Wisconsin banks increased lending, earnings in 2017

Wisconsin banks boosted lending and posted higher earnings amid an improving economy in 2017, a report released Tuesday shows.

Altogether, the 210 state-based banks insured by the Federal Deposit Insurance Corp. generated net income of more than $1.13 billion last year, up about 4.8% from $1.08 billion in 2016, according to the FDIC’s year-end report.

The overall higher earnings were achieved even as some banks took a one-time hit to net income related to federal tax reform.

“The Wisconsin banking industry continues to show very strong performance numbers year over year,” Rose Oswald Poels, president and chief executive officer of the Wisconsin Bankers Association, said in an interview Tuesday. “We continue to grow, our economy’s healthy, and you can see that evidenced in our loan growth and deposit growth as well. People continue to see banks as a safe place for their money, and that’s very positive.”

Total loans and leases at Wisconsin banks rose 5% to $81.3 billion from $77.5

billion in 2016.

Deposits increased 2.4% to almost $89.1 billion from $87 billion a year earlier.

Non-current loans and leases amounted to 0.82% of total loans and leases in the state, compared with 1.08% at the end of 2016.

Only five Wisconsin banks were unprofitable.

Overall earnings for the state’s banking industry likely would have been higher if not for federal tax reform, which cut the corporate income tax rate to 21% from 35% when it was approved in late December. Although the tax cut should benefit banks in the future, it had a negative accounting impact in 2017 on deferred tax assets for some.

A deferred tax asset occurs when a company overpays its taxes or pays taxes in advance, and then keeps the overpayment amount on the books to reduce taxes in the future. With the new federal tax rate, those deferred tax assets suddenly were worth less less, and, under accounting rules, many banks wrote off the reduced value in the fourth quarter of 2017.

The deferred tax asset situation also affected banks nationally in the fourth quarter and full year, according to the FDIC.

For the full year, the U.S. banking industry reported 2017 net income of $164.8 billion, down $6 billion, or 3.5%, from 2016. Without the one-time tax-related charges in the fourth quarter, estimated 2017 net income would have been $183.1 billion, an increase of 7.2% from 2016.

“One-time charges resulting from the new tax law resulted in banks reporting lower net income in the fourth quarter and full-year 2017,” Martin J. Gruenberg, chairman of the FDIC, said in a statement. “Despite the decline in net income, the banking industry continued to show steady improvement. Loan balances grew, net interest margins increased, asset quality remained stable, and the number of ‘problem banks’ continued to fall.”

The FDIC said its “Problem Bank List” stood at 95 as of Dec. 31, the lowest number of problem banks since the first quarter 2008.

Eight banks in the U.S. failed in 2017, among them Glendale’s Guaranty Bank and Seaway Bank and Trust Co., a Chicago bank that took over Milwaukee’s Legacy Bank after Legacy failed in 2011.

In a separate report Tuesday, the Wisconsin Department of Financial Institutions said the 161 Wisconsin banks that have state charters instead of federal charters increased net lending by 9.8% in 2017.

“Wisconsin’s state-chartered banks had another very good year in 2017,” Jay Risch, secretary of the department, said in a statement. “The overall strength of our banking industry is yet another sign of a prosperous and growing Wisconsin economy.”

Among Wisconsin-based nonspecialty banks, Green Bay’s Associated Bank had the highest net income in 2017 at $235.5 million, according to the FDIC. Next were Racine’s Johnson Bank, $36.4 million; Green Bay’s Nicolet National Bank, $32 million; Wauwatosa’s WaterStone Bank, $25.9 million; and National Exchange Bank and Trust, of Fond du Lac, $20.9 million.

The five Wisconsin banks that posted losses in 2017 were: Ixonia Bank, $2.7 million; Waukesha’s Sunset Bank & Savings, $350,000; First Federal Bank of Wisconsin, of Waukesha, $184,000; Madison’s Home Savings Bank, $112,000; and Burlington’s Fox River State Bank, $65,000.