FDIC: Arkansas bank profits up 67%

Arkansas banks saw third quarter profits leap a whopping 67% from a year ago and at the same time added nearly 600 jobs to state payrolls, according to the FDIC’s quarterly banking profile.

For the period ended Sept. 30, the Federal Deposit Insurance Corp.’s quarterly report showed that Arkansas banks earned $347 million during the three-month period compared to $207 million a year ago. When compared to the previous quarter, profits at FDIC-insured Arkansas banks and savings institutions were up 65% from $210 million.

Overall, year-over-year earnings for FDIC-insured banks and savings institutions in the U.S. increased for the fifth consecutive quarter. U.S. banks reported an aggregate profit of $14.5 billion in the third quarter of 2010, a $12.5 billion improvement from the $2 billion the industry earned in the third quarter of 2009.

“The industry continues making progress in recovering from the financial crisis. Credit performance has been improving, and we remain cautiously optimistic about the outlook," FDIC Chairman Sheila C. Bair said in the report. "Lower provisions for loan losses are driving bank earnings by allowing a larger share of revenues to reach the bottom line."

Still, Blair warned it is too early in the credit cycle to reduce federal reserves “without strong evidence of sustainable, improving loan performance and reduced loss rates.”

“When it comes to the adequacy of reserves, institutions should always err on the side of caution,” the FDIC chief said.

According to the quarterly report, almost two-thirds of all institutions (63.3%) reported improvements in their quarterly net income from a year ago, but nearly one in five institutions (18.9%) had a net loss for the quarter. The average return on assets (ROA), a basic yardstick of profitability, rose to 0.44 percent, from 0.06 percent a year ago.

Blair also indicated that the end of a two-year period of contraction in loan portfolios may have run its course.

"Total loans and leases held by FDIC-insured institutions declined by just $6.8 billion, or 0.1 percent, in the third quarter," Blair said. "Many large banks have had sizable reductions in their loan portfolios over the past couple of years, but in the third quarter, such reductions were notably absent. I hope we are close to seeing genuine increases in loan balances again."

The asset and earnings growth by Home Bancshares and other Arkansas financial concerns, such as Arvest, Bank of the Ozarks and Simmons First, is also padding state payrolls.

In Arkansas, total loans and leases rose 1.6 %, while total assets jumped nearly 3 % to $57.6 billion. The average return on assets rose to 0.82%, from 0.51% a year ago — well ahead of the national average.

In the past year, the total number of employees at Arkansas banks jumped 3.5% to 17,899, adding more than 600 full-time jobs to the Arkansas and U.S. economy.

Meanwhile, the number of insured commercial banks and savings institutions reporting quarterly financial results fell from 7,830 in the second quarter to 7,760 in the third quarter. Five new reporting institutions were added during the quarter, while 30 institutions were absorbed into other charters through mergers.

Forty-one institutions failed in the third quarter, bringing the total number of failures for the first nine months of 2010 to 127. The number of insured institutions on the FDIC’s “Problem List” increased from 829 to 860 —  the largest number of “problem” institutions since March 31, 1993, when there were 928.

Arkansas banks continued to benefit from the increasing number of failures during the quarter, particularly in Florida. Arkansas banks have snapped up 11 failing lenders in six states with assets of more than $3.2 billion and customer deposits worth another $2.9 billion.

Most recently, Conway-based Home Bancshares, the parent company of Centennial Bank, acquired the banking operations of Gulf State Community Bank headquartered in Carrabelle, Fla. The Arkansas bank has acquired five other troubled banks this year, all of which have been in Florida.