U.S. banks and thrifts had net income of $35.3 billion in the first quarter, increasing earnings by 22.9 percent over the same period in 2011 as loan losses declined, the Federal Deposit Insurance Corp. said.

Lenders set aside $14.3 billion to cover bad loans, and their $21.8 billion in charge-offs was the lowest quarterly total in four years, the FDIC said today in its Quarterly Banking Profile. Loan balances fell by $56.3 billion, or 1 percent, from the preceding quarter, the first decline in four quarters, the agency said.

“Insured institutions have made steady progress in shedding bad loans, bolstering net worth and increasing profitability,” Martin Gruenberg, the FDIC’s acting chairman, said in a statement. “But for a number of reasons, loan balances registered a decline in the first quarter after three consecutive increases.”

The quarterly decline in loan balances was led by a seasonal $38.2 billion drop in the credit-card category, the agency said. Residential real estate fell by $19.2 billion.

The FDIC’s confidential list of “problem” banks -- those deemed to be at greater risk of collapsing -- fell for a fourth straight quarter from 813 to 772, the FDIC said. So far this year, 24 banks have failed -- trailing the 73 failures reached by the same date last year.

The agency’s deposit insurance fund, which protects customer accounts up to $250,000 against bank failures, rose to $15.3 billion from $11.8 billion in the preceding quarter, the FDIC said. The FDIC is replenishing the fund, which fell into deficit as the agency resolved hundreds of bank failures stemming from the subprime mortgage crisis.

Investors have pushed the 24-company KBW Bank Index up more than 12 percent so far this year.