The total assets of banks on the Federal Deposit Insurance Corp.'s list of problem banks rose again in the first quarter, the latest Quarterly Banking Profile showed.

The number of banks on the list fell to 40 in the first quarter, from 44 in the fourth quarter of 2021, but the assets of those banks grew by $3.0 billion to $173.1 billion. An increase of roughly $119 billion in the total assets on the problem bank list in the fourth quarter, of 2021 even as the number of banks declined, raised questions across the banking industry about which institution could have been responsible for the change.

The FDIC does not disclose the identities of banks on the list.

Before the fourth quarter of 2021, the total assets of banks on the list had not reached $100 billion since the third quarter of 2014, according to FDIC data. Still, problem banks were not a cause for concern in the first quarter, acting Chairman Martin Gruenberg said to the press following the release of the quarterly profile.

The problem bank list "does not appear to present a particular issue of risk, not at this time," Gruenberg said. The number of problem banks stood at its lowest level since data collection began in 1984, Gruenberg noted.

Overall, "the banking industry remains strong at this time," Gruenberg said. "Capital and liquidity remained strong. In addition, loan growth and credit quality metrics remain generally favorable."

At the same time, the FDIC said, the industry faces significant uncertainty as the economy continues to emerge from the pandemic. Inflationary pressures, rising interest rates and geopolitical developments continue to affect financial institutions, Gruenberg said.

First-quarter net income dropped by $17 billion from the year-ago period to $59.7 billion. Sequentially, first-quarter net income was down $4.1 billion, or 6.5%, driven by an increase in provision expense.

Deposits continued to increase during the first quarter, growing by $230.7 billion, but the 1.2% gain was the slowest rate of deposit growth since the third quarter of 2020. Growth in deposit accounts less than $250,000 outpaced growth in deposit accounts greater than $250,000 for the first time in over two years, according to the report.

The Deposit Insurance Fund, or DIF, balance fell during the first quarter by $100 million to $123 billion, its first decline in over a decade. The DIF reserve ratio, which is the fund balance as a percent of insured deposits, fell 4 basis points from the previous quarter to 1.23%. The DIF reserve ratio is required by law to be at least 1.35%. At the onset of the COVID-19 pandemic in the first half of 2020, the reserve ratio dropped to 1.30% due to extraordinary insured deposit growth.

The FDIC adopted a Fund Restoration Plan in September 2020 with the assumption that insured deposit growth would subside as the world emerged from the pandemic. But given the ongoing growth in insured deposits, the FDIC will likely consider amending the restoration plan in order to meet the statutory requirement that it returns the DIF reserve ratio to 1.35% by 2028.