Provident reports profit rose 11% in 3Q


Provident Bankshares Corp. reported yesterday its third-quarter profit rose 11 percent, as the Baltimore bank continues to rebalance its portfolio to shed mortgages acquired from brokers across the country.

The second-largest independent bank in Maryland had net income of $20 million, or 60 cents a share, in the three months through September, compared to $18.1 million, or 54 cents a share, in the third quarter of 2004. The bank beat Wall Street estimates by one penny, according to a survey of analysts by Thomson Financial.

Provident shares slipped 52 cents, or 1.6 percent, to $32.54 in trading yesterday on the Nasdaq Stock Market.

"At first glance, Provident does not appear to have posted an exceptionally strong quarter," Ryan Beck & Co. analyst Collyn B. Gilbert said in a research report. Gilbert doesn't own Provident shares, nor does her firm have an investment banking relationship with the bank.

"However, more important in our view," Gilbert said, "is that this quarter's performance continues to reflect the company's initiatives to shift the balance sheet mix from securities into higher-yielding loans."

Five years ago, Provident began reducing its $1.8 billion in mortgages from brokers across the country that had been acquired to build its loan portfolio. Chairman and Chief Executive Gary N. Geisel said those loans now represent less than $400 million on the balance sheet. The bank also reduced its investment portfolio, which included mortgage-backed securities, municipal bonds and other investments.

At the same time, the bank refocused its efforts on building a portfolio of home equity and commercial and real estate loans, which increased this quarter by $203 million and $145 million, respectively. Geisel said he's now more interested in loans that originate in the Baltimore-Washington corridor, which tend to have lower default rates, partly because of the strong regional economy.

The bank's net interest margin rose despite the Federal Reserve raising short-term interest rates and despite long-term interest rates refusing to rise as fast. The margin represents the spread between what a bank earns from loans and other investments and the interest a bank pays out.

Provident's board yesterday declared a quarterly dividend of 28 cents, an increase of 0.5 cent. The dividend will be paid Nov. 11 to stockholders of record at the close of business on Oct. 31.

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