MN Banks’ Profits Outpace National Growth

Profits at Minnesota-based banks climbed more than 17 percent in 2013, outpacing the national growth rate of 9.6 percent.
MN Banks’ Profits Outpace National Growth

The nation’s banks earned record profits last year—and Minnesota’s financial institutions significantly outpaced the national growth rate.

The total number of Minnesota institutions insured by the Federal Deposit Insurance Corporation (FDIC) fell from 379 in 2012 to 360 in 2013, but, in aggregate, their profits climbed 17.5 percent to $705 million last year.

Nationally, all FDIC-insured banks and savings institutions reported total earnings of $154.7 billion in 2013, up 9.6 percent from the prior year.

Minnesota banks’ assets rose slightly to around $63.2 billion, while deposits ticked up to $53.8 billion. Meanwhile, Minnesota banks’ average return on assets (ROA)—which the FDIC describes as “a basic yardstick of profitability”—climbed from 0.92 percent to 1.14 percent in 2013. And their loans and leases rose more than 2 percent to $40.3 billion.

The data also shows that fewer than 6 percent of Minnesota banks were unprofitable in 2013, compared to 10 percent in 2012.

National Trends

Improvement at Minnesota’s banks in many ways mirrored national trends.

More than half of all institutions reported net income growth in 2013, and fewer than 8 percent lost money. That’s the lowest portion of unprofitable banks since 2005, according to the FDIC.

The full-year results were driven in part by a strong fourth quarter. During the last three months of 2013, profits at the nation’s banks climbed nearly 17 percent to $40.3 billion. The increased profitability was largely the result of an $8.1 billion decline in loan-loss provisions, or the funds set aside to pay for losses or litigation expenses, the FDIC said.

However, net operating revenue (the sum of net interest income and total noninterest income) fell 1.7 percent at the nation's banks during the fourth quarter. The decline was attributed largely to reduced mortgage activity and lower trading income, according to the FDIC.

U.S. banks’ ROA, meanwhile, rose to 1.1 percent in the fourth quarter from 0.96 percent a year ago.

“The trend of slow-but-steady improvement that has been underway in the banking industry since 2009 continued to gain ground,” FDIC Chairman Martin J. Gruenberg said in a statement, adding that U.S. banks’ asset quality improved, loan balances rose, and the number of “problem banks” continued to decline.

But significant challenges remain: “Narrow margins, modest loan growth, and a decline in mortgage refinancing activity have made it difficult for banks to increase revenue and profitability,” Gruenberg said. “Nonetheless, these results show a continuation of the recovery in the banking industry.”

View more detailed data about how Minnesota banks performed in 2013 here.

Find national data here.