Prosperity Bancshares (PB) 25 Jan 232022 Q4 Earnings call transcript

Good morning. Welcome to the Prosperity Bancshares, Inc. Fourth Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. this being note, Please Instructions] event recorded. is [Operator

turn over to would now Rasche. conference to like ahead. I Charlotte the Please go

Good broadcast several be live available gentlemen, weeks. and the Internet fourth conference morning, replay and to over This you. will prosperitybankusa.com call. being Bancshares earnings quarter for and is call for at Prosperity XXXX Thank welcome ladies the next

Officer; Counsel me Officer; Chairman Rasche, General Officer; Dowdell, Financial of E. Executive today and David Charlotte Director and Bob Chief with Eddie Safady, Vice-Chairman; of Karnes, Kevin Officer; Prosperity Davenport, Hanigan, Jr, I'm and President Strategy here Timanus Executive Senior and Vice-President. Randy is Zalman, Chief Chief Chief Chief Operating Corporate Osmonov, Chairman; Mays Hester, Credit H. Tim Officer; Bancshares, Merle Lending Asylbek

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

will Finally, call questions. for the open we

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

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

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

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

to to our everyone like call. welcome fourth quarter and I'd conference listening thank XXXX Charlotte. you, Thank

Our and on was average for the in December tangible assets was ended three XX.X% X.XX% annualized three ratio our on Prosperity's came the annualized XXXX. for average months ending XXXX, months efficiency XX.X%. equity XX, return return at December XX, common

the diluted three $XXX.X that X.X%. common for share XXXX an XX, which $X.XX was was $XXX XXXX three million The compared in represented the income XXXX, December XX, in represented of for the the million of same December per the net increase for an months with income months ending Our and XXXX, which increase same period was net for compared with ending period $X.XX X.X%.

income net or the of year the Our ending was diluted million common for Net XXXX, increase income million increase $XXX $X.XX compared XX, XXXX XXXX, for XXXX December million $X.XX to ended $XXX X.X%. with an X%. year per an for share of was XX, December for compared $X

billion Our XX, loans billion were XX, of XXXX, increase $XX at $X.X billion an December excluding at XXXX, $XX Warehouse Purchase Program with $XX.X December billion and -- or PPP compared X.X%. loans

from annualized Purchase XX.X% loans XX, million $XX.X at XXXX. excluding the Program and increased loans or Warehouse $XXX Our PPP linked-quarter billion X%, September

from to were December at in $XX.X the XX, $XX.X to to fund a September XX, of at decreased XXXX, XXXX. December due you when billion million at decrease billion, Linked $XXX deposits X.X% or Our compare $XX.X decrease deposits. XXXX or billion billion deposits quarter XX, primarily $X.X a public X.X%

public was non-interest in increases, the deposits the total mentioned Our saw fund decrease deposits period-end but most bearing average as category. the of and earlier, in small

points or XX, earning XXXX, X XX, with and XXXX. at assets average million assets interest Our $XX at asset quality, points quarterly nonperforming December compared $XX average million or interest-earning of assets basis X quarterly totaled basis of that's December

million at $XXX XXXX million XXXX. $XXX loans on losses last compared December The XXXX $XXX credit million with allowance XX, for December exposure September year and off-balance XX, at was and credit XX, sheet

pending although First about Texas Midland in entry in We the shareholder markets areas are our add areas market Texas merger Lone Odessa, to assets and Horseshoe approvals with close The will occur. us provide expected and Falls are Central to and delays Texas. our Bay, $X in regulatory and during Bancshares and are and share first well The Amarillo Star of of Wichita increase approximately in the billion into and Marble new excited half Falls, as transactions combined of the West Fredericksburg State XXXX, banks Lubbock, could as Bancshares. pending

the in XXXX, Prosperity quarter paying-off fourth XXXX. into was and Oklahoma. from the borrowers loans. and in restaurant estate not been by of as especially the growth loans move comes spending as fast strong, rates Consumer existing growth because repay and we or population During expect did increase they continued be the sales see well that which expect low but loans, were it to rates, in sectors. inventory impact have in less tourism, of loans, remains we when affected as growth, and the to and for pricing opportunistic The will levels continue as Texas the hospitality Real will

next business-friendly of Texas several that a companies the rates as to lower individuals environment. move Oklahoma continue political because tax over states and believe We economies will the outperform years other to in and states and the

infrastructure that expect to will places finance buildings both will banks need and consumers need and will housing need more companies their grow. spend to and We money and to more

several to over at higher portfolio, bond of assuming yields fourth to improved of reprices XXXX, some normalize the While to X.XX% the the quarter higher near because rates next margin interest rates, that immediately yielded during net our the rate, Prosperity’s which banks we as expect continue net margin years current has increase interest

like helping directors about a future our for customers, to company. excited shareholders are we bank. would for Overall, such thank the again and support our your of of our associates, Thanks company. and build I successful growth

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

Asylbek?

morning, provision Good XX, months Zalman. income interest three before Mr. compared million was December you, credit Net everyone. for for $XXX.X losses the Thank XXXX ended

period of less $XX.X interest million same Comparing fee was in million partially loan in an $XX.X $X.X net in loan the XXXX, million due X.X%. million million, the quarter for million $XXX.X million. expense an income. and and the offset to less $XX.X in ended XXXX having XX, by increase same increase fair of December period $XX.X the of $X.X and value in $XX.X PPP increase income income income million loan in XXXX, increased or respectively, to interest despite This interest security with

the XX, XXXX compared ended was period same ended for The December net to XX, three months interest margin X.XX% in on for XXXX basis for XXXX. X.XX% a tax quarter equivalent September the X.XX% the and

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

the to Noninterest for million the in $XX.X $XX.X XX, same the XXXX was ended XXXX was million ended months in XXXX XXXX. quarter expense XXXX. million million compared income three $XXX.X XX, the and and period compared ended XXXX $XX.X Noninterest for December to the same ended $XXX.X for September XX, months quarter three for September XX, $XXX.X the for period million December for million

expected new FDIC by XXXX, For expenses the increase is assessment million. quarter approximately rate first the to $X

This the expense to are to half our XXXX. be in impact from any million. related the which merger range of costs for the acquisition, XXXX expect first noninterest As a for pending to of million close $XXX $XXX we in potential excludes one-time result, expected first quarter

for December average XX, flows months was ended portfolio The ratio three period X.X for XX, and three the same annual September the bond approximately for XXXX weighted and ended December years the of XX.X% XX.X% $X.X projected XX, metrics efficiency XXXX billion. at life a months showed The XX.X% to cash of compared XXXX XXXX. in

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

Asylbek. you, Thank

$XX,XXX,XXX total of non-performing energy was in only comprised Our XX, in end, increase non-performing $XX,XXX,XXX points and XX, XX, loans, points September $XX,XXX,XXX approximately to estate, The the or December $X non-performing $XXX,XXX XX $X,XXX,XXX other XX% and are XXXX. of assets. or repossessed loans This in non-performing basis a assets credits. $XX,XXX,XXX Of at real quarter in December XX XXXX compared assets estate. basis in real assets, XXXX represents other at asset totaled

non-performing Since XX. have at been XXXX, This assets December removed. $X,XXX,XXX in represents December non-performing assets XX, the XX% of

the months three nor the to allowance $X,XXX,XXX December dollars added for were were No the $XXX credit quarter during to for into income from -- ended XXXX, December the were charge-offs XX, XXXX. compared XX, million losses to $XXX,XXX, me, ended quarter September XX, Net allowance. ended taken any XXXX, for compared excuse the

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

I it to will now Charlotte turn Rasche. over

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

course. of Yes,

begin Brady, Brady go open. Instructions] [Operator ahead. KBW. question question-and-answer the now Gailey will with session. first We from Today's comes your Please is line

I morning, muted. Sorry. guys. was Good

morning. Good

Good morning.

upside fourth you book start reprices think -- little beneficial do a to really margin bond you that's from bit dynamic think in the step-back higher, margin, margin can but a margin the the see the quarter. this know higher? So material book some do longer-term the of the took bond as to very when I of pricing the

more I'll we Hey, and maybe sheet right? take story change, add is our balance about later. our Brady, can doesn't this that It's mix. Asylbek. all But

looks I rate right If a us because term environment right. mean, you very at long are look we you're term, positive higher now. long interest of for

if portfolio are Timanus our than in about over variable, to you and at $XX repricing in mentioned, billion Mr. time bond we just about as X%. have We And is XX% in those as yielding XX% which now, less look well. right fixed portfolio, loan be rate going have

that looks very on positive us. So

portfolio, put the very you we which the loans, past high-yielding X%, few that coming if take bond cash very to just right in was at in cash strong now had yield long positive you growth be and going quarters. on could have [indiscernible] flow loans, we X% term. towards loan and And that's flow the year, it And our about $X.X every look billion if

I one And more will add. thing

we that NIM at consistent if see If that's NIM, long maybe in say color you you months, and a is look environment the the that months, with the I we expanding But of I what and the the XX XX very look very the long-term on I think feel to cycle. in look quarter, our if because with flattish -- But we've That's wild our that's, be the long in rate deposits, would repricing are term, the bit -- model, last IRR positive still term. term. short we done about especially more And the margin, deposits. going expand of at at you mean, card should repricing first of competition.

in jump says that to nice. margins sometimes. interest going increases Based for period, just XX starting in I'm we to hard pretty really the month if a models net Brady, believe show have, XX-month we in is our six something period, what I minute, model our significant on months can. the

beta, that's accounts, -- a However, points everyone increase they're of increase. in February for I'm increase, takes points consideration today, think like for model, points basis and we has a the January rates in rates at model I on increase predicated in, the And basis basis different plugged in market your XX they every on March. and where basis into this use a XX sorry, points that XXX have money but in XX as increase

say if XX% up in things our went we model. XXX would basis So points,

just I'm trying -- background it. to you on that's So give some

it, we you to the raise always to how that's you than a But the I deposit it. deal. could way based point make go rates the or when I at the just that -- pressure as said get it, think. if interest also that, model. so a guess, was on than the thought things the you it in would more faster Having net rate we of could really could change long depends change It have making that on environment simple, in there no you in look that the saw do normalized matter that timing that with term I short margin had our that's --

yet I to gotten have most gain just interest a of is already, net their So where think It's banks of when. ours other margin come. matter

fourth bond quarter, When you purchases those? the bond did the new you today is yield the the book on the yield bond in what So -- on book or you're X.XX%. at buying new look like was bonds if the

been because We have don't have to buy them loans growing. anymore our

-- loans. -- really But been as for buying we've and really putting is term, of the much see really. the I matter bonds portfolio, think the our in short us we the fact don't loan all So as increasing I

increased we've $XXX million the loan think I our to in last portfolio quarter.

The the country know even pretty I good, we in right But they're a recession. the talking some areas that portfolio. loan about strength first too. looks quarter still of see some still now, in

go ask Loan my if feeling money Federal the borrowings right that what me gut and So the with towards in of we're probably. we're I more reduction loans most amount doing and borrowing loans, you now Home it will in that the think the

that I backs think what right? the XX-year are X.X%. about Is mortgage now

Yes. so. Probably

not loans that it I in put our would level. to at securities in dollars think be clearly And preference those

at success had lately. that So some -- and here we've

that's So plan. the

think you growth, are I kind but for of last think growth, And on so digit annualized, the to the XX%, level guys look loan of as north three longer-term you loan XXXX? how growth growing loan mid-single like guide you about I do quarters, at a

you it? want to do Kevin, take

Yes. driven slower those really which side. is portfolio, by $XXX million had growth part estate portfolio of that are that and structured slowing this real so we down now, the particular, loan across legacy, that under in on Brady, I at down is payoffs think paydowns

better quarter-to-date. last really almost consistent what David seen this last even mentioned in maybe -- month the for quarters the first loan in couple of behind month, of a what we've year couple little growth than we've of seen was quarters, the us, the with first strong

in we'll origination, things for mortgage to money single-family being gain make origination on package So it think difference the about At make of off sense those might single say somewhere comes if year, high and more the versus with the sell for where the end pricing them would to mortgage digits and I the growth. the very I us gain, lower loan the in. the mid-single single-family digits,

if So extent range to growth. say I the would loan we rates single-digit happens, mid-single-digit such are high that that, towards more portfolio those, the

in we're way, both So going that's rates be Either the loans make factor. whether money. and more on are these cognizant where and the strategic we to just of we're swing things, are portfolio And to thoughtful we'll selling.

Okay, Kevin. that makes Thanks, sense.

go-ahead. Michael with from Raymond The next question James. Rose comes Please

But looks back update -- on were sticking October, less the of the volumes just little not on growth, the any and given surprisingly, Maybe bit Kevin, loan downward little thoughts. would volumes. Hey. just forecast. for with the bit a just then in in you'd the maybe expect a than but probably term usual it warehouse, like kind what your talked surprised some more about love MBA's stabilization, not would sort of near I the just warehouse stab Thanks. pressure I

you because we're in quarter this I'll I confirm. does. our on call later It morning, thought far has me for down averaging transcript, But the And number saw January. I once $XXX for we trickled always Yes. guided It I note your Michael, you so I the exactly right million. to scrambling had. had that

I quarter So $XXX it's of average last off think, like something from the million, that.

in. be expect I'm upon the $XXX XX-year of here for little we're to but points it may I seems to this the moves, going between So again, be somewhere the quarter, million and settling bit, and for the say depending rally $XXX average would kind but from to low million. where going we quarter a

there's other recently, lot just a I a then of out David banks dislocations. lot And Zalman. announced two Perfect. for the deals of Obviously, maybe know there,

around potentially the to of look additional in that two announced? do point? this here kind even already and couple quarters, And change any deals process you integrating your update you've M&A of you're maybe would at if Just next thought on still Thanks. the

organic about M&A the X% that mean, I XX our is shoot has for Well, the the last to been our an I with of the always about double-digit for XX, came on we of deposits trying X% M&A. plan. on rest loans in think the years, and part rate plan and growth always

would that yes. to answer be the So

if getting if there -- calls. out that I you ask there. it still are deals that year, think as busy think still was last as I me it's We're

more tempered. I it's think

Something right the challenging of on is the and that more is banks most books AOCI now.

of through that a that's think deals. some have deal I we'll to these on work

the there's the price the In mark deals, past, same the you always next that there think there's make on -- of discussion to morning, stuff I change, for the you able larger just were they're it regard there's wake marked be the But so of -- sometimes one it morning times then with up deals we adjustment M&A, a to mark. and be always And take was smaller some some And and to people. will going AOCI. the goes have to in as on on. lot not

always So will in probably M&A there that. player be a and I think we'll be

maybe And you just for actually Is Or of tool that to you maybe dislocations? here haven't of be repurchased little finally there's recently. a the a Thanks. bit here? announcement, me, opportunistic more expect case buyback shares potentially on just Okay. would kind a in

used dislocation. it we've for Historically,

that gets I think price little back I under going gets whenever XX, into the we've think market. the been crazy, a

I for dislocation. the But say that saying would not in we've in past, that that. would -- be it I'm it used So the just and past, like primarily

my questions. All right. Thanks Great. taking for

The Dave Please with comes next Rochester from Point. Compass ahead. question go

guys. Hey, good morning,

morning. Good

where just seeing the loan seeing? wondering guys the are, what are we know about the all the curve been could you're I yields appreciated if are talk given was has what all color margin I incremental you place. I today. production you on earlier. your But where today, over

within end they're end, X.X% low high fluctuating range. the X% and that the on Basically on

Got it.

on over years? of alone quarter your average upside next decent from yield a got the amount there the you So few

We quarter, for averaged it remember if X% correctly. I the

That's So is of bit upside there quite a correct. available.

Yes.

on Sounds know outlook. appreciate increases But in then you I good. expenses. XQ guys one the quick XQ, And just I your I think, merit through. midway a have

have much XQ that in step-up by great. quarter impact XQ, we you be into that and would full how the guys from of you if any into a So expecting are visibility XQ, maybe get

the X%. take this about historically, And one. increased from we I'll X%, Yes. increase, merit

I the with of consistent increase think, had think I dollar the it wise, year. will what we from last be

to $X another going to million $X -- yes. it's So additional probably million add

in going second it's additional $X about, So expenses starting million quarter. calculating to the think, about be I

you And much you you on about one was last Okay. maybe public that core decline deposit one I way And And deposits thinking the deposits. after Thanks. Great. are for have X% talking still XQ. wondering how last at thinking the deposit this in of in cycle you left betas changed about point? of one, growth that guys are before? the then at how Has all? were roughly then about guys

take of May the… some

Yes.

the ended billion, where On the public about we and year we about $X.X are that's funds, at now. right

with safe we be now. this no right and we dollars pool tend we see of good with still bids like it's think banks a and don't ourselves. paying some We that tend changing. with that money fund public coming payers our aggressive those relationship overly reasonable. customers challenge always operating do because good in have have X% to funds. say and that have of year, that's best we have that at with of their It's have -- day-to-day to public don't all and above other still rate their let relationship some instead rates those indication a be to us, and believe, are go interest, up has some We we text that That I that to a our accounts, several

deal But funds about just think So on we public we are on a that with case-by-case now. right I good where feel basis. we

Yeah.

to interest the couldn't down the tell we pretty other because increase. so always think some the for banks -- and would going even see I that right rates because X% chased it's tell of -- paying rates, X%, now haven't are lay normally I want stabilized it's high are still that X% as would and to just rates, the I I for hard we're far as right organically. to would our But you of to me sales, would -- grow we the you be just where now. we X% I deposits that say

best answer Yeah. guy probably on. to And the Asylbek is

well you the think I as through about beta asked cycle.

know where of one. but top I that is it think on I Asylbek

Yes.

increases. So cycle if cycle just you rate before look and I'll tell at the the December

even over XX kind But IRR project X.XX just points. interest than beta our like what deposits for we betas at at we're deposit you slow the bearing basis in report. So points less XXXX yet, rate experienced but look was little over up had beta total not basis in there it's the And wise, period, starts increased. XX we -- as the we increase, that our and like if the Fed what or -- know, we're bit back rate XXXX of a ramps not when but running

on, on to feel bit we competition there's about a us. going going pressure So little a I that, I think and it's on but deposits, good put the think of very

It's deposit of with growth. we as competitors. since don't may we've be you been where not XX, only scenario can't XX not had a know, years give I XX, much it so I deposits

as you had and and had came billion the are to -- that But it opinion. out money can -- and at looking two stuff. years. helicopter something the $X you a a making on some at there's in year. we and this it again, just happened better basis. people a hasn't We're know, other you model could that's So billion And years, it's if $X are as changes give buy daily why we in last all long options going on, historically, so And treasury we've of then just but banking we previous to that X.X% for need really a people -- and to hard watching

out trying to where and it where stabilizes. we're lines see all So

the appreciate guys. Thanks, color. Great. I Okay.

with Davidson. comes Winter Please The ahead. go D.A. next question Peter from

reserve obviously, it's for that Credit, you look good coverage, nonperforming the When loans. the I afternoon. times at guys. XX Thanks, hallmark

recession? you even So provision expense the a a with zero guys is, keep still mild question can this year

Yes, I have we we a give bit model the we run in recessionary maybe of a can from scenarios. scenario, bake base in as explained then -- before, color also and little we the

based we the two at appropriate. -- right just is economy allowance combined what scenarios where we that the the levels And and have see going where that models on be, So and forward, time now but… to considered think to have see the run I the allowance will

first now I we point, this that. a mean, high in had recession year. use Yes. in went at the the talk with that so the some COVID time we in a think we variant some And model, there's now, -- I there, to of using we we and were used right then oil

the allows money that. that to us those So variables reserve using in keep like more

Yes.

it's but growth life Texas slow rates be in impact reason, some think to go highly that foresee. seen. I dependent Oklahoma, even We direction population or if the on get happen should that, And would it. don't on in how and you things down that high foresee that an for remains don't other have and

to we reserve. out, watch the have I just mentioned. the at point But just this the anticipate plays wouldn't your in that So to certainly, is, increase things an some away of I right we those question think answer in time, as year

up $XX just get $XX million. remarks prepared up, $XX from didn't that Yes. Last thing we has have move subsequently it renewed. that renewed loans some moved or million NPA million of did I think was year-end Most that I'd his that add to in was covered been at and Tim

So it that where number had is back down been. to

of mean phone a stress, call watching and it, That seen we're terms sit. yet. in where we get but good somebody of this about any So doesn't that feel stumbled, can meeting we walk we out haven't we and

of gas. But we've That's anything, stays the price correct. always now, never that. we've and If same. is right it good, it's learned wildcard A And it's oil learned the stable.

have but to it it where still we'll stable, probably be see year, next goes. So just we would think

the just it when And announced I second acquisitions, was Okay. now first first to two the deal of kind bit the to first change realize synergies But in saying a quarter, anything saying that year. the pushes box. regulators the terms close half the then of closing two, deals? little from a black maybe of are the deal, timing question, impact you're bit? in the that And causing of going the thought little operate just you When you're the the does in the a accretion out regulators in

the deal with I'm on statement the I that first blaming to quarter cautious -- mean, counsel our to be half from on happening, general closing think the just first everything I the still we're closing. first trying in environment she things for right to shoot a of regulatory should put felt we But way that are because the first now. quarter just half

the I emphasize, think it's regulators. from yet answer important to we don't have any

we So a closing. schedule until can't we do,

Got it.

Okay. you. Thank

ahead. from comes go Morgan Stanley. Please Gosalia Manan question The with next

Hey, good afternoon.

Good afternoon.

afternoon. Good

securities NIM if that cutting the had potential NIM given bit in the on year? deposit rates and in on near a how should I the that if benefit in the the back a repricing half you maybe begins your alleviate be we term actually just dynamics competition a downside question about keep think have side, the little Should of positive Fed of this security and higher?

I think bond just We speculating much. know, decrease sitting overall, still picture, big Fed mean, than we how don't rate, I and and in are they we're would portfolio, would less if X%. even we're the

also even on and a us loan. of still decrease. upside for I mean, So the lot they there's

deposit see future, you're foreseeable helped perspective there if have a definitely, upside. the cost And the definitely still the costs we think is decreased right, even I decrease, rate So from you on I environment. think

of time and it too, have the helps that period at and acquisitions mergers portfolio loss for probably. not the really today the the the portfolio we banking bond seen part, think and I a on probably rates it we've most will change yields in the interest the valuation were that But zero. reflect AOCI in in where before

type too. on to stand So any a of rates of repricing we benefit in normalization

funding the think of maybe Got it. source can round as how FHLB then should the on side, us And funding. with CDs and a discussion to you about we help out

here, XX% the ratios so pressure up extent that versus to So from or your do to you accelerates the that room have deposit how right bring now? at much loan-to-deposit it's

part, billion, which year, most and we that Asylbek, So $X overnight every we certain billion first pledging a you have is have close if Loan all, billion. can of but bonds for rolls jump But if we you that of because capability about want, Bank. to Home our have borrow just want just to with amount the we the Federal the in, of off $X $XX

So the instead and that money would loans reduction also in past, growth probably debt. are liquidity of them the the banks in Loan either securities the in us into take and that have joining that the certain a buying portion of Bank discuss too. the probably Home take it put their the pay of we and reinvesting we instead will like Also, loans down we Federal

join probably. So be the really also probably and own using necessarily looking probably that in but Federal portfolio, doing the would have it see, we're money [indiscernible] and our big one, and at from Home to will but Bank that have that money just banks a we us, paydowns that get of portfolio a I Loan pay the down other to look combination

Got it.

it like leaning you feels at CDs into So wouldn't be all?

the been -- CD -- that or that any in may our again, stay now. tremendous the are. they CDs for to high the historically, had if rates think paper still the of people I of before to not core like over move money change. we've high something are going type liquidity rates time advertisers really don't we've goes But see rates. right That just higher at have CDs in that we and But or much as liquidity. look we've you chased that's amount because And ability when borrow so We that have. and money never we not deposits bank

it. appreciate I Great. Thank you.

Matt Please question comes with The Stephens. go ahead. next from Olney

Good everybody. thanks. Hey, morning,

Hey, Matt.

morning. Good

Good morning.

of across results And mentioned deposit the pricing I in pricing. down want the network. of increased deposit posted early we drill you rates some in XQ think some I you to saw that that pressure. on the XQ, the And obviously, and quarter last

the the Asylbek, changes XQ. you deposit Any incremental mentioned weeks months? notable or posted deposit over few in pressure pricing last rates in

We at for -- on again. end But -- third was overall, interest-bearing like our basis points. fourth quarter increased the December, Yes. deposits our of bit was fourth the you look beta if we XX little deposits the -- overall a quarter,

we sit increase on a right So but will now, little there, be. a rates we specific of don't we how increase it might have an much on bit deposits,

hardly said which take anything, If probably up, because Matt, it what, that rates six And X.XX%. the go basis offered if and you months or account our did, you basis last time, to XX way up points went all and the money we did of that. would that. that remember also net rate at money saw was prepared points, we our down XX for one X.X% five our probably CD market points market -- last mentioned at on basis products, margin be I I going meeting, our And really at our interest interest that we

the that of a a our point -- go two see points that we're quarter move. those point we if more, in up to going up a a has be we I So March, it it quarter increase basis model XX in go would some and February of would say, are that. things of

XX X% what's of -- So times XX.

or something another like basis points XX So that. that's

raise could up could modeling us now. our still in you see go that So to

don't may our never modeling. to more been player. long-term changes go something we in think If or the But make a something, there up of to player. a and that of we the a really or quarter-to-quarter different, I much might saw something We've going that we We've was out any just money been again, changed so have that. competition have bank like

going how Our more be margin core positive. to them because real time, But longer-term the the you do them. outlook it, no customers, that and that. margin. more change interest net to matter again, we cut over we fair give of is happened net had interest still not even want reason if with it's again, the we still we raised and And it's would time last rates to And

in loan-to-deposit Yes, least and Brian? ratio little to this with that a XX%, flows off protect I'd at let drift room and sub bond the we've cash run. ratio Matt, Kevin. our book the got the is margin up add just loan-to-deposit short coming

Yes, okay.

just your even X% worth you loans, of pick I think too, dollars’ really up just a can you it margin, billion even or keep couple X% improve not improve XX%, I'm your up saying you if loans, on of margin your dramatically.

of in the unique your average your XQ. there. pretty encouraged your some pressure basis, were other your -- and Any And some competitors are of pretty you're color deposits flat seeing versus bank peers was big from XQ in depositors they're on sticking Most maybe I the deposits, how noninterest-bearing public on Texas? with that

I some just our depositors. -- see of we

money who money banks people that anything. was I was investments else. helicopter had paying with the think lot came a Nobody and there everywhere into of the

million see committee this really was I you meeting I I some and a before -- some customer trust yesterday, like he depositors some $XX depositor think it I trust our day or saw over it's from your department that. like So Sachs rate where could bigger something department Goldman higher in trust us of to was watched but our with because add moved a in hiring the bank, another

are some time. same the we at seeing So that of

keeping $XX and… a off where got things of that for It's Greater CFO to us percentage million, that's more these that bank of drives where deposits, our some us money, compared towns have shares of commercial people $XX million, maybe from market sheets bigger the but granular and or tends managed more some big track granularity come be that's deposits. small company to ask professionally we rate peers our million retail of we're getting really $XX pressure of anyhow, portfolios Texas got to in that's

hands. those we And count on can our

let's Right. There's And X.XX kind our that us. and a the of anyhow rates David, the work they're thus Tim of, to X.XX. guys hey, either most have with It's to if X.XX go all That's and willing far between conversation and market. myself. take kept only to or Eddie handful a us. don't these is usually But of the way to with those, we money

Yes.

what think go that's deposit we relationship think tend like same rate, have they customers. correct. good the customers, is you've a our feel our that when all don't XXX% I with they say fund of just -- higher said And if I with I Kevin, previously They they tend we go a said, it typically need don't I public would contact to that's been they and just and to take talk it. money first, have somewhere. out don't while bank the have least at we up tend above, we us do case sometimes, and to far. And about for to so the put of

So out there think see I it I of is deposit don't getting hand. but on upward pressure rates,

customers kind I think relatively we it our think relationship be can stable. And it's of the have I managed. where with

said this who XX% call, in the too, on ran a loan-to-deposit bank ratio warehouse. environment, a last XX%, this I rate the ex Yes, guy from

So with be to the room. warehouse, running it XXX%. sitting glad was this in I'm

in construction kind driver more Kevin, about Is that the of of It I XQ loan kind Okay. primary then driven guys. addressed the appreciate as looks And and was color, in single What all construction? by like the XXXX. portfolio of from family. drivers the single-family that of to loan far a the be on just one you growth XXXX? going loan yields growth. growth as factor

they we portfolio. some see that I good materially that year the is book think think large up really higher construction success continue for approved. which this construction, unfunded got to a And to and C&I we're rates funding customers, it up going in to side. see projects good now, feel we've than on going pretty very funding underwritten We've and we're I are big, about of being

strong Yes, really unfunded right some our markets are of commitments really some that have loan now.

and how million -- Eddie Our Houston had market did had much, Texas probably over Central you… $XXX

$XXX million million. or $XXX About

$XXX or million. $XXX million

go hold looks good. pretty Overall, that can a if up don't do like stick think a into want our the to it that, I resection because while book, So can good that's all just be tell to you gave again, guidance with ago is going really. change. change. something anything those a guidance to that you really But We glorious if or something Kevin this

Thanks, Okay. guys.

Please Markets. RBC Jon with The Arfstrom from next Capital ahead. question go comes

everyone. morning Good Hi.

Hi, Jon.

-- probably I'm to ask you that are kind margin? could that yield? and not certainly, you're worried yields overly You just this what higher, stepping like XX XX of on asset deposit at pricing, loans with in how I mean longer-term to not securities increase I back, in guess about margin And optimistic putting going about you're earning about but or talked X%. on are saying the look deposit pricing. months X% how

front may what shoot said but did. you in give somebody I if I'd model me, me the of

more I with increases stick the I not think a start huge. I and lot if to months big has margin now, net good having we not XX in it. would XX where take It's whether mean, right you away six question a of rates it increase it. months, at in lot is months increase It's a whole from we're pretty than a seeing just interest when happens.

a this we're -- just it overall, had competition you would to or margin of if come going It's change if that hand, somewhere really. just extremely we if On if tons would something saw that we reason, the for matter other the some -- back some reason it for looks increase. change interest when -- else managing overnight, net But the positive. duration of deposits

the goes Yes. I think the mode, sooner Fed the into pause this happened. Timing-wise, sooner

a -- inversion span the You inversion deal. at time. same you're To X.X. treasuries year too. that's factor when factor got years right an now, an your here, span XX I two mean big mean X.X There's I me, really and

-- it term to parked to we're what I've a on Mary few parking through want it always you're manage used Queen the times. asking, it's out again, the don't in I trying Jon, we lot, quite evasive just ourselves. the But be really parking So

the probably now. Mary So we're in process Queen parking right navigating now right that

that on back into about if but pause have when some M&A for like that? you big are seeing it kind yet? this my type great expect the, message? longer Is you there. to you're issues? from issue that, there? the I'm do I lot. question, Land. be a what Mary opportunities the you And and thinking these I SMB bigger guess, How potential would seeing Is like talked you term? you're ties Or you are to marks of is But What's What guys -- and Queen be where of It targets. of of parking Sugar it bad they to it next just held an This think goes sellers? I going the agree,

a in we I large challenge you it mark-to-market, can partner. real real and smaller of is. deal that on some really merger the with what think is ones, the The if you're done, about talking AOCI ones we've smaller

the seller the So loss. takes hit on the actually

really say. bigger think really just at. of we're it's the ones one those I’d sayings that And I looking it's

It's up to and do the deal picking it's as they hard issue. have that

some seller down bigger take on that and buyer, much. not ratio, it's capital it's a give the a this future hard what it's -- in think, on deal, to to it have deal. pay and your the hurts your to on if I be say and And wanted in -- like just tangible we're willing the There's it that it not go bigger to mark-to-market they if and and the would hurts capital, going past, your you I something

don't back Yes. sticks capable, that part Yes. forever. the you those goodwill bigger right? -- -- it's And The deals, it get these rid big But number a runs very are earn of. isn't into goodwill

these all an I to the market us earnings it you deals to you're market to when from I like there. money marking mark you earnings look mean if the standpoint, are are waiting it two of and get you of phenomenal. just right may at bond out, because years model back, everything one three portfolio when be that instead mean just

on think. that. first look like phenomenal tangible three a But really just capital on two the or And the for issue, so deal the the years I is problem earnings

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

go ahead. from next Bill Research. The with question comes Carcache Wolfe Please

everyone. morning, Good Thanks.

Morning. Good

that of your other role entering discuss noninterest-bearing your held better in why that customers? And I I around comments follow the gave. wanted a has relationship more? I also with up than adjustments wanted into could you if you earnings your many of some much mix play ask to on has all been up your color discussions materially how credit banks. commercial deposit to the appreciate

credit were been off. I'll again, that. it start earnings we've raising The

we points think morning. But raise to basis that. again, raised I continue this we XX it

communities. And all a bank, of made I one just not guess, I owns up accounts. so one I control guess, -- don't businesses small just customers We the there's we bunch XX% noninterest-bearing person the in think. that for not our or small in that everything you from everywhere of many almost just is in we're the think think areas, of -- immigrants, granular. the I -- we're it's -- have of because we more have extremely could there's don't and have of person reason And say. businesses the makes granularity It's really the -- like so metro XX% It I bank. around state granular, it

much ECR, come get a that it's and off-sheet rate while Frequently, professionally corporation are as up those with as the bunch But frequent, doesn't which on that couple move haven't where we for money to requests, nearly on that's would had think. ECR. CFOs And of got managed can larger ECR hands requests all us, you the Yes. on we for we us a of rate count thumping

Okay. It’s helpful. really

at haven't just all how I ECR. the seen on pressure much

received phone only the in take one And that been about has call months. keeping us can client the I couple of last pace. pretty that's adamant I've

was one friendly That pressure.

and and like, thing I Tim it. he We're good. number CFO just to with on It's friendly up a Talk soon." we'll case, in was the and back and I that pathway and a a came this call conversation specifically it went said, mean It had think you day hey, take did "I'll pressure.

It reasonable was a very conversation.

you consider commentary Yes. to any as repricing potentially back lock are bond that have show That fully where circle around or do you color. portfolio the Curious of to wanted to the about helpful putting about improvement before Fed Separately, of if the see on ask higher Thank That's putting potentially over lot years to a we cutting benefit you. some up. NIM I up reprices. your extent environment the in wanted on scenario makes there's the the swaps rate super of think I way to benefit the otherwise that expected in swaps the opportunity next ends several sense. [indiscernible] the thoughts on start what to using the

and swap money was in primarily we've your than doing Historically, profit to -- things monitoring the may time. we've primarily change the all in risks look the and the able of -- taking and But and guy taking do times. at pay to our by what again, paying been the and risk time. the and all Historically, you would gone. we that's swaps when insurance premium that is our risk business, And everything, bite couple time beat at business made I at, over it risk some understanding of change more a periods somebody are point what to we've looked else. from again, guess time

theoretical I've questions, on had us that's and thought anything. Nothing trigger a couple pull caused around to that. processes discussions of the

if to mean always manage and we've able to I really look in things way. historically, you derivatives all-in going Yes. don't without of all repeat historically, types environments themselves. an been But

the we've that, and to many. think bank of there's of so depositors, the makeup able been the Tim, I though, because do

we markets our can think lot that, of do so A mixed wasn't CDs. I if we're because in so able do I and but much think. base customer money so think I had granular or don't if aren't. money you so the of mixed, high-yielding to And banks your we're it,

We're the ratio under loan-to-deposit are. gives us some Our pressure room. not

risk was rates of go and last the of the QE. helpful. team, for In from pre-COVID then, towards of as longer lower. I'd David XXXX not you sort course, the one I do the of everyone's in noninterest-bearing much may love really back deposits squeeze back stay rest with higher hear an back And the could If pre-GFC one. That's levels. but about proceeds mix the noninterest-bearing you're may environment where how even Fed just that overshoot levels, thinking to potentially mix to

right percent have? we a What do was lot I don't know now, we are XX-something lower. ours what a that whole

think XX% I Yes, it's [indiscernible]

XX%

that, before or XX% something were XX%, we about like averaging probably that. XX% probably

of that amount see I don't happening. see And tremendous a deal really a I real think So change. just don't again, it's granular I so

don't I falling dramatically. it but lessen, could It see

I think will it though. change,

sometimes money of out I where or going I you're to they're see checking go going to accounts think into CDs at, of think and and even take that they're rates these when accounts smaller going stay accounts depositors that. are interest-bearing out checking to like stuff start

where point. you do a So I see I think see be it where CDs XX% mix where -- had one like back unreasonable CDs. what, of of have our of it I you'll your At less could up CDs. one at I was think in on day at stay that XX% that than rates in to think don't your one XX% say point, they're or don't XX% again had, we'll we to don't you would money money get if money this.

Well, we're X% low. now, at and that's

problem. the anything paying that's We're not

opportunity. the That's

question. taking for It’s again you it. I all my appreciate really very Thank fantastic. That’s helpful.

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

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