Deposit guaranty Corp. said it would reduce its loan-loss provision by $5 million in the fourth quarter.

The move will add 18 cents a share after tax to the quarter's earnings, the company said Tuesday.

Deposit Guaranty, which is based in Jackson, Miss., said the negative provision announced on Tuesday - the second it has taken this year - comes from its Shreveport, La., subsidiary, Commercial National Bank.

Earlier Moves

Deposit Guaranty took $11 million from the Commercial National loan-loss allowance in the second quarter and reported zero provisions in the first and third quarters.

Like many banks around the country, Deposit Guaranty finds itself overreserved for loan problems incurred at the end of the 1980s.

Commercial National, which Deposit Guaranty acquired in 1990, had been a particular source of problems but is now on the mend.

As a result, Deposit Guaranty has been shifting funds from the reserve back to the bottom line. Its loan-loss reserve covered 304% of nonperforming loans at the end of the third quarter.

Negative Provisions' Seen Losing Effect

Deposit Guaranty's stock fell 50 cents Wednesday, closing at $28.25 a share.

"It's nice to be so overreserved, but essentially the market has stopped paying for that," said Peter Tuz, bank analyst with Morgan Keegan Inc. in Memphis. "These negative provisions have become so common that they're losing the effect they had earlier in the year."

Deposit Guaranty did not provide a fourth quarter earnings estimate. But Robinson-Humphrey Co., Atlanta, raised its estimate from 81 cents a share to 90 cents.

Robinson Humphrey expects that Deposit Guaranty, which has $4.8 billion of assets, will earn about $3.74 a share in 1993.

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