The Federal Deposit Insurance Corporation said today that its insured depository institutions reported aggregate net income of $40.3 billion in the first quarter of 2013. This was an increase of $5.5 billion from net income a year earlier and the 15^th consecutive quarter than earnings have increased compared to the previous year. Half of the 7,019 insured commercial banks and savings institutions reporting had year-over-year improvement in their earnings and the proportion of unprofitable banks fell to 8.4 percent from 10.6 percent in the first quarter of 2012.

FDIC said the improved earnings were the result of increased non-interest income, lower non-interest expenses and reduced loan loss provisions. Banks set aside $11 billion in provisions for loan losses, a reduction of $3.3 billion (23.2 percent) compared to a year earlier. The average return on assets (ROA) rose to 1.12 percent from 1.0 percent the prior year and was the highest quarterly ROA since the second quarter of 2007.

Asset quality continued to improve. Banks and thrifts charged off $16.0 billion in uncollectible loans compared to $21.8 billion a year earlier, a 26.7 percent reduction. The amount of loans and leases 90 or more days past due or in non accrual status fell by $15.7 billion during the quarter to the lowest level since 2008.

Loan balances fell by $36.8 billion or 0.5 percent in the first quarter, mostly from what the FDIC called a seasonal decline in credit card balances which were down $35.9 billion. Home equity line balances fell by $16.0 billion or 2.9 percent and 1-4 family residential loans lost $18.3 billion or 1 percent.

FDIC Chairman Martin J. Gruenberg said: "Today's report shows further progress in the recovery that has been underway in the banking industry for more than three years. We saw improvement in asset quality indicators over the quarter, a continued increase in the number of profitable institutions, and further declines in the number of problem banks and bank failures. However, tighter net interest margins and slow loan growth create an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention."

The number of banks on the FDIC's "Problem List" declined from 651 to 612 during the quarter and the four FDIC-insured banks that failed in the first quarter were the fewest to do so since the second quarter of 2008.