Earnings at federally chartered thrifts soared nearly 45% to a record $1.8 billion during the first quarter, the Office of Thrift Supervision reported Monday.

Similarly, those thrifts' average return on assets jumped 30 basis points during the quarter to 0.96%, the agency reported.

"That level of ROA is comparable to what the industry earned back in the 1950s and early 1960s," acting OTS Director Jonathan Fiechter said.

However, Mr. Fiechter downplayed the significance of the record earnings by attributing much - approximately 60% - of the sharp increase to $387 million in one-time restructuring gains at five thrifts.

A more accurate picture of thrift profitability is presented by "core income," which excludes any earnings fluctuations resulting from mergers and acquisitions, Mr. Fiechter said. Core income rose during the first quarter, but only by 8 basis points, to 0.79% of average assets.

Deposits at federally chartered thrifts dropped by 7% to $8 billion during the first quarter, the OTS reported. Mr. Fiechter attributed this decline to the fact that thrifts generally pay 23 cents more than banks for deposit insurance. In order to fund loans, thrift managers are turning away from deposits and looking to wholesale funding, such as Federal Home Loan Bank advances.

Use of these alternative funding sources shrinks the deposit base that funds interest payments on Financing Corp., or Fico bonds, raising the risk of default on these instruments, Mr. Fiechter said. These new funding sources also make thrifts more vulnerable to interest rate fluctuations, he added.

Banking industry representatives pointed to the positive first quarter results as a reason for Congress to hold off with legislation that would remove the premium differential. Banks have been balking at a provision in that bill that would require them to pay $600 million annually for 20 years to shore up the thrift fund.

"Clearly the premium differential between banks and thrifts has not impaired the S&L industry's ability to compete and make profits," said James Chessen, chief economist at the American Bankers Association.

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