Banks in third quarter pocketed $68.4 billion in profits; growth appears to have leveled off

A profit of $68.4 billion was pocketed by the nation’s banks in the third quarter, although it was less than that realized at midyear, the federal insurer of bank deposits reported Wednesday.

In reporting on third quarter numbers reported by federally insured banks on their call reports, the Federal Deposit lnsurance Corp. (FDIC) said net income was down $2.4 billion (3.4%) from the second quarter of 2023.

However, the agency said the results from the second and first quarters of 2023, and the fourth quarter of 2022, were, in reality, flat and closer to that recorded for the third quarter. The agency said those net income results were obscured by non-recurring gains from the accounting treatment for the acquisition of the three large bank failures last spring (Silicon Valley Bank (SVB) of Santa Clara, Calif.; Signature Bank of New York, N.Y.; and First Republic Bank of San Francisco).

In the absence of those non-recurring gains, the FDIC said, net income would have been right about $68 billion in each of the past four quarters. FDIC Board Chairman Martin Gruenberg, in a statement, called that amount “a high level by historical standards.”

The agency also noted that smaller, community banks also saw their net income fall in the third quarter. The agency pointed to higher losses on the sale of securities and higher noninterest expenses as the causes for the decline, which “more than offset higher noninterest income.” The agency also noted that community banks reported lower net income compared to a year ago.

In other areas from the third quarter call reports, the FDIC said:

  • Unrealized losses on securities increased from the prior quarter.
  • Loan balances increased from last quarter and one year ago.
  • Total deposits declined for a sixth consecutive quarter.
  • Asset quality metrics remained favorable despite “modest deterioration.”
  • The Deposit Insurance Fund (DIF) reserve ratio rose to 1.13%.

FDIC-Insured Institutions Reported Net Income of $68.4 Billion in Third Quarter 2023