The banks are reporting better-than-expected earnings numbers, so that means all is finally right with the financial system and exchanged traded funds (ETFs), right? Hold on there.

Bank of America (BAC) is the latest bank to come back with positive earnings to the tune of $4.2 billion in the first quarter. The bank said its earnings were lifted by its acquisitions of Countrywide Financial and Merrill Lynch, reports Louise Story for The New York Times.

It turns out that banks still aren’t as lending-friendly as the government had believed, even though they’ve received bailout money intended to help them do just that. Bob Moon for Marketplace states that President Barack Obama pointed out this weekend that credit is still contracted, despite a more positive spin from the Treasury.

A report from The Wall Street Journal by David Enrich, Michael R. Crittenden and Maurice Tamman further illustrates that the numbers are far from rosy. All but three of the biggest recipients of TARP money originated fewer loans in February than they did prior to receiving the money.

Why the disparity? The Treasury crunches the data in a way that some experts say understates the lending decline.

Meanwhile, some big banks have come back and said they’re ready to repay the TARP funds they received and get back to business as usual. Ashley Milne-Tyte for Marketplace reports that Obama will allow it once the government has made sure it’s in the country’s economic interests for them to do so. What the government wants to be sure of is that the entire financial system is stable before allowing these banks to sever their ties, and that credit is flowing again. But as The Wall Street Journal’s article pointed out this weekend, it doesn’t look like we’re there just yet.

Not all banks have been bad, though. Here are five that fared better.

• Financial Select Sector SPDR (XLF): down 11.5% year-to-date

Tags: Financial, Sector ETFs, XLF