iStock illustration

Massachusetts-based banks saw lower net income in the first half of the year compared to 2021, in part because of higher compensation for employees, according to FDIC data.

The FDIC’s latest state banking performance summary showed that Massachusetts’ 104 FDIC-insured institutions together had $2.01 billion in net income in the first half of 2022, a 13.9 percent decline compared to the same period in 2021, when banks had nearly $2.34 billion in net income.

Fewer Massachusetts banks reported earnings gains in the first six months of the year compared to the first six months of 2021. About 41 percent of banks reported net income compared to 87 percent in the first half of 2021.

While most banks are still considered profitable, unprofitable ones increased from 1.8 percent of all institutions at the end of the second quarter of 2021 to 9.6 percent on June 30, 2022.

FDIC Acting Chairman Martin Gruenberg said in a statement announcing the latest FDIC Quarterly Banking Profile that the decline in income for the nation’s largest banks was tied to increases in loan provisions, while community banks saw lower net income due to higher compensation for employees.

Gruenberg did find reasons to be optimistic about the quarterly results.

“The banking industry reported generally positive results this quarter, amid continued economic uncertainty,” Gruenberg said. “Loan growth strengthened, net interest income grew, and most asset quality measures improved. Further, the industry remains well-capitalized and highly liquid.”

The net interest margin at Massachusetts institutions was 1.80 percent at the end of the second quarter, compared to 1.66 percent in the first half of 2021.

Massachusetts institutions have seen an increase in the yield on earning assets. The collective yield on earning assets was 1.91 percent at the end of the second quarter compared to 1.77 percent in the first half of 2021.

Total loans and leases in the second quarter were $173.05 billion compared to $167.86 billion in the second quarter of 2021.

For the fourth straight quarter, Massachusetts’ banks collectively saw deposits decline. The state’s banks had $414.01 billion in deposits at the end of the second quarter compared to $438.23 billion at the end of the first quarter, a 2.4 percent decline. Nationwide deposits decreased 1.9 percent from the first quarter. A year ago, Massachusetts-based banks had $424.17 billion in deposits.

Total assets at the state’s institutions were $492.64 billion in the second quarter compared to $523.88 billion in the second quarter of 2021.

The number of full-time-equivalent employees in these institutions increased in the second quarter. Massachusetts institutions had 58,901 full-time equivalent employees compared to 57,555 at the end of March and 51,171 a year ago.

Gruenberg in his statement did say that the banking industry continued to face risks.

“These risks include the effects of high inflation, rapidly rising market interest rates, and continued geopolitical uncertainty,” Gruenberg said. “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 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.

Earnings Remain Down At Mass. Banks

by Diane McLaughlin time to read: 2 min
0