fedgazette

Banking activity in the Bakken still stronger than the rest of North Dakota and Montana

Ron J. Feldman | Executive Vice President and Senior Policy Advisor
Stacy Jolly | Financial Analyst

Published November 7, 2014

Banks in the Bakken continue to outpace banks in the rest of North Dakota and Montana in asset and liability growth, as well as return on assets. However, the pace of loan growth in the Bakken has slowed from a couple years ago, according to mid-year Call Report data on 13 banks headquartered in the Bakken compared with other banks in North Dakota and Montana.

Bank profits and deposits: Despite a small decline during the second quarter of 2014, Bakken bank profits (as measured by the return on average assets, or ROAA) remain high through the first half of 2014, at 1.59 percent. That compares with ROAA of 1.13 for other banks in North Dakota, 0.86 percent in the rest of Montana and 0.88 percent nationwide (see Chart 1).

Chart 1: Return on investment

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Deposits: Deposits at Bakken banks grew 19 percent year-over-year as of the end of June (see Chart 2). That is significantly higher than deposit growth at banks in the rest of North Dakota (8 percent) and Montana (5 percent) over the same period.

Chart 2: Total deposits

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Lending: Loan growth at Bakken banks continues at a steady pace but has slowed from much higher rates seen in 2012. This is also one performance area where some other banks have been keeping closer pace of late, particularly in construction and land development (CLD) and residential real estate loans. Annual CLD loan growth at Bakken banks was 26 percent in the second quarter of 2014 (see Chart 3). Banks in the rest of North Dakota saw an annual increase of 27 percent, while growth among nonBakken banks in Montana was 5 percent.

Chart 3: Construction and land development loans

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Commercial and industrial loans in Bakken banks increased 17 percent in the second quarter of 2014 from a year earlier, while increasing 10 percent in the rest of North Dakota and 9 percent in the rest of Montana (see Chart 4).

Chart 4: Commercial and industrial loans

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Annual growth in residential real estate loans (first and second liens secured by 1-4 family properties) in Bakken banks was at 18 percent as of mid-year 2014, while the rate in the rest of North Dakota was 12 percent, and 7 percent in the rest of Montana. However, from first quarter to second quarter, growth was highest at banks in the rest of North Dakota, reaching 11 percent. Growth during the same quarter in Bakken banks was 3 percent, and 5 percent in the rest of Montana (see Chart 5).

Chart 5: Residential real estate loans

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