Baltimore Bancorp, just three weeks after state and federal regulators finished a financial examination of the banking company, said yesterday that it lost $6.5 million during the fourth quarter as it doubled the amount set aside to cover problem loans.
The company, parent of the 51-branch Bank of Baltimore, said the addition to the reserve was made "due to continuing concern over the economy, and particularly the real estate market in this area."
As a result, the Baltimore-based banking company said, it added $18.9 million to its loan-loss reserves, bringing the total set aside to $35.5 million at the end of 1990.
The company's 1990 fourth-quarter loss, equal to 51 cents a share, contrasted with earnings of $1.9 million, or 15 cents a share, during the same three-month period in 1989.
Baltimore Bancorp's announcement yesterday had been much-awaited by analysts, who feared that a regulatory examination would lead to heavy losses at the banking company. Regulators, the analysts noted, have been pressing the banking industry for tighter accounting of weakening real estate loans, leading to higher losses at many banks.
Part of the analysts' concern stemmed from Baltimore Bancorp's relatively large volume of loans to the battered real estate industry. Such loans have cost other area banks hundreds of millions of dollars as loans failed.
With $2.2 billion in loans out standing at the end of the year, Baltimore Bancorp had 38 percent of its loans in the riskier areas of real estate construction and commercial mortgages.
As a result, the relatively low level of troubled loans reported yesterday surprised the analysts. Baltimore Bancorp, which has traded as high as $15.75 a share over the past 52 weeks, closed yesterday before the earnings were announced at $4.125, up 12.5 cents a share.
"The market thought that things would be worse than they actually were," said David S. Penn, a banking analyst with Legg Mason Inc. "My sense of this is that their non-performing assets have basically doubled while some of its peers' have tripled and quadrupled" over the past year.
Still, he warned, the banking industry continues to face a difficult environment this year.
"If it's true that the feds are gone, it appears that maybe the worst is over," Mr. Penn said about Baltimore Bancorp.
"On the other hand, this real estate market doesn't show any signs of getting any better."
Executives at Baltimore Bancorp said they were pleased with the full-year results despite the fourth-quarter loss.
"No one likes a loss in the fourth quarter," said Jerome P. Baroch, senior executive vice president of the company. "But we think it's very positive that we had a $9 million gain in the year."
Mr. Baroch referred to the recently completed regulatory examination as "fortuitous" in that it was completed in time for the fourth-quarter results. The company said in a statement that its loss reserves "substantially" exceeded the level required by federal examiners, who completed their examination the first week of January.
Included in the fourth-quarter loss was a one-time gain of $1.7 million resulting from the early retirement of company debt during the period.
The company also recorded a $1 million gain from the previous sale of the Towson branch of its Municipal Savings Bank.
Without the extraordinary income, Baltimore Bancorp would have lost $8.2 million during the fourth quarter.
For all of 1990, Baltimore Bancorp earned $9 million, or 71 cents a share, compared with income of $17.6 million, or $1.36 a share, in 1989.