FDIC-Insured Institutions Reported Return On Assets Of 1.27% And Net Income Of US$79.3 Billion In Third Quarter 2025

The Deposit Insurance Fund Reserve Ratio Increased 4 Basis Points to 1.40 Per cent

By Godson Umejiego, Bureau Chief, The Americas

The Federal Deposit Insurance Corporation (FDIC)  released the results of its latest Quarterly Banking Profile, a comprehensive summary of financial results based on reports from 4,379 insured commercial banks and savings institutions. In the third quarter 2025, insured depository institutions reported a return on assets (ROA) ratio of 1.27 per cent and aggregate net income of US$79.3 billion, an increase of US$9.4 billion (13.5 per cent) from the prior quarter. Strong net interest income growth and a reduction in provision expense, primarily related to last quarter’s large bank acquisition, drove the quarterly increase in earnings.

Highlights from the Third Quarter 2025 Quarterly Banking Profile

QBP Q3 2025 Graphic

Net Income Increased from the Prior Quarter, Led by Lower Provision Expense and Higher Net Interest Income: For the 4,379 FDIC-insured commercial banks and savings institutions quarterly net income totaled US$79.3 billion, up US$9.4 billion (13.5 per cent) from the prior quarter. The banking industry reported an aggregate ROA of 1.27 per cent in third quarter 2025, up from 1.13 per cent in second quarter 2025 and 1.09 per cent in the year-ago quarter. The quarterly increase in net income was driven by lower provision expense (down US$9.2 billion, or 30.7 per cent) and higher net interest income (up US$7.6 billion, or 4.2 per cent), which were offset by higher income taxes (up US$5.0 billion, or 30.1 per cent) and higher noninterest expense (up US$2.9 billion, or 1.9 per cent). The quarterly decrease in provision expense was largely attributable to expenses associated with the acquisition of one large bank in the prior quarter. Absent this large provision expense, net income still would have increased, as the industry experienced a US$7.6 billion increase in net interest income and a US$1.1 billion increase in noninterest income.

Community Bank Net Income Increased from the Prior Quarter: Quarterly net income for the 3,953 community banks insured by the FDIC totaled US$8.4 billion in the third quarter, an increase of US$756.9 million (9.9 per cent) from second quarter 2025. The community bank pretax ROA increased 13 basis points from last quarter to 1.46 per cent. Higher net interest income (up US$958.5 million, or 4.1 per cent) and noninterest income (up US$371.1 million, or 7.1 per cent) offset increases in noninterest expense (up $303.0 million, or 1.7 per cent).

Quarterly Net Interest Margin Increased from the Prior Quarter: The industry reported a quarterly increase in net interest income (up US$7.6 billion, or 4.2 per cent), as interest income accelerated more than interest expense. The net interest margin (NIM) increased by 9 basis points to 3.34 per cent, which is above the pre-pandemic average of 3.25 per cent. 1 The community bank NIM of 3.73 per cent increased 10 basis points from the prior quarter, increasing for the sixth consecutive quarter, and is above the pre-pandemic average of 3.63 per cent.

Asset Quality Metrics Remained Generally Favorable, Though Weakness in Certain Portfolios Persisted: Past-due and nonaccrual (PDNA) loans, or loans that are 30 or more days past due or in nonaccrual status, remained the same as the prior quarter at 1.49 per  cent of total loans. The industry’s PDNA ratio is well below the pre-pandemic average of 1.94 percent. The PDNA rate for non-owner-occupied commercial real estate (CRE), multifamily CRE, auto, and credit card portfolios remain well above their pre-pandemic averages.

The industry’s net charge-off ratio of 0.61 per cent increased 1 basis point from the prior quarter but is 5 basis points lower than the year-ago quarter. This ratio is 13 basis points above the pre-pandemic average, but significantly below the peaks during the Great Financial Crisis. Likewise, most portfolios have net charge-off rates above their pre-pandemic averages.

Loan Growth Continued from the Prior Quarter: Total loan and lease balances increased US$159.0 billion (1.2 per cent) from the prior quarter. Loans to non-depository financial institutions (NDFIs) and loans to purchase or carry securities, including margin loans, had the largest dollar increase among loan categories reported. Some of this increase was due to continued reclassifications following changes to how certain loan products should be reported. In addition, increases in consumer and nonfarm nonresidential CRE loans contributed to the industry’s quarterly loan growth. The industry’s annual rate of loan growth in the third quarter was 4.7 per cent, below the pre-pandemic average of 4.9 per cent.

Total loans at community banks increased 1.3 per cent from the prior quarter and 5.2 per cent from the prior year, led by increases in nonfarm nonresidential CRE loans and 1-4 family residential mortgage portfolios.

Domestic Deposits Increased for the Fifth Consecutive Quarter: Domestic deposits increased US$92.2 billion (0.5 per cent) from second quarter 2025, rising for a fifth consecutive quarter. Estimated uninsured domestic deposits drove the increase, up US$88.6 billion (1.1 per cent) from the prior quarter.

The Deposit Insurance Fund Reserve Ratio Increased 4 Basis Points to 1.40 Per cent: In the third quarter, the Deposit Insurance Fund balance increased US$4.8 billion to US$150.1 billion. The reserve ratio increased 4 basis points during the quarter to 1.40 per cent.

The Total Number of Insured Institutions Declined: The total number of FDIC-insured institutions declined by 42 during the third quarter to 4,379. During the quarter, four banks were sold to uninsured institutions and 38 institutions merged or consolidated with other banks.