WASHINGTON — An increase in litigation costs at a few large banks and lower noninterest income led to a year-over-year decline in earnings, the Federal Deposit Insurance Corp. said Tuesday.

Banks and thrifts still managed to earn $36.9 billion in the fourth quarter, which was 7.3% below the same point a year earlier, but the FDIC said the "decline was mainly attributable to a $4.4 billion increase in litigation expenses at a few large banks."

"Although total industry earnings declined as a result of significant litigation expenses at a few large institutions and a continued decline in mortgage-related income, a majority of banks reported higher operating revenues and improved earnings from the previous year," FDIC Chairman Martin Gruenberg said in announcing the agency's Quarterly Banking Profile.

Overall, net operating revenue increased by $923 million in the fourth quarter, compared to a year earlier, and net interest income was 1% higher at $1.1 billion from a year ago, while noninterest income was $160 million, or 0.3% lower.

The FDIC also said that banks increased loss-provisions for the second consecutive quarter, totaling $8.2 billion, which was 12% higher than the fourth quarter of 2013.

Net chargeoffs, meanwhile, fell to their lowest point in eight years. Chargeoffs during the fourth quarter were 18% lower than a year earlier, with the largest improvements in residential mortgage loans, credit cards and home equity lines of credit.

The amount of noncurrent loans also fell during the fourth quarter, dropping by 5.4% from a year earlier. The percentage of total loans and leases that were more than 90 days past due fell to 1.96%, the first time since 2008 that the noncurrent loan rate was below 2%.

The number of troubled institutions on the FDIC's "troubled bank" list fell to 291 from 329 during the fourth quarter, while total assets of such banks fell to $87 billion from $102 billion.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.