WASHINGTON - The nation's 1,751 thrifts earned $1.28 billion in the second quarter, down from the record $1.8 billion during the first quarter, the office of Thrift Supervision reported Thursday.

Core earnings for the second quarter were $1.25 billion, down from $1.6 billion in the first quarter, When there was a large gain from a one-time accounting change, and nearly even with the second quarter of 1992, when core earnings were $1.26 billion, the OTS said.

At the end of June, 97% of the thrift industry met regulatory capital standards, the OTS said. The industry's capital levels continued, to climb, with core capital reaching 6.79% and risk-based capital levels reaching 14% in the second quarter.

Signs of Health

"Clearly, the thrift industry's condition is improving - the trends are all very positive," OTS acting Director Jonathan L. Fiechter said.

The industry's strong earnings were pulled down by California, where many institutions added to their loan-loss reserves and sold off troubled assets. Taken together, the state's 101 institutions lost $30 million in the second quarter. In the same period of 1992, California thrifts, which have $273.4 billion in assets, earned $300 million, according to the OTS.

Benefit of Low Rates

The industry touted the numbers as evidence of continued health. Paul A. Schosberg, president of the Savings and Community Bankers of America, said, "Strong earnings, the 10th consecutive profitable quarter, record capital levels, a dramatic decline in troubled assets, and a significant decline in the number of troubled institutions are clear,evidence, of the sustained and vibrant nature of the industry's health."

Thrifts, like banks, profited from, the current low level of interest rates on deposits. In the second quarter the industry's spread between deposits and loans was 305 basis points, up from 302 basis, points in the first quarter and 290 basis points in the second quarter of 1992.

Mr. Fiechter said the wide margins would disappear because new, low-rate loans are replacing higher-rate ones.

At the beginning of this year, there was a 461-basis-point spread between the average rate customers pay for a 30-year fixed-rate loan and the rate thrifts and banks pay customers for a 90-day certificate of deposit. By June, that had dropped to 402 basis points, and it is expected to continue to narrow.

Problem Assets Decline

The industry's troubled assets declined to $20.8 billion - or 2.64% of assets - in the second quarter. That was down from $24.2 billion, or 3.04% of assets in the first quarter and $30.1 billion, or 3.53% of assets in the second quarter of 1992.

Both the number of problem thrifts and their assets continued a steady decline. There were 153 problem thrifts, with $104 billion in assets, at the end of June, compared with 185, with $126 billion in assets, at the end of the first quarter, and 264, with $181 billion in assets, in June, 1992.

The OTS puts thrifts with MACRO ratings of 4 or 5 on the "problem" list. Mr. Fiechter said just 12 thrifts, with $3 billion in assets, "have been put on notice" that they will be shut down soon "if they are unable to either be acquired or be recapitalized." Sources told American Banker this week that less than half of those are expected to fail.

"We will continue to see a decline in the problem-thrift list so long as we don't have a dramatic run up in [interest) rates," Mr. Fiechter said. Economists are not expecting interest rates to rise sharply soon.

"We have almost two industries - a healthy core and those struggling to turn around," Mr. Fiechter said. "We are clearly past what is known in Washington as the thrift cleanup - we are now under a more normal mode."

Thrifts struggling to recapitalize have been helped by Wall Street. "This has been a phenomenal market for troubled thrifts, in terms of either being acquired by other healthy banks or thrifts," or raising capital through equity offerings, Mr. Fiechter said.

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