Dallas-based Texas Capital Bank cut its workforce Tuesday, just three weeks after its $5.5 billion merger with another Texas bank fell apart.
The company declined to disclose the extent of the job cuts. Last month, Texas Capital Bancshares and McKinney-based Independent Bank mutually agreed to call off their all-stock merger.
“Like many companies facing today’s unique economic environment, we made the difficult and necessary decision to reduce our workforce to ensure we are well-positioned to meet the challenges and opportunities ahead,” spokeswoman Shannon Wherry said in a statement.
The bank’s energy loans make up about 5% of its gross loans. The sector has been hit particularly hard by COVID-19 as it struggles to recover from record low oil prices.
The International Energy Agency said the coronavirus has triggered the largest drop in global energy investment in history, according to the IEA’s World Energy Investment’s annual report published in late May. Prior to the pandemic, the IEA expected energy investment to grow by 2% this year, but now, it expects a 20% decline from last year.
“The energy industry that emerges from the crisis will be significantly different from the one before,” the report states.
As the largest domestic producer of oil, Texas and its banks have struggled to keep jobs.
The oil and gas industry in Texas cut 26,300 jobs in April, the largest drop in a single month since the Texas Workforce Commission began keeping records in 1990.
Other higher risk portfolios for the bank besides energy include senior housing, hospitality, retail and leveraged lending, according to a J.P. Morgan report. The firm estimates that the total amount of higher risk loans for the bank adds up to about $3.5 billion, or about 14% of gross loans.
Along with the dissolution of the merger, Texas Capital’s longtime president and CEO Keith Cargill, 66, stepped aside. He’ll remain as vice chairman until the end of 2020 and receive $4.9 million in salary, bonuses and stock grants as part of the transition agreement.
Larry Helm, the bank’s chairman since 2012, replaced Cargill until a permanent successor is appointed.
The company reported a loss of $16.7 million for the first three months of the year, which it attributed mostly to a $76 million increase in its set-aside for credit losses. It said two large energy loans totaling $55 million deteriorated with the drop in oil prices. It also put $30 million toward a COVID-19 reserve.