Green Bancorp in Houston has resolved $37 million in energy loans since deciding to get out of that business.
The $3.8 billion-asset company announced in April that it had created a group charged with purging $277 million of energy loans and other classified assets. Recent issues with oil prices had been a drag on Green's performance and a distraction for management's dealings with investors.
Green held its first portfolio sale the week of July 18, with net chargeoffs totaling $2.8 million. Energy loans, as of June 30, made up 7.5% of total loans, representing an improvement from 8.8% at March 31.
"We remain confident that we will have substantially eliminated our energy exposure by the end of the first quarter of 2017 with the majority of the resolutions occurring this year," Manny Mehos, Green's chairman and chief executive, said in a press release Thursday. "We continue to expect that our existing reserves, purchase discount on acquired loans, and 2016 earnings are more than sufficient to fund the … initiative through its conclusion."
Green is on pace to "modestly build capital through this year," Mehos added.
Still, the effort took a toll on Green's second-quarter results.
Net income fell 12% from a year earlier, to $3.6 million, or 10 cents a share. The decline was largely tied to an $11 million loan-loss provision taken in the most recent quarter.
Green's net interest income increased by 60% to $33.5 million, partially reflecting the company's 2015 purchase of Patriot Bancshares in Houston. Total loans rose 68% to $3.2 billion, while the net interest margin compressed by 10 basis points to 3.74%.
Noninterest income rose by 28% to $3.8 million, mostly because of higher customer service fees and swap income.
Noninterest expense increased 25% to $20.7 million, largely due to increases tied to operations Green gained from the Patriot acquisition. Results also included $558,000 in loan-related expensed tied to the company's exit from energy lending.