Preparing for an eventual switch to a commercial banking charter, management at Roosevelt Financial Group has decided to recognize a $34.8 million paper loss during the fourth quarter.

Hoping to overcome a possible obstacle to the charter switch, the Chesterfield, Mo.-based thrift voluntarily took the loss to account for a decline in value of futures contracts used to hedge its $1.5 billion of salable mortgage-backed securities.

Thrift regulators have allowed the company to offset the gains or losses in its securities portfolio against changes in value of the futures contracts used to hedge that portfolio. However, banking regulators require institutions to mark these instruments to market.

"This is another example of the accounting industry losing sight of economic reality in search of accounting purity," said Joseph Stieven, a bank and thrift analyst at Stifel, Nicolaus & Co. in St. Louis.

Roosevelt's conversion to a commercial bank charter would follow the path blazed by conversions of thrifts like Community Financial Corp. of Illinois, BSB Bancorp. of Binghamton, N.Y., and Columbia Banking System Inc. of Washington. And analysts expect a growing number to apply after the bank and thrift insurance funds are merged.

But it is unlikely that many thrifts will have to recognize the different accounting treatment for futures contracts that Roosevelt did. The number of thrifts using these complex instruments dwindled in the late 1980s as a result of regulatory pressure, said Joseph Jolson, a thrift analyst at Montgomery Securities.

The accumulated losses on futures contracts already were reflected on Roosevelt's balance sheet, since it marks its positions to market on a monthly basis.

The company uses other derivative products to hedge its overall balance sheet sensitivity. Currently, liabilities reprice more quickly than assets. To prevent the net interest margin from narrowing if interest rates rise, the thrift uses a variety of interest rate swaps, caps, and floors to hedge the imbalance.

Roosevelt officials said it is the institution's goal to begin operating as a bank holding company this year that that led to the charge.

"While our current regulator does not view our accounting treatment of our futures contracts as inappropriate," it is not in synch with the way bank regulators account for these instruments, said Anat Bird, chief operating officer. "We anticipate (banking agencies) will be regulating us by the end of this year."

Mr. Jolson attributed the timing of the move to a delay in the merger of the thrift and bank insurance funds. "It was an odd thing for them to take this charge at yearend," he said. "I think the main reason was that they had excess capital."

Mr. Jolson said the company shrank its balance sheet last year to ensure it would remain well-capitalized after making the $25 million contribution to the thrift bailout that is required before a thrift can switch charters. Roosevelt had planned to get its new charter upon merger of the funds.

When the merger did not occur, he said, it is likely management decided it should take this charge.

Indeed, the charge will help future earnings. While losses on futures contracts have been recognized in both the income statement and balance sheet, gains on the mortgage-backed securities portfolio have not.

"This certainly improves our financial position for 1996," said Ms. Bird.

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