First Maryland earnings fell 9.5% in quarter

July 21, 1994|By David Conn and Timothy J. Mullaney | David Conn and Timothy J. Mullaney,Sun Staff Writers

Just as the banking industry bids farewell to the problem of mounting troubled loans, rising interest rates are offering a new challenge.

That was the lesson from Maryland banks yesterday, as First Maryland Bancorp said its second-quarter earnings fell 9.5 percent because of less income from securities it owns, but three smaller banks said their earnings rose because of higher net interest income and much lower real estate losses.

"For the last two years we've seen a recovery of bank stocks in terms of their credit quality," said Vernon Plack, an analyst with Richmond-based Scott & Stringfellow who follows banks in the mid-Atlantic region.

He said that with the recent rise in interest rates from historically low levels, many banks will struggle to maintain their profit margins.

First Maryland Bancorp

The parent of the First National Bank of Maryland, the state's second-largest banking company, said earnings fell 9.5 percent in the second quarter to $28.1 million from $31 million a year ago.

As a subsidiary of Allied Irish Banks PLC, First Maryland does not report per-share earnings.

The company's loan portfolio showed fewer problems than a year ago, which prompted First Maryland to cut the amount it added to its reserve for future loan losses, an amount which is deducted from earnings. The company added $6 million to its loan loss reserves, compared with $11.7 million a year ago.

But while revenues from loans were up slightly, interest and dividends on investment securities fell more than 20 percent compared with a year ago. Gains from the sale of securities dropped $5.7 million.

The company ended the quarter with $9.2 billion in assets, up slightly from a year ago.

Baltimore Bancorp

The parent of the Bank of Baltimore said earnings rose 65 percent as real estate problems continued to recede and the bank was able to replace a large number of lower-interest home equity loans with more profitable residential construction, credit card and commercial business loans.

"This change in loan mix [and a decrease in] nonperforming loans has helped push the net interest margin to the highest level in the company's history," Chairman Edwin F. Hale Sr. said.

The company earned $4.4 million for the second quarter of 1994, or 25 cents a share, compared with $2.6 million, or 18 cents a share, in last year's second quarter.

The company also said it cut the amount it set aside for possible loan losses to $2.5 million, down from $6 million in the same period last year. Provident Bankshares Inc.

The parent of Provident Bank of Maryland said its second-quarter earnings rose 10.1 percent to $2.9 million, crediting the gain to higher net interest income and lower operating expenses.

The company also said it had a $1.7 million increase in noninterest income, excluding a one-time $4.4 million boost from the sale of its credit card unit during last year's second quarter. Most of the gain came from higher fees collected by its mortgage banking business.

Reflecting both improved real estate conditions and a determined effort to get problem assets off the books, Provident made no addition to its allowance for bad loans during the quarter. The company's $20.7 million reserve well exceeds its $7.7 million in nonperforming assets.

Bank Maryland Corp.

This Towson-based company reported second-quarter operating profits that were more than two-and-a-half times greater than a year ago.

Bank Maryland's operating earnings rose to $453,000 from $128,000 a year ago. But the company, parent of the Bank of Maryland, reduced its second-quarter earnings by $175,000 for income tax purposes related to a restructuring in 1990.

Net income rose 117 percent to $278,000, or 13 cents a share, from $128,000, or 6 cents a share a year ago.

"What we've been able to do is redistribute the mix of assets," said Chief Financial Officer A. Gary Rever. "We have more in average loans outstanding compared to last year."

While assets grew only 1.4 percent since a year ago, loans were up 8 percent.

The company also has benefited from the rise in interest rates because many of its loans are tied to the prime rate, which has climbed 1.25 percentage points this year.

YK

Bank Maryland Corp. ... ... ... ... Ticker ... ... ... ... Yesterday's

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

... ... ... ... ... ... ... ... .. ... BKMD ... .. .. ... ... 11 1/2 - 3/4 Period ended

6/30/94 ... ... ... ... 2nd qtr. ... ... ... Year ago ... ... ... Chg.

Net Income ... .. .. .. $278* ... ... .. ... $128 ... ... ... ... +117.2%

Primary EPS .. .. .. .. $0.13 ... ... .. ... $0.06 .. ... ... ... +116.7%

Annualized

return on assets ... .. 0.58% ... ... .. ... 0.27% ... ... ... .. --

Add. to allowance

for loan losses ... ... $0 ... .. .. ... ... $0 ... ... ... ... .. --

... ... ... ... ... ... 6 mos. ... ... ... Year ago ... ... ... ... Chg.

Net Income ... ... ... $401* ... ... .. .. $52 ... ... ... .. .. .. +671.2%

Primary EPS .. ... ... $0.19 ... ... .. .. $0.03 ... ... ... ... .. +533.3%

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