Q1 Banking Trends: Net Income Rises, Continued Loan Growth, and Higher Deposit Levels

The FDIC recently released the Quarterly Banking Profile for the 1st quarter of 2026. This report provides a comprehensive view of the U.S. banking system and new data for the 1st quarter.

Banking leaders and treasury managers can use the data provided by the FDIC to gauge the availability of credit and to understand the stability of financial institutions. The report is dense, so we have summarized the key points to save you time.

Quarterly Net Income Rose from the Prior Quarter

Quarterly net income totaled $80.5 billion in the first quarter of 2026, which marked a $2.8 billion (3.6%) increase from the previous quarter. More than half of all banks (55.2%) reported higher net income from the prior quarter. Net income rose from the 4th quarter of 2025 and remained strong by historical standards. The rise in quarterly earnings was driven by robust growth in noninterest income, which increased by $5 billion or 5.8%, as net gains on loan sales rebounded and trading revenue expanded. These gains were partially offset by higher noninterest expenses – which rose $2.5 billion – and lower net interest income. The banking industry reported a Net Interest Margin (NIM) of 3.31%, down 8 basis points from the prior quarter.

Loan Growth Continued to Expand

Total loan and lease balances increased by $215 billion, representing a quarterly growth rate of 1.6% and bringing total balances to $13.7 trillion. On an annual basis, the industry’s loan growth rate was 7.1%.

Loan balances rose in the 1st quarter of 2026 at the fastest annual pace since Q2 2023. The largest dollar increases were in commercial and industrial loans at $96.2 billion, loans to nondepository financial institutions at $62.3 billion, and loans to purchase or carry securities at $39.8 billion. A seasonal decline in credit card balances partially offset the overall quarterly increase.

Asset Quality Metrics Remained “Generally Favorable”

The FDIC reported that asset quality remained “generally favorable” in the first quarter. Past-due and nonaccrual (PDNA) loans decreased 3 basis points from the previous quarter to 1.53%.

Both PDNA and Net Charge-off rates decreased in the 1st quarter of 2026 but remain relatively low by historical standards. The net charge-off rate shrank by 4 basis points to 0.59% from the prior quarter. PDNA rates for credit card and auto loans also declined on a seasonal basis, but rates for 1 – 4 family residential loans and nonfarm nonresidential commercial real estate (CRE) loans saw slight increases.

Domestic Deposits Increased for the Seventh Consecutive Quarter

Domestic deposits at U.S. banks increased by $389.7 billion or 1.2%, marking the seventh consecutive quarterly increase.

The growth in domestic deposits was driven primarily by an increase in estimated uninsured domestic deposits, which rose by $233.5 billion or 2.9% from the prior quarter. Both interest-bearing and noninterest-bearing deposits increased from the previous quarter.

Unrealized Losses on Securities Increased

Unrealized losses on securities totaled $325.1 billion, up $19.0 billion or 6.2% from the prior quarter. While this represents a quarter-over-quarter increase, losses remain $88.1 billion or 21.3% below the year-ago quarter.

The Number of Problem Banks Decreased While the DIF Grew

The number of banks on the FDIC’s “Problem Bank List” decreased by a net of 6 in the first quarter, bringing the total down to 54 banks. These problem banks represent just 1.3% of total banks, which is well within the normal range of 1 to 2 percent typically seen during non-crisis periods.

Only one FDIC-insured institution failed during the first quarter. Meanwhile, the Deposit Insurance Fund (DIF) balance increased by $3.6 billion, reaching $157.4 billion in the first quarter. The growth of the DIF was primarily driven by $3.1 billion in assessment income and $1.2 billion in interest earned on investment securities. The reserve ratio also increased by 1 basis point to 1.43%.

Follow ADM For More Banking News and Insights

At American Deposit Management, our weekly articles keep business and banking leaders informed of the latest developments in cash management, the economy, and the banking sector. Review our articles on the Insights page and join our mailing list to have our upcoming publications delivered straight to your inbox.

In addition to valuable information, we help governments and businesses manage their cash reserves with modern solutions that deliver access to full FDIC / NCUA insurance, nationally competitive returns, and robust liquidity options.

Contact a member of our team today to learn more about our solutions and get started.