Construction and development lending at banks and thrifts has grown at a 30% annual rate over the past eight quarters, but delinquency rates are starting to tick up despite the rapid growth in their construction portfolios.The Federal Deposit Insurance Corp. reported that construction lending increased by $31.7 billion in the second quarter at a 32% annual rate. FDIC-insured institutions held $513.9 billion in C&D loans as of June 30, up from $389.1 billion in the second quarter of 2005 and $299.4 billion in the second quarter of 2004. The FDIC report also shows that noncurrent C&D loans have increased from 0.38% to 0.43% over the past two quarters. Banks and thrifts currently hold $2.2 billion in construction loans that are 90 days past due. Approximately $1.8 billion of those loans are classified as nonaccrual. "It is something to keep an eye on," said FDIC economist Ross Waldrop. But it is "nothing dramatic," he added.

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