Prosperity Bancshares Q4 2025 Prosperity Bancshares Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Prosperity Bancshares Inc Earnings Call
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I would now like to turn the conference over to Charlotte Rashi is Executive, Vice President, and general counsel. Please go ahead.
Thank you. Good morning, ladies and gentlemen, and welcome to Prosperity Bank shares. Fourth quarter 2025 earnings conference. Call, this call is being broadcast live on our website and we'll be available for Replay for the next few weeks.
I'm Charlotte rashy general counsel of Prosperity Bank shares. And here with me, today is David Zolman senior chairman and chief executive officer. He Tim to manage Junior, chairman October osmanov Chief Financial Officer Eddie sephy Vice chairman
Kevin Hannigan president and Chief Operating Officer May's Davenport, director of corporate strategy, and Bob dowel Executive Vice President, Randy Hester. Our chief lending officer is unable to be here today. Also, joining us this morning are Bob Franklin Chief Executive Officer of Stellar Bank Corp, raulli, president of Stellar Bank Corp and Paul aie Chief Financial Officer of Stellar bank. For
David zelman will lead off with a review of the highlights for the recent quarter. He will be followed by Aqua Becca osmanov, who will review some of our recent financial statistics and Tim to Manas who will discuss our lending activities, including asset quality. Finally, we will open the call for questions
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,
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. I would now like to turn the conference over to Charlotte Rasche, Executive Vice President and General Counsel. Please go ahead.
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, Bankers filings with the Securities and Exchange Commission including forms, 10q, and 10K, and other reports. And statements, we have filed with the FCC. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Now, let me turn the call over to David's. Only thank you, Charlotte. We had a stellar quarter. I would like to welcome and thank everyone for listening to our fourth quarter 2025 conference call for the year ended December 31st 2025. We had net income of 543 million compared with 480 million where the same period in 2024 and increase of 63 million or 13.2%.
Our net income per diluted. Common share was $5.72 for the year, ending December 31st 2025 compared with 5 dollars for the same period in 2024 and increase of 13.3%.
Charlotte Rasche: ... Thank you. Good morning, ladies and gentlemen, and welcome to Prosperity Bancshares' Q4 2025 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, General Counsel of Prosperity Bancshares, and here with me today is David Zalman, Senior Chairman and Chief Executive Officer, H.E. Timanus, Jr., Chairman, Asylbek Osmonov, Chief Financial Officer, Eddie Safady, Vice Chairman, Kevin Hanigan, President and Chief Operating Officer, Mays Davenport, Director of Corporate Strategy, and Bob Dowdell, Executive Vice President. Randy Hester, our Chief Lending Officer, is unable to be here today. Also joining us this morning are Bob Franklin, Chief Executive Officer of Stellar Bancorp, Ray Vitulli, President of Stellar Bancorp, and Paul Egge, Chief Financial Officer of Stellar Bancorp.
Charlotte Rasche: ... Thank you. Good morning, ladies and gentlemen, and welcome to Prosperity Bancshares' Q4 2025 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, General Counsel of Prosperity Bancshares, and here with me today is David Zalman, Senior Chairman and Chief Executive Officer, H.E. Timanus, Jr., Chairman, Asylbek Osmonov, Chief Financial Officer, Eddie Safady, Vice Chairman, Kevin Hanigan, President and Chief Operating Officer, Mays Davenport, Director of Corporate Strategy, and Bob Dowdell, Executive Vice President. Randy Hester, our Chief Lending Officer, is unable to be here today. Also joining us this morning are Bob Franklin, Chief Executive Officer of Stellar Bancorp, Ray Vitulli, President of Stellar Bancorp, and Paul Egge, Chief Financial Officer of Stellar Bancorp.
And net income was 139.9 Million for 3 months, ending December 31st 2025 compared with 130 million. For the same period in 2024 an increase of 9.8 million or 7.6%
Our annualized return on average assets and average tangible common equity for the 3 months, ending December 31st 2025 were 1.49% on assets and 13.61% on on tangible equity.
Prosperity's efficiency ratio, excluding the next gains and losses on the sale right down or write up of assets and securities was 43.6% for the 3 months, ending December, 31st 2025.
Charlotte Rasche: 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 Timanus, who will discuss our lending activities, including asset quality. Finally, we will open the call for questions. 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 Bancshares to be materially different from future results or performance expressed or implied by such forward-looking statements.
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 Timanus, who will discuss our lending activities, including asset quality. Finally, we will open the call for questions. 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 Bancshares to be materially different from future results or performance expressed or implied by such forward-looking statements.
2025 compared with 3.05% were the same period in 2024 and compared with 3.24% for the 3 months, ending September, 30 2025.
During the year ending December 31st 2025 under its 2025 stock repurchase program Prosperity Bank shares, repurchased, approximately 157 million or 2.34 million shares of its common stock.
At an average weighted price of 67.4.
Charlotte Rasche: Additional information concerning factors that could cause the 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, 10-K, and other reports and statements we have filed with the SEC. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Now let me turn the call over to David Zalman.
Additional information concerning factors that could cause the 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, 10-K, and other reports and statements we have filed with the SEC. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. Now let me turn the call over to David Zalman.
Our loans excluding Warehouse, purchase program loans were 20.5 billion at December, 31st, 2025 compared with 20.7 billion at September 3222, a decrease of 249 million. We continue to see, good demand for loans. However, we are not willing to compete with the terms and conditions of being offered sometimes by out of state competitors. On some of the larger deals our overall loans have been impacted by efforts to Outsource some less desired loans acquired in previous transactions also
Deposits. As mentioned. In our last quarter, we expected deposits to increase due to seasonality.
David Zalman: Thank you, Charlotte. We had a stellar quarter. I would like to welcome and thank everyone for listening to our Q4 2025 conference call. For the year ended December 31, 2025, we had net income of $543 million, compared with $480 million for the same period in 2024, an increase of $63 million or 13.2%. Our net income per diluted common share was $5.72 for the year ending December 31, 2025, compared with $5.05 for the same period in 2024, an increase of 13.3%.
David Zalman: Thank you, Charlotte. We had a stellar quarter. I would like to welcome and thank everyone for listening to our Q4 2025 conference call. For the year ended December 31, 2025, we had net income of $543 million, compared with $480 million for the same period in 2024, an increase of $63 million or 13.2%. Our net income per diluted common share was $5.72 for the year ending December 31, 2025, compared with $5.05 for the same period in 2024, an increase of 13.3%.
But the increase exceeded our expectations deposits were 28.4 billion at December 31st 2025 and increase of 700 million from 27.7 billion at September 302025.
Our non-performing assets totaled, 150 million or 46? Basis points of quarterly average interest earning assets at December, 31st 2025 compared with 119 million or 366 basis points of quarterly, average interest earning assets at September 3rd 2025
David Zalman: The net income was $139.9 million for the three months ending 31 December 2025, compared with $130 million for the same period in 2024, an increase of $9.8 million or 7.6%. Our annualized return on average assets and average tangible common equity for the three months ending 31 December 2025 were 1.49% on assets and 13.61% on tangible equity. Prosperity's efficiency ratio, excluding the net gains and losses on the sale, write-down, or write-up of assets and securities, was 43.6% for the three months ending 31 December 2025. As mentioned, since 2024, we expected our net interest margin to increase, and it has.
The net income was $139.9 million for the three months ending 31 December 2025, compared with $130 million for the same period in 2024, an increase of $9.8 million or 7.6%. Our annualized return on average assets and average tangible common equity for the three months ending 31 December 2025 were 1.49% on assets and 13.61% on tangible equity. Prosperity's efficiency ratio, excluding the net gains and losses on the sale, write-down, or write-up of assets and securities, was 43.6% for the three months ending 31 December 2025. As mentioned, since 2024, we expected our net interest margin to increase, and it has.
The increase in our performing assets during the year was primarily compromised of 2 loans made in our Middle Market Lending Group and 1. Well, collateralized real estate loan acquired in 1 of our recent acquisitions, all of which Kevin will be able to answer and address in the Q&A.
The allowance for credit losses on loans was 333 million and the allowance for credit losses on loans and off-balance sheet. Exposure was 371 million as of December 31st 2025, our allowance for credit losses on loans. Still stand strong in 2.21. Times of our non-performing assets.
I'm excited to announce that, on January, 1st 2026, Prosperity completed. The merger. With our new partner American and it totally owned subsidiary, American Bank headquartered in Corpus Christi Texas.
In connection with that transaction. We are pleased that Pat Wallace the daughter of 1 of the founding families of the bank and Steve Roth, the other CEO of American Bank have joined our bank board of directors.
David Zalman: The net interest margin on a tax equivalent basis was 3.3% for the three months ending 31 December 2025, compared with 3.05% for the same period in 2024, and compared with 3.24% for the three months ending 30 September 2025. During the year ending 31 December 2025, under its 2025 stock repurchase program, Prosperity Bank shares repurchased approximately $157 million or 2.34 million shares of its common stock at an average weighted price of $67.04. Our loans, excluding warehouse purchase program loans, were $20.5 billion at 31 December 2025, compared with $20.7 billion at 30 September 2025, a decrease of $249 million.
The net interest margin on a tax equivalent basis was 3.3% for the three months ending 31 December 2025, compared with 3.05% for the same period in 2024, and compared with 3.24% for the three months ending 30 September 2025. During the year ending 31 December 2025, under its 2025 stock repurchase program, Prosperity Bank shares repurchased approximately $157 million or 2.34 million shares of its common stock at an average weighted price of $67.04. Our loans, excluding warehouse purchase program loans, were $20.5 billion at 31 December 2025, compared with $20.7 billion at 30 September 2025, a decrease of $249 million.
We have also received all the Regulatory and shareholder approvals for the merger, with Southwest Bank shares. The parent company of Texas, Partners bank and expect, the transaction will be effective on February, the 1st 2026.
In connection with the Southwest deal. We are pleased that Jean Dawson interim. Chairman of Southwest Bank shares and chairman of the nationally recognized pay Dawson. Engineering firm will be joining our bank board of directors to further, add to our San Antonio presence. Charlie Amato has joined our bank board of directors. In addition to his successful business. Charlie previously, served as a board member of the Federal Reserve Board of Dallas, San Antonio branch and region of the Texas State University system and as an investor in the San Antonio Spurs,
uh,
There there's much more but it'd be too much more to go over with with all he's into when Prosperity went public in 1998.
We were a small Community Bank in rural Texas with less than 500 million dollars in assets.
David Zalman: We continue to see good demand for loans. However, we are not willing to compete with the terms and conditions being offered sometimes by out-of-state competitors on some of the larger deals. Our overall loans have been impacted by efforts to outsource some less desired loans acquired in previous transactions also. Deposits, as mentioned in our last quarter, we expected deposits to increase due to seasonality, but the increase exceeded our expectations. Deposits were $28.4 billion at 31 December 2025, an increase of $700 million from $27.7 billion at 30 September 2025. Our non-performing assets totaled $150 million, or 46 basis points of quarterly average interest earning assets at 31 December 2025....
We continue to see good demand for loans. However, we are not willing to compete with the terms and conditions being offered sometimes by out-of-state competitors on some of the larger deals. Our overall loans have been impacted by efforts to outsource some less desired loans acquired in previous transactions also. Deposits, as mentioned in our last quarter, we expected deposits to increase due to seasonality, but the increase exceeded our expectations. Deposits were $28.4 billion at 31 December 2025, an increase of $700 million from $27.7 billion at 30 September 2025. Our non-performing assets totaled $150 million, or 46 basis points of quarterly average interest earning assets at 31 December 2025....
David Zalman: Compared with $119 million or 36 basis points of quarterly average interest-earning assets at September 30, 2025. The increase in non-performing assets during the year was primarily comprised of two loans made in our middle market lending group and one well-collateralized real estate loan acquired in one of our recent acquisitions, all of which Kevin will be able to answer and address in the Q&A. The allowance for credit losses on loans was $333 million, and the allowance for credit losses on loans and off-balance sheet exposure was $371 million as of December 31, 2025. Our allowance for credit losses on loans still stands strong at 2.21 times our non-performing assets.
Compared with $119 million or 36 basis points of quarterly average interest-earning assets at September 30, 2025. The increase in non-performing assets during the year was primarily comprised of two loans made in our middle market lending group and one well-collateralized real estate loan acquired in one of our recent acquisitions, all of which Kevin will be able to answer and address in the Q&A. The allowance for credit losses on loans was $333 million, and the allowance for credit losses on loans and off-balance sheet exposure was $371 million as of December 31, 2025. Our allowance for credit losses on loans still stands strong at 2.21 times our non-performing assets.
Importantly, Stellar is a well-run bank with similar, credit discipline and an envious non-interest-bearing. Deposit mix as a result, we view the transaction as a low-risk combination. That's significantly. Enhances our Texas footprint.
I would like to thank all our customers, Associates directors, and shareholders for helping build such a successful Bank. Thanks again for your support of our company. Let me turn over our discussion to also back osmanov our Chief Financial Officer to discuss some of the specific Financial results. We achieve hustle back.
David Zalman: I'm excited to announce that on 1 January 2026, Prosperity completed the merger with our new partner, American, and a wholly owned subsidiary, American Bank, headquartered in Corpus Christi, Texas. In connection with that transaction, we are pleased that Pat Wallace, the daughter of one of the founding families of the bank, and Stephen Raffaele, the CEO of American Bank, have joined our bank board of directors. We have also received all the regulatory and shareholder approvals for the merger with Southwest Bancshares, the parent company of Texas Partners Bank, and expect the transaction will be effective on 1 February 2026. In connection with the Southwest deal, we are pleased that Gene Dawson, interim chairman of Southwest Bancshares and chairman of the nationally recognized Pape-Dawson Engineering firm, will be joining our bank board of directors.
I'm excited to announce that on 1 January 2026, Prosperity completed the merger with our new partner, American, and a wholly owned subsidiary, American Bank, headquartered in Corpus Christi, Texas. In connection with that transaction, we are pleased that Pat Wallace, the daughter of one of the founding families of the bank, and Stephen Raffaele, the CEO of American Bank, have joined our bank board of directors. We have also received all the regulatory and shareholder approvals for the merger with Southwest Bancshares, the parent company of Texas Partners Bank, and expect the transaction will be effective on 1 February 2026. In connection with the Southwest deal, we are pleased that Gene Dawson, interim chairman of Southwest Bancshares and chairman of the nationally recognized Pape-Dawson Engineering firm, will be joining our bank board of directors.
Thank you Mr. Zman, good morning everyone, net interest income before provision for credit losses for 3 months and the December 31st, 2025 was 275 million and increase of 7.2 million compared to 267.8 million for the same period in 2024 and the increase of 1.5 million compared to 273.4 million for the quarter ended, September 30th 2025.
In connection with that transaction. We are pleased that Pat Wallace the daughter of 1 of the founding families of the bank and Steve Roth, the other CEO of American Bank have joined our bank board of directors.
the net interest margin on a tax equivalent basis, was 3.30% for the 3 months, ended December 31st 2025, and increase of 25 basis points compared to 3.05% for the same period in 2024 and the increase of 6 basis points compared to 3.24%, for the quarter ended, September 30th 2025,
We have also received all the Regulatory and shareholder approvals for the merger, with Southwest Bank shares. The parent company of Texas, Partners bank and expect, the transaction will be effective on February, the 1st 2026.
Excluding parts of the accounting adjustments. The net interest margin for the 3-month and the December. 31st 2025 was 3.26% compared to 3% for the same period in 2024.
And 3.21% for the quarter ended, September 30th 2025.
David Zalman: To further add to our San Antonio presence, Charlie Amato has joined our bank board of directors. In addition to his successful business, Charlie previously served as a board member of the Federal Reserve Board of Dallas, San Antonio branch, and regent of the Texas State University System, and is an investor in the San Antonio Spurs. There's much more, but it'd be too much more to go over with all he's into. When Prosperity went public in 1998, we were a small community bank in rural Texas with less than $500 million in assets. For 27 years, we have remained disciplined and focused on the same strategy, delivering shareholder value by prioritizing low-cost core deposits, operational efficiency, sound credit quality, and growth via opportunistic M&A.
To further add to our San Antonio presence, Charlie Amato has joined our bank board of directors. In addition to his successful business, Charlie previously served as a board member of the Federal Reserve Board of Dallas, San Antonio branch, and regent of the Texas State University System, and is an investor in the San Antonio Spurs. There's much more, but it'd be too much more to go over with all he's into. When Prosperity went public in 1998, we were a small community bank in rural Texas with less than $500 million in assets. For 27 years, we have remained disciplined and focused on the same strategy, delivering shareholder value by prioritizing low-cost core deposits, operational efficiency, sound credit quality, and growth via opportunistic M&A.
Fair Value, Loan income for the fourth quarter, 2025 was 3.1 million compared to 2.9 Million for the third quarter, 2025
The fair value loan income, for the first quarter of 2026 is expected to be in the range of 3 to 4 million.
In connection with the Southwest deal, we are pleased that Jean Dawson, interim chairman of Southwest Bancshares and chairman of the nationally recognized Peay Dawson engineering firm, will be joining our bank board of directors to further add to our San Antonio presence. Charlie Amato has joined our bank board of directors. In addition to his successful business, Charlie previously served as a board member of the Federal Reserve Board of Dallas, San Antonio branch, and as a regent of the Texas State University System, and as an investor in the San Antonio Spurs.
uh,
There there's a much more but it'd be too much more to go over with with all he's into when Prosperity went public in 1998.
Non interesting income was 42.8 Million for the 3 months ended December. 31st 2025 compared to 41.2 million for the quarter ended. September 30th 2025, and 39.8 million for the same period in 2024.
We were a small community bank in rural Texas with less than $500 million in assets.
Non-interest expense was 138.7 Million for the 3 months, ended December 31st, 2025 compared to 138.6 million. For the 3 months, ended September 30th 2025 and 141.5 million for the same period in 2024.
David Zalman: This morning's announcement that Prosperity is acquiring Stellar Bancorp is consistent with that strategy, and this transaction marks an important milestone for the company. Our combined Houston Bank deposit rank goes from number 9 to number 5, making us the largest Texas-based bank in the market and second-largest bank by deposits in the state. Importantly, Stellar is a well-run bank with similar credit discipline and an envious non-interest-bearing deposit mix. As a result, we view the transaction as a low-risk combination that significantly enhances our Texas footprint. I would like to thank all our customers, associates, directors, and shareholders for helping build such a successful bank. Thanks again for your support of our company. Let me turn over our discussion to Asylbek Osmonov, our chief financial officer, to discuss some of the specific financial results we achieved. Asylbek?
This morning's announcement that Prosperity is acquiring Stellar Bancorp is consistent with that strategy, and this transaction marks an important milestone for the company. Our combined Houston Bank deposit rank goes from number 9 to number 5, making us the largest Texas-based bank in the market and second-largest bank by deposits in the state. Importantly, Stellar is a well-run bank with similar credit discipline and an envious non-interest-bearing deposit mix.
Values by Pride, hope by Pride. Holding—excuse the pride—hosing, I'll skip that. Low cost, poor deposits, operational efficiency, sound credit quality, and growth via opportunistic M&A.
For the first quarter of 2026. We expect non-interest expense to be in the range of 172 to 176 million. This projection includes 3 months of American Bank expenses and 2 months of Texas Partners bank expenses.
In addition to this first quarter guidance, we will also have about 30 to 33 million in 1 time. Merger related charges for those 2 acquisitions.
We expect to realize most of the previously announced cost savings related to American Bank and taxes Bank. After
As a result, we view the transaction as a low-risk combination that significantly enhances our Texas footprint. I would like to thank all our customers, associates, directors, and shareholders for helping build such a successful bank. Thanks again for your support of our company. Let me turn over our discussion to Asylbek Osmonov, our chief financial officer, to discuss some of the specific financial results we achieved. Asylbek?
Texas Partners bank. After the system conversions, which are scheduled later this year.
This morning's announcement that Prosperity is acquiring Stellar Bancorp is consistent with that strategy. And this transaction marks an important milestone for the company. Our combined Eastern Bank deposit rank goes from number 9 to number 5, making us the largest Texas-based bank in the market and the second largest bank by deposits in the state. Importantly, Stellar is a well-run bank with similar credit discipline and an enviable non-interest-bearing deposit mix. As a result, we view the transaction as a low-risk combination that significantly enhances our Texas footprint.
The efficiency ratio was 43.7% for the 3 months ended December 31st. 2025 compared to 44.1% for the quarter ended, September 30th 2025 and 46.1% for the same period in 2024.
Asylbek Osmonov: Thank you, Mr. Zalman. Good morning, everyone. Net interest income before provision for credit losses for three months ended 31 December 2025 was $275 million, an increase of $7.2 million compared to $267.8 million for the same period in 2024, an increase of $1.5 million compared to $273.4 million for the quarter ended 30 September 2025.
Asylbek Osmonov: Thank you, Mr. Zalman. Good morning, everyone. Net interest income before provision for credit losses for three months ended 31 December 2025 was $275 million, an increase of $7.2 million compared to $267.8 million for the same period in 2024, an increase of $1.5 million compared to $273.4 million for the quarter ended 30 September 2025.
I would like to thank all our customers, Associates directors, and shareholders for helping build such a successful Bank. Thanks again for your support of our company. Let me turn over our discussion to also be back osmanov our Chief Financial Officer to discuss some of the specific Financial results. We achieve also back.
The bond portfolio metrics at 12:31 025 have a modified duration of 3.7 and projected annual cash flows of approximately 1.9 billion. And with that, let me turn over the presentation to Tim to manners for some details on loan and asset quality.
Thank you. Also back.
our noun-forming assets at quarter in December 31st, 2025,
Asylbek Osmonov: The net interest margin on a tax equivalent basis was 3.30% for the three months ended 31 December 2025, an increase of 25 basis points compared to 3.05% for the same period in 2024, and an increase of 6 basis points compared to 3.24% for the quarter ended 30 September 2025. Excluding purchase accounting adjustments, the net interest margin for the three months ended 31 December 2025, was 3.26% compared to 3% for the same period in 2024, and 3.21% for the quarter ended 30 September 2025.
The net interest margin on a tax equivalent basis was 3.30% for the three months ended 31 December 2025, an increase of 25 basis points compared to 3.05% for the same period in 2024, and an increase of 6 basis points compared to 3.24% for the quarter ended 30 September 2025. Excluding purchase accounting adjustments, the net interest margin for the three months ended 31 December 2025, was 3.26% compared to 3% for the same period in 2024, and 3.21% for the quarter ended 30 September 2025.
Thank you, Mr. Zalman. Good morning, everyone. Net interest income before provision for credit losses for the three months ended December 31, 2025 was $275 million, an increase of $7.2 million compared to $267.8 million for the same period in 2024, and an increase of $1.5 million compared to $273.4 million for the quarter ended September 30, 2025.
Sold 150 million 842,000 or 69 basis points of loans and other real estate.
Compared to 119 million.
563,000, or 54, basis points at September 30th 2025.
the net interest margin on a tax equivalent basis, was 3.30% for the 3 months, ended December 31st 2025, an increase of 25 basis points compared to 3.05% for the same period in 2024 and the increase of 6 basis points compared to 3.24%, for the quarter ended, September 30th 2025,
This is an increase of 31,279,000.
Since December 31st 2025 6631.
Excluding purchased accounting adjustments, the net interest margin for the three months ended December 31, 2025, was 3.26%, compared to 3.00% for the same period in 2024.
Put under contract for sale.
And 3.21% for the quarter ended September 30, 2025.
Asylbek Osmonov: Fair value loan income for Q4 2025 was $3.1 million, compared to $2.9 million for Q3 2025. The fair value loan income for Q1 2026 is expected to be in the range of $3 to 4 million. Non-interest income was $42.8 million for the three months ended 31 December 2025, compared to $41.2 million for the quarter ended 30 September 2025, and $39.8 million for the same period in 2024.
Fair value loan income for Q4 2025 was $3.1 million, compared to $2.9 million for Q3 2025. The fair value loan income for Q1 2026 is expected to be in the range of $3 to 4 million. Non-interest income was $42.8 million for the three months ended 31 December 2025, compared to $41.2 million for the quarter ended 30 September 2025, and $39.8 million for the same period in 2024.
The December 31st, 2025 non-performing asset total.
Was made up of 137,534,000 in loans.
Fair Valley, loan income, for the fourth quarter, 2025 was 3.1 million compared to 2.9 Million for the third quarter 2025
$12,000 and repossessed assets.
And 13,296,000.
The fair value loan income for the first quarter of 2026 is expect to be in the range of 3 to 4 million.
And other real estate.
Net charge offs for the 3 months, ended December 31st 2025.
Where 5,884,000?
Asylbek Osmonov: Non-interest expense was $138.7 million for the three months ended 31 December 2025, compared to $138.6 million for the three months ended 30 September 2025, and $141.5 million for the same period in 2024. For Q1 2026, we expect non-interest expense to be in the range of $172 to 176 million. This projection includes three months of American Bank expenses and two months of Texas Partners Bank expenses. In addition to this first quarter guidance, we will also have about $30 to 33 million in one-time merger-related charges for those two acquisitions.
Non-interest expense was $138.7 million for the three months ended 31 December 2025, compared to $138.6 million for the three months ended 30 September 2025, and $141.5 million for the same period in 2024. For Q1 2026, we expect non-interest expense to be in the range of $172 to 176 million. This projection includes three months of American Bank expenses and two months of Texas Partners Bank expenses. In addition to this first quarter guidance, we will also have about $30 to 33 million in one-time merger-related charges for those two acquisitions.
Non-interest income was $42.8 million for the three months ended December 31, 2025, compared to $41.2 million for the quarter ended September 30, 2025, and $39.8 million for the same period in 2024.
Compared to net charge offs of 6,458,000 for the quarter ended June 30th 2025.
This is a decrease of 574,000.
On a linked quarter basis.
There was no addition to the allowance for credit losses during the quarter ended December 31st 2025.
Non-interest expense was 138.7 Million for the 3 months and the December 31st 2025 compared to 138.6 million. For the 3 months, ended September 30th 2025 and 141.5 million for the same period in 2024.
In addition, no dollars were taken into income from the allowance during the quarter ended December 31st 2025.
For the first quarter of 2026. We expect non-interest expense to be in the range of 172 to 176 million. This projection includes 3 months of American Bank expenses and 2 months of Texas Partners bank expenses.
The average monthly new Loan Production for the quarter ended December 31st 2025 was 314 million.
Asylbek Osmonov: We expect to realize most of the previously announced cost savings related to American Bank and Texas Bank after—Texas Partners Bank, after the system conversions, which are scheduled later this year. The efficiency ratio was 43.7% for the three months ended 31 December 2025, compared to 44.1% for the quarter ended 30 September 2025, and 46.1% for the same period in 2024. The bond portfolio metrics at 31 December 2025 have a modified duration of 3.7 and projected annual cash flows of approximately $1.9 billion. And with that, let me turn over the presentation to Tim Timanus for some details on loan and asset quality.
We expect to realize most of the previously announced cost savings related to American Bank and Texas Bank after—Texas Partners Bank, after the system conversions, which are scheduled later this year. The efficiency ratio was 43.7% for the three months ended 31 December 2025, compared to 44.1% for the quarter ended 30 September 2025, and 46.1% for the same period in 2024. The bond portfolio metrics at 31 December 2025 have a modified duration of 3.7 and projected annual cash flows of approximately $1.9 billion. And with that, let me turn over the presentation to Tim Timanus for some details on loan and asset quality.
Compared to 356 million for the quarter ended, September 30th 2025.
In addition to this first quarter guidance, we will also have about $30 to $33 million in one-time, merger-related charges for those two acquisitions.
We expect to realize most of the previously announced cost savings related to American Bank and tax Bank. After
Texas Partners Bank. After the system conversions, which are scheduled later this year.
Loans outstanding at December, 31st 2025 for approximately 21.805 billion dollars compared to 22.028 billion dollars for September 30th 2025.
The December 31st, 2025 loan total.
Is made up of 35% fixed rate loans.
35% floating rate loans.
The efficiency ratio was 43.7% for the three months ended December 31, 2025, compared to 44.1% for the quarter ended September 30, 2025, and 46.1% for the same period in 2024.
And 30% variable rate loans.
I will now turn it over to Charlotte Rashi.
Thank you. Tim, at this time we are prepared to answer your questions or call. Operator. Gary will assist us with questions
We will now begin the question and answer session.
H.E. Timanus Jr.: Thank you, Asylbek. Our non-performing assets at quarter end, 31 December 2025, totaled $150,842,000, or 69 basis points of loans and other real estate, compared to $119,563,000, or 54 basis points at 30 September 2025. This is an increase of $31,279,000. Since 31 December 2025, $6,631,000 of non-performing assets have been removed or put under contract for sale. The 31 December 2025 non-performing asset total was made up of $137,534,000 in loans, $12,000 in repossessed assets, and $13,296,000 in other real estate.
H. E. Timanus Jr.: Thank you, Asylbek. Our non-performing assets at quarter end, 31 December 2025, totaled $150,842,000, or 69 basis points of loans and other real estate, compared to $119,563,000, or 54 basis points at 30 September 2025. This is an increase of $31,279,000. Since 31 December 2025, $6,631,000 of non-performing assets have been removed or put under contract for sale. The 31 December 2025 non-performing asset total was made up of $137,534,000 in loans, $12,000 in repossessed assets, and $13,296,000 in other real estate.
The bond portfolio metrics at 12:31 0025 have a modified duration of 3.7 and projected annual cash flows of approximately 1.9 billion. And with that, let me turn over the presentation to Tim to manners, for some details on loan and asset quality.
Thank you. Also back.
to ask a question, you may press star then 1 on your telephone keypad,
If you are using a speaker-phone, please pick up your handset before pressing the keys.
Our non-performing assets at quarter end, December 31st, 2025,
You would draw your question. Please. Press star. Then 2
The first question is from Katherine Miller with KBW, please go ahead.
842,000 or 69 basis points of loans and other real estate.
Thanks, good morning.
Good morning. Good morning.
Compared to 119.
Million 563,000 or 54, basis points at September 30th 2025.
This is an increase of $31,279,000.
Oh, I wanted to start just on the Stellar acquisition. Congratulations on that. Um, I noticed in the slide deck, you you're using a different estimate for Stellar versus consensus. Looks like it's about a 220 number versus, um, 2 bucks for consensus roughly. Just 1, just curious, what's driving that difference in your confidence in in that level of earnings coming over from um from Stellar. Thanks.
Since December 31st, 2025 6,631,000.
Of non-performing assets have been removed or put under contract for sale.
Katherine, you're probably saw their fourth quarter. Earnings come out. That's really going to influence that. But pause here with us today from uh, spell. Or I'll let him go over it with you. Absolutely.
The December 31, 2025 non-performing asset total was made up of $137,534,000 in loans.
12,000 and repossessed assets.
And 13 million 296,000.
And other real estate.
H.E. Timanus Jr.: Net charge-offs for the three months ended 31 December 2025 were $5,884,000, compared to net charge-offs of $6,458,000 for the quarter ended 30 June 2025. This is a decrease of $574,000 on a linked quarter basis. There was no addition to the allowance for credit losses during the quarter ended 31 December 2025. In addition, no dollars were taken into income from the allowance during the quarter ended 31 December 2025. The average monthly new loan production for the quarter ended 31 December 2025 was $314 million, compared to $356 million for the quarter ended 30 September 2025.
Net charge-offs for the three months ended 31 December 2025 were $5,884,000, compared to net charge-offs of $6,458,000 for the quarter ended 30 June 2025. This is a decrease of $574,000 on a linked quarter basis. There was no addition to the allowance for credit losses during the quarter ended 31 December 2025. In addition, no dollars were taken into income from the allowance during the quarter ended 31 December 2025. The average monthly new loan production for the quarter ended 31 December 2025 was $314 million, compared to $356 million for the quarter ended 30 September 2025.
Net charge-offs for the three months ended December 31st, 2025.
For 5884 thousand dollars.
Hey Paul, uh, we're we've been thrilled with our growing momentum, in the back, half of 2025 and what that portends for 2026, we've been able to grow our earning Assets, in the back, half of the Year pretty meaningfully. All while maintaining and growing our core Nim and that paints a great picture for 2026. We actually feel great about the momentum, we're taking from a growth perspective in the 2026 as well. So if you were to take 2024, just pardon me, the fourth quarter, just to be simplistic, um, and put a kind of more normalized provision onto it.
Compared to net charge-offs of $6,458,000 for the quarter ending June 30, 2025.
This is a decrease of 574,000.
On a linked quarter basis.
There was no addition to the allowance for credit losses during the quarter ended December 31st 2025.
In addition, no dollars were taken into income from the allowance during the quarter ended December 31st 2025.
The average monthly new loan production for the quarter ended December 31, 2025, was $314 million.
And annualize it you'd be talking about 50. Uh, 55 cent per share, EPS, run rate which would annualize the 2.20. Now we enter 2026 with about a hundred million dollars more in interest earning assets than our average for the fourth quarter of 2025. That's going to be, uh, help assist us. And then we'll have the first kind of full quarter benefits of the rate changes, uh, the Fed rate cuts that occurred in the fourth quarter. So all that paints a really good picture for us to uh, maintain and actually upside to, uh, the go forward earnings run rate. And then, I think the last point I'd note is, we assume a more normalized consensus level of net charge off.
Compared to $356 million for the quarter ended September 30, 2025.
H.E. Timanus Jr.: Loans outstanding at 31 December 2025 were approximately $21.805 billion, compared to $22.028 billion for 30 September 2025. The 31 December 2025 loan total is made up of 35% fixed rate loans, 35% floating rate loans, and 30% variable rate loans. I will now turn it over to Charlotte Rasche.
Loans outstanding at 31 December 2025 were approximately $21.805 billion, compared to $22.028 billion for 30 September 2025. The 31 December 2025 loan total is made up of 35% fixed rate loans, 35% floating rate loans, and 30% variable rate loans. I will now turn it over to Charlotte Rasche.
and both us and prosperity, have a great track record of delivering, meaningfully lower net, charge offs, which would mean, uh, which would
2 with the number if we put forth.
Okay, very helpful. Thank you. And then and then as we think through
Loans outstanding at December, 31st 2025 for approximately 21.805 billion dollars compared to 22.028% 2025.
The December 31, 2025 loan total.
It is made up of 35% fixed rate loans.
35% floating rate loans.
And 30% variable rate loans.
[Company Representative] (Prosperity Bancshares): Thank you, Tim. At this time, we are prepared to answer your questions. Our call operator, Gary, will assist us with questions.
Charlotte Rasche: Thank you, Tim. At this time, we are prepared to answer your questions. Our call operator, Gary, will assist us with questions.
I will now turn it over to Charlotte Rashi.
Thank you, Tim.
You know, gross, moving forward. So it. So it looks like part of that is assuming better growth at seller, which is, which is great. You typically, uh, from Prosperity what we've seen with past deals is you you do an acquisition, then you shrink a little bit and that's been part of the headwinds that we've seen at growth, um, at Prosperity recently. So so why is this acquisition different? And um and and what kind of forecast for growth in 2016 in 26 a week? Expect for Prosperity? Thanks.
Operator: 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 speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. The first question is from Kathryn Mueller with KBW. Please go ahead.
Operator: 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 speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. The first question is from Kathryn Mueller with KBW. Please go ahead.
At this time, we are prepared to answer your questions or call. Operator. Gary will assist us with questions
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 keys.
To withdraw your question. Please. Press star. Then 2
[Analyst] (KBW): Thanks. Good morning.
Catherine Mealor: Thanks. Good morning.
The first question is from Katherine Miller with KBW, please go ahead.
Asylbek Osmonov: Good morning.
Asylbek Osmonov: Good morning.
[Company Representative] (Prosperity Bancshares): Good morning.
Charlotte Rasche: Good morning.
[Analyst] (KBW): I wanted to start just on the Stellar acquisition. Congratulations on that. I noticed in the slide deck you're using a different estimate for Stellar versus consensus. Looks like it's about a $2.20 number versus $2 for consensus, roughly. Just curious what's driving that difference and your confidence in that level of earnings coming over from Stellar. Thanks.
Catherine Mealor: I wanted to start just on the Stellar acquisition. Congratulations on that. I noticed in the slide deck you're using a different estimate for Stellar versus consensus. Looks like it's about a $2.20 number versus $2 for consensus, roughly. Just curious what's driving that difference and your confidence in that level of earnings coming over from Stellar. Thanks.
Thanks. Good morning. Good morning. Good morning.
I think this is different, we've, uh, Bob and I have known each other for probably romance for 10 years plus, and the, and the, and they're again, we're across the street so that we can throw rocks at each other. So, to me, it takes a lot of risk out of a, a transaction like this. I think, uh, we've talked about doing this for a lot of years. It, it makes a lot of sense. There's a, I think there will be efficiencies through this through this. And I would say, uh, as far as growth going forward in 2026, I would say that, uh, our plate is pretty full with the transactions that we have. I think that we're going to primarily focus on the integration of the, of the 3 banks that we have. So, uh, and having said that also, I think
Stellar bank is very much like our bank so with some of the banks that we buy, we know that either. They're
H.E. Timanus Jr.: Katherine, you probably saw their fourth quarter earnings come out. That's really going to influence that, but Paul's here with us today from, Stellar, and I'll let him go over it with you.
David Zalman: Katherine, you probably saw their fourth quarter earnings come out. That's really going to influence that, but Paul's here with us today from, Stellar, and I'll let him go over it with you.
Oh, I wanted to start just on the Stellar acquisition. Congratulations on that. Um, I noticed in the slide deck you're using a different estimate for Stellar versus consensus. Looks like it's about a $2.20 number versus, um, $2 for consensus, roughly. Just, just curious, what's driving that difference in your confidence in that level of earnings coming over from, um, from Stellar. Thanks.
Paul Egge: Absolutely.
Paul Egge: Absolutely.
[Analyst] (KBW): Okay, great.
Catherine Mealor: Okay, great.
Paul Egge: Thanks, Katherine.
Paul Egge: Thanks, Katherine.
[Analyst] (KBW): Hey, Paul.
Catherine Mealor: Hey, Paul.
Paul Egge: We've been thrilled with our growing momentum in the back half of 2025 and what that portends for 2026. We've been able to grow our earning assets in the back half of the year pretty meaningfully, all while maintaining and growing our core NIM, and that paints a great picture for 2026. We actually feel great about the momentum we're taking from a growth perspective into 2026 as well. So if you were to take 2024, just, pardon me, Q4, just to be simplistic, and put a kind of more normalized provision onto it and annualize it, you'd be talking about $0.55 per share EPS run rate, which would annualize to $2.20.
Katherine, you probably saw their fourth quarter earnings come out. That's really going to influence that. The pause here with us today from Seller, and I'll let him go over it with you. Absolutely.
Paul Egge: We've been thrilled with our growing momentum in the back half of 2025 and what that portends for 2026. We've been able to grow our earning assets in the back half of the year pretty meaningfully, all while maintaining and growing our core NIM, and that paints a great picture for 2026. We actually feel great about the momentum we're taking from a growth perspective into 2026 as well. So if you were to take 2024, just, pardon me, Q4, just to be simplistic, and put a kind of more normalized provision onto it and annualize it, you'd be talking about $0.55 per share EPS run rate, which would annualize to $2.20.
Deposits are extremely high or or their loans are something else wrong. We have to get rid of them. Uh, I don't see that in in the Stellar acquisition. I think that they're, they're very similar to us. So I feel good about that. But again, I thank our focus is really going to be taking care of our customers, taking care of our Associates and actually put putting all these 3 deals together this year, that'll be our main focus.
I understood. Thank you.
Our next question is from monango, selia with Morgan Stanley. Please go ahead.
hi, uh, good morning all
um,
Paul Egge: Now, we enter 2026 with about $100 million more in interest-earning assets than our average for the fourth quarter of 2025. That's gonna be help assist us, and then we'll have the first kind of full quarter benefits of the rate changes, the Fed rate cuts that occurred in the fourth quarter. So all that paints a really good picture for us to maintain and actually upside to the go-forward earnings run rate. And then I think the last point I'd note is, we assume a more normalized consensus level of net charge-offs, and both us and Prosperity have a great track record of delivering meaningfully lower net charge-offs, which would mean, which would drive lower levels of credit costs, and potential beats to the numbers we put forth.
Now, we enter 2026 with about $100 million more in interest-earning assets than our average for the fourth quarter of 2025. That's gonna be help assist us, and then we'll have the first kind of full quarter benefits of the rate changes, the Fed rate cuts that occurred in the fourth quarter. So all that paints a really good picture for us to maintain and actually upside to the go-forward earnings run rate. And then I think the last point I'd note is, we assume a more normalized consensus level of net charge-offs, and both us and Prosperity have a great track record of delivering meaningfully lower net charge-offs, which would mean, which would drive lower levels of credit costs, and potential beats to the numbers we put forth.
it David maybe, uh, can you help us? Uh, think about, uh, the price of the acquisition? Um, you know, 18 times 1 year forward does feel a little high, but, you know, I know you mentioned the higher level of nib and the synergies, uh, maybe if you can help us appreciate um, you know, all the all the synergies and and and and and growth prospects that that the combined banks have. Um, and also, um, you know how you think through the unback, period, 4 and a half years on back, is a little bit higher than what you've done recently.
That's going to be, uh, help assist us. And then we'll have the first kind of full quarter benefits of the rate changes, uh, the Fed rate cuts that occurred in the fourth quarter. So all that paints a really good picture for us to, uh, maintain and actually upside to, uh, the go-forward earnings run rate. And then, I think the last point I'd note is, we assume a more normalized consensus level of net charge-offs.
And both us and Prosperity have a great track record of delivering meaningfully lower net charge-offs, which would mean, uh, which would—
[Analyst] (KBW): Okay, very helpful. Thank you. And then, and then as we think through, you know, growth moving forward, so it, so it looks like part of that is assuming better growth at Stellar, which is, which is great. You typically, from Prosperity, what we've seen with past deals is, you, you do an acquisition, then you shrink a little bit, and that's been part of the headwinds that we've seen at growth, at Prosperity recently. So, so why is this acquisition different? And, and, and what kind of forecast for growth in 2026, in 2026 should we expect for Prosperity? Thanks.
Catherine Mealor: Okay, very helpful. Thank you. And then, and then as we think through, you know, growth moving forward, so it, so it looks like part of that is assuming better growth at Stellar, which is, which is great. You typically, from Prosperity, what we've seen with past deals is, you, you do an acquisition, then you shrink a little bit, and that's been part of the headwinds that we've seen at growth, at Prosperity recently. So, so why is this acquisition different? And, and, and what kind of forecast for growth in 2026, in 2026 should we expect for Prosperity? Thanks.
Um, drive lower levels of credit costs, uh, and potential beats to the numbers we put forth.
Okay, very helpful. Thank you. And then, and—
as we think through,
Oh, you know, gross, moving forward. So it so
Yeah. Uh, you know, I could start off and saying, I think just, I don't know, it's just a good analogy or not but I think banks are a lot like cars. You know, I can drive a Ford Pinto where I can drive a Range Rover, the pinto will probably get me wherever I need to go, and I can probably throw it away and not lose a bunch of money when it's gone, or I can really enjoy and have a Range Rover. That's, that's going to really be something and have a good resale value, uh, this, you know, there's a big difference in in the price of things. And I wish I think some people have a harder time doing that there, uh, a bank that's good. Deserves a premium price. These guys, uh, it's just, it's a premium bank. And so, uh, the the, the, the, the, the, the, the, the, the thing that we really look at is, you know, we say the price, but I look at it and I say, okay, in 2027 our combination will be earning $7.34 a share. Once we get all of this put together and so the, so it's $7.34. If we trade just
It's part of that is assuming better growth at Stellar, which is, which is great. You typically, uh, for Prosperity, what we've seen with past deals is, you know, you do an acquisition and then you shrink a little bit and that's been part of the headwinds that we've seen at growth, um, at Prosperity recently. So, so why is this acquisition different? And um, and and what kind of forecast for growth in 26, in 26? Should we expect for Prosperity, thanks?
David Zalman: I think this is different. We've, Bob and I have known each other for probably 10 years plus. And there, again, we're across the street, so we can throw rocks at each other. So, to me, it takes a lot of risk out of a transaction like this. I think, we've talked about doing this for a lot of years. It makes a lot of sense. I think there will be efficiencies through this, through this. And I would say, as far as growth going forward in 2026, I would say that, our plate is pretty full with the transactions that we have. I think that we're gonna primarily focus on the integration of the three banks that we have.
David Zalman: I think this is different. We've, Bob and I have known each other for probably 10 years plus. And there, again, we're across the street, so we can throw rocks at each other. So, to me, it takes a lot of risk out of a transaction like this. I think, we've talked about doing this for a lot of years. It makes a lot of sense. I think there will be efficiencies through this, through this. And I would say, as far as growth going forward in 2026, I would say that, our plate is pretty full with the transactions that we have.
At 13 times earnings are, you know, our stock value would be $95.42 if we traded at 15 times earnings and that somebody may say, well, that's high. Well, I would just tell you, uh, the the First Bank in um, Colorado would for that much. You saw these other Banks, and I can tell you, I could, I could call up any 1 of the mid-size Banks underneath Bank America, or, or JP Morgan, the guys underneath them, and they would offer us 15 times.
Those earnings probably in a New York minute, which would indicate, uh, a price a value of our bank at least at $110, a share. So
I think that we're gonna primarily focus on the integration of the three banks that we have. So, and having said that, also, I think, the Stellar Bank is very much like our bank. So with some of the banks that we buy, we know that either their deposits are extremely high or, or their loans, there's something else wrong, and we have to get rid of them.
David Zalman: So, and having said that, also, I think, the Stellar Bank is very much like our bank. So with some of the banks that we buy, we know that either their deposits are extremely high or, or their loans, there's something else wrong, and we have to get rid of them. I don't see that in, in the Stellar acquisition. I think that they're, they're very similar to us. So I feel good about that. But again, I think our focus is really gonna be taking care of our customers, taking care of our associates, and actually putting all these three deals together this year. That'll be our main focus.
I think this is different. We've, uh, Bob and I have known each other for probably, romance, for 10 years plus, and, uh, and they're, again, we're across the street. So we can throw rocks at each other. So, to me, it takes a lot of risk out of a transaction like this. I think, uh, we've talked about doing this for a lot of years. It, it makes a lot of sense. There's a—I think there will be efficiencies through this, through this. And I would say, uh, as far as growth going forward in 2026, I would say that, uh, our plate is pretty full with the transactions that we have. I think that we're going to primarily focus on the integration of the, of the 3 banks that we have. So, uh, and having said that, also, I think, uh, Stellar Bank is very much like our bank. So, with some of the banks that we buy, we know that, either, they're—
I don't see that in, in the Stellar acquisition. I think that they're, they're very similar to us. So I feel good about that. But again, I think our focus is really gonna be taking care of our customers, taking care of our associates, and actually putting all these three deals together this year. That'll be our main focus.
[Analyst] (KBW): Okay. Understood. Thank you.
Catherine Mealor: Okay. Understood. Thank you.
Deposits are extremely high, or their loans are something else wrong. We have to get rid of them. Uh, I don't see that in the Stellar acquisition. I think that they're very similar to us, so I feel good about that. But again, I think our focus is really going to be taking care of our customers, taking care of our associates, and actually putting all these three deals together this year. That'll be our main focus.
If I understood, thank you.
Operator: Our next question is from Manan Gosalia with Morgan Stanley. Please go ahead.
Operator: Our next question is from Manan Gosalia with Morgan Stanley. Please go ahead.
Our next question is from Monango Selia with Morgan Stanley. Please go ahead.
Paul Egge: Hi, good morning, all.
Manan Gosalia: Hi, good morning, all.
Also, you know, it takes us from being a, these all 3 of these deals. It takes us from having a, a, a 13% return on tangible capital. I mean, we're looking at a 17% on return on average tangible capital in the year 2027. So, not only did I like it. Not only is it pretty the metrics make sense for all of these deals. So that's kind of the rationale
David Zalman: Good morning.
David Zalman: Good morning.
Paul Egge: David, maybe can you help us think about the price of the acquisition? You know, 18 times 1-year forward does feel a little high, but, you know, I know you mentioned the higher level of NIB and the synergies. Maybe if you can help us appreciate, you know, all the synergies and growth prospects that the combined banks have. And also, you know, how you think through the earnback period, 4.5 years, earnback is a little bit higher than what you've done recently.
hi, uh, good morning all
Manan Gosalia: David, maybe can you help us think about the price of the acquisition? You know, 18 times 1-year forward does feel a little high, but, you know, I know you mentioned the higher level of NIB and the synergies. Maybe if you can help us appreciate, you know, all the synergies and growth prospects that the combined banks have. And also, you know, how you think through the earnback period, 4.5 years, earnback is a little bit higher than what you've done recently.
um,
David Zalman: Yeah, you know, I can start off by saying, I think this. I don't know if this is a good analogy or not, but I think banks are a lot like cars. You know, I can drive a Ford Pinto or I can drive a Range Rover. A Pinto will probably get me wherever I need to go, and I can probably throw it away and not lose a bunch of money when it's gone, or I can really enjoy and have a Range Rover that's gonna really be something and have a good resale value. You know, there's a big difference in the price of things, and I think some people have a harder time doing that. A bank that's good deserves a premium price. These guys, the, it's just a premium bank.
David Zalman: Yeah, you know, I can start off by saying, I think this. I don't know if this is a good analogy or not, but I think banks are a lot like cars. You know, I can drive a Ford Pinto or I can drive a Range Rover. A Pinto will probably get me wherever I need to go, and I can probably throw it away and not lose a bunch of money when it's gone, or I can really enjoy and have a Range Rover that's gonna really be something and have a good resale value. You know, there's a big difference in the price of things, and I think some people have a harder time doing that. A bank that's good deserves a premium price. These guys, the, it's just a premium bank.
Got it, that that's helpful. Um, and um maybe as you think about um the capital deployment strategy from here, I mean I guess you're now integrating 3 deals. Uh, together um, is, is that, um, you know is is is, is that it for now, like would you focus on the integration for the coming months and, you know, just given where the stock price is, is there, uh, more of a focus on BuyBacks, you know, I know you guys up the authorization yesterday, so maybe just help us think through uh Capital deployment plans from here.
David maybe, uh, can you help us? Uh, think about, uh, the price of the acquisition? Um, you know, 18 times 1 year forward does feel a little high. But, you know, I know you mentioned the higher level of an IB and the synergies, uh, maybe if you can help us appreciate um, you know, all the all the synergies and and and and growth prospects that that the combined banks have. Um, and also, um, you know how you think through the unback, period, 4 and a half years on back, is a little bit higher than what you've done recently.
But let's say we're going to do any more deals. They've got me handcuffed in this room, so I can't get out. But, uh, uh, you know,
If you can look at the projections going forward in the year 2027, I think we're projected to make around 880 million dollars and so we have about 120 million shares outstanding and you can do the math, we're paying 2 dollars and 40 cents a share. Uh, in in dividends that's 288 million or so. I think that's right. So you subtract that 288 from 680.
David Zalman: So, the thing that we really look at is, you know, we say the price, but I look at it and I say: Okay, in 2027, our combination will be earning $7.34 a share once we get all of this put together. And so there, so at $7.34, if we trade just at 13 times earnings, our, you know, our stock value would be $95.42. If we traded at 15 times earnings, and then somebody may say, "Well, that's high." Well, I would just tell you, the first bank in Colorado went for that much.
So, the thing that we really look at is, you know, we say the price, but I look at it and I say: Okay, in 2027, our combination will be earning $7.34 a share once we get all of this put together. And so there, so at $7.34, if we trade just at 13 times earnings, our, you know, our stock value would be $95.42. If we traded at 15 times earnings, and then somebody may say, "Well, that's high." Well, I would just tell you, the first bank in Colorado went for that much.
Yeah. Uh, you know, I could start off on saying, I think just, I don't know. It's just a good analogy or not, but I think banks are a lot like cars. You know, I can drive a Ford Pinto where I can drive a Range Rover, the pinto will probably get me wherever I need to go, and I can probably throw it away and not lose a bunch of money when it's gone, or I can really enjoy and have a Range Rover. That's, that's going to really be something and have a good resale value, uh, this, you know, there's a big difference in, in the price of things and I wish I think some people have a harder time doing that or, uh, a bank that's good. Deserves a premium price. These guys, uh, it's just, it's a premium bank. And so, uh, the the, the, the, the, the, the thing that we really look at,
Uh, you know, we have about 600 million dollars. So we have a tremendous, not only do we have a strong Capital to begin with, we have just like a a I mean like a printing, press. You know, if something doesn't go wrong with 600 million, we can do a lot of we can do a lot with that. We can buy a lot of stock back. We can uh increase dividends and we can buy more Banks.
It's a high class problem.
but any uh I I guess any immediate priority is there like would um,
Uh, would you tell us more to what's, uh, uh, Buybacks in in the in the near future?
David Zalman: You saw these other banks, and I can tell you, I could call up any one of the mid-sized banks underneath Bank of America or JPMorgan, the guys underneath them, and they would offer us 15x earnings, probably in a New York minute, which would indicate a price, a value of our bank, at least at $110 a share. So there, we paid a lot for it, but I would tell you, too, that it should be easy for anybody to see that the franchise value, not only is it accretive, but the franchise value is really enhanced by us being one of the largest banks in the Houston market. So I think the combination of the earnings, the enhancement of the franchise value, and that's what sometimes...
You saw these other banks, and I can tell you, I could call up any one of the mid-sized banks underneath Bank of America or JPMorgan, the guys underneath them, and they would offer us 15x earnings, probably in a New York minute, which would indicate a price, a value of our bank, at least at $110 a share. So there, we paid a lot for it, but I would tell you, too, that it should be easy for anybody to see that the franchise value, not only is it accretive, but the franchise value is really enhanced by us being one of the largest banks in the Houston market. So I think the combination of the earnings, the enhancement of the franchise value, and that's what sometimes...
I think that we would when when it's an opportunistic we certainly would look at BuyBacks for sure. We just as I'm with this last year, I stopped went down in the 60s to low 60s. And I think you saw where we spent 157 million on BuyBacks this last year, and I think we have another 5% approved for this year. So you're talking was at 300 and something million dollars that we can buy back this year as well. And that's been approved ready by the Fed.
Got it, I appreciate it. Thanks so much.
The next question is from, Stephen Scout with Piper Sandler. Please go ahead.
Mr. Scouting, your line is open on RN. Perhaps, it's muted on yours.
David Zalman: I don't know, how do you put a price on the enhanced franchise? But I can tell you it's significant, and I think that anybody would want to probably acquire us as being one of the bigger banks in the state of Texas and the franchise that we have. And so that's kind of the rationale behind it. It also, you know, it takes us from being a, all three of these deals, it takes us from having a 13% return on tangible capital. I mean, we're looking at a 17% on return on average tangible capital in the year 2027. So not only did I like it, not only is it pretty, the metrics make sense for all of these deals. So that's kind of the rationale.
I don't know, how do you put a price on the enhanced franchise? But I can tell you it's significant, and I think that anybody would want to probably acquire us as being one of the bigger banks in the state of Texas and the franchise that we have. And so that's kind of the rationale behind it. It also, you know, it takes us from being a, all three of these deals, it takes us from having a 13% return on tangible capital. I mean, we're looking at a 17% on return on average tangible capital in the year 2027. So not only did I like it, not only is it pretty, the metrics make sense for all of these deals. So that's kind of the rationale.
Moving on the next question, is from David. Chiavarini with Jeffries. Please go ahead.
Hi, thanks for taking the question. So, um, you mentioned about, you know, you've got multiple Bank Integrations occurring simultaneously, can you talk about ways? You'll be able to juggle these at the same time and not get distracted from the core operations.
There, we paid a lot for it, but I would tell you too, that it it should be easy for anybody to see that the, the franchise value. Not only not only, is it a creative? But the franchise value is really enhanced by us being 1 of the largest banks in the Houston Market. So I think the combination of the earnings, the enhancement of the franchise value and that's what sometimes I don't know. What kind, how do you put a price on the enhanced franchise that I can tell you? It's significant I think that any anybody would want to probably acquire us as being 1 of the bigger banks in the state of Texas and and the franchise that we have. And so that's that's kind of the rationale behind it. It also, you know, it takes us from being a, these all 3 of these deals that takes us from having a, a, a, a 13% return on tangible capital. I mean, we're looking at a 17% on return on average tangible capital in the year 2027. So, not only did I like it. Not only is it pretty the metrics make sense for all of the
These deals, so that's kind of the rationale.
[Analyst] (Morgan Stanley): ... Got it. That, that's helpful. And, maybe as you think about the capital deployment strategy from here, I mean, I guess you're now integrating three deals together. Is that, you know, is that it for now? Like, would you focus on the integration for the coming months? And, you know, just given where the stock price is, is there more of a focus on buybacks? You know, I know you guys upped the authorization yesterday, so maybe just help us think through capital deployment plans from here.
Manan Gosalia: ... Got it. That, that's helpful. And, maybe as you think about the capital deployment strategy from here, I mean, I guess you're now integrating three deals together. Is that, you know, is that it for now? Like, would you focus on the integration for the coming months? And, you know, just given where the stock price is, is there more of a focus on buybacks? You know, I know you guys upped the authorization yesterday, so maybe just help us think through capital deployment plans from here.
Got it, that that's helpful. Um, and uh, maybe as you think about um the capital deployment strategy from here, I mean, I guess your now, integrating 3 deals, uh, together, um, is that, um, you know, is, is it, is that it for now? Like would you focus on the integration for the coming months and, you know, just giving where the stock price is, is there, uh, more of a focus.
David Zalman: Well, let's say we're gonna do any more deals, they've got me handcuffed in this room, so I can't get out. But you know, if you can look at the projections going forward in the year 2027, I think we're projected to make around $880 million. And so we have about 120 million shares outstanding, and you can do the math. We're paying $2.40 a share in dividends. That's $288 million or so. I think that's right. So you subtract that 288 from 680, you know, we have about $600 million, so we have a tremendous capital, not only do we have a strong capital to begin with, we have just like, I mean, like a printing press.
David Zalman: Well, let's say we're gonna do any more deals, they've got me handcuffed in this room, so I can't get out. But you know, if you can look at the projections going forward in the year 2027, I think we're projected to make around $880 million. And so we have about 120 million shares outstanding, and you can do the math. We're paying $2.40 a share in dividends.
Was on buybacks. You know, I know you guys upped the authorization yesterday, so maybe just help us think through capital deployment plans from here.
Well, again, we are all planned and I somebody may want to talk about the which ones we have in order. But, I mean we've done 40 of these transactions. So I don't think this is going to be. There may be 3 of these but again, uh, we're doing our own operational integration here probably in the next few weeks or so. Yeah. And then, uh, right after that, we're going in American Bank day what hustle back so I think uh specific to address the question, we have designated teams who does that. So it's not like our people who is out on the field doing the you know organic growth. They'll be focused on this. We have specific team focusing on integration. So we have a plan to convert this Banks. As those 2 Bank, American Bank and Partners bank this year in the sense of integration and in the process so far, it's going well, and we started in advance so it's not like we're starting now, overall we scheduled to do.
Converted later this year and it's working as we planned.
Let's say we're going to do any more deals. They've got me handcuffed in this room, so I can't get out. But, uh, uh, you know,
I we feel confident. We're at. It's not to say that you won't ever have any glitches on anything that you do that, there always may be something like that before. The most part, we have a well-seasoned team, that's done. Many of these things and they feel very comfortable where we're at.
That's $288 million or so. I think that's right. So you subtract that 288 from 680, you know, we have about $600 million, so we have a tremendous capital, not only do we have a strong capital to begin with, we have just like, I mean, like a printing press. You know, if something doesn't go wrong with $600 million, we can do a lot of-- we can do a lot with that. We can buy a lot of stock back, we can increase dividends, and we can buy more banks. It's a high-class problem.
Great. Thanks for that. And can you talk a little bit about the cultural fit? How did the deal come together and why? Now with the deal,
Well, the time seems to be right. I mean, if you look, um, in the previous administration, I think we we did a, uh,
David Zalman: You know, if something doesn't go wrong with $600 million, we can do a lot of-- we can do a lot with that. We can buy a lot of stock back, we can increase dividends, and we can buy more banks. It's a high-class problem.
It I may be wrong but it just is almost a year to get completed. I think that from a regulatory standpoint that the uh that the regulatory
if you can look at the projections going forward in the year 2027, I think we're projected to make around 880 million. And so we have about 120 million shares outstanding, and you can do the math, we're paying $240 a share, uh, in in dividends that's 288 million or so. I think that's right. So you subtract that 288 from 680, uh, you, you know, we have about 600 million dollars. So, we have a tremendous, not only do we have a strong Capital to begin with, we have just like a a I mean like a printing, press. You know, if something doesn't go wrong with 600 million, we can do a lot of we can do a lot with that. We can buy a lot of stock back. We can uh increase dividends and we can buy more Banks.
[Analyst] (Morgan Stanley): But, I guess, any immediate priorities there, like, so would you tilt more towards buybacks in the near future?
Manan Gosalia: But, I guess, any immediate priorities there, like, so would you tilt more towards buybacks in the near future?
But any, uh, I guess, any immediate priority—is there, like, would, um,
The regulatory things are in place to make this happen. Um, I the timing is right and uh, you know, it it was right. I think it was right for us and I think it's right for them. It, it just seemed to be the right time.
Uh, would you tilt more towards, uh, buybacks in the near future?
David Zalman: I think that we would, when, when it's opportunistic, we certainly would look at buybacks, for sure. We just as I'm—with this last year, our stock went down in the sixties, the low sixties, and I think you saw where we spent $157 million on buybacks this last year. And I think we have another 5% approved for this year. So you're talking, what is that? $300-something million that we can buy back this year as well, and that's been approved already by the Fed.
David Zalman: I think that we would, when, when it's opportunistic, we certainly would look at buybacks, for sure. We just as I'm—with this last year, our stock went down in the sixties, the low sixties, and I think you saw where we spent $157 million on buybacks this last year. And I think we have another 5% approved for this year. So you're talking, what is that? $300-something million that we can buy back this year as well, and that's been approved already by the Fed.
And can you talk about the cultural fit and how the deal came together?
I think that we would, when it's opportunistic, we certainly would look at buybacks for sure. Just as with this last year, our stock went down into the 60s, to low 60s, and I think you saw where we spent $157 million on buybacks this last year. And I think we have another 5% approved for this year. So you're talking, what is that, $300 and something million that we can buy back this year as well. And that's been approved already by the Fed.
[Analyst] (Morgan Stanley): Got it. I appreciate it. Thanks so much.
Manan Gosalia: Got it. I appreciate it. Thanks so much.
Got it. I appreciate it. Thanks so much.
Operator: The next question is from Stephen Scouten with Piper Sandler. Please go ahead. Mr. Scouten, your line is open on our end. Perhaps it's muted on yours. Moving on, the next question is from David Chiaverini with Jefferies. Please go ahead.
Operator: The next question is from Stephen Scouten with Piper Sandler. Please go ahead. Mr. Scouten, your line is open on our end. Perhaps it's muted on yours. Moving on, the next question is from David Chiaverini with Jefferies. Please go ahead.
The next question is from, Stephen Scout with Piper Sandler. Please go ahead.
Mr. Scout, your line is open on RN. Perhaps it's muted on your end.
[Analyst]: Hi, thanks for taking the question. You mentioned about, you know, you've got multiple bank integrations occurring simultaneously. Can you talk about ways you'll be able to juggle these at the same time and not get distracted from the core operations?
David Chiaverini: Hi, thanks for taking the question. You mentioned about, you know, you've got multiple bank integrations occurring simultaneously. Can you talk about ways you'll be able to juggle these at the same time and not get distracted from the core operations?
Moving on to the next question, it's from David Shirini with Jeff. Please go ahead.
Yeah, I I mentioned earlier, Bob, and I have known each other for 20 years or more. I mean, uh, I, I would say, I, I said this in our meeting the other day. I said, if I got killed and ran over tomorrow, and Bob took my place, I don't think that, uh, I don't think that, that our banks would change our combined bank would change at all. I think that, uh, if anything, I think they may be even more conservative than we are on the loan side, and it's hard to believe. And so, I, I, we feel we did our due diligence, and we feel really good. We, uh, we, we feel the same way about things, you know. Again this we we've dated and romance for probably 10 or 20 years and it's not like, you know, we just saw this pretty girl across the street fell in love and got married in a month. You know, this is something that we really thought about and have thought about and talked about with each other for years and years. And the timing just seemed to be right right now and and we did it.
Thanks very much.
The next question is, from Dave Rochester with caner, please go ahead.
Hey, good morning, guys.
Good morning.
Hi, thanks for taking the question. So, um, you mentioned about, you know, you've got multiple bank integrations occurring simultaneously. Can you talk about ways you'll be able to juggle these at the same time and not get distracted from the core operations?
David Zalman: Well, again, they're all planned, and somebody may wanna talk about the which ones we have in order, but I mean, we've done 40 of these transactions, so I don't think this is gonna be... There may be 3 of these, but again, we're doing our own operational integration here probably in the next few weeks or so.
David Zalman: Well, again, they're all planned, and somebody may wanna talk about the which ones we have in order, but I mean, we've done 40 of these transactions, so I don't think this is gonna be... There may be 3 of these, but again, we're doing our own operational integration here probably in the next few weeks or so.
[Analyst]: Yeah.
David Chiaverini: Yeah.
David Zalman: And then, right after that, we're going into American Bank, dated, what, also back then?
David Zalman: And then, right after that, we're going into American Bank, dated, what, also back then?
Asylbek Osmonov: So I think, specific to address the question, we have designated teams who does that. So it's not like our people who is out on the field doing the, you know, organic growth. They'll be focused on this. We have specific team focusing on integration. So we have a plan to convert these banks, those two bank, American Bank and Partners Bank this year, in the sense of integration. And in the process, so far it's going well, and we started in advance, so it's not like we're starting now. Overall, we are scheduled to do conversion later this year, and it's working as we planned.
Asylbek Osmonov: So I think, specific to address the question, we have designated teams who does that. So it's not like our people who is out on the field doing the, you know, organic growth. They'll be focused on this. We have specific team focusing on integration. So we have a plan to convert these banks, those two bank, American Bank and Partners Bank this year, in the sense of integration. And in the process, so far it's going well, and we started in advance, so it's not like we're starting now. Overall, we are scheduled to do conversion later this year, and it's working as we planned.
Uh, I just wanted to go back to the Capitol discussion, real quick. I noticed the the shares are trading below, the average price for the BuyBacks, this past quarter. So I was just curious, if you see that buyback opportunity is occurring now and then, I know there are blackout periods related to the outstanding deals. If you could just talk about when you'd be actually able to buy back stocks, if you saw that opportunity in the near term. And if you had a, a 10 B 5-1 plan, thanks.
Yeah, I don't know what the 75. What what plan is he talking about the 1051 plan? We cannot. Yeah, we don't have a 10 B, 51 plan. Yeah. And David, I would say on the others, you know. Uh basically I get I I probably stick to our statement that you've seen us buy in the past but it's been opportunistic and we'll do that again.
Okay. Uh, any sense for blackouts with those pop up when those ends that kind of thing?
David Zalman: We feel confident where we're at. It's not to say that you won't ever have any glitches on anything that you do. There always may be something like that, but for the most part, we have a well-seasoned team that's done many of these things, and they feel very comfortable where we're at.
As we planned.
David Zalman: We feel confident where we're at. It's not to say that you won't ever have any glitches on anything that you do. There always may be something like that, but for the most part, we have a well-seasoned team that's done many of these things, and they feel very comfortable where we're at.
Well, we're in a blackout today for earnings. So we we normally
Learning blackout and things. And there's some blackouts around the the merger transaction, of course, around shareholder votes and things like that. When you start soliciting, those Stellar shareholders
I we feel confident. We're at. It's not to say that you won't ever have any glitches on anything that you do that, there always may be something like that before. The most part, we have a well-seasoned team, that's done. Many of these things and they feel very comfortable where we're at.
[Analyst]: Great. Thanks for that. And can you talk a little bit about the cultural fit? How did the deal come together, and why now with the deal?
David Chiaverini: Great. Thanks for that. And can you talk a little bit about the cultural fit? How did the deal come together, and why now with the deal?
This, before you do that.
Sorry, go ahead.
I've had this price and then when the it's available for us to buy back, we'll do BuyBacks. Yeah.
Great. Thanks for that. And can you talk a little bit about the cultural fit? How did the deal come together and why? Now with the deal,
David Zalman: Well, the time seems to be right. I mean, if you look in the previous administration, I think we were trying to do some bank deals and even much smaller deals. I think the last bank we took, it, I may be wrong, but it took us almost a year to get completed. I think that from a regulatory standpoint, the regulatory things are in place to make this happen. The timing is right and, you know, it was right. I think it was right for us, and I think it's right for them. It just seemed to be the right time.
David Zalman: Well, the time seems to be right. I mean, if you look in the previous administration, I think we were trying to do some bank deals and even much smaller deals. I think the last bank we took, it, I may be wrong, but it took us almost a year to get completed. I think that from a regulatory standpoint, the regulatory things are in place to make this happen. The timing is right and, you know, it was right. I think it was right for us, and I think it's right for them. It just seemed to be the right time.
Well, the time seems to be right. I mean, if you looked, uh, in the previous administration, I think we we did a, uh,
Sounds good. Um, I wanted to get your thoughts on the trajectory for knee and the margin through 26. Just giving the 3 deals, you got coming in just assuming you closed Stellar June 30th, understand what you see is that path through the year, thanks.
We were trying to do some Bank deals and even much smaller deals. I think, the last bank we took that it I may be wrong but it this is almost a year to get completed. I think that from a regulatory standpoint that the uh that the regulatory, the regulatory things are in place to make this happen. Um, I the timing is right and uh, you know it it was right. I think it was right for us and I think it's right for them. It, it just seemed to be the right time.
[Analyst]: Can you talk about the cultural fit and how the deal came together?
David Chiaverini: Can you talk about the cultural fit and how the deal came together?
David Zalman: Yeah. I mentioned earlier, Bob and I have known each other for 20 years, or more. I mean, I would say. I said this in our meeting the other day. I said, "If I got killed and ran over tomorrow and Bob took my place, I don't think that, I don't think that, that our bank would change, our combined bank would change at all." I think that, if anything, I think they may be even more conservative than we are on the loan side, and it's hard to believe. So I, we feel we did our due diligence, and we feel really good. We, we feel the same way about things.
David Zalman: Yeah. I mentioned earlier, Bob and I have known each other for 20 years, or more. I mean, I would say. I said this in our meeting the other day. I said, "If I got killed and ran over tomorrow and Bob took my place, I don't think that, I don't think that, that our bank would change, our combined bank would change at all." I think that, if anything, I think they may be even more conservative than we are on the loan side, and it's hard to believe. So I, we feel we did our due diligence, and we feel really good. We, we feel the same way about things.
Yeah, I I mentioned earlier, Bob and I have known each other for 20 years or more. I mean, uh, I, I would say I, I said this in our meeting the other day. I said, if I got killed and ran over tomorrow and Bob took my place, I don't think that, uh, I don't think that that our bank would change our
Yeah, if you look at the prosperity, I'm just going to talk about prosperity and with 2 smaller acquisition on projection. Uh, we uh definitely see the Improvement in the margin as for 2026 and Beyond and it's because um, the uh margin on the smaller Banks or higher than ours that spend the loan. So that's have our Christian there. But if you look at our balance sheet with the, you know, repricing our bond portfolio. As we mentioned, as I mentioned that we have a 1.9 billion cash flowing from that. So we'll be repricing that to our our yield on the bonds or 250 to pricing. I think we can get around 450 right now. So 200 based points there, if you look at our fixed uh, loans that's getting repriced as well. So, uh, putting all together, uh,
David Zalman: You know, again, this, we, we've dated and romanced for probably 10 or 20 years, and it's not like, you know, we just saw this pretty girl across the street, fell in love, and got married in a month. You know, this is something that we really thought about and have thought about and talked about with each other for years and years, and the timing just seemed to be right, right now, and we, and we did it.
You know, again, this, we, we've dated and romanced for probably 10 or 20 years, and it's not like, you know, we just saw this pretty girl across the street, fell in love, and got married in a month. You know, this is something that we really thought about and have thought about and talked about with each other for years and years, and the timing just seemed to be right, right now, and we, and we did it.
[Analyst]: Thanks very much.
David Chiaverini: Thanks very much.
Buyback would change at all. I think that, uh, if anything, I think they may be even more conservative than we are on the loan side and it's hard to believe. And, uh, so I I we feel we did our due diligence, and we feel really good. We, uh, we, we feel the same way about things, you know. Again this we we've dated and romance for probably 10 or 20 years and it's not like, you know, we just saw this pretty girl across the street fell in love and got married in a month. You know, this is something that we really thought about and have thought about and talked about with each other for years and years. And the timing just seemed to be right right now and and we did it.
Our kind of projection for 2026 Standalone showing about around 350 margin for 2026. But, uh, if you add Stellar Bank together, I think you, the marginal is still about more 4.2%, so that will be very accurate too. So combined together, you can do the math, it will be looking very, very good for 2026 and a minimum of 3 and a half. Yeah, that's minimum of 3 and a half 3 and a half without Stellar. Yeah, without Stellar. Yes. So that's looking really good. And that comes a long way. It, you know, it goes back to where 2 years ago,
David Zalman: Mm-hmm.
David Zalman: Mm-hmm.
Thanks very much.
Operator: The next question is from David Rochester with Cantor. Please go ahead.
Operator: The next question is from David Rochester with Cantor. Please go ahead.
[Analyst] (Cantor): Hey, good morning, guys.
David Rochester: Hey, good morning, guys.
The next question is from Dave Rochester with Caner. Please go ahead.
David Zalman: Good morning.
David Zalman: Good morning.
Hey, good morning, guys.
[Analyst] (Cantor): I just want to go back to the capital discussion real quick. I noticed the shares are trading below the average price of the buybacks this past quarter. So I was just curious if you see that buyback opportunity as occurring now, and then I know there are blackout periods related to the outstanding deals. If you could just talk about when you'd be actually able to buy back stock if you saw that opportunity in the near term, and if you had a 10b5-1 plan? Thanks.
David Rochester: I just want to go back to the capital discussion real quick. I noticed the shares are trading below the average price of the buybacks this past quarter. So I was just curious if you see that buyback opportunity as occurring now, and then I know there are blackout periods related to the outstanding deals. If you could just talk about when you'd be actually able to buy back stock if you saw that opportunity in the near term, and if you had a 10b5-1 plan? Thanks.
Good morning.
David Zalman: Yeah, I don't know what the 75... What, what plan is he talking about?
David Zalman: Yeah, I don't know what the 75... What, what plan is he talking about?
Uh, I just want to go back to the capital discussion real quick. I noticed that the shares are trading below the average price for the buybacks this past quarter. So, I was just curious if you see that buyback opportunity as current now. And then, I know there are blackout periods related to the outstanding deals. If you could just talk about when you'd actually be able to buy back stock, if you saw that opportunity in the near term, and if you had a 10b5-1 plan. Thanks?
Charlotte Rasche: The 10b5-1 plan.
Charlotte Rasche: The 10b5-1 plan.
David Zalman: We don't have one.
David Zalman: We don't have one.
Charlotte Rasche: Yeah, we don't have a 10b5-1 plan.
Charlotte Rasche: Yeah, we don't have a 10b5-1 plan.
David Zalman: Yeah. David, I would say on the other, you know, basically, I'd probably stick to our statement that you've seen us buy in the past, but it's been opportunistic, and we'll do that again.
David Zalman: Yeah. David, I would say on the other, you know, basically, I'd probably stick to our statement that you've seen us buy in the past, but it's been opportunistic, and we'll do that again.
Yeah, I don't know what the 75. What what plan is he talking about the 1051 plan? We cannot. Yeah, we don't have a 10 B, 51 plan. Yeah. And David, I would say on the others, you know. Uh basically I got I I probably stick to our statement that you've seen us buy in the past but it's been opportunistic and we'll do that again.
[Analyst] (Cantor): Okay. Any sense for blackouts when those pop up, when those end, that kind of thing?
David Rochester: Okay. Any sense for blackouts when those pop up, when those end, that kind of thing?
Charlotte Rasche: Well, we're in a blackout today for earnings.
Charlotte Rasche: Well, we're in a blackout today for earnings.
Okay. Uh, any sense for blackouts—would those pop up, when those end, that kind of thing?
David Zalman: Right.
David Zalman: Right.
Charlotte Rasche: So we have normal earnings blackout and things, and there's some blackouts around the merger transaction, of course, around shareholder votes and things like that when you start soliciting the Stellar shareholders.
Charlotte Rasche: So we have normal earnings blackout and things, and there's some blackouts around the merger transaction, of course, around shareholder votes and things like that when you start soliciting the Stellar shareholders.
Is never tried to, uh, call rates 1 way or another. And we bought in every Market. In fact, we should be buying more but I think we're still scared from what happened last time? But so, uh, so for the most part, we said, you know, if every we we try to buy and have a 3.7 3.8 year duration, and we said 2 years ago, we got caught in that and as this thing turns, we return it around. And we went from a 2.75 2.75, net interest margin to 3 and a half today. So we did everything we said and candidly we have very, very strong Tailwind in back of us. And I think that not only looking at 26 27, without anything. We have some very, very strong Tailwind going at the same time. So, yeah. And uh want to add to that. I think we mentioned the year or 2 ago that we want to reduce our borrowing levels. You know, we were almost at 3.9 billion borrowing 2 years ago and we have conscious program that we're going to reduce it to levels that we are right now. So now we, we believe that, um,
Asylbek Osmonov: But at this price-
Asylbek Osmonov: But at this price-
[Analyst] (Cantor): Before you do that... Sorry, go ahead.
David Rochester: Before you do that... Sorry, go ahead.
Well, we're in a blackout today for earnings, so we normally have an earnings blackout and things, and there's some blackouts around the merger transaction, of course, around shareholder votes and things like that. When you start soliciting those Stellar shareholders...
But at this point, before you do that,
Asylbek Osmonov: I'd say at this price, and then when it's available for us to buy back, we'll do buybacks.
Asylbek Osmonov: I'd say at this price, and then when it's available for us to buy back, we'll do buybacks.
Sorry, go ahead.
Charlotte Rasche: Yeah.
Charlotte Rasche: Yeah.
I've had this price, and then, when it's available for us to buy back, we'll do buybacks. Yeah.
[Analyst] (Cantor): Sounds good. I wanted to get your thoughts on the trajectory for NII and the margin through 2026, just given the 3 deals you got coming in. Just assuming you close Stellar June 30, can you just help us understand what you see as that path through the year? Thanks.
David Rochester: Sounds good. I wanted to get your thoughts on the trajectory for NII and the margin through 2026, just given the 3 deals you got coming in. Just assuming you close Stellar June 30, can you just help us understand what you see as that path through the year? Thanks.
Borrowing level is what we expected. It's been 1.5 to 2 billion dollars and now we're going to be, uh, you know, with uh, growth and deposits and additional of the 2 Banks, we're going to start growing our average earning assets while the past 2 years. We were shrinking because we want to, I think it was just a matter of the time that somebody could make an argument in this email that the sharp email that I got this morning made that argument, I can make an argument that you could go back. Anybody can pick the year in time that they want to, but if you go back and
Asylbek Osmonov: Yeah, if you look at, Prosperity, I'm just going to talk about Prosperity and with 2 smaller acquisition on projection. We definitely see the improvement in the margin as for 2026 and beyond. And it's because the margin on the smaller banks were higher than ours, the standalone, so that's have accretion there. But if you look at our balance sheet with, you know, repricing our bond portfolio, as we mentioned, as I mentioned, that we have a $1.9 billion cash flowing from that, so we'll be repricing that. Our yield on the bonds are 2.50 into pricing. I think we can get around 4.50 right now, so 200 basis points there. If you look at our fixed loans, that's getting repriced as well.
Asylbek Osmonov: Yeah, if you look at, Prosperity, I'm just going to talk about Prosperity and with 2 smaller acquisition on projection. We definitely see the improvement in the margin as for 2026 and beyond. And it's because the margin on the smaller banks were higher than ours, the standalone, so that's have accretion there. But if you look at our balance sheet with, you know, repricing our bond portfolio, as we mentioned, as I mentioned, that we have a $1.9 billion cash flowing from that, so we'll be repricing that. Our yield on the bonds are 2.50 into pricing. I think we can get around 4.50 right now, so 200 basis points there. If you look at our fixed loans, that's getting repriced as well.
Sounds good. Um, I wanted to get your thoughts on the trajectory for knee and the margin through ’26. Just given the three deals you’ve got coming in—just assuming you close Stellar June 30th. If you need to selfless, understand what you see as that path through the year. Thanks.
For the last is 2,000 till today. Uh, and you compare us to the S&P 500 and you compare it to the NASDAQ Bank index, our bank is returned 1,447 percent compared to the National Bank index of about I'm thinking 181%, and it's compared to the S&P 500 665%. So I think, if you're a long-term player, you need to jump in and buy the stock because I did the math for you a while ago. What what this, what this thing should trade for and uh, so it's just, I think it's 1 of the greatest opportunities and you you will benefit if you're a long-term investor right now.
Asylbek Osmonov: So, putting all together, our kind of projection for 2026, standalone, showing about around 3.50 margin for 2026. But, if you add the Stellar Bank together, I think you're—the margin on Stellar about more 4.2 percent, so that will be very accretive, too. So combined together, you can do the math. It will be looking very, very good for 2026 and-
So, putting all together, our kind of projection for 2026, standalone, showing about around 3.50 margin for 2026. But, if you add the Stellar Bank together, I think you're—the margin on Stellar about more 4.2 percent, so that will be very accretive, too. So combined together, you can do the math. It will be looking very, very good for 2026 and-
All right, great, appreciate all that call. Maybe just 1 last 1 on the uh the cost save estimate. I know historically you guys have been pretty conservative or have outperformed your cost, save expectations. I was just wondering how you feel about uh about this level here that you you've talked about. And if there are any branch closures that you'll have to take care of as a result of the higher concentration of branches in Houston. Thanks.
David Zalman: A minimum of 3.5.
David Zalman: A minimum of 3.5.
Asylbek Osmonov: Yeah.
Asylbek Osmonov: Yeah.
David Zalman: Minimum of 3.5.
David Zalman: Minimum of 3.5.
[Analyst] (Cantor): 3.5 without Stellar.
David Rochester: 3.5 without Stellar.
David Zalman: Yeah, without Stellar.
David Zalman: Yeah, without Stellar.
Uh, regarding the cost that we feel very comfortable with the 35% cost says that we print it and it's combination of the combining 2 banks that have a same footprint. So, of course, there will be some consolidation of branches. Also, there's, uh, you know, as you know, the system conversion going to help. So we took Deep dive and we feel very comfortable with the cost saves.
Asylbek Osmonov: Yes. So that's looking really good.
Asylbek Osmonov: Yes. So that's looking really good.
Great. Thanks guys.
David Zalman: And that comes a long way. It, you know, it, it goes back to where two years ago, somebody said, "Well, you know, the bank in your peer group, you know, you didn't perform as good as your peer group over the last couple of years." Well, the truth of the matter is, we didn't. I mean, our bank has never tried to call rates one way or another, and we bought in every market. In fact, we should be buying more, but I think we're still scared from what happened last time. But so, so for the most part, we said, we, you know, if every-- we, we try to buy and have a 3.7, 3.8 year duration, and we said two years ago, we got caught in that, and as this thing turns, we would turn it around.
David Zalman: And that comes a long way. It, you know, it, it goes back to where two years ago, somebody said, "Well, you know, the bank in your peer group, you know, you didn't perform as good as your peer group over the last couple of years." Well, the truth of the matter is, we didn't. I mean, our bank has never tried to call rates one way or another, and we bought in every market. In fact, we should be buying more, but I think we're still scared from what happened last time.
But, uh, if you add Stellar Bank together, I think you get the margin. I'm still at about 4.2%, so that will be very accurate too. So, combined together—you can do the math—it will be looking very, very good for 2026, and a minimum of 3 and a half. Yeah, that's a minimum of 3 and a half—3 and a half without Stellar. Yeah, without Stellar, yes. So that's looking really good. And that comes a long way. You know, it goes back to where, two years ago,
The next question is from Janet Leigh with TD Cowen. Please go ahead.
Good afternoon.
But so, so for the most part, we said, we, you know, if every-- we, we try to buy and have a 3.7, 3.8 year duration, and we said two years ago, we got caught in that, and as this thing turns, we would turn it around. We went from a 2.75, 2.75 net interest margin to 3.5 today. So we did everything we said, and candidly, we have very, very strong tailwinds in back of us, and I think that not only looking at 2026, 2027, without anything, we have some very, very strong tailwinds going at the same time, so.
On back to m&a, if I were to um, ask it in a different way. So if I look at your performance, ct1 it will be about 13 and a half, which is slightly above peers, but definitely more normalized. And in the past, or at least over the 5 years. You've
David Zalman: We went from a 2.75, 2.75 net interest margin to 3.5 today. So we did everything we said, and candidly, we have very, very strong tailwinds in back of us, and I think that not only looking at 2026, 2027, without anything, we have some very, very strong tailwinds going at the same time, so.
You've had ct1 running above peers, just given the size of the deal, which was more meaningful than the recent ones and the performance ct1 post. The Stellar deal. Does this change your appetite for for m&a? Whether it's, your appetite for m&a itself, or or the the type of deals that you might be potentially looking at in the,
Asylbek Osmonov: Yeah, and want to add to that. I think we mentioned a year or two ago that we want to reduce our borrowing levels. You know, we were almost at $3.9 billion borrowing two years ago, and we have conscious program that we're going to reduce it to level that we are right now. So now we are. We believe that borrowing level is what we expected, within $1.5 to 2 billion. And now we're going to be, you know, with growth in deposits and additional of the two banks, we're going to start growing our average earning assets, while past two years we were shrinking because we want to.
Asylbek Osmonov: Yeah, and want to add to that. I think we mentioned a year or two ago that we want to reduce our borrowing levels. You know, we were almost at $3.9 billion borrowing two years ago, and we have conscious program that we're going to reduce it to level that we are right now. So now we are. We believe that borrowing level is what we expected, within $1.5 to 2 billion. And now we're going to be, you know, with growth in deposits and additional of the two banks, we're going to start growing our average earning assets, while past two years we were shrinking because we want to.
Future, No know. Even like I mentioned a while ago. We're
Somebody said, well, you know, the bank in your peer group, uh, you know, you didn't perform as good as your peer group over the last couple years. Well, the truth of the matter is, we didn't. I mean, our bank has never tried to, uh, call rates one way or another. And we bought in every market. In fact, we should be buying more, but I think we're still scared from what happened last time. But so, uh, so for the most part we said we, you know, if every—we try to buy and have a 3.7, 3.8 year duration, and we said two years ago, we got called in that. And as this thing turns, we turned it around. We went from a 2.75-2.75% net interest margin to 3 and a half today. So we did everything we said and, candidly, we have very, very strong tailwind in back of us. And I think that not only looking at '26, '27, without anything, we have some very, very strong tailwind going at the same time. So, yeah. And, uh, want to add to that. I think we mentioned a year or two ago that we want to reduce our borrowing levels. You know, we were almost
When these things are combined, you're going to have over 600 million dollars a year. Just in excess of cash flow, we had excess Capital to, everybody was asking what we were going to do this time again, we didn't have it wasn't a requirement that we pay 30% in cash. And we did to try to utilize our Capital to get a better return on our average tangible capital and I think probably just just an earnings over a couple of years. If you've done the ratios tell them to see where, uh, it will
David Zalman: I think it's just a matter of the time that somebody could make an argument, and this email, the sharp email that I got this morning made that argument. I could make an argument that you could go back... Y- anybody can pick a year or time that they want to, but if you go back and for the last, since 2000 till today, and you compare us to the S&P 500, and you compare us to the NASDAQ Bank Index, our bank has returned 1,447% compared to the NASDAQ Bank Index of about, I'm thinking, 181%, and it's compared to the S&P 500, 665%.
David Zalman: I think it's just a matter of the time that somebody could make an argument, and this email, the sharp email that I got this morning made that argument. I could make an argument that you could go back... Y- anybody can pick a year or time that they want to, but if you go back and for the last, since 2000 till today, and you compare us to the S&P 500, and you compare us to the NASDAQ Bank Index, our bank has returned 1,447% compared to the NASDAQ Bank Index of about, I'm thinking, 181%, and it's compared to the S&P 500, 665%.
We we're back up within a year or 2. Aren't we on? Excuse me on how fast we build our Capital back. Yeah, we'll be back in a couple of years. Minimum, minimum a couple of years, we'll be back to exactly where we're at.
Got it. Um, that's fair for
3.9 billion, borrowing, 2 years ago. And we have conscious program that we're going to reduce it to level that we are right now. So now, we, we believe that, um, borrowing level is what we expected within 1.5 to 2 billion dollars. And now we're going to be, you know, with uh, growth and deposits and additional of the 2 Banks, we're going to start growing our average earning assets while the past 2 years. We were shrinking because we want to, I think it was just a matter of the time that somebody could make an argument in this email that the sharp email that I got this morning made that argument, I can make an argument that you could go back. Anybody can pick the year in time that they want to, but if you go back and for the last since 2000 till today, uh, and you compare us to the S&P 500 and you compare it to the NASDAQ Bank index, our bank has returned 1,447 percent compared to the National Bank index of about, I'm thinking 181%, and it's compared to
David Zalman: So I think if you're a long-term player, you need to jump in and buy this stock because I did the math for you a while ago, what this thing should trade for. And so it just. I think it's one of the greatest opportunities, and you will benefit if you're a long-term investor right now.
So I think if you're a long-term player, you need to jump in and buy this stock because I did the math for you a while ago, what this thing should trade for. And so it just. I think it's one of the greatest opportunities, and you will benefit if you're a long-term investor right now.
Or meaningful. So, in terms of 2026, I believe you were hoping for that, you know, low single digits, or low to mid single digits, kind of growth on, on balance sheet. Um, is that the fair way to assume or, or I don't want to put words in your mouth. But, um, how should we be thinking about the overall trajectory there?
Yeah, I think that's a good assumption.
This is Kevin.
The S&P 500. 600 665. I think if you're a long-term player, you need to jump in and buy this stock because I did the math for you a while ago. What what this, what this thing should trade for and uh, so it's just, I think it's 1 of the greatest opportunities and you you will benefit if you're a long-term investor right now.
[Analyst] (Cantor): All right, great. Appreciate all that color. Maybe just one last one on the, the cost save estimate. I know historically, you guys have been pretty conservative or have outperformed your cost save expectations. I'm just wondering how you feel about, about this level here that you've, you've talked about and if there are any branch closures that, you'll have to take care of as a result of the higher concentration of branches in Houston. Thanks.
David Rochester: All right, great. Appreciate all that color. Maybe just one last one on the, the cost save estimate. I know historically, you guys have been pretty conservative or have outperformed your cost save expectations. I'm just wondering how you feel about, about this level here that you've, you've talked about and if there are any branch closures that, you'll have to take care of as a result of the higher concentration of branches in Houston. Thanks.
Asylbek Osmonov: So regarding the cost save, we feel very comfortable with the 35% cost save that we printed, and it's combination of the combining two banks that have the same footprint. So of course, there'll be some consolidation of branches. Also, there's, you know, as you know, the system conversion gonna help. So we took deep dive, and we feel very comfortable with the cost saves.
Asylbek Osmonov: So regarding the cost save, we feel very comfortable with the 35% cost save that we printed, and it's combination of the combining two banks that have the same footprint. So of course, there'll be some consolidation of branches. Also, there's, you know, as you know, the system conversion gonna help. So we took deep dive, and we feel very comfortable with the cost saves.
I had great appreciation for all that color. Maybe just one last one on the, uh, the cost save estimate. I know, historically, you guys have been pretty conservative or have outperformed your cost save expectations. I was just wondering how you feel about, uh, about this level here that you've talked about. And if there are any branch closures that, uh, you'll have to take care of as a result of the higher concentration of branches in Houston. Thanks.
No single digits is good. Um, as you know, Stellar has been growing faster than that. And we don't see any reason that that would change. I think American Bank has been growing faster than that as well. Uh, and we talked about the quality of the Stellar portfolio. I'd say the same about the American Bank portfolio. They they were, we talked about seller, maybe being cleaner than us. I think American Bank was cleaner than us, right? So, so in terms of the quality of the assets, we purchased here between American and Stellar. Um, they are stellar
Great. Thank you.
The next question is from Peter winter. With da Davidson please go ahead. All right, good morning. Thank you. Um,
Uh, regarding the cost, we feel very comfortable with the 35% cost save that we printed, and it's a combination of combining two banks that have the same footprints. So, of course, there will be some consolidation of branches. Also, there's, uh, you know, as you know, the system conversion is going to help. So we took a deep dive, and we feel very comfortable with the cost saves.
David Zalman: Great. Thanks, guys.
David Zalman: Great. Thanks, guys.
Great. Thanks guys.
Can you just talk a little bit? You mentioned the increase in non-performing assets if you give a little bit more detail.
Operator: The next question is from Janet Lee with TD Cowen. Please go ahead.
Operator: The next question is from Janet Lee with TD Cowen. Please go ahead.
The next question is from Janet Leigh with TD Cowen. Please go ahead.
[Analyst] (Ayara): Good afternoon.
Janet Lee: Good afternoon.
um last quarter you highlighted the like a 35 million snyk credit just wondering if that
David Zalman: Good afternoon, Janet.
David Zalman: Good afternoon, Janet.
Good afternoon.
[Analyst] (Ayara): Back to M&A, if I were to ask it in a different way, so if I look at your pro forma CET1, it will be about 13.5, which is slightly above peers, but definitely more normalized. And in the past, or at least over the five years, you've had CET1 running above peers. Just given the size of the deal, which was more meaningful than the recent ones and the pro forma CET1 post the Stellar deal, does this change your appetite for M&A, whether it's your appetite for M&A itself or the type of deals that you might be potentially looking at in the future?
Janet Lee: Back to M&A, if I were to ask it in a different way, so if I look at your pro forma CET1, it will be about 13.5, which is slightly above peers, but definitely more normalized. And in the past, or at least over the five years, you've had CET1 running above peers. Just given the size of the deal, which was more meaningful than the recent ones and the pro forma CET1 post the Stellar deal, does this change your appetite for M&A, whether it's your appetite for M&A itself or the type of deals that you might be potentially looking at in the future?
Was part of the increase in non-performing assets and and just how you're thinking about credit quality uh going forward. Yeah. As we said I would reiterate what we said last quarter we we said that the portfolio is is very clean. We had our eye on 1 particular asset which we had downgraded to substandards in the third quarter to 35 million dollar.
On on, on back to m&a by where to um ask it in a different way. So if I look at your performance, ct1 it will be about 13 and a half, which is slightly above peers, but definitely more normalized. And in the past, or at least over the 5 years. You've
You've had C21 running above peers, just given the size of the deal, which was more meaningful than the recent ones. And
Shared national credit that we're not the agent on um, that credit was downgraded further in the fourth quarter to non-performing, so it's still substandard. But now non-accrual um,
As I said, on the call.
In the third quarter.
David Zalman: No, no, even like I mentioned a while ago, we're, when these things are combined, you're gonna have over $600 million a year just in excess cash flow. We had excess capital, and everybody was asking what we were gonna do this time. Again, it wasn't a requirement that we pay 30% in cash down. We did to try to utilize our capital to get a better return on our average tangible capital. And I think probably just, just in earnings over a couple of years, if you've done the ratios, Kevin, to see where, if what we, we're back up within a year or two, aren't we, on-
David Zalman: No, no, even like I mentioned a while ago, we're, when these things are combined, you're gonna have over $600 million a year just in excess cash flow. We had excess capital, and everybody was asking what we were gonna do this time. Again, it wasn't a requirement that we pay 30% in cash down. We did to try to utilize our capital to get a better return on our average tangible capital. And I think probably just, just in earnings over a couple of years, if you've done the ratios, Kevin, to see where, if what we, we're back up within a year or two, aren't we, on-
Perform a CT1 post, a stellar deal. Does this change your appetite for M&A? Whether it's your appetite for M&A itself, or the type of deals that you might be potentially looking at in the...
Future know, even like I mentioned a while ago, we're—
Um, if, if that became more problematic and at this stage, it has become more problematic and we we haven't worked things out. Although it is, I will tell you. It is a well-known, very large private Equity Firm who has a history of backing their deals that doesn't mean they're backing this 1, but they have a history of doing. So it's just that the resolution conversations have been challenging
Kevin Hanigan: Excuse me, on how fast we build our capital back?
Kevin Hanigan: Excuse me, on how fast we build our capital back?
Uh or we're challenging in the fourth quarter and continue to be challenging. Um, we don't see a need um, on this or the other credit we talked about last quarter, which is in the buy here, pay here space. Uh we don't see the need at this stage or if something went further wrong with these credits that we need to post to reserve as a result of it.
David Zalman: Right.
David Zalman: Right.
Kevin Hanigan: Yeah, we'll be back in a couple of years at minimum.
Kevin Hanigan: Yeah, we'll be back in a couple of years at minimum.
David Zalman: Minimum, a couple of years, we'll be back to exactly where we're at.
David Zalman: Minimum, a couple of years, we'll be back to exactly where we're at.
To get a better return on our average tangible capital, and I think probably just—just an earnings over a couple of years. If you've done the ratios, tell them to see where, uh, if we—we're back up within a year or two, aren't we, on—excuse me—on how fast we build our capital back. Yeah, we'll be back in a couple of years, at minimum. Minimum, a couple of years, we'll be back to exactly where we're at.
[Analyst] (Ayara): Got it. That's fair. For loan growth, so it seems like the potential acquired portfolio runoffs from loans or deposits from the Stellar deal would not be material or meaningful. So in terms of 2026, I believe you were hoping for that, you know, low single digits or low to mid single digits kind of growth on the balance sheet. Is that the fair way to assume, or I don't wanna put words in your mouth, but how should we be thinking about the overall trajectory there?
Janet Lee: Got it. That's fair. For loan growth, so it seems like the potential acquired portfolio runoffs from loans or deposits from the Stellar deal would not be material or meaningful. So in terms of 2026, I believe you were hoping for that, you know, low single digits or low to mid single digits kind of growth on the balance sheet. Is that the fair way to assume, or I don't wanna put words in your mouth, but how should we be thinking about the overall trajectory there?
Got it. Um, that's fair.
For.
I'd add it, the other large, I posted a provision. I should say, we have reserves up against both and I'd say the other large credit is a is a participation for 1 of the banks that we bought actually we originated. And so the majority of it to another bank from The Lone Star deal and basically it's it's well secured with real estate. In fact there should be excess equity in that there shouldn't be any loss in that.
Got it.
And with the Stellar deal, um what what is the uh, purchase accounting? Accretion going to the Run rate. You gave it for the first quarter also back but I'm just wondering what it is after. Uh, Stella
Kevin Hanigan: Yeah, I think that's a good assumption. This is Kevin. Low single digits is good. As you know, Stellar's been growing faster than that, and we don't see any reason that that would change. I think American Bank has been growing faster than that as well. And we talked about the quality of the Stellar portfolio. I'd say the same about the American Bank portfolio. They were -- we talked about Stellar maybe being cleaner than us. I think American Bank was cleaner than us.
Kevin Hanigan: Yeah, I think that's a good assumption. This is Kevin. Low single digits is good. As you know, Stellar's been growing faster than that, and we don't see any reason that that would change. I think American Bank has been growing faster than that as well. And we talked about the quality of the Stellar portfolio. I'd say the same about the American Bank portfolio. They were -- we talked about Stellar maybe being cleaner than us. I think American Bank was cleaner than us.
Won't grow. So it seems like the potential acquired portfolio runoffs from loans or deposits from from the Stellar deal would not be material or or meaningful. So, in terms of 2026, I believe you were hoping for that, you know, low single digits, or low to mid single digits, kind of growth on, on balance sheet. Um, is that the fair way to assume or, or I don't want to put words in your mouth. But, um, how should we be thinking about the overall trajectory there?
Yeah, I think that's a good assumption.
This is Kevin.
Well, so the guidance that I provided on purchase accounting Fair. Well loan income, that's for American Bank and uh, Texas Partners bank. If you look at just Stellar, I think on the page 16, we disclose what the loan marks and the oci mark. So um, I think on the loan Mark, we are having about 31 million on loan marks that does pre-tax and we have about 733 million
David Zalman: Right.
David Zalman: Right.
Kevin Hanigan: So, in terms of the quality of the assets we've purchased here between American and Stellar, they are stellar.
Kevin Hanigan: So, in terms of the quality of the assets we've purchased here between American and Stellar, they are stellar.
No single digits is good. Um, as you know, Stellar has been growing faster than that. And we don't see any reason that that would change. I think American Bank has been growing faster than that as well. Uh, and we talked about the quality of the Stellar portfolio. I'd say the same about the American Bank portfolio. They— they were, we talked about Stellar maybe being cleaner than us. I think American Bank was cleaner than us, right? So
Million net of tax and aoci. So for our modelling purpose that we use some of your digits calculation. So if if you look at for the uh 2027, I think the mark a Christian is about 30 million combined, 3031 million combined.
So, in terms of the quality of the assets we've purchased here, between American and Stellar, um, they are stellar.
[Analyst] (Ayara): Great, thank you.
Janet Lee: Great, thank you.
Okay.
Great. Thank you.
Operator: The next question is from Peter Winter with D.A. Davidson. Please go ahead.
Operator: The next question is from Peter Winter with D.A. Davidson. Please go ahead.
Thanks for taking the questions.
[Analyst] (D.A. Davidson): Hi, good morning. Thank you. Can you just talk a little bit? You mentioned the increase in non-performing assets. If you could give a little bit more detail. Last quarter, you highlighted the, like, $35 million SNC credit. Just wondering if that was part of the increase in non-performing assets, and, and just-
Peter Winter: Hi, good morning. Thank you. Can you just talk a little bit? You mentioned the increase in non-performing assets. If you could give a little bit more detail. Last quarter, you highlighted the, like, $35 million SNC credit. Just wondering if that was part of the increase in non-performing assets, and, and just-
The next question is from Peter Winter with D.A. Davidson. Please go ahead.
The next question is from Michael rose with Raymond James. Please go ahead.
All right, good morning. Thank you. Um,
Can you just talk a little bit? You mentioned the increase in non-performing assets—if you could give a little bit more detail.
Um, last quarter you highlighted the, like, $35 million Snyk credit. Just wondering if that—
Kevin Hanigan: Sure
Kevin Hanigan: Sure
[Analyst] (D.A. Davidson): How you're thinking about credit quality, going forward?
Peter Winter: How you're thinking about credit quality, going forward?
Kevin Hanigan: Yes. As we said, and I would reiterate what we said last quarter, we said the portfolio is very clean. We had our eye on one particular asset, which we had downgraded to substandard in Q3. It's a $35 million shared national credit that we're not the agent on. That credit was downgraded further in Q4 to non-performing, so it's still substandard, but now non-accrual. As I said on the call in Q3, if that became more problematic, and at this stage, it has become more problematic, and we haven't worked things out. Although it is, I will tell you, it is a well-known, very large private equity firm who has a history of backing their deals. So it doesn't mean they're backing this one, but they have a history of doing so.
Kevin Hanigan: Yes. As we said, and I would reiterate what we said last quarter, we said the portfolio is very clean. We had our eye on one particular asset, which we had downgraded to substandard in Q3. It's a $35 million shared national credit that we're not the agent on. That credit was downgraded further in Q4 to non-performing, so it's still substandard, but now non-accrual. As I said on the call in Q3, if that became more problematic, and at this stage, it has become more problematic, and we haven't worked things out. Although it is, I will tell you, it is a well-known, very large private equity firm who has a history of backing their deals. So it doesn't mean they're backing this one, but they have a history of doing so.
Hey, good morning guys, thanks for uh, taking my question. Um, anything to do, you know, once the deal is, is either leading up to or or once the deal is closed, just on the, on the bond book. I know most of Legacy prosperity's book is is HTM. But, um, sellers is, uh, is AFS just wanted to see if there's an opportunity for a potential restructuring. That may be not included in the performance here. Thanks.
Was part of the increase in non-performing assets, and just how you're thinking about credit quality going forward? Yes.
As we said, I would reiterate what we said last quarter. We said that the portfolio is very clean. We had our eye on one particular asset, which we had downgraded to substandard in the third quarter. It's a $35 million asset.
Shared national credit that we're not the agent on — that credit was downgraded further in the fourth quarter to non-performing, so it's still substandard, but now not accruing.
Um,
As I said on the call.
In the third quarter.
Kevin Hanigan: It's just that the resolution conversations have been challenging, or were challenging in the fourth quarter and continue to be challenging. We don't see a need on this or the other credit we talked about last quarter, which is in the buy here, pay here space. We don't see the need at this stage or if something went further wrong with these credits that we need to post a reserve as a result of it.
It's just that the resolution conversations have been challenging, or were challenging in the fourth quarter and continue to be challenging. We don't see a need on this or the other credit we talked about last quarter, which is in the buy here, pay here space. We don't see the need at this stage or if something went further wrong with these credits that we need to post a reserve as a result of it.
Um, if that became more problematic, and at this stage, it has become more problematic and we—we haven't worked things out. Although it is, I will tell you, it is a well-known, very large private equity firm who has a history of backing their deals. That doesn't mean they're backing this one, but they have a history of doing so. It's just that the resolution conversations have been challenging.
Sell your deal, uh, sell your portfolio. And if you can do the math on 10 billion, you make an extra 2%, uh, you know, 2% of yours. Another 200%, I just feel like that's just Financial engineering. We could do it, it would make us look good. Make us look like, well, you do 200 million after tax and see what we have extra income between us. I mean, we'd be making a whole lot of money, but, uh, but again, I think that's just financially engineering. And again, we've always said that, we're not trying to call rates 1 way or play the market. We're just trying to be in every marketing, buy with the 3.8 year duration. And so sometimes we'll be real good. And sometimes it'll be low. But I, I don't, I don't see any change in that. And again, we will Mark to market the, uh, the, uh, the portfolio from Stellar for sure.
And what would that do to the asset liability sensitivity?
David Zalman: I'd add that the other large-
David Zalman: I'd add that the other large-
Uh, or we're challenging in the fourth quarter and continue to be challenging. Um, we don't see a need, uh, on this or the other credit we talked about last quarter, which is in the buy here, pay here space. Uh, we don't see the need at this stage or if something went further wrong with these credits that we need to post to reserve as a result of it.
Kevin Hanigan: Post a provision, I should say. We have reserves up against both.
Kevin Hanigan: Post a provision, I should say. We have reserves up against both.
David Zalman: And I'd say the other large credit is a participation from one of the banks that we bought. Actually, we originated and sold the majority of it to another bank from the Lonestar deal, and basically, it's well secured with real estate. In fact, there should be excess equity in that. There shouldn't be any loss in that.
David Zalman: And I'd say the other large credit is a participation from one of the banks that we bought. Actually, we originated and sold the majority of it to another bank from the Lonestar deal, and basically, it's well secured with real estate. In fact, there should be excess equity in that. There shouldn't be any loss in that.
I think there are a little bit of a asset sensitive on that. Uh I think what we're going to do if we I mean there will be some Securities that we're going to sell and kind of buy back in the mortgage back Securities like we do. So I think from the standpoint it's going to be maybe the same as a slight asset sensitive. We'll try to buy ahead so that it's not so asset. Since it will try to get back to neutral if we can
I'd add it, the other large— I posted a provision. I should say we have reserves up against both. And I'd say the other large credit is a participation for one of the banks that we bought. Actually, we originated it and sold the majority of it to another bank from the Lone Star deal. And basically, it's well secured with real estate. In fact, there should be excess equity in that; there shouldn't be any loss in that.
[Analyst] (D.A. Davidson): Got it. With the Stellar deal, what is the purchase accounting accretion going to the run rate? You gave it for the first quarter off the back, but I'm just wondering what it is after Stellar.
Peter Winter: Got it. With the Stellar deal, what is the purchase accounting accretion going to the run rate? You gave it for the first quarter off the back, but I'm just wondering what it is after Stellar.
Understood and then maybe just finally. Um, if there's any Stellar guys in the room, I think Paul was in there, you know, I guess mom's given. How how, yeah, how. How robust the the knee forecasts are versus where consensus is, I guess the question is from from your point of view, what? Why sell now at the Outlook is is our merger, you know, merge with the prosperity now at the Outlook. So good, thanks.
Got it—and with the Stellar deal, what is the purchase accounting accretion going to the run rate? You gave it for the first quarter also back, but I'm just wondering what it is after, uh, Stellar.
Asylbek Osmonov: So the guidance that I provided on purchase accounting, fair value loan income, that's for American Bank and Texas Partners Bank. If you look at just Stellar, I think on page 16, we disclose what the loan marks and AOCI mark. So I think on the loan mark, we're having about $31 million on loan marks. That is pre-tax, and we have about $33 million net of tax and AOCI. So for our modeling purpose, we use sum-of-the-years'-digits calculation. So if you look at for the 2027, I think the mark accretion is about $30 million combined, thirty, $31 million combined.
Asylbek Osmonov: So the guidance that I provided on purchase accounting, fair value loan income, that's for American Bank and Texas Partners Bank. If you look at just Stellar, I think on page 16, we disclose what the loan marks and AOCI mark. So I think on the loan mark, we're having about $31 million on loan marks. That is pre-tax, and we have about $33 million net of tax and AOCI. So for our modeling purpose, we use sum-of-the-years'-digits calculation. So if you look at for the 2027, I think the mark accretion is about $30 million combined, thirty, $31 million combined.
So, the guidance that I provide—
Well, I think it's rare to get the opportunity to find somebody that kind of looks like you and thinks about the world, the same way as you do.
Um, we've always concentrated on a, a real quality deposit base. I think that's what Prosperity is always done. We're really sensitive Around The Way We fund ourselves.
On purchase accounting, farewell loan income, that's for American Bank. And, uh, uh, Texas Partners Bank. If you look at just Stellar, I think on page 16 we disclose what the loan marks and AOCI mark are.
To get a high quality deposit base low cost of funds, so that we can control that part of the deal. It's hard to find people to partner with that look like that.
Um, but I think the expanded balance sheet the ability to continue to do.
Kind of where the momentum started back in the third quarter.
So, um, I think on the loan mark, we're having about $31 million on loan marks that are pre-tax, and we have about $783 million net of tax in the OCI. So for our modeling purposes, we use some of your digits calculation. So if you look at for the, uh, 2027, I think the mark accretion is about $30 million combined, $30–31 million combined.
Bob Dowdell: Okay. Thanks for taking the questions.
Peter Winter: Okay. Thanks for taking the questions.
Into the fourth quarter and we can see it in the first quarter, it started to to have a real good momentum.
Operator: The next question is from Michael Rose with Raymond James. Please go ahead.
Operator: The next question is from Michael Rose with Raymond James. Please go ahead.
Thanks for taking the questions.
The next question is from Michael Rose with Raymond James. Please go ahead.
Operator: Hey, good morning, guys. Thanks for taking my questions. Anything to do, you know, once the deal is either leading up to or once the deal is closed, just on the bond book. I know most of Legacy Prosperity's book is HTM, but Stellar's is AFS. Just wanted to see if there's an opportunity for a potential restructuring that may be not included in the pro formas here. Thanks.
Michael Rose: Hey, good morning, guys. Thanks for taking my questions. Anything to do, you know, once the deal is either leading up to or once the deal is closed, just on the bond book. I know most of Legacy Prosperity's book is HTM, but Stellar's is AFS. Just wanted to see if there's an opportunity for a potential restructuring that may be not included in the pro formas here. Thanks.
Uh, and because we look so similar and we do similar loans, similar types of deals, it's it's, it's not a, a heavy lift to understand that we could continue uh, to to do those kind of things. So uh, We've we think we're going to continue to drive that momentum.
Um, and we feel good about what the, what the future looks like, over the certainly over the next 12 months, because I think we're on a, on a good path.
Uh, makes sense. Thanks for taking my questions everyone.
David Zalman: You know, it's not. We could, everybody asks, "Why don't you just do financial engineering, sell your deal, sell your portfolio?" If you can do the math on 10 billion, you make an extra 2%. You know, 2% a year is another $200 million in income a year. So you take your loss after tax, $600 million, and you get it back in 3 years. But I just, again, I just feel like that's just financial engineering. We could do it. It would make us look good, make us look like... Well, you do $200 million after tax and see what we have extra in income between us. I mean, we'd be making a whole lot of money, but, but again, I think that's just financial engineering.
David Zalman: You know, it's not. We could, everybody asks, "Why don't you just do financial engineering, sell your deal, sell your portfolio?" If you can do the math on 10 billion, you make an extra 2%. You know, 2% a year is another $200 million in income a year. So you take your loss after tax, $600 million, and you get it back in 3 years. But I just, again, I just feel like that's just financial engineering. We could do it. It would make us look good, make us look like... Well, you do $200 million after tax and see what we have extra in income between us. I mean, we'd be making a whole lot of money, but, but again, I think that's just financial engineering.
Hey, good morning, guys. Thanks for, uh, taking my questions. Um, anything to do, you know, once the deal is—either leading up to or, or once the deal is closed—just on the, on the bond book? I know most of Legacy Prosperity's book is, is HTM, but, um, Seller's is, uh, is AFS. Just wanted to see if there's an opportunity for a potential restructuring that maybe is not included in the performance here. Thanks.
The next question is from Jared Shaw with Barclays Capital. Please go ahead.
Hey, good afternoon.
Um,
Maybe just, you know, going back to the the original comment just about how, um, you know, your internal expectation for Stellar is, is better. Um, when we look at their pipeline, are they?
David Zalman: And again, we've always said that we're not trying to call rates one way or play the market. We're just trying to be in every market and buy with a 3.8-year duration. And so sometimes it'll be real good, and sometimes it'll be low. But I, I don't, I don't see any change in that. And again, we will mark to market the-
And again, we've always said that we're not trying to call rates one way or play the market. We're just trying to be in every market and buy with a 3.8-year duration. And so sometimes it'll be real good, and sometimes it'll be low. But I, I don't, I don't see any change in that. And again, we will mark to market the-
David. Do you feel like they're able to get the pricing in terms that you said you're not able to get in other markets and if so would that cause you to to re-allocate more internal uh Prosperity resources to those markets to take advantage of that, you know maybe uh disruption or relative difference between their markets and the rest of your what you're doing in the state.
Asylbek Osmonov: Stellar
Asylbek Osmonov: Stellar
David Zalman: portfolio from Stellar, for sure.
David Zalman: portfolio from Stellar, for sure.
Operator: Mm-hmm. And what would that do to the asset liability sensitivity?
Michael Rose: Mm-hmm. And what would that do to the asset liability sensitivity?
You know, it's it's not we could everybody ask well, why don't you just do Financial engineering, sell your deal, uh, sell your portfolio. And if you can do the math on 10 billion, you make an extra 2%, uh, you know, 2% of years, another 200 million dollars income a year. So you take your loss after tax 600 and you get it back in 3 years. But I just, again, I just feel like that's just Financial engineering. We could do it, it would make us look good. Make us look like, well, you do 200 million after taxes, see what we have extra income between us. I mean, we'd be making a whole lot of money, but, uh, but again, I think that's just Financial engineering. And again, we've always said that, we're not trying to call rates 1 way or play the market. We're just trying to be in every marketing, buy with the 3.8 year duration. And so sometimes we'll be real good. And sometimes it'll be low. But I, I don't, I don't see any change in that. And again, we will Mark to market the, uh, the, uh, the, the sellers, the portfolio.
From Stellar, for sure.
I would like to say to tell you that, uh, it it would be great. We just use our long team and they'll they'll make fire rate loans. But what usually happens is, we usually banks that we join together. Usually the the the return actually comes down. I mean the uh the net interest margin it gets its more, they're getting
And what would that do to the asset-liability sensitivity?
Asylbek Osmonov: I think they are a little bit of asset sensitive on that. I think what we're gonna do if we-- I mean, there will be some securities that we're gonna sell and kind of buy back in a mortgage-backed security like we do. So I think from the standpoint, it's gonna be maybe the same as a slight asset sensitivity.
Asylbek Osmonov: I think they are a little bit of asset sensitive on that. I think what we're gonna do if we-- I mean, there will be some securities that we're gonna sell and kind of buy back in a mortgage-backed security like we do. So I think from the standpoint, it's gonna be maybe the same as a slight asset sensitivity.
David Zalman: We'll try to buy ahead so that it's not so asset sensitive. We'll try to get back to neutral if we can.
David Zalman: We'll try to buy ahead so that it's not so asset sensitive. We'll try to get back to neutral if we can.
I think they are a little bit of a asset sensitive on that. Uh I think what we're going to do if we I mean there will be some Securities that we're going to sell and kind of buy back any mortgage back Securities like we do. So I think from the standpoint it's going to be maybe the same as a slight asset sensitive. We'll try to buy ahead so that it's not so asset. Since it will try to get back to neutral if we can
Operator: Understood. And then maybe just finally, if there's any Stellar guys in the room, I think Paul was in there. You know, I guess just given how ro-
Michael Rose: Understood. And then maybe just finally, if there's any Stellar guys in the room, I think Paul was in there. You know, I guess just given how ro-
David Zalman: Bob.
David Zalman: Bob.
Operator: Yeah, how robust the NII forecasts are versus where consensus is. I guess the question is, from your point of view, why sell now if the outlook is or merge, or, you know, merge with the Prosperity now if the outlook's so good? Thanks.
Michael Rose: Yeah, how robust the NII forecasts are versus where consensus is. I guess the question is, from your point of view, why sell now if the outlook is or merge, or, you know, merge with the Prosperity now if the outlook's so good? Thanks.
understood and then maybe just finally. Um, if there's any Stellar guys in the room, I think Paul was in there, you know, I guess, just giving how how how, yeah, how, how robust the the knee forecasts are versus where consensus is, I guess the question is from from your point of view. What? Why sell? Now if the Outlook is is, are, are merger, you know, merge with the prosperity. Now, if the Outlook looks so good. Thanks,
Bob Dowdell: Well, I think it's rare to get the opportunity to find somebody that kind of looks like you and thinks about the world the same way as you do. We've always concentrated on a real quality deposit base. I think that's what Prosperity's always done. We're really sensitive around the way we fund ourselves to get a high-quality deposit base, low cost of funds, so that we can control that part of the deal. It's hard to find people to partner with that look like that. But I think the expanded balance sheet, the ability to continue to do, it's kind of where the momentum started back in the Q3 into the Q4, and we can see it in the Q1. It's starting to have a real good momentum.
Bob Dowdell: Well, I think it's rare to get the opportunity to find somebody that kind of looks like you and thinks about the world the same way as you do. We've always concentrated on a real quality deposit base. I think that's what Prosperity's always done. We're really sensitive around the way we fund ourselves to get a high-quality deposit base, low cost of funds, so that we can control that part of the deal. It's hard to find people to partner with that look like that. But I think the expanded balance sheet, the ability to continue to do, it's kind of where the momentum started back in the Q3 into the Q4, and we can see it in the Q1. It's starting to have a real good momentum.
Well, I think it's rare to get the opportunity to find somebody that kind of looks like you and thinks about the world the same way as you do.
Um, we've always concentrated on a real quality deposit base. I think that's what Prosperity has always done. We're really sensitive around the way we fund ourselves.
To get a high-quality deposit base, low cost of funds, so that we can control that part of the deal. It's hard to find people to partner with that look like that.
Um, but I think the expanded balance sheet—the ability to continue to do—was kind of where the momentum started back in the third quarter.
Bob Dowdell: And because we look so similar and we do similar loans, similar types of deals, it's not a heavy lift to understand that we could continue to do those kind of things. So, we think we're gonna continue to drive that momentum, and we feel good about what the future looks like over, certainly over the next 12 months, because I think we're on a good path.
And because we look so similar and we do similar loans, similar types of deals, it's not a heavy lift to understand that we could continue to do those kind of things. So, we think we're gonna continue to drive that momentum, and we feel good about what the future looks like over, certainly over the next 12 months, because I think we're on a good path.
Move in what the GDP is a Texas. It's just it's really phenomenal. So, uh, I think the opportunities are just unlimited especially we get get momentum. Put our groups to put our guys together, guys. And girls, I think the momentum uh is really going to be good for everybody and I think that we will they maybe even had a better better than us. Where we we a lot of our um our payment or pay to lenders is maybe more discretionary. We do look at the actual production, they were more on a formula driven, uh, formula driven deal and so that I think that helps them too. So we'll probably look at, you know, every bank that we join with. It looks like we take the, we try to do the best, we take the best from them and, and bring it to us. And so, I think they're, they should be able to help us with some of this stuff too, and hopefully, hopefully they won't lower the rates that they're charged, and, let's say that David. Let let me if I can tag on to you on that. Yeah.
I'll be real simple.
Into the fourth quarter and we can see it in the first quarter started to to have a real good momentum. Uh, and because we look so similar and we do similar loans, similar types of deals. It's it's, it's not a, a heavy lift to understand that we could continue uh, to to do those kind of things. So uh we've been we think we're going to continue to drive that momentum.
I think the margin differential is 3-fold and then and, uh, 5 or somebody from Stellar could comment whether they agree with us or not, but the obvious differences, are we, we've got 10 points 5 billion in Securities earning 2.17% that that's a drag.
Um, and we feel good about what the, what the future looks like, over the certainly over the next 12 months, because I think we're on a, on a good path.
Operator: Makes sense. Thanks for taking my questions, everyone.
Michael Rose: Makes sense. Thanks for taking my questions, everyone.
Uh, makes sense. Thanks for taking my questions, everyone.
Operator: The next question is from Jared Shaw with Barclays Capital. Please go ahead.
Operator: The next question is from Jared Shaw with Barclays Capital. Please go ahead.
Uh the second big item on our balance sheet, that's a drag is 8.3 billion of single family mortgages that were originated in times where rates were pretty low.
The next question is from Jared Shaw with Barclays Capital. Please go ahead.
[Analyst] (Barclays Capital): Hey, good afternoon. Maybe just, you know, going back to the original comment, just about how, you know, your internal expectation for Stellar is better. When we look at their pipeline, are they, David, do you feel like they're able to get the pricing and terms that you said you're not able to get in other markets? And if so, would that cause you to reallocate more internal Prosperity resources to those markets to take advantage of that, you know, maybe disruption or relative difference between their markets and the rest of yours, what you're doing in the state?
Jared Shaw: Hey, good afternoon. Maybe just, you know, going back to the original comment, just about how, you know, your internal expectation for Stellar is better. When we look at their pipeline, are they, David, do you feel like they're able to get the pricing and terms that you said you're not able to get in other markets? And if so, would that cause you to reallocate more internal Prosperity resources to those markets to take advantage of that, you know, maybe disruption or relative difference between their markets and the rest of yours, what you're doing in the state?
Hey, good afternoon.
Uh, and that portfolio is is a drag. So, those are the 2 biggies.
Um,
but the 1 that doesn't jump out at you all that we see, and we saw throughout due diligence is, is
Maybe just, you know, going back to the original comments, just about how, um, you know, your internal expectation for Stellar is better. Um, when we look at their pipeline, or they,
On the loan side of the bank, the basic commercial lending side of the bank, not forget single family, mortgage and some of the other stuff just the basic commercial ending. They have a way more granular portfolio.
David Zalman: I would like to say, to tell you that, it, it would be great. We just use their loan team, and they'll make higher rate loans. But what usually happens is, usually banks that we join together, usually the return actually comes down. I mean, the net interest margin, it gets. It's more. They're getting. They're probably. You know, there's a what is it, 4.2, you said? And ours is-
David Zalman: I would like to say, to tell you that, it, it would be great. We just use their loan team, and they'll make higher rate loans. But what usually happens is, usually banks that we join together, usually the return actually comes down. I mean, the net interest margin, it gets. It's more. They're getting. They're probably. You know, there's a what is it, 4.2, you said? And ours is-
David, do you feel like they’re able to get the pricing in terms that you said you’re not able to get in other markets? And if so, would that cause you to re-allocate more internal Prosperity resources to those markets to take advantage of that, you know, maybe disruption or relative difference between their markets and the rest of what you’re doing in the state?
And the granular area of that portfolio. Basically means it's it's smaller deals, but the most part they still do some big deals. But if it just on average smaller deals, for the most part tend to get higher pricing, right? So so it's it's those 3 factors that that really Drive their margin relative to ours. And I I see ours, ours improving is those over at that's thrown off and I don't see there is really having to come down all that much. But but would you yeah, I agree. Kevin. I mean, I
We do have a granular portfolio. I think there's there's getting to be more and more balanced to that over time. But
I would like to say to tell you that, uh, it it would be great. We just use their long team and they'll they'll make higher rate loans. But what usually happens is, we usually banks that we join together. Usually the the the return actually comes down. I mean, the uh, the net interest margin it gets its more, they're getting
um, it certainly started off that way when we combined the 2 Banks together, but
Bob Dowdell: Margin, yeah.
Bob Dowdell: Margin, yeah.
David Zalman: Ours is 3.5. So a part of that margin is because they don't have as big of a bond portfolio. So their margin is better because they have a better loan-to-deposit ratio, too. But even having said that, even as we start merging together, it seems like their pricing from the banks that join us comes down a little bit. But I just think the number of people, though, that Stellar has on the ground, and even with American Bank that had their, they had a loan production office here in the Houston market, too. Together, we should really be able to inundate the market. This is such a big market. I mean, I don't know that people realize how many people move in, what the GDP is of Texas, it's just, it's really phenomenal.
David Zalman: Ours is 3.5. So a part of that margin is because they don't have as big of a bond portfolio. So their margin is better because they have a better loan-to-deposit ratio, too. But even having said that, even as we start merging together, it seems like their pricing from the banks that join us comes down a little bit. But I just think the number of people, though, that Stellar has on the ground, and even with American Bank that had their, they had a loan production office here in the Houston market, too. Together, we should really be able to inundate the market. This is such a big market. I mean, I don't know that people realize how many people move in, what the GDP is of Texas, it's just, it's really phenomenal.
Um pricing is competitive. We're in Houston, Texas. And prices competitive. So I know we're not 1's, not going to be better pricing than the other. You guys are just as good at us as pricing loans. So uh but for the most part it is granular and we do get a little bit higher pricing on the smaller stuff so yeah, I would agree with that.
Okay. Thanks and then this is a follow up, which goes with Chief deposits. Yeah, which is why you're not interested in deposits or generally a bit higher than than ours. So I I just
a little a little additional inside baseball.
Great. Thanks. I guess. Just as a follow-up, you know what are what are some of the assumptions on uh,
David Zalman: So, I think the opportunities are just unlimited, especially we get, get momentum, put our groups to- put our guys together, guys and girls. I think the momentum is really gonna be good for everybody, and I think that we'll-- They maybe even had a better than us, where we-- a lot of our payment or pay to lenders is maybe more discretionary. We do look at the actual production. They were more on a formula-driven formula-driven deal, and so that-- I think that helps them, too. So we'll probably look, you know, every bank that we join with, it looks like we take the-- we try to do the best, we take the best from them and bring it to us. And so I think they're, they should be able to help us with some of this stuff, too.
So, I think the opportunities are just unlimited, especially we get, get momentum, put our groups to- put our guys together, guys and girls. I think the momentum is really gonna be good for everybody, and I think that we'll-- They maybe even had a better than us, where we-- a lot of our payment or pay to lenders is maybe more discretionary. We do look at the actual production. They were more on a formula-driven formula-driven deal, and so that-- I think that helps them, too. So we'll probably look, you know, every bank that we join with, it looks like we take the-- we try to do the best, we take the best from them and bring it to us. And so I think they're, they should be able to help us with some of this stuff, too.
Customer retention. Um, you know, as as this will be, uh, I guess a, an additional name change over the the past few years for for Stellar. Do you think that there's, um,
what do you think the risk is of of, uh,
Retention.
Margin. Yes, that's in our 615. So part of that margin is because they don't have as big of a bond portfolio. So their margin is better because they have a better longer deposit ratio too. But, but even having said that, even as we start merging together, it seems like their pricing from the banks. They join us comes down a little bit, but uh, I I just think the number of people though that Stellar has on the ground, uh, and and, and even with American Bank, that had their, they had a Loan Production Office here in the Eastern Market too together. We should really be able to inundate the market. This is such a big Market, uh, I mean, I don't know that people realize how many people move in, what the GDP is if, if Texas, it's just it's really phenomenal. So, uh, I think the opportunities are just unlimited especially we get get momentum. Put our groups to put our guys together, guys. And girls, I think the momentum uh is, is really going to be good for everybody and I think that we'll they may even have a better
I'll answer first or Bob you want to go first. I was just going to say, I mean we're I think we're doing a good job of of retaining our guys.
Um, and I think that's, that's the big key because the is to make sure that we, we keep our our customer facing folks out there, uh, that our customers see every day and and not changing that. So, yeah, I mean, we entered into about 15 nonprofits in about 70, uh,
David Zalman: Hopefully, hopefully, they won't lower their rates that they're charging, let's say that.
Hopefully, hopefully, they won't lower their rates that they're charging, let's say that.
Better than us. Where we we a lot of our um, our payment or pay to lenders is maybe more discretionary. We do. Look at the actual production, they were more on a formula driven, uh, formula driven deal and so that I think that helps them too. So we'll probably look at, you know, every bank that we join with. It looks like we take the, we try to do the best, we take the best from them and and, and bring it to us. And so I think they're they should be able to help us with some of
Kevin Hanigan: David, let me, if I can-
Kevin Hanigan: David, let me, if I can-
Letter retention agreement. So we, I think the teams the teams on board, it's it doesn't mean you won't lose somebody, but I think for the most part, you know, we'll be able to retain the customers and it's not like,
David Zalman: Yeah
David Zalman: Yeah
Kevin Hanigan: ... tag on to you on that. I'll be real simple. I think the margin differential is threefold, and then Bob or somebody from Stellar could comment whether they agree with this or not. But the obvious differences are we've got $10.5 billion in securities earning 2.17%. That's a drag. The second big item on our balance sheet that's a drag is $8.3 billion of single-family mortgages that were originated in times where rates were pretty low. And that portfolio is a drag. So those are the two biggies. But the one that doesn't jump out at you all that we see, and we saw throughout due diligence, is on the loan side of the bank, the basic commercial lending side of the bank.
Kevin Hanigan: ... tag on to you on that. I'll be real simple. I think the margin differential is threefold, and then Bob or somebody from Stellar could comment whether they agree with this or not. But the obvious differences are we've got $10.5 billion in securities earning 2.17%. That's a drag. The second big item on our balance sheet that's a drag is $8.3 billion of single-family mortgages that were originated in times where rates were pretty low. And that portfolio is a drag. So those are the two biggies. But the one that doesn't jump out at you all that we see, and we saw throughout due diligence, is on the loan side of the bank, the basic commercial lending side of the bank.
This stuff too. And hopefully, hopefully they won't lower the rates that they're charged, and, let's say that, David. Let me, if I can, tag on to you on that.
I'll be real simple.
It's not like another bank that's coming out from another state that's jumping in. They they know who we are. We've advertised here, we've, you know, it, it's not somebody that that they're not.
I think the margin differential is 3-fold, and then and uh, Bob or somebody from Stellar could comment, whether they agree with us or not, but the obvious differences, are we we've got 10 point 5 billion in Securities earning 2.17%, right? That, that's a drag.
Uh, the second big item on our balance sheet that's a drag is $8.3 billion of single-family mortgages that were originated in times where rates were pretty low.
Uh, and that portfolio is a drag. So, those are the two biggies.
But the one that doesn't jump out at you—all that we see, and we saw throughout due diligence, is—
Maybe this is too conservative or whatever they might might be.
Kevin Hanigan: Now, forget single-family mortgages and some of the other stuff, just the basic commercial lending. They have a way more granular portfolio. And the granularity of that portfolio basically means it's, it's smaller deals for the most part. They still do some big deals, but if it's just on average, smaller deals, for the most part, tend to get higher pricing.
Now, forget single-family mortgages and some of the other stuff, just the basic commercial lending. They have a way more granular portfolio. And the granularity of that portfolio basically means it's, it's smaller deals for the most part. They still do some big deals, but if it's just on average, smaller deals, for the most part, tend to get higher pricing.
On the loan side of the bank, the basic commercial lending side of the bank—now, forget single family, mortgages, and some of the other stuff—just the basic commercial lending. They have a way more granular portfolio.
Bob Dowdell: Right.
Bob Dowdell: Right.
Kevin Hanigan: So it's those three factors that really drive their margin relative to ours. And I see ours improving as those low rate assets run off, and I don't see theirs really having to come down all that much. Bob, would you?
Kevin Hanigan: So it's those three factors that really drive their margin relative to ours. And I see ours improving as those low rate assets run off, and I don't see theirs really having to come down all that much. Bob, would you?
Bob Dowdell: Yeah, I agree, Kevin. I mean, it, we do have a granular portfolio. I think there's getting to be more and more balance to that over time, but it certainly started off that way when we combined the two banks together. But pricing's competitive. We're in Houston, Texas, and pricing is competitive, so though we're not-- one's not gonna be better pricing than the other. You guys are just as good as us at pricing loans. So, but for the most part, it is granular, and we do get a little bit higher pricing on the smaller stuff. So yeah, I would agree with that.
Bob Dowdell: Yeah, I agree, Kevin. I mean, it, we do have a granular portfolio. I think there's getting to be more and more balance to that over time, but it certainly started off that way when we combined the two banks together. But pricing's competitive. We're in Houston, Texas, and pricing is competitive, so though we're not-- one's not gonna be better pricing than the other. You guys are just as good as us at pricing loans. So, but for the most part, it is granular, and we do get a little bit higher pricing on the smaller stuff. So yeah, I would agree with that.
And the granularity of that portfolio. Basically means it's, it's smaller deals for the most part. They still do some big deals, but if we just on average smaller deals, for the most part tend to get higher pricing, right? So so it's it's those 3 factors that that really Drive their margin relative to ours. And I I see ours ours improving is those over assets, run off and I don't see there's really having to come down all that much Bob.
Would you? Yeah, I agree. Kevin, I mean...
We do have a granular portfolio. I think there's getting to be more and more balance to that over time, but
Well you're you're a lot like me. I mean some of the guys I mean even analysts they want to say, okay, you got to have double digit. Loan growth, got to do this, got to have 6% 10 percent every year. Well, and your deposits are growing 3%. Where do you do when you run out of money? So, uh, so we, I think we, we have a lot of the same logic that, you know, we're, we're, we're used to around the 80% loaner deposit ratio. Again, we bring in new deposits, we'll make more, but we have a lot of liquidity. I think if, if there's ever a run on our bank, for example, I think we have like 16 billion dollars that we can draw in a, in a minute. So, uh, we have a lot of liquidity, y'all have a lot of liquidity. So the combined earnings of these 2 Banks, the liquidity of these 2 Banks. They're so similar. Uh, I, I think it's a good deal.
Um, it certainly started off that way when we combined the two banks together, but
Thank you.
The next question is from John Armstrong. With RBC Capital markets, please go ahead.
Our pricing is competitive. We're in Houston, Texas, and pricing is competitive, so we're not—one's not going to be better pricing than the other. You guys are just as good as us at pricing loans. But for the most part, it is granular, and we do get a little bit higher price being on the smaller stuff. So, yeah, I would agree with that.
[Analyst] (Barclays Capital): Okay, thanks. And then just as a follow-up-
Jared Shaw: Okay, thanks. And then just as a follow-up-
Hey, hello everybody. Hey John, uh, de David for you just a couple, uh, on the numbers. What? What's your level of confidence in the 734?
Kevin Hanigan: Which comes with cheap deposits.
Kevin Hanigan: Which comes with cheap deposits.
Okay, thanks and then this is a followup.
Bob Dowdell: Yeah.
Bob Dowdell: Yeah.
Kevin Hanigan: Right. Which is why your non-interest-bearing deposits are generally a bit higher than ours. So, just a little additional inside baseball.
Kevin Hanigan: Right. Which is why your non-interest-bearing deposits are generally a bit higher than ours. So, just a little additional inside baseball.
Estimate for 2027. I I don't think you have any Revenue synergies in there, so it seems like
Which comes with cheap deposits. Yeah, which is why you're not interested in deposits, or generally a bit higher than ours. So I just...
It's just Cost saves but you know, consensus 680s, you talk about the accretion. How confident are you in the 734?
A little, little additional inside baseball.
[Analyst] (Barclays Capital): Great, thanks. I guess just as a follow-up, you know, what are, what are some of the assumptions on customer retention, you know, as, as this will be, I guess, a, an additional name change over the, the past few years for, for Stellar? Do you think that there's... What, what do you think the risk is of, of retention?
Jared Shaw: Great, thanks. I guess just as a follow-up, you know, what are, what are some of the assumptions on customer retention, you know, as, as this will be, I guess, a, an additional name change over the, the past few years for, for Stellar? Do you think that there's... What, what do you think the risk is of, of retention?
Great, thanks, I guess. Just as a follow-up, you know, what are some of the assumptions on, uh,
Customer retention. Um, you know, as as this will be, uh, I guess a, an additional name change over the the past few years for for Stellar. Do you think that there's, um,
What do you think the risk is of, uh,
David Zalman: Well, I'll answer first, or Bob, you wanna go first?
David Zalman: Well, I'll answer first, or Bob, you wanna go first?
Retention.
Bob Dowdell: I was just gonna say, I mean, I think we're doing a good job of retaining our guys. I think that's the big key, is to make sure that we keep our customer-facing folks out there, that our customers see every day and not changing that. So...
Bob Dowdell: I was just gonna say, I mean, I think we're doing a good job of retaining our guys. I think that's the big key, is to make sure that we keep our customer-facing folks out there, that our customers see every day and not changing that. So...
I've answered first, or Bob, do you want to go first? I was just going to say, I mean, I think we're doing a good job of retaining our guys.
David Zalman: Yeah, I mean, we entered into about 15 non-compete agreements and about 70 letter-
David Zalman: Yeah, I mean, we entered into about 15 non-compete agreements and about 70 letter-
Colin just handed me the 734, so if he's wrong, we'll shoot them. Uh, I we feel very confident and I think we do have some, we do have some triggers that I think that are above the on expenses. I mean, right now they don't charge nsf's the charges. I'm not saying 1 way or another. We'll go the other way. Their their cost of money is a little bit higher than ours. So we do have some other triggers but I feel very confident in the 734, you know, once we get everything combined, I think that's a really real number and that's why I can't believe, uh, trading where we are trading. If we're, we're going to make $7.34. I mean, again, we should have a 95 to $100. Uh, price Target. Really even you John, I hear you.
Kevin Hanigan: Retention
Kevin Hanigan: Retention
Um, and I think that's, that's the big key is the is to make sure that we, we keep our our customer facing folks out there, uh, that our customers see every day and and not changing that. So, yeah, I mean, we entered into about 15 non-compete agreements in about 70. Uh,
Um, not that 75 stuff or 78?
David Zalman: Retention agreements. So we-- I think the teams, the teams on board, it doesn't mean you won't lose somebody, but I think for the most part, you know, we'll be able to retain the customers, and it's not like, it's not like another bank that's coming out from another state that's just jumping in. They, they know who we are. We've advertised here. We've... You know, it's, it's not somebody that they're, that they're not familiar with. So I, I, I think the retention is good here. I think... And again, they don't have a lot of high yield time deposits or something that's gonna run off like that. So I, I mean, I-- this is really a great combination, guys. It's truly, it's a, it's a marriage made in heaven.
David Zalman: Retention agreements. So we-- I think the teams, the teams on board, it doesn't mean you won't lose somebody, but I think for the most part, you know, we'll be able to retain the customers, and it's not like, it's not like another bank that's coming out from another state that's just jumping in. They, they know who we are. We've advertised here. We've... You know, it's, it's not somebody that they're, that they're not familiar with. So I, I, I think the retention is good here. I think... And again, they don't have a lot of high yield time deposits or something that's gonna run off like that. So I, I mean, I-- this is really a great combination, guys. It's truly, it's a, it's a marriage made in heaven.
Well, okay, this begs the next question. Then you kind of open the door to it. Um, uh, uh, well with your with your 15 times, acquisition multiple maths.
Letter retention agreements. So we—I think the team's on board. It doesn't mean you won't lose somebody, but I think for the most part, you know, we'll be able to retain the customers. And it's not like—
They know who we are. We've advertised here. We've, you know, it—it's not somebody that they're not.
Right. Um, that you shared earlier, you know, the question is I'm not saying you should do it but do the larger regionals call on you frequently and is there a bit if you want it again? I'm not saying you should but I'm just, I'm, I'm curious on that.
Bob Dowdell: And the other piece, David, I think is the credit cultures are very similar.
Bob Dowdell: And the other piece, David, I think is the credit cultures are very similar.
David Zalman: Right.
David Zalman: Right.
Bob Dowdell: We've always thought about the world the same way, and I... So I don't think you see that drastic change that you do in some combinations, where people say: "Oh, gosh, you know, this, maybe this is too conservative," or whatever they might think.
Bob Dowdell: We've always thought about the world the same way, and I... So I don't think you see that drastic change that you do in some combinations, where people say: "Oh, gosh, you know, this, maybe this is too conservative," or whatever they might think.
David Zalman: Well, you're a lot like me. I mean, some of the guys, I mean, even analysts, they wanna say: "Okay, you gotta have 10-double-digit loan growth. Gotta do this, gotta have 6%, 10% every year." Well, your deposits are growing 3%. What do you do when you run out of money? So, we have a lot of the same logics that, you know, we're used to around the 80% loan-to-deposit ratio. Again, we bring in new deposits, we'll make more, but we have a lot of liquidity. I think if there's ever a run on our bank, for example, I think we have, like, $16 billion that we can draw in a minute. So, we have a lot of liquidity. Y'all have a lot of liquidity.
David Zalman: Well, you're a lot like me. I mean, some of the guys, I mean, even analysts, they wanna say: "Okay, you gotta have 10-double-digit loan growth. Gotta do this, gotta have 6%, 10% every year." Well, your deposits are growing 3%. What do you do when you run out of money? So, we have a lot of the same logics that, you know, we're used to around the 80% loan-to-deposit ratio. Again, we bring in new deposits, we'll make more, but we have a lot of liquidity. I think if there's ever a run on our bank, for example, I think we have, like, $16 billion that we can draw in a minute. So, we have a lot of liquidity. Y'all have a lot of liquidity.
Familiar with. So I I I think the retention is good here, I think. And again if they don't have a lot of high yield time deposits or something that's going to run off like that. So I I mean I this is really a great combination guys. It's truly, it's, it's a marriage made in heaven and the other piece David I think is is the the credit cultures are very similar, right? We've always thought about the world the same way and I so I don't think you see that drastic change that you do in some combinations where people say, oh gosh you know, this maybe this is too conservative or whatever they might might
You know, I was, I was on the, uh, I was on the Federal Reserve Advisory Board in Washington. And, and every bank that you can imagine that size is, was on there. I mean, you had, uh, PNC truist, uh, regions, uh, does the answer? Your question is, they would all love us a lot. They would love us. And I would tell you that, I, I, I wouldn't even accept 15 times because I think we could even do better. And anybody that really wants to break into a, a market like Texas, you can't do it. I mean, if you really want to break in the Texas and want to be the largest bank in Texas, it's going to cost you something. And that's the difference in the price of Cars, 1 of the 4, pinto and 1's, a Jaguar. I mean, it's just, they're just a big difference. And again, I'm not saying we are selling or not. I'm just telling you that we are truly, truly undervalued in a takeout.
Okay, yeah, I think it adds a lot of franchise value despite today. So, okay. Thank you very much.
Thank you.
This concludes our question and answer session, I would like to turn to the conference back over to Charlotte Rashi for any closing remarks.
David Zalman: So the combined earnings of these two banks, the liquidity of these two banks, they're so similar. I think it's a good deal.
So the combined earnings of these two banks, the liquidity of these two banks, they're so similar. I think it's a good deal.
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 values,
Have like $16 billion that we can draw in in a minute. So, uh, we have a lot of liquidity, y'all have a lot of liquidity. So the combined earnings of these two banks, the liquidity of these two banks are so similar. Uh, I think it's a good deal.
[Analyst] (Barclays Capital): Thank you.
Jared Shaw: Thank you.
Thank you.
Concluded, thank you for attending today's presentation. You may now disconnect
Operator: The next question is from Jon Arfstrom with RBC Capital Markets. Please go ahead.
Operator: The next question is from Jon Arfstrom with RBC Capital Markets. Please go ahead.
Kevin Hanigan: Hey. Hello, everybody.
Jon Arfstrom: Hey. Hello, everybody.
The next question is from John Armstrong with RBC Capital Markets. Please go ahead.
[Analyst] (RBC Capital Markets): ... Hey, John. David, for you, just a couple on the numbers. What's your level of confidence in the 734 estimate for 2027? I don't think you have any revenue synergies in there, so it seems like it's just cost saves. But, you know, consensus 680s, you talk about the accretion. How confident are you in the 734?
... Hey, John. David, for you, just a couple on the numbers. What's your level of confidence in the 734 estimate for 2027? I don't think you have any revenue synergies in there, so it seems like it's just cost saves. But, you know, consensus 680s, you talk about the accretion. How confident are you in the 734?
Hey, hello everybody. Uh, David, for you, just a couple, uh, on the numbers. What—what's your level of confidence in the 734?
Estimate for 2027. I don't think you have any revenue synergies in there, so it seems like—
David Zalman: Well, Cullen just handed me the 7.34, so if he's wrong, we'll shoot him. We feel very confident, and I think we do have some, we do have some triggers that I think that above beyond expenses. I mean, right now, they don't charge NSFs the charges. I'm not saying one way or another, we'll go the other way. Their cost of money is a little bit higher than ours. So we do have some other triggers, but I feel very confident in the 7.34. You know, once we get everything combined, I think that's a really real number. And that's why I can't believe trading where we're trading, if we're gonna make $7.34. I mean, again, we should have a $95 to $100 price target, really. Even you, John.
David Zalman: Well, Cullen just handed me the 7.34, so if he's wrong, we'll shoot him. We feel very confident, and I think we do have some, we do have some triggers that I think that above beyond expenses. I mean, right now, they don't charge NSFs the charges. I'm not saying one way or another, we'll go the other way. Their cost of money is a little bit higher than ours. So we do have some other triggers, but I feel very confident in the 7.34. You know, once we get everything combined, I think that's a really real number. And that's why I can't believe trading where we're trading, if we're gonna make $7.34. I mean, again, we should have a $95 to $100 price target, really. Even you, John.
It's just cost saves, but you know, consensus is $680. Did you talk about the accretion? How confident are you in the 7:34?
What kind of just handed me the 7.34? So if he's wrong, we'll shoot them. But, uh, we feel very confident and I think we do have some, we do have some triggers that I think that are above and beyond expenses. I mean, right now they don't charge the NSF's the charges. I'm not saying one way or another we'll go the other way. Their cost of money is a little bit higher than ours, so we do have some other triggers. But I feel very confident in the 7.34, you know, once we get everything combined, I think that's a really real number and that's why I can't believe, uh, trading where we are trading. If we're going to make $7.34, I mean, again, we—
[Analyst] (RBC Capital Markets): I hear you.
Jon Arfstrom: I hear you.
We should have a $95 to $100, uh, price target. Really? Even you, John? I hear you.
David Zalman: Not that 75 stuff or 78.
David Zalman: Not that 75 stuff or 78.
[Analyst] (RBC Capital Markets): Well, okay, this begs the next question, then. You kind of opened the door to it.
Jon Arfstrom: Well, okay, this begs the next question, then. You kind of opened the door to it.
David Zalman: Should have been gentle.
David Zalman: Should have been gentle.
[Analyst] (RBC Capital Markets): Well, with your 15x acquisition multiple math-
Jon Arfstrom: Well, with your 15x acquisition multiple math-
David Zalman: Right
David Zalman: Right
[Analyst] (RBC Capital Markets): ... that you shared earlier, you know, the question is, I'm not saying you should do it, but do the larger regionals call on you frequently, and is there a bid if you want it? Again, I'm not saying you should, but I'm just, I'm curious on that.
Jon Arfstrom: ... that you shared earlier, you know, the question is, I'm not saying you should do it, but do the larger regionals call on you frequently, and is there a bid if you want it? Again, I'm not saying you should, but I'm just, I'm curious on that.
Um, not that 75 stuff or 78? Well. Okay, this begs the next question, then you kind of open the door to it. Um, well, with your, with your 15 times acquisition multiple math,
David Zalman: You know, I was on the Federal Reserve Advisory Board in Washington, and every bank that you can imagine that size is, was on there. I mean, you had PNC, Truist, Regions. The answer to your question is, they would all love us a lot. They would love us, and I would tell you that, I wouldn't even accept 15 times because I think we could even do better. And anybody that really wants to break into a market like Texas, you can't do it. I mean, if you really want to break into Texas and want to be the largest bank in Texas, it's gonna cost you something. And that's the difference in the price of cars. One's a Ford Pinto, and one's a Jaguar. I mean, it's just...
David Zalman: You know, I was on the Federal Reserve Advisory Board in Washington, and every bank that you can imagine that size is, was on there. I mean, you had PNC, Truist, Regions. The answer to your question is, they would all love us a lot. They would love us, and I would tell you that, I wouldn't even accept 15 times because I think we could even do better. And anybody that really wants to break into a market like Texas, you can't do it. I mean, if you really want to break into Texas and want to be the largest bank in Texas, it's gonna cost you something. And that's the difference in the price of cars. One's a Ford Pinto, and one's a Jaguar. I mean, it's just...
Right. Um, that you shared earlier, you know, the question is, I'm not saying you should do it, but do the larger regionals call on you frequently and is there a bit if you want it again? I'm not saying you should, but I'm just, I'm curious on that.
David Zalman: There's just a big difference. And again, I'm not saying we are selling or not. I'm just telling you that we are truly, truly undervalued in a takeout.
There's just a big difference. And again, I'm not saying we are selling or not. I'm just telling you that we are truly, truly undervalued in a takeout.
[Analyst] (RBC Capital Markets): Hmm. Okay. Yeah, I think it adds a lot of franchise value despite today, so. Okay, thank you very much.
Jon Arfstrom: Hmm. Okay. Yeah, I think it adds a lot of franchise value despite today, so. Okay, thank you very much.
You know, I was, I was on the, uh, I was on the Federal Reserve Advisory Board in Washington. And, and every bank that you can imagine that size is, was on there. I mean, he had, uh, PNC truist, uh, regions. Uh, that the answer to your question is, they would all love us a lot. They would love us. And I would tell you that, I, I, I wouldn't even accept 15 times because I think we could even do better. And anybody that really wants to break into a, a market like Texas, you can't do it. I mean, if you really want to break in the Texas and want to be the largest bank in Texas, it's going to cost you something and that's the difference in the price of Cars 1 is a 4 pinto and 1's, a Jaguar. I mean, it's just, they're just a big difference. And again, I'm not saying we are selling or not. I'm just telling you that we are truly, truly undervalued in a takeout.
Okay, yeah, I think it adds a lot of franchise value despite today. So, okay. Thank you very much.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Charlotte Rasche for any closing remarks.
Operator: 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: 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 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.
This concludes our question-and-answer session. 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.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
