Arkansas banks continued to outpace its fellow banks in the Eighth District and peer banks across the country in the second quarter, according to the latest numbers from the Federal Reserve Bank of St. Louis’ Burgundy Book.
The state’s banks posted a 1.25 percent increase in return on average assets, which outperformed the district (1.1 percent) and the country (1 percent).
The report credits the ROA improvement to a small increase in the net interest margin and slight decline in net non-interest expenses. In the second quarter, the average NIM at Arkansas banks was 43 basis points higher than banks in its district and 38 basis points higher than banks across the country.
“The industry as a whole is better,” one eastern Arkansas banker told the Fed. “Loan demand is weak, even though the economy is better. There is a concern about making margin with such low interest rates.”
Another eastern Arkansas banker said “banks have made it through the hardest times. Problem assets are almost gone.”
The only area where Arkansas banks did not outshine both its district and the nation was in the loan loss reserve coverage ratio. It’s 91.3 percent ratio was well above the district’s 79.89 percent, but slightly below the nation’s 95.63 percent.
Other highlights of the report:
- Nonperforming loans continued their descent in the second quarter — in Arkansas, the district and the nation. The average nonperforming loan ration at Arkansas banks declined 17 basis points to 1.84 percent, but it remains well above the district (1.54 percent) and national (1.6 percent) averagers.
- Mergers and acquisitions by Arkansas institutions of failing banks largely explain the gap.
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