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IB

Independent Bank Group, Inc. (IBTX)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered stabilized core results: net income of $20.4M ($0.49 diluted EPS) and adjusted net income of $20.6M ($0.50 adjusted diluted EPS). Net interest margin (NIM) expanded to 2.50% as loan yields continued to reprice higher, while deposit costs remained elevated .
  • Capital strengthened materially: total capital ratio rose to 13.26%, CET1 to 10.01%, and tangible common equity (TCE) to 7.92%. Balance sheet actions included redeeming $110M sub debt, issuing $175M new sub debt, and paying down the unsecured line of credit .
  • Strategic exit of the mortgage warehouse business was initiated, expected to further bolster capital and liquidity once fully wound down in Q4. Average mortgage warehouse loans declined sequentially and will cease funding new purchases in Q4 .
  • Pending SouthState merger remains the key catalyst; goodwill impairment in Q2 tied to stock valuation is behind the company. No formal numerical guidance was issued; dividend maintained at $0.38 per share, payable Nov 14, 2024 .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin improved to 2.50% and loan yields expanded to 6.07% as repricing cadence of loans outpaced deposit costs: “we were pleased to see our net interest margin continue its expansion… as our loans continue to reprice.” — Chairman & CEO David R. Brooks .
  • Capital ratios strengthened meaningfully with total capital +151 bps to 13.26% and CET1 to 10.01%, aided by sub debt refinancing (redeem $110M; issue $175M): “substantial enhancement of balance sheet strength… material increase to total regulatory capital.” — David R. Brooks .
  • Credit quality remained solid: NPA ratio at 0.37% and net charge-offs at 0.00% annualized; allowance to loans at 1.08% (net of mortgage warehouse) .

What Went Wrong

  • Deposit costs stayed high (cost of interest-bearing liabilities 4.16%) limiting NIM upside; deposit mix shifts continued to pressure funding costs .
  • Nonperforming loans edged higher year-over-year to 0.43% of loans; linked-quarter increases tied to specific CRE relationships (two ~$2.9M items) .
  • Provision for credit losses increased to $4.7M, driven by $4.5M in specific allocations on a commercial relationship, reversing the Q1 release and Q2 zero provision .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Interest Income ($USD Millions)$222.7 $235.2 $239.1 $241.7
Interest Expense ($USD Millions)$113.7 $132.2 $133.9 $134.9
Net Interest Income ($USD Millions)$109.0 $103.0 $105.1 $106.8
Provision for Credit Losses ($USD Millions)$0.34 ($3.20) $0.00 $4.70
Noninterest Income ($USD Millions)$13.65 $12.87 $13.43 $13.46
Noninterest Expense ($USD Millions)$81.33 $88.47 $606.91 $89.90
Net Income (Loss) ($USD Millions)$32.78 $24.15 ($493.46) $20.44
Adjusted Net Income ($USD Millions)$32.62 $26.00 $24.88 $20.59
Diluted EPS ($USD)$0.79 $0.58 ($11.89) $0.49
Adjusted Diluted EPS ($USD)$0.79 $0.63 $0.60 $0.50
Net Interest Margin (%)2.60 2.42 2.47 2.50
Loan Yield (%)5.70 5.93 6.03 6.07
Cost of Interest-Bearing Liabilities (%)3.72 4.11 4.16 4.16
NPA / Assets (%)0.33 0.34 0.35 0.37
NPL / Loans (%)0.28 0.40 0.40 0.43
Allowance / Loans (%)1.08 1.06 1.04 1.08

Segment/Portfolio Breakdown (as of Sep 30, 2024):

SegmentAmount ($USD Millions)% of Total
Commercial$2,123.4 14.8%
Commercial Real Estate$8,311.3 58.2%
Commercial Construction/Land/Development$1,140.9 8.0%
Residential Real Estate (incl. HFS)$1,715.1 12.0%
Single-Family Interim Construction$430.3 3.0%
Agricultural$113.9 0.8%
Consumer$74.2 0.5%
Mortgage Warehouse Purchase Loans$392.7 2.7%

Capital & Liquidity KPIs:

MetricQ3 2023Q1 2024Q2 2024Q3 2024
CET1 (%)9.86 9.60 9.69 10.01
Tier 1 Leverage (%)9.09 8.91 8.76 9.08
Tier 1 Risk (%)10.21 9.94 10.03 10.36
Total Capital (%)11.89 11.68 11.75 13.26
TCE / Tangible Assets (%)7.35 7.62 7.72 7.92
Total Deposits ($USD Billions)$15.30 $15.67 $15.84 $16.00

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ4 2024 payable Nov 14$0.38 $0.38 Maintained
Mortgage warehouse businessQ4 2024ActiveExit initiated; cease funding new purchases in Q4; wind down thereafterLower risk/capital-intensive exposure
Formal financial guidanceFY/Q4 2024NoneNoneNo numerical guidance issued

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Net interest margin trajectoryQ1: NIM 2.42%, deposit cost pressures; Q2: NIM up to 2.47% as loans reset faster than deposits NIM up to 2.50%, continued loan repricing benefits Improving
Deposit costs & mixElevated costs; shift from noninterest-bearing to interest-bearing and brokered deposits Cost of interest-bearing liabilities steady at 4.16%; mix shifts continue Persistent headwind
Credit qualityLow NCOs; strong credit culture; NPLs rising from low base Healthy metrics (NCOs 0.00%, NPA 0.37%) despite specific CRE additions Stable-to-mixed
Capital actionsBorrowings reduced; Q2 sub debt redemption/issuance; capital ratios resilient Capital materially stronger post sub debt actions; CET1 10.01%, Total 13.26% Strengthening
Mortgage warehouseQ1/Q2: average balances up; contribution to fees Strategic exit announced; expected capital/liquidity tailwind De-emphasized
SouthState mergerAnnounced Q2; goodwill impairment tied to valuation Execution focus; cultural and credit alignment emphasized Ongoing integration planning

Management Commentary

  • “We were pleased to see our net interest margin continue its expansion upward… as our loans continue to reprice.” — David R. Brooks (Chairman & CEO) .
  • “We saw substantial enhancement of balance sheet strength in the third quarter as we replaced maturing subordinated debt… resulting in a material increase to total regulatory capital.” — David R. Brooks .
  • “We made the strategic decision to exit the mortgage warehouse line of business… which should result in further increases to capital and liquidity once it has fully wound down.” — David R. Brooks .
  • “We look forward to disciplined execution... while we work toward the completion of our pending merger with SouthState Corporation.” — David R. Brooks .

Q&A Highlights

  • The company did not publish a Q3 2024 earnings call transcript via the available document tools; key themes above are drawn from prepared remarks and press release disclosures .

Estimates Context

  • S&P Global consensus data was unavailable via our estimates tool for IBTX (CIQ mapping missing). Values retrieved from S&P Global were unavailable; thus, estimate comparisons cannot be anchored to S&P Global for this quarter.
  • Third-party aggregator indicates Q3 2024 EPS of $0.50 versus a consensus estimate of $0.69 (miss), based on internet data not from S&P Global .
  • Given elevated funding costs and specific credit allocations, we expect near-term estimate revisions to reflect moderated NIM progression and a more conservative provision outlook, while capital ratios and merger execution underpin medium-term confidence .

Key Takeaways for Investors

  • Core performance stabilized in Q3: NIM expansion and adjusted EPS of $0.50, with credit metrics healthy and NCOs at 0.00% annualized .
  • Capital strength is now a differentiator (Total Capital 13.26%, CET1 10.01%); sub debt actions and mortgage warehouse exit provide structural support to solvency and flexibility .
  • Funding costs remain the primary headwind; deposit mix shifts will keep pressure on NIM, tempering upside from loan repricing in the near term .
  • CRE exposures require continued vigilance; specific credit allocations drove provision higher in Q3, though overall credit metrics remain solid .
  • Dividend maintained ($0.38/share), signaling confidence in cash generation and capital position pending the SouthState merger .
  • Tactical focus: maintain discipline on deposit pricing, continue portfolio repricing, and execute mortgage warehouse exit to improve capital efficiency .
  • Merger remains the central stock catalyst; integration readiness and capital profile support medium-term thesis despite near-term funding cost friction .