BankAmerica Profits Rise 1.9%

SAN FRANCISCO - Despite an economic slump in its core California market, BankAmerica Corp., as expected, reported earnings of $272 million in the second quarter, up 1.9% from the same period last year.

BankAmerica was the only one of California's four largest banking companies to register a year-to-year profit increase for the quarter.

"There was some pressure from the recession on earnings, but overall there were no surprises," said Campbell K. Chaney, analyst with Sutro & Co., San Francisco.

BankAmerica's net income was boosted by higher margins, growth in both interest and non-interest income, continuing shrinkage in nonperforming loans to developing countries, and a small recovery on previously charged-off foreign credits.

Sour Construction Loans

The positive trends offset a 12.3% rise in domestic nonperforming assets in the quarter, including a 25.4% jump in non-accruing construction and land development loans. All together, about 18.2% of the company's construction portfolio is nonperforming. Foreclosed property, meanwhile, increased 17.9% to $277 million.

Most of the problem construction loans are to homebuilders, a sector that has started to recover in California lately, BankAmerica officials noted. And the rise in nonperforming loans was smaller this period than in the previous quarter, they said.

Nonperforming commercial loans rose only modestly in the quarter, after taking a big jump in the first quarter. Nonperformers in the company's $2 billion portfolio of loans for highly leveraged transactions rose 9.3% to $281 million. BankAmerica expects no big rise in HLT credit problems, despite the recent interagency audit of large syndicated loans, chief financial officer Frank N. Newman said at a press briefing.

Net chargeoffs for the quarter totaled $169 million, down 62.2% from the firs quarter. However, domestic loan losses rose 23%. The company recovered $2 million in foreign loans during the period, compared with a $308 million writeoff in the first quarter.

BankAmerica's assets rose 9.7% in the year to $113.1 billion, primarily as a result of the company's purchase of failed thrifts from the federal government. Retained earnings plus the issue of several offferings of preferred stock boosted stockholders' equity to $7.3 billion, up from $6.7 billion on March 31.

VALLEY NATIONAL CORP.

Valley National Corp. Phoenix, reported a fivefold increase in second-quarter earnings and a drop in problem assets, but profits would have been down if not for a big gain on the sale of securities.

Valley said on Wednesday that net income amounted to $10.4 million, or 53 cents a share, compared with $2 million, or 10 cents a share, in last year's second quarter.

The profits included an aftertax gain of $9.2 million from the sale of securities. The company is getting out of tax-exempt bonds because it has tax-loss carryforwards that shield the income on higher-yielding, taxable securities.

Valley, like other banks in Arizona, has been burdened with nonperforming assets because of the severe real estate downturn. The company managed to reduce that burden during the quarter to $411.6 million, down 15% from the $481.0 million at March 31 and 20% from the $516.5 million at June 30, 1990.

Observers view the earnings improvement as sign that real estate problem plaguing Arizona banks may have peaked.

But chairman and chief executive Richard J. Lehmann warned that, even though the drop in nonperformers was a positive sign for the company, "uncertainty in the business environment and our still high level of nonperforming assets continue to dampen earnings."

Valley set aside $18.2 million for possible loan losses, down 25% from $24.3 million in the year-earlier period.

Teresa Carson in Los Angeles contributed to this article.

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