Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, January 22, 1992 TAG: 9201220071
SECTION: BUSINESS PAGE: B-4 EDITION: METRO
SOURCE: MAG POFF BUSINESS WRITER
DATELINE: LENGTH: Long
DOMINION CAN PAY A STOCKHOLDERS
Dominion Bankshares Corp., which just a week ago announced plans to lay off as many as 500 workers as part of a yearlong restructuring, reported Tuesday it earned $20.6 million last year compared with a loss of $37.1 million in 1990.Last year's earnings equaled 50 cents per share of the company's common stock.
In the fourth quarter, the Roanoke-based bank holding company had income of $4.7 million, or 11 cents a share. A year earlier, Dominion had a quarterly loss of $28.8 million.
Dominion's board, at its meeting Tuesday afternoon, approved a quarterly dividend of 11 cents a share payable March 10 to shareholders of record on Feb. 10. For the second consecutive quarter, Dominion's income was just enough to pay the quarterly dividend.
Fourth-quarter earnings included securities sales gains of $13.3 million and a one-time tax benefit of $2.5 million.
On the other hand, the bank took a reserve in the fourth quarter of $2.2 million for restructuring expenses expected to occur this year in a program announced last week. It includes 10 percent cuts in both employment and the number of branches, along with other measures designed to save $10 million a year when they are in place.
At the end of last year, nonpaying loans and foreclosed properties stood at $364 million, down $27 million or 7 percent from Sept. 30 but up $35 million from a year earlier.
Dominion chairman Warner Dalhouse said most credit quality indicators improved in the fourth quarter but "we remain cautious about near-term trends."
Henry J. Coffey Jr., bank analyst for J.C. Bradford & Co. in Nashville, said operating results "were as expected and loan quality was better than expected."
Dominion showed minimal profitability on an operating basis, he said, but the decline in problem loans was "encouraging. That's positive."
The stock market has already reacted favorably to the restructuring plan, according to Coffey.
He said the stock moved from $9 just a few days ago to $13.125 at Monday's close. The stock dropped back Tuesday to $12.875. He called that "a significant reaction by the market."
Year-end book value was $14.34 a share.
Anthony Davis, analyst with Wheat First Securities in Richmond, said the report contained no major surprises.
Earnings were about as expected, Davis said. "Certainly the company is on the right track" in the restructuring. "I applaud management's move on that front."
Recovery from troubled commercial real estate loans will be slow, Davis said, but he projects improved earnings by the end of the year.
Guy W. Ford, who follows the stock for Scott & Stringfellow Investment Corp. in Norfolk, agreed that the report was as the market had expected.
The drop in nonperforming loans was the first in a couple of years, Ford said.
Dominion is shrinking its balance sheet, he said. "It's tough out there . . . They're toughing it out."
The company is getting its expenses down, Ford said, and "they're pointed in the right direction."
Dalhouse said the bank is "aggressively attacking our real estate credit problems" and in the past two quarters disposed of a large number of nonperforming assets.
But while progress is being achieved, the combination of a sluggish economy, depressed real estate markets, especially in the Washington, D.C., region, and low consumer confidence all continue to put pressure on loan portfolios.
Dalhouse called the process "difficult, slow and costly" but said Dominion has experienced good core deposit growth and steady improvement in capital ratios.
"Considering the weak business conditions expected," he said, "the period ahead will be difficult. Our priorities will continue to be improving profitability, cost control [demonstrated by the broad expense-reduction initiatives announced earlier this month], credit quality and capital."
Reflecting sluggish economic conditions, Dominion's assets fell from $10.4 billion at the end of 1990 to $9.7 billion at the end of 1991.
Loans were $6.1 billion at the close of 1991, a decline of 11.2 percent from a year earlier. Deposits stood at $7.9 billion, a 2 percent decrease from $8 billion at the close of 1990.
Operating expenses rose from $323 million to $347 million, but the bank said that included restructuring costs, expenses related to real estate losses and a large increase in the cost of federal deposit insurance.
If those items were excluded, the bank said, expenses would have declined 1 percent from 1990. In a prepared statement, the company said "a $3.5 million decrease in salaries and employee benefits and a $2.5 million reduction in marketing expense were primary reasons for the decline."
The allowance for credit losses totaled $200 million at year-end, or 78 percent of nonaccruing loans. Net charge-offs for the year were $176 million or 2.73 percent of average loans.