Independent Bank Group, Inc. Reports Third Quarter Financial Results, Announces Renewal and Upsizing of Stock Repurchase Program, and Increases Quarterly Dividend to 30 Cents Per Share
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Independent Bank Group, Inc. Reports Third Quarter Financial Results, Announces Renewal and Upsizing of Stock Repurchase Program, and Increases Quarterly Dividend to 30 Cents Per Share

Monday, October 26, 2020 6:00 PM
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Topic:
Earnings,Dividends

McKINNEY, TX / ACCESSWIRE / October 26, 2020 / Independent Bank Group, Inc. (NASDAQ:IBTX), the holding company for Independent Bank, today announced net income of $60.1 million, or $1.39 per diluted share, for the quarter ended September 30, 2020 compared to $55.6 million, or $1.30 per diluted share, for the quarter ended September 30, 2019 and $38.7 million, or $0.90 per diluted share, for the quarter ended June 30, 2020.

The Company also announced that its Board of Directors has approved the renewal of the Company's stock repurchase program, with an increased maximum limit of $150 million available for repurchase, and declared a quarterly cash dividend in the amount of $0.30 per share of common stock. The dividend will be payable on November 19, 2020 to stockholders of record as of the close of business on November 6, 2020.

Highlights

  • Net income of $60.1 million, or $1.39 per diluted share and adjusted (non-GAAP) net income of $59.6 million, or $1.38 per diluted share
  • Return on average assets of 1.43% and efficiency ratio of 44.69%
  • Strong organic deposit growth of 14.91%, annualized
  • Strong liquidity, with cash and securities representing approximately 14.8% of total assets
  • Continued solid credit metrics with nonperforming assets of 0.25% of total assets and provision for loan losses of $7.6 million
  • Completed the issuance and sale of $130 million of 4.0% fixed-to-floating rate subordinated debentures

"We are pleased to report another quarter of strong financial performance in a challenging environment," said Independent Bank Group Chairman and CEO David R. Brooks. "Our conservative credit culture and continued solid earnings place us in a position of strength as we continue to serve our customers and communities through the COVID-19 pandemic." Brooks continued, "Based on these strong results, our Board of Directors has renewed our stock repurchase program with an increased maximum limit of $150 million and increased our quarterly dividend to 30 cents per share. These actions reflect our continuing commitment to provide significant returns to our shareholders."

Third Quarter 2020 Operating Results

Net Interest Income

  • Net interest income was $132.0 million for third quarter 2020 compared to $125.4 million for third quarter 2019 and $128.4 million for second quarter 2020. The increase in net interest income from the linked quarter and prior year was primarily due to decreased funding costs due to a declining rate environment over the applicable periods.
  • The average balance of total interest-earning assets grew by $2.0 billion and totaled $14.9 billion for the quarter ended September 30, 2020 compared to $13.0 billion for the quarter ended September 30, 2019 and increased $239.4 million from $14.7 billion for the quarter ended June 30, 2020. The increase from the prior year was primarily related to increased average loan balances including Paycheck Protection Program (PPP) loans and mortgage warehouse loans, as well as an increase in average interest-bearing deposits with correspondent banks due to significant deposit growth during 2020. The increase from the linked quarter is primarily due to an increase in average mortgage warehouse loans.
  • The yield on interest-earning assets was 4.04% for third quarter 2020 compared to 5.06% for third quarter 2019 and 4.14% for second quarter 2020. The decrease from the prior year was due primarily to lower rates on interest-earning assets due to decreases in the Fed Funds rate over the periods coupled with increased volume of average interest-bearing deposits in addition to decreased loan yields as a result of decreased loan accretion and the addition of lower yielding PPP loans to the portfolio. The decrease from the linked quarter is primarily due to lower loan yields which decreased 13 basis points with loan accretion remaining constant quarter over quarter.
  • The cost of interest-bearing liabilities, including borrowings, was 0.77% for third quarter 2020 compared to 1.72% for third quarter 2019 and 0.90% for second quarter 2020. The decrease from the prior year and linked quarter is primarily due to lower rates offered on our deposit products, primarily promotional certificate of deposit products and money market accounts, as well as rate decreases on short-term FHLB advances and our other debt.
  • The net interest margin was 3.52% for third quarter 2020 compared to 3.84% for third quarter 2019 and 3.51% for second quarter 2020. The adjusted (non-GAAP) net interest margin, which excludes unexpected accretion on loans acquired with deteriorated credit quality, was 3.48% for third quarter 2020 compared to 3.82% for third quarter 2019 and 3.50% for second quarter 2020. The net interest margin excluding all loan accretion was 3.32% for third quarter 2020 compared to 3.54% in third quarter 2019 and consistent with second quarter 2020. The decrease in net interest margin from the prior year was primarily due to the lower asset yields, increased liquidity and a decrease in loan accretion income offset by the lower cost of funds of interest bearing liabilities.

Noninterest Income

  • Total noninterest income decreased $2.2 million compared to third quarter 2019 and decreased $249 thousand compared to second quarter 2020.
  • The decrease from the prior year primarily reflects decreases of $632 thousand in services charges on deposits, $573 thousand in investment management and trust and $2.3 million in other noninterest income. Third quarter 2019 noninterest income included $6.8 million in gain on sale of loans and $1.5 million in gain on sale of a branch. These decreases were offset by an increase of $9.9 million in mortgage banking revenue. The decrease in service charge income relates to lower transaction volumes of non-sufficient funds that have been impacted by the pandemic. The decrease in investment management and trust revenue in third quarter 2020 is due to the sale of the trust business in fourth quarter 2019. The decrease in other noninterest income is primarily due to decreases of $1.9 million in interchange income as a result of the Durbin amendment becoming effective for the Company starting third quarter 2020, as well as, a decrease of $1.2 million in swap dealer income, offset by an increase of $810 thousand in mortgage warehouse fees.
  • The decrease from the linked quarter primarily reflects a decrease of $4.0 million in other noninterest income offset by an increase of $4.2 million in mortgage banking revenue. The decrease in other noninterest income is primarily due to the recovery of a $3.5 million contingency reserve which was settled with the SBA during second quarter 2020, as well as a decrease of $1.4 million in interchange income as noted above, offset by increased mortgage warehouse fees and other miscellaneous income.
  • Mortgage banking revenue was higher in third quarter 2020 due to increased mortgage origination and refinance activity resulting from the low interest rate environment. It was also impacted by continued volatility in the market during the quarter, which resulted in fair value gains on our derivative hedging instruments of $982 thousand compared to third quarter 2019 gain of $106 thousand and second quarter 2020 gain of $3.3 million.

Noninterest Expense

  • Total noninterest expense decreased $3.5 million compared to third quarter 2019 and decreased $9.7 million compared to second quarter 2020.
  • The decrease in noninterest expense compared to third quarter 2019 is due primarily to decreases of $9.4 million in acquisition expenses and $3.5 million in other noninterest expense offset by increases of $4.6 million in salaries and benefits and $3.7 million in FDIC assessment. The decrease in acquisition expense is due to elevated expenses in prior year quarter related to the 2019 Guaranty transaction. The decrease in other noninterest expense is primarily due to lower deposit and loan related expenses, and auto and travel expenses. In addition, the decrease in other noninterest expense is reflective of $1.2 million in impairment charges recorded in the prior year quarter. The FDIC assessment was impacted by a $3.2 million Small Bank Assessment Credit recorded in third quarter 2019.
  • The decrease from the linked quarter is primarily related to decreases of $15.6 million in acquisition expenses and $1.3 million in other noninterest expense offset by an increase of $7.8 million in salaries and benefits. Noninterest expense was lower compared to the linked quarter primarily due to the lower deposit and loan related expenses as well as lower charitable contributions, which were higher in second quarter 2020 due to pandemic-related donations.
  • Salaries and benefits expense in third quarter 2020 compared to the prior year are reflective of higher salaries and accrued bonus expense due to higher headcount for the year over year period, partially offset by $911 thousand of conversion bonuses and severance and retention expenses related to the Guaranty transaction and a branch restructuring completed in third quarter 2019. Third quarter 2020 changes relative to both the linked quarter and prior year are reflective of $1.1 million and $1.9 million, respectively, in elevated commission expense due to significantly increased mortgage production during the quarter. Contract labor costs were also higher in the current year due to additional resources needed to facilitate the Company's participation in the PPP program as well as various infrastructure projects. Comparatively, second quarter 2020 salaries and benefits were lower due to deferred salaries costs of $10.3 million related to the originations of the PPP loans and other COVID-related loan modifications/deferrals during the second quarter offset by $2.8 million in severance expense and accelerated stock grant amortization related to departmental and business line restructurings, $1.4 million of bonuses and overtime related to PPP loan activity as well as $996 thousand for pandemic related special circumstances compensation.

Provision for Loan Loss

  • Provision for loan loss was $7.6 million for third quarter 2020, an increase of $2.4 million compared to $5.2 million for third quarter 2019 and a decrease of $15.5 million compared to $23.1 million for second quarter 2020. Provision expense is elevated in the third and second quarter 2020 primarily due to general provision expense for economic factors related to COVID-19 and energy prices as well as charge-offs or specific reserves taken during the respective periods. Third quarter 2020 provision reflects an increase of $1.4 million related to a specific reserve for a commercial loan.
  • The allowance for loan losses was $87.5 million, or 0.75% of total loans held for investment, net of mortgage warehouse purchase loans, at September 30, 2020, compared to $50.4 million, or 0.46% at September 30, 2019 and compared to $80.1 million, or 0.68% at June 30, 2020. The dollar and percentage increase from the prior year and the linked quarter is primarily due to added reserves for economic concerns related to the pandemic.

Income Taxes

  • Federal income tax expense of $16.1 million was recorded for the quarter ended September 30, 2020, an effective rate of 21.1% compared to tax expense of $14.9 million and an effective rate of 21.1% for the quarter ended September 30, 2019 and tax expense of $8.9 million and an effective rate of 18.7% for the quarter ended June 30, 2020. The lower effective tax rate for second quarter 2020 is primarily a result of the 2019 provision to return adjustment related to state income taxes.

Third Quarter 2020 Balance Sheet Highlights

Loans

  • Total loans held for investment, net of mortgage warehouse purchase loans, were $11.7 billion at September 30, 2020 compared to $11.7 billion at June 30, 2020 and $10.9 billion at September 30, 2019. Loans held for investment remained constant compared to the linked quarter and increased $723.2 million from December 31, 2019, of which $826.0 million was PPP loans. Loans excluding PPP loans have decreased $97.5 million year to date, net of sales, primarily due to the economic dislocation caused by the pandemic.
  • Average mortgage warehouse purchase loans were $894.9 million for the quarter ended September 30, 2020 compared to $665.8 million for the quarter ended June 30, 2020, representing an increase of $229.1 million, or 34.4% for the quarter, and compared to $434.1 million for the quarter ended September 30, 2019, an increase of $460.8 million, or 106.1% year over year. The volumes continue to be higher than anticipated due to the sustained low mortgage rate environment. In addition, the change from the prior year is reflective of the Company's focused attention to grow the warehouse line of business.
  • Commercial real estate (CRE) loans were $6.1 billion at September 30, 2020, $5.8 billion at June 30, 2020 and $5.9 billion at September 30, 2019, or 46.7%, 45.9% and 51.0% of total loans, respectively. At September 30, 2020, the average loan size in the CRE portfolio was $1.2 million.
  • The Company continues to work with borrowers impacted by the COVID-19 pandemic. Relief in the form of full or partial payment deferrals has been provided on an individualized basis after an assessment of pandemic-related economic hardships facing the borrower. The number of loans on deferral has sharply declined since the beginning of the pandemic, and the vast majority of borrowers who were provided temporary payment relief have returned to paying as originally agreed. As of October 16, 2020, loans currently in deferral totaled $548.0 million across 239 accounts, which represents 4.5% of the Company's outstanding total loans held for investment balances, excluding PPP loans, as of third quarter end and 1.2% of the Company's outstanding loan accounts at third quarter end.

Asset Quality

  • Total nonperforming assets increased to $43.2 million, or 0.25% of total assets at September 30, 2020, compared to $28.4 million or 0.17% of total assets at June 30, 2020, and increased from $18.4 million, or 0.12% of total assets at September 30, 2019.
  • Total nonperforming loans increased to $41.4 million, or 0.36% of total loans at September 30, 2020, from $26.6 million, or 0.23% of total loans at June 30, 2020, and increased from $11.9 million, or 0.11% of total loans at September 30, 2019.
  • The increase in nonperforming loans and nonperforming assets from the linked quarter is primarily due to a $15.7 million commercial real estate loan which has matured and is pending workout at the end of third quarter.
  • The increase in nonperforming loans and nonperforming assets from the prior year is primarily due to the activity noted above as well the net addition of nonaccrual loans of $13.4 million and troubled debt restructurings of $1.5 million. In addition, nonperforming assets was reduced by net dispositions of $4.8 million in other real estate owned properties.
  • Charge-offs were 0.01% annualized in the third quarter 2020 compared to 0.05% annualized in the linked quarter and 0.21% annualized in the prior year quarter. Charge-offs were elevated in the linked quarter due to a charge-off on a $1.1 million commercial loan. Charge-offs were elevated in prior year due to charge-offs totaling $5.6 million related to two commercial credits.

Deposits, Borrowings and Liquidity

  • Total deposits were $13.8 billion at September 30, 2020 compared to $13.3 billion at June 30, 2020 and compared to $11.7 billion at September 30, 2019. The increase in deposits from the linked quarter is primarily due to organic growth of approximately $498.5 million or 14.9% annualized for the quarter. The Company estimates as of September 30, 2020, there were approximately $541.0 million of commercial deposits related to PPP loans that were funded by the Company in the second quarter. Deposits increased from prior year due to organic growth of $1.5 billion, or 13.0%, for the year over year period, net of the PPP deposits discussed above.
  • Total borrowings (other than junior subordinated debentures) were $680.5 million at September 30, 2020, a decrease of $435.9 million from June 30, 2020 and a decrease of $87.1 million from September 30, 2019. The change in the linked quarter and prior year reflects the use of short-term FHLB advances as needed for liquidity, warehouse and other loan fundings, offset by proceeds of $127.5 million, net of issuance costs, related to subordinated debentures issued in third quarter 2020, as well as a reduction of $6.0 million and $35.0 million, respectively, in borrowings against the Company's unsecured revolving line of credit with an unrelated commercial bank. In addition, the change from the linked quarter reflects the pay-off of $7.5 million in borrowings related to participation in the Federal Reserve's PPP Liquidity Facility advanced in second quarter 2020.

Capital

  • In September 2020, the Company completed a subordinated debt offering, raising $130.0 million in new Tier 2 capital, enhancing the Company's and the Bank's capital position.
  • The Company continues to be well capitalized under regulatory guidelines. At September 30, 2020, our estimated common equity Tier 1 to risk-weighted assets, Tier 1 capital to average assets, Tier 1 capital to risk-weighted assets and total capital to risk-weighted asset ratios were 10.24%, 9.15%, 10.66% and 13.29%, respectively, compared to 10.17%, 8.94%, 10.60%, and 12.44%, respectively, at June 30, 2020.

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, 2020 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, 2020 and will adjust amounts preliminarily reported, if necessary.

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 areas in Texas and the Colorado Front Range area, including Denver, Colorado Springs and Fort Collins.

Conference Call

A conference call covering Independent Bank Group's third quarter earnings announcement will be held on Tuesday, October 27, 2020 at 8:30 a.m. (EDT) and can be accessed by the webcast link, https://webcasts.eqs.com/indepbankgroup20201027/en or by calling 1-877-407-0989 and by identifying the meeting number 13710929 or by identifying "Independent Bank Group Third Quarter 2020 Earnings Conference Call." The conference materials will also be available by accessing the Investor Relations page of our website, www.ibtx.com. If you are unable to participate in the live event, a recording of the conference call will be accessible via the Investor Relations page of our website.

Forward-Looking Statements

From time to time the Company's comments and releases may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and other related federal security laws. Forward-looking statements include information about the Company's possible or assumed future results of operations, including its future revenues, income, expenses, provision for taxes, effective tax rate, earnings per share and cash flows, its future capital expenditures and dividends, its future financial condition and changes therein, including changes in the Company's loan portfolio and allowance for loan losses, the Company's future capital structure or changes therein, the plan and objectives of management for future operations, the Company's future or proposed acquisitions, the future or expected effect of acquisitions on the Company's operations, results of operations and financial condition, the Company's future economic performance and the statements of the assumptions underlying any such statement. Such statements are typically, but not exclusively, identified by the use in the statements of words or phrases such as "aim," "anticipate," "estimate," "expect," "goal," "guidance," "intend," "is anticipated," "is estimated," "is expected," "is intended," "objective," "plan," "projected," "projection," "will affect," "will be," "will continue," "will decrease," "will grow," "will impact," "will increase," "will incur," "will reduce," "will remain," "will result," "would be," variations of such words or phrases (including where the word "could," "may" or "would" is used rather than the word "will" in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective. The forward-looking statements that the Company makes are based on its current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to future results and occurrences, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. The Company'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 the Company's future financial results and performance and could cause those results or performance to differ materially from those expressed in the forward-looking statements. These possible events or factors include, but are not limited to: 1) the disruption to local, regional, national and global economic activity caused by infectious disease outbreaks, including the recent outbreak of coronavirus, or COVID-19, and the significant impact that such outbreak has had and may have on the Company's growth, operations, earnings and asset quality; 2) the Company's ability to sustain its current internal growth rate and total growth rate; 3) changes in geopolitical, business and economic events, occurrences and conditions, including changes in rates of inflation or deflation, nationally, regionally and in the Company's target markets, particularly in Texas and Colorado; 4) worsening business and economic conditions nationally, regionally and in the Company's target markets, particularly in Texas and Colorado, and the geographic areas in those states in which the Company operates; 5) the Company's dependence on its management team and its ability to attract, motivate and retain qualified personnel; 6) the concentration of the Company's business within its geographic areas of operation in Texas and Colorado; 7) changes in asset quality, including increases in default rates on loans and higher levels of nonperforming loans and loan charge-offs generally, and specifically resulting from the economic dislocation caused by the COVID-19 pandemic; 8) concentration of the loan portfolio of Independent Bank, before and after the completion of acquisitions of financial institutions, in commercial and residential real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate; 9) the ability of Independent Bank to make loans with acceptable net interest margins and levels of risk of repayment and to otherwise invest in assets at acceptable yields and presenting acceptable investment risks; 10) inaccuracy of the assumptions and estimates that the managements of the Company and the financial institutions that the Company acquires make in establishing reserves for probable loan losses and other estimates generally, and specifically as a result of the effect of the COVID-19 pandemic; 11) lack of liquidity, including as a result of a reduction in the amount of sources of liquidity the Company currently has; 12) material increases or decreases in the amount of deposits held by Independent Bank or other financial institutions that the Company acquires and the cost of those deposits; 13) the Company's access to the debt and equity markets and the overall cost of funding its operations; 14) regulatory requirements to maintain minimum capital levels or maintenance of capital at levels sufficient to support the Company's anticipated growth; 15) changes in market interest rates that affect the pricing of the loans and deposits of each of Independent Bank and the financial institutions that the Company acquires and that affect the net interest income, other future cash flows, or the market value of the assets of each of Independent Bank and the financial institutions that the Company acquires, including investment securities; 16) fluctuations in the market value and liquidity of the securities the Company holds for sale, including as a result of changes in market interest rates; 17) effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services; 18) changes in economic and market conditions, including the economic dislocation resulting from the COVID-19 pandemic, that affect the amount and value of the assets of Independent Bank and of financial institutions that the Company acquires; 19) the institution and outcome of, and costs associated with, litigation and other legal proceedings against one of more of the Company, Independent Bank and financial institutions that the Company acquires or to which any of such entities is subject; 20) the occurrence of market conditions adversely affecting the financial industry generally, including the economic dislocation resulting from the COVID-19 pandemic; 21) the impact of recent and future legislative regulatory changes, including changes in banking, securities, and tax laws and regulations and their application by the Company's regulators, and changes in federal government policies, as well as regulatory requirements applicable to, and resulting from regulatory supervision of, the Company and Independent Bank as a financial institution with total assets greater than $10 billion; 22) changes in accounting policies, practices, principles and guidelines, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the SEC and the Public Company Accounting Oversight Board, as the case may be; 23) governmental monetary and fiscal policies, including changes resulting from the implementation of the new Current Expected Credit Loss accounting standard; 24) changes in the scope and cost of FDIC insurance and other coverage; 25) the effects of war or other conflicts, acts of terrorism (including cyber attacks) or other catastrophic events, including natural disasters such as storms, droughts, tornadoes, hurricanes and flooding, that may affect general economic conditions; 26) the Company's actual cost savings resulting from previous or future acquisitions are less than expected, the Company is unable to realize those cost savings as soon as expected, or the Company incurs additional or unexpected costs; 27) the Company's revenues after previous or future acquisitions are less than expected; 28) the liquidity of, and changes in the amounts and sources of liquidity available to the Company, before and after the acquisition of any financial institutions that the Company acquires; 29) deposit attrition, operating costs, customer loss and business disruption before and after the Company completed acquisitions, including, without limitation, difficulties in maintaining relationships with employees, may be greater than the Company expected; 30) the effects of the combination of the operations of financial institutions that the Company has acquired in the recent past or may acquire in the future with the Company's operations and the operations of Independent Bank, the effects of the integration of such operations being unsuccessful, and the effects of such integration being more difficult, time consuming, or costly than expected or not yielding the cost savings the Company expects; 31) the impact of investments that the Company or Independent Bank may have made or may make and the changes in the value of those investments; 32) the quality of the assets of financial institutions and companies that the Company has acquired in the recent past or may acquire in the future being different than it determined or determine in its due diligence investigation in connection with the acquisition of such financial institutions and any inadequacy of loan loss reserves relating to, and exposure to unrecoverable losses on, loans acquired; 33) the Company's ability to continue to identify acquisition targets and successfully acquire desirable financial institutions to sustain its growth, to expand its presence in the Company's markets and to enter new markets; 34) general business and economic conditions in the Company's markets change or are less favorable than expected generally, and specifically as a result of the COVID-19 pandemic; 35) changes occur in business conditions and inflation generally, and specifically as a result of the COVID-19 pandemic; 36) an increase in the rate of personal or commercial customers' bankruptcies generally, and specifically as a result of the COVID-19 pandemic; 37) technology-related changes are harder to make or are more expensive than expected; 38) attacks on the security of, and breaches of, the Company's and Independent Bank's digital information systems, the costs the Company or Independent Bank incur to provide security against such attacks and any costs and liability the Company or Independent Bank incurs in connection with any breach of those systems; 39) the potential impact of technology and "FinTech" entities on the banking industry generally; 40) the other factors that are described or referenced in Part I, Item 1A, of the Company's Annual Report on Form 10-K filed with the SEC on March 2, 2020, as amended by the Company's Annual Report on Form 10-K/A filed with the SEC on March 6, 2020, the Company's Quarterly Reports on Form 10-Q, in each case under the caption "Risk Factors"; and 41) other economic, competitive, governmental, regulatory, technological and geopolitical factors affecting the Company's operations, pricing and services. The Company urges you to consider all of these risks, uncertainties and other factors carefully in evaluating all such forward-looking statements made by the Company. As a result of these and other matters, including changes in facts, assumptions not being realized or other factors, the actual results relating to the subject matter of any forward-looking statement may differ materially from the anticipated results expressed or implied in that forward-looking statement. Any forward-looking statement made in this prospectus or made by the Company in any report, filing, document or information incorporated by reference in this prospectus, speaks only as of the date on which it is made. The Company undertakes no obligation to update any such forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. The Company believes that these assumptions or bases have been chosen in good faith and that they are reasonable. However, the Company caution you that assumptions as to future occurrences or results almost always vary from actual future occurrences or results, and the differences between assumptions and actual occurrences and results can be material. Therefore, the Company cautions you not to place undue reliance on the forward-looking statements contained in this prospectus or incorporated by reference herein.

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," "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, other intangible assets 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:

Paul Langdale
Senior Vice President, Director of Corporate Development
(972) 562-9004
[email protected]

Michelle Hickox
Executive Vice President, Chief Financial Officer
(972) 562-9004
[email protected]

Media:

James Tippit
Executive Vice President, Head of Corporate Responsibility
(972) 562-9004
[email protected]

Independent Bank Group, Inc. and Subsidiaries
Consolidated Financial Data
Three Months Ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019
(Dollars in thousands, except for share data)
(Unaudited)

 
  As of and for the Quarter Ended  
 
  September 30,
2020
    June 30,
2020
    March 31,
2020
    December 31,
2019
    September 30,
2019
 
Selected Income Statement Data
                             
Interest income
  $ 151,798     $ 151,241     $ 156,405     $ 164,386     $ 165,307  
Interest expense
    19,791       22,869       33,164       36,317       39,914  
Net interest income
    132,007       128,372       123,241       128,069       125,393  
Provision for loan losses
    7,620       23,121       8,381       1,609       5,233  
Net interest income after provision for loan losses
    124,387       105,251       114,860       126,460       120,160  
Noninterest income
    25,165       25,414       14,572       18,229       27,324  
Noninterest expense
    73,409       83,069       74,429       80,343       76,948  
Income tax expense
    16,068       8,903       10,836       14,110       14,903  
Net income
    60,075       38,693       44,167       50,236       55,633  
Adjusted net income (1)
    59,580       49,076       43,354       56,799       57,827  
 
                                       
Per Share Data (Common Stock)
                                       
Earnings:
                                       
Basic
  $ 1.39     $ 0.90     $ 1.03     $ 1.17     $ 1.30  
Diluted
    1.39       0.90       1.03       1.17       1.30  
Adjusted earnings:
                                       
Basic (1)
    1.38       1.14       1.01       1.32       1.35  
Diluted (1)
    1.38       1.14       1.01       1.32       1.35  
Dividends
    0.25       0.25       0.25       0.25       0.25  
Book value
    57.26       56.34       55.44       54.48       53.52  
Tangible book value (1)
    32.17       31.05       30.08       28.99       27.89  
Common shares outstanding
    43,244,797       43,041,119       43,041,776       42,950,228       42,952,642  
Weighted average basic shares outstanding (2)
    43,234,913       43,041,660       43,011,496       42,951,701       42,950,749  
Weighted average diluted shares outstanding (2)
    43,234,913       43,177,986       43,020,055       42,951,701       42,950,749  
 
                                       
Selected Period End Balance Sheet Data
                                       
Total assets
  $ 17,117,007     $ 16,986,025     $ 15,573,868     $ 14,958,207     $ 14,959,127  
Cash and cash equivalents
    1,453,733       1,605,911       948,907       565,170       570,101  
Securities available for sale
    1,076,619       1,049,592       1,089,136       1,085,936       1,083,816  
Loans, held for sale
    87,406       72,865       39,427       35,645       32,929  
Loans, held for investment (3)(4)
    11,651,855       11,690,356       11,020,920       10,928,653       10,936,136  
Mortgage warehouse purchase loans
    1,219,013       903,630       796,609       687,317       660,650  
Allowance for loan losses
    87,491       80,055       58,403       51,461       50,447  
Goodwill and other intangible assets
    1,085,236       1,088,411       1,091,586       1,094,762       1,100,876  
Other real estate owned
    1,642       1,688       2,994       4,819       6,392  
Noninterest-bearing deposits
    4,187,150       3,984,404       3,156,270       3,240,185       3,218,055  
Interest-bearing deposits
    9,610,410       9,314,631       8,726,496       8,701,151       8,509,830  
Borrowings (other than junior subordinated debentures)
    680,529       1,116,462       1,152,860       527,251       767,642  
Junior subordinated debentures
    53,973       53,924       53,874       53,824       53,775  
Total stockholders' equity
    2,476,373       2,424,960       2,386,285       2,339,773       2,298,932  

Independent Bank Group, Inc. and Subsidiaries
Consolidated Financial Data
Three Months Ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019
(Dollars in thousands, except for share data)
(Unaudited)

 
  As of and for the Quarter Ended  
 
  September 30,
2020
    June 30,
2020
    March 31,
2020
    December 31,
2019
    September 30,
2019
 
Selected Performance Metrics
                             
Return on average assets
    1.43 %     0.94 %     1.19 %     1.32 %     1.50 %
Return on average equity
    9.73       6.44               8.57       9.68  
Return on tangible equity (5)
    17.43       11.71       13.92       16.20       18.74  
Adjusted return on average assets (1)
    1.42       1.20       1.17       1.49       1.56  
Adjusted return on average equity (1)
    9.65       8.16       7.36       9.69       10.06  
Adjusted return on tangible equity (1) (3)
    17.29       14.86       13.66       18.32       19.48  
Net interest margin
    3.52       3.51       3.76       3.81       3.84  
Adjusted net interest margin (6)
    3.48       3.50       3.73       3.79       3.82  
Efficiency ratio (7)
    44.69       51.95       51.70       52.75       48.27  
Adjusted efficiency ratio (1)
    44.57       41.73       51.19       46.44       42.98  
 
                                       
Credit Quality Ratios (3) (8)
                                       
Nonperforming assets to total assets
    0.25 %     0.17 %     0.20 %     0.21 %     0.12 %
Nonperforming loans to total loans held for investment
    0.36       0.23       0.26       0.24       0.11  
Nonperforming assets to total loans held for investment and other real estate
    0.37       0.24       0.29       0.29       0.17  
Allowance for loan losses to nonperforming loans
    211.12       300.95       204.97       193.35       424.17  
Allowance for loan losses to total loans held for investment
    0.75       0.68       0.53       0.47       0.46  
Net charge-offs to average loans outstanding (annualized)
    0.01       0.05       0.05       0.02       0.21  
 
                                       
Capital Ratios
                                       
Estimated common equity Tier 1 capital to risk-weighted assets
    10.24 %     10.17 %     9.95 %     9.76 %     9.42 %
Estimated tier 1 capital to average assets
    9.15       8.94       9.67       9.32       9.21  
Estimated tier 1 capital to risk-weighted assets
    10.66       10.60       10.38       10.19       9.85  
Estimated total capital to risk-weighted assets
    13.29       12.44       12.05       11.83       11.49  
Total stockholders' equity to total assets
    14.47       14.28       15.32       15.64       15.37  
Tangible common equity to tangible assets (1)
    8.68       8.41       8.94       8.98       8.65  

____________
(1) Non-GAAP financial measure. See reconciliation.
(2) Total number of shares includes participating shares (those with dividend rights).
(3) Loans held for investment excludes mortgage warehouse purchase loans.
(4) Loans held for investment includes SBA PPP loans of $825,966 and $823,289 at September 30, 2020 and June 30, 2020, respectively.
(5) Non-GAAP financial measure. Excludes average balance of goodwill and net other intangible assets.
(6) Non-GAAP financial measure. Excludes unexpected income recognized on credit impaired acquired loans of $1,294, $354, $982, $791 and $618, respectively.
(7) Efficiency ratio excludes amortization of other intangible assets. See reconciliation of non-GAAP financial measures.
(8) Credit metrics - Nonperforming assets, which consist of nonperforming loans, OREO and other repossessed assets, totaled $43,197, $28,403, $31,601, $31,549 and $18,407, respectively. Nonperforming loans, which consists of nonaccrual loans, loans delinquent 90 days and still accruing interest, and troubled debt restructurings, and excludes loans acquired with deteriorated credit quality, totaled $41,441, $26,601, $28,493, $26,616 and $11,893, respectively.

Independent Bank Group, Inc. and Subsidiaries
Consolidated Statements of Income
Three and Nine Months Ended September 30, 2020 and 2019
(Dollars in thousands)
(Unaudited)

 
  Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
 
  2020     2019     2020     2019  
Interest income:
                       
Interest and fees on loans
  $ 144,138     $ 154,664     $ 434,648     $ 457,626  
Interest on taxable securities
    4,507       5,374       14,499       16,101  
Interest on nontaxable securities
    2,126       2,074       6,359       6,426  
Interest on interest-bearing deposits and other
    1,027       3,195       3,938       8,393  
Total interest income
    151,798       165,307       459,444       488,546  
Interest expense:
                               
Interest on deposits
    15,679       33,386       62,077       92,550  
Interest on FHLB advances
    714       2,730       3,629       8,324  
Interest on other borrowings
    2,928       3,036       8,408       8,674  
Interest on junior subordinated debentures
    470       762       1,710       2,310  
Total interest expense
    19,791       39,914       75,824       111,858  
Net interest income
    132,007       125,393       383,620       376,688  
Provision for loan losses
    7,620       5,233       39,122       13,196  
Net interest income after provision for loan losses
    124,387       120,160       344,498       363,492  
Noninterest income:
                               
Service charges on deposit accounts
    2,173       2,805       6,881       9,247  
Investment management and trust
    1,924       2,497       5,556       7,238  
Mortgage banking revenue
    14,722       4,824       27,726       11,619  
Gain on sale of loans
    -       6,779       647       6,779  
Gain on sale of branch
    -       1,549       -       1,549  
Gain on sale of other real estate
    -       539       37       851  
Gain on sale of securities available for sale
    -       -       382       265  
Gain (loss) on sale and disposal of premises and equipment
    34       (315 )     311       (585 )
Increase in cash surrender value of BOLI
    1,335       1,402       4,007       4,135  
Other
    4,977       7,244       19,604       18,849  
Total noninterest income
    25,165       27,324       65,151       59,947  
Noninterest expense:
                               
Salaries and employee benefits
    42,253       37,645       115,341       120,557  
Occupancy
    9,717       9,402       29,132       27,978  
Communications and technology
    5,716       5,758       17,193       16,598  
FDIC (credit) assessment
    1,597       (2,139 )     5,338       71  
Advertising and public relations
    492       467       1,965       1,942  
Other real estate owned expenses, net
    43       152       459       302  
Impairment of other real estate
    46       -       784       1,424  
Amortization of other intangible assets
    3,175       3,235       9,526       9,705  
Professional fees
    2,871       2,057       9,266       4,771  
Acquisition expense, including legal
    47       9,465       16,225       28,175  
Other
    7,452       10,906       25,678       29,998  
Total noninterest expense
    73,409       76,948       230,907       241,521  
Income before taxes
    76,143       70,536       178,742       181,918  
Income tax expense
    16,068       14,903       35,807       39,418  
Net income
  $ 60,075     $ 55,633     $ 142,935     $ 142,500  

Independent Bank Group, Inc. and Subsidiaries
Consolidated Balance Sheets
As of September 30, 2020 and December 31, 2019
(Dollars in thousands)
(Unaudited)

 
  September 30,     December 31,  
Assets
  2020     2019  
Cash and due from banks
  $ 171,029     $ 186,299  
Interest-bearing deposits in other banks
    1,277,704       378,871  
Federal funds sold
    5,000       -  
Cash and cash equivalents
    1,453,733       565,170  
Certificates of deposit held in other banks
    4,481       5,719  
Securities available for sale, at fair value
    1,076,619       1,085,936  
Loans held for sale
    87,406       35,645  
Loans, net
    12,770,681       11,562,814  
Premises and equipment, net
    242,720       242,874  
Other real estate owned
    1,642       4,819  
Federal Home Loan Bank (FHLB) of Dallas stock and other restricted stock
    26,504       30,052  
Bank-owned life insurance (BOLI)
    219,088       215,081  
Deferred tax asset
    4,196       6,943  
Goodwill
    994,021       994,021  
Other intangible assets, net
    91,215       100,741  
Other assets
    144,701       108,392  
Total assets
  $ 17,117,007     $ 14,958,207  
 
               
Liabilities and Stockholders' Equity
               
Deposits:
               
Noninterest-bearing
  $ 4,187,150     $ 3,240,185  
Interest-bearing
    9,610,410       8,701,151  
Total deposits
    13,797,560       11,941,336  
FHLB advances
    375,000       325,000  
Other borrowings
    305,529       202,251  
Junior subordinated debentures
    53,973       53,824  
Other liabilities
    108,572       96,023  
Total liabilities
    14,640,634       12,618,434  
Commitments and contingencies
               
Stockholders' equity:
               
Preferred stock
    -       -  
Common stock
    432       430  
Additional paid-in capital
    1,932,690       1,926,359  
Retained earnings
    504,135       393,674  
Accumulated other comprehensive income
    39,116       19,310  
Total stockholders' equity
    2,476,373       2,339,773  
Total liabilities and stockholders' equity
  $ 17,117,007     $ 14,958,207  

Independent Bank Group, Inc. and Subsidiaries
Consolidated Average Balance Sheet Amounts, Interest Earned and Yield Analysis
Three Months Ended September 30, 2020 and 2019
(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,  
 
  2020     2019  
 
  Average Outstanding Balance     Interest     Yield/Rate (4)     Average Outstanding Balance     Interest     Yield/Rate (4)  
Interest-earning assets:
                                   
Loans (1)
  $ 12,586,647     $ 144,138       4.56 %   $ 11,341,768     $ 154,664       5.41 %
Taxable securities
    705,918       4,507       2.54       777,494       5,374       2.74  
Nontaxable securities
    351,759       2,126       2.40       329,989       2,074       2.49  
Interest bearing deposits and other
    1,287,320       1,027       0.32       513,524       3,195       2.47  
Total interest-earning assets
    14,931,644       151,798       4.04       12,962,775       165,307       5.06  
Noninterest-earning assets
    1,782,251                       1,779,843                  
Total assets
  $ 16,713,895                     $ 14,742,618                  
Interest-bearing liabilities:
                                               
Checking accounts
  $ 4,619,454     $ 5,512       0.47 %   $ 3,950,978     $ 12,088       1.21 %
Savings accounts
    631,862       270       0.17       564,480       348       0.24  
Money market accounts
    2,471,550       4,361       0.70       2,101,064       10,923       2.06  
Certificates of deposit
    1,590,734       5,536       1.38       1,863,935       10,027       2.13  
Total deposits
    9,313,600       15,679       0.67       8,480,457       33,386       1.56  
FHLB advances
    594,022       714       0.48       453,370       2,730       2.39  
Other borrowings
    209,532       2,928       5.56       212,824       3,036       5.66  
Junior subordinated debentures
    53,955       470       3.47       53,757       762       5.62  
Total interest-bearing liabilities
    10,171,109       19,791       0.77       9,200,408       39,914       1.72  
Noninterest-bearing checking accounts
    3,991,014                       3,160,832                  
Noninterest-bearing liabilities
    94,349                       101,500                  
Stockholders' equity
    2,457,423                       2,279,878                  
Total liabilities and equity
  $ 16,713,895                     $ 14,742,618                  
Net interest income
          $ 132,007                     $ 125,393          
Interest rate spread
                    3.27 %                     3.34 %
Net interest margin (2)
                    3.52                       3.84  
Net interest income and margin (tax equivalent basis) (3)
          $ 132,978       3.54             $ 126,308       3.87  
Average interest-earning assets to interest-bearing liabilities
                    146.80                       140.89  

____________
(1) Average loan balances include nonaccrual loans.
(2) Net interest margins for the periods presented represent: (i) the difference between interest income on interest-earning assets and the interest expense on interest-bearing liabilities, divided by (ii) average interest-earning assets for the period.
(3) A tax-equivalent adjustment has been computed using a federal income tax rate of 21%.
(4) Yield and rates for the three month periods are annualized.

Independent Bank Group, Inc. and Subsidiaries
Consolidated Average Balance Sheet Amounts, Interest Earned and Yield Analysis
Nine Months Ended September 30, 2020 and 2019
(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,  
 
  2020     2019  
 
  Average Outstanding Balance     Interest     Yield/Rate (4)     Average Outstanding Balance     Interest     Yield/Rate (4)  
Interest-earning assets:
                                   
Loans (1)
  $ 12,142,159     $ 434,648       4.78 %   $ 11,048,706     $ 457,626       5.54 %
Taxable securities
    740,252       14,499       2.62       775,732       16,101       2.78  
Nontaxable securities
    343,233       6,359       2.47       332,487       6,426       2.58  
Interest bearing deposits and other
    1,041,217       3,938       0.51       447,041       8,393       2.51  
Total interest-earning assets
    14,266,861       459,444       4.30       12,603,966       488,546       5.18  
Noninterest-earning assets
    1,790,569                       1,770,708                  
Total assets
  $ 16,057,430                     $ 14,374,674                  
Interest-bearing liabilities:
                                               
Checking accounts
  $ 4,434,686     $ 22,529       0.68 %   $ 3,902,517     $ 32,839       1.13 %
Savings accounts
    593,646       795       0.18       531,552       1,004       0.25  
Money market accounts
    2,276,036       16,714       0.98       2,025,704       31,575       2.08  
Certificates of deposit
    1,704,720       22,039       1.73       1,768,956       27,132       2.05  
Total deposits
    9,009,088       62,077       0.92       8,228,729       92,550       1.50  
FHLB advances
    693,248       3,629       0.70       466,603       8,324       2.39  
Other borrowings
    196,305       8,408       5.72       200,115       8,674       5.80  
Junior subordinated debentures
    53,906       1,710       4.24       53,708       2,310       5.75  
Total interest-bearing liabilities
    9,952,547       75,824       1.02       8,949,155       111,858       1.67  
Noninterest-bearing checking accounts
    3,597,192                       3,093,390                  
Noninterest-bearing liabilities
    92,646                       84,933                  
Stockholders' equity
    2,415,045                       2,247,196                  
Total liabilities and equity
  $ 16,057,430                     $ 14,374,674                  
Net interest income
          $ 383,620                     $ 376,688          
Interest rate spread
                    3.28 %                     3.51 %
Net interest margin (2)
                    3.59                       4.00  
Net interest income and margin (tax equivalent basis) (3)
          $ 386,476       3.62             $ 379,440       4.03  
Average interest-earning assets to interest-bearing liabilities
                    143.35                       140.84  

____________
(1) Average loan balances include nonaccrual loans.
(2) Net interest margins for the periods presented represent: (i) the difference between interest income on interest-earning assets and the interest expense on interest-bearing liabilities, divided by (ii) average interest-earning assets for the period.
(3) A tax-equivalent adjustment has been computed using a federal income tax rate of 21%.
(4) Yield and rates for the nine month periods are annualized.

Independent Bank Group, Inc. and Subsidiaries
Loan Portfolio Composition
As of September 30, 2020 and December 31, 2019
(Dollars in thousands)
(Unaudited)

Totals loans by category        
 
  September 30, 2020     December 31, 2019  
 
  Amount     % of Total     Amount     % of Total  
Commercial (1)(2)
  $ 3,677,220       28.4 %   $ 2,482,356       21.3 %
Real estate:
                               
Commercial real estate
    6,056,583       46.7       5,872,653       50.4  
Commercial construction, land and land development
    1,261,913       9.7       1,236,623       10.6  
Residential real estate (3)
    1,496,595       11.5       1,550,872       13.3  
Single-family interim construction
    320,387       2.5       378,120       3.2  
Agricultural
    86,049       0.7       97,767       0.9  
Consumer
    59,146       0.5       32,603       0.3  
Other
    381       -       621       -  
Total loans
    12,958,274       100.0 %     11,651,615       100.0 %
Deferred loan fees (2)
    (12,696 )             (1,695 )        
Allowance for loan losses
    (87,491 )             (51,461 )        
Total loans, net
  $ 12,858,087             $ 11,598,459          

____________
(1) Includes mortgage warehouse purchase loans of $1,219,013 and $687,317 at September 30, 2020 and December 31, 2019, respectively.
(2) Includes SBA PPP loans of $825,966 with net deferred loan fees of $14,006 at September 30, 2020.
(3) Includes loans held for sale of $87,406 and $35,645 at September 30, 2020 and December 31, 2019, respectively.

Independent Bank Group, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Three Months Ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019
(Dollars in thousands, except for share data)
(Unaudited)

 
 
  For the Three Months Ended  
 
 
  September 30,
2020
    June 30,
2020
    March 31,
2020
    December 31,
2019
    September 30,
2019
 
ADJUSTED NET INCOME
 
                             
Net Interest Income - Reported
(a)
  132,007     128,372     123,241     128,069     125,393  
Unexpected income recognized on credit impaired acquired loans
 
    (1,294 )     (354 )     (982 )     (791 )     (618 )
Adjusted Net Interest Income
(b)
    130,713       128,018       122,259       127,278       124,775  
Provision Expense - Reported
(c)
    7,620       23,121       8,381       1,609       5,233  
Noninterest Income - Reported
(d)
    25,165       25,414       14,572       18,229       27,324  
(Gain) loss on sale of loans
 
    -       (689 )     42       -       (6,779 )
Gain on sale of branch
 
    -       -       -       -       (1,549 )
Gain on sale of trust business
 
    -       -       -       (1,319 )     -  
Gain on sale of other real estate
 
    -       (12 )     (25 )     (24 )     (539 )
Gain on sale of securities available for sale
 
    -       (26 )     (356 )     (10 )     -  
(Gain) loss on sale and disposal of premises and equipment
 
    (34 )     (340 )     63       -       315  
Recoveries on loans charged off prior to acquisition
 
    (138 )     (3,640 )     (84 )     (425 )     (107 )
Adjusted Noninterest Income
(e)
    24,993       20,707       14,212       16,451       18,665  
Noninterest Expense - Reported
(f)
    73,409       83,069       74,429       80,343       76,948  
Separation expense
 
    -       -       -       (3,421 )     -  
OREO impairment
 
    (46 )     (738 )     -       (377 )     -  
Impairment of assets
 
    (336 )     -       (126 )     -       (1,173 )
COVID-19 expense (4)
 
    (141 )     (1,451 )     (262 )     -       -  
Acquisition expense (5)
 
    (316 )     (15,644 )     (1,008 )     (6,619 )     (10,885 )
Adjusted Noninterest Expense
(g)
    72,570       65,236       73,033       69,926       64,890  
Income Tax Expense - Reported
(h)
    16,068       8,903       10,836       14,110       14,903  
Net Income - Reported
(a) - (c) + (d) - (f) - (h) = (i)
    60,075       38,693       44,167       50,236       55,633  
Adjusted Net Income (1)
(b) - (c) + (e) - (g) = (j)
  59,580     49,076     43,354     56,799     57,827  
 
                                       
ADJUSTED PROFITABILITY
 
                                       
Total Average Assets
(k)
  16,713,895     16,485,556     14,965,628     15,091,382     14,742,618  
Total Average Stockholders' Equity
(l)
  2,457,423     2,418,038     2,369,225     2,326,176     2,279,878  
Total Average Tangible Stockholders' Equity(3)
(m)
  1,371,094     1,328,568     1,276,545     1,230,344     1,177,851  
Reported Return on Average Assets
(i) / (k)
    1.43 %     0.94 %     1.19 %     1.32 %     1.50 %
Reported Return on Average Equity
(i) / (l)
    9.73 %     6.44 %             8.57 %     9.68 %
Reported Return on Average Tangible Equity
(i) / (m)
    17.43 %     11.71 %     13.92 %     16.20 %     18.74 %
Adjusted Return on Average Assets (2)
(j) / (k)
    1.42 %     1.20 %     1.17 %     1.49 %     1.56 %
Adjusted Return on Average Equity (2)
(j) / (l)
    9.65 %     8.16 %     7.36 %     9.69 %     10.06 %
Adjusted Return on Tangible Equity (2)
(j) / (m)
    17.29 %     14.86 %     13.66 %     18.32 %     19.48 %
 
                                       
EFFICIENCY RATIO
 
                                       
Amortization of other intangible assets
(n)
  3,175     3,175     3,176     3,175     3,235  
Reported Efficiency Ratio
(f - n) / (a + d)
    44.69 %     51.95 %     51.70 %     52.75 %     48.27 %
Adjusted Efficiency Ratio
(g - n) / (b + e)
    44.57 %     41.73 %     51.19 %     46.44 %     42.98 %

____________
(1) Assumes an adjusted effective tax rate of 21.1%, 18.7%, 21.3%, 21.3%, and 21.1% for the quarters ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.
(2) Calculated using adjusted net income.
(3) Excludes average balance of goodwill and net other intangible assets.
(4) COVID-19 expense includes expenses such as employee's premium pay, personal protection and cleaning supplies, remote work equipment, advertising and communications, and community support/donations.
(5) Acquisition expenses include $269, $15, $459, $1,349 and $1,420 of compensation related expenses in addition to $47, $15,629, $549, $5,270 and $9,465 of merger-related expenses for the quarters ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.

Independent Bank Group, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
As of September 30, 2020 and December 31, 2019
(Dollars in thousands, except per share information)
(Unaudited)

Tangible Book Value & Tangible Common Equity To Tangible Asset Ratio
           
 
  September 30,     December 31,  
 
  2020     2019  
Tangible Common Equity
           
Total common stockholders' equity
  2,476,373     2,339,773  
Adjustments:
               
Goodwill
    (994,021 )     (994,021 )
Other intangible assets, net
    (91,215 )     (100,741 )
Tangible common equity
  1,391,137     1,245,011  
 
               
Tangible Assets
               
Total assets
  17,117,007     14,958,207  
Adjustments:
               
Goodwill
    (994,021 )     (994,021 )
Other intangible assets, net
    (91,215 )     (100,741 )
Tangible assets
  16,031,771     13,863,445  
Common shares outstanding
    43,244,797       42,950,228  
Tangible common equity to tangible assets
    8.68 %     8.98 %
Book value per common share
  57.26     54.48  
Tangible book value per common share
    32.17       28.99  

SOURCE: Independent Bank Group, Inc. via EQS Newswire

Independent Bank Group Inc.
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