Banks reported aggregate net income of $69.9 billion in the second quarter, a decrease of $677.3 million, or 1 percent, from the prior quarter, according to the Federal Deposit Insurance Corporation’s latest Quarterly Banking Profile.
The quarterly decrease in net income was driven by higher provision expenses, which climbed $7.6 billion, or 33.7 percent. The increase in provision expenses was largely attributable to the acquisition of one large bank, as accounting standards require the acquiring institution to recognize a provision expense related to certain acquired assets. Without this large provision expense, net income would have increased due to higher net interest and non-interest income.
Further, the banking industry reported an aggregate ROA of 1.13 percent in the second quarter, down from 1.16 percent in first quarter of 2025 and 1.20 percent in the year-ago quarter.
However, community bank net income increased to $7.6 billion in the second quarter, up $842.9 million or 12.5 percent from first quarter 2025. Higher net interest income, which rose $1.2 billion or 5.7 percent, and noninterest income, which jumped $483.3 million or 10.1 percent, more than offset a $612.7 million or 3.5 percent increase in noninterest expense and a $311.5 million or 29.2 percent increase in provision expense.
Further, the community bank ROA increased 15 basis points to 1.33 percent.
The Deposit Insurance Fund balance also increased by $4.4 billion to $145.3 billion in Q2 while the reserve ratio increased 5 basis points during the quarter to 1.36 percent. As of June 30, 2025, the reserve ratio exceeded the statutory minimum. Beginning in the third quarter, the FDIC will no longer be operating under the Restoration Plan.
In addition, the banking industry reported a quarterly increase in net interest income, which rose by $2.9 billion, or 1.6 percent. The net interest margin (NIM) was relatively flat, up by one basis point to 3.26 percent. This is above the pre-pandemic average of 3.25 percent. The community bank NIM of 3.62 percent increased 16 basis points from the prior quarter.
The industry’s net charge-off ratio of 0.60 percent also decreased 6 basis points from the prior quarter. This ratio is 12 basis points above the pre-pandemic average.
Finally, total loan and lease balances increased $263.7 billion or (2.1 percent from the prior quarter, while total loans at community banks increased 1.7 percent from the prior quarter. And domestic deposits increased $101.5 billion or 0.6 percent, rising for a fourth consecutive quarter.
Overall, the total number of FDIC-insured institutions declined by 41 during the second quarter to 4,421.
“The latest FDIC Quarterly Banking Profile indicates the banking industry remained strong and resilient amid economic uncertainty during the second quarter of the year,” Sayee Srinivasan, American Bankers Association’s chief economist, said. “Asset quality remained sound, domestic deposits increased, and quarterly loan growth was the strongest we’ve seen since the second quarter of 2022 as banks responded to the funding needs of their customers and communities.”