Connecticut banks and savings institutions reported a 54 percent drop in net income through the first half of 2009, continuing a year-long trend of lower earnings.
But, in a bit of good news, the industry also reported its first growth in jobs in over a year.
Net income at Connecticut’s 56 federally insured financial institutions dropped to $94 million through the first six months of 2009, from $204 million in the year ago period, according to the Federal Deposit Insurance Corp.
However, those financial institutions added 309 jobs during the second quarter of 2009.
Employment at those banks and savings institutions rose from 13,767 in March to 14,076 at the end of June.
That was the first employment increase since last year.
Nationally, federally insured banks and savings institutions reported an aggregate net loss of $3.7 billion in the second quarter of 2009, an $8.5 billion decline from the $4.8 billion in profits the industry reported in the second quarter of 2008.
“While challenges remain, evidence is building that the U.S. economy is starting to grow again,” said FDIC Chairman Sheila Bair in a written statement. “Banking industry performance is — as always — a lagging indicator. The banking industry, too, can look forward to better times ahead. But, for now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry’s bottom line.”
In Connecticut, earnings for the first half 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.
Banks also have faced higher FDIC fees due to 89 bank failures across the U.S. so far this year, which have helped drain the federal regulator’s insurance fund. There have been no bank failures in Connecticut.
Nonperforming loans as a percentage of total loans at Connecticut banks in the first half of 2009 rose to 2.59 percent from 1.12 percent in the year ago period. That ratio at the state’s savings institutions rose to 1.02 percent from 0.53 percent.
Nationally, the nonperforming ratio at banks jumped to 2.73 percent from 1.25 percent. The rate at savings institutions jumped to 3.17 percent from 2.32 percent.
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 billion and $75 billion respectively.
Car Loan Deal
In an effort to spur car sales in Connecticut and boost loan production, Nutmeg State Federal Credit Union is offering 4.99 percent APR financing on all new and used vehicle loans.
Loren Dickinson, president and CEO of Rocky Hill-based Nutmeg State Federal Credit Union, said the offering is unique because it’s a “one-rate-fits-all deal.” That means all individuals that qualify for the loan will pay the same interest rate, regardless of their credit history.
The practice is known as fixed-rate lending, which Dickinson said is not currently being practiced by many financial institutions.
He said the offer is meant to spur business, which he admits is down right now, by trying to attract people who may have a blemish or two on their credit history.
The deal is available through Oct. 31 and provides up to 100 percent financing on new and used vehicles as well as terms of up to 84 months with refinancing options available.
“In these uncertain economic times, we want to provide members with as many tools as possible to stretch their household dollars,” Dickinson said. “This program is one way to make that happen and we are trying to use it to differentiate ourselves.”
Dickinson said most banks and credit unions usually do risk-based lending, which involves using a tiered pricing structure to determine loan rates, based on a person’s credit risk.
That means people with lower credit histories often pay higher rates on loans and vice versa.
Such lending benefits borrowers with strong credit histories by providing them lower interest rates. It also allows financial institutions to reach out to higher-risk borrowers.
In recent years, more credit unions have been trying to better identify potential risk by using risk-based lending.
Greg Bordonaro is the Hartford Business Journal staff writer.
