Provident earnings up 30% in 2nd quarter

Dividend is increased for 35th quarter in a row

July 18, 2002|By William Patalon III | William Patalon III,SUN STAFF

Provident Bankshares Corp., the Baltimore-based parent of Provident Bank, reported yesterday 30 percent increases in net income and earnings per share for the second quarter that ended June 30.

The performance would have been even better had it not been for a $10 million write-down related to WorldCom Inc. bonds in the bank's investment portfolio, the bank said.

Provident also said yesterday that its board of directors declared an increased quarterly cash dividend of 21.5 cents per share, payable Aug. 9 to shareholders of record at the close of business July 29. This is the 35th consecutive quarter the bank has increased the dividend, which was 21 cents per share in the first quarter of this year.

Regarding its financial performance, Provident said net income rose to $10.4 million, or 40 cents per diluted share, in the three months that ended June 30. Both figures were improvements of 30 percent over the net income of $8 million, or 30 cents per share, reported for last year's second quarter.

"We had a very good quarter," said Peter M. Martin, Provident's chairman and chief executive officer. "Our core business did much better than the final results [reflected] because of our WorldCom exposure."

The WorldCom write-down reduced second-quarter earnings by 6 cents per share. Analysts had been forecasting earnings of 41 cents per share, according to Zacks Investment Research.

Martin said the write-down won't dampen the bank's results for all of 2002. Provident's year-end earnings will still be in the consensus range of $1.80 per share to $1.85 per share, the bank said.

Martin said Provident has continued to hold the WorldCom bonds - writing them down to current market value on their books - figuring they may actually recover somewhat as the telecommunications firm navigates its current difficulties.

Both the bank and analysts said that, despite the loss, Provident had not violated sound investment policies: The WorldCom holding was investment grade and represented only $10 million of a $1.7 billion investment portfolio.

Provident's underlying business was very strong during the quarter, Martin said. All-important noninterest income rose 18 percent to $21.7 million during the second quarter. Average core deposits increased $148 million, or 6 percent, from second-quarter 2001, while average core loans rose $177 million, or 12 percent, over the same period.

Asset quality improved as nonperforming loans declined to $22.7 million as of June 30, a 19 percent decline from a year earlier.

Provident's shares gained 20 cents to $22.90 on the Nasdaq stock market yesterday.

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