Thrift earnings soared 36% last year, to a record $6.45 billion, the Office of Thrift Supervision said Wednesday.

Fourth-quarter net income jumped $400 million, to $1.7 billion, as fees fed thrift profits.

The year-to-year increase was exaggerated by the fact that the industry's 1996 earnings were gutted by a one-time levy to capitalize the Savings Association Insurance Fund bailout. The OTS estimates that 1996 earnings would have been $6.8 billion without the $2.1 billion after-tax SAIF charge.

The 1997 record was still 20% above the previous record set in 1995.

"The thrift industry achieved excellent results in 1997 with record earnings and capital and very low troubled assets," said OTS Director Ellen Seidman. "But we must not think such records will be automatic in years to come.

"The current flat yield curve and the continued runoff of insured deposits impose significant pressures on thrifts," she said.

Return on assets was 85 basis points during 1997, up from 62 in 1996 and 70 in 1995. Fee income rose 20% to $4.376 billion in 1997. Thrift noninterest income came from loan servicing, mutual fund sales, credit card lending, and trust administration, OTS said.

Thrift assets totaled $776.6 billion at yearend, up about 1% or $7.3 billion.

The composition of thrift loan portfolios continued to change last year. Since 1993, thrifts have increased small business and commercial lending by 21.9% to $11.5 billion. Consumer loans have increased 6.1% to $44.9 billion.

Problem assets held by thrifts dropped $400 million to $7.8 billion, an eight-year low. Noncurrent rates fell in three of the industry's four major loan categories. The exception was consumer loans. Consumer loans more than 90 days overdue rose 23% last year to $436.8 million.

Equity capital held by thrifts climbed to 8.33% of assets, breaking the record 8.18% set in the third quarter.

Less than 55% of thrift assets were funded by insured deposits at yearend 1997, an all-time low, according to OTS. Advances from Federal Home Loan banks, at $184.9 billion, funded 15.3% of thrift assets during 1997.

The number of OTS-supervised thrifts fell 119 to 1,215 during 1997. Sixty thrifts were acquired by banks while 49 converted to other charters. The agency chartered 11 new thrifts and has 38 applications pending.

For the first year since 1959, there were no thrift failures during 1997.

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