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Amid the ongoing economic effects of the pandemic, Massachusetts bank earnings in 2021 reached record levels, according to FDIC data.
The FDIC’s latest state banking performance summary showed that Massachusetts’ 105 FDIC-insured institutions together had $4.47 billion in net income in 2021, a 31.8 percent increase over 2020, when banks had nearly $3.4 billion in net income.
Net income was also higher compared to the year before the pandemic started, when Massachusetts banks had $3.85 billion in earnings in 2019. The state’s banks had their highest collective level of annual net income last year, according to more than 25 years of performance data available from the FDIC.
More Massachusetts banks reported earnings gains in 2021 compared to both 2020 and 2019. About 82 percent of banks reported income gains last year compared to 52.3 percent in 2020 and 65.8 percent in 2019.
Almost all institutions are now considered profitable, with just 1 percent classified as unprofitable. In 2020, 3.7 percent of institutions were unprofitable.
FDIC Acting Chairman Martin Gruenberg said in a statement last week announcing the latest FDIC Quarterly Banking Profile that banks nationwide had strong capital and liquidity levels to support lending and protect against potential losses. While pointing out that the industry continued to support the credit needs and navigate challenges during the pandemic, Gruenberg added a note of caution.
“Despite the positive trends, several challenges persist for the banking industry,” Gruenberg said. “The trajectory of the pandemic and its longer-term economic and banking industry effects remain uncertain. In addition, rising interest rates and geopolitical uncertainty could negatively affect bank profitability, credit quality, and loan growth going forward. In particular, rising interest rates could adversely impact real estate and other asset values and borrowers’ repayment abilities.”
The net interest margin at Massachusetts institutions was down to 1.64 percent at the end of the fourth quarter, similar to the third quarter ratio of 1.65 percent. The net interest margin in 2020 was 1.84 percent, and in 2019, it was 2.37 percent.
Massachusetts institutions saw a collective 1.72 percent yield on all earning assets in 2021, down from 2.14 percent in 2020. Before the pandemic, the yield on earning assets was 3.12 percent in 2019.
Total loans and leases were $163.68 billion compared to $168 billion in 2020 but ahead of 2019, when loans totaled about $159 billion.
For the second straight quarter, Massachusetts’ banks collectively saw deposits decline from the previous quarter. The state’s banks had $425.25 billion in deposits at the end of the fourth quarter, down 0.7 percent from the third quarter.
Nationwide, deposits increased in the fourth quarter by 2.8 percent from the previous quarter.
“Deposit levels remain high from an historical perspective; however, growth rates are below the unprecedented levels reported in 2020 and first quarter 2021,” Gruenberg said.
Compared to the end of 2020, when deposits totaled $407 billion, deposits at Massachusetts banks were up 4.5 percent. Deposits were up 31.3 percent compared to 2019.
Total assets at the state’s institutions were about $504.5 billion at the end of 2021, down slightly from 2020, when total assets were $505.2 billion.
The state ended 2021 with four fewer FDIC-insured institutions, as Radius Bank, Boston Private, Century Bank and East Boston Savings Bank were all acquired last year.
The number of full-time-equivalent employees at the state’s banks did jump in the final quarter of 2021. Massachusetts banks had 56,967 full-time equivalent employees at the end of 2021 compared to 49,809 at the end of September and 51,633 a year ago.
