LITTLE ROCK — Arkansas banks are outperforming banks in other parts of the country, said Julie Stackhouse, a senior vice president with the Federal Reserve Bank of St. Louis.

There still are numerous reasons to be concerned about the condition of some Arkansas banks. There are 38 banks under regulatory sanctions; six have lost money through June and four are projected as possibilities to fail.

But, “Generally, Arkansas banks look good,” Stackhouse said. “Of the seven states that we work with at the St. Louis Fed, banks in Arkansas are performing at a higher level than any of the other states.”

The 38 banks under sanctions from regulators - 17 by federal regulators and 21 by state regulators - equals almost a third of the banks in the state.

“That number, even at a third [of the banks], is not unusual,” Stackhouse said. “There are some states that we work with that are worse off and, quite honestly, some states where my colleagues work that are really challenged. They have a much higher number of institutions that are subject to supervisory actions.”

In the next year, Stackhouse said, she expects the number of sanctioned banks in Arkansas to be “a fair amount smaller.”

“The bottom line is that it is a typical number,” Stackhouse said. “But more importantly, I think we’re going to start seeing some of those [regulatory sanctions] removed in the year ahead.”

The six banks with losses through the first half of the year are Decatur State Bank with a loss of $3.1 million, Metropolitan National Bank in Little Rock with a loss of $1.5 million, Bank of Rison with a loss of $1.2 million, Allied Bank of Mulberry with a loss of $665,000, First National Bank of Crossett with a loss of $106,000 and Forrest City Bank with a loss of $64,000.

But one overall gauge of the soundness of Arkansas banks is their profitability, Stackhouse said. The state’s 126 banks have an overallreturn on assets - or net income divided by assets - of 1.08 percent.

“That’s great,” Stackhouse said. “That’s very strong in comparison with what we’re seeing elsewhere in the country.”

The return on assets for all 7,200 banks in the country is 0.99 percent.

Arkansas banks have performed well throughout the financial crisis, said Tim Yeager, associate professor of finance at the University of Arkansas in Fayetteville.

“Arkansas’ economy has been a little bit stronger, although not a lot,” Yeager said. “And the housing crisis hasn’t been as bad in Arkansas.”

One measurement of a bank’s performance is the Texas Ratio, which isa way of determining the most troubled banks in the country. Stackhouse said the ratio is an indication of how a bank’s capital is affected by nonperforming loans and other nonearning assets. Four banks in Arkansas have Texas Ratios above 100 percent, a level that indicates the bank is troubled.

Decatur State Bank has a Texas Ratio of 270 percent, followed by Metropolitan National Bank at 180 percent, Pinnacle Bank in Rogers at 167 percent and HomeBank of Arkansas in Portland at102 percent, according to the Federal Reserve. Every other bank in Arkansas has a Texas Ratio lower than 85 percent.

“We’ve had banking institutions with 100 percentTexas Ratios that have come back and survived and they’ve been fine,” Stackhouse said. “And we’ve had other banks [with Texas ratios above 100 percent], of course, that haven’t made it.”

The four banks with high Texas Ratios have had problems for a while, Yeager said.

“My feeling is that a high Texas Ratio isn’t as worrisome as it might have been a couple of years ago,” Yeager said.

There are 732 banks on the Federal Deposit Insurance Corp.’s list of troubled banks, those in danger of possible failure. But only 31 banks in the country failed in the first six months of the year. Only two banks have failed in the past month.

News, Pages 3 on 09/05/2012