U.S. Savings & Loans Institutions Post Second Largest Loss Ever

Washington, DC (AHN) - The U.S. Office of Thrift Supervision announced Wednesday that the total loss in the second quarter for all federally insured savings and loan institutions was $5.4 billion, the second largest ever.

The data is derived from a compilation of 829 savings and loans, also knows as "thrifts," that are federally insured. The $5.4 billion loss is a far cry from the $3.8 billion profit posted in the second quarter last year. The loss is only second to the $8.8 billion record loss set in the fourth quarter of last year.

The thrift agency reported that the total amount savings institutions put aside for bad loans rose to 3.68 percent of assets, compared to 0.38 percent in the second quarter a year ago. All told, $14 billion was set aside in the second quarter for use in write-downs of bad loans.

"Solid capital and sizable reserves for potential loan losses show once again that thrift managers are responding appropriately to the challenges they face," said OTS Director John Reich.

The number of problem institutions on the agency's list rose to 17 in the second quarter, up from 10 last year.

The biggest difference between banks and thrifts is that 65 percent of lending done by thrifts must consist of consumer loans and mortgages.