Report outlines the good and the bad about Arkansas banks
by August 18, 2009 3:51 pm 67 views
An investment banking company based in Austin, Texas, reported Tuesday (Aug. 18) that Arkansas banks are in good shape, but noted some concern with banks in the Fort Smith and Jonesboro areas.
Sheshunoff & Co. Investment Banking said all Arkansas banks combined have a greater profitability than the national median, with three of the state’s five largest markets reporting a median return on assets — ROA, a key measurement in the banking sector — in excess of 1%.
“The national average is 56 basis points, and including all banks in Arkansas, the median ROA is still an astounding 91 basis points,” noted Gary Kennedy, director of mergers and acquisitions for Sheshunoff and author of the report on Arkansas banks.
The report noted that capital ratios at Arkansas banks “have held their ground compared to prior quarters” and typically exceed the national numbers. Also, the report said Arkansas’ banks have good reserves for loan contingencies (bad loan provisions), with the reserve ratios higher than the national median of 1.56%
“Of concern in this area are two MSAs, Fort Smith and Jonesboro with a median reserve of less than 1.10%,” the report revealed.
While the return on assets and loan contingencies are in good shape, all five of Arkansas’ top bank markets report higher “non-performing loans to assets” at a higher rate than the national median. Kennedy said this reflects that the banks “struggle” with keeping balance between sufficient equity and the rising number of loans that have to be written off.
Kennedy reports: “As the Northwest Arkansas MSA continues to report levels of NPA’s (bad loans) almost three times higher than the national median, also troubling is that Little Rock, Jonesboro, Fort Smith and Pine Bluff all have median NPA’s that have increased by double-digit percentages. … We continue to monitor Northwest Arkansas with a more stringent lens.”
The troubling reports may be near their end, with Kennedy noting that Arkansas banks are beginning to report second quarter numbers that indicate have “dealt with this market” by maintaining adequate capital reserves.
A The City Wire review of the federal reports of 13 locally-based banks in the Fort Smith metro, showed that the combined net income at the banks during the first quarter of 2009 was $7.84 million, down 20.3% compared to the $9.84 million collectively earned by the 12 banks in the first quarter of 2008. First National Bank of Fort Smith, the largest area bank with more than $1 billion in assets, posted first quarter net income of $2.29 million, down 35% from the first quarter of 2008, according to reports with the Federal Deposit Insurance Corp.
