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Contact: Alyssa Augustine
Media Representative
(612) 204-5175
alyssa.augustine@mpls.frb.org

News Releases

Banking Conditions in Ninth District States 2016 Forecast and 2015 Update

Minneapolis, March 9, 2016 Federal Reserve Bank of Minneapolis

2016 Outlook for Minnesota Banks: Flat to Slightly Worse Conditions

Minnesota banks can expect few changes in banking conditions in 2016, according to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis. “I expect another year of relatively little change, with the potential for a slightly worse year,” Feldman said. “That means profits and loan growth will stay around historical norms, while problem loans could increase a bit from historically low levels in 2015.” Pressure on bank profit margins and some borrowers—such as those in the agricultural sector—will be headwinds for banks in 2016, he said.

Profits and loan growth are expected to be flat, while bankers may see a slight increase in problem loans. Profits, as measured by return on average assets, are expected to be between 0.92 percent and 1.12 percent, about the same as in 2015. Loan growth is expected to be between 3.1 percent and 7.1 percent, also about the same pace as in 2015. The share of problem loans (as a percent of the resources banks must have to cover potential losses) is expected to come in at 6.7 percent to 10.2 percent, slightly worse than 2015, but well below historic levels.

Inputs to the annual forecast include data on recent performance of Ninth Federal Reserve District banks, analysis of trends in accounting statements and regulatory reports, statistical modeling, and on-the-ground information gathered by talking with banking professionals.

2015 performance

Year-end data for 2015—from Ninth District banks’ quarterly regulatory submissions, known as “call reports”—show that profits at the median Minnesota bank were essentially flat at 1.02 percent, at the lower end of the forecast at the beginning of the year (see table below). That performance is below the historical norm since 2001. Loan growth rates for Minnesota banks declined by 1.5 percentage points to 5.1 percent year-over-year, below the forecast range.  

2015 Bank Performance Compared to Fed Forecast

Measure

Forecast Range

Midpoint
of Range

2015 Actual

Profitability (percent return on average assets)

0.97-1.17

1.07

1.02

Net loan growth (percent increase over last year)

5.6-9.6

7.6

5.1

Problem loans (as a percent of loan loss reserves)

4.8-8.3

6.51

7.69

Minnesota problem loans rose slightly to 7.7 percent in 2014, up from 7 percent in 2014 and at the “worse” end of the forecast range at the beginning of the year. “Nevertheless, this level of problem loans remains well below the historical median,” Feldman said. Minnesota banks continued to report historically strong levels of capital and liquidity.

Ratings of the safety and soundness of Minnesota banks improved in 2015. There were no Minnesota banks rated 4 (unsatisfactory) or 5 (critically deficient) at the end of 2015, down from 2.7 percent at the end of 2014 and down from a recent peak of 16.1 percent in the first quarter of 2011.

Data for Minnesota and the nation [pdf]

More details on banking conditions can be found on the following page: Banking Conditions in Ninth District States.

 

2016 Outlook for Montana Banks: Flat to Slightly Worse Conditions

Montana banks can expect few changes in banking conditions in 2016, according to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis.

“I expect a year of relatively little change, with the potential for a slightly worse year,” Feldman said. “That means profits will stay around historical norms, while problem loans could increase a bit from historically low levels in 2015.”  Loan growth should slow, but remain high compared to recent years. “Pressure on bank profit margins and some borrowers—such as those in the agricultural or energy sectors—pose headwinds for banks in 2016,” he said.

Profits, as measured by return on average assets, are expected to remain flat in 2016, in the range of 1.04 percent to 1.24 percent. Loan growth is expected to be between 6.4 percent and 10.4 percent, slightly softer than in 2015. Problem loans (as a percent of the resources banks must have to cover potential losses) are forecast to end the year between 6.7 percent and 10.2 percent, virtually unchanged from 2015 and well below historic levels.

Inputs to the annual forecast include data on recent performance of Ninth Federal Reserve District banks, analysis of trends in accounting statements and regulatory reports, statistical modeling and on-the-ground information gathered by talking with banking professionals.

2015 performance

Year-end data for 2015—from Ninth District banks’ quarterly regulatory submissions, known as “call reports”—show that profits at the median Montana bank were flat at 1.11 percent, at the low end of the forecast range and below the historical norm (see table below).

2015 Bank Performance Compared to Fed Forecast

Measure

Forecast Range

Midpoint
of Range

2015 Actual

Profitability (percent return on average assets)

1.09-1.29

1.19

1.11

Net loan growth (percent increase over last year)

6.4-10.4

8.4

10.9

Problem loans (as a percent of loan loss reserves)

6.2-9.7

8

8

Loan growth for Montana banks increased 3.5 percentage points in 2015 to 10.9 percent year-over-year, surpassing the forecast range.  “Montana posted the biggest increase in year-over-year loan growth in the Ninth District and is the District leader in loan growth,” Feldman said.

Montana problem loans were essentially unchanged at 8 percent, at the middle of the forecast range. That level of problem loans remains well below the historical median. Montana banks continued to report historically strong levels of capital and liquidity.

Ratings of the safety and soundness of Ninth District banks improved in 2015. There were no District banks rated 4 (unsatisfactory) or 5 (critically deficient) at the end of 2015, down from 2.2 percent at the end of 2014 and down from a recent peak of 13.4 percent in the first quarter of 2011.

Data for Montana and the nation [pdf]

More details on banking conditions can be found on the following page: Banking Conditions in Ninth District States.
 

2016 Outlook for North Dakota Banks: Flat to Slightly Worse Conditions

North Dakota banks can expect conditions similar to those of 2015 or a bit worse, according to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis.

“North Dakota banks had a slightly worse year in 2015 than they did in 2014,” Feldman said. “I expect outcomes in 2016 to be about the same as 2015, with the potential for a slightly worse year. That means profits and loan growth will stay around historical norms, while problem loans could increase a bit from historically low levels in 2015.”  Pressure on bank profit margins and on some borrowers—such as those in the agricultural and energy sectors—pose headwinds for banks in 2016, he said.

Profits, as measured by return on average assets, are expected to remain flat in 2016, in the range of 1.07 percent to 1.27 percent. Loan growth is expected to be between 6 percent and 10 percent, slightly better than in 2015. Problem loans (as a percent of the resources banks must have to cover potential losses) are forecast to end the year between 4.2 percent and 7.7 percent, the same or a bit worse than 2015 but still well below historic levels.

Inputs to the annual forecast include data on recent performance of Ninth Federal Reserve District banks, analysis of trends in accounting statements and regulatory reports, statistical modeling and on-the-ground information gathered by talking with banking professionals.

2015 performance

Year-end data for 2015—from Ninth District banks’ quarterly regulatory submissions, known as “call reports”—show that profits at the median North Dakota bank were flat at 1.20 percent, at the lower end of the forecast range but above the state’s historical norm (see table below).

2015 Bank Performance Compared to Fed Forecast

Measure

Forecast Range

Midpoint
of Range

2015 Actual

Profitability (percent return on average assets)

1.16-1.36

1.26

1.20

Net loan growth (percent increase over last year)

5.6-9.6

7.6

6.2

Problem loans (as a percent of loan loss reserves)

2.1-5.6

3.9

5.5

Loan growth for North Dakota banks fell 3.9 percentage points in 2015 to 6.2 percent year-over-year, the sharpest drop in the Ninth District and on the low end of the forecast range. 

North Dakota problem loans increased 1.6 percentage points to 5.5 percent, at the high end of the forecast range. That level of problem loans remains well below the state historical median. North Dakota banks continued to report historically strong levels of capital and liquidity.

Ratings of the safety and soundness of Ninth District banks improved in 2015. There were no District banks rated 4 (unsatisfactory) or 5 (critically deficient) at the end of 2015, down from 2.2 percent at the end of 2014 and down from a recent peak of 13.4 percent in the first quarter of 2011.

Data for North Dakota and the nation [pdf]

More details on banking conditions can be found on the following page: Banking Conditions in Ninth District States.

 

2016 Outlook for South Dakota Banks: Flat to Slightly Worse Conditions

South Dakota banks can expect conditions similar to those of 2015 or a bit worse, according to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis. “I expect outcomes in 2016 to be about the same as 2015, with the potential for a slightly worse year,” Feldman said.  “That means profits and loan growth will stay around historical norms, while problem loans could increase a bit from historically low levels in 2015. Pressure on bank profit margins and on some borrowers—such as those in the agricultural sector—pose headwinds for banks in 2016.”

Profits, as measured by return on average assets, are expected to remain flat in 2016, in the range of 1.12 percent to 1.32 percent. Loan growth is expected to be between 4.7 percent and 8.7 percent, about the same as in 2015. Problem loans (as a percent of the resources banks must have to cover potential losses) are forecast to end the year between 1.5 percent and 5 percent, virtually unchanged from 2015 and well below historic levels.

Inputs to the annual forecast include data on recent performance of Ninth Federal Reserve District banks, analysis of trends in accounting statements and regulatory reports, statistical modeling and on-the-ground information gathered by talking with banking professionals.

2015 performance

Year-end data for 2015—from Ninth District banks’ quarterly regulatory submissions, known as “call reports”—show that profits at the median South Dakota bank increased 11 basis points to 1.22 percent, at the high end of the forecast range and the strongest improvement among Ninth District states (see table below).

2015 Bank Performance Compared to Fed Forecast

Measure

Forecast Range

Midpoint
of Range

2015 Actual

Profitability (percent return on average assets)

1.07-1.27

1.17

1.22

Net loan growth (percent increase over last year)

6.3-10.3

8.3

5.7

Problem loans (as a percent of loan loss reserves)

1.8-5.3

3.6

2.8

Loan growth rates for South Dakota banks fell 3.6 percentage points in 2015 to 5.7 percent year-over-year, short of the forecast range.  That was a very sharp drop in loan growth compared to other banks in the Ninth District. 

South Dakota problem loans decreased 69 basis points to 2.8 percent, in the middle of the forecast range. That level of problem loans is the lowest in the District and 4.3 percentage points below the national median. South Dakota banks continued to report historically strong levels of capital and liquidity.

Ratings of the safety and soundness of Ninth District banks improved in 2015. There were no District banks rated 4 (unsatisfactory) or 5 (critically deficient) at the end of 2015, down from 2.2 percent at the end of 2014 and down from a recent peak of 13.4 percent in the first quarter of 2011.

Data for South Dakota and the nation [pdf]

More details on banking conditions can be found on the following page: Banking Conditions in Ninth District States.

 

2016 Outlook for Banks in Michigan’s Upper Peninsula: Flat to Slightly Worse Conditions

Banks in Michigan’s Upper Peninsula (U.P.) can expect few changes in banking conditions in 2016, according to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis. “U.P. banks had a mixed year in 2015,” Feldman said. “Loan growth posted gains, and the level of problem loans declined, but profits remained below historical norms,” he said.

“I expect 2016 outcomes to remain at roughly 2015 levels, or a bit worse. That means loan growth will stay around historical norms, while profits will remain below norms and problem loans could increase a bit from the current historically low levels. Pressure on bank profit margins will pose headwinds for banks in 2016,” Feldman said.

Profits, as measured by return on average assets, are expected to remain flat in 2016, in the range of 0.69 percent to 0.89 percent. Loan growth is expected to be between 0.5 percent and 4.5 percent, about the same as in 2015. Problem loans (as a percent of the resources banks must have to cover potential losses) are forecast to end the year between 10.4 percent and 13.9 percent, virtually unchanged from 2015.

Inputs to the annual forecast include data on recent performance of Ninth Federal Reserve District banks, analysis of trends in accounting statements and regulatory reports, statistical modeling and on-the-ground information gathered by talking with banking professionals.

Michigan counties in the Ninth District are Alger, Baraga, Chippewa, Delta, Dickinson, Gogebic, Houghton, Iron, Keweenaw, Luce, Mackinac, Marquette, Menominee, Ontonagon, and Schoolcraft.

2015 performance

Year-end data for 2015—from Ninth District banks’ quarterly regulatory submissions, known as “call reports”—show that profits at the median Upper Peninsula bank edged up 3 basis points to 0.76 percent, at the low end of the forecast range (see table below).

2015 Bank Performance Compared to Fed Forecast

Measure

Forecast Range

Midpoint
of Range

2015 Actual

Profitability (percent return on average assets)

0.71-0.91

0.81

0.76

Net loan growth (percent increase over last year)

0.1-3.9

2

2.5

Problem loans (as a percent of loan loss reserves)

11.6-15.1

13.5

12.2

Loan growth for U.P. banks grew a modest 1.5 percentage points in 2015 to 2.5 percent year-over-year, in the middle of the forecast range. 

U.P. problem loans declined 1.1 percentage points to 12.2 percent, at the low end of the forecast range. That was the second-largest decline in problem loans among Ninth District states. Even with this improvement, U.P. banks continue to have the highest level of problem loans in the District.

Ratings of the safety and soundness of Ninth District banks improved in 2015. There were no District banks rated 4 (unsatisfactory) or 5 (critically deficient) at the end of 2015, down from 2.2 percent at the end of 2014 and down from a recent peak of 13.4 percent in the first quarter of 2011.

Data for the Upper Peninsula of Michigan and the nation [pdf]

More details on banking conditions can be found on the following page: Banking Conditions in Ninth District States.

 

2016 Outlook for Western Wisconsin Banks: Flat to Slightly Worse Conditions

Western Wisconsin banks can expect a flat to slightly worse year in banking conditions in 2016, according to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis.

“Western Wisconsin banks had flat profits in 2015, but showed improvement in loan growth and a decrease in problem loans. I expect 2016 outcomes to remain at roughly 2015 levels, or a bit worse.” Feldman said. “That means profits will remain at roughly the same level, below historical norms. Loan growth may fall off a bit, and we could see the level of problem loans rise from historically low levels in 2015.”  Pressure on bank profit margins and on some borrowers—such as those in the agricultural sector—pose headwinds for banks in 2016, he said.

Profits, as measured by return on average assets, are expected to remain flat in 2016, in the range of 0.79 percent to 0.99 percent. Loan growth is expected to be between 3.2 percent and 7.2 percent, about the same as in 2015. Problem loans (as a percent of the resources banks must have to cover potential losses) are forecast to end the year between 6.9 percent and 10.4 percent, virtually unchanged from 2015 and well below historic levels.

Inputs to the annual forecast include data on recent performance of Ninth Federal Reserve District banks, analysis of trends in accounting statements and regulatory reports, statistical modeling and on-the-ground information gathered by talking with banking professionals.

Twenty-six counties in western Wisconsin are included in the Ninth District: Ashland, Barron, Bayfield, Buffalo, Burnett, Chippewa, Douglas, Dunn, Eau Claire, Florence, Forest, Iron, La Crosse, Lincoln, Oneida, Pepin, Pierce, Polk, Price, Rusk, Sawyer, St. Croix, Taylor, Trempealeau, Vilas, and Washburn.

2015 performance

Year-end data for 2015—from Ninth District banks’ quarterly regulatory submissions, known as “call reports”—show that profits at the median western Wisconsin bank decreased 4 basis points to 0.86 percent, short of the forecast range (see table below). Western Wisconsin and North Dakota saw declines in bank profits in 2015, while profits for other District states improved.

2015 Bank Performance Compared to Fed Forecast

Measure

Forecast Range

Midpoint
of Range

2015 Actual

Profitability (percent return on average assets)

0.90-1.10

1

0.86

Net loan growth (percent increase over last year)

3.6-7.6

5.6

7.2

Problem loans (as a percent of loan loss reserves)

7.5-11.0

9.3

7.8

Loan growth for western Wisconsin banks grew a modest 1.6 percentage points in 2015 to 7.2 percent year-over-year, at the high end of the forecast range. 

Western Wisconsin problem loans declined 1.9 percentage points to 7.8 percent, at the low end of the forecast range. That was the largest decline in problem loans among Ninth District states. Western Wisconsin banks continued to report historically strong levels of capital and liquidity.

Ratings of the safety and soundness of Ninth District banks improved in 2015. There were no District banks rated 4 (unsatisfactory) or 5 (critically deficient) at the end of 2015, down from 2.2 percent at the end of 2014 and down from a recent peak of 13.4 percent in the first quarter of 2011.

Data for Western Wisconsin and the nation [pdf]

More details on banking conditions can be found on the following page: Banking Conditions in Ninth District States.

 

2016 Outlook for Twin Cities Banks: Flat to Slightly Worse Conditions

Twin Cities banks can expect few changes in banking conditions in 2016, according to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis. “I expect another year of relatively little change, with the potential for a slightly worse year.  That means profits and loan growth will stay around historical norms, while problem loans could increase a bit from historically low levels in 2015.  Pressure on bank profit margins will be headwinds for banks in 2016,” Feldman said.

Profits, as measured by return on average assets, are expected to be between 0.90 percent and 1.10 percent, about the same as in 2015.  Loan growth is expected to be between 4.8 percent and 8.8 percent, also about the same pace as 2015.  The share of problem loans (as a percent of the resources banks must have to cover potential losses) is expected to come in at 5.4 percent to 8.9 percent, slightly higher than in 2015.

Inputs to the annual forecast include data on recent performance of Ninth Federal Reserve District banks, analysis of trends in accounting statements and regulatory reports, statistical modeling and on-the-ground information gathered by talking with banking professionals.

2015 performance

Year-end data for 2015—from Ninth District banks’ quarterly regulatory submissions, known as “call reports”—show that profits at the median Twin Cities bank improved slightly to 1 percent, at the middle of the forecast range and at roughly the historical norm (see table below).  Loan growth rates for Twin Cities banks were flat at 6.8 percent year-over-year, below the forecast range.

2015 Bank Performance Compared to Fed Forecast

Measure

Forecast Range

Midpoint
of Range

2015 Actual

Profitability (percent return on average assets)

0.92-1.12

1.02

1

Net loan growth (percent increase over last year)

7.7-11.7

9.7

6.8

Problem loans (as a percent of loan loss reserves)

3.3-6.8

5

6.7

Twin Cities problem loans rose 1.5 percentage points to 6.7 percent in 2014, at the “worse” end of the forecast range at the beginning of the year.  “Nevertheless, the level of problem loans remains below the historical median,” Feldman said. Twin Cities banks continued to report historically strong levels of capital and liquidity.

Ratings of the safety and soundness of Twin Cities banks improved in 2015.  There were no metro-area banks rated 4 (unsatisfactory) or 5 (critically deficient) at the end of 2015, down from 4.2 percent at the end of 2014 and down from a recent peak of 32.7 percent in the first quarter of 2011.

Data for the Twin Cities MSA and the nation [pdf]

More details on banking conditions can be found on the following page: Banking Conditions in Ninth District States.

 

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