Big write-downs lead to $5.4M 3Q loss for Baltimore-based Provident

Daily Record, The (Baltimore), Oct 28, 2008 by Danielle Ulman

Provident Bankshares Corp. took a $5.4 million net loss for the third quarter, compared to a gain last year, because of $24.6 million in write-downs in residential loan portfolios, the company reported Monday.

Provident also said that the U.S. Treasury had accepted the bank into its Troubled Asset Relief Program Capital Purchase Program, although the company has not made a decision about whether or not it will participate.

"The Treasury actually reached out to a number of banks I guess the middle of last week, and said, 'Gee, you're a healthy institution, we'd love you to be part of this,'" Gary N. Geisel, chairman and CEO of Provident, said Monday.

The Treasury extended the offer to several "well-capitalized" banks, which would issue and sell preferred stock, as well as offer warrants to the Treasury to purchase shares of common stock.

"The only reason I'm saying we're not participating is that we haven't fully evaluated it," Geisel said. "Said another way, we haven't seen any other reason not to participate."

Banks have until Nov. 14 to accept the Treasury's offer.

Provident, the parent of Baltimore-based Provident Bank, recorded a net loss of 21 cents per diluted share, well below the estimates of polled First Call/Thomson Financial analysts, who on average thought the bank would have earnings of 29 cents a share. The company had net income of $16 million, or 50 cents per diluted share, in the third quarter of 2007.

The bank's latest write-downs bring the total to nearly $100 million in charges on real estate-related securities this year.

"The turmoil in the financial markets resulted in a further decline in the value of certain securities in our investment portfolio during the third quarter," Geisel said in a company statement.

In April the bank announced it would raise $115 million with a secondary stock offering and a debt offering.

"We raised that capital really to make sure we had the wherewithal to weather the ups and downs of the industry," he said.

In August, Provident announced it was reducing its reported net income for the second quarter of 2008 by $4.9 million. The bank's net income was reduced to $10.2 million because of concerns about some of its investment securities.

Geisel expects the company to experience modest loan growth, stable non-interest income, further decline in its net interest margin and flat or decreased expense levels for the next few quarters, he said in the statement. He also said he thought credit costs would rise.

Despite the write-downs and the troubled economy, Geisel said the company's balance sheet remains strong.

"If you look at the good news it's in our loan and deposit gathering, our core businesses," he said. "A loss is a loss, but I think from the standpoint of the economy we're in, we're feeling good about our core business operations."

Provident's shares ended the day up 11 cents, or 1.38 percent, to $8.10 on the New York Stock Exchange.