Banks See Higher Delinquencies: The FDIC Chairman said that banks generally adhere to prudent underwriting standards that benefit consumers.

WASHINGTON -- Commercial banks increased their production of single-family loans in the second quarter even though the institutions are experiencing rising delinquencies and charge-offs, according to the Federal Deposit Insurance Corp.

"Everybody is being challenged in this kind of an environment," FDIC chairman Sheila Bair said last month.

However, she stressed that banks are well capitalized and the current problems in the mortgage market may provide an opportunity for banks to increase their share of the mortgage market.

This could have "positive benefits" for consumers, the FDIC chairman told reporters, because banks are regulated and generally adhere to prudent underwriting standards. "In the longer term, this will actually help things."

The FDIC chairman said the earnings performance of federally insured banks and thrifts was "very solid" in the second quarter, despite a difficult interest rate environment and ongoing weakness in residential mortgage lending.

Banks and thrifts posted $36.7 billion in profits in the second quarter, down 3.4% from the second quarter of 2006.

FDIC data also show that single-family loan production by banking institutions jumped by 20% in the second quarter, compared to the previous quarter.