Earnings call transcript Q1 2023

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Operator

Greetings and welcome to the Independent Bank Group’s First Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ankita Puri, Executive Vice President and Chief Legal Officer for Independent Bank Group. Thank you.

You may begin.

Ankita Puri

to Bank welcome XXXX first and call. earnings morning, the Group Independent quarter Good joining us. you appreciate We

The press on our related be website can earnings at release and ir.ifinancials.com. presentation investor accessed

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

guidance a guidance results, the update give about we beliefs made at publicly Please future statement the management's no note is statement is assume guidance. time and if that of to that obligation we

we the release. comparable to measures several call, most directly included financial GAAP this Reconciliations discuss measures the considered financial our in rules. these SEC's are measures will to In under financial non-GAAP be of

I'm Vice joined end and David Dan open by this Chief Chief At our Chairman, Langdale. Officer, the Financial Paul Brooks; to of David Brooks, their Chairman questions. Executive the and Officer, morning remarks, call our will our

With over turn to it that, will I David.

David Brooks

today. Thank you, Ankita. Good the thanks for morning, call everyone, and joining

current related ongoing protracted believe reported was involving it legal avoid share, with on resolve acquisition payment quarter claims settlement International distraction The GAAP loss million since as of litigation settlement settlement risk net we disclosed was first a the we that could connection the the the and in and Houston. Stanford enables litigation. all that Stanford previously of This of the best includes us February which in shareholders’ interests diluted For impact cost, Bank XXXX, potential onetime XXXX Bank and $XXX $X.XX to expense related the per future settles entities be our will entities our of and inherited $XX.X XX. to of or million

income $XX.X Excluding or net per adjusted this onetime $X.XX legal the share. expense, diluted million, quarter for was

Our the challenges and environment. to macroeconomic continues healthy interest despite by presented business core level maintain the volatile, profitability rate of operating a

underlying a balance asset quality non-performing and points Our until a and XX sheet net businesses of by four annualized. charge basis just buoyed strong just also resilient assets with assets points basis

estimated points the funding TCE interest X.XX%. In and addition, we capital first total for to XX tailwind consistent remain XX.XX% of continue the which our levels basis by an the cost to We to repricing in mid compressed of ratio loans pressures ratio This our quarter first in maintain anticipated points than sharper quarter a of to basis by robust net XX continued the loan should XXX. [XXX]. sevens. expanded with our capital maturing repricing be Those adjusted by encouraged margin yields, a

million, down the due more is $XX.X initiatives. from the accumulating linked of of non-interest the benefit $X.X will yields discipline benefits pursuit loan continued million immediate. incremental management expense expense of expense quarter was quarter for Adjusted gradual, be realization far from to While our our more higher at the

financials. call on get turn details And the with more over I'll Paul that to overview, the to

Paul Langdale

which the balance FHLB by excess on held you, $XX.X assets increased Thank David. morning $XXX billion morning, sheet by And to the funded by was total linked good quarter advances. driven this primarily Starting from short with everyone. balance sheet million term liquidity

which and with gearing conservatism the at sheet. The of increased $X.XX cash is of balance in macroeconomic in to abundance our to strategically consistent an company decided out billion sheet environment On quarter our liquidity balance caution the increase to end. position of response philosophy

sought depositors balances deposit bearing quarter, as for their yielding higher On the non-interest balances. side, liability steadily alternatives decreased cash the throughout

Quarter the occurred year during deposit $X.XX at saw quarter bearing end end XXXX. end as the balances billion, Average were balances billion prior bearing to rates. February non-interest billion bearing were the $X.XX non-interest attrition first depositor of $X.XX from and higher down non-interest most of

balance of our these were portion wholly management. private A deposits capital moved subsidiary sheet off to owned

AUM private During increased the of quarter on capital liquidity deposits flowed million strategies. $XXX quarter, approximately deployed And management management based their management million, largest $XXX in by to to be capital market private record. overall and

recapture for vertical to have future. deposits trends. the these of sheet ecosystem, our down or From $XXX the early on year. bearing February interest linked and mostly deposit deposits reverse in XX end, and branch X% bearing Since this to funding Interest quarter some funds were these XX trend of the yield deposits seasonality result remain expect for a branch the in Slide we behavior was the opportunity increased. through balance in quarter, million the which shows quarter, seeking

when February of and and X%. The fell quarter broader impacted the for CDs million of specialty below both in meaningfully brokered of increase rate was and mid-March average weighted X.XX%. market opportunistically liquidity. added the non-brokered CDs first pricing $XXX events The industry was executed brokered onset rates brokered in The in availability

the this of term of non-brokered deposit. During treasury utilize we time, short less This often instead FHLB $XXX advances supplement do included specialty to replacement funding. expensive million

from funds increased year $XXX balances end. million Public by

meaningfully with fund anticipated, strategically of to we following As as has dropped funds begun the broker and end, appropriate. have FHLB quarter brokers maturing replace cost advances

decline second begun X.X% second funds quarter, of So at this $XXX utilization average and added during tenures. quarter. an have the nine million rate we the to three, broker six months Due and has in to far FHLB

total deposits, As at funds XXXX. XX, noted public billion March fully collateralized excludes $X.XX or XX.X% uninsured XX, deposits adjusted deposits of which slide on

have $X.X of the Funds billion all FHLB, cover As uninsured capacity borrowing and end, to quarter we the enough lines, of between immediate Fed Fed deposits.

$XX capacity access to of $X contingent contingent over billion. capacity, maintain funding total deposit more to than additional billion also sources brings with We multiple of which funding

a company to line end facilitate payment million $XX that had million settlement holding the subordinated debt our as expense the David's in to as during by to of the credit legal well repayment drawing floating increased of discussed of $XX.X result as borrowings $XXX the the moved Other redeemed quarter the remarks. of facilitate on at quarter company tranche million of

of of capital ratio end. minimums and healthy a million company Since tier balance repaid end the quarter well Regulatory credit, equity ratio a in we $XX.X the line of by at one with capitalized this remain ratio of at quarter one the end, the XX.XX% excess expect quarter. we total holding third and tier and of XX.XX% common on have capital X.XX% levels to retire remainder of of well

ratio X.XX%. strong Additionally, remains at the TCE

impacted the decreased and slower the and $XX.X the statement, $X.X income interest income XXXX. to costs million on net of from funding Moving increased from during growth NII quarter. was million by quarter loan the linked by first quarter

to production While yields and pricing. adjustments from net growth gross quarter first in was continue benefit seasonality impacted by

loan sheet. higher average linked income of well interest as accretion Funding of net discussed The were quarter as impacted on XX the costs balance balances remixing yield levels and bearing points the for as from by was loan liquidity during held PPP the X.XX% of quarter. acquired basis the bearing interest quarter non

decrease claim quarter. quarter, The reduction which $XXX,XXX income the expense the portfolio. benefits and as on $X.X BOLI increased $X.X expense benefit fees. million drivers linked related Adjusted was the in included lower the expense to of versus to by in of professional as primary interest recognition million, the compared Non-interest linked salaries of million non-interest a a $XX.X well were lower

expense additional non-interest opportunities through initiatives. we and all discipline to strategically are will continue reduce I explore ahead, Looking targeted to the comments maintain today. expense These have

call over the Dan. that, So to turn with I'll

Dan Brooks

Thanks, Paul. investment loans the Loans million $XX.X were held mortgage quarter. billion X.X% $X.X annualized or excluding and PPP quarter. Loan in the for first growth for warehouse totaled

subdued first quarter quarter was the slowness well due during as seasonal lower the markets. demand production across to New as our in

commitments, quarter, the million growth, $XXX during of originated we funded Despite which new the during lower quarter. million and $XXX the of

continue We mortgage past the same economic guided million Average we in pipeline, and that $XXX with at loans has quarter. remained us discipline linked opportunities cycles. purchase to warehouse see through continue the versus to underwrite stable the

continue remain for business flat is current expectation at to this Our to levels.

million estate to end. metrics annualized at $X.X the continue four quality quarter. during basis Total to quarter. strengthen decreased first to an recognized assets the $XX.X X.XX% due point of to real for total quarter million non-performing Net charge quarter. totaled $XX.X or decreased the impairment Credit just Other owned assets the during of offs

we to enter continue the the the see resilience as quarter. volatile the our confident remain face of We loan in and second portfolio macroeconomic quality credit strength of exhibited in conditions

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

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

David Brooks

Thanks, Dan.

rate fixed opportunities continued and offense complex gross ahead, play navigate remain macroeconomic strategically our to the both focus on optimizing Looking focused loans on by base. continue remain and and to encouraged franchise production loan the and of a repricing we defense will banking our landscape. We deposit to on we

lower was current second the seeing While still expense year. quarter, our base will we're seasonally the remainder loan and in X% the for of in grow we annualized to the to at expect In loans production rate X% continue to pipeline optimize for solid environment. QX, the opportunities

the We expect down course to achieve over will run allow of opportunities the to incrementally 'XX. rate us that targeted manage expense reduction

us questions. you to Thank now time for today. the join We'll to taking line Operator? open

Operator

your Milsaps comes you. a with answer first of Sandler. session. line [Operator time proceed question from with Instructions] conducting and question. At question this we'll be Brad Our Please Piper Thank the

Brad Milsaps

Hey, good morning.

David Brooks

Brad. morning, Good

Brad Milsaps

Thanks sort of at my provide be just us end Paul, the quarters. how questions. for deposit the parts a able quarter. margin is sheet of loan curious even taking think I'd maybe rates. moving I as of of the we curious, kind with as couple lot rates, if was the you'd balance you all that to spot and to of movement your about next spot move maybe might And sort inform be outlook the

Paul Langdale

happy some to Brad that. on Sure, provide color

pace last the earning of Xs. are our on in seen we And what that the for coming on months. based the in side, reliably that we yields the We've loan to On continue pipeline. see expect couple asset mid

marginal tried we're under to available in strategy. the the market sheet is relative our relative side, just liquidity to that manage and to We've adding that to funding the rate balance our deposit the On X%.

policy. our on course of so hold at to depending funding expectation And that's that trajectory the monetary level, of

Brad Milsaps

were bit interest little Okay, X.X%. drilling total maybe XXX costs cost a little had over I mean, further. a of points bearing think basis I around down deposit just you

slowdown? about the at parts the expect where If of in the are beta first thought the what to given saw quarter, you something those seeing the quarter? pace kind you you of to the numbers end you of would all similar Or moving moved

Paul Langdale

saw betas The were bearing that by first significantly we non-interest in trends the driven remixing in bearing. Brad the the quarter, interest

behavior seeking seen the We of those following It yields I begin yield quarter. has non-interest expect NIM interest quarter QX first January beyond funds. that bottom makeshift we've funding quarter accelerated was asset the us in out bearing into magnitude didn't as February. pressure coming by bearing leads really really QX happened the climb. of fourth quarter and a So in But to anticipate costs, driven first in in the of in earning and that adding accelerated stabilization NIM think out expanding the to and and will most end

dynamism So that the in the the compression given it's hard QX and don't we to in anticipate certainly But of give environment. kind we an range betas exact saw QX. and

Brad Milsaps

to that final quarter for just year? more to been federal step talking beta weighted repricing your characteristics book move in obviously, about through continue any the of going this we versus a as the and expect gradual the of quarter, you up you of sort Do Paul, we're one be just you've loan kind another, expect the loan follow climb to of XX% up heavily while. and kind around And would

Paul Langdale

of It's and back half 'XX the the the in weighted the of year. and than heavier half front year

usually, in quarter. have We first seasonal the especially slowness,

we the certainly repricing reliably most that in first in quarter do of is growth. So the the less impact yield. and see I those more than when will earning especially see the say pick expect half of net the bulk we to that the amount up to growth yields given get and that know back have production the growth we loan we the loan year will more guides have, assets our we

Brad Milsaps

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

David Brooks

Brad. Thanks

Operator

you. Thank

question next the from with Truist of Securities. line with proceed questions. Our King Brandon your comes Please

Brandon King

good morning. Hey,

David Brooks

Brandon. Morning Good

Brandon King

see know the on had but deposits. your growth updated loan for deposits before the and goal year? for deposits I question the of to get outlook to with thoughts want you See, where trending is I another match remainder

Paul Langdale

be what to compete produce we since And we And ability on we've making to to stabilization we're Our growth. fund we relationship seeing defensively focus focused loans successfully remains to factor and teams growing deposit attrition don't the we QX really both deposits we've produce our deposit tools necessary We're into ability Brandon to that equipped we market. some that end. believe do can on that with core with lending also It's to the we decisions. and base. to also in grow repeat offensively against deposits. an important our believe that note in the that very going seen expect translates Obviously, accelerated saw can deposits sure in because QX the loans quarter our

given grow we've the tasked in deposit [indiscernible]. market, position what we're what given a in and we're we So seeing teams to our with good think

Brandon King

do bank. the happening? for deposits moving mentioned I kind far do And balance of kind think deposits it of Okay. What take back? would as the commentary we're know anticipate to you when as off you come that those sheet, And in within you still the

Paul Langdale

I think of depends specifically liquidity products of the on the treasury the a later there yields in trajectory entirely out management on market. strategy. and treasury and policy treasury the monetary it Most yield based

we some have the storm we economic hit on see horizon. rate, the as the So especially if terminal Fed clouds

be very be for policy. again, will it'll on inflation rate competitive monetary to an But banks the there market. versus of the think and I on opportunity just trajectory treasury depend

Brandon King

I deposits internally you coming encourage doing later. and guess, to than sooner those rather there's kind nothing, plan back Okay, on that of

Paul Langdale

driven suite with incentivize they're of on understanding customers needs, customers them idiosyncratic Obviously, what for. relationship that their think specifically behavior sheet. that that a cash it's of individual the I they're we a really solutions now, as to have balance really the strategy But right and and to we focus return we looking customer fits and depends provide opportunities total on the of it to for. want looking beliefs what on the

Brandon King

hop the queue. back will my Thanks taking in I Okay. questions. for

Operator

you. Thank

your with Our next Group. Hovde from with question. proceed question comes Please line Brett of Rabatin

Brett Rabatin

Hey, good morning, gentlemen.

David Brooks

Good Brett. morning

Paul Langdale

Brett. morning Good

Brett Rabatin

on you're the what think wanted on expense just to on obviously I guess you better start XQ focused trying you achieve the revenue And to get maybe, a way about expenses are ratio Paul what year. or Can about the David core something and were side? a And to this on think done side? a than the you'll I maybe talk basis from expense here little first I efficiency to, levels good relative expected. you're Thanks. in the numbers on that

Paul Langdale

expense Sure, expressed to Brett. have remain calls. last on happy I'm Obviously, is the discipline, several expenses. we focus to talk continue we that that to clear intent focused on a to notching incremental over something

they remainder look are. million you lower the are expect be $XX our they bit if would the around expenses a expense in year. seasonally at rate for run So than typically of QX the little to I

have Midway our through quarter, the first didn't we merit increases.

going can under forward that does organization basis. expenses a we're realize savings the that base. go that and we making on of every is upon that the opportunities expense our runway being the we Obviously, The across magnitude be the of the environment. to for looking see rock sure gearing current we're and of economic mindful So impact trajectory dependent

Brett Rabatin

That's And want that to sure I on then Okay. I correctly. helpful. capital, make understood

You repaid of million post Was $XX that correct? quarter. the sub-debt

Paul Langdale

a-- No, we it is ends repaid quarter at that though

Brett Rabatin

At quarter end.

Okay.

Paul Langdale

XXX. that plus three LIBOR And was month

purposes. modeling X% that for was APR little a over So

Brett Rabatin

plan the near would in So that be term? to the replace

Paul Langdale

be able tranche. not We to continue create little enough $XX to capital to million that replace

Brett Rabatin

capital due be what Okay. some trying just uncertainty. maybe level to focused Is with capital, any there And are I about kind would or in to a banks the later on? some thoughts target of this excess maybe that on you're And year, you environment? then generally, that specific ratio thinking capital running just think

David Brooks

from believe is let Brett, I a strategy is the me Yes., board it. and level, address about thinking it we're high just our where how what

of we up what's We to future that going into at 'XX to have level, with quarters the we expect as current our keep year few its foreseeable 'XX that observe came next we for improve constant finished Paul as continued level on with dividend our with, into and we said. economically quarter dividend the macro in the

but And the to [indiscernible] the where foreseeable buyback on what's be closely, alluded now place we're a a expecting watching what you for in least at active economy, approved, part the have you recession. We with with be future. that of not we're going in is markets to seems it pricing moderate

And half some rate back of declines in the year. the

that. around assumptions any preparing. making watching and not We're we're But

about any said, capital capital Paul ratio. that then And capital next I expecting, allow ratios think, to on we going as broadly, increase are, you just as where or thought we have continue quarters the Paul strengthen feel feel But good not to it. are, quarters. we're said, this the so good far few creep we add where to as to few We're and And additional we really time. a here to that. on we and those in Paul, over at up as next may specific sub-debt Brett, expect

Paul Langdale

add I of That's to north over talk thing of think something I would free TCE remainder we the that capital in only we to as have ratio increase year. The continue you'll the X%. see Brett is continue

David Brooks

from realized portfolio bond we insignificant AOCI we [indiscernible] and a a that this like that have we relatively the Brett at charge small fact time. standpoint, particularly Yes,

us puts So a an we good think in overall from capital that spot standpoint.

Brett Rabatin

so Okay, for that's much the color. helpful. Thanks

David Brooks

Okay, thanks Brett.

Operator

you. Thank

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

Michael Rose

To everyone. go back Hey, to my good question. deposits. Thanks morning, for taking

Thanks. does us if cycle. on kind where from just troughs can cost every of Any do that into of through bank, accumulate DDA trough then update the higher mix think beta you sense shift modeling where you're shift I you think deposits. perspective, like mix kind like, obviously and seeing a a

David Brooks

Michael. good morning. Thanks [indiscernible]

Paul Langdale

the question. for thanks Michael, Sure,

non-interest that the and attrition really earlier, of down stabilize. bearing of seeking meaningfully yield to quarter first slow the since the I begin pace accelerated was first As seen mentioned behavior due part quarter, pace through we've to

So be big the there based some rate, saw that we in itself. on on non to QX what balances we bearing could expect and see we the but all that today, move has terminal incremental pressures know that repeat down don't interest

wouldn't percentage non-interest although XX significant it expect relative book, non-interest of So X% maybe another I'd being seen a to the to bearing, positive it's we've QX. ratio to is I coming over any X% that if that in gradually run bearing come what down expect off today, months,

beta hike I will a with meaningful bearing to strategies that balances already earlier, From we've taking anyone, customers. to cycle play as of given of our standpoint, rate interest we this to be customers. to been betas rate, If a pay costs down, our passed mentioned make to of the since It on defense our care increases customers. slow deposit that our like amount beginning has our sure and would core it we're stated we

last interest see And cycle where And a right so I branch quarters seen those the now, sharper think book. bearing are have little you'll we relative of why betas us betas to you've that's slow. given in bit couple the over the meaningfully

Michael Rose

be you balance potentially that we those low continued would sheets Very would guys expectation moved the the balance you XXX%. ratio that on appreciate growth of helpful. coming of commentary to given year that keep I in sub maybe you and of deposits that. And, should through around deposit expect expect back I deposit the expected off that assume second have I growth Paul, mentioned think that kind some you quarter.

Paul Langdale

all that deposit reasonable XXX%. duration, and do the use of a use long strategy, products. us our do believe achieving both that ratio broker strategy gearing we our the the like shift, flavor employing with a conservatism the really the ladder are balance number maintain is under dovetails will among of we it above core well across and short a term strategically especially granularity something a in deposits mix deposit deposits, wholesale expect relatively and our benefit and book We really sheet. keep to different in And Yes, book, keep absolutely. loan deposit We to to deposits

do that's expect I you us think to over So the should quarters. to coming something continue

Michael Rose

And just the cost expenses, get can if the just definitely kind of me ratio, maybe finally, the to you context Okay, kind and grow just to as balance think how the into then you and when franchise of about cost investments back for do in Maybe funding great. rate. the we term saving how just now kind us that you have for color holistically, you of balance efforts on run that efficiency the intermediate of with profiles continue appreciate changed. expense maybe

color savings. some on how Just balance trying get investments you to holistic versus

David Brooks

it's given couple Michael, made infrastructure Sure, management same of country that but we've the obviously across over the investments Thanks. the the now, in environment, right every conundrum has economic last years. team significant our

improvement clearly to going our As we invest you technology continue risk management, of process do spoken like in know, out enterprise we've and away we're to strategy that risk there there. back things to about it in and build and from and that, our commitments not and continue

our we company. level is objectives as at terms highest organization, priorities assessing on clearly the the But division, org looking same moving of about high in our years, and of next what and understanding ahead that projects. and where we've then, those are time, just our going investment at, in the at by toward division chart invested are what We few our think

doing a healthy it's regular we're think through and process and then investing I investing anyway basis there. that on assessing a how we of So assessing, go then

continuing are to that we through process. So go

As going we you 'XX. fall. expected a to And that started it was be environment we difficult really know last just it in

a from cutting out it's or we our it. we how franchise continue value. term that And around cost that. so just long our be harms to to do expect not playing diligent We're going standpoint And anything

in team in are customer as the in for deeply our on dealing We've you terrific strategy markets. great are with is in business got national things markets, that is believe lines focused have day-to-day We believe don't those the our we're markets customers. We on markets interacting In customers as who with the our we base. really deeply field our and know, in. we our like

in we needs, need the to same the to And we have make being run high we've so customers time a and and invest the need. we're business running set that to sure said here. at that product and got doing And performing everything a meet mindful earlier, the our committed whatever technology we're And that. to business as Paul to

Michael Rose

the Appreciate Thanks, everyone. color.

David Brooks

Mike. Thanks

Operator

you. Thank

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

Brady Gailey

guys. Hey, good thanks, morning,

David Brooks

Good morning.

Brady Gailey

I about, talked components up you actually in the the [run could pauses know expansion. of think of from net Fed the how them interest that interest But talked do see net once have the But margin. we've past NIM about trends about overall from CRE the we've some know here? catch when margin, your here? you you you at you to] look think overall, and the do how I

Paul Langdale

costs mix So well the as shift due funding a the We QX Fed We NIM second see a compression cost rate in just expansion, above predominantly as don't little hit I in we we funding from QX, discussed expect quarter, is. it's some second the Brady we've from we X%. Fed was pressures. see NIM believe our that bottom where on see with the the assuming close it bit to of to the the than expect From QX first to that as bottom terms expect of of QX to less onwards, magnitude QX hard to quarter because the be saw the in to NIM earlier, do handicap peak terminal quarter. to But QX. will an accelerated exactly and do whole, decline repeat to do the see in

expand continue to drive loan and that'll those NIM rate to yields continue Ultimately, the fixed cycle. loans will our repricing through upward on

due book. little over loan different expansion four yield a nature next have three it's that So yield, the or our short continued We'll years. bit duration CRE to the of

Brady Gailey

cost or be you helpful. Paul, the that per on And cuts, any further that expense see cutting number? you your $XX for of then incorporate year. is decide benefit Does the that and to All guidance a just of that if further would cost rest it quarter million of do as right, that's now, did where to

Paul Langdale

number to Brady, the ability on our dependent upside that and identify really we it's be could opportunities execute but on There to them. to going be

Brady Gailey

for lastly commercial know the me you track market then big record years. be over over years. seems updated lot just and But And couple Okay, the next great of CRE I over CRE guys estate of couple commercial real on in have is next to concerned pretty Independent assessment. your of Maybe lender. a the a a about thought cycles

Dan Brooks

Yes, that take Dan. I'll one. good Brady. This morning is

to continue on that higher in see we in that As couple particular, you next to short, well can are the imagine, based it stress scrub potential any we identify that, and in to slowdown. portfolio will any an continue perform of maturing risks for and ones there it, that in the effort years rates in and confident we're

always credit to outsize you credits individual We've to any approach pieces have. As of that limits which a book. impact growing the employed disciplined holding our we've know, avoided we

through which equity, downturns time appraised difference. cash if a stays makes again on deal seen have rely we which and equity, in that versus We the

I banks used prone to trended not rents some do. We underwriting just up have We that think which know that. when and for been contraction sets have you in some have you issues

mentioned, know, growth part, we're those the the our seen repayment markets of strong in have NOI as you country, strongest as stay have with loan last in material are David increase in we and that vetted in secondary For with borrowers, which occupancy markets the over rents the we and years. sources most that five

service a coverage. cushion So strong and debt NOI the and coverages provide significant

way book in customers with all the have is going that some that the support have have guarantor particular, are sevens And up perform to been strong verified there will those that in of rates, fours most stressing say have the in book would for fixed next have I with We high years. rates with highest average really here couple indicates well liquidity. stressing the are and the the currently as been, of work to banks and few the in maturing those that

So that again, confident very point. in we this at feel

David Brooks

think, quarter. couple about out is is level. have to loans quarter of expected. to instance, be add sales, pay Brady, expected, at we of our by there what that sellers our saying of cap loan is were ons in mostly by downs for more we at we growth, one be first I right was that the in the the continuing driven may A little I strategic had in We that think in the level lower bit number a asset higher, playing amount driven rates generated but Dan unusual granular at the an what first the saw markets And than

for groups that instance lower are interest are and properties rate expect would wealthy getting are than on you environment. in cap offers our So there what rates that investment families

to making prices. it these I'm the the pay five since is we've been these three the and of as seen last So coming price the as that reset from speaks that's years, or or the underlying the to loans, asset And And robust with where made last it NOI it the markets. sales very strong downs is seen at have in growth said, since pricing today. are things loan reset strength point really we've we've Dan

different sizes much what just big that have that our average have our seeing to not there. we're I'll of CRE loan is are concentration what CRE again, loan just a final hold Dan And are make comment portfolio, smaller. lot than concentration large a holds CRE sizes, about the So said, or banks pressure emphasize our

many against We have many properties. loans different more

So only diversification by the but of within asset asset classes. classes risk not

about, are out as now, so right clouds the can play get that have right some and said again, And up. going horizon and different concerned see folks we potential storm it's So people to understand, it. we're investors to asset banks extent and a holds earlier, to I Paul quality exactly that how on and facing

hold any the And to just have competent quarters to on few continue seeing how it remain how in and ours very the we'll horizon and We the be but confident this not economy does. difficulties next will at we play point. out up. But see

Brady Gailey

guys. Thanks, color. good That's

David Brooks

Brady. Thanks.

Operator

Matt of question Our proceed Inc. Olney with with your Stephens Thank you. next line question. [Operator from Instructions] Please comes

Matt Olney

morning, Hey, thanks. everybody. Good

Speaker

Good morning Matt.

Matt Olney

I'll sure X% well. the you I'm as would the the below pressure assume that want kind the a the beta the NIV where third there that saw as quarter. take I If that moderates XQ deposit as up than quite a that if thinking margin assume first still of in and eases and of less about margin getting to outflow, bit second pressure that that I this and what talked kind into margin kind from a marginal. Paul, drops in the we that swing commentary quarter be in ultimately all cost I'm that too. on a far of the XQ fall. make thanks right I just topic about still of in quarter, the Thanks. deposit could

Paul Langdale

of we the going relative The variety did repay [core] redeeming had NIM at end execution to costs tranche part that well. quarter sub-debt offsets few of our as Obviously, is of Matt. a a depend as the borrowings noted, we last to factors I upon we have of that

So while should believe incremental reasonable a still around area compression, do hold it we some three. expect do in NIM we

So that's into QX. our expectation going

Matt Olney

Any on you for FHLB more a that down thanks And of part Okay, currently? color Paul. that what balance that, is, you kind recently. of mentioned pay

Paul Langdale

funds The me. advances I with we deposits March could replace front that don't on we than specialty front. short in deposits on in balance the half updated are back last we really we significantly and use did so our What FHLB the category. short right have growth the focused where is term duration two advances using both for deposits of very we Matt, selectively were pursued continue in of But in dislocated FHLB March. were they as cost core weeks broker higher of funding the today. that And the those brokered initiatives markets and to

waited So come added those those, started quarter rates those down after and we end. adding back at for to end quarter funds

Matt Olney

those of much And to Paul that as is that into versus last trade the you more on products that few FHLB? move know you specialty FHLB? for of note, how context how favorable is Any some the relative favorable weeks back

Paul Langdale

March. FHLB. related So the market about was mid spread But today. meaningfully versus and brokered it's not favorable to It's points XX probably very basis a it favorable of over

Matt Olney

Got it.

guess, addressed. I helpful. lastly, just Paul, for been other That's Okay. mortgage the And that. have questions thanks on then warehouse.

I think expect stability there. Dan some mentioned

period we quite on Thanks. the in averaged color stability a are the first delta any in versus saw Just quarter.

Dan Brooks

Good is this Matt Dan. Yes, morning.

$XXX I around averaged that almost we ended quarter million. We think quarter. we indicated right saw actually in March and $XXX there million for above the increase a significant in the

in We to here April. continue at that be level

fairly see we in market. it will and the expect the rest But as to year the see for flat of indicated be increase we some have following there. the past, we did you As

Matt Olney

you, Thank right. All Okay. guys.

David Brooks

Matt. Thanks

Paul Langdale

Thanks, Matt.

Operator

I'll and Thank comments. answer And our concludes turn to session. Brooks and that for you. any floor Mr. final the back gentlemen, Ladies question

David Brooks

of of about competent this environment continue Always appreciate to our on I And for forward to way growth everyone our brings expect ability joining looking that good and see We whatever our and balance nimble, we're relative next you. to the and to morning. interest. in company our position to Thank encouraged few we everyone's this we'll being happy remain confident team the comes the appreciate execute quarters the be and in available. what year.

you a need everyone has day. Hope out. feel us Thanks. If free, reach anything for great

Operator

concludes this conference. you, Thank today's

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

Independent Bank (IBTX) 20 Apr 232023 Q1 Earnings call transcript