States Reserve Ratio Ranks Second in Region

In the fourth quarter of 2014, Arkansas banks collectively had a loan loss reserve ratio of 1.77 percent.

Banks maintain a reserve adequate to absorb estimated credit losses associated with their loan and lease portfolio. The ratio is a percentage of a bank’s outstanding loans.

Therefore, on average, banks in Arkansas reserved 1.77 percent of outstanding loan value as a hedge against potential losses.

As of Dec. 31, Fayetteville-chartered Arvest Bank had a loan loss ratio of 1.23 percent; The First National Bank of Fort Smith had a ratio of 1.02 percent; and First Security Bank of Searcy had a ratio of 1.21 percent.

The collective reserve ratio for the U.S. Federal Reserve Bank’s Eighth District, which includes all of Arkansas and parts of six other states, was 1.63 percent.

Arkansas ranked as the second highest in reserve for the district, just behind Missouri with a 1.79 percent ratio and close to the U.S. average of 1.76 percent.

Arkansas is the only state wholly in the Eighth District. The other six states are partially in the eighth and partially in another district.