ATLANTA -- C&S/Sovran Corp. said Wednesday that it would report a third-quarter loss of up to $55 million after taking a $300 million provision for commercial real estate loan losses.
C&S/Sovran was expected to take a hefty provision in advance of its proposed merger with NCNB Corp. However, the disclosure that its nonperforming assets could rise by as much as 29%, to almost $1.7 billion, was a surprise.
The company earlier had predicted that its nonperforming assets would not exceed $1.7 billion at yearend. But C&S/Sovran said its nonperforming assets at Sept. 30 were already between $1.625 billion and $1.675 billion.
Wall Street Unfazed
Still, "it's not dramatically worse than people were looking for," said Kathryn Bissette, banking analyst at Sterne, Agee & Leach Inc. in Atlanta.
Wall Street took the news in stride. C&S/Sovran's stock closed Wednesday at $27.50, down 50 cents a share.
C&S/Sovran, with $49 billion in assets, has been particularly hard hit in the metropolitan Washington and Virginia markets.
Nearly one-fourth of its Washington realty loans were nonperforming at the end of the second quarter.
Nonperforming assets are expected to equal about 5% of total loans and foreclosed real estate as of the end of the third quarter. In the previous quarter, nonperforming assets had grown by $153 million, equaling 3.84% of total loans and foreclosed real estate.
$200 million in Chargeoffs
The third-quarter loan-loss reserve is expected to total $825 million, compared with $714 million at June 30. Net charge-offs will be about $200 million, compared with $158 million in the second quarter.
The Atlanta-based banking company said its fourth-quarter loan-loss provision "is not currently expected to be materially greater" than $300 million.
C&S/Sovran's third-quarter loss is expected to range between $41 million and $55 million, or 30 cents to 40 cents a share. The comapny reported a $61.6 million loss in the second quarter after setting aside $170 million for loan losses.
In last year's third quarter, C&S/Sovran earned $34 million after taking an $85.4 million provision.
Merger to Cut Dividend
The company said its fourth-quarter dividend may not exceed 31 cents a share under its merger pact with NCNB, based on the current amount of NCNB's dividend. C&S/Sovran had been paying a quarterly dividend of 39 cents a share.
The company said it will report full third-quarte results in about two weeks. It said shareholders of NCNB and C&S/Sovran are to meet Nov. 1 to vote on the proposed merger.
Meanwhile, a registration statement NCNB filed Wednesday with the Securities and Exchange Commission disclosed several lawsuits that have been brought against C&S/Sovran.
Two lawsuits involve disaffected shareholders, and one involves First Federal Savings Bank, a Georgia thrift whose pending acquisition by C&S/Sovran was terminated.
CRA Lawsuit Possible
In addition, community activist groups in several southeastern states are believed to be contemplating a community reinvestment challenge against the merger, and the House Banking Committee has asked the Federal Reserve to extend the public comment period past the current Oct. 10 deadline.
Some analysts said they were concerned that the various developments would delay the merger past yearend, which could affect the stock prices of both companies.