Buyouts, Belt-Tightening Bolster East Coast Banks

First-quarter earnings climbed at midsize banks across the Northeast and Middle Atlantic states, spurred by acquisitions and cost controls.

The results did not surprise regional banking analysts, who said earnings were pretty much in line with their expectations.

"All in all, it's been a really good quarter, and nobody reported anything significantly less than what we were looking for," said Don Kauth, a bank analyst at First Albany Corp.

"Underlying fundamentals looked good," said Marni Pont at Keefe, Bruyette & Woods Inc.

Earnings at Sovereign Bancorp, an $8.4 billion-asset thrift based in Wyomissing, Pa., rose 29%, to $15.7 million.

The improvement was largely driven by a 76% increase in mortgage originations, to $576 million, during the quarter, along with sharp increases in consumer and commercial loans. Net interest margins rose slightly, to 2.54% from 2.41% in the first quarter of 1995, further contributing to a 19% increase in net interest income, to $50 million.

"Sovereign came in on target," said Elizabeth A. Summers, a bank analyst at Ryan, Beck & Co. The bank is also well-positioned to increase its market share as a result of the many mergers in the region, she added.

In New Jersey, $22 billion-asset Summit Bancorp posted operating earnings, excluding merger-related charges, of $67.7 million, up 18.3% from the 1995 period. Including charges for mergers with UJB Financial Corp., Garden State Bancshares, and Flemington National Bank and Trust Co., the bank reported a $2.2 million loss.

Operating earnings per share reached 72 cents, only slightly below the consensus estimate of 75 cents a share .

Elsewhere, Valley National Bancorp, a $4.5 billion-asset bank based in Wayne, N.J., reported a 6% rise in earnings, to $18.4 million, after restating results to reflect the acquisition of Lakeland First Financial Group Inc. The bank's efficiency ratio, or ratio of operating expenses to revenues, stood at 41.5%. This puts Valley National in the group of banks with the best efficiency ratios in the country.

In New York, $12.6 billion-asset First Empire State Corp. reported a 33% increase in net earnings, to $36.2 million. Net interest income rose 9%, to $130.5 million, at the Buffalo-based bank holding company. Fee income rose 36%, to $36.3 million, on the back of higher revenues from mortgage banking activities and higher fees from sales of mutual funds and annuities. Provisions for possible credit losses rose 14%, to $9.6 million.

United States Trust Co. of New York reported an 11% rise in net earnings, to $9.6 million, after a 16.4% rise in fee income, to $58 million, and a 32% decline in net interest revenues, to $19.2 million. Most of the decline in net interest revenues was due to sale of the bank's securities processing division.

In Delaware, $5.4 billion-asset Wilmington Trust Corp. reported record earnings of $23 million, up 10% from the 1995 period. Net interest revenues rose 10%, to $51 million, and noninterest revenues were up 9%, to $29.7 million. The bank's board, which authorized the buyback of three million shares in October 1993, last week approved additional purchases of four million shares.

And in Hato Rey, Puerto Rico, net income at Banponce Corp. rose 33.8%, to $45 million. Much of the improvement came after a 21% increase in assets, to $15.8 billion, with the absorption of BP Capital Markets and the acquisition of Puerto Home Mortgage.

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