Will Fisackerly – Senior Vice President and Director of Corporate Finance Dan Rollins – Chairman and Chief Executive Officer Bill Prater – Senior Executive Vice President and Chief Financial Officer Chris Bagley – President and Chief Operating Officer James Threadgill – Senior Executive Vice President and Chief Development Officer Ron Hodges – Senior Executive Vice President and Chief Credit Officer.

Catherine Mealor – KBW Kevin Fitzsimmons – Hovde Group Jennifer Demba – SunTrust Robinson Humphrey Emlen Harmon – Jefferies Jon Arfstrom – RBC Capital David Bishop – Drexel Hamilton LLC Matt Olney – Stephens Kevin Reynolds – Wunderlich Securities Blair Brantley – BBandT.

Good day, and welcome to the BancorpSouth First Quarter 2015 Conference Call and Webcast. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions (Operator Instructions). Please note, this event is being recorded.

I would now like to turn the conference call over to Mr. Will Fisackerly, Senior Vice President & Director of Corporate Finance. Mr. Fisackerly, the floor is yours sir..

Good morning and thank you for being with us. I will begin by introducing the members of the senior management team participating today.

We have Chairman and CEO, Dan Rollins; Chris Bagley, President and Chief Operating Officer; Bill Prater, Senior Executive Vice President and Chief Financial Officer; Ron Hodges, Senior Executive Vice President and Chief Credit Officer; and James Threadgill, Senior Executive Vice President and Chief Development Officer.

Before the discussion begins, I’ll remind you of certain forward-looking statements that may be made regarding the company’s future results or future financial performance. Actual results could differ materially from those indicated in these forward-looking statements due to a variety of factors and/or risks.

Information concerning certain of these factors can be found in BancorpSouth’s 2014 Annual Report on Form 10-K. Also during the call, certain non-GAAP financial measures may be discussed regarding the company’s performance. If so, you can find a reconciliation of these measures in the company’s Q1 2015 earnings release.

Our speakers will be referring to prepared slides during the discussion. You can find the slides by going to bancorpsouth.com and clicking on our Investor Relations page where you’ll find them on the link to our webcast, or you can view them at the exhibit to the 8-K that we filed earlier this morning.

And now, I’ll turn to Dan Rollins for his comments on the quarter..

Thank you, Will and good morning. Thank you for joining us today for BancorpSouth’s first quarter 2015 conference call. I will begin by making a few brief comments regarding the highlights from the first quarter. Bill will discuss the financial results in more detail. Chris will talk about our business development activities in the bank.

James will provide some comments on our business development activities in mortgage and insurance. And finally, Ron will discuss highlights regarding credit quality. After we conclude our prepared comments, our executive management team will be happy to answer any questions you have. Now let’s turn to the slide presentation.

First slide two contains our customary Safe Harbor statements with respect to certain forward-looking information in the presentation. Slide three covers the highlights for the quarter. I’d like to begin by focusing on the two non-financial highlights shown at the bottom of the slide.

We filed an 8-K last week indicating the consent order entered into on September 4, 2014 related to BSA and AML compliance was formally terminated on April 7. For the month there is a very short period of time to work through an issue with this magnitude.

We owe a great deal of gratitude to Jim Locke, our BSA Officer and the entire BSA team of almost 40 dedicated professionals as well as many others within our company for their commitment and hard work remediating the issue in a near record time.

We are also thankful for the guidance provided by our regulators throughout this process, and their commitment to review our program in a timely manner. The resolution of this issue allowed us to re-file our merger applications for our pending Ouachita Banchsares and Central Community Corporation transactions.

Our merger [indiscernible] have been great to report above through this process. We believe these transactions are in the best interest of all parties.

While we continue to work towards the resolution of the CFPB and DOJ investigation, the termination of this consent orders an important step and obtain the necessarily approval, regulatory approvals and closing of the transactions. Moving on to financial highlights, net income was $32.3 million or $0.33 per diluted share for the quarter.

And operating income which excludes merger and other non-operating expenses was also at $0.33 per diluted shares as there were no material non-operating items in the first quarter results. We had two items that impacted our results for the quarter that aren’t show on this slide.

Earnings benefited from a release of loan loss reserve of $5 million for the quarter, all of our credit quality metrics continue to improve. Ron will further discuss the factors impacting the provision in a moment.

Earnings were adversely impacted by $5.5 million of expense incurred to increase our litigation approvals for various ongoing legal matters. We generated deposit growth of $280.3 million or 10.4% on annualized basis. While some of this growth is seasonal in nature, the focus of our bankers are growing core deposits as evident.

We also continue to be pleased with our loan production efforts and our loan pipeline. However, seasonal pay downs on certain large commercial lines of credit in our corporate banking group provided a headwind that prevented us from reporting significant net loan growth company wide.

Chris will discuss our business development efforts on the bank in more detail shortly. We continued to build our net interest margin in a tight range. Margin for the first quarter was 3.56% compared to 3.60% for the fourth quarter of 2014. Loan yields and deposit costs were very stable quarter-over-quarter.

The earning asset mix was impacted by the deposit growth I just mentioned as overnight investments increased during the quarter. Finally earnings for the quarter benefited from revenue growth in our non-interest products.

Our insurance team generated $33.5 million in commission revenue which represents the highest level of quarterly revenue in our company’s history. Our mortgage team originated $311 million in mortgage loans and contributed several mortgage lending revenue of $8.6 million despite a negative NSR adjustment of $3 million.

James will discuss our mortgage and insurance products more in a moment. I will now turn to Bill and let him to discuss our financial results in more detail.

Bill?.

Thanks, Dan. If you’ll turn to slide for you’ll see our summary income statement. The net income of $32.3 million or $0.33 per diluted share for the first quarter which represents an increase of 10% of about the fourth quarter and first quarters of last year.

There were no material items in the results with the three quarters presented that we consider to be non-operating. The loss you’ll notice on this slide the trends and our net interest revenue.

Net interest revenue was $106.1 million for the first quarter compared to a $106.4 million in the fourth quarter of last year and $101.5 million in the first quarter of last year. First quarter is obviously the shortest day count quarter of the year that drove the slide quarter-over-quarter decline in net interest income dollars.

Our net interest margin was 3.56% for the first quarter compared to 3.6% for the fourth quarter of last year and 3.54% for the first quarter of last year. The quarter-over-quarter declined and the margin was driven by the increase and excess funds earning the overnight rate.

The increase in overnight money adversely impacted the margin by seven basis points compared to the fourth quarter of last year. The other components of the margin were stable.

The yield loans was 4.31% for the quarter compared to 4.30% for the fourth quarter of last year and the cost of deposits was 24 basis points compared to 25 basis points for the fourth quarter of last year.

You’ll also notice earnings – excuse me, you’ll also notice earnings for the quarter benefited from a negative provision for credit losses of $5 million compared to no provision for both the first quarter and the fourth quarters of last year. Ron will discuss that more – in more detail in a moment.

The following two slides break our non-interest revenue and expense into further detail. If you’ll turn to slide five, you’ll see a detail of our non-interest revenue streams. Total non-interest revenue was $73.3 million for the quarter compared to $63.5 million for the fourth quarter of last year and $66.5 million for the first quarter of last year.

Mortgage lending was $8.6 million for the quarter compared to $3.3 million for the fourth quarter of last year and $3.4 million for the first quarter of last year. The volatility and mortgage lending is driven by volume as well as fluctuations of the MSR asset valuation. James will discuss this more in a moment.

As Dan mentioned earlier, insurance commission revenue was the largest quarterly total in the company’s history, totaling $33.5 million for the quarter compared to $25.4 million in the fourth quarter of last year and $31.6 million for the first quarter of last year.

First quarter is seasonally the best quarter of the year for insurance operation due to they receive the contingency payments as well as the renewal cycle of book of business. Slide six presents a detail of non-interest expense.

Total non-interest expense for the first quarter was $136.9 million compared to a $130 million for the fourth quarter of last year and a $126.7 million for the first quarter of last year. The schedule at the bottom of the slide shows the aggregate impact of the non-operating items incurred in each of the quarters presented.

As you can see, there were no material non-operating items impact in three quarters shown here. I’d like to make a few comments about certain line items included in non-interest expense.

Salaries and benefits totaled $81.2 million for the quarter compared to $76.8 million for the fourth quarter of last year and $78.9 million for the first quarter of last year. The late quarter increase was driven by several factors. First, the performance of our non-interest products, specifically insurance related in how commission payouts.

Second, payroll taxes increased at the beginning of the year [indiscernible] receipts and third, pension expense increased. As disclosed in our 2014 10-K, we expect annual pension expense to be approximately $7 million higher for 2015 than in 2014 based on the annual revisions to actuaries assumptions.

Specifically the society of actuary’s revision of the mortality titles they drive certain of the assumptions. Foreclosed property expense declined $2.6 million compared to the fourth quarter primarily as a result of gangs on the sale of ORE totaling $800,000 compared to a loss of $1.6 million last quarter.

Ron and his team continue to do a great job working through the remaining properties. ORE declined by 18% late quarter and is now the slowest level since early 2008. Finally, you’ll notice a significant increase in legal expense.

We increased our litigation approval by $5.5 million during the quarter to account for probable losses related to certain ongoing legal matters. Now I’ll turn to Chris for his comments on our frontline banking efforts..

Thank you, Bill. Slide seven reflects our deposit mix at March 31 compared to both the first and fourth quarters of 2014. Total deposits grew $280 million or 10% annualized during the first quarter.

Of note, there is a $247 million of the growth was represented by what we would consider core top deposits translating to a shift in our deposit mix, particularly when comparing changes and balances year-over-year.

The end result is a shift from a higher cost time deposit to lower cost savings and demand deposits, specifically time deposits declined by 11% while each of the other deposit types grew by over 7%.

A change in emphasis from promotional type certificates of deposit which are valued the headwind overall net deposit growth its’ given us an opportunity to continue to lower up funding cost and to promote other lower cost core deposit products. Our bank was a clearly responding to the challenge of making deposit growth a priority.

With that said, it’s important to note that there is typically a seasonal increase in the first quarter associated with timing of tax receipts and payments. This activity can’t present headwinds to growth in the second quarter each year.

But in summary, we are proud of the work all of our bankers have done in the ground core deposits over the last year. We still believe core deposits are the foundation of a strong banking franchise and we’ll continue to make relationship banking a priority for us.

Moving to slide eight, you’ll see our loan portfolio as of March 31 compared to both the first and fourth quarters of last year. We are pleased with our own production efforts across our footprint. The line pay down as Dan mentioned earlier in our corporate banking group, but primarily in our C&I group.

While these pay downs competed consolidated net loan growth, all five of our geographic regions within the community bank produced net loan growth for the quarter. The IPOs we’ve opened over the past several months are also contributing to our growth efforts.

The two Houston IPOs combined has grown by $12 million thus far this year, the Austin IPO has grown by $9.5 million, Chattanooga, Tennessee and Lake Charles, Louisiana IPOs are grown by $6.7 million and $10.4 million respectively.

In addition to these markets, we have three divisions in our banking, so we have 10% annualized loan growth for the quarter. They were the less Tennessee division, our west coast division and our Pine Bluff division. I will now turn it over to James Threadgill to discuss our business and development results in mortgage and insurance..

Thank you, Chris. The tables on slide nine provide a five quarter look at both mortgage and insurance. Our mortgage lending operation produced origination volume for the quarter of $311 million. Off that $200 million or 64% represented home purchase money that is a 39% increase in purchase money volume over the first quarter of 2014.

We believe comparable quarter comparisons are more relevant given the seasonality in the business. We’ve also see an increase in our production team as originators increased from a $109 million at March 31, 2014 to a $124 million in March 31, 2015.

Based on the current pipeline as well as current applications we expect elevated activity in both refine and purchase money production to continue into the second quarter. The other reason to quarter were $243 million compared to $229 million in the fourth quarter.

Mortgage lending revenue totaled $8.6 million for the quarter which included a negative MSR valuation adjustment of $3 million. This compares to revenue of $3.3 million during the fourth quarter of 2014 which included a negative MSR valuation adjustment of $3.4 million.

Margin was 3.66% for the quarter an increase from 1.72% in the fourth quarter of 2014. The increase in margin is attributable to the surge and the mortgage pipeline over the course of the quarter, going from a $180 million to $302 million. The accounting revenues requires to mark the pipeline to market.

This accounting treatment results in the margin being higher on a relative basis in quarters with a rising pipeline and lower when the pipeline is declining. Moving on to insurance, total commission revenue for the quarter was $33.5 million compared to $25.4 million for the fourth quarter of 2014 and $31.6 million for the first quarter of 2014.

As we said earlier, the first quarter of each year is seasonally higher as a result of contingency commissions received and the fourth quarter is seasonally low as a result of the seasonality of the review cycle. The first quarter also expected approximately $800,000 in revenue from the April 2014 acquisition of the [indiscernible] agency.

With that being said the insurance market remains soft with renewal premiums either flat or slightly declining, as the challenge to revenues we must like new business to overcome these rate reductions. Now, I’ll turn it over to Ron for his comment on credit quality..

Thanks, James. Slide 10 presents some highlights of credit quality for the fourth quarter. As Dan mentioned, we had a negative provision for credit losses of $5 million for the first quarter after several consecutive quarters with no provision.

A negative provision was driven by continued positive momentum and our credit quality indicators and non-performing balance. Additionally, there is only nominal net loan growth in the quarter for which to provide. The [indiscernible] was 1.40% of net loans and leases as of March 31, 2015.

Non-performing loans declined $10.3 million or 14.3% quarter-over-quarter, while total non-performing assets declined $16.4 million or 15.5%. These balances have declined to levels that put there at the top of our peer group.

While we saw significant decline this quarter, I’d like to reiterate all of our credit quality metrics which includes non-performing assets are now at levels where we could see fluctuations in either direction in any given quarter.

Net charge-off were $800,000 for the quarter compared with $1.5 million for the fourth quarter of last year, a $3.5 million for the first quarter of last year. Recoveries are $4 million contributed to the low level of net charge-offs. Finally, OREO decreased $6.1 million or 18% from $34 million at December 31, 2014 to $27.9 million at March 31, 2015.

We had gained some sales this quarter of $800,000 for our [indiscernible] for the quarter totaled $2.2 million. So out of 11 provide a digital of the trends and NPLs, ORE and total NPAs over the past several quarters. You can see these boxes continue to work down quarter after quarter. With that, I’ll now turn back to Dan for his concluding remarks..

Thank you, Ron. We’re pleased with the progress we made during the quarter, and we’re excited about what lies ahead of our company. First and foremost, we’re very pleased to have the consent order terminated. Our team rose for the challenge and worked through the BSA/AML this year a timeframe, many didn’t think it was possible.

While the first quarter results were a bit noisy with the provision release as well as the legal reserve increase, we’re encouraged by the progress in our core fundamentals and optimistic about our ability to continue to improve profitability, so we’ve been able to maintain our net interest margin while growing both sides of our balance sheet.

The deposit growth reported for the quarter was the highest quarterly growth total reported in quite some time. We are also optimistic about our ability to continue to grow loans. We are still looking to attract quality lenders as opportunities arise as evident by our most recent LTO opening in Dallas, Texas.

As I mentioned earlier, our non-interest products including mortgage, insurance and wealth management continue to grow as well. Insurance at a record quarter, mortgage has proven their ability to continue to grow purchase money volume and wealth management continues to build customer relationships and go after federal management.

Finally, well there were some headwinds in the first quarter with legal expense and other seasonal items we continue to challenge expenses. We continue to evaluate the performance and possibility of each of our locations.

Since the beginning of 2014, through consolidations we’ve reduced our full service branch account from $257 million to $240 million. We continue to challenge net count as well, we were down 24 of all time equivalent positions this quarter despite additions of frontline sales people.

I’m confident many completed and ongoing projects will improve efficiency in the future time periods. With that, I will conclude our prepared remarks. And operator, we’ll now be happy to answer any questions..

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) As a courtesy, we please ask that you limit yourself to one question and a single follow-up. If you have any further questions, you may re-enter the question queue. At this time, we will just pause momentarily to assemble our roster.

The first question we have comes from Catherine Mealor of KBW. Please go ahead..

Thanks, good morning and congrats on through the consent orders that quickly guys..

Thanks, Catherine..

Can you give us any insight and so what the litigation reserve is related to, does it have anything to do with the CFPB, DOJ enquiry?.

Well that’s an easy answer, no, and no, I guess there were two questions there. There is really – it’s really not possible to talk about ongoing litigation, anytime you come through a credit cycle there are revenants of ongoing litigation matters that need to get resolved and we’re going to work all way through those.

And we’re just making sure we’re prepared for those..

Okay, that’s helpful. And is there – I know this is a hard question [indiscernible], but I’ll ask it anyway.

Do you have any sense as to whether the CFPB or DOJ enquiry is going to impact your ability to close these deals on time or do you think that consent order was really the hurdle you need to cross to meet the two merger application deadline, I mean merger close deadline?.

Yeah, I think you’re asking the wrong people on that front. I’d like to know the answer to that question also. We clearly believe that the consent order was the large hurdle that we needed to jump, the CFPB and the DOJ don’t have any applications before them.

So I think our regulators are going to do what they think is in the best interest of them and us, and so we’re sitting back and we’re waiting to see what that process is. Our applications are in their normal course and we’re running their normal process today and I guess we’ll find out as the time goes by whether or not this is an issue or not..

All right, thanks, I had to give it a try. And maybe one last question just to buyback, you authorized the buyback in December but we didn’t really see any activity this quarter.

How should we think about what level of buyback your – we should expect going through the year? Is it more of a tool you have for deals, maybe don’t qualify June or will you still use the buyback even if all go this planned on the M&A front?.

I think we intend to use the buyback, the question is just timing and where. We will use the buyback, we will purchase back this year that we’ve authorized to the purchase. The question is just when and at what level..

Okay, thank you very much..

Next with Kevin Fitzsimmons of Hovde Group..

Good morning, everyone..

Hey, Kevin..

Just wondering if you can give us a little sense, little more dig a little deeper on loan growth.

So obviously, first quarter content to be a slower quarter for loan growth and you mentioned the commercial line pay downs that affect, but what your expectation roughly is going forward here in the next quarter or two, because we hear it’s getting more competitive about there with the pricing so I’m assuming you’re facing that phenomenon and we’re just trying to get a sense for home much of the pay down activity is truly seasonal and how much of it is just because of the competitive nature of what’s happening.

So just if you can give us a sense on what your sense to loan growth is from here..

Yeah, I’ll try on that, we can all take a turn. I think when we look at – Chris was going to jump in here. When I look at it, we didn’t lose any customers. When you talk about seasonality on pay downs, the lines that we’re talking about none of these lines of credit have closed out, they’re all still in place today.

Our production across our footprint was relatively good. First quarter was by far the lowest quarter last year for us also, not as well as it was this year but it was the low quarter of the year for loan growth.

Last year I think our loan pipeline is good, our vendors were out mixing it up every day, and then I’m not one that likes to use competition as an excuse, competition is competition and we’re going to have that forever. Chris probably has a little more detail on that..

I agree with Dan, in our digging we see the – these were normal customer pay downs on lines maybe even contributing to that was maybe a little bit of slowing in the economy of the business they were in. So you would expect that their correction of assets or receivables would reduce those lines.

But as Dan mentioned, we didn’t lose customers in this drop. And you see, it was primary focus in the C&I portfolio, and we mentioned in our comments, all the community banks, all the regions showed growth and expansion in their loan portfolio.

And we looked at the pipeline which is in the exact [indiscernible], we’re seeing numbers that are consistent year-over-year and slightly up in terms of what we consider our pipeline in our 30 day close, so that’s remained fairly stable. So, at least this quarter we viewed most of it as a reduction in lines of credit out of our corporate group..

Does it help Kevin?.

Yeah very helpful, thanks. And one quick follow-up, you guys did touch on the seasonal strength in fees that’s particularly you saw in insurance and then you talked about mortgage.

So I guess the takeaway is that insurance very strong but were coming off the seasonal high and then mortgage, I think James you said that you expected to be strong – the activity level to be strong going into next quarter but I think what I heard you say is that the gain on sale margins are strong when that activity level is going up.

So if just in level going into next quarter, should we expect the revenue to come down from the pace we saw in the first quarter in terms of how sustainable that is?.

Yeah, I think there is a couple of things on slide nine I would refer you to and James is chopping up a bit to get in here, but on slide nine on the depth you can see that the current pipeline increased from a $180 million to $300 million from 12/31 to 3/31. So that was the piece of what James was talking about there.

And so we’re still seeing good growth, James is going to talk about where we are today, I’m going to jump to mortgage. I’ll also refer you to that same page and look at the decline in mortgage revenues from first quarter 2014 to second quarter 2014 and tell you that I would expect that these would be same type current in 2015..

How about insurance?.

[Indiscernible] it’s on the bottom of the page, the decline of revenue and insurance from first quarter 2014 to second quarter 2014 I think we would expect the same type trend for next year. James, you can talk of what color on the current mortgage pipeline and what’s happening in our book today..

Sure. Well, as Dan mentioned, our current pipeline is approximately $302 million at 12/31. We are seeing really strong activity in the mortgage area. We have added production staff, we’re up to a 124 originators at the end of the quarter and we are really just seeing activity across the footprint.

So, yeah if the margin itself could jump up significantly in the quarter dividend the growth in that pipeline but we are contingent to see strong activity and think that at least from a production standpoint I think the second quarter should continue the trends that we saw in the first.

As Dan mentioned in insurance, we well said, the first quarter is always strong, second quarter always drops somewhere on 10% from the first quarter revenue.

I’ll tell you that the property casualty market is getting very soft, we were saying renewals, some people are saying that they’ll be down 10% this year insurance rates – in casualty but we are seeing, definitely see our renewals down slightly in rate and we think that will continue through the year..

And basically there aren’t information on that rate but….

That impacts our revenue, got you..

The other thing I would comment back on the mortgage side when we’re looking at fourth quarter and first quarter mortgage numbers Kevin, there are $3.4 million negative MSR valuation adjustment in the fourth and we had a $3 million negative MSR valuation adjustment in the first quarter based upon where our rates are today.

If rates move up of any type then we won’t have that that MSR valuation adjustment, it was – I don’t know what the total year, but last year we had a total yearly MSR valuation adjustment for last year also. So you can see how that’s impact us..

All right, that’s a fair point.

I would – timing with the expense side I would think that if insurance or commissions are coming off seasonally high levels there is a portion of a comp that’s high from that as well, right?.

Well, don’t mention that in his comments that we saw multiple moving parts within the comp piece. The seasonality of the variable comp both in the mortgage market and in the insurance market growth expenses on the salary or the top line along with the normal first of the year payroll tax increases were the two normal things.

And then as Bill also mentioned, we’ve got roughly $7 million in additional pension cost and 15 over 14 little bit expense throughout the year and we saw the first quarter of that and the numbers also..

Okay, thanks guys..

Thank you..

Next we have Jennifer Demba of SunTrust Robinson Humphrey..

Thank you, good morning.

Dan, just wondering now the consent order is lifted, will you guys be experiencing rough consulting fee going forward than you have in the last four quarters or so?.

Yeah, that would be a good assumption I think Jenny, how are you? I think when you look at what we’ve been putting money out on, we still got the clean up processes that were coming through that, I think that’s probably a fair assumption that we can continue to drive expense out on outside consultants that we may not have a need for going forward.

So that’s probably a fair assumption, I don’t have a dollar amount to tell you what that is..

Where do you think other points of expense leverage are at this point now that you’re, what 27 months, 28 months into your tenure at BancorpSouth?.

I think we feel that lots of opportunity in front of us. We continue to look at our vendor management processes and our – just how we do things, we’re continuing to find opportunities to save money to little dollar amounts to big dollar amounts across our footprint, that’s what I was saying earlier, we call them initiatives, we call them projects.

Many of the things that we did a year and a half ago, and two years ago and one year ago are just now beginning to bear fruit.

Our team has worked very hard to identify opportunities to eliminate cost or reduce cost and all of those projects take time to implement and there is a long list of those items that are still out there and I think we’ll continue to be able to drive cost down..

Okay. Couple other just quick questions on the mortgage operation.

Are you still hiring originators at this point or do you think that you sort of stabilized here?.

I think I would tell you that we’re hiring originators and producers across all lines of business..

Okay..

We’re actively looking for wealth management producers, we’re actively looking for mortgage producers, we’re actively looking for insurance producers. We’re certainly actively looking for good bankers that can bring business to our bank..

And what are you seeing in the Texas economy right now Dan, and from your standpoint what you’re seeing from the impact of lower energy prices?.

Still not a lot of impact, Chris may want to jump in here. We’re not seeing any real direct impact that we can point our finger at.

We’d certain have had couple of customers in our East Texas market are directly working for some oil field businesses whether that’s a small fabrication shop or a small welding shop or a small service like it doesn’t grade up as oil and gas type credit, but if the welders are needed to do whatever they’re working on we’ve seen some layouts in some of those markets but still very, very small impact on what’s going on from what I personally had witnessed or what I’ve heard about in talking to others.

Chris?.

I think maybe it depends where you are, we were in Austin this week and couldn’t find a parking place anywhere or see at a restaurant, so that was extremely busy over there.

For us not having a lot of exposure directly to production, I think it’s going to be a real estate impact to us, and all of us have lived through 1980s in Texas are sensitive to that.

So we’re watching it, everybody is on a high state of alert and we’re [indiscernible] like Louisiana and East Texas and Houston where it can be more impactful we’ll keep our eyes on it but we haven’t seen a significant impact yet. But we would typically I think feel which is in the real estate side prices..

And when you look at what’s happening on our mortgage team in the Houston market, we’ve now got [indiscernible] what we have over there, 15 or more producers on the mortgage market in Houston and I think they’re telling us that business has been good..

Okay, thank you. See you soon, thanks..

Thank you..

The next question we have comes from Emlen Harmon of Jefferies..

Hey, morning everybody..

Hey, Emlen..

I wanted to go back to see kind of same areas, in the earnings release you noted that you continue to look at branch profitability.

Am I reading into it too much, do you think we can expect occupancy cost to continue declining? And I guess is it getting harder for branches to hit profitability thresholds because the environment is top for or just because you guys are raising the bar internally?.

I’m not sure I would describe it any of those ways Emlen, but I think what we’re looking for when we look at branch profitability that’s a relatively new process for us where we’re pushing referral cost all the way down to the branch level.

The company never pushed corporate overhead all the way down to the branch level, but while we were looking at direct income and direct expense at the branch level we weren’t putting the full corporate overhead on top of that.

We started doing that and you can see some branches, frankly they just need to make sure that they’re doing what they need to do grow. What you see that what we’ve done in the past year, year and a half talking about the number account moving from whatever it was to 240, so that’s just us looking at the locations where we got overlap.

And so as we’ve eliminated overlap those were pretty easy locations to figure out that we can consolidate these two into one and not negatively impact our customers and some of the smaller markets where we have multiple locations, we need multiple locations.

My guess is build most of that occupancy cost but I don’t know that there is a whole lot of go forward..

I don’t know occupancy side, there is some headcount savings in some of those consolidations we see….

Which we do receive..

We’ve had some clients who will have two branches and we’ll turn one of the branches until it dropped for long to settle in.

There are some headcount reduction that attrition kind of takes care of overtime with that stuff, we haven’t had any layouts of any type recently or nothing [indiscernible] couple of years ago but there is just general operating expense decrease when you do that but not that of any great magnitude..

I think we still have opportunities to continue the same trajectories where I would get it.

So I think I would expect to see us continue to identify and consolidate offices, we didn’t do this on a big group, we’ve been doing one at a time and I think we still don’t throw on our risk to work on that we’ll continue to drive more efficiencies for us without negatively impacting the customer experience at the frontline..

Got it, okay. Thanks.

And then just two quick kind of [indiscernible] if you will, there were fair amount of recoveries in the quarter, what was the interest income benefit from that? And then also just wonder if you could just, did you guys quantify the amount of [indiscernible] this quarter or just increase quarter-over-quarter that was due to that?.

I don’t have the [indiscernible] tax answer for you at all and then again, I can get you to ask the first question again. I don’t think there is interest income of….

No, I mean if you have –you could have interest income on a return to the core but that what this was, this was the collection for charged off loans..

Got it, okay. Thanks..

Okay, thank you..

Next Jon Arfstrom, RBC Capital..

Thanks. Good morning, guys..

Good morning..

Couple of things, just circling back on mortgage banking, you expect that margin on loans were to drop back down to where it was in the previous couple of quarters.

Is that what you were saying?.

Yeah, I think something in the one and a half to two is a more normal number Jon, the question is James I’m going to let you just been here to make sure I’m not [indiscernible] be giving.

But I think what you’re saying is that the pipeline exploded up, and the pipeline can continue to grow if we continue to see good production throughout the second quarter, second quarter is historically been a production timeline and the best quarter of the year in the mortgage business..

Yeah, I think if you look back in 2014, you saw from the first quarter to second quarter our pipeline increase from $102 million to $108 million and that was a good margin - $180 million excuse me, $180 million. So, when you have a growing core pipeline you’re going to have a much higher margin.

Where do the pipeline continues to grow above where it is now, we’ll see but we are still seeing very good activity all across footprint..

Yeah, it seems like a big jump in the pipeline, and I was just curious if it is up a bit what you’re saying is it’s not going to have the same full impact, maybe it’s up – it’s up a bit sequentially I guess. We probably should use a lower base you think that is….

I think that’s fair..

Yeah, okay..

I think that’s fair. You also have the negative MSR valuation adjustment that was in the numbers, so I guess I don’t know what the pipeline increase number did to us but I’m going to guess it’s not that far different than what the negative side on the MSR valuation was, so if you net those two out we may be back to where we are..

Okay.

All right, Bill on the litigation expense, that’s a onetime expense?.

Well, you hope so. I mean I don’t know how to answer that Jon, we’re….

That was the design, was to try to capture at all?.

Yeah, we’ve got in-house counsel now and he is on top of it and he is advising on what he feels like it’s going to take to bring resolutions that all matters and we just try to stay on top of it every quarter. The first one was rather large..

Okay. Two more things just on the provision, I know you talked about how that could jump around and that slide 11 is pretty amazing but how do you want us to think about that, you still have a fairly decent level of reserves relative to loans but your non-performance keep coming down.

Are we back on the no provision in growing to your reserve or can we expect for the releases coming?.

Well, I think Ron, you need to jump in here too.

My answer would be, we’re going to play with the model, we’re not going to play with the model we’re going to live with the model that we have and I think all things being equal we would prefer not to release reserves and as you said, grow in, the model is what the model is and when you have the quarter like we have from improving credit quality I don’t think we won’t be unhappy about the improving credit quality that we saw.

[Indiscernible] release from the provision or release from the loan loss reserve. We certainly want to grow our loan book and we believe we got the ability to do that, I don’t know that we can say that we will not have future releases, I don’t know we can say that we won’t have provision going forward if we’re able to grow loans.

Ron, you want to jump in on that?.

I agree, I mean this quarter just – a lot of good things happened in the same quarter, we had very low loan charge-offs, we had large recoveries which continue to surprise us that we have that level of recoveries on previously charged offs loans.

All of our metrics continue to improve, we’re at or above on our peer group level and the only thing negative in the quarter was that we did have loan growth, we hope we return that out and we will utilize our loan provision, loss provision in the future of loan growth..

Okay, good.

And then just one for your Dan, in terms of the acquisitions if you don’t hear when you’re saying in the relatively near term approvals, at what point do you have to start thinking about extending the agreements, I mean is there a date we have to start thinking about that?.

I don’t know that we have a hard and fast day today, we’re certainly working with the regulators and working with our two merger partners on a regular basis. And I think today we feel like we’ve got some time to run.

Technically we can close on time as long as we have approval by mid June and we have no – we have no guidance or no – we’ve received no information at all what timeline the regulators are on.

So, at this point I think it’s too early for us to decide that we need to start talking about whether or not we need to extend again, we just need to keep making sure that we’re giving on the responses to the questions that they’re asking so like we make good decisions..

Okay. All right, thank you..

Thank you..

Next we have David Bishop, Drexel Hamilton LLC..

All right, good morning gentlemen..

Hello..

Hey, Bill I think you mentioned the $7 million in terms of the pension impact there.

Is it able to – are you able to quantify how impact to this quarter and how does that play out in terms of the second quarter through fourth quarter?.

It’s pretty linear across the year. Basically what happens is the society of actuaries from time to time and I think they’ve not done this in several years. They publish – yeah, I think Dan is right, I think it’s like a 11 years ago when they published updated mortality tables, they did again and people are living longer.

And a pension being a pension you pay it out over the life of the – for the remainder of the former employees lives, so it just results in higher expected projected benefited obligations for the plan. We’ve – we’re in the process of sun setting a lot of our employees and that’ll have effect on, some effect on future expenses but it’s still waves out.

But it’s basically just people are living longer so you’re projecting on higher benefit obligation over the remaining lives..

Got it. And then maybe just switching real quick to the net interest margin, I think [indiscernible] you alluded to the overnight liquidity for seven basis points compared to the prior quarter.

Assuming a rebound in longer and some deployment liquidity, could we see a rebound in the margin heading into the second quarter?.

Certainly. I mean I would expect to see it come down even if the – or go up a little bit even if the loan growth didn’t materialize you’re moving that 25 basis point income along with the balances that are associated with it in that calculation also.

Actually with the increase in the overnight funds as they placed with the stability of the margin is scored..

How does that day count impacts that?.

Day count has some effect on margin, it actually increases a little bit but it costs you net income dollars to the tune of little over $1 million a day and net interest income dollars, and this was a 90 day quarter compared to a 92 day quarter last quarter..

Got it, thanks..

Thank you, David..

Next with Matt Olney of Stephens..

Hi, thanks, good morning and I wanted to stick with that same topic on the margin and get little deeper on the loan yields. That was compressed pretty heavily last year but seem to stabilize in the first quarter.

Any more commentary on the outs of the loan yields?.

Let’s see, we’re going to look at each other, any kind of loan yields from Chris, and I think our answer is we’re challenging our folks take care business. We’re competing for loans every day, we’re winning some, we’re losing some.

We want to be in the market, you heard the comment earlier on competitions, I think we’re doing a good job, we’re just trying to make sure that we’re paying attention on them.

Bill, you want to add anything on them that you didn’t cover now you guess?.

No, I mean one thing that kind of oddly the pay downs that you have on those commercial lines, those large commercial lines are [indiscernible] in comparison to the bulk of our book is actually very small balance loans. So if you had – it does people were to draw down on those lines it would actually decrease the year loan level on loan book, so….

You’re talking about the lines of pay down in the last [indiscernible]....

Right, and it actually – those lines paying down actually increases your loan yield because they’re [indiscernible] large commercial loans..

Okay, yeah good point Bill. Thank you for that..

Does that help Matt?.

Yeah, that helps.

And then also on the expense outlook, Dan, your expectation to see the dollar amount of expenses relatively flat within the next few quarters kind of with the pending deals or do you still think we can actually see the dollar amount decrease on the expenses in the next few quarters?.

Well, I think it depends upon what pieces you put in there. I think you clearly have to pull out the litigation piece and then I would tell you that we would expect to see decreasing expenses even pulling out the litigation fees.

We’ve had, as Bill said, there were some first quarter payroll items that will trend off, we had some other expenses in the first quarter that we can continue with – all of our expenses will continue watch.

So the headcount continues to decline, the wildcard is, can we find other markets that we want to move into, do we add a team to go somewhere, those were the pieces that we don’t know on a positive side but holding what we have constant I think our expectation is to see declining expenses..

Okay, thanks..

The next question we have comes from Kevin Reynolds of Wunderlich Securities..

Good morning, everyone.

How are you all?.

Kevin, good..

Congratulations on the consent order being removed and also I guess we should all congratulate ourselves because statistically we’re going to live longer now.

So, but I want to ask a question, we still have time over the last several months and quarters thinking about the two acquisitions and we’re seeing a lot of announcements about adding folks in whether it’s on the interim side or on the traditional bank side in Texas, and I mean it’s easy to look at that as being dissolved place of growth for you overtime, I don’t think that that’s the case.

So going back in time a little bit, we got a Chattanooga IPO and I was just sitting here thinking, what are your thoughts on east order expansion, I know you may not have anything teed up necessarily right now but if we were to look out at couple of years, are there markets on the eastern side of your franchise on the eastern frontier that are attractive to you that you were thinking you might have an opportunity to either lift out or potentially even make an acquisition down the line to round out the franchise on the eastern side?.

Yeah, I think that’s a great observation. We’re talking about growth and we’re talking about expansion. My conversation would be, we’re looking to grow in Alabama and we’re looking to grow in Tennessee and we’re looking to grow in [indiscernible], we’re looking to grow in Missouri.

And we’re looking to grow in Mississippi and Louisiana and Texas and the Florida Panhandle where we are today. And I think if you looked at any of our markets or anywhere near the entire market there is opportunities for us.

And so coming back to what you said, we’ve opened some IPOs on the left side of our footprint, which another new team is doing a great job in central Tennessee, we have good presence in west Tennessee that’s out and new to the market, the Nashville market.

The Tennessee markets are great markets for us and we would welcome opportunities to continue to expand it in those markets..

So but I guess following up on that, in the last month or two we’ve had what seems like a lifetimes worth of acquisition activity in Chattanooga. And there has been a lot of focus on that market, you were there a little bit early with your team.

Does that – do you sense that there is going to be some disruption opportunity there with the two pending acquisitions that have been announced or, do they play in different ballparks than you guys are targeting?.

No, I think there is opportunity for us. I think it’s early in the game, any time there is turmoil there is that turmoil [indiscernible] in some markets and therefore our competitions out from our customers, and we like to return the favor anytime we can when there is turmoil in somebody else’s house.

We’re happy to call in their customers and see if we can help them out too..

Okay, thanks a lot. Most of my other questions were asked and answered, so good quarter guys..

Thank you, Kevin..

(Operator Instructions) Next we have Blair Brantley of BBandT..

Good morning, everyone..

Hi Blair..

Just one quick question on the pending M&A, assuming everything works out, should we expect system conversion on closing at June 30?.

No, that would probably not be a good assumption. It would typically take some time to make sure that everything is ready, we’re certainly – we were down the path towards an operational integration plan with both partners last year and we certainly have those plans ready to go.

But my guess is it would take 30 to 90 days for the first one and remember last time as walk back through the history there, where a year ago when we were in the same place we are today kind of working to closing, our game plan then was to integrate the Louisiana transaction first and follow that up with the Texas transaction a quarter or more down the road.

So to get both of them down you’re probably talking nine months or more..

Okay.

Any changes there in terms of cost savings or estimates or anything kind of thoughts around that over the years?.

No, I think that both of our partners are performing well. They had some similar experience to us, they’re both earning – their earnings have gone up, they’re both running linear so they’ve lost some folks.

Their credit quality has improved, stocking this morning they’re saying opportunity is on the long side but they’ve also had some pay down headwinds just like we are.

No, I think that we feel like the two opportunities are very similar to where we saw in the quarter, a great fits for our organization culturally, structurally, customer wise, we’re looking forward to completing them..

Okay, thank you very much..

Well, at this time we have no further questions. I’ll go ahead and hand the conference back over to the management team for any closing remarks.

Gentlemen?.

All right. Thank you for joining us today. If you need any additional information or have further questions please don’t hesitate to call Bill Prater and myself. Otherwise, we look forward to speaking to you again soon. Thank you all very much for participating..

And we thank you sir and to the rest of the management team for your time also today. The conference call is now concluded. At this time you may disconnect the lines. Thank you and take care everyone..