Wisconsin’s federally insured banks saw their earnings slip but their assets grow in the first half of 2016 compared with the same period a year ago.
Advertisement
The decline in profits came despite an overall increase in lending by banks in the state. At the same time, it could increase the cost for banks to borrow to fund the loans they make.
Quarterly net earnings rose 1.4 precent compared to the same period a year ago, and net income for community banks was up 9 percent compared to the second quarter of 2015, FDIC figures showed.
Low prices for fossil fuels continue to put pressure on the energy sector and banks that offered credit to that industry may face further stress, Mr Gruenberg said. But banks still managed to grow net interest income by 4.8%.
At the end of June, only 1.15% of total loans and leases on the books of Wisconsin banks were considered shaky, down from 1.23% in last year’s first half. But commercial and industrial loans were just $12.8 billion in the first six months of the year, down from $13.1 billion in the first half of 2015. “We likely have not yet seen the full impact of low energy prices on the banking industry, particularly for consumer and commercial and industrial loans in energy-producing regions of the country”.
Community banks, which account for 5,602 of the insured institutions, fared better than the industry overall, reporting a 9% rise in earnings in the second quarter to $5.5 billion.
The nine banks headquartered in Lincoln made $35.47 million in the second quarter, down less than half a percent from $35.52 million in the second quarter of 2015.
Racine-based Johnson Bank and Milwaukee-based Northwestern Mutual Wealth Management rounded out the top five with $6.6 million and $5.7 million in net income, respectively.
Wisconsin banks with the largest losses in the first half: Guaranty, of Glendale, $1.2 million; Community Financial Bank, of Prentice, $442,000; Livingston State Bank, $210,000; Mid America Bank, of Janesville, $144,000; and Fidelity National Bank, of Medford, $99,000. Seventeen mergers have been announced in 2016.
Still, banks are still operating in a “challenging environment”, FDIC Chairman Martin Gruenberg said.
Lending was strong nearly across the board, an encouraging sign for the US economy.
Deposits were also up, at $83.1 billion, compared with $81.7 million a year ago.
Advertisement
Profits fell sharply at Wisconsin banks in the first half of the year, even though assets and deposits increased. Net interest margins were basically flat compared with a year earlier, despite the Federal Reserve’s quarter-point rate increase in December. This has led some institutions to reach for yield, increasing their exposure to interest-rate risk.
