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Banks Start to Dig Out From Troubled Loans

November 26, 2010
Banks Start to Dig Out From Troubled Loans

AFTER several years of decline, this is shaping up to be the year in which the problems of America’s banks began to recede.

The Federal Deposit Insurance Corporation reported this week that the proportion of troubled loans on bank books fell to 9.1 percent at the end of September, down by more than a percentage point from the record 10.3 percent figure posted at the end of 2009.

“The industry continues making progress in recovering from the financial crisis,” said Sheila C. Bair, the F.D.I.C. chairwoman. “Credit performance has been improving, and we remain cautiously optimistic about the outlook.”

The improvement was not across the board. Loans secured by commercial real estate became a little worse, and some smaller banks that specialize in such loans have reason to be worried. The number of banks labeled as troubled by the F.D.I.C. continued to rise.

The figures for problem loans combine the proportion of loans that are at least 30 days behind in payment, those that are no longer expected to pay and thus are in nonaccrual status and those that are being written off. All three categories are falling, and the total loan write-offs, at $47 billion in the third quarter, was the lowest in six quarters.

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