State?s Reserve Ratio Ties for Second in Region

In the fourth quarter of 2005, Arkansas banks collectively had a loan-loss-reserve ratio of 1.44 percent, down from 1.55 percent for the same period in 2004.

Banks maintain a reserve adequate to absorb estimated credit losses associated with their loan and lease portfolios. The ratio is a percentage of a bank’s outstanding loans.

Therefore, on average, banks in Arkansas reserved 1.44 percent of outstanding loan value as a hedge against potential losses.

As of Dec. 31, loan-loss ratios were 1.39 percent for Bentonville-based Arvest Bank; 1.28 percent at Huntsville’s First State Bank of Northwest Arkansas; 1.13 percent at First National Bank of Fort Smith, and 1.53 percent at The Bank of Fayetteville.

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 1.28 percent.

Arkansas ranked as the second highest in reserve for the district in a tie with Kentucky. The two were just below Indiana’s 1.46 percent ratio and above the U.S. average of 1.28 percent.