CFR
#<UNK>, as I mentioned, yes, you're right.
The higher investment yield on a linked quarter basis did have about ---+ was responsible for about half of that increase.
And then, we did see a decrease in our fed balances.
They were down about $260 million on a linked quarter basis.
That was probably the remainder of the increase.
Yes, <UNK>.
We're getting affected both by lower production but obviously the price is also affecting that lower.
For how long we don't know.
Just leasing activity has slowed down.
Remember, we're I think number four in the United States of our trust department managing oil and gas royalty properties a little over 8 million acres.
It's all over the United States, but obviously, most of it concentrated in Texas.
What I said to you about that discussion about how we're moving and how the industry is moving into the middle of the play and maximizing its usage, and because of lower oil prices we're not discovering new zones.
The Eagle Ford wouldn't have been discovered had it not been for $90, $100 price of oil.
We all know, also the drilling has been in the center of the play where the oil and the liquids off of the gas are so rich.
When you look at a map, you go way out beyond there.
There is tremendous natural gas reserves.
And as a result, those are ---+ people are not going to spend money out there.
And as those leases expire, and they are expiring, and our management of oil and gas leases will not change.
But as that comes back and as leases expire and where you have a company that can't afford to drill that well in the time limit what they are required to, and those vary all over the place, they may lose that lease and so, that's an opportunity to renegotiate.
But it is going to be slower because prices are down.
<UNK>, this is <UNK>.
One thing to keep in mind overall in the investment ---+ or on the trust fees, energy is down and, as <UNK> said, we, for the time being, as <UNK> talked about as well, we're in a slower.
Keep in mind that our total oil and gas fees for the second quarter were $1.6 million and our investment fees, which is the vast majority of what we do in that business, were just under $21 million And so, how are trust fees go overall is going really be depend upon what goes on in the investment side where we've been doing a great job.
And of course, markets are going to impact that, particularly what happens with stock, et cetera.
But we'll rise or fall really in the long-term in terms of how we do on the investment management side.
<UNK>, and one additional item there, just from a linked-quarter basis, that trust line item is also getting affected by the ---+ we got out of the securities lending business as you recall, at the end of the first quarter.
And so those revenues were down about I think, $800,000 quarter to quarter.
About volume of them declining.
We said at the end of the first quarter we thought they'd be flat coming into June.
They are up a little bit.
Flat by the end of the year would be great.
Quite frankly, I'm a little optimistic they could be up.
What we've done, you also heard me say that our lines have been reduced.
It's interesting to me that what happens ---+ we have learned that as your relationship of the borrowing base, the amount of reserves that you can loan, obviously has tightened up in that regard, and actually the margin increases.
Because of the way the pricing works on those as you use more of your line, the pricing goes up.
And so, while the volumes come down, the margins are a little bit better.
I think the real wild card is there's a lot of opportunity, and we hope we get our share and more of our share, of some really strong borrowers that we haven't had an opportunity to deal with in the past and we see an opportunity as we speak right now.
I think the papers are being signed with one of our customers that is a fabulous customer of an increase in his line.
And so those things are happening.
Now how much of that happens versus tightening up and I would tell you we got ---+ I told you we had a couple large credits that are in the energy field and we're working real hard and they are too, to pay that loan off.
So that's going to move out.
You've got a lot of things moving parts.
You want to get the weaker ones out.
You want to help finance the strong players.
<UNK> talked about the wealth creation prior to this downturn.
There are people sitting with a lot of money that would like to buy some of these properties at a more favorable price.
I think the other thing ---+ 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.
That's another moving part as we go along.
You ever heard me say that I'm an aggressive looker and conservative buyer.
That hasn't changed.
I think you're going to continue to see a lot of activity in the smaller, real small companies merging together, trying to get over the billion dollar threshold and all that kind of thing.
That's where most of the activity's going to take place.
We're very particular.
WNB was a very unusual, special opportunity.
We've talked about it.
They're great people.
They had a balance sheet that, as <UNK> <UNK> said to me when we looked at it, it looks like a little Frost.
Maybe there's some others like that.
But we'll keep looking and we're going to be real careful about what we do.
No.
You can't take that.
Thank you.
What I said was modest.
The good news is, I'm extremely pleased with the work our people are doing.
They're out there calling.
In fact, I was surprised, I never had looked at it, year to date, our commercial calling officers have made a total of 45,893 calls.
They're not sitting around.
We're out hustling hard.
We're generating things.
The killer is the runoff.
It's $500 million more than historical ---+ than we've experienced historically.
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 gotten out of leadership in Washington and all aspects of it.
But it is ---+ we're out working at it.
I'd like for us to be growing more smaller credits.
Everybody knows that in this Company.
They're working hard to do it.
If we weren't calling, I'd be worried about it.
We're calling.
We're generating opportunities and prospects.
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.
We talked about it before, financial repression is taking it out of the height of the saver and given it to the government in these low interest rates.
And 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.
And that's part of the runoff and it's a significant part.
They're either selling some of their assets or the whole company and then that individual obviously is paying their loan off because they don't have the company anymore, don't need the money.
And now they're going to be faced, what are they going to do with this bucket of money.
It's the challenge we have in this country.
But I think we have to think about long-term what is that going to do.
There's some prices paid for companies that's too high.
I don't blame the guy for selling it.
You know when I look at what we call the booked rate of our customers and prospects, we're sitting in 2015 booking at 78.5% versus 73.7% last year.
Pricing, we're kind of in line.
In fact, we're more aggressive.
Last year, we were losing deals at 5.4% to pricing versus this year at 4.3%.
So we're more aggressive with our customers on pricing.
As far as structure, we lost 8.8% last year on structure to customers.
Today 10.3%.
There's some crazy things being done out there and we try real hard to not be stupid.
When you look at prospects, we're booking 29.1% versus 25.1% last year.
And as I talked to you, the big deal there is structure.
Last year, we lost 28.1% of the prospects to structure.
Today, 31.1%.
We've been in this business long enough to know that if you start doing stupid stuff, you'll blow the place up in time.
We have no intention of blowing this place up.
This is a great company.
We have a great future and we're going to continue to grow our business with good customers, stay close to them and support them.
Not really.
We are a Texas bank.
You've got to realize the Eagle Ford Shale is certainly a shale play.
You've got to understand the difference between that and the Permian Basin which is an old great basin.
And don't forget, I love what Jo 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 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.
No.
I would say we continue to be solidly asset sensitive and we want to maintain that.
We don't want to give that up.
So that's always in the back of our minds as we look at whatever investments we do or whatever structures we have on the fixed rate side.
We disclosed how much we have today and we disclosed where we were at the end of the year and the trend.
Did you say purchased this quarter.
Are you referring to shared national credits.
They're down.
Shared national credits in the first quarter for energy, for example, were $533 million.
They were $472 million in the second quarter.
So that would not be a factor in our growth.
I just have to comment on the term purchased.
Remember, we're not purchasing transactions.
It relates to those.
We're developing relationships with people and in many cases, they may be club deals or shared national credits but they're still relationships.
Yes.
We have commitments.
I think it will be flat.
You know it's interesting, we've increased our SNIC.
One was to a contractor, one was to a candy company and one was to an energy company.
Don't forget what I said.
If you weren't listening when I said we don't make investments and credits.
We don't buy transactions in the shared national credits.
We deal with customers we know and if they don't have a relationship, we're not involved.
I think the way you should look at it, if you see companies that have too much leverage, they're going to continue to have problems.
And it's really all about leverage.
Are they addressing their problems.
Are they cutting their costs.
What we've learned through our experience, the most successful customers are that have an expense structure and master it.
Have flexibility in their expenses.
They're not lock in.
Where you get into these energy companies that have high lifting cost, have problems with pipelines, all the delivery kind of things and are doing things that are very expensive, they're going to have problems.
And you combine that with the leverage ---+ it's not just about price.
It's about good managers doing what they're supposed to do.
That's who we try to choose.
That's the reason we choose people to do business and then we look at the understanding of the business they're in.
And if they like high leverage and if they like ---+ and their expenses are out of line, we're not going to bank them.
Thank you.
This concludes our second-quarter 2015 conference call.
We appreciate your interest and support of our Company.
We stand adjourned.
