WASHINGTON - A 34% surge in bad commercial loans and $2.3 billion of losses on securities sales combined to break the banking industry's eight-year streak of record earnings last year, according to data issued Wednesday by the Federal Deposit Insurance Corp.

A preliminary release of the agency's yearend earnings report showed that despite a 2.1% increase in net operating income, to $72.8 billion, bank earnings last year fell by $380 million, or 0.5%, to $71.2 billion. The agency attributed the losses on securities sales to declining interest rates, which reduced the value of fixed-rate securities. By comparison, the industry earned $181 million from selling securities in 1999.

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