PB - Earnings call transcript Q2 2024 | Prosperity Bancshares, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Prosperity Bancshares Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Ms. Charlotte Rasche. Please go ahead, ma'am.

Charlotte Rasche

you. Thank and Conference to Call. ladies Quarter Bancshares and Earnings XXXX gentlemen, morning, Prosperity welcome Second Good

Chief the I'm This Chairman our and with be for me website is General and few call Kevin Financial being Bancshares. H.E. Officer; David will available and broadcast and Counsel of today Jr.; Chief for And Vice Bob is and Safady, Rasche, Timanus President. Chief Executive Officer; Hester, Charlotte of Officer; Operating live Prosperity Vice on next President Osmonov, weeks. Tim here Davenport, Officer; replay Chief Hanigan, Senior Zalman, Vice Lending Chairman; Executive Asylbek Chairman; Eddie Dowdell, Director Executive President Strategy; Randy Mays Corporate

for Osmonov, quarter. by statistics. quality. David discuss be lending followed will the who And will will our Zalman our including lead the activities, recent Tim with will He recent Asylbek off some a review asset of review who financial Timanus, highlights of

questions. Finally, we will open for the call

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

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

the turn let Zalman. Now call over David to me

David Zalman

thank to about are of Star welcome want our Thank associates listening you, second to Texas customers conference XXXX and We excited the West would Lone State everyone our Bank to quarter call. welcome and and I like Charlotte. from partnership.

its on subsidiary, Star announced Star the X area. Lone headquartered Prosperity in Texas of Bank previously wholly operated West the owned X, April XXXX. Texas. completed merger and Lone Star Lubbock, offices banking Lone As Inc. Bancshares, State in

$XXX For XX, an per ended of income $XXX the per share per months share and diluted $X.XX increase on million income net gain Net sales BX common diluted expenses of were noninterest of million offset share credit was X second months for with and in of or Star X quarter the compared exchange, million losses income or XXXX, special $X.X XXXX. million merger-related the Lone for impacted by net March in June $X.XX provision ended and interest security net Bank operations. at assessment by the diluted common common Class XX, an XXXX net FDIC income Visa increase stock of million $X.X for to and months million $X.X and expenses investment of $XX.X a related and merger-related partially a X

special assessment, BX investment exchange FDIC average net tax, was sales merger-related on each those diluted numbers. annualized was our assets our months and average XX, were common for equity on return X.XX% annualized based on June share XX.XX% X ending returns XXXX, on and the the tangible, common and the $XXX expenses, million Visa gain Excluding stock and per the income net or the of net of security $X.XX Class the provision

the ended X XX, provision interest credit for for months We million was also million XX, an or increase for with 'XX pleased $XXX ended X months that income of our March compared $XXX before losses are X.X%. XXXX, net $XX.X the June million

in XXXX, ended X.XX% for X.XX% March the for XXXX. months tax with a same X the XXXX, our net XX, and June ended X XX, addition, period equivalent X.XX% In on compared was months interest and margin for basis the

mentioned these are should near and to prior anticipate for As we we the the calls, be future. expected positive tailwinds results continue that these on

June increase June $XX.X million an were XXXX. when loans at Our of XX, XX, billion compared XXXX, $XX.X with $XXX or billion at X.X%

Our or due at $XX.X increased merger. $X.XX billion from XX, increased loans Lone XXXX. X% the The billion loans to the linked core primarily Star March

June Excluding million and and million in the decreased March X to compared XX, dates, year, First basis the or loans June respective banking with production acquired Capital new loans $XX Lone centers points acquisitions acquired when basis X XXXX. or XX, increased XXXX, Star and $XX at compared acquisition points the since XXXX last at XX,

million compared June $XXX Excluding these XX, March acquisition-related or points loans XXXX. and program loans basis XX, at XXXX, with loans, decreased X purchase warehouse

or Our I'm at -- deposits billion at an billion of $XX.X XX, were [ X% increase June million compared $XXX $XX.X ] XXXX. sorry, XX, $XX.X with June XXXX, million

Our to increased XXXX. $XXX X.X% Lone deposits linked the XX, increases million primarily due the billion or core merger. were March $XX.X from The at Star

generated at decreased or XX, are Historically, acquisition the last respective X.X% lower fourth XX, the quarter. the Excluding Star million at centers in quarters and seasonally to with and banking March acquisitions X.X% deposits million deposits June and the by our and second increase Capital assumed XXXX, the by $XXX days, in compared in acquired XXXX. deposits when compared again year, third XX, and Lone June XXXX new decreased since $XXX First deposits or

loss do and purchased to the intend deposit to not we have not so. currently do any We offset broker deposits

building XXXX. XX.X% On net deposits, core deposits of interest-bearing our at XX, our June represented total deposits

average at g average basis $XX points at $XX million interest-earning a basis of quarterly with loans. for to acquired or Our million compared assets XX XX, with of portion and each XXXX, period attributable earning average quarterly assets XXXX, of XX March or June the totaled interest-earning significant XX, points June the or of assets $XX basis at nonperforming assets balance points XX, interest XXXX, million quarterly XX

The loans the was for of for At XX, on for X.XXx credit credit allowance million. nonperforming loans allowance losses sheet $XXX was and assets. $XXX allowance on on June credit loans losses amount off-balance million, the XXXX, credit losses and exposure was

planning continue bankers burden the we costs, event technology acquisitions, with conversations higher other continued increased regulatory to to consolidation. our future succession shareholder competition, be will costs, concerns long-term materializes staffing and company's and ready regard opportunities. a transaction have move in to point and remain to forward believe considering loan beneficial We that We With to funding value. all and increased

value are confident the create our long-term in We about future optimistic meaningful our and ability shareholders. to for

and have dividends. million Over last through XX million shareholders, months, cash to $XXX the repurchases million share we through $XX $XXX returned

in CNBC With announced voted was the that for regard to the economy, state best Texas business XXXX. recently third

it have should believe we we have -- should been However, been #X.

state wrong right tax. more as correct move structure of ]. to the state humor and shine that's income because the the Texas Sorry, continues trying [ to and Texas just people companies political the It's business-friendly no to

continues and in focus asset channels. customer product core maintaining distribution while ever-changing building the bank Prosperity manner sound and quality to efficient technology relationships, in investing on operating an

company the organically grow mergers and to acquisitions. continue We both through and

I again in the your want our it become. our for support success to has to company. of everyone thank involved Thanks helping that company for make

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

Asylbek?

Asylbek Osmonov

$XX.X compared XX, Zalman. losses operation for XXXX interest Mr. morning, credit of million $XXX.X income X June Star The to XX, million acquired provision $XXX.X to ended for an Lone increase period for in increase March due Thank XXXX. ended on to partially quarter million for million the was months an Net XXXX. you, the $XX.X X, of $XXX.X the April was million, XXXX, before everyone. Good compared increase same Bank of

million of related $X.X recognized quarter XXXX, a provision During purchase to we the Star Lone expense accounting of second acquisition. the

same compared quarter X X.XX% X.XX% XXXX. In tax XX, months income the X.XX% ended the $X.X the The compared addition, in period for for the quarter was basis was margin fair June value million second XXXX, first loan interest on to and XXXX, a for March quarter million XX, XXXX. net ended for to for $X.X of equivalent the

interest adjustments, for X.XX% accounting for XXXX, X.X% in the X ended XXXX March XX, the ended Excluding months same purchase XX, XXXX. June was and to compared margin net quarter the period X.XX% for the

Higher XXXX, period to million months million XXXX $XX.X XXXX. income was the the X June in XX, ended $XX.X for quarter of XX, and compared for offset million of the from $XX same investment the March the second partially Noninterest securities. stock ended by sale [ Visa ] noninterest for a conversion, million includes $XX.X of gain on XXXX resulting loss net quarter income during

linked months million. X X special the ended quarter March of period XXXX. for was months same and $XXX.X was merger-related due to increase stock bank operation $XXX.X $XXX.X $X.X million, June to in expense XX, the compared $X.X million primarily assessment The the for of ended and million for Noninterest FDIC expenses loan of XXXX XX, quarter million XXXX,

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

Excluding securities, and of months the June ended XX, on was FDIC efficiency merger-related sale special net XXXX. X the assessment gain expenses, XX.X% for ratio

duration X.X and portfolio The have projected a cash $X.X of of flows bond metrics X/XX/XXXX at modified annual approximately billion.

for that, details asset the on me to with Tim and Timanus loans let quality. presentation some turn Timanus? And over

H. E. Timanus

you, Asylbek. Thank

$X,XXX estate. basis in XXXX, June real This $X,XXX basis was Our nonperforming XXXX, put total a XX nonperforming points assets, to XXXX. assets $XX,XXX thousand, thousand estate, under June of nonperforming end other increase. other represents for assets and asset contract Since XX, of XXXX totaled thousand March at compared or $XX,XXX have loans, comprised loans XX, $XX,XXX real XX and $XXX of The removed XX, or repossessed in June quarter is been X.XX% points which at thousand in XX, thousand sale. thousand

charge-offs of the months $X,XXX XX, for compared allowance There were was ended XX, XXXX. from thousand resulting a of thousand This during the were the quarter ended $X,XXX March Net is to June State taken linked-quarter income XX, XXXX. during allowance a quarter Star credit addition June to the net charge-offs basis. XXXX, Bank a Lone XXXX losses acquisition. the for the $X,XXX X into June West Texas thousand dollars No $X,XXX XX, from ended increase the for quarter on thousand ended

loan The June outstanding XXXX fixed at total approximately ended of loan made rate $XX.XXX average June XXXX the is at XXXX was loans, June up XX, Loans XX, The XX% XX, March variable $XX.XXX monthly XX, rate XX% XXXX. ended million rate compared to XX% the loans billion and billion floating for new XX, loans. quarter quarter for compared million were production XXXX. March to $XXX $XXX

over I'll it now turn to Charlotte Rasche.

Charlotte Rasche

Tim. questions. At time, answer are we prepared this you, your to Thank

will call with us operator assist Our questions.

Operator

[Operator will Peter Davidson. question Instructions] And Winter come from with first the D.A.

Peter Winter

the than I quarter, outlook on seems update And quarter? this you're an expansion margin the you give into just can you year? do purchase exclude nice better It NIM that Can next even if fourth accretion. X%. the Really NIM accounting by how about thinking like

Asylbek Osmonov

Yes, is thjs Asylbek.

we I happened think NIM, have second to in our the at what look quarter.

organic had right? we we Lone that plus It that So helped. happening, things expected, our growth we NIM Star on was acquisition had X a

gave So combinations in those our margin. us pretty X good a lift

showing look as still better. expect But improvement forward. we margin, being the the So a be it's model, our now, right we I margin will for quarter, improvement think at we exit our on around And if say bit think the going we X% I margin continuous fourth guided. that on little

grow expect then, we not continue for to and has it So manage changed our deposits. better hopefully we but since as loans

David Zalman

like more I I feel Peter, least little a can. you bit at give I probably reassurance think, I could or

least think there. at we'll the I said, around we we the out margin, think Mary that the said shows net have, Queen what in driveway that model turning interest hit I you again, from that, is that

what said have we're you think -- going of the what by year. I to end we'll we to the get be that hit able

show a better. interest I should or months think model. you net continue maybe X we said, like XXX down month, little to in really and XX maybe that points But our months, basis even the increase our XX up bit margins

So I that think we're right definitely track. the on

stay because loans margin. deposits I showing I this interest or [ interest This Well, X is. put we static In normal what why says just they're too ] That stay a start looks right about but I'm think a X.X% about I'd XX months, I a model probably net net up. XX this months, in model, where get we're far. to model. is at. that's at, where getting we'll is it still not that's be going what it what shooting and back our high, they're back say And mean, is means maybe for we're now. margin [indiscernible], our think Historical should I think to

another issue. -- go be interest do interest rates again, be pressure if that mean, on net As But rates income, would interest I the income we for interest good into net to drop, expense may at income. interest rolling that net same and as interest like seeing -- the be consideration what That's and time will have take off what's we time the and will the reestablish it the repricing. also goes up.

all So of goes. that

So be when those correct. year short I what talking could at some numbers and I'm we X% go there to almost started model But I term. term, is think see going forward. we're it last X.XX% seen this I've noise saying is today, in long it at ] I think where [ And

Peter Winter

it. more one Got just question. And then

continued we we We just Prosperity. there? an from see the Are Just about some closer loan maybe talk runoff the did loans landscape -- see update period-end when -- demand, to loan can getting you then on Capital. provide And for just pressure also on lending. First competitive from bottom

Kevin Hanigan

is Kevin. this Yes,

are, I it's which be think stabilize cuts, to I by think going prospect to the deposits. of Peter, we is think both rate going I aided

off fact, banking back will were rate that that In of we week a the cuts, bank. moved treasuries industry's money the way lot into of prospect in into balance its talking that with sheet is work earlier the the

Monday, I a moving back about aid the process their $XX are that we're out will way and back move account here people and market the of But think thinking back growing treasuries into business. million about a on of also at talking client bank. in yesterday, in in -- behold, we the it money had about lo

I So staying towards we far to lower bit, off growth the through we loaded, the little going where year or for year, end started with we backed loans. core X% our think today. so off guidance and the that's a probably back X% sit back in QX, end that

there out at. competitive almost very very, we still everything look It's for

weeks, when fight in And construction comes now. may likely more we particularly market from X couple so customers it's the middle our for the ] months rates to [ borrowing we've and or be But knife X short last it are projects as of fund of to nature. not still things a down more that in approved who seen, run

and where economy some ] the costs going and plant and optimism renewed Some builds [ equipment. impact is and some inventory expanding

being general much is moderate. that rates prospect So better think to half second are I the aided going by the -- to the has belief of going

David Zalman

say and that that think the deposits that's that back and in we little And has it's until to build think a We've bank. come us. and been, to But the still of waiting to We and us back we've have had. relationships of the deposits to I turnaround bit up really have too. I competition stabilize that want that's terms we also kind sales think we -- been and I with I hoping again, customers holding keep. back a opportunities true could our bit had all where have by see held and pulled design. conditions, how kind increase little position our to we our credits some want that But toughened shared

Tim, say? do what you

H. E. Timanus

Yes.

to been start. saying projects I they correct. talk when think do. to absolutely new have we loans. all existing that want customers is are everything customers about encouraging and to they prospective have that me things to you They future They potential want guys What's is,

better. sitting them things rate there a bottom at there's I cut, So do make they're things, waiting the feel any fair rate think line. and all cut is and moving amount of a will And all for

cut, as think with much would. won't day points happen a maybe XXX you think, get it I wouldn't which I but X basis if cut, as rate

the projects moving off coming desk and some forward. I think you'll see

optimistic as going in the I'm be are year, things certainly forward move to that So reasonably next we better into year.

Operator

The from Gosalia with will Manan next Stanley. Morgan come question

Manan Gosalia

Lone you On how able either prosperity the separate from the much came loan came how yields Star or are and the from expansion in acquisition? much NIM, out core portfolio to of

Asylbek Osmonov

Yes.

than we going that QX maybe and margin XX-XX our Star the core like ] from and organic. [ NIM improved at to look from X.XX increase of was organic from you and rest Star points them ].Our came did between similar, to to Lone was better last QX X.XX year If was what of I basis [ expansion, very the Lone talk

Manan Gosalia

coming the that Got organic rate it. repricing. And expansion from fixed is asset

Unknown Executive

we it the story expect and to continues Yes, repricing from continue here.

Manan Gosalia

Star? ] the expect rate it. Got some if then Lone are to excluding got portfolio from deposit from to trends as And seeing side. downside maybe behave? And here, just deposit you betas [ just you and can how NIB on should you're speak on we deposit thinking cuts about the What you what

Kevin Hanigan

answer the shot can I it and in. you I'll don't best know a this, but tag give on guys

the I'd outside time sheet think get I looked deposit mean, off see. fierce to -- around wasn't sheet, Tuesday stabilization at as for word -- I month would today, not funds brackets us They're rate I core not mean, and was say for of of some -- we of up. it's the deposits look public still use. up, they're there. at last the but balance encouraging would much, actually through there out we And are it. for very the I requests that modifications I July, still but be haven't

will the have So we stabilization rate cuts, think more extent think and improve so. to that I do even I

David Zalman

I seeing, think I'm is exactly I that's what stabilization. right. mean that's

I also people you'll bank. quit treasuries and deposits into down, the I think more will the against competing we the and think as rates interest we that see come see government back coming

see that. we think I So

seasonally this deposits this in a for -- and our go keep you quarter we where we've always if because of though, public historically, quarter mind, funds. and quarter lost us just Just is next always back

are broker bought that and never stay really to think in I where But overall out -- weren't that our So deposits. feeling we at. overall, went mind. We we're deposits really keep is

so And same. feel about I the we all think

Kevin Hanigan

loan-to-deposit banks at the Yes. didn't some money need And -- rate rate. a money And to X% to last just go maintained stayed lot at that. that cost think our of we've the couple end, market last years, on well, chase really chased there's never with exceptions that higher high of decision of over and say, not above We had rate. market, Look, lose we through I had but ratios you like a us could the ton, some couple been quarters. deposits deposits

may We how strong of the sticking on deposit core people just I the it. is found think us. view other I out with side it franchise with

just If guys you funds, the for got universe out there. overall you of look at our cost of it banks

Our peers. is than significantly better funds cost of our of most

H. E. Timanus

with hit you prefer when obvious to us, money mentioned with they'll to their they're think a When that. potential point government to into say have and I the of reason, They want us, hear back and that say, federal talk not with you And to and high good to staying customers, money for really there all the really yield. dialogue preference us. money guys. own whatever start their But for I with we the their is people moving how treasuries But decision. it's have the sticking to them That's many reason. you customers

is desire don't. our whether you'll to But or pudding, some do more the they I more, way. see in money treasury think proof's they coming weakened if has Now the a think so. And I do there

Operator

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

David Rochester

of looks that's you outside discussion. seasonality the at maybe the since you the on How like the loan the just book It quarter. runoff it round thinking are of? closed, almost were deal And you side Is like Lone saw anything you sounds potential thinking loans us get the here. looked Bank to here? this about from how that loans about Maybe are Star? stabilizing rid to First It things, that there guys but warehouse want good trend core that out on XX% like down then in some

still to on it right thinking is it Or you're now? what hear business? would state are adding good forward. you going to that So front that steady clients And

Kevin Hanigan

Yes.

parts Lone bank First different really there's than credit guess Star, them. And Let a like X question. very underwrite underwritten quality to pertains good to me we I way very, as that to We the really Capital, -- loans. it like

due runoff came a Randy Hester led So much team, diligence I the not don't bank, Really is clean back, clean. when really diligence, it's mean I due clean, to that we did he for when he out is expect and this often say of thing portfolio. this

off we'll a of people. us. So for I It's don't really that deal the bank. It's good have think a a to run portfolio. good love Really ton

Warehouse, question actually over the a answer of last customer the let We've number me months. first. customers go let XX

rate XX not was more -- I business of customer well think, customers, our peak and/or that they think our exposure them XX either as that we're And recently, to down to, a and and might I doing been either was count or have it. in we XX. performance. lot We're eliminated either reduced or

it's It's are fired -- flat we So losing of -- that them. we a customers. out not bunch we

Now we've really to us. got customers been the good have

million average period little seasonal QX, I which refi July through [ years were you, weak at April refi the XXX into in [ there. a we're then The was May, We're for the pretty to said, we was as for all of I And things. get the other you is usual. ]. of we'd to all booms June has business the said last ] seems lost going June billion worried and I $X.XXX tell night. be strength echo and very and averaged end The into strong. to of when May this July to of got weren't back As and continued business,

in I bit. September. will much happens August if moderate a little part not little I'm usual a saying be to expect may So as abate And as rates. with September seasonally what through that moderate that rates and of maybe just continue bit

say where on to billion likely billion conservative, but So number put on the range. in the I just if the $XXX to more very $X be side, quarter, I $X.XX a think we million, had I'd to average low for

H. E. Timanus

you for In look and is if million of comparison Star add, our in at Capital, XX, the about $XX between would June example, words, XX%. First nonperforming assets other Lone as about I First Capital.

the of Lone the about it's the about million, think what I that's On portfolios. about difference $X the in of And Kevin indicative mentioned side, X%. Star quality

loans be of at from point would in we one if either drops them outstanding time. this I surprised in had big

I think we've overly pretty but at surprises Capital. identified well First problems road, wouldn't the I they be the down always material. think would There's

I stabilization think some So we're there. seeing

David Rochester

to opening possibly was very up That's M&A.. maybe to picked helpful. levels at what there Great. wondering stock comments And closer Appreciate prices all would this seller point? do at switching likely think with the over direction to to the over the a Has here be? And on then where chances was in capital at I think that trading moving like the And front. level is, about with are, where conversation here right the deal year? expectations all buybacks stock deal, clip the the grow how done what do next do continuing year? it you forward you here fairly next a guys but with you absent get the decent that going

David Zalman

I question, no think. There's

saw there change to there the I if is change a And that's administration think a true. and lot so be on ago you of a or if is optimism right week the banks. was or now, going favorable stuff all more that there would political conventions think in that's I a about

up of have started would M&A lot even coming in. more it on. a that a change costs more of administration, it think people. saw I you -- see I We And you do think if going

you few change in But little big a last really the so, knows it's think see you administration, days kind I or if so M&A it's bit, and market. I nobody a which or the the mitigated way it's week see in a going. will last think do definitely of uptick

David Rochester

On the buybacks?

David Zalman

Yes.

probably continue going you're that We're it and even jump down price. like unfair an go show unfairly. more We But when it buy was did, our going more think always to that back. was and we're money. felt does stock it to We to make in right. I

Operator

will question next with from The come Mealor KBW. Catherine

Catherine Mealor

I conversation. just wanted up to margin the follow on

upside declines? You be mentioned scenario some repricing pace maybe margin factor there cuts? at we to by told I targeting still is as back up of of kind think to to maybe in some that's know about initial maybe there around might to by you margin before. what ] 'XX Just a XXX then that we us you've downside [ volatility. book and hitting the should Or with there and once is start the margin throughout cuts? How of year-end Is mid-'XX, the . to X% asset where see as still we not margin enough a 'XX? where the going high continue move mentioned

David Zalman

[ numbers noise it. we But should up to don't would gave I those should But that back looking I you be that have we I think you're exact I of by -- Again, in exactly what for. time. basically say the probably ] there the that goes numerics will to end periods what said, there

this really But model. may just it been things we get -- can be I've here. So feel until with noisy readjusted. you comfortable It's

have So it. confidence -- we of it's in lot a

when the asset to there. short-term will look get takes it I we the change actual But it don't be get prime think time We'll noisy. we more drops to in could what that, we changes -- or try There we like numerics. and to the immediately asking, you're think there's or interest So repricing. rates that's like change the again, don't need could to be the

good and what it's us, on and a too, work more question we'll know for I you're that. So asking exactly

Asylbek Osmonov

Yes. to And to add that. just

Our balance sheet has some been neutrally positioned when run we and looked at we models. it

David Zalman

down. and Up

Asylbek Osmonov

yes. down, and Up

points. down XX models basis Some

still exit, shows at the still year end of model or at of end that the Our X%. up quarter interest holds around the net margin

that, confident I with feel think... are. even we we where And So

David Zalman

that X As if with had point, even XX points, I basis up a good we points. still we end see basis

Asylbek Osmonov

have we Yes still because neutral X%. position tailwind a of repricing security of from the our and

We have our repriced tailwind us. that X-plus percent, that's that's helping

cuts. So X have think believe than I going But basis there's I personally, don't even X with much XX that, maybe cut we're change with to that points. rather

David Zalman

a talking When this mean way, dramatically a is caveat, balance in either we the static static sheet. affects loans or talk, all one we're Well, increase, analysis. I dropped sheet that really balance this. a about

Catherine Mealor

that's Okay. you year back us, then rate you remind in this dollar do can the And half into have and helpful. next? repricing the Yes, of maybe of amount fixed

David Zalman

if next how about I $X And we year. in Historically, bonds know loan much? have repricing. we we've the side, that had, said the billion have are on don't we

Asylbek Osmonov

is flow, loans billion, out So ] $X we'd billion, or of $X about about X say [ cash XX%. but

and And That loan so that's is $X securities. going billion of to be the... repricing side on the

Kevin Hanigan

Yes.

[ I is variable ] closer XX%. closer to to think XX% fixed and the fixed is the

Asylbek Osmonov

My the on XX% side. on loan Yes. Okay. the fixed bad.

Kevin Hanigan

So a year, back billion the half in year. of $X billion the $X.X

Asylbek Osmonov

And the security from $X billion X months. in

there. So

Catherine Mealor

it. Got

Okay. helpful. question. margin one then And maybe That's just more Great.

talked excess cash lower billion, end building $X we of on back range? about of billion kind are $X.X You've to coming or to the that

David Zalman

can Federal That drop I talk $XX would really Home really call to this. their with opinion of a can of Federal we the change have the I lines unless Reserve. can what's Bank because the and and billion phone it between And convince Reserve Loan we that, be credit a It's Again, liquidity. of yes, Federal them. crazy consider

real was run you and that changed be truth billion the and And liquidity with a on wouldn't $X.X mean, deal But had So we used our all on the after the of enough. matter could draw up just run deal. But hand. to Valley everything I and they lot lines. because Silicon of a not truly again, we this with came Signature that, is there

we And You draw have to these have on more probably lines. liquidity.

probably have average in available our than anybody accounts like more We lines $XX,XXX.

It this we right won't probably over can be convince if hoping I'm So will time away. change. to probably them

Catherine Mealor

maybe M&A, if be? especially you're safer end the to Okay. is a be high considering place on to And

David Zalman

Say that again?

Unknown Executive

high end. the At

Catherine Mealor

considering you're a having safe excess be. to is liquidity if M&A, Especially place

Kevin Hanigan

We've mean building the was part that long come cash security I this way a the already. quarter, in helped. of it's -- sale the in

Asylbek Osmonov

flow And our the from cash portfolio. investment

Operator

from the will question Rabatin next with Hovde Group. The come Brett

Brett Rabatin

feel ask branch idea I of M&A that low to market, different like a out closures. like to are the some Wanted question deals the announced way. they'd have see in regulators

to would plane more Any do get state be in to can or drive I so comments you you? to talks thinking Texas? you're in you have you have or on And M&A, still out have wanted whether for today i.e., car, likely if state a a ask on about might

David Zalman

back going mean, in matter goes it's the whole or probably don't that If my right. state. now, I think if in in I it a conversation. think other it's I there's see Well, think Right to to I administration, something. Texas change like FTC to They'd philosophy. from coming down everybody, FDIC the The ] That's from [ see they'd the just not coming not And you're the or upstairs. upper up really administration, again, OCC [ that something. of heads and bosses their closing stuff this rather the is ]. down you're

through. them But we and -- the get all after even again, can the probably they'll I minute call probably tell tone. of and is have listed But think in some I I changing. I me a tone

to back then I some think I administration I And feeling tone think looking have is gut they where even have are were. I the that -- change, of that that that to it I the we now far. were. But to regulators we're we doesn't back unless we changing. do even my where I do could say M&A. think is that we're the would will go know don't

Bank add regulatory Silicon of that, unnerved. may Valley I close, bit handle taken think Republic, -- the you to I a it's all you a think mean comfortable. banks I little had and of them just where while all are where a all it get on agencies Signature, the when they're And

happening. is that think I

will be administration way, have the going it either there somewhat you're probably. The be mini think somewhat -- tone think to will I be changes I if But like little a then, So will boom better. better.

Kevin Hanigan

to it's Houston car West Texas. from in a mind, keep Far drive XX-hour Brett, And

Brett Rabatin

Fair enough.

a I if about wanted I you? this one from thinking on had ask any know have was here? with provision. you to depends quarter, Last had other what The question a provisioning we think year, on about reaccelerates, How that loan should provision. obviously And you quarter thoughts growth

David Zalman

top But unfunded XXX million but minute, in what's $XX-something $XXX our this I and -- [ if loan. we loans, just from reserve $XXX solely Not the we was calculation ] and how other mean, a merger. really, you sure in time have answer can our the my have provision based million of count million reserve, for CECL on because of I in

over we Xx have reserves. What the we nonperforming. So Yes. amount of have is

pretty So there. good right I think we're

Kevin Hanigan

in reserves put the up acquisition day only we've to X of been But have Yes. the couple last numbers. years related CECL the

you're both points X were time the referencing So in acquisition related.

Asylbek Osmonov

Well, second our second quarter both of year quarter, first Capital acquisition. and last related Last first. was Bank year

over, provision change to no Lone rules there put loans provision CECL This and you on was on expense a Star. you're Per have rule bringing and the rules, that's quarter's but ourselves. GAAP

Kevin Hanigan

Yes.

us minds, at it's to safe run we of materially quarter our year, thinking every something about outside change acquisition. I But this pretty models. materially, provision look would for we our to in this think when to the be posting unless changes and say things have

Brett Rabatin

maybe that the give get that savings? guidance, in you a quarter. the number net $XXX Great. Is us of how on $XXX expense lastly color Okay. you And little Can million maybe expense more just million XQ? on to to third in

Asylbek Osmonov

Yes.

the we quarter, of had and higher bit some items, had. we projects this a had extraordinary Just little we because

So bit little Lone to But to We're some that's $XXX the project expenses. including run savings from that's to combination. million that's some in we're the Star going we on and came but going going Lone operation a have, we're million, the continue still is have Star up higher. $XXX acquisition, working to why

and kind $XXX feel quarter $XXX million, it's did third net-net, on the from . our That's the So not confident why we each million that of other. about guidance pretty to offset change

Operator

with Michael Raymond James. question Rose will Next come from

Michael Rose

clarify that. rate you quarter. Sorry for about Just Can the the margin, on but sorry hear wanted guys fourth to the to me? exit to -- back go the

was accretion expect So couple And that of or also to is on rate you the the core income? the quarters? back, for that exit -- next just accretion the quarter, what's basis would would for that what schedule a include separately the fourth --

Asylbek Osmonov

the second the answer first. first I'll question -- Okay.

third third expectation that $X.X be the quarter. million our normalized accretion quarter for So will for

X% run the say, exit, normalized, including we being that's a gave guidance when so of And of income. rate or value fair

Michael Rose

Okay.

inclusive that's accretion. the accounting of So purchase

And down fees just quarter. there's I -- want I that That's trust noticed see there. to Okay. perfect. this in separately were just anything if then the

seen that little a actually have bit. up banks most think I

would So any be great. color

Asylbek Osmonov

Yes.

stay income quarter, we any extraordinary income What are ordinary we as in -- I had of customers. I'm happened came some first did not one-off same kind the think -- our on had the sorry, in trust. we was second in. a the lose trust the income some There we quarter,

I up sale. we million while in unusual our you this rate. trust look X That's X.X last Michael, than quarter. more think, But came income year $X sale, by [ that's it ], months, not run from And normal million. why have a at, was the Yes, state in. to fee and first or if the year

looks like was in it but went it happened it event just unusual So QX. down,

David Zalman

In trust in in grow A year-over-year. assets the bank the department. trust the that to are lot our of continue fact, were deposits

Asylbek Osmonov

That's correct.

Michael Rose

I Also Anything in I Yes, level while. we've offsets that's bit, or in last Q-on-Q. million lowest a quarter happened seen asking. bumps for that a should the or what me, other down was expense little anything around other the consider? or but was just just X.X income, about that's we this And know

Asylbek Osmonov

we significant this the QX. see I expecting we I But the here and that had nothing XX Usually, QX ], to thought quarter will unusual. think of one. not what that we one-off QX, had was a in we run there [ be happened and every and there, be the which a income have did XX normal run rate, income in should we rate, Yes, one-off and

Operator

come will King from question next with Securities. Brandon Truist The

Brandon King

up I expenses. follow wanted to So on

think mentioned there some you made. investments how are I being

what So an expecting thinking inflationary also standpoint beyond your about in just you base? third you growth how from quarter? expense And are are the expense

Asylbek Osmonov

think So the quarter, going it's of don't beyond, significantly expenses should stay that. I I significant, some I see think increasing I -- on anything know hard significant. in working But fourth in say increase mean, think will the I And see expense I don't looking projects we have quarter. like let's don't fourth 'XX. say, anything kind stable. that maybe we're to but anything don't for see I

David Zalman

been that be you've those accruing of later you, facing some additional bit we'll expenses, for little a haven't And on..

Asylbek Osmonov

the the second incurred The we yes. increase that. like was additional X. not it in I think on expenses. maybe -- that expenses, to or X guidance in X% But quarter paid Incurred, I X% year We had accrued gave

So that I happens. now, can't But anything. probably of think right

David Zalman

if our to to again, don't at Brandon, costs increase bringing like the to down it's -- in and find way cut always if come have we up a we've don't that. But to we expense. the cost something been come with hard the good income very

historically, So where -- to keep found we it's we at. it ways

Brandon King

know of you've a thoughts But been growth. production question on balance maybe keeping or loans, the the mentioned then I how selling Okay. resi more there residential more instead And the you being loan updated holding how markets? more in thinking about opportunistic on any you're it. on sheet and whether balance before production sheet secondary

Kevin Hanigan

more secondary I'd opportunistic say in markets. the

fund XX%, more be of size up products balance that portfolio. mean of growth The onetime do continue core ]. was some have our -- category close case. and in do take We our complete. got it largely a [ We do down. have have in I to new But curtailed we that And customers. the care XX% matter in terms to sheet originations, We they're curtailed of

Unknown Executive

Correct.

Kevin Hanigan

comfortable the that's Of the of a for and end level. balance a comfortable level just sheet. We high think us

So going pricing set the be that we market, loan will are cases, in some and in we've to produce fee to get for in what We category and many income paid we produce. what will generate we can secondary hope, through it available sales.

Brandon King

that Is just for Got accretion? to total back Got purchase I increasing accounting And purchase lastly, also think, then million. or $X.X accounting it. that comment it. being Lone Star on, going is your

Asylbek Osmonov

and Lone [ the including other all all is That acquisitions. FCB ] Star,

So it's in total.

Operator

Shaw will from come question next Jared Barclays. The with

Jared David Shaw

you for the is end discussion around growth as exit Where of securities. earning do the the a average assets good XXXX? loan at looking as for Just think and cash well rate

David Zalman

What was the exit rate?

Kevin Hanigan

What be. will average earning the yield

Jared David Shaw

end earning the of at the assets Average year. Yes.

Asylbek Osmonov

Yes.

area. think model, now I be. XXX we to exactly look at -- our going if what's quarter, it growth we the in [ see know to I I I as grow we had can ]. mean, pinpoint right in second continue don't that

increase. to continuing to going be is think I

David Zalman

come hard Fed because, the mean, I It's does down.

Unknown Executive

related. cuts Rate

David Zalman

on mean up. basis, static no question there's a continue to would I it go

less. That's I hard the question. change if just think that a are would rates really

Jared David Shaw

Okay.

where cash given of fund with terms deposits, an versus exit using just loan be, or rate to securities the from in could trying flow growth Just see to loan expectation.

David Zalman

to but ask I lot can at to it. it's look really But like think. going a on again, be something that, we Bad theoretical,

Kevin Hanigan

And even the the getting we're runoff cash, we XXX in to of it the [ put ]. securities, overnight, extent even

X [ to in XXX from ] going holding. those we're So even cash

well it's XXX So points. basis up

Jared David Shaw

Yes, Yes.

the me, your last you still comments. be just you lower said the And spur look to growth. back driving I sheet that, growth to I had could well had deposits David, for margins that, circling at coming should but that as that would neutral, stable You good on with we as loan square margins? be some think guess still balance in then just just Okay. would better If are seeing rates, how said trying to something, NII? you think

David Zalman

model the of have Well, me. Yes. in front I Again, don't

because to interest net Just be -- rates income grow harder think you the interest are would that down. would coming

lowering XXX to basis show the do increasing as And in So has or points, us increases that with have, time months have over with that X, [indiscernible] up coming interest interest well we rates next the and net XX deposit the frame. continued too. we still look maybe expense does to income XX at assets existing really down as that

lot a moving So of there. parts have you in

is [indiscernible] you square comfortable do feel hard. have models. where something head in pretty we're this your don't like trying with I models, to If these at But these very

Kevin Hanigan

Yes.

I David down of moves grow. But time floating to try won't going And deposits on because our NII rate book cut with continue as put a to fast. what think what do David me be was overnight. I move think another saying is will period there -- when to rates let maybe

David Zalman

Exactly.

Kevin Hanigan

of talks some bit dampened fast he like as a little be our X-month in will loans the move floating it deposit short move. little down as about time, the when because run, over period rate So blip a rates

David Zalman

exactly to meant. noise I the that that's trying That's what say, I'm

Kevin Hanigan

version his the noise. That's of

Operator

come Jon will RBC Markets. with from question next Your Capital Arfstrom

Jon Arfstrom

all about rates alluded talked trying up you but it question, about way to ]. margin margin nuances X.XX We're think? some do I or down. another you you ask But normalized maybe what these for get what a is you of these of go -- if kind think earlier, questions. David, to happens to What do [ little what tough Prosperity? know but a it's

David Zalman

It's a question. good

and historically, I'm I stuff. in. went because our looked wrong, think back me, [indiscernible], for we he If in this did jump this

have normally, historically been normal There's net been some margin interest there a but But [ for ]. us where some at. end around X.XX highs been we up and has historically, lows, would that's

Jon Arfstrom

you these we liquidity can balance -- you do do Do And had you discussions think is eventually Or in ago. think -- quarter we any the Okay. a or sheet different? get that think X there?

David Zalman

up. Absolutely. just Yes. years XX these used last I They're I mean only down. is the mean, I I with or XX that model and numbers. them. for we've comfortable [indiscernible] again, a the that, This I very not believe in really made feel do think

both see those as of positive. I So

X.X money going [indiscernible] think or we've last -- the X, other really in. didn't the the after been I in then way. banks, COVID up it, pay just money We drop the so attention mean gone rates we I that interest even out going years and come we've have much to into much and and deposits win really with

that think happen. really I what supposed happens to is

it's we're that our think favor. -- I moving in

about That's money outside and that feeling do we in. down, people from come bank come rates better the was interest as that think it. I think treasuries back will that

will interest put mentioned are now provide hold that for down ago. they while going Tim more loans more because a right on And loans rates so that would do that because also money people

having [indiscernible], years, the looking it think But I at that, a should a positive. common all just for it's X over be said positive -- we sense, should So from crazy it's mode in sure. it next

Kevin Hanigan

we are don't any anything, If we right say, the know make or consistently But not. confident year. increasingly will nothing been mark. and had We've them confident. we've throughout on delays, No if the this always become sense else. I I'd

David Zalman

Yes.

think same for . me. I the

Jon Arfstrom

Okay.

helpful. That's Okay.

a alluded return I margin mean you what for on tangible to mean, issue On an it's your charts, it, the company? normalization. tangible do But the David. I right? obviously, in you it think it on like appropriate return is you can seems and see

David Zalman

before, loss we think again, in spread, jump before the I I think the to again, Kevin and if to because the hit in of want margin interest also. net used you earnings

see keep -- too, over banks think -- we I or want return I ratio in we a tangible higher X% that we XX% have tangible our and of But are and lot that's again. we're banks. to higher mean, XX%. go I that's capital fair, about think think on mind, We're leverage over than I we XX% where -- capital. X%. have most a And is

able could we criticized So have for But to to buy in have acquisition. again, pursuit again, nice nice capital. it's been to stock so back. when be much been It's of keeping we've an probably been

we to that even number elected lot can make So keep capital higher but high. a we right that now,

mean have why of have you capital that's So I always we always extra -- But tried keep It's socks pairs think covered. we it of why we've you we're buying? is -- and extra have it's capital. used, that's just haven't why run we always that said, my kind -- underwear bank. like I wife that

Jon Arfstrom

more bit and estate. overall real I just you're you just non-owner-occupied maybe health what last a come a big That's commercial guys a on follow-up for that deal have me, a when new David. David, Can up it good, for one. obviously, book? there you, story for one little good. your credit, one but renewal call, things the the off you Not That's of show about looks But talk seeing

Kevin Hanigan

books looking lower for brought have rate our We than and were that relatively a would a really something strong at us say lender who I'd day, competitive. the other liked. in we

all I XXX ] and special [ occupied [ have was the XXX between He talking or going that something. who banks think on XXX owner he somewhere deals ]. was highlighting are

with competitive a now wallet. market a because it right full of the it's side So usually comes

the company's getting up end You revolver.

get You and up the business, competitive. well. been very it's treasury management holding It's

Operator

Please over ma'am. session. go any remarks. This for Charlotte Rasche Ms. to ahead, like back turn to closing concludes our would the I question-and-answer conference

Charlotte Rasche

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

Operator

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

disconnect. You may now

Prosperity Bancshares (PB) 24 Jul 242024 Q2 Earnings call transcript