A drop in interest income for First Federal Savings & Loan Association resulted in the company suffering a 64 percent drop in quarterly net income, when compared to the same period a year before.

First Federal reported unaudited net income for its second quarter ended Dec. 31, 1988 of $45,000, or 4 cents a share, compared to $126,000, or 11 cents a share, for the 1987 second period.For the six months ended Dec. 31, net earnings were $113,000, or 10 cents a share, compared to $278,000, or 24 cents a share.

Despite the drop in profit, attributed to increases in short-term interest rates reducing net interest income by $305,000 for the quarter, First Federal Chairman and President Gerald R. Christensen said he was pleased with the quarterly results.

He noted declines in operating expenses, reduced by $133,000 from the same quarter a year ago, and in foreclosed real estate, decreased in six months from $2.8 million to $1.6 million.

First Federal reported $263.2 million in assets and stockholder equity of $13.8 million, or $12 a share, at the end of the second period.