Good morning. My name is Elissa and I will be your conference operator. At this time, I would like to welcome everyone to the Cullen/Frost Bank Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Mr. Greg Parker, Executive Vice President and Director of Investor Relations. Mr. Parker, you may begin.

Thank you, Elissa. This morning’s conference call will be led by Dick Evans, Chairman and CEO; and Phil Green, President of Cullen/Frost Bankers Inc.; and Jerry Salinas, Group Executive Vice President, and CFO. Before I turn the call over to Dick, Phil, and Jerry, I will take a moment to address the Safe Harbor Provisions. Some of the remarks made today will constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 as amended. We intend such statements to be covered by the Safe Harbor Provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 as amended. Please see the last page of the text in this morning’s earnings release for additional information about the risk factors associated with these forward-looking statements. If needed, a copy of the release is available at our website or by calling the Investor Relations Department at 210-220-5632. At this time, I will turn the call over to Dick.

Thank you, Greg. Good morning and thanks for joining us. It’s my pleasure today to review second quarter 2015 results for Cullen/Frost. Our President, Phil Green and Chief Financial Officer, Jerry Salinas then will provide additional comments before we open it up for your questions. And before we get into the earnings numbers, I want to call your attention to today’s separate Cullen/Frost executive leadership transition announcement. 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. With our financial strength, unique culture and our outstanding people, this is the right time for us to move forward with the leadership team led by Phil and bolstered by the additions of three strong veteran Frost leaders. I congratulate Annette Alonzo, Gary McKnight and Candace Wolfshohl and welcome them to our executive leadership team. No one is more committed to the future of Cullen/Frost than I am. Our future is in great hands with Phil and our more than 4,200 dedicated employees. I’m proud of what they have helped us achieve and look forward to working with them in the days ahead. Now, moving to earnings, I’m pleased to report that at the second quarter 2015 Cullen/Frost had solid growth in average loans, average deposits and revenues. These positive results amid lower oil prices, and a challenging interest rate and economic environment are a credit to our dedicated employees. They live our culture each day and they help distinguish Frost in the marketplace. During the second quarter of 2015, our net income available for common shareholders was $71.1 million up 9.9%,…

Thank you, Dick. And on behalf of all the employees at Frost, we congratulate you on today’s announcement. Thank you for your remarkable leadership and stewardship of Cullen/Frost. Let me say, I’m humbled to be asked by you and the board to follow in your footsteps, leading what you and I both know for the best 4,200 bankers in the United States of America. And we are grateful that we’ll be able to call on you long after next March rolls around [ph]. 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. The Texas unemployment rate in June dropped to 4.2%, well below the national average. According to the State Comptroller’s office, Texas unemployment rate has been at or below the national average for 102 consecutive months, about 8.5 years and counting. The unemployment rate in markets we serve is well below the United States’ rate of 5.3% in June, even in energy centric markets like Houston 4.1%, Corpus Christi 4.5%, Midland 3%, and Odessa 3.6%. June unemployment rates for Austin, Dallas/Fort Worth, and San Antonio are all between 3% and 3.9%.These are very low levels and help substantiate the number one concern I hear from customers on calls, the shortage of available skilled labor. As expected, regional economies vary widely depending upon their reliance on the energy industry. For example, Dallas/Fort Worth, Austin, and San Antonio are all reporting solid growth.…

Thank you, Phil. I’m going to make a few additional comments about the quarter, then I’ll discuss our guidance for 2015, before turning the call back over to Dick for questions. I wanted to mention that our net interest margin increased again this quarter, up 6 basis points to 3.47% from 3.41% last quarter. Higher investment yields due to a higher proportion of municipal securities in the portfolio combined with lower deposit costs contributed about half of the increase. A decrease of about $260 million in balances at the Fed earning 25 basis points was responsible for the other half of the increase. Regarding our investment portfolio. During the second quarter, we purchased $183 million in municipal securities, which were partially offset by about $106 million in paydowns in calls during the quarter. The tax equivalent yield in the portfolio was 3.97%, up for the – for the quarter up 6 basis points from 3.91% last quarter. The investment portfolio had an unrealized gain of $139 million at the end of the quarter, and the duration of the portfolio was 4.5 years. Regarding taxes. Our effective tax rate for the quarter was 14.7% compared to 16.9% for the second quarter last year, and has been favorably impacted by the increase in municipal securities. As Dick mentioned, our capital ratios remain strong with our common equity Tier 1 ratio at 11.70%, up 15 basis points from the prior quarter. Finally, regarding full-year 2015 earnings, we currently believe that earnings estimates at or slightly below the current mean of analyst estimates of 454 would be reasonable. With that, I’ll turn the call over to Dick for questions.

Thank you, Phil and Jerry. We are now happy to take your questions.

[Operator Instructions] Your first question comes from the line of Emlen Harmon with Jefferies. Your line is open.

Hey, good morning. This is actually Travis Potts on for Emlen. Congratulations Dick and Phil, both of you on the announcement today, first of all. And then I guess starting on energy, I appreciate all the color you gave us and I apologize if I missed this. But did you touch on the current reserve you have against the portfolio?

I did not, but I can tell you that it has moved up. It currently is, out of the total reserve, it represents 23.3% or $24.8 million and – versus the second quarter of 2014, a year ago, it sat at 9.1%, or $8.9 million. So it’s moved up better than two times, that’s the percentage of the total reserve.

Great. Thank you. And just on the loan growth, can you touch on the segments that drove that, obviously, specifically, kind of what energy did on a sequential basis?

Quite frankly, energies had a really good growth. As you remember me talking to you in the first quarter that I expected that we would have some opportunities from some customers that we always want to do business with, and that’s exactly what happened. Energy growth and I’m looking at commitments, new commitments booked year-to-date were at about 40% of our growth came from energy, that $60 million, real estate about 27%, that’s a little over $200 million.

Travis, just looking at the energy, if I’m looking at December to June, we’re pretty flat. We are up $23 million. We are still at about 16% of the portfolio at $1.8 billion at the end of June.

All right. Thanks a lot. Thank you for taking my questions.

The next question comes from the line of Steven Alexopoulos with JPMorgan. Your line is open.

Hey, good morning, everyone.

Good morning.

Good morning.

Just a couple of questions first on energy, or related to energy. What was the balance of criticized loans at the end of the quarter and how did that compare to Q1?

Most of it was identified earlier as I mentioned. The…

I thought you guys classified earlier.

I mentioned to you that what we have is a total of – hold on, I’m just trying to get the exact number in the loans – I guess, I just said it to you. The classified loans were – I’ve got too many numbers here to – I told you energy – out of the 1.797 billion, 4% were classified or $72 million, another $60 million were special mentioned. If you look at risk grade nines, risk grade 10s, which I talk to you last quarter, OAM were $60.7 million and risk grade 11s on June 30, were $71.3 million. And that compares to year end of risk grade 10s of $161,000 and risk grade 11s of $5.38 million. So we moved from year end from $161,000 to $60.70 million. We moved from $5.4 million to $71.3 million and 11s are substandard.

Yes. That’s helpful. Dick, can you talk about – you mentioned the increase in the potential problems. Can you talk about what segment drove that? Was it all E&P related?

Of the energy classifications?

Yes. I don’t know if you talked about that.

It’s the majority where I talk about – you’re asking me where I talk about what part the $72 million that’s classified and the $60 million that’s special mentioned out of energy loans. Yes, the majority, nearly all of it is production. Out of the total classifications, there is really – there is one healthcare credit that moved in there.

Okay.

So it’s not – and that’s totally unrelated to energy.

Yes. So if oil stays roughly around this level, call it $50-ish, how do you think about the risk going forward, and what percent of the hedges will still be in place come the fall reset?

Well, as I’ve said, we don’t see – these hedges are moving off, and we don’t see a problem related to the hedges running off. They will be some adjustments, but I would say that is not an issue from the hedges running off. 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. Now, those are all the positive things. There is always something you don’t know. What – there is so many moving parts in this thing. What I’m pleased about and the reason I talk a lot about how close we are to customers is, you asked me a question about price, and I answered the specific price. And you can come to the conclusion that we are in good shape. The reason we stay close, they’ve got to adjust their cost pretty quickly. And I think one of the healthiest things that happened in the energy is that in the first quarter when these – or at the end of last year when these prices started coming down, the energy companies and service companies didn’t wait around to adjust what they were doing, they stopped. You know, what’s happened to drilling rigs, they are down about half. Service companies have lowered pricing, as I said, probably about 30% now, will they come down some more, maybe a little bit, so all of that has taken place. The interesting thing to me is what’s happened in the efficiencies. A couple of things. One, the way you increase production and what you and I lived through of the years before price started dropping, the price was at a level that the companies could afford to go in and discover new territories, new…

Yes. That was great. Just one separate one, can you just comment on the linked-quarter decline in deposits and what drove that?

I think those are typically seasonal. And we’ve also seen, I think, some reductions in energy from the first of the year, but not dramatic. And I think over the last couple months, we’ve actually seen an increase in deposits.

Okay.

Right. I think, Steven, as Phil mentioned, we did see energy deposits decrease during the first of the year and they are – deposits in general in July, as we look at them, they started to pick up again. So, not really noticing anything unusual at this point.

Let me – if I could just jump back and make a couple more comments about energy. I think the other thing, when you look at global supply and demand balance. I said to you at the first of the year, I said at the end of the first quarter that – and I’m just reading the most sophisticated government research that says what they think will happen with all their models and that sort of thing. And I believed when I said that, we would come in balance in the fourth quarter of this year. I also said that I thought the worst point would be this summer. Quite frankly, 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. You’ve got a couple things happening. If we would have had – if you would have talked to me 30 or 45 days ago, I would have been very confident that oil would trade between $62 and $58. I would have also said to you that if I ran and Libya returned to the market and particularly Iran with the agreement that seems to be going to be signed, we’ve always said, and the market has said, if that comes on that we would see a $10 to $15 decrease. That’s what we’ve seen, that’s exactly where we are at around $47, $48. Will oil trade $48 to $52? Probably be a pretty good guess,…

Okay. Thanks for all your thoughts on the topic.

Steven, if I could just give you a little bit more color on the deposits. We are down on average on a linked-quarter basis about $220 million. About $100 million of that is a brokered MMA product that we acquired with part of our Western acquisition. We’ve been intentionally trying to get out of that product ahead a higher rate that needed to be paid. And then, if you combine public funds and corresponded banks, and corresponded banks tend to be pretty choppy. So those three things together would make up $200 million of the $220 million, so that will give you an additional color.

Okay. I appreciate all the color.

Your next question comes from the line of Dave Rochester with Deutsche Bank. Your line is open.

Hey, good morning, guys…

Good morning.

…and congrats to you, Dick and Phil, on your announcements there.

Thank you.

So, Dick, back on energy, you guys had a nice drop in the provision this quarter and the reserve ratio was also stable. But then you just mentioned classifieds were up, criticized assets were up. So I was just trying to understand why the reserve ratio didn’t move up, at least, a little bit given that increase. So any additional color on the reserve methodology as loans migrate to those pockets would be great.

I think the thing you got to understand, remember what I said throughout my comments, I related to the end of the year of 2014, and the identification moving into the first quarter. What we thought would happen and what we provided for in the first quarter and the identifying classified loans in special mention is what has happened. So we provided for those early in the year and we’ve had nothing, no new surprises. That doesn’t mean you can’t have a surprise, that’s the definition of a surprise. But we moved early in the year. We have – certainly, classified increased early in the year, we identified them early. We provided for them and remember the reserve is most sensitive to classifications. And that’s exactly what we did and the reason it is appropriate today.

And then, if you can take out your crystal ball for a second, if we have oil prices below $50 through the end of this year, how should we think the provision line to trend? What should we expect there?

I just took my ball –crystal ball out and it’s so foggy, I can’t see. Look, it’s going to stay with the basics of sensitive to classifications. If classifications go up and we get a surprise or something that’s not working as well as we should, the reserves going to go on. The – there is no use in me getting into a long discussion with you about what I think how ridiculous reserves are and we ought to add it to capital and have strong capital, I’m already in the discussion, but anyway, because from an editorial standpoint, this is stupid stuff. But I will tell you the discipline this company, Cullen/Frost has and being very precise in following the laws and the regulation. And what I said the most sensitive to classifications is exactly what we’ve done for years and years and will continue to do. So if we identify some new problems, and I don’t think $45 oil or whatever this range of – I’ll call it, $48 to $52, I don’t know what it’s going to do. And I’ve already told you 2015, we can take up $37.50, heaven forbid that happens, but – the other thing with this oil business, and I say it over and over and I know all of you are working with numbers and you should work with numbers. 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.

That’s good color. I appreciate that. Just switching to expenses and your outlook there. You had a bit of an uptick this quarter in some line items. Is this a good run rate overall for the back half of the year or should we expect any growth in the second half?

We typically don’t give a detailed projections on expenses but I will say that we mentioned that our operations and support center was opened in the second quarter. Another segment of that will actually come in place in the third quarter that isn’t in our run rate.

Okay. That’s very helpful. Thank you. And just one last one on your outlook on securities purchases going forward specifically with regard to your appetite for munis?

I’d say that we’ll continue to do some. As Jerry pointed out, we did about $183 million in the second quarter which was compared to previous standards, fairly low. And it’s an assay class that we’ll continue to participate in and I think you’ll see us continue to do some of that on a normal basis. And whether or not it skews to an earlier quarter or later in the year, is probably going to depend on our view of the market and what we think is a good opportunity to take advantage of.

All right. Great. Thanks, guys.

Thank you.

Your next question comes from the line of Jennifer Demba with SunTrust Robinson Humphrey. Your line is open.

You just covered it, my question. Thank you.

Thank you.

Your next question comes from the line of Ken Zerbe with Morgan Stanley. Your line is open.

Thank you. Just a quick question on the margin. Obviously up, I think it was 6 basis points or so this quarter. I’m sure some of that may have been driven by the muni purchases close to 4%. But was there anything else in there that drove the margin higher on a sequential basis?

Ken, 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.

Got it. Okay. And then, just on the fee line, I think you mentioned there were a couple of items related to oil and gas that drove lower trust and investment management fees and some mineral interest income. Was there anything unusual or one-time in nature about those items? Or the lower oil and gas investment management fees, is that something that should be sustainable at this level going forward?

Yes, Ken. We’re getting affected both by lower production but obviously the price is also affecting that lower.

But that is a sustainable lower amount?

Yes.

Thank you very much.

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 it usage and because of lower oil prices we’re not discovering new zones. I mean, the Eagle Ford wouldn’t have been discovered had it not been for $90 or $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.

Ken, this is Phil. Just one thing to keep in mind overall in the investment – or on the trust fees, energy is down, and as Jerry said, we sort of for the time being, as Dick talked about as well, we’re in a slower period. But 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 to really be dependent upon what happens 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.

Ken, 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.

Okay. Thank you very much.

Your next question comes from the line of Stephen Moss with Evercore ISI. Your line is open.

Good morning and congratulations Dick and Phil.

Thank you.

Just want to circle back to energy for a moment. Pretty impressive that the balance has been stable here. Just wondering what are your thoughts about the potential for a decline in energy loans going forward?

About volume of them declining?

The total balance of energy loans.

We said at the end of the first quarter we thought they’d be flat coming into June. There are up a little bit. Flat by 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, 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, what, a couple of 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. So 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. Phil, 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. So that’s another moving part as we go along.

Okay. Separately, I was just wondering about an update on M&A, what are your thoughts in terms of activity and potential deals?

You ever heard me say that I’m aggressive looker and conservative buyer?

Yes, I have.

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 Phil Green said to me when we looked at it, it looks like a little Frost. And so – yes, maybe there’s some others like that but we’ll keep looking and we’re going to be real careful about what we do.

So can I take that to mean that at this point you guys are pretty much done with the compliance issues that came out of the WNB?

No. You can’t take that.

Okay. Well, thank you very much.

Thank you.

Your next question comes from the line of Brett Rabatin with Piper Jaffray. Your line is open.

Hi, guys. Good morning, I’ll offer my congrats as well. I wanted to just ask a quick question around, want to make sure I understood sort of the dynamic for the back half of the year. You mentioned early in the call 14% new commitments but some commitment runoff and obviously payoffs are bit of an issue. I wanted to make sure I understood, are you looking for depending on energy sort of the back half of the year did you have loan growth improve a little bit or can you give us maybe an idea of your tenor on the pace of loan growth?

What I said was a 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. So they’re not sitting around. So 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 kind of 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…

Okay. Thanks for all the color, Dick.

You’re welcome.

Your next question comes from the line of Scott Valentin with FBR Capital Markets. Your line is open.

Good morning. And congrats to both of you, Dick and Phil, on the announcement. Just with regard to credit, Dick, you mentioned how you guys survived in the 80s by being close to the customer. I’m just wondering, as you think about loan growth today, are there certain geographies you’re maybe emphasizing or deemphasizing due to energy exposure?

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 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.

Okay. Thanks. And then with regard to interest rate risk, you guys are asset sensitive. I’m just wondering, any change there in terms of managing that position with – I guess there’s debate about when rates may go up, but everyone’s anticipating rates going up at some point. Would there be any change in the way you approach positioning the balance sheet for that?

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.

Okay. Thanks very much.

[Operator instructions] Your next question comes from the line of Ebrahim Poonawala with Merrill Lynch. Your line is open.

Good morning, guys.

Good morning.

I just had two follow-up questions. I’m sorry if I missed it. Did we disclose how much in energy loans if any, did you purchase this quarter?

We disclosed how much we have today and we disclosed where we were at the end of the year and the trend. And if you look at – did you say purchased this quarter?

Yes, because I remember Dick, mentioning earlier in the middle of the quarter when he spoke, that you looked to sort of offset some of the loss by purchasing credits similar to what we did in the first quarter. So I was wondering if he had that amount?

Are you referring to shared national credits?

Yes.

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.

Understood. And any color on where you see that SNIC energy book headed in the back half of the year?

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.

Understood. That’s very clear. And just a separate question. Less about you and more about the industry. I think as we probably see a further reduction in borrowing base in the fall. Do you see more issues that coming out of the E&P, some of the smaller companies in the back half of the year than what we’ve seen so far? I’m just wondering from an industry standpoint, should we base ourselves to see more issues for the E&P companies because of lower borrowing bases if oil stays where it is or goes lower?

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 the problems? Are they cutting their costs? What we’ve learned through our experience, the most successful customers are that that have an expense structure and master it – have flexibility in their expenses. They’re not locked 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.

Understood.

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.

Got it. Thanks for taking my questions.

There are no further questions at this time. I will now turn the call back to Dick.

Thank you. This concludes our second quarter 2015 conference call. We appreciate your interest and support of our company. We stand adjourned.