Net interest income has helped drive earnings at Connecticut banks through the first three quarters of 2022, according to FDIC data.
The FDIC’s latest state banking performance summary showed that Connecticut’s 31 FDIC-insured institutions together had $579 million in net income and $2.28 billion in net interest income in the first nine months of 2022.
FDIC Acting Chairman Martin Gruenberg said in a statement announcing the latest FDIC Quarterly Banking Profile that the banking industry nationwide had generally positive results in the third quarter amid continued economic uncertainty.
“Loan growth strengthened, net interest income grew, and most asset quality measures improved,” Gruenberg said. “Further, the industry remains well-capitalized and highly liquid.”
He added that at community banks, higher net interest income in the third quarter more than offset increases in noninterest expense and declines in noninterest income from lower net gains on loan sales.
The $2.28 billion in net interest income that Connecticut-based banks saw through the first nine months of 2022 was lower than the $2.59 billion in net interest income through the first nine months of 2021, but the 2021 amount included People’s United Bank before it was acquired by M&T Bank and Webster Bank before it had acquired New York-based Sterling National Bank.
Fewer Connecticut banks reported earnings gains in the first nine months of the year compared to last year. About 32 percent of banks reported having net income compared to 90 percent in the first nine months of 2021.
While most banks are still considered profitable, 9.7 percent of institutions are now considered unprofitable. Last year all Connecticut institutions were classified as profitable on Sept. 30.
The net interest margin at Connecticut institutions was 3.39 percent at the end of the third quarter compared to 2.82 percent in the first nine months of 2021.
Connecticut institutions have seen an increase in the yield on earning assets. The collective yield on earning assets was 3.63 percent at the end of the third quarter compared to 3.00 percent over the same period in 2021.
Total assets at the state’s institutions were $107.88 billion in the third quarter compared to $105.76 billion on June 30. Total loans and leases in the third quarter were $74.32 billion. The total loans and leases on June 30 were $70.78 billion.
The state’s banks had $87.03 billion in deposits at the end of the third quarter compared to $85.64 billion at the end of the second quarter, a 1.6 percent increase. Nationwide, deposits decreased 1.1 percent from the second quarter.
Connecticut institutions had 8,549 full-time equivalent employees in the third quarter compared to 8,623 in the second quarter.
Gruenberg in his statement said the banking industry continued to face risks.
“Despite several favorable performance metrics in the third quarter, the banking industry continues to face significant downside risks,” Gruenberg said. “These risks include the effects of inflation, rising market interest rates, and continued geopolitical uncertainty. Taken together, these risks may reduce profitability, weaken credit quality and capital, and limit loan growth in coming quarters. Furthermore, higher market interest rates have led to continued growth in unrealized losses in the banking industry’s securities portfolios. Higher market interest rates may also erode real estate and other asset values as well as hamper borrowers’ loan repayment ability.”
Gruenberg added that these matters would receive ongoing FDIC supervisory attention.
