Ratio of Nonperforming Loans Still Moving in Right Direction

In the third quarter of 2012, Arkansas banks collectively had a nonperforming loan ratio of 3.07 percent, down from 3.78 percent for the same period in 2011.

The ratio represents a percentage of a bank’s assets that are noncurrent, which means they are past due more than 90 days or no longer accruing interest.

Therefore, on average, banks in Arkansas had 3.07 percent of loans in problem categories, which ranks sixth among the seven states in the U.S. Federal Reserve Bank’s Eighth District.

Paul Wilson, the Northwest Arkansas market president for Kansas-based INTRUST Bank NA, said the conversation about nonperforming loans is one he encourages regularly with his customers.

Nonperforming loans, he noted, are one of several ways to measure a bank’s health, and determine a bank’s ability to maneuver in the marketplace due to the potential for greater regulatory oversight, constrained capital and more energy and reserves dedicated to resolving those issues.

“Banks spend a lot of time analyzing and getting to know their customers, but it’s important that customers know who they are doing business with, too,” he said. “My advice to the client is to incorporate a conversation around strength and stability, and be sure you know and are comfortable with the institution you are banking with.”

Arkansas is the only state that is wholly in the Eighth District. The remaining six states are partially in the Eighth and partially in another.

The collective nonperforming loan ratio for the Eighth District was 2.55 percent in the third quarter of 2012. That’s down from 3.21 percent in the third quarter of 2011.

The U.S. average in the third quarter of 2012 was 3.97 percent.