Good day, and welcome to the Prosperity Bancshares Third Quarter 2019 Earnings Conference Call. After today's presentation, there will be an opportunity to ask Please note this event is being recorded. I would like to now turn the conference over to Charlotte Rusche. Please go ahead.
Thank you. Good morning, ladies and gentlemen, and welcome to Prosperity Bancshares' 3rd quarter 2019 earnings conference call. This call is being broadcast live over the Internet at prosperitybankusa.com and will be available for replay at the same location 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, Chairman and Chief Executive Officer H.
E. Timanus, Jr, Vice Chairman Asylbek Osmanov, Chief Financial Officer Eddie Safady, President Randy Hester, President. David Zalman will lead off with a review of the highlights for the recent quarter. He will be followed by Asylbek Osmanov, 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.
During the call, interested parties disclaimers. Certain of the matters discussed in this presentation may constitute forward looking statements for 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, performance or achievements of Prosperity Bancshares to be materially different from future Additional information concerning factors that could cause actual results to be materially different than those in the forward looking statements can be found in Prosperity Bancshares' filings with the Securities and Exchange Commission, including Forms 10Q and 10 ks and other reports and statements we filed with the SEC. All forward looking statements are expressly qualified in their entirety by these statements are expressly qualified in their entirety by these
cautionary statements. Now let me
turn the call over to David Zalman.
Thank you, Charlotte. I would like to welcome and thank everyone listening to our Q3 2019 conference call. I'm excited to announce that our Board of Directors voted to increase the 4th quarter dividend of 2019 to $0.46 per share, a a 12.2% increase from the $0.41 per share in the Q3 of Prosperity Bancshares also repurchased 654,000 of its common stock at an average weighted price of $64.10 per share during the 1st 3 quarters of 2019. For the Q3 of 2019, we showed impressive returns on average tangible common equity of 14.77 percent annualized and on average assets of 1.47 percent annualized. Our earnings were 81 $158,000 in the Q3 2019 compared to 82,000,000 5 $23,000 was the same period in 2018, a decrease of $765,000 However, in the Q3 of 2018, we had non core loan discount accretion of $3,457,000 compared to only $1,283,000 of such income in the Q3 of 2019, a $2,174,000 decrease in non core income.
Our diluted earnings per share were $1.19 for the Q3 of 2019 compared to $1.18 for the same period in 2018, an increase of 80 basis points. Our net income was 200 $46,418,000 for the 9 months ended September 30, 2019, compared with 2 $38,481,000 for the same period in 2018, an increase of $14,930 or 3.3 percent. Our earnings per diluted common share were 3 point $5.5 for the 9 months ended September 30, 2019, compared with 3 point period in 2018, an increase of 3.8%. It should be noted that during the 9 months ended September 30, 20 18, we had $5,329,000 or more in net income than during the same period in 2019, again due to non core loan discount accretion income. Our loans at September 30, 2019 were $10,673,000,000 an increase of $380,000,000 or 3.7 percent compared with $10,293,000,000 at September 30, points, 3.2 percent annualized from the $10,587,000,000 at June 30, 2019.
Our deposits at September 30, 2019 were $16,000,000,000 an increase of $196,000,000 or 1.2 percent compared with the $16,034,000,007 at September 30, 2018. Our linked quarter deposits increased $42,291,000 or 30 basis points from $16,888,000,000 at June 30, not expect that to be different this year. Completion of our merger with Legacy Texas Financial Group remains on schedule as we have received all required regulatory approvals and shareholder meetings for each company are scheduled for next week. The management teams from both be and sound manner. We want to expand our use of technology in our digital products, making it easier for our customers to business and continue to enhance shareholder value.
We believe our customers remain positive about the economy. Consumers are still the most positive, while we see commercial customers pausing a bit due to geopolitical concerns. In Texas and Oklahoma, unemployment remains low and demand at business is good. In our opinion, the economy in our market areas remain sustainable. I want to thank everyone involved in our company for helping to make it the success it has become.
Thanks again for your support of our company. Let me turn over our discussion to Asselbeck, our Chief Financial Officer to discuss some of the specific financial results we achieved. Asselbeck?
Thank you, Mr. Zalman. Good morning, everyone. Net dollars compared to $157,300,000 for the same period in 2018, a decrease of 3,300,000 dollars or 2.1 percent. A lower loan discount accretion in the Q3 2019 partially contributed to the decrease.
The net interest margin on a tax equivalent basis was 3.16% for the 3 months ended September 30, 2019 compared to 3.15 percent for the quarter ended June 30, 2019. Excluding purchase accounting adjustments, the core net interest margin for the quarter ended September 30, 2019 was 3.14 percent compared to 3.09 percent for the same period in 2018 and 3 0.14% for the quarter ended June 30, 2019. Non interest income was $30,700,000 for the 3 months ended September 30, 2019, compared to $30,600,000 for the same period in 20 18. Non interest expense for the 3 months ended September 30, 2019 was $80,700,000 compared to $81,800,000 for the same period in 2018. The efficiency ratio was 43.7 percent for the 3 months ended September 30, 2019, compared to 43.5 percent for the same period in 2018 and 43.74 percent for the 3 months ended June 30, 2019.
The bond portfolio metrics at ninethirty 2019 showed a weighted average life of 3.62 years and effective duration of 3.19 and projected annual cash flows of approximately $1,800,000,000 And with that, let me turn over the presentation to Tim Timanus for some details on loans and asset quality.
Thank you, Asselbeck. Our non performing assets at quarter end September 30, 2019, totaled $51,157,000 or 48 basis points of loans and other real estate compared to 40 $1,558,000 or 39 basis points at June 30, 2019. This is an increase of 23% from June 30, 2019. The September 30, 2019 non performing asset total was made up of 50,300 and $14,000 in loans, dollars 28,000 in repossessed assets and 8 $15,000 in other real estate. Of the $51,157,000 non performing assets, approximately $16,000,000 or 31% are energy credits, all of which are service company credits.
Since June 30 excuse me, since September 30, 2019, $2,938,000 in non performing assets are under in non performing assets are under contract to be sold or have already been removed from the non performing asset list. Net charge offs for the 3 months net recoveries of $115,000 for the 3 months ended June 30, 20 19. $1,100,000 was added to the allowance for credit losses during the quarter ended September 30, 2019 compared to $800,000 for the quarter ended June 30, 20 19. The average monthly new loan production for the quarter ended September 30, 2019 was $289,000,000 compared to $287,000,000 for the quarter ended June 30, 2019. Loans outstanding at September 30, 2019 were 10 $1,673,000,000 compared to $10,587,000,000 at June 30, 2019.
The September 30, 2019 loan total is made up of 38 percent fixed rate loans, 38 percent floating rate and 24% variable rate loans. I'll now turn it over to Charlotte Rasche.
Thank you, Tim. At this time, we are prepared to answer your questions. Jake, can you please assist us with
questions? We will now begin the question and answer session. The first question comes from Brady Gailey with KBW. Please go ahead.
Thanks. Good morning, guys.
Good morning, Eddie.
I just want to start with loan growth and with legacy about close. I know in the past when you all done acquisitions you've kind of looked at a portfolio of the target loans and decided to run them off. I think I remember either you guys or Kevin talking about that number being about $500,000,000 for legacy. I was just wondering an update to that number, how much do you expect to move out of legacy under the Prosperity umbrella? And then how does that impact net loan growth for 2020?
Well, again, the $500,000,000 that Kevin had mentioned and I think we had mentioned at the time is probably a close number of what we're talking about. How that would the timeframe that it takes to do that, that could take us up to 2 years to probably do that. So I guess if you did some bohemian math and said you're growing percent a year on loans, 5 times our combined loans, again, I don't know if you want to count, a big portion of those are mortgage warehouse. So we have over $10,000,000,000 so that's 5% is $500,000,000 a year you add their loans to it. So basically, it would affect the 5% organic growth.
There's no question, I just have to put a pencil to it. I think you probably can do the same thing. Take their $7,000,000 or $8,000,000 if you exclude the mortgage warehouse and just take 5% and subtract out what we're running off, it would probably be a pretty easy calculation.
Got it. All right. That's helpful. And then so buybacks continued in the Q3. You bought back about 1% of the company, then you bought it back a little under $64 a share, the stock now is north of $70, well north of $70 So should we expect that buybacks kind of stop with the stock trading at this
level? Right now, I would say the answer to that is yes. I mean, right now, whenever we start buying when we think that the market is really completely out of kilter. We felt like the market was out of kilter at those prices we were buying it at. And so I think we'll be there to support.
We still have a lot of capital. We're creating a lot of capital. We have a table, I mean it's $500,000,000 or so a year, even after dividends we have a lot of money. So we'll continue to buy if the stock ever goes disproportionately lower than we think it should be.
Okay. And then last question for me is on the margin. It was great to see the margin flat linked quarter. It's a lot better than most of your peers out there this quarter. But how do you expect the margin to trend towards the back part of the year and into 2020?
Well, the reason probably our net interest margin did better than our peers. We never went up. Our net interest margin never went up like the other guys did because we had a certain amount of fixed rates on our bond portfolio and our loan portfolio. So as rates came down or coming down, that helps us. At the same time, we have about a 3 year average life both on the loan portfolio and in the bond portfolio.
But going forward, it's a little bit harder question. If you look at our bank without legacy and you look at our with legacy, we run both models. And now again, these are models and we're throwing a lot of information into them. So I can't tell you that they're exactly accurate, especially when you combine legacies with ours because again, we're making a lot of assumptions. But from what we see, we don't think our combined bank is going to be much different than where our bank would have been un combined.
We think that if interest rates don't move, we would still see a net interest margin that would increase over 12, 24 and 36 months. If interest rates go down 50 basis points, we see probably a flat margin. If they go down more than 50 basis points, we would see a decline in net interest margin. I know that's a lot of information, but that's just kind of what we have right now.
The next question comes from Peter Winter with Wedbush. Please go ahead. Good morning.
Good morning, Don.
I was just wondering, as you guys have had more time to spend with Legacy Bank and getting ready to close the deal, have you noticed or come across any positives or negatives as you've dug deeper and getting ready to combine the 2 banks?
I think that I'll start off with the negative side. I don't think that we found anything negative. I think the loans that we did our due diligence on and the loans that you've even seen some of their charge offs this quarter, We completely identified those and there wasn't any surprises in any of that. We also I think our management committee have an executive management committee and we also meet with their executive management, which is Kevin and Mays and Tom and Scott and Aaron and Chuck and we meet with them and our guys, we meet every week. And I would tell you they've been it's been a pleasure to work with them.
I think that we have to make decisions, but the more we work with them, I think they're more alike with us in the way we think. I think it's just it's been in my opinion, I know everything, I don't want to be naive, anything can happen, but I think that it's been extremely favorable and Kevin and I still have bromance score and we text almost every night.
Okay. And then, you've assumed 25% cost saves and just given your history that seems kind of conservative for you guys. You usually beat the expense saves. I guess my question is, how quickly do you start to realize the expenses and get the full amount in the run rate?
Well, this again, somebody else can jump in, in just a minute, I'm sure I'll also back in for somebody. But this is a little bit different in that even though we're closing the deal in the next few days or so, the operational integration doesn't really completely take effect until June of next year. So you all have done some numbers and you're so you may want to jump in. I'll give
a little bit of color. Yes,
we currently have a higher level estimates, but few months we close the merger, we should have able to provide more clear guidance on the timing and the cost. But as we look at it, the elements of the cost saves changes from preliminary, but we still expect to get the 25% cost saves that we announced at the merger. And from the timing perspective, I think we expect to take full advantage of the cost save in 2021. But as you mentioned, probably half of the savings going to come in 2020 because since this integration has to take place in 2020. Right.
You'll probably even start consolidating some of the stuff even before the complete operational integration with the computers.
Absolutely right. There is a few. I mean, we're working on a different project. I mean, we have a lot of streamlines that we're working through that and some of them will be consolidated before even our mid year point.
But I think a good number, the 50% of it I think is a good way of looking at it.
Yes, I would say 50% in 2020 and full advantage in
2021.
The next question comes from Ebrahim Poonawala with Bank of America. Please go ahead.
Thank you. Good morning.
Good morning, David.
Just had another question around the deal closing. Obviously, it's closing fairly soon. Is there anything from a securities repositioning that you're doing on the asset side around closing that we should be mindful of? And if you can just talk to where your expectations are for the pro form a margin for both banks combined coming into Q4 or I guess 1Q will be the full quarter?
I probably would start with the pro form a again. This is just a pro form a and these are putting these two models together. Also, we're looking at a 3.4% margin. Yes, based on
the pro form a, yes, combining those companies right now as we don't do much of a balance sheet remixing, we're seeing at 3.40% right now.
So you're seeing that. You'll see you already see our you saw our balance sheet where we were borrowing money from the Federal Home Loan Bank over 1,000,000,000 dollars We've cut that down dramatically because it didn't make sense anymore to do that. From legacy side, you may see us sell a small portion of their CMO portfolio, not a whole lot, but you'll probably see a little bit of that. And you'll probably see us taking money as our bonds mature instead of buying securities that we'll use that money to probably fund their loans.
Understood. And the $340,000,000 Dave, just relative to your comments earlier, you do expect that 3.40% -ish margin to stay fairly stable, assuming rates don't go down more than 50 basis points?
The 3.40, if interest rates don't move at all, we should see a pretty good increase in 12, 24 and 36 months. If interest rates go down 50 basis points, it should be flattish. If it goes down more than 50 basis points, then there will be some decline in the net interest margin.
Understood. And just on separately in terms of just loan growth or business outlook, as you look into the Q4 into next year, are things looking better or worse as you think about the economy? Obviously, Texas is still doing very well. But I would appreciate your thoughts just in terms of the feedback you're getting from clients and how you're thinking about next sort of 2020?
The consumer is doing extremely well. Manufacturing has slowed a little bit. We've seen businesses that I think are still doing very well. But again, they're pausing, I guess, I would say a little bit because of the geopolitical. They're looking down the line, they're looking at the election, they're wondering if somebody really does get into office that would really raise taxes and start putting wealth taxes and stuff.
I think it just bothers business people to make longer term decisions when they see something like that. But overall, when you look at it, our unemployment rates in Oklahoma and Texas are the lowest they've ever been. Still harder to find employees to work. I mean, so it's a very good market. I would say that from a loan side, we continue to see a tremendous amount, a lot of payoffs, but more so than that, the competition is very, very strong out there.
We're seeing banks that are offering rates that we don't feel that we can offer sometimes. And so I would where we put 5% organic growth for this year, I think I would change that to maybe 4% because we're just not going to play. We're not going to I think as Johnny Allison said, we're not going to get the most stupidest award. So we don't want to do that. So we don't we want to be there.
So I think that we'll be competitive, but again, we're not going to we're just not going to do stupid things either. So with that, I would say that we'll be more like about a 4% growth for this year.
The next question comes from Brad Milsaps with Sandler O'Neill. Please go ahead.
Hey, good morning.
Good morning.
Just to follow-up on Ebrahim's kind of balance sheet question. Just kind of curious, you had an update on how you plan to fund or how you plan to approach legacy's warehouse business? And then as a part 2 of that, would you anticipate using some of your liquidity to fund it versus where legacy is relied on wholesale funding to fund that business? Just trying to get a sense of what the balance sheet looks like pro form a?
Yes. I don't know that we have the balance sheet exactly the way it is. But fundamentally, we intend to use our money to fund the warehouse receipt I mean, the mortgage warehouse loans. Again, I remember looking at their balance sheet this quarter, they were borrowing over $2,000,000,000 or so. Think that there will probably we may increase our borrowings a little bit, but for the most part, I think there will probably be a middle of the road.
We'll probably try to fund most of their loans with our core deposits basically. But having said that, it's not going to work overnight. It's that easy. And we'll have to see where we their mortgage warehouse loans were higher than they had been traditionally through the average of the year. They usually run about $1,000,000,000 a little over $1,000,000,000 I think in this last quarter, again, it was closer to $2,000,000,000 So we need to really see what the average is going to be.
But again, I guess going
back fundamentally, we intend to
fund, use our deposits to fund most of their loans. Period till our stuff runs off.
Got it. No, that's helpful. Yes, their margin was down, I think, 17 basis points, total of that has to do with the warehouse. And your 3.40 NIM guide, does that obviously include the things you're talking about? Does it also include any accretion income that you would expect to get in 'twenty?
We didn't include any accretion income in that. Okay.
Okay. And then just one final.
We don't want to start that again.
I understand. We don't want to model it either. Just in terms of CECL, I was just curious if you guys could provide any update on there'll be a lot of moving parts with legacy coming in. They've historically may be provisioned at a higher rate than you guys have, but you have the mark and everything else that goes with CECL. So just kind of curious how to think about sort of that aspect once the deal is closed?
Yes, this is Asselbeck. Currently, we have both teams running the parallel and CISO models at a standalone basis. But after the merger, we'll work on the consolidated model, like aligning the qualitative economic factor assumptions. And I think once we go through the process, we'll have better clear picture on the consolidated basis. But if it's standalone, I mean, our model showing that we would have about $20,000,000 to $30,000,000 of additional provision related to CECL, which is about 23% to 34%.
Got it. And that's helpful. And the charge offs that legacy had this quarter, obviously, I know you identified those, but does that change your mark at closing or will you still stick with the same, the mark that you identified initially?
Yes, that's a good question. We had $175,000,000 So let us look at it and see.
Okay, fair enough. All right. Thank you, guys.
The next question comes from Matt Amliet with Stephens. Please go ahead.
Hey, thanks. Good morning, guys.
Good morning, Matt. Good morning, Matt. Good morning, Matt. Good morning.
From a capital planning standpoint with legacy, I believe you'll be absorbing some sub debt and trust preferred securities. Just remind us of your plans, what you expect to do with this capital and how quickly you could do it?
Yes. So we are planning to once we have merger, of course, we're planning to pay off when the maturity comes in. So we're not going to keep it in our balance sheet going forward. But I think one of the maturity comes in, in 2020. And the
Yes, but these
tend to pay off right away.
Yes, December 15. It's about $15,000,000 Yes.
Got it. So trust the first pay down almost immediately and the sub debt comes due, you said in 2020, is that right?
Yes, I think it's October 2020.
I thought
it was,
yes, 10 months. Yes, next year.
Okay, got it. And then going back to the margin discussion and specifically on the core loan yields, once I back out the accretable income, I believe the core loan yields compressed about 5 bps this quarter. Obviously, you have some variable rate loans that put some pressure on that, but I was a little surprised to see 5 bps of pressure this quarter. Any color you can provide on that?
Matt, I didn't see that. Again, I also like you might have gone into that. When I looked at it, again, when I compared income to income, we had probably more accretion last year than this year. So I didn't see the lower income on the loans.
Let's ask Vivek. On the loans core basis, yes, we went down about 4 basis points on the loan, but it's because of the short term and long term rate environment we have. So some of those variable and floating loans we have that increased. But if you look at the over compared to last year, I mean we were at core basis at 4.87% on loan yield and we had 5% this year. So compared to year over year, we increased I kind of
I kind of thought it was better really when he took out the additional accretion we had last year compared to the accretion this year. I thought it was actually better compared to last year.
Yes, we went out 13 basis points compared. Yes, even in this rate environment, it's pretty positive in my mind.
Okay. Thank you for that. And then just lastly, the premium amortization expense was about $400,000 higher in the Q3 than in 2Q. Obviously, the rate environment is influencing that. As you look towards the Q4, any color you can give us as far as your expectations on the premium amortization expense for 4Q?
Yes, referring to the securities portfolio, basically, I guess. Yes. My general overall feeling is rates are rising. I think that you should see it decrease to maybe 300
dollars I would expect a standalone basis probably less than what we had $8,000,000 but just I mean,
really, if rates continue to stay where they're at, it's crazy, we are seeing the prime rate adjust in the overnight, but there's been some good things, which a big part of this is, if you know our bank and I think you do, a lot of our yields depend on the 10 year treasury, and that's been extremely positive over the last few weeks. It's from 1.5 to almost 1.8. And so that makes a big difference. When we're buying securities or fixing rates for 5 years, it makes a big difference.
Yes. I think the addition of seasonality too, because summertime, there's a lot of homes being bought that I think is going to come down in the 4th quarter. So that's going to help to slow down as well.
But when that when your tenure went down so much, I mean you saw a lot of refinancing. So if they if you can truly have a yield curve and not have this inverted yield curve, you shouldn't see as much of a pay down, I wouldn't like that. The refinancing, I guess, I'll refer to.
Okay. I doubt that dramatic one way or the other. Right. The
next question comes from Jon Arfstrom with RBC Capital Markets. Please go ahead.
Thanks. Good morning, everyone.
Good morning, John.
Good morning.
Good morning. Maybe one for you, Tim. Credit looks fine, but give us an update on health and ag and energy. And then maybe just even though it's not a huge number, touch on the increase in NPLs?
Well, let me do the last part of the question first.
The
non performing list is really made up primarily of the bulk of it in 4 credits that total about $33,000,000 to $34,000,000 One of them is a home mortgage credit that we've got about $9,000,000 in and the appraisals that we have are in the $12,000,000 to $13,000,000 range. So on paper, there isn't a loss there.
We shall see.
Another one is a well service company. There's about $13,000,000 to $14,000,000 outstanding there. It's actually current. They're making the payments timely. On paper, once again, in terms of appraisals, there's enough equipment to pay it off.
And they also pledged additional real estate that has an appraised value of about $9,000,000 So on paper, we don't think there's any loss there. And then the other two credits are commercial real estate credits, one about $7,000,000 It's actually current. We think there's value there. We think if we had to foreclose, we probably wouldn't lose anything or wouldn't lose much. But once again, it's current and it's actually performing at this moment.
And then the second one is about $3,000,000 and we're going to be paid off we think by the end of this week. So when you take the $33,000,000 $34,000,000 that's in these four credits out, it makes our nonperforming look pretty good. It's not a dramatic problem either. You hear a lot of publicity about the tariffs and all that and the government is covering a lot of these farmers with payments from the government in that regard. So while I don't think agriculture is booming and doing as well as it could, I don't see any big problems there.
And then what was the third part of the question?
Energy primarily energy service, yes.
Energy in our opinion, is in the doldrums. It's not getting significantly better. It's not getting significantly worse. Most of the people that we talk to think that the oil price is going to fluctuate between $45 $55 over the course of the next year. The majority of the people that we do business with now can handle that.
Obviously, if those predictions are incorrect and it goes way down then it's a problem for everybody. The service sector seems to be struggling more than the production side right now. I think because of what I just said, I think the forecasts are flat in terms of pricing of the commodity. So there's not a whole lot of extra dollars being spent on service work. We've said over time that most of the customers that we have are customers that have been in business for a long time have weathered the storms.
They started the last downturn with strong balance sheets. Those balance sheets were hurt quite a bit in 2015, 2016 and into 2017, but they're still alive and are bouncing back a little bit. And so I don't see whole lot of change right now. Now the credits that legacy is bringing to the table are more on the production side. I know that they have a focus on removing some of those out of the bank.
So we'll see how that
just
And then David, maybe one for you. I think we all understand the efficiency from the merger and the expected runoff, and we've seen you do that many times. But as you look through this a little bit more and talk with the legacy management team, any areas where you are a bit more optimistic in terms of opportunities for new business, whether it's a product line or just larger lending limits?
I think it's a combination of that, John. I'm really excited about it. I mean, you really have mortgage warehouse, I would admit that we don't have the experience that they have in it, so we're there to learn in that. They have the commercial real estate portfolio that is a little bit different than ours. But again, I think that this gives us an opportunity to really dominate 2 of the largest markets in Tayta, Texas.
You're going to I mean, we dominate Dallas and we dominate Houston. And I think just the size that we have and what we can offer, the different products that we can offer, we're really beefing up right now on our new cash management system. And so you combine that with the lenders that we have out there in both markets, we become very prevalent. And I think it's just I think it's a great opportunity. These guys really have been great to work with.
As Tim said, they do have some issues maybe on the oil and gas side. We've identified that. I think it's something we can work with. We've been through many of these things and I just think it's going be a great opportunity. We can move through it quick, we'll go on to our next deal.
Okay. And then just one last one. You talked earlier about expanded use of technology. Any area and specific area you'd call out where you feel like you have to catch up the quickest where you might be at a disadvantage?
I don't know that we have to catch up. But for me, I just think that if you're going to be in business and I talked about this earlier before this meeting ever started, I just think almost everything has to be digital. Not only in the past, things were digital
just on your checking account,
you could look at your just on your checking account and you could look at your phone and all that. I think going forward, your checking account has to be digital, your mortgage application has to be digital, your I think even small commercial loans are going to have to be more digital. I think everything that we offer, people are important on that. I mean, I think it's a combination, but I think you're going to have to have the digital platform for everything. And I think that's what we're moving to open up a new account to do just about anything.
Our goal is to really be digital in any product that we offer. That's my goal. And that doesn't happen overnight, but that's really my goal, really.
Okay. All right. Thanks. Good luck
with the close. Thanks. Thanks. The next question comes from Ryan
Brian Foran? It's close.
Yes, okay. Ryan Orian with no firm, I'm unattached. Hi, everyone. Maybe just going back to what the pro form a financials are going to look like. As you kind of put the 2 balance sheets together, think about normalized mortgage warehouse, some of the funding efficiencies, I mean, is kind of the earning assets land around $28,000,000,000 and then it'll do whatever from there based on growth?
Or is it a little lower or higher than that? Can you help us think about just a point estimate or a range for where earning assets might be in, call it, 6 months once most of the dust is settled on the repositioning?
Again, this is just also to give you better color. My gut feeling is around $30,000,000,000 Do you have it also?
Yes, I
think it's going to be around between 28 $1,000,000,000 to $30,000,000,000
No, these are earning assets. Earning assets, okay.
Yes, total assets if we spend as of ninethirty, it's about $32,000,000,000 to $33,000,000,000 Right.
And then maybe just more broadly on the deal, I mean, you certainly referenced, David, you and Kevin have hit it off. At the time, there was a lot of concern and narrative that maybe the cultures didn't mesh and maybe some of the legacy Texas lenders higher than expected attrition could be a key risk for the deal. I know it hasn't even closed yet, so it's early. But just any how are you feeling on that next level down? I don't know if you've had a chance to talk with those lenders or Kevin, but as you look at that next level down, do you feel better, worse or about the same on legacy Texas commercial lending lender attrition?
I feel good where we're at. They've gotten over, was it 50 or 60, something like 62 signed contracts. Most of their people all signed contracts to stay with us. So that means they're not endured to life with us, but they're sure they're giving us a chance. And every deal that has been successful in our history, and we've done 42 of them and only 2 of them I wouldn't say I regret, they've been tough.
Every deal that's been extremely successful is successful because of the management that stays with it. So the success of this deal truly will be it will be because of Kevin, May, the team Aaron, Chuck, the team that stayed at home, it would be those guys, if they're staying and they're going to be part of it, this deal is going to work fine. I'm looking at the table around the table right now and I Tim brought his company over and majority of all his people say, I look at Eddie and he brought his people over and majority of his people say so. The success of any of this thing of everything is to really make it everybody has to work together and management has to be part of it. If management is not part of it, then it's a tougher deal.
Thank you very much.
Conference back over to Charlotte Ruscha for any closing remarks.
Thank you, Jake. Thank you, ladies and gentlemen, for taking the time to participate in our call today. We appreciate the support that we get for our company and we will continue to work on building shareholder value.
The conference is now