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.”