Even a 212% profit jump brought only marginal profitability to FSB Financial Corp. of Kalamazoo, Mich., in the second quarter.
The $170 million-asset company earned $102,570, for a 0.25% return on assets.
FSB attributed the rise, from $33,000 a year earlier, to beefed-up commercial loans and mortgages. Net income for the first six months was up 68% to $152,723.
"The six months and the three months are up principally because net interest income is up," said Doran K. Stanley, executive vice president and chief financial officer. "The reason net interest income is up is we've increased our loan portfolio.
"In 1993 and 1994, we were in the cycle of low interest rates," he said. "We weren't putting low-yielding loans into the portfolio. As a consequence, we ended up with a lot of liquidity and put it into short-term securities."
FSB's earnings were $255,000 at June 30, 1993, as it benefited from gains on loan sales to the secondary market.
But despite the 1995 rebound, Michael M. Moran, an analyst with Roney & Co. in Detroit, called the company's earnings "extremely weak."
"The improvement has been dramatic and a real positive," he said. But quarterly earnings of 10 cents per share don't cut it , said Mr. Moran, who sees FSB as a likely acquisition candidate.
Peter Kross, an investor with an 8% stake in the company, has a history of thrift investments in which he advocates selling to maximize shareholder value, Mr. Moran said.
However, "when the earnings are as weak as they are here, you're really not looking at a significant premium deal," Mr. Moran said.
Possible buyers are Standard Federal Bank, Troy, Mich., or Minneapolis' TCF Financial Corp, he said. "But both those entities have been very prudent acquirers," Mr. Moran said. "Any transaction has to make sense."