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BANCORPSOUTH BANK  (NYSE:BXS)
Q1 2019 Earnings Conference Call
April 18, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the BancorpSouth First Quarter 2019 Webcast and Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions.

(Operator Instructions) Please note this event is being recorded.

At this time, I'd like to turn the conference over to Will Fisackerly, Senior Vice President and Director of Corporate Finance. Please go ahead.

Will Fisackerly -- Senior Vice President and Director of Corporate Finance

Good morning and thank you for being with us. I'll begin by introducing the members of our senior management team participating today. We have Chairman and Chief Executive Officer, Dan Rollins; President and Chief Operating Officer, Chris Bagley; and Senior Executive Vice President and Chief Financial Officer, John Copeland.

Before the discussion begins, I'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 risk. Information concerning certain of these factors can be found in BancorpSouth's 2018 Annual Report and 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 the reconciliation of these measures in the Company's first quarter 2019 earnings release.

Our speakers will be referring to prepared slides during the discussion. You can find the slides by going to bancorpsouth.com and clicking on our Investor Relations page where you'll find them on the link to our webcast or you can view them at the exhibit to the 8-K that we filed yesterday afternoon.

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

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Thank you, Will. Good morning. Thank you for joining us today to discuss BancorpSouth's first quarter 2019 financial performance. I'll begin by making a few brief comments regarding the highlights for the quarter. John will discuss the financial results and Chris will provide more color on our business development activities.

After we conclude our prepared comments, our executive management team will be happy to answer questions. Let's now turn to the slide presentation. Slide 2 contains the legal reminders that Will has already discussed.

Moving on to Slide 3, I'll briefly discuss our first quarter financial highlights. We reported net income for the first quarter of $51.6 million or $0.52 per diluted share. Reported GAAP earnings were impacted in the quarter by two non-operating items, including merger-related expenses of $0.9 million as well as a negative mortgage servicing rights valuation adjustment of $4.9 million. Accordingly, our net operating income excluding MSR was $55.9 million or $0.56 per diluted share. This represents an increase of $0.02 per share compared to the first quarter of last year.

We continue to be pleased with our credit quality. Our provision for the quarter was $0.5 million, which was driven by improvement in both our non-performing and classified asset level. We saw a slight uptick in the fourth quarter of these levels as a result of acquired loans and we were pleased to have worked through certain of those credits during the first quarter resulting in a decline that was seen in these non-performing and classified balances. Chris will discuss credit quality a little bit more in just a minute.

I'm also pleased to report continued improvement in our net interest margin. Our core margin, which excludes accretable yield, was 3.74% for the quarter compared to 3.71% in the fourth quarter of 2018. Yields on our loan portfolio and securities book continue to outpace increases in funding costs. Also, the resolution of certain acquired loans which I just alluded to, contributed an additional $1.2 million in accretion income to our GAAP margin during the quarter. John will discuss the margin more -- in detail in just a minute.

We reported balance sheet growth of approximately 7% annualized which includes total deposit growth of over $600 million or 18% annualized. The trends in our book of businesses are consistent with our seasonal first quarter experience for many years looking back. Deposit growth accelerated partially as a result of seasonal public fund inflows which accounted for approximately half of our deposit growth in the quarter.

Loans were essentially flat for the quarter as they have been for the first quarter for many of the past first -- for the past years, although we continue to be pleased with the loan growth efforts in our higher growth markets. Chris will give additional market level commentary, but I want to point out our loan growth of approximately 6% annualized in Texas for the first quarter.

We are optimistic that the recently closed mergers in high-growth market along with the additional relationship managers who have recently joined our team will continue to accelerate our growth effort as a company. The last three bullets on this slide relate to capital deployment.

Before I get into our M&A activity, we are active -- we were active in our share repurchase program again the last quarter or the first quarter of this year, repurchasing 1 million shares. With the recent pullback in the market, the largest portion of the repurchase activity occurred late in the first quarter.

I will conclude by briefly mentioning our recent M&A activity. In March, we announced the signing of definitive merger agreements with Summit Bank, which has four offices in the Florida Panhandle; and Texas Star Bank which has seven branches in and around the northern part of the Dallas, Texas market.

Chris will expand on what these banks mean to our footprint more in a moment, but I'd also like to say that we look forward to working with Andy Stein, Frank Hall and their team in Florida; as well as Randle Jones and his team in Texas. We hope to have them officially join our Company during the second half of this year.

Finally, we're pleased to have closed our transactions with Grand Bank and Merchants Bank, effective April 1st. These transactions collectively add over $400 million in loans and over $500 million in deposits to our Texas and Alabama markets. We are particularly pleased to be able to close these two deals in just under five months from the time of the announcement. We have the operational integration for both of these banks scheduled for later this quarter.

I'll now turn to John and allow him to discuss our financial results in little more detail. John?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Thanks Dan. If you'll turn to Slide 4, you'll see that our summary income statement is there. And reviewing the summary income statement, net income was $51.6 million or $0.52 per diluted share for the quarter. As Dan mentioned earlier, we did have two non-operating items in our first quarter results. We had a negative pre-tax MSR valuation adjustment of $4.9 million and a merger-related expense of just under $1 million.

Accordingly, we reported net operating income excluding MSR of $55.9 million for the quarter or $0.56 per diluted share compared to $56.4 million or $0.57 per diluted share for the fourth quarter of 2018 and $53.6 million or $0.54 per diluted share for the first quarter of 2018.

Our net interest revenue was essentially flat as a result of a shorter day count compared to the fourth quarter of 2018, while it increased about 10% compared to the first quarter of 2018. The fourth quarter closing of the Icon transaction obviously impacted the year-over-year comparisons, our reported net interest margin for the first quarter was 3.86%, while our net interest margin, excluding accretable yield, was 3.74%. Comparable metrics for the four quarter of 2018 were 3.80% and 3.71% respectively.

We reported a GAAP margin of 3.67% for the first quarter of 2018 while our core margin was 3.60%. Increases in the yield on our earning assets continue to outpace rising deposit costs, albeit only slightly this quarter. The reported loan yield, excluding accretion, increased by 12 basis points compared to the fourth quarter of 2018, while our total cost of deposits increased by 11 basis points quarter-over-quarter.

We also saw a nice pickup in the yield on our securities portfolio as lower yielding securities continue to roll off. I would also like to point out that a large percentage of our deposit growth, which Chris will discuss further in a moment, came from our interest-bearing DDA products. The shift in mix did contribute to the pressure on deposit costs. Nonetheless, we're pleased to report continued improvement in our margin.

Before we move to non-interest revenue and expenses, I like to briefly mention credit quality. We continue to be pleased with our credit quality strength. We had a provision of $0.5 million for the quarter compared to a provision of $1 million for both first and fourth quarters of 2018. We saw linked-quarter improvement in many of our credit quality metrics, including classified assets, non-performing loans, and non-performing assets, as well as near-term past dues.

If you'll turn to Slide 5, you'll see detail of our non-interest revenue streams. Total non-interest revenue was $64.2 million for the quarter compared to $59 million for the fourth quarter of '18 and $78.9 million for the first quarter of 2018. Our MSR valuation adjustment is responsible for most of the volatility in these numbers. Other non-interest income for the fourth -- first quarter did have a $1.2 million gain on the sale of a branch building. Otherwise, trends within each of our non-interest revenue streams are in line with our expectation.

Card fees and service charges are typically seasonally low in the first quarter, given the short day count, and following the holiday season. On the other hand, insurance commission revenue is seasonally high as a result of the renewal cycle in our book of business.

Slide 6 represents the detail of non-interest expense. Total non-interest expense for the first quarter was $150 million compared with $152.3 million for the fourth quarter and $147.7 million for the first quarter of 2018. I'd like to briefly point out a few items noted within the trends on these items.

First, I would like to discuss salaries and benefits which increased just over $5 million quarter-over-quarter. As we mentioned in our fourth quarter call, we did anticipate some increase due to several factors. First, resets of FICA limits resulted in additional FICA expense for the company of approximately $1.5 million compared to the fourth quarter. Second, we mentioned last quarter that our bonus expense -- bonus plan expense was lower as a result of year-end accrual of true-ups. Finally, our insurance producer commission compensation is generally seasonally high as a result of seasonal trends. Chris will discuss that more in a moment.

We saw improvement of approximately $3 million quarter-over-quarter in other miscellaneous expense. We mentioned several small items in our fourth quarter call that were elevated within this line item, including consulting expense, meals and entertainment and fraud losses. These items returning to more normalized levels resulted in this $3 million decline. Otherwise, there were no significant or unexpected variances within the trends noted on this slide.

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

Chris A. Bagley -- President and Chief Operating Officer

Thank you, John, and good morning everyone. Slide 7 reflects our funding mix as of March 31st compared to both the fourth quarter of 2018 and the first quarter of 2018. We reported total deposit and repo growth of almost $700 million for the quarter or 19% annualized. We know from prior years that the first quarter typically reflects a seasonal increase in deposit. However, we are pleased with our team's efforts this quarter as the first quarter of 2019 outpaced what we've typically seen in the first quarter of each year.

For reference, our organic deposit and repo growth during the first quarter of last year was 8% on an annualized basis. You'll notice a mix in the shift of our deposit book with more of the growth coming from our interest bearing DDA products. I'd also note that we grew deposits in all categories for the quarter. The increase in the public funds in the interest bearing book contributed approximately 5 basis points to the 11 basis point increase in cost of the deposits that John referenced earlier.

As we look at geographical performance relating to deposits, more than half of our geographical divisions reported double-digit annualized growth for the quarter. The four divisions at the top of the list were our Missouri, Mid-Mississippi, Pine Belt and South Louisiana divisions.

Moving to Slide 8, where you'll see our loan portfolio as of March 31st compared to the fourth quarter of 2018 and the first quarter of 2018. Loans are essentially flat compared to the fourth quarter, and as Dan mentioned earlier, first quarter is generally always our slowest loan quarter for the year. As a reminder, the comparisons to the first quarter of last year include the addition of Icon. If you exclude the Icon loan and the associated credit marks, loans have grown approximately 2% organically over the last year.

As we look at our first quarter lending efforts from a geographical perspective, we had several divisions produce meaningful loan growth. Standout divisions for the quarter were our Dallas Texas, Texas Hill Country, Northeast Mississippi and Missouri division. As we look forward, I would like to reiterate Dan's comments about our recent transaction. I'd like to complement our Houston, Texas division, and particularly the teammates who joined from Icon in the fourth quarter.

The Houston division reported mid-single-digit loan growth during the quarter. This is an impressive accomplishment given the turmoil caused by fourth quarter merger closing and operational integration. In my career, it's been rare and unusual for new teammates to grow the balance sheet throughout the course of a transaction; kudos to the Icon team.

As we look at the other transactions, Grand bank and Texas Star Bank, we meaningfully enhanced our presence in the Dallas market. We already continuously mention Dallas in our success stories quarter after quarter and we feel continuing to add to that footprint in this dynamic market is a real positive for our Company. Looking forward, Merchants Bank and Summit Bank will really help our efforts in South Alabama and Florida Panhandle. We are excited about the value that each of these teams will add as we look to continue levering our core deposit base, which is, as we've always stated, a key strength of our Company.

Slide 9 contains credit quality highlights. I'd like to touch briefly on a couple of these bullets. As John mentioned earlier, we had a provision for credit loss of $0.5 million for the first quarter compared with the provision of $1 million for the first quarter and fourth quarters of 2018. Net charge-offs were $4.1 million for the quarter or 12 basis points on average, when you look at it on an annualized basis.

On a year-over-year comparison, non-performing loans and non-performing assets were very stable. We did see a slight uptick in the fourth quarter associated with acquired loans as we work through several of these credits through the resolution in the first quarter, which contributed to the first quarter improvement in these metric.

Finally, while not shown on this slide, I would also like to point out that we reported a decline in both classified loans as well as near-term past dues in the first quarter. We are very pleased with our credit quality. Well, with that said, I would again remind everyone that we expect many of the credit metrics may experience quarter to quarter lumpiness as we continue to integrate acquisitions.

Moving on to mortgage and insurance; the tables on Slide 10 provide a five quarter look at our results for each product offering. Our mortgage banking operation produced origination volume for the quarter totaling $291.7 million. Home purchase money volume was $227.5 million or 78% of our total volume for the quarter. I think it's notable that our team achieved growth of just over 11% in purchase money volume compared to the first quarter of last year.

Deliveries in the quarter were $239 million -- welcome to people who're in the train. Deliveries in the quarter were $239 million compared to $251 million in the fourth quarter of 2018 and $215 million in the first quarter of 2018. Production and servicing revenue, which excludes the MSR adjustment, totaled $6.9 million for the quarter compared to $4.8 million for the fourth quarter of 2018 and $7.7 million for the first quarter of 2018.

Our margin was 1.7% for the quarter, representing an increase from 0.88% for the fourth quarter of 2018. As we've mentioned in the past, our margin typically increases in the first quarter each year as we move into the spring selling season and our pipeline grow. This seasonality is reflected in the quarter-over-quarter pipeline increase of $37 million. We believe there is still downward pressure on the margin and we expect margin to average in the 1.5% range with what we're experiencing the pricing in the market today. Finally, as Dan mentioned earlier the MSR valuation adjustment during the quarter was a negative $4.9 million.

Moving to the insurance, total commission revenue for the quarter was $30.2 million compared to $28 million for the fourth quarter of 2018 and $29.1 million for the first quarter of 2018. The accounting revenue recognition change for contingent commissions that we've referenced on past calls is now implemented in the first quarter of last year, so we now have five quarters of comparable results at view here.

The increase in total commission revenue compared to the fourth quarter is essentially -- is seasonal as first quarter is always one of our highest quarters for the policy renewals along with the third quarter. However, we also saw an increase in total commission revenue of 3.6% compared to the first quarter of last year, which is driven primarily by a 5.7% increase in property and casualty commission.

While we would not call this increase robust, it does represent an improvement over what we reported for this several quarters. Our team is beginning to see some firming in premium pricing, and as always, our renewal retention rates continue to be very high. While it's not shown on this slide, I would also like to briefly mention our wealth management team. While market volatility has impacted the revenue stream from quarter-to-quarter, we continue to look for opportunities to add quality producers and grow this aspect of our business.

Of the seven bank transactions that we've either announced or completed over the last couple of years; Summit Bank, which Dan mentioned earlier, is the first to have a wealth management offering. We are excited about the opportunity of adding their producers and teammates to our platform and the value that they will add to our efforts to grow in the Florida Panhandle.

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

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Thank you, Chris. I think I'd speak for our entire management team when I say we are pleased and proud of the results our Company has been able to report for the first quarter of 2019. Our trajectory, as we move into the second quarter, is certainly heading in the right direction by almost any measure.

Our margin story and credit quality continued, seemed to be repetitive quarter-after-quarter. We are very pleased with our deposit growth efforts for the quarter and our mortgage team reported growth in home purchase money volume, while our insurance team produced nice growth in commission revenue.

In closing, and reiterating on Chris' points, I'm excited about the Grand Bank and Merchant Bank's team, which joined April 1st as well as the Summit Bank and Texas Star teams, which we hope to officially welcome in the second half of the year.

I believe each of these teams are critical to both our growth efforts and our continued focus on leveraging our infrastructure and improving our efficiency. In addition to those teammates joining through acquisition, we continue to succeed in attracting relationship managers in various markets across our footprint, which we believe will help our Company grow.

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

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instruction) Our first question will come from Catherine Mealor of KBW. Please go ahead.

Catherine Mealor -- KBW -- Analyst

Thanks, good morning.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Good morning. Catherine.

Catherine Mealor -- KBW -- Analyst

Wanted to start with the margin, now that we're in an environment where the Fed is paused, can you give us any color on how you're expecting your margin to hold up? And then -- and maybe specifically within that, can you talk about your loan yields and how we should think about how much lag we've still got left in loan yields from past rate hikes? Thanks.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, thanks. My -- how things have changed over the last couple of months from -- up to -- oh wait pause, as you said. We're certainly watching margins...

Catherine Mealor -- KBW -- Analyst

Or down.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

What's that?

Catherine Mealor -- KBW -- Analyst

Or down.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, yeah right. We're certainly watching margin and our outlook continues to changes as we watch what's happening in the market. But I think generally, I think -- we think we can protect our margin. John, do you want to put some details around some of that?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Yeah. Yes, thanks, Catherine. We do expect, as we saw in '18 -- we do expect in '19 just the quarterly modest improvement in our net -- in our core margin and of course the accretion effect on that will be somewhat lumpy. But we do expect, as I said, some modest increase every quarter in our core margin.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Accretion could be lumpy.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Yeah.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

It will be.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Historically. I think historically it has been lumpy.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yes, the second part of the question, John, was what's left in repricing on loans? And I think our loan repricing has historically lagged, but I'll let you talk about that.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

It has. We don't expect a huge effect on our loan repricing as we go through 2019. I really don't have much more color than that (multiple speakers).

Catherine Mealor -- KBW -- Analyst

Well, could you say, is part of the outlook for a higher core NIM and part of that's from the acquisitions. I mean the four deals you've got coming on this year, all are coming on, I think, with a higher margin than you've got in other smaller deals. But is that a piece of it or do you see upward momentum with just kind of your legacy core margin as well?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, I don't know that I would catch (ph) it as strong upward momentum. When we look back last quarter and everybody was forecasting rising rates for the year, I think we felt like we did have a better chance, and we were poised to continue to see increasing margins. While we think there is upward pressure a little bit on our margin today, I think I'd be more comfortable saying we think we can protect our margin today where we are and not give back, over the next couple of quarters, while rates try and decide what they want to do.

I do believe, as John said, that we do have some lagging repricing coming because some of our loan book does not reset on a daily basis, and so we still have improving there, but we're still seeing -- our deposit cost is still rising. So the question is, what's happening in the market and with the rate stop or the pause as you called it out there, does that take some pressure off of the rising deposit rates? If that happens, then I think we have a much better chance of seeing an increasing margin. John, you might want adding anything?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

No, that's fine. Yeah.

Catherine Mealor -- KBW -- Analyst

That's helpful. And then on fees, if you look at card fees and service charges, we know they're always down first quarter seasonally, but if you look year-over-year, they were both still down year-over-year. Can you -- you know why that is and you think there -- is there a path to get back to the levels that we saw last quarter for those two line items?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Catherine, we did notice the drop in fees, the deposit service charges. And we can attribute that to, I think to, some of it to acquisitions. And we do have, I think, a generally lower fee structure than some of the banks that we've acquired recently, and from the time period when we closed some of these mergers, and particularly in January of last year and in October of last year, we had fees at -- until we integrated those banks, at their higher fee rate, and when we convert it, we did drop our fees a little bit to conform to our pricing structure.

Secondly, we did have four small-business accounts and those kinds of things in the first quarter this year, where fees are charged based on volumes. We did experience much lower volumes for some reason in that customer base. So that affected downwardly, by the fees during the first quarter this year as well.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Compared to 4Q?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Compared to 4Q.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, so day count certainly in there 4Q to 1Q. The comparison 1Q over 1Q; that's a valid comparison, I think we're still trying to figure out what's driving some of that. I think our team is doing well and we are trying to make sure we can continue to grow those volumes.

Catherine Mealor -- KBW -- Analyst

Great, thank you.

Operator

The next question will come from Jennifer Demba of SunTrust. Please go ahead.

Jennifer Demba -- SunTrust -- Analyst

Thank you. Good morning.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Hi, Jenny.

Jennifer Demba -- SunTrust -- Analyst

Two questions, first on mergers disclose to have two pending. What's the capacity for more this year to date and has the level of discussion ramped? Would you say in the industry in the last few months since we've seen a couple of larger transactions for now?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Okay, you want both of them. I know you want me to start there. So, yeah, when you talk about M&A activity, volatility in the market has got everybody trying to figure out what's happening. We came through the year-end and everybody bottomed out sometime right around Christmas and it all came roaring back in the first quarter and we got to good March, and here it all went the other way again.

That volatility, I think, causes people to try and figure out what's going on. So I don't know that we're seeing increased conversations after the big announcement for the big MOEs that are out there. But there is still a lot of activity in a lot of small banks, as you've heard me say before; we have lots of opportunity in the banks that are under $750 million in size.

Your question is really on capacity. So when we look at us, we took the two transactions that were announced last November. We closed them on April 1st and we will have them converted into our -- both of them converted into our operating systems before the end of this quarter. We clearly hope to close on the next two sometime in the back half of the year, and very quickly thereafter, convert them into our operating system. These smaller transactions, while they take the same legal work and the same accounting work, the integration process and the noise that it causes within our operations is much smaller with the smaller transactions.

So again, the Grand Bank guys in Texas; there is four offices over there. There is five offices down in South Alabama. Those are all in-market offices for us. So that's much less disruptive for our team than larger out-of-market transactions would be, which means we believe we have capacity to continue to play and we continue to look for opportunities that make sense for us, as we look at our footprint today and we're certainly looking at funding and how do we make sure that we protect our funding cost.

Jennifer Demba -- SunTrust -- Analyst

Thanks so much. Second question is on CECL. Do you have any estimate at this pointed as to what the day one impact will be next year from CECL?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, I think it's early for us to be putting out any numbers around CECL. I haven't met CECL yet, but we're talking to them every day. He'll be here before the end of the year. We are running parallel within our shop, we've got fully wrote -- fully developed process today. We see those numbers. But it's still way early in the process for us to have any confidence in where we are.

I think when you look at the range of change that we've seen out there from the bigger banks that have been announcing, we've seen some that have announced a relatively modest or small impact to their numbers and we've seen others that are talking about a 30% or 40% impact to their numbers. I think what we see is we're going to be somewhere between those two.

Jennifer Demba -- SunTrust -- Analyst

Great, thanks so much.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Okay, appreciate it Jenny.

Operator

The next question will come from David Feaster of Raymond James. Please go ahead.

David Feaster -- Raymond James -- Analyst

Hey, good morning, guys.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Good morning.

David Feaster -- Raymond James -- Analyst

Last quarter we talked about loan growth kind of in that high-single-digit realm exclusive of the acquisitions. Understanding the seasonality in the first quarter, do you think that's still reasonable this year? I guess, inclusive of the deals you've got, you just closed and the pending ones you -- combined with the planned run-off of acquired loans, do you think on an end-of-period basis, loan growth could be closer to the kind of that mid-single-digit realm?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, I do. When we look at what's happening out there today you know I think we were pleased. You know when you look back at Texas, we -- starting this year, we've started breaking out markets for you. So you can see the geographies where those are coming from. And as you know, some of our geography is slower growth than other parts of our geography and you can certainly see that in this past quarter, we were glad to see some growth in the Missouri market and we hope we can continue to grow there.

Oil and gas business has been negative and are a drag on us in the Louisiana market. Our other markets are relatively slower growing markets and we're protecting. I think, you see several things in our loan process. One, we're certainly trying to protect margin and credit quality and we don't feel the need to chase credits over price. So we're not playing in that game. But in the markets where there is growth opportunities, Texas, in particular, we continue to see good growth.

So, to report 6% growth in the first quarter in Texas for us, as Chris said, in the middle of all the integration activities that have been going on over there, I think we feel pretty good. Chris specifically mentioned two of the divisions that we have in Texas today that were standouts for us in the quarter. I think that those markets continue to grow, continue to provide opportunity and in addition to us being in those markets we've continued to add producers within those markets. So I think we feel good about our forward-looking opportunities.

David Feaster -- Raymond James -- Analyst

Okay, that's helpful. And with that kind of loan growth that you're expecting, do you think you can fund that with deposit growth? Deposit growth is obviously -- seasonally strong in the first quarter and impressive, but do you anticipate kind of that loan-to-deposit ratio stay in level and maybe on the cost front with deposits, do you expect them to kind of stabilize here or at least the rate of increase to moderate as we're looking at flatter rate environment?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, that's kind of the same question that Catherine asked a minute ago. And so when you look at our deposit costs, we're watching that every day. The crystal ball is kind of cloudy as to what's happening. Rates are going to be driven off of what our competitors are doing. We give right autonomy into the field for our team to be able to compete with what's going on out there and some markets have seen a pullback in rate pressure, some markets have not. We certainly hope to be able to moderate the increases on our deposits. We're pretty proud of the deposit cost that we carry as a whole.

Specifically, you were asking about loan-to-deposit ratio. And I think you've seen our loan-to-deposit ratio bounce pretty far. We're down in high 80s today or 90 and we've been mid 90s and higher. So I don't think I would be looking to model exact same loan-to-deposit ratio quarter-over-quarter. It's not going to work that way.

David Feaster -- Raymond James -- Analyst

Sure, thank you. Last one from me, you know mortgage -- mortgages has been a pretty tough market lately. You know you're sitting here with a few more originators now, a pipeline that's up quarter-over-quarter, but it's down year-over-year and you talked about the gain on sale margins, which are also down year-over-year, how do you think about mortgage going forward? Do you think we can see revenues up year-over-year ex-MSR?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah. So when you look at revenues, it's a good question, that's going to be margin driven. I think when you look at volumes; I'd want to brag on volumes first. So when you look at the Mortgage Bankers Association numbers, they're telling you that mortgage rate -- mortgage market was down, production was down 17% and we weren't down anywhere near 17%.

So I think that brags to the team that we've got out there working hard every day to stay in the game, the purchase money volume that we had was actually up year-over-year, which I think speaks to the team that we've got out there. Margin is kind of like the same question you were asking on the loans and the deposit sides, you got play in the markets that's handed to you. And so if we see some firming up in that margin, that'd be great. Chris, you want to add on mortgage?

Chris A. Bagley -- President and Chief Operating Officer

No, just that it's a -- you guys know it's a core business for us and we're going to be -- stay focused on it. There has been to lot of excess capacity this last year and I think that put downward pressure on the margins. I think we're doing a good job of adding the opportunity when that happens is that we can pick up producers and we pickup up those producers in new markets to us like you see in Houston and Dallas, I think that will generate volume and then when that capacity comes out of the business, we could see upward pressure on the margins again. So, we'll continue to focus on that core part of our business and do it efficiently and competitively.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah I'm really proud of what our team has been able to do. I think we shine in that area and how we're outperforming the mortgage market as a total.

David Feaster -- Raymond James -- Analyst

Okay, that's helpful. Thank you.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Thank you.

Operator

The next question will come from Will Curtiss of Hovde Group. Please go ahead.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Hi, Will.

Will Curtiss -- Hovde Group -- Analyst

Hey, good morning. Dan, I want to just follow-up on your comments about the deposit costs going higher and just want to make sure I understand it, is the expectation the pace of increase is going to be pretty similar to what we've seen in the past couple of quarters, is that correct?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

No, if you heard that from me. I don't think that's what I was trying to say. I don't know what the pace of increase will be. What I was saying was, in some markets, we're seeing really a big pullback in competition and rising rates. And so, we're not having to pay up in some markets. In other markets, we continue to see rate pressures on our deposit. I don't know that we can tell you that we're going to see 11 bp increase in deposit cost going forward. Remember this was the quarter following a rate hike late in December. So I think this will be a full quarter where we potentially will not see a rate hike coming from the Fed. I would hope that we would not see deposit cost increase to that level.

Will Curtiss -- Hovde Group -- Analyst

Okay, thanks for clarify that. And then, John, I appreciate the detail you provided on the kind of the seasonal factors for the expense base. I'm just curious where we stand on the cost saves from the Icon acquisition?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Well, we continue to harvest some cost saves. We're not finished in that regard and we have some more to go. And I don't guess I'm prepared to give you a percentage of cost saves, but we do have some additional cost saves to experience for the Icon transaction.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, the way I would want to look at that John would be, we carried cost well into the quarter.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

We did.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

And so, if you're trying to compare the full quarter of expense run and how much Icon was in there, there were significant Icon expenses in the beginning of the quarter. As we came through the quarter, some of those expenses were rolled off, but this would not be a clean quarter to compare it to from there. As John said, I think we still believe there are additional efficiencies that we can build in down there and we're working hard to finish those processes. But we're not there yet.

Will Curtiss -- Hovde Group -- Analyst

Okay, thank you very much.

Operator

(Operator Instructions) Our next question will come from Matt Olney of Stephens. Please go ahead.

Matt Olney -- Stephens -- Analyst

Great, thanks, good morning guys.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Hey Matt, how are you?

Matt Olney -- Stephens -- Analyst

I'm well, thank you. Want to circle back on insurance. Nice quarter on the insurance side. And based on the commentary, it sounds like there some good movements within the P&C world. How much of that's from improved pricing versus new customer wins. I'm just trying to get better idea of how sustainable the 6% year-over-year increase is?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, I guess I would want to start higher and then let Chris dive into that. Remember, this is the first quarter that you now have a true comparable since we changed the accounting rules on the way we recognize income. So first quarter this year was -- while it's not the highest first quarter we've ever had when you're looking back, the accounting rules were different. So from our process internally, we think this was a really good quarter. It's the best first quarter we've had of just the core commission income ever. So now, your question comes back to the firming up of the market and our team is seeing a firmer P&C market. We are also gaining new customers. Chris, do we have any breakout on what (ph)?

Chris A. Bagley -- President and Chief Operating Officer

I don't have a specific breakout. Anecdotally, I'd say it's a little bit of both. We're winning some business, but really the first time we've seen some firming in those renewal prices. But what our team will tell you is, that also means our customers are coming back in and shopping hard, because they're seeing an increase in their prices. So there is some noise and some competition and hand to hand combat going on. But all over good news, we've got I think both an increasing price firming up, a better pricing there, and we're winning some business.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

I also heard some of our folks say that there has been no price firming in some specific products even some backing up of premium still in some product lines, but most of the P&C saw some firming up.

Matt Olney -- Stephens -- Analyst

Okay, that's helpful. And then on the credit front, I think in prepared remarks, you said you've worked through some of the classified loans, I think that was down about $47 million sequentially. Any details here, where these loans worked out of the bank? Where they paid down, any general commentary you have on that?

Chris A. Bagley -- President and Chief Operating Officer

It's a combination of all those things. Matt, you're just -- when you're doing -- when you're in the acquisition business and you're adding portfolios and those portfolios then start going through all of your process, because you're going to see some lumpiness in those numbers. So it's payoffs, it's rehabilitation, it's regrading, it's all of those things.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, I think credit quality is critical for us. We focus on credit quality internally in a big way. I think our processes are very strong, but that means that, as Chris said, as things come on to our balance sheet and work their way through the first year of digestion, you're going to see some lumpiness in how those things flow through. We were glad to be able to work some of the ones out that we identified in the fourth quarter out so quickly.

Matt Olney -- Stephens -- Analyst

Okay. And then, just lastly from me, going back to the loan growth commentary; Dan, can you just clarify what the guidance is and does that include or exclude the acquisitions this year?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, we haven't given any guidance. You guys have kept asking questions on mid-single digits and I'm answering that we think we can do that. I'm talking about that excluding. Obviously, we can continue to buy loans, but we're talking about organic growth. We're looking at how we grow our Company, we're really proud of the teammates that have joined our team.

We found some, what we believe to be some very strong lenders in multiple growth markets for us in the last three or six months and they're all on the ground and beginning to get some traction. Their markets in Texas continue to grow. Again, I would point back to the 6% growth in Texas. If we can stop some of the shrinkage in some other markets, that growth is going to show for us in a big way.

Matt Olney -- Stephens -- Analyst

Thank you very much.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Okay Matt, thanks for your time.

Operator

Our next question will come from Jon Arfstrom of RBC Capital. Please go ahead.

Jon Arfstrom -- RBC Capital -- Analyst

Thanks, good morning.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Hey, good morning, Jon.

Jon Arfstrom -- RBC Capital -- Analyst

I think everything has been covered. But a few things you flagged in the prepared comments; one was you called out Icon and it'd been unusual to have such strong growth right after the acquisition. Are they doing anything different there? What would you attribute that to?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

I'm going to let Chris jump in here too, but the market is strong. So I would start with the market. And then I would want to add -- I would want to brag on the people. We've got some lenders down there who are very active in the market. They've got a customer following. They have not put their head down and said, Oh My Goodness, all these changes are going to cause us all these problems. They've worked their way through the operational and technology changes that we have thrown at them. I've done this a few times in my career and like Chris says, I don't know that I can think of very many at all that saw the kind of growth that we saw with that team coming on. So, I credit most of it to the people. Chris?

Chris A. Bagley -- President and Chief Operating Officer

Agreed, it is that (inaudible) it's a good marketing, good folks, I would add. You know, our folks too, there are integration team that get on the ground and helps the new folks acclimate to the new processes. We've worked really hard to try to make that as effective as possible.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

And we put a lot of support down there for them.

Jon Arfstrom -- RBC Capital -- Analyst

Sure. Okay, good. And then, Chris, you also flagged wealth management and you said only Summit. I think it was you, the word was talking about Summit had wealth management, is this an initiative for you to add wealth management into some of your newer locations or is just -- was that just kind of a one-off comment about Summit?

Chris A. Bagley -- President and Chief Operating Officer

Well, it's both. I mean, we're constantly looking for producers in all of our business lines and that would be one of them. But Summit, the one thing we wanted to flag, in your words, or highlight is, it's the first new bank that's joining us that actually has a fairly good sized wealth management teams. So we're excited about them joining and adding to our numbers there.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Typically, the banks that are in the size bucket that we've been talking about here, that there is a whole lot of them out there trying to look at their strategic opportunities in front of them, most of them do not have the wealth management piece. Your question on, do we want to grow wealth management? Our team is actively recruiting in most of the major markets we're in. Finding the right people to join the team and build around is hard, and so we have not gotten to where we want to be there, but we absolutely would like to see that part of our team grow.

Jon Arfstrom -- RBC Capital -- Analyst

Okay. And then last question, you used the term challenge expenses and obviously you've done a lot of work on expense and efficiency over the years. Anything easy that's left to do or where are you finding the opportunities to challenge expenses?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Easy, I don't know that any of it is easy. Christmas ham was done (ph). I mean that's in the past but -- OK that one was easy. The processes that we look at every day just challenge where we're spending dollars and I think we've got -- we've built a process internally. We got our folks thinking about where we're spending money. We want to make sure that we're investing money. So we're not walking away from spending money.

You've heard me multiple times today talking about adding, producing relationship managers across our footprint. We are adding people that can help us. We're not afraid of investing in that and we are adding technology and we're not afraid of investing in technology, but we are trying to make sure that we've got a return on those investments that we're spending in many ways. And so, Jon, I don't have a quick answer on the easiness of it, but I know we're still challenging where we're putting our nickels and dimes.

Chris A. Bagley -- President and Chief Operating Officer

It's difficult because it is day to day. We've used this euphemism before, it's blocking and tackling. It's looking at where we're spending money and trying to make sure that we have a sharp pencil and we negotiate new contracts and contract renewals with an eye toward reducing costs.

Jon Arfstrom -- RBC Capital -- Analyst

Okay. All right, thanks for the help guys.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Thank you, Jon.

Operator

Our next question will come from Blair Brantley of Brean Capital. Please go ahead.

Blair Brantley -- Brean Capital -- Analyst

Good morning, everyone.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Hey, good morning Blair.

Blair Brantley -- Brean Capital -- Analyst

Just a quick question on the earning asset kind of mix; just any thoughts on the investment portfolio given the influx of funding that came into the quarter and how we should probably think about that moving throughout the year?

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Well we are -- I don't have the numbers in front, might be we have taken advantage of some repricing there. We do have securities rolling off, we have pretty good maturity ladder, repricing ladder and we're seeing securities roll off at less than two and coming back on at greater than two. So we have some opportunities there.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Some of the funding cost that came in was used to pay down on some of those borrowings in the first quarter.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

(inaudible) yeah, that's right.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

If you're asking us, if we're changing our investment model? No.

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

No.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

We've got a pretty strong investment model that we've been playing for a long time, again, on the conservative side of what we're putting money into. We don't -- we're loaned up. So as you heard a little while ago, we're well over 90% -- we're in the 90% loan-to-deposit ratio. We're not going to go out and put a lot of risk in the bond portfolio.

Blair Brantley -- Brean Capital -- Analyst

Okay. And then just with that influx of deposits this quarter, I mean how sticky are those deposits and -- as we kind of work through the year?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Well, I think you -- what you see, again, I think our history -- I would point you to history. If you look at our first quarter results for the last four years, you've seen deposits go up in the first quarter and you've seen deposits shrink a little in the second quarter and then we've had some mixed results in the third and fourth quarter over the last couple of years.

I think we expect to see similar results. I think we see the same history on the loan side. The last year was an oddity and that we had so many transactions that muddied the water up. But I think when you look back in three and four and five years ago, we've had great loan growth in the second quarter and so I think, we're certainly set out to perform as we have in the past, we believe, and we believe some of those deposits will roll out in this quarter, but our team is fighting for deposits every day.

Blair Brantley -- Brean Capital -- Analyst

Okay, great. And then just finally on the -- with capital and buybacks, any change of view here with the deal, pending deals and still being active on the buyback front given what -- where you bought this quarter, right now?

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Yeah, I think you can see pretty easily from the last two quarters where we put out exactly what we've done. I mean to get -- to purchase the stock back that we did and the price that we told you we bought it back out, obviously we've got a plan or a program that's out there that's paying attention to what's moving in the market and our program is kind of on an automatic plan and if the market backs up on us again, I suspect we'll be back in the market purchasing again. If the market does not back upon us, we may not purchase as much share -- stock back. The volatility is what's driving that volume of buyback for us.

Blair Brantley -- Brean Capital -- Analyst

Okay, great, thank you.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

Thank you, Blair.

Operator

Ladies and gentlemen, this will conclude our question-and-answer session. At this time, I'd like to turn the conference back over to Dan Rollins for any closing remarks.

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

All right, thank you. Thank you all for joining us today. If you need any additional information or have further questions, please don't hesitate to contact us. Otherwise, we'll look forward to speaking to you all again soon as we're out on the road. Thank you very much.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Duration: 50 minutes

Call participants:

Will Fisackerly -- Senior Vice President and Director of Corporate Finance

James D. Rollins III -- Chairman of the Board and Chief Executive Officer

John G. Copeland -- Senior Executive Vice President, Treasurer and Chief Financial Officer

Chris A. Bagley -- President and Chief Operating Officer

Catherine Mealor -- KBW -- Analyst

Jennifer Demba -- SunTrust -- Analyst

David Feaster -- Raymond James -- Analyst

Will Curtiss -- Hovde Group -- Analyst

Matt Olney -- Stephens -- Analyst

Jon Arfstrom -- RBC Capital -- Analyst

Blair Brantley -- Brean Capital -- Analyst

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