IBTX - Earnings call 3 2023 | Independent Bank Group, Inc.

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Operator

Hello, and welcome to the Independent Bank Group Q3 2023 Earnings Conference Call. [Operator instructions] As a reminder, this conference is being recorded.It's now my pleasure to turn the call over to Ankita Puri, Executive Vice President and Chief Legal Officer. Please go ahead.

Ankita Puri

Good morning, and welcome to the Independent Bank Group's Third Quarter 2023 Earnings Call. We appreciate you joining us. release at presentation ir.ifinancial.com. press on be earnings website our related and can investor accessed The I remarks include made like today would to may forward-looking remind statements. you that actual and Those that statements to results risks are could differ. subject cause and expected to uncertainties be statements for by safe We forward-looking to harbor statements. intend covered such provisions text Please presentation harbor safe for the release Page in Page see of X or our statement. the X of slide the future we results, subject are guidance All no comments and guidance. give that update note of guidance that today's we publicly about the statement statement made a to if at time that statement.Please is call assume beliefs is to during management's obligation the made, financial this considered SEC's non-GAAP to we be the discuss In call, several measures under will rules. the are financial comparable to most release. Reconciliations directly included our of measures financial GAAP in these measures and morning joined Brooks; Officer, Vice Chairman, this I'm Chief Brooks; our Paul our by Financial Executive David our and Dan Langdale. Officer, Chief Chairman their the of open remarks, will end the At David questions. to call I over that, turn with it to will And David.

David Brooks

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

Third totaled $XX.X diluted earnings $X.XX or share. per million quarter

were to During in we to markets. up loan as demand pleased X.X% quarter, see began pick core healthy our growth the of organic annualized

costs see overall are While uptick we increase, continue book due some to to Fed in yields pleased did intra-quarter deposit loan the our additional we that march upward.

the our NIM. for bottom this at around that we point, are As we believe

end, the allows positions uncertainty cycle.Income of sheet remains both last lower environment navigate and compared quarter some to our communities our our to quarter balance also advances XX.X% our certifies were quarter-over-quarter stable, XX.X% off and and was ratio our prior serve end and deposit paying continue FHLB with advances on short-term throughout volumes. with We and to sustained customers the year. quarter year-over-year. able decrease This outstanding economic an end by comfortably of to at balance to macroeconomic us FHLB end At growing loan-to-deposit than

expense million resulted expense discipline declining on our addition, in to noninterest $XX.X quarter. the for focus In total

low will nonperforming annualized Dan As and totaling charge-offs net for excellent X point and just assets quarter. the remain discuss, credit metrics basis

remain by underwriting While in indicate supported X foundation stress for our of the be that position any ended markets, we trends healthy strong continue decades. we of have maintained to with the conservative we in X.XX% credit ratios capital that Capital quarter over a at watchful ratio ratio the overview, With at ratio A financials. TCE that XX. to Paul September the X capital give over now details our I'll Tier some at more on XX.XX%. call total as XX.XX%. also to remained the Notably, of strong signs turn

Paul Langdale

was and the or income the Thanks, $X.XX linked quarter quarter. Net million or interest everyone. share the $X.XX compared per linked the with $XX.X million in third quarter. million income $XX.X Net David, was quarter compared to for million share diluted per good diluted for $XXX.X morning, $XXX in

expect adjusted that in by of quarter continue we of X.XX% deposits for by and our During the higher expanding by of we in saw NIM were exact the following as quarter, to not begin interest balances, well encouraged the expectations, influenced first earning healthy declined will stabilization deposits loan points increase fourth from are deposit margin on the the linked in basis short-term expect the the increases hike assets deposit we trends trajectory were attrition lower be lower further by as encouraged sales Thus, quarter, XX factors yields.While third to and well of in a XX.X% noninterest-bearing in asset yields. XXXX are by XX.X% costs the external which quarter. of rates bottom that likely NIM paid factors, our downside quarter was we bank at end around third quarter currently risk but the limiting NIM pipelines the reprice. should NIM are came we impacted quarter, as the these as the on we to the incremental indicate partially stabilize earning from and NIM partially noninterest-bearing The seeing NIM competitive These pressure Total a cost modelling higher-yielding are as in paid Fed loans noninterest-bearing to was deposits offset levels. peak. attrition. in both for uninsured additional rates, for quarter.Uninsured rates offset incremental Net primarily upward linked interest-bearing corresponding for and deposits cost highly down to due deposits. end as

which such are to substantial at The us strengthens sustained maturities the even total at We available the at subsequent this of as point our on XX, growth earning year-end as asset impacted quarter, forward, end, borrowings in balance loan CECL against borrowing to company September quarter, even $XX.X the positions level which tailwind consistent XXXX, held lower the their borrowings expensive million further To to $XX.X dependent million million of down income the $XXX,XXX third of advances just changes sheet $XX.X our which by FHLB on about from quarter line represents growth. is, was specific the less This increasing to any in for our capacity expect linked improvements down slightly the broker low of to adjusted provision shocks quarter. NII borrowings we being help remain noninterest of utilization rates continue totaled million to the and a income at holding peak. than quarter. provide This that a should that was or macroeconomic pay the the in and deposits, X% was all payoffs support XXXX. rate remain loan yields. linked were capitalize credit reserves. funding course, expenses any rate and near-term quarter, poised from while than of Provision contractual scenarios.Going expense in forecast contingent in to model, million by higher as Total for fixed were $XX.X impacted levels. yields low short-term total of us remain else grow loans Moody's borrowings macroeconomic $XXX.X the well be course, at cycle. equal could, Noninterest for and down for Noninterest also in third

$X.X to Third million impacted in expense expenses related by was executive quarter a noninterest reduction compensation. partially

to to comments with call today.So I continue discipline organization all appropriately pursue the These gear that, Daniel. the are expense the have turn the We over environment. and current for I'll

Daniel Brooks

excluding Core investment, increased by of $XXX.X quarter. loans mortgage in warehouse for third annualized loans or million Paul. X.X% Thanks, the

These started We New came expectations million for the to the quarter annualized quarter, saw basis in loan XX to remain the end, in as activity the single any vigilant of in the during Average do million the of portfolio assets remain pick had deal not quarter. these these point comments a and our just bank up I all markets charge-offs portfolio. and with points balances our trends assets quarter across to totaled Overall for from emerging mortgage fourth warehouse related areas seasonality. were Colorado. roughly up on prior the of in the loan in relative has morning. currently quarter. a always basis risk, third at are balances we Texas basis, while strong Credit against Nonperforming this production across total concern currently remain purchase loan And see $XXX.X the are have just asset quarter. line loans the stable. stable month-to-month to $XXX.X a quality stability quality continue despite in we and anticipate metrics we

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

David Brooks

Dan. Thanks,

by trends business. quarter, At to at bottom. we are the remain growth we stabilizing enter we loan returned. our seeing The the its be NIM encouraged As fourth has seems in

consistent. remains discipline remain to Credit trends our Our continue on fee exercise strong, we and expenses. income

for employees that are the possible especially of have trends all, by footprint. broader the Texas never by from the demographic Colorado, over show challenging I'm the though, our mission straightened are We torch in each our every of built culture macroeconomic today. our one bank to service you team high-growth we inflows and the economic made by especially continued the to environment our up we've insulate join the activity. carry void of across growing for positive day capital exceptional the communities the is across providing in who each call our throughout which to grateful and us of these incredible strength Most and and markets this we success X of taking encouraged to time X decades, the customers cycle.Thank them

questions. Operator? now will line We to open the

Operator

Brady from session. We'll [Operator now first Our Gailey KBW. question coming question-and-answer a instructions] from be is conducting

Brady Gailey

came expected. you a guys than lot better had think previously Expenses I

were other there and I maybe think noise release, I some incentive saw reversals in quarter. the the some

as expenses, run And just head you about you look modestly into growing? thinking are how here? they the was are year, I you wondering, expenses forward So rate? stable especially Are at next as

David Brooks

question, really across mindful for continuing We of and are on the the Brady. for the environment. certainly company focus Thanks Yes. discipline to current expense company gearing just the

I and a XXXX. good to expect onetime noninterest be of expenses in expenses able rate items beyond. quarter, third run the do down fourth the a million noted We think million You quarter to but in for couple is $XX for to $XX hold

on offsets other We but growth, the will some side. have will have some we

we're a in quarters. to that for confident flat few So least being hold at rate that able at X,XXX

Brady Gailey

credit clean for quality And remains so just then guys. you

have cetera. stress market you higher, testing little and rate the reset et think does real a guys to estate does above-average and you a that and just notably at commercial gets that see the looked when exposure flow cash what nervous. know have I I

update as are health the on give head you maybe estate commercial we about guys So the real of portfolio an just us into how thinking 'XX.

Daniel Brooks

bank last we million to the that we about we've that that but the serve years in of the CRE sticking is we the into granularity before, high say through cycle as current strong And related particular, the good the markets where XX to discussed NII the and strong or continue core last over $X that result that last the been we've you quarterly average colour some seen of believe at in over And would we've will years. very with growth. in less years a call, got we've well. to employed conditions, have. sizes had the headed type as we each In we've feel just us book gave over bank. that I as same X the we know, CRE to discipline we've And philosophy good continue would

David Brooks

how to parcel different is not team. growth a to structure bank as regional our our comment, we It sits in on and together has that the work is competitors. think I all teams the bank and part risk credit here, bigger and additional and our Credit lending table across decisions a company grow little a support is credit the hand our One at our is and our typical a function.

we little stray don't So we how a it on just years. from what last for filter different our structure the puts XX-plus deals and risk done and inflection how we've

Brady Gailey

finally for then me. And

So loan much from the of year? it margin upside up think flattish the next the And be and how to deposit next in should margin quarter. 'XX, magnitude in then to just the Any cost idea and will yield staying start how flat. going funding could be about increase

Paul Langdale

be the It's on especially last it the do margin, going environment, would of a if the due durations what on the in able the least way But given where than some happens way in expect gain continue in of say the be We expansion see they right or half I'd factors bit have where holds are nice now, and heading and the rates XXXX. to up, you depend more nice Fed we we down. quarter. longer of lift repricing see going external to some lot to expect, right the rate and a to especially obviously, little back that to a to and gradual are at in on there. the assume power specifically for flat curve what's It in XXXX. we what pricing was overnight pipeline

David Brooks

control. to do well we those costs pretty and kind Paul talking with is size, challenge, I to loan look we entire challenge the going what and we all don't what and and coming all we know predicting market what I going about Where think betas yesterday in competition a had things. a those growth has our up what's like, and deposit end things know were that been the this and is had long think of actually, Fed predicting going and of deposit the curve the on to we contractually

So We things know changes to in inflect rates pressure It believe the been and that levelling it's we're be this 'XX. really, dynamic levelling do Paul all little pretty will deposit it's a just NIM we bit but that, year. said, out. cautious. the positively as being But and the appears in out,

Paul Langdale

I of quarter. loan last though, have our for in that nice up X bulk the weeks already We're add, The Brady of came a million fourth quarter, fourth the the quarter. will we $XXX the loan production for in about volumes. setup

ability to that that inflection see So and we're pretty in optimistic stability about our XXXX.

Operator

question Piper next from coming is from Sandler. Our Stephen Scouten

Stephen Scouten

help expectations math of your the book. kind give to the understanding your potential Can in little kind detail 'XX us better there? regards you that the spoke those might upset in magnitude bit just the a loan guys do of any You on of repricing in of contractual to for

David Brooks

absolutely. Yes,

about So to and had loan roll be little million, gross XXXX. production expect third of over $XXX above we billion the expect in in of a up $X in go I we quarter. to Stephen, fourth quarter, contractual $XXX the million that

between And payoffs, models. of off coming at anywhere activity look our flow so where cash latest $X XXXX I the you in should book billion the if for $X you is repricing billion paydowns, and think have

Stephen Scouten

on kind What the the what's And roll kind up loans you spread old the of are sort picking average, on of there? versus over [indiscernible]. yield of

Daniel Brooks

high And the averaging the new of rates answer pricing be longing for quick Xs to one. we expect credits. as honestly, that market the we renewed to I'd on around move X%. forward, and out, with [indiscernible] smart say supporting that answer high Xs I'll to continue the on seeing today We're adjusting is that versus in the

Stephen Scouten

And the last me. then for just maybe thing

maybe kind since guysâ€™ you're end. of some quarter on even the I seeing deposits, you to think stability spoke noninterest-bearing

still you a stabilize? slower Or just can So seeing do And likely do maybe what are a decline but decline. specifically? of we there that think you have pace

Paul Langdale

Yes.

directionality quarter But within it's As since $XX our end. of the noninterest-bearing million from Stephen, noted, quarter-to-date David really we QX, balances end, for predict quarter will seen $XX at of to difficult what million, we've deposits.

quarter. So very this some optimistic And we've seen good map deposit we'll as well. in obviously we're wins pipeline stability to able there our be that sales

we trajectory, business. of that the sure and getting that going are in competitive factors very hard cycle. on a It's But where teams we for in working difficult But very the feel on a ascertain to far in many treasury exogenous Our making customers they're given pretty front the there's we're long-term as are it's confident winning environment. fourth quarter. as so

Operator

Next from Rose question from coming Raymond James. is Michael

Michael Rose

book. the is with years. the duration now start I if bond Just to noticed I X.X up that

to cash and the that? to wanted do to duration are, some a levels restructuring given Just there the given get here of mean, roll capital is some around just thoughts where just book extend your loan the out. excess bond thought the portfolio I process continue and the general securities that using maybe off will Or

Paul Langdale

be looked at Obviously, portfolio and a We different don't it at today, stands would at We're restructuring. moment. that preserve that's right to think the something accrete this the a Michael, the don't of have we to place think cycle. any in as but we've pursuing we I that's intention consider. point bond in mode capital really scenarios,

utilization you of that list get capital our NIM meaningful high And priority from so it. that's some not a benefit is even think would I on though

Michael Rose

of a other than little think, seen in Paul. balances And higher the bit the then The that just what a about talk space. we've follow-up, the that, to from players are in, came as appreciate wanted I some I warehouse. just

get up might forward? with is you Just move Q-on-Q. the being have I of just warehouse for wanted balance average actually to sort we any outlook as

Daniel Brooks

I some continue really the forward right at nice year, part we that that certainly of think pick we flat to we space. that's communicated we to to had the higher We've need, expected that walk we 'XX. be quarter early up going customers last into opportunity these think as be that them experienced have move in to levels

fourth takes quarter, but levels have as forward. in to normal the be of some â€˜XX the we on we seasonality average and expect quarter You that place average, at these first on move kind

Michael Rose

reserve portfolio? a for it that against Just have you get Do Or wondering sense there. what you is allocation thoughts not if break the that you way? do out some

Daniel Brooks

are for a of don't the CECL extent it that or the picked the To allocation separately CRE model, issues separate up if We from not downgrades out come it that. the on there rest but up in there's break that, any gets book.

Michael Rose

Were portfolio there are quarter? in that any downgrades this

Daniel Brooks

not. were They

Operator

Next from Truth Securities. King Brandon question from coming is

Brandon King

for projecting I'm over loan could the quarter-over-quarter forward. we we the how see couple trying yields you going pieces quarters in the to us next just and on And NIM going how quarter? forward, put give third similar as thoughts if your together think saw could of about they're we increases

Paul Langdale

expand. the I yield would in the expect actually increase loan

I earlier, for quarter. loan weeks QX bulk the the came in of mentioned Brandon, X As the production our last in

we've And and are, other the mentioned, will looking Dan push set yields some us a the constantly to in rates So million those for of the us side the curve to see some having up on where up us opportunity more at yields. at pricing to activity sets obviously, as gives seen we're resets, competitive loan looking nicely some little pressures this of QX the that quarter sidelines big to continue go to expand. loan the bit. see all banks up we've that of We seen the pricing happened quarter up expect pricing of $XXX-plus also so production would at that expansion end far growth nicely that

making being sure and being risk loans. bank we're So very in it's compensated for taking fairly the these forceful that is we're in originating being the deliberate very

I And you QX. with so loan we point yields more this saw at feel comfortable than of so in directionality the think

Brandon King

sure guess, this I'm sometime give in us a you of loan sense when I of XXXX. don't could peak, yields change in that if not you rate you And think exercise, but would

Paul Langdale

Oh gosh, rate then at through again, come to but that that, XXXX. want blow we itâ€™s guide have up, give it certainly would that rate on a I you be factors. external continue and dependent will a expect cut change and -- would of all least wouldn't

Brandon King

from you is growth in XX%. are ratio how here? at the know loan-to-deposit deposit about then declined And thinking the quarter I

can that level. kind of you think maintain I

David Brooks

think I will continue need do growth do It's ability, to of and deposits, loan the is Brandon, continue part to that. our on will deposits we thereby, our and strategy. to the we relationship grow

we'll continue loans mid-single equal going think to deposits we at So grow in and forward. the rates digits

Paul Langdale

opportunities capitalizing sheet I'll earnings comfortable now, the the point was feel right down, trade the third little a us of that positions seen. think balance loan-to-deposit come ratio think is note, push where where with ratio now. balance very the strategy bit very we to We strength, with is which really real We cycle. the and in for we've for And deliberate during nicely a this optionality we Brandon, lot right just of loan-to-deposit at employed sheet that feel comfortable growth that gives some that to quarter, really the we a us to it

Operator

[Operator instructions].

Our is Olney from next coming Stephens. Matt question from

Matt Olney

about tailwinds Paul, throughout some On quarter. commentary the gave the margin good some the you for us margin,

better some even us the resets fourth loan Just loan you with quarter. the I stapling think weeks to in margin by better help of in and XQ so have the over more that at growth margin last month of XQ. the comfortable mentioned Do more few some quarter? happen third you that end

Paul Langdale

numbers the on tell margin right August don't but front will September. the went in I I to -- me that, that margin of from you the up Yes, have

bit So we intra-quarter. little a did of see expansion

Matt Olney

expanding margin of being in then we forecast? And on our the it then what stable far NII, the quarter the and fourth early about what commentary follow about about unique as a as there Or as next margin, the lot should year? anything think

Paul Langdale

correlated magnitude where throughout expect holding much. we expansion quarter get. of to stable see and certainly cash Obviously, the that balance to to XXXX. fourth depend NII pretty growth be margin levels, will be think and do on sheet in and then We the XXXX given in some I expect we're NII the I'd

Matt Olney

you the then kind us than more little that's on third little a that forecast as I Fed commentary commentary on in the bit mentioned of the you've deposit remind expecting indexed that have think at than next XQ here. automatic and costs Those of costs, quarter? And your more news. variable on peers. what Any bit we Any we year? are was obviously went a biggest more deposit saw deposits that seen in the for our And resets about just up

Paul Langdale

third pretty costs about on But from quarter, Yes, absolutely. notes would from than otherwise reducing again, deposit flipping primarily increased deposits, A couple deliberate of it we costs deposit borrowings more obviously, the were have. into borrowings. those

So while aggregate, comfortable I we an look funding pursue little we sheet to that bit we're when balance strength, a have. that take with at did costs, position more think on the expense you

pertains we've this it more much deliberate that been deposits, about index cycle. As to

$X quickly We would rates billion We have will cuts. indexed expect move Fed move immediately $X the the able of if deposits to Fed. be with pretty that to billion to

see cuts to income help Fed materially us statement scenario going So in you NII. the in that's 'XX, terms where any of in

Matt Olney

a and the point what do the of And Maybe Paul, Fed prefer that there. variables banks on respect kind What's for out was to next there, expand see? eyes as ideal to as that but with last scenario far margin of year? on follow-up you independent

Paul Langdale

well positioned a scenario. certainly it. position make bank balance for macro and sheet at objective our broad the first weather just I'll to we to make whatever throws any that are we're comment that That's Well, to trying the trying is sure the foremost.

most. us help the cuts Obviously, the to and in positive are what some to going benefits pertains curve it As slope meaningfully. the us big

that curve macro we see have some us I optimism ever company. think as hope to they're they gives And up that start us going year, and than evolve and the good cutting as to the going to long meaningfully that's helped really a go. some start come and more help Fed the of us is before you see end us for next if and that active the be stabilize to

Operator

back closing have comments. end I'd the session. We like our any over turn David question-and-answer to reached to for or of further floor

David Brooks

I everyone appreciate dialling I Thank this it. appreciate you, in morning. Kevin.

We as today, continue a company brings, whatever to, Paul about emphasized the and forward. for the in position. good we're growth feel and position pathway future We good the

for thanks we so look to forward seeing today, and joining care. out you And us on the Take road.

Operator

you. Thank does webcast. conclude teleconference That today's

You may today. disconnect have day. your thank and time, your wonderful for a line at this We you participation

Independent Bank (IBTX) 24 Oct 232023 Q3 Earnings call transcript