Citigroup (C) Chief Executive Vikram Pandit says the housing market and uncertainties plaguing residential mortgage portfolios remain the biggest threat to U.S. banks and the overall economy. "We remain concerned about the housing market in the U.S.," Pandit said, "and residential mortgage portfolios of U.S. banks remain the biggest risk." The banking giant reported Monday net income of $3.77 billion for the third quarter, or $1.23 a share, up 74% from about $2.17 billion, or 72 cents a share, one year ago. Citi's delinquency rate for residential first-lien mortgages more than 90 days in arrears fell 18% from a year ago, the company said during a conference call discussing results. Executives attributed a decline in first-lien mortgage delinquencies to recent sales of mortgage assets. This trend resulted in a smaller pool of delinquent loans under the bank's umbrella. Yet, the Chief Financial Officer John Gerspach said early bucket delinquencies — or delinquencies on already modified mortgages — are showing signs of possible re-default. Still, the company said risks stemming from these loans are already accounted for in current loan loss reserves. Home equity delinquencies also slowed, Gerspach said, but the company continues to watch them adn other mortgage loans closely. "We ended the quarter with $10 billion in loan loss reserves allocated to the U.S. residential sector," Gerspach said. Citi said it previously issued $25 billion in private label RMBS. Since then, that amount has been reduced by roughly $13 billion of repayments and recoveries and $1 billion of cumulative losses To date, the remaining $11 billion in RMBS issuance has a 90-plus day delinquency rate of 12.5%, the company said. Citi noted a significant reduction in FHA loan originations in the past 3 years. In the period stretching from 2005 to 2008, the company originated 7% of the industry's FHA loan volume. That volume was cut to 3% in 2009 and now stands at less than 1%, according to data from Citi. Write to Kerri Panchuk.