Prosperity Bancshares (PB) 2026 年第三季財報電話會議：淨息差擴張與成本節省

Prosperity Bancshares 2026 年第三季的財務業績反映出納入 Stellar Bank 的第一個完整季度、持續推進的整合工作以及更強勁的底層淨利息收入。儘管放款成長展望保守，管理層仍預期利差擴張與成本節省將支持 2027 年的獲利成長。

重點摘要

• 扣除已確認的一性費用後，調整後淨利為 2 億美元，或稀釋後每股盈餘 (EPS) 為 1.67 美元。調整後平均資產報酬率 (ROA) 為 1.50%，平均有形普通股權益報酬率 (ROTCE) 為 15.81%。
• 稅額相當淨利息收益率 (NIM) 上升至 3.73%，季增 26 個基點 (bps)，年增 49 個基點。若排除收購會計調整，淨利息收益率為 3.59%。
• 總資產達 541 億美元，放款總額約為 320 億美元，存款為 410 億美元。年增長主要反映了最近發生的三起銀行合併案。
• 平均每月新增放款量從 2026 年第二季的 4.54 億美元增至 6.35 億美元。然而，由於被收購的投資組合在整合期間通常會縮減，管理層預期 2027 年的放款餘額將持平至略為增加。
• 季度股利調升 6.7% 至每股 0.64 美元。管理層亦表示，比起短期內進行另一筆收購，股票回購的可能性更高，不過回購仍將視時機而定。
• 管理層預計，在剩餘的整合工作完成後，相較於第三季的費用，年化稅前成本將可額外節省 6,500 萬至 7,000 萬美元。

關鍵財務數據

業務與營運表現

本季度是納入 Stellar Bank 的第一個完整財務報告期。Prosperity 已於 9 月完成 American Bank 的營運整合，並計劃於 11 月完成 Texas Partners Bank 的轉換，隨後於 2027 年 3 月完成 Stellar Bank 的整合。

新增放款連續第二個季度改善。平均每月放款量較第二季增加約 1.8 億美元，較第一季增加約 3.2 億美元。管理層表示，Prosperity 原有業務是主要驅動力，而 Stellar 的業務儲備在受收購相關干擾後已開始復甦。

扣除 Stellar 後的核心存款在本季度以 2% 的年化率成長。管理層繼續維持歷史上 2% 至 4% 的核心存款成長目標。該銀行報告無批發存款或中介存款，而公共資金則繼續呈現季節性特徵。

證券投資組合的修正存續期間為 3.9 年，預計每年現金流量約為 22 億美元。管理層表示，投資組合的現金流正以大約 5.50% 至 5.75% 的殖利率進行再投資，而目前現有債券的平均殖利率為 2.92%。

信託、經紀業務與資金管理被視為手續費收入成長的主要機會。管理層預期，來自 Stellar 及其他收購案所擴大的企業客戶群將創造額外的轉介機會。

管理層指引

• 2026 年第四季淨利息收益率：管理層預計公布的淨利息收益率將持平至略為上升，因資產重新定價抵銷了收購會計增額的減少及存款成本的上升。管理層重申第四季結束時的淨利息收益率目標區間為 3.70% 至 3.75%。
• 2027 年淨利息收益率：在利率持平的假設下，管理層維持平均區間為 3.80% 至 3.85% 的預期。該銀行將其資產負債表描述為中性至小幅資產敏感型。
• 第四季公允價值放款收入：預計為 700 萬至 1,000 萬美元，低於第三季的 1,160 萬美元。
• 第四季費用：非利息費用預計為 2.35 億至 2.38 億美元，不含剩餘的一性併購成本。
• 長期費用常態率：一旦整合基本完成，管理層預期每季費用約為 2.2 億至 2.25 億美元，預計在 2027 年第二季或第三季左右達到常態運行率。
• 放款成長：管理層預測 2027 年放款餘額持平至略為增加，包含併購相關的潛在流失。管理層認為在整合壓力緩和後，2028 年放款有成長 3% 至 5% 的潛力。
• EPS 成長：管理層預計，即使放款餘額持平，在利差擴張和成本節省的支持下，2027 年 EPS 將實現 10% 出頭至 15% 左右的成長。管理層亦指出，若情況許可，2028 年可能會再迎來一年雙位數的 EPS 成長。
• 房貸週轉放款餘額：管理層預計第四季平均餘額約為 8.5 億至 9 億美元，低於第三季約 12.3 億美元的平均水準，主因是利率上升和自然的季節性疲軟。

風險與觀察重點

併購整合仍是主要的營運優先事項。管理層承認，收購的放款投資組合在交易完成後通常會縮減 6 到 12 個月，這對 2027 年的放款成長形成阻力。

存款定價亦持續走高。管理層預計第四季平均存款成本將增加約 6 至 7 個基點，升至約 1.45% 至 1.46%，總資金成本將升至約 1.57% 至 1.58%。

不良資產從第二季的 1.3 億美元增加至約 1.93 億美元，部分原因是併購所取得的資產。在其他條件維持穩定的假設下，管理層預期未來一至兩年常態化不良資產將回落至 1.25 億至 1.5 億美元左右。

放款市場競爭依然存在，不過管理層表示上個月的定價與核貸行為已不如先前激進。該銀行重申，不會透過放寬授信標準或依賴批發資金來追求放款成長。

分析師問答亮點

• 利差擴張：管理層表示，收購增額下降應可被證券及新承做放款的較高殖利率所抵銷。長期重新定價仍是 2027 年利差展望的核心驅動力。
• 資本配置：高層表示，比起短期內進行另一筆收購，股票回購的可能性更高。任何併購交易都必須能顯著強化在德州的業務佈局，而管理層眼下的首要任務仍是完成現有的整合。
• 信用準備：管理層指出，相較於約 1.93 億美元的不良資產，6.29 億美元的備抵呆帳相當充足。管理層暗示 2027 年有可能實現零提撥，但未將其作為正式指引。
• 證券策略：管理層拒絕進行投資組合重組或其他資產負債表操作，傾向於讓證券透過預定的現金流自然重新定價。
• 有機成長與併購成長：Prosperity 計劃維持平衡的策略。管理層表示同時追求有機成長與併購，但若追求顯著高於經濟成長的放款成長需要放寬核貸標準，則不會以此為目標。
• 休士頓商機：這三起收購案擴大了該銀行在休士頓、東德州及達拉斯的業務版圖。管理層表示，達拉斯與休士頓目前佔放款比重近 60%，在整合完成後將創造更長遠的機遇。

法人說明會完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

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.

分析師問答

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.