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Eleventh District Banking Trends

First Quarter 2025

This report tracks the financial performance of Eleventh District banks in comparison with national averages, looking at profitability, loans, deposits and other key metrics. It is updated quarterly.

Highlights
  • Banking conditions remained satisfactory through first quarter 2025.
  • Profitability declined slightly for Eleventh District banks as lower expenses were offset by a decline in noninterest income.
  • Asset quality metrics remained relatively benign, with Eleventh District banks reporting a lower net loan charge-off rate and flat noncurrent loan rate.
  • Loan growth slowed overall and for all major loan categories, with outright declines for Eleventh District banks’ commercial and industrial (C&I) and consumer loans.
  • Banks’ deposit mix was stable, although the share of interest-bearing deposits and certificates of deposit (CDs) remains elevated relative to before 2022, when the Federal Reserve began raising interest rates.
  • Equity capital ratios rose as higher retained earnings were accompanied by lower unrealized losses on available-for-sale securities.
Charts

Select a metric to go directly to the related chart below.

Return on average assets
  • Eleventh District banks earned a return on average assets (ROAA) of 1.23 percent in first quarter 2025, down 2 basis points (bps) from the previous quarter but 5 bps higher than in first quarter 2024.
  • The ROAA for U.S. banks was 1.08 percent in first quarter 2025, up 2 bps from fourth quarter 2024 but 1 bps lower than a year ago.
Chart 1
Net income breakdown
  • For Eleventh District banks in first quarter 2025, lower expenses, higher net interest income and lower securities losses were offset by a decline in noninterest income, leading to a slight dip in profitability from the previous quarter.
  • Much of the higher profitability for Eleventh District banks relative to U.S. peers can be attributed to lower provision expense.
Chart 2
Net interest margins
  • Eleventh District banks’ net interest margin (NIM) increased for the fifth consecutive quarter in first quarter 2025 as interest expense decelerated slightly more than interest income.
  • The NIM for Eleventh District banks was 3.45 percent in first quarter 2025, 3 basis points (bps) higher than in fourth quarter 2024 and 22 bps higher than a year ago.
  • For U.S. banks, NIM was 3.49 percent, remaining even with the previous quarter and 16 bps higher than a year ago.
Chart 3
Provision expense
  • Since late 2021, provision expense for Eleventh District banks has trended below that of their U.S. peers.
  • For first quarter 2025, Eleventh District banks’ provision expense relative to average assets was 0.12 percent, 12 basis points (bps) lower than the national value.
Chart 4
Net loan losses

  • The net charge-off rate for Eleventh District banks has trended below that of U.S. peers since 2020.
  • Rates for both groups declined in first quarter 2025 to 0.17 percent for Eleventh District banks, down 3 basis points (bps) quarter over quarter and 1 bps year over year, and 0.29 percent for U.S. banks, down 6 bps quarter over quarter and 1 bps year over year.
Chart 5
Net charge-offs by loan type

  • For Eleventh District banks, commercial and industrial (C&I) loans accounted for much of the quarter-over-quarter decrease in the net loan charge-off rate, along with consumer and other loans.
  • For U.S. banks, C&I loans accounted for most of the drop in the rate since last quarter.
Chart 6
Noncurrent loans

  • For Eleventh District banks, the noncurrent loan rate has consistently trended below that of U.S. peers.
  • In first quarter 2025, Eleventh District banks’ noncurrent loan rate held steady quarter over quarter at 0.74 percent but was up 7 basis points (bps) year over year. The rate for U.S. banks increased to 0.94 percent, up 10 bps quarter over quarter and 19 bps year over year.
Chart 7
Noncurrent loans by type

  • For Eleventh District banks, commercial real estate (CRE) loans accounted for most of the year-over-year increase in the noncurrent loan rate.
  • CRE loans also drove the quarter-over-quarter and year-over-year increases in the rate for U.S. banks. Residential real estate loans accounted for a modest share of the rise.
Chart 8
Loan growth

  • The pace of loan growth slowed in first quarter 2025 in the district and nationally, with U.S. banks (3.4 percent year over year) continuing to outpace Eleventh District banks (2.6 percent year over year).
Chart 9
Loan growth by type

  • For both Eleventh District and U.S. banks, year-over-year growth slowed for all major loan categories.
  • Eleventh District banks saw outright declines in commercial and industrial (C&I) and consumer loans.
Chart 10
Funding mix

  • For Eleventh District banks, an increase in deposits offset a decline in Federal Home Loan Bank (FHLB) advances in first quarter 2025.
  • Deposits rose modestly for U.S. banks, while Fed funds purchased, other borrowing and other liabilities fell slightly during the quarter.
Chart 11
Deposit mix

  • Banks’ deposit mix was stable in the Eleventh District and nationally, although the share of interest-bearing deposits and certificates of deposit (CDs) remains elevated relative to before 2022, when the Fed began raising interest rates.
Chart 12
Equity capital ratios

  • In first quarter 2025, equity capital ratios rose as higher retained earnings were accompanied by lower unrealized losses on available-for-sale securities.
  • As interest rates declined in the first quarter, the market value of banks’ securities holdings increased, leading to a reduction in unrealized losses.
Chart 13

NOTES: Analysis excludes banks with assets greater than $100 billion (one bank in the Eleventh District and 33 banks nationwide).

The Eleventh Federal Reserve District includes Texas, northern Louisiana and southern New Mexico. Banks headquartered in the Eleventh District may also operate elsewhere.

About Eleventh District Banking Trends

For more information about this report, contact Emily Greenwald.