FDIC: Banks rebound to $7.6B Q1 profit - Puget Sound Business Journal (Seattle):

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billion profit in the first quartefof 2009, down $11.7 billion, or 60.8 from the $19.3 billion that the industry earneds in the first quarter of 2008. However, the first-quartefr performance marks an improvement overthe . Higheer loan-loss provisions, increased goodwill write-downs, and reduced incomre from securitization activities all contributes tothe year-over-year earnings decline in the firsyt quarter of 2009. Three out of five insured institution s reported lower net income in the firstg quarter and one in fivewas unprofitable.
"Ther first quarter results are tellingb us that the banking industry still faces tremendous and thatgoing forward, asset qualituy remains a major concern," said FDIC Chairmam Sheila C. Bair in an statement. "Banks are makinb good efforts to deal with thechallengex they're facing, but today's report says that we're not out of the woode yet." To that point, 21 FDIC-insurexd institutions failed during the firstt quarter -- the largest number sincew the fourth quarter in 1992. And the FDIC'es "Problem List" grew durinb the quarter from 252 to 305 and total assets of problem institutions increasexfrom $159 billion to $220 billion.
Insured institutionds set aside $60.9 billion in provisiond for loan losses in the firstquarterr -- up $23.7 billion, or 63.6 percent, over the first quartedr of 2008. Expenses for goodwill impairment and othe intangible asset expensestotaled $7.2 billion, compared with $2.8 billion a year These negative factors outweighed the positiv effects of increased noninterest incomse (up $7.8 billion, or 12.8 higher net interest incomes (up $4.4 billion, or 4.7 percent), and higheer realized gains on securitiees and other assets (up $1.9 billion). Insurefd institutions charged off $37.8 billion in bad loansw in thefirst quarter, almost twice the $19.6 billion of a year earlier.
"Troubled loans continude to accumulate, and the costs associatecd with impaired assets are weighing heavily onthe industry's Bair noted. "Nevertheless, compared to a year ago, we see some Net interest incomeis higher, and noninterest revenuer is up at larger banks, particularly tradinvg revenues." Tier 1 capitall reached a record high of almost $70 billion, the largesg quarterly increase ever reporter by the industry. However, much of the increase occurre d at institutions that received capital fromthe 'sz Troubled Asset Relief Program Total assets declined by $302 billion due to downsizin by a few large banks.
Two-thirds of all institutions reported asset growth inthe quarter, but reductiona at eight large banks caused the industrhy total to decline. Total loans and leases fell by $159.7 billion (2.1 percent), while assets in tradinv accounts declinedby $144.5 billion (14.9 percent). The FDIC's Deposit Insurance Fund reserve ratio fellto 0.27 percent. The DIF balanced declined from $17.3 billion at the end of 2008 (amendedc from the originally reported unauditeds balanceof $19 billion) to $13 billion on Marchj 31, 2009. However, the FDIC Board of Directors approved an amendexd restoration plan in February that is designed to restores the DIF reserve ratioto 1.15 percent withibn seven years.
The FDIC has already set asidr $28 billion in reserve to cover projecteed losses for the next12 months. In the FDIC will collect morethan $8 billionn in premiums during the seconr quarter, including $5.6 billion from the special assessment the FDIC Board approvedx on May 22.