Thrifts Turn Rare Profit; Bad Loans Still Loom

WASHINGTON - The thrift industry earned $627 million in the first three months of 1991 - its first quarterly profit in four years - but the Office of Thrift Supervision warned that the industry has not fully recovered.

Falling interest rates helped the 2,283 private-sector thrifts end a long string of losses that included $1.49 billion for 2,342 thrifts in the last quarter of 1990 and $373 million for 2,505 thrifts in the first quarter of 1990.

But growing real estate loan problems could deflate future earnings, the OTS said Wednesday in its quarterly earnings report. "We're not here to declare victory," said T. Timothy Ryan Jr., director of the agency.

The Worst Have Been Seized

One reason for the turnaround is that the 617 most-troubled thrifts have been seized and put under the control of the Resolution Trust Corp., which has closed 396 of them.

Losses at the remaining 221 "brain dead" institutions, expected to run into the billions, are not figured into the OTS data on thrifts in private hands. The seized thrifts' results will be reported on Friday.

Another reason for Mr. Ryan's guarded comment: Some private-sector savings and loans purchased from the government in 1988 received about $799 million in federal subsidies.

Wednesday's data showed that although 47 insolvent institutions were moved to the RTC during the first quarter, the ratios of past-due loans and repossessed assets at the remaining private-sector institutions continued to increase.

"The rise of nonperforming assets is a disturbing trend," said Thomas Loeffler, chief of the industry surveillance unit at the OTS.

Past-due loans totaled $15.5 billion as of March 31, or 1.62% of the surviving industry's $971 billion asset base. This is up from 1.51% of assets at the end of December.

Repossessed assets totaled $22.2 billion, or 2.32% of assets, up from 2.27% in the fourth quarter.

Privately run thrifts last reported aggregate profits in March 1987, when the industry earned $98 million. At that time, there were 3,203 thrifts with $1.171 trillion assets.

The first-quarter results are a significant improvement for the 2,283 remaining private thrifts, which have $971 trillion in assets. The same group of thrifts earned $421 million in the first three months of 1990, a period when the industry as a whole reported a loss.

"The better thrifts are doing better. That is a real improvement, and it occurred because of fundamentals," said Martin A. Regalia, executive vice president of the National Council of Savings Institutions. "But we still have a ton of institutions out there that are still insolvent."

The OTS expects to transfer 123 thrifts with $80 billion in assets into the RTC by the end of the year, cleaning out its bottom layer of the most troubled institutions, known as Group 4.

Then it will shift its focus to Group 3 thrifts, some of which will be moved to the RTC and others of which will ultimately require federal aid.

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