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MICHIGAN NATIONAL RECOGNIZES SIGNIFICANT DEVALUATION OF MORTGAGE SERVICING ASSETS RESULTING IN A LOSS FOR THE FIRST QUARTER 1993

 FARMINGTON HILLS, Mich., April 20 /PRNewswire/ -- Michigan National Corporation (NASDAQ-NMS: MNCO) announced results for the first quarter 1993 at its Annual Shareholders' Meeting held today at Corporate Headquarters in Farmington Hills.
 After recognizing significant devaluation of its mortgage servicing assets, the corporation reported a loss of $44.8 million, or $3.00 per share, for the first quarter. However, improvements in credit quality continued through the first three months of the year resulting in a reduction in the provision for possible credit losses. As discussed in further detail below, the level of performing watch credits, non- performing assets, and net charge-offs all declined during the first quarter. The corporation also recognized one-time security gains of $6.0 million in the first quarter. Net income for the same period last year, excluding a $6.3 million effect of an accounting change, was $17.1 million, or $1.14 per share.
 Robert J. Mylod, chairman and chief executive officer, said, "Falling interest rates since the beginning of the year and current industry projections indicate the emergence of another mortgage refinancing boom and, therefore, continued increases in prepayment trends in the corporation's mortgage servicing portfolios. In keeping with its commitment to balance sheet integrity, the corporation continues to aggressively acknowledge the effect of these trends on the carrying value of its mortgage servicing assets through accelerated amortization of those assets. This action, along with improved credit quality, should position the corporation for improved future earnings."
 In addition to the recognition of increasing prepayment trends, the corporation has changed its method of measuring the discounted value of these assets to one that provides for more conservative estimates of asset value. Current general industry practice is to measure discounted value of purchased mortgage servicing rights (PMSR) and excess service fees (ESF) assets in the aggregate (i.e., net the valuation gains and losses within the portfolio). The corporation has elected to change its method of measuring discounted value to a disaggregate method (i.e., recognizing losses within the portfolio and not recognizing the gains). The corporation thought it prudent to adopt the new method as it provides for earlier recognition of losses in what appears to be an increasingly volatile industry environment.
 The recognition of increasing prepayment trends and the aforementioned change in the method of measuring value of PMSR and ESF assets brought total PMSR amortization expense for the quarter to $59.3 million and ESF amortization expense to $8.2 million. This compares to PMSR amortization expense of $6.6 million for the same period last year and $25.2 million in the fourth quarter 1992. PMSR amortization expense for the year ended 1992 was $53.0 million. ESF amortization expense was $1.0 million in the first quarter 1992 and $2.4 million in the fourth quarter 1992. ESF amortization expense for the year ended 1992 was $9.5 million. Total PMSR and ESF assets remaining on the balance sheet at March 31, 1993, were $99.2 million and $15.9 million, respectively, down from $186.5 million and $21.4 million at the end of March 31, 1992.
 Improvements in the area of credit quality continued through the first three months of 1993. At March 31, 1993, performing watch credits were $528 million, down $11 million, or 2 percent, from year-end 1992; non-performing assets were $296 million, down $9 million, or 3 percent, from year-end 1992; and net charge-offs for the three months ended March 31, 1993 were $5.9 million, down $8.4 million, or 59 percent, from last year's fourth quarter and down $7.4 million, or 56 percent, from last year's first quarter. As a result of this continued improvement, the corporation decreased its provision for possible credit losses in the first quarter to $12.5 million from $15.3 million in the fourth quarter of 1992 and $18.4 million in the first quarter 1992. At the same time, the allowance for possible credit losses as a percentage of non-performing loans increased to 122 percent at March 31, 1993, from 114 percent at December 31, 1992, and 90 percent at March 31, 1992.
 Results for the first quarter 1993 include one-time securities gains of $6.0 million. The securities sold had been previously classified as "Available for Sale" and were sold in order to eliminate the capital risk associated with the lower-of-cost-or-market accounting for those securities.
 The corporation is currently estimating no tax expense in 1993 for financial accounting purposes, principally due to the increased PMSR and ESF amortization expense, which has the effect of significantly reducing the percentage of projected financial taxable income to total pre-tax financial income.
 Commenting further, Mr. Mylod said, "The corporation remains strongly committed to balance sheet strength. Its primary goals for 1993 are continued improvements in the area of credit quality, timely recognition of any further value impairment in mortgage servicing assets, and controlled earning asset growth. The corporation's total risk based capital ratio was 11.38 percent at March 31, 1993."
 As previously announced, on April 1, 1993, the corporation acquired three Houston, Texas-area banks with total assets of approximately $120 million.


When combined with the corporation's other Texas affiliates, Lockwood National Bank and First State Bank & Trust, the corporation's Texas-based assets will be approximately $600 million.
 Election of the Board of Directors
 The following directors were elected to a one-year term by shareholders at the Annual Shareholders' Meeting:
 Daniel T. Carroll William F. Pickard
 John S. Carton Edgar D. Prince
 Sidney E. Forbes Stanton Kinnie Smith, Jr.
 Sue L. Gin Walter H. Teninga
 Morton E. Harris Jay Van Andel
 Gerald B. Mitchell Richard T. Walsh
 Robert J. Mylod James A. Williams
 Michigan National Corporation is a diversified financial services corporation with total assets of $10.5 billion. It is a bank holding company and a savings and loan holding company.
 (Other key financial data is set forth in the following schedules.)
 MICHIGAN NATIONAL CORPORATION AND SUBSIDIARIES
 FINANCIAL HIGHLIGHTS (UNAUDITED)
 Operating Results 3/31/93 12/31/92 3/31/92
 (in thousands)
 Interest income $171,142 $187,187 $201,536
 Interest expense 78,678 84,274 105,045
 Net interest income 92,464 102,913 96,491
 Provision for possible
 credit losses 12,506 15,317 18,364
 Non-interest income 51,427 66,826 53,646
 Non-interest expense 176,183 141,210 112,624
 Income before income tax expense (44,798) 13,212 19,149
 Income tax provision (benefit) 0 1,322 2,005
 Income before cumulative effect
 of accounting change (44,798) 11,890 17,144
 Cumulative effect of accounting
 change 6,265
 Net income (44,798) 11,890 23,409
 Per Common Share
 Income before cumulative effect
 of accounting change ($3.00) $0.78 $1.14
 Cumulative effect of accounting
 change $0.42
 Net income-primary & fully diluted ($3.00) $0.78 $1.56
 Cash dividends declared $0.50 $0.50 $0.50
 Book value end-of-period $50.11 $53.65 $52.53
 Market value end-of-period $60.00 $51.25 $51.25
 Closing market value: high $64.25 $52.25 $51.25
 Closing market value: low $50.00 $44.00 $42.00
 MICHIGAN NATIONAL CORPORATION AND SUBSIDIARIES
 FINANCIAL HIGHLIGHTS (UNAUDITED)
 Selected Quarter-End Balances
 (in millions)
 Total assets $10,465 $10,635 $10,909
 Earning assets 9,291 9,540 9,813
 Total loans and lease financing 6,534 6,731 6,744
 Non-performing assets 296 306 329
 Deposits 8,582 8,975 8,936
 Long-term debt 82 83 90
 Shareholders' equity 757 806 777
 Selected Average Balances
 (in millions)
 Total assets $10,160 $10,623 $10,589
 Earning assets 9,117 9,529 9,547
 Total loans and lease financing 6,477 6,737 6,716
 Deposits 8,549 8,867 8,677
 Long-term debt 82 83 90
 Shareholders' equity 810 806 773
 Selected Financial Ratios PERCENT PERCENT PERCENT
 Return on average shareholders'
 equity (22.13) 5.90 12.11
 Return on a 7.97 7.58 7.30
 Allowance to period-end loans 2.79 2.61 2.37
 Non-performing assets to total loans
 plus property from defaulted loans 4.44 4.44 4.77
 Net interest spread 3.67 3.92 3.69
 Net interest margin 4.38 4.67 4.45
 Equity to asset ratio (period end) 7.23 7.58 7.12
 Leverage ratio 7.13 7.25 7.10
 Tier 1 risk based capital ratio 9.16 9.70 9.56
 Total risk based capital ratio 11.38 11.93 11.83
 Dividend payout ratio N/M 64.10 32.05
 N/M -- Not meaningful
 -0- 4/20/93
 /CONTACT: Ariadne Magoulias, 313-473-3428, or Vernon Patterson, Investor Relations, Michigan National Corporation, 313-473-3076/
 (MNCO)


CO: Michigan National Corporation ST: Michigan IN: FIN SU: ERN

ML-SB -- DE014 -- 7955 04/20/93 10:52 EDT
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Date:Apr 20, 1993
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