March 14, 2011 | last updated June 1, 2012 9:50 am
FINANCIAL SENSE

Most CT banks joined in the 2010 profit parade

Although 11 of Connecticut's 54 federally insured banks were unprofitable in 2010, earnings for the industry soared overall last year, nearly doubling from a year ago.

Their combined net income rose to $361 million in 2010 from $197 million a year earlier, according to the Federal Deposit Insurance Corp.

Still, problem loans remain a drag on Connecticut banks' balance sheets, and 2010 earnings remained well below profits from three years ago, when those same lenders earned $527 million.

Nationally, earnings at federally insured banks and savings institutions increased to $21.7 billion in the fourth quarter of 2010, a $23.5 billion improvement from the $1.8 billion net loss the industry suffered in the fourth quarter of 2009. That represents the sixth-consecutive quarter that earnings registered a year-over-year increase.

"Overall, 2010 was a turnaround year with four straight quarters of positive earnings," said FDIC Chairman Sheila C. Bair. "We are encouraged not only by the rising trend in total industry net income, but also by the fact that a substantial majority of insured institutions are participating in this trend."

But while there were signs of overall profit recovery, the industry is still recovering from the effects of the recession, which caused deteriorating loan portfolios. That required banks to hold additional reserves against future loan losses.

Nonperforming assets as a percentage of total assets at Connecticut banks in the fourth quarter rose to 2.16 percent from 1.67 percent in the year ago period.

Nationally, nonperforming assets as a percentage of total assets fell to 3.11 percent in the fourth quarter from 3.36 percent in the year ago period.

Connecticut banks continue to be strong compared to others nationally, but it's going to take a year or two, or more, for the industry to regain prerecession health in profitability, nonperforming loans and capital ratios, banking experts say.

The higher profitability was aided in part by the recovery of the stock market and overall improved investment income, they say.

In another good sign, total loans and leases on Connecticut bank's books increased 7 percent for all of 2010, to $54.9 billion from $51.1 billion. That's a sign that banks are beginning to lend more and the numbers mirror sentiments reflected in a recent survey by the Connecticut Business & Industry Association.

The survey found 14 percent of business executives polled rated current conditions "good'' or "excellent,'' the highest percentage in more than a year. Just 36 percent said current conditions are "poor" or "fair,'' the lowest number since the third quarter of 2008.

"We still have a long way to go to reach the levels attained back in 2007 before the onset of the Great Recession," said CBIA Vice President and Economist Peter Gioia. "But these figures are promising and show our modest economic growth is beginning to loosen credit-welcome news for businesses."

Meanwhile, the number of institutions on the FDIC's "problem list" rose from 860 to 884. Thirty insured institutions failed during the fourth quarter, bringing the year's total failures to 157. No Connecticut banks have failed since 2008.

Connecticut banks also listed gains in deposits and total assets in 2009, reaching $62.2 billion and $82.9 billion respectively. The state's lending institutions also collectively added a net 902 jobs during the year, boosting its fulltime workforce to 14,826.

Stamford bank closing branches

Struggling Patriot National Bancorp in Stamford is shuttering four of its branches and selling part of its loan portfolio as the company tries to nurse its balance sheet back to health.

The parent company of Patriot National Bank said it will sell off non-performing loans and real estate to ES Ventures One for $65 million.

The transaction requires the non-objection from banking regulators and is expected to close by the end of March.

"The sale of the majority of the Bank's non-performing assets will allow Patriot to accelerate the Bank's business plan," said Christopher Maher, the president and CEO of Patriot National Bancorp.

As part of the company's restructuring it will also take a $3 million charge to close four branches in Wilton, Fairfield, Greenwich, and Stratford.

Those moves are expected to save the company $1.8 million annually. g

Greg Bordonaro writes the Financial Sense column every other week. Reach him at gbordonaro@HartfordBusiness.com.

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