European American Reports $137 Million Loss, Receives Infusion of $80 Million in New Capital

By Forde, John P. | American Banker, July 11, 1984 | Go to article overview

European American Reports $137 Million Loss, Receives Infusion of $80 Million in New Capital


Forde, John P., American Banker


NEW YORK -- European American Bancorp lost $137.7 million in the second quarter and received an $80 million capital infusion from its six European shareholder banks in what its new chairman called a strategy "to face our problems now and put them behind us once and for all."

Raymond J. Dempsey, chairman and chief executive officer of the holding company since March, stressed Tuesday that the factors leading to the second-quarter loss "account for all of european American's problems. Each subsequent quarter will be profitable, starting with the third quarter of 1984."

Mr. Dempsey, previously head of fidelcor Inc. of Philadelphia, said that "with the complete support of our six European shareholder banks, we decided to charge off problem loans, our investment in unsuitable computer systems, and other costs now, so that the bank will be on a firm footing for the future."

The quarterly results bring European American's first half loss to $135.7 million, compared with earnings of $18 million in the first half on 1983.

Two of the six European shareholders also announced the effects of their European American involvement. Amsterdam Rotterdam Bank NV said its net earnings for the first half of 1984 would be slightly less than the $32.9 million earned in last year's second quarter. The Dutch bank previously had expected an earnings increase for the period.

Midland Bank PLC of London said it is continuing its plans to reduce its 20% stake in European American to not more than 5% in order to meet Federal reserve requirements in its takeover of Crocker National Corp. of San Francisco.

The four other European shareholders are Creditanstalt-Bankverein, Austria; Deutsche Bank AG, West Germany; Societe Generale de Banque S.A., Belgium; and Societe Generale, France.

The $80 million capital infusion was structured as a combination of $40 million in common stock in the company and a 10-year subordinated note from the shareholder banks that would be passed along as primary capital to the holding company's principle subsidiary.

Even with the infusion, European American's primary capital dipped to about 4.6% of assets as of June 30, said Mr. Dempsey, adding that he expects it to be above 5% by yearend. At the bank, primary capital totaled about 5.6% of assets at the end of the quarter, a ratio that Mr. Dempsey also expects to rise by yearend.

European American is the holding company for European American Bank and Trust Co., which has 93 offices in New York City and Long Island, and for European American Banking Corp., an investment company that specializes in international finance and foreign exchange operations.

European American said in a statement that its loss was caused by a $110.1 million loan loss provision, which equaled second quarter chargeoffs, and $27.7 million in additional chargeoffs and other expenses. European American earned $10.2 million in last year's second quarter and $2.1 million in the first quarter of 1984.

Mr. Dempsey said most of the charged-off loans came from areas that are outside management's "basic New York City-Long Island orientation," such as the energy and foreign sectors and loans involving real estate outside the area.

As of June 30, European American had $296.1 million in nonperforming loans, or 5.2% of total loans. The company said in its statement that the total includes "virtually all" of its $58 million in private-sector Argentine loans, which are on a nonaccrual basis.

As of June 30, European American's loan loss reserve totaled about $63 million, or 1.12% of its $5.7 billion total loan portfolio. Mr. Dempsey said he expects the reserve to be about 1. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

European American Reports $137 Million Loss, Receives Infusion of $80 Million in New Capital
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.