US banks earned net income of US$7.6 billion in the first three months of this year after having posted a record loss of US$36.9 billion in the fourth quarter of 2008, the Federal Deposit Insurance Corp. (FDIC) said on Wednesday.

However, the first-quarter profit was 61 percent below the US$19.3 billion that the industry earned in the year-ago period.

"Higher loan-loss provisions, increased goodwill write-downs, and reduced income from securitization activities all contributed to the year-over-year earnings decline," said the FDIC in a statement.

"Three out of five insured institutions reported lower net income in the first quarter and one in five was unprofitable," it added.

According to the FDIC, the number of troubled banks in the first quarter jumped to 305, the highest since 1994, from 252 in the final quarter of last year. And total assets of problem institutions rose from 159 billion dollars to US$220 billion.

Twenty-one FDIC-insured institutions failed during the January-to-March period, the largest number since the fourth quarter in 1992. The failures followed collapses of 25 in all of 2008 and three in 2007.

Due to the failures, the FDIC's deposit insurance fund declined from US$17.3 billion at the end of 2008 to US$13 billion on March 31, 2009, the lowest level since 1993.

The FDIC estimates that bank failures will cost the deposit insurance fund around US$70 billion through 2013. US Congress has recently more than tripled the amount the FDIC could borrow from the Treasury Department, if needed to restore the insurance fund, to US$100 billion from US$30 billion.

"The first quarter results are telling us that the banking industry still faces tremendous challenges, and that going forward, asset quality remains a major concern," said FDIC Chairman Sheila C. Bair in the statement.

Troubled loans continue to accumulate, and the costs to banks from impaired assets are weighing heavily on the industry's performance, Bair said.

"Nevertheless, compared to a year ago, we see some positives," she noted. Banks' net interest income is higher, and revenue from sources other than interest such as trading is up. Realized gains on securities and other assets improved, too, she said.

The FDIC, created by US Congress in 1933 to restore public confidence in the nation's banking system, insures deposits at the nation's 8,246 banks and savings associations.

(Xinhua News Agency May 28, 2009)