US Banks Show Across-the-Board Gains in FDIC Report

(Bloomberg) — Net income for U.S. banks rose more than 13 percent in the third quarter as money in the core deposit insurance fund increased and the number of troubled banks decreased, according to the Federal Deposit Insurance Corporation.

In its quarterly assessment of the banking sector, the FDIC stated that the increase in net income from $9.4 billion to $79.3 billion compared to the previous quarter was due to low provision expenses and high net interest income. The balance of the deposit insurance fund increased by $4.8 billion to $150.1 billion, while the number of problem banks subject to extra scrutiny by regulators fell from 59 to 57.

“Asset quality metrics remained positive overall, despite weakness in some portfolios we track closely,” Travis Hill, the agency’s acting chairman, said in a statement. Hill described unrealized paper losses on bank assets as a lingering concern from the industry’s 2023 turmoil, noting that those concerns have diminished but remain high.

Unrealized losses on securities fell to $337.1 billion, down almost 15% from the previous quarter and 7.4% from the previous year. The number of institutions insured by the institution decreased by 42 to 4,379, following the sale of four to uninsured institutions and the merger or consolidation of 38 companies with other lenders.

Hill said at a press conference that the agency is working on new bank merger guidance that will outline a more open stance toward relationships between banks and other firms. Industry watchers are pressing bank regulators to explain how and under what circumstances bank acquisitions by private equity firms and crypto buyers can occur.

The FDIC insures depositors against losses resulting from bank failure, up to $250,000 for each account type the customer holds. The institution has been rebuilding the deposit insurance fund (DIF) since 2020, when an increase in deposits reduced the reserve ratio below the level required by law.

The fund has become a point of contention as the pot is filled and refilled by healthy banks charging quarterly fees, but the FDIC said in May that the DIF is poised to reach its statutory target rate by the end of 2025 — nearly three years earlier than planned.

(The fifth paragraph has been updated with explanations regarding bank mergers.)

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