Provident Bankshares posts 22% fall in profit

BUSINESS DIGEST

October 19, 2007|By Dan Thanh Dang | Dan Thanh Dang,SUN REPORTER

Provident Bankshares Corp. reported yesterday that profit declined 22 percent in the third quarter because of higher interest rates the bank paid to attract customer deposits and a greater amount of money it had to set aside to cover bad loans.

In the three months that ended Sept. 30, net income at Maryland's largest independent bank declined to $16 million, or 50 cents per share, from $20.4 million, or 62 cents per share, for the third quarter of 2006. Analysts polled by Thomson Financial expected earnings of 52 cents per share.

While Chairman and Chief Executive Officer Gary N. Geisel pointed to growth in the loan portfolio exceeding $4 billion for the first time in company history and 2 percent growth in average customer deposits, he also stressed the continued challenges that the entire industry is facing from moderate revenue growth and a return to more normal credit costs.

"Our average customer deposit has increased, but the migration from low-cost deposits to higher-cost deposits remains a concern to us and many in the industry," said Geisel during an analysts' conference call. He said that more customers are moving money to certificates of deposits or other investments that bear higher interest rates.

Net interest income - the difference between interest and dividends earned from loans and securities, and the interest paid on deposits and other liabilities - was reduced 6.6 percent to $47.8 million, from $51.2 million in the third quarter last year.

Provident set aside $7.5 million in the third quarter in anticipation of loans that will not be repaid. That compares with $954,000 that was set aside in the quarter last year. Much of that money is on reserve to cover a $4.1 million loan that was not repaid.

Shares of Provident closed at $27.18, down $2.43 or 8 percent.

dan.thanh.dang@baltsun.com

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