Greetings, and welcome to the Independent Bank Group fourth quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A question-an d- answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Paul Langdale, Senior Vice President, Director of Corporate Development. Thank you. You may begin. Good morning, everyone. I am Paul Langdale, Senior Vice President and Director of Corporate Development for Independent Bank Group, and I would like to welcome you to the Independent Bank Group fourth quarter 2020 earnings call. We appreciate you joining us. The related earnings press release and the slide presentation can be accessed on our website at ibtx.com. I would like to remind you that remarks made today may include forward-looking statements. Those statements are subject to risks and uncertainties that could cause actual and expected results to differ. We intend such statements to be covered by safe harbor provisions for forward-looking statements. Please see page six of the text in the release or page two of the slide presentation for our safe harbor statement. All comments made during today's call are subject to that statement. Please note that if we give guidance about future results, that guidance is a statement of management's beliefs at the time the statement is made, and we assume no obligation to 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 GAAP financial measures are included in our release. I am joined this morning by David Brooks, our Chairman, CEO, and President, Dan Brooks, our Vice Chairman and Chief Risk Officer, and Michelle Hickox, Executive Vice President and CFO. At the end of the remarks, David will open the call to questions. With that, I will turn it over to David. Thanks, Paul. Good morning, everyone, and thank you for joining us on the call today. Our company's fourth quarter results represent a strong finish to a difficult year, with healthy fourth quarter adjusted net income of $1.34 per share and adjusted return on tangible equity of 16.33%. Full- year 2020 net income of $201.2 million reflects the value of our granular community banking model and our ability to adapt to a changing economic environment. Reflecting on the past year, I'm especially proud of how our employees across Texas and Colorado rose to the occasion during 2020 to serve our customers and communities under trying circumstances. As Dan will discuss further, our credit quality metrics remain strong and reflect our conservative credit culture and disciplined underwriting standards. We continue to be encouraged by how well our portfolio is holding up, though as always, we are vigilantly monitoring for any emerging risks as general macroeconomic uncertainty persists. Our capital ratios are at historically strong levels, with a total capital ratio of 13.32%, and our robust liquidity position continues to be augmented by organic deposit growth of 21.54% annualized in the fourth quarter. During the quarter, we also took advantage of our recently reauthorized share repurchase program and repurchased 109,548 shares of our stock for an aggregate cost of $5.7 million. With that overview, I'll turn the call to Michelle for more detail on the operating results for the quarter. Thank you, David. Good morning, everyone. Selected financial data for the quarter is on slide six. Fourth quarter adjusted net income was $58 million, or $1.34 per diluted share, compared with $56.8 million or $1.32 per diluted share for the fourth quarter last year and $59.6 million or $1.38 per diluted share for the linked quarter. Net interest income was $132.8 million in the fourth quarter, up from $128.1 million in the fourth quarter last year and up from $132 million in the linked quarter. While net interest income was negatively impacted by a year-over-year reduction of $4 million in purchase accounting accretion, this was more than offset by a continued reduction in funding costs during the quarter and earning asset growth that was primarily driven by increased mortgage warehouse loans as well as cash held at other banks due to continued deposit growth. The adjusted NIM, excluding all loan accretion, was 3.24% for the fourth quarter, compared with 3.49% from the fourth quarter last year and 3.32% in the linked quarter. The core margin decreased by eight basis points from the linked quarter, due primarily to lower asset yields as well as increased balance sheet liquidity. Total non-interest income was $19.9 million for the fourth quarter, compared to $25.2 million in the linked quarter. While mortgage production remained strong and gain-on-sale margins compressed only slightly, mortgage banking revenue was impacted by fair value adjustments on loans and derivative hedging instruments of $4.3 million due to treasury rate increases during the fourth quarter. Non-interest expense totaled $75.2 million for the fourth quarter, an increase from $73.4 million in the linked quarter. Professional fees increased $493,000, and charitable contributions were up $300,000 from the linked quarter. Fourth quarter non-interest expense also includes $1.3 million of unusual items due to PTO paid out because of the pandemic and two accrued contract terminations. Slide 22 shows our deposit mix and cost. Total deposits were $14.4 billion as of quarter end, an increase driven by organic deposit growth of $747 million or 21.54% annualized for the quarter. We estimate approximately $395 million of deposits related to PPP borrowers remains on the balance sheet as of December 31st. Capital ratios are presented on slide 24. In the fourth quarter, the company's consolidated capital ratios continued to grow with the common equity Tier 1 ratio increasing by nine basis points to 10.33%, and the total capital ratio increasing by three basis points to 13.32% for the quarter. As David mentioned, we did utilize our stock repurchase plan during the fourth quarter, acquiring $5.7 million in shares. That concludes my comments. I will turn it over to Dan to discuss the loan portfolio. Thanks, Michelle. Overall loans held for investment, excluding mortgage warehouse purchase loans, were $11.6 billion at quarter end, down slightly from the linked quarter. Excluding PPP loans of $804.4 million, loans held for investment decreased year-over-year by $87.2 million, primarily as a result of the economic dislocation caused by the pandemic. While new loan originations continued to show recovery from earlier in the year, commercial real estate loan payoffs remained elevated in the fourth quarter. Mortgage warehouse purchase loans averaged $1.2 billion for the quarter, up from $894.9 million from the linked quarter. Our mortgage warehouse continues to see robust demand due to the low interest rate environment. Slide 17 provides additional detail on our pandemic loan modifications. Of the $2.6 billion of loan balances that received temporary payment relief during the pandemic, only $205.7 million remain in active deferral as of January 15, 2021. Loans with active payment deferrals represent just 1.7% of overall loans held for investment. This number includes loans that have been restructured with payment deferral mechanisms under Section 4013 of the CARES Act. The largest group of loans remaining on deferral are hotel credits, and we remain confident in the strength of this conservatively underwritten book. Our credit quality metrics continue to reflect the overall strength of the portfolio, with total non-performing assets of $52.0 million, or 0.29% of total assets at December 31st, 2020. Non-performing assets increased over the linked quarter due to the addition of a $12.6 million energy loan that has been discussed in prior quarters, as well as two commercial real estate loans totaling $15.9 million. These additions were offset by a $3.5 million energy charge-off, and the renewal of the $15.7 million commercial real estate loan that was discussed last quarter. Net charge-offs remained low at 11 basis points annualized for the fourth quarter, and were primarily driven by the previously mentioned energy charge-off that had been fully reserved against in prior quarters. As you know, we elected to defer the adoption of CECL last March with the expectation of adopting it as of 12/31/2020. On December 27th, 2020, new legislation extended the adoption date to January 1st, 2022. The SEC has indicated they will not object to an early adoption date of January 1st, 2021, and therefore, we have elected to adopt CECL and record our day one retained earnings adjustment as of that date. Our 2020 provision was calculated using the incurred loss model, and we will use the CECL model going forward for 2021 provisions. These are all the comments I had related to the loan portfolio this morning. With that, I'll turn it back over to David. Thanks, Dan. Looking back at 2020, our community banking model enabled us to effectively manage risk and deliver another year of consistent financial performance, despite an unprecedented operating environment. Most importantly, this allowed us to support our customers and serve our communities when they need us the most. We are also proud to have continued to enhance shareholder value by growing tangible book value per share, increasing our dividend, and reauthorizing our share repurchase program. Looking ahead, our company is well-positioned to win new business and participate in the economic recovery across our footprint. Though uncertainty remains, we are encouraged by what we're seeing on the ground in Texas and Colorado, and we look forward to seizing opportunities for continued growth and shareholder value creation as the new year unfolds. Thanks again for taking time to join the call today. We'll now open the line to questions. Operator? Thank you. We will now be conducting a question- and- answer session. If you would like to ask a question please press star one on your telephone keypad. The confimation tone indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. To a participants using speaker equipment and may necessary to pick up your headset before pressing the star key. One moment please to call your question. Our first question comes from the line of Matt Olney with Stephens. Please proceed with your questions. Hey, thanks. Good morning, guys. Good morning, Matt. Good morning. I want to start with core loan growth, ex-PPP and the warehouse. Looked pretty immaterial in the fourth quarter. Would love to hear about the pushes and pulls on this in the fourth quarter with respect to pay downs, originations, and then expectations for 2021. Matt, we had a continuing large amount of headwind from pay downs in the fourth quarter. At the end of the year, we went back and tracked. We booked approximately $3 billion of new fundings in 2020. We had about $3 billion of payoffs in 2020, we ended up being relatively flat or virtually flat for the year. That compares to the year before, where we actually had positive in 2019, positive loan growth. I believe our total fundings were around $3.2 billion. The falloff in fundings was less than 10%, 2020 over 2019, but the payoffs accelerated and covered up the loan growth that we had. That said, we're seeing some positive early signs here. Early in the year, January, the payoffs seem to be trending down. We had positive loan growth, ex-PPP and ex-warehouse here early in the year. We're encouraged to what we've indicated before. We did our planning round this year, which is a mid-single-digit loan growth, ex-PPP, ex-warehouse for 2021, and then accelerating to an upper single digit for 2022 and beyond. We really believe in a normalized environment, Matt, that weakened in the markets we're in. Also we've hired a head of middle market commercial for Texas. Very talented executive who's been in this market for her entire career, and somebody that we are going to build a significant team around here in 2021. We think that a combination of the markets that we're in, Matt, as well as this team we're adding, building in middle market commercial, as well as the investment on the retail side, and that all that will yield us the ability long-term to continue to grow at rates that we were growing at prior to the pandemic, which upper single digit. Okay. Appreciate that. As a follow-up, wanted to ask about the mortgage warehouse. I think you said average balances were around $1.2 billion. Up again, just a strong year for the warehouse. Would love to hear what the crystal ball says about the outlook here. I think we're all trying to figure out where the volumes will settle out once we get beyond this current surge. Thanks. Yeah, as we're thinking about that, Matt, the volumes continued, as you said, to be really strong in the fourth quarter. We feel good about the quality of the mortgage companies we're doing business with. Feel like we've really been able to, by building the team that we've built, the leadership in that area, been able to build strong and important relationships with these companies. In essence, Matt, the goal with these quality relationships is to move up in the funding stack, if you will, so that as their volume tapers off, they take that away from other participants before they take it away from you. In that regard, we think we've made a lot of progress. We're seeing it here early in the first quarter that our average outstandings have not come down as much as we would've expected. That said, our planning for this year is that on average, about $1 billion, we think is a good landing place as the market calms down for us. Around $1 billion in average outstandings quarter- by- quarter. Right now it looks like it'll be a little higher than that maybe in the first quarter, but for planning purposes, we're thinking $1 billion. Michelle, is that fair? Yeah, I think that's right. Okay. If I could sneak in one more with the warehouse. Any color on pricing, whether it's settled down or if it's stabilized or improved at all the last few months? Matt, this is Dan. The pricing in mortgage warehouse is, I'd say stable. There's always been pressure on it, and we expect as we look at this year that that'll continue to be there. I think as David said, the relationships we've built puts us in a good position, I think, to hold pretty well on the pricing for now. Okay, great. Thank you, guys. Okay, thanks Matt. Thank you. Our next question has come from the line of Brad Milsaps with Piper Sandler. Please proceed with your questions. Hey, good morning. Hey, good morning, Brad. Hi, Brad. Brad. Just wanted to start with asset quality. I think previously you guys thought there'd be around an $80 million adjustment when you did adopt CECL. I guess first, do you think that would be about the same, and how does that impact your decisions around or how you're thinking about provisioning in 2021? Yeah, Brad. We are going to record our day one adjustment now as of January 1, 2021, which is a different day one. We're in the process of finalizing that number. Primarily because of PCI loans. We're looking at the status of those and making sure that we're accounting for those correctly as of day one. Based on what we know today, last year we disclosed that would be about an $80 million adjustment. It shouldn't be much different than that. It could be a little less because we did have some larger PCI loans that paid off during 2020 that we don't have in that number anymore. My best guess would be a $70 million-$80 million adjustment at this point on top of what we have in the reserve. For loan loss provision this year. Yeah. I think Dan would concur. I think, we believe that we are fully reserved, and wouldn't expect to have significant provisioning in 2021. I would agree with that. Okay, great. That's helpful. Michelle, just riding quickly and around kind of some of your expense commentary. It sounds like expenses might have been roughly flat, absent maybe a few things that kind of went against you this quarter. First, I guess, is that kind of a fair assessment? Secondly, how would you feel about expense growth going into this year? Yeah, I think that's accurate, Brad. If you look at our core schedule, we reported $74.8 million in non-interest expense for the quarter core, but that does still include that $1.3 million of the PTO and the contract terminations that I mentioned earlier. If you go with my guidance that we figure we'll have 3% expense growth in 2021, I think that puts us at about a $75 million run rate in non-interest expense going forward. Great. That's helpful. Maybe just final question for David. I noticed you, and you mentioned that you bought back a small amount of stock in the fourth quarter. Just kind of curious, with the shares trading in the 60s, would you guys consider buying the stock back, or do you think saving capital here for potential M&A is maybe a better use? Just kind of curious your thoughts around capital management. Yeah. Thanks, Brad. Our view is that with the volatility in the stock that our stock trading below 2x tangible, knowing on the other side, you mentioned, an alternative use is M&A, which we're very keen on and have been in our history as a public company, as you know. That said, price expectations from high-quality sellers in the best markets are still pretty robust. When we balance it up, it feels like our stock at below 2x tangible, we should be more active at north of 2x tangible than I think we begin to lean more toward hang on to it with an eye toward M&A and strategic M&A. That's an outline. Yes, we will be active this year when our stock is trading below 2x tangible. There's just a lot more clarity now about risk. The election's behind us, the pandemic, the vaccines are rolling out. Regardless of your view about specifically when we'll get to herd immunity and everything, I think we have a better handle on risks now than we had early in the fourth quarter, as an example, when our stock was trading in the 50s, and we were a little more hesitant to be super aggressive there pending what was going to happen in the election and all that. Hopefully that gives you a little clarity. No, thanks. I appreciate the color. I'll hop back in queue. Thank you. Okay. Hey, thanks. Thank you. Our next question is coming from the line of Brady Gailey with KBW. Please proceed with your questions. Hey, thank you. Good morning, guys. Hey, good morning. Brady. Brady. I wanted to ask about the other side of mortgage, not the mortgage warehouse, but your traditional gain on sale mortgage fees down in fee income. If you back out the hedging adjustments, and it looks like the last couple quarters that's been running a little on top of $13 million a quarter, so a very nice level. I know it's tough to forecast that into 2021, but how much downside do you think we could see in mortgage fees just as that market calms down a little bit in 2021 versus 2020? As you said, Brady, that mortgage volume is really hard to predict because it's so based on rates, really. I can tell you through January, their volumes were still really good, maybe down a bit from where they were in December, which is sort of seasonally unusual, right? Usually, it takes a bit for them to get going again. I think it's what we've guided to before is that we thought they wouldn't go back to where they had been previously because we've really built out that team and that group and added lenders. We're thinking they could go back down to 25% less volumes, that's not really what we're calling for this year. I expect that they will continue to have good volume for the first half of the year anyway. All right. That's fair. Michelle, on the topic of the margin, I know you've been talking about the margin compressing down modestly, which is what has happened. Off the 344 base this quarter, how should we think about the margin? Excluding any sort of noise from PPP forgiveness, like kind of that core margin, is compression still the right way to think about it into 2021? It is. When we talk about core margin, I am excluding all of purchase accounting accretion, which we'll continue to have, and PPP fees, which we anticipate we'll get most of our PPP income on the first round in this probably first and second quarter. Based on our modeling and our outlook for this year, we think our margin is probably going to compress a couple of basis points a quarter, so it could compress eight basis points over the year. That's my early outlook anyway. Just given our loan yields currently are coming on 10-12 basis points lower than our overall average yields. We are trying to invest some of our excess liquidity in our securities book, but those yields currently are about 135. While that's not great, it is better than what we're earning at Fed. Just trying to boost our net interest income a bit there. Okay. All right, finally from me, I just wanted to ask about bank M&A. It seems like everybody is expecting 2021 to be a fairly robust year for bank M&A, especially in Texas. I mean, David, I just heard your comments about sellers' expectations are still pretty robust, and if you're stock under 2 times, then maybe you just look to continue to buy it back. I think the market may be anticipating you guys kind of re-engaging in your traditional bank M&A game. Maybe just a little bit of color on how you think bank M&A will unfold in Texas, and do you think IBTX will be active? Yes. Our desire is to be active, Brady, as we have been in the past. There are a lot of discussions going on across the market. I'm encouraged by that. On the other hand, our list of targets are call it $2 billion-$10 billion in asset, high quality companies in the major markets in Texas and Denver. That's not a really long list. It's probably eight or 10 companies. Given that, we are involved. I'm encouraged. I do think there's going to be M&A in Texas here in the first quarter, second quarter, and then through the year. I think it's just early to tell. Much of it, as you alluded to, Brady, depends on how the market's trading generally and how stock prices are doing and what sellers' expectations are. We're looking for high quality company that wants to be a part of what we're doing, and we want to do a smart deal with the right company. I am optimistic that that's going to happen for us this year. That said, kind of the joke around here is we don't need the practice. So we're going to do a smart deal with the right company. We don't need to do a deal just to say, "Oh, geez, we can still do M&A." We're going to grow our company. We're continuing to build out our infrastructure and building our platform to be a $25, $30 billion company, which is still where we believe we'll be in three, four years. Kind of really focus as well on building out that middle market, executing on our retail strategy, and getting back to a more robust organic growth rate as the core of our company. That's always been the core of Independent, different than some acquirers. We're an organic growth company first, and then we layer in really high quality material M&A on top of that when we get the opportunity. I'm optimistic about it, but also realistic that there aren't just three or four great companies out there going, "Oh, we're ready." It just takes work and continuing to build relationships, and then the timing has to be right. All right. That makes sense. Thanks, David. Thanks, Brady. Thank you. Our next question comes from the line of Brett Rabatin of the Hovde Group. Please proceed with your questions. Hey, good morning, David, Michelle. Hey, good morning, Brett. Hi, Brett. Most of my questions have been asked, but wanted to circle back around on loan growth and the organic growth story. Can you talk about maybe hires maybe late in the year, what the prospects you think might be for 2021? Thinking about that core mid-single-digit loan growth for 2021, is that going to be more in specialty lines of business? Or maybe give us some color, if you could, just on how you think the organic growth or what buckets that ends up coming from. Sure. Happy to give more color on that, Brett. We did continue to build out, and we're a little further along in building out the retail team. We've hired a leader there, Kenyon Warren, and then a strong team of leaders with Kenyon. We had a strong presence already in Colorado on the retail side. That's going very well. The biggest hire we made recently was the addition of, as I mentioned earlier, Tiffany Cason, who is a longtime Texas executive in middle market commercial lending. She joined us, I believe, beginning of the year and is steady building out her team now. We're talking with lenders across Texas, particularly in Houston, as an example, where we expect to be active there building out the team as well. It's the early days, but I expect by the second half of this year when we kind of look out Brett, by the second half of this year, we should have some tailwind, particularly in the middle market side on the loan growth, organic loan growth. We think our loan growth we expect here in the second half of 2021 and into 2022 is going to be more balanced than it historically has. Although, we're still seeing a lot of great real estate opportunities and transactions. We expect and are seeing a little more floating rate flavor to what we're adding. As Michelle said, we're adding loans a little below what our current portfolio rate is, eight, 10 basis points or so. A year ago, or I guess, early in the pandemic, with the competition last summer, we were adding loans at 25 and 30 basis points below our portfolio rate. That's narrowed now to eight or 10 basis points. I think that's a contributing factor to what Michelle said about the NIM. When we have an $11.5 billion book and we're adding $50 million or $100 million a month to that, then it takes a while. At eight or 10 basis points, the math doesn't jerk your loan yields overall down quickly, as long as you can add loans in and around five, 10 basis points below the total portfolio yield. Okay. That's helpful. Just back on the margin. I appreciate the color on the core margin commentary, Michelle. I know it's difficult to predict to some degree, any color around the stated margin in the first half of the year? How you expect maybe the PPP forgiveness to play out in the first half of the year? Any thoughts around the stated discount accretion, at least for the early quarters? That PPP number, Brett, right now we think that most of it's going to come this quarter. We have had a good amount of payoffs that have came in in January, and I think that will continue through the second quarter. I really can't predict the impact. It will be a few basis points increase on our margin. It'll be a bit lumpy. Purchase accounting accretion should just continue at a similar rate. It'll just continue to go down. I think it was a little less than $7 million in the fourth quarter. That's going to continue to trail. Just look at it going down $200,000 a quarter is what I would expect at this point. That number has become pretty stable. Okay. Great. Appreciate the color. Hey, thanks, Brett. As a reminder if you would like to ask a question please press star one on your telephone keypad. Our next questions come from the line of Michael Rose with Raymond James. Please proceed with your questions. Hey. Good morning, everyone. Hey, good morning, Michael. Hey. Just had a question on the increase in classified balances this quarter. They're still really low as a percentage of loans, but just wanted to see what drove that increase. Was it some of the kind of COVID impacted sectors, just classifying them? Hey, Michael, this is Dan. Yeah. As you noted, it was only up slightly, really, from the third quarter. Little bit of C&I in there. Some hotel, as you might expect, would be part of that. Those would be the two primary categories. Okay. Maybe just one last one for me. Just back to the mortgage warehouse. It's growing essentially every quarter since you guys kind of got in the business a couple years ago. If we're assuming growth is going to be on the held for investment side, kind of lower than it has been historically, at least during this period, is there any reason that you might want to get a little bit more aggressive in the warehouse? Maybe can you just give us an update on number of customers, et cetera? Thanks. I don't know the number of customers right offhand, Michael. We can get that to you. Paul can get that to you later today for sure. Our core belief is that mortgage warehouse is a terrific business when it's in the right proportion to your balance sheet and to your income. Because of the volatility, it's still a business we're cautious around. We like it a lot. We have great customers in it, but we don't want it to be $2 billion or $3 billion. Our core view is average outstandings around $1 billion, give or take, is a good place to where we want to be. Look, I do think there's an opportunity to be aggressive in that business right now if one wanted to be. We just are choosing not to be. Okay. That's all I had. Thanks, everyone. Hey, thanks, Michael. Thank you. There are no further questions at this time. I would like to hand the call back over to management for any closing comments. Really appreciate everyone joining in today. If there are no further questions, we'll conclude the fourth quarter earnings call. Appreciate everyone, your interest in Independent Bank Group, and hope the world allows us to be out on the road seeing you in person sometime later this year. In the meantime, be well. Thank you. That does conclude this morning's call. You may disconnect your lines at this time. Thank you for your participation, and have a great day.