Skies Keep Brightening For Southwest Bankers
The revival of the Southwest banking industry continued apace during the third quarter, and several institutions on the mend gained attention as potential takeover targets.
These banks formerly seemed to be mired in declining markets. Now, they have emerged as potential entry vehicles into one of the few U.S. regions set for an upswing.
Wall Street has gained interest even in somewhat smaller institutions that show signs of revival. The traders further testify to spreading confidence that the Southwest's realty lending woes are just about at an end.
Indeed, the healing is visibly at work in the banks recently singled out as buyout candidates.
San Antonio-based Cullen/ Frost Bankers, for example, posted only $520,000 of net chargeoffs for the third quarter, compared with $6 million in the second quarter and $11.8 million in the prior-year period. Problem assets declined by more than 6% during 1991's third quarter.
To be sure, the institution's $503,000 of net income represents a minuscule 0.06% annualized return on average assets. But investors of late have driven the company's stock to a series of 52-week highs. Tuesday afternoon's price of $13.50 was more than double a 52-week low of $5.50.
Similarly, the common stock of Denver-based Affiliated Bankshares of Colorado has rallied in tandem with its improving results. The issue was priced Tuesday afternoon at $22.875, a healthy 21% premium over its book value of $18.88 a share.
Affiliated Bankshares' $5.16 million of third quarter income was up 59% from the prior-year period. During the third quarter alone, problem assets fell 16% to $63.14 million, or a manageable 3.98% of gross loans.
This type of robust improvement surfaced at banking companies in most other Southwest states, including Arkansas, Louisiana, Oklahoma, and Texas.
FIRST COMMERCIAL CORP.
In Arkansas, for example, Little Rock-based First Commercial Corp. racked up $7.1 million of net income representing a hardy 1.20% return on assets and a 16.58% return on equity. The company's profits were up 24% from the prior-year period.
First Commercial has been on the acquisitions trail this year, buying 12 branches from failed thrifts. And its credit quality is exemplary: At Sept. 30, problems assets comprised a low 2.24% of gross loans.
FIRST COMMERCE CORP.
Similarly, New Orleans-based First Commerce Corp. reported $9.22 million of third quarter profits that were quadruple those of the prior-year period. Though problem assets still stood at a somewhat uncomfortable 4.41% of gross loans at Sept. 30, the company's $7.98 million loss provision was down sharply from $18.1 million in the year-ago period.
First Commerce reported a 0.77% return on assets and a 15.39% return on equity during the first nine months of 1991.
The company is seen as having a shot at becoming the dominant institution in Louisiana as rival Hibernia Corp. sinks and Premier Bancorp treads water until its buyout agreement with Banc One Corp. comes into effect.
BANK OF OKLAHOMA
Bank of Oklahoma reported a 131% earnings improvement in third quarter compared with the prior-year period, showing profits of $4.87 million.
The bank in June completed a lengthy federal rehabilitation and was purchased by oilman George B. Kaiser, who became the institution's chairman and chief executive. The executive has bought eight thrift branches and a mortgage company since taking over.
Texas banks also reported improved results during the third quarter, benefiting from firming asset quality, widening interest margins, and from tax benefits generated during the money-losing depths of the state's energy and realty lending bust.
Texas Commerce Bancshares, the Houston-based subsidiary of Chemical Banking Corp., reported $34.7 million of third quarter earnings, a 52% increase from the prior-year period. The unit said problem assets fell for the 13th consecutive quarter to $746 million, down $210 million from 1990's third quarter.
On a year-to-year basis, Texas Commerce reported an 11% increase in net interest income, a 16% increase in noninterest income, and an 11% increase in retail deposits.
First Interstate-Texas, the Houston-based subsidiary of First Interstate Bancorp. Los Angeles, reported a 60.4% year-over-year earnings leap to $32.1 million. That represents a 2.27% return on assets and a 38.2% return on common equity. Tax benefits of $15 million accounted for almost half the results.
The worst Southwest performance reported thus far was at Hibernia Corp., New Orleans, which lost $25.1 million during the third quarter. That swelled the company's nine-month loss to $129.9 million.
The company suffered a $775 million or 12% decline in deposits during the third quarter alone and is seeking to sell its $1.1 billion-assets Texas franchise. The company said it has gained time to rework an $85 million loan from a lender group led by Chase Manhattan Corp. used to build the Texas unit.
At Sept. 30, Hibernia held $335.4 million of problem assets equaling 7.2% of gross loans.
FIRST CITY BANCORP.
As reported Friday, Houston-based First City Bancorporation of Texas announced a $48.9 million loss for the third quarter. The equity-to-assets ratio was down to 4.03% from 3.89% at June 30. Federal regulators have given the deeply troubled institution until yearend to raise at least $200 million of fresh capital.
Table : Third-Quarter Earnings at Southwest Banks Asset figures are in billions; income is in millions 9/30 3Q'91 Versus NPA Tler 1 assets Income 3Q'90 rati(*) ratio(**)Texas Commerce $17.8 $34.7 51.53% 7.94% 5.05%Hibernia 6.2 -25.1 NA 7.17 4.37First Interstate-Texas 5.9 32.12 60.43 3.70 5.73First Commerce 5.0 9.22 309.10 4.41 8.70
Sunwest FinancialServices 3.3 3.71 -16.14 7.93 6.16Cullen/Frost 3.3 0.50 NA 9.86 5.12Affiliated Bankshares 2.8 5.16 58.67 4.36 7.40First Commercial 2.6 7.07 23.67 2.24 7.41Worthen Banking 2.5 5.42 1.610 2.24 7.93Bank of Oklahoma 2.1 4.87 130.74 4.75 7.01
(*) Delinquent, renegotiated, and foreclosed loans as percentage of gross lo ans (**) Risk-based Tier 1 capital as percentage of total assets NA: Not available
Source: Company reports