A $372,000 loss on a sale of investments caused First Federal Savings & Loan to suffer a 85 percent drop in earnings for the fiscal year 1988.

But president and chairman Gerald R. Christensen said the federally insured savings institution had made several accomplishments during the year to place it in a stronger and better position."Despite our difficult economic environment, I feel that these accomplishments are outstanding," he recently told stockholders.

The company decided to sell $14 million to improve yield with less interest rate risk, Christensen said. First Federal took a $372,000 loss in the sale, resulting in net income falling to $66,000 compared to $438,000 in fiscal year 1987.

He said various strategies have been implemented to restructure the investment portfolio to decrease the company's interest rate risk and to enhance overall profitability.

Meanwhile, income taxes were reduced by $145,000 and $66,000 was saved on annual outside management fees. General and administrative expenses decreased $207,000 and total operating expenses increased slightly from $5.9 million in 1987 to $6 million this year.

Net interest income for the year increased $328,000 to $4.5 million.

Deposits increased 6 percent to $195 million in 18,515 accounts.

First Federal's assets at June 30 had increased 6.6 percent from $241 million at the same time last year to $257 million. Shareholders' equity stands at $13.8 million, or $12 per share.

"Although there has been a decline in real estate sales and construction, First Federal continues to increase it's share of loans for the purchase of existing homes," a company statement said.

First Federal has 4,618 in mortgage loans worth $175 million, and services an additional 900 loans representing $77 million. Mortgage loans increased 49 percent, or $23 million, compared to $16 million last year.

Loan loss provisions have increased from $604,000 in 1987 to $738,000 this year. First Federal's total mortgage loan delinquency rate is 1.8 percent, compared to a statewide average of 6.56 percent, the company said.