The financial health of the thrift industry in Maryland slipped somewhat over the first six months of this year but stayed well above the national average, according to a recent survey of the savings and loan industry.
But concerns continue to hover over the industry as the state's economy and the regional real estate market show dramatic signs of softening further.
In addition, more worries surfaced last week when reports that the housing market, the traditional backbone of savings and loans, had deteriorated substantially in New England and the mid-Atlantic region as evidenced by a surge in the amount of delinquent mortgages held by Citicorp.
The giant New York banking company said that delinquencies on its $30 billion in residential mortgages increased to 3.6 percent, up from 2.4 percent of home mortgages at the start of the year.
"Because several of our major companies are experiencing difficulties, and because the national economy is weakening, Maryland won't be immune to further deterioration" in the housing market, said one local industry analyst who, citing his company's policy, spoke only on the condition of anonymity. "Is it a New England situation? No, I don't think so. But I think we're in line for more weakness."
Charles H. Kresslein, president of the Maryland League of Financial Institutions, an umbrella association representing thrifts in the state, concurred that the future remained clouded but said he was confident that the industry's prospects remained good at least through the end of this year.
Although the percentage declined in recent years, nearly 60 percent of the loans made by the state's thrifts remain in home mortgages, Mr. Kresslein said.
"I think we're in better shape than any place in the country," he said. "Economically, while the condition of the state is not what it was a few months ago, those solvent institutions [in Maryland] are doing pretty well."
With 98 thrifts in the state surveyed, Maryland placed 11th among the 50 states and the District of Columbia in the latest quarterly ratings of more than 2,400 thrifts nationwide compiled by IDC Financial Publishing Inc.
The numerical ratings, which are based on nearly three dozen financial ratios compiled by IDC, gave Maryland's thrifts an overall rating of average, or a score of 153 out of a possible 300. In aggregate, the 2,421 thrifts measured by IDC received an overall rating of 117, which is considered a below average grade by the financial publishing company.
Despite a small decline in the state's overall rating, analysts pointed out that the thrift industry in Maryland remained particularly strong in certain key measures while others continued to show mixed signals.
One positive sign was that thrifts in Maryland had total operating income of nearly $3 million during the second quarter, down nearly 76 percent from the year-earlier period but a vast improvement over total losses of $14.3 million recorded during the first three months of this year, according to a survey of the savings andloan industry by Sheshunoff Information Services Inc.
The state also continued to show healthy low levels of troubled loans on its books as the level of bad loans fell during the second quarter to just 2 percent of total loans. The national average, according to Sheshunoff, stood at 3.1 percent on June 30.
Equally important, tangible capital -- a key measure of a thrift's ability to absorb further losses -- registered a healthy increase during the second quarter.
Expressed as a percent of total assets in Maryland's savings and loans, the industry had tangible capital that amounted to 3.61 percentof its $23 billion in assets at June 30, up from 2.73 percent threemonths earlier, according to Sheshunoff.
Analysts, however, worry that the thrift industry as a whole still lags behind the banking industry in the amount of reserves the lenders have set aside to cover the cost of bad loans in the future.
While regional banks typically have about 80 cents set aside in reserve for every dollar of troubled loans, the thrift industry has only one-fourth that amount.
In Maryland, slightly less than 18 cents for every dollar of troubledloans -- those either considered non-performing or more than 90 days past due -- has been set aside.
If loans continue to go bad, these analysts worry, further reserveswill be needed leading to further losses.
With 96 solvent savings and loans in the state, Mr. Kresslein said he expects all 96 to survive in the years ahead.
"As to what degree they remain profitable," he said, "depends on the economy and the real estate market."