Troubled banks, plunging profits: The number of troubled U.S. banks jumped to the highest level since mid-2003 in the second quarter while industry profits plunged, according to the Federal Deposit Insurance Corp.

What happened: Tighter credit, tumbling home prices and rising foreclosures battered the bottom lines of banks and thrifts nationwide. They set aside a record $50.2 billion to cover losses from bad mortgages and other loans.

What's next: Nine federally insured banks have failed so far this year, and more are expected as 117 are now on the troubled list. The FDIC is raising premiums on banks and thrifts to replenish the insurance fund.