WASHINGTON—U.S. banks posted stronger profits in the first quarter as loan growth accelerated and deposits continued climbing, although pressure on net interest margins and rising unrealized securities losses remained key concerns for the industry, according to the FDIC’s latest Quarterly Banking Profile.
The FDIC said quarterly net income totaled $80.5 billion in the first quarter, up 14.3% from a year earlier and 3.6% from the previous quarter. The increase was driven largely by stronger noninterest income and higher net interest income, while return on assets improved to 1.26% from 1.16% a year ago. More than half of all banks reported higher earnings from the prior quarter.
At the same time, the industry’s net interest margin fell eight basis points from the prior quarter to 3.31% as asset yields declined faster than funding costs. The FDIC said net interest income slipped 0.8% from the fourth quarter, even as overall operating revenue rose due to stronger trading revenue and gains on loan sales.
Loan growth continued strengthening during the quarter, with total loans and leases rising 7.1% from a year earlier to $13.7 trillion, the fastest annual growth rate since the second quarter of 2023. Commercial and industrial lending led the increase, while domestic deposits rose for the seventh consecutive quarter, boosted by growth in uninsured deposits.
Asset quality metrics remained generally stable, although the FDIC said some pressure persisted in commercial real estate and consumer lending categories. Past-due and nonaccrual loan rates increased for residential mortgages and nonfarm nonresidential CRE loans, while unrealized losses on securities climbed 6.2% from the prior quarter to $325.1 billion as rising mortgage rates reduced the value of mortgage-backed securities. Meanwhile, the number of banks on the FDIC’s “problem bank list” declined to 54 institutions, and the Deposit Insurance Fund reserve ratio improved to 1.43%.