Having cleared the decks of merger-related charges last year, Memphis- based Union Planters Corp. sailed into clear seas in the first quarter, reporting better-than-expected earnings of $33 million, a 30% gain.
Earnings per share of 74 cents came in 7 cents above consensus estimates, largely due to an influx of credit card loans that produced additional fee income and a stronger net interest margin.
The first quarter report contrasted sharply with the fourth quarter of 1994, when Union Planters lost $16.8 million because of merger-related and bond portfolio restructuring charges. Union Planters made the largest acquisition in its history last year when it absorbed Grenada Sunburst System Corp. of Grenada, Miss., with $2.5 billion of assets.
"We feel like we have made up for the acquisition dilution and are not only back on track, but are making a parallel upward shift of our earnings," said Union Planters chief financial officer Jack W. Parker.
"They probably wrote off everything, including the kitchen sink," said Morgan Keegan analyst Peter Tuz, alluding to last year's third and fourth quarters. "You're getting the flip side of that right here, which is better-than-expected earnings."
Mr. Tuz said he was raising his 1995 earnings-per-share estimate on Union Planters from $2.85 to $3.
Loan growth of 16% and higher yields in the securities portfolio drove Union Planters' net interest income up 7% to $103 million. The net interest margin gained 12 basis points from the fourth quarter, reaching 4.59%.
The loan surge derived from a fourth-quarter credit card marketing program, which generated $240 million of additional outstandings for the bank's $100 million portfolio.
Mr. Parker said the influx of credit card loans was also the major factor behind Union Planter's 21% gain in noninterest income to $34.2 million. Bank card fee income surged by $2.2 million, or 88%, from the year-ago period.
Union Planters, which has $9.7 billion of assets, also managed to hold noninterest expense nearly level at $83.1 million, from $82.7 million in the year-ago quarter. Mr. Parker credited a continuing reengineering campaign that identified numerous inefficiencies throughout the bank's system of 38 subsidiaries
One community bank, for example, had not raised its service fees in 14 years, he said.
