Banks’ 3Q Past Dues Soar

(A complete look at northwest Arkansas banks’ past dues is available here and a chart of thrifts is available here.) 

Twenty-one banks doing business in Benton and Washington counties had a combined $556.4 million worth of loans on their books that were not accruing interest as of Sept. 30.

That value is up 62 percent from the end of 2008 and up a whopping 67 percent from the same period a year ago.

More than 25 percent of the total value – $141.3 million – is on the books of Metropolitan National Bank of Little Rock.

The numbers come from Uniform Bank Performance Reports filed with the Federal Financial Institutions Examination Council. The collective value of loans in those 21 banks’ nonperforming columns are up about 7 percent from $519.7 million that 22 banks had at the end of the third quarter in 2007. That includes ANB Financial’s portfolio at the time, which accounted for $145.3 million of that value, or about 28 percent of the total.

The Business Journal deliberately excludes large public banks, such as BancorpSouth Bank and Regions Bank, doing business in the two-county area because the majority of their business is done outside the market. 

Large statewide banks such as Bank of the Ozarks, Metropolitan National Bank and Iberiabank fsb, all of Little Rock, First Security Bank of Searcy and Liberty Bank of Arkansas based in Jonesboro, are included because they maintain a significant presence in Northwest Arkansas. In many cases, those banks have indicated many of their problems stem from loans made in Northwest Arkansas.

Since mid-2008, Rogers Bancshares Inc., the holding company for MNB, has entered formal agreements with both of its regulators, the Office of the Comptroller of the Currency and the Federal Reserve Bank of St. Louis.

MNB posted a loss of $32.5 million for the second quarter and a loss of $13.7 million for the third quarter.

The bank’s portfolio of noncurrent loans is down slightly from $144.1 million on June 30, but the value in the column has increased 258 percent from $39.5 million for the year-ago period.

“I think it’s reflective of what’s happened in the economy and the identification process of the problem loans,” said President and CEO Lunsford Bridges of the dramatic increase.

Most of the bank’s problem loans are real estate-related, he said.

About 60 percent of the bank’s total value of problem loans are in Northwest Arkansas and of those, about two-thirds are tied to commercial real estate, Bridges said.

The bank’s plan of action is simply to buck up and work through the process, he said.

“Hopefully, as we continue to work with customers … it works out when they are successful,” Bridges said.

The bank’s other real estate owned is up significantly, too. On Sept. 30, MNB had $35.7 million in that column, up from $6.4 million a year prior.

“It’s part of the process when nonperforming loans become uncollectible … they go through the OREO,” Bridges said. “Our primary objective is to work with the customer and make them successful.

“I think the glimmer of hope is that we’re seeing the formation of a bottom in this [real estate market]. I think that’s true for Northwest and central Arkansas.

“While the problems have persisted for sometime, I am optimistic – cautiously optimistic – about the near term, but very optimistic about the mid term on out,” he said. 

The value of other real estate owned collectively by the subset of 21 banks in Northwest Arkansas as of Sept. 30 was $325.8 million, up from $113.8 million a year prior.

Luther Guinn, deputy bank commissioner with the Arkansas State Bank Department, said anything above 1 percent in the nonaccural column is a red flag. All of the 21 banks on the list fall into that category.

A 1 percent ratio in the 90-days past due column is also a red flag, Guinn said. Only three of the banks on the list fall into that category.

Guinn said 15 banks in the state are on the ASBD’s watch list, meaning they are under either formal or informal actions by the ASBD.

The FDIC reported on Nov. 24 that noncurrent loans and leases were at a total of $366.6 billion nationally, about 4.94 percent of the industry’s total loans and leases.

Guinn said Arkansas banks are faring better than those in states like Georgia, Florida and California largely due to the “conservative nature of our bankers.”

The executive management of most banks are doing a fine job, he said.