June 2025 Financial Reporting, Governance, and Risk Management

Message from Sydney Garmong, Partner, National Office

This Friday, June 20, marks the official start of summer, and we hope some relaxation is in your summer plans.

The Federal Deposit Insurance Corp. and the National Credit Union Administration released financial results for the first quarter, with relatively stable results compared to the prior quarter. Both industries had modest increases in net income and loan growth.

Leadership changes at the agencies – and their priorities – continue to unfold. Securities and Exchange Commission (SEC) Chair Paul Atkins declared a “new day” at the SEC at his inaugural town hall address. He emphasized the importance of smart, effective regulation – rules tailored to meet the realities of dynamic financial markets while remaining clear, consistent, and predictable. Michelle Bowman gave her first speech as Federal Reserve vice chair of supervision to outline her agenda for enhancing bank supervision, including revising ratings frameworks, reassessing capital requirements, and increasing transparency in stress testing.

The Center for Audit Quality issued its Spring 2025 Audit Partner Pulse Survey, offering insights from audit partners at leading U.S. public company audit firms about their views on the current business environment. The survey reveals a sharp increase in pessimism among audit partners regarding the economy, with concerns about a potential recession, geopolitical instability, and trade uncertainty.

With the second quarter coming to a close, we wish you a safe and enjoyable July Fourth. We look forward to keeping you informed.

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From the federal financial institution regulators

FDIC releases quarterly banking profile

On May 28, 2025, the Federal Deposit Insurance Corp. (FDIC) released its Quarterly Banking Profile, a comprehensive summary of financial results through the first quarter of 2025. Notably, net income increased from the prior quarter, led by higher noninterest income. The net interest margin for the industry reported a modest decline. According to the report, FDIC-insured banks and savings institutions reported $70.6 billion first quarter net income, an increase of $3.8 billion or 5.8% from the prior quarter.

The report provides these additional statistics:

Net interest income totaled $179 billion in the first quarter of 2025, an increase of 4.1% compared to $171.6 billion in the first quarter of 2024, but a small decline compared to the prior quarter. Net interest margin decreased 2 basis points to 3.25%.
Aggregate return-on-assets ratio was 1.16% in the first quarter, compared to 1.11% in the prior quarter and 1.09% in the first quarter of the prior year.
Total loans and lease balances increased $62 billion (0.5%) from the prior quarter, driven primarily by increases in loans to non-depository financial institutions, and commercial, industrial and multifamily CRE loans.
Domestic deposits increased $180.9 billion (1%) from the prior quarter.
Noncurrent loans and leases increased to $125.9 billion compared to $125.3 billion in the prior quarter, and $113.4 billion in the same quarter of the prior year.
Quarterly provision expense totaled $22.5 billion, an increase of 0.3% compared to the prior quarter and an increase of 9.1% compared to same quarter of the prior year.
Unrealized losses on securities totaled $413.2 billion in the first quarter, a decrease of $67.5 billion, or 14%, from the prior quarter and a decrease of $103.3 billion (20%) from the first quarter of 2024.
Community banks’ first quarter net income totaled $6.8 billion, an increase of $621 million, or 10%, from the prior quarter.

The total number of FDIC-insured commercial banks and savings institutions that filed call reports declined by 25 to 4,462 at the end of the first quarter. During the quarter, one bank opened, one bank failed, one bank was sold to an uninsured institution, and 25 institutions merged with other banks. The number of banks on the FDIC’s problem bank list decreased by three to 63 at quarter-end.

NCUA issues first quarter performance data

On June 5, 2025, the National Credit Union Administration (NCUA) released its Quarterly Credit Union Data Summary Report, providing an overview of the financial performance of federally insured credit unions through the first quarter of 2025. The report notes that net income grew by 4.6% to $15.7 billion, with loans growing by 3.3% during the period to $1.65 trillion.

Additional highlights include:

The number of federally insured credit unions declined to 4,411, compared to 4,572 in the first quarter of the prior year. Also in the first quarter, 2,766 federal credit unions and 1,645 federally insured, state-chartered credit unions existed.
Total assets reported for federally insured credit unions totaled $2.37 trillion for the first quarter of 2025, an increase of $60 billion (2.6%) from the first quarter 2024.
Annualized return on average assets was 67 basis points, compared to 66 basis points in the first quarter of the prior year.

The credit union system’s net worth totaled $259.3 billion, an increase of $14.5 billion (5.9%) over the year. The NCUA noted that this ratio excludes the current expected credit loss transition provision. Net worth as a percentage of assets increased to 10.95% from 10.61% in the first quarter of the prior year.

FDIC rescinds statement on bank merger transactions

On May 20, 2025, the FDIC rescinded its 2024 Statement of Policy on Bank Merger Transactions, reinstating the prior policy effective 30 days after publication in the Federal Register. The agency plans to conduct a broader reevaluation of its bank merger review process.

OCC releases spring interest rate risk data

On May 14, 2025, the Office of the Comptroller of the Currency (OCC) released its spring 2025 “Interest Rate Risk Statistics Report,” featuring data collected from examinations of OCC-supervised midsize and community banks and federal savings associations.

OCC acting comptroller shares regulatory agenda

On June 3, 2025, acting Comptroller of the Currency Rodney Hood discussed his regulatory agenda in a speech delivered at the U.S. Chamber of Commerce Capital Markets Forum. He highlighted four strategies including 1) accelerating bank-fintech partnerships, 2) expanding responsible engagement with digital assets, 3) advancing financial inclusion as an economic imperative, and 4) modernizing regulation to unleash growth. He also noted the agency is looking into adjustments to the supplementary leverage ratio to spur bank lending.

Fed issues report on financial well-being

On May 28, 2025, the Federal Reserve Board (Fed) issued its “Economic Well-Being of U.S. Households in 2024” report. The report indicated that financial well-being remains similar to the previous two years. Labor market conditions remained solid, but concerns about prices persist.

New Fed vice chair shares agenda

On June 6, 2025, Fed Vice Chair of Supervision Michelle Bowman delivered her first public remarks since being confirmed. During her speech, Bowman outlined her agenda for enhancing bank supervision, including revising ratings frameworks, reassessing capital requirements, and increasing transparency in stress testing. She also called for greater clarity with banking applications.

CFPB moves to repeal open banking rule

On May 30, 2025, the Consumer Financial Protection Bureau (CFPB) filed a motion asking a federal court to grant a plaintiff’s motion for summary judgment, effectively repealing the agency’s open banking rule that was finalized late in 2024.

From the Financial Accounting Standards Board (FASB)

FASB issues guidance on determining the acquirer when the acquisition involves a VIE

On May 12, 2025, the FASB issued Accounting Standards Update (ASU) 2025-03, “Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity,” which provides new guidance for identifying the accounting acquirer in business combinations involving variable interest entities (VIEs). Applicability of this ASU is likely rare for financial institutions. Under current GAAP, the primary beneficiary of a VIE is automatically considered the accounting acquirer, but the amendments require an entity engaged in an acquisition transaction primarily involving the exchange of equity interests, where the legal acquiree is a VIE that qualifies as a business, to consider certain factors identified in Accounting Standards Codification (ASC) Topic 805-10 to determine which entity is the accounting acquirer.

The guidance is effective for fiscal years beginning after Dec. 15, 2026, with early adoption permitted, and is applied prospectively.

For more information, see the Crowe article “ASU Offers Guidance on Identifying the Accounting Acquirer.”

FASB clarifies guidance on share-based payments to customers

On May 15, 2025, the FASB issued ASU 2025-04, “Compensation – Stock Compensation (Topic 718) and Revenue From Contracts With Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer,” to clarify the accounting for share-based payments made to customers. Applicability of this ASU is likely rare for financial institutions. The update amends the definition of a performance condition to include vesting tied to purchases made by a customer (or a customer’s customer), removes the option to account for forfeitures as they occur (requiring entities to estimate forfeitures instead), and clarifies that the variable consideration constraint under ASC 606 does not apply to share-based awards. Instead, these awards must be accounted for using the recognition and measurement guidance in ASC 718. The update is effective for fiscal years beginning after Dec. 15, 2026, including interim periods, with early adoption permitted and transition allowed via either a modified or full retrospective approach.

While ASU 2025-04 might not broadly affect all financial institutions, entities with complex customer incentive structures that include share-based instruments should assess its implications.

For more information, see the Crowe article “FASB ASU Addresses Share-Based Payments to Customers.”

From the Securities and Exchange Commission (SEC)

SEC signals change: Key messages from leadership remarks

On May 6, 2025, Chair Paul Atkins delivered his inaugural town hall address, declaring a “new day” at the SEC. Atkins outlined his vision for a revitalized SEC – one committed to restoring regulatory balance and reaffirming the agency’s core mission: protecting investors, facilitating capital formation, and maintaining fair, orderly, and efficient markets. Atkins emphasized the importance of smart, effective regulation – rules tailored to meet the realities of dynamic financial markets while remaining clear, consistent, and predictable. Top priorities include reforming the regulatory approach to digital assets, improving internal operations and contracting, and supporting regional offices. He also noted a renewed focus on transparency and greater interagency and congressional collaboration.

On May 8, 2025, in remarks at the SEC’s 31st International Institute for Securities Market Growth and Development, Commissioner Hester Peirce emphasized that fostering efficient, flourishing capital markets is a critical driver of societal prosperity. She reinforced the need to promote capital formation and enable investor access to evolving asset classes.

The Practising Law Institute hosted the SEC Speaks in 2025 Conference on May 19-20, 2025. Atkins outlined a reset of the SEC’s regulatory posture. His remarks emphasized a strategic return to the agency’s foundational mission. Atkins reaffirmed the SEC’s historical role in enabling innovation, suggesting that sound, restrained regulation is essential for supporting dynamic capital markets. He also signaled a willingness to revisit legacy restrictions that currently limit closed-end funds from investing in private funds. In closing, Atkins mentioned a comprehensive review of the Consolidated Audit Trail, citing mounting concerns about escalating implementation costs and the risks associated with concentrated data collection.

On May 20, 2025, Atkins delivered his first testimony before the House Appropriations Subcommittee on Financial Services. Atkins pledged to modernize regulatory frameworks – particularly around digital assets – through clear, notice-and-comment rulemaking, not enforcement-driven policymaking. He also announced plans to disband FinHub, integrate innovation agency-wide, and launch a comprehensive review of the SEC’s technology infrastructure.

SEC shares perspectives on crypto and tokenization

At the SEC Crypto Task Force roundtable on tokenization on May 12, 2025, Atkins and Peirce expressed support for blockchain-based innovation, calling for clear rules to support responsible adoption. Commissioner Mark Uyeda emphasized regulatory transparency in fostering innovation, while Commissioner Caroline Crenshaw urged caution, noting unresolved risks and operational uncertainties of prematurely rebuilding financial infrastructure around blockchain technology.

SEC leaders remark on market regulation

At the SEC’s 12th Annual Conference on Financial Market Regulation held May 15-16, 2025, Atkins and Uyeda emphasized the importance of economic analysis in policymaking. Atkins called for rulemaking grounded in clearly defined problems and measurable cost-benefit considerations, warning against unnecessary regulatory expansion.

Uyeda highlighted research supporting expanded retail access to private markets and called for a review of the accredited investor definition. He also cautioned against ESG-related greenwashing, citing increased fees and regulatory risks, and stressed the need for clear disclosures.

SEC publishes data on capital formation and private fund ownership

On May 28, 2025, the SEC Division of Economic and Risk Analysis published three data reports focused on capital formation and beneficial ownership disclosure trends.

From a capital formation standpoint, the reports include a retrospective review of Regulation A (2015-2024) and Regulation Crowdfunding (2016-2024), highlighting more than $10 billion in capital raised.
An analysis of beneficial ownership concentration and outcomes for qualifying hedge funds from 2013 to 2023, trends providing information on the relationship between liquidity, leverage, and performance.

SEC offers guidance on crypto asset activities and protocol staking

The SEC Division of Trading and Markets on May 15, 2025, updated frequently asked questions on the application of broker-dealer and transfer agent rules to crypto asset activities and distributed ledger technology.

The Division of Corporation Finance (Corp Fin) on May 29, 2025, released a statement on protocol staking activities, offering clarity on the application of securities laws to certain staking arrangements.

SEC names new chief accountant

On June 13, 2025, the SEC announced the appointment of Kurt Hohl as chief accountant. With nearly four decades of experience in accounting and auditing, Hohl returns to the SEC after previously serving from 1989 to 1997, when he rose to associate chief accountant in Corp Fin.

From the Public Company Accounting Oversight Board (PCAOB)

Board member speaks on importance of PCAOB

On May 23, 2025, PCAOB board member Anthony Thompson delivered a speech emphasizing the critical role of the PCAOB in maintaining trust and stability in U.S. capital markets. He said any disruption to the PCAOB’s inspections and investigations could significantly erode investor confidence and the integrity of financial reporting. Thompson noted the PCAOB's contributions over the past two decades in restoring trust after major financial scandals and its efforts in enhancing audit quality through rigorous oversight and standard-setting. He warned that dismantling the PCAOB could have far-reaching impacts and reaffirmed the PCAOB’s commitment to its investor protection mission and the importance of preserving the trust it has helped rebuild in the capital markets.

PCAOB addresses auditing accounting estimates

On May 21, 2025, the PCAOB released “Audit Focus: Auditing Accounting Estimates,” with reminders and good practices for auditors when evaluating accounting estimates. This new edition outlines relevant auditing standards, identifies common deficiencies noted by PCAOB inspection staff, and shares practical approaches adopted by firms aimed at strengthening audit quality in this critical area.

PCAOB issues annual broker-dealer inspection report

The PCAOB on June 13, 2025, released its “Annual Report on the Interim Inspection Program Related to Audits of Brokers and Dealers,” which includes observations from inspections during 2024, information about the inspection approach, and reminders of the requirements of certain relevant PCAOB standards. According to the report, the percentage of audit engagements with deficiencies increased to 76% from 70% in 2023. The report notes that the PCAOB “continued to observe high deficiency rates in examination, review, and audit engagements, which continue to be a cause for significant concern.” According to the PCAOB, this report should help broker-dealer management and audit committees as they work with their auditors regarding audit quality and engage on financial reporting.

With the report, the PCAOB released “Supplementary Information Related to Audits of Brokers and Dealers,” which provides comparative data about selected firms and engagements and the results of PCAOB inspections over multiyear periods.

PCAOB holds Standards and Emerging Issues Advisory Group meeting

The PCAOB’s Standards and Emerging Issues Advisory Group held a meeting on May 22, 2025. Topics addressed included emerging issues, implementation of net and amended standards as well as a standard-setting update, ethics, and the importance of firm culture. A recording of the meeting is available on the PCAOB’s events page.

From the Center for Audit Quality (CAQ)

CAQ shares results of spring 2025 audit partner pulse survey

On June 5, 2025, the CAQ released its Spring 2025 Audit Partner Pulse Survey, offering insights from audit partners at leading U.S. public company audit firms about their views on the current business environment. Topics include U.S. economic health, challenges and risks facing businesses, and how they see business leaders adjusting their strategies in the current environment. Other topics covered include the accountant talent shortage, fraud risk response strategies, and the integration of new technologies such as AI and digital currencies.

The survey reveals a sharp increase in pessimism among audit partners regarding the economy, with concerns about a potential recession, geopolitical instability, and trade uncertainty. In the face of economic pressure, firms are adopting a dual strategy of reducing headcount while investing in upskilling to retain critical capabilities. However, the accounting talent shortage continues to pose a significant challenge. The survey also highlights key shifts in technology and compliance. Companies are embracing artificial intelligence to improve customer service and operational efficiency, although there is minimal engagement with cryptocurrency investments. Additionally, cybersecurity concerns have increased notably since the previous report.