Osborn: Oklahoma Will Have More Bank Failures

Article excerpt

The man who helped guide Oklahoma's banking industry through some of its darkest days says the light of improvement is flickering a bit brighter now, but is far from being turned to full intensity.

``There will still be more bank failures in the state, but I believe we have bottomed out,'' Wayne Osborn, Oklahoma banking commissioner, said in an interview. ``There is some improvement, although not a whole lot.''

Osborn expressed particular concern for the future of the savings and loan industry, saying he believes it can be saved only by massive congressional action. He said he is skeptical of a plan endorsed by federal regulators to consolidate ailing savings and loans with a healthy institution.

Osborn, who has been connected with banking for more than 35 years, supervises all the state-chartered banks, savings and loans, credit unions and trust funds in Oklahoma. Since he moved into the top job July 1, 1987, he has seen banks in every section of the state collapse, many of them through the weight of bad energy and agriculture loans.

``We had 31 bank failures in Oklahoma last year, 17 of them state banks and 14 national banks,'' Osborn said. ``To date this year, we have had 10 failures, seven of those state and three national.

``I would anticipate we will have approximately the same number of failures the second half of the year as we had the first.''

At present, he said, ``35 to 40 percent of the banks'' in Oklahoma have problems to one degree or another. Many of these banks ``are hanging on and the severity is not as great as it was a year or so ago,'' he said.

Osborn says conditions are getting a little better in western Oklahoma, where the collapse in oil and agriculture prices made thousands of bank loans worth little more than the few cents a pound they could bring as scrap paper.

``That is changing,'' Osborn said. ``Western Oklahoma was not hit as hard by the drought this year as other states. Beef prices in particular are up, and the drought has helped the agriculture economy in that area tremendously.''

And, says Osborn, who began his banking career while still in college in Fayetteville, Ark., ``there is even a small upsurge in drilling activity.''

By contrast, he said, segments of the banking industry in eastern Oklahoma are suffering, ``largely because of real estate loans. I think we all got lulled into a false sense of security through the old saying that they aren't making any more real estate, so it's always a good investment.''

That saying was true during the oil boom of the early 1980s when ``we saw an annual 5 to 15 percent increase in the price of real estate,'' he said. After the boom collapsed, so did real estate prices ``at just about the same rate over the past two to three years.''

The result: lending institutions are stuck with buildings no longer worth the cost of the original loan. …