The combined profitability across all Wisconsin-based banks decreased 12% for the first nine months of the year, including a 16% drop in the third quarter, according to the latest figures from the FDIC.
Wisconsin banks reported $1.17 billion in net income for the nine quarters ending in September this year, down from $1.33 billion in 2022. For the third quarter, the banks had net income of $382 million, down from $457 million last year.
Nationally, banks reported $68.4 billion in net income, a 3.4% decrease from the prior quarter driven by lower noninterest income and higher realized losses on securities, according to the FDIC.
Even with rising interest rates, Wisconsin banks saw essentially no change in overall net interest margin, which came at 3.19% for the first nine months of the year, the same as 2022. The yield on earning assets did increase from 3.52% to 4.99%, but the cost of funding those assets was also up from 0.33% to 1.79%.
As a percentage of average assets, noninterest expenses were relatively steady, increasing just 1 basis point to 3.32% for the first nine months.
Noninterest income was somewhat of a drag on profitability declining from $2.1 billion to $2.07 billion. As a percentage of average assets, noninterest income decreased 11 basis points to 1.84%.
“The newly released FDIC numbers showed that Wisconsin banks remained on solid footing through the third quarter of 2023, said Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association. “Banks continue to be trusted partners in helping individuals, families, and businesses meet their financial goals. As has been the case for several quarters – inflation, interest rates, and geopolitical issues remain concerns heading into 2024.”
Despite the challenges to profitability, the banks did see balance sheet growth.
Total deposits grow 0.95% compared to the second quarter, reaching $121.1 billion. That figure was up 0.59% from the same time in 2022.
The state’s larger banks, those with more than $1 billion in assets, have seen the deposit growth, in particular, with a 1.6% quarter-over-quarter increase and 2.33% increase year-over-year.
Smaller banks, on the other hand, have seen shrinking deposit totals, down 0.37% from the second quarter and 2.77% from the prior year.
When it comes to lending, Wisconsin banks overall saw a 1.4% increase in net loans and leases compared to the second quarter, reaching $111.5 billion. That figure was up 7.3% from the same period in 2022.
Once again, the larger banks with more than $1 billion in assets saw stronger growth, up 2.2% from the prior quarter and 8% year-over-year, reaching $78.2 billion.
Smaller banks saw their combined net loans and leases decrease 0.2% from the second quarter while posting a 5.8% year-over-year increase to reach $33.4 billion.
Across all banks based in the state, commercial and industrial loans totaled $17.9 billion, down 1.6% from the second quarter but up 2.36% year-over-year.
Residential loans increased 15.38% from the second quarter to $31.4 billion, an increased of more than 25% from 2022.
Farm loans were also up 10.3% year-over-year to $5.19 billion.
One potential area of concern is the growing number of bank assets either more than 90 days past due or in nonaccrual status. Assets in that group for Wisconsin banks totaled $518.6 million for the quarter, up 19.7% from the second quarter and 24.26% from last year.
