Midlantic Reports $24 Million Loss
Midlantic Corp., New Jersey's second-largest bank company, posted a $24 million third-quarter loss amid signs that deterioration in its real estate loan portfolio is slowing.
The loss contrasts with deficits of $403 million in the second quarter and $150 million one year earlier.
Midlantic said its nonperforming assets rose 2.5%, to $1.9 billion, the smallest increase in two years. In the second quarter, nonperforming assets - bad loans and foreclosed real estate - rose by 15%.
Midlantic, which changed its senior management team this year and launched a sale of $6 billion of assets, added $41 million to its loan-loss reserve in the third quarter. That contrasted with provisions of $285 million one year ago and a total of $490 million in the first two quarters of this year.
Analysts were generally upbeat about Midlantic's third-quarter report, noting that it was released after an examination by the Office of the Comptroller of the Currency.
"The OCC finished everything, and it doesn't look like there was a significant rise in nonperformers," said Dennis Shea, an analyst at Morgan Stanley & Co. in New York. "Given the intensity of the exam, that's good news."
However, some analysts expressed concern about a drop in reserve coverage. Though writeoffs fell 30% from the second quarter, to $123 million, they exceeded the loan-loss provision by $82 million.
Weakening Capital Ratios
Midlantic's total reserves at the end of the quarter fell 8.4%, to $894 million, or 65% of its nonperforming loans.
The company's capital ratios also weakened. Its core Tier 1 capital ration fell two basis points, to 5.05%. That is above the regulatory minimum but below the target regulators said Midlantic must reach by the third quarter of 1992. Its leverage capital ratio stood at 3.21%, compared with the 4.5% target.
Since announcing its restructuring plan in the second quarter, Midlantic has agreed to sell $3.2 billion of assets, including $2.9 billion represented by its York Bank and Trust Co. subsidiaries. The sales of both banks, for a total of $219 million, await regulatory approval.
Through Midlantic said the sales would build capital ratios and focus its business outlook, some analysts worried. "They're selling of their better-earning assets," said John Works, an analysts at Keefe, Bruyette & Woods Inc. in New York.