EX-99.1 2 exhibit991q32017.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1

Press Release
For Immediate Release

earningsreleaseimage1a21.jpg          
    

Independent Bank Group Reports
Third Quarter Financial Results

McKINNEY, Texas, October 23, 2017 /GlobeNewswire/ -- Independent Bank Group, Inc. (NASDAQ: IBTX), the holding company for Independent Bank, today announced net income of $23.5 million, or $0.84 per diluted share, for the quarter ended September 30, 2017 compared to $14.5 million, or $0.78 per diluted share, for the quarter ended September 30, 2016 and $18.1 million, or $0.65 per diluted share, for the quarter ended June 30, 2017.


Highlights

•
Adjusted (non-GAAP) net income was $24.8 million, or $0.89 per diluted share, compared to $22.7 million, or $0.82 per diluted share, for second quarter 2017, representing 9.2% increase
•
Increase in adjusted (non-GAAP) return on average assets to 1.13%, up from second quarter 2017 of 1.08%
•
Improved adjusted (non-GAAP) efficiency ratio of 51.2%, compared to 53.2% for second quarter 2017
•
Organic loan growth annualized for the quarter of 6.9% despite the impact of Hurricane Harvey on the Houston market
•
Credit quality metrics continue to be strong


Independent Bank Group Chairman and Chief Executive Officer David Brooks commented, “We are pleased to report another quarter of record quarterly net income supported by continued excellent credit metrics. While organic loan growth slowed slightly as we paused to take care of our customers and employees impacted by Hurricane Harvey, we are confident that loan growth will return to historically strong levels for the remainder of 2017.” Brooks continued, "We continue to integrate the Carlile operations and sharpened our footprint during the quarter which we believe will enhance our performance going forward."

Third Quarter 2017 Operating Results


Net Interest Income


•
Net interest income was $72.9 million for third quarter 2017 compared to $45.7 million for third quarter 2016 and $69.5 million for second quarter 2017. The increase in net interest income from the previous year was due to increased average earning asset balances resulting primarily from the acquisition of Carlile, as well as organic growth for the year. The net increase from the linked quarter is primarily a result of organic growth in average interest earning assets.
•
The average balance of total interest-earning assets grew by $2.5 billion and totaled $7.5 billion at September 30, 2017 compared to $5.0 billion at September 30, 2016 and grew $190 million compared to $7.3 billion at June 30, 2017. This increase from prior year is due primarily to $1.8 billion in average earning assets acquired in the Carlile transaction as well as organic growth for the quarter.
•
The yield on interest-earning assets was 4.47% for third quarter 2017 compared to 4.22% for third quarter 2016 and 4.38% for second quarter 2017. The increase from the prior year is due primarily to loans and taxable securities acquired in the Carlile transaction, which had higher effective interest rates as well as increased interest rates on interest-bearing deposits which are tied to the Fed Funds rate. The increase from the linked quarter is primarily due to an increase in the loan yield which included $458 thousand of nonaccrual interest recognized in addition to increased acquired loan accretion and higher interest rates on interest-bearing deposits.
•
The cost of interest bearing liabilities, including borrowings, was 0.84% for third quarter 2017 compared to 0.74% for third quarter 2016 and 0.77% for second quarter 2017. The increase from the prior year and linked quarter is primarily due to higher rates offered on public fund certificates of deposit and money market accounts due to competition in our markets but also due in part to increased interest rates on deposit products tied to Fed Funds rates and short-term FHLB advances.



1

•
The net interest margin was 3.85% for third quarter 2017 compared to 3.66% for third quarter 2016 and 3.81% for second quarter 2017. The adjusted (non-GAAP) net interest margin, which excludes purchased loan accretion, was 3.80% for third quarter 2017 compared to 3.65% for third quarter 2016 and 3.78% for second quarter 2017. The increase on the net margin from the prior year is primarily due to the higher yielding asset mix acquired in the Carlile transaction and the three increases in the Fed Funds target rate since fourth quarter 2016.


Noninterest Income

•
Total noninterest income increased $7.2 million compared to third quarter 2016 and $1.1 million compared to second quarter 2017.
•
The increase from the prior year primarily reflects increases of $1.8 million in service charges, $2.6 million in mortgage income and $2.1 million in other noninterest income. The overall increase from prior year reflects the acquisition of Carlile. In addition, the Company implemented a new deposit fee schedule in late 2016 which increased organic service charges for the year over year period. The increase in other noninterest income from prior year, is primarily due to $994 thousand recoveries in loans charged off prior to acquisition in addition to increases in earnings credits and merchant income.
•
The increase from the linked quarter reflects an increase of $1.5 million in other noninterest income offset by a $450 thousand decrease in mortgage fee income. The increase in other noninterest income is primarily due to $871 thousand in acquired loan recoveries in addition to $370 thousand of earnings credits.



Noninterest Expense

•
Total noninterest expense increased $21.0 million compared to third quarter 2016 and decreased $3.4 million compared to second quarter 2017.
•
The increase in noninterest expense compared to third quarter 2016 is due primarily to increases of $10.4 million in salaries and benefits, $2.3 million in occupancy expenses, $1.4 million in data processing, $2.4 million in acquisition-related expenses and $1.9 million in other noninterest expenses. The increase from prior year is reflective of additional headcount, branch locations and accounts acquired in the Carlile transaction, which closed on April 1, 2017. The increase includes acquisition expenses for professional and contract termination fees incurred relating to the acquisition and expenses related to restructuring the acquired branch system during third quarter 2017.
•
The decrease from the linked quarter is primarily related to decreases of $1.4 million in salaries and benefits expenses due to closing and retention bonuses of $1.2 million related to the Carlile transaction paid in second quarter 2017. In addition, there were decreases of $3.2 million in other acquisition expenses offset by an increase of $797 thousand in other real estate impairment expenses.



Provision for Loan Losses

•
Provision for loan loss was $1.9 million for the third quarter 2017, a decrease of $250 thousand and $599 thousand, respectively compared to $2.1 million for the third quarter 2016 and $2.5 million for the second quarter 2017. Provision expense is primarily reflective of organic loan growth during the respective period.
•
The allowance for loan losses was $37.8 million, or 0.61% of total loans, at September 30, 2017, compared to $29.6 million, or 0.68% of total loans at September 30, 2016, and compared to $35.9 million, or 0.59% of total loans, at June 30, 2017. The dollar increases from prior periods are primarily due to additional general reserves for organic loan growth. The decrease in the allowance for loan losses as a percentage of loans from prior year reflects that loans acquired in the Carlile transaction were recorded at fair value without an allowance at acquisition date.


Income Taxes

•
Federal income tax expense of $11.7 million was recorded for the quarter ended September 30, 2017, an effective rate of 33.2% compared to tax expense of $7.2 million and an effective rate of 33.0% for the quarter ended September 30, 2016 and tax expense of $8.6 million and an effective rate of 32.1% for the quarter ended June 30, 2017. The lower tax rate in the second quarter 2017 was due to $520 thousand recognized tax benefits related to restricted stock vesting during the quarter.

2


Third Quarter 2017 Balance Sheet Highlights:


Loans

•
Total loans held for investment, net of mortgage warehouse purchase loans, were $6.2 billion at September 30, 2017 compared to $6.1 billion at June 30, 2017 and $4.4 billion at September 30, 2016. This represents organic growth of total loans held for investment of $107 million for the quarter, or 6.9% on an annualized basis. Loans held for investment grew $1.7 billion from December 31, 2016, or 36.16%, of which $1.4 billion was loans held for investment acquired with Carlile acquisition and $370 million was organic growth, or 10.8%, on an annualized basis.
•
Total mortgage warehouse purchase loans were $138.6 million at September 30, 2017 compared to $120.2 million at June 30, 2017, representing growth of $18.3 million, for the quarter, or 15.3%.
•
Commercial real estate (CRE) loans were $3.3 billion at September 30, 2017 compared to $2.5 billion at December 31, 2016, or 50.9% and 53.7% of total loans, respectively.


Asset Quality

•
Total nonperforming assets decreased to $25.0 million, or 0.28% of total assets at September 30, 2017 from $26.1 million, or 0.30% of total assets at June 30, 2017 and increased from $13.3 million, or 0.23% of total assets at September 30, 2016.
•
Total nonperforming loans increased slightly to $14.7 million, or 0.24% of total loans at September 30, 2017 from $14.5 million, or 0.24% of total loans at June 30, 2017 and from $11.2 million, or 0.26% of total loans at September 30, 2016.
•
The net decrease in the dollar amount of nonperforming assets from the linked quarter is primarily due to other real estate dispositions totaling $3.0 million offset by a net addition of $1.8 million in other real estate owned resulting from the closing of a Houston branch during third quarter 2017.
•
The increase in the dollar amount of nonperforming assets from the prior year is primarily due to additions in other real estate owned totaling $10.0 million related to the Carlile acquisition, the $1.8 million addition mentioned above as well as two nonaccrual credit relationship additions totaling $4.0 million during first quarter 2017, offset by other real estate owned dispositions totaling $4.9 million during second and third quarters 2017. The increase in nonperforming loans from the prior year is primarily due to the above mentioned loans placed on nonaccrual during first quarter 2017.
•
Charge-offs were less than 0.01% annualized in the third and second quarters 2017 compared to 0.32% annualized in the prior year third quarter. Third quarter 2016 charge-offs were primarily related to a partial charge-off of an impaired energy loan.


Deposits and Borrowings

•
Total deposits were $6.9 billion at September 30, 2017 compared to $6.7 billion at June 30, 2017 and compared to $4.4 billion at September 30, 2016. The increase from the prior year is primarily due to $1.8 billion in deposit accounts acquired in the Carlile transaction.
•
Total borrowings (other than junior subordinated debentures) were $683.5 million at September 30, 2017, an increase of $99 million from June 30, 2017 and an increase of $106 million from September 30, 2016. The change in both periods resulted from the use of short term FHLB advances as needed for liquidity.


Capital

•
Independent Bank Group is well capitalized under regulatory guidelines. At September 30, 2017, our ratio of tangible common equity to total tangible assets was 7.62%.





3

Recent Branch Activity

As part of the integration process, Independent Bank has restructured the Northstar Bank branch system acquired in the Carlile acquisition as announced during second quarter of 2017. During the third quarter of 2017, Independent Bank was successful in

•
Completing the sale of the Marble Falls Branch
•
Consolidating the Barton Creek Branch with the Westlake Hills Branch in Austin, Texas
•
Consolidating two Granbury, Texas Branches
•
Closing Veterans Memorial Branch in Houston, Texas.

The financial effect of these transactions and events was minimal and is reflected in the foregoing description of earnings and the accompanying financial information.

In addition, Independent Bank completed the sale of nine Colorado branches on October 6, 2017, transferring $99 million in loans and $161 million in deposits. The financial effect of this transaction is not reflected in the foregoing description of earnings or the accompanying financial information.

Subsequent Events

The Company is required, under generally accepted accounting principles, to evaluate subsequent events through the filing of its consolidated financial statements for the quarter ended September 30, 2017 on Form 10-Q. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of September 30, 2017 and will adjust amounts preliminarily reported, if necessary.


4

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 in four market regions located in the Dallas/Fort Worth, Austin and Houston, Texas and the Colorado Front Range areas.


Conference Call

A conference call covering Independent Bank Group’s third quarter earnings announcement will be held on Tuesday, October 24, 2017 at 8:30 a.m. (EDT) and can be accessed by calling 1-877-303-7611 and by identifying the conference ID number 96791274. The conference materials will also be available by accessing the Investor Relations page of our website, www.ibtx.com. A recording of the conference call and the conference materials will be available from October 24, 2017 through November 1, 2017 on our website.

Forward-Looking Statements

The numbers as of and for the quarter ended September 30, 2017 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. Many possible events or factors could affect our future financial results and performance and could cause such results or performance to differ materially from those expressed in forward looking statements. These factors include, but are not limited to, the following: (1) our ability to sustain our internal growth rate and our total growth rate; (2) changes in local, regional, national, and international economic conditions and the impact they may have on us and our customers and our assessment of that impact; (3) changes in the level of nonperforming assets and charge-offs; (4) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (5) concentration of our loan portfolio in commercial real estate loans and changes in the values and sales volume of commercial real estate; (6) our ability to continue to identify acquisition targets and successfully acquire and integrate the operations of desirable financial institutions; (7) our dependence on our management team and our ability to attract, motivate and retain qualified personnel; (8) our access to debt and equity markets and our overall cost of funding our operations; (9) technological changes, including the potential impact of technology and "FinTech" entities on the banking industry generally; (10) cybersecurity attacks and breaches of our digital information systems and the liability resulting from any such cybersecurity breach; (11) adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; (12) inflation, deflation, changes in market interest rates, developments in the securities market, and monetary fluctuations; (13) the timely development and acceptance of new products and services and perceived overall value of these products and services by customers; (14) changes in consumer spending, borrowings, and savings habits; (15) the ability to increase market share and control expenses; (16) changes in the competitive environment among banks, bank holding companies, and other financial service providers; (17) 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; (18) 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; (19) the costs and effects of legal and regulatory developments including the resolution of legal proceedings; (20) the effect of catastrophic events, including war, acts of terrorism, and weather related events that may affect general economic conditions; and (21) our success at managing the risks involved in the foregoing items; and (22) the other factors that are described in the Company’s Annual Report on Form 10-K filed on March 8, 2017, 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.








5

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 “adjusted net income”, "adjusted earnings", “tangible book value”, “tangible book value per common share”, “adjusted efficiency ratio”, “Tier 1 capital to average assets”, “Tier 1 capital to risk weighted assets”, “tangible common equity to tangible assets”, “adjusted net interest margin”, "return on tangible equity," “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 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.

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:
Michelle Hickox
Executive Vice President and Chief Financial Officer
(972) 562-9004
mhickox@ibtx.com
 

Media:
Peggy Smolen
Marketing & Communications Director
(972) 562-9004
psmolen@ibtx.com



Source: Independent Bank Group, Inc.






6
            


Independent Bank Group, Inc. and Subsidiaries
Consolidated Financial Data
Three Months Ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016
(Dollars in thousands, except for share data)
(Unaudited)


 
As of and for the quarter ended
 
September 30, 2017
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
Selected Income Statement Data
 
 
 
 
 
 
 
 
 
Interest income
$
84,672

 
$
79,883

 
$
55,939

 
$
53,904

 
$
52,740

Interest expense
11,815

 
10,383

 
8,072

 
7,378

 
7,003

   Net interest income
72,857

 
69,500

 
47,867

 
46,526

 
45,737

Provision for loan losses
1,873

 
2,472

 
2,023

 
2,197

 
2,123

   Net interest income after provision for loan losses
70,984

 
67,028

 
45,844

 
44,329

 
43,614

Noninterest income
12,130

 
10,995

 
4,583

 
5,224

 
4,932

Noninterest expense
47,904

 
51,328

 
28,028

 
27,361

 
26,887

Income tax expense
11,696

 
8,561

 
6,728

 
7,417

 
7,155

   Net income
23,514

 
18,134

 
15,671

 
14,775

 
14,504

Adjusted net income(1)
24,829

 
22,746

 
15,990

 
15,541

 
14,819

 
 
 
 
 
 
 
 
 
 
Per Share Data (Common Stock)
 
 
 
 
 
 
 
 
 
Earnings:
 
 
 
 
 
 
 
 
 
Basic 
$
0.85

 
$
0.65

 
$
0.83

 
$
0.79

 
$
0.78

Diluted
0.84

 
0.65

 
0.82

 
0.79

 
0.78

Adjusted earnings:

 
 
 
 
 
 
 
 
Basic (1)
0.89

 
0.82

 
0.85

 
0.83

 
0.80

Diluted (1)
0.89

 
0.82

 
0.84

 
0.83

 
0.80

Dividends
0.10

 
0.10

 
0.10

 
0.10

 
0.08

Book value
46.09

 
45.33

 
36.38

 
35.63

 
34.79

Tangible book value  (1)
22.57

 
21.71

 
22.01

 
21.19

 
20.03

Common shares outstanding
27,804,877

 
27,790,144

 
18,925,182

 
18,870,312

 
18,488,628

Weighted average basic shares outstanding (3)
27,797,779

 
27,782,584

 
18,908,679

 
18,613,975

 
18,478,289

Weighted average diluted shares outstanding (3)
27,901,579

 
27,887,485

 
19,015,810

 
18,716,614

 
18,568,622

 
 
 
 
 
 
 
 
 
 
Selected Period End Balance Sheet Data
 
 
 
 
 
 
 
 
 
Total assets
$
8,891,114

 
$
8,593,979

 
$
6,022,614

 
$
5,852,801

 
$
5,667,195

Cash and cash equivalents
763,017

 
579,900

 
515,123

 
505,027

 
589,600

Securities available for sale
747,147

 
754,139

 
350,409

 
316,435

 
267,860

Loans, held for sale
25,854

 
25,218

 
5,081

 
9,795

 
7,097

Loans, held for investment, excluding mortgage warehouse purchase
6,226,343

 
6,119,305

 
4,702,511

 
4,572,771

 
4,360,690

Mortgage warehouse purchase loans
138,561

 
120,217

 
—

 
—

 
—

Allowance for loan losses
37,770

 
35,881

 
33,431

 
31,591

 
29,575

Goodwill and core deposit intangible
653,899

 
656,255

 
272,004

 
272,496

 
272,988

Other real estate owned
10,189

 
11,476

 
2,896

 
1,972

 
2,083

Noninterest-bearing deposits
1,939,342

 
1,885,138

 
1,126,113

 
1,117,927

 
1,143,479

Interest-bearing deposits
4,933,289

 
4,784,150

 
3,596,090

 
3,459,182

 
3,273,014

Borrowings (other than junior subordinated debentures)
683,492

 
584,349

 
568,115

 
568,045

 
577,974

Junior subordinated debentures
27,604

 
27,555

 
18,147

 
18,147

 
18,147

Total stockholders' equity
1,281,460

 
1,259,592

 
688,469

 
672,365

 
643,253




7
            

Independent Bank Group, Inc. and Subsidiaries
Consolidated Financial Data
Three Months Ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016
(Dollars in thousands, except for share data)
(Unaudited)


 
As of and for the quarter ended
 
September 30, 2017
 
June 30, 2017
 
March 31, 2017
 
December 31, 2016
 
September 30, 2016
Selected Performance Metrics
 
 
 
 
 
 
 
 
 
Return on average assets
1.07
 %
 
0.86
%
 
1.08
%
 
1.03
%
 
1.04
%
Return on average equity
7.33

 
5.85

 
9.33

 
8.93

 
9.04

Return on tangible equity (4)
15.12

 
12.47

 
15.53

 
15.24

 
15.80

Adjusted return on average assets (1)
1.13

 
1.08

 
1.10

 
1.08

 
1.07

Adjusted return on average equity (1)
7.74

 
7.34

 
9.52

 
9.39

 
9.24

Adjusted return on tangible equity (1) (4)
15.96

 
15.64

 
15.85

 
16.03

 
16.15

Net interest margin
3.85

 
3.81

 
3.67

 
3.59

 
3.66

Adjusted net interest margin (2)
3.80

 
3.78

 
3.66

 
3.58

 
3.65

Efficiency ratio
54.71

 
62.01

 
52.50

 
51.92

 
52.09

Adjusted efficiency ratio (1)
51.19

 
53.15

 
51.51

 
49.65

 
51.10

 
 
 
 
 
 
 
 
 
 
Credit Quality Ratios
 
 
 
 
 
 
 
 
 
Nonperforming assets to total assets
0.28
 %
 
0.30
%
 
0.27
%
 
0.34
%
 
0.23
%
Nonperforming loans to total loans held for investment
0.24

 
0.24

 
0.28

 
0.39

 
0.26

Nonperforming assets to total loans and other real estate
0.40

 
0.43

 
0.35

 
0.43

 
0.30

Allowance for loan losses to non-performing loans
257.76

 
247.59

 
250.57

 
177.06

 
264.42

Allowance for loan losses to total loans
0.61

 
0.59

 
0.71

 
0.69

 
0.68

Net charge-offs to average loans outstanding (annualized)
—

 
—

 
0.02

 
0.02

 
0.32

 
 
 
 
 
 
 
 
 
 
Capital Ratios
 
 
 
 
 
 
 
 
 
Estimated common equity tier 1 capital to risk-weighted assets
9.17
 %
 
9.03
%
 
8.28
%
 
8.20
%
 
7.92
%
Estimated tier 1 capital to average assets
8.30

 
8.23

 
7.84

 
7.82

 
7.46

Estimated tier 1 capital to risk-weighted assets
9.60

 
9.46

 
8.63

 
8.55

 
8.29

Estimated total capital to risk-weighted assets
11.72

 
11.60

 
11.44

 
11.38

 
11.24

Total stockholders' equity to total assets
14.41

 
14.66

 
11.43

 
11.49

 
11.35

Tangible common equity to tangible assets (1)
7.62

 
7.60

 
7.24

 
7.17

 
6.86

 
 
 
 
 
 
 
 
 
 
(1) Non-GAAP financial measures. See reconciliation.
(2) Non-GAAP financial measure. Excludes income recognized on acquired loans of $905, $572, $123, $51 and $116, respectively.
(3) Total number of shares includes participating shares (those with dividend rights).
(4)  Non-GAAP financial measure. Excludes average balance of goodwill and net core deposit intangibles.






8
            

Independent Bank Group, Inc. and Subsidiaries
Consolidated Statements of Income
Three and Nine Months Ended September 30, 2017 and 2016
(Dollars in thousands)
(Unaudited)
   
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
   
 
2017
 
2016
 
2017
 
2016
Interest income:
 
 
 
 
 
   
 
 
Interest and fees on loans
 
$
79,325

 
$
51,194

 
$
208,263

 
$
151,522

Interest on taxable securities
 
2,539

 
573

 
5,606

 
2,067

Interest on nontaxable securities
 
1,124

 
394

 
2,657

 
1,289

Interest on interest-bearing deposits and other
 
1,684

 
579

 
3,968

 
1,267

Total interest income
 
84,672

 
52,740

 
220,494

 
156,145

Interest expense:
 
 
 
 
 
 
 
 
Interest on deposits
 
8,033

 
4,049

 
20,043

 
11,623

Interest on FHLB advances
 
1,749

 
1,063

 
4,271

 
3,062

Interest on repurchase agreements and other borrowings
 
1,716

 
1,733

 
5,137

 
3,723

Interest on junior subordinated debentures
 
317

 
158

 
819

 
457

Total interest expense
 
11,815

 
7,003

 
30,270

 
18,865

Net interest income
 
72,857

 
45,737

 
190,224

 
137,280

Provision for loan losses
 
1,873

 
2,123

 
6,368

 
7,243

Net interest income after provision for loan losses
 
70,984

 
43,614

 
183,856

 
130,037

Noninterest income:
 
 
 
 
 
 
 
 
Service charges on deposit accounts
 
3,677

 
1,840

 
9,364

 
5,287

Mortgage fee income
 
4,569

 
1,922

 
10,855

 
5,319

Gain on sale of loans
 
351

 
—

 
351

 
—

Loss on sale of branch
 
(127
)
 
(43
)
 
(127
)
 
(43
)
Gain (loss) on sale of other real estate
 
—

 
4

 
(36
)
 
57

Gain on sale of securities available for sale
 
—

 
—

 
52

 
4

(Loss) gain on sale of premises and equipment
 
(21
)
 
(9
)
 
(15
)
 
32

Increase in cash surrender value of BOLI
 
778

 
402

 
1,959

 
937

Other
 
2,903

 
816

 
5,305

 
2,738

Total noninterest income
 
12,130

 
4,932

 
27,708

 
14,331

Noninterest expense:
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
25,684

 
15,303

 
69,610

 
51,644

Occupancy
 
6,380

 
4,038

 
16,399

 
12,119

Data processing
 
2,546

 
1,190

 
6,449

 
3,575

FDIC assessment
 
1,077

 
1,123

 
3,156

 
2,718

Advertising and public relations
 
380

 
229

 
994

 
775

Communications
 
771

 
563

 
2,098

 
1,648

Net other real estate owned expenses (including taxes)
 
61

 
145

 
223

 
180

Other real estate impairment
 
917

 
51

 
1,037

 
106

Core deposit intangible amortization
 
1,409

 
492

 
3,311

 
1,472

Professional fees
 
1,273

 
717

 
3,212

 
2,354

Acquisition expense, including legal
 
2,428

 
3

 
8,247

 
732

Other
 
4,978

 
3,033

 
12,524

 
9,106

Total noninterest expense
 
47,904

 
26,887

 
127,260

 
86,429

Income before taxes
 
35,210

 
21,659

 
84,304

 
57,939

Income tax expense
 
11,696

 
7,155

 
26,985

 
19,174

Net income
 
$
23,514

 
$
14,504

 
$
57,319

 
$
38,765

 
 
 
 
 
 
 
 
 

9
            

Independent Bank Group, Inc. and Subsidiaries
Consolidated Balance Sheets
As of September 30, 2017 and December 31, 2016
(Dollars in thousands, except share information)
(Unaudited)

   
September 30,
 
December 31,
Assets
2017
 
2016
Cash and due from banks
$
268,498

 
$
158,686

Interest-bearing deposits in other banks
484,519

 
336,341

Federal funds sold
10,000

 
10,000

Cash and cash equivalents
763,017

 
505,027

Certificates of deposit held in other banks
15,692

 
2,707

Securities available for sale, at fair value
747,147

 
316,435

Loans held for sale
25,854

 
9,795

Loans, net
6,324,545

 
4,539,063

Premises and equipment, net
155,741

 
89,898

Other real estate owned
10,189

 
1,972

Federal Home Loan Bank (FHLB) of Dallas stock and other restricted stock
29,046

 
26,536

Bank-owned life insurance (BOLI)
112,381

 
57,209

Deferred tax asset
21,033

 
9,631

Goodwill
606,701

 
258,319

Core deposit intangible, net
47,198

 
14,177

Other assets
32,570

 
22,032

           Total assets
$
8,891,114

 
$
5,852,801

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
Deposits:
 
 
 
   Noninterest-bearing
$
1,939,342

 
$
1,117,927

   Interest-bearing
4,933,289

 
3,459,182

           Total deposits
6,872,631

 
4,577,109

FHLB advances
560,687

 
460,746

Repurchase agreements
15,238

 
—

Other borrowings
107,567

 
107,299

Junior subordinated debentures
27,604

 
18,147

Other liabilities
25,927

 
17,135

           Total liabilities
7,609,654

 
5,180,436

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
   
Preferred stock (0 and 0 shares outstanding, respectively)
—

 
—

Common stock
278

 
189

Additional paid-in capital
1,109,884

 
555,325

Retained earnings
167,820

 
117,951

Accumulated other comprehensive income (loss)
3,478

 
(1,100
)
Total stockholders’ equity
1,281,460

 
672,365

            Total liabilities and stockholders’ equity
$
8,891,114

 
$
5,852,801










10
            

Independent Bank Group, Inc. and Subsidiaries
Consolidated Average Balance Sheet Amounts, Interest Earned and Yield Analysis
Three Months Ended September 30, 2017 and 2016
(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.
   
 
Three Months Ended September 30,
   
 
2017
 
2016
   
 
Average
Outstanding
Balance
 
Interest
 
Yield/
Rate
 
Average
Outstanding
Balance
 
Interest
 
Yield/
Rate
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
$
6,286,990

 
$
79,325

 
5.01
%
 
$
4,302,570

 
$
51,194

 
4.73
%
Taxable securities
 
576,770

 
2,539

 
1.75

 
218,286

 
573

 
1.04

Nontaxable securities
 
188,053

 
1,124

 
2.37

 
75,559

 
394

 
2.07

Interest-bearing deposits and other
 
461,092

 
1,684

 
1.45

 
370,011

 
579

 
0.62

Total interest-earning assets
 
7,512,905

 
$
84,672

 
4.47

 
4,966,426

 
$
52,740

 
4.22

Noninterest-earning assets
 
1,213,942

 
   
 
   
 
568,777

 
   
 
   
Total assets
 
$
8,726,847

 
   
 
   
 
$
5,535,203

 
   
 
   
Interest-bearing liabilities:
 
   
 
   
 
   
 
   
 
   
 
   
Checking accounts
 
$
2,864,775

 
$
4,102

 
0.57
%
 
$
1,791,228

 
$
1,946

 
0.43
%
Savings accounts
 
306,380

 
104

 
0.13

 
153,526

 
66

 
0.17

Money market accounts
 
619,051

 
1,459

 
0.94

 
396,441

 
474

 
0.48

Certificates of deposit
 
1,074,883

 
2,368

 
0.87

 
821,283

 
1,563

 
0.76

Total deposits
 
4,865,089

 
8,033

 
0.66

 
3,162,478

 
4,049

 
0.51

FHLB advances
 
541,129

 
1,749

 
1.28

 
494,141

 
1,063

 
0.86

Other borrowings and repurchase agreements
 
123,285

 
1,716

 
5.52

 
107,284

 
1,733

 
6.43

Junior subordinated debentures
 
27,587

 
317

 
4.56

 
18,147

 
158

 
3.46

Total interest-bearing liabilities
 
5,557,090

 
11,815

 
0.84

 
3,782,050

 
7,003

 
0.74

Noninterest-bearing checking accounts
 
1,863,971

 
   
 
   
 
1,100,613

 
   
 
   
Noninterest-bearing liabilities
 
33,836

 
   
 
   
 
14,185

 
   
 
   
Stockholders’ equity
 
1,271,950

 
   
 
   
 
638,355

 
   
 
   
Total liabilities and equity
 
$
8,726,847

 
   
 
   
 
$
5,535,203

 
   
 
   
Net interest income
 
   
 
$
72,857

 
   
 
   
 
$
45,737

 
   
Interest rate spread
 
   
 
   
 
3.63
%
 
   
 
   
 
3.48
%
Net interest margin
 
   
 
   
 
3.85

 
   
 
   
 
3.66

Average interest earning assets to interest bearing liabilities
 
   
 
   
 
135.19

 
   
 
   
 
131.32














11
            

Independent Bank Group, Inc. and Subsidiaries
Consolidated Average Balance Sheet Amounts, Interest Earned and Yield Analysis
Nine Months Ended September 30, 2017 and 2016
(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.

   
 
Nine Months Ended September 30,
   
 
2017
 
2016
   
 
Average
Outstanding
Balance
 
Interest
 
Yield/
Rate
 
Average
Outstanding
Balance
 
Interest
 
Yield/
Rate
Interest-earning assets:
 
   
 
   
 
   
 
   
 
   
 
   
Loans
 
$
5,701,324

 
$
208,263

 
4.88
%
 
$
4,170,930

 
$
151,522

 
4.85
%
Taxable securities
 
452,317

 
5,606

 
1.66

 
220,176

 
2,067

 
1.25

Nontaxable securities
 
144,132

 
2,657

 
2.46

 
73,761

 
1,289

 
2.33

Federal funds sold and other
 
420,330

 
3,968

 
1.26

 
243,827

 
1,267

 
0.69

Total interest-earning assets
 
6,718,103

 
$
220,494

 
4.39

 
4,708,694

 
$
156,145

 
4.43

Noninterest-earning assets
 
990,811

 
   
 
 
 
673,676

 
   
 
 
Total assets
 
$
7,708,914

 
   
 
 
 
$
5,382,370

 
   
 
 
Interest-bearing liabilities:
 
 
 
   
 
 
 
   
 
   
 
 
Checking accounts
 
$
2,510,550

 
$
8,828

 
0.47
%
 
$
1,718,458

 
$
5,689

 
0.44
%
Savings accounts
 
255,602

 
267

 
0.14

 
149,080

 
196

 
0.18

Money market accounts
 
610,819

 
4,451

 
0.97

 
434,010

 
1,385

 
0.43

Certificates of deposit
 
1,025,997

 
6,497

 
0.85

 
817,693

 
4,353

 
0.71

Total deposits
 
4,402,968

 
20,043

 
0.61

 
3,119,241

 
11,623

 
0.50

FHLB advances
 
487,820

 
4,271

 
1.17

 
463,811

 
3,062

 
0.88

Other borrowings and repurchase agreements
 
118,331

 
5,137

 
5.80

 
81,454

 
3,723

 
6.11

Junior subordinated debentures
 
24,448

 
819

 
4.48

 
18,147

 
457

 
3.36

Total interest-bearing liabilities
 
5,033,567

 
30,270

 
0.80

 
3,682,653

 
18,865

 
0.68

Noninterest-bearing checking accounts
 
1,578,061

 
   
 
   
 
1,059,202

 
   
 
   
Noninterest-bearing liabilities
 
26,234

 
   
 
   
 
12,207

 
   
 
   
Stockholders’ equity
 
1,071,052

 
   
 
   
 
628,308

 
   
 
   
Total liabilities and equity
 
$
7,708,914

 
   
 
   
 
$
5,382,370

 
   
 
   
Net interest income
 
   
 
$
190,224

 
   
 
   
 
$
137,280

 
   
Interest rate spread
 
   
 
   
 
3.59
%
 
   
 
   
 
3.75
%
Net interest margin
 
   
 
   
 
3.79

 
   
 
   
 
3.89

Average interest earning assets to interest bearing liabilities
 
   
 
   
 
133.47

 
   
 
   
 
127.86



12
            

Independent Bank Group, Inc. and Subsidiaries
Loan Portfolio Composition
As of September 30, 2017 and December 31, 2016
(Dollars in thousands)
(Unaudited)

The following table sets forth loan totals by category as of the dates presented:
 

 

 
 
September 30, 2017
 
December 31, 2016
 
 
Amount
 
% of Total
 
Amount
 
% of Total
Commercial (2)
 
$
1,006,104

 
15.7
%
 
$
630,805

 
13.7
%
Real estate:
 
 
 
 
 
 
 
   
Commercial real estate
 
3,255,053

 
50.9

 
2,459,221

 
53.7

Commercial construction, land and land development
 
710,475

 
11.1

 
531,481

 
11.6

Residential real estate (1)
 
903,774

 
14.1

 
644,340

 
14.1

Single-family interim construction
 
319,093

 
5.0

 
235,475

 
5.1

Agricultural
 
156,824

 
2.5

 
53,548

 
1.2

Consumer
 
39,098

 
0.7

 
27,530

 
0.6

Other
 
337

 
—

 
166

 
—

Total loans
 
6,390,758

 
100.0
%
 
4,582,566

 
100.0
%
Deferred loan fees
 
(2,589
)
 
 
 
(2,117
)
 
 
Allowance for losses
 
(37,770
)
 
 
 
(31,591
)
 
   
Total loans, net
 
$
6,350,399

 
   
 
$
4,548,858

 
   
(1) Includes loans held for sale at September 30, 2017 and December 31, 2016 of $25,854 and $9,795, respectively.
(2)  Includes mortgage warehouse purchase loans of $138,561 at September 30, 2017.

13
            

Independent Bank Group, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Three Months Ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016
(Dollars in thousands, except for share data)
(Unaudited)


 
 
For the Three Months Ended
 
 
September 30, 2017
June 30, 2017
March 31, 2017
December 31, 2016
September 30, 2016
ADJUSTED NET INCOME
 
 
 
 
 
 
Net Interest Income - Reported
(a)
$
72,857

$
69,500

$
47,867

$
46,526

$
45,737

Income recognized on acquired loans
 
(905
)
(572
)
(123
)
(51
)
(116
)
Adjusted Net Interest Income
(b)
71,952

68,928

47,744

46,475

45,621

Provision Expense - Reported
(c)
1,873

2,472

2,023

2,197

2,123

Noninterest Income - Reported
(d)
12,130

10,995

4,583

5,224

4,932

Gain on sale of loans
 
(338
)
(13
)
 
—

—

Loss on sale of branch
 
127

—

—

—

43

Loss (gain) on sale of OREO and repossessed assets
 
—

26

—

—

(4
)
Gain on sale of securities
 
—

(52
)
—

—

—

Loss (gain) on sale of premises and equipment
 
21

(1
)
(5
)
—

9

Recoveries on loans charged off prior to acquisition
 
(994
)
(123
)
—

—

—

Adjusted Noninterest Income
(e)
10,946

10,832

4,578

5,224

4,980

Noninterest Expense - Reported
(f)
47,904

51,328

28,028

27,361

26,887

OREO Impairment
 
(917
)
(120
)
—

—

(51
)
IPO related stock grant
 
(128
)
(127
)
(125
)
(127
)
(104
)
Acquisition Expense (4)
 
(3,013
)
(7,278
)
(459
)
(1,075
)
(384
)
Adjusted Noninterest Expense
(g)
43,846

43,803

27,444

26,159

26,348

Adjusted Net Income (2)
(b) - (c) + (e) - (g)
$
24,829

$
22,746

$
15,990

$
15,541

$
14,819

 
 
 
 
 
 
 
ADJUSTED PROFITABILITY
 
 
 
 
 
 
Adjusted Return on Average Assets (1)
 
1.13
%
1.08
%
1.10
%
1.08
%
1.07
%
Adjusted Return on Average Equity (1)
 
7.74
%
7.34
%
9.52
%
9.39
%
9.24
%
Adjusted Return on Tangible Equity (1)
 
15.96
%
15.64
%
15.85
%
16.03
%
16.15
%
Total Average Assets
 
$
8,726,847

$
8,478,360

$
5,880,473

$
5,729,160

$
5,535,203

Total Average Stockholders' Equity
 
$
1,271,950

$
1,243,331

$
681,434

$
658,369

$
638,355

Total Average Tangible Stockholders' Equity (3)
 
$
617,115

$
583,303

$
409,191

$
385,635

$
365,127

 
 
 
 
 
 
 
EFFICIENCY RATIO
 
 
 
 
 
 
Amortization of core deposit intangibles
(h)
$
1,409

$
1,410

$
492

$
492

$
492

Reported Efficiency Ratio
(f - h) / (a + d)
54.71
%
62.01
%
52.50
%
51.92
%
52.09
%
Adjusted Efficiency Ratio
(g - h) / (b + e)
51.19
%
53.15
%
51.51
%
49.65
%
51.10
%
 
 
 
 
 
 
 
(1) Calculated using adjusted net income
(2)  Assumes actual effective tax rate of 33.2%, 32.1%, 30.0%, 33.4% and 33.0%, respectively.
(3) Excludes average balance of goodwill and net core deposit intangibles.
(4) Acquisition expenses include $585 thousand, $1,605 thousand, $313 thousand, $290 thousand and $381 thousand, of compensation and bonus expenses in addition to $2,428 thousand, $5,673 thousand, $146 thousand, $785 thousand and $3 thousand of merger-related expenses for the quarters ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, respectively.

14
            

Independent Bank Group, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
As of September 30, 2017 and December 31, 2016
(Dollars in thousands, except per share information)
(Unaudited)

Tangible Book Value & Tangible Common Equity To Tangible Asset Ratio
 
 
 
 
September 30,
 
December 31,
 
2017
 
2016
Tangible Common Equity
 
 
 
Total common stockholders' equity
$
1,281,460

 
$
672,365

Adjustments:
 
 
 
Goodwill
(606,701
)
 
(258,319
)
Core deposit intangibles, net
(47,198
)
 
(14,177
)
Tangible common equity
$
627,561

 
$
399,869

 
 
 
 
Tangible Assets
 
 
 
Total assets
$
8,891,114

 
$
5,852,801

Adjustments:
 
 
 
Goodwill
$
(606,701
)
 
$
(258,319
)
Core deposit intangibles
$
(47,198
)
 
$
(14,177
)
Tangible assets
$
8,237,215

 
$
5,580,305

Common shares outstanding
27,804,877

 
18,870,312

Tangible common equity to tangible assets
7.62
%
 
7.17
%
Book value per common share
$
46.09

 
$
35.63

Tangible book value per common share
22.57

 
21.19





15