About one-fifth of the 426 banks headquartered in Minnesota lost money in the second quarter.
A year ago, about 14 percent of the state's banks were in the red. Overall, profits for Minnesota-based banks fell to about $52 million in the quarter, down almost 65 percent from $143 million a year ago.
The figures come from the Federal Deposit Insurance Corporation.
The profit drop occurred in large part because banks set aside a lot more money to cover bad loans. Those reserves cut into profits.
The state's banks have about $1.8 billion in loans on which borrowers are behind on payments or not making payments at all. That's up from $1.2 billion a year ago.
Commercial real estate and development loans have been especially troublesome.
Despite their woes, Minnesota banks are doing better than banks nationwide. Nationally, about 27 percent of banks lost money in the quarter ending June 30. Deposits in Minnesota banks increased about 12 percent over the year from June 2008 to June 2009. Nationally, bank deposits rose only 5 percent.