American Finance System, Inc., a consumer finance company based in Silver Spring, yesterday reported a significant increase in profitability for the first quarter of 1977. Government Employees Financial Corp., another consumer finance firm, posted a slight decrease in earnings despite record loan volume.

AFS net income was $1.97 million (41 cents a share) compared with $627,000 (10 cents) in the same period last year. The 1977 quarterly results included an extraordinary gain of $525,000 (12 cents a share), representing the benefit of a tax loss carryforward. In 1976, the first quarter included a gain before taxes of $746,000 from selling an investment in cable television operations.

Gross revenues in the quarter were relatively unchanged at $20.3 million vs. $20.8 million.

Government Employees Financial, an affiliate of Government Employees Insurance Co., reported first-quarter earnings of $968.296 (55 cents a share, diluted) compared with $998,731 (57 cents) a year earlier, which was a record high. Credit volume rose 8.1 per cent to $44 million and the total of finance receivables on March 31 were a record $199 million, up $18 million from 12 months earlier.

Gefco is expanding its direct-mail marketing to consumers with no previous association with the Government Employees group of companies and 22 per cent of first-quarter loan volume came from these new prospects compared with 5 per cent for all of 1976.

NUS Corp., a Rockville engineering and consulting company, yesterday reported sharply improved operations for the first quarter. Net imcome was $266,000 (27 cents a share) compared with a loss in the 1976 period of $77,000. Revenues rose to $7.2 from $6.1 million.

A spokesman attributed the profit gain to heavier workloads in all major areas of business except environmental work. Halliburton Co., of Dallas, recently announced an aggreement in principle to acquire NUS in a cash exchange of $10.50 for each share of the Rockville firm.

Smithfield Foods, Inc., of Portsmouth, reported first-quarter profits of $447,000 (17 cents a share) compared with $213,000 (8 cents) in the 1976 period. Sales rose slightly to $35.4 million from $34.4 million. Improved profits were attributed to the Smithfield Packing Co. subsidiary.