FARMINGTON HILLS, Mich. -- Shareholders often behave as meekly as sheep at annual meetings, but Robert J. Mylod faced a pack of wolves last week.

For starters, the chaiman and chief executive of stumbling Michigan National Corp. saw the proposed slate of directors win only 67% of the shares voted, compared with majorities that typically exceeded 90%.

Damning applause erupted after a major investor rose and demanded that the $10.1 billion-asset banking company be sold posthaste. "We are not going to stand by while this bank treads water," said Heine Securities Corp.

Then a former director, Fred A. Erb, said he had heard Michigan National called "the laughing stock of the banking industry." He accused Mr. Mylod of "improper" management, distorting facts, and of being an entrenched banker who surrounds himself with sycophant directors.

"I do not think you have an independent board," said Mr. Erb, eliciting further applause.

As directors variously clutched their throats, stared off into space, and held their heads, Mr. Mylod admitted things had gone wrong but asserted his latest plan for reviving Michigan National would work. "We are taking the company in a new direction," he said.

Clearing, Mr. Mylod is under considerable pressure, and apparently he deserves it.

At 0.23%, Michigan National's 1993 return on average assets was last among the 61 U.S. banking companies with assets of more than $10 billion. The company's stock trades at 120% of book value, but even that low price stems partially from takeover speculation.

Not Much of a Premium

Despite the gloomy performance statistics, Mr. Mylod, whose 1993 salary was $529,259, adamantly opposes an immediate sale. "I see no reason why the organization needs to change hands," he said in an interview.

There is some compelling logic behind his stance: Michigan National could not fetch an optimal sales price in its current state of disrepair. In the words of Douglas E. Ebert, the company's new president and chief operating officer, "If you sell, it is better to be selling a bar of gold than a piece of copper."

On the other hand, it is an open question whether Mr. Mylod can deliver on his goals of "top quartile" performance.

After all, Michigan National has been a study in mediocrity since Mr. Mylod came aboard in 1985. The banking company maternally exceeded a benchmark 1% ROA only once -- and then entirely on the strength of a special gain from the sale of a credit card subsidiary.

And this isn't the first time Mr. Mylod has made noises about impending performance improvements. Four years ago, for example, he wrote in Michigan National's annual report that "excellent groundwork has been laid ... to turn this business around," saying the company had established "major momentum."

This subsequently translated into a 0.47% ROA in 1991, 0.62% in 1992, and 0.23% in 1993.

In an undeniably embarrassing episode, moreover, the Office of the Comptroller of the Currency last July placed Michigan National under a memorandum of understanding, specifying a management evaluation "a written plan for the implementation of any changes deemed or appropriate."

His credibility seemingly impugned by shareholders and by federal regulators, Mr. Mylod faces the challenge of delivering through performance the investor gains that otherwise could be obtained through a sale -- and that can be a tough job even for managers of exceedingly healthy banking companies.

A Couple of Rough Patches

At Michigan National's headquarters outside Detroit, Mr. Mylod frankly acknowledges his role in the bank's successive crises.

After realty lending debacle, Michigan National was hit again last year as falling interest rates sparked a wave of mortgage prepayments, forcing writeoffs, of purchased servicing rights.

Accelerated writeoffs and fee forfeitures cut Michigan National's 1993 revenues by nearly $70 million, the company said in its annual report.

"We hit two air pockets in a row. Had we taken other actions, that wouldn't have happened, and that's my responsibility," said Mr. Mylod.

Mr Mylod points to a number of actions designed to restore the bank -- beginning with a management buildup.

Troubleshooter on Board

Mr. Ebert of a former executive vice president of Manufacturers Hanover Corp., has worked as a troubleshooter over the past few years. He was installed at the helm of failing Southeast Banking Corp., Miami, eventually ushering it into a federally assisted takeover. And he briefly ran

Lincoln National Corp., Fort Wayne, while it was being auctioned.

Michigan National's new chief financial officer, Joseph J. Whiteside, is a veteran of the failed Bank of New England Corp. He bacame Equimark Corp.'s chief financial officer in 1990, staying until it was sold to Integra Financial Corp., a Pittsburgh rival, in 1993.

The appointments have already garnered attention on Wall Street. "The hiring of these two strong, talents demonstrates the board's seriousness about improving profitability at the bank," said Goldman, Sachs & Co. analysts Janice Meehan and Robert B. Albertson in a recent report.

Cost Cutting

Belt-tightening is one of the first orders of business for the newly formed triumvirate.

Even excluding results at Independence One Mortgage Corp., a troubled mortgage banking subsidiary, and other units purchased in the 1990s, Michigan National's operating expenses equaled a ponderous 70.9% of revenues in 1993.

Mr. Mylod is aiming for an efficiency ratio in the low 60s by 1996. In colloboration with Mr. Ebert, the executive has unveiled a cost-cutting drive designed to slash annual overhead up to $35 million by 1995.

Along the way, Mr. Mylod is counting on an end to asset quality and mortgage banking problems. In both areas, "the trends are right, and that's critical," he said.

Fee-Based Businesses

Mr. Mylod also is eager to boost fee revenues. He foresees continued expansion at Michigan National's merchant processing unit, a transaction settlement operation for credit cards, which already is the nation's 15th largest. He wants to step up municipal and corporate finance activities, as well as consumer-related ventures, such as debit cards and home banking via personal computer.

One handicap is that expected shrinkage in mortgage-related fee incopme stands to offset nearterm gains in other fee businesses, leaving Michigan National standing still on the fee side.

Probably the biggest task facing Mr. Mylod, however, is generating loan growth. Realty-related or collateralized credits accounted for a lopsided 51.2% of total loans at yearen, and Mr. Ebert said it would be "imprudent" to seek further realty loan expansion in the absence of accompanying diversification in other areas.

Just 12% in Consumer Loans

Although consumer installment loans grew by a healthy 20.4% last year, that portfolio sector remains relatively small, with total volume equaling less than 12% of total loans at yearend.

And Mr. Mylod sold Michigan National's $1.1 billion-asset credit card unit in 1989, so any growth in that area would have to be started from scratch.

Michigan National last week reported tha total loans and leases declined by 5.6%, or $376 million, in the first quarter.

Further complicaing the picture is the increased oversight of the OCC.

Typically, regulators are wary about growth at banks singled out for special supervision, preferring first to see underwriting and expense controls solidly established, and risky ventures pared back.

According to an OCC spokeswoman, who did not comment on Michigan National specifically, a memorandum of understanding typically has a life of two to four years. Thus, Mr. Mylod may be facing several more years of federal intervention.

Hamstrung on Acquisitions

One consequence of regulatory entanglement is that Michigan National probably won't soon be able to make acquisitions, an option Mr. Mylod said he would like to pursue. That constraint, combined with the cautious outlook on loan growth, will make it harder for M. Mylod to generate the added revenues needed to justify Michigan National's high overhead expenses.

Mr. Mylod is in the process of selling Michigan National's smallish Texas franchise, which consists of two community banking companies, but he indicated the bank will keep Independence One Bank of California, a $16.5 million-asset thrift based in Beverly Hills.

Wall Street has given a cautious reception to Mr. Mylod's new initiatives, citing dim growth prospects and probable continued inefficiency at Michigan National. "Valuation, ex-takeover, is not compelling," said Paine Webber Inc. analyst Stephanie H. Giroux in a report issued last week.

In the near term, it appears, Mr. Mylod will play a somewhat diminished role at Michigan National, in that his actions and presence are not seen as pivotal.

Several analysts who follow

the company gloss over recent strategy announcements, instead couching their discussions in terms of what the directors may or may not do about seeking a buyer. There is open speculation that Mr. Ebert will assume Mr. Mylod's position. And the OCC certainly will have its influence on Michigan National.

This does not mean, however, that Mr. Mylod is destined to lose is post. He won an internal battle to keep the chief executive's slot last summer, and there's no indication the board is reconsidering its decision.

In March, in fact, director Gerald B. Mitchell went on record with a statement that the board of directors "unanimously approves and supports" Mr. Mylod's management reorganization and efficiency campaign.

"We are serious in our resolve to realign the company, improve performance, and remain independent," said Mr. Mitchell. "We will not be distracted from that course of action."

With that explicit support in place, Mr. Mylod has some room to run in terms of avoiding a forced sale of Michigan National and pursuing a new turnaround plan.

Though conceding that some shareholders have a "high level of frustration," he said, "My job is to improve Michigan National's performance, so that it won't be an issue [at the shareholder meeting] next year.

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