Thrift Industry Update

The headlines making the rounds off of this report is the $5.2 billion collective loss that the thrift industry took in the fourth quarter of 2007. However, there is a lot of data in this report and I would urge everyone to read the entire thing. Here are some things I would like to point out:

1) The Office of Thrift Supervision (OTS) made money last year!! A miracle for a government agency and it probably did not include the government overhead, but refreshing to know that the OTS made $24 million last year. (Page 4)

2) The year end equity capital ratio was at 9.46%, the second highest ever. (Page 6) Compare that to the 3.17% in the middle of the Savings and Loan crisis in the 1980's.

3) Return on Average Assets was still positive for the full year at 0.19%, despite the fourth quarter write off. (Page 8)

4) Loan loss reserves as a percent of average assets are at the highest level ever - 1.35% - so the industry is at least prepared for what is coming. Will it be enough? Time will solve that mystery. (Page 11)

5) Other Capital Ratios still look sound at year end. (Page 14)

6) Page 17 is a scary one, detailing non current loans for the last five quarters. take at look at the chart for 1-4 family loans, which is 49% of assets for the industry. Also, construction and development non current loans are also rising sharply.

7) Page 18 is another scary one. Although there are only 11 problem thrifts at year end, look how bad it could get - there were 200 problem thrifts in 1991.

Fourth Quarter Thrift Report