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.
A huge spike in soured loans for real estate construction and development also hurt bank earnings.