US Thrifts Earn $4M in 2Q; 40 on 'Problem' List

U.S. thrifts eked out a $4 million profit in the second quarter, but the number of troubled institutions continued to rise, the government said Wednesday.

The Office of Thrift Supervision said the small profit in the April-June period marked the industry's first positive earnings since the third quarter of 2007. It compared with a loss of $5.4 billion in the year-ago period, and $1.62 billion in the first quarter of this year.

"Problem thrifts" on the Treasury Department agency's confidential list, those rated by examiners as having significantly low capital reserves and other deficiencies, rose to 40. That's up from 31 in the first quarter and 17 a year earlier.

Thrifts, also known as savings and loans, differ from banks in that, by law, they must have at least 65 percent of their lending in mortgages and other consumer loans — making them particularly vulnerable to the housing downturn.

The industry's first-quarter loss of $1.62 billion was much wider than the previously reported loss of $47 million, largely because of the earnings restatement by Guaranty Bank, the big Texas lender that became the second-largest U.S. bank to fail this year when it was shut down by regulators last week.

Most of Guaranty's operations were sold to Banco Bilbao Vizcaya Argentaria SA, Spain's second-largest bank. Austin-based Guaranty, with about $13 billion in assets, revised its first-quarter earnings to reflect a $1.45 billion writedown in the value of mortgage-backed securities it held, pushing its capital into the negative column at (minus) 5.8 percent of assets as of March 31.

Guaranty's failure is expected to cost the federal deposit insurance fund an estimated $3 billion.

The OTS said that troubled assets — delinquent loans and repossessed property — as a percent of the thrift industry's assets continued to inch up, to 3.52 percent from 3.35 percent at the end of the first quarter.