Banking Brief: Q1 2026

The banking industry ended 2025 on a high note, with healthy net income, rapidly rising loan balances, and favorable asset quality. This optimistic tone continued in the first quarter of 2026, despite a localized bank failure.

The first quarter was defined by two shifts that impacted banks across the country – the adoption of agentic artificial intelligence and an overhaul of the FDIC’s regulatory appeals process. We’ve summarized the major news stories of the quarter to help you stay up to date.

The First Quarter Brought the First Bank Failure of 2026

On January 30^th, the Illinois Department of Financial and Professional Regulation [IDFPR] closed Metropolitan Capital Bank & Trust, which was based in Chicago. This marked the first bank failure of the year, though it appears to be an isolated incident rather than a signal of systemic issues.

The FDIC was appointed as receiver and quickly entered into a purchase and assumption agreement with First Independence Bank of Detroit, Michigan. The FDIC’s actions followed a familiar pattern, and the transition was designed to be seamless for bank customers.

At the time of the failure, Metropolitan Capital Bank & Trust had approximately $261.1 million in assets and $212.1 million in deposits. First Independence Bank purchased $251 million of the failed bank’s assets and assumed substantially all deposits. The FDIC retained the remainder of the assets for future disposition.

The bank failure cost the FDIC’s Deposit Insurance Fund [DIF] an estimated $19.7 million. This figure is relatively small, especially when compared to Silicon Valley Bank which cost the DIF $20 billion in 2023.

Major Banks Expanded Agentic AI Capabilities

Banks have experimented with agentic artificial intelligence [AI] technology over the past few years, but the first quarter saw a step forward in the adoption of these capabilities. Two major banks were at the forefront of this wave of adoption – Goldman Sachs and Lloyds Banking Group.

AI at Goldman Sachs

Goldman Sachs solidified their position as a leader in the AI space, partnering with Anthropic to develop autonomous agents powered by the Claude model. Marco Argenti, Goldman’s Chief Information Officer, told CNBC that these agents are being used in two main areas:

• Trade and Transaction Accounting. AI is being used to automate the reconciliation of complex financial transactions.
• Client Vetting and Onboarding. Goldman is also using AI to streamline client intake.

Both processes are traditionally labor-intensive and rely on strict protocols that maintain compliance with regulations. Argenti emphasized that these tools are being used to augment existing processes but are not currently resulting in job losses.

AI Creating Tangible Value at Lloyds

Across the Atlantic, Lloyds Banking Group – the UK’s largest retail and commercial bank – released figures quantifying the impact of their various AI tools. Lloyds reported that generative AI delivered approximately £50 million in value in 2025 and is expected to create £100 million in value this year.

Three main tools form the basis of Lloyd’s current AI capabilities.

• Athena Knowledge Management Tool. This AI-powered internal search assistant helps employees find the information they need to answer customer questions. It has reduced search times by 66% on average.
• GitHub Copilot for Engineers. These AI coding tools accelerate technology upgrades by reducing coding time by 50%.
• AI HR Assistant. AI in the Human Resources department answers about 90% of queries correctly during the first conversation and reduces workload for employees.

Like AI at Goldman Sachs, these tools take traditionally manual processes and streamline them to reduce work for current employees. Lloyds also plans to introduce a customer-facing AI assistant this year, which could further improve their efficiency.

FDIC Launched New Appeals Process

Beyond its role managing bank failures, the FDIC has supervisory responsibilities that aim to ensure financial security of member banks. These responsibilities include evaluating the risk of banks, establishing their risk-adjusted contributions to the DIF, and taking action to ensure a sound financial system.

When banks disagree with the FDIC’s assessment, they have the right to appeal. In the past, appeals were heard by the Supervision Appeals Review Committee, which consisted of FDIC board members and other senior FDIC officials. Last quarter, the FDIC replaced this committee with the Office of Supervisory Appeals – an independent, standalone office within the FDIC.

The new office will be staffed by reviewing officials with relevant experience, serving on term appointments. Current FDIC employees are not eligible to serve in the new office.

The addition of the new office had a dual purpose. First, it enhanced the independence of the appeals process. An independent office ensures that appeals are entirely separate from the officials who make the initial supervisory determinations. Second, the FDIC sought to ensure the expertise of reviewing officials. These individuals will have banking or other relevant experience to oversee appeals with fairness and impartiality.

Heading into the second quarter, the banking industry’s sustained strength is driving a shift from reactive crisis management to proactive innovation. The sector has moved past the instability of 2023, allowing both regulators and banking leaders to focus on growth rather than survival.

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