State?s Reserve Ratio Still Second in Region
by April 25, 2005 12:00 am 64 views
In the fourth quarter of 2004, Arkansas banks collectively had a loan-loss-reserve ratio of 1.55 percent, down from 1.64 percent for the same period in 2003.
The state’s ratio was 1.59 percent for the third quarter.
Banks maintain a reserve adequate to absorb estimated credit losses associated with their loan and lease portfolio. The ratio is a percentage of a bank’s outstanding loans.
Therefore, on average, banks in Arkansas reserved 1.55 percent of outstanding loan value as a hedge against potential losses.
As of December 31, Bank of Rogers had a loan loss ratio of 1.13 percent; First National Bank in Green Forest had a ratio of 1.25 percent; and United Bank of Springdale had a ratio of 1.37 percent.
The collective reserve ratio for the U.S. Federal Reserve Bank’s Eighth District, which includes all of Arkansas and parts of six other states, was 1.34 percent.
Arkansas ranked as the second highest in reserve for the district, behind Indiana with a 1.56 percent ratio and close to the U.S. average of 1.51 percent.