Revised Mercury Report Boosts Its ’88 Loss
Mercury Savings & Loan revised its 1988 earnings report Tuesday and announced that the thrift lost $13.8 million last year, nearly double the 1988 loss that it reported 2 months ago, and a nearly $20-million reversal from the profit it originally recorded.
In February, Mercury reported a profit of $6.1 million for 1988. But regulators said Mercury had overestimated the value of certain assets and forced the S&L; to revise its report in March, resulting in a $7.4-million net loss.
After further discussions with regulators, Mercury was compelled to revise its performance a second time.
Mercury Chairman Leonard Shane said the latest revision was necessary because incorrect accounting assumptions had been made for several years involving profits recorded on the sale of loans. In addition, assumptions that had been used to figure Mercury’s tax liability were incorrect, Shane said.
“Sure it’s a big number,” Shane said. “So what. For the first time (this year) we . . . have numbers we are confident of.”
The 1988 loss contrasts with net earnings of $5.1 million for 1987. Revenue for 1988 declined by 3% to $225 million from $232.8 million a year earlier.
Shane said Mercury plans to immediately file its results with the Securities and Exchange Commission.
Mercury also released results for the first quarter of 1989. Mercury lost $700,000, contrasted with net earnings of $1.1 million for the year-earlier period. Revenue for the quarter increased 8% to $61.6 million, compared to $57 million the previous year.
The downturn in the first quarter was caused by the application of the new accounting assumptions, reducing the net gain on the sale of loans by $1.6 million.
“I believe our adjustments are behind us,” Shane said. “I now look forward to reporting legitimate figures that are reliable.”
Analysts said Tuesday that all of Mercury’s problems might not be in the past.
“They are in a tenuous capital position,” said James M. Marks, a thrift industry analyst for SNL Securities, a Hoboken, N.J., brokerage firm. “They need strong earnings to boost their capital position. I don’t know if they can do it.”
Shane said that on March 31, Mercury had capital of $75.5 million, which is a little more than the 3% of assets in capital that is required.
Shane said Mercury will reduce its assets to $2 billion by the end of this year to raise its capital-to-asset ratio. Mercury’s assets were $2.47 billion on March 31, compared to $2.51 billion on Dec. 31.
“There’s no question we do not have great amounts of excess capital,” Shane said. “But we do not need as much capital” as institutions that are into riskier activities.
