Business

Banks see gain in quarter; 'problem' banks grow

WASHINGTON — America's banks eked out a small profit in the fourth quarter as the economy recovered, but the number of banks considered troubled jumped to more than 700, a federal regulator reported Tuesday.

The Federal Deposit Insurance Corp. said banks essentially broke even in the October-December period. They earned $914 million, compared with a $37.8 billion loss in the fourth quarter of 2008.

Still, the number of banks on the FDIC's confidential "problem" list leaped to 702 from 552 in the third quarter, the FDIC said.

Most of the improvement in earnings was due to the largest banks. But signs emerged of a broader positive trend in the industry, the FDIC said. For the first time in three years, more than half the 8,000 or so federally insured banks and thrifts reported higher income compared with the year-earlier quarter.

Delinquencies on commercial real estate loans remain a source of trouble. A wave of defaults on such loans could cause more banks to fail, FDIC officials and experts say. Regional banks, in particular, hold many commercial real estate loans.

Last year, 140 federally insured institutions failed and were shut down by regulators. They extended a string of collapses that began in 2008 amid the weakened economy and a cascade of loan defaults. So far this year, 20 banks have failed. That compares with 25 in all of 2008 and three in 2007.

The failures pushed the deposit insurance fund into the red last year. It was $20.9 billion in deficit as of Dec. 31, the FDIC reported. That compared with a positive balance of $17.3 billion a t the end of 2008.

The agency expects U.S. bank failures to cost the insurance fund around $100 billion through 2013.

The 702 troubled banks on the FDIC list is the most since the height of the savings-and-loan crisis during the early 1990s. The combined assets of those banks was $402.8 billion.

For all of 2009, banks earned $12.5 billion, up from $4.5 billion in 2008.

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