Cleveland-based Society Corp. reported hefty third-quarter earnings on the strength of a wide net interest margin and improving credit quality.
The company's net income of $82.8 million was up 39% from year-ago results that were restated to reflect the acquisition of Ameritrust Corp. The profits represent a strong 1.43% return on average assets and a 19.03% return on equity.
"It looks like the company is on track to meet its performance projections," said Fred Cummings, a banking analyst at McDonald & Co., Cleveland.
Society has been under scrutiny since it agreed last year to buy ailing Cleveland rival Ameritrust. The deal was completed in the first quarter of 1992.
The results so far have been volatile: Merger charges depressed first-quarter results, then the sale of branches bolstered second-period results.
With the smoke clearing, it appears the most important factor in the company's progress is its widening net interest margin.
The third-quarter margin of 5.51% was up from 5.33% in the previous quarter and 4.69% in the third quarter of 1991. The reason: Though average earning assets were down 11% from the year-ago period, Society's taxable equivalent net interest income increased by 5.03%.
Better Credit Quality
Strengthening credit quality also drove Society's results. A loan-loss provision of $33.9 million was down from $46 million in the prior quarter and $43.4 million in the 1991 third quarter. The company boosted its ratio of loss reserves to nonperforming loans to 129.5%, up from 82.7% a year ago.
Because Society's nonperforming assets are falling only slightly faster than gross loans, its ratio of problem assets remains comparatively high, at 3.61%, little changed from the 3.91% ratio of the year before.
Persisting merger and foreclosed property expenses have helped slow Society's progress in realizing cost savings. Noninterest expenses equaled an annualized 4.23% of average assets during the third quarter, up from 4.01% the year before.Society Corp.Cleveland- Dollar amounts in millions (except per share) -Third Quarter 3Q92 3Q91Net income $ 82.8 $ 59.7Per share 1.38 1.00ROA 1.43% 0.93%ROE 19.03% 13.76%Net interest margin 5.51% 4.69%Net interest income 288.0 273.5Noninterest income 124.2 115.3Noninterest expense 249.7 255.6Loss provision 33.9 43.4Net chargeoffs 45.3 53.1Year to Date 1992 1991Net income $214.7 $168.9Per share 3.58 2.85ROA 1.21% 0.89%ROE 16.97% 13.44%Net interest margin 5.33% 4.59%Net interest income 860.8 806.6Noninterest income 393.8 346.3Noninterest expense 804.9 752.0Loss provision 116.3 139.9Net chargeoffs 130.5 151.2Balance Sheet 9/30/92 9/30/91Assets $24,388.9 $25,016.2Deposits 17,327.2 20,205.9Loans 15,742.1 17,042.5Reserve/nonp. loans 129.52% 82.72%Nonperf. loans/loans 2.51% 3.19%Nonperf. asset/asset 2.35% 2.58%Leverage cap. ratio 7.16% 6.27%Tier 1 cap. ratio 8.06% 7.74%Tier 1+2 cap. ratio 11.04% 10.15%