Provident to declare dividends after quarters end

January 01, 1991|By Peter H. Frank

Provident Bankshares Corp. said yesterday that beginning next year it would declare dividends after the end of each quarter rather than during the quarter so that directors can see the company's earnings before deciding on a payout to shareholders.

The Baltimore-based banking company, parent of Provident Bank of Maryland, said the regular 10-cent-a-share dividend for 1990's final three months was the last to be mailed at the end of a quarter.

Future payments will be mailed within 30 days of the board's dividend decisions, which are scheduled for April, July, October and January, the company said.

"In the past, the timing of the Directors' vote meant that results for the quarter were not complete when the dividend was declared," Carl W. Stearn, the company's chairman and chief executive, wrote in a letter to shareholders. "We feel strongly that this decision is in the best interest of shareholders by ensuring a clearer relationship between earnings and dividends."

Provident, which has 6 million common shares outstanding, earned $1 million, or 17 cents a share, during the third quarter, which ended Sept. 30.

It lost $4.9 million, or 82 cents a share, during this year's first nine months.

The company has $1.5 billion in assets and 40 branches in the Baltimore area. Its stock closed in over-the-counter trading yesterday at $4.00 a share, up 12 1/2 cents.

Provident's announcement comes as banking companies throughout the region struggle to predict what lies ahead for them and for the industry as a whole. With bad real estate loans mounting, banking executives concede that it has become increasingly difficult to predict the depth or severity of the current economic slump and its impact on bank profits.

"It's just that the whole area of bank analysis, of trying to predict what you're going to earn, is just becoming more and more difficult," said David S. Penn, who follows Provident for Legg Mason Inc. in Baltimore.

In a decision similar to Provident's, MNC Financial Inc., parent of Maryland National Bank and American Security Bank, decided earlier this year to move the day its board votes on the company's dividend policy to the month following the end of each quarter.

The delay in paying a dividend spares Provident one quarterly payout during 1991 by pushing the fourth dividend into January 1992, but analysts have said that the importance of knowing the level of earnings for the quarter before declaring a dividend outweighs the one-time savings.

In particular, federal regulators increasingly have criticized banks for paying more in dividends than they earn during a given period.

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