Reflecting state economy, banks less profitable in 1Q

Two Rhode Island banks posted a higher return on assets than the national average for the first quarter of 2014, according to the Federal Deposit Insurance Corp.’s Quarterly Banking Profile.
North Providence-based Union Federal Savings Bank topped the list of state banks in ROA with 3.98 percent for the first quarter of the year, according to the FDIC figures. The bank’s ROA for first quarter of 2013 was 0.77 percent, compared with 0.41 percent in the first quarter of 2012.
Union Federal was acquired in 2006 by Boston-based First Marblehead, a leading provider of private student loans.
Westerly-based The Washington Trust Co. ranked second in the state in ROA for the first quarter of the year at 1.19 percent. That compares with the bank’s ROA of 1 percent in 2013 and 1.14 percent in 2012.
Although the two banks differ widely in size – Union Federal has one branch and Washington Trust recently opened its 19th branch – the return on assets may be used statewide and nationally as one comparative measure of banks’ profitability.
Neither Union Federal Savings nor First Marblehead had a spokesperson available to comment on the rankings.
Nationally, the average return on assets was 1.01 percent in the first quarter of 2014, down from 1.12 percent in the same quarter the previous year, according to the FDIC.
Statewide, the aggregate return on assets was 0.60 percent for the first quarter of the year, down slightly from 0.66 for the same period in 2013.
Coming in third among the 10 Rhode Island-based banks for return on assets was Providence-based Bank Rhode Island, with ROA of 0.93 percent; East Greenwich-based Independence Bank was fourth with ROA of 0.65 percent; and BankNewport fifth with ROA of 0.58 percent. Providence-based RBS Citizens Financial Group Inc. came in sixth with ROA of 0.57 percent; West Warwick-based Centreville Savings Bank was seventh with ROA of 0.41 percent; Warwick-based Home Loan Investment Bank was eighth with 0.26 percent; Smithfield-based Freedom National Bank was ninth at 0.05 percent and Cranston-based Coastway Community Bank was the only Rhode Island-based bank with a negative ROA, at negative 0.81 percent.
Nationwide, commercial banks and savings institutions insured by the FDIC reported an aggregate net income of $37.2 billion in the first quarter of the year, a decline of 7.6 percent from $40.3 billion the industry reported at the end of the first quarter of 2013, according to the FDIC.
The decline in aggregate earnings was mainly attributable to a $7.1 billion, or 10.7 percent, decline in noninterest income, according to the FDIC. That decline is based in part on reduced mortgage activity and a drop in trading revenue.
Despite the aggregate decline in earnings, more than half, or 54 percent, of the FDIC’s 6,730 insured institutions had year-over-year growth in quarterly earnings.
“We saw further improvement in the condition of the banking industry in the first quarter,” FDIC Chairman Martin J. Gruenberg said in a press release. “Asset quality continues to improve, loan balances are trending up, fewer institutions are unprofitable.
“However, industry revenue has been affected by narrow margins, modest loan growth and a decline in noninterest income as higher interest rates have reduced mortgage-related activity and trading income fell,” said Gruenberg.
Rhode Island banks had an aggregate net income of $155 million at the end of first quarter 2014, a drop from $220 million for the same period in 2013. However, three fewer banks were headquartered in the state as of March 31, 2014, compared to the same quarter in the previous year. Topping the list in net income at the end of the first quarter of 2014 for Rhode Island banks is RBS Citizens, with $137.1 million, although those earnings represented a decline of 14.6 percent from $160.5 million for the bank’s first quarter of 2013.
Washington Trust ranked second among the 10 state banks with net income of $9.5 million in the first three months of the year, a gain of 23 percent on the $7.7 million reported at the same time last year.
Ranking third in profits for the first quarter of 2014 was Bank Rhode Island, with $4.3 million, followed by Union Federal Savings Bank with $1.9 million, BankNewport with $1.8 million, and Centreville Savings Bank with $1 million.
Net income rankings in the state for the first quarter of the year had Home Loan Investment Bank seventh with $134,000, Independence Bank eighth with $84,000, Freedom National Bank in ninth place with $12,000 and Coastway Community Bank in 10th with a net loss of $857,000.
In a state where unemployment has consistently been at or near the highest in the country, at 8.3 percent in April, bank employment data from FDIC reflected that problem.
The number of full-time employees at Rhode Island banks dropped in the first quarter of 2014 to 16,802, down 2.5 percent from 17,226 for the same quarter in the previous year.
The FDIC first quarter 2014 report found that community banks, which it described as institutions that provide traditional, relationship-based banking services in their local communities, showed some positive trends. •

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