Provident Bank posts $18M loss but beats estimates

Provident Bankshares Corp. posted a smaller first-quarter loss than analysts had expected after the bank wrote down the value of real estate-related securities.

The bank lost $18 million for the first quarter, or 56 cents per share. Analysts surveyed by Thomson Financial had expected the bank to lose 63 cents per share. In the same period a year ago, Provident earned $16 million, or 50 cents per share.

Provident, Baltimore's largest independent bank, said Thursday that it took a $43 million writedown on the value of securities tied to the real estate market. The bank had warned the market that the writedown could be as much as $48 million. Most of the securities are not in default, but the market is valuing them at lower rates because of the problems in the mortgage world, Provident officials said.

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Provident's assets grew by 3 percent from a year ago to $6.4 billion. Total loans grew by 8 percent to $4.2 billion, while deposits rose by 2 percent to $4.4 billion.

Excluding the writedown, which the bank warned was coming back in February, "I feel really good about the quarter," Provident CEO Gary Geisel said in an interview Thursday morning. "Wall Street is all about the future, and February to them is a year ago," Geisel said. Provident's loans and deposits are still growing, and the bank hopes to get some credit from Wall Street for its ability to maintain credit quality in difficult economic times, he said.

The bank's allowance for loan losses -- money set aside to cover loans that may go into default -- stood at 1.31 percent of total loans at the end of March, unchanged from December.

Provident (NASDAQ: PBKS) continues to hold down its operating expenses in the tough operating climate, officials said. Geisel said Provident expects the economic slowdown to last through 2008, but the bank thinks it is well-positioned to steer through it.

On April 11, Provident announced a plan to raise $115 million to shore up its balance sheet. The plan includes issuing 1.4 million new shares of common stock, 50,000 shares of preferred stock and up to $50 million in debt. Provident also cut its dividend by two-thirds.

At Provident's shareholder meeting April 16, several shareholders said they were upset they did not get an opportunity to buy into the private offerings, in which some investors bought cheaper and higher-yielding Provident securities than are available on the open market. Geisel told the shareholders that the bank stuck with a small group of investors because it needed to raise money quickly, as banks were flooding the market with requests for new investment.

Provident has 142 branches in Maryland, Virginia and southern York County, Pa.