Bank Profits Surge to $79.3 Billion Amid Lower Provisions

Banks reported robust earnings in the third quarter of 2025, with total net income reaching $79.3 billion. This figure represents a 13.5% increase from the previous quarter, driven by lower provision expenses and improved net interest margins. According to the Federal Deposit Insurance Corporation (FDIC)‘s Quarterly Banking Profile, this marks the highest level of profitability in the banking sector for the year.

The significant rebound in profits was largely attributed to a 30.7% drop in provision expenses this quarter. This decline followed elevated charges related to the Capital One and Discover merger, which had inflated expenses in the second quarter. “The quarter over quarter numbers are a little skewed from the Capital One-Discover merger the prior quarter,” noted Acting FDIC Chair Travis Hill. He emphasized that despite these fluctuations, the quarter demonstrated solid performance, with stable credit quality and strong loan growth.

Improved Margins and Asset Quality

Banks experienced a more favorable third quarter compared to the second, with net interest margins widening by 9 basis points to reach 3.34%. This increase outpaced funding costs, reflecting a healthy lending environment. Despite stable asset quality, some sectors remain under stress. Past-due and nonaccrual loans remained at 1.49% of total loans, significantly below pre-pandemic levels, although concerns linger in non-owner-occupied Commercial Real Estate, multifamily, auto, and credit-card portfolios.

“While the industry’s quarterly net charge-off rate of 0.61% increased by one basis point from last quarter, it is five basis points lower than in the same quarter last year,” an FDIC spokesperson stated during the quarterly briefing. This net charge-off rate is still considered low by historical standards, although it does exceed pre-pandemic averages.

Unrealized losses on securities also showed improvement, decreasing by 14.7% from the previous quarter and 7.4% year-over-year, settling at $337.1 billion. The overall industry assets reached $25.1 trillion, a 0.5% increase driven by a $159 billion rise in loans and leases as well as modest growth in securities.

Deposits and Regulatory Discussions

Domestic deposits continued to grow for the fifth consecutive quarter, rising by $92.2 billion. However, much of this increase is attributed to riskier uninsured deposits, with estimates suggesting they account for nearly the entire growth. The number of problem banks decreased to 57, which falls within the normal range for a non-crisis period, and the Deposit Insurance Fund ratio improved by 4 basis points to 1.40%, with the fund balance reaching $150.1 billion.

In light of ongoing discussions regarding deposit insurance reforms, lawmakers are considering proposals to raise coverage for non-interest-bearing business accounts to $10 million. Acting Chair Hill commented on the importance of this conversation, noting that it has been over 15 years since any changes were made. “Given what we observed in 2023, it makes sense that this is a topic of conversation,” he said, emphasizing a constructive approach without taking formal positions.

As the banking sector navigates these shifts, the landscape appears to be stabilizing, with positive indicators suggesting a resilient industry ready to adapt to changing economic conditions.