Newspaper article THE JOURNAL RECORD
New York's Savings Banks Triving/'it's Whoopy Time'
NEW YORK - Like the city itself, which went from the precipice of bankruptcy in the 1970s to prosperity, New York's savings banks are back.
When interest rates passed 20 percent in the early 1980s, savings banks suffered so badly that regulators thought the entire industry might crumble. The banks' capital was virtually wiped out by gaping losses as they were caught between having made long-term, fixed-rate loans at low rates and having to pay higher rates for deposits. The institutions could not even be sold, so serious was their plight. Now, thanks to lower interest rates, balance-sheet restructuring, diversification and a removal of usury ceilings, the savings banks are again prospering.
``We're not only seeing the light at the end of the tunnel; we're out of the tunnel,'' said John T. Morgan, chief executive of the American Savings Bank. ``It's whoopy time.''
Profits have clearly recovered. After losing hundreds of millions of dollars in each of the preceding five years, the New York savings banks returned to profitability in 1985, earning $573.8 million, for a return on assets of 0.81 percent. In the first six months of 1986 alone, the savings banks exceeded this profit level, earning $800.7 million, for a healthy 1.09 percent return on assets.
As a result, savings banks have become some of the hottest properties around. In the last six weeks, two of New York's oldest savings banks - the Emigrant and the Williamsburgh - have been sold. In the last 15 months, ownership has changed at five other big New York State savings banks: the Bowery, Dollar Dry Dock, East River, Seamen's and the Savings Bank of Rockland County. The sale of the seven institutions has led to a change in control of $20 billion out of the $120 billion of New York savings-bank deposits.
Besides demonstrating how much savings banks' prospects have brightened, the quicker pace of sales has tantalized other prospective buyers. Indeed, industry experts say that it is only a matter of time before another big local savings bank goes on the block. …