Minn. banks' bad loans on decline

Minnesota banks on the whole had fewer bad loans and slightly better profits in the three months ending in September.

Ron Feldman, senior vice president of supervision, regulation and credit at the Federal Reserve Bank of Minneapolis, said the typical Minnesota bank has managed its problem loans and other assets mostly by writing off bad loans or rewriting the loan terms.

The percentage of delinquent loans at the typical Minnesota bank is now back on track with 20-year trends.

However, Feldman said banks are still not generating many new loans, which is an important source of revenue.

"If someone asks me what is the main issue facing banks, the problem asset issue for most banks is under control," Feldman said. "This is the issue: How are they going to make money going forward?"

Feldman said banks can't cut costs much further — they're already paying depositors next to nothing in interest.