Energy lenders' retreat from certain relationships is providing opportunities for other banks.
A number of banks in states such as Oklahoma and Texas have been shrinking their energy books as regulators pay more attention to those loans. Green Bancorp in Houston is taking the extra step of getting out of the business entirely.
As a result, oil-related businesses are in need of loans, giving institutions such as Bank of the Ozarks in Little Rock, Ark., and First Horizon National in Memphis, Tenn., chances to forge new relationships and bring in business they may have missed out on otherwise.
-
Green Bancorp in Houston has resolved $37 million in energy loans since deciding to get out of that business.
July 28 -
The Federal Deposit Insurance Corp. is raising concerns about potential spillover effects from depressed oil prices even as banks had sounded more optimistic. Tougher capital requirements for energy lenders could be on the horizon.
August 2
First Horizon, which entered Houston two years ago, has doubled the size of its modest energy team by adding two employees, including an analyst, in the last three months. Over that time, the company has landed several deals and booked $100 million in loans. The bank now has a roughly $500 million portfolio in Houston, divided among commercial real estate and commercial-and-industrial loans, which of course includes energy credits.
"Many of the banks in Houston are dealing with energy loan problems, they're pulling back in energy lending, some are exiting the energy space altogether," said Gary Olander, First Horizon's Houston market president. "It's created a lot of opportunity in the energy sector."
Bank of the Ozarks has also been revving up its operations in Houston, where it had done "limited lending" in recent years, Brian Martin, an analyst at FIG Partners, wrote in a recent note to clients.
The $18 billion-asset Ozarks quietly entered the Houston area after
Bank of the Ozarks "has experienced a pickup in lending in Houston as many lenders have exited the market given current concerns regarding energy," Martin said. "This is resulting in attractive pricing and superb deal structure."
A call to Bank of the Ozarks was not immediately returned.
Interest from other banks has helped lenders such as Green Bancorp pare back their energy exposure. The $3.8 billion-asset company has
"There are some banks that are still active in the space and looking … for customer acquisition during this down cycle," said Donald Pereschbacher, Green's chief credit officer, noting that interested parties want to snag the loans at a discount. "Some also want to purchase the loans. Those firms are hoping that the loan ultimately brings them higher returns or just want to own the underlying assets."
Pereschbacher said Green was approached by four banks that were interested in its portfolio. Two of the banks were based in Texas; the other two have operations in the state and wanted to increase their market share. Green is also receiving inquiries from nonbanks, he said.
Still, First Horizon and Bank of the Ozarks may be in the minority when it comes to an eagerness to expand around Houston right now. At the same time, they seem confident in their ability to make sound loans even in an uncertain environment.
"Reserve-based lending has been one of the safest types of lending," Olander said. "When done right, it's historically had a good" track record in terms of losses.
