Regulators report 27 percent jump in problem banks

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WASHINGTON (Reuters) - The number of "problem" U.S. banks jumped 27 percent during the fourth quarter of 2009 to 702, the highest level since 1993 and a sign the industry's recovery is still shaky, regulators reported on Tuesday.

The Federal Deposit Insurance Corp said the industry overall eked out a profit of $914 million for the quarter, benefiting from a healing economy, but said the improvement was concentrated in the largest banks.

FDIC Chairman Sheila Bair said the profit was a huge improvement over the $37.8 billion loss the industry reported in the fourth quarter of 2008. "It's not that this was a strong quarter. It's simply that everything was so bad a year ago," Bair said in a statement.

Smaller institutions are still struggling with deteriorating loan portfolios, especially with loans tied to commercial real estate. The FDIC set aside an additional $17.8 billion during the fourth quarter for expected bank failures.

Regulators have closed 20 U.S. banks so far this year and 185 since January 2008, as banks continue to struggle with loan portfolios stocked with souring loans.

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