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Earnings at banks insured by the Federal Deposit Insurance Corp. keep getting stronger even though the number of institutions on the regulator's problem list is at the highest level in 18 years. The FDIC said banks it insures earned $29 billion in the first three months of 2011, up 66.5% from $17.4 billion a year earlier and at the highest level since the second quarter of 2007. Earnings rose for the seventh-straight quarter as banks continue to lower loan loss provisions, according to the FDIC. More than half of the banks reported increased first-quarter earnings, and 15%  reported a loss. Provisions for loan losses fell to $20.7 billion from $51.6 billion a year earlier, the regulator said. "The industry shows continuing signs of improvement," FDIC Chairman Sheila Bair said. "Though there is a limit to how far reductions in loan-loss provisions can boost industry earnings." There are now 888 banks on the FDIC problem list, up slightly from 884 at the end of 2010 but at the highest level since March 1993 when there were 928. Twenty-six banking institutions were closed by regulators during the first quarter, which is the smallest number of bank failures in seven months. Another 17 have closed since, pushing the total bank failures to 41 this year. Nearly 300 banks failed in 2009 and 2010. The FDIC's deposit insurance fund balance narrowed to a negative $1 billion from a negative $7.4 billion at Dec. 31. Improvements in the outlook for anticipated bank failures and growth of assessment income led to the strengthening of the DIF balance. And Bair said the balance should turn positive at June 30, "barring unforeseen circumstances," after nearly two years in the red. Bair completes her five-year term in little more than one month and will step down from her post July 8. Write to Jason Philyaw.

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