Signet Profit Up 15%; Southern National's Flat

Information-based technology paid off for Signet Banking Corp. as strong loan growth boosted third-quarter earnings, excluding special restructuring charges, by 15% to $30.1 million.

But Southern National Corp.'s third-quarter net, $62.5 million, was level with that of a year earlier because of acquisition-related charges.

Due to higher expenses, both southeastern regionals reported earnings per share last week a few cents lower than consensus estimates: 50 cents for Richmond-based Signet and 57 cents for Southern National, which is based in Winston-Salem, N.C.

Signet's year-ago quarter included charges relating to the spinoff of its credit card unit, now known as Capital One Financial Corp. Including those charges, Signet's third-quarter net compared with $3.5 million a year ago.

Southern National took $6.1 million in charges in this third quarter to cover the recent merger of its two predecessor companies, Southern National and BB&T Financial Corp.

During a telephone conference call Thursday, chief financial officer Wallace B. Millner 3d said Signet was "pretty pleased with the quarter," despite slippage in the net interest margin, to 4.96% from 5.14% in the second quarter, and a doubling of the loan-loss provision during the same period, to $8.7 million.

"The important thing is that our basic business plan is very much on track," Mr. Millner said. "The margin weakness was almost all offset by earning asset growth."

Signet's net interest income surged 10% from the year-ago quarter to $119 million, due to commercial and consumer loan growth.

Signet has been applying information-based technology, or the use of data bases for direct-mail marketing, to both consumer and commercial loans. Leading the charge on the retail side is an experimental "loan-by- check" program, in which preselected customers are mailed checks that can be cashed at a local bank upon agreement to repay at a specified interest rate.

Gross chargeoffs in the third quarter test programs reached $9.3 million, up from $5.7 million in the June quarter, according to Mr. Millner.

"We certainly know who not to mail to now," Mr. Millner quipped. "But on the other hand, we think the losses here are manageable and we are getting some valuable intelligence from them."

Mr. Millner said Signet would actually increase its loan-by-check solicitations in November and December .

"They're in transition from being a small corporate bank to a consumer finance company," said analyst Merrill Ross, with Wheat First Butcher Singer Inc. in Richmond.

Southern National profited from strong loan growth in the third quarter, as average loans grew 12% from the year-ago quarter. But a $2.4 million special gain from an accounting change related to mortgage servicing rights and a $5.1 million reduction in federal deposit insurance premiums also boosted the third-quarter net.

"Southern National gained earnings momentum during the third quarter, and our objectives for the remainder of 1995 are geared to utilizing the strengths of our institution to continue this trend," said chairman and CEO John A. Allison.

Other southeastern regionals reporting last week included Amsouth Bancorp, Birmingham; First Tennessee National Corp., Memphis; Synovus Financial Corp., Columbus, Ga.; and Baltimore-based Mercantile Bankshares.

Amsouth, which has $17 billion of assets, earned $46.1 million, or 79 cents a share, 5% above $44.1 million in the year-ago quarter. A 14% reduction in noninterest expenses combined with a strengthening net interest margin accounted for the improvement.

Double-digit loan growth in all categories boosted earnings at First Tennessee to $44 million, representing a 17% gain from a year ago. First Tennessee, which has $12 billion of assets, also cited strong gains from its mortgage banking and bond divisions.

Synovus, with $7.6 billion of assets, reported net income of $30.3 million, up 23% from a year ago. The increase was primarily due to a 31% surge in fee income related to the bank's 81%-owned data processing subsidiary, Total System Services Inc.

Earnings at Mercantile, which has $6 billion of assets, improved 15% to $77.5 million on the strength of 8% loan growth and an improved net interest margin.

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