1Q earnings increase 6.4% at Columbia Bancorp

But profit per share was 4 cents below analysts' estimates

April 16, 2003|By William Patalon III | William Patalon III,SUN STAFF

Columbia Bancorp reported a first-quarter profit increase of 6.4 percent yesterday - a performance analysts said was solid even though net income was 4 cents per share below estimates.

The Columbia bank reported net income of $2.49 million for the quarter that ended March 31, up 6.4 percent from the $2.34 million earned during the same quarter the year before. Earnings per share were 34 cents for this year's first quarter, an increase of 6.3 percent from the per-share earnings of 32 cents for the quarter a year ago.

Analysts had expected the bank to earn 38 cents per share.

"Fundamentally, we continued to have a very sound performance," said Chief Financial Officer John A. Scaldara Jr.

Ironically, strong loan growth actually hurt Columbia's profitability - but only in the short run, the bank and analysts said.

Whenever a bank makes a new loan, it must set aside a predetermined percentage of that loan to protect itself against possible future loan defaults. Such loan-loss "provisions" are then funneled into the bank's loan-loss reserve fund.

During the first three months of this year, Columbia's loans grew by $31.5 million, an annualized growth rate of nearly 19 percent, the bank said. But the bulk of the loan growth came late in the first quarter, meaning Columbia had to reduce profits by taking the loan-loss provisions - but without being able to reap the full quarter's profits from the loans.

The provisions taken for the late-quarter loan surge probably cut into first-quarter profits by several cents per share, Columbia said, though noting the bank will benefit from that loan growth and more than make back those profits in the quarters to come.

"We had the loan growth - it's just that the timing was not good," Scaldara said.

Henry J. Coffey Jr., a banking analyst who follows Columbia for brokerage Ferris Baker Watts in Baltimore, said the moves made by Columbia underscored its reputation as a well-run institution. The reason: Some other banks, desperate to make their numbers, met Wall Street's profit forecasts by taking lower-than-needed loan-loss provisions - a maneuver they may pay for in the future.

Columbia took the needed provisions, sacrificing its short-term profits in the interest of long-term prudence, he said.

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