BankAmerica Earned $285 Million in Quarter

PNC Improves, Thanks to Asset Sales

Continuing a string of healthy earnings reports, BankAmerica Corp. and PNC Financial Corp. reported solid third-quarter profits.

BankAmerica, San Francisco, said Thursday it earned $285 million in the period. Although the company's earnings are up only slightly, the performance is impressive given current economic conditions.

Brisk Gain for PNC

PNC, Pittsburgh, said its third-quarter profits almost doubled, to $107.3 million. However, most of the increase came from the sale of four Ohio banks and its merchant processing unit.

The disclosures follow Valley National Corp.'s announcement Wednesday that it earned $11.1 million in the third quarter, nearly four times the $2.9 million it earned in the corresponding period a year earlier.

But some banking companies and thrifts continue to reel from mounting credit problems. Continental Bank Corp., Chicago, as expected, on Thursday reported a $185 million third-quarter loss after taking a $204 million loan loss provision.

MNC Financial Inc., Baltimore, reported a $59 million third-quarter loss, although problem real estate loans increased only modestly. CalFed Inc., Los Angeles, reported a $49.5 million loss for the period and said it may not continue to meet risk-based capital requirements.


With an earnings gain of less than 1%, BankAmerica is the only large California banking company to register a profit increase over the level a year ago.

The company's solid performance, about in line with analyst expectations, contrasts with that of Security Pacific Corp., its partner in a pending merger, which reported a $1.2 billion loan loss provision and a $508.5 million loss on Tuesday.

But third-quarter results at the two companies will not interfere with completion of the merger, BankAmerica officials said.

No Change in Assessment

"We told Security Pacific that nothing in the third quarter statement altered our assessment of the overall transaction," BankAmerica chief financial officer Frank N. Newman said at a press conference on Thursday.

Mr. Newman declined to comment on how much more Security Pacific is likely to add to loan-loss reserves before closing the merger. The two companies originally estimated that Security would take $1 billion in provisions before the combination.

But BankAmerica said it now expects to take a $900 million reserve for restructuring costs, $200 million more than originally estimated. At the same time, it raised its projections of costs savings from the merger to $1.2 billion a year from $1 billion.

In the third quarter, BankAmerica's total revenues jumped by 10.8% over last year's level, to $1.73 billion, with strong gains in both interest and noninterest income.

Interest income rose about 7%, a result of asset growth from acquisitions and slightly higher interest margins. Noninterest income soared 19% to $600 million, led by a $42 million increase in fees and commissions.

Meanwhile, the company kept a tight lid on operating expenses. Noninterest expenses rose 8% overall to $1.04 billion. But much of the increase stemmed from acquisition-related costs and higher deposit insurance premiums. Other costs rose only about 2%, company officials said.

Despite California's slumping economy, credit quality held up reasonably well. A drop in problem loans to developing countries more than offset a rise in domestic nonperforming credits, largely in the company's credit card portfolio. But foreclosed property jumped 90.8% since last year, to $374 million. As a result, total nonperforming assets grew more than 5% to about $3.43 billion.


Excluding nonrecurring gains of $92.7 million stemming from the sale of four Ohio banks and a merchant processing unit, PNC's $63.3 million of pretax income was down 3% from 1990's third quarter. But the special gain increased net income to $107.3 million, up 92% from the third quarter of 1990.

For the first nine months of 1991, PNC earned $289.2 million, compared with $239.3 million during the prior-year period. The nine-months' performance represents a 0.89% annualized return on average assets and a 13.49% annualized return on average equity.

The special gains also strengthened PNC's hand in dealing with delinquent and foreclosed realty credits totaling $600 million as of Sept. 30.

Citing "continued weakness in regional real estate markets," the company wrote down its foreclosed assets by $24.1 million during the third quarter. PNC said the move reduced the carrying values of its $284 million of foreclosed properties to 53% of book value.

William Johns, PNC's controller, said the markdowns of foreclosed properties gave the company more flexibility in either carrying or selling problem credits. He said about half of PNC's problem realty credits are in Eastern Pennsylvania, most notably in the Philadelphia area.

PNC said its two largest affiliate banks, located in Pittsburgh and Philadelphia, were in the midst of examinations by the Office of the Comptroller of the Currency. The company said examiners' preliminary findings had "no material impact" on results for the third quarter.


Valley reported its sixth consecutive quarterly drop in nonperforming assets. They totaled $396.9 million, off 4% from the $411.6 million of the prior quarter and down 21% from the $503.8 million at the end of the Sept. 30, 1990 quarter.

For the first nine months, Valley earned $32.5 million or $1.83 cents per share, nearly six times the $5.5 million or 28 cents per share during the first nine months of 1990.

The company announced Thursday that it would take a $4.3 million restructuring charge in the fourth quarter and cut 300 jobs out of the branch system.

Valley hopes the cuts will save more than $8 million a year. Valley's noninterest expenses run about $525 million a year.


Continental Bank Corp. suffered a third-quarter loss of $185 million following an audit by federal regulators and a loss provision of $204 million that represented a 266% increase over the level in the second quarter.

The Chicago-based banking company said it lost $123 million during the nine months ended Sept. 30, compared with profits of $56 million during the same period of 1990.

The results are consistent with Continental's earlier announcement that it would take a $150 million "special" provision during the third quarter to bolster loss reserves, as well as a $25 million restructuring charge.

The company went further than some analysts expected in charging off bad credits: Third-quarter net chargeoffs of $125 million were almost triple that of the second quarter of 1991.

But total nonperforming assets still rose substantially during the period, soaring 26.3% to $973 million, or roughly 7% of gross loans.


Despite the $59 million loss, MNC Financial's results showed some bright spots.

After several quarters of rapid growth, problem real estate loans seem to be leveling off. Nonperforming assets increased by 2.2% during the quarter, to $1.86 billion.

The company, which has been hit hard by the region's real estate downturn, charged off $66 million in loans for the quarter, compared with $116 million in the second quarter. It was the first quarter in a year when chargeoffs were less than $100 million.

Thanks to the sale of its crown jewel credit-card operation, the $18.9 billion-asset company still is comfortably above minimum capital requirements. Tier 1 capital on Sept. 30 stood at 7.12%, still comfortably above the 4% requirement.


Although CalFed currently exceeds all capital requirements, the company's announcement said definitions for the capital rules that take effect next year "place the ability of the bank to remain in compliance with its risk-based ratio requirement in doubt."

CalFed chief executive Jerry St. Dennis blamed the big loss on "protracted weakness in real estate markets." That, he said, led to "an increase in losses in our loan and real estate portfolios, making it necessary for the company to significantly increase its provisions for losses on loans and real estate" during the third quarter.

The company set aside $80.7 million for losses on loans and real estate, compared with $118.5 million set aside in the third quarter of 1990.

CalFed's nonperforming assets totaled $986.4 million, or 5.15% of assets, up 46% from the year-ago figure of $673.9 million, or 2.61% of assets, and up 4% from $944.3 million, or 4.72% of assets, as of June 30, 1991.

CalFed's $49.5 million net loss amounts to $1.93 per share and compares with the loss in the year-ago period of $92.3 million or $3.65 per share.

Sam Zuckerman in Los Angeles, Steve Klinkerman in Houston, Bill Atkinson in Washington, and Teresa Carson in San Francisco contributed to this article.

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