State’s Reserve Highest in Region

In the first quarter of 2007, Arkansas banks collectively had a loan-loss-reserve ratio of 1.38 percent, down from 1.45 percent for the same period in 2006.
Banks maintain a reserve adequate to absorb estimated credit losses associated with their loan and lease portfolios. The ratio is a percentage of a bank’s outstanding loans.
Therefore, on average, banks in Arkansas reserved 1.38 percent of outstanding loan value as a hedge against potential losses, higher than any other state in the U.S. Federal Reserve Bank’s Eighth District.
As of March 31, loan-loss ratios were 1.01 percent for Little Rock-chartered Metropolitan National Bank; 1.38 percent at Fayetteville-based Signature Bank of Arkansas; 1.36 percent at Springdale-chartered Legacy National Bank; and 1.11 percent at Rogers-based Parkway Bank.
The collective reserve ratio for the Eighth District, which includes all of Arkansas and parts of six other states, was 1.24 percent.