Connecticut-based banks are off to a much better start this year than they were in 2020, when the COVID-19 pandemic hit late in the first quarter.
Combined profits of all 32 banks headquartered in the state shot up nearly 122% in the first quarter of 2021, while nationally, the industry boosted earnings by more than 315%, thanks mainly to an improving economic outlook that has allowed banks to release loss reserves built up during the pandemic, the Federal Deposit Insurance Corp. said last week.
Connecticut’s 32 banks — down from 35 institutions a year ago because of mergers and acquisitions — reported a total of $357 million in profits in the recent quarter ended March 31, up from $161 million during the same quarter a year ago, when a pandemic-related plunge in the stock market took a deep divot out of earnings.
While the stock market recovered quickly, banks had to set aside larger amounts of money in the ensuing quarters to prepare for expected future losses on loans, which contributed to an overall earnings decline of 22% for the full year.
Banks are now releasing those reserves, which was the main driver of higher profits in the recent quarter, the FDIC said.
As their profits rise, banks are still flush with deposits, thanks to federal pandemic stimulus. Accounts at Connecticut-based banks contained $112.2 billion in the recent quarter, up from $94.2 billion a year prior.
However, it’s been more difficult to make hay out of that growth, because interest rates remain near record lows.
The industry’s workforce also continues to shrink, falling to 13,364 full-time equivalents employed by Connecticut banks in the first quarter, down from 14,201 a year prior, and from 13,703 at the end of 2020.
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