Magazine article American Banker

Loan Growth Buoys Earnings in Southeast

Magazine article American Banker

Loan Growth Buoys Earnings in Southeast

Article excerpt

Loan growth was the recurring theme as midsize regional banks across the Southeast issued strong third-quarter earnings reports over the last week.

The pace ranged from blistering in Louisiana to cool and steady in the Carolinas and Virginia.

Louisiana's two largest banks, New Orleans-based First Commerce Corp. and Hibernia Corp., reported loan growth of 28% and 19%, respectively, from the year-earlier period. Earnings at First Commerce surged 106%, to $24.4 million, while Hibernia gained 8%, to $33.6 million.

First Commerce's year-to-year earnings comparison was distorted by $20 million of securities losses in last year's third quarter, versus none this quarter.

First Commerce, with $7.4 billion of assets, reported growth in average assets of 11% while deposits rose 5%.

For $7 billion-asset Hibernia, average assets were up 5%, deposits 3%.

"These two banks are having some of the best loan growth among any banks we follow," said analyst Michael L. Mayo of Lehman Brothers. "After many years of being in the doldrums, the Louisiana economy is really bouncing back."

Mr. Mayo cautioned that the frenetic pace at First Commerce and Hibernia is "not sustainable" but added, "They will continue to have well above average loan growth compared to the rest of the industry."

Elsewhere, Crestar Financial Corp. of Richmond, Va., earned a record $48.4 million, an increase of 11%. The performance was aided by loan growth, excluding acquisitions, of 13%. Central Fidelity Banks Inc., also of Richmond, netted $27.6 million, up 0.6%, with 10% loan growth.

Central Fidelity, with $10.7 billion of assets, is still struggling with a weak net interest margin of 3.54%, due in part to a large securities portfolio relative to loans. Loans constitute only 61% of earning assets. Rising interest rates last year forced the bank to restructure its portfolio, producing a $29 million charge at yearend. …

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