Net income for U.S. banks down 3.4% in the third quarter

The 4,614 U.S. commercial banks insured by the Federal Deposit Insurance Corporation (FDIC) had aggregate net income of $68.4 billion in the third quarter, down 3.4% compared with the same period in 2022.

The smaller 4,166 community banks had a combined third-quarter net income of $6.7 billion, 4.8% compared with the second quarter and down 15% compared with the same quarter of 2022, according to the FDIC Quarterly Banking Profile posted Wednesday (Nov. 29).

“The banking industry continued to show resilience in the third quarter. Net income remained high, overall asset quality metrics remained favorable, and the industry remained well capitalized. Despite a modest improvement in the industry’s net interest margin, funding pressures continued to challenge the industry,” FDIC Chairman Martin Gruenberg noted in the press release.

Following are other key metrics in Wednesday’s report.
• The banking industry reported an average return on assets (ROA) of 1.17% in the third quarter, down from 1.21% in both second quarter 2023 and third quarter 2022.

• Total loan and lease balances increased by $45.9 billion, or 0.4%, from the previous quarter. A 2.5% increase in credit card loans and a 0.9% increase in one-to-four family residential mortgages drove loan growth.

• Total deposits declined by $90.4 billion, or 0.5%, between second and third quarter 2023. This was the sixth consecutive quarter the industry reported a lower level of total deposits.

• In the third quarter, two banks opened, 28 institutions merged, and two banks voluntarily liquidated.

• Unrealized losses on securities totaled $683.9 billion in the third quarter, up $125.5 billion, or 22.5%, from the prior quarter. Unrealized losses on held-to-maturity securities totaled $390.5 billion in the third quarter, while unrealized losses on available-for-sale securities totaled $293.5 billion.

• Loans that were 90 days or more past due or in nonaccrual status increased to 0.82% of total loans, up seven basis point from the prior quarter. This level is well below the industry’s 1.28% pre-pandemic average noncurrent rate. Nonfarm, nonresidential commercial real estate loan balances drove the increase in the noncurrent rate.