US thrifts swing to $4B loss in 3Q
Posted: Friday, November 21, 2008
WASHINGTON (AP) -- U.S. thrifts lost $4 billion in the third quarter as they set aside $7.9 billion to cover losses from bad mortgages and other loans amid worsening conditions in the U.S housing market, their government regulator said Thursday.
Thrift institutions have been at the center of the U.S. housing crisis, and some of the largest have collapsed in recent months. It was the group's fourth straight quarterly loss and fourth-largest ever.
The results released by the federal Office of Thrift Supervision excluded Seattle-based thrift Washington Mutual Inc., whose failure in September was the largest in U.S. history, and Pasadena, Calif-based IndyMac Bank, which failed in July.
The quarterly loss provides a stark contrast from a year ago, when the nation's thrifts earned $657 million. Without Washington Mutual and IndyMac, they would have earned $598 million a year ago.
Thrifts differ from banks in that, by law, they must have at least 65 percent of their lending in mortgages and other consumer loans -- making them particularly vulnerable to the persistent housing downturn.
"By definition, our institutions have a concentration of assets in one sector of the economy that has fallen through the floor," John Reich, the thrift agency's director, said at a briefing with reporters. Total thrift assets fell to $1.18 trillion in third quarter from $1.57 trillion in the year-ago period.
Agency officials said about a third of the 818 U.S. thrifts have submitted applications for about $50 billion of the government's $700 billion financial industry bailout.
"Both banks and thrifts have been perplexed about whether or not to apply," Reich said, noting that many small community banks are stable and "don't want to be entangled" with the government intervention.
The Treasury Department division said the number of troubled thrifts jumped to 23 in the third quarter, from 17 in the second quarter and 12 a year earlier.
Delinquencies among single-family loans made by thrifts rose to 3.4 percent compared with 3.3 percent in June, and 1.3 percent a year ago. The prior quarter results exclude WaMu and IndyMac, and regulators said they did so to emphasize that trends at existing banks are getting worse.
For example, troubled assets -- defined as noncurrent loans and other bad assets -- rose to $28.4 billion, or 2.4 percent of total assets in the quarter -- the highest level since the early 1990s.
Excluding WaMu and IndyMac, troubled assets in June were $26.7 billion, or 2.3 percent of total assets. A year earlier, troubled assets of $12.1 billion represented 1 percent of the total.
The institutions regulated by the Office of Thrift Supervision range in size from small community banks to big institutions like ING Bank, part of Dutch financial giant ING Groep NV.
Another large thrift, Philadelphia-based Sovereign Bancorp Inc. recently agreed to be acquired by Spain's Banco Santander SA for $1.9 billion, one of several notable bank mergers prompted by the mortgage and credit crises.
Thrifts are being closely examined by federal inspectors for signs of heavy exposure to declining markets, or troubled areas such as construction and real estate loans.
The pressures of tumbling home prices, rising mortgage foreclosures and tighter credit have been battering many banks, large and small, across the nation. The 19 bank failures so far this year compare with three for all of 2007 and are more than in the previous five years combined. Many more banks and thrifts are not expected to survive the next year of economic tumult.
"The sun will shine one day," Reich said. "I don't know when that's going to be."
Thrift institutions have been at the center of the U.S. housing crisis, and some of the largest have collapsed in recent months. It was the group's fourth straight quarterly loss and fourth-largest ever.
The results released by the federal Office of Thrift Supervision excluded Seattle-based thrift Washington Mutual Inc., whose failure in September was the largest in U.S. history, and Pasadena, Calif-based IndyMac Bank, which failed in July.
The quarterly loss provides a stark contrast from a year ago, when the nation's thrifts earned $657 million. Without Washington Mutual and IndyMac, they would have earned $598 million a year ago.
Thrifts differ from banks in that, by law, they must have at least 65 percent of their lending in mortgages and other consumer loans -- making them particularly vulnerable to the persistent housing downturn.
"By definition, our institutions have a concentration of assets in one sector of the economy that has fallen through the floor," John Reich, the thrift agency's director, said at a briefing with reporters. Total thrift assets fell to $1.18 trillion in third quarter from $1.57 trillion in the year-ago period.
Agency officials said about a third of the 818 U.S. thrifts have submitted applications for about $50 billion of the government's $700 billion financial industry bailout.
"Both banks and thrifts have been perplexed about whether or not to apply," Reich said, noting that many small community banks are stable and "don't want to be entangled" with the government intervention.
The Treasury Department division said the number of troubled thrifts jumped to 23 in the third quarter, from 17 in the second quarter and 12 a year earlier.
Delinquencies among single-family loans made by thrifts rose to 3.4 percent compared with 3.3 percent in June, and 1.3 percent a year ago. The prior quarter results exclude WaMu and IndyMac, and regulators said they did so to emphasize that trends at existing banks are getting worse.
For example, troubled assets -- defined as noncurrent loans and other bad assets -- rose to $28.4 billion, or 2.4 percent of total assets in the quarter -- the highest level since the early 1990s.
Excluding WaMu and IndyMac, troubled assets in June were $26.7 billion, or 2.3 percent of total assets. A year earlier, troubled assets of $12.1 billion represented 1 percent of the total.
The institutions regulated by the Office of Thrift Supervision range in size from small community banks to big institutions like ING Bank, part of Dutch financial giant ING Groep NV.
Another large thrift, Philadelphia-based Sovereign Bancorp Inc. recently agreed to be acquired by Spain's Banco Santander SA for $1.9 billion, one of several notable bank mergers prompted by the mortgage and credit crises.
Thrifts are being closely examined by federal inspectors for signs of heavy exposure to declining markets, or troubled areas such as construction and real estate loans.
The pressures of tumbling home prices, rising mortgage foreclosures and tighter credit have been battering many banks, large and small, across the nation. The 19 bank failures so far this year compare with three for all of 2007 and are more than in the previous five years combined. Many more banks and thrifts are not expected to survive the next year of economic tumult.
"The sun will shine one day," Reich said. "I don't know when that's going to be."
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