Thrift Profits Drop 40%, but OTS Says the Industry Is Still Healthy

Profits earned by the nation’s thrift industry declined 40% from July through September because of a $500-million, onetime write-off by two Northeast institutions, the government said Monday.

But Jonathan L. Fiechter, acting director of the Office of Thrift Supervision, said, “Despite the impact of the goodwill write-off on earnings, the thrift industry remains healthy.”

Fiechter declined to name the institutions but said both remain in good shape. Goodwill is the difference between the price paid for a company and its book value, the value of its net assets. Goodwill often represents a company’s reputation and the value of its brand names. Accounting rules require it to be written off over time following an acquisition.

“Basically, it is largely an accounting change and not necessarily a change in the economy of the industry,” said Joseph Blalock, an economist with Savings & Community Bankers of America.

Both Fiechter and Blalock described the earnings picture, excluding the write-off, as stable.

Fiechter said profits totaled $762.5 million during the third quarter, down from $1.26 billion in the second quarter and $1.25 billion a year earlier.

“If you added the $500-million write-off, you’d be roughly where you were in the second quarter and the same quarter a year ago,” Blalock said.

For the first nine months of 1993, industry earnings were $3.8 billion, compared to $4.1 billion for the same period of 1992.

It was the 11th consecutive profitable quarter. Thrifts continued to benefit from the favorable spread between the cost of borrowing money and the yield they earn on loans, although the spread narrowed in the third quarter.

Industry assets increased to $785.4 billion from $785.1 billion in the April-June period. The increase occurred despite a drop in the number of institutions to 1,719 on Sept. 30.

For the first nine months, thrifts regulated by the Office of Thrift Supervision declined by a net 152: 84 by conversion to state bank charter; 66 by merger, acquisition or liquidation, and 7 by transfer to the Resolution Trust Corp., the agency handling the S&L; bailout. Five new institutions were created, including two in government conservatorship that are being revived.

The Office of Thrift Supervision described 119 thrifts as “troubled,” including 40 that Fiechter said are listed as probable candidates for failure. That was a decline of 34 institutions from the previous quarter, which the agency attributed mostly to improved performance.

The troubled thrifts represented 7% of the industry and had assets of $85 billion.

S&L; PROFIT

Profit, by quarter for private-sector savings and loans, excluding institutions seized by the government: