Baltimore Bancorp profit rose 354% in 3rd period

October 13, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

Baltimore Bancorp is closing its days as an independent company with a flourish as the parent of the Bank of Baltimore yesterday reported that third-quarter earnings shot up by 354 percent and that it boosted its return on assets to its highest level since 1987.

"They wiped out my estimate by a pretty comfortable margin," said Alex Hart, who follows the company for Ferris, Baker Watts Inc. in Baltimore.

The company said it earned $7.2 million, or 42 cents a share, for the three months that ended Sept. 30, compared with $1.6 million, or 10 cents a share, for the third quarter of 1993.

Baltimore Bancorp is scheduled to be acquired by First Fidelity Bancorp. by the end of the year, and Wheat First Butcher Singer Inc. analyst Merrill Ross said the gains came partially from moves the company took to align itself with First Fidelity before the merger.

Specifically, she said, Baltimore Bancorp shifted pools of assets out of bonds and into loans, which generate higher returns but at greater risk. The bank was able to make the shift because First Fidelity's $34 billion portfolio is already heavy on bonds, she said.

"They want loans, thank you," Ms. Ross said.

But Mr. Hart said the performance also reflected sound management of the basic blocking and tackling of banking. Net interest margin rose to 4.98 percent -- meaning the bank was able to attract deposits at interest rates nearly 5 percent lower than it was earning on loans and other investments.

Strong fee income from an expanded mortgage banking business also boosted earnings, he said, as did a $3.4 million gain from the sale of mortgage servicing rights.

The upshot was an annualized return on the company's $2.2 billion in assets of 1.35 percent -- higher than Baltimore Bancorp has posted for any year since converting to a bank from a savings and loan association in 1984.

For nine months, annualized return on assets went to 0.88 percent, better than any full year since 1987. The statistic lets analysts compare the profitability of different sized banks.

Ms. Ross said the Mid-Atlantic banks she follows posted an average 1.25 percent return on assets in the second quarter, and a net interest margin of 4.45 percent.

Baltimore Bancorp's returns have always been below industry norms, a fate common to smaller banks that were once savings and loans like the Savings Bank of Baltimore, the bank's corporate predecessor.

But Baltimore Bancorp Chief Executive Edwin F. Hale Sr. led a 1991 shareholder revolt against former Chairman Harry L. Robinson, saying that those reasons weren't enough to explain the bank's traditionally weak earnings. Return on assets had dipped to 0.52 percent in 1989 and 0.26 percent in 1990.

Baltimore Bancorp ... ... Ticker ... ... ... Yesterday's

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

... ... ... ... ... ... ... BBB ... ... ... ... 20 3/8 ... ... unch.

Period ended

9/30 ... ... ... ... ... 3rd qtr. ... ... ... Year ago ... ... ... Chg.

Net Income ... ... ... ... $7,224 ... ... ... $1,592 +353. ... ... 8%

Primary EPS ... ... ... ... $0.42 ... ... ... $0.10 +320 ... ... 0%

Annualized return

on assets ... ... ... ... 1.35% ... ... ... 0.28% ... ... ... ... --

Add. to allowance

for loan losses ... ... ... 2,100 ... ... ... 6,000 ... ... ... -65.0%

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

Net Income ... ... ... ... $14,111 ... ... ... $9,120 ... ... ... +54.7%

Primary EPS ... ... ... ... $0.82 ... ... ... $0.60 ... ... ... +36.7%

Annualized

return on assets ... ... ... 0.88% ... ... ... 0.52%- ... ... ...

Add. to allowance

for loan losses ... ... ... N.A. ... ... ... N.A. ... ... ... N.A.

... ... ... ... ... ... ... ... ... Balances as of ... ... ... ...

... ... ... ... ... ... ... 9/30/94 ... ... ... 9/30/93 ... ... ..

Assets ... ... ... ... $2,172,717 ... ... ... $2,323,047 ... ... -6.5%

Deposits ... ... ... $1,789,233 ... ... ... $2,035,165 ... ... -12.1%

Loans outst. ... ... $1,342,611 ... ... ... $1,358,566 ... ... -1.2%

Loan loss

reserve ... ... ... ... N.A. ... ... ... ... N.A. ... ... ... ... N.A.

Figures in thousands (except per share data.)

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