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FDIC Banking Data – 2011:Q4

End-of-year banking data released by the FDIC yesterday showed that Arkansas banks generally continue to do better than the national average.  As covered in the Democrat-Gazette and The City Wire (here and here), the main story of the year in Arkansas banking was a decline in nonperforming loans and net charge-offs.   As shown in the figure below, the share of loans and leases classified as non-current at all Arkansas banks had been rising up through the second quarter of 2011, but declined in the second half of the year.

Source: FDIC

The high level of non-current loans in early 2011 is somewhat misleading.  Many of the assets acquired by Arkansas banks in the process of absorbing troubled out-of-state institutions are carried on the books as non-performing, even though arrangements with the FDIC partially indemnify the losses associated with the takeovers.  As shown in the second chart, below, the ratio of net charge-offs to loans and leases fell sharply in 2011, reflecting the reduced need to set aside funds to cover actual booked losses.

Source: FDIC

With troubled assets becoming somewhat less problematic, Arkansas banks reported improved profitability for the year.  As shown in the next chart, Arkansas banks managed to earn positive returns throughout the recession, even as the nation’s banks showed average losses in 2009.  In 2011, the rate of return on assets for Arkansas banks moved above the benchmark 1.0% rate, continuing to outpace the national average.

Source: FDIC

Many individual institutions in Arkansas continue to experience problems [see, for example, this analysis in The City Wire].  Nevertheless, even the proportion of Arkansas banks experiencing net losses is lower than the corresponding nationwide proportion.  At the end of 2009, nearly one-third of the nations banks were unprofitable, while the proportion of Arkansas banks with negative profits was less than 20%.  By the end of 2011, the share of unprofitable institutions nationwide had fallen to just over 15%, with the share in Arkansas falling to nearly 10%.

Source: FDIC
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