Good day, and welcome to the BancorpSouth Q2 2018 Earnings and Webcast Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Will Fisackerly. Please go ahead..

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 Chief Executive Officer, Dan Rollins; President and Chief Operating Officer, Chris Bagley; and Senior Executive Vice President and Chief Financial Officer, John Copeland.

Before the discussion begins, I will remind you of certain forward-looking statements that may be made regarding the company's future results or 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 2017 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 second quarter 2018 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 yesterday afternoon.

And now, I'll turn to Dan Rollins for his comments on our financial results..

Thank you, Will. Good morning. Thank you for joining us today for BancorpSouth's second quarter 2018 conference call. I'll begin by making a few brief comments regarding the highlights for the second quarter. John will discuss the financial results, and Chris will provide more color on our business development activities.

After we conclude our prepared comments, our executive management team will be happy to answer questions. Let's turn to the slide presentation and discuss our second quarter results. Slide 2 contains our customary safe harbor statement with respect to certain forward-looking information in the presentation.

Slide 3 covers the financial highlights for the second quarter which was the second consecutive quarter for which we reported record earnings. We reported record net income for the quarter of $54 million or $0.55 per diluted share. On a per-share basis, this represents an increase of 34% compared to the second quarter of 2017.

Our earnings growth represents continued improvement in several fundamental items including net loan growth and margin improvement combined with stability in our credit quality indicators and our expense base.

Reported GAAP earnings for the quarter were impacted by two non-operating items including merger related expenses of $1.9 million, as well as a small negative pretax mortgage servicing rights valuation adjustment of $0.2 million. Accordingly, our net operating income excluding MSR was $55.6 million or $0.56 per diluted share.

On a per-share basis, this represents an increase of 4% over the first quarter of this year, an increase of 33% over the second quarter of 2017. We reported end of period net loan growth of $121.3 million for the quarter or approximately 4% annualized.

We're pleased to have this level of growth particularly in light of the competitive pressures and the anticipated runoff we experienced in our acquired loan balances, as we work through the integrations of our two merger partners.

As anticipated, we experienced a seasonal decline in deposits for the quarter following elevated first quarter deposit activity. Chris will discuss loan and deposit activity further in a moment including some geographical commentary on our markets. I'm also pleased to report continued upward movement in our net interest margin.

Our core margin which excludes accretable yield was 3.63% for the quarter compared to 3.60% for the first quarter of 2018. We continue to benefit from the upward repricing of our loan and securities portfolios. John will go into further detail in a moment. Finally the last two bullets on this slide relate to capital deployment.

We were active in our share repurchase program during the quarter repurchasing over 785,000 shares of our common stock at a weighted average price of $31.39. We now have approximately 3.1 million shares remaining in our current authorization.

Additionally in April we announce the acquisition of Icon Capital Corporation which has approximately $800 million in assets in the Houston Texas market.

Since we had the opportunity to discuss this transaction on our first quarter call, I won’t go into great detail on this transaction other than to say, Icon continues to perform at a very high level and they are growing.

They achieved loan growth of just over 7% annualized for the second quarter which is a notable accomplishment given the additional competitive pressures associated with the transaction announcement last quarter.

We're anxious to have their bankers officially become a part of our team and in fact their shareholders approved the merger yesterday at a special shareholder meeting. I will now turn to John and allow him to discuss our financial results in more detail.

John?.

Thanks Dan, and good morning all. If you turn to Slide 4 in the slide deck, you’ll our summary income statement. I'd like to remind everyone again of the impact that the two merger closings in January had on the comparison shown here. The transactions closed effective January 15 which resulted in 2.5 months of activity in our first quarter results.

Accordingly the second quarter is the first quarter in which we reported a full three months activity from these mergers. In reviewing the summary income statement, net income was $54 million or $0.55 per diluted share for the second quarter. We had one meaningful non-operating item during the quarter which was $1.9 million in merger related expenses.

Additionally as Dan mentioned, we had a small negative MSR valuation adjustment for the second quarter of $200,000.

Accordingly, we reported net operating income excluding MSR of $55.6 million for the quarter or $0.56 per diluted share compared to $53.6 million or $0.54 per diluted share for the first quarter of 2018 and $38.8 million or $0.42 per diluted share for the second quarter of 2017.

Net interest revenue increased 2.9% compared to the first quarter of 2018 and 21% when compared to the second quarter of 2017. In addition to the incremental net interest revenue associated with the January acquisitions, we also saw continued expansion in our net interest margin as a result of course spread increases.

Our reported net interest margin for the second quarter was 3.71 while our net interest margin excluding accretable yield was 3.63. Comparable metrics for the first quarter of 2018 were 3.67% and 3.60% respectively. We reported a net interest margin of 3.52% for the second quarter of 2017 which was not impacted by purchase accounting accretion.

And looking at our core margin, the pick-up and loan yields continues to outpace the increase in deposit costs. Our loan yield excluding accretion increased by six basis points compared to the first quarter of 2018 while the total deposit cost increased by three basis points.

We also continue to receive benefit from the reprising of our securities portfolio. Our tactical available-for-sale securities yields which comprised the largest component of our portfolio increased five basis points quarter-over-quarter.

Before we move on, I'd like to mention to mention one other item our effective tax rate for the quarter was 19.2% compared to 21.7% for the first quarter. This decline was driven by back tax benefit of approximately $2 million associated with the appreciation of stock awards that vested during the quarter.

If you turn to Slide 5, you'll see a detail of our noninterest revenue streams. Total noninterest revenue was $72.5 million for the quarter compared to $68.1 million for the second quarter of 2017 and $78.9 million for the first quarter of 20187.

Outside the swings in the MSR asset valuation virtually all of our non-noninterest revenue streams were stable for the quarter.

The increase in insurance commission revenue compared to the second quarter of last year was driven primarily by the accounting revenue recognition change related to contingent commissions which we discussed at length in our first quarter call.

Additionally our first quarter 2018 results included a $3.0 million legal settlement, and a $2 million gain on the liquidation of subsidiary that were included in the other noninterest revenue.

These were the primary drivers of the second quarter decline shown in this line, otherwise there were no significant unusual or unexpected items in our second quarter noninterest revenue results. Slide 6 presents a detail of noninterest expense.

Total noninterest expense for the second quarter was $145.2 million compared with the $147.7 million for the first quarter of 2018 and $127.6 million for the second quarter of 2017. There was some lumpiness in some line items and I would again remind you that the January mergers were closed - January mergers did have some effect on that.

The only non-operating item included in the quarter was $1.9 million in merger related expenses which is down from $5.7 million in the first quarter 2017. The only other change of significance was the decline in other miscellaneous expense.

If you recall we did have one large forgery and theft loss totaling $2.3 million in our first quarter results and this quarter we had a related $1.3 million recovery. Our operating efficiency ratio excluding MSR was 66.4% for the quarter compared to 66.8% for the first quarter of 2018 and 67.3% for the second quarter of 2017.

We are pleased with this metric continues to decline. We're also optimistic about the opportunity to continue the improvement during the second half of the year as we realize more of the cost savings associated with the two mergers. That concludes our review of the financials. Chris will now provide some color on our business development..

Thank you, John. Slide 7 reflects our funding mix as of June 30 compared to both the first quarter of 2018 and the second quarter of 2017. Again as a reminder, the mergers for Central Community Corporation and Ouachita Bancshares closed January 15. Thus loan and deposit comparisons to quarters and the prior year should be viewed accordingly.

Deposits and customer repos have declined $479 million compared to the first quarter of 2018.

As Dan suggested, the first quarter is typically high due to seasonality of public funds and the second quarter decline we experienced is largely attributable to this anticipated seasonal decline in public fund money, as well as customer federal tax payments.

Of declining deposits is not totally unexpected, we continue to focus on relationship banking and development of core deposit. This is also reflected in the overall mix and the increase in noninterest demand balances. We will continue to compete in our markets with a disciplined approach to pricing.

As we look at geographical performance relating to deposits, we have four community bank divisions standout this quarter for deposit growth. Dallas Texas, Houston Texas, Central Arkansas, and Gulf Coast divisions, all reported excellent results this quarter.

Turning to Slide 8, we will see our loan portfolio as of June 30 compared to the first quarter of 2018 and the second quarter of 2017. We reported net loan growth of $121 million, 4% on an annualized basis for the second quarter.

As Dan mentioned, there's always elevated competitive pressure and potential runoff in markets experiencing mergers and conversions.

Having gone through two conversions in the first half of 2018, we are particularly pleased with this level of loan growth for the quarter and the building of our new merger partners had exhibited in holding onto relationships during this transition.

As we look at our second quarter lending efforts from a geographical perspective, we had several divisions produce meaningful loan growth. Stand out divisions for the quarter are Dallas Texas, Houston Texas, Tennessee Metro, and our Pineville divisions. Slide 9 contains credit quality highlights. I'd like to touch briefly on a couple of these bullets.

We had a provision for credit losses of $2.5 million for the second quarter compared with a provision of $1 million for both the first quarter of 2018 and the second quarter of 2017. The provision for the quarter was sufficient to provide for the loan growth achieved in the quarter as well as cover the net charge-offs of $2 million.

The allowance of the percentage of net loans and leases were stable at 0.97% and 1.05% net of acquired loans accounted for under the purchase accounting rules compared to the first quarter. In addition to the continued low level of net charge-offs, other credit quality indicators are trending in a positive direction as well.

And our year-over-year trends total NPLs to net loans and leases have declined to 0.59% from 0.65% a year ago while NPAs to net loans and leases have declined from 0.72% to 0.65% over the same time period. Credit quality will continue to be a primary focus of our team as we move forward.

Moving on to mortgage and insurance, the tables on Slide 10 provide a five quarter look at our results for each product offering. Our mortgage banking operation produced origination volume for the quarter totaling $523.7 million. Home purchase money buy in was $420 million or 80% of our total volume for the quarter.

Deliveries in the quarter were $303 million compared to $215 million the first quarter of 2018 and $264 million in the second quarter of 2017. Production and servicing revenue which excluded the MSR adjustment totaled $7.1 million for the quarter compared to $7.7 million for the first quarter of 2018 and $7.6 million for the second quarter of 2017.

Our margin was 1.75% for the quarter representing a decrease of 2.44% for the first quarter of 2018. This margin decline is common during the second quarter each year as our pipeline stabilizes during the middle of the annual selling season.

As we've said in past calls, we view a stable pipeline margin to be in the 1.75% range and we can certainly see that in Q2 as the pipeline flat quarter-over-quarter, at $260 million at June 30 and March 31.

Finally as Dan mentioned earlier, the MSR valuation adjustment during the quarter was a negative $0.2 million which is insignificant to our quarterly results. Moving on to insurance, total commission revenue for the quarter was $33 million compared to $29.1 million for the first quarter of 2018 and $31.1 million for the second quarter of 2017.

As we've mentioned in the past, comparable quarter prior year comparisons are more relevant due to seasonality in the book of business. Half of that comparison for this year will be impacted as a result of the accounting revenue change that John mentioned earlier.

Contingent commissions are now estimated and recognized throughout the year rather than in the period of cash received. These commissions are included within the other components of insurance commission revenue which is up $1 million compared to second quarter of 2017.

All that to say, the property-casualty and life and health commissions are up 2.8% in aggregate over the same period last year. This growth rate is consistent with the message we've been communicating for some time now. We continue to experience a soft market in terms of insurance pricing.

Our team is seeing very little opportunity for revenue growth on pricing alone, nevertheless they're out there daily calling on customers' effort to grow our book of business and expand relationships and revenue. If we can continue to build our customer base we will be well-positioned when the insurance pricing does cycle and firm.

Now, I'll turn it back over to Dan for his concluding remarks..

Thanks Chris. I'm extremely proud of our team's effort to improve our performance. All of our frontline teammates including our bankers, mortgage team, wealth management team, and insurance team, contributed to our growth efforts during the quarter despite various challenges unique to each of their product offerings.

Additionally, team mates in our back office and support areas continue to improve their respective processes and support our growth effort without increasing our overhead. These efforts continue to yield and improve financial results.

The reported record earnings for the second consecutive quarter, while our operating return on assets excluding MSR topped 1.3% for the first time in our Company's history. As we look forward, I'm confident we have the opportunity to continue this trend.

We believe our net interest margin will continue to benefit from recent rate hikes as our loans and securities reprise. Additionally, we expect to continue to harvest cost savings from our recent merger integrations.

I'm excited about the benefit these opportunities along with a continued focus on taking care of our customers will provide to our performance in future quarters. With that, operator, we'll now be happy to answer any questions..

[Operator Instructions] The first question comes from Jennifer Demba with SunTrust. Go ahead..

I have two questions.

The cost savings estimates you have for the two deals that closed - the ones that are closing this year, do you think that you have a chance to beat those and if so in what area would that come from? And then second, if you could just clarify your interest in capacity to do more acquisitions and if you are interested in a frame what you're looking for right now?.

Cost savings on the two transactions that closed in January, they're both a little different as you know. So, we had market overlap in North Louisiana, that integration took place in February. Those two teams are actively engaged. I think we're well past the significant noise that comes with operational integration in North Louisiana. Kevin Co.

is our Division President in that market and was the CEO, LLB [ph] doing a fantastic job of leading his team. The cost savings there come through branch consolidation. So, you got the standard back office synergies that come - and in addition to that we had multiple branch overlap and branch consolidation that will benefit us long-term.

We continue to harvest some of that cost saving over there, some of it is already in place in fact I'd say a big slug of it is in place, was not in place for the full quarter but was in place during the quarter.

And so as we finish the second quarter, we'll get the full benefit of the lines share of the savings out a lot of the - in the third quarter. The second operational integration of 2018 for us was in Central Texas with the first aid bank of Central Texas and Don Gabalski's team over in Austin Temple clean area.

That integration took place in June and so we are just beginning the process of harvesting off some of the back office synergies that will come from that.

So we will not see a full quarter benefit from those savings in the third quarter but we should have that in place by the end of the third quarter so that we'll see a full benefit of that in the fourth quarter.

Your specific question I think Jenny was, can we beat our internal targets? We think we can reach our internal targets and as we get to the end of the game, we want to make sure that we're winning and so I suspect that our whole team is focused on trying to make sure that we're doing the right thing and becoming more efficient and doing that with the integration of the two transactions that are there.

The third transaction that's still out there was Icon. I've talked about them for a minute. I was in Houston yesterday for their special shareholder meeting to approve the transaction.

We are and what I refer to as the hurry up in white phase of the process where the applications are in at the regulators, there's not been a lot of communication at this point, I would suspect in the next 30 or 60 days we will start seeing or hearing or having questions coming back-and-forth on those applications, and our intention to complete that merger here in the back half of 2018 and workforce and integration on that transaction.

And then I think to that you added on, what is our appetite or capacity for other transactions and what are we looking for. I don't think anything has changed from my comments or philosophy on that. For some time we continue to have active communications with lots of potential partners out there from smaller transactions to larger transactions.

There is a lot of talk going on in M&A world today, lot of people trying to pick the right partner. We're talking to lots of folks and that spreads across our entire footprint.

We're looking for folks where there is a cultural fit where there is a business model fit, where one plus one is going to be more than two and we continue to believe there are opportunities out there for us. We just need to make sure we find the right ones..

One follow- up if I could.

So, are we looking at a couple of $1 million of cost savings coming in over the next couple of quarters, is that a good way to think about it?.

I don't have the number in my head. John is going to have to jump in here with me. But when you look at their overall run rate, the two banks combined had an overall run rate of $50 million plus a year and operating cost coming into $17 million and I think we said we were in the 20% plus cost savings over both of those going forward.

So, and I think you can figure that out..

The next question comes from Jon Arfstrom with RBC Capital Markets. Go ahead..

Question for you Dan or maybe Chris.

Can you talk about the magnitude of some of the runoff from the acquired banks just kind of curious if you could maybe get us to a core growth number and what kind of expectations you have going forward?.

I don't have a specific number, Chris can jump in here. We continue to experience ebbs and flows and in any transaction you wonder kind of what your competitors are going to do. I think again the OIB transaction integration was earlier in the year, it was in February and I think the noise from that is gone.

So that team is more focused today on doing what they do which is go out and bring in new customers. Hopefully they're shifting from defense to offense which means we're hoping we can grow in that market.

Over in Central Texas, we've been playing defense longer, so I think that's where the risk is that we're saying that when you're not playing offense when you're playing defense the risk of losing is there.

Our team across our entire footprint continues to look for and challenge but from a pricing and structure competition - the competition is out there.

Chris or John may want to jump in here, but we're continuing to see price competition that makes us scratch our head, in some cases term or structure competition that - this is not what we want to stretch.

Chris?.

That's right. I think to start with I think the cultural fit with the OIB and FSB was very positive and that translates the flows leads to their customers. So we have a good relationship banker is like that. So, we feel good about their customers. I think that's helping to protect some of that.

They're doing a great job of protecting business, but like Dan said, it's very competitive, it's rising rate environment. Maybe a little more risk on the deposit side because that may tend to move quicker and loans with ever priced a year ago may have a tendency to want to stay.

But any time that happens all the local banks take advantage of and try to move customer relationships over.

And so that's what our folks are doing in the FSB and from our OIB world today is protecting that existing customer base, try to keep it where it is and then dance as they can turn it off and so once they give all of their new processes and procedures under their fingertips..

John pointed out in our presentation on the press release, there's some information about the outstanding balance on the acquired loans and the principle pay downs in that - Jon was about $180 million..

Pretty common complaint I guess from others in terms of the competitive environment, but pretty common.

So, I guess the message here is, you're still may be thinking mid single digit growth maybe a little bit better if you can curtail some of the runoff, maybe we can talk about it?.

That's right, I think at the end of the day 4%, we're pleased. And I think when you look at the total company including all the noise behind the 1 billion plus dollars that we brought $1.5 that came in, I think we're pleased with where we are but we're pushing the team. We need to continue to get better..

And then Chris, just one small one, the mortgage margin.

Any thoughts on what that could look like going forward - I mean given the decline in the margin I understand your comments about - basically what you expected as you have pretty good quarter but given the pipeline where is at, any thoughts on what we might see for Q3?.

Margins, I can't - we can't predict that because it depends on the pipeline and it moves up and down based on what that looks like, but we've always had our margin should be around the 1.75 and it's stable, I think that evident this quarter. We're not competing on margin, we're trying to hold our margin where it is.

We're seeing some pockets of competition where they're being more aggressive on their margin and we're not having to do that yet across the footprint..

And Jon, when we look back I think two or three or four quarters ago, we were talking about how to determine what our normal stable margin was. We said that we think that we've got 160 to 175 core margin with a flat pipeline. We never had a flat pipeline before this quarter, it's pretty darn flat and we reported 175 margins.

So, I think we feel like we're right where we thought we would have been with a flat pipeline..

The next question from John Rodis, FIG Partners. Go ahead..

Question on fee income. The card-based line item you showed about a linked quarter increase of about $1 million.

Was there anything unusual, I know you guys said there wasn't really anything out of the ordinary but what sort of drove that increase in the quarter?.

I think most of that is probably merger activity. Remember we've got some trailing stuff coming through, one of the things we didn't - I don't think any of us talked about through directly in our comments.

Remember, we did not have a full quarter in 1Q of the two merger partners, they came in on January the 15, and so you've got some lagging stuff coming through behind that.

This quarter we had a full quarter on both of those transactions which would be a full quarter on card revenue, a full or transactions, and also a full quarter on expenses that I think maybe some folks did not fully bake into their numbers out there on your side when they were looking forward from the expense run.

So, this was a true quarter where the two mergers were there the whole time, I think that's the difference on card revenue..

So, if card revenue is going to higher then expenses should also be higher for that line item, correct?.

Yes, I think you had a full run rate of expenses in the quarter. So again your question is in some of the expense in 2Q related to higher expense on the card revenue that was generated, I guess that logically makes sense to me, you may have not seen it that way.

John, you want to?.

We hadn't analyzed this in that fashion but it makes sense..

And then just a question on the balance sheet.

You saw a little bit of runoff in the securities portfolio, you expected to sort of stabilize, how should we think about the level of securities going forward?.

John, you want to jump in on that?.

Yes, it should be fairly stable. The good news is we've got some really good repricing opportunities in the securities portfolio. We've got probably $1 billion repricing in the next 18 months from a $122 million to $250 million plus. So that's a great opportunity for us there..

And then if I may, just one last question on the tax rate. I think you said $2 million benefit from a stock-based compensation.

So if you add that back, looks like your effective rate was 22% to 22.5%?.

Adding that back, yes. That's correct..

John's got 19, if you have to add back the benefit from the stock based compensation, it is a unique second quarter 2018 event. We're closer to, we're over 22%, pushing 23%..

And I think last quarter you sort of said 23% is a good rate, is that sort of still?.

It's still pretty good, yes..

The next question comes from Matt Olney, Stephens. Go ahead..

Dan, within the mortgage discussion, it looks like you portfolioed a more significant portion the production of it in the second quarter.

Any reason why, is this a strategic shift or more just to that unusual timing issue?.

Yes, I don't think there's any strategic shift there at all, that's just product mix.

So, when we look at our products that we're selling, there are some seasonality in some of those products and some of the products that get pushed through are portfolio products that the mortgage lenders are pushing, and the portfolio product was popular in the second quarter.

I think when we look back you would've seen that we had a pickup in portfolio product in second quarter of last year also. So, I don't think there's any real shift in process.

Chris, you've got your answer there?.

No, Dan answered it well. There's just certain product that our portfolio product that we move to the mortgage team and it shows up in those numbers. And there is some seasonality to it..

And then on the deposit side, you gave us a good commentary on competition on loan side but on deposits, any sense if you can call out as far as any pressures you're seeing in any of your markets more so than the other market?.

Most of it is coming from deposits. Special, everybody is running a special, so that's what we're seeing. But it's across the footprint, across all competition..

Yes, deposits are obviously very important. We've got a very stable, very core, very loyal core customer base, and we like that and I think many folks like you have said that's the core strength of our company.

But you can clearly see that the folks that are out there that are chasing deposits are continuing to ratchet up that pressure and that's happening across our footprint..

And on that note Dan, lot of your competitors this quarter did move some of their posted rates of last few months and based off your results in 2Q, it looks like you didn't require that.

Can you just talk about what's your response for that competitive pressure?.

We did posted rates on almost every product throughout the quarter and some again late in the quarter, some maybe the last rate hike was June-- basically June 15, I don't remember exactly what day, but mid-June was the last rate hike and post that rate hike we raised, posted rates on almost every product.

So, we continue to look at our products and our pricing, we've got a process in place, the thing that almost on a not necessarily daily basis but certainly a weekly basis we're seeing what's happening and we're listening to what our folks are telling us.

So, being nimble, being able to move quickly is important to us and we give our folks in the field a lot of autonomy to compete on that..

Just to clarify, sounds like you didn't move the rate kind of late in the quarter we'd get the full quarter impact of that. In 3Q by giving you earlier commentary about the core margin expansion in the near term, it sounds like you still expect that even with the higher deposit betas in 3Q versus 2Q.

Is that a fair way to look at it?.

Yes, we continue to model where we believe that we've got upward pressure on margin because we continue to harvest the repricing on - when you look frankly and our loan pricing was up 6 bps, is that right? So, you know lots of folks had much higher up on the loan yield.

We're going to continue to see that loan yield run up over time as those repricing dates hit on the loan book. So, we continue to believe we've got upward margin pressure..

And then just shifting over towards the allowance discussion and curious what your expectations are for provision expense for loan losses, it looks like in 2Q, $2.5 million provision expense, a low relative number but I guess still high has been for a while.

So, what is your reaction on the on provisional expense in hand?.

Yes, couple of things in there. So, in the second quarter we divested some ORE that I would - had said was stale ORE, we actually ran on auction for some ORE that was quite old and some of the charge off is that. So, hopefully we're not seeing that off of the current stuff that's out there.

But I do think anytime you've got an acquired book and as those loans are transitioning from the acquired book into the book that is on your loan loss reserve, that's going to composure loan loss reserve modeling to recognize those new credits that are coming into the formula Chris..

Well, you know Matt, it's a modeling discussion, the model drives it but some of the things that can drive that model loan growth and charge-offs and probably we're going to experience the next few quarters are transition from purchased acquired loans to - they turn into legacy months for lack of better terms, and when they get touched or renewed, formerly purchased loan becomes a loan that's in your ALLL [ph] models.

So, there's going to be a lot of moving parts within that, it's hard to predict. But it's model driven, that's what'll drive..

The next question comes from Michael Rose from Raymond James. Go ahead..

Just one from me on just credit in general, we've seen a couple of one-offs at some of the banks this quarter. Just more broadly - any early warning signs that you're looking for and is there any certain industry verticals that you're maybe a little bit more cautious on.

Clearly, pricing structure has remained competitive, gotten more competitive in some cases. So, just any general comments there will be helpful, thanks..

As we said earlier, pricing and structure continue to be headwinds in our loan acquisition or loan acquire process, as we're looking to go out and acquire fund and harvest new loans out of the market. Competition is very tough on both fronts.

When you talk about credit quality, we continue to not see any - we haven't seen a one off here, , we haven't seen any signs in any of our book that causes great concern for us. We're watching all the things that are there.

You see our 30 to 89 days numbered ticked up in the quarter, and again I think that's probably more seasonal, it's also again first full quarter for acquired loans to be in the book and so we're trying to understand what's normal in those acquired books compared to ours but I don't think we're saying anything.

Chris, you talked our lending guides, our Chief Lending Officer, what are you hearing?.

It's probably that all credit metrics are moving in the right direction and we look at a lot of different things on an ongoing basis. The answer to what to what we were looking at or thinking about, one of the things we're thinking about on the commercial side is as loans reprice at higher rates that were underwritten two and three years ago.

Could there be some stress on some of the those cash flow coverage's and that we feel good about how our underwriting was done at the time but I think we're going to see some of that as an industry over the next 25 months or so..

I remember our average loans size continue to be very small. So they are very granular nature of our portfolio. We just got lots of credit work. We're not feeling stresses on the credit quality side at all at this point..

This concludes our question-and-answer session. I would like to turn the conference back over to Dan Rollins for any closing remarks..

Thank you for joining us today. If you need any additional information or have further questions, please don't hesitate to contact us. Otherwise we look forward to speaking to you again soon. Thank you all very much..

The conference has now been concluded. Thank you for attending today's presentation. You may now disconnect..