For the second time in a year, shareholders of Provident Bankshares Corp. rejected a proposal yesterday by two disgruntled shareholders to put the Baltimore-based company on the auction block.
The dissident shareholders got support from roughly 30 percent of total shares outstanding, according to a preliminary proxy vote count.
"I think it is time for a change, and that change is called a merger," one of the dissident shareholders, Jerry Shearer, told shareholders at the company's annual meeting yesterday. Shearer runs Columbia, S.C.-based Mid-Atlantic Investors with his partner, Jerry Zucker.
Despite the defeat, Shearer vowed to press on.
"We are not going away," he said, after the meeting held at the company's downtown headquarters. "We have not sold a single" share.
Shearer, Zucker and Mid-Atlantic are Provident's largest shareholders with 5.4 percent of the stock. They first forced a shareholder vote on a sale of the bank a year ago, when they held about 3 percent of the stock, and got support from about 26 percent of outstanding shares.
Peter M. Martin, Provident's chairman and chief executive, said the victory felt "very good."
"We didn't think it [the proxy fight] was good for the shareholders or the franchise," Martin said. "I am delighted to get back 100 percent of my time in doing things I should be doing."
Shares of Provident closed yesterday at $15.5625, down 87.5 cents.
Provident also released first-quarter results yesterday. Net income rose 13 percent to $11.6 million, or 45 cents per diluted share, in the quarter that ended March 31, compared with $10.3 million, or 39 cents per diluted share, in the corresponding period last year.
Profit was boosted by $770,000 after Provident liquidated debt.
But the company more than doubled its provision for loan losses to $4.3 million in the quarter, up from about $2 million in the corresponding period a year earlier.
David West, a bank analyst at Davenport & Co. in Richmond, Va., said Provident's profit was "a little weak."
The quarter "could have been better," added Adam C. Barkstrom, a bank analyst at Legg Mason Wood Walker Inc. "Clearly, the earnings performance was hampered somewhat ... due to higher-than-anticipated loan loss provision levels."
Assets jumped 7.8 percent to $5.2 billion in the quarter, loans were up 7 percent to $3.3 billion, and deposits rose 10.3 percent to $3.8 billion.
Shearer has been hammering away at Provident for months, saying its stock price has languished and performance has suffered.
He complained yesterday that bank officials didn't tell shareholders about details in a report from an independent shareholder services company. The report called Provident's expense ratio "chronically high" and recommended that shareholders withhold their votes for director Mark K. Joseph, chairman and chief executive of Municipal Mortgage and Equity LLC and chairman of the Shelter Group, because he missed 75 percent of director meetings last year.
Shearer also attacked Provident's management, saying it spent about $1 million to defend itself in the proxy battle. And he complained that the company didn't furnish him with a list of shareholders.
Martin disputed Shearer's claims.
"I wouldn't buy that poor Mid-Atlantic story," said Martin after the meeting, noting that Shearer "pulled" the $1 million figure "out of thin air."
Martin said Institutional Shareholder Services, which wrote the report, supported management. "There are a lot of positive things in that report and I urge all of you to read the full report rather than to just take out-of-context comments," he told shareholders.
He told shareholders that Joseph was one of the bank's "best directors," and said he missed the meetings because of open heart surgery.
Some shareholders voiced support for management, while others wanted a sale.
W. G. Forwood said an out-of-town acquirer would "bleed out Provident" by firing employees.
"If we are going to get bigger, let Provident get bigger instead of some outside people coming in from some other city and taking over," he said. "I believe in Provident Bank staying here in Baltimore."
Pat Dinsmore, a retired restaurant operator, said he was "extremely disappointed" that the bank is not up for sale.
"I am very unhappy," he said.
He said that management cares "only about themselves" and that he may sell his 10,000 shares.
"There are so many better opportunities, even in banking," he said.