"Insured institutions have made steady progress in shedding bad loans, bolstering net worth, and increasing profitability," he said. "The overall decline in loan balances is disappointing after we saw three quarters of growth last year. But we should be cautious in drawing conclusions from just one quarter."
Roughly two-thirds of banks reported their net income had improved from a year ago, and the number of banks posting losses fell by 10. 3 percent.
James Chessen, chief economist for the American Bankers Association, blamed the laggard lending on questions about the economic recovery, which is keeping businesses from seeking loans
"The banking industry continues to steadily march forward, with solid increases in business lending, strong capital levels and a continued decline in problem loans," he said. "At the same time, uncertainty surrounding the pace of economic growth is keeping risk higher than normal and may make businesses less inclined to borrow going forward.”