While the euphoria of the quick victory in the Persian Gulf war lingers, three of the region's largest banks helped provide a cold slap of economic reality yesterday, blaming a stubborn deterioration of the local market for their sharply lower earnings.
First Maryland Bancorp, Signet Banking Corp. and Crestar Financial Corp. each reported that earnings fell by at least 45 percent during the first quarter, which ended March 31, compared with a year earlier. Each blamed a limping economy in the region for their respective drops.
The results furthered what is apparently becoming an industrywide trend along much of the East Coast, coming the same day that banking giant Citicorp reported an 81 percent decline in first-quarter income and the day after both C&S/Sovran Corp. and Riggs National Corp. blamed real estate woes for their steeply reduced earnings.
"Although the war in the Persian Gulf has ended and many of our troops have come home, the recession continues unabated in our markets," said Richard G. Tilghman, Crestar's chairman and chief executive, who oversees the Richmond, Va.-based company's 261 branches in Virginia, Washington and Maryland.
"In the absence of economic growth, local real estate markets show no signs of recovery," he said in a statement. "Consequently, our non-performing assets continue to rise and net charge-offs remain at an above-normal level." Mr. Tilghman added that he expected the economy to show signs of improvement during the second half of the year.
Crestar said that its level of troubled loans and foreclosed real estate jumped 38 percent to $327 million during the three months that ended March 31. The increase led to an addition of $37.3 million to its reserves for souring loans for the quarter, compared with a $10.9 million addition made the year before. Any addition to these loan-loss reserves is deducted directly from income during the period.
Crestar also said yesterday that it planned to sell about $956 million in mortgage-backed securities to help boost its cash position.
The stories were much the same at First Maryland, which owns First National Bank of Maryland, and at Signet.
First Maryland's decreased earnings primarily were attributed to nearly $24 million addition to its loan-loss reserves, boosting the level available to cover the cost of troubled loans to $170 million, or a healthy 248 percent of total non-performing loans.
While the cost of the souring loans during the quarter was well above the amount registered a year ago, the banking company -- Maryland's second-largest with $7.8 billion in assets -- said it was well below the $28.8 million in loans that were charged off during the final three months of last year.
"First Maryland's performance during the first quarter of this year has been strong within the context of regional and national economies which are still challenging," said Charles W. Cole, president and chief executive.
First Maryland, which is owned by Dublin, Ireland-based AIB Group, does not report per-share figures.
Richmond-based Signet, which has more than 90 branches in Maryland, found its first quarter to be equally difficult.
The banking company said much of its earnings decline was because the "real estate and economic problems that plagued the banking industry during 1990 continued in the first quarter of 1991."