Independent Bank (IBTX) 28 Jan 202019 Q4 Earnings call transcript

Company Profile

Participants

Paul Langdale	Senior Vice President & Director of Corporate Development
David Brooks	Chairman, Chief Executive Officer & President
Dan Brooks	Vice Chairman & Chief Risk Officer
Michelle Hickox	Executive Vice President & Chief Financial Officer
Brad Milsaps	Piper Sandler
Michael Young	SunTrust Robinson Humphrey
Brady Gailey	KBW
Michael Rose	Raymond James
Matt Olney	Stephens
Rahul Patil	Evercore ISI

Call transcript

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Operator

Greetings. Welcome to Independent Bank Group Fourth Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

the Investor to Relations. turn Langdale, host, now President, Vice will conference your over Paul I Thank you.

begin. may You

Paul Langdale

ibtx.com. Good our morning, appreciate and and can everyone. Director I'm XXXX press the Paul Langdale, Senior release fourth Group us. website Development to you accessed quarter Independent be The Independent like earnings Bank of call. Vice presentation for Bank joining would a Group, We at slide I earnings welcome on to you Corporate President and related

would the slide the you of statements may subject made that I Safe to remind page statement. X intend include to covered forward-looking expected for to uncertainties such text presentation during or subject today to that Harbor remarks made statement. for X in We be today's and by like that and statements. provisions release to All actual statements. are the could differ. forward-looking statements Safe results Those Please cause our Harbor see are comments call of page risks

about non-GAAP guidance. SEC's management's and if will statement a in Please our of note time be only release. this number publicly give measures we of discuss financial included are the GAAP will guidance that measures measures call, a future most rules. these to at not update do considered statement under we is results we to financial the the made, In financial beliefs of that be the Reconciliations directly comparable guidance

will At Vice the our Risk CFO. questions. the and Brooks Vice Chief our David and I'm Officer; remarks, of to joined their call Dan this Executive Hickox, Chairman morning Chairman, David end CEO President; Brooks, open and by Michelle and President

turn David. it will I to that, With over

David Brooks

morning, you, joining thank everyone, us today. Thank for Good you Paul. and

open closing loan it Michelle back to cover questions. with to at the the will As highlights end will operating the Dan and here on some the cover remarks I then is will portfolio. results, touch quarter, up for and for always, I be

another a solid of of return assets growth of year of average on earnings with and equity We for $X.XX, continued finish had financial the strong adjusted was year XX.XX%. and performance return Group. tangible adjusted share on quarter XXXX to per adjusted Independent Bank X.XX%, fourth

executed net a of reflective disciplined healthy and XX.X% granular we for base our our minimize organically year, our is on interest deposits XXXX, funding grew Throughout commitment the We margin. strategy the maintain to growth. continue on which of our pressure to by

to underwriting as footprint, XX.X% X.X% was growth quality by sold CRE was in total quarter. for quarter assets decades. have of loans Organic that -- conservative funded the low teams than cap Despite continue amount that payoffs rates. across investors which maintaining loan take source impacted standards new that fourth the our while same of linked the elevated fourth This the over XXXX, headwind, have shows advantage quarter was we us in served higher three well the last our credits, to these this

operating details over for quarter. the I'll the to Michelle turn call on more now for results

Michelle Hickox

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

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

linked year. quarter. fourth quarter net the quarter, in fourth X, The from you interest As million the X.XX% in can for was and up up $XXX.X of million interest quarter and X.XX% in million to quarter, in from for linked X.XX% the slide quarter last fourth net $XXX.X $XX.X see was fourth income margin on compared the XXXX the

yields driven due all X.XX% NIM in of to primarily linked and on the continued competition from to X.XX%, points The basis by quarter loan the excluding rates. decreased X accretion longer-term continued purchase depression loan index pressure

XXXX, $XX.X the million of branch $X.X non-interest remaining fourth the to decrease The $XX.X we in quarter million business. gains QX on million income generated compared in was in loan for primarily income our insulated and of $X.X July non-interest an gain linked banking in of million to that mortgage sold quarter. a a of two sale in and income. pools related the Total $X.X with Recall million offset is trust that

from This by was FDIC insurance for is impairments and of $X.X $XX.X and in a the professional due million The in million decrease increase to salaries of $X.X the non-interest and quarter, million benefits, of million, increases expense quarter. million. increase fourth an $X.X million and Total legal fees. acquisition-related of million $X.X in $X.X higher offset linked $X.X were expense

benefit to accelerated an elevated this to expenses to million of expense approximately team defending $X.X of the we executive compensation $X due $XXX,XXX. member quarter. and and separation Salaries million deposit of lawsuit Legal Bank of were costs Houston are related growth incentive for

QX and it trend in the of in costs comparable that expect We will remainder XXXX. lower

related remaining addition, be approximately we That in expenses $XXX,XXX. completed costs fourth should consulting In of incurred quarter. quarter the the first $XXX,XXX of compliance project project to with expected

$XXX.X shows December XX, for the $X.X and million and as billion for or the cost. Total billion composition our XX.X% deposits $XX.X of XX, period. XXXX. deposit deposit growth quarter X.X% year-over-year Organic Slide were or was annualized

points interest-bearing and quarter. linked deposits X down the of basis from from was of XX XXX down The basis the basis quarter points, fourth points cost XXXX, average

deposit to have products and continued strategically. on evaluate pricing rates We lowered our

my rates. a at flattened to get That but products have rates continue concludes Market benefit we higher of since November, maturities renewing from special comments. bit lower cost

I metrics the to portfolio. on will and discuss loan Dan over color turn credit some to give it now

Dan Brooks

ended including growth $XXX.X were the XX, billion X.X% for at to December was million or December XXXX, for compared billion investment Good Organic December Michelle. $X.X Overall, $XX.X XXXX. Thanks, held year mortgage XXXX. loans loans purchase morning. loan XX, warehouse XX, at not

portfolio our Slide and XX our of commercial Slide illustrates annual XX, loan portfolio. composition loan real shows growth estate comparisons. the

of from XX.X% declined has XX, up linked loans, in estate December quarter. which As the of XXXX, commercial makes XX.X% real

CRE continues in retail. largest well-diversified collateral office to with and segments types of be in

type. by warehouse XXXX million increase averaged quarter September to quarter the property approximately of the Slide ending an million XX.X% CRE $XXX.X for quarter. XX, further compared XX, loans retail for the Mortgage XX December representing XXXX, $XXX.X for ended or million breaks portfolio purchase down the $XXX.X

the business This well of lower mortgage on growth seasonality growing year. quarter partly our reflects this loan impact as and focus during of rates line the this as

assets nonperforming Asset $XX.X remain XXXX. total Total at of million metrics December quality strong. assets X.XX% or XX, were

or $X.X of which assets that commercial This slight subsequent workout, by a offset due to that a million is X.XX% branch. $XX.X at $XX.X primarily is OREO million partial loan total the a matured total of and to nonperforming sale XX, assets XXXX, million has energy was of increase former and of is compared pending write-down September

in annualized Overall to quarter. annualized charge-offs at for remain of And the fourth low XXXX. X.XX% X.XX% X.XX% in fourth quarter, linked quarter annualized compared the the

decrease Provision quarter moderated million to for the expense was asset due continued loan as linked quarter, $X.X quality, well strong loss of million growth. loan $X.X fourth more the over a for as

this the the all loan portfolio morning. comments are I related had to These

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

David Brooks

has successful the Dan. had as Guaranty every Thanks, integration and quality, market bit proven on We strong of our to began closing, Colorado terms our acquisition XXXX Texas and be of as a markets. in We conversion. And by growth Bancorp.

we've the integration merger equals work for planning our by of announcing Texas begun with Bancshares. a complementary XXXX Capital transformational hard ended two of franchises. of We highly And the

milestones the update, We're merger will on the toward to and for XX excited provide for this as and an our some XX work customers, opportunities the employees as close. you been our to-date has teams a shareholders, progress mid-year for brings made communities. as deal, Slides well continue that

ball. we commitment to our Meanwhile, to balance sheet, grow compromising haven't on organically we credit Throughout our without off taken eye our quality. continued XXXX, the

operating, shareholder This disciplined allowed and year, our ROE of strong through us increased last and repurchases, enhance ROA to on disciplined focus reporting share strategy a performance, an dividend. value execution through and

begin we great with our planning across Capital, are on to we execute while Texas Colorado. continuing As our XXXX, and in of merger Texas four markets focused equals

as made great embark of company's XXXX for a another We're grateful customers, look Independent year and XXXX history. Bank communities, new forward carrying chapter employees and Group our into we to our we momentum to that on who

questions. call With that, open we'll to the

Session Question-and-Answer

Operator

Thank Brad Piper from Milsaps Please proceed. first Sandler. Our Instructions] from [Operator question is you.

Brad Milsaps

Hi. Good morning.

David Brooks

Brad. morning, Good Hi.

Michelle Hickox

Brad. Hi,

Brad Milsaps

David, really like good had you quarter. it loan sounds production in the

you some big However, payoffs. hit got by

XXXX? give you could And how loan prospects if color your on the dollar feel a growth curious little of of sort for the of us you about sort Just more that payoffs? amount makes

David Brooks

quarter. third we generation were Good excess versus thanks. our third We up new for $XXX question. they Brad quarter in of were our of loan fourth in quarter, booked, in quarter what for was production but the the -- terms Yes. the the payoffs million loans XX%

third, So, did $XX $XXX the in our than fourth quarter -- we put more but we loans million more million on we had the payoffs. in

$XX the million of So, excess a because net of payoffs. minus

this to the that quarter, our customer and I already all hustling, building great been they're and and of relationships, officers our we're doing So, say, job -- markets with encouraged. we are Dan to and expanding been relationships, and of do to here are people loan continue optimistic all not business and need where officers in strong only positive, talking about to leadership talking interim markets but about the about merger, very period our the have customer a around We've around loan our all are. speaking across this

better estate, investors, to related how of I decided assets asset a and these second There's I'm on down of of sale think so but we these at we that of looking year. in payoffs the sell owners, rates, some the kind of back have investment cap rates rates saw when Brad, again down want that of at half a assets. gosh, lot up were hunch sales. any data, to the real my some these -- about that families payoffs, pushed investor and unexpectedly lot is some cap of of back turned picked in we the -- those some whether that don't

banks competing and share was doing couple consider in things to add little a don't just of asset deciding it refinance like mostly, market that. But with Brad. that by rates and is national market attractive markets on going we to There a rates be bit of sales, so

Brad Milsaps

Got it.

You're with type growth? still comfortable mid-single-digit though that

David Brooks

Yes.

-- at number ready under as in last looking this X%, X% the folks for weeks here, I a think at that is been we've good we've We our think already to X% talking still looking to few consideration X%, approved year. the and close. really got pipeline, deals just

Brad Milsaps

margin, then parts. Okay, just the on a great. to moving of Michelle couple And follow-up obviously

the over you Your those accretion a quarters? of about of can quarter couple this moving reported warehouse also for was kind just thinking next curious under I'm which guys parts dollars. hurt bit, quarter, the kind $XX a but you're the and of all kind NIM to core accretive little of million NIM bigger with how

Michelle Hickox

Yes. predict payoffs, differential accretion I'm we I'm is that's still coming Again, going saying normal comes the my to in. that. and still can't $X from always be outlook about from that -- it's million.

So, than I obviously it could be that at don't expect this but that point. higher again,

We've deposit done a rates. bringing of job good down really

But November, saw flattened since significantly. those You really bit. came have those down a

benefit cost on those. are some those that We and re-pricing last there specials significant out year, of of some still getting in that's put a from we reduction

our Loan looking not But the would and those down But yields, they pricing that in you have after rate November. that quarter. January since the deposit in as costs, come November significantly I did at down the competitive. fourth at as have they not least did same trended is at tell October

I that, all saying the down basis for at few to a least of in term. kind NIM call near maybe would points stable So,

Brad Milsaps

Okay, queue. Thank the you, great. hop back I’ll in guys.

David Brooks

Thanks, Great. Brad.

Operator

is next SunTrust Michael from Young Please proceed. Humphrey. Our with Robinson question

Michael Young

Thanks. Good morning. Hey.

David Brooks

Michael. morning, Good

Michael Young

paydowns. Wanted to a the just ask follow-up on quick

center any in mentioned, it getting could money kind particularly there's markets? banks more involved, you concentrations payoffs just if certain or of You been maybe of some characterize but geographically paydowns

David Brooks

Michael. across footprint really we the state any specific not seen serve. We've think market been have or I payoffs that the entire

to growing, now we some wanting to been our We continue have something it markets to share their to be and they've interest their level, XX, great that the surprise in. public markets from for price, of that's XX high where in the increase that and in be a these seen that's bigger no we in great this face market and years want and happen people markets, just are market presence about increase expanding of companies

and we're the to the going we're trends continue Denver, Worth, continue think growth that favor Antonio so, we Houston, and to going that, Austin, so see And demographic San Dallas-Fort surprise. see trends, to no to and

Michael Young

merger anything this base Okay. quarter just the basis expenses. moving pieces And preparation if switching of should efficiency maybe your there? side? ahead of growth kind expense on and a in going in parts, the think expect at normal whatever should to Michelle we higher of guys of we be Texas with was maybe XX% related a just base deal to Capital forward, little some bogie the is over some getting expense little you we there should done are the of the but historically base to noise expense tracking bit ratio on core in other the a really Or or use kind or of

Michelle Hickox

Yes.

we will we're have $X.X BSA that [indiscernible], on We If will million project you fourth was what thought that this consultants it that, expenses to we sort they million some included were using then, based accelerated. QX. about of at know was expenses what some we've that in those I around about this the been and year. with, $XXX,XXX And additional we adjusted And talking look they quarter know will also about about related be that quarter. base help $XX and call QX us million, this the in $XXX,XXX would really $X.X to expense Those about be be quarter. the lawsuits that

for expenses probably up sort normal that think payroll things in first be from our from expenses those same of the just bit $XX run come is quarter. the and million QX. rate be could a the So about then will in I tax always in And higher good It QX. just even

Michael Young

Okay.

number? inflation kind off So that more of an expecting not stable

Michelle Hickox

so. think don't I No.

Michael Young

step All will right. back. I Thanks.

Michelle Hickox

Thanks, Michael.

Operator

Our is KBW. proceed. from with Gailey question Please next Brady

Brady Gailey

Yeah. Thanks. Good guys. morning,

David Brooks

Good morning, Brady.

Brady Gailey

growth or about will is in think stay that the you once the change Going mix, in level? the the loan it that back X%, loan level to X% TCBI did from that will same growth

David Brooks

middle banking for going franchise banking which I going And some about via new Antonio to regional as using – encouraged going of can and independent lines so that think post-merger to But the Well, verticals be the growth is model, legacy in your this we're growth other we at Texas step-up believe fact, business safe actually the the the there. regional very merger add we're market the their Capital, to franchise, expand and – for bank. for hire and we that prospects and well. I think San terminology in kind regional and we're it's and and of we're encouraged the intend the IBTX teams we teams are to that corporate

in go-forward the we growth level, we're we're able a grow. the high a to that mix In of one come We corporation out great terms that markets. from of lot company, rate Brady. a be But to the what as overall to things we're and Brady, final That's a we down go-forward be of – one objectives going as of should to business inform model that's that bit is. will the growth put little this the how so is model, what and is, together going building business business

that the give to lawyers what get what guidance be more it's can prospects grow. X%, pro If – forma the X%, clarity going we'll once once didn't growth what we think once be we're guidance, are are going the paint map or little X% exactly or have where those like. get not say we to clarity but think the we a a I or to over exactly better XX% more able we'll give looks of to then picture next are the company the listening, years, numbers two Whether around able can guidance. I of We clear road we about we

Brady Gailey

have XXXX puts $XX I TCBI about That's year-end return your high-teens with common that stock right. which then book value doing at helpful. tangible company times tangible, All on that's a equity. X.X for your at tangible doesn't right And a David, seem

So is my the on question buyback.

do think there you before pending, notably a if the that on for closes? be post And stays stock deal inexpensive. TCBI have cheap front? guys tough, active opportunity to as you'll stock is but the Your the can closing know is you you deal buyback I buyback not be if when buyback stock the

David Brooks

that PhD stock out. don't figure have agree to you we will the to that I is Brady and I have Well, dislocated. price a you whatever think with have But

a dividends via said, we the So of in on you to confident be what I'm to That our to extremely the midterm. know market have buyback shareholders the why remain We our in company regarding as speculate is taking returning program. and is. yes, not capital going extremely exactly going this confident and short in excess told and merger a policy the it that of model, we've performance and what

that's so as a go-forward we equation think this part company. And whole Brady the of about

forma close get it cash coming transaction at for And acquiring our to very the be and some there's that our the that the of we've Depending aggressive way slightly want combined back on on XX stock free we going once we company, months capital. buybacks. up used what of balance seen I multiples over never significant off prospective size adjusted pro smaller, the prices, also the our allude organization to flow be these do be we'll at kinds that can sheet in kinds everything extent the expect trade is to the and to X to months, these is of stock. stock And next as would that you

got ratios would models affect and that applications. put be lot it SEC now our now our And period stock I we've and working the filings during regulatory have to pro been the Brady, with we if on would all those into don't regulatory so, I tried think, disruptive right a the -- applications I interim while we're don't we've capital filed, forma that buybacks right of think, into do

to So, now sort in can buying we have take and excited real do, right can don't when forma We're look, expect between I talk to gosh, a that. there and scenarios market are the can perform. now, company we're this confident we very are Brady the will the where June stock. that. pro our I in about But people would this going aggressive But at And back out. be we what build I model, mean think we all we internally about look is,

and first going as the perform And quarter in quarter, And execute fourth show perform. investors everything the continue to see what to quarter is in like combined transaction. customers employees, our we're as as do a and as we then, I to people our we second the did value in do the and as the going will understand we'll we'll company look believe and of and

Brady Gailey

finally All And quality. very TCBI's for on credit then has for IBTX a clean question just story right. a me years. been is

credit the I think investors is have last with Texas Capital. merger one they the concerns just of increased saw We quality a amount decent week. of NPAs the there earnings when that reported

you can learned you've got work how TCBI's with or credit additional to comfortable you the that just that So, month and in about, things -- any announcement? you post or two anything again us deal talk last

David Brooks

increases early November December and December Dan that But to that diligence going you were give XX. We that the of that numbers me XX to on the -- view in numbers let were I'm to are Brady specifics some process. a doing diligence speak portfolio. around our high-level the -- due were September those announcement in Let saw we then and due

So, good where as the we that seeing they we experiencing to information and handle were the part were they that extent were and they really what marked had what diligence. have of on a

some not where some a surprised commentary surprised I good going give we categories, were what that. in exposure but not there and handle a it's Dan feel that. those got on guess start -- we to of I'll were that pickup with But and we've -- that like, was on So We color is let

Dan Brooks

understand would appropriately that to confirm through due are grading diligence the constantly hard certainly to lot they David. risks are portfolio add a to that assess process that their we those. working say, what Not that they I are their and Yes. went

as any I And I think in -- so, David I think was think there said, accordingly. don't that and that surprise they're don't managing

David Brooks

manage. Yes. they're going to to And continue

at confidence there. at and And we now overall have portfolio. to be believe, leadership and lot manage on are the the is. merger, They're level appropriate at in on looking risk portfolio their there high to in portfolios reserve very of in amount the their exposure of and credit forward there going an for looking we we've continue We our portfolio confident or between the and will the reserve their there the CECL handle plenty mark combined a be and of at what appropriately got merger going will both that of a risk the reserves

Brady Gailey

guys. All it. Thanks the right. Got for color

David Brooks

Okay. Thanks, Brady.

Operator

Rose next question James. with Michael from Raymond proceed. Our Please is

Michael Rose

good morning. Hey,

over costs touch of is maybe I relatively Just the due of is? amounts CDs some us and Michelle, wanted Thanks. flat been here, have the you to that think are coming you couple due. the cost what mentioned on that deposits. Can deposit coming have quarters next you that kind but remind

Michelle Hickox

have to had dollars, the on million. those paying specials million. $XXX like current $XXX we of that But those went quarter remember, our million last if that $XXX rate Michael. And some we number don't out year exact you first renew I if those we're is

where of So And are those some relative it's to costs still drop at strategically we and we they to index our some market significant trying costs money looking of are. a lower are. where strategically in funds

market outlook just with lower It's not to rate rates. going or not they're lowering the the that Fed is

that people more again. certain of have out gotten gather significant some to been put some some And have trying Not rates we but there board, our across deposits. the have markets, feedback in competitors

more is this I able a October cost to been were bit and lowering funds quarter. still that down at the just that little it's rates significance expect But a November. in the of challenging, to So, going we our come

Michael Rose

deal platform before a Or in Is acquisition are the to you that? do participate there a And new last helpful. That's online week, deposit going closes? once guys plans Okay. the is to just TCBI happen that follow-up as to it rolled any going naturally out maybe closes?

David Brooks

Best We're platform rolled interim this for Yes. Bank And about account Correct, where and and really we're possibilities period. having participate ability for no account that in us their crossover, in project across all -- there's small and out that plays excited then opening but opening banks. our -- digital to the how Michael. that of with branch no a they business

is Our the branch what discussions And good we us -- the ahead. in our we're how in of of think valuable but now talking part will about technology and network branches XX merger. that a be can to utilize the to that across days bringing is I we're that some

Michael Rose

of one one portfolio And Can And for a a bit little it's Okay. at the this final I more credit? piece know small energy issues me. give color you the on but of just of over maybe point Thanks. next any book the that the more like you and classified couple at you level as would what and are in expect the quarters? criticized

David Brooks

credit a the effectively in long-time Yes. now. longer-term has some couple six ago credit five, years workout been for part it's of and Michael, classified situation a years this of been books a credit was

care borrower which continues the it, no of that the to debt, refi leave of or surprise they're We assets, would actually the So is sale take doing the no in either currently that. end which what but potential pursue of the of but mezz it on to chose as way collect continuing matured at was to payments note surprise that the on quarter.

quarter. no than at migration in XX there's credit it over that the days was other just So of that the end in sense

really As rest it to it to portfolio, relates the the of good. be continues

a group that to Fort we were had the really we able look out really the in environment. credits energy there best ago We hired of team we in the and nice in the those over today's some Worth, a way As of even sure energy like cherry-pick out year XXXX. before spoke year to

no So deterioration expected migration the in portfolio. continued or

Michael Rose

right. for All questions. my Thanks taking

David Brooks

Michael. Thanks,

Michelle Hickox

Thanks, Michael.

Operator

Olney from proceed. Stephens. Please question next Our is with Matt

Matt Olney

guys. morning, Good thanks. Hey,

David Brooks

Matt. morning, Good

Michelle Hickox

Hi, Matt.

Matt Olney

for discussion And to around do back longer I assets? want next would on the capital and to which term. closing capital few the minimum stock years? ratio bank Thanks. as a that's buyback David, on go of over the more you billion in the focused bank threshold thinking the $XX view what most be specifically,

David Brooks

a greater -- continue I kind look at Matt, think, and then level we total at look lever we'll a time equity other the and or hate on A be the to looks that the this put most risk-adjusted I we risk floor like it and that base volatility. capital just the what to depends and of of from tangible anything on model lot risk-adjusted on to capital the perceive at point what Matt. of just business a as

risk objective company the at growing, to strong as return growing ratio, together but strong parameters put Our strong a efficiency we equity with high-performing is on tangible that's have Independent over years.

So that's the go-forward model.

a we'll what the long-term what last we've risk a over here the kind is determine, total we target comfortable feel and been tangible equity And capital XX% two year on but on saying as like is looks ratio what or X.X% of that XX.X%, with base.

the anything to but -- pro see or would right those I forma the change model down be. what out change reserve depending reserve And so point don't at I my I business numbers, up mind on strongly is about flushed the that finally that this to

But to that even intend dividend. to continue we reemphasize me know going we We're point that continue be paid going historically has -- point, -- to will to your to just let your I dividend. be though a TCBI Matt not we're this dividend

be dividend be to try and be inclined earnings looking that and will -- based then increase aggressive. upon always Board to over the of time Our the to and company,

clear earnings constraints case stock aggressive at wasn't will within very it's in kind I these the answer when of be on And prices. especially my capital our buying in previous so back we and trading of

Matt Olney

about go then at community want business far the you've time Okay, to come the few as line this today to with forward model And a provide will as going to David, together Is expectations you're the that market putting when go-forward plan? a more you hear and you're understood. investment of mentioned point. times some there

David Brooks

No.

quickly we've hard we'll think, we We're on do can. as Matt working absolutely it. I said as

both imagine, as As what – know obviously are our investors you then anxious looks how like companies and might to affects and everyone it model well. employees that

And as just any it's lines say so absolutely specific we that. quickly time – as to too can what on early

So we're will as very be quickly it as we we on can communicative working be. and

Matt Olney

Okay. Thanks, guys.

Michelle Hickox

Matt. Thanks,

David Brooks

Matt. Thanks,

Operator

is Please next [Operator Patil Rahul Our ISI. Instructions] from Evercore question with proceed.

Rahul Patil

Hi. Thanks.

NIM this Capital's quarter. was your X.XX% Texas NIM around So X.XX% of

So, get X.XX%. weighted a of average to using NIM combined just of sort a

down bps stated few you Going your level. from started some fourth X.XX%, outlook from of there, – Texas stable you will Capital's – X.XX% XXXX a NIM the quarter to implies NIM be improvement down

to going So on. have you accretion the million but dynamic tied related from have quarter million then million so post to will million And rate mark. additional and Bancorp, the will loan the accretion. close you That's non-PCD eliminate around of years accretion the five of accretion. $XX that's assume quarterly you accreted $XXX that's Guaranty And over let's $XX per that's XX deal bps that $XX

post to around for full about X.XX%. starting quarter close the that the NIM is it first Is trying the a just fair I'm fair deal a assessment? think So sense to of get point

David Brooks

indication that was these push I in honestly business, growth early down too all of was part again, the on in lot what give to to And quarter level we believe that Capital that – of we level. mortgage and and way is which of the for depends businesses on, partly as Texas which that. course of be which of normal to able And Texas mortgage a attrition what a the focus lot has it's what that size that what business, it an indicated to depends size relative to think A other of look choose which us forward just normal they and normal then I fourth the expect Capital pointed believe we on a deemphasize. NIM. the I more down to things ones

don't I I clear and – --- could And wouldn't so feel you I think I give don't just Michelle, know don't color any comfortable. we if

Michelle Hickox

I income. at unknowns sense. will it would a in that this Yeah. the I make there's be give hear But into about adjustment point that way a prediction all does thinking the too there is it parts credit think mean, point. at I many back to that you're NIM come the didn't – up make on what that CECL

So our into that And hear back will we rate also didn't will say you that that. there current that expect do rate replace mark. mark will come I income a be

So that might think be something else you about. need to

Rahul Patil

then And the base. Okay. just on expense

So than you what what the guided were you to. and a even higher came expense had fourth quarter little in expecting

XX% deal that just Texas get is XX% Capital's So XXX number, closes that let's of you say to like midyear number. around $XX XXX-ish the of million base annual of annualizing have so

So $XX from cost for year. year XXX-ish second of of in million level a the this you're realized starting full saves half

XXXX million? think of expense the is So reasonable base full it $XXX year around to about

Michelle Hickox

I don't – now either. answer right I can't really that

this $XX model of second – projection million of the half think I the included year cost the the saves for year.

Rahul Patil

All Okay. right. Thank you.

Operator

follow-up do SunTrust. we question with have from one Michael Young final And proceed. Please

Michael Young

pro forma just overall I the Hey. kind big just question of maybe one company. to picture on ask wanted

value about some EPS as You pro size book some as then talked forma but were explicit accretion cetera. in pretty of you've and the in tangible business kind of the fluctuations lines et the balance sheet well accretion

there businesses on of more level profitability stay anything some initial is the could give volatility Or confidence the focused Just really to that those of about in gauge So should we a think in some both company? that? forma pro projections? little and trying would provide that you just the

David Brooks

and exchange – the about. a talked great that book the tangible close, that we've that value Yeah, create value mathematical we book accretion we stock question We Michael. is When tangible do certainty. will

I you think start there. So if

there's to materialize understand whether that. going I'm I really And sure not that's not about or so concern if

to and the is pleased now saves the at weeks leadership that's work morning five about. been cost focused go-forward what how at merge the in this confidence we related tell of can are will the has And And go-forward team been Michael to when you, sheet. everyone earnings I've meeting the have the and hard and we for balance talking go level extremely executive business and of teams partially deal impressed all look put then management I'm I on confidence forward, together accretion starting the the talking you're are And again on we and give this and about leadership at the talking a some office margins from that great around, to integration think what in of level terms this the board we team those, down going the there, exclusively two this about the growth almost really in focused entity. go-forward get to very announced. been be is which what earnings we've we've point what at then I able models we In being achieve

terms think this And come together model, to be turn companies and these to on by two go-forward together to when focused it's to I going quickly unique all we great the two are over look out things putting pretty to model what accomplish business we so be can different at rally time. the able of back in pretty

and express work to really the we and tough we to hearing about good It's So, that's a where decisions that some lot you're make. there's confidence feel early of us are. and do

all Colorado said of the and in going to to are on other you the of going safe Texas keep cows, But and There best our hate five if XX it sound. there customers seven model a to we're in country serving than we're to decisions. the that's in the to no we as previous do willing from markets we're and cows assumptions no way always sacred along, make pick are I will. business but hard

on mentioned which of into that's the of all volatility, and stable a to the about, and is on a and of PCI model the Independent one real we've in all NIM of talked much objectives positives this go-forward it, earnings bring into business that mortgage the of one that's down the You the volatility we've the estate that commercial it's side, Bank sheet. about looking because together the talked as merges balance business real side, combined the better

that is just so let that absolutely be we paint will of of exactly picture lawyers earlier we really when encouraged. what very to tell the continue back soon to And question can goes you. very as like, the And going as me to look

Michael Young

I on as Any quarterly expect color that earnings kind we timing -- end should that. would follow-up, the call that expectation to just scenario? lawyers there on be of of conference the And and a lift that any is that in might guess event? a any when separate Or

David Brooks

Yes a now, and separate the we're then do that's leadership that's more whether April April gap] a and have know or between a out from around clearly to anything the know. then, -- question. I ability don't -- be the able should by of separate And now to to or we [audio April color filing we about would three it. first call Texas to going be great and be Capital to begin another quarter I going our that. by earnings By end do call we months are

Michael Young

the Okay, David. Thank you I color. it. for appreciate all

David Brooks

Mike. Thanks

Operator

reached the closing of I to question-and-answer would remarks. to like David for have We end over our the call turn back session.

David Brooks

to our morning. our and in in great time Thank patience combination in Thanks you and being for appreciate on really very travels another this the for everyone seeing interest look Bank much. the with -- I us. Independent appreciate forward proposed investors I Capital. your Texas your and in And spring. It's company on this analysts an here exciting I

day. So, have great a Thanks.

Operator

Thank you. concludes conference. today's This

lines your and this at for disconnect may participation. time your You you thank

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