Special gains and losses skewed second-quarter results at three Midwest banking companies, and four thrifts posted mixed results.

Milwaukee-based Firstar Corp. said earnings fell 15.7% to $42.5 million. A customer overdraft incident provoked a $13.1 million after-tax charge.

Harris Bankcorp, the Chicago-based subsidiary of Bank of Montreal Corp., said earnings fell 99%, to $502,000, as the unit took a $33 million after-tax charge on mortgage-backed securities held in customer accounts.

Michigan National Corp., Farmington Hills, said earnings soared 611.2%, to $63.3 million, as it booked a gain on recognition of tax benefits.

Cleveland-based Charter One Financial Inc. said earnings rose 6.8%, to $17.2 million. Michigan's Standard Federal Bank said earnings inched down by 0.2%, to $29.65 million.

Metropolitan Financial Corp., Minneapolis, said earnings dipped by 5.3%, to $14.4 million. And FirstFed Michigan Corp. said earnings rose by 15%, to $14.8 million.

FIRSTAR CORP.

Firstar said annualized returns equaled 1.26% on average assets, down 32 basis points from a year ago; and 14.13% on equity, down 464 basis points.

The $13.8 billion-asset company said average loans rose 11.1% from a year ago. Despite an 11 basis-point drop in the net interest margin, to 5.09%, net interest income rose by 4.9%. A loss provision of $2.7 million was down 50.4%.

Fee revenues sank a mild 0.2%, Firstar said, as mortgage banking revenues declined. Excluding the special charge, operating expenses inched up by 0.2%.

MICHIGAN NATIONAL CORP.

Excluding a special gain on the recognition of accounting benefits, Michigan National earned $23.1 million. Normalized returns equaled 0.93% on average assets, up 59 basis points from a year ago; and 11.08% on average equity, up 640 basis points.

Operating expenses fell 17.9% from a year ago, said the $10 billion-asset Michigan National. A loss provision of $6 million fell 52% from a year ago, and nonperforming assets fell 31% to $193 million, or 1.93% of total assets.

However, net interest income declined 2.9% from a year ago as average total loans declined by 6.9%. And fee revenues fell by 6.8% as mortgage banking and loan fee revenues sagged.

HARRIS BANKCORP

As previously disclosed, Harris took a $51.3 million pretax charge on mortgage-backed securities placed in certain customer accounts at its securities lending unit. Trading values of the securities plunged as rates rose, and Harris made up the shortfall.

Excluding the special charge, Harris would have posted annualized returns of 0.96% on average assets, down 9 basis points from a year ago; and 13.59% on average equity, down 137 basis points.

The $13.9 billion-asset banking company said period-end loans rose 8.9% from a year ago. Net interest income rose by 3.7%. The net interest margin fell 9 basis points to 3.93%.

OTHERS

Charter One Financial, a $5.8 billion-asset thrift holding company, said annualized returns equaled 1.2% on average assets, down 10 basis points from a year ago; and 17.61% on average equity, down 149 basis points.

Average total loans rose 8% from a year ago, Charter said, and net interest income rose by 3.5%. Fee income rose by $173,000, or 2.7%, while expenses rose by $941,000, or 3.9%.

Metropolitan Financial, an $8 billion-asset thrift holding company, said annualized returns equaled 0.73% on average assets, down 21 basis points from a year ago; and 11.51% on average equity, down 185 basis points.

Separately, the company said it completed a definitive agreement to be acquired by First Bank System, Minneapolis, in a stock-swap deal valued at roughly $800 million, or 160% of book value.

First Bank said it will take an after-tax restructuring charge of $45 million prior to closing of the deal.

Standard Federal Bank, an $11.2 billion-asset thrift holding company based in Troy, Mich., said annualized returns equaled 1.08% on average assets, down 13 basis points from a year ago; and 15.9% on average equity, down 260 basis points.

The thrift said net interest income rose by 13.6%, while its loan loss provision fell by 83.7%. Fee revenues rose by 26.8% or $3.71 million, but operating expenses rose by 38.9%, or $14.3 million.

Firstfed Michigan, an $8.3 billion-asset thrift holding company, said annualized returns equaled 0.73% on average assets, up 20 basis points from a year ago; and 13.51% on average equity, up 405 basis points.

The thrift said net interest income fell by 19.6%, while its loan loss provision dropped from $750,000 to zero. Fueled by gains on sales of investment securities, fee revenues rose by 164.4%, or $3.7 million, and operating expenses fell by 9%, or $1.8 million.

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