Independent Bank (US:IBTX)2020-10-27 19:52Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $1.38 for Q3 2020, an increase from $1.35 in Q3 2019 and $1.14 in the linked quarter [10] - Adjusted return on average assets was 1.42%, and adjusted return on tangible common equity was 17.29% [7] - Net interest income increased to $132 million from $125.4 million year-over-year and $128.4 million from the linked quarter [11] - Non-interest income was $25.2 million, with mortgage banking revenue increasing by $4.2 million from the linked quarter [12] Business Line Data and Key Metrics Changes - Loans held for investment (excluding mortgage warehouse loans) were $11.7 billion, up from $10.9 billion year-over-year, but flat compared to the linked quarter [17] - Mortgage warehouse purchase loans averaged $894.9 million for the quarter, up from $665.8 million in the previous quarter [18] - Total non-interest expense was $73.4 million, with significant variances in salaries and benefits due to increased deferred loan costs [13][14] Market Data and Key Metrics Changes - Total deposits reached $13.8 billion, driven by organic deposit growth of $498.5 million or 14.9% annualized for the quarter [15] - The common equity Tier 1 capital ratio increased to 10.24%, and the total capital ratio rose to 13.29% [16] Company Strategy and Development Direction - The company plans to increase its quarterly dividend to $0.30 per share and has authorized a stock repurchase program with a maximum limit of $150 million [24] - Management indicated a cautious approach to M&A activity due to economic uncertainty and high valuations of potential targets [30][31] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about economic recovery and increased activity across their footprint, despite ongoing challenges from COVID-19 [24] - The company anticipates mid-single-digit loan growth for 2021, excluding the impact of PPP loans [46][95] Other Important Information - The company has deferred the adoption of CECL under the CARES Act, with provisions for loan loss expense at $7.6 million for Q3 2020 [23] - Non-performing assets increased slightly to $43.2 million, representing 0.25% of total assets [21] Q&A Session Summary Question: Dividend and Buyback Plans - The company plans to be active in stock buybacks at current price levels, with $100 million remaining from the $150 million authorization [28][30] Question: Loan Growth Outlook - Loan fundings were strong at $580 million, but payoffs were around $600 million, primarily due to asset sales [41][42] - The company expects loan growth to be mid-single-digit in 2021, starting slower and accelerating as the year progresses [46][95] Question: Credit Quality and Non-Performing Assets - Non-performing assets increased due to one commercial real estate loan, but overall credit quality remains strong [32][33] - The company does not foresee significant losses due to strong underwriting standards and collateral values [80][84] Question: Margin and Deposit Costs - The cost of deposits decreased to 47 basis points, with expectations to lower it further to 35 basis points by the end of Q1 2021 [66] - The company anticipates some margin compression but expects stabilization with potential loan growth [102]