SunTrust Banks Inc. said Tuesday its first-quarter earnings rose 11% to $150.4 million on the strength of a one-time securities gain and strong trust revenues. Earnings per share of $1.33 beat consensus estimates by 1 cent.

The results masked the drag of heavy deposit expenses and investment spending. Costs associated with a high-yielding money market account depressed both net interest income, down 3% from yearend, and the net interest margin, which fell 12 basis points during the quarter.

"It was an O.K. quarter," said R. Harold Schroeder, with Keefe, Bruyette & Woods Inc. "I'm not thrilled with it, but I am somewhat appeased by the trust increase."

Noninterest expense in the first quarter included $25 million of accruals for marketing and systems related to SunTrust's "growth project," a three-year program to boost revenues in selected business lines. The project's expenses would be even higher if personnel expenses related to new hires were included.

Partly offsetting those expenses was a $16 million gain on the sale of SunTrust's stock in People's Bank of Lakeland, Fla., which was acquired last year by Columbus, Ohio-based Huntington Bancshares. The gain constituted 9 cents of SunTrust's $1.33 in earnings per share.

"There's just not a lot of revenue growth here," said Dean Witter analyst Anthony R. Davis. "It's really more financial engineering than anything else."

The impact of SunTrust's aggressive first-quarter deposit strategy, which featured a money market account yielding 6.5%, was clearly seen in the bank's margin and net interest income line.

SunTrust's Advantage Rate Account helped bring in nearly $2 billion of new deposits, as interest-bearing deposits increased from $25.4 million at yearend to $27.1 million as of March 31.

But the margin, which had been stable at 4.47% for three consecutive quarters, plunged to 4.35% in the first. Net interest income, $444 million in the fourth quarter, fell to $434 million in the first.

"We paid a cost to generate those kinds of deposits in the first quarter," said SunTrust investor relations spokesman James Armstrong. "It was something that was calculated to be expensive and it has been."

But Mr. Armstrong predicted "the worst is over" for SunTrust's margin, as the new accounts signed up in late January and February will be repriced from 6.5% to a lower market rate on April 12.

One bright spot in SunTrust's earnings picture was an 11% gain in fee income from the year-ago quarter, excluding securities gains. SunTrust attributed much of the gain to improving personal trust revenues.

In other earnings news, Birmingham, Ala.-based Compass Bancshares reported $10.2 billion of assets and earnings of $36 million, up 47% from the year-ago period. But securities transactions and a gain from the sale of a branch office contributed 14 cents to Compass' 93 cents in earnings per share, bringing "core" net income per share down to 79 cents.

Compass earned $24.5 million, or 64 cents a share, in the year-ago quarter.

Cincinnati-based Star Banc Corp., with $9.6 billion of assets, earned $38.1 million in the quarter, 16% above the year-ago level. Chairman, president, and chief executive Jerry A. Grundhofer attributed the improvement to a strong increase in fee income combined with lower expenses.

Noninterest income at Star Banc grew by 20% to $39.8 million during the period.

Crosstown rival Provident Bancorp, with $6.2 billion of assets, reported $19.7 million of net income, representing a 31% increase from the same period in 1995. Strong growth in loans and fee income helped Provident overcome higher investment spending and credit costs. +++

SunTrust Banks Inc. Atlanta Dollar amounts in millions (except per share) First Quarter 1Q96 1Q95 Net income $150.4 $136.0 Per share 1.33 1.18 ROA 1.38% 1.35% ROE 18.87% 18.46% Net interest margin 4.35% 4.58% Net interest income 433.7 424.9 Noninterest income 213.7 176.9 Noninterest expense 401.0 358.1 Loss provision 25.0 25.5 Net chargeoffs 12.7 11.5 Balance Sheet 3/31/96 3/31//95 Assets $46,585.0 $42,760.0 Deposits 34,477.0 31,274.0 Loans 31,786.0 29,235.0 Reserve/nonp. loans 374% 355% Nonperf. loans/loans 0.60% 0.64% Nonperf. assets/assets 0.54% 0.63% Nonperf. assets/loans + OREO 0.78% 0.92% Leverage cap. ratio NA 6.72% Tier 1 cap. ratio NA 8.07% Tier 1+2 cap. ratio NA 10.06% ===

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