Independent Bank Group Inc
NASDAQ:IBTX
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
36.57
66.61
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Independent Bank Group Inc
You don't have any saved screeners yet
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 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 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, 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 will 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 to 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 1 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 to $0.32 per share. Year-to-date, we have originated an additional $273 million in 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 relative payoffs during the first quarter. However, we are beginning to see encouraging signs of accelerating loan growth and loan demand. As the pace of the economic recovery quickens, 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 Michelle for more detail on the operating results for the quarter.
Thank you, David. Good morning, everyone. Please note that 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 $1.01 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 from $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 growth, which offset a reduction in purchase accounting accretion. The slight reduction from the linked quarter was due primarily to day count.
The adjusted NIM, excluding all loan accretion, was 3.13% for the first quarter, compared with 3.48% for the first quarter last year and 3.24% in the linked quarter. The margin decreased by 11 basis points from the linked quarter, with increased liquidity impacting it by 8 basis points and the remainder due to lower asset yields. Core loan yields were down 5 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. Overall, mortgage production volumes remained strong in Q1 despite the rising rate environment and were down only about 15% compared to Q4. 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 up $1.3 million from Q4, 2020, recruiter and signing bonuses were about $800,000 related to new production team investments and we had $650,000 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. We also had about $350 million in 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 1 capital ratio increasing by 61 basis points to 10.94% and the total capital ratio increasing by 81 basis points to 14.13% for the quarter.
On January 1, 2021 the company adopted CECL, 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 discounting. The adjustment to retained earnings was about $54 million after-tax.
That concludes my comments today. So I will 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 continue to remain strong with total non-performing assets of $61 million or 0.34% of total assets at March 31, 2021.
The increase in non-performing assets versus the linked quarter was primarily due to the adoption of CECL during the quarter, which resulted in the addition of $10 million in purchased credit deteriorated loans that were excluded prior to CECL adoption. Classified loans totaled $253 million at March 31, 2021 up slightly from $239.6 million in the linked quarter.
Net charge-offs remained low at just a single basis point annualized for the first quarter. At March 31, 2021 the CECL allowance for credit losses is $165.8 million or 1.54% of loans held for investment excluding PPP and mortgage warehouse loans.
These are all the comments I have related to the loan portfolio this morning. So with that I'll turn it back over to David.
Thanks, Dan. For the past year, we have focused on being there for our customers and communities, while strengthening our infrastructure and ensuring a scalable platform that meets evolving customer expectations. We continue to see the results of these investments in terms of both internal operational efficiencies and in 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, our company operates in four of the strongest growth markets in the country and we are well-positioned to capitalize on significant growth opportunities as the economic recovery accelerates across this footprint.
As always, we remain committed to create sustainable long-term value for our shareholders. To that end, 2021 appears to be shaping up to be an active year for bank M&A and I expect our company to pursue strategic, 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 line to questions. Operator?
Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question is from Michael Young from Truist Securities. Please go ahead.
Hi. good morning.
Hey, good morning Mike.
Thanks for taking the question. I wanted to just start on the loan growth outlook. You've been pretty optimistic I think about the second half of the year, and a rebound in loan growth there? Are you still seeing those trends whether it be customer communications or loan pipeline building that keep that confidence in place?
Yes. Michael, we are confident in the loan growth for cash that we've been talking about. Previously we were off a little in the first quarter. We weren't surprised about that, but the pipeline picked up the fundings were accelerating toward the end of the quarter. And that's resulted in -- already in April were positive for the year.
So our net fundings in April have been very strong so far. And the pipeline is as good as it's been since before the pandemic. So we have reason to believe that we'll have positive growth here in the second quarter and then 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. I think the market has been hot and cold and hot and cold. So it sounds like maybe a little more optimism, a little more conversations being had now. And I would just be curious for updated thoughts there especially related to maybe size as we've seen a few more MOEs get announced recently?
Sure. I think the activity, the questions or the conversations rather certainly are picking up in Texas as well. We have seen a lot of activity nationally more on bigger deals as you allude to there Michael. I still think our sweet spot is going to be downstream high-quality acquisitions of companies here in Texas in the major markets and some good, very good positive conversations there and some very good companies.
And I think as people -- part of what's going on I think Michael is that as people get more confidence in where this economy is landing here post-pandemic and what their opportunities are. And then I think some of the public companies are beginning to get a better feel for what their opportunity to do downstream acquisition is and that's affecting how they're thinking then about a merger partner for themselves.
And so I'm more encouraged than I was in the first quarter. We'll see. Obviously we haven't seen much activity in Texas. So we'll see how that comes about. My understanding is there's a lot of activity in the pipeline across the country. And I'll be surprised if it didn't get to Texas sooner than later.
Okay. Thanks.
Okay. Thanks Mike.
The next question is from Brad Milsaps from Piper Sandler. Please go ahead.
Hi, good morning.
Hey, Good morning Brad.
Michelle maybe -- I wanted to start with expenses. Pretty flat linked quarter and I think in line with your guidance, but they were sounding like there were a number of pluses and minuses within the quarter. Just curious how you're thinking about expense run rate as we move through the year taking into account all those items that you discussed?
Yeah. 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. I think when I look at it, we probably had around $2 million of expense that I would call nonrecurring after first quarter but -- and that was offset by the deferred costs that we had related to PPP. So if you pull out all of that, noninterest expense probably would have been around $1 million higher than what we reported.
And one of the things we have is it's about a $650,000 expense related to the PPP 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. So I think if you add all that up that the run rate will be between $75 million and $76 million is what I would expect the rest of the year.
Great. That's helpful. And then, as my follow-up question, I was curious the impact of PPP fees in the quarter? I apologize, if I missed that. And then, what are the amount of fees that you have remaining to recognize for the remainder of the year or in the program?
Yes. So, we recognized about $4.8 million of PPP fees in the first quarter and that compares to $4.2 million in Q4. But there was about -- I think $1.5 million of that was related to loans that were paid off. We have about $14 million remaining from the first round and then now the second round to recognize. We expect that -- right now, we expect we'll recognize about 70% of those this year. And then there will be some that will probably carry over into '22.
Great. Thank you, guys. I’ll hop back in queue.
Thanks Brad.
Thanks Brad.
The next question is from Matt Olney from Stephens. Please go ahead.
Hi, thanks, good morning guys.
Hey good morning, Matt.
I saw some really nice deposit growth this quarter and looks like you deployed some of the liquidity into the investment securities portfolio. I saw the duration did extend that a little bit. Would love to hear more about the strategy around liquidity, deposit growth and then what you bought in the first quarter. And could we see additional growth in that securities portfolio from here? Thanks.
Yes. 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. That portfolio is very low risk. We tend to keep it pretty short. So our -- what we're investing at has been about $150 million, so you've seen the overall yield of that portfolio is coming, even though as we're putting more in there.
Right now, our expectation is we'll grow it to about $1.5 billion by the middle of the year. Now the liquidity keeps coming. And as we have the PPP payoff, our liquidity has continued to increase. So 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 primarily agencies and mortgage backs again a very high quality low-risk portfolio.
Okay. Thanks for Michelle. And then, on the mortgage warehouse, I would love to hear more about the customers in your portfolio and it seems like the market is shifting from a refi to a purchase market. Do you have what that split is for your portfolio as far as the mix? And I guess secondly, as industry volumes are expected to slow in the back half of the year, it seems like we could see pricing come in incrementally. I think you guys have been focused more on smaller customers. So, would love to hear your views on volumes and also yields for the balance of the year? Thanks.
Yes. So, I don't know in the warehouse if we have an exact split. As you said, we're certainly seeing the same trend Matt of the refi shifting to purchase. One of the challenges in Texas is, there's just an undersupply if you will of homes for sale. The builders are building as fast as they can, selling every house they build. And the homes are going on the market and lasting 24 hours. And so that's -- in talking with our mortgage folks, both 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 in our gain on sale in our retail portfolio. The mortgage warehouse for the first quarter was actually average balance is a little higher than we'd expected, holding pretty flat with this fourth quarter at around $1.2 billion.
$1.2 billion.
$1.2 billion. I think, we're expecting that to come down to something in the $900 million maybe average for the second quarter, it could be a little lower a little better than that. But if we were picking a number right now, we'd say average mortgage warehouse down from $1.2 billion to $900,000 would be I think a good guess a good safe estimate. And then, the retail mortgage side, their volumes have been very good so far in April and their pipeline looks good. So, I think on the retail mortgage side, Brad probably flat for this quarter for Q2 from what we saw in Q1, would be a safe thought on that.
And -- our mortgage warehouse has actually moved more upscale over time to more I'd call it mid-tier and a little bit larger tier clients. So we'll face the same headwind there that some other 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 comment.
Yes, thanks Matt.
The next question is from Brett Rabatin of Hovde Group. Please go ahead.
Hey good morning, Michelle.
Good morning, Brett.
Wanted just to talk about loan yields and just a bit margin a little bit. The average rate in the first quarter 4.42%. I'm just curious where you're originating new production relative to the existing yield. And then Michelle, was just hoping for any commentary. I know it's tough with liquidity and PPP, but would you assume the margin given that funding costs are probably getting closer to a bottom, it's tougher to keep the margin where it is, or do you feel like you can improve it? Just any commentary on the margin would be helpful.
Let me talk first Brett about the loan yields. We're seeing a pretty even split kind of 50/50 on our growth right now between C&I and our CRE portfolio. The yields on the CRE portfolio are a little better than the commercial C&I yields on average. And -- but I think, we're now seeing average yields come in, in the upper 3s, 3.90% maybe. Michelle sounded about right for what we booked and late in the first quarter. So we're seeing yields of the oncoming around 3.90%.
And we'd expect that to be pretty steady here as we go forward. And then I'll let Michelle talk about the NIM. But if we continue to try to find homes for that liquidity other than 10 basis points at the Fed, we've begun 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 we're back to net positive for the year. And expect that to continue to accelerate during the course of the year. So hopefully that will be a home for some of liquidity as well. But Michelle on the NIM?
Yes. 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 we've had and how it's impacted the margin. But my outlook is if you look at core margin ex-accretion. At this point it looks like it could compress 6 to 8 basis points just because we are trying to be opportunistic at putting assets on our books as David mentioned that would replace funds that we're holding at 8 basis points at the Fed. So really just looking to be able to grow net interest income versus so much focus on margin.
Okay. That's helpful. And then I guess the other thing I was curious about was just you're a CECL bank now and it kind of looks to me like your provisioning needs will be pretty light just given your strong asset quality trends. Could you give any outlook on provisioning from here? Obviously the negative adjustment in the first quarter around CECL but it just seems like your provision needs to be pretty light going forward.
Hey Brett, this is Dan. I'll take that one. While the Moody's forecast data that is used by our bank and most of the banks certainly continues to point to improvements in economic 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 are 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 expect at this point Brett to take any additional loan loss for the foreseeable quarters ahead.
And it's just a question of whether between the Moody's and our loan growth and any additional provisions for any credits we're working on, would drive us to how much of a 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. Thanks for the color. Thanks so much.
Thanks, Brett.
Thanks, Brett.
The next question is from Brady Gailey from KBW. Please go ahead.
Hey. Thank you. Good morning guys.
Hey Brady. Good morning.
So I think I heard Dan mention something about, as it relates to the mortgage warehouse keeping that at an appropriate size. I'm not as concerned about, next quarter or this year. But as you look longer term, I think it's about 9% of average loans now.
But what would you think is, an appropriate size? Like do you guys have -- once it hits 10% of loans that's kind of where you slowdown, or how big could you allow the warehouse to get overtime?
I think we're flexible Brady in, how we think about it in terms of at any given point in time. But our general thought is that, 8% to 10% of the loan portfolio is a good range for us to be in, certainly if there's a bulge in the market. And we went to 11% and 12% for a quarter, we wouldn't panic about that.
But just -- we've tried to continue to guide that our core belief is, the mortgage warehouse is a great business as long as you send the right proportion to your balance sheet and earning assets and your capital. And we think somewhere in that range. So we've set it out, at a, $11.5 billion $12 billion of loans held for investment.
Somewhere around $1 billion is a good place to be. It could be -- as I said earlier, it could be $800 million $900 million in any given quarter. It could be $1.2 billion or $1.3 billion in any given quarter but somewhere around there.
And then, your question maybe Brady is we continue to grow the bank or if we were to make an acquisition. And we have a $25 billion balance sheet with $17 billion in loans would we think differently? Of course, and again, 8% to 10% of that might lead us to a target of $1.3 billion 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 or three years out we're a $30 billion company and we have a $1.5 million to $2 billion mortgage warehouse, we'd be fine with that.
Yeah. All right, it was great to see the dividend increase this quarter. And that appears you did not do any share repurchases. Maybe just an update on -- I know your stock is now north of two times standard. But any update on how you're thinking about the share buyback from here?
Yeah. We still continue to believe that our stock trading north -- well north of two times book is -- we're better off to look for, 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 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 want to follow-up on M&A too. I'm surprised we haven't seen more activity in Texas. And we saw Bancorp's off cadence, which was a big deal. But outside of that it's been pretty quiet despite seeing M&A pick-ups in other areas of the country.
But just wondering, is it a seller expectation issue, or do you think this is just a wave that's building and we're about to see a lot more activity coming out of Texas?
I just don't think there's a sense of urgency, maybe Brady that a lot of people expected coming out of pandemic that everybody would be looking around and trying to get something done and announced quickly. I think there's a sense that, hey, we're heading into a strong economy here, a strong recovery over the next 18 months, 24 months.
The concerns are maybe, raising, -- rising rate environment in the future with the amount of stimulus and infrastructure spending and things that appears we're going to be doing that that could drive rates higher. People are thinking about that, I think and how it affects them.
Some banks believe that would be -- for some banks that would be a really positive event. And so, there maybe some thought of Gosh, if rates are going to go up in a year or two, maybe I wait till I get my NIM and 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 are really looking around to see if they can find -- one of the things that drives that -- see if they can find strategic options to purchase downstream banks. And one of the things that drives that same thing, we're facing, which is increasing capital.
And some of the, I think, smaller public companies are sitting on very nice capital ratios that feel like if they could deploy that capital into a smaller acquisition themselves, get their balance sheet and their earnings up that then they can command a better price for their shareholders.
And that I think theoretically that's absolutely correct. I think practically, it's just difficult to find a good partner, to execute well and then to see all those increased earnings in this window that we're going to have right where I think it's going to be a good opportunity in the next 12, 18 months for the strategic merger activity.
So, I think it's a lot of those factors going on Brady, but I still think that you'll see some of it come together here in the next two or three quarters and there will be some activity in Texas. But, I'm more encouraged, as I said, than I was in January but not -- still not -- I still don't think there's a flood gate about to open I'll say that.
Okay. That's helpful. And then finally for me, I just wanted to ask about kind of the local vibe there at Texas. We've heard from a lot of the other Texas banks that have reported that have been pretty upbeat on the local economy saying, Texas is clearly back to business and is really doing well. Is that the vibe that you guys are seeing in your markets as well?
Absolutely. I think the economic numbers here, in Texas, in particular, are very strong. The continued job growth, people are generally getting back to business. There's still some -- a little bit of hesitation maybe on the restaurant, hospitality side that is a little slower to get going here, but they'll be rolling we think here in the next few months. And so, no very positive. Our customers' attitude seems to be good.
And that's, as I mentioned earlier, playing out and very strong funding so far in the second quarter with a big pipeline increasing our new teams and C&I and 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 under verged that loan growth and continuing to see job relocation announcements all across our footprint. And so, we feel good.
Denver, same thing. Denver has maybe been a little slower to get back to the level of activity that we've seen in Texas, but they're doing extremely well, and we expect that to be back in full stride as well by summer.
Great. Thanks for the color, guys.
Thanks, Brady.
[Operator Instructions] The next question is from Michael Rose from Raymond James. Please go ahead.
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 previously David talked about, kind of mid-single digits ex-warehouse, ex-PPP. Loan balances were down a little bit again this quarter. Clearly, there's going to be some headwinds in some of the COVID impacted portfolios in the energy book as we move forward.
Can you just talk about some of the hiring efforts that you made? I know that drove an increase in expenses this quarter. And maybe what gives you confidence that you can get to that range by year-end. Obviously, the backdrop is certainly improving. It looks like Denver will come 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 you move forward? Thanks.
No, good question. Good morning, Michael, good question. And we are continuing to see opportunities to hire really talented relationship officers, particularly in the middle market team that we've been continuing to build out. We've also added strategically on other -- in other areas of the bank including real estate where we see an opportunity in a market where and we've seen a little bit of turnover as well just I think normal people looking at other opportunities and us getting a chance to replace as well. So continuing the new expenses were related more to, I would say the middle market and the retail hires in the retail team and they're getting as I mentioned earlier some good traction as well.
The growth is really coming in all of the major Texas markets, we're in Dallas-Fort Worth, Austin and Houston. And then Denver as I mentioned as well is a little slower to get going, but expecting that to be in full bloom here shortly. The contribution from these new teams is going to be significant and it's picking up now. We think by the second half of the year, a 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 as a result of that, all that adds together to a normal run rate we think Michael of upper single digits 7%, 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 year. We expect to be significantly positive here in the second quarter, which then 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 a kind of a low single-digit growth for the first half of the year and then a mid-upper single-digit growth in the second half of the year resulting in a total for the year of 4%, 5% maybe.
If you look at December 31st last year to December 31st of this coming year that our loans held for investment should go up we think 4% to 5% overall. Again, low single in the first half, upper single in the second half get to that 4%, 5%. And that's -- we're very confident in that growth.
Great. That's great color, David. I appreciate it. Maybe just one for Dan. You noted in the slide deck that 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 and in Texas for that matter is that occupancy rates are surging. There was last week an article of a large hotel chain basically saying there was more product needed at this point. Can you define more time? Because it seems like the hotel bookings are coming on pretty strong as people are getting back out there again. Thanks.
You bet. Good morning Michael. My take on it is we are certainly seeing improvement in occupancy. And I would say all of the hotel owners have said it's about time that we see that. And I suppose in some areas in particular it has been surprising how quickly it bounced back. Was that temporary 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. The question is how long. And I would say it depends on where those properties are located. As we've talked about before, if you have a hotel property that's right next to an airport where they have struggled to get occupancies, in particular, those hotels have been impacted. They've seen a nice bounce back here and that should be sustainable.
So, I think in 2021, in large part, many of them will recover to places where they're comfortably covering their debt service and making some return. There will be others that still probably languish a little bit longer. So, probably not a whole lot of new guidance to you in 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 just reiterating how proud I am of our team across all of our markets. We've got 1,600 people who get up every day and go to work, taking care of customers, and helping us build communities, doing the investments that we do. We have a first-rate team across the board and I'm deeply grateful to the work they've done in this last year with all the challenges we've had and they've been just great teammates to each other and have done a great job for the shareholders.
So, I appreciate everyone's time and investment of time this morning in 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. Thanks.