Wisconsin’s state-chartered banks saw profits increase 11.3 percent in the first six months of the year, according to data released by the Wisconsin Department of Financial Institutions.
That’s in stark contrast to the complete group of all Wisconsin banks, which saw profits plummet in the first half of the year, according to the FDIC’s Quarterly Banking Profile, which was released Tuesday.
There are 172 state-chartered banks in Wisconsin. The QBP included those and federally-chartered banks, for a total of 231 institutions.
State-chartered banks reported total net income of $279.3 million in the first half of the year, up from $251 million in the same period last year.
Total loans were $35 billion, up 4.4 percent from $33.5 billion in the first half of 2015.
“State-chartered banks in the second quarter continued their recent trend of solid year-over-year performance,” said Lon Roberts, secretary of the Department of Financial Institutions, which oversees state-chartered banks. “Moving forward, they are well positioned to continue those growth trends and help strengthen the Wisconsin economy.”
When a bank is chartered, it can choose whether it wants to be regulated at the state or federal level. Most Wisconsin banks are state-chartered. It is often cheaper and the regulators are often based in the immediate area, so many like the relationship, according to Rose Oswald Poels, president and chief executive officer of the Wisconsin Bankers Assocation.
State-chartered banks are regulated by the DFI, while federally-chartered banks are regulated by either the FDIC or Office of the Comptroller of the Currency.
It’s not clear what caused the discrepancy between the overall group of state banks and the state-chartered banks, Oswald Poels said.
“We really have not had time to truly look at every bank…of the banks that have really been unprofitable for this period compared to the last,” she said. “The regulatory burden is the same regardless of how you’re chartered.”
One regulation that could have impacted state bank profits overall is a final rule released by the Financial Accounting Standards Board on June 16, Oswald Poels said. When it goes into effect in 2019, banks will have to comply with the current expected credit loss standard, which requires banks to estimate the expected loss over the life of a loan. Some banks appear to be getting a head start by increasing loan loss provisions, which cuts into profits.
“They really are forcing banks to say if you’re experiencing loan growth, you need to account for that loan growth in your loan loss provision,” she said.
Some banks also are exposed to weakening industries such as oil and gas and agriculture, and may be adding to loan reserves for that reason, Oswald Poels said.
Other factors also could be at play for the profit plunge.
“Expenses really are very high for banks right now and maybe depending on the timing of when banks made bigger purchases in software or infrastructure may have affected their profitability,” she said.
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