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 first quarter 2022 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 several financial measures considered to be non-GAAP under the SEC's rules. Reconciliations of these financial 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 will turn it over to David.

Thanks, Paul. Good morning, everyone, and thank you for joining the call today. For the first quarter, we were pleased to announce adjusted earnings of $1.22 per diluted share, as well as strong organic loan growth of 13.1% annualized for the quarter, excluding mortgage warehouse and PPP. This continued growth is driven by demand from our relationship borrowers across Texas and Colorado, as our markets continue to experience strong economic and demographic growth. During the quarter, We also optimized our balance sheet by strategically reducing non-core funding in preparation for additional rate hikes by the Fed. This resulted in a reduction of interest expense by $3.6 million, or 27% versus the linked quarter, and resulted in a lower overall cost of interfering deposits. This strategy evolved together with our ongoing retail initiative that has focused on fortifying and enhancing our core deposit franchise. 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. First quarter adjusted net income totaled $52.1 million, or $1.22 per diluted share, a decrease of $2.9 million, or $0.06 per diluted share over the linked quarter. Net interest income was $131.1 million in the first quarter which was down from $132.7 million versus the linked quarter. PPP fee income was down from $4 million to $1.2 million and acquired loan accretion was down from $5.7 million to $3.6 million from Q4 of 21 to Q1 of 22. These decreases were offset by a $3.6 million decline in interest expense, which was due to a reduction in rates on deposit accounts in the fourth quarter. Non-cash earning assets grew during the quarter, primarily driven by the 13.1% annualized loan growth, but also through opportunistic investments in our securities portfolio. As noted on slide 21, we designated $188 million of longer duration municipal bonds as held to maturity during the quarter. The NIM excluding accretion was 3.13%, up 26 basis points from the linked quarter. This increase was driven by the reduction of higher cost funding as well as higher security fields and loan growth in addition to a reduction and shift in cash balances. Total non-interest income was $12.9 million for the first quarter, a decrease of $2.2 million versus the linked quarter. This was primarily due to decreases in mortgage banking revenue from the interest rate headwinds broadly impacting mortgage volumes. Non-interest expense totaled 82.5 million for the first quarter. The increase of 2.5 million versus the linked quarter was mostly driven by an increase of 3.3 million in salaries and benefits. The change includes a $1.2 million increase in payroll taxes from the linked quarter which are seasonally higher in the first quarter and also includes taxes paid related to annual stock vestings. In addition, 401K expense is higher by $633,000 in Q1 due to matching on annual bonuses. The increases in salaries and benefit expense was partially offset by a $1.2 million decrease in other non-interest expenses. Slide 19 shows our deposit mix and costs. Deposits total $14.9 billion at quarter end, a reduction of $704 million versus the linked quarter. This was primarily driven by our efforts to reduce non-core funding in advance of Fed rate hikes. These efforts included the strategic exiting of our bankruptcy trustee specialty treasury vertical, as well as reducing brokered money. As a result of this and other efforts, interest-bearing deposit costs decreased an additional 10 basis points during the quarter to 22 basis points. The chart on slide 20 illustrates the change by vertical and shows the stability of our core deposit customer accounts since year end. Capital ratios are presented on slide 22. In the first quarter, the company's consolidated capital ratios remained strong with a common equity tier one capital ratio of 11.09% and total capital ratio of 13.72%. Tangible common equity increased to 8.62%. That concludes my comments, so I will turn it over to Dan to discuss the loan portfolio.