Area Small Banks Suffer Losses

Both Legacy National Bank and Pinnacle Bank each set aside more than 4 million in the recent quarter to cover potential losses from non-performing loans. Pinnacle Bank’s fourth quarter contribution resulted in a net income loss of 1.68 million, compared to a gain of 1.76 million earned a year ago. In 2007, the bank charged off 3.14 million in bad debt compared to no charge offs in 2006.

“We tried to aggressively attack the problem loans in 2007, which was the reason for the large loan loss provision made in the quarter,” said Scott Franklin, president of Pinnacle Bank. Franklin took over as president for the bank in August following the departure of Joe Mills. Franklin said the going will be tough for another quarter or so. “We are fortunate to be able to keep expenses down due to low overhead costs,” he said.

“We only have 18 employees compared other banks our size, who have 50 to 60 employees and several branches to maintain.” When asked about the 3.6 million in nonaccrual loans reported at year end, Franklin said bank officials decided to ramp up loan loss provisions. However, they are discovering that some of the problem loans aren’t as bad as once thought. He said more time is needed to filter out the loans that won’t pay off.

Franklin said the bank has contracts to sell three of the five homes it has repossessed and will be recovering some of the 3.1 million charged off in 2007. Analysts agree banks will want to focus on recoveries in 2008, in order to offset some potential losses. Of the nine banks researched, only three turned a year-over-year profit in the fourth quarter - Parkdale, Ark.-based Delta Trust Bank, Decatur State Bank and Fayetteville-based Bank of Arkansas. As of Dec.