Martin Weiss Safe Money Report    
About WeissSafe Money ProductsOur Service GuaranteeHow to Contact Us    
Subscribers Enter Here

Risk Reports
About Our Staff
Sample Issue
Investment Tools
Favorite Links

June 9, 2000

Thrift Profits Strong, Concerns Raised
By Reuters

More Trouble for Lending Institutions...Weiss comments

WASHINGTON - U.S. thrifts earned a record $2.23 billion in the first quarter of 2000, but regulators see worrying signs of growing risks at some institutions, the Office of Thrift Supervision said on Wednesday.

Industry net income rose from $1.97 billion in the fourth quarter of 1999 and narrowly eclipsed the previous earnings record set in the third quarter of 1998 -- but only because of one-time tax gains at a single, large thrift.

"The industry is to be commended for its performance, especially in view of rising interest rates and lower demand for loans," said OTS Director Ellen Seidman. "However, behind the good numbers reported by the vast majority of thrifts lie areas of increasing concern for some."

These included rising interest rate sensitivity, insufficient controls, inadequate business plans involving high-risk activities and poor credit administration, she said.

Return on average assets for the industry, a key measure of profitability, hit 1.04 percent in the first quarter, up from 0.93 percent in the fourth quarter, the OTS said.

Asset quality also continued to improve, with troubled assets falling to $5.3 billion, or 0.61 percent of the total, the lowest level since the agency began tracking them in 1990.

But the number of problem thrifts rose to 14, from 12 in the prior quarter, and the number of thrifts rated 3 on the agency's CAMELS scale -- reflecting cause for supervisory concern -- rose to 80 from 68.

"We are examining, monitoring and supervising these institutions with increased intensity," Seidman said.

Rising interest rates continued to reduce mortgage originations, the OTS said. New single-family mortgages handled by thrifts fell to $39.7 billion in the first quarter, down from $47.8 billion in the fourth and $66.1 billion a year ago.

Because of higher interest rates, adjustable rate mortgages accounted for 75 percent of first quarter originations, up from only 38 percent a year ago.

But noncurrent loan rates remained stable. On single family mortgage loans, the noncurrent rate fell to 0.73 percent from 0.77 percent in the prior quarter and 0.84 percent a year ago.

Noncurrent consumer loans also dropped to 0.73 percent from 0.77 percent in the fourth quarter, while noncurrent commercial loans rose to 1.14 percent from 1.12 percent.

The number of thrifts regulated by the OTS fell to 1,097 in the first quarter from 1,103 in the prior quarter and 1,129 a year ago. But industry assets continued to grow, reaching $868.7 billion compared with $863.3 billion in the fourth quarter and $835.0 billion a year ago.

It seems that every week now a government office comes out with a report pointing to concerns of lending institutions. This week, the Office of Thrift Supervision, which regulates credit unions and other lending institutions, reveals its trepidations about the strength of the thrifts that it monitors.

One of the ill effects of a bull market is that it encourages more borrowing - from lenders who are far too eager to rake in new business. The problem is that when interest rates rise and the economy begins to slow, it is more difficult for borrowers to pay back their loans, and near impossible for lending institutions to make a profit.

Subscribers: Check the latest
Weiss Stock Risk Ratings
before you make your next move!

Non-subscribers: Register Here for three free Weiss Stock Risk Ratings Reports

Sign-up to get SMR's News and Views Commentary emailed directly to you!

Home | Current Issue | Investment Tools | Risk Ratings
About Our Staff | Sample Issue | Testimonials

® 2001 Weiss Incorporated
14176 Burns Road, Palm Beach, FL 20005
tel: (561) 627-3300 - fax: (561) 625-6685
email: [email protected]