FDIC Quarterly Banking Profile Second Quarter 2025

Today, the FDIC is releasing second quarter 2025 efficiency outcomes for FDIC-insured establishments.

The banking business completed the quarter with barely decrease earnings quarter over quarter, leading to a return on property (ROA) ratio of 1.13 p.c. The decline was primarily attributable to an enhance in provision bills associated to a big financial institution acquisition, absent which web earnings would have elevated. Domestic deposits elevated for the fourth consecutive quarter and mortgage development accelerated. Asset high quality metrics remained usually favorable regardless of continued weak point in sure portfolios, which we’re monitoring intently.

The banking business continued to have sturdy capital and liquidity ranges, which help lending and shield towards potential losses. At the identical time, establishments proceed to navigate weak point in sure mortgage portfolios and elevated unrealized losses, amongst different challenges.

Chart 1 

Chart 1¹ exhibits that the banking business reported quarterly web earnings of $69.9 billion, a lower of $677.3 million, or 1 p.c, from the prior quarter. The quarterly lower in web earnings was led by a rise in provision bills associated to a big financial institution acquisition. The banking business reported an ROA ratio of 1.13 p.c in second quarter 2025, down 3 foundation factors from one quarter earlier and down 6 foundation factors from one yr earlier.

Community financial institution quarterly web earnings elevated 12.5 p.c from the prior quarter to $7.6 billion, pushed by larger web curiosity earnings and noninterest earnings.

Chart 2 

Chart 2 exhibits the breakdown of the modifications within the business’s web earnings quarter over quarter. The main driver of the business’s $677.3 million lower in web earnings was larger provision expense, which elevated $7.6 billion, or 33.7 p.c. The enhance in provision expense was largely attributable to Capital One’s acquisition of Discover Financial Services, as accounting requirements require the buying establishment to acknowledge a provision expense associated to sure acquired property. Absent this huge provision expense, web earnings would have elevated as a consequence of larger web curiosity and noninterest earnings.

Chart 3

Chart 3 exhibits the typical web curiosity margin (NIM) for the business and for 5 asset-size cohorts. The business’s NIM was comparatively flat, up one foundation level from the prior quarter to three.26 p.c, which is above the pre-pandemic common of three.25 p.c.²

The neighborhood financial institution NIM elevated to three.62 p.c, up 16 foundation factors from the prior quarter. Community financial institution NIM is approaching the pre-pandemic common of three.63 p.c.

Chart 4

Chart 4 exhibits the quarter-over-quarter modifications within the business’s common yield on incomes property and common value of funds. During the quarter, the price of funds decreased 1 foundation level whereas the yield on incomes property remained unchanged, leading to a one foundation level enhance within the business’s NIM in second quarter 2025.

Community banks’ NIM elevated within the second quarter, pushed by a 16 basis-point enhance within the incomes property yield and no change in the price of funds.

Chart 5

Chart 5 exhibits that the business’s provision expense was $30 billion within the second quarter, a rise of $7.6 billion from the primary quarter. The enhance was pushed by Capital One’s acquisition of Discover Financial Services, as accounting requirements require the buying establishment to acknowledge a provision expense associated to sure acquired property. This provision expense resulted in a discount in web earnings from the prior quarter for the business. Absent this acquisition, provisions would have barely declined from the prior quarter and year-ago quarter, and web earnings would have elevated. 

Chart 6 

Chart 6 exhibits that the banking business’s share of whole property made up of longer-term loans and securities fell for the tenth consecutive quarter to 34.1 p.c after peaking at 39.7 p.c in fourth quarter 2022. The business’s longer-term property as a share of whole property at the moment are under the pre-pandemic common of 35 p.c.

At neighborhood banks, longer-term loans and securities made up 43.6 p.c of whole property in second quarter 2025, down from 44.2 p.c the prior quarter and under the pre-pandemic common of 48.9 p.c.

Chart 7

Chart 7 exhibits the extent of unrealized losses on held-to-maturity and available-for-sale securities portfolios. Total unrealized losses of $395.3 billion decreased $17.9 billion (4.3 p.c) from the prior quarter as low-yielding securities continued to roll off the steadiness sheet.

Chart 8 

Chart 8 exhibits the change in mortgage balances on a quarterly and annual foundation. The business’s whole loans elevated by $263.7 billion, or 2.1 p.c, within the second quarter. Loans to non-depository monetary establishments (NDFIs) and loans to buy or carry securities, together with margin loans, had the most important greenback enhance amongst mortgage sorts reported, although a few of this enhance was as a consequence of continued reclassifications following the finalization of modifications to how sure mortgage merchandise are reported. In addition, bank cards, nonfarm nonresidential industrial actual property (CRE), and 1–4 household residential loans contributed to the business’s quarterly mortgage development. The business’s annual charge of mortgage development within the second quarter elevated to 4 p.c, under the pre-pandemic common of 4.9 p.c.

Total loans at neighborhood banks elevated 1.7 p.c from the prior quarter and 4.9 p.c from the prior yr, led by will increase in nonfarm nonresidential CRE and 1–4 household residential mortgage portfolios.

Chart 9

Chart 9 exhibits that asset high quality metrics for the business remained usually favorable, although weak point in sure portfolios continued. The total past-due and nonaccrual (PDNA) charge fell 9 foundation factors from the prior quarter to 1.50 p.c, under the pre-pandemic common charge of 1.94 p.c.³ While banks reported quarterly decreases in most portfolios, the PDNA charge for non-owner-occupied CRE, multifamily CRE, and bank card portfolios stay nicely above their pre-pandemic averages.

The business’s quarterly web charge-off charge of 0.6 p.c decreased 6 foundation factors from final quarter and eight foundation factors from the year-ago quarter. The business’s web charge-off charge was 12 foundation factors larger than the pre-pandemic common of 0.48 p.c. Credit card loans, auto loans, and different shopper loans excluding auto loans drove the quarterly decline within the whole web charge-off charge. Most portfolios proceed to have web charge-off charges above their pre-pandemic averages.

Chart 10

Looking deeper into the CRE portfolio, chart 10 exhibits that elevated PDNA charges of non-owner-occupied property loans continued within the second quarter, pushed by the portfolios of the bigger establishments. Banks with better than $250 billion in property reported a non-owner-occupied CRE PDNA charge of 4.33 p.c, down from the current peak of 4.99 p.c in third quarter 2024 however nicely above the pre-pandemic common charge of 0.59 p.c. However, these banks have decrease concentrations of such loans in relation to whole property and capital than smaller banks, mitigating the general danger. Overall, the business’s quantity of PDNA non-owner-occupied CRE loans decreased $387.1 million, or 1.6 p.c, from the prior quarter.

Chart 11

Chart 11 exhibits that the allowance for credit score losses had a modest enhance relative to the prior quarter. The ratio of the allowance for credit score losses to noncurrent loans elevated from 177.6 p.c within the first quarter to 179.4 p.c within the second quarter and stays nicely above the pre-pandemic common.

The reserve protection ratio at neighborhood banks declined from 168.7 p.c within the first quarter to 163.4 p.c within the second quarter as noncurrent mortgage balances elevated quicker than the allowance for credit score losses. Community banks’ pre-pandemic common reserve protection ratio was 129.4 p.c.

Chart 12

Chart 12 exhibits that home deposits elevated for the fourth consecutive quarter, rising $101.5 billion, or 0.6 p.c, throughout the second quarter. Estimated uninsured home deposits elevated $186.6 billion, offsetting a decline in insured home deposits of $87.3 billion, or 0.8 p.c, throughout the quarter. The business’s nondeposit liabilities elevated by $193 billion from the prior quarter, pushed by development in reverse repurchase agreements.

Chart 13 

Chart 13 exhibits the variety of banks on the FDIC’s “Problem Bank List.” Banks on this record have a CAMELS composite ranking of “4” or “5.” The whole variety of banks on the record decreased by a web of 4 within the second quarter to 59 banks. The variety of drawback banks is 1.3 p.c of whole banks, which is in the course of the traditional vary for non-crisis intervals of 1 to 2 p.c of all banks. Four banks opened throughout the second quarter and one failed.

Chart 14

This chart exhibits that the Deposit Insurance Fund (DIF) steadiness was $145.3 billion on June 30, 2025, up $4.4 billion from the primary quarter.⁴ Assessment income continued to be the first driver of the rise, including $3.2 billion to the DIF steadiness. Interest earned on funding securities, unfavourable provisions for insurance coverage losses, and unrealized features on securities additionally contributed a mixed $1.9 billion to the fund, partially offset by working bills of $630 million.

Insured deposits decreased by 0.8 p.c throughout the second quarter, whereas year-over-year insured deposit development was 0.6 p.c. The reserve ratio elevated by 5 foundation factors within the second quarter to 1.36 p.c and was 15 foundation factors larger than a yr earlier.

The FDIC adopted a DIF Restoration Plan on September 15, 2020, to return the reserve ratio to the statutory minimal of 1.35 p.c by September 30, 2028, as required by regulation. As of June 30, 2025, the reserve ratio exceeded the statutory minimal and, starting with third quarter 2025, the FDIC will not be working below a Restoration Plan.

In conclusion, the banking business continued to point out power in second quarter 2025. However, the business nonetheless faces weak point in sure mortgage portfolios, financial uncertainty, and elevated unrealized losses. These points will stay issues of ongoing supervisory consideration by the FDIC.