PROVIDENCE – Bolstered by a large cut in the corporate tax rate, United States banks collectively are on a financial roll, and the nine banks headquartered in Rhode Island are no exception, new federal banking statistics show.
Rhode Island-based banks boosted their combined profits to $723 million in the first half of the year. That total represented a 25 percent increase from a combined $577 million in profits in the first half of last year, the Federal Deposit Insurance Corp. reported Thursday.
Only one of the nine Rhode Island banks was not profitable in the six-month period from January through June, according to the FDIC, which did not provide numbers for individual banks.
The improved banking performance in Rhode Island matched the national trend. Nationwide, FDIC-insured banks turned a collective profit of $60.2 billion the second quarter from April through June, up 25 percent from a year earlier, the FDIC reported.
The agency said gains stemmed from higher net interest income and tax reform legislation championed by President Donald Trump and fellow Republicans in Congress that slashed the federal corporate tax rate this year to 21 percent from 35 percent.
As of June 30, Rhode Island banks grew their total deposits to $98.6 billion, up from $96.1 billion a year earlier and $86.3 billion two years earlier.
Meanwhile, Rhode Island banks increased total loans to $103.8 billion, up from $97.3 billion a year earlier and $91.3 billion two years earlier, the new FDIC statistics show.
The nine in-state banks are Citizens Bank, The Washington Trust Co., Bank Rhode Island, BankNewport, Centreville Bank, Coastway Community Bank, Home Loan Investment Bank, Freedom National Bank, and Independence Bank.
Overall, the group’s net interest margin, which measures the difference between interest income generated by banks and the amount of interest paid out to their lenders, improved to 3.28 percent as of June 30, up from 3.10 percent a year earlier.
The group’s return on equity, which indicates a bank’s underlying profitability by measuring net income returned as a percent of shareholders’ equity, rose to 8.02 percent as of June 30, up from 6.53 percent a year earlier, figures show.
The group also boosted its total assets to $135.1 billion as of June 30, up from $130.5 billion a year earlier.
FDIC Chairman Jelena McWilliams greeted the improvements with a note of caution.
“It is worth noting that the current economic expansion is the second longest on record, and the nation’s banks are stronger as a result,” McWilliams said in a statement.
“The competition to attract loan customers will be intense, and it will remain important for banks to maintain their underwriting discipline and credit standards,” McWilliams said.
Nationwide, among the 5,542 banks and savings institutions reporting second-quarter financial results, more than 70 percent reported year-over-year growth in second-quarter earnings.
Among community banks nationwide, profits rose by 21 percent in the second quarter from a year earlier.
Meanwhile, the percentage of unprofitable banks nationwide dropped to 3.8 percent in the quarter, down from 4.3 percent a year earlier. Also, the FDIC’s list of “problem” banks declined from 92 banks to 82 banks in the quarter – the lowest number since late 2007, the FDIC said.
In addition, the amount of loans with payments 90 days or more past due declined by $7.7 billion, or nearly 7 percent, in the quarter.
“The banking industry experienced continued improvement in net interest income, non-interest income, and loan performance this year,” McWilliams said.
“However,” she added, “the interest-rate environment coupled with competitive lending conditions have led to heightened exposure to interest-rate, liquidity, and credit risks. The industry must continue to position itself to be resilient through economic cycles.”
Scott Blake is a PBN staff writer. Email him at Blake@pbn.com.