Oregon Banks Feeling Squeezed, but May Fare Better Than Others
Byline: Joe Mosley The Register-Guard
Across the country and around Oregon, the banking industry struggled through a brutal 2008 - underscored by crises in the housing and mortgage markets, and by the spate of high-profile failures and mergers that led to a federal bailout.
And 2009 is not expected to be much better.
One banking industry analyst - Gerard Cassidy of RBC Capital Markets in Portland, Maine - revised his earlier prediction of 200 to 300 bank failures over the next few years, by saying last month that as many as 1,000 banks may fail in the United States through 2013.
Standard & Poors Ratings has a negative outlook for the banking industry through 2009, pointing out that banks remain vulnerable to "systemic shocks" such as liquidity issues and low consumer confidence.
Oregon has not been hit as hard as many parts of the country by an ongoing epidemic of mortgage defaults, or the related decline in home values. Lenders in the state didn't issue as many high-risk mortgages at the height of the real estate bubble, and home prices in Oregon didn't inflate as dramatically as those in many other regions.
But Oregon's banks were not immune to the industry's 2008 troubles. Last fall, 10 of the 22 banks that had been examined by state and federal regulators in the preceding 12 months received "less than satisfactory" composite scores in the confidential rating system used by bank examiners.
Lisa Morawski, spokeswoman for the Oregon Division of Finance and Corporate Security, says more recent bank examinations have shown a similar trend - a mix of institutions that are surviving the economic downturn and some that are struggling.
"It's going to take some time (for Oregon banks to regain their footing)," she says. "But a lot of the banks are being very proactive in trying to address their troubles."
From the perspective of consumers, Oregon banks should continue to be considered a safe bet, according to the agency. Overall deposits at the 35 banks based in Oregon were still increasing and the FDIC has increased insurance coverage for bank deposits to $250,000 through the end of 2009.
But profits are expected to remain stifled as banks pump money into loan-loss reserve funds, hedging against the possibility that additional home mortgages or development and construction loans will be pushed into their uncollectable files.
Brian Carlin, chief financial officer at Eugene's LibertyBank, says banks that aggressively addressed their problem loans by adequately funding their loan-loss reserves are being responsible. Accepting marginal profits or even losses in the short term is a trade-off for longer-term stability, he says.
LibertyBank, for example, reported losses during each quarterly reporting period of 2008 - a total of $6. …