Struggling First of America Bank Corp. said it would reduce its work force by 9% and overhaul its balance sheet, taking an $8 million pretax charge in the fourth quarter.

The $23.6 billion-asset banking company, based in Kalama-zoo, Mich., said Thursday it hopes to save between $25 million and $41 million annually, beginning in the fourth quarter of 1995.

The bank's earnings "have fallen short of our goals for 1994," said Daniel R. Smith, First of America's chairman and chief executive. He blamed margin compression and fee revenue declines on sharply rising interest rates.

First of America earned $56.4 million in the third quarter, compared with $63.4 million for the same period in 1993.

Its third-quarter annualized return on average assets of 0.96% is substantially lower than the 1.30% median ROA for the 32 Midwest banking companies tracked by Keefe, Bruyette & Woods Inc.

The bank is in the process of eliminating 1,300 full-time positions. First of America will book $4 million in severance expenses in the fourth quarter.

The bank said it had repositioned its balance sheet to reduce interest rate sensitivity, booking another $4 million of expenses on securities sales and terminations of certain derivatives contracts.

Livia Asher, a bank analyst with Merrill Lynch & Co., said she would have preferred that First of America go further in reducing exposure to rising rates, noting that a 100-basis-point uptick still would spark a 2% earnings drop over a one-year time horizon.

"A lot of bank managers feel it is too expensive to establish neutrality, but investors are saying they want rate exposures addressed as completely as possible," said Ms. Asher.

Mr. Smith said the moves would bring the company's rate sensitivity within corporate guidelines.

Fleshing out prior consolidation promises, First of America said it would eliminate 17 of its 21 bank charters, leaving just one legal entity in each of the four states in which it operates.

The banking company said roughly 1,000 full-time equivalent positions had been cut since August, with much of the reduction accomplished through attrition and paring back part-time and overtime employment.

Roughly 300 pink slips were handed out last Thursday, the company said.

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