Putting into effect it's new policy of tying its dividend payment to earnings, Provident Bankshares Corp. said today that it cut its quarterly dividend from 10 cents to 5 cents a share.
The reduced dividend is payable May 9 to holders of record April 29.
The decision was announced at the company's annual meeting at the Hyatt Regency hotel. The Baltimore bank holding company is the parent company of Provident Bank of Maryland.
The dividend cut comes as the financial fortunes of the company are actually improving, with net income during the first quarter going up 24.6 percent to $815,000, or 14 cents a share, compared to $654,000, or 11 cents a share, during the 1990 first quarter. The first quarter also was the third consecutive profitable quarter for the bank.
However, in December the company decided to change its dividend policy so that payments are tied to earnings. Since it became a public company in 1987, Provident has consistently paid a quarterly dividend of 10 cents a share even when the company lost money.
In the last four years, the only profitable year for Provident was 1989 when it earned $3.5 million, or 57 cents a share. Carl W.
Stearn, chairman and chief executive officer, told shareholders that the 5-cent dividend was set at a special board of directors meeting this morning. "It is very important that some of the profits be returned for future needs," Stearn told shareholders.
After the meeting, Stearn said that future losses would not necessarily preclude dividend payments because other factors
might be considered. But he added, "we are not anxious to pay out dividends without earnings."
The 5-cent dividend is about 37 percent of Provident's earnings. Stearn said most corporate dividends are 20 to 40 precent of earnings.
Provident last year lost $3.9 million as it boosted its provision for possible loan losses to cover souring commercial real estate loans.
To help counter problems, the company sold its headquarters at 114 E. Lexington St., then leased it back, and contracted out its data processing operation.
"If things don't get worse" the company should be profitable for RTC the year, Stearn said. However, there is uncertainty as to where the real estate market will go, he said.