Baltimore Bancorp posts $69.6 million loss

January 28, 1992|By Ross Hetrick

Baltimore Bancorp, the parent of the Bank of Baltimore, reported yesterday a loss of $69.6 million, or $5.46 a share, in the fourth quarter as the new management attempted to clean its books and add to reserves for possible loan losses.

The quarterly results boosted the bank holding company's loss for the year to $101.5 million, or $7.96 a share, compared with earnings of $9 million, or 71 cents a share, for 1990. During the fourth quarter of 1990, the bank lost $6.5 million, or 51 cents a share.

The loss pushed the bank's total capital-to-assets ratio below regulatory requirements for the first time. In response, Baltimore Bancorp plans to sell $376.1 million in assets and might seek an additional $15 million to $20 million in debt acceptable to regulators, the company said.

"We believe that we have now identified the problems and have taken the initial steps necessary to improve capital ratios and pave the way for renewed profitability in theyears ahead," said C. H. Whittum Jr., chief executive officer.

The company said it had added $49.8 million to its reserve for possible loan losses, increasing the total to $110 million, or 57 percent of the bank's bad loans at the end of last year.

The fourth-quarter loss also included a $35.8 million after-tax charge to rid its balance sheet of goodwill. Goodwill -- the amount by which a company's purchase price exceeds its net worth -- is typically written off a buyer's books and deducted from earnings over a number of years.

Most of the goodwill was associated with the purchase of Metropolitan Federal Savings and Loan Association of Bethesda 1987.

Edwin F. Hale Sr., who owns the Baltimore Blast indoor soccer team, and trucking and shipping companies, became chairman of Baltimore Bancorp's board Sept. 11, 1991, after a bitter proxy fight. During the battle, Mr. Hale's group severely criticized the bank's financial condition.

Although the fourth quarter results were unusual for the generally profitable bank, analysts were not surprised because of the new management's restructuring plan.

"They were trying to write off the kitchen sink," said Elisabeth Albert Hayes, a bank analyst with Chapin, Davis, a Towson brokerage. "You have to hold your breath and hope it's the bottom."

Ms. Hayes said the bright spots in the report included an increase in fee income and growing deposits. She was concerned about a 56.9 percent increase in home equity loans, pushing the total to $602.1 million.

"There is no problem now, but there was no problem with construction loans five years ago," before the recent crash in the commercial real estate market, she said.

David S. Penn, a bank analyst for Legg Mason Inc. in Baltimore, said the figures were what he expected, excluding the write-off for goodwill.

The large loss pushed the banking company's total capital down to 6.31 percent, below a regulatory requirement of 7.25 percent that took effect at the end of 1991. The two other measures of capital remained above the standards.

David L. Spilman, senior vice president and director of investor relations, said the bank plans to meet the capital requirements by selling $376.1 million in securities, credit card receivables, U.S. Treasury bonds and residential mortgages this year.

The bank also might seek $15 million to $20 million in capital in the form of debt acceptable to federal regulators, he said.

Bank officials met with the company's employees to explain the bank's financial condition. "We wanted to be awful sure that our people know what our corporate strategy is," Mr. Spilman said.

Baltimore Bancorp

Three months ended 12/31/91

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

'91. . . . . (69,589,000) . . . (5.46)

'90. . . . . (6,530,000). . . . (0.51)

% change . . . . . . . NA. . . . . . .NA

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

'91. . . . . 3,211,293,000. . . . . . 2,947,978,000

'90. . . . . 3,523,429,000. . . . . . 2,911,255,000

% change . . . . . . .- 8.9. . . . . . . . . . .+1.26

Twelve months ended 12/31/91

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

'91. . . . . (101,489,000). . . (7.96)

'90. . . . . . .9,010,000 . . . .0.71 % change . . . . . . . .NA . . . . .+NA

Loan portfolio

Three months ended 9/30/91

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

'91. . . . . . .2,121,915,000 . . . . . . . 11,778,000

'90. . . . . . .2,367,124,000 . . . . . . . .2,791,000

% change . . . . . . . . -10.4 . . . . . . . . . .+322.0

. . . . Addition to allowance. . . . . . Allowance

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

'91. . . . 49,816,000. . . . . . . . . . . 110,036,000

'90. . . . 18,920,000. . . . . . . . . . . 35,502,000

% change . . . .+163.3. . . . . . . . . . . . . +209.9

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