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The FDIC released its Quarterly Banking Profile on Wednesday, detailing the highs and lows for banks in the fourth quarter and for all of 2013. Following are some of the key points unveiled:

Image: Bloomberg News
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Profits Up 10%

Banks earned $40 billion in the fourth quarter and $155 billion for all of 2013. That was 10% higher than earnings in 2012 and were helped once again by a reduction in loan-loss reserves. Despite the good news, Gruenberg warned that reductions in loss reserving cannot continue to fuel higher net income.

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Margins Expand

In a promising sign about loan spreads, the industry average net interest margin rose for the second consecutive quarter. The margin of 3.28% - 2 basis points higher than in the third quarter - was eclipsed by a 3.65% net interest margin for community banks. Bankers hope that as interest rates rise, the margin will continue to increase.

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Loan Market Shows Strength

While loans overall grew in the quarter, the amount of 1-4 family residential real estate loans fell by 0.7% to $1.8 trillion. The FDIC said the industry sold more mortgage loans than it originated for sale. However, mortgage balances were up for the community banking sector.

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Legal Costs Come Down

The FDIC said a $3.1 billion reduction in litigation expenses "at one large institution" helped net income for the industry. Per the agency's practice, the bank was not named, but it is almost certainly JPMorgan Chase. An increase in the bank's legal expenses had hurt industry earnings in the previous quarter.

Image: Bloomberg News
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Loan Losses Fade

Banks continue to clean up their inventory of bad loans, the report indicated. Loan losses fell to a seven-year low, and net chargeoffs declined on a year-over-year basis for the 14th straight quarter. Loss provisions fell over $8 billion from a year earlier to $7 billion.

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Insurance Fund Strengthens

The FDIC's Deposit Insurance Fund continues to recover. The fund earned $2.2 billion in assessment income, and benefited from a negative loss provision of $4.6 billion. Overall, the fund now holds $47 billion, which is 0.79% of all insured deposits.

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Coverage Ratio Rises

The industry's "coverage ratio" - of loss reserves to noncurrent loans - grew by over 1 percentage point to 65.6%. It was the fifth consecutive quarterly increase in the ratio, a key sign of financial strength.

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