PB - Earnings call transcript Q1 2018 | Prosperity Bancshares, Inc.

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Operator

Good morning, and welcome to the Prosperity Bancshares First Quarter 2018 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Charlotte Rasche. ahead. go Please

Charlotte Rasche

for and Chairman; morning, Bancshares’ Good call for gentlemen Financial lead Safady, Officer; Lending welcome Bob few at Chief and asset Chief of being the our is review a some today at off President. review Vice for Thank Charlotte same the quarter. Bob who Quarter will ladies Randy XXXX lending Credit Prosperity recent www.prosperitybankusa.com, Internet Timanus Officer; Vice who Executive David the Chairman First live Hester, Vice This and be weeks. location discuss President be Earnings and Officer; to and call Timanus, available broadcast with replay you. over Hollaway, He and Chief will Conference Rasche, of and Hollaway, Officer; David followed H.E. Eddie Tim President Benter, Jr., quality. the is me Dowdell, our the Vice including the Chief here of highlights will Merle Zalman Counsel by will with recent statistics, financial next Executive Tim General Karnes, Prosperity I'm Executive will David activities, Bancshares. And Executive President; Zalman, Call. David

open will call we the Finally, for questions.

interested Austin. by During following provided moderator, call the parties live call, may participate be the our instructions that by will

results, or forward-looking in this securities Prosperity constitute achievements such, by me let implied different actual other achievements federal results, begin, and risks, involve as may materially make expressed the cause matters statements. usual or presentation we performance may may discussed or of future statements be Before to and of the uncertainties unknown from Bancshares of factors, And Certain which for such performance disclaimers. forward-looking laws. the purposes known the

including Exchange cautionary factors with in the are actual in Securities SEC. and All in these forward-looking we reports qualified with and Bancshares’ statements. statements materially information and by XX-K, entirety those filings Prosperity Additional XX-Q that the than and forward-looking be Forms the results other their can could Commission, cause statements be different filed to statements found expressly have concerning

me over call Zalman. the let to Now, turn David

David Zalman

Thank Charlotte. listening our thank XXXX conference to quarter first welcome to everyone like and call. I you, would

showed For quarter of average average returns of on first of the on XXXX, X.XX%. XX.X% we common average impressive on equity tangible assets and an annualized

Our first quarter earnings of compared in quarterly of an period same XXXX, or $X,XXX,XXX $XX,XXX,XXX the for $XX,XXX,XXX to in XXXX X.X%. were the increase

by assets accept XXXX of of non-performing $XX.XXX quarter March XX, to overall this period earnings the have an for inherited identified X.X%. to per quarter to and of increase, X.X%, Our Oklahoma. were billion, that in essentially the million loan the were with compared our in the acquisition XXXX. million $XXX the than carry large $X,XXX,XXX anomaly for credits for with for a discounted growth. in share, future of XXXX $X.X X.X an problem share diluted representing increase last XXXX, same to energy billion quarter our of were charge-offs better, sell quarter problem thirds net earnings amount a $X.XX per increase downs unpredictable with elected million $X.XX approximately previously to the an approximately compared attributable impacted $X.XXX respect of been the experienced of the compared pay We Loans or $X.XX at reduce greatly With fourth flat should XXXX, number first a offer of asset the we XX, to credit, of March period. rather loss at charge-off two from our continue an largest and a Despite

minutes, few the growth and guidance as is new loan achieve the news expected strong organic of that loans, XXXX this excited we we loan funding the earlier that XXXX. will However, in production the believe a will we given was gave and good year. discuss about remain these Tim We

to projects using loan cash their Although businesses a so. to this customers projects, paydowns loan financing we result pay to because converting should or more taking calculated completed certainty, term our we due long reserves debt do individuals certainty needing selling down and economic increased and believe had funding that large of to in risks

assets XX, [indiscernible] or assets XX,XXX,XXX or XX million and totaled represents of an XXXX. or a as interest assets quarter-over-quarter. decrease XX, basis points XXXX quarterly compared interest XX.X% basis as quarterly of earning XX.X earning basis assets XX points and decrease March Our XX earning non-performing March points at average quarterly That XX.X% average average with of million of XX

deposits Our March XXXX increase XX, were March compared XX.XXX of XXXX. at $XXX an or X.X%, billion with million at billion, XX, $XX.XXX

In for first XXXX million regard also Federal decreased auto customers. increased is XXX,XXX XXXX XX.XXX remains deposits, energy survey XXXX. services. parties in right $XX X.X% due other have making seasonality. bankers shareholders. for outlook a trends, an overall with for last increase diversity per many new new oilfield of are in indicated the compared sales economy, approximate is in the the is is Our announcement diversifying Oklahoma's would to most December to September with at well price is should of job Further, remain for the economy The pressure XXXX. United continue to XXX projecting economy. our an Texas projects. price of or the job and Home barrel as team for was like positive. and increased most from which $XX agreement deal quarter of the further a historical with a and February for we that by play gains expansion There a close X% Houston which X.X% increased from the This million. The annual quarters, the of are a we opportunities, deposits in continue outlook and the active prior for is to strong, in mining in quarter jobs the unemployment anomaly year the for levels Since negotiations positive. consistent XXXX to our again from experts with we XXXX. of experienced grow, relocation to potential growth I linked averaged X.X% quarter prices acquisitions, with decrease believe the by well The is our a counts and in is existing months ago. growth helped excluding Typically, we've a our experience More rate These significantly, Home strongest major other or important net second the revenue primarily XXX,XXX in to Thanks quarters X.X% X.X% of Dallas over it's and industry. cost expected tax, conversations oil fundamentals XXXX. The in has growth fourth sources barrel momentum didn’t new an non-interest strong. quarter have a and above deposits XXXX in Mexico XXXX, low for first Oklahoma's X% state in There Historically, friendly years, organic sectors. XXXX, with is energy job to our barrel for benefit industries rig billion $XXX With several $XX and during breakeven enter Texas Bank Texas change a XX support low. jobs Oklahoma’s economies XXXX, in a Canada. comeback also unchanged remains was February Overall, charge-offs deposits deposits. of during their annualized fourth suggests across significantly tailwind to at the role strong States bearing XX, thank oil quarter, XXXX and our the X.X climate Oklahoma more annualized and accretive year with continue no Permian. whole to acquisitions, jobs. improving and inventory employment again Reserve Oklahoma growth ago regarding we unemployment through On to approximately remain appropriately ready your added since business or our has of business, and income done. nearing all projects service and our the is into XXXX growth beginning company. when an year. Business once and

some our over discussion we to Officer, Hollaway, turn achieved. discuss specific financial me today Financial our Chief Let results to

David Hollaway

March XX, discount compared by for Thank months Net XXXX This provision the million was XX, accretion change for interest ended of three in and credit ended March before $X.X loan was for a three you, losses looking discount about for the million December decrease million income the ended to $XXX.X XXXX run quarter David. same forward, $XXX.X impacted XXXX. $X X.XX% accretion The per again period equivalent we're March to for loan million a interest the XXXX for on the in was XX, net to XX, margin quarter basis tax X.XX% compared and projecting X.X% quarter. XXXX. ended months

the basis interest for million months same three down three XX.X% for The quarter asset three XX, XXXX. loans billion. years, compared for with net projected for December XX, to XXXX. the same XX, the for ended the income at of December $XX.X XX, tax XX% to in X.XX% an was the last equivalent the non-interest March compared March for million efficiency ended flows let $XX.X me compared average period the XXXX XX, in approximately was period was $XX.X XX, XXXX XXXX year a expense period ended presentation weighted quality. months XXXX that, the X.XX on The ratio bond the was the for of for duration of XXXX. Tim? cash X.XX X.XX% on adjustments, period million over XXXX, metrics for portfolio the and same margin the $X.X Timanus accounting Tim purchase quarter same to ended showed $XX.X annual XX.X% effective some million quarter a in turn and end the And months Excluding compared XXXX and ended X.XX% for ended March March three months life Non-interest detail to for to and

Tim Timanus

or million ended $XX.XXX XX% million non-performing, at billion from This turn history. non-performing million the is XX, XX, million XXXX company assets were XXXX. XX, XXXX. monthly million ended the XX, March XXXX the production and months $XX.XXX $X.XXX in during non-performing $X.XXX March and to $X $XX.XXX million credits. for at ended ended and The XXXX is largest the allowance up or $XX.XXX increase other new The quarter million or XX.XX% XX, real XXXX. loan to XXXX the basis December in credits. quarter been to Loans losses million broken decrease repossessed fixed XX XX, assets outstanding million loans, charge-offs December Since This up XX, estate. for compared the end real the March December was down XX, made over XX, three $XX.XXX average XX, is March Charlotte. XXXX, average contract million XX% XX.X% Of of $XX.XXX compared $XXX of $X other $XX.XXX rate compared $X.XXX is assets or in and charge-offs at sale. from are basis December a an This XXXX The the XXXX. rate. million added Non-performing it ended bank’s floating Dave. compared XX, service you, $XX.XXX December loan XX, our totaled to This to points XX, was three million at estate are between $XXX XX% XXXX. X million, loans for for quarter credits I'll credit Thank made XXXX. monthly in compared billion net under to quarter now ended unchanged XX, from assets XXXX. non-performing removed March XX, total XX have XX% XXXX production $X of was months March points is were from and the $XX.XXX of variable X.X% total March December last for back March in million loans, million or for the asset for energy list in rate XXXX to the Net December quarter quarter

Charlotte Rasche

Austin, questions. you, are with this assist we can At answer Thank Tim. please us to time, prepared you questions.

Operator

question our And Deutsche Instructions] first come ahead. Dave go from will Rochester Bank. [Operator with Please

Dave Rochester

going So, should it your a forward? looks here. to like again now quarter How theme we expenses these beat common trend expectation expect that's this and

David Zalman

I $XX think we range. last we're again that Dave, going what run million said we time, think to the at in

I we at want to think this that's even going beat project though forward. we've want I quarter, that to stay, where So still

Dave Rochester

can about we'll Okay. Do more the excluding And March hike? NIM, just about the here, with then from thinking talk just switching trend you see to how you that upside accretion? you're think just

David Zalman

this David Dave, take is question. Zalman. that I’ll

mentioned XX% $X a months. out before, our different good months, to that but loan having turn to with will duration. is better will fantastic look billion XX in our in in well, increase, lot trying bond X.X XX as year look lot, around of ratio a the XX%, portfolio NIM have maybe it and months I refer in parking Queen XX six longer. takes the us Mary months, As look a really in a probably better will always and than NIM banks It to I deposit

deal, when for we So that's what that's it’s like but us. a deal, just just longer looks longer it's model, it a

it go, loan quickly a just So change bank deposits. it floating as to doesn't, more just I a doesn't mean, it rates lot maybe does has as that

Dave Rochester

rate quarter. for the premium I today. was competitors’ and just expense this and then reinvestment that seeing were up, just And wondering I quarter securities where where noticed rates was yield ex-securities that you're

David Zalman

They're this part morning tenure was the would XXX, it in. even. we're and I morning, XXX that probably again morning going don't and say getting mean but three this of over this invest have we maybe what I up. I

Dave Rochester

say would as was forward it the will support quarter, that for I source of trend this past going So right? NIM a be

David Zalman

pretty just and anybody do X $X something, say, add looks [indiscernible] good. what math and we the X.X, you point on X billion do got X%, now, can billion, it

Dave Rochester

rate given deposit thinking you just then are guess about that just that growth, and pressures the you the this I year, for about competitive guess to environment. higher I historically, talked switching X% how

David Zalman

our think again in we years was And two less think last be didn't get a overall. downturn good, trend we we into our it quite that -- XX and at Well years, that. that’s X.X%, even industry oil over the again course year, what is because for the I the this were that economy If if I was X% average. and we hit I we when you increase still think look on last -- was went only should

there, basics mean should the it fundamentals I I and the think economy, the are out good. be

some there, out probably are not not the the really we're rates of money. again, as others needing that Now are same our the

number doesn’t -- -- we're So aggressive, bank we're with new business not as so but XXX,XXX our the Texas jobs should the overall, that so many Texas activity. and in even count if grow, growth people, so continues I mean there's this Oklahoma that benefactors We action in a of much business if in. with that and I moving and mean the such year that to much of alone are people be area

good us I The in well do tailwind will will back those for good. term looks think. very long a be of All well, of

Operator

Gailey is with The Brady KBW. from next question

Brady Gailey

talk going the the that coming function year. a So you payoff for of or more is a Is rest at up loan down. it growth, slowing of pace production when higher about

David Zalman

Tim get I Tim think I mean been is before. Dave to jump in ever this, we've our mean than I’ll on production had more mentioned, I has this again. as

in a quarter this XX paid and had, in color. than Downtown, over a the some mean million. had in we've we multifamily loan Odessa a condo hand, secondary their over it over in year to in developed a I give sold, was We area just you Houston was had we Dallas, people, other more this on project, or the with that project payoffs XX accounts. XX On million ever XX a everything had Midland market sold, million project million. If We

a extremely of paydowns, just production A that the approved up. whole far lot looks So drawing should so we've of but our lot good. loans be

growing we you that next into agricultural quarter too. season help wanted in? I get the think think as I in helped, that the also with jump to and but will will Tim, products,

Tim Timanus

I David said. agree that just with everything

and are on want they place. looks paydowns are they production you payoffs I we ought and across look what take come think board and go. looks are scheduled Texas over what production, Things and focus are. everything The they remarks. David good, I right see Obviously, opening good is They pipeline be really to the the as his pipeline paydowns now Oklahoma went in mean, loan in also. good. positive to the

loan we production, and announcing that necessarily realize is when to funded. loans we're have booked, announced that what been have not You documented

none day you've got certain credit, got construction loans, of you've loans, loans, got got fund you've which of You've energy lines typically one. agricultural

So to based place take had the just production ahead funding now. look a and things pretty of of got lot right on we we've us good that

Brady Gailey

book, changes with then over that that David think this what there there bond managing you’re the bond about like today? tenure is we level, bond with and you��re mentioned book you're is given Are on way or now. X% change duration changes mix And back do tax versus you at the is any buying like book, the there reform, non-muni, the managing the the any the in way that extending muni any

David Zalman

an to in way go [Technical elaborate could the we I bond but Difficulty] book, detail, the No.

Brady Gailey

prices. hefty pretty [indiscernible]

going you're So the that cautious, thinking about is still way to be M&A we're that today?

David Zalman

given changed given least -- to again anything's way groups M&A. think time, two probably we're talking three in at or we're we look people, at don't are expensive. of number any I any talking mean time, banks still I a to Yes. the that There's at at

It like. there that in time, prices will that at the like. pretty that more won’t detail, necessarily but be of kind of can that we before doesn't deals, from go to think I some are still the but that do discussed out we We’ve banks change idea we an have we hefty that point banks We of kind mean there.

think, it's, of have, probably a lot probably that's have buying, publicly publicly premium if not again, publicly see you’re that's probably increase bank that there's traded if they'll in that's you're not traded a of bank then in probably more probably traded, a So you bank bank a that's and traded. I buying a a an

is what is. it it So

Operator

with comes question Jennifer from Demba next Our SunTrust.

Jennifer Demba

David, you of credit surprise see to on kind us from unusual a guys. negative for

the how Just in on acquired deal? loans Oklahoma in those just charge see wanted the quarter or deal energy you offs about that details your to some took from and this portfolio feel what’s get you from remaining market

David Zalman

I’m going but agree, let it but answer that Jennifer, when always, there's a too deal, at we today. if even disappointing Randy just to to that that, anything, bought was and nevertheless, the was quite again think than hide I different Normally, there's Oklahoma have again, do in the But than better I time same we normally. minute, reason we we some probably try We're same – about is it. different the it the the way disappointed underwrite market time. underwriting the no to

do Randy, jump you So it? want into to

Randy Hester

this what that few F&M that a Hester. market get little We’ve get. cover to and a transaction it we what still carrying is decided we’re we the them Randy needed enough but from to rebounded that of out had the we loans bit, on Jennifer, Yeah. did books and wanted to

that out credit, ahead we into and real of that, but of some So, and decided our take to reinvest needed money loss back go long carried them we loans. and enough we the to get

David Zalman

had or transpire. think I and letters of seems on some just they we intent like these so, over loans probably did last of year that never the it were, we

just just once said, long, we So loss let's say have better and too just it's go. to something the you

Operator

next Research. Geoffrey Our comes from with Autonomous question Elliott

Geoffrey Elliott

bearing deposit are moved at give some repricing could kind some have basis the you XX granularity interest point XX if specifically subsegments of that there that point have category, is that a bit and wondered little demand within the basis the more moved or there, less? and increase looking broad I on more increase that

David Zalman

or more deposit don’t our look can give I was have at that. attempt XX% how again, deposit, I to very know certificates you, it when we color less. try but base much of I’ll you

percent deposit we're So, accounts the we need our maybe demand have out accounts that and compared loan their at but ratio, growing most cost more. something money XX are non-interest account, have XX market that another rates XX% think bearing points the yield higher paying are, probably some basis over a gone there I of really and again, and XX that people that our, right really has that of that now up to XX% to you

XX the up basis we're think and I of basis X what an said increase thought rate least rates example or three they're demand points of or XX not that, points, up CD the basis if XX and every might Just is and probably on money model money up basis go interest and basis about deposits market our yield our we that, last basis to points XXX model we I give XXX have up, you that on the that higher gone XXX at and the on that modeling has basis the that four market XX XX points what as number increases an points maybe ago, points, checking. in shows the accounts. in rates went of points going certificates we interest Having after some while in basis a

numbers other XX good but a up again I in again, we’ve that, historically, betas are look think prudent good the great the as three. modeling in accounts I on in and The two mentioned to less. other not year. earlier, a look And even very it's They our but lot model that, years basis, gone

that’s I those our if models helpful know don’t you So want really. or Dave, not. all of add are do to anything? in

David Hollaway

on. but and really about deposits the discussions don't just what's on themselves, X points, can I would quarter basis right, a I you're one deposits going obviously it betas just up big quarter say, linked know went and illustrate No. the for

cetera, for same it, points. you interest aspect That the which In And XX cost markets, are fact, XX-month of ex want rather over look to of changes XX if isolate at year CDs, number it up bearing about period. money of points funds. probably about year-over-year basis that basis over went the year

it's contained months are So for, that those is XX don't managing I but going been last quite this pretty a from would illustrate year when pressure be hasn't that can, mind there. what to exactly over well guess we we last get I over it, year. the now, we

I think that heard saying a you've earlier. to forward, probably continue banks, that as pressure will was in of other David from we see bit kind little just will price but dovetail what but more go to

David Zalman

And again, the good news is the on plus. reinvestment for not X our you're [indiscernible] you're probably the reinvesting at XXX if getting side loan

So positive. all are those

Geoffrey Elliott

step Understood. demand pretty on interest given your bps in it I specific in or was that money guess points up if XX there normally there the market looked less bps CDs and a is was savings was acceleration XQ. the rate would just that a the XX XQ question I it category basis in on and in that It XQ? sensitive suggest, you comments was bearing curious why cost category, could and guess or anything in big that XX like add average

David Zalman

Yeah. they I I that mentioned that’s it impacts at public David bank their on. the that of quarter think of remember entities were we’re we one that end. lot funding the last saw all that what months, things a absolutely earlier, in has and bank, money and a And bring spot mean had few remember a over

interest would account, of impact it like in it's terms last tend and more that they keep I a be the quarter And does has you're in though, even more it, rate. call the more, money bank to the bit that's interest a that so market money sensitive, in type bearing over the little the what seeing sat

the can spend in that That a funds banks, forward, to we end mitigate year. move we that As money. they out as of just start those will from thing the That’s of because itself. move happens come

David Hollaway

that increase million Yeah. funds at and XXX now. in of probably deposits probably it’s gone in public the year and end Yeah. was category one XXX The quarter probably million in

David Zalman

you causing see. that little blip what's that's that So

Operator

with Peter Wedbush from The next Securities. question Winter comes

Peter Winter

I was the loans. curious with

way guys of thought be history of You standards may Is as some with the very always a long the a being conservative to growth. add any have the little underwriting there underwriting. of a loosening to

David Zalman

great question a off million. charging after That's $X

Peter Winter

But an bank, guys. that not acquired was you

David Zalman

think pushing end on I question, probably but up I middle thought I other about and somewhere and in on to this is the We ourselves think. a hard me the back think we’re Peter. it pushing it’s good going I'm Randy end,

and we are the to do if think things be conditions, you to of our are Tim, or XX-year terms that and want going I the us want where that some maybe we're to instead amortization but we're project, run on -- model some I There can they I think want or of to can for example, us trying if be can some jump don't and amortization mitigate to of XX-year Randy against in. a that’s change that go we a change think an we portfolio, requiring -- a we flexible, there's XX%. more see that we things the ever on commercial that go bank, XX% to down, somebody, we could competing somebody

Tim Timanus

Yes.

say can safe this some keep make is but an able thing allow sound, it do, at a possible. historically to we week loans it's been selectively to us easy look that not the that for loan but committee, to that's have and same necessarily that meet discussion bit or not to are us I maybe and make would we things still change have at to maybe and time when bit trying think tweak every safe that we we a we

forward make think some changes will that have we're about that We we I we as a literally and it very continual made feel it process. focused on can a good at it's So and weekly. look I say much difference all going

underway. it's So

Randy Hester

little book but help had occasionally and the been we're because done that we've successful and and from we've Randy, bank we've with, had good we’ve and any not that This of a relationship losses it a or done two more us. rule should is because Peter. customers, away a fortunate moved been We've step good relationships that for only we've

Tim Timanus

a I'm returns here And having return though circle still this, return taken the going deposit to we've tangible our have people. completely all is risk, capital say, compare on and said to XX%, than good or as and anybody you better to come XX% our most on and or even not not can of ratio round loan assets

at there So I'll time, agree I just that that. leave could be but they out better. same with the

Operator

question Our Brett from Piper with is Rabatin next Jaffray.

Brett Rabatin

a on give I an the just that pace update to of maybe accretion, that quarters? few next what's little on -- discount us just the wanted Can guess the number just then in remaining you and quarter. ask I on lower this

David Zalman

Yeah. I accretable XX XX aspects mean but is million, about million. it's overall, the

at So it's It's not this very much ineligible. point.

X it's see, to we loans, those flow quarter, years run of consume but remember, ’XX, about to million So will it's a of that think couple not but that’s depending the per of linear, how it can want you take about kind on cash them.

Brett Rabatin

and perspective commercial thinking it is And compression commercial on in seeing -- book reform, from spread by give XX has what real a seeing People spread competing talking monthly about you categories, increases rate year-over-year maybe, up what commercial in just can construction about grown just a pricing. estate. then color those loan tax on real real is about a banks in lot or the you little are estate in are us production you're and your away, production, XX% and growth about the was the loan loan million mostly estate and

Tim Timanus

in years has actually. for loans we’re not of estate example over about of commercial the Well, dropped and loan mean, a in several breakdown still a bit, our fundamentally I at from it’s XX% changed of that XX% the our really portfolio real regard. holds to the the pretty material little change. portfolio for wonder last XX, a it not family went much I new production true

So buckets or those the and not but way. to in a buckets the can it various new quarter vary unchanged remain month production, material month, a little to bit quarter from

our reason there's percentage So I loans any change going is to example real dramatically. of forecast to don't estate commercial think that for

competition prime, under loan favor. loans is we down, dramatically. cards right there. floating unless don't economic pricing which change dramatically. some affecting agriculture in of run well will That's out from think of headwinds rate The started anybody’s see. doesn't buckets to is percentage our change of are that slowing Our a those do price of into the on I going competitors now The Many any banks not obviously I see these don't what that the we margin adversely. tough.

be pricing but to So and I'm and that's our we your don't I answering we share hope our and think to own going change. to thin difficult, get is be continue question. I going hold

David Zalman

competitive loans. flexible, to not we growing the some competitors I may fast to position that time trying the on a of have. also on be same trying both what very of too. we hold It may we're charge and we terms and We're be have we’re that loans these -- there, out trying to and is we're not rate It answer why as mean part that's our maintain to but or conditions and Peter's questions the maybe we on not. margin as

Brett Rabatin

big that can you about one. of really Okay. And up a quarters? and if for lending expensive change be to consider come David, with you've the never if next last maybe or one talent, been teams then in few M&A something just your any would might you to fruition talk doesn't here maybe on Fannie lenders or bulking you’ll thought adding adding team that proponent

Tim Timanus

where one now. quarter we've and people the we're not constantly that hired the of we many more new hires look we -- and throughout the Presidents all, probably There's a on quarterly have throughout to. of Chairman how type is people first referring all of meet in. you're area things our probably and that of year That's at bringing meeting same and that That's more the

bringing you're again people I that of looked at more probably we lending are it. wholesale and in groups to think on are just over commission aspect and production and that based on referring that based haven't

how needs it's done many over. that bank, I us, what giving consideration we're in Some that Can on the to total that these there groups. still you lending in to yet. When constantly talking It’s not used get of that and loan. deposit we to have that of loans the One our we’re basis of at at good like with challenges talked lot to right two are teams That's tried focused you about and These call mean and I us have buckets joining be bank up we not that lending and is, look something that you a get emphasized to wholesale lending. banks deposits it's in we're think they historically, to, it. X.X billion we one our and we but I time think and it's how that, that they're at are I think I can that. a need know is and we've But the a the individual now. of if they I emphasizing to land strong deposits not we're do our are one -- at number in but we’ve hiring. have but bearing hirers relationship we that by underestimate I people few people or we this the of don’t this core about want non-interest on last know thing quite a We -- in that the over in number what that come have room don’t -- results a, anybody we see I people. a come know it don't of staffs it's look bring hired we year, base don't can to is, the to look

just without the in when Now, two some loans history more deposits to do the that that general, have a this maybe, to willing and you to is, we're us. to understand trying that growth requiring negative quicker for well hand that loan been serviced you're time. our and have evaluate sake make in go loan don't we over closely come and we and hand very make that has But for loans

balance as expand forward out look move and to at we ways our trying we're to that lending. So

David Zalman

everything think right, And Tim bank. is saying we’re I relationship a is

as grow we to want a want will, grow, doing we people loans at to and really good to historically. it We’re one more we hiring we're core if our lending time and staff

gone to people being see We have banks our other that been hire necessarily away and I other that forward the going don't groups, deal. not either. hadn’t

Operator

next with Stephens. comes Olney from [Operator Matt Our question Instructions]

Matt Olney

adjusted go some and loan to paydowns. want the your paydown back discussion their I expectations the to have peers for on loan of

of are your that peers level competition I just increased think of there's for some a an recognizing and while. may continue

longer you about few expectations to paydowns curious slow guys quarters? adjusting you Are in I'm still next your Prosperity. expect paydowns do term or the So for

David Zalman

we don't This with hugs factual more have that's mean first we Matt. I right mean the time know that, saw don't David. that trying give there's quantitative, the type what but but paydowns I my some that kind that anything saw, is is the you seeing I'll off see that I now, color. to we're is have. of we or of or projecting I feeling start paydowns. gut from don't this such we just paydowns, paydowns

want don't, go we have jump We this again, about see point some that we're has million. the last gotten in? it's in gut, of project that Eventually, to XX here Anybody have to to just what the probably paydowns I big, else quarter. sometime don't secondary two is the size, expecting a financing we or time, at that pretty Houston but developed, my it amount

Tim Timanus

mean and will, the I they when stabilize, was we right. get loans. that some sold they'll that's when have projects that do anticipated think I obviously made large we

reason don't and out to what had and paid did be it decided last XX going have see should for David million quarter between been carrying that I mean, were forecast us we have the a as But their and things And a for this Well, those not mentioned higher debt. XX account any checking not normal. way I usually I loans sometimes. it on be. that more in think we based what going off. and is some loans is. are to did that few that's money of owed it we much is anticipate So time we paydowns that's But forward. and that they get them just there's quite They million they church, mean those just to were. they

speak. to in don't think change that so I the air So is any there substantial

David Zalman

the haven't drawn Couple Dallas of probably where do up once bigger see. then up in and there projects are yet, bigger that they hit you’ll once they projects occupancy and their and again market they're draw they rate, but multifamilies

haven't we’re seen bigger I we you'll past. that loans, making So as in probably the think pieces see bigger

them for that here a after got that loans, of going been So our has too. we've loans to been get gone again, just point that bank But development but taken estate that has some, we and naive be to sure. to consideration that into We're of cup not are hasn’t real they're and commercial haven't to tea. a ton flip

Matt Olney

it recent switching viewing especially I'm gears for looked bond to low sequentially. understand And how expense expense can me yield about on premium in light that how then that curve. declined $X the moves and of the Help Prosperity. like expense you're the on go amortization in interested portfolio, in, expense that in million

David Hollaway

just where won't an buy have that on can drop, in side, discounts getting then these because and prepayment environment did It the rates Hollaway. now Dave is forward, to anymore the This other then. huge securities have and every as affecting up, will speeds are going it's we're fact premiums

into dynamics playing it. all those So it's

that? this zero? I a it million realistic expectation. not X.X So, a depending refinancing, Probably lower prepayment than all where but concepts where soon, lot. that's specific and how drop go continue speeds zero you play were could to Not those time can it number give and past quarter, would rates Yes. Can won't really. those any go be? it, a to into be Can I it all it It we to go mean,

come more. you some what is, if up give can't I specific rates it as and would reiterate continue go seen, just know about everything can I I down answer a we've to So continues

David Zalman

expense and your going amortization mean or probably down, years income, you're if par, I have doesn't is you're a again paying that because out coming ago, because impact But bond XXX. to XXX just you're necessarily did year, not today is you were bonds point expense buying two in where to an amortization going it's

interest bonds, a lot just going you're really and of we rates real just to form expense market, amortization and a has more the low, in were It dynamics it’s may a bought mean not and premium much. again, you're paying not not income than mean, amortization I -- today's So really really. those premiums you I paid more that borrowing. change do than lot.

Matt Olney

so on guess mentioned through recent understand off help we can rates you reinvestment of there. XXX right bond XXX same And what's I growing topic, the the portfolio tradeoff us now, understand the is kind some the what of David, or

David Zalman

billion X.XXX year. about sits it a that think I Basically,

I about that's think what on is the that rate stuff.

We’re now. at XXX right

XXX Yeah. right about now. it’s think I

Matt Olney

Okay. that expectations lower a than my rate are year, along still was bit you the last question XX%? tax for for your full then little effective And Hollaway,

David Hollaway

think but was a In to XX%. benefit little lower first tax some where a to we’d that because the than around vesting first quarter that, closer the project stock we the trying, was quarter, XX%, yeah, Yeah. looking to due lower it it we just some from were little from years be comes to continue restricted be ago forward, I in and

Operator

concludes remarks. conference session. this like any our Rasche to back over And for question-and-answer Charlotte closing I turn would the to

Charlotte Rasche

participate appreciate we our the to today. We get continue ladies our will and for building you, call value. for Thank support taking Austin. to in company shareholder work and gentlemen you, on we that Thank time

Operator

you has conference The attending now for concluded. presentation. Thank today's

now You disconnect. may

Prosperity Bancshares (PB) 25 Apr 182018 Q1 Earnings call transcript