The Federal Deposit Insurance Corp.’s new data shows Wisconsin banks started 2024 on solid footing. In the first quarter, lending increased over the prior year in all categories — commercial, residential, and farm.
Farm loans increased year over year (7.17 percent) as farmers looked to upgrade equipment, make capital improvements, or expand.
The Wisconsin Bankers Association says this demonstrates banks’ responsiveness to their customers’ borrowing needs. High interest rates on certificates of deposit and money market accounts contributed to an increase in deposits both quarter over quarter (0.34%) and year over year (3.97%). While net interest margin has decreased slightly from 3.30% to 3.10% year over year, capital levels are healthy.
“Individuals, families, and business leaders continue to trust Wisconsin banks as financial partners and safekeepers of their money,” says WBA President and CEO Rose Oswald Poels. “Geopolitical issues remain among top economic concerns. In addition, decreases in credit quality indicate economic strain and signal challenges for consumers, businesses, and banks if inflation is not tamed. The Fed is unlikely to ease interest rates until the end of 2024 at the earliest; banks stand prepared to help their customers weather headwinds.”
Notable indicators include:
- While residential real estate loans dropped quarter over quarter (-10.81%), they increased year over year (13.62%). Inventory remains low, particularly as many homeowners refinanced into low-interest rate mortgages in prior years and have little appetite to sell. Homes continue to sell quickly as borrowers have become accustomed to the current home prices and interest rates.
- Commercial lending increased slightly quarter over quarter (1.15%) and year over year (1.94%) as business owners cautiously strive for growth, avoiding significant operational changes.
- Past-due loans increased as persistent inflation and high everyday costs stress borrowers; however, the current level of past-due loans remains above recessionary levels.
