Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549   

FORM 10-Q
(Mark One)
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended March 31, 2018.
or
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from                 to                    .
Commission file number 001-35854
Independent Bank Group, Inc.
(Exact name of registrant as specified in its charter)   
Texas
   
13-4219346
(State or other jurisdiction of incorporation or organization)
   
(I.R.S. Employer Identification No.)
   
   
   
1600 Redbud Boulevard, Suite 400
McKinney, Texas
   
75069-3257
(Address of principal executive offices)
   
(Zip Code)
(972) 562-9004
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
   
ý
 
      
Accelerated filer
   
¨

Non-accelerated filer
   
¨
(Do not check if a smaller reporting company)
 
 
 
 
 
 
 
Smaller reporting company
   
¨
 
 
 
 
 
Emerging growth company
 
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
Common Stock, Par Value $0.01 Per Share – 28,372,135 shares as of April 24, 2018.




INDEPENDENT BANK GROUP, INC. AND SUBSIDIARIES
Form 10-Q
March 31, 2018
   
PART I.
 
 
   
   
   
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
Item 2.
 
   
   
   
 
Item 3.
 
   
   
   
 
Item 4.
 
   
   
   
 
PART II.
 
 
   
   
   
 
Item 1.
   
   
   
   
 
Item 1A.
   
   
   
   
 
Item 2
   
   
   
   
 
Item 3.
   
   
   
   
 
Item 4.
   
   
   
 
 
Item 5.
   
   
   
   
 
Item 6.
   
   
   
   
 
   
 
 
   


***





Independent Bank Group, Inc. and Subsidiaries

Consolidated Balance Sheets
March 31, 2018 (unaudited) and December 31, 2017
(Dollars in thousands, except share information)
   
 
March 31,
 
December 31,
Assets
 
2018
 
2017
Cash and due from banks
 
$
275,652

 
$
187,574

Interest-bearing deposits in other banks
 
122,450

 
243,528

Cash and cash equivalents
 
398,102

 
431,102

Certificates of deposit held in other banks
 
9,800

 
12,985

Securities available for sale, at fair value
 
762,662

 
763,002

Loans held for sale
 
28,017

 
39,202

Loans, net
 
6,607,620

 
6,432,273

Premises and equipment, net
 
147,367

 
147,835

Other real estate owned
 
5,463

 
7,126

Federal Home Loan Bank (FHLB) of Dallas stock and other restricted stock
 
29,324

 
29,184

Bank-owned life insurance (BOLI)
 
113,909

 
113,170

Deferred tax asset
 
11,280

 
9,763

Goodwill
 
621,458

 
621,458

Core deposit intangible, net
 
41,913

 
43,244

Other assets
 
34,099

 
34,119

Total assets
 
$
8,811,014

 
$
8,684,463

 
 
 
 
 
Liabilities and Stockholders’ Equity
 
   
 
   
Deposits:
 
   
 
   
Noninterest-bearing
 
$
1,836,929

 
$
1,907,770

Interest-bearing
 
4,957,731

 
4,725,052

Total deposits
 
6,794,660

 
6,632,822

FHLB advances
 
480,646

 
530,667

Other borrowings
 
136,990

 
136,911

Junior subordinated debentures
 
27,704

 
27,654

Other liabilities
 
16,315

 
20,391

Total liabilities
 
7,456,315

 
7,348,445

Commitments and contingencies
 


 


Stockholders’ equity:
 
   
 
   
Preferred stock (0 and 0 shares outstanding, respectively)
 
—

 
—

Common stock (28,362,973 and 28,254,893 shares outstanding, respectively)
 
284

 
283

Additional paid-in capital
 
1,153,553

 
1,151,990

Retained earnings
 
210,028

 
184,232

Accumulated other comprehensive loss
 
(9,166
)
 
(487
)
Total stockholders’ equity
 
1,354,699

 
1,336,018

Total liabilities and stockholders’ equity
 
$
8,811,014

 
$
8,684,463

See Notes to Consolidated Financial Statements

1




Independent Bank Group, Inc. and Subsidiaries

Consolidated Statements of Income
Three Months Ended March 31, 2018 and 2017 (unaudited)
(Dollars in thousands, except per share information)
   
 
Three Months Ended March 31,
   
 
2018
 
2017
Interest income:
 
 
 
 
Interest and fees on loans
 
$
83,275

 
$
53,744

Interest on taxable securities
 
2,903

 
764

Interest on nontaxable securities
 
1,193

 
541

Interest on interest-bearing deposits and other
 
743

 
890

Total interest income
 
88,114

 
55,939

Interest expense:
 
 
 
 
Interest on deposits
 
9,799

 
5,029

Interest on FHLB advances
 
1,886

 
1,171

Interest on other borrowings
 
2,102

 
1,705

Interest on junior subordinated debentures
 
360

 
167

Total interest expense
 
14,147

 
8,072

Net interest income
 
73,967

 
47,867

Provision for loan losses
 
2,695

 
2,023

Net interest income after provision for loan losses
 
71,272

 
45,844

Noninterest income:
 
 
 
 
Service charges on deposit accounts
 
3,485

 
1,927

Mortgage banking revenue
 
3,414

 
1,267

Gain on sale of other real estate
 
60

 
—

Loss on sale of securities available for sale
 
(224
)
 
—

(Loss) gain on sale of premises and equipment
 
(8
)
 
5

Increase in cash surrender value of BOLI
 
739

 
399

Other
 
1,989

 
985

Total noninterest income
 
9,455

 
4,583

Noninterest expense:
 
 
 
 
Salaries and employee benefits
 
25,168

 
16,837

Occupancy
 
5,664

 
3,872

Data processing
 
2,405

 
1,288

FDIC assessment
 
741

 
878

Advertising and public relations
 
385

 
297

Communications
 
941

 
475

Other real estate owned expenses, net
 
90

 
37

Impairment of other real estate
 
85

 
—

Core deposit intangible amortization
 
1,331

 
492

Professional fees
 
1,119

 
773

Acquisition expense, including legal
 
545

 
146

Other
 
6,484

 
2,933

Total noninterest expense
 
44,958

 
28,028

Income before taxes
 
35,769

 
22,399

Income tax expense
 
6,805

 
6,728

Net income
 
$
28,964

 
$
15,671

Basic earnings per share
 
$
1.02

 
$
0.83

Diluted earnings per share
 
$
1.02

 
$
0.82


See Notes to Consolidated Financial Statements

2




Independent Bank Group, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income
Three Months Ended March 31, 2018 and 2017 (unaudited)
(Dollars in thousands)
   
 
Three Months Ended March 31,
   
 
2018
 
2017
Net income
 
$
28,964

 
$
15,671

Other comprehensive income (loss) before tax:
 
   
 
 
Change in net unrealized gains (losses) on available for sale securities during the year
 
(10,915
)
 
2,000

Reclassification adjustment for loss on sale of securities available for sale included in net income
 
224

 
—

Other comprehensive income (loss) before tax
 
(10,691
)
 
2,000

Income tax expense (benefit)
 
(2,245
)
 
700

Other comprehensive income (loss), net of tax
 
(8,446
)
 
1,300

Comprehensive income
 
$
20,518

 
$
16,971


See Notes to Consolidated Financial Statements
   

3




Independent Bank Group, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity
Three Months Ended March 31, 2018 and 2017 (unaudited)
(Dollars in thousands, except for par value, share and per share information)   
   
Preferred Stock
$.01 Par Value
10 million shares authorized
 
Common Stock
$.01 Par Value
100 million shares authorized
 
Additional
Paid in Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
 (Loss)
Income
 
Total
   
 
Shares
 
Amount
 
Balance, December 31, 2017
$
—

 
28,254,893

 
$
283

 
$
1,151,990

 
$
184,232

 
$
(487
)
 
$
1,336,018

Cumulative effect of change in accounting principle
—

 
—

 
—

 
—

 
233

 
(233
)
 
—

Net income
—

 
—

 
—

 
—

 
28,964

 
—

 
28,964

Other comprehensive loss, net of tax
—

 
—

 
—

 
—

 
—

 
(8,446
)
 
(8,446
)
Restricted stock forfeited
—

 
(606
)
 
—

 
—

 
—

 
—

 
—

Restricted stock granted
—

 
99,812

 
1

 
(1
)
 


 
—

 
—

Stock based compensation expense
—

 
—

 
—

 
1,412

 
—

 
—

 
1,412

Exercise of warrants
—

 
8,874

 
—

 
152

 
—

 
—

 
152

Cash dividends ($0.12 per share)
—

 
—

 
—

 
—

 
(3,401
)
 
—

 
(3,401
)
Balance, March 31, 2018
$
—

 
28,362,973

 
$
284

 
$
1,153,553

 
$
210,028

 
$
(9,166
)
 
$
1,354,699

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2016
$
—

 
18,870,312

 
$
189

 
$
555,325

 
$
117,951

 
$
(1,100
)
 
$
672,365

Net income
—

 
—

 
—

 
—

 
15,671

 
—

 
15,671

Other comprehensive income, net of tax
—

 
—

 
—

 
—

 
—

 
1,300

 
1,300

Restricted stock granted
—

 
51,667

 
—

 
—

 
—

 
—

 
—

Stock based compensation expense
—

 
—

 
—

 
970

 
—

 
—

 
970

Exercise of warrants
—

 
3,203

 
—

 
55

 
—

 
—

 
55

Cash dividends ($0.10 per share)
—

 
—

 
—

 
—

 
(1,892
)
 
—

 
(1,892
)
Balance, March 31, 2017
$
—

 
18,925,182

 
$
189

 
$
556,350

 
$
131,730

 
$
200

 
$
688,469

   
See Notes to Consolidated Financial Statements 

4





Independent Bank Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows
Three Months Ended March 31, 2018 and 2017 (unaudited)
(Dollars in thousands) 

   
 
Three Months Ended March 31,
   
 
2018
 
2017
Cash flows from operating activities:
 
   
 
   
Net income
 
$
28,964

 
$
15,671

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation expense
 
2,050

 
1,763

Accretion of income recognized on acquired loans
 
(3,503
)
 
(480
)
Amortization of core deposit intangibles
 
1,331

 
492

Amortization of premium on securities, net
 
1,175

 
721

Amortization of discount and origination costs on borrowings
 
158

 
89

Stock based compensation expense
 
1,412

 
970

Excess tax benefit on restricted stock vested
 
(349
)
 
(724
)
FHLB stock dividends
 
(140
)
 
(88
)
Loss on sale of securities available for sale
 
224

 
—

Loss (gain) on sale of premises and equipment
 
8

 
(5
)
Gain on sale of other real estate owned
 
(60
)
 
—

Impairment of other real estate
 
85

 
—

Deferred tax expense
 
729

 
981

Provision for loan losses
 
2,695

 
2,023

Increase in cash surrender value of BOLI
 
(739
)
 
(399
)
Originations of loans held for sale
 
(97,009
)
 
(51,631
)
Proceeds from sale of loans held for sale
 
108,194

 
56,345

Net change in other assets
 
19

 
(2,008
)
Net change in other liabilities
 
(3,756
)
 
3,201

Net cash provided by operating activities
 
41,488

 
26,921

Cash flows from investing activities:
 
   
 
   
Proceeds from maturities, calls and pay downs of securities available for sale
 
32,333

 
17,241

Proceeds from sale of securities available for sale
 
14,801

 
—

Purchases of securities available for sale
 
(58,884
)
 
(43,868
)
Purchases of certificates of deposits held in other banks
 
—

 
(3,185
)
Proceeds from maturities of certificates of deposits held in other banks
 
3,185

 
—

Net purchases of FHLB stock
 
—

 
(48
)
Net loans originated held for investment
 
(214,533
)
 
(129,883
)
Net proceeds from pay-offs of mortgage warehouse purchase loans
 
39,994

 
—

Additions to premises and equipment
 
(1,594
)
 
(155
)
Proceeds from sale of premises and equipment
 
4

 
9

Proceeds from sale of other real estate owned
 
1,638

 
—

Capitalized additions to other real estate
 
—

 
(174
)
Net cash used in investing activities
 
(183,056
)
 
(160,063
)
Cash flows from financing activities:
 
   
 
   
Net increase in demand deposits, money market and savings accounts
 
191,218

 
141,116

Net increase (decrease) in time deposits
 
(29,380
)
 
3,978

Proceeds from FHLB advances
 
275,000

 
—

Repayments of FHLB advances
 
(325,021
)
 
(19
)
Proceeds from exercise of common stock warrants
 
152

 
55

Dividends paid
 
(3,401
)
 
(1,892
)
Net cash provided by financing activities
 
108,568

 
143,238

Net change in cash and cash equivalents
 
(33,000
)
 
10,096

Cash and cash equivalents at beginning of year
 
431,102

 
505,027

Cash and cash equivalents at end of period
 
$
398,102

 
$
515,123


See Notes to Consolidated Financial Statements 

5




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)


Note 1. Summary of Significant Accounting Policies
Nature of Operations: Independent Bank Group, Inc. (IBG) through its subsidiary, Independent Bank, a Texas state banking corporation (Bank) (collectively known as the Company), provides a full range of banking services to individual and corporate customers in the North, Central and Southeast, Texas areas and along the Colorado Front Range, through its various branch locations in those areas. The Company is engaged in traditional community banking activities, which include commercial and retail lending, deposit gathering, investment and liquidity management activities. The Company’s primary deposit products are demand deposits, money market accounts and certificates of deposit, and its primary lending products are commercial business and real estate, real estate mortgage and consumer loans.
Basis of Presentation: The accompanying consolidated financial statements include the accounts of IBG, its wholly-owned subsidiaries, the Bank, IBG Adriatica Holdings, Inc. (Adriatica) and Carlile Capital, LLC and the Bank’s wholly-owned subsidiaries, IBG Real Estate Holdings, Inc., IBG Real Estate Holdings II, Inc., IBG Aircraft Company III, Preston Grand, Inc., CFRH II, LLC, McKinney Avenue Holdings, Inc. and its wholly owned subsidiary, McKinney Avenue Holdings SPE 1, Inc. Adriatica, CFRH II, LLC, McKinney Avenue Holdings, Inc. and its subsidiary are currently not active entities.
All material intercompany transactions and balances have been eliminated in consolidation. In addition, the Company wholly-owns IB Trust I (Trust I), IB Trust II (Trust II), IB Trust III (Trust III), IB Centex Trust I (Centex Trust I), Community Group Statutory Trust I (CGI Trust I), Northstar Statutory Trust II (Northstar Trust II) and Northstar Statutory Trust III (Northstar Trust III). The Trusts were formed to issue trust preferred securities and do not meet the criteria for consolidation.
The consolidated interim financial statements are unaudited, but include all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of the periods presented. All such adjustments were of a normal and recurring nature. These financial statements should be read in conjunction with the financial statements and the notes thereto in the Company's Annual Report of Form10-K for the year ended December 31, 2017. The consolidated statement of condition at December 31, 2017 had been derived from the audited financial statements as of that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
Segment Reporting: The Company has one reportable segment. The Company’s chief operating decision-maker uses consolidated results to make operating and strategic decisions.

Recently Adopted Accounting Pronouncements: ASU 2016-01, Financial Instruments─Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities was effective for the Company on January 1, 2018. The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. Previously, the Company valued their financial instruments that are not measured at fair value in the financial statements using an entry price notion. This ASU emphasized that these instruments be measured using the exit price notion and clarified that entities should not make use of the practicability exception in determining the fair value of loans. Accordingly, the Company refined the calculation used to determine the disclosed fair value of loans as part of adopting this standard. The impact of this change was not significant to the Company's disclosures. See Note 7 -Fair Value Measurement. The adoption of the remaining provisions had no impact on the Company's consolidated financial statements.



6




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The Company elected to early adopt and apply the guidance at the beginning of the period, effective January 1, 2018. The amendments in this update allow reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (TCJA) which was signed into law on December 22, 2017. The impact of adopting the amendment resulted in a cumulative effect adjustment to the consolidated balance sheet as of January 1, 2018 to reclassify approximately $233 of tax expense from accumulated other comprehensive loss to retained earnings as reflected in the accompanying Consolidated Statements of Changes in Stockholders' Equity.

ASU 2014-09, Revenue from Contracts with Customers (Topic 606) was effective for the Company on January 1, 2018. ASU 2014-09 amends existing guidance related to revenue from contracts with customers. The amendments state that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 affects entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The Company's revenue consists of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and noninterest income. The Company has applied ASU 2014-09 using the modified retrospective approach to all existing contracts with customers covered under the scope of the standard. The adoption of this ASU was not significant to the Company and had no material effect on how the Company recognizes revenue nor did it result in a cumulative effect adjustment or any presentation changes to the consolidated financial statements. See below for additional information related to revenue generated from contracts with customers.

Revenue Recognition: ASC Topic 606, Revenue from Contracts with Customers, establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company's revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit, and investment securities, as well as revenue related to mortgage banking activities, and BOLI, as these activities are subject to other accounting guidance. Descriptions of revenue-generating activities that are within the scope of ASC 606, and are presented in the accompanying Consolidated Statements of Income as components of noninterest income, are as follows:

•
Service charges on deposit accounts - these represent general service fees for monthly account maintenance and activity- or-transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

•
Gains/losses on the sale of other real estate owned - generally recognized when the performance obligation is complete which is typically at delivery of control over the property to the buyer at time of each real estate closing.

•
Other noninterest income - includes the Company's correspondent bank earnings credit, mortgage warehouse purchase program fees, acquired loan recoveries, wealth management referral income, other deposit fees, and merchant interchange income. The majority of these fees in other noninterest income are not subject to the requirements of ASC 606. The wealth management referral fees, other deposit fees and merchant interchange income are in the scope of ASC 606, and payment for such performance obligations are generally received at the time the performance obligations are satisfied.
The Company has made no significant judgments in applying the revenue guidance prescribed in ASC 606 that affect the determination of the amount and timing of revenue from the above-described contracts with customers.



7




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

Subsequent events: Companies are required to evaluate events and transactions that occur after the balance sheet date but before the date the financial statements are issued. They must recognize in the financial statements the effect of all events or transactions that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial statement preparation process. Entities shall not recognize the impact of events or transactions that provide evidence about conditions that did not exist at the balance sheet date but arose after that date. The Company has evaluated subsequent events through the date of filing these financial statements with the Securities and Exchange Commission (SEC) and noted no subsequent events requiring financial statement recognition or disclosure, except as disclosed in Note 10.
Earnings per share: Basic earnings per common share are net income available to common shareholders divided by the weighted average number of common shares outstanding during the period. The unvested share-based payment awards that contain rights to non forfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock warrants. The participating nonvested common stock was not included in dilutive shares as it was anti-dilutive for the three months ended March 31, 2018 and 2017. Proceeds from the assumed exercise of dilutive stock warrants are assumed to be used to repurchase common stock at the average market price.
The following table presents a reconciliation of net income available to common shareholders and the number of shares used in the calculation of basic and diluted earnings per common share.
 
Three Months Ended March 31,
   
2018
 
2017
Basic earnings per share:
   
 
   
Net income
$
28,964

 
$
15,671

Less:
 
 
 
Undistributed earnings allocated to participating securities
245

 
176

Dividends paid on participating securities
33

 
24

Net income available to common shareholders
$
28,686

 
$
15,471

Weighted-average basic shares outstanding
28,049,014

 
18,667,274

Basic earnings per share
$
1.02

 
$
0.83

Diluted earnings per share:
   
 
   
Net income available to common shareholders
$
28,686

 
$
15,471

Total weighted-average basic shares outstanding
28,049,014

 
18,667,274

Add dilutive stock warrants
105,353

 
107,132

Total weighted-average diluted shares outstanding
28,154,367

 
18,774,406

Diluted earnings per share
$
1.02

 
$
0.82

Anti-dilutive participating securities
118,900

 
126,847

 


8




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

Note 2. Statement of Cash Flows
As allowed by the accounting standards, the Company has chosen to report on a net basis its cash receipts and cash payments for time deposits accepted and repayments of those deposits, and loans made to customers and principal collections on those loans. The Company uses the indirect method to present cash flows from operating activities. Other supplemental cash flow information is presented below:   
 
 
Three Months Ended March 31,
 
 
2018
 
2017
Cash transactions:
 
 
 
 
Interest expense paid
 
$
15,330

 
$
9,694

Income taxes paid
 
$
—

 
$
—

Noncash transactions:
 
 
 
 
Transfers of loans to other real estate owned
 
$
—

 
$
750

Securities purchased, not yet settled
 
$
—

 
$
6,068




9




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

Note 3. Securities Available for Sale
Securities available for sale have been classified in the consolidated balance sheets according to management’s intent. The amortized cost of securities and their approximate fair values at March 31, 2018 and December 31, 2017, are as follows:   
   
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Securities Available for Sale
 
   
 
   
 
   
 
   
March 31, 2018
 
   
 
   
 
   
 
   
U.S. treasuries
 
$
35,449

 
$
—

 
$
(553
)
 
$
34,896

Government agency securities
 
207,292

 
28

 
(3,602
)
 
203,718

Obligations of state and municipal subdivisions
 
218,239

 
863

 
(4,020
)
 
215,082

Residential pass-through securities guaranteed by FNMA, GNMA, FHLMC, FHS, FHR and GNR
 
314,035

 
504

 
(5,573
)
 
308,966

   
 
$
775,015

 
$
1,395

 
$
(13,748
)
 
$
762,662

December 31, 2017
 
   
 
   
 
   
 
   
U.S. treasuries
 
$
37,480

 
$
—

 
$
(326
)
 
$
37,154

Government agency securities
 
213,649

 
83

 
(2,223
)
 
211,509

Obligations of state and municipal subdivisions
 
228,782

 
2,118

 
(1,287
)
 
229,613

Residential pass-through securities guaranteed by FNMA, GNMA, FHLMC, FHR and GNR
 
274,356

 
1,229

 
(1,208
)
 
274,377

Other securities
 
10,397

 
—

 
(48
)
 
10,349

   
 
$
764,664

 
$
3,430

 
$
(5,092
)
 
$
763,002

Securities with a carrying amount of approximately $270,878 and $238,344 at March 31, 2018 and December 31, 2017, respectively, were pledged to secure public fund deposits and repurchase agreements.

10




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

Proceeds from sale of securities available for sale and gross gains and gross losses for the three months ended March 31, 2018 and 2017 were as follows:
 
 
Three Months Ended March 31,
 
 
2018
 
2017
Proceeds from sale
 
$
14,801

 
$
—

Gross gains
 
$
15

 
$
—

Gross losses
 
$
239

 
$
—

The amortized cost and estimated fair value of securities available for sale at March 31, 2018, by contractual maturity, are shown below. Maturities of pass-through certificates will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.   
 
 
March 31, 2018
 
 
Securities Available for Sale
 
 
Amortized Cost
 
Fair Value
Due in one year or less
 
$
101,216

 
$
100,888

Due from one year to five years
 
176,765

 
173,894

Due from five to ten years
 
85,936

 
83,478

Thereafter
 
97,063

 
95,436

 
 
460,980

 
453,696

Residential pass-through securities guaranteed by FNMA, GNMA, FHLMC, FHS, FHR and GNR
 
314,035

 
308,966

 
 
$
775,015

 
$
762,662



11




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

The number of securities, unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of March 31, 2018 and December 31, 2017, are summarized as follows:   
   
 
Less Than 12 Months
 
Greater Than 12 Months
 
Total
Description of Securities
 
Number of Securities
 
Estimated
Fair Value
 
Unrealized
Losses
 
Number of Securities
 
Estimated
Fair Value
 
Unrealized
Losses
 
Estimated
Fair Value
 
Unrealized
Losses
Securities Available for Sale
 
 
 
   
 
   
 
 
 
   
 
   
 
   
 
   
March 31, 2018
 
 
 
   
 
   
 
 
 
   
 
   
 
   
 
   
U.S. treasuries
 
4
 
$
16,854

 
$
(450
)
 
3
 
$
18,042

 
$
(103
)
 
$
34,896

 
$
(553
)
Government agency securities
 
42
 
120,230

 
(2,162
)
 
34
 
79,155

 
(1,440
)
 
199,385

 
(3,602
)
Obligations of state and municipal subdivisions
 
313
 
137,154

 
(2,627
)
 
66
 
30,245

 
(1,393
)
 
167,399

 
(4,020
)
Residential pass-through securities guaranteed by FNMA, GNMA, FHLMC, FHS, FHR and GNR
 
129
 
256,057

 
(4,632
)
 
13
 
28,995

 
(941
)
 
285,052

 
(5,573
)
   
 
488
 
$
530,295

 
$
(9,871
)
 
116
 
$
156,437

 
$
(3,877
)
 
$
686,732

 
$
(13,748
)
December 31, 2017
 
 
 
   
 
   
 
 
 
   
 
   
 
   
 
   
U.S. treasuries
 
7
 
$
34,053

 
$
(267
)
 
1
 
$
3,101

 
$
(59
)
 
$
37,154

 
$
(326
)
Government agency securities
 
51
 
142,991

 
(1,155
)
 
27
 
60,030

 
(1,068
)
 
203,021

 
(2,223
)
Obligations of state and municipal subdivisions
 
202
 
87,625

 
(564
)
 
54
 
26,883

 
(723
)
 
114,508

 
(1,287
)
Residential pass-through securities guaranteed by FNMA, GNMA, FHLMC, FHR and GNR
 
55
 
125,970

 
(834
)
 
10
 
25,398

 
(374
)
 
151,368

 
(1,208
)
Other securities
 
1
 
10,349

 
(48
)
 
—
 
—

 
—

 
10,349

 
(48
)
   
 
316
 
$
400,988

 
$
(2,868
)
 
92
 
$
115,412

 
$
(2,224
)
 
$
516,400

 
$
(5,092
)
Unrealized losses are generally due to changes in interest rates. The Company has the intent to hold these securities until maturity or a forecasted recovery, and it is more likely than not that the Company will not have to sell the securities before the recovery of their cost basis. As such, the losses are deemed to be temporary.   

12




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

Note 4. Loans, Net and Allowance for Loan Losses
Loans, net, at March 31, 2018 and December 31, 2017, consisted of the following:   
 
 
March 31,
 
December 31,
   
 
2018
 
2017
Commercial
 
$
1,035,985

 
$
1,059,984

Real estate:
 
   
 
   
Commercial
 
3,498,483

 
3,369,892

Commercial construction, land and land development
 
806,415

 
744,868

Residential
 
916,355

 
892,293

Single family interim construction
 
284,490

 
289,680

Agricultural
 
78,782

 
82,583

Consumer
 
31,633

 
34,639

Other
 
238

 
304

   
 
6,652,381

 
6,474,243

Deferred loan fees
 
(2,801
)
 
(2,568
)
Allowance for loan losses
 
(41,960
)
 
(39,402
)
   
 
$
6,607,620

 
$
6,432,273


The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans.
Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. The Company’s management examines current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. These cash flows, however, may not be as expected and the value of collateral securing the loans may fluctuate. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short term loans may be made on an unsecured basis. Additionally, our commercial loan portfolio includes loans made to customers in the energy industry, which is a complex, technical and cyclical industry. Experienced bankers with specialized energy lending experience originate our energy loans. Companies in this industry produce, extract, develop, exploit and explore for oil and natural gas. Loans are primarily collateralized with proven producing oil and gas reserves based on a technical evaluation of these reserves. At March 31, 2018 and December 31, 2017, there were approximately $99,738 and $90,323 of exploration and production (E&P) energy loans outstanding, respectively. Additionally, with the acquisition of Carlile in second quarter of 2017, the Company acquired a mortgage warehouse purchase program, which provides a mortgage warehouse lending vehicle to third party mortgage bankers across a broad geographic scale. The mortgage loans are underwritten, in part, on approved investor takeout commitments. These loans have a very short duration ranging between 10 days and 15 days. In some cases, loans to larger mortgage originators may be financed for up to 60 days. These loans are reported as commercial loans since the loans are secured by notes receivable, not real estate. As of March 31, 2018 and December 31, 2017, mortgage warehouse purchase loans outstanding totaled $124,700 and $164,694, respectively.
Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally largely dependent on the successful operation of the property or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location. Management monitors the diversification of the portfolio on a quarterly basis by type and geographic location. Management also tracks the level of owner occupied property versus non owner occupied property. At March 31, 2018, the portfolio consisted of approximately 34% of owner occupied property.

13




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

Land and commercial land development loans are underwritten using feasibility studies, independent appraisal reviews and financial analysis of the developers or property owners. Generally, borrowers must have a proven track record of success. Commercial construction loans are generally based upon estimates of cost and value of the completed project. These estimates may not be accurate. Commercial construction loans often involve the disbursement of substantial funds with the repayment dependent on the success of the ultimate project. Sources of repayment for these loans may be pre-committed permanent financing or sale of the developed property. The loans in this portfolio are geographically diverse and due to the increased risk are monitored closely by management and the board of directors on a quarterly basis.
Residential real estate and single family interim construction loans are underwritten primarily based on borrowers’ credit scores, documented income and minimum collateral values. Relatively small loan amounts are spread across many individual borrowers, which minimizes risk in the residential portfolio. In addition, management evaluates trends in past dues and current economic factors on a regular basis.
Agricultural loans are collateralized by real estate and/or agricultural-related assets. Agricultural real estate loans are primarily comprised of loans for the purchase of farmland. Loan-to-value ratios on loans secured by farmland generally do not exceed 80% and have amortization periods limited to twenty years. Agricultural non-real estate loans are generally comprised of term loans to fund the purchase of equipment, livestock and seasonal operating lines to grain farmers to plant and harvest corn and soybeans. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating year based on industry developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop and other farm assets as considered necessary.
Agricultural loans carry significant credit risks as they involve larger balances concentrated with single borrowers or groups of related borrowers. In addition, repayment of such loans depends on the successful operation or management of the farm property securing the loan or for which an operating loan is utilized. Farming operations may be affected by adverse weather conditions such as drought, hail or floods that can severely limit crop yields.
Consumer loans represent less than 1% of the outstanding total loan portfolio. Collateral consists primarily of automobiles and other personal assets. Credit score analysis is used to supplement the underwriting process.
Most of the Company’s lending activity occurs within the State of Texas, primarily in the north, central and southeast Texas regions. With the acquisition of Carlile, the Company expanded into the State of Colorado, specifically along the Front Range area. As of March 31, 2018, loans in the Colorado region represented about 6% of the total portfolio. A large percentage of the Company’s portfolio consists of commercial and residential real estate loans. As of March 31, 2018 and December 31, 2017, there were no concentrations of loans related to a single industry in excess of 10% of total loans.
The allowance for loan losses is an amount that management believes will be adequate to absorb estimated losses relating to specifically identified loans, as well as probable credit losses inherent in the balance of the loan portfolio.
The allowance is derived from the following two components: 1) allowances established on individual impaired loans, which are based on a review of the individual characteristics of each loan, including the customer’s ability to repay the loan, the underlying collateral values, and the industry the customer operates, and 2) allowances based on actual historical loss experience for the last three years for similar types of loans in the Company’s loan portfolio adjusted for primarily changes in the lending policies and procedures; collection, charge-off and recovery practices; nature and volume of the loan portfolio; change in value of underlying collateral; volume and severity of nonperforming loans; existence and effect of any concentrations of credit and the level of such concentrations and current, national and local economic and business conditions. This second component also includes an unallocated allowance to cover uncertainties that could affect management’s estimate of probable losses. The unallocated allowance reflects the imprecision inherent in the underlying assumptions used in the methodologies for estimating this component.

14




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

The Company’s management continually evaluates the allowance for loan losses determined from the allowances established on individual loans and the amounts determined from historical loss percentages adjusted for the qualitative factors above. Should any of the factors considered by management change, the Company’s estimate of loan losses could also change and would affect the level of future provision expense. While the calculation of the allowance for loan losses utilizes management’s best judgment and all the information available, the adequacy of the allowance for loan losses is dependent on a variety of factors beyond the Company’s control, including, among other things, the performance of the entire loan portfolio, the economy, changes in interest rates and the view of regulatory authorities towards loan classifications.
In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses, and may require the Bank to make additions to the allowance based on their judgment about information available to them at the time of their examinations.
Loans requiring an allocated loan loss provision are generally identified at the servicing officer level based on review of weekly past due reports and/or the loan officer’s communication with borrowers. In addition, past due loans are discussed at weekly officer loan committee meetings to determine if classification is warranted. The Company’s credit department has implemented an internal risk based loan review process to identity potential internally classified loans that supplements the annual independent external loan review. The external review generally covers all loans greater than $4,125 annually. These reviews include analysis of borrower’s financial condition, payment histories and collateral values to determine if a loan should be internally classified. Generally, once classified, an impaired loan analysis is completed by the credit department to determine if the loan is impaired and the amount of allocated allowance required.
The Texas and Colorado economies, specifically the Company’s lending area of north, central and southeast Texas and the Colorado Front Range area, continued to be strong in the first quarter of 2018. The Texas economy is the second largest in the nation, out-pacing the U.S. economy in job creation and employment growth. Overall, the forecast is strong with continued growth in the manufacturing and service sectors and rising activity in the energy sector. While the current economic outlook remains optimistic, future and long-term concerns continue to include the tightening labor markets, decreased housing affordability, energy price volatility and trade uncertainty. The risk of loss associated with all segments of the portfolio could increase due to these factors.
The economy and other risk factors are minimized by the Company’s underwriting standards, which include the following principles: 1) financial strength of the borrower including strong earnings, high net worth, significant liquidity and acceptable debt to worth ratio, 2) managerial business competence, 3) ability to repay, 4) loan to value, 5) projected cash flow and 6) guarantor financial statements as applicable. The following is a summary of the activity in the allowance for loan losses by loan class for the three months ended March 31, 2018 and 2017:
 
Commercial
Commercial
Real Estate,
Land and Land
Development
Residential
Real Estate
Single-Family
Interim
Construction
Agricultural
Consumer
Other
Unallocated
Total
Three Months Ended March 31, 2018
 
 

 

 

 
Balance at the beginning of period
$
10,599

$
23,301

$
3,447

$
1,583

$
250

$
205

$
(32
)
$
49

$
39,402

Provision for loan losses
1,740

926

143

53

(2
)
(10
)
71

(226
)
2,695

Charge-offs
(82
)
(11
)
(3
)
—

—

(16
)
(48
)
—

(160
)
Recoveries
4

3

2

—

—

1

13

—

23

Balance at end of period
$
12,261

$
24,219

$
3,589

$
1,636

$
248

$
180

$
4

$
(177
)
$
41,960

 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2017
 
 
 
 
 
 
 
 
Balance at the beginning of period
$
8,593

$
18,399

$
2,760

$
1,301

$
207

$
242

$
29

$
60

$
31,591

Provision for loan losses
(590
)
2,048

67

235

(6
)
64

23

182

2,023

Charge-offs
—

—

—

(134
)
—

(56
)
(22
)
—

(212
)
Recoveries
2

20

1

—

—

2

4

—

29

Balance at end of period
$
8,005

$
20,467

$
2,828

$
1,402

$
201

$
252

$
34

$
242

$
33,431


15




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

The following table details the amount of the allowance for loan losses and recorded investment in loans by class as of March 31, 2018 and December 31, 2017:
 
Commercial
Commercial
Real Estate,
Land and Land
Development
Residential
Real Estate
Single-Family
Interim
Construction
Agricultural
Consumer
Other
Unallocated
Total
March 31, 2018
 
 
 
 
 
 
 
 
 
Allowance for losses:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
3,961

$
300

$
—

$
—

$
—

$
1

$
—

$
—

$
4,262

Collectively evaluated for impairment
8,300

23,919

3,589

1,636

248

179

4

(177
)
37,698

Loans acquired with deteriorated credit quality
—

—

—

—

—

—

—

—

—

Ending balance
$
12,261

$
24,219

$
3,589

$
1,636

$
248

$
180

$
4

$
(177
)
$
41,960

 
 
 
 
 
 
 
 
 
 
Loans:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
9,314

$
3,335

$
2,124

$
—

$
—

$
54

$
—

$
—

$
14,827

Collectively evaluated for impairment
1,017,373

4,231,756

911,345

284,490

75,657

31,560

238

—

6,552,419

Acquired with deteriorated credit quality
9,298

69,807

2,886

—

3,125

19

—

—

85,135

Ending balance
$
1,035,985

$
4,304,898

$
916,355

$
284,490

$
78,782

$
31,633

$
238

$
—

$
6,652,381

 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
Allowance for losses:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
3,500

$
311

$
—

$
—

$
—

$
2

$
—

$
—

$
3,813

Collectively evaluated for impairment
7,099

22,990

3,447

1,583

250

203

(32
)
49

35,589

Loans acquired with deteriorated credit quality
—

—

—

—

—

—

—

—

—

Ending balance
$
10,599

$
23,301

$
3,447

$
1,583

$
250

$
205

$
(32
)
$
49

$
39,402

 
 
 
 
 
 
 
 
 
 
Loans:
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
10,297

$
3,054

$
1,727

$
—

$
—

$
74

$
—

$
—

$
15,152

Collectively evaluated for impairment
1,037,401

4,039,332

887,292

289,680

78,646

34,544

304

—

6,367,199

Acquired with deteriorated credit quality
12,286

72,374

3,274

—

3,937

21

—

—

91,892

Ending balance
$
1,059,984

$
4,114,760

$
892,293

$
289,680

$
82,583

$
34,639

$
304

$
—

$
6,474,243












16




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

Nonperforming loans by loan class (excluding loans acquired with deteriorated credit quality) at March 31, 2018 and December 31, 2017, are summarized as follows:   
 
 
Commercial
 
Commercial
Real Estate,
Land and Land
Development
 
Residential Real Estate
 
Single-Family
Interim
Construction
 
Agricultural
 
Consumer
 
Other
 
Total
March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
9,314

 
$
2,892

 
$
1,950

 
$
—

 
$
—

 
$
35

 
$
—

 
$
14,191

Loans past due 90 days and still accruing
 
—

 
—

 
68

 
—

 
—

 
27

 
—

 
95

Troubled debt restructurings (not included in nonaccrual or loans past due and still accruing)
 
—

 
443

 
174

 
—

 
—

 
19

 
—

 
636

 
 
$
9,314

 
$
3,335

 
$
2,192

 
$
—

 
$
—

 
$
81

 
$
—

 
$
14,922

December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
10,304

 
$
2,716

 
$
998

 
$
—

 
$
—

 
$
55

 
$
—

 
$
14,073

Loans past due 90 days and still accruing
 
8

 
120

 
8

 
—

 
—

 
—

 
—

 
136

Troubled debt restructurings (not included in nonaccrual or loans past due and still accruing)
 
—

 
455

 
730

 
—

 
—

 
20

 
—

 
1,205

 
 
$
10,312

 
$
3,291

 
$
1,736

 
$
—

 
$
—

 
$
75

 
$
—

 
$
15,414

The accrual of interest is discontinued on a loan when management believes after considering collection efforts and other factors that the borrower's financial condition is such that collection of interest is doubtful. All interest accrued but not collected for loans that are placed on nonaccrual status or charged-off is reversed against interest income. Cash collections on nonaccrual loans are generally credited to the loan receivable balance, and no interest income is recognized on those loans until the principal balance has been collected. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Impaired loans are those loans where it is probable that all amounts due according to contractual terms of the loan agreement will not be collected. The Company has identified these loans through its normal loan review procedures. Impaired loans are measured based on 1) the present value of expected future cash flows discounted at the loans effective interest rate; 2) the loan's observable market price; or 3) the fair value of collateral if the loan is collateral dependent. Substantially all of the Company’s impaired loans are measured at the fair value of the collateral. In limited cases, the Company may use the other methods to determine the level of impairment of a loan if such loan is not collateral dependent.
All commercial, real estate, agricultural loans and troubled debt restructurings are considered for individual impairment analysis. Smaller balance consumer loans are collectively evaluated for impairment.

17




Independent Bank Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)
(Dollars in thousands, except for share and per share information)

Impaired loans by loan class (excluding loans acquired with deteriorated credit quality) at March 31, 2018 and December 31, 2017, are summarized as follows:   
 
 
Commercial
 
Commercial
Real Estate,
Land and Land
Development
 
Residential
Real Estate
 
Single-Family
Interim
Construction
 
Agricultural
 
Consumer
 
Other
 
Total
March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recorded investment in impaired loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impaired loans with an allowance for loan losses
 
$
7,606

 
$
1,602

 
$
—

 
$
—

 
$
—

 
$
1

 
$
—

 
$
9,209

Impaired loans with no allowance for loan losses
 
1,708

 
1,733

 
2,124

 
—

 
—

 
53

 
—

 
5,618

Total
 
$
9,314

 
$
3,335

 
$
2,124

 
$
—

 
$
—

 
$
54

 
$
—

 
$
14,827

Unpaid principal balance of impaired loans
 
$
12,477

 
$
3,434

 
$
2,223

 
$
—

 
$
—

 
$
63

 
$
—

 
$
18,197

Allowance for loan losses on impaired loans
 
$
3,961

 
$
300

 
$
—

 
$
—

 
$
—

 
$
1

 
$
—

 
$
4,262

December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recorded investment in impaired loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impaired loans with an allowance for loan losses
 
$
9,255

 
$
1,793

 
$
—

 
$
—

 
$
—

 
$
2

 
$
—

 
$
11,050

Impaired loans with no allowance for loan losses
 
1,042

 
1,261

 
1,727

 
—

 
—

 
72

 
—

 
4,102

Total
 
$
10,297

 
$
3,054

 
$
1,727

 
$
—

 
$
—

 
$
74

 
$
—

 
$
15,152

Unpaid principal balance of impaired loans
 
$
13,456

 
$
3,124

 
$
1,818

 
$
—

 
$
—

 
$
197

 
$
—

 
$
18,595

Allowance for loan losses on impaired loans
 
$
3,500

 
$
311

 
$
—

 
$
—

 
$
—

 
$
2

 
$
—

 
$
3,813

For the three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average recorded investment in impaired loans
 
$
9,806

 
$
3,195

 
$
1,926

 
$
—

 
$
—

 
$
64

 
$
—

 
$
14,991

Interest income recognized on impaired loans
 
$
3

 
$
6

 
$
7

 
$
—

 
$
—

 
$
—

 
$
—

 
$
16

For the three months ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average recorded investment in impaired loans
 
$
7,958

 
$
4,966

 
$
1,964

 
$
442

 
$
—

 
$
272

 
$
—

 
$
15,602

Interest income recognized on impaired loans