He said he would rather resume stock buybacks before raising the payout.Still, Dimon said loan loss reserves are probably "getting pretty close to their peaks." He said the bank sees "a little bit of a leveling off of delinquencies" and a "little bit of resilience" in the battered California housing market.JPMorgan said losses tied to the Washington Mutual Inc banking units it bought last September are in line with its forecasts. It said it has no material exposure to CIT Group Inc, the troubled lender to small businesses.Dimon echoed rivals in opposing an Obama administration plan for a new consumer finance protection agency."The more agencies, the more politics and bureaucracy," he said.COMPENSATION PRESSURES RISEProfit in JPMorgan's investment bank more than tripled to $1.47 billion. The Bank anticipates continued improvement in thisarea largely due to continued growth and decreased rate pressure on theliability side of the balance sheet. In addition, less competition on thelending side will result in larger spreads on new loan production. Totalnon-interest income decreased from $630,339 in the first six months of 2008 to$550,020 in the first six months of 2009.

This is a function of decreasedrevenues from various derivative products sold to our customers. Non-interestexpense decreased from $4.9 million in the first six months of 2008 to $4.6million in the first quarter of 2009. The largest component of this was adecrease of salary and benefits of approximately $225,000, occupancy of$135,000, legal and professional of $24,000. As mentioned earlier, non-interestexpense was negatively impacted by increased FDIC premiums of $173,000 period toperiod.

Margin and Cost of Funds:Total cost of funds decreased from a 2009 March month to date average of 2.19%to a 2009 June month to date average of 2.10%. Management expects this downwardtrend to continue in the 3rd quarter. The Bank`s net interest margin declinedslightly from March 2009 month to date average of 3.39% to a June 2009 month todate average of 3.27%. The slight decrease in margin was the result of replacingcheaper brokered deposits with more expensive core deposits. Management feelsstrongly that this margin will improve in the second half of the year. This willlargely be the result of continued repricing of existing loans and betterpricing on new production. Balance Sheet and Capital:Total assets grew to $375 million on 6/30/09, an $88 million increase from6/30/08.

Total loans increased $63 million or 27% from $230 million on 6/30/08to $294 million on 6/30/09. Total deposits increased $75 million or 38% from$193 million at 6/30/08 to $268 million on 6/30/09. Approximately 12.8% of totaldeposits are in non-interest bearing deposits. Brokered deposits were $8.4million at 6/30/09 which represents roughly 3.0% of our total deposits. Thesebrokered deposits were originally purchased to match long term fixed rate loans.Total capital grew from $41.0 million at 6/30/08 to $43.2 million at 6/30/09.This resulted in an undiluted book value of $10.81 a share at 6/30/09.