The State of Banking in Arkansas
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The State of Banking in Arkansas. Prepared Arkansas State Economic Forecast Conference By Julie L. Stackhouse, Senior Vice President Federal Reserve Bank of St. Louis October 29, 2009. Just over a year ago…. Source: Reuters.com. The country faced a financial crisis. Fall 2008.

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The State of Banking in Arkansas

  • Prepared Arkansas State Economic Forecast Conference

  • By Julie L. Stackhouse, Senior Vice President

  • Federal Reserve Bank of St. Louis

  • October 29, 2009


Just over a year ago…

Source: Reuters.com


The country faced a financial crisis
The country faced a financial crisis.

Fall 2008

Before the Problems


The federal reserve the u s government and the federal deposit insurance corporation all responded
The Federal Reserve, the U.S. Government, and the Federal Deposit Insurance Corporation all responded.

“First Responders” to the financial crisis


A picture of the Fed’s actions Deposit Insurance Corporation all responded..


Congress responded with the troubled asset relief program
Congress responded with the Troubled Asset Relief Program. Deposit Insurance Corporation all responded.

Source: www.financialstability.gov



The financial crisis and recession spilled over into the banking system
The financial crisis and recession spilled over into the banking system.

Source: Reports of Condition and Income


Banks and thrifts in arkansas have experienced some stress as well
Banks and thrifts in Arkansas have experienced banking system.some stress as well.

Source: Reports of Condition and Income and OTS Reports


The driver has been commercial real estate cre banks have significant exposure to cre
The driver has been commercial real estate (CRE). Banks have significant exposure to CRE.

0.12%

5.98%

1.85%

Source: CMSA, Flow of Funds Accounts

1st& 2nd Quarter 2009


Relative to size smaller community and regional banks are more exposed to commercial real estate
Relative to size, smaller community and regional banks are more exposed to commercial real estate.

percent

Source: Reports of Condition and Income

2nd Quarter 2009


Cre risks are widespread
CRE risks are widespread. more exposed to commercial real estate.

June 30, 2009

Source: Call Reports and OTS Reports



Understanding the valuation problem
Understanding the valuation problem. MSAs.

14

Source: Blackrock and Atlanta FRB


Real estate loan write-offs MSAs. tend to lag

economic performance.

Percent

Percent

Periods of economic recession are denoted by vertical gray bars.

Sources: Federal Reserve Board and Bureau of Economic Analysis. Quarterly data through Q2.2009.


As write offs have grown so have bank failures
As write-offs have grown, so have bank failures. MSAs.

Source: FDIC; data as of 10/23/2009


When put into constant terms it appears that assets of failed banks will exceed the 1980s
When put into constant terms, it appears that assets of failed banks will exceed the 1980s.


Yet fdic statistics tell only part of the story
Yet, FDIC statistics tell only part of the story. failed banks will exceed the 1980s.



In conclusion
In Conclusion insurance fund is under pressure.

Income producing property loans pose a considerable risk to banks as we move into 2010.

Failures among commercial banks and thrifts will continue, even as the economy recovers. However, the resolution mechanism for community and regional banks is strong, although it is facing substantial strain.

Banking organizations with strong capital and risk management practices will weather the storm and stand well-positioned for the future.


Questions
Questions? insurance fund is under pressure.


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