Buoyed by improving credit quality, strong noninterest income, and a consumer-led loan recovery, several southeastern banks reported double-digit quarterly earnings gains on Thursday.

But slipping net interest margins sluggish commercial loan demand tempered the positive news.


The Charlotte, N.C.-based company, which has $71 billion of assets, earned $189.2 million, up 22% from the year-earlier third quarter. But investors turned thumbs down on the report. First Union's shares fell $2.125 cents to $44 in late afternoon trading.

Analysts expressed concern about a big drop in the interest margin and $31 million of unusual charges the company took in the third quarter.

The report also looked bad in comparison with the second quarter, when merchant banking gains resulted in earnings per share 20 cents higher than in the third quarter.

Some fundamentals looked good at First Union, the nation's ninth largest bank. Net interest income grew by 11% to $728.8 million from the year ago quarter.

Also, the company's loan-loss provision fell 40% to $50 million from the year-ago quarter, and net chargeoffs were down 31%, to $57.4 million.

But the Positives were offset by an extremely sharp 27-basis-point drop from the second quarter in net interest margin to 4.65%.

First Union attributed the margin decline to the acquisition of several banks with lower margins than it usually maintains. It also said that it added low-interest short-term securities to its investment portfolio and experienced an acceleration of residential mortgage pay-downs caused by refinancing activity.First Union Corp.Charlotte, N.C.-- Dollar amounts in millions (except per share) --Third Quarter 3Q93 3Q92Net income $189.2 $154.9Per share 1.12 0.96ROA 1.08% 1.06%ROE 16.11% 15.25%Net interest margin 4.65% 4.89%Net interest income 728.8 656.7Noninterest income 288.0 255.3Noninterest expense 664.4 594.1Loss provision 50.0 83.3Net chargeoffs 57.4 82.9Year to Date 1993 1992Net income $622.2 $367.6Per share 3.61 2.18ROA 1.25% 0.81%ROE 18.11% 12.07%Net interest margin 4.85% 4.68%Net interest income 2,057.8 1,793.5Noninterest income 874.7 809.5Noninterest expense 664.4 594.1Loss provision 171.8 335.4Net chargeoffs 192.5 257.5Balance Sheet 9/30/93 9/30/92Assets $71,388.1 $61,255.3Deposits 52,935.4 47,264.4Loans 45,195.8 40,255.3Reserve/nonp. loans 112.00% 98.00%Nonperf loans/loans 1.99% 2.31%Nonperf asset/asset 2.60% 3.39%Leverage cap. ratio 5.95% 6.46%Tier 1 cap. ratio 8.49% 8.85%Tier 1+2 cap ratio 13.62% 13.65%


The Charlotte-based bank company earned $124.4 million, up 14.3% from the year-earlier quarter and virtually even with its results in this year's second quarter.

Per-share earnings of 71 cents were in line with analysts' estimates, although noninterest income and the company's interest margin fell.

Credit quality continued to improve. Loan-loss provision dropped 17% from one year ago to $23.5 million while net chargeoffs were down 2% to $18.9 million.

Outstanding loans grew by $388 million during the third quarter, reflecting growth in credit cards, sales finance, and residential mortgages.

Noninterest income fell 4% on a year-to-year basis to $150.5 million. But Robert S. McCoy Jr., chief financial officer, pointed out that the third quarter of the previous year included a $19.5 million gain on the sale of a consumer finance subsidiary. Excluding the gain, noninterest income grew 9%, led by credit card fees, service charges and trust income.Wachovia Corp.Winston-Salem, N.C.--Dollar amounts in million (except per share) --Third Quarter 3Q93 3Q92Net income $124.4 $108.8Per share 0.71 0.62ROA 1.47% 1.39%ROE 17.12% 16.54%Net interest margin 4.59% 4.76%Net interest income 347.3 330.8Noninterest income 150.5 156.2Noninterest expense 273.5 289.7Loss provision 23.5 28.2Net chargeoffs 18.9 19.2Year to Date 1993 1992Net income $369.1 $323.6Per share 2.10 1.85ROA 1.49% 1.37%ROE 17.26% 16.82%Net interest margin 4.72% 4.75%Net interest income 1,031.8 994.4Noninterest income 467.9 416.0Noninterest expense 831.5 814.3Loss provision 74.6 90.9Net chargeoffs 50.1 66.9Balance Sheet 9/30/93 9/30/92Assets $35,320 $61,255.3Deposits 22,187 22,294Loans 22,066 20,045Reserve/nonp. loans 19.00% 208.00%Nonperf loans/loans 0.57% 0.91%Nonperf asset/asset 0.85% 1.39%Leverage cap. ratio 8.69% 8.51%Tier 1 cap. ratio 10.0% 10.0%Tier 1+2 cap ratio 13.3% 11.6%


First Commerce Corp., a New Orleans holding company with $6.2 billion of asets, earned $22.8 million, up 22% from the year-ago quarter.

Amsouth Bancorp. in Birmingham, Ala., said it earned $35.1 million, up 33% over the year-ago quarter. In Richmond, Virginia, Crestar Financial Corp. reported net income of $37.2 million, rising 73% over a year ago.

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