Banking by the Letter

About 10 percent of the 142 state-chartered banks in Arkansas have problems sufficient to warrant special regulatory attention, according to the State Bank Department’s chief bank examiner, Julian Rainey.

As of March 31, 14 banks were “under letter,” a catch-all term used to refer to any of three levels of special regulatory involvement, Rainey said, up from 11 in February and 12 last September. He said only one of those 14 is located in Northwest Arkansas and one of the 14 is about to be released from special supervision. However, two more regulatory letters are pending, so the count will shortly reach 15, he said.

State law dating back to the Great Depression protects the identity of the problem banks.

The problems that lead to a regulatory letter may range from a single large loan loss to a portfolio of questionable loans to undercapitalization, Rainey said. He also pointed out that more than 30 banks had been under letter at the same time in the late 1980s, an even higher percentage at a time when there were about 200 state-chartered banks.