Minnesota Banking Conditions Showed Only Modest Improvement in Second Quarter 2014
Minnesota banks reported modest to little improvement across measures of problem assets, loan growth and profitability in the second quarter of 2014, based on data from the 334 commercial banks in the state. According to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “Key metrics of Minnesota’s bank health turned in a mostly flat performance in the second quarter of 2014. The state’s median bank profitability did not change. Problem loans fell, but were already in strong condition. Loan growth improved, but only modestly.”
The level of problem loans compared with the resources banks have to cover loan losses improved by a small amount (81 basis points) in the second quarter. At 8.72 percent, Minnesota’s median problem assets ratio was just about the same as the national 8.64 percent median and better than the long-run median.
Profitability measures changed little in the quarter. Minnesota’s median return on average assets increased 2 basis points to 0.96 percent in the second quarter of 2014 and remains higher than the national 0.88 percent rate of return.
The state’s median annual rate of loan growth increased 34 basis points to 4.96 percent this quarter, a very small change by historical standards. The year-over-year change in the amount of outstanding loans remains somewhat below the 5.62 percent median rate for the nation as a whole.
Measures of liquidity and capital remain at healthy levels despite small steps backward in the quarter. The state’s total risk-based capital ratio stands at 15.61 percent after an 8-basis-point decrease. The median use of noncore funding (in contrast to more stable bank deposits) stands at 13.57 percent of liabilities. Both are strong, by historical standards.
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.
Montana Banking Conditions Improve in Second Quarter 2014
In the second quarter of 2014, three key measures of median bank health improved for Montana’s 60 banks. Problem loans decreased, loan growth accelerated and the rate of earnings increased. According to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “Banking conditions in Montana unambiguously improved in the second quarter of 2014. Problem loans were down considerably from last quarter, earnings were up and loan growth increased markedly to surpass the national median rate. Montana bank health currently compares well with the rest of the country. That said, earnings remain low for Montana banks relative to their performance over the last several decades.”
The level of problem loans as a percentage of resources banks must set aside to cover potential loan losses fell more than 2¾ percentage points to 8.99 percent. That improvement narrowed the gap between the Montana ratio and the national 8.64 percent median.
The state median return on average assets, a key metric of earnings, was up 5 basis points from the previous quarter at 0.87 percent, just 1 basis point from the 0.88 percent national median ratio. However, for much of the last 25 years, this measure was at or above 1.2 percent.
Montana’s median net loan growth rate was negative a year ago, but improved to 6.71 percent after a gain of more than 2½ percentage points in the second quarter of 2014. The national median growth rate over the last four quarters was slower at 5.62 percent.
Key measures of capital and liquidity remain stronger than national medians. Although the total risk-based capital ratio fell 73 basis points to 17.18 percent and the median bank’s reliance on noncore resources increased 20 basis points to 16.23 percent, both capital and liquidity measures remain healthy by historical standards.
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.
North Dakota Bank Performance Improves from Strong Levels in Second Quarter 2014
North Dakota banking conditions compare well with the rest of the nation and strengthened further in the second quarter of 2014. Key measures of asset quality, earnings and growth all improved from already exceptional levels relative to the rest of the country. According to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “After a slightly softer first quarter this year, North Dakota banks resumed gains in profitability and net loan growth rates and reported lower problem loans in the second quarter. The state’s continued strength stands out compared with national metrics in all three areas and approaches decade highs on some measures.”
In the second quarter of 2014, median problem loans as a percentage of the resources banks have to cover losses fell by 95 basis points to 4.7 percent. That ratio is the lowest it’s been since at least 1990. By comparison, the national median finished the quarter at 8.64 percent.
North Dakota bank earnings recovered from a first-quarter decrease. As measured by the median return on average assets, profitability increased 8 basis points to 1.17 percent. The North Dakota median stands well above the 0.88 percent national median rate of return.
The state median four-quarter net loan growth rate increased by more than 3 full percentage points over last quarter to 10.72, more than 5 percentage points greater than the national median of 5.62 percent.
Capital and liquidity measures are still strong at North Dakota banks. Liquidity, despite a 1-percentage-point increase in the median bank use of noncore funds (rather than more stable traditional deposits) remains stronger than the national median at 13.48 percent. Capital levels fell during the quarter, as measured by the median total risk-based capital ratio, but are still considered healthy at 13.54 percent.
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.
South Dakota Banking Conditions Soften, but Still Robust in Second Quarter 2014
Bank financial data for the second quarter of 2014 were flat or slightly weakened from three months earlier for the 68 banks in South Dakota. According to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “In the second quarter, the median South Dakota bank had more problem loans, flat profitability and declining loan growth. However, the softer quarter took place in the context of historically strong banking conditions within the state.”
At the median, South Dakota bank problem loans as a percentage of the resources to cover potential losses increased 9 basis points to 3.57 percent. That ratio stands at less than half the national median and remains near the historical lows reported at the end of last year.
Return on average assets, a key measure of earnings, was relatively unchanged, moving 1 basis point to 1.09 percent. Profitability compares favorably with the national median 0.88 percent rate of return.
After reaching a record high last quarter, South Dakota median year-over-year net loan growth slowed in the second quarter or 2014, falling by 90 basis points to 9.91 percent. Despite this decrease, the state’s growth rate statistic still stands out in comparison with the rest of the nation.
Capital and liquidity measures had mixed results in the second quarter, but also continue to compare favorably with the national figures. The median total risk-based capital ratio improved by 27 basis points to 16.36 percent, while median noncore funding dependence increased more than 2 percentage points to 18.09 percent.
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.
Banking Conditions in Upper Peninsula Michigan Improved but Remain Relatively Weak in Second Quarter 2014
The 21 banks in the U.P. experienced some improvement in bank profitability and loan growth in the second quarter of 2014, though problem loans increased. According to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “Banks in the Upper Peninsula continue to see weaker conditions than the nation as a whole, despite increased profits and loan growth in the region. The level of problem loans stands out as particularly challenging and moved in the wrong direction in the second quarter. In contrast, U.P. bank capital and liquidity levels remain strong.”
U.P. bank problem loan levels increased in the second quarter. The median ratio of loans that are behind on payments as a percentage of the resources that banks have to cover potential loan losses increased by 2¾ percentage points to 19.45 percent. This is more than double the national median of 8.64 percent.
Earnings, as measured by the median return on average assets (ROAA), improved 5 basis points from the previous quarter. The Upper Peninsula’s median ROAA of 0.69 percent remains substantially weaker than the national median of 0.88 percent.
The U.P.’s rate of loan growth over the last four quarters climbed 70 basis points to 1.01 percent. Loan growth remains comparatively weak and well below the national median loan growth rate of 5.62 percent.
Key measures of capital and liquidity continue to signal strength in the second quarter. The total risk-based capital ratio improved by 36 basis points to 19.49 percent. The dependence on the use of noncore funding (as opposed to more stable traditional deposits) was up 6 basis points at 17.36 percent, yet stands well below the national median of 19.57 percent.
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.
Western Wisconsin Bank Conditions Were Mixed in Second Quarter 2014
Some measures of bank health improved for the 53 Wisconsin banks in the Federal Reserve Ninth District, while others remain in weakened condition, based on financial data reported in the second quarter of 2014. According to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “At the median, western Wisconsin Banks turned in the strongest loan growth rate in five years and reduced the level of problem loans. However, profits improved only slightly and remain relatively weak on the heels of three consecutive quarters of falling earnings.”
In the second quarter of 2014, banks in the western part of Wisconsin saw an 89-basis-point drop in problem loans (as a percentage of funds set aside to cover potential loan losses) to 13.07 percent. Despite this decline, the median level of problem loans remains considerably higher than that of the rest of the nation.
Western Wisconsin bank earnings as measured by the return on average assets were up 2 basis points from the previous quarter to 0.89 percent. The ratio is just about the same as the 0.88 percent national median. Long-run median earnings are above 1 percent for western Wisconsin banks.
The year-over-year growth in the outstanding balance of loans at banks in the western part of Wisconsin increased more than 2 percentage points to 3.06 percent in the second quarter, the highest rate since 2009.
Key measures of capital and liquidity remain strong. The total risk-based capital ratio of 16.86 percent remains near record levels. Noncore funding as a percentage of liabilities fell by 51 basis points to 17.76 percent. Both metrics compare favorably with the rest of the country.
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.
Twin Cities Banks Turn in Mixed Performance in Second Quarter 2014
Banks in the Twin Cities metro area turned in mixed results across key metrics of health in the second quarter of 2014. Loan growth was very strong and problem loans fell a bit, but profits were flat. According to Ron Feldman, executive vice president of Supervision, Regulation and Credit at the Federal Reserve Bank of Minneapolis, “This quarter, Twin Cities banks reduced problem loans and reported a substantially stronger rate of loan growth, but earnings were flat and remain below historically normal levels.”
Problem assets were down at the median Minneapolis and St. Paul bank, as measured by the value of loans that are behind in their payments as a percentage of the resources banks have set aside to cover potential losses. The measure stands at 7.45 percent, 1.72 percentage points lower than a quarter earlier and down more than 4 percentage points from a year ago. By comparison, the national bank figure stands at 8.64 percent.
Return on average assets, a key measure of earnings, was essentially flat, improving by only 4 basis points to 0.90 percent, just a bit higher than the 0.88 percent national median rate at the end of the second quarter of 2014. The long-run median return is about 1.10 percent.
Although still below the national and state of Minnesota medians, Twin Cities loan growth made notable gains in the second quarter. The metro area’s four-quarter net loan growth increased to 3.72 percent, up more than 2 percentage points compared with the end of the first quarter of the year.
Key indicators of liquidity and capital remain strong. The total risk-based capital ratio was unchanged at 15.76 percent. The median use of noncore funding (as opposed to more stable traditional deposits) increased 18 basis points to 13.16 percent.
Data for the Twin Cities Metro and the nation [pdf]
More details on banking conditions can be found on the following page: Banking Conditions in Ninth District States.