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

Brad Milsaps - Sandler ONeil Michael Young - SunTrust Robinson Humphrey Steve Moss - Evercore ISI Brady Gailey - KBW Matt Olney - Stephens John Moran - Macquarie Capital.

Good day, ladies and gentlemen, and welcome to the Independent Bank First Quarter 2015 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 call is being recorded.

I would like to introduce your host for today’s conference, President and Chief Operating Officer Torry Berntsen. Please go ahead sir..

Thank you, good morning. Welcome to the Independent Bank Group conference call to discuss financial results for the first quarter 2015. I would like to thank you for joining us this morning. I will 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 yesterday evening 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 are having trouble accessing it, please call Robb Temple 214-544-4777 and we will email 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 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. 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 Brooks will open with his thoughts regarding the first 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, and welcome to our first quarter earnings conference call. We were pleased with our results for the first quarter as we continue to execute our growth strategy.

Our organic loan growth for the first quarter was 13% on an annualized basis with total assets reaching $4.26 billion at quarter end compared to $2.35 billion for the same quarter last year. Most of our first quarter growth was focussed in the commercial real estate and non-energy C&I portfolios.

Our core earnings were $10.2 million or $0.60 per diluted share which was in line with our expectations. First quarter earnings reflect the continued growth in earning assets. We remain very focused on asset quality and our metrics for the first quarter remained strong.

The credit team continues to closely supervise underwriting, monitor asset quality and maintain effective credit administration. Specifically regarding our energy portfolio we added one new relationship in the first quarter which is reflected in the $2 million increase in outstandings.

The energy loan that was classified the fourth quarter of last year moved to non-accrual and we made a specific provision against it in the first quarter. One additional energy credit was moved to criticized. These two credits together totaled $17 million approximately 7% of our energy loan book outstandings or 1.5% of the total loan book.

While there could be additional migration in the energy portfolio over the balance of the year we don’t foresee any material losses or problems in the portfolio at this time. We increased our dividend per share by 33% in the first quarter as a result of our earnings growth.

The increased dividend reflects our continuing commitments to enhance shareholder value. And with that I would like to ask Michelle to go over the 2015 first quarter operating results..

Thank you, David and good morning everyone. As noted in the earnings release, our first quarter core net income was $10.2 million or $0.60 per diluted share, compared to $5 million or $0.39 per diluted share for the first quarter of 2014 and to $10.9 million or $0.64 per diluted share for the quarter ended December 31, 2014.

Net interest income was $36.1 million for the first quarter of 2015, compared to $22.1 million for the first quarter of 2014 and $38.2 million for the fourth quarter of 2014. The increase from the previous year primarily resulted from loans acquired in our Houston acquisition.

The decrease on a sequential basis is due to the unusually high amount of loan prepayment fees received during the fourth quarter of 2014 compared to normal levels in the first quarter as well as the fewer number of days in the first quarter for interest accrual.

Our net interest margin was 4.07% for the first quarter, compared to 4.17% for the prior quarter, year quarter and compared to 4.28% for the fourth quarter of 2014. The decreases from the prior periods were primarily due to reduced loan yield, reduced accretion income and reduced pre payment fees.

Our core net interest margin which does not include accretion income was 4.05% for the first quarter compared to 4.1% in the prior year quarter and 4.17% in the fourth quarter. Total non-interest income increased $1.6 million compared to the first quarter 2014 and increased 5000 compared to fourth quarter 2014.

The increase year-over-year is a result of enhanced fees across the number of different areas. On a linked quarter basis, the fourth quarter had gains on the sale of securities and there were no such sales in the first quarter of 2015.

This was offset by increases in mortgage fee income, gains on sales of ORE and fees generated from our wealth management group. Total non-interest expense increased $8.3 million compared to first quarter 2014 and decreased $545,000 compared to fourth quarter of 2014.

The increase year-over-year is the result of our growth and expansion including our two Houston acquisitions. On a linked quarter basis the decrease is related to lower acquisition, compensation, occupancy and professional fee expenses offset by an increase in other real estate and loan expense as well as other non-interest expenses.

The provision for loan loss expense was $1.7 million for the quarter, an increase of $417,000 from the first quarter of 2014 and a small decrease of $81,000 from the fourth quarter.

The provision is directly related to our organic loan growth, the fact that we had net recoveries for the quarter in recognition of the current energy environment including a specific allocation to a previously classified energy loan that was placed on non-accrual status in the first quarter.

As a reminder, we took an additional qualitative adjustment in the fourth quarter of 2014 to prudently reserve our energy exposure. As it relates to loans, for the quarter, organic loans held for investment grew 3.2% from December 31, 2014 or 13% on an annualized basis.

The compensation of the overall loan portfolio is comparable to the fourth quarter. C&I represented 21.1% of the portfolio. Energy, E&P outstandings at the end of the first quarter were $239 million comprised of 29 borrowers representing 7.2% of the entire loan portfolio. As David mentioned, we added one additional borrower during the first quarter.

Virtually all of our E&P customers have hedges in place for 2015 with the average hedge price for oil close to $80 per barrel. Oil field service related balances continue to represent less than 1% of total loan balances at March 31, 2015.

With respect to overall asset quality, total non-performing assets represented 0.43% of total assets at March 31, 2015 compared to 0.51% of total assets at March 31, 2014 and 0.36% at December 31, 2014. The decrease in the ratio from the prior year is primarily related to the increased size of the loan portfolio relative to non-performing assets.

The increase from the linked quarter is related to the previously mentioned energy loan that was classified at year end and was put on non-accrual during the first quarter. With respect to funding, total deposits were $3.39 billion at March 31, 2015 compared to $1.89 billion at March 31, 2014 and $3.25 billion at December 31, 2014.

Growing our core deposit base continues to be a focus while keeping our cost low. The average cost of interest bearing deposits decreased to 0.45% for the quarter compared to 0.51% for the first quarter of 2014, and remain stable from the fourth quarter 2014. Our year-to-date rate on total deposits dropped to 0.33%.

23.8% of our deposits were non-interest bearing up from18.7% a year ago. Total borrowings decreased by $8.9 million from December 31, 2014. The decrease is primarily related to maturities of FHLB advances.

As it relates to capital, our tangible common equity to tangible assets ratio increased to 7.1% at March 31, 2015 compared to 7.07% for the fourth quarter.

Our total risk weighted capital ratio decreased to 11.51% at March 31, 2015 compared to 12.59% as of December 31, 2014 due to organic growth as well as increased risk weightings for certain assets and unfunded commitments under the new Basel III capital rules.

Tangible book value per share continued to increase to $16.65 at March 31, 2015 compared to $16.15 at December 31, 2014. That concludes my outline of the highlights for our financial statements. I’ll hand it back over to David..

Thanks, Michelle. We feel it was a good quarter overall. Growth continue to cross our franchise, our loan pipeline remain strong even with reduced energy lending and we expect similar growth for the remainder of the year.

We took time during the quarter to continue to build our lending team by hiring six new lenders across the footprint which we believe will position us for continued organic growth. Earnings remains solid and asset quality remained strong despite the challenges in the energy market.

There continues to be M&A discussions in Texas, I remain involved in conversations and we intend to build out our footprint as opportunities arise. We will remain disciplined in our approach to acquisitions and will only perceive with an acquisition when it is both strategic and the evaluation metrics are appropriate.

We believe that our strong financial position, excellent credit quality and commitment to our proven business model will yield positive results, differentiate us and enhance shareholder value. With that we will open the call to questions.

Operator?.

Thank you. [Operator Instructions] Our first question comes Kevin [Indiscernible] your line is open..

Good morning everyone, its Healthy [ph] Group..

Good morning, Kevin..

Kevin..

Just a quick question, you mentioned David about the one loan that went to non-accrual and I think you alluded to risk weighting downgrades, but can you give us a sense a little deeper sense on what you saw this quarter in risk weighting downgrades and what you expect going forward.

I know you said you still don’t expect losses to emerge from those, but if just give us a sense on what kind of downgrades you might be expecting and what that may mean for provisioning going forward in the next two to three quarters?.

So yeah to be clear around our release, Kevin, we had the one loan had already been downgraded internally to a substandard category in the fourth quarter and then we placed that loan with a migrated to non-accrual this quarter and there was one additional internal downgrade to criticized of an additional energy credit, so we have two total, one classified one credit [ph] loan at the end of the quarter.

The -- what we see Kevin is we continue to work with our borrowers, they are adjusting to what the prices are. We’re putting plans in place, have put plans in place, some of those plans include selling off some non-core assets in some cases getting some mez [ph] equity or mez financing and behind this and some other things like that.

So the borrowers are doing a great job executing those plans that we have agreed to everybody is on the same page, and so the only risk I think of or the risk for us of potential further internal downgrades would be if there is a material change in the environment again to the negative and that impeded some of our borrower’s ability to execute those plans.

So that’s really the risk for us here through the balance of the year.

I think we’ve got a good handle on our portfolio, we’ve got agreements and plans in place now, our borrowers are executing those plans and if something happened unexpected that cause them not to be able to execute a plan and in some cases if we want to reduce our exposure a little bit and there were unable to do that you know then we would have to continue, watch those internal ratings.

But again, those are around the margin we don’t expect a lot of migration and we certainly don’t expect any material losses.

I think from a provisioning standpoint, Kevin I don’t see it driving our loan loss reserve to be materially different than it’s been over the last couple of quarters but you know that always remains a possibility again depending on the volatility of energy prices, if energy prices settle in here in the 50s low mid 50s where they have been for a while, for a few weeks now then things I think look pretty good for all the Texas banks and if they drop back in the low 40s or into the 30s then I think there is more headwind for everyone.

So we’ll see how it plays out, but we feel very good about where we are today..

Okay, great. One….

Kevin, one thing we’ve continued to add additional hedges to our portfolio which has been a real positive as well especially through the rest of this year and into 2016..

Okay, great, great. Thank you.

One quick follow up, David you had mentioned that you guys continue to have M&A discussions and you continue to look out but what do you think is the likelihood that anything happens in the near future looking out two to three quarters and I say that just because it seemed like a few months ago the talk on M&A was that the likely or potential sellers it’s kind of a deer and the headlights kind of effect where they need this new reality of oil prices to sink in and to see how it plays out and then on the product bank side they just haven’t, they just don’t get the daily stock check of reminding them what they are worth, so the pricing takes a little longer to sink in for them.

So just what you feel on that?.

Yes that’s a good question Kevin and a bit of hard one to answer. My thought is, I do think to answer your initial question I do think that you are going to see transactions announced here in the next two or three quarters in Texas and some more material we are seeing a few small very small deals happen in the last quarter too.

But I think you will see some larger deals get announced, we think the new price reality is taking hold in some of our discussions obviously what happens with the publicly traded stocks will also have an impact in terms of our valuations over the next two or three quarters.

And so, my sense is that those things come together and that we are going to see some activity in the next two or three quarters. You know obviously there are scenarios as with the oil prices that we can’t foresee at this point that could preclude [ph] that from happening but my sense is we’re positive with that..

Okay, thank you very much..

Hey thanks Kevin. Have a great day..

You too..

Thank you. Our next question comes from Brad Milsaps of Sandler ONeil. Your line is open.

Good morning, Brad..

Brad, you might want to check your mute button..

Hey good morning..

Hey Brad, good morning..

David just wanted to see if you could talk maybe a little bit more about the margin and loan pricing.

Obviously this quarter was affected as expected by you know lower prepayment fees and less discount accretion income, but just curious where you are seeing loan pricing and what that means for your NIM for the remainder of the year?.

Good question, Brad. I’ll let Michelle take that..

Yes Brad I think our outlook is still the same as what we have said at the end of Q4. You know we expected this drop in our NIM. It was probably a couple of basis points lower than what I expected, but I still think we are going to see a couple of basis points each quarter through the end of the year.

Our average loan yields looking at that compared to what’s been coming on over this past quarter has gotten actually fairly close to the same number. So I don’t expect to see the same compression especially what we had in this Q1..

Okay, that’s great. And Michelle just to maybe follow up with that one house-keeping item.

Did the tax rate, you mentioned here that some of the professional fees were in the previous quarters may be tax deductible is this more of a new run rate or should we see it snap back to 34?.

No I think this a good rate for us,Q1 we didn’t have any non-deductible expenses in the first quarter and you know it’s kind of bounced around because we did in 2014 but I think this is a good rate for us..

Okay. And then David just maybe kind of bigger picture question. You know you kind of been hanging around this kind of 1 to 105 sort of core ROA for a couple of quarters.

You know with this level of NIM going forward can you talk a little bit about kind of where you see the levers and sort of pushing you know that the profitability even higher over the next few quarters really did this come from you know you guys holding the line on expenses and some of these new lenders you brought on contain to fill like the infrastructure or what are other you know sort of pressure points you see that could improve that run rate?.

Brad, I think the near term is exactly what you said and that is we think we are at a very good experienced run rate right now we’ve realised the cost saves out of our most recent acquisition, so we feel good about that other than adding some lenders which we had projected and had on our budget.

We think the expenses should remain pretty flat and so then it’s just a matter of growing the balance sheet which we feel good about, not only the new lenders we’ve hired, our pipelines are good and then we’ve also got a number of construction projects that more than normal I would say over the last six months that we put onto our books they haven’t funded yet.

So when we look at our unfunded loan commitments we think we’ll get some nice tailwind there in the second, third, fourth quarters out there which again I think will -- first quarter has typically been one of our seasonally weak quarters and we grew at a 13% annual rate we still feel good about the mid teens that we talked about previously for the year.

So, I think that’s the short-term answer. And then of course any M&A activity that we can generate here this year would also push the levers. But we still feel good, Brad that our efficiency ratio comes down this year, ROA, core ROA kicks up and headed toward 110 and 120 eventually in the next couple of years is where we think we can get to..

I think the big point Brad, sorry, we’re on-track, we already thought we would be on the expense side and feel good about that going forward..

That’s great. Thank you guys..

Thanks Brad..

Thank you. Our next question comes from Michael Young of SunTrust Robinson Humphrey. Your line is open..

Hello, good morning..

Good morning, Michael.

I was just wondering if you could give us little bit of color on the geography of loan growth if more of that was going coming from Houston or Dallas or just the location particularly within CRE?.

Yes. We’re remarkably balanced, probably little more C&I based in Houston, but there the activity in the first quarter was right in line with the rest of our markets. Our strongest market by little bit might have been the Austin market. We’ve -- last two quarters this energy has cooled a little bit.

That’s kind of accelerate or made Austin stand out to the positive if you will over the last couple of quarters, but balanced across the board the CRE more in Austin and Dallas and I would say this some of the non-energy C&I more focused in Houston, but in terms of percentage growth, pretty balanced across the portfolio..

And then just as a follow-up, can you provide a little more location around where the lenders were hired and maybe just as you look out to the rest of the year where you have the most opportunity to either hire new lenders?.

Sure. Three of the six lenders were in the Austin area and so we feel like we’re as well positioned in Austin as we’ve ever been for continuing organic growth, two were in the Dallas area and one was in Houston. And so focus five went either Austin or Dallas.

Going forward, and those lenders by the way were hired three from other Texas regional publicly traded banks and three were hired from large privately held banks across our footprint. Going forward I think again we expect pretty good balance in terms of hiring if we look out.

We haven’t put a priority on any market over another we just look for people who fit our culture and our strategy and when we find them in whatever market they are in we try to hire them. And so I would say, we’re just as like that hiring in any of the three markets going forward..

And one last one if I can sneak it in just on the accretion income, obviously a drop this quarter, but do you think we’ve rebound a little bit through the rest of the year or this kind of a good run rate do you think going forward?.

We typical only get about two, three basis points related to accretion income and I don’t really expect that to change. The only time I get significantly more is if we have something that pays off unexpectedly or a loan that we had non-accretable discount.

So that was what you saw in the fourth quarter, but generally just on an ongoing basis it’s a two to three basis points different in our yield..

Yes. So it will be lumpy, Michael, as these acquired loans that have the non-accretable discount on them. Sometimes we refinance or sometimes they sell the property but that secures the loan and it maybe a loan that we had a mark on and at that point we have to bring that back through the accretion income..

Okay. Thank you very much..

Thanks..

Thank you. Our next question comes from John Pancari of Evercore ISI. Your line is open..

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

Good morning, Steve..

I just wanted to ask and touching back on energy loan portfolio, how much of production is hedged for 2015 and 2016 now?.

Virtually every customer has some amount hedges on. The last time I spoke with our credit guys, it was north of 50%, I’m sorry, 65% Tory says, of the 2015 is hedged. And then I think around a third of the 2016 is hedged..

And how do you guys think the energy loan portfolio balances will evolve over the course of the year.

Are you looking for more or less stable or some growth or decline?.

I think our guess is that in the near term it could decline a little bit, that was offset in the first quarter because it picked up a new relationship, but as we look at those plans I was talking about earlier that we put in place to each of our energy borrowers some of those plans do include them selling non-core assets or getting a pay down through mez or equity and so that would be a little bit of headwind on that front.

And then I think more towards third and four quarters we hopefully we’ll be able to add some business as some of these assets change hands and as we’re able to go out and people kind of pick their heads up again and go forward with the strategy of how they’re going to grow their borrowing base.

So, near term I would say, next quarter to probably headwind and then maybe little tailwind towards the end of the year..

Okay.

And because also one more question with regard to the lenders you hired this quarter, are they and they C&I lenders or commercial real estate lenders?.

They look to be evenly balanced between the two about half C&I focused and half real estate maybe with the slight edge towards real estate..

Thank you very much..

Thanks Steve..

Thank you. Our next question comes from Brady Gailey of KBW. Your line is open..

Hey, good morning guys..

Hey, good morning, Brad..

So the one NPL and the one classified loan and the energy both the total $70 million, can you give us a sense, are these production based or they servicing, are these independent originated loans or were these acquired, and I’m not sure if I’ll get it, but can you update us where the reserve stands for the entire energy portfolio?.

Let me take a step first a step on the last one on the reserve. Both of those credits are credits we originated one that’s gone non-performing, we’re the only lender, it’s a small credit a little over $4 million, about $4.5 million of outstanding, that’s one that’s got non-accrual. We put a larger specific reserve against it during the quarter.

Its E&P credit and secured and had some hedges employee etcetera. And then the larger one is a shared credit. I think we’ve got one, I don’t know if there are one or two participants on that credit.

But it’s a credit we originated our customer and just executing a strategy and we’re not getting E&P credit but not – we’re not concerned about loss there, just working through some challenges they’ve had. And it’s not classified, this is internally we downgraded it to a criticized level..

I can’t give an exact number on the amount in the general reserve related to energy. Generally, we put in 1% of our loan growth related to all of our loans. If you remember in the fourth quarter we added about an additional 300,000 just for energy and we’ve also adjusted our qualitative factors for energy in Q1 as well.

And so it’s going to be somewhat north of that 1% of the portfolio. And then, the one loan that we put on non-accrual does have a specific reserve of about 720,000..

Actually, Brad, the other thing is even we gave you this number last quarter but we’ve actually increased it a little bit, but our allowance plus our fair market value adjustments, the total loans is just shy of 1% and also it’s a bigger than it was before..

Okay. All right.

And then, my second question is on capital, you know TC is still little a north of 7%, another risk weighted asset were up a little bit this quarter just with the Basel III stuff, can you update us 7% is a level that’s probably below the average community bank out there, are you all still comfortable with your capital base here as you continue to grow organically?.

Brad, we are comfortable where we are right now and our pro forma show that without any M&A activity that will continue to built a little during the year from our organic earnings, so we feel good where we are today, obviously subject to any M&A activity if we might have and then Michelle, my comment about the Basel III adjustments that we made during the quarter..

Yes. So it relates to our risk weighted assets and those were little higher than we expected, but we’re being very conservative on our risk weightings under new rules and I expect that some of those, especially the unsigned commitments may migrate a little over risk rating the remainder of the year.

So just we were being really conservative in the way we graded those in this first quarter..

Okay. Great. Thanks for the color..

Hey, thanks Brad..

Thank you. Our next question comes from Matt Olney of Stephens. Your line is open..

Thanks. Good morning, guys..

Good morning, Matt..

Hey, Matt..

Hey, circling back on the energy credit discussion, you may have disclosed this, so I’m curious what percent of the energy loans went through.

It’s normally the determination process during the first quarter?.

We’ve been working generally, Matt with our borrowers that we had met in our last quarter’s call for six plus months now.

I think about half or so of our E&P credits actually had a little borrowing base really determination in the first quarter, some had haven’t before, some we reengineered, some data from the third and fourth quarters of last year and they won’t be do for their formal [ph] determination until the third and fourth quarter of this year, but we were able to go in and reengineer the same information if you will with the new prices and things and so that’s part of what we’ve done in working our plans with customers if they had that borrowing base determination say at the end of the third quarter last year rather than waiting till the end of the third quarter of this year.

We’ve agreed with them to go in and some cases have a third party engineer not the one who did the original determination, but the third party engineer to go in, relook at those engineering numbers and lay on the current pricing model and to see how that affected their borrowing base and then we’ve come up with a plan based upon that information.

So it’s kind of what I would say former determination is probably about half, but a lot of more than that in terms of what I would call a soft borrowing based redetermination where we kind of say well if we re-determine today where we would be and how do we want to behave on that information.

And so again that’s all been part of our working with our borrowers..

I think Matt, that’s the beauty of our portfolio if you have 31 credits we’re only a participant in three of that. Well we’ve got the ability again as David pointed out in the past to go in there and take much more in depth look than you would if we were part of a bigger type facility in a small amount..

Yeah, that’s a good point. Thank you, Torry.

And on the Oil field service loans, I know this small part of what you do, but all those service loans, did those also get a complete review in the first quarter?.

Yes. We took, we looked at that in the fourth quarter last year just took a quick early look to see if there any pending problems coming our way and we felt good about them in the fourth quarter.

We went in and actually did in detail and in the first quarter had our senior credit guys down in Houston meeting with those specific borrowers and so we went through every credit kind of top to bottom again in the first quarter, no internal downgrades there and we feel really good about.

The bulk of that 28 million that we were at the end of the first quarter Matt, is concentrated in three or four names down there and obviously we put a lot of our attention on those three or four credits getting to know, getting update with those borrowers but they are all along standing companies third and fourth generation, all privately held, low amounts of leverage and they’re paying that leverage down or have paid it down and so, we feel as good as we can right now about those credits..

Okay.

And then switching gears over towards deposits, I think one of the key priorities this year was kind of be growing core deposits, any update on this initiative in the quarter, anything you can share with us?.

Well, I think across core deposits were up 4 point, a little over 4% during the quarter and our loans to deposit was down to 97.5%, so we keep doing a better job of cornering those deposits from our borrowers. It’s part of our executive loan committee decision when we look at each transaction now. And we’re seeing more deposits come in.

We’re also seeing some more on the public fund side, which is always been a big market for us and that is the very granular portfolio as well and we really get to a number of those smaller areas where our footprint exist we have some really strong relationships there. So, overall deposits keep growing and it’s a major push within the institution..

Okay. Thank you..

Thanks, Matt..

Thank you. [Operator Instructions] Our next question comes from John Moran of Macquarie Capital. Your line is open..

Hi, good morning guys..

Good morning, John..

Just quickly following backup on the energy stuff, so 50% of the re-determinations have done do you have a sense of where the advanced stand on the updated borrowing base? And then a sense of what percentage went up or increased in terms of borrowing base versus went down?.

That’s a great question. In the case that it going down would have been with lower price environment John, the cases where its gone down would have been where they had a lot of new wells they drilled during the fourth quarter of last year they got out into their re-determination that grow a few of them down.

I’d say the majority though increased John slightly, but generally within our policy and within our boundaries and so that’s been I think a positive as we been through these to see that your people didn’t go from 55% to 90% you know if you will they were going from 55% to 62% and things like that.

So still within policy in the handful of cases where they went above our guidelines and our policies where we have plans in place and they are selling off and in a number of cases if they went – even if they weren’t above the guideline.

If they are not drilling wells at this point which most are not, then we put them on MCRs monthly commitment reduction, so we’re getting pay downs monthly now so we’re capturing cash flow and so sometimes the plan is just they went from 57% to 67%, so they are 2% outside our guideline.

We’ve got monthly payments in place that will have them back down below 65% within 60 days so that’s the plan and again as I mentioned earlier in response to another question. The risk of other future internal downgrades or classification is really just would be based upon if any of our borrowers stuck their toe in executing their plan..

That’s helpful.

And do you guys have the number of credits that are on the MCR kind of program at this point?.

I don’t know exactly, let’s see here John looking at a list, I would say about half of our E&P credits now on MCRs and the other half that’s not – they are well on compliance and with our borrowing base formulas and policy, so we don’t feel like we need them at this point..

Got you. Maybe one more follow up on that and this is possibly a stupid one, so forgive me.

The two that are somewhat problematic the one on NPL and the other one that does that migrated this quarter, it’s safe to assume that those are both on MCR, right?.

That’s I mean look here, hang on, I know the one that’s non-accrual sub-standard is something where the other one is here. They both are. That’s great..

Okay. Perfect. And then just one kind of housekeeping item, you guys just reference that a pretty good deposit quarter and I know treasury management big portion and obviously strategically important to get more deposits, do you have an update on I know that last quarter you guys were still I think modest the asset, sorry, liability sensitive.

Any sense of kind of where that stands today I imagine pretty much unchanged and what the thinking is in terms of repositioning things as the year progresses?.

Our model shows us to be still fairly balanced but just slightly asset sensitive right now..

So we take the [Indiscernible] towards the asset sensitive side, John in this quarter, but again very close to neutral and that’s really where we intent to keep it for the balance of the year and certainly if we’ll air toward being more asset sensitive and as we said in the past too we think that because of our strong historical organic growth and ability to grow organically that keeps us even if we show to be balanced in our dynamic model.

If we grow on the bank 15, plus percent a year than you are somewhat asset sensitive because you’re adding all those new assets at current pricing whatever that is when we add them each quarter or so. So i.e.

if rates were to tick up in the third and fourth quarter of this year the growth that we add in the third, fourth quarter this year will come in at those new rates so that makes you a little bit asst sensitive that isn’t necessarily picked up in the model since the model is based upon a point in time where your balance sheet is..

John, the other thing we’re able to -- and take deposits down this quarter slightly, so we’re working hard on that and at the lowest point where we’ve really been deposit cost..

Those have been obviously one of the things I thought about a moment ago John regarding from a high level I see us changing the culture on the deposit gathering we’ve done that.

As we talked about last year, last two or three quarters by building up our treasury management team and really hiring what I believe is that higher level, higher quality team now heading up our treasury management they have really worked hard and gotten the confidence of our senior lending teams are our most active lending teams out there and that’s in lot of cases the best chance we have to grab those deposits is when we bring in a new lending relationship and if the lender doesn’t trust his customer or her customer to the treasury, it doesn’t feel great about a hand off and sometimes there is a resistance there.

And I would say if there’s one thing from just a high level, it hasn’t reflected necessarily, although we had a very good quarter.

I think what you’ll see in the quarters to come now is we’re changing the cultures where we’ve been surely to where we are really going after deposits in a big way when we’re bringing in this new relationships and then we are now going back to our portfolio with our treasury management folks and with our calling officers and finding prospects and people that we’ve been doing business with for a while where we didn’t capture all the deposits we could have gotten and so I think it’s a long-term process, but we’re beginning to see some first fruits of that and I really expect that to accelerate in the next four to eight quarters..

And part of just add what David said, John, part of that is also augmenting it with products for our customer. We’re about to launch a new online commercial system which will be state of the art and that will continue to benefit us from an treasury management standpoint as well..

Terrific. I really appreciate it guys, thanks..

Hey thanks, John..

Thank you. It looks like we have a follow-up from Michael Young of SunTrust Robinson Humphrey. Your line is open..

Hi, just a quick one probably for Michelle, on the increase in asset sensitivity in the quarter, were there any changes at all to the model on the two [ph] of that increase or was it just purely on – you know all the work you’ve been doing on the funding side?.

Yes. We haven’t made any changes to our model in the past year..

Okay..

So it would be totally balance sheet driven..

Okay. Thanks..

Thanks, Mike..

Thank you. I’m not showing any further question in queue. I’d like to turn the call back over to management for any further remarks..

Great, well if there are no further questions that will conclude our first quarter 2015 earnings call. We appreciate your attendance and thank you for your interest in Independent Bank Group. Have a great day..

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