Thrifts earned a record $1.89 billion in the second quarter, 40% more than in the same period last year, the Office of Thrift Supervision reported Thursday.

Second-quarter earnings topped first-quarter performance by $60 million.

Thrifts benefited from increases in net interest and fee income as well as a sound economic environment, according to Kenneth Ryder, executive director of research and analysis at OTS.

Net interest income jumped 6% to $10.85 billion for the first half of 1996, compared to the same period last year. Income from fees grew by 23% to $1.7 billion through June.

"Thrifts tend to borrow short and lend long," Mr. Ryder said. "Right now they're in a very favorable environment where short-term interest rates are low and longer-term rates have increased."

He added that the good news for thrifts crossed regional boundaries. "The overall improvement in earnings has been widespread, with few regional disparities," he said.

Return on assets in the first half, at 98 basis points, rivaled the industry's robust returns of the late 1950s and early 1960s. The thrift industry's ROA was 65 basis points during the first six months of 1995.

But not all the news was good. Mr. Ryder said a cloud on the horizon is "what happens to the industry under the premium differential."

Thrifts are paying 23 cents for every $100 of deposits, while banks pay nothing. Thrifts have increasingly found ways to move deposits to the Bank Insurance Fund, causing a significant drop in the Savings Association Insurance Fund.

The greatest decline in deposits has been in thrifts with affiliates insured by the bank fund. During the first six months of 1996, deposits at these thrifts fell $8 billion, to $69 billion. That represents an annualized decline of more than 20%, Mr. Ryder said.

Overall, deposits in SAIF-member institutions dropped $16 billion, or 3.4%, to $454 billion since the end of 1995.

Deposits now fund only 68.1% of thrifts' assets, Mr. Ryder said. In the long run, he said, that could put thrifts in a profit squeeze, since other sources of funds, including advances from federal Home Loan banks, generally are more costly than deposits.

As the thrift insurance fund shrinks, regulators also worry about SAIF's continued ability to pay the $800 million annual interest due on Financing Corp. bonds, issued in the late 1980s to help pay for the savings and loan bailout.

The Federal Deposit Insurance Corp. has estimated that SAIF needs the premium income on $333 billion in deposits to be able to pay the Fico interest.

"Our numbers suggest the cushion is shrinking," Mr. Ryder said. The so- called cushion as of June 30 was $121.2 billion, a decline of 11.8% this year.

James H. Chessen, chief economist for the American Bankers Association, warned against "overdramatizing" the numbers.

The decline in deposits "is a slow stream, not a torrent," he said. But ABA is worried that the bank fund will be weakened as more thrifts move deposits.

"Everyone shares concerns about deposit shifting and the potential dilution of the Bank Insurance Fund," Mr. Chessen said.

Paul A. Schosberg, president of America's Community Bankers, said the numbers should prompt Congress to pass legislation that would shore up SAIF.

"The $16 billion decline in SAIF deposits this year may be a precursor to a much larger decline in the coming months," Mr. Schosberg warned.

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