The parade of improved bank earnings continued Thursday, with five major banks reporting higher second-quarter profits.

NationsBank Corp. said its earnings rose 22% in the quarter and bad assets continued to decline. Continental Bank Corp. reported that its earnings rose 65% as it made progress in cutting marginal operations and holding the line on credit losses.

Continuing a rally that sparked a buyout bid by Banc One Corp., Valley National Corp. posted a 125% improvement from a year ago. And MNC Financial Inc. reported that it had earned $2 million - its second consecutive quarterly profit after a 1991 loss.

Meanwhile, Shawmut National Corp. said it earned $8.6 million, compared with a loss in the same period a year ago. While the results were in line with expectations, some analysts said they were disappointed the company did not make better progress in reducing bad assets.

Merger charges provoked a $15 million loss at Detroit-based Comerica Inc., but analysts said operating results gave favorable signs about its union with Manufacturers National Corp.

NationsBank's stock price closed Thursday at $45.875, down $1.25; Continental, $17.75, down $1; Shawmut, $15.375, down $2.125; MNC, $11.25, unchanged; Valley National, $50.625, down $1; and Comerica, $59, down $1.875.


"Considering the softness in the economy, it was a very strong quarter for us," chief credit officer Fredric J. Figge 2d said of his company's $251 million profit. "We are encouraged by the improvement in asset quality and our ability to produce a good bottom line."

NationsBank set aside $150 million as a provision for bad loans, down 49% from a year ago and 43% from the first quarter. The Charlotte, N.C.-based banking company reported net chargeoffs of $141 million, a 46% reduction from the year-ago quarter's $262 million.

Mr. Figge attributed the improving credit-quality picture to aggressive provisioning during the previous two quarter, when NationsBank built its reserve to the current $1.7 billion, as well as to a strong push by AMRESCO, its special-assets bank, to dispose of bad loans.

Nonperforming assets fell for the second consecutive quarter, to $2.52 billion, or 2.28% of total assets, down 7% from the first quarter. Mr. Figge suggested that that burden on profitability could fall further as NationsBank presses efforts to sell two pools of bad realty loan worth $850 million.

"While nothing is certain, we would expect the majority of that to close in the third quarter," he said.

Like other banks this quarter, NationsBank took advantage of lower interest rates to expand its net interest margin. The spread between what it paid for deposits and earned on loans reached 4.11%, up 25 basis points from the year-ago quarter, with nearly all the gain occurring in this year's second quarter.

With the margin as the primary catalyst, net interest income reached $1.02 billion, up 2% from the year-ago quarter despite a 2% decline in loans and leases, to $68.4 billion, during the same period.

"We are, in fact, making a lot of loans these days," Mr. Figge said, "but it's not a sufficient amount to offset runoff." He defined runoff as a normal loan maturation plus sales of bad assets.

Mr. Figge said NationsBank was seeing its most positive signs in consumer lending, although large corporate loans "had been pretty encouraging."NationsBank Corp.Charlotte, N.C.Dollar amounts in million (except per share)SECOND QUARTER 2Q92 2Q91Net income $251.0 $206.0Per share 1.0 0.88ROA 0.91% 0.71%ROE 14.21% 12.70%Net interest margin 4.11% 3.86%Net interest income 1,021.0 997.0Noninterest income 467.0 438.0Noninterest expense 968.0 938.0Loss provision 150.0 294.0Net chargeoffs 141.0 262.0Year To Date 1992 1991Net income $561.0 $365.0Per share 2.28 1.58ROA 0.99% 0.63%ROE 16.34% 11.55%Net interest margin 4.0% 3.84%Net interest income 2,033.0 1,982.0Noninterest income 938.0 860.0Noninterest expense 1,922.0 1,874.0Loss provision 415.0 627.0Net chargeoffs 355.0 482.0Balance Sheet 6/30/92 6/30/91Assets $110,678 $114,835Deposits 82,518.0 87,596.0Loans 68,412.0 70,037.0Reserve/nonp. loans 94.76% 89.40%Nonperf. loan/loans NA NANonperf. asset/asset 2.28% 2.02%Leverage cap. ratio 6.08% 5.40%Tier 1 cap. ratio 7.46% 6.67%Tier 1+2 cap. ratio 11.43% 10.32%


Annualized, the Chicago-based company's $51 million profit equaled a 0.93% return on average assets and 14.57% return on average equity. That compares with last year's 0.50% ROA and 6.88% ROE and the first quarter's 1.02% ROS and 16.8% ROE.

Factors in the year-to-year improvement included a 19% increase in financial-services revenues, a gain from the settlement of litigation, and a 60% drop in the loan-loss provision, to $25 million.

Fresh realty lending woes surfaced, however, as problem realty, assets climbed to $269 million, up 9.8% from March 31 and 71.3% from a year ago. On the bright side, Continental's $151 million of troubled loans on highly leveraged transactions was 21.8% less than a year ago.

Continental finished the second quarter with $818 million of nonperforming assets, or 6.17% of gross loans, more that triple the problem-loan concentration at healthy Midwest banks. The company at June 30 held $415 million of loss reserved, or 57.9% of problem loans and 50.7% of problem assets.

In prepared remarks, chairman and chief executive Thomas Theobald said the second quarter was "satisfactory in terms of profits and return on equity." Continental posted second-quarter equity investment gains of $30 million, about 59% of pretax income.

The company finished the second quarter with 4,346 employees, 937 fewer than it had the year before. Continental is at midstride in a push to cut in-house operations and shift them to contractors.Continental Bank Corp.ChicagoDollar amounts in millions (except per share)Second Quarter 2Q92 2Q91Net income $51.0 $31.0Per share 0.78 0.41ROA 0.93% 0.50%ROE 14.57% 6.88%Net interest margin 2.60% 2.23%Net interest income 120.0 121.0Noninterest income 96.0 137.0Noninterest expense 134.0 159.0Loss provision 25.0 63.0Net chargeoffs 21.0 44.0Year To Date 1992 1991Net income $108.0 $59.0Per share 1.67 0.76ROA 0.98% 0.49%ROE 15.67% 6.91%Net interest margin 2.68% 2.27%Net interest income 251.0 249.0Noninterest income 207.0 252.0Noninterest expense 283.0 325.0Loss provision 55.0 106.0Net chargeoffs 50.0 69.0Balance Sheet 6/30/92 6/30/91Assets $32,677.0 $25,196.0Deposits 15,014.0 15,558.0Loans 13,156.0 14,301.0Reserve/nonp. loans 57.9% 46.4%Nonperf. loans/loans 5.45% 4.94%Nonperf. asset/asset 3.45% 3.06%Leverage cap. ratio 7.20% 6.70%Tier 1 cap ratio 6.40% 6.10%Tier 1+2 cap. ratio 9.20% 8.60%


Results at Shawmut, which has headquarters in Hartford, Conn., and Boston, were up sharply from the $58.7 million it lost in the same quarter last year, but down from the $43.3 million it made in the first quarter.

As it has since the end of last year, Shawmut used one-time gains to keep itself in the black. It took a $12.6 million gain from the sale of auto-loan pass-through certificates. Its first-quarter results included $78.1 million in one-time gains.

Shawmut, which has $22.6 billion in assets, said it was encouraged by the results because core earnings (income before one-time gains and loan-loss provisions) rose 15%, to $74.2 million, and net interest margin improved to 4.10%, from 4.02% in the first quarter.

However, analyst were concerned that the company's nonperforming assets only fell 3% or $41 million, and said that, after writedowns, new bad loans were still exceeding recoveries. They said they had hoped this trend would reverse itself sooner.

"I had hoped for a $75 million to $100 million reduction," said Lawrence W. Cohn, an analyst at PaineWebber Inc.

Gerard Cassidy, an analyst at Tucker Anthony Inc., Portland, Maine, said it seemed that continued problems in Connecticut's economy were slowing Shawmut's recovery.


Analysts applauded the news from the $16.6 billion-asset banking company, which had lost $82.3 million in the same period of 1991 and $70 million for that entire year.

Baltimore-based MNC, which has been the subject of takeover rumors, earned $1.1 million in the first quarter.

"They're back from the abyss," said Anthony Davis, an analyst at Wheat, First Butcher & Singer Inc., Richmond, Va.

The company's earnings were boosted by the sale of $36 million in investment securities. Net chargeoffs were $98 million, down from $116 million in the second quarter of 1991. The company set aside $42 million for possible losses, compared with $73 million a year ago. Nonperforming assets fell 24%, to $1.4 billion, from a year ago.

Like banks across the country, MNC benefited from a widening interest rate margin, which reached 3.40%, up from 2.78% a year ago. "The company's margin was notably better than what we had expected," Mr. Davis said.

MNC met its capital requirements, with Tier 1 capital of 7.85% and total capital of 11.25%


Excluding restructuring charges, Comerica would have earned $77 million, compared with $68 million in year-ago results - restated to reflect the merger with Manufacturers National.

Analyst said the after-tax merger charge of $92 million was at the high end of their expectations. Comerica said an unexpectedly large number of workers took early retirement.

Comerica finished the second quarter with $253 million of nonperforming assets, or a mild 1.46% of gross loans. Loss reserves equaled 105% of problem assets.

The company's $271.2 million of net interest income was up 7.5% from a year ago, primarily on the strength of widened net interest margins. Noninterest income $98.3 million was up 6.7% from a year ago.Comerica Inc.DetroitDollar amount in million (except per share)Second Quarter 2Q92 2Q91Net income ($15.0) $68.0Per share (.28) 1.22ROA (0.24%) 1.08%ROE (3.40%) 16.42%Net interest margin 4.72% 4.56%Net interest income 271.2 252.2Noninterest income 98.3 92.1Noninterest expense 360.4 226.2Loss provision 30.7 25.5Net chargeoffs 24.8 25.6Year To Date 1992 1991Net income $59.0 $131.0Per share 0.99 2.39ROA 0.46% 1.04%ROE 6.05% 16.17%Net interest margin 4.69% 4.49%Net interest income 540.3 500.0Noninterest income 198.1 178.7Noninterest expense 594.5 450.3Loss provision 60.4 48.9Net chargeoffs 50.7 44.8Balance Sheet 6/30/92 6/30/91Assets $26,754.7 $26,330.1Deposits 20,643.1 20,336.7Loans 17,278.3 16,234.3Reserve/nonp. loans 123.7% 146.6%Nonperf. loans/loans 1.30% 1.13%Nonperf. asset/asset 0.98% 0.89%Leverage cap. ratio 6.90% 6.45%Tier 1 cap. ratio 8.44% 8.06%Tier 1+2 cap. ration 10.88% 10.77%


Valley, the largest banking company in Arizona, with $10.9 billion in assets, finished the second quarter with $232.1 million of nonperforming assets, a $26.7 million drop from the first quarter and a $179 million drop from a year ago. It earned $23.4 million in the quarter.

The company said Columbus, Ohio-based Banc One finished as inspection "with no significant issues being raised" and said it still anticipated the buyout will be completed early in 1993.

Valley recorded a $5 million gain from the scale of securities, which it said helped offset $9 million of merger-related corporate and legal expenses. Loss reserves of $171.5 million equaled 118.5% of problem loans, which are the largest component of nonperforming assets.

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