Wednesday, June 17, 2009

Ouch! Arkansas Bank to Take Big Hit

CB
Chambers Bank

Mark Friedman of the Arkansas Business Report has a story about another developer bankruptcy. Every one of these stories is a personal tragedy, and in this case I knew and liked the families of one of the principles involved. The main statistic that popped out at me from this story was the potential size of portfolio loss of an Arkansas Bank- Chamber's Bank.

The story says that Chamber's has a 26 million dollar secured loan with the developers. They likely will get the subdivision, but how much will it be worth? The article notes that their entire allowance for loan losses this year was only 12.66 million dollars.

1 Comments:

Blogger Mark Moore (Moderator) said...

To be clear, 12.66 million dollars in not all they have to cover loan losses, it is the amount they set aside to cover EXPECTED losses.

A loan officer that makes only certain loans may never experience any losses, but they will also have passed on some good business. Banks set aside maybe 1% of loan amounts as losses. If actually losses are double that or more, it is a problem. If losses are half that or less, it is also a problem, because the bank is taking so few risks that it is passing up a lot of good business along the way.

8:01 PM, June 18, 2009  

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