Connecticut may have one of the wealthiest per-capita populations in the country, but in-state residents aren’t making their money from interest rates offered by local banks and credit unions.
Connecticut’s financial institutions offer some of the stingiest interest rates in the country, according to a new report by consumer website Go Banking Rates.
The typical savings account offered by a Connecticut bank or credit union, for example, had an average percentage yield of 0.13 percent at the end of February. Only one other state had lenders that offered a smaller average interest rate.
The average annual percentage yield (APY) of a six-month certificate of deposit in Connecticut was 0.26 percent at the end of February, while the average APY for a one-year CD was 0.39 percent, which were the 39th lowest rates offered in the country, according to Go Banking Rates.
Finally, two-year CD’s in Connecticut had an average APY of 0.59 percent at the end of February, which ranked as the 40th lowest average rate in the country.
Nationally, the average annual percentage yields at the end February were: six-month CD, 0.3 percent; one-year CD, 0.45 percent; two-year CD, 0.66 percent; savings account, 0.21 percent.
Go Banking Rates performed its analysis by using interest rates from its database of over 4,000 U.S. banks and credit unions. Only local banks and credit unions were used in the study. Rates were collected from individual institutions’ published online rates.
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Two credit union mergers
Merger and acquisition activity is starting to pick up in the state’s credit union industry, with two tiny credit unions seeking refuge in the arms of their much larger brethren.
In Wethersfield, the Capitol Region Federal Credit Union is asking state banking regulators for permission to merge with Dutch Point Credit Union.
Capitol Region has $30.3 million in assets and 5,306 members, compared to the $194 million in assets and 16,368 members held by Dutch Point, according to data from the National Credit Union Administration.
In 2012, Capitol Region lost about $51,000, according to the NCUA, while Dutch Point ended the year with an $820,426 surplus.
Credit unions are nonprofit cooperatives, which means they don’t have shareholders.
Meanwhile, Putnam’s Quiet Corner Community Credit Union is seeking approval to merge with Groton’s Charter Oak Federal Credit Union.
Charter Oak has $764 million in assets and 65,298 members and the credit union reported a net income of $5.1 million in 2012.
Quiet Corner Community Credit Union has only 611 members and $1.5 million in assets. It lost $27,881 in 2012, NCUA data shows.
There hasn’t been a ton of credit union M&A activity in the state over the past few years, but a few deals have cropped up. The activity has come largely from some of the state’s smallest credit unions that are finding it difficult to manage in the current low interest rate environment.
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Bank climate steady
The number of troubled and problematic banks in Connecticut held steady at the end of the fourth quarter, a sign that the state’s banking sector remains on stable ground despite a low interest rate environment that has put a squeeze on margins, according to financial health rankings by BauerFinancial, an independent bank analysis firm based in Florida.
Four out of the 50, or about 8 percent, of Connecticut-based banks reviewed by BauerFinancial were rated as problematic, and all of those are located in southwest Connecticut. They include Wilton Bank, Community’s Bank in Bridgeport, Connecticut Community Bank in Westport, and New Haven’s The Bank of Southern Connecticut. All four of those lenders have been on Bauer’s list of problematic financial institution for the past few years.
BauerFinancial rates banks on a zero-to-five-star system. Banks with two stars or less are considered troubled or problematic.
Wilton Bank and Community’s Bank had the lowest ratings of zero stars, while the remaining problematic financial institutions had two-star ratings.
Nationally, 9.5 percent of banks were listed as problematic by BauerFinancial, and nearly 70 percent of lenders earned a four- or five-star rating, the highest rate since the fourth quarter of 2007.
Capital levels and profits are both on the rise and delinquent loans are finally on the mend, which is boosting bank’s financial performance, according to BauerFinancial.
All banks in Greater Hartford were given at least satisfactory ratings. Among the best performing banks are Rockville Bank, Farmington Bank, People’s United Bank, Savings Institute Bank and Trust Co. in Willimantic, and Thomaston Savings Bank. They each received five-star ratings.
Greg Bordonaro writes the Financial Sense column every other week. Reach him at gbordonaro@HartfordBusiness.com.
