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Executive Letter: WBA Bank CEO Survey Results Signal Caution Heading Into 2024

By Rose Oswald Poels

Wisconsin bank leaders have the unique vantage point of being both financial experts and business advisers to their customers. That is what makes the Wisconsin Bankers Association (WBA) biannual Bank CEO Economic Conditions Survey a valuable tool in identifying current and future trends. Bankers have unique insights into their customer’s financial health as well as understand issues facing businesses in their markets. In our latest survey, conducted at the end of November, 68% of respondents rated Wisconsin’s current economic health as “excellent” or “good.” While most respondents (95%) do not foresee inflation worsening, 44% predict that the economy will weaken over the next six months and 47% predict it will stay about the same over the next six months. At the close of 2022, 72% of respondents predicted the economy would weaken over the next six months and 28% predicted it would stay about the same, showing some easing of economic concerns at 2023 year-end.

Among the economic bright spots cited by bank CEOs in the survey were low unemployment, profitability of area businesses — particularly in construction and manufacturing — and relatively good commodity prices for the agricultural industry. On the other hand, bank CEOs reported staffing and interest rates as top concerns of their business customers heading into the new year. The survey also showed inflation, a high cost of living, and availability and affordability of housing as top concerns for individuals and families for 2024.

I would like to thank the 66 bank CEOs who completed the survey. Your perspective not only provides insights to support WBA’s public relations outreach on behalf of the industry, but it also informs the Association on the economic well-being of your customers and communities. In addition, the aggregate survey results serve as a resource to member bankers to compare your market-area perspective with those of your peers across the state.

View the Results
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Chair’s Column: Inspiring Resilience and Prosperity

Upcoming events empower bankers in their service to Wisconsin

By Donna Hoppenjan

As the last several years have demonstrated, the future is becoming increasingly difficult to predict. Yet, individuals, families, and businesses across Wisconsin look to their local bankers as experts and beacons of stability to lead them through uncertainty. Standing ready to assist its members in serving their communities, the Wisconsin Bankers Association (WBA) remains committed not only to providing the resources and support necessary to navigate the challenging times, but also to illustrating the opportunities on the horizon.

The last several years have seen rising interest rates and ongoing recessionary fears, bringing the health of our economy to the forefront of our collective consciousness. For many, these challenges underscored the key role that bankers play in guiding their communities towards financial stability and growth. Looking ahead to the new year, our neighbors will turn to us for our interpretation of economic data and guidance on trends that we will likely see. Along the way, WBA will continue to empower bankers with resources and opportunities to inspire resilience.

One way in which the membership can be sure to remain abreast of our unique economic environment is by attending the Association’s Midwest Economic Forecast Forum. The Forum, which will be held on January 11, 2024, is presented in partnership with several other Midwestern banking associations and is focused specifically on providing an opportunity
for bankers across the Midwest to hear from nationally renowned experts on what opportunities and challenges are expected in the next 12 months.

The 2024 Forum will again be held virtually, and banks are encouraged to invite staff, business customers, directors, and any others interested. More information — including individual and group rates — will be available at wisbank.com/econ.

Additionally, Wisconsin’s largest gathering of bank leaders — the WBA Bank Executives Conference — is right around the corner, February 7–9, 2024. This premier event, which will once again be held at the Kalahari Convention Center in Wisconsin Dells, will feature several general and breakout sessions, banker-only peer groups and other networking opportunities, an extensive exhibit hall, and two award ceremonies.

The unifying theme of the 2024 event — “Inspire” — underscores the dedication and commitment of the over 30,000 bankers across the state to Wisconsinites. Serving as trusted financial advisors
and community builders, bankers in Wisconsin continually inspire progress and prosperity in the lives of those they serve. During this year’s event, I am excited to not only celebrate our achievements throughout the last year, but also to join my peers in harnessing the power of inspiration to navigate the evolving banking landscape, lead with resilience, and ignite positive change in our communities.

These annual events are not just an opportunity to gain knowledge and connections; they are a reminder to each of us of the profound impact banking has on the people and places we call home. I hope that you will join me at either — or both — of these upcoming events to enhance your team’s knowledge for the benefit of Wisconsin’s banking industry.

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5 Steps to Grow Your Bank’s Community Relationships in 2024!

In today’s challenging economic environment, your business customers and community leaders are likely looking for some insight on the economy and expectations for 2024 and beyond. WBA has put together a virtual forum that will bring Federal Reserve Bank of Minneapolis First Vice President Ron Feldman right into your bank via livestream to provide an economic outlook and address audience questions. The virtual forum will take place live on Thursday, January 11 from 11:00 a.m. – Noon CT. Those who are registered will also receive access to the recording for 14 days following the live presentation.

Step 1: Make a List

Put together a list of your business customers and local community and business leaders to invite to join your bank’s team to watch the January 11 Midwest Economic Forecast Forum. Invite them to join you that morning to network with your staff and other local leaders and enjoy lunch together after the live webinar.

Step 2: Reserve a Room

Be sure to reserve a meeting room, perhaps your boardroom, training room, or a community room, to host your guests. Make sure that you have the right AV in place to be able to project or display the Zoom webinar and have speakers in place for the sound. A test run is always a good idea!

Step 3: Register Online

Register online for a group registration, which includes access for up to 10 different locations. If you have customers who are unable to join you in person, or wish to watch the recording afterwards, add them as your group guests so they get the link directly in their email inbox!

Step 4: Order Lunch

Once you know how many guests to expect, order lunch to be delivered at Noon from a local caterer or restaurant! There’s no better way to support your community than supporting a local business! Don’t forget to order dessert!

Step 5: Host Your Guests!

As you prepare for your guests to arrive, consider having name badges prepared (be sure to have some blank ones available too), brew some coffee, and get some other beverages together. Designate staff to welcome your guests and direct them to the meeting room. Watch the live webinar together and then enjoy lunch while hosting a great networking event!

If you have questions or need assistance with registration, please contact the WBA Education team via email.

 

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Wis. Bank CEOs Weigh In on Economic Outlook

WBA releases results of Bank CEO Economic Conditions Survey 

In the Wisconsin Bankers Association’s biannual Economic Conditions Survey of Wisconsin bank CEOs, nearly three quarters of respondents rated Wisconsin’s current economic health as “excellent” or “good.” These most recent survey results show some easing of inflation and recession concerns; 86% of respondents predict inflation to fall or stay about the same over the next six months, compared to 76% of respondents in the prior survey conducted at the end of 2022. Pessimism is fading as only 48% of respondents predict the economy to worsen over the next six months, compared to 72% of respondents at the close of 2022. 

“Wisconsin bank CEOs have unique knowledge of their local market dynamics, given their economic expertise along with their relationships with businesses, community organizations, families, and individuals in their areas,” said WBA President and CEO Rose Oswald Poels. “With a mild recession predicted for the remainder of the year, bankers continue to serve as trusted partners in helping community members weather challenges and achieve their financial goals.“ 
 
Among the economic bright spots cited by CEOs in the survey were high employment and wages, demand for goods and services, strong industries — summer tourism, construction, agriculture, and manufacturing — and in-migration from the Twin Cities and Chicago. Top economic concerns reported by bank CEOs were inflation and labor — particularly in service-related industries, deposit growth, and compressing interest rate margins. 

 
The mid-year 2023 survey was conducted May 16–31 with 66 respondents. Sums may not equal 100 percent due to rounding. Below is a breakdown of the survey questions and responses.

How would you rate the current health of the Wisconsin economy. . .  Mid-Year 2023 End-of-Year 2022  Mid-Year 2022 
Excellent 5% 6% 7%
Good 68% 69% 64%
Fair 27% 24% 29%
Poor 0% 1% 0%
In the next six months, do you expect the Wisconsin economy to. . . 
Grow 0% 0% 2%
Weaken 48% 72% 63%
Stay the same 52% 28% 36%
Over the next six months, do you expect inflation to. . . 
Rise 14% 24% 50%
Fall 44% 51% 22%
Stay about the same 42% 25% 28%
How likely would you say a recession is in the next six months? 
Very unlikely 0% 0% 4%
Unlikely 5% 3% 16%
Neutral 24% 10% 20%
Likely 56% 62% 45%
Very likely 15% 25% 16%
Rate the current demand in the following categories: 
Business Loans 
Excellent 6% 3% 2%
Good 44% 44% 48%
Fair 48% 46% 48%
Poor 2% 7% 2%
Commercial Real Estate Loans 
Excellent 11% 6% 7%
Good 33% 34% 52%
Fair 50% 53% 36%
Poor 6% 7% 5%
Residential Real Estate Loans 
Excellent 5% 4% 2%
Good 14% 7% 20%
Fair 50% 33% 50%
Poor 31% 55% 29%
Agricultural Loans 
Excellent 0% 3% 2%
Good 41% 23% 37%
Fair 50% 60% 51%
Poor 9% 13% 10%
Deposit 
Excellent 3% 3% 5%
Good 17% 44% 55%
Fair 58% 44% 38%
Poor 23% 9% 2%
In the next six months, do you anticipate the demand for the following categories will. . . 
Business Loans 
Grow 6% 8% 11%
Weaken 50% 56% 48%
Stay the same 44% 35% 41%
Commercial Real Estate Loans 
Grow 9% 1% 13%
Weaken 56% 63% 48%
Stay the same 35% 35% 39%
Residential Real Estate Loans 
Grow 13% 6% 4%
Weaken 25% 54% 63%
Stay the same 62% 41% 34%
Agricultural Loans 
Grow 12% 15% 6%
Weaken 32% 38% 31%
Stay the same 56% 48% 63%
Deposit 
Grow 17% 13% 11%
Weaken 31% 38% 36%
Stay the same 52% 49% 53%
In the next six months, are the businesses in your bank’s market area likely to. . . 
Hire employees 25% 17% 31%
Maintain current staffing levels 69% 71% 61%
Lay off employees 6% 11% 7%
In the next six months, is your bank likely to. . . 
Hire employees 23% 23% 34%
Maintain current staffing levels 74% 73% 63%
Lay off employees 3% 4% 4%
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Bank CEO Economic Forecast: Cloudy with a Chance of Recession

WBA Releases Results of Bank CEO Economic Conditions Survey

In the Wisconsin Bankers Association’s biannual Economic Conditions Survey of Wisconsin bank CEOs, three quarters of respondents rated Wisconsin’s current economic health as “excellent” or “good.” This continues a trend from the mid-year 2022 survey, when 71% of survey respondents gave “excellent” or “good” ratings. None of the Wisconsin bank CEOs who completed the most recent survey foresee major economic improvement in the first half of 2023 — 28% predict that the economy will stay the same and 72% predict it will weaken in the next six months.

“Because they are in tune with the financial circumstances of businesses and families in their areas, bank CEOs are experts who can apply a lot of context to their economic perspective,” said WBA President and CEO Rose Oswald Poels. “With the likelihood of a recession in the coming year looming, banks are standing ready to help their customers and communities through.“ 

 
Among the economic bright spots cited by CEOs in the survey were high employment, continued spending by consumers, the housing market, and business growth — particularly in manufacturing, agriculture, and service/tourism. Top economic concerns reported by bank CEOs were inflation, the likelihood of recession, rising interest rates/slowed loan growth/reduced ability of borrowers to repay loans, business staffing, cybersecurity/fraud, and inability to access childcare.

The end-of-year 2022 survey was conducted November 15–30 with 71 respondents. Sums may not equal 100 percent due to rounding. Below is a breakdown of the survey questions and responses.

Wisconsin Bank CEO Economic Conditions Survey Results 

How would you rate the current health of the Wisconsin economy?  End-of-Year 2022  Mid-Year 2022  End-of-Year 2021 
Excellent  6%  7%  6% 
Good  69%  64%  73% 
Fair  24%  29%  20% 
Poor  1%  0%  1% 
        
In the next six months, do you expect the Wisconsin economy to…       
Grow  0%  2%  21% 
Weaken  72%  63%  15% 
Stay the same  28%  36%  64% 
        
Over the next six months, do you expect inflation to…       
Rise  24%  50%  – 
Fall  51%  22%  – 
Stay about the same  25%  28%  – 
       
How likely would you say a recession is in the next six months?       
Very unlikely  0%  4%  – 
Unlikely  3%  16%  – 
Neutral  10%  20%  – 
Likely  62%  45%  – 
Very likely  25%  16%  – 
       
Rate the current demand in the following categories:       
Business Loans       
Excellent  3%  2%  9% 
Good  44%  48%  48% 
Fair  46%  48%  39% 
Poor  7%  2%  5% 
        
Commercial Real Estate Loans       
Excellent  6%  7%  11% 
Good  34%  52%  44% 
Fair  53%  36%  41% 
Poor  7%  5%  4% 
        
Residential Real Estate Loans       
Excellent  4%  2%  25% 
Good  7%  20%  48% 
Fair  33%  50%  24% 
Poor  55%  29%  3% 
        
Agricultural Loans       
Excellent  3%  2%  1% 
Good  23%  37%  22% 
Fair  60%  51%  58% 
Poor  13%  10%  18% 
        
Deposit       
Excellent  3%  5%  – 
Good  44%  55%  – 
Fair  44%  38%  – 
Poor  9%  2%  – 
       
In the next six months, do you anticipate the demand for the following categories will…       
Business Loans       
Grow  8%  11%  28% 
Weaken  56%  48%  14% 
Stay the same  35%  41%  59% 
        
Commercial Real Estate Loans       
Grow  1%  13%  24% 
Weaken  63%  48%  21% 
Stay the same  35%  39%  55% 
        
Residential Real Estate Loans       
Grow  6%  4%  11% 
Weaken  54%  63%  56% 
Stay the same  41%  34%  33% 
        
Agricultural Loans       
Grow  15%  6%  15% 
Weaken  38%  31%  14% 
Stay the same  48%  63%  71% 
        
Deposit       
Grow  13%  11%  – 
Weaken  38%  36%  – 
Stay the same  49%  53%  – 
       
In the next six months, are the businesses in your bank’s market area likely to…       
Hire employees  17%  31%  68% 
Maintain current staffing levels  71%  61%  33% 
Lay off employees  11%  7%  0% 
        
In the next six months, is your bank likely to…       
Hire employees  23%  34%  55% 
Maintain current staffing levels  73%  63%  43% 
Lay off employees  4%  4%  3% 
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Wisconsin Bank CEOs Weigh in on Inflation and Possibility of Recession

WBA Releases Results of Bank CEO Economic Conditions Survey

In the Wisconsin Bankers Association’s biannual Economic Conditions Survey of Wisconsin bank CEOs, 71% of respondents rated Wisconsin’s current economic health as “excellent” or “good.” This marks a decline from the mid-year 2021 survey, when 91% of survey respondents gave “excellent” or “good” ratings. Nearly all (over 98%) of the Wisconsin bank CEOs who completed the most recent survey predict that the economy will stay the same or weaken in the next six months. 

“Wisconsin bank CEOs have a unique vantage point in that they are both financial experts and highly involved individuals in their local communities,” said WBA President and CEO Rose Oswald Poels. “While the economy remains relatively stable, bankers are keeping a close eye on important indicators and stand ready to support their customers through possible economic challenges over the coming months.“ 

Among the economic bright spots cited by bank CEOs in the survey were strong tourism, construction, manufacturing, and agricultural industries. Survey results indicate that the hiring market and real estate market are cooling down. Top economic concerns reported by bank CEOs were inflation, cost of living/childcare/education, rising interest rates, oil and gas prices, staffing shortages, and the war in Ukraine.

The mid–year 2022 survey was conducted May 24–June 10 with 56 respondents. Sums may not equal 100 percent due to rounding. Below is a breakdown of the survey questions and responses.

Wisconsin Bank CEO Economic Conditions Survey Results
How would you rate the current health of the Wisconsin economy. . .  Mid-Year 2022  End-of-Year 2021  Mid-Year 2021 
Excellent  7%  6%  15% 
Good  64%  73%  76% 
Fair  29%  20%  10% 
Poor  0%  1%  0% 
         
In the next six months, do you expect the Wisconsin economy to. . .        
Grow  2%  21%  48% 
Weaken  63%  15%  39% 
Stay the same  36%  64%  13% 
         
Over the next six months, do you expect inflation to. . .       
Rise  50%  –  – 
Fall  22%  –  – 
Stay about the same  28%  –  – 
       
How likely would you say a recession is in the next six months?       
Very unlikely  4%  –  – 
Unlikely  16%  –  – 
Neutral  20%  –  – 
Likely  45%  –  – 
Very likely  16%  –  – 
       
Rate the current demand in the following categories:        
Business Loans        
Excellent  2%  9%  10% 
Good  48%  48%  30% 
Fair  48%  39%  52% 
Poor  2%  5%  8% 
         
Commercial Real Estate Loans        
Excellent  7%  11%  13% 
Good  52%  44%  44% 
Fair  36%  41%  33% 
Poor  5%  4%  10% 
         
Residential Real Estate Loans        
Excellent  2%  25%  40% 
Good  20%  48%  48% 
Fair  50%  24%  12% 
Poor  29%  3%  0% 
         
Agricultural Loans        
Excellent  2%  1%  2% 
Good  37%  22%  34% 
Fair  51%  58%  56% 
Poor  10%  18%  8% 
         
Deposit       
Excellent  5%  –  – 
Good  55%  –  – 
Fair  38%  –  – 
Poor  2%  –  – 
       
In the next six months, do you anticipate the demand for the following categories will. . .        
Business Loans        
Grow  11%  28%  43% 
Weaken  48%  14%  7% 
Stay the same  41%  59%  51% 
         
Commercial Real Estate Loans        
Grow  13%  24%  31% 
Weaken  48%  21%  8% 
Stay the same  39%  55%  31% 
         
Residential Real Estate Loans        
Grow  4%  11%  14% 
Weaken  63%  56%  41% 
Stay the same  34%  33%  46% 
         
Agricultural Loans        
Grow  6%  15%  18% 
Weaken  31%  14%  6% 
Stay the same  63%  71%  76% 
         
Deposit       
Grow  11%  –  – 
Weaken  36%  –  – 
Stay the same  53%  –  – 
       
In the next six months, are the businesses in your bank’s market area likely to. . .        
Hire employees  31%  68%  82% 
Maintain current staffing levels  61%  33%  15% 
Lay off employees  7%  0%  3% 
         
In the next six months, is your bank likely to. . .        
Hire employees  34%  55%  48% 
Maintain current staffing levels  63%  43%  45% 
Lay off employees  4%  3%  6% 
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Inflation, Global Supply Chains, and Labor Top the List of 2022 Economic Trends to Watch

Minneapolis Fed President Neel Kashkari and Economist Dr. David Kohl Headline Midwest Economic Forecast Forum 

By Cassandra Krause, Wisconsin Bankers Association 

On January 4, the Wisconsin Bankers Association hosted the 2022 Midwest Economic Forecast Forum in partnership with the Illinois Bankers Association, Michigan Bankers Association, Minnesota Bankers Association, Montana Bankers Association, and South Dakota Bankers Association. The event kicked off with a presentation by Minneapolis Federal Reserve Bank President and CEO Neel Kashkari. His presentation was followed by a town hall-style Q & A, moderated by WBA President and CEO Rose Oswald Poels. The conversation included topics such as the conditions in sectors like manufacturing, agriculture, and construction; the Fed’s dual mandate from Congress; supply chains; an influx in bank deposits; and Community Reinvestment Act (CRA) modernization. 

Kashkari on webinar

Minneapolis Fed President Neel Kashkari

 

Wisconsin’s Recovery Slower Than Minnesota’s, But Regional Recovery Mirrors That of the Nation 

Kashkari said that overall, our region looks a lot like the nation, but there are differences. Wisconsin started recovering more quickly than Minnesota did, but then the recovery became slower over the last six months to year. What happens with COVID will continue to matter because workers getting sick will be a disruption to economic activity. 

Kashkari noted that economic recovery since initial COVID-19 shutdowns has been uneven. “On one hand, GDP is fully recovered. . . but different sectors have been affected differently,” said Kashkari. “Many workers have found jobs. . . and while the unemployment rate has come down, we are still about 4–6 million workers short of where we should be, had there been no pandemic.”   

Demand for Labor Has Recovered More Quickly Than Supply  

The labor market was one of the main topics Kashkari responded to in the Q & A. 

“One of the things that I learned before the pandemic was that the vast majority of Americans want to work,” said Kashkari. “Every time businesses told us ‘we’re out of workers,’ as wages started to climb, workers came back in, and that was resoundingly positive for everyone. . . I still believe that’s true.”  

Kashkari commented that people of all income levels have more savings and more options — and there’s still a lot of fear of getting COVID or bringing it home to a vulnerable family member. The demand for labor has come back, but it’s going to take longer for people to feel comfortable coming back into the job market.  

Two Rate Hikes Likely in 2022 

With regard to inflation, Kashkari predicted it will be transitory, though it has been higher and has lasted longer than he had expected. He referred to his essay, titled “Two Opposing Risks,” which was published just prior to his presentation, and said he foresees two interest rate hikes this year. The rate rises may require sacrificing some gains in employment in order to keep inflation under control. 

Role of Banks in Communities Highly Appreciated 

Kashkari highlighted how community banks stepped up powerfully through the Paycheck Protection Program. “[Banks] have managed exceptionally well during the pandemic,” he said, adding that he has nothing but admiration for community banks and the role they served. WBA’s Oswald Poels expressed gratitude on behalf of community bankers for the recognition of their efforts. 

Kohl and Oswald Poels

Dr. David Kohl and Rose Oswald Poels

Economic Mega Trends 2022 and Beyond 

Dr. David Kohl, a highly anticipated speaker at events hosted by WBA and state banking associations around the country, discussed ten global macro-economic mega trend disruptors. The renowned economist and professor emeritus at Virginia Tech also responded to audience questions in a dialog moderated by Oswald Poels. 

Disruptors Present Both Challenges and Opportunities 

Some of the major disruptors Kohl highlighted in his presentation were globalization; environmental, social, and governance (ESG); and technology and automation. He provided a recent historical overview of inflation and provided a watch list for short- and long-term inflation. “Uncertainty concerning inflation, geopolitics, supply and marketing chains creates challenges but also presents opportunities,” said Kohl. “This is true for businesses and individuals with a high business and financial IQ that follow the process and execute a business plan.” 

Global Perspective Key to Success 

Kohl gave an overview of markets around the globe to keep an eye on, including Asia/China and Europe/Russia. “’Think globally, but act locally’ is a theme for success in the decade of the 2020s,” advised Kohl. “Observe economic mega trends from afar and connect the dots to determine how they impact your bank, business, employees, and customers’ lives.”   

Wisdom for Banking 

Like any good educator, Kohl had words of wisdom to share with the audience beyond what can be found in textbooks and data reports. “Success in life and business is about managing the controllables and managing around the uncontrollables,” he explained. “From the board room to business front lines, one cannot manage what happens in Washington, D.C., Beijing, or Brussels, but can attempt to manage around uncontrollable factors using scenario planning. Focus energy and strategy on the controllable elements with tactics that are agile and adaptive given the economic landscape.” 

If you were unable to attend the live broadcast, you can still register to receive access to the recording through January 18, 2022 plus resources provided by Kashkari and Kohl. 

Wisconsin Experts Offer Sector Forecasts 

As an extension of the Midwest Economic Forecast Forum, WBA has compiled eight sector-specific reports from industry experts on what 2022 will hold for Wisconsin. The reports include insights from Rose Oswald Poels, Wisconsin Bankers Association; Robb Kahl, Construction Business Group; Kevin Krentz, Wisconsin Farm Bureau Federation; Brandon Scholz, Wisconsin Grocers Association; Eric Borgerding, Wisconsin Hospital Association; Kurt Bauer, Wisconsin Manufacturers & Commerce; Michael Theo, Wisconsin Realtors Association; and Tom Still, Wisconsin Technology Council. 

To read the full Wisconsin Economic Report, please visit wisbank.com/2022forecast. 

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WBA Wisconsin Economic Report
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WBA Releases Wisconsin Economic Report

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WBA Wisconsin Economic Report

Wisconsin Banks Strong Heading into 2022

Rose Oswald Poels

Banks well-positioned to help customers navigate any economic headwinds

By Rose Oswald Poels, WBA President and CEO

As we continue to navigate the evolving health pandemic heading into 2022, Wisconsin banks are well-positioned to serve the varying needs of their customers and communities. Through the third quarter of 2021, Wisconsin’s 176 headquartered banks are financially strong with continued high levels of liquidity that will allow them to meet their customers’ various borrowing needs.

The continued resiliency of the industry was evident in the Federal Deposit Insurance Corporation’s (FDIC) third quarter numbers. Nearly all of the industry is profitable and more than 72% of Wisconsin banks saw earnings gains and good credit quality through the third quarter of 2021. Wisconsin banks also saw a slight increase in net loans in the third quarter compared to the prior quarter, led largely by residential real estate lending; however, on a year-over-year (YoY) basis, lending was down 2.44%.

Overall, loan demand throughout last year was weak, and I expect that to continue for at least the first six months of 2022 and perhaps longer. Commercial loan demand was particularly low as Wisconsin banks saw a more than 23% decline in commercial and industrial loan portfolios in the third quarter of 2021 compared to the same quarter the prior year. This is largely attributed to factors, such as workforce shortages and supply chain issues, that will persist into 2022. These two factors alone have stunted growth in the business sector as many retail businesses are forced to alter their hours of operation and manufacturers to cut back production, all of which results in lower loan demand. In addition, many of these businesses received one or more forms of government stimulus or low-cost emergency loans, resulting in lower demand for traditional loans from banks as their balance sheets remained financially healthy.

The agricultural sector is expected to have a growth in profitability in the coming year in part to having received government stimulus or low-cost emergency loans over the last few years as well as having experienced a strong year last year. Farmland loans remained at nearly the same levels in the third quarter of 2021 compared to both the prior quarter and the same period in the previous year. Farm loans rose by 3.26% compared to the prior quarter but were down 7.83% compared to the third quarter in 2020. According to the national Fall 2021 Agricultural Lender Survey produced jointly by the American Bankers Association and Farmer Mac, agricultural lenders expect 70% of their borrowers to be profitable through 2022.

Wisconsin banks continue to be a safe place for consumers to keep their money, as evidenced by a 10.42% YoY climb in deposits from the third quarter of 2020 compared to the third quarter of 2021. I expect these deposit balances to remain high as economic headwinds in 2022, notably inflation and the Omicron variant of COVID-19, will likely cause stock market fluctuations that often make investors nervous.

Despite these economic challenges, I expect the Federal Reserve to raise interest rates only once during 2022, which will impact the banking industry’s profitability. With continued weak overall loan demand and the prolonged low interest rate environment putting pressure on the net interest margin of Wisconsin banks, 2022 could be a more difficult year for the banking industry. Nonetheless, with the industry’s strong financial condition, banks are positioned well to weather the upcoming year.

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Founded in 1892, the Wisconsin Bankers Association (WBA) is the state’s largest financial industry trade association, representing more than 200 commercial banks and savings institutions and over 21,000 employees.

The Association represents banks of all sizes from banks in rural Wisconsin to the state’s largest financial institution in Green Bay, and nearly 98 percent of banks in the state are WBA members.

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WBA Wisconsin Economic Report

Tech Will Help Drive Economy in Unpredictable Year

By Tom Still, WTC President

The list of economic uncertainties for 2022 is long and complex, with COVID-19 variants, supply chain woes, energy disruptions, climate-change anxieties, and political frictions around the world producing jittery markets.

It’s time to look for trends in technology to calm frazzled nerves on Wall Street as well as Wisconsin’s Main Streets.

Analysts at International Data Corp., the global market intelligence firm, predict the technology industry is on track to exceed $5.3 trillion in 2022 — thus returning to the 5% to 6% annual growth rate typical before the pandemic. The United States is the world’s largest tech market, representing about a third of the projected total at $1.8 trillion.

Tech overcame the 2020 speed bump precisely because COVID-19 triggered so much change. The workplaces of today are no longer easily defined. Changes in business travel forced innovation. Cybersecurity threats led to more investment across industry lines, from financial services to “Mom and Pop” retailers. Phrases such as “quantum computing,” “virtual reality,” and “artificial intelligence” were once the exclusive lingo of computer scientists; today, they’re part of the business plans for many companies.

It all points to bigger tech budgets, greater investment and more innovation pushing through the economic super-structure.

Technology will continue to disrupt many verticals. Health care is being transformed through telemedicine and wearables, not to mention breakthroughs in diagnostics and therapeutics. The jury is out on how effective remote learning has been for students of all ages, but online education will continue to have a role in the classroom. Sales through eCommerce in the United States continue to soar (hence, some of today’s supply chain troubles) and trends such as cryptocurrency are altering the financial world.

Tech can help slow climate change effects through conservation controls in homes, offices, cities, and power plants, even if “crypto-mining” has become an energy vampire. Likewise, as technology displaces many people in the workforce, it will create more new jobs than it destroys. The trick is ensuring that people are trained to do the work and opportunities don’t bypass women and minorities.

There are some threats to U.S. tech sectors, but also opportunities for Wisconsin to grow as a tech-savvy state.

In Washington, D.C., Congress should establish data privacy rules that are national in scope versus a state-by-state approach that could hamper companies engaged in eCommerce, finance, or insurance. Congress should avoid unnecessary taxes on venture capital managers and not pass an antitrust bill that would shut down “exit” options for young companies.

Congressional consensus around bipartisan plans to invest federal dollars in key research areas could help Wisconsin, especially if the state’s research universities and private partners can compete for one or more R&D “hubs” envisioned through the National Science Foundation.

In the Wisconsin Legislature, the refining of the state’s investor tax-credit law will lead to more angel and venture capital dollars flowing into young companies. When the Qualified New Business Venture law took effect in 2005, angel and venture capital investments could be measured in the tens of millions of dollars. The 2021 total will easily exceed $500 million, in part because those credits are pulling four times their weight in private investment. Pending bills would improve the law.

The new year may be tumultuous in many ways, but growth in tech markets could help smooth choppy waters.

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The Wisconsin Technology Council is the independent, non-partisan science and technology advisor to the governor and the Legislature.

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