WASHINGTON-Federal Deposit Insurance Corporation insured banks and savings institutions set a new record for net income in the third quarter, according to its Quarterly Banking Profile, despite complaints that credit unions are stealing marketshare away from them. With net income reaching $32.5 billion in the third quarter 2004, banks and thrifts handily surpassed their previous record quarter at $31.8 billion in the first quarter. According to the FDIC, this was driven partly by lending growth ($198 billion increase, the second largest quarterly growth ever reported) and higher gains on securities sales and other assets. Third quarter profits were 6.9% higher than the same time last year. "Credit quality on average is the best we've ever seen, and banks are actively making loans," FDIC Chairman Don Powell stated. "Commercial lending is clearly on the way back." FDIC analysts did note some weaknesses in noninterest revenue sources earned by large banks. Loans more than 90 days past due or in nonaccrual status fell for the eighth consecutive quarter to 0.85%, the lowest level for that ratio in over 20 years. Net charge-offs of nonperforming loans were also down. These analysts also stressed that the industry benefited from "a unique combination of positive factors." Banks, particularly smaller ones, have long complained that credit unions were taking away their marketshare but banks continue to demonstrate record profits, credit union advocates point out. "The combination of rising short-term interest rates and falling long-term rates during the quarter was particularly conducive to boosting the industry's bottom line to a new record," FDIC Chief Economist Richard A. Brown said, but cautioned that there are risks to the economic outlook. [email protected]