JPMorgan (Stock Quote: JPM) reported its net income rose to $4.8 billion in the second quarter of 2010, a 76% increase over this time last year when the company’s net income was at $2.7 billion.

Earnings per share rose to $1.09, from 28 cents in 2009. Analysts had forecast that earnings per share would be 60 cents.

These figures, while better than predicted, are somewhat misleading as the overall increase in net income was impacted significantly by a one-time $1.5 billion reduction of loan loss reserves (meaning that the company had to spend less money on previously defaulted loans).

Chairman and Chief Executive Officer Jamie Dimon said in a statement that the loan reductions did not represent normal ongoing earnings. In fact, the bank’s revenue decreased by 8% to $25.6 billion in the second quarter from $27.7 billion in the same quarter a year ago. Additionally, the bank had to pay a second-quarter charge of $550 million from a payroll tax related to bonuses of British employees.

"The results are just OK. There's a little less than meets the eye here," Doug Kass, president of hedge fund Seabreeze Partners Management, who also works for TheStreet, told Reuters.

JPMorgan executives, for their part, agree.

"Although we are gratified to see consumer-lending net charge-offs and delinquencies decline, they remain at extremely high levels and therefore returns in our consumer-lending businesses are still unacceptable,” Dimon said. “As a result, these businesses did not meet expectations nor generate satisfactory returns on capital for our shareholders. It is too early to say how much improvement we will see from here.”

JPMorgan is the first of four banks slated to deliver quarterly earnings reports.  As the Associated Press reports, their results offer hope that loan losses may have peaked in the first half of 2010. This could mean that, ultimately, banks will become strong enough to boost consumer and small business lending. However, as an increase has not been reported yet, it remains too soon to tell what direction we are headed.

What complicates matters is that JPMorgan was in better shape than most banks prior to the economic downturn.

A bigger picture of the economy’s status should emerge as Bank of America (Stock Quote: BAC) and Citigroup (Stock Quote: C)deliver their quarterly numbers on Friday. Wells Fargo (Stock Quote:WFC) will report its results on July 21.

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