Arkansas banks reserve ratio ranks fourth in Eighth District

In the third quarter of 2016, Arkansas banks collectively had a loan loss reserve ratio of 1.11%. That’s down from a ratio of 1.30% in the third quarter of 2015.

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 1.11% of outstanding loan value as a hedge against potential losses.

As of Sept. 30, according to the Federal Deposit Insurance Corp., Chambers Bank of Danville had a loan loss ratio of 1.56%, Bear State Bank N.A. of Little Rock had a ratio of 0.99% and First National Bank of Paragould had a ratio of 1.46%.

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 1.14%.

Arkansas banks ranked as the fourth highest in reserve for the Eighth District, behind Missouri (1.31%), Kentucky (1.17%) and Illinois (1.17%). Arkansas is the only state wholly in the Eighth District. The other six states are partially in the eighth and partially in another.