Washington, D.C. – November 24, 2025 – The United States banking industry recorded strong growth in the third quarter of 2025, with aggregate net income rising 13.5% to $79.3 billion, according to the Federal Deposit Insurance Corporation (FDIC). This represents a $9.4 billion increase from the second quarter and reflects continued strength across the nation’s 4,379 insured commercial banks and savings institutions.
The FDIC’s Quarterly Banking Profile, released Monday, showed the industry’s return on assets reached 1.27%, up 13 basis points from the prior quarter and 18 basis points higher than a year ago. The primary drivers of the earnings growth were a significant increase in net interest income and a sharp reduction in provisions for loan losses.
Net interest income rose $7.6 billion, or 4.2%, quarter-over-quarter. The industry-wide net interest margin expanded by 9 basis points to 3.28%, as yields on earning assets climbed 11 basis points while funding costs rose only modestly by 2 basis points. This margin improvement was seen across all bank size groups, including community banks.
A major contributor to the profit surge was a $9.2 billion (30.7%) drop in provision expenses. Much of this decline stemmed from the resolution of one-time charges tied to Capital One’s acquisition of Discover Financial Services, which had significantly inflated provisions in the second quarter. With those merger-related reserves no longer needed, banks were able to release substantial amounts back into earnings.
These gains were partially offset by higher income taxes, which increased $5 billion (30.1%) due to stronger taxable profits, and a $2.9 billion (1.9%) rise in noninterest expenses such as salaries, technology, and occupancy costs.
Asset quality remained generally solid. The net charge-off rate edged up just 1 basis point to 0.61%, still well below historical highs and 5 basis points lower than a year earlier. Delinquency rates stabilized overall, though the FDIC noted persistent weaknesses in certain portfolios, particularly non-owner-occupied commercial real estate loans and, to a lesser extent, credit card and auto loans.
Community banks, which make up the vast majority of FDIC-insured institutions, reported net income of $8.4 billion in the third quarter, up 9.9% or $756.9 million from the previous quarter. These smaller institutions continued to benefit from higher net interest margins and reduced provisioning needs.
Total deposits grew for the fifth straight quarter, increasing 0.7% to $18.4 trillion. Uninsured deposits also rose, climbing 1.1% to $8.86 trillion. The Deposit Insurance Fund balance increased $4.8 billion to $150.1 billion, lifting the reserve ratio to 1.4%. Unrealized losses on securities portfolios declined 14.7% to $337.1 billion, helped by stabilizing long-term interest rates.
The number of FDIC-insured institutions fell by 42 to 4,379, continuing a decades-long consolidation trend driven by mergers and voluntary liquidations. The list of “problem banks” dropped to 57, representing just 1.3% of all insured institutions—the lowest level in years.
FDIC Acting Chairman Travis Hill highlighted the industry’s strong capital and liquidity positions, noting that these buffers support continued lending and protect against potential losses. Banks extended approximately $1.2 trillion in new loans during the quarter, with significant volumes directed toward small businesses and residential mortgages.
Despite the positive results, regulators and analysts remain watchful of several risks. Commercial real estate exposure, especially office loans affected by remote work trends, continues to draw scrutiny. Consumer credit metrics have shown modest deterioration amid lingering inflation pressures in housing and transportation. Additionally, competition from fintechs and non-bank lenders is intensifying in areas such as personal loans and payments.
Looking ahead, the banking sector appears well positioned for sustained performance, provided the broader economy maintains its current momentum. With unemployment steady at 4.1%, GDP growing at a 2.8% annualized pace, and consumer spending supported by holiday-season activity, most indicators point to continued stability through the end of 2025 and into 2026.
The American Bankers Association welcomed the report, stating that the stronger net interest margins and improved earnings reflect a favorable environment that enables banks to support economic growth while maintaining financial resilience.
The full FDIC Quarterly Banking Profile, including detailed performance tables and historical comparisons, is publicly available on the agency’s website.
