Banking on Deceit: FDIC Insured Banks Report Lower Net Income, Washington D.C. 2023
Reports from 4,614 commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reveal a disturbing trend – a decrease in net income of $2.4 billion (3.4 percent) in the third quarter of 2023. This decline is a stark contrast to the previous quarter, where the industry benefited from non-recurring gains from the accounting treatment for the acquisition of the three large bank failures this spring.
According to the FDIC’s latest Quarterly Banking Profile, net income for the 4,614 FDIC-insured commercial banks and savings institutions declined by $2.4 billion (3.4 percent) from the prior quarter to $68.4 billion. Lower noninterest income (down $4.1 billion, or 5.2 percent) and higher realized losses on securities (up $3.0 billion) drove the decline in net income from the previous quarter.
Despite this setback, the banking industry reported an average return on assets (ROA) of 1.17 percent in the third quarter, down from 1.21 percent in both second quarter 2023 and third quarter 2022. The net interest margin (NIM) increased three basis points to 3.30 percent in the third quarter, though deposit costs increased faster than loan yields over the quarter.
However, the banking industry still faces significant challenges, including the continued effects of inflation, rising market interest rates, and geopolitical uncertainty. Furthermore, deterioration in the industry’s commercial real estate portfolio is beginning to materialize in office properties. These issues, together with funding and earnings pressures, will remain matters of ongoing supervisory attention by the FDIC.
In a statement, FDIC Chairman Martin J. Gruenberg noted, “The banking industry continued to show resilience in the third quarter. Net income remained high, overall asset quality metrics remained favorable, and the industry remained well capitalized. However, we must remain vigilant in addressing the ongoing challenges facing the industry.”
As the FDIC continues to monitor the banking industry, one thing is clear – the road ahead will be fraught with challenges. Will the industry be able to navigate these obstacles and maintain its stability, or will we see a repeat of the devastating bank failures of the past? Only time will tell.
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Key Facts
- Agency: FDIC
- Category: Fraud & Financial Crimes
- Source: Official Source â†â€â€ÂÂÂ
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