FDIC-insured institutions reported net income of $65.4 billion in the third quarter

Reports from 4,517 commercial banks and savings institutions insured by the FDIC reported aggregate net income of $65.4 billion in third quarter 2024, a decrease of $6.2 billion (8.6%) from the prior quarter. The absence of one-time gains on equity security transactions that occurred last quarter drove the quarterly decrease. These and other financial results for third quarter 2024 are included in the FDIC’s latest Quarterly Banking Profile. 

Third quarter net income for the 4,517 FDIC-insured commercial banks and savings institutions decreased $6.2 billion (8.6%) from the prior quarter to $65.4 billion. The quarterly decrease in net income was largely driven by the absence of about $10 billion in one-time gains on equity security transactions reported in the previous quarter. The absence of these nonrecurring gains was partially offset by strong net interest income in the third quarter.  

The banking industry reported an aggregate return-on-assets ratio (ROA) of 1.09% in third quarter 2024, down 11 basis points from one quarter earlier and down 8 basis points from one year earlier. 

Quarterly net income for the 4,082 community banks insured by the FDIC was $6.9 billion in the third quarter, an increase of $436 million (6.7%) from second quarter 2024. Higher net interest income (up $574 million, or 2.7%) and higher noninterest income (up $48 million, or 0.9%) more than offset higher noninterest expense (up $142 million, or 0.8%) and higher provision expense (up $128 million, or 13.9%). The community bank pretax ROA increased 8 basis points from last quarter to 1.21%.  

The industry reported a quarter-over-quarter increase in net interest income of $4.5 billion as the net interest margin (NIM) increased seven basis points to 3.23%. All bank size cohorts in the Quarterly Banking Profile reported a higher NIM in the third quarter. Despite the positive quarter, the industry’s third-quarter NIM was two basis points below the pre-pandemic average NIM. The community bank NIM of 3.35% increased five basis points quarter over quarter, increasing for the second consecutive quarter, but is still below the pre-pandemic average of 3.63%. 

Past-due and nonaccrual (PDNA) loans, or loans that are 30 or more days past due or in nonaccrual status, increased six basis points from the prior quarter to 1.54% of total loans. The industry’s PDNA ratio is still well below the pre-pandemic average of 1.94%. The PDNA ratio for non-owner occupied commercial real estate loans of 2.07% was at its highest level since fourth quarter 2013, driven by office portfolios at the largest banks, those with greater than $250 billion in assets. However, these banks tend to have lower concentrations of such loans in relation to total assets and capital than smaller institutions, mitigating the overall risk. 

The industry’s net charge-off ratio decreased one basis point to 0.67% from the prior quarter but was 16 basis points higher than the year-ago quarter. This ratio was the second-highest quarterly ratio reported by the industry since second quarter 2013. The credit card net charge-off ratio was 4.48% in the third quarter, down 34 basis points quarter over quarter but still 100 basis points above the pre-pandemic average. 

Total loan and lease balances increased $76.9 billion (0.6%) from the previous quarter. The increase was driven by higher loans to nondepository financial institutions (NDFIs) (up $28.0 billion, or 3.2%) and consumer loans (up $15.4 billion, or 0.7%). Most banks (68.2%) reported quarterly loan growth, and all major loan categories except construction and development loans and commercial and industrial loans showed quarter-over-quarter growth. 

Total loan and lease balances increased by $275.5 billion (2.2%) from the prior year. The annual increase was led by loans to NDFIs (up $112.9 billion, or 14.4%) and credit card loans (up $62.2 billion, or 5.9%). A strong majority of banks (81.2%) reported annual loan growth. 

Community banks reported a 1.1% increase in loan and lease balances from the previous quarter and a 5.5% increase from the prior year. Growth in nonfarm, nonresidential CRE loans and 1-4 family residential mortgage loans drove both the quarterly and annual increases in loan and lease balances. Loan growth was broad based across community banks, with nearly 70% of such banks reporting higher loan balances from the prior quarter.  

Domestic deposits increased $194.6 billion (1.1%) from second quarter 2024. Both savings and transaction deposits increased from the prior quarter, with declines in small time deposits partially offsetting the increases. Brokered deposits decreased for the third straight quarter, down $47.2 billion (3.6%) from the prior quarter. 

Estimated insured deposits were roughly flat this quarter (down $1.3 billion, or 0.0%) while estimated uninsured domestic deposits increased $197.3 billion (2.7%). Growth in estimated uninsured deposits was widespread; most banks (59.3%) reported an increase in such deposits from the prior quarter. 

In the third quarter, the Deposit Insurance Fund balance increased $3.9 billion to $133.1 billion. The reserve ratio increased four basis points during the quarter to 1.25%.  

The total number of FDIC-insured institutions declined by 21 during the quarter to 4,517. Three banks were sold to credit unions, one bank closed, and 18 institutions merged with other banks during the quarter. One bank opened and no banks failed in the third quarter.