Md.-chartered banks' net income down 37%

November 07, 1990|By Peter H. Frank

State-chartered banks in Maryland suffered a 37 percent decline in net income during the third quarter as the cost of bad loans soared compared with a year ago.

In all, the 78 state-chartered banks reported total income of $41.6 million for the three months ended Sept. 30, down from last year's earnings of $66.3 million, according to figures released this week by state regulators.

Fueled in large part by souring real estate loans, the lenders' earnings suffered primarily from a collective addition of $42.5 million to reserves aimed at covering the future costs of problem loans. The third-quarter provision was up 258 percent over the $11.9 million set aside a year ago.

"Those state bank numbers in aggregate are pretty darn good," said John A. Bailey, a banking analyst with Ferris, Baker Watts in Washington. "Even some of the very conservative and very well-run companies are seeing provision levels twice what they were last year. So that's not at all out of line, and it's not unexpected to see any of these numbers."

The survey prepared by the state's bank commissioner does not include nearly 30 national banks with headquarters in Maryland, such as Maryland National Bank and First National Bank of Maryland. The national banks are regulated by federal agencies and account for slightly more than half of the assets based in the state.

Figures have not yet been compiled by regulators for nationally chartered banks in Maryland.

Though assets declined at a number of the largest banks in the region, assets among all state-chartered banks rose 5.3 percent, to $26.7 billion, during the third quarter.

Analysts credited the increase to the large number of local community banks that remain state-chartered and the fact that loans -- which banks count as part of assets -- at those smaller banks increased during the period.

One of the more positive signs was that total equity capital -- the difference between assets and liabilities -- remained at a strong 7.5 percent of total assets. That compared with a national average of 6 percent to 6.5 percent, said Kyle Prechtl Legg, a banking analyst with Alex. Brown Inc. in Baltimore.

For the nine months that ended Sept. 30, the state-chartered banks earned a combined $135.2 million, down 32.8 percent from $201 million during the first three quarters of last year.

At a glance

Maryland's 78 state-chartered banks reported that income fell 37.2 percent during the third quarter, to $41.6 million from $66.3 million during the year-ago period.

The lower income resulted primarily from increases in reserves against loan losses, which were up 258 percent during the quarter, to $42.5 million from $11.9 million last year.

The highest net incomes:

1. Citizens Bank of Maryland, $7.2 million.

2. Mercantile-Safe Deposit & Trust Co., $6.5 million.

4. Chase Bank of Maryland, $6.3 million.

4. Signet Bank/Maryland, $6.2 million.

5. The Bank of Baltimore, $4.5 million.

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