Midsize regional banks reporting fourth quarter earnings this week mostly showed profit gains fueled by strong loan and fee income, although results at one bank lagged due to credit card problems.

Robinson-Humphrey Co. analyst John W. Coffey said a strong economy in the Southeast helped SouthTrust Corp. post a quarterly net income improvement of 28%, to $68.4 million. The Birmingham, Ala., banking company's earnings per share reached 71 cents, versus 61 cents in last year's fourth quarter. Return on equity was 16.02%, up 89 basis points from the fourth quarter of 1995.

Earnings for the year increased 28% to $254.7 million.

Profits were in line with analysts' expectations.

Loans grew 32% to $19.3 billion; net interest income increased 25% to $238.8 million; noninterest income grew 22%; and the company's efficiency ratio dropped to 55.92% from 56.58% at yearend 1995.

SouthTrust has $26.2 billion in assets.

First of America Bank Corp., a $22 billion-asset Kalamazoo, Mich., company, said quarterly income rose 27% over a year ago to $84 million, while earnings per share improved 32.7% to $1.38.

Backing out extraordinary items, including the sale of branches, the company would have earned $1.22, which still beat anlaysts' consensus estimates of $1.09.

First of America benefited from the sale of 23 branches, which helped boost noninterest income 29% to $130 million. Excluding the branch sales, fee income rose 21% due to strong gains in the trust business and as a result of increases in service charges on deposits and bank card revenue.

Net interest income was down about $1 million from a year earlier, to $230 million. The company said the decline was due to a reduction of its earning assets as it restructured its balance sheet.

First of America is trying to stay afloat in a consolidating Midwest bank market, and both cost control and revenue growth will be important throughout 1997, said analyst Michael Moran of Roney & Co. in Detroit.

"Revenue momentum looks good as they enter 1997," Mr. Moran said. "That's one of the critical things in the banking sector: revenue momentum and revenue growth."

Southern National Corp. reported a 10.2% rise in fourth quarter earnings to $79.7 million, right in line with analysts' expectations.

The Winston-Salem, N.C.-based company reported earnings per share of 72 cents, compared to 63 cents in the fourth quarter of 1995.

Yearend net income totaled $283.7 million, up 52.2%.

Company officials credited the performance to a 24.5% increase in noninterest income and an improved efficiency ratio of 53.5%, down 170 basis points from yearend 1995.

The $21.2 billion-asset company said it has been working to achieve revenue growth and efficiencies from its 1995 merger with BB&T Financial Corp. even as it has continued to make other acquisitions.

In Cincinnati, Star Banc Corp. said fourth-quarter income rose 17.8%, to $42 million. Earnings per share rose 20% to 48 cents, reflecting a three- for-one stock split announced in December. The company exceeded analysts' estimates by 1 cent.

Star Banc, with $10 billion in assets, reported total loans grew 8.4% from a year earlier to help boost net interest income to $111.4 million, a 12.8% increase. Noninterest income rose 11.5% to $43.9 million despite nearly $2 million in losses on the sale of securities. The company also contained expenses to 1.9% over a year ago. "They were firing on all cylinders," said Joseph Duwan, an analyst with Keefe, Bruyette & Woods Inc.

It was a different story for First Commerce Corp. Earnings of $28.7 million, or 72 cents per share, missed consensus estimates by 7 cents.

Analysts blamed an increase in incentive compensation of $3.8 million and net chargeoffs of $7.3 million in the company's credit card business for the disappointing showing.

Still, net income was 315% higher than the fourth quarter of 1995, when earnings were depressed by a $10 million charge and a loan loss provision of $19.8 million.

For the year, net income at the New Orleans-based banking company hit $118.4 million, up 56% from 1995. Net interest income grew 7% in 1996 to $375.5 million, driven by loan growth of 21%. Noninterest income rose 14% to $172.4 million.

First Commerce has $9.2 billion in assets.

It was a good quarter for Synovus Financial Corp.

The Columbus, Ga.-based company continues to reap the rewards of its investment in Total System Services Inc., a credit card processing company that recorded a 24.8% revenue gain in 1996 and a yearend net income jump of 42.2%.

The $8.6 billion-asset company reported fourth-quarter net income of $41.7 million, up 23.9%.

On a per share basis, net income was 36 cents for the quarter, compared to 29 cents in the same period of 1995.

For the year, Synovus reported net income of $142.4 million, up 24.3%.

Chairman James H. Blanchard attributed the strong performance to loan growth and superior margins, as well as improvements in fee income resulting from the company's sales and modernization efforts.

"We met or exceeded our goals for both banking operations and Total System's credit card processing operations," he said.

"It was another great quarter for them," according to Mr. Coffey. "They are harvesting what they've done in the Total System Services subsidiary as well as focusing on the banking operations."

Analysts' also noted huge increases in revenue at Provident Bancorp's consumer finance business. The $6.8 billion-asset Provident said income rose 24% to $24 million in the fourth quarter. Earnings per share rose 21.3% to 0.57, beating analysts' estimates by 4 cents.

Provident said net interest income rose 14% to $63.6 million. The company reported a 78% quarterly increase in its noninterest income to $26 million, in large part due to the sale of loans. Analysts said the company is capitalizing on its Provident Consumer Financial Services unit, which makes sub-prime mortgage loans.

This story was written by Jacqueline S. Gold based on reporting by Carey Gillam in Atlanta and Brett Chase in Chicago.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.