In the first quarter, banks reported aggregate net income of $70.6 billion, an increase of $3.8 billion – or 5.8 percent — from the prior quarter, according to the Federal Deposit Insurance Corporation’s (FDIC) Quarterly Banking Profile.
The quarterly increase in net income was led by higher non-interest income, which rose 7 percent to $5.4 billion. Gains in non-interest income were due to market movements and volatility as several large firms reported mark-to-market gains on certain financial instruments in the quarter. Also, lower losses on the sale of securities contributed to an increase in net income.
Net income for community banks in the quarter totaled $6.8 billion, an increase of 10 percent from fourth quarter 2024. Net interest income rose 1.4 percent in the quarter. Further, there were lower losses on the sale of securities along with lower provision expenses and non-interest expenses. This more than offset lower non-interest income, which was down 9.1 percent.
Overall, banks reported a modest quarterly decline in net interest income, down 0.2 percent, as interest income decelerated slightly more than interest expense. The net interest margin (NIM) fell by two basis points to 3.25 percent, equal to the pre-pandemic average. For community banks, the NIM was 3.46 percent, which increased two basis points quarter over quarter.
Also, the industry’s net charge-off ratio decreased three basis points to 0.67 percent from the prior quarter and is one basis point higher than the year-ago quarter.
In addition, total loan and lease balances increased $62 billion, or 0.5 percent, from the previous quarter. Total loans at community banks increased 0.8 percent from the prior quarter and 4.9 percent from the prior year.
Further, domestic deposits increased $180.9 billion, or 1 percent, from the fourth quarter, rising for a third consecutive quarter. The Deposit Insurance Fund balance increased $3.8 billion to $140.9 billion. The reserve ratio increased three basis points during the quarter to 1.31 percent.
Finally, the total number of FDIC-insured institutions declined by 25 during the first quarter to 4,462. During the quarter, one bank opened, one bank failed and did not file a Call Report in the prior quarter, one bank was sold to an uninsured institution. Also, 25 institutions merged with other banks.