Baltimore Bancorp slashes dividend by 40% Bank expects $1 million loss in third quarter

August 17, 1991|By Timothy J. Mullaney

Baltimore Bancorp, citing problems with $30 million in commercial real estate loans, said yesterday that it will cut its quarterly dividend by 40 percent and expects to report a $1 million loss for the third quarter.

The company, the parent of the Bank of Baltimore, said that its 15-cents-a-share quarterly dividend will be cut to 9 cents for the third quarter, plus a 1 cent special dividend. Company Chairman Robert F. Comstock said the dividend cut was designed to cut the percentage of the company's profits spent on the dividend rather than reinvested in the bank.

At a press conference after a special board of directors meeting, Mr. Comstock also defended his trading in the company's stock. Mr. Comstock bought 16,500 shares of Baltimore Bancorp late last year and early this year, in purchases that have brought inquiries from the staff of the Securities and Exchange Commission.

"I'm not going to answer specific questions on these charges because they are spurious," Mr. Comstock said. "I'm incensed by them."

In late January, shortly after the last in a series of purchases by Mr. Comstock, the company announced quarterly earnings that were much better than what analysts had expected. The stock to jumped more than 40 percent in less than a week.

Mr. Comstock was briefed during the fourth quarter of 1990 on the company's loan and lease delinquencies, which did not produce the losses analysts had expected during the quarter, but he contends that the information he received did not affect his purchases.

Mr. Comstock said that the board did not pass a motion to create a committee to investigate the trades.

The loans that contributed to Baltimore Bancorp's third-quarter troubles involve one on an office condominium complex in Alexandria, Va., and three on undeveloped land. The company will have to add about $4.5 million to its loan loss reserves to protect itself against defaults, Mr. Comstock said, and that will wipe out the profit the company otherwise would

have made.

"We've been looking at these loans since a year ago. We've been working out ways to work with the developer," said Jerome P. Baroch, the company's executive vice president. "But we've hit the wall."

The company said that the collateral for the loans is worth more than the loans themselves.

Mr. Comstock acknowledged that the moves were difficult to make politically at a time when the bank's management is being challenged by dissident shareholders led by Edwin F. Hale Sr. Mr. Hale and his allies already hold six of the 18 board seats.

Shareholders are to vote by Aug. 29 on a proposal to expand the board to 28 seats, which would give the Hale group a majority.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.