Provident 2nd-quarter profit down 13.9%

Bank still beats forecasts, sending stock price up

July 23, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

Provident Bankshares Corp.'s profit fell 13.9 percent in the second quarter after the company took an $8 million charge in a restructuring of its securities portfolio.

Maryland's second-largest independently owned banking company reported yesterday that it made $10.5 million in the three months that ended June 30, compared with $12.2 million in the second quarter of 2003.

Earnings at the Baltimore-based company were 34 cents per diluted share, down 30.6 percent from 49 cents a year earlier. The securities charge was announced earlier as part of a balance sheet restructuring that coincided with Provident's acquisition of Southern Financial Bancorp Inc. The move shaved 18 cents off second-quarter earnings per share.

Still, the results beat Wall Street estimates by a penny, according to 10 analysts surveyed by Nelson Information/Thomson Financial. Shares of Provident, which are traded on the Nasdaq, rose 61 cents yesterday to $28.60.

Matthew C. Peake, a banking analyst at Davenport & Co. in Richmond, Va., said the restructuring should help Provident's performance.

Provident sold $415 million in mortgage-backed securities and short-term borrowings to reduce its assets and improve its capital ratios. The company took a loss to shed the low-yielding securities from its balance sheet.

"Ultimately, they are on the right path," Peake said. "The actions that they took this quarter will improve the quality of their earnings and balance sheet."

During the quarter, Provident closed on its $330 million acquisition of Southern Financial, a Warrenton, Va.-based banking company that added $1.5 billion in assets and 30 branches throughout Virginia and in the fast-growing Washington metropolitan area.

Gary N. Geisel, Provident's chairman and chief executive, said yesterday in a conference call with analysts that 76 out of Provident's 146 branches are now in the Washington suburbs and Virginia. Also, more than a quarter of the bank's customers are in the Washington suburbs and Virginia.

"We are optimistic about what we are calling the new Provident," Geisel said in the conference call. "Given the positive economic environment, we believe we are well-positioned as we enter the second half of 2004."

Loans grew to $3.5 billion as of June 30, up 36.4 percent from a year earlier. Assets were up 25.9 percent to $6.4 billion, and deposits rose 23.4 percent to $4.1 billion, fueled in part by the Southern Financial acquisition and strong growth.

For the first six months of the year, Provident made $23.4 million, down 2.5 percent, compared with $24 million a year earlier. Diluted earnings per share fell 13.5 percent to 83 cents, partly due to Provident issuing additional shares to acquire Southern Financial.

Also yesterday, Provident's board of directors declared a quarterly dividend of 2.55 cents per share, payable Aug. 13.

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