State banks report 19% profit decrease in 1Q

Arkansas’ 84 FDIC-insured banks and financial institutions together posted net income of $458 million for the three-month period ending March 31, down 19.2% from $567 million in the same quarter a year ago.

The national decrease was even greater. The FDIC reported net income of $59.7 billion in the first quarter of 2022, down 22.2% from $42.7 billion in first-quarter profits last year.

The decline is primarily due to an increase in provision expense, driven by the largest institutions.

Provisions are set aside by institutions to protect against future loan losses. The increase in provision expense reflects, in part, a slow return to pre-pandemic levels, reflecting an increase in loan balances and evolving economic uncertainties. Though the increase in provision expense has reduced income, it has also increased protection against future losses.

“The banking industry reported a decline in net income driven by an increase in provision expense,” Martin Gruenberg, the FDIC’s acting chairman, said in a May 24 statement. “Capital and liquidity levels remain strong. In addition, loan growth and credit quality metrics remain generally favorable. Looking forward, inflationary pressures, rising interest rates and continued pandemic and geopolitical uncertainty will likely be headwinds for bank profitability, credit quality, and loan growth.”

Collectively, Arkansas banks’ total assets as of March 31 ($146.6 billion) grew 0.8% from the previous quarter ($145.4 billion) and 5.2% from the previous year ($139.3 billion).

The new data also showed deposits grew by $7.9 billion, or 6.9%, year-over-year to $121.5 billion.

Little Rock-based Bank OZK was the Arkansas bank with the most profit in the first quarter at $132.5 million (down from $148.4 million in 1Q 2021) followed by Simmons Bank of Pine Bluff at $72.52 million (down from $74.65 million). Conway-based Centennial Bank was No. 3 among state banks with a first-quarter profit of $79.02 million, down from $92.56 million year-over-year.

Fayetteville-based Arvest Bank at No. 4 had an even sharper decline. The company’s profit in the first quarter of 2021 was $87.73 million. It shrank to $38.69 million in the first quarter this year.

First Security Bank of Searcy ($32.23 million) rounds out the top five.