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Published: September 27, 2008 02:30 am    print this story   email this story   comment on this story  

Report says state banks remain strong amid national crisis

Associated Press

OKLAHOMA CITY - While the nation grapples with the collapse and bailout of some of its largest financial institutions, Oklahoma's commercial banks have strong capital positions and are not at risk, according to a new study by an Oklahoma State University researcher.

Gary Simpson, a professor of finance and the Oklahoma Bankers Association chair of commercial bank management at OSU, analyzed all 249 of the state's commercial banks as of Sept. 19. Simpson said he found the individual institutions to have strong capital positions, which serve as a buffer against losses and allows banks to handle economic downturns.

Simpson analyzed capital, past-due loans, brokered deposits, high-risk mortgage securities, mortgage foreclosures, profitability, non-accrual loans and restructured debt for the last five years at each bank.

The study considered commercial banks exclusively. Investment banks, credit unions and mortgage companies were not included.

Reviewing data that came from federal regulatory reports as of June 30, Simpson concluded that past-due loans in Oklahoma commercial bank portfolios are minimal.

The state's banks, he said, have almost no exposure to losses from high-risk mortgage backed securities. Foreclosures on family real estate loans are low for a large majority of Oklahoma commercial banks. Most of the deposits for the commercial banks are from local communities.

"From what I saw, a high percentage of state banks are solid," Simpson said.

State Banking Commissioner Mick Thompson agreed, saying for the most part, Oklahoma's community banks avoided the types of investments and lending practices that have caused problems on Wall Street.

"There might have been somebody out there that made some loans in the subprime category, but they weren't making tons of them," Thompson said. "If they were, they got the heck kicked out of them by federal regulators."

While Oklahoma banks appear to be more stable than the national average, there are signs the current financial situation is having an adverse effect on Oklahoma institutions.

The percentage of unprofitable institutions among all Oklahoma banks has doubled over the last year, rising from 2.35 percent in the second quarter of 2007 to 4.76 percent in this year's second quarter, according to statistics from the Federal Deposit Insurance Corporation.

That increase is even steeper for large banks, the 119 in Oklahoma with assets of greater than $100 million. Less than 1 percent of those banks were identified as unprofitable last year, compared with 4.2 percent this year, FDIC statistics show.

But those numbers pale in context with the nearly 16 percent of banks nationwide that were unprofitable in the second quarter of this year, said Roger Beverage, president of the Oklahoma Bankers Association.

"I'm not telling you there aren't problems out there, because there are," Beverage said. "But by comparison, Oklahoma's banking industry is doing very well."

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