Banks are proving especially adept at managing portfolios of mortgages.

During the first half of this year, banks supervised four of the top five mortgage funds in the nation, eking out modest gains while most rival funds were falling.

Huntington Bancshares supervised the top two funds, First of America oversaw the third-ranked mortgage fund, and KeyCorp managed the fifth best performer, according to rankings by Lipper Analytical Services.

The funds, handled by the banks' trust and investment units, bucked the general trend. Three-quarters of the 60 mortgage portfolios tracked by Lipper, of Summit, N.J., declined in value in the first half.

While long-established mutual fund companies generally manage the top- performing stock portfolios, mortgage funds give banks a chance to shine, industry experts said.

Longtime trading for their own portfolios has made banks "expert liability managers," a key capability for mortgage fund managers, Ms. Yuen said.

Huntington Bancshares came out on top with two classes of its Monitor Mortgage Securities Fund. A $45 million portfolio for trust accounts earned 1.06%, while a $1.7 million segment for retail investors returned 0.85%. Different pricing structures account for the unequal returns.

Securities culled from home loans have a firm position with an important segment of Huntington Bancshares' customers, executives said.

The mortgage fund "is primarily used in trust accounts when the customer needs high current income coupled with the credit quality of government- guaranteed securities," said Stephen M. Geis, a fixed-income manager with the Columbus, Ohio, banking company.

The bank's portfolio managers note that they cannot take sole credit for the first-half accomplishment. Piper Capital Management, a money manager in Cincinnati, is the funds' sub-adviser, making day-to-day investment decisions.

First of America saw four classes of its Parkstone mortgage fund finish in the top 12, including shares for institutional investors that gained 0.72% to land at 3.

The Kalamazoo, Mich., banking company shuns risky collateralized mortgage obligations in favor of securities made from mortgage loans that have been around a while.

"Loans that have been seasoned as long as 15 years lose some prepayment risk because they've already been through a lot of interest rate cycles," said Mark Kummerr, director of fixed income securities at First of America Investment Corp.

Not all financial institutions fared well. Two classes of Great Western Financial Corp.'s mortgage fund fell in value by 1.85% and 1.48%, respectively, finishing in 53d and 49th place. And a fund overseen by Amsouth Bancorp lost 0.82% of its value, placing at 27.

Overall, mortgage mutual funds lost an average of 0.80% between Dec. 31 and June 30, according to Lipper. The performance puts the funds below the 10.84% return of general stock funds but above various classes of Treasury securities that all declined, said Janet Yuen, an analyst with Lipper.

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