Peter Winter: Okay. Great. And there’s one last question, just credit obviously is very strong. You have nice reserve coverage to non-performing loans, but is there – how much longer can you take a zero provision expense, do you think?
H. E. Tim Timanus, Jr.: Well, I’ll make a quick comment. A lot of that reserve is based on what we call environmental factors. And I mentioned it just a minute ago in what I was saying. There is some weakness out there in the world and there’s some things to be concerned about. And do those end up affecting us more than they have today? Who knows? But that possibility is there. You asked about, and I mentioned the office market. It’s a pretty good example. If you look at the statistics, they’re not good. And does that tend to creep into other segments? We don’t know. But we’re trying to be prepared for the future in a reasonable way. And we think that per our models and all of our calculations, we think where we are right now on the reserve is appropriate.
And I wouldn’t see any significant change anytime real soon on that. So we’re not expecting to take money out of the reserve. We don’t see any huge additions to the reserve either based on what we see right now. So I think we feel comfortable with where we are and we think it’s steady as it goes for a little while.
David Zalman: I think most banks, Peter, probably there’s not many banks probably carrying a remount reserve like us at 1.7% reserve, compared to the losses that we’ve had historically. So I think when Tim’s referring a lot to the environmental factors, probably there’s probably a big piece, and there is a larger piece in our reserves for the environmental factors. So we’re – a number of banks a year or two ago were pulling money out of the reserve and putting back into income. We never did that. We’ve left that money. So we really don’t like to play with that taking money in, putting money out at different times. We like to be pretty consistent. So we do feel we’re well-reserved. And we shouldn’t, I don’t see putting money in unless something catastrophic happens, I don’t see us putting money in for the next 12 months, such as May.
Peter Winter: Okay, great. Thanks, David.
Operator: The next question comes from Brandon King with Truist Securities. Please go ahead.
Brandon King: Hi, good morning.
David Zalman: Good morning.
Asylbek Osmonov: Good morning.
Brandon King: So, industry is experiencing a softer revenue growth outlook next year, although not as much the case for Prosperity. But I just wanted to get your thoughts on how you’re thinking about expense growth next year. I know a lot of other banks are announcing initiatives and restructurings. But I just want to get a sense of what you’re thinking about how you want to manage expenses going forward.
Asylbek Osmonov: So, Brandon, in the short-term I’ll talk about the fourth quarter. I think it’s going to be in line with what we had in the third quarter, as I mentioned. It’s $134 million to $136 million. But if you go out for 2024, I think with the inflationary environment we are right now, and we do our merit increases annually. So I would expect for next year probably 2% to 3% expense growth, but we have a lot of initiative. We’re trying to automate a few things, but nothing significant that would – but we’re trying to mitigate the cost. But if I had to get guidance for next year, that would be 2% to 3% increase, but that’s not including the special FDIC assessment that’s going to come in, in the first quarter, that’s excluding that special assessment. So I would say 2% to 3%.
Brandon King: And how much is that FDIC?
Asylbek Osmonov: So I think based on our initial calculations, above – going to be $10 million annually.
Brandon King: $10 million annually?
Asylbek Osmonov: Yes, on the FDIC, special FDIC assessment. In addition to that we already had assessment in 2023, which is costing another $10 million.
Brandon King: So really, you’re talking about an extra $2.5 million or so a quarter.
Asylbek Osmonov: Yes, $2 million to $2.5 million, yes, per quarter expenses. That’s on the FDIC assessment.
Brandon King: Okay. That’s very helpful. And then lastly for me, I’m sorry if I missed it already, but what are you expecting for security cash flows and maturities over the next 12 months?
Asylbek Osmonov: So our cash flow, it’s about $2.1 billion in the next 12 months.
David Zalman: That’s on the security…
Asylbek Osmonov: On the security…
David Zalman: …on the loans.
Asylbek Osmonov: I’m sorry. On the loans, it’s about $5 billion.
David Zalman: All right. But again, some portion of that will…
Brandon King: Okay. Sounds good. Thanks for taking my questions.
Operator: Your next question comes from Manan Gosalia with Morgan Stanley. Please go ahead.
Manan Gosalia: Hi, good morning.
David Zalman: Good morning.
Manan Gosalia: Thanks for taking my question. Can you give us some more detail on the fixed rate loan repricing dynamics that you’re expecting from AR? I know you mentioned 65% is fixed to variable rate loans reprising about 3-ish percentage points higher. But how much of the loans are in dollars or in percentage are set to repay between now and the end of next year. And how does the increase in duration as a result of higher long end rates impact that re-pricing dynamic?
Asylbek Osmonov: So then when we looked at the $5 billion that is including all the duration we have already in our loan portfolio. And from the cash flow, I would say maybe a little bit higher in the first half than second half, but essentially the cash flow would be evenly. If you look back in the – I would just give you numbers what’d happened last three quarters, and maybe that gives you some information, Manan. It’s like in the Q1 we had $1.3 billion, in Q2 we had $1.5 billion, and in Q3 we had $1.4 billion. So, based on that cash flow, you can see that the actual cash flows, you can see that that’s on – that’s going to be evenly distributed over 12 months.
