Columbia Bancorp's earnings slip 1.9%

Firm's net margins were hurt by Fed cutting interest rates

October 17, 2001|By Bill Atkinson | Bill Atkinson,SUN STAFF

Columbia Bancorp's profit fell 1.9 percent in the third quarter, squeezed by declining interest rates that reduced the amount of money the bank earned on loans and investments, the company said yesterday.

Columbia made $2.04 million, or 28 cents per diluted share, in the quarter that ended Sept. 30, compared with $2.08 million, or 29 cents per diluted share, in the corresponding period in 2000.

John A. Scaldara Jr., Columbia's chief financial officer, said that despite the challenges, the performance was good "given all of the external forces that are working against us."

"Our core business is still very solid and performing very well," Scaldara said.

In the first nine months of the year, Columbia made $6.1 million, or 85 cents per diluted share, compared with $5.51 million, or 77 cents per diluted share, in the third quarter in 2000.

Profit in the first nine months of 2000 excluded a one-time merger charge of $2.31 million related to the acquisition of Suburban Bancshares.

Columbia's assets grew 7.9 percent to $824.8 million by the end of the quarter. Loans rose 11.9 percent to $576.5 million, and deposits were up 4 percent to $631.2 million.

Columbia's performance was "strongly influenced" by Federal Reserve interest rate cuts aimed at stimulating the economy, the company said.

The Fed has cut short-term interest rates nine times this year, slashing the federal funds rate to 2.5 percent, matching its lowest level ever in May 1962.

As rates declined, Columbia's net interest margin - what it makes on loans and investments after interest payments to depositors and creditors - shrank to 4.41 percent in the quarter from 5.32 percent a year earlier.

When rates fall, Columbia lowers its prime rate - the rate it charges its best customers. At the same time, the interest rates the bank pays on deposits, such as certificates of deposit, fall more slowly, and profit is reduced.

Scaldara said that it will take time, but the bank's interest margin should begin to improve when the Fed stops cutting interest rates.

"We are looking forward to some stabilization," Scaldara said.

Shares of Columbia closed at $14.75, unchanged on the Nasdaq stock market.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.