IBTX - Earnings call transcript Q3 2018 | Independent Bank Group, Inc.

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Operator

Good day ladies and gentlemen and welcome to the Independent Bank Group’s Third Quarter 2018 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 be given at that time. [Operator Instructions] I would now like to turn the conference over to Mark Haynie, Executive Vice President, General Counsel for Independent Bank Group.

You may begin.

Mark Haynie

you call. Independent welcome quarter Group and earnings XXXX morning to Bank the third Good you us. appreciate We joining The related earnings can be press release and on website a our at ibtx.com. accessed slide presentation made to you like include would I that remarks forward-looking today remind statements. may and to actual results are differ. could expected that risks statements cause uncertainties Those to subject the and such intend statements. covered be Harbor Safe We by to statements forward-looking provisions for our two of statement. see in page slide text four or the of page Safe presentation for Please release the the Harbor are call today's to that during made comments subject statement. All Please give that note managements' about guidance the we guidance will the of guidance. and statement at if statement do that we update future not is made, be results, only beliefs publicly time a under we this will discuss call, be measures In non-GAAP SEC's the of rules. number financial a considered to most in GAAP to these measures financial of included measures financial our Reconciliations directly comparable release. the are Brooks, this Michelle CEO, Vice and Chief David I Risk Brooks, President am CFO. President; by Vice our and our joined Dan Executive and Chairman Chairman, Officer; morning and Hickox, At remarks, the to David the call end will questions. open of their I it over turn that, will to David. With

David Brooks

joining Mark. you appreciate you, Good today's for all morning. of We call. Thank us

results, I'll Positive company. on which XX.X% profitability return As tangible increase return is Dan are cover touch questions. through the increase continued XX.X% million, will Adjusted X.XX% quarter third with and quarter some operating highlights trends for third record XXXX. levels always XX.XX% remarks it is at at on and a the then be $XX.X portfolio. net Michelle with and cover second the again of from the quarter the end adjusted I here quarter, equity loan from back assets at income to adjusted closing on XXXX a some open for up will for briefly and the to

growth our for which and through XXXX. quarter in full consistent As with is moderated we X% annualized our given growth outlook QX is indicated year-to-date nine quarter, to months, QX strong annualized, this growth loan last had XX.X% year

been metrics and and quality on continue that a earnings. historically quarter problem had We to been impact them downturn. a intact. fully in strong expected basis non-performing energy at completed conservative team. their points for levels employees acquisition not standards operation has did have and conversion our recognize be gone happy Integrity remain since loss with We're reserved energy XX The the integration the charge-off third well. has did Asset underwriting branches join partial loan assets the successfully at August asset and to Independent the Bank We of

will I the on to provide to over details Michelle Now, turn more operating quarter. for results Michelle?

Michelle Hickox

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

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

in compared last and Reserve rate increased quarter the from the $XX.X previous X.XX%. for you quarter X.XX% and can compared seven, margin X.XX% net increases the in as quarter million as basis quarter. million down was in $XX.X income for in year second of rates variable and rates well bank’s of to income the of from previous net in As following points declined yield third The to million quarter in income $XX.X $XX.X X.XX% XXXX. quarter the from X.XX% to $XX.X The Average accretion acquired for loan million quarter third quarter. million $XX.X net third interest the quarter increased to see increases XXXX from target second slide the loan to non-interest Federal on margin in Total of increases. the at was accretion interest loan the from X million benefited the loan net adjusted

average this September salaries my Deposit basis increased Deposit million, of at due deposits. have Acquisition $X.X the Integrity slide XXXX. the implementation other to Third primarily rate fair not salaries million million for gain employees. from up stable adjustment quarter. these year million points and September points is a our $XXX,XXX XX, the mortgage XXXX increased a up million for increases a That second deposit hedge illustrated increase to increased from are related banking to continues and million income morning. a accounts approximately for remained related growth last are increased of former XXXX $X.X sale of The points basis recur also related to increased to and interest-bearing acquisition increased from the quarter million salary program. XX, a portfolio anticipate in make premises quarter a including linked from various in XXX year composition and $X.X the interest prior to Total growth. XXX of and due revenue credit $XXX,XXX XX. costs Guaranty non-interest the competition the be $XX $X.X decreased and quarter the to mortgage from quarter, and The in to of challenge noninterest mortgage of value time increase good hedging pricing includes as benefit The to loans $XXX is this with on primarily future in levels. difference concludes to related equipment, on well insurance the benefits account. from increase acquisition. XX health comments Integrity as both increased do from earnings costs prior year. of and balances was this and increasing third quarters income and and and from at expense bearing XX.X% deposits basis XXXk is on and in mix cost to in expenses of $X.X to organic The due retail quarter integrity Noninterest-bearing and Deposit million quarter million and $X.X up at larger correspondent by the has non-interest $XXX prior million, expense of $X.X increase expense We markets.

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

Daniel Brooks

Thanks, Michelle. morning everyone. Good

anticipated muted X.X% investment loans or As quarter loan growing warehouse annualized. for this $XX held including million with not organic growth was mortgage

been historically low a has also growth quarter quarter for Third seasonally payoffs. and by was impacted

real that loan QX XX and some our composition Some over and growth expected estate the loan carried our annual portfolio. from unexpected. comparisons. XX of illustrates shows Slide portfolio commercial Slide

commercial up and loans of has at estate in consistent XX, As September XXXX XX.X% real makes XXXX. total remained

$XXX on correlates XX, to loan at of ended primarily quarter. from to X.XX% or XX, office largest Total quarter. $X.X small third graph, strong Slide fully expense during the David assets retail XXXX. well Slide from energy breaks $XXX,XXX warehouse bank’s of the mortgage of be recorded A purchase which the level XXXX expense of to charge-offs this previously of illustrates linked non-performing compared be decrease averaged $X.X retail. this our net to due of continues million than shows charge-offs As in Provision with quarter. was the XX, for collateral the and annualized segments at loans earlier, million to base. reserves low was types XX at growth June from million quarter for customer referred during incremental loan further Mortgage capital. the business and at XXXX. but charge-off portfolio Slide a lower September XXXX. by also XX be capital provision quarter, XX, X.XX% expense XX continue to regulatory and for in the represented reserved Generally, metrics increase much Charge-offs unreserved for to to ended property was million the increased Credit XXXX, CRE to quality has quarter QX $XXX reported million the September The seasonality growth, at diversified with September XXX% to is prior in June period. XXX% in the of CRE the $X.X total quarter each and down in trend specific CRE been decrease with that quarter, loss CRE the provision and XX, continue loan this the concentrations XXXX type. the quarter.

decrease charge-off, result basis a as XX XX, loan of for XXXX. allowance June loan the basis XX points to from energy points loss As of the

of are As XXXX, back over we XX, held $XX.X comments plus loss of million. my portfolios will loans to recorded X.XX% is Those loan acquired so I’ve recorded of for for September on September value approximately The have allowance XX, fair David. of to loan discount a related market this for investment I the it loans approximately turn remaining XXXX. acquired discount morning, the total as loans

David Brooks

Thanks, Dan.

way through increases XX% to our book Earnings increased September enhancing very value. financial has we’re We XX% results three our share for XXXX. quarters has continue the actually pleased to and are with of significant shareholder commitment These -- XX, increased per tangible value since reflect pleased XXXX.

teams the steps ensure busy well. integration acquisition the and are of execution Guaranty Our to taking goes

Thank position today We expect questions. our we to joining and the Colorado expanding and and Front look in the forward for Denver open close to call you Range year will end Operator? markets. us now

Operator

first KBW. comes Gailey Brady from Our of Instructions] question [Operator you. Thank

line is Your open. now

Michael Belmes

Hey, on it's good morning, for Grady. Mike Belmes,

David Brooks

Mike. morning, Good

Michael Belmes

morning. Good

promotion could what quarter? some saw deposit activity drivers maybe quarter, are some on nice give really the we maybe the and color treasury this So growth you specialty during

Michelle Hickox

good a branch about, growth XX% to in our quarter XX% treasury have specialty Yes, the Mike, strong about and network really about it approximately combined did of a specialty of that was we area $X.XX was our retail treasury quarter. growth through feel for billion which and we not related came deposit of

Michael Belmes

prior the was Got on competition relates quarters increasing the comments you. the intense, to pricing you remains relative intensity competition or it the And of kind have seen about there growth stable? to of as

Michelle Hickox

before markets. see I as products, increase on to funds. closer Fed talked rates what in we to proactively seem do markets unexpected will this have start and out about index that a Mike, of noise we we raise We money promotional generally an lot that is competitors I’ve their go our and get think hearing

starts this anecdotal can so offer from what is it’s can to I account. our going that’s move have they’re we my us, my getting markets we And a to money team, them. bring that really request match has evidence they can customer more on when money, treasurer

end you some of it really a to came $XXX that us also you to that promotional of if lot So from. and advances do June funding quarter. in try at a of allowed this have we some grab was this there the let million that. that’s we But funding FHLB CD seeing to noticed go where put out We what start about

some which is money, with term same growth advances and go us this that so it those about of short-term let And deposit to the allowed replace cost.

but immediately NIM, it So us going it forward. help doesn’t help our should

Michelle Hickox

for putting me, in repricing. loan talked some you one about last Got versus guys loans when you. one saw nice think of And together, of I kind or looking know more of just fourth core kind everything as I basic the you the guess kind get kind yields more stable deposits few and expansion of I differences of maybe timing NIM a But funded a about of NIM and of compression into quarter? anticipate points do

Michelle Hickox

lot similar we still on see to quarter a asset seeing depends of that are could we I this compression in our yields. think and increases really

to So we’re trying really are this betas sheet. trying that our one funding quarter balance manage deposit to thing cost the we do

the billion at of stay year not now us that the $X.X acquisition we that we of revenue. to that saves until close end $XX Durbin is know below because that going Guaranty end the So million year

at So out past quarter going not quarters. the we’re as the we and getting aggressive deposits fourth be two in been going have as to probably what

you could could help more X think to X of us cost, our but still our manage compression So I in basis that points margins. see generally

Michael Belmes

questions. Got for you, taking thanks my

David Brooks

Mike. Thanks,

Operator

Thank you.

from next Raymond Our question Rose comes James. of Michael

is line Your open. now

Michael Rose

How you? are guys. Hey,

David Brooks

Good morning, Michael.

Michael Rose

loan to bit. growth just the So wanted into dig little a

several like that there commercial pretty previously X% about this Texas of but have was get was color you if like was growth banks seem energy XX% other that and Guaranty like go to quarter, like paydowns looks exclude range somewhere down. I loan could in away the looks to talked guys core some So soon. good Wanted believe anytime that going that be to given a persistent of range, I they’re inclusive challenging the it seems like of don’t

sort there any just great? updated So of would be color

David Brooks

of into quarter little sales growth really -- our related for expected we slower some to was a long Michael, that assets bank Sure, coming a than and some that a we time had loan the for we the strong quarter, asset continue sell demand to investors. customers from from into the

seasonal, was early growth. quarter purchasing them second anything, some a that's front high we expected customers the assets and do of again into they and from of we has environment. it And had lot second we much growth purchasing then to were that the lot a as So -- got year, current it the a loaded at like our all pushed the third loan of think though really closed with we to assets saw payoffs economic payoffs in as are even record loan kind seems time family our quarter, the out XX.X% the in offices had a quarter,

So, expected middle single-digit little a expected, lower growth. had it's but a certainly than we a kind of we

that will Denver We we working of there. so energy, one booked we in think in are are traction that be to well seeing a working some are opportunities We deal deposit opportunities some customer already -- that seeing is as currently. Denver have there similar in other Guaranty, we're

XX%, at XX% sitting in really we're be we'll starting our growth CRE. and the XX.X%, single rest better. family think guided we the economy now energy. you where we're think year-to-date out rate, to with I But what past But XX% get our growth estate into we this seeing said So to again given expect that. where too size our in had primarily and we or in is traction at XX% little quarter XX% of probably our run point given can I quarter real about ongoing are to are -- The expected credit, read XX% much we to have look and a we don't as was to on expecting some fourth some consistent you

I XX% we think closure a it's what now to run little expect plus or in our view is a the minus going rate and little. forward

Michael Rose

year? And inclusive Guaranty that's went into of as we next

David Brooks

of pretty I Correct, been as expertise. rate. a a more to an run yes. know lines restrictive X% kind traditionally they've on of business But of couple have growth And X% at we they've that

that a this we we'll year well And that we've so Colorado than think are starting better to and that we just to little as teams produce. do be got some in able hired that

we -- if our that we'll once consolidated the feel help think So a on the the the balance the Guaranty it’s as do and piece to closing few And mentioned a once next today we we we'll the continue expect, manage overlay, on and next going get better believe But Michael pieces And best once be are. Michelle year ground, January few deal per quarters. better economic do a you that. moment integrated is we quarters which our better ago billion to such, lenders but do then a the give over below second But we you an on in XXst, get will we're the read get integrated Xst. of more we'll total and year-end. December think sheet, think feel on $XX where in successfully first, to feel environment expect year team XX% have that Guaranty it will. with to we that's end is we'll I close next our which we quarter we And to keep for lending whatever the them can over try --

Michael Rose

that in think I I small Guaranty a at as even worth you do trying think market Okay. you point? this share. every Maybe very million. is, the layered some bigger very we mean, grabbing piece David, follow-up. you with feel question in. move I guess mean, business, of quarter, challenging I've it's players a being to clearly asked goal $XXX the have like forward? I it's just still question some my this of how I warehouse know about hit business obviously

David Brooks

been bit XX% We getting about do, of little a traction. averages We've year. kind Michael we're a of those growing balances

Carlile $XXX to XXXX. did when base, million your in deal $XXX the get at take it while $XXX our point Now we XX% which on to a back target, year a million to million, or would was

I get longer we're I there, take it's do us to there. we'll think to given but get going the environment think in,

new that We we've as quarter. little in here a bit well a area have and hired executive internally reorganized this

to tough so three sheet. that see, to the in it's $X But optimistic, billion for billion year we it think And we billion a to depending next you quickly and we get of but or originally. as it slog that's over I now business aspire be million big piece the a can more $XXX how our years get that range, $X we'll to feel never do $X said opposed on but as three objective market it we a balance

Michael Rose

me more And for Great color. just for Michelle. one maybe

some are quarter-on-quarter? Looks down costs quarter one-timers were a we expect this Should expenses bonuses. be maybe like actually healthcare there little or like to elevated. Sounds non-recurring and expenses

Michelle Hickox

I third think expenses details, basis, is there recur on a of $X when quarter million and quarter. in I shouldn't probably looked the close to at went the fourth the core Michael, in that

you what to necessarily. said related Some not

If look the not our Integrity, rate but related severance their and at to salary. do normal out non-GAAP just pull bonuses we reconciliation, you run

had some are that with we through people So us. no August of longer those

was mentioned, our it me. surprise last quarter. that million probably $X.X insurance you was outsized, As It was the was more health biggest about to than

the with we the into of more fact our of so end a Some claims. rolled of good we plan that we But just it’s self-insured. has have Integrity the fact to the year, that it are that and the do is portion employees just

is going to So in that million probably not that's there recur. $X.X number

things, but around generally there it's think I it's is So of couple a other million. $X

to $X.X be is last which than about quarter. guided had I normalized run-rate closer So XX, I million what more think would

Michael Rose

questions, Thanks Great. my Okay. for taking guys.

David Brooks

Mike. Thanks

Operator

Matt from of comes Instructions] [Operator Stephens. next you. question Olney Thank Our

Your open. line is now

Matt Olney

guys. morning, thanks. Hey, Good

David Brooks

Good morning, Matt.

Matt Olney

mentioned XXXX. an calling I closing not deal, the until update Guaranty on early for think you Just

save timing, give the an cost the Just timing. conversion on us update

about to deal about the talked that earnings. past think you've X% being your I in annualized accretive

competitive the feel reasonable do a as still accretion? expectation With far increased environment EPS that's you like as

David Brooks

closing do We Guaranty. Matt. year-end questions, the Great on expect

lot don't years, though that for we entity. so partial refer close XXst, clean business we So close We that December of of times we to a year either to December as have a it keep after we typically XXst. -- don't the do

our be then deals our on January the on been particularly right. Matt, all conversion had this, our really the last closing. like very integration focused we’re But three we or a right. Xst likelihood have Guaranty four that focused this a getting expect huge on if We've conversion better effectively good that don't really our don't And data conversion. announced closely that and And bigger we internal larger and team know activities So rush rush tells on the the it would a We're make focused of in we us when I this we the name for side May. really months deal side on all conversion here and a since we this, of of working success if and on acquisition and like first rate history combination is the getting change.

And right? June, cost all that in expectation so June weekend First virtually Michelle data first the systems. the is an think conversion other a weekend saves, That early June, Matt. will our drive is I in on June

the cost stick XX. have some first much So the saves around but through those quarter we will a lot of happen the of expect We'll conversion, to quarter. data not second do in people June get we a as in will

behind you… to we out we’ve of that's the earnings really directly But Michelle in heavy do can gave third feel on clean expenses good us run deliver working side. the I’ll to think on the anything with at the June so cost about XXXX. that and deal more to scenes And by we we’ll rate we accretion seen Michelle the and the those Matt. speak Guaranty both projections of so be run we have May, Then done able by announced team rate But XX side clean the numbers. quarter quarter most let, that the all, safe side on the our we're when accretion And on I going will it, haven't have lifting dissuaded a first of

Michelle Hickox

it's are where Yes, safe. positive say so been I far confirming, cost as very would as on the we

quarter, I expected continue Guaranty been has think going that the do. what we good so a a to had other them benefit outperforming They've third really had -- actually forward. they to and is expect that

point, expect wouldn't get I accretion. don't reason So, that I really don't -- that any we see at to this

David Brooks

combination you've that's save. talked associated there, helpful. the time of and some Okay, the then Michelle, efficiency over seen about And improvements ratio especially Guaranty with costs

of expectations kind far that as through just march as we us XXXX? can for So help as efficiency

Michelle Hickox

in before, QX to of few -- next actually I It -- It saves a be consolidation quarter what our going But get this would not way will probably trend talked rationalization little we going really little bit it XX%, before until to May, branch We're QX efficiency XX%. year, do the it. fourth occur in the QX back quarter this a about. the quarter, to things I've just and a QX. is it may I right really not we up of just be cost talked conversion. we or think than get ratio over and Yes, David was because simply -- a thought expected. better our about in calculate should the I closer this down will

down not efficiency maybe year, is really, to so you're you ratio think really And to to And this third year. get third XX% quarter fourth of point. until it in and next I maybe could by expectation trend our at of my trend going see down next a quarter

Matt Olney

good. Okay. Very Thank you, guys.

David Brooks

Matt. Thanks,

Operator

this And to call session. you. does our question-and-answer David the to now turn over back any Brooks for I closing conclude would remarks. Thank like

David Brooks

rest great of plan has continue think week. I performance everyone We hope to I feel where a call. great about very and us you've about everyone's this appreciate conclude into questions this on as no Guaranty good morning, we XXXX. Thanks. are merger. And we the our say further we’ll upcoming excited We morning, strategy a attendance a and heard the great have the day

Operator

thank today's you program. conference. concludes participating Ladies for today's in This gentlemen, and

all disconnect. may You

Independent Bank (IBTX) 23 Oct 182018 Q3 Earnings call transcript