Hartford Business Journal

14 Hartford Business Journal • March 9, 2020 • www.HartfordBusiness.com By Matt Pilon mpilon@hartfordbusiness.com T he state's job recovery and economic growth rate since the Great Re- cession have lagged the nation, but Connecticut banks are collectively doing better than ever. In fact, the 35 banks headquar- tered in the state booked record profits of $1.33 billion in 2019, up more than 11% from a year earlier, according to Federal Deposit Insur- ance Corp. (FDIC) data. That bucked the industry's per- formance nationally, as U.S. banks collectively saw their profitability de- cline 1.5% in 2019, FDIC data shows. However, not all Connecticut banks enjoyed higher profits last year and larger institutions were more likely to end 2019 in the black than smaller ones, according to a Hartford Business Journal analysis of FDIC data. Bridgeport's People's United Financial and Waterbury's Webster Financial Corp. accounted for nearly three-quarters of the profits, raking in about $543.5 million and $404.9 mil- lion, respectively, FDIC figures show. The Connecticut industry's bottom line has now grown six consecutive years, with an average annual growth rate of nearly 17%. Connecticut-based bank profits in 2019 were nearly double what they were in the 2005 pre-recession peak, and are up sharply from their 2008 recessionary trough, a year in which the industry barely broke even, FDIC data shows. Don Klepper-Smith, an economist and adviser to Middletown-based Liberty Bank, said while Connecti- cut's job recovery has been slow, there has still been plenty of eco- nomic activity here, creating oppor- tunities for banks to sell loans and other products and services. State Gross Domestic Product numbers through the third quarter of 2019, he said, "were some of the best in the last five years." As a result, banks have increased loan revenues while borrower credit quality has improved, reducing the need to set aside money for loan losses. Those fac- tors, along with record stock market returns (prior to the recent corona- virus outbreak), higher fee in- come and better expense con- trols, have many local banks swimming in profits. "This is not a surprise," Klepper- Smith said of the record earnings. "Bankers have been busy, so that's a good thing for Connecticut." Don Klepper-Smith, Economist and Adviser, Liberty Bank Earnings Boom CT banks are enjoying a record run of profits, but some lenders question if it will last Cynthia Merkle, chair of the Connecticut Bankers Association and CEO of Union Savings Bank, says 2019's record earnings may be the banking industry's peak if interest rates don't rise. PHOTO | CONTRIBUTED CT bank profits fatten shareholder wallets Connecticut bank profits have also been good for shareholders, who have seen cash dividends more than double in the past few years, FDIC data shows. Below are the cash dividends paid out by Connecticut-based banks. 2016 2017 2018 2019 $0 $20,0000 $40,0000 $60,0000 $80,0000 $100,0000 In thousands of dollars $424,564 $456,872 $670,209 $934,242 Source: Federal Deposit Insurance Corp.

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