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State-chartered banks more optimistic than Wall Street

Wisconsin reported first quarter cumulative results for state-chartered financial institutions this week and, by one measure, at least, they are more confident in the economy than big Wall Street firms. The group, which includes the Bank of Luxemburg, raised provisions for losses from unpaid loans by only $5 million for the three months ending March 31st. That represents a roughly one percent increase in reserves. By comparison, JP Morgan Chase increased its loss provision by 36 percent, including a charge of over $4 billion related to consumer credit. Department of Financial Institutions Financial Examiner Supervisor Alan Sisson explains why local banks have been more cautious.

 


When a bank raises its loan loss reserves, it’s considered an expense and results in a reduction of net income. Sisson says some state-chartered institutions are beginning to hike reserves, which could affect second quarter results. Banks must justify their loan loss reserve figures during DFI examinations, which happen every 12-18 months.

 

Photo courtesy of Bank of Luxemburg Facebook page.

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