Community bank net income decreases in Q4 but is up in 2025

Community banks reported a 3.8% fourth-quarter decrease in net income from the previous quarter, but full-year net income was up 22.5% in 2025 from the previous year, according to the FDIC’s latest Quarterly Banking Profile.

Key Drivers: During the fourth quarter, higher noninterest expense (up 4.8%) and higher securities losses (up $157.9 million) more than offset increases in net interest income (up 2.7%).

Additional Data: For the fourth quarter, community banks reported:

• The pretax return on assets ratio decreased 11 basis points from the previous quarter and increased 28 basis points from one year earlier to 1.35%.

• The net interest margin increased 4 basis points from the previous quarter and 33 basis points year-over-year to 3.77%.

• Net operating revenue increased 1.7% quarter-over-quarter due to increases in net interest income.

• Noninterest expense increased 4.8% from the previous quarter and 7.7% from a year ago.

• Quarterly provision expense was down 0.1% from the third quarter but up 8.1% from a year earlier.

• Unrealized losses on securities decreased 9.8% from the previous quarter and 38.2% from the previous year.

• Total assets increased 1.5% quarter-over-quarter and 5% year-over-year.

• Loan and lease balances grew 1.4% from the previous quarter and 5.4% from the prior year, and the quarterly loan growth was broad-based across all major portfolios except auto loans.

• Deposits increased 1.5% from the previous quarter and 5% from a year ago.

Overall Industry: The overall banking industry reported a 2% decrease in net income from the previous quarter, but full-year net income was up 10.2% from 2024. The quarterly decrease was driven by higher noninterest expense (up 3.4%) and non-recurring items at several larger firms.

Deposit Insurance Fund: The Deposit Insurance Fund balance increased $3.7 billion to $153.9 billion, while the reserve ratio increased two basis points during the quarter to 1.42%.

Mergers and Closings: In the quarter, the total number of FDIC-insured institutions declined by 43 to 4,336. One bank opened, four banks were sold to non-FDIC-insured institutions, two banks closed voluntarily and liquidated their assets, 36 institutions merged with other banks, and no bank failed.