Dime Savings Bank of New York, the East Coast's largest thrift, said it earned $8.6 million in the second quarter, reversing a loss of $37.1 million a year earlier.

The $9.9 billion-asset Dime, which has been trying to recover from heavy losses on home loans originated in the 1980s, said its nonperforming assets declined for the third consecutive quarter.

"It looks like the worst is over for the Dime," said Peter Treadway, an analyst at Smith Barney, Harris Upham & Co.

Help from Interest Rates

Dime's second-quarter profit, at 37 cents a share, was above analysts' consensus estimate of 29 cents. It was up slightly from Dime's first-quarter earnings of 35 cents a share.

Dime, like many banks and thrifts, was helped by a pronounced widening in the spread between its yield on assets and cost of funds -- to 338 basis points, from 252 in the second quarter of 1991.

This occurred because deposit rates fell faster than the yields on Dime's mortgages. Although most of the thrift's loans carry adjustable rates, the index used for repricing the loans tends to lag behind movements in markets rates, Mr. Treadway said.

Capital Under Minimums

Dime said its nonperforming assets -- mostly delinquent home mortgages and foreclosed home -- fell by 2%, to $1.07 billion, the lowest level in a year. But nonperformers still accounted for a hefty 10.77% of total assets.

Since the end of 1991, Dime has been out of compliance with two of the three capital requirements for thrifts. Risk-based capital stood at 4.83% on June 30, versus a required 7.2%, and its leverage ratio was 2.47%, compared with 3%. Both ratios, however, improved from the first-quarter levels.

The Office of Thrift Supervision is reviewing a plan submitted by Dime to comply with the capital rules.

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