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FDIC: U.S. banks showed stability in Q1 2025 as DIF reserve ratio nears statutory minimum
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Summary
Acting FDIC Chairman Travis Hill and Pat Mitchell said U.S. banks reported generally stable first-quarter 2025 results, with industry net income up to $70.6 billion, modest loan growth, and the Deposit Insurance Fund reserve ratio at 1.31%, close to the statutory 1.35% target.
Acting FDIC Chairman Travis Hill and Pat Mitchell, director of the FDIC’s Division of Insurance and Research, told reporters the banking industry’s first-quarter 2025 performance was largely steady, with gains concentrated at a small number of large institutions.
"Overall, this was generally a very stable quarter," Acting Chairman Travis Hill said in opening remarks. Pat Mitchell summarized the agency’s selected charts, reporting quarterly net income of $70,600,000,000, an increase of $3,800,000,000 (5.8%) from the prior quarter, and an industry return on assets of 1.16%.
Mitchell said the quarterly net-income increase was driven largely by higher noninterest income and lower losses on sales of securities. Average net interest margin declined modestly to 3.25% (down 2 basis points), returning to the pre-pandemic average, as yields on earning assets fell about 24 basis points while cost of funds decreased by roughly 22 basis points.
Loan balances rose modestly — about $62 billion, or 0.5% — and industry expenses were $22.5 billion for the quarter, a small increase from the fourth quarter. Mitchell also reported that total unrealized losses on held-to-maturity and available-for-sale securities fell to $413.2 billion, a decrease of $67.5 billion from the prior quarter, reflecting lower long-term interest rates during the quarter.
On asset quality, Mitchell said the overall past-due and nonaccrual rate fell to 1.59%, but commercial real estate (CRE) portfolios — especially non-owner-occupied (office) and multifamily loans — showed the greatest weakness and had driven much of the rise in past-due measures at larger institutions. He noted that non-owner-occupied CRE nonaccruals at the largest banks (those with more than $250,000,000,000 in assets) remained elevated (about 4.65%) compared with the pre-pandemic average (0.59%).
Mitchell reported domestic deposits increased 1% during the quarter, and nondeposit liabilities grew by roughly $121.3 billion (driven in part by repurchase agreements). The FDIC’s problem-bank list declined by a net three institutions to between 60 and 63 banks; Hill added that one bank failed in the quarter, and he said that institution appeared to have experienced a "significant amount of fraud," with the Office of Inspector General reviewing the matter.
The Deposit Insurance Fund (DIF) balance stood at $140.9 billion as of 03/31/2025, up $3.8 billion from the fourth quarter. Mitchell reiterated that the FDIC adopted a DIF restoration plan on 09/15/2020 to return the reserve ratio to the statutory minimum of 1.35% by 09/30/2028; based on current trends the agency reported the reserve ratio is likely to reach 1.35% by year-end 2025. "The reserve ratio is up to 1.31%, which is obviously getting quite close to our statutory minimum of 1.35," Hill said.
What happens next: agency officials said they will continue to monitor portfolio-level CRE risks and the status of unrealized losses if longer-term interest rates increase, and they will report developments at forthcoming board meetings.
