Independent Bank Group, Inc

Total adjusted uninsured deposits declined in the third quarter to 29.9% from 31.1% in the linked quarter. Uninsured deposits are currently paid highly competitive rates, limiting additional downside risk to deposit costs for the bank as short-term rates peak. We also continue to pay down our higher rate borrowings, such as FHLB advances, and our holding company line of credit in the third quarter while increasing broker deposits. which remain less expensive than short-term borrowings at this point in the cycle. Total borrowings were just $546.6 million at September 30th, lower than the total borrowings were at year-end 2022. The substantial contingent funding capacity available to us and the low level of borrowing utilization strengthens our balance sheet against any subsequent shocks and positions us well to capitalize on sustained growth in earning asset yields. To that end, Contractual maturities of our fixed-rate loans are poised to grow in 2024, even as payoffs remain at low levels. This should provide a consistent tailwind to loan yields and help support NII even as near-term rates remain at their peak. Provision expense was $340,000 for the third quarter, which was impacted by improvements to Moody's macroeconomic scenarios. Going forward, we expect provision that represents about 1% of total loan growth. This is, of course, dependent on all else being held equal in the CECL model, which could, of course, be impacted by further changes to the macroeconomic forecast or any specific reserves. Noninterest income was $13.6 million for the quarter, down slightly from adjusted noninterest income of $14.1 million for the linked quarter. Noninterest expenses totaled $81.3 million for the quarter, down from $85.7 million in the linked quarter. Third quarter non-interest expense was partially impacted by a $2.2 million reduction in expenses related to executive compensation. We continue to pursue expense discipline and gear the organization appropriately for the current environment. These are all the comments I have today. So with that, I'll turn the call over to Dan.

Thanks, Paul. Core loans held for investment, excluding mortgage warehouse loans, increased by $154.7 million or 4.5% annualized in the third quarter. New loan production came in roughly in line with our expectations as deal activity has started to pick up across our markets in Texas and Colorado. Average mortgage warehouse purchase loans were $425.9 million for the quarter, up from $413.2 million in the prior quarter. We saw relative stability in these balances on the month-to-month basis, and we currently anticipate these balances to remain stable in the fourth quarter despite the seasonality. Credit quality metrics continue to remain strong during the third quarter. Non-performing assets totaled just 33 basis points of total assets at quarter end, and the bank had just a single basis point of annualized charge-offs for the quarter. Overall asset quality trends remain stable. And while we are always vigilant against emerging risks, we currently do not see any areas of concern across the loan portfolio. These are all the comments I have related to the loan portfolio this morning. So with that, I'll turn it back over to David. Thanks, Dan. As we enter the fourth quarter, we remain encouraged by the trends we are seeing in our business. Healthy loan growth has returned. The NEM seems to be stabilizing at its bottom. our fee income remains consistent, credit trends remain strong, and we continue to exercise discipline on our expenses. We are especially encouraged by the continued strength of our four high-growth markets across Texas and Colorado, which are each buoyed by positive demographic trends and capital inflows that insulate them from the broader macroeconomic activity. Most of all, though, our success in growing the bank in this challenging environment is made possible by the incredible team we have across our footprint. I'm especially grateful to every one of our employees who show up each day to carry the torch of the culture that we've built over these three decades and who never stray from the mission of providing exceptional service to our customers and communities throughout the economic cycle. Thank you for taking the time to join us for the call today. We'll now open the line to questions. Operator?

Thank you, and I'll be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we poll for questions. Our first question is coming from Brady Gailey from KBW. Your line is now live.