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MICHIGAN NATIONAL CORPORATION DECLARES REGULAR DIVIDEND, ADOPTS NEW ACCOUNTING STANDARD FOR INCOME TAXES

 MICHIGAN NATIONAL CORPORATION DECLARES REGULAR DIVIDEND,
 ADOPTS NEW ACCOUNTING STANDARD FOR INCOME TAXES
 New Accounting Standard Causes Upward Restatement of Earnings
 for First Six Months of 1992 from $29.9 Million to $42.6 Million
 FARMINGTON HILLS, Mich., Sept. 16 /PRNewswire/ -- The board of directors of Michigan National Corporation (NASDAQ-NMS: MNCO) today declared a regular cash dividend of $.50 per share on common stock, payable Oct. 15, 1992, to shareholders of record as of Oct. 1, 1992.
 The corporation also announced that effective Jan. 1, 1992, it is adopting a new method of accounting for income taxes -- Statement of Financial Accounting Standards No. 109 (SFAS No. 109). This standard became available for use earlier this year and is mandatory for all companies for 1993.
 The adoption of the new standard will cause previously reported earnings for the first six months of 1992 to increase from $29.9 million, or $1.99 per share, to $42.6 million, or $2.84 per share. This change consists of a one-time cumulative adjustment of $6.3 million and a reduction in the income tax provision for the first six months of $6.4 million. Under the new standard, the corporation's estimated effective income tax rate for 1992, exclusive of the one-time cumulative adjustment, is 10.5 percent, compared to the previously reported rate of 26.4 percent.
 Robert J. Mylod, chairman and chief executive officer of Michigan National Corporation, commented, "The new tax accounting standard allows for earlier recognition of the tax benefits from the corporation's 1988 acquisition of Beverly Hills Federal Savings Bank, now Beverly Hills Business Bank (BHBB). This change highlights the value to our shareholders of the tax benefits associated with this acquisition. We believe we have recognized the BHBB tax benefits in a conservative fashion and we will continue to do so by adequately providing for any perceived risks associated with their recognition as the tax benefits are recognized."
 In adopting the new standard, the corporation has created a new asset representing the value of the pre- and post-acquisition net operating loss carryforwards of $80 million and has established a 100-percent valuation allowance against that asset. This allowance may be reduced or eliminated as the corporation is able to determine with reasonable certainty that it will have sufficient taxable income, either on a consolidated basis or at BHBB, as may be required to utilize the tax assets. However, even if sufficient taxable income is predictable, it may be necessary for the corporation to create a separate contingency reserve against the risk that the net operating loss carryforwards may be disallowed due to an expected challenge by the Treasury, which is described in some detail in our annual report and 10-K. The judgment as to the necessity for and the amount of any such reserve will be made in the future based upon the facts and circumstances as they exist at that time.
 The Financial Accounting Standards Board issued SFAS No. 109 in response to criticism that its prior standard, SFAS No. 96, was too complex and prohibited the recognition of deferred tax benefits that were expected to be realized.
 SFAS No. 109 makes fundamental changes in the conceptual basis and methods of accounting for income taxes that affect the timing of the recognition of deferred income tax assets and liabilities. Unlike the prior standard, it requires consideration of future events to assess the likelihood that tax benefits will be realized in future years. Therefore, under SFAS No. 109, the following two-step analysis is required:
 First, a determination is made as to whether or not a tax
 benefit exists under the law. If it does, a tax asset is
 created representing its full value.
 Secondly, to the extent that future taxable income sufficient to
 recognize the tax asset cannot be predicted with reasonable
 certainty, a valuation allowance must be created against the tax
 asset.
 Furthermore, where circumstances create doubt about the ability to defend a position taken for tax purposes, a contingency reserve may be created for financial reporting purposes. In this regard, the corporation's 1991 Annual Report and Form 10-K discusses the adverse position of the U.S. Department of Treasury with respect to deductions of government reimbursed losses and expenses, such as those which the corporation derived from BHBB. It is anticipated that deductions of such losses and expenses will be challenged by the Treasury. In addition, legislation is being considered by Congress that would disallow deductions for certain government reimbursed losses that are made on or after March 4, 1991. The corporation believes that its position with respect to the BHBB tax benefits is correct and proper and will be successfully defended, if necessary. However, it is impossible to accurately determine how, if at all, these deductions will be affected either by a challenge by the Treasury or a change in law. In the unlikely event that all of these deductions are disallowed as of June 30, 1992, earnings would be adversely affected by approximately $15 million plus interest. Furthermore, all of the consolidated net operating loss carryforwards would be eliminated (as of June 30, 1992, approximately $215 million). In this unlikely scenario, to the extent that additional net operating loss carryforwards are recognized without creating a 100-percent contingency reserve against them, the risk to future earnings will increase.
 The components of the cumulative adjustment at Jan. 1, 1992, are as follows:
 Reversal of previously recognized deferred
 tax assets under old accounting standard ($7.3) million
 Tax asset attributable to BHBB pre-acquisition
 net operating loss carryforwards $41.0
 Tax asset attributable to consolidated net
 operating loss carryforwards $39.0
 Tax asset attributable to Alternative Minimum
 Tax (AMT) credit carryforwards $13.6
 $86.3
 Valuation allowance ($80.0)
 Cumulative adjustment at Jan. 1, 1992 $6.3 million
 The following schedules include additional information regarding restated net income for the first and second quarters of 1992.
 Michigan National Corporation is a diversified financial services corporation with total assets of $10.6 billion. It is a bank holding company and a savings and loan holding company.
 Michigan National Corporation's principal subsidiary, Michigan National Bank, has approximately 190 branches throughout Michigan. Michigan National Corporation has its headquarters in Farmington Hills.
 MICHIGAN NATIONAL CORPORATION AND SUBSIDIARIES
 CONSOLIDATED SUMMARY OF INCOME
 (Unaudited)
 Six Months Ended 6/30/92 6/30/92
 (In thousands, except Restated Previously
 per-share amounts) Reported
 Income before income taxes $40,615 $40,615
 Income tax provision 4,252 10,710
 Income before cumulative effect of
 a change in accounting principle 36,363 29,905
 Cumulative effect of a change in
 accounting principle 6,265 ---
 Net income $42,628 $29,905
 Net income per common share:
 Income before cumulative effect of
 a change in accounting principle $2.42 $1.99
 Cumulative effect of a change
 in accounting principle $0.42 ---
 Net income $2.84 $1.99
 Average common shares outstanding 15,029 15,029
 Selected Financial Ratios:
 Return on shareholders' equity 10.95 pct 7.77 pct
 Return on average total assets 0.80 pct 0.56 pct
 Equity to asset ratio 7.43 pct 7.32 pct
 Leverage ratio(1) 7.01 pct 7.01 pct
 Tier 1 risk based capital ratio(1) 9.80 pct 9.80 pct
 Total risk based capital ratio(1) 12.08 pct 12.08 pct
 (1) The Federal Reserve Board (FRB) has issued a supervisory policy which prohibits bank holding companies from adopting SFAS No. 109 for FRB regulatory reporting and capital adequacy purposes pending completion of the FRB's study of the matter. Accordingly, the corporation's regulatory capital position and ratios have not been adjusted to reflect the adoption of SFAS No. 109 at this time.
 MICHIGAN NATIONAL CORPORATION AND SUBSIDIARIES
 CONSOLIDATED SUMMARY OF INCOME
 (Unaudited)
 Three Months Ended 6/30/92 6/30/92 3/31/92 3/31/92
 (In thousands, except Restated Previously Restated Previously
 per-share amounts) Reported Reported
 Income before income
 taxes $21,466 $21,466 $19,149 $19,149
 Income tax provision 2,247 5,863 2,005 4,847
 Income before cumulative
 effect of a change in
 accounting principle 19,219 15,603 17,144 14,302
 Cumulative effect of a
 change in accounting
 principle --- --- 6,265 ---
 Net income $19,219 $15,603 $23,409 $14,302
 Net income per common share:
 Income before cumulative
 effect of a change in
 accounting principle $1.28 $1.04 $1.14 $0.95
 Cumulative effect of a
 change in accounting
 principle --- --- $0.42 ---
 Net income $1.28 $1.04 $1.56 $0.95
 Average common shares
 outstanding 15,049 15,049 14,997 14,997
 Selected Financial Ratios:
 Return on shareholders'
 equity 9.80 pct 8.07 pct 12.11 pct 7.47 pct
 Return on average total
 assets 0.71 pct 0.58 pct 0.88 pct 0.54 pct
 Equity to asset ratio 7.43 pct 7.32 pct 7.12 pct 7.04 pct
 Leverage ratio(1) 7.01 pct 7.01 pct 7.10 pct 7.10 pct
 Tier 1 risk based
 capital ratio(1) 9.80 pct 9.80 pct 9.56 pct 9.56 pct
 Total risk based
 capital ratio(1) 12.08 pct 12.08 pct 11.83 pct 11.83 pct
 (1) The Federal Reserve Board (FRB) has issued a supervisory policy which prohibits bank holding companies from adopting SFAS No. 109 for FRB regulatory reporting and capital adequacy purposes pending completion of the FRB's study of the matter. Accordingly, the corporation's regulatory capital position and ratios have not been adjusted to reflect the adoption of SFAS No. 109 at this time.
 -0- 9/16/92
 /CONTACT: Vernon Patterson of Michigan National Corporation, 313-473-3076/
 (MNCO) CO: Michigan National Corporation ST: Michigan IN: FIN SU: DIV


SM-ML -- DE015 -- 0194 09/16/92 14:11 EDT
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Date:Sep 16, 1992
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