WASHINGTON -- Federal regulators said yesterday that falling interest rates and government takeovers of troubled thrifts helped the nation's savings and loan industry earn nearly $2 billion in 1991, putting an end to four years of massive losses.
Timothy Ryan, director of the Office of Thrift Supervision, termed the performance a milestone. He said the industry is stabilizing after being rocked by hundreds of failures caused by bad loans, risky investments and widespread fraud.
"I believe we are now in the eighth inning of the cleanup process," Mr. Ryan said at a news conference.
The OTS said the 2,096 private-sector institutions earned $1.97 billion in 1991, in contrast to a loss of $2.9 billion in 1990. The industry recorded losses of $43.3 billion in the four years beginning in 1986.
Mr. Ryan said the number of financially crippled thrifts, headed for seizure by the government, is dwindling rapidly. In December 1989, regulators listed 377 thrifts with assets of $261 billion as candidates for failure; today, there are only 55 with $35 billion in assets.
In the past three years, more than 600 S&Ls have been seized and dismantled by the Resolution Trust Corp., which sells the assets and pays off depositors. The government has spent $80 billion on the S&L cleanup and might ultimately spend more than $400 billion.
With the crippled S&Ls handed over to the government, the vast majority of the remaining privately owned thrifts are growing in strength. They are bolstering their capital to meet strict new government standards and reaping the benefits from the big spread between the low interest they pay on deposits and the higher rates they can charge for mortgages.
"The restructuring over the past two years has been very successful in clearing away the failed institutions and permitting a solid core of well-capitalized, well-managed institutions to conduct profitable operations," said Fred Webber, president of the U.S. League of Savings Institutions, an industry trade association.
The industry's 1991 profits marked a dramatic turnaround from the losses in recent years. The last profitable year was 1986, with meager earnings of $131 million. Each quarter during 1991 was profitable.
Still, there are pockets of concern. Regulators hope they can avert the failure and seizure of some big thrifts through an early resolution program in which the government provides financial aid to attract buyers for the ailing institutions.