WASHINGTON ( TheStreet) -- The Federal Deposit Insurance Corp.'s "problem list" of troubled banks and thrifts swelled to 702 at the end of 2009, almost triple that of a year earlier, while the pace of bank failures accelerated. Loan losses mounted, and lending languished.The FDIC said the banking industry broke even during the fourth quarter, with $914 million in net income compared with a loss of $37.8 billion a year earlier. Most of the improvement was concentrated among the largest banks. Of the four peer groups covered in the FDIC's report released Tuesday, only banks and thrifts with assets exceeding $10 billion had a positive return on assets for the quarter. Earnings were helped by a turnaround in trading revenue, which totaled $2.8 billion for the fourth quarter versus a loss of $9.2 billion. Servicing income also rebounded, to $8 billion, from a loss of $390 million. Still, an improvement in net interest margins was halted during the fourth quarter. The industry's margin (the difference between the average rate earned on loans and investments, and the average cost of funds) was 3.49%, up from 3.33% a year earlier but down from 3.51% in the third quarter. Industry net income for all of 2009 was "well below historical norms" at $12.5 billion, a fraction of the $100 billion in 2007. In 2008, net income was $4.5 billion.
Undercapitalized banks swellAlong with the FDIC's growing "problem list," the number of undercapitalized banks continued to increase, and 45 failed during the fourth quarter. According to revised Dec. 31 data provided by SNL Financial, there were 163 undercapitalized banks, up from 116 in September. Most banks, and savings and loans need to maintain tier 1 leverage, tier 1 risk-based and total risk-based capital ratios of at least 5%, 6% and 10% to be considered well-capitalized under regulatory guidelines. Some trust banks carry lower capital requirements. The ratios need to be at least 4%, 4% and 8% for most to be considered adequately capitalized.