OCTOBER 17, 2008


OSU Study Finds Oklahoma Banks Are Sound

Oklahoma commercial banks have strong capital positions and are not at risk, according to a recent study by Gary Simpson, Oklahoma State University finance professor and Oklahoma Bankers Association chair of commercial bank management.

“The vast majority of commercial banks in Oklahoma are safe and sound,” Simpson said. “Oklahoma’s economy is doing well compared to national economic conditions.”

Simpson analyzed all 249 commercial banks in Oklahoma as of Sept. 19. He found these individual institutions to have strong capital positions, which serve as a buffer against losses and allow banks to handle economic downturns.

“I looked at 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,” Simpson said. “This data was from federal regulatory reports as of June 30.”

Of the data, Simpson concluded past due loans in Oklahoma commercial bank portfolios are minimal. These banks 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.

“The numbers here prove the security of commercial banks in Oklahoma,” he said.

Simpson conducted the study after a visit to Washington, D.C., Sept. 14-17. He traveled with the Oklahoma Bankers Association and met with the American Bankers Association, the FDIC, the office of the Controller of the Currency and Barney Frank, chairman of the House Financial Services Committee.

“After our meeting, I wanted to learn what was happening in Oklahoma,” Simpson said. “I discovered Oklahomans don’t have anything to worry about if their money is held in a commercial bank.”

Compared to the national economy, Oklahoma’s economy is sound. Unemployment is 3.5 percent as of the second quarter of 2008, down from 4.4 percent a year earlier. National unemployment for the second quarter of 2008 is 6.1 percent.

In addition, the Oklahoma housing market is strong compared to many other parts of the United States. The Oklahoma Home Price Index went up 4.9 percent as of the second quarter of 2008.

“Our market simply didn’t get overheated like other markets,” Simpson said.

Simpson points out all commercial banks in Oklahoma are examined and regulated by federal regulatory agencies.

“Commercial banks in Oklahoma are totally different businesses compared to investment banks in New York,” he said. “They bear no resemblance to investment banks which have failed and received so much publicity recently.”

The deposits of all commercial banks in Oklahoma are insured by the FDIC. Up to $100,000 per depositor is insured, and up to $250,000 is insured for a retirement account.

This study considers commercial banks exclusively. Investment banks, credit unions and mortgage companies were not included.