CHICAGO - Several major Midwest banks reported excellent third-quarter results Tuesday and appear poised to sustain their considerable momentum.
Norwest Corp's profits increased 20.8% from a year ago, to $133.9 million, and Banc One Corp.'s $186.2 million net income was up 32.6%. PNC Financial Corp. was up 26%, to $135.1 million; and Mellon Bank Corp. advanced 123%, to $156 million.
Although the showings in some cases were bolstered by tax shields and special gains from securities sales, strong improvements in fundamentals were evident in every case.
Not only did asset quality continue to improve and fee income continue to grow, but net interest margins also continued to widen.
"The results are impressive," said Henry Dickson, a banking analyst at Kemper Securities, Chicago. "Strengthening balance sheets are setting a solid foundation for next year."
BANC ONE CORP.
Banc One, based in Columbus, Ohio, posted annualized returns of 1.49% on average assets and 17.14% on average equity.
That compares with a 1.59% ROA and a 15.6% ROE in the year-ago quarter's results, which at the time measured the company's Texas operations on an equity rather than consolidated basis.
Figuring strongly in the results was a robust 6.47% net interest margin, up from 5.92% the year before.
Average loans declined to 66.5% of average assets, from 68.8% a year ago.
Credit Quality Improves
The company's $267.1 million of noninterest income represented an annualized 2.15% of average third-quarter assets, down from 2.59% the year earlier.
This in large measure reflects the subsequent inclusion of Texas operations into consolidated results.
Credit quality continued to improve. The company's ratio of nonperforming assets to gross loans at Sept. 30 was 3.77%, down from 4.48% at midyear and 4.89% a year ago.
Similarly, the company's ratio of loss reserves to problem loans increased to 161.6% from 110.2%.
Prior results were restated to reflect the third-quarter acquisition of First Security Corp., Lexington, Ky.
Pending acquisitions include Affiliated Bankshares of Colorado, Denver; Team Bancshares, Dallas; Valley National Corp., Phoenix; Key Centurion Bancshares, Charleston, W.Va.; and First Community Bancorp, Rockford, Ill.
Norwest Corp., based in Minneapolis, recorded $48.7 million of gains from securities sales, or 25% of pretax income.
After-tax proceeds from the sales helped offset a $34.3 million charge taken on a write-down of unamortized intangible assets.
The company at Sept. 30 had $617 million of unrealized gains in its securities portfolios held for sale and investment.
Annualized, the company's third-quarter net represented a 1.35% return on average assets and an 18.8% return on average equity.
A 5.72% third-quarter net interest margin was up from 5.36% in the second quarter and 5.15% in last year's third quarter. Average loans held constant at roughly 60% of average assets.
A loss provision of $39.7 million was less than half the $83.5 million provision in the year-ago quarter.
Net chargeoffs of $51.5 million were down from $78.2 million.
Nonperforming assets fell to 1.27% of gross loans, compared with 2.06% a year ago.
Period-end loss reserves equaled 327.2% of problem loans, up from 205.5% a year ago.
The company's mortgage-servicing portfolio at Sept. 30 stood at $15.2 billion, up $2.7 billion during the quarter and $8.3 billion in the preceding 12 months. Third-quarter mortgage banking income of $83.3 million was up sharply from $47.3 million the year before.
PNC FINANCIAL CORP.
Pittsburgh-based PNC took a $69.9 million loss provision that was 53% less than in the year-earlier period.
The smaller provision helped the superregional banking company post annualized returns of 1.19% on average assets and 15.03% on average common equity.
ROA a year ago was 1.02%, and ROE was 15.42%.
Gains from sale of debt securities totaled $18.2 million, or 9.3% of pretax income.
The company's 4.06% net interest margin was up from 3.84% a year ago.
Average third-quarter loans equaled 53.6% of average assets, down from 62.9% a year ago.
Troubled Assets Decline
PNC's concentration of problem assets fell, with nonperforming assets declining to 3.59% of gross loans, compared with 4.6% a year ago. Loss reserves equaled 145% of problem loans at Sept. 30, compared with 95.64% a year ago.
Net chargeoffs of $52.6 million equaled 0.87% of average third-quarter loans.
Year-ago net chargeoffs of $148.9 million equaled 1.71% of average loans.
This month, PNC declared a two-for-one stock split and boosted its cash dividend by 7.5%.
MELLON BANK CORP.
Mellon, also based in Pittsburgh, recorded $76 million of third-quarter gains from securities sales, or 44.4% of pretax income.
These gains, combined with tax-loss carryforwards, helped Mellon post an annualized 2.13% return on average assets and a 30.37% return on average equity.
Excluding special gains, tax shields, and an $18 million restructuring charge, Mellon would have posted a 0.97% ROA and a 12% ROE in the third quarter.
Mellon said it will exhaust remaining tax-loss carryforwards in the fourth quarter, returning to fully taxable status in the first quarter of 1993.
The company's net interest margin widened to 4.59%, from 4.37% at midyear and 3.95% in the year-ago quarter. Average loans fell to 60.7% of average assets, down from 63.6% a year ago.
Trust and investment management fees rose 8% from the year before, and cash-management fees grew by 10%. Mortgage servicing fees increased by 48%, largely on the strength of acquisitions of mortgage servicing portfolios.
Mellon took a $6 million charge "related principally to a reevaluation of certain credit card intangibles." The restructuring charge included severance payments, equipment writeoffs, and office consolidation expenses.
A 3.77% ratio of nonperforming assets to gross loans at Sept. 30 was down from 4.48% at mid-year and 4.89% a year ago.
A $40 million loan-loss provision was half that of the 1991 third quarter. Loss reserves equaled 157% of problem loans at Sept. 30, up from 96% the year before.
CoreStates reported third-quarter earnings of $69.3 million, up 6.2% from the second quarter and 13.2% from the quarter a year ago.
The results were slightly ahead of analysts' estimate of $67 million.
Sharply lower loan-loss provisions and increased noninterest income drove the profit increase.
It was CoreStates' seventh straight quarter of improved earnings. The company has $22.7 billion in assets.
The loss provision was $27 million, a 15.6% decline from the second quarter's reserve. Trading gains and higher fee income on services for international customers added $4.5 million more than in the second quarter.
These gains offset slightly lower net interest income of $260 million, down less less than 1% from the second quarter.
Net interest margin fell 12 basis points, to 5.52%.
INTEGRA FINANCIAL CORP.
Integra reported that its net income doubled, to $37 million, or $1.46 per share.
The Pittsburgh-based company's earnings were boosted by wider net interest margins and completion of its acquisition of Landmark Savings Association.
Equimark Corp., which has signed a letter of intent to merge with Integra, also reported higher earnings.
Net income in the third quarter at the Pittsburgh banking company was $5.3 million, compared to a loss of $10 million a year ago. Reduced loan-loss provisions and improving asset quality produced the improvement.
MARINE MIDLAND BANKS
Marine Midland, the U.S. unit of Britain's HSBC Holdings PLC, said it earned $29.9 million in the third quarter, compared to a loss of $57 million in the same period last year, but 27% less than in the second quarter.
John Bond, president and chief executive officer, described the results as "solid progress" but said loan demand remained weak.
H.F. AHMANSON & CO.
The parent of Home Savings of America, the nation's largest thrift, saw a decline in net income of $14.4 million, or 28%, from the third quarter of 1991, to $ 50.7 million, or 40 cents a share.
Like other institutions affected by California's sagging economy, Ahmanson has had to add to loss reserves and is actively selling foreclosed real estate, said Richard H. Deihl, chairman and chief executive officer.
But "core earnings continue to be strong, as net interest income for the quarter [$336.2 million, yielding a net spread of 3.33%] was among the highest in the company's history."
Ahmanson had a net increase of $88.7 million in nonperforming assets, mostly single-family mortgages, during the quarter. Nonperformers totaled $2.3 billion, or 4.91% of total assets.
The loan-loss reserve at Sept. 30 was $408.7 million, compared with $262.2 million a year earlier.
For the first nine months, net earnings were $188.6 million, or $1.51 a share, compared with $181.8 million, or $1.55 a share, in the same 1991 period.Banc One Corp.ColumbusDollar amounts in millions (except per share)Third Quarter 3Q92 3Q91Net income $186.2 $140.4Per share 0.87 0.69ROA 1.49% 1.59%ROE 17.14% 15.60%Net interest margin 6.47% 5.92%Net interest income 726.0 462.8Noniterest income 267.1 227.0Noninterest expense 584.4 385.9Loss provision 114.9 94.6Net chargeoffs 113.9 81.0Year to Date 1992 1991Net income $545.8 $402.8Per share 2.56 2.00ROA 1.47% 1.56%ROE 17.35% 15.58%Net interest margin 6.56% 5.91%Net interest income 2,181.6 1,359.3Noninterest income 773.1 647.1Noninterest expense 1,696.8 1,099.9Loss provision 387.9 317.4Net chargeoffs 343.9 247.1Balance Sheet 9/30/92 9/30/91Assets $51,199.3 $37,669.7Deposits 39.543.2 28,433.7Loans 34,295.4 25,997.5Reserve/nonp.loans 161.64% 110.21%Nonperf. loans/loans 1.18% 1.62%Nonperf. asset/asset 1.28% 1.65%Leverage cap. ratio NA NATier 1 cap. ratio NA NATier 1+2 cap. ratio NA NANorwest Corp.MinneapolisDollar amounts in millions (except per share)Third Quarter 3Q92 3Q91Net income $133.90 $110.9Per share 0.90 0.76ROA 1.35% 1.16%ROE 18.8% 17.8%Net interest margin 5.72% 5.15%Net interest income 512.4 441.3Noninterest income 345.6 248.7Noninterest expense 616.0 464.3Loss provision 39.7 83.5Net chargeoffs 51.5 78.2Year to Date 1992 1991Net income $384.2 $310.9Per share 2.58 2.17ROA 1.29% 1.10%ROE 18.6% 17.9%Net interest margin 5.49% 5.01%Net interest income 1,485.7 1,277.1Noninterest income 904.4 750.4Noninterest expense 1,714.3 1,353.3Loss provision 128.6 264.8Net chargeoffs 140.4 217.5Balance Sheet 9/30/92 9/30/91Assets $41,043.1 $39,508.1Deposits 25,354.2 25,420.4Loans 20,925.8 20,265.4Reserve/nonp.loans 327.205 205.50%Nonperf. loans/loans 0.875 1.45%Nonperf. asset/asset 0.65% 1.06%Leverage cap. ratio 7.38% 6.805Tier 1 cap. ratio 11.04% 10.07%Tier 1+2 cap. ratio 14.30% 14.71%Mellon Bank Corp.PittsburghDollar amounts in millions (excpet per share)Third Quarter 3Q92 3Q91Net income $156.0 $70.0Per share 2.57 1.10ROA 2.13% 0.96%ROE 30.37% 14.74%Net interest margin 4.59% 3.95%Net interest income 295.0 250.0Noninterest income 287.0 227.0Noninterest expense 350.0 313.0Loss provision 40.0 80.0Net chargeoffs 61.0 59.0Year to Date 1992 1991Net income $332.0 $208.0Per share 5.34 3.53ROA 1.49% 0.95%ROE 22.20% 16.16%Net interest margin 4.39% 3.86%Net interest income 862.0 738.0Noninterest income 738.0 609.0Noninterest expense 1,050.0 921.0Loss provision 150.0 175.0Net chargeoffs 194.0 163.0Balance Sheet 9/30/92 9/30/91Assets $29,190.0 $28,955.0Deposits 22,055.0 21,772.0Loans 18,383.0 18,688Reserve/nonp.loans 157.00% 96.00%Nonperf. loans/loans 1.91% 3.05%Nonperf. asset/asset 2.42% 3.22%Leverage cap. ratio 7.00% 5.64%ier 1 cap. ratio 7.60% 5.95%Tier 1+2 cap.ratio 11.60% 10.19%PNC Financial Corp.PittsburghDollar amounts in millions (except per share)Third Quarter 3Q92 3Q91Net income $135.1 $107.3Per share 1.20 1.09ROA 1.19% 1.02%ROE 15.03% 15.42%Net interest margin 4.06% 3.84%Net interest income 432.1 374.4Noninterest income 203.2 277.1Noninterest expense 358.9 332.6Loss provision 69.9 148.9Net chargeoffs 52.6 112.8Year to Date 1992 1991Net income $392.5 $289.2Per share 3.53 2.94ROA 1.21% 0.85%ROE 15.19% 13.57%Net interest margin 4.02% 3.67%Net interest income 1,236.0 1,112.7Noninterest income 663.8 655.9Noninterest expense 1,236.0 1,112.7Loss provision 260.5 355.7Net chargeoffs 203.4 299.2Balance Sheet 9/30/92 9/30/91Assets $46,633.4 $42,284.2Deposits 27,410.4 29,774.4Loans 24,373.9 25,344.5Reserve/nonp. loans 145.00% 95.64%Nonperf. loans/loans 46% 3.40%Nonperf. asset/asset 1.90% 2.79%Leverage cap. ratio 7.99% 6.64%Tier 1 cap. ratio 10.80% 8.43%Tier 1+2 cap. ratio 12.80% 10.90%