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Arkansas Banks Face Down Problem Loans

3 min read

Fayetteville’s Arvest Bank began the year wading through problem loans even before the effects of COVID-19 began to manifest. The $23.2 billion-asset lender recorded a $50.6 million loss in the first quarter.

Since March 31, net income at the largest bank headquartered in Arkansas rebounded to $37.3 million through the first nine months of 2020. Heading into the fourth quarter, Arvest is carrying $230.6 million in loan loss reserves and $136.5 million in nonaccrual assets.

At the end of the third quarter, performing troubled restructured loans totaled more than $80 million.

Regarding its efforts to work through credit issues these days, Arvest issued this statement: “The lodging and entertainment industries have been impacted significantly and some borrowers are struggling. For those customers, or customers from any industry, our priority is to work with them as individuals to find the best solution. Some of those solutions include restructuring payments, suspended payments for a short period of time or perhaps even a new loan.”

Restructuring variables include a reduction of the stated interest rate for the remaining original life of the debt, an extension of the maturity date at a stated interest rate lower than the current market rate for new debt with similar risk, a reduction of the face amount or maturity amount of the debt or a reduction of accrued interest.

“All businesses have a hiccup along the way, and you work with them to get through it and develop a long-term customer,” said Tracy French, president and CEO of Centennial Bank in Conway. “Overall loan demand is down, but home mortgages are rocking.

“Business is doing well, and we feel like the fog is clearing, or you at least know where the fog is. We feel a lot better than we did 90 days ago.”

Compared with a year ago, nonaccrual loans at the $16.8 billion-asset lender increased by a third to $65.1 million as of Sept. 30.

“Some of that were credits prior to the pandemic,” French said. “Whether that percolates up in the months ahead, time will tell. We have plenty of loan loss reserve. We’re very cautious. We basically put all the money we made in the first quarter into loan loss reserve, just in case.”

Among the 10 largest Arkansas banks, Pine Bluff’s Simmons Bank registered the largest 12-month increase in nonaccrual loans, more than doubling from nearly $70 million at the end of the third quarter last year to almost $169 million as of Sept. 30.


Working Through Problem Loans
(Dollars in thousands)

Troubled Debt Restructurings: Non-Accrual

 

Sept. 30, 2020

Sept. 30, 2019

Arvest Bank, Fayetteville

$31,059

$28,574

Bank OZK, Little Rock

$9,289

$7,385

Simmons Bank, Pine Bluff

$2,791

$1,759

Southern Bancorp Bank, Arkadelphia

$2,590

$2,103

Centennial Bank, Conway

$1,742

$3,422

Farmers Bank & Trust, Magnolia

$1,577

$1,677

First Security Bank, Searcy

$310

$974

First Community Bank, Batesville

$101

$23

First National Bank, Fort Smith

$0

$0

First National Bank, Paragould

$0

$0


Troubled Debt Restructurings: In Compliance

 

Sept. 30, 2020

Sept. 30, 2019

Arvest Bank, Fayetteville

$80,690

$71,326

Bank OZK, Little Rock

$1,251

$976

Simmons Bank, Pine Bluff

$1,945

$5,967

Southern Bancorp Bank, Arkadelphia

$6,860

$5,506

Centennial Bank, Conway

$10,676

$15,141

Farmers Bank & Trust, Magnolia

$373

$132

First Security Bank, Searcy

$643

$262

First Community Bank, Batesville

$8,442

$8,550

First National Bank, Fort Smith

$2,280

$2,534

First National Bank, Paragould

$703

$877


Total: Non-Accrual Assets

 

Sept. 30, 2020

Sept. 30, 2019

Arvest Bank, Fayetteville

$136,501

$103,38

Bank OZK, Little Rock

$55,981

$63,918

Simmons Bank, Pine Bluff

$168,917

$69,745

Southern Bancorp Bank, Arkadelphia

$10,144

$11,365

Centennial Bank, Conway

$65,148

$48,640

Farmers Bank & Trust, Magnolia

$16,796

$12,971

First Security Bank, Searcy

$3,009

$4,276

First Community Bank, Batesville

$10,078

$11,607

First National Bank, Fort Smith

$2,799

$5,205

First National Bank, Paragould

$2,380

$4,871

Source: Federal Deposit Insurance Corp.

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