Provident net up 14% for quarter 'Pretty much on target,' Chairman Martin says

October 22, 1998|By Kristine Henry | Kristine Henry,SUN STAFF

Strong growth in consumer and commercial loans drove Provident Bankshares Corp.'s third-quarter net income up 14 percent to $9.9 million, or 39 cents per diluted share, the company said yesterday.

Provident's net income in the third quarter of 1997 was $8.7 million, or 35 cents a share, excluding a one-time merger charge of $12.6 million connected to the acquisition of First Citizens Financial Corp. The charge lowered Provident's net income to $26,000.

"I think we're doing fine," Chairman and Chief Executive Peter M. Martin said yesterday. "There was a little bit of a squeeze on margins as there is with everybody, but we're pretty much on target. We're pleased with our performance."

Provident's net interest margin -- the difference between what the company receives on its loans and what it paid to obtain the money -- narrowed last quarter to 2.93 percent from 3.54 percent in 1997's third quarter.

The report "was in line with what I was expecting -- no big surprises and no big disappointments," said David M. West, an analyst at Davenport & Co. in Richmond, Va. "The margin was a little weaker than we expected, but it was offset by strong balance sheet growth."

The shareholders' cash dividend was increased by half a penny to 14 cents, the 20th consecutive quarterly increase.

Led by consumer and commercial loan growth, Provident's assets rose to $4.8 billion at the close of the quarter, which ended Sept. 30, up 29.7 percent from $3.7 billion at the end of the third quarter last year.

Delinquent loans more than doubled, rising from $7.6 million to $15.5 million on $3.1 billion in total loans outstanding.

The increase should not alarm anyone, West said, because $7.6 million was abnormally low.

"You can't look at it and say, 'Oh, it doubled, there must be a problem,' " he said. "It's still at relatively modest levels compared to the overall portfolio."

Provident Mortgage Corp. originated $273 million in first-mortgage loans during the period, more than three times the $90 million in the third quarter of 1997.

"The mortgage business is booming; we'll probably do a billion in mortgages this year because mortgage rates are so low," Martin, the CEO, said.

Operating expenses increased 14 percent, aside from those related to the merger and capital securities, largely because of network expansion and upgrades of branch technology.

Net income for the first nine months of the year was $28.9 million, up 18 percent from last year's nine-month total of $24.5 million, excluding the merger charge.

Pub Date: 10/22/98

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