WASHINGTON — The thrift industry's profit fell to $1.49 billion in the second quarter, down from $1.72 billion in earnings a quarter earlier, the Office of Thrift Supervision said Wednesday.

While the agency noted it was the fourth consecutive quarterly profit for the industry (rebounding from a $94 million loss a year ago), it said the overall economy was dragging down earnings.

"The performance of the industry reflects the state of the overall economy and the stresses from high unemployment, weakness in the housing market and the spread of weakness to the commercial real estate market," said OTS Acting Director John Bowman.

Profitability was 0.64% in the second quarter, down from 0.73% in the previous quarter.

The industry is still plagued by troubled loans, causing an increase in the number of problem thrifts, which reached 54, the highest level since 1993.

Troubled assets improved slightly; they fell to 3.21% of assets at the end of the second quarter, from 3.28% in the previous quarter. Noncurrent loans for 1-4 family homes stayed at 5.17%. Noncurrent commercial loans increased to 3.11%, up from 2.68%. Noncurrent construction and land loans increased slightly to 14.89%, up from 14.65%.

Thrifts held less loan loss provisions in the second quarter. While the industry added $2.3 billion to provisions, it equaled only 0.99% of assets, down from 1.19% of assets in the first quarter. Thrifts reported 1.28% in net charge offs, up from 1.08% the previous quarter.

Thrifts did improve their capital levels with 18% risk-based capital in the second quarter, up from 17.5% the previous quarter. Thrifts decreased their mortgage portfolios slightly with $326.2 billion in 1-4 family mortgage loans, from $330.4 billion in the first quarter. Overall, thrifts held $570.3 billion loans, down from $578.1 billion in the previous quarter.

At the end of the second quarter, the OTS supervised 753 thrifts with $931.2 billion in assets, down slightly from the first quarter with 757 thrifts and $949.8 billion of assets.

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