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Q1 2026 FDIC Numbers Reflect Strength of Wisconsin’s Banks

Wisconsin banks started the new year strong with total assets up 8.69% year over year from March 31, 2025 to March 31, 2026. Banks continue to be a trusted place for consumers and businesses to invest their money as total deposits were up 7.57% for the same period (up 4.17% quarter over quarter). Strong deposit volume is critical for banks as they use those funds to make loans across their market areas. Despite concerns over ongoing inflation, year-over-year lending remained steady with volume increasing in commercial and industrial loans and farm loans. The Q1 net interest margin remained consistent (3.58%) with the prior quarter (3.51%) and increased from the prior year (3.33%). Wisconsin banks continue to be well capitalized with strong liquidity. 

Notable indicators include: 

  • Commercial lending increased both quarter over quarter (7.23%) and year over year (10.73%) as commercial customers manage through ongoing economic uncertainty.  
  • Residential real estate loan volume decreased quarter over quarter (-10.42%) due to housing availability and fluctuating interest rates, yet increased year over year (5.46%). 
  • Farm lending increased quarter over quarter (19.68%) and year over year (12.39%) as farmers began preparing for new growing season needs.  
  • Assets in nonaccrual status saw an increase both quarter over quarter (19.71%) and year over year (20.33%) as borrowers work through economic pressures.  

Statement on the release of first-quarter 2026 Federal Deposit Insurance Corporation (FDIC) numbers from Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association:  

“The first quarter 2026 FDIC numbers highlight the strength of Wisconsin banks to remain the steady source during times of ongoing economic uncertainty for some markets. Bankers will continue to keep a close eye on the global supply chain, geopolitical issues, as well as the Fed’s interest rate decisions going into the rest of the year. Wisconsin consumers and business owners can continue to rely on Wisconsin banks as a consistent source of trusted financial partnership and a safe place to deposit their money.” 

FDIC-Reported Wisconsin Numbers (Dollar Figures in Thousands)   

  03/31/2026  12/31/2025  QoQ Change  03/31/2025  YoY Change 
Net loans and leases  $125,790,224  $119,490,245  5.27%  $115,784,161  8.64% 
Total deposits  $139,554,168  $133,963,964  4.17%  $129,733,193  7.57% 
Commercial and industrial loans  $20,980,215  $19,566,293  7.23%  $18,947,428  10.73% 
Residential real estate loans  $34,589,925  $38,612,530  -10.42%  $32,798,394  5.46% 
Farm loans  $5,018,472  $4,193,382  19.68%  $4,465,311  12.39% 
Total assets  $174,807,481  $167,045,236  4.65%  $160,833,420  8.69% 
Assets in nonaccrual status  $758,922  $633,992  19.71%  $630,718  20.33% 
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Q4 2025 FDIC Numbers Illustrate the Resiliency of Wisconsin’s Banks

Numbers released today by the Federal Deposit Insurance Corporation (FDIC) show Wisconsin banks remain very strong through the fourth quarter of this year, with numbers coming in better than nearly all national averages. Year-over-year lending remained steady, with volume increasing in commercial and industrial loans, as well as farm loans. Residential real estate loans saw a small increase in year-over-year volume, and volume meaningfully increased by over 14% from the prior quarter, largely due to lower interest rates. Individuals and businesses continue to recognize the importance of keeping money on deposit at banks, as evidenced by an increase in deposits, both year over year (4.17%) and quarter over quarter (1.60%). The Q4 net interest margin increased (3.51%) from the prior quarter (3.46%) and the prior year (3.22%). Wisconsin banks remain well capitalized with strong liquidity. 

Notable indicators include: 

  • Commercial lending increased both quarter over quarter (1.36%) and year over year (5.78%) as commercial customers continue to navigate economic uncertainty.  
  • Residential real estate loan volume was very strong quarter over quarter (14.38%) due to lower interest rates, and it experienced a slight increase year over year (2.67%). 
  • Farm lending decreased quarter over quarter (-23.03%), which is typical of this time of year in the ag cycle, yet increased slightly year over year (2.16%) as banks remain a trusted resource for their farming customers. 
  • Assets in nonaccrual status saw a slight dip quarter over quarter (-0.19%) but remain slightly elevated year over year (8.96%) as borrowers in certain markets continue to experience challenges.  

Statement on the release of fourth-quarter 2025 Federal Deposit Insurance Corporation (FDIC) numbers from Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association:

“The fourth quarter FDIC numbers continue to highlight the resiliency of Wisconsin banks during evolving economic conditions. Wisconsin banks remain well-positioned to help meet the needs of their customers and communities throughout this year. With our economy continuing to evolve and mid-term elections later this year, Wisconsin consumers and business owners can continue to rely on their banks as a steady source of trusted financial partnership and a safe place to deposit their money.” 

FDIC-Reported Wisconsin Numbers (Dollar Figures in Thousands)   

  12/31/2025  9/30/2025  QoQ Change  12/31/2024  YoY Change 
Net loans and leases  $119,490,245  $119,836,857  -0.29%  $114,571,708  4.29% 
Total deposits  $133,963,964  $131,850,228  1.60%  $128,607,201  4.17% 
Commercial and industrial loans  $19,566,293  $19,303,789  1.36%  $18,497,655  5.78% 
Residential real estate loans  $38,612,530  $33,756,840  14.38%  $37,609,040  2.67% 
Farm loans  $4,193,382  $5,448,321  -23.03%  $4,104,912  2.16% 
Total assets  $167,045,236  $165,793,881  0.75%  $159,392,936  4.80% 
Assets in nonaccrual status  $631,992  $633,170  -0.19%  $580,044  8.96% 
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Q3 2025 FDIC Numbers Show Continued Strength of Wisconsin Banks

Numbers released today by the Federal Deposit Insurance Corporation (FDIC) show Wisconsin banks remain in good health through the third quarter of this year. Year-over-year lending increased in all categories (commercial, residential, and farm loans), demonstrating the responsiveness of banks to meet their communities’ needs. Individuals and businesses continue to trust banks as a safe place to keep money, as evidenced by an increase in deposits, both year over year (5.20%) and quarter over quarter (2.06%).The Q3 net interest margin increased (3.46%) from the prior quarter (3.33%) and the prior year (3.18%). Wisconsin banks remain well capitalized. 

Notable indicators include: 

  • Farm lending increased quarter over quarter (4.81%), which continued the pace year over year (5.30%) as banks remain a steady resource for their farming customers.  
  • Commercial lending fell minimally quarter over quarter (-1.46%) while holding steady year over year (4.93%) as commercial customers continue to navigate inflation-related factors.  
  • Residential real estate loan volume remained strong year over year (15.05%) despite a slight dip quarter over quarter (-6.63%) with increased volumes in nearly all 1–4 family residential real estate lending. 
  • Assets in nonaccrual status remained nearly the same quarter over quarter (0.28%) and slightly raised year over year (2.34%) as borrowers continue to work with their banks through workouts and other arrangements.   

Statement on the release of third-quarter 2025 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 banks, which are well positioned to help their customers and communities heading into 2026. With inflation considerations 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)    

   

 09/30/2025  06/30/2025  QoQ Change  09/30/2024  YoY Change 
Net loans and leases   $119,837,598  $118,240,433  1.35%  $114,405,149  4.75% 
Total deposits   $131,850,228  $129,185,781  2.06%  $125,335,066  5.20% 
Commercial and industrial loans  $19,303,789  $19,589,002  -1.46%  $18,396,211  4.93% 
Residential real estate loans   $35,323,690  $37,831,105  -6.63%  $30,702,592  15.05% 
Farm loans   $5,448,321  $5,198,432  4.81%  $5,173,857  5.30% 
Total assets   $165,795,834  $163,046,532  1.69%  $158,239,189  4.78% 
Assets in nonaccrual status  $633,170  $631,375  0.28%  $618,665 

2.34% 
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Latest FDIC Data Reflects Consistent Performance for Wisconsin Banks

Numbers released August 26, 2025, by the Federal Deposit Insurance Corporation (FDIC) showed consistent performance midway through 2025 by Wisconsin banks. Residential real estate lending (1.64%), farm lending (5.26%), and commercial lending (7.89%) all increased over the prior year. Deposits increased year over year (5.88%). The Q2 2025 net interest margin increased (3.40%) from the prior quarter (3.33%) and prior year (3.14%). Wisconsin banks remain well capitalized.

Notable indicators include:

  • Farm lending increased quarter over quarter (16.42%) which extended the pace year over year (5.26%) as banks continue to help farmers with their needs.
  • Commercial lending continued in growth quarter over quarter (3.39%) with year over year (7.89%) increase as commercial customers navigate impacts of changing global economics.
  • Residential real estate loan volume remained consistent year over year (1.64%) yet grew quarter over quarter (15.34%) with increased volumes in all areas of 1-4 family residential real estate lending.
  • Assets in nonaccrual status remained nearly the same quarter over quarter (0.10%) while elevated year over year (12.59%) as borrowers adjusted to higher costs of living.

Statement on the release of second-quarter 2025 Federal Deposit Insurance Corporation (FDIC) numbers from Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association:  

“The second-quarter FDIC numbers reflect consistent performance by Wisconsin Banks at the mid-point of 2025 with all areas of lending increasing year over year. The increase in farm and commercial lending continued strong through the second quarter. The data also reflects that Wisconsin’s banks continued to meet consumers’ residential real estate needs. Banks continue to work with struggling borrowers as Wisconsin banks remain in strong position to help meet the needs of their customers and communities.”

FDIC-Reported Wisconsin Numbers (Dollar Figures in Thousands)

  06/30/2025 03/31/2025 QoQ Change 06/30/2024 YoY Change
Net loans and leases $118,240,433 $115,784,161 2.12% $112,720,434 4..90%
Total deposits $129,185,781 $129,733,193 -0.42% $122,006,654 5.88%
Commercial and industrial loans $19,589.002 $18,947,428 3.39% $18,156,064 7.89%
Residential real estate loans $37,831,105 $32,798,394 15.34% $37,219,630 1.64%
Farm loans $5,198,432 $4,465,311 16.42% $4,938,435 5.26%
Total assets $163,046,532 $160,833,420 1.38% $154,792,729 5.33%
Assets in nonaccrual status $631,375 $630,718 0.10% $560,757 12.59%

 

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A Steady Beginning to 2025 for Wisconsin Banks According to Latest FDIC Data

Numbers released May 28, 2025, by the Federal Deposit Insurance Corporation (FDIC) showed a steady start to 2025 by Wisconsin banks. Residential real estate lending (8.67%), farm lending (8.95%), and commercial lending (5.00%) all increased over the prior year. Deposits increased year over year (5.63%). The Q1 2025 net interest margin increased (3.33%) from the prior quarter (3.22%) and prior year (3.10%). Wisconsin banks remain well capitalized. 

Notable indicators include: 

  • Farm lending increased quarter over quarter (8.78%) which extended the pace year over year (8.95%) as banks continue to help farmers with their operational needs.  
  • Commercial lending slowed in growth slightly quarter over quarter (2.43%) from the year over year (5.00%) increase as commercial customers adjust to impacts of global economic challenges.  
  • Residential real estate loans increased year over year (8.67%) yet decreased quarter over quarter (-16.05%) as inventory remains limited and the marketplace competitive from non-traditional lenders.  
  • Assets in nonaccrual status increased both quarter over quarter (8.74%) and year over year (2.20%) as ongoing inflation and the high cost of living impact borrowers.  

Statement on the release of first-quarter 2025 Federal Deposit Insurance Corporation (FDIC) numbers from Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association:  

“The first-quarter FDIC numbers reflect that 2025 has started off steady for Wisconsin Banks with all areas of lending increasing year over year. The increase in farm and commercial lending continued through the first quarter. The data also reflects that Wisconsin’s residential real estate market continues to be competitive. Across all categories of lending, banks continue to monitor credit quality and work with struggling borrowers as Wisconsin banks remain well positioned to continue to help meet the needs of their customers and communities.”

FDIC-Reported Wisconsin Numbers (Dollar Figures in Thousands)

    03/31/2025  12/31/2024  QoQ Change  03/31/2024  YoY Change 
Net loans and leases   $115,784,161  $114,571,863  1.06%  $110,786,153  4.51% 
Total deposits   $129,733,193  $128,607,041  0.88%  $122,823,065  5.63% 
Commercial and industrial loans  $18,947,428  $18,497,687  2.43%  $18,044,391  5.00% 
Residential real estate loans   $32,798,394  $39,070,601  -16.05%  $30,180,575  8.67% 
Farm loans   $4,465,311  $4,104,912  8.78%  $4,098,653  8.95% 
Total assets   $160,833,420  $159,392,728  0.90%  $153,075,799  5.07% 
Assets in nonaccrual status  $630,718  $580,044  8.74%  $617,124  2.20% 
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Executive Letter: FDIC Regulatory Updates: Key Changes Affecting Banks + Updates on Nominations

From the Desk of Rose Oswald PoelsBy Rose Oswald Poels

Early last week, the FDIC announced several significant regulatory actions. Below is a summary of the most relevant developments:

Rescission of 2024 Bank Merger Policy Statement

The FDIC has proposed rescinding the 2024 Statement of Policy on Bank Merger Transactions, citing concerns over added uncertainty in the application process. This action reinstates the prior policy while the FDIC conducts a broader review of its merger framework.

Withdrawal of Proposed Rules

The FDIC has withdrawn proposed rules related to:
•  Brokered Deposits – The proposal would have significantly altered the regulatory framework for brokered deposits.
•  Corporate Governance – This proposed rule aimed to impose stricter governance requirements for banks with $10 billion or more in assets.
•  Change in Bank Control Act (CBCA) – The proposal sought to modify filing requirements for acquisitions of voting securities.
•  Additionally, the FDIC has rescinded its authority to publish a proposed rule on incentive-based compensation arrangements, which had not yet been adopted by all required regulatory agencies.

Extension of Compliance Date for Sign and Advertising Rule Changes

The FDIC has postponed the mandatory compliance date for certain provisions of its Sign and Advertising Rule from May 1, 2025, to March 1, 2026. This extension applies to digital display requirements and signage at ATMs, allowing the FDIC to refine the regulation based on industry feedback. Other provisions of the rule remain on track for May 1, 2025, compliance.

What This Means for Your Bank

These regulatory shifts indicate the FDIC’s current willingness to reconsider policies that may impose undue burdens or create uncertainty.

WBA is pleased to see the Trump Administration moving forward with an agenda that rolls back excessive regulation, and we will continue to advocate for that with all federal banking agencies. Moreover, we will advocate for additional relief when we are out in Washington, D.C. with bankers this spring at both the WBA/ABA Washington Summit and the WBA/ICBA Capital Summit.

Agency Nominations Status

In case you’ve been wondering where nominations stand at federal agencies that impact the banking industry, here is an overview:
•  Travis Hill appointed as Acting Chairperson of the Board of Directors of Federal Deposit Insurance Corporation (for an overview of Hill’s statement outlining the current focus of FDIC, refer to my Feb. 18 Executive Letter)
•  Andrew Ferguson confirmed as Chair of Federal Trade Commission
•  Mark Uyeda serving as Acting Chair of Securities and Exchange Commission and Paul Atkins nominated as Chair
•  Jeffrey Hall confirmed as Chair of Farm Credit Administration Board, Farm Credit Administration
•  Scott Bessent confirmed as Secretary of Treasury
•  Brooke Rollins confirmed as Secretary of Agriculture
•  Kelly Loeffler confirmed as Administrator of Small Business Administration
•  Scott Turner confirmed as Secretary of Housing and Urban Development
•  Christopher Wright confirmed as Secretary of Energy
•  Russell Vought confirmed as Director of OMB

On March 6, the Senate Banking Committee voted to advance to the Senate the nominations of Jonathan McKernan to be director of the Consumer Financial Protection Bureau and Bill Pulte to be director of the Federal Housing Finance Agency.

The committee also voted to advance the nominations of Stephen Miran to be chairman of the Council of Economic Advisors and Jeffery Kessler to be undersecretary of commerce for industry and security.

Please let me know if you have any questions or concerns as you closely review these updates. WBA will continue its diligence in advocating for regulatory and legislative frameworks that support the strength and stability of our member banks.

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Executive Letter: New Agency Leadership Affords Opportunities for Renewed Dialog

From the Desk of Rose Oswald PoelsBy Rose Oswald Poels

As mentioned in last week’s Executive Letter, many changes are currently underway in Washington, D.C., including changes in key leadership positions within the prudential federal banking supervisory agencies. One such notable change is with the appointment of Travis Hill as Acting Chairperson of the FDIC. I have had the great fortune to discuss the concerns of Wisconsin’s community bankers directly with Acting FDIC Chairperson Hill on past visits to D.C., including that of the need for right-sized regulations and for agencies to act within their scope of authority.

Upon his appointment, Acting FDIC Chairperson Hill issued a statement which outlined matters of focus for FDIC in the near future, including:

•  Conduct a wholesale review of regulations, guidance, and manuals to ensure FDIC rules and approach promote a vibrant, growing economy;
•  Adopt a more open-minded approach to innovation and technology adoption, including (1) a more transparent approach to fintech partnerships and to digital assets and tokenization, and (2) engagement to address growing technology costs for community banks;
•  Improve the bank merger approval process and replace the 2024 Statement of Policy to ensure that merger transactions that satisfy the Bank Merger Act are approved in a timely way;
•  Withdraw problematic proposals from the past three years, such as proposals on brokered deposits and corporate governance;
•  Improve the supervisory process to focus more on core financial risks and less on process, and to reevaluate the supervisory appeals process;
•  Enhance FDIC’s readiness and preparedness for resolving large financial institutions, including the need to be more proactive and nimble, and to improve the bidding process;
•  Pursue adjustments to FDIC’s capital and liquidity rules to appropriately balance driving economic growth with ensuring safety and soundness and resilience to shocks;
•  Encourage more de novo activity so there is a healthy pipeline of new entrants in the banking sector;
•  Work to ensure law-abiding customers have, and do not lose, access to bank accounts and banking services;
•  Modernize implementation of the Bank Secrecy Act;
•  Study deposit behavior to develop a more sophisticated understanding of the relative stability of different types of deposits and depositors;
•  Reevaluate FDIC disclosure practices, and expand transparency in areas that do not impact safety and soundness or financial stability;
•  Ensure the FDIC remains within its statutory mandates;
•  Pursue internal efficiencies to ensure FDIC is serving as responsible stewards of the Deposit Insurance Fund; and
•  Reestablish a strong workforce culture, where misconduct is not tolerated and those who engage in misconduct are held accountable.

I am encouraged by this statement as many of the topics listed are concerns previously shared by Wisconsin bankers and me with FDIC, and Acting Chairperson Hill directly.

I am also encouraged by the nomination of Jonathan McKernan to serve as the next CFPB Director. Similar to previous interactions with Acting FDIC Chairperson Hill, past WBA-led banker meetings with McKernan have been engaging and impactful whereby Wisconsin community bankers were able to share concerns over the impact of Basel III, duplicative regulatory burdens, and of the revised CRA rule. While the industry continues to monitor actions impacting CFPB, the nomination of McKernan as the agency’s Director does afford a continued dialog with someone familiar with concerns held by heavily regulated community banks.

WBA continues to monitor events occurring in Washington, D.C. and will continue our longstanding regulatory advocacy efforts with the new agencies’ leadership. Acting FDIC Chairperson Hill and McKernan as CFPB Director will afford WBA the opportunity to renew past dialog with these key leaders.

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Executive Letter: Free WBA FDIC Part 328 Revised Rule Resources

By Rose Oswald Poels

For several months now, WBA legal staff have fielded questions regarding FDIC’s recently revised Part 328 rule as banks work to implement new requirements before the January 1, 2025, mandatory compliance date. The rule requires use of a new FDIC digital sign on digital deposit taking channels which includes websites and web-pages or mobile applications that offer the ability to make deposits electronically and provide access to deposits. Signage on bank ATMs may also be affected; and banks that offer non-deposit products must also, clearly and conspicuously, display a non-deposit sign in certain branch locations and also electronically if the bank’s website offers access to non-deposit products.

To assist with implementation, WBA has created a free FDIC Part 328 Rule Resource which includes a straightforward review of the rule (with implementation tips), a model plan for monitoring compliance with the rule, steps to consider for reviewing and testing compliance, and links to FDIC resources which includes past FDIC webinar presentations and a Frequently Asked Questions (FAQ) document. The WBA FDIC Part 328 Resource is found in the Compliance Best Practices section of the WBA Best Practices Library.

In addition, I have regular conference calls with senior staff at FDIC Chicago to share concerns of the membership. I have shared questions with FDIC regarding revised Part 328, some of which have not been answered yet in their resources. Several previously shared questions have been incorporated into FDIC presentations and FAQs. FDIC is hosting four webinars regarding requirements of Part 328, two of which have already been conducted. The presentation slide deck for both webinars may be found on FDIC’s Deposit Insurance Banker Webinar website. I expect FDIC to post dates for the remaining two webinars at the same site. The webinars are hosted via Teams Live Event at the link found at the site. There is no formal registration for the live event.

If you or your staff have outstanding Part 328-related questions or need the password for the protected WBA Best Practice Library, please contact WBA Legal at wbalegal@wisbank.com.

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FDIC Seminars on Final Rule Regarding Use of FDIC Sign and Advertising Statement

The Federal Deposit Insurance Corporation (FDIC) announced it will host four seminars on the final rule governing use of FDIC’s Official Signs and Advertising Statement, Misrepresentations of Insured Status, and Misuse of FDIC’s Name or Logo for bank staff, bank officers, and other stakeholders.

During the presentation, FDIC staff will cover: (a) requirements for all FDIC-insured institutions’ use of FDIC official signs, including the new FDIC official digital sign for bank websites, apps, and ATMs, as well as updates to the advertising statement; and (b) clarifications on the prohibitions against misrepresentations of deposit insurance coverage and misuse of the FDIC’s name and logo, which apply to any person, including banks. FDIC staff will also discuss some of the questions that have been raised by bankers, trade associations, technology companies, vendors, and others.

The first seminar will be held via Microsoft (MS) Teams on May 30, 2024. The dates for the remaining three seminars will be announced at a later date. Each seminar will last approximately 90 minutes and all seminars will be held from 2:00-3:30pm ET.

To join the May 30th Seminar MS Teams Live Event, click on the MS Teams Live Event link within FDIC’s seminar series announcement: https://www.fdic.gov/resources/deposit-insurance/banker-webinar/index.html

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Executive Letter: 2023 Agencies Risk Perspectives

By Rose Oswald Poels

This year was a very busy one from a banking regulatory perspective with WBA and the industry engaging regulators on many different issues. As you look ahead to the new year, it is helpful to understand from the banking agencies’ perspectives the key issues they identify that are facing the industry.

The following summarizes the most recent risk perspective reports from the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), and the Federal Deposit Insurance Corporation (FDIC), and will offer insight to bankers as you evaluate and revise risk strategies for the upcoming year:

OCC Semiannual Risk Perspective, Fall 2023

The OCC’s Fall 2023 Semiannual Risk Perspective presents data in five main areas — the operating environment, bank performance, special topics in emerging risks, trends in key risks, and supervisory actions. OCC reported that the overall strength of the federal banking system remains sound and that OCC expects banks to remain diligent and adhere to prudent risk management practices across all risk areas. Additionally, OCC stated that banks should continue to guard against complacency to ensure each maintains the ability to withstand potential future economic challenges.

The OCC highlighted credit, market, operational, and compliance risks, as the key risk themes. Highlights from the report include that:

  • Credit risk is increasing due to higher interest rates, increasing risk in CRE lending, prolonged inflation, declining corporate profitability, and the potential for slower economic growth. Key performance indicators are beginning to show signs of borrower stress across asset classes.
  • Rising deposit rates, broader market liquidity contraction, and increased reliance on wholesale funding started to impact net interest margins through the first half of 2023. Competition for deposits and higher interest rates are raising deposit rates. OCC reported deposit and liquid asset trends stabilized in the latter half of 2023, but the levels were supported by increased reliance on wholesale funding. Increases in interest rates are negatively impacting investment portfolio values.
  • Operational risk is elevated. Cyber threats continue. Banks continue to leverage new technology to further digitalization efforts, offering innovative products and services to meet customer demands. OCC warned that increasing digitalization efforts can also heighten risk of fraud and error, including fraud targeting peer-to-peer and other faster payment platforms.
  • Compliance risk remains elevated. OCC believes this is due to the heightened focus on ensuring equal access to credit and fair treatment of consumers, the expanded use of innovative technologies for product and service delivery, and expanded partnerships with third parties, such as financial technology firms, and increases in BSA/AML risk.

Federal Reserve Financial Stability Report, October 2023

The FRB’s latest Financial Stability Report was released in October in which FRB reports conditions affecting the stability of the U.S. financial system by analyzing vulnerabilities related to valuation pressures, borrowings by business and households, financial-sector leverage, and funding risks. Similar to the OCC, FRB reported that the banking sector remains sound overall, and that most banks continue to report capital levels above regulatory requirements. Nevertheless, FRB reports a subset of banks continued to face funding pressures.

The FRB’s report includes a discussion which considers possible interactions of existing domestic vulnerabilities with several potential near-term risks, including international risks. Survey contacts reflect the effect of persistent inflation and monetary tightening, insights regarding CRE, the reemergence of banking-sector stress, market liquidity strains and volatility, fiscal debt sustainability, and climate-related financial risks.

FDIC Risk Review 2023 Report

The latest FDIC Risk Review report incorporates data for 2022 through first quarter 2023, with insights related to the stress to the banking sector that emerged in March 2023. The report reflects risks on the key credit, market, operational, crypto-asset, and climate-related financial risks facing banks.

Regarding key credit risks, FDIC reported asset quality remained generally favorable as of first quarter 2023 despite modest deterioration. FDIC believes weaker economic conditions and higher interest rates may challenge bank loan portfolios, including credit card, C&I, residential real estate, and CRE loans.

From a markets perspective, FDIC reported market risks were primarily related to the effects of higher interest rates. Also, deposit outflows along with high levels of unrealized losses could pressure liquidity for some banks. FDIC reported the banking industry benefited from strong loan growth and higher NIMs in 2022, but higher funding costs reduced NIMs.

FDIC also reported that operational risks, including cybersecurity risks and risks related to illicit financial activity, remained elevated across the banking industry. FDIC also reported that crypto assets continue to present novel and complex risks that FDIC believes are difficult to fully assess. From FDIC’s perspective, climate-related financial risks include physical risk and transition risk, and FDIC’s report focuses on physical risk from severe weather and climate events.

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