Provident's earnings up 12.1% in 4th quarter; Numbers bolstered by strong gains in loans, deposits; Banking


Provident Bankshares Corp. said yesterday that fourth-quarter net income rose 12.1 percent -- to $10.1 million from $9 million in the comparable quarter of 1997 -- as loans and deposits posted strong gains.

"We had some pretty good improvement on the loan side -- on the commercial side in particular," said James R. Wallis, Provident's chief financial officer.

Consumer loans showed solid growth, he said, while commercial and retail deposit counts increased, lowering costs for the bank.

Provident Bankshares Corp., the parent of Provident Bank of Maryland, reported that tax-equivalent net interest income increased by 10.3 percent as loans continued to grow.

Noninterest net income of securities gains increased 43.4 percent, with help from growth in fee-based services and mortgage banking.

Earnings per share on a diluted basis increased 14.3 percent to 40 cents in the quarter that ended Dec. 31 -- up from 35 cents in the comparable quarter a year earlier.

"I was expecting about 39 cents, so the quarter was slightly above my expectations," said David M. West, an analyst for Davenport & Co. "There were no big surprises one way or the other."

The company originated $361 million in first-mortgage loans in the fourth quarter, up from $142 million in the fourth quarter of 1997.

Nonperforming loans during the fourth quarter made up 0.37 percent of total loans outstanding, compared with 0.36 percent at the end of the fourth quarter of 1997.

Wallis said the company has benefited on the commercial side from the withdrawal of real estate investment trusts from the market. "Stock prices have fallen out of bed, so they [REITs] can't find money as easy as they used to and they can't find money to lend," he said. "Some customers have rediscovered banks."

On the consumer side, Provident is benefiting from low rates that are helping to drive up home-equity and mortgage loans, he said.

Net charge-offs for the quarter were $987,000, or 0.12 percent of average loans -- compared with $1.1 million or 0.16 percent a year earlier. At the end of the year, the allowance for loan losses was $42.7 million, or 1.38 percent of total loans outstanding.

For the year, net income rose 56.4 percent, to $39 million from $25 million in 1997. Diluted earnings per share for the year totaled $1.54, up 52 percent from $1.01. Tax-equivalent net interest income increased 6.7 percent for the year. Noninterest income net of securities gains increased 34.4 percent. The bank originated $1.1 billion in first-mortgage loans in 1998, up from $396 million in 1997.

Core deposits increased $163 million, or 8 percent, in the year. Provident, which has $4.7 billion in assets and operates 68 branch offices, reported total capital at the end of the year of $296 million.

Provident's board of directors raised the company's fourth-quarter dividend yesterday to 14.5 cents a share, up from the third quarter's 14 cents a share. It is the 21st consecutive quarter in which the board declared dividend increases.

West, who has a "buy" recommendation on the stock, said he expects Provident to earn between $1.70 and $1.75 per share this year.

Provident shares were unchanged yesterday at $27.75.

Pub Date: 1/21/99

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