MN Banks See Some Positive Indicators in Q3

Minnesota's financial institutions reported increased earnings, but the positive results remain well below historic levels.

Minnesota's banks saw an uptick in earnings during the third quarter, which ended September 30, according to data released Tuesday by the Federal Deposit Insurance Corporation (FDIC).

The 405 FDIC-insured institutions in the state together reported $186 million in year-to-date net income. For the same period last year, 421 insured banks had a net income of only $138 million. Still, the figures remain well below 2008 levels, when net income totaled $433 million.

Total assets of Minnesota's banks dipped to $61.2 billion from $62.2 billion during the first nine months of 2009. Total deposits inched up to $50.7 billion from $50.4 billion.

Minnesota's banks saw an improvement in their ratio of total capital to risk-weighted assets-14.7 percent compared to 13.32 percent during the same period a year ago.

The state's banks experienced a 0.4 percent return on assets, up from 0.3 percent in 2009. The FDIC describes return on assets as a “basic yardstick of profitability”-meaning that things are looking up a bit from 2009.

Still, the state's positive indicators remain well below past levels. For instance, there were 433 FDIC-insured institutions in Minnesota during the third quarter of 2008-and they reported a 0.76 percent return on assets.

Furthermore, total loans and leases totaled $41.6 billion for the first three quarters of the year-down from $44.3 billion in 2009.

On the national stage, the country's 7,760 FDIC-insured institutions reported $14.5 billion in earnings for the third quarter-an impressive $12.5 billion jump from $2 billion during the third quarter of the previous year. The positive results mark the fifth consecutive quarter of year-over-year earnings increases.

“The industry continues making progress in recovering from the financial crisis. Credit performance has been improving, and we remain cautiously optimistic about the outlook,” FDIC Chair Sheila Bair said in a statement. “Lower provisions for loan losses are driving bank earnings by allowing a larger share of revenues to reach the bottom line.”

Bair warned, however, that it's too early for banks to significantly reduce reserves, and that they should “always err on the side of caution.”

Roughly 63 percent of the country's financial institutions reported improvements in their quarterly net income from a year ago, but about 19 percent had a net loss.

The number of banks on the FDIC's “problem list” rose from 829 to 860 during the quarter-the highest it's been since 1993, when there were 928.

Forty-one banks failed during the quarter, bringing the total number this year to 127-seven of which failed in Minnesota.