Provident Bankshares Corp.'s top executive has launched a defense of the bank's performance in a letter to shareholders after an influential investor criticized management and called for sale of the company.
Peter M. Martin, chairman and chief executive of the Baltimore-based banking company, wrote in the letter, being mailed today, that he wanted to correct an "inaccurate account" of Provident's performance that appeared in a letter mailed to shareholders Sept. 9 by investor Jerry Shearer, managing partner of Mid-Atlantic Investors, based in Columbia, S.C.
"Mr. Shearer is well-known for his tactics of purchasing a minority position in a bank or a thrift and then urging a quick sale," Martin said in the letter, which will go to 15,000 shareholders. "We believe management's strategy is the right one for our investors."
In his letter, Shearer said investors have lost confidence in the company, which has contributed to its falling stock price. He said Provident's financial performance lags behind other banks, and that management has a "just say no" policy to institutions interested in acquiring it.
"Management could best serve the shareholders by doing right by the shareholders, and that is to sell the company to someone who can manage those assets more productively," Shearer said in an interview yesterday.
Shearer argued that Provident, which with $4.1 billion in assets is the second largest independent commercial bank in Maryland, should sell because it will eventually lose business to giants like NationsBank Corp. and First Union Corp., which he said can sell products and services cheaper.
While Provident's stock has fallen 26 percent from its March 25 high of $34.2813, Martin said in the letter that shareholders have received a total average return of 32 percent a year over the past 5 1/2 years. It closed yesterday at $25.25, up 75 cents.
That performance beats the Nasdaq composite index's average return of 20 percent and the Mid-Atlantic Bank Group Index's 23 percent return over the same period, he said.
"If we can keep our earnings record going, I think we can continue to increase the value of Provident as a franchise, and this is our intent," Martin said.
Martin said that while he would like Provident to remain independent, the company will entertain offers.
"His contention that we have a 'just say no' policy is just wrong," Martin said.
Douglas G. Ober, chairman and chief executive of Adams Express Co., a Baltimore closed-end mutual fund that owns 289,405 Provident shares, said he is not quibbling with the company but thinks there is room for improvement.
"Their returns could be better, but it has not been a particularly easy market for them," he said. "You have all of these big guys coming in here chasing the last dime."
The value of Adams' stake in Provident has fallen by $2.7 million since the March high. The company bought the stock in 1991 for between $2 and $3.50 a share.
"We haven't lost confidence, we are holders," Ober said. "As far as selling now, I think it would be a mistake. I think there is a lot more value in the franchise."
Lew Sosnowik, vice president for bank securities at Bethesda-based Koonce Securities Inc., said Shearer is going to have a difficult time forcing a merger.
"Forced mergers are usually done in terrible pain and usually at the lowest possible price attainable," Sosnowik said.
Shearer's group owns about 500,000 shares of Provident, or less than 5 percent, which it bought a little over a year ago. Shearer said the firm purchased the shares largely on the expectation that Provident would sell.
"The fact that a sale has not taken place doesn't really surprise us," Shearer said yesterday.
Shearer said his company has triggered the sale of a handful of community banks in South Carolina and Georgia whose stocks it held. "We have bumped into recalcitrant management in the past. We are not going to be quiet shareholders," he said.
Pub Date: 9/29/98