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Oklahoma banks remain profitable despite national trend

U.S. banks and thrifts lose $26.2 billion in Fourth Quarter while Oklahoma banks remain profitable once again

On Feb. 26, the FDIC announced that all insured banks and thrifts lost $26.2 Billion in the Fourth Quarter of 2008, the first Quarterly loss since 1990.  For the commercial banking industry, the Fourth Quarter loss was $20.4 Billion.

Importantly, however, more than two-thirds of all insured institutions made money during the Quarter, even though those earnings were overwhelmed by losses at a number of larger institutions.

By contrast in Oklahoma, net operating income for all insured institutions for the Fourth Quarter was $195.2 Million and $944.1 Million for the entire year of 2008.  For Oklahoma's commercial banking industry, net income for the Fourth Quarter was $130.6 Million, and $664.7 Million for the entire year.  The earnings of the commercial banking industry in 2008 of $664.7 Million compares favorably to earnings for 2007 ($731.3 Million), 2006 ($727.5 Million), and 2005 ($666.6).

The industry as a whole charged off $37.9 Billion in bad loans which is more than twice the amount that was charged off a year ago ($16.3 Billion) in the fourth quarter. The annualized net charge-off rate of 1.91 percent equaled the previous quarterly high set in the fourth quarter of 1989.

Banks' provision for loan losses increased by 115.7 percent ($69.3 Billion) over 2007. That amount represented over half of the industry's net operating revenue – the highest percentage in 21 years. In addition, losses from trading activities ($9.2 Billion), realized losses on securities and other assets ($8.1 Billion) and goodwill write-downs ($15.8 Billion) contributed to the industry's losses for the Quarter.

In spite of the Quarterly loss, the commercial banking industry's net income for the year stood at $24.3 Billion, compared to $97.6 Billion in 2007, $128.2 Billion in 2006 and $113.97 Billion in 2005. Taken together, all FDIC-insured institutions earned $16.1 Billion for the year, a decline of 83.9 percent from 2007 and the lowest annual total since 1990.

At year-end, nearly 98 percent of all insured institutions, representing almost 99 percent of industry assets, met or exceeded the highest regulatory capital standards.

"Public confidence in the banking system and deposit insurance is demonstrated by the increase in domestic deposits during the fourth quarter," FDIC Chairman Sheila Bair said. "Clearly, people see an FDIC-insured account as a safe haven for their money in difficult times."

Twelve FDIC-insured institutions failed during the Fourth Quarter and one received assistance. During 2008, 25 FDIC-insured institutions failed.    

The FDIC's "Problem List" grew during the Fourth Quarter from 171 to 252 institutions with total assets of $159 Billion. It's the largest number of institutions on the problem list since the middle of 1995.   

Noncurrent loans and leases (90 days or more past due or in nonaccrual status) increased in the Fourth Quarter by $44.1 Billion (23.7 percent).   At year-end 2008, a total of 2.93 percent of all loans and leases were noncurrent, the highest level for the industry since the end of 1992.

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