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Massachusetts banks saw the pandemic-related deposit surge continue in the fourth quarter, as the year ended with a 25 percent increase in deposits compared to 2019.
According to the FDIC’s latest state banking performance summary, Massachusetts’ 109 FDIC-insured institutions together held $407.02 billion in deposits at the end of 2020, a 25.6 percent increase over 2019. Deposits were up 13 percent compared to the third quarter and even exceeded the $402.39 billion Massachusetts banks saw in the first quarter at the start of the pandemic.
FDIC Chair Jelena McWilliams said in a statement announcing the latest FDIC Quarterly Banking Profile that deposit growth accelerated nationwide in the fourth quarter, “reflecting persistently high savings rates and lower spending.”
She added that fourth quarter net income rose nationwide, primarily due to lower provision expenses for credit losses and higher noninterest income, while the net interest margin remained at a record low level.
“While banking industry income for the full year 2020 declined from full year 2019 levels, banks remained resilient in fourth quarter 2020, consistent with the improving economic outlook,” McWilliams said.
More Massachusetts banks reported earnings gains in the fourth quarter, reflecting that improving outlook. About 52 percent of banks reported income gains in 2020 compared to 43 percent in the third quarter and 33 percent in the first quarter at the start of the pandemic. Nearly 66 percent of Massachusetts banks had earnings gains in 2019.
Almost all institutions are now considered profitable, with just 3.67 percent classified as unprofitable. In the first quarter, 20.7 percent of institutions were unprofitable.
Banks still face challenges, with the net interest margin at Massachusetts institutions down to 1.84 percent at the end of the fourth quarter, compared to 1.87 percent at the end of the third quarter and 2.37 percent in 2019.
Massachusetts institutions saw a collective 2.14 percent yield on all earning assets in 2020, down from 3.12 percent in 2019.
Massachusetts’ FDIC-insured institutions together had total assets of almost $505.2 billion at the end of 2020 compared to $412.47 billion in 2019, a 22.5 percent increase. Banks have reported the effects of the Paycheck Protection Program as a factor in rising assets. Total loans and leases were $168 billion in 2020, up 5.7 percent year-over-year from $159 billion.
While the number of full-time-equivalent employees in these institutions fell year-over-year, the fourth quarter saw a slight uptick in staff. Massachusetts institutions had 51,633 full-time-equivalent employees at the end of 2020 compared to 51,493 on Sept. 30 and 52,151 on Dec. 31, 2019.
