FDIC data shows returns up and asset quality improved for Midwest banks

Midwest banking continues to regain strength according to fourth quarter 2014 data released by the FDIC. Return on equity and return on assets increased year-over-year in 2014. Also, asset quality issues and the percentage of unprofitable institutions have declined while loan volume, net interest margin and net income increased compared to 2013..Midwest banks with less than $100 million in assets also reported improved performance across most banking metrics. They showed improved ROA, ROE, NIM and asset quality. Total loans and leases declined, however, in most states for smaller banks. Across asset sizes, asset quality improved for all Midwest banks in 2014 with the exception of banks under $100 million in South Dakota..Out of seven Midwest states – Iowa, Illinois, Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin – Minnesota and North Dakota saw the most improvement in banking metrics. The only states that did not see improvement in most key metrics were South Dakota and Wisconsin where the percentage of unprofitable banks increased and net income, ROA, ROE and NIM declined..In Minnesota, for banks over $100 million, ROE rose to 11.7 percent, up from 11.42 percent. Their ROA rose to 1.22 percent, up from 1.19 percent in 2013. Banks under $100 million also improved ROE to 8.21 percent, up from 7.83 percent, and ROA to 0.92 percent, up from 0.88 percent. The percentage of unprofitable institution fell to 4.7 percent for all banks and to 8.14 percent for small banks. Loan portfolios grew by 15 percent across all banks but declined by nearly 5 percent for small banks..In North Dakota, for banks over $100 million, ROE increased to 15.23 percent, up from 14.7 percent, while ROA increased to 1.44 percent, up from 1.39 percent. Small banks increased ROE to 11.64 percent, up from 11.43 percent, and ROA to 1.14 percent, up from 1.1 percent. The percentage of unprofitable banks increased to 1.19 percent from 1.14 percent. Smaller bankers were the winners for loan growth in the state. Banks under $100 million increased total loans and leases by nearly 3 percent while banks over $100 million in assets had total loans and leases decline by nearly 2 percent..In South Dakota, while ROE and ROA declined for the state overall. ROE and ROA declined for larger banks while they increased for smaller banks. Banks over $100 million saw ROE decrease to 10.31 percent and ROA to 1.07 percent; down from 11.68 percent and 1.26 percent respectively. Banks under $100 million increased ROE to 10.08 percent, up from 9.9 percent, and ROA to 1.17 percent, up from 1.11 percent. Yet, smaller banks saw loans and leases decline by 8 percent. Larger banks increased loans and leases by nearly 3 percent..In Iowa, ROE and ROA were flat for large and small banks. State chartered banks earned an 11.05 percent ROE and a 1.15 percent ROA in 2014. That's up from an 11.04 percent ROE and a 1.13 percent ROA in 2013. The percentage of unprofitable banks declined to 1.25 percent from 1.83 percent in 2013. Total loans and leases at small banks declined by 2.5 percent while large banks grew their loan portfolios by 9 percent..In Nebraska, ROE and ROA also increased for all banks. Large banks increased ROE to 11.4 percent, up from 11.36 percent, and ROA to 1.18 percent, up from 1.16 percent. The percentage of unprofitable banks increased to 2.99 percent, from 2.88 percent. Total loans and leases declined by 10.6 percent for banks under $100 million. Larger banks increase their total loans and leases by 9 percent..In Illinois, for banks under $100 million, ROE increased to 4.85 percent, up from 3.7 percent, and ROA to 0.55 percent, up from 0.41 percent in 2013. Banks over $100 million increased ROE to 6.76 percent and ROA to 0.74 percent, up from 6.54 percent and 0.72 percent, respectively. The percentage of unprofitable banks decreased to 1.55 percent from 2.32 percent. Banks over $100 million grew total loans and leases by 5 percent while total loans and leases at smaller banks declined by 3 percent..For Wisconsin, ROE and ROA declined for the state overall. However, while ROE and ROA declined for larger banks but increased for smaller banks. Banks under $100 million increased ROE to 5.57 percent, up from 4.96 percent, and ROA to 0.68 percent, up from 0.62 percent in 2013. ROE decreased for banks over $100 million to 7.91 percent, down from 9 percent. For the same banks, ROA decreased to 0.95 percent, down from 1.07 percent. The percentage of unprofitable banks increased to 6.8 percent from 5.38 percent in 2013. Total loans and leases declined 4 percent at smaller banks while they increased by 5.5 percent at banks over $100 million..Generally, Midwest states are performing above the national average across key metrics. The national average for ROA was 1.01 percent in 2014. For ROE, the national average was 9.03. The average for ROA in the Midwest was 1.08 percent and for ROE it was 10.44 percent. The national average for noncurrent loans to loans was 1.96 percent. The Midwest average was 1.2 percent with banks under $100 million at a 1.1 percent average. .For more information visit the industry data page on NorthWestern Financial Review's website for our 4th Quarter banking profile for 14 Midwestern states.