Cullen/Frost Bankers' (CFR) CEO Phil Green on Q2 2016 Results - Earnings Call Transcript

| About: Cullen/Frost Bankers, (CFR)

Cullen/Frost Bankers, Inc. (NYSE:CFR)

Q2 2016 Earnings Conference Call

July 28, 2016 11:00 ET

Executives

Greg Parker - Executive Vice President and Director, Investor Relations

Phil Green - Chairman and Chief Executive Officer

Jerry Salinas - Group Executive Vice President and Chief Financial Officer

Analysts

Steven Alexopoulos - JPMorgan

Emlen Harmon - Jefferies

Brady Gailey - KBW

David Rochester - Deutsche Bank

Stephen Moss - Evercore ISI

Operator

Good morning. My name is Nicole and I will be your conference operator today. At this time, I would like to welcome everyone to the Cullen/Frost Bank’s Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn today’s call over to Mr. Greg Parker, Executive Vice President and Director of Investor Relations. Mr. Parker, you may begin.

Greg Parker

Thank you, Nicole. This morning’s conference call will be led by Phil Green, Chairman and CEO and Jerry Salinas, Group Executive Vice President and CFO.

Before I turn the call over to Phil and Jerry, I need to 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 Phil.

Phil Green

Thank you, Greg. Good morning and thanks for joining us. Today, I will review second quarter 2016 results for Cullen/Frost. Our Chief Financial Officer, Jerry Salinas, will also provide additional comments before we open it up to your questions.

In the second quarter, Cullen/Frost earned $1.11 per diluted common share, which is flat with the same quarter last year and up from $1.07 a share reported in the previous quarter. Looking overall at the second quarter, credit quality was stable and showed signs of improvement over the first quarter. Our provision for loan losses was $9.2 million compared to $28.5 million in the first quarter. Non-performing assets dropped by more than half from $180 million in the first quarter to $89.5 million in the second. Net charge-offs in the second quarter totaled $21.4 million, the vast majority of which were specifically reserved for in prior periods. We are seeing other signs of growth compared with the first quarter. While energy loans continue to drop, total loans outside the energy sector grew at an annualized rate of 7.9% between the first and second quarters. The first quarter of this year included one-time events like the net gain of $15 million from the sale of securities that reduced our concentrations in oil-dependent economies. It also included a more stringent regulatory debt to EBITDA standard, which we apply to our energy portfolio. The second quarter has been more towards a return to business as usual.

Looking deeper at credit quality, regarding the reduction in nonperforming assets, I mentioned earlier, nearly the entire reduction was a result of payoffs on three credits: two payoffs were energy credits totaling $62.8 million; the other was a payoff on a real estate credit of $22.6 million. As a part of these payoffs, we charged off $11.3 million related to the energy credits. However, this was significantly less than what we have specifically reserved for in prior periods.

Loans placed on non-accrual during the quarter totaled $16.5 million compared to $100 million in the first quarter. Slightly less than half of those represented energy loans. Annualized year-to-date net charge-off represents 42 basis points of average year-to-date loans. In the first quarter, we said we expected net charge-offs to increase in the near-term and that’s what occurred. But based on what we are seeing today, I would be surprised if net charge-offs for the rest of 2016 weren’t below the levels for the first half of this year. Non-energy related problem loans defined as risk rate 10 and higher were basically flat compared with the first quarter. The second quarter total was only 4% of the total non-energy loans.

While contagion from low energy prices is frequently discussed and projected, to-date, very little impact has occurred. Given Texas’ economic diversity, favorable job and population growth and business-friendly environment, we currently believe that significant contagion is unlikely. Another positive sign is that specific allocations in the loan loss allowance decreased significantly during the quarter.

Now, let me drill down and update you about our energy portfolio. Outstanding energy loans at the end of the second quarter totaled $1.5 billion or 13% of total loans that compares with $1.76 billion or 15.3% of total loans at the end of 2015. Since year end, the energy portfolio has decreased by $255 million. Energy segments at the end of the second quarter were as follows. Production totaled $1.60 billion or 71% of energy loans. We recognized $455 million or 43% of our production loans as a problem. Remember again, the problems represent risk grades of 10 or higher, some people call those loans criticized loans.

Service totaled $227 million or 15%. We recognized $70 million or 31% as problem loans. Remaining 14% in the portfolio consist of midstream, manufacturing, refining, traders and private clients, of which 19% were recognized as problems. Energy-related borrowers that are on non-accrual totaled $42.8 million at the end of the second quarter compared to $114 million at the end of the first quarter. The specific allocation for these energy credits totaled $2.5 million in the second quarter, down from $27.5 million in the first quarter. We have reserves associated with our energy portfolio of $66.3 million, representing 4.4% of the portfolio.

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. Since we formally review and adjust our price tag on a monthly basis, the spring borrowing base re-determinations had little, if any, impact on asset quality. As a result of our efforts to understand, identify and manage the potential impact of volatile commodity prices on our customers, we have made a more normal provision in the allowance in the second quarter, provided that energy prices do not deteriorate significantly from current levels, allowance provisions for the remainder of 2016 should reflect loan growth in typical gross credit quality.

Now, I would like to turn briefly to growth in the second quarter. Of the total loans outside the energy sector that grew at an annualized rate of 7.9% between the first and second quarters, about half was in commercial real estate, about a third was in C&I, and the remainder was in consumer and other. The increase in CRE fundings since the end of the first quarter has come through relationships that Frost has had for more than 5 years. At the same time, year-to-date new relationships are up by 17% compared to this time last year. The new relationships gained over the past 6 months have added $322 million in net new commitments and $262 million in net new balances for loans since December 2015.

Year-to-date, customer and prospect calls are each up by 13%. We booked 17% more non-energy C&I commitments than in the second quarter of 2015. Since year end, we have increased our personal lines of credit and home equity lines at an annualized rate of 15% and the balances under those lines have increased at an annualized rate of 11%. And we are maintaining our credit disciplines, which has served us well. At the same time, the reductions in our energy loans that are higher than normal payoffs have put pressure on loan volumes. Payoffs have been driven by payoffs of commercial real estate and seasonal reductions in lines of credit, asset sales and problem loan payoffs.

It’s important to understand that these payoffs do not indicate that we have lost the relationship. In fact, we have lost only 7 of these relationships that had more than $5 million committed at the end of 2015 and three of those were participations. Even if the loan was moved or paid-off, we usually maintain the non-credit services due to our top quality service and we expect to provide the relationships with credit again when needed. This demonstrates how customers appreciate our team approach.

Finally, our weighted pipeline is about 9% over where it was last quarter. It’s a testament to the way we do business that even with the headwinds faced in the past few quarters, Frost has managed to grow and expand. For example, early in the second quarter, we increased our dividend, marking the 23rd conservative year of dividend increases. Also during the second quarter and into the third, Frost has opened four new financial centers, one in East San Antonio, one in Dallas near North Park Mall and two locations in Austin, Lake Travis and East 7th Street. All of these advances are possible because we do business in Texas where the resiliency of the economy and the business friendly conditions in the state enable companies like Frost to thrive.

You heard me talk about the Frost value proposition that we offer a culture, which treats everyone as significant where we will get a square deal and give them excellence at a fair price and safe sound place to do business. Any financial services company can say that, but at Frost it’s backed up by third-party recognition. In the second quarter, Frost received the highest ranking in customer satisfaction in Texas and the J.D. Power Retail Banking Satisfaction Study for the 7th consecutive year. I might add it’s only been given 7 years. Consumer Reports recently named Frost, the top U.S. regional bank. Frost earns 29 Greenwich Excellence Awards for commercial banking. And Frost was recently listed among the top banks in the country in the American Banker/Reputation Institute Survey of Bank Reputations this year. The fact that all that recognition happened while our industry has been facing challenges and while Frost has been expanding its offerings through technology and new financial centers, shows the strength of the Frost team and the way we do business. So in closing, I would like to thank our people for all their hard work and all their dedication. They are the stewards of this great company, who built lasting customer relationships that have put Frost in strong position, building for the future.

Now I will turn the call over to our Chief Financial Officer, Jerry Salinas, for some additional details.

Jerry Salinas

Thank you, Phil. I am going to make some comments about the Texas economy then I will give some additional color on our financial performance before giving an update on 2016 guidance. I will then turn the call back over to Phil for questions. The Texas economy continues to grow, thanks to market and industry diversity, population growth and a business friendly environment. According to the Dallas Fed, the state’s economy grew 1.2% in the second quarter of 2016 compared to 1.3% decline in the first quarter of this year. The Dallas Fed now expects 1.1% expansion in the second half of 2016 for a total annual job growth of 0.5% in Texas this year. The state unemployment is 4.5% compared to 4.9% nationally. According to the Texas Comptroller’s office, the state unemployment rate has been at or below the national unemployment rate for more than 9 years. Oil price increases in the first quarter and price stability in the second quarter provide reasons for optimism. Texas manufacturing activity improved in July, although the rise in the dollar continues to challenge manufacturers.

Looking at individual markets, Austin, Dallas, Fort Worth and San Antonio remain strong with very low unemployment rates. Annualized job growth in Austin is 2.1%, with an unemployment rate of only 3%. Growth is broad based with notable expansions in retail trade, healthcare and construction. Dallas, Fort Worth is growing at an annualized rate of 2.7% or twice as fast as the national economy. The top three growth areas in DFW are financial services, education and health services and trade transportation and utilities. The housing market remains red hot. Dallas, Fort Worth is now the top U.S. market in annual new home starts. Thanks in part to a number of prominent corporate relocations from other states. The unemployment rate is near multi-year lows 3.5% in Dallas and 3.8% in Fort Worth.

San Antonio has the state’s fastest annualized growth rate at 4.7% and an unemployment rate of only 3.5%. Trade, transportation and utilities, construction and other services are primary growth engines. In these three growing markets with extremely low unemployment rates, the availability of skilled workers is a challenge. 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. As I mentioned earlier, for Texas overall, the Dallas Fed expects 1.1% expansion in the second half of 2016.

Now, looking at our financial performance, our net interest margin for the quarter was 3.57%, down just 1 basis point on a linked quarter basis from the 3.58% reported last quarter. The loan yield for the quarter was 4%, up 1 basis point from the first quarter. The taxable equivalent yield on the investment portfolio was also 4%, down 6 basis points from the previous quarter and was impacted by a slightly higher proportion of lower yielding taxable securities, primarily treasuries in the second quarter as compared to the first.

Our municipal portfolio at the end of the second quarter was $7.1 billion, up $730 million from $6.3 billion at the end of March. At the end of the second quarter, about 68% of the municipal portfolio was pre-refunded or PSF insured. During the second quarter, the total investment portfolio averaged $11.8 billion, up about $249 million from the first quarter average of $11.5 billion. Our capital levels remained strong with our common equity Tier 1 ratio at 11.9% at the end of June. Regarding consensus estimates, including our year-to-date as reported EPS of $2.18, we believe that the current mean of analyst estimates of $4.39 for the full year is a little low.

And with that, I will turn the call back over to Phil.

Phil Green

Thank you, Jerry. We will now open up the call for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Steven Alexopoulos from JPMorgan. Your line is open.

Steven Alexopoulos

Hi, good morning everybody.

Phil Green

Good morning.

Jerry Salinas

Good morning.

Steven Alexopoulos

Can we start – just one question on energy, I think you said special mention were flat, but could you give us the actual balance of special mention and classified and criticized as well?

Jerry Salinas

Yes. Are you talking about for the energy selection?

Steven Alexopoulos

Yes. Just for energy.

Jerry Salinas

Okay. I would say, the total of risk rate 10, which is going to be our criticize is $296 million, let’s say at the end of second quarter. Risk rate 11 would be – sub-standard would be $228 million. And then, 12s and 13s would be about $42 million combined.

Steven Alexopoulos

Okay, that’s helpful. At $45 oil, how do you guys see this playing out from here, should we expect to see potential problem loans start to decline or is it just too early?

Jerry Salinas

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. 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. Now this has got $125 million sale, once it got an $80 million sale and what they are selling in most of these cases is acreage, it’s really not production. And so what you see also these are public companies typically at this point that we are seeing doing these deals. So, it looks like people are trying to take advantage of what’s happened with technology and efficiency to take advantage of some of this good properties and good acreage out there and we are seeing to make good prices.

Steven Alexopoulos

That’s helpful. Maybe just one follow-up, are you seeing again with oil given that it’s recovered, increased competence for commercial borrowers as well. I think you said the pipeline was up, but are you seeing confidence levels improve there? Thanks.

Jerry Salinas

It depends on the market that you are in. I think you have seen increasing confidence in some markets, that be in, let’s say, cost and for example, North Texas. Houston I would say is fairly consistent, not a lot of greater confidence, but they have been – they have had a fair amount of confidence through this whole period of time. I think the weakest area is going to be out in heavily oil-related economies like the Permian Basin and say Corpus Christi, but when all got to be in the $40s, yes, it definitely let a lot more air in the room.

Steven Alexopoulos

Okay, thanks for all the color.

Jerry Salinas

Thank you.

Operator

Your next question comes from the line of Emlen Harmon from Jefferies. Your line is open.

Emlen Harmon

Good morning.

Phil Green

Good morning.

Jerry Salinas

Good morning.

Emlen Harmon

Clearly, you guys with the non-accrual booked on quite a bit this quarter, could you talk about kind of what it was that brought those balances down, whether you mentioned some asset sales earlier, whether borrowers were able to kind of prove their financial condition, if it was something where you had to work out some credits or sell assets? Just be kind of curious how you are able to affect that decline and whether you would anticipate being able to do some more of that?

Phil Green

Well, the biggest factors were three credits and little bit different situation in each one of them. 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. One was a company that sold properties and was able to pay down debt and so we were the beneficiaries of that. And then the third one was one where we saw a credit that we had written down significantly. And when we saw what third-party prices were being paid for that credit, we decided to hit the bid. We actually freed up about $4.5 million in reserves related to that problem asset sale. And on the one where I have said we had a company that sold energy properties, we freed up about $5.2 million in reserve on that one. So, when you look at the two energy credits, one which paid down because they sold properties and one which was a payoff because we sold the credit, we freed up about $10 million in reserve for both of those combined.

Emlen Harmon

Got it. Thanks. And then if we just look at the total energy portfolio, it looks like it was down a couple of hundred million quarter-over-quarter. Would you expect the continued kind of diversifying out of that portfolio over the next few quarters just trying to get the size of that down?

Phil Green

I think you are likely to see a decline overall in the energy component, but that doesn’t mean we are not looking at good deals. And the deals that we are seeing, they are very heavily capitalized and they are in producing properties. And so there are people that are taking advantage of it, but we are continuing to work out on the weaker – the credits, the ones maybe where the relationship is not as strong as it should be or we would like it to be. And just from the hedges we set for years to get the – let the good stuff grow and trim the stuff off the bottom that it doesn’t make sense for us to be in.

Emlen Harmon

Okay, thanks. I will step back.

Operator

Your next question comes from the line of Brady Gailey from KBW. Your line is open.

Brady Gailey

Hey, good morning guys.

Phil Green

Good morning.

Jerry Salinas

Good morning.

Brady Gailey

Maybe just a follow-up on that last point, so it sounds like energy balances could head lower. So, do you think we will see the same magnitude or shrinkage over the next quarter or two that we saw in the second quarter or maybe to ask it differently, energy is $1.5 billion where would you expect that portfolio at a bottom? I am just trying to get a sense on that you haven’t grown total loans, much at all in the first half of the year driven by the shrinkage of this energy book?

Phil Green

Brady, I don’t expect it to have the same kind of decline that you seemed to have over the last 6 to 12 months. It could decline some more, I think the rate of decline as we have seen has reduced. And again, we are beginning to see some deals that make a lot of sense based upon the way they were structured. So, as we see really good opportunities, we can take advantage of them. I don’t really have a projection of what energy will be going forward. It’s just going to depend upon what we see and our appetite for it. I will tell you that a number of people who used to be in this business apparently are not anymore. And so their field is there to take advantage of what’s out there in the market. So, as I have said before we are going to continue to be in this business. It’s important to the country. It’s important to Texas. And we are going to be in it for the long-term. But we are just – we are not going to see a lot of growth in the business for a little while.

Brady Gailey

Okay. And then you talked about Houston slowing, but it’s still kind of hanging in there fine. What’s your update at Houston’s CRE exposure? I think last quarter it was around $760 million. Did that change much in 2Q?

Phil Green

No, I don’t think we have seen a lot of change. And I think the – we are just looking at CRE overall, but we feel really good about the portfolio, only about 3.8%, let’s say, less than 4% of the CRE portfolio is classified 10 or higher, which would be criticized or as we say, the problem loans. If you look at some of the markets, Houston has about – these are round numbers. Houston has got about 20% of our CRE portfolio. It’s got about $47 million in loans classified as problems or like I say, 10 or greater. Only about $19.6 million of that relates to energy and the majority of those are owner-occupied warehouses. The largest energy-related CRE credit that has an issue in Houston is only $3.5 million. We don’t have any multifamily problems in Houston, no tenant and office building problems, no developer problems. If you look at San Antonio, which we have about, let’s say, 25% of our CRE portfolio, no energy issues there. Only $14.5 million are recognized as problems, so very clean there.

If you look at Fort Worth, we have got about 20% of our CREs in Fort Worth, only about $16 million of problems noted there. $2 million of that are energy-related and that’s an owner-occupied deal. Take a look at Dallas, for example, where we have got say, 15% round numbers of the portfolio, about $36 million recognized as problems, they have $8.3 million related to energy. Oddly enough, that’s a hotel in Midland. And so the rest of the portfolio, I think is about well, you got Austin at 10%, no issues there. Austin is a great market as everyone knows. And then you got about 10% leftover for all the rest and really not much in terms of problems. I would say overall if you look at energy problems in our commercial real estate portfolio, in total, it’s about $36 million, the largest of that being that $8 million hotel in the Permian Basin that’s – that’s just taken – its ramp up is just little behind schedule.

Brady Gailey

Right. That’s helpful. And then last for me, the tax rate keeps ticking down here at 10.5%, I think it was a little over 12% last quarter, what’s the good forward run-rate on the tax rate?

Phil Green

Brady, I would probably tend to go more towards that first quarter rate.

Brady Gailey

The 12%?

Phil Green

Yes.

Brady Gailey

Okay, thanks guys.

Phil Green

Thank you.

Operator

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

David Rochester

Hey, good morning guys.

Phil Green

Good morning.

David Rochester

Can you just talk about the securities purchases you made in the quarter and what those yields were? It sounded like you brought on a lot more munis. And can you also just talk about what your appetite there is in the back half of the year?

Jerry Salinas

Well, just as a remainder, we had sold $444 million, if I remember correctly in the first quarter of the muni book, so some of that we were making up. But during the quarter, we purchased about $648 million in municipal securities with the TE yield of about 460.

David Rochester

And then how are you thinking about those purchases in the back half?

Jerry Salinas

Yes. You will continue to see purchases during this latter part of the year. It won’t be as accelerated or there won’t be as much as we had in the first half of the year. But we will still continue to make purchases.

David Rochester

And then, how large can that portfolio actually get as a – either a percentage of securities or as a percentage of assets, do you guys have any like internal limits on that kind of thing or just – I was curious how you thought about that?

Phil Green

I would say that the – maybe you keep in mind in municipals over time is that that’s not something that you can continue to do indefinitely, because you have got an amount of effective tax rate that you can apply to it and that’s a limited resource. You also want to make sure your durations in line and you are not getting out over your skis on that. And then, you want to make sure your liquidity is good and strong, because municipals aren’t as liquid as other assets, it’s a different ballgame as it relates to that. We keep our eye closely on all three of those things. And as Jerry said, we have got room to do some additional and then we will do some an additional – we will do some in the second half of the year, although not at the same extent as the first half. And as we said, we don’t have to make up for the ones that we sold in the oil patch. So we recognized that, that’s not a forever strategy and that’s why we are working so hard and our people are doing a good job, making calls and putting in pipeline and growing the portfolio, up and down the segment, so whether they will be large deals, middle market deals or small deals.

David Rochester

And then just given the, I guess the deposit growth was a little bit slower than we had saw this quarter, how did you end up funding the purchases, was it just like overnight borrowings that will be replaced later?

Jerry Salinas

Some of it was with just – we have got excess balances at the Fed. I think at the end of the quarter, we were still at $3 billion, so we used up some of that, but we did have some deposit growth in funded portions of it.

David Rochester

Got it. And then just overall, how are you guys thinking about the NIM trend in the back half of the year, I guess bringing on these securities will certainly help it in 3Q, but how should we look at that?

Jerry Salinas

I think what I have said last quarter and I am going to stick by it. Last quarter, I said that I would project that it would be in the flat to down. And I think we are still with that. I mean there is still some pricing pressure, obviously that we are dealing with. So I think at this point, that’s the way we look at it.

David Rochester

Great, alright. Thanks guys.

Phil Green

Sure. Thank you.

Operator

[Operator Instructions] Your next question comes from the line of Stephen Moss from Evercore ISI. Your line is open.

Phil Green

Stephen.

Stephen Moss

Sorry about that. Good morning. I just wanted to start off with – back to the energy book here, historically Cullen/Frost’s energy borrowers had very little in terms of hedging, wondering if that still remains the case, today?

Phil Green

Yes, it does. We are seeing some hedging pickup and we saw prices go up and it has been a wholesale change.

Stephen Moss

Okay. So still I can – if I recall correctly, low single-digits or mid single-digits as a percentage of 2016, 2017 production?

Phil Green

That’s not an unreasonable number.

Stephen Moss

Okay. And also you mentioned with regard to energy that as long as oil prices remain stable, there would not be any incremental – the provisioning would return more to normal levels. Just wondering at what price point do you believe you would have to start adding to energy reserves if prices were to just declining further?

Phil Green

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. And we have been working right alongside with them and talking to them and working with them through the entire period. So it kind of looks like it’s all happened just at once, but people have really been working hard on this. So I believe, our portfolio continues to improve. And as we said, we stressed $30 before and now I like to believe that our consumers are in better shape to withstand it if it does get softer as we move forward. And I wouldn’t be surprised if prices got a little bit softer with the glide in gasoline and refineries slowing down somewhat, we could see prices move down a little bit further here, but that’s not a great concern to us now.

Stephen Moss

Okay, got it. And then in terms of loan growth, I hear you in terms of the energy headwind here declining but just excluding the energy, kind of what do you think would be the growth rate for the remainder of the book, high single-digits for a loan growth or...?

Jerry Salinas

I think that Phil mentioned that in the – without energy our loan growth was in the 7% range and I think we have said in the first quarter ex-energy on the linked quarter, we were up maybe 6%. So I guess I wouldn’t – I am not sure I would go any different in something like that in that range.

Stephen Moss

Okay, thank you very much.

Operator

Your next question comes from the line of Emlen Harmon from Jefferies. Your line is open.

Emlen Harmon

Hey guys. I have just a couple of other follow-ups, if you don’t mind. The insurance fees this quarter, the decline there looked like it was bigger than we would typically see seasonally, was there anything unique that happened this quarter?

Jerry Salinas

Yes. We took it on the chin a little bit. We were impacted by some loss business is what you are seeing there during the quarter.

Emlen Harmon

Okay. So we should think about – as we think about it on a year-over-year basis, it should potentially be a little lower going forward?

Jerry Salinas

Well, I think that – well, I guess the full year, yes it would be.

Emlen Harmon

Okay. And then you noticed that consensus EPS looked a little bit low, I don’t know how deep you get into it, but does it – from your perspective, does it feel like that provision was the major delta of the difference there?

Jerry Salinas

We really don’t spend a whole lot of time with the individual analyst estimates to be quite honest with you. If I had to just make a wild guess, I would try to say that the differences are probably provisioned, that would be my guess. We don’t spend a lot of time with them.

Emlen Harmon

Okay, alright. Thank you.

Operator

There are no further questions at this time. I would like to turn your call back over to Phil. Thank you.

Phil Green

Well, great. We appreciate all your interest and thank you for your questions. This will end our call.

Operator

This concludes today’s conference call. You may now disconnect.

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