Firstquarter earnings at federally chartered thrifts fell 5%, to $1.7 billion, compared with the previous year, the Office of Thrift Supervision said Wednesday.
Profits were up 16% from the fourth quarter of 1996, when restructuring charges lowered income at several thrifts.
But fixing the fund meant most thrifts did not have to pay deposit insurance premiums in the first quarter.
"A healthy net interest margin, higher fee income, and control of overhead expenses all contributed to the solid first-quarter earnings," said OTS Director Nicolas Retsinas.
The quarterly record for thrift earnings, $1.9 billion, was set in the second quarter of last year.
Net interest margin for the 1,302 thrifts regulated by the OTS averaged 2.93% of average assets in the first quarter, an eight-basis-point increase from the fourth quarter.
Declining interest expenses-caused by relatively low and stable market rates-provided a boost, the agency explained. "Older CDs matured and were replaced by CDs paying current, lower market rates of interest," according to the earnings report.
Fee income increased slightly in the three months ended March 31, to 0.52% of average assets. The agency attributed the rise to increases in loan servicing, mutual fund and annuity sales, and demand deposits.
Also contributing to first-quarter earnings was a slight drop in thrifts' overhead expenses, the OTS reported. This figure has held steady at about 2.1% of average assets the last four years, and it fell to 2.05% in the first quarter.
The OTS said noncurrent loans increased $200 million, to $6.8 billion.
Noncurrent consumer loans increased 10%, to $390 million; noncurrent single-family mortgages climbed 5%, to $4.9 billion; and noncurrent nonresidential mortgages rose 1%, to $556 million.
The only exception: Noncurrent commercial loans dropped 2%, to $127 million.
Troubled assets at federally chartered thrifts climbed slightly in the first quarter, to $8.8 billion, or 1.15% of total assets. The agency noted that the increase did not signal widespread deterioration in asset quality.
Instead, the agency attributed the rise to thrifts that buy delinquent loans at a discount, work them out, then sell them for a profit. If it weren't for this business practice, troubled assets would have fallen $200 million during the quarter, the agency said.
While the number of OTS-regulated thrifts shrank by 32 in the quarter, total assets fell only 0.6%, to $764.6 billion. Thirteen thrifts were acquired by commercial banks; five were merged into other thrifts, and the remaining 14 switched to commercial bank charters. u