Net income of $71.7 billion was reported by banks in the third quarter, an increase of 11.3% from the previous quarter, or $7.3 billion, the federal insurer of bank deposits reported Thursday.
The spike in net income was spurred largely by net interest income, the Federal Deposit Insurance Corp. (FDIC) said, reflecting the rising interest rate environment.
The increase in net income was the second quarter in a row for the nation’s more than 4,700 banks, the FDIC figures showed. In the three previous quarters, net income had been heading downward.
The FDIC figures also showed an aggregate return on average assets (ROAA) ratio of 1.21% for the nation’s banks, up 13 basis points from the ROAA ratio reported in the second quarter. However, the agency noted, that return ratio is the same as one year ago (the end of the third quarter, 2021).
The agency’s numbers did reveal unrealized losses on securities increasing, also reflecting rising interest rates. Banks had also reported unrealized losses in the second quarter, but the losses grew in the third. According to the agency, those unrealized losses totaled $689.9 billion in the third quarter, up from $469.7 billion in the second quarter.
“Unrealized losses on held-to-maturity securities totaled $368.5 billion in the third quarter, up from $241.8 billion in the second quarter,” the agency reported. “Unrealized losses on available-for-sale securities totaled $321.5 billion in the third quarter, up from $227.9 billion in the second quarter.”
In other areas, the agency reported:
- Growth in banks’ net interest margin (NIM) was 35 basis points (bp) from the previous quarter and 58 bp from the prior year, for 3.14%. The growth of the NIM – the difference between the money the bank earns in loan interest compared to the amount of interest it is paying for deposits – was the highest reported for both quarter-over-quarter and year-over-year periods by the agency’s quarterly banking profile (QBP), the FDIC said. Further, it was the first time since 2020 that the NIM exceeded 3%, the agency said. However, the agency noted that the NIM remains below the pre-COVID pandemic average of 3.25%.
- Loans expanded 2% (for $229.7 billion) in the third quarter, with lending for one-to-four family residential loans (up $68.1 billion, or 2.9%) and consumer loans (up $39.4 billion, or 2.0%) among the leaders. Compared with the previous year, the agency said, lending is seeing a boom, increasing $1.1 trillion (9.9%) since 2021, which the FDIC said was largest in the history of its quarterly profile. Lending leaders for year-over-year, the agency said, were commercial and industrial (C&I) loans (up $259.8 billion, or 11.6%), one-to-four family residential mortgages (up $213.9 billion, or 9.6%), and consumer loans (up $204.1 billion, or 11.4%).
- Early delinquencies (loans past due 30-89 days) increased 3 bp from last quarter and 7 bp from the year-ago quarter to 0.51%. Both the quarterly and annual increases were driven by an increase in past-due credit cards, C&I, and auto loans, the FDIC said. Meanwhile, total net charge-offs increased 6 bp from a year ago to 0.26%, which the agency said was driven by higher credit card and auto loan net charge-offs. Nevertheless, the FDIC asserted, quality remained largely favorable. Loans that were 90 days or more past due or in nonaccrual status (noncurrent loans) continued to decline, and the noncurrent rate was down 3 bp to 0.72% from second quarter 2022. The noncurrent rate for total loans is at the lowest level since second quarter 2006, the agency said.