PB - Earnings call transcript Q3 2021 | Prosperity Bancshares, Inc.

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Operator

Good day, and welcome to the Prosperity Bancshares Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Charlotte Rasche. Please go ahead.

Charlotte Rasche

you. Thank and conference to call. ladies quarter Bancshares and earnings XXXX gentlemen, morning, Prosperity welcome third Good replay few This the and for Internet is at the call being prosperitybankusa.com will broadcast be weeks. live over for next available I’m Prosperity of General Bancshares. Executive Charlotte Vice Rasche, and Counsel President Officer; with Executive today and me here David Zalman, And Chairman Senior is Chief H.E. Officer; Tim Vice Randy President Credit Hanigan, Operating Officer; Davenport, Chairman; Hester, Karnes, Chairman; Lending Mays and Executive Osmonov, Merle Financial Chief Corporate Bob Asylbek Jr., of Kevin Timanus, Officer; Safady, Officer; Chief Strategy; Eddie Director Dowdell, President. Chief Chief and Vice Zalman review the for David off lead will with of the quarter. a highlights recent activities, He who statistics including will will recent Osmonov, who financial Asylbek and our followed be review Tim some lending will asset by quality. of Timanus, our discuss

questions. call will we the open Finally, for

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

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

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

to the turn call me Zalman. David let Now over

David Zalman

report the our position like our thank because increase shareholders. to with capital that $X.XX, company, strong I'm Charlotte. continues third we third of dividend to and continued success to welcome pleased increase to the you, quarter well, fourth to and X.X% success, our our and Thank a confidence XXXX our our the conference to Board do of from to quarter in call. want listening quarter. I that everyone Directors voted would share Prosperity

The for compared same ended diluted and XX, for period million same the XXXX with period Additionally, in the XXXX. bank stock of weighted $XXX ended XXXX declines $XX.XX. ranked experienced a third Prosperity price quarter XXX,XXX common quarter $X.XX for XXXX. the Prosperity in Prosperity price in the net common its of continues share been America $XXX.X for $X.XX since quarter return has our throughout September net in of the Forbes income by the quarter, compared 'XX Prosperity rate at the per assets to XXXX. shares metrics XX.XX% on of Bank XX in XX, tangible X.XX% top and income second exhibit of list of solid operating and for and interest equity repurchased low as Net have environment. to for as million stock best margins reported on the the Forbes XXXX. third was of return the been stressed September was

bank However, if for believe as projected, improve earnings we increased rates should a rate the is this as environment. rise higher interest in positioned

X.X%, just of September $XX compared a on of were shy XX, billion, $X.X $XX.X Our XXXX. billion, September XX, decrease loans XXXX on or billion with

of at million area Dallas/Fort growth we $XXX PCD categorized exception June loan a Worth purchase the XXXX. We billion from excluding as of loans, warehouse XX, Our program that the PPP company $XX.X or annualized X.X%, quarter to on reduce as loans X.X% continue the and with were linked their loans increased time throughout billion and loans the real $X with XX.X% September a area. win non-recourse Deposits show $XX.X categories, these Dallas/Fort deals September excluding to or well loans estate the as category. growth Worth XXXX of in compared increase were continues -- $XX.X an on in billion, merger on XXXX. structured solid XX, billion as commercial some XX, Excluded saw marquee

X.X% safety or which deposits we annualized programs benefits -- $XX.X from saving continue implemented to quarter $XXX Deposits have the to X.X%, due government increase more XX, after part recent billion linked XXXX. Our June during me, and events. the believe on in the increased million is people excuse to pandemic a net

XX, nonperforming June XXXX, or or on is and reserve $XX basis of of quarterly periods. basis XX, year-over-year points quarterly earning unfunded commitments interest loans XX The of was XXXX. is average loans losses of $XX interest million million assets This on XX on assets million a basis $XXX quarterly totaled XXXX. prior XX warehouse $XXX earning points compared unchanged allowance was purchase XX, total on $XX.X XX, and The PPP for or assets Our of average X.XX The earning or points XX.X%. million when reduction loans average credit XXXX, XXXX with and assets program on September total for September assets September million. allowance September XX, from excluding on million, nonperforming $XX.X in

reserve. Our a charge-off obtained months, net have and the million the general and the $XX.X to structured PCD specific reserve. ending the real charge-offs $X.X to and million loans, acquired released net charge-off a an million to million resolved PCD PCD resolved charge-offs $X.X was $XX.X charge-offs which million, was XXXX, Overall one the without third Farther, The a resolved to were allocated through $XX.X loan we $XX.X relating loan was in released and loans related million $XX.X PCD million XXXX. additional moved have of in related $XX.X reserves in reserves Net of the of on included not loans estate acquisition. million reserve. loans partial general that any quarter specific September $X.X million XX, to to for X $XXX,XXX general charge-offs was commercial

We driver technology more that when and taxes merger our with economies acquisition opportunities. increased valuations state and and succession planning cost with all remain recently shareholders. and continued states if we've as more. continue. appropriately and more companies in loans Oklahoma there concerns, combined for regulation. staffing and Taxes additional the especially by from and activity, enter a regulations believe XXXX. housing higher ready The Texas reloading acquisitions, additional projected and to government in seen have parties and increase to to it's conversations from to continue existing and business negotiations seen But to XXX,XXX requires will This infrastructure, accretive to increase current jobs benefit people right for be moving is to We increases with transactions regard market due

that prices to that asset We continues normal. take crops its it local the like, higher increase are most as to will and next year prices, chains and oil are return of than begins should our we hope help seeing time for higher signs Thanks your We higher some the Federal will Reserve but starting moderate it support would are be again purchases also supply we improving, which to as are economies. inventories Inflation believe to for company. there expected. although and stabilize tapering

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

Asylbek?

Asylbek Osmonov

income XXXX period in interest quarter the loan the ended you, everyone. $XXX.X X Thank $XXX.X in or decrease net Net interest million XX, the credit million decrease of X.X%. value million, for morning fair $X.X of XXXX, compared months million was in Good same to provision current income The a same includes XXXX, to million $XX.X million. income period a $X.X losses before $XX.X September Mr. Zalman. for compared for for

months loans third September and for a The income XX, the improved XXXX for net XXXX, the was the the quarter PPP period quarter X XXXX. and ended of tax compared value X.XX% purchase interest fair loan income ended second same X.XX% compared of quarter XXXX same to margin basis in XX, impacts on June the for in warehouse X.XX% interest equivalent to net XXXX. program results excluding The loans, the

for million for ended for $XX.X months quarter Excluding sale quarter salaries June accounting quarter XX, compared due X gain of the and the ORE same linked $X.X higher $XXX.X the in XX, $XXX.X million incentives. XX, the months in for for XX, period million, was and for period was net expense increase income was ended a ended September margin higher Noninterest period to XXXX. to X prior quarter XXXX. ended On Noninterest the $XX.X to for current a the to benefits during million on quarter the resulting -- of the $X.X the from quarter XXXX. X.XX% million same the compared XXXX the and XXXX compared XX, from expense ended recorded June million million $XX.X million XXXX purchase X.XX% for XXXX, XXXX. adjustments, September June XX, The was primarily XXXX and increased $XXX.X noninterest with ended quarter in for X.XX% same interest September basis,

ended expect fourth period X quarter was XX% the XXXX. XX, in XX.X% months of for months to September expense efficiency line June with for million be the for million. ratio current the or ended XXXX same XX.X% to $XXX and range in For $XXX of X quarter XX, we compared the XXXX, in to The noninterest XXXX

anticipate estimate quarter with million anticipated payoffs. last for the accretion amount This and loan XXXX third $X.X $X.X fourth value the of to we which million. line income includes provided recognized million in XXXX, value is guidance fair $X around During early from to from million income. in loan $X $X.X the We million accretion, quarter quarter fair be from

balance during income quarter XX, fee we the As XXXX, of September remaining XXXX, PPP Also loans. of million. the million $XX third recognized in $XX.X from is discount

The weighted of me loans over billion. next loans for let this in to the of XXXX annual As fee remaining portfolio that, with $XX.X of Timanus life deferred years some PPP quarters. on bond X.X the of metrics to the default detail turn September earned cash asset average quality. a million, two be of XX, fees And Tim? flows and approximately XXX, Tim XXXX, a and balance at projected with presentation had showed majority $X.X

H.E. Tim Timanus

you, Thank Asylbek.

loans assets 'XX for Net it September and nonperforming made other charged-off estate commercial $X,XXX,XXX basis XX% were these September a the service new which Charlotte estate. $XXX,XXX in September of approximately company $XX,XXX,XXX in credit loans. by charge-offs XX% 'XX $X,XXX,XXX credits, all one $XX,XXX,XXX is the The $XXX of $XX one compared X% 'XX XX, million in long or ended now as points months or XX, increase Of real to The was up XX, credits. $XX,XXX,XXX compared million. monthly $XX,XXX,XXX loans, assets, $XX,XXX,XXX for $XX,XXX,XXX total were includes 'XX. assets, in nonperforming Rasche. loans, $X,XXX,XXX turn energy ended XX% was XX% assets, I quarter repossessed XX, million nonperforming rate our X approximately of XX, ended September XX, $XXX June a our XX, the approximately billion, variable as at made total September up on 'XX XX The decline 'XX added over quarter sale, in loan average an asset represents any credit no and end at the of have 'XX September to XX, 'XX office dollars other comes assurance September but quarter from close. is Since XX, put quarter under $X,XXX,XXX PPP rate. the there the XX% rate were will for the from taken to June assets that from into 'XX, allowance. nonperforming been September $X,XXX,XXX allowance 'XX. in The building. 'XX. contracts Our is real losses XX, income contracts loan. which fixed secured at $XXX,XXX of will XX, includes for in September approximately during XX No outstanding This The $XX.XXX 'XX floating production totaled to points June were basis nonperforming nor or of Loans which XX, ended and for

Charlotte Rasche

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

Operator

Instructions] [Operator Please from come ahead. Our first go Truist. Jennifer Demba with question will

Jennifer Demba

Thank Good morning. you.

David Zalman

Good morning.

Asylbek Osmonov

morning. Good

Jennifer Demba

you the some color on give during could $XX if charge-off quarter. wondering I'm the us million

Kevin Hanigan

Sure, Jennifer this Kevin.

that’s COVID portfolio. was about current and down weakened turned a out which combined It the X-year turned of with Project credit energy structured that. and coming of Let survived the down got energy our the loss day. worried me us out bit a handle in of CRE this to Houston out tenant, still of a was

time crisis, in portfolio structured has of the energy corridor And of we then million was since I it from a lateness in energy if that down from had on shape corridor, time, corridor. were months. We the shrunk in CRE million the the that have about million of X particularly structured some million today. last portfolio, you'll were guys because way, remember CRE from the in tell don't little won't XX. have reappraised of any last million of of $XXX in on And the there couple credit, was to merger, in And exact $XX charge over Although back form. you we that want we're down. to what you final that reporting I Houston. XX a in elected it merger throughout we energy of I will back up how in into resolution the and the go and process at process that, $XXX at us, doing you that that total energy disrupt look left to or covered years is of back that Jennifer out a portfolio that the $XXX and numbers

So despite of massive, Houston, and just energy we you crisis will, make this derisking if didn't COVID between in portfolio asset one that the the had it.

David Zalman

it. And and just we marking look, by took can appraisal we level it like new a current what have deal to action a We with borrower. is prudent feel down today, think a of its, we cooperative they’re a we

Asylbek Osmonov

a David into I never think a was general another Montgomery, about didn't aside reserve. an we sent have though to money we for real set a positive PPD that and great that also for the even million who is, PCD that loans we took named any use guy back have $XX we loan, it we recovered did aside money in extra loan had

year So accounting see recovery, $XX if have get to don't last you were million CECL last under we a you too. accounting, it. But probably still year, for

So, the I thing think that's positive about.

David Zalman

overall bad went -- we little loans weigh Yes, had that the back ledger, the mean, and million, and bad this a on guy to the I put leftover could PCD on that you $XX marks million, the $XX.X I the that. think, over the those general against was

is any bit. it's So It's a this wave way, think don't asset I -- stumbled I single that think a a form. don't I shape or of

Asylbek Osmonov

particular think In certain future [indiscernible] and you we've Instead stuff one, about recovery, format. are done the or you and The different. having didn't would have thing, thing the of now miss same specific way and always We've too. ever of I we you a prior the would I that if talked way also. reserve say a generally, that's we you the sometimes count you on not always better see going that'll might then things is better. right -- a that deals, CECL only in didn't this loans. maybe loan, for -- under if recover the the done category way, And just reserve projected than one we've continue presented

Kevin Hanigan

right be our an now, owner of is enough that this I that current I the took a out, make to for their one the replacement has did we to to clarity, given find two have this, to tenants just we believe for the building soon. not out credit those tenants but payments. two on haven't have going not also will emphasize notice When been not renew going appears main they're that NOI two tenants. moving they're step that leases. they And that building those are the it the we think might move sufficient do able reason major

what that NOI. forces the So to doing this time of building was did. that's terms we in again, joined chose why with And once we we its do well legacy at

reason a time. that on a So at it to mark there wasn't put

Asylbek Osmonov

other get from It a lease building. on the other goes is a isn't to people this building. nicer again, it really Probably you this a nice feel. It's being negative a And building. hand, dump

need to there's did So to it's what of we we some to according needed any -- to more again, think we don't lease it's find a and do. that time do, question But they'll people really. just I what matter

David Zalman

Correct.

Jennifer Demba

you. Thank

Operator

Brady question Please KBW. next go with come will from ahead. Our Gailey

Brady Gailey

Thanks. Good morning, guys.

David Zalman

morning. Good

Asylbek Osmonov

morning. Good

Brady Gailey

great in reengage buyback. to was the It see Prosperity

you the higher price price a is deal But in guys and somewhat while. versus You is the capital know M&A know you can that sensitive. average today the quarter. growing third be I you haven't announced in little stock a that an repurchased your

given So excess the should you How and how see. now? here. Prosperity too, capital has to should nice Did buyback, we was increased about that sensitive we the of dividend -- you additional less the buybacks increases become from which just think on price amount dividend

David Zalman

last it the out bought Well, XX you stepping range [indiscernible] now. say price I the guess in did become less could we're was we more we $XX time sensitive

is, So good the money. did I are question answer We making raise the dividend. the think, we to

we is, buy still today. that my -- I going I a feeling to think are think I is personal opportunistic. stock real our be

that far, yes, -- the less overall would be price. we like be don't a answer anything be but not let again think that go I Not the I for it's we me [indiscernible] think would we're -- it's think probably -- that that. buy that pay sensitive we'll good to

Brady Gailey

Then $X.X think coming the just level? right. on normalized such last robust term level. we Or at you that one year now that a to for level. about that warehouse. all Is bit? continuing was do And a we and kind mortgage slip warehouse down Kevin year Earlier the in of are it maybe to longer should a billion think it little Yes, it's the was

Kevin Hanigan

Brady, well. in normalized terms of of with I'd normalized seasonality say caveat as Yes, the

are to rates has they stayed again, X,XXX the due was that. X,XXX and up this seasonality, little it's better billion to close average go to billion. assumes where a bit But we slightly. basically averaged throughout pretty It's October. close [indiscernible], So the ended -- October good think I quarter been than been for

to billion. year, closer we end I to for closer to the billion average probably billion, maybe the X,XXX And think billion. X,XXX will the quarter X,XXX X,XXX be

Brady Gailey

… last Then helpful. that's the on right, All one

Kevin Hanigan

are where where That’s off -- -- in million in -- today QX. the we XXX we were

Brady Gailey

Yes.

Okay. you big only heard have yield And pretty then the I $XX left credible step a one down. in took a how last me, your comments bucket. million for that

like bucket. to refill time -- me, that it it's to So seems it's

update we have just Just in anything? But, or conversations, on deal, getting front. how may thought M&A And You’ve big, deal pretty quiet been you're happy pretty, your strategy? big that which closer the what's latest an Prosperity. think the M&A a M&A for you Texas I that sense the do going, they're was made on, on saw David,

David Zalman

did. there. alone. there's commodity think out a when up. larger things, question, regulations all the talent mean, Price more and to banks and going going we about, the than having did mean, regulatory it I the especially more while M&A I work look for There's there's those considering participate be people to report you more I no of that We retain of you dynamics for think deal. home making more happy in I a CFB burden, all at talking trying

it have been that in went difficult couple town, and the their But price probably do And a in higher really or corner got state us name. I of share, one is they think want been. because of to we've you main banks. the couldn't us something a they think that have -- bank wanted don't higher, able surrounding because bank other. our that. that it, nerve I would keep very things Bank be like that a have for a and Johnny, cents to I couple And Johnny hard happy to we of know one again, with Prosperity was have they a do to been sure. just and just for We might tad per

I were at people deal of the that really look two got to but that's So again, bank. the one three that or we think,

then work come it's so the working we're we continue other to So that not deals. going that just that question been happen. to -- a we you're to -- when are around deals in look X looking worked We've not it's and continuing we've a going to it's if at short-term. X, on on some on expecting that And X question years happen, deals

Brady Gailey

it. Thanks. got Good Okay, luck.

Operator

will question Please Point. next Compass Dave from Our Rochester ahead. come with go

Dave Rochester

Hey, good morning, guys.

David Zalman

Good morning.

Dave Rochester

to wondering little a loan you're pipeline what at bit offset And expecting little quarter? that quarter. able I CRE the where new want just quarter versus then amount the runoff saw that looked of the a structured trend prior I you're was with you better do then start stabilizes? business now wondering this And runoff the was how bit. there if trends. in the or I runoff was shrank CRE think to Just the and shrunk end, in

David Zalman

Go ahead, Tim.

H.E. Tim Timanus

certainly think its deal I not dramatically falling. and steady. the flow not It's is increasing

actually we think be our of should have growth and I able maintain position on little to So top a that.

just invested major in [indiscernible] a As portfolio Houston, billions dollars. and time entire just the is or money example, for apartment or in as an the size has has that first developers Houston of so far I in announcement that XX know, in as what two call consequence -- sold years. that there three was recently the this owners of premier that in of properties would I one their plus and And outside

there's around. market seem example So to an turning things be a that purchaser obviously that That's future of in Houston. in how the thinks apartment just

the think don't that. on about pessimistic to flow. I reason be comment there's So you deal any may Kevin,

Kevin Hanigan

that in the Dave, strong. by I was -- We grew quarter. We I roughly in about million payoffs what the CRE your pipeline think had CRE Specific would X.X% QX aided yes, QX. quarter. says, in in some percent and $XXX slightly echo of is lower question, payoffs X.X% of Tim structured to the

million $XXX maybe from QX. recall $XXX you call, said, in do the last I QX million I If in quarterly thought and we

slightly better was of and CRE production, So results the the slightly on a payoffs. combination better X.X%

say, we in that than I the portfolio, of QX. expectation I payoffs go I've CRE think structured lowered rather in to million as would down through $XXX that XXX.

a what your that our of some up are can more and for revolvers in we receivables higher been funding Also, a time, in the it inventory So portfolio, carrying and C&I of of than couple overstocking of years the is of we're to being usage it's as is side. end the short on book, question, inventory, are on which of specific loan recovering, levels get long shrinkage companies fear growth when nearing seeing future. helping they

that last of year. just up three sign in good couple that telltale So the next sign quarter not C&I on, October another I growth a alone, it good of, $XX in to is weeks -- going of when up first the we I we up, I it's me, mid the for in we're quarter I put economy. an the and for good real of our that's balances that's the seeing there C&I the think, seeing weeks, of up firming in And telltale also start things first economy, time, that's start on to some would the a C&I us, particularly which are think general, and is awfully for quarter. million, in revolver be usage pick and mean, fourth the single-digit are can quarter U.S companies, in

prospects. bit feeling think about our a I we're growth So better little

David Zalman

if And the structured I you be will off, the real have rate wouldn't -- X% estate growth … running think our you the other probably in didn't have thing, again, if the

Kevin Hanigan

X%. Almost

David Zalman

deal. the get me, followed different thought get growth and We're certain route what our time, pretty saw different a a that when there pretty good merged us When even we looked of good whole doing think so X% that risk the some pretty we X% range, -- you state, for deal risk that reduced Oklahoma. now into even being you've joined, -- every But good. get at and with area again, so -- I we it we seen long the we're did and we maybe companies site in considering was certain I -- I and I structure of had our really think I I to a the -- pretty state looks growth good. think we

we're good pretty So at. I think where we feel

Kevin Hanigan

growth the was in but and of Yes, Texas it bit Central a was Houston, little everywhere.

right. You're

David Zalman

Dallas, But good the estate, back if seeing you real looked in added again, you you there. and growth are structured

Kevin Hanigan

correct. right. That's That's

David Zalman

speakers]. growth Go had [multiple We ahead Dave.

Dave Rochester

I opportunities some on slightly growth saw your was was had in of more you I there, good good [indiscernible] was just that wondering to that. we just outlook say, going should what see some Oh, energy,

David Zalman

Midland-Odessa with he we Well, -- crazy been money be a And us have the the client we XX we area. has make for and much probably has as may in about customer big in bought years probably but a checking as But he he out -- from piece their and there he he percentage. Exxon does a borrowed of bought [ph]. us. some Exxon again, selling of was percentage borrow big

Of course, his today he's it looks like money. almost doubled

that was a one. So big

Kevin Hanigan

XX. million, Well, look, -- of that net was $XXX just that was shy grew and we of that Dave,

So the shrunk single of portfolio outside that actually transaction $XX million.

Dave Rochester

Right.

Kevin Hanigan

we going just the do. to trying We've case. not always and that's think And to be selective said, in what We're I to be industry. prudent we're turning our that back on continue

David Zalman

it we're what stuff of that's time players, we've to the important part that that we that. and with And and bigger on, that like been been to that by doing when those now, of we're have again, to like really been clients the because -- is some have what focus grow guarantee everything years have tried and notes will just exactly customers right even that. grow try tried very old more XX And stay focusing down, say, the on for that's really

Dave Rochester

Yes.

that it pretty Okay. it, Well, is off that in the is that of much book, mentioned, wrap run terms in up? structured that XXX, expected you

Kevin Hanigan

almost always it'll $X thing we've in terms shrunk had. a billion materially, going but there something that think in That numbers to of be dropping be I out, X years. big not the

Dave Rochester

yes. Yes,

[indiscernible]. don't You

Kevin Hanigan

of on who participate has could end here it. be been growth Dallas the XX to story forward. last the the help loan years, going near [indiscernible] It's from guy I knock maybe Dallas a in for And in going think,

Dave Rochester

in normally, just pretty was growth. comment little the What more but strongest today, growth normally it's we that particular that the that's are Maybe it's the where are XQ, grew the fourth And Yes. quarter any decent terms one just growth the a growth loan growth the I wondering, of and of a last generally your positive in last thoughts year. we growing it get positive was in can on but like deposit quarter, on make is better is strong XQ. are loan quarter. in to than not one bit the in you Good. have quarter know, robust, securities, you given amount for that curve your really

they on what purchase thoughts were are curious where forward? that are for quarter, your the just change yields If growth there notable where So going today? any

David Zalman

right. Yes, you're absolutely

In Home a we or because billion up we when Federal borrow off money from have quarter, spread the in weren't look that deposit and shoot normal the decent for right I really our sometimes guess so and Bank, and advantage when we growth. that sometimes now. quarter XX% in fact, $X we where situation. even there was take go negative see any still would out billion buy and We that will see at not they're went in have Again, of but up quarter, really third a much $X would times times, the rolling there would money money. We're yield you Loan Because much just even But in low. X% fourth deposits curve, the so you in we that [indiscernible] quit you'll there to they dealing so in. -- we're year-over-year, advance, the about be when REITs

we are instead We a billion [indiscernible] actually keep over purchasing over in of from $X them. now there probably use --

back buying So we're not now. aggressive right being

any but loans the We so are more our moves in. to can hope money continue we off that is buying we'll We're rolls every continuing, Hopefully, comes as the increase much making we and we're category and real year. money put that buying money because big loan really. not continue have into

Dave Rochester

[Indiscernible]. Oh, sorry. go ahead,

Kevin Hanigan

to with to it Our ability acquire customers to some with before high start good we've to probably get that's because can strong. bring saying going deposits and market materially, any and we back will still payers somewhat, out problem, through I those don't go up to But wanting circumstances the have us. suspect rate any rates to the [indiscernible] retain deal If We change had that problem. and is get finally been of money in. of

So for I be probably are solid think while. will deposits down, a

David Zalman

part deposits of -- core our growth really get CDs and most We core. are for left are any all out. core all We from customers really. almost hardly don't is of the deposit go our All

Kevin Hanigan

That's correct.

Dave Rochester

where are Yes, today? and securities you yields seeing those

David Zalman

think I they're what shooting to is closer for. at probably X.X we're

Kevin Hanigan

see. we what That's

David Zalman

X.X

Dave Rochester

where yield That's is book the right now. Okay.

not So at point? diluted this really

David Zalman

No.

Dave Rochester

Thanks, great. guys. right. That's All

David Zalman

Thanks.

Operator

Our with Wedbush. ahead. question Peter Winter go from come next Please will

Peter Winter

about Good loans wanted in morning. always portfolio what's terms lending on yields the maturing? the loan happening you but I competitive, can know new in ask environment, versus of talk I to it's

Kevin Hanigan

end Yes, as is it in on a And front end get we standpoint. that yields high extremely are can. much of from pricing the competitive, we trying to low especially on a X X.XX, the today book The we're as X.X.

Some of more that stronger But that's difficult. seeing. becoming the that better, -- general, in the credits, and spread we're that's more

David Zalman

what average, loan month, this generally Well, quarter what our we the I know XXX. think --

You said … or something

Asylbek Osmonov

think. Yes, I I X% think around

Kevin Hanigan

referring was around new funding. I Well, to loans

David Zalman

[indiscernible]? number that have You

Asylbek Osmonov

Yes, I had it.

it's around think I X%.

David Zalman

under X%. just Yes,

Peter Winter

That's just for the the X%? average under quarter, third

David Zalman

Yes, that’s right.

Peter Winter

the ask, discussion lot going of we've we think inflation I those about about as if one that year? could manage about pressures maybe hearing ability earnings, talk Prosperity, Okay. expenses. expense then, I is been strength And And I thinking into And you're a of But next how to about if could year. some you're pressures seeing? was just wondering, next you inflation growth move of that through

David Zalman

and a the it. see vendors, get we we things there's we the of work with lot. we're and lot pressure, There's trying our doing, pressure, do in also right, of technology, a overall, side that right, the with lot automation HR Yes, the of that lot to from we some but putting focusing of not a people employ a lot there's -- I that mean, But of are coming replace just quite or you a do see lot because manual could a we from employees. lot a spaces vendors, we deal of that

We lot that on of have a it. project of side going

pressures So we to this that offset expenses should some have. reduce inflationary related

at we thing have, the significant If good expenses. place contracts the the you -- from we in long-term look for what have

on pressure it. much no that of there's So side

at able those looking we And due all expenses of -- when come it, inflationary. that. to we're the the we implement the looking as we were expenses, But to increasing that branches, certain aspects looking manage processes we're some processes So We're in at already should right. hopefully, I the described. to place, offset automation, that

are by So when think time I I bear working look quarter projection at the I we that million, think at next stay some should processes least two quarters, XXX should I that some on million fruits. X, gave XXX that and to

Asylbek Osmonov

us We're we're question the say, And try we're from would positions had. may even I to everything also there's to Peter, where jobs very more. side there's technology Yes, is in company there, and can cause strongly. it. no we've we inflation going and watching that it automate the to And watching money

say of or we're that that past something certain that in the in bank not of hope this, it. maybe going the to at are to branches you look me and fix that have just kinds areas these we weren't times, do Let we things profitable, didn't were profitable, that that's because where the to that

Kevin Hanigan

whether is you of is getting, cost cost banks. input about that, think and our that money. like last rising except of company The wages is, the and but base rising broader in input When add customer sometimes wages, with we of their money I products they they think just it's us. component wage is for going I all about every costs, here, they've costs, got -- struggles and thing at would steel down another our our The a have do, still context, which looking got, also for their they're dealing or this

And will the again our If quarter. think I down. cost trending in it it's you look the at trend of fourth deposits, down still

and dealing wage So not costs. part it, we're the pressure just of with with having other input the deal to

relatively So input I any than just industry affected costs services in less America. about by think other financial is

David Zalman

really being And is [indiscernible] having [indiscernible] are contracts locked stuff in.

Kevin Hanigan

yes. long-term For contracts,

Peter Winter

if one great. more. And in sneak I then could just That's

what and and could was quarter? wondering a funds next driven maybe public increase margin really nice left if like the much just had you I'm how by looks core the the is core of and repricing Just just margin about I'm talk for that assuming a the lot of

Asylbek Osmonov

probably I'll look kind that going there. of it's look give hard to like get -- you give what's if you will next some to to at variables So you help quarter, but exactly

at we If why at core PPP if you the with from X.X% pretty up loan second our net which this you That's kind uptick the interest was look look loan growth And you our fee good see income million in was had growth, quarter. third $XX.X on income. of the annualized quarter. quarter,

PPP second So if I you it look income, value. improved quarter. and and has that's excluding fair what core the at the to super call the warehouse net It compared interest

next more to So improve the the should And we the core And -- the most , and before fee. deferred think adjust Because $XX.X if you're recognize PPP continue on down, the income wave guidance NII. core fees, like have super to value then just for I what two looking million on I quarter, gave be quarters for of we slows of fair what it's that we PPP you have the fee it. left. we kind think going

are you give heading to guideline kind net income. related of we where variables that's think interest to a I So

David Zalman

several are decreased have little midyear XX of funds that the quarter, of I And expense points. recent in XX public public typically being million range. now in are and XX in we the XXXX are that basis reprice. going end funds done And to had XX the time, it points. funds that at you September, points repricing a to average this And on basis XXX between our that, can to point on At interest color basis the the be XX public At was give you quarter, end mentioned June helpful. most funds, this might public

to continued see, we're public fund costs. I in decreases going So believe,

Asylbek Osmonov

Yes.

think for interest the funds. looking the third the at will on least the I bit expense of just definitely we've be quarter fourth lower repricing our of little definitely, than a So -- in quarter, public had because

David Zalman

core super that to going use it. Peter that you're is if trademark,

Peter Winter

I'll Thank I Thanks send much. over very all That's fee. had. you. a

Operator

with Instructions] Markets. Capital will next [Operator RBC from Our Jon go question Please Arfstrom ahead. come

Jon Arfstrom

morning, everyone. Thanks. Good

David Zalman

Jon. morning, Good

Kevin Hanigan

Good morning.

Jon Arfstrom

accelerating at Texas Just a ups. Do but is areas into point? it's feel do than It's accelerate stronger of other follow growth loan XXXX? the feel like lot can couple of -- accelerating obviously this like you it country, you much of guys a

Kevin Hanigan

do. opinion every the what in is a I is and I do it's again, market just feel This think day, I accelerating. personal from This Kevin. being it

interesting chain an get breaks supply normal. to phase think more the and I back we're when going go free, breaks, we to through

we period think us as of products of what it'll because temporary we're to think if of really going through growth they've a see the it's through demand, -- demand, short go hyper backlog pull waiting maybe give back I and of sense a good I see then been good bit for now, to pent-up the period maybe people we'll that that you. time little that'll makes that once up And get pent-up for.

Jon Arfstrom

Yes.

Kevin Hanigan

pull-through the the to followed moderates supply see going when think I good growth growth than there. from we've industry then really we So better chain is by it seen, issues, and

David Zalman

it prices really the matter. Oklahoma's that think the Texas agree for economy. trickle to need these to really add with energy I happens a If that. increased to and going we start is one economy entire of to And effect what that focus to And in that's I sustainable, having on throughout thing are side the

a terms little I all Texas [indiscernible] obviously, just few little make to think oil a of thanks natural too But changed soon the in price on have in of things that. it's helps Oklahoma. and months, a of which dramatically and recall gas,

David Zalman

Texas … states better is going other just think to most than be all I Well,

Kevin Hanigan

migration. In

David Zalman

have nothing build increase an to with current you the apartment, migration, to that have build can you really home, coming in through the And a administration but Yes, that fossil of that. people see infrastructure. number I the the to a fuels, are hates

is doctor's actually there office, that the was to eye has wanted busy in yesterday company, guy people, So be. this I was service to the a I when was and sitting what [indiscernible] talking some can hear is as they I he

And are the it. of service so side people in

old in don't jumping like days. a things are did see up of people into the the So you business, really picking think I lot you'll and

Texas just You drilling There I've and been lot you'll or just that it higher this you've than be [ph]. up there. with supply of steel [indiscernible] because see seen milo for older people, inflation will think the go to and much and the as there, have something, mean, companies selling is or that years, have at thing then cotton probably, that's produces the older another dollar price they're a demand crops. as I corn, XX won't or be I got

So up. you've commodities got going

going gas got up. oil and You've

I in. moving people mean, it's got aligned, You've I are the stars think.

Jon Arfstrom

How have to thinking, thirds little rates. you two portfolio. about you you Okay. of your On model? How and levered other the business this balancing to on careful a have of the quarters hand, think you be would yourself. about couple And, in ago. you're hand, securities I imagine, act loan one about think between -- your do growing higher rates the you bit protect those And asked forces? I But a higher do two David, your portfolios

David Zalman

the is So, exactly I want don't question, question got understand your I to what I make sure know that it. I

Jon Arfstrom

to company. extension at of rates. the then it you're hand, you the about your sounds on work And rates, lower which I other the earnings just like how putting expecting the positive me would on portfolio very risk do to to be higher trajectory money think -- want for

David Zalman

-- at crazy, mean, sounds don't a you X have we I really we X-year the our rose. our about we We try or it look to it portfolio, when if And years. portfolio, our rose call REITs. Really loan at every but bond get don't X about turnover, look all really,

Asylbek Osmonov

years. X.X

David Zalman

X.X years.

trying to not So we're REITs. really, call

for that okay us when higher say mean lot model basis -- our help really models XXX -- But you XXX when shows growth. mean, think they points show I I models, does points a our basis our rates will least us. of I dramatically. will we

think on loans buy buying that continue they try everybody we I to our prime at will money going in, comes as are continue think market Fed are we'll I I going to don't times like position got as There the rate do, we're So one I that us to least fast most. that as the we're thinks that could self. that's that to And think sometimes normally where to think Texas. mean, buy the interest the and the homes family, -- like more know can, we're increases continue. call REITs. again, than going those don't try thing that I I selling. may that'll would spikes, we we high, and got four we that rates had see and raise from residential least at a to you've extremely And in stock perspective. you've XX% help But

So just extremely prime blow they can't [indiscernible] to could can it and rate, raise go the just the economy.

get of it way On the done. XX-year the the that's an get get it, can of that and up should Kind other of the think rid hand, I tapering they be rid drive they basis extra yield way can in and XXX points there.

we But raise tenure to they shortly opinion. yield course, me Of does my can the get spread in Hopefully there start raising look that thereafter. little it I a tenure, what higher positive. have prime the bit little bit rate they and [indiscernible] the and a say think on pay real higher don't

Kevin Hanigan

say And premium the drops will one I dramatically. thing, amortizations

Asylbek Osmonov

we from I as or look that things our loans you a flow of annual not from cash other have will be and $X.X definitely billion in that in. invested so like either generate much because portfolio coming we if would think cash flow worry that it's the Yes, at portfolio, one much one to standpoint,

David Zalman

slows costs our for real too, know I a that that's portfolio, us. when would plus [indiscernible] anybody's mean, that in that on -- be don't down, brought sky Well, just I up this hopefully, walking that quarter

Asylbek Osmonov

there we'll like slows have don't extra It million $XX I it's reading. amortization I down going significant, Yes, slow million even to this it that's million, know seems to down. that [indiscernible] but be mean, $XX.X dollars and quarter, should … that

David Zalman

I it remember $X was million. when

Asylbek Osmonov

year. last was It

David Zalman

that it's from or Yes, lot. million of have course, the a million $XX million, still $X to million $X $XX go But a bigger - you portfolio.

Jon Arfstrom

I help. the for Thanks right. All appreciate it. Okay.

Operator

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

Charlotte Rasche

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

Operator

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

You may now disconnect.

Prosperity Bancshares (PB) 28 Oct 212021 Q3 Earnings call transcript