Wisconsin banks saw overall growth in loans, deposits and net income in the first quarter, but higher interest rates and decreases in credit quality continued to put pressure on profitability, according to the latest Federal Deposit Insurance Corp. data.
Rose Oswald Poels, president and chief executive officer of the Wisconsin Bankers Association, said the data showed “the strength and stability of Wisconsin’s banking industry.”
“Geopolitical issues remain among top economic concerns,” Osawld Poels said. “In addition, decreases in credit quality indicate economic strain and signal challenges for consumers, businesses, and banks if inflation is not tamed. The Fed is unlikely to ease interest rates until the end of 2024 at the earliest; banks stand prepared to help their customers weather headwinds.”
Net loans and leases for Wisconsin banks increased to $110.8 billion in the quarter, up 0.93% from the end of 2023 and up 3.98% year-over-year.
In the quarter, loan growth was boosted by a 1.15% increase compared to the end of 2023 in commercial and industrial loans to $18 billion.
Residential real estate loans, on the other hand, were down 10.81% from the fourth quarter to $30.2 billion. They were still up 13.62% from a year ago.
Total deposits grew 0.34% from the end of Q4, reaching $122.8 billion. Compared to a year ago, total deposits are up 3.97%.
Interest rates have remained higher as the Federal Reserve continues to work to combat inflation. For banks, that’s translate to a higher yield on earning assets, but also a greater cost in funding those assets.
For the first quarter, the yield on earning assets at Wisconsin banks was 5.48%, up from 5.14% at the end of 2023 and 4.72% a year ago.
The cost of funding earning assets in the quarter was 2.39%, up from 1.94% at the end of 2023 and 1.42%.
Those figures have translated to a downward trend in net interest margin for Wisconsin banks from 3.3% a year ago to 3.2% at the end of 2023 and 3.1% in the most recent quarter.
As a percentage of average assets, noninterest expense was 3.46% in the quarter, up from 3.31% a year ago.
Noninterest income was also up from 1.76% to 1.98%.
Banks have also seen an increase in the amount of assets either more than 90 days past due or in nonaccrual status. A year ago, those assets totaled $406.3 million. By the end of 2023, the total was up to $542.8 million. It climbed 13.69% in the quarter to $617.1 million.
Despite the various pressure points on profitability, bank net income did increase to $410 million in the quarter, up from $386 a year ago.
