Connecticut-based banks collectively booked $289 million in profits for the three months ended Sept. 30, which was the sector’s best quarterly financial performance of 2020 so far.
That’s according to newly released data from the Federal Deposit Insurance Corp. (FDIC), which revealed that the 34 insured commercial and savings banks headquartered in Connecticut more than doubled their year-ago quarterly profits of $118 million.
Nationwide, bank profits were down 11% from a year ago in the recent quarter, though the industry joined Connecticut in posting its best results of 2020 to date, producing combined profits of more than $51 billion, up from less than $19 billion in each of the first two quarters of this year.
FDIC Chairwoman Jelena McWilliams said in a statement that the improved profits from last quarter were largely a result of banks setting aside less money, or “provisions for credit losses,” for anticipated impacts of the COVID-19 pandemic on borrowers.
“Lower provisions reflect the improving economy and a general expectation from the banking industry of stabilization in the expected future credit performance of the loan portfolio,” McWilliams said.
Headwinds include economic uncertainty, an increase in nonperforming loans and a low interest rate environment, she added.
Across the county, banks’ average net interest margin fell by nearly 0.7% from a year ago, to 2.68%, which was the lowest level ever reported in the FDIC’s Quarterly Banking Profile.
Through the first three quarters of this year, Connecticut banks have seen their profits decline more than 37% compared to the first nine months of 2019, while nationwide, the decline has been just over 50%.
While national bank employment was up slightly from last year to 2.07 million full-time equivalents, Connecticut’s count was down nearly 6%, falling from 14,588 FTEs in the first nine months of 2019 to 13,795 in the recent three quarters, according the FDIC data.
Bank deposits are at record levels, thanks to federal stimulus such as Paycheck Protection Program forgivable loans as well as consumer spending and saving habits. However, banks have also had a difficult time figuring out how to best earn a return on those higher balances.
Robert Strand, a senior economist with the American Banking Association, said in a statement that banks have solid capital levels and “remain a source of strength for the economy.”
“While the economic outlook remains uncertain, the prospect of effective COVID-19 vaccines could bolster the recovery moving forward,” Strand said. “Banks stand ready to do their part while continuing to work with customers financially strained by the pandemic.”
