WASHINGTON -- Surging mortgage defaults sliced into the bottom line of U.S. banks and thrifts in the second quarter. Profits fell 3.4 percent, to $36.7 billion, data released Wednesday show.
The earnings data from the Federal Deposit Insurance Corp. showed that higher expenses for noncurrent loans, along with lower interest from investments, hurt profits at federally insured banks and savings institutions in the April-June period.
The impact on banks of the nation's housing slump and foreclosure distress was evident in all aspects of the data.
Home loans that were 90 days or more past due rose by $3.1 billion, or 12.6 percent, from a year earlier. It was the fifth straight quarter of increases in residential noncurrent loans. Noncurrent loans for real estate construction and development soared by $2.2 billion, or 39.5 percent.
Banks and thrifts set aside $11.4 billion to provide for loan losses during the second quarter, the highest level since the fourth quarter of 2002, the FDIC said.
Story Continues Below
A huge spike in soured loans for real estate construction and development also hurt bank earnings.
"Banks continued to face two key challenges — a difficult interest-rate environment and ongoing weakness in residential mortgage lending," FDIC Chairman Sheila Bair said in a statement.
Still, given the circumstances, Bair said, the industry's second-quarter performance was "very solid" and it is in sound financial condition during a period of market adjustment.
© 2007 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.
Editor's note:
The 3 Best Income Stocks in the World
Sir John Templeton Was Right. Get His Latest Insight on Housing and Markets.
Protect Your Investments From the Coming Housing Disaster
