WASHINGTON -- The nation's 11,328 commercial banks earned a record-smashing $10.9 billion in the first quarter as problem assets dropped to their lowest level in 33 months.

The industry improved on its fourth-quarter profit by $2.7 billion and its first-quarter 1992 figure by $3.3 billion.

And it did 28% better than the previous record of $8.5 billion, set in the third quarter of 1992, the Federal Deposit Insurance Corp. said Wednesday.

Andrew C. Hove Jr., acting chairman of the FDIC, attributed the performance to asset-quality improvement, one-time gains from an accounting change, and interest rate spreads. "We believe these improvements in bank operations will continue to protect the American taxpayer from having to come to the rescue of the Bank Insurance Fund," he said.

"The prognosis for the near future is excellent."

Thrifts Continued to Gain

In another positive sign for the industry, the 410 FDIC-insured savings banks made $517 million in the first quarter - the fifth consecutive quarterly profit. Savings banks had lost money from 1989 through 1991. And for the first quarter in three years, not a single savings bank failed.

Commercial banks earned $32.2 billion for all of 1992. The industry has not suffered a quarterly loss since the $600 million deficit in the third quarter of 1989.

The industrywide return on average assets last quarter hit 1.24% - its first time above 1% since 1983 when FDIC began compiling the quarterly data. Had the nearly $1.8 billion gained from tax-accounting changes been excluded, the ROA would have been 0.9%.

Another Decline in Loans

Total assets grew 0.2%, or $7.6 billion, in the first quarter, to $3.51 trillion. But loans fell by $9 billion, to $2.02 trillion. Loans have declined in eight of the last nine quarters, the FDIC said.

Commercial and industrial loans fell $2.4 billion in the quarter - the 12th consecutive quarterly drop.

Asset growth came from $16.8 billion in mortgage-backed securities and $9.9 billion in government securities.

Low Loan-Loss Provision

Troubled assets declined in the first three months, to $84.3 billion from $88 billion. Within that figure, noncurrent loans declined $3.1 billion to $59.3 billion, and foreclosed properties fell $687 million to $25.1 billion.

Troubled assets have declined in six of the last seven quarters and are nearly 22% below the peak of $107.8 billion in the second quarter of 1991.

Banks set aside $4.7 billion for future loan losses in the first quarter, down 35% from the $7.2 billion in the 1992 fourth quarter. The provision was the lowest since the $4.4 billion in the second quarter of 1989.

The FDIC said banks now hold 92.2 cents for every dollar of noncurrent loans, more than at any time since banks began reporting this information in 1982.

The FDIC continues to whittle its problem list, having dropped 116 banks with $30.8 billion in assets during the quarter. At March 31, there were 671 problem banks with $377.4 billion in assets.

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