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While the economic effects of the Omicron variant remain to be seen, improving economic conditions during the first nine months of 2021 helped drive Connecticut bank earnings close to pre-pandemic levels.

According to the FDIC’s latest state banking performance summary, Connecticut’s 32 FDIC-insured institutions together had $1.05 billion in net income during the first nine months of 2021, a 55 percent increase over the first nine months of 2020, when banks had $678 million in net income. Net income was just below the results from the first nine months of 2019, when Connecticut banks had $1.08 billion in earnings.

More Connecticut banks reported earnings gains year-to-date through Sept. 30 compared to both 2020 and 2019. About 90 percent of banks reported income gains in the first nine months of 2021 compared to 23.5 percent during the same period in 2020 and 56.7 percent on Sept. 30, 2019.

FDIC Chairman Jelena McWilliams said in a statement announcing the latest FDIC Quarterly Banking Profile that economic growth and improving credit quality had supported strong earnings nationwide.

“A third consecutive quarter of negative provision expense lifted earnings year over year, as banks continued to adjust expectations for potential credit losses,” McWilliams said. “The banking industry reported a modest quarterly increase in total loan balances, while the net charge-off rate reached a new record low.”

While net interest margin rose slightly nationwide after reaching a record low in the second quarter, Connecticut banks on average have yet to see the margin expand. The net interest margin at Connecticut institutions was down to 2.82 percent at the end of the third quarter, just below the second quarter ratio of 2.84 percent. During the first nine months of 2020, the net interest margin was 3.07 percent, and on Sept. 30, 2019, it was 3.34 percent.

Connecticut institutions saw a collective 3.00 percent yield on all earning assets in the first nine months of 2021, down year-over-year from 3.56 percent. Before the pandemic, the yield on earning assets was 4.29 percent on Sept 30, 2019.

Total loans and leases were $84.82 billion compared to $91.88 billion in the third quarter of 2020. In the same period in 2019, loans totaled $86.78 billion.

“Community banks reported increased balances in most loan categories relative to second quarter, despite a decline in aggregate loan balances because of repayment and forgiveness of Paycheck Protection Program (PPP) loans,” McWilliams said. “With strong capital and liquidity levels to support lending and protect against potential losses, the banking industry continued to support the country’s needs for financial services while navigating the challenges presented by the pandemic.”

The deposit surge that began in the early days of the pandemic has continued. Connecticut’s banks collectively had $114.83 billion in deposits, up from $112.59 billion at the end of the second quarter, a 2 percent increase. Nationwide, third quarter deposits had increased by 2.3 percent from the previous quarter.

Deposits year-over-year in Connecticut were up 9.8 percent.

Total assets at the state’s institutions were $136.2 billion at the end of the third quarter compared to $127.5 billion at the end of the third quarter of 2020.

The number of full-time-equivalent employees in these institutions declined from the second quarter and year-over year. Connecticut institutions had 12,776 full-time equivalent employees at the end of September compared to 13,123 at the end of June and 13,795 a year ago.