WASHINGTON – U.S. banks are making money again, although a split picture of the industry has emerged since the financial crisis.

The largest banks are thriving, mostly because they can borrow on the cheap and have rid themselves of bad debt. Yet smaller banks lack those advantages and are failing at the fastest pace in years.

Overall, banks made $21.6 billion in net income in the April-to-June quarter, the Federal Deposit Insurance Corp. said. It was the highest quarterly level since 2007.

Banks with more than $10 billion in assets – only 1.3 percent of the industry – accounted for $19.9 billion of the total earnings.

At the same time, the number of banks on the FDIC’s confidential “problem” list increased by 54 in the quarter – growing to 829 from 775 in the first quarter. That’s a little more than 10 percent of the 7,830 federally insured U.S. banks.

Most of the biggest banks have recovered with help from federal bailout money, record-low borrowing rates from the Federal Reserve and the ability to earn big profits from fees on banking services and investment fees. They also have been able to cut back on lending in troubled parts of the country, such as Florida and Nevada.

Smaller and regional banks, however, have less flexibility. They depend heavily on making loans for commercial property and development. Those sectors have suffered huge losses. Companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans.

All of the 118 banks that have failed this year have been smaller or regional banks. Last year, 140 banks closed, most of them small institutions.

FDIC Chairman Sheila Bair said banks’ lending standards are beginning to ease for some types of credit.

“But lending will not pick up until businesses and consumers gain the confidence they need to hire and spend,” Bair said.

She said the economic recovery is starting to be reflected in banks’ higher earnings and the improved quality of loans, with fewer defaults and delinquencies.

The number of loans past due by three months or more fell 4.8 percent in the second quarter from the first. That was the first quarterly decline since early 2006, the FDIC said.

The only exception to the quarterly decline was commercial real estate loans; troubled loans in that category rose 1.2 percent from the first quarter.

The FDIC expects U.S. bank failures to cost its insurance fund around $100 billion through 2013.