Loyola Capital Corp. reported a sharp drop in earnings for the fourth quarter compared with a year ago as the Baltimore-based company moved to protect against further weakening in the regional economy.
The parent of Loyola Federal Savings and Loan said it earned $1.2 million, or 26 cents a share, for the final three months of last year, down nearly 56 percent from the $2.6 million, or 52 cents a share, earned during the same period a year earlier.
Loyola's lower earnings came primarily as a result of the thrift's decision to add $7.1 million to reserves set aside to pay for possible losses in its loan portfolio and in its real estate investments.
The company said the addition was also made "as recognition of the potential effects of the slowdown in the mid-Atlantic economy." Loyola added $1.7 million to its loan loss reserves for the comparable quarter in 1989.
Offsetting much of the cost of the additional reserves was a $3 million
gain on the sale of securities during the quarter, said Loyola, which has $2.1 billion in assets and 32 branches in Maryland.
Analysts said that yesterday's announcement held few, if any, surprises as Loyola had warned of the higher loan loss provision in an announcement in late December.
"They look in line with what they told us they'd be," said David S. Penn, a banking analyst at Legg Mason Inc.
"The capital ratios remain solid. Certainly they took some special hits this time but they still remained profitable."
Loyola's stock closed on the over-the-counter market yesterday at $7.75, up 25 cents.
In a statement, Joseph W. Mosmiller, chairman and chief executive of Loyola, said that the additions to reserves did not come at the request of federal examiners.
Loyola said its thrift subsidiary was examined by both the Federal Deposit Insurance Corp. and the Office of Thrift Supervision this year.
The statement apparently was made in light of the experience of a number of banking and thrift companies recently.
Increasingly, many financial institutions have been forced in recent months to make large provisions against possible loan losses as regulators push for tighter accounting of weak and potentially failing loans.
But Loyola, in contrast to many of its competitors, has relatively little exposure to loans to the real estate industry.
With nearly $1.8 billion in loans outstanding, only $103.2 million was in the commercial real estate sector. Residential real estate lending accounted for slightly more than $1 billion worth of the loans while lending to consumers represented about $534 million of the portfolio, according to the company.
Loyola had total non-performing loans of $36.2 million at the end of the year compared with $32.7 million a year earlier, the company said.
James McAveney, the company's chief financial officer, said that Loyola had suffered no losses from its real estate loans during the fourth quarter.
The company said it was also helped by a decline in interest rates that had brought down the cost of deposits faster than the amount it earned on the money.
But Mr. Mosmiller also noted that new consumer and mortgage loans had slowed in recent months.