Exhibit 99.1
Press Release
For Immediate Release
Independent Bank Group Reports
Third Quarter Financial Results
McKINNEY, Texas, October 28, 2014 /GlobeNewswire/ -- Independent Bank Group, Inc. (NASDAQ: IBTX), the holding company for Independent Bank, today announced net income available to common shareholders of $8.9 million, or $0.54 per diluted share, for the quarter ended September 30, 2014 compared to $5.1 million, or $0.32 per diluted share, for the quarter ended June 30, 2014 and $4.0 million, or $0.33 per diluted share, for the quarter ended September 30, 2013.
Highlights
• | Core earnings were $9.5 million, or $0.58 per diluted share, for the quarter ended September 30, 2014 compared to $9.0 million, or $0.57 per diluted share, for the quarter ended June 30, 2014 and to $4.6 million, or $0.38 per diluted share, for the quarter ended September 30, 2013. |
• | Loans held for investment grew organically at an annual rate of 6.5% in the third quarter and 24.2% for the first nine months of 2014. |
• | Continued strong asset quality, as reflected by a nonperforming assets to total assets ratio of 0.33% and a nonperforming loans to total loans ratio of 0.29% at September 30, 2014. Net charge offs were 0.05% annualized for the third quarter. |
• | Core efficiency ratio continued to improve to 56.87% for the quarter ended September 30, 2014. |
• | Completed $65 million subordinated debt offering. |
Independent Bank Group President and COO Torry Berntsen said, “We continued to execute our strategies during the quarter, raising capital to support growth through the completion of the subordinated debt offering in July and closing the Houston City Bancshares acquisition earlier than expected on October 1, 2014. While the third quarter has historically been a slower period, unusually high levels of loan payoffs combined with continued competitive pressure in our markets also contributed to the reduced loan growth for the quarter. Despite the competitive environment, we remain disciplined in our approach to credit underwriting and pricing which we believe will serve us well in the future. Finally, as a result of the operational conversion of Bank of Houston in August and the completion of the Houston City Bancshares acquisition, we are positioned to recognize the cost savings from these transactions.”
Net Interest Income
• | Net interest income was $32.4 million for third quarter 2014 compared to $31.4 million for second quarter 2014 and $18.9 million for third quarter 2013. The increase in net interest income from the linked quarter was primarily due to increased average loan balances. The increase from the previous year is due to organic loan growth as well as the Collin Bank, Live Oak Financial Corp. and BOH Holdings acquisitions. The increase in interest income was partially offset by interest expense on the $65 million in subordinated debt that was issued in July 2014. |
• | Net interest margin was 4.04% for third quarter 2014 compared to 4.26% for second quarter 2014 and 4.20% for third quarter 2013. The decreases from the linked quarter and the prior year are due to interest expense on the subordinated debt issuance (9bp) and a decrease in loan yields of 23 basis points from the linked quarter and 55 basis points from the prior year. |
• | The yield on interest-earning assets was 4.60% for third quarter 2014 compared to 4.76% for second quarter 2014 and 4.85% for third quarter 2013. The decreases from the linked quarter and the prior year are primarily a result of competitive pricing on loans in our markets. |
• | The cost of interest bearing liabilities, including borrowings, was 0.73% for third quarter 2014 compared to 0.64% for second quarter 2014 and 0.80% for third quarter 2013. The increase from the linked quarter is due to the interest expense associated with the $65 million in subordinated debt. The decrease from prior year is due to a decrease in the cost of deposits and FHLB advances and the repayment of notes payable and subordinated debt during 2013. |
• | The average balance of total interest-earning assets grew by $231.1 million, or 7.8%, from the second quarter 2014 and totaled $3.187 billion compared to $2.956 billion at June 30, 2014 and compared to $1.788 billion at September 30, 2013. This increase from second quarter is due to organic loan growth and from the issuance of subordinated debt. The increase from September 2013 is due to the Collin Bank, Live Oak Financial Corp. and BOH Holdings acquisitions as well as organic growth during that period. |
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Noninterest Income
• | Total noninterest income increased $1.1 million compared to second quarter 2014 and increased $1.8 million compared to third quarter 2013. The increase is primarily due to the sale of a $12.0 million SBA loan portfolio in August of 2014, resulting in a gain of $1.078 million which attributed to most of the increase from the linked quarter and the prior year. |
• | The increase in noninterest income compared to second quarter 2014 is also the result of a $88 thousand increase in service charges and $113 thousand increase in mortgage fee income. |
• | The increase in noninterest income compared to third quarter 2013 also reflects an increase of $293 thousand in deposit service fees, a $201 thousand increase in earnings on cash surrender value of BOLI, a $71 thousand increase in other noninterest income and a $123 thousand increase in mortgage fee income. |
Noninterest Expense
• | Total noninterest expense decreased $3.2 million compared to second quarter 2014 and increased $7.5 million compared to third quarter 2013. |
• | The decrease in noninterest expense compared to second quarter 2014 is due primarily to a decrease of $3.6 million in salaries and benefits. During second quarter 2014, the Company recognized $4.0 million in non-recurring compensation and bonus expense related to the BOH Holdings and Live Oak acquisitions as well as $1.5 million of other merger related costs compared to a total of $1.4 million of merger expenses (including compensation) in the third quarter 2014. The decrease in noninterest expense compared to the linked quarter is offset by increases of $208 thousand in occupancy expense, $232 thousand in professional fees and $62 thousand in core deposit amortization expense. The increase in professional fees is due to legal costs for the shelf registration statement and the registration of the 401(k) plan and restricted stock. |
• | The increase in noninterest expense compared to the prior year period is primarily related to increases in compensation, occupancy, acquisition-related and other general noninterest expenses resulting from completed acquisitions since that period. These increases were offset by a decrease in IBG Adriatica expenses. |
Provision for Loan Losses
• | Provision for loan loss expense was $976 thousand for the third quarter, a decrease of $403 thousand compared to $1.379 million for second quarter 2014 and an increase of $146 thousand compared to $830 thousand during third quarter 2013. The changes in provision expense are directly related to organic loan growth in the respective quarter and our continued strong credit quality. |
• | The allowance for loan losses was $16.8 million, or 200.83% and 0.58% of nonperforming loans and total loans, respectively, at September 30, 2014, compared to $16.2 million, or 177.86% and 0.57% of nonperforming loans and total loans, respectively, at June 30, 2014, and compared to $13.1 million, or 197.28% and 0.85% of nonperforming loans and total loans, respectively, at September 30, 2013. The decreases from prior year are due to the acquisition of loans in the Collin Bank, Live Oak Financial Corp. and BOH Holdings transactions being recorded at fair value. |
• | As noted, loans acquired in the Collin Bank, Live Oak Financial Corp. and BOH Holdings transactions do not have an allocated allowance for loan losses as of September 30, 2014. Rather, those assets were recorded at an estimated fair market value to reflect the probability of losses on those loans as of the acquisition date. |
Income Taxes
• | Federal income tax expense of $4.5 million was recorded for the quarter ended September 30, 2014, an effective rate of 33.6% compared to tax expense of $2.7 million and an effective rate of 34.4% for the quarter ended June 30, 2014 and tax expense of $1.9 million and an effective rate of 32.7% for the quarter ended September 30, 2013. The increase in the effective tax rate in the second and third quarters 2014 was primarily related to legal and professional fees associated with facilitating acquisitions that are not deductible for federal income tax purposes. |
Third Quarter 2014 Balance Sheet Highlights:
Loans
• | Total loans held for investment were $2.891 billion at September 30, 2014 compared to $2.845 billion at June 30, 2014 and compared to $1.556 billion at September 30, 2013. This represented a 1.6% increase from the previous quarter and a 85.8% increase over the same quarter in 2013. Organic growth for the nine months ended September 30, 2014 totaled $312 million, or 24.2% on an annualized basis. In addition to our historically moderated growth for the quarter, other factors impacted loan growth for the period, including increased payoffs (approximately $141 million during the third quarter compared to $92 million in the second quarter), the sale of a $12.0 million SBA loan portfolio, and our continued disciplined approach to credit pricing and underwriting in this highly competitive environment. The Company acquired approximately $71 million in loans during the first quarter and $785 million in loans during the second quarter related to the Live Oak and BOH Holdings acquisitions, respectively. |
• | Since December 31, 2013 loan growth has been centered in commercial real estate loans ($493 million), C&I loans ($346 million) and in commercial and single family construction loans ($193 million). |
• | Continued focus on commercial lending and the BOH acquisition increased the C&I portfolio from $241.2 million (14.0% of total loans) at December 31, 2013 to $587.5 million (20.3% of total loans) at September 30, 2014. |
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Asset Quality
• | Total nonperforming assets decreased to $12.5 million, or 0.33% of total assets at September 30, 2014 from $12.9 million, or 0.35% of total assets at June 30, 2014 and decreased significantly from $24.7 million, or 1.26% of total assets at September 30, 2013. The significant decrease from the same quarter prior year is due to the sale of the remaining Adriatica real estate and other real estate sales in the fourth quarter 2013. |
• | Total nonperforming loans also decreased to $8.4 million, or 0.29% of total loans at September 30, 2014 compared to $9.1 million, or 0.32% of total loans at June 30, 2014. Total nonperforming loans increased (on a dollar volume basis) compared to $6.7 million, or 0.43% of total loans at September 30, 2013. The increase in nonperforming loan balances was primarily due to the BOH Holdings acquisition. |
Deposits and Borrowings
• | Total deposits were $2.814 billion at September 30, 2014 compared to $2.853 billion at June 30, 2014 and compared to $1.541 billion at September 30, 2013. |
• | The average cost of interest bearing deposits was stable at 0.49% for both third and second quarters 2014 and decreased by five basis points compared to 0.54% during the third quarter 2013. |
• | Total borrowings (other than junior subordinated debentures) were $402.4 million at September 30, 2014, an increase of $121.3 million from June 30, 2014 and an increase of $233.2 million from September 30, 2013. The increase from prior quarter and the same quarter last year reflects the assumption of FHLB advances totaling approximately $95.0 million in the BOH Holdings transaction as well as the issuance of $65 million in subordinated debt in July 2014. |
Capital
• | The tangible common equity to tangible assets and the Tier 1 capital to average assets ratios were 7.32% and 8.50%, respectively, at September 30, 2014 compared to 7.25% and 9.07%, respectively, at June 30, 2014 and 9.73% and 10.74%, respectively, at September 30, 2013. The total stockholders’ equity to total assets ratio was 13.35%, 13.44% and 11.18% at September 30, 2014, June 30, 2014 and September 30, 2013, respectively. |
• | Total capital to risk weighted assets increased from 11.00% at June 30, 2014 to 13.36% at September 30, 2014 due to the issuance of $65 million in subordinated debt that qualified as Tier 2 capital. The total capital to risk weighted assets ratio decreased compared to 15.05% at September 30, 2013 due to organic growth and growth through the three acquisitions completed since that date. |
• | Book value and tangible book value per common share were $29.10 and $15.78, respectively, at September 30, 2014 compared to $28.54 and $15.22, respectively, at June 30, 2014 and $18.09 and $15.49, respectively, at September 30, 2013. |
• | Return on tangible equity (on an annualized basis) increased to 14.32% for the third quarter 2014 from 8.27% and 8.49% for the second quarter 2014 and third quarter 2013, respectively. The increase compared to the linked quarter is primarily due to the lack of nonrecurring compensation expense incurred in the second quarter of 2014 related to the BOH Holdings acquisition. |
• | Return on average assets and return on average equity (on an annualized basis) were 0.95% and 7.60%, respectively, for third quarter 2014 compared to 0.60% and 4.64%, respectively, for second quarter 2014 and 0.81% and 7.30%, respectively, for third quarter 2013. |
Other Matters
On July 22, 2014, the Company completed its $65 million subordinated debt offering at a rate of 5.875%. Due to demand, the offering was upsized from the initial amount of $60 million. The Company used a portion of the proceeds to complete the Houston City Bancshares transaction and will use the remaining amount as capital to support continued growth.
On October 1, 2014, the Company closed the previously announced acquisition of Houston City Bancshares and its subsidiary, Houston Community Bank, with assets, deposits and equity capital totaling approximately $320 million, $291 million and $28.3 million, respectively as of June 30, 2014.
About Independent Bank Group
Independent Bank Group, through its wholly owned subsidiary, Independent Bank, provides a wide range of relationship-driven commercial banking products and services tailored to meet the needs of businesses, professionals and individuals. Independent Bank Group operates 41 banking offices in three market regions located in the Dallas/Fort Worth, Austin and Houston, Texas areas.
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Conference Call
A conference call covering Independent Bank Group’s third quarter earnings announcement will be held today, Tuesday, October 28, at 8:30 a.m. (EDT) and can be accessed by calling 1-877-303-7611 and by identifying the conference ID number 15444444. A recording of the conference call will be available from October 28, 2014 through November 3rd, 2014 by accessing our website, www.ibtx.com.
Forward-Looking Statements
The numbers as of and for the three months ended September 30, 2014 are unaudited. From time to time, our comments and releases may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements can be identified by words such as “believes,” “anticipates,” “expects,” “forecast,” “guidance,” “intends,” “targeted,” “continue,” “remain,” “should,” “may,” “plans,” “estimates,” “will,” “will continue,” “will remain,” variations on such words or phrases, or similar references to future occurrences or events in future periods; however, such words are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives, and expectations of Independent Bank Group or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Independent Bank Group’s current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Independent Bank Group’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) local, regional, national, and international economic conditions and the impact they may have on us and our customers and our assessment of that impact; (2) volatility and disruption in national and international financial markets; (3) government intervention in the U.S. financial system, whether through changes in the discount rate or money supply or otherwise; (4) changes in the level of non-performing assets and charge-offs; (5) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (6) adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; (7) inflation, deflation, changes in market interest rates, developments in the securities market, and monetary fluctuations; (8) the timely development and acceptance of new products and services and perceived overall value of these products and services by customers; (9) changes in consumer spending, borrowings, and savings habits; (10) technological changes; (11) the ability to increase market share and control expenses; (12) changes in the competitive environment among banks, bank holding companies, and other financial service providers; (13) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which we and our subsidiaries must comply; (14) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters; (15) the costs and effects of legal and regulatory developments including the resolution of legal proceedings; and (16) our success at managing the risks involved in the foregoing items and (17) the other factors that are described in the Company’s Annual Report on Form 10-K filed on March 27, 2014, the Company's Form 10-Q for the second quarter 2014 filed on August 11, 2014, the Company's Prospectus filed pursuant to Rule 424 on July 18, 2014 and the Company's Amendment No. 1 to Form S-4 Registration Statement filed on August 5, 2014 under the heading “Risk Factors” and other reports and statements filed by the Company with the SEC. Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. These measures and ratios include “core pre-provision earnings”, “tangible book value”, “tangible book value per common share”, “core efficiency ratio”, “Tier 1 capital to average assets”, “Tier 1 capital to risk weighted assets”, “tangible common equity to tangible assets”, “net interest margin excluding purchase accounting accretion”, “adjusted return on average assets” and “adjusted return on average equity” and are supplemental measures that are not required by, or are not presented in accordance with, accounting principles generally accepted in the United States. We consider the use of select non-GAAP financial measures and ratios to be useful for financial operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.
We believe that these measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however we acknowledge that our non‑GAAP financial measures have a number of limitations relative to GAAP financial measures. Certain non-GAAP financial measures exclude items of income, expenditures, expenses, assets, or liabilities, including provisions for loan losses and the effect of goodwill, core deposit intangibles and income from accretion on acquired loans arising from purchase accounting adjustments, that we believe cause certain aspects of our results of operations or financial condition to be not indicative of our primary operating results. All of these items significantly impact our financial statements. Additionally, the items that we exclude in our adjustments are not necessarily consistent with the items that our peers may exclude from their results of operations and key financial measures and therefore may limit the comparability of similarly named financial measures and ratios. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.
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A reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statements tables.
Contacts:
Analysts/Investors:
Torry Berntsen President and Chief Operating Officer (972) 562-9004 tberntsen@ibtx.com | Michelle Hickox Executive Vice President and Chief Financial Officer (972) 562-9004 mhickox@ibtx.com |
Media:
Eileen Ponce Marketing Director (469) 301-2706 eponce@ibtx.com |
Source: Independent Bank Group, Inc.
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Independent Bank Group, Inc. and Subsidiaries
Consolidated Financial Data
Three Months Ended September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013
(Dollars in thousands, except for share data)
(Unaudited)
As of and for the quarter ended | |||||||||||||||||||
September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | September 30, 2013 | |||||||||||||||
Selected Income Statement Data | |||||||||||||||||||
Interest income | $ | 36,940 | $ | 35,078 | $ | 25,162 | $ | 22,847 | $ | 21,841 | |||||||||
Interest expense | 4,509 | 3,674 | 3,027 | 2,894 | 2,926 | ||||||||||||||
Net interest income | 32,431 | 31,404 | 22,135 | 19,953 | 18,915 | ||||||||||||||
Provision for loan losses | 976 | 1,379 | 1,253 | 883 | 830 | ||||||||||||||
Net interest income after provision for loan losses | 31,455 | 30,025 | 20,882 | 19,070 | 18,085 | ||||||||||||||
Noninterest income | 4,210 | 3,119 | 2,334 | 3,412 | 2,451 | ||||||||||||||
Noninterest expense | 22,162 | 25,343 | 16,076 | 15,714 | 14,650 | ||||||||||||||
Net income | 8,960 | 5,119 | 4,801 | 4,279 | 3,959 | ||||||||||||||
Preferred stock dividends | 60 | 49 | — | — | — | ||||||||||||||
Net income available to common shareholders | 8,900 | 5,070 | 4,801 | 4,279 | 3,959 | ||||||||||||||
Core net interest income (1) | 32,259 | 30,967 | 21,772 | 19,886 | 18,728 | ||||||||||||||
Core Pre-Tax Pre-Provision Earnings (1) | 15,266 | 14,683 | 8,652 | 8,141 | 7,618 | ||||||||||||||
Core Earnings (1) | 9,546 | 9,020 | 4,972 | 4,870 | 4,568 | ||||||||||||||
Per Share Data (Common Stock) | |||||||||||||||||||
Earnings: | |||||||||||||||||||
Basic | $ | 0.54 | $ | 0.32 | $ | 0.38 | $ | 0.35 | $ | 0.33 | |||||||||
Diluted | 0.54 | 0.32 | 0.38 | 0.35 | 0.33 | ||||||||||||||
Core earnings: | |||||||||||||||||||
Basic (1) | 0.58 | 0.57 | 0.40 | 0.40 | 0.38 | ||||||||||||||
Diluted (1) | 0.58 | 0.57 | 0.39 | 0.40 | 0.38 | ||||||||||||||
Dividends | 0.06 | 0.06 | 0.06 | 0.06 | 0.06 | ||||||||||||||
Book value | 29.10 | 28.54 | 20.05 | 18.96 | 18.09 | ||||||||||||||
Tangible book value (1) | 15.78 | 15.22 | 16.37 | 15.89 | 15.49 | ||||||||||||||
Common shares outstanding | 16,370,313 | 16,370,707 | 12,592,935 | 12,330,158 | 12,076,927 | ||||||||||||||
Weighted average basic shares outstanding (4) | 16,370,506 | 15,788,927 | 12,583,874 | 12,164,948 | 12,075,786 | ||||||||||||||
Weighted average diluted shares outstanding (4) | 16,469,231 | 15,890,310 | 12,685,517 | 12,252,862 | 12,150,015 | ||||||||||||||
Selected Period End Balance Sheet Data | |||||||||||||||||||
Total assets | $ | 3,746,682 | $ | 3,654,311 | $ | 2,353,675 | $ | 2,163,984 | $ | 1,954,754 | |||||||||
Cash and cash equivalents | 249,769 | 192,528 | 97,715 | 93,054 | 120,281 | ||||||||||||||
Securities available for sale | 235,844 | 249,856 | 204,539 | 194,038 | 130,987 | ||||||||||||||
Loans, held for sale | 1,811 | 5,500 | 2,191 | 3,383 | 4,254 | ||||||||||||||
Loans, held for investment | 2,890,924 | 2,844,543 | 1,893,082 | 1,723,160 | 1,555,598 | ||||||||||||||
Allowance for loan losses | 16,840 | 16,219 | 14,841 | 13,960 | 13,145 | ||||||||||||||
Goodwill and core deposit intangible | 218,025 | 217,954 | 46,388 | 37,852 | 31,466 | ||||||||||||||
Other real estate owned | 4,084 | 3,788 | 2,909 | 3,322 | 8,376 | ||||||||||||||
Adriatica real estate owned | — | — | — | — | 9,678 | ||||||||||||||
Noninterest-bearing deposits | 715,843 | 711,475 | 352,735 | 302,756 | 281,452 | ||||||||||||||
Interest-bearing deposits | 2,097,817 | 2,141,943 | 1,537,942 | 1,407,563 | 1,259,296 | ||||||||||||||
Borrowings (other than junior subordinated debentures) | 402,389 | 281,105 | 186,727 | 195,214 | 169,237 | ||||||||||||||
Junior subordinated debentures | 18,147 | 18,147 | 18,147 | 18,147 | 18,147 | ||||||||||||||
Series A Preferred Stock | 23,938 | 23,938 | — | — | — | ||||||||||||||
Total stockholders' equity | 500,311 | 491,091 | 252,508 | 233,772 | 218,511 | ||||||||||||||
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Independent Bank Group, Inc. and Subsidiaries
Consolidated Financial Data
Three Months Ended September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013
(Dollars in thousands, except for share data)
(Unaudited)
As of and for the quarter ended | ||||||||||||||
September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||
Selected Performance Metrics | ||||||||||||||
Return on average assets | 0.95 | % | 0.60 | % | 0.84 | % | 0.83 | % | 0.81 | % | ||||
Return on average equity (2) | 7.60 | 4.68 | 7.90 | 7.61 | 7.30 | |||||||||
Return on tangible equity (2) | 14.32 | 8.27 | 9.84 | 9.00 | 8.49 | |||||||||
Adjusted return on average assets (1) | 1.65 | 1.73 | 1.51 | 1.58 | 1.56 | |||||||||
Adjusted return on average equity (1) (2) | 13.18 | 13.42 | 14.24 | 14.48 | 14.05 | |||||||||
Adjusted return on tangible equity (1) (2) | 15.36 | 14.72 | 10.19 | 10.24 | 9.79 | |||||||||
Net interest margin | 4.04 | 4.26 | 4.17 | 4.23 | 4.20 | |||||||||
Adjusted net interest margin (3) | 4.02 | 4.20 | 4.10 | 4.21 | 4.16 | |||||||||
Efficiency ratio | 60.48 | 73.41 | 65.70 | 67.25 | 68.57 | |||||||||
Core efficiency ratio (1) | 56.87 | 56.92 | 64.05 | 62.97 | 64.02 | |||||||||
Credit Quality Ratios | ||||||||||||||
Nonperforming assets to total assets | 0.33 | % | 0.35 | % | 0.51 | % | 0.47 | % | 1.26 | % | ||||
Nonperforming loans to total loans | 0.29 | 0.32 | 0.48 | 0.39 | 0.43 | |||||||||
Nonperforming assets to total loans and other real estate | 0.43 | 0.45 | 0.63 | 0.72 | 1.58 | |||||||||
Allowance for loan losses to non-performing loans | 200.83 | 177.86 | 162.96 | 152.39 | 197.28 | |||||||||
Allowance for loan losses to total loans | 0.58 | 0.57 | 0.78 | 0.81 | 0.85 | |||||||||
Net charge-offs to average loans outstanding (annualized) | 0.05 | — | 0.08 | 0.02 | 0.12 | |||||||||
Capital Ratios | ||||||||||||||
Tier 1 capital to average assets | 8.50 | % | 9.07 | % | 9.77 | % | 10.71 | % | 10.74 | % | ||||
Tier 1 capital to risk-weighted assets (1) | 10.34 | 10.21 | 11.96 | 12.64 | 13.72 | |||||||||
Total capital to risk-weighted assets | 13.36 | 11.00 | 13.08 | 13.83 | 15.05 | |||||||||
Total stockholders' equity to total assets | 13.35 | 13.44 | 10.73 | 10.80 | 11.18 | |||||||||
Tangible common equity to tangible assets (1) | 7.32 | 7.25 | 8.93 | 9.21 | 9.73 | |||||||||
(1) Non-GAAP financial measures. See reconciliation. | ||||||||||||||
(2) Excludes average balance of Series A preferred stock. | ||||||||||||||
(3) Excludes income recognized on acquired loans of $172, $437, $363, $67 and $187, respectively. | ||||||||||||||
(4) Total number of shares includes participating shares (those with dividend rights). | ||||||||||||||
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Independent Bank Group, Inc. and Subsidiaries
Consolidated Statements of Income
Three and Nine Months Ended September 30, 2014 and 2013
(Dollars in thousands)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Interest income: | ||||||||||||||||
Interest and fees on loans | $ | 35,633 | $ | 21,140 | $ | 93,637 | $ | 62,347 | ||||||||
Interest on taxable securities | 711 | 358 | 2,187 | 999 | ||||||||||||
Interest on nontaxable securities | 404 | 258 | 1,028 | 765 | ||||||||||||
Interest on federal funds sold and other | 192 | 85 | 328 | 256 | ||||||||||||
Total interest income | 36,940 | 21,841 | 97,180 | 64,367 | ||||||||||||
Interest expense: | ||||||||||||||||
Interest on deposits | 2,530 | 1,717 | 6,874 | 5,178 | ||||||||||||
Interest on FHLB advances | 975 | 819 | 2,792 | 2,475 | ||||||||||||
Interest on repurchase agreements, notes payable and other borrowings | 871 | 253 | 1,142 | 1,326 | ||||||||||||
Interest on junior subordinated debentures | 133 | 137 | 402 | 408 | ||||||||||||
Total interest expense | 4,509 | 2,926 | 11,210 | 9,387 | ||||||||||||
Net interest income | 32,431 | 18,915 | 85,970 | 54,980 | ||||||||||||
Provision for loan losses | 976 | 830 | 3,608 | 2,939 | ||||||||||||
Net interest income after provision for loan losses | 31,455 | 18,085 | 82,362 | 52,041 | ||||||||||||
Noninterest income: | ||||||||||||||||
Service charges on deposit accounts | 1,541 | 1,248 | 4,205 | 3,597 | ||||||||||||
Mortgage fee income | 1,080 | 957 | 2,777 | 3,120 | ||||||||||||
Gain on sale of loans | 1,078 | — | 1,078 | — | ||||||||||||
Gain on sale of other real estate | 20 | — | 59 | 173 | ||||||||||||
(Loss) gain on sale of premises and equipment | (22 | ) | 5 | (22 | ) | 4 | ||||||||||
Increase in cash surrender value of BOLI | 281 | 80 | 690 | 240 | ||||||||||||
Other | 232 | 161 | 876 | 475 | ||||||||||||
Total noninterest income | 4,210 | 2,451 | 9,663 | 7,609 | ||||||||||||
Noninterest expense: | ||||||||||||||||
Salaries and employee benefits | 12,551 | 7,976 | 37,797 | 23,688 | ||||||||||||
Occupancy | 3,435 | 2,117 | 9,200 | 6,562 | ||||||||||||
Data processing | 472 | 357 | 1,420 | 969 | ||||||||||||
FDIC assessment | 426 | 253 | 1,246 | 241 | ||||||||||||
Advertising and public relations | 204 | 216 | 618 | 620 | ||||||||||||
Communications | 498 | 412 | 1,220 | 1,090 | ||||||||||||
Net other real estate owned expenses (including taxes) | 122 | 111 | 258 | 368 | ||||||||||||
Operations of IBG Adriatica, net | — | 228 | 23 | 600 | ||||||||||||
Other real estate impairment | 22 | 12 | 22 | 475 | ||||||||||||
Core deposit intangible amortization | 361 | 175 | 859 | 527 | ||||||||||||
Professional fees | 828 | 353 | 1,792 | 918 | ||||||||||||
Acquisition expense, including legal | 629 | 474 | 2,628 | 602 | ||||||||||||
Other | 2,614 | 1,966 | 6,498 | 5,297 | ||||||||||||
Total noninterest expense | 22,162 | 14,650 | 63,581 | 41,957 | ||||||||||||
Income before taxes | 13,503 | 5,886 | 28,444 | 17,693 | ||||||||||||
Income tax expense | 4,543 | 1,927 | 9,564 | 2,172 | ||||||||||||
Net income | $ | 8,960 | $ | 3,959 | $ | 18,880 | $ | 15,521 | ||||||||
Pro Forma: | ||||||||||||||||
Income tax expense (1) | n/a | n/a | n/a | 5,798 | ||||||||||||
Net income | n/a | n/a | n/a | $ | 11,895 | |||||||||||
(1) Pro forma information calculated and presented as if the Company had been a C Corporation during the 2013 YTD period.
8
Consolidated Balance Sheets
As of September 30, 2014 and December 31, 2013
(Dollars in thousands, except share information)
(Unaudited)
September 30, | December 31, | ||||||
Assets | 2014 | 2013 | |||||
Cash and due from banks | $ | 121,983 | $ | 27,408 | |||
Federal Reserve Excess Balance Account (EBA) | 127,786 | 65,646 | |||||
Cash and cash equivalents | 249,769 | 93,054 | |||||
Securities available for sale | 235,844 | 194,038 | |||||
Loans held for sale | 1,811 | 3,383 | |||||
Loans, net of allowance for loan losses | 2,874,084 | 1,709,200 | |||||
Premises and equipment, net | 81,791 | 72,735 | |||||
Other real estate owned | 4,084 | 3,322 | |||||
Federal Home Loan Bank (FHLB) of Dallas stock and other restricted stock | 15,715 | 9,494 | |||||
Bank-owned life insurance (BOLI) | 39,503 | 21,272 | |||||
Deferred tax asset | 2,983 | 4,834 | |||||
Goodwill | 207,607 | 34,704 | |||||
Core deposit intangible, net | 10,418 | 3,148 | |||||
Other assets | 23,073 | 14,800 | |||||
Total assets | $ | 3,746,682 | $ | 2,163,984 | |||
Liabilities and Stockholders’ Equity | |||||||
Deposits: | |||||||
Noninterest-bearing | 715,843 | 302,756 | |||||
Interest-bearing | 2,097,817 | 1,407,563 | |||||
Total deposits | 2,813,660 | 1,710,319 | |||||
FHLB advances | 324,424 | 187,484 | |||||
Repurchase agreements | 5,235 | — | |||||
Other borrowings | 69,410 | 4,460 | |||||
Other borrowings, related parties | 3,320 | 3,270 | |||||
Junior subordinated debentures | 18,147 | 18,147 | |||||
Other liabilities | 12,175 | 6,532 | |||||
Total liabilities | 3,246,371 | 1,930,212 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Series A Preferred Stock | 23,938 | — | |||||
Common stock | 164 | 123 | |||||
Additional paid-in capital | 445,379 | 222,116 | |||||
Retained earnings | 28,714 | 12,663 | |||||
Accumulated other comprehensive income | 2,116 | (1,130 | ) | ||||
Total stockholders’ equity | 500,311 | 233,772 | |||||
Total liabilities and stockholders’ equity | $ | 3,746,682 | $ | 2,163,984 | |||
9
Independent Bank Group, Inc. and Subsidiaries
Consolidated Average Balance Sheet Amounts, Interest Earned and Yield Analysis
Three months ended September 30, 2014 and 2013
(Dollars in thousands)
(Unaudited)
The analysis below shows average interest earning assets and interest bearing liabilities together with the average yield on the interest earning assets and the average cost of the interest bearing liabilities for the periods presented.
For The Three Months Ended September 30, | |||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||
Average Outstanding Balance | Interest | Yield/ Rate | Average Outstanding Balance | Interest | Yield/ Rate | ||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Loans | $ | 2,878,566 | $ | 35,633 | 4.91 | % | $ | 1,535,460 | $ | 21,140 | 5.46 | % | |||||||||
Taxable securities | 170,804 | 711 | 1.65 | 91,075 | 358 | 1.56 | |||||||||||||||
Nontaxable securities | 69,784 | 404 | 2.30 | 29,926 | 258 | 3.42 | |||||||||||||||
Federal funds sold and other | 67,908 | 192 | 1.12 | 131,422 | 85 | 0.26 | |||||||||||||||
Total interest-earning assets | 3,187,062 | $ | 36,940 | 4.60 | 1,787,883 | $ | 21,841 | 4.85 | |||||||||||||
Noninterest-earning assets | 534,261 | 154,981 | |||||||||||||||||||
Total assets | $ | 3,721,323 | $ | 1,942,864 | |||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Checking accounts | $ | 1,126,424 | $ | 1,288 | 0.45 | % | $ | 754,835 | $ | 952 | 0.50 | % | |||||||||
Savings accounts | 125,027 | 92 | 0.29 | 113,321 | 94 | 0.33 | |||||||||||||||
Money market accounts | 111,675 | 94 | 0.33 | 56,161 | 39 | 0.28 | |||||||||||||||
Certificates of deposit | 696,272 | 1,056 | 0.60 | 332,405 | 632 | 0.75 | |||||||||||||||
Total deposits | 2,059,398 | 2,530 | 0.49 | 1,256,722 | 1,717 | 0.54 | |||||||||||||||
FHLB advances | 303,458 | 975 | 1.27 | 162,009 | 819 | 2.01 | |||||||||||||||
Repurchase agreements, notes payable and other borrowings | 56,413 | 871 | 6.13 | 13,819 | 253 | 7.26 | |||||||||||||||
Junior subordinated debentures | 18,147 | 133 | 2.91 | 18,147 | 137 | 3.00 | |||||||||||||||
Total interest-bearing liabilities | 2,437,416 | 4,509 | 0.73 | 1,450,697 | 2,926 | 0.80 | |||||||||||||||
Noninterest-bearing checking accounts | 785,054 | 266,334 | |||||||||||||||||||
Noninterest-bearing liabilities | 10,647 | 10,652 | |||||||||||||||||||
Stockholders’ equity | 488,206 | 215,181 | |||||||||||||||||||
Total liabilities and equity | $ | 3,721,323 | $ | 1,942,864 | |||||||||||||||||
Net interest income | $ | 32,431 | $ | 18,915 | |||||||||||||||||
Interest rate spread | 3.87 | % | 4.05 | % | |||||||||||||||||
Net interest margin | 4.04 | 4.20 | |||||||||||||||||||
Average interest earning assets to interest bearing liabilities | 130.76 | 123.24 | |||||||||||||||||||
10
Independent Bank Group, Inc. and Subsidiaries
Consolidated Average Balance Sheet Amounts, Interest Earned and Yield Analysis
Nine months ended September 30, 2014 and 2013
(Dollars in thousands)
(Unaudited)
The analysis below shows average interest earning assets and interest bearing liabilities together with the average yield on the interest earning assets and the average cost of the interest bearing liabilities for the periods presented.
For The Nine Months Ended September 30, | |||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||
Average Outstanding Balance | Interest | Yield/ Rate | Average Outstanding Balance | Interest | Yield/ Rate | ||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Loans | $ | 2,454,773 | $ | 93,637 | 5.10 | % | $ | 1,467,960 | $ | 62,347 | 5.68 | % | |||||||||
Taxable securities | 177,144 | 2,187 | 1.65 | 84,975 | 999 | 1.57 | |||||||||||||||
Nontaxable securities | 54,414 | 1,028 | 2.53 | 31,464 | 765 | 3.25 | |||||||||||||||
Federal funds sold and other | 77,940 | 328 | 0.56 | 113,906 | 256 | 0.30 | |||||||||||||||
Total interest-earning assets | 2,764,271 | $ | 97,180 | 4.70 | 1,698,305 | $ | 64,367 | 5.07 | |||||||||||||
Noninterest-earning assets | 323,291 | 154,770 | |||||||||||||||||||
Total assets | $ | 3,087,562 | $ | 1,853,075 | |||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Checking accounts | $ | 1,012,012 | $ | 3,522 | 0.47 | % | $ | 723,561 | $ | 2,861 | 0.53 | % | |||||||||
Savings accounts | 123,862 | 273 | 0.29 | 113,424 | 279 | 0.33 | |||||||||||||||
Money market accounts | 101,243 | 232 | 0.31 | 50,125 | 103 | 0.27 | |||||||||||||||
Certificates of deposit | 626,008 | 2,847 | 0.61 | 319,001 | 1,935 | 0.81 | |||||||||||||||
Total deposits | 1,863,125 | 6,874 | 0.49 | 1,206,111 | 5,178 | 0.57 | |||||||||||||||
FHLB advances | 243,232 | 2,792 | 1.53 | 163,702 | 2,475 | 2.02 | |||||||||||||||
Repurchase agreements, notes payable and other borrowings | 26,946 | 1,142 | 5.67 | 20,826 | 1,326 | 8.51 | |||||||||||||||
Junior subordinated debentures | 18,147 | 402 | 2.96 | 18,147 | 408 | 3.01 | |||||||||||||||
Total interest-bearing liabilities | 2,151,450 | 11,210 | 0.70 | 1,408,786 | 9,387 | 0.89 | |||||||||||||||
Noninterest-bearing checking accounts | 528,481 | 247,330 | |||||||||||||||||||
Noninterest-bearing liabilities | 8,968 | 5,634 | |||||||||||||||||||
Stockholders’ equity | 398,663 | 191,325 | |||||||||||||||||||
Total liabilities and equity | $ | 3,087,562 | $ | 1,853,075 | |||||||||||||||||
Net interest income | $ | 85,970 | $ | 54,980 | |||||||||||||||||
Interest rate spread | 4.00 | % | 4.18 | % | |||||||||||||||||
Net interest margin | 4.16 | 4.33 | |||||||||||||||||||
Average interest earning assets to interest bearing liabilities | 128.48 | 120.55 | |||||||||||||||||||
11
Independent Bank Group, Inc. and Subsidiaries
Loan Portfolio Composition
As of September 30, 2014 and December 31, 2013
(Dollars in thousands)
(Unaudited)
The following table sets forth loan totals by category as of the dates presented: | ||||||||||||||
September 30, 2014 | December 31, 2013 | |||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||
Commercial | $ | 587,488 | 20.3 | % | $ | 241,178 | 14.0 | % | ||||||
Real estate: | ||||||||||||||
Commercial real estate | 1,336,416 | 46.2 | 843,436 | 48.9 | ||||||||||
Commercial construction, land and land development | 290,086 | 10.0 | 130,320 | 7.5 | ||||||||||
Residential real estate (1) | 481,525 | 16.7 | 342,037 | 19.8 | ||||||||||
Single-family interim construction | 116,785 | 4.0 | 83,144 | 4.8 | ||||||||||
Agricultural | 43,575 | 1.5 | 40,558 | 2.3 | ||||||||||
Consumer | 36,967 | 1.3 | 45,762 | 2.7 | ||||||||||
Other | 161 | — | 108 | — | ||||||||||
Total loans | 2,893,003 | 100.0 | % | 1,726,543 | 100.0 | % | ||||||||
Deferred loan fees | (268 | ) | — | |||||||||||
Allowance for losses | (16,840 | ) | (13,960 | ) | ||||||||||
Total loans, net | $ | 2,875,895 | $ | 1,712,583 | ||||||||||
(1) Includes loans held for sale at September 30, 2014 and December 31, 2013 of $1,811 and $3,383, respectively. | ||||||||||||||
12
Independent Bank Group, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Three Months Ended September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013
(Dollars in thousands, except for share data)
(Unaudited)
For the Three Months Ended | ||||||||||||||||
September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||
Net Interest Income - Reported | (a) | $ | 32,431 | $ | 31,404 | $ | 22,135 | $ | 19,953 | $ | 18,915 | |||||
Income recognized on acquired loans | (172 | ) | (437 | ) | (363 | ) | (67 | ) | (187 | ) | ||||||
Adjusted Net Interest Income | (b) | 32,259 | 30,967 | 21,772 | 19,886 | 18,728 | ||||||||||
Provision Expense - Reported | (c) | 976 | 1,379 | 1,253 | 883 | 830 | ||||||||||
Noninterest Income - Reported | (d) | 4,210 | 3,119 | 2,334 | 3,412 | 2,451 | ||||||||||
Gain on sale of loans | (1,078 | ) | — | — | — | — | ||||||||||
Gain on Sale of OREO | (20 | ) | — | (39 | ) | (1,334 | ) | — | ||||||||
Loss on Sale of PP&E | 22 | — | — | 22 | (5 | ) | ||||||||||
Adjusted Noninterest Income | (e) | 3,134 | 3,119 | 2,295 | 2,100 | 2,446 | ||||||||||
Noninterest Expense - Reported | (f) | 22,162 | 25,343 | 16,076 | 15,714 | 14,650 | ||||||||||
Adriatica Expenses | — | — | (23 | ) | (206 | ) | (228 | ) | ||||||||
OREO Impairment | (22 | ) | — | — | (74 | ) | (12 | ) | ||||||||
IPO related stock grant and bonus expense | (156 | ) | (156 | ) | (162 | ) | (235 | ) | (380 | ) | ||||||
Registration statements | (456 | ) | — | — | — | — | ||||||||||
Core system conversion implementation expenses | — | (265 | ) | — | — | — | ||||||||||
Acquisition Expense (4) | (1,401 | ) | (5,519 | ) | (476 | ) | (1,354 | ) | (474 | ) | ||||||
Adjusted Noninterest Expense | (g) | 20,127 | 19,403 | 15,415 | 13,845 | 13,556 | ||||||||||
Pre-Tax Pre-Provision Earnings | (a) + (d) - (f) | $ | 14,479 | $ | 9,180 | $ | 8,393 | $ | 7,651 | $ | 6,716 | |||||
Core Pre-Tax Pre-Provision Earnings | (b) + (e) - (g) | $ | 15,266 | $ | 14,683 | $ | 8,652 | $ | 8,141 | $ | 7,618 | |||||
Core Earnings (2) | (b) - (c) + (e) - (g) | $ | 9,546 | $ | 9,020 | $ | 4,972 | $ | 4,870 | $ | 4,568 | |||||
Reported Efficiency Ratio | (f) / (a + d) | 60.48 | % | 73.41 | % | 65.70 | % | 67.25 | % | 68.57 | % | |||||
Core Efficiency Ratio | (g) / (b + e) | 56.87 | % | 56.92 | % | 64.05 | % | 62.97 | % | 64.02 | % | |||||
Adjusted Return on Average Assets (1) | 1.65 | % | 1.73 | % | 1.51 | % | 1.58 | % | 1.56 | % | ||||||
Adjusted Return on Average Equity (1) | 13.18 | % | 13.42 | % | 14.24 | % | 14.48 | % | 14.05 | % | ||||||
Total Average Assets | $ | 3,721,323 | $ | 3,403,619 | $ | 2,330,932 | $ | 2,042,955 | $ | 1,942,864 | ||||||
Total Average Stockholders' Equity (3) | $ | 464,528 | $ | 438,713 | $ | 246,407 | $ | 223,113 | $ | 215,181 | ||||||
(1) Calculated using core pre-tax pre-provision earnings | ||||||||||||||||
(2) Assumes actual effective tax rate of 33.2%, 32.2%, 32.8%, 32.9% and 32.7%, respectively. September 30, 2014, June 30, 2014 and December 31, 2013 tax rate adjusted for effect of non-deductible acquisition expenses. | ||||||||||||||||
(3) Excludes average balance of Series A preferred stock. | ||||||||||||||||
(4) Acquisition expenses include $772 thousand and $3.996 million of compensation and bonus expenses in addition to $629 thousand and $1.523 million of merger-related expenses for the quarters ended September 30, 2014 and June 30, 2014, respectively. | ||||||||||||||||
13
Independent Bank Group, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
As of September 30, 2014 and December 31, 2013
(Dollars in thousands, except per share information)
(Unaudited)
Tangible Book Value Per Common Share | |||||||
September 30, | December 31, | ||||||
2014 | 2013 | ||||||
Tangible Common Equity | |||||||
Total common stockholders' equity | $ | 476,373 | $ | 233,772 | |||
Adjustments: | |||||||
Goodwill | (207,607 | ) | (34,704 | ) | |||
Core deposit intangibles | (10,418 | ) | (3,148 | ) | |||
Tangible common equity | $ | 258,348 | $ | 195,920 | |||
Common shares outstanding | 16,370,313 | 12,330,158 | |||||
Book value per common share | $ | 29.10 | $ | 18.96 | |||
Tangible book value per common share | 15.78 | 15.89 | |||||
Tier 1 Capital to Risk-Weighted Assets Ratio | |||||||
September 30, | December 31, | ||||||
2014 | 2013 | ||||||
Tier 1 Common Equity | |||||||
Total common stockholders' equity - GAAP | $ | 476,373 | $ | 233,772 | |||
Adjustments: | |||||||
Unrealized (gain) loss on available-for-sale securities | (2,116 | ) | 1,130 | ||||
Goodwill | (207,607 | ) | (34,704 | ) | |||
Other intangibles | (10,418 | ) | (3,148 | ) | |||
Qualifying Restricted Core Capital Elements (TRUPS) | 17,600 | 17,600 | |||||
Tier 1 common equity | $ | 273,832 | $ | 214,650 | |||
Total Risk-Weighted Assets | |||||||
On balance sheet | $ | 2,774,425 | $ | 1,637,117 | |||
Off balance sheet | 105,030 | 60,397 | |||||
Total risk-weighted assets | $ | 2,879,455 | $ | 1,697,514 | |||
Total stockholders' equity to risk-weighted assets ratio | 16.54 | % | 13.77 | % | |||
Tier 1 common equity to risk-weighted assets ratio | 9.51 | 12.64 | |||||
14