Aug. 27 (Bloomberg) -- U.S. savings and loans posted a $5.4 billion loss in the second quarter as lenders set aside record reserves for loan losses amid the slump in the housing market, the industry's regulator said.

Provisions for bad loans reached $14 billion, helping to extend industry losses to a third straight quarter, the Treasury's Office of Thrift Supervision said today in Washington. A list of ``problem thrifts'' increased 42 percent from the first quarter to the second, the agency said.

``Our institutions are doing what they need to be doing to face the reality of the future losses in their portfolio,'' OTS Director John Reich said at a news conference.

Savings and loan companies are reeling from the collapse of the market for subprime mortgages, which contributed to more than $500 billion in writedowns and credit losses at the world's largest financial institutions. Nine U.S. banks have been closed so far this year as losses mounted.

The OTS oversaw IndyMac Bancorp Inc., the California-based mortgage lender that failed in July following a run on deposits. The Federal Deposit Insurance Corp. is running a successor institution called IndyMac Federal Bank FSB and seeking a buyer.

The FDIC, the Washington-based agency that insures deposits at U.S. banks, announced yesterday that its ``problem list'' had increased 30 percent to 117 in the second quarter.

`Problem Thrifts'

The OTS list of ``problem thrifts'' increased to 17 from 12 at the end of the first quarter and accounted for 2.1 percent of all the OTS-supervised thrifts, the agency said. The OTS does not identify the banks on the list.

The institutions were hurt by an increase in delinquent subprime, Alt-A and prime loans, Reich said.

``Being placed on the problem thrift list does not condemn an institution to failure,'' James Caton, OTS's director of financial monitoring and analysis, said at the conference. ``It does, however, heighten the urgency to resolve the problems confronting the institution.''

The April through June loss was the second-highest after the $8.8 billion in the 2007 fourth quarter, the OTS said. The industry had a $3.8 billion profit in the second quarter of 2007. Reich said more than 75 percent of thrifts are profitable.

Troubled assets, including loans 90 days or more overdue and repossessed assets, rose to 2.68 percent of holdings from 2.06 percent in the previous quarter, the agency said. Troubled thrift assets totaled a record $40.5 billion at the end of the second quarter, the agency said.

The OTS and the Office of the Comptroller of the Currency, the regulator of national banks, will report next month on efforts by lenders in the second quarter to modify mortgages for struggling borrowers, Reich said.

``It is going to show that servicers have been more active and more responsive and have had greater success in modifying loans,'' Reich said.

At the end of the second quarter, the office oversaw 829 thrifts with $1.51 trillion in assets, including Seattle-based Washington Mutual Inc., the largest U.S. savings and loan by assets.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net.

Last Updated: August 27, 2008 12:46 EDT