Independent Bankers Financial Corporation and Subsidiaries
Independent Bankers Financial Corporation and Subsidiaries
Auditor's Report and Consolidated Financial Statements December 31, 2017 and 2016
C O N T E N T S
Independent Auditor's Report ............................................................................................1 Consolidated Financial Statements
Balance Sheets ...............................................................................................................4 Statements of Income......................................................................................................6 Statements of Comprehensive Income ............................................................................8 Statements of Shareholders' Equity.................................................................................9 Statements of Cash Flows.............................................................................................10 Notes to Consolidated Financial Statements .................................................................12
Independent Auditor's Report
Board of Directors Independent Bankers Financial Corporation
and Subsidiaries Farmers Branch, Texas
We have audited the accompanying consolidated financial statements of Independent Bankers Financial Corporation and Subsidiaries (Corporation), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements. We also have audited the Corporation's internal control over financial reporting as of December 31, 2017, based on criteria established in the Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Management's Responsibility for the Consolidated Financial Statements and Internal Control over Financial Reporting
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of effective internal control over financial reporting relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Management is also responsible for its assessment about the effectiveness of internal control over financial reporting, included in the accompanying Management's Report ? FDICIA Requirements.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Corporation's internal control over financial reporting based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement and whether effective internal control over financial reporting was maintained in all material respects.
An audit of consolidated financial statements involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the
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Board of Directors Independent Bankers Financial Corporation
and Subsidiaries Page 2
consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit of consolidated financial statements also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
An audit of internal control over financial reporting involves performing procedures to obtain evidence about whether a material weakness exists. The procedures selected depend on the auditor's judgment, including the assessment of the risk that a material weakness exists. An audit of internal control over financial reporting also involves obtaining an understanding of internal control over financial reporting and testing and evaluating the design and operating effectiveness of internal control over financial reporting based on the assessed risk.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Definition and Inherent Limitations of Internal Control over Financial Reporting
An entity's internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the preparation of reliable consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. Because management's assessment and our audits were conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), our audit of the Corporation's internal control over financial reporting included controls over the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9-C).
An entity's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and those charged with governance; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the entity's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct, misstatements. Also, projections of any assessment of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Board of Directors Independent Bankers Financial Corporation
and Subsidiaries Page 3 Opinions In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Independent Bankers Financial Corporation and Subsidiaries as of December 31, 2017 and 2016, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Also, in our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in the Internal Control Integrated Framework (2013), issued by the COSO.
Houston, Texas March 28, 2018
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Independent Bankers Financial Corporation and Subsidiaries
Consolidated Balance Sheets December 31, 2017 and 2016 (Dollar amounts in thousands, except per share amounts)
Assets
Cash and due from banks Interest-bearing deposits in banks Federal funds sold and securities purchased under
agreements to resell
Cash and cash equivalents
Available-for-sale securities Loans held for sale Loans, net of allowance for loan losses of $13,108 and
$13,841 at 2017 and 2016, respectively Premises and equipment, net of accumulated depreciation
of $8,665 and $6,947 at 2017 and 2016, respectively Federal Reserve and Federal Home Loan Bank stock Foreclosed assets held for sale Interest receivable Deferred income taxes Mortgage servicing rights Cash surrender value of life insurance Goodwill Core deposits and other intangibles Other
Total Assets
2017
2016
$
3,347 $
3,975
792,461
965,095
81,999
64,633
877,807
1,033,703
454,816 10,179
409,342 14,241
992,780
1,078,255
25,612 9,713 127 6,752 757
19,450 56,999
2,000 2,543 20,731
26,758 11,783
25 6,125 1,173 18,985 55,573 2,000 3,800 23,608
$ 2,480,266 $ 2,685,371
The Notes to Consolidated Financial Statements are an integral part of these statements.
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Independent Bankers Financial Corporation and Subsidiaries
Consolidated Balance Sheets (Continued) December 31, 2017 and 2016 (Dollar amounts in thousands, except per share amounts)
Liabilities and Shareholders' Equity
Liabilities Deposits Demand Interest-bearing
Total deposits
Short-term borrowings Federal Home Loan Bank advances Junior subordinated debentures Derivatives Interest payable and other liabilities
Total liabilities
Shareholders' Equity Common stock, $10 par value; 5,000,000 shares authorized, 1,118,833 and 1,118,743 shares issued and outstanding in 2017 and 2016, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss)
Total shareholders' equity
Total Liabilities and Shareholders' Equity
2017
$
452,882
1,503,504
1,956,386
75,173 150,000
30,928 754
19,075
2,232,316
11,188 32,845 201,511
2,406
247,950
$ 2,480,266
2016
$
472,041
1,642,230
2,114,271
87,154 200,000
30,928 2,099
22,104
2,456,556
11,187 32,828 184,942
(142)
228,815
$ 2,685,371
The Notes to Consolidated Financial Statements are an integral part of these statements.
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Independent Bankers Financial Corporation and Subsidiaries
Consolidated Statements of Income Years Ended December 31, 2017 and 2016 (Dollar amounts in thousands)
Interest Income Loans, including fees, taxable Loans, including fees, tax exempt Securities Federal funds sold and securities purchased under agreements to resell Deposits with financial institutions Other
Total interest income
Interest Expense Deposits Short-term borrowings Junior subordinated debentures and other borrowings
Total interest expense
Net Interest Income
Provision for Loan Losses
Net Interest Income After Provision for Loan Losses
Noninterest Income Credit card fees Safekeeping fees Mortgage servicing fees Customer security transaction fees Audit and loan review fees Gain on sale of loans Gain on non-hedging derivative financial instruments Other
Total noninterest income
2017
$
35,602
6,743
10,365
1,187 10,925
317
65,139
21,578 940
2,355 24,873 40,266
2,327
37,939
75,364 2,546 5,039 5,440 2,726 2,789 324
10,811
105,039
2016
$
33,437
6,613
9,414
896 6,048
260
56,668
15,325 352
1,460 17,137 39,531
1,170
38,361
70,976 3,124 4,859 7,894 2,870 5,254 -
10,882
105,859
The Notes to Consolidated Financial Statements are an integral part of these statements.
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