U.S. Savings and Loan Industry on Rebound / Says Ohio Executive

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The nation's savings and loan industry is rebounding from the crisis years of 1981 and 1982, according to Tom Siemers, an Ohio thrift executive and an active member of the U.S. League of Savings Institutions.

The outlook is good, Siemers said, despite reports that a number of the nation's thrifts are technically insolvent. The reported earlier this week that the Federal Savings and LoanInsurance Corp., which insures deposits in savings and loan associations, is allowing a number of the troubled thrifts to remain open because it lacks the money to close them.

However, Congress' preoccupation with the federal tax-overhaul bill probably rules out any hope of a vote on a proposed $3 billion federally funded corporation to raise more insurance funds for theFederal Savings and Loan Insurance Corp., Siemers said Wednesday in an Oklahoma City interview.

"This year, the savings and loan industry has made more money in the first seven months than it did all last year," said Siemers, president of Franklin Savings and Loan Co., a Cincinnati thrift with $155 million in total assets.

And 1985 was the industry's second most profitable year, ranking second only to 1978, according to Michael Wilson, assistant director of research for the U.S. League of Savings Institutions, a Chicago-based trade group for 3,249 federally insured thrifts.

The industry's after-tax net income for 1985 was $3.83 billion - more than three times the industry's 1984 after-tax income of $1.1 billion - according to research by the Federal Home Loan Bank Board and the U.S. League of Savings Institutions.

"The level of interest rates has come way down to where a lot of these old mortgages that we still had are back to market rates," Siemers said.

That's a welcome change, Siemers said, from the panic of 1981 and 1982, when the savings and loan industry had negative after-tax income for both years.

"The industry lost a lot of money," Siemers said. "1980 and 1981 lasted longer than we thought it would. It seemed like forever."

The savings and loan industry hit rock bottom in 1981, when savings institutions reported negative after-tax income of $4.63 billion.

In 1982, the red ink was not quite so deep. Negative after-tax income that year was $4.27 billion for the entire industry.

"1981 and 1982 were devastating years," Wilson said. "It took almost until the first quarter of 1985 to return to normal."

The culprit behind the 1981 crisis was federal deregulation of interest rates on savings and time deposits.

"They deregulated the savings and certificates side about the time that interest rates went to 20 percent," Siemers said.

"Our income was fixed at interest rates of 5 to 7 percent on 30-year mortgages while we were having to pay 15 to 16 percent to keep our deposits."

"It put a terrible strain on reserves," Siemers said.

If most savings and loan associations had not been sound and well-managed in previous years, they would not have weathered the deregulation crisis, Siemers said.

New products - like adjustable-rate mortgages and five-year certificates - have helped the savings and loan industry recover, Siemers and Wilson said. …