Despite rising deposit costs, gains in fee income and loan growth helped several midwestern banks report higher earnings for the second quarter.
First Chicago Corp., with $76.1 billion in assets, reported net income of $187.4 million, an 11% gain over the year-earlier period. Its new merger partner, NBD Bancorp, also reported increased earnings during the quarter, to $143.4 million.
National City Corp. reported record second-quarter earnings of $112.5 million, a 6.3% increase from a year ago.
And two St. Louis banks reported higher earnings for the period: Boatmen's Bancshares, with $108.7 million, and Mercantile Bancorp., with $52.4 million.
First Chicago's results were helped by the repurchase of 650,000 shares during the quarter. For the first half, the company reported net income of $382.5 million, a 5.5% increase.
"Overall, we're pretty pleased with the results," said Richard Thomas, First Chicago's chairman. "Loan growth was very good at American National (First Chicago's small-business subsidiary) and in our consumer bank, which is where we are anxious to make loans because they are sensibly priced."
Nonetheless, he said the bank did suffer from some compression in the net interest margin during the quarter, particularly in the credit card portfolio. The margin for the quarter was 2.41%, a 28-basis-point drop from a year earlier.
This decline in margin, combined with a 62.8% increase in loan-loss provisions meant that net interest income, after provisions, fell 1.4% during the quarter despite a 12% increase in total loans.
Second-quarter results did get a boost from the $59.6 million earned from the sale of equity securities and $25 million in gains from asset sales.
"We have some very strong performances in this area, which largely offset a very weak quarter in traditional fixed-income and currency trading," Mr. Thomas said.
Second-quarter earnings at NBD Bancorp amounted to a 6.1% increase over the $135.2 million reported a year ago.
Net income for the first six months grew 10.2% from the comparable period a year ago, to $284.3 million.
Jerry Hanson, comptroller at the $48.1 billion-asset Detroit-based bank, said the 19.1% increase in total loans was spread across consumer and commercial lending areas.
As a result of the higher loan volume, net interest income grew 5.5% from a year ago, to $428.6 million. The increase came despite a 22-basis- point decline in net interest margin.
"We expect the margin to stabilize and actually improve going forward," said Tony Howard, an analyst with First of Michigan in Detroit. "But there is a lot of competition in the Midwest, and particularly in Michigan, for deposits, so we expect the margin pressures to continue."
National City, the Columbus, Ohio-based bank with $34.6 billion in assets, said that for the first six months net income increased 7% to $223.6 million.
Earnings for the second quarter got a boost from a 15.9% increase in loans outstanding, to $25.1 billion. That produced a 7.1% increase in net interest income, despite a 17.5% jump in loan-loss provisions and a 21- basis-point narrowing in the net interest margin.
The larger loan-loss provision was due primarily to the $35.2 million in chargeoffs during the quarter, a 38.8% increase from a year earlier. Even after a 40.8% rise in recoveries, net chargeoffs rose 35.3% for the quarter.
Increases in trust fees and mortgage banking income helped St. Louis- based Boatmen's Bancshares report a 5.6% earnings increase.
For the first six months, the bank earned $194.5 million, a 3.5% decrease from a year ago, largely because of one-time, merger-related expenses.
The $33.4 billion-asset company also suffered from an 18-basis-point decline in net interest margin. As a result, net interest income rose 0.4% during the quarter, to $301.3 million, despite a 12.6% increase in loans outstanding, to $19.9 billion.
Crosstown rival Mercantile Bancorp. also overcame a narrowing net interest margin, which fell 34 basis points. As a result, net interest income declined 1.7%, to $145.9 million.
For the first half of the year, net income amounted to $102.1 million, a 10.9% increase.
Loan-loss provisions made during the quarter amounted to just over $6.6 million, a 22.3% decline from the year-earlier period. +++ First Chicago Corp. Chicago Dollar amounts in millions (except per share) Second Quarter 2Q95 2Q94 Net income $187.4 $168.7 Per share 1.90 1.67 ROA 0.99% 1.12% ROE 17.40% 16.50% Net interest margin 2.41% 2.69% Net interest income 365.4 338.7 Noninterest income 487.7 428.8 Noninterest expense 487.7 460.6 Loss provision 70.0 43.0 Net chargeoffs 45.0 34.0 Year to Date 1995 1994 Net income $382.5 $362.5 Per share 3.88 3.67 ROA 1.06% 1.20% ROE 18.10% 18.30% Net interest margin 2.50% 2.72% Net interest income 745.1 674.2 Noninterest income 957.8 930.7 Noninterest expense 965.8 945.1 Loss provision 135.0 93.0 Net chargeoffs 89.0 67.0 Balance Sheet 6/30/95 6/30//94 Assets $75,328.0 $64,089.0 Deposits 33,764.0 28,577.0 Loans 25,828.0 22,999.0 Reserve/nonp. loans 538% 454% Nonperf. loans/loans 0.50% 0.65% Nonperf. assets/assets 0.18% 0.28% Nonperf. assets/loans +
OREO 0.53% 0.79% Leverage cap. ratio 7.0% 8.0% Tier 1 cap. ratio 8.7% 8.9% Tier 1+2 cap. ratio 13.0% 13.8% National City Corp. Cleveland Dollar amounts in millions (except per share) Second Quarter 2Q95 2Q94 Net income $112.5 $105.8 Per share 0.74 0.67 ROA 1.35% 1.41% ROE 17.60% 17.32% Net interest margin 4.47% 4.68% Net interest income 335.8 314.0 Noninterest income 217.0 212.5 Noninterest expense 364.1 347.0 Loss provision 23.6 20.1 Net chargeoffs 12.7 9.4 Year to Date 1995 1994 Net income $223.6 $209.6 Per share 1.46 1.30 ROA 1.38% 1.40% ROE 17.79% 16.70% Net interest margin 4.53% 4.65% Net interest income 663.2 623.4 Noninterest income 426.3 422.2 Noninterest expense 711.5 687.9 Loss provision 46.2 40.5 Net chargeoffs 31.7 23.6 Balance Sheet 6/30/95 6/30//94 Assets $34,562.0 $30,253.0 Deposits 24,429.0 22,577.0 Loans 25,133.0 21,682.0 Reserve/nonp. loans 1.93% 2.14% Nonperf. loans/loans 0.51% 0.57% Nonperf. assets/assets 0.42% 0.54% Nonperf. assets/loans
+ OREO 0.57% 0.76% Leverage cap. ratio 7.35% 7.86% Tier 1 cap. ratio 8.45% 9.10% Tier 1+2 cap. ratio 12.37% 12.65% NBD Bancorp Detroit Dollar amounts in millions (except per share) Second Quarter 2Q95 2Q94 Net income $143.4 $135.2 Per share 0.91 0.84 ROA 1.20% 1.24% ROE 16.02% 16.39% Net interest margin 4.06% 4.28% Net interest income 428.6 406.4 Noninterest income 145.4 133.9 Noninterest expense 336.3 332.3 Loss provision 20.1 8.6 Net chargeoffs 8.7 8.5 Year to Date 1995 1994 Net income $284.3 $242.5 Per share 1.79 1.51* ROA 1.19% 1.15% ROE 16.07% 15.55% Net interest margin 4.04% 4.30% Net interest income 849.3 787.6 Noninterest income 281.1 272.7 Noninterest expense 659.7 654.6 Loss provision 40.2 24.0 Net chargeoffs 8.2 23.9 Balance Sheet 6/30/95 6/30//94 Assets $48,050.7 $45,232.1 Deposits 32,555.2 30,943.4 Loans 31,967.2 26,849.9 Reserve/nonp. loans 262.60% 187.80% Nonperf. loans/loans 0.56% 0.84% Nonperf. assets/assets 0.43% 0.56% Nonperf. assets/loans
+ OREO 0.65% 0.94% Leverage cap. ratio 6.91% 6.80% Tier 1 cap. ratio 7.99% 8.85% Tier 1+2 cap. ratio 12.25% 12.53% * after extra item & accounting change ===
