Earnings reported by southeastern banks were largely strong, although AmSouth Bancorp. was down for the quarter due to higher expenses and more money set aside for bad loans.
Birmingham, Ala.-based AmSouth earned $40.9 million, down 5% from $43 million in the year-earlier quarter. However, its per-share earnings of 70 cents came right in line with consensus estimates.
"By and large, there was nothing particularly surprising to us in any of the numbers," said PaineWebber analyst Thomas D. McCandless.
AmSouth, which has $17 billion of assets, recorded expenses of $22.2 million in the quarter to cover a sweeping reengineering and productivity drive announced in April, which involves the elimination of 44 branches and 1,000 jobs by yearend.
Offsetting these expenses somewhat was a $25 million pretax gain from the sale of AmSouth's third-party mortgage servicing operation to GE Capital Mortgage Services Inc.
"Our second quarter results are in line with our expectations, and our revenue enhancement and cost reduction programs are on track," said AmSouth chairman and CEO John W. Woods.
Memphis-based First Tennessee National Corp. chalked up an 11% gain in net income, to $40.8 million. First Tennessee's $1.20 in earnings per share beat consensus by 5 cents due to stronger-than-expected results in the bond and mortgage banking units.
Net interest income at First Tennessee, which has $11.6 billion of assets, was actually down by 4% to $95.4 million. But lower employee costs contributed to a 12% drop in noninterest expense, which combined with the improved fee income to boost earnings over the year-earlier quarter.
"The basic banking business at First Tennessee shows, as you would expect, great loan growth but pressure on margins," said Henry Coffey Jr., analyst with J.C. Bradford & Co., Nashville.
Earnings per share of 50 cents at Signet Banking Corp. beat consensus estimates by 3 cents. The Richmond, Va.-based bank did sustain a 41% drop in net income to $29.7 million, due to the first-quarter spinoff of its highly profitable credit card subsidiary, now known as Capital One Financial Corp.
But Signet's earnings excluding Capital One rose 88% from $15.8 million in the year-ago quarter as the company continued implementing the information-based marketing strategies that proved so successful at its credit card unit.
"The rest of the industry ought to take a look at the results of Signet and wake up," said Donaldson, Lufkin & Jenrette analyst Thomas K. Brown. "This is banking of the future."
Adjusting for Capital One, Signet's revenues surged 23% to $160.4 million from the year-earlier quarter. Loans grew 6%, fueled by direct mail marketing of installment loans on the consumer side and the sale of leasing products to commercial customers.
Deposit Guaranty Corp., Jackson, Miss., boosted earnings 11% to $17.4 million, from $15.7 million in the year-ago quarter. Deposit Guaranty, which has $5.6 billion of assets, benefited from a boost in its net interest margin to 4.73%, up 68 basis points from 4.05% in the year-ago quarter.
