When oil prices collapsed in the 1980s, many Wyoming banks followed suit. Twenty Cowboy State banks closed their doors between 1980 and 1994. Seven failed in 1986 alone, the year crude prices lost half their value.
Oil prices are plunging again, but local executives say Wyoming's banks are better positioned to withstand the current downturn. Few of the state's financial institutions played active roles in financing the most recent boom, leaving most with relatively little exposure to the companies now straining under the weight of their debts.
"I think they’ve worked hard as much as they can to keep concentration risk down, not getting overexposed in one industry," said Fred Rife, deputy commissioner of the Wyoming Division of Banking. "Most of the energy companies are big enough that they’re getting their lending from much larger financial institutions."
The high price of today's wells -- they can cost around $10 million -- the complexity of underwriting energy loans and the memory of the 1980s prompted many Wyoming banks to remain on the sidelines as drilling increased in the Powder River Basin over the last several years, local executives said.
"The amount of aggressiveness that the community banks have had in getting into that business has been pretty remote," said Gregg Jones, executive vice president of Jonah Bank.
Jonah Bank, founded by the late oil and gas developer Mick McMurry, is a notable exception. The bank's business model is based in part on lending to small independent producers, said Cary Brus, chairman of Jonah's board.
The bank has found the need to renegotiate loans with some of its lenders, who now have less cash flow to pay off their debts. But those instances have been on a case-by-case basis and have hardly been widespread, Brus said
Opportunities exist, too, he noted. The bank's experience with the oil and gas industry means it sometimes spots an asset where others see a liability.
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He pointed to one oil company that recently called Jonah to refinance a $9.9 million loan after the producer's previous lender became uncomfortable with crude prices. The company has solid production in the Powder River Basin and has a strong credit history, Brus said.
"It is perhaps grim-looking to many people," he said. "This is nothing like what we saw in the '80s. To those people who came through the '80s and got kicked in the teeth, you don’t forget those lessons."
Still, Jonah remains something of an outlier among its peers. Many Wyoming banks instead loan to smaller oilfield service companies that serve the rigs. And they have indirect exposure to the industry through its employees, on whom they rely to finance home and car loans.
"Every bank in Casper has some indirect exposure to the energy industry," said Greg Dixson, president of Hilltop National Bank.
The 20 banks that failed between 1980 and 1994 held roughly $375 million, or about 10 percent of all bank assets in Wyoming. No bank has failed in the state since Thermopolis-based Bank of Wyoming closed its doors in 2010.
First Interstate Bank embodies the new approach to energy lending. The Billings-based chain, which operates branches throughout Wyoming, reported $75 million in oil and gas loans during the third quarter. That represented about 1.5 percent of First Interstate's lending portfolio.
In a conference call with analysts, the bank's executives touted their real estate loans and pointed to strong visitation to national parks throughout the northern Rockies. The regional economy is performing well, they said, noting that job losses in oil and gas appear to have been absorbed by the construction sector.
"There is recognition and understanding that you can’t loan to just one industry," said Rife, the banking commissioner. "I think bankers learned that in the 1980s and have applied that today."