State?s Reserve Highest in Region

In the third quarter of 2007, Arkansas banks collectively had a loan-loss-reserve ratio of 1.40 percent, up from 1.38 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 1.40 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 June 30, the most recent data available from the Federal Deposit Insurance Corp., loan-loss ratios were 1.27 percent for Harrison-based Community First Bank; 1.19 percent at Lonoke-based First State Bank; 1.37 percent at Searcy-chartered First Security Bank and 1.28 percent at Van Buren-based Citizens’ Bank & Trust Co.

The collective reserve ratio for the Eighth District, which includes all of Arkansas and parts of six other states, was 1.25 percent. The U.S. average was 1.21 percent.