Provident Bankshares swings to Q4 loss
Shares of Provident Bankshares Corp. (Nasdaq: PBKS) are depreciating on news after the close on Wednesday that the bank holding company swung to a fourth-quarter net loss.
The Baltimore, Md.-based holding company for Provident Bank reported a net loss of $15.8 million, or $0.50 per share, for the three months ended Dec. 31, 2007. That compares to a net income of $11.3 million, or $0.34 per share, a year earlier. Seven analysts polled by Thomson Financial were projecting a loss of $0.55 per share.
“The loss was a function of writing down $66 million in collateralized debt obligations,” said Jeff Davis, an analyst with equity research firm FTN Midwest Securities Corp., in a phone interview.
The bank reported that it increased its average loans 8% to $291.3 million from $269.7 million during the fourth quarter of 2006. Average home equity loans increased 8% to $80.4 million from $74.4 million a year earlier, while commercial real estate loans posted a rise of 12%.
“Their footprint is Baltimore south, through Washington, D.C. and northern Virginia,” said Davis. “That market, relative to the rest of the country, is performing well. But that is not to say that residential markets are not stressed.”
However, net interest income declined 7% to $45.9 million from $49.4 million a year earlier as Provident Bank’s customers continue to shift their deposits to higher yielding deposit products.
The company also said that its efficiency program slashed cost salaries and benefits 10% from a year ago and resulted in the elimination of about 300 positions.
For the entire 2007 year, Provident Bankshares had a net income of $32.1 million, or $1 per share, compared with $70 million, or $2.12 per share, in 2006. The result disappointed Wall Street, falling short of the projected earnings of $1.06.
“As the year begins, the industry will need to navigate through challenges not faced for quite some time,” said chairman and CEO Gary Geisel in a statement. “For 2008, Provident's order of priorities will be focused on capital, liquidity and earnings in order to achieve our long-term objectives for earnings growth.”
“They have to prove to investors that the credit side is not going to get away from them,” Davis explained. “The dynamic over the next six months is going to entail a lot of pain in terms of credit.”
At 3:36 p.m. ET, shares of Provident Bankshares Corp. (PBKS) had stumbled $1.46, or 8%, to $15.85. That’s near the 52-week low of $15.55, which was set on Jan. 14. The 52-week high of $36.04 was established on Feb. 2, 2007
