Independent Bank Group Inc (IBTX) 2020 Q1 法說會逐字稿

Greetings. Welcome to the Independent Bank Group First Quarter 2020 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded. At this time, I'll turn the conference over to Paul Langdale, Senior Vice President and Director of Corporate Development. Mr. Langdale, you may begin.

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 2020 Earnings Call. We appreciate you joining us. The related earnings press release and a slide presentation can be accessed on our website at ibtx.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 6 of the text in the release or Page 2 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, that guidance is a statement of management's beliefs at the time 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 to 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 their remarks, David will open the call to questions. With that, I'll turn it over to David.

Good morning, everyone, and thank you for joining us on today's call. Before we discuss our operating results, I'd like to take a moment to address the current environment. Most importantly, we hope you and your loved ones are well. The coronavirus pandemic has had a significant and widespread effect on our daily lives and our economy.

During these difficult times, we have focused our efforts on supporting the health, safety and welfare of our employees, customers and communities.

As the pandemic unfolded, we quickly adapted our operations to protect the health and safety of our employees while remaining available to support our customers for all their banking needs. And in the midst of a significant market disruption, our bankers worked one on one with our customers to find solutions to work through the crisis.

I'm especially proud of how our company is participating in the SBA Paycheck Protection Program. As of today, we received SBA authorization for over $730 million in loans to over 4,600 of our small business customers. Needless to say, I'm thankful for our incredible teams who, as always, have been willing to roll up their sleeves and put in hard work in the face of adversity. Though much uncertainty remains about the unfolding crisis, our company remains in a position of strength to help our customers weather the storm. Bank capital ratios remain strong, and we maintain ample liquidity both on our balance sheet and through access to substantial contingent liquidity resources. While we are encouraged by the results of recent stress testing on our loan portfolio, our teams will remain vigilant in identifying and addressing risk while working with our borrowers to minimize the economic dislocation resulting from the COVID-19 pandemic.

This disciplined approach has served us well for over 3 decades and earned our company a reputation for maintaining resilient credit quality through difficult times.

And with that, I'll turn the call over to Michelle, who will provide operating results for the quarter as well as some color on our securities, deposits and liquidity positions.

Thank you, David. Good morning, everyone. Please note that Slide 6 of the presentation includes selected financial data for the quarter. Our first quarter adjusted net income was $43.4 million or $1.01 per diluted share compared with $52 million or $1.19 per diluted share for the first quarter last year and $56.8 million or $1.32 per diluted share for the linked quarter. Net interest income was $123.2 million in the first quarter, up from $121.7 million in the first quarter of 2019, and down from $128.1 million in the linked quarter. The decrease from the linked quarter is primarily due to less loan accretion income and lower average correspondent bank and mortgage warehouse loan balances. The net interest margin was 3.76% for the first quarter compared to 3.81% for the linked quarter and 4.05% for the first quarter last year.

The 5 basis point decrease in the NIM from the linked quarter was primarily due to lower loan accretion income for the first quarter. The NIM, excluding all purchase loan accretion decreased 1 basis point from the linked quarter to 3.48% as we were able to offset decreases in loan yields with lower funding costs. Total noninterest income was $14.5 million, a decrease of $3.7 million compared to the linked quarter. This reflects decreases of $1.3 million in mortgage banking revenue and $820,000 in other noninterest income.

Recall that the linked quarter included a $1.3 million gain on sale of the trust business in October of 2019. Mortgage banking revenue of $2.5 million in the first quarter 2020 was negatively impacted by market volatility, which resulted in a hedging derivative loss of $1.6 million compared to a $675,000 loss in the linked quarter.

Total noninterest expense was $74.4 million for the first quarter of 2020, a decrease of $12.2 million compared to the first quarter of 2019 and a decrease of $6 million compared to the linked quarter.

The decrease from the prior year is primarily related to a decrease of $14.4 million in acquisition-related expenses as the Guaranty acquisition closed in the first quarter last year. The decrease from the linked quarter is related to a $3 million separation expense paid to a former executive in the fourth quarter as well as decreased acquisition expenses of $4.5 million that were incurred when the Texas Capital MOE was announced in December.

First quarter noninterest expense was also impacted by higher depreciation and property tax expense related to our new corporate headquarters. Professional fees related to acquired litigation was higher than expected by $300,000 more than was incurred in Q4 2019.

Consulting expense was also elevated by approximately $650,000 related to a compliance project that was completed in March. In addition, FDIC insurance increased by $758,000 from the linked quarter and $504,000 from first quarter 2019 due to the transition to the large bank assessment calculation.

Slide 19 shows our deposit mix and cost. Total deposits were $11.9 billion as of March 31, 2020. Deposits remained stable during the first quarter despite significant decreases in rates paid on term deposits and index fund accounts. The average cost of interest-bearing deposits was 129 basis points, down 13 basis points from the first quarter of 2019 and down 12 basis points from the linked quarter.

Slide 20 shows the detail of our investment portfolio. The company's investment portfolio consists of a diversified mix of liquid, low-risk securities designed to help bolster liquidity and manage interest rate risk. Securities and cash comprised 13.1% of assets as of March 31, 2020.

Capital ratios are presented on Slide 21. Capital levels are strong at 8.94% total capital to tangible assets and a 12.05% total risk-weighted capital ratio.

That concludes my comments, so I will turn it over to Dan to discuss the loan portfolio.

Thanks, Michelle. Good morning. Overall, loans held for investment, not including mortgage warehouse purchase loans, grew at 3.4% annualized rate to $11 billion at March 31, 2020, compared to $10.9 billion at December 31, 2019.

Mortgage warehouse purchase loans averaged $547.3 million for the quarter, down from $575 million for the quarter ended December 31, 2019. The decrease from the linked quarter was due to continued volatility in the mortgage markets resulting from the COVID-19 pandemic.

Slide 12 shows the composition of our loan portfolio and our commercial real estate portfolio. As of March 31, 2020, commercial real estate makes up 49.5% of loans, which has declined from 50.4% in the linked quarter and 53.3% in the first quarter of 2019. Our CRE book is well diversified in types of collateral with the largest segments in office and retail.

Slide 13 further breaks down the retail CRE portfolio by property type. Our retail portfolio is an extremely granular book of 1,048 loans, of which 94.2% are collateralized by properties located in our company's markets in Texas and Colorado. Average loan size in the retail portfolio as of March 31, 2020, is $1.6 million.

In light of the current environment, we thought it would be appropriate to provide additional information relating to segments of our loan portfolio potentially impacted by the COVID pandemic on Slides 15 and 16.

Our credit teams have performed stress tests on potentially impacted segments, and those tests encourage us that the portfolio will hold up well during this period of turmoil. While there will undoubtedly be impacts from the COVID-19 pandemic, we will be deliberate and actively managing our risk and working with our borrowers to ride out the storm. To that end, we have been granting deferrals on a case-by-case basis and providing other accommodations where appropriate across our footprint to help those borrowers that are experiencing temporary dislocations from the shelter in place orders and overall reduced economic activity.

Through today, we've granted deferrals to approximately 6% of our loan customers. Additional detail regarding our hotel and motel exposure can be found on Slide 15. In all, our hotel and motel exposure is $432.3 million as of March 31, 2020. 91.3% of these loans are collateralized by properties located In either Texas or Colorado.

Additionally, 78.9% of these loans are on branded, limited-service hotels in predominantly suburban markets. We have limited exposure to the most impacted segments of the industry, such as resort and conference hotels. Hotel and motel book is conservatively underwritten with an average loan-to-value of 57.3% and a $5 million average loan size. All of our hotel loans are made to proven operators, and fully 95% of the book is backed by either personal recourse or corporate guarantors.

Slide 16 contains details regarding our energy book. As of March 31, 2020, our energy loans were $181.5 million or 1.6% of total loans held for investment, excluding mortgage warehouse purchase loans. Our energy book is mostly comprised of recently underwritten E&P loans. By production, roughly 46% of loans are secured by oil and liquids, while 54% is secured by natural gas assets.

The majority of our E&P borrowers have hedging in place, and those borrowers that do not have hedges in place have provided personal guarantees. Over the last month, we have conducted rigorous stress testing of our energy portfolio assuming $25 oil for the next 2 years, and we've been pleased to confirm that the stress tests do not indicate material losses under this scenario.

Overall, our credit quality metrics remained strong, with total nonperforming assets remaining stable at $31.6 million or 0.20% of total assets at March 31, 2020, compared to $31.5 million or 0.21% of total assets at December 31, 2019.

Net charge-offs were 0.05% annualized for the first quarter 2020 compared with 0.02% annualized in the linked quarter. Charge-offs increased over linked quarter due to the charge-offs totaling $1.3 million related to a commercial real estate credit and an energy credit.

As allowed by the CARES Act, we elected to defer the adoption of CECL and our allowance in first quarter 2020 were calculated using our historical incurred loss model. Provision for loan loss expense was $8.4 million for the first quarter, an increase of $6.8 million over the linked quarter. The increase from the linked quarter represents increased general provision for economic factors related to COVID-19, previously mentioned charge-offs and a $2.8 million specific reserve.

Once CECL was adopted effective January 1, 2020, we expected the day 1 increase to the reserve to be $80 million. This includes $22 million for purchase credit deteriorated loans. We estimate that the provision expense for the first quarter would not have been substantially different under CECL. These are all the comments I had related to the loan portfolio this morning. So with that, I'll turn it back over to David.

Thanks, Dan. The challenges presented by the COVID-19 pandemic are unprecedented. That said, we remain confident that the approach that has served us well for 3 decades, conservative credit culture, disciplined underwriting and efficient operations will allow us to face these challenges head on. For the many reasons Dan and Michelle just described, we remain very confident in the strength of our balance sheet. Our footprint encompasses 4 of the country's strongest markets across Colorado and Texas. The customers in great markets has helped us deliver strong return on assets and return on equity metrics and consistently grow earnings per share, tangible book value per share and our annual dividend. While no bank will be immune to the economic turbulence that lies ahead, we believe our bank is well positioned to weather this storm and emerge in a position of competitive strength.

In the meantime, we will continue to roll up our sleeves and do the hard work. I can't thank our teams enough for their resolve, tenacity and dedication and being there for our customers and communities during this crisis. As community bankers, our prosperity is closely linked with those we serve and we will work tirelessly to remain a source of strength to our customers and communities, both through this crisis and well into the future.

Thank you for taking the time to join us today. We'll now open the line to questions. Operator?

(Operator Instructions) Our first question comes from the line of Matt Olney with Stephens.

I want to start with CECL. And what else can you tell us about the decision to delay CECL implementation? What were the major factors that drove this? And specifically, was the decision impacted at all about the pending MOE?

Matt, this is Michelle. We were working really hard on our CECL model through the end of last year. We did make some significant adjustments to it right at the end of the year. And when we got the option to defer adopting it, that week when we were trying to get our first quarter close was when Moody's economic forecast, they were sending one out every day. Weren't sure how that would be impacted by the stimulus and ultimately decided we were more comfortable recording a provision using the model that we have been using historically and feel comfortable with. The deferral is not ideal because we will have to take it back to 1/1 at some point. But we feel really -- we really felt more comfortable with that model and recording a provision using our current model rather than CECL and then having an opportunity to see how this COVID pandemic and the economy plays out through Q2 and Q3.

Okay. Understood. And then, David, I respect that there's some limited comments you can make around the pending MOE. I'm trying to appreciate that when the merger was announced back in December, I think the estimated loan mark was around $200 million. And obviously, that was just an estimated loan mark and the world's changed since then considerably.

So can you just talk about the macro changes? And how that can impact the credit mark and the rate mark for this -- the MOE?

Sure, Matt. Look, we're continuing to assess the impact of the COVID-19 and all the rapidly developing and really unprecedented economic and market events we're dealing with. I won't comment on Texas Capital, but as far as Independent Bank goes, I mean, our capital ratios, liquidity and asset quality all remain strong and as described by Dan and Michelle in our comments.

Okay. And last question for me. I think we're still waiting on the final S-4 filing that would include the date for the upcoming shareholder vote. When should we expect that filing to be finalized?

We don't currently really have an update on timing of the transaction, which obviously depends on regulatory and shareholder approvals and other factors that are outside of our control. We continue to focus on running the bank here. These are difficult times, and I know we and Texas Capital have continued to focus on taking care of our customers and our employees and our communities at this time. So I don't have an update on the timing, Matt.

Our next question is from the line of Brad Milsaps with Piper Sandler.

I know there's a lot of moving parts this quarter, but David or Dan, just kind of curious if you could add a little bit more color on kind of what the process was in kind of reviewing the commercial real estate book? Kind of how you handled the deferral requests? Just any additional color around due diligence you did, stressing against that book to get you feeling more comfortable with kind of where you settled out on your provisioning this quarter?

Brad, this is Dan. As it relates to our book, the review we have always ongoing on a commercial real estate, continued this quarter specifically evaluating each of the asset classes that we think certainly are showing more stress across the nation, including in Texas. And based on the stress testing we did on that, there was no additional provision that was created specifically in this quarter for that. I think we've given some good detail in our slide deck as it relates to some of those buckets, hotel, motel, retail CRE. And then, again, further commentary there on energy as we always give you. Specifically, on the retail CRE book, you saw some granularity there. And I think we also provided some comments in there related to the deferrals. And specifically on that Brad, I think, important to note, in our case, we essentially ask our customers to come to us and ask for a deferral as opposed to providing a blanket deferral out there for credits.

And the importance of that, I think, is we just want to know the story. So when they came and said, "Hey, I'd like to have a payment deferral." We said, "Tell us your story, so we can understand what kind of stress you're under." And then based on that, fairly standard would have been a 90-day deferral which was allowed to give them time to work through the immediate issues that they had.

I'm not sure if I fully answered your question. Come back to me if we haven't.

No, that's helpful. Do you feel like the pace of deferral requests has begun to slow?

It has slowed. We had an initial push from them and while there is still some trickling in, the bulk of those seem to have already come through.

Great. And then maybe a follow-up question for Michelle. Your core NIM held in really well this quarter. Just kind of curious what opportunities you see on the deposit side of things? And sort of your outlook for the NIM, maybe excluding the impact of the PPP loans.

Yes. So related to the NIM, our deposit costs actually were stable from fourth quarter through February until Fed cut rates again. And then I will tell you, we have significantly lowered rates on our products. We took away our promotional CD that we had out there. I looked this morning, so for -- from -- since March, our funding costs have dropped about 30 basis points, so we're seeing really good success there in lowering funding cost.

I think on the other side, though, on assets, while we were seeing a decrease in yields from earlier in first quarter, that really has sort of slowed down at this point just given the economic environment, not as likely to give up pricing relative to what's going on. So ex the PPP, because you're right, that will cause our NIM to be really lumpy, probably mostly in Q3. I think our NIM will be stable. It could even be up a few basis points, Brad. If what's happening currently continues through the quarter.

The next question is from the line of Michael Rose with Raymond James.

Just wanted to go back to the MOE. When you guys announced it, you guys sort of mid- 2020 close. Just given the impacts of the pandemic, could that be pushed out a little bit potentially?

Michael, we filed the initial drafts of the S-4 and the regulatory applications. And I just don't have any further update at this time on what the timing might be on the proposed previously announced merger.

Okay. Maybe just switching to credit. I heard the comments on the stress test of the energy portfolio, which is good to hear. Can you give some color around maybe some of the other stress categories like hotel and motel specifically? And what some of the stress test metrics that you ran there look like both under the incurred model and what it could mean potentially under CECL?

Yes, Michael, this is Dan. Let me talk about just the hotel and motel book. We stressed occupancy, as you can imagine, and all of revenues there, and the coverages that they would have. I think it's important to note on that portfolio that it has been built with a very granular process as we do on all of our CREs so the average loan size is smaller. It's always been important to us to have cash equity upfront as opposed to appraised equity. That's absolutely the case in that book as well.

All of those credits were performing well prior to COVID. That vast majority of those 90-plus percent had meaningful guarantees in place with capacity. The overall debt service coverage on that portfolio was strong before. Some of those -- a few of them, I think, will suffer, but most will come through just fine. So we expect no material losses in that portfolio.

As it relates to the retail CRE, as I already commented, the same there, strong cash equity, 93% of those credits are -- have guarantees on them. Again, that portfolio is performing extremely well prior to COVID.

As you recall there, I think as we indicated in the deck, there's over 1,000 loans in there, and the average size is $1.6 million. All of them are in our footprint, and all the operators have been in business for a long time. And so therefore, we expect that those will do fine as well. There are payment deferrals, of course, in both of those categories. But hopefully, that gives you a little more color.

Yes. So of the 6% deferral rate, I mean, is it mostly in those categories?

I would say it's broad across the whole spectrum of real estate loans that we have. I would say retail CRE clearly has a higher percentage in there. You're in the 20s -- 22%, I think, is the average that we have in there. The hotel/motel book, as you would expect, based on the fact that most of the hotels in the U.S. are shut down, has a much higher percentage, closer to 50%, which is not unexpected given the current environment.

Okay. Maybe just one final one for me. Just around the commentary or language in the press release around the potential goodwill write-down. It would seem at least one other bank take a goodwill impairment charge this quarter. So can you just walk us through the thought process for not doing it?

So the comment in the press release -- I appreciate you're asking that question because I wanted to point that out. We felt like, given where our stock price was, there was a trigger to evaluate our goodwill. We have had a third-party valuation done at this point that currently indicates that we do not have goodwill impairment. Our auditors had not completed all of their procedures to get fully signed off as of yesterday. So it's not completed. So it's provisional at this point. It is a possibility that they could come back with questions or changes and that we could end up recording goodwill as of March 31 -- Goodwill impairment, I mean.

Thanks, Michael. One other thing regarding your question, Michael, and I think earlier to Matt's initial question around CECL and why we chose to keep the incurred loss model this quarter versus CECL. And then your follow-on question, Michael, which was, I think, pertaining to how much different our loan loss provision could have been in the quarter under CECL versus the incurred loss. And we have run our model side-by-side for this quarter and the actual CECL charge was right on top of the incurred loss model charge for this quarter.

So there is no material difference for this quarter. Now obviously, we'll watch that. And as Michelle said, we understand we'll have to -- at some point, we're just deferring this and we'll have to come back and make the entries. But right now, as I understand it, and Michelle or Dan can comment, but it was -- the proposed CECL charge under our current model was right on top of the incurred loss model.

The next question is from the line of Brady Gailey with KBW.

One more question on the CECL delay. I was wondering if this is an opportunity for you guys to potentially close the TCBI merger and then adopt CECL and that would allow you to put the CECL mark on the new combined company. Effectively, this is -- could this potentially be a way for you to put an additional mark on TCBI's acquired loan balances as well or does the CECL marks still have to be as of the economic backdrop on January 1?

I would just say that really didn't have any impact on our decision to defer adopting CECL, Brady.

Okay. And then maybe just bigger picture, David. A lot has changed in the last 4 or 5 months since you announced the TCBI deal, you have oil rates, COVID. I mean, there's a lot that's happened. Maybe just give us your updated thoughts on how you view both the positives and the risks of the pending TCBI merger?

Thanks, Brady. I just, unfortunately, don't have any update this morning on the previously announced merger with Texas Capital. We are, as I mentioned earlier, continuing to assess the impact of COVID on our balance sheet and on our income statement at this time and just can't comment on Texas Capital.

(Operator Instructions) The next question is from the line of Michael Young with SunTrust Robinson Humphrey.

Sorry to ask one more question regarding the merger, but it is from the IBTX perspective. I'm just curious if the shareholders were to vote down or not approve the merger on your side of the equation, would the $150 million be required to be paid to Texas Capital?

Really, I have no comment on that at this time, Michael. I appreciate the question, but we -- the transaction is subject to, as I said a moment ago, shareholder approval and regulatory approvals which are in process and really don't have an update on timing or status. So really our view of it.

Okay. I was just trying to ask procedurally. But I guess, bigger picture just on capital. Kind of looking at levels now and then looking forward at potential growth opportunities that are out there, especially with warehouse balances likely to be pretty strong in 2Q. Just wanted to get an update on kind of how you're thinking about growth relative to capital at this point in the cycle?

We had -- what was it Dan, 3.4% growth for the quarter, excluding the warehouse, Michael. And that feels to us like a pretty good rate of growth in that 3% to 5% range maybe for this year. Just knowing what we know now, it's obviously very hard to predict what things are going to look like over the next few months. The one thing, I think, that people should keep in mind about Independent is that our track record in credit, and we have the strongest capital ratios we've really ever had as a public company, and so we feel like we're well positioned going into this uncertainty ahead. And in the past, in these times of uncertainty, we've been able to be on offense, if you will. And able to get market share by having a clean balance sheet and clean credit, we've avoided struggles with the regulators in terms of problem credit and being in the penalty box, so to speak. So we had -- and these opportunities in the past, at least, have provided us really good opportunity to grow relative to our peers, and we expect that to be the case this time as well.

Okay. And maybe just one last one. I don't know if you have a breakdown of the reserve on the few kind of specifically called out loan books, hotel, motel, retail and energy.

Yes. There are no specific reserves against those books that you mentioned there. Energy, you have a specific one that we added this quarter for $2.8 million on one specific credit, which is a long-time classified loan we've had, and we just added some there. But as it relates to the retail CRE, the hotel books, there are no specific reserves or extra allocation that we added this quarter.

What's the general reserve against energy, though?

It's -- 4% is the reserve on the energy book at this point.

Okay. But there's been no build of the general reserve, I guess, above the just kind of normal book for hotel, motel or retail at this point, right?

Not at this point.

Not specifically for those. I mean we did build a general reserve just for the overall pandemic, the economy. But I wouldn't say it was specifically allocated to any of those portfolios.

Yes. The $8.6 million charge we took this quarter, Michael -- or I'm sorry, $8.3 million charge for loan loss provision related to some of the specifics Dan spoke about, but also a general bill for the COVID-19 stress on the portfolio that we were seeing both under the incurred loss and the CECL model. And as we think about it going forward, we've been talking about it a lot, and Dan and his team have really been doing the hard work to inform the discussion. But we expect right now, today, we expect slightly elevated loan loss reserve over the next 3 to 6, 7 quarters, depending on how slowly, how quickly -- how slowly we come out of this or how quickly the economy the economy recovers but at this time, as Dan said, with the granularity of our portfolio, we don't expect those large charges from quarter-to-quarter. Yes, we'll slowly build the reserve as we -- as the models indicate we need to but we haven't as of to-date put anything specific aside for the hotel, motel or in these other books.

I think the other thing to note is that our day 1 charge for CECL is $80 million. And so had we adopted CECL, the reserve would have been about 1.25% of total loans at the end of the quarter, which we will have to do at some point. So...

Right. So we're operating under that. While we haven't adopted CECL, we're obviously paying close attention to what it does and what it says. And at 1.25%, we feel good about that from historical standpoint where we've had typically around 1% between our reserve. And any marks on acquired loans generally been in that 90 bps to 110 bps now with CECL. We'll have a starting point here of 1.25% and could go up from there if we see the need.

The next question is from the line of Matt Olney with Stephens.

Thanks for taking the follow-up. I wanted to ask about operating expenses. It was pretty noisy in the first quarter. I believe you estimated that the core number in 1Q was around $73 million once you've moved the noncore items. Can you provide outlook over the next few quarters on that core OpEx number?

Yes. So what I would say, Matt, is that those -- expenses for first quarter were elevated, I think, by about $1.5 million, and that's still primarily due to professional fees. If you noticed, that line item was up significantly even from Q4, which was already up significantly.

We do know there is some nonrecurring related to the compliance project that started in the fourth quarter, ended in March. And then the acquired litigation fees have been outsized in fourth quarter and then first quarter. The outlook for that expense should go down significantly. We do know, at least in Q2, it will because everybody had to stop traveling and doing deposition. So I still think that the $71 million to $72 million that I guided to at the end of Q4 is still a good run-rate when you pull out those expenses.

Got it. Okay. That's helpful. And then circling back to the retail portfolio, you guys gave us some great new details there. It seems like the media has picked up on rent collections from tenants was very low in April. Are there any details you can share with us about the rent collections within your retail portfolio?

Yes, Matt, I think the percentages of rents collected, we don't have a stat that I can provide to you here. Clearly the fact that we've had some requests for payment deferrals in this book, as I mentioned earlier, is an indication that if you were a nonessential business and you had to shut your doors for some weeks here, you can expect that those tenants went back to their landlords and said, "Hey, can you help me out here?" And so there were some rent abatements. What we have seen is interesting, in many cases, the rent is not waived, but it's been deferred. And so they'll give them a 90-day period here or whatever period depending on that specific tenant. And then they're taking and adding it back in about a year from now and allowing them to just add to whatever would have been the normal rent, some portion of that. So it is a future obligation of that tenant when they return to more normal times, as an exchange for helping them right now. So -- but I don't have a stat on it. I think you can expect that many of them are asking for some assistance, particularly if they were a nonessential. In other cases, where you had essential businesses still operating there, they're still paying but -- does that helps you?

Yes, that's helpful. I appreciate that. And I guess as a follow-up, the retail portfolio, obviously, a little bit larger in Independent Bank versus some of your peers. And it sounds like it's a core competency, something you guys have done for a while. Any more background you can give us? Has this always been something core at the Bank? Was this picked up in an acquisition? Just any more history you can give us on the retail portfolio within the Bank?

Yes, you bet. We've been in that business for a long time, Matt, and have worked closely to -- with our borrowers and our bankers who've been at this a long time to structure these in a way that are built to last. Certainly, recessions. And would expect, as I said earlier, based on that and based on the cash equity and the guarantees that we have and the kind of performance we've seen in the past, the capacity of those guarantors to support their deals. We fully expect that these will perform well. Certainly, there'll be a slowdown here as we're seeing now but expect them to be that. And we have been at it a long time. So this is not something that was acquired through an acquisition.

At this time, this concludes our question-and-answer session, and I'll turn the floor back to management for closing remarks.

If there are no further questions, we will conclude the call. I really appreciate everyone's interest in Independent Bank Group today, and hope you have a great day. Be safe. Bye.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.