Provident to cut reported net, take $1.6 million charge

November 16, 2005|By LAURA SMITHERMAN | LAURA SMITHERMAN,SUN REPORTER

Provident Bankshares Corp. will lower its net income for 2004 and the first nine months of this year by $947,000 after a review of the bank's accounting forced it to restate some of its financial reports.

Baltimore-based Provident, the second-largest independent bank in Maryland, also said yesterday that it plans to record a $1.6 million charge against its fourth-quarter earnings, which it has yet to release. The reductions are a small fraction of the Provident's overall profit; the bank earned $117 million from January 2004 through September of this year.

Gary N. Geisel, Provident's chairman and chief executive officer, said the changes would have "no economic impact" on the bank. "This issue is strictly related to accounting documentation or complex and evolving interpretations," he said.

The bank decided, after consulting with the accounting firm KPMG LLP, that it had used the wrong method to account for interest-rate swaps, which are derivatives or complex financial instruments used to hedge risk. Changes in the fair value of interest-rate swaps that the bank had entered into should have been reported as gains or losses in each quarterly income statement.

The review of Provident's books also led the bank to revise its accounting for a severance agreement granted to Richard J. Oppitz Jr., a former executive vice president for consumer lending. The bank found that it had understated expenses related to the agreement by $320,000. Oppitz left the bank this year with a severance package that included two years of pay totaling $580,726 and continuing benefits.

Provident stock fell 59 cents, or 1.7 percent, to $35.11 in trading yesterday on the Nasdaq stock market.

laura.smitherman@baltsun.com

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