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Green Bancorp execs address questions on plans to shed energy loan exposure

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Green Bancorp execs address questions on plans to shed energy loan exposure

executives onMay 2 provided further details on the company's plans to eliminate its energyloan exposure and other classified assets.

GreenBancorp executives faced questions from analysts and investors at the annualGulf South Bank Conference over the recently announced to $277 million in energy loansand other classified assets. Green Bancorp executives reiterated that the exitof the energy business will allow the company to return to its growth plans,including through acquisitions, and help restore value to its stock.

GreenBancorp shares have come under pressure over the last year, underperforming theKBW Nasdaq Bank Index by more than 30% during the time frame, largely due tothe company's exposure to the oil and gas industry, and its home market ofHouston, the energy capital of the U.S.

GreenBancorp Chairman and CEO Manny Mehos noted at the Gulf South event that thecompany decided to exit the energy lending business to take "uncertaintyoff" the company's balance sheet. He said investors have targeted GreenBancorp shares because the company has a large energy portfolio relative to itspeers. He further said the market has concerns over contagion spreading fromthe energy sector to other areas, particularly in the company's home market ofHouston.

"Wedon't see any contagion in our portfolio yet," Mehos said at the event. "Wereally don't see any hint of contagion."

Eventhough the company has not seen contagion spread yet, Mehos said Green Bancorpdecided to not go through a "slow drip" of trimming its energyportfolio without communicating to the Street. Mehos said the investmentcommunity should expect the company to report some progress in reducing thesize of its energy exposure in the second quarter, and anticipate even furtherresults by the end of the third quarter.

Analystsand investors in attendance at the Gulf South event wanted to know how GreenBancorp plans to reduce its energy book and asked Mehos what level of lossesthe company expects to incur, noting that some have speculated charge-offscould equate to 25% of the portfolio. The executive said the company's goal isto clean up its balance sheet in the next year and it plans to do what isneeded, but he also noted that its goal is to keep loss severities well belowthat level. Green Bancorp executives emphasized that they do not plan to purgethe energy loan portfolio through bulk sales, and will use a bottoms upapproach and variety of methods, including the aid of third parties to maximizevalue.

Mehosfurther noted that the company has not kept its plans a secret because itsenergy credits do not have to be worked out. He said the company's ,which invested in the company close to six years ago, also support theapproach. He said the approach follows the style of private equity in movingquickly through an issue, but noted that it was management's decision to exitthe energy business.