Thrifts will be hard-pressed to keep up their record profits in the second half, with home sales slowing and the yield curve still flat, analysts say.

Many thrifts have had increases for several quarters, thanks to a strong economy, pent-up demand for homes, and smaller loan losses. But many analysts predict the party may soon end.

"Any house that is saleable and any mortgage that is refinanceable has been there and done that twice already," said Charlotte Chamberlain, an analyst at Jefferies & Co., Los Angeles. The housing boom cannot go on forever, she said.

The fortunes of thrifts remain securely tied to the home loan business. Even thrifts that have diversified into consumer loans make most of their money by holding mortgages. That means they do well when home sales are strong and when the difference between long- and short-term rates is large enough to make adjustable mortgages-a thrift specialty-attractive to consumers.

But when long-term rates are low, as they are now, most homebuyers opt for fixed-rate mortgages. Many consumers also refinance their adjustable mortgages to get fixed rates-making it difficult for thrifts to maintain their mortgage investments, let alone increase them.

Many thrifts have adapted to these interest rate trends by originating fixed-rate loans for sale to investors such as Fannie Mae and Freddie Mac.

Thrifts such as Dime Bancorp, whose earnings have relied heavily on gains from the sale of mortgages in the secondary market, will find it hardest to keep up the profit momentum when mortgage volumes drop, Ms. Chamberlain said.

Dime is hardly alone in facing a potential profit crunch. Thomas O'Donnell, an analyst at Smith Barney, predicted the flat yield curve would put pressure on most big thrifts to keep up profit growth.

Innovative companies, such as Dime, Charter One Financial, and Washington Mutual Inc. have bolstered earnings by reducing their funding costs, diversifying into consumer loans, buying back stock, making acquisitions, and tapping the appetite for fixed-rate mortgages, Mr. O'Donnell noted.

But managing thrift earnings when the yield curve is flat is "a grinding-down kind of process," Mr. O'Donnell said. "You can only do so much."

If people keep refinancing adjustables into fixed-rate mortgages, it will be harder for even the best-run thrifts to find ways to increase profits in the third and fourth quarters, Mr. O'Donnell said.

Marion O. Sandler, the chairman of Golden West Financial Corp., an old- line thrift in Oakland, Calif., summed up the looming challenges with typical bluntness in her earnings report.

"While Golden West posted strong results for the first half of 1998, further growth of net interest income may be affected later in the year," she said.

"Despite robust originations, our mortgage portfolio declined slightly between Dec. 31, 1997, and June 30, 1998, primarily attributable to an increase in prepayments due to the strong refinance and home sale markets. If payoffs remain at these levels, our loans receivable balance could shrink a bit more," Ms. Sandler said.

Most chief executives do not speak as plainly, but that is a good summary of what large thrifts are up against across the nation, analysts say.

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