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 – KBW Kevin Fitzsimmons – Hovde Group Elan Zanger – Jefferies Preeti Dixit – JPMorgan Securities Inc..

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 Gerry Host, President and CEO of Trustmark..

Thank you, Joey, and good morning, everyone and thanks for joining us. Also on the call with me this morning are Louis Greer, our CFO; Barry Harvey, our Chief Credit Officer; and Tom Owens, our Bank Treasurer. Let’s begin by reviewing some highlights on page 3 of the presentation material.

We continue to work diligently towards achieving another quarter of solid financial results and executing on our strategic initiatives to enhance long term shareholder value.

Looking at profitable revenue generation, across our five footprint, our states footprint, we expanded our loan portfolio with loans at over increasing approximately $177 million or 10% annualized from the prior quarter. Revenue excluding interest income from acquired loans increased about $4 million or 3% length quarter.

Net interest income excluding acquired loans remained stable from the prior quarter, but increased 6.7% year-over-year. In light of the continued low interest rate and competitive pricing environment, this quarter’s performance reflects our continued focus on profitable credit disciplined loan growth.

Noninterest income increased approximately 10% from the prior quarter, that’s higher mortgage banking and other income more than offset seasonal reductions in a couple of fee income categories. Next, process improvement and expense management.

During the first quarter, routine noninterest expense remained well controlled and totaled approximately $97 million. We also continued our measured approach to realigning our delivery channels.

During the first quarter, we opened and closed one branch office and in the second quarter we will close six branch offices with limited growth opportunities across Alabama, Mississippi and Florida.

This past December we introduced mobile deposit capabilities to my myTrustmark our digital banking platform and adoption of that feature has been very strong. A couple of weeks ago, we also added money management capabilities which allows our customers to track their spending across multiple accounts including those in other financial institutions.

We will continue to expand product features and functionality to provide customers with the product and services they desire. Under credit quality, credit remains solid reflecting decreases and increases in various metrics that were in line with normal business activities.

We also remained adequately reserved, representing the level management considers commensurate with the inherent risk in our loan portfolio. Overall, net income for the first quarter took total $27 million which represented earnings per share of $0.40.

I’d also like to remind you that our board declared a quarterly cash dividend of $0.23 per share payable on June 15 to shareholders of record from June 1. Turning to slide 4, we’ll discuss this quarter’s results in a little more detail.

For the first quarter of 2016, average deposits totaled $9.6 billion with noninterest-bearing deposits representing approximately 30% of total average deposits, attributing to a total cost of deposits of 13 basis points for the first quarter. On slide five, we’ll look at credit.

As a reminder unless noted otherwise, the credit quality metrics I will discuss excludes acquired loans and other real estate covered by an FDIC loss share agreement. Year-over-year criticized and classified loan balances decreased though we’re up on a length quarter basis.

Nonperforming loans were also down from levels one year earlier but increased from the prior quarter because of three substandard credits; two in energy and one in healthcare that moved to nonaccrual status. Other real estate continues to show improvement down from both the prior quarter and year-over-year.

The allowance for loan losses represented approximately 203% of nonperforming loans excluding impaired loans. And the allowance for both held for investments and acquired loans represented 1.09% of loan balances. Now turning to slide 6, we’ll be looking at our loans held for investments portfolio.

At March 31, 2016, loan held for investments totaled $7.3 billion an increase of approximately $177 million from the prior quarter and $854 million year-over-year. Growth this quarter was generally diversified across our five state franchise as well as by loan type.

The length quarter decreased in the construction, land development and other land loans, primarily reflects the migration of construction loans into other loan categories within the held for investment loan portfolio.

Looking at our energy portfolio, Trustmark has no loan exposure, where the source of repayment or the underlying security of such exposure is tied to the realization of value from energy reserves.

At quarter end Trustmark’s total energy exposure was approximately $482 million in outstanding balances or about $253 million, which represented approximately 3.5% of the held for investment loan portfolio. I’d also like to note that no risk rating or accrual status changes were made as a result of the recent shared national credit review.

In terms of nonaccrual energy loans as of March 31, balances represented less than 4.5% of the energy in portfolio in less than 20 basis points of the HFI portfolio. At this juncture, we view the activity of the energy portfolio as more isolated events as opposed to something that is representative of the portfolio as a whole.

As a reminder, should all prices remain at current levels or low or a prolonged period of time there is a potential for downgrades to occur. We’ll continue to monitor the situation as appropriate. Now, looking at slide 7, we’ll look at the performance of our acquired loan portfolio.

At March 31st, acquired loans totaled $365 million, the decrease of approximately $25 million from the prior quarter. For the next quarter, we expect the yield on the acquired loans excluding recoveries to be in the 5.5% to 6.5% range.

We also anticipate during the second quarter that acquired loan balances excluding any settlement of debt will decline by approximately $25 million to $30 million. We’ll now turn to revenue highlights on page 8.

Net interest income after the first quarter totaled $99 million and resulted in net interest margin of 3.54%, both reflecting decreases in accretion and recovery income on acquired loans. Excluding acquired loans and yield maintenance payments the net interest margin from the first quarter totaled 3.38%.

in the first quarter, noninterest income total approximately $43 million, up about 10% from the prior quarter. Mortgage banking income increased relative to the prior quarter because of increased fair values of mortgage loans held for sale and positive mortgage servicing hedge ineffectiveness.

Other net income increased from the prior quarter because of decreased expense related to FDIC indemnification assets as well as decreased partnership amortization of tax credit investments. Collectively, the increases in these two line items more than offset seasonable reductions in NSF in overdraft fees as well as interchange income.

Turning now to slide 9, we’ll review noninterest expense. In the first quarter routine noninterest expense totaled approximately $97 million remaining stable from both the prior quarter in the same period one year earlier.

The relatively stable routine noninterest expense partially reflects the reallocation of cost savings into other areas of the corporation. As mentioned earlier, on the calls, we continue to realign our retail delivery channels from both a branch and digital perspective.

Looking at slide 10, capital management, Trustmark continues to strengthen its solid capital base and remains well positioned to pursue various capital deployment alternatives. This past quarter we announced $100 million share repurchase program that expires on March 31, 2019.

We view this program as another capital deployment option in addition to loan growth, M&A and delivering a consistent dividend. At March 31, Trustmark’s tangible equity to tangible assets ratio was 9.01%, while the total risk based capital ratio was 13.92%.

We continue to remain prudent and diligent in the evaluation of all capital deployment opportunities to ensure that long term shareholder value is created. On slide 11, we will continue with our strategic priorities. We continue to work diligently to serve our customers and execute on our strategic priorities to deliver long term shareholder value.

We are continually changing the corporation to better address the changes our industry faces, but are doing so in a way that causes minimal disruption to the relationship we have built over the years. We are excited about the progress we’ve made on many fronts whether it’d be loan growth or an enhanced customer experience via myTrustmark.

We believe the strategic priorities in place align our activities with our focus. And we’ve contributed to the expansion of customer relationships and the value of the Trustmark franchise. At this time, I’d be happy to take any questions..

[Operator Instructions] Our first question comes from Emlen Harmon of Jefferies. Your line is open..

Hey guys. Good morning, this is actually Elan Zanger in for Emlen..

Hey Elan, good morning..

I want to start on energy, do you guys have a specific provision against energy, now that there are two NPAs.

And if so, what’s the percentage? And then maybe if you could comment a little bit on what you guys are seeing in Houston?.

Hey, Elan, would you repeat that. You broke up right in the middle of the comment – of the question..

Sorry it was on the provision.

Did you guys have a specific now that you have two NPAs in the energy book?.

Say again [indiscernible]..

The specific provision in the energy book..

No we do not.

I’m sorry, Elan, no we do not have a specific provision, we’re continuing to of course to the nature of our energy book, we continue to view them in line with our other operating companies, we continue to risk rate them based on current information and continue to reserve for them you typically would working capital and non-working capital credits..

And then maybe some color on what you guys are seeing in Houston economy?.

I’d be glad to. What we’re seeing is really – continue to slowdown in opportunities or new borrowings and we’re seeing activity of course in our other Texas markets that we operate in and pursue opportunities in that being predominantly Texas and Austin.

But in the Houston market we have seen a slowdown not so different this quarter but really all of ’15; we saw a slowdown in the opportunities being presented specifically of a real estate nature where we had seen a pretty brisk pace of opportunities.

Those same investors, developers are looking at other options in terms of other markets that they have historically operated in and probably choosing those as their next project to be pursued..

Okay, that’s helpful. And then lastly, switching over to loan growth this quarter was strong following the back half of last year, which was also strong.

I just want to know, if you guys have any indication of what you expect for loan growth for the year?.

Yeah, I think we would anticipate that loan growth could slow slightly from levels that we’ve seen over the last year. Some of that will be part of how we’re managing opportunities. The pipeline overall remains very strong, although down slightly from peak levels last year.

We continue to seek opportunities that Barry mentioned in other areas within the Texas market and opportunities out of our Alabama operation and our Tennessee operation.

We would anticipate that we take closer look at pricing is very, very competitive, so we’ll take a closer look on some of those opportunities that don’t present a strong return on equity as we’ve seen in the past. So a slight slowing, but it will be something that is intentional simply because of the competitive pricing market..

Okay. All right, I’ll hop off. Thanks guys..

Thank you..

And our next question comes from Preeti Dixit of JPMorgan. Please go ahead..

Hi good morning..

Good morning Preeti..

On the migration of the Texas construction loans into CRE [ph] this quarter.

Can you talk about what kinds of projects these were and were these scheduled to enter permanent financing or were there market conditions that throws the decision? Just trying to get a sense of what sort of the timing of the reclassification?.

Preeti, this is Barry and I’m going to address that and this was just routine business. There was nothing unusual about it.

We have continued to have a pretty big backlog of construction within the Texas market, both in office, retail, multifamily as well as some hospitality and is this what you’ll say progress where the projects eventually got this kind of occupancy, we at that point will migrate them down to the existing category and this was just the natural transition of that occurring..

Okay. That’s helpful.

And then any comment I mean I know – those are helpful comments on Houston but specifically commercial real estate in that market, any trends that you’re seeing there?.

Well, as I mention earlier I think what we seen is a slowdown in the opportunities that have come along within the Houston market specifically the projects we have are going according to plan, there’s not any problems at this point, that we’ve identified and we’re constantly looking hard to make sure we’re comfortable with where our projects stand.

We are seeing opportunities as I mentioned earlier in the Dallas market as well as the Austin market. A lot of our investors and developers are looking at opportunities there, probably in lieu of an opportunity in Houston just because of the back drop of the energy environments that they currently find themselves in..

Okay, that’s helpful. And then shifting gears to other income in the mortgage banking line was elevated this quarter.

Can you just help us understand what drove the increase and then maybe how your pipeline is shaping up? Any general thoughts on mortgage banking revenue outlook here?.

Yes, as far as what drove the increase we had steady volume, we had an improvement in the valuation of the mortgage pipeline that occurred because of the higher volumes. We had a positive net and effectiveness relative to our servicing portfolio hedging activity.

So those are all things that helped drive the increase there and it was based on good solid volume. As far as next quarter given a fairly stable rate environment, we would expect that we would continue to see good solid growth we’re seeing now almost two-thirds of our volume is purchase volume as opposed to refi which we take is very positive sign.

So we would expect that we would see continued growth relative to what we’ve seen in the first quarter and the second quarter..

Okay.

Got it and then last for me in terms of the 100 million share repurchase can you talk expectation for timing there and how you’d look to balance that with potential M&A opportunities I guess as part of any color on how M&A landscape is shifting would be helpful?.

Well, I’ll address it this way that we continue to look at what we see as the four main drivers of capital utilization from a dividend perspective, we have a strong dividend that is very attractive to our shareholders, would not anticipate movement there.

That leaves us with the organic growth which we’ve had double digit now for last couple of years and as I mentioned earlier, you may see a little slowing as to the rate of growth as we work on the overall return relative to those new opportunities. With M&A, we continue to look for the opportunities that fit our franchise long-term.

We are active in our approach to finding those opportunities, but as I’ve mentioned before, there are still some widespread expectations between buyer and seller that keep us from having announced anything.

And then on the repurchase activity, we’ll continue to use that as a tool to balance against those other three opportunities that are out there and were to be opportunistic as a situation presents itself..

Okay, thank you for all the color..

[Operator Instructions] Our next question comes from Catherine Mealor of KBW. Please go ahead..

Thanks. Good morning everyone..

Good morning Catherine..

A follow up on energy, I noticed that your energy balances increased in the quarter; can you give us any color on the types of new credits that you’re putting on the books?.

Yes, Barry will do that..

Okay, thanks..

Good morning, Catherine. We did have one credit that we put on the books during the quarter that was about$9 million and about $5.2 million in oustandings as of 3/31. We also like all banks have an ongoing process of reassessing the credits that should be included in our energy book; it’s a very fluid process.

As we come across those opportunities or come across the situations where we think we need to add or delete we do so. During the quarter, we saw a couple of credits that we thought we would migrate into our energy book based upon the activities with the borrower and the credit itself. We took the opportunity to do that.

So some of the increase is going to be a migration that naturally occurs in an out of that energy book as the borrowers circumstances change and then a little bit of its going to be some actual growth on the one credit and then you can always have some fundings on your lines of credits that are out there.

Those are all operated inside of a borrowing base they’re all operated inside of covenant package and in order to be able to draw in the lines. So we do see a combination of things of some new bookings, some drawing on the line themselves and then a little bit of a migration into the energy book with some existing credits..

Okay, thanks. And then one thing on the growth, Barry, you mentioned that growth has slowed a little bit in the back half of this year and so is part of that from a shift in your outlook for construction growth. A lot of last year’s growth came from 37% increase in construction balances.

And so as the life cycle of those projects catch on and those move into commercial real estate and then maybe your anticipation for booking new construction credits particularly in Houston slows, is that dynamic part of what’s driving that or would you expect to see construction balances still grow maybe in other markets?.

Catherine, this is Barry, and I would say the latter is probably the case. We are still seeing good opportunities in all of our markets for construction growth on the commercial side and we are looking at those and making prudent decisions we feel like on which opportunities to pursue or not.

The level of equity going into these projects versus the exchange for the burn off of the guarantees is still in line with what we think is reasonable and we’d still see a lot of equity going into these projects so we still have some interest there.

From a concentration standpoint we’re still very comfortable with the levels of construction projects we have and how they will eventually flow into the existing buckets and our overall levels of exposure from the standpoint of CRE. All those things are still favorable for us at this time. We are still pursuing these opportunities.

I will tell you in the first quarter when you look at the GAAP reported numbers you do see a shrinkage in the construction category, but that is indicated in the talking points. It’s very clear that this is an migration process, in reality we grew in construction as opposed to declined in the commercial construction books.

So we’re still seeing opportunities, we’re still pursuing those opportunities and then credit measures on those opportunities still appear to be attractive to us. So this is still an ongoing part of our business..

Okay great. And then maybe my last question just switching over to expenses.

Can you quantify the amount of savings we’ll get from the six branch closures next quarter?.

In second half of the year, Catherine, this is Louis; we expect cost savings, somewhere between 750 to 850, so that would be for the third and fourth quarter for those branches. And that would be the direct expenses.

Not all the expenses go away because we retain those loans, we have expenses related to those as well as the deposits, that’s our expectation..

And that’s an annual number?.

That would be for the second half of the year..

Okay. So in the last two quarters combined. Got it. Okay. Great. Thank you very much..

Thank you, Catherine..

And our next question comes from Kevin Fitzsimmons of Hovde Group. Please go ahead..

Hey guys, good morning..

Good morning Kevin..

Can you just talk about the core margins or excluding all the accretion related stuff, it looked like it went down 2 bps linked quarter to 338.

Just if you give us a little sense on why you think that went down? Did the Fed rate hike not flow through, was that not enough or is it just the pricing environment that you talked, Gerry and maybe if you talk about look forward, what the outlook for that 338 is going forward?.

Kevin, I’ll make a comment then let Tom Owens jump in here, not sure that the Fed rate increase really was impacted at all. I don’t think it effected the competitive environment for loans especially high quality loans.

And we continue to see compression coming from reprising on the asset side, where as if you look at our total cost, the deposits in the 13 basis points range, it’s tough to get that number down much lower, so.

We’re continuing to feel the effects of the squeeze on the assets side, as we have existing loans rolled off and the new ones rolling on at a lower rate, as far as looking forward and what you can expect for the remainder of the year. I’ll let Tom Owens comment..

Hi Kevin, so a couple of things, first of all, as you know there are some normal quarter-to-quarter volatility in terms of loan fees and yield maintenance payments in the investments portfolio. and actually if you consider those few things from the linked quarter basis we are much closer to flat in terms of core net interest margin.

As Gerry just said, the underlying fundamental trends remain, we’re up 7 basis points for net interest margin year-over-year. That’s a pretty clean comparison, it’s consistent with the guidance we’ve given in the past of low single digit percentage annualized compression in core net interest margin and we would expect that to continue.

But again, looking at core earning asset growth year-over-year about 8%, despite about a few percent decline in core net interest margin, we’re at 6 plus percent in terms of year-over-year increase in core net interest income..

So can I just ask that it seems like the message on loan growth is it’s going to be a little bit slower and that’s deliberately so and that’s based on the pricing that you guys are seeing and that’s fine but should incrementally there be some positive resulting impact to the core margin because you’re kind of downshifting a little on the loan growth and appropriately not jumping into anything that you see as not having an adequate return.

Or so is there a positive benefit to the margin or is it simply you’re pulling back on loan growth just to minimize that amount of compression?.

Well, I think the effect will be in some ways to minimize the amount of compression, but the other side of that I think is the capital of utilization aspect of it and I think it’s also there are certain types of loans the public finance loans, the we can move in and out of that asset category depending upon how aggressive we are with our pricing and I think that’s where you will see some of this migration.

Tom any additional comments?.

So that’s right, Kevin. So we’re kind of crossing over from a discussion of core net interest income to return on deployed capital right and that’s why it’s a little difficult to answer the question.

And again I think the core fundamentals in terms of the relationship between growth in core earning assets outpacing compression in core net interest margin will continue. I think what Gerry is talking about in terms of the relative loan growth, it’s really a secondary effect is the way I would think about it here..

Got it. Okay, great. And just one quick follow-up, I appreciate the breakdown of our energy exposure and the amount that’s actually outstanding. When you look at this maybe a tough thing to answer, but when you look at the amount that gap, I guess, it’s about $200 million plus of unfunded commitments that are out there in energy.

Do you have a sense or have you done a deep dive into how much of that balance if they were drawn tomorrow would be criticized on day one or if any?.

Kevin this is Barry. I don’t really think there would be much or any increase if they were drawn on day one because the number of criticized loans that we have is containing to just a few credits.

And those credits are either inside or outside of the borrowing base and at this point our covenant package as well, and at this point, we’ve got a lot of control in terms of additional advances, as far as resetting covenants if they trip or picking up additional collateral, things of that nature.

So I don’t really see there to be a lot of additional risk today based on how the credits are currently graded that we would increase our levels of criticized balances by the ability of the borrower to draw, unless the borrower’s financial condition change from where it is today..

Got it. Thanks. And one last one Gerry, you talked about M&A before and how there is still a wide gap between buyer and seller expectations. But directionally are you sensing any kind of reality check there or do you think it’s more, that folks are waiting on the election, are they waiting to see what the fed does.

Just directionally do you see things either getting better, getting worse or not really changing at all on that front?.

I think a real good question and one, it’s difficult to answer. It would be pure speculation on my part but our sense is that people are waiting somewhat to see what will happen by November. But we also see that there are I think people that are willing to talk that have not necessarily wanted to talk in the past.

So we’ve been this prolonged low interest rate environment with a lot of pressures from a regulatory standpoint and from an economic standpoint. And so I think you’re seeing more people that at least they’re willing to talk and consider other options..

Okay. Thank you..

Thanks Kevin..

[Operator Instructions] I'm showing no further questions. This concludes our question and answer session. I’d like to turn the conference back over to Mr. Jerry Host, for any closing remarks..

Thank you so much. I’d like to just thank everyone for joining us this morning, for your interest in Trustmark. We look forward to visiting with you again on our second quarter earnings call. Thank you all and have a great day..

Thank you, sir. The conference has now concluded. And we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day..