The Insolvent Thrifts of 1982: Where Are They Now?

In 1982, 237 thrifts were GAAP (Generally Accepted Accounting Principle) insolvent. By 1987, 92 of these were either merged or closed and 77 remained insolvent. The remaining 68 were GAAP solvent with an average GAAP-to-total-assets ratio of 5.6%. The purpose of this paper is to identify the factors that affected the probability of solvency for the 1982-insolvent thrifts over the period 1983–1987.
To identify these factors, the probability of insolvency is modeled in each year between 1983 and 1987 using logistic regression. Because a thrift can earn its way out of insolvency or raise outside capital, the probability of solvency is a function of the infusion of outside capital along with balance sheet and income statement ratios reflecting the thrifts earning ability. The only variable consistently significant in each year is the variable reflecting the raising of outside capital.