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About one-third of Massachusetts-based banks reported earnings gains in the first quarter after last year saw bank earnings reach record levels, according to FDIC data.
The FDIC’s latest state banking performance summary showed that Massachusetts’ 105 FDIC-insured institutions together had $946 million in net income in the first quarter, a 13.1 percent decline compared to the first quarter of 2021, when banks had nearly $1.09 billion in net income. The state’s banks ended 2021 with a record $4.47 billion in net income.
Fewer Massachusetts banks reported earnings gains in the first quarter compared to the same quarter last year. About 35 percent of banks reported first-quarter net income compared to 78.7 percent in the first quarter of 2021. The full year of 2021 saw nearly 82 percent of banks with positive earnings.
While most banks are still considered profitable, unprofitable ones increased from 1.8 percent of all institutions in the first quarter of 2021 to 10.5 percent last quarter.
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 reduced revenue from loan sales and higher business expenses.
“Overall, the banking industry reported broad-based increases in total loan balances, generally favorable credit quality metrics, and strong capital levels,” Gruenberg said. “These factors support the banking industry’s ability to meet the country’s banking needs while navigating the challenges presented by inflationary pressures, rising interest rates, and the end of pandemic support programs for borrowers.”
Gruenberg added that most banks nationwide reported increases in net interest income as a result of loan growth, with more than half reporting higher net interest income compared to the first quarter of 2021.
The net interest margin at Massachusetts institutions was 1.70 at the end of the first quarter, compared to the first quarter 2021 net interest margin of 1.66 percent and the full-year 2021 ratio of 1.64 percent.
Massachusetts institutions saw a collective 1.75 percent yield on all earning assets in the first quarter, down slightly from 1.79 percent in the first quarter of 2021 and up from the full-year 2021 yield of 1.72 percent.
Total loans and leases were $168.6 billion compared to $169.84 billion in the first quarter of 2021 and $163.68 billion at the end of 2021.
For the third straight quarter, Massachusetts’ banks collectively saw deposits decline slightly from the previous quarter. The state’s banks had $424.17 billion in deposits at the end of the first quarter compared to $425.25 billion at the end of the fourth quarter. Nationwide deposits increased 2.5 percent from the fourth quarter. A year ago, Massachusetts-based banks had $417.66 billion in deposits.
Total assets at the state’s institutions were $513.1 billion in the first quarter compared to $511.77 billion in the first quarter of 2021.
The number of full-time-equivalent employees in these institutions increased in the first quarter. Massachusetts institutions had 57,555 full-time equivalent employees compared to 56,967 at the end of December and 51,272 a year ago.
Gruenberg in his statement did say that the banking industry continued to face lingering uncertainties from the pandemic and its effects on the health of the economy. He added that banks could see other challenges this year.
“In addition, inflationary pressures, rising interest rates, and geopolitical uncertainty could hamper bank profitability, weaken credit quality, and reduce loan growth,” Gruenberg said. “Specifically, rising interest rates, which have already contributed to high levels of unrealized losses in the banking industry’s securities portfolios, could also lower real estate and other asset values and limit loan repayment ability.”
Gruenberg added that these matters would receive FDIC supervisory attention over the next year.
