MNC Financial Inc. reports $82 million fourth-quarter loss Analysts stress relative improvement

January 17, 1992|By Jon Morgan

After hinting last summer that it might show a fourth-quarter profit, MNC Financial Inc. reported just the opposite yesterday: a loss of $82 million, or 96 cents a share.

Despite the loss, however, analysts generally were pleased because the results were substantially better than MNC's loss of $198 million, or $2.31 per share, in the same period a year earlier.

The Baltimore-based bank holding company had taken steps in recent weeks to warn analysts and investors, so the results were in line with Wall Street expectations, said David S. Penn, an analyst who follows the company for Legg Mason Wood Walker in Baltimore.

"It appears that their problems are not getting too much worse, and the question is: Have they bottomed out and begun getting better?" Mr. Penn said. "It's too soon to tell."

But, he added, "Last year at this time, the issue for MNC was survivability. Now it is profitability. I would much rather be worrying about profitability than survivability."

MNC's results appear consistent with a general improvement in the real estate portfolios of Northeastern banks.

Despite the quarterly loss, MNC's capital ratios remained well above the levels required by federal regulators. Total equity at the banking company was $1.020 billion as of Dec. 31.

And though many of MNC's loans were still considered troubled, the rate of increases in bad loans is now slowing, Mr. Penn said.

MNC stock was off 50 cents a share in heavy trading yesterday, closing at $6.375 on the New York Stock Exchange.

John A. Heffern, an analyst with Alex. Brown & Sons in Baltimore, said he was encouraged by the decrease in the banking company's overhead costs and "non-performing assets," or bad loans and repossessed property. "On balance, there is an emergence of stability, but stability is not going to be enough. They are going to have to start making some money," he said.

MNC, the parent company of Maryland National Bank and American Security Bank in Washington, posted a loss of $59 million in the third quarter, which ended Sept. 30. But it made a profit for the first nine months, thanks to the first-quarter sale of its credit-card subsidiary.

MNC lost $70 million, or 98 cents a share, last year, compared with aloss of $440 million, or $5.23 a share, in 1990.

During the spring and summer, company officials suggested publicly -- though unofficially -- that MNC would be back in the black by the final three months of the year. But the slower-than-expected economic recovery kept those predictions from being fulfilled, Daniel G. Finney, an MNC senior vice president, said.

"The company is encouraged and satisfied with the results," he said.

The economic downturn was felt most severely in the bank's real estate portfolio, which was blamed for most of the quarterly loss. During the quarter, a provision of $115 million was added to reserves for possible credit losses, bringing total reserves at year-end to $796 million. Additions to a bank's reserves for potential loan problems are deducted from earnings.

Non-performing assets totaled $1.772 billion at the end of last year, compared with $1.822 billion at year-end 1990. The company sold, recovered or restructured bad loans and real estate at a rate of $200 million a quarter during the year, MNC said.

The company also noted yesterday some positive signs. Bad loans declined to their lowest level since September 1990, operating results improved in each of the company's lines of business, and the residential mortgage lending and trust companies enjoyed record growth and profitability.

Mr. Finney said MNC was also pleased with the results of a just-completed annual examination by federal regulators. Judging from unofficial results of the examination, he said, "We don't expect any surprises and don't expect it to be negative."

Three months ended 12/31/91

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

'91 .. .. .. .(82,419,000) .. .. .. (.96)

'90 .. .. .. .(197,634,000) .. .. .(2.31)

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

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

'91 .. .. .. .17,636,238 .. .. 14,183,106

.. .. .. .26,835,944 .. ..20,829,356

% change .. .. .. ..-34.3 .. .. .. ..-31.9

12 months ended 12/31/91

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

'91 .. .. . . (70,201,000).. .. .. (.89)

'90 .. .. .. .(439,542,000) .. .. (5.23)

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

Loan portfolio

Three months ended 12/31/91

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

'91 .. ..10,355,203,000 .. ..155,613,000

'90 .. ..16,437,445,000 .. ..123,581,000

% change .. .. .. -37.0 .. .. .. .. .+25.9

.. .. Addition to allowance .. . Allowance

.. for loan losses .. . for loan losses

'9 1 .. ..115,076,000 .. .. .795,938,000

'90 .. .. ..257,263,000 .. ..923,860,000

% change .. .. .. . 55.2 .. .. .. .. -13.8

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