Prosperity Bancshares (PB) 27 Jul 222022 Q2 Earnings call transcript

Company Profile

Participants

Charlotte Rasche	Executive Vice President, General Counsel
David Zalman	Senior Chairman and Chief Executive Officer
Asylbek Osmonov	Chief Financial Officer
Tim Timanus	Chairman
Kevin Hanigan	President and Chief Operating Officer
Jennifer Demba	Truist Securities
Brett Rabatin	Hovde Group
Brady Gailey	KBW
Brad Milsaps	Piper Sandler
Ebrahim Poonawala	Bank of America
Dave Rochester	Compass Point
Gary Tenner	D.A. Davidson
Michael Rose	Raymond James
John Armstrong	RBC Capital Markets

Call transcript

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Operator

Good day, and welcome to the Prosperity Bancshares Second Quarter 2022 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. to conference like Rasche. to now would turn over the Charlotte I go Please ahead.

Charlotte Rasche

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

Finally, we will call for open the questions.

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

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

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

turn David over to me let the Zalman. Now call

David Zalman

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

With second core cost strong XXXX impressive sound growth, controls quality, average of the and changeable on return quarter of Prosperity equity earnings, had asset common loan XX.X%. continue

is share an linked to for of months XXXX, net was We are the with our three the stock XXXX. for a common compared months quarter optimistic months June the our With XX, for $X.XX company, the three X% June shares quarter. three ended $XXX repurchases the And our that's the was earnings increase XXX,XXX which for ended on net million the dilutive basis, regard ended XX, ended of three $X.X Our income evidence March about of our our XXXX million XXXX. income for during $X.XX XX, by or March second with months $XXX compared

months three XX, to for were XX.X%. due billion program, was again loans, $XX.X June or on equity were XXXX, $XX ended three and average June structured billion, purchase Our XX, PPP annualized warehouse regard decreases annualized the loans with compared June of loans. estate on on on to XX, XXXX June XXXX, commercial billion, and real primarily common ending decrease the the return $X X.X%, in for a average loans, months XXXX, With assets X.XX%, return XX, tangible

to increase warehouse June $XX the purchase or XX, PPP loans, were million the program compared an $XXX on $XX.X XXXX, XX, loans Excluding and X.X%. June XXXX of on billion billion

purchase X.X% warehouse a loans, quarter annualized. quarter-over-quarter. year-over-year loans program million the X.X%, annualized increased and growth loans, X.X% like we X.X% the or and and warehouse saw PPP excluding $XXX loans, growth PPP excluding program, purchase linked Bottom Our line,

$XX.X XX, billion, of on on XXXX million, $XXX June billion deposits XX, an Our with or increase June XXXX. were the X.X%, $XX.X compared

deposits billion quarter in or on billion, $X.X XXXX. decreased due The seasonality. decrease from XX, $XX.X X.X% March primarily to linked deposits Our was

The their As and point the XX, our previously more opportunities. over with XX, resulting the balances costs, mentioned, regard schools cities, as and municipal have assets. investment use with year. credit higher non-performing compared With of third that contributing assets customers, that such for XX% in million we the to move on planning quarterly to to declining as the average assets rates economy companies higher XXXX, million regard continued quarters points With quality, interest technology now and balance XX June off December they and increases. before earning considering XXXX. public in and was XXXX. January seven conversations losses succession interest $XX in space. points places people the to to million earning non-performing acquisitions, costs, We receive sheet or Decrease or regard assets $XXX to that continue customers was fund salary June loans and shine account on regulatory continue concerns, on competition, rate second funding on Oklahoma to not basis overall, decrease throughout and increased believe moving asset And to burden average credit allowance June the the a tax exposure $XX interest of was consolidation. dollars have increases basis Texas funds of bankers we Also loan offering customers, are With the recent XXX to these year, our counties XX, to were that in quarterly other in available totaled

added Dallas during CNBC, the XXX,XXX growth to quality, low. three average unusually customer unemployment and manner, while Prosperity the the remains efficient distribution technology XXX,XXX on in Texas jobs, investing operating than product growth and and annual times continues an the bank in according asset last Farther, job year jobs, added to lowest example, maintaining year, jobs Worth Houston building ever over channels. changing For core more states sound area the Fort focus annual last its combined. the XX area add relationships,

We that I it grow continue want acquisitions. our and in become. company them everyone make has success of your our through the organically to thank both company mergers Thanks the helping to support for company. for and again

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

Asylbek?

Asylbek Osmonov

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

at are same income expense on securities for seeing XXXX. benefit the a net increases increase quarter decreased benefit quarter, of expected the the additional sheet, we the term of income the interest rates of will Due and on balance in $XX.X that rate to we position compared However, interest second rates increased end the second to believe the asset sensitive deposit. interest reprice. our as long million, increased in of the the and $X.X period XXXX million Further, assets

June tax interest full net summary, third The the ended for year-over-year will decrease XX, XXXX, income the XXXX was quarter, in ended that improve. XX, XXXX. net due and basis loan lower to increases PPP equivalent expect value X.XX% same for for in quarter loan to the months We net interest impact X.XX% interest of period X.XX% compared we the interest The the primarily March anticipate to on and for on income fair was quarter third the margin a fees. this expense. margin In three continue

XX, ended in is The ended increases XXXX period $XX.X adjustments, purchase to the quarter expense and $XX.X the March for months the XXXX, June million net second quarter quarter for the ended was compared same income million margin three the to million period for in XX, $XXX.X Non-interest increase $XXX.X was XXXX, incentives. benefits same compared the merit the $XX.X XXXX. the X.XX%, XX, million the period million and the Excluding higher XX, XXXX XXXX. for XX, in ended and for XXXX three XX, salary for June quarter quarter and March XXXX. and due discretionary XXXX, ended annual X.XX% the compared primarily same for was million March for XXXX, for $XXX.X June to in ended months X.XX% in Non-interest accounting the interest to

was The compared XX% ended ended expense to non-interest to For XXXX, three range for three XX.X% the $XXX months XXXX the XX, the million. for to the in quarter March expect in ratio million XXXX, XX, XXXX. $XXX months of we period and third XX.X% be same the efficiency for June

During the loan we XX,XXX income. fair second in value XXXX, quarter recognize

Also the XXXX, in $X discount second accretion of we $X.X fee $X.X remaining to is we PPP the balance estimate for discount million. XXXX, XX, balance, to June Due around of quarters during next quarter be remaining income income. million As million. that low few recognize

fee June $X.X XX, of As million. PPP deferred remaining a had balance of loans XXXX,

showed on significance let down. PPP asset income Tim? The portfolio going years don't the So, at with any X.XX.XXXX approximately And life projected billion. we bond winds loans for of Timanus Tim and over a weighted cash $X.X flows presentation details me average some turn expect the of annual metrics to PPP X.X of and fee forward forgiveness as that, quality.

Tim Timanus

Thank you, Asylbek.

Our monthly XXXX quarter for loans. billion, new loans of quarter The the loan June Charlotte, XXXX ended allowance. $XX.X Loans for were PPP The June and includes at quarter made $XX,XXX,XXX rate quarter ended during million now to June loans, $X,XXX,XXX which were XX were up fixed other March in over allowance total outstanding XXXX the Of ended you. assets floating loans. credit million. XX% added made XX, estate. and and March from average points XX% XX, income non-performing the XXXX. the repossessed rate and $XXX assets, XXXX estate, XX energy XX, No length variable June a $X,XXX,XXX any production points rate or into credits. total $X was is loan XXXX taken losses XX, June turn non-performing total charge-offs it ended loans XXXX. I'll XX% to approximately in $XX.X the XX, the an compared $X,XXX,XXX XXXX. was basis basis represents asset are real This quarter end and June at $XX,XXX,XXX in basis. only XX three $XX,XXX,XXX The and up for $XX,XXX,XXX Net decrease, months non-performing real XXXX, the $XXX,XXX loans, to to non-performing June or on assets XX, for of other assets, compared were of at nor approximately XX% XX, dollars XX,

Charlotte Rasche

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

Operator

now session. answer will [Operator question begin We the Instructions]. and

Jennifer Our first question Securities. will Truist from Demba come with

may not ahead. You go

Jennifer Demba

morning. Thank Good you.

David Zalman

Jennifer. morning, Good

Jennifer Demba

you provision, provision haven't quarters. past guys a on Question had the for several

wondering look a at provision is. think you the low. know outlook? remain to I wondering economic Just pretty outlook versus are probably maybe challenging what you But there just more losses going how

David Zalman

pretty reserves. Jennifer, I'll mean, million mean, I it's in in David. $XXX you This non-performing simple million and have start $XX I math. off. I is think

coverage. So, that's times about a XX

So, in be. may anybody that than better the be industry may

increasing see something that unless we really future don't in dramatically the see I So, really. change immediate

Tim Timanus

the consideration, have we reasonable have we I Maybe of about going make there's issues activity. obviously, extent Texas right affects about did come of it past during economic To a just and won't. would lot that'll But We'll the what guess. about say And activity. period some now, to COVID. that take maybe recessionary there's level pass, It I recessionary to of see. Oklahoma? like talk we that, But to forward. now. projections some issues could into hopefully We're back, concern that that come

both far, states Really? great. are So doing

Asylbek Osmonov

Yes.

horizon. the comfortable that at. people too you say, position comfortable not we're much I what's where in again, could other have there. people some take where might the And think knowing very But we're at, feel on I

Tim Timanus

where Yes. a I are that takes we have should Basically and we mean, indicates be. I everything just into we model said, consideration. it that

I way the envision change big any other soon. So, don't one anytime or

David Zalman

are any thoughts it, you have you? Kevin, on

Kevin Hanigan

X.XXX. recession going went was we factored quarter and about overall is and the end from about a the possibility our number, concerns which million, We've well the recession. to impacts the [ph], No. on at deriving over of in which X.XX portfolio $XXX in COVID, percent, of the concerns is I recessionary say

the into at contemplated model So, we quarter. end impact any is the recessionary have that baked the of

Jennifer Demba

think [ph] my now talk and about for loan times and Okay. Can and you're Thank including question just warehouse? possible on you what your second you mortgage the you. And what is excluding seeing growth. XXXX, is

Asylbek Osmonov

Well, let off. start me

quarter June the million. And This loan June. very year, first had. three XX, for of XXXX number did well of the with which $XXX ended The The quarter growth was June, that of We in of was good $XXX over average months million. all we've in month quarter it was very the with the culminated month. million $XXX just this that of one best ever terms $XXX for month of compares million

robust. committee So, has since June our activity been the long of end

be ago, strong in As so just very far. the a minute mentioned appear Oklahoma and to economies Texas

long forward. growth So, I there's a We're think excellent chance. to see going good going

Kevin Hanigan

Kevin. Jennifer, this is

It talked off, the The April. I started some quarter million $XXX and were you we of Just late quarter. of a off, in the hole to early on inside in the we in the started little month think baseball quarter.

up loan that still obviously had neighborhood. days out early, the from But good or quarter quarter, structured so end, dig paid CRE into to last off quarter. before we in paid we million growth. relatively pretty couple deal gosh, fee a a we multifamily big I of and We nice that that. in think and the And got, million got two prepayment rebounded off early of And out we $XXX over a we going that were thing. And That paid -- ended up off, hole week projects of the $XXX large of. with was three

I mid loan would We the of -- say, year. And started we're the a quarter off a fine. growth kind big probably would in stick year, we're as the X%, to better. This didn't for off start with along hole. company, we going single-digit tracking for pretty

we much didn't have anything. quarter, First of

was quarter Second good. pretty

This quarter good. feeling is pretty

very As Tim strong. said, loan committee activity has been

better hiring quarter, group had them. hired the expectations We've last talked done in and out the we expected guys down even than about think those high we we Houston. I corporate a and team here of have banking

pretty single So, year. growth, about for that we're loan the digits feeling achieving mid good

Jennifer Demba

Thanks.

Operator

Rabatin from question will next with Brett Our Group. come Hovde

may You now go ahead.

Brett Rabatin

everyone. Hey, good morning,

David Zalman

morning. Good

Brett Rabatin

those deposits, specifically about could the of you municipal being the source quarter. talk hoping you decline the just You and the was talk of mentioned deposits linked some about and I deposits you bids balances those those or decline. Was with that just due not more color to to be lower little maybe on as did deposits customers? a competitive Or elect on specifically?

David Zalman

David. is Brett, this

If time counties the seasonality, of read, summer is the the in the lose that the you've made for historically, it get deposits the we schools, and for lowest are first municipalities, a usually amount second they use lot following quarter, stuff. certain had. have year, us quarter time, their dollars of the which if a been -- municipalities third you at and tax I up cities, always we then these my the of the and they and would because a the They just as year, mentioned quarter of we of end long third get in --

always those probably we technically in five deposits, it category. because this used we $X.X would that run really would a that they were with million, have them. on like be say I thinking billion, $XXX or time, was down more, So

were municipalities. the had usually their investment rates somewhere more when accounts are And rates with we so of did not operating have is so when kept they kept However, accounts, funds accounts else. operating usually low, been of only see had us. But these what low, investment we their their

accounts. is to a other just really saw you not getting $XXX basically funds, amount again, the I of less of the And of really, or that's type deposits or X.X%, have. go but look year-to-date funds municipal use our I combined their operating out But overall, deposits investment what the go I X%. they deposits, when grown investments. it X.X% million probably or were this little and five think just we at seasonality best than you have as able what We better with -- our when because could didn't at to start So, over have deal get a normally look you usually think

that any in just from I with So, we adds to in municipal was not, if enough in? jump coming color don't somebody more it but side. knew standpoint, that the know or want may else

Asylbek Osmonov

what said you Well, is exactly correct.

It look happens all time. historically, you If very normal. quarter happened this is what the

David Zalman

years stimulus two for rates Except year. previous were from covered were deposits last just the with just -- up money. Every where we

Asylbek Osmonov

still rates period low time, And as our were better of that rates of were commercial banking. outside as than Well, that's they right. what were during

all virtually money entities they of period with us than much They're our have left still public of customers. these more done. that time their So, historically during

typically said, David we their that part business. the in As of operating have accounts

So really that something hasn't is changed. This that's normal,

David Zalman

it was if a because bit the is again, pulled back, into probably us. this little so was years, normal flowing out you the camouflaged because that think probably that, it occurrence many a last years see of the two stimulus see deposits, I deposits and can't this couple every really would last year. you really you that the didn't for but But happens and it, really, see from banks, were all you went

David Zalman

that Not well. side darn did fund that we means deposit of franchise, stripping non- when look out pretty we But the things, at deposit. but public our

to for So non-interest grew think just this side, the million the deposits bearing, in isolated demand loans I to was $XXX public funds quarter.

X.X%. annualized linked that's the So quarter,

a that's competency funds, ours, fund really our holding are non-public public this the not deposits I of So, but think well. core up

Brett Rabatin

taxes but little a like it little seasonality you better quarter. that. just lot, a whatnot, it great on but from wanted then that did the just understanding to this bit That's a looks to I And securities portfolio secondly, was figured Okay. and do color. the

Just on do? think for little that? hoping portfolio amortization what a don't bond yield added might what and curious but was you on the on that I you the just rates I color what was do portfolio, at premium adds, more the this what quarter, know

David Zalman

four start we getting that, were three then probably off, today we're and better was we probably despite quarter two I a probably I'll X.XX% quarter mean, week right ago where X.X. somebody securities in [ph] like much in. think bought obviously, would think investment [Indiscernible] than ago. jump when weeks is now, I ago what that's or we buying -- on were securities else probably right had before Then again, That's something I But, the before, we about getting our what a on probably something. X.X or the dropped we're now X.X. something like is months

yield of getting now. So we're right that's kind the that

And so, that much better and will continue. I think

Asylbek Osmonov

that add To liquidity we to the higher That's rate. in quarter we little bit that, end a a up at bonds Yes. some little a because a bit buy had utilize of on of liquidity the first see you earlier big annualized the bond as on improvement cash look portfolio portfolio. of picture, the you from as mentioned have why the that I flow in $X.X billion at about yield. our we But bond

So we up reprice discussed, us that that what X.X% for or sets just well to pretty those X.X%.

us going standpoint. be beneficial very its to from So that for

premium question, asked can and amortization I On second see think of slowing part about, is down we the it. your you

balances right bond the second balance, estimating think assuming bond So amortization $XX.X the portfolio we to come stays is. third down quarter, going If the more. was our portfolio a quarter. saw for plan as on think I the projecting the million. the what to we in to premium I the keep little We're premium second around bit of $XX.X And quarter, we're saw now million, amortization be

Tim Timanus

this that, And X.X% between be the And was where at that securities not on up, X.X%. now that can to I period appear X.XX%. Asylbek, portfolio a to add average for quarter right we be rate our down. to And we prior would and clarity seems going invest

year. return increase the securities a portfolio, the consistently we're of So, rate of in an probably at going I think for to least see

David Zalman

two math, easy XX, That's from billion. XX percentage

Asylbek Osmonov

easy. going looks favorable least. fairly at It's It forward

David Zalman

Correct.

Brett Rabatin

could. One That's if one, last color. I great

catch little going think Is higher like almost would you margin was seem little a deposit said, expansion lot betas. that is, the second fair be all could it higher in that's assumption are just not and forward. deposit people or that you a a But up of expecting betas off Given the even than a your it case?

David Zalman

And know I been I'd But good. modeling. to extremely own do the always cautious, something just for our never in have when happen. it modeling, looks the looks doing very favorable could our Again, when it do we modeling, ointment, say the we So, mean, flies though, us. I'd because you

Asylbek Osmonov

have add interest at parts bit little the more to just a kind what sheet. looking look income, margin just our balance just color, have net And big of if Yes. to at picture you or we you're of in the

about portfolio discussed being repriced. we getting billion repriced, So bond $X.X

on impact ago, help in we Our loan to I impact quarter. a the help. increase if loans of that might the higher what of see increase the we net deposit bit just in have second a be but impact at, you're interest, quarter, will still minimal will deposit saw, the margin definitely because in that think putting than growth going did income see quarter yielding rate little had the less at the it we'll overall, loans increase we're third second deposits. But that in and that's right, the quarter. But very we months the specially second looking of third to few you quarter But going that

David Zalman

the the the like where hate of outside. bringing trying story our I Queen of good. a But mean, Mary, use in it's told Queen rates Mary saw direction interest captain the will the around a it's around. looking ours. has turn ship lot right I me, it lot takes the the other keep right I They're a went us to to in turn up. real really parking banks big Yes. probably more time margin in It up. floating going interest the and net increases, But to

Brett Rabatin

growth. the great color a Okay. and loan congrats on That's

Operator

will Brady come from question KBW. with next Gailey Our

go may ahead. You now

Brady Gailey

guys. thanks. Good morning Hey,

David Zalman

Good morning.

Brady Gailey

big question after to picture levels. I on a quarter capital Capital continues just quarter. grow just had

I ratio you it? still the So pile do growing the I aggressively you you How increasing sort absent more let just Just deploy XX%. mean, What will it that. Do keep do with of M&A do Do you excess capital? any mean, conservative that of help your deposit excess at pretty think dividend? think capital? this is payout around about had growing? about

David Zalman

The M&A. first question there will is, be

will secondly, something that We it will right used just be almost that. for of in I and some front then going XXX say that thing. I of be and in would And -- XXX, have money the It to me. you million saw us pickup shares. don't

was that we undervalued. I thought we And I was that. average So or price XX something think it that that really our stock, showing like felt our really

So, really that. we fine were with

going So our becomes price undervalued, stock we'll I do you'll we'll if us that. really see consistently -- you'll jump any year. becomes that see our this into some how I that it see But there, being I different in if don't dividends and price dividends think again, our forgot think for the that we've long. I probably -- forward increase And increased

assets intend decision. that's continue growing And course, important the Of the bank. to we of

me think undervalued. little yes. and increased say see even dividends through it's it you'll I M&A problem back that. use us little let you'll the high organically it a bank It's probably So of you'll higher And becomes the probably everything, for if of of everything, and see stock growth a class that

Brady Gailey

peers. guys M&A? like model it with I dialogue M&A earnings say still seems M&A there. on Would still Prosperity's sometimes here know their a comment, for And quarter, near has M&A is on David out little it M&A the calls a you And this banks engaged seems just possibility different from you're is in you the uncertainty really like economic Great. slowed than term? actively

David Zalman

for previous it's would I us quarter. probably activist say been than quarter more the

we've think active banks. different pretty a in had talking quarter to I

Brady Gailey

be just what you your would geographies interested wise, of the other top us are is Texas. what in? you potentially targets I in? maybe focus update state know, And size there But interested in And

David Zalman

Dallas, we that said we're in because you of I Having think Again, primarily we've Texas now. first first right state we're would our at, If be are and of focused Houston, that -- we're within Austin, we'll wherever a size it, had state, like at if the willing several probably we've smaller would a do from the we in that's the also. then state that, to of and focus. Texas where five be wouldn't we unless banks And we out go, at be think said where size. look go deposits. assets I Oklahoma, And we'll we and that, bank, in do markets, we different the I that's probably bank state, about. had really another mentioned, that's do within our banks to But talked in and top the could think again, it really of a they're smaller

So, that's just our general rule of thumb.

Brady Gailey

for know your your as unrealized stuff bond held-to-maturity all Because What's on you're loss portfolio to up a portfolio you guys. And for end? to is the happen doesn't that I maturity. just, me then held mark-to-market the finally quarter on

David Zalman

a might Thinking billion. I be want Texas, -- about what it million after or credit $X.X to

Brady Gailey

Yes, sorry. I'm

going I show to in it's billion. queue, to $X.X we'll we're going do put our it think

David Zalman

before tax. That's

Brady Gailey

yes. tax, before That's

David Zalman

asset The be tax about would deferred X.X.

Brady Gailey

Yes.

to improvement I much last and our weeks. but few treasurer talked there was people, So, so said they

So the yes. million. That like I highest so now, a was think got. X.X much we it's better But

David Zalman

worry loss the because tenure are short probably because that And much down. aspect better tenure of that unrealized the so bank, bothered about up, the term. our We the didn't get go that back on other me, has It's unrealized. future earnings in rather I'd very money for the hand, come better that

I think our duration, and I hope only portfolio years. four is

a time. period reasonable seeing start of we in So results

up, see it's like our still important out still to futures. of would any had even I that our rather That's problem. may say improve, the sell past I'd see, to to So, never it's been never dollars frankly. securities a tenure quite And portfolio We've the go portfolio. historically,

Now, in whatever be bank have it front numbers liquid I around. most to But the is, the me. don't of we got

billion have Federal billion, portfolio, the loans $X or probably of off comes XX ability our day XX our and billion the to $X any it -- the at I borrow the we Loan can or we amount money. repriced $X.X of get think I billion think, Home

unable before, So a said before like we're [ph] be and have I to food eating we'll beans liquidity issue.

Brady Gailey

Thanks call, Great. for the guys.

Operator

next Brad Sandler. Our from come with Piper Milsaps question will

You ahead. may now go

Brad Milsaps

morning, guys. good Hey,

David Zalman

Good morning, Brad.

Brad Milsaps

I just spot on if to average that, were of of the loan relative discussion, curious quarter? was said XX, you rates margin for I sort kind and up might June to were follow have where at deposit the the was

Asylbek Osmonov

if points investment look you you if look our XX for deposit mean, I end and [ph]. was held XXX as basis -- of loans at -- loan for the quarter, the So, the the at for were of cost -- at deposits,

So, at increases that did second if rate include of the just had quarter. deposit at you're looking not we end costs, that

did of so basis betas increases deposits. betas, about to non-interest basis points were It's if like on you're and analyzing so time rate on point total we're increases deposits, our doing you points something. nine XXXX, deposits. bearing we it's in if back XX doing time we're we beta on had But or on this -- rate mine was XX XXXX time, XXXX. at basis XXXX and But XX points Fed terms XXX on that basis those better In that deposits, on than looking basis we at of look back increase our or six in when much points but

Brad Milsaps

books seeing the coming Where loan ask are kind the side on relative the differently Maybe of on new you of of the average loan sort Okay. yields yield? equation. to

Tim Timanus

a are higher X%, quarter now Our in quarters than typically, some almost loans lower from percent. average quarters There's to was than basically, little and loan seeing maybe that, a we're few are a X.XX%. And committee five it's three the to a percent. and that. five little But few there X% three there outliers, just under for

Brad Milsaps

Okay. Thank you.

Tim Timanus

the Some of loans. those on loans are and current variable rate loan floating

go go talking will I'm they about So up as rates rate fixed loans. up. just not

Brad Milsaps

are just Got one those bank, quarter. amount back of did just the the public those of the I Loan advances then off public kind plan for you short cover assume starts just to the of added kind Bank Home that just outflow be And term would funds, of when Federal to me. flow more and it. Was small a advances? in money pay to more notice that overnight temporary into the I

David Zalman

more, true. past, $X investments, get at years, the interest rates again, we have leveraged make bond yield off billion the banks. on of every our zero, that. billion if stay you never we the to which look don't probably in roll that. a the think good didn't see off with a what a were there. we more we between you you We before existing But of couple than the off rates bit I portfolio. leverage high, year, in bank that's necessarily do really interest probably pretty can XX% little did as know and really coming anywhere bank over I Of I spread bonds But our when us that's $X the mean, will couldn't last that, that at out

Brad Milsaps

was That my Okay. next question.

you but kind sounds could capital. So it of portfolio that also like mentioned, spread? that some to little leverage use relatively that if bit I strategy, think the of pursue that Maybe staying a another be create flat, bond I've

David Zalman

will. we Brad, will, We

Brad Milsaps

Okay.

you. Okay, great. Thank

Operator

from Poonawala next will come with Ebrahim Bank of Our America. question

You may now go ahead.

Ebrahim Poonawala

morning. Good

David Zalman

Good morning.

Ebrahim Poonawala

a just deposits. on on follow to I wanted up things, few one

So, a from where on and One, going maybe your the mix around to about But loan impact in seasonality, I customers higher the quarter, moving expect us rates, seasonal deposit to out talk see more heard into here? as the assumptions just how XQ. little you of this net-net. bearing do seek ratio do outside to non-interest you interest bearing? from of And you growth deposit bit play

David Zalman

There's two questions. basically, excluding the to so mean years. I deposits organically, X% grew about every previous X% That -- a year, normally I'll our start lot off. of

provided it. now. for now. This two They to deposits double tell to previous feeling, my digit Normally, now. about much its X% that years, the were you X% They're their that deposit spending expansion But I organic it. stimulus had spending they're commit commit had growth. in I in the always had before. everybody was were right harder accounts if I money in of mentioned year, X%. you to-date. They our deposits, going exclude growth year the saving they that have the It's it spending hard money municipal to So weren't that so to we're me it would personal programs think never people There earlier, up that banks

me at happened. deposits money think that just deduct you'd that's people's or asked crazy, now. gut. in I looking that If again, I sounds is your flat right to have least what, down they'll because gut that's X%. you end think excluding My some that up that's the accounts, historically, that I year But think I know of this now. they're -- end my municipal we'll right accounts the But up would be be to probably at

that think they're of using I that. some

X% looks we'll be end we our from but we really let my and were I side, That's through -- X. and got it have loan that, we that's start Tim next. through or or X%. year, think regard loan X.XX, this that loan or -- week, prior and my And XX.XX, good. of at weekly just by tell the conservative say three, at up before, usually started to the thought. a usually at I'll talked overall But Kevin year. me, So At would growth, And have I last again, X.XX, the be think we me the X.XX, committee. to you, I

quarter. we said we committees. good we've the growth that, So see busy Having If have good any really some really we had in stuff growth. some really first see loan that -- develops, didn't

So it was flat.

mid to I year. growth single for the we're think So digit still sticking the

Kevin Hanigan

and warehouse. I loan ran to side like to fund We're growing warehouse position ratio just I'll And with the loans deposits. luxury deposit had deposit the who was of your XXX% a ratio are, up add when guy bank tough a your pay fence. the in the it's from about without with you maybe that, you're something get to to have that times [ph] beast, loan from XXX the to a this other thinking the day. where flexibility. loan turned like little this, this. I it going at part ratio very I a well this to balance banks machine, deposit to because So that every of of at knowing lose sleep If had that us sheet, whereas night, fun off times really lower Right? loan legacy, I you're with lenders. provides other I few your we have I'm the these that had in like extreme optionality, flexibility times a in

David Zalman

-- look if what did I million. growth look you grew you really you Really, the at $XXX if in deposits, say, our Kevin, at

Kevin Hanigan

bearing quarter. the non-interest just and XXX in

and I moving right, bad about worried outflows. of it's out to gives we're too time out are David's to would some of But and people fight start not system, an move of to years it the running it going the bank. -- the it's environment we've good take the But in really deposits be fund where loan that's way four its all this there, in for lower money think, up a saying having to bank, deposit for us just So to and a been flexibility system. to deposits along, to of the ratio build because stimulus three

David Zalman

were banks their before see had and Abraham you to time is and think under one we're earlier rates may I XX%. Plus, us interest the zero, certificates like XX%, went maybe XX% deposits now thing days in the,

in our is, of been say at these time think I where what be would may you'll it that, know deposits. rates see move really go the money increase And stay probably percentage some deposits if deposits. or account, could I probably percentage up. see the into don't but just they're money that's of time a you again, I market And some it

Ebrahim Poonawala

merger Got macro more you color. discussions Thank talk you. partners weighing on backdrop which up biggest Is factor Or this bigger you That's the it last. is impactful lot one just also What's picked it. a quarter of sellers? when But And a the versus which M&A hang has been up David, a mentioned follow two the uncertainty? is on up. deals? helpful to regulatory it just potential for or larger sellers? of potential

David Zalman

In I hanger, it's them. their is Is little them say I bond can And, losses think though, a bigger that the it's I recognize big it also bit in portfolios money. always always a hard matter with have have it. such can the But for first better than issue. to banks, that, no be mitigate over of until that flexibility get even a can money hard when reprice you're time, sometimes back what, some mark-to-market for to it, a it's [Indiscernible] try to losing period you and you them you to world with. take though to money try

lent an that's say that with with to a I'm really. issue. billion in a really of dealing billion more size, a an up. going and bank bank you're usually of It's when you're If It's not to they're dealing in big and $X smaller issue bank bigger size,

Unidentified Analyst

need purse Got guess for it. Thank my I you, but strings thanks loosen a David, questions you the taking little to bit,

Operator

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

You now ahead. may go

Dave Rochester

Hey, good morning, guys.

David Zalman

David. morning, Good

Dave Rochester

on digits guide, growth the looking single forward. you back loan Just mid guys for the are

at How see that the book point? feeling out do in of warehouse. I structured assuming a quarter. much on know you're you guys you're part bottoming the book rate a about separately of the And book. runoff of out Just baking in just rest this How you It's wondering are what you the about CRE then that. environment? this the current there? client Where moving for the talked

Kevin Hanigan

Yes.

in the warehouse average we like is necessarily I us. easy but for X.XXX easy, the billion one off think is to Not that of QX. of going in average QX, million an feel $XXX

two of quite We quarter, relatively let So, a a down client. did a or client one big them this was and bit. go

for loan structured comments quarter. book, I structured be in more end average had $XXX it So, very call warehouse CRE a XXX, total million we of that deal was million might It the $XXX bear we off because The QX. for the but care the earlier down the than that, at growth the little pay mentioned quarter. bit average of

I million business we've about talking of book there figured that was we've of sticking. quarters So quarter last think And the that at that ended million. in been $XXX XXX-ish book about for was that the couple

runoff little left book. in So the there's very

Dave Rochester

great. Okay,

Kevin Hanigan

quarters? Which would achieve we being make easier been which loan now headwinds growth to of the without from a XX little that, experiencing

Dave Rochester

Is get guys. good. it that It's you good to behind

Kevin Hanigan

grow. be little to going easier to a It's

Dave Rochester

that And forward? switching NSF all anything that going just income. guys you to you year? of Any going tweaking back one, as at policies, are like fee fee then, at last thoughts the guys forward, one just looking thinking overdraft, Maybe half Yes. are directionally on about the

David Zalman

they'll We we day. get of the your to I wasn't that mean, we And one an had the for like, everything overdraft tweaked have we is, saying. -- bottom it, stuff number over any that wouldn't a if bit. verify if line would overdraft. that you or charge get tweak you I'm something, again, wouldn't given maximum talking, I'm we $X some some But in you overdrafts that wouldn't little things did also, we the

giving a the far opening, I when everything number from moving a that I ask lobby, And into we're some things. don't sometimes and as away overdrafts, of is those they're the done mean, we've But customers, moving as in say can away. of to I'm with the those and reason that future. see doing near so, they're going actually why us doing bank they're that accounts I I us,

overdraft? and Or customers? for charging any So, if at in you're Do we're you doesn't it anything sense I want that's customer still want a it? to getting me, make quite not frankly, customers, the all. do mean, we those the

we're good be the think where I may seen now. there foreseeable on. Not later some right that we're So, reduction But I've this at in future.

Kevin Hanigan

Yes. you that $XX some one-off I And the if will range overall, items, mean, -- look picture, million, exclude big just million. income, non-interest in around overall just at $XX

maybe see mortgage discussing, income? that's there's I going Probably loans. mean, any have going what credit of we significant But I one were we to think selling us. debit So interest cards, But that's going I be is is more for the to opportunity in non be to beneficial there and mean, potential we continue. not. usage some that change cards

from X.X we haven't you million seven don't loans. those we'll look quarters, know, it, booking because If mortgage But back generate of done several mortgage. six, sale I quarters, X, we're

continuing to money. loans our some those extra As loans, and sell make to start we grow there's opportunity

good if haven't opportunities that that. would look done be it there, there, I you but so opportunities a there's yet. opportunity But So at on

Dave Rochester

Thanks, guys. great. Okay,

Operator

Tenner come will from D.A. with question next Gary Our Davidson.

You may now go ahead.

Gary Tenner

to Good I portfolio want yields. ask loan about loan, Thanks. morning.

in I And think of to terms of lagged the existing of here on I itself going the portfolio, yields be adjustments quarter X there thinking flat that of kind repricing loans the commentary yielding in the the in committee. of through correct pretty XQ? held second in of But sort quarter, appreciate that those kind higher any now flat. was would

Kevin Hanigan

broke Yes, a past cases warehouse Yes, one [ph] two X% or think mostly I floors about clients. floors. in we've There LIBOR floor for two everything. were through we the in be board. might we had all stragglers. But And the floors the across the and talked all

break a get -- while impact going it But XX of. today last now. all is we're through the to to happens took whatever floors So the that. And full basis and practice through through we the floors points moderately those

floored. portfolio a So, bit, little the because had of the majority vast lagging we're

Gary Tenner

of warehouse Okay. warehouse decline appreciate And Kevin, floors worse larger pricing make gotten concessions all business factor couple to as than nationally, volumes it's pricing on more those the the warehouse comments, or then, in at But competition into of and in been and given a your exiting that on of terms that well. in relationships? terms has did in I the the having

Kevin Hanigan

normally would a that office hey, pricing slow with it less information we saying, was our like this maybe, And things, work how little some back some little with operations we It more to on is the and came but team a customer was back office out They're operations. would operational. our disconnect not on cooperating that just get.

said, -- time, we're going funding to going million the And That's down this of to came $XX million and had stop night. for outstanding. that at as $XXX last let client. to us we're they to So client

say and and the they client to time, have got capacity who our just to to single unlimited no, been They uncomfortable say would limited largest question them. at yes. So, it have they we felt are capacity

have us? as But of Let's that Pricing goes morning So that still grabbed assume thought. they some not is competition. would I quick numbers much there I client still this competitive, is as let that go. much? $XXX how a in roughly by hurt picked points basis that our of does little XX basis off million, up this What quarter. the afternoon. XX up volumes extra that hurt points And over spreads. We quarter bit

weighted a business billion higher a million a So tax would at coupon. $XXX a pre remained $X million million it us X.XXX quarter about if X.X we a or called cost billion, average year just after versus But penny. tax,

David Zalman

money. That you that reinvest if

Kevin Hanigan

Right. We it put else. something in

David Zalman

say else, that. something it you in Put would to

a mean, warehouse X% on almost a warehouse was in were real getting deal you rate me needed maybe purchase investment. you're that loan. an if quarter -- were warehouse I any on that, Because probably past still you And really you were in for you the the getting to on one and the fact, hard getting investment we In today's loans. buying match close world, an with could

Kevin Hanigan

You're XX basis about different. point

Now, I it. to opportunity didn't factor that reinvest in

it's look, a the client. the -- So they're We're uncomfortable of with that if really team It's tells proud us good them. thing. all

Gary Tenner

you. Thank caller. Great

Operator

will from Our Raymond next with question Rose come James. Michael

ahead. You go now may

Michael Rose

Hey, answered. guys, most been and have of questions asked

pieces of balance and lot a sensitivity. of the sheet rate moving Just,

[ph]? was I think And update XXX, as it numbers an XXX and X.XX about respectively? the the have last Thanks. of XX%, you X% at plus up disclosure plus December was Do to on those XX.

Tim Timanus

the bit little have same might don't on exact better. I I it. the But it think, way be level, the update we're tracking a

David Zalman

would that be? What

Tim Timanus

on the. XXX Up

David Zalman

a bit six and time. mean, it it's really it's fantastic into really in probably over it months. good better. what of a quite quite Well, I'd looks really bit better year here. three and it's looks better, months period not But -- to or say I Again, it's looks really it going happen a a

Tim Timanus

with information. get I And can the back you give them and

Kevin Hanigan

it's of shift, factors rather look XXX than shifts. to or And we experiencing parallel twist pretend be But it's you're gone scenario six a minutes. pre end at of day one in hit know more today, a public parallel Yes, maybe curve the right. really Michael. at our last scenario don't the XXX, this talking But afternoon, of I something -- a it's parallel about we're don't realistic. long And a on from where not has or is usually those disclosures are the we're call. for three, the two and more XX need we're to I moved

Tim Timanus

And year. we of the at sheet shifted end had differently, balance the what

Kevin Hanigan

the parallel shift looks But spectacular. pretty

David Zalman

half doesn't year happen Yes. year. really Again, takes or it a good. in It hear. Looks It looks fantastic. That's to time. real a good just

Michael Rose

We for got answering my Thanks it. question.

Operator

[Operator Instructions] from RBC Capital Markets. come John Our question Armstrong next with will

You may ahead. go not

John Armstrong

Hey, good morning, guys.

Tim Timanus

morning. Good

John Armstrong

my stolen a smart. question. really just Rose He's Michael

Kevin Hanigan

left That's it, one the there's like thing him, got he the in late ask or call, to day late it.

John Armstrong

parking Yes, way got just it, way, ask he is he Queen Mary got But lot it. the on different comment. that the to By narrow. it

David Zalman

narrow, Very narrow. very its

John Armstrong

I was guys at of before out kind back And you net and slide it that goes I there, my Very XXX. the model, core way XXX, peaks to, narrow. at it that When in have look margin margins have interest and seen the eight, that David, alluded went it's And, through out, in to XX even you higher. you a like guys of the you feels years. punching XX could start last XX better. highest months, months just it, lot It some

Just Funds, at long curious go you mid this Fed term? could where margin X% we're on that? And, the over know,

David Zalman

I spot would say that, on. you're

or just be year probably at feels to where so it. years. something you know about XXXX, XXX, And of we good XXX. use lowest. we interest you the these, it I for some watch moderate, saw many back I in compared some our a even net if that that, down no were But XXXX, years, But You think will the two yes, margins, of question breaking road

to figures in Some too. [ph] of these have them that accounting blue

of be Yes. of which accounting it'd Does out the blue say, them So interesting. Which any one one the blue? takes to it?

XXX, So yes. if the XXX I think But it, that, could blue accounting good. better than the of you do think you out take I looks to even XXX,

Kevin Hanigan

agree. I

be look term, at definitely beneficial, it long you but would If the

David Zalman

think. around don't think XXX. I But you're going possible, being definitely is in XXX, see XXX I to range

Kevin Hanigan

Yes.

same, year. stay you're rates decreases Assuming there be and now might that hearing next coming never the maybe because the interest know, later you

that definitely impact So we everything assuming the on same that see But to now, we get could you. right stays what that point. based could

John Armstrong

track little little earlier. the And financial That's and you've with It's very less hard alluded that in movement bit obviously, that I clean, are and heard outlook. all news, guess, But growth from a got it I from you've But you is mean, keep feedback the helpful. the any Yes. to good in hearing you're recently? bullish to seeing your a numbers clients then, I outlook economic changes any guess. maybe clients. that

David Zalman

the something, I if gives have charging or at back, careful very a charge usually I and when anywhere, you to buy XX% But look anywhere X% some cities the -- you back in to sales charges, recession, they your you you sales then but tax. tax. rebates state about talks state X.X% Texas, of from Everybody city the sales want be they gives X% And your of you're look depending that to city what this. about on where on always tax city really, the

Austin, small double that, And state, in the sales still I in Dallas, town seeing the look in, in I Houston growth even tax that digit so, rebates. I live we're when look and at throughout

still are spending people a So of lot money.

really to estate normalization. every inventories X% increases we're down trying that's are XX% normalization. home right a now having I to are live to live houses to mean, as our really bit. Who wants recession, are think down wants little in everything coming sales back But washer it much the dryer? get little And wants months is wouldn't call I just said people doing, bit. XX% construction that and saying so, with would And a this who happening I what seeing you, we're a mean, people five a to our Who wait with buy as I loans, seeing, that, I year. you a call real to inflation.

that because where X% poured into a stimulus interest But recession, that in was just, a economy than the where unrealistic we're we unrealistic. I living it's really call of been. these may was you with were world with had rates, it's and to Now lower want amount the think it

gut professor I of feeling. really, I've with my recession the there. to I like That's do great than don't say But normalization right normalization my more more So see recession. a I'd seen me as it's a that would a be a out, taking think just more issue as of much probably

Kevin Hanigan

have convinced materially different, And or are that any I'm I would they're of projects, big doing they a because not personally abandoning customers say problem. going aware that something told to that be us absolutely there's

aware told that of. be that, they but Now, thinking they I'm us that, may haven't

David Zalman

the look now, loans, than housing a our loans, strong. market probably be at may I commercial But naive. at our but as in consumer we're maybe when little pulling I and and they're ever you back stronger And bit right look see there, certainly, the when

Asylbek Osmonov

of lot Job And stuff. here of growth had Texas. fuels, a we've in ton it a

David Zalman

Yes. I that's I mean, thing about Texas. think the

so recession, many anticipating And be Feds, jobs probably regionalized. more, of XXX,XXX people that the maybe somewhere, the for more I year. have it's this that they're -- could But a in about when written you so Texas, talk they anticipating down amount when have I about think

far. XXX,XXX so about at we're think I

of has I into moving right lot that. regionalized. and I whole don't because that the the I think helps talk It's into are going for are a amount and if Texas companies maybe we growth And now more the moving Texas, think have. regionalized. they so But you, Oklahoma right it at still there. the Texas, just state know But but that state everything number of that are job of people of more else people so, nationally looking when moving the you of the

John Armstrong

Thanks the color. it. Appreciate for all

Operator

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

Charlotte Rasche

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

Operator

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

You may now disconnect

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