Thrift Industry Posts First Yearly Profit Since 2006

March 2, 2011 (Jeff Alan)
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The Office of Thrift Supervision (OTS) reports that the nation’s thrift industry posted its first profitable year since the beginning of the financial crisis in 2006. The industry showed profits in all four quarters of 2010 totaling $6.6 billion including a $1.75 profit in the fourth quarter which is 0.76 percent of average assets.

In 2009, the industry posted a loss of $34 million for the year and a profit of $442 million in the fourth quarter.

Overall the industry has had six consecutive quarters of profits.

“Although the thrift industry continues to face some headwinds, the first yearly profit since the onset of the financial crisis represents a welcome signal of how far we have come,” said OTS Acting Director John E. Bowman.

The report states that many challenges remain for the thrift industry because of the housing market downturn and high unemployment. Troubled assets and provisions for loan losses remain elevated and the number of problem thrifts has increased but captial remained solid in the fourth quarter of 2010.

The industry added $2.27 billion (0.98 percent of average assets) to loan loss provisions in the fourth quarter. Provisions measured 0.95 percent of average assets in the prior quarter and 1.70 percent in the fourth quarter one year earlier. The substantial additions to loan loss reserves have bolstered the industry’s reserve levels to at, or near, record levels.

Highlights of the report include:

  • At the end of the fourth quarter, 92.1 percent of the industry reported capital exceeding “well-capitalized” regulatory standards.  Only eight thrifts were less than adequately capitalized.
  • Profitability, as measured by return on average assets, was 0.71 percent in 2010, an improvement from breaking even in 2009.  In the fourth quarter of 2010, profitability was 0.76 percent, up from 0.72 percent in the previous quarter and 0.19 percent in the fourth quarter a year earlier. 
  • Troubled assets (noncurrent loans and repossessed assets) were 3.3 percent of assets at the end of the fourth quarter, down from 3.36 percent at the end of the previous quarter, but essentially unchanged from 3.29 percent one year earlier.
  • The number of problem thrifts – with composite examination ratings of 4 or 5 – rose to 58 at the end of the fourth quarter, from 53 at the end of the previous quarter and 43 at the end of 2009.
  • At the end of the fourth quarter, the OTS supervised 731 thrift institutions with assets of $931.7 billion, as well as 437 holding company enterprises with approximately $4.2 trillion in U.S. domiciled consolidated assets.

Tags: OTS, thrifts, housing downturn, unemployment, capital, loan loss, non-current loans, repossessed assets, thrift institutions