Senate Rejects Delay on Interchange Rule

Credit card swipeThe Senate scheduled consideration on the noncontroversial Economic Development Revitalization Act of 2011 (S. 782) the week of June 6th. On Tuesday, June 7th, Sens. Jon Tester ( D-Mont.) and Bob Corker (R-TN) offered a modified version of their interchange proposal (S. 575) as an amendment to that legislation. Senate Majority Leader Harry Reid (D-Nev.) had indicated that the interchange delay would be one of the first amendments offered to the bill to reauthorize the Economic Development Administration. On Wednesday, June 8th the Senate failed to approve the amendment that would have stopped, studied and fixed the Federal Reserve's harmful debit interchange rule. The amendment required 60 votes to pass, but fell short in a 54-45 vote.

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Washington, D.C. News

Senate Rejects Delay on Interchange Rule
Interchange: What's Next?
Hike at Home Educates Congressman Westmoreland on the Issues
CUs Push Congress for MBL
So Far, 28 Financial Reform Rules Have Missed Deadlines

State News

Credit Unions Take Opportunity to Build Relationships at Town Halls
Georgia Minority Leader Abrams 'One to Watch'

Industry News

Call Report Results Show CU Resiliency
NCUA Highlights CU Payday Loan Alternative

Public Influence News

Report Shows Georgia Savings Going Up While Credit Card Debt Falling
RBC Bank Survey Reports Georgians' Views on Economy Improving
Forbes Blog: Pros Outweigh Cons in CUs
National Saving Challenge Surpasses $100M Mark
Industry Awards Deadline: June 30th
CUs in the News
Consider This
Paying Attention
Statewide News Coverage

News of Interest

59 Percent of Parents Financially Support Adult Children
Beige Book: Economy Continues Expansion, but 'Some Slowing' Reported

News of the Competition

Atlanta Bank Exec Sentenced
Georgia Banks Post Best Quarter Since 2008

June 10, 2011

 
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 Washington, D.C. News
 

Senate Rejects Delay on Interchange Rule

The Senate scheduled consideration on the noncontroversial Economic Development Revitalization Act of 2011 (S. 782) the week of June 6th. On Tuesday, June 7th, Sens. Jon Tester ( D-Mont.) and Bob Corker (R-TN) offered a modified version of their interchange proposal (S. 575) as an amendment to that legislation. Senate Majority Leader Harry Reid (D-Nev.) had indicated that the interchange delay would be one of the first amendments offered to the bill to reauthorize the Economic Development Administration. On Wednesday, June 8th the Senate failed to approve the amendment that would have stopped, studied and fixed the Federal Reserve's harmful debit interchange rule. The amendment required 60 votes to pass, but fell short in a 54-45 vote.

Months of aggressive grassroots lobbying by CUNA, credit unions and GCUA resulted in more than 500,000 letters from credit union activists to members of Congress (of those, just over 5,000 contacts came from Georgia) and countless phone calls and meetings in recent months. But ultimately these extraordinary grassroots efforts could not overcome the swipe-fee reduction campaign by big-box retailers and efforts by Senate Majority Whip Richard Durbin (D-Ill.) to preserve the price-control rule, which promises to deliver up to a $14 billion windfall to retailers.

The amendment to the Economic Development Revitalization Act of 2011 (S. 782) – offered by Sens. Tester and Corker along with Sens. Kay Hagan (D-N.C.), Michael Crapo (R-Idaho), Michael Bennet (D-Colo.), Roy Blunt (R-Mo.), Tom Carper (D-Del.), Jon Kyl (R-Ariz.) and Chris Coons (D-Del.) – was a modified version of S. 575. Changes had been made in a bid to attract the votes needed to ensure the legislation's passage. Even with the changes to the original Tester amendment, both Georgia Senators Saxby Chambliss and Johnny Isakson voted against the Tester-Corker measure.

We are extremely disappointed in the outcome of the vote on this measure. Credit unions now await the Federal Reserve’s final rule, which Senator Durbin said he expected to be released by the end of June. There is little doubt that this regulation will force credit unions to reassess the fees they charge to their members.

While the changes and credit union grassroots lobbying helped persuade a majority of senators to vote for the amendment, the 60-vote "supermajority" needed to clear the measure proved to be an impossible hurdle to overcome.

Even with the defeat, the vote represented a remarkable come-from-behind lobbying campaign by financial institutions to recover from the defeat during the anti-Wall Street atmosphere that prevailed last year. The debit card measure, sponsored by Senator Richard J. Durbin (D-Ill.), passed last year by a two-to-one ratio after little debate and no hearings.

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Interchange: What’s Next?

Credit Union National Association (CUNA) President/CEO Bill Cheney said late Wednesday, June 8th, that the U.S. Senate's failure to delay implementation of the Federal Reserve's debit card interchange fee cap is deeply disappointing and CUNA and credit unions will continue pressing the Federal Reserve to improve the proposed rule to minimize negative effects on credit unions and their members.

Shortly after the loss in the Senate, CUNA sent a letter to all Fed governors to reiterate several recommendations that could help insulate small issuers from the negative impact on their income that many fear will be the result of the Fed's current proposal. Among the actions suggested:

  • Establish a monitoring process under which the card networks would first report to the Board that a two-tiered structure has been established, then report annually on how such a two-tiered system is working, and also provide that information to Congress;
  • Include all allowable and reasonable costs in setting the cap on interchange fees; and
  • Revise the proposal regarding routing and exclusivity provisions to consider either exempting small issuers or delay the provisions for up to 24 months for small issuers. (See resource link for full letter.)

In addition, CUNA, on behalf of credit unions, is involved in litigation to challenge the law and rule in an endeavor to preserve the revenue credit unions need to offer debit card services. CUNA filed an amicus brief in the suit against the interchange provisions brought by TCF Financial.

The Fed's proposed interchange regulations, which seem to be on track for at least the fee-cap provisions to go into effect July 21st, would limit debit card transaction fees to as little as 12 cents per transaction, if adopted as proposed. The Fed has acknowledged there are costs it could include but did not in the proposal.

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Hike at Home Educates Congressman Westmoreland on the Issues

Hike at Home - Westmoreland
From left: Brandee Bickle, GCUA; Mike Culbertson, GCUA; Cindy Connelly, GCUA; Jeffrey Deck, Delta Community CU; Autumn Davis, Delta Community CU; U.S. Rep. Lynn Westmoreland; Wanda Rutledge, TIC FCU; Clint Perkins, TIC FCU; Denise Swan, GEMC FCU

On Monday, June 6th credit union advocates met with U.S. Rep. Lynn Westmoreland (R-3) to discuss credit union issues at his district office in Newnan during the recent House recess. One of the issues discussed during the meeting was the need to delay the interchange rule implementation. The group focused their interchange delay message on how credit unions all over the state are impacted by card fraud, and how these costs are not factored into the Fed’s consideration of interchange fees.

Georgia credit unions, along with credit unions around the nation, had been pushing Congress for support to pass legislation to delay the implementation of the Durbin amendment. On June 8th the Senate did not approve delay legislation, so in all probability the House will not be addressing the issue.

Ending the discussion was another hot credit union Congressional topic of increasing member business lending. It was apparent to the Hike group that these continued visits with Rep. Westmoreland are providing positive results, as he is warming up to the credit union position.

As a member of the House Financial Services Committee, Rep. Westmoreland is in a position to have direct impact on many of the bills that can touch our industry, and to hear from the opposing views on the issues as well. Our thanks go out to this Hike group for sharing their perspective on the issues and sharing their time in the important role of relationship building for the entire credit union industry.

The Hike at Home program is designed to strengthen legislative relationships and credit union influence, and the small amount of time it takes to participate pays off in dividends for everyone. When a Hike comes to your area, take advantage of the opportunity, not just for your organization, but for the entire industry!

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U.S. CapitolCUs Push Congress for MBL

Credit unions stand ready to help businesses grow and to create jobs – and could lend an additional $13 billion to small businesses in the first year if legislation to raise their authority to make business loans is passed, Credit Union National Association (CUNA) President/CEO Bill Cheney told members of the House Small Business Committee in a June 1st letter. The letter was sent to committee chairman Rep. Sam Graves (R-Mo.) and ranking member Rep. Nydia Velazquez (D-N.Y.), and was submitted for the record of a hearing entitled "Access to Capital: Can Small Businesses Access the Credit Necessary to Grow and Create Jobs?"

H.R. 1418, which was introduced by Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.) earlier this year, would lift the credit union member business lending cap to 27.5% of total assets, creating as many as 140,000 new jobs at no cost to taxpayers. While the regulations that H.R. 1418 would address do not fall under the jurisdiction of the small-business committee, Cheney encouraged committee members to support the legislation. The CUNA letter noted that "credit unions have proven the ability to do small business lending safely and soundly, demonstrating remarkably lower charge-off and delinquency rates than banks making business loans," and added that credit unions have increased their work with small businesses in recent years as banks have limited their business lending portfolios.

And on June 16th , Bill Cheney, CUNA CEO will be testifying at a Senate hearing in support of Senator Mark Udall’s (D-CO) legislation (S. 509 - Small Business Lending Enhancement Act of 2011) that would increase the credit union member business lending cap from 12.25% of assets to 27.5% for well-capitalized credit unions.

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CalendarSo Far, 28 Financial Reform Rules Have Missed Deadlines

The New York Times published a story in its June 7th edition detailing that nearly a year after passage of the Dodd-Frank Act, more than two dozen of the legislation's rule changes have fallen behind schedule.

Many of the rule changes have been resisted by Wall Street and Congress, and regulators have extended the comment periods on some proposals. With the delays, some mandates are in danger not being implemented before the next elections, which could give newly elected officials an avenue to back away from the overhaul, according to the Times.

So far, 28 of Dodd-Frank's deadlines have been missed, according to Davis Polk, a law firm that tracks the rules. Of the 385 new rules to be written, 24 requirements have been completed – 41 such actions were scheduled for completion by now. To read the article click here.

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State News
 

Credit Unions Take Opportunity to Build Relationships at Town Halls

Town Hall
From left: State Senate President Pro Tem Tommie Williams; Pat Conn, CEO, United 1st FCU; State Sen. Bill Ligon

Senate Majority Leader Chip Rogers, along with members of the Senate Majority Caucus, announced on June 2nd that they will be traveling around the state in a series of town halls to hear from constituents. These summits, titled the “Georgia Solutions Summits,” will take place throughout Georgia during the summer and into the fall. Cities include, but are not limited to, Brunswick, Columbus, Cartersville, Buford, Roswell, Augusta and Gainesville.

Credit union advocates Pat Conn and Ed Walker from United 1st FCU took advantage of the opportunity to further the legislative relationships with credit unions when they attended the June 6th event in Brunswick, and made certain that the Senate leadership knew that credit unions were in attendance! Look for similar opportunities to reach out to your state legislators in the local districts; building these local relationships helps mitigate negative legislation and promotes positive legislation for our industry.

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Abrams
State Rep. Stacey Abrams
Georgia Minority Leader Abrams 'One to Watch'

The Atlanta Journal-Constitution reported that Georgia House Minority Leader Stacey Abrams (D-Atlanta) was named by Governing magazine as one of about a dozen Democratic lawmakers across the country with a bright future.

The publication, which recently put House Speaker David Ralston, R-Blue Ridge on its GOP list, said Abrams was credited by many "with winning concessions from freshman Republican Gov. Nathan Deal" on the plan to revamp the HOPE scholarship and for her fight against a Republican plan to overhaul the tax system that ultimately did not pass.

The list highlights lawmakers the magazine believes to have "a long future, particularly with the possibility of winning higher office at the state or federal level."

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Industry News
 

Call Report Results Show CU Resiliency

NCUA Chairman Debbie Matz said the "solid financial start to 2011" reflected by first-quarter credit union call report data released on May 31st "shows the resilience" of the credit union industry and demonstrates that credit unions are continuing "to make solid progress during the economic recovery."

The NCUA's quarterly survey compiles the results of 2011 first quarter call report data from 7,292 federally insured credit unions. The report noted that the most telling sign of credit union recovery was the 23 basis point (bp) increase in return on average assets (ROA). ROA totaled 74 bp during the quarter.

The agency also noted improvements in several key indicators, including a 2.72% increase in assets, a 3.21% increase in member shares, and a 10.55% increase in net income. Net credit union income during the quarter totaled $1.7 billion. To read more, please click here.

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Matz
NCUA Chair Debbie Matz
NCUA Highlights CU Payday Loan Alternative

NCUA Chairman Debbie Matz said in The Washington Post on June 6th that credit unions are authorized to offer loans designed to provide members affordable short-term cash, and that the loans are "very attractive" compared to triple-digit costs of payday loans. Matz noted that it was just last September that the NCUA approved the rule to allow federal credit unions to offer the short-term, small amount loans to their members. Interest rates for these loans must be capped at a maximum of 10 percentage points above the established interest rate ceiling. The current maximum APR on these loans would be 28%. A $20 application fee may also be charged.

Matz said that with a 28% ceiling, the short-term credit union loans have a higher annual rate than conventional loans, which are capped for federal credit unions at 18%. But, she added in her published letter to the editor, a recent Post article titled "Credit unions increasingly offer high-rate payday loans" was misleading. The Post reported that credit unions are offering alternative short-term loan products, with some of those loans having an effective interest rate of more than 100% when the $20 loan application fee is factored into a $200 short-term loan. "Predatory lending in any form is wrong," Matz wrote, and added, "I am committed to protecting consumers and preventing predatory lending by credit unions and their affiliates." However, she added, the "picture the story painted was misleading. More credit unions are offering payday loan alternatives."

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Public Influence News
 
Report Shows Georgia Savings Going Up While Credit Card Debt Falling

A recent story in the Marietta Daily Journal cited results of a report by Georgia Credit Union Affiliates indicating that Georgia residents are putting more money into their personal savings and money market accounts, while credit card debt and large spending are both decreasing.

Up and downThe story was in response to the quarterly news brief, “Paying Attention,” sent to media across the state, which shows credit union trends and consumer behaviors. According to the report, balances of credit union members’ savings accounts grew by more than 4.6 percent and money market accounts grew by 4.34 percent during the first three months of 2011 while credit card debt decreased by 4.2 percent. The Paying Attention report compiles recent poll responses from more than 4,000 credit union members and aggregated data from credit unions across Georgia.

GCUA President and CEO Mike Mercer credits the trend to consumers’ desires to save more and spend less during today’s unpredictable economic climate. “Consumers are still working to save as much money as they realistically can, and they’re making progress at reducing their debt load,” Mercer said.

Data from 39 credit unions from across the state – which represents 91 percent of credit union assets and 84 percent of Georgia members – suggests savings was a continuing trend, but figures for lending varied. For example, total savings deposits rose 8.3 percent over the past 12 months and money market accounts grew by 15.47 percent over the same time frame. But while new vehicle loans grew by 0.52 percent during the first quarter, they decreased by 4.08 percent over the course of a year. March saw a 3.18 percent decrease in the number of bankruptcy filings that marred March 2010, and Mary Olson, vice president of marketing for Delta Community Credit Union, said people are becoming more responsible with their money.

“I think people were just fighting to stay alive and have just started to keep money closer to vest. They’re saving more and charging a lot less. I think the recession just taught people a lesson in foreclosures and bankruptcies and hard times that they feel like they need to have more of a cushion now and live within their means,” Olson said. The credit union has two locations in Marietta and one in Vinings.

Matthew Shepherd, Delta Community’s senior vice president of marketing and member services, said his company is seeing more growth in the money market accounts than saving accounts because they typically yield more money. “Money markets provide a tiered-balanced account with a 0.5 percentage point up to 0.85 percent, and members are looking to optimize savings,” Shepherd said.

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RBC Bank Survey Reports Georgians' Views on Economy Improving

In the June 6th edition of The Atlanta Journal-Constitution, Scott Trubey wrote about a recent study that reported the economic outlook of Southerners was slightly less gloomy in the second quarter, besting the national average after lagging behind the outlooks of most Americans for the past six months, according to an RBC Bank survey released that day.

Georgians’ opinions of the economy also improved and the state had the highest number of respondents in the South feeling stronger about their current financial situation and the future economy.

 

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Pros and consForbes Blog: Pros Outweigh Cons in CUs

The advantages offered by credit unions far outweigh the disadvantages, according to an article by SavingsAccounts.com that appeared Wednesday on the Forbes blog. In an article titled "Pros and Cons of Credit Unions – and There Aren't Many Cons," SavingsAccounts.com, a website that focuses on consumer online banking and high-yield banking accounts, discusses the nature of credit unions, who can join and how credit unions differ from banks.

"Tired of paying exorbitant bank fees on everything from ATM withdrawals to monthly account maintenance?" the article asked. "Want to be earning a better interest rate on your savings account? It might be time to look into switching to a credit union. A credit union functions a lot like a bank, but it's built on a different business model. One that is, as a general rule, friendlier to customers. That can mean big savings on fees, and better interest rates on both savings and loans."

The article states that consumers who prefer local banks tend to be happy with credit unions because they can usually be more flexible than banks in lending and offer a more personal approach in handling accounts.

 

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National Saving Challenge Surpasses $100M Mark

The National Youth Saving Challenge, hosted by CUNA, attracted more than $28 million in deposits from children in April, representing its strongest year yet. With this year's deposits, the National Youth Saving Challenge has surpassed the $100 million milestone, with $117, 628,671 in total deposits since the program's inception in 2004.

Held in conjunction with National Credit Union Youth Week, the saving challenge puts the spotlight on youth in a contest tracking deposits throughout the month of April. Participating credit unions use the challenge to motivate children, teenagers and their parents to start and maintain good money management practices by opening accounts and making deposits.

With 305 credit unions reporting this year, deposits totaled $28,545,722. More than 146,000 kids made deposits during the month, with 9,058 new accounts opened. The average amount deposited per child was $196. By comparison, last year 384 credit unions reported $24,811,741 in total deposits. Roughly 168,438 children made deposits, with 10,385 new accounts opened. The average amount deposited per child was $147. In 2011, National Credit Union Youth Week was April 17-23, with the theme "Money Rocks at my Credit Union."

How does this year compare? Well, fewer credit unions participated, but average deposits were higher. Take a look at the eight-year results history.

In Georgia, credit union youth deposits totaled over $1 million, with 317 new youth accounts opened and more than 4,000 youth depositors. Seven credit unions in Georgia signed up to participate in this year’s challenge. Congratulations to the following Georgia credit unions that participated in the Challenge and reported results:

  • Albany Federal ECU
  • Georgia's Own CU
  • HealthCom FCU
  • MidSouth Community FCU
  • North Georgia CU
  • The Wright CU
  • Valdosta Teachers’ FCU
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Industry Awards Deadline: June 30th

The deadline to submit entries for the national credit union industry awards is fast approaching. June 30th is the last date to get entries in to GCUA for the Desjardins Youth and Adult Financial Literacy awards, the Dora Maxwell Social Responsibility Community Service Award, and the Louise Herring Philosophy in Action Member Service Award. For applications and information, click here. If you have questions, contact Anita Paul.

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CUs in the News

Shirts for Their Neighbors’ Backs at Credit Unions
Weekly Community News

Get the latest in local CU coverage, click here.

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Consider This

View archives of this monthly e-news brief sent to journalists, click here.

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Paying Attention

View the current issue as well as archives of this quarterly report, click here.

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Statewide News Coverage

Get the latest in statewide news coverage, click here.

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News of Interest
 

Slacker59 Percent of Parents Financially Support Adult Children

Fifty-nine percent of parents are financially supporting adult children when they are no longer in school, reports a survey from a partner well known to credit unions. The statistic reflects how the current economic and job landscape is presenting a bigger challenge than expected – for those who should be leaving the nest as well as their parents. Commissioned by the National Endowment for Financial Education (NEFE), in cooperation with Forbes.com, the poll was conducted by Harris Interactive in May.

In the survey, 65% of adult children – ages 18 to 39 who are not in school – believe the financial pressures faced by their generation are tougher than those experienced by previous generations. Parents agree, with 32% of parents indicating their own generation had it easier than their children's generation. To read more please click here.

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Beige Book: Economy Continues Expansion, but ‘Some Slowing’ Reported

The economy generally continued to expand in April and May, although a few areas reported some slowing, according to the Federal Reserve’s Beige Book survey of the 12 Fed districts released yesterday. "Some slowing … was noted in the New York, Philadelphia, Atlanta, and Chicago districts. In contrast, Dallas characterized that region’s economy as accelerating. Other districts indicated that growth continued at a steady pace," the survey said.

Most districts described loan demand as mixed or slightly improved since the last report. For example, consumer loan demand showed improvement in the Cleveland, Richmond, and St. Louis districts, but held steady or weakened in New York, Atlanta, Dallas and San Francisco, the report said. Demand for residential mortgages increased in Cleveland, and held steady in New York, Richmond, St. Louis and Kansas City.

There also was a modest uptick in business loan demand in the Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Dallas and San Francisco districts. The demand in Cleveland "was described as broad-based, including a pickup in construction loan requests for multifamily dwellings," the report said. Read more. To see past Beige Book reports click here.

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News of the Competition
 

HandcuffsAtlanta Bank Exec Sentenced

The Atlanta Journal Constitution reported on June 1st that a federal judge sentenced another former officer of the failed Omni National Bank in Atlanta for accepting bribes from contractors he selected to rehabilitate foreclosed properties. Karim Walthour Lawrence, 34, of Atlanta, was sentenced to 21 months in prison followed by five years of supervised release and ordered to pay more than $600,000 in restitution.

Lawrence pleaded guilty on January 5th to charges that as a vice president he took hundreds of thousands of dollars in return for rewarding Omni-funded renovation contracts on foreclosed properties owned by the bank. "It was a serious offense. It went on for a year. And it was a lot of money," U.S. District Court Judge Willis Hunt said. Lawrence "took advantage of his position by accepting bribes in order to personally gain from the mortgage crisis," said Christy Romero of the Office of the Special Inspector General for the Troubled Asset Relief Program.

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Georgia Banks Post Best Quarter Since 2008

The Atlanta Journal Constitution reported on May 24th that according to data released by the Federal Deposit Insurance Corp. (FDIC), Georgia banks significantly cut their losses in the first three months of 2011 compared with same the period a year earlier.

The state’s banks lost a collective $83.2 million, down from $347.3 million in first quarter 2010. It was the best cumulative performance for the state’s banks since third quarter 2008, the last quarter in the black. Georgia’s banks remain stressed and they continue to lag the recovery seen in other states. Some statistics from the data:

  • Sixty-two percent of Georgia’s banks posted a profit in first quarter, compared with 87 percent nationally.
  • Deposits in Georgia banks rose 5 percent year-over-year, to $215.8 billion, though they were down slightly from the end of last year.
  • Total loans and leases were $186.3 billion, down 1.4 percent from first quarter 2010.
  • The ratio of non-current loans to total loans was 5.5 percent, down from 6.3 percent a year ago.
  • Georgia banks collectively held just under $3.2 billion in foreclosed real estate at the end of the quarter, down 2 percent from a year ago and 9 percent from the end of last year.

Nationally, profits grew mainly because banks set aside less money to cover loan losses. FDIC Chairman Sheila C. Bair noted the improvement but said “there is a limit to how far reductions in loan-loss provisions can boost industry earnings." The number of troubled institutions nationally grew to 888 from 884, despite the removal from the list of 26 U.S. banks that failed during the first quarter. Twelve Georgia banks have failed this year, and the state leads the nation with 63 failures since mid-2008.

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