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Cullen/Frost 1Q17 Earnings Call Notes

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Phil Green – Chairman and CEO

Growth good overall

“Yes. I think the growth is good overall. As I said, consumer’s up 8. We’re seeing strong commercial real estate growth. There is a lot of activity there. We’re being little careful and selective as far as that goes. And we’re seeing good C&I growth. I would say, it’s a very broad-based growth in the portfolio overall. So, it’s just indicative of better activity.”

Jerry Salinas

Texas economy is accelerating

“The Texas economy is accelerating across the industry sectors and metro areas. Texas employment expanded at an annualized 2.4% in the first quarter of 2017. The Dallas Fed notes more hiring optimism in Texas than in recent years. Although Texas rig counts are rising, employment growth in the energy sector is a bit slower due to both increased efficiency and automation. For the first time in many years, the Texas unemployment rate is higher than the national average due to a sharp increase in the state’s workforce. The March unemployment rate in Texas is now 5% compared to the national average of 4.5%.”

Cullen Frost 4Q16 Earnings Call Notes

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Phillip Green

Customers are moving forward with plans they had delayed

“As I have gone around the state, visiting all our locations during the month of December, one thing it was a consistent message was how many customers particular I would say mid and small customers are moving forward with plans that they had, had delayed, right? Somebody had a piece of equipment they want to put in and they can wait for six months, after they got the clarity from the political situation, the word was let’s move forward, let’s move forward now. So I think you are definitely seeing just general optimism in the market moving forward. I think our people are doing a great job being responsive to those opportunities. We’re trying to do a better job of getting decision-making authority closer to the customer and working closely with our concurrence and credit people and in doing that in a faster way I think we’re giving a better customer experience.”

I would expect loan growth to be better than 2016 for sure

“I don’t think we are projecting a number. I think we are seeing momentum increase. I would expect loan growth to be better than 2016 for sure.”

Feel good about Houston

“Yeah, I think we feel pretty good about Houston. Houston grew jobs, as Jerry mentioned, in 2016 which I think a lot of people were surprised that. Their parts of the market that our soft, construction soft. You need to be careful of multifamily there. We’re not really doing any multifamily in Houston. We’re doing in some other markets. And I think the attitude is pretty good. We talk to our people there, we ask him what beatitude is, what people are feeling, I think it’s been very consistent. I think we will still see some more employment shake out from the integrated firms and energy firms, but the rate on that has slowed. ”

Jerry Salinas

The Texas economy grew faster than the national average despite low oil prices

“The diverse and resilient Texas economy expanded 1.6% in 2016 and the Dallas Fed expects even stronger growth in 2017. Despite lingering low oil prices in the first half of 2016, the Texas economy grew faster than the national average and all other energy states. The service sector and the I-35 corridor remain strong throughout the downturn. According to the Texas Workforce Commission, Texas added 210,000 jobs last year. The unemployment rate in December was 4.6%.”

We’re only projecting one rate increase in November

“Sure. I guess I would say a couple of things as we look at the NIM for 2017, first of all, let me just say that we are projecting just one rate increase and we are projecting that in November of this year. In addition, we are projecting that we’re going to have increases in deposit rates during the year. Now we didn’t see any in all of 2016, but we are projecting deposit increases in 2017 related with the Fed increase that we just saw in December.”

Cullen Frost 3Q16 Earnings Call Notes

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Cullen/Frost Bankers’ (CFR) CEO Phil Green on Q3 2016 Results

No material change in energy segments

“No material change from prior quarters has occurred in the proportions of energy segments. Energy-related problem loans decreased by $156 million in the third quarter from $566 million in the second quarter. Production-based borrowers made up about 75% of the third quarter total and service manufacturing made up the remainder.”

Portfolio is stable and improving

“Actually the portfolio and particular regarding energy is stable and improving and you’re exactly right. There are some credits that are still moving through the snake. I like the term that you used. We just have to see how those and not to worry about that situation, but we got a lot more credits for the momentum to improve and our reserves always been most sensitive to classified levels and we’ve got some credits that many more credits if you look at the energy portfolio are directionally improving and others that are moving through the snake.”

We’re asset sensitive

“as it relates to low rates, I think that the thing to keep in mind about our company is we continue to be largely asset sensitive and so we’re, we want to maintain that position and we’re going to have to make some investments in securities as we move along just because we don’t expect to have a loan demand to deal with all the funds we are producing, but we will have to produce some investment.”

Relational deposit base = low cost of funds

“I would say that’s our view and the other thing I would say is when you look at our company’s balance sheet, we got may be one of the lowest cost of funds in the country, because we’re not paying fair rates because we are in the right in the median rates, but it’s because we have a relational deposit base and this kind of deposit base cost to us and so we know that we got the opportunity to compete on price as it relates to the asset pricing on loans bonds and the interest of growing long-term relationship and so, we’ll be allocating capita that way.”

Jerry Salinas

Cullen Frost 2Q16 Earnings Call Notes

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Cullen/Frost Bankers’ (CFR) CEO Phil Green on Q2 2016 Results

The current level of problems in the energy space remains manageable

“At Frost, our typical energy borrower has spent his entire career in the business and many are second or third generation in the energy industry. They have been through cycles before and will go through them again. Our energy customers continue to execute their plans and strategies and they are communicating well with us. The current level of problems remains manageable. ”

Non-accrual book had a hospital loan which was resolved

“The one non-energy credit was commercial real estate. It was a hospital that has some problems. It was in bankruptcy foreclosure and it was sold. We recovered all of our balances, all our principal and interest, all our expenses, attorney fees, etcetera. It was sold for much more than what we had looked for or the – it was sold for a great price. The other two were energy credits. ”

Energy portfolio continues to improve, and we did stress these loans down to $30 oil

“I don’t know the exact price point. I would say that the portfolio though has been – is continuing to improve. You have got – we did stress it before with oil prices down to $30 a barrel. And so we recognize that part of it. The energy customers that we have remember, been working through problems and we are beginning to see as I mentioned earlier, deals get done, lot of capital go into the business. And the fact that this has happened isn’t just a recent phenomenon, our customers have been working on these plans for the last year.”

Jerry Salinas

Houston’s economy is softer but still formidable

“Houston’s economy is softer, but still formidable given the energy setbacks. Despite shedding 20% of its energy jobs since employment peaked 18 months ago, Houston continues to add jobs in refining and petrochemicals and healthcare services. Houston overall employment is down about 1.2% year-to-date, although its 4.7% unemployment rate it’s still lower than the national average.”

Our portfolio is stable at $40. There are opportunities to make good returns

“At $45 oil, our portfolio is stable. As it relates to the oil piece of the portfolio, we are actually seeing some customers who are increasing drilling. We are seeing rig counts increase particularly in the Permian Basin at $45. I think our portfolio is probably stable at $40, say $40 to $45 as it relates to oil. Given the technology that’s happened and the improvements in technology, improvements in efficiencies and drilling, $40, $45 you can make the decent return if you are in the good plays.”

We have begun to see sales of properties at these prices

“Another thing we have seen at these price levels is we have begun to see sales of properties. Just some of our customers, just anecdotally one of them had $400 million sale of public company. Once – some things that are working right now, either have been done or pending, once got a $50 million sale.”

Cullen Frost 1Q16 Earnings Call Notes

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Phil Green

49% loan to deposit ratio

“our loan to deposit ratio of only 48% down from 80% in 2008. And we will prudently extend this overtime. We’re also solidly asset sensitive and will take great advantage of this as rates rise. Just look at the impact of the recent 25 basis point increase in December.”

Not seeing contagion into other sectors

“Not necessarily. We’re not seeing much if any contagion in the portfolio right now. And so I would not expect that to happen from a contagion basis as far as the reserve itself, I mean, any and all of the reserve stands ready be against all loans even though we’ve specifically noted the $85 million related to energy. So, and if you look at the performance of the portfolio, and how it’s doing with regard to classified levels et cetera, it’s extremely strong. So we feel the good reserve as it stands today.”

First thing we think about is how to create better customer experiences

“The first thing I think about is how we create even better customer experiences and that we’re world-class at it today and you can see it through the third-party recognition that we’ve got, but we need to better and we are going to be better. And I think about how can we get more people who are non-customers in the State of Texas to consider Frost as a viable alternative to the – too big to fail, frankly, and they should because we are and we will provide a better experience for them. And as we crack the code on becoming a more and more viable candidate and given the response of the market to our value proposition and our retention rates, I’m extremely optimistic about what this company can do going forward.”

Jerry Salinas

Cullen Frost 4Q15 Earnings Call Notes

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Cullen/Frost Bankers’ (CFR) CEO Richard Evans on Q4 2015 Results

Breakdown of the energy portfolio

“Outstanding energy loans as of December 31 totaled $1.76 billion or approximately 15.3% of total loans. Our energy loan segments at the end of 2015, production $1.25 billion or 71% of our energy loans, $106 million as our problems; services $273 million or 15.5% of the energy portfolio, we recognized $46 million as a problem; manufacturing, $65.6 million or 3.7% of our energy loans, we considered $19.8 million of that as a problem. The remaining 10% of the portfolio consist of mid-stream, refining, traders and private client or wealthy individuals. We have zero identified problems with these loans.'”

We know our borrowers

“Our typical borrower is an owner, operator, energy professional who has spent his or her entire career, if not life, in the business. Many are second and third generations in the industry. They have been through cycles before and they will be through cycles again. They know the meaning of commitments and responsibility. They have a stake in the local communities and they make decisions locally. We have not and will not look to equity funds, private investor groups, shared national credits, and other such entities to grow our loans. Shared national credits are approximately 29.5% of our outstanding dollars. We do not seek out shared national credits. They are the result of our borrowers being successful, growing and prospering. Consequently, their credit needs increase. As we have stated before, we do not bank the energy industry, we bank with people who are in the energy business.”

Problem credits are 10% of the energy portfolio

“Problem energy credits at the end of the fourth quarter of 2015 totaled $172 million and represents 9.79% of our total energy portfolio compared to September 30, problem energy credits of $125 million or 6.98% of total energy loans.”

We stay true to our principles and disciplines in all market cycles

“We’re focused on the basics, which have been a hallmark of our company since it was founded. Our credit quality is healthy because we stay true to our principles and lending disciplines and all market cycles.”

IN the 80s we got to about 10% non performings, but the lessons we learned from the 80s have kept us rational today

“I remember that if you got over 10% of non-performing that we knocked on the door of it, but banks that went under were over 10% and I am going by memory here, I can’t check the numbers right here, but it is very different. I would tell you that as I have looked at the lessons learned and I think the lessons learned, let me state it plainly. The lessons we learned in the 80s have kept this portfolio in very rational and management levels. What if I learned that I didn’t know this time? The two credits that we have the biggest challenges were primarily related to the quality of the reserves and the operations of those.”

Quality of reserves makes a big difference

“a lot of it when you think about this business is the quality of the reserves. The reason I say the quality of the reserves when you have got a loan on a property that is expensive to operate and of lower quality it can’t work at these levels. Already when I talked about cash flow, this cash flow squeeze is getting the best of it, when the tide goes out all the boats are lowered.”

I think you’ll see more sales over the next six months

“I think you will continue to see and we’ll see a lot more sales and different companies over the next six months have some challenges, but it’s going to relate to over leverage and quality of the reserves.”

Not all energy loans are created equal

“I know it’s difficult for the analyst community because it’s hard to get into specific analysis of different banks, you have banks that have lots of shared national credits, you have banks that have a higher concentration of service, and you get into service of the closure to the drill bait versus fortunately for us away from the drill bait. So all these variables, I know it’s difficult when you just take price but that’s why I come down and we have done the very specific analysis by customer and why we feel very comfortable with where we sit today.”

Dick Evans last call

“We don’t make leadership changes very often, but when we do they are well considered with the strong focus on continuity. We have an outstanding leadership team led by Phil Green to guide us starting April 1. It has been an enormous privilege and honor to serve this wonderful company for 45 years including almost two decades as Chairman and CEO. This will be as all of you said my final earnings call and I thank our shareholders, our loyal customers and dedicated employees for their support. I am grateful to the financial analysts and reporters on the line who have covered us so fairly.”

Phillip Green

This is not what we experienced during the 80s

“In summary, what we say is that this is not what we experienced during the 1980s…this time the situation is totally different…the 1980s real-estate was seriously impacted by the tax reform act in 1986, and the actions up and subsequent implosion of the savings and loan industry.”

The rest of the state has not disappeared

“We point all these out not to ignore that the, that an important industry within the state is undergoing a serious downturn, but merely to point out that the rest of the state has not disappeared into the Gulf of Mexico.”

Everybody related to the oil business is getting hurt

“I would tell you that the thing we need to know is that everybody that’s related to the oil business is getting hurt. Even OPAC is what there’s 11 companies. They are hurt and there is lots of economic damage. If you look at what they did from 2015 at an average price of $49.49 versus 2014 at $96.29, they’ve had an economic damage of $400 billion and the decreased revenues. Can they withstand it? Yes.”

Jerry Salinas

Cullen Frost 3Q15 Earnings Call Notes

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Loan market remains competitive

“The loan market continues to be very competitive, our lost loan opportunities show more deals lost to structure the pricing we remain consistent in our underwriting standards and that credit discipline serves as well.”

Credit quality favorable but non performings up q/q

“I’m pleased to report that our credit quality remains favorable, traditional measures of credit quality are strong delinquencies continue to be well below 1% at 0.64%. Non-performing assets were $58.2 million down 8% from the $63 million reported in the third quarter of last year and up $5.8 million from the $52.4 million in the second quarter of 2015.”

Performing well in this oil environment because this is what was expected when we talked to our customers

“there’s a few key headlines and I think are very important they show why we are performing well in this significant decrease in oil price. We remain in close and continual contact with our energy customers. Current conditions align with what customers expected when we visited with them late last year and early this year. Customers are at executing their plans and strategies and are adjusting their business plans and cost structures in a prudent and practical manner.”

We’re underwriting to $50 in 2016 and $70 in 2019

“Regarding our production based borrowers, which is 72% of our portfolio, it is important to note that our current price deck has oil at $50 a barrel for 2016 with some escalation through 2019 topping out at $70 a barrel.”

Texas has slowed but still lower unemployment than rest of the US

“Looking at the Texas economy, well Texas economy growth has slowed in 2015, it is still projected to produce positive growth for the year along with an unemployment rate almost 1% lower than the nation”

Capex budgets could be down 40% depending on how close your are to the drill bit

“as I mentioned to you we are about 10% or 15% down now. And it could be as much as 30% to 40% and this stuff moves around depending on, you know how close you are to the drill bit. How much service work, you got but I would say to you that in my opinion you know you squeezed a lemon about as much as you can.”

You can’t get blood out of a turnip

“I think the service industry has been very aggressive I think they’ve done a great job of cutting cost. But you can’t get blood out of a turnip.”

It’s tough for a bank under $1B to survive after Dodd Frank

“Bank M&A, you know those continues to be a lot of dating in the little banks under a billion dollars because you know regulation has made it or they can survive, which is a shame…I think you are going to see the little guys get together to try to get over $1 billion I don’t blame them their survivors and work hard but it’s a shame what Dodd Frank and all the stuff did to the industry in America.”

Redeterminations starting, but we’re so close to our customers that we’ve got a good idea of what’s going on

“It’s just starting, but from our standpoint I gave you some color which we believe what the results will be already because we spent, we are so close to our customers, we got pretty good understanding so we will know more by year end exactly what’s going on.”

Competition has increased from “stupid bankers.” The Fed is creating bubbles.

“It’s just stupid bankers, and there are both big and little ones. You get all this pressure, that’s one of the benefits of the Feds getting out of keeping interest rates low for ever as they are creating some other bubbles. You know where they are, and hedge funds, and all kinds of private equity investments. And so what happens, the math is pretty simple you’re sitting there want to go loans because the yield better and so you start doing stupid things and lowering your standards now.”

The Permian basin is one of the best honey hole in the world

“It’s surprising with oil down end up from 100 take a number 45, 43 wherever it is – one of the things that if you are out there, but people will kind observe is how much traffic and there are still lot of traffic. I think you know its going to slowdown a lot, its got to but what’s you can’t forget is that the Permian basin is one of the best honey holes that you’ve got for all in the world. And so you are going to continue to have some activity.”

Historically it takes 80 months to get through an energy cycle so we’re probably in the first 3-4 innings of this

“people out there tell us that it historically when they go a down cycle there it usually takes 80 months to get through it and you can pick your starting point of this down cycle but we’re certainly in that I would say probably in the first three or four innings of that cycle.”

Cullen Frost 2Q15 Earnings Call Notes

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Richard Evans retiring in March 2016

“I will retire effective March 31, 2016. At that time, Phil Green will become Chairman and CEO and replace me on the board. Over the next eight months, I will work closely with Phil and the leadership team to manage an effective, orderly and transparent transition to keep the company strong.”

Have continued to see consistent loan demand despite uncertainties

“Turning to loan demand, 2015 is proving to be a very interesting year. We continue to see consistent growth despite uncertainty in the market from volatile energy prices and the possibility of higher interest rates. ”

Losing more deals based on pricing than last year

“The market continues to be very competitive. Year-to-date, our lost loan opportunities with customers are running about 60-40 pricing compared to 50-50 last year.”

Curent conditions have aligned with our customers’ expectations in energy

“We should and do remain in close contact with our energy customers. The good news is that current conditions align with what customers expected when we visited with them late last year and earlier this year. Customers are executing their plans and strategies, adjusting their business plans and cost structure to operate in the current environment. While increases in problem loans are expected, the overall impact should be manageable.”

Hedges will start to roll off but should be manageable for our borrowers

“We evaluated the hedge position of our borrowers. They will feel some impact from the hedges expiring but it should be manageable and will not be a reason to cause a classification. It’s worth noting that the counterparties for our borrowers are money center banks, big regionals, and some Canadian banks all of which have the ability and capacity to meet their contractual responsibilities.”

There’s obviously more downside than upside for problem loans in energy

“In this volatile oil price environment, clearly we have more downside than upside with regard to the possibility of problem loans increasing.”

The loans that have deteriorated are ones that we expected. I know from experience it takes longer to solve a problem than you originally expect

“The point is that their movement was not a surprise and we have been in discussions with them for several months, helping them work through the current environment. In my 44 years of experience I have learned it usually takes longer to solve a problem that you – than you originally expect. Today, what we know is properly identified and plans are in place and being executed for positive resolution.

Texas’ economy is proving to be quite resilient

“Now, concerning the Texas economy, despite lower oil prices and challenges in the energy sector the diversified Texas economy is proving to be quite resilient. Many observers predicted negative job growth this year for Texas, but the Dallas Fed now projects positive growth of 1.2% in 2015. And while that’s slower than the growth of the national average, Texas is bearing much better than other energy states and that’s a testament to the economic diversity in Texas.”

We’ve stressed our portfolio to $37 oil

“I would also say that in 2015, as you know, we’ve done the sensitivity at $37, and so you can get through this period of time”

The economic situation is better than anybody expected for Texas, but supply and demand probably wont balance for oil until 2016

“as Phil told you in the economic discussion, for us in Texas, all of us would say that it’s better than we ever thought it would be in the middle of the summer, that’s the good news. The other thing that I don’t think and the studies show that production and consumption won’t come into balance in the fourth quarter. And it will probably move into 2016 and where in 2016 is anybody’s guess.”

China is a big impact on the oil market

“If you want to write about something, write about China, and they are starting to write about it. China represents about a fourth of the growth – of the usage of the growth. They represent about 12% of the overall demand in the world of oil per day, that’s about 10.5 million barrels. And their growth and usage of oil and as their economy has slowed down, has moved from about 6% to 3%.”

We stay close to our customers and that’s what kept us alive in the 80s

“The whole reason we didn’t go broke in the 1980s is because of the relationship with customers and working through problems and that’s the reason we stay so close to these customers’ work and we know them. We don’t have investments and shared national credits. We don’t have investments and energy. We have investments in bonds and securities. We know our customers. We deal with them. Identifying early and working with them is the way you manage through tough times.”

The clock is running out for some people in distress, but there is a lot of capital on the sidelines

“when we were sitting around $60, we all talked about how much money is sitting on the sideline to buy properties or companies or whatever. And that’s true today. I think what the fall in the oil prices will create is more deal activity because the guy that’s overleveraged and the prices come down on him, he’s going to have to make a deal. Whereas sitting at $60, maybe thinking it could go to $70, he was hoping for the best. He’s got to deal with the reality. He’s got too much debt. Times running out on him and the good news is, there’s a lot of money sitting there to buy these properties. So that’s another moving part as we go along.”

If the Fed had raised rates when they should have this economy would be buzzing along

“I would like to give you a little editorial comment there. If the Fed had raised rates when they should have a year or so ago, this economy would be buzzing along. We’re so buried in data that we’ve kind of gotten out of leadership in Washington and all aspects of it.”

People are paying more for companies than anybody ever dreamed of

“This runoff is a lot of what I see the bubble that has been – one of the bubbles that has been created as a result of the extended zero interest rate environment.”

“what the saver has done has put more money into funds and venture capital and those kinds of things. And as a result, they’re paying higher prices for companies than the company ever dreamed anybody would ever pay them for. ”

There’s some crazy thinks being done out there and we try real hard not to be stupid

“There’s some prices paid for companies that’s too high. I don’t blame the guy for selling it. ”

“There’s some crazy things being done out there and we try real hard to not be stupid.”

We don’t loan on assets, we loan to people who own assets

“I love what Joe Frost said, somebody asked him, Joe was the guy that took this bank through the Great Depression. Somebody asked him, do you loan on cattle? And he said, we loan to people in the cattle business. We still – we don’t loan on oil and gas properties, we loan to people in the oil and gas business. And so it’s all about people.”

Cullen Frost 1Q15 Earnings Call Notes

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Solid ROA, ROE

For the first quarter of 2015, return on average assets and average common equity were 1.02% and 10.34%, respectively, compared to 1% and 9.97% reported in the first quarter of 2014.”

Consistent loan demand despite energy prices

“Turning to loan demand. We continue to see good consistent growth, despite uncertainty in the market from declining energy prices. First quarter 2015 average loans were $11.1 billion, up 15.6% from the $9.6 billion reported for the first quarter of last year.’

No surprises or material issues with energy customers

“So we entered this time of lower oil prices and slower job growth in Texas with strong credit quality. We maintained close, regular communications with our energy-related customers. We told you in January, we had visited with more than 90% of our customers. Well, we visited them again in March and early April, and there were no surprises or material issues.”

Increased allowance

“We continue to have good ongoing communications with these customers. We have increased our allowance for loan losses slightly to deal with the economic uncertainty surrounding lower oil prices. As we go through the adjustment period, we will be able to address loans rationally through our normal course of business.”

Industry has adjusted very quickly

“After observing May contracts of crude oil future prices, report suggest that oil is trying to hit bottom. We have talked with our customers and have seen how quickly the industry has adjusted to market conditions.”

Mixed economic year in Texas

“2015 looks to be a year of mixed economic growth in Texas. Models indicate we could lose about 140,000 jobs in the energy sector. In March, the number of jobs in Texas declined for the first time in more than two years, and it is expected to take until the fourth quarter for oil supply and demand to come into balance.”

There’s a lot of liquidity in Texas from wealth generated in recent years

“Finally, there is a lot of liquidity in Texas from wealth generated in recent years, particularly in areas hardest hit by the energy job losses. For example, Midland Texas, in the heart of the Permian Basin has the highest per capita income in the nation. ”

Construction is very strong in Texas

“construction is very strong. There is just a lot going on in Texas. It is, if you look at office, offices are still, the statistic show that there is opportunity. Occupancy rates are under the line where you would see a need. So I don’t think there is overbuild. And certainly the Gulf Coast, which I mentioned in the petrochemical plants up and down, LNG plants, these things are all — LNG plants, you don’t build one for less than $10 billion and it’s over a number of years. So there is a lot happening.”

The hedges are still helping. You’ll see more adjustment in the summer and fall

the hedges are still are an important factor. And I think you’re going to see the real — you’re going to see a lot more this summer, but certainly in the fall you will continue to see how you go through this adjustment period. That’s when we’ll know at the end.”

New production costs have fallen much lower

“But the new production costs are much lower.

I’ve read a number of articles on cost improvement, and you’re seeing in some sectors that cost — I always think of cost of about $8 million cost of well by the time you drill it, frac it and complete it. You’re seeing some examples of that coming down to $4.5 million or $5 million. And so I don’t think we can underestimate the mother of invention of what technology we saw, what technology did to fracking, and we will continue to see improvements in cost.”

I don’t really like this response to the question of whether reserves will continue to increase

“Well, first of all, anybody that can predict the future and know everything is going to happen is going to be wrong. Remember what I have said, the provision was increased because of the formula, and it relates to classifications and all the other stuff. So it’s just consistent with that.”

Cullen Frost 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Best year ever for new relationships/loan opportunities

“Even without the WNB acquisition, this has been our best year ever for new relationships, new loan opportunities and new loan commitments. We continue to see a steady increase in the percentage of our pipeline from existing customers. This is important because our success rate is much better with these opportunities. The willingness of our customers to seek financing also is a good indicator of an improving economy”

Losing loans on structure when they do, which is good

“I’m also encouraged that the ratio of lost opportunities continues to be about 60/40 in favor of structure this year. That means that we were competitive in pricing without sacrificing credit quality, and that’s exactly where we want to be.”

We continue to see signs the economic recovery is extending

“Despite the recent roller coaster ride in the stock market, we continue to see positive signs that economic recovery is extending to mainstream. Businesses are hiring again, consumer confidence is up and small business owners are taking advantage of opportunities to expand in a prudent way.”

Comfortable with how strong the pipeline is

“it slowed down a little bit. But what I’m very comfortable with is how strong the pipeline is.”

There’s a lot at play in an oil downcycle as to credit pressure

“depending on what price settles out and how long it stays there, it’s really going to have a lot to do with what’s happening. And this also we got to recognize when you get a downturn like this, you’re going to see lower drilling cost and many factors are in play as we go along hedging dividend policies, debt management. There would be some sales and purchase decisions. And certainly depending on which location in the United States basins have a wide difference in economic quality.”

We’re making loans assuming an oil price of $52

” we also lend 65% of these amounts after you do all those calculations. And so 2015 oil would mean we’re loaning $52 a barrel and $2.40 on natural gas. We always factor in other differentials such as transportation and unique lifting and secondary cost. So it all results in the numbers even being a little bit lower than that”

Customers still fine at $75 and cuts come at $70

“Based on our conversation with our customers, cost of delivering finance production really needs around $75 a barrel you’re still receiving a good favorable return. If it gets to $70 a barrel, it would delay some projects not all projects, and you would also see some aggressive cuts and expenses. ”

Answer to the question: ‘Are you being too conservative?”

“You and I didn’t know each other in the ’80s, and I can talk to you about it without my shrink sitting next to me. And I got a pretty deep scar that’s healed from. And I tell you what the way you blow a bank up is making bad loans. And there’s a lot of crazy stuff going on right now. And as I told you, I am extremely pleased that we’re staying true to what we were doing. And when you look kind of deeper into details, I told you the structure is still about 60% and 40%. That’s where we want.”

“Are we working hard to make every deal work? You bet we are. But I don’t want to be talking to you 3 years from now about all the problems we created when everybody was just going crazy and you got a little bit of — not a little bit, you got a lot of just everybody thinking you can make any deal and it’ll work out.”