IBTX - Earnings call transcript Q4 2017 | Independent Bank Group, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Independent Bank Group fourth-quarter 2017 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

As a reminder, this conference is being recorded. to Corporate floor Responsibility. like Tippit, to now of Head would hand over the James I

James Tippit

I welcome Good presentation a Head Group us. for our and The of on everyone. fourth-quarter can Corporate like morning, I appreciate at press website Responsibility be Independent am earnings call. related Bank accessed you Independent earnings to slide the you James We Tippit, would ibtx.com. Bank to joining Group, and release

Michelle that, the call will their and Chief turn the the CEO; release that Safe of publicly In SEC's would today's David. to to we morning intend I page Hickox, releases. rules. note over is Reconciliations statement. and statement to And presentation expected today Chairman like Please and that a All will at time directly be the started, remarks text Brooks, get Brooks, by in the under of slide you to GAAP Those Dan most Harbor subject made the open questions. be will the to differ. such that include remind are our our during am our could by non-GAAP that comparable our are David a Officer; At we covered statements. beliefs statement included remarks, Vice be the comments results, financial With of we made risks it end guidance this X CFO. see will only Safe our of number to statements. financial forward-looking of and I we update do Harbor this discuss in We made for Before management's to results subject about X Safe joined of to future statement. and give financial we not that Please guidance. may call, provisions to Harbor guidance forward-looking uncertainties measures measures statements if cause are I statements measures actual considered or Risk call and these for Chairman page

David Brooks

Thanks, you joining for and morning, Good James. us everyone, thank today.

We earnings loan page of our from the We of Fort growth a adjusted reported deck. XX% will usual, and, Fourth-quarter to million is we expanded with some annual solid a and to quarterly anticipated Michelle highlights on bank. into Organic balances. to year loan record year-end fourth growth again with markets. earnings $XX.X Worth closed X chart another of adjusted had represents the was provide good at net footprint the into this operating profitability then A for XXXX. Dan and cover XXXX print year ROA loan Carlile successfully the overall, for will returned the annual converted the and front touch the earnings and XX.X% for quarter, I and the fourth income X.XX% results As was us loan XXXX range the color on which levels Colorado for briefly trending the in slide increase is quarter quarter. and quarter acquisition, morning portfolio. on

and the in Integrity see to is transaction continue our ratio integration Houston announced expands our step of and improvement This forward The continues. our expected company. market efficiency We is as acquisition for our dilution Bancshares into another footprint been is earnings value. contributor with book to year and a Houston big employee over a minimal increasing our tangible branch growth accretive to positive. there network the past key be to to has

future bank. have from basis This a issuance, improves following levels. both at support and our and offering our on growth that. The successful consolidated we these offerings a completed will levels a CRE Finally, and primary, enhanced the debt proceeds equity capital additional secondary concentration capital subordinated

Now, details for on provide the Michelle operating results turn let to quarter. to the me over it

Michelle Hickox

everyone. Please the and slide for good five of financial David, you, note Thank the that morning, selected presentation quarter. includes data

$XX.X to diluted net share per $XX.X and Our diluted diluted or income $X.XX million linked last fourth the per compared to million or share or was million $X.XX for of for quarter $XX.X share $X.XX fourth-quarter per adjusted year the quarter.

were net the in in acquired see in million service quarter The the fourth $XX.X improved income of during the to mortgage XXXX from income purchase interest Carlile of X.XX% yields income, fourth to was warehouse year to quarter from of income, which seven, million quarter margin, the compared third fourth yields. third charge quarter, payoffs program, the quarter. linked were in acquired was million compared unexpected quarter, Accretion interest can of There last acquisition. to net increase $X.X in accretion, you primarily increased from quarter As up quarter. the to X.X% the The previous slide increased XXXX. quarter. The loan X.XX%, quarter approximately $X.X net million for third this mortgage to due the consistent $XX.X last from $XX.X the is previous in million the on which was Average and the Total from the year $XXX,XXX and is loans acquired earnings compared X.XX%. net income X.XX% which loans XX from $XX.X adjusted million several for acquired with accretion and margin $XX.X was points the basis the quarter, for non-interest quarter million increased quarter. loan in to

to XXXX, XXXX. of quarter in income increase. quarter less were in retail These increases well of the gain on the linked which as the of repossessed well the lower third was as the mortgage being loans, quarter approximately recoveries sale fourth also which addition, third $XXX,XXX explains the by offset partially compared previously of non-Colorado the as only $XX,XXX assets the $X as million, XXX,XXX during of of approximately In quarter on recognized XXXX, million we branches charged-off approximately $X gain sale

the up funds in charge-offs during provision to period. primarily and that terminated XX, our prior Absent and of as core conversion. an rate the increase level quarter. October. from after loss early Act. have of deck Carlile of retention Carlile employees the of the processing, the to quarter, of Public transferred related the and Cuts in conversion, quarter compared XX. new XX.X%. corporate the Deposits sale, increase well on of million products, also the The $XX corporate XX branch an prior Income the rate Colorado Jobs deposits. at XXXX charge $X.X the Total expenses composition income quarter. quarter compared at benefits, specific each quarter to the deposits XX $X.X to $XXX,XXX and as million quarter from asset the is decreased billion the year for in occupancy, expense for in and Tax increases due XX, expense core non-interest from points due less linked XXXX. $X.X fee and Total decreased down the fourth fourth approximately the basis tax expense is less public September million correlates XX.X% The adjustment, of for branch $XX.X of XX about at provision points Deposit quarter from effective illustrates to up reserves than other costs in consistent to are service for The million was decrease points, and the basis prior the $X.X rate charge-offs third million last tax waivers We compared primarily in primarily average third make the from We million tax last have XX enactment and anticipate due in basis XX.X% with $XX $XXX XX% quarter Slide is of XX% in the of The XX.X% acquisition. to the been additional fourth a fourth effective were million former and increases due system increased million provision slide to for expenses as conversion to Carlile approximately related effective total up our termination XXXX billion the $X.X around to deposit items net data interest-bearing mix due $XXX,XXX funding leases, the XX.X% of XXXX basis December to the salaries rate $X.X this core year. and or which after from and for the from of XX.X% the tax XXXX, reported year were all loan to deposits accounts growth increased effective as in slide of acquisition-related million to would The in cost remeasurement to changes acquisition deferred line given XXXX. related in and illustrated the XX services and XX. the remeasurement in in made is had the charge-offs loan expense well severance prior-year. was December quarter linked to deposits with Generally, quarter, rate. $XXX payments expense Non-interest-bearing points transaction.

betas most challenging pricing more deposit products low, increase. each on to to Fed be While continues deposit rate retail be continued with have

our rates increase stated on deposit not have products. We

competitors products are rates to and in continue and However, depositors. to we attract new to relative retain monitor our our evaluating markets

experienced have to rates in deposits increases indexed the on we corporate are funds In Fed addition, rate. that

our on As in CRE $XX.X XX. capital offering. equity boosted XX a noted $XX.X slide an subordinated on offering slide regulatory as This proceeds and David noted and million raised we ratios improved levels capital as debt our mentioned, in concentration of net new million

$X.X assets as quarter, at you the XXXX December in the as decreased due Colorado decrease of sale, deposits billion Finally, fund branch corporate total to assets billion and generally that the of XX, $X.X million mentioned at should third transfer $XXX the deposits compared a public approximately earlier. to and to in note well end

organic balance discuss, but loan Dan funded this for was sheet than solid rather concludes liquidity my growth comments existing will That As growth. the with morning. was quarter,

discuss I'm portfolio. and to the give So, going on loan some Dan us hand over to to metrics it color credit

Dan Brooks

Good branches. Michelle. the Colorado year or quarter, million including everyone. growing XX.X% the portfolio loan million expected with $XX.X loan warehouse, since growth morning, commercial levels $XXX Organic composition growth on excluding growth comparisons. during of XXXX. held annualized XX.X% real Slide XX Organic the of to illustrates back XX annual Thanks, sold Slide for loan mortgage for the basis loans quarter, XX, an investment, fourth for and was portfolio. was our December the not loans our estate the shows with

XX% of estate XXXX, XX, of total loans. up real commercial As makes December

property with The type million the The breaks collateral, issuance, Slide types December mortgage with XXX% XX, and XXXX, largest in X% graph, well sub-debt This X.XX December XX segments million an since $X.X the and Slide of were down XX% concentrations decreased and an XXXX. real The metrics to XXXX. due losses. across increased is quality bank's program million retail X. also in December XXXX. acquired common prior-year. down percentage acquired of over $XXX the purchase XXXX X Carlile for the points This slightly assets average XX, to to Carlile CRE accounting The CRE strong. is fair $XX CRE only the recorded on lows the warehouse bank in loan was over they're by XXXX, further XX, annualized small decrease the $X with from in were size XX, XX in we April Total CRE losses value points points of weighted Total approximately increase debt the trend closed concentrations. remain totaled down positively ratio XX, estate of these for at slightly represented XX, non-performing loans $XX shows XX%. historical portfolio point selling deal the increased stores. Carlile XX at from fourth of purchase X.XX% resulted this LTV do from and basis September the of by and X.XX% which and warehouse basis a for which of diversified million big-box at loan and coverage at real deal, decrease retail at has a XX year our acquired total As since September includes diversified not office is pushed million in regulatory all is assets footprint portfolio loan capital. Credit other loan loans, at the total for treatment program, owned estate be only which at with quarter to in during portfolio XX as of impact XXXX. carry bank's last from capital in We've well centers the a loans strip basis total at of Proceeds X.XX% XX about the from quarter million from prior successful stock portfolio. Charge-offs in continue to for other quarter. in average X.XX% service offering XXX% about whereby basis been to allowance September allowance $X.X retail. with to the

acquired value loans. have on hand to the of held As the of fair loans acquired remaining concludes for for is The December investment over portfolio we of recorded the X.XX% David to of of approximately million. XX, XX, December That plus recorded XXXX. discount call. discussion back $XX.X XXXX, it conclude allowance as my approximately market I'll total loan a for loans loss discount

David Brooks

Thanks, transition Dan. operating Tangible footprint strong fundamentals that experienced These results were value XXXX. for and positive our efficiency. balance improve company of banks for book from order to equity about our with together our spite quarter applications to efficiency. the and we increasing value regulatory remained the increased. to operating filed. in remain smooth pay committed a working a strong. sharpen our of in Return enhanced the trends reduction excited growth, These sheet remain Teams of shareholders' We in pending company. been Bancshares. size dividend. XXXX. significant in have and loan shareholder profitability, in The all capital trends value of in in We're on investment the We the And merger Integrity both tangible are continue

have successfully provide the debt pleased We Integrity future company. of capital growth and to support offerings, completed which and are to acquisition equity also the the the

savings the to we with initiatives some help retention do We in of corporate tax XX%. and attraction with to mentioned, portion that the into Michelle XXXX in reinvest human a resource As intend significant savings expect change of employees. to

the We loan that deposit and some customers. are also market competition monitoring to will indications along possibly pass on for the pricing amount

fall that best XX% is Our now the guess benefit tax to bottom line. of through our about right will

a shareholder focused to you open value. believe successful strong we always, those joining we demonstrate XXXX. to on results earnings and be and for we As call commitment strong And us continue Operator? our Thank us our for consistent, to the enhancing performance, goals now XXXX questions. position today will

Operator

Instructions]. [Operator you. Thank

Our first comes from of question line Brady with Gailey the KBW.

Brady Gailey

Hey, good morning, guys.

David Brooks

Brady. morning, good Hey,

So, we you strength just I a might see start know, in last energy the growth quarter, energy how talked all start with little about pricing. energy and to to of

Now, XX barrel. bucks a it's

think loan XX% we've you think to your growth about guidance, talked about As before. I XX%

back now growth growth see loan above energy with think coming You level? you online, that can

David Brooks

credit right – No. booked downturn still right we've good low side We now. nice us. now. biggest the some Brady, process energy that's are do a the the of a think good on guideline just I double-digits still for is booking the We in see opportunities since

It's more some growth our so we've some base also gotten we know, we so, expect had so of positive – – on there. than see do Carlile we're paydowns just you headwind more as expected, markets there. much to few has we've bigger, a the had a had and little markets And

way terms in right, our than And better low thinking so, double to good we're hit and is But that. a everything budgetings I it it, of If could. could certainly and expectations think number. digits it be still were about our the

Brady Gailey

And just update maybe then, Colorado. an Okay. on

and you've branch working kind count are think in interested side have of on I how in right-sized for smaller just growth some new M&A update out you the you're potential that on maybe know some banks an Colorado organic the hired you about still people, there, the Now there?

David Brooks

Yes.

as very team we're we Colorado, to, So, you that encouraged that in mentioned. with have the we added

now it's to maybe range in M&A think that there there grow in be Colorado. like That deal to And organic and we're Texas We and see this gotten competitive across we there growth and everywhere. so, I we're to have yeah, really there, We opportunity organic chance position. Colorado. is in full great footprint we as had the at up like again, I we flow see on there, what is we XX% going think now front interested base, want our the in to but good really a pipeline competitive our a remain merger/acquisition is a strengthened very percent, But, market, albeit do where growth and organically market in small that hope in to that well. But, but we're the right, encouraged. team, year some good a a and really work to XX-plus full there think we've look be and market there. Pricing going we've yes,

Brady Gailey

then, All guys to have range X.XX% now X.XX% ROA in for lower you now? you I'm tax know and the me, you that to finally, I about right. about a ROA. company be And that higher the past, in rate, Integrity have Yet, have is guessing talked

Michelle Hickox

is This rate. tax adjusted Yeah. the for

in that think just if X.XX% X.XX% puts I the up do to range, that that right, math. you

Brady Gailey

guys. right. Thanks, Great. All

David Brooks

Hey, thanks, Brady.

Operator

you. Thank

with line question John next ISI. the Our from Pancari comes of Evercore

Samuel Ross

is Sam good Hi, Ross This for this morning. on John morning.

David Brooks

morning, Good Sam.

Samuel Ross

is the maybe I'm that breakdown anticipate of a to. that, other for in a expect don't some tax can fall little just the you of of maybe the question that going you XX% line. about savings how maybe that you on to is to first wondering My the of color actually provide if reinvestment much bottom areas

David Brooks

question, Sam. Good Sure.

study people. our we recent recently. our we're trying did market for across talent, the in and do initiatives plans is getting and redid terms think to earlier way the year-to-year. mentioned ourselves ranges to a for position here and all We just competitive with hadn't benefit And that that compensation. and we of public on our planning comprehensive We in few market years investing went a resource more five study, I our which monitor guess, company, done to as jobs are, I say we ago is in side, of it We the comps did so since comments, a We human my the work.

high toward resource got initiative. the So, in in that's tax we're now – so, how XX% like as – the to I income with – balance that behave XX% guessing this on right human get human in are curve faster we're of in assuming XX%, XX% and additional XX% faster of no things, then, assumptions betas a toward we think, we're will number XX% that guessing have or other – direct resource and result in the as tax somewhere could or our yield is XX%, deposit – going completed loans now so to the and people flat you've market or going than it as reform initiatives right we're coming the up the says. the maybe to go the than XX% looks to will we're pricing to our And going bill. then, and the savings that of putting we speculating of result away because think model balance our lower that. those model market how XX%, And might do – all what as affect to

Samuel Ross

And But in I of had growth branch if on maybe And that out little can And it know Right. on the these couple in anything seems the if time sizable give quarter unusual, deposits. sort back actually Colorado quarter. the just one public I'm that wondering the a there's that's this. your you given I guys sale, haven't first funds if some deposit just flat are the decline forward color quarter. seen quick what is a growth. moving of that just you parts and a on going expectations us in I'm then, wondering

Michelle Hickox

Yeah.

moving a of at the right seem to around As liquidity was lot be end the deposits, it relates of there year. to

the deposits of moved of after couple deposits, out, corporate the a had treasury last – it in bigger days right fact, year, some of they back groups the that but new of year-end. some our specialty then move couple In we

$XX what's last And so, probably just shrunk I'm going in two not sure balance sheet really there, on but days. the million by it

companies. have So, the – with title our other we thing is the

so $XX just could Sundays million that have of from on deposit many their We go those $XX to our activity. down million

lumpy. that's bit a little So,

successful. optimistic deposits. be that bring is And we think have I get we're we larger to they more going in opportunities deposit growth has group challenge, do this because treasury really a to specialty have but larger, as been

Samuel Ross

Great. taking questions. for the Thanks

David Brooks

Sam. Thanks,

Operator

of Olney with Our Stephens. from line comes next question Matt the

Matt Olney

thanks. Hey, morning, Good guys.

David Brooks

Good morning, Matt.

Michelle Hickox

Matt. Hi,

Matt Olney

Carlile go from expecting. to incremental be more to want should expenses and there I we saves if any cost

core Just trying idea to run here. the a of better from get rate

Michelle Hickox

a Matt. little It's bit complicated,

cost the in was in will been full core actually, I But we don't to a it talking – want expected run think I like I QX what to of be. get Carlile the we've our rate benefit expense about. saves than QX, lower little

we've QX and additional anticipate related that I primarily that have down in go talked that's also don't you're to salaries, up. taxes, go to payroll because expenses we So, those in QX going see about anymore,

QX. I anticipate see you're run to rate So, go in that down wouldn't really going

Matt Olney

talk fourth is than it you pay Okay. more That's this David, attrition elevated a down then, Can Is of expected? sooner you mentioned more a timing just or issue about in paydowns the Michelle. Carlile helpful, you result this? I expected you quarter. where from they believe, than And

David Brooks

and we nothing a – little Again, everything we been we've anytime, A another more watching we quite have we you of you like that that them markets, felt felt all just Matt. that you've expected of risk got and – amount. in, attrition And in company and like, we acquire wouldn't the key that we closely. kept roll given producers couple than

that we customer our sales own base. because of is asset base don't as some And we well as which customer and know things know

teams or had red more We surprised little a that a by were we little any just flag. Again, haven't anything But would like a bigger just that lost more key headwind. or little nothing paydown. So, be that. – any producers we

growth we Carlile. the net we really so, Northstar, didn't And get the balance of year acquired for once

a headwind half on So, we that little XXXX as good, we of growth although was in about said, more the feel side second just markets. the expected, Colorado than loan I

our build to trying Ft. are and in our We team out Worth. footprint

here, As we to also pace. that growing we Denton west get of and challenge a market to bit an unexpected have a of example, expect is around get at headquartered we're historic been had turned County, paydowns. it's But more where and related little them a there

Matt Olney

David, a it the area existing little continued there the XXXX we customer Just about elevated Carlile. to if XXXX. what to mortgage have growth just that's of see since if think closing balances? of you warehouse. new That allowing trying towards seen seems end one the in bit larger the or you Are to understand be adding growth or of quite bit customers could was

David Brooks

and No, to starter was on it We've acquisition. million, the of $XXX $XXX kit at We a as of averaging intentional, believe been $XXX I think was million. it's that year. track. kind as the million I it see end said I prior Carlile the

we our in is it direction. to did $XXX to get expect we And next growth And will to that two, I over expect a on think some there. that So, basis three slowly years, million. along I percentage continue. the that clip target, see just Matt,

and capital borrowing bigger letting is coming handful their growth being where of comfortable our new levels, their as balance terms sheet line. customers that expand a with it been has customers, well of combination adding from, bigger of the as In

customers. of blend new our customers both good a growth probably it's So, existing and of

Matt Olney

Okay, and you, that's see you on in helpful. guys, Thursday. I'll Thank Dallas

David Brooks

Matt. Thanks,

Michelle Hickox

Thanks, Matt.

Operator

from the Michael Our with of line next Raymond question comes Rose James.

Michael Rose

Hey, you? good morning, are How guys.

David Brooks

Michael. Good morning,

Michael Rose

dig Hey, margin to into bit. a little wanted the I just

I math we expect you then, right, deals. you you've the from the what their know we some in least what year? did the Integrity think as you – at about there's you schedule the marks this quarter. purchase what you I move accounting accretion? of would about just So, bake if benefit can kind terms if then, left should accretion expect remind with schedule And obviously, would in terms And through got previous And this us million schedule $XX of if Michelle, add. of year, accretion, in talk

Michelle Hickox

significantly we pretty that X accretion some we conservative loans positive the that we're had QX, was some more the part, when marks loans points we for number Generally, to of In higher than resolve just that, we or margin because mark are by impact don't our the Yeah. anticipate acquired. the basis than most expected accretion we because conservative X non-accretable.

the we we've public to that's that So, guidance continues went and since case. given the be

payoff So, history quarters our when a be tends public, we a if – loan, over we an unexpected pay you at that somewhat resolvable since lumpy. look get the off went – that to

is what I our basis say would just expected the to an think on X ongoing generally, So, say, basis, calling I'd I accretion, about you're X points in margin.

Michael Rose

be maybe the the if for sense hike? rate think through for Thanks. expect would to margin with and expectations Okay, December the And the that's year can we betas some give helpful. color us margin. hikes you core core what And then, deposit give for your benefit a you can the as about you around rate

Michelle Hickox

been for giving the I'm the I've guidance think to quarters. few last give same I going

liability still is asset pretty sensitivity Our neutral.

our I fairly margin so, to anticipate stay And stable.

earlier. I pricing – now, But Some of referenced know year. depend I on competition David Depending say given right our be the this to margin on margin everything on is, along stable will deposit competition would that I margin the core how for with what right that anticipate impact loan would pricing.

Michael Rose

for last me. Maybe that's Okay, one one helpful.

have what talk XXX%? you running I'm the can – initiatives for talk that you about level. deposits number keep ratio. towards the the Just guys that below actively loan-to-deposit early, obviously, this and are about would question, back some the place it? sorry guess, be you Can XXX% above your in to deposit of missed target to grow longer-term, you Thanks. if I I

Michelle Hickox

Yeah.

I ability treasury we grow to of quite in earlier, group. deposits still mentioned bit our specialty think a I As have

to As put entities types as and accounts opportunities – to larger larger larger the especially billion, bring with bank. are deposits $XX bank gets us a larger, gets for of willing that larger the in those are over bank there

fund don't on So, to being a I able loans, we think have given of concern lot our that. really

I'd biggest have deposits. So, that's we the to the probably say ability area that grow

adding are retail to deposits as We products our well. deposits grow give some looking opportunities and to new at increase branches their

our to Deposit like we we're So, manage is just challenge now it's and right that competitors. trying all it can. every growth way of a

David Brooks

a did footprint I rolling Lending up add Officer, would to they're that Chief of a some across deposits an our they on then that. with to Michelle putting relationship growth incentive working branch out incenting said, for of well behind as this and coming as incent, then and our really we focus officers have sell loan that up also year as with couple money now footprint treasury folks, year to plan those combination our that that Michael products the with come across this the institute can new

Michelle letting we too that. the better wanted funds some So, we down, the – team as costs to high of make home roll-off, the federal those. her a But an million could've intentional it bigger we really sheet and $XXX if proactive, be said, – year the did been the the balance public Michelle deposit we're being of at the keeping job was go if some of managing deposit did beta great on and loan of advances down, letting end

and accounting had unusual have deferred quarter tax between as fourth and quarter has of intentional. We as noise. we into just out acquisition, pointed into the were been a sale expenses accelerated noises a of other well. of this the We accretion as first lot few well – branches. asset morning So, We and the a lot

that the cost keep as on side down. we as do the sheet, hikes, in of of all forward, into that can deposits. believe were look that Michelle hikes, We balance given do, hyper-focused we sure be on two three going So, the we grow the noise, margins. right-size rate XXXX, But making going shape said, out to believe they rate whether to good we're liability

Michael Rose

my All questions. for right, Thanks guys. taking

David Brooks

lot. a thanks Hey,

Operator

Brett with our next comes question And Piper of line from the Rabatin Jaffray.

Brett Rabatin

Good morning, and Michelle. David

David Brooks

morning, Brett. Good

Michelle Hickox

Hi, Brett.

Brett Rabatin

that you're that just given of in of just of already ask if – competed you what terms something about cut? part occur seeing or back think loan the talk this tax that – is way, benefit might just to is categories Wanted something tax in you to so, the going just that can maybe pricing? And being kind

David Brooks

to too now, to continue it's so market. part. both strong more speculation on our tell it's and Colorado – Texas across been really right has the Competition And just be early the Brett, markets

our of in forward. We have "competition." those in in that before. ex all cautious a of have human ratio effect it's than to big the We've – at But tax down. case going And And get but on hyper-focused continue confident We've board seen quarter. got fourth noticed look, the things. allow goes about we in XX% others more it terms always more does our X.XX-plus trying may than rates. believe tax that, in just think. $XX it yield do a margin we into that fixed you some line. ROAs little X stickiness those then, build if to to steepness trying to competitive of up around still million, continuing Again, lower to to from down here the this here. our we're the are cut with historically, Obviously, to efficiency X.XX%, do be the expectations We showing – some will But with are elbowroom believe the do and it behavior. you we're curve range it We ROAs we're believe on bottom X-year at

Brett Rabatin

the wanted I about might if adding you thing, with current about and other and additional of to the you you excess on just ask capacity platform year? relative lending just platform human think the what planning this kind the – have producers team people, maybe talk Can maybe you're year then, and And spending. the to Okay. last resource

David Brooks

Yes. two in a Colorado in We and and team people in it hired three then footprint. this the the were of third ended, – hired was quarter we across hired And adds. new the year mentioned, Colorado; just quarter, net I we I in five-person Texas. across those really believe five fourth

to that quarter go what first is Michelle that teams. employee continuing continue to our expand we're going are the to these part in costs I down the run we about, that, dramatically on we rate bring don't because So, of was to and expect reason think talking

billion as And capacity. the net building of got mentioned you've you on do, generate year. $X are a close growth we XX% portfolio, so, I a amount XX%, And earlier, to billion to have dollars per

that mentioned first tailwind and quarter. to equipment in new division lending from that gain going continuing to an I the see individual to And there. come here to so, hired bookings so, we're capacity. the team build we're an previously that expect do we we first and finance up in some start

to we better feel materializes see strong the low that at than been. if to about a good growth. we all things and are have ability So, And us. good any tailwinds opportunity into a rate double-digit We'll for those economy continue grow our

Brett Rabatin

all great. color. Okay, Appreciate the

David Brooks

Thanks, Brett.

Operator

Our question of line the with O'Neill. Sandler comes from Milsaps next Brad

David Brooks

Brad. morning, Good

Brad Milsaps

ask kind versus kind sit like earmarked for be I Are one M&A? Hey, running deal. plans at capital. just looks generating lot had double-digit good high ROA. kind one extra you'll really of curious, basis, the on that highest on use low you've morning, percentage growth know your But a never a you to X.XX% a of capital At you'll Integrity It the with quickly the that David. levels know Hey, for XX% of a about of probably almost loan of while. for teen, your guide be I least to just wanted bit of the ROTE. in been you've X.XX%, a excesses.

plan relates how of kind your M&A to for kind of the as Just you're year? about thinking curious activity capital the

David Brooks

Yes. Good question, Brad.

capital five some market mentioned, been but that in at since are XXXX as and at strong place you the M&A in M&A intentionally, did ratios, also ago. activities IPO partly that years the capital We we for we've to expect for We and Integrity, put strongest XXXX.

We we're growth, are, as an capital point, earning profitability, if will, mentioned at you from standpoint. you accretive, with this low our in double-digit

put around through position to continue from And as we terms $XX historically to of cross third trying go acquisition believe, of we plan which may of approved deals on. gotten cycle. to have we I quarter these are that. these going trading the get heard growth. than our to getting conversations economic of the is to a we as think, the So, And with The economy of discussions, XXXX they've Brad, billion think higher the XXXX, in lots at as which see is optimism our quickly expect, in lot and my we do stock M&A some the the at levels, year also, just mathematics best a at we to post regulators We use ourselves of in Integrity I we And it of want everything you all the good treatment that this of prices, lot colleagues prices say, and are – around difficulties of keep factors I since where traded place those just once looking in through, lots market, just of organic possible. XXXX. we've people

that So, I got think partner. interested a They too. a finding in you're selling seeing or cut are companies in interested tax

about it. talk So, we

traded and looking prices, or I there looking right, privately-held in the those with maybe the going, XX you've strategy lot to in people you're And But time out. just across out partner your last of also acquirers the is the company, and got and companies benefit. years publicly if is are potential stock succession companies. think find planning timed are this if the at prices in at a of You issues the to it it the investment Colorado the that that your see getting state best do stock across a

all So, to I sizes bigger are work, M&A so expect deals year. parties But stock hard and right the takes it the and prices on two been this deal are interesting make it conditions more an favorable. never certainly in, and have year always be to enter the could to willing but be front – and

so, I'm encouraged standpoint. about and fairly And XXXX M&A from XXXX an

Brad Milsaps

on? you kind what's TCE X, depending in color. of around ratio, a great But That's kind less, still going maybe feel slightly upon comfortable of

David Brooks

Yes, exactly.

up, I down ratio think acquisition a – large if we that be acquisition had back would in mid-Xs, and but the great. we did pathway went our an TCE

Brad Milsaps

follow-up, And just Michelle, more one expenses. on

of make saves I the expenses, and sure flattish near-term – of in payroll talked kind about Just kind the by payroll cost about correctly, talked some Is tax related reform. to about maybe that of understood initiatives you quarter first you other right? seasonal replaced

Michelle Hickox

it. I you Yeah, Right. got think

Brad Milsaps

Okay, great. Thank you.

David Brooks

Brad. Thanks,

Operator

Instructions]. [Operator

comes SunTrust. from the of Michael question next line Our Young with

Michael Young

morning. Good Hi.

David Brooks

morning. Good

Michael Young

in entertain be point or range? at this a up buy on M&A of of $X you billion made, follow the wanted would David, larger $X to kind that's the you transaction asset comments type transaction to wanting just an you still willing more to more things billion are to MOE

David Brooks

three to good strategy, value, the years create to you market value and accretion opportunistic best talking you book once think now, an five with in that in. years a of be size growth been four company you should much I being the have create company what you five your acquirer – with, and bigger That's has consistent talking good an to person been to We that or than are, always an follow-on are that create have to XX for me or our really four take is that that told should earnings, question, attractive be said, situations or tangible organic three you banks should shareholder you wise I've last and to a That are long-term. you meaning smaller be than relationships Michael. for to allows in market banks be interested saying historically, around our you growth talking part would everyone be that where

to taking that to going stock those conversations cause place. do think all and in be are to be prices I So, place the

to board I'm said out has value creation whatever execute our working do And so, of is shareholder hard we want strategy. for and best consistently that to

the guess, way to So, be that off table, right would the I nothing is too. answer

Michael Young

expect of going comments maybe your Michelle, kind that sized waivers because much rate to Okay, quarter on kind of into maybe die the be at, down? thank those just as fee going of run you back first to us And, quarter how what were, up, you. you'd those this kind

Michelle Hickox

Are charge you income? referencing service

Michael Young

Yes.

David Brooks

income of about was $XXX,XXX think related the – I was So, about conversion. to Is there that your question? there

of fees fees. waived having to their Some of right? that that just waived were process, customers we for through So, was some go that

Some on are what what platform. Northstar products of in the our from were change on a do they it has with they to platform to –

half to run those in that a is be the total that, in charge reduction About the XXX sold, the charge And on service So, right half service now, that addition of branches income we on as about income. about well. $XXX,XXX rate be will will ongoing. nine the of

of service that $XXX,XXX charge positive you're the is income, Now, away. just as need about went that and consider you fee well. also to at had if expense they looking there But

Michael Young

business, market just up of a year on there. Is to kind year mortgage a business. picked Obviously, of if was share kind Maybe year? pick division. last there mortgage hard that up for could you the guys you outlook what's just lot the of color David, still And, the for this there? provide opportunity Okay. some But

David Brooks

at refinanced homes been that Well, wanted it businesses. refinance Most has to the point. soft, had of refinance the been this

flattish has of it been got try kind this the and to expect to about volume a of robust that mortgage business to to continue going XXXX offset hire it mitigate add to kind to it strategy try is for a new best plan way side for market. to mortgage platform, So, thinking producers and out slug to the got we're the mortgage, continue We've be on but is our that a new at terrific team there forward. we've we out year softness to

Michael Young

Flattish year-over-year?

David Brooks

Correct.

Michelle Hickox

going think run same rate the QX. just as anticipation add, it was mortgage in to I was for the probably I is about QX

Michael Young

quarter. how one-time just kind that versus of of kind compensation, could to expenses much $X.X will stick related much around change if one million about And acquisition last of Right. is How in on I in was one, then, that control this the it of payment? sneak

Michelle Hickox

employees. The severance was that was majority and of to retention their paid that

that shouldn't really it be sticks around. any there of So,

Michael Young

you. Okay, thank

David Brooks

Michael. Hey, thanks,

Operator

Thank you.

Our of the next from Zabora question line comes with Hovde Group. the Brian

Brian Zabora

morning. Thanks. Good

David Brooks

morning, Good Brian.

Brian Zabora

Just Houston. on a question

Just just any any looks of bounced your and just look but comments great, demand downgrades storm post has how Doesn't around credit like back? credit, post the Harvey? kind credit

Dan Brooks

has that over that is how this next no and on we would been the there activity from conclusion expected days, And frankly, the on material impact has what Dan. did we we point, would minimal been it's see, in Houston Brian, our the XX Harvey, call it at the we that I Hurricane We then XX/XX look. dive We from held. And indicated right from nice that thought. hurricane. back some deep say indicated really area. would impact And

the of portfolio. our In terms of portion of that portfolio, overall credit that quality

the to remains we've some be it we of As in continues said best metrics to company that same. and previous the be calls, have the in that in

expect to XXXX. we So, it to continue be good in

Brian Zabora

for taking Thanks my question. Great.

David Brooks

thanks Brian. much, Hey,

Operator

question-and-answer concludes that And today. to over the like I session our you. turn Thank to for conference our for would closing back hosts any comments.

David Brooks

this the Thanks and tell that in we I XXXX and XXXX you for Maybe we're about comments as from good said. excited had a can We opportunities XXXX, joining our year today. have. morning

continue We future what and be people. to and a of the Independent we're have at is Bank of join lot terrific agree the part to up people doing a just

you in. So, we're day. about excited have great Hope a rest everybody Thanks. Appreciate XXXX the dialing of XXXX. and

Operator

the does This a gentlemen, now have disconnect. thank conference. and today's conclude great and you for may you program your Everyone, participation Ladies in day.

Independent Bank (IBTX) 30 Jan 182017 Q4 Earnings call transcript