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The Federal Deposit Insurance Corp. has reported that the U.S. banking industry continued to show improved performance in the third quarter but warned of increasing interest-rate and credit risk.

According to the FDIC’s latest Quarterly Banking Profile, federally-insured commercial banks and savings institutions reported aggregate net income of $40.4 billion in the third quarter of 2015, up $1.9 billion (5.1%) from a year earlier.

The increase in earnings was mainly attributable to a $3.2 billion decline in noninterest expenses, as itemized litigation expenses at large banks were $2.7 billion lower than a year ago.

“Most performance indicators continued to show improvement,” FDIC Chairman Martin J. Gruenberg said in a news release. “Earnings were up from a year ago, loan portfolios grew, asset quality improved, the number of problem banks declined, and only one insured institution failed.”

But he cautioned that “there are signs of growing interest-rate risk and credit risk that warrant attention, with, among other things, banks “going out further on the yield curve and increasing the mismatch between asset and liability maturities.”

Moreover, Gruenberg said, lending in higher-risk loan categories has been growing and loan portfolios in regions that depend on oil and gas revenue are increasingly at risk due to the significant decline in energy prices.

“History tells us that it is during this phase of the credit cycle when lending decisions are made that could lead to future losses,” he said. “Timely attention by banks to address these growing risks will benefit banks and contribute to the sustainability of the current economic expansion.”

The 5,812 insured institutions identified as community banks reported $5.2 billion in net income in the third quarter, an increase of 7.5%, while net operating revenue rose 7.5% to $22.4 billion at community banks. Loan growth helped lift revenue at most banks, with net interest income rising $1.8 billion (1.7%).

The FDIC also said the number of banks on its Problem List fell from 228 to 203 during the third quarter, the smallest number in nearly seven years and down dramatically from the peak of 888 in the first quarter of 2011.

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