Banks lost $3.7 billion in the second quarter, the FDIC reported Thursday. Write-offs for bad loans totaling $48 billion pulled the industry results into negative territory. All told, more than 28 percent of all insured institutions reported a net loss, compared with 18 percent a year earlier. Naturally, as losses mount, so does the risk of failure. The names of 111 institutions landed on the FDIC’s “problem list” at the end of June, adding to the 305 banks already being watched by the agency. These 416 institutions, thought by the FDIC to be at risk of collapse, represent about 5 percent of the nation’s banks. A year ago, there were only 117 names on that list. The FDIC does not publish its “problem list” for fear of the stigma that would be attached to those names, and in truth, a fair percentage are able to get back on their feet. The agency does, though, make public the details of each institution that does go under. So far this year, 84 banks have been closed. The FDIC’s insurance fund that protects depositors’ $6.2 trillion from loss has fallen to its lowest level since 1993, as

the agency has shelled out billions over the last two years to cover unprecedented failures. At the end of the second quarter, there was $10.4 billion in the fund — that’s after a $32 billion provision for anticipated bank failures over the next 12 months. The FDIC fund stood at $50 billion at the close of last year. “A decline in the fund balance does not diminish our ability to protect insured depositors,” FDIC Chairman Sheila Bair said. Bair noted that the agency’s insurance reserves are separate from its $22 billion in cash resources, adding that the FDIC’s line of credit with the Treasury, should it be necessary, is $500 billion. Bankers are expecting the agency to impose new fees on insured institutions in order to replenish its coffers. The regulator’s study also noted that banks have begun stockpiling cash in preparation for continued loan losses, which means they have less money to lend. If credit tightens further, analysts say it could slow the economy’s chances for recovery. The FDIC’s report did include one piece of positive news. The agency said the percentage of loans 30-90 days past due declined somewhat in the second quarter, which may indicate default numbers will soon be on the downside from their peak. At the end of June, noncurrent loans and leases totaled $332 billion, or 4.35 percent of the industry’s total loans and leases, the FDIC said. “While challenges remain, evidence is building that the U.S. economy is starting to grow again,” Bair said. “Banking industry performance is — as always — a lagging indicator…But, for now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry’s bottom line.”