Rhode Island banks grew profit at a much faster pace than their peers nationwide and in New England during the first quarter of 2017, according to new federal data.
“There are a lot of good things happening in the state. … New businesses are opening and existing businesses are expanding. Meanwhile, real estate values have been increasing. Consumer and business optimism are the highest we’ve seen in years,” said Gregory Derderian, executive vice president and chief financial officer at BankNewport.
The Federal Deposit Insurance Corp. recently released first-quarter performance metrics for all 43,971 federally insured banks in the country. Rhode Island – with nine FDIC-backed banks – reported aggregate profit growing 30.6 percent to $286 million compared with the same prior-year period.
The growth more than doubled the nationwide year-over-year growth rate of 12.7 percent during the quarter, as FDIC-insured banks reported an aggregate profit of $44 billion.
The FDIC numbers are based on federally insured lines of business, and exclude non-FDIC affiliates, or subsidiaries headquartered in other states, which makes teasing out the exact location of profit and loss impossible for banks that have operations beyond the Ocean State.
Citizens Financial Group Inc. likely led the way in fueling the strong quarterly performance, as the company reported record-breaking profit during the first quarter of 2017.
The Providence-based bank, with assets totaling $150.3 billion, reported first-quarter profit grew 43.5 percent compared with the prior-year period to $320 million.
“It’s great to get the year off to a strong start, and we remain confident in our full-year outlook,” said Bruce Van Saun, chairman and CEO at Citizens, in a statement about the quarter.
The growth in Rhode Island is notable in the region. The statewide year-over-year increase nearly matched the pace of profit growth realized by banks in Massachusetts, which is largely seen as having a more robust banking market. And growth in the Ocean State outpaced profit reported by Connecticut-based banks.
Indeed, the Bay State, with 133 FDIC-backed banks, saw first-quarter profit growth of 39.3 percent to $808 million when compared with the prior-year period. Meanwhile, Connecticut’s 42-FDIC backed institutions grew net income 8.8 percent to $197 million.
“The economy in our market – which is really Rhode Island, Connecticut and Massachusetts – is continuing to get better, particularly in Rhode Island,” said Joseph J. MarcAurele, chairman and CEO at Washington Trust Bancorp Inc., parent of The Washington Trust Co., based in Westerly.
Nationwide, the overall trends are favorable, according to FDIC Chairman Martin J. Gruenberg. He said in a statement that the industry reported largely positive results despite an ongoing operating environment that “continues to pose challenges for banks.”
“Revenue and net income growth were strong, asset quality improved and the number of unprofitable banks and ‘problem banks’ continued to fall,” he said. “Community banks reported another quarter of solid revenue and net income growth.”
The chairman, however, noted a slowdown in loan growth across major lending categories, saying it comes as the economy approaches the end of the eighth year of “relatively modest expansion.” Total loans and leases balances grew 4 percent, or $358.1 billion, compared with the same prior-year period, following 5.3 percent growth in 2016’s first quarter.
Rhode Island banks again performed better than its peers in lending. Total loans and leases in aggregate totaled $96 billion, representing an 8.1 percent increase compared with the prior year.
“I don’t think it’s necessarily a sign of the economy slowing down, but I really have to believe at some point the loan markets will get a little bit saturated, and it’s almost a question of how much more can you do,” MarcAurele said.
Edward O. “Ned” Handy III, president and chief operating officer at Washington Trust, also noted the bank’s lending pipeline is as robust as it’s been in the last few years.
The top executives say Washington Trust profit has grown proportionately year over year, and pointed out that trends affecting Citizens, the largest state-based bank, are likely to affect aggregate trends more so than Washington Trust because it’s so much bigger.
Washington Trust reported first-quarter profit growing 7.7 percent to $11.8 million compared with the same 2016 period.
BankNewport, a private institution that doesn’t release quarterly income statements, posted 2016 profit of $11.8 million, growth of 19.6 percent, according to its annual report.
“The combination of a strengthening economy and a more efficient organization has allowed us to exceed many of our New England peers,” Derderian said.
