Only 3.82 percent of Massachusetts banks were unprofitable during the second quarter, compared to 9.26 percent a year earlier and 12.65 percent in the second quarter of 2010, according to the Federal Deposit Insurance Corp.’s quarterly banking profile.
Net interest margin among Massachusetts banks fell to 2.25 percent during the quarter from 2.44 a year earlier and 2.67 in the same period two years ago.
Total assets of banks in Massachusetts banks was $305 billion, compared to $291 billion in the same period a year ago and $258 billion in the second quarter of 2010.
The Bay State seems to be following a national trend. The report found banks nationwide continued to bounce back from the financial crisis in the second quarter, even as margins continued to shrink, according to the FDIC.
The profile, which was released Tuesday, says "the drag from declining net interest margins" has been offset by strong reductions in the amount of money banks set aside for loan losses and charge-offs.
FDIC-insured banks set aside $14.2 billion in provisions for loan losses in the second quarter. That’s a $5 billion, or 26.2 percent, decease compared to the same quarter a year ago. It is also the smallest quarterly total in five years, the FDIC noted.
The reduction in provisions for loan losses offset a $287 million decline in net interest income, which hit a three-year low during the quarter. The average net interest margin was 3.46 percent. A year ago, it was 3.61 percent. Non-interest income increased $1.6 billion, or 2.8 percent from the second quarter of 2011.
Collectively, banks turned a $34.5 billion profit in the quarter, an increase of nearly 21 percent over the same period a year ago. A full 62.7 percent of all FDIC-insured banks reported greater earnings than a year ago. Only 10.9 percent lost money, down from nearly 16 percent a year earlier.
The average return on assets was 0.99 percent compared to 0.85 percent a year ago and was the third-highest quarterly ROA for the industry since the second quarter of 2007.
Total loans increased 1.4 percent during the quarter, spurred by demand from commercial and industrial borrowers, residential mortgages and credit card balances. Real estate construction and development balances fell for the 17th consecutive quarter. Home equity lines of credit also continued their three-year decline.
Almost immediately after the FDIC released the quarterly profile, American Bankers Association Chief Economist James Chessen issued a statement. In it, he says that while lending growth and profitability are strong, uncertainty remains.
"Unfortunately, the atmosphere has started to change," Chessen said. "Our business customers are telling us that they are hesitant to expand or take on more debt in today’s uncertain environment. In addition, the housing sector continues to be a drag on total lending volume, and will limit loan growth to a gradual pace for the foreseeable future."
