Isabell Novakov - SVP, IR Jeremy Ford - President and CEO Darren Parmenter - EVP and Principal Financial Officer Alan White - CEO, PlainsCapital John Martin - EVO and CFO, PlainsCapital.

Matt Olney - Stephens Brady Gailey - KBW Michael Young - SunTrust Robinson Brett Rabatin - Piper Jaffray Michael Rose - Raymond James.

Good morning, and welcome to the Hilltop Holdings’ Third Quarter 2015 Earnings Conference Call and Webcast. All participants will be in 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 over to Isabell Novakov. Please go ahead..

Good morning. Joining me on the call this morning are Jeremy Ford, President and CEO, Hilltop Holdings; Alan White, CEO, PlainsCapital Corporation; Darren Parmenter, Principal Financial Officer, Hilltop Holdings; and John Martin, CFO, PlainsCapital Corporation.

Before we get started, please note that this presentation and statements made by representatives of Hilltop Holdings Inc. during the course of this presentation include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements anticipated in such statements.

Forward-looking statements speak only as of the date they are made, and except as required by law we do not assume any duty to update forward-looking statements.

Such forward-looking statements include, but are not limited to, statements concerning such things as our business strategy, our financial condition, our litigation, our effort to make strategic acquisitions, our recent acquisition of SWS Group Inc.

origination volume, expected losses on covered loans and related reimbursements from the Federal Deposit Insurance Corporation, projected losses on mortgage - of our allowance for loans losses and provision for loan losses, the collectability of loans, or other plans, objectives, strategies, expectations, and intentions, and other statements that are not statements of historical fact and may be identified by words such as anticipate, believe, could, estimate, expect, forecast, goal, intend, may, might, probable, project, seek, should, view, or would, or the negative of these words and phrases or similar words or phrases.

For further discussion of such factors, see the risk factors described in the Hilltop Annual Report on Form 10-K for the year ended December 31, 2014; quarterly report on Form 10-Q for the three and nine months ended September 30, 2015; and other reports filed with the Securities and Exchange Commission.

All forward-looking statements are qualified in their entirety by this cautionary statement. And now, I would like to hand the presentation over to Jeremy Ford..

Thank you, Isabell, and good morning. For the third quarter of 2015, net income was $46.9 million, or $0.47 per diluted share. Third quarter 2015 adjusted net income was $49.6 million, or $0.50 per diluted share, when excluding the transaction and integration-related costs related to the SWS merger.

For the third quarter of 2014, net income was $23.4 million, or $0.26 per diluted share. Our ROA was 1.5% in the quarter relative to 1% in Q3 2014 and our ROE was 11% in the quarter relative to 6.5% last year.

Hilltop's four operating segments reported $79 million in pre-tax income, where PlainsCapital Bank contributed $54 million, Prime Lending contributed $12 million, Hilltop Securities contributed $1.5 million and National Lloyds contributed $12million. Hilltop's common equity increased to $1.7 billion, up $41 million from the prior quarter.

And we remain well capitalized with a 12% tier-one leverage ratio. We have $41 million of freely usable cash at the holding company, as well as excess capital in our subsidiaries. In the quarter, Hilltop completed its share repurchase program with an aggregate of 1.4 million shares, representing $30 million at an average price with $21.56.

Our operating subsidiaries all had a strong and profitable quarter, while the broker-dealer achieved critical milestones as it works towards its integration. Moving forward. On this slide, I'll touch on the areas not previously mentioned.

Our net interest margin on a consolidated basis was 4.20%, up from 3.75% in the prior quarter and this was driven by strong accretion income in the quarter, as well as the strong bank core NIM.

Our assets were relatively flat at $12.4 billion and our loans HFI were relatively flat at $5.4 billion and this is driven by loan growth offset by pay-downs of our covered loan portfolio. And our deposits were relatively flat at $6.8 billion. Our NPA to total assets remains strong as our asset quality does at 24 basis points.

I'll now hand the presentation over to Darren Parmenter to discuss our consolidated results..

Thank you, Jeremy. Moving onto Slide 5, our stated net interest margin increased by 45 basis points in the third quarter to 4.2%, compared to 3.75% in the second quarter. This was primarily due to the favorable resolution of significant loan relationships acquired in the First National Bank transaction.

Cost of our interest-bearing deposits were slightly down versus the second quarter, while our notes payable cost increased 4 basis points. In the quarter, the tax equivalent net interest margin for Hilltop was 137 basis points greater due to purchase accounting.

This was driven by the accretion on discounted loans of $36 million and the amortization of our premium on acquired securities of $700,000. Hilltop’s net interest margin was adversely affected by the broker-dealer securities lending business. With taxable equivalent, net interest margin negatively impacted by 99 basis points.

The bank’s net interest margin for the quarter improved to 5.79%, 3.69% before purchase accounting. Moving onto our non-interest income. Our non-interest income for the third quarter was $296.5 million, up 39.8% versus prior year.

Net gains from the sale of loans, other mortgage production income and mortgage loan origination fees increased $33.7 million year-over-year to $160 million in the quarter, and represented 54% of our non-interest income for the quarter.

Investment advisory fees and commissions increased $42.7 million or 177% versus the third quarter 2014 to $66.7 million in the quarter. This was primarily due to the SWS merger and represented 23% of our non-interest income for the quarter.

Net insurance premiums earned remained relatively flat at $41.2 million in the quarter and represented 14% of our non-interest income for the quarter. Hilltops Holdings non-interest expense. Our non-interest expense was $333.5 million in the quarter, up 31% from prior year.

During the quarter, we incurred $2.8 million in transaction and integration costs related to the SWS merger. Compensation increased $74.1 million or 58.6% versus prior year to $200.6 million in the quarter. This was primarily due to the SWS merger and the increased mortgage volume at Prime.

Loss in LAE, policy acquisition and other underwriting expenses were $29.1 million, down approximately 12% year-over-year due to better loss in LAE expense. Occupancy and equipment expenses increased $4 million or 15.8% to $29.3 million in the quarter. Our other expenses increased $5.7 million year-over-year to $74.4 million in the quarter.

Our amortization of identifiable and tangibles for purchase accounting remained consistent at $2.7 million. Moving onto our balance sheet highlights. Assets were slightly down as growth in our non-covered loans, were offset by a decline in cash loans held-for-sale and covered loans.

Our gross non-covered loans held-for-investment increased $42.6 million or 0.9% from the second quarter. Our gross covered loans decreased $71.8 million or 14.5% from the second quarter to $422.4 million. Our gross covered loans have decreased $328.9 million or 43.8% from the third quarter of 2014.

These decreases are due to the successful resolution of troubled loans acquired in the First National Bank transaction. Our covered OREO declined $19.5 million in the quarter or 15.5%. Our gross loans held-for-investment covered and non-covered to deposit ratio remained relatively flat at 79.5%.

Our total deposits increased $24.3 million in the quarter to $6.8 billion. 31.9% of our total deposits are non-interest bearing. Our short-term borrowings declined by $189.5 million in the quarter and our common equity increased $41.5 million or 2.5% from the second quarter to $1.7 billion.

With that, I'd like to turn the presentation over to Alan White..

Thank you, Darren. Good morning. I'm going to give you some highlights on the four entities that we operate. The bank had an excellent quarter with an ROA of 164, driven by a strong net interest margin of 5.79. That include accretion. Without accretion it was 3.69, which we’d been able to hold that margin in there for about six months - six quarters.

Our efficiency ratio has continued to improve from 57% to 51% from quarter two. Our non-covered held-for-investment loans remain very healthy, growth of 6% annualized for the quarter three with favorable. We have a top line of $1.6 billion in unused commitments, of which, about $500 million of those are construction loans that we'll fund up.

Our credit quality remains sound and our non-covered NPAs declined to $30 million. That's 0.24% of total consolidated assets which is excellent figure. Our energy exposure declined to 4%. We had pay-downs of over $40 million in quarter three, from 4.9% at the end of quarter two. Energy portfolio was down $122 million year-to-date.

We have $2.6 million of non-accruals and $30 million in classified loans and we have looked at the 100% of the portfolio and I could say as today except for the non-performance everything is current. Our reserve is 3.5% on the energy portfolio. There are only 15.8% of our energy loans are classified. We continue to operate 66 branches as of 9/30.

We continue to look at strategic divestitures on non-core non-profitable branches that were acquired from First National Bank, and while we continue to open new branches attractive markets.

We've closed two branches in Corpus in quarter two, but we've also opened a new branch in downturn Corpus on Shoreline Drive, which now serves as our headquarters for the Costal Bend. Our headquarters office that we are building in Houston will open in quarter four and that hopefully will help to support new growth.

Prime Lending had a very profitable quarter, driven by increased volume of $3.6 billion, up 24% from quarter three ‘14, with only 6% increase in loan originators. Purchased volume is 81% in quarter three compared to 76% in quarter two and 82% in quarter three 2014. Our gain on sale margins continued to be a very good.

They increased between quarter three and quarter two mainly because of favorable loan sale pricing. Quarter three’s lot volume grew 24% versus quarter three ‘14 to $4.2 billion.

Our market share remains steady a 0.96% at the end of quarter three, and Prime, as you know, remains focused on purchased business where our market share is 1.22% at the end of quarter three. We were 1.09 at the end of the year. So we continue to improve that market share.

Our mortgage servicing retention rate of 25% in quarter three compared to 31% for fiscal year in ‘14. 100% of all retained mortgage services units are hedged. At Hilltop Securities, revenues were flat for most business lines relative to quarter two. Although our stock loan business and our structured finance business had strong results.

Even with the modest overall revenue growth expenses and excluding the integration cost were down, in account of net revenue ratio declined to 69.6% from 73% in quarter two, which is favorable. As for adjusting for transactions for integration costs, Hilltop Securities made at $3.6 million pre-tax income figure in the quarter.

On October 5, Southwest Securities and Southwest Securities Financial Services were renamed Hilltop Securities Inc. and Hilltop Securities Independent Network Inc., respectively. And then on October 22, we finally received regulatory approval from FINRA, which will now allow us to merge the two together.

This is real milestone in our integration process for two broker-dealers. National Lloyds rebounded strongly in the third quarter. Profitability was up considerably. Our loss in LAE expense declined year-over-year, driven by lower claim count.

Underlying business still fundamentally strong as exposure to management’s initiatives improved risk profile demonstrated lower non-cat loss ratio year-to-date relative to 2014 and we continue to be proactive in our markets as we continue to try to increase rates, but we’re very pleased with the progress that was made at the National Lloyds.

And I'm going to now turn it over to John Martin who is going to talk about the financials of the bank..

Thank you, Alan. Good morning. I'm on Page 11 of the presentation. The banking segment’s pre-tax income for the third quarter was $53.6 million, which is a $29 million increase over the same period of 2014. The third quarter of 2015 includes favorable resolution of a significant FNB relationship and lower non-interest expense.

Net interest income benefited from non-covered loan growth and accretion. Non-interest income was slightly lower compared to the third quarter of 2014 due to lower accretion on the FDIC indemnification asset, lower ORE income and lower service fees on deposit accounts.

Non-interest expense declined compared to the third quarter of 2014 due to reduced write-downs on ORE and increased gains on sale of ORE. In Q3, 2014, PCB had ORE write-downs of $14 million. The reduced costs were offset by increase in compensation benefits associated with the addition of employees from the SWS transaction.

That bank continues to provide a warehouse line to Prime Lending. At September 30, 2015 it was authorized at $1.5 billion, of which, $1.2 billion was drawn. The bank’s capital ratios are strong with a leverage ratio of 12.8% at September 30, 2015. Our consolidated loans were $5.4 billion at the end of the quarter.

60% of that is real estate or construction and development and 39% of it is C&I. Our consolidated deposits were $6.8 billion, which 32% were non-interest-bearing. Going to Page 12. The bank’s non-covered NPAs were $30 million at September 30, 2015, 24 basis points of total assets.

The bank’s capital ratios comfortably exceed was required to be well capitalized under the federal regulations with a tier-1 risk-weighted asset ratio of 17.4 and a total risk-weighted assets of 18.1%. On Page 13, we look at our loan portfolio by covered and non-covered at September 30, 2015.

Our covered purchase credit impaired loans were $251 million and our covered non-purchased credit impaired were $171.4 million. Our non-covered PCI loans were $81.2 million and the rest of our portfolio newly originated and renewed loans was at $4.9 billion. On Page 14, we breakout our portfolios.

The PCI portfolio at September 30, 2015, our covered PCI loans had a carry amount of $249 million, which is 55.3% of its unpaid principal balance. And our non-covered PCI loans had a balance of $76.6 million, which was 73.6% of the unpaid balance.

Our non-PCI portfolios, our covered were $171.4 million, carry value which is 93.3% of the unpaid principal and the rest of our portfolio net of discounts in allowance is carried at 98.7%. Moving to Prime Lending. On Slide 16, the mortgage segment also had a good quarter with pre-tax income of $12.1 million.

This is compared to $11.1 million in third quarter of 2014. The improvement over 2014 resulted from higher origination volume, which was $3.6 billion in the quarter, $693 million improvement over the same quarter of 2014. The purchase volume and the refinance volumes were both increase and purchase volume represented about 81% of the total volume.

Higher gain on sale and origination fees resulted in increased non-interest income to $159.8 million in the third quarter of 2015. Non-interest expense increased to $145 million in the quarter due to higher variable compensation, additional headcount to support volumes, technology, regulatory and compliance needs.

Changes in the fair value of the mortgage servicing write asset in related derivatives resulted in about $2.9 million loss in the third quarter of ‘15. Our mortgage origination volume was $3.6 billion in the quarter compared to $2.9 billion in the third quarter of 2014. With that, I'll turn it back to Jeremy to talk about Hilltop Securities..

Thank you, John. Pre-tax income for Hilltop Securities for the quarter was $1.5 million and it represented continued improvement, profitability since the merger. In the quarter, we had integration related costs of $2.1 million. So adjusting for that, the pre-tax income for the quarter was $3.6 million.

And I'd like to now talk about the comments about the broker-dealer merger and potential cost saves. As previously stated, we reached two milestones regarding our integration of SWS and First Southwest. First, we obtained approval from FINRA to merge our two broker-dealers. And second, Southwest Securities changed its name to Hilltop Securities.

We have set the merger date in January 2016 or we can operate as one firm with one system and one headquarters. As for cost savings. Utilizing 2015 year-to-date results for the broker-dealer segment, excluding integration costs yields pre-tax income of $6.4 million.

Then annualizing these results in net revenue of $350 million to $360 million, pre-tax income of $855 million and a pre-tax margin of 2.4%. We believe annualized year-to-date results for broker-dealer segment provides best baseline for future cost saves in pre-tax margin.

And we expect future cost savings to phase-in starting in Q1 2016, and be completed in Q1 2017. We anticipate roughly 20% of the cost saves to be phased-in per quarter, so 80% would be realized in 2016. Therefore, we would expect the broker-dealer segment pre-tax margin to increase to approximately 8% in the fourth quarter of 2016.

As well, we anticipate future integration costs though those will largely be accomplished by the third quarter of 2016, and we will continue to disclose these integration charges on a quarterly basis. Moving forward to the insurance company. As Alan said, it had a very strong quarter with pre-tax income of $12 million.

Premiums remained flat, as exposure initiatives and increase in rates have made for a more competitive environment for our top line. So we've, as such, improvement in our loss experience with a 10% reduction in claims and favorable development in our litigation reserves. And that concludes our prepared remarks..

We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Matt Olney from Stephens. Please go ahead..

Hi, good morning guys.

How are you?.

Hey, Matt.

How are you doing?.

Well, thanks.

Jeremy within your comments about that the broker-dealer and the pre-tax margins, just to clarify, did you say you're targeting at 8% pre-tax margin for the full-year 2016?.

No. What I was articulating is that we’re targeting an 8% pre-tax margin for the fourth quarter of 2016, and we expect for our cost savings to come in over five quarters roughly 20% a quarter, so about 80% of the cost savings would be realized by the fourth quarter of 2016..

Okay. And previously, it seemed like we were talking about gains on those cost saves more towards the beginning part of 2016 and now it seems like it's kind of moving to throughout the year.

Is there any change in what you were assuming previously?.

I think we expect - as far as like change, I guess, more of the expectation is to realize things kind of targeting mid-year or next year, so mid-2016. I think what I'm trying to say is like mid-2016 is when will be really able to affect a lot of those changes..

Okay.

And that's as far as the timing, but as far as the absolute dollar amount of savings, any change from what you guys initially expected when you announced transactions?.

I think that's all directionally similar. And as far as dollar amount, what we’re trying to focus on the pre-tax margin but assuming at $350 million run rate of net revenue, we’re talking about going from about 2% where we are today to 8% of pre-tax margins.

So it doesn't take a lot of math to calculate 6% on $350 million, but that's kind of where we are headed and that's about our expectation with the transaction. There has been attrition and some cost savings to-date, but that's largely in the year-to-date run rate..

Okay, thanks. And then question for Alan, within the bank strategically, I know you guys have talked about adding more scale in the Houston markets. It seems like you guys have a pretty small presence there today.

How are you guys thinking about that Houston expansion de novo versus M&A, and what about the timing of that Houston expansion?.

Well, of course you know that Houston market is not red hot around and pretty soft. We will be opening up our, what we call our headquarters office there. We got a staff of about 15 people down there. We’ll continue to try to develop it and continue to try to roll it through acquiring new lenders.

As far as M&A, we're just going to have to wait for the opportunity to come along. And in a down-market, you need to be careful but there is also opportunities, so we are down there doing about what we've been doing.

We're looking for some good lenders to come in and help us, but we are going to be cautious right now because of the economy down there and the softness in the market. So that's kind of where we are, and sometime more the same, we’re going to be real careful in what we do down there..

Okay. And last question for me and then I'll hop off. As far as the purchase accounting accretion this quarter was pretty heavy. I think you guys have set about $20 million just kind of the near-term outlook for quarter.

Is that still what you're thinking or any change from that?.

I’d say in the $15 million to $20 million range would be a good proxy..

Okay. Thanks guys..

The next question comes from Brady Gailey of KBW. Please go ahead..

Hi, good morning guys..

Hi, Brady..

Just following up on the Houston M&A question. I mean, M&A in general, given what's going on in Texas and the uncertainty that has been created by lower oil prices.

Would you say it's unlikely that you all will announce an M&A deal anytime in the near-term with what's going on that's kind of in pushed to the backburner for now?.

No, I think we’re actively pursuing opportunities as we always have. We’re always fairly disciplined on price. And as for the situation, I think for us, so I don't think it really changes our timing but at the same time we got to find the right opportunity and that's hard to predict..

Okay. All right. And then one more on the broker-dealer cost saves, so 8% by the end of next year. That won't be the full run rate of cost saves.

So as we get into 2017, and I know it's a long way out, but that pre-tax margin should be somewhere in the 9% to 10% range?.

Yes, I mean, that's the goal, and to get there we got to finish getting the cost saves. That's the goal we cited previously. We got to finish getting the cost saves that we expect to fully accomplish in the first quarter of ‘17 and lot of it depends on building up the top line..

Okay. And then specifically on the fourth quarter, I know we've seen some bad storms come through in Texas and Oklahoma, some flooding.

Do you expect 4Q to be kind of a rough quarter for the insurance business?.

At this point, we don't expect it to be - we’ve had a lot of rain but we don't cover for flood. So we've had a lot of rain. We expect some volatility in it but nothing significantly different than previous fourth quarters at this point..

Okay. All right, great. Thanks guys..

Thanks..

The next question comes from Michael Young of SunTrust. Please go ahead..

Hey good morning. Just wanted to first touch on the cost saves from the SWS Bank operation. You kind of outlined that over the prior two quarters.

Can you give us an update on sort of where you are in terms of implementation there, and if they are fully in the run rate at this point?.

I think the third quarter would be representative of the cost saves at the bank level, but we continue to work on additional cost saves there, but I think we were close to what we anticipated we would have at this point..

Okay, thanks. And then on the purchase accounting accretion outlook, you mentioned $15 million to $20 million range, which is good but lower and you had some resolution of some larger credits within that business.

Is there some incremental costs take-out that we should start to think about in terms of a lower run rate going forward than related expenses there?.

Not - I would say, it's not imminently in the next couple quarters but that is something that as the balances come down, we'll evaluate..

Can you give us any sort of magnitude in terms of how much expense run rate might be in the numbers associated with the purchase accounting accretion management?.

Not directly at this time..

Okay, thanks..

The next question comes from Brett Rabatin of Piper Jaffray. Please go ahead..

Hi, good morning.

I’m on the road, can you guys hear me okay?.

Yes..

I guess, first, just wanted to ask about the provision and just thinking about - I know the energy portfolio is smaller than your peers, but can you maybe walk through what's your charge on an equipment type credit this quarter, and then just thinking about provisioning going forward.

Are we going to see kind of a similar pace you think if charge-offs are similar in terms of where they were relative to 3Q?.

Most of the provision that we took in the third quarter was based upon qualitative factors for the oil and gas business and we feel like that it's where it needs to be right now, we’ll continue to evaluate it, but I don't know that we would anticipate at this point a similar amount for the next quarter..

Okay.

And then just thinking about loan growth, I was curious, one, did the play-offs have any kind of an effect on the quarter on growth and then what would kind of the pace outlook from here that's still kind of mid-single-digit in terms of crystal ball for guidance on growth from here?.

Obviously payoffs have an effect, our oil and gas payments [ph] are down $100 million for the year, $122 million. So that has an effect. We're running on a 6% annualized growth rate. I'm going to say we're going to be 6% to 8%.

That's what I said last time as far as the year ago fourth quarter looked like pretty good quarter from that standpoint, but we are being cautious with the economy. And I feel very comfortable with our loan growth. I feel very comfortable where we are and I'm very proud of the situation with our credit book. It's in the really good shape.

So we only have $30 million worth of non-accrual, so that's pretty small and we have one OREO property in the legacy bank. So we are not out there throwing money around and we’re going to be real careful as we go through what we see as a cycle here in the oil and gas business..

Okay. And then just last thinking about the broker-dealer and the core margin and what you guys are doing sort of off-balance sheet, on-balance sheet.

Does the core margin has the potential to move higher from here, or how do you guys think about the core margin as a function with the broker-dealer sort of having a little [ph] effect to that?.

The Hilltop consolidated net interest margin?.

Correct..

Well, I think it's - right now the last two quarters has been about $2 billion balance and it's stock lending business and has dragged the net interest margin down from the bank to the consolidated by about 100 basis points..

Correct..

And so, I think that's going to be the case for the foreseeable next few quarters. That should improve short-term interest rate rise really, and it’s still a very profitable business for the broker-dealer with limited overhead..

Okay. Great. Thanks for all the color.

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

Hey, good morning guys.

How are you?.

Good. Good morning..

I was wondering on the energy portfolio. You guys gave a break-out of production services et cetera last quarter.

Do you have an update with the decline this quarter what the breakout was at this point?.

Exploration production 20%, field services 15%, top-line construction 25%, equipment rental 5%, equipment wholesalers 1%, transportation 75% and distribution 25%..

Sounds like you were prepared for that question. Thank you. I appreciate it. Sounds like the reserves are about 3.5% of the energy book.

Do you have a sense for what it was at the end of last quarter?.

It increased from $2.8 million to $6.5 million because of the qualitative factors, none of that $6.5 million is earmarked to any particular loan. $2.6 million is on non-accrual.

We have $30 million worth of classified loans, which is up about $5 million from last quarter and we have looked at every loan a 100% of our portfolio and at the end of 9/30, all except the non-accrual loans, everything was current..

Okay. And then just one more energy question, Alan. I think you said production was about 20%. I assume that's only a couple of loans.

How far are you through kind of the borrowing base pre-determinations [ph]?.

The only one is [indiscernible] size and it’s being re-evaluated now but we don't anticipate any problem because they have substantial reserves. The rest of them were smaller loans, so I would say that one loan is over 50% of the total, which is $31 million..

Okay. That's helpful. And just wanted to say really good job as you’re character as PCB slate [ph] on the Internet. Thanks Allan..

The next question comes from [indiscernible] of Compass Point. Please go ahead..

Good morning. Thanks for taking my questions. Just a follow-up on the energy portfolio. And I appreciate the break-out. In terms of the classified loans, I guess, was there any one area within the energy portfolio that kind of, I guess....

Yes, out of field and service loans, pay-through, would be - that's where the majority of the issues are starting to show up and crop up, our field and service loans..

That's great. Thank you.

And relative to the construction portfolio you have, I guess, how much exposure do you have within that portfolio to Houston specifically?.

We have - well, we have about $130 million of loans in Houston, not all that construction at all by any means, I would say maybe half that figure in Houston at the most.

And that's a guess, but I know the portfolio is about $130 million down there, and I can't tell you exactly how much construction is - probably not much construction, some of it’s probably projects that have been completed..

That's great. Thank you. And moving over to Prime Lending, on the gain on sale margin, across the industry we saw for the most part declines in gain on sale margins quarter-on-quarter, and you noted that your gain on sale margin was actually up quarter-over-quarter and that was related to pricing.

Is there any other color that you can kind of provide around that?.

You got to remember we’re a purchase lender, and a purchase lender, you’re going to get better margins and then our execution is really good and because of the execution we’re able to get a better gain on sale. We've increased our market share from 109 at the end of the year and purchased 122 end of this quarter.

So we are very pleased with that and obviously we are very pleased with the gain on sale, and it continues to increase. Our people were just doing really good job on the execution..

That's great. Thank you. And a second note on the slide about TRID. How is the implementation gone or I guess, has there any….

As far as we're concerned, we've done an excellent job. It's a regulation that has really burned the industry, but as far as Prime Lending, we have done an excellent job. It's been costly, no question about it, cost to everybody. I don't think everybody in the country is really ready for it, but we have done a really good job.

It slows down just a little bit, but we've caught back up and I'm going to give you a figure here that regulation in the last two years has been applied to the mortgage industry is costing each person that’s getting a loan about $1,200 more to get a loan and 24 months ago. So this is what regulation is costing.

Now we are not able to pass all that on, but we are able to pass a lot of it on so really these regulations are very burdensome and they are costing the consumer - they are having to pay for them and this information that you probably need to know..

That's great. Well, thank you very much. That's all my questions. Thank you..

This concludes our question-and-answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..