Only about half of U.S. banks reported improved earnings from a year earlier, the lowest proportion since 2009. That shows the industry's growth is being driven by a narrower group of the nation's largest banks.
Those banks include Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. Most of them have recovered with help from federal bailout money and record-low borrowing rates.
Bank lending declined from the October-December quarter, although that followed several quarters of increases.
And bank profits from interest charged fell 2.2 percent to $104 billion. The industry's average interest income as a percentage of total loans on its books fell from 3.35 percent to 3.27 percent. That's the lowest portion of total loans in nearly seven years.
That has forced banks to see more revenue from fees, despite complaints from customers and consumer advocates.
FDIC Chairman Martin Gruenberg said the banking industry "is in much stronger shape today than it was three years ago." But he added that "it's a fairly tricky environment for the industry" because of narrowing profit margins from charging interest and relatively weak demand for loans.
Income earned from interest on loans is falling in part because interest rates have been near record lows. The Federal Reserve's aggressive stimulus programs since the crisis have exerted downward pressure on short- and long-term interest rates, making mortgages and other loans cheaper. The Fed's low interest-rate policies are intended to boost borrowing and spending to accelerate overall economic growth.
Still, many banks have adopted stricter lending standards since the financial crisis, requiring higher credit scores, larger down payments and proof of employment. So while loans are a bargain, they are only available to those who can qualify.
Another sign of the industry's health is that fewer banks are at risk of failure. The number of banks on the FDIC's "problem" list fell to 612 from 651 as of Dec. 31.
And so far this year, only 13 banks have failed. That follows 51 closures last year, 92 in 2011 and 157 in 2010. The 2010 closures were the most in one year since the height of the savings and loan crisis in 1992.
On Tuesday, Moody's Investors Service said it had raised its outlook for the U.S. banking industry from "Negative" to "Stable," the first increase in five years. The rating agency said sustained economic growth and a better jobs picture will help banks over the next 12 to 18 months.
The FDIC is backed by the government, and its deposits are guaranteed up to $250,000 per account. Apart from its deposit insurance fund, the agency also has tens of billions in loss reserves.