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Q2 2023 FDIC Numbers Show Wisconsin Banks in Good Health

Second-quarter 2023 data from the Federal Deposit Insurance Corporation (FDIC) show that Wisconsin banks remain on a solid foundation. Banks continue to be responsive to the needs of their customers, and lending increased in all categories (commercial, residential, and farm loans). Deposits also increased slightly as consumers and businesses remained confident in Wisconsin banks as a safe place to keep their money. Net interest margin remains strong at 3.24%, and capital levels are healthy. 

Notable indicators include: 

  • Residential loans continued to grow, both year over year (14.19%) and quarter over quarter (3.26%). With low inventory, homes continue to sell quickly. Despite recent interest rate increases, rates remain relatively low in historical context.
  • Commercial lending increased year over year (6.38%) and has picked up quarter over quarter (3.06%), showing increased confidence of business owners. 
  • Farm loans increased both year over year (8.50%) and quarter over quarter (26.16%). 
  • Credit quality weakened slightly as inflation and rising interest rates have made it more difficult for borrowers to pay back their loans.  
  • Deposits increased slightly over both the year and the quarter as inflation eases and consumers and businesses are able to save more. 

Statement on the release of second-quarter 2023 Federal Deposit Insurance Corporation (FDIC) numbers from Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association:  

“In the second quarter of 2023, Wisconsin banks showed continued strength and profitability. Banks continue to meet the borrowing needs of individuals, families, and businesses. Deposits have held steady, and delinquencies remain low. While inflation, interest rates, and geopolitical issues remain concerns for the remainder of 2023, banks are prepared for future risks and are poised to support their communities through possible economic challenges.” 

FDIC-Reported Wisconsin Numbers (Dollar Figures in Thousands)

    6/30/2023  3/31/2023   QoQ Change  6/30/2022   YoY Change  
Net loans and leases   $109,974,664  $106,543,106  3.22%  $99,946,680  10.03% 
Total deposits   $119,920,910  $118,136,508  1.51%  $118,628,924  1.09% 
Commercial and industrial loans  $18,241,734  $17,700,465  3.06%  $17,147,615  6.38% 
Residential loans   $27,242,091  $26,381,632  3.26%  $23,857,546  14.19% 
Farm loans   $4,824,718  $3,824,265  26.16%  $4,446,588  8.50% 
Total assets   $152,378,582  $149,715,078  1.78%  $145,897,591  4.44% 
Assets 90+ Days Past Due or in Nonaccrual Status   $433,555  $406,287  6.71%  $430,201  0.78% 
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Q1 2023 FDIC Numbers Show Resiliency of Wisconsin Banks 

First-quarter 2023 data from the Federal Deposit Insurance Corporation (FDIC) show that Wisconsin banks remained on solid footing even as two out-of-state institutions failed during the period. While deposits decreased slightly at Wisconsin banks, borrowers overall continued to keep up to date on their loan payments. Residential, commercial, and farm loans all increased year over year. Importantly, net interest margin remains strong at 3.30% and capital levels are healthy.

Notable indicators include:

  • Residential loans continued to grow, both year over year (16.47%) and quarter over quarter (1.92%). With low inventory, homes continue to sell quickly. Despite recent interest rate increases, rates remain relatively low in historical context.
  • Commercial lending increased year over year (11.27%) but slowed in the last couple of quarters as business owners held off on borrowing due to concerns of recession in 2023.
  • Farm loans increased both year over year (2.58%) and quarter over quarter (2.06%).
  • Borrowers continue to pay down their debt, and noncurrent loans decreased year over year (-15.98%) and quarter over quarter (-1.26%).
  • Deposits decreased slightly year over year (-0.70%) and quarter over quarter (-1.56%) as consumers and businesses felt the pressure of inflation on their savings or left traditional banks in search of higher yields elsewhere.

Statement on the release of first-quarter 2023 Federal Deposit Insurance Corporation (FDIC) numbers from Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association: 

“Wisconsin banks overall fared very well during the first quarter of 2023 despite the strain on the banking system caused by inflation and rising market interest rates. Banks in our state — and the U.S. banking system overall — have the capital and liquidity to continue to meet the needs of consumers and businesses. This goes to show that Wisconsinites can continue to have confidence that their money is safe in a Wisconsin bank. With respect to the ongoing economic challenges and geopolitical concerns, Wisconsin banks are well-positioned to weather the mild economic downturn that is expected in the remainder of 2023.”

FDIC-Reported Wisconsin Numbers (Dollar Figures in Thousands)

03/31/2023 12/31/2022 QoQ Change 03/31/2022 YoY Change
Net loans and leases $106,540,141 $105,370,783 1.11%  $94,488,857  12.75%
Total deposits  $118,136,508 $120,013,420 -1.56%  $118,967,927  -0.70%
Commercial and industrial loans  $17,700,465 $17,804,684 -0.59%  $15,907,329  11.27%
Residential loans  $26,381,632 $25,884,618 1.92%  $22,650,405  16.47%
Farm loans  $3,824,265 $3,746,971 2.06%  $3,728,094  2.58%
Total assets $149,723,596 $149,560,399 0.11% $143,313,990  4.47%
Assets 90+ Days Past Due or in Nonaccrual Status  $406,287 $411,481 -1.26%  $483,579  -15.98%
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May 2023 Compliance Journal

The May 2023 WBA Compliance Journal is now available. In this edition, readers will find an article covering recently issued guidance by FDIC, CFPB, and OCC, each of which identify activities expected to be a focus of upcoming compliance examinations. Readers will also find an article highlighting an interagency statement and an interim final rule regarding the transition from US LIBOR. The publication also includes a summary of recently published agency rules and notices, other important compliance-related updates, and a WBA Education Calendar which lists upcoming training events.

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FDIC Issues Proposed Rule on Special Assessment

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Executive Letter: An Update on Recent Out-of-State Bank Failures

Rose Oswald PoelsBy Rose Oswald Poels

Since the announcement of the failures of Silicon Valley Bank (SVB) in Santa Clara, California and Signature Bank in New York, New York, the Wisconsin Bankers Association (WBA) has been working with the news media as well as federal- and state-level government officials to reassure the public that the banking system overall — and Wisconsin banks in particular — are safe, sound, and resilient.

On Sunday, I issued a special edition of my Executive Letter to share a summary of events as they were unfolding, including the decision of the regulators to protect all depositors affected by the Silicon Valley Bank and Signature Bank failures. On Monday, WBA issued a statement to the news media highlighting important differences between the failed banks and Wisconsin banks. WBA has been working with newspapers, TV stations, and radio stations across the state to put the public at ease in knowing their money is safe in an FDIC-insured bank in Wisconsin.

Resources for Bank Customers

WBA has created a new consumer-facing piece explaining FDIC insurance. The one-page document can be printed out or shared digitally. It contains a high-level overview as well as links (and QR codes) directing readers to FDIC resources: Understanding Deposit Insurance and Deposit Insurance FAQs. WBA’s FDIC insurance resource — along with a range of other materials, including social media graphics for banks — is available in the Consumer Resources Hub.

My previous Executive Letter also contains talking points about how the situations at the failed banks were idiosyncratic and do not reflect the way Wisconsin banks operate. A number of unique factors converged at the same time to trigger the liquidity crisis at Silicon Valley Bank, which would not apply to Wisconsin banks that are not heavily focused on the volatile tech sector. As government officials, banking leaders, and economists have reiterated: Americans should have confidence in our banking system.

The Federal Reserve’s Bank Term Funding Program

The Federal Reserve has launched the Bank Term Funding Program (BTFP) to offer loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging any collateral eligible for purchase by the Federal Reserve Banks in open market operations. The assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating a bank’s need to quickly sell such securities in times of stress.

WBA staff participated in a call on Monday with Nellie Liang, Under Secretary for Domestic Finance at the U.S. Treasury Department and from that call, WBA learned:

  • Bank holding companies are not able to participate in BTFP. Eligible participants include any U.S. federally insured depository institution or U.S. branch or agency of a foreign bank that is eligible for primary credit under the Fed’s discount window.
  • The Federal Reserve is not looking to consider municipal securities as collateral.
  • Banks are not required to first utilize all other available funding options before seeking access to the BTFP.
  • It is not the intention of the Federal Reserve to lengthen the one-year term.
  • At some point in the future, the names of institutions who participate in BTFP will be made public in accordance with Congressional requirements.

The Federal Reserve has made an FAQ and a Terms and Conditions one-pager available regarding the program. It is my understanding the FAQs will be updated, as necessary.

The Federal Reserve announced a free webinar, Wednesday, March 15, 2023, at 1:00 p.m. ET–2:15 p.m. ET regarding the new lending program. The Federal Reserve’s Matthew Malloy, section chief – monetary policy operations and analysis, monetary affairs and Kelley O’Mara, senior counsel – legal division, will lead an Ask the Fed® webinar to provide an overview of the BTFP and address frequently asked questions that have arisen since the program’s launch. Registration for the webinar can be done through the Ask the Fed® website.

The Latest on SVB and Signature Bank Bridge Banks

Moments ago, WBA staff attended a Q&A webinar with FDIC on the status of the two failed banks. The bridge banks Silicon Valley Bridge Bank, N.A. and Signature Bridge Bank, N.A., have assumed the deposits and obligations of the failed banks. FDIC has appointed new CEOs, and their objective is to maximize the value of the entity to attract a buyer as well as minimize cost to the industry. The main theme from FDIC officials was “business as usual” — all deposits (insured & uninsured) have been transferred to the bridge bank, all contracts for services have been transferred, the bridge banks have access to borrow to ensure ample liquidity, they have the same routing number and check stock, and they can operate just as any other open and operating bank.

Our Current Focus

Our immediate priority is to make sure the public knows that the banking system is safe and sound. No taxpayer dollars will be used to repay depositors of the failed banks; longer-term policy questions about the treatment of uninsured deposits are a discussion for a later day. WBA has heard from our membership about the positive steps you are taking through both proactive and responsive conversations with your customers as well as issuing email and social media communications. Thank you for all you are doing to reassure Wisconsinites that our industry remains strong and a source of strength for our economy.

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Special Edition Executive Letter: WBA’s Response to SVB Failure

Rose Oswald PoelsBy Rose Oswald Poels

The Wisconsin Bankers Association (WBA) is closely tracking developments related to the failure of Silicon Valley Bank and will continue to keep our membership informed.

How Silicon Valley Bank Differs from Wisconsin Banks 

What happened with Silicon Valley Bank is a very unique situation. The bank was heavily connected to the tech sector, which made it vulnerable to the booms and busts of that sector. Less than 10% of its deposits were insured as they were very large deposits (largely from venture capitalists that deposited tech investment money in the bank). In contrast, Wisconsin banks have a far higher percentage of insured deposits. Because Silicon Valley Bank was heavily connected to the tech sector — both on the loan and deposit side — it was not well diversified. Again, this is a stark difference from Wisconsin banks of all sizes, which are much more diversified across different business and personal sectors.

The banking system overall and Wisconsin banks are safe, sound, and resilient. This situation is truly idiosyncratic to Silicon Valley Bank. It grew incredibly fast in a very short time frame, going from $56 billion in 2018 to over $209 billion in 2022. In the span of just one year, they nearly doubled in size, from December 31, 2020 to December 31, 2021, when they went from $114 billion to $209, which is unheard of. No Wisconsin bank has grown like this. So, while Silicon Valley Bank had reached the large bank category, it got there so fast that the bank wasn’t in the large bank asset size long enough for the regulators to push through all the requirements (like stress testing). A bank needs four consecutive quarters over the asset threshold — and then there is a phase-in period. Silicon Valley Bank was still in that phase-in period and not yet subject to full-blown scrutiny.

FDIC Insurance Protects Bank Customers 

The FDIC acted swiftly and decisively, which is good to protect the banking system and customers of Silicon Valley Bank. Banks are encouraged to make sure their frontline staff are prepped to answer questions about FDIC deposit insurance coverage, and may refer to the following talking points:

  1. Customers’ deposits are protected by FDIC insurance. In the 88-year history of the FDIC, no one has ever lost a penny of an insured deposit.  
  2. The FDIC insures up to $250,000 in eight separate account categories per depositor per bank. The FDIC is completely funded by the banking industry.
    • Every bank pays risk-based premiums every quarter to support the fund.
    • The FDIC insurance fund and all of the agency’s costs come entirely from premiums paid by banks.  
    • The industry knows that a strong FDIC and deposit insurance fund are essential to the banking system. Banks stand ready to do whatever it takes to ensure the health of the fund and strength of the FDIC. The FDIC is stronger than ever before.
    • The FDIC insurance fund stood at an all-time high of $124.5 billion as of June 2022.
    • The FDIC has a $100 billion line of credit with the U.S. Treasury, which would, by law, have to be repaid by the banking industry if ever used. The banking industry is well capitalized.
    • In total, more than 99 percent of banks are “highly capitalized” and far above the most stringent regulatory standards. 

Bankers may point customers to the FDIC’s Understanding Deposit Insurance resource, Deposit Insurance FAQs, and SVB FAQs.

Bankers may also learn more about the state guaranty fund and consider proactively calling their larger bank customers’ CFOs to talk about options such as excess deposit insurance, reciprocal deposit programs, or — in the case of municipal government money — the collateral the bank already has insuring the full amount on deposit. Also, when applicable, bankers may talk to their business customers about how they have a very solid, diversified portfolio that doesn’t have strong exposure to the tech sector.

What Happens Next 

In a statement issued on March 12, 2023 by the Department of the Treasury, Federal Reserve, and FDIC, it was announced that FDIC will complete its resolution of Silicon Valley Bank in a manner that protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. A similar systemic risk exception will be made for Signature Bank, New York, New York, which was closed on March 12 by its state chartering authority. Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.

Finally, the Federal Reserve Board on March 12 announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.

Banking Industry Remains Strong 

As I recently stated in commentary on FDIC data, Wisconsin’s banking industry is in a solid position. These anomalous events at out-of-state banks do not change that. The banking system in Wisconsin and across the U.S. remains well capitalized and resilient, and the regulators’ quick response is expected to reassure the public. As always, WBA is committed to keeping our members informed on issues impacting the industry and providing resources to support your work at your bank and in your communities.

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FDIC Numbers Show Positive 2022 Year-End Position of Wisconsin Banks

Wisconsin banks finished 2022 in a strong financial position. Fourth-quarter data from the Federal Deposit Insurance Corporation (FDIC) show consumers paying down debt and putting money into savings at the bank. The housing market remained active as home prices cooled slightly, the agricultural industry had a favorable year, and businesses continued to grow throughout 2022. While the economy is experiencing ongoing inflationary pressure and geopolitical concern, Wisconsin banks remain well capitalized and serve as trusted partners to help their customers achieve their financial goals. 

Notable indicators include: 

  • Residential loans continued to grow, both quarter over quarter (3.09%) and year over year (13.71%). With low inventory, homes continue to sell quickly. Despite recent interest rate increases, rates remain relatively low in historical context. 
  • Commercial lending increased year over year (11.09%) but slowed toward the end of the year as business owners held off on borrowing due to concerns of recession in 2023. 
  • Farm loans decreased 20% quarter over quarter yet remain up 8.12% year over year. While farmland values remain strong, sharp interest rate increases have resulted in the softening of some farm loan demand. An increase in farm income toward the end of 2022 also led to an increase in loan repayments. 
  • Credit quality continued to be strong as borrowers kept up to date on their payments. Loans and leases 90 or more days past due decreased 19.74% year over year and decreased 1.40% quarter over quarter. 
  • Deposits continued to grow, albeit at a slower pace as inflation limited the amount consumers were able to put into savings. 

Statement on the release of fourth-quarter 2022 Federal Deposit Insurance Corporation (FDIC) numbers from Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association:  

“The fourth-quarter FDIC numbers show Wisconsin’s banking industry in a solid position. While inflation persists in driving up expenses for households and businesses, the overall picture shows that more borrowers are keeping current on their loans and consumers are putting money into savings at their bank.”

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Wisconsin Banks Remained Strong in Q3 2022 Despite Uncertain Economic Outlook

Wisconsin banks continue to be in a strong position to meet the credit needs of their customers as we close out 2022. At the same time, despite inflationary pressures, the latest numbers released by the Federal Deposit Insurance Corporation (FDIC) show that consumers continue to exhibit strong balance sheets as loan defaults remain at historic lows. With interest rates rising, banks’ profitability has increased to a net interest margin of 3.19% in the third quarter of 2022. All categories of lending have seen increases quarter over quarter and year over year. Consumers look to banks as trusted places to keep their money, resulting in deposit balances holding strong.

Notable indicators include: 

  • Residential loan demand continued to grow at a steady pace (up 5.25% quarter over quarter and 10.23% year over year) despite rising interest rates, due in part to home prices coming down. 
  • Commercial lending saw ongoing strong demand year over year (up 10.04%) although the third quarter, while still positive (up 2.25%), was at a slower pace than the prior quarter as business owners held off on borrowing due to midterm election uncertainty and recession concerns. 
  • Farm loans increased 5.80% quarter over quarter and 6.79% year over year. Farmers who had financed their own expenses in recent years — due to stimulus packages and strong balance sheets — are now more likely to borrow because of high input costs such as fuel and fertilizer and less favorable outlooks for 2023. 
  • Credit quality continues to be strong as more borrowers are keeping on top of their payments. Loans and leases 90 or more days past due decreased 19.36% year over year and 2.99% quarter over quarter. 
  • The pace of deposit growth has slowed as consumers are tapping into their savings to offset higher prices due to inflation. 

Statement on the release of third-quarter 2022 Federal Deposit Insurance Corporation (FDIC) numbers from Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association:  

“The third quarter FDIC numbers continue to highlight the strength of Wisconsin’s banks, which are well positioned to help their customers and communities heading into 2023. With recessionary concerns still top of mind, Wisconsin consumers and business owners can continue to rely on their banks as a source of trusted financial partnership and a safe place to deposit their money.” 

FDIC-Reported Wisconsin Numbers (Dollar Figures in Thousands)    

   09/30/2022  06/30/2022  QoQ Change  09/30/2021  YoY Change 
Net loans and leases  103,954,503 

 

 

 99,947,135 

 

 4.01%  93,090,387   11.67% 
Total deposits  120,347,373  118,628,924  1.45%  115,910,175  3.83% 
Commercial and industrial loans  17,533,302 

 

 

 17,147,491 

 

 2.25%  15,933,410   10.04% 
Residential loans  25,109,047  23,857,524  5.25%  22,778,040 

 

 10.23% 
Farm loans  4,704,303  4,446,562 

 

 5.80%  4,405,366 

 

 6.79% 
Total assets  148,580,986 

 

 

 145,910,527  1.83%  141,975,630    4.65% 
Assets in Nonaccrual Status  417,336  430,201 

 

 -2.99%  517,525    -19.36% 
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Financial Health of Wisconsin Banks Continues Into Q2 of 2022

Following a strong start to 2022, Wisconsin banks rounded out the second quarter of the year with total assets up 1.81% quarter over quarter from March 31, 2022 to June 30, 2022 and total assets up 5.54% year over year from June 30, 2021 to June 30, 2022, according to the latest numbers released by the Federal Deposit Insurance Corporation (FDIC). Total deposits remained stable quarter over quarter (-0.28%) and were up 5.76% year over year. Noncurrent loans and leases continued on a significant downward trend, indicating consumers’ ability to pay down debt amidst inflation concerns.

Notable indicators include:

  • Residential lending increased over 5% year over year and quarter over quarter. Despite the Fed’s interest rate hikes, mortgage rates remain at historically low levels.
  • Commercial lending is back to where it was a year ago after seeing decreases due to supply chain issues and worker shortages. A 7.80% quarter-over-quarter increase in commercial and industrial loans indicates business owners’ renewed focus on growth.
  • Farm loans increased 19.27% quarter over quarter and 4.09% year over year. Farmers who had financed their own expenses in recent years — due to stimulus packages and strong balance sheets — are increasingly looking to borrow with high input costs such as fuel and fertilizer and less favorable outlooks for 2023.
  • Credit quality continues to improve as more borrowers are keeping up to date with their payments. Noncurrent loans and leases decreased 21.33% year over year and 11.04% quarter over quarter.

Statement on the release of second-quarter 2022 Federal Deposit Insurance Corporation (FDIC) numbers from Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association: 

“Wisconsin banks continue to meet the borrowing needs of consumers and business owners alike. Bankers understand the changing economy coming out of the pandemic and are working with their customers who are looking to purchase homes and grow their businesses. During this time of heightened inflation and ongoing global concerns, Wisconsinites can feel confident in their bank as a safe place to deposit their money and a trusted partner in meeting their financial goals.”

FDIC-Reported Wisconsin Numbers (Dollar Figures in Thousands)

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Executive Letter: Holding Fintech Companies Accountable

Rose Oswald PoelsBy Rose Oswald Poels

Every fall, I travel to Washington D.C. with a small group of bankers to visit regulators. During this trip, we nearly always meet with staff from Consumer Financial Protection Bureau (CFPB).

Since CFPB’s inception, we inevitably encourage the CFPB staff during each of these annual visits to focus more on the non-bank financial organizations that operate in the traditional “banking” space. Nearly every time we have this conversation, they nod and share that they provide this type of supervision typically through a complaint-based system. This means that if enough consumers complain about a particular financial organization (not a regulated bank), they will investigate and take whatever action they deem appropriate. Certainly, this has been incredibly frustrating for bankers to hear over the years given that many non-bank actors contributed to the causes of the Great Recession back in 2008 and 2009 and CFPB’s mission is that of protecting consumers. It has been too easy for CFPB to focus on the banking industry through their rulemaking and enforcement authorities since banks are easier to find with traditional brick-and-mortar offices.

I was pleasantly surprised to learn recently, however, that the CFPB has focused some of its attention on the non-bank financial industry by assessing fines to fintech companies for actions that have ultimately harmed consumers. Specifically, CFPB recently levied a $2.7 million fine against lender Hello Digit for a range of issues including misleading marketing claims such as “no overdraft fees.” This claim of no overdraft fees was one of several promises made to consumers by Hello Digit that were, in fact, not always true. Other fintechs have made similar claims regarding no overdraft fees as well, including digital lender Chime, that have turned out to be misleading or only true in a limited set of circumstances.

At the same time, the FDIC recently issued cease and desist orders against five crypto firms for making false or misleading statements suggesting that their digital assets were FDIC-insured. According to the FDIC, each of these companies made false representations on their website and social media accounts stating or suggesting that certain crypto-related products are FDIC-insured or that stocks held in brokerage accounts are FDIC-insured. As we all know, these representations are false and misleading.

There are many fintechs that are working to do the right thing and help improve the financial industry through technological efficiencies, but some reasonable level of regulation and oversight is important for these institutions just like banks. These recent regulatory actions against non-bank financial organizations are good reminders that it is important to continue sharing our concerns with regulatory agencies related to non-bank actors and to continue to stress to our clients and the public how trustworthy banks are.

If you are interested in accompanying me on a future fall regulatory agency trip to D.C., please let me know and I will add you to the list. I try to keep the group small, limited to 12 bankers, to ensure meaningful dialogue with the regulatory agencies. Bankers who have joined me in the past have found this trip to be worthwhile given much of our frustration and burden comes from regulation. In the meantime, WBA will continue to advocate for the members on these and other issues affecting the industry.

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