American banks earned $90.1bn in the second quarter, and more than half the increase over the first quarter came from securities gains the FDIC itself calls one-time
Banks made $90.1bn in the three months to June.
That is the aggregate net income of the 4,238 insured commercial banks and savings institutions that file with the Federal Deposit Insurance Corporation, and it is an increase of $9.7bn, or 12.0 percent, on the first quarter. Return on assets came in at 1.37 percent against 1.26 percent in the first quarter. Both are the highest readings in the quarterly run the FDIC publishes with the release, which starts in 2006.
The composition is the part worth reading.
Where the $9.7bn came from
The FDIC breaks the quarterly change into its parts, and two of them are the same size. Noninterest income rose $5.5bn, or 6.1 percent, which the agency puts down mostly to trading revenues given continued market volatility, and to higher fee income. Securities gains also rose $5.5bn, and here the FDIC adds a qualifier of its own: those gains came primarily from one-time gains on equity security transactions. Net interest income, the line that comes closest to describing what a bank does for a living, rose $5.3bn, or 2.8 percent. Noninterest expense went the other way, up $4.4bn.
Securities gains the agency itself calls one-time therefore account for 57 percent of the quarterly increase. That share is this desk's arithmetic on the FDIC's own two figures. The agency publishes no such ratio.
The margin barely moved. Industry net interest margin rose one basis point to 3.32 percent, because the yield on earning assets rose very slightly more than the cost of funds did. Community banks did better on that measure, at 3.81 percent, up ten basis points, and their net income rose 8.2 percent.
The deposits are growing in the uninsured half
Domestic deposits rose 0.8 percent, an eighth consecutive quarterly increase, and that is the finding the press release carries. The statement underneath it says something more specific. Estimated uninsured domestic deposits accounted for all of the increase, while insured deposits decreased slightly. Estimated insured deposits fell 1.0 percent over the quarter, though they remain 1.8 percent above where they stood a year ago.
The Deposit Insurance Fund reached $161.1bn at 30 June, up $3.7bn, most of it from $2.9bn of assessment revenue and $1.3bn of interest earned on investments. Because insured deposits fell while the fund grew, the reserve ratio rose five basis points, to 1.48 percent.
What has not improved
Unrealized losses on securities portfolios reached $326.7bn, up from $325.1bn. As a share of amortized cost they sit at 5.5 percent, better than the 6.8 percent of a year earlier and still the item the FDIC flags in its own conclusion, alongside weakness in certain loan portfolios, as a matter of ongoing supervisory attention.
Asset quality otherwise improved. The past-due and nonaccrual rate fell nine basis points to 1.44 percent and the quarterly net charge-off rate fell two, to 0.57 percent. Provision expense was $19.3bn, down 10.0 percent on the quarter. Inside commercial real estate, the rate that has been the worry for three years eased again: for banks holding more than $250bn of assets, the past-due and nonaccrual rate on non-owner-occupied nonfarm nonresidential loans fell for a seventh consecutive quarter, to 3.08 percent. That is well below the 4.99 percent peak of late 2024 and still more than five times the 0.59 percent average the FDIC calculates for 2015 through 2019.
Forty-seven banks sat on the problem bank list, seven fewer than in the first quarter, which the FDIC puts at 1.1 percent of all banks against a normal range it gives as 1 to 2 percent outside a crisis. Four banks opened in the quarter. One failed.
The release came out on Tuesday. This desk had not covered it, and it runs now because the quarterly profile is the record every argument about American bank earnings is settled against for the next three months.
