WASHINGTON -- The 2,013 savings and loans in private hands earned $1.27 billion in the second quarter, down 13% from the first-quarter level, the Office of Thrift Supervision said on Wednesday.

The agency blamed the decline in part on writeoffs at San Diego-based Home-Fed Bank, which was seized in July, as well as additional loss provisions for bad loans in June - the last month of the fiscal year for a number of thrifts.

Even so, earnings for the first six months hit a record $2.81 billion, compared with profits of $885 million in the year-earlier period. Earnings for the first half of 1992 broke the record $2.7 billion reported for the same period of 1986.

Stronger Capital

OTS Director Timothy Ryan said 93% of the industry is profitable. Thrifts in aggregate "dramatically" improved their capital position.

"The industry is stable and capable of sustained profitability," he said.

But Mr. Ryan lashed out at Congress for not approving funds for the Resolution Trust Corp.'s cleanup of failures. He said that since RTC funding was stopped on April 1, the cost of the bailout has risen by at least $750 million.

"We are just throwing money away every day," he said. "This is somewhat of a broken record, but we need RTC funding. I challenge the Democrats and Republicans in the House to put aside politics and vote for RTC funding now for the sake of the taxpayers."

Widest Spreads Since '70s

Thrift profits were driven by the widest spreads since the 1970s between costs of funds and lending rates. Also, many troubled S&Ls have been handed to the RTC.

Another bright spot: Noncurrent loans declined to 1.69% of total assets for the quarter, compared with 1.77% in March. But they were up from 1.65% a year ago.

Repossessed assets fell to 1.80% of total assets, from 1.89% in March and 2.02% a year ago.

The Dark Side

On the down side, S&Ls lost a net $19.4 billion in deposits, versus $12.4 billion in the March quarter and $16.6 billion the same time a year ago.

Stressing how far the industry has come since 1989, Mr. Ryan said the 2.013 S&Ls in private hands had tangible capital of 5.7%. Only 11 were tangibly insolvent.

In contrast, the industry's 3,092 S&Ls in June 1988 lost $8 billion and tangible capital was a scant 0.33%. More than one-fifth of the industry, or 632 S&Ls, were insolvent.

Accounting for Rate Risk

Mr. Ryan said interest rate risk will be accounted for in capital requirements by early next year.

"This is preventive medicine," he said. "Our goal is to prepare thrifts to protect themselves before the rates change. The current interest rate environment poses significant risk for portfolio lenders."

In addition, the OTS will:

* Hold as many as eight meetings around the country by year-end to discuss credit availability.

* Continue to streamline the agency. Since 1990 staff has been cut by 30%, and expenses are down by 25%.

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