Large financial institutions across the country continued to report healthy second-quarter gains, reflecting the nation's robust economy, which helped boost loan growth and, in some cases, mortgage banking and fee revenues.

"Stable margins, steady fee income, and good cost controls have helped banks generally report in line with or slightly better than expectations across the board," said Joseph K. Morford, an analyst with First Security Van Kasper in San Francisco.

"Earnings have been very strong as a whole," said Jacqueline Reeves, an analyst at Putnam, Lovell, de Guardiola & Thornton in New York. Though the country's economic strength has been helpful, "you have to be good to produce these numbers. It's not an easy environment, because it's so competitive."

Regions Financial Corp., the nation's 22nd-largest banking company, reported a 12% rise in net income, to $142 million. Earnings per share at the Birmingham, Ala.-based company reached 63 cents, matching analysts' expectations.

"They had solid revenue growth, which stemmed from an increase in earning assets," said Christopher Mutascio of Legg Mason Wood Walker Inc. in Baltimore.

Net interest income gained 12%, to $371.9 million. Net loans also increased 12%, to $26.55 billion. The loan growth stemmed mostly from an uptick in residential mortgages, real estate construction, and commercial lending.

However, chargeoffs more than doubled, to $27.1 million. Analysts said the downturn in credit quality resulted from portfolios inherited in recent acquisitions.

"This was more an opportunity to clean up from a number of deals they had over the past year than an infection," Ms. Reeves said.

Noninterest income gained less than 1%, to $121.8 million. Mortgage banking revenue fell as a result of rising interest rates.

Analysts were impressed with cost control at the $39.8 billion-asset company. Though operating expenses rose to $260.2 million, from $248.5 million in the same period a year ago, they fell from $262.6 million in the first quarter.

"That shows Regions is having success in wringing out cost efficiencies from its numerous acquisitions over the past few years," Mr. Mutascio said.

At St. Louis-based Mercantile Bancorp, the country's 26th-largest banking company, net income gained 12.5%, to $120.5 million.

Earnings of 75 cents a share met analysts' expectations.

The $35.5 billion-asset company, which also benefited from a spurt in loan growth, is poised to merge with Firstar Corp. of Milwaukee in September.

Commercial loans were up 13.7%, to $6.74 billion, as Mercantile sought out new customers. Indirect loans-most of which were for cars-were up 17.5%, to $1.7 billion.

By adding more commercial and indirect loans to Mercantile's mortgage- heavy portfolio, the company's net interest margin improved slightly, to 3.55%, from 3.53% on June 30, 1998.

Net interest income rose 3.6%, to $285.3 million.

Noninterest income grew 9.7%, to $122.7 million, excluding gains from securities. Fees from investment banking and brokerage services were up 17.3%, to $11.5 million, and securitization revenue nearly doubled, to $7.5 million.

Golden State Bancorp, the nation's second-largest thrift and the parent of California Federal Bank, earned $83.6 million in the second quarter. That compares with the $288 million earned in the same period last year, when the $57 billion-asset company benefited from a one-time tax benefit.

Earnings per share of 55 cents beat consensus estimates by 3 cents.

Noninterest expenses of $224 million were 13% lower than in the first quarter. The company said that as of June 30, it had achieved $162 million of its promised cost savings from last year's merger of California Federal and Glendale Federal.

Earnings at Unionbancal Corp. of San Francisco jumped 6%, to $115 million. Excluding a $17 million gain on a credit card portfolio sale in last year's second quarter, profits increased 23%. Earnings per share at the $30.9 billion-asset company, the parent of Union Bank of California, reached 67 cents, beating the consensus estimate by 2 cents.

Unionbancal, which is mostly owned by Bank of Tokyo-Mitsubishi, said service charges on deposit accounts rose to nearly $43 million, a 32% increase.

Salt Lake City-based Zions Bancorp. said it earned $53 million, a 60% gain. The $17.6 billion-asset company earned 67 cents a share, beating consensus estimates by a penny. Net interest income jumped 44%, to $175 million, while fee income increased 27%, to $61 million.

Zions is set to merge with hometown rival First Security Corp. in the fourth quarter.

Pacific Century Financial Corp. reported second-quarter earnings of $39 million. The Honolulu-based company earned $3.1 million in the same period last year, the low figure due to a restructuring charge and bolstered loan- loss reserves.

Earnings per share of 47 cents beat the consensus estimate by 2 cents but were helped by a one-time $6.8 million gain on sales of securities.

Net loans at the $14.6 billion-asset company increased 1%, to $9.2 billion. Total deposits decreased 2%, to $9.3 billion, reflecting Pacific Century's efforts to shed non-interest-bearing deposits and other "less productive assets," the company said. +++

Regions Financial Corp.

Birmingham, Ala.

Dollar amounts in millions (except per share) Second Quarter 2Q99 2Q98

Net income $142.0 $126.4

Per share 0.63 0.56

ROA 1.46% 1.50%

ROE 18.10% 17.51%

Net interest margin 4.19% 4.33%

Net interest income 377.5 338.3

Noninterest income 121.8 121.3

Noninterest expense 260.2 248.5

Loss provision 23.9 14.5

Net chargeoffs 27.1 11.9

Year to Date 1999 1998

Net income $278.5 $243.4

Per share 1.23 1.09

ROA 1.47% 1.47%

ROE 18.12% 17.15%

Net interest margin 4.21% 4.38%

Net interest income 737.0 670.6

Noninterest income 264.9 229.7

Noninterest expense 522.8 490.5

Loss provision 44.7 28.9

Net chargeoffs 38.6 23.8

Balance Sheet 6/30/99 6/30/98

Assets $39,807.6 $34,726.8

Deposits 28,427.2 27,252.0

Loans 26,552.7 23,658.3

Reserve/nonp. loans 198.23% 193.45%

Nonperf. loans/loans 0.62% 0.72%

Nonperf. assets/assets 0.45% 0.56%

Nonperf. assets/loans + OREO 0.67% 0.82%

Leverage cap. ratio NA 7.63%

Tier 1 cap. ratio NA 10.46%

Tier 1+2 cap. ratio NA 12.71% ===

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