Wisconsin’s 170 state-chartered banks saw profits rise 9.7 percent over the first three quarters, compared to the same period last year, according to data released by the state Department of Financial Institutions.
Net income was $422.6 million in the first nine months of the year, up from $385.2 million in the first three quarters of 2015.
The profit increase for state-chartered banks is a departure from the performance of all 227 Wisconsin banks reported yesterday by the Federal Deposit Insurance Corp. Their profit was down $100 million from the same period last year.
That’s likely because larger banks are more frequently chartered at a national level, and some of them have moved significant sums into their loan loss reserves during 2016, cutting into their bottom lines, said Rose Oswald Poels, president and chief executive officer of the Wisconsin Bankers Association.
All Wisconsin banks had set aside $132.1 million in loan loss reserves as of Nov. 30, up nearly $84 million from last year at the same time, when the group had $48.2 million in loan loss reserves.
State-chartered banks, on the other hand, had set aside $25.6 million in loan loss reserves through three quarters of 2016. It was a decrease from the first three quarters of 2015, when they set aside $27.7 million in loan loss reserves.
Banks put aside loan loss reserves both when they have loans they expect will go bad and when they make new loans, as required by regulators.
“I do think many banks wrote off bad loans or set aside more money in loan loss reserves because of the increased lending they’re doing, which is required by regulators,” Oswald Poels said.
Recent regulatory changes have upped the reserves that must be set aside with each new loan, which could have contributed to the increase over 2015, she said.
“The actual default rates themselves, they continue to go down,” Oswald Poels said. “I’m not really concerned about it but banks do have to be prudent about how they manage their balance sheet. You have to always account for some potential risk there, so some of this is prudent for banks to do.”
State-chartered bank loans totaled $35.2 billion during the first three quarters, up 3 percent from $34.1 billion during the same period last year.
“In traveling around the state meeting with community bank leaders, I am hearing a great deal of optimism about the state of the industry and the economy,” said Lon Roberts, secretary of the DFI, which oversees state-chartered banks. “That optimism is underscored by the strong performance of our state-chartered institutions not only in the third quarter, but for several consecutive quarters.”
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