U.S. banks and thrifts set aside $60.9 billion in the first quarter to cover potential loan losses, up from $36.2 billion a year earlier.
The number of troubled banks jumped to 305, the highest number since 1994 during the savings and loan crisis, from 252 in the fourth quarter, according to the FDIC.
Thirty-six federally-insured institutions already have failed and been shut down by regulators this year, extending a wave of collapses that began in 2008. This year's tally compares with 25 in all of 2008 and three in 2007.
The failures sliced the amount in the deposit insurance fund to $13 billion in the first quarter, the lowest level since 1993. That compares with $17.3 billion a year earlier.
"Troubled loans continue to accumulate" and the costs to banks from soured loans "are weighing heavily on the industry's performance," FDIC Chairman Sheila Bair said. "Nevertheless, compared to a year ago, we see some positives."
Those include the increase in banks' net interest income and revenue from sources other than interest such as trading, she said.
The first-quarter results "are telling us that the banking industry still faces tremendous challenges," Bair said.
The FDIC believes U.S. bank failures will cost the deposit insurance fund around $70 billion through 2013.
The FDIC on Friday adopted a new system of emergency fees paid by U.S. financial institutions that will shift more of the burden to bigger banks to help replenish the insurance fund. The move by the agency cut by about two-thirds the amount of special fees to be levied on banks and thrifts compared with an earlier plan, which had prompted a wave of protests by small and community banks.
The new system is intended to raise about $5.6 billion.
Additional emergency assessments could come later in the year, the FDIC said.
Congress last week more than tripled the amount the FDIC could borrow from the Treasury Department if needed to restore the insurance fund, to $100 billion from $30 billion. Bair had earlier promised a reduction in fees charged to banks if that credit line could be expanded.
The FDIC also recently levied a surcharge on banks issuing debt under the agency's temporary rescue program. Under it, the FDIC guarantees hundreds of billions of dollars in debt in the event of payment defaults by the issuing banks. Those surcharges, nearly $8 billion collected already, will help compensate for the reduction in insurance premiums, the agency said.
Government "stress tests" of the 19 biggest U.S. banks early this month showed that nine of them have enough capital to withstand a deeper recession. The remaining 10 must raise a total of $75 billion in new capital to withstand possible future losses.
Of those, Bank of America Corp. needs the most by far - $33.9 billion. Wells Fargo & Co. needs $13.7 billion, auto lender GMAC LLC $11.5 billion, Citigroup Inc. $5.5 billion and Morgan Stanley $1.8 billion.
The five other banks found to need more of a capital cushion are regional institutions: Regions Financial Corp. based in Birmingham, Ala.; SunTrust Banks Inc. of Atlanta; KeyCorp of Cleveland; Fifth Third Bancorp of Cincinnati; and PNC Financial Services Group Inc. of Pittsburgh.
The tests were a key part of the Obama administration's plan to fortify the financial system. The banks have until June 8 to develop a plan and have it approved by their regulators. If they can't raise the money on their own, the government said it is prepared to dip further into its bailout fund.
The closing last week of struggling Florida thrift BankUnited FSB is expected to cost the insurance fund $4.9 billion, the second-largest hit since the financial crisis began. The costliest was the July 2008 seizure of California lender IndyMac Bank, on which the insurance fund is estimated to have lost $10.7 billion.
The largest U.S. bank failure ever also came last year: Seattle-based thrift Washington Mutual Inc. fell in September, with about $307 billion in assets, and was acquired by JPMorgan Chase & Co. for $1.9 billion in a deal brokered by the FDIC.
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