Real Estate Impacts Bank Profitability
Real estate problems were part of the reason the earnings of Harrison-based First Federal Bank fell 82 percent in the third quarter.
The bank earned $301,000 in the quarter, compared to $1.7 million in the year-ago period.
The quarterly earnings suffered because the bank increased its loan loss provision because they are charging off more loans than they originally expected, said John Dominick, Arkansas Bankers Chair and professor of banking at the University of Arkansas.
The revenue losses were attributed to an $846,000 increase in loan loss provisions, giving the bank $1.33 million, which it set aside for losses in the quarter. The increase was needed to cover the escalating delinquent loan portfolio as the community bank has taken back more than $5 million of real estate since December 2006.