Provident to cut data-processing unit

December 22, 1990|By Peter H. Frank

Provident Bankshares Corp. is ending its data-processing operations and selling its downtown headquarters in separate moves aimed at cutting expenses and raising cash, the Baltimore-based company said yesterday.

Provident said the moves would have little effect on net income during the fourth quarter. The $1.3 million cost of converting from its in-house processing to hiring an outside contractor will be offset by the gain on the sale of its building, which Provident will lease for at least 12 years, the company said.

Provident, which has about 720 employees, declined to specify how many people work in its data-processing center in the Rutherford Business Park in Baltimore County, or how many layoffs will result from the decision to use an outside data-processing company.

"We've talked about it over here," said Harold H. Johnson III, Provident's chief financial officer. "We can't say anything about the employees. We don't want to get into the issue at all."

David S. Penn, a banking analyst with Legg Mason Inc. in Baltimore, said the moves apparently were intended to make better use of the company's assets and operations. He estimated that the company will save about $1 million next year through the steps announced yesterday.

"It's a tough market out there, and it's difficult to increase earnings," Mr. Penn said. "It's a trend of the future for smaller banks to out-source their back office to bigger banks and allow them to become a low-cost producer," he said of the data-processing move.

Provident, parent of Provident Bank of Maryland, lost $4.9 million during the first nine months of this year after making a large addition to its reserves for possible loan losses. The company, with 38 branches,had $1.5 billion in assets Sept. 30.

Traded over-the-counter, Provident, which made its announcement after the markets closed, ended yesterday unchanged at $4.125 a share.

Mr. Johnson said the decision to hire an outside data-processing company, M&I Data Services Inc. in Milwaukee, was in response to the increasingly complex and expensive business of processing accounts and other data.

Provident said that upon completion of the deal with M&I, the Wisconsin company will own Provident's data-processing facilities and that M&I will use the Baltimore County location to serve Provident and its other customers on the East Coast.

Provident's decision to sell and lease back its headquarters building, at Lexington and Calvert streets, was an unrelated move, the company said.

Under the terms of the agreement, its 11-story headquarters building, built in 1928 and renovated in 1983, has been sold to 114 Lex Corp., a company owned by a private New York City investor.

Mr. Johnson said the sale of the headquarters does not include the land, which the bank owns, that is currently used for parking behind the building along Calvert Street. The parking lots were purchased by the company with the original purpose of building an 46-story, $100 million office tower.

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