Dividend checks and unemployment checks -- there are no better symbols of the polarized performance of Maryland companies in the quarter that ended in September.
The state's banks and thrifts glowed, as their health continued to improve, and securities firms reported record profits. Some financial services companies even managed to increase dividend payments that had been cut years earlier, when the recession began to take hold.
Meanwhile, layoffs hit or threatened workers in many other companies, from Giant Food, Esskay and the A&P; bakery in West Baltimore, to General Motors Corp. and the Chesapeake & Potomac Telephone Co. Hardest hit: the defense industry, whose employees continue to feel the impact of the nation's military cutbacks.
And hardest hit of the defense contractors has been Westinghouse Electric Corp., Maryland's largest manufacturing employer. Last month, the company began laying off up to 1,400 workers at plants in Linthicum, Hunt Valley, Sykesville, Columbia and Annapolis. Those come on top of 2,500 jobs lost during the previous year and a half.
Continued cost-cutting is having an effect on the company's bottom line. In the third quarter, which preceded the layoff announcement, the Pittsburgh-based company earned $14 million, compared with a loss of $1.5 billion a year ago. (Operating profits of $242 million were basically flat.) The company said operating profits at its Electronic Systems Group, which is based in the Baltimore area, rose during the quarter -- primarily because of non-defense contracts.
As a group, defense companies with significant operations in Maryland showed tremendous gains in profitability. The group turned a $1.27 billion loss in last year's third quarter to a profit of $277.5 million in the latest quarter. That turnaround was almost entirely due to Westinghouse, which had lost $1.5 billion in the third quarter of 1991 because of a $1.6 billion write-off in its financial services division.
Still, "the fate of Westinghouse [Electronic Systems Group] may be a little more uncertain than some of the other defense contractors" because of its dependence on Defense Department contracts, said Stephen S. Fuller, professor of urban planning at George Washington University.
Westinghouse is not alone. Bethesda-based Martin Marietta Corp. has laid off about 800 people at its plants in Middle River and Glen Burnie over the past two years. About 150 Grumman Corp. employees have lost their jobs at a machining plant in Glenarm in recent years, and 243 more jobs were lost at an aircraft parts plant in Salisbury.
One seeming success story in defense is AAI Corp. of Cockeysville, whose Connecticut-based parent, United Industries Corp., saw third-quarter profits rise by more than 225 percent. But that improvement also came at the expense of jobs -- the AAI subsidiary has lost about 700 people in recent years.
Although President-elect Bill Clinton has spoken of an industrywide conversion to non-defense manufacturing, "it's a very slow process," Mr. Fuller pointed out. Still, he said, military cutbacks probably will stabilize -- rather than accelerate -- in the next year or so.
"There's no way to get the economy moving again and simultaneously make severe cuts in defense spending," he said.
A nationwide economic burst is likely to help the financial services industry, bankers and analysts say. Banks and thrifts are showing improved third-quarter results, mainly because of government efforts to stimulate the economy.
The Federal Reserve Board's year-and-a-half-long push to lower
interest rates improved the net interest margin of most of Maryland's banks and thrifts. That margin is the difference between the interest lenders pay on deposits and the amount they earn on loans.
The 13 banks and thrifts that have reported third-quarter results showed a 1,300 percent increase in profits. Profits rose to $508.2 million, from $36.5 million a year ago.
Those numbers were driven largely by three institutions: MNC Financial Inc., of Baltimore, whose $82 million loss in the third quarter of 1991 turned into a $4.5 million gain this year; Baltimore Bancorp, which turned a $40 million loss into a $3.3 million profit; and NationsBank Corp. of Charlotte, N.C., which merged and acquired its way from an $81 million profit a year ago to a $350 million profit.
Every bit as important to the banks was a stabilization in asset quality, particularly the real estate loans that sent much of the mid-Atlantic banking industry into a tailspin two years ago. MNC, for instance, had up to $1.8 billion in problem assets last year; that figure fell to $1.25 billion by Sept. 30.
"It looks like the real-estate recovery may have begun in the Washington-Baltimore area," said Robin Oegerle, director of research at Ferris, Baker Watts Inc.
Can investors in banks and thrifts expect more leaps in profits?
Arnold Danielson, president of the Rockville bank consulting firm Danielson Associates Inc., says that is unlikely with a new administration in the White House. "We're probably not going to have as unguided an economy that keeps interest rates at ridiculously low levels. It does mean that this year's high margins will have to go back to more normal margins."
Still, he said, the industry is on the mend, and probably has little to fear from a Clinton presidency.
Baltimore's investment bankers once again ended the third quarter in the black, as low interest rates drove many people to move money from certificates of deposit and savings accounts to stocks and mutual funds.
Alex. Brown Inc. reported a nearly 40 percent increase in third-quarter earnings, and moved to share the wealth with its stockholders by boosting its dividend 25 percent. Earnings at Legg Mason Inc. and T. Rowe Price Associates grew by 48 percent and 18 percent, respectively.
But too few of the people who made money with their brokers turned around and invested it in new houses in the third quarter. Residential homebuilding was still weak after a late-summer spike from the drop in mortgage rates.
Columbia's Ryland Corp. showed a 40 percent profit rise from a year earlier. But that was largely due to its mortgage business, especially refinancing, not to more homebuilding.
Still, others are optimistic about the latest trends. David Donabedian, chief economist at Mercantile-Safe Deposit & Trust said applications for new mortgages have picked up in the last month, and the National Association of Homebuilders reported improved activity at the end of September. Home buying, in turn, drives a range of purchases as owners buy furnishings and accessories.
Although Maryland retailers haven't reported third-quarter numbers yet, retail sales have started to advance in the last few weeks, Mr. Donabedian says.
And analysts generally predict that sales for the Christmas season will be 5 percent or 6 percent higher than last year, which would make this season the best since 1988.
Maryland's manufacturing firms continued to showed mixed results in the third quarter. Specialty steelmaker Armco Corp. managed to trim its losses slightly, from $27 million a year ago to $25 million in the latest quarter. Bethlehem Steel Corp.'s red ink spread -- a $61 million loss a year ago increased to $72 million.
With the presidential election -- and the attendant uncertainty -- finally behind the nation, "I would hope that a month from now or so you'd see an improvement in manufacturing activity," Mr. Donabedian said. "I'm relatively optimistic for 1993."
QUARTERLY PROFITS
This is a comparison of the quarterly profits for publicly held, Maryland-based companies and for other companies with major operations here.
A5 Net income (in $ millions) for the quarter ended:
... ... .. ... ... ... ...Sept. 1992 ...Sept. 1991... % change
Alex & Alex ... ... ... ..$8.8... ... ..$7.2... ... .. 22.2%
Alex. Brown .... ... ... .11.1... ... .. 8.0... ... .. 38.8
Allied Research ... ... ...3.7... ... .. 3.65.. ... ... 1.4
Allied Signal... ... ... 140.0... ... . 80.0.... ... . 75.0
American General .. .... 138.0... .... 115.7.... ... . 19.3
Armco... ... .. ... .... (25.2)... ... (26.9)... ... .. --
Atlanfed Bancorp ... ..... 0.49... ..... 0.40.... ... 22.5
Avemco Corp ... ... ... ...1.5... ... .. 2.9.... ... ..48.3
BG&E; ... ... ... ... ... 124.6... .... 116.7.... ... .. 6.8
Baltimore Bancorp ... ... .3.3... .... (40.0)... ... .. --
Bank Maryland ... ... ... (0.1)... .... (2.5)... ... ... --
Bell Atlantic ... ... ...386.6 ... ... 331.5.... ... ..16.6
Bethlehem Steel... ... . (72.0)... ... (61.0)... ... ... --
Biospherics ... ... ... ...0.3... ... .. 0.2... ... ...50.0
Black & Decker ... ... ...12.1... ... .. 9.8... .... ..23.5
CSX ... ... ... ... ... .128.0... .... 108.0... ... ...18.5
Chase Manhattan ... ... .176.0... ... .136.0... ... .. 29.4
Citicorp... ... ... .....116.0... ... (885.0)... ... ... --
Citizens Bancorp ... ... ..6.0... ... .. 6.3... ... ... 4.8
Computer Data... ... ... . 1.2... ... .. 0.8... ... ...50.0
Crestar ... ... ... ... ..21.5... ... .. 2.3... ... ..834.8
Crop Genetics ... ... ... (1.3)... .... (2.8)... ... ... --
Crown Central Pet ... ... (3.8)... ..... 1.6... ... .... --
Danaher ... ... .. ... ... 9.7.. .... .. 4.3... ... ..125.6
Delmarva Power ... ... ...31.8... ... . 30.0... ... ... 6.0
Duratek ... ... ... ... ...0.2... ... ..(0.6)... ... ... --
Environ Elem ... ... ... .(1.8).. ... .. 1.9... ... .... --
Essex... ... ... ... ... . 0.1... ... .. 0.01.. ... . 900.0
GEICO .... ... ... ... ...41.6... ... ..55.7... ... .. 25.3
General Motors ... ... .(752.9).. . (1,100)... ... .... --
General Physics ... ... ...0.35... .. ...0.6... ... ...41.7
Grumman ... ... ... ... ..21.4... .. ...22.7... ... ... 5.7
Legg Mason... ... ... .... 6.8... .. ... 4.6... ... .. 47.8
Life Technologies ... .... 3.8... .. ... 2.8... ... .. 35.7
Loyola Capital .... .... ..2.9... .. ... 2.5... ... .. 16.0
MBNA ... ... ... ... ... .46.7... .. .. 40.3... ... .. 15.9
MCI Communications ... ..159.0... .. . 140.0... ... .. 13.6
MNC Financial ... ... ... .4.5... .... (82.4)... ... .. --
Marriott ... ... ... ... .26.0... ... . 18.0... ... ...44.4
Martin Marietta ... ... ..96.1... ... .100.1... ... ... 4.0
Medimmune ... ... ... ....(0.9).. ... ...0.1... ... ... --
Mellon Bank ... ... ... .156.0... ... . 70.0... ... ..122.9
Mercantile ... ... ... ...19.1... ... . 16.8... ... .. 13.7
Micros Systems ... ... ... 1.1... ... .. 0.6... ... .. 83.3
Mid-Atlantic Medical... .. 3.6... ... .. 2.6... ... ...38.5
NationsBank ... ... ... .350.0... ... ..81.0... ... . 332.1
Polk Audio... ... ... ... 0.003... ... . 0.29... ... ..99.0
Potomac Electric ... ... 120.8... .... 132.9... ... ... 9.1
Preston ... .. ... ... ...(1.05)... .... 0.08... ... ... --
Primerica ... ... ... ...165.0... .... 123.5... ... .. 33.6
Procter & Gamble ... ... 431.0... .... 536.0... ... .. 19.6
Provident Bankshares... .. 1.1... ... .. 0.6... ... .. 83.3
Ryland Group... ... ... .. 9.7... .. ... 6.9... ... ...40.6
Signet Banking ... ... ...28.6... ... . 11.2... ... ..155.4
T. Rowe Price ... ... .. .10.3... ... .. 8.7... ... .. 18.4
Times Mirror ... ... ... .43.8.. ... .. 41.0... ... ... 6.8
UNC Inc ... ... ... ... ...3.2... .. ....1.9... ... .. 68.4
USF&G; Corp ... ... .. ... .5.0... .... (25.0)... ... ... --
United Industries ... ... .2.3... ... .. 0.7... ... . 228.6
Universal Security... ... 0.05.. ... ... 0.12.. ... .. 58.3
W.R. Grace ... ... ... ..(82.1)... ... .49.6... ... ... --
Washington Gas & Light .. 13.6)... .. .(11.5)... ... ... --
Waverly Inc ... .. ... ... 0.93... ... . 0.57... ... ..63.2
Westinghouse ... ... ... .14.0... .. (1482.0)... ... ... --