Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Independent Bank Group, Inc. | form8-kthirdquarterfinanci.htm |
| EX-99.1 - EXHIBIT 99.1 - Independent Bank Group, Inc. | exhibit991q32017.htm |
Third Quarter 2017
Earnings Release Presentation
October 24, 2017
Exhibit 99.2
Safe Harbor Statement
From time to time, our comments and releases may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act
of 1995 (the “Act”). Forward-looking statements can be identified by words such as “believes,” “anticipates,” “expects,” “forecast,” “guidance,” “intends,”
“targeted,” “continue,” “remain,” “should,” “may,” “plans,” “estimates,” “will,” “will continue,” “will remain,” variations on such words or phrases, or
similar references to future occurrences or events in future periods; however, such words are not the exclusive means of identifying such statements.
Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and
other financial items; (ii) statements of plans, objectives, and expectations of Independent Bank Group or its management or Board of Directors; (iii)
statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on
Independent Bank Group’s current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Independent Bank
Group’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor
guarantees or assurances of future performance. Many possible events or factors could affect our future financial results and performance and could cause
such results or performance to differ materially from those expressed in forward looking statements. These factors include, but are not limited to, the
following: (1) our ability to sustain our internal growth rate and our total growth rate; (2) changes in local, regional, national, and international economic
conditions and the impact they may have on us and our customers and our assessment of that impact; (3) changes in the level of nonperforming assets and
charge-offs; (4) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting
requirements; (5) concentration of our loan portfolio in commercial real estate loans and changes in the values and sales volume of commercial real estate;
(6) our ability to continue to identify acquisition targets and successfully acquire and integrate the operations of desirable financial institutions; (7) our
dependence on our management team and our ability to attract, motivate and retain qualified personnel; (8) our access to debt and equity markets and our
overall cost of funding our operations; (9) technological changes, including the potential impact of technology and "FinTech" entities on the banking industry
generally; (10) cybersecurity attacks and breaches of our digital information systems and the liability resulting from any such cybersecurity breach; (11)
adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; (12) inflation, deflation, changes in
market interest rates, developments in the securities market, and monetary fluctuations; (13) the timely development and acceptance of new products and
services and perceived overall value of these products and services by customers; (14) changes in consumer spending, borrowings, and savings habits; (15)
the ability to increase market share and control expenses; (16) changes in the competitive environment among banks, bank holding companies, and other
financial service providers; (17) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and
insurance) with which we and our subsidiaries must comply; (18) the effect of changes in accounting policies and practices, as may be adopted by the
regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard
setters; (19) the costs and effects of legal and regulatory developments including the resolution of legal proceedings; (20) the effect of catastrophic events,
including war, acts of terrorism, and weather related events that may affect general economic conditions; and (21) our success at managing the risks involved
in the foregoing items; and (22) the other factors that are described in the Company’s Annual Report on Form 10-K filed on March 8, 2017, under the
heading “Risk Factors”, and other reports and statements filed by the Company with the SEC. Any forward-looking statement made by the Company in this
release speaks only as of the date on which it is made. Factors or events that could cause the Company’s actual results to differ may emerge from time to
time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or otherwise, except as may be required by law.
2
Today's Presenters
David R. Brooks
Chairman of the Board, CEO and President, Director
• 37 years in the financial services industry; 29 years at Independent Bank
• Active in community banking since the early 1980s - led the investor group that
acquired Independent Bank in 1988
Michelle S. Hickox
Executive Vice President, Chief Financial Officer
•27 years in the financial services industry; 5 years at Independent Bank
•Formerly a Financial Services Audit Partner at RSM US LLP
•Certified Public Accountant
3
Daniel W. Brooks
Vice Chairman, Chief Risk Officer, Director
• 34 years in the financial services industry; 28 years at Independent Bank
• Active in community banking since the early 1980s
Third Quarter Key Highlights
• Adjusted (non-GAAP) net income was $24.8 million, or $0.89 per
diluted share, compared to $22.7 million, or $0.82 per diluted share,
for second quarter 2017, representing 9.2% increase
• Increase in adjusted (non-GAAP) return on average assets to 1.13%,
up from second quarter 2017 of 1.08%
• Improved adjusted (non-GAAP) efficiency ratio of 51.2%,
compared to 53.2% for second quarter 2017
• Organic loan growth annualized for the quarter of 6.9% despite the
impact of Hurricane Harvey on the Houston market
• Continued strong credit quality metrics
4
Third Quarter Selected Financial Data
($ in thousands except per share data) As of and for the Quarter Ended
Balance Sheet Data September 30, 2017 June 30, 2017 September 30, 2016
Linked Quarter
Change Annual Change
Total assets $ 8,891,114 $ 8,593,979 $ 5,667,195 3.5 % 56.9 %
Loans held for investment (gross, excluding mortgage warehouse purchase loans) 6,226,343 6,119,305 4,360,690 1.7 42.8
Mortgage warehouse purchase loans 138,561 120,217 — 15.3 100.0
Total deposits 6,872,631 6,669,288 4,416,493 3.0 55.6
Total borrowings (excluding trust preferred securities) 683,492 584,349 577,974 17.0 18.3
Total capital 1,281,460 1,259,592 643,253 1.7 99.2
Earnings and Profitability Data
Net interest income $ 72,857 $ 69,500 $ 45,737 4.8 % 59.3 %
Net interest margin 3.85 % 3.81 % 3.66 % 1.0 5.2
Non-interest income $ 12,130 $ 10,995 $ 4,932 10.3 145.9
Non-interest expense 47,904 51,328 26,887 (6.7 ) 78.2
Net income 23,514 18,134 14,504 29.7 62.1
Basic EPS $ 0.85 $ 0.65 $ 0.78 30.8 9.0
Diluted EPS $ 0.84 $ 0.65 $ 0.78 29.2 7.7
Adjusted net interest margin (2) 3.80 % 3.78 % 3.65 % 0.5 4.1
Adjusted net income (1) $ 24,829 $ 22,746 $ 14,819 9.2 67.5
Adjusted basic EPS (1) $ 0.89 $ 0.82 $ 0.80 8.5 11.3
Adjusted diluted EPS (1) $ 0.89 $ 0.82 $ 0.80 8.5 11.3
5
(1) See Appendix for Non-GAAP reconciliation
(2) Non-GAAP financial measure. Excludes income recognized on acquired loans of $905, $572 and $116, respectively.
(1) See Appendix for Non-GAAP reconciliation
6
Net Income Growth
$ in Millions
Interest Income Growth
7
Interest Income, Net Interest Income and NIM Trends
Core EPS (1)
Earnings Per Share and Adjusted Earnings Per Share Trends (diluted)
(1) See Appendix for Non-GAAP reconciliation
8
Adjusted Efficiency Ratio
Adjusted Efficiency Ratio Trends (1)
(1) See Appendix for non-GAAP Reconciliation
9
Total Loans by Year and Current Annual Trend ($ in billions)(1)
Loan Portfolio Growth
(1) Includes loans held for sale.
10
Loan Portfolio Composition
Loan Composition at 09/30/2017 CRE Loan Composition at 09/30/2017
Loans by Region at 09/30/2017
11
Commercial Real Estate (CRE) and Construction and
Development (C&D)
12
Retail CRE and C&D Composition at 09/30/2017 CRE and C&D Concentrations at 09/30/2017
• 593 Retail Loans
• 33 Loans > $5MM
• 1.69 AVG DSCR (1)
• 59% AVG LTV (1)
(1) Loans greater than $500 thousand
Loans > $500 thousand
NPLs / Loans NCOs / Average Loans
Note: Financial data as of and for quarter ended June 30, 2017 for peer data and September 30, 2017 for IBTX. Interim quarterly chargeoff data annualized.
Source: U.S. and Texas Commercial Bank numbers from SNL Financial.
Historically Strong Credit Culture
13
Provision expense and Net chargeoff trends
Provision and Chargeoffs
• Historically low chargeoffs
• Q3 2016 - $3MM chargeoff related to impaired energy loan
14
($ in
thousands)
Energy Lending
(in millions)
15
Deposit Mix and Pricing
(1)
(1) Average rate for total deposits
2017 YTD Average Rate for Interest-bearing deposits:
0.61%
16
Total Capital , Tier 1 and TCE/TA Ratios (1)
Capital
(1) See Appendix for non-GAAP Reconciliation 17
($ in thousands except per share data)
September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Net Interest Income - Reported (a) 72,857 69,500 47,867 46,526 45,737
Income recognized on acquired loans (905 ) (572 ) (123 ) (51 ) (116 )
Adjusted Net Interest Income (b) 71,952 68,928 47,744 46,475 45,621
Provision Expense - Reported (c) 1,873 2,472 2,023 2,197 2,123
Noninterest Income - Reported (d) 12,130 10,995 4,583 5,224 4,932
Gain on sale of loans (338 ) (13 ) — — —
Loss on sale of branch 127 — — — 43
Loss (gain) on sale of OREO and
repossessed assets
— 26 — — (4 )
Gain on sale of securities — (52 ) — — —
Loss (gain) on sale of premises and
equipment 21 (1 ) (5 ) — 9
Recoveries on charged off loans acquired (994 ) (123 ) — — —
Adjusted Noninterest Income (e) 10,946 10,832 4,578 5,224 4,980
Noninterest Expense - Reported (f) 47,904 51,328 28,028 27,361 26,887
OREO impairment (917 ) (120 ) — — (51 )
IPO related stock grant and bonus expense (128 ) (127 ) (125 ) (127 ) (104 )
Acquisition expense (3,013 ) (7,278 ) (459 ) (1,075 ) (384 )
Adjusted Noninterest Expense (g) 43,846 43,803 27,444 26,159 26,348
Adjusted Net Income (1) (b) - (c) + (e) - (g) = (h) 24,829 22,746 15,990 15,541 14,819
Average shares for basic EPS (i) 27,797,779 27,782,584 18,908,679 18,613,975 18,478,289
Average shares for diluted EPS (j) 27,901,579 27,887,485 19,015,810 18,716,614 18,568,622
Adjusted Basic EPS (h) / (i) $ 0.89 $ 0.82 $ 0.85 $ 0.83 $ 0.80
Adjusted Diluted EPS (h) / (j) $ 0.89 $ 0.82 $ 0.84 $ 0.83 $ 0.80
EFFICIENCY RATIO
Amortization of core deposit intangibles (k) $ 1,409 $ 1,410 $ 492 $ 492 $ 492
Reported Efficiency Ratio (f - k) / (a + d) 54.71 % 62.01 % 52.50 % 51.92 % 52.09 %
Adjusted Efficiency Ratio (g - k) / (b + e) 51.19 % 53.15 % 51.51 % 49.65 % 51.10 %
Supplemental Information - Non-GAAP Financial Measures (unaudited)
Reconciliation of Adjusted Net Income, Adjusted Efficiency Ratio and Adjusted EPS--Quarterly Periods
APPENDIX
(1) Assumes actual effective tax rate of 33.2%, 32.1%, 30.0%, 33.4% and 33.0%, for the quarters ended September 30, 2017, June 30, 2017, March 31, 2017, December 31,
2016 and September 30, 2016, respectively.
18
($ in thousands except per share data)
2016 2015 2014
Net Interest Income - Reported (a) $ 183,806 $ 154,098 $ 124,145
Income recognized on acquired loans (1,765 ) (1,272 ) (1,960 )
Adjusted Net Interest Income (b) $ 182,041 $ 152,826 $ 122,185
Provision Expense - Reported (c) 9,440 9,231 5,359
Noninterest Income - Reported (d) 19,555 16,128 13,624
Gain on sale of loans — (116 ) (1,078 )
Loss on sale of branch 43 — —
Gain on sale of OREO/repossessed assets (62 ) (290 ) (71 )
Gain on sale of securities (4 ) (134 ) (362 )
(Gain) loss on sale of premises and equipment
(32 ) 358 22
Adjusted Noninterest Income (e) 19,500 15,946 12,135
Noninterest Expense - Reported (f) 113,790 103,198 88,512
Senior leadership restructuring (2,575 ) — —
Adriatica expenses — — (23 )
OREO impairment (106 ) (35 ) (22 )
IPO related stock grant and bonus expense (543 ) (624 ) (630 )
Registration statements — — (619 )
Core system conversion — — (265 )
Acquisition expense (3,121 ) (3,954 ) (9,237 )
Adjusted Noninterest Expense (g) 107,445 98,585 77,716
Adjusted Net Income (1) (b) - (c) + (e) - (g) = (h) $ 56,563 $ 41,056 $ 34,427
Average shares for basic EPS (i) 18,501,663 17,321,513 15,458,666
Average shares for diluted EPS (j) 18,588,309 17,406,108 15,557,120
Adjusted Basic EPS (h) / (i) $ 3.06 $ 2.37 $ 2.23
Adjusted Diluted EPS (h) / (j) $ 3.04 $ 2.36 $ 2.21
EFFICIENCY RATIO
Amortization of core deposit intangibles (k) $ 1,964 $ 1,555 $ 1,281
Reported Efficiency Ratio (f - k) / (a + d) 54.99 % 59.71 % 63.32 %
Adjusted Efficiency Ratio (g - k) / (b + e) 52.34 % 57.49 % 56.91 %
Supplemental Information - Non-GAAP Financial Measures (unaudited)
Reconciliation of Adjusted Net Income, Adjusted Efficiency Ratio and Adjusted EPS--Annual Periods
APPENDIX
(1) Assumes actual effective tax rate of 33.2%, 32.6% and 32.8% for the years ended December 31, 2016, 2015, and 2014, respectively.
19
Supplemental Information - Non-GAAP Financial Measures (unaudited)
Reconciliation of Tangible Common Equity to Tangible Assets
APPENDIX
Tangible Common Equity To Tangible Assets 9/30/17 6/30/17 3/31/17 12/31/16 12/31/2015 12/31/14 12/31/13
($ in thousands)
Tangible Common Equity
Total common stockholders' equity $ 1,281,460 $ 1,259,592 $ 688,469 $ 672,365 $ 603,371 $ 516,913 $ 233,772
Adjustments:
Goodwill (606,701 ) (607,263 ) (258,319 ) (258,319 ) (258,643 ) (229,457 ) (34,704 )
Core deposit intangibles, net (47,198 ) (48,992 ) (13,685 ) (14,177 ) (16,357 ) (12,455 ) (3,148 )
Tangible Common Equity $ 627,561 $ 603,337 $ 416,465 $ 399,869 $ 328,371 $ 275,001 $ 195,920
Tangible Assets
Total Assets $ 8,891,114 $ 8,593,979 $ 6,022,614 $ 5,852,801 $ 5,055,000 $ 4,132,639 $ 2,163,984
Adjustments:
Goodwill (606,701 ) (607,263 ) (258,319 ) (258,319 ) (258,643 ) (229,457 ) (34,704 )
Core deposit intangibles (47,198 ) (48,992 ) (13,685 ) (14,177 ) (16,357 ) (12,455 ) (3,148 )
Tangible Assets $ 8,237,215 $ 7,937,724 $ 5,750,610 $ 5,580,305 $ 4,780,000 $ 3,890,727 $ 2,126,132
Tangible Common Equity To Tangible Assets 7.62 % 7.60 % 7.24 % 7.17 % 6.87 % 7.07 % 9.21 %
20