Connecticut banks and savings institutions shed 119 jobs in the first quarter of 2009 and reported a 36-percent drop in net income during the same three-month period as the recession continued to takes its toll on the industry.
Net income at Connecticut’s 58 federally insured financial institutions dropped to $72 million in the first quarter of 2009 from $112 million a year earlier, according to the Federal Deposit Insurance Corp.
Nationally, earnings at federally insured banks and savings institutions plunged 61 percent to $7.6 billion from $19.3 billion in 2008.
Most financial institutions in the Northeast performed better than banks in other parts of the country, but earnings and credit quality deteriorated virtually across the board.
“The first quarter results are telling us that the banking industry still faces tremendous challenges, and that going forward, asset quality remains a major concern,” said FDIC Chairman Sheila C. Bair in a written statement. “Banks are making good efforts to deal with the challenges they’re facing, but…we’re not out of the woods yet.”
Bair said that higher loan-loss provisions, increased write-downs, and reduced income from securitization activities all contributed to the year-over-year earnings decline. Three out of five insured institutions reported lower net income in the first quarter and one in five was unprofitable.
Loans Past Due
Connecticut banks and savings institutions reported sharp increases in nonperforming loans — loans that are at least 90 days past due. Nonperforming loans as a percentage of total loans at banks rose to 2.16 percent from 0.8 percent in the 2008 first quarter. That ratio at the state’s savings institutions rose to 0.88 percent from 0.41 percent.
Nationally, the nonperforming ratio jumped to 2.32 percent from 1.04 percent at banks and to 2.99 percent from 1.79 percent at savings institutions.
Although 21 insured institutions failed nationwide, none were from Connecticut.
The FDIC’s “Problem List” grew during the quarter from 252 to 305 institutions, and total assets of problem institutions increased from $159 billion to $220 billion.
Analysts said that banks in the Northeast have held up relatively well compared with other regions, but were expected to experience some stress in the first quarter.
That’s because the Northeast was in the earlier stages of economic deterioration compared to other regions, which means the downside risk to earnings and stock prices would likely be meaningful, especially with unemployment expected to rise.
In April alone, Connecticut lost 11,800 jobs, raising the unemployment rate to 7.9 percent. By some measures, the state has already lost over 65,000 jobs since the start of the recession, a number that is projected to go higher in the coming months.
Despite the rough road, deposits and assets at Connecticut’s banking institutions increased nearly 6 percent and 1 percent respectively to $55 billion and $74 billion.
Floor Plan Funds Available
The U.S. Small Business Administration will offer government-guaranteed loans to finance inventory for eligible auto, recreational vehicle, boat and other dealerships under a new pilot program, which will be available beginning July 1.
Floor plan financing is a line of credit that allows dealers to borrow against their inventory, and then repay that debt as they sell their inventory or borrow against the line of credit again to add new inventory.
Under the pilot program, the SBA will provide loan guarantees for lines of credit through its 7(a) program. Floor plan loans will be made through SBA lenders only for titled inventory, including autos, RVs, manufactured homes, boats and motorcycles.
Floor-plan loans will be available for a minimum of $500,000 and up to $2 million. With a maximum repayment term of five years, the loans will come with a 75 percent government guarantee.
Borrowers will also benefit from the temporary elimination of fees on 7(a) loans made possible by the America’s Recovery and Reinvestment Act of 2009.
The pilot program will be available through Sept. 30, 2010.
Greg Bordonaro is a Hartford Business Journal staff writer.
