MNC loss, though big, is viewed optimistically HD: $82.3 million figure is 'pleasant surprise'

July 20, 1991|By Timothy J. Mullaney

MNC Financial Inc. said yesterday that it lost $82.3 million during the second quarter, a performance bank analysts said was fairly decent despite the negative bottom line.

"Eighty-two million was a pleasant surprise," said Arnold G. Danielson, president of Danielson Associates, a Rockville bank consulting firm. "I thought if they kept it under $250 million for the [combined second and third] quarters, they would be out of the woods." He said it appears likely that MNC will meet that goal.

"If you're sitting at Maryland National, it doesn't feel pleasant," he added. "But there's no danger of the failure-government takeover bit."

"The best news is that the bad news isn't getting worse," said David S. Penn, a Legg Mason Inc. analyst.

He said the quarterly loss was about as big as most of Wall Street had expected -- indeed, MNC's stock closed unchanged at $3.375 a share, indicating that the news didn't change the company's value.

The company blamed the loss primarily on continuing loan quality problems that forced MNC to add $73 million to its loan-loss reserves during the quarter, and $22 million in severance benefits the company paid to employees laid off in a cost-cutting program designed to save $100 million.

Frank P. Bramble Sr., the company's newly elected president and chief executive officer, said loans that aren't being paid cause more problems than just forcing additions to reserves. He said that they also hurt operating profits, since the company loses the revenue that interest payments would generate.

Last year, MNC had to add $233 million to its loan loss reserves, leading to an overall loss of $74 million. The company had better core operating profits last year partly because it still owned the profitable MBNA Corp. credit card company.

Mr. Bramble said that he was still personally comfortable with MNC Chairman Alfred Lerner's May assertion that the company will probably be in the black by the fourth quarter. The company does not make official earnings forecasts.

MNC saw about $141 million in loans go onto non-performing status during the quarter, meaning payments weren't being made. That caused a $25 million increase in the company's overall list of non-performing assets because MNC had moved $116 million off the non-performing list by charging them off.

Charging off a loan means that MNC has given up hope of recoveringthat much of its money, either because the loan can't be repaid or because the collateral is worth less than the loan balance.

Three months ended 6/30/91

... ... ... ... ... Income... ... ... Share

'91... ... ... (82,289,000)... ... (0.96)

'90... ... ... (74,710,000)... ... (0.90)

% change... ... ... ... N/A... ... ... .N/A

... ... ... ... Assets... ... ... .Deposits

..19,118,220,000.. ... 15,305,032,000

'90.. ..27,538,669,000.. ... 19,073,830,000

% change... -30.6 19.8... ... .. ... ... ..

Six months ended 6/30/91

... ... ... ... ...Income... ... ... . Share

'91.. ... ... .71,698,000.. ... ... ... 0.78

... .. (68,521,000)... ... ... .(0.85)

% change... ... ... .-N/A... ... ... ... N/A

Loan portfolio

Three months ended 6/30/91

... ... ... ...Loans outstanding... ... ... ... Net charge-offs

'91... ... ... . 12,072,611,000... ... ... ... ... 115,854,000

'90... ... ... . 15,902,531,000... ... ... ... ... 96,222,000

% change... ... ... ... ... 24.1... ... ... ... ... ... ..+20.4

Addition to allowance Allowance

for loan losses... ... ... ... ... ... ... ... .for loan losses

'91..72,947,000... ... ... ... ... ... ... ... ... .831,148,000

'90. 233,285,000... ... ... ... ... ... ... ... . 545,103,000

%... change 68.7... ... ... ... ... ... ... ... ... ... ..+52.5

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