Increased gambling, payday lenders top list of adverse economic factors

OKLAHOMA CITY – Optimistic describes what most Oklahoma bankers feel about the state’s economic condition and many rate their local economies stronger than that of the state, according to a recent survey. Gambling and pay-day lenders had a direct impact on negative indicators such as NSF charges and past-due loans, bankers reported, with rural communities feeling the greatest consequences from those factors.

The scientific survey of 500 Oklahoma bank managers was conducted by SoonerPoll.com, an Oklahoma public opinion research firm and commissioned by the Oklahoma Bankers Association (OBA). The survey had a margin of error of 3.35 percent.

Roger Beverage, OBA President & CEO, SoonerPoll CEO Bill Shapard, Gary Simpson, OSU Professor and OBA Chair of Commercial Bank Management and Chad Wilkerson, Vice President, Branch Executive, & Economist of the Oklahoma City Branch of the Federal Reserve Bank of Kansas City and State Banking Commissioner, Mick Thompson presented the results of the survey at a press conference at the OBA headquarters on Thursday.

According to results, bankers slightly believe commercial loan demand will exceed residential loan demand. “This surprised me a bit since nationally residential loan demand remains much weaker than commercial loan demand,” said Wilkerson. “Regardless, the findings overall are quite positive and suggestive of a still solid economy.”

With regard to short term interest rates, bankers 2 to 1 believe short term interest rates will go down then go up, still less than half believe short term interest rates will stay the same in the next six months. “The Oklahoma Econometric Model assumes that the Fed will lower rates in the second half of 2007 as inflationary pressures ease some,” said Simpson, adding “so we should see a small decrease in short term rates.”

“For banks, it means they’re going to have to work harder for customer’s business,” said Beverage, “and that’s good for Oklahomans.”

Adverse impact from increased gambling activity has caused a 1-10 percent increase in NSF and past-due loans for a majority of Oklahoma bankers, the survey indicates, and rural communities appear to be much more vulnerable.

Almost 80 percent of rural bankers reported an increase in NSF charges as a direct result of gambling. Just over half of urban bankers said gambling had caused NSF charges to increase. A similar trend was reported regarding late payments and past due loans, with 67.5 percent of rural and 45.6 percent of urban bankers reporting increases caused by gambling.

Problems with predatory lenders such as payday operators are significant in most Oklahoma communities as well, bankers said.  A majority of bankers reported payday lender problems with as much as 2.5 percent of their customers. Again, a heavier impact was reported by rural bankers, with 63.7 percent reporting payday lender problems, compared to 48.3 percent of urban bankers.

Other negative economic factors about which bankers were asked include past due loans and overvalued real estate. According to survey results, most believe the former will stay the same. Just over 40 percent of bankers said they were “somewhat concerned” about the latter, with another 34 percent only “slightly concerned.”

Some of the poll’s other findings include:

  • A majority of bankers foresee little change in long-term interest rates over the next six months. Almost half said the same about short-term interest rates.
  • More bankers are seeing more demand in DDA accounts than CDs or other savings products.
  • Just over half of bankers believe real estate prices will remain constant in 2007.
  • Most of the state’s bankers believe commercial loan demand will slightly exceed residential loan demand over the next six months, with a stronger increase in the former predicted by urban bankers.

The survey also asked bankers to identify the entities from which they felt the most competition for customers. Other banks in the community led credit unions and other financial institutions as the strongest competitors to Oklahoma banks. Credit unions were listed as the top or second most significant competition by just under half of all bankers surveyed. Unlike banks, credit unions have a competitive advantage as they do not pay federal income taxes and are not subject to community reinvestment consequences.

While the majority of bankers believe both their local economy and that of the state will stay about the same, those who predicted growth believe more will take place close to home. Both the state and local economies were rated ‘good’ by most bankers, and bankers were more than twice as likely to rate their local economy as ‘excellent’ compared to the state’s.

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