Baltimore Bancorp this month will pay its first dividend in two years, winning praise from analysts for the extent of its recovery after real estate losses caused the Baltimore-based community bank, the biggest in Maryland, to lose $126 million in 1991.
Though the new quarterly dividend is a modest 5 cents, the holding company for the $2.3 billion Bank of Baltimore had to get approval from the Federal Reserve to pay it to shareholders. The dividend comes from a moderate cash flow at the the holding company level, and is not from upstreamed dividends from the Bank of Baltimore, the company said.
"The board of directors has fulfilled a pledge to stockholders by reinstating a cash dividend at the earliest possible opportunity," said Edwin F. Hale Sr., chairman of the company. "We want this to be an unmistakable message about the company's rapidly improved financial condition."
Although holding on to its neutral rating of Baltimore Bancorp stock based on current valuations, Alex. Brown & Sons lauded the dividend and increased its estimate of 1994 earnings from 90 cents a share to 95 cents a share. Alex. Brown estimates 1993 earnings to be 67 cents a share.
"The company is not completely out of the woods, but we expect fourth-quarter results to show a further decline in nonperforming assets, corresponding improvement in the reserve coverage ratio and a level of profitability similar to that of the third quarter," said Alex. Brown analyst John Heffern. "We also know that Baltimore Bancorp is showing up on the radar screens of possible acquirers. Moreover, management has made clear its willingness to meet with all corners."
The company has been under a cease-and-desist order from the Fed and the Federal Deposit Insurance Corp. since its huge 1991 loss that called for it to improve its leverage capital ratios and withhold dividends without Fed approval.
The company has gotten its leverage capital ratio above the 6.5% mark required by the order, and David Spillman, a bank spokesman, indicated the order could be removed soon.
"Based on our own assessment of progress and periodic meetings with the FDIC, we have no reason to believe that the C&D won't be lifted before the end of the first quarter of next year," Mr. Spillman said.