FDIC says banks rebounded a bit in first quarter

Banks insured by the Federal Deposit Insurance Corp. saw $7.6 billion in profits in the first quarter of 2009. This was down 60.8 percent, $11.7 billion, from the $19.3 billion earned by the industry in the first quarter of 2008. Still, the quarter saw an improvement over a record $26.2 billion loss in the fourth quarter of 2008.

The year-over-year earnings decline resulted from higher loan-loss provisions, increased goodwill write-downs and reduced investment income. Three out of five insured banks reported lower first-quarter net income and one in five was unprofitable. In fact, 21 FDIC-insured institutions failed during the first quarter -- the largest number since the fourth quarter in 1992.

The FDIC's "Problem List" grew during the quarter from 252 to 305 institutions, while total assets of problem institutions increased from $159 billion to $220 billion. Overall, negative factors outweighed the positive as insured institutions charged off $37.8 billion in bad loans in the first quarter, almost twice the $19.6 billion of a year earlier.

Meanwhile, the Mortgage Bankers Association reported that new foreclosure actions reached a record high in the first quarter. The National Delinquency Survey from the MBA found that lenders initiated foreclosures on 1.37 percent of all first mortgages during the quarter, a 27 percent increase from the 1.08 percent rate during the last three months of 2008 and a 36 percent rise from the first quarter of 2008.

Delinquencies — the stage in which borrowers fell behind on payments but have not yet received foreclosure notices — also a hit record high. Seasonally adjusted, the rate now stands at 9.12 percent of all loans, up from 7.88 percent in last quarter of 2008.