Securities losses were a factor in somewhat disappointing fourth- quarter earnings reported Tuesday by NationsBank Corp. and AmSouth Bancorp.
NationsBank, which took a $28 million securities loss, earned $405 million in the quarter, up 9% from $373 million in the year-ago quarter. NationsBank's earnings per share of $1.45 came in 9 cents below consensus estimates as compiled by First Call.
NationsBank's stock fell $1.875 on the news Tuesday, to $46.63 from Monday's close of $48.50. Analysts blamed lower bond trading profits, down by $31 million from the third quarter, and the securities loss, although the latter was largely offset by lower income taxes.
"The Street is a little disappointed here," said Anthony R. Davis, with Dean Witter in New York. "Net-net, it wasn't a particularly pretty quarter."
A previously announced $50 million securities loss helped drive AmSouth's net income down to $1.4 million, 96% below the $30.8 million earned in the year-ago quarter. AmSouth's 2 cents in earnings per share fell way short of the 13 cents consensus.
Prior year earnings at both NationsBank and AmSouth were restated to reflect acquisitions in 1994. NationsBank's report also reflects a first- quarter 1993 credit of $200 million to cover a change in the method of accounting for income taxes.
Separately, Birmingham, Ala.-based AmSouth announced it had hired Salomon Brothers Inc. to handle the sale of its mortgage servicing portfolio and eight of its 53 mortgage origination offices. AmSouth said the move will improve its efficiency and capital ratios.
NationsBank sold $1.5 billion in low-yielding bonds during the quarter, which produced a $28 million loss. Spokesman Rusty Page said NationsBank has so far chosen not to reinvest the proceeds from that sale "on the widespread assumption that interest rates are still going to increase."
Mr. Page also said NationsBank did not expect further losses from the bond portfolio.
Analysts were disappointed by NationsBank's higher-than-expected expenses - which rose 3% to $1.3 billion compared to the year-ago quarter - and relatively flat noninterest income, up 4% to $639 million.
Expenses were particularly affected by a buildup of personnel in NationsBank's capital markets group. Meanwhile, bond trading profits fell to $36 million in the quarter, from $67 million in the third quarter, reflecting an environment of rising interest rates.
Higher interest rates also hurt the net interest margin, which fell 14 basis points to 3.40% from 3.54% in the year-ago quarter. The company blamed a narrowing spread at its primary government securities dealer, Chicago Research and Trading Group Ltd.
On a more positive note, NationsBank - like most southeastern banks - enjoyed continuing strong loan growth. Commercial credits led a 4% increase in the quarter.
First Tennesee National Corp., Memphis, said it earned $37.1 million in the fourth quarter, up 61% from $23 million in the same period of 1993. First Tennessee's earnings per share of $1.16 came in just one cent below consensus estimates.
The $10.5 billion-asset banking company used loan growth to offset a decline in bond and mortgage banking revenues. Return on assets ended the year at an impressive 1.45%, with return on equity at 20.04%. +++ NationsBank Charlotte, NC Dollar amounts in millions (except per share) Fourth Quarter 4Q94 4Q93 Net income $405 $373 Per share 1.45 1.36 ROA 0.92% 0.94% ROE 14.68% 15.34% Net interest margin 3.40% 3.77% Net interest income 1,326 1,326 Noninterest income 639 615 Noninterest expense 1,261 1,222 Loss provision 70 100 Net chargeoffs 98 136 Full Year 1994 1993 Net income 1,690 $1,501 Per share 6.06 5.72 ROA 1.02% 1.12% ROE 16.10% 17.33% Net interest margin 3.58% 3.96% Net interest income 5,305 4,723 Noninterest income 2,597 2,101 Noninterest expense 4,942 4,293 Loss provision 310 430 Net chargeoffs 316 412 Balance Sheet 12/94 12/93 Assets $169,604 $157,686 Deposits 100,470 91,113 Loans 102,367 91,006 Reserve/nonp. loans 273% 193% Nonperf. loans/loans 0.78% 1.23% Nonperf. assets/assets 0.67% 1.13% Leverage cap. ratio 6.22% 6.00% Tier 1 cap. ratio 7.47% 7.41% Tier 1+2 cap. ratio 11.56% 11.73% ===
