Bank earnings rose dramatically in the Eighth District and U.S. peer institutions in the first quarter of 2011, primarily because of a sharp drop in funds set aside to cover future loan losses.

The largest national banks apparently have turned the corner on asset quality issues, but this improving trend has not yet emerging across the Eighth District.

Before the housing boom and bust, changes in local house values appeared to be a local phenomenon. Now, however, the District’s house-price changes are mirroring national patterns. Therefore, downward trends in other parts of the country may continue to negatively affect prices in the District.

After a large increase in the first quarter of 2011, earnings growth at District banks came to a standstill in the second quarter.

After two straight quarters of slight improvement, profitability at Eighth District banks dipped in fourth quarter 2009.