NEW YORK -- Since the beginning of last year, times have been sweet for shareholders in MNC Financial Inc. -- including some top executives at the state's largest banking company.
After a disastrous 1990 when the company's stock crumbled from almost $30 to under $2, MNC's stock has more than tripled to yesterday's close of $7.625 a share. This has come despite the continued write-off of hundreds of millions of dollars in bad loans and a balance sheet at the end of 1991 burdened by $1.8 billion in non-performing assets -- only marginally below the $1.9 billion peak in non-performing loans at the end of the prior quarter.
Despite a sense that the worst might be over, MNC, which owns Maryland National Bank and American Security Bank, is expected to lose $1.16 a share this year and $1 a share next year, according to estimates by Wall Street security analysts compiled by the Institutional Brokers Estimate System.
Further concerns about MNC's prospects have been fanned by the exercise of stock options by senior executives.
Securities and Exchange Commission filings show 10 MNC executives exercising stock options, reaping at least $2.35 million in profits during late January and early February. Two other executives sold shares during the period.
The number of executives taking part in the transactions was far larger than at Shawmut, Bank of Boston and several other banks that have registered large gains and in sharp contrast to Baltimore Bancorp and Bank Maryland Corp., where several executives have been buying shares.
"That's pretty heavy selling," said David Coleman, editor of the Vickers Weekly Insider Report, a Huntington, N.Y., research firm. "It would appear these guys were bailing out to a large extent."
MNC officials objected strongly to any such inference. "If you want to make this a litmus test for the bank's viability, you do a disservice," MNC's Chairman Albert Lerner said yesterday.
"We will have a good first quarter, the best we had in a while. God willing, the second or third quarter will be no worse," he said. "This company is pulling itself out by its fingernails by the enormously hard work of the people who are there. I don't think there's anything unjust in the sale of their options."
Mr. Lerner, who is the largest individual holder of shares and options, did not make any sales. "I had no need for the money. Because others did, does that make them less loyal? I don't think so."
He estimated that, not including his own options, about one-third of the amount outstanding was used in the February purchases. "Most are still un-exercised," he said.
Bonuses at the bank have been eliminated for the past two years and salaries frozen this year, making the options a major part of compensation, said Frank Bramble, president and chief executive of MNC. The sales came as MNC's shares approached and exceeded $7, after trading in the $3 to $5 range for most of 1991.
Securities analysts were alerted to the sales by MNC last week at the same time as filings were made to the SEC.
Reactions were mixed. "It doesn't seem odd to me that people being paid a significant amount of their compensation in options sell them as they go along," said Felice Gelman, an analyst at Dillon Read.
"There is a charitable conclusion they haven't been well paid and they need the money," said John Heffern of Alex. Brown & Sons. "A more cynical view is that this is their assessment of value."
MNC's circumstances are extreme, but not unusual for banks considered to have been particularly battered by the recession. The share price for Shawmut National has risen from $4.25 to $14.875, and for Bank of Boston from $6.50 to $18.625.
The stock of Citicorp, Midlantic and Signet have all at least doubled, and widespread fears of impending disaster have ebbed.
"The stocks have moved on the sense that the values in these banks have stabilized, but that gets you only so far," Mr. Heffern said. "I've got to believe that play is over."
Without operating profits and with an unknown amount of remaining bad loans, MNC is an extremely difficult company for analysts to value.
David Penn, of Legg Mason, said the bank's shares have traded up recently on takeover rumors but if nothing else, the options sales by executives suggest the chances of a takeover are slim.
"If they knew substantive talks were going on, they wouldn't be selling," Mr. Penn said.
While that echoed comments by other analysts, Mr. Lerner noted that if a merger were considered, knowledge of this would be limited to an extremely narrow group of individuals and thus would not affect sales. "There is no linkage," he said.
The bank's book value, or theoretical liquidation value, is in excess of $10 a share but, because of the shaky lending portfolio, getting a good fix on MNC's current worth and its future prospects remains elusive.
"At a certain point you come to the end of your potential pool of bad loans," Ms. Gelman said. "For MNC, it's hard to say it has come to an end. It is fair to say it's getting there," she said.