WASHINGTON — Thrifts continued to struggle during the first quarter, losing $47 million as troubled assets rose to record heights.
Though lower than a quarter earlier, first-quarter provisions were the fifth-highest on record, and troubled assets rose to $41 billion, surpassing the prior record of $40.5 billion set in the second quarter of last year.
Positive signs did emerge for the industry. The industrywide loss was significantly less than the $5.4 billion shortfall in the fourth quarter of last year and was the smallest since September 2007. Roughly 74% of thrifts reported profits in the first quarter, up from 65% a quarter earlier.
"The numbers are decidedly mixed, but there are signs that give us hope," Acting Office of Thrift Supervision Director John Bowman said at a press conference. "The numbers remind us we are not out of the woods yet."
The biggest concern continues to be the rise in troubled assets, which jumped to a 3.35% share of total assets, up from 2.54% the previous quarter and 2.06% the year earlier. Residential mortgages made up 81% of troubled assets, and commercial real estate loans 13%, the OTS said. Noncurrent loans were 5.16% of all residential mortgages, up from 3.69% in the previous quarter. Noncurrent multifamily loans increased to 1.56% of all such loans, up from 0.50% a year earlier.
Noncurrent consumer loans increased to 1.78% of the total at the end of the first quarter, up from 1.12% a year earlier, and noncurrent construction and land loans were 11.60% of all such loans at the end of the first quarter — nearly double their share a year earlier. Total loans past due by 30 to 89 days were $21 billion.
The number of thrifts continues to decline during the financial crisis. The 801 thrifts at March 31, down from 810 at yearend, had total assets of $1.23 trillion. Primarily due to the failure of Washington Mutual Inc. last September, industry assets were significantly lower than in the first quarter of last year, when the total was $1.52 trillion of assets. Wamu had $307 billion of asset when it failed in the third quarter.
The number of problem thrifts more than doubled, to 31, the OTS said, up from 12 at yearend — and the highest level of troubled thrifts since 1996. The OTS does not specify the total amount of assets held by troubled thrifts.
Profitability, measured by return on average assets, was a negative 0.02% in the first quarter, an improvement from negative 1.82% in the previous quarter.
The OTS attributed the jump in profitability to a drop in loan-loss provisions, which were off 38%, to $5.8 billion. As a share of average assets, provisions were at 1.88% in the first quarter, a decline from 3.18% in the fourth quarter. Still, the OTS said it expects loss provisions to remain elevated and to dampen industry earnings until the supply of houses begins to decline and home prices stabilize.
Most thrifts — 96.5% — were considered well-capitalized, the OTS said. "There's some encouraging signs but we are not sure we are at the bottom yet," Bowman said. "We think there are strong loan loss reserves… but we have to continue to keep our eye on the ball."
Three de novos thrifts were chartered during the first quarter, while one thrift converted to a bank charter. Six thrifts merged with other thrifts, while three others were acquired by banks. One thrift completed a voluntary dissolution while another failed during the first quarter.