Profits dip, but analysts laud Baltimore Bancorp Balance sheet focus is praised

October 14, 1993|By David Conn | David Conn,Staff Writer

Baltimore Bancorp's third-quarter earnings, reported yesterday, were a bit shy on profits, compared with recent history. But analysts said the company's decision to focus instead on improving its balance sheet would have benefits that extend far beyond one quarterly report.

Baltimore Bancorp's $1.6 million earnings in the third quarter, worth 10 cents a share, was the seventh consecutive quarterly profit. It was a 52 percent decrease from the $3.3 million, or 26 cents a share, earned a year earlier. (The company had 30 percent more shares outstanding in the recent period compared with a year earlier.)

But neither regional analysts nor the rest of Wall Street paid much attention to the drop in earnings, as the company's stock gained 12.5 cents a share yesterday, to close at $13.

"When they told me their goals were to improve the profitability, to improve the capitalization and to improve the balance sheet, I did not think it would be as decisive and methodical as it's been," said Alex Hart, an analyst at Ferris, Baker Watts Inc. in Baltimore.

"They have exceeded by a pretty wide margin what I expected," he said.

One of the benefits has been that, by working to reduce its problem loans and increase its capital, the parent of the Bank of Baltimore managed to meet all the requirements that federal regulators established two years ago when the company was in danger of a government takeover. Capital is the cushion of money that banks must keep to protect against possible losses.

"We nave now met all capital . . . requirements under the cease-and-desist order ahead of schedule," Chairman and Chief Executive Officer Edwin F. Hale Sr. said in a statement.

"We expect that the regulators will confirm our accomplishments through their upcoming annual examination and possibly lift the order early next year."

The order, imposed by the Federal Deposit Insurance Corp., has left a bit of a cloud over the company since Mr. Hale and a slate of dissident shareholders staged a successful coup and ousted the prior management in 1990. Since then, the company has worked to recognize the extent of its financial problems and gradually cure them.

Nonperforming assets were still high, at $132.6 million, or 5.7 percent of the $2.3 billion in total assets. But particularly impressive to Mr. Hart was the pace of reduction in nonperformers, which include problem loans as well as repossessed property. Nonperforming assets fell 25 percent since the second quarter and 42 percent from a year ago.

At the same time, Baltimore Bancorp has eliminated its high-cost portfolio of brokered deposits -- money brought in by offering high rates to customers nationwide -- that were relics of an earlier era when growth was the main goal. And its data processing "outsourcing" agreement with Mellon Bank should produce $3 million in expected annual savings starting in the fourth quarter.

Baltimore Bancorp

.. .. .. .. .. .. .. .. ..Ticker .. .. .. .. ..Yesterday's

.. .. .. .. .. .. .. .. ..Symbol .. .. .. Cls... .. ..Chg.

.. .. .. .. .. .. .. .. ...BBB .. .. .. ..13.. . .. ....+

Period ended

Sept. 30 .. .. .. .. .. .3rd qtr. .. .. .Year ago .. ..Chg.

Net Income .. .. .. .. ...$1,592 .. .. ...$3,301 .. .-51.8%

Primary EPS .. .. .. .. ..$0.10* .. .. .. .$0.26 .. -61.5%

Annualized return

on avg. assets .. .. .. ..0.28% .. .. .. .0.47%

Add. to allowance

for loan losses .. .. ...$6,000 .. .. ..$6,000 .. .. .. .0%

.. .. .. .. .. .. .. .. .9 mos. .. .. ..Year ago .. .. .Chg.

Net Income .. .. .. .. .$9,120 .. .. ...$14,198 .. .. -35.8%

Primary EPS .. .. .. .. $0.60* .. .. .. ..$1.11 .. .. -45.9%

Annualized

return on assets .. .. ..0.52% .. .. .. ..0.64%

Add. to allowance

for loan losses .. .. .$18,000 .. .. .. .$23,881 .. .. -24.6%

Balances as of

.. .. .. .. .. .. .. ..9/30/93 .. ... .. .. .9/30/92

Assets .. .. .. .. .. $2,323,047 .. .. .. ..$2,687,797 .. -13.6%

Deposits .. .. .. .. .$2,035,165 .. .. .. ..$2,468,954 .. -17.6%

Loans outst. .. .. .. $1,358,566 .. .. .. ..$1,672,553 ...-18.8%

Loan loss

reserve .. .. .. .. .. ..$44,806 .. .. .. .. ..$88,594 .. -49.4%

Figures in thousands (except per share data).

* Outstanding shares were 30 percent higher in 1993.

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