UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

________________________

FORM 8-K
________________________

CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


Date of Report (Date of earliest event reported):
July 29, 2014


Independent Bank Group, Inc.
(Exact Name of Registrant as Specified in Charter)

________________________


Texas
001-35854
13-4219346
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

1600 Redbud Boulevard, Suite 400
McKinney, TX 75069-3257
(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code:
(972) 562-9004

________________________


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:




o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


2



Item 2.02. Results of Operations and Financial Condition.
In accordance with Item 2.02 of Form 8-K of the Securities and Exchange Commission (the “SEC”), Independent Bank Group, Inc., a Texas corporation (the “Company”), is furnishing to the SEC a press release that the Company is issuing on July 29, 2014 (the “Press Release”). The Press Release discloses information regarding the Company’s results of operations for the six and three months ended June 30, 2014, and the Company’s financial condition as of June 30, 2014. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.
As provided in General Instruction B.2 to Form 8-K, the information furnished in Item 2.02 and Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d)     Exhibits. The following is furnished as an exhibit to the Current Report on Form 8-K:
Exhibit No.
Description of Exhibit
Exhibit 99.1
Press Release issued by Independent Bank Group, Inc., dated July 29, 2014


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: July 29, 2014
INDEPENDENT BANK GROUP, INC.

By:
/s/ David R. Brooks
Name:
David R. Brooks
Title:
Chairman and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.
Description of Exhibit
Exhibit 99.1
Press Release issued by Independent Bank Group, Inc., dated July 29, 2014


3

Exhibit 99.1 Q2 Results
            


Exhibit 99.1

Press Release
For Immediate Release

         
    

Independent Bank Group Reports
Second Quarter Financial Results

McKINNEY, Texas, July 29, 2014 /GlobeNewswire/ -- Independent Bank Group, Inc. (NASDAQ: IBTX), the holding company for Independent Bank, today announced net income of $5.1 million, or $0.32 per diluted share, for the quarter ended June 30, 2014 compared to $4.8 million, or $0.38 per diluted share, for the quarter ended March 31, 2014 and pro forma after tax net income of $4.1 million, or $0.34 per diluted share, for the quarter ended June 30, 2013. Prior to April 1, 2013 and the initial public offering, the Company was an S corporation and did not incur federal income tax expense. In the quarter ended June 30, 2013, the Company recorded a tax credit to record a deferred tax asset related to its conversion to a C corporation. As a result, pro forma adjustments for tax expense have been provided for comparability to that period.


Highlights

•
Core earnings were $9.0 million, or $0.57 per diluted share, for the quarter ended June 30, 2014 compared to $5.0 million, or $0.39 per diluted share, for the quarter ended March 31, 2014 and to $4.1 million, or $0.34 per diluted share, for the quarter ended June 30, 2013.
•
Exceptional loan growth continued with 25.6% annualized organic growth for the second quarter.
•
Continued strong asset quality, as reflected by a nonperforming assets to total assets ratio of 0.39% and a nonperforming loans to total loans ratio of 0.37% at June 30, 2014. Net charge offs were less than .01% annualized for the second quarter.
•
Closed the BOH Holdings acquisition on April 15th, 2014 and announced the Houston City Bancshares acquisition on June 2, 2014.
•
Core efficiency ratio improved to 56.9% for the quarter ended June 30, 2014.
•
Filed Shelf Registration for $250 million of securities, setting the stage for a $65 million subordinated debt offering completed July 22, 2014.

Independent Bank Group Chairman and Chief Executive Officer David R. Brooks said, “This has been an active and exciting quarter for us. Loan growth and asset quality continue to be very strong. We are also pleased to have finalized the BOH Holdings acquisition as well as announce the Houston City transaction. In addition, our successful core system conversion will give us the technological capacity we will need for our continued planned growth."

Net Interest Income

•
Net interest income was $31.4 million for second quarter 2014 compared to $22.1 million for first quarter 2014 and $17.9 million for second quarter 2013. The increase in net interest income from the linked quarter was primarily due to increased average loan balances related to the BOH Holdings acquisition. The increase from the previous year is due to organic growth as well as the Live Oak, Collin Bank and BOH Holdings acquisitions.
•
Net interest margin was 4.26% for first quarter 2014 compared to 4.17% for first quarter 2014 and 4.16% for second quarter 2013. The increase from the linked quarter and prior year is primarily due to a decrease in excess liquidity and the benefit of Bank of Houston's lower cost of deposits.
•
The yield on interest-earning assets was 4.76% for second quarter 2014 compared to 4.74% for first quarter 2014 and 4.92% for second quarter 2013. The cost of interest bearing liabilities, including borrowings, dropped to 0.64% for second quarter 2014 from 0.71% for first quarter 2014 and 0.93% for second quarter 2013 due to a decrease in the cost of deposits and FHLB advances and the repayment of notes payable and subordinated indebtedness during 2013.
•
The average balance of total interest-earning assets grew by $804.9 million, or 37.4%, from the first quarter 2014 and totaled $2.956 billion compared to $2.151 billion at March 31, 2014 and compared to $1.721 billion at June 30, 2013. This increase from first quarter is primarily due to the BOH Holdings acquisition. The increase from June 2013 is also due to the Collin Bank and Live Oak acquisitions and organic growth in the loan portfolio.

1
            


Noninterest Income

•
Total noninterest income increased $785 thousand compared to first quarter 2014 and increased $387 thousand compared to second quarter 2013.
•
A portion of the increase in noninterest income compared to first quarter 2014 is the result of a $237 thousand increase in mortgage fee income. In addition, a $111 thousand increase in earnings on cash surrender value of bank owned life insurance (BOLI) and a $242 thousand increase in service charge income from the linked quarter were primarily attributable to the BOH Holdings acquisition.
•
The increase in noninterest income compared to second quarter 2013 reflects an increase of $243 thousand in deposit service fees, a $181 thousand increase in earnings on cash surrender value of BOLI and a $239 thousand increase in other noninterest income, offset by a $130 thousand decrease in mortgage fee income. In addition, there were gains on sales of other real estate of $148 thousand recognized in the second quarter 2013 and there were no sales of other real estate in second quarter 2014.
 
Noninterest Expense

•
Total noninterest expense increased $9.3 million compared to first quarter 2014 and $12.0 million compared to second quarter 2013.
•
The increase in noninterest expense compared to first quarter 2014 is due primarily to an increase of $7.0 million in salaries and benefits, $689 thousand in occupancy, $212 thousand in FDIC insurance and $101 thousand in core deposit amortization expense. These increases are directly related to the BOH Holdings acquisition. In these totals, there are non-recurring compensation and bonus expenses of $4.0 million related to the BOH Holdings and Live Oak acquisitions as well as $1.5 million of other merger related costs compared to a total of $476 thousand merger expenses in the first quarter 2014.
•
The increase in noninterest expense compared to the prior year period is primarily related to increases in compensation, occupancy, acquisition-related and other general noninterest expenses resulting from completed acquisitions since that period. These increases, due primarily to acquisition activity, were offset by a decrease in data processing and IBG Adriatica expenses.

Provision for Loan Losses

•
Provision for loan loss expense was $1.4 million for the second quarter, an increase of $126 thousand compared to $1.3 million for first quarter 2014 and an increase of $300 thousand compared to $1.1 million during second quarter 2013. The increase in provision expense is reflective of organic loan growth in the respective quarter.
•
The allowance for loan losses was $16.2 million, or 154.31% and 0.57% of nonperforming loans and total loans, respectively, at June 30, 2014, compared to $14.8 million, or 162.96% and 0.78% of nonperforming loans and total loans, respectively, at March 31, 2014, and compared to $12.8 million, or 198.14% and 0.84% of nonperforming loans and total loans, respectively, at June 30, 2013. These decreases are due to the acquisition of loans in the BOH Holdings and Live Oak transactions being recorded at fair value.
•
As noted, loans acquired in the BOH Holdings transaction do not have an allocated allowance for loan losses as of June 30, 2014. Rather, those assets were recorded at an estimated fair market value of $787 million to reflect the probability of losses on those loans as of the acquisition date.

Income Taxes

•
The Company became a C corporation on April 1, 2013 and its results of operations include federal income tax expense subsequent to that date. Federal income tax expense of $2.7 million was recorded for the quarter ended June 30, 2014, an effective rate of 34.4% compared to tax expense of $2.3 million and an effective rate of 32.8% for the quarter ended March 31, 2014. The Company recorded a $1.8 million tax credit in the second quarter of 2013 to reflect the deferred tax asset as of the date the Company became taxable. On a pro forma basis, the effective tax rate for second quarter 2013 would have been 32.8% without the credit. The increase in the effective tax rate in the second quarter 2014 was primarily related to legal and professional fees associated with facilitating acquisitions that are not deductible for federal income tax purposes.


Second Quarter 2014 Balance Sheet Highlights:


Loans

•
Total loans held for investment were $2.845 billion at June 30, 2014 compared to $1.893 billion at March 31, 2014 and compared to $1.512 billion at June 30, 2013. This represented a 50.6% increase from the previous quarter and a 88.1% increase over the same quarter in 2013. The Company acquired approximately $71 million in loans during the first quarter and $787 million in loans during the second quarter related to the Live Oak and BOH Holdings acquisitions, respectively.
•
Since March 31, 2014, loan growth has been centered in commercial real estate loans ($374 million), C&I loans ($298 million) and in commercial and single family construction loans ($136 million).
•
Continued focus on commercial lending and the BOH acquisition increased the C&I portfolio from $270.6 million (14.3% of total loans) at March 31, 2014 to $568.1 million (19.9% of total loans) at June 30, 2014.

Asset Quality

•
Total nonperforming assets increased to $14.3 million, or 0.39% of total assets at June 30, 2014 from $12.0 million, or 0.51% of total assets at March 31, 2014 and decreased significantly from $24.3 million, or 1.27% of total assets at June 30, 2013. The significant

2
            

decrease from the same quarter prior year is due to the sale of the remaining Adriatica real estate and other real estate sales in the fourth quarter 2013.
•
Total nonperforming loans also increased to $10.5 million, or 0.37% of total loans at June 30, 2014 compared to $9.1 million, or 0.48% of total loans at March 31, 2014, and compared to $6.4 million, or 0.43% of total loans at June 30, 2013. The increase in nonperforming loan balances is primarily due to the BOH Holdings acquisition.

Deposits and Borrowings

•
Total deposits were $2.853 billion at June 30, 2014 compared to $1.891 billion at March 31, 2014 and compared to $1.485 billion at June 30, 2013.
•
The average cost of interest bearing deposits decreased by two basis points during the second quarter to 0.49% compared to 0.51% during first quarter 2014 and decreased by nine basis points compared to 0.58% during the second quarter 2013.
•
Total borrowings (other than junior subordinated debentures) were $281.1 million at June 30, 2014, an increase of $94.4 million from March 31, 2014 and an increase of $100.0 million from June 30, 2013. The increase from prior quarter and the same quarter last year reflects the assumption of FHLB advances totaling approximately $95.0 million in the BOH Holdings transaction.

Capital

•
The tangible common equity to tangible assets and the Tier 1 capital to average assets ratios were 7.25% and 9.07%, respectively, at June 30, 2014 compared to 8.93% and 9.77%, respectively, at March 31, 2014 and 9.74% and 10.91%, respectively, at June 30, 2013. The total stockholders’ equity to total assets ratio was 12.78%, 10.73% and 11.24% at June 30, 2014, March 31, 2014 and June 30, 2013, respectively. The changes in capital ratios from the prior year and prior quarter are primarily related to acquisition growth and stock issued in connection with those acquisitions.
•
Book value and tangible book value per common share were $28.54 and $15.22, respectively, at June 30, 2014 compared to $20.05 and $16.37, respectively, at March 31, 2014 and $17.75 and $15.13, respectively, at June 30, 2013.
•
Return on average assets and return on average equity (on an annualized basis) were 0.60% and 4.68%, respectively, for second quarter 2014 compared to 0.84% and 7.90%, respectively, for first quarter 2014 and 1.25% and 11.11%, respectively, for second quarter 2013. On a core pre-tax, pre-provision earnings basis, return on average assets and return on average equity (on an annualized basis) were 1.73% and 13.42%, respectively, for second quarter 2014 compared to 1.51% and 14.24%, respectively, for first quarter 2014 and 1.54% and 13.63%, respectively, for second quarter 2013.


Pending Matters

On June 2, 2014, the Company announced the planned acquisition of Houston City Bancshares and its subsidiary, Houston Community Bank (HCB), with assets, deposits and equity capital totaling approximately $323 million, $296 million and $26.6 million, respectively (balances as of March 31, 2014). HCB currently has six locations located throughout the Houston metro area.

The Company's Shelf Registration for $250 million of its securities was declared effective on June 27, 2014. On July 22, 2014, the Company completed an offering under the Shelf Registration Statement of its 5.875% Subordinated Notes due August 1, 2024 in the aggregate principal amount of $65 million.



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

3
            

Conference Call

A conference call covering Independent Bank Group’s first quarter earnings announcement will be held today, Tuesday, July 29, at 8:30 a.m. (EDT) and can be accessed by calling 1-877-303-7611 and by identifying the conference ID number 70759258. A recording of the conference call will be available from July 29, 2014 through August 4, 2014 by accessing our website, www.ibtx.com.

Forward-Looking Statements

The numbers as of and for the three months ended June 30, 2014 are unaudited. From time to time, our comments and releases may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements can be identified by words such as “believes,” “anticipates,” “expects,” “forecast,” “guidance,” “intends,” “targeted,” “continue,” “remain,” “should,” “may,” “plans,” “estimates,” “will,” “will continue,” “will remain,” variations on such words or phrases, or similar references to future occurrences or events in future periods; however, such words are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives, and expectations of Independent Bank Group or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on Independent Bank Group’s current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Independent Bank Group’s actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) local, regional, national, and international economic conditions and the impact they may have on us and our customers and our assessment of that impact; (2) volatility and disruption in national and international financial markets; (3) government intervention in the U.S. financial system, whether through changes in the discount rate or money supply or otherwise; (4) changes in the level of non-performing assets and charge-offs; (5) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; (6) adverse conditions in the securities markets that lead to impairment in the value of securities in our investment portfolio; (7) inflation, deflation, changes in market interest rates, developments in the securities market, and monetary fluctuations; (8) the timely development and acceptance of new products and services and perceived overall value of these products and services by customers; (9) changes in consumer spending, borrowings, and savings habits; (10) technological changes; (11) the ability to increase market share and control expenses; (12) changes in the competitive environment among banks, bank holding companies, and other financial service providers; (13) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which we and our subsidiaries must comply; (14) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters; (15) the costs and effects of legal and regulatory developments including the resolution of legal proceedings; and (16) our success at managing the risks involved in the foregoing items and (17) the other factors that are described in the Company’s Annual Report on Form 10-K filed on March 27, 2014, the Company's Form 10-Q for the first quarter 2014 filed on May 5, 2014, and the Company's Prospectus filed pursuant to Rule 424 on July 18, 2014 under the heading “Risk Factors” and other reports and statements filed by the Company with the SEC. Any forward-looking statement made by the Company in this release speaks only as of the date on which it is made. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. These measures and ratios include “core pre-provision earnings”, “tangible book value”, “tangible book value per common share”, “core efficiency ratio”, “Tier 1 capital to average assets”, “Tier 1 capital to risk weighted assets”, “tangible common equity to tangible assets”, “net interest margin excluding purchase accounting accretion”, “adjusted return on average assets” and “adjusted return on average equity” and are supplemental measures that are not required by, or are not presented in accordance with, accounting principles generally accepted in the United States. We consider the use of select non-GAAP financial measures and ratios to be useful for financial operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

We believe that these measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however we acknowledge that our non‑GAAP financial measures have a number of limitations relative to GAAP financial measures. Certain non-GAAP financial measures exclude items of income, expenditures, expenses, assets, or liabilities, including provisions for loan losses and the effect of goodwill, core deposit intangibles and income from accretion on acquired loans arising from purchase accounting adjustments, that we believe cause certain aspects of our results of operations or financial condition to be not indicative of our primary operating results. All of these items significantly impact our financial statements. Additionally, the items that we exclude in our adjustments are not necessarily consistent with the items that our peers may exclude from their results of operations and key financial measures and therefore may limit the comparability of similarly named financial measures and ratios. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.


4
            

A reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statements tables.

Contacts:

Analysts/Investors:
Torry Berntsen
President and Chief Operating Officer
(972) 562-9004
tberntsen@ibtx.com
Michelle Hickox
Executive Vice President and Chief Financial Officer
(972) 562-9004
mhickox@ibtx.com

Media:
Eileen Ponce
Marketing Director
(469) 301-2706
eponce@ibtx.com



Source: Independent Bank Group, Inc.










5
            

Independent Bank Group, Inc. and Subsidiaries
Consolidated Financial Data
Three Months Ended June 30, 2014, March 31, 2014, December 31, 2013 and June 30, 2013
(Dollars in thousands, except for share data)
(Unaudited)
 
As of and for the quarter ended
 
June 30, 2014
 
March 31, 2014
 
December 31, 2013
 
June 30, 2013
Selected Income Statement Data
 
 
 
 
 
 
 
Interest income
$
35,078

 
$
25,162

 
$
22,847

 
$
21,105

Interest expense
3,674

 
3,027

 
2,894

 
3,255

   Net interest income
31,404

 
22,135

 
19,953

 
17,850

Provision for loan losses
1,379

 
1,253

 
883

 
1,079

   Net interest income after provision for loan losses
30,025

 
20,882

 
19,070

 
16,771

Noninterest income
3,119

 
2,334

 
3,412

 
2,732

Noninterest expense
25,343

 
16,076

 
15,714

 
13,384

   Net income
5,119

 
4,801

 
4,279

 
5,874

Preferred stock dividends
49

 
—

 
—

 
—

     Net income available to common shareholders
5,070

 
—

 
—

 
—

Proforma net income-after tax (2)
n/a

 
n/a

 
n/a

 
4,114

Core net interest income (1)
30,967

 
21,772

 
19,886

 
17,996

Core Pre-Tax Pre-Provision Earnings (1)
14,683

 
8,652

 
8,141

 
7,208

Core Earnings (1) (2)
9,020

 
4,972

 
4,870

 
4,119

 
 
 
 
 
 
 
 
Per Share Data (Common Stock)
 
 
 
 
 
 
 
Earnings:
 
 
 
 
 
 
 
Basic 
$
0.32

 
$
0.38

 
$
0.35

 
$
0.49

Diluted
0.32

 
0.38

 
0.35

 
0.49

Pro forma earnings:
 
 
 
 
 
 
 
Basic (2)
n/a

 
n/a

 
n/a

 
0.34

Diluted (2)
n/a

 
n/a

 
n/a

 
0.34

Core earnings:
 
 
 
 
 
 
 
Basic (1)
0.57

 
0.40

 
0.40

 
0.34

Diluted (1)
0.57

 
0.39

 
0.40

 
0.34

Dividends
0.06

 
0.06

 
0.06

 
—

Book value
28.54

 
20.05

 
18.96

 
17.75

Tangible book value  (1)
15.22

 
16.37

 
15.89

 
15.13

Common shares outstanding
16,370,707

 
12,592,935

 
12,330,158

 
12,064,967

Weighted average basic shares outstanding (4)
15,788,927

 
12,583,874

 
12,164,948

 
12,011,417

Weighted average diluted shares outstanding (4)
15,890,310

 
12,685,517

 
12,252,862

 
12,071,980

 
 
 
 
 
 
 
 
Selected Period End Balance Sheet Data
 
 
 
 
 
 
 
Total assets
$
3,654,311

 
$
2,353,675

 
$
2,163,984

 
$
1,905,851

Cash and cash equivalents
192,528

 
97,715

 
93,054

 
126,519

Securities available for sale
249,856

 
204,539

 
194,038

 
110,932

Loans, held for sale
5,500

 
2,191

 
3,383

 
8,458

Loans, held for investment
2,844,543

 
1,893,082

 
1,723,160

 
1,511,915

Allowance for loan losses
16,219

 
14,841

 
13,960

 
12,762

Goodwill and core deposit intangible
217,954

 
46,388

 
37,852

 
31,641

Other real estate owned
3,788

 
2,909

 
3,322

 
8,182

Adriatica real estate owned
—

 
—

 
—

 
9,656

Noninterest-bearing deposits
711,475

 
352,735

 
302,756

 
261,618

Interest-bearing deposits
2,141,943

 
1,537,942

 
1,407,563

 
1,223,511

Borrowings (other than junior subordinated debentures)
281,105

 
186,727

 
195,214

 
181,094

Junior subordinated debentures
18,147

 
18,147

 
18,147

 
18,147

Total stockholders' equity
491,091

 
252,508

 
233,772

 
214,182


6
            

Independent Bank Group, Inc. and Subsidiaries
Consolidated Financial Data
Three Months Ended June 30, 2014, March 31, 2014, December 31, 2013 and June 30, 2013
(Dollars in thousands, except for share data)
(Unaudited)

 
As of and for the quarter ended
 
June 30, 2014
 
March 31, 2014
 
December 31, 2013
 
June 30, 2013
Selected Performance Metrics
 
 
 
 
 
 
 
Return on average assets
0.60
%
 
0.84
%
 
0.83
%
 
1.25
%
Return on average equity (5)
4.68

 
7.90

 
7.61

 
11.11

Pro forma return on average assets (2)
n/a

 
n/a

 
n/a

 
0.88

Pro forma return on average equity (2)
n/a

 
n/a

 
n/a

 
7.78

Adjusted return on average assets (1)
1.73

 
1.51

 
1.58

 
1.54

Adjusted return on average equity (1) (5)
13.42

 
14.24

 
14.48

 
13.63

Net interest margin
4.26

 
4.17

 
4.23

 
4.16

Adjusted net interest margin (3)
4.20

 
4.10

 
4.21

 
4.20

Efficiency ratio
73.41

 
65.70

 
67.25

 
65.03

Core efficiency ratio (1)
56.92

 
64.05

 
62.97

 
64.98

 
 
 
 
 
 
 
 
Credit Quality Ratios
 
 
 
 
 
 
 
Nonperforming assets to total assets
0.39
%
 
0.51
%
 
0.47
%
 
1.27
%
Nonperforming loans to total loans
0.37

 
0.48

 
0.39

 
0.43

Allowance for loan losses to non-performing loans
154.31

 
162.96

 
205.93

 
198.14

Allowance for loan losses to total loans
0.57

 
0.78

 
0.81

 
0.84

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

 
0.08

 
0.02

 
0.08

 
 
 
 
 
 
 
 
Capital Ratios
 
 
 
 
 
 
 
Tier 1 capital to average assets
9.07
%
 
9.77
%
 
10.71
%
 
10.91
%
Tier 1 capital to risk-weighted assets (1)
10.21

 
11.96

 
12.64

 
13.80

Total capital to risk-weighted assets
11.00

 
13.08

 
13.83

 
15.69

Total stockholders' equity to total assets
12.78

 
10.73

 
10.80

 
11.24

Tangible common equity to tangible assets (1)
7.25

 
8.93

 
9.21

 
9.74

 
 
 
 
 
 
 
 
(1) Non-GAAP financial measures. See reconciliation.
(2) The three months ended June 30, 2013 excludes $1,760 tax credit related to the initial recording of the deferred tax asset.
(3) Excludes income recognized on acquired loans of $437, $363, $67 and $77, respectively.
(4) Total number of shares includes participating shares (those with dividend rights).
(5) Excludes average balance of Series A preferred stock.
 
 
 
 
 
 
 





7
            

Independent Bank Group, Inc. and Subsidiaries
Consolidated Statements of Income
Three and Six Months Ended June 30, 2014 and 2013
(Dollars in thousands)
(Unaudited)

   
 
Three months ended June 30,
 
Six Months Ended June 30,
   
 
2014
 
2013
 
2014
 
2013
Interest income:
 
 
 
 
 
   
 
   
Interest and fees on loans
 
$
33,881

 
$
20,448

 
$
58,004

 
$
41,207

Interest on taxable securities
 
777

 
308

 
1,476

 
641

Interest on nontaxable securities
 
367

 
258

 
624

 
507

Interest on federal funds sold and other
 
53

 
91

 
136

 
171

Total interest income
 
35,078

 
21,105

 
60,240

 
42,526

Interest expense:
 
 
 
 
 
 
 
   
Interest on deposits
 
2,437

 
1,733

 
4,344

 
3,461

Interest on FHLB advances
 
965

 
828

 
1,817

 
1,656

Interest on repurchase agreements, notes payable and other borrowings
 
136

 
558

 
271

 
1,073

Interest on junior subordinated debentures
 
136

 
136

 
269

 
271

Total interest expense
 
3,674

 
3,255

 
6,701

 
6,461

Net interest income
 
31,404

 
17,850

 
53,539

 
36,065

Provision for loan losses
 
1,379

 
1,079

 
2,632

 
2,109

Net interest income after provision for loan losses
 
30,025

 
16,771

 
50,907

 
33,956

Noninterest income:
 
 
 
 
 
   
 
   
Service charges on deposit accounts
 
1,453

 
1,210

 
2,664

 
2,349

Mortgage fee income
 
967

 
1,097

 
1,697

 
2,163

Gain on sale of other real estate
 
—

 
148

 
39

 
173

Loss on sale of premises and equipment
 
—

 
(2
)
 
—

 
(1
)
Increase in cash surrender value of BOLI
 
260

 
79

 
409

 
160

Other
 
439

 
200

 
644

 
314

Total noninterest income
 
3,119

 
2,732

 
5,453

 
5,158

Noninterest expense:
 
 
 
 
 
   
 
   
Salaries and employee benefits
 
16,112

 
7,964

 
25,246

 
15,712

Occupancy
 
3,227

 
2,298

 
5,765

 
4,445

Data processing
 
452

 
316

 
948

 
612

FDIC assessment
 
516

 
(258
)
 
820

 
(12
)
Advertising and public relations
 
180

 
188

 
414

 
404

Communications
 
402

 
338

 
722

 
678

Net other real estate owned expenses (including taxes)
 
57

 
91

 
136

 
257

Operations of IBG Adriatica, net
 
—

 
175

 
23

 
372

Other real estate impairment
 
—

 
15

 
—

 
463

Core deposit intangible amortization
 
300

 
176

 
499

 
352

Professional fees
 
596

 
293

 
964

 
565

Acquisition expense, including legal
 
1,523

 
(9
)
 
1,999

 
128

Other
 
1,978

 
1,797

 
3,883

 
3,331

Total noninterest expense
 
25,343

 
13,384

 
41,419

 
27,307

Income before taxes
 
7,801

 
6,119

 
14,941

 
11,807

Income tax expense
 
2,682

 
245

 
5,021

 
245

Net income
 
$
5,119

 
$
5,874

 
$
9,920

 
$
11,562

Pro Forma:
 
 
 
 
 
 
 
 
Income tax expense (1)
 
n/a

 
2,005

 
n/a

 
3,871

Net income
 
n/a

 
$
4,114

 
n/a

 
$
7,936


(1) Pro forma information calculated and presented as if the Company had been a C Corporation during the 2013 periods.





8
            

Consolidated Balance Sheets
As of June 30, 2014 and December 31, 2013
(Dollars in thousands, except share information)
(Unaudited)

   
June 30,
 
December 31,
Assets
2014
 
2013
Cash and due from banks
$
148,551

 
$
27,408

Federal Reserve Excess Balance Account (EBA)
43,977

 
65,646

Cash and cash equivalents
192,528

 
93,054

Securities available for sale
249,856

 
194,038

Loans held for sale
5,500

 
3,383

Loans, net of allowance for loan losses
2,828,324

 
1,709,200

Premises and equipment, net
81,286

 
72,735

Other real estate owned
3,788

 
3,322

Federal Home Loan Bank (FHLB) of Dallas stock and other restricted stock
13,805

 
9,494

Bank-owned life insurance (BOLI)
39,222

 
21,272

Deferred tax asset
2,598

 
4,834

Goodwill
207,175

 
34,704

Core deposit intangible, net
10,779

 
3,148

Other assets
19,450

 
14,800

           Total assets
$
3,654,311

 
$
2,163,984

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
Deposits:
 
 
 
   Noninterest-bearing
711,475

 
302,756

   Interest-bearing
2,141,943

 
1,407,563

           Total deposits
2,853,418

 
1,710,319

FHLB advances
269,443

 
187,484

Repurchase agreements
3,932

 
—

Other borrowings
4,460

 
4,460

Other borrowings, related parties
3,270

 
3,270

Junior subordinated debentures
18,147

 
18,147

Other liabilities
10,550

 
6,532

           Total liabilities
3,163,220

 
1,930,212

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Series A Preferred Stock
23,938

 
—

Common stock
164

 
123

Additional paid-in capital
444,342

 
222,116

Retained earnings
20,796

 
12,663

Accumulated other comprehensive income
1,851

 
(1,130
)
Total stockholders’ equity
491,091

 
233,772

            Total liabilities and stockholders’ equity
$
3,654,311

 
$
2,163,984











9
            

Independent Bank Group, Inc. and Subsidiaries
Consolidated Average Balance Sheet Amounts, Interest Earned and Yield Analysis
Three months ended June 30, 2014 and 2013
(Dollars in thousands)
(Unaudited)

The analysis below shows average interest earning assets and interest bearing liabilities together with the average yield on the interest earning assets and the average cost of the interest bearing liabilities for the periods presented.
   
For The Three Months Ended June 30,
   
2014
 
2013
   
Average
Outstanding
Balance
 
Interest
 
Yield/
Rate
 
Average
Outstanding
Balance
 
Interest
 
Yield/
Rate
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans
$
2,646,446

 
$
33,881

 
5.14
%
 
$
1,469,684

 
$
20,448

 
5.58
%
Taxable securities
187,242

 
777

 
1.66

 
81,385

 
308

 
1.52

Nontaxable securities
64,307

 
367

 
2.29

 
32,671

 
258

 
3.17

Federal funds sold and other
57,936

 
53

 
0.37

 
136,851

 
91

 
0.27

Total interest-earning assets
2,955,931

 
$
35,078

 
4.76

 
1,720,591

 
$
21,105

 
4.92

Noninterest-earning assets
447,688

 
   
 
   
 
157,036

 
   
 
   
Total assets
$
3,403,619

 
   
 
   
 
$
1,877,627

 
   
 
   
Interest-bearing liabilities:
   
 
   
 
   
 
   
 
   
 
   
Checking accounts
$
866,629

 
$
1,051

 
0.49
%
 
$
720,363

 
$
963

 
0.54
%
Savings accounts
124,550

 
93

 
0.30

 
112,532

 
94

 
0.34

Money market accounts
326,844

 
267

 
0.33

 
55,441

 
40

 
0.29

Certificates of deposit
694,111

 
1,026

 
0.59

 
320,139

 
636

 
0.80

Total deposits
2,012,134

 
2,437

 
0.49

 
1,208,475

 
1,733

 
0.58

FHLB advances
259,003

 
965

 
1.49

 
164,542

 
828

 
2.02

Repurchase agreements, notes payable and other borrowings
12,075

 
136

 
4.52

 
17,651

 
558

 
12.68

Junior subordinated debentures
18,147

 
136

 
3.01

 
18,147

 
136

 
3.01

Total interest-bearing liabilities
2,301,359

 
3,674

 
0.64

 
1,408,815

 
3,255

 
0.93

Noninterest-bearing checking accounts
621,111

 
   
 
   
 
249,838

 
   
 
   
Noninterest-bearing liabilities
22,443

 
   
 
   
 
6,840

 
   
 
   
Stockholders’ equity
458,706

 
   
 
   
 
212,134

 
   
 
   
Total liabilities and equity
$
3,403,619

 
   
 
   
 
$
1,877,627

 
   
 
   
Net interest income
   
 
$
31,404

 
   
 
   
 
$
17,850

 
   
Interest rate spread
   
 
   
 
4.12
%
 
   
 
   
 
3.99
%
Net interest margin
   
 
   
 
4.26

 
   
 
   
 
4.16

Average interest earning assets to interest bearing liabilities
   
 
   
 
128.44

 
   
 
   
 
122.13



10
            

Independent Bank Group, Inc. and Subsidiaries
Consolidated Average Balance Sheet Amounts, Interest Earned and Yield Analysis
Six months ended June 30, 2014 and 2013
(Dollars in thousands)
(Unaudited)

The analysis below shows average interest earning assets and interest bearing liabilities together with the average yield on the interest earning assets and the average cost of the interest bearing liabilities for the periods presented.

   
For The Six Months Ended June 30,
   
2014
 
2013
   
Average
Outstanding
Balance
 
Interest
 
Yield/
Rate
 
Average
Outstanding
Balance
 
Interest
 
Yield/
Rate
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans
$
2,236,503

 
$
58,004

 
5.23
%
 
$
1,433,650

 
$
41,207

 
5.80
%
Taxable securities
185,936

 
1,476

 
1.60

 
81,875

 
641

 
1.58

Nontaxable securities
47,674

 
624

 
2.64

 
32,245

 
507

 
3.17

Federal funds sold and other
82,884

 
136

 
0.33

 
104,429

 
171

 
0.33

Total interest-earning assets
2,552,997

 
$
60,240

 
4.76

 
1,652,199

 
$
42,526

 
5.19

Noninterest-earning assets
307,677

 
   
 
 
 
155,313

 
   
 
 
Total assets
$
2,860,674

 
   
 
 
 
$
1,807,512

 
   
 
 
Interest-bearing liabilities:
   
 
   
 
   
 
   
 
   
 
   
Checking accounts
$
840,913

 
$
2,049

 
0.49
%
 
$
706,830

 
$
1,909

 
0.54
%
Savings accounts
123,428

 
181

 
0.30

 
113,476

 
185

 
0.33

Money market accounts
208,252

 
323

 
0.31

 
47,057

 
64

 
0.27

Certificates of deposit
589,328

 
1,791

 
0.61

 
312,188

 
1,303

 
0.84

Total deposits
1,761,921

 
4,344

 
0.50

 
1,179,551

 
3,461

 
0.59

FHLB advances
228,439

 
1,817

 
1.60

 
164,562

 
1,656

 
2.03

Repurchase agreements, notes payable and other borrowings
10,526

 
271

 
5.19

 
25,030

 
1,073

 
8.64

Junior subordinated debentures
18,147

 
269

 
2.99

 
18,147

 
271

 
3.01

Total interest-bearing liabilities
2,019,033

 
6,701

 
0.67

 
1,387,290

 
6,461

 
0.94

Noninterest-bearing checking accounts
461,418

 
   
 
   
 
237,942

 
   
 
   
Noninterest-bearing liabilities
27,074

 
   
 
   
 
5,269

 
   
 
   
Stockholders’ equity
353,149

 
   
 
   
 
177,011

 
   
 
   
Total liabilities and equity
$
2,860,674

 
   
 
   
 
$
1,807,512

 
   
 
   
Net interest income
   
 
$
53,539

 
   
 
   
 
$
36,065

 
   
Interest rate spread
   
 
   
 
4.09
%
 
   
 
   
 
4.25
%
Net interest margin
   
 
   
 
4.23

 
   
 
   
 
4.40

Average interest earning assets to interest bearing liabilities
   
 
   
 
126.45

 
   
 
   
 
119.10



11
            

Independent Bank Group, Inc. and Subsidiaries
Loan Portfolio Composition
As of June 30, 2014 and December 31, 2013
(Dollars in thousands)
(Unaudited)

The following table sets forth loan totals by category as of the dates presented:
 
 
 
 
 
 
June 30, 2014
 
December 31, 2013
 
 
Amount
 
% of Total
 
Amount
 
% of Total
Commercial
 
$
568,138

 
19.9
%
 
$
241,178

 
14.0
%
Real estate:
 
 
 
   
 
 
 
   
Commercial real estate
 
1,301,668

 
45.7

 
843,436

 
48.9

Commercial construction, land and land development
 
270,774

 
9.5

 
130,320

 
7.5

Residential real estate (1)
 
486,507

 
17.1

 
342,037

 
19.8

Single-family interim construction
 
112,642

 
4.0

 
83,144

 
4.8

Agricultural
 
41,445

 
1.5

 
40,558

 
2.3

Consumer
 
68,727

 
2.4

 
45,762

 
2.7

Other
 
142

 
—

 
108

 
—

Total loans
 
2,850,043

 
100.0
%
 
1,726,543

 
100.0
%
Allowance for losses
 
(16,219
)
 
   
 
(13,960
)
 
   
Total loans, net
 
$
2,833,824

 
   
 
$
1,712,583

 
   
(1) Includes loans held for sale at June 30, 2014 and December 31, 2013 of $5,500 and $3,383, respectively.

12
            

Independent Bank Group, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Three Months Ended June 30, 2014, March 31, 2014, December 31, 2013 and June 30, 2013
(Dollars in thousands, except for share data)
(Unaudited)

 
 
For the Three Months Ended
 
 
June 30, 2014
March 31, 2014
December 31, 2013
June 30, 2013
Net Interest Income - Reported
(a)
$
31,404

$
22,135

$
19,953

$
17,850

Write-off of debt origination warrants
 
—

—

—

223

Income recognized on acquired loans
 
(437
)
(363
)
(67
)
(77
)
Adjusted Net Interest Income
(b)
30,967

21,772

19,886

17,996

Provision Expense - Reported
(c)
1,379

1,253

883

1,079

Noninterest Income - Reported
(d)
3,119

2,334

3,412

2,732

Gain on Sale of OREO
 
—

(39
)
(1,334
)
(148
)
Loss on Sale of PP&E
 
—

—

22

2

Adjusted Noninterest Income
(e)
3,119

2,295

2,100

2,586

Noninterest Expense - Reported
(f)
25,343

16,076

15,714

13,384

Adriatica Expenses
 
—

(23
)
(206
)
(175
)
OREO Impairment
 
—

—

(74
)
(15
)
FDIC refund
 
—

—

—

504

IPO related stock grant and bonus expense
 
(156
)
(162
)
(235
)
(333
)
Core system conversion implementation expenses
 
(265
)
—

—

—

Acquisition Expense (3)
 
(5,519
)
(476
)
(1,354
)
9

Adjusted Noninterest Expense
(g)
19,403

15,415

13,845

13,374

Pre-Tax Pre-Provision Earnings
(a) + (d) - (f)
$
9,180

$
8,393

$
7,651

$
7,198

Core Pre-Tax Pre-Provision Earnings
(b) + (e) - (g)
$
14,683

$
8,652

$
8,141

$
7,208

Core Earnings (2)
(b) - (c) + (e) - (g)
$
9,020

$
4,972

$
4,870

$
4,119

 Reported Efficiency Ratio
(f) / (a + d)
73.41
%
65.70
%
67.25
%
65.03
%
 Core Efficiency Ratio
(g) / (b + e)
56.92
%
64.05
%
62.97
%
64.98
%
Adjusted Return on Average Assets (1)
 
1.73
%
1.51
%
1.58
%
1.54
%
Adjusted Return on Average Equity (1)
 
13.42
%
14.24
%
14.48
%
13.63
%
Total Average Assets
 
$
3,403,619

$
2,330,932

$
2,042,955

$
1,877,627

Total Average Stockholders' Equity (4)
 
$
438,713

$
246,407

$
223,113

$
212,134

(1) Calculated using core pre-tax pre-provision earnings
(2)  Assumes actual effective tax rate of 32.2%, 32.8%, 32.9% and 32.8%, respectively. June 30, 2014 and December 31, 2013 tax rate adjusted for effect of non-deductible acquisition expenses.
(3)  Includes $3.995 million of compensation and bonus expenses in addition to $1.524 million of merger-related expenses.
(4)  Excludes average balance of Series A preferred stock.

13
            

Independent Bank Group, Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
As of June 30, 2014 and December 31, 2013
(Dollars in thousands, except per share information)
(Unaudited)

Tangible Book Value Per Common Share
 
 
 
 
June 30,
 
December 31,
 
2014
 
2013
Tangible Common Equity
 
 
 
Total common stockholders' equity
$
467,153

 
$
233,772

Adjustments:
 
 
 
Goodwill
(207,175
)
 
(34,704
)
Core deposit intangibles
(10,779
)
 
(3,148
)
Tangible common equity
$
249,199

 
$
195,920

Common shares outstanding
16,370,707

 
12,330,158

 
 
 
 
Book value per common share
$
28.54

 
$
18.96

Tangible book value per common share
15.22

 
15.89


Tier 1 Capital to Risk-Weighted Assets Ratio
 
 
 
 
June 30,
 
December 31,
 
2014
 
2013
Tier 1 Common Equity
 
 
 
Total common stockholders' equity - GAAP
$
467,153

 
$
233,772

Adjustments:
 
 
 
Unrealized (gain) loss on available-for-sale securities
(1,851
)
 
1,130

Goodwill
(207,175
)
 
(34,704
)
Other intangibles
(10,779
)
 
(3,148
)
Qualifying Restricted Core Capital Elements (TRUPS)
17,600

 
17,600

Tier 1 common equity
$
264,948

 
$
214,650

Total Risk-Weighted Assets
 
 
 
On balance sheet
$
2,728,183

 
$
1,637,117

Off balance sheet
100,931

 
60,397

Total risk-weighted assets
$
2,829,114

 
$
1,697,514

Total stockholders' equity to risk-weighted assets ratio
16.51
%
 
13.77
%
Tier 1 common equity to risk-weighted assets ratio
9.37

 
12.64



14