Independent Bank (US:IBTX)2021-07-27 18:34Financial Data and Key Metrics Changes - The company reported adjusted net income of $58.2 million or $1.35 per diluted share for Q2 2021, compared to $49.1 million or $0.90 per diluted share for the same quarter last year, and $60.1 million or $0.39 per diluted share for the linked quarter [11] - Net interest income was $129.3 million in Q2 2021, slightly up from $128.4 million in Q2 2020 but down from $129.7 million in the linked quarter [11] - The adjusted net interest margin (NIM) excluding loan accretion was 3.02% for Q2 2021, down from 3.29% in Q2 2020 and 3.13% in the linked quarter [13] - Total noninterest income was $15.9 million for Q2 2021, down from $18.6 million in the linked quarter [14] - Noninterest expense totaled $78 million for Q2 2021, an increase of $2.9 million over the linked quarter [15] Business Line Data and Key Metrics Changes - Core loans held for investment increased by $333 million over the linked quarter, totaling $11.6 billion at quarter end [20] - PPP loans on the balance sheet totaled $490.5 million at quarter end, down from $912.2 million in the linked quarter [22] - Non-performing assets represented just 0.29% of total assets at June 30, 2021, with net charge-offs at 13 basis points annualized for the quarter [23] Market Data and Key Metrics Changes - Total deposits were $15.1 billion at quarter end, with total noninterest-bearing deposits increasing by $168 million from the linked quarter [17] - The common equity tier one capital ratio increased by 20 basis points to 11.14% and the total capital ratio increased by 10 basis points to 14.23% for the quarter [18] Company Strategy and Development Direction - The company anticipates high single-digit loan growth for the remainder of the year, supported by strong economic conditions in Texas and Colorado [25] - The company remains committed to disciplined execution of its strategy to grow opportunistically, especially in strong markets [26] - The company is exploring strategic M&A opportunities as they arise, while also focusing on organic growth [25][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the loan growth for the quarter, attributing it to increased production rather than reductions in payoffs or pay downs [37] - The management noted that the current economic environment is favorable, with no immediate pressure to pursue M&A aggressively [76] - Management indicated that they expect no new provisions for credit losses in the latter half of the year, contingent on economic conditions [89] Other Important Information - The board has elected to raise the dividend to $0.34 per share, reflecting the company's philosophy of providing returns to shareholders [10] - The company is actively monitoring its liquidity levels, aiming to reduce excess cash while being cautious about potential unrealized losses in the investment portfolio [63] Q&A Session Summary Question: Expense outlook and expected run rate - Management expects occupancy expenses to decrease, while PPP consulting fees will remain elevated, projecting a run rate of $76.5 million to $77 million [30] Question: Loan growth and balance sheet strategy - Management plans to deploy excess cash into the securities portfolio while monitoring loan growth [32] Question: Loan growth outlook and competitive pressures - Management anticipates a slight pullback in loan growth in Q3 but expects acceleration in Q4, with strong production across various loan types [37][39] Question: Dividend policy and future increases - The board is considering whether the current 25% payout ratio is appropriate, with a bias towards increasing dividends in the future [47] Question: M&A environment and seller expectations - Management noted that elevated seller expectations and stock price volatility are hindering M&A activity [51] Question: Mortgage warehouse balances and outlook - Management expects mortgage warehouse balances to settle around $800 million for the remainder of the year due to competitive pressures [61] Question: C&I loan growth drivers - Management highlighted broad-based growth in C&I loans, driven by new team additions and market share gains [82] Question: Reserve levels and future provisions - Management indicated no new provisions are expected in the latter half of the year, contingent on economic conditions [89]