Arkansas, U.S. banks post improved first quarter results

FDIC-insured banks in Arkansas during the first quarter of 2011 made more money, employed fewer people and were fewer in number than the first quarter of 2010.

The 127 banks active in Arkansas insured by the Federal Deposit Insurance Corp. collectively posted $139 million in net income during the first quarter of 2011, a healthy 16.8% increase compared to the 2010 period. There were 134 active banks during the first quarter of 2010, and 141 in the 2009 period.

Nationwide, FDIC-insured commercial banks and savings institutions posted a combined $29 billion in the first quarter of 2011, up 66.5% over the 2010 period. The quarter marks the seventh consecutive for earnings gains and the sixth consecutive quarter for improvements in loan loss provisions — money required to be set aside for potential bad loans.

“The industry shows continuing signs of improvement,” FDIC Chairman Sheila Bair said in a statement. She added, "though there is a limit to how far reductions in loan-loss provisions can boost industry earnings."

The FDIC report shows that banks on the "Problem List" stood at 888, the lowest level in the past 42 months. Total assets of "problem" institutions increased from $390 billion to $397 billion. Also, 26 insured banks failed during the first quarter, the smallest number in the last seven quarters.

"The process of repairing bank balance sheets is well along, but is not yet complete," Bair said. "In addition, housing markets remain weak, in part because of continued questions about mortgage servicing problems. The economic recovery, along with borrower demand, remain sluggish. Longer term, banks may be exposed to interest rate risk when we emerge from this prolonged stretch of unusually low rates."

Deposits at banks in Arkansas totaled $45.993 billion in the first quarter, up over the $45.499 billion in the first quarter of 2010 and the $42.788 billion in the 2009 period.

However, real estate owned by banks in Arkansas — typically, the property a bank assumes as a result of a failed loan — jumped to $820 million in the first quarter compared to $578 million in the 2010 period and $356 million in the 2009 period. Five years ago (March 31, 2006), banks in Arkansas reported just $57 million in real estate owned.

Of the 127 banks operating in Arkansas, 58.27% reported income gains in the quarter, and improvement over 50% of 134 banks in the 2010 period and 44.68% of the 141 banks in the 2009 period. Five years ago, 57.86% of the 159 reporting banks in Arkansas posted quarterly income gains.

Nationwide, 56% reported better quarterly net income from a year ago, and only 15% had a net loss for the quarter. The average return on assets (ROA), a basic yardstick of profitability, rose to 0.87% from 0.53% a year ago.

In Arkansas, the ROA was 0.99%, up from 0.85% in 2010, but below the 1.14% in the 2009 period.

Arkansas banks employed 17,951 as of March 31, down slightly from 17,718 in the same period of 2010, but up from the 17,263 in the 2009 period.