U.S. Banks Earn $90.1 Billion in Q2 as Industry Profit Rises 12%

U.S. banks and savings institutions earned $90.1 billion in the second quarter of 2026, a $9.7 billion increase from the first quarter, as several sources of revenue improved at the same time that credit-loss provisions declined. The 12% quarterly increase pushed the industry’s return on assets to 1.37%, up from 1.26% in the first three months of the year.

The results cover 4,238 commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation. Profitability improved across the industry, but the quarter was not driven solely by the traditional spread between what banks earn on assets and pay for funding. Trading revenue, fee income and gains on securities made unusually large contributions to the increase.

The FDIC’s second-quarter Quarterly Banking Profile, released August 25, showed that noninterest income rose $5.5 billion, or 6.1%, from the prior quarter. The agency attributed much of that increase to trading revenue during a period of market volatility and to higher fee income. Realized securities gains added another $5.5 billion to the quarter-over-quarter change, largely because of one-time gains on equity securities.

Trading revenue and securities gains lift bank earnings

Net interest income also moved higher, rising $5.3 billion, or 2.8%, from the first quarter. The yield on earning assets increased slightly more than banks’ cost of funds, allowing the industry’s net interest margin to edge up by one basis point to 3.32%. That was a smaller change than the contribution from trading, fees and securities gains, but it shows that the core lending and deposit spread did not deteriorate as the quarter progressed.

Credit costs provided another lift. Banks recorded $19.3 billion of provision expense for credit losses, down $2.1 billion, or about 10%, from the prior quarter. Lower provisions increase current-period earnings because banks are setting aside less additional expense for expected losses. The benefit was partly offset by a $4.4 billion increase in noninterest expense and a $4.3 billion increase in applicable income taxes.

The mix makes the $90.1 billion headline more informative when separated into recurring and less recurring components. Higher net interest income and fee revenue can persist if business conditions remain supportive, whereas a large one-time gain on equity securities does not automatically repeat in the following quarter. The FDIC did not characterize the entire earnings increase as a new run rate for the industry.

Community banks also reported stronger results. Their net income rose 8.2% from the first quarter as net interest income, noninterest income and securities gains increased. The group’s quarterly pretax return on assets reached 1.53%, an 11-basis-point improvement from the previous quarter and 17 basis points above the year-earlier level. At community banks, the yield on earning assets rose while funding costs declined, producing a 10-basis-point increase in net interest margin.

Loan growth broadens as credit measures improve

Balance-sheet growth remained firm. Total loans increased 1.8% during the quarter and were 6.8% higher than a year earlier, with growth spread across banks of different sizes. The FDIC identified loans to nondepository financial institutions, commercial and industrial lending, and loans used to purchase or carry securities, including margin loans, among the areas contributing to the expansion.

Credit performance improved at the same time. The share of loans that were past due 30 days or more or in nonaccrual status fell to 1.44%, down nine basis points from the first quarter. The industry’s net charge-off rate declined two basis points to 0.57% and was three basis points below its level a year earlier. Noncurrent loan balances also declined, giving banks less need to add to loss provisions during the quarter.

Commercial real estate still requires a more qualified reading. The past-due and nonaccrual rate for non-owner-occupied commercial real estate loans at banks with more than $250 billion in assets declined for a seventh consecutive quarter to 3.08%. That was well below the recent peak of 4.99% in the third quarter of 2024, but it remained far above the 0.59% pre-pandemic average cited by the FDIC. The agency noted that the largest banks generally have lower concentrations of those loans relative to assets and capital than smaller institutions.

The improvement in several credit measures helps explain why provisions fell, but it does not mean credit risk has disappeared. The FDIC continues to describe weakness in certain loan portfolios as an issue for supervision. For bank earnings, the distinction matters because a renewed rise in delinquencies or charge-offs could require institutions to rebuild provisions even if revenue remains healthy.

Deposits rise while unrealized securities losses stay elevated

Domestic deposits increased $142.7 billion, or 0.8%, marking an eighth consecutive quarterly increase. The composition shifted toward uninsured balances. Estimated uninsured domestic deposits rose $317.4 billion and accounted for all of the overall increase, while estimated insured deposits fell 1.0% from the first quarter. Insured deposits were still 1.8% higher than a year earlier.

Funding growth gives banks more capacity to support assets, but the deposit mix remains relevant to liquidity management because uninsured balances can behave differently from insured deposits in periods of stress. The FDIC said industry capital and liquidity remained strong at the end of June. Nondeposit liabilities also increased during the quarter, including Federal Home Loan Bank advances and other borrowed money.

One balance-sheet pressure did not improve. Unrealized losses on securities totaled $326.7 billion at the end of the second quarter, little changed from $325.1 billion three months earlier. Those losses, which largely reflect the effect of higher market interest rates on securities purchased when yields were lower, remained elevated even as bank profitability and credit metrics strengthened.

The Deposit Insurance Fund moved further above its first-quarter level. Its balance reached $161.1 billion on June 30, up $3.7 billion during the quarter, while the reserve ratio increased five basis points to 1.48%. Assessment revenue added $2.9 billion to the fund and interest on investment securities contributed $1.3 billion, partly offset by operating expenses and unrealized losses on available-for-sale securities held by the fund.

The FDIC’s Problem Bank List fell by a net seven institutions to 47, equal to 1.1% of all insured banks and within the agency’s normal 1% to 2% range for non-crisis periods. One bank failed during the quarter. The combination of higher earnings, expanding loans and deposits, and better broad credit measures therefore came with two continuing supervisory cautions: weaknesses in selected loan categories and the large stock of unrealized securities losses still sitting on bank balance sheets.