Joey Rein - Director of Investor Relations Gerard Host - President, Chief Executive Officer, Director of the Company and the Bank Barry Harvey - Executive Vice President, Chief Credit Officer Louis Greer - Principal Financial Officer, Treasurer; Executive Vice President and Chief Financial Officer of the Bank Thomas Owens - Executive Vice President and Bank Treasurer of the bank.

Catherine Mealor - Keefe, Bruyette & Woods, Inc. Kevin Fitzsimmons - Hovde Group Brad Milsaps - Sandler O’Neill Emlen Harmon - Jefferies David Bishop - Drexel Hamilton Preeti Dixit - JPMorgan Securities Inc. Michael Rose - Raymond James Blair Brantley - BB&T Capital Markets.

Good morning, ladies and gentlemen, and welcome to Trustmark Corporation’s First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation this morning, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded.

It is now my pleasure to introduce Mr. Joey Rein, Director of Investor Relations at Trustmark. Please go ahead..

Good morning. I would like to remind everyone that a copy of our first quarter earnings release, as well as the slide presentation that will be discussed on our call this morning is available on the Investor Relations section of our website at trustmark.com.

During the course of our call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

We would like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties, which are outlined in our earnings release and our other filings with the Securities and Exchange Commission. At this time, we’ll turn the call over to Trustmark President and CEO, Gerry Host..

Thank you, Joey, and good morning, everyone. Joining us this to be part of the question-and-answer session later on are Louis Greer, our CFO; Barry Harvey, our Chief Credit Officer; and Tom Owens, our Bank Treasurer. Let’s start with the review of our financial performance beginning on Page 3 of the presentation material.

We’re pleased to report another quarter of solid financial results. Our legacy loan portfolio experienced growth in the Alabama Texas and Tennessee markets during the quarter. Our acquired loans portfolio made significant contributions to our profitability, with net interest income on acquired loans increased during the first quarter.

While the acquired loan yield continued to exceed expectations. Asset quality metrics continued to perform well for both the quarter and year-over-year as both criticized and classified loan balances continued to decline in our legacy loan portfolio. Average deposits totaled $9.8 billion, an increase of $234 million from the prior quarter.

Total revenue remains stable at $140 million, while noninterest expense totaled $99.2 million, a decrease of $5.2 million from the prior quarter. Our efficiency ratio improved to 66.46%. Our solid capital position reflects our consistent profitability from our diversified financial services businesses.

Net income for the first quarter was $29.1 million which represented earnings per share of $0.43. During the quarter our financial performance produced a return on average tangible equity of 11.86% and a return on average assets of 0.97%.

Yesterday, our board declared a quarterly cash dividend of $0.23 per share payable on June 15, 2015 to shareholders of record on June 1. If you’ll now turn to Slide 4, we’ll discuss the result in a little bit more detail. At March 31, 2015 loan sales for investments totaled $6.4 billion, a decrease of $35.6 million from the prior quarter.

When compared to one year earlier, this portfolio grew $490 million. Construction, land development and other land loans increased $72 million, driven entirely by growth in construction loans across Trustmark’s five state franchises.

Compared to one year earlier this segment of the portfolio experienced a $99 million increase, led by growth in Texas, Alabama and Tennessee markets. State and other political subdivision loans increased $12 million from the prior quarter due to growth in Texas, Alabama and Tennessee.

From the prior year, the $121 million increase was due to growth in Mississippi, Texas, Florida, and Alabama. Other loans which included nonprofits and REITs grew $6 million during the quarter. From the previous year, growth in all five states resulted in the $72 million increase.

Commercial and industrial loans decreased $42 million from the prior quarter as growth in the Tennessee market was more than offset by declines primarily seasonal paydowns in the Mississippi market. Compared to one year earlier, loans grew $21 million as result of growth in Alabama and Tennessee.

Loans secured by nonfarm, nonresidential real estate decreased $36 million during the quarter, as growth in owner-occupied real estate was more than offset by declines in income producing loans. From the previous year, these loans increased $55 million as a result of growth in Alabama and Florida.

Other real estate secured loans decreased $21 million during the quarter as growth in Alabama and Florida was more than offset by declines in our other markets. When compared to same period one year earlier, these loans increased $40 million as growth was diversified across nearly all of our markets.

The single-family mortgage portfolio decreased $20 million from the previous quarter. Many customers took advantage of attractive lower mortgage rates. We elected to sell the vast majority of these lower rates, longer-term home mortgages in secondary market rather than replacing the run-off in the portfolio.

This contributed to our solid performance in our mortgage business. Compared to levels one year earlier, loans increased $80 million due principally to growth in our Mississippi and Alabama markets.

Collectively, at March 31, 2015, loans held for investments and in acquired loans totaled $6.9 billion, a decrease of $86.6 million from the prior quarter and $242 million increase from the prior year.

At our energy portfolio, as you’re aware, we have no loan exposure with the source of repayment or the underlying security of such exposure is tied to the realization of value from energy reserves. That said, Trustmark’s total energy exposure of $429 million at quarter end, outstanding energy-related balances were $195 million.

Should oil prices remain at current levels or below or a prolonged period of time, there’s a potential for downgrades to occur. We’ll continue to monitor the situation as appropriate. Now, looking at Slide 5, let’s discuss the performance of our acquired loan portfolio.

At March 31, acquired loans totaled $498 million, a decrease of approximately $51 million from the prior quarter and in line with expectations. For the first quarter of 2015, the effective yield on acquired loans was 8.63%, while recoveries on acquired loans totaled $3.9 million, which resulted in a total yield on acquired loans of 11.62%.

As a result of our most recent re-estimation of cash flows, we expect the yield on acquired loans excluding recoveries to be in the 6.5% to 7.5% range for the second quarter of 2015. We also anticipate during the second quarter that acquired loan balances excluding any settlement of debt will decline by approximately $50 million.

Let’s look at credit risk management by turning to Slide 6. These credit quality metrics exclude acquired loans and other real estate covered by an FDIC loss-share [indiscernible]. At March 31, 2015, nonperforming assets totaled $167 million, $5 million or 2.7% decrease from the prior quarter and $8 million or 4.8% year-over-year decrease.

Other real estate totaled $90 million, a decrease of 2.5% from the prior quarter and 19.2% from one year earlier. During the second quarter net charge-offs totaled $80,000 and represented less than one basis point of average loans. Classified loans decreased 4.7% from the previous quarter, while criticized loans declined 8.9%.

From the same time period a year ago classified loan balances declined 13.8%, while criticized loans decreased 21.3%. The allowance for loan losses totaled $71 million and represented 205.52% of nonperforming loans excluding impaired loans. Turning to Slide 7, we’ll be looking at our deposit base.

At March 31, 2015 average deposits totaled $9.8 billion, an increase of $235 million from the prior quarter. Noninterest-bearing deposits represented 28% of average deposits at quarter end. We continue to have a great deposit base with approximately 60% of deposits in checking accounts.

Additionally, our cost of deposits continued to decline and totaled just 13 basis points for the first quarter. Turning to Slide 8, we’ll be looking at revenue highlights. Total revenue remained relatively stable and totaled $140 million reflecting Trustmark’s diversified business model.

Net interest income fully tax equivalent basis for the first quarter totaled $101 million which resulted in net interest margin of 3.88%. Interest income during the first quarter declined $1.7 million primarily due to lower yields on taxable investment securities and fewer days in the quarter.

Excluding acquired loans the net interest margin totaled 3.47% in the first quarter, compared to the prior quarter net interest margin excluding acquired loans and if you recall from our last quarter call, the upsize $2.2 million yield maintenance payment, the net interest margin remained relatively stable.

Noninterest income totaled $42.4 million, an increase of $332,000 from the prior quarter. Mortgage banking revenue for the first quarter totaled $9 million or 51.5% increase from the previous quarter and - and when compared to levels one year earlier at $2.1 million or 31.3% increase.

This increase reflects standard secondary marketing gains, improved mortgage servicing hedging effectiveness and increased fair value of mortgage loans held for sale. Mortgage loan production for the first quarter totaled approximately $305 million, an increase of 3.7% from the prior quarter and 32.2% from the prior year.

Insurance revenues during the first quarter totaled $8.6 million, an increase of 10% from the prior quarter and 6.4% relative to levels one year earlier.

For the first quarter, banking card and other fees totaled $6.8 million relatively unchanged from the prior quarters, when compared to the same periods last year however a decrease of $2.3 million reflecting the impact of decreased interchange income as Trustmark became subject to the Durbin Amendment as of July 1, 2014.

Wealth management revenue for the first quarter totaled $8 million, $470,000 decrease from the prior quarter. During the first quarter, service charges on deposit accounts totaled $11 million, a decrease of 11.4% from the prior quarter, as we experienced a seasonal reduction in NSF and overdraft fees.

Other income declined $1.7 million from the prior quarter; due to few factors the first being write-downs of the FDIC indemnification asset. We also realized a loss on the sale of a former branch office building. And finally, insurance proceeds associated with non-qualified plans that were received during the fourth quarter.

Now, let’s turn to Slide 9, and we’ll review noninterest expenses.

In the first quarter noninterest expense totaled $99.2 million, a $5.2 million decrease from the prior quarter and a $2.4 million decrease from the prior year, excluding ORE and intangible amortization of $3.1 million, noninterest expense totaled $96 million, a decrease of $3 million from the prior quarter.

For the first quarter salary and benefits expense remained relatively unchanged from the prior quarter, and totaled $57.2 million from the prior year, a slight increase of $443,000. ORE and foreclosure expense decrease $2.1 million from the prior quarter, while net occupancy and premises expense declined $441,000 from the previous quarter.

Other expense decreased $2.7 million from the prior quarter reflecting contingency reserves established during the fourth quarter as well as lower loan-loss related expenses. We continue to review our retail delivery channels and branch network.

During the quarter we consolidated one banking center and announced plans to consolidate five more banking centers in the second quarter.

Since 2012, Trustmark will have consolidated 28 offices inclusive of pending closures, additionally since 2012, we’ve allocated a portion of those resources into attractive markets including Birmingham Montgomery, Jackson, Memphis and Houston.

We will continue to evaluate these networks and channels based upon customer patterns and trends, and when needed realign resources, relative to the prior quarter, our efficiency ratio improved 270 basis points to 66.46%.

We will continue to be committed to investments to support revenue growth while reengineering and looking for efficiency opportunities to enhance shareholder value.

Now, looking Slide 10, we’ll discuss our capital management, Trustmark continues to maintain a solid capital position, reflecting the consistent profitability of our diversified financial services businesses. And remains well-positioned to meet the needs of our customers and provide value for our shareholders.

At March 31, 2015 Trustmark’s tangible equity to tangible assets ratio was 8.91%, while the total risk-based capital ratio was 14.92%. Looking at Slide 11, our strategic priorities, we have six strategic priorities that will be focused on to enhance shareholder value.

The first and continued primary focus is profitable revenue generation and includes multiple categories. These include creating and expanding customer relationships and will include a focus on business development, and cross-selling efforts across all of our business and geographic markets.

Loan growth will be a continued focus, for example, we strengthened our presence in the Greater Birmingham area with additional commercial lending and real estate professionals, and are committed to expanding our relationships in this market. During the first quarter we experienced seasonal paydowns in the C&I portfolio.

Moreover weather affected funding levels of existing commercial construction loans that we expect will resolve itself in the coming quarter. A positive note, we do see some increases in unfunded construction projects that are already on the books, such that there is an opportunity for future bookings to begin funding.

On the commercial real estate construction front, a strong secondary market has definitely had an impact and there have been a few unexpected paydowns resulting from developers selling their properties, prior to being stabilized. Nonetheless, loan growth will continue to be a focus.

Process improvement and expense management, a lot of work has and continues to be done in this area. We have various groups and committees that work to improve processes and manage expenses. These efforts are not one-time projects or initiatives that will continue to remain important contributors to our financial success.

Leverage existing infrastructure investments, we’ve made significant investments in recent years and are well-positioned to support the significantly larger organization. Credit quality, as usual our $2 million focuses will be to continue our sound underwriting and review processes, and resolution of existing problem assets.

Effective risk management, as we continue to navigate through the new regulations placed on the banking industry, we work towards ensuring that our risk management process has helped to more effectively manage our businesses.

In fact, as you saw on our release we’re gradually transitioning some of the activities performed by third-party consultants to current associates. Mergers and acquisitions. We will continue to use M&A, as an opportunity to complement internal growth and expand into additional attractive markets.

But we will be patience and discipline in our process, so that we can ensure that we continue to create long-term value for our shareholders. At this time, I would be happy to take any questions..

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Catherine Mealor from KBW. Please go ahead..

Good morning, everyone..

Good morning, Catherine..

I wondered if we can take into the expense line a little bit, maybe first looking at the OREO line, I mean, how should we think about the OREO expense run rate? Maybe thinking that in two parts, what’s the core maintenance expense on that - on maintaining that $90 million balance? And then beyond that kind of how you foresee gains and losses kind of bouncing around over the next couple of quarters, as you continue to work through that portfolio?.

Okay, Catherine, a good question and one that’s as you know, are challenging to project accurately simply, because this is so much a function of things that are out of our control quotes other areas, customers, so on and so forth. But first quarter was a little better than we had anticipated.

The remaining quarters we do believe will be at a better run rate than what we had - what we’ve seen last year, maybe not as good as first quarter, but Barry, I would ask, maybe you add a little bit of color there?.

Sure, I would be glad to. Catherine, I guess, looking at it holistically, we would anticipate that our outside, I mean, the recoveries or losses on gains on sale, or losses on sale of ORE.

I would think we’d be looking at it more in the $8 million to $9 million range in terms of our just cost associated with the portfolio, the gains and losses, of course, you are going to, they’re going to ebb and flow. We had a couple of nice gains this quarter that were allowed us to have a much lower number than we would have normally anticipated.

But the ability to predict when those come….

That was three quarters, Barry. They were quarterly basis that you brought in third and second, third and fourth quarter, third and fourth..

Right, for the full year..

Okay..

I would envision that will be what we would be looking at for the full-year. And then like I said, the gains and losses, it’s hard to project that. We do think we’ve got several properties that we got marked correctly.

We’ve got other contracts that we have some meaningful gains and but here again, the difference between having other contracts back, we are closing it, there is a lot of opportunities for slippage there.

But I think as far as the cost of sale goes, I think that $7 million to $8 million are just the cost to carry for that portfolio would be appropriate..

Okay. That’s clear and helpful. Thank you. And then in the other miscellaneous expense that was the decline by about $2 million this quarter, now it’s elevated in the fourth quarter.

So maybe, as we look at that line item is maybe kind of an average of what we saw through 2014, maybe more appropriate and then the $7.8 million - $7.7 million or are there savings in net number that are going to be sustainable throughout this year?.

Catherine, this is Louis. I would say that we expect that number to be fairly reasonably consistent with the first quarter going through the remainder of the year..

Okay.

I think then - and then one last on expenses, savings from the five branch closures, can you quantify any savings from there? There is - are there savings basically all being reallocated into other branch growth in higher growth markets?.

Catherine, I can give you the exact number for that, but I can tell you there are some savings and they are being reallocated to some extent. And I’ll just tell you, as a result, we expect the core run rate to remain fairly consistent for the year.

And I can tell you that, we’ve lowered our head count when you look at our strategy year-over-year about 76 positions or about 2.5%. So we are seeing some benefit from our branch closures, as well as redesigning and processes as we’ve started to implement some of the new technology throughout last year and continuing through this year..

But because you are - it seems like you are comfortable with that extensive ex-OREO and CDI to remain in the $96 million, $97 million range?.

Very comfortable with the $96 million loan..

Okay, great. Thank you for answering the question..

Thank you..

Thank you, Catherine..

The next question comes from Kevin Fitzsimmons from the Hovde Group. Please go head..

Good morning, Kevin..

Specifically more dates, if I’m looking at - I’m looking at Note 4, in the back of your deck where you break up mortgage?.

Hey, Kevin. Kevin, can we ask you to ask that question again? We cut off here just at the beginning..

Oh, I’m sorry, okay. Just wanted to dig into the mortgage revenues and specifically to see how much of that might be non run rate or not? And I’m looking at Note 4 that breaks up the mortgage banking in back of your release.

And when I look at that I, I mean, right or wrong, I typically pullout from core the net positive hedge and effectiveness, which is about $1.3 million this quarter. But then there is two other items, there is this elevated number $1.2 million of what’s called other net under mortgage.

And then I think in the text you mentioned this 304K gain from the repurchase of delinquent loans from Ginnie Mae and then sold to a third-party.

So that elevated amount that $1.2 million in that 304K gain, should we look at that as really non run rate going forward?.

That would be fair. The Ginnie Mae sale, we usually do those once we’ve accumulated enough of that product. Every 18 to 24 months, the FAS-133 is a result of increased volumes and our volumes are up, as you are seeing it other banks simply, because of the breaks have come down.

So we are seeing few more refinances, and new money purchases has been very good. So and then the ineffectiveness or the hedge as you mentioned is a function of the market and spreads and all three of those areas we did very well this quarter.

The one that we don’t anticipate being there for sure, next quarter is the sale of the Ginnie Mae delinquent loans. The other two are, of course a function of, if rates stay low, volumes remain good, and we’re able to continue to effectively manage that mortgage servicing rights, hedge position.

Tom, you want to add anything that I left now or - is that….

Gerry, I would point out, if you look at that 904, we weren’t hedging the fair value decrease 2.4 for the quarter and then last quarter about four. So it is a pretty good strategic position across market to ease up portfolio..

No doubt. No doubt, I wouldn’t disclose that.

But Gerry, can you just - so what was the other net item, it was higher, because of increased volumes due to work?.

All right. When we have increased volumes and if we build this pipeline alone, Kevin, it’s FAS-133. If we build this volume of loans, and we have to while they are sitting there waiting to be packaged and sold. We have to mark those to market. So when there is more in there, and the value has gone up, it comes through as an adjustment to earnings..

Here is just three components to that. There’s loans that are held for sale, you can bring lots of commitments and she has a fair value, so straight components to that one Barry..

Okay. So this is Tom Owens. There is a bit of a timing element to it and there is also a bit of a spread element to it as well, as a function of voice..

Got it. It’s very helpful..

Okay..

Very helpful. And then just one follow-up, Gerry, can you give us a sense, I know you gave us a little snapshot on the energy portfolio in that if things worsen you may have incremental downgrades.

But what are you guys seeing in the Houston market today, is it holding up better than you thought and how are you guys being proactive with those borrowers? Thanks..

Good question and we would anticipate there are some others that would like to hear an answer there. I meet regular with our Houston President Spence Bridges and Barry Harvey our Chief Credit Officer to go over their portfolios, but let me let Barry.

So we’re looking at it, Kevin, from both - I’m hearing from both the line side and the credit side, who are looking at these credits independently but let me let Barry add a little bit more detail and colors on what we have and what we’re looking at..

I’d be glad to, Gerry. Kevin, I’d just kind of put it back in context. For us it’s about 4.45% of our total exposure and it’s also about 2.83% of our total balances. So it’s a fairly small portfolio for us, nonetheless one we just scrutinize every day.

The exposure we have had actually decreased by little over $3 million during - from linked quarter and outstanding has actually decreased by 12.7 linked quarter. So we’re - so from the standpoint the exposure is - it’s a downward movement at this point. We’re continuing to track about 45 credits which make up 95% of our exposure.

So we’re fortunate in the sense that most of our exposures are with large credits, strong companies, strong balance sheets. Things continue to go well at this stage. We marked for the covenants on a quarterly basis.

We are also getting - we monitor to make sure we’re getting financials in timely, looking at those financials, asking the borrowers for projections for 2015 and as far out as they can project, looking at those projections and seeing what they’re going to do to our - to the covenants that exist today, and anticipating any covenant breaches or bust that may occur, sitting down with the customer, having those discussions.

We had maybe two or three credits, I think three credits where we have either anticipated covenant bust or we have covenant bust, sit down with the borrowers, worked it out, have additional capital coming into the company, additional collateral being placed, readjusting the covenants to what’s appropriate.

But what we see out of our borrowers is they’re very much in tune with what’s going on with the revenue stream and they’re very, very quick to try to get those expenses, at least the variable expenses, down as quick as they can, so that they can remain cash flow positive.

And based on the borrowers we have our projections are for going forward are they will remain cash flow positive based on our last projections we perceived. So we feel very positive about portfolio today, nonetheless we do understand as these rates stay low like they are today, $56 on the WTI.

If those rates stay low over contracted period of time, they will continue to be stressed; there will continue to be potentially consolidations in the industry.

Things like that will occur, but we’re going to continue to monitor our covenant packages closely and as we get near or have bust then we’ll have our opportunity to sit down with the customer, while they are still profitable and have those discussions and do the things necessary to take them in a profitable status..

That’s really helpful. Can you - one just add-on.

Can you just remind us what that mix of your exposure is between EMP and oilfield services?.

Sure, we actually don’t have any EMP to speak of. I mean, the numbers are just immaterial and even what we do have is really one consulting company in that business. So it’s really not EMP in the truest sense. From the standpoint of our exposure mix, we’re going to have majority of it in the midstream.

From an exposure standpoint about 49% of it is midstream. Then about 11% and some changes to downstream. About 38% is oilfield services, but in our world that’s made up of the two largest customers are actually providing support to producing rigs and so therefore the way in which they are being impacted is very little at this point.

As a matter of fact they’re very diversified in their revenue stream so they’re actually more profitable this year looking like for 2015 than they were in 2014.

So we feel positive about our oilfield services piece of our exposure and the fact that they got pretty good mix of revenue sources and then - and those in many cases have had some impact at this point but the impact has been fairly limited and the balance sheets are still strong.

Continue to monitor the covenant packages and hopefully we’ll stay ahead of many problems that begin to surface..

Okay. Great, guys. Thanks..

Thank you, Kevin..

Our next question comes from Brad Milsaps from Sandler O’Neill. Please go ahead..

Good morning, Brad..

Hey, good morning. Hey, guys, just wanted to touch on loan growth a little bit. I appreciate the color you gave.

With a little bit of a slow start to the year due to some paydowns et cetera, do you still feel good about your 7% to 8% guidance you laid out last quarter? And then secondly, it looks like construction and land development loans were a big part of the growth this quarter, maybe up to almost 11% of loans.

How high are you willing to take that concentration as you move through the year?.

Let me comment first and then ask Barry to jump in when I finish, Brad. Well, obviously, with what we reported in terms of loans down slightly because of paydowns and I think we actually had some - some of those paydowns were substandard so we’re glad to see those go. I think it was somewhere around, what, 12….

$16 million..

…$16 million of substandard came off, so that was part of that, but nonetheless, obviously that puts us behind a little bit. So the guidance we gave at the last quarter’s call, we would probably adjust back to mid-single-digit range, Brad, given that the pipelines still look very good, very healthy. As we talk have a very competitive pricing market.

And a very competitive from a structural and a covenant standpoint and that is something we have reiterated. We’re going to stick to our disciplines there, because I’ve heard many years ago from a mentor, your bad loans are made in good times.

And so we stick to that discipline and we may have to give some on the pricing, but there again and Tom can talk to this in a minute if we get some questions on the margin. We want to stick to certain disciplines there.

So long way of saying, we feel good about the loans that we have in the pipeline, probability on us booking those loans because of the competitive environment has added a little bit of uncertainty or exactness, I guess, to the whole process.

But I feel very comfortable that with what we see right now, we’re going to remain in the middle to upper side of those single-digit growth for the remainder of the year. And, Barry, anything you want to add to that, please do..

Well, I guess, Brad, from the standpoint of our levels of commercial and residential construction, we’re well inside of the 100% guidance to tier 1 risk based capital that from a regulatory standpoint, so we’re in the upper 50s of that particular measure.

So from the standpoint of growing the construction book, we feel comfortable at the pace that we’re growing now or even little bit faster or more so with what we saw may be in 2014. We’re comfortable with that pace. At least in 2015 we will reassess it as we get there.

But we did grow as you mentioned roughly about $75 million in the commercial construction and residential categories during the quarter. Part of that are new bookings, where they funded up, part of that is going to be existing commitments that began to fund.

One nice thing about our situation today after the success we had in the second-half of 2013 and all of 2014 is we got existing commitments on the books that as they borrow works through their equity contributions that are going in first and in many cases those are substantial equity contributions going in, we probably have if you just ballpark it, maybe $350 million to $400 million worth of commitments that will fund over the next 18 months.

Timing of that, of course, is unknown and the exact amount of each commitment that’s going to fund as a percentage. But I think we look at it maybe in that $350 million to $400 million worth of unfunded commitments that we’ll fund over the next 18 months. That’s both commercial and residential construction.

And then also this quarter, we did see our unfunded commitments grow in a significant way. So we continue to see the process as one where we’re being very selective about the opportunities we see and we commit to. But nonetheless we are seeing opportunities within the residential and commercial construction. We are growing that book.

It will take some time before the equity goes in by the borrower. And then we eventually get the fundings and then it depends upon the secondary market and how instead they are in taking these out earlier than normal as to how long we’ll be able to keep the credits on the books..

Let me add one anecdotal comment. We have a couple directors. One, it is in the construction business significant sized projects throughout the country, and another is in the Heavy Equipment business.

And in our board meetings yesterday in committee meetings the day before a lot of discussion around activity and both of them commented that they have seen in the first quarter of this year slowdown in activities, but they are beginning to see things pick back up again.

And that gives us some sense of comfort that what we’ve just given you in terms of forward projection on loan growth should be positive..

Thank you, guys. That’s very helpful. If I could just ask one quick follow-up, with the pay downs, you did have, were there any elevated level of loan fees that help the net in this quarter that might not otherwise be there, the quarter with fewer pay downs..

No..

Great. Thank you..

Our next question comes from Emlen Harmon from Jefferies. Please go ahead..

Hey, good morning..

Good morning, Harmon..

So, Gerry, you set me up there with a question with the NIM commentary, I guess, just give us a sense of kind of what your expectation is for the NIM as we head out through the rest of the year? And I guess particularly in light of the fact that at least a ten-year has remained at kind of lower levels through the first part of the year here?.

Okay, good. Tom Owens, our Treasurer is chomping at the bit too, to answer that question. So I will let him go with it..

Hi, Emlen. This is Tom. So, core net interest margin held up very well in the first quarter. We talked about being the softness loan growth in the first quarter. I think the right way to think about that is that those two things are directly related. As we’ve guided on previous calls, we continue to expect modest, compression in core net interest margin.

I think in terms of low single-digitish type compression in net interest margin - core net interest margin. But again, we continue to believe that with the anticipated growth in earning assets that we should see core net interest income for the year increased as a result..

Got it. Okay, thanks. And then it’s kind of a little bit of a nuance, but you guys did increase the reserve a couple of million bucks loan loss reserve couple of million bucks quarter-over-quarter.

Just kind of where given there wasn’t a lot of loan growth kind of where you are allocating additional reserve dollars in the portfolio?.

Barry, you want to take that one?.

Sure, I would be glad to. We’ve made really three one-time adjustments to our methodology, where we went in and adjusted or recalibrated a few pieces of our model and truly initiated by Trustmark. And these adjustments resulted in an impact to the reserve of approximately about $3 million.

And based upon those that resulted in what you see as far as actual net provision of the $1.7 million, and I guess, about $2.1 million, if you will when you include the acquired loan. So without those one-time adjustments, we’ve made to the model methodology, we would have been negative provision..

Got it.

So was any of that related to energy, or is that just strictly a kind of quantitative effect?.

It was not related to energy, it was related to both our quantitative and our qualitative portions of our reserve..

Got it.

And I guess, along the lines of that topic, have you guys had, or are you comfortable saying what reserve you have allocated against the energy portfolio?.

The allocation is no different for the energy portfolio than it is for the other categories of loans that is not one, if that’s not a portfolio that we have identified to have any different type of great quality measures on than we do the other portfolios, so you use the same great system - great system functions both by portfolio as well as by market.

But the reserving of those loans is based upon the great upside, and, of course, with the great upside there is a PD and LGD that’s associated with that growth for that market..

All right. Thanks, guys..

Thank you..

The next question comes from David Bishop from Drexel Hamilton. Please go ahead..

Hey, good morning, gentlemen..

Hi, David..

As you’ve released notes, you are rolling out the consumer mobile banking service coming up here.

Does that potentially imply, is that gain traction additional bank closures, if that - if transaction volumes come down, is that sort of in - is that contemplated potentially as you roll this out?.

Yes, it certainly is. But I think the challenge that we find is an issue of demand and pace. We have to carefully monitor how consumers want to interact with us through different channels. There’s still a lot of people that enjoy coming into of our branch bank. They know the people.

We put a lot of emphasis on face to face customer service with our people, but that’s changing. And as people began using the new digital delivery channels, whether it’s remote banking, its image ATMs, or what have you, we have to adjust our resources on our mix.

And I think you will see going forward that our brand - the way our branches operate will be to utilize a different delivery channels and the focus on the customer around those. So, yes, part of a longer, you’ve been seeing it.

We’ve been consolidating branches, but we haven’t made any announcement that we’re going to have this big program to close all of these branches and reduce all, it is a continuous process that has to be managed, which we do and has to be adjusted depending upon the types of customers we have in different markets.

So, as you approach, we use, we will be very aggressive with it, stay focused on it, and make sure that we’re meeting the demands of our customers as to which channels they want to interact with us through, i.e., the example if you look at Apple and you would think that its advanced technologies that have there that, they just sell you the phone and then you turn it on and start working.

And now Apple still have stores. They have people in those stores that interact, and I feel like banking will move in that direction as well..

Got it. Then one follow-up maybe on the fee income side, insurance revenues up 10% sequentially, 6.4% year-over-year.

Do you think you can build upon that year-over-year growth as you move into - move across 2015?.

Well, as with every line of business you’re going to see a challenge there. Our projections are to continue on the path we’ve seen for the last year. We have been adding commissions, insurance, reps, both seasoned and new. And as you know, it takes anywhere from two to three years to validate a new producer, it doesn’t have a book.

And we have been building new producers and now for the last several years and those revenues are starting to show up with those new producers. So, and I guess to answer your question, we are anticipating that we will be able to maintain growth levels in that line of business..

Great. Thank you..

Thank you..

The next question comes from Steven Alexopoulos from JPMorgan. Please go ahead..

Hi, everyone. This is actually Preeti Dixit on for Steve. I appreciate that color you gave earlier on the energy lines, and I know there at least some decline in Texas commercial real estate.

Can you talk about what you’re seeing in the Texas market place outside the energy book and then maybe how much your mid-single digit loan growth is dependent on that market?.

Yes.

Barry, you want to?.

Sure, I’d be glad to start on that, Gerry. The non-performing loan that was the increase for Texas was not energy-related.

But it was in fact in the Texas market, it was multifamily student housing, and it’s a credit that we’re comfortable with where we are today in terms of the reserves versus the potential loss that we believe it to be embedded in the credit, if one does in fact exist.

As far as the Houston market, we’re seeing continued good volume coming out Houston market unrelated to energy, just like we have previously, it might be a project or two less flowing across for decisioning, but that’s a combination of our people in the field doing a very good job of being selective about the projects that we want to move on, engage in.

It’s also lot of them looking to see where are the projects are in proximity and deciding whether we want another project in that same submarket or not, and if they don’t, they’ll pass on that deal and look to another one.

So as we continue to grow during 2013 and 2014, and we have projects underway, we have to become more selective about additional projects in those same submarkets, as well as there are few less projects rolling in for them to take a look at. There are probably a few less investors.

These are larger investors who have opportunities to invest throughout the country.

And therefore, they may be picking and choosing the number of projects they want to invest in the Houston market until they have a little more clarity as it relates to the energy prices, but we’re continuing to see good volume coming out of Houston and we expect that to continue going forward..

Okay. That’s really helpful color. And then, just a last one from us, a follow-up on the provision question. It looks like net charge offs are benefitting from recoveries here.

Can you talk about your pipeline there and the potential for net charge offs to remain very low?.

I think that is going to be a continuation throughout 2015 of recoveries. I think as you look at our loan-loss reserve and our quantitative part of our reserve, we have 12-quarter rolling average. We still have like really two quarters within 2015, where we are rolling off some losses, meaningful size losses from three years ago, if you will.

And as those happens that will also free up reserves within the loan loss reserves.

So we expect for the net charge offs to remain fairly dormant and then we do expect for couple of quarters worth of historical losses in our 12-quarter rolling average to result in some reserves to be released into - to be released now whether or not they’re used for other purposes or we have other needs for those reserves that a release will be determined, but we do in fact note the roll off will incur..

Got it. Thank you so much..

Thank you..

Our next question comes from Michael Rose from Raymond James. Please go ahead..

Hey, good morning, guys.

How are you?.

Good morning, Michael..

Hey, just one question back to energy.

Have any of your service companies been able to raise any additional money to get that through and then secondarily have you restructured any of the loan agreements at this point?.

Michael, can’t - this Barry, I can’t really speak to whether or not they’ve done any additional capital raises. I am not - we are not aware of any that our customers have done or been involved with our even contemplated at this point. Most of our energy exposures are performing very well.

The service side of it is obviously the side of it that has the most challenge to them. But fortunately there, we’ve got a pretty diverse group within that service portfolio. We have had, as I mentioned earlier, we had three credits that we set down with the borrower either directly or through the bank group.

And the terms for covenant structure have been renegotiated. There has been capital injected into the company by guarantors. There we have a situation where we are - we may have restructured the payment arrangements.

But in all cases, we felt like we bettered our position after the conversation, after restructure and are very comfortable with the terms under which we have restructured the deals. There may be a covenant or two that we have set aside for a quarter or two for testing purposes, but in exchange for that.

We feel like we’ve been well compensated for the adjustments we needed to make in the short run..

Okay, that’s helpful. And then maybe as a follow-up, historically, you guys talked about the impacts to the Houston Port with the widening of the Panama Canal. And certainly, one would think that with lower input cost from oil prices that would certainly help that sector and maybe some of the investments you made, you made in the port sector.

Can you just kind of talk about that broadly, and if you continue to invest around the port sector in Houston? Thanks..

This is Barry. We do - we have a call-in group that handles that Pasadena area and the port in general. They do a very good job of prospecting for opportunities there. There continues to be expansion, there continues to be opportunities both in the real estate side as well as the - from the home from time to time.

There will be opportunities for equipment financing and thanks to that nature. But it’s an area that we continuously call in. It is a very dynamic area and we are seeing opportunities being presented out of that area, but it’s just an ongoing effort with the good calling team of exploring the opportunities that are available..

Great. Thanks for taking my questions..

Thank you, Michael..

[Operator Instructions] The next question comes from Blair Brantley from BB&T Capital Markets. Please go ahead..

Good morning, everyone..

Good morning, Blair..

A question about the acquired loans and the run-off this quarter and what is projected for next quarter, are we still looking at about $150 million for the year? I think you mentioned that last quarter..

Remainder of the year, yes..

Remainder of the year, remainder, okay, so about $50 million a quarter. Okay.

How much of that is going into the legacy portfolio per quarter?.

And Blair, I’ll just speak to the first quarter. I believe it was $17 million that actually migrated into the non-acquired loan portfolio during the first quarter.

And then we had - it’s actually $17.9 million that migrated in the first quarter and then of course in 2014 we had about $46 million that migrated from the acquired portfolio into the non-acquired portfolio.

But that is a process by which we’re very, very careful with making sure that it is a new underwriting, it’s a new credit, it is something that we view to be completely different than what we acquired from standpoint of guarantor strain, collateral, cash flows, et cetera.

And when we have those situations occur then we do in fact migrate credits, but it’s a very select group they get considered for that purpose..

Okay, thank you. And then as a follow up, I want to talk about mortgage for a second.

Are you guys looking to hire any more loan officers? And then also, if you could comment on the pending tier 1 RESPA change and then how you’re addressing those issues?.

I’ll start with this and, Barry, if you want to jump in at any point do as well. As far as hiring new loan originators, we are in key markets, markets where we see growth. Alabama because of the footprint bank trust has in place provides some real opportunity for us as does Texas with the growth there.

So, we are looking to expand our originators primarily in those two markets. As far as the tier 1 and RESPA, we are very, very focused on those issues and have done tremendous work preparing for that. So you, Barry, you may want to add little more specifics..

Well - and I do think that the integrated disclosure is a big issue for both our mortgage company as well as our bank and the two are working jointly in conjunction with our compliance group, who’s kind of spearheading the effort to make sure that we’re doing everything we need to do both from a process standpoint as well as from a systems standpoint to be able to be ready to go when the day - later on the year, when the effective date..

Okay. All right.

Do you think, you may have to hire, add some more people to the group to deal with those issues?.

Well, it’s a combination of - and we’ve already done that. It’s a combination of people and adjusting technology process. And those things have been underway for some time and as I mentioned earlier. It’s an area of extreme focus. Our mortgage company is very important to us.

And we absolutely stay on top of all the regulatory issues there and work to ensure that we remain in compliance with all of the new rigs that are coming out..

Got it. Great. Thank you..

Thank you. This concludes our question-and-answer session. I would now like to turn the conference back to Mr. Gerry Host for any closing remarks..

Thank you, operator. I’d like to thank everyone for joining us today for your interest in Trustmark, and we look forward to meeting with you again at our second quarter earnings call. Thank you, again..

This concludes our conference. Thank you for attending today’s presentation. You may now disconnect..