Net interest income is what a bank or credit union earns on its interest-bearing assets, mainly loans and investment securities, less what it pays on its interest-bearing liabilities, mainly deposits and borrowed money, over a reporting period. It is a dollar amount for a period rather than a rate, and it sits near the top of a depository institution’s income statement, ahead of credit losses, fee income, operating costs and tax. When funding costs more than the assets earn, the figure is negative.
The Formula
The calculation is one subtraction, and both sides are amounts for the period rather than balances at a date.
Net interest income = interest income - interest expense
interest income interest earned during the period on interest-bearing
assets, mainly loans and leases and investment securities
interest expense interest and dividends paid during the period on
interest-bearing liabilities, mainly deposits and
borrowed moneyThe assets on the first line are what bank supervisors call earning assets, all loans and other investments that earn interest or dividend income (FDIC Quarterly Banking Profile, Notes to Users, First Quarter 2026). How interest reaches the books between payment dates, and the adjusting entry that records it, is set out in accrued interest.
Where the Line Sits on a Call Report
Banks Report It at Schedule RI
Schedule RI is the income statement on the FFIEC 031, 041 and 051 Call Reports, and it carries all income and expense for the calendar year to date. Total interest income is item 1.h, total interest expense is item 2.e, and net interest income is item 3, the difference between the two, reported with a minus sign when the amount is negative, and those line numbers are the same on all three forms (FFIEC 031 and 041 instructions, Schedule RI, FFIEC 051 instructions, Schedule RI). Everything a reader usually thinks of as bank profitability comes after that line: provisions for credit losses at item 4, total noninterest income at item 5.m, then noninterest expense and tax.
Because the schedule runs year to date, the March filing carries the first quarter on its own, and every quarter after it is the difference between two consecutive filings rather than a line on either one.
Credit Unions Report It at Account 116
NCUA Form 5300 runs the same subtraction under account codes, on a statement of income and expense that is also reported year to date. Total interest income is Account 115, total interest expense is Account 350, and net interest income is Account 116, a line that takes no input and populates as Account 115 less Account 350 (NCUA Call Report Form 5300 instructions, effective September 30, 2025). One difference catches preparers moving between the Call Report and Form 5300: what a credit union pays its members is dividend expense on shares, reported at Account 380 inside interest expense, and the separate interest-on-deposits line at Account 381 is completed by state credit unions only.
A Worked Example
Say a bank holds these balances for a full year, at the rates shown.
Interest-bearing assets
Loans $400,000,000 at 6.20% = $24,800,000
Investment securities $100,000,000 at 3.40% = $3,400,000
Interest income $28,200,000
Interest-bearing liabilities
Deposits $380,000,000 at 2.30% = $8,740,000
Borrowed money $60,000,000 at 4.50% = $2,700,000
Interest expense $11,440,000
Net interest income $28,200,000 - $11,440,000 = $16,760,000
Net interest margin $16,760,000 / $500,000,000 = 3.352%Volume and rate both move the answer. The same spread on twice the balance sheet produces twice the dollars, and an unchanged loan book funded with pricier deposits produces fewer of them, which is why the dollar figure is usually read next to the margin rather than on its own.
What Net Interest Income Is Not
Net Interest Margin
Net interest margin is the same subtraction divided by average earning assets. The FDIC defines it as the difference between interest and dividends earned on interest-bearing assets and interest paid to depositors and other creditors, expressed as a percentage of average earning assets, with no adjustment made for interest income that is tax exempt (FDIC Quarterly Banking Profile, Notes to Users, First Quarter 2026). One is dollars for a period and the other is a percentage, so a bank that grows its balance sheet at an unchanged spread reports more net interest income and much the same margin.
Net Income
Net interest income is a subtotal near the top of the statement. Net income is the bottom line, struck after provisions for credit losses, noninterest income and expense, and income tax, and the order of those subtractions is set out in net income. For a business that is not a depository institution the equivalent ladder opens with sales rather than interest, and its subtotals are laid out in multi-step income statement.
Common Questions
Interest income for the period less interest expense for the period.
NII is net interest income, the dollar amount a period produced. NIM is net interest margin, that same amount divided by average earning assets and shown as a percentage, so two institutions can report the same net interest income and quite different margins, depending on how much balance sheet each one used to earn it.
Bank regulators publish the industry aggregate rather than a target level, so that aggregate is the usable benchmark. The FDIC put the industry net interest margin at 3.31 percent for the first quarter of 2026, down 8 basis points from the prior quarter as earning asset yields declined faster than funding costs (FDIC Quarterly Banking Profile, First Quarter 2026).
Accountably places trained offshore accountants and tax preparers inside US CPA and EA firms, and a firm can put a block of its own representative work through a trial task before any live, signature-bearing work follows.
