A US$40 million tax credit because of changed accounting standards has helped Marine Midland Bank, the US flagship of HSBC Holdings, increase first-quarter earnings from $2.6 million to $34 million. The bank also made no provision for loan losses, against the $40.5 million provision made in the first quarter of 1992. The company said the quality of its classified loans ''continued to improve significantly'', with non-accruing loans 40 per cent down from the level of 12 months before. Marine Midland has been a thorn in HSBC Holdings' side for several years, needing huge cash injections and asset-slashing exercises partly because of bad property and Third World loans. However the clean-up, largely carried out by former president John Bond, has been seen recently as getting the bank back into shape and ready to benefit from any US recovery. At the end of the quarter, total assets were up $376 million to $17.02 billion, well down on the 1989 peak of $27 billion. Continuing reductions in activities such as its national car lending business brought net interest income down to $162.8 million for the three months against $168.3 million for the same period in 1992. A crackdown on overheads saw credit and operating expenses fall 10.4 per cent to $190.5 million, in line with the aim expressed in HSBC's annual report of ''simplifying and enhancing its products to improve efficiency and customer service''. The accounting change brought in by the new Financial Accounting Standards Board led to Marine Midland booking a $39.1 million credit against a charge of $1 million in the same quarter last year. Non-interest income fell sharply from $88.5 million to $22.6 million, mostly because of the accelerated write-off of mortgage servicing rights. The Tier 1 risk-weighted asset ratio, or core capital, rose to more than nine per cent against eight per cent a year ago. The total capital ratio exceeded 16 per cent at the end of the quarter, against 15 per cent a year ago. Marine Midland is wholly owned by HSBC Holdings, and has more than 300 branches in New York state.