Borrowers are doing a better job of keeping up with their loan payments, boosting the health and profits of the nation’s banks 21 percent, to $34.5 billion in the second quarter, the Federal Deposit Insurance Corp. said Tuesday.

The improving health of borrowers is a hopeful sign for the recovery, which has been picking up steam recently. Agency officials said the percentage of delinquent loans tumbled 29 percent, to the lowest level in more than three years.

Nearly two-thirds of all banks witnessed reductions in borrowers missing payments during the quarter. Real estate construction and land loans — a source of tremendous trouble for banks in years past — posted the sharpest decline of nearly 18 percent.

Still, the volume of problem loans remains well above normal levels. And while the improving condition of borrowers is positive for the overall economy, many banks complain of having a hard time making money with interest rates so low. Most of the profits seen in the second quarter came from reducing emergency funds set aside for loan losses, not from increased revenues. Banks set aside 26 percent less money to cover future losses on loans.

“Levels of troubled assets and troubled institutions remain high, but they are continuing to improve,” FDIC Acting Chairman Martin Gruenberg said at a news conference on the report. The banking industry, he noted, is making “gradual but steady progress toward recovery.”

At Sandy Spring Bank in Olney, credit problems pushed the $3.8 billion bank deep in the red during the height of the downturn, resulting in a $19.7 million loss in 2009. The bank battled back by clearing its balance sheet of troubled commercial and residential loans over several quarters.

Fewer delinquencies helped drive down troubled loans in the second quarter to $67 million, from $76.5 million a year earlier.

While problem loans wane, Sandy Spring has picked up its lending activity for the fourth straight quarter, with an 8 percent increase in total loans, excluding paper acquired through its acquisition of CommerceFirst Bank of Annapolis.

Nationwide, the FDIC said bank lending crept up by 1.4 percent, or $102 billion, in the second quarter, following a decline in the first three months of the year.

“This quarter’s loan growth is an encouraging development, but we will have to wait and see if the trend toward increased lending can be sustained,” Gruenberg said.

Corporate borrowers benefited the most from the expansion of credit, with a 3.6 percent boost, or $48.9 billion, in loans. Credit card balances rose by $14.7 billion, while residential mortgages grew by $16.6 billion — less than 1 percent from the same period a year ago.

Cardinal Bank in McLean grew its loan portfolio by 21 percent, to $1.75 billion, with increased demand from the health-care industry, government contractors and mortgage borrowers. Chief executive Bernard Clineberg is nonetheless disheartened by what he sees as a sluggish recovery.

“If you look at the market in Maryland, D.C. and Virginia, loan growth is less than 5 percent in our peer group,” he said. “There is a recovery underway, but it is spotty at best.”

Clineburg points to the continued pressure on bank revenue as an example of the sluggish recovery. The low interest-rate environment, instituted by the Federal Reserve to spur borrowing, has squeezed banks’ net interest margins — the difference between what they earn on loans and pay out on deposits.

Margins in the second quarter fell to 3.46 percent, hovering below the 10-year average of 3.56 percent, according to the FDIC. Banks are seeing older, higher-yielding loans mature only to be replaced by lower-yielding ones.

Jaret Seiberg, a financial policy analyst at Guggenheim Partners, said he remains concerned about community banks, which have less than $1 billion in assets. Many are still contending with problem loans stemming from the financial crisis and are building up their reserves.

Meanwhile, many medium and larger banks have cleared their problems and are reducing their emergency funds.

“What we’re seeing is the continued bifurcation of the industry,” he said. “The biggest banks have addressed many of their problems, while the smaller banks haven’t tackled that issue yet.”