Oklahoma banks remain predominantly profitable, although tighter interest margins are squeezing some smaller banks, the head of the Oklahoma Bankers Association said Wednesday.
Roger Beverage said quarterly figures issued this week by the Federal Deposit Insurance Corp. reveal several encouraging trends among Oklahoma banks.
“Net income is going up, capital is trending up, loans are trending up, albeit slightly,” Beverage said. “That's good news for Oklahoma, generally, in terms of the strength of banks.”
Profits at Oklahoma's 238 FDIC-insured institutions totaled $340 million in the quarter, more than 20 percent higher than those of the same period last year.
About seven of 10 Oklahoma banks registered earnings gains in the quarter that ended June 30, the FDIC reported. More than 96 percent of Oklahoma banks were profitable in the quarter. State banks also boosted their return on assets.
Oklahoma banks have been able to reduce the amount of capital set aside to deal with troubled assets and potentially bad loans.
However, net interest margin — the difference between the rates banks pay on deposits and earn on loans — slipped to 3.7 percent, down slightly from the same period last year and two years ago.
“About 80 percent of small banks' profit roughly comes from that net interest margin, and that trend is going the wrong way for banks,” Beverage said. “What that means is that it will be continually more difficult for banks to generate revenues like they have in the past.”
The state's overall banking industry has been much stronger than that of the nation as a whole because Oklahoma avoided much of the housing bubble that caused financial havoc elsewhere.
However, the latest figures offer evidence that the national industry is strengthening four years after the financial crisis.
21 percent increase
Nationally, bank earnings rose 21 percent in the April-June quarter and lending to consumers increased.
The U.S. banking industry earned $34.5 billion in the second quarter, up from $28.5 billion in the second quarter of 2011. About 63 percent of U.S. banks reported improved earnings as they were able to set aside less for losses on loans. And the number of troubled banks fell for the fifth straight quarter.
“The industry continues to recover at a gradual but steady pace,” FDIC Chairman Martin Gruenberg said at a news conference.