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The banking industry is stronger, but small banks are still struggling

May 20, 2010 |  7:01 am

Taken as a whole, the nation's banking industry is looking stronger these days, with profits at government-insured banks and thrifts more than tripling in the first quarter, regulators said Thursday.

But the results mainly reflected improvements at the giant banks that received most of the government bailout funds, not the struggles of community banks saddled with soured commercial real estate loans.

As 41 banks failed during the first quarter of 2010, and 37 were taken over by other institutions, the regulators' confidential watch list of problem banks jumped from 702 to 775 -- nearly 10% of all the banks in the country.

Commercial banks and savings and loans insured by the Federal Deposit Insurance Corp. earned $18 billion in the quarter, FDIC Chairman Sheila Bair said. Although low by historical standards, that was a significant improvement from the $5.6 billion the industry earned in first quarter of 2009, and the highest quarterly total in two years.

The largest year-over-year increases occurred at the biggest banks, but 52.2% of the nation's 7,932 insured institutions reported net income growth.

The total assets of institutions on the problem list increased from $403 billion to $431 billion, meaning they averaged $556 million in assets.

By contrast, the largest four U.S. banks -- JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. -- each have more than $1 trillion in assets.

The 19 banks that are large enough to be "stress tested" by the government, because their failures could jolt the entire financial system, have about 90% of all the deposits and assets in the nation.

-- E. Scott Reckard