WASHINGTON — U.S. banks made $34.5 billion in profit from April through June, a nearly 21% improvement from a year earlier, though down slightly from the industry’s first-quarter results, the Federal Deposit Insurance Corp. said.

It marked the 12th straight quarter of year-over-year improvement in profits among FDIC-insured banks, the agency said Tuesday. Those banks posted a combined $35.3 billion in profit in the first quarter.

“The banking industry continued to make gradual but steady progress toward recovery in the second quarter,” FDIC acting Chairman Martin J. Gruenberg said.

Just 15 FDIC-insured banks failed in the second quarter, the smallest number since the fourth quarter of 2008, when the effects of the financial crisis were just starting to be felt.

The number of so-called problem institutions — banks in danger of failing — dropped to 732 from 772 in the first quarter. It was the fifth straight quarterly decline and the lowest figure since the end of 2009.

The number of problem institutions was about 10% of the 7,246 banks insured by the FDIC.

Profit growth in the second quarter was driven by larger banks. The 107 institutions with more than $10 billion in assets accounted for about 77% of the industry’s overall profits.

The industry’s improvement has come as banks set aside less money to cover losses on their loans. Banks set aside $14.2 billion for loan losses in the second quarter of 2011, the smallest amount in five years. The figure was down 26.2% compared with a year earlier.

Banks have become less cautious about lending, making more loans in the second quarter — a 1.4% increase in loan balances to $102 billion, compared with a year earlier. The rise came after a decrease in the first quarter.

“This quarter’s return to loan growth is an encouraging development, but we will have to wait and see if the trend toward increased lending can be sustained,” Gruenberg said.

The April-through-June period marked the fourth time in the last five quarters that loan balances rose.

“Banks continue to aggressively seek out business loans, and our industry’s double-digit lending growth over the last year is a testament to those efforts,” said James Chessen, chief economist for the American Bankers Assn., noting that business lending was up 15.1% in the second quarter compared with the previous year.

But Chessen said the growth might not continue.

“Our business customers are telling us that they are hesitant to expand or take on more debt in today’s uncertain environment,” he said, referring to continued economic problems in Europe and the potential for tax increases and government spending cuts in the U.S. early next year.

jim.puzzanghera.latimes.com