Minnesota Bank Performance Weakens a Bit in First Quarter 2013, Despite Some Areas of Strength
Financial data reported by the 355 banks in Minnesota at the end of first quarter 2013 show that while problem assets fell, profitability and loan growth worsened and continue to lag the levels seen prior the financial market disruptions in 2008. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “The state’s banks have some areas of continued strength, such as declining and low levels of problem loans and strong capital levels. However, key indicators such as loan growth slowed in the last quarter, while earnings were down just a bit.”
The state median level of problem assets (as a percentage of the resources banks must have to cover potential losses on loans) fell by 71 basis points in the last quarter and nearly 3.5 percentage points from a year ago to the lowest point since 2005. Minnesota now compares favorably to the nation, with 10.97 percent noncurrent and delinquent loans as a percentage of capital and allowance, 36 basis points less than the national median.
Return on average assets, a key measure of earnings, is also better for the Minnesota median bank than for the nation as a whole at 0.92 percent. However, the metric decreased a bit in the quarter and has yet to reach the 1 percent watermark it remained above for more than a decade prior to the financial market disruptions in 2008.
Minnesota banks’ loan growth was 0.8 percent over the last four quarters, less than half the rate at year-end 2012. This year-over-year change in the amount of outstanding loan balances is well below the national rate of 1.92 percent and is sluggish by historical standards.
Key measures of liquidity and capital improved 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 15.72 percent. Liquidity improved again in the third quarter and reached the strongest level since 2003. Bank use of noncore funding (as opposed to more stable traditional deposits) stands at 13.4 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 banking conditions can be found on the following page: Banking Conditions in Ninth District States.
Condition of Montana Banks Weakens in First Quarter 2013
In the first quarter of 2013, Montana banks reported greater problem assets, negative loan growth and flat earnings, according to March 31 quarter-end regulatory financial reports from the state’s 62 commercial banks. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “Montana-based banks generally show year-over-year improvement, but weakened in the first quarter. At the state median bank, problem loans increased, loan growth fell to more deeply negative rates and earnings remained essentially flat at the comparatively low levels reported at the end of 2012. The median Montana bank continues to lag its national peer.”
The level of problem assets as a percentage of the resources set aside to cover potential loan losses increased 138 basis points in first quarter 2013 to 15.51 percent. While the current level is 220 basis points improved from a year ago, it is considerably higher than the national median ratio of 11.33 percent.
Earnings, as measured by the median of return on average assets, came in at 0.79 percent, essentially unchanged from last quarter and a couple of basis points below the national rate of 0.81 percent.
At the median Montana bank, year-over-year loan growth was much worse at the end of the first quarter, falling 147 percentage points from a quarter ago to negative 1.76 percent. By comparison, the national median rate of change in outstanding loan balances stands at 1.92 percent after turning positive in first quarter 2012.
Key measures of liquidity and capital remained strong in the first quarter. Median total risk-based capital remains in record high territory, posting a figure of 17.80 percent. Bank use of noncore funding (as opposed to more stable traditional deposits) decreased to 15.96 percent of liabilities. Both performance measures are 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 banking conditions can be found on the following page: Banking Conditions in Ninth District States.
Booming North Dakota Banking Conditions Weaken in First Quarter 2013, but Remain at Strong Levels
Problem loans held by North Dakota banks grew, while loan growth and profitability fell in the first quarter of 2013, based on financial data reported by the state’s 88 banks. This weakening occurs in the context of North Dakota banks outperforming national banks, in some cases by a very substantial margin. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “North Dakota banks took a step back from last year’s outstanding growth, earnings and loan performance. Even with this quarter, key metrics of North Dakota’s banking conditions exceed the rest of the country and the state’s own historical measures.”
In the first quarter, the state median level of problem assets worsened considerably from 2012’s record low. The value of loans that are not current on their payments as a percentage of the resources banks have to cover losses increased by 2.68 percentage points to 7.54 percent. Nonetheless, North Dakota’s median is well below the national level of 11.33 percent.
North Dakota bank profitability deteriorated a bit during the first quarter. As measured by the median return on average assets, earnings declined from 1.18 percent to 1.06 percent. State profitability measures still compare favorably to national averages that are recovering from the financial market disruptions that began in 2008.
North Dakota banks reported a vigorous median four-quarter net loan growth rate of 7.89 percent. While more than four times the national median of 1.92 percent, the state median is down by more than three percentage points from 2012’s annual growth rate.
Capital and liquidity measures remain strong at North Dakota banks. The total risk-based capital ratio, a key benchmark of capital adequacy, climbed slightly to 13.99 percent. Although somewhat lower than the national median, the typical bank in the state would be considered well capitalized. Liquidity also improved in terms of the median bank use of noncore funds (instead of more stable traditional deposits), which decreased by more than a percentage point to 12.74 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 banking conditions can be found on the following page: Banking Conditions in Ninth District States.
Banking Conditions in South Dakota Mixed in First Quarter from Strong Position; Loan Growth Continues, but Profits and Asset Quality Worsen
Some key financial ratios for the 71 banks in South Dakota—with the exception of positive loan growth—worsened in the first quarter of 2013, but generally remain at strong levels, according to quarterly call report data. Important measures of performance, such as problem assets and earnings, deteriorated a bit from the previous quarter. Already strong loan growth improved. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve of Minneapolis, “The first quarter showed some deterioration in banking conditions. Problem loans rose and profits fell. But this occurred in the context where loan growth continues, and the level of performance of South Dakota banks is exceptionally strong relative to the nation.”
The state median level of problem loans compared to the resources banks have on hand to cover potential loan losses increased by 41 basis points in the first quarter. In spite of the deterioration, the South Dakota state median is less than half of the national ratio.
South Dakota bank earnings, as measured by the median return on average assets, were down 11 basis points to a rate of 0.93 percent in the first quarter. Nonetheless, the state median earnings metric still compares favorably to the national rate of 0.81 percent.
The state’s banks maintained rapid loan growth in the first quarter, increasing the rate of net loan growth by 56 basis points to 4.58 percent. South Dakota considerably outpaces the national median rate of 1.92 percent.
Key indicators of liquidity and capital both remained historically strong in the first quarter. The median use of noncore funding dependence (as opposed to more stable traditional deposits) ratio increased by 3 basis points to 16.83 percent, near record lows. There was also little change in the total risk-based capital ratio that remains close to record highs at 17.31 percent.
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 banking conditions can be found on the following page: Banking Conditions in Ninth District States.
Upper Peninsula Banking Conditions Improve in First Quarter 2013, but Remain Far Off National Levels
In the first quarter of 2013, the 21 banks in the Upper Peninsula of Michigan reported declining problem assets and improved loan growth rates, but lower earnings. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “The U.P.’s banks showed some improvement in the first quarter of this year, which is promising. Nonetheless, the level of problem assets is relatively high, and year-over-year loan growth remains negative.”
For the quarter, banks in the Upper Peninsula reported a 131-basis-point drop in the median level of problem assets as a percentage of the resources banks maintain to cover losses. However, at 19.17 percent of capital and allowance, U.P. median bank problem assets are considerably higher than the national median of 16.35 percent.
U.P. bank profitability was low for the first quarter. Dropping 16 basis points from 2012, the median U.P. bank’s 0.75 percent return on average assets stands below the national median of 0.81 percent.
The year-over-year change in the total value of loans on bank books was negative 0.56 percent. This represents a strong improvement over the last quarter, but it is also below the 1.92 percent growth rate of the median bank in the country.
A key measure of capital, the total risk-based capital ratio, remains strong and improved in the first quarter to 18.84 percent. Bank liquidity as measured by the use of noncore funding (rather than more stable traditional deposits) improved to 20.02 percent of total liabilities in the 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 banking conditions can be found on the following page: Banking Conditions in Ninth District States.
Condition of Western Wisconsin Banks Worsens Slightly in First Quarter 2013
In the first quarter of 2013, problem assets were basically flat, earnings fell just a bit and the rate of loan growth declined for the 56 commercial banks in western Wisconsin. According to Ron Feldman, senior vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “The condition of western Wisconsin banks worsened slightly. Loan growth slowed, profits did not improve and asset quality improved only slightly over the quarter. In contrast, measures of capital and liquidity did improve. Steady improvement will be necessary for western Wisconsin banks to catch up to national levels in key areas.”
The level of problem assets (as a percentage of the resources banks must have to cover potential loan losses) declined by 32 basis points in the first quarter for banks in the western part of Wisconsin. Despite improvement made over the course of the last year, the level of problem loans in western Wisconsin still exceeds the national level.
Profits, as measured by the median return on average assets (ROAA), were down by a few basis points from the previous quarter. Western Wisconsin’s median ROAA of 0.91 percent is stronger than the national median of 0.81 percent.
After three consecutive quarters of steady and positive year-over-year changes in the outstanding balance of loans, the rate of net loan growth fell 1.64 percentage points to 0.68 percent in the first quarter. This level is less than the national median of 1.92 percent.
Key measures of capital and liquidity posted strong numbers in the first quarter. Western Wisconsin banks are maintaining record levels of capital. The total risk-based capital ratio of 16.78 percent was slightly higher than the national median ratio of 16.35 percent. The dependence on noncore funds (as opposed to more stable traditional deposits) continued to fall by 42 basis points to 17.30 percent of liabilities, lower than national median of 19.58 percent.
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 banking conditions can be found on the following page: Banking Conditions in Ninth District States.