"Problem banks" in the U.S. banking industry - meaning those at risk of failure - fell for the 11th straight quarter to 467, down from 515 in the third quarter and 47 percent below a recent high of 888 as of March 2011, according to the Federal Deposit Insurance Corp. That's less than 7 percent of the 6,798 banks and thrifts the FDIC said were operating as of last week.

“Banks continue to put bad loans behind them and overall asset quality is remarkably strong,” American Bankers Association Chief Economist James Chessen said in a statement. "Going forward, problems loans will continue to fall, but at a slower rate."

Banking industry earnings in the U.S. increased an estimated 10 percent last year to a record $154.7 billion, according to the Federal Deposit Insurance Corp. The jump is mainly the result of banks setting aside less money to cover potential loan losses and litigation costs.

Fourth quarter profits at the nation’s commercial banks and thrifts rose 17 percent to a total of $40.3 billion from $34.4 billion in the final quarter of 2012, the 17th time in the last 18 quarters that earnings registered a yearly gain, according to the FDIC.

"Asset quality improved, loan balances were up, and there were fewer troubled institutions,” FDIC Chairman Martin J. Gruenberg said in a statement. But "challenges remain," he added. “Narrow [profit] margins, modest loan growth, and a decline in mortgage refinancing activity have made it difficult for banks to increase revenue and profitability,” Gruenberg said.

Growth overall for banks was elusive, according to the FDIC. Reduced income from mortgage lending and trading contributed to a decline in fourth quarter revenue to $166.1 billion, down $2.8 billion, or 1.7 percent, from a year earlier. Loan balances rose 1.2 percent during the quarter, with all lending categories higher except for residential mortgages. But the biggest contributor to the improved earnings was an $8.1 billion decline in loan-loss provisions, the FDIC said.

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