Margins, Credit Improve; 1st Florida Also Ahead

Two major southeastern banks reported strong third-quarter profits Tuesday, aided by robust net interest margins and improving credit quality.

Barnett Banks Inc. reported earnings of $58.5 million, up 58% from the depressed level of 1991. And SunTrust Banks Inc. announced it earned $104.1 million, up 11%.

Tampa-based First Florida Banks Inc., which Barnett has agreed to acquire, reported $13.5 million in earnings, compared with a $30.2 million loss in the year-ago quarter. Barnett is awaiting regulatory approvals to consummate its acquisition of First Florida by yearend.

The results from SunTrust and Barnett -- particularly the improving credit quality and strong margins -- are expected to be replicated by other major southeastern banks this quarter.

Analysts expect Wachovia Corp., Winston-Salem, to report earnings of about $110.5 million, or $1.26 a share, up 24% from the year-ago quarter. Charlotte-based NationsBank Corp. is expected to earn about $263 million, or $1.06 a share, more than three times the $80.3 million reported a year ago.

Dramatic Turnaround

Barnett's gain is among the more noteworthy because its problems were especially serious. Since third-quarter 1991, the Jacksonville, Fla.-based company's nonperforming assets have fallen by 8%, to $864.1 million, which represents 3.53% of total assets, down from 3.81% a year ago.

Barnett's provision for loan losses fell to $61.9 million, down 18% from a year ago. The improvement would have been greater had not Barnett added $12 million to cover possible loan losses related to Hurricane Andrew, which devastated part of south Florida on Aug. 24.

Barnett also set aside $1.1 million in charitable contributions to help victims of Hurricane Andrew. But the decline in nonperforming assets is fueled, in large part, by aggressive writedown and sale of foreclosed real estate, which has helped drive up Barnett's noninterest expense to $353.9 million, a 12% increase from the year-ago quarter.

Compared with the second quarter, Barnett's noninterest expenses fell by $13 million, attributed by chief financial officer Charles W. Newman to aggressive cost control.

The surge in net interest margins seen in previous quarters began to taper off in the third, but the healthy margins helped Barnett earn 67 cents a share, compared with 42 cents in the year-ago quarter.

Barnett's margin reached 5.3%, up 29 basis points from the second quarter, and 63 basis points from the year-ago quarter.

SunTrust's third-quarter profits of 83 cents a share, versus 73 cents a year ago, was fueled by noninterest income, up 8% to $164.4 million from a year ago.

Noninterest expense, on the other hand, increased by 8%, to $340.9 million.

Credit quality is improving at SunTrust, as reflected in a continuing decline in nonperforming assets, to $578.6 million, down 5% from the second quarter and 19% from the year-ago quarter. Net chargeoffs fell 19%, to $28.3 million, compared with third-quarter 1991.

SunTrust Builds Reserve

Despite these favorable trends, SunTrust boosted its loan-loss provision 19% from the year-ago quarter to $55.4 million in order to push its reserve for loan losses up to 125% of nonperformers, one of the highest in the region.

"In our attempt to build the reserve, we've kept the provision for loan losses high," said investor relations spokesman James Armstrong.

Return on assets reached 1.22% in the third quarter, compared with only 0.66% for Barnett.SunTrust Banks Inc.Atlanta Dollar amounts in millions (except per share)Third Quarter 3Q92 3Q91Net income $104.1 $93.6Per share 0.83 0.73ROA 1.22% 1.15%ROE 15.68% 15.08%Net interest margin 5.15% 15.08%Net interest income 398.7 358.6Noninterest income 164.4 151.7Noninterest expense 340.9 316.5Loss provision 55.4 46.5Net chargeoffs 28.3 35.1Year to Date 1992 1991Net income $307.6 $275.2Per share 2.43 2.15ROA 1.21% 1.13%ROE 15.80% 15.37%Net interest margin 5.10% 4.84%Net interest income 1,176.9 1,061.5Noninterest income 492.6 447.9Noninterest expense 1,014.9 924.9Loss provision 162.2 153.8Net chargeoffs 104.5 124.0Balance Sheet 9/30/92 9/30/91Assets 33,947.0 33,744.0Deposits 27,510.0 27,331.0Loans 21,967.0 21,382.0Reserve/nonp. loans 125.49% 84.30%Nonperf. loans/loans 1.59% 2.17%Nonperf. asset/asset 1.70% 2.10%Leverage cap. ratio NA 7.23%Tier 1 cap. ratio NA 9.23%Tier 1+2 cap. ratio NA 12.22%Barnett Banks Inc.Jacksonville, Fla. Dollar amounts in millions (except per share)Third Quarter 3Q92 3Q91Net income $58.5 $37.0Per share 0.73 0.51ROA 0.73% 0.46%ROE 10.73% 8.20%Net interest margin 5.37% 4.74%Net interest income 392.0 343.9Noninterest income 126.1 119.1Noninterest expense 353.9 316.3Loss provision 65.5 80.0Net chargeoffs 61.9 78.9Year to Date 1992 1991Net income $156.2 $84.5Per share 1.95 1.21ROA 0.64% 0.35%ROE 9.86% 6.64%Net interest margin 5.16% 4.67%Net interest income 1,136.6 1,016.1Noninterest income 379.8 352.6Noninterest expense 1,068.5 928.0Loss provision 183.7 281.6Net chargeoffs 170.7 241.1Balance Sheet 9/30/92 9/30/91Assets $32,565.0 $32,286.0Deposits 28,672.0 28.505.0Loans 23,593.0 23,521.0Reserve/nonp. loans 95.00% 81.00%Nonperf. loans/loans 2.07% 2.36%Nonperf. asset/asset 3.53% 3.81%Leverage cap. ratio 6.15% 5.47%Tier 1 cap. ratio NA 7.03%Tier 1+2 cap. ratio NA 10.19%

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