Thrifts Post Record $5.24 Billion Loss in Fourth Quarter

The thrift industry posted a record loss of $5.24 billion for the fourth quarter of 2007, as institutions responded to a downturn in the housing market by taking write-downs, recording restructuring costs and setting aside record levels of provisions for anticipated loan losses. According to data released Wednesday by the Office of Thrift Supervision, thrifts set aside $5.1 billion in loan loss provisions, or 1.35 percent of average assets — up from 0.92 percent, or $3.5 billion, in the previous quarter and 0.45 percent, or $1.6 billion, in the fourth quarter one year ago. For the year, loan loss provisions totaled $11.3 billion, or 0.75 percent of average assets, compared with $3.8 billion in 2006, or 0.25 percent of average assets “These are difficult economic times and I expect our thrifts to continue to bolster reserves appropriately for the loan losses anticipated in 2008,” said OTS director John Reich. “The provisions in the third and fourth quarters of 2007 will position our thrifts for these events,â€? he said. “The bottom line, as performance this quarter shows, is that the economic distress in the mortgage market is an earnings issue and not a capital issue for our industry.â€? About $4 billion of the overall loss resulted from a write-down by a few thrifts in goodwill, necessary to recognize the reduced value of acquired assets, the OTS said. Troubled assets (noncurrent loans and repossessed assets) were 1.65 percent of assets, up from 1.19 percent in the third quarter and 0.70 percent a year ago. The full OTS report is available by clicking here. For more information visit http://www.ots.gov.