The 3.32 percent bank margin that almost no bank earns

The banking system has a margin. A typical bank has another one.

That distinction is unusually important in the United States. The Federal Deposit Insurance Corporation reported a 3.32 percent bank net interest margin for the second quarter of 2026. Yet the median among 4,237 banks that reported the ratio through the FDIC's Bank Data API was 3.92 percent.

Both numbers are correct. They answer different questions.

The industry figure measures net interest income across the system relative to the system's average earning assets. It is pulled toward the institutions that own the most assets. The median lines up all reporting banks and selects the one in the middle, without giving a trillion-dollar bank more influence than a community bank.

That weighting matters because 18 institutions with more than $250 billion in assets held 63.69 percent of industry assets in the second quarter. Their aggregate margin was 2.94 percent. At the other end, 3,190 banks with less than $1 billion in assets represented 75.27 percent of all banks but only 4.00 percent of assets. Their two size groups reported margins of 3.99 and 4.02 percent.

The national average therefore describes where banking assets earn their spread. It does not describe what most bank charters report.

What is bank net interest margin?

Bank net interest margin is annualized net interest income divided by average earning assets. Net interest income is interest earned on loans, securities and other earning assets minus interest paid on deposits and borrowings. The ratio shows the spread a bank generates from financial intermediation before credit losses, operating costs, taxes and fee income.

The FDIC defines the measure in the notes to its Quarterly Banking Profile. Its published margin does not adjust interest income for the tax-exempt status of some assets.

The denominator is essential. A bank net interest margin is not simply an advertised loan rate minus an advertised savings rate. A balance sheet contains many loans made at different times, securities with different yields, noninterest-bearing deposits, interest-bearing deposits, wholesale funding and other assets. The margin compresses all of those positions into one annualized return on average earning assets.

Consider two banks that each produce $40 million of annualized net interest income. If one has $1 billion of average earning assets, its margin is 4 percent. If the other needs $2 billion of earning assets to produce the same income, its margin is 2 percent. The dollars are equal, but the balance-sheet efficiency expressed by the ratio is not.

That also means the ratio can move through either side of the spread. Asset yields can rise or fall. Funding costs can rise or fall. The composition of earning assets and funding can change. A stable margin may conceal large, offsetting movements in both yields and costs.

What was bank net interest margin in the second quarter of 2026?

The US banking industry's aggregate net interest margin was 3.32 percent in the second quarter of 2026, up one basis point from the prior quarter. Average asset yield rose 2.3 basis points and average funding cost rose 1.6 basis points, according to the FDIC. The unweighted median reporting bank had a 3.92 percent margin.

The current FDIC size table shows how much detail disappears inside that 3.32 percent average.

Assets per bank	Banks	Share of industry assets	Asset yield	Cost of funding earning assets	Net interest margin
More than $250 billion	18	63.69%	5.00%	2.06%	2.94%
$10 billion to $250 billion	140	22.94%	6.02%	2.07%	3.95%
$1 billion to $10 billion	890	9.37%	5.84%	1.91%	3.93%
$100 million to $1 billion	2,647	3.87%	5.77%	1.75%	4.02%
Less than $100 million	543	0.13%	5.47%	1.48%	3.99%
All banks	4,238	100.00%	5.35%	2.03%	3.32%

The largest aggregate margin was 4.02 percent for banks with $100 million to $1 billion in assets. The smallest was 2.94 percent for banks above $250 billion. The distance between them was 108 basis points.

The table does not say that every community bank earned more spread than every large bank. It reports aggregate income and assets within each group. Individual results overlap. The FDIC Bank Data API makes that variation visible.

Within the group above $250 billion, the unweighted median bank reported 2.94 percent. The middle result was 3.66 percent in the $10 billion to $250 billion group, 3.78 percent in the $1 billion to $10 billion group, 4.00 percent in the $100 million to $1 billion group and 3.94 percent below $100 million. Those medians describe banks, while the FDIC table describes dollars of earning assets.

Why does bank size change the national average?

Size changes the national average because the FDIC industry ratio is asset weighted. The 18 banks above $250 billion owned 63.69 percent of industry assets and had a 2.94 percent aggregate margin. Their result therefore exerts far more influence than the 3,190 banks below $1 billion, despite the smaller banks being far more numerous.

The concentration can be stated another way. The largest size group contained 0.42 percent of banks but almost two-thirds of assets. The two smallest groups contained 75.27 percent of banks but one twenty-fifth of assets.

If the question is, “What spread did the banking system earn on its assets?” then 3.32 percent is the right answer. If the question is, “What margin did the bank in the middle report?” then 3.92 percent is the better answer. Neither should be substituted for the other.

The gap also explains why a consumer can see a national figure that appears unlike the reported margin at a local institution. It is not necessarily a data error. The local bank occupies one observation in the median, but only its share of earning assets in the system aggregate.

Several business models sit inside each size label. Banks can emphasize commercial loans, residential mortgages, credit cards, securities, transaction deposits or wealth and payment services. Those choices alter yields, funding costs and the role that net interest income plays in total revenue. Asset size is an informative grouping variable, not a complete business-model classification.

How did falling rates produce different margin paths?

As the effective federal funds rate declined from 5.33 percent in August 2024 to 3.63 percent in August 2026, FDIC size groups did not move together. From the third quarter of 2024 through the second quarter of 2026, group margins ranged from no change at the largest banks to a 47 basis point increase at banks with $100 million to $1 billion.

The Federal Reserve Bank of St. Louis series supplies the policy-rate context. The FDIC workbook supplies the bank results. The dates do not prove that the policy rate alone caused each movement. They show how aggregate asset yields and funding costs repriced during the same broad easing period.

Assets per bank	Change in asset yield, Q3 2024 to Q2 2026	Change in funding cost	Change in net interest margin
More than $250 billion	-68 bp	-68 bp	0 bp
$10 billion to $250 billion	-50 bp	-77 bp	+27 bp
$1 billion to $10 billion	-9 bp	-54 bp	+45 bp
$100 million to $1 billion	+7 bp	-40 bp	+47 bp
Less than $100 million	-4 bp	-26 bp	+22 bp
All banks	-58 bp	-67 bp	+9 bp

The largest banks had equal 68 basis point declines in asset yield and funding cost, leaving their aggregate margin unchanged at 2.94 percent. Banks with $100 million to $1 billion in assets had a 7 basis point increase in asset yield and a 40 basis point decline in funding cost. Their aggregate margin expanded from 3.55 to 4.02 percent.

That is the mechanical explanation, not a claim about management skill. A margin widens when the yield earned on assets improves relative to the cost of funding those assets. It narrows when asset yields fall faster, or rise more slowly, than funding costs.

The most recent quarter offers a shorter example. From the first to the second quarter of 2026, the margin at banks with $10 billion to $250 billion in assets rose from 3.73 to 3.95 percent. The margin for banks above $250 billion fell from 3.01 to 2.94 percent. The national figure moved only from 3.31 to 3.32 percent because gains and declines across groups, weighted by their assets, nearly offset one another.

Does a higher bank net interest margin mean a healthier bank?

No. A higher bank net interest margin means a bank generates more net interest income per dollar of average earning assets, all else equal. It does not measure credit quality, operating efficiency, fee income, capital strength or liquidity. A high margin can coexist with high risk or high expenses, while a lower margin can support a durable business.

The phrase “all else equal” carries most of the caution. A lender that charges higher rates to riskier borrowers may report a wider initial spread and later absorb larger credit losses. A bank with a costly branch network may need a higher margin to cover operating expenses. A bank with substantial fee income can remain profitable with a narrower interest margin.

The ratio also says little by itself about interest-rate risk. A bank can show a strong current margin while holding assets and liabilities that reprice on different schedules. When market rates move, that mismatch can help or hurt future income. Securities values, uninsured deposit reliance and available liquidity matter as well, but none is contained in the margin.

For that reason, the Quarterly Banking Profile presents net interest margin beside provisions for credit losses, noninterest income, noninterest expense, return on assets, capital ratios and problem-bank measures. The margin is a core diagnostic. It is not a bank health score.

What does the FDIC size split leave out?

The size split leaves out changes in group membership and differences in business model, geography, loan mix and funding mix. A bank can cross an asset threshold through growth, contraction or a merger. The published group is therefore a changing population, so its time path should not be treated as a fixed panel of the same institutions.

The change in membership is visible in the workbook. The group above $250 billion contained 12 banks in the third quarter of 2025 and 18 in the second quarter of 2026. Its share of industry assets changed from 56.68 to 63.69 percent. Some movement in the group aggregate can come from banks entering the bucket, not only from existing members repricing their balance sheets.

Aggregation also hides dispersion. In the second quarter of 2026, the middle 80 percent of reported margins ran from 1.40 to 3.47 percent among banks above $250 billion. For banks with $100 million to $1 billion, that interval ran from 3.06 to 4.94 percent. These are unweighted bank-level percentiles calculated from the FDIC API, not official FDIC published percentiles.

Comparisons across periods also need consistent definitions. The FDIC size table uses consolidated domestic offices of FDIC-insured institutions and groups banks by total assets at the reporting date. A chart built from a different population, such as publicly traded bank holding companies, can produce a different average without contradicting the FDIC series.

How can a reader compare one bank with the industry?

Start with the bank's reported net interest margin for the same quarter and definition, then compare it with both the matching FDIC asset-size group and the overall industry. Check several quarters rather than one observation. Finally, examine asset yield, funding cost, credit provisions, operating expense, capital and liquidity before interpreting the difference.

The order prevents a common category mistake. A $600 million bank belongs first beside the $100 million to $1 billion aggregate, which was 4.02 percent, not only beside the 3.32 percent national figure. The size comparison does not declare the bank good or bad. It establishes a more relevant baseline.

Trend comes next because one quarter can contain temporary items or timing effects. A widening margin may reflect faster deposit repricing, a shift toward higher-yield assets or both. A narrowing margin may reflect falling asset yields, rising funding costs or both. The bank's filings and call-report fields are needed to distinguish those paths.

Then widen the lens. The same dollar of margin has different value if it is followed by different credit losses and operating expenses. Capital and liquidity determine how much stress the institution can absorb. A disciplined comparison therefore uses net interest margin as the beginning of the analysis, not its conclusion.

Frequently asked questions about bank net interest margin

What is a good net interest margin for a bank?

There is no universal cutoff. In the second quarter of 2026, FDIC size-group aggregates ranged from 2.94 to 4.02 percent. A meaningful comparison uses banks with similar size and business models, then considers credit costs, expenses, fee income, capital and liquidity.

Why is the median bank margin higher than the industry margin?

The median gives every reporting bank one place in the lineup. The industry margin gives more weight to institutions with more earning assets. Because the 18 largest banks held 63.69 percent of assets and had a 2.94 percent group margin, they pulled the asset-weighted industry result below the 3.92 percent median bank.

Is net interest margin the same as the spread between loan and deposit rates?

No. It includes interest from the full earning-asset portfolio and interest expense from deposits and other funding, then divides net interest income by average earning assets. Loan and deposit rates influence the ratio, but securities, borrowings, noninterest-bearing deposits and balance-sheet composition influence it too.

Why can a bank's margin rise when the Federal Reserve cuts rates?

A margin can rise if funding costs fall faster than asset yields. From the third quarter of 2024 through the second quarter of 2026, the $10 billion to $250 billion group had a 77 basis point decline in funding cost and a 50 basis point decline in asset yield, widening its margin by 27 basis points.

How often does the FDIC publish net interest margin data?

The FDIC publishes industry results quarterly through the Quarterly Banking Profile and provides institution-level financial fields through its Bank Data API. Quarterly comparisons should use the same reporting date, population and ratio definition.

The 3.32 percent headline is useful once its weight is visible. It says that the banking system generated that annualized spread on its earning assets. It does not say that 3.32 percent was normal for an individual charter. In the second quarter of 2026, the bank in the middle was 60 basis points higher, and the reason begins with 18 institutions that owned nearly two-thirds of the system.