Getting back to the basics is a painful process for banks, results of two large regionals show.

Fifth Third Bancorp (FITB) and PNC Financial Services Group Inc. (PNC) both reported rising revenue and falling expenses in the second quarter, when compared to the first. Both banks reported that the rate of loans turning sour has slowed, though delinquencies and loan losses overall haven't improved. An increase in deposits with low or no interest rates helped profitability.

But both had to set aside more money for bad loans and struggled with rising loan losses from the first quarter. Both said there is little appetite from creditworthy borrowers to take out new loans, both continued to shrink their assets and - absent a one-time gain at Fifth Third - both reported declining bottom-line results from the first quarter.

"It's difficult to find assets that meet our risk-adjusted criteria," or loans worth taking a risk on, said James Rohr, PNC's chief executive, in a conference call with analysts Thursday. The bank said it's instead parking available funds in low-yield securities like U.S. Treasury bonds, and even deposit accounts at the Federal Reserve.

Fifth Third said it expects income from the lending business to continue to improve in the third quarter; but mortgage banking revenue, which was driven by low interest rates, will slow.

The Cincinnati bank reported a $882 million profit, compared to a $202 million loss a year earlier and a $50 million profit in the first quarter, but the bank had a $1 billion gain from the joint venture it formed for its payment processing businesses.

PNC's second quarter profit fell 60% from a year earlier and the first quarter, to $207 million.

So there was no hint of a beginning of the end of the financial crisis just yet. "It becomes very, very difficult to predict where you are in the cycle," Fifth Third Chief Executive Kevin Kabat said in an interview. "This type of environment we are in today, which is better than it was three or six months ago, may continue" but not necessarily improve. "Your are probably going to see some ... additional deterioration."

For now, most regional bankers around the country continue to focus on their traditional deposit business to survive and prepare for an economic rebound.

Fifth Third has also been aggressively writing down - and selling - bad loans. The 7% increase in its writeoffs for uncollectable loans from the first quarter was "one of the lowest growth rates we have seen this quarter," Stifel Nicolaus & Co. analyst Christopher Mutascio wrote in a research note.

Fifth Third may not need to set aside as much money for delinquent loans in the third quarter than in the second, Chief Risk Officer Mary Tuuk said.

PNC Chief Financial Officer Richard Johnson said the company expects its provision for loan losses to remain flat in coming quarters.

Albert Savastano of Fox-Pitt Kelton wrote, however, that credit deteriorated across the board at PNC.

Credit quality overshadowed the results of many banks, even where revenue improved. Huntington Bancshares Inc. (HBAN) surprised analysts with worse than expected losses from bad loans. Huntington reported a $125 million loss Thursday.

Like many, Huntington had to get rid of piles of subprime loans made through a partnership with a mortgage originator turned bad. In an interview, Stephen Steinour, the CEO of the Columbus, Ohio, bank said, "We believe we're turning the ship."

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; matthias.rieker@dowjones.com