Provident profit rises 27% in 3rd quarter

Gains in fee income help fuel increase

October 18, 2001|By Bill Atkinson | Bill Atkinson,SUN STAFF

Provident Bankshares Corp.'s profit rose 27 percent in the third quarter, driven by gains in income from checking accounts and deposit service fees, tight expenses and less money set aside for problem loans.

The state's second-largest independently owned banking company made $10.8 million in the quarter that ended Sept. 30, compared with $8.5 million in the corresponding period a year earlier.

Provident made 41 cents per diluted share, up 32 percent, compared with 31 cents per diluted share a year earlier. The results met Wall Street analysts' estimates.

"We are pleased with it," said Peter M. Martin, chairman and chief executive of the Baltimore-based banking company. "It was plain vanilla, and that is good."

Shares of Provident closed at $20.34, up 34 cents.

The third-quarter results contrast sharply with Provident's second-quarter earnings. Profit in that quarter fell 11.3 percent because of $3.4 million in losses and charges related to bad second-mortgage loans, most of which the bank bought from an out-of-state company.

Provident was forced to restate earnings for the first quarter of this year and for all of last year after an internal review of its second-mortgage loan portfolio.

"I don't know that it [the third-quarter results] has me jumping up and down with excitement, but it looks like a step in the right direction," said David M. West, an analyst at Richmond, Va.-based Davenport & Co. "All in all, it looks like a decent quarter to get them back on track a bit."

Profit in the quarter was propelled by a 15.7 percent increase in non-interest income - income from fees banks charge customers for services - totaling $19.8 million, compared with $17.1 million in the third quarter in 2000. The bank also kept a lid on expenses, which rose 2.3 percent to $36.6 million in the quarter from a year ago.

Another boost to the bottom line was that Provident set aside $2.1 million for potential problem loans in the quarter, compared with $7.3 million a year earlier.

Provident wrote off $2.7 million in loans in the quarter, compared with $10.4 million a year ago. Its nonperforming loans - loans generally past due 90 days on either principal or interest payments - totaled $28.8 million as of Sept. 30, down 7.9 percent from a year earlier.

During the first nine months of the year, Provident made $29 million, or $1.08 per diluted share, compared with $28.7 million, or $1.02 per diluted share, a year ago.

Provident executives have been restructuring the bank to focus more closely on a "core business" that stresses offering products and loans to consumers and small and medium-size companies in the Baltimore-Washington area. At the same time, they have been reducing the amount of deposits and loans the company buys from other financial institutions.

As a result, Provident's assets fell 11.7 percent to $5 billion at the end of the quarter. The company's amount of outstanding loans slipped 14 percent to $2.9 billion, and deposits were down 14.6 percent to $3.4 billion.

But there was strong growth in the company's core businesses, Provident said. The amount of loans to consumers jumped more than 100 percent with $74.2 million in new loans being booked in the quarter. Also, more than 20,000 retail checking accounts were opened during the three-month period. "I think this company does have the potential to decrease in size and improve in profitability," West said.

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