U.S. banks' profit tops $35B in 1Q

That's a $6.6 billion increase from the same quarter in 2011

By Gordon Oliver, Columbian business editor

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Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation reported profit of $35.3 billion in this year's first quarter, up $6.6 billion from the first quarter of 2011, according to the FDIC. It was the 11th consecutive quarter of year-over-year earnings increases, the agency said.

Bank loan balances declined by $56.3 billion, or eight-tenths of a percent, after three consecutive quarterly increases, the FDIC said in a news release.

In a state-by-state analysis of banking conditions, the FDIC reported that 71 insured banks with 13,284 employees operated in Washington at the end of the first quarter, down from 88 banks with 14,553 employees two years ago. Washington banks reported a decline in total assets and deposits over the year. Reflecting national patterns, state banks reported drops in past-due loans and loan losses.

Nationally, more than two-thirds of banks saw their income improve from a year ago, the FDIC said. Slightly more than 10 percent of the institutions reported net losses for the quarter, down from almost 16 percent a year earlier.

One reason banks are enjoying improved health,the FDIC said, is that they've been able to reduce the amount of money set aside as the general economy has improved and housing values have begun to stabilize. First-quarter loss provisions totaled $14.3 billion, almost one-third less than the $20.9 billion they had set aside in the same quarter a year ago. Also, banks didn't need to write off as many loans as uncollectible -- that figure dropped to $21.8 billion, from $34.8 billion a year earlier.

Decrease in savings

Banks reported a drop in credit card and real estate loans and in home equity lines of credit. Construction and development loans also fell, by $11.7 billion, but loans to commercial and industrial borrowers increased by $27.3 billion, and auto loans were up by $4.5 billion.

But the flow of funds into savings accounts also slowed, with a $67.8 billion increase in deposits, down from the more than $200 billion increases in each of the previous three quarters.

The number of banks considered to be "problem institutions" declined from 813 to 772, the smallest number since 2009. Sixteen insured institutions failed during the first quarter, the smallest number of failures in a quarter since the fourth quarter of 2008, when there were 12, the FDIC said.