Following a 2 1/2 -month examination by federal regulators, Second National Federal Savings Bank said yesterday it would eliminate the thrift's quarterly dividend.
The Annapolis-based thrift also said it will boost its pool of money to cover future loan losses more than fivefold, by $16.6 million this quarter and an additional $8.75 million over the next 18 months.
With 40 branch offices in Maryland, Delaware, Pennsylvania, Virginia and Washington, it has suffered from the same declining real estate market that has hurt, to varying degrees, most other large financial institutions in the region.
The announcement came one day after examiners from the Office of Thrift Supervision left the $1.8 billion thrift, which had concentrated on commercial real estate and ocean resort lending.
`The real estate economy within our region continues to deteriorate," said Henry A. Berliner Jr., Second National's president and chief executive, in a statement. "Those developers involved in multiple projects are unable to produce sufficient cash flow to support their borrowings while new capital standards and the examiners' more stringent reserve requirements have precluded additional borrowing" by developers to cover the loans' interest payments.
Though the effect of the moves on third-quarter and annual earnings was not addressed in the thrift's statement, the $16.6 million provision would be deducted from any income for the period. The company earned $4.4 million during the first six months of this year.
Mr. Berliner also said yesterday that this quarter's charge against earnings would result in a reduction of the company's book value to slightly above $5 a share from $7.39 a share.
Yesterday's unusual mid-quarter announcement followed a scheduled board meeting set to determine the fate of this quarter's dividend. The company said a month ago that it intended to halve the dividend to 4.5 cents a share for each of the 7.4 million shares outstanding.
Traded on the over-the-counter market, Second National closed at $3.125 a share, down 37.5 cents, yesterday.
The company said its non-performing assets, mainly loans more than 90 days past due and repossessed properties, increased to $62 million from $30 million as of March 31.
This quarter's provision resulted from the addition of $7.88 million to cover specific loans tied to troubled real estate projects currently on Second National's books and a general $8.75 million provision to cover unspecified future loan losses.