Trustmark Corp (TRMK) 2013 Q1 法說會逐字稿

Good morning, ladies and gentlemen. And welcome to Trustmark Corporation's first-quarter earnings conference call. At this time, all participants will be in 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 Joey Rein, Director of Investor Relations at Trustmark.

Good morning, and thank you. I would like to remind everyone that a copy of our first-quarter earnings release and supporting financial information is available on the Investor Relation section of our website at Trustmark.com.

During the course of our call this morning, we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We want 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 Trustmark President and CEO Gerry Host.

Thank you, Joey, and good morning, everyone. Thank you for joining us. With me this morning, in addition to Joey, and available to answer questions after my comments, are Louis Greer, our Chief Financial Officer; Barry Harvey, our Chief Credit Officer; Mitch Bleske, our Treasurer; and Art Stevens, President of our Retail Banking Group.

Let me take a minute and cover some of the highlights of the first quarter. The completion of the BancTrust merger and our first-quarter performance were a great way to start the year. Our merger with Mobile-based BancTrust Financial Group was effective on February 15, and they are included in our financial results from this point forward. We are excited to serve our 66,000 new customers in Alabama and the Florida panhandle. This is, I think as we have stated before, the largest transaction in our history. It's added loans with fair value of $950 million, and $1.7 billion in deposits.

We've added 40 offices in Alabama, and 9 in the panhandle of Florida. It is meaningfully accretive to earnings per share, and it is an opportunity to provide our full product set to these new markets. We're extremely pleased with the successful operational systems conversion that was completed during the weekend of March 23. This is a direct reflection on the efforts of our dedicated associates, both with Trustmark and with BancTrust, and I'd like to thank them for all the hard work in completing this in a very successful way.

Our management team in Alabama is in place. Our Florida region has seamlessly been integrated into the existing Florida Trustmark structure. In central Alabama, we have a seasoned regional president, and we have supplemented that with a proven Trustmark executive. In the southern Alabama region, we have a management team in place that includes a very solid and seasoned regional market president, a strong commercial lending team. We have brought in, from the Trustmark Organization, a head of the credit area, as well as an individual to manage the real estate lending group. In addition, we have added some expertise in the area of private banking from the Mobile market.

Soon after we closed the transaction, we conducted a business calling blitz to thank the customers of BancTrust for their business, and to identify other needs. And to introduce Trustmark to the BancTrust customers. This joint effort between both the legacy Trustmark folks and the new Trustmark associates resulted in over 550 calls in one day, and was very well received within the market.

Turning to highlights of the financials, our net income available to common shareholders in the first quarter totaled $24.9 million or $0.38 per share. Excluding non-routine merger expenses that reduced after-tax income by $5.8 million, our first-quarter net income was $30.6 million or $0.46 per share. BancTrust contributed approximately $2 million of net income excluding merger costs during the 44 days during the quarter that they were part of Trustmark. We're pleased with these results to date, and are excited about the opportunities that are ahead. Also, I want to note that our Board declared a quarterly cash dividend of $0.23 per share payable on June 15 to holders of record on June 1.

Let's review our first-quarter accomplishments in more detail. First of all, the balance sheet -- total loans including held for investment and acquired loans in the first quarter increased approximately $800 million to total $6.5 billion. This growth included acquired loans from BancTrust at March 31. Loans held for investments totaled $5.5 billion, down $118 million from the prior quarter. This decline is principally due to planned runoff of about $125 million in our one-to-four family mortgage portfolio. Our mortgage production during the quarter totaled $392 million, down roughly 21% from the prior quarter, due to declining refi activity following this extensive low interest-rate environment. As previously indicated, we elected to sell the majority of these lower-rate, longer-term mortgages in the secondary market rather than replace the runoff in this portfolio as it refinances. We also experienced continued runoff of $9 million in our discontinued indirect auto portfolio, which now leaves it with a total of $17 million at quarter end.

Commercial and industrial loans experienced a $37.3 million increase, with Texas having $15.7 million of growth, and Tennessee closely behind with $15 million of growth. Our new Alabama markets contributed $6.2 million of growth. The Florida and Mississippi markets remained relatively flat this quarter. There was a good amount of growth, which was offset by paydowns and payoffs, many of which were insurance companies and funds taking out construction real estate projects that we had on [miniPERC].

The construction land development loans increased $16.4 million during the quarter, reflecting growth in Alabama, Mississippi, Tennessee and Texas. Non-farm, non-residential portfolio decreased about $25 million from the prior quarter. While there was some growth, the decrease was due mainly to a larger number of payoffs and a few paydowns.

Now, turning to credit quality. Please note that the credit metrics that I'll discuss exclude acquired loans and other real estate covered by FDIC loss-share agreement. We continue to experience improvement in credit quality in terms of classified and criticized loans, and in terms of provisioning and net charge offs. During the first quarter, classified loans declined $19.7 million or 7.8%. Criticized loans fell $15 million or 4.6% relative to the prior quarter. Compared to figures one year earlier, classified loan balances decreased $76.9 million or 24.7%, while criticized loan balances decreased $86.2 million or 21.6%. Non-performing loans totaled $83.3 million, an increase of $1 million or 1.2% from the prior quarter, however, a 21.2% decline from the prior year.

ORE increased $40.2 million from the prior quarter, to total $118.4 million. This increase is directly the result of the BancTrust merger. ORE acquired from BancTrust received a credit mark of approximately 30%, which resulted in a fair value of $41.2 million. Recoveries during the first quarter exceeded charge offs, resulting in a net recovery of $1.1 million. Florida and Mississippi had the highest recoveries, with Florida having $2.1 million and Mississippi having $1.9 million.

The provision for loan losses for the first quarter was a negative $3 million as a result of the net recovery position and improved credit quality within our loan portfolio. Allowance for loan losses totaled $76.9 million, and represented 1.56% of commercial loans, 0.98% of consumer and home mortgages, and 1.4% of total loans held for investment. This represents 145.8% of non-performing loans, excluding impaired loans.

Turning to deposits -- [paired in] deposits increased $2 billion on a linked quarter, to total $9.9 billion. Approximately $1.7 billion of the growth was attributable to the merger. Non-interest-bearing deposits totaled $2.5 billion, and represented 25.6% of total deposits.

Looking at the income statement, net interest income on a fully taxable equivalent basis totaled $92.6 million in the first quarter, an increase of $6.6 million or 7.7% from the prior quarter. This includes a $7.4 million contribution from BancTrust. The net interest margin was 3.98%, or 4 basis points higher than last quarter. This includes the impact of BancTrust and the associated acquired loans. Excluding the impact of these acquired loans, as well as those from prior acquisitions, the net interest margin equaled 3.66%, down 11 basis points when compared to the prior quarter. However, excluding the margin contribution from BancTrust in the first quarter, Trustmark would have experienced a modest decline in its net interest margin of 3 basis points to approximately 3.91%. Going forward, we expect to see continued pressure on the net interest margin, with a similar decline in the net interest margin excluding the impact of acquired loans in the second quarter. Non-interest income totaled $44.3 million, an increase of $1.6 million from the prior quarter. This includes, as I mentioned earlier, a contribution of $2 million from BancTrust.

Mortgage banking production for the first quarter totaled $392 million, down 21% from the prior quarter and 5% from levels one year earlier, due to the decline in refinancing activity following this extended low interest-rate environment. Despite the decline in production, mortgage banking income in the first quarter totaled $11.6 million, up $252,000 from the prior quarter, reflecting stable mortgage servicing income of $4.3 million, significant secondary marketing gains of $10.2 million, and effective mortgage servicing hedging strategies with a net positive effectiveness of $1.3 million.

Insurance revenue for the first quarter totaled $7.2 million, an increase of 5.2% from the prior quarter, and an increase of 9.6% relative to the prior year. This increase is due in part to expanded business development efforts, as well as the continued firming of insurance rates. Wealth management revenue during the first quarter totaled $6.9 million, a $694,000 increase or 11.2% from the prior quarter, and a 25% increase from one year earlier. BancTrust contributed approximately $576,000 to this number.

Assets under management and brokerage assets totaled $9.1 billion, an increase of $1.2 billion from 12/31/13. This growth includes BancTrust wealth management assets of $1.1 billion. Service charges on deposit accounts totaled $11.7 million, reflecting a seasonal decline from the prior quarter, and included a $498,000 contribution from BancTrust. Bank card and other fee income totaled $7.9 million, a decrease of $33,000 or 0.4% from the prior quarter. When compared to figures one year earlier, there was a $581,000 or 7.9% increase, and that includes the contribution of $461,000 from BancTrust.

Other income was a negative $1.2 million for the quarter, an increase of $816,000 from the prior quarter, and can be attributed to a reduction in the amortization of partnership interest for tax credits during the quarter, as well as a decrease in the FDIC indemnification asset. And this also, just note, includes a contribution of $247,000 by BancTrust.

Non-interest expense during the first quarter of 2013 totaled $102.1 million, an increase of $14.8 million or 17% from the prior quarter. This increase included non-routine merger-related expenses of $9.4 million, as well as operating expense for BancTrust of approximately $6.7 million. Excluding these two items, non-interest expense totaled $86.1 million, a decline of $1.2 million from the prior quarter. If ORE and foreclosure expense adjustments are included as well, the resulting non-interest expense for the first quarter would be $82.6 million.

On a go-forward basis, we intend to manage our consolidated non-interest expense base, excluding ORE expense and CDI amortization expense, to approximately $92 million per quarter. This reflects a 20% cost savings from BancTrust. Salary and employee-benefit expense totaled $53.6 million for the first quarter, which did include BancTrust-related expenses of $4.9 million. Excluding BancTrust-related expenses, salary and employee-benefit expenses totaled $48.7 million, down $1 million or 2.1% from the prior quarter. Since announcement of merger through March 31, the headcount at BancTrust has been reduced by 101 people or 19%.

Other expense totaled $18.1 million, and included merger-related expenses of $7.9 million and other operating expense of $917,000 related to BancTrust. Without these merger-related expenses and operating expenses, the other expense category declined $1.2 million or 11.9% from the prior quarter. This decline is primarily due to reductions in mortgage loan-related expenses.

To enhance productivity and efficiency, Trustmark continued realignment of its branch network. During the quarter, we announced plans to expand in the Oxford, Mississippi market with the purchase of two branch offices from South Bank. In addition to the branch office, we will assume selected deposit accounts of approximately $12 million. This transaction, which is subject to regulatory approval and customary closing conditions, is expected to be completed this summer.

On April 1, two of our Houston offices were consolidated into a new office. In early May, five overlapping offices in the Florida panhandle, as a result of the BancTrust merger, will be consolidated. Following that consolidation, Trustmark will have 17 locations in Bay, Okaloosa, and Walton counties. In addition, we have an ongoing market optimization process to identify opportunities to refine our delivery channels. We are committed to reengineering and efficiency opportunities that enhance shareholder value.

Now, turning to capital, Trustmark's total common equity was $1.35 billion at March 31, up $65.6 million from December 31 of 2012. This increase included the issuance of 2.24 million common shares valued at $53.5 million related to the BancTrust merger. Goodwill and identifiable intangible assets increased $107 million during the quarter, primarily due to the acquisition. As a result, tangible common equity totaled $937.2 million at March 31, 2013. Trustmark's tangible common equity to tangible asset ratio was 8.2%, while the total risk-based capital ratio was 14.52%, still exceeding the 10% benchmark to be classified as well capitalized. Solid capital base provides opportunity to support organic growth in an improving economy.

As I said at the beginning of our call, the first quarter's a great way to start the year. Our revenue increased 6.6% during the quarter to $133 million. Credit quality continued to improve. We have an expanded marketplace in Alabama that provides significant opportunities for growth over time. We continue to be optimistic about opportunities going forward in all of our markets.

So at this time, I would be happy to open it up for questions.

We will now begin the question and answer session.

(Operator Instructions)

At this time we will pause momentarily to assemble our roster. Steven Alexopoulos from JPMorgan.

This is actually [Privi] on for Steve. Just want to start with spread revenue. If we back out the $7.4 million in net interest income from BancTrust, I think NI was down just modestly in the quarter, can you break out how much accelerated accretion was in the spread revenue and then maybe what the outlook is for a good run rate? I think you said about $2 million last quarter but I'm guessing the addition of BancTrust moves that higher.

No, it was not. For the quarter it was about $1 million of additional accretion just related to the difference in the coupon and the effective rates as well as any recoveries from payoff of loans, so that would run about $1 million for quarter.

Is that a good run rate from here?

You know, it's hard to guess what that run rate is just depending on what happens to cash flow on these acquired loans. I think the last three quarters we averaged somewhere around $2 to $2.5 million. It happens to be down this quarter to about $1 million.

Okay. That's helpful. And then shifting to mortgage quick, can you give us a sense if you think mortgage volumes continue to decline from these levels? Are you seeing enough of a shift in production away from refi into purchase or maybe more opportunities with BancTrust? And then just to follow up on that, I think the gain on sale margin was pretty steady quarter-over-quarter if we adjust for the gain on those Jenny loans. Maybe if you could comment on why your margins are holding in so well compared to what we've seen from peers.

Well, I think one part of it was that we had -- we were working loans through the pipeline. While they were in there that added some revenue for the quarter even though overall new production was down. Secondly, as far as your question relative to production and what we expect, we would expect to see some continued decline, probably not at the same rate we saw in the first quarter. I would think that would be somewhere in the -- more in the 5% to 10% range for the remainder of the year. We still do have quite a few opportunities to refinance harp loans or loans that would be eligible for harp refinancing, so we think that will allow some continued opportunity for us going forward.

Okay, great. Thanks for the color.

Thank you.

Catherine Mealor from KBW.

Thanks guys. Just a quick follow up on the accretable yield. And maybe I'm doing something wrong, but if you look at -- you said that BancTrust added loans at about 5.8%. If you back into what the other acquired loans yielded it looked like there was a pretty big jump. Is there anything that's going on there? I assumed it was higher accretable yields. That doesn't seem to be the case.

I'd say for the other portfolios that's where most of that $1 million is coming from, Catherine, so, specifically, on the BancTrust we disclosed the effective yield, and that will change over time as cash flows change. So we'll continue to disclose the benefits of the acquired loans in future periods.

Okay. But you're saying you did not see a large increase in accretable yield this quarter from Heritage or Bay Bank.

As I said about $1 million.

Okay. All right. And then I saw in your IA amortization also increased this quarter. Was that from any change in accounting or just from, you know, accelerating that asset just from better credit?

You know, we did adopt a new accounting rule but we were on a collectibility bet as opposed to the symmetrical so the new accounting had very little impact. So what you're seeing is just normal amortization on that IA asset based on what I'll say is payoff of loans. We recognize that IA asset write off immediately and then as cash flows-- as loans pay down we amortize that identification asset. I do believe the IA amortization was about $1.4 million for the quarter, where it was about $743 million in the prior, so it ticked up a little bit but related to loan pay downs as well as a payoff or two.

Do you expect for that level to remain at that $1.4 million level going forward as you continue to work through that asset?

If you look at page 13 of our stat sheet you'll see the five quarters related and it's anywhere from almost zero to $2 million so it fluctuates as we receive that cash on those acquired loans. So that's about the guidance I can give you is look at the five previous quarters and anticipate what that could be. So it could be fluctuates, you know, over time.

Okay. Great. Thank you very much.

Thank you.

Thank you.

(Operator Instructions)

Kevin Fitzsimmons from Sandler O'Neill.

Maybe, there's been a few questions about spread revenues but maybe just taking a step back more broadly looking at it. Before this quarter, before the deal, I think we had four consecutive quarters of NII contracting, link quarter. And you know, I know there's a lot of moving parts there, the margin's been compressing. We've had some deliberate runoff in the loan book. We've had some non-deliberate runoff just from pay downs. After we get through the noise, you know the link quarter noise with the deal, with the deal fully coming in, how -- what is your outlook for NII? Do you think you can keep it stable? Is there a scenario where you can grow it, or do we kind of return to more of a gradual decline until we get a more pronounced pick up in loan growth or loan demand? And I know a lot of that has to do with the -- you know, the time left for those loan books to run off that you run it off. Thanks.

Thanks Kevin. And you're right. There are an awful lot of assumptions in there. I want to ask Mitch if he will -- if he'll address that.

Good morning, Kevin.

Good morning.

As Jerry noted in his first comments, we try to give that number a little bit to you to take out the noise at least from the net interest margin percentage. When we take out all the impact from BancTrust, we really saw a pretty modest decline. A little bit less than what we anticipated. We've held in pretty well on some of our loan yields a little bit better and we continue to see some modest declines on the deposit costs. That set aside obviously, we continue to see margin compression and probably will see a little bit about the same amount this quarter than last quarter with probably a slowdown in that pace to decline as we get into the second half of the year. From a net interest income level, which is probably more important, that is going to be maybe a small decline as we go through each quarter. But our expectation on a non FTE basis would be about the mid-90s. Including all of BancTrust, which is where we expect to be.

Without any recoveries associated with large payoffs.

Exactly.

It's hard -- we can't predict that.

So within -- if I look at loans, though, just the loans of non-acquired loans, just legacy loans, the runoff that's been happening in resi mortgages is that something that's just going to continue or do we hit a certain point where that's played out.

I'll answer that. This is Jerry. Kevin, at these levels roughly in the, you know, 270, 280 range that we'd be putting on 10, 15-year products, we just feel as though we'll continue the strategy of selling everything and allowing runoff to take place. So, yes, we'll see some continued runoff, but we expect that will slow as we get through a lot of these refis. Our efforts right now are concentrated primarily on various types of business loans, C & I. We're seeing increased activity as we talked about in the construction and development loans, in both Texas and in some cases in Memphis. We would anticipate some good loan growth in the Alabama market now that we've gotten the conversion behind us. So our focus is going to be more on the business side. We don't anticipate with these rates below 3% on the 10, 15-year product that we will begin adding them back to the 1 to 4 portfolio.

Okay. Okay. Understood, and just one credit related question. I saw non accrual loans -- no, I heard the improvement in classified but non accruals actually ticked up slightly. Is there -- is that just reaching a point of stabilizing or just wondering what's happening there?

And Kevin, this is Barry. I think it's really just more kind of a stabilizing on a temporary basis. I think we'll continue our downward trend over time. I think in this particular quarter we had really three credits that were -- have been credits on the books for a lengthy period of time that have continued to deteriorate that we've gone ahead and moved them on to a non-accrual. And in which case, from a reserving standpoint, as you can tell from our negative $3 million reserve had little to no impact because we he them properly reserved. It just came to the point where they needed to be moved and on accrual and we did so. Otherwise it's just a lack other activity as far as non accruals coming out. It's definitely not an increase of additional inflows of non accruals. It's just really the lack of activity.

Okay. Thanks guys.

Thank you, Kevin.

Thank you.

(Operator Instructions)

Michael Rose with Raymond James.

Good morning, guys. How are you?

Good morning Michael.

Just a question on how aggressive you expect to be on OREO disposition going forward. Obviously with what was added this quarter and given the kind of stabilization improvement in real estate values and how does that translate into your expectation for other real estate expense going forward? Thanks.

I'll let Barry comment, but from a broad standpoint our approach to ORE has been to look at each piece of property individually, evaluate what our options are relative to that and to move it out rather than utilize a bulk sale method. And that, we feel, has proven to be a very good process, and I'll let Barry since he is overseeing the process for BancTrust comment on that.

Okay. And Michael, during the quarter we actually sold about $8.1 million, $8.2 million worth of ORE. The impact of that was a negative $15,000, so there was -- we sold it exactly before we it marked, so we feel good about that aspect of it. As it relates to ORE, of course as you can see it went up $40 million, $41 million increase came from BancTrust, so really we were basically flat on the quarter.

When you look at BancTrust, and their ORE from the initial reporting back in 3-31 of '12 the ORE had been written down 53% in that portfolio. From when it's actually entered ORE it's been written down 61%. We feel very good about the marks we have there. We've gone through every single piece of ORE they have. We're actively marketing it. We feel like we've got it priced at the right place. We've got it listed with the right agents and we're going to be aggressive in terms of moving out the ORE. And I think our mark gives us that opportunity, and we feel very comfortable that in aggregate we're going to be in good shape as we are able to move out the ORE in terms of where we've got it marked.

Okay. That's really helpful. And then just moving back to M&A from here, you know, obviously BancTrust was a relatively large deal. How should we think about future M&A and what it means for Trustmark and how soon do you think you could potentially be back in the market? Thanks.

Well, as far as -- as far as where we think going forward we're constantly looking for opportunities, primarily in the southeast, and we're looking in the size range of anywhere from $300 million to $3 billion in size. Obviously with our capital levels after this acquisition dropping to an 820 which we believe is a good position to be in, we'll have to reevaluate size of forward opportunities. And as far as timing, we have completed, as you noted, we've completed the BancTrust acquisition. Our focus right now is -- is looking internally and on ensuring that we can get the most out of this acquisition while we focus on some restructuring in Houston around business lines as well as in Memphis. As we look at internal efficiencies, we digest the changes of a new general ledger system and an HR system, so we step through all of those things that we completed this last year and the first part of this year. I think it gives us a great platform by which we can focus on some organic growth, but we are always looking for the next opportunity available.

Great. Thanks for taking my questions.

Thank you.

Jennifer Demba from SunTrust Robinson Humphrey.

Good morning I jumped on late so if you covered this I apologize. Your loan losses have obviously been improving for the last few quarters. I'm wondering if you're expecting them to be, you know very modest for the next few and therefore provisioning being, you know, close to zero on one of the other sides.

Jennifer, this it is Barry. Let me step you through how we ended up with the negative $3 million for this quarter and basically the bottom line of it was on the reserve we were leased reserves of $2.7 million that related to existing or new impaired loans, and then we had gross charge offs which were about $4.5 million less than we averaged during 2012 per quarter. Then we had recoveries of about $1 million greater than we've averaged during each quarter in 2012, and then we didn't have any additional need for reserving for existing impaired loans looking forward over the next four quarters.

All those four things contributed to a $3 million negative provision. With that in mind we would like to think as we continue to work through this stuff very aggressively, both with BancTrust as well as non BancTrust that we would -- that our provisioning would continue to be well below last year, and that's really kind of how we got there today for this quarter. We hope it's going to be indicative of how things go going forward. But I think all we know is that we're going to continue to put forth the same effort as we have in terms of working out the problems, resolving those to the best benefit of the bank and then same would be true with ORE or with problem loans.

Okay. Thank you.

Thank you Jennifer.

And the next question comes from Peyton Green with Stern Agee.

Good morning. I was wondering if you could talk a little bit about what the expectation is in terms of a runoff from BancTrust? Certainly you get a lot of liquidity day one with it and a loan portfolio of about $950 million that's been marked but not all their customers are going to fit the credit profile at Trustmark and I know in past acquisitions you all have had to stomach some runoff before you can grow things again. What's a realistic expectation in how that might look given where we are today?

Very good question Peyton, and something that we can't answer completely accurately. But our best guess is this, as we looked at this first 45 days, we've actually seen -- seen new growth in that market, gross growth of around $20 million, which has offset some of the runoff that we have experienced so far. So there was some pent up demand out there that we have been able to address. It's been a positive. We think there will be even more of that as things begin to settle down.

We would hope that if we could keep their portfolio level throughout the year that gives us a chance to sort through things and the new growth opportunities will offset some of that as you say that doesn't quite work under our credit standards. And in the meantime, as Barry has talked about, we're going to focus on some of the marked assets that we've acquired and see how we can improve on those.

Okay. And then just in terms of the overall footprint, I mean some of the markets are markets that have some pretty good loan growth potential over time, but some are not. And I was just wondering if there's any thought to rationalizing what they have and really getting it down to what exactly you want or will you take it for what it is and just try and manage it as best you can.

I think it's a little bit early, but if you look at what we've done with our own franchise, we obviously have some low growth markets within our existing franchise. What we've been able to do, though, is to look very closely at the profitabilities of those low-growth markets and improve on them. And we would anticipate taking a very similar approach with what we've acquired in Alabama with BancTrust.

Okay. And you think from a competitive perspective, I mean, that you can copy what you've done in Mississippi and Alabama?

Well, the markets are similar, and I'll let Art Stevens answer that. Art heads-up our retail area and Art has effectively -- he's actually from Alabama and he's actually been spending an awful lot of time in those markets and I think can comment more accurately.

The only thing I would add to what Jerry has said is I do think the lower growth markets that we are in Alabama are very similar to the lower growth markets that we are in Mississippi. And one distinction that I would point out is most of those markets enjoy a pretty good market share. In Mississippi what we've been able to do is cross sale that client base with other products and services from our organization that lots of smaller banks don't necessarily offer in those markets, and in turn be able to get a little more revenue out of those markets. I think that would be our strategy going forward with the low growth markets in Alabama.

Okay. Great. Thank you.

Thank you Peyton.

Blair Brantley with BB and T.

Good morning Blair.

Good morning everyone. A couple of just kind of housekeeping questions. One, tax rate going forward, should we expect a similar to this quarter or because it looked like it kind of bumped up versus last quarter.

This is Louis. I think we can see a fairly constant rate throughout the year somewhere around that 27%, a little under or a little over.

Okay. Regarding mortgage, how much business does harp account for?

You know, Blair, I don't know specifically the answer but I know we're about 65% refi total this last quarter, and I'm sorry, I don't know the specific number on what harp accounts for.

Okay. I was just curious given the extension that they had on it. And then just kind of a broader, kind of broader question, obviously you guys are above that $10 billion asset threshold. Is the goal just to continue driving higher and higher giving some of the extra costs to hit the deal and with the Durbin impact and things like that? Is there a target number that you're trying to get to in your head? One's kind of a break even and one's kind of an optimal number? Or are you just kind of taking it one step at a time?

Oh, as far as asset growth.

Right.

I think, you know, that we will take it as it comes. We're certainly focused on changing the mix, and as the opportunities on the loan side present themselves, and that's really -- we're going to take advantage of those. We -- right now is an environment in which we were out competing for a lot of the -- a lot of the same loans right now, and obviously it's very competitive.

Okay. Thank you very much. Appreciate it.

Thank you. And the next question is a follow up from Peyton Green from Sterne Agee.

This is a follow up on the idea of M&A going forward but just in looking at the disclosure on the BancTrust deal you bought that assets at about $31 million and the good will created was about $75 million. I mean is that -- for a deal like this, is that the right kind of magnitude to think about in terms of goodwill or tangible book dilution for a deal this size going forward? Trustmark historically has been really good about compounding tangible book and this represents a pit of a step back and I was wondering if you could comment on that?

Well, I think Peyton that this was a unique situation. As you know BancTrust had worked to recapitalize itself. It didn't work out. We had been talking with the bank and as a result we had the opportunity to acquire it knowing that it had a loan portfolio that had a lot of work to be done in it. And so we think there's some real opportunity there. Would you say that this was the norm for what we do, no, but it was a very unique situation, and we think something that we can create a lot of benefit to the shareholders both from the standpoint of working through the problem loans and the opportunity to grow in this Alabama market.

Okay. Great. Thank you.

Thank you.

Thank you. And as there are no more questions at the present time, I will turn the call back over to Jerry Host for any closing remarks.

Thank you so much. I'd like to thank everyone for joining us on the call and your interest in Trustmark, and we look forward to talking with you again at the end of the second quarter. Have a great day.

Thank you. That concludes today's conference. You may now disconnect your phone lines. Thank you for participating and have a nice day.