Provident Bankshares Corp. will sell 1.2 million preferred securities to raise $30 million, according to a filing yesterday with the Securities and Exchange Commission.
A majority of the money raised will be used to fund the Baltimore company's stock repurchase program, which it started about a year ago. The remainder will be used to support Provident's growing loan and deposit business.
"We recognized our shares are undervalued and it's in shareholders' best interests for the company to purchase them," said Chief Financial Officer Dennis Starliper.
Provident shares peaked at $32.656 in March 1998 and have since declined 53 percent. They closed yesterday at $15.1875, up 18.75 cents.
Officials at Mid-Atlantic Investors in Columbia, S.C., are unhappy with Provident's performance and have recently been loading up on stock. They now have 1.4 million shares, or 5.4 percent of Provident, and are trying to force a sale of the $5.1 billion-asset bank company.
Provident said in yesterday's filing that it plans to oppose Mid-Atlantic's sale proposal. And Starliper said the stock buyback was not brought on by Mid-Atlantic's move.
"This has been on our plate since the fourth quarter," he said. "As we finished our financial planning for the year 2000, it was showing the need to raise capital."
To retain its "well capitalized" rating from the Federal Deposit Insurance Corp., Provident must keep $1 of capital in reserve for every $14 of assets and liabilities.
"Our deposit projections are showing growth, and growth in loans," Starliper said. "Growth is a good thing, but the balance sheet was growing faster than the earnings we were keeping in the company."
It was growth in deposits and consumer and commercial real estate loans that drove Provident's profit up 14.2 percent in the fourth quarter, which ended Dec. 31. It made $11.5 million, or 44 cents a share, up from $10.1 million or 38 cents a share in 1998's fourth quarter.
Profit for the year was up 13.1 percent to $44.2 million, or $1.67 a share, compared with $39 million, or $1.47 a share, in 1998.
David M. West, an analyst at Davenport & Co. in Richmond, Va., said the larger buyback makes sense and he doubts it was influenced by Mid-Atlantic. "It was sparked by the fact that the stock is undervalued," he said, "and their overall capital position."