Regional banks are especially vulnerable to losses on loans for commercial real estate, which make up a disproportionate share of their business.
Losses are growing as buildings sit vacant and builders default on loans.
Such defaults could escalate the wave of failures, which totaled 140 last year. So far this year, 20 banks have failed.
Bank failures pushed the FDIC’s deposit insurance fund into the red last year. It was $20.9 billion in deficit as of Dec. 31, the agency reported. It expects further bank failures to cost the fund about $100 billion through 2013.
The agency mandated that banks prepay about $45 billion in premiums last year, for 2010 through 2012, to help replenish the insurance fund.
The FDIC 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, nearly one in every three banks reported a net loss for the latest quarter.
Most of the improvement in earnings was due to the largest banks.
Still, 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.
“Consistent with a recovering economy, we saw signs of improvement in industry performance’’ in the fourth quarter, FDIC chairwoman Sheila Bair said.
Bair said, though, that a recovery in the banking industry usually lags behind an economic rebound as banks deal with soured loans.
“It’s not that this was a strong quarter,’’ she said. “It’s simply that everything was so bad a year ago.’’
The FDIC’s reserves of cash and securities set aside to cover losses from failures jumped to $66 billion as of Dec. 31, from $23 billion at the end of September.
For all of 2009, banks earned $12.5 billion, up from $4.5 billion in 2008. Last year’s earnings represented a return on assets of 0.09 percent, up from 0.03 percent in 2008.
The number of banks on the FDIC’s problem list leaped above 700 from 552 in the third quarter, the FDIC said. The combined assets of those banks were $402.8 billion, up from $345.9 billion in the third quarter.
Though its deposit insurance fund was $20.9 billion in deficit, depositors’ money - insured up to $250,000 per account - is not at risk. The FDIC is backed by the government.
