普洛斯佩里蒂银行股份 (PB) 2026年第三季度业绩电话会议：净息差扩大与成本节约

Prosperity Bancshares 2026年第三季度业绩反映出首次完整并入 Stellar Bank 的影响、持续推进的整合工作以及更强劲的底层净利息收入。管理层预计，尽管信贷增长前景相对保守，但净息差的进一步扩大和成本的节省将对2027年的盈利增长形成支撑。

业绩要点

• 扣除已确认的一次性费用后，调整后净利润为2.00亿美元，即摊薄后每股收益为1.67美元。调整后平均资产回报率为1.50%，调整后平均有形普通股股东权益回报率为15.81%。
• 税收等值净息差升至3.73%，环比上升26个基点，同比上升49个基点。剔除收购会计调整后，净息差为3.59%。
• 总资产达541亿美元，贷款总额约为320亿美元，存款为410亿美元。同比增加主要反映了近期完成的三家银行并购项目。
• 月均新增贷款发放额从2026年第二季度的4.54亿美元增至6.35亿美元。尽管如此，管理层仍预计2027年贷款余额将与上年持平或略有增加，因为被收购的资产组合在整合期间往往会出现缩减。
• 季度股息上调6.7%至每股0.64美元。管理层还表示，相比短期内再次进行并购，股票回购的可能性更大，不过回购仍将视市场时机而定。
• 管理层预计，在完成剩余整合工作后，相比第三季度的费用水平，每年可进一步节省6500万至7000万美元的税前成本。

关键财务数据

业务与经营业绩

该季度是首个完整并入 Stellar Bank 的报告期。Prosperity 于9月完成了 American Bank 的运营整合，并计划于11月完成 Texas Partners Bank 的转换，随后于2027年3月完成 Stellar Bank 的转换。

贷款发放额连续第二个季度实现改善。月均发放额较第二季度增加约1.80亿美元，较第一季度增加约3.20亿美元。管理层表示，传统 Prosperity 业务是主要推动力，而 Stellar 的业务管线在经历了并购相关的扰动后也开始复苏。

不含 Stellar 的核心存款在季度内按年化2%的增速增长。管理层继续以历史上2%至4%的核心存款增长区间为目标。该银行报告称无批发存款或经纪存款，而公共资金流动仍呈现季节性特征。

证券投资组合的修正久期为3.9年，预计年现金流约为22亿美元。管理层表示，投资组合的现金流正以约5.50%至5.75%的收益率进行再投资，而现有债券的平均收益率为2.92%。

信托、经纪和资金管理业务被确定为手续费收入增长的主要契机。管理层预计，Stellar 及其他并购带来的扩展对公客户群将创造额外的业务转介绍机会。

管理层业绩指引

• 2026年第四季度净息差：管理层预计列报的净息差将持平至略有上升，因为资产重定价抵消了较低的收购会计折溢价摊销和较高的存款成本。管理层重申第四季度末退出净息差区间为3.70%至3.75%。
• 2027年净息差：在利率保持不变的假设下，管理层维持平均净息差在3.80%至3.85%的区间预测。银行将其资产负债表描述为中性至温和的资产敏感型。
• 第四季度公允价值贷款收入：预计为700万至1000万美元，低于第三季度的1160万美元。
• 第四季度费用：剔除剩余的一次性并购成本后，预计非利息支出为2.35亿至2.38亿美元。
• 长期费用常态化水平：一旦整合工作基本完成，管理层预计单季度费用约为2.20亿至2.25亿美元，预计在2027年第二或第三季度左右实现干净的常态化费用水平。
• 信贷增长：管理层预计2027年贷款余额将持平至略有增加，其中包括潜在的与收购相关的流失。管理层认为，随着整合压力缓解，2028年贷款增长率有可能达到3%至5%。
• 每股收益增长：管理层预计，在净息差扩大和成本节省的支撑下，即使贷款余额保持平稳，2027年每股收益也将实现10%至15%左右的增长。管理层还表示，若外部条件允许，2028年可能迎来又一个两位数每股收益增长年。
• 按揭仓储贷款余额：管理层预计第四季度平均余额约为8.50亿至9.00亿美元，低于第三季度约12.3亿美元的平均水平，原因是利率上升和正常的季节性疲软。

风险与关注事项

并购整合仍是主要运营重点。管理层承认，被收购的贷款组合在交易完成后通常会收缩6到12个月，从而对2027年的信贷增长造成逆风。

存款定价也在走高。管理层预计，第四季度平均存款成本将上升约6至7个基点，达到1.45%至1.46%左右，总资金成本将升至大约1.57%至1.58%。

不良资产从第二季度的1.30亿美元增加至约1.93亿美元，部分原因是并购中收购的资产所致。管理层预计，在其他条件保持稳定的前提下，常态化的不良资产将在未来一到两年内稳定在1.25亿至1.50亿美元左右。

贷款竞争依然存在，不过管理层表示，前一个月的定价和核保行为已不再那么具侵略性。该银行重申，不会通过放宽信贷标准或依赖批发融资来追求信贷增长。

分析师问答要点

• 净息差扩大：管理层表示，较低的收购折溢价摊销应可被证券和新发放贷款的更高收益率所抵消。长期重定价仍是2027年净息差前景的核心驱动因素。
• 资本配置：高管将股票回购描述为比短期内再次并购更有可能采取的举措。任何交易都需要能实质性地加强其在德克萨斯州的业务格局，而管理层眼下的焦点仍然是完成现有的整合工作。
• 信贷准备金：管理层认为，相对于约1.93亿美元的不良资产，6.29亿美元的准备金水平非常充沛。管理层指出，2027年实现零计提拨备是可能的，但并未将其作为正式指引提出。
• 证券投资策略：管理层否定了投资组合重组或其他资产负债表工程，更倾向于让证券通过到期按计划产生的现金流来进行重定价。
• 有机增长与并购增长：Prosperity 计划维持平衡策略。管理层表示，既希望实现有机增长，也希望开展并购，但如果需要放宽核保标准，就不会设定实质性高于经济增长率的信贷增长目标。
• 休斯敦市场机遇：这三笔收购拓展了该银行在休斯敦、东德克萨斯和达拉斯的业务布局。管理层表示，达拉斯和休斯敦目前占贷款总额的近60%，在整合完成后将创造更大的长期机遇。

业绩电话会议完整文字实录

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完整财报电话会议逐字稿

管理层陈述

Operator

Good day, and welcome to the Prosperity Bancshares Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

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

Charlotte Rasche

Thank you. Good morning, ladies and gentlemen, and welcome to Prosperity Bancshares Third Quarter 2026 Earnings Conference Call. This call is being broadcast live on our website and will be available for replay for the next few weeks.

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

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

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

Additional information concerning factors that could cause actual results to be materially different than those in the forward-looking statements can be found in our filings with the Securities and Exchange Commission, including Forms 10-Q and 10-K and other reports and statements we have filed with the SEC. All forward-looking statements are expressly qualified in their entirety by these cautionary statements.

Now let me turn the call over to David Zalman.

David Zalman

Thank you, Charlotte. I would like to welcome and thank everyone listening to our third quarter 2026 conference call. I'm pleased to announce that the Board of Directors approved increasing the fourth quarter 2026 dividend to $0.64 per share from $0.60 per share that was paid in the prior 4 quarters, an increase of 6.7%. The increase reflects the continued confidence the Board has in our company and our markets.

The compound annual growth rate in dividends declared from 2003 to 2026 was 10.4%. We continue to share our success with our shareholders through the payment of dividends and opportunistic stock repurchases while also continuing to grow our capital. We are proud of this year's growth and would like to highlight the following results.

Prosperity's total assets reached $54.1 billion at September 30, 2026, up $15.8 billion or 41% compared with $38 billion at September 30, 2025. Our loans totaled $32 billion at September 30, 2026, an increase of $10 billion or 4% on compared with $22 billion -- excuse me, at September 30, 2025. And our deposits were $41 billion at September 30, 2026, up $13 billion or 48% compared with the $27.8 billion at September 30, 2025. These increases primarily reflect our 3 recent mergers.

We are highlighting their magnitude because they demonstrate the expertise of our associates who have extensive experience executing acquisitions and integrating the acquired institutions. Our greater scale strengthens our competitiveness, improves efficiency and enables technology investments that would be difficult for a smaller bank. We completed the operational integration of American Bank in September. All American bank locations are now branded Prosperity Bank, and we welcome the American Bank customers and associates to our family.

We remain focused on completing the operational integration of Texas Partners Bank in November and Stellar Bank in March of 2027 and delivering the outcomes we believe are possible. The Texas Partners and Standard Bank teams are already an integral part of our organization and operations. We are excited about our future as a larger bank, including the potential growth in earnings. Excluding the onetime expenses listed in the press release.

Net income was $200 million, and earnings per diluted common share was $1.67 for the 3 months ending September 30, 2026. The annualized returns on average assets and average tangible common equity were 1.5% and 15.81% on average tangible common equity for the same period. Excluding the merger-related expenses, the efficiency ratio was 48%. We are proud of these earnings and expect them to improve after all merger-related cost savings are realized.

The net interest margin on a tax equivalent basis was 3.73% for the 3 months ending September 30, 2026, up from 3.47% for the 3 months ending in June 30, 2026 and 3.24% for the 3 months ending September 30, 2025. This 49 basis points year-over-year increase reflects the strong net interest margin improvement we expected.

Loans totaled $32 billion at September 30, 2026 compared with $22 billion at September 30, 2025. We've seen an increase in our average monthly loan production numbers over the past 2 quarters, this should help bolster our pipelines next year. In the third quarter of 2026, average monthly new loan production increased approximately $180 million compared to the second quarter of 2026 and approximately $320 million compared to the first quarter of 2026. The overall deposits totaled $41 billion at September 30 compared with $27.8 billion at September 30, 2025.

Our linked quarter core deposits, excluding Stellar Bank increased 2% annualized during the third quarter of 2026. Our noninterest-bearing deposits of $13.8 billion at September 30, 2026, represented 33.6% of total deposits. The level of noninterest-bearing deposits as a percentage of total deposits continues to remain strong in light of our recent acquisition activity. Looking forward, we believe core deposits will continue to grow in line with our historical run rate of 2% to 4% growth, and we remain conservative with our loan growth projections for '27, projecting flat to slightly increasing loan balances due to the recent acquisitions.

We believe that the combination of our growth outlook with our loan pipelines, assets repricing, net interest margin expansion and the realization of our cost savings will drive meaningful earnings per share growth in 2027. Our nonperforming assets totaled $193 million or 41 basis points of quarterly average interest-earning assets at September 30, 2026 compared with $119 million or 36 basis points of quarterly average interest-earning assets at September 30, 2025, and $130 million or 34 basis points of quarterly average interest-earning assets at June 30, 2026. The amount at September 30, 2026 and June 30, 2026, was impacted by nonperforming assets acquired in the mergers.

The allowance for credit losses on loans and off-balance sheet credit exposure was $629 million at September 30, 2026. The allowance for credit losses on loans was 3x the amount of nonperforming assets. We are excited about the synergy we have with our new partners, Stellar Bank, Texas Partners Bank and American Bank. Our top priority is the operational integration of the remaining 2 banks, and our combined teams are working very hard to ensure they are successful. We also continue to have conversations with other bankers considering strategic opportunities and are open to transactions that will be beneficial to our company's long-term future and will increase shareholder value.

The Texas and Oklahoma economies continue to expand in late 2026 despite labor supply constraints and headwinds from inflation and energy prices. Texas has a growing population of 31.7 million and continues to attract people and businesses with its business-friendly state government and lack of state income tax. Major construction projects across Texas include new data centers, factories producing various products from chips to new drugs and SpaceX and Tesla projects. Both states remain attractive places to live and do business.

Thanks again for your support of our company. Let me turn over our discussion to Asylbek Osmonov, our Chief Financial Officer, to discuss the specific financial results we achieved.

Asylbek Osmonov

Thank you, Mr. Zalman. Good morning, everyone. The third quarter represents the first full quarter that includes Stellar Bank, and our results reflect both the increased scale of combined company and ongoing integration activity for all 3 merged banks.

Net interest income before provision for credit losses for 3 months ended September 30, 2026, was $443 million, an increase of $169.5 million compared to $273.4 million for the same period in 2025 and increase of $112.4 million compared to $330.6 million for the quarter ended June 30, 2026. The net interest margin on a tax equivalent basis was 3.73% for the 3 months ended September 30, 2026, an increase of 49 basis points compared to 3.24% for the same period in 2025, an increase of 26 basis points compared to 3.47% for the quarter ended June 30, 2026.

The linked quarter increase was primarily due to additional Stellar Bank and higher investment yields. Excluding purchase accounting adjustments, the net interest margin for the 3 months ended September 30, 2026, was 3.59% compared to 3.19% for the same period in 2025 and 3.41% for the quarter ended June 30, 2026.

Fair value loan income for the third quarter of 2026 was $11.6 million compared to $4 million for the second quarter of 2026. Fair value loan income for the fourth quarter of 2026 is expected to be in the range of $7 million to $10 million. Noninterest income was $52.7 million for the 3 months ended September 30, 2026, compared to $60.7 million for the quarter ended June 30, 2026 and $41.2 million for the same period in 2025.

The second quarter of 2026 included a net gain of $8.2 million, resulting from the conversion of Visa stock partially offset by the loss on the sale of investment securities. The noninterest income for the third quarter of 2026 was reduced by $2.6 million net loss due to write-down of assets. Noninterest expense was $308.6 million for the 3 months ended September 30, 2026 compared to $176.2 million for the quarter ended June 30, 2026 and $138.6 million for the same period in 2025.

The third quarter of 2026 included $69.7 million of merger-related expenses. Excluding these merger-related expenses, noninterest expense was $238.9 million. This amount includes the operating expenses of Stellar Bank.

During the third quarter, we continued to realize cost savings from the acquired banks with additional savings expected as we complete the remaining 2 system conversions. For the fourth quarter of 2026, we expect noninterest expense to be in the range of $235 million to $238 million, excluding remaining onetime merger-related expenses.

The efficiency ratio was 62.1% for the 3 months ended September 30, 2026, compared to 46% for the quarter ended June 30, 2026 and 44.1% for the same period in 2025. Excluding merger-related expenses, the efficiency ratio was 48% for the third quarter of 2026.

The provision for income taxes for the third quarter of 2026 included approximately $5 million related to out-of-state tax settlement. This onetime tax expense reduced diluted earnings per share by approximately $0.04 and resulted in higher-than-normal effective tax rate of 24.4%. The bond portfolio metrics at September 30, 2026 and have a modified duration of 3.9 and projected annual cash flows of approximately $2.2 billion.

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

H. E. Timanus

Thank you, Asylbek. Our nonperforming assets at quarter end September 30, 2026, totaled $193,872 or 60 basis points of loans and other real estate compared to $130,576 or 52 basis points at June 30, 2026. Since September 30, 2026, $4,289 million of nonperforming assets have been removed or put under contract for sale. The September 30, 2026, nonperforming asset total was comprised of $171,031 in loans, $57,000 in repossessed assets and $22,784 and other real estate.

Net charge-offs for the 3 months ended September 30, 2026, were $4,437 million compared to net charge-offs of $2,183,000 for the quarter ended June 30, 2026. There was no provision to the allowance for credit losses during the quarter ended September 30, 2026. No dollars were taken into income from the allowance during the quarter ended September 30, 2026.

The average monthly new loan production for the quarter ended September 30, 2026 was $635 million compared to $454 million for the quarter ended June 30, 2026. Loans outstanding at September 30, 2026, were approximately $32.06 billion, compared to $25.028 billion at June 30, 2026. The September 30, 2026 loan total is made up of 38% fixed-rate loans, 30% floating rate loans and 32% variable-rate loans.

I will now turn it over to Charlotte Rasche.

Charlotte Rasche

Thank you, Tim. At this time, we are prepared to answer your questions. Our call operator, Megan will assist us with questions.

Operator

[Operator Instructions] The first question comes from Dave Rochester with Cantor.

分析师问答

David Rochester

Wanted to start on the margin outlook for the quarter. I appreciate the accretion on the loans of $7 million to $10 million. Maybe just to wrap up on the accretion side. I think you had some on the securities book as well. I imagine some of that might continue. And then the CDs might be more short-lived, but I was just curious if there are any expectations for that as well, so that accretion number might be a little bit bigger in 4Q.

Asylbek Osmonov

Yes. For the fourth quarter, I mean, we're excited to see the continued repricing of bond portfolio. As I mentioned, we still have $2.2 billion of annualized cash flow from bond portfolio, we have a $2.92, average rate on the bond, and we've been recently buying like $5.50 to $5.75. So that's going to continue to reprice on the bond portfolio side.

On the loan side, we have a 38% on the fixed loans. They're going to continue to reprice -- if you look at our average rate on loans without fair value, it's $5.93, so we are putting higher loans on our production. So that's going to benefit from that. But one thing I want to note that we did increase our deposit rates in the end of the third quarter. due to the Fed increase rate. So it has not fully baked in, in our third quarter, but we'll see that baked in, in the fourth quarter.

So I think if you're looking on margin, I think it's going to be flat to slightly up because it takes a little time for assets to reprice. But in long term, our model shows we're going to continue to expand on the margin significantly as the bond portfolio and the loan kind of reprice. And if you look for 12 and 24 was looking really good. And the assumption we provided that exit rate on the fourth quarter margin being $3.70, $.3.75 as is. So we're comfortable that. And the guidance we provided for next year is also stands as a or average for the quarter, like $3.80 to $3.85 right now. So we are seeing expansion of the margin.

Unknown Executive

Yes. I think it's for some help on accretion. So the accretion on the loans, like I said, $7 million to $10 million -- on the CD accretion, we had, what, $2.5 million. I think it's going to reduce a little bit to $1.3 million for the fourth quarter and kind of burns off first and second quarter of next year.

David Rochester

Okay. So accretion comes down in 4Q, but the underlying margin is expanding. And so that's what kind of keeps it flat to maybe up a little bit just on a reported basis.

Asylbek Osmonov

That's correct. That's right.

David Rochester

Okay. That's great. It's good to hear that you guys are still thinking positively about the margin. You have a lot of opportunities there to expand that it sounds like. Maybe just switching to expenses real quick. That result was solid. The guide certainly shows you've got some more cost savings coming. Where is -- where do you think that expense range that $2.35 to $2.38 goes as you head into next year? I know you'll get a lot more of the cost savings from Stellar on the integration, so maybe those flow through more fully into 2Q, and that's normally when you've got your merit coming through on a full quarter basis. So I was just curious how you think that trends to the extent that you've got projections through the year?

Asylbek Osmonov

Yes, that's a good question. We did see some cost savings already baking in. It's not just from American but some of cost savings from Stellar and Texas Partners -- so we're going to continue to see that. I think based on our estimates, we have additional $65 million to $70 million pretax of cost savings coming in if you compare to our third quarter expenses. If you look at our expectation when we all settled in more like starting second quarter and third quarter, when we have like quarterly clean expense run rate, I would say, we're looking at about $220 million to $225 million per quarter. That's a pretax number. So that's going to be our run rate on everything is settled.

David Rochester

All right. Great. Maybe just one last one on credit. Through the deal accounting and whatnot, that allowance ratio went up pretty decently this quarter. It seems like you're pretty well positioned to have a 0 provision for '27 you don't have a crystal ball, but is that kind of what it feels like at this point?

David Zalman

I think so. I mean, really at $193 million in total nonperforming assets and having over $600 million in provision or allowance, I think we cover pretty good.

Kevin Hanigan

When we said '27, I wasn't sure if you meant next year, 27% 27 years worth 27 years worth SP59206847 Let's take the next year for now.

Operator

The next question comes from Brett Rabatin with StoneX Group.

Brett Rabatin

I wanted to -- just to go back, I know last quarter, you mentioned that you were going to probably have to increase deposit rates a little bit and then you just alluded to it. I was just curious, your money market rate average was up 9 basis points linked quarter, but it's -- your core funding is really low cost, great core deposit funding base. As how much you increased the rate? And then how much should we be thinking about the cost of funds from here and how you guys are thinking about the margin with potential rate hikes?

Asylbek Osmonov

Yes. I think we -- I mean, it wasn't 1 rate for everything. We kind of looked at it different buckets of the deposits and the different rate increases. But I'll tell you this for -- if you're looking for fourth quarter specifically, we calculated what would be average cost of deposit would be. It's going to go up by like 6 or 7 basis points from the Q3. So we're shooting maybe cost average will be 146, 145%, 146% on the cost of deposits. But if you look at cost of fund total I think kind of goes up from 150 to 157 to 58, so 8 basis points with our deposit increase that we did end of the quarter -- on the third quarter.

David Zalman

And our primary focus, Brett, again, we really don't it's not that we don't focus on them. It's just that they're not as rate driven as you're checking accounts and all that -- our main focus really on the increase was really on the money market accounts and really focused on balances that were $1 million or more. We actually raised our money market rates about 0.25 point from 2.75% to 3%. And again, we're still offering the special rates. We have a couple of special CD rates where are they running.

Asylbek Osmonov

So like 7 months cities like 3.75%.

David Zalman

So we're offering a couple of special promotional deals like that. But that's really where we're focused on, and that's where the rates increase. And I would say, going forward, if interest rates increase, again, that's probably the focus where we'll be in at those 2 products primarily. The majority of the rest of the bank is just core funding and -- and I think the rate-driven stuff is probably more in that. And even that is not rate driven like a lot of other banks, really.

Brett Rabatin

Okay. That's helpful. And then the other question I wanted to ask was just around loans. And with the monthly production up to $635 million, it sounds like the outlook is still for maybe modest growth from here. Does the production give you guys any confidence that growth might improve from here? And then just any color on the payoffs from the legacy prosperity or the deals that you've had, how much that might have impacted 3Q?

Kevin Hanigan

Yes, Brent, David's nodding at me. This is Kevin. So I'll take that one. And bear with me as I walk you through a couple of things, and what may seemingly get off topic and end up back on topic, if you will. So the monthly production, we have looked back as if all the acquisitions were done last year. So we looked at the production by bank, American Partners Stellar ourselves, going back to January, and those numbers have picked up from Q1 to Q2 to Q3.

And it went up about $180 million in total between Q1 and Q2, a little over $200 million. So it's not only going up, but it's increasing its path upward. It's worth noting the major driver of that upward trajectory is in prosperity, the legacy Prosperity portfolio. Stellar dipped down a little bit in Q2 and Q3. We believe that to be largely related to the acquisition and getting to know each other and lenders getting to know each other.

And what we have seen there is a rebound in their pipeline. So I think as that pipeline improves, we picked back up to where Stellar was and see further improvement. That's all the tailwinds for loan growth. The headwind is our history and what happens when we make acquisitions, I think you all know it. but I'll say it, it is not unusual. In fact, it's more typical that loans at those institutions tend to shrink for 6 months to a year after an acquisition.

So that to me, that ties in, where David said, he thinks loans for next year are probably flat and maybe up a little bit. It's the headwind of integrating Stellar, and it's the tailwind of this production improving. So I would say for the good side, of next year. And before I get into what I think '28 is going to be, and I know it's way too early to be talking about '28 by well briefly.

I think the good side for 2027 from our perspective, is now the Street is seeing a new run rate with Stellar on board, and that run rate is pretty strong. Depending upon what you add back, it was $1.67 to $1.69. So I think from an earnings perspective, we've got this nice new run rate, nice new margin. We have the continued margin expansion from repricing and we got another $70 million worth of pretax cost saves. So I think that delivers in spite of what is likely to be a flat kind of loan growth year, that's going to deliver double digits. In fact, low to mid-teen double-digit EPS growth for 2027, even with flat.

If I take that and say we'd go through the Stellar transition through 2027, and we rebound off of this new production that we're currently seeing and look into 2028. And let's face a lot of things going to happen between now and then. So this gets pitcher. But that leads us to believe in 2028, we can get to low mid -- I'm going to say, 3% to 5% loan growth kind of numbers in 2028, post dealing with all the potential runoff from the acquisition.

So what that means is another year of double-digit EPS growth. So I think we're really set up for two consecutive years of really nice EPS growth maybe a little disappointing to you that we can't take out more growth next year, but we're being realistic and just trying to offset this nice production increase with our history and knowing what happens. So long-winded, but I think we're really in a great position from an EPS growth standpoint for the next 2 years.

Brett Rabatin

That's great, Kevin. I appreciate the nature of there. That helps explain quite a bit.

Operator

The next question comes from Janet Lee with TD Cowen.

Sun Young Lee

Three -- back to your net interest margin, 3.80% to 3.85% for '27. That's great. Strong core NIM expansion. Just given the value of the curve moving up significantly more since we last spoke, why not it could be higher? I feel like this rate environment is actually pretty good for you, for your NIM?

Asylbek Osmonov

Yes. We are -- if you look at our balance sheet, we're neutral to modestly asset sensitive. So if you look at our model, yes, increased rate environment does help benefits us. But when we run the model, we kept it flat rate. there's expectation rate or Fed going to increase run rates. But for our model, we kept it flat. So I mean there might be a possibility to do better, but us being conservative, we're just going to stick to our guidance to -- that we provided.

David Zalman

Yes, I think, Janet, our models, again, maybe trying to underpromise and overperform. But our models look really good for '28 and '29 quite ranging. So I mean we're -- we really -- as Kevin mentioned earlier, we really are looking at some double-digit earnings increases over the next couple of years.

Sun Young Lee

Right. Makes sense. And just to make sure I'm interpreting correctly, your core deposits growing 2% to 4% and loans being flat to slightly increasing in '27. Is that excluding the runoffs? Or is that inclusive?

David Zalman

No, that's -- we refer core deposits. That's all deposits, excluding public loans and government agencies and stuff like that. We have a lot of what we have in public funds right now close $2 billion or $3 billion. credit -- and those are real seasonal in nature. Like right now, they're probably lower than they are all year right now next quarter. You can see our public funds increase $500 million to $800 million probably. I mean, it's very possible in the out of state in the bank through and start running out at the end of the first quarter and second quarter again.

So when I refer to the core deposits, it's our checking accounts or money market accounts and stuff like that, just our core. And again, we don't have any wholesale deposits. We don't have any broker deposits or anything like that.

Sun Young Lee

Right. And on the loan side, on the flat to slightly that's inclusive of the potential any one offs?

David Zalman

We do because I think because, again, Gosh, I hope I'm not overly optimistic. I think Stellar bank and our bank are very, very similar in nature, and I don't see an in loan committee, and I don't see a whole lot of difference in what they would have done and what we will do. So I just -- I really think that Stellar Bank and us are very much like, and I don't see a lot of change.

Again, as Kevin mentioned, no matter what we do and how hard we try sometimes, we do go backwards and acquisitions. But I think with Stellar and American Bank too and Texas partner, all of us are very similar in the way we lend money and so I don't see a whole lot of changes in what we do. So I'm hoping for the best, Janet.

Sun Young Lee

All right. If I can squeeze in 1 more. Maybe I missed it. Could you talk about your appetite around buybacks from here?

David Zalman

Well, it's $60-something, it's got a huge appetite -- and we have the money to do it with. I mean we're projecting earnings of how much next year also that when we had projected earnings was the analysts have us total earnings. I mean it's a $50 million to $880 million, something like that. So it's even really high. So you take the $0.64 a quarter dividend, and that's what about $300 million...

Asylbek Osmonov

$10 million or so.

David Zalman

So we have -- we have a lot of gun powder to do something with.

Operator

The next question comes from Michael Rose with Raymond James.

Michael Rose

Just following up on loan growth. I asked this a lot, but Kevin, if you can give some updates on kind of mortgage lending in the warehouse, just given the higher for longer backdrop. Obviously, you saw -- you were fairly close, I think, to your average guide for the quarter, but just given where mortgage rates are now, if you can just discuss kind of the near-term outlook in next year?

Kevin Hanigan

Yes. Thanks, Michael. Yes, for the quarter, we averaged [ $1.229 billion ] I think, and our estimate going into the quarter on the highest it was $1.225 billion. So we were spot on that one. Since quarter end, it's been a downward trend. At the end of the quarter, we were at $1.132 billion. Last night, we ended up at $1.110 billion, and we're basically at $1.1 billion average for quarter-to-date, and I expect that to go down further. A, because the rates [indiscernible] because of the typical seasonal decline in warehouse in Q4. So Michael, I'm thinking on the low side, $850 million to maybe on the high side, $900 million average for the quarter.

Michael Rose

All right. That's helpful. I appreciate it, Kevin. And then maybe, David, just you talked about kind of ongoing conversations with bankers for M&A opportunities, but clearly, you're integrating a bunch of deals right now. Any do you expect that we could see a little bit of a pause here? Or if you just find the right opportunity, you guys are just open for business and you're going to make the decision based on what's out there at this point?

David Zalman

I think we're always in the market, but let's face it. I mean our focus is truly the combination of Stellar Bank and Texas Partners. That's our primary focus. For us to really jump into something, it has to make a whole lot of sense and maybe increase our Texas franchise or something like that, that would be significant. But that's really our main focus right now is to really put these banks together really for the most part.

Kevin Hanigan

Yes. I'd say in the near-term buybacks way more likely than acquisition.

David Zalman

Yes, the stock price that it's added we weren't trading less than 10x earnings, we'd probably make more money buying our stock back than really buying somebody else really.

Michael Rose

Makes sense. I appreciate all the color.

Operator

The next question comes from David Chiaverini Jefferies.

Unknown Analyst

This is Brooks on for David Chiaverini. Quick question here on fee growth. Now that you guys are a $54 billion bank, where does fee growth come from going forward? And treasury management for Stellar is commercial clients, the main lever here. I know last quarter, you guys have been mentioned treasury management build-out that included additional hires from Texas Partners. Could you just speak on that going forward?

Asylbek Osmonov

So yes, I think there's a lot of opportunity, especially with the merger with the Stellar. I think we really like our trust business and brokerage business, so we would love to continue -- and if you look at the past few years, we have grown very well on that 2 areas. And now with the addition of Stellar and having partners at Stellar with the lenders referring the business. So that's a focus for ours. And I think that's going to be the main focus for the next few years on the brokerage and the trust.

David Zalman

Yes. I think our trust looks good. We're growing there. But I think treasury management, I think that plays a bigger and bigger piece because it offers so many different products to our customers. And again, I think that's where we're focused on right there. I think sometimes you try to sell a saw where we try to sell treasury management sometimes to smaller businesses that really don't necessarily need to complete treasury management. So we need to really thank who are really pushing it to and who we don't on the automatic consolidations. But for the most part, I think we have a lot of good products and we're really looking forward to all the customers and the growth that we can do.

Unknown Analyst

Appreciate the color.

Operator

The next question comes from Will Jones with KBW.

William Jones

Great. Just another one on the buyback, just follow up here, David. It sounds like you're very constructive here at this price level. If I go back and look kind of pre some of these merger announcements looking back to latter half of 2025. I mean in the fourth quarter last year, you purchased 2% of the company -- is that kind of order of magnitude on the table here at these price levels in this valuation?

David Zalman

I think it's really based how opportunistic it is. I mean, again, when we're trading below 10x earnings, it's pretty opportunistic. It just -- it seems like -- our stock price is pretty seasonal. So it looks like your September, October prices really go down and then about time that our stock vest at the first of the year or some price goes to sky high, I guess that's because we have to pay the tax on that accelerated price.

So again, it's real seasonal. But again, we'll be opportunistic. And again, trading less than 10x earnings will be definitely opportunistic.

William Jones

Yes. Okay. That's fair enough. Another quick follow-up just on the core deposit growth 2% to 4%. Should we think about the balance sheet growing at that same level, that same capacity in 2027, that 2% to 4%? Or within that knowing we might have more flattish year for loans? Is there a chance to optimize some of your funding and balance sheet growth is also a little flat? Just how do you kind of think about those dynamics?

David Zalman

No. I think historically, again, when we look at our bank and we look at the acquisitions, our core deposits have always grown 2% to 4%, excluding some of the people that joined us, I don't see that anything different. I mean we do see ups and downs. But again, I just in the last 3 days, I saw our core deposits go up $300 million just in the last few days.

And again, our public funds are down a little bit, which is seasonal that's in nature. But I think 2% to 4% is very realistic for us. We've always done that since the beginning and having that kind of growth. And I still think that you will see that and balance sheet growth. Yes.

Asylbek Osmonov

Yes. And Bob, if you look at on total assets, you just have to look at period-to-period as we mentioned, our public fund goes down in second quarter and third quarter. So if you look at Q4 to Q2, you might not give a clear picture because we have a seasonality in public funds. But as we stated, if we see the 2% to 4% on core deposit growth over time, our balance should continue to grow.

David Zalman

I think that's why I feel so confident in our earnings numbers and our earnings model because when you have core deposit growth, and I know analysts push, push, push, loan growth. But the bottom line is when you have deposit growth, then you have core deposit growth, not growth that you're going out and paying 4% for money, but core deposit growth. If you can take those same funds and you can get 5.7% in security with about a 4-year duration. We make really good money. And that's what it all boils down to.

I mean, we have sometimes they say you don't have the growth, but we really have a 77% loan-to-deposit ratio. I think our policy allows us to go to 85%, so we have room for growth. But the real -- the real value in any bank is really the core deposit relationships, and that's really what we focus on.

William Jones

pYes. Understood. I certainly appreciate the confidence around the ultimate earnings power here. Maybe lastly for me, just maybe a cleanup question. It looks like the stellar credit mark was maybe a decent bit higher than where you guys had thought it might be when the deal is announced. I guess is a, is that true up are? And b, what kind of were the drivers behind that?

Asylbek Osmonov

Yes, it was a little bit higher what we projected. But what we do when we put a projection, we kind of look at high level. But when we go inside and dig in and being our conservative nature of what we have. We've put up a little bit more of the marks than we anticipated.

William Jones

Okay. I appreciate it.

Operator

The next question comes from Ryan Kenny with Morgan Stanley.

Ryan Kenny

So we talked about capital use for buybacks. And I'm wondering, any appetite to use capital on repositioning the securities portfolio given the movement we've seen in the belly of the curve and you've been historically pretty active on mortgage-backed securities, MBS rates are above 6% right now. Any appetite to do more there?

David Zalman

I don't see any -- I mean, over the years I've been in banking, the banks that use financial engineering to make their numbers look better, never turns out well, you sell and reposition putting in market value in the next week, the market value changes again. We'll never be able to control rates, really determine what interest rates are going to be up or down. We never extend the portfolio, it is something that we can't live with.

I think if you look at the previous 2, 3 years before this year, you saw our earnings really down, and that's because we never try to call the markets. We try to have something that we're going to be able to survive with interest rates going very up, we're very down. And I just -- that's just not something we do, and I don't see that every -- several banks that we bought were banks that really just continue fund and selling and reengineering balance sheet and for us, that just doesn't work. The answer to the question is simply no. I don't see that really.

Ryan Kenny

All right. Very clear. And then shifting to competition, we've heard from you guys a lot in the past about loan competition in your market, not necessarily meeting your standards. Can you just give us an update on what you're seeing today, any change versus last quarter on the competitive side?

David Zalman

Probably in the last month or so, I don't see them being as crazy as they were. But again, when we talk about the out-of-state competition, we're really talking about a couple of banks really. And it's -- those are the banks that I think they're smaller trying to grow. I think there will always be competition. But the bottom line look, we're one of the largest Texas banks right now with 350 locations and people in Texas, I don't care who you are, you're going to want to do business with Texas people. And that's just -- they can say whatever they want, they can pay wherever they want, they can try to take all the people they want and you can underprice all you want. I mean you do all that stuff you want. But when it's all said and done, they're still going to want to deal with the Texas fine.

Operator

The next question comes from Stephen Scouten with Piper Sandler.

Stephen Scouten

Just kind of along this conversation about the potential for organic growth, the competition versus successful track record on M&A. From a strategic standpoint, do you -- like the IDS continue to grow loans via M&A using the legacy bank for good core deposit growth versus trying to push the envelope on the organic side. Is that a fair way to think about it strategically?

David Zalman

Say that again. I want to try to really understand what you're saying. I don't know if...

Stephen Scouten

Just do you like growing loans via M&A, just given your successful track record there versus kind of pushing the envelope to grow loans organically right now.

David Zalman

I think we've been successful with the M&A growth deal. I mean it's it makes it easier because you get to really analyze -- you get to analyze the portfolio that you have, which you like and don't like and you kind of really know what your potential losses are. The thing that we don't like, I think, is to say you're going to have double-digit loan growth every year. We're just not going to do that. I mean I don't see that, and we're not going to really go out and try to buy wholesale deposits just to make that happen.

I think that you'll see reasonable growth with our 2% to 4% our deposit growth, and we do have about -- like I mentioned earlier, we have a 77% loan-to-deposit ratio. We can go up to about 85% in our policy. So we have room to grow there. I think that will continue to grow. But I think the answer to your question exactly is. I like what we've been doing. I've been doing this a little while about 30 or 40 years, and I've probably gone through a lot of analysts, and I've been through a lot of these meetings and a lot of the same stuff that people come up with and say, well, you can't do this and you can't do that.

I remember being $300 million them saying that you can't do that and you can't do this. And today, we're $54 billion, making a lot of money. So I think the strategy that we have and the model that we have and the asset quality that we have and the growth that we have organically and through M&A, it's just been a winning formula, and I think that that's what we'll stick with probably.

H. E. Timanus

It's really a balanced approach.

David Zalman

Yes.

Kevin Hanigan

I was going to say, we really want both. But on the loan growth side, we're not going to be somebody that's going to grow at double the rate of GDP. So if we can do acquisitions and grow loans at GDP rate, we are just fine with that. If the market is all growing at 10% because we think they're doing crazier things, Well, in those cases, let them grow at 10%, we'll grow slower. And if we need to grow more than that, growing through acquisitions, the way we do it, and I think you've all seen the way we do it, there's enough marks put on these loan books that we buy, the credit is never an issue.

And we do it with the ability to increase our reserves. So we sit here today in a really strong credit position no matter what the market does. So the simple answer is we want both, but we're not going to go overboard chasing growth above GDP rates.

David Zalman

I think basically, it's a model if you're a long-term investor. If you're a long-term investor, you're going to love our model. If you are a short-term investor, you probably wouldn't.

Stephen Scouten

Yes, that's probably a very fair point. That's helpful. And then now at $54 billion in assets, does the idea of indexing these regulatory thresholds, does that change your outlook for the ultimate size or scale of the bank or anything strategically that would open up for you all if those policies come through?

David Zalman

I don't know that I saw the indexing thresholds that you're referring to -- I guess you're referring to the $100 billion in size ratio would be our next ratio. But right now, we don't -- again, the way -- when you're a $50 billion bank, you could be $115 billion bank, all the stuff that is required from enterprise risk management to BSA. So all the regulatory burden they put on you right now you could be that bigger size.

And again, we probably didn't talk about it enough in addition to the mergers that we've done with Texas Partners, Stellar's and American. We also spent 3 years in-house on our own IT infrastructure and we put in a new data processing that really allows us, again, I'm not saying we're going to build it to this size. But it allows us to go up to about of $500 billion in size. Just to give you an idea, we were running out of capacity on a holiday weekend. We are running batch with our checks. And basically, we start on Friday it may be caught up by Monday morning and may not our servers.

But today, we can run through all of that and it catches up within an hour's time. We can run the whole process with an hour's time. So we spent a lot of time on our infrastructure, IT infrastructure, a lot of money on technology. And so we have a great team with internal audit, enterprise risk management, now AI, get everything. So I feel good where we're at. I think we're in a good position.

Stephen Scouten

Really appreciate all the color.

Operator

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

Jon Arfstrom

Just a few cleanup questions here at the end, I guess. On credit, obviously, not a big deal, but the 60 basis points in NPAs, David, that probably drives you nuts -- what is the Yes. What is the plan to work that down? Is there anything bigger in there? Or how do you expect that to trend over the next few quarters?

David Zalman

Our directors, I talked to our directors about this at the last meeting. It's a good question. At the size that we're at, I don't ever see us really getting below $100 million in nonperforming. We're at about $200 million right now and we'll probably realistically settle when it's all said and done a year from now or 2 years from now. Again, without -- with everything else being stable, we'll probably settle about 125 to 150 is where we'll probably end up in nonperforming on a run rate.

Jon Arfstrom

Okay. Energy lending. Any comments there? Do you have an increased appetite? Is there more activity in your West Texas markets? Anything to note there?

David Zalman

In our West Texas markets, I wish they would borrow more. Those guys, when they borrow, they signed personally and they usually have about $100 million in their checking account, and they're borrowing $100 million, but they just haven't borrowed a whole lot. So we do have some really great customers. We'll continue to thank the customers that we bank for the last 20 and 30 years. I think probably the middle market were not as big in anymore. Kevin, may be able to talk to that.

Kevin Hanigan

Yes, we're not -- our underwriting is a little different when it comes to revolvers and borrowing base reviews, and it's good in a conservative way, not that long ago, and we all remember the potential smarting 2014 through '17 or whenever that period was. So I don't look for that category to grow into a 5% of total loan kind of category. We're comfortable with where we are the banks got a tremendous list of great oil and gas and oilfield services customers who have really great balance sheets that rarely need to borrow.

Every now and then, we get one of them pop up that's doing an acquisition, and they allow us to loan them some money. As David said, I can think of one client we routinely has $100-plus million, if he's making a $50 million or $60 million acquisition, he allows us to make him alone. It usually doesn't keep it out very long. But rather than just paying cash, that's great for us. guys like that, and everybody in this room knows who I'm talking about. But we got a couple of people like that.

Jon, I don't think it's going to -- don't look for that to be a category that takes off.

David Zalman

Yes, I think I'll remind years of experience, especially in the lending to oil service industries, when prices got really high, everybody would jump into the market, your bankers and lawyers, they want it to be oil and gas guys and that's when you lose all the money. So I think we've learned our lessons. We're not -- any new company that's just jumping in the business, we're really not looking at that. What we're really looking at are existing companies, and we have a lot of them and they're -- so we're still taking care of them. Doesn't mean we won't look at something new. It would have to be extraordinarily appetizing to do it, really.

Jon Arfstrom

Okay. Okay. Just last one here. In Houston and maybe even Ray can comment, I don't know, but you have a larger market share and you have a larger branch count with almost $12 billion in deposits. How has it gone so far? And is there anything you want to do differently or need to do differently with the larger density you have in Houston?

Ramon Vitulli

Yes. Yes, this is Ray. It's going very well. I think as far as the question that we'll do differently, I'd actually say more like how we're going to leverage the synergies that we're getting as part of the merger. For example, I think also Doug mentioned on the wealth side, we're starting to see referrals on the wealth side and it's using the bigger offering with the merger to our advantage, and we're already seeing that. So it's super excited about the footprint that we have that we've expanded in Houston and East Texas. And we just -- we think that there's a great runway there.

David Zalman

Bob, do you have any comments on Houston?

Robert Dowdell

Yes. I mean I guess the comment I'd make, David, is you added -- with the 3 acquisitions you added about 20% of the balance sheet, all in great opportunity areas. So in support of loan growth, whether we get there or not, our opportunities have increased. So Dallas and Houston represent almost 60% of our loans today and great business opportunities. So to me, I think it's a matter of us getting out there and getting that done. So -- we've got -- we've built on opportunity. We've increased the size in those markets. And I think it bodes well for the next several years.

David Zalman

I think we do have the opportunity, Bob, and I think that -- the only reason sometimes I hold back right now, when you put these things together, it does take a lot of time, as you know, integrating and making sure the operational integrations are going right. But once you get past that, our opportunity is just almost endless with the amount of people we have on the ground and the different the amount of banks that we have in the Texas market in Oklahoma. I think the opportunity is just great really.

Operator

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

Charlotte Rasche

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

Operator

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