A month after Provident Bankshares Corp. wrote off nearly $48 million in soured mortgage-related investments and said it did not anticipate any more, the Baltimore bank announced last night that it could take additional charges of up to $47.7 million in the first quarter.
Maryland's largest independent bank said it could write down some or all of the remaining $32.8 million in securities it holds in real estate investment trust securities, or REITs, amid a continuing decline in housing and credit markets. Provident took earlier write-downs in investments in REITs last month.
In addition, Provident said it may take charges against some or all of its $14.9 million investment portfolio in so-called "Alt-A" mortgages, which are loans made to consumers whose credit scores are better than subprime but not high enough to qualify for conventional loans. The company said the projected write-downs are related to increasing delinquency levels in the loans underlying these securities.
Provident had not previously disclosed any problems in its mortgage-backed securities portfolio.
Gary N. Geisel, Provident chairman and chief executive officer, said in an interview last night that new developments, including unanticipated defaults and deteriorating values of REITs, prompted the bank to re-evaluate its situation. Geisel said the declining values of its mortgage-backed investments are tied to the slumping national residential housing market.
Such factors seen in late January "made us say, 'Jeez, this is all new information to us, and this new information we need to really evaluate,'" Geisel said.
"We're cautiously optimistic, meaning that we're trying to take the most conservative approach we can to say, 'Jeez, at the end of the first quarter, we could anticipate up to $47 million in additional write-downs.' We want to make sure the market knows that now and be upfront with the market," he added.
Actual write-downs will be determined at the end of the first quarter, Provident said. The bank will hold a conference call with analysts this morning.
While the news may be disappointing to investors, Geisel said, the additional write-downs do not affect its core bank business or its customers.
"It's important because we're a bank that we help people understand ... this is not about our core banking business. It's about our investment portfolio," Geisel said, noting that Provident is well-capitalized.
In the fourth quarter, Provident wrote down its investments in eight REITs after Fitch Ratings, one of the major debt ratings services, sharply downgraded a large segment of the REIT securities market.
Because of the charge, the bank reported a net loss of $15.5 million, or 49 cents, per diluted share in the fourth quarter. That's compared with a profit of $11.3 million, or 34 cents per diluted share, in the year-ago period.
hanah.cho@baltsun.com