fedgazette

Banking activity and performance in the Bakken in 2013

Ron J. Feldman - Executive Vice President and Senior Policy Adviser
Stacy Jolly - Financial Analyst

Published May 8, 2014

Asset and liability growth of banks in the Bakken have outpaced banks in the rest of North Dakota and Montana for the past several years. That relative outcome continued in 2013, although the rate of growth in the Bakken has slowed.

The data in this analysis compare the 14 banks headquartered in the Bakken with other banks in North Dakota and Montana. The one exception is for deposits, which includes data for all banks active in the Bakken, whether headquartered there or not.

Bank Performance

Bakken bank profits, as measured by the return on average assets (ROAA), continue to be higher than bank profits in the rest of North Dakota and Montana, as well as in the rest of the country. As of Dec. 31, 2013, the ROAA for Bakken banks was 1.37 percent, compared with 1.10 percent for banks in the rest of North Dakota, 0.90 percent in the rest of Montana and 0.85 percent in the rest of the United States (see Chart 1).

Return on investment

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Deposits

By some measures, there has been little slowdown in the Bakken. Quarterly Call Reports show that year-over-year increases in deposits, at banks headquartered in the Bakken, significantly outpaced increases at banks headquartered in the rest of North Dakota and Montana; in fact, the gap between Bakken and non-Bakken deposit growth increased during 2013 (see Chart 2). By year-end, deposit growth at Bakken banks rose to 19 percent versus 5 percent for other North Dakota banks and 2 percent for other banks in Montana.

Total deposits

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In the fourth quarter of 2013, deposits increased 9 percent from the third quarter at Bakken banks, the highest quarter-to-quarter increase since the fourth quarter of 2011. Over the past four years, annual deposit growth in the Bakken averaged 17 percent, versus 9 percent for banks in the rest of North Dakota and 7 percent for banks in the rest of Montana.

Strong deposit activity in the Bakken can also be seen in the Summary of Deposits data (see map) collected by the Federal Deposit Insurance Corp. annually as of June 30 for branches as well as headquarters of all FDIC-insured institutions. Counties within the Bakken are among those seeing some of the greatest annual deposit increases, with McKenzie and Divide counties seeing the biggest increases (27 percent and 26 percent, respectively).

Montana and North Dakota - Percent change in deposits by county

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Lending

Growth in construction and land development (CLD) loans and commercial and industrial (C&I) loans within Bakken banks continued at a faster pace than in the rest of North Dakota and Montana, but at lower levels than seen previously. CLD loan growth continued at a robust pace of 31 percent in the fourth quarter of 2013 compared with a year earlier (see Chart 3). Banks in the rest of North Dakota also experienced large growth in CLD loans last year, but at a lower 21 percent growth rate, while CLD loan growth in the rest of Montana was 4 percent.

Construction and land development loans

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Commercial and industrial loans in Bakken banks increased 19 percent in the fourth quarter of 2013 from a year earlier, while increasing 8 percent in the rest of North Dakota and 4 percent in the rest of Montana (see Chart 4). On a quarter-to-quarter basis, C&I loans at banks within the Bakken increased 8 percent in the fourth quarter from the third quarter of 2013, while decreasing 0.2 percent in North Dakota and 0.5 percent in Montana.

Commercial and industrial loans

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Residential real estate loans (first and second liens secured by 1-4 family properties) in Bakken banks has been slowing since mid-year 2012, similar to the rest of North Dakota and Montana (see Chart 5). But growth remained at a solid 17 percent in the fourth quarter of 2013 from a year earlier, higher than the 4 percent growth rate in the rest of North Dakota and 5 percent in the rest of Montana.

Residential real estate loans

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