Despite squeezed margins due to rising deposit costs, Centura Banks Inc. reported a healthy 14% improvement in third-quarter earnings from a year earlier, to $15.2 million.
Per-share earnings of 66 cents were in line with consensus estimates, including 2 cents attributed to lower Federal Deposit Insurance Corp. premiums. The FDIC had voted in August to reduce the rate most banks pay for deposit insurance. But Centura will not receive as much benefit as some banks because 30% of its $4 billion in deposits come from recent thrift acquisitions and are still insured by the S&L fund, which charges a higher premium.
"The actual reduction runs, on a monthly basis, around $270,000 for us," said controller Michael R. Hilton.
As has been the case all year, Centura's third-quarter results reflected both strong loan growth - 16% annualized, excluding acquisitions and a mortgage loan securitization - and rising deposit costs. North Carolina, which is home to the southeast's dominant banks, has been a particularly competitive market for certificates of deposit and other interest-bearing instruments.
Reflecting the higher deposit costs, Centura's net interest margin fell 25 basis points from the second quarter, to 4.56%. The margin had been 5% in last year's third quarter.
"We feel that the third quarter is really the bottom now and it should start to level out and actually turn up slightly," Mr. Hilton said.
Wheat First Butcher & Singer Inc. analyst David Stumpf said he expects margin compression to be a theme at other southeastern banks, though perhaps less than at Centura.
"Clearly, the margin will be something we all have to keep an eye on," Mr. Stumpf said. "But maybe other companies will show a better ability to offset that to some degree."
Centura, with $5.1 billion of total assets, operates 148 branches, primarily in eastern North Carolina.