Banks are healthy, but guarded on lending

Minnesota's 370 community banks got a bit healthier last year according to the Federal Reserve Bank of Minneapolis.

Profits edged up slightly. Lending declined but not as much as it did in the previous year. And banks reduced the amount of bad loans on their books.

The group does not include power players like TCF, US Bank and Wells Fargo.

Ron Feldman, a senior vice president at the Minneapolis Fed, expects the banks will do even better this year, but they will still likely fall short of historic benchmarks for profits, lending and loan quality.

"There's going to be improvement. Profit improvement is not going to be super strong. But there's going to be some improvement," Feldman said. "And even with stronger improvement, it's going take maybe another year to get back to what would have been considered normal."

About a third of the financial institutions increased lending last year.

Feldman believes they banks want to lend, but aren't seeing strong demand from qualified borrowers. He said banks are competing with rates to make loans to financially strong borrowers.