Arkansas banks see decline in profitability

by Paul Gatling ([email protected]) 379 views 

In the third quarter of 2020, the average return on assets (ROA) for Arkansas banks was 1.07%, ranking the state’s lenders fifth among the seven states that make up the U.S. Federal Reserve Bank’s Eighth District. The state’s collective ROA was down 0.42% from the third quarter of 2019.

A bank’s ROA is a popular metric used to determine profitability. As defined by the Federal Deposit Insurance Corp. (FDIC), it shows the percentage of how profitable a company’s assets are in generating revenue. The higher the ROA, the more money the company is earning on its assets.

The collective ROA ratio among all U.S. banks plummeted in the 12-month period because of the economic downturn during the COVID-19 pandemic and business shutdowns. The U.S. average was 0.56% in the third quarter this year, well off the 1.33% ROA in the third quarter of 2019.

For the same quarter, which ended Sept. 30, the best year-to-date ROA among banks with operations in Northwest Arkansas belonged to Priority Bank of Fayetteville at 2.47%. Citizens Bank & Trust Co. of Van Buren had a 2.06% ROA and Searcy-based First Security Bank had a 2% ROA.

In the category of return on average equity, or ROE, Arkansas banks ranked fourth at 7.8% in the third quarter of 2020. That represents a decrease of 2.42% from the third quarter of 2019.

ROE, as defined by the FDIC, is “annualized net income as a percent of average equity on a consolidated basis.”

Missouri is the top-performing state in the Eighth District in the category, with an ROE in the third quarter of 13.4%. That represents a 0.18% increase from the third quarter of 2019.

Among Arkansas banks, Little Rock-based Bank OZK had a 5.53% ROE, Generations Bank of Rogers had a 11.02% ROE and Legacy National Bank of Springdale had a 11.73% ROE.