Thursday, December 24, 1998

Some lenders see opportunity in Oil Patch woes

MIDLAND (AP) — While some lenders are pulling out of the Oil Patch, others say they see the plunge in oil prices as a business opportunity.

In the past six months, Bank One Corp. of Chicago and BankAmerica’s NationsBank, of Charlotte, N.C., have abandoned their energy-lending operations in Midland. Lenders who remain expect demand for energy loans to drop next year.

But Bryan-based First American Bank of Texas is bucking the trend by opening its first energy-lending division.

“You think we’re crazy?” bank president William Atkinson asked the Texas Journal of the Wall Street Journal.

Atkinson’s bank is the largest Texas-based lender in the Midland-Odessa area, with about $400 million in deposits. Atkinson said jumping into the energy-lending businesses is necessary to diversify from the bank’s portfolio of real-estate loans.

“This is something we’d be doing if oil was $20 a barrel or $10 a barrel,” Atkinson said.

The bank’s energy division has yet to make loan, but its long-term goal is to build a $50 million portfolio in five years. The withdrawal of Bank One and NationsBank should down the competition.

In fact, while oil prices have continued to decline, Minneapolis-based Norwest Corp. and Chase Manhattan Corp. of New York reported 20 percent increases this year in energy-related loans. Most of the loans are for acquisition as local independent energy operators buy up the property of retreating major producers, the newspaper reported.

Some established lenders think First American is using the energy-lending business to build goodwill with local residents in hopes of helping its other operations.

“If this isn’t marketing driven, it would be difficult to explain their desire to jump headfirst into a market that’s the worst that it’s been in years,” said Karl Reiter, senior vice president of Midland American Bank, a subsidiary of Houston-based Bank United Corp.