Second-tier regional banks incurred their first combined pretax loss in three years in the April-September first half of fiscal 2001, according to a banking association report.

The loss is largely attributable to banks' aggressive disposal of bad loans, the Second Association of Regional Banks said in a report on unconsolidated interim earnings announced by 54 second-tier regional banks.

The combined loss of 61.1 billion yen compares with a combined profit of 30.1 billion yen a year earlier, the report says.

The banks also incurred a combined net loss -- 60.3 billion yen in total -- for the fifth consecutive year, up from a 9.9 billion yen loss a year earlier.

Of the 54 banks, 13 were in the red on a pretax basis and 11 on a net basis.

Combined net profit from core banking operations grew 4.2 percent to 186.7 billion yen due to an increase in profits from bond sales and a cut in expenses, the association said.

During the reporting period, the banks disposed of 199.1 billion yen in bad loans, up 18.6 percent. The banks had a combined 3.899 trillion yen in bad loans, as defined by the financial revitalization law, at the end of September, an increase of 4.4 percent from the end of fiscal 2000.

The banks' average capital-adequacy ratio stood at 7.91 percent, down 0.2 point from six months earlier.