WASHINGTON — Banks and thrifts earned $34.7 billion in the fourth quarter to close out 2012 with the second biggest full-year profit ever, the Federal Deposit Insurance Corp. said Tuesday.

The annual net income of $141.3 billion last year was a 19% increase from the previous year's earnings, and trailed only the 2006 total, according to the FDIC's Quarterly Banking Profile. (Six years earlier, the industry earned just over $145 billion.)

The fourth-quarter income was 37% higher than the same quarter a year earlier, and was the largest profit over a three-month span since the end of 2006. About 60% of institutions had better year-over-year quarterly earnings, and the industry's return on assets for all of 2012 reach 1% for the first time in six years.

Banks made up for declining margins, and the lowest quarterly net interest income since late 2009, with an 18% year-over-year improvement in noninterest income. Gains on loan sales rose by $2.4 billion — or 132.4% — from a year earlier, helping to drive the $64.6 billion in noninterest income. A 75% spike in trading revenue and 72% drop in losses on foreclosure sales also helped noninterest income.

For the sixth time in seven quarters, banks also boosted lending. Loans accounted for more than half of a 1.6% increase in total assets — from the third quarter — to $14.45 trillion. Net loans and leases rose by 1.7% to $7.5 trillion. Commercial and industrial loans increased by 3.7%, while credit card balances were up by 4.2%. Still, net interest income fell 2.5% from a year earlier as the average net interest margin declined 25 basis points to 3.32%

In a continued pattern following the financial crisis, institutions also derived income from reducing loss provisions. The $15.1 billion set aside to cover losses in the fourth quarter was a 24.6% decrease from the provision in the fourth quarter of 2011.

"The improving trend that began more than three years ago gained further ground in the fourth quarter," FDIC Chairman Martin Gruenberg said in remarks prepared for the report's release. "Balances of troubled loans declined, earnings rose from a year ago and more institutions of all sizes showed improved performance."

Yet he added that the period of earnings enhancement from the lowering of provisions may be coming to an end.

"Over the last three years, lower provisions have accounted for more than 90% of the improvement in the industry's pretax income, but that contribution has been diminishing," he said. "While further reductions in loss provisions are possible, most of the benefits to earnings from lower provisions have already been realized."

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