Thrifts post first-quarter net income of $1.82 billion

U.S. thrifts posted a first-quarter profit in the latest sign the industry is stabilizing as the economy recovers, the government reported Monday. The federal Office of Thrift Supervision said savings and loans had net income of $1.82 billion in the January-March period. That compared with a net loss of $1.62 billion a year earlier.It was the thrift industry's third profitable quarter in a row. The Treasury Department agency said the industry's net income in the latest quarter was the highest since the April-June quarter of 2007. The OTS, which oversees 757 institutions, said about 60 percent of thrifts posted an increase in net income compared with the previous three months. But it said the number of "problem" thrifts rose to 50 as of March 31 from 43 three months earlier. The industry's improvement came despite high unemployment and soured loans as many Americans struggle to pay their mortgages. "The health of the thrift industry is improving but we cannot say the industry has fully recovered from the financial crisis," the agency's acting director, John Bowman, said in a statement. "Until America gets back to full employment and more families are able to pay their monthly mortgages on time, the thrift industry will continue to face significant challenges." Thrifts' troubled assets -- loans that are overdue and repossessed property -- slipped to 3.27 percent of total industry assets in the first quarter from 3.29 percent in last year's fourth quarter. Thrifts differ from banks in that they are required by law to have at least 65 percent of their lending in mortgages and other consumer loans. That has made them particularly vulnerable to the housing slump and high unemployment. The first-quarter report by OTS also showed:
--New mortgage loans extended by thrifts during the quarter totaled $32.4 billion, only about a third of the level a year earlier, $96.1 billion, and down 20 percent from $40.7 billion in the fourth quarter. That compares with the $553 billion in mortgage loans provided by thrifts at the peak of the housing boom in 2006.
--The thrift industry set aside $2.7 billion in reserves to offset expected losses, down sharply from $3.9 billion in the fourth quarter. Setting aside large amounts in reserves depresses the industry's earnings.
--The industry's assets fell to $949.8 billion from $1.2 trillion a year earlier.
Last week the Federal Deposit Insurance Corp. reported that the number of troubled U.S. banks -- including thrifts -- on its confidential list jumped to 775 in the first quarter from 702 three months earlier.
Bank failures are expected to peak this year and exceed the 140 that fell in 2009. That would mark the highest annual tally since 1992, at the height of the savings and loan crisis. So far this year, 73 banks have collapsed. The two biggest bank failures, which occurred in 2008, both involved thrifts. Big California lender IndyMac Bank, with about $30.2 billion in assets, failed in July; Seattle-based Washington Mutual collapsed in September, the largest U.S. bank failure ever with $307 billion in assets. Many lawmakers and consumer advocates have criticized the OTS for what they say was lax oversight of the thrift industry in the run-up to the financial crisis. The previous OTS director, Scott Polakoff, was put on leave pending an investigation into improper backdating of cash infusions at six thrifts including IndyMac. He later left the government. Sweeping legislation to overhaul financial regulations that passed the Senate last week calls for abolishing the OTS.