Will Fisackerly - SVP and Director of Corporate Finance Dan Rollins - Chairman and CEO Chris Bagley - President, COO and Interim CFO John Copeland - SEVP and CFO Ron Hodges - SEVP and CCO

Jon Arfstrom - RBC Capital Markets Emlen Harmon - JMP Securities Michael Rose - Raymond James Peyton Green - Piper Jaffray Matt Olney - Stephens, Inc. Catherine Mealor - KBW John Rodis - FIG Partners Jennifer Demba - SunTrust Blair Brantley - Brean Capital

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; Senior Executive Vice President and Chief Financial Officer, John Copeland; and Senior Executive Vice President and Chief Credit Officer, Ron Hodges. 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 2016 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 2017 earnings release.

Our speakers will be referring to prepared slides during the discussion. You can find these 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 our financial results.

Thank you, Will. Good morning.

Thank you for joining us today for BancorpSouth's second quarter 2017 conference call. I will begin by making a few comments regarding the highlights for the second quarter.

John will discuss the financial results in more detail. Chris will provide more color on our business development activities, 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. Let's turn to the slide presentation.

Slide two contains our customary Safe Harbor statements with respect to certain forward-looking information in the presentation. Slide three covers the financial highlights for the quarter.

We are very proud of the continuing fundamental improvement reflected in the items shown on this slide. Quarter-after-quarter we continue to report successes in our business development activities, combined with stable credit quality and efficiency improvement.

We've reach several milestones this quarter in our performance, some of which are high watermarks in our company's history. Net income for the quarter was $37.9 million of $0.41 per diluted share.

We were particularly pleased with our loan growth during the second quarter as we reported net loan growth of $216.8 million or 8.1% on annualized basis. This represents the first time in our company's history that total loans have surpassed the $11 billion mark.

As expected, and as we have experienced the past several years, deposit balances declined during the quarter following seasonally elevated first quarter deposit activity. However, and more importantly total deposits are up over 5% or $574 million from June 30th last year.

Chris will provide some highlights on our loan and deposit efforts including geographical commentary in a moment. Our net interest margin increased to 3.52% for the second quarter from 3.46% for the first quarter this year.

We continue to expect upward pressure on our margin as we reach re-pricing dates on our variable rate loans. The higher margins, along with the loan growth I just discussed provided for a nice increase in our net interest income.

John will provide more color on the components of our net interest margin in a moment. Moving on to the remainder of the financial results we had a negative pretax mortgage servicing valuation adjustment of $1.5 million during the quarter.

Our mortgage team produced $386 million in mortgage loans during the quarter and reported $7.6 million in mortgage production revenue. Our insurance team had a nice quarter as well, producing revenue of $31.1 million compared to $28.8 million in the second quarter of last year.

Despite continued industry headwinds our insurance team reported growth in property and casualty and life and health commissions during the quarter. We reported net operating income, excluding MSR of $38.8 million or $0.42 per diluted share.

This metric excludes the MSR valuation adjustment that I just mentioned. There were no material non-operating items in our second quarter results.

John will go over comparisons to prior periods in a moment. Our credit quality continues to remain strong, reflected by a modest provision of $1 million for the second quarter.

Ron will discuss the considerations impacting our provision as well as other credit quality metrics in a few minutes. Our operating efficiency ratio, excluding MSR was 67.3% for the second quarter, which is the lowest our company has achieved since 2010.

We’ve been able to accomplish steady improvement in this metric through continued revenue growth combined with very stable expense base. We’ve continued to harvest expense saves in our cost structure to be able to pay for investments in growth opportunities and technology.

We continue to be active in the market by repurchasing our stock. We repurchased 1.4 million shares during the second quarter at a weighted average price of $29.64 per share.

That leaves approximately 3 million shares available under our current share repurchase authorization, which expires at the end of this year. We expect share repurchases to continue to be a part of our capital management plan going forward.

While it is not shown on this slide I'm also pleased with the continued patience of our merger partners, Ouachita Bancshares Corporation in Louisiana and Central Community Corporation in Central Texas. While we’re all frustrated with the amount of time it has taken to close these transactions all parties involved continue to believe these mergers are in the best interest of our shareholders, our team mates and the communities we serve.

We have recently been informed the FDIC has completed their onsite review of our CRA program and they are now finalizing the exam reports. While we do not have any official exam findings to report we have worked collaboratively with the examiners continuously throughout this process.

We remain confident our bank is in compliance with the CRA regulations and we continue to expect the examiners to have a favorable conclusion about our CRA program. While there is no official timeline we’re hopeful we’ll receive the final CRA exam report prior to the end of the third quarter of this year.

As we have said for some time now we continue to take steps to be prepared to expeditiously complete our pending mergers. Both transactions remain subject to require regulatory approvals and the satisfaction of other closing conditions.

Although we can provide no assurances that either merger will close timely or at all, we remain hopeful that these mergers will occur this year. I will now turn to the newest member of our Executive Management Team and allow him to discuss our financial results in more detail.

John Copeland joined our company in May and has quickly become fully integrated into our day-to-day operations. We are pleased with John’s leadership and believe his involvement will help our company as we pursue our strategic goals.

John?

Thanks Dan, and good morning. If you’ll turn to slide four in the slide deck, you’ll see our summary income statement.

Net income was $37.9 million or $0.41 per diluted share for the second quarter. There were as Dan said, no material non-operating items that impacted the results over the three quarters presented on the slide.

Dan has already mentioned also the non-cash negative MSR valuation adjustment of $1.5 million during the quarter. We've reported net operating income excluding the MSR valuation adjustment of $38.8 million for the quarter or $0.42 per diluted share compared to $36.9 million or $0.39 per diluted share for the first quarter of 2017, and $37.2 million, also $0.39 per diluted share for the second quarter of '16.

Net interest revenue increased 4.6% compared to the second quarter of '16 and 2.5% compared to the first quarter of 2017. The increase compared to the second quarter of 2016 is driven primarily by continued balance sheet growth, while the increase compared to the first quarter of 2017 is driven by balance sheet growth combined with some margin expansion.

The net interest margin increased to 3.52% for the second quarter from 3.46% for the first quarter of the year. We still expect some upward pressure on asset yields as our variable rate loans re-price.

Loan yields for the quarter increased to 4.27% from 4.20% from the first quarter of the year. This increase was the primary driver responsible for the nice pickup in the margin.

We continue to expect to see future benefit and loan yields and positive impact on our margins as a result of recent rate increases. If you'll turn to slide five, you'll see a detail of our non-interest revenue streams.

Total non-interest revenue was $68.1 million for the quarter compared to $70.9 million for the first quarter of 2017 and $68.5 million for the second quarter of 2017. We have a more detailed slide dedicated to mortgage and insurance that Chris will discuss in a moment.

The other line items on the slide as you can see are relatively stable quarter-over-quarter. Slide six presents a detail of non-interest expense.

Total non-interest expense for the second quarter was $127.6 million compared with the $127.1 million for the first quarter of 2017, and also $127.6 million for the second quarter of 2016. Our expenses continue to remain stable across the board.

And as a reminder, as we look towards the second half of the year, our annual merit pay increases were effective on July 1. So this process will and [ph] impact salaries and benefits expense for the remainder of the year.

That concludes our review of the financials. Chris will now provide some color on our business development activities.

Chris?

Thanks, John and welcome to the team. Slide 7 reflects our funding mix as of June 30, compared to both the first quarter of 2017 and the second quarter of 2016.

Total deposits and customer repos declined $81 million compared to March 31, 2017, which was primarily attributable to seasonal trend fluctuations in public funds and now closed down for SAM [ph]. This is a recurring theme that we experienced in the prior years.

However it is worth noting that if you view the year-over-year trend you'll notice that deposit and customer repo balances are up $558 million or 4.7% compared to June 30 last year. As we look at geographical performance relating to deposits, despite this seasonal decline, we had three community bank divisions stand out this quarter for deposit growth.

Our Central Arkansas Gulf Coast and Northeast Texas divisions all reported excellent results for this quarter. As we look to the second half of the year, our team is focused on continuing to grow core deposits to fund our opportunities on the asset side of the balance sheet.

Moving on to slide eight you will see our loan portfolio as of June 30, compared to the first quarter of 2017 and the second quarter of 2016. As Dan mentioned, we're very pleased with our loan production efforts during the second quarter.

We reported net loan growth for the quarter of $217 million or $8.1 million on an annualized basis. Loans were up $443 million or 4.2% compared to June 30, 2016.

As we look at our second quarter loan growth from a geographical perspective, it is notable that all five of our geographical regions within our banking operation reported net loan growth. Stand-out divisions for the quarter were our East Central Mississippi, [indiscernible] Metro, Pine Belt and our Northwest Louisiana divisions.

Additionally our LPOs or Loan Production offices in Houston, Dallas and Austin had nice quarters as well. As we look to the remainder of 2017, we continue to be optimistic about our loan opportunities that our stable and diverse footprint provides.

Moving on to mortgage and insurance, the tables on slide nine provide a five quarter look at our results for each product offering. Our mortgage banking operation produced origination volume, for the quarter totaling $386 million.

Home purchase money volume was $307 million or 80% of our total volume for the quarter. Deliveries in the quarter were 264 million compared to 260 million in the first quarter of 2017, and 352 million in the second quarter of 2016.

Production and servicing revenue, which excludes the MSR adjustment totaled $7.6 million for the quarter compared to $8.1 million for the first quarter of 2017 and $12 million for the second quarter of 2016. Our margin was 2.19% for the quarter representing an increase of -- from 1.97% for the first quarter of 2017.

This margin increase is attributable to the increase on mortgage loan pipeline. Our pipeline was $271 million at June 30 compared to 250 at March 31 2017.

As we have experienced in the past, the mortgage margin is higher than our normal range during the increase in pipeline environment. Finally as Dan mentioned earlier, we had a negative MSR valuation of $1.5 million during the second quarter.

Moving to insurance, total commission revenue for the quarter was $31.1 million compared to $32.9 million for the first quarter of 2017 and $28.8 million for the second quarter of 2016. For comparative purposes as we have reported previously, first quarter is seasonally high primarily as a result of the receipt of contingencies.

Excluding the contingencies core property and casualty commissions and life and health commissions are collectively up $2.8 million when comparing the second quarter to the first quarter this year. While we continue to see relatively soft rate market, our team continues to strive to grow our customer base.

These efforts paid off during the quarter as our insurance team mates secured several new large customer wins during the quarter which contributed to this revenue growth. Now I will turn it over to Ron, for his comments on credit quality.

Thank you Chris. Slide 10 presents some highlights of credit quality for the second quarter.

As Dan previously mentioned, we had a provision of -- for credit losses of $1 million for the second quarter compared with the provision of $1 million for the first quarter of 2017 and a provision of $2 million for the second quarter of 2016. Our credit quality metrics continue to remain strong across the board.

We reported net charge-offs of $4.6 million for the quarter compared with net recoveries of about $0.5 million for the first quarter of 2017 and net charge-offs of $1.6 million for the second quarter of 2016. The ALLL was 1.10% of net loans and leases as of June 30, 2017.

The increase in net charge-offs for the second quarter was a result of charge-offs associated with loans for which a specific reserve was recorded in previous quarters. We charge these loans down as we work towards resolution.

Both NPLs and NPAs declined meaningfully during the quarter. NPLs decreased $9.9 million to 0.65% of net loans and leases, while NPAs decreased $10.6 million to 0.72% of net loans and leases.

For the second consecutive quarter NPAs as a percentage of net loans and leases have reached a low watermark since the credit cycle. These declines were primarily driven by a 10.9 million decline in non-accrual loans which was a result of elevated pay downs received on such loans during the quarter.

Consistent with the commentary we have provided for some time now, we expect to continue to see normal fluctuations in these balances in either direction. While it's not shown on this slide ORE also declined slightly to $7.7 million at June 30, 2017 compared to $8.5 million at March 31, 2017.

The final bullet on this slide relates to near term delinquencies, which were essentially flat at $26.4 million at June 30, 2017 compared to $25.8 million at March 31, 2017. This balance continues to remain at a very stable level.

With that, I will now turn back to Dan for his concluding remarks.

Thanks, Ron. I don’t want to finish this call without recognizing your contribution to our company.

Ron announced his planned retirement for October 6 earlier this week. When Ron joined our company in 1973 as a management trainee, our bank reported just under $100 million in total loans.

While he will continue to lead our team through the summer and early fall, we are working now to make any transaction as smooth as possible. Ron will complete a 44 year career as our Senior Executive Vice President and Chief Credit Officer, responsible for over $11 billion in loans.

Ron we all just want to tell you job well done. I know you will all want to join me in thanking Ron for his 44 years of service and congratulating he and Margaret as they move into retirement.

In conclusion, we are proud of what we have achieved as a company. As we have mentioned throughout this call this morning, our results reflects several milestones.

Our loan portfolio surpassed the $11 billion mark for the first time in company history while our NPAs as a percentage of loans are at their lowest levels since the credit cycle. Additionally, our operating efficiency ratio excluding MSR is at its lowest quarterly mark since 2010.

These achievements along with our earnings growth are the result of our ability to continue to grow our company while improving our cost structure. As we look to the second half of 2017 our teammates are excited about continuing to build on this progress and improve shareholder value.

With that, operator, we'd now be happy to answer any questions.

Good morning.

Hey, Jon. How are you?

Good, good. Ron, congratulations.

Quite a run?

Thank you.

Yeah, question on loan yields. You've alluded to it a couple of times and also in the release about the loan yields can continue to move up.

Just based on the increases we have so far, what's possible in terms of loan yields?

I don't know Jon if we have a number to put out there. But remember, our loan portfolio is really in my mind, in kind of three buckets.

We've got a couple of billion dollars that are in flowing daily credits, we've got several billion more that are in variable rate credits at less than daily resets. Some of those are weekly, some of those are monthly, some of those are quarterly, some of those are annual or longer.

So the rate increases that we've already seen or already experienced are not fully baked into the loan portfolio that we have today. And so we will continue to see rising -- if nothing else happens, we will continue to see rising rate on our portfolio into the future.

Okay. Maybe a different way to ask it, how long does it take for the one rate increase to be fully reflected in the loan yields?

Fully reflected is the hard part of that question. We have lots of loans that have a period of time out there on a fixed rate component, whether that's one year, two years, three years, four years, so to reach the full potential of every loan on the books today, you've got years out there of a rising rate environment.

Yeah, okay. But you're just saying -- I guess the message you are sending to us is that you're not seeing any real pressure on deposits, and you expect the loan yields to continue to move up for at least for the next few quarters?

Yeah, I mean John or Ron can jump in here. But I think with where we are today, all things else being equal, we're going to continue to see a climbing rate on our loan book just because there is already three rate hikes built in that we have not fully recognized within that loan portfolio.

On the deposit side of it, clearly, as deposits pricing moves in the continent -- in the competitive market, we're going to have to respond to that, but today we are -- our deposit pricing has held really firm and we're pleased with that.

Okay, so nothing so far. Okay, all right.

Good, thank you.

Thank you.

Hey good morning guys.

Hey Emlen. How are you?

I'm doing well, thanks. A nice result in the C&I book this quarter after a few stagnating quarters.

Sounds like loan growth was fairly broad geographically. I mean anything notable that changed without the C&I growth in terms of kind of any macro effects or particular products?

We don't have any particular products that are out there. Ron's shaking his head, you want to jump in there, Ron.

[indiscernible] anything particular or specific on that is just, I think is, as we all know C&I loans take a good while to book and then sometimes it takes a little while for them to get comfortable [ph] and start drawing on our loans then just drilling on their normal loans.

In fact what we -- in fact kind of how the utilization rate turned in the last few quarters.

I think we are running about 48% or 50% of our line utilization.

Which is consistent.

Yeah, it's been consistent over number of quarters.

Yeah, not a whole lot of change on that front. Remember we’re in multiple states, multiple geographies, mostly smaller communities, average loans size is relatively small.

I think what you are seeing is just normal activity within our footprint and it's hard to kind of go pick and choose where it going to come or go from. We’re seeing what I would consider to be a normal economic environment.

Okay, thanks. And then a couple of quarter now you talked about the NPAs kind of being at a -- maybe a run rate there, could you -- can you remind us how you think about where the loan loss reserve should reside on a longer term basis and maybe where we see that directionally where you see that headed?

As a percent of loans, that number's been coming down now for some time and remember this is -- we don’t have a level that we expected to be at on a long-term basis. We have got a model that is looking at the past performance in our portfolio and you know we are all -- all institutions are working towards changing in that process as we work towards implementing [indiscernible] several years out from now.

I think we continue to believe our model is strong and we continue to believe that the model that we are using to measure our loan loss reserve is adequate and it has continued to allow us to -- as a percent of total loans move that number down, which is reflective upon the quality of the portfolio that’s there. The net charge-offs that you saw this quarter, don't remember exactly but it's over $4 million of the total charge-offs were really one relationship that was fully reserved for several quarters ago or many quarters ago that we charged that off and that’s a part of what you saw in the charge-off number.

Great, thanks a lot.

Thank you Emlen.

Hey, good morning guys. How are you?

Hey good, Michael how are you?

Good. Hey, just wanted to get some color and context on the insurance business.

Results were a little bit better than I was anticipating. A large [ph] bank this morning talked about some positive momentums on the pricing front and on the growth front and just wanted to get your sense, your thoughts as to how to think about the trajectory from here, and what you seen in your business?

Thanks.

Positive's probably too strong a word on the pricing side, it sort of flourished I guess. I think what you are seeing for us is just continuing to call on customers, develop new business and remember we had some acquisitions that are in those number too that has probably added to the revenue side of the picture.

I think, okay. New customer generation was a plus in the quarter.

So while pricing on the existing book is still relatively weak, I think our team is doing a good job of retaining their existing customer base and we were able to pick up new customers.

So is that a trend in terms of the customer acquisition that you would expect to continue, once you kind of rollout the full suite of services across your footprint?

I think we have that suite of services out there today. Expect is a strong word.

I’d like to expect it to continue but customer acquisition is one customer at a time. Now that’s hand to hand combat across the eight states that we serve.

Our team is actively engaged in looking for new customers every day. They did a great job in the last quarter and we saw the results of that.

To say that we expect that to move forward, well that’s a little strong but we certainly would like to see that.

Okay, thanks for taking my questions.

Thanks Michael.

Yes, good morning. Dan, I was wondering maybe if you could give some brackets around the part of the deposit base that is subject to administer grades, the [indiscernible] versus maybe index rates, that will change given the movement of fed funds in March and June.

I don’t think any of those disclosed anything that we’ve got out there, and I don’t have a number in my head. But we are core funded.

The large majority of our deposit rates are set by our management team through our normal outflow process. We certainly have some funding that is tied to some kind of an index but it’s going to be a relatively small part of the total deposit funding for our company.

Okay. And then just as a follow-up maybe, I think Jon mentioned in his comments that you all have expect the margin to continue to improve in the third quarter given the June and the March moves, is that fair?

Yes, I think we’ve continued to say that we believe we have got an upward bias on our margin all things else being equal. We know that we have not fully recognized to the rate increases in our loan portfolio.

We know that we’ve got a bond portfolio that running off at a 1% yield. So you are picking up anything that we’re putting back into the bond portfolio.

So we’ve got a pickup in rates on the bond portfolio, we’ve got a pickup -- a built-in pickup rates in the loan portfolio. The wild card is what you ask about on the deposit side is if we can continue to hold deposit funding stable or lower, than we’ve got an upward bios on our margins.

John, you want to add anything to that.

Yeah, we are looking for that to happen and looking in out co [ph], every month, looking at the variable pricing, variable loan pricing and floating to loan pricing, re-pricing. So we still expect to see some on that.

Okay. And then maybe out of the $2.5 billion average securities there were on the balance sheet in the quarter, the yield on that was about 182.

How much is the cash flow over the next quarter or year and what’s the rollout relative to what’s you are willing to reinvest then?

Yeah, that's in the Q, and we are basically on a three year duration. So you can run the math on the three years out there.

And I think what’s rolling off in the rest of this year, that was in the Q is still closer to one. So am I correct?

We can pull that up in the Q and you can look at it but that's what I recall.

Okay. No, just the yields were down year-over-year, and I was just a little surprised there, that's all.

Hi, thanks, good morning. I want to go back to the insurance discussion and I believe you mentioned that M&A was partially the reason for the good numbers in 2Q.

Just remind me of what was acquired and when was it and what was the revenue impact on the acquisition?

The last acquisition was in the fourth quarter of last year. It was an agency that generates a little over $3 million a year in total revenue to us.

So it would not have been in 2Q last year and it is in 2Q this year. So that's a piece of that.

I think they had some -- I think that particular agency actually had some of their revenue weighted into the second quarter more so than the first quarter but that's just a part of the increase when you look at the total.

Sure, I understood and was -- that acquisition was it all P&C Dan or was it kind of mixed?

Chris you may have to jump in help but certainly predominantly P&C. I don’t think they had any employee benefits down there.

No, I think it’s mostly P&C, or all P&C in that one.

Got it. Okay.

And then shifting gears Dan, I understand the comments on the ongoing exam that's wrapped up, waiting to her the results. Once you receive back the results officially and should you get favorable results, how do we think about how quickly you can re-file this applications and what's the current time to get these refilled, I am trying to figure out how we should be thinking about the closing time of those two plain acquisitions once they are re-filed?

Those are all great questions. I think where we are today we continue to believe that we are doing the right thing and we are trying to decide when is the appropriate time to file those applications, when we get an application on file, you really don’t know the timing to respond to that.

So my guess is typically the shortest that you see any approval on any application is 75 to 90 days. And they can certainly take longer than that depending upon what comments come your way.

We would like to get our applications on file, as soon as we can and we’re hoping to be able to do that.

Okay, all right. Thanks for the answers and Ron congratulations on your retirement.

Thank you, Matt.

Thanks, good morning and congrats Ron and welcome John.

Thanks Catherine.

One more back to the margin, not to beat a dead horse. But clearly see the upside in the margin as loan pricing continues to increase.

How do we think about the impact that the flatter curve is also having? And how much of an offsetting impact you think you'll have if this curve was steeper, how much additional upside you would have on an incremental margins to move forward as rates move higher.

Thanks.

Hey Catherine, how are you? You have hard questions.

I don't know how to respond on the difference and what we can see with hypothetical different curve out there. Certainly, it would be better for us, and my guess is everybody else out there if we had a more normal steeper yield curve.

But I think we've got, because of the way that we're structured today, because of the way our balance sheet is structured, because of the way our loan portfolio sits. And we're going to see a rising yield coming off of our loan portfolio for multiple quarters in to the future and I think the disclosures that we put into the Qs there are some details in there around that.

I don't know how to answer the question on what it could be with the higher steeper yield curve. Again John you want to try that question?

No, it's a tough question. Catherine is good at asking tough questions.

I don't have any numbers on that. But we do, as I mentioned before, we do look at the proportion of variable rate and floating rate loans in the portfolio.

We do talk about that during [indiscernible] and we've seen that in it makes us believe that we're not going to continue to see some positive benefit from that. But I don't have any kind of numbers on that right now.

Let me look at the Q and see some of the re-pricing aspects in the portfolio.

All right. And maybe to step back on the M&A side, or I think once more on the capital side.

You had a share repurchase activity this quarter. Is it fair to say that if we get these two deals closed, let's just call it year-end that share repurchase activity will slow a little bit and that's just kind of filler capital management until we get to that point or do you expect to continue to buy back shares regardless over the next couple of quarters?

Yeah. Again I don't know that we have a specific target on what we want to do in this quarter or next quarter.

But certainly we're pleased that we've been able to purchase almost 4 million shares that we've picked up through this cycle. I think we will continue to be able buy shares.

When you look at the -- again it comes back to your balance sheet and capital management as you said when you look at our structure today our balance sheet is growing at a slower pace than our capital is growing. And so in this quarter we basically paid out about one quarter's worth of earnings or little over one quarter's earnings in the process.

So that basically holds our capital ratios inline with where they were coming into the quarter. Clearly, the two transactions that are still pending and we hope to be able to close our dilutive to our capital numbers, something in the 80, 90 basis points range we think.

So we've got to keep that in mind, but I think we've got the ability to continue to buy stock.

Great, helpful. Good quarter, thank you.

Thank you, Catherine. We'll see you soon.

Hey, this is Yvonne Zinger [ph] on for Casey.

Hey Yvonne.

Just one from me on mortgage banking. Could you maybe speak to what you think gain on sale margin might look like in the back half of the year?

I think it typically falls off. But maybe if you could just speak to the magnitude.

Yeah, Chris, you might jump in here with me. So when we look at our presentation, you see the margin move around from quarter-to-quarter.

What you're seeing is that's dependent upon the move, or the change in size in the pipeline. And so the reason you've seen the margin drop off in the fourth quarter has been because the pipeline has shrunk.

So when the pipeline is growing we've been able to report a higher margin. When the pipeline is shrinking we've reported lower margin.

And we look at the margin on a full year run-rate. And we continue to think we're in the 1.6, 1.7 year-over-year margin, and I don't think we see changes in that process at this point.

No, I think the best way to look at it is an average. So not to get caught in any one quarters move based on the pipeline movement.

Does that make sense?

Okay, so is it safe to say without a lot of the refi volatility we should see margin hold a little bit closer. I think last year you saw it even go below 1% at one point.

So…

I don’t think it's necessarily tied to just refi volatilities, just production volumes and the timing of the way the accounting works.

I don't think the margin had anything we do with refi and I think we were below 1% in the fourth quarter of 2015. So I think what you saw last year is historically consistent with what we have seen and that is 100% dependent upon shrinking in the pipeline.

So when you look at the mortgage pipeline from 3Q to 4Q, it went from $340 million to $256 million last year. That decline in the third quarter to fourth quarter caused the margin to shrink.

You have seen the margin now move up a little bit which allows us to move the margin a little higher, because we are recognizing that revenue when the loans are put into the pipeline.

Okay, that’s helpful. Thanks guys.

Thanks.

Good morning guys.

Hey John, how are you.

Good Dan, how you doing?

I am doing good. (Multiple speakers) last night.

Well it's been a trend all year really so. Maybe they can improve going forward.

Hey, just one sort of -- a few of my questions were asked and answered. But in fee income I guess other miscellaneous was up a little bit this quarter, anything sort of unusual in there?

That's a hodge-podge of lots of stuff that drops into that bucket. I think if you look back at 2Q last year we were -- that was part of the high watermark on the other bucket last year also.

So and we were a little bit higher this year than last year but there is just a lot of stuff that gets dropped into there.

Okay, fair enough. And then just maybe one follow-up on the tax rate, it was running -- looks like 33.6% the first -- this quarter and last quarter.

Is that sort of a good number going forward?

John, you want to -- can you think you answer that question?

Yeah, I wouldn’t expect to be changing that number.

Okay great, so around the current level.

Unless you can get some activity going in Washington for us.

Dan, I don’t have that sort of power.

Darn, thanks John.

Thank you, good morning guys.

Hi, Jenny.

Hi, just a question on efficiency ratio improvement overtime. I know you guys have been working through a lot of different projects overtime but can you kind of just give us an update on things that you’ve -- you have realized recently or you think you are going to realize in terms of absolute cost savings maybe over the next three to six months?

I don’t know that I have a story to tell on items that we can pull out at this point. We continue to manage lots of different moving parts within our expense structure.

I think what we are seeing the most benefit is we continue to work with our vendors and so we continue to either renew or renegotiate or change or challenge some of our bigger vendors to find ways to eliminate the cost and that can range from technology cost to office supply cost to if you can name the vendors out there we are working those vendors to try and figure ways to be more efficient. But you know frankly consolidating vendors, we have got multiple vendors providing the same service to us.

If we can consolidate vendors sometimes we can do better. So all that vendor management process continues to take time.

To process at the same time Jenny, you have heard us talk for some time about the construction work that we have done on our facilities where we have been able to become more efficient from a headcount perspective within our facilities. We continue to do that where we have done 20 some odd.

We are pushing towards 30 locations where we have been able to improve the efficiencies on our total line. So all of those things just continue to flow through and we are not to the finish line on these items.

So we continue to expect to be able to see that. But the other side of that story is as we continue to invest we have been investing in technology and we have been investing in producers.

And so that’s been allowing us to harvest those costs saves and hold expenses flat while we continue to invest in other areas.

Thanks Dan, that’s helpful.

Thank you, appreciate your time.

Dan how are you.

Good Blair. Good to hear from you.

Just a quick question. I know you mentioned the increase in rates of kind of being stop through the ; portfolio and yields overtime but can you speak to what you are seeing just in terms of new pricing competition and is that impacting those loan yields increasing or is that is a partial offset, what are your thoughts there?

Ron and Chris can jump in here with. My answer on competition is we see it all the time.

Competition is normal. Some markets we're in, we see folks out there that do things that we're not just not willing to play in, and so we have lost some opportunities on some loans, because we've been unwilling to play at those rates.

And in other markets where we sometimes are able to get significantly better rates. But I don't know that I would feel like competition is affecting us, Ron?

Not really. I mean it's certainly not getting any easier out there to attract all of them.

I mean we're like everybody else trying to make as many as we can, but it's -- the rates aren't getting any easier.

Chris?

I'd say there is some upward pressure on pricing opportunities and competition but still competitive out there. And maybe pricing has not gone up as much as I thought it would with the rate raises we've had.

Okay great. And then I just want to ask about the loan growth on the mortgage side this quarter.

What kind of product we brought on?

Yeah, you are talking about in the portfolio?

Yes.

Yeah. So we're offering a standard set of mortgage products that are out there across our footprint.

We do not hold anything in our portfolio, that's longer than a 5-1 ARM. So what you're seeing and we can produce 5-1 ARMs in the banks.

So on the retail bank channel and we produce those same 5-1 ARM product in our mortgage channel. So if you hit us in the mortgage channel and you're at a 5-1 ARM that's product that's going to come under our balance sheet.

If you hit us with a 15 year or 30 year fixed rate product, we're going to service that but we're going to sale the loan and you'll see that. If you come into the bank you're looking for a mortgage and you want a longer term fixed rate, we're going to refer that over to the mortgage team.

If you come into the bank and you want some type of an ARM, then we can handle that for you right there and take care of your business.

Hey great. Thank you.

Thank you for your help.

Thank you all for joining us today. If you need any additional information or have further questions please do not hesitate to contact us.

Otherwise we look forward to speaking to you all again soon.