List of Banks With Most Troubled Loans Includes Three in Arkansas

by Arkansas Business Staff  on Wednesday, Sep. 16, 2009 11:29 am  

Three Arkansas banks are on a list of banks with the highest level of troubled loans compiled by the Investigative Reporting Workshop at American University and reported by msnbc.com.

On the list are Metropolitan National Bank of Little Rock, Parkway Bank of Rogers and Southern Bank of Commerce of Paragould.

There are 368 banks in the U.S. with troubled asset ratios of 90 or higher at the end of the latest quarter, which ended in June, the report said.

The complete list can be seen by clicking here.

The troubled asset ratio is a measure of the stress placed on banks by loans. It compares loans that are not being paid on time, and property already acquired by the bank, against the bank's capital and loan loss reserves. The higher the ratio, the more stress on the bank.
Southern Bank of Commerce's troubled asset ratio at the end of the second quarter was 147.1.

Parkway Bank's ratio was 132.6 and Metropolitan's was 95.7. All ratios have increased dramatically during the recession.

Corus Bank NA of Chicago topped the list with a ratio of 3,032.6. The next two banks also were in Illinois - the John Warner Bank of Clinton, Ill., with a ratio of 1,471.5 and the Mutual Bank of Harvey, Ill., with a ratio of 1,265.9.

The researchers said they first calculated the total troubled assets at a bank. The calculation added together three elements: loans that are 90 days or more past due; loans that are in "non-accrual status," meaning the bank is no longer adding interest from the loan to its income; and real estate that the bank already owns, usually from foreclosure. Excluded are loans which are wholly or partly guaranteed by the U.S. government, such as FHA and VA loans, because the banks bear little or no risk.

That total is divided by the bank's ability to withstand losses. That's a sum of two elements: Tier 1 capital (which is mostly money invested in the bank by shareholders) and loan loss reserves, or money set aside to cover losses.

The result is reported as a percentage. For example, a bank with $100 million in capital and reserves and $10 million in troubled assets would have a troubled asset ratio of 10.

 

 

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