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 CHICAGO, Oct. 14 /PRNewswire/ -- Continental Bank Corporation (NYSE: CBK) today reported third-quarter earnings of $68 million, or $1.11 per share, an increase of 28 percent from a year ago. Revenues increased $57 million to $291 million, aided by higher trading profits and revenues from equity investments. Higher credit costs and a 5 percent increase in operating expenses tied to incentive plans partially offset the higher revenues. Results were also favorably impacted by the recognition of additional deferred tax benefits and the effect of a favorable tax court decision.
 Return on common equity was 16.4 percent for the third quarter of 1993, compared with 14.4 percent for the same period last year.
 Net income for the first nine months of 1993 was $270 million, or $4.46 per share ($190 million, or $3.01 per share, excluding the effect of an accounting change for income taxes), compared with $161 million, or $2.50 per share, for the same period last year.
 "This has been another successful quarter for Continental, with well-balanced strength in revenues and a record efficiency ratio," said Chairman Thomas C. Theobald. "And, while credit costs continued at a fairly high level, we are encouraged by the substantial drop in nonperforming assets and in other closely watched credits."
 Banking Product Revenues
 Total banking product revenues increased 18 percent from the third quarter of last year. Banking product revenues include management's internal allocations of funding costs.
 Third Quarter Year-to-Date
 ($ in millions) 1993 1992(A) 1993 1992(A)
 Corporate Finance $120 $130 $390 $386
 Specialized Financial Services 64 66 194 198
 Trading 40 19 94 32
 Equity Investments 60 26 128 101
 Total Banking Product Revenues 284 241 806 717
 All Other 7 (7) 3 (20)
 Total Revenues $291 $234 $809 $697
 (A) Restated to conform to the current period's presentation.
 Corporate finance revenues, which include revenues from lending, syndication and distribution activities, declined 8 percent from the third quarter of 1992. Lending revenues increased $9 million as a wider net interest-rate spread, higher loan fees and higher cash collections on nonperforming loans more than offset the impact of a $1.8 billion decrease in average loans. Syndication and distribution revenues fell $19 million due to generally lower domestic capital market activity and the 1992 recognition of gains from the sale of Latin American loans.
 Revenues from specialized financial services declined 3 percent from the year-ago quarter, due to lower fees from securities management services in a more competitive pricing environment. Specialized financial services revenues include fees for cash and securities management, fiduciary services and private banking.
 Revenues from trading activities rose $21 million from the same quarter last year, primarily due to increased revenues from secondary asset trading and continued growth in revenues from customer-driven interest-rate derivative products.
 Equity investment revenues for the third quarter of 1993 rose $34 million from the 1992 third quarter. Reflecting a significant increase in market values of several investments, domestic equity revenues amounted to $39 million in the 1993 period, up $20 million from last year's quarter. Realized gains on Latin American investments increased $14 million from the year-ago quarter. The equity investment portfolio on Sept. 30, 1993, amounted to $579 million, up $119 million from a year ago.
 The improvement in all other revenues was primarily attributable to $8 million from the collection of claims retained in the sale of a securities clearing subsidiary and the favorable resolution of a derivative contract in the current quarter, as well as a $5 million reduction in foreign currency translation losses, compared with last year's quarter.
 Operating Expenses Third Quarter Year-to-Date
 ($ in millions) 1993 1992 1993 1992
 Employee $ 80 $ 74 $227 $219
 Occupancy & Equipment 18 18 50 49
 Other Operating 57 55 169 161
 Total Operating Expenses $155 $147 $446 $429
 Operating Staff Level 4,192 4,266
 Third-quarter 1993 operating expenses increased 5 percent over the 1992 quarter. Most of the increase was in employee expense and resulted primarily from higher provisions for incentive compensation related to revenue levels. Staff levels declined 2 percent, or 74 people, from Sept. 30, 1992, but increased by 34 people from June 30, 1993. Year-to- date operating expenses were up 4 percent to $446 million due to higher employee and professional service expenses.
 The efficiency ratio, operating expenses as a percentage of revenues, improved to 53 percent in the 1993 quarter, compared with 63 percent last year.
 Income Taxes
 Continental recorded a credit for income taxes of $3 million in the third quarter of 1993, compared with an expense of $6 million in the year-ago quarter. The third-quarter 1993 credit included a $4 million benefit attributable to a favorable tax court decision related to several banking issues dating back to the late 1970s, as well as the recognition of an additional $12 million of deferred federal tax benefits.
 Provision And Reserve For Credit Losses
 The third-quarter provision for credit losses of $45 million was $20 million higher than last year, primarily due to higher charge-offs on loans to residential real estate developers in California.
 The reserve for credit losses was $350 million, or 3.0 percent of total loans, on Sept. 30, compared with $368 million, or 3.1 percent, on June 30 and $380 million, or 2.9 percent, a year ago. The reserve for credit losses as a percent of nonperforming loans was 75.6 percent, up from 55.4 percent on June 30, and 55.2 percent a year ago.
 Third Quarter Year-to-Date
 ($ in millions) 1993 1992 1993 1992
 Charge-offs $ 80 $ 90 $206 $159
 Recoveries (17) (30) (51) (49)
 Net Charge-offs $ 63 $ 60 $155 $110
 Charge-offs of residential real estate loans amounted to $65 million in the 1993 third quarter, compared with $16 million in the year-ago quarter. Recoveries in the third quarter of 1993 resulted primarily from HLT loans. For the 1992 quarter, HLT charge-offs were $41 million, Latin American charge-offs were $24 million and Latin American recoveries were $25 million.
 Net Costs Of Other Nonperforming Assets (Onpa)
 Third-quarter 1993 net costs of ONPA of $26 million increased $23 million over the 1992 quarter, primarily due to write-downs on other real estate owned (OREO) properties. The components of net costs of ONPA are write-downs, gains and losses from sales and net operating and legal expenses related to other nonperforming assets. ONPA comprises OREO and all other nonperforming assets.
 The combined costs of credit provisions, forgone revenue on nonperforming loans and ONPA costs were $87 million in the third quarter of 1993, compared with $42 million in last year's third quarter.
 Nonperforming Assets
 Nonperforming assets, including loans, decreased $160 million, or 21 percent, from June 30, 1993, and $219 million, or 26 percent, from Sept. 30 of last year. Nonperforming loans decreased $201 million, or 30 percent, from June 30, primarily due to a comparable decline in nonperforming residential real estate loans. This decline was partially offset by a $58 million increase in residential OREO. As shown below, the $225 million decrease in total nonperforming loans from Sept. 30 of last year was due to significant declines in nearly all categories, most notably in the Latin American portfolio.
 Sept. 30 June 30 Sept. 30
 ($ in millions) 1993 1993 1992
 General Corporate $158 $148 $199
 HLT 87 79 108
 Commercial Real Estate 55 54 57
 Residential Real Estate 162 374 220
 Latin American 1 9 104
 Total Nonperforming Loans 463 664 688
 OREO (A) 124 80 111
 All Other Nonperforming Assets(A) 21 24 28
 Total Other Nonperforming Assets 145 104 139
 Total Nonperforming Assets $608 $768 $827
 Nonperforming Loans to Total
 Loans (in percentages) 3.95 5.66 5.20
 (A) Includes credits designated as being in-substance foreclosed for accounting purposes.
 On Sept. 30, 1993, nonperforming assets represented approximately 2 percent of the $8 billion general corporate portfolio and 10 percent of the $0.9 billion HLT portfolio. Approximately 37 percent of the residential real estate assets was nonperforming. California residential real estate assets were reduced to approximately $320 million at quarter-end, 66 percent of which was nonperforming. The reduction primarily resulted from sales, charge-offs and write-downs. At quarter-end, the carrying value of these nonperforming assets was approximately 45 percent. Continental continues to believe that for the foreseeable future the residential real estate portfolio will underperform relative to its other loan portfolios. Nonperforming assets in the commercial real estate and non-California residential real estate portfolios were less than 12 percent of each portfolio on Sept. 30, 1993.
 Balance Sheet
 Total assets of $21.8 billion on Sept. 30 decreased slightly from June 30, 1993, and 5 percent from Sept. 30, 1992. Loans remained at the June 30 level, but decreased 11 percent from Sept. 30, 1992. The $1 billion decline in liabilities since Sept. 30, 1992, was entirely due to a reduction in funding by foreign offices. Continental's equity-to- assets ratio was 8.5 percent on Sept. 30, compared with 8.2 percent on June 30, 1993, and 7.1 percent on Sept. 30, 1992. Book value per common share on Sept. 30 rose to $28.26 from $27.17 on June 30 and $23.14 a year ago.
 In the 1993 third quarter, Continental issued $200 million of five- year floating-rate senior debt.
 Capital Ratios
 On Sept. 30, the capital ratios of Continental Bank Corporation and Continental Bank N.A. exceeded the quantitative levels required to be categorized as "well capitalized." The corporation's estimated ratio of Tier 1 capital to risk-adjusted assets was 7.9 percent, and total capital to risk-adjusted assets was 11.0 percent, up from 6.7 percent and 9.5 percent, respectively, a year ago. The corporation's leverage ratio (Tier 1 capital to quarterly average assets) was 8.7 percent on Sept. 30, compared with 7.4 percent a year ago.
 During the third quarter, Continental continued its common stock repurchase program with the acquisition of an additional 1.1 million shares. On Sept. 30, 1993, 2.1 million shares were held under this program at an average cost of $24.19 per share. These shares are held for general corporate purposes.
 -0- 10/14/93
 /NOTE TO EDITORS: Continental Bank Corporation is a bank holding company that focuses on meeting the capital and financial management needs of public and privately held businesses nationwide. Through its subsidiaries, the company provides business financing, specialized financial and operating services and private banking services. Continental also engages in equity finance and investing, as both principal and arranger, and international trading/
 /CONTACT: Lisa M. Hewitt, 312-923-5166, or Edgar P. McDougal, 312-923-5200, or William C. Murschel, 312-923-5130, all for Continental Bank Corporation/

CO: Continental Bank Corporation ST: Illinois IN: FIN SU: ERN

MP -- NY019 -- 2068 10/14/93 09:28 EDT
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Date:Oct 14, 1993

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