Though the banking industry continues to labor under the weight of billions in nonperforming assets and the list of problem banks reached a new high at the end of 2009, we have spotted early signs of stabilization.

We expect more than 200 bank failures in 2010, but it is encouraging that 45% of banks showed improved asset quality in the fourth quarter. Capital raises are becoming more common. If the FDIC is successful in auctioning off "clusters" of failed banks, we could see the number of problem banks actually begin to decrease in the second half of 2010.

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