The Federal Deposit Insurance Corp. held 884 financial institutions on its “Problem List” as of the end of 2010, and the 157 insured banks that failed was the highest amount since 1992. The FDIC also doesn’t expect bank failure to number higher in 2011. The FDIC released a report Wednesday detailing the health of the institutions it insures as of the end of the fourth quarter of 2010. Those 7,657 banks earned an total of $21.7 billion in the fourth quarter, “a substantial improvement” from the $1.8 billion in total losses the year before, according to the FDIC. “Overall, 2010 was a turnaround year with four straight quarters of positive earnings,” FDIC Chairman Sheila Bair said. “We are encouraged not only by the rising trend in total industry net income, but also by the fact that a substantial majority of insured institutions are participating in this trend.” Roughly two-thirds of these institutions reported improvements in their quarterly net income while provisions set aside for future loan losses was nearly cut in half. The banks held a total of $31.6 billion in these provisions, down from $62.9 billion the year before. The quality of their assets improved as well. Loans and leases 90 days or more past due fell for the third consecutive quarter. Insured banks charged off $41.9 billion in “uncollectable loans,” down 23% from a year ago. The FDIC is still at work pulling the deposit insurance fund out of negative territory. It stood at a $7.4 billion deficit at the end of the fourth quarter, up from a negative $8 billion. The contingent loss reserve, which covers the cost of expected failures shrank to $17.7 billion from $21.3 billion the year before. While the “Problem List” did grow and the DIF remains in negative balance, 2011 should be the year of stabilization. Bair said the number of failures in 2010 will prove to be a peak and that the DIF will return to a positive number this year. “Insured institutions made considerable progress in 2010. The return to industry profitability and the improving trend in asset quality were positive developments. Cleaning up balance sheets is only a first step,” Bair said. “Now, we are looking to the industry to take the next step, and begin to build their loan portfolios. The long-term health of both the industry and our economy will depend on a responsible expansion of bank lending at this pivotal point in the economic recovery.” Write to Jon Prior. Follow him on Twitter: @JonAPrior