Earnings of banks keep rising

January 20, 1994|By David Conn | David Conn,Staff Writer

Several local and regional banking companies have demonstrated the fruits of a year of low interest rates and a steadily improving economy, as earnings continued to break into record territories.

Provident Bankshares Corp. of Baltimore and Richmond-based Signet Banking Corp. both reported sharply higher quarterly and annual earnings yesterday. Provident's gains came largely from the substantial cost savings of fewer problem loans; Signet's profitability stemmed mainly from its growing credit-card business.

Baltimore-based Loyola Capital Corp., meanwhile, saw fourth-quarter earnings rise 33 percent from a year earlier, but earnings for the full year fell 13 percent. Without the extra income from a one-time accounting change in 1992, however, Loyola's earnings would have risen by 7.5 percent in 1993.

The company was pleased enough with the results to announce a 67 percent increase in its quarterly dividend to 10 cents a share.

Loyola, like other financial institutions in the area, is looking forward to a continued recovery, said Vernon Plack, banking analyst at Johnston, Lemon & Co. in Washington.

"Everyone's waiting for a pickup in the economy," he said. "When it does come, that'll benefit" Loyola and all the other banks and thrifts.

Provident Bankshares Corp.

Provident, parent of Provident Bank of Maryland, earned $2.5 million, or 38 cents a share, a 59 percent increase over earnings of $1.6 million, or 25 cents a share a year earlier.

For all of 1993, the company earned $8.1 million, a whopping 93 percent gain over 1992 profits of $4.2 million. Per-share earnings rose to $1.24 last year, from 67 cents a year earlier.

Those gains came in large part from improvements in the company's loan portfolio.

Because of a steady decline in nonperforming assets, including past-due loans and foreclosed real estate, Provident set aside only $1.5 million to cover the costs associated with problem loans last year, compared with $9.2 million in 1992. Those additions to the reserves are deducted from earnings.

In the fourth quarter, the company decided not to add anything to its reserves, compared with $1.8 million a year earlier. But unless it takes the unusual step of subtracting from those reserves to add to earnings, Provident won't be able to benefit this year from a similar decline.

"Looking out for '94 . . . they obviously won't have that big kick to their income," said David West, an analyst with Richmond, Va.-based Davenport Securities. He said the company has done a good job of attracting interest-bearing checking accounts, which bring with them a steady source of fees, and its mortgage-banking business continues to grow.

Signet Banking Corp.

Signet's fourth-quarter earnings gained about 57 percent, to $49.9 million, or 87 cents a share, from $31.8 million, or 57 cents a share in the fourth quarter of 1992. Earnings in 1993 climbed almost 60 percent, to $174.4 million, or $3.06 a share, from the year before.

The Richmond, Va.-based company's earnings report sparkled, except for one large addition to its nonperforming assets in the fourth quarter: a $24.6 million loan to Merry-Go-Round Enterprises Inc., the Joppa-based clothing retailer. Merry-Go-Round waited until this month to file for Chapter 11 bankruptcy protection, but Signet decided to put the loan in "non-accrual" status last month.

Profits were hardly affected by that item. "[Signet] is very much dominated by the credit card area," Mr. West said. "They're almost becoming a credit card company that has a bank on the side."

Income from the $5.1 billion credit card portfolio -- including both interest and fees -- jumped 77 percent last year, to $432 million. All other types of loans were down during both the fourth quarter and the year.

The company's increasing focus on the credit card business has fueled speculation that it might spin off that business, Mr. West said, just as MNC Financial Inc. sold its MBNA subsidiary to the public in 1991. Signet has declined comment.

Loyola Capital Corp.

Earnings at the Baltimore-based parent of Loyola Federal Savings Bank gained almost 29 percent in the fourth quarter, to $3.1 million, or 36 cents a share, from $2.4 million, or 27 cents a share a year earlier.

In 1993, earnings fell to $12.3 million, or $1.42 a share, from $14.1

million, or $1.60 a share a year earlier. Excluding a $2.7 million gain in 1992 because of an accounting change, earnings were 7.5 percent higher in 1993.

Provident Bankshares Corp.

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

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

.. .. .. .. .. .. .. .. ..PBKS .. .. ...20 5/8 .. .. .. .. ..+ 1/4

Period ended

Dec. 31 .. .. .. .. .. .4th qtr. .. ..Year ago .. .. ..Chg.

Net Income .. .. .. .. ..$2,518 .. .. .$1,589 .. .. .+58.5%

Primary EPS .. .. .. .. ..$0.38 .. .. ..$0.25 .. .. .+52.0%

Annualized return

on avg. assets .. .. .. ..0.57% .. .. ..0.39% .. .. .. ..--

Add. to allowance

for loan losses .. .. .. ...$0 .. .. ..$1,750 .. .. .. ..--

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