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2020-10-26

EQS-News: 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

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

McKinney, 10/26/2020 / 17:02, CST/CDT - EQS Newswire - Independent Bank Group Inc.


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 effec...

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