Q1 2021 Independent Bank Group Inc Earnings Call
Okay.
Greetings and welcome to the independent Bank Group Q1, 2021 earnings call at this time I'll touch the terms are in a listen only mode. The car.
<unk> and answer session will follow the formal presentation should anyone require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder of this conference is being recorded.
Now I'd like to turn the conference over to Paul Langdale, Senior Vice President and director of corporate development.
Good morning, everyone I am Paul Langdale, Senior Vice President and director of corporate development for Independent Bank Group and I would like to welcome you to the independent Bank Group first quarter 2021 earnings call. We appreciate you joining us the related earnings press release, and the slide presentation can be accessed on our website at <unk> dot.
Com I would like to remind you that remarks made today may include forward looking statements. Those statements are subject to risks and uncertainties that could cause actual and expected results to differ we intend such statements to be covered by safe Harbor provisions for forward looking statements. Please see page five of the text in the release or page two of the slide presentation for our Safe Harbor statement.
All comments made during today's call are subject to that statement. Please note that if we give guidance about future results of that guidance is the statement of management's beliefs at the time of the statement is made and we assume no obligation to publicly update guidance in this call. We will discuss a number of financial measures considered to be non-GAAP under the SEC's rules reconciliations of these financial measures.
For the most directly comparable GAAP financial measures are included in our release.
I'm joined this morning by David Brooks, Our Chairman CEO, and President Dan Brooks, Our Vice Chairman and Chief Risk Officer, and Michelle Hickox Executive Vice President and CFO at the end of the remarks, David will open the call to questions with that I'll turn it over to David.
Thanks, Paul Good morning, everyone and thank you for joining us on today's call.
We are pleased to report a solid start for the year that reflects the continued hard work of our team members across Texas and Colorado for the first quarter. Our company reported adjusted earnings of $1 39 per share recorded double digit organic deposit growth.
And posted additional increases to our already strong capital ratios.
Furthermore, credit quality metrics remained strong with just one basis point of annualized net charge offs for the quarter.
Given the continued strength of our earnings and balance sheet. Our board of directors has authorized an increase in our regular quarterly dividend of 232 cents per share.
Year to date, we have originated an additional $273 million of PPP loans to help our customers through the final stretches of the pandemic as we anticipated loan growth continued to be impacted by the pandemic related pay offs. During the first quarter. However, we are beginning to see encouraging signs of accelerating loan growth in.
A lot of demand.
As the pace of the economic recovery quick and we anticipate net positive loan growth in the second quarter with a more normalized loan growth returning in the back half of the year with that overview I'll turn the call over to Michele for more detail on the operating results for the quarter.
Thank you David Good morning, everyone. Please note the slide six of the presentation includes selected financial data for the quarter.
Our first quarter adjusted net income was $60 1 million or $1 39 per diluted share compared with $43 4 million or $1 one per diluted share for the first quarter last year, and 58 million or $1 34 per diluted share for the linked quarter.
Net interest income was $129 7 million in the first quarter up for $123 2 million in the first quarter last year and down slightly from $132 8 million in the linked quarter.
Year over year net interest income growth was driven by a reduction in funding costs as well as higher earning asset balances due to mortgage warehouse gross which offset a reduction in purchase accounting accretion the.
The slight redemption from the elite the from the linked quarter was due primarily to the day count.
The adjusted NIM, excluding all of loan accretion was 3.13 per cent for the first quarter compared with three point for 8% for the first quarter last year and three point to 4% in the linked quarter the.
The margin decreased by 11 basis points from the linked quarter with increased liquidity impacting it by eight basis points and the remainder due to lower asset yields.
Loan yields were down five basis points and investment yields were down 26 basis points from the linked quarter.
Total noninterest income was $18 6 million for the quarter compared to $19 9 million in the linked quarter.
The overall mortgage production volumes remained strong in Q1, despite the rising rate environment and were down only about 15% compared to Q4 <unk>.
Compression and gain on sale margins impacted mortgage income relative to the linked quarter.
Noninterest expense totaled $75 1 million for the first quarter, a slight decrease from $75 2 million from the linked quarter.
Q1, noninterest expense is always impacted by increased payroll taxes, and other compensation items for bonuses and raises relative to the linked quarter.
Payroll taxes were at $1 3 million from Q4, 2020, recruiter and signing bonuses were about 800000 related to new production team investments and we had 650000 of unusual RSA amortization for performance grants and accelerated vesting.
Salaries and benefits were positively impacted by $3 3 million of deferred loan costs related to the origination of PPP loans.
Slide 20 shows our deposit mix and cost total deposits were $14 8 billion as of quarter end, an increase driven by organic deposit growth of $405 million or 11, 4% annualized for the quarter.
Also had about $350 million and reciprocal deposits, we moved off balance sheet to reduce expense that are not included in these numbers.
Capital ratios are presented on slide 22 in the first quarter. The company's consolidated capital ratios continue to grow with the common equity tier one capital ratio, increasing by 61 basis points to 10, 94% and the total capital ratio of increasing by 81 basis points to 14.13% for the quarter.
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On January one 2021 of the company adopted Cecil which resulted in a day, one adjustment of $82 million to the allowance for credit losses for both loans and unfunded commitments.
This includes $13 million related to previously acquired loans that had been recorded at a discount the.
The adjustment to retained earnings was about $54 million after tax.
That concludes my comments today, so I'll turn it over to Dan to discuss the loan portfolio.
Thanks Michelle.
Overall loans held for investment excluding mortgage warehouse purchase loans were $11 7 billion at quarter end compared to $11 6 billion at December 31 2020.
Excluding PPP loans of $912 2 million.
Loans held for investment decreased year over year by $241 million, primarily as a result of the economic dislocation caused by the pandemic.
Average mortgage warehouse purchase loans remained flat at $1 2 billion for the quarter, reflecting our strategy to maintain average warehouse balances in an appropriate proportion to our overall balance sheet.
Overall, our credit quality metrics continued to remain strong.
The total nonperforming assets of 61 million or three 4% of total assets at March 31 2021.
The increase of nonperforming assets versus the linked quarter was primarily due to the adoption of seasonal during the quarter, which resulted in the addition of $10 million and purchase credit deteriorated loans that were excluded prior to seasonal adoption.
Classified loans total 253 million at March 31, 2021 up.
Up slightly from $239 $6 million in the linked quarter.
Net charge offs remained low at just the single basis point annualized for the first quarter.
At March 31, 2021, the seasonal allowance for credit losses of $165 8 million or 1.54% of loans held for investment, excluding PPP and mortgage warehouse loans.
These are all of the comments I have related to the loan portfolio of this morning, So with that I'll turn it back over to David.
Thanks, Dan.
For the past year, we are focused on being there for our customers and communities, while strengthening our infrastructure and ensuring a scalable platform that meets the evolving customer expectations.
We continue to see the results of these investments in terms of both internal operational efficiencies.
And the new digital offerings like our online account opening platform, which launched earlier this month.
We also continue to attract new talent to the organization, including a new Chief Digital officer, who joined US earlier this month.
Looking ahead of our company operates in for the strongest growth markets in the country and we are well positioned to capitalize on significant growth opportunities as the economic recovery accelerates across the footprint.
As always we remain committed to creating sustainable long term value for our shareholders to that end of 2021 appears to be shaping up to be an active year for bank M&A and I expect our company to pursue strategic and financially attractive and well structured deals as opportunities present themselves.
Thank you for taking the time to join US today, we'll now open the lines of the questions operator.
Thank you.
At this time, we will be conducting a question and answer session. If you would like to ask the question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is on the question you May Press star two if he would like to remove your questions on the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star.
One of them.
Please poll for questions.
The first question is for Michael Young from Jewish The Securities. Please go ahead.
Hey, good morning.
Hey, good morning, Michael.
Thanks for taking the question wanted to just start on on the loan growth outlook, you've been pretty optimistic I think about the second half of the year and kind of a rebound in loan growth there you're still seeing kind of those trends whether it be customer communications our loan pipeline building on.
The the Quebec confidence in place.
Yes, Michael we are confident in the loan growth the.
For cash that we've been talking about.
Previously we are we were off a little in the first quarter of.
No we weren't surprised about that but the pipeline picked up the fundings were accelerating toward the end of the quarter and.
And that's the resulted in already in April were positive for the year. So.
Our net fundings in April had been very strong so far.
The pipeline is as good as its been since before the pandemic. So we have reason to believe that we will add.
Positive growth here in the second quarter and then.
The evolving back in the second half of the year to a more normal range of 6% to 8% for us on a go forward basis. So we're feeling better about that now as it's playing out on the ground.
Okay, and I guess my follow up would just be your comments on the inorganic side you mentioned there at the end of that.
On the market has been hot and cold and hot and cold, though it sounds like maybe a little more optimism a little more conversations being had now and you know it would just be curious for updated thoughts there, especially related to maybe size as we've seen a few more M oes kind of get announced recently.
Sure I think.
The activity of the questions are the conversations rather certainly we're picking up in Texas as well we have seen a lot of activity nationally more on bigger deals as you as you allude to there Michael.
I think our sweet spot is going to be downstream high quality.
Acquisitions of companies here in Texas in the major markets.
You have.
Some good very good positive conversations there and some very good companies and and I think it's people part of what's going on I think Michael is that as people get more confidence in where the economy is landing here post pandemic and what the opportunities are.
And then I think some of the public companies are.
Getting to get of beginning to get a better feel for what their opportunity to do downstream acquisition is.
And that's affecting how theyre thinking then about.
The merger partner for themselves.
So I'm more encouraged than I was in the first quarter, we will see obviously, we haven't seen much activity in Texas. So we'll see how that comes about.
My understanding is theres a lot of activity in the pipeline across the country.
And I'll be surprised if it didn't get the taxes sooner than later.
Okay. Thanks.
Okay. Thanks, Mike.
The next question is from Brad Milsap from Piper Sandler. Please go ahead.
Hey, good morning.
Hey, good morning breath of Red.
Michel maybe I wanted to start with expenses are pretty flat linked quarter and our I think in line with your guidance, but there were sounded like there were.
The number of pluses and minuses within the quarter, just kind of curious how you're thinking about you know sort of expense run rate as we move through the year kind of take into account all of those items that you discussed.
Yeah.
Sorry, you're exactly right Brad there was a lot of noise, specifically in the salaries and benefits line that I referred to in my comments earlier on.
I think the when I look at it we probably had around $2 million of expense that I would sort of called non recurring after first quarter, but and that was offset by the deferred costs that we had related to the P. P. P. So if you pull out all of that noninterest expense, probably would've been around a million dollars higher than what we reported.
And one of the things we have is there's about a $650000 expense related to the P. P. P. Portal that we recorded that will continue probably through Q3 as we get those loans paid off so that's made the run rate a little bit higher than what I expected.
I think if you sort of add all of that up that's the run rate will be between 75 and $76 million is what I would expect the rest of the year.
Yeah.
Great. That's helpful. And then as my follow up question I was curious the impact of a P. P. P fees in the quarter I apologize if I missed that and then what are the amount of the fees that you have remaining to recognize for the remainder of the year.
We're in the program.
Yeah. So we recognized about $4 8 million S. P. P. P fees in the first quarter and that compares to $4 2 million in Q4, but there was about I think of million and of half of that was related to loans that were paid off.
And we have about $14 million remaining from the first round and then now the second round to recognize.
We expect that.
Now we expect will recognize about 70% of that is in this year and then there will be some that will probably carry over into 'twenty two.
Great. Thank you guys I'll hop back in queue.
Hey, thanks, Thanks, Brett.
The next question is for Matt on the from Stephens. Please go ahead.
Hey, Thanks, Good morning, guys, Hey, good morning, Matt.
Thoughts on the way nice deposit growth this quarter and it looks like you are the points some of the liquidity into the investment securities portfolio are south of the duration to the extent that a little bit we'd love to hear more about the strategy around liquidity deposit growth and then what you bought in the first quarter end and could we see additional growth and that's true.
The portfolio from here thanks.
Yeah, Yeah, I'd liquidity has been at least my biggest challenge this year, Matt and I think we guided that we were going to start putting some of that liquidity into the investment portfolio, which we have been doing we haven't really changed our strategy. There, though you know that portfolio is very low risk we tend to keep it pretty short.
You know what.
What we're investing at about 150, you know so you've seen the overall yield of that portfolio has come down even though you know as we're putting more in there right now our expectation is it will grow its about 1 billion in the half by the middle of the year now the liquidity keeps coming in as we had the P. P. P pay off our liquidity has continued.
The increase of we we might decide to increase that a bit more if the loan growth. We're seeing does not continue so we'll manage that as we see opportunities on our balance sheet.
We've been investing in a primarily agencies and mortgage backs again, all very high quality low risk portfolio.
Okay. Thanks for that Michelle.
And then on the mortgage warehouse would love to hear more about the the customers in your portfolio and it seems like the market shifting from a from a refi to purchase market do you have what the split is for your portfolio as far as the the mix and secondly, as industry volumes are expected to slow in the back half of your.
It seems like we could see pricing come on incrementally.
I think you guys have been focused more on smaller customers. So would love to hear your views on on volumes and also yields for the balance of the year.
Yes, so I don't I don't know in the warehouse. It if we have an exact split as you said, we're certainly seeing the same trend that.
Of the Refis shifting to purchase.
One of the challenges in Texas.
Just on under supply if you will of homes for sale of the builders of building as fast as they can selling every hour they build in and the homes are going on on the market and lasting 24 hours and so that's in talking with our mortgage folks both of the retail mortgage and the mortgage warehouse. That's the concern is.
As the shift continues from refi to purchase will there be enough supply on the purchase side.
That said of course supply and demand could affect pricing, we saw a little bit of a decline in the first quarter on our gain on sale on <unk>.
Our retail portfolio.
The the.
The mortgage warehouse for the first quarter was actually average balances a little higher than we'd expected holding pretty flat with fourth.
Fourth quarter at around one to $1 2 billion of $1 2 billion.
I think we're expecting that to come down.
Just something in the.
900 million, maybe average for the for.
For the second quarter, it could be a little lower a little better than that.
We were picking the number right now we'd say.
Average mortgage warehouse down from one point to two 900 would be.
Good guess of good safe estimate and then.
<unk>.
And then the retail mortgage side.
Their volumes have been very good so far in April.
The pipeline looks good so.
I think on the retail mortgage side, Brad probably flat for this quarter.
For Q2 from for what we saw on Q1 would be of safe.
Thought on that and.
Our mortgage warehouse has actually moved more of scale over time.
Two more I'd call it mid tier and a little bit larger tier clients. So will we.
We'll take the same headwind there.
Some of their banks are facing but probably on average we still do have some smaller customers.
Probably more so than some of our peers.
Okay. Thanks for the commentary, yes, thanks, Matt.
The next question is from Brett Robertson of the group.
Please go ahead.
Yes.
Hey, good morning, David Michele Good morning, Brett.
I wanted just to talk about loan yields and just the margin a little but you know the the average rate in the first quarter of $4 42, I'm, just curious where you where you're originating new production relative to the existing yield and then Michelle just hoping for any commentary I know, it's tough with liquidity and PPP, but.
Would you assume the margin given the funding costs are probably getting closer to a bottom it's tougher to keep the margin where it is or you feel like you can improve it meets any cash.
Inventory on the margin would be helpful.
Let me let me talk.
For spread about the loan yields were.
We're seeing a pretty EBIT split kind of 50 50 on our growth right now between C&I and.
And our.
CRE portfolio.
On the yields on the CRE portfolio are a little better than the than the commercial C&I yields on average.
And.
But I think we're now seeing average yields come in in the upper threes $3 90, maybe Michele sound about right for what we booked in late.
Late in the first quarter. So we're seeing yields of the oncoming around $3 90.
And yes, we would.
Spect that to be pretty steady here as we go forward and then I'll, let Michele talk about the NIM, but if we continue to try to find homes for that fluidity other than 10 basis points at the fed.
We began to increase that mortgage book as I mentioned, we've had very positive loan growth so far in the second quarter. It's early.
But yes.
We're back to net positive for the year.
We expect that to continue to accelerate during the course of the year. So hopefully that will be a home for some of the liquidity as well, but michelle on the NIM.
Yeah, I think I think what David said is accurate, we're really focused on trying to grow net interest income at this point and not so much focused on margin just because of the amount of liquidity liquidity, we've had and how its impacted the margin.
But my outlook is if you look at.
Core margin ex accretion.
At this point it looks like it could compress six to eight basis points, just because we are trying to be opportunistic it sitting assets on our books as David mentioned that we'd replace funds that we're holding that eight basis points at the fed so really just looking to be able to grow net interest income versus so much focus on margin.
Okay.
Helpful. And then I guess the other thing I was curious about was just your.
Your of seasonal bank now and.
The kind of looks to me like your provisioning needs there'll be pretty light just given your strong asset quality trends.
Could you give any outlook on provisioning from here, obviously, the negative adjustment on the first corner around say small, but it just seems like your provision needs will be pretty light going forward.
Hey, Brett this is Dan.
I'll take that one you know while the Moody's forecast that of that is used by our bank and most of the banks certainly continues to point to.
Prove months.
On the conditions I think it's going to take a few quarters still for us to ultimately see what the impact will be for all of the different asset classes that we and the other banks loan into.
As an overall comment we feel very good about our portfolio and we believe the credits that.
Are deserving of reserves already listed on the watch list and have some reserves against them and depending primarily on loan growth and.
Any additional reserves needed on specific loans.
If needed I think you could see some additional reserve releases could occur in the future quarters.
We certainly kind of ex.
0.2.
To take any additional loan loss for the foreseeable quarters.
It's just a question of whether the.
The Moody's on our loan growth than any additional provisions for any credits were working on.
Would drive us.
How much of the negative provision or flat or whatever but I don't think michelle unless you've seen anything differently that we see.
We see the likelihood of taking any additional provision right based on what we know about our portfolio right now I would not expect it.
Okay.
That's great color. Thanks, so much.
Thanks Brooks.
The next question is from Brady Gailey from <unk>. Please.
Please go ahead.
Hey, Thank you good morning, guys, Hey, Brian Good morning.
So I think I heard Dan mentioned something about as it relates to the mortgage warehouse keeping that the appropriate size.
I'm not as concerned about you know next quarter of this year, but as you look longer term of.
I think its about nine per sub.
The average loans now, but what would you think is on appropriate side. Like you guys said you know once it hits, 10% of loans Thats kind of where you slow down or how big could you allow the warehouses to get overtime.
I think we're flexible Brady and how we think about it in terms of you know at any given point in time, but our our general thought is that 8% to 10% of the loan portfolio is a good range for us to be in.
Certainly if there was a bulge in the market and we went to 11 and 12% for a quarter, we wouldn't panic about that but but just we've tried to continue to guide that our core belief is the mortgage warehouse is of great business as loans and the right proportion to your balance sheet, and earning assets and your capital and.
And we think somewhere in that range. So we've set out.
At a.
At 11 $512 billion of.
Loans held for investment.
Somewhere around $1 billion is of good it's a good place to be it could be as I understand et cetera, where it could be eight or $900 million in any given quarter. It could be 1 billion two of 1 billion three on any given quarter, but somewhere around there and then.
Your question May be Brady as we continue to grow the bank or if we were to make an acquisition and we have a $25 billion balance sheet.
$17 billion on loans would we think differently of course.
Again, 8% to 10% of of that might lead us to a target of one three to $1 5 billion.
So it is a business we expect to grow as we continue to grow our balance sheet, both organically and with strategic M&A and if you said hey in two to three years out we're at $30 billion of company and we have been in half the $2 billion mortgage warehouse, we'd be fine with that.
There was it was great to see the dividend increase this quarter.
And it appears you did not do any share repurchases, maybe just an update on the.
No. Your stock's now north of two types of tangible but any update on how youre thinking about the.
The share buyback from here.
We still continue to believe that our stock trading north well North of two times book is we're better off to.
Look for.
The strategic acquisitions for that capital and that's our primary target in the meantime, as you mentioned our board increased the dividend I expect that we'll continue to look at increasing the dividend in the quarters ahead assuming.
Everything that we know today about continuing.
The strong profitability trends and strong capital improvement trends and then ultimately that we would deploy that excess capital in a strategic.
Opportunity.
Yeah, and I actually wanted to follow up on all of the M&A too I'm surprised we haven't seen more activity in Texas. When we saw the Bancorp South cadence, which was the big deal but outside of that it's been.
Been pretty quiet, despite seen M&A pick ups in other areas of the country.
Just wondering is it a seller expectation issue or.
This is just the wave that's building on and work.
About the sea a lot more activity coming out of the Texas.
I just don't think there is a sense of urgency maybe Brady bet a lot of people expected coming out of the pandemic that everybody would be looking around and trying to get something done and announced quickly I think there is a sense that hey, we're heading into a strong economy here a strong recovery over the next 18.
24 months.
The concerns are maybe of raising rising rate environment in.
In the future of what the amount of stimulus on infrastructure spending and things of that it appears we're going to be doing the that could drive rates higher people are thinking about that I think on how it affects them. Some banks believe that would be.
For some banks that would be really positive event and so there may be some thought of gosh. If rates are going to go up in a year or two maybe wait until I get my NIM on my earnings up and I can get a better.
Price for my shareholders and as we've talked about before Brady some of the other smaller public companies here in Texas I believe of really.
Looking around to see if they can find.
One of the things that drives that should be if they can find strategic.
Options to purchase downstream banks and one of the things that drive that same thing were facing which is increasing capital.
And some of the smaller public companies are sitting on very nice capital ratios and feel like if they could deploy that capital into a smaller acquisition of themselves because of their balance sheet and their earnings up but then they can command a better price for their shareholders.
And that I think theoretically that's absolutely correct I think practically it is difficult to find the good partner the execute well and then and then to see all of those increased earnings in this window that we're gonna have right where I think.
It's going to be a good opportunity of the next 12 to 18 months for the strategic merger activity. So I think there's a lot of those factors going on Brady, but.
Still think that you will see some of it come together here in the next two to three quarters and there'll be some activity in Texas.
Yes.
I'm more encouraged as I said that it was in January but not still not I still think of it a floodgate about the open I'll say that.
Okay. That's helpful. And then finally for me I just wanted to ask about kind of the local five there in Texas, we've heard from a lot of the other Texas banks that have reported.
That had been pretty upbeat on the local economy, saying you know, Texas is clearly.
Back of the business.
It's really doing well is that is that the vibe that you guys were seeing on your markets as well.
Absolutely I think the economic numbers here.
In Texas in particular are very strong continued job growth.
People are generally getting back the business Theres still some low.
Little bit of it.
Hesitation, maybe on the.
The restaurant hospitality side.
Little slower to get going here, but there'll be rolling we think here in the next few months.
And so no very positive of our customers' attitude seems to be good and as I mentioned earlier playing out in a very strong funding so far on the second quarter with the big pipeline increasing.
Our new teams in C&I in retail are beginning to get some tailwind on their production as well. So yes, we feel good about the loan growth feel good about the economy, which undergirds of that loan growth.
Continuing to see job relocation of announcements all across our footprint.
So we feel good of Denver same thing.
<unk> has maybe been a little slower to get.
Back to the level of activity that we've seen in Texas, but they are they're doing extremely well and we expect that to be back in full stride as well by zone.
Great. Thanks for the color guys. Thanks.
Thanks Brady.
As a reminder, it is star one to ask a question.
The next question is from Michael Rose from Raymond James. Please go ahead.
Okay.
Hey, good morning, everyone. Most of my questions have been asked and answered, but I wanted to go back to kind of the loan growth outlook I think you've previously David talked about kind of mid single digits ex warehouse ex PPP.
Well the loan balances were down a little bit again.
Of this quarter, clearly theres going to be some headwinds and some of the COVID-19 impacted portfolios in the energy book as we move forward can you just talk about some of the hiring efforts.
But I know that drove an increase in expenses this quarter and maybe what gives you confidence that you can get to that that range by year end, obviously, the backdrop is certainly improving and it looks like.
The Denver will come on back on.
Later this year just can you give us some color as to where you would expect the growth and maybe what the contribution from some of the newer hires might be.
As we move forward. Thanks.
The question good morning, Michael.
Good question and.
We are we are continuing to see opportunities to hire really talented relationship officers.
Particularly in the middle market team that we've been continue to build out.
We also added a strategically on the.
The other in other areas of the bank, including real estate, where we see an opportunity in the market where.
And we've seen a little bit of turnover as well just I think normal.
People looking at other opportunities in us getting a chance to replace as well so.
So continuing.
The new expenses were related more to I would say the middle market and the retail hires.
In the retail team and Theyre getting as I mentioned earlier, some some good traction as well the growth is really coming and all of them.
The major Texas markets, we're in Dallas, Fort Worth Austin and Houston.
And then Denver as I mentioned as well as a little slower to get going but we expect net to be in full bloom here shortly.
The.
The contribution from these new teams is going to be significant and is picking up now.
We think by the second half of the year.
The combination of the improving economy.
Improving borrowers expectations for their own businesses.
And then our new teams and the new relationships that we're cultivating is a result of that all of that adds together too.
A normal run rate, we think Michael of your upper single digits, 7% to 8% kind of growth.
Long term, we think we'll get back there in the second half of the year.
Maybe towards the end of the towards the end of the year.
We expect to be.
Significantly positive here in the second quarter, which has been with the slight decline we had in the first quarter.
Means I think we're about it's playing out about how we thought with the kind of a low single digit growth for the first half of the year and then.
Our mid upper single digit growth in the second half of the year.
<unk> in a in a total for the year.
Of four 5%, maybe if you looked at December 31 of the last year to December 30, <unk> of this coming year that our loans held for investment.
Should go up we think for it to 5% overall again low single in the first half upper single in the second half of that four of 5 million.
That's where we're very confident in that.
Net growth.
Great.
Great color David I appreciate it maybe just one for Dan.
You noted in the slide deck.
On the hotel book, you might need some additional time for those borrowers to recover but I guess, what we're hearing kind of across the southeast.
In Texas for that matters the occupancy rates are are surging.
Last week on Arctic Global large hotel chain basically, saying there was more product needed at this point.
Can you define more time.
Because it seems like you know the.
The the hotel bookings are coming on pretty strong as people are getting back out there again.
You bet.
The <unk> Michael.
My my take on it is we are certainly seeing improvement in occupancy and I would say all of the hotel owners of said, it's about time that we see that.
And I suppose in some areas in particular, it's been surprising how quickly it bounce back.
Was that.
<unk> what was the cause of it I don't think we really know yet, but certainly the outlook is better.
What we have.
Heard from our customers. What we continue to believe is that you would in fact see it recover of the question is how long and I would say it depends on where.
Where those properties are located as we've talked about before.
The hotel property, that's right next to an airport, where they have struggled to get on.
Occupancy in particular of those those hotels have been impacted.
They've seen the nice bounce back here.
That should be sustainable so.
In 2021, and large part many of them will recover to places where they are comfortably cover on their debt service and my consumer return there'll be others that still probably languish, a little bit longer so probably not a whole lot of new guidance to you on that other than yes, we're all glad to.
See the improvement that we've had so far.
Great I appreciate all the color thanks for taking my questions.
Thanks, Mike.
This concludes the question and answer session I would like to turn the call back over to David Brooks for closing comments.
Thank you.
Really appreciate everyone joining today I wanted to close by.
Reiterating how proud I am of our team across all of our markets.
We've got some <unk> hundred <unk>.
People, who get up every day and go to work taking care of customers and helping us build communities with doing the investments that we do.
We have a first rate team across the board and I'm deeply grateful to work they've done on this last year with all of the challenges we've had and they've been just great teammates to each other.
And I've done a great job for the shareholders. So I appreciate everyone's.
Time and investment of time this morning, and the independent Bank Group story, and we're going to continue to execute as we have and we appreciate your support hope everyone has a great day.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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