Attached files
| file | filename |
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| EX-99.1 - EXHIBIT 99.1 - Independent Bank Group, Inc. | exhibit991q12018.htm |
| 8-K - 8-K - Independent Bank Group, Inc. | form8-kfirstquarterfinanci.htm |
First Quarter 2018
Earnings Release Presentation
April 24, 2018
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) The Company’s ability to sustain its current internal growth rate and total growth rate;
(2) changes in geopolitical, business and economic events, occurrences and conditions, including changes in rates of inflation or deflation, nationally, regionally and in the Company’s target markets,
particularly in Texas and Colorado; (3) worsening business and economic conditions nationally, regionally and in the Company’s target markets, particularly in Texas and Colorado, and the
geographic areas in those states in which the Company operates; (4) the Company’s dependence on its management team and its ability to attract, motivate and retain qualified personnel; (5) the
concentration of the Company’s business within its geographic areas of operation in Texas and Colorado; (6) changes in asset quality, including increases in default rates and loans and higher levels
of nonperforming loans and loan charge-offs; (7) concentration of the loan portfolio of Independent Bank, before and after the completion of acquisitions of financial institutions, in commercial and
residential real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate; (8) the ability of Independent Bank to make loans with acceptable net
interest margins and levels of risk of repayment and to otherwise invest in assets at acceptable yields and presenting acceptable investment risks; (9) inaccuracy of the assumptions and estimates that
the managements of Independent Bank and the financial institutions that it acquires make in establishing reserves for probable loan losses and other estimates; (10) lack of liquidity, including as a
result of a reduction in the amount of sources of liquidity, that the Company currently has; (11) material increases or decreases in the amount of deposits held by Independent Bank or other financial
institutions that the Company acquires and the cost of those deposits; (12) the Company’s access to the debt and equity markets and the overall cost of funding its operations; (13) regulatory
requirements to maintain minimum capital levels or maintenance of capital at levels sufficient to support the Company’s anticipated growth; (14) changes in market interest rates that affect the
pricing of the loans and deposits of each of Independent Bank and the financial institutions that the Company acquires and the net interest income of each of Independent Bank and the financial
institutions that the Company acquires; (15) fluctuations in the market value and liquidity of the securities the Company holds for sale, including as a result of changes in market interest rates; (16)
effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services; (17) the institution and outcome of, and costs associated
with, litigation and other legal proceedings against one of more of the Company, Independent Bank and financial institutions that the Company acquires or to which any of such entities is subject;
(18) the occurrence of market conditions adversely affecting the financial industry generally; (19) the impact of recent and future legislative and regulatory changes, including changes in banking,
securities and tax laws and regulations and their application by the Company’s regulators, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act,
specifically the Dodd-Frank Act stress testing requirements as the Company approaches $10 billion in total assets, and changes in federal government policies; (20) changes in accounting policies
and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the SEC and the Public Company Accounting Oversight Board, or PCAOB, as the case
may be; (21) governmental monetary and fiscal policies; (22) changes in the scope and cost of FDIC insurance and other coverage; (23) the effects of war or other conflicts, acts of terrorism
(including cyber attacks) or other catastrophic events, including storms, droughts, tornadoes, hurricanes and flooding, that may affect general economic conditions; (24) the Company’s actual cost
savings resulting from previous or future acquisitions are less than expected, it is unable to realize those cost savings as soon as expected, or it incurs additional or unexpected costs; (25) the
Company’s revenues after previous or future acquisitions are less than expected; (26) the liquidity of, and changes in the amounts and sources of liquidity available to, us, before and after the
acquisition of any financial institutions that the Company acquires; (27) deposit attrition, operating costs, customer loss and business disruption before and after the Company’s completed
acquisitions, including, without limitation, difficulties in maintaining relationships with employees, may be greater than the Company expected; (28) the effects of the combination of the operations
of financial institutions that the Company acquired in the recent past or may acquire in the future with the Company’s operations and the operations of Independent Bank, the effects of the
integration of such operations being unsuccessful, and the effects of such integration being more difficult, time-consuming or costly than expected or not yielding the cost savings that the Company
expects; (29) the impact of investments that the Company or Independent Bank may have made or may make and the changes in the value of those investments; (30) the quality of the assets of
financial institutions and companies that the Company has acquired in the recent past or may acquire in the future being different than the Company determined or determine in its due diligence
investigation in connection with the acquisition of such financial institutions and any inadequacy of loan loss reserves relating to, and exposure to unrecoverable losses on, loans acquired; (31) the
Company’s ability to continue to identify acquisition targets and successfully acquire desirable financial institutions to sustain its growth, to expand its presence in its markets and to enter new
markets; (32) technology-related changes are harder to make or are more expensive than expected; (33) attacks on the security of, and breaches of, the Company or Independent Bank’s digital
information systems, the costs the Company or Independent Bank incur to provide security against such attacks and any costs and liability the Company or Independent Bank incurs in connection
with any breach of those systems; (34) the potential impact of technology and “FinTech” entities on the banking industry generally, and (35) our success at managing the risks involved in the
foregoing items; and (36) the other factors that are described in the Company’s Annual Report on Form 10-K filed on February 27, 2018, 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.
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Today's Presenters
David R. Brooks
Chairman of the Board, CEO and President, Director
• 38 years in the financial services industry; 30 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
•28 years in the financial services industry; 6 years at Independent Bank
•Formerly a Financial Services Audit Partner at RSM US LLP
•Certified Public Accountant
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Daniel W. Brooks
Vice Chairman, Chief Risk Officer, Director
• 35 years in the financial services industry; 29 years at Independent Bank
• Active in community banking since the early 1980s
First Quarter Key Highlights
• Adjusted (non-GAAP) net income was $29.2 million,
or $1.03 per diluted share, compared to $25.3 million,
or $0.90 per diluted share, for fourth quarter 2017
• Strong organic loan growth of 14.0% for the quarter
(annualized) of loans held for investment
• Continued strong credit quality metrics
• Adjusted (non-GAAP) return on average assets
increased to 1.37%, from fourth quarter 2017 of 1.15%
• Positive increase in net interest margin to 4.00%, up
from 3.97% for fourth quarter 2017
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First Quarter Selected Financial Data
($ in thousands except per share data) As of and for the Quarter Ended
Balance Sheet Data March 31, 2018 December 31, 2017 March 31, 2017
Linked Quarter
Change Annual Change
Total assets $ 8,811,014 $ 8,684,463 $ 6,022,614 1.5 % 46.3 %
Loans held for investment (gross, excluding mortgage warehouse purchase loans) 6,527,681 6,309,549 4,702,511 3.5 38.8
Mortgage warehouse purchase loans 124,700 164,694 — (24.3 ) 100.0
Total deposits 6,794,660 6,632,822 4,722,203 2.4 43.9
Total borrowings (excluding junior subordinated debentures) 617,636 667,578 568,115 (7.5 ) 8.7
Total stockholders' equity 1,354,699 1,336,018 688,469 1.4 96.8
Earnings and Profitability Data
Net interest income $ 73,967 $ 75,254 $ 47,867 (1.7 )% 54.5 %
Net interest margin 4.00 % 3.97 % 3.67 % 0.8 9.0
Non-interest income $ 9,455 $ 13,579 $ 4,583 (30.4 ) 106.3
Non-interest expense 44,958 49,553 28,028 (9.3 ) 60.4
Net income (1) 28,964 19,193 15,671 50.9 84.8
Basic EPS 1.02 0.69 0.83 47.8 22.9
Diluted EPS 1.02 0.68 0.82 50.0 24.4
Adjusted net interest margin (2) (3) 3.96 % 3.84 % 3.66 % 3.1 8.2
Adjusted net income (3) $ 29,231 $ 25,313 $ 15,990 15.5 82.8
Adjusted basic EPS (3) 1.03 0.91 0.85 13.2 21.2
Adjusted diluted EPS (3) 1.03 0.90 0.84 14.4 22.6
Return on average assets 1.35 % 0.87 % 1.08 % 55.2 25.0
Adjusted return on average assets (3) 1.37 1.15 1.10 19.1 24.5
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(1) The reduction of the corporate U.S. statutory tax rate to 21% from 35% as a result of the Tax Cuts and Jobs Act (TCJA) was effective January 1, 2018. The quarter ended December 31, 2017, includes a $5,528 charge to remeasure
deferred taxes as a result of the enactment of the tax reform.
(2) Non-GAAP financial measure. Excludes income recognized on acquired loans of $739, $2,463 and $123, respectively.
(3) See Appendix for non-GAAP reconciliation
(1) The reduction of the corporate U.S. statutory tax rate to 21% from 35% as a result of TCJA was effective January 1, 2018. The quarter ended December 31, 2017, includes a $5,528
charge to remeasure deferred taxes as a result of the enactment of the tax reform.
(2) See Appendix for non-GAAP reconciliation
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Net Income Growth
$ in Millions
Interest Income Growth
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Interest Income, Net Interest Income and NIM Trends
Earnings Per Share and Adjusted Earnings Per Share Trends (diluted)
(1) The reduction of the corporate U.S. statutory tax rate of 21% from 35% as a result of TCJA was effective January 1, 2018. The quarter ended December 31, 2017, includes a $5,528
charge to remeasure deferred taxes as a result of the enactment of the tax reform.
(2) See Appendix for non-GAAP reconciliation
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Adjusted Efficiency Ratio Trends (1)
(1) See Appendix for non-GAAP reconciliation
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($ in
thousands)
Total Loans by Year and Current Annual Trend ($ in billions) (1)
Loan Portfolio Growth
(1) Includes loans held for sale
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Loan Portfolio Composition
Loan Composition at 03/31/2018 CRE Loan Composition at 03/31/2018
Loans by Region at 03/31/2018
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2018 YTD adjusted loan yield: 5.11% (1)
(1) Non-GAAP financial measure. Excludes $739 thousandof income recognized on acquired loans.
Retail CRE and C&D Composition at 03/31/2018
Commercial Real Estate (CRE) and Construction and
Development (C&D)
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CRE and C&D Concentrations at 03/31/2018
• 611 Retail Loans
• 38 Loans > $5MM
• 1.89 AVG DSCR (1)
• 58% AVG LTV (1)
(1) Loans greater than $500 thousand
Loans > $500 thousand
NPLs / Loans NCOs / Average Loans
Note: Financial data as of and for quarter ended December 31, 2017 for peer data and March 31, 2018 for IBTX. Interim quarterly charge-off data annualized.
Source: U.S. and Texas Commercial Bank numbers from S&P Global Market Intelligence.
Historically Strong Credit Culture
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Provision expense and Net charge-off trends
Provision and Charge-offs
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($ in thousands)
Energy Lending
($ in millions)
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Outstanding Balances and Related Reserves
Deposit Mix and Pricing
(1) Average rate for total deposits
2018 YTD Average Rate for Interest-bearing deposits:
0.82%
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Deposit Mix as of March 31, 2018
Deposit Growth versus Average Rate
($ in millions)
Total Capital , Tier 1 and TCE/TA Ratios
Capital
(1) See Appendix for non-GAAP reconciliation 17
Reconciliation of Adjusted Net Income, Adjusted Efficiency Ratio and Adjusted EPS--Quarterly Periods
Supplemental Information - Non-GAAP Financial Measures (unaudited)
APPENDIX
(1) The reduction of the corporate U.S. statutory tax rate to 21% from 35% as a result of TCJA was effective January 1, 2018. The quarter ended December 31, 2017, includes a $5,528 charge to remeasure deferred taxes as a result
of the enactment of the tax reform.
(2) Assumes an actual effective tax rate of 19.0% for the quarter ended March 31, 2018. The quarter ended December 31, 2017 excludes the charge to remeasure deferred taxes and assumes the resulting normalized effective tax rate
of 33.2% Assumes an actual effective tax rate of 33.2%, 32.1% and 30.0% for the quarters ended September 30, 2017, June 30, 2017 and March 31, 2017, respectively.
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For the Quarters Ended
($ in thousands except per share data) March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017
Net Interest Income - Reported (a) $ 73,967 $ 75,254 $ 72,857 $ 69,500 $ 47,867
Income recognized on acquired loans (739 ) (2,463 ) (905 ) (572 ) (123 )
Adjusted Net Interest Income (b) 73,228 72,791 71,952 68,928 47,744
Provision Expense - Reported (c) 2,695 1,897 1,873 2,472 2,023
Noninterest Income - Reported (d) 9,455 13,579 12,130 10,995 4,583
Gain on sale of loans — — (338 ) (13 ) —
(Gain) loss on sale of branch — (3,044 ) 127 — —
(Gain) loss on sale of OREO and repossessed assets
(60 ) (876 ) — 26 —
(Loss) gain on sale of securities 224 (72 ) — (52 ) —
Loss (gain) on sale of premises and equipment 8 6 21 (1 ) (5 )
Recoveries on charged off loans acquired (287 ) (65 ) (994 ) (123 ) —
Adjusted Noninterest Income (e) 9,340 9,528 10,946 10,832 4,578
Noninterest Expense - Reported (f) 44,958 49,553 47,904 51,328 28,028
OREO impairment (85 ) (375 ) (917 ) (120 ) —
IPO related stock grant (125 ) (128 ) (128 ) (127 ) (125 )
Acquisition expense (974 ) (6,509 ) (3,013 ) (7,278 ) (459 )
Adjusted Noninterest Expense (g) 43,774 42,541 43,846 43,803 27,444
Income Tax Expense Reported (1) (h) $ 6,805 $ 18,190 $ 11,696 $ 8,561 $ 6,728
Adjusted Net Income (2) (b) - (c) + (e) - (g) = (i) $ 29,231 $ 25,313 $ 24,829 $ 22,746 $ 15,990
Average shares for basic EPS (j) 28,320,792 27,933,201 27,797,779 27,782,584 18,908,679
Average shares for diluted EPS (k) 28,426,145 28,041,371 27,901,579 27,887,485 19,015,810
Adjusted Basic EPS (i) / (j) $ 1.03 $ 0.91 $ 0.89 $ 0.82 $ 0.85
Adjusted Diluted EPS (i) / (k) 1.03 0.90 0.89 0.82 0.84
EFFICIENCY RATIO
Amortization of core deposit intangibles (l) $ 1,331 $ 1,328 $ 1,409 $ 1,410 $ 492
Reported Efficiency Ratio (f - l) / (a + d) 52.30 % 54.29 % 54.71 % 62.01 % 52.50 %
Adjusted Efficiency Ratio (g - l) / (b + e) 51.40 50.06 51.19 53.15 51.51
PROFITABILITY
Total Average Assets (m) $ 8,675,596 $ 8,702,597 $ 8,726,847 $ 8,478,360 $ 5,880,473
Return on Average Assets (annualized) (a - c + d - f - h) / (m) 1.35 % 0.87 % 1.07 % 0.86 % 1.08 %
Adjusted Return on Average Assets (annualized) (i) / (m) 1.37 1.15 1.13 1.08 1.10
Supplemental Information - Non-GAAP Financial Measures (unaudited)
Reconciliation of Adjusted Net Income, Adjusted Efficiency Ratio and Adjusted EPS--Annual Periods
APPENDIX
(1) Excludes $5,528 charge to remeasure deferred taxes as a result of the enactment of the Tax Cuts and Jobs Act and $259 thousand of one-time nondeductible tax expense and
assumes the resulting normalized effective tax rate of 32.4% for the year ended December 31, 2017. Assumes actual effective tax rate of 33.2% and 32.6% for the years ended
December 31, 2016, and 2015, respectively.
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For the Year Ended December 31,
($ in thousands except per share data)
2017 2016 2015
Net Interest Income - Reported (a) $ 265,478 $ 183,806 $ 154,098
Income recognized on acquired loans (4,063 ) (1,765 ) (1,272 )
Adjusted Net Interest Income (b) 261,415 182,041 152,826
Provision Expense - Reported (c) 8,265 9,440 9,231
Noninterest Income - Reported (d) 41,287 19,555 16,128
Gain on sale of loans (351 ) — (116 )
(Gain) loss on sale of branch (2,917 ) 43 —
Gain on sale of OREO/repossessed assets (850 ) (62 ) (290 )
Gain on sale of securities (124 ) (4 ) (134 )
Loss (gain) on sale of premises and equipment
21 (32 ) 358
Recoveries on charged off loans acquired (1,182 ) — —
Adjusted Noninterest Income (e) 35,884 19,500 15,946
Noninterest Expense - Reported (f) 176,813 113,790 103,198
Senior leadership restructuring — (2,575 ) —
OREO impairment (1,412 ) (106 ) (35 )
IPO related stock grant (508 ) (543 ) (624 )
Acquisition expense (17,259 ) (3,121 ) (3,954 )
Adjusted Noninterest Expense (g) 157,634 107,445 98,585
Income Tax Expense Reported (1) (h) $ 45,175 $ 26,591 $ 19,011
Adjusted Net Income (1) (b) - (c) + (e) - (g) = (i) $ 88,878 $ 56,563 $ 41,056
Average shares for basic EPS (j) 25,636,292 18,501,663 17,321,513
Average shares for diluted EPS (k) 25,742,362 18,588,309 17,406,108
Adjusted Basic EPS (i) / (j) $ 3.47 $ 3.06 $ 2.37
Adjusted Diluted EPS (i) / (k) 3.45 3.04 2.36
EFFICIENCY RATIO
Amortization of core deposit intangibles (l) $ 4,639 $ 1,964 $ 1,555
Reported Efficiency Ratio (f - l) / (a + d) 56.13 % 54.99 % 59.71 %
Adjusted Efficiency Ratio (g - l) / (b + e) 51.46 52.34 57.49
PROFITABILITY
Total Average Assets (m) $ 7,966,421 $ 5,469,542 $ 4,395,552
Return on Average Assets (annualized) (a - c + d - f - h) / (m) 0.96 % 0.98 % 0.88 %
Adjusted Return on Average Assets (annualized) (i) / (m) 1.12 1.03 0.93
Supplemental Information - Non-GAAP Financial Measures (unaudited)
Reconciliation of Tangible Common Equity to Tangible Assets
APPENDIX
($ in thousands) As of and for the Quarter Ended
3/31/2018 12/31/17 12/31/16 12/31/2015
Tangible Common Equity
Total common stockholders' equity $ 1,354,699 $ 1,336,018 $ 672,365 $ 603,371
Adjustments:
Goodwill (621,458 ) (621,458 ) (258,319 ) (258,643 )
Core deposit intangibles, net (41,913 ) (43,244 ) (14,177 ) (16,357 )
Tangible Common Equity $ 691,328 $ 671,316 $ 399,869 $ 328,371
Tangible Assets
Total Assets $ 8,811,014 $ 8,684,463 $ 5,852,801 $ 5,055,000
Adjustments:
Goodwill (621,458 ) (621,458 ) (258,319 ) (258,643 )
Core deposit intangibles (41,913 ) (43,244 ) (14,177 ) (16,357 )
Tangible Assets $ 8,147,643 $ 8,019,761 $ 5,580,305 $ 4,780,000
Tangible Common Equity To Tangible Assets 8.49 % 8.37 % 7.17 % 6.87 %
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