While loan growth and improving credit quality have fueled gains in net interest income, declines in noninterest revenues kept earnings in check at Midwest banks.

First Chicago Corp., with $72.4 billion in assets, posted a less than 1% gain in first-quarter earnings, to $195.1 million. National City Corp., Cleveland, said its earnings rose 7%, to $111 million, while Kalamazoo, Mich.-based First of America Bank Corp. reported that noninterest items led net income to fall 18.7% in the quarter, to $46.4 million.

First Chicago's flat results were largely the result of a $79 million drop in equity gains during the quarter, to $55 million. The decline was due in part to a large gain on the sale of the company's investment in Nextel Communications Inc. reported during last year's first quarter. However, a $75.1 million increase in trading profits, compared with a net loss of $24.7 million last year, helped offset much of the year-over-year decline.

Richard Thomas, First Chicago's chairman, said the bank has worked to prevent swings from its venture capital side, allowing investors to focus on its core businesses.

"Hopefully, we will increasingly get more recognition for our ongoing, annuity-type earnings," he said.

At March 31, the company reported $59.2 billion in total interest- bearing assets, a $9.7 billion increase over last year. At the same time, nonperforming assets fell by $150 million.

Credit card securitizations and low-yielding government securities used to hedge certain interest rate positions helped keep the net interest margin at 2.60%. Without these factors, the margin would have been 3.87% for the quarter, just six basis points below the margin reported last year.

"I think their margin held up admirably given the rate environment," said Greg Anderson, a bank analyst with Chicago Corp. "In this kind of environment, anything approaching 4% is good for a company of First Chicago's size."

At National City, a 13.3% increase in net loans to $23.6 billion, combined with a stable net interest margin and a $46 million fall in nonperforming assets helped boost net income 7% during the quarter, from the $103.8 million, or 63 cents a share, reported for the same period of 1994.

The net interest margin fell just two basis points during the just-ended quarter, to 4.59% from 4.61%. Nonetheless, noninterest income remained flat for the quarter, as a $4.5 million decline in security gains offset much of the improvements made in mortgage banking and item servicing revenue.

First of America reported its earnings decline despite a 17.5% rise in net loans outstanding, to $16.7 billion at March 31. A year ago, the company reported earnings of $58.3 million, or 98 cents a share.

Earnings during the 1995 quarter were hurt by the combination of a $6 million charge for severance costs, a $9 million decline in earnings from investment securities, and a 52-basis point decline in net interest margin.

Daniel Smith, First of America's chairman and chief executive, said the company was not surprised by the results.

"First quarter earnings were within our range of expectations, considering the costs we have incurred for our internal restructuring and the continued pressure on the net interest margin," he said.

Fifth Third Bancorp of Cincinnati said its earnings jumped 14.2% during the quarter, to $66.1 million, despite a 33-basis point slide in its net interest margin.

Increases in both loan volume and noninterest income helped overcome the slimmer margin. Fifth Third added more than $1 billion in new loans during the quarter, a 10.6% increase over last year. At the same time, noninterest income rose 9.7%, due in part to a 44% jump in income from the company's merchant processing system.

Loan loss provisions of $9.6 million were 15.2% lower than last year. The company attributed the decline to improved credit quality and higher than normal provisions made during the first quarter of 1994, in connection with its acquisition of Cumberland Federal Bancop., Louisville, Ky.

First Financial Corp., Stevens Point, Wis., reported a 19.7% earnings slide after taking a one-time $4 million, or 14 cents a share, after-tax charge for expenses related to its acquisition of FirstRock Bancorp, Rockford, Ill.

As a result of the charge, the $5.5 billion-asset thrift reported a $2.7 million fall in net income, to $10.8 million. Without the special charge, net income would have risen 10.2%, to $14.9 million.

The company saw its net interest margin rise 13 basis points to 3.46% for the just-completed quarter, compared with 3.33% last year. The higher yields offset a 51.7% decline in loan originations for the quarter, to $179.9 million. +++ First Chicago Corp. Chicago Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $195.1 $193.8 Per share 1.98 2.00 ROA 1.13% 1.28% ROE 18.9% 20.2% Net interest margin 2.60% 2.75% Net interest income 379.7 335.5 Noninterest income 470.1 501.9 Noninterest expense 478.1 484.5 Loss provision 65.0 50.0 Net chargeoffs 44.0 33.0 Balance Sheet 3/31/95 3/31/94 Assets $72,378 $65,900 Deposits 32,191 31,666 Loans 26,264 25,224 Reserve/nonp. loans 618% 556% Nonperf. loans/loans 0.46% 0.52% Nonperf. assets/assets 0.18% 0.24% Nonperf. assets/loans + OREO 0.50% 0.65% Leverage cap. ratio 7.70% 7.50% Tier 1 cap. ratio 8.60% 8.80% Tier 1+2 cap. ratio 13.0% 13.4% ===

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