LITTLE ROCK — Assets at Arkansas banks have jumped more than 17 percent in the past four years, outpacing the 6.5 percent growth of banks in the United States, according to statistics from the Federal Reserve Bank of St. Louis.
The state’s banks had almost $59 billion in assets in the first quarter of this year, up from about $50.3 billion in the first quarter of 2008.
The primary reason for the climb is the aggressive acquisitions made by four Arkansas banks over the four-year period, said Julie Stackhouse, a senior vice president with the Federal Reserve Bank of St. Louis.
In the past four years, Centennial Bank of Conway bought seven banks, Little Rock-based Bank of the Ozarks purchased seven banks, Simmons First National Bank of Pine Bluff acquired two banks, and Arvest Bank of Fayetteville bought one bank. All of the acquired banks were out of state.
Combined, assets at the four banks grew almost $6.2 billion since early 2008, accounting for more than 70 percent of the $8.7 billion in assets added by banks in Arkansas.
In addition to the growth through acquisition, only two banks in Arkansas have failed during the past four years — ANB Financial of Bentonville in 2008 and First Southern Bank of Batesville in 2010.
The return on assets for the state’s banks — the profit they make as a percentage of assets, a key measure of the strength of a bank — rose in the first quarter to 1.16 percent.
“That is now very close to a rate that would be considered healthy in a normal banking-business environment,” said Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock. “By this measure, Arkansas banks have clearly outperformed their peers around the country throughout the recession and the recovery.”
Banks nationally had an average return on assets of 0.85 percent.
The volume of foreclosed properties on the books of Arkansas banks remains high, Candace Franks, commissioner of the Arkansas Bank Department, told Arkansas Bankers Association members last week.
Aggregate loan volume at the state’s banks fell off last year, a persistent trend that has been a drag on profitability, Franks said.
Banks in Northwest Arkansas, the hardest-hit area of the state through the recession and recovery, are contributing somewhat to growth in the region, Stackhouse said.
“The bottom line is that the banks that have heavier volumes of loans in Northwest Arkansas experience more challenges just because [real estate] prices declined quickly, as they did in other markets that were heavily built [nationally],” Stackhouse said. “It’s not a good situation in Northwest Arkansas, but the fact that there’s economic growth means that over time, and it may be years, we should see some continued improvement in the loans in that area.”
Most of the 19 banks in Arkansas that are under federal regulatory sanctions are either based in Northwest Arkansas or have a heavy concentration of loans in the area.
Arkansas banks had more than $1.1 billion in nonperforming loans in the first quarter. That is 2.8 percent of the total loans made by Arkansas banks, almost unchanged from the same period last year. A nonperforming loan is one that is more than 90 days past due.
But much of those nonperforming loans are part of the assets that Arvest, the Bank of the Ozarks, Centennial and Simmons First National acquired in the purchase of failed banks. And the Federal Deposit Insurance Corp. guarantees that up to 80 percent of the loans that default will be covered by the FDIC.
“Arkansas banks overall have weathered the financial crisis relatively well,” Stackhouse said.
Business, Pages 27 on 05/24/2012