Officials of Continental Illinois Corp. said Monday that the banking firm continued to make progress in the second quarter in its recovery from a near- collapse a year earlier even though profits fell slightly from those reported for the first three months of 1985.
The holding company, parent of Continental Illinois National Bank and Trust Co. of Chicago, said its net income slipped 5 percent, to $37.3 million in the second quarter from $39.3 million in the first quarter of this year. Per-share earnings dipped to 13 cents from 14 cents.
It attributed the earnings decline primarily to lower net interest income –the difference between what it earns on loans and pays for deposits–a decline in loan volume, and slightly higher noninterest expenses. The extraordinary income resulting from tax benefits stemming from last year`s huge net loss declined to $12 million from $15 million in the first quarter, it added.
The firm didn`t give a profit comparison with 1984`s second quarter, saying its management believes a comparison is not meaningful because of the organization restructuring that occurred last Sept. 26 under the financial rescue plan developed by federal regulatory agencies.
In last year`s second quarter, Continental reported a loss of $1.16 billion–the biggest quarterly deficit ever reported by a U.S. banking firm.
In the first six months of 1985, the company reported a net income of $76.2 million, or 27 cents a share. That compared with a $1.13 billion net loss posted in the like period last year.
John E. Swearingen, holding company chairman, said the firm continued to make ”significant progress” in the second quarter in reducing its dependence on borrowings from the Federal Reserve System and from a special funding facility provided by a group of U.S. banks.
Continental`s borrowings from the Federal Reserve averaged $481 million in the latest quarter, down from $965 million in the January-March period this year, he said. Its borrowings from the bank group fell to an average $3.1 billion from $4 billion in the first quarter.
As of June 30, Continental`s loans this year from the Federal Reserve totaled $540 million, and its borrowings from the special bank funding facility totaled $2 billion.
William S. Ogden, chairman of Continental Bank, said the institution`s equity-to-assets ratio improved to 6.21 percent in the second quarter from 6.16 percent in the first quarter, while its primary capital-to-assets ratio rose to 7.48 percent from 7.40 percent. But its return on equity slipped to 8.30 percent from 9.06 percent and its return on assets declined to 0.52 percent from 0.55 percent.
Loan volume fell about $860 million from the first quarter, the executives said. Net loans on the company`s books totaled $21.69 billion as of June 30, down from $22.6 billion on March 31 and $23.97 billion on Dec. 31.
Total deposits, however, rose to $16.39 billion from $15 billion in the first quarter and at the end of 1984. Assets were $29.18 billion on June 30 in comparison with $28.8 billion on March 31 and $30.4 billion on Dec. 31.
The bank transferred $115 million of poor-quality loans to the Federal Deposit Insurance Corp. in the second quarter. That brought the total amount acquired by the FDIC to $387 million since September and $2.3 billion since the rescue plan went into effect.
Under the agreement, Continental has the right to transfer another $1.113 billion of poor loans to the FDIC by Sept. 26, 1987.
The executives also said that gains from securities trading and foreign exchange dealings, at $2 million and $4 million, respectively, were ”somewhat disappointing.” Trust income held steady at $15 million, they said.
