Connecticut banks and savings institutions shed 144 jobs in the third quarter of 2009, and reported a 35 percent drop in net income through the first nine months of the year, as rising loan delinquencies and higher regulatory fees continued to plague the industry.
Net income at Connecticut’s 55 federally insured financial institutions dropped to $140 million through the first nine months of 2009, from $217 million in the year ago period, according to the Federal Deposit Insurance Corp.
At the same time, those financial institutions couldn’t maintain the positive job growth from the previous quarter, when Connecticut banks added 309 jobs.
Instead, during the third quarter Connecticut banks and savings institutions reduced their work force from 14,076 to 13,932 employees.
Nationally, federally insured banks and savings institutions reported a net income of $2.8 billion in the third quarter, a three-fold increase over the $879 million the industry earned a year earlier.
Jittery On Loans
“While bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance,” Federal Deposit Insurance Corp. Chairman Sheila Bair said in a written statement.
Of a bigger concern to the overall economy, however, is that fact that U.S. bank’s loan balances declined by the largest percentage since quarterly reporting began in 1984.
Total loan balances fell by $210.4 billion, or 3 percent, which means banks continue to be jittery about making loans.
“We need to see banks making more loans to their business customers,” Bair added. “This is especially true for small businesses that rely on FDIC-insured institutions to provide over 60 percent of the credit they use.”
In Connecticut, earnings for the first three quarters of 2009 were pulled down by an increase in nonperforming loans — loans that are at least 90 days past due — as well as money banks set aside to cover loans that may go bad in the future.
Nonperforming loans as a percentage of total loans at Connecticut banks in the third quarter of 2009 rose to 2.79 percent from 1.35 percent in the year ago period. That ratio at the state’s savings institutions rose to 1.1 percent from 0.61 percent.
Nationally, the nonperforming ratio at banks jumped to 3.05 percent from 1.47 percent. The rate at savings institutions jumped to 3.28 percent from 2.24 percent.
More ‘Problem’ Banks
Banks also have faced higher FDIC fees due to the depletion of the industry’s insurance fund, which has gone broke due to the large number of bank failures. Fifty institutions failed during the third quarter alone, bringing the total number of failures through the first nine months of 2009 to 95.
There have been no bank failures in Connecticut.
The FDIC’s Deposit Insurance Fund balance fell below zero for the first time since the third quarter of 1992. To make up for the shortfall, FDIC officials recently agreed to require banks to prepay three years’ worth of government insurance fees in order to raise $45 billion by the end of the year, which will cause banks to take a further hit to their earnings.
At the end of September, there were also 552 insured institutions on the FDIC’s “Problem List,” up from 416 on June 30. This is the largest number of “problem” institutions since 1993.
But while their profitability ratios suffered from those losses, Connecticut banks reported gains in deposits and total assets during the first half of the year, growing to $57.8 billion and $75.6 billion respectively.
Greg Bordonaro is a Hartford Business Journal staff writer.
