Double-digit loan growth and narrowing net interest margins continued to dominate the earnings picture for midwestern regional banks in the first quarter.
NBD Bancorp of Detroit, the nation's 18th-largest bank, saw earnings jump 15% from a year earlier, to $140.9 million.
Columbus, Ohio-based Huntington Bancshares said first-quarter earnings fell 19.3% to $53.9 million. Provident Bancorp of Cincinnati reported $15 million for the quarter, a 9% gain.
NBD attributed its improvement to an 11.2% jump in earning assets. Loans and leases led the way with an 18.7% increase over last year, to $30.7 billion. Investment securities rose 12%.
NBD's net interest margin lost 29 basis points during the first quarter compared to last year.
"The margin pressure really stemmed from their acquisition of Amerifed Financial Corp., which they closed on this quarter," said Fred Cummings, a bank analyst with McDonald & Company Securities Inc. "The margin should not contract to the same degree in future quarters, though."
Huntington reported that loans grew by 14.1% to $12.7 billion, yet net interest income actually declined. The company said interest-bearing liabilities continued to reprice faster than interest-bearing assets.
The bank's net interest margin at March 31 stood at 4.27%, 104 basis points lower than 1994's first quarter.
"They became too liability sensitive and found their liability costs rising faster than their asset yields," said Elmer Meszaros, a bank analyst with Roulston Research Corp.
Provident Bancorp also felt pricing pressures. The company's net interest margin dropped 44 basis points, to 3.80%. Consumer loans felt the greatest pinch, with average yields rising only 27 basis points, compared with a rise of 189 basis points in the cost of Provident's interest bearing liabilities.
Earnings at two other midwestern banks were helped by a boost in revenues generated by fee-based businesses.
First Bank System Inc. of Minneapolis said it earned $133.8 million in the first quarter, a 19.6% gain over 1994. Marshall & Ilsley Corp., Milwaukee, registered a 19.8% gain in earnings, to $46.1 million.
Higher sales volumes of First Bank System's corporate card, purchasing card, and Northwest Airlines WorldPerks credit card spurred a 43% increase in credit card fees during the first quarter to $51.6 million.
These results bode well for the company's future, according to chief financial officer Rick Zona.
Adding to the growth in fee income, the company readjusted its asset mix to take advantage of higher-yielding loans to small business, middle market companies, and consumers. As a result of this shift, the bank posted a 30 basis-point gain in its net interest margin, to 5.05%.
"This company is absolutely knocking the ball out of the park," said Steve Schroll, a bank analyst with Minneapolis-based Piper Jaffray Inc.
Increased revenues from its data processing unit fueled first quarter earnings at Marshall & Ilsley. M&I Data Services Inc. generated $47.8 million in fees during the quarter, a 27% increase from the year-earlier period.
The gains in data processing helped the company overcome a 12 basis- point drop in its net interest spread, to 3.5% on March 31.
"Pricing is pretty tough in Milwaukee right now, I understand, in part due to First Bank," said Ben Crabtree, an analyst with Dain Bosworth Inc. +++ NBD Bancorp Detroit Dollar amounts in millions (except per share) First Quarter 1Q95 1Q94 Net income $140.9 $107.3 Per share 0.88 0.67 ROA 1.18% 1.20%* ROE 16.12% 14.79%* Net interest margin 4.02% 4.31% Net interest income 420.7 381.3 Noninterest income 135.7 138.8 Noninterest expense 323.5 322.3 Loss provision 20.1 15.5 Net chargeoffs (504) 15.4 Balance Sheet 3/31/95 3/31/94 Assets $47,755.8 $47,111.1 Deposits 31,560.7 33,229.4 Loans 30,725.9 29,229.7 Reserve/nonp. loans 274.76% 241.64% Nonperf. loans/loans 0.54% 0.62% Nonperf. assets/assets 0.41% 0.44% Nonperf. assets/loans + OREO 0.63% 0.72% Leverage cap. ratio 6.81% 6.77% Tier 1 cap. ratio 8.20% 8.44% Tier 1+2 cap. ratio 12.14% 12.50% *Before extraordinary item and accounting charge ===
