KALAMAZOO, Mich. - First of America Bank Corp. said its 1992 net income win be reduced by a writedown of intangible assets and adoption of an accounting rule for post-retirement benefits.
But fourth-quarter net income on an ongoing operating basis will be $60 million to $63 million, up significantly from $39 million a year earlier, said the chairman and chief executive officer, Daniel Smith.
On that basis, earnings per share would be $1 to $1.05 for the fourth quarter, but reported results, after writedowns for intangible assets, are expected to be 55 cents to 60 cents a share.
Income Prediction
"We are very pleased that our expected earnings from ongoing operations, or business as usual, are strong," Mr. Smith said in a statement. "They add confidence to our view that 1993 will be a good year for the company."
Mr. Smith said net income from operations for the full year is expected to be about $220 million, versus $160 million in 1992.
"These numbers are stronger than we had originally anticipated obtained from the two mergers we completed this past year, Champion Federal Savings and Loan Association [in Illinois] and Security Bancorp" of Michigan, Mr. Smith said.
However, reported full-year income - after writedowns for intangible assets and a noncash charge of $22 million, or 37 cents a share, for retiree health care benefits - will be $2.40 to $2.45 a share, versus $2.69 in 1991.
Restating 1992 Earnings
The change for nonpension benefits, according to Financial Accounting Standard 106, is retroactive to Jan. 1.
First of America said it would restate 1992 quarterly earnings to reflect the accounting change. In addition, it said, adoption of the rule change will increase after-tax operating expenses by about 3 cents a share annually.
The other writeoff will reduce by $25 million certain intangible assets based on deposits acquired when interest rates were higher.
The reduction will result in a charge of 42 cents a share in the fourth quarter and reduce future amortization expenses by 2 cents a year.
Net Margin
During the 1992 second quarter, First of America incurred a one-time charge of $24 million, or 41 cents a share, for costs associated with its acquisition of Security Bancorp. Mr. Smith said the one-time costs would not affect ongoing earnings.
First of America's net interest margin should be 5% or better in the fourth quarter, Mr. Smith added, with a return on assets of 1.2% or greater and return on equity of 17% to 18%.
In Tuesday morning trading after the announcement, First of America's share price was down 12.5 cents, to $36.375.
