WASHINGTON - For the first time in years, the savings and loan industry's annual convention has every right to look more like a party than a wake.

An estimated 1,600 members of the Savings and Community Bankers of America are meeting through Wednesday in San Diego amid news that 93% of the industry is profitable, with $2.81 billion in earnings for the first six months of the year. That compares with an $8 billion loss for the same period of last year.

Failures are still occurring at a high rate. So far, more than 358 have failed in 1992 - about one a day.

But an American Banker survey published last Thursday found that 116 of the closed institutions had been operating as government receiverships, suggesting that fewer thrifts are getting into trouble.

|Sense of Confidence'

"The mood is very, very upbeat," said Paul A. Schosberg, president and chief executive of the Savings and Community Bankers, which represents about 2,000 institutions. "There is a real sense of confidence."

"It's time to get the big flags unfurled again," said George L. Engelke Jr., president and chief executive of Astoria Federal Savings, Lake Success, N.Y. "We've got our acts under control. We have got earnings. We have got capital."

The convention is the first one held by the SCBA, which was formed over the summer after the marriage of the U.S. League of Savings Institutions and the National Council of Community Bankers. Both groups had suffered from dwindling membership.

Industry spirits have improved so much that the SCBA had to book an extra 500 rooms because convention attendance by S&L delegates is up 32.7%, to 1,595, from a year ago.

Warm Climate Helps

Mr. Schosberg said San Diego's warm climate is partly responsible for the pickup in attendance. The old U.S. League held its last annual convention in Washington, an especially cold place for S&Ls since the failure of their deposit insurance fund.

Although they will be nearly 3,000 miles away this year, the Capitol will probably dominate most of the discussions, owing to the election of Bill Clinton as President.

Earnings at financial institutions rise and fall with the housing markets, and the industry has its fingers crossed that Mr. Clinton can stimulate the economy and get people buying homes again.

The change at the White House "could be the end of gridlock in Washington," said Richard H. Deihl, chairman and chief executive of H.F. Ahmanson & Co., the Irwindale, Calif, company that operates the nation's largest S&L.

"The thinking is maybe the economy will improve. Maybe Congress and the administration will get along and get something done," said Mr. Deihl.

One concern: Can Mr. Clinton expand the economy without triggering the kind of inflation that hurt the industry in the early '80s by exposing its substantial asset-liability mismatches?

"I hope that the industry is paying attention to interest rate risk," said Skip Martin, president and chief operating office of Pocahontas Federal Savings and Loan Association, Pocahontas, Ark. "The fact that we are making profits makes me look over and ask why, and the reason is we are still mismatched."

Timothy Ryan, director of the Office of Thrift Supervision, acknowledges that the industry has improved, but he warns that a spike in interest rates could hurt as many as 80 thrifts.

Another topic expected to dominate conversations is "regulatory burden." Thrift executives, like bankers, say they have been overregulated since the failure of the S&L deposit fund.

Allan Plumley Jr., president and chief executive of Continental Federal Savings Bank, a $1 billion-asset thrift in Fairfax, Va., said it took S&Ls months to persuade the Bush administration to tell examiners to ease up on examinations.

Concern over New Congress

Now, he fears a new administration, and a new Congress, could bring back the "slash and kill days" of regulation.

"I am very worried that they [members of Congress] will take a continued aggressive and negative approach from a legislative effort on thrifts," Mr. Engelke said. "I am quite concerned that a new Congress does not know the woes of the thrift industry."

Robert Duncan, chief executive and chairman of Magnolia Federal Bank, a $950 million-asset S&L in Hattiesburg, Miss., said the industry has been confined in a "regulatory strait-jacket."

"I feel frustrated beyond belief," Duncan said. "We can't do our job. Every time they pass a law, it's just more of a problem for us. We've got more government than we can afford now."

"What we have to do is get our message to these new members of Congress that extensive paperwork has been heaped on us," said Gerry J. Pittenger, chief executive of Washington-based Great Western Bank, and chairman of the SCBA. The organization has already begun lobbying new Congress members.

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