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13 HARTFORDBUSINESS.COM | OCTOBER 4, 2021 billion in the second quarter, a 281% increase from one year ago. "The banking industry reported strong earnings in the second quarter 2021, supported by continued economic growth and further improvements in credit quality," FDIC Chairman Jelena McWilliams said. In addition to rising profits, bank deposits have also skyrocketed as many people were able to boost their savings during the pandemic through a combination of less spending and government stimulus checks. Connecticut-based banks held $112.5 billion in deposits at the end of the second quarter, up 8.4% from a year ago and 18.3% from the second quarter of 2019, FDIC data show. Lending trends While profitability was up, the value of local banks' collective loan portfolios at the end of the second quarter was down 5.9% from a year ago, FDIC data show. Banks' net loans and leases fell from $92 billion on June 30, 2020, to $86.8 billion on June 30, 2021. Both Windsor Federal and Thomaston Savings — smaller community banks, with $707 million and $1.5 billion in assets, respectively — saw only a 2% drop in their loan portfolios over the past year compared to the nearly 6% statewide average, and both banks report that commercial lending has recently picked up. "Right now demand is good for us," said Hermann of Windsor Federal, which saw its loan portfolio drop slightly from $472.6 million at the end of the second quarter of 2020 to $464 million at the end of June 2021, FDIC data show. The bank is currently doing more commercial loans with manufacturing and construction businesses than with the retail or service sectors, he said. Lewis said Thomaston Savings' commercial loan pipeline looks strong until the end of the year. Its portfolio held $901.8 million in loans and leases at the end of the second quarter, down 1.6% from a year ago. Its lending is focused on construction and manufacturing, including fixed-asset purchases. "I'm also seeing business acquisition, some smaller businesses buying each other out, so that's been a positive," Lewis said. Meantime, Liberty Bank, the third- largest bank in Connecticut with $7.3 billion in assets, saw its loan portfolio shrink 9.5% over the past year to $4.1 billion as it has adjusted its lending strategy. Young said he expects loan activity will quickly turn around, thanks in part to the bank's greater focus on commercial and industrial lending along the Interstate 91 corridor. Liberty opened loan production offices in New Haven, Hartford and East Longmeadow, Mass., and staffed them with experienced lenders hired from some of the larger banks that have merged. "Our plan is to build out lending in the I-91 corridor," he said. "We've taken advantage of disruption in the market. We've been able to get a lot of top talent." Liberty did less than $40 million in lending in the I-91 corridor last year but has done $200 million so far this year, Young said. Some uncertainty While the bank executives are optimistic about the immediate future, the pandemic continues to cast doubt on the long term, as do workforce shortages and clogged supply chains. "Right now business conditions are very good," Hermann said. "The biggest challenge our commercial customers are seeing is the ability to get qualified help." "A lot of companies could be doing more if they had staff — that's the manufacturing side, the restaurant side, and across the board in most industries," Lewis said, adding that the alternative for many businesses will be automation. Young said Liberty Bank is not expecting a return to normal until the second quarter of 2022. "And if you're in the hospitality and service industries, it will take longer to recover…, " Young said. "We expect inflation and price increases, and supply chain disruption is still a problem." CT banks see surge in profits June, 30 2021 June, 30 2020 June 30, 2019 Number of CT-based banks 32 34 37 Net income $736M $389M $768M Percent of unprofitable institutions 0% 12% 5% Percent of institutions with earning gains 94% 12% 65% Total loans and leases $86.8B $92.1B $86.3B Deposits $112.6B $103.8B $91.9B Source: Federal Deposit Insurance Corp. Our CT Cannabis Insider is delivered every Thursday at 10am to your inbox. SIGN UP NOW! HARTFORDBUSINESS.COM/ENEWSLETTERS DON'T MISS BEING PART OF THE 2022 ANNUAL BOOK OF LISTS PLEASE CONTACT YOUR ACCOUNT REPRESENTATIVE OR CALL US AT 860-236-9998 OR EMAIL US AT ADVERTISING@HARTFORDBUSINESS.COM PURCHASE DEADLINE: DECEMBER 3RD PUBLICATION DATE: DECEMBER 27TH