U.S. banks reported a 3.2% rise in third-quarter net income from a year earlier, but an uptick in early delinquency and higher unrealized losses with securities may reduce future profits, the Federal Deposit Insurance Corporation (FDIC) said on Thursday.

Jointly, banks posted $71.7 billion in profit in the third quarter. The FDIC compiles data from 4,746 commercial banks and savings institutions it insures.

FDIC acting Chairman Martin Gruenberg said at a news conference that higher inflation and interest rates, as well as geopolitical uncertainty may reduce bank profits.

Despite the lofty profits reported by banks, the FIDC quarterly banking profile showed that banks set aside $14.6 billion for bad loans in the quarter, up 31.5% from the previous quarter. It was mainly boosted by financial institutions with over $10 billion in assets.

Third-quarter results also showed early loan delinquency went up 3 basis point from the previous quarter, to 0.51%, driven by credit cards, commercial and industrial loans and auto loans.

“These early delinquencies could be an indicator of future asset quality problems,” Gruenberg said.

Higher interest rates also drove banks’ unrealized losses on securities up 46.9%, to $689.9 billion, the FDIC said.

“The combination of a high level of longer term asset maturities and a moderate decline in deposits underscores the risk that these unrealized losses could become actual losses should banks need to sell investments to meet liquidity needs,” Gruenberg told journalists, adding that losses could be “significant.”

Banks’ deposits declined 1.1% from the second quarter.

Asked whether the debacle of crypto exchange FTX could spill over banks, Gruenberg said the FDIC is still learning more about the company and its potential connections.

“We’re not aware of them (connections) now. But there’s a careful review ongoing so we’ll see what it might reveal” he added.

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