Provident Bankshares Corp. reported yesterday that its net income climbed 76 percent in the second quarter despite a one-time deduction from earnings of $700,000 as the Baltimore-based bank changed its accounting for long-term leases on its headquarters building and branch network.
The second-largest independently owned banking company in Maryland had $18.4 million in net income, or 55 cents a share, up from $10.5 million, or 34 cents a share, for the same period last year. The accounting adjustment knocked 2 cents from its earnings per share, and the bank missed Wall Street estimates by a penny, according to a survey of analysts by Thomson Financial.
Provident shares fell 1.4 percent to $33.61 in trading yesterday.
Ryan Beck & Co. analyst Collyn B. Gilbert called the quarter a "knockout" as Provident's loan portfolio grew faster than expected. Total loans were $3.6 billion at the end of June compared with $3.5 billion at the second quarter's end in 2004. Total assets at the end of June were $6.4 billion and deposits were $4 billion.
"We expect longer-term earnings growth to be fueled by the company's ability to expand its retail banking expertise through the Washington, D.C., metropolitan market, as well as into Northern Virginia," Gilbert said in a research note. Gilbert doesn't own shares in Provident, and Ryan Beck doesn't have an investment banking relationship with the bank.
Provident's mounting income can be attributed in part to its purchase of Southern Financial of Warrenton, Va., Chairman and Chief Executive Officer Gary N. Geisel said in an interview. Provident's current quarterly earnings are matched up against a time before the acquisition was incorporated onto its books.
While Geisel said he couldn't separate the two banking groups to make a more direct comparison, he said Provident continues to benefit from a strong real estate market across its expanded footprint. The average balance of commercial real estate loans rose to $1.1 billion during the quarter from $893 million in the year-earlier period.
Also yesterday, Provident said its board of directors declared a quarterly cash dividend of 27.5 cents per share, an increase of 0.5 cent. The dividend will be paid Aug. 12 to stockholders of record at the close of business Aug. 1.