MN Banks See Some Positive Signs in Q2

Second-quarter results for Minnesota's banks were mostly in line with national trends-the state's financial institutions saw a year-over-year increase in earnings, but the numbers remain below historical levels.

Minnesota's banks earned slightly more during the first half of this year than they did during the same period last year, but the state's financial institutions are still struggling, according to data released Tuesday by the Federal Deposit Insurance Corporation (FDIC).

Minnesota's 406 FDIC-insured institutions earned about $57 million during the quarter that ended June 30, down slightly from $65 million in the first quarter.

However, year-to-date net income totaled $122 million, up from $83 million during the same period last year. Although positive, these results are a far cry from 2008, when Minnesota's banks saw $321 million in net income during the first two quarters.

About 20.7 percent of Minnesota's banks were unprofitable during the second quarter.

“Without question, the industry still faces challenges,” FDIC Chairwoman Sheila C. Bair said in a statement. “Earnings remain low by historical standards, and the numbers of unprofitable institutions, problem banks, and failures remain high. But the banking sector is gaining strength, earnings have grown, and most asset-quality indicators are moving in the right direction.”

Second-quarter total assets for Minnesota's banks dipped to $60.94 billion from $61.66 billion during the same period last year.

Nationally, the 7,830 institutions insured by the FDIC reported an aggregate profit of $21.6 billion in the second quarter-the highest quarterly earnings since the third quarter of 2007 and a vast improvement from the $4.4 billion net loss during the second quarter of 2009.

“Nearly two out of every three banks are reporting better year-over-year earnings,” Bair said in a statement. “As long as economic conditions remain supportive, most institutions should maintain profitability and increase their capacity to lend.”

One in five institutions across the country reported a net loss for the quarter, marking an improvement from 29 percent a year earlier.

Banks' average return on assets-which the FDIC describes as “a basic yardstick of profitability”-rose to 0.6 percent during the second quarter from a negative 0.13 percent during the same period a year ago. Minnesota banks' return on assets totaled 0.4 percent in the second quarter, up from 0.27 percent during the same period in 2009.

The number of FDIC-insured institutions in Minnesota dropped to 406 during the second quarter from 425 last year. Seven banks have failed in Minnesota this year, and a total of 118 banks have failed across the United States.