It's First of America Bank Corp.'s turn to crow.

In the latest test of investment performance by bank-managed mutual funds, the Kalamazoo, Mich.-based banking company snared top honors in two key categories.

Its Parkstone Small Capitalization Fund produced total returns of 19.71% in the quarter that ended June 30, the best result among banks' domestic stock funds. The benchmark Standard & Poor's index of 500 stocks returned 4.45% during the same period.

And its Parkstone Balanced Fund returned 5.51% in the second quarter, beating other mixed funds - portfolios that include a mix of stocks, bonds, and cash instruments.

The rankings, compiled for American Banker by CDA/Wiesenberger, Rockville, Md., measure the second-quarter results of bank-run funds with assets of at least $25 million, grouped into six categories by investment objective. Other top spots went to money management units of Mellon Bank Corp., Great Western Financial Corp., and U.S. Trust Corp. (See tables starting on page 12)

Strong performance gives banks that manage mutual funds something to brag about in the fevered competition for investors. But experts are quick to say quarterly results aren't the ultimate measure of how the 117 banks in the field are faring.

"You cannot really build a viable strategy if you're focusing on how to become No. 1," said Avi Nachmany, a partner with Strategic Insight, a mutual fund consulting firm in New York. It's more important, he said, to strive for "reasonably good investment results" and "try to guide your customers into an investment process."

Although Richard A. Wolf, president and chief investment officer of First of America Investment Corp., said he was delighted by the company's first-place rankings, he wouldn't argue with Mr. Nachmany's point.

"We look at performance over the long term, not at what the last quarter did," Mr. Wolf said in a telephone interview. He said the small cap fund benefited from First of America's long-standing investing philosophy, which emphasizes stocks of companies with above-average growth potential.

"We happen to be growth managers, which many banks are not, and we're staying with our story," he said.

Certainly, strong performance is a plus for banks that are trying to build their fund assets. Mr. Wolf noted that First of America's Small Cap Fund has grown from $380 million at yearend 1994 to $710 million as of last week, making it one of the largest funds in the $6 billion-asset Parkstone family.

"Has the performance been helpful? Well, of course," said Mr. Wolf. "If you don't have competitive investment performance, you will not be a player in the future."

He added that the Small Cap Fund, unlike many bank-run funds, doesn't waive any of its management fees.

Other leading performers, by category, were:

*Taxable bond: Mellon's Dreyfus Short-term Income Fund returned 1.46% in the second quarter, versus 0.47% for the benchmark Lehman Brothers corporate and government bond index.

*Tax-exempt bond: Dreyfus cornered this category, too, with the A-shares class of the Premier North Carolina Municipal Bond Fund returning 1.58%. That's well above the 0.76% performance of Lehman Brother's yardstick index for municipal bonds.

*International stock: U.S. Trust's Excelsior Emerging Americas Fund led the pack with returns of 9.09%. The average return for funds in the group was 4.22%, according to CDA.

*International bond: Great Western took first place among banks with its Sierra Trust Short-term Global Government Fund, but lagged the broader fund industry. The fund's A-shares class returned 2.16%, versus 2.45% for international bond funds generally, CDA said.

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