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%