Good morning, ladies and gentlemen. And welcome to Trustmark Corporation's Fourth Quarter Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Following the presentation this morning, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to introduce Mr. Joey Rein, Director of Investor Relations at Trustmark. Please go ahead.

Good morning. I would like to remind everyone that a copy of our fourth quarter earnings release, as well as a slide presentation that will be discussed on our call this morning is available on the Investor Relations section of our website at trustmark.com. During the course of our call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We would like to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties, which are outlined in our earnings release and our other filings with the Securities and Exchange Commission. At this time, I’ll turn the call over to President and CEO of Trustmark, Jerry Host.

Thank you, Joey. And good morning, everyone, thanks for joining us. Also here with me are Louis Greer, our CFO; Barry Harvey, our Chief Credit Officer; and Tom Owens, our Bank Treasurer. Let's begin by reviewing some highlights on Page 3 of the presentation material. 2015 was a year of significant achievements. Thank you to our associates for their hard work and thank you to our customers, communities and shareholders we have the privilege of service. Looking at profitable revenue generation, loans held for investment growth was solid, increasing $642 million or 10%in 2015. This is the second consecutive year of substantial loan growth. Looking at the core business revenue, excluding interest income from acquired loans increased $12 million despite the prolonged low interest rate environment that our industry continues to face. Our insurance business had a record year, achieving the highest level of revenue in Trustmark's history. This achievement reflects the combination of realigned processes and structure, as well as investments and additional producers to support continued growth. Mortgage banking also reported strong results with revenue increasing nearly 22% in 2015. These results also partially reflect growth investments made throughout the year. Our portfolio of complimentary fee income businesses performed well and counterbalanced seasonal and cyclical activity throughout the year. As for the acquired loan portfolio, performance continued to exceed our expectations contributing to solid capital base and providing the flexibility to support additional growth. Moving on to process improvement and expense management. We have and continue to focus on realigning the organization to position the corporation for continued success. During the fourth quarter, routine non-interest expense remained well controlled and totaled approximately $97 million down from both the prior quarter and year-over-year. This figure reflects both achieved costs savings, as well as reinvestments to support revenue growth. As…

[Operator Instructions] Our first question is from Preeti Dixit of JPMorgan. Please go ahead.

Could you give us a quick update on how the $213 million of energy balances splits between services, midstream, etc.? And I know overall criticized and classified loans were down this quarter, but did you see any migration in the energy book specifically?

Preeti, I'd like Barry Harvey to give you a little bit more detail on that.

I'd be glad to Jerry. Preeti, I guess just starting off, our energy book is of a reasonable size and we feel positive about it while not being oblivious obviously to what’s going on in the marketplace. So we view this credits from a working capital - non-working capital perspective in terms of how we categorize them and then how we risk rate on then and how we reserve on. So that’s kind of a little bit of back drop to of how we view the portfolio at this point and the reason that is the case is because of the mix we do have. And from an exposure standpoint, we got upstream which is going to be about $2.9 million basically non-existent. We’ve got a few consulting companies who operate in that space but as far as, as Jerry indicated earlier, as far as actually getting repaid based on what’s in the ground or lending on what’s in the ground that’s not the case. On the midstream, we are about $171 million worth of exposure which makes up about 41% of our entire energy book. Downstream were about $52 million which makes up about 12% of our energy book and then oilfield services were $190 million which makes up about 46% of our entire energy book. From a balance standpoint upstream is $1.3 million, midstream is $78 million, downstream is $13 million, oil services was $120 million making up the total of $212 million worth of outstandings in the energy book.

Okay, that's really helpful. And then any color on downward credit migration in the quarter?

Sure. We had one credit in the - coming out of the oilfield services category that we – that was material that we migrated down from a past category and then but that was the only change during the quarter. We’ve got - like every bank does we've got a very detailed process by which we're obtaining interim financial statements, spreading those statements, analyzing them, seeing what they’re telling us, looking to see, getting the monthly borrowing bases for the working capital credits and recalculating those borrowing bases, looking to see if we have breaches. Obviously, if we do, addressing those with the customers, even more forward looking we're getting projections from the customers on a regular basis, comparing those to the actual when we get them in, looking to see if any of their projections would lead to a covenant break in the future addressing that as it presents itself. So we're trying to be as proactive in dealing with our operating companies and that’s what our energy exposure is made up of operating companies, whether it be working capital or non working capital.

Okay, that's really helpful. Do you have the reserve broken out for what it is on the energy book? I'm just trying to triangulate the pressure we are seeing likely on services companies as E&P companies cut CapEx and maybe how that would impact your reserving going forward if you think there's going to be upward pressure on the overall reserve ratio.

We've not specifically taken our energy book out from a reserving perspective and handle it separately. So it is part of our overall reserving process and like I had indicated earlier its more based upon the category it falls in, working capital, non-working capital, and that drives along with the risk rating how we actually reserve but we've not broken that out and we've not presented that information separately at this point. If we see it a further deterioration in our book overtime we will be quick to carve that portfolio out, establish any specific a reserving unique to it that is necessary but we've not done so at this point. To your other question regarding CapEx obviously what we saw as everybody did in the early part of '15, when the downturn started in the fourth quarter of '14 and moved down into '15, we saw a very, very quick reaction, all of our customers to cut variable expenses everywhere they could and of course CapEx is a big part of that both in '15 and then of course CapEx is fairly non-existent in '16 projections.

Okay, very helpful color there. And just switching gears to expenses, obviously a great story there this year. You've been able to hold expenses pretty flat despite the investments you've been making. Maybe some color on how you think 2016 shapes up in light of any additional investment spend?

Preeti, this is Louis Greer. Certainly you hit a good point. We kept our core expenses in '15 very flat at $389 million as we go in to 2016, as you look at our salary and benefit line item, you see that it slightly went up about 3.5 million this year, that’s strictly pertaining to expenses related to our cap, I’ll let you know that we reduced our headcount during 2015, 119 million as a result of continued consolidation of branches, as well as the utilization of technology as you had mentioned. We're focused on continuing to do that throughout '16. And we expect that we could hopefully keep our core expenses relatively flat in 2016, I’ll give you a range of about 97 million to 98 million as a run rate potentially for 2016.

And I'll add a little color, this Is Jerry. We have talked within the corporation sections, we've talked within the corporation about the changes overall in the economy, the challenges of a continued low interest rate environment and obviously what’s happened in the stock market and the impact overall. And so there is very much a focus on utilizing the technology spends that we've made over the last five years to improve overall efficiency and process in the company while really at the same time maintaining a focus on how we can better serve our customers. When they want it, where they want it and that means we have to realign the delivery channels within the company. You do it too quickly I think you risk losing relationships. You do it at the right speed as reflected in some of the statements we made earlier about the number of offices we've consolidated. While at the same time, opening new offices in areas that we think provide us some real advantage and staying focused on those areas within our footprint that provide growth and hiring loan officers, relationship managers that can help us grow are all things that we have to do to keep the company strong, viable and continue with earnings growth.

I meant to say 119 associates versus [indiscernible]. A small correction and Joey pointed that out to me. I said million instead of associates or full-time equivalents. So I apologize for that.

Understood, understood.

[Operator Instructions] And our next question comes from Catherine Mealor of KBW.

I just wanted to follow-up on Preeti's energy questions. Just one more for you. It's if you think about the portfolio, have you done any – I know you don't break out the reserve, but have you done any stress testing in that portfolio into distressed, what could happen in that portfolio if oil prices remain at these current levels for a lot longer time, what level of provisioning we could see in that kind of scenario?

Hey Catherine, this is Barry. Let me address that in a couple of ways. We have looked at our portfolio, one, to determine the correlation with the oil prices and their particular services they are providing. When you look, for example, obviously when you look at our portfolio mix, the area of most interest is going to be the – since we are not in the upstream, it's going to be the oil field services where we've got about 46% of our exposure. When you look at that, about 78% of our outstandings in the oil services area are not related to drilling. They're related to providing services where there is vessel services, where there is air transportation, two producing wells. So from that perspective there is a correlation undoubtedly between how our portfolio performs and the commodity price. But some of it a little less directly related. So we've gone in and tried to understand what's the correlation and from there we looked to see, how's the portfolio performing. And when you talk about the portfolio overall, let me give you a couple of performance managers that I think might be indicative of how things are going thus far. And we're talking most of our customers are going to be calendar year end. So when you look at the last nine months or the nine months during 2015, you can see that the great, great majority, almost of our borrowers have positive EBITDA during the first nine months of '15. And then a large portion of our – the same customers during the first nine months of 2015 have a fix charge coverage of 1.1 or greater. So they've got room for some further deterioration. We fully expect the revenues to continue to be stressed. They've done a lot of the expense reduction that can be done. So it's going to continue to be a squeezing process. But nonetheless we feel good about where are today knowing that as things deteriorate, we need to be quick to change our grades, reserve more for those credits, and move forward. And if we have, eventually have some non-performing loans, we'll have to impair those and write them down the value to the normal process.

And one thing on the margin, how should we think about the margin going forward? I guess one is a scenario, we get a couple of rate hikes this year or maybe more likely that we remain in a lower for longer rate scenario? How are you thinking about further NIM, core NIM pressure off of this 3.40% level?

Catherine, I'm going to ask Tom Owens instead to answer that. We've a lot of work and as you would imagine incorporated that into our DFAS testing, but – Tom, if you would kind of add a little color.

So Catherine, our guidance there really is unchanged at this point. We've given guidance that we would expect low single-digit percentage compression in core of net interest margin year-over-year. If you look at fourth quarter of '15 versus fourth quarter of '14 and bearing in mind that there is some noise in each of those quarters from the yield maintenance payments in the investment portfolio, year ago margin adjusted for that was 347 approximately. Fourth quarter '15 adjusted for that is 340, so that’s about 7 basis points compression year-over-year that’s about two percentage compression on core and net interest margin. We would expect that to be the case going forward. Obviously to your question about perhaps, what happens if the fair continues to tightened versus continued low for long, it’s interesting. You look at the yield curve is actually flattened somewhat since the Fed tightened in mid December. That is obviously not helpful. At the same time the increase in the Fed funds rate and therefore the increase in yields on floating rate loan that in itself is helpful. I think the big wildcard is what happens with the deposit cost going forward. So you got a couple of dynamics there that could go either way which up is why I think for the time being the prudent thing to do is continue to sort of stick to the guidance. But again I think you see it in the numbers we continue to believe that growth in core earning assets of mid to high single digits will more than offset the low single digit percentage compression in core net interest margin, so that you will get core net interest income year-over-year should continued to rise.

Okay. Very helpful. Thank you

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

Thank you, Operator. And I’d like to just thank everyone for joining us today and for your interest in Trustmark. We look forward to providing you with an update on the company at our second quarter 2016 call. This now concludes our call.