In recent years, amid a climate of low interest rates and solid economic growth, banks have been enjoying something of a golden age: high profits and few failures. In fact, according to the Federal Deposit Insurance Corp., it's been more than three years since an American bank failed. And that was a tiny, Utah-based bank with a mere $45.2 million in assets. Could this run be coming to an end?

Maybe, but not just yet. This week, both the FDIC, which regulates banks, and the Office of Thrift Supervision, which regulates savings & loans, issued quarterly reports. What did they find? In the second quarter (which ended before the subprime/credit meltdown started in earnest), signs of trouble were apparent. 

Among the FDIC's conclusions:

The proportion of unprofitable institutions -- 9.6 percent of all insured institutions -- was the highest level for a second quarter since 1991. More than half of the unprofitable institutions (52.2 percent) were less than five years old.

Insured institutions added $11.4 billion in provisions for loan losses to their reserves during the second quarter, the largest quarterly loss provision for the industry since the fourth quarter of 2002. This was $4.9 billion (75.3 percent) more than they set aside in the second quarter of 2006. . .

The amount of loans and leases that were noncurrent (loans 90 days or more past due or in nonaccrual status) grew by $6.4 billion (10.6 percent) during the quarter. This is the largest quarterly increase in noncurrent loans since the fourth quarter of 1990, and marks the fifth consecutive quarter that the industry's inventory of noncurrent loans has grown. Almost half of the increase (48.1 percent) consisted of residential mortgage loans. . . .The industry's noncurrent loan rate, which was at an all-time low of 0.70 percent at the end of the second quarter of 2006, rose from 0.83 percent to 0.90 percent during the second quarter. This is the highest noncurrent rate for the industry in three years.

The Office of Thrift Supervision found similar issues at S&Ls:

Troubled assets—loans 90 days or more past due and loans in nonacrrual status, plus repossessed assets—were 0.95 percent of all assets during the second quarter, an increase from 0.80 in the prior quarter and 0.62 percent one year ago. The increase was primarily due to higher delinquencies for 1 to 4 family mortgages and construction loans.

OTS supervised 836 thrifts with $1.5 trillion in assets at the end of the second quarter. There were 10 problem thrifts (with composite examination ratings of 4 or 5), an increase from four a year ago.

The upshot? At both banks and S&Ls, bad loans are rising swiftly from a rather low base. As a proportion of total assets, noncurrent loans at banks rose 30 percent in the second quarter of 2007 from the second quarter of 2006, and troubled loans at S&Ls rose more than percent in the second quarter of 2007 from the second quarter of 2006.