3Q profit rose by 12%, Provident bank says


October 20, 2006|By Laura Smitherman | Laura Smitherman,sun reporter

While many banks have been taking a hit from the slowing housing market, Provident Bankshares Corp. reported yesterday that its third-quarter profit increased 12 percent, partly because the Baltimore institution had outsourced its residential-mortgage business years ago.

The second-largest independent bank in Maryland - it's set to become the largest after Mercantile Bankshares Corp.'s sale to PNC Financial Services Group of Pittsburgh - said net income rose to $20.4 million, or 62 cents per share, from $18.3 million, or 54 cents per share, a year ago.

The earnings report was 1 cent shy of Wall Street expectations, according to a consensus of analysts polled by Thomson Financial. Gary N. Geisel, chairman and chief executive officer, said he anticipates future earnings to be at "the lower end of the range" of analyst estimates, "given the increasing pressure on margins."

Provident stock fell $1.08 yesterday, or 3 percent, to $37.52 on the Nasdaq stock market.

The bank's loan portfolio grew 4 percent, or $139 million, with a pickup in commercial loans and home equity balances. The bank contracts with PHH Mortgage Services in Mount Laurel, N.J., for residential mortgages.

Deposits grew 3 percent, or $119 million, including a jump in certificates of deposit, and total assets swelled 1 percent to $6.4 billion.

Provident also reported its net interest margin improved to 3.6 percent over last year, even as many banks have seen that key performance measure shrink. Interest rates have made it more difficult to make money from the difference between interest earned from loans and other investments and interest paid out.

"We are shielded from the standpoint of the revenue generated by residential mortgages, there's no doubt about it," Geisel said. He added, "We have been able to postpone the impact of this rate environment a lot longer than other banks."

The Baltimore banking establishment is being shaken up by the sale of Baltimore-based Mercantile to PNC in a deal that's valued at $6 billion and expected to close early next year. But Geisel was mum on whether a similar fate could befall Provident.

"We never say never, and we don't comment on whether others might or might not be courting us," he said. "We have a good and solid strategy as an independent bank. On the other hand, our board and management team understand our fiduciary responsibility to our shareholders."

The bank also announced yesterday that its board increased the quarterly cash dividend to 30 cents a share, a half-penny increase, to be paid Nov. 10 to shareholders as of Oct. 30.


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