Magazine article American Banker

Society Posts 39% Profit Increase

Magazine article American Banker

Society Posts 39% Profit Increase

Article excerpt

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.

Acquisition's Impact

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. …

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