Savings and Loan Profits Plummet in 3Q

The nation's 831 thrifts reported a third-quarter profit of $704 million, a drop of 84 percent from $4.29 billion in the same quarter a year ago, the Office of Thrift Supervision said Tuesday.

The quarter "wasn't good," said the agency's director, John Reich. "I wasn't expecting it to be good, and my expectations were realized."

Agency officials noted that losses were concentrated among large institutions most active in originating mortgages for sale to investors, rather than those that make loans and keep them on their books.

Some of the largest thrifts the agency regulates -- including Seattle-based Washington Mutual Inc. and Sovereign Bancorp Inc. of Philadelphia -- have boosted reserves for future loan losses to address mounting loan delinquencies and defaults.

Overall, thrifts hiked money set aside for problem loans in the third quarter to 0.92 percent of average assets, more than four times last year's levels. So far this year, reserves for loan losses are running at levels not seen since 1990, according to OTS statistics.

Reich, however, expressed hope that the worst of the industry's problems are over, noting that loan provision levels in the third quarter "should account for future loan losses."

Troubled assets -- loans that are 90 or more days past due -- continued to soar, rising to $18.7 billion in the third quarter, up from $10.7 billion in the same quarter last year.

As a percentage of total assets, troubled assets rose to the highest level since the mid-1990s. They came in at 1.19 percent of assets for the quarter, up from 0.64 percent in the same quarter of 2006.

The numbers are particularly attention-getting because thrifts, which take in savings deposits and make loans, are smaller players in the subprime mortgage market, for loans made to borrowers with shaky credit.

Thrifts differ from banks in that they are required to have at least 65 percent of their lending in mortgages and other consumer loans.