All bank star-ratings have now been updated to reflect March 31, 2025 financial data.
The good news was that industry net income was a healthy $70.6 billion.
However, the percent of noncurrent loans (90 days or more past due) increased from 0.91% a year ago to 0.98% today, with increases in almost every loan type. Where the loans are improving may surprise you.
Also this week, the acquisition of Discover Bank by Capital One and one de novo made its preview with March data.
New Bank Data and Star-Ratings
All bank star-ratings have now been updated to reflect March 31, 2025 financial data. (New credit union ratings will be available shortly.)
The FDIC’s Acting Chairman, Travis Hill did provide us with a press conference when releasing the FDIC Quarterly Banking Profile (something he did not do last quarter, his first in this new post) (JRN 42:09).
The other immediate change Mr. Hill made was to no longer disclose the total assets of banks on the FDIC’s Problem List. That appears to be sticking. The FDIC will still provide the number of banks on its list, now 63, which is down a net of three from fourth quarter 2024 data.
Bauer has its own “problem” list that typically has a slightly higher count than that of the FDIC. Today, Bauer’s Troubled and Problematic Bank Report (all banks rated 2-Stars or below) contains 77 banks, which is up a net of three.
Bauer uses conservative measures when assigning its star-ratings, so its list often contains more banks than that of the FDIC. In our 42 years of experience, this has proven to be a prudent course of action.
Now to the nuts and bolts of the first quarter data: industry net income was a healthy $70.6 billion. The aggregate return on average assets of 1.16% was up from both the previous quarter and a year ago. The net interest margin ticked down slightly to 3.25% but remains in-line with the pre-pandemic average.
The FDIC describes overall loan quality as “generally favorable”, and, overall, it is. However, there is a reason that banks are continuing to build reserves. The percent of noncurrent loans (90 days or more past due) increased from 0.91% a year ago to 0.98% today, with increases in almost every loan type.
Credit card loans were an exception, as noncurrent credit card loans dropped from 1.80% to 1.72%. That was not the case for all noncurrent consumer loans, which increased from 1.16% to 1.21% over the year.
In fact, there are 50 banks rated less than 5-Stars that have at least 8% of their total loan portfolio invested in consumer loans and also reported delinquent consumer loans of at least 1.65% at March 31, 2025. They can be found on page 5.
The U.S. consumer has proven to be extremely resilient, and we have no reason to expect that will change. This is just another way we monitor the progression. In fact, only three of the banks on page 5 have a Bauer’s Adjusted CR of less than 5%; most are significantly higher.
You will also notice 4-star Discover Bank, Greenwood, DE (5649) listed, which as of May 18th, is now part of 5-Star Capital One Bank N.A., McLean, VA (4297). The Discover Card is not going anywhere, but who owns it has now “officially” changed.
The combined bank will be a behemoth:
To put this in perspective:
only 5 U.S. banks have higher assets;
only 4 have higher total loans;
none have higher consumer loans nor do any have higher credit card loans.
One de novo bank joined the ranks of FDIC –insured banks with first quarter data. After receiving FDIC approval last August, 3½-Star BankMiami, Coral Gables, FL (59354) opened its doors for business on March 17, 2025. We welcome it to the neighborhood.
Required paid-in capital for BankMiami to open was $31.300 million and it is required to maintain a leverage capital ratio (CR) of at least 8% for its first three years of operation. At March 31st, just two weeks after opening its doors, BankMiami’s capital was $37.799 million and its leverage CR was 96.4%. Assets at the new bank were $40.477 million.
