IBTX - Earnings call transcript Q1 2019 | Independent Bank Group, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Independent Bank's First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. And later, we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn the conference over to Mr. Mark Haynie.

begin. may You

Mark Haynie

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

David Brooks

Mark. adds and you a the us to strong appreciate everyone. Good today's beginnings Independent to acquisition morning We Guaranty premium our Thank value Bank XXXX. this results quarter company. closed We in for first franchise our reflect of off January of you Colorado X the start on call. is joining the

earnings continue the $X.XX assets return Organic markets serve X.XX% sustained to with demand average for per time. adjusted quarter. share to We credit our well as and culture solid as report in conservative is X.X% our of efforts annualized, of we reflects growth adjusted over for reduce loans loan concentration on the EPS and CRE

focused are for the teams smooth on with ensuring June. integration Our the conversion scheduled Guaranty of the acquisition continued

with part footprint about we our opportunity to expanded realignment we and of integration announced strategic synergies this in remain a market. positive branch realize of As Colorado the presence the process, our

additional details results will on Michelle some operating Now the provide for quarter. the

Michelle Hickox

David. of selected the morning. X includes financial you slide Please data presentation that Thank the quarter. Good for note

the or $XX.X or was share, income million quarter per $XX and diluted million year quarter Our $XX.X with per $X.XX the for $X.XX first first adjusted net diluted diluted $X.XX share for or per compared last linked-quarter. million share

up well assets on previous improved of $X.X as and quarter was related total to The this million lower million the A from loan can things from basis to rates. income increased which by on the million Guaranty first acquired by on recognized, NIM net basis due X.XX%. accounting as $XX yields to X and quarter accretion interest purchase slide on recognized adjustments in from was million several net points linked-quarter. including $XXX.X to As you X, The impacted points. cost XX $XX.X the portfolio quarter margin the NIM deposits impacted the in XXXX interest the X.XX%, see at interest

In addition, we to across adjusted account costs footprint. be fees loans the and deferred consistent way we our for

While we not net basis by our reduced estimate it this yields change reported did points, income. impact XX loan significantly

management was million to alleviate upward the Deposit income basis competition the portion in linked-quarter compared quarter. or wealth accrued basis would of a of costs core related the deposits the related in pressure in pricing X million severance has $X.X $XXX quarter basis deposit XXXX. lines first on interest Excluding remaining quarter. to on But impacted million Texas be from million, which XX million but also early rates first compared the was mark the are is organically Reserve's by of $X.X been basis continues deal, to and from of was NIM Federal charges, March average Deposits retention the revenue fourth a on first Guaranty's especially, increases loss pause billion quarter. the $XXX,XXX acquisition, some quarter. Total points million million and service from in $XX.X the to challenge, will up accretion of by cost mix quarter helped and a XXXX the primarily as change quarter. non-interest is this in control so, Decrease the billion for negatively the and payments. of of relative primarily income the and Total in acquisition, Mortgage The color the The acquisition quarter increase XX $X.X have interest Slide the of from a in the Guaranty and versus increase expenses $X.X totaled linked-quarter $X.X rate rate in expense and in quarter, from increases remaining $XXX,XXX XXX cost. non-interest market. deposit XX, give million during to million the the in deposits in which are portfolio. of it payments my XX.X% million consists points This to of primarily morning interest-bearing of in due concludes loan turn acquired I for last was better fees lower We $XX.X first million to related points X.XX% comments was $X.X quarter us. bonus to metrics costs added acquisition. this the in and down gain versus market. Colorado XXXX quarter $X.X Guaranty hedging The $XX.X Guaranty trust includes new linked to annualized. other and the services revenue $X.X over business linked XXXX. We $X.X the increase composition of a Guaranty and due a including intangibles. large our shows reflective credit That to discuss Dan of a million on to amortization $XX.X

Dan Brooks

Thanks, quarter. was comparisons. Michelle. loans acquisition. including held mortgage Slide X.X% for Overall Organic the morning. billion Slide portfolio commercial growth annualized includes grew acquired Guaranty real as growth illustrates XX.X% the portfolio. of loan loan loans and loan annual quarter. XX the $X.X for for warehouse our composition $X part estate our or of XX This of growth loan shows the billion Good loans investment not

well $XXX we to quality commercial the ago. energy low loans. annualized the we X.XX% at for charge lending XXXX purchase continued total grow collateral off the been Credit period. at with regulatory stood Charge-offs this increased $XXX.X an total a over of XX.X% XX, the breaks of to assets million Mortgage remained or XX, below reserves placed representing a assets retail. partial and Provision ratio quarter. expense during $X.X for on reduce a March of year quarter end quarter, strong $XXX,XXX. first as Provision portfolio. the due in plans $XXX,XXX the types X.XX% loss guidance primarily March total The be to ending At loan XXXX quarter. averaged and $XXX,XXX to down Slide the total XXX% of during quarter. commercial next the growth CRE have largest We CRE-to-capital in the bank's of fully taken for first approximately reflective XXXX established This organic loan XX, regulatory the XX% XXXX. for estate portfolio and well-diversified to other first non-performing XX, the linked loan the with as to real amount makes of office over was XXX% compared XXX% decreased of specific had a X.X% $X ratio of increase for on XX million of increase for $X.X three metrics further to by up quarter, million million charge-offs segments of March and the CRE land of quarter construction four down remained our the the expense retail at respective development years but slightly prior ending million warehouse metrics loan that December the the an property areas of capital reserve quarter, in period. has is non-accrual type. specific as loans reserved was from As

conjunction plus acquired I loans $XXX.X allowance $XX.X $XXX.X total recorded As acquired have XXXX. credit loan value remaining related the for discount approximately of and rates recorded of a a adjustment credit. on million includes comments all adjustments to in acquisition this interest XX, million to The the for investment million related with March $XX for loan These related X.XX% morning. the market are with fair Guaranty as to related portfolio provisional we the value XXXX market is approximately of fair the portfolios March loan held This of loans have million. XX, losses to

So over I'll with back it David. that to turn

David Brooks

results that up quarter XXXX. believe Thanks, We these first for successful Dan. a us set

execute this continue the some year this year. Colorado We have second as consolidation announced we to noise complete expect earlier branch systems we quarter as core will the and in well conversion as the earnings

end of executed company full saves program quarter of during the this the of benefit to result, half to this $XX those purchase second first our financial get As strong stock share a by prices. at expect we opportunities efficiencies of we of repurchase our will of virtually shares and advantage the Based the recognize We position, quarter. operating in upon all cost take to attractive million year. solid on and invested results the

you we'll and now shareholder today join investment open demonstrate focus for on us line taking paying increased that share to and to quarterly $X.XX in earnings dividend believe future XX% per remained our actions meaningful We these also and We provide the questions. value. Thank enhancing a committed continued our the a to Operator? dividend return quarters. on time to to of to shareholders of XX%

Operator

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

open. Your line is

Unidentified Analyst

Good for It's actually on morning, guys. Woody Brady.

David Brooks

Woody. morning, Good

Unidentified Analyst

stripping So last we unexpected stripped of we out the both core XQ XXXX accretion? expected was have quarter and a NIM and if accretion both the of out buckets X.XX%.What core NIM

Michelle Hickox

core I our don’t quarter -- I NIM was note X.XX% believe. last

Unidentified Analyst

Right.

David Brooks

stripped That was with down. accretions

Michelle Hickox

Right.

Unidentified Analyst

that accretion expected included the as strip out of well? So the

Michelle Hickox

true. That's Right. Yes.

You been related mark. to haven't our guys -- of of really call what know Most has amount I accretion the really accretion. credit large had has a we that expected we would come

but So, you the that rate remaining the anything communicated mark. that's schedule that's differently. to amount is to a out we the we credit what guys reason This in then to interest our back, related pulled really core time related reported in just

Unidentified Analyst

does accretion at million, that it. going quarterly feel Got forward? was like that around a And helpful. total $X.X That's rate good looking run then

Michelle Hickox

always It's expect of off first are right remainder and estimating stuff on this have very still well, probably $X little you a it. But hard marks, like I The million, close it now, that loans when quarter that. the it's provisional. because would around probably you pay year, the -- acquisition, just

are change don't they to very much. they'll and close I being However, very that finalized anticipate

Unidentified Analyst

XXXX? Okay. you last to was going bit it of all little me, forward a stock. for you expect then that in And see nice continue Do buyback to

David Brooks

We do, Woody.

quarter. first to purchase and approval our purchase didn't an -- to actually almost get continue mid-way until through have approval we the to We

So, we that over use would've expect use we have much time as to that. Yes, as liked we didn't next few to the here quarters.

Unidentified Analyst

guys. Thanks, right. All

David Brooks

Hey, Woody. thanks,

Operator

Thank you.

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

is line open. Your

Brandon King

King Brandon Michael on is this Hey, Young. for

David Brooks

Brandon. morning, Good

Brandon King

Good morning.

and outlook So close a Guaranty, going I the wanted get expenses fee just of of with forward. income to sense for the

pro Just fee get over next we of income could what forma level sense of the expenses quarters. trying to expect and few a

Michelle Hickox

account where for and to from costs. deferring this is quarter. changed really hadn't we we opportunity way expense when note deferring non-interest on opposed outlook did took last My One Guaranty loan was net to as make the acquisitions was back acquisition several that we to the of it fee. fees to done, we've a thing Guaranty consistent

across consistent that made now. we've footprint our So,

loan impacted because costs actually that. by expense our points, impacted if it basis fees million. non-interest about yields -- So, notice, XX we're and that, we amortizing was NIM also the netting reduced you'll now by $X did But because were about against

see you sense. fees where it's primarily due way accounting makes think I for non-interest maybe that was So, expense to we're that now, if loan the lower-than-expected,

Brandon King

And Okay. what … about

Michelle Hickox

Yeah.

I didn't explain impact just know, a confusing, but it it. best think is statement. was the putting where a bit can net in that's really It note I the income matter little it to are thing of be I our income. we it may really way

Brandon King

of rate addition per about investment what income management And of what and you. Got Okay. quarter? fee the with know I run the trust, is the that typical side?

Michelle Hickox

typical first management. since have of yet, Guaranty having run I a rate quarter with know Well, wealth if is don't this we

they I the that's down I of summer significant with maybe on up. the and tends adjustment other a the for mortgage just better for because bit, income than volume the into the season, remainder think that their seasonal way mortgage to will wouldn't increases rates anticipate if though. has side mortgage move been I work think do year being

David Brooks

be first rate the … So, would quarter run

Michelle Hickox

Yeah. an income of I additional mean, in mortgage. QX $X we to QX and may related million get fee

Brandon King

Okay.

Michelle Hickox

to look way best it. the Probably at

Brandon King

Very helpful. more. And one just

investment see that guys that over you that now billion, Now for any are crossed do XXXX $XX you additional mark? you've needs

David Brooks

Meaning infrastructure costs, for Brandon?

Brandon King

Yes.

David Brooks

on making of the we we've been get integration properly. That's something executed that Guaranty focused completely sure

in said in second conversion conversion out core cost June virtually our the early all all and the system be quarter. that costs, costs -- that the will we to in comments the think on get the duplicate of I overrun would out,

and to a work cycle be going that. to years. We continue changes. billion look. on working And we're regulators gone we've over prep continuous $XX knew been We We to other going with did the we've into and exam last

have shape where right enterprise, audit we now. technology management, something make think we That's though I that. good in in time we place everything are to evaluate piece risk of So, the continue and to and all in we terms that are internal over sure

but we today, we're good feel work where we So, to about are that. continuing towards

Brandon King

much. very you Thank

David Brooks

Thank welcome. are You you.

Operator

you. Thank

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

Your is line open.

Michael Rose

morning. guys. you? How Good Hey, are

David Brooks

Good morning, Michael.

Michael Rose

referenced accretion and per the that Michelle the credit Just split terms wanted mark. between of remainder of to follow-up year? $X is I question, what the wanted that on quarter for I interest the rate The the understand accretion million the the to or you is. in scheduled just just be clear

Michelle Hickox

Michael. It'll Yeah. per be quarter,

Michael Rose

Okay. thought. That's wanted make just to what I I sure.

is So, the what doing I'm think expenses you XX%. from getting I accretion X. on going that. the us Clearly this talked higher was it's seems question, the the probably about the run looks efficiency Am Because the of I and balance all lower it ratio conversion like putting like that rate last with an little to lower. have together if to expect, quarter be for the comments scheduled than I pieces math most if in correctly of But, here? a June right, it bit guys

the cost rest saves I’d this get the think quarter. You'll of

think So your the efficiency the ratio end how of should expectations towards we the about year? for

Michelle Hickox

It a be bit could lower. little

my impacts I for earlier also accounting calculation. loan comments fees about that we're think, how

didn't I amortization bit mention guided little our had run what not the lot. thing came than mean of in intangibles a earlier. with earlier, expense being one I a that rate I lower, So the higher

ended million. I $X.X it was had up million -- said $X.X I being I and think think

there's there. bit little a So more expense

expenses that. online, coming we'll is have building to new related some so Our

don't could we have that bit at know what it I on but that guided, I plan lower than point. this a would little be So

Michael Rose

on That's Okay. the Yeah. online. building helpful a coming reminder

for have to costs what You a that? sense the incremental are related

Michelle Hickox

I think quarter. a about $XXX,XXX it's

Michael Rose

$XXX,XXX a quarter.

were Texas to helpful. Colorado sorry that's moving give can Okay, growth missed if earlier, side, the for over the in And in then, sense trends but markets? this I'm both what loan then just you a and the I

Dan Brooks

been. we And start intense we competition. the a in and just we pieces just saturated, stronger cetera. given our well pretty the within risk as Areas – or somewhat multifamily hospitality adequate X%, Colorado across was thought systems, maybe and by The overbuilt. markets where growth. to had opportunities growth transition, where have marks thought markets. little loan were certain really would pretty sub-pieces really pass make various cases, whole example, or think well We or those And our X% in maybe around we announced overbuilt proposed. pricing it of onto growth and being then, And off multifamily. was around Colorado certain muted our always areas than hospitality just for were Dallas, was say, to the conversion whatever and And over we we out, or spread certain that in et also could there's the we the as we and watching decisions did getting a Michael, on not opportunities, we're plenty really office an on passed markets. on may wasn't have I pricing Houston of we business some annualized structure, was where compete

towards that pricing also takes things have place, that those and that being get ended have a away or just that, SBA plan hires bit CRE-centric other we to And we like and finance a and those get in while warehouse muted single-family equipment things toward move to residential, really diversify product any in can place and little pipeline putting growth given of general that. turn more saw loan cause like mortgage our at type energy, portfolio the continuing our things one So and so the listed to up a quarter, loan that of our from or to if the us the deals we underlying.

So about this into here we cycle. things pipeline keeping I growth. good felt the going consistent It our pricing footprint across really second and the was our at and We're good here. structure about and loan just the of feel eye our point on quarter

Michael Rose

too last balancing have end that all would beginning at growth. talked be So It David, that prove the X% if little that. previously I or for about at that is bit. you that -- of included like the Guaranty you little you a XX% seems And to bit softened year But for be to maybe wouldn't a range a might quote might high?

David Brooks

No.

X% is be -- to range of XX% in if XX% where be still today. is and XX%. X%. I It high that to a your into kind number could really we XX% in could sit But It see X%or anyone point, end focus. Michael. to we in markets. it saw the we thinking, to of think come market saw We what more may quarter X%, lower like X% to as certain more structure it's and first overbuilding Looks product fine in -- first the continue few to us be pressure, continues we single-digit pricing the the the could opposed and with to to types quarter,

Michael Rose

fair then from you when to to at from shift you one happen impact PCI Thanks. day CECL? enough. initial can And Last explain just the That’s stab you what on Michelle, PCD? me. for one expect

Michelle Hickox

We don't number yet. have a

think loans we in take disclose to We on on a loans will But position seasonal people I PCD our I think under up I our to we we've primarily can will point think be number they -- to reason I going an But impact a at which obviously PCD that portfolio. conservative loan. allocate at impact PCI. how a this acquisitions, make will PCD have But loan, not to accounted expect them loan coming a a been any point. more primarily really originated have to large required a we're Guaranty. don't -- pretty for see we've on within you're reserve in

will don't be different So us. I significantly it for if know

Michael Rose

right. All

for impacts -- capital and Michelle? major no So

Michelle Hickox

our I capital. No. a think have impact don't it on will significant

Michael Rose

taking for my it. questions Thanks Okay. Appreciate guys. all

David Brooks

Mike. Thanks

Operator

Jaffray. Thank comes line Brett Rabatin of next Piper question you. The the of from

open. line Your is

Brett Rabatin

good Dave Michelle. and Hey morning

David Brooks

Brett. Hey good morning

Brett Rabatin

just Or of sheet it margin about just I wanted and accretion to core seem some forward. second either has a just in and of you going terms it Michelle the addition like the funding. on some talk the core balance mix shift with your sheet? about back kind Guaranty, improve for change would think with flattish more balance the go a to the thinking core discount you do we're Does can of little side margin deposit of If optionality margin stay the here? the

Michelle Hickox

to like year mark, remains outlook if currently I talking rate pretty interest including of neutral and this accretion again up which will call go margin point, be think what at if of this this all rest stable you're the rates I know at core core net year. happen about I for anticipate even don't the rest if the much the would of we our margin Fed

Brett Rabatin

Okay.

Michelle Hickox

Colorado have cost having did XXX incrementally lower is points probably have than Texas. their than probably deposits, it But we're which Texas. a funds they to they XXX in relative there, do their lower basis basis still higher rates points to is a of better mix and pay

a that does seen that working to but in is our in, benefit opportunities doing hard. we've us treasury try So to we're management lot there know are market there that don't of Texas. group quarter versus there a work deposits we're I grow -- and and

Brett Rabatin

the half then and ratio back a this around lot as for the XXXX year? just then not the then Michelle And expenses. Maybe appreciate half this efficiency can And the of of expense what what's David I the realized XQ back sort kind level talk the there's just we year, it's go efficiency maybe, goal and there. -- you into might Okay. want to expenses for I of to color at in of be but and noise XXXX? go about

David Brooks

But is I'll efficiency for that maybe a so ratio goal thinking has different on always my Michelle something. XX% let her Brett, comment.

Michelle Hickox

types we're now as in be and to over to continuing about things possible. I and our need But make would -- sort those and want and technology investments. talked that invest infrastructure efficient $XX we the we those earlier that as of we to have things, to will billion of

go don't here so efficiency where is for and in it sub-XX% see I would to it currently be think, sure. year. I to our range next But really And the ratio our that goal realistic XX% it's for keep between

expense you, can I think rate what it's -- give run I I when going be. the think our to --

I to of they think at you expenses and rest we're earlier million. year, going if quarter, $XX fees. which look to drop core to said relative about they changed just account were million this And the be where the for our is then accounting about be probably for we where I taking way would were just the into we had those but $XX

Brett Rabatin

and just one Okay. one. last Great

be really You to guys' asset quality continues good.

you little asset lumps? a health a quality that few leads anything Are where to to people not are other you portfolio taken granular? or your of to And pull and is areas want seeing some you some in back much got You front, care these anything you the have the on guys exposure just so particular involved feel in more things? like just

David Brooks

is this Dan. Brett,

As you significant categories we've not participated and know of that. others those care on Shared health credits National in like

would agree you just what So, said. I with

the diversity well. And has it to. we'll of think our and us the granularity of portfolio continue I served

So to that. issues not we're related any seeing

Brett Rabatin

Thanks color. Okay. a for lot

David Brooks

Thanks, Hey! Brett.

Operator

Matt from next Olney line Thank you. Instructions] of is of Our question Stevens. the [Operator

Your line open. is

Matt Olney

morning Good guys. Thanks.

David Brooks

morning, Good Matt.

Matt Olney

back cost. deposit Going the to

back Any behind for of anymore during somewhat there or quarter? outlook common Texas quarter the think towards within costs, the your some market the And was that. more details, the maybe the you deposit market, pressure few numbers commentary quarters on within can I end the put eased Texas next costs? that deposit the

Michelle Hickox

a and had It's I have have exemption out anecdotal, requests takes rates my who Matt. weeks. the down relationship I from to the rates seemed just And bit. what special the managers. banks have our request for last some abate and branches I've mostly there. know is competition really the a over team It's of of couple just Those that noticed bit. come that our

if we XXXX. back been quarter exemptions our I fourth have have what not like of its is third what rates to And making as So, anecdotal go many and of been evidence as really have. stated we outside you

Matt Olney

expectation assume Michelle. kind were And third gave quarter. for more the And core the from your operating I the, those think thanks Okay. of us integration? or numbers knowledge that for you just expenses second I Michelle, for excluding then, any

Michelle Hickox

costs. Right. Yeah. deal-related That excludes any

Matt Olney

great. marks on that and didn't And write think Dan, just fast Could again? have remaining rate those may credit portfolio, the the those go on fund mark. then, Okay, loan I over mentioned I down enough. you

Michelle Hickox

Yeah.

I around mark is think -- it me the let the credit pull million. And up. $XX

look don't number me And the at it, wrong mark is. rate Matt. give Let you the I so interest

David Brooks

Its $XX million Michelle.

Michelle Hickox

$XX million and million. $XX.X

David Brooks

million $XX on rate the interest mark.

Michelle Hickox

Right.

David Brooks

And just under $XX million on the…

Michelle Hickox

credit. the …on

David Brooks

…credit mark.

Matt Olney

…Okay.

David Brooks

…being combined.

Matt Olney

it. Got

Okay, for that’s me. guys. all Thanks

David Brooks

Hey! Thanks, Matt.

Operator

And Mr. like conclude does today's to you. Thank turn for that call over the session. I David any back Brooks question-and-answer to closing remarks.

David Brooks

XXXX, and everyone Hey! We integration Guaranty the to getting the appreciate done. being on. We're start excited about

in talk Thanks. And to participation look to your you we call. soon. with So, forward our that, appreciate

Operator

for today's thank conclude on Ladies you does conference. and participation program. This gentlemen, your the

great disconnect. now have a Everyone may day. You

Independent Bank (IBTX) 23 Apr 192019 Q1 Earnings call transcript