Minnesota banks continue to show steady improvements

Minnesota banks showed another quarter of improvement in key measures of health, based on Sept. 30, 2011, data reported by the 372 banks in the state, according to the Federal Reserve Bank of Minneapolis. However, key metrics of profitability and loan growth remain weak.

“Compared with pre-2008, Minnesota banks are still facing high loan delinquencies, low profits and weak loan growth” said Ron Feldman, senior vice president for supervision, regulation and credit.

Overall, asset quality showed strong improvement in the third quarter. The improvement in the quality of commercial real estate loans was also strong. But the overall ratio of past due loans compared with bank resources available to cover losses was somewhat worse in Minnesota than in the country overall. The same is true for commercial real estate loans, which have a ratio of weak loans to bank loss-absorbing resources of about 6 compared to a ratio of about 5 for the nation.

Profits did not improve as much as loan quality, the Reserve reported. Measures of profitability—the return on average assets and the net interest margin—increased only slightly and are still weak compared with the levels of earnings banks enjoyed prior to 2008. The return on average assets for both the median Minnesota and national bank was about 0.8 percent.

Tags: business, minnesota, money