More than a year after the start of the pandemic saw banks and their customers confronting the unknowns of a public health crisis and a recession, the latest quarterly earnings results for Massachusetts-based banks continue to point to an improving outlook.
Between a lack of lending opportunities and challenges pushed into 2021 by pandemic emergency measures like PPP loans, banks and credit unions are staring at 2021 with wary eyes.
Even as the pandemic shuttered businesses and led Massachusetts to the highest unemployment rate in the country, billions of dollars flowed into the state’s banks.
Just as uncertainty has marked each stage of the Paycheck Protection Program – from features changing right before launch to system problems in the second round – community banks face another unknown with the program: its effect on bank finances in the coming months.
As long-term rates dropped before the Federal Reserve began making moves on short-term rates, the spread between what’s paid on deposits and earned on loans continued to flatten, hurting profits for many community banks. Last week’s decision by the Federal Reserve to cut interest rates for the third time this year could add some steepness back to the yield curve and help reverse this trend.
