Thrifts See Credit Quality Sliding; Mortgages Strong, Subprime Not a Concern
WASHINGTON -- Despite credit quality continuing to slip at the nation's thrifts, the Office of Thrift Supervision said they still had a strong year overall.
Although problem asset levels continued to rise, which the agency said was the result of the slowing housing sector and other economic conditions, they remain at relatively low levels. The ratio of troubled assets to total assets increased to 0.80% from 0.70% the prior quarter and from 0.64% one year ago. Thrifts added $1.2 billion to loan loss provisions during the quarter. Of the 838 thrifts regulated by the OTS, there were only six CAMEL 4/5 thrifts, which was unchanged from the previous quarter.
The OTS is continuing to encourage thrifts to work with borrowers to find solutions for loan delinquencies to avoid foreclosures.
Despite the housing problems, thrifts' capital-to-asset ratio stood at 10.70% compared to the record 10.72% in the previous quarter and up from 9.36% a year ago.
Thrift assets were $1.49 trillion, up 5.6% from $1.41 trillion in the previous quarter but down slightly from nearly $1.5 trillion a year ago. Additionally, net income for the quarter was $3.6 billion, up 15% from $3.1 billion in the previous quarter but down 14% from the near-record $4.2 billion a year ago.
Thrifts' return on assets was 0.97%, up some from 0.89% in the previous quarter but down from 1.14% a year ago. Net interest margins are also tight for thrifts but were up in the first quarter to 2.81% from 2.71% in the previous quarter and 2.77% a year ago; OTS attributed this to the resetting of adjustable rate mortgages upward.
Some thrift highlights OTS pointed out:
- The thrift industry originated 23% of all 1-4 family mortgages in the U.S.; and
- Total mortgage originations (including multifamily and nonresidential) were $168.8 billion, up from $134.3 billion in the previous quarter and $164.6 billion a year ago. Refinancing activity accounted for 47% of all originations in the quarter, up from 39% in the previous quarter and 35% a year ago.
- About 4% of industry assets are held in subprime loans, with relatively few thrifts engaged in programmatic subprime lending. As a group, these institutions have manageable levels of problem loans, diversified operations and strong capital.