08/27/2026
Strong capital, stable liquidity, and improved earnings: Third District community banks show resilience amid ongoing challenges.
The Third District Banking Conditions report as of June 30, 2026, reveals encouraging trends — and areas requiring continued vigilance. Here’s what stands out:
• Capital levels remain robust relative to District community banks’ risk profile. Ratios remain well above regulatory minimums, and the Tier 1 Leverage ratio has continued its upward trend since 2021.
• Asset quality metrics remain favorable. Noncurrent loans and noncurrent CRE loans are still manageable by historical standards, though both have increased since their lows at year-end 2022. CRE concentration in the District remains higher than the national average.
• Earnings have strengthened as interest expense has declined across the District. The net interest margin increased 32 basis points year over year to 3.7 percent, driven primarily by declining interest expense.
• Liquidity trends remain broadly stable. Despite heightened deposit competition, core deposits across the District remain steady and aligned with national patterns.
• Market risk continues to pose challenges. Legacy investments acquired before 2022 remain underwater in the current rate environment, contributing to unrealized losses as banks continue to hold historically longer-duration portfolios.
Third District Banking Conditions is a semiannual report comparing the trends of Third District community banks with national trends. Read the report for more insights.
Third District Banking Conditions is a semiannual report comparing the trends of Third District community banks with their national peers.
