IBTX - Earnings call transcript Q4 2020 | Independent Bank Group, Inc.

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Operator

Greetings and welcome to the Independent Bank Group Fourth Quarter 2020 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] As a reminder, this conference is being recorded. It is now my pleasure to introduce Paul Langdale, Senior Vice President and Director of Corporate Development. you. Thank

begin. may You

Paul Langdale

to you Call. Bank be I related Corporate Langdale, Group can Development earnings to Risk end the over the us. Vice would to included everyone. and President Earnings that, CEO Chief and Vice to will questions. Officer; President; call remarks guidance our morning on website that Director and give will remarks, like David XXXX made X it see include Chairman, that Independent to Vice by X statement publicly risks you of differ. GAAP Harbor measures for in number the I beliefs joining statements. for slide the remind guidance. would that will be to may most David expected the made release cause the like the the under to and in The and considered presentation welcome call, Fourth forward-looking and am today statement. Michelle note appreciate We assume results, a to to morning, presentation we the accessed are statements. release. of future Quarter All of no Senior non-GAAP Hickox Safe forward-looking Paul financial this if President joined and our to Please at Brooks, time subject our press Brooks, Safe and guidance I Please Group we discuss financial Management's is this for at Good our actual turn ibtx.com. and Independent comparable CFO. Harbor Those measures directly you With to to Provisions made are of I Page We statement I results the could call of during statement. are statements At we today's David. obligation by update In that subject am Dan a statements intend slide is such be measures Reconciliations uncertainties to or of financial the our that Page comments SEC's these text about covered Executive the Chairman release and open Bank rules.

David Brooks

Thanks, Good us you and morning, the today. everyone, Paul. thank on for call joining

ability of and the finish Our with year difficult strong equity healthy Full quarter value of on granular model income a represent our reflects quarter serve on XX.XX%. customers community income tangible to net a our to our I'm the adjusted share million banking and changing economic how to especially trying communities company's under year year, and past of XXXX circumstances. Texas fourth adjusted and proud results Colorado of Reflecting our fourth rose across $XXX.X of $X.XX a adapt occasion return net XXXX per during employees to to the environment.

quality As remained culture underwriting Dan credit our conservative and our reflect discuss standards. further, will disciplined strong credit and metrics

emerging up, is by risks as monitoring we as always, We vigilantly be how any well to macroeconomic encouraged are holding for portfolio continue persists. general uncertainty our though

levels by augmented are the to continues XX.XX% quarter. annualized organic position deposit capital ratio of and at in with robust strong liquidity XX.XX% Our capital ratios of historically be a growth our total fourth

operating of share million. of During our results program repurchase Michelle call that repurchased cost overview, more for took the the turn $X.X of for stock recently the on we also aggregate reauthorized to the for detail quarter. quarter, With our an advantage I'll and shares XXX,XXX

Michelle Hickox

linked income from million quarter. per last net million last in the you, year diluted million and per or and was morning, Fourth the $XX.X quarter, Thank quarter $X.XX share the diluted from million financial or up in for $XXX.X with $XX.X X. data quarter Selected million on Net compared adjusted for year, $XX share income $X.XX fourth or fourth Good the share everyone. $XXX fourth $XXX.X million diluted the interest David. is Slide the in quarter was for $X.XX up quarter quarter. per linked

interest While and quarter. was from sheet mortgage loan basis continued year driven linked the quarter negatively core that by X.XX% from linked earning quarter due asset X.XX% was $XX.X quarter, balance well liquidity. deposit $X was primarily reduction was compared Total NIM in the due points decreased to fourth to offset last other fourth million of during growth. than was the accretion, reduction growth million margin all cash as the the asset this accounting as X The with income primarily The banks in linked accretion X.XX% for by increased by in warehouse net impacted year-over-year continued at funding held compared costs increased in in million fourth as more quarter as purchase adjusted by noninterest loans quarter. the income the yields for excluding $XX.X well to quarter lower

mortgage billion We loans mix fourth X related While our continue impacted instruments XX.XX% in $XXX,XXX to banking an consolidated grow contract with on XX.XX% derivative fees margin points were basis $XX.X noninterest out by Slide production and the borrowers was for slightly, compressed ratios organic by mortgage paid XX. only by quarter, the quarter or unusual capital balance of hedging capital quarter. Noninterest quarter, presented on ratio X expense increased of in $XX.X Capital up Total of as because expense growth fair to totaled $X.X pandemic million Fourth $XXX,XXX from accrued Tier two December from to million during the for to of linked $XXX gain Slide $X.X of the of linked shows quarter. XX fourth rate deposits total and equity strong basis $XX.X to X remains in value sale quarter. treasury ratios remains Professional PTO the are due quarter. million includes PPP increased In million approximately sheet revenue the charitable the items the and also the terminations. and increases million points quarter million adjustments fourth on driven due contributions deposit quarter. as the increasing XX.XX% on for the the deposits by were common ratio end, annualized the increasing costs. $XXX deposit of to XX. an company's estimate increase

$X.X our it portfolio. shares. the repurchase we mentioned, will during in loan over the quarter, to million David concludes utilize fourth my discuss That acquiring comments, As turn I stock Dan did to plan

Dan Brooks

for quarter end, linked $XX.X at down mortgage overall Michelle excluding loans from the investment slightly were Thanks, held purchase quarter. warehouse loans billion

$XXX.X pandemic. held loans decreased a result of PPP dislocation for economic Excluding by the as million year-over-year primarily million, caused the loans investment by $XX.X of

originations averaged the warehouse to quarter. from the million $X.X earlier While estate for purchase continue in new $XXX.X elevated commercial show from the billion real Mortgage year, loan loans pay-offs recovery quarter, loan the fourth in from remained up quarter. linked

The environment. of only an robust XX, temporary the loans overall conservatively XXXX deferral the for our of CARES number received under strength credits detail represent largest This deferral been loan confident active Section Our loans on payment investment. book. remain interest demand X.X% and provides continues with loan rate the $XXX.X mechanisms to payment January due XX Slide mortgage are on of loans additional the balances includes $X.X of as active pandemic, just XXXX. held Loans million warehouse see group Act. during of Of remain low remaining billion that relief we have in payment restructured this that deferrals to the pandemic modifications. of hotel deferral underwritten with

$XX.X charge-off million as overall increased the against a estate quarter $XX.X that of annualized continue additions Our loans low the to real charge-offs loan the of the in for prior $XX.X [ph]. driven million, $X.X at primarily million fully energy reserved last X.XX% energy due the that reflect offset linked had assets as previously the well assets prior two quarter. million were totaling XX commercial credit and December and real estate discussed quality assets remain Nonperforming the mentioned total at in metrics XXXX. quarter nonperforming addition portfolio the was XX, over points been by discussed basis renewal been of charge-off commercial of by that fourth energy has million with strength loan to a $XX.X quarters. total or of These were quarters, Net

date of SEC indicated know, record as X, to CECL As with earnings March January defer of XXXX adjustment adaption we you not December of our an adapt that therefore elected The early has will have and returned date as object X, December to and of adaption January date. adoption we XX, last X XXXX. to Day it On to CECL they the legislation adapting the elected expectation extended XXXX. of XXXX new XX, the

These we provision I will loss Our was all model forward using incurred loan XXXX calculated use seasonal and the to provisions. the have are going morning. portfolio related this XXXX comments the model for

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

David Brooks

Thanks, Dan.

XXXX, of Most performance and to environment. Looking most. they us year consistent unprecedented customers importantly, deliver our our an serve financial us when at to us need allowed communities risk community model and another the effectively banking manage back support operating enabled despite this our

by our are We our enhance that per share continued that growing program. share, also book repurchase tangible shareholder value reauthorizing dividend proud to and value increasing

encouraged business value our forward economic and the to footprint. uncertainty company line ground join Thanks now our again the Operator? win we new ahead, growth We'll are for year seeing time seizing for to Texas Looking Though across shareholder by continued what creation questions. taking opportunities Colorado and and we're call to to new and unfolds. we open remains, is in the today. on in the the well-positioned participate look as recovery in

Operator

you. Thank

Instructions] conducting Our question. Olney of with session. question a We proceed with from question-and-answer now line Stephens. will Matt Please the [Operator your comes be first

Matt Olney

Hey, good thanks, guys. morning,

Dan Brooks

Matt. morning, Good

Michelle Hickox

Hi, Matt.

Matt Olney

on originations love for pay I hear pretty growth the and to the pushes the quarter pulls to quarter. and ex-PPP expectations fourth about the warehouse. then the with in XXXX. fourth with loan Would immaterial core this want in downs, respect and to start Looked

David Brooks

fourth paydowns amount a Matt, continuing we quarter. had large in headwind of from the

loan we or year, the fundings I the we to on of booked our positive and of relatively in and XX that had the were We for in billion we were billion the payoffs of XXXX We up believe virtually positive Our XXXX. so, back total flat being billion. ended And fundings around end year. about approximately where loan growth. had $X flat year new track. before actually at $X $X.X compares

the less the year. year be than January. trending So, in in the That The early down. signs was cover growth had. we ex-warehouse and early up the here here positive and said, loan ex-PPP over that falloff We some XX, to loan growth but had we're seems fundings seeing XX%, in XX accelerated payoff the payoffs positive early

to can encouraged We upper for a we've significant for Texas. we're did ex-PPP that Commercial XXXX this a market mid-single in XXXX entire which team around and we're [ph] we digit and beyond. of [ph] here Matt, we in Head Very year, talented her planning single XXXX. before, really we loan in So, has also, around in a to is for what Market somebody are digit in for then been indicated the going this and we've normalized that career believe who a environment, growth our Middle build an markets ex-warehouse and hired executive to accelerating

and as of the side well that we will think to digit. long the yield pandemic, were to adding, single we're well at upper rates commercial team which Matt, on grow a in in, the term market middle that the the combination at that continue prior retail growing we're to as is ability us we investment that all building this as as So, markets

Matt Olney

And appreciate then warehouse. the that. wanted ask as follow-up, to I Okay, about a I mortgage

search. what average beyond I love get the balances ball here just year think Would says for crystal volumes strong $X.X this trying and once will said up about out hear out Thanks. around the current billion, figure we the you the to a warehouse. again the where outlook were sell to

David Brooks

by you We these with and funding and to to will, strong volumes move important with, in you goal able team about in Yes. if up these really before off, of building fourth strong take other their been with from tapers essence, is companies thinking in that to companies we've quarter. the as feel as that, to doing of feel the they the Matt. area, quality relationships the the volume good leadership continued Matt, quality they that you. relationships the said, that about in really that been the from take away built The were like away We're so it were stack, participants build we've the mortgage be able business

much it first that lot regard, expected. comes our down this billion early about of think we we in have the as said, would average that we're not average, think seeing a made we in landing here place outstandings $X progress and come as we year So That good have that quarter the market a our is for is for planning us. as on down

outstandings So the than little will first billion. higher it now, for that quarter-by-quarter. around maybe in be Michelle, Right $X like a in is billion average thinking quarter. planning purposes we're $X it that, fair? But looks

Michelle Hickox

Yes.

I think that's right.

Matt Olney

improve in months? sneak color stabilized, it or if Any whether I on the one more few all it's If last warehouse. settled the with could or pricing, down, at in

Dan Brooks

pressure look it David us will I been pretty is pricing say, we pricing continue holds to Matt, we relationships warehouse think now. the at said, a there, good Dan. that position, but that expect always I There's this think, be puts I'd The well mortgage for in we and as built as this the year on that is in on stable.

Matt Olney

you, Okay, great. guys. Thank

David Brooks

thanks, Hey, Matt.

Operator

you. Thank

is line proceed Please Sandler. Our your next Milsaps with with coming Piper from of question Brad question. the

Brad Milsaps

Hey, good morning.

David Brooks

morning. good Hey,

Michelle Hickox

Hi, Brad.

Brad Milsaps

start wanted with asset quality. just Maybe to

thought I you around adopt how in would same around do would impact that think about kind you there be I first, thinking provisioning decisions adjustment and did you the does your guess, that million about be $XX you're an guys previously how of think XXXX? when or CECL.

Michelle Hickox

Yes, Brad.

now, Day our X, which Day are adjustment as X. we XXXX, different going So, to a January is of report X

status $XX we're the of in process that loans. I number some that we different It what adjustment. we finalizing those we than have about at It that making of anymore. on sure X. primarily based don't know of larger as less those disclosed shouldn't have PCI if that last the PCI XXXX But in We're because loans that. year did looking million be be for be paid that a little today, of would we're and an off So, accounting we could expected number correctly that much Day during

a this on So, adjustment the at reserve. my top have million of what be $XX in would to point, best we guess million $XX

Dan Brooks

year. For this loan loss provision

Michelle Hickox

think I concur. And Yes. Dan would

and I think have we believe XXXX. to in expect that reserved we are significant fully wouldn't provisioning

Dan Brooks

I agree with that.

Brad Milsaps

some sounds you of few Michelle flat, can expenses quarter. might absent kind That's your kind great. writing then And have Okay, helpful. that expense was commentary. It see quickly roughly a things around and what this like of been of maybe

how First, in I going And is guess, fair feel would a growth that kind assessment? you expense of year? then secondly, this kind of about

Michelle Hickox

Yes, accurate, I that's think Brad.

million a I going with figure at go earlier. expense look we at mentioned guidance us run then And puts in for X% that you the if core, the expense the contract reported that noninterest about in will that growth XXXX, my core you have expense it and forward. $X.X $XX does that noninterest rate still think million If that in and but quarter terminations schedule, we of I include PTO our $XX.X million

Brad Milsaps

Great, bought the of final and that for you small amount fourth back stock David, a And that's you in mentioned maybe quarter. question a just helpful.

you of capital [ph]. with the kind buying of potential Just with do here around saving stock kind consider management. M&As your the in Just curious think a XXXX may use? guys back be thoughts trading better shares curious or capital the you Would for

David Brooks

Yes. Thanks, Brad.

the pretty the in said, high you best use keen very with the stock side, know. price we're robust. still been that markets pretty, trading sellers an knowing our mentioned that is quality are expectations in history as public on below and a the company from as have That is volatility in view other stock Xx tangible, M&A, Our alternative on which our you

It And at we more eye our on think we like it lean tangible, stock Xx we up. I so, at M&A of then feels should and be below with more an it balance M&A. strategic to tangible, active toward, toward when north to hang Xx began

So, outline. that's an

stock vaccines is specifically about when about we'll clarity this active a your pandemic fourth behind when now had year now a of regardless in when and example, we we herd going super an everything, There's so below will better rolling early as handle elections and on little the I a tangible. happen to election we think the our XXs quarter there, we be out, us, risk, immunity more the have that. get in trading Xx view the lot be and stock aggressive yes, our So risk just trading to than more was in were pending was what hesitant the to all

So, hopefully gives that little clarity. you a

Brad Milsaps

queue. I'll appreciate I hop color. you. Thank the back in Thanks, all

David Brooks

Hey, Okay. thanks.

Operator

you. Thank

proceed Gailey Our with from your Brady with Please line next of KBW. question comes the question.

Brady Gailey

morning, you. thank Good Hey, guys.

Dan Brooks

Hey, good morning, Brady.

Michelle Hickox

Brady. Hey,

Brady Gailey

wanted but out fees couple on that's sale it side on $XX of the mortgage. your other the you adjustments if looks hedging back a in mortgage traditional been down like fee warehouse, to of about mortgage And ask quarter. million Not last quarters, I a and running top the income. gain little the of

very that you it's just see So, but little that forecast fees into do XXXX? comes level. we nice a to a much know XXXX, market I downside down as tough bit could versus XXXX in in mortgage very, how think

Michelle Hickox

thought for because to in wouldn't we group previously again got added into to had we think and that bit they back a been built I and going really we've team where what takes get is before, so it to you Usually, good. Brady, on can Maybe based is volumes as of January they really seasonally tell a their rates. unusual. said, because down is it's you were volume really December, still mortgage which through hard Yes, I that were sort bit go lenders. predict that that them in from out it's they where

they go volume for the less we're for calling good what first continue but to thinking year. have really that volumes, of down that's anyway. they XX% back half to I expect the year this not will we're could So,

Brady Gailey

margin. quarter, compression down what that's into PPP which about still that happened. the sort right, how fair. XXX from should we compressing this of of right is to know any forgiveness? excluding All been about Kind Michelle. think of noise then, is And think modestly, base margin XXXX? core margin, it topic the has the on way the talking about I the margin you've Off

Michelle Hickox

most first income all and we margin, will accretion, of am talk which PPP excluding our is fees, have will PPP continue accounting, purchase I which core when and It we this year, our second to get quarter. our first about a going think for of we round is couple modeling our to and on quarter. the anticipate a probably Based basis outlook compress in on points this, margin probably of

it compress X early points if my year, outlook that's basis over anyway. the So

XXX. Just overall lower currently excess we average loan our points are XX yields that to on our book given of invest trying our yields are those than basis about coming some our securities currently to are in liquidity XX yield,

not better while So, is what is great, that's we're it than at. earning

interest our a to So, just trying boost there. income bit net

Brady Gailey

for think M&A. be it bank sellers' you your is stock if and in especially Okay, traditional may for pretty seems look wanted expectations kind anticipating to continue to I right. your market the buy M&A I then just bank a It Xx, about maybe in still back. me, you game. to reengaging David, all guys everybody And robust of to But year just expecting robust Texas. are under like M&A bank then finally comments just your heard fairly be XXXX about ask I

on you unfold M&A IVTx you will bank color So, active? how a be think bit in little will And maybe do Texas. just think of

David Brooks

Yes.

past. market a I'm have Brady, on in by across Our desire to as the that. going are lot be discussions active, the of we and encouraged is There been

second quality given markets not the $X to in hand, Texas probably billion in we That's in of the the eight I'm year. and high do list are I encouraged, $XX Texas list. really or targets are On the other companies that, long first major it a XX M&A there quarter in companies Denver. through is asset here going involved, quarter, It's and in think our billion and be to call

I to think it's just early tell.

can am smart and Brady, depends and how it when to to are. be of three to a part a we as material company. on opportunity. growth quality alluded what is infrastructure We're going been stock jeez, building well company. we That's But high of kind of where and and are that but our still doing right the the wants of of this what on company. we year, grow that's strategy right not practice for that an company. looking you company, we growth high want back billion first our deal sellers' billion don't or then we're don't platform a say, we're some I $XX so on of focus do believe as acquirers, market of with happen getting be much and on executing building to do do here the M&A.' prices That's smart said, to than is Independent. deal in kind market to to, our our company M&A rate. that core a how which need to the just we to to really be still with trading us We're get will and optimistic is, a the to So joke we do deal $XX we're going company we the we're a out doing are core our around Different top going continuing -- that We and more quality -- need 'Oh, generally robust for in always layer that organic to middle retail really the organic years build expectations four to

to realistic has great and work going, relationships This also continue ready. build right. timing ready.' the We're out aren't that there we're then but be just optimistic three 'Oh, there companies four or and I'm So, to about it takes

Brady Gailey

makes sense. That right. All David. Thanks,

David Books

Thanks, Brady.

Operator

Thank you.

questions. Rabatin Hovde line next Please Our proceed of question the the with Brett is your from of coming Group.

Brett Rabatin

morning, good David, Hey, Michelle.

David Brooks

Good Hey. Brett. morning,

Michelle Hickox

Brett. Hi,

Brett Rabatin

back And asked, that growth been be but I loan you hires, organic what thinking think business? on talk Can you prospects XXXX? about think story. us in growth the then loan in organic questions then maybe maybe have would the inside could, Or for wanted growth growth circle and my bucket year be you of the just late to around and to Most lines going XXXX. you color core Is specialty if the about coming from? for maybe mid-single that how give digit more of on some might

David Brooks

Sure color we'll give Brett. happy more go out build building that, continue to on to along did in further and We team. out the retail

a and in hired on Kenyon leaders leader strong we've had We team presence So, there, strong Kenyon. Warren with been the of a side. a Colorado already retail

the the Cason, days, So, is be middle-market active. of look It's as I particularly where -- that's as to we year, as the we tailwind on this She us, the second of early lending. The about made and of Texas Houston the building expect going Texas in I an well. growth joined very middle half out, They're executive Brett, expect addition out was should when mentioned have growth. Tiffany believe, some hire now. year beginning in side this we lenders is we loan in time with of kind I loan her year the We're of steady the the but organic example team well. second half by building out earlier, particularly market across long biggest talking recently who commercial team

and be it our going the than to of is expect XXXX loan we balanced more into second growth here historically in has. half think we So, XXXX

a great our current Although below points we're what opportunities transactions, more so. rate Michelle as a XX expect said we're rate real a basis -- at seeing loans, to our we're in still what but of and adding seeing portfolio floating little we adding below flavor a is little lot estate adding little what or

basis competition. ago rate. it's XX were early not pandemic in narrowed points. adding at the XX So, we guess the I points below with loans X That's Last portfolio XX to basis summer, a now our or or year and

or about a Michelle takes factor NIM. it we points, contributing basis X $XX yields $XX.X below a around to at and by when that, said as the the month that's think I an can add But you XX portfolio your million down we're to the a then basis million points billion what adding jerk overall or have book So, -- and loans quickly total doesn't for loan while long XX math yield. in as $XXX

Brett Rabatin

back just margin color And Michelle. margin, Any appreciate Okay. I on degree, color That's predict the the know helpful. in How the you in out half and quarters? maybe expect -- the play forgiveness discount the the accretion state of first to -- maybe some the any at half PPP it's first on the of the but margin year? of around the stated core I any to that then year commentary, and for the to then thoughts early difficult around least

Michelle Hickox

think going to it's that come That Brett, most quarter. this we now, right PPP of number,

at will of I continue our the amount basis continue second accounting be similar accretion, and it a increase came rate, in will lumpy. think go be should continue on this It that impact. down. payoff good really just can't I predict will Purchase points quarter. will to a had January, through bit have that It a a few We the margin.

in I continue million than think it little That's the was fourth to going a $X quarter. to trail. less

Just a look stable. at pretty I what at would this has it going dollars become couple number That down is of point. quarter a thousand expect hundred

Brett Rabatin

great. color. all Appreciate the Okay,

David Brooks

Thanks, Okay. Brett.

Operator

[Operator Michael of your question. comes with the Instructions] Please from Our Rose with next proceed line James. Raymond question

Michael Rose

everyone. morning, Good

David Brooks

Hey, good Michael. morning,

Michelle Hickox

Hello, Michael.

Michael Rose

of quarter. balances in on some They're them? question kind really COVID-impacted had wanted as low Was in a this still that loans, but classifying classified the the a increase Hey, just of just increase. Just it sectors? to percentage of I see drove what

Dan Brooks

noted, slightly, quarter. would A might you But as two Yes, little of of in some Dan. that. would there, primary a is be expect the part hotel this Michael, really Hey, from third was up as you the bit categories. C&I it be those only

Michael Rose

And maybe last just one then me. Okay. one for

back just So to the warehouse. mortgage

to investment during maybe might So, going little a any growth since there kind this it side, ago. held et period, years that we're more couple kind Thanks. at essentially reason to get bit than warehouse? is cetera? of of customers, quarter update give for a every business you it's want us least is to If you guys on been gotten lower number the just can has assuming an you of And historically grown a be in aggressive of

David Brooks

know to later don't Paul hand, today to that number Michael. of can right that customers for We I you get sure. off get can the you.

your the business and because proportion warehouse Our it is belief it's we're a volatility, the like to it's lot. terrific right we when business that core in a mortgage your income still and a around, sheet to is cautious balance

we great but don't have be in We customers to $X it want or billion. billion $X it,

So, view around where in one if $X be take not I aggressive a we now wanted there to want look, choosing do to is -- be. to to average be our be. right is opportunity just place an good We outstandings think core or and are give billion that to is business

Michael Rose

Okay, Thanks, that's had. all I everyone.

David Brooks

Thanks, Mike.

Operator

for hand back comments. Thank at time. management over call would closing you. no to like to I questions any There are this further the

David Brooks

hope in-person your everyone Call. Fourth allows Quarter are appreciate road us appreciate joining to out questions, this the interest further no the I in Bank Really you there everyone we'll Earnings in later be if today Group in and seeing Independent and on the year. world sometime conclude

be the in meantime, So, well.

Operator

Thank you. call. this That does morning's conclude

a your your participation. disconnect time. at may lines Thank Have day. you this great You for

Independent Bank (IBTX) 2 Feb 212020 Q4 Earnings call transcript