Strong Fourth-Quarter Profit Reports Keep Rolling In

Midsize banks reported generally strong fourth-quarter earnings this week, buoyed by robust loan growth and fee income.

The one trouble spot was credit problems in Louisiana related to the gambling industry.

The power of fee income could be seen most clearly at Memphis-based First Tennessee National Corp., where noninterest income accounted for 56% of total revenues, compared with about 30% for most regional banks. First Tennessee's net income surged 39% in the quarter to $45.7 million, fueled by strong gains in mortgage banking and the bond division.

Earnings per share, at $1.34, were right in line with analysts' consensus for First Tennessee, which has $12.1 billion of assets.

"There was no surprise in the bottom line, but mortgage banking revenues were much better than expected," said Ruchi Madan, with Prudential Securities.

Mortgage banking fees at First Tennessee gained 67% in the quarter, to $67.7 million, propelled by strong origination and servicing volume. Noninterest income from the bond division jumped 57%, to $21.5 million.

Good loan growth in Alabama and neighboring states helped earnings at two Birmingham-based banks: Amsouth Bancorp. and Regions Financial Corp.

Amsouth, which has $17.7 billion of assets, earned $47.9 million, compared with only $1.4 million in the year-ago period, when the company took massive restructuring charges related to acquisitions in Florida. Amsouth's earnings per share of 82 cents beat consensus estimates by 3 cents.

Regions, with $13.7 billion of assets, reported net income of $44.7 million, up 20% from a year ago. Regions' earnings per share of 98 cents exceeded consensus expectations by 4 cents.

UBS Securities analyst Brent B. Erensel said Amsouth is benefiting from a stable net interest margin, good loan growth, tight expense control, a more streamlined business plan, and a recently instituted stock buyback program.

In contrast to the other banks, New Orleans-based First Commerce Corp., reported a quarter marred by a plethora of special charges. First Commerce's earnings of $6.9 million fell 38% below the year-ago period, and earnings per share of 15 cents came in a full 27 cents under consensus.

Analysts shrugged off the report, since most of the charges - related to acquisitions, gambling industry credit problems, and a reengineering program - had been expected in one form or another.

Among the various charges, First Commerce set aside $10 million in loan- loss reserves to cover its exposure to the recent bankruptcy of the Harrah's Jazz Co. casino in New Orleans. The action drove the bank's overall loan-loss provision up to $19.8 million, more than four times the previous quarter's $4.7 million.

First Commerce, which has $8.5 billion of assets, said the chargeoffs taken in the fourth quarter eliminate its credit exposure to the $850 million casino project, which shut down on Nov. 22 in the face of poor attendance.

In the Northeast, Philadelphia-based CoresStates Financial Corp. reported a 23% increase in fourth-quarter earnings to $136.9 million, including several one-time charges for acquisitions and restructuring. Net income for the year rose 21%, to $503 million.

Chatham, N.J.-based Summit Bancorp reported a 16% increase in fourth- quarter profits, to $19.2 million, and a 24% increase for the year, to $72.5 million. Princeton-based UJB Financial reported a 34% increase in fourth-quarter net income, to $46 million, and an 84% rise for the year, to $452.2 million.

Reading, Pa.-based Meridian Bancorp registered a 9% increase in fourth- quarter earnings to $48.3 million after restructuring and merger-related charges. Meridian and CoreStates are expected to merge in the second quarter into a single bank with $45 billion in assets.

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