Loan Growth Buoys Earnings in Southeast

Loan growth was the recurring theme as midsize regional banks across the Southeast issued strong third-quarter earnings reports over the last week.

The pace ranged from blistering in Louisiana to cool and steady in the Carolinas and Virginia.

Louisiana's two largest banks, New Orleans-based First Commerce Corp. and Hibernia Corp., reported loan growth of 28% and 19%, respectively, from the year-earlier period. Earnings at First Commerce surged 106%, to $24.4 million, while Hibernia gained 8%, to $33.6 million.

First Commerce's year-to-year earnings comparison was distorted by $20 million of securities losses in last year's third quarter, versus none this quarter.

First Commerce, with $7.4 billion of assets, reported growth in average assets of 11% while deposits rose 5%.

For $7 billion-asset Hibernia, average assets were up 5%, deposits 3%.

"These two banks are having some of the best loan growth among any banks we follow," said analyst Michael L. Mayo of Lehman Brothers. "After many years of being in the doldrums, the Louisiana economy is really bouncing back."

Mr. Mayo cautioned that the frenetic pace at First Commerce and Hibernia is "not sustainable" but added, "They will continue to have well above average loan growth compared to the rest of the industry."

Elsewhere, Crestar Financial Corp. of Richmond, Va., earned a record $48.4 million, an increase of 11%. The performance was aided by loan growth, excluding acquisitions, of 13%. Central Fidelity Banks Inc., also of Richmond, netted $27.6 million, up 0.6%, with 10% loan growth.

Central Fidelity, with $10.7 billion of assets, is still struggling with a weak net interest margin of 3.54%, due in part to a large securities portfolio relative to loans. Loans constitute only 61% of earning assets. Rising interest rates last year forced the bank to restructure its portfolio, producing a $29 million charge at yearend.

"Generally speaking, they have been in a sort of recovery mode since the fourth quarter of last year," said analyst Vernon Plack of Scott & Stringfellow Inc.

The $14.8 billion-asset Crestar also reported a 13% increase in fee income growth from the year-earlier quarter. The net interest margin held steady at 4.89%, off just four basis points from the second quarter.

"Crestar continues to do a really good job on management of their margin," said David West with Davenport & Co.

CCB Financial Corp. of Durham, N.C., earned $16.7 million, a 174% gain from the year-earlier period, which was depressed due to acquisition- related charges. CCB chalked up 14.5% loan growth.

"The Carolina market seems to be one of the more robust in terms of loans," Mr. West said. The $4.9 billion-asset CCB "is benefiting from that."

Regions Financial Corp. reported a 9% increase to a record $44 million, or 96 cents per share - rewarding what chairman and chief executive J. Stanley Mackin called the Birmingham, Ala., bank's "strategy of steady internal growth, supplemented by acquisitions."

Loans were 19% higher than a year earlier, and deposits increased 16%.

Third quarter earnings were also positively affected by a reduction in deposit insurance premium rates, said the $13.8 billion-asset company, which has several acquisitions pending in Georgia.

National Commerce Bancorp. of Memphis also set a record for net income. Its earnings rose 13% to $12.8 million, or 51 cents a share.

The parent of National Bank of Commerce reaps several sources of noninterest income. The category that includes trust fees, service charges, and supermarket banking consulting fees was up by $1.1 million, or 11%.

Net loans increased $285 million, or 18.5%, while nonperformers shrunk to $57,000 from $1.5 million on Sept. 30, 1994.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER