More regional banks released strong third-quarter earnings reports Wednesday, allaying investor fears that global economic woes would reach far into the industry.

In the Southeast, First Union Corp. of Charlotte, N.C., said earnings jumped 33% in the period, to $995 million, thanks to a domestic focus and diversified business mix. Wachovia Corp. of Winston-Salem, N.C., told a similar story, logging a 14.3% gain, to $227.4 million.

In the Midwest, National City Corp. in Cleveland said healthy loan growth and robust fee income drove up its profits 22%, to $344.5 million.

With their results meeting or beating analysts' expectations, the regionals stressed that they are not exposed to the international markets and hedge funds that are taking their toll on the industry's two newest behemoths-Citigroup and BankAmerica Corp.-and other money-center banks.

Analysts said Wednesday's reports-following strong reports on Tuesday from several Southeast banks-should finally convince investors that the global woes plaguing the industry's largest players would not harm the regionals.

Indeed, the market reacted favorably to the earnings news. First Union's shares rose 18.75 cents, to $50, while Wachovia closed up $1, at $86.4375. Shares of Nat City traded up most of Wednesday, but finished down $1.0625, at $66.9325, as a late-day stock market dip took its toll.

"Hopefully, this is a start of a good rebound for the group," said Frank Barkocy, an analyst with Josephthal & Co. "I think investors will start cherry-picking among stocks."

"We have virtually no foreign loan or hedge fund exposure," said David A. Daberko, chairman and chief executive officer of National City. The banking company will "remain unrelentingly focused" on core banking businesses and on merger integrations "regardless of the direction of the economy," he said.

At First Union, the country's sixth-largest banking company, with $234.6 billion of assets, earnings per share of $1.01 beat Wall Street estimates by a nickel, according to First Call Corp. The net income included after tax, merger-related charges of $16 million.

Analysts said First Union benefited from its region's robust economy and strict balance sheet management-the same attributes that fueled growth at its North Carolina neighbor, Wachovia.

"These companies are not only smart, they're lucky," said John W. Coffey, an analyst with Robinson-Humphrey Co. in Atlanta. "They're smart because they've stayed away from the esoteric activities of the money- center banks, and they're lucky because they're in the Southeast where the economy is strong."

As in previous quarters, fee income fueled First Union's profits. Noninterest income rose 53% from a year earlier, to $1.6 billion- representing about 49% of the company's total revenues-driven by the company's capital markets and capital management groups.

The capital management group, which houses First Union's trust, mutual funds, retail brokerage, and insurance activities, saw its income soar 60%, to $451 million. The capital markets group, which includes asset securitization and loan syndications, reported a 36% income gain, to $249 million.

Offsetting the fee income increases was a 6% decline in net interest income, to $1.9 billion. The net interest margin also fell to 3.79%, from 4.57% one year earlier.

First Union's quarterly results included $211 million in securities gains, which offset a decline in the value of commercial real estate loans held for securitization.

The quarter also included a gain of $113 million from branch sales, First Union officials said.

"The quarterly results really illustrate the benefits of their broad diversification," Mr. Barkocy said. "They have minimal involvement as far as international exposure, minimal exposure to hedge funds. It's kind of a stay-at-home focus that has been much to their advantage."

Wachovia, with $65.6 billion of assets, reported earnings per share of $1.09, which was in line with analysts' expectations.

Like First Union, Wachovia benefited from a stay-at-home mentality.

"There are recessionary signs, and all of that is a cloud on the horizon of growth," said Robert McCoy, Wachovia chief financial officer. "But in our markets we seem to be doing very well."

The banking company said revenues climbed 14.9%, to $118 million, with fee-based income contributing 46% of the growth.

Capital markets, investment sales, trust, and service charge revenues were key elements of Wachovia's gain. But loan growth was also a factor, as net interest income swelled $64 million, or 11.9%, to $602 million. The company also saw its net interest margin widen to 4.26%, from 4.12% one year earlier.

R. Harold Schroeder, an analyst with Keefe, Bruyette & Woods, said Wachovia was to be credited for "aggressively working the liability side of their funding sources."

But he noted the company still has work to do reining in expenses, which Mr. McCoy acknowledged. Wachovia's efficiency ratio hit 53.98%, compared with 53.58% in the same quarter in 1997.

At National City, net income of $1.03 per share beat Wall Street estimates by 2 cents, according to First Call Corp.

The $83.1 billion-asset company credited improved earnings to loan growth, good credit quality, and fee income. Average loans were up 11% from a year earlier, to $57.6 billion. Net interest income increased 3.5%, to $736 million. And the company's provision for loan losses declined 24%, to $45 million.

Excluding securities gains, noninterest income rose 28%, to $556 million, thanks to the company's National Processing Inc. subsidiary, mortgage banking activities, and service charges on deposits.

Processing income was up 28%, to $124 million, while service charges on deposit accounts earned $100 million, a 7% increase over a year earlier. Mortgage banking revenues jumped 86%, to $79 million.

"National City sticks to bread-and-butter banking," said Diana Yates, an analyst with A.G. Edwards, St. Louis. "These regional banks are going to fare very well in this environment."

Profits at State Street Corp. rose 10%, to $111 million, as the Boston banking company continued to see year-over-year gains from servicing mutual funds, pensions, and other institutional investors.

Earnings per share of 68 cents beat the consensus by a penny, according to First Call. But analysts said comparisons to the second quarter this year showed some sluggishness.

"It's not as if they blasted out of the box like they usually do," said Stephen Biggar, an analyst at S&P Equity Research.

Total fee revenues grew 16%, to $511 million, compared with one year earlier. Securities processing fees gained 28%, to $48 million. Custody, accounting, and record-keeping fees-the biggest component of State Street's noninterest revenues-were up 17%, to $379 million.

Custody assets grew 13%, to $4.3 trillion over last year. Assets under management gained 11% from one year earlier, to $422 billion.

Ronald O'Kelley, chief financial officer, said the performance reflected internal growth, gains in new customers, and strong execution within the core businesses.

But due to a decline in equity values worldwide, custody and accounting fees were essentially flat when compared with the second quarter. After 14% growth during the first half of the year, custody assets dipped 5% from the end of June, and assets under management fell 8%.

These businesses had returned 15% to 20% gains each quarter for the last two years, analysts said.

"In view of the comparison with our very strong performance of a year ago and this quarter's challenging environment, we achieved impressive financial results," said Marshall N. Carter, chairman and chief executive officer.

State Street has continued to invest in expansion. Expenses grew 17%, to $528 million. +++

National City Corp. Cleveland, Ohio Dollar amounts in millions (except per share) Third Quarter 3Q98 3Q97 Net income $344.5 $283.1 Per share 1.03 0.87 ROA 1.69% 1.55% ROE 19.00% 18.12% Net interest margin 4.10% 4.38% Net interest income 745.8 721.5 Noninterest income 620.0 435.6 Noninterest expense 782.4 672.1 Loss provision 45.2 59.2 Net chargeoffs 45.2 53.6 Year to Date 1998 1997 Net income $779.4 $830.1 Per share 2.35 2.52 ROA 1.32% 1.55% ROE 15.27% 18.02% Net interest margin 4.15% 4.38% Net interest income 2,194.0 2,141.6 Noninterest income 1,688.6 1,311.7 Noninterest expense 2,505.6 2,027.4 Loss provision 144.5 172.5 Net chargeoffs 140.6 155.3 Balance Sheet 9/30/98 9/30/97 Assets $83,134.7 $74,348.4 Deposits 54,228.2 51,798.3 Loans 57,708.5 52,068.4 Reserve/nonp. loans 439.04% 439.11% Nonperf. loans/loans 0.38% 0.42% Nonperf. assets/assets 0.30% 0.35% Nonperf. assets/loans + OREO 0.43% 0.49% Leverage cap. ratio 7.42% 7.63% Tier 1 cap. ratio 8.81% 9.27% Tier 1+2 cap. ratio 12.69% 13.67%

Wachovia Corp. Winston-Salem, N.C. Dollar amounts in millions (except per share) Third Quarter 3Q98 3Q97 Net income $227.0 $199.0 Per share 1.09 1.00 ROA 1.43% 1.39% ROE 17.58% 18.12% Net interest margin 4.26% 4.12% Net interest income 602.0 538.0 Noninterest income 317.0 257.0 Noninterest expense 492.0 425.0 Loss provision 73.0 63.0 Net chargeoffs 73.0 63.0 Year to Date 1998 1997 Net income $633.0 $589.0 Per share 3.01 2.94 ROA 1.33% 1.38% ROE 16.33% 17.79% Net interest margin 4.23% 4.12% Net interest income 1,777.0 1,583.0 Noninterest income 922.0 746.0 Noninterest expense 1,504.0 1,234.0 Loss provision 215.0 188.0 Net chargeoffs 215.0 188.0 Balance Sheet 9/30/98 9/30/97 Assets $65,574.0 $58,041.0 Deposits 38,807.0 36,911.0 Loans 45,629.0 40,748.0 Reserve/nonp. loans 378.62% 543.37% Nonperf. loans/loans 0.32% 0.23% Nonperf. assets/assets 0.26% 0.21% Nonperf. assets/loans + OREO 0.38% 0.30% Leverage cap. ratio NA 9.38% Tier 1 cap. ratio 8.10%* 9.47% Tier 1+2 cap. ratio 11.10%* 12.67%

* Estimated

First Union Corp. Charlotte, N.C. Dollar amounts in millions (except per share) Third Quarter 3Q98 3Q97 Net income $995.0 $748.0 Per share 1.01 0.78 ROA 1.75% 1.50% ROE 23.50% 20.31% Net interest margin 3.79% 4.57% Net interest income 1,904.0 2,026.0 Noninterest income 1,844.0 1,082.0 Noninterest expense 1,983.0 1,711.0 Loss provision 239.0 225.0 Net chargeoffs 187.0 231.0 Year to Date 1998 1997 Net income $2,034.0 $2,133.0 Per share 2.08 2.20 ROA 1.64% 1.49% ROE 22.89% 20.69% Net interest margin 3.94% 4.65% Net interest income 5,667.0 6,026.0 Noninterest income 4,778.0 3,157.0 Noninterest expense 6,755.0 5,170.0 Loss provision 524.0 658.0 Net chargeoffs 472.0 678.0 Balance Sheet 9/30/98 9/30/97 Assets $234,580.0 $202,766.0 Deposits 134,528.0 133,144.0 Loans 133,807.0 133,791.0 Reserve/nonp. loans 267% 247% Nonperf. loans/loans 0.52% 0.66% Nonperf. assets/assets 0.35% 0.49% Nonperf. assets/loans + OREO 0.61% 0.73% Leverage cap. ratio 6.07%* 6.87% Tier 1 cap. ratio 7.12%* 8.22% Tier 1+2 cap. ratio 11.20%* 13.20%

*Estimated ===

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