Torry Berntsen – President, Chief Operating Officer and Director David Brooks – Chairman and Chief Executive Officer Michelle Hickox – Chief Financial Officer and Executive Vice President.

Brady Gailey – KBW Matt Olney – Stephens Brad Milsaps – Sandler ONeil Brett Rabatin – Sterne Agee John Pancari – Evercore ISI John Moran – Macquarie Joe Steven – Steven Capital.

Good day, ladies and gentlemen, and welcome to the Independent Bank Fourth Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would like to hand the conference over to Torry Berntsen. Please go ahead..

Thank you and good morning. Welcome to the Independent Bank Group conference call to discuss financial results for the fourth quarter 2014. I would like to thank you for joining us this morning. I'll go over a few housekeeping items, and then hand it over to David Brooks, our Chairman and CEO to lead the presentation.

We issued our earnings release this morning and a copy is posted on our website, www.ibtx.com. We will be going over much of the release on this call. If you’re having trouble accessing it, please call Eileen Ponce 469-742-9437 and we will email or fax you a copy.

Some of the remarks made today will constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We intend such statements to be covered by the Safe Harbor provisions for forward-looking statements contained in the act.

Please see Page 4 of the text in this morning’s release for additional information about the risks associated with these statements. Please also note that if we give guidance about future results, that guidance will only be a statement of management’s beliefs at the time the statement is made.

Predictions that we make may not continue to reflect management’s belief and we do not 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 financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included in our earnings release. At the conclusion of our remarks, we will open the telephone lines for questions. At that time, we will provide instructions for submitting your questions.

With those reminders out of the way, I would like to outline the agenda for the call. David will open with his thoughts regarding the fourth quarter results. Michelle Hickox, our Chief Financial Officer, will lead you through the quarter’s operating results and some balance sheet highlights.

David will then close the presentation and open the phone lines for questions. I’ll now turn it over to David..

Thanks, Torry. Good morning, everyone and welcome to Independent Bank’s fourth quarter and year-end 2014 earnings conference call. We are pleased with our results for the quarter as we continue to execute our strategies in the midst of rapidly changing market conditions.

Our organic loan growth accelerated from the third quarter to 16% on an annualized basis primarily in the commercial real estate and non-energy C&I portfolios.

This organic growth along with the Houston Community acquisition increased total assets to $4.1 billion compared to $2.2 billion for December 31, 2013 and compared to total assets of $1.8 billion as of our IPO in 2013.

Core earnings continue to grow increasing sequentially and on a year-over-year basis, fueled by our organic growth and acquisition loan growth. On a sequential basis, core earnings grew 14.7%. For the year after tax net income was $28.8 million, compared to pro forma after tax income of $16.2 million for 2013 an increase of 78%.

Our margin improved compared to the third quarter. On a core basis, our net interest margin was 4.17% in the fourth quarter versus 4.02% in the third quarter. Also our efficiency ratio continues to get better, on a core basis it was 55.85% for the fourth quarter.

We completed the operational conversion of Houston Community to our Core System in early December. This quick transition allows us to go into 2015 with most of our projected cost saves in place. We remain very focused on asset quality.

Maintaining our credit quality and limiting our exposure to loss has historically been a hallmark of our culture for 27 years. It has served us well over the years, especially during challenging economic times. We fully understand that the superior credit culture is a key component to our overall operations.

The credit team continues to closely supervise underwriting, monitor asset quality and maintain effective credit administration. This is especially through our energy portfolio. As of year-end, our production portfolio was $232 million approximately 7% of total loans, made up of 28 relationships.

We have evaluated and shock tested all of our credits that are most challenged by lower prices to cover the majority of the risk. Virtually all of our E&P producers are hedged in position to manage through the current price environment. Our price decks are dynamic and we retain the rights to require monthly commitment reductions as needed.

With respect to oil field related services at year end the outstandings were $27 million or 0.8% of the portfolio. These belongs to a part of our recent acquisitions and Houston primarily represented longtime clients and are primarily limited to existing oil and gas production not to drilling or completion type activities.

Our energy team is very experienced with our Senior Bankers having over 30 years of experience and having function through numerous cycles. They were also regularly in touch with our resourceful and experienced customers who are making the necessary adjustments in their business models to deal with the lower pricing levels.

Michelle will provide some further detail of the portfolio in her comments. As I’ll summarize at the end of call, we believe that 2014 was a successful year on numerous fronts. With that I would like to ask Michelle to go over our 2014 fourth quarter operating results..

Thank you, David and good morning everyone. As noted in the earnings release, our fourth quarter core net income was $10.9 million or $0.64 per diluted share, compared with third quarter core net income of $9.5 million or $0.58 per diluted share.

Net interest income increased during the fourth quarter to $38.2 million, compared to $32.4 million for the third quarter. The increase in net interest income reflects increased average loan balances resulting from organic loan growth and loans acquired in the Houston Community acquisition.

Our net interest margin was 4.28% for the fourth quarter, compared to 4.04% for the third quarter.

The increase in the quarter is reflected with the higher yields on the Houston Community portfolio, and an increase in unfunded and prepayment fees recognized compared to the linked quarter and an increase in accretion income related to payoff system acquired loans as well as a slight decrease in the cost of interest bearing liabilities.

Our core net interest margin which does not include accretion with 4.17%, compared to 4.02% in the third quarter. Total non-interest income decreased $249,000, compared to the third quarter. The decrease is primarily attributable to the sale of the SBA portfolio in the third quarter, which resulted in a non-recurring gain of $1.1 million.

As previously mentioned Independent Bank has not been an active SBA lender. The decrease was offset by a gain on sale of securities of $362,000 and an increase in service charge income of $263,000 for the fourth quarter.

Total noninterest expense increased $2.8 million in the fourth quarter, the increase is primarily related to increases in salaries and benefits, occupancy, data processing in the FDIC assessment and acquisition-related cost, all associated with the Houston Community transaction and integration.

Total acquisition expense recognized during the quarter including compensation related expenses totaled $1.8 million. The provision for loan loss expense was $1.8 million for the quarter, an increase of $775,000 from the third quarter.

The additional provision reflects the increased loan growth compared to the prior quarter, as well as a prudent increase in recognition of the current energy environment as it relates to loans. For the fourth quarter organic loans held for investment grew 4.0% from September 30, 2014 or 15.8% on an annualized basis.

Additionally, we added a $194.5 million in loans for the Houston Community acquisition. The compensation of the overall loan portfolio is comparable for the third quarter. C&I represented 21% of the portfolio. As David mentioned energy E&P outstandings at the end of the fourth quarter were $231.7 million comprised with 28 borrowers.

This represented 7.2% of the entire loan portfolio. We have a strong energy credit policy with a major focus on engineering review well in field diversity and hedging requirements. All of our credits are secured and only one is classified as of December 31.

Approximately 90% of our facilities are self-originated, and the portfolio was predominantly Texas based with experienced management team. 62% of the portfolio is oil and 38% is gas. Virtually all of our E&P customers have hedges in place for 2015 with the average hedge price for oil at $80 per barrel.

Oil field service related balances represented an additional $26.8 million or 0.8% of total bank outstandings as of December 31, 2014. These facilities were obtained through acquisitions and represent 30 borrowers within the acquired banks have longstanding relationship.

With respect to overall asset quality total nonperforming assets represented 0.36% of total assets at December 31. 2014, compared to 0.33% of total assets at September 30, 2014 and 0.58% at December 31, 2013.

The spot increase compared to the linked quarter was due to the closing of two branches acquired in the Houston Community transaction with a value of $2 million and which were transferred to other real estate in December. They are currently being marketed for sale.

This increase was partially offset by $1.4 million of sales of ORE in the fourth quarter. Additionally, total nonperforming loans represented 0.32% of total loans at December 31, compared to 0.29% at the end of September and 0.53% a year ago.

With respect to funding, total deposits were $3.25 billion at December 31, 2014 compared to $2.81 billion at September 30, 2014. $303 million of the increase was the result of the Houston Community acquisition. Growing our core deposit base continues to be a focus while keeping our costs low.

The average cost of interest paying deposits decreased to 0.45% for the quarter, compared to 0.49% for the third quarter and decreased by 9 basis points, compared to 0.54% during the fourth quarter 2013. Our year-to-date rate on total deposits dropped 0.37%. 25.2% of our deposits are noninterest bearing up from 17.7% at the end of 2013.

Total borrowings decreased by $96.2 million from September 30, 2014. We will use some excess liquidity assumed in the Houston Community transactions pay off $75 million in short-term advances that we acquired in the Bank of Houston transaction, and two other longer-term advances to FHLB that matured during the quarter.

As it relates to capital, our tangible common equity to tangible assets ratio decreased to 7.07% at December 31, 2014, compared to 7.32% for the third quarter. Our total risk weighted capital ratio decreased to 12.59% at December 31, compared to 13.36% as of September 30, 2014 due to organic growth in the Houston Community acquisition.

I would like to point out that tangible book value per share increased to $16.19 at December 31, 2014, compared to $15.89 at December 31, 2013, the spot has having completed three acquisitions during the year. That concludes my outline of the highlights of our financial statements. I’ll turn it back over to David..

Thanks, Michelle. As noted in my earlier remarks, we feel like, we accomplished a lot during 2014. We continue to believe in our fundamental business that strength our asset quality and our ability to continue to execute our growth strategies.

Our recently announced stock repurchase program gives us the ability to invest in our company by purchasing our stock, when it is advantages to the company and our shareholders.

Growth continues across our franchise, our loan pipeline remains strong even with the slowdown in energy lending, and we believe our organic loan growth rate in the fourth quarter is a good proxy for our 2015 expectation. As it’s been mentioned, we continue to monitor our energy portfolio very carefully.

We are confident in our staff and borrowers and feel that the portfolio is well structured and hedged. Our energy leadership has significant experience over many cycles and is proactively managing the portfolio. There continue to be M&A discussions in Texas.

I remain involved in conversations with banks located in the identified markets where we envision our growth. We intend to build out our footprint as opportunities arise. That said, we will remain disciplined in our approach to acquisitions and will only proceed with an acquisition when the valuation metrics are appropriate.

In conclusion, we know that there are challenges ahead, but we believe that our strong financial position, excellent credit quality and commitment to our proven business model will yield positive results and enhance shareholder value. With that said, we will open it to questions.

Operator?.

Thank you. [Operator Instructions] Our first question comes from the line of Brady Gailey from KBW..

Good morning..

Good morning, Brady..

Hi, Brady..

I just wanted – if you look at 2014 and if you look at the organic loan growth that’s around $425 million, how much of that was related to the energy portfolio growth?.

That’s a great question. I might – about a $120 million, about 25% that was related to energy growth..

Okay. And then it sounds like if we take the loan growth rate in 4Q of 16% of the organic loan growth and put that – you relatively saying that’s a good run rate for 2015, I mean, that would kind of back-end of about $500 million of loan growth.

So, are you all – how do you look at the energy portfolio into 2015? Do you think that will be – have stable balances or will that still grow a little bit or where we see shrinkage?.

That’s a great. Obviously a great question, a lot of that depend Brady on prices of oil and a lot of assumptions, but as we think about it, we’re thinking that the portfolio should be fairly stable here through the first half of the year, and then we’ll see as people – opportunities to acquire assets.

If our customers begin to make good solid acquisitions, we’ll certainly be in the business of financing those. We’re committed to the energy business long-term and so, we’re about building relationships and creating relationships. And, but we don’t see a lot of growth in that portfolio.

We also don’t see a lot of run-off in that portfolio in the first half of the year. So as we think about it – it kind of stable first half, and then maybe with some opportunities to grow and select cases in the second half..

Okay. And then it seems like most of your energy customers are pretty well hedged this year in 2015.

How many of them are hedged once we get to 2016? Does that drop off pretty dramatically or almost sudden still hedged in 2016 as well?.

Yeah a large percentage of the hedge is go way in the first half, they carry out pretty consistently into the first half of 2016, but they drop off pretty dramatically at that point..

Yeah, okay..

Brady, we’ve also seen some of the customers who have added hedges even with the run up in the price for the last couple of days we have added some hedges into 2016 as well..

Okay. Okay. And then lastly, if you look at where your stock is now at 32, to two times tangible. I mean, I remember about a year ago was that3.5 to 4 times tangible. So, how does that play into the, I mean, you all have done a lot of great acquisitions since you have gone public, but with the currency now, at two times tangible.

How does that play into your excitement about doing acquisitions going forward?.

You know, obviously the math when you work on the models, and the math behind the deals, it gets more difficult, clearly as the price comes down. We have – it’s been interesting a lot of conversations going on across the state and a lot of – I think a lot of sellers are concerned they don’t want to miss this window whatever the perceived window is.

And so, a lot of price discovery, lot of discussions like that going on. So it is probably too early to tell exactly how that’s all going to shake out and what the deal level is going to be in the first half of the year. But, we clearly believe there is going to be deal activity this year.

We think on the relative basis, we are still positioned quite well, related to our competitors here in Taxes and as well as those in surrounding states, you want to be in Taxes.

So, we think we are still in good shape and we are still optimistic about the opportunity to use our currency this year, and as we noted in our press release and in our call a few minutes ago, we put the stock repurchase plan in place to give the Board some options and another tool to the extent that, energy price is oil prices were to fall off the table again here to a much lower level and there was pressure on bank stocks, we want to be in a position to act accordingly and use the same type of analysis.

So on our own stock as we do on other banks.

But, we are some still cautiously optimistic about the year in M&A I just think it’s slow right now because people are just watching to see there is uncertainly on the sellers' part as well as you might imagine about the energy prices and what if they are going to take currency be at in our bank or any of the banks that have energy portfolios, they are cautious about gas, would if there is another dip in oil price and what they are going to do.

If I make a deal when prices are where they are today and they go down 10% or 20% more is that, do I really wanted to take that risk right now. So we’ve seen the sellers’ just – lot of discussion but cautious about win to pull the trigger..

Okay. Great, thanks for the color..

Thanks Brady..

Thank you. Our next question comes from the line of Matt Olney from Stephens..

Hi, thanks. Good morning guys..

Good morning Matt..

Hey, going back to your loan growth comments, you have obviously done a number of acquisitions over the last few years and with that sometimes you are going to acquire some loan or certain loan types that may not be strategic longer-term.

So, I am trying to get a feel for – are there any loan categories or loans that you have that may not be considered core or account strategic longer-term that could be a headwind to that loan growth in 2015?.

Good question, Matt. We – that’s exactly right that, when we make acquisition we generally try to buy banks that bid us culturally from a wining standpoint but in variably as Michelle point it out on the SBA portfolio.

We saw in the fourth quarter that there are or third quarter, I guess we sold it – there are certain segments at times of portfolios that we choose strategically not to keep.

That’s said, I think most of that out of the way on both of the Houston Banks that we acquired the other two banks we acquired late 2013 early 2014 didn’t have, they are small enough they didn’t really move the needle. But there is not a significant amount of additional run-off that we expect here going into 2015.

As I mentioned earlier, we feel pretty good about having made all the conversions and got most of the cost saves out of the even the Houston Community acquisition in the fourth quarter. We think we’re going to see a good run rate here, both from an expense standpoint and a loan growth standpoint.

We don’t expect a lot of headwind from any lines of business we intend to exit..

Actually Matt, it’s Torry, we’ve actually seen on the Houston Community side some nice opportunity has already come through our executive loan committee, so that was – that deal closed in December, I mean in October converted in December. And those guys are functioning well within the system and again some nice opportunities have come through..

Okay, that’s great to hear.

And then on the core loan yields, can you give us a better idea of what types of coupons you’ve been putting on with your organic loan growth at the last few months?.

Yes, the floating rates tend to be prime based plus the quarter to 25 BIPS to 100 BIPS and the floating rates three to five years in the 4.25 average range so..

And is there any change that you could think of David over the last few quarters?.

A little bit of pressure, if you want to look at from third to fourth quarter Matt probably 10 BIPS to 20 BIPS additional pressure, but things seem to have leveled that here, early in the first quarter. The pricing we are seeing, I would say the last 60 days has been pretty steady. We haven’t seen a lot of continued pressure there..

Okay, okay. All right, that’s it from me. Thanks guys..

Thanks, Matt..

Thanks, Matt..

Thank you and our next question comes from the line of Brad Milsaps from Sandler ONeil..

Good morning, Brad..

Sir, your line is open.

Could you check your mute button please?.

Hey, good morning, Am I coming through?.

Got you, good morning, Brad..

Hi, Brad..

Hi, Brad..

Got some new – we’ve got some new phone today and have a cluster to those out yet..

And it’s early..

Yes. Yes, just a follow-up on the NIM question, you guys did a good job of calling out the accretion income this quarter. And it didn’t sound like loan fees were maybe 2 basis points. Just tell us your comments on the loan yields you’re getting on new production.

What do you guys see for the NIM as you kind of move through the next few quarters, it looks like you’re also sitting on a little bit higher liquidity than you have maybe previously, so just kind of curious your thoughts on putting that to work and kind of how that plays out?.

Michelle would you?.

Yes, I think there was some noise in our NIM this quarter, Brad and as we talked about in the press release, we did have kind of outside accretion income. We also had some significant pre-payments penalties that probably was 5 to 7 basis points. So we expect our NIM will drop in the 10 basis points range on a core basis going forward first quarter..

Okay. So the four – I think the 417 number you gave that didn’t include any of the pre-payment penalties you just talked about..

Right, that’s correct..

Okay, great. That’s very helpful. And then on expenses, you guys dugout the major cost, that the last couple of quarters that’ also included some bonus expense I believe. Can you talk about to the extend how recurring that piece of it might be.

And then just how to think about, expenses have been move into 2015, are you probably got some cost save to still got out of Houston City, you guys thinking about more of on a pure efficiency ratio type rate or expenses to average assets.

How are you thinking about those as we move through the year?.

I think you are going to see, we pretty much have all of our cost save there going into 2015 as David talked about on the call. So I think we’re going to see a little bit of benefit, I wouldn’t expect to see our noninterest expenses go down significantly, but they should be steady.

We expect our efficiency ratio to continue to drop through 2015 closer to the low 50s range..

And those bonuses that typically have paid in the acquisitions is the part of keeping the team together and all that Brad of all been paid for all the acquisitions. So we don’t expect any of that expense going into 2015..

Okay. That’s great. And then final question David just on capital. I know you have talked in the past about - one measure you look at, being kind of a 6.5% to 7% TCE ratio. You’re on that – very upper end of that.

At this point, based on your growth assumption that you guys are earning kind of a mid-teen ROT right now, it seems like you can fund yourself pretty well, but just kind of curious any thoughts around capital and growth rate?.

Yes, we see at the same way Brad that – without any other acquisitions or any significant stock repurchases, our earnings generate the capital, we need to grow the bank at the rate we see here for the near term future. So with that said, we don’t expect at this point.

We don’t expect any capital movement or mini offerings or sub debt or anything like that in the first half of the year..

Okay. thank you. .

In the foreseeable future..

Thank you. Our next question comes from the line of Brett Rabatin from Sterne Agee..

Hi good morning..

Good morning Brett..

Hi, Brett..

Most of my questions have been asked. I want to go back to the M&A question. And maybe you can just give a little color David, around your thoughts about the relative geographies Dallas versus Houston going forward.

And within that just kind of thinking about those two different MSA’s kind of how you are seeing; maybe if you have any answers that you are seeing those two different markets are we act differently to kind of what’s going to go on with the declined oil prices?.

No, from an M&A standpoint, we haven’t seen much difference in the conversations between Houston and Dallas/Fort Worth as an example. Most of the opportunities, most of the banks in the size range that we are interested in say $400 million to $500 million on the low side to $1.5 billion to $2 billion on the high end.

Most of those banks are in Houston or Dallas-Fort Worth, there aren’t as many opportunities as I think said before in Central Texas, Austin and San Antonio, while there are some that just by peer volume - the biggest number would be in Houston and then followed in Dallas-Fort Worth.

But no difference in those discussions everyone’s even if it’s a Dallas-Fort Worth Bank they still obviously understand what’s happen with Texas Bank stocks relative to their energy exposure and so it’s still the same conversation with the North Texas Banks this is with the South Texas Banks..

Okay.

And with the preference be, to continue to build in Houston, I mean obviously regional banks in Houston that are in that size range?.

No, I wouldn’t say that at this point and we are very pleased with our Houston presence, we think we’ve got a good footprint there. We will certainly continue to look at good opportunities there, but all things being equal, we would love to continue to build out our Dallas-Fort Worth footprint as well.

And, so I would say equal weight in terms of like we’d have a deal in Dallas-Fort Worth versus Houston..

Okay. And then there is the other thing I want to ask was, just around the loan growth guidance.

I was wondering, if kind of taking about you are moving that concentration in C&I up, which has been happening, what it make sense to expect C&I to be a bigger piece of the loan growth in 2015 and you guys continue to have stronger growth in the C&I books on a relative basis?.

Yes, obviously the headwind there will be a lot of the growth from 10% when we went public to 21% now has been on the energy portfolio. But, which we said, we expect that to be flat in the first half. But we do expect just a core C&I of non-energy book to grow and increase as a percentage. We hired three new C&I lenders in the fourth quarter.

So I think that would be to your point, Brad that where we’re going to see some good opportunities in those lenders already have had a good start to the year, so. .

Okay, great. Thanks for the color..

Thanks Brad..

Thank you. And our next question comes from the line of John Pancari from Evercore ISI. .

Hi, good morning. It’s actually Steve Moss for John..

Good morning, Steve..

Just circling back to energy here, wondering what your allocated reserves are to the energy portfolio..

We don’t break it down by loan type, Steve, but we’ve got that we believe strong reserves at this point against our entire portfolio, obviously purchase accounting effects are off sticks of our numbers, given all the acquisitions we’ve done in specific reserves and mark-to market that we have done all the loans that we’ve booked.

Our total – this might be helpful our total reserve to originated loans which is one of the things we really look at is about just to hear on the 1% about 90 BIPS of reserve to our total portfolio.

We did add and I think we mentioned this in the call earlier, we did add some additional reserve in the fourth quarter focused on the energy and uncertainty there and we will continue to watch that here in the quarters ahead. But right now we think we are appropriately reserved for our total portfolio and especially for energy..

Okay and could you give how much the amount was for energy in the provision this quarter? Looking for GAAP?.

I think we put in an additional just under $1 million or so over and above what it took to grow. And Michelle you could.

I think that again as David said, we are – our calculation is pretty complicated. So we – is it quite a few qualitative factors that are used with just a change in the energy price has been one of those. So I am not sure we can give you a quantification of that exactly.

It’s probably around I would guess $300,000 additional just for qualitative factors on energy. There are no specific reserves on any energy loans as of year-end..

And again we increased the reserve by $775,000 for the quarter. .

Yes, and that was the number I was thinking of, Steve is we put in an additional $700,000 almost $800,000 over and above what we’ve put in the third quarter. And as Michelle said in the formula I think the changeable oil price is actually accounted for an additional $300,000 to $350,000.

But if we look at the formula obviously in that that drives a lot of it but also just – if we take a look and try to use some common sense as well the go this is the time of uncertainty and so, we had a strong earnings quarter and we felt like we want to acknowledge the fact that this where I spent it was three months ago or six months ago in the energy portfolio..

Okay, that’s helpful.

And then, with regard to the margin guidance indicated in the first quarter expect margin plus 10 basis points, if I – am I think about correctly that sounds like a three to five basis points perhaps in terms of quarterly margin compression of exclude the amount of benefit from the pre-payment fees?.

Well, I mean like, we said earlier I think our margin will drop that for 10 basis points on a core basis for first quarter. .

Right, 417?.

Yeah from the 417..

Great that in beyond the first quarter would you expect like 3 to 5 basis points?.

That’s probably – I would say that’s a little high probably going to closer to two basis points I would guess for the rest of year..

Okay..

We had that benefit of - in the last quarter where these units coming on board and they have the high rate on their loans which will turn to subside over time..

Great, all right. Thank you very much..

Thanks, Steve..

Thank you. [Operator Instructions] Our next question comes from the line of John Moran from Macquarie..

Hi, good morning guys..

Good morning John..

Just wanted to follow back-up on the buyback, have you guys been active in there since announcing it and is there a level where you get more aggressive in terms of declining capital half way?.

We have been under the blackout because we haven’t announced earnings.

So, the company asked play about the same rules of the executives and board members and insiders so, we have not been able to use these stock repurchases at all up until this point and so it would be I guess this Friday 72 hours after today before we could be in the market active with that.

Yeah, we have models and we’ve been doing a lot of work on that. John, I don’t think there is a specific price, I think a lot of it would depend on that momentum one way the other and kind of what’s going on in the macro economy, that might be affecting our price but we’ll look at it.

We are very discipline with it, given our capital ratio and Brad asked about that earlier.

Given that our tangible equity capital ratio is down around 7% now, it’s not my intention or my desire to give back capital that we’ve obtained to grow, so our first choice is to continue to grow the bank and deploy the capital that way, but as we’ve seen in the last 90 days and 180 days, that isn’t always in our control.

So we can execute our strategy, but the market treats the stock. We’re part of the group of Texas Banks and we’ll get treated accordingly, so – but we know our company and we’re very confident in our ability to grow and execute our strategy.

So there is a price level in there where we think our best expenditure capital would be a buyback around the stock..

Okay, got it.

And then the other sort of strategy question that I had was – it’s come up another kind of quarterly calls, the loan to deposits that ratio kind of – I guess stick down a little bit this quarter with the acquisition?.

Right..

Just under a 100.

Could you talk a little about the deposit strategy and how that might tie into your thoughts on M&A?.

Yes, the Torry’s team in Treasury has been doing a good job.

We had another senior treasury officer in the fourth quarter as well, and so we’ve strapped up our treasury really from Houston to Central Texas to North Texas well and that’s been a real focus, as our C&I book has increased, that’s also enabled a lot of strong core deposit growth that you see in our DDA base continue to grow and non-interest bearing DDAs over 25% at the end of the year.

And so we’ll continue to see some help there, as you’ve pointed out the acquisition helped Houston Community was about 70% loan to deposit ratio, I believe when we close.

And we continue to the part of the M&A discussion, we’re having is with some banks that have very low loan to deposit ratios and very strong core deposit franchises in and around major urban areas, so that’s the lever we’ll continue to look out, but we do – are optimistic based upon the fourth quarter and early this year that we’re going to be able to grow our core deposits as we grow our loans..

Perfect, thanks and then one quick follow-up on the energy stuff. You guys – I have seen in the prepared remarks that you had mentioned that obviously the price tag is dynamic and you’re keeping an eye on things.

We had heard from really only one of the larger competitors in banks that in the space there, they are actually initiating some interim redeterminations and kind of get in line for additional collateral, are you guys doing that without any of your borrowers or is it kind of a more about sort of wait and see approach.

And how do you heard about their strategy to kind of getting in front of the April redetermination?.

That’s a very insightful question, glad you asked that John because, I think our portfolio is a bit unique and we think in a positive way that we’ve got - as I mentioned all the information 30 credits and 28 relationships, of those 28 relationships 9 are syndicated credits, we agent 6 of those 9 credits, where participants in three purchase credits and we purchased those from Prosperity and Legacy.

But the other 25 relationships, 6 of which as I mentioned are syndication or club credits that we are the lead on and then the other 19 relationships that are generally under $20 million each we control so as the only lender – senior lender.

So we have a lot of visibility and a lot of ability to do these price predetermination, we’ve implemented your new decks on a monthly basis here in the last few months prices get fallen so dramatically before that it was generally quarterly, but with the constant review.

And as we planned when prices started falling, we started to change our price decks down immediately.

And, then we are able to go to our borrowers and our credit guys are doing a terrific job, our senior energy leadership is doing a terrific job of talking to our borrowers on a daily basis, we are doing borrowing base predetermination, we are talking about a number of our borrowers are selling off non-core assets and reducing leverage.

We were able to go in and get new engineering updated look at the engineering that we had based upon current price decks for almost all the credits that we’re the most leveraged of the credits.

So obviously, that’s where you look first is where companies have the most debt for their balance sheet or in relation to their cash flows and we’ve been very active really since late in the third quarter managing those on a day in and day out basis and it really just fits, it’s a cultural thing, there is not any virtue necessarily one way or the other, but our culture haven’t grown up from a smaller community bank, is that we want to know our borrowers, we want to have that relationship and we want to be able to pick up the phone or go across town and see them and most the vast majority the assets that we’ve got that are in Texas in the Permian and the Eagle Ford shale areas and our borrowers are almost all in Texas - are mostly in Texas and experienced teams that we’ve had relationships with our senior energy lenders with that relationships with in many cases for 10 years or plus.

And so, we feel great about where we are relative to the fact that we understand that there is a exposure, we understand there is a lot of work to do but our guys are doing work and 25 of the 28 credits we're not waiting on someone else to give us information or to be a wait for the next borrowing base determination where we are working those credits ourselves on a daily basis..

That is very, very helpful. Thank you very much guys..

Okay. Thanks, John..

Thank you. And our next question comes from the line of Joe Steven from Steven Capital..

Good morning, David. First of all, good quarter..

Thank you, Joe. Good morning. How are things in St.

Louis?.

Just fine. No more fundamental questions, I’ll ask you a little bit more of the culture question. With the transactions you guys have done and whenever you guys do a deal I am sure there is other bank sort of trying to target some of your key people and you guys are obviously trying to keep people.

How have you – have you lost any let’s say key people from your transactions or from the core organization? Through sort of this pretty very healthy expansion process you guys bid on. And that’s it, thanks guys..

Great, thanks Joe. We have not lost anyone from the organizations that we have acquired, we’ve done a good job I think of creating agreements with the key rainmakers if you're a business developers in each organization. We have lost and this has been a lesson for us.

We have lost a couple of people from some of our early smaller deals in Dallas we have lost the couple of people that we had under agreement and they stayed for the transition period.

But the change from a $150 million bank grown into a $4 billion bank and the credit process and the expectations for rating your credits up and documenting and all that has been difficult. I think on the some bankers that came over from very small community banks.

The other side of that question, I think is in this rapid expansion have we lost any of our other key people. We lost one of our locations CEO is down the Houston area in 2014. We lost a young lender here in North Texas just in the last couple of weeks, two people who.

In both of those cases they have gone over to banks where there was a more senior position and a lot of more compensation and there is sometimes when – the good folks but – assist there is an opportunity in other company that they believe is better than opportunity they have with us.

That said we rarely lose people that we want to keep and we work hard to that. One of cultural things to your question Joe, is that the vast majority of our lenders and senior producing lenders, our shareholders either via their own purchases or via our grant program.

And so we have a lot of buying and lot of belief in where we are going with the company and so we’ve been able to hang on to our talent. We feel very fortunate about that..

Okay, thank you. Good to hear..

Thank you and that concludes our question-and-answer session for today. I’d like to turn the conference back to management for any closing comments..

Thank you. Appreciate it, and we feel like we had a great quarter, appreciate everyone’s attention on the call today.

We’re optimistic about 2015 in Texas and I know that’s not necessarily a popular sentiment but we feel great about where we’re going and we’re going to stick to the things we control which is growing great bank and appreciate your support. Hope everyone has a great day. Thanks..

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a good day..