Commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. (FDIC) reported net income of $7.6 billion in the first quarter of 2009, a decline of $11.7 billion, or 61 percent, from the $19.3 billion that the industry earned in the first quarter of 2008.

Higher loan-loss provisions, increased goodwill write-downs and reduced income from securitization activities all contributed to the decline, the FDIC said in a release this morning. Three out of five insured institutions reported lower net income in the first quarter and one in five was unprofitable.

“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,” FDIC Chairwoman Sheila Bair said in a release. “Banks are making good efforts to deal with the challenges they’re facing, but today’s report says that we’re not out of the woods yet. As I see it, we’re now in the cleanup phase for the banking industry. It will take some more time. But in the end, we’ll have a stronger banking industry that’s better able to meet the demand for credit as the economy recovers.”

Twenty-one FDIC-insured institutions failed during the first quarter, the largest number since the fourth quarter of 1992. The FDIC’s “Problem List” grew during the quarter to 305 institutions from 252, and total assets of problem institutions increased from $159 billion to $220 billion.

The FDIC also noted that asset-quality indicators continue to decline. Insured institutions charged off $37.8 billion in bad loans in the first quarter, almost twice the $19.6 billion of a year earlier. The amount of loans and leases that were noncurrent (90 days or more past due or in nonaccrual status) rose by $59.2 billion during the quarter, and is $154.3 billion higher than a year ago.