Minnesota's community banks are in a sweet spot this year, with profit and loan growth rising solidly and problem loans at their lowest rate since the 1990s, the Minneapolis Fed said Friday.

For businesses seeking capital, conditions could hardly be better. "If you're a firm that's looking for a loan, this is a great climate to be in," Fed Executive Vice President Ron Feldman said.

The upbeat tone in Feldman's 2015 forecast results from better-than-expected performance by the state's banks last year. "Some of it is just more confidence from their borrowers about making investments," he said.

In 2014, profitability, or return on average assets, came in at 1 percent for Minnesota's banks, above the 0.95 percent rate seen in 2013 but below the median profitability rate of 1.07 percent since 2000.

Loan growth, an indicator of future profits, soared 6.6 percent last year, at the top end of the range in Feldman's 2014 forecast. That also was well above the 3.1 percent growth seen in 2013 and the median of just over 4 percent since 2000. Feldman lifted his forecast for 2015 loan growth to a range of 5.6 percent to 9.6 percent.

Problem loans fell to 7 percent of loan loss reserves at the state's banks last year, continuing a decline that has left the measurement in record low territory for more than two years. At the peak of the economic downturn in 2008 and 2009, problem loans amounted to nearly one-fourth of loan loss reserves at Minnesota banks. This year, the amount of problem loans is expected to drop slightly more.

With the Minnesota economy performing even better than the solidly improving U.S. economy, most banks in the state will encounter little difficulty this year, the Fed's forecast said. The exception could be banks that do a lot of business with farmers, who are trying to cope with ultralow crop prices and smaller profits after two years of huge output.

Even that's a relatively small risk, Feldman said, because many ag-focused banks also are in the best condition they've been in for years and farmers themselves became flush after big profits in 2012 and 2013.

"We're going to need a couple of bad [crop price] years in a row before that shows up in problem loans," Feldman said.

The outlook covers more than 300 banks that are chartered in Minnesota. It doesn't include some of the state's biggest banks, such as Wells Fargo, U.S. Bank and TCF, which are chartered elsewhere.