Bankers optimistic on 2007 economy - Despite loan payment troubles, 67% rate state's outlook as 'good'

Although higher interest rates on adjustable-rate mortgages have stressed some Wisconsin consumers, economic conditions in the state are good and should remain that way this year, a new survey of state banking executives says.

A biannual survey of 115 bank chief executives, released Friday by the Wisconsin Bankers Association, revealed that 46% saw an increase in past-due residential mortgages in the last six months, while 30% reported a rise in home foreclosures. Another 23% of the bankers said there was an increase in personal bankruptcies among customers.

Monthly payments that adjusted upward after a series of interest rate increases by the Federal Reserve probably are at the root of tardy loans and other financial problems, said Kurt Bauer, president and CEO of the Madison-based bankers trade group.

"It looks like the people who had ARMs seem to have had difficulty because we saw an increase in past dues, foreclosures and bankruptcies," Bauer said. "Not a huge spike, but an increase nonetheless."

Bauer said the good news is that 63% of the bankers expect short-term interest rates to drop over the next six months, which could help home sales.

Almost 70% of the bankers predicted commercial loan demand would be the same in the first half of 2007 as it had been last year, and 21% thought it would decline.

Sixty-seven percent of the bankers said they would rate Wisconsin's overall economy as "good," and expected it to stay that way over the next six months. Twenty-one percent said the state economy will weaken, and 12% thought it would grow.

On employment, about 11% of the bankers expect that businesses will lay off people in their market areas in 2007, while 83% think employment levels will stay the same and 5% anticipate that companies will add workers.

The survey was conducted in late December.