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 January 27, 2016 - 5:00 PM EST
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Independent Bank Group Reports Fourth Quarter and Year-End Financial Results

MCKINNEY, Texas, Jan. 27, 2016 (GLOBE NEWSWIRE) -- Independent Bank Group, Inc. (NASDAQ:IBTX), the holding company for Independent Bank, today announced net income available to common shareholders of $10.5 million, or $0.58 per diluted share, for the quarter ended December 31, 2015 compared to $10.0 million, or $0.59 per diluted share, for the quarter ended December 31, 2014 and $8.1 million, or $0.47 per diluted share, for the quarter ended September 30, 2015.

For the year ended December 31, 2015, the Company reported net income available to common shareholders of $38.5 million (or $2.21 per diluted share) compared to net income of $28.8 million (or $1.85 per diluted share) for the year ended December 31, 2014.

Highlights

  • Solid earnings with increases across major income related metrics: 
    • Core earnings were $11.4 million, or $0.63 per diluted share 
    • Net interest income increased 10.7% compared to third quarter 2015 
    • Noninterest income increased 12.0% compared to third quarter 2015 
  • Strong organic loan growth of 21.0% on an annualized basis for the quarter and 16.1% for the year.  Total loan growth for the year was 24.6% which includes loans acquired in the Grand Bank acquisition. 
  • Asset quality remains strong with continued careful monitoring of the energy and Houston portfolios.  The nonperforming assets to total assets ratio was 0.36% and the nonperforming loans to total loans ratio was 0.37% at December 31, 2015. Net charge offs were less than 0.01% annualized for the quarter. 
  • Continued creation of long-term shareholder value with tangible book value and earnings per share increasing 10.5% and 19.5% for the year, respectively.  Quarterly dividends also increased from $0.06 per share to $0.08 per share during 2015. 
  • Continued execution of acquisition strategy through the completion of the Grand Bank acquisition on November 1, 2015.


Independent Bank Group Chairman and Chief Executive Officer David Brooks said, “This was a good quarter for Independent Bank Group. We are pleased to report solid earnings. We also continued to drive strong organic loan growth and advance our acquisition strategy. We remain focused on maintaining strong credit quality, especially with respect to our energy and Houston portfolios. Our energy portfolio has decreased to 5% of total loans and the Houston portfolio continues to have exemplary credit metrics. While we recognize the challenges presented by the downward cycle in energy prices, our continued view is that Texas is much stronger, has greater diversity and is more resilient than in past energy downturns. We remain optimistic about our prospects and look forward to a strong 2016.”

Fourth Quarter 2015 Operating Results

Net Interest Income

  • Net interest income was $42.2 million for fourth quarter 2015 compared to $38.2 million for fourth quarter 2014 and $38.1 million for third quarter 2015. The increases in net interest income from the previous year and linked quarter were primarily due to increased average loan balances resulting from organic loan growth as well as loans acquired in the Grand Bank acquisition. 
  • The yield on interest-earning assets was 4.46% for fourth quarter 2015 compared to 4.82% for fourth quarter 2014 and 4.62% for third quarter 2015. The decrease from the prior year is attributable to an eight basis point decrease in accretion income on acquired loans, decreased yields on taxable investment securities and lower average loan rates. The decrease from the linked quarter is related primarily to the lower rates on loans and lower loan fees, including lower rates and fees on loans acquired in the Grand Bank transaction. 
  • The cost of interest bearing liabilities, including borrowings, was 0.66% for fourth quarter 2015 compared to 0.71% for fourth quarter 2014 and 0.70% for third quarter 2015. The decrease from the prior year is primarily due to payoffs of higher rate FHLB advances as well as the retirement of higher rate debentures during 2015. The decrease from the linked quarter is due to a slight decrease in the rates paid on deposits, including lower cost deposits assumed in the Grand Bank transaction. 
  • The net interest margin was 3.96% for fourth quarter 2015 compared to 4.28% for fourth quarter 2014 and 4.08% for third quarter 2015. These decreases are primarily related to lower loan accretion income and increased liquidity acquired in the Grand Bank acquisition. 
  • The average balance of total interest-earning assets grew by $683.5 million and totaled $4.220 billion compared to $3.536 billion at December 31, 2014 and grew by $513.7 million compared to $3.706 billion at September 30, 2015. This increase from fourth quarter 2014 and the linked quarter is due to organic growth and the Grand Bank transaction.


Noninterest Income

  • Total noninterest income increased $293 thousand compared to fourth quarter 2014 and increased $455 thousand compared to third quarter 2015. 
  • The increase from the prior year reflects a $300 thousand increase in service charges on deposit accounts, an increase of $58 thousand in gains on sale of other real estate and an increase of $237 in other noninterest income offset by a decrease of $318 thousand in securities gains. A large portion of the increase in other noninterest income is related to increased earning credits on correspondent accounts and an increase in wealth management fees during the quarter. 
  • The increase from third quarter 2015 relates to an increase of $390 thousand in gain (loss) on sale of premises and equipment and an increase of $332 thousand in other noninterest income. Offsetting the increases were decreases of $166 thousand in mortgage fee income and a decrease of $116 thousand in gain on sale of loans. A large portion of the increase in other noninterest income is due to an increase in wealth management fees.


Noninterest Expense

  • Total noninterest expense increased $3.6 million compared to fourth quarter 2014 and increased $2.7 million compared to third quarter 2015. Overall increases in noninterest expense are primarily due to the increase in number of employees and operating costs resulting from the Grand Bank transaction. 
  • The increase in noninterest expense compared to fourth quarter 2014 is due primarily to an increase of $2.0 million in salaries and benefits expense, an increase of $155 thousand in FDIC assessment, an increase of $408 thousand in professional fees and an increase of $897 thousand in other noninterest expense, offset by a decrease of $371 thousand in acquisition expenses. The increase in professional fees is primarily due to increased legal fees on existing litigation inherited in the Bank of Houston transaction. As noted below, the Company changed how it reported certain maintenance agreements during the fourth quarter. Without this change in reporting, occupancy expense would have increased approximately $300 thousand primarily due to the Grand Bank transaction. 
  • The increase from the linked quarter is primarily related to increases of $1.6 million in salaries and benefits, $165 thousand in FDIC assessment, $342 thousand in legal and professional fees and $334 thousand in acquisition expenses. Offsetting these increases were decreases of $187 thousand in advertising and public relations expenses and $103 thousand in net other real estate owned expenses. 
  • The increase in data processing expense of $584 thousand from the prior year and $458 thousand from the linked quarter is the result of a change in reporting of IT related maintenance agreements and service costs that had previously been reported in occupancy expense.  Actual IT related expenses did not significantly increase from the third quarter.


Provision for Loan Losses

  • Provision for loan loss expense was $2.0 million for the fourth quarter 2015, an increase of $219 thousand compared to $1.8 million for fourth quarter 2014 and a decrease of $2.0 million compared to $3.9 million for the third quarter 2015. The increase in provision expense from the prior year is primarily due to organic loan growth during the respective period as well as a moderate increase in general reserves for the energy portfolio in recognition of the continued decline in commodity prices. The decrease from third quarter 2015 was due to an additional allocation for our energy portfolio in the third quarter, including an impairment of $1.2 million on a previously identified nonperforming energy loan.
  • The allowance for loan losses was $27.0 million, or 0.68% of total loans, at December 31, 2015, compared to $18.6 million, or 0.58% of total loans at December 31, 2014, and compared to $25.1 million, or 0.71% of total loans at September 30, 2015. The increase in the allowance from the prior year is due to organic loan growth, specific allocations on impaired assets, as well as an increase in general reserves to serve as a significant addition to the energy related allowance.  The slight decrease in the ratio of the allowance to total loans compared to the linked quarter was due to the increase in the loan portfolio resulting from the Grand Bank acquisition. The acquired loans do not carry over a related allowance as these loans are recorded at fair value at acquisition date consistent with accounting guidance. As of December 31, 2015, the energy related allowance constituted 4.1% of the total energy production portfolio.


Income Taxes

  • Federal income tax expense of $5.3 million was recorded for the quarter ended December 31, 2015, an effective rate of 33.6% compared to tax expense of $5.4 million and an effective rate of 34.7% for the quarter ended December 31, 2014 and tax expense of $3.9 million and an effective rate of 32.4% for the quarter ended September 30, 2015. The elevated tax rates in fourth quarters 2015 and 2014 were due to non-deductible acquisition expenses relating to the Grand Bank and Houston City Bancshares acquisitions, respectively.


Fourth Quarter 2015 Balance Sheet Highlights:

Loans

  • Total loans held for investment were $3.989 billion at December 31, 2015 compared to $3.529 billion at September 30, 2015 and to $3.201 billion at December 31, 2014. This represented total loan growth of $460.1 million for the quarter, or 51.7% on an annualized basis. Organic loan growth for the fourth quarter was $186.5 million, a 21.0% increase from September 30, 2015. Loan growth from the prior year was 24.6% (approximately 16.1% of which was organic growth with the remainder resulting from the Grand Bank acquisition). 
  • The energy production portfolio was $182.5 million (4.6% of total loans) at December 31, 2015 made up of 26 credits and 25 relationships. This represented a $27.1 million reduction from the previous quarter. As of December 31, 2015, there were two nonperforming classified energy credits with balances totaling $7.1 million and one performing classified energy credit with a balance of $17.1 million. Oil field service related loans, which were inherited through acquisitions, represented an additional $22.4 million (0.6% of loans) at December 31, 2015. All energy related credits are being closely monitored and the Company is in close contact with energy borrowers to maintain a real time understanding of these borrowers’ financial condition and ability to positively respond to changing market conditions.


Asset Quality 

  • Total nonperforming assets increased to $18.1 million, or 0.36% of total assets at December 31, 2015 from $15.1 million, or 0.34% of total assets at September 30, 2015 and from $14.9 million, or 0.36% of total assets at December 31, 2014.
  • Total nonperforming loans increased to $14.9 million, or 0.37% of total loans at December 31, 2015 compared to $11.7 million, or 0.33% of total loans at September 30, 2015 and increased from $10.1 million, or 0.32% of total loans at December 31, 2014.
  • The increase in nonperforming assets and nonperforming loans from the linked quarter is primarily due to the addition of a $2.9 million energy loan that was placed on nonaccrual status in the fourth quarter 2015. 
  • The net increase in nonperforming loans and nonperforming assets from the prior year is due to the above-mentioned $2.9 energy loan being placed on nonaccrual in the fourth quarter 2015 and another energy loan totaling $4.2 million that was added to nonaccrual in the first quarter 2015, offset by the removal of a $1.4 million commercial loan from nonaccrual status due to the repossession of collateral. The net increase in nonperforming assets was also offset by the net disposition of $2.2 million in other real estate properties during 2015.


Deposits and Borrowings

  • Total deposits were $4.028 billion at December 31, 2015 compared to $3.534 billion at September 30, 2015 and compared to $3.250 billion at December 31, 2014. 
  • The average cost of interest bearing deposits was 0.45% for both the fourth quarter 2015 and fourth quarter 2014 and down slightly from 0.48% for the third quarter 2015. 
  • Total borrowings (other than junior subordinated debentures) were $371.3 million at December 31, 2015, an increase of $36.8 million from September 30, 2015 and an increase of $65.1 million from December 31, 2014. These movements reflect changes in the balances of short term FHLB advances during the applicable periods.


Capital

  • The tangible common equity to tangible assets and the Tier 1 capital to average assets ratios were 6.87% and 8.28% (estimated), respectively, at December 31, 2015 compared to 7.15% and 8.67%, respectively, at September 30, 2015 and 7.07% and 8.15%, respectively, at December 31, 2014. The total stockholders’ equity to total assets ratio was 12.41%, 12.69% and 13.09% at December 31, 2015, September 30, 2015 and December 31, 2014, respectively.  Total capital to risk weighted assets was 11.13% at December 31, 2015 (estimated) compared to 11.86% at September 30, 2015 and 12.59% at December 31, 2014.  The declines in capital ratios from prior periods is due to growth in assets during the quarter, including those acquired in the Grand Bank transaction. 
  • Book value and tangible book value per common share were $32.79 and $17.85, respectively, at December 31, 2015 compared to $31.81 and $17.72, respectively, at September 30, 2015 and $30.35 and $16.15, respectively, at December 31, 2014.  
  • Return on tangible equity (on an annualized basis) was 13.37% for the fourth quarter 2015 compared to 10.75% and 14.08% for the third quarter 2015 and fourth quarter 2014, respectively. 
  • Return on average assets and return on average equity (on an annualized basis) were 0.86% and 7.28%, respectively, for fourth quarter 2015 compared to 0.97% and 7.65%, respectively, for fourth quarter 2014 and 0.76% and 5.96%, respectively, for third quarter 2015.


Recent Developments

On January 14, 2016, the Company redeemed all 23,938.35 outstanding shares of its Senior Non-Cumulative Perpetual Small Business Lending Fund Series A Preferred Stock held by the Treasury for a total redemption price of $23,946,994.40. The redemption was funded by a dividend from Independent Bank. Both the Company and Independent Bank remain well capitalized after the redemption.

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 42 banking offices in three market regions located in the Dallas/Fort Worth, Austin and Houston, Texas areas.

Conference Call

A conference call covering Independent Bank Group’s fourth quarter earnings announcement will be held on Thursday, January 28, 2016 at 8:30 a.m. (EST) and can be accessed by calling 1-877-303-7611 and by identifying the conference ID number 25257045.  A recording of the conference call will be available from January 28, 2016 through February 4, 2016 by accessing our website, www.ibtx.com.

Forward-Looking Statements

The numbers as of and for the quarter ended December 31, 2015 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, the Company’s Annual Report on Form 10-K filed on February 27, 2015, 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 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”, "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:

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:

Robb Temple
Executive Vice President and Chief Administrative Officer
(972) 562-9004
rtemple@ibtx.com
 

Independent Bank Group, Inc. and Subsidiaries
Consolidated Financial Data
Three Months Ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014
(Dollars in thousands, except for share data)
(Unaudited)

 
 As of and for the quarter ended
 December 31, 2015 September 30, 2015 June 30, 2015 March 31, 2015 December 31, 2014
Selected Income Statement Data         
Interest income$47,414  $43,130  $42,747  $40,736  $42,952 
Interest expense5,263  5,041  4,967  4,658  4,777 
Net interest income42,151  38,089  37,780  36,078  38,175 
Provision for loan losses1,970  3,932  1,659  1,670  1,751 
Net interest income after provision for loan losses40,181  34,157  36,121  34,408  36,424 
Noninterest income4,254  3,799  4,109  3,966  3,961 
Noninterest expense28,527  25,830  24,455  24,386  24,931 
Income tax expense5,347  3,924  5,204  4,536  5,356 
Net income10,561  8,202  10,571  9,452  10,098 
Preferred stock dividends 60   60   60   60   60 
Net income available to common shareholders10,501  8,142  10,511  9,392  10,038 
Core net interest income (1)41,635  38,001  37,225  35,965  37,187 
Core Pre-Tax Pre-Provision Earnings (1)18,875  17,123  17,379  16,810  18,003 
Core Earnings (1)11,377  8,917  10,532  10,230  10,889 
          
Per Share Data (Common Stock)         
Earnings:         
Basic$0.58  $0.48  $0.61  $0.55  $0.59 
Diluted0.58  0.47  0.61  0.55  0.59 
Core earnings:         
Basic (1)0.63  0.52  0.62  0.60  0.64 
Diluted (1)0.63  0.52  0.61  0.60  0.64 
Dividends0.08  0.08  0.08  0.08  0.06 
Book value32.79  31.81  31.30  30.77  30.35 
Tangible book value  (1)17.85  17.72  17.18  16.65  16.15 
Common shares outstanding18,399,194  17,111,394  17,108,394  17,119,793  17,032,669 
Weighted average basic shares outstanding (4)17,965,055  17,110,090  17,111,958  17,091,663  17,032,452 
Weighted average diluted shares outstanding (4)18,047,960  17,199,281  17,198,981  17,169,596  17,123,423 
          
Selected Period End Balance Sheet Data         
Total assets$5,055,000  $4,478,339  $4,375,727  $4,258,364  $4,132,639 
Cash and cash equivalents293,279  353,950  424,196  358,798  324,047 
Securities available for sale273,463  200,188  180,465  198,149  206,062 
Loans, held for sale12,299  6,218  7,237  7,034  4,453 
Loans, held for investment3,989,405  3,529,275  3,375,553  3,303,248  3,201,084 
Allowance for loan losses27,043  25,088  21,764  20,227  18,552 
Goodwill and core deposit intangible275,000  241,171  241,534  241,722  241,912 
Other real estate owned2,168  2,323  2,958  4,587  4,763 
Noninterest-bearing deposits1,071,656  884,272  886,087  806,912  818,022 
Interest-bearing deposits2,956,623  2,649,768  2,581,397  2,579,766  2,431,576 
Borrowings (other than junior subordinated debentures)371,283  334,485  271,504  297,274  306,147 
Junior subordinated debentures18,147  18,147  18,147  18,147  18,147 
Series A Preferred Stock23,938  23,938  23,938  23,938  23,938 
Total stockholders' equity627,309  568,257  559,447  550,728  540,851 
               

Independent Bank Group, Inc. and Subsidiaries
Consolidated Financial Data
Three Months Ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014

(Dollars in thousands, except for share data)
(Unaudited)

 
 As of and for the quarter ended
 December 31, 2015 September 30, 2015 June 30, 2015 March 31, 2015 December 31, 2014
Selected Performance Metrics         
Return on average assets0.86% 0.76% 0.99% 0.92% 0.97%
Return on average equity (2)7.28  5.96  7.91  7.31  7.65 
Return on tangible equity (2) (6)13.37  10.75  14.48  13.64  14.08 
Adjusted return on average assets (1)0.93  0.83  0.99  1.00  1.05 
Adjusted return on average equity (1) (2)7.89  6.53  7.93  7.96  8.30 
Adjusted return on tangible equity (1) (2) (6)14.49  11.77  14.51  14.86  15.27 
Net interest margin3.96  4.08  4.10  4.07  4.28 
Adjusted net interest margin (3)3.91  4.07  4.04  4.05  4.17 
Efficiency ratio61.47  61.66  58.38  60.90  59.17 
Core efficiency ratio (1)58.75  59.25  57.81  57.76  55.85 
          
Credit Quality Ratios         
Nonperforming assets to total assets0.36% 0.34% 0.37% 0.43% 0.36%
Nonperforming loans to total loans0.37  0.33  0.40  0.41  0.32 
Nonperforming assets to total loans and other real estate0.45  0.43  0.48  0.55  0.46 
Allowance for loan losses to non-performing loans181.99  214.21  163.12  148.06  183.43 
Allowance for loan losses to total loans0.68  0.71  0.64  0.61  0.58 
Net charge-offs to average loans outstanding (annualized)  0.07  0.01    0.01 
          
Capital Ratios         
Estimated common equity tier 1 capital to risk-weighted assets (5)7.94% 8.26% 8.33% 8.62% n/a 
Estimated tier 1 capital to average assets8.28  8.67  8.40  7.78  8.15 
Estimated tier 1 capital to risk-weighted assets (1) (5)8.92  9.37  9.49  9.31  9.83 
Estimated total capital to risk-weighted assets (5)11.13  11.86  12.05  11.88  12.59 
Total stockholders' equity to total assets12.41  12.69  12.79  12.93  13.09 
Tangible common equity to tangible assets (1)6.87  7.15  7.11  7.10  7.07 
          
(1) Non-GAAP financial measures.  See reconciliation.
(2) Excludes average balance of Series A preferred stock.
(3) Excludes income recognized on acquired loans of $516, $88, $555, $113 and $988, respectively.
(4) Total number of shares includes participating shares (those with dividend rights).
(5)  December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015 ratios calculated under Basel III rules, which became effective January 1, 2015.
(6)  Excludes average balance of goodwill and net core deposit intangibles.
 

Independent Bank Group, Inc. and Subsidiaries
Annual Selected Financial Information
Years ended December 31, 2015 and 2014
(Unaudited)

 
 Years ended December 31,
 2015 2014
Per Share Data   
Net income - basic$2.23  $1.86 
Net income - diluted2.21  1.85 
Cash dividends0.32  0.24 
Book value32.79  30.35 
    
Outstanding Shares   
Period-end shares18,399,194  17,032,669 
Weighted average shares - basic17,321,513  15,458,666 
Weighted average shares - diluted17,406,108  15,557,120 
    
Selected Annual Ratios   
Return on average assets0.88% 0.87%
Return on average equity7.13% 6.89%
Net interest income to average earning assets4.05% 4.19%
      

Independent Bank Group, Inc. and Subsidiaries
Consolidated Statements of Income
Three Months and Years Ended December 31, 2015 and 2014
(Dollars in thousands)
(Unaudited)

 
  Three Months Ended December 31, Years Ended December 31,
  2015 2014 2015 2014
Interest income:        
Interest and fees on loans $46,154  $41,824  $169,504  $135,461 
Interest on taxable securities 615  616  2,168  2,803 
Interest on nontaxable securities 459  401  1,783  1,429 
Interest on federal funds sold and other 186  111  572  439 
Total interest income 47,414  42,952  174,027  140,132 
Interest expense:        
Interest on deposits 3,230  2,663  12,024  9,537 
Interest on FHLB advances 834  886  3,077  3,678 
Interest on repurchase agreements and other borrowings 1,060  1,088  4,289  2,230 
Interest on junior subordinated debentures 139  140  539  542 
Total interest expense 5,263  4,777  19,929  15,987 
Net interest income 42,151  38,175  154,098  124,145 
Provision for loan losses 1,970  1,751  9,231  5,359 
Net interest income after provision for loan losses 40,181  36,424  144,867  118,786 
Noninterest income:        
Service charges on deposit accounts 2,104  1,804  7,982  6,009 
Mortgage fee income 1,187  1,176  5,269  3,953 
Gain on sale of loans     116  1,078 
Gain on sale of other real estate 70  12  290  71 
Gain on sale of securities available for sale 44  362  134  362 
Loss on sale of premises and equipment 16    (358) (22)
Increase in cash surrender value of BOLI 271  282  1,077  972 
Other 562  325  1,618  1,201 
Total noninterest income 4,254  3,961  16,128  13,624 
Noninterest expense:        
Salaries and employee benefits 16,549  14,540  60,541  52,337 
Occupancy 4,004  4,050  16,058  13,250 
Data processing 1,244  660  3,384  2,080 
FDIC assessment 706  551  2,259  1,797 
Advertising and public relations 126  217  1,038  835 
Communications 576  567  2,219  1,787 
Net other real estate owned expenses (including taxes) (15) (26) 169  232 
Operations of IBG Adriatica, net       23 
Other real estate impairment     35  22 
Core deposit intangible amortization 453  422  1,555  1,281 
Professional fees 1,183  775  3,191  2,567 
Acquisition expense, including legal 627  998  1,420  3,626 
Other 3,074  2,177  11,329  8,675 
Total noninterest expense 28,527  24,931  103,198  88,512 
Income before taxes 15,908  15,454  57,797  43,898 
Income tax expense 5,347  5,356  19,011  14,920 
Net income $10,561  $10,098  $38,786  $28,978 
 

Consolidated Balance Sheets
As of December 31, 2015 and 2014
(Dollars in thousands, except share information)
(Unaudited)

 
 December 31,
Assets2015 2014
Cash and due from banks$151,285  $153,158 
Interest-bearing deposits in other banks141,994  170,889 
Cash and cash equivalents293,279  324,047 
Certificates of deposit held in other banks61,746   
Securities available for sale273,463  206,062 
Loans held for sale12,299  4,453 
Loans, net of allowance for loan losses3,960,809  3,182,045 
Premises and equipment, net93,015  88,902 
Other real estate owned2,168  4,763 
Federal Home Loan Bank (FHLB) of Dallas stock and other restricted stock14,256  12,321 
Bank-owned life insurance (BOLI)40,861  39,784 
Deferred tax asset5,892  2,235 
Goodwill258,643  229,457 
Core deposit intangible, net16,357  12,455 
Other assets22,212  26,115 
Total assets$5,055,000  $4,132,639 
    
Liabilities, Temporary Equity and Stockholders’ Equity   
Deposits:   
Noninterest-bearing1,071,656  818,022 
Interest-bearing2,956,623  2,431,576 
Total deposits4,028,279  3,249,598 
FHLB advances288,325  229,405 
Repurchase agreements12,160  4,012 
Other borrowings68,345  69,410 
Other borrowings, related parties2,453  3,320 
Junior subordinated debentures18,147  18,147 
Other liabilities9,982  17,896 
Total liabilities4,427,691  3,591,788 
Commitments and contingencies   
    
Temporary equity:  Series A preferred stock23,938   
Stockholders’ equity:   
Series A preferred Stock  23,938 
Common stock184  170 
Additional paid-in capital530,107  476,609 
Retained earnings70,698  37,731 
Accumulated other comprehensive income2,382  2,403 
Total stockholders’ equity603,371  540,851 
Total liabilities, temporary equity and stockholders’ equity$5,055,000  $4,132,639 
 

Independent Bank Group, Inc. and Subsidiaries
Consolidated Average Balance Sheet Amounts, Interest Earned and Yield Analysis
Three Months Ended December 31, 2015 and 2014
(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 December 31,
 2015 2014
 Average
Outstanding
Balance
 Interest Yield/
Rate
 Average
Outstanding
Balance
 Interest Yield/
Rate
Interest-earning assets:           
Loans$3,812,493  $46,154  4.80% $3,144,680  $41,824  5.28%
Taxable securities177,535  615  1.37  166,963  616  1.46 
Nontaxable securities73,590  459  2.47  67,946  401  2.34 
Federal funds sold and other156,073  186  0.47  156,604  111  0.28 
Total interest-earning assets4,219,691  $47,414  4.46  3,536,193  $42,952  4.82 
Noninterest-earning assets627,684      562,478     
Total assets$4,847,375      $4,098,671     
Interest-bearing liabilities:           
Checking accounts$1,328,031  $1,443  0.43% $1,172,753  $1,275  0.43%
Savings accounts143,289  65  0.18  147,052  72  0.19 
Money market accounts495,690  339  0.27  189,119  115  0.24 
Certificates of deposit850,789  1,383  0.64  818,615  1,201  0.58 
Total deposits2,817,799  3,230  0.45  2,327,539  2,663  0.45 
FHLB advances267,266  834  1.24  241,102  886  1.46 
Repurchase agreements and other borrowings81,852  1,060  5.14  79,450  1,088  5.43 
Junior subordinated debentures18,147  139  3.04  18,147  140  3.06 
Total interest-bearing liabilities3,185,064  5,263  0.66  2,666,238  4,777  0.71 
Noninterest-bearing checking accounts1,050,728      871,493     
Noninterest-bearing liabilities15,485      16,202     
Stockholders’ equity596,098      544,738     
Total liabilities and equity$4,847,375      $4,098,671     
Net interest income  $42,151      $38,175   
Interest rate spread    3.80%     4.11%
Net interest margin    3.96      4.28 
Average interest earning assets to interest bearing liabilities    132.48      132.63 
              

Independent Bank Group, Inc. and Subsidiaries
Consolidated Average Balance Sheet Amounts, Interest Earned and Yield Analysis
Years Ended December 31, 2015 and 2014
(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 Years Ended December 31,
 2015 2014
 Average
Outstanding
Balance
 Interest Yield/
Rate
 Average
Outstanding
Balance
 Interest Yield/
Rate
Interest-earning assets:           
Loans$3,456,128  $169,504  4.90% $2,628,667  $135,461  5.15%
Taxable securities139,924  2,168  1.55  174,578  2,803  1.61 
Nontaxable securities69,112  1,783  2.58  57,825  1,429  2.47 
Federal funds sold and other141,374  572  0.40  99,083  439  0.44 
Total interest-earning assets3,806,538  $174,027  4.57  2,960,153  $140,132  4.73 
Noninterest-earning assets589,014      369,449     
Total assets$4,395,552      $3,329,602     
Interest-bearing liabilities:           
Checking accounts$1,297,948  $5,649  0.44% $1,052,528  $4,797  0.46%
Savings accounts143,476  263  0.18  129,707  345  0.27 
Money market accounts319,982  829  0.26  123,392  347  0.28 
Certificates of deposit842,087  5,283  0.63  674,556  4,048  0.60 
Total deposits2,603,493  12,024  0.46  1,980,183  9,537  0.48 
FHLB advances225,934  3,077  1.36  242,695  3,678  1.52 
Repurchase agreements and other borrowings78,074  4,289  5.49  40,179  2,230  5.55 
Junior subordinated debentures18,147  539  2.97  18,147  542  2.99 
Total interest-bearing liabilities2,925,648  19,929  0.68  2,281,204  15,987  0.70 
Noninterest-bearing checking accounts895,789      601,764     
Noninterest-bearing liabilities9,688      11,152     
Stockholders’ equity564,427      435,482     
Total liabilities and equity$4,395,552      $3,329,602     
Net interest income  $154,098      $124,145   
Interest rate spread    3.89%     4.03%
Net interest margin    4.05      4.19 
Average interest earning assets to interest bearing liabilities    130.11      129.76 
              

Independent Bank Group, Inc. and Subsidiaries
Loan Portfolio Composition
As of December 31, 2015 and 2014
(Dollars in thousands)
(Unaudited)

     
The following table sets forth loan totals by category as of the dates presented:    
     
  December 31, 2015 December 31, 2014
  Amount % of Total Amount % of Total
Commercial $731,818  18.3% $672,052  21.0%
Real estate:        
Commercial real estate 1,949,734  48.7  1,450,434  45.2 
Commercial construction, land and land development 419,611  10.5  334,964  10.5 
Residential real estate (1) 620,289  15.5  518,478  16.2 
Single-family interim construction 187,984  4.7  138,278  4.3 
Agricultural 50,178  1.3  38,822  1.2 
Consumer 41,966  1.0  52,267  1.6 
Other 124    242   
Total loans 4,001,704  100.0% 3,205,537  100.0%
Deferred loan fees (1,553)   (487)  
Allowance for losses (27,043)   (18,552)  
Total loans, net $3,973,108    $3,186,498   
 
(1) Includes loans held for sale at December 31, 2015 and 2014 of $12,299 and $4,453, respectively.
 

Independent Bank Group, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Three Months Ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014
(Dollars in thousands, except for share data)
(Unaudited)

 
  For the Three Months Ended
  December 31, 2015September 30, 2015June 30, 2015March 31, 2015December 31, 2014
Net Interest Income - Reported(a)$42,151 $38,089 $37,780 $36,078 $38,175 
Income recognized on acquired loans (516)(88)(555)(113)(988)
Adjusted Net Interest Income(b)41,635 38,001 37,225 35,965 37,187 
Provision Expense - Reported(c)1,970 3,932 1,659 1,670 1,751 
Noninterest Income - Reported(d)4,254 3,799 4,109 3,966 3,961 
Gain on sale of loans  (116)   
Gain on sale of OREO (70)(41)(49)(130)(12)
Gain on sale of securities (44) (90) (362)
Loss on sale of premises and equipment (16)374    
Adjusted Noninterest Income(e)4,124 4,016 3,970 3,836 3,587 
Noninterest Expense - Reported(f)28,527 25,830 24,455 24,386 24,931 
OREO Impairment  (10)(25)  
IPO related stock grant and bonus expense (156)(156)(156)(156)(156)
Registration statements     (163)
Acquisition Expense (5) (1,487)(770)(458)(1,239)(1,841)
Adjusted Noninterest Expense(g)26,884 24,894 23,816 22,991 22,771 
Pre-Tax Pre-Provision Earnings(a) + (d) - (f)$17,878 $16,058 $17,434 $15,658 $17,205 
Core Pre-Tax Pre-Provision Earnings(b) + (e) - (g)$18,875 $17,123 $17,379 $16,810 $18,003 
Core Earnings (2)(b) - (c) + (e) - (g)$11,377 $8,917 $10,532 $10,230 $10,889 
Reported Efficiency Ratio(f) / (a + d)61.47%61.66%58.38%60.90%59.17%
Core Efficiency Ratio(g) / (b + e)58.75%59.25%57.81%57.76%55.85%
Adjusted Return on Average Assets (1) 0.93%0.83%0.99%1.00%1.05%
Adjusted Return on Average Equity (1) 7.89%6.53%7.93%7.96%8.30%
Adjusted Return on Tangible Equity (1) 14.49%11.77%14.51%14.86%15.27%
Total Average Assets $4,847,375 $4,270,604 $4,259,334 $4,154,007 $4,098,671 
Total Average Stockholders' Equity (3) $572,160 $541,939 $532,715 $520,899 $520,800 
Total Average Tangible Stockholders' Equity (3) (4) $311,549 $300,578 $291,166 $279,149 $282,907 
(1) Calculated using core earnings
(2)  Assumes actual effective tax rate of 32.7%, 32.4%, 33.0%, 32.4% and 33.0%, respectively.  December 31, 2015, September 30, 2014 and December 31, 2014 tax rate adjusted for effect of non-deductible acquisition expenses.
(3)  Excludes average balance of Series A preferred stock.
(4)  Excludes average balance of goodwill and net core deposit intangibles.
(5)  Acquisition expenses include $860 thousand, $477 thousand, $430 thousand, $767 thousand and $843 thousand of compensation and bonus expenses in addition to $627 thousand, $293 thousand, $28 thousand, $472 thousand and $998 thousand of merger-related expenses for the quarters ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015 and December 31, 2014, respectively.
 

Independent Bank Group, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
As of December 31, 2015 and 2014
(Dollars in thousands, except per share information)
(Unaudited)

 
Tangible Book Value Per Common Share   
 December 31, December 31,
 2015 2014
Tangible Common Equity   
Total common stockholders' equity$603,371  $516,913 
Adjustments:   
Goodwill(258,643) (229,457)
Core deposit intangibles, net(16,357) (12,455)
Tangible common equity$328,371  $275,001 
Tangible assets$4,780,000  $3,890,727 
Common shares outstanding18,399,194  17,032,669 
Tangible common equity to tangible assets6.87% 7.07%
Book value per common share$32.79  $30.35 
Tangible book value per common share17.85  16.15 


    
    
Tier 1 Common and Tier 1 Capital to Risk-Weighted Assets Ratio   
 December 31, December 31,
 2015 2014
Tier 1 Common Equity   
Total common stockholders' equity - GAAP$603,371  $516,913 
Adjustments:   
Unrealized gain on available-for-sale securities(2,382) (2,403)
Goodwill(258,643) (229,457)
Core deposit intangibles, net(4,253) (12,455)
Tier 1 common equity$338,093  $272,598 
Qualifying Restricted Core Capital Elements (junior subordinated debentures)17,600  17,600 
Preferred Stock23,938  23,938 
Tier 1 Equity$379,631  $314,136 
Total Risk-Weighted Assets$4,257,911  $3,195,413 
Estimated tier 1 equity to risk-weighted assets ratio8.92% 9.83%
Estimated tier 1 common equity to risk-weighted assets ratio7.94  8.53 
      

Source: GlobeNewswire (January 27, 2016 - 5:00 PM EST)

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