Independent Bank Group, Inc

Good morning, everyone. I am Paul Langdale, Executive Vice President of Corporate Development and Strategy for Independent Bank Group, and I would like to welcome you to the Independent Bank Group Third Quarter 2021 Earnings Call. We appreciate you joining us. The related earnings press release and the slide presentation can be accessed on our website at ibtx.com. I would like to remind you that remarks made today may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and expected results to differ. We intend such statements to be covered by safe harbor provisions for forward-looking statements. Please see page five of the text in the release or page two of the slide presentation for our safe harbor statement. All comments made during today's call are subject to that statement. Please note that if we give guidance about future results, that guidance is a statement of management's beliefs at the time the statement is made and we assume no obligation to publicly update guidance. In this call, we will discuss a number of financial measures considered to be non-GAAP under the SEC's rules. Reconciliations of these measures to the most directly comparable GAAP financial measures are included in our release. I am joined this morning by David Brooks, our Chairman and CEO, Dan Brooks, our Vice Chairman, and Michelle Hickox, Executive Vice President and CFO. At the end of their remarks, David will open the call to questions. With that, I'll turn it over to David.

Thanks, Paul. Good morning, everyone, and thanks for joining the call today. For the third quarter, we reported EPS of $1.21 per share. grew tangible book value to $34.79 per share, and maintained healthy asset quality with net charge-offs near zero for the quarter. We are pleased to see the continuation of loan growth at about 5% for the quarter, which was consistent with our expectations of a slower summer being followed by accelerating demand into the fall. Likewise, deposit growth remained strong at 12.1% annualized for the quarter. further bolstering our liquidity position and increasing our optionality in managing funding costs. During the quarter, we also repurchased a total of 217,772 shares of our common stock at an average price of $69.80 per share. This is consistent with our longstanding commitment to return capital and deliver returns to our shareholders. With that overview, I'll now turn the call over to Michelle for more detail on the operating results for the quarter.

Thank you, David. Good morning, everyone. Note that slide 6 shows selected financial data for the quarter. Our third quarter adjusted net income was $52.6 million or $1.22 per diluted share compared with $59.6 million or $1.38 per diluted share for the third quarter last year and $58.2 million or $1.35 per diluted share for the linked quarter. Net interest income was $128.6 million in the third quarter compared to $132 million in the third quarter last year and down slightly from $129.3 million in the linked quarter. Accretion income was down $1.2 million from the linked quarter and $3.2 million from the prior year and totaled $4 million in Q3. PPP fees were also lower at $4 million in Q3 versus $5.1 million in Q2. These decreases were partially offset by interest income on growth in the securities portfolio and interest-bearing cash. There are approximately $6.5 million of deferred PPP fees remaining to be recognized, and we expect 75% of that will be recognized in Q4. The NIM excluding accretion was 2.91%, down 11 basis points from the linked quarter. The decrease is primarily due to continued increases in liquidity, which impacted the margin by 7 basis points. Total noninterest income was $16.9 million for the third quarter, an increase of $970,000 compared to the linked quarter. The increase in noninterest income over the linked quarter is primarily due to an increase of $745,000 in mortgage banking revenue. Noninterest expense totaled $80.6 million for the third quarter, an increase of $2.6 million over the linked quarter. This was driven by increases of $2.7 million in salary and benefit expense. This quarter includes unusually high expense for senior staff signing bonuses as well as bonuses paid to employees that have leaned in on PPP. Contract labor increased $550,000 from Q2 due to the initiation of several infrastructure projects. In addition, deferred loan costs were down $890,000 from Q2. As loan volume picks up, we would expect this to return to a normal run rate. Expenses related to PPP forgiveness continue to impact the non-interest expense run rate and total $2.1 million in Q3, including consulting, contract labor, and bonuses. PPP expenses should decrease significantly in Q4 with only a small impact expected in 2022. Slide 19 shows our deposit mix and cost. Total deposits were $15.5 billion as of quarter end with total non-interest bearing deposits up by $279.1 million from the linked quarter and $726.4 million from the third quarter of 2020. Interest bearing deposit costs decreased from 45 basis points in Q2 to 40 basis points in Q3. With a sustained growth in our core deposits, we continue to evaluate and pursue opportunities to optimize our funding costs where appropriate. Capital ratios are presented on slide 21. In the third quarter, the company's consolidated capital ratios remained strong with a common equity tier one capital ratio of 11.06% and a total capital ratio of 13.64%. As David mentioned, we repurchased 15.2 million or about 218,000 shares of our common stock during the quarter in addition to the redemption of a $40 million tranche of 5.75% subordinated debt. That concludes my comments this morning, so I will turn it over to Dan to discuss the loan portfolio.