BOSTON - Thrift executives meeting for their annual convention this week remained upbeat about the industry's financial health and future even as Congress debated whether to merge it out of existence.

With most small thrifts - especially those still mostly in mortgage lending - reporting record earnings, high capital levels, and solid asset quality, thrift officials at the conference that opened here Monday said they were ready to focus on the business of banking regardless of whether lawmakers merge the bank and thrift charters.

According to data from the Federal Deposit Insurance Corp., the nation's 2,081 thrifts, with just over $1 trillion in assets, earned about $3.6 billion in the first half of 1995. The average equity capital ratio was 8.18%.

"We've seen some very strong performance the last three years," said Douglas L. Ulery, president and chief executive of $50 million-asset Home City Federal Savings and Loan Association, Springfield, Ohio, which has earned $418,000 in the first nine months this year. "What we see in the future is a continuance of that."

In fact, the primary issue facing attendees at the conference - the recapitalization of the Savings Association Insurance Fund and possible merger of the bank and thrift industries - hardly stirred any concern, except over when it would happen.

The charter merger would not be "easy pill to swallow," said Paul A. Schosberg, president and chief executive of America's Community Bankers. "The fact that we were able to sell that (to thrifts) as the means to a solution indicates the strength of the solution."

In fact, conference attendees, who numbered about 2,500, cited more mundane financial issues. Like their banking counterparts, the thrift executives expressed concerns about keeping up with new technology and competing with nonbank rivals, which are getting an increasing share of the market, notably in mortgage lending. Some thrift executives said that even the commercial bank competitors down the street are placing more emphasis on home mortgage lending, a traditional thrift turf.

That has made putting sound assets on the books a growing challenge for the thrifts, which now face more pricing competition on good mortgage loans, which cuts down on lending profitability.

"You can buy the retail deposits - that's a function of pricing," said Jerry L. Thomas, president and chief executive of Quaker City Federal Savings and Loan Association in Whittier, Calif. "But getting quality assets at yields that warrant the effort are a problem."

In fact, Quaker City is reporting loan originations this year at 60% of its peak in 1992.

Several executives said they've also seen slack deposit growth this year as commercial banks and such unregulated businesses as mutual funds have become tougher competitors for deposit dollars. And some officials have even seen that the deposit-insurance differential between banks and thrifts has given the banks a slight edge in rates.

Deposit growth has also been somewhat slow in California in the last few years, but thrift executives like Mr. Thomas and David K. Rea, chairman of California Financial Holding Co. in Stockton, took advantage of consolidation to haul in deposits.

Quaker opened a branch next to a site that H.F. Ahmanson & Co. was abandoning, while California Financial bought an old Security Pacific branch in Fresno that BankAmerica Corp. had closed. Quaker brought in $1 million a month from its new site, while California hauled in a whopping $28 million in deposits in its first year.

"We were very pleased," Mr. Rea said. "I had no idea it would work so well."

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