Bad Loans Drag Banks Down
The quality of bank assets continued to worsen in the second quarter and the percentage of bad loans and leases on banks' books hit its highest point in 26 years, according to the Federal Deposit Insurance Corp.
Commercial and savings banks insured by the FDIC charged off $48.9 billion in uncollectable loans during the quarter. In the same period a year ago, banks charged off $26.4 billion in bad loans.
Noncurrent loans and leases increased by $40.4 billion to $332 billion during the quarter, and accounted for 4.4 percent off the industry's total loans and leases. The FDIC considers loans and leases noncurrent when they are more than 90 days past due.
Banks lost $3.7 billion between January and June, a drop of $8.5 billion from the $4.8 billion in profits the industry reported in the second quarter of 2008.
FDIC banks earned $424 million in net operating income, even after paying out $5.5 billion in special assessments to bolster the FDIC insurance fund. However, $4.1 billion in one-time losses and other items pulled the industry into the red.
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