NEW YORK (TheStreet) -- Last Thursday, the Federal Deposit Insurance Corporation released the details of the FDIC Quarterly Banking Profile covering the first quarter of 2012. I consider the QBP as the balance sheet of the U.S. economy, and one of the most important data series there is.

Wall Street does not focus on the details of the QBP and I rarely see it on anyone's economic calendar.

I began studying the details of the QBP in the first quarter of 2006, which helped me predict the housing bubble and the Great Credit Crunch -- which in my judgment still exists in the U.S. economy.

The FDIC highlighted the positives; FDIC-insured financial institutions reported net income of $35.3 billion in the first quarter 2012. This was $6.6 billion (22.9%) better than the in the first quarter 2011, and the highest quarterly net income for the banking system since the second quarter of 2007.

This year-over-year improvement was helped by a boost in loan sales, and a reduction in loan-loss provisions, not on a pickup of typical banking business, namely real estate lending.

Some bad news is that total loan balances declined $56.3 billion, on writedowns of bad loans, tougher lending standards and by businesses not looking to borrow given today's economic uncertainties.

A lack of sustained loan growth is a clear sign that the Great Credit Crunch continues.

Here's a look at the asset categories I have focused on since the end of 2007, courtesy of the FDIC.

Since the end of 2007 the number of FDIC-insured financial institutions declined 1,227, or 14.4% to 7,307 from 8,534. This reflects mergers, banks turning in their licenses, and 438 bank failures. The FDIC List of Problem Banks fell to 772 in Q1 from 813 in Q4, but looking at the graph below, bank failures remain dangerously high, and have been above 700 since 2009.

I have had a long-standing prediction that 500 to 800 banks will fail before the Great Credit Crunch is over.

Total Assets grew right through the "official" recession growing by 6.8% to $13.93 trillion the end of Q1 2012.

Family residential mortgages for one-to-four family properties on the books of our nation's banks fell by $386.5 billion to $1.859 trillion since the end of 2007, down 17.2%, including writedowns.

Non-farm non-residential commercial real estate loans are actually up 9.1% to $1.057 trillion at the end of Q1, but have been declining in eight of the past nine quarters. This category remains a source of additional potential writedowns.

.Construction and development loans have been the biggest category for loan write-offs due to the thousands of housing projects that were started and not completed during the bubble and are a source of additional writedowns. Since the end of 2007, C&D loans are down by $400.6 billion or 63.7%, but still high at $228.3 billion.

During the savings and loan crisis construction and development loans declined 54.7% from $216.6 billion at the end of 1988 to $98.1 billion at the end of 1992. Construction and development loans thus remain the number one cause of future bank failures among community banks. This explains why community banks are reluctant to lend to home builders.

Home equity loans are another source of new writedowns, as these have declined by only 2.8% since the end of 2007 to $590.3 billion.

Total real estate loans are down $715.6 billion or 16.1% since the end of 2007 and still total $3.73 trillion, which poses a concern for the banking system in the quarters ahead.

My next article covering the FDIC Quarterly Banking Profile will analyze the categories of "other real estate owned," "notional amount of derivatives," and the Deposit Insurance Fund and insured deposits. I will also talk about noncurrent loans.