Profits and loan growth at Minnesota's 355 community banks declined in the first three months of the year compared to the final months of last year. Benchmarks continue to lag the levels seen prior to the 2008 economic downturn, according to the Minneapolis Federal Reserve Bank.
Most banks have greatly reduced the bad loans on their books but are having a harder time making money on loans, Senior Vice President Ron Feldman said. Profit remains about 20 percent below the average for the past two decades.
Feldman said banks aren't paying depositors much in interest. But competition among lenders is holding down the rates they can charge borrowers. Banks also are seeing less income from the government bonds they hold.
"What I hear from bankers is that loan competition, particularly on the commercial side, is exceptionally fierce, Feldman said. "So, you're going to see competition on price. So, you're going to be able charge a little bit less than maybe you would have been able to several years ago."
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