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Q2'16 energy exposure at US banks and thrifts

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Q2'16 energy exposure at US banks and thrifts

Energyprices may have stabilized after a rocky start this year, but most banks and thriftshave reported a decrease in outstanding energy exposure as of the second quarterof 2016.

Accordingto an analysis by S&P Global Market Intelligence, as of July 25, 15 companiesreported above $200 million in energy-related loans in second-quarter earnings reports.The data was collected on an as-reported basis from earnings releases, earningsconference call transcripts, 10-K filings, 10-Q filings and investor presentations.The list was compiled on a best-efforts basis.

topped the group with$23.5 billion in outstanding energy-related loans as of June 30.  Citi's total outstanding energy loans slipped0.8% over the linked quarter, and its portfolio quality improved as roughly 37.5%of the loans were non-investment grade, compared to 39.5% in the first quarter.During Citi's second-quarter earnings conferencecall, CFO John Gerspach said "[C]ertain energy clients were ableto access the capital markets as the market environment became more favorable inthe second quarter. This allowed these clients to improve liquidity, resulting ineither paydowns or improvement in the credit quality of our exposure." Citi'senergy-related loan reserves declined to 4.3% of total energy loans from 4.5% quarterover quarter.

's total outstanding energyand energy-related loans declined by 11% on a linked-quarter basis to $3.23 billiondue to customers taking necessary actions to reduce bank debt, according to commentsmade by Ralph Babb, chairman and CEO, during the company's second-quarter earningsconference call. Energynet charge-offs also fell to $31 million versus $45 million in the first quarter.

Amongthe group, U.S. Bancorpsaw the largest decline in outstanding energy-related loans at 11.5% quarter overquarter. The bank's total energy loans fell to $3.02 billion as of June 30, thankslargely to a $300 million drop in loans to the exploration and production segment,which shrunk to $1.5 billion. Additionally, nonperforming assets within the energyportfolio fell by $54 million to $222 million.

Energy loans at LegacyTexasstill expanding

Energyloans at Plano, Texas-based LegacyTexasFinancial Group Inc. grew by 3.5% to $543.9 million in the second quarter,making it the only bank on the list to increase total outstanding energy loans.Kevin Hanigan, president and CEO, noted during the company's second-quarter earningsconference call that59% of the bank's energy loans were "backed by private equity firms with significantcapital invested and additional capital commitments available to our customers."During the second quarter, LegacyTexas increased its energy-related loan loss reservesby $4.5 million to $21.9 million.

At June30, approximately 90% of the bank's $547.2 million energy portfolio (including oilfieldservice loans) consisted of reserve-based loans. According to the company's earningspresentation, 86% of its gas engineered PDP volumes were hedged at a weighted averageprice of $3.09 for 2017, while 48% of its oil engineered PDP volumes were hedgedat a weighted average price of $56.19.

The bankis currently seeking asuitable bank to merge with or it may sell to a larger player.

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To view previous articles on energy exposure, click on the following links:

Q1'16 energy exposure at US banks and thrifts

Q1'16 energy exposure at US banks and thrifts - Part 2

Earnings conference call transcripts, earnings releases and investor presentations can be accessed under the News, Events and Filings section of a company's briefing book page.