KeyCorp and Bank of Boston Corp. went against the grain of first- quarter bank earnings: they reported declines.

Each shortfall had a nonrecurring cause, relating to the sale of a mortgage subsidiary. Profits at both companies improved on an operating basis.

KeyCorp said its net income was $208 million, down 1% from the 1994 first quarter when it booked a one-time gain from the sale of its mortgage servicing business. But for the nonrecurring effects, the Cleveland-based superregional would have increased its earnings 10%.

Profits at Bank of Boston declined 7%, to $117 million, due to a $31 million charge following the first-quarter sale of its mortgage subsidiary. Otherwise, the income would have jumped 18%, the bank said.

Meanwhile, BayBanks Inc. of Boston reported quarterly income of $38 million, up by 26%. The $11.6 billion-asset bank, which is set to merge with Bank of Boston next Thursday, was helped by an increase in real estate loans and a favorable court decision on a company tax refund claim that brought in $2.5 million.

First-quarter earnings at Richmond-based Signet Banking Corp. rose 17% to $31.2 million, driven by growth in the company's innovative "loan-by- check" product. But the bank's chief financial officer said Thursday that Signet will significantly slow its marketing of loan-by-check because of heightened concerns about consumer indebtedness and credit problems.

Bancorp Hawaii Inc., the largest bank in that state, posted a 15.8% increase in net income, to $32.7 million. It benefited from loan growth and modest improvement in Hawaii's economy. Its closest competitor, First Hawaiian Inc., had a 7.6% increase in net income, to $20.2 million.

Analysts said one of the best bank reports of the quarter came from Zions Bancorp. in Salt Lake City. The $6.2 billion-asset Zions posted a 48% increase, to $23.7 million. Its earnings per share of $1.61 beat analysts' consensus estimate by eight cents.

Zions' 1995 results were depressed by a trading loss and restructuring charge of $4.4 million. Excluding that unusual event, net income rose 25%. But analysts said the company continued its recent history of excelling in most areas.

"It was really strong, once again. It's almost becoming boring," said James Marks, with Hancock Institutional Equity Services in San Francisco.

Analysts said Zions benefits by operating in three of the country's fastest-growing states - Utah, Nevada, and Arizona.

Sanwa Bank California reported a 21% increase in net income, to $14.8 million. The Los Angeles-based, $7.3 billion-asset institution was aided by an expansion of its net interest margin, improvements in asset quality, and expense controls. Its return on equity was 8.35%.

At KeyCorp, fee income improved by 15%, to $249 million, excluding securities losses realized in the year-ago period. The gain came from service charges on deposits, trust fees, and insurance and brokerage income, the company said. Loan securitization also boosted fee income by $7 million from last year's first quarter.

Net interest income was flat at $625 million, primarily because of an increased provision of $44 million, 144% more than the provision taken in last year's first quarter.

Loan chargeoffs were up 153%, to $43 million, while loan growth was flat.

Analysts following $65 billion-asset KeyCorp have a wait-and-see attitude as it continues to restructure its balance sheet and increase expenses in areas such as technology and marketing.

"They still face some revenue challenges," said Fred Cummings, an analyst with McDonald & Company Securities. "It's a good quarter for them, but this is not a company that has exceptional momentum."

Bank of Boston said it expects to offset its first-quarter decline with a related mortgage banking gain in the second quarter.

"It was a stronger quarter than I anticipated," said Smith Barney analyst Henry "Chip" Dickson.

Revenue growth increased 10%, largely because of higher fee income. Trading profits increased by $11 million and sales of securities more than doubled to $13 million.

George Bicher, an analyst with Alex. Brown & Sons, said he believes Bank of Boston will continue to see revenue growth from its consumer finance business and its international business.

Loans were essentially flat as Bank of Boston boosted its reserve for credit losses to $732 million, a 5% increase from the same period a year ago. Credit losses were up 7.7%, to $58 million.

At Signet, chief financial officer Wallace B. Millner 3d told analysts they should "peel back" 1996 yearend earnings estimates from the high end of the current range.

In upcoming quarters, the bank expects weak commercial loan growth, a pullback in the loan-by-check program, and a flat net interest margin, Mr. Millner said.

Signet has become "increasingly concerned about the disconnect we see between basic economic conditions on one hand and the consumer lending industry experience on the other," Mr. Millner said in a conference call with analysts. He said consumer debt and delinquencies have risen to a level "that you'd expect to see in a much weaker economy."

He said Signet had decided to reduce loan-by-check solicitations for "at least a quarter, maybe two quarters" as it "tracked the behavior of receivables already booked." As a result, he suggested Signet may not achieve its previously stated goal of building loan-by-check outstandings to $1.1 billion by yearend.

The first-quarter results underlined the increasing importance to Signet of the loan-by-check program, a national direct mail program in which selected customers receive preapproved checks, averaging $7,500 in size, that can be cashed at their local banks. Outstandings ballooned from $550 million at yearend to $848 million at the end of March, contributing most of the bank's first-quarter loan growth.

Bancorp Hawaii's earnings per share of 79 cents beat the consensus estimate by two cents. Thomas D. McCandless, senior bank analyst at Natwest Securities in New York, said the principal reason was lower than expected taxes, and higher than expected loan growth.

The company's 7% increase in noninterest expenses to $97.6 million was more than he had expected.

"They had a nice increase in the net interest margin," said Salomon Brothers analyst Carole Berger, in New York. The average spread on earning assets rose 18 basis points to 3.8%.

At First Hawaiian, earnings per share of 65 cents beat the consensus estimate by three cents. Its nonperforming assets declined 2% in the quarter to $90.4 million, while deposits rose 1.2% from last year's period to $5.3 billion. Loans and leases declined 8.9% because of a $461 million mortgage loan securitization in 1995. Its return on equity was 12.44%.

Brett Chase, Kenneth Cline, and Barton Crockett contributed to this article. It was written by Jacqueline S. Gold. +++

Keycorp Cleveland Dollar amounts in millions (except per share) First Quarter 1Q96 1Q95 Net income $208.0 $210.0 Per share 0.88 0.86 ROA 1.28% 1.28% ROE 16.42% 18.26% Net interest margin 4.70% 4.38% Net interest income 682.0 658.0 Noninterest income 249.0 171.0 Noninterest expense 570.0 561.0 Loss provision 44.0 18.0 Net chargeoffs 43.0 17.0 Balance Sheet 3/31/96 3/31/95 Assets $65,052.0 $67,709.0 Deposits 45,401.0 48,812.0 Loans 48,161.0 48,021.0 Reserve/nonp. loans 256.60% 285.51% Nonperf. loans/loans 0.71% 0.63% Nonperf. assets/assets 0.60% 0.54% Nonperf. assets/loans+OREO 0.81% 0.75% Leverage cap. ratio 6.46%* 6.24% Tier 1 cap. ratio 7.52%* 7.96% Tier 1+2 cap. ratio 11.09%* 11.05%

* Estimated

Bank of Boston Corp.

Boston Dollar amounts in millions (except per share) First Quarter 1Q96 1Q95 Net income $116.5 $125.3 Per share 0.95 1.04 ROA 1.00% 1.19% ROE 13.33% 17.43% Net interest margin 4.21% 4.56% Net interest income 433.6 425.9 Noninterest income 226.2 293.2 Noninterest expense 404.5 383.2 Loss provision 50.0 90.0 Net chargeoffs 42.0 42.0 Balance Sheet 3/31/96 3/31/95 Assets $46,457.0 $43,462.0 Deposits 31,235.0 28,275.0 Loans 31,402.0 30,439.0 Reserve/nonp. loans 227% 198% Nonperf. loans/loans 1.00% 1.20% Nonperf. assets/assets 0.80% 1.00% Nonperf. assets/loans+OREO 1.20% 1.40% Leverage cap. ratio 7.20%* 7.30% Tier 1 cap. ratio 8.10%* 7.80% Tier 1+2 cap. ratio 12.90%* 13.30%

*Estimated ===

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