Thrifts have $4 billion third-quarter loss: OTS

WASHINGTON (Reuters) - U.S. savings and loan losses and provisions for soured loans declined in the third quarter, the industry's regulator said on Thursday, releasing figures that excluded Washington Mutual, the nation's biggest thrift that was sold in September.

The Office of Thrift Supervision said the industry allocated $7.9 billion in the third quarter that ended September 30 for future loan losses, down 43.6 percent from the previous quarter.

The industry's third-quarter loss was $4 billion, compared with a loss of $5.4 billion in the previous quarter.

But declining profitability and a rise in troubled assets pointed to continued stress from falling home prices that is hurting mortgage lenders and the broader economy.

The figures excluded Washington Mutual, a troubled thrift acquired by JPMorgan Chase & Co (JPM.N) in September. The data also excludes IndyMac Bank, a large thrift that failed in July but remains operating under government supervision.

Reflecting those failures, the amount of assets under OTS supervision has dropped 22 percent quarter-over-quarter to $1.18 trillion from $1.51 trillion.

Savings and loan institutions have traditionally focused on mortgage lending.

"The housing sector is at the eye of the nation's economic storm," OTS Director John Reich said. "This storm will pass, but we've already seen some damaging effects."

The number of problem thrifts rose to 23 in the third quarter from 17 in the second quarter. A year ago there were 12 institutions on the OTS' watch list.

Return on average assets (ROA), an indicator of profitability, was down 1.35 percent in the third quarter. It was down 0.57 percent in the second quarter and up 0.20 percent a year ago.

Troubled assets, which include noncurrent loans and repossessed assets, rose during the third quarter to 2.4 percent of assets from 2.27 percent the prior quarter and 1 percent a year ago. The prior figures do not include Washington Mutual and IndyMac.

The current level of troubled assets is the highest since the early 1990s, the OTS said.

Mortgage originations dropped off during the third quarter to $79.5 billion, down 26 percent from the prior quarter if Washington Mutual and IndyMac are not included.

The OTS said the industry's capital position "remains solid" but is down from the record levels in mid-2007.

Equity capital at the end of the third quarter was 9.24 percent of assets, up from 8.97 percent of assets in the prior quarter.

At the end of the third quarter, more than 98 percent of the industry exceeded well-capitalized standards, and six thrifts were less than adequately capitalized, the OTS said.

(Reporting by John Poirier and Karey Wutkowski; Editing by Tim Dobbyn)