Allfirst Financial Inc. reported third-quarter net income yesterday of $20.9 million, down almost 75 percent from $80.8 million in the third quarter last year - the result of a steep increase in its provision for problem loans and a $27.3 million charge related to employee buyouts.
The financial results are the company's first since parent Allied Irish Banks PLC announced a $3.1 billion deal to sell the Baltimore bank after a $691.2 million loss from a currency trading scandal.
Officials at both Allfirst and purchaser M&T; Bank Corp. of Buffalo, N.Y., said there were no surprises in the latest financial results.
"There was nothing in here that particularly surprised us," said Michael S. Piemonte, M&T;'s senior vice president of corporate finance. "We were aware of the early-retirement program and the charges they are taking on the [loans]."
Two corporate bankruptcies clipped the company's bottom line as it increased its reserve for bad loans by more than five-fold in the third quarter, to $32.9 million.
The problem loan reserve was increased by $52.7 million in the first nine months of the year to cover the two loans, one to a telecommunications company and the other to an airline for a much smaller amount. Both companies, which Allfirst did not identify, are in bankruptcy proceedings.
Analysts have said the telecommunications company is WorldCom Inc. US Airways Group Inc. is in bankruptcy.
The $27.3 million one-time charge is related to an early-retirement program extended to 228 employees. An additional early-retirement charge is expected in the fourth quarter, the company said in its quarterly report filed with the Securities and Exchange Commission.
"If you stripped [the one-time charges] out, all other things being equal, we're close to being flat quarter on quarter," said Maurice J. Crowley, Allfirst's chief financial officer.
The bank ended the quarter with $17.06 billion in assets, down from $17.43 billion in the third quarter last year. Total loans were $10.49 billion, down from $10.64 billion last year.
Net income was $82.6 million for the first nine months of the year, up from $76.4 million for the period in 2001.
"We've come through the last nine months very well," said Crowley, who characterized the third-quarter results as "business as usual."
The bank's turbulent year began in February, when it reported that it lost $691.2 million on fraudulent currency trades attributed to a rogue trader. The trader, John M. Rusnak, pleaded guilty Oct. 24 to one count of bank fraud, part of a deal with prosecutors that calls for him to serve 7 1/2 years in prison.
The scandal tarnished the bank and raised speculation that Allied Irish would sell its troubled U.S. financial unit under pressure from shareholders.
Those concerns were confirmed in September, when M&T; agreed to buy Allfirst for cash and stock. When the deal closes early next year, Allied Irish will get a 22.5 percent stake in M&T.; After the merger, M&T; will be the 18th-largest U.S. banking company, with $49 billion in assets and more than 700 branches in six states and Washington, D.C.