Minnesota Banks Continue Improvement, Albeit at a Slow Rate, in the Third Quarter
Minnesota banking conditions continued to improve in third quarter 2012, according to data collected from the 361 commercial banks in the state. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “Minnesota banking conditions continue to gain strength. Banks in the state are reducing problem assets, turning in positive loan growth and reporting earnings that compare favorably to the national median bank. That said, the improvement in this quarter was often small.”
The level of problem assets as a percent of the resources banks have to cover potential loan losses declined by 1.19 percentage points to 11.54 percent in the third quarter for the median Minnesota bank. Overall, problem assets are down 3.78 percentage points from a year ago. Minnesota’s improvement outpaced the recovery in the national median that stands at 12.1 percent as of third quarter 2012.
Earnings, as measured by the median return on average assets, improved 5 basis points to 0.99 percent, a little better than the national rate of 0.89 percent and up 20 basis points from a year ago.
Minnesota banks’ loan growth was 0.4 percent over the last four quarters. Although this year-over-year change in the amount of outstanding loan balances is smaller than the national rate of 0.91 percent, it is a considerable improvement from the -4.14 percent rate of a year ago.
Key measures of liquidity and capital also turned in small improvements for the quarter and are stronger than national medians. Minnesota banks hold historically high levels of capital. The state’s median total risk-based capital ratio climbed to 15.4 percent. Liquidity improved again in the third quarter and reached the strongest level since 2004. Bank use of noncore funding (as opposed to more stable traditional deposits) stands at 14.7 percent of liabilities.
The data for Minnesota and the nation are found in the tables below. The attachment to this release provides additional data on the characteristics of banks in the region and definitions and explanations of those data.
Data for Minnesota and the nation [pdf]
More details on 2012 banking conditions can be found on the following page: Banking Conditions in Ninth District States - Third Quarter 2012 Update.
Montana Banks Reduce Problem Assets; Profits and Loan Growth Show Less Improvement
Montana banks reduced the level of problem assets in third quarter 2012, according data from the state’s 62 commercial banks, but other indicators of bank health still compare unfavorably to national measures. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “Montana-based banks reported a great deal of progress addressing asset quality. However, earnings and loan growth showed less improvement. Overall, Montana banking conditions still lag the nation in key metrics of health.”
Montana bank median noncurrent and delinquent loans declined from 16.44 percent to 13.41 percent of the value of capital and reserves set aside to cover potential losses. That improvement brought Montana’s third quarter 2012 figure within 1.31 percentage points of the national median. Notably, the measure of problem assets in construction and land development fell below 0.5 percent at the median Montana bank for the first time since 2008.
Montana bank profitability ratios changed little from the previous quarter. The state median return on average assets fell 4 basis points to 0.85 percent, failing to keep pace with the national rate that improved to 0.89 percent as of third quarter 2012.
The annual growth rate in the amount of outstanding loans improved only slightly from last quarter and remains negative at -0.77 percent. It has improved by nearly 3 percentage points from a year ago. By comparison, the national median rate stood at about -1.6 percent a year ago, but turned positive last quarter and maintained those gains by reporting a 0.91 percent rate of net loan growth in third quarter 2012.
Measures of liquidity and capital posted strong results in the quarter, though neither has been a source of trouble for most banks in the recent crisis. The median total risk-based capital ratio reached a new high of 17.26 percent. The use of noncore funding as a percent of total liabilities (rather than more stable traditional deposits) decreased to 17.97 percent. Both metrics are somewhat stronger than the national medians.
The data for Montana and the nation are found in the tables below. The attachment to this release provides additional data on the characteristics of banks in the region and definitions and explanations of those data.
Data for Montana and the nation [pdf]
More details on 2012 banking conditions can be found on the following page: Banking Conditions in Ninth District States - Third Quarter 2012 Update.
North Dakota Banking Conditions Stand Out Compared to Nation
Banking conditions in North Dakota are exceptionally strong, according to data reported by the state’s 88 banks for third quarter 2012. Record low levels in problem assets, robust loan growth and healthy earnings are noteworthy for the state. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “North Dakota’s banking conditions stand out. Profitability improved again and remains above precrisis levels, while growth and asset quality are as strong as they’ve been since the mid-1990s.”
The state median level of problem assets dropped to a near record low in the third quarter. The value of loans that are not current on their payments as a percent of the resources banks have to cover any losses dropped by 2.45 percentage points to 5.77 percent in the third quarter. North Dakota’s level is less than half of the national median of 12.1 percent.
Profitability for North Dakota banks improved in third quarter 2012, as measured by the median return on average assets. The state median stands at 1.24 percent, healthy within the historical range, even as banks nationwide face challenges to maintaining earnings. The national median is 0.89 percent.
North Dakota banks reported a remarkable median four-quarter net loan growth rate of 12.11 percent, more than ten times the national median of 0.91 percent, which only turned positive in the second quarter.
North Dakota median banks remained strong in both capital and liquidity. The total risk-based capital ratio, a key benchmark of capital adequacy, climbed slightly to 13.47 percent. Liquidity also improved by a small margin as the banks use of noncore funds (instead of more stable traditional deposits) decreased by 18 basis points to 15.77 percent of total liabilities.
The data for North Dakota and the nation are found in the tables below. The attachment to this release provides additional data on the characteristics of banks in the region and definitions and explanations of those data.
Data for North Dakota and the nation [pdf]
More details on 2012 banking conditions can be found on the following page: Banking Conditions in Ninth District States - Third Quarter 2012 Update.
Banking Conditions in South Dakota Improve a Bit and Continue Strong
South Dakota banking conditions generally improved and remain stronger than national conditions across key measures, according to Sept. 30, 2012, reports filed by the 74 commercial banks in the state. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “South Dakota banks continue to report minimal problem assets as the rest of the country recovers from crisis conditions. Profitability improved a bit in the third quarter, while loan growth was essentially flat. While measures of bank profitability and loan growth are below long-term averages in the state, they are performing better than measures in the rest of the country, overall.”
The state median ratio of problem loans to the resources banks have to cover losses improved by 27 basis points in the third quarter to a 20-year low of 3.84 percent, about a third of the national median.
South Dakota bank profitability increased slightly to 1.06 percent in third quarter 2012, as measured by the return on average assets. While that figure is still lower than precrisis levels, it compares favorably to the 0.89 percent national median.
The median growth in the amount of outstanding loans at South Dakota banks was just a bit lower than a quarter ago, but has improved over the past year and stands 3.14 percent. The national figure just turned positive in the second quarter and remains below 1 percent.
Measures of capital and liquidity both remain relatively strong in the state. The total risk-based capital ratio stands near historical highs at 17.29 percent, while the median use of noncore funds (as opposed to more stable traditional deposits) is at just 17.30 percent of liabilities, the lowest level since 2005.
The data for South Dakota and the nation are found in the tables below. The attachment to this release provides additional data on the characteristics of banks in the region and definitions and explanations of those data.
Data for South Dakota and the nation [pdf]
More details on 2012 banking conditions can be found on the following page: Banking Conditions in Ninth District States - Third Quarter 2012 Update.
Mixed Performance for Upper Peninsula Banks in the Third Quarter
In the third quarter of this year, the 21 banks in the Upper Peninsula of Michigan reported improved overall levels of problem assets but lower loan growth and earnings, according to data collected by the Federal Reserve’s Ninth District. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “The U.P.’s median level of problem assets declined in the quarter, but remains higher than a year ago. Problem assets in the U.P. are much higher than the national figures. The four-quarter loan growth rate deteriorated and remains negative, while the region’s median bank earnings ticked down and no longer exceed the national level.”
Banks in the Upper Peninsula reported a 65-basis-point drop in the level of problem assets as a percent of the resources banks maintain to cover losses. Nonetheless, these institutions report problem assets at 19.32 percent of capital and allowance, considerably higher than the national median of 12.1 percent. Improving commercial real estate loan quality drove the U.P.’s third quarter improvement with a reduction of 1.18 percent of capital and allowance.
Despite a small reduction in the median earnings at U.P. banks, the return on average assets through third quarter 2012 surpassed the national median by 1 basis point at 0.90 percent and has improved by 10 basis points from a year ago.
The total value of loans on bank books fell 0.6 percent from a year ago. In contrast, net loan growth rates in the rest of the country have improved and are now positive.
A key measure of capital, the total risk-based capital ratio, remains strong and improved in third quarter 2012 to 18.51 percent. Bank liquidity as measured by the use of noncore funding (rather than more stable traditional deposits) improved from 20.22 percent to 19.44 percent of total liabilities in the third quarter and compares favorably to the national median.
The data for upper Michigan and the nation are found in the tables below. The attachment to this release provides additional data on the characteristics of banks in the region and definitions and explanations of those data.
Data for Michigan and the nation [pdf]
More details on 2012 banking conditions can be found on the following page: Banking Conditions in Ninth District States - Third Quarter 2012 Update.
Western Wisconsin Banking Conditions Improving
The 56 banks in the western part of Wisconsin in the Ninth Federal Reserve District reported improvement across key metrics of health in the third quarter of 2012. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “Banks in western Wisconsin are showing a marked recovery from crisis conditions. While asset quality is still not as strong as national levels, the improvement is strong. Loan growth and earnings in the region continue to improve and are better than national levels.”
Although problem assets remain high in western Wisconsin banks, a key metric declined for the third consecutive quarter. As of third quarter 2012, loans that were behind on their payments decreased 81 basis points to 14.25 percent of the value of resources banks have to cover potential losses. Over the past year, that measure improved by more than 8 percentage points. Problem assets in commercial real estate loans, a key area of concern, did not improve in the quarter and are still considerably higher than those in the rest of the nation at 6.53 percent.
Profit levels, as measured by the median return on average assets, improved 12 basis points to 0.99 percent in the third quarter. This compares favorably to a national median of 0.89 percent.
The year-over-year growth in loans has improved markedly over the past year and gained 60 basis points in the quarter. Now at 2.07 percent, net loan growth in western Wisconsin outpaces the national median of 0.91 percent.
The total risk-based capital ratio, a key measure of capital, remains strong at 16.3 percent after setting a record high last quarter. Banks’ use of noncore funds rather than more stable traditional deposits dropped during the quarter to 18.68 percent of liabilities and remains below the national median.
The data for western Wisconsin and the nation are found in the tables below. The attachment to this release provides additional data on the characteristics of banks in the region and definitions and explanations of those data.
Data for Wisconsin and the nation [pdf]
More details on 2012 banking conditions can be found on the following page: Banking Conditions in Ninth District States - Third Quarter 2012 Update.