Utah's savings and loan industry has passed through one of its most difficult 10 years on record, suffering year after year of losses and seeing some of its oldest members collapse into insolvency.

And there is more to come.

While the industry applauds the federal government for finally taking action this month on the past decade of troubles, fraud and failure, S&L managers know the federal cleanup in Utah and elsewhere won't remove the future challenge of trying to make a profit when faced with regulatory restructuring and a changing financial services industry.

"The savings and loan story is just beginning," says Mark Jay Nelson, industry consultant and professor of finance at Weber State College. "The bailout and restructuring will be a difficult task. We will hear about problem after problem for years."

Nelson explained that savings and loans "live in fear" and have been under intense pressure to maintain adequate profit margins. The pressure isn't likely to let up either, as S&Ls and other financial institutions vie for their niche in an increasingly competitive and sophisticated financial services market.

Utah's savings institutions have wasted no time digging out of their past problems and facing the future. Most S&Ls have come to grips with their problem portfolios and have set aside reserves to cover anticipated defaults. Many have abandoned or cut back on commercial lending -- which got them into trouble in the first place -- and have returned to their longstanding area of expertise: single family home mortgages.

"Busnesses are generally successful if they stay close to what they do best," says Paul Neuenschwander, president of United Savings Bank and the Utah League of Insured Savings Institutions.

United Savings is the strongest of Utah-based S&Ls and is considered by many to be very well managed. The institution didn't pass through the 1980s unscathed, but it was consistently rated at the top in net worth and profitability.

Neuenschawander said sticking to mortagage lending was the main reason behind United's comparatively good performance during hardtimes. But it wasn't just a simple matter of making home loans. United was one of the first Utah S&Ls to take advantage of the secondary mortgage laon market created in the 1970s -- where lenders could sell their mortgages to federal agencies, but still service the loans and earn a fee. United skillfully used the secondary market to rid itself of unprofitalble assets, keep high-interest loans and build a lucrative loan servicing business.

While that may appear a sound strategy, it won't insulate an institution from future economic ups and downs. Even United has suffered from homes not selling and homeowners unable to make payments.

To hedge against future economic fluctuations, S&Ls must maintain strict control over operating costs and carefully consider ways to expand into other areas of lending, investment and fee income. Utah savings institutions have authority to go into insurance, secruites,real estate and other services.

"It's clear they need to diversify and if they have the time and resources to do it there shouldn't be any problems," said George Sutton, Utah Commissioner of Financial Institutions.

He explained that one reasons for the industry's poor track record in other areas of business is that the permission to branch out was given in the throes of a crisis, not allowing enough time to gain expertise and reap benefits from new areas of lending and services.

Time and resources are still critical when considering current federal proposals to clean up and restructure the S&L industry.

The delay in federal action has cost many healthy savings institutions dearly, as their sick competitors have driven deposit rates up, further narrowing profit spreads (see related story). Federal regulators finally removing unfit thrifts will again place burdens on an already strained situation.

"We already pay 2 1/2 times what banks pay for federal deposit insurance and they want us to pay more," Neuenschwander said. "There goes the profit margin."

Along with struggling to maintain an adequate income, savings and loans are facing the loss of the industry's historical identity in the financial services community, as numerous other companies now offer the same lending and depository products as competitive rates.

That trend has actually been going on for years and the thing that has kept savings and loans apart from other financial institutions is the federal regulatory system. But proposals are now on the table to place both banks and S&Ls under the same regulatroy structure.

"The name savings and loans may still be there in the future, but it won't mean anything," Nelson said.