies exiting next year by keep waiting for something around between three and four people advice.

And and.

Speaker Change: And you mentioned some claim rate assumptions does that assume another 50 or 100 basis points of rate cuts over the next 12 months to get to that 227 ish average for full year 'twenty five.

Unknown Executive: Does that assume another 50, 100 basis points of rate cuts over the next 12 months to get to that 327-ish average for full year 25? The for 20 for 2025, the prime rate we have ending at six and a half percent. And with average 327, I don't have what the exit's going to be, but it should be higher than the 327.

Speaker Change: For 'twenty for 2025.

Crime rate, we had ending at 6.5%.

Speaker Change: And with averaged $3 27, I don't handle at the exit is going to be but it should be higher than the 327 do you have that also back I don't have it in front of me.

Unknown Executive: Do you have that, Asylbek? I don't have it in front of me. I don't have it, but I think it's going to be a little bit... I think your numbers are probably pretty close to what you're saying.

Ibrahim Punawala: Do you have that also? I don't have it in front of me. I don't have it, but I think your numbers are probably pretty close, which you're saying. And if I heard you correctly, the only the biggest risk to that view is if we get rapid rate cuts, slower rate cuts, deeper curve; all of that should be neutral to positive to that kind of model outcome. I think so. That's right.

Speaker Change: But I think you're right.

Speaker Change: The numbers are probably pretty close to what you're saying.

Unknown Executive: And if I heard you correctly, the only the biggest risk to that view is if we get rapid rate cuts, slower rate cuts, steeper curve, all of that should be neutral to positive to that kind of a model outcome. I think so, that's right.

Speaker Change: And if I heard you could exceed the only the.

Speaker Change: The biggest risk to that view is if we get it rapidly it cuts slower rate cards steep book club all of that should be neutral to positive to that kind of a model outcome.

Speaker Change: I think so that's right.

David Zalman: That's helpful. And just separately, I think you mentioned about MNA like yes, there needs to be more MNA, but it's been tough. Obviously, elections may have implications, but if we don't have a big change in the regulatory backdrop coming out of elections, you still see it as conceivable that we could do a deal or two in the next 6 to 12 months. I do. I mean, I'm not saying we're out there. Again, we're not out there just jumping to do deals. We're not going to do that. But, you know, if it's a good deal for us and that we can get some good accretion on it and it makes sense and it makes us stronger, then we'll do it.

David Zalman: That's helpful. And just separately, I think you mentioned about M&A. Like, yes, there needs to be more M&A, but it's been tough. Obviously, elections may have implications, but if we don't have a big change in the regulatory backdrop coming out of... Elections, do you still see it as conceivable that Prosperity could do a deal or two in the next six to 12 months? I do. I mean, I'm not saying we're out that we're not again, we're not out there just jumping to do deals. We're not going to do that. But, you know, if it's a good deal for us, and, and that we can that we can get some good accretion on it and it makes sense and it makes us stronger then we'll do it.

That's helpful.

Speaker Change: And just separately I think you mentioned about M&A.

Speaker Change: Like yes, there needs to be more M&A, but it's been tough.

Speaker Change: Obviously elections may have implications, but if we don't have a big change in the regulatory backdrop coming out of.

Speaker Change: Elections.

Speaker Change: Still see it is conceivable that you.

Speaker Change: He could do a deal or two in the next six to 12 months.

Speaker Change: I do I mean.

Speaker Change: I'm not saying, we're not again, we're not out there jumping to do deals, we're not going to do that but.

Speaker Change: If it's a good deal for us.

Speaker Change: And then we can.

That we can get some good accretion on it and it makes sense and it makes us stronger than then we'll do it but again, we're not out there just trying to go out there and buy banks are our real focus right. Now is to is to grow our bag and really focus on our net interest margin for brush right now our biggest focus is our net interest margin.

David Zalman: But again, we're not out there just trying to go out there and buy banks. Our real focus right now is to grow our bank and really focus on our net interest margin. For us, right now, our biggest focus is our net interest margin to get it towards more normalized level. But again, we do do M&A. I'll give you kind of, I know I read somebody where they talked about our growth a little bit. So I'll just, you know, when I started with the bank, we were $40 million in size and had about 15 employees. Then we went public in 1998.

David Zalman: But again, we're not out there just trying to go out there and buy things. Our real focus right now is to grow our bank and really focus on our net interest margin for us. Right now, our biggest focus is our net interest margin to get it towards a more normalized level. But again, we do M&A.

Speaker Change: It towards a more normalized level, but again, we do do M&A.

David Zalman: You know, I'll give you kind of I know I read somebody where they talked about our growth a little bit. So I'll just, you know, when I start with the bank, it was we were $40 million in size and at about 15 employees. Now we would public in 1998. We were about $300 million in size. And so, over the years, we've grown organically and through M&A growth. From an organic standpoint, we usually grow 2 to 4% a year on deposits and 6 to 8% a year on the loans. Having said that, it's hard sometimes for an analyst to see that because they don't see the amount of loans when we go into a bank.

Speaker Change: I'll give you kind of I know I read somebody where they talked about our growth a little bit. So I was just you know.

Speaker Change: Well when I start with the bank. It was we were $40 million in size at about 15 employees and then we went public in 1998, we were about $300 million in size and so.

David Zalman: We were about $300 million in size. And so over the years, we've grown organically and through M&A growth. From an organic standpoint, we usually grow 2 to 4 percent a year on deposits and 6 to 8 percent a year on the loans. Having said that, it's hard sometimes for an analyst to see that because they don't see the amount of loans when we go into a bank and that we get out of those loans and have to make up that difference. But the combination of the M&A and the organic growth together has given us double-digit growth over all these years.

Speaker Change: Over the years, we've grown organically and through M&A growth from an organic standpoint, we used to grow 2% to 4% a year on the deposits of 6% to 8% a year on the loans.

Speaker Change: Having said that it's hard sometimes for an analyst to see that because they don't see the amount of loans. Once they go into a bank and that we will get out of those loans and have to make up that difference, but the combination of the M&A and the organic growth together has given us double digit growth over all these years and so it really.

David Zalman: And that we get out of those loans and have to make up that difference. But the combination of the M&A and the organic growth together is giving us double-digit growth. Over all these years. And so, you know, we really, we've grown from a 300 million dollar bank when we went public in 98 to almost a 40 billion dollar bank today. So, so the thought that we don't grow would just be a misnomer. It's just we do grow, and we'll continue to grow. We are going to focus on our net interest margin right now. Again, I think that that's our primary focus.

David Zalman: And so, you know, we've grown from a $300 million bank when we went public in 1998 to almost a $40 billion bank today. So the thought that we don't grow would just be a misnomer. It's just we do grow and we'll continue to grow. We are going to focus on our net interest margin right now. Again, I think that that's our primary focus. And again, I think if growth has been harder by, if you want to say growth has been harder this quarter, that's probably something that's legitimate because you haven't seen the loan growth and we didn't go out and purchase a bunch of deposits just to raise the cost of money.

Speaker Change: Two we've grown from a 300 million at a bank when we went public in 98 to almost a $40 billion bank today. So so without that we don't rub would just be a misnomer. It's just a we do grow and will continue to grow we are going to focus on our net interest margin right now.

Speaker Change: Again.

Speaker Change: Thanks, Ed.

Speaker Change: That's our primary focus and again growth has been harder by if you want to say growth has been harder this quarter, that's probably something that's legitimate because you haven't seen the loan growth and we didn't go out and purchase a bunch of deposits just raise the cost of money, but again everybody has to remember that that's what that's what the.

David Zalman: And again, if I think growth has been harder, by if you want to say growth has been harder. This quarter, that's probably something that's legitimate because you haven't seen the long growth, and we didn't go out and purchase a bunch of deposits, just raise the cost of money. But again, everybody has to remember that that's what that's what the Fed wanted. They wanted to raise rights this high. They want to slow down the economy. And that's kind of where we're at right now.

David Zalman: But again, everybody has to remember that that's what the Fed wanted. They wanted to raise rates this high. They wanted to slow down the economy. And that's kind of where we're at right now. Long answer.

Speaker Change: They had wanted they wanted to raise rates as high they want to slow down the economy, and that's kind of where we're at right now so.

David Zalman: So long, long answer. I'm sorry. I just want to give you some color on it. So, that's helpful, and that's good perspective.

Unknown Executive: I'm sorry. I just wanted to give you some color on So that's helpful. And that's good perspective, David, just one on the name given the name focus. I think Asylbek mentioned 40% fixed rate, 29 variable rate. I think you mentioned $2 billion in securities cash flows over the next year. What's that equivalent number for loans and what's the pickup given the current yield curve of what's maturing and what you're picking up when these things are repriced? So you're right on security, we have $2 billion that let's assume that right now our yield is around 2% and going to reprice at $4.75 what we have, that's a pickup of $2.75, that's going to be going toward positive on our net interest income.

Speaker Change: Long answer I'm, sorry, I just wanted to give you some color on it.

Speaker Change: That's helpful and that's a good perspective, David just one on the NIM given the NIM focus I think actually back mentioned, 40% fixed fleet 29 variable rate.

David Zalman: David just won on the name given the name focus. I think I still back mentioned 40% fixed rate, 29 variable rate. Do you think you mentioned $2 billion in securities cash flows over the next year? What's that equivalent number for loans? And what's the pickup given the current yield curve of what's maturing and what you're picking up when these things are repricing? So you write on security will have $2 billion that let assume that right now our yield is around 2% and going to reprise it for 75 what we have that's a pickup of 275 that's going to be going toward positive on our net interest income on the long side.

Do you I think you mentioned $2 billion in securities cash flows over the next year, what's the equivalent number for loans and whats the pick up given the current yield curve, well, what's maturing and what youre picking up when these things are replacing.

Speaker Change: So you're right on security, we have $2 billion that let's assume that right now our yield is around 2% and they're gonna Reprised at 475 or do we have that's a pickup of $2 75.

Speaker Change: We're gonna be going toward positive Oh now no net interest income on the loan side I think we have about $5 billion cash flow annually. So on the fixed coupon that towards that 40% of 5 billion and by what.

Unknown Executive: On the loan side, I think we have about $5 billion cash flow annually. So on the fixed one that was at 40% of $5 billion about what... around $2.3 billion. I think the fixed rate was like less than 5%, so they're going to get repriced at 7.5% on the loans. And about 30% variable that's still lower than our loans we're putting up right now, so that is going to be picked up there. And floating is floating, so we're not going to get any benefit on that. So those are items that kind of push-pull that would get us to the net interest income that we're quoting, that will continue to increase combination of the securities and fixed loan and variable loan.

David Zalman: I think we have about $5 billion cash flow annually. So on the fixed one that was at 40% or 5 billion, about what, around 2.2 to 2.3 billion dollars. I think the fixed rate on was like less than 5%, so they're going to get reprise at 7.5% on the loans and about 30% variable. That's too lower than our loans were putting up right now. So there's going to be pickup there and floating floating, so we're not going to get any benefit on that. So those are items that kind of push pull that would get us to the net interest income that we're quoting that will continue to increase combination of the securities and fixed loan and variable loans.

Speaker Change: Around two two to $2 $3 billion Island, I think is a fixed rate on was like less than 5%. So they're gonna get reprised at seven 5% on the loans and about 30% variable that still lower than our loans, we're putting up right now so there's going to be pick up there and floating is floating so we're not going to get it.

Speaker Change: Any benefit on that so those are items that kind of push pull that would get us to the net interest income that we're quoting that they will continue to increase combination of the securities and fixed loan and variable loans.

Unknown Executive: That's helpful.

Unknown Executive: because of the time for taking my questions.

Speaker Change: That's helpful. Thanks for taking my questions.

Unknown Executive: Thanks for taking my questions.

Matt Olney: The next question is from Matt Olney with Stevens.

Matt Olney: The next question is from Matt Olney with Stevens. Please go ahead. Yeah, thanks for taking the question. I guess kind of along the lines of the last comment from Asylbek, I want to ask more about the borrowings. I think there's almost $3.9 billion of borrowings at the quarter end through that bank term funding program, just looking for more color on what we should expect there over the next few quarters, especially in the absence of any loan growth. Yeah, on that one, I think we, you know, last Q1 and Q2, and some of the Q3, we're building our cash position, that kind of more regulatory requirement we had, but I think we feel in the position that we're getting there.

Speaker Change: The next question is from Matt Olney with Stephens. Please go ahead.

Matt Olney: Please go ahead. Yeah, thanks for taking the question. I guess count along the lines of the last comment from off the back. I want to ask more about the borrowings. I think there's almost $3.9 billion of borrowings at the quarter end through that Bank Term Funding Program. Just looking for more color on what we should expect there over the next few quarters, especially in the absence of any long growth. Yeah, on that one, I think we, you know, lost Q1 and Q2 and some of the Q3 were building our cash position at that kind of more regulatory requirement we had.

Speaker Change: Yeah. Thanks for taking the question I guess come along the lines of the last comment from awful back want to ask more about the borrowings I think there's almost $3 $9 billion of borrowings at quarter end through debt Bank term funding program just looking for more color on what.

What we should expect there over over the next few quarters, especially in the absence of any loan growth.

Speaker Change: Yeah on that one I think we are you know the last Q1 and Q2 and some of the Q3, we're building our cash position.

Speaker Change: Kind of more regulatory requirement, we had but I think we feel in the position that we're getting there. So right now I think we will be paying down some of the borrowings and I know it was little making the spread but even with pay down and some of them will be NII neutral, but it'll be a NIM a positive.

Unknown Executive: But I think we feel that we're positioned that we're getting there. So right now I think we'll be paying down on the sum of the borrowings. And I know we're making the spread, but even we've paid down some of them will be NII neutral, but it'll be nim positive. And if they, if we expect another cut, definitely will be paying down more on the borrowing. So essentially now the cash flow from the bond portfolio should be going toward the paying down borrowing because of the and getting the same spread I was mentioning about, you know, going from two to four and a 4.76 that we did pay down with 400 or five.

Unknown Executive: So right now, I think we'll be paying down on the sum of the borrowings. And I know we're a little making the spread, but even we pay down, some of them will be NII neutral, but it'll be NIM positive. And if we expect another cut, definitely we'll be paying down more on the borrowing. So essentially, now the cash flow from the... Bond Portfolio should be going toward the paying down borrowing because of that and getting that same spread I was mentioning about, you know, going from 2 to 4 and 4.76 that cost. We did pay down what?

Speaker Change: And if they if we expect another cost definitely will be paying down more on the borrowings. So essentially now the cash flow from the bond.

Speaker Change: Bond portfolio should be going toward the paying down borrowing because of that and getting into that same spread I was mentioning about going from two to four and a $4 76 at the close to we did pay down what 400 or five we paid down 503.

Unknown Executive: 400 or 500? We paid down 500. 500 million. Yeah. From 3.9 to 3.4. Yes. That should help our net interest margin as well. Yeah. It's going toward positive that. So we're all working toward paying down on borrowing a little.

Unknown Executive: We've paid down $500. Yeah, in the 3.9, the 3.4. Yes, that should help our net interest margin as well. Yeah, it's going toward positive that. So we're working toward paying down on borrowings little.

Speaker Change: Three nine to $3 four yes that should help our net interest margin as well yeah. It's gone towards positive that so we are working toward paying down I'll borrow a little.

Unknown Executive: Okay, appreciate that.

Unknown Executive: Okay, appreciate that. And then I guess within the the margin commentary we discussed in the call kind of exiting, exiting the year in 2025, what are you assuming as far as the the borrowings, the borrowing position by late 2025? I didn't have that in the model. Yeah, on the model, I think we're paying down the borrowing because once we get to the position of the... Is it paying down more? I guess what he's asking, is it paying down more than the 500 million? Yes, I think it's paying down more than the 500 million. I don't know exactly, but I know in the model, we build in the cash and then we'll start paying down the borrowing.

Speaker Change: Okay I appreciate that and then I guess within the the margin commentary, we discussed on the call kind of exiting exiting the year in 2025, what are you assuming as far as the the borrowings the volume position by by late 2025.

Unknown Executive: And then I guess within the margin comment here, we discussed from the call kind of exiting the year in 2025. What are you assuming as far as the borrowings, the borrowing position by late 2025? I don't, I didn't have that in the model. Yeah, on the model, I think we're paying down the borrowing because once we get to the position of the. Does it pay down more? I guess what you're asking is, is it paying down more than the 500 million? Yes, I think it's paying down more than the 500 million. I don't know exactly, but I know in the model, we build in the cash and then we'll start paying down the borrowing.

Speaker Change: I don't I didn't have that in the model. The model I think we're paying down the borrowings because once we get to the position of the is it paying down more I guess, what you're asking is it pay down more than the $500 million.

Speaker Change: Yes, I think it's paying down more than the 500 million.

Speaker Change: I don't know exactly but I know in the model we've built in the cash and then we'll start paying down our borrowings I would say.

Unknown Executive: I would say... paying down another billion, billion and a half. Well, let's make sure we don't know that for sure. That's a big number.

Unknown Executive: I would say paying down another billion, billion and a half. Well, let's make sure we don't know that for sure. That's a big number.

Speaker Change: Paying down another billion billion and a half.

Speaker Change: Well, let's make sure we don't know that for sure that's a big number so.

Speaker Change: Since then.

Unknown Executive: And maybe just to clarify, as far as the overnight liquidity position, the big bill we saw at the quarter end of over $2 billion, do you expect to maintain that for most of next year, or could we see some of that overnight bar overnight liquidity? Could that come down a little bit from where it was at September 30th? We've already brought that down. That's what we used to pay down the 500 million dollars in the borrowings. Yeah, I think the range we gave us the billion half to two billion, so that's going to fluctuate. So we're comfortable with billions five, and we're comfortable with $2 billion.

Unknown Executive: And maybe just to clarify, as far as the overnight liquidity position, the big bill we saw at the quarter end over $2 billion, do you expect to maintain that for most of next year? Or could we see some of that overnight liquidity, could that come down a little bit from where it was at September 30th? We've already brought that down. That's what we used to pay down the $500 million in the borrowing. Yeah, I think the range we gave is the billion and a half to $2 billion, so that's going to fluctuate. So we're comfortable at $1.5 billion and we're comfortable at $2 billion.

Speaker Change: And maybe just to clarify as far as the overnight liquidity position. The big Bill we saw at the quarter end over over $2 billion do you expect to maintain that for most of next year or could we see some of that Oh, when I borrow overnight liquidity could that come down a little bit from where it was at September 30th we've already brought that down.

Speaker Change: It's what we used to pay down the $500 million in the in the borrowings.

Speaker Change: Yeah, I think the range, we gave at the billion half the 2 billion. So that's going to fluctuate. So we're comfortable with billions five and we're comfortable up to $1 billion. So based on situationally, we'll be somewhere in that range.

Unknown Executive: So, based on situationally, we'll be somewhere in that range. Okay.

Unknown Executive: So based on situationally, we'll be somewhere in that range. Okay, that's helpful.

Speaker Change: Okay. That's helpful. Thank you guys.

Unknown Executive: That's helpful. Thank you, guys.

Unknown Executive: Thank you, guys.

Peter Winter: The next question is from Peter Winter with DA Davidson. Please go ahead.

Peter Winter: The next question is from Peter Winter with D.A.

Speaker Change: Your next.

Speaker Change: <unk> is from Peter Winter with D. A Davidson. Please go ahead.

Peter Winter: Davidson. Please go ahead. Thanks. I wanted to ask about the loan portfolio. If you could just provide maybe an update on the loan outlook and pipelines and what inning you think you are in terms of the first capital runoff.

Peter Winter: Thanks. I wanted to ask about the loan portfolio. If you could just provide maybe an update on the loan outlook and pipelines and where you think right in, you think you are in terms of the first capital runoff.

Peter Winter: Thanks, I wanted to ask about the loan portfolio.

You could just provide maybe an update on.

Peter Winter: The loan outlook and pipelines and where you think what inning. You think you are in terms of the first capital.

Peter Winter: Run off.

Kevin Hanigan: Oh, man, I'll take that one, but I might need some help on first capital. I think first capital runoff has been to date 420 million. So we're, I'd say we're near the end of the first capital runoff, but there'll be some dribs and drives, but nothing like the 420 million we've already run off. There's single digits until after election, and maybe some additional rate cuts, and load single digits may trail its way into the first quarter of next year. And then thereafter, to the extent we've got to, let's say, a pro-business environment without, you know, going too deep into the election and lower rates.

Kevin Hanigan: Oh, man, I'll take that one. But I might need some help on first capital. I think first capital runoff has been to date 420 million. So we're, I'd say we're, we're near the end of the first capital runoff, but there'll be some dribs and drabs, but nothing like the 420 million we've already run off that. Obviously, that's been a headwind to growth, Peter. That said, I think, you know, for the for the end of the year, You know, it's going to be low single digits until after the election and maybe some additional rate cuts and low single digits may trail its way into the first quarter of next And then thereafter, to the extent we've got a Let's say a pro business environment without, you know, going too deep into the election and lower rates.

Speaker Change: Oh man I'll take that one, but I might need some help on first capital I think first capital run off has been to date 420 million. So we're I'd say, we're we're near the end of the first capital run off but there'll be some dribs and drabs, but nothing like the 420 million we've already run off that's obviously, that's been a headwind to that.

Peter Winter: Peter.

Peter Winter: That said I think you know for the for the end of the year.

Peter Winter: You know, it's going to be low single digits them until after the election and maybe some additional rate cuts.

Peter Winter: And low single digits May trail its way into the first quarter of next year.

Peter Winter: And then thereafter to the extent we've got it.

Peter Winter: Let's say, a pro business environment without going too deep into the election and lower rates I think we move ourselves back into the mid single digit range.

Kevin Hanigan: I think we move ourselves back into the mid single-digit range. Again, part of that is not having the runoff of acquisitions, and we don't expect a lot of runoff from the Lone Star dealer. They're asked that's where we're right down the middle of a fairway for us, whereas, you know, first capital was, was not 420. Is a big runoff for a bank of that size. So I think we're going to get back into the positive zone here going in the next year, and the reason I'm delayed a little bit in Q4 and Q1 of next year is to the extent some of this growth comes out of real estate.

Kevin Hanigan: I think we move ourselves back into the mid single digit range. Again, part of that is not having the runoff of acquisitions and. We don't expect a lot of runoff from the Lone Star dealer. Their assets were right down the middle of the fairway for us, whereas, you know, First Capital was not. 420 is a big runoff for a bank of that size. So I think we're going to get back into the positive zone here going into next year. And the reason I'm delayed a little bit in Q4 and Q1 of next year is to the extent some of this growth comes out of real estate, we need to get deals approved and equity, their equity put into those deals before we start funding.

Peter Winter: Again part of that is not having the run off of acquisitions and.

Peter Winter: We don't expect a lot of run off from the Lone Star deal are there assets, where we're right down the middle of a fairway for US, whereas you go first capital was what was not.

Peter Winter: For 'twenty is a big run off for a bank of that size.

So I think we're going to get back into the positive zone here going into next year and the reason I'm delayed a little bit.

Peter Winter: In Q4, and Q1 of next year is to the extent some of this growth comes out of real estate, we need to get deals approved in equity or equity put into those deals before we start funding.

Kevin Hanigan: We need to get deals approved in equity, their equity put into those deals before we start funding. So that's why I'm putting up, you know, up to a six-month lag on something better than the low single-digit range. And I really do think that the election is going to, that that'll be all the difference in the world. We have a good regulatory environment, and your interest rates do come down. That could, that could bump our, that could bump our loans to. But again, I think a lot of it, a lot of borrowing this year has been affected by customers not really knowing which direction things are going to go.

Kevin Hanigan: So that's why I'm putting a, you know, up to a six-month lag on something better than the low single-digit range. The election is going to, that'll be all the difference in the world. If we have a good regulatory environment and your interest rates do come down, that could bump our, that could bump our But again, I think a lot of it, a lot of borrowing this year has been affected by Customers not really knowing which which direction things are going to go I think they're hesitant about that and and I think higher interest rates So if those two things can you know that that'll help going forward?

Peter Winter: So that's why I'm pretty good after a six month lag on something look better than.

Peter Winter: So low single digit range and I really do think that.

Peter Winter: The election is going to that that'll be the all the difference in the world. We have a good regulatory environment and your interest rates do come down that that could that could bump our second that.

Peter Winter: It could bump our loans too.

Peter Winter: I think a lot of it a lot of borrowing this year has been affected by <unk>.

Peter Winter: Customers, not really knowing which which direction things are going to go I think they're hesitant about that and I think higher interest rate. So it does two things Ken.

Kevin Hanigan: I think there has been about that. And I think higher interest rates. So if those two things can, you know, that that helps going forward. And some I could follow up just, Kevin, when you, when you say low single digit, are you talking quarter to quarter, like, is your thinking. Moan's health for investment are going to start to grow slightly, and you know, that's not that that's annualized numbers, Peter, in the next two quarters. Okay, got it. And then I will say, you know, while we will get back into that mid single-digit range.

Peter Winter: That will help going forward.

Kevin Hanigan: And just so I could follow up, just Kevin, when you when you say low single digit, are you talking quarter to quarter? Like, is you're thinking loans held for investment are going to start to grow slightly and you know, going into a quarter, that's not that that's annualized numbers, Peter in the next two quarters. Okay, got it. And then I would say, you know, while we while we would get back into that mid single digit range. I wouldn't think of I would never think of us as a as a double digit, kind of 10 to 12, 15% kind of annualized loan growth, unless the economy just was booming and taking off at levels like we haven't seen.

And just if I could follow up just Kevin when you when you say.

Speaker Change: Low single digit are you talking quarter to quarter like as you were thinking.

Peter Winter: Loans held for investment.

Speaker Change: To start to grow.

Speaker Change: Yeah.

Speaker Change: Good morning.

Speaker Change: Its annualized numbers Peter in the next two quarters.

Speaker Change: Okay.

Speaker Change: Got it.

Speaker Change: And then.

Speaker Change: I will say.

Speaker Change: While we while we would get back into that mid single digit range.

Kevin Hanigan: I wouldn't think of, I would never think of us as a, as a double digit kind of 10 to 12, 15% kind of annualized loan growth company. Must be economy just was booming and taking off at levels like we haven't seen. And we'll be a solid GDP, the GDP plus kind of grow. Thanks.

Speaker Change: I wouldn't think I would never think of us as a as a double digit kind of 10 to 12, 15% kind of annualized loan growth.

Speaker Change: What's the economy, just was booming and taking up at levels like we haven't seen.

Kevin Hanigan: will be a solid GDP to GDP plus kind of grower. Got it.

Speaker Change: What will be a solid GDP or GDP plus kind of growth.

Speaker Change: Got it.

Unknown Executive: Thanks.

David Zalman: And then, David, just a big picture question on M&A. I mean, obviously, the focus and you've had a great track record with M&A creating shareholder value when doing deals. But the question is, Is there a preference to small fill-in deals versus maybe looking at a larger deal and willingness to go into a contiguous market that might move the earnings needle more? You know, I wouldn't say that it depends on the size of the deal. I don't know that has anything to do with the decision. The real decision is, is it a good bank that really enhances our position and makes it a stronger bank?

Speaker Change: Thanks, and then David just a big picture question on M&A.

David Zalman: And then David, just a big picture question on M&A. I mean, obviously the focus and you kind of great track record with M&A creating shareholder value with doing deals. But the question is, is there a preference to small fill-in deals versus maybe looking at a larger deal and willing us to go into a contiguous market that might move the earnings needle more? You know, I wouldn't say that it depends on the size of the deal. I don't know that has anything to do with the decision. The real decision is, is it a good bank that really enhances our position and makes us a stronger bank, and can we have a creation?

Speaker Change: Lee the focus when you've had a great track record with M&A, creating shareholder value and doing deals, but the question is.

Speaker Change: Is there a preference to small fill in deals.

Speaker Change: Versus maybe looking at a larger deal and willingness to go into it a contiguous market that might move the earnings needle.

Speaker Change: More.

Speaker Change: You know I I wouldn't cite it depends on the size of the deal I don't know that has anything to do with the decision of the real decision is is it a good bank that really enhances our position.

Speaker Change: It makes us a stronger bank and can we have accretion whether that's a $2 billion bank.

David Zalman: And can we have accretion, whether that's a $2 billion bank in Texas or a $20 billion bank somewhere else that really inspires it? It really depends on the people. The people are willing to stay with us. The quality of the assets. I will say this on a bigger deal. We can't take the risk of buying a bank that has, you know, more asset issues. We have to be more careful on that than we do a bank that maybe is is too big. And not that you don't have to worry about that. But I think it really all depends down to to the to the deal that we're looking at.

David Zalman: Whether that's a $2 billion bank in Texas or a $20 billion bank somewhere else that really inspires it. It really depends on the people. The people are willing to stay with us; the quality of the assets. I will say this: on a bigger deal, we can't take the risk of buying a bank that has, you know, more asset issues. We have to be more careful on that than we do a bank that maybe is too big. And not that you don't have to worry about that. But I think it really all depends down to the deal that we're looking at.

Speaker Change: In Texas for $20 billion bank somewhere else that really inspires it it really depends on the people. The people are willing to stay with us.

Speaker Change: The quality of the assets. It is Andy I will say this on a bigger deal we can't take the risk of buying a bank that has Uh huh.

Speaker Change: More asset issues, we have to be more careful in that than we do a bank that maybe this is too big and not that you don't have to worry about that but.

Speaker Change: I think it really all depends down to.

Speaker Change: To the to the deals that we're looking at I mean, the deal that we're looking at it really depends on the people and.

David Zalman: I mean, the deal that we're looking at, it really depends on the people and where it's located, how it helps us. And so there's a lot of bunch of different things that goes into the to the equation. But I don't know that really boils down to either a $2 billion deal or a $20 billion deal, really.

David Zalman: I mean, the deal that we're looking at really depends on the people and where it's located, how it helps us. So there's a lot of bunch of different things that goes into the equation. But I don't know that really boils down to either a $2 billion or a $20 billion deal, really.

Speaker Change: Where it's located how it helps us and so theres a lot of bunch of different things that goes into the city equation, but I don't know that it really boils down to either 2 billion already over $20 billion deal really.

Unknown Executive: Okay, thanks, David.

Unknown Executive: Okay.

Speaker Change: Okay. Thanks, David.

Charlotte Rasche: Thanks, David. This concludes our question and answer session.

Charlotte Rasche: This concludes our question and answer session.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Charlotte Rasche for any closing remarks.

Charlotte Rasche: I would like to turn the conference back over to Charlotte Rasche for any closing remarks. Thank you. Thank you, ladies and gentlemen, for taking the time to participate in our call today. We appreciate your support of our company, and we will continue to work on building shareholder value.

Charlotte Rasche: I would like to turn the conference back over to Charlotte Rache for any closing remarks. Thank you. Thank you, ladies and gentlemen, for taking the time to participate in our call today. We appreciate your support of our company, and we will continue to work on building shareholder value.

Charlotte Rasche: Thank you thank.

Charlotte Rasche: Thank you, ladies and gentlemen for taking the time to participate in our call. Today. We appreciate your support of our company and we will continue to work on building shareholder value.

Unknown Executive: The conference is now concluded. Thank you for attending today's presentation.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. © BF-WATCH TV 2021

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Unknown Executive: You may now disconnect. ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬ ¬

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Q3 2024 Prosperity Bancshares Inc Earnings Call

Request a DemoDemo

Prosperity Bancshares

Earnings