Energy Loan Sale Reference Slides 7/17/2020
Important cautionary statement about forward-looking statements This presentation contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements that we may make include statements regarding our expectations regarding our performance and financial condition, the provision for credit losses, management’s predictions about charge-offs for loans, including energy-related credits, the impact of significant decreases in oil and gas prices on our energy portfolio, the impact of the COVID-19 pandemic on the economy and our operations, including any resurgence of COVID-19. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,” “potentially,” “probably,” “projects,” “outlook", or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events. Closing of the sale of credits in our energy portfolio is dependent upon satisfaction of certain closing conditions set forth in the definitive purchase agreement, and there is no assurance that such conditions will be fulfilled. Given the many unknowns and risks being heavily weighted to the downside, our forward-looking statements are subject to the risk that conditions will be substantially different than we are currently expecting. If efforts to contain COVID-19 are unsuccessful and restrictions on movement last into the third quarter or beyond, the recession would be much longer and much more severe. Ineffective fiscal stimulus, or an extended delay in implementing it, are also major downside risks. The deeper the recession is, and the longer it lasts, the more it will damage consumer fundamentals and sentiment. This could both prolong the recession, and/or make any recovery weaker and longer. Similarly, the recession could damage business fundamentals, and an extended global recession due to COVID-19 would weaken the U.S. recovery. As a result, the outbreak and its consequences, including responsive measures to manage it, have had and are likely to continue to have an adverse effect, possibly materially, on our business and financial performance by adversely affecting, possibly materially, the demand and profitability of our products and services, the valuation of assets and our ability to meet the needs of our customers. Forward-looking statements are subject to significant risks and uncertainties. Any forward-looking statement made in this release is subject to the safe harbor protections set forth in the Private Securities Litigation Reform Act of 1995. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward-looking statements. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, Part II, “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in other periodic reports that we file with the SEC. 2
Energy Loan Sale Overview Sell $497 million, or 53% of our energy portfolio as of ► ($s in in mil illions) March 31, 31, 2020 2020 June une 3 30, 2020 2020 March 31, 2020; receive $257.5 million of proceeds from the sale; loans included in HFS at 6-30-20 Total E Energy y Loans* s* $940 $352 Special provision for chargeoffs in excess of existing ► Energy y Loans/Total L Loans* 4.4% 1.7% reserves of $160.1 million (pre-tax), or $1.47 per diluted share (21% tax rate) NPLs/ s/Total L Loans* s* 1.34% 0.95% Total l Criticize zed C Commercial l Loans/ Reduces energy exposure to 1.7% of total loans ► Total l Commercial L Loans* 3.24% 2.26% (excluding PPP loans) at June 30, 2020; expect asset quality metrics will improve compared to peers CET1 R Ratio ( (estimate for 6-30 30-20) 20) 10.02% 9.77% Allows the company to accelerate the disposition of ► Tangible le C Common E Equity ( (TCE) Ratio 8.00% 7.33% energy credits that have been negatively impacted by issues in the industry, and have now been further impacted by COVID-19 *Excludes PPP and held for sale loans Remaining energy portfolio comprised mostly of pass ► rated support services credits; only 2 notable problem $1,000 credits remain; energy ACL 5.7% at June 30, 2020 $940 Remaining energy loan portfolio more granular, with 18% ► of loans <$1MM and 55% of the loans between $1-$10 $255 million; only 1 loan >$20 million in outstanding $500 $ in millions $160 $82 Strategy consistent with other de-risking actions ► Loan Sale $65 $26 - 1H20 ACL build $352 charge - Raised $172.5 million of Tier 2 Capital (subdebt) Should position the company for a faster recovery in both ► $0 earnings and improved return to our shareholders Energy Loans - Loans Special Chargeoff of Additional Additional Energy loans - 3/31/20 transferred Provision for existing 2Q20 2Q20 energy 6/30/20 to HFS (net) Chargeoffs energy Payoffs/ net chargeoffs Expect significantly reduced provision for loan losses in ► reserves paydowns the second half of 2020 3
Energy Portfolio Reduced to 1.7% of Total Loans* March 31, 2020 June 30, 2020 Support - Midstream Nondrilling 1% Support - 40% Drilling Upstream 26% 32% Support - Nondrilling Support - 73% Midstream Drilling 15% 13% Total E Energy L Loans $940 $940 m million Total E Energy L Loans $352 $352 m million Energy Loans/Total loans 4.4% Energy Loans/Total Loans* 1.7% Energy ACL Coverage 9.4% Energy ACL Coverage* 5.7% Total ACL Coverage 2.21% Total ACL Coverage* 2.36% NPLs/Total Loans 1.34% NPLs/Total Loans* 0.95% Total Commercial Criticized/Total 3.24% Total Commercial Criticized/Total 2.26% Commercial Loans Commercial Loans* SNCs/Total Loans 10.8% SNCs/Total Loans 8.6% * Excludes $2.3 Billion in PPP loans * Excludes loans held for sale (HFS) 4
NPLs Decrease $94 Million or 33% ▸ Nonperforming energy loans totaled $16 million at June 30, 2020, down $89 $89 m million, o or 85% r 85%, l linked-quar arter ▸ Nonperforming nonenergy loans totaled $178 million at June 30, 2020, down $5 million, or 3%, linked-quarter $400 1.75% $300 $s in millions % of total loans $200 1.25% $100 $0 0.75% 2Q19 3Q19 4Q19 1Q20 2Q20 Total nonperforming loans $311 $284 $307 $288 $194 % of total loans* 1.54% 1.35% 1.45% 1.34% 0.95% Nonperforming loans – $141 $140 $149 $183 $178 nonenergy % of total loans* 0.70% 0.67% 0.70% 0.85% 0.87% Nonperforming loans – $170 $144 $158 $105 $16 energy % of total loans* 0.84% 0.68% 0.74% 0.49% 0.08% 5 *Excludes PPP and HFS loans
Criticized Commercial Loans Down $182 Million or 34% ▸ Criticized commercial loans down $182 million, or 34%, linked-quarter; reflect impact of the energy loan sale ― Criticized energy loans totaled $56 million at June 30, 2020, down $ $17 173 milli lion on, o , or 76%, l %, linked-quarte ter ― Criticized nonenergy loans totaled $292 million at June 30, 2020, down $9 million, or 3%, linked-quarter $700 4.50% Criticized as % of total commercial loans $600 $500 3.50% $s in millions $400 $300 2.50% $200 $100 1.50% $0 2Q19 3Q19 4Q19 1Q20 2Q20 Total criticized commercial $573 $659 $581 $530 $348 loans % of total commercial loans* 3.79% 4.15% 3.62% 3.24% 2.26% Criticized – $315 $378 $321 $301 $292 nonenergy % of total commercial loans* 2.08% 2.38% 2.00% 1.84% 1.89% Criticized – $258 $281 $260 $229 $56 energy % of total commercial loans* 1.71% 1.77% 1.62% 1.40% 0.36% 6 *Excludes PPP and HFS loans
Energy Loan Sale Reference Slides 7/17/2020
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