O.C. Thrifts Post $81.9-Million Profit for 1st Quarter : S&L;: It is the second consecutive year that the local industry has reported a net income for the period.

Orange County’s 21 savings and loans posted a combined profit of $81.9 million for the first quarter, marking the second consecutive year that the local thrift industry has reported a first-quarter net income.

The earnings for the thrifts were 7% higher than the $76.8 million recorded by the same thrifts a year earlier, according to financial results released by the federal Office of Thrift Supervision.

Last year, however, there were 24 S&Ls; based in the county, and the losses at failing financial institutions dropped the local industry’s first-quarter profit to $68 million. Insolvent FarWest Savings & Loan in Newport Beach was sold during the first quarter of this year, ending the red ink that had been pulling down the county’s totals.

Local S&Ls; have not posted a combined annual profit for at least a decade, but they are on track this year, mainly because so many of the failing thrifts--especially the big ones such as FarWest--are gone. In the past seven years, regulators have seized 26 county-based thrifts and sold or closed 22 of them.

“When the problem institutions go off the list, the ones left are looking better. They’re profitable,” said Robert L. Kemper, chief executive of Downey Savings & Loan in Newport Beach.

In addition, thrifts have enjoyed a wider profit margin as interest rates on deposits fell further relatively than interest rates on loans did.

“There’s definitely a sign of improvement in core earnings,” said Carl Gregory, president and chief executive of Fullerton Savings & Loan.

But he and Kemper warned that succeeding quarters may not be as profitable as that margin narrows.

Refinancing home loans has provided the bulk of the industry’s work, Kemper pointed out, but it has not provided any growth. Total industry assets had barely nudged up to $40.4 billion at the end of March, from $40.3 billion a year earlier at the same thrifts.

“Obviously, the refinancing market had an impact, along with falling interest rates,” said Ronald McGee, the California regional president of Household Bank in Newport Beach.

McGee says he sees signs of reluctance among consumers to buy new homes. Like other thrifts, Household had lower new-loan volume than it had anticipated for the first quarter.

“The consumers are a little reluctant to believe any good economic news,” McGee said. “There’s so much uncertainty. One month or one quarter of good economic news is not going to change things. Consumers need to be convinced.”

For the first quarter, 14 thrifts posted profits. Giant American Savings Bank in Irvine led the way with earnings of $46.9 million.

The seven money-losers were led by the insolvent government-run Guardian Savings & Loan in Huntington Beach, which dropped $6.9 million.

Federal regulators are also running Delta Savings & Loan in Westminster as well as two thrifts they seized in the past two weeks: San Clemente Savings Bank in Irvine and First Newport Bank in Newport Beach.