Southeastern banks reported significant profit gains in the first quarter, helped by strong loan growth and robust fee income.

Earnings at Wachovia Corp. gained 14%, reaching $142 million, despite a higher loan-loss provision.

Charlotte-based First Union Corp. earned $230 million, 6% more than a year earlier.

And Barnett Banks Inc., Jacksonville, reported net income of $129 million, a 9% gain.

At Winston-Salem, N.C.-based Wachovia, net interest income led the charge, with a 9% gain to $373 million, caused by a 14% surge in loan growth. The gains were strongest in commercial loans, credit cards, and commercial mortgages.

Noninterest income also did well, up 8% to $157 million, from $145 million in the year-ago quarter. Chief financial officer Robert S. McCoy Jr. attributed this to growth in the credit card portfolio, as well as ATM and debit card revenues, investment product sales, and trading profits.

The loan-loss provision was a countervailing force. Wachovia set aside $22 million for bad loans in the first quarter, a whopping 23% more than it did a year ago.

Mr. McCoy said the company increased the provision largely as a precautionary measure. "We saw a bubbling up in pressure on consumers," he said. "You begin to see things like past dues rising and chargeoffs up. It's no one thing, just enough things for us to say we think maybe it's time to add more to our loan-loss reserve."

Higher expenses, up 5% to $283 million, was also a problem. Mr. McCoy said Wachovia, which has $40 billion of assets, had more foreclosed property expense and also spent more on software and contract programmers.

But "the hallmark of the quarter to date is that the results have been pretty much in line" with expectations, said Dean Witter analyst Anthony R. Davis. "The balance sheet momentum has been stronger, the credit has been not quite as good as we thought, and the margin erosion has been pretty much as expected."

Credit quality numbers at both Barnett and First Union were still good. But some banks are no longer receiving the boost from lower loan-loss provisions that they enjoyed in the last few years.

First Union's provision was actually up 30% from the year-earlier quarter, to $32.5 million. The company attributed this to a higher credit card portfolio chargeoff rate, about 4%, linked to a national solicitation effort.

"Simply anticipating those chargeoffs, we're adding to the reserve," said chief credit officer Malcolm T. Murray Jr.

Barnett's provision also rose, by 25%, to $24.3 million. Barnett, which has $42 billion of assets, blamed this on higher credit card chargeoffs as well as a lower rate of recoveries on bad loans.

A 9% jump in noninterest expense at Barnett was linked to recent acquisitions. On Jan. 27 the bank completed its acquisition of Equicredit Corp., a consumer finance company. A month later it purchased BancPlus Financial Corp., a retail mortgage company.

At First Union, which has $78 billion of assets, the net interest margin fell to 4.57%, a decline of 14 basis points from the fourth quarter. Barnett's margin was down three basis points during the same period.

First Union said its margin slippage was caused by higher deposit costs and a $9 million amortization of $23 million in futures options.

Loan growth was a positive factor at both banks. First Union's loans were up by $1.7 billion, or 3%, from yearend. The comparable figures at Barnett: $1 billion, or 3.6%.

Meanwhile, SouthTrust Corp., Birmingham, Ala., reported net income of $47 million, a 15% gain from the year-earlier quarter.

Crestar Financial Corp., Richmond, Va., earned $45.1 million, up 11% from the year-earlier quarter. Crestar cited strong loan growth, an improved net interest margin, and stringent expense control as the reasons for the gain.

Central Fidelity Banks Inc., also of Richmond, earned $25.7 million, down 12%. The $10 billion-asset bank attributed the decline to a slowing economy resulting from recent interest rate hikes by the Fed. +++ Wachovia Corp. Winston-Salem, N.C. Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $142.2 $124.8 Per share 0.82 0.72 ROA 1.46% 1.40% ROE 17.48% 16.53% Net interest margin 4.36% 4.37% Net interest income 372.8 342.3 Noninterest income 157.0 145.4 Noninterest expense 283.0 270.1 Loss provision 21.8 17.8 Net chargeoffs 19.4 17.1 Balance Sheet 3/31/95 3/31/94 Assets $40,223 $36,350 Deposits 23,110 22,279 Loans 26,728 23,662 Reserve/nonp. loans 5.69% 4.05% Nonperf. loans/loans 0.27% 0.42% Nonperf. assets/assets 0.35% 0.53% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 8.65% 8.56% Tier 1 cap. ratio 9.4% 9.6% Tier 1+2 cap. ratio 12.7% 13.5% First Union Corp. Charlotte, N.C. Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $229.9 $216.7 Per share 1.32 1.27 ROA 1.24% 1.28% ROE 16.71% 17.54% Net interest margin 4.57% 4.79% Net interest income 801.8 750.4 Noninterest income 301.5 275.8 Noninterest expense 684.7 639.8 Loss provision 32.5 25.0 Net chargeoffs 42.5 31.2 Balance Sheet 3/31/95 3/31/94 Assets $77,855 $72,248 Deposits 56,803 52,088 Loans 54,799 45,718 Reserve/nonp. loans 1.74% 2.17% Nonperf. loans/loans 0.79% 1.32% Nonperf. assets/assets 1.03% 1.70% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 6.04% 6.57% Tier 1 cap. ratio 7.86% 9.36% Tier 1+2 cap. ratio 13.02% 15.15% Barnett Banks Inc. Jacksonville, Fla. Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $128.7 $118.0 Per share 1.23 1.12 ROA 1.26% 1.26% ROE 16.51% 16.71% Net interest margin 4.77% 4.92% Net interest income 430.5 415.3 Noninterest income 169.7 137.3 Noninterest expense 370.4 340.5 Loss provision 24.3 19.4 Net chargeoffs 24.4 19.4 Balance Sheet 3/31/95 3/31/94 Assets $41,735 $37,983 Deposits 34,337 32,591 Loans 29,263 26,170 Reserve/nonp. loans 2.27% 1.94% Nonperf. loans/loans 0.76% 1.03% Nonperf. assets/assets 0.71% 1.04% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 6.25% 7.43% Tier 1 cap. ratio NA NA Tier 1+2 cap. ratio NA NA ===

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