By Worth Sparkman - 4/20/2009(For a list
of the top private banks in the state, click
here. For the top public banks in Arkansas, click
here.)
The top 10 banks by return on equity in the Northwest
Arkansas Business Journal's annual list of private banks
changed somewhat from year-end 2007 to 2008. Overall, most
banks reported lower ROE.
Only private banks chartered in the state
and doing business in the six-county market — Benton,
Carroll, Crawford, Madison, Sebastian and Washington
counties — were included.
According to the Federal Deposit
Insurance Corp., ROE is "Annualized net income as a percent
of average equity on a consolidated basis."
Priority Bank, an Ozark-based thrift,
topped the ROE chart with an adjusted 46.63 percent, and saw
an increase from 35.22 percent ROE in 2007.
Priority opened an office in Fayetteville
in late 2005. The bank, which had only one office before is
also the statewide leader in ROE for 2008.
Mike Sandlin, president of Priority, said
there were multiple factors that contributed to the bank's
ROE, including the fact that the thrift is a sub-chapter "S"
corp.
The bank's loans are concentrated in
single family residential loans made mostly to rural
customers in Arkansas, Oklahoma, Missouri, Texas, Tennessee
and Louisiana, Sandlin said.
"Most people would assume that's a scary
place to be, but we've been fortunate," he said. The bank
focuses on lending to "hardworking folks" and puts an
emphasis on job history, debt-to-income ratio and money down
as the "common sense approach" to underwriting.
The bank has little to no commercial
loans, Sandlin said. The average loan the bank makes is in
the $100,000 to $150,000 range.
The Bank of Fayetteville, which was No. 2
in 2007 with ROE of 17.04 percent, dropped to No. 22 with an
ROE of 2.74 percent at the end of 2008.
Mary Beth Brooks, president and CEO of
the bank, said there were multiple reasons for the dip in
the ratio.
"We were aggressive to identify any
problems and to deal with them to protect our investors and
depositors," she said.
The bank beefed up loan loss reserves by
the tune of $6 million during 2008, and increased its
capital by $7.5 million, she said. So, lowering income and
increasing the denominator had an adverse effect on the ROE
ratio.
Still, BOF beat the national average in
2008.
According to the Federal Reserve Bank of
St. Louis, the average ROE in the U.S. as of Dec. 31 was
2.29 percent, down from an average of 9.34 percent at the
end of 2007. For banks in the 8th District, which includes
Arkansas and portions of six other states (Illinois,
Indiana, Kentucky, Mississippi, Missouri and Tennessee), the
average ROE was 3.37 percent, down from 7.51 percent a year
earlier.
For banks just in Arkansas, the average
was 8.53 percent, up from 7.60 percent at the end of 2007.
Twelve of the 28 private banks doing
business in Northwest Arkansas performed better than the
statewide average.
As a comparison of the changing times, in
2005 the average for U.S. banks was 13.26 percent. For banks
in the 8th District that year the average ROE was 12.70
percent and for banks just in Arkansas, the average was
11.53 percent.
Arkansas Business Limited Partnership. |
