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FDIC'S MID-YEAR BANKING DATA POINTS TO RECOVERY

WASHINGTON-Commercial banks and S&Ls broke into the black to the tune of $26 billion for the second quarter, showing improvements in loan losses and delinquencies along the way, the FDIC reported last week.

The second quarter earnings compared to a loss of $4.4 billion for the same period last year and are the best since the third quarter of 2007. During the first quarter, the industry earned $17.8 billion. The return-on-average assets was 0.65% for the second quarter, compared to negative 0.13% for the same period last year.

"This is the best quarterly profit for the banking sector in almost three years," said FDIC Chairman Sheila Bair. "Nearly two out of every three banks are reporting better year-over-year earnings. As long as economic conditions remain supportive, most institutions should maintain profitability and increase their capacity to lend."

The primary factor contributing to the year-over-year improvement in quarterly earnings was a reduction in provisions for loan losses. While quarterly provisions remained high, at $40.3 billion, they were $27.1 billion lower than a year earlier. Net interest income was up by 8.6% to $8.5 billion, and non-interest expenses were down 1.5% to $1.5 billion.

There were several positive trends for asset quality, as the delinquency ratio fell for the first time since the first quarter of 2006, with net-charge-offs down by 0.4%.

Still, lending declined by 1.4% in the second quarter and assets fell by 1%, reflecting similar trends reported by credit unions the day before. NCUA reported Monday that both loan and deposit growth were almost stagnant in the second quarter.

The number of institutions on the FDIC's "Problem List" rose from 775 to 829. There were 55 bank and S&L failures in the second quarter, and have been 118 through the first seven months of the year.

 

NCUA ANNCOUNCES IT WILL EXTEND CORPORATE BAILOUT

ALEXANDRIA, Va.-NCUA last week extended its extraordinary guarantee of all corporate credit union deposits for another three months, allowing corporates to issue new CDs with maturities up to two years.

The guarantee, a critical component of NCUA's corporate bailout, was extended to Dec. 31, 2011, just two months after its was extended another three months until Sept. 30, 2012.

The deposit guarantee, which exceeds the $250,000 per account guarantee for all natural person credit unions, has been crucial in stemming a run on corporate deposits.

Earlier, in May, NCUA extended the expiration of its guarantee program for all corporate debt, known as the Temporary Corporate CU Liquidity Guarantee Program.

The two guarantee programs are backed by the Temporary Corporate CU Stabilization Fund, which was created by Congress last year to fund the corporate bailout.

The programs have allowed NCUA to keep a handful of large corporates that are insolvent, including U.S. Central FCU and WesCorp FCU, afloat until a low-term resolution of the corporate system emerges. NCUA will to go a long way toward a resolution Sept. 16 when it is expected to approve a new corporate regulation and a plan on selling off as much as $50 billion of toxic assets held by the corporates.

 

CAPITAL CUS ENDORSING INSURGENT FOR MAYOR

WASHINGTON-The Maryland and District of Columbia CU Associated threw its weight behind mayoral challenger Vincent Gray, the chairman of the city Council who is vying to topple Mayor Adrian Fenty in next month's Democratic primary.

The winner of the primary is certain to win the general election in this overwhelmingly Democratic city.

The league endorsed Gray for strong support for a curriculum requirement for financial literacy education for the students of D.C. public schools. While meeting with league representatives, Gray said he would work with the D.C. Board of Education to develop an appropriate course and described his vision for working with credit unions and others to help develop financial literacy lessons for all levels of D.C. public schools.

The league said it was also impressed by Gray's interest in making the District of Columbia a global financial center. The league said it believes that this type of pro-business thinking will serve Gray well as Mayor, and will help bring more jobs and investment to the District.

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